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Shaping Globalization: London's Merchant Bankers in the Early Nineteenth Century

Published online by Cambridge University Press:  31 October 2014

Manuel Llorca-Jaña
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Abstract

This article argues that entrepreneurs, not governments or markets, shaped globalization during the early nineteenth century. The article concentrates on the trading and financial activities of London merchant bankers, and in particular on the different diversification strategies they followed. Although most London merchant bankers remained cautious and did not diversify their operations either geographically or in the products they traded during this period, Huth & Co. established an impressive global network of trade and lending, dealing with over six thousand correspondents worldwide in a wide range of products. This firm shaped globalization well before the transport and communication revolution of the last quarter of the nineteenth century.

Type
Research Article
Information
Business History Review , Volume 88 , Issue 3 , Autumn 2014 , pp. 469 - 495
Copyright
Copyright © The President and Fellows of Harvard College 2014 

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References

1 In the first issue of this journal published by Cambridge University Press, the editors took the opportunity to remind us that “important subjects are waiting for investigation.” Among them they highlighted globalization, further adding, “Business historians must make the case that entrepreneurs and firms, not governments or markets, have driven and shaped globalization.” Friedman, Walter A. and Jones, Geoffrey, “Business History: Time for Debate,” Business History Review 85 (Spring 2011): 3 and 5–6CrossRefGoogle Scholar.

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4 Thanks to this development, India (in 1813) and China (in 1834) were opened up to British merchants. Greenberg, Michael, British Trade and the Opening of China, 1800–42 (Cambridge, U.K., 1951)Google Scholar. Jones, Merchants to Multinationals, 21; Kynaston, David, The City of London, vol. 1 (London, 1995), 25–27Google Scholar; Jones, Charles, International Business in the Nineteenth Century (Brighton, 1989), 2Google Scholar; Chapman, S. D., “British Marketing Enterprise: The Changing Roles of Merchants, Manufacturers, and Financers, 1700–1860,” Business History Review 53 (Summer 1979): 217Google Scholar.

5 Jones, International Business, 2; Chapman, “The International Houses.” For Spanish merchants in London during this period, see Lamikiz, Xabier, Trade and Trust in the Eighteenth-Century Atlantic World (London, 2010), 45–50Google Scholar, 146–50.

6 Roberts, Richard, Schroders: Merchants and Bankers (London, 1992), 30CrossRefGoogle Scholar. In the early nineteenth century, the name “Schroder” appeared with an umlaut; today, the company omits it. For consistency throughout the article, I have omitted the umlaut.

7 Own account operations refer to when a merchant banker bought goods at his own risk, taking full responsibility for the final selling price.

8 For a theoretical discussion of whether to trade on commission and/or own account, see Llorca-Jaña, Manuel, “The Organization of British Textile Exports to the River Plate and Chile: Merchant Houses in Operation, c.1810–1859,” Business History 53 (Oct. 2011): 829–31Google Scholar.

9 The main obstacles to trade were lack of information and lack of trust, and these obstacles accounted for most transaction costs. Casson, Mark, “The Economic Analysis of Multinational Trading Companies,” in The Multinational Traders, ed. Jones, Geoffrey (London, 1998), 23Google Scholar; Jones, “Multinational Trading Companies,” 16.

10 Roberts, Schroders, 22.

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20 Chapman, The Rise of Merchant Banking, 17–18 and 25; Ferguson, The House of Rothschild, 35–59.

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22 Perkins, E. J., Financing Anglo-American Trade: The House of Brown, 1800–1880 (Cambridge, Mass., 1975), 92Google Scholar; Chapman, The Rise of Merchant Banking, 126.

23 Jones, Merchants to Multinationals, 23.

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26 Chapman, The Rise of Merchant Banking, 38, 59–60, 105.

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28 Chapman, The Rise of Merchant Banking, 18, 122. Rothschild & Sons, Brandt Sons & Co., and Ralli Brothers specialized in trade between Britain, the eastern Mediterranean, and Russia during the first half of the nineteenth century. Jones, Merchants to Multinationals, 24–25; Roberts, Schroders, 53.

29 Jones, International Business, 34; Chapman, The Rise of Merchant Banking, 130; Jones, Merchants to Multinationals, 29, 36. Perkins, Financing Anglo-American Trade, 17, 112–13; Killick, John R., “Risk, Specialisation and Profit in the Mercantile Sector of the Nineteenth Century Cotton Trade: Alexander Brown and Sons, 1820–80,” Business History 16 (Spring 1974): 1–2Google Scholar; Chapman, Merchant Enterprise in Britain, 152. Marriner, Sheila and Hyde, Francis E., The Senior John Samuel Swire, 1825–1898 (Liverpool, 1967)Google Scholar; Jones, Merchants to Multinationals, 37; Jones, International Business, 145–46. Wake, Kleinwort Benson, 39–40, 42–45. Marriner, Sheila, Rathbones of Liverpool, 1845–1874 (Liverpool, 1961), 5–10Google Scholar.

30 Huth to Gruning (Madrid), London, 26 Sept. 1815, Spanish Letters, Huth Papers, University College London Special Collections, London, U.K. (hereafter SLHP), 157.

31 Printed circular. Hamburg, 1 Oct. 1844. Records of William Brandt, 1/1/2, page 374, Nottingham University Library, Nottingham, U.K.

32 Huth to Goodhue (New York), London, 14 Nov. 1837, English Letters, Huth Papers, University College London Special Collections, London, U.K. (henceforth ELHP), 18.

33 Huth to Perit (Philadelphia), London, 19 Aug. and 17 Nov. 1838, ELHP 21.

34 De Bruyn was a major sugar trader. Huth to De Bruyn (Amsterdam), London, 2 and 12 Apr. 1839, ELHP 23.

35 Balance of a Chilean Voyage, 1840, loose papers, MS 10700-6, Huth Papers, Guildhall Library, London.

36 For more on this topic, see Llorca-Jaña, Manuel, “The Economic Activities of a Global Merchant-Banker in Chile: Huth & Co. of London, 1820s–1850s,” Historia 45 (July–Dec. 2012)Google Scholar.

37 Perkins, Financing Anglo-American Trade, 56; Chapman, The Rise of Merchant Banking, 42.

38 Jones, Merchants to Multinationals, 24–25; Roberts, Schroders, 53.

39 Austin, Baring Brothers, 65–67; Chapman, The Rise of Merchant Banking, 26–27. It was only during the 1870s that Barings focused their attention on other quarters beyond the U.S. and the Far East.

40 Austin, Baring Brothers, 6.

41 Chapman, The Rise of Merchant Banking, 35–36.

42 Ibid., 8.

43 Ibid., 35–36.

44 Roberts, Schroders, ch. 1. Jones, Merchants to Multinationals, 24–25.

45 Huth was very active in London public auctions. Account Current, 1817, R/38, Incoming Letters, Huth Papers, University College London Special Collections, London, U.K. (henceforth ILHP).

46 Huth to Barrié (Corunna), London, 6 Jan. 1815, SLHP 156.

47 During the 1810s–1840s, Huth corresponded with over 130 correspondents in Cuba alone.

48 Huth to Bibby (Canton), London, 1 and 14 Mar. 1837, ELHP 17; Huth to Russell Sturgis (Canton), London, 13 and 30 Apr. 1839, ELHP 23.

49 Stewart & Wilson to Huth (London), Glasgow, 25 Apr. and 4 Nov. 1836; 19 May 1836; 26 Nov. 1836; 23 Dec. 1836. MS Gen 531/14, University of Glasgow Special Collections, Glasgow, Scotland.

50 Undated, ca. 1830s, No. 47, HC 16/1, Baring Brothers Papers, Baring Archive, London, U.K.

51 Mercury was crucial to the silver-mining process.

52 Ferguson, The House of Rothschild, 358–62. See also Platt, Tristan, “Container Transport: From Skin Bags to Iron Flasks—Changing Technologies of Quicksilver Packaging between Almadén and America, 1788–1848,” Past & Present 214 (Feb. 2012): 205–53Google Scholar.

53 Huth, Gruning & Co. papers, Rothschild Archives, London, U.K. (henceforth RHL). See also Platt, Tristan, “Spanish Quicksilver: A Preliminary Note,” Rothschild Archive Review of the Year (2011): 38–48Google Scholar.

54 Huth Gruning to Rothschild (London), Valparaiso, 2 Mar. 1841, XI/38/149/A, RHL.

55 Huth Gruning to Huth (London), Valparaiso, 20 July 1838; 29 Jan. 1840, XI/38/149/A, RHL.

56 An advance was a flexible form of credit, which varied by merchant banker. In the case of Huth, it was cash supplied to consignors as a proportion of the invoiced cost of cargoes. The usual practice was that the consignor was permitted to draw on the consignee (e.g., Huth) or on another merchant backing the consignee for a proportion of the value of the consignment—typically for a 3-to-6-month term, but sometimes for 6 to 12 months also—well before remittances for these consignments were received. Huth's advances were used for short-, medium-, and long-term financing. After agreeing to terms, the merchant banker would accept the bill, but only after charging 0.5 to 1 percent commission. These drafts could be cashed at maturity or discounted immediately after acceptance (thus receiving the face value of the bill minus a discount rate).

57 Chapman, Merchant Enterprise in Britain, 135.

58 Ibid., 46.

59 Jones, International Business, 63.

60 Roberts, Schroders, 51.

61 Perkins, Financing Anglo-American Trade, 92.

62 Marriner, Rathbones of Liverpool, 5.

63 Chapman, The Rise of Merchant Banking, 25–26.

64 Ibid., 105.

65 Freedman, A London Merchant Banker, 1.

66 Chapman, The Rise of Merchant Banking, 8–9.

67 Ibid., 11, 14–15.

68 Ibid., 18 and 35. Rothschild in particular retained just a handful of correspondents, focusing on safety, simplicity, and large turnover.

69 Ibid., 42; Perkins, Financing Anglo-American Trade, 119.

70 Perkins, Financing Anglo-American Trade, 119; Hidy, The House of Baring, 227. Barings expanded later on, to the extent that by the mid-1850s they had 1,200 correspondents. Yet, from Table 2 it is clear that the experience of Huth was far more impressive.

71 Chapman, The Rise of Merchant Banking, 42.

72 “Report from the Select Committee of the House of Lords, on the Mercantile Law Amendment Bill,” British Parliamentary Papers (London, 1856), 294Google Scholar; Wake, Kleinwort Benson, 114.

73 Roberts, Schroders, 47, 58–60.

74 Austin, Baring Brothers, 11–13.

75 Marriner, Rathbones of Liverpool, 219.

76 Chapman, The Rise of Merchant Banking, 92.

77 Jenks, L. H., The Migration of British Capital to 1875 (London, 1963)Google Scholar, ch. 3; McGrane, Reginald C., Foreign Bondholders and American State Debts (New York, 1935), 9Google Scholar.

78 Huth to Goodhue (New York), London, 14 Nov. 1836, 6 and 21 Jan. 1837, ELHP 16; Huth to Perit (Philadelphia), London, 21 and 30 Jan. 1837, ELHP 17.

79 Huth to Perit (Philadelphia), London, 8 and 22 July 1837, ELHP 18; Huth to Murray (New York), London, 29 May 1839, ELHP 23; Huth to Goodhue (New York), London, 31 Aug. 1839, ELHP 24.

80 Huth to Perit (Philadelphia), London, 13 Dec. 1838, ELHP 21.

81 Huth to Anderson Hober (Hamburg), London, 7 Jan. and 14 Feb. 1845, ELHP 45.

82 Jones, “Huth, Frederick Andrew.”

83 Huth to Bank of Liverpool (Liverpool), London, 2, 5, and 12 Jan. 1849, ELHP 59.

84 Jones, “Multinational Trading Companies,” 19.

85 Jones, Merchants to Multinationals, 45.

86 Jones, International Business, 99.

87 Roberts, Schroders, 24.