Rogue Captains Built First Global Market by ignoring their superiors’ orders:
In the 17th and 18th centuries, the East India Company established a monopolistic trade network on the high seas, gaining immense wealth and influence at home in England. Their ships sailed from Europe with silver and bullion, returning months or years later with exotic goods from Asia and Africa. Along the way, enterprising ships’ captains engaged in private trading of their own, abusing company resources for personal gain. Now, researchers at Columbia University have shown that it was this illicit trading, rather than officially sanctioned activity, that was directly responsible for the creation of the first global market and the success of the East India Company.”The researchers analyzed data from 4,572 voyages undertaken by the East India Company between 1601 and 1833, totaling over 28,000 port-to-port journeys. In a paper in this month’s American Journal of Sociology, they describe how many rogue captains ignored orders to trade in established markets and then return directly to England, choosing instead to explore new locations and trade between local Asian ports for their own personal profit. Although they were breaking the law by appropriating supplies and ship crews for this private trading, in doing so they ultimately benefited the East India Company by building a larger market and gaining a unique knowledge of local market fluctuations.
“In the end they had a much larger trade network pioneered by these malfeasant captains, had more goods in their networks, and were better able to respond to the changing market in the East,” says Emily Erikson, the study’s lead author. By weaving together a complex network of ports, the opportunistic captains created a connection between Europe and East Asia whereby events in one region immediately affected the other. “They were engaging in criminal activity but that was actually necessary to build up what was the first instance of the global market,” says Erikson. She and co-author Peter Bearman argue that not only did these entrepreneurial individuals enable the East India Company to completely dominate East Asian trade by 1760, they also paved the way for the Industrial Revolution and the rise of capitalism by illicitly creating the first modern competitive market.
Because a market is a decentralized structure, it must consist of many individuals who can act in their own interest. “We sort of take the process for granted at this point,” says Erikson. “We live in a capitalist society, we think markets are good, we believe in individual freedom. But back then, people didn’t believe individual initiative was a good thing, especially in the context of a monopoly organization.” As East India Company captains acted in their own interest, they inadvertently expanded their market, generating more demand for manufactured products of the West and building England’s wealth — thereby catalyzing the Industrial Revolution. “In short, before the invention of steamships, the East India Company laid down the commercial ties that served as a template for the modern world-trade system,” write the authors.
(Hat tip to Jesse Walker at Reason.)