The New Opium Wars, Hidden in Plain Sight

Studying history helps me understand the present - because history is filled with stories that are hard to believe.

When the world reaches into the realm of the “unbelievable,” history provides a litmus test of how frequently the unbelievable - becomes true.

Let me give you an example.

At the beginning of the 19th century, Britain had developed an expensive addiction.

But not to drugs.

Tea.

Contrary to what we may assume in the West, until the early 19th century, tea was largely a novelty beverage served in British coffee houses.

Dutch merchants introduced the beverage around 1650, but the quintessential British cup of tea did not take hold for nearly 300 years.

When it did, the people went crazy for it.

When one of the wealthiest countries in the world develops an appetite for something, it can change the shape of global trade. (Similar to when the Americans adopted ketchup - a story for another time.)

At this point in history, tea was grown at scale in only one place - China.

The Qing Dynasty of early 19th century China was one of the most technologically and philosophically developed cultures the world had ever known. Although Britain was the rising star in the world, most historians believe that China was the wealthier of the two nations as the 18th turned to the 19th century.

China was known as the “place where silver goes to die.” The world transacted on Spanish silver dollars, and although China had many goods that the world wanted, there was little that China wanted in return.

So, “trade” with China was a one-way street - silver in, product out, and never the reverse.

Consequently, Britain’s voracious appetite for tea came with the burden of an escalating trade deficit.

Silver for tea.

But silver, was running in short supply.

Spanish silver dollars had historically been minted from the Spanish mines in Mexico, but after Mexico reclaimed its independence in 1821, they halted the production of Spanish coins.

Trade currencies depend on trust in the issuing government, so although Mexico continued to produce minerally equivalent coins, they lacked the Spanish Guarantee and were not accepted as a replacement.

The scarcity of Spanish silver coins increased to the point that merchants became accustomed to paying a premium for them.

And so, at the beginning of the 19th century, the trade currency was shrinking as global trade was expanding.

The British needed a new solution to buy their tea.

While this situation was unfolding, the British were colonizing India. They had not succeeded yet, but the area around Calcutta had largely become British. West Bengal, the region where Calcutta was located, was the source of another highly addictive crop - opium, derived from the Indian poppy plant.

So, while the Chinese had the monopoly on tea, the British now had the monopoly on opium.

This is where history took a turn.

China had been using opium medicinally for many years, as had many countries around the world. But its rarity had prevented widespread recreational use from taking hold.

When the British merchants determined that Chinese smugglers would pay them in silver for opium, a new opportunity opened up - the triangular China trade:

The British East India Company would produce opium in their Indian colonies.

British smugglers would sell the opium to Chinese dealers in exchange for silver.

The British would use the silver to buy tea.

The British could use Chinese silver to buy Chinese tea.

The population of China was roughly 30 times that of Britain, and opium is far more addictive than tea.

So, what began as a solution to a tea trade deficit grew into the most lucrative industry in the British Empire.

As opium addiction became more widespread, the Chinese government became wise to its destructive nature.

They could see it was tearing apart families. It was bankrupting citizens and destroying lives.

It was a systemic heroin addiction - the original opioid crisis.

The response, was the original War on Drugs - the Opium Wars.

Fought in two stages, between 1839 - 1842 and 1856 - 1860, they began as most wars do, with economic sanctions. In this case, Chinese officials required British merchants to abandon the opium trade or be barred from all Chinese trade - tea included.

But when the smuggling on the black market continued, the Chinese held hundreds of British merchants captive in the port city of Canton. They demanded they forfeit nearly 2.5 million pounds of opium, causing financial ruin to many British merchants.

But with a growing appetite for more product in China, and the need to recoup losses among the British, trade continued.

The Americans had not been labelled as opium smugglers by the Chinese, so the British hired American cotton ships to smuggle for them. Chinese opium dealers opened up pirate industries to conduct business further out at sea.

Prohibition always forces the market to get creative.

But although the conflict had been limited to trade sanctions thus far - when tensions are high, wars are like riots - they often start by accident.

One night, while out drinking in Canton, some British sailors stopped at a grocery store to buy more booze. The store owner refused to sell to them because the sailors were visibly drunk and obnoxious (according to the Chinese account).

A fight broke out, and the store owner was killed.

The Chinese government leveraged this incident as the event they needed to escalate the conflict.

They demanded the culprits be handed over. When the Brits refused, the Chinese assembled their Navy, and fired the first shots of the Opium Wars on the British Navy escort that followed their trade merchants.

But within minutes, both sides learned how unprepared the Chinese military was for modern combat.

Although wealthy and technologically advanced, the Chinese had been in a period of isolationism for over a century. While European militaries had been advancing, the Chinese had not.

The British navy found themselves fighting an enemy armed with cannons, muskets and strategies that were over 100 years old.

Realizing their advantage - and therefore leverage over their most lucrative customer, the British launched an offensive that included attacks on Chinese Navy vessels and coastal forts, blockades of Chinese ports to international trade, and the invasion and capture of Canton.

In order for the British to relent their attack, the Chinese were forced to pay reparations of 21 million silver dollars in exchange for the confiscated opium, cede the island of Hong Kong to the British, open up five key Chinese ports to unrestricted British trade and legalize the destructive opium trade - beginning what Chinese school curriculums today refer to as the “century of humiliation.”

The British had a product so addictive that people would destroy their families to maintain their habit, and they used their military to ensure unobstructed distribution right into the hands of their customers.

Can you imagine that model being applied today?

Next week, in Part Two, I will talk about exactly that.

Thanks for reading. Have a great week.

Jay

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