Friday, 21 February 2014

Opium wars, trade and precious metals

China economics blog always keeps an eye on trade.  The Opium wars are a fascinating case study.  A recent article provides an interesting reminder of the issues.

Old Time Farm Crime: The Opium Wars [Modern Farmer]

"It was a major drug bust with more than 1,600 arrests and the confiscation of 11,000 pounds of a highly addictive substance.

No, this wasn’t a DEA raid of a major meth operation, or an Interpol investigation into international drug smuggling. It was the year 1839 and the Chinese government was cracking down on British importation of opium. The drug issue was a powder keg that led to a series of wars between the two countries over the course of more than 20 years and changed both nations for generations.

To the British, the Chinese crackdown was a matter of business. It was a perceived trade imbalance on the British end due to Chinese officials requiring silver in trade for their goods, most notably tea, that led the British to realize that opium could tip the scales in their favor.

The British government, initially through its East India Company, had tried trading everything from woolens to scientific instruments to pottery, but the Chinese only cared about precious metals."

 What is interesting here is that Chinese imports of gold and silver and yet again reaching record levels.

"In a 50 year period prior to 1828, Britain paid out £27m in silver to the Chinese. During the same period they only sold about £9m of British goods to them. That balance shifted dramatically when the British went full bore into opium smuggling.

In the decade of the 1830s, despite an imperial decree outlawing the export of silver, China exported more than seven times more silver than it took in (an estimated $7 million in and $52 million out) a lot of that used to buy opium. And that doesn’t include the gold that was exported in the same decade.

By the eve of war British merchants were exporting about $25 million (about $245 million today) worth of opium to China from their Indian possessions."
Interesting how things change and yet stay the same.

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