For this holiday edition, with hands in pocket and purse a lot lately, this article reflects on some world history of how Money & Trade drives Empires and Scientific development.
It is not easy to grasp the true role of economics in modern history, so I will start with a very simple example. Mr Buck establishes a new Bank on Bribie Island. Mr Stone, a new building contractor, finishes his first big job and gets paid $1 million in cash, and deposits it in Buck’s bank. The Bank now has $1 million in capital. Mrs Cook comes to Bribie and sees a business opportunity to open a new restaurant, but does not have the money to set it all up. She goes to Mr Buck at the Bank, shows him her detailed business plan, and he credits her account at his bank with a loan of $1 million. Mrs Cook contracts Mr Stone to build her Restaurant for his quoted price of $1 million. When the restaurant is completed, she pays Mr Stone, with a $1 million cheque from her account, which Mr Stone deposits into his account at Mr Bucks bank.
Mr Stone now has $2 million in his account. How much cash is actually in Bucks Bank? Yes, just $1million. Banks can repeat this many times over until Mr Stone might eventually have $10 million in his account, although the Bank has just $1 million in its vaults. If account holders, in all the Banks, decided to demand their money at the same time, you can see how there would be major collapse and financial crisis. The entire world economy is based on the belief that the future will always be better.
CREDIT for FUTURE
The modern era created a new system, based on the belief in the future, and a special kind of money called “Credit”, which enables us to build the present at the expense of the future, and an assumption that the future will be far more abundant than our present resources.
In the long course of history, this is quite a new concept. Historically, people with good ideas found it difficult to start new businesses. Kings built palaces and waged wars, raising funds by taxes and tariffs, but kitchen maids with great ideas could only dream of wealth while scrubbing the royal floors. Prior to Captain Cook’s scientific world exploration, the Dutch East & West India Companies raised funds selling shares to investors to participate in the exploitation of distant lands.
The Dutch built a defensive walled settlement, on an island in the mouth of the Hudson River, and called it New Amsterdam. The British repeatedly attacked and finally captured it, renaming it New York. The remains of the wall, built to defend against British and native attack, is now totally paved over by one of the world’s most famous roads …… WALL STREET
Crown did not conquer the subcontinent of India, but private investors in the British East India Company, who had a huge private army. They ruled the Indian Empire for over 100 years with a military force that considerably outnumbered the armed forces of the British Crown. Likewise with the Dutch in Indonesia.
CHINA OPIUM WAR
The most notorious example of how Governments did the bidding of big trading Companies was the First Opium War, between Britain and China. In the early 1800s the British East India Company, with its many influential business investors, made fortunes exporting drugs, particularly Opium, to China. Millions of Chinese became addicts, creating social and economic disruption. In the 1830s the Chinese government issued a ban on drug trafficking. British drug merchants simply ignored the law, so Chinese authorities began to confiscate and destroy drug cargos.
However, the drug cartel leaders were well connected at Westminster, with MP’s and Ministers as stockholders, so they pressured the British Government to take action. In 1840, Britain declared war on China in the name of “Free Trade”, and quickly brought China to the negotiation table with their modern weapons. A subsequent peace treaty was made in which China agreed not to constrain the activities of British drug companies. Britain demanded, and received, control of Hong Kong island, which they then used as a secure base for drug trafficking. By the late 1880s about 40 million Chinese, a tenth of the population had become opium addicts. Hong Kong remained in British hands until 1997 and is now experiencing separation conflict.
SLAVE TRADE
When Europeans conquered America, they opened gold and silver mines, established sugar, tobacco and cotton plantations, which became the mainstay of American production and export. Nobody wanted to work in terrible conditions, so about 10 million African slaves were taken to America, with 70% working on sugar plantations. They lived short and miserable lives, in terrible conditions, so that Europeans could enjoy sweet tea and candy. Private slave trade companies sold shares to investors, and the companies bought ships, soldiers and slaves, and sold the plantation products for huge profits. The Industrial Revolution saw Belgium gain control of 2.3 million square kilometres in the Congo basin of Africa, an area 75 times the size of Belgium, which was known as the Congo Free State. Belgian officials and investors established Rubber Plantations and exploited the 25 million inhabitants between 1885 and 1908, driven by growth and profit, costing the lives of 6 million of them. Countless other examples accompanied the growth of the modern economy throughout the world.
Here in Australia South Sea, Islander Kanaka Slaves were brought here to work on the Morayfield sugar plantation on the Caboolture River in 1870. TODAYS WORLD In today’s world, the above stories seem to be part of the world’s forgotten history. On many criteria such as life expectancy, child mortality and calorie intake, the average standard of living of humans is significantly higher than it was 100 years ago…..despite the exponential growth in the number of humans. The economic pie has grown bigger, but can it go on doing so indefinitely? Some say that eventually, Homo Sapiens (that’s you and me) will exhaust the raw materials and energy of Planet Earth. What will happen then? The world does not lack energy, what we lack is the knowledge necessary to harness and convert it to our needs. The total amount of energy stored in all the fossil fuel on earth is negligible compared to the amount the sun dispenses every day, free of charge. Most people throughout history have lived under conditions of scarcity. Modern psychology has convinced people that indulgence is good, and we now live in a world driven by “Consumerism”.
We buy countless products we do not need, that until yesterday we did not know existed. Manufacturers deliberately create short-term products and invent new models of perfectly satisfactory goods that we are urged to purchase. Religious and public holidays have become Shopping Festivals. Access to money is encouraged through Loans, Credit Cards, BPay, After Pay, Pay Pal and many others. The rich remain greedy and make more money, and the masses give free reign to their cravings to buy more and more. Perhaps we are all part of the first religion in history whose followers actually do what they are asked to do. Merry Christmas. How do we know if we will get paradise in return? We have seen it on TV!!