trade and commerce 1857-90

• Historians have presented different interpretations about the importance of economic factors in driving the British Empire's expansion.

  Marxist interpretation

  • The Marxist interpretation of the British Empire focuses heavily on trade, seeing expansion as being driven by the ‘haves’ against the ‘have-nots
• Cecil Rhodes & Indian sepoys

  • In 1889, Cecil Rhodes (pictured) led soldiers employed by the British South Africa Company to the Limpopo river to create the colony of Rhodesia.
  • In India, sepoys were local Indian soldiers, employed by the East India Company. The East India Company was often able to pay soldiers on time and more reliably than local political or military leaders.
• Expanding trade and commerce was a defining feature of the British Empire.

  Adam Smith and Free Trade

  • The 18th-century focus on mercantilism and protectionism was dismantled in the first half of the 19th century by Adam Smith’s Wealth of Nations concept of ‘free trade’.
  • Mercantilism is the economic policy of a state that seeks to maximise the exports of the state while minimising the reliance on imports.
  • Protectionism is the restriction of foreign imports through measures like taxation.
• Adam Smith: Wealth of Nations (1776)

  • Smith argued that wealth could be infinite and that governments should not intervene in markets. Smith argued that individuals pursuing their selfish goals would lead to the optimal outcome because of the 'invisible hand' of the market.
  • This free-market doctrine became a dogma in the UK.
• Handling of the Irish Potato Famine

  • During the Irish Potato Famine, Parliament was reluctant to intervene because of its belief in free markets. It thought that if it helped Ireland, it would create a 'moral hazard' and make them reliant on UK money. Sir Robert Peel managed to send the Irish £100,000 worth of Maize, but his government collapsed and support stopped. The Economist condemned this failure in 1845.
• Britain and free trade in India

  • The British Empire's growth was supported by free trade.
  • Free trade is based on the idea that competition between businesses leads to the best outcomes for consumers.
  • However, in India, the East India Company tried to create a monopoly and raise taxes as high as they could to maximise their profits. The East India Company had a monopoly granted by the Queen and tried to seize all control from local politicians, like the Mughal Emperor.
• Britain and free trade in China

  • The East India Company had been selling opium made in India (used to make heroin) to China. The Qing Dynasty decided to ban opium in China. During the Opium Wars with China between 1839 and 1860, the British navy fought against the Qing Dynasty (Chinese government) in order to allow Britain to keep selling the now-illegal opium in China.
  • Britain gained Hong Kong as a colony from China in 1842 as part of the Treaty of Nanjing.
  • In China, the East India Company's commercial interests were supported by the British military and British navy.
• Factors that made it easy for colonies to trade with Britain

  • Power of the Pound Sterling as a currency
  • Use of English law
  • Use of English as a language
  • Capital provided by the City of London's financial markets
• Between 1875 and 1900, 20% of Britain's imports were from colonies and 33% of Britain's exports went to colonies
• Imperial preference


  Tariffs (taxes) on goods between two nations were lower if they were both parts of the British Empire
• The USA would dismantle the system of imperial preference after World War 2
• British Empire transportation

  • Shipping
  • Railroads
  • Canals
• Ships sailing 'under the British ensign'

  Flying a British flag, meaning the British Navy would defend these ships and their cargo to allow free trade
• Royal Navy squadrons

  • Blue squadron patrolled the Indian Ocean
  • Red squadron sailed in the Caribbean and Atlantic
• Clipper ships

  • Narrow sailing boat popular in the 19th Century
  • Used to transport low volume, high-priced goods like tea, opium, saffron, and vanilla
• Steamships


  Could increase cargo capacity
• Steamships becoming more popular

  After the opening of the Suez Canal
• Railway imperialism


  Important in self-governing colonies
• Self-governing colonies

  • Canada
  • Australia
  • India
  • West Africa
• Most investment in railways came from private individuals investing in private companies (a bit like venture capital)
• According to Stone (1999), 71% of British money channelled towards building railways went to regions of recent settlement like India
• Although British speculators and businesses may have improved the infrastructure in Britain's colonies, most of the contracts for providing the railway equipment and rolling stock went to British companies
• Canals and rivers

  • Rivers were often the focus of explorers' quests.
  • Canals could be used to avoid dangerous waterways.
  • New canals and waterways were created in India and Canada.
• Many ships sailed 'under the British ensign' (flying a British flag) because this meant that the British Navy would defend these ships and their cargo to allow free trade.

  Steamships

  • Steamships could increase cargo capacity. They became more popular after the opening of the Suez Canal.
• Clipper ships

  • Narrow sailing boats that were popular in the 19th Century.
  • Because of their narrow width, they were used to transport low volume, high-priced goods like tea, opium, saffron, and vanilla.
• Areas in the British Empire that specialised in different products

  • Agriculture
  • Canada, Australia and New Zealand - cheap foodstuffs and raw materials (wool)
  • New Zealand - wool, gold, frozen lamb
  • Tropical colonies (South Africa) - cocoa, coffee, groundnuts, sugar, palm oil
  • North America and the Caribbean - sugar, tobacco
  • India - tea, opium
• 75% of all of New Zealand's exports went to Britain
• India exported opium to China, leading to the Opium Wars
• Mining

  • The main export from Nigeria was tin.
  • New Zealand exported gold to Britain.
  • The main export from the Gold Coast, Rhodesia, and South Africa (after 1886) was gold.
  • The main export from Sierra Leone and South Africa (Kimberley) was diamonds.
• Industry

  • Industry in the British Empire was limited because it couldn't compete with manufacturing in Britain.
  • In the 1870s, almost 2/3 of New Zealand's imports came from Britain.
  • Britain was known as the 'workshop of the world' because of its prowess in manufacturing after the Industrial Revolution.
• There were pros and cons to trading with Britain.

  Effect of trade on colonies

  • Pros of trade with Britain:
  • British investors and speculators invested in local colonial infrastructure.
  • British colonies could borrow more money.
  • Cons of trade with Britain:
  • Being part of Britain's trading empire often involved losing national sovereignty and control of your country.
• Effect of trade on colonies cont.

  • Most local investments were in infrastructure that was only accessible to the very rich. For example, India developed railway tracks for key routes well before running clean water was available for the population.
  • The local population had to pay taxes to Britain or British trading companies.
  • Trade led to the collapse of local indigenous industries. Countries were not encouraged to develop manufacturing industries, instead Britain wanted to export manufactured goods.
• The revival of chartered companies

  • A chartered company was a private company that had been granted a royal charter (usually a monopoly) to operate.
  • The East India Company was a chartered company that had operated lawlessly and ruthlessly in a quest to make a profit, conquering regions and bribing MPs.
  • Chartered companies became key from the 1870s when Britain's economic supremacy was challenged by other European powers.
  • 1881: North Borneo Trading Company (specialised in coal, iron, and tobacco) founded.
  • 1884: Imperial Federation League founded.
  • 1889: British South Africa Company founded.
• Tin (main export from Nigeria)
• Gold

  • Main export from New Zealand, the Gold Coast, Rhodesia, and South Africa (after 1886)
• Diamonds

  • Main export from Sierra Leone and South Africa (Kimberley).