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San José State University Department of Economics |
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applet-magic.com Thayer Watkins Silicon Valley & Tornado Alley USA |
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the Economy of Hong Kong |
The story of Hong Kong is one of the most important in human history. Although Hong Kong was not created until the mid-19th century the story starts much earlier with the development of the distinctive features of Chinese civilization. Chinese civilization arose about 2000 BCE in the Yellow River (Huanghe) Valley of north China. It arose late compared to the other river valley civilizations of the Nile and the Tigris-Euphrates, but it had a meteoric rise to brilliance. By 500 BCE it had a technology that was more than a thousand years ahead of the Middle East and Europe. For example, at that time Chinese metal workers could cast multi-ton objects of iron when no one else in the world could melt into liquid even one ounce of iron. It was more than a thousand years later that metal workers in Europe could cast such large objects. But it was not just in metallurgy that Chinese civilization was far advanced over the rest of the world. See Ancient China's Advanced Technology.
During this ancient time there were many different Chinese kingdoms and it was called the Warring States period. This came to an end about 300 BCE when the aramies of the king of Qin (Chin) in northwest conquered the other seven major kingdoms. This was the creation of the Chinese Empire. The First Emperor destroyed the power of the feudal hierarchies in the separate kingdoms by creating a class of administrator-bureaucrats to run the empire. These bureaucrats were called Legalists. They had a particularly harse philosophy of governance. Fortunately their governance did not long survive. Fifteen years after the death of the First Emperor his empire and dynasty collapsed. The Han state rose to take over the control of the empire. The Han leaders liked the idea of an organization of bureaucrats to run their empire, but the Han leaders chose scholars through a competitive examination to fill the administrative positions in the government. These mandarins were more humane than the legalists of the Qin Empire but their long term effect on Chinese civilization was stagnation.
The mandarins may have had some benefits for the Chinese civilization but they as a class did not want anyone rocking the boat and endangering the exhalted position of the mandarins. The mandarins suppressed innovations and created technological stagnation. The level of technology of ancient China was so high that even though it had stagnated under the mandarins it remained the most advanced in the world for many centuries.
Even as late as the early 1400's China was vastly superior to Europe in naval technology. The Empire sent armadas of ships into the Indian Ocean which visited what is now Indonesia, India, the Persian Gulf and East Africa. These armadas carried as many as thirty thousand people. But bureacratic infighting led to the destruction of these ships and an inward turning of Chinese civilization. For more on this see Treasure Fleets.
China continued to be technically superior to the outside world until the time of the Industrial Revolution. It was also probably the largest economy of the world up until about that time.
At the time of European contact the Chinese leaders, with good reason, saw their civilization as superior to that of the Europeans even as that superiority was being lost. For the European traders visiting the Chinese Empire there were wonderous products, such as tea and porcelain, available only in China which they wanted. However the leaders of the Chinese Empire decided that the Europeans could not have any products that the Chinese would want except precious metals. Therefore the Europeans were not allowed to bring any European products to exchange for the Chinese products. So the European traders paid in silver. Over the centuries silver was flowing from the Americas to Europe and from there to the Chinese Empire. This drain of silver made it more and more difficult for the Europeans to get the Chinese products they wanted. Silver was becoming scarcer outside and more plentiful inside the Empire.
It was not that the Chinese population did not want the products the European traders would have available; it was that the Chinese government, under severe penalties, prevented the Chinese from buying those goods. Over time the Chinese government relented and allowed the importation of textiles such as cotton goods from India and wollens from Britain. There was however one product that had such a demand that there were Chinese who were willing to risk the punishment of government to buy it from the outside traders. That product was opium.
The human body naturally produces some chemicals, called endomorphins, which can reduce pain and calm the spirit. These chemicals have a survival value in nature. An animal that is injured and is incapacitated by the pain has little chance of survival. However animals whose brains produce in times of crisis chemicals which allow them to cope with pain and fear have a better chance of survival.
There are some plants which produce chemicals close enough in chemistry to duplicate the effect of the endomorphins. The opium poppy is one of those plants.
The pharmacological properties of the opium poppy were discovered in ancient times apparently in the Middle East. Opium was listed in Assyrian texts on herbs and medicine. Greek texts from the first century A.D. describe opium. It is with the Greeks that the knowledge of opium spread east to India and China. It did not reach China until about the sixth century A.D. Cultivation of the opium poppy in Japan did not occur until about the 15th century.
Opium is obtained by scratching the immature opium flower pod. The sap which oozes from the cut dries and can be collected. This sap contained some chemicals such as morphine and codeine which are analgesics (pain killers) and others which relax the smooth muscles of the body. The morphine and codeine can be extracted and used to alleviate pain in the case of injuries or surgeries. In addition opium was dissolved in alcohol to produce a product called laudanum which was used treat diarrhea. Another form of this medicine involved camphor and was called paragoric.
The smoking of opium developed only after the practise of smoking tobacco was adopted from the Indians of the Americas. The attitude toward opium up through the 19th century was not much different than the attitude toward tobacco; i.e., that it was not a healthy practise but could be tolerated. The understanding of the mechanism of addiction came much later. It is only in recent decades that people came to accept that the nicotine of tobacco is addictive.
In the early 19th century opium was being grown and used from Anatolia to India. Its nonmedicinal use was accepted as a bad habit on par with the use of tobacco. It was not banned in the United States, for example. In China the practise of opium smoking was spreading and traders were finding that there were Chinese who were willing to risk the severe punishment the Empire can decreed for importing barbarian products to buy opium from India. The traders involved were not necessarily just Europeans; there were people from India who were handling the trade, including Parsis from west India. (The Parsis were the descedants of the Zoroastrians who fled the Persian Empire at the time of its conquest by Muslims.)
By the 1830's there were some government officials who were concerned at the growing number of opium smokers, the outflow of silver to pay for the opium and the corruption of lower level government officials who permitted this trade. One of those officials concerned with the growing influence of the opium trade was Lin Tse-hsu who was the governor-general of the province of Hu-Kuang.
Lin carried out a program of suppression of opium smoking in his province by first giving amesty to those who voluntarily gave up their stocks of opium and their pipes. Thereafter anyone caught with opium was executed. The program was a success and Lin sent a report to the Emperor in 1838 suggesting that this same program be implemented throughout the empire. Lin was made Imperial Commission in Canton (Guangdong) in South China that same year.
Lin then implemented the same program in Canton that he had carried out in Hu-Kuang. However, this time the program involved stocks of opium owned by foreign traders. Lin demanded the surrender of twenty thousand cases of opium stored in foreign ships. The British Superintendent of Trade, Captain Elliot, complied. A British trader, William Jardine, journied to London to complain of Lin's action. Lord Palmerston brought the matter up in the House of Commons but not in terms of the confiscation of the stocks of opium. Instead he charged that the Chinese Empire with maltreatment of British subjects, insults to the British flag, insults to representatives of the British government and the theft of goods owned by British citizens. The Hosue of Commons voted to sent an expeditionary force to China. This force consisted of three battleships, fourteen frigates, four armed steamships carring four thousand troops.
The expeditionary force was charged with demanding as reparation for the insults to representatives of the British government that either the cession of an island off the coast of South China or the proper security for the freedom of trade for British traders.
The expeditionary force assembled in Hong Kong harbor and then sailed north to attack Chusan Island. The force captured the capital city of Chusan, Tinghai. Captain Elliot, the British Superintendent of Trade, negotiated with Empire representatives. The Chinese lost another sea battle and sued for peace. The government representatives offered the cession of Hong Kong Island in return for Chusan Island. The government representatives also offered financial compensation for the confiscated opium.
On January 20, 1841 a treaty granting the British Hong Kong Island perpetuity was signed. The Emperor however repudiated the treaty negotiated by his representatives. The hostilities resumed and the Chinese forces were again defeated. A new treaty, the Treaty of Canton, again involved British gaining Hong Kong Island but under the condition that commercial taxes collected in Hong Kong would be turned over to the Chinese Empire. Lord Palmerston in London felt that the Captain Elliot had not negotiated an adequate agreement. Palmerston felt that Hong Kong was a poor trade for the island of Chusan. Outraged at Elliot's inadequate treaty Palmerston fired Elliot and replaced him with a more militant Sir Henry Pottinger. War soon broke out and British forces captured Shanghai and beseiged the southern capital of the Empire, Nanjing. To regain control of Nanjing the Empire accepted a new treaty which gave unconditional ownership of Hong Kong to Britain and opened the four ports of Shanghai, Amoy, Fuchow and Ningpo to British trade. The treaty also included the payment of cash to Britain.
(To be continued.)
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