Category Archives: economics

by | 1 July 2012 · 3:01 pm

Punitive Social Work in Vietnam

From: Vietnam: Rising Dragon, by Bill Hayton (Yale U. Press, 2010), Kindle Loc. 1379-1432:

The official response to public prostitution, public drug use and public vagrancy is the same: first of all try to persuade the offender to change their uncivilised lifestyle and then, if they fail to reform, remove them from the city. Control of what the authorities still call ‘social evil’ falls, not to the police, but to the local People’s Committee. Party cadres will visit uncivilised households, Women’s Union activists will try to persuade prostitutes to give up their trade and local neighbourhood wardens will try to organise neighbours to fight antisocial behaviour. But if they fail then the People’s Committee – not the court – will order detention. The campaign to promote civilised living has co-opted the old ways of dealing with social problems: exclusion and re-education.

From political dissidents in the 1950s, to army officers from the defeated south in the 1970s, to prostitutes and drug users now, the Party has long treated ‘deviants’ on the premise that it can change their minds and make them ‘better’ citizens. Re-education is an unsettling combination of liberalism and totalitarianism. On the one hand the regime believes that most of those with unacceptable behaviour can be ‘reformed’, but on the other it has a very rigid definition of acceptable behaviour. In practice, re-education has been far from liberal. Hundreds, perhaps thousands, of former southern soldiers, officials and dissidents died from abuse and neglect in re-education camps after the war and these days the centres set up to reform cases of ‘social evil’ more often harm their inmates than help them.

Male drug users are sent to ‘06 centres’. Female sex workers, who may also be drug users, are sent to ‘05 centres’ and street children to social protection centres. These are usually in remote places and although they are managed by the Ministry of Labour, Invalids and Social Affairs (MoLISA) rather than the Ministry of Public Security, in practice they are run like prisons. There are more than 80 state-run 06 centres in the country, each holding around a thousand inmates. There are few, if any, trained drugs counsellors or social workers in the centres; staff are simply allocated to work there by the Ministry. Inmates are all treated the same; little attempt is made to understand individuals or why they might have become involved with drugs or sex work. Re-education isn’t exactly stimulating. Half the day is spent memorising Party positions and the laws on crime, and chanting slogans such as: ‘The whole nation condemns social evil’. The rest is spent performing manual labour. The inmates wear blue striped pyjamas, conditions are hard and they are frequently beaten.

Unsurprisingly, the centres usually fail. They keep people off the streets for two or three years but then return them to the same neighbourhood and the same social problems, and the result is almost always the same. They’re then likely to be picked up again and sent away for another spell in the camp. While the centres may give the authorities the impression that they’re in control of the problem, in many ways they’ve made it worse. Surveys suggest that 60 per cent of the inmates of 06 centres are now HIV-positive. Though the authorities deny it, intravenous drug use is rampant and there is plenty of unsafe sex between inmates. Given that neither problem is supposed to exist, MoLISA refuses to provide them with clean needles or condoms. Maintaining the Party line has failed to change inmates’ behaviour. Instead it’s just increased the prevalence of HIV.

Party experts and government officials are struggling to find new ideas for ways to cope with the problems of the new society they are building. The top of the hierarchy clings to the utopian idea that socialism can solve everything. Theoreticians still argue over the legacies of social thinkers like Karl Marx, Max Weber and Émile Durkheim and their implications for solving the country’s problems. The lower levels try to cope using whatever resources are to hand. Social work – once abolished on the grounds that it was unnecessary under socialism – is being encouraged again. Religious groups, including the Catholic Church, are being allowed to provide social care; ‘empathy groups’ of families of people with HIV are being allowed to organise autonomously of the Party; and international experts from the UN and other agencies are being invited to advise on new strategies. Western-trained practitioners are turning local NGOs into agencies to try to treat the problems directly.

The problems are tying the Party’s ideologues up in ideological knots. For decades they argued that social evils were the result of foreign and capitalist influence, starting under the French and continuing under the Americans. Trying to explain why they have surged now, under Party leadership, has pitted theorists who hold the line that socialism has the answers against practitioners who work on the assumption that it hasn’t. It seems unlikely that the old line can be held for much longer but it still has powerful supporters. They don’t understand the new world they have created – they still announce strategies calling for a 90 per cent reduction in crime, for example – and for the time being it’s easier to fall back on traditional ideas than seek out new ones. Other arguments are familiar from other countries. Why should money be spent on those who’ve abused the Party, state and nation’s generosity when loyal citizens get by with less? Many people, addicts’ families included, see the re-education camps as a good solution to the problem. Families have been known to imprison their own children at home or bribe the army to send them to bases on remote islands to prevent them using drugs – why should they be opposed to sending them away to an 06 centre?

Similar dilemmas exist over street children. There are few sights which offend urbanites – Vietnamese and foreign – more than seeing children living on the street. Compared with most cities in Asia, the number of visible street children in Vietnam is relatively small, but that doesn’t mean they don’t exist. The authorities in the two big cities take dramatically contrasting approaches. Hanoi tends to be more hard line, regularly rounding up apparently vagrant children. In Ho Chi Minh City they are more tolerant. In Hanoi shoe-shine boys have learnt not to carry the tools of their trade openly. Instead they buy a school uniform and carry the brushes and polish in a rucksack so that the police don’t spot them. They also take less visible jobs, working in the markets rather than selling postcards in the tourist areas. In Ho Chi Minh City, tolerance has allowed well-organised trafficking rings to flourish. They ‘rent’ children from poor families, particularly in the centre of the country, promising to take care of their accommodation and employment. They tell the families the children will be trained and well looked after but the kids are usually put to work as cheap labour; selling flowers, cutting cloth and working in restaurants or as domestic servants. Sixteen-hour days, minimal wages and Dickensian accommodation are the norm.

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by | 5 May 2012 · 11:47 am

Castile vs. Portugal in the Canaries

From Imperial Spain: 1469-1716, by J. H. Elliott (Penguin, 2002), 2nd ed., Kindle Loc. 981-1014:

The traditional hostility of Castile and Portugal, exacerbated by Portuguese intervention in the question of the Castilian succession, provided an added incentive to Castile to acquire its own possessions overseas. One of the major battlefields in the Castilian-Portuguese conflict of the fifteenth century was to be the Canary Islands, which seem to have been discovered by the Genoese in the early fourteenth century. During the course of the Castilian War of Succession Ferdinand and Isabella attempted to substantiate their rights to the Canaries by dispatching an expedition from Seville in 1478 to occupy the Grand Canary. The resistance of the islanders and dissensions among the Castilians frustrated the intentions of Ferdinand and Isabella, and it was only in 1482 that a new expedition under Alfonso Fernández de Lugo laid the foundations for eventual success, beginning with the subjugation of Grand Canary in the following year. Even now, Palma was not taken till 1492 and Tenerife till 1493. But, in the meantime, the treaty of 1479 ending the war between Castile and Portugal had settled the dispute over the Canaries to Castile’s advantage. Portugal renounced its claim to the Canaries in return for a recognition of her exclusive right to Guinea, the kingdom of Fez, Madeira, and the Azores, and so Castile acquired its first overseas possessions.

Castile’s occupation of the Canaries was an event of major importance in the history of its overseas expansion. Their geographical position was to make them of exceptional value as an indispensable staging-post on the route to America: all Columbus’s four expeditions put in at the Canary archipelago. But they were also to provide the perfect laboratory for Castile’s colonial experiments, serving as the natural link between the Reconquista in Spain and the conquest of America.

In the conquest and colonization of the Canaries can be seen at once the continuation and extension of techniques already well tried in the later Middle Ages, and the forging of new methods which would come into their own in the conquest of the New World. There were marked similarities between the methods of the Reconquista and those adopted for the conquest of the Canaries, which itself was regarded by Ferdinand and Isabella as part of Castile’s holy war against the infidel. The occupation of the Canaries, like the Reconquista, was a blend of private and public enterprise. Much of the Reconquista, especially in its later stages, had been conducted under the control of the Crown. The State also participated in the Canary expeditions, which were partly financed by the Crown and public institutions. But private enterprise operated alongside the State. Fernández de Lugo made a private contract with a company of Sevillian merchants – one of the first contracts of the type later used to finance the expeditions of discovery in America. Even an expedition entirely organized and financed under private auspices, however, was still dependent on the Crown for its legal authority. Here again the Reconquista provided a useful precedent. It had been the practice for the Crown to make contracts with leaders of military expeditions against the Moors. It seems probable that these contracts inspired the document known as the capitulación, which later became the customary form of agreement between the Spanish Crown and the conquistadores of America.

The purpose of capitulaciones was to reserve certain rights to the Crown in newly conquered territories, while also guaranteeing to the leader of the expedition due mercedes or rewards for his services. These rewards might consist of an official position such as the post of adelantado of Las Palmas conferred upon Fernández de Lugo – adelantado being a hereditary title granted by medieval Castilian kings and conferring upon its holder special military powers and the rights of government over a frontier province. The leader of an expedition would also expect to enjoy the spoils of conquest, in the shape of movable property and captives, and to receive grants of land and a title of nobility, like his predecessors during the Reconquista. In making capitulaciones of this type, the Crown was clearly bargaining away many of its rights, but generally it had no alternative. When it provided financial assistance, as it did for Columbus and Magellan, it could hope to make rather more favourable conditions, but the work of conquest and colonization had to be left largely to private enterprise.

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by | 5 May 2012 · 11:42 am

Medieval antecedents of Imperial Spain

From Imperial Spain: 1469-1716, by J. H. Elliott (Penguin, 2002), 2nd ed., Kindle Loc. 955-980:

Medieval Castile had built up a military, crusading tradition which was to win for it in the sixteenth century an overseas empire. But it had also developed another tradition too easily overlooked – a tradition of maritime experience which was the essential prelude to its acquisition of overseas territories. The discovery and conquest of the New World was, in reality, very far from being a lucky accident for Spain. In many respects the Iberian peninsula was the region of Europe best equipped for overseas expansion at the end of the fifteenth century. Although the opening up and settlement of the New World was to be a predominantly Castilian undertaking, the enterprise had a common Iberian foundation. Different parts of the peninsula each contributed their own skills to a common store on which the Castilians drew with such spectacular results. The medieval Catalans and Aragonese had acquired a long experience of commercial and colonial adventure in North Africa and the Levant. The Majorcans had established an important school of cartography, which had devised techniques of map-making invaluable for the charting of hitherto unknown lands. The Basques, with the experience of Atlantic deep-sea fishing behind them, were skilled pilots and ship-builders. The Portuguese had played a predominant part in the perfecting of the caravel, the stout, square-rigged vessel which was to be the essential instrument of European overseas expansion in the late fifteenth and sixteenth centuries.

But the Castilians also had acquired their own commercial and maritime experience, especially during the past two centuries. The growth of the Mesta and the expansion of the wool trade with northern Europe stimulated the development of the ports of north Spain – San Sebastian, Laredo, Santander, Corunna – which as early as 1296 banded together in a brotherhood, the so-called Hermandad de las Marismas, aimed at protecting their domestic and foreign commerical interests in the manner of the Hanseatic League. Similarly, the advance of the Reconquista in the late thirteenth century to Tarifa, on the straits of Gibraltar, had given Castile a second Atlantic seaboard, with its capital at Seville – itself recaptured by Ferdinand III in 1248. A vigorous commercial community established itself in Seville, including within its ranks influential members of the Andalusian aristocracy who were attracted by the new prospects of mercantile wealth. By the fifteenth century the city had become an intensely active commercial centre with thriving dockyards – a place where merchants from Spain and the Mediterranean lands would congregate to discuss new projects, form new associations and organize new ventures. It was Europe’s observation post from which to survey North Africa and the broad expanses of the Atlantic Ocean.

These developments occurred at a time when western Europe as a whole was displaying a growing interest in the world overseas. Portugal in particular was active in voyages of discovery and exploration. With its long seaboard and its influential mercantile community it was well placed to embark on a quest for the gold, slaves, sugar, and spices, for all of which there was an expanding demand. Short of bread, it was also anxious for new cereal-growing lands, which it found in the Azores (rediscovered in 1427) and in Madeira. Like Castile it was inspired, too, by the crusading tradition, and the occupation of Ceuta in 1415 was itself conceived as part of a crusade which might one day encircle the earth and take Islam in the rear.

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Filed under economics, Mediterranean, Portugal, religion, Spain, war

by | 29 April 2012 · 2:41 pm

Mercantile constitutionalist Aragon before 1492

From Imperial Spain: 1469-1716, by J. H. Elliott (Penguin, 2002), 2nd ed., Kindle Loc. 528-549:

The Catalan Diputació was … an immensely powerful institution, backed by large financial resources; and its obvious attractions as a bulwark of national liberty had stimulated Aragonese and Valencians to establish similar institutions in their own countries by the early fifteenth century. As a result, all three states were exceptionally well protected at the end of the Middle Ages from encroachments by the Crown. In the Diputació was symbolized that mutual relationship between the King and a strong, free people so movingly expressed in the words of Martin of Aragon to the Catalan Corts of 1406: ‘What people is there in the world enjoying as many freedoms and exemptions as you; and what people so generous?’ The same concept was more astringently summarized in the famous Aragonese oath of allegiance to the king: ‘We who are as good as you swear to you who are no better than we, to accept you as our king and sovereign lord, provided you observe all our liberties and laws; but if not, not.’ Both phrases, one emotionally, one legalistically, implied that sense of mutual compact which was the foundation of the Catalan-Aragonese constitutional system.

It was typical of the medieval Catalans that their pride in their constitutional achievements should naturally prompt them to export their institutional forms to any territories they acquired. Both Sardinia (its conquest begun in 1323) and Sicily (which had offered the Crown to Peter III of Aragon in 1282) possessed their own parliaments, which borrowed extensively from the Catalan-Aragonese model. Consequently, the medieval empire of the Crown of Aragon was far from being an authoritarian empire, ruled with an iron hand from Barcelona. On the contrary, it was a loose federation of territories, each with its own laws and institutions, and each voting independently the subsidies requested by its king. In this confederation of semi-autonomous provinces, monarchical authority was represented by a figure who was to play a vital part in the life of the future Spanish Empire. This figure was the viceroy, who had made his first appearance in the Catalan Duchy of Athens in the fourteenth century, when the duke appointed as his representative a vicarius generalis or viceregens. The viceroyalty – an office which was often, but not invariably, limited to tenures of three years – proved to be a brilliant solution to one of the most difficult problems created by the Catalan-Aragonese constitutional system: the problem of royal absenteeism. Since each part of the federation survived as an independent unit, and the King could only be present in one of these units at a given time, he would appoint in Majorca or Sardinia or Sicily a personal substitute or alter ego, who as viceroy would at once carry out his orders and preside over the country’s government. In this way the territories of the federation were loosely held together, and their contacts with the ruling house of Aragon preserved.

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by | 29 April 2012 · 2:41 pm

Warlike pastoralist Castile before 1492

From Imperial Spain: 1469-1716, by J. H. Elliott (Penguin, 2002), 2nd ed., Kindle Loc. 550-592:

The medieval Crown of Aragon, therefore, with its rich and energetic urban patriciate, was deeply influenced by its overseas commercial interests. It was imbued with a contractual concept of the relationship between king and subjects, which had been effectively realized in institutional form, and it was well experienced in the administration of empire. In all these respects it contrasted strikingly with medieval Castile. Where, in the early fourteenth century, the Crown of Aragon was cosmopolitan in outlook and predominantly mercantile in its inclinations, contemporary Castile tended to look inwards rather than outwards, and was oriented less towards trade than war. Fundamentally, Castile was a pastoral and nomadic society, whose habits and attitudes had been shaped by constant warfare – by the protracted process of the Reconquista, still awaiting completion long after it was finished in the Crown of Aragon.

The Reconquista was not one but many things. It was at once a crusade against the infidel, a succession of military expeditions in search of plunder, and a popular migration. All these three aspects of the Reconquista stamped themselves forcefully on the forms o Castilian life. In a holy war against Islam, the priests naturally enjoyed a privileged position. It was their task to arouse and sustain the fervour of the populace – to impress upon them their divinely appointed mission to free the country of the Moors. As a result, the Church possessed an especially powerful hold over the medieval Castile; and the particular brand of militant Christianity which it propagated was enshrined in the three Military Orders of Calatrava, Alcántara, and Santiago – three great creations of the twelfth century, combining at once military and religious ideals. But while the crusading ideal gave Castilian warriors their sense of participating in a holy mission as soldiers of the Faith, it could not eliminate the more mundane instincts which had inspired the earliest expeditions against the Arabs, and which were prompted by the thirst for booty. In those first campaigns, the Castilian noble confirmed to his own entire satisfaction that true wealth consisted essentially of booty and land. Moreover, his highest admiration came to be reserved for the military virtues of courage and honour. In this way was established the concept of the perfect hidalgo, as a man who lived for war, who could do the impossible through sheer physical courage and a constant effort of the will, who conducted his relations with others according to a strictly regulated code of honour, and who reserved his respect for the man who had won riches by force of arms rather than by the sweat of manual labour. This ideal of hidalguía was essentially aristocratic, but circumstances conspired to diffuse it throughout Castilian society, for the very character of the Reconquista as a southwards migration in the wake of the conquering armies encouraged a popular contempt for sedentary life and fixed wealth, and thus imbued the populace with ideals similar to those of the aristocracy.

The Reconquista therefore gave Castilian society a distinctive character in which militantly religious and aristocratic strains predominated. But it was equally important in determining the pattern of Castile’s economic life. Vast estates were consolidated in the south of Spain, and there grew up a small number of great urban centres like Córdoba and Seville, living off the wealth of the surrounding countryside. Above all, the Reconquista helped to ensure in Castile the triumph of a pastoral economy. In a country whose soil was hard and barren and where there was frequent danger of marauding raids, sheep-farming was a safer and more rewarding occupation than agriculture; and the reconquest of Estremadura and Andalusia opened up new possibilities for the migratory sheep industry of North Castile.

But the event which transformed the prospects of the Castilian sheep industry was the introduction into Andalusia from North Africa, around 1300, of the merino sheep – an event which either coincided with, or created, a vastly increased demand for Spanish wool. The Castilian economy during the fourteenth and fifteenth centuries steadily adapted itself to meet this demand. In 1273 the Castilian Crown, in its search for new revenues, had united in a single organization the various associations of sheepowners, and conferred upon it important privileges in return for financial contributions. This organization, which later became known as the Mesta, was entrusted with the supervision and control of the elaborate system whereby the great migratory flocks were moved across Spain from their summer pastures in the north to their winter pastures in the south, and then back again in the spring to the north.

The extraordinary development of the wool industry under the Mesta’s control had momentous consequences for the social, political, and economic life of Castile. It brought the Castilians into closer contact with the outer world, and particularly with Flanders, the most important market for their wools. This northern trade in turn stimulated commercial activity all along the Cantabrian coast, transforming the towns of north Castile, like Burgos, into important commercial centres, and promoting a notable expansion of the Cantabrian fleet. But during the fourteenth century and much of the fifteenth the full extent of the transformation which was being wrought in Castilian life by the European demand for wool was partially hidden by the more obviously dramatic transformations effected by the ravages of plague and war.

The Black Death of the fourteenth century, although less catastrophic in Castile than in the Crown of Aragon, provoked at least a temporary crisis of manpower, which may have helped to give the economy a further twist in the direction of sheep-farming.

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by | 13 March 2012 · 6:59 pm

Prussian Progressivism: Hegel to Marx

From: Iron Kingdom: The Rise and Downfall of Prussia, 1600-1947, by Christopher Clark (Penguin, 2007), Kindle Locs. 8160-96, 8229-40 (pp. 431-434):

The one institution that all Prussians had in common was the state. It is no coincidence that this period witnessed an unprecedented discursive escalation around the idea of the state. Its majesty resonated more compellingly than ever before, at least within the milieu of academia and senior officialdom. No individual did more to promulgate the dignity of the Prussian state after 1815 than Georg Wilhelm Friedrich Hegel, the Swabian philosopher who took up Fichte’s vacant chair at the new University of Berlin in 1818. The state, Hegel argued, was an organism possessing will, rationality and purpose. Its destiny – like that of any living thing – was to change, grow and progressively develop. The state was ‘the power of reason actualising itself as will’; it was a transcendent domain in which the alienated, competitive ‘particular interests’ of civil society merged into coherence and identity. There was a theological core to Hegel’s reflections on the state: the state had a quasi-divine purpose; it was ‘God’s march through the world’; in Hegel’s hands it became the quasi-divine apparatus by which the multitude of subjects who constituted civil society was redeemed into universality.

In adopting this approach, Hegel broke with the view prevalent among Prussian political theorists since Pufendorf and Wolff that the state was no more than a machine engineered to meet the external and internal security needs of the society that fashioned it. Hegel vehemently rejected the metaphorical machine-state favoured by theorists of the high enlightenment, on the grounds that it treated ‘free human beings’ as if they were mere cogs in its mechanism. The Hegelian state was not an imposed construct, but the highest expression of the ethical substance of a people, the unfolding of a transcendent and rational order, the ‘actualization of freedom’. From this it followed that the relationship between civil society and the state was not antagonistic, but reciprocal. It was the state that enabled civil society to order itself in a rational way, and the vitality of the state depended in turn upon each of the particular interests that constituted civil society being ‘active in its particular function – equipping itself for its particular sphere and thereby promoting the universal’.

Hegel’s was not a liberal vision – he was not a champion of unitary national legislatures, having seen what they were capable of in Jacobin France. But the progressive orientation of his vision was undeniable. For all his misgivings about the Jacobin experiment, Hegel celebrated the French Revolution as a ‘splendid dawn’ that had been greeted with joy by ‘all thinking people’. Hegel’s Berlin students were told that the Revolution represented an ‘irreversible achievement of the world spirit’ whose consequences were still unfolding. The centrality of reason and a sense of forward momentum suffuse his reflections on the state at every point. There was no place in the Hegelian polity for privileged castes and private jurisdictions. And by elevating the state above the plane of partisan strife, Hegel brought into view the exhilarating possibility that progress – in the sense of a beneficent rationalization of the political and social order – might simply be a property of the unfolding of history, as embodied in the Prussian state.

It is difficult, from a present-day standpoint, to appreciate the intoxicating effect of Hegel’s thought on a generation of educated Prussians. It was not a question of Hegel’s pedagogical charisma – he was notorious for standing hunched over the lectern reading out his text in a halting and scarcely audible mumble. According to an account by his student Hotho, who attended Hegel’s lectures at the University of Berlin, ‘his features hung pale and loose upon him as if he were already dead.’‘He sat there morosely with his head wearily bowed down in front of him, constantly leafing back and forth through his compendious notes, even as he continued to speak.’ Another student, the future Hegel-biographer Karl Rosenkranz, recalled laborious paragraphs punctuated by constant coughing and snuff-taking.

It was the ideas themselves and the peculiar language Hegel invented to articulate them that colonized the minds of disciples across the kingdom. Part of the explanation lies in the context. Hegel’s appointment was the work of the sometime Hardenberg protégé, enlightened reformer and Minister of Education Karl von Altenstein. The philosopher’s writings provided an exalted legitimation for the Prussian bureaucracy, whose expanding power within the executive during the reform era demanded justification.

…

Throughout the nineteenth and well into the twentieth century, the ‘Prussian school’ of history would remain overwhelmingly focused on the state as the vehicle and agent of historical change.

After the philosopher’s death during the cholera epidemic of 1831, Hegelianism disintegrated into warring schools and passed through swift ideological mutations. Among the raucous ‘Young Hegelians’ who coalesced in Berlin in the late 1830s was the youthful Karl Marx, a new Prussian from the Rhineland and the son of a Jewish convert to Christianity, who had moved to Berlin in 1836 to continue his studies in jurisprudence and political economy. For Marx, the first true encounter with Hegel’s thought was a revelatory shock akin to a religious conversion. ‘For some days’, he told his father in November 1837, his excitement made him ‘quite incapable of thinking’; he ‘ran about madly in the garden by the dirty water of the Spree’, even joined his landlord on a hunting excursion, and found himself overpowered by the desire to embrace every street corner loafer in Berlin. Marx would later reject Hegel’s understanding of the state bureaucracy as the ‘general estate’, but it stayed with him none the less. For what else was Marx’s idealization of the proletariat as the ‘pure embodiment of the general interest’ than the materialist inversion of the Hegelian concept? Marxism, too, was made in Prussia.

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by | 13 March 2012 · 10:44 am

The Financial Ascent of the Dutch VOC

From: The Ascent of Money: A Financial History of the World, by Niall Ferguson (Penguin, 2008), Kindle Loc. 1780-1831:

The campaign for a reform of what would now be called the VOC’s corporate governance duly bore fruit. In December 1622, when the Company’s charter was renewed, it was substantially modified. Directors would no longer be appointed for life but could serve for only three years at a time. The ‘chief participants’ (shareholders with as much equity as directors) were henceforth entitled to nominate ‘Nine Men’ from among themselves, whom the Seventeen Lords were obliged to consult on ‘great and important matters’, and who would be entitled to oversee the annual accounting of the six chambers and to nominate, jointly with the Seventeen Lords, future candidates for directorships. In addition, in March 1623, it was agreed that the Nine Men would be entitled to attend (but not to vote at) the meetings of the Seventeen Lords and to scrutinize the annual purchasing accounts. The chief participants were also empowered to appoint auditors (rekening-opnemers) to check the accounts submitted to the States-General. Shareholders were further mollified by the decision, in 1632, to set a standard 12.5 per cent dividend, twice the rate at which the Company was able to borrow money. The result of this policy was that virtually all of the Company’s net profits thereafter were distributed to the shareholders. Shareholders were also effectively guaranteed against dilution of their equity. Amazingly, the capital base remained essentially unchanged throughout the VOC’s existence. When capital expenditures were called for, the VOC raised money not by issuing new shares but by issuing debt in the form of bonds. Indeed, so good was the Company’s credit by the 1670s that it was able to act as an intermediary for a two-million-guilder loan by the States of Holland and Zeeland.

None of these arrangements would have been sustainable, of course, if the VOC had not become profitable in the mid seventeenth century. This was in substantial measure the achievement of Jan Pieterszoon Coen, a bellicose young man who had no illusions about the relationship between commerce and coercion. As Coen himself put it: ‘We cannot make war without trade, nor trade without war.’ He was ruthless in his treatment of competitors, executing British East India Company officials at Amboyna and effectively wiping out the indigenous Bandanese. A natural-born empire builder, Coen seized control of the small Javanese port of Jakarta in May 1619, renamed it Batavia and, aged just 30, duly became the first governor-general of the Dutch East Indies. He and his successor, Antonie van Diemen, systematically expanded Dutch power in the region, driving the British from the Banda Islands, the Spaniards from Ternate and Tidore, and the Portuguese from Malacca. By 1657 the Dutch controlled most of Ceylon (Sri Lanka); the following decade saw further expansion along the Malabar coast on the subcontinent and into the island of Celebes (Sulawesi). There were also thriving Dutch bases on the Coromandel coast. Fire-power and foreign trade sailed side by side on ships like the Batavia – a splendid replica of which can be seen today at Lelystad on the coast of Holland.

The commercial payoffs of this aggressive strategy were substantial. By the 1650s, the VOC had established an effective and highly lucrative monopoly on the export of cloves, mace and nutmeg (the production of pepper was too widely dispersed for it to be monopolized) and was becoming a major conduit for Indian textile exports from Coromandel. It was also acting as a hub for intra-Asian trade, exchanging Japanese silver and copper for Indian textiles and Chinese gold and silk. In turn, Indian textiles could be traded for pepper and spices from the Pacific islands, which could be used to purchase precious metals from the Middle East. Later, the Company provided financial services to other Europeans in Asia, not least Robert Clive, who transferred a large part of the fortune he had made from conquering Bengal back to London via Batavia and Amsterdam. As the world’s first big corporation, the VOC was able to combine economies of scale with reduced transaction costs and what economists call network externalities, the benefit of pooling information between multiple employees and agents. As was true of the English East India Company, the VOC’s biggest challenge was the principal-agent problem: the tendency of its men on the spot to trade on their own account, bungle transactions or simply defraud the company. This, however, was partially countered by an unusual compensation system, which linked remuneration to investments and sales, putting a priority on turnover rather than net profits. Business boomed. In the 1620s, fifty VOC ships had returned from Asia laden with goods; by the 1690s the number was 156. Between 1700 and 1750 the tonnage of Dutch shipping sailing back around the Cape doubled. As late as 1760 it was still roughly three times the amount of British shipping.

The economic and political ascent of the VOC can be traced in its share price. The Amsterdam stock market was certainly volatile, as investors reacted to rumours of war, peace and shipwrecks in a way vividly described by the Sephardic Jew Joseph Penso de la Vega in his aptly named book Confusión de Confusiones (1688). Yet the long-term trend was clearly upward for more than a century after the Company’s foundation. Between 1602 and 1733, VOC stock rose from par (100) to an all-time peak of 786, this despite the fact that from 1652 until the Glorious Revolution of 1688 the Company was being challenged by bellicose British competition. Such sustained capital appreciation, combined with the regular dividends and stable consumer prices, ensured that major shareholders like Dirck Bas became very wealthy indeed. As early as 1650, total dividend payments were already eight times the original investment, implying an annual rate of return of 27 per cent. The striking point, however, is that there was never such a thing as a Dutch East India Company bubble. Unlike the Dutch tulip futures bubble of 1636-7, the ascent of the VOC stock price was gradual, spread over more than a century, and, though its descent was more rapid, it still took more than sixty years to fall back down to 120 in December 1794. This rise and fall closely tracked the rise and fall of the Dutch Empire. The prices of shares in other monopoly trading companies, outwardly similar to the VOC, would behave very differently, soaring and slumping in the space of just a few months.

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Filed under Britain, economics, Indonesia, Netherlands, piracy, Portugal, Spain, Sri Lanka, war

by | 11 September 2011 · 8:21 am

Rosa’s Route to Apostasy

From Looking for History: Dispatches from Latin America, by Alma Guillermoprieto (Vintage, 2001), pp. 33-35:

[Rosa’s] family was well off by the standards of the provincial backwater she was brought up in, but her father, a devout Catholic, had strong sympathy for the labor movement. One of her first memories is of learning the songs of the Fifth Regiment of the Spanish Republican Army from activist priests who taught at her school. They told her about Dolores Ibarruri, “La Pasionaria,” the Basque miner’s daughter who during the Civil War exhorted the Republican troops to fight for liberty and face down death. Rosa was barely a teenager when she took to singing the Civil War hymns herself, to cheer on workers during strikes. At university, swept up in the radical fervor of the times, Rosa and her friends were soon helping campesino organizations coordinate invasions of privately owned ranches, set up roadblocks, and stockpile whatever weapons they could find for the coming revolution.

Although the FARC already existed, it was seen by many as old hat and insufficiently idealistic, and new guerrilla groups, and what used to be called “preparty formations,” multiplied. The Ejército de Liberación Nacional, or ELN, as well as the Quintín Lame, an armed Indian rights group; the Partido Revolucionario de los Trabajadores; the M-19—all came into being. By the late seventies Rosa was closely identified with another of the groups to emerge from the university crucible, the Ejército Popular de Liberación, or EPL. The group was strong in the area of Cordoba, where in those days the population was fairly clearly divided between poor campesinos and the people with money who owned cattle ranches and farms where bananas and oil palms were grown.

How Rosa’s destiny took her from the EPL to the heart of paramilitary power is, in her telling, a long, breathtaking, and not always reliable story, but she is only one of many defectors from the fanatic left to join the ranks of the murderous right. The autodefensas claim that fully one-third of their troops are former guerrillas, and even if one disputes the figures, there is no doubting the general trend. Rosa’s life, however, is unusual even in Colombia, where reality always seems to flow out of someone’s dream, or nightmare.

The first thing that bothered Rosa about her leftist associates was what one might describe as their impact on the political ecology of the departamento of Córdoba. At the height of the revolutionary ferment, there were six different guerrilla organizations prowling around the hills in Rosa’s region, each one demanding that the campesinos pay “taxes” to finance their coming liberation. “If a campesino had five cows, he had to give up one,” Rosa says. “The guerrillas were eating up all the money from the NGOs [nongovernmental organizations]. They were hijacking mules. They were emptying out the community stores.”

None of these organizations, however, was capable of defending the campesinos when the ranchers—including many drug traffickers turned aspiring landed gentry—began organizing assassination squads to deal with guerrilla collaborators. “Those people were terrible masacradores,” Rosa says. “The rank and file were ranch guards, ranchers, drug traffickers, and everything you’ve heard about the [murders committed with] chainsaws, axes, and machetes is true.” Although the guerrillas could not defeat the paramilitary squads, they did rather well when it came to turning on each other. One guerrilla group, the ELN, tried to dispute the EPL’s local hegemony, Rosa recalls. “The ELN wanted to rule,” she says. “And they killed whoever didn’t obey.”

One day the campesinos decided they’d had enough of multiple taxes and the conflicting, deadly demands on their political loyalties. The first one to rebel was a fisherman who turned on an ELN patrol that had approached him for money. In Rosa’s description, the fisherman hacked a young man and a young woman guerrilla to death. “Campesinos don’t know how to kill,” Rosa observes dryly, having dwelt on the scene in some detail. “And when someone kills who doesn’t know how to do it, he kills monstrously.”

As for her own apostasy from the revolutionary cause, Rosa says it took place sometime after she was kidnapped in 1991 by one of the leaders of the antiguerrilla squads, the paramilitares. She had already decided by then that her commitment was to the campesinos and not the guerrillas, she says. Then came the kidnapping. She was abducted, she told me, after participating in a land invasion of a ranch owned by a well-known paramilitar. Her captors took her to a camp where “a fat man” was put in charge of torturing her to get information about the guerrillas. He broke off her teeth with pliers. (She paused in her narrative to show me that all her upper teeth had caps.) She was tied down while the fat man jumped on her stomach. She was forced to stand, bleeding, through the rest of the night, wondering when her execution would take place. At dawn, she was told to start walking. The bullet in the back she was expecting never came (“maybe because I never gave them the information they wanted, and they got tired of torturing me”). She kept walking and eventually found her way to her parents’ house.

The lesson she appears to have drawn from this episode is not what one would expect. “After that time,” Rosa explains, she and her kidnapper respected each other. “Me on this side, you on that one, we both agreed.” “It’s funny how life is,” she said, in conclusion to her narrative. “Because the guy who ordered the fat man to torture me and I are now pretty good friends.” Presumably, this is because a few months after her abduction she crossed over to her enemy’s side.

By then, Rosa says, a majority of the guerrilla group she was involved with, the EPL, had decided that a revolutionary war could not successfully be fought in Colombia, and had turned their weapons in, changing their organization’s name, but not its initials, to Esperanza, Paz y Libertad (Hope, Peace, and Liberty). Peace was not forthcoming, however, because the FARC guerrillas soon appeared with their own guns and tried to establish control in the void they perceived had been created by the despised pacifists. The FARC began executing former EPL guerrillas. The survivors and their campesino supporters felt they had no option except to join forces with the right-wing paramilitary leaders who had tortured Rosa and murdered many other comrades.

This dispatch was dated April 13, 2000.

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Filed under Colombia, drugs, economics, education, military, NGOs, war

by | 8 September 2011 · 9:19 pm

The Making of Evita Duarte

From Looking for History: Dispatches from Latin America, by Alma Guillermoprieto (Vintage, 2001), pp. 6-8:

The facts of Evita’s early life coincide nicely with those of the poor she came to represent: she was, like so many others, born of a destitute woman who found it expedient, and possibly gratifying, to take a wealthy and powerful lover. (Juan Duarte was a landowner and small-town caudillo, or political boss, in a rural area about ninety miles west of Buenos Aires, and he was properly married. Juana Ibarguren was a woman he spent many nights with and was the mother of five of Duarte’s children, of whom Eva Maria, born in 1919, was the youngest.) Like so many children born of these arrangements in a country where upper-class snobbery reaches extremes of refinement and viciousness, Eva was humiliated by her bastard status. (Juana Ibarguren and her children, who lived in a one-room house, were kept away from Juan Duarte’s elegant funeral, but were allowed to say a quick farewell to the corpse at the wake.) Eva migrated on her own from the sticks to Buenos Aires at age fifteen, and, like so many of the expanding capital’s other new residents, she looked for opportunity and found it lacking. She shared with her class a gnawing, all-encompassing resentment that was the precise counterpart of the seething contempt the ruling class cultivated for the plebes. Most important, neither she nor her fellow poor were inclined to be fatalistic. The Argentina that Eva Duarte grew up in was a nation of recent immigrants—Italian anarchist farmers, Spanish socialist shopkeepers, conservative German merchants—who had brought their politics with them when they migrated, and who firmly believed that they deserved the better life they were willing to work so hard for.

Perón—himself born out of wedlock, and pursuing upward mobility through an army career—was their catalyst. He was a cynical politician who systematically played off his followers against one another, often with tragic results, and his authoritarian approach to government probably grew out of his intense admiration for Franco and Mussolini. It may well be the case that he (and Eva) provided shelter for Nazis fleeing Europe after the Axis collapse, in exchange for a significant part of the Third Reich’s treasure—Dujovne works hard to try to prove it in her biography—but generations of Argentines have remained impervious to these accusations, because of what Perón gave them: a political movement that legitimated and ennobled the working poor, and a decisive restructuring of the state which—by nationalizing key resources, establishing generous social-welfare programs, and institutionalizing a crony relationship between organized labor and the government—transformed Argentina from a sugar daddy for the rich into a sugar daddy for the poor. Perón was only one of several upstart colonels when Evita thanked him for existing, and his speeches did not then, or ever, reveal the kind of substantial political thinking that gets translated into lasting programs or gets used to interpret reality in other parts of the world, but he cannot simply be written off as a demagogue. He had a vision of a free Argentina: a nation that under his verticalista guidance would steer clear of both sides in the Cold War, and in which law and order would prevail, government would be responsive to the needs of its citizens, and workers would get the respect their efforts deserved. In that sense, he was revolutionary, and Eva Duarte, like millions of others, responded instantly to his appeal. As for his aloof, diffident personality (he liked to describe himself as “a herbivorous lion”), it, too, was a virtue, for it turned him into an empty vessel that Evita could fill with her faith.

Eva Duarte’s role in history was determined within months of her first encounter with the colonel. One day she was a source of hilarity for upper-class women, who made a point of tuning in to her “Famous Women” broadcasts. (“What a daily pleasure, this nasal voice who played [Catherine of Russia] with rural tango accents!” one said.) The next, she had secured her movie role in Circus Cavalcade, because she was already the established mistress of Juan Perón, a man not known for passion, who had nevertheless rented an apartment in Eva’s building so that he could be near her without violating the moral code. His new lover was not easy or pleasant to live with—she threw tantrums, demanded in public that he marry her, and soon displayed her contempt for all but his most slavishly devoted political associates—yet despite these defects she was the perfect woman for him, because she pushed him beyond his own apathy.

This book was one of my last two purchases from my local Border’s before it went out of business. My favorite history shelves were still much fuller than many of the other shelves in the sad-looking store.

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Filed under Argentina, biography, democracy, economics

by | 7 July 2011 · 8:53 pm

Breadlines in the U.S. and Ukraine, 1933

Bloodlands: Europe Between Hitler and Stalin, by Timothy Snyder (Basic Books, 2010), Kindle Loc. 533-575 (pp. 21-22):

Nineteen thirty-three was a hungry year in the Western world. The streets of American and European cities teemed with men and women who had lost their jobs, and grown accustomed to waiting in line for food. An enterprising young Welsh journalist, Gareth Jones, saw unemployed Germans in Berlin rally to the voice of Adolf Hitler. In New York he was struck by the helplessness of the American worker, three years into the Great Depression: “I saw hundreds and hundreds of poor fellows in single file, some of them in clothes which once were good, all waiting to be handed out two sandwiches, a doughnut, a cup of coffee and a cigarette.” In Moscow, where Jones arrived that March, hunger in the capitalist countries was cause for celebration. The Depression seemed to herald a world socialist revolution. Stalin and his coterie boasted of the inevitable triumph of the system they had built in the Soviet Union.

Yet 1933 was also a year of hunger in the Soviet cities, especially in Soviet Ukraine. In Ukraine’s cities—Kharkiv, Kiev, Stalino, Dnipropetrovsk—hundreds of thousands of people waited each day for a simple loaf of bread. In Kharkiv, the republic’s capital, Jones saw a new sort of misery. People appeared at two o’clock in the morning to queue in front of shops that did not open until seven. On an average day forty thousand people would wait for bread. Those in line were so desperate to keep their places that they would cling to the belts of those immediately in front of them. Some were so weak from hunger that they could not stand without the ballast of strangers. The waiting lasted all day, and sometimes for two. Pregnant women and maimed war veterans had lost their right to buy out of turn, and had to wait in line with the rest if they wanted to eat. Somewhere in line a woman would wail, and the moaning would echo up and down the line, so that the whole group of thousands sounded like a single animal with an elemental fear.

People in the cities of Soviet Ukraine were afraid of losing their place in breadlines, and they were afraid of starving to death. They knew that the city offered their only hope of nourishment. Ukrainian cities had grown rapidly in the previous five years, absorbing peasants and making of them workers and clerks. Ukrainian peasant sons and daughters, along with the Jews, Poles, and Russians who had inhabited these cities for much longer, were dependent upon food they obtained in shops. Their families in the country had nothing. This was unusual. Normally in times of hunger city dwellers will make for the countryside. In Germany or the United States the farmers almost never went hungry, even during the Great Depression. Workers and professionals in cities were reduced to selling apples, or stealing them; but always somewhere, in the Altes Land or in Iowa, there was an orchard, a silo, a larder. The city folk of Ukraine had nowhere to go, no help to seek from the farms. Most had ration coupons that they would need to present in order to get any bread. Ink on paper gave them what chance to live that they had, and they knew it.

The proof was all around. Starving peasants begged along the breadlines, asking for crumbs. In one town, a fifteen-year-old girl begged her way to the front of the line, only to be beaten to death by the shopkeeper. The city housewives making the queues had to watch as peasant women starved to death on the side-walks. A girl walking to and from school each day saw the dying in the morning and the dead in the afternoon. One young communist called the peasant children he saw “living skeletons.” A party member in industrial Stalino was distressed by the corpses of the starved that he found at his back door. Couples strolling in parks could not miss the signs forbidding the digging of graves. Doctors and nurses were forbidden from treating (or feeding) the starving who reached their hospitals. The city police seized famished urchins from city streets to get them out of sight. In Soviet Ukrainian cities policemen apprehended several hundred children a day; one day in early 1933, the Kharkiv police had a quota of two thousand to fill. About twenty thousand children awaited death in the barracks of Kharkiv at any given time. The children pleaded with the police to be allowed, at least, to starve in the open air: “Let me die in peace, I don’t want to die in the death barracks.”

Hunger was far worse in the cities of Soviet Ukraine than in any city in the Western world. In 1933 in Soviet Ukraine, a few tens of thousands of city dwellers actually died of starvation. Yet the vast majority of the dead and dying in Soviet Ukraine were peasants, the very people whose labors had brought what bread there was to the cities. The Ukrainian cities lived, just, but the Ukrainian countryside was dying. City dwellers could not fail to notice the destitution of peasants who, contrary to all seeming logic, left the fields in search of food. The train station at Dnipropetrovsk was overrun with starving peasants, too weak even to beg. On a train, Gareth Jones met a peasant who had acquired some bread, only to have it confiscated by the police. “They took my bread away from me,” he repeated over and over again, knowing that he would disappoint his starving family. At the Stalino station, a starving peasant killed himself by jumping in front of a train. That city, the center of industry in southeastern Ukraine, had been founded in imperial times by John Hughes, a Welsh industrialist for whom Gareth Jones’s mother had worked. The city had once been named after Hughes [Yuzovka (Юзовка)]; now it was named after Stalin. (Today it is known as Donetsk.)

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Filed under democracy, economics, food, U.S., Ukraine, USSR