Grant's KnowledgeEconomyDraft102315

August 1, 2017 | Author: mbebinger280 | Category: The United States, International Politics, China, New York City, Libraries
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Fred Grant, China Trade Roots of the Knowledge Economy, working draft...



China Trade Roots of the Knowledge Economy The great American China trade fortunes were built through the private collection and use of knowledge. These fortunes were next invested in the United States, notably in railroads and manufacturing. These technological ventures required an educated workforce -- and public -- for success. Thus, at much the same time as these private investments were made, individual China traders made a series of crucial early investments in libraries and schools, supporting key institutions that helped build an educated nation. Investments in institutions of public knowledge provided practical support to private investments in a complicated economy. These investments in public knowledge have long paid rich dividends to the American nation and public. 1. Trade with China, in the eighteenth and early nineteenth centuries, is famous for having created merchant fortunes, in the West and in China. 2. Great wealth was indeed created, and was celebrated in the West and China. The popular obsession with trade success stories has contributed to an amnesia as concerns failure. Although the poet Chu Dajun (1630-1696), for example, famously wrote that “silver piles up in the thirteen hongs” (of Canton), the vast majority of the Chinese merchants who conducted this monopolized trade ended up bankrupt. John Murray Forbes (1813-1898), one of the top American traders, looked back on all of the investments he had made during what is considered to have been the heyday of the trade and doubted they yielded a six percent return on average. Speaking of American trade through 1840, Tyler Dennett, a great historian of American relations with Asia, stated that it “is obvious that American commercial relations with China were valued not so much because of their present returns as for their future possibilities.” 1




3. The China trade thus had its winners and losers. What characterized its winners? The success stories of the China trade commonly involve the meticulous collection, analysis and use of knowledge. Modern examples of information obsession, such as hedge fund types who amass data concerning markets, companies, or products, White, “Hong Merchants,” pp. 15-16; An-yun Sung, “A study of the Thirteen Hongs of Kuangtung; A Translation of Parts of the Kuangtung Shih-San-Hang Kao of Liang Chia-Pin” (M.A. thesis, Univ. of Chicago, 1958), pp. 24-5 and 73 (the poem is included in Chu's “poems on Canton,” the Guangzhou Zhuzhici). Kuo-tung Anthony Ch’en, The Insolvency of the Chinese Hong Merchants 1760-1843 (Nankang: Institute of Economics, Academia Sinica, 1990). “My trade operations since I began business when a boy in Canton, or, if you take a fairer test, since I returned from China, in 1837, have not averaged over six per cent. interest on the amount invested, if you take out the first lucky hit of the Acbar by being out during the China war, and the very nice tea speculation to England that was made for me at the same time. Without these two operations I am sure my profits have not been over six per cent., and I am inclined to think that with them they would not be much over six.” Sarah Forbes Hughes, ed., Letters and Recollections of John Murray Forbes (Cambridge: The Riverside Press, 1899), Vol. I, p. 116 (italics in the original). Tyler Dennett, Americans in Eastern Asia (New York: The MacMillan Co., 1922), p. 75. 1




represent a continuation of a well worn path to success. The private collection and exploitation of commercially useful information has an ancient history, as seen for example in the handwritten Fugger newsletters of the sixteenth century. This practice was early protected in the United States by the Supreme Court in Laidlaw v. Organ, 15 U.S. 178 (1817). The term “knowledge economy” is of recent vintage, but the practices denoted by this expression reach far back in time and long distances across the globe. 4. The most successful American China traders meticulously collected and used information. John Perkins Cushing at Canton studied markets and products in great depth and built a large fortune. Stephen Girard in Philadelphia also carefully studied the markets in which he was engaged, providing precise written instructions to his Canton agents (as was common). A group of interconnected families, known at Canton as the “Boston Connection,” built lasting wealth both through deep knowledge of trade and strong personal connections from Canton, to London, and worldwide. Confidential business information flowed easily among people who knew and had confidence in each other. For its part, the government of Qing China understood the commercial importance of knowledge, especially as concerned valuable Chinese export products. State policies that centered foreign trade at Canton (far from the tea districts), prohibited foreign communication with inland producers, and barred instruction in Chinese language (on pain of death), were designed at least in part to frustrate what might today be considered commercial espionage. Nonetheless, after years of effort, the British finally obtained and exported live tea plants from China. 5




5. Relics of these trading voyages are sometimes described as exotic, or even curiosities. Some traders may have thought of articles gathered in trade as exotic, but few of the winners did. Portraits and tokens of esteem cemented relationships across the seas, typically conducted by intermediaries (supercargoes and captains) between principals who never met. Articles brought home to an American sedentary merchant (such as Girard) helped him better understand the distant persons and the unfamiliar cultures and markets with which he was doing business. Some of this material might best be understood as in the nature of market research. Of such research, some bears fruit and some does not. Trading knowledge amassed by early American merchants is found in archives, to some extent, but the great bulk of their learning died with them. Many of the objects they gathered have survived. Much of this material, now found in museum cabinets, was gathered for practical purposes. William Sturgis, a prominent Canton trade merchant, did business with native Americans on the Northwest Coast. Years later, when he represented Boston in the Massachusetts legislature, “one of the 9

Jacques M. Downs, The Golden Ghetto: The American Commercial Community at Canton and the Shaping of American China Policy, 1784-1844 (Republication, Hong Kong: Hong Kong Univ. Press, 2014), pp. 151, 157 and 159-160; John R. Haddad, America’s First Adventure in China (Philadelphia: Temple Univ. Press, 2013), p. 43. See Jonathan Goldstein, Stephen Girard's Trade with China 1787-1824: The Norms Versus the Profits of Trade (Portland, Maine: Merwin Asia, 2011), pp. 64-68. Downs, Golden Ghetto, pp. 155-160 and 367-369. See Frederic D. Grant, Jr., The Chinese Cornerstone of Modern Banking: The Canton Guaranty System and the Origins of Bank Deposit Insurance 1780-1933 (Studies in the History of Private Law, Martinus Nijhoff Publishers, Brill, 2014), pp. 72 and 77-78. See Lyman H. Butterfield, “Bostonians and their Neighbors as Pack Rats,” The American Archivist, Vol. 24, pp. 141-159 (1961). 5






professional orators of that body got off a long Greek quotation. Captain Bill replied in one of the Indian dialects of the Northwest Coast, which he explained, was much more to the point, and probably as well understood by his colleagues, as that of the honorable and learned gentleman.” He possessed this linguistic skill because it was of concrete importance to the foreign trade in which he was engaged. That it made him witty, was but a side benefit. Language facilities were part of the considerable body of knowledge that Sturgis, and others, gathered while doing business across the Pacific. 10

6. The period 1784 to 1843 was the heyday of the early American China trade. The United States of America, Qing China, and the trade itself each changed markedly during this sixty year period. The knowledge and skills required for success changed with the trade. Markets shifted, wars gave rise to losses and to opportunities, opium trades (with Turkey and with India) rose and fell, and the players changed. In 1784, the United States was new to a complex and venerable trade. As of 1843, the Americans were influential veterans. In the early years, merchants from various port cities on the American east coast did business with China, without clear dominance by any one. Boston was important, but not as a destination for inbound cargoes. In time, the contest for preeminence was joined between Philadelphia and New York, and resolved in favor of the Port of New York. It is curious that the New York China trade has received little scholarly attention, despite its importance. The articles of trade also evolved, shifting slowly from premium to bulk commodities. This change is exemplified in the declining importance of tea, formerly king of the trade and the clipper ship, and the rise of the United States export ice trade. The first “fresh” New England apples reached Canton in 1846, packed in with a shipment of ice. 11



7. It is well known that many China trade fortunes were invested in the United States economy. Having accumulated capital, the China traders found better opportunities close to home. Industry, railroads and infrastructure required money, and provided good diversified uses for repatriated funds. Some China traders retired and became passive investors. Others became prominent active investors. John Murray Forbes, who went to China at seventeen and developed the confidence of the richest private businessman in the world, Wu Bingjian (Howqua II), became a very successful investor, on his own and in managing sizeable funds entrusted to him by individuals including the Wu family. Forbes (the great-grandfather of Secretary of State John 14

Samuel Eliot Morison, The Maritime History of Massachusetts 1783-1860 (Boston: Houghton Mifflin Co., 1921), p. 69; Downs, Golden Ghetto, p. 414 n.27. Downs, Golden Ghetto, p. 377 (“In any case New York had outdistanced Philadelphia as an entrepot well before the War of 1812, and by 1820, it was clearly the most important China trade port in America.”). Downs, Golden Ghetto, p. 377 (“New York City, oddly enough, needs more exploring.”). This want may reflect the magnitude of the task, and the fact that the records of some key firms are not known to have survived. Edward Delano Diary, 1846, Delano Family Papers, Franklin D. Roosevelt Presidential Library. Downs, Golden Ghetto, pp. 82, 152, 237 and 239; Arthur M. Johnson and Barry E. Supple, Boston Capitalists and Western Railroads (Cambridge: Harvard University Press, 1967), pp. 2327 and 185-186; Duncan Yaggy, “John Forbes: Entrepreneur” (Ph.D. diss., Brandeis University, 1974); “Forbes, John Murray,” Dictionary of American Biography (Allen Johnson and Dumas Malone, eds.; New York: Charles Scribner’s Sons, 1931), Vol. 6, pp. 507-508. See Frederic D. 10






Forbes Kerry) and his associates employed methods and connections developed in China to construct and manage the Michigan Central and the Chicago, Burlington and Quincy railroads. 15

8. Jacques Downs, the great historian of the American China trade, noted a tendency among China traders to support libraries. “Because China traders were not, as a group, noted for their philanthropy, at least no more so than other merchants, their interest in libraries is more noticeable.” Downs is correct, but the scope of their interest was far greater, encompassing libraries, schools and other cultural institutions. 16

Having used knowledge to build trading fortunes, leading American China traders supported both the nation and their ongoing domestic investments by contributing to institutions of public knowledge. Some prominent examples are: The New York Public Library (John Jacob Astor) John Jacob Astor of New York City (1763-1848) was the first American multi-millionaire. His major role in the Northwest Coast fur trade – which produced cargoes for China – is celebrated in the colorful ceramic beaver plaques seen in the Astor Place subway station. Astor traded in teas and other Canton products, and was heavily involved in the Turkey opium trade through the Chinese crackdown of 1821. Astor is said to have netted $200,000 in profits on the 1808-1809 voyage of the Beaver, which President Jefferson permitted to sail despite the Embargo in order to facilitate the return to China of a (dubious) Mandarin. The voyage was notorious, with Astor’s Chinese passenger rumored to have been “a common Chinese dock loafer.” The story of “Punqua Wingchong” – who seems to have been a Cantonese small trader or “outside shopman”-- who was seen on Nantucket, in New York, presented himself in Washington, D.C., and sailed to China on Astor’s vessel has not been adequately disentangled. Who this man was, why he was in the United States (evidently more than once), how and with whom he traveled to America, and his connections to Astor all need better explanations. As a tragic sidelight, a Chinese man known as “Quak Te” committed suicide in 1809 on Nantucket. “Quak Te” is said to have been a servant to 17




Grant, Jr., “Hong Merchant Litigation in the American Courts,” Proceedings of the Massachusetts Historical Society, Vol. 99, pp.44-62 (1987), pp. 44-5. Downs, Golden Ghetto, pp. 252 (quoted text) and 233 (“a number showed their cultural inclinations in their philanthropy”). Downs, Golden Ghetto, p. 237. Downs, Golden Ghetto, p. 415 n.43 (estimates of his fortune “vary from $8 million to $25 million.”). Downs, Golden Ghetto, pp. 106, 120, 123, 201); Charles C. Stelle, "American Trade in Opium to China, Prior to 1820," Pacific Historical Review, Vol. 9, pp. 425-444 (1940), p. 440 (“Astor’s speculations in opium were great enough to cause J. and T.H. Perkins to state in 1818, ‘We know of no one but Astor we fear,” . . . ) (italics in the original). Dael Norwood, “Trading in Liberty: The Politics of the American China Trade, c. 1784-1862” (Ph.D. Diss., Princeton University 2012), pp. 150-161. 15

16 17

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“Punqua Wingchong,” who was left behind on the island (where it is rumored Punqua Wingchong went for deportment training before traveling to Washington, D.C.). 21

The New York Public Library. John Jacob Astor employed Joseph Cogswell to build the great public Astor Library, which opened in 1854. The library was intended to serve as a public educational resource. With the historian George Bancroft, Astor’s librarian Cogswell had earlier been a founder and schoolmaster of the famous Round Hill School in Northampton (1823-1834) (modeled after European secondary schools). The Astor Library was consolidated with the Lenox Library and the Tilden Foundation in 1895 to become the New York Public Library. 22

Girard College (Stephen Girard) Stephen Girard of Philadelphia (1750-1831), who traded extensively with China and named several of his ships after French philosophers, was the wealthiest man in the United States at the time of his death. Girard was heavily involved in the sale of opium from Turkey in China, but discontinued that business in the wake of the Chinese enforcement efforts of 1821. 23

Girard College. Almost all of Girard’s estate passed by will to charitable and municipal organizations. About half went to found Girard College in Philadelphia, as a boarding school for “poor, white, male” orphans. The Girard Will has twice been the subject of leading decisions of the United States Supreme Court. In Vidal v. Girard’s Executors, 43 U.S. 127 (1844), the Will was upheld over the objections of French relatives of the deceased. Over a century later, in Pennsylvania v. Board of Trusts, 353 U.S. 230 (1957), the Court held the refusal to admit black students to be a violation of the 14th amendment to the U.S. Constitution. Girard College remains a boarding school today. 24

The Boston Public Library (Joshua Bates) Joshua Bates (1788-1864) was one of the two early American partners of Baring Brothers, a British firm that provided substantial financing to many leading American China traders – and financed the Louisiana purchase by the United States. Frances Ruley Karttunen, The Other Islanders: People Who Pulled Nantucket’s Oars (New Bedford: Spinner Publications 2005), p. 146. “Cogswell, Joseph Green,” Dictionary of American Biography (Allen Johnson and Dumas Malone, eds.; New York: Charles Scribner’s Sons, 1930), Vol. 4, p. 273; Downs, Golden Ghetto, p. 123; John S. Bassett, “The Round Hill School,” Proceedings of the American Antiquarian Society, vol. 27 (New Series), pp. 18-62 (1917), p. 53. The China trader John Murray Forbes attended and was greatly influenced by the Round Hill School and Cogswell and Bancroft as teachers before he left for China at seventeen years of age. John Murray Forbes, Reminiscences of John Murray Forbes (Sarah Forbes Hughes, ed.; Boston: George H. Ellis, 1902), Vol. I, p. 73. Goldstein, Stephen Girard's Trade with China; Jonathan Goldstein, Philadelphia and the China Trade (University Park: Pennsylvania State Univ. Press, 1978), pp. 35 and 44; Downs, Golden Ghetto, pp. 112, 115, 120, 123, 254 and 415 n.43. 21





Joshua Bates credited Thomas H. Perkins with having given him a start in business, and had close ties with the families known as the “Boston Concern.” 25

The Boston Public Library. In October of 1851, writing from London, Bates offered $50,000 for the purchase of books for the city’s new public library, "the building shall be such as to be an ornament to the City, that there shall be a room for one hundred to one hundred and fifty persons to sit at reading tables, and that it be perfectly free to all." Bates made two gifts of $50,000 to the library. An oil portrait of Joshua Bates hangs today at the end of the magnificent Bates Hall, in the (older) McKim Building of the Boston Public Library. 26

Princeton University, Lawrenceville Academy (John Cleve Green) A forceful individual, John Cleve Green (1800-1875) transformed Russell & Company during the 1830s into the leading American trading house at Canton. Jacques Downs, preeminent scholar of the American China trade, describes Green as “businesslike.” He “chastely avoided all personal remarks and occasionally even took others to task for their lack of the same restraint. Green’s own correspondence is invariably short, to the point, and suffocatingly dull.” 27

Princeton College and Lawrenceville Academy. Green’s children died young. In retirement, and in his bequests, Green focused on philanthropy, giving generously to Princeton College, to the Princeton Theological Seminary and to the Lawrenceville Academy. His donations to Princeton College are said to have amounted to “upwards of a million and a half, perhaps two million dollars.'' 28

The Boston Athenaeum, The Perkins School for the Blind (Thomas Handasyd Perkins and James Perkins) Thomas Handasyd Perkins (1764-1854) and James Perkins (1761-1822), whose commercial education began with instruction from their mother the widow Perkins, operated the leading Boston China trade firm of J. & T. H. Perkins & Co. and were core members of the “Boston Concern.” The Perkins brothers were uncles of and the initial employer of John Murray Forbes. Their firm was active in the Northwest Coast fur trade, was heavily involved in opium, and invested in the notorious Astor-led 1808 voyage of the Beaver. That venture yielded them a tidy $113,000 profit on the July 1809 auction sale of one of the few return cargoes to reach the United States on a ship that sailed during the Embargo. 29

Downs, Golden Ghetto, pp. 111, 155, 170, 186, 196 and 367-369. Downs, Golden Ghetto, pp. 54 (quoted text), 55, 95, 168-71, 173 and 224. Downs, Golden Ghetto, p. 254; Downs, Golden Ghetto, pp. 106, 116, 119, 123-124, 150-156, 224, 237; Dael Norwood, “Trading in Liberty,” p. 156 n.108. 25


27 28



The Boston Athenaeum. The Perkinses were important early supporters of the Boston Athenaeum, originally a practical working library with a chemistry laboratory on the premises. The portraits of both brothers hang in the library today. A magnificent life size portrait of Thomas Handasyd Perkins by Thomas Sully dominates its first floor. 30

The Perkins School for the Blind. James and Thomas Handasyd Perkins were founders and important supporters of the Perkins School for the Blind. 31

Other Gifts to Schools and Libraries Milton Academy. John Murray Forbes (1813-1898) was a driving force behind the 1884 refounding of Milton Academy, which had become decrepit. Forbes took as inspiration the Round Hill School he attended as a boy under schoolmasters George Bancroft (later a great historian) and Joseph Cogswell (later Librarian of the Astor Library). 32

The Peabody Essex Museum. The Peabody Essex Museum holds important material originally donated by Salem China merchants to the East India Marine Society, a predecessor institution. As their donations were generally of objects rather than funds, the East India Marine Society went through periods of hardship, but its successor is fortunate to hold original objects and records which are of world-class significance but are little celebrated within its walls. 33


The Ipswich Public Library. Augustine Heard (1785-1868), a prominent China trader and founder of Augustine Heard & Co., one of the two great American China coast firms of the nineteenth century, strongly supported his local library. He Downs, Golden Ghetto, p. 252; Downs, Golden Ghetto, p. 253; Richard W. Hale, Jr., Milton Academy 1798-1948 (Milton: Milton Academy, 1948), p. 30; J.M. Forbes, Reminiscences of John Murray Forbes, Vol. I, pp. 68-84; S. Hughes, ed., Letters and Recollections of John Murray Forbes, Vol. I, pp. 37 and 46.;view=1up;seq=192 Paul A. Van Dyke, Merchants of Canton and Macao: Politics and Strategies in EighteenthCentury Chinese Trade (Hong Kong: Hong Kong Univ. Press, 2011), p. 197 (“all that remains from Yanqua's glory days in the trade is a life-sized image of him in the Peabody Essex Museum. . . . According to legend, Yanqua placed his own clothes on the image.”). The image of Yanqua -- one of only two hong merchants who were able to withdraw their funds from trade and retire from the hong guild – is in storage and has not been seen by the public in many years. 30






contributed forty thousand dollars, “selected the plans for the building, determined library policy, and chose the original trustees.” 35

The Brooklyn Female Academy, The Brooklyn Public Library. Abiel Abbot Low (1811-1893), a China trader who came home with $150,000 and went on to, among other things, serve as President of the New York Chamber of Commerce, supported the Brooklyn Female Academy (later the Packer Collegiate Institute) and the Brooklyn Public Library. 36

Frederic D. Grant, Jr. New York City, 23 October 2015



Downs, Golden Ghetto, pp. 197 and 252 (quoted text). Downs, Golden Ghetto, pp. 85 and 172. -8-

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