(How the British East India Company made money) Mercantilism was the term used to describe virtually all European colonial powers from the 17th century up to World War II. Colonial nations, such as England, created trade monopolies to increase their military and economic power. Before the Industrial Revolution this was done by having precious metals, gold and silver, shipped to the mother country. After factories were built in England, cheap raw materials, such as sugar, cotton and wood were exported. These raw materials were then manufactured, and sold back to the colony as a finished good. By producing products in England, it created jobs for factory workers, and also helped factory owners expand their businesses.
The most well known route system before factories was called the Triangular trade route. It involved shipping slaves from Africa to the Caribbean, molasses from the Caribbean to America, and then rum back to Africa. A less well-known route involved shipping the drug opium from India to China, tea from China to England, and then cloth from Britain were sold to India. Profits were earned at each part of the trade route, which was controlled by the British East India Company until 1833-34. China prohibited opium smoking in 1729, and banned all trade of opium in 1773, but trade in this product continued to increase after 1823.
British plantations in India were the chief suppliers of opium to the world. Opium was first distributed to the Chinese through the port city of Canton. Bills of exchange (checks) were written to buy tea and silks for shipment to Britain. The British were in a "win" situation on all three legs of the Asian triangular trade, especially as opium created a self made market with users willing to pay any price for the addictive drug. Two "Opium Wars" were fought by England in the 19th century to expand the trade, and the suppression "Boxer Rebellion" in the 20th century was to protect trading rights and "spheres of influence." This destructive trade finally came to an end during World War I, by which time opium production in China supplied Chinese addiction.
1. What type of metals did European countries consider valuable ?
2. Why was opium such a popular trade product for the British ?