Emily Erikson's new book, Between Monopoly and Free Trade, brings new tools and data to the study of the English East India Company and more generally to the study of early modern trade between Europe and Asia. The English East India Company (henceforth EIC) played a central role in the development of Britain's economy, the regulation of markets, and Britain's colonial empire. Famously the “East Indian” trade in Britain was organized around a monopoly company from its beginnings in 1600 through the nineteenth century. The EIC faced stiff competition from monopoly companies chartered by the Dutch, French, Portuguese, among others. The EIC was ultimately successful in winning a large share of the market for Asian trade by the early nineteenth century. Its monopoly came to an end in 1833, but its impact was felt for generations.
Erikson uses social network analysis to generate novel insights regarding the decisions of employees and the performance of the EIC. Erikson views the EIC's organizational structure as combining hierarchy with horizontal networks, which are defined as decentralized patterns of interaction and communication (pp. 19, 26). The EIC's directors tried to control the trade, including where ships went, how much time was spent, and what goods were purchased and sold. There were limits to the directors’ control however. Many of the EIC's captains and agents engaged in a valuable trade within Asia and even to Britain without the explicit direction or authorization of the directors. Some contemporaries and historians have viewed the so-called “private trade” of employees as detrimental to the interests of the EIC. Instead Erikson sees the private trade as a complement to the EIC's monopoly, and one of the key factors in its success. The EIC's directors struggled to control private trade from 1600 to 1660. For the next hundred years they essentially conceded to their employees the right to private trade. The private trade era was one of the most innovative according to Erikson because it fostered the transfer of information between employees. This led to the incorporation of more and new ports in the Company's trade, which in turn led to new opportunities, markets, and commodities (p. 3).
Erikson's supports these claims using data on the port to port movements of the EIC ships. The author digitizes Anthony Farrington's (Catalogue of East India Company Ships Journals and Logs, 1600–1834. British Library 1999) data on ship logs and adds information on Asian ports. The result is a detailed data set on the voyages of all EIC ships, including the identity of their captains, orders for travel, and their movements between ports. One immediate finding is that the most frequently visited ports in the Company's network were not established through travel orders from the EIC's directors (p. 103). Rather they were established through captains’ decision to explore new markets. Erikson addresses what factors influenced a ship's travel from one port to another by estimating a model of port travel decisions. The most interesting variables are recent travels to the destination port by a different captain (the social networks variable), formal orders by the company to travel to the port, and the captain's prior visits to the port (experience). The results show that an inexperienced captain is around 38 percent more likely to travel to a port if another captain has recently travelled to the destination port. It is noteworthy that the effect of the social network variable is most sizeable in the period from 1660 to 1760, which Erikson regards as the era of private trade. One concern (shared in all empirical studies of networks) is that the estimate for the social network variable is biased. There is a possibility that captains with shared travel behavior also share unobservable characteristics also linked with travel decisions. For example, they might both be holding cargo, which is most valuable in the destination port. There is no simple solution to this problem, but it is worthy of consideration in future work on this topic.
The second component of Erikson's analysis focuses on what types of port-to-port travel was fostered by private trade. The author uses their data set of all voyages to define private trade trips as those that were circular (i.e., there was a clear deviation from the most direct route) or as those that resulted from a seasonal delay (a common tactic used by private traders was to purposely miss the seasonal winds). All other trips are regarded as legitimate and ordered by the EIC officials. Erikson visualizes the resulting trade network between ports at various dates using network software. Readers should note that in network analysis the visualization is not a map of the physical network but rather links to the most significant nodes in terms of connections. The really innovative part of Erickson's analysis comes in deleting the network links due to private trading trips and then calculating various measures of network size and integration (p. 118). The results show that the network without private trade is far smaller and less integrated than the actual network, especially from 1680 to 1760. The one unresolved issue is whether private trade created a more valuable network to the EIC's directors and shareholders. Ports clearly varied in what they offered and travel to smaller ports might have been profitable for captains but of limited value to the EIC as a whole. In any event, most readers will be struck by the scale of the private trade network at a key point in the EIC's history.
Some might be wondering whether Erikson's analysis omits a role for Asian actors, including rulers, merchants, traders, and artisans in the East. In the last two chapters Erikson studies the characteristics of Asian ports and examines which types were most frequently visited by the EIC. The conclusion is that the most visited ports were the most commercialized and decentralized, as opposed to the most centralized, regulated, and reciprocal in terms of trading practices. Erikson argues that this pattern reflects a complementarity between the EIC's private trade and similar organizational structures in Asia.
Overall the book is a great success. Historians looking to apply tools from sociology and social network analysis will find it informative. Historians of the EIC and European-Asian trade should be convinced that private trade was an important factor in the EIC's success and the growth of its trade. Social scientists will find that the EIC provides an interesting case where coordinated action by decentralized decision-makers yields innovative behavior. That said the external validity of the EIC's model remains open. It is not clear how many companies in history have become successful when their employees shirk on their responsibilities to the company in an effort to gain privately.
