Category Archives: opium

Inside the Bubble, Shanghai, 1939

From Last Boat Out of Shanghai, by Helen Zia (Ballantine, 2019), Kindle pp. 81-82:

Blinded by their own good fortune and privilege, the children of Shanghai’s elite didn’t notice when their own neighbors couldn’t afford to buy food. Essentials such as rice, cooking oil, medicines, and fuel became scarce at any price. The Japanese military that surrounded Shanghai controlled the flow of goods, seizing whatever it wanted for its war effort or for its comfort. Scarcity drove prices into a dizzying inflationary spiral as hoarders and speculators gorged themselves on the desperation of others—those who couldn’t afford to pay black market prices starved. Without kerosene or coal, the poorest had frozen in the two harsh winters that had come and gone since the start of the war. Bodies of the poor and homeless lay as rotting detritus on the streets and alleys of Shanghai until corpse-removal trucks eventually took them away.

Benny didn’t have to think about the present when his future seemed predetermined and rosy, war or no war. Since he had passed the difficult entrance exam for admission to St. John’s Junior Middle School, his path all the way to its eponymous university was automatic as long as he continued to pass his courses. His parents had no worries for their son when everyone knew that doors opened for St. John’s graduates. They stood out in every crowd, speaking fluent English and carrying themselves as though they were proper English gentlemen and ladies. At both St. John’s and its sister institution, St. Mary’s Hall, classes were taught in English. Thanks to his alumni parents, Benny could already speak English well and would fit right in. So many of China’s most powerful political, business, and intellectual leaders had studied at its schools: T. V. Soong, former finance minister and governor of the Central Bank of China; Wellington Koo, representative to the League of Nations and ambassador to France; Lin Yutang, influential writer and philosopher; and a long list of others. The well-connected were well served. That was the Chinese way.

With his pedigree and school ties, Benny was set. Still, the boy harbored a secret wish for himself. He wanted to chart his own course, the way his father must have when he left accounting to join the police ranks. Benny hoped to pursue medicine when he reached college, for St. John’s had a medical school that was affiliated with the University of Pennsylvania in America.

But there were plenty of pitfalls in the sin city for boys like him. Shanghai was notorious for its spoiled firstborn sons who had nothing better to do than become playboys, squandering their families’ wealth on opium, women, and gambling, bringing shame to their families. Benny’s mother and her friends gossiped about the latest scandals about young men from reputable families during their all-night mah-jongg games. “Pay attention in school, and stay away from those bad boys,” she’d admonish her son afterward.

“Yes, Mother,” he’d reply obediently. Benny had already resolved to stay away from opium. He’d known what the narcotic had done to his grandfather.

Benny could easily have pursued a life of pleasure, as other Shanghai scions did. His family appeared to have unlimited resources. His father was thriving in spite of the war. Or as others might say, because of it.

Just as Benny didn’t see the beggars all around him, he had never thought about the ample food and luxurious goods that his police inspector father managed to bring home at a time when rice riots were breaking out in the city. Benny didn’t wonder how his mother could continue her shopping habits that allowed her to dress in the latest foreign fashions, adorned with ever-fancier jewelry. It was unthinkable for proper Chinese children to question their parents. Even when Benny noticed that some of his father’s associates looked rather tough and unsavory, like the kind of men that his mother warned him to avoid when he rode his bicycle, he would have never thought to ask about them. They were just people that a police inspector needed to know, like the assortment of British, Americans, Russians, Japanese, and other foreigners with whom his father dealt.

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Filed under Britain, China, economics, education, Japan, language, opium, U.S., war

American Independence & Chinese Silver Imports

The June 2009 issue of Journal of World History has an enlightening bit of historical revisionism by Alejandra Irigoin entitled The End of a Silver Era: The Consequences of the Breakdown of the Spanish Peso Standard in China and the United States, 1780s–1850s (Project MUSE subscription required). Here are her conclusions (pp. 238-239).

This article argues for revision of traditional views of the global silver trade with China in the late eighteenth and early nineteenth centuries. Section I shows that the existing historiography tends to ignore that silver imports into China continued for longer than normally acknowledged and at increased levels up to the 1820s. New evidence shows that the structure of the silver trade changed substantially when US merchants became central intermediaries between Spanish American silver “producers” and Chinese “consumers,” when Chinese imports of silver consisted increasingly of Spanish American coins, the so-called pillar and bust dollars.

Section II explores the role of Americans as intermediaries who increased trade with Spanish America in order to obtain silver coins needed to trade with China. The timing of the flow of silver out of China to pay for opium purchases is challenged, as is opium as a cause for the desilverization of China. This article also questions received wisdom that reduction in the supply of silver owing to Spanish American independence was the root cause of silver scarcity in China in the early nineteenth century. This received wisdom ignores a fundamental fact: Spanish America itself was a significant reservoir of silver coins in the world. Thus, (relatively minor) interruptions in the production of silver—at different points in time and in distinct places—in South America during Independence were unlikely to account for supply shortages in China, and continued exports of silver into the United States confirm this view. Hence, the fall in Chinese silver imports must be a function of demand-side forces in addition to supply-side problems.

Spanish American independence presented a different problem to the global economy. The Spanish Empire broke up into a multitude of distinct states in the wake of independence, each fiscally and monetarily autonomous. In other words, the largest monetary union of the premodern world had collapsed. The resulting fragmentation of coinage and seigniorage across postindependent Spanish America terminated a silver standard that had organized international trade throughout the early modern world, East and West and in between. New republican governments, especially in regions with silver endowments, took over mint houses in the service of local and regional interests. Coins minted in various mint houses began to diverge in quality and fineness, whereupon the universal standard of the Spanish silver peso was definitively lost.

Section IV advances the central argument of this paper, namely that Chinese demand for silver, at least since the late eighteenth century, involved demand for a certified and reliable means of payment, as opposed to silver in some generic sense. “Good” colonial Spanish American coins traded at a premium over the sycee [ingot] equivalent, clearly confirming this point. Fragmentation of the Spanish monetary standard after independence had a devastating influence on Chinese demand. The impact of Spanish American independence on China’s economy operated through deterioration of coin quality, not through quantities of silver per se. By contrast, the United States used Spanish dollars as legal tender under the control of central monetary authorities, thereby succeeding in keeping new peso coins in circulation for a decade or more.

The end of the silver standard following independence in Spanish America during the 1810s and the 1820s had major consequences for development of the global economy before the gold standard. On one hand, termination of the silver era contributed to the poor economic performance of the Chinese economy. A lack of high-quality, reliable Spanish pesos between the 1820s and the 1850s, rather than insufficient silver mining, largely explains the fall in Chinese silver imports. Hence, I argue that the Chinese silver trade in these decades was demand-side rather than supply-side (mining) driven. Consequences for the internal market in China were manifold, including increased transaction costs, fragmentation of markets, and credit shortages. On the other hand, the United States reacted differently—and with a different timing—to termination of the silver standard. Immediate detrimental effects were weathered by workings of a well-integrated banking system, a quasi–monetary authority, and assay by the mint. Ultimately, this article poses an important comparative question for economic historians: in light of the US response, why did the Chinese empire never monopolize seigniorage, and why did it fail to provide reliable control of its currency system in the face of high costs for the domestic Chinese economy? Answers fall well beyond the scope of this article, of course, but the question should at least be framed in a global context.

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Filed under China, economics, Latin America, opium, Spain, U.S.

Japanese Army Drug Lords of Manchuria

Furumi Tadayuki (1900-83), who served as assistant director-general for administrative affairs in Manzhouguo, once said: “Manzhouguo is an immense installation created by a top secret fund of the Guandong Army.” The Japanese army was able to engage in extensive activities, such as intelligence gathering, throughout Asia, because it had sufficient funds which Manzhouguo siphoned off. This practice cast a huge shadow over postwar Japanese politics, beginning right with Prime Minister Kishi Nobusuke (1896-1987). The basic source for the monetary fund was opium. This was the problem which Gotō Shinpei worked hardest on in Taiwan; by making the sale of opium a monopoly, Gotō tried gradually to reduce the quantity of it available. He took the same approach in Manzhouguo, and although it was said to have been well regulated in Manzhouguo, this was in fact not the case. Opium production provided the richest source for such a slush fund. It was not only produced in Manchuria, but steadily flowed into Manzhouguo via Turkey, India, and Shanghai. The opium produced colosgal profits which became the financial source for Japan’s military schemes. The very fact that Amakasu Masahiko (1890-1945) gained such power in Manchuria was due to this money. While Kishi was a mere bureaucrat, Amakasu had at his disposal a slush fund of some ten million yen—which would come to ninety billion yen (roughly $800 million) today—for his special operations. This is difficult to prove on the basis of documents, the only corroboration being oral testimony, but younger scholars are now examining materials in such places as the Public Record Office in Great Britain on the remittance of opium, and this issue will probably be cleared up in the not-too-distant future.

SOURCE: Manchuria under Japanese Dominion, by Yamamuro Shin’ichi, trans. by Joshua A. Fogel (U. Penn. Press, 2006), pp. 231-232

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Filed under China, Japan, opium