Maritime Enterprise and Empire: Sir William MacKinnon and His Business Network, 1823-1893 0851159354, 2002153718

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MARITIME ENTERPRISE AND EMPIRE

William Mackinnon, 1882

MARITIME ENTERPRISE AND EMPIRE SIR WILLIAM MACKINNON AND HIS BUSINESS NETWORK, 1823–93

J. Forbes Munro

THE BOYDELL PRESS

© J. Forbes Munro 2003 All Rights Reserved. Except as permitted under current legislation no part of this work may be photocopied, stored in a retrieval system, published, performed in public, adapted, broadcast, transmitted, recorded or reproduced in any form or by any means, without the prior permission of the copyright owner First published 2003 Published by The Boydell Press An imprint of Boydell & Brewer Ltd PO Box 9, Woodbridge, Suffolk IP12 3DF, UK and of Boydell & Brewer Inc. PO Box 41026, Rochester, NY 14604–4126, USA website: www.boydell.co.uk ISBN 0 85115 935 4 A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Munro, J. Forbes. Maritime enterprise and empire : Sir William Mackinnon and his business network, 1823–93 / J. Forbes Munro. p. cm. Includes bibliographical references and index. ISBN 0–85115–935–4 (alk. paper) 1. Steamboat lines—Scotland—History—19th century. 2. Shipping—Scotland—History—19th century. 3. Mackinnon, William, 1823–1893. 4. Wm. Mackinnon Co.—History—19th century. I. Title. HE827 .M86 2003 387.5′44′092—dc21 2002153718

Typeset by Keystroke, Jacaranda Lodge, Wolverhampton Printed in Great Britain by St Edmundsbury Press Limited, Bury St Edmunds, Suffolk

Contents List of illustrations Acknowledgements

vii ix

Introduction

1

Part 1 Enterprising Scots

13

1 East India merchants: Clyde to Calcutta, 1823–61

15

2 The British India Steam Navigation Company, 1856–70

35

3 Extending the system: Australia, Indonesia and Arabian waters, 1862–70

69

4 Business networking, 1860–70

88

Part 2 Suez and after

119

5 The Suez Canal, India and the Netherlands Indies, 1869–82

121

6 The Persian Gulf, the Zanzibar mail contracts, and the London-Gulf line, 1869–82

154

7 Eastern Africa, 1872–82

181

8 ‘Aristocratic capitalism’, railways and the Central African project, 1876–82

213

9 Family, group and network, 1870–82

234

10 The failure of the City of Glasgow Bank, 1878–82

253

Part 3 Shipping power and imperial rivalries

279

11 The Australian opening, 1880–93

281

12 India: competition, collaboration and consolidation, 1882–93

309

13 Indonesia: nationalism in Dutch colonial policy, 1882–90

327

14 Imperial politics: Egypt and the scramble for Africa, 1882–6

346

v

CONTENTS

15 Interludes: a Scottish election, an African expedition and a Persian railway, 1885–7

382

16 A false dawn: East Africa and the western Indian Ocean, 1887–90

408

17 The fall of the Imperial British East Africa Company, 1890–3

451

Conclusion

483

18 Maritime enterprise and empire

485

Appendix: family trees Sources Index

512 515 517

vi

Illustrations Maps 1 2 3 4 5 6 7

The Indian Ocean in the nineteenth century British India S.N. Co’s services, 1870 Netherlands India S.N. Co’s lines, 1870 The Persian Gulf Eastern Africa in the 1870s Queensland in the 1880s East-Central Africa, 1888–9

11 54 78 170 185 286 412

Tables 2.1 Calcutta and Burmah S.N. Co: distribution of shares, 1857–60 2.2 BI: profit and loss account results, 1864/5 to 1869/70 4.1 British India and Netherlands India S.N. Cos: distribution of shares, 1870 5.1 BI and NISM fleets, 1869–82 5.2 Coasting trade of British India, 1872/3 to 1882/3 5.3 BI and NISM: builders of new steamships, 1870–82 5.4 BI and NISM steamer earnings, 1869–82 5.5 BI and NISM: capital and dividends, 1869–83 11.1 The Mackinnon Group in Australia: shareholdings 11.2 BI Associated Steamers Ltd and Australasian United S.N. Co Ltd, 1886–93 18.1 Mackinnon Group shipping companies, 1888/9

41 68 92 133 134 145 152 152 295 304 490

Figures 4.1 4.2 4.3 9.1 9.2

The Mackinnon Group, 1865 The Mackinnon Group, 1872 The Mackinnon enterprise network, 1860s The Mackinnon Group, 1881 Mackinnon Mackenzie & Co’s shipping agency earnings, 1870–82 9.3 The Mackinnon enterprise network, 1881 vii

91 98 99 240 241 251

ILLUSTRATIONS

12.1 Shipping freights, 1880–93 12.2 BI net earnings, 1880–93

310 317

Plates William Mackinnon, 1882 William Mackinnon, James Hall and Robert Mackenzie in Bengal, c. 1850 Sir Henry Bartle Frere Peter Denny Steamships on the Hooghly Shipping at Zanzibar Leopold II James Nicol Fleming William Mackinnon, May 1881 Thomas McIlwraith and fellow Ministers, Queensland, 1879 The Dorunda in Queensland waters Henry Morton Stanley, 1886 George Mackenzie and General Mathews issue manumission papers to freed slaves

viii

ii 22 47 146 149 188 223 256 269 284 296 396 424

Acknowledgements I am indebted to many people for their advice and assistance in preparing this book. It could not have been written without access to archives and libraries in Britain and around the world, and I would like to thank the staff of the institutions listed in the section on ‘Manuscript Sources’ for their care and attention. Among them, Stephanie Jones, the former archivist of Inchcape & Co, Marylin Bell Hughes of the Tennessee State Library and Archives, and Dr Gustaaf Janssens of the Archives of the Royal Palace, Brussels, deserve special mention for going out of their way to make my work easier. I am particularly grateful to Mr. Sandys Dawes of Faversham, Kent, to Mr Duncan Macalister Hall of Torrisdale Castle, Argyll, and to Mr J. Bounder of Melbourne, Victoria, for giving me access to source material which was not available on public deposit. Among my academic colleagues, Andrew Porter of King’s College, London, the late Frank Broeze of the University of Western Australia, Gregg Huff of the University of Glasgow and Duncan Waterson of MacQuarie University in New South Wales were generous in supplying information within their particular areas of expertise. Tony Slaven of the University of Glasgow gave support and encouragement to the project over the years, and I am very grateful to him for the opportunity to spend some time in the Centre for Business History in Scotland, of which he is Director. This not only enabled me to revisit my academic roots but also provided the incentive to complete the work that I had started before becoming Clerk of Senate of the University. Small grants from the Economic and Social Research Council, the Nuffield Foundation and the Ross Fund of the University of Glasgow made it possible to undertake some of the extensive travelling which was necessary to piece together the story of Sir William Mackinnon and his business network. My thanks go out to these bodies for their financial support. Finally, I am grateful to Mike Shand of the CartoGraphics Unit, Department of Geography and Topographic Science, University of Glasgow, for the digital cartography, and to the Trustees of the National Library of Scotland and the John Oxley Library Collection, State Library of Queensland, for permission to reproduce the photographs that appear on pages 188 and 284.

ix

This book is dedicated to George Shepperson Philip D. Curtin Jan Vansina Sydney Checkland

Introduction On 22 June 1893, Sir William Mackinnon, Baronet of Balinakill and Loup, and Companion of the Indian Empire, died in his personal suite in the Burlington Hotel, just off Bond Street in London’s West End. Some six days later he was buried in the little churchyard of the village of Clachan, in Kintyre in western Scotland. One mourner, Henry Morton Stanley, the African explorer, recorded the scene: ‘We walked from his house, after a simple service in the dining room. . . . The coffin was borne on the shoulders of relays of the Clachan villagers. In the parish grave-yard was an open grave, as for a peasant, into which the sumptuous oak coffin, was lowered . . . and in a short time all that was mortal of a dearly-loved man lay beneath a common mound.’1 The contrast between the setting and location of William Mackinnon’s death, in the fashionable heartland of Victorian Britain and its Empire, and the simplicity of the final ceremony and resting-place in the Scottish Highlands symbolises much of the contradiction and ambiguity which surrounds this nineteenth century figure. A self-made businessman – merchant, shipowner and financier – who rose from humble origins by methods that were little known to the British public. A successful entrepreneur who was touched by the shadow of the failure of at least two of the larger enterprises with which he was associated. A philanthropist who shunned publicity. A neat, dapper little figure, whose personality could appear as colourless as the pale grey suits he favoured, but whose private warmth and generosity were attested to by many who knew him. An imperialist who influenced government policy but who largely steered clear of party politics. A man whose advice and assistance were sought by members of the British aristocracy, and who consorted with the King of the Belgians, but who preferred to take his leisure privately, in the company of a small circle of friends and relatives. A figure known in business and government spheres in London, but whose ventures were usually conducted far from the metropolitan centres of power. A frequent visitor to the city who never acquired a townhouse and spent much of what time he could in his rural retreat in Scotland. In short, a person of repute who was known to, but little understood by, contemporaries and historians alike. The obituary writers reflected this uncertainty by dwelling on that aspect of Mackinnon’s career that was most in the public eye in the few years before his death. Although he was the senior partner in two merchant firms, 1

Dorothy Stanley (ed.), The Autobiography of H.M. Stanley (London, 1909), p. 449. 1

INTRODUCTION

including one of Calcutta’s principal agency houses, and the chairman of four or five steamship companies, including the British India Steam Navigation Company which possessed the world’s largest sea-going fleet, and although he had been in his time a director of a Glasgow bank and a London discount house, and conducted business affairs in all five of the world’s continents, for the newspapermen of 1893 he was chiefly associated with the Scramble for Africa. The Times had perhaps the most balanced view among the London papers. It managed a reference to Mackinnon’s ‘Scotch simplicity of manner and habit’, called him ‘a perfect type of old-fashioned Scotch presbyterian’, and devoted a paragraph to the rise of the British India S.N. Co., ‘which has done so much to sustain the reputation of England as the greatest commercial nation on the face of the globe’. Even so, its obituary emphasised Mackinnon’s involvement in the affairs of East Africa in the 1880s and early 1890s – through the establishment of the Imperial East Africa Company, the drama of the Emin Pasha Relief Expedition, and ‘the difficulties and anxieties connected with the Uganda troubles’ – and it expressed the widely-held view that ‘Had it not been for the public spirit of Sir William Mackinnon, Germany might now have been supreme over the whole of East Africa.’ 2 The Standard took an even more extreme view of Mackinnon’s claim to fame: ‘It was as Chairman of the British India Steam Navigation Company that he first became known to the general public; but his name only came to be distinguished from that of the ordinary businessman when his relations with the Sultan of Zanzibar enabled him and Sir Fowell Buxton to construct sixty miles of road into the interior from Dar-es-Salaam for the purpose of encouraging legitimate commerce and checking the slave trade.’ 3 Even the newspapers of his native Scotland, which were somewhat more knowledgeable about his origins, the extent of his business empire, and his role in Scottish religious and commercial life, felt obliged to measure his achievements by the same yardstick. Thus, The Glasgow Herald pointed out that ‘it is only in recent years that he came prominently before the general public. This arose through his position in the Imperial British East Africa Company, of which he was the founder.’ It also quoted approvingly the observations of its London correspondent that ‘He did not gain a penny by his operations in East Africa; on the contrary he threw away thousands of pounds.’ 4 The drift of these comments was clear – in late Victorian Britain public esteem did not accrue to ‘ordinary businessmen’, but only to those who engaged in substantial philanthropic or patriotic activity. Such a view nevertheless leaves unexplored a whole range of questions about the nature

2

The Times, 23 June 1893, p. 11, col. c. The Standard, 23 June 1893, in British India Steam Navigation Co, Press Cuttings and Articles, 1890–1964, National Maritime Museum, Greenwich, BIS/37/1. 4 Glasgow Herald, 23 June 1893, in Biographical Notices, Vol. viii, pp. 248–50, Mitchell Library, Glasgow. 3

2

INTRODUCTION

of the wealth-creation process that sustained public benefaction, and about the motives behind civic gestures. It was natural, even excusable, that obituary writers, pressed by deadlines at a time when the future of British rule in Uganda was still under discussion, and when adventurers like Stanley still grabbed the daily headlines, should play up Mackinnon’s part in the partition of East Africa between Britain and Germany. However, in the century which has passed since the 1890s there has been little change in William Mackinnon’s reputation as an elderly Scotsman who had something of an obsession about incorporating East Africa into the British Empire. Such works of scholarship as threw light on his life and times tended to reinforce the bias towards Africa and the later years of his career. John Galbraith’s study of Mackinnon’s involvement in the politics of the scramble for colonies in East Africa, Iain Smith’s account of the Emin Pasha relief expedition, or Roger Anstey’s investigation of British interests in the Congo basin, which deals in part with Mackinnon’s relations with Leopold II,5 were all fine works of historical research, but they touched upon only one aspect of his long career and one area of his geographically-extensive interests. They were obliged to treat what little was known about his business empire as a mere backdrop to events in, and political manoeuvrings about, East Africa, and they were unable to explore the inter-relationships between Mackinnon as businessman, Mackinnon as philanthropist, and Mackinnon as imperialist. This is not merely a matter of explaining how he came to have the means to engage in humanitarian or patriotic gestures, or whether prospects of financial gain had any bearing on his imperialist instincts, but also whether his African ventures might not have been at the expense of his business interests, a serious distraction from the stewardship entrusted to him by shareholders, directors and partners. This book has been written in the belief that it is time to try to see William Mackinnon in the round – to try to bridge the gap between the public face and the private man but more especially to set what has been published on his ‘flirtation’ with Africa into the context of his entire life and career. It is time, in other words, to see William Mackinnon – whom The Times described as ‘one of the most enterprising British merchant princes of our time’ – in his Asian and Australian as well as his African settings. However, despite the emphasis on a single entrepreneur, this book is not simply a work of biography. It contains biographical elements, which enable us to study Mackinnon’s business interests and affairs, and to see his life history in the setting of the enterprises in which he played a leading role, the circles within which he moved, and the economic and political environment within which

5

John S. Galbraith, Mackinnon and East Africa, 1878–1895: A Study in the ‘New Imperialism’ (Cambridge, 1972); Iain R. Smith, The Emin Pasha Relief Expedition, 1886–1890 (Oxford, 1972); Roger Anstey, Britain and the Congo in the Nineteenth Century (Oxford, 1962). 3

INTRODUCTION

he operated. Another purpose of the book is therefore to examine the history of the inter-related group of firms he created and led. The activities of these enterprises – trading partnerships, shipping companies, and subsidiary enterprises in commodity production and processing – spanned the entire arc of the Indian Ocean maritime region during the second half of the nineteenth century. From India westwards to the Persian Gulf, the Red Sea and eastern Africa, from India eastwards and south-eastwards to Burma, Singapore, the Indonesian archipelago and eastern Australia, and from India to Scotland and England, the geographic spread of William Mackinnon’s interests, contacts and responsibilities was truly enormous. Few figures other than Ministers of State would attempt to co-ordinate the work of subordinates and associates over territory of such an extent. In business terms, he was a leader of imperial, indeed international, dimensions, and his career is intertwined with the growth and evolution of the British Empire at so many points that historical scholarship has tended to throw up fragments of that story rather than any coherent account. William Mackinnon created and co-ordinated what has come to be recognised as a business network. This is a collaborative method of organising activities and transactions, typically employed by individuals, family firms, and small-to-medium enterprises, which may be used to foster business growth and diversification within national economies and also internationally. It is distinctly different from the large single firm, which is hierarchically-structured and internalises all or most of the processes relevant to its operations, that has been the typical and predominant form of business organisation in the USA and Western Europe in the twentieth century. However, the discovery of the vitality of networking within Asian business in the twentieth century, and the rediscovery of its significance in Western business history prior to the twentieth century, has given new life to the study of the network form of business organisation.6 The concerns that William Mackinnon established, or helped to bring into existence, formed the heart of what might be described as a family-based enterprise network. This had three principal components. At its organisational core were some five trading houses in which William Mackinnon or members of his family were principal partners. The ‘inner-core’ partners in turn controlled the main body of the group, comprising affiliated or subsidiary firms, through the use of interlocking shareholdings and directorships and the possession of agency contracts. These two elements – the ‘inner core’ and its affiliates – I have called the Mackinnon group, in recognition of the fact they constitute the

6

W.A. Powell, ‘Neither Market Nor Hierarchy: Network Forms of Organization’, Research in Organisational Behaviour, 12 (1990), pp. 295–336; N. Norhia and R.G. Eccles, Networks and Organizations: Structure, Form and Action (Boston, 1992); M. Ebers (ed.), The Formation of Inter-Organisational Networks (Oxford, 1997); M. Casson, Information and Organization: A New Perspective on the Theory of the Firm (Oxford, 1997). 4

INTRODUCTION

predecessors of the present-day Inchcape Group.7 Authority within the group was vested in a family, rather than in a parent company or holding company in the twentieth century manner. However, given the comparative slowness of transport and communications in the nineteenth century, and the need for high levels of trust in managers operating at very long distances from the home base, it is unlikely that any other means of co-ordinating international trade and shipping activities on a global scale would have been possible. There was also, however, a third element, which rendered the group the active heart of an even larger organisation – the enterprise network. The partnerships and its subsidiaries/affiliates interacted with a wider web of connections and contacts – individuals, firms and institutions – which supported their activities through financial investment, the supply of useful information, and the exercise of political influence. This was the ‘outer fringe’ of allies and associates without which the entrepreneurial activities and routine functional operations of the group would have been far less successful. It is intended, therefore, that the book should follow the rise of the Mackinnon group and the wider penumbra of its enterprise network. It will try to explain the origins and evolution of what I have described elsewhere as a ‘large, sprawling, loosely-knit and yet cohesive business empire, held together by postal and telegraphic communications, by ties of kinship, by the recruitment of managers and assistants from the same Scottish or Scottishexpatriate circles as the principal partners, by the constant rotation of key men between the main centres of managerial authority, and by incessant travelling on the part of the key entrepreneurial figures’.8 William Mackinnon, the extended Mackinnon family, the Mackinnon group and the even wider Mackinnon enterprise network are the concentric circles around which the book revolves. Despite the imperial, indeed international, stage on which the Mackinnon group operated, despite its wholehearted embrace of the latest technology and business methods, and despite its increasing reliance over time on information flows focused on London for strategic management of its concerns, this was a kinship and enterprise network drawing deeply on an older sub-soil of Highland history and values. It is probably not overly fanciful to regard William Mackinnon as the head of a new Highland clan – albeit one based on enterprise in trade, shipping and finance, rather than the older version based on land, cattle, fishing and military power. For William Mackinnon was not only an entrepreneur who, in the course of his career, acquired the trappings and style of the ‘Highland gentleman’, with a landed estate and country seat

7

Stephanie Jones, Two Centuries of Change in International Trading. The Origins and Growth of the Inchcape Group (London, 1986); Sir Percival Griffiths, A History of the Inchcape Group (London, 1977). 8 J. Forbes Munro, ‘Scottish Overseas Enterprise and the Lure of London: The Mackinnon Shipping Group, 1847–1893’, Scottish Economic and Social History, 8 (1988), p. 75. 5

INTRODUCTION

on the western flanks of Kintyre. He also became the patriarchal leader of a ‘clan’ of Mackinnons, Halls, MacNeills, Mackenzies and Macdonalds, all interconnected by blood, by marriage, and by interlocking financial interests, as well as by religion, education and common roots in Highland society and mores. To several of the middle-ranking among them, William Mackinnon was known, almost jocularly, as ‘Balinakill Himself ’ – which was a way of referring to a Highland chief by his seat of power, and in a manner which implied both a deference to the authority of, and a pride in loyalty towards, the man ‘himself’. In such small cultural references lie the clues to this being an enterprise group of a particular type, having something in common perhaps with the network of Highland Scots who drove and dominated the Canadian fur trade on behalf of the North West Company of Montreal.9 This book therefore makes a contribution to the study of Scottish enterprise abroad as well as the history of the British Empire of the second half of the nineteenth century.10 It is almost self-evident that William Mackinnon and his group have been unduly neglected by historians of British overseas trade and finance, and by historians of the Empire. The reasons for this are not hard to find. Much of the action took place away from the London heartland of Victorian imperialism – in Scotland and various colonial territories – and failed to attract the attention of politicians and the press, or involved relations with foreign governments that were conducted outside the ken of the Foreign Office. Furthermore, the archival resources from which the story can be pieced together are voluminous but at the same time scattered and fragmentary. However, simply to rescue some historical figure from neglect is not, and never can be, the principal justification for a book such as this. What makes William Mackinnon and his business network a worthy subject is that like comparable clusters of overseas enterprise – say Rhodes and his Southern African mining empire, or the Jardine Matheson complex in East Asia – they provide a focal point that enables us to explore themes of general interest. The first of these is the nature of British business organisation overseas – how trade and finance was conducted in the relatively free-trading, protoglobal economy which was created by Britain in the second half of the

9 For the North West Company, see J. Hunter, A Dance called America: The Scottish Highlands, the United States and Canada (Edinburgh, 1994), pp. 149–71, and M.W. Campbell, The North West Company (Vancouver, 1983). 10 Studies of the Scots abroad, more especially within the Empire, and their contributions to their adopted countries, include G. Donaldson, The Scots Overseas (London, 1966), M. Brander, The Emigrant Scots (London, 1982), and R.A. Cage (ed.), The Scots Abroad: Labour, Capital, Enterprise, 1750–1914 (London, 1985). J.M. Mackenzie explores the connections between Scotland and the making of the British Empire in ‘Scotland and the Empire’, The International History Review, XV (1993), pp. 714–39, but the most ambitious and detailed account of the relationship is M. Fry’s, The Scottish Empire (Edinburgh, 2001).

6

INTRODUCTION

nineteenth century and which operated through the clearing-house functions performed by the British economy within that international system. A focus on the cluster of Mackinnon firms enables us to examine, from the inside out as well as the outside in, the relations between a key overseas agency house and the wider set of commercial and financial relations of which it was part. It permits us to examine the structure and strategies of one of the most identifiable ‘investment groups’ or ‘business groups’ active in promoting what economists call foreign direct investment, and to see something of the mercantile diversification processes embedded in the financing of new concerns in overseas locations. It should also let us see something of the costs as well as the benefits of conducting business through a group or network approach rather than through a single integrated firm. The main scholarly points of reference here are the works of Stanley Chapman on the methods by which mercantile firms mediated the commercial needs of the British economy, the rise of merchant banking, and the development of ‘investment groups’ as vehicles for international finance,11 and of Geoffrey Jones on British business in Asia and the role of multinational trading companies.12 What distinguished the Mackinnon group from many similar entrepreneurial clusters was its diversification from trade into shipping. Our second theme is therefore the role of shipping in promoting trade in parts of the world outside the North Atlantic basin, and more specifically the contribution of steamship lines to the growth of intra-Asian and intercontinental commerce. How the technology of the steamship was harnessed and used to create a set of inter-connected coastal, or shallow-water, shipping Iines, and the consequences both for the enterprise group that created these transportation systems and the local Asian, Australian and African economies that they served, is relatively little known. The rise of the steamship ‘East of the Cape’ and ‘East of Suez’ deserves recognition alongside the diffusion of railways outwards from Europe as one of the great integrating forces of the late nineteenth century international economy. The relevant scholarly literature here derives mainly from the work of the shipping historians gathered around the International Maritime Economic History Association who have studied in a variety of international contexts such

11

S.D. Chapman, ‘British Marketing Enterprise: the Changing Roles of Merchants, Manufacturers and Financiers, 1700–1860’, Business History Review, 53, 2 (1979), pp. 205–34, The Rise of Merchant Banking (London, 1984), ‘British-based Investment Groups Before 1914’, Economic History Review, 2nd series, 38 (1985), pp. 230–51, and Merchant Enterprise in Britain (Cambridge, 1992). 12 R.P.T. Davenport-Hines and G. Jones (eds), British Business in Asia since 1860 (Cambridge, 1989); G. Jones and J. Wale, ‘Merchants as Business Groups: British Trading Companies in Asia before 1945’, Business History Review, 72 (1998), pp. 367–408; G. Jones (ed.) The Multinational Traders (London, 1998); and G. Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries (Oxford, 2000). 7

INTRODUCTION

topics as the transition from sail to steam, the segmentation of the shipping industry into liner and tramping operations, the finance and management of shipping companies, the role of agents and brokers, the development of liner conferences and the implications of innovations in the technology and organisation of shipping for specific commodity trades.13 This flourishing research in maritime and shipping history has recently been given a theoretical edge and linked to the first of our themes by Boyce’s study of the organisational changes leading to the emergence of large liner groups in British shipping.14 It has also been given a link to our third theme by Headrick’s account of the technological basis of European imperialism in Asia and Africa, in which steamship lines stand alongside naval and military technology, railways and telecommunications systems as tools for the expansion and maintenance of European rule.15 Our third strand of enquiry, then, is the relationship between economics and politics, between business and government – and more specifically between overseas enterprise and overseas empire. This is a theme that has been addressed by others – from studies of individual businessmen, such as Donald Currie of the Castle Line, through essays on British businesses in Latin America and their relations with local governments, to large quantitative assessments of the sources and purposes of British investment in the Empire.16 The most widely-known work, however, is undoubtedly the ambitious and thought-provoking attempt by Cain and Hopkins to analyse the development of the British economy, and in turn Britain’s relations with its Empire, through the prism of ‘gentlemanly capitalism’.17 Inevitably, their ideas and arguments are expressed at a very high of generalisation and

13

Among others, L.R. Fischer and G. Panting (eds), Change and Adaptation in Maritime History; The North Atlantic Fleets in the Nineteenth Century (St. John’s, Newfoundland,1985), L.R. Fischer and Helge W. Nordvik (eds), Shipping and Trade, 1750–1950: Essays in International Maritime Economic History (Pontefract, 1990); S. P. Ville and D. M. Williams (eds), Management, Finance and Industrial Relations: Essays in International Maritime and Business History (St. John’s, 1994), and D.J. Starkey and G. Harlaftis (eds), Global Markets: The Internationalization of the Sea Transport Industries since 1850 (St. John’s, 1998). 14 G. Boyce, Information, Mediation and Institutional Development: The rise of large-scale enterprise in British shipping, 1870–1919 (Manchester, 1995). 15 D.R. Headrick, The Tools of Empire: Technology and European Imperialism in the Nineteenth Century (New York, 1981), and The Tentacles of Progress: Technology Transfer in the Age of Imperialism, 1850–1940 (New York, 1988). 16 A. Porter, Victorian Shipping, Business and Imperial Policy: Donald Currie, the Castle Line and Southern Africa (Woodbridge, Suffolk, 1986); D.C.M. Platt (ed.), Business Imperialism, 1846–1930 (Oxford, 1977); L.E. Davis and R.A. Huttenback, Mammon and the Pursuit of Empire (Cambridge, 1986). 17 These ideas were first expressed in a pair of scholarly articles: P.J. Cain and A.G. Hopkins, ‘Gentlemanly Capitalism and British Expansion Overseas: I, The Old Colonial System, 1688–1850’, Economic History Review, 2nd series, 39 (1986) and ‘II, New Imperialism, 1850–1945’, Economic History Review, 2nd series, 40 (1987). The arguments 8

INTRODUCTION

national aggregation, and are unable to give more than brief or passing attention to the experience of individual businessmen, firms, or even groups of firms, which attempted to master the complex economic and policy environments in which they conducted their affairs. Furthermore, Cain and Hopkins tend to focus on the banking and financial institutions located in or centred on London, and the influence of these on national policy-making. The central thrust of their argument is that the ‘gentlemanly capitalists’ of Victorian and Edwardian Britain – which they sometimes associate with the whole of the services sector of the British economy but usually more narrowly with the City of London – rather than the manufacturers of the ‘provinces’ were the driving force behind the expansion of the British Empire after 1850. Consequently, the nuances of where Scots, Irish or ‘colonial’ businessmen at work in the far-reaches of the Empire might fit into an analysis that is heavily centred on England and its capital have yet to be properly explored. William Mackinnon certainly developed aspirations of becoming a latter-day ‘Highland gentleman’, but it may be questioned whether he was ever fully assimilated into the ranks of the ‘City gents’ of London or whether those around him ever escaped from the values of small burgh and urban Scotland. Where does someone who was a Scottish shipowner rather than a London merchant banker, whose vessels operated mainly out of port cities other than London, and whose principal source of income and wealth lay in India rather in the ‘square mile’ of the City, fit into the analytical framework offered by Cain and Hopkins? There is even the question as to how far someone whose business group served the Dutch, Portuguese and (very briefly) the French overseas empires, and participated in the early stages of what would become the Belgian empire in Africa, can truly be seen as a ‘British’ imperialist. The Cain and Hopkins ‘thesis’ is a stimulating one, but it is also highly controversial – much of the criticism centring on the issue of whether a socially descriptive label like ‘gentlemanly capitalism’ can really be a fulcrum for an analysis of the main trends in the economic history of Britain and its Empire, or bear the weight of the enormous edifice that has been erected upon it.18 My purpose in this book is neither to fit Mackinnon and his network relations unquestioningly into the framework of ‘gentlemanly

were subsequently elaborated and given greater evidential support in two books, the first of which is the more substantial: P.J. Cain and A.G. Hopkins, British Imperialism: Innovation and Expansion, 1688–1914 (London, 1993), and British Imperialism: Crisis and Deconstruction, 1914–1990 (London, 1993). 18 The critics include M.J. Daunton, ‘“Gentlemanly Capitalism” and British Industry, 1820–1914’, Past and Present, 122 (1989), pp. 119–58, A. Porter, ‘‘Gentlemanly Capitalism’ and Empire: the British Experience since 1750?’, The Journal of Imperial and Commonwealth History, 18 (1990), pp. 265–95, G. Ingham, ‘British Capitalism: Empire, Merchants and Decline’, Social History, 20 (1995), pp. 339–54, and the several contributors to R.E. Dumett (ed.), Gentlemanly Capitalism and British Imperialism: the New Debate on Empire (London, 1999). 9

INTRODUCTION

capitalism’ nor to mount a central assault on it. It is rather to try to pick a more independent path through the thickets – for the purpose of demonstrating that the interplay between business and government during the expansion and the exploitation/development of the British Empire derived neither wholly from the needs and interests of the metropolis, whether this was ‘gentlemanly capitalism’ or not, nor principally from the actions, ideas and requirements of the men on the ‘periphery’, whatever their social antecedents. Rather it was an iterative process, involving a complex two-way interchange of information, initiatives, experience and resources, to which both centre and periphery contributed in varying degrees. Moreover, in the highly decentralised structures that were the European overseas empires of the nineteenth century, periphery-periphery relations, that is between different territories of the same empire or territories forming parts of different empires, could also be important arenas for government-business interaction involving trade, transport and finance. In following these themes through the principal phases in the development of the Mackinnon group, I will be attempting to bridge three distinctive sub-fields of history – business history, shipping or maritime history, and imperial history. I hope to demonstrate that these three areas of scholarship can usefully cross-fertilise each other. The real substance and interest of what I have to say lies in the connection between business strategies and structures, the technology and organisation of transport, and the politics of imperial expansion, and to focus on one to the exclusion of the others would be to miss the essence of what made William Mackinnon such an important figure in the nineteenth century world. Finally, a brief comment on the use of abbreviations is called for. Much of what follows will tell the story of two steamships companies of which William Mackinnon was Chairman – the British India Steam Navigation Company and the Netherlands India Steam Navigation Company. The former is relatively well-known to British maritime historians, who use the abbreviation BI (or sometimes BISN Co) to refer to it; the latter, by contrast, is largely unfamiliar to British maritime historians but somewhat better known to their Dutch counterparts, who employ the abbreviation NISM drawn from the company’s Dutch name. I have therefore decided to call the two companies by the short names – BI and NISM – to which they are most frequently referred within their respective national literatures.

10

40ºN 40º 40

PERSIA

MED. SEA Suez

(IRAN)

Basra +

+

+

ARABIA

Bushire

+

INDIA

Muscat

+

RE DS

+

Bombay

BAY OF BENGAL

EA

ARABIAN SEA +

Calcutta

PACIFIC OCEAN

Rangoon SOUTH CHINA SEA

+

Aden

20ºN 20 20º

+

Madras

CEYLON

CA

Singapore +

Equator

0º

SEYCHELLES

SUMATRA

ZANZIBAR

JAVA

E

Mozambique

Batavia +

A

ST

AF

RI

BORNEO

INDIAN OCEAN

+

MAURITIUS

20ºS 20 20º QUEENSLAND

AUSTRALIA Freemantle

+

40ºS 40º 40

1000 miles 60ºE 60 60º

80ºE 80 80º

Map 1 The Indian Ocean in the nineteenth century

100ºE 100 100º

120ºE 120º 120

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Part 1

Enterprising Scots Probably in no city in the British overseas dominions can Scotsmen cite with greater pride and justification more noteworthy achievements by their countrymen than the examples provided in that connection by Calcutta. There is something about engineering and merchandising on a big scale that seems peculiarly adapted to the Scottish mind. A. MacMillan (ed.) Seaports of India and Ceylon (London, 1928), p. 78

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1

East India merchants: Clyde to Calcutta, 1823–61

1

1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5

In 1861 some seventy British merchant firms were located in the bustling city of Calcutta, on the banks of the Hooghly River in Bengal. These were the agency houses, all private partnerships, which conducted the large trade between Britain and northern India, as well as a substantial part of the commerce within north-east India and between India and neighbouring Asian territories – the so-called ‘country trades’. The Calcutta agency houses, together with their counterparts in Bombay in western India, were the cutting edge of British capitalism in South Asia. Times were good for them. The shock of the Mutiny, which had caused panic in the city in 1857, had abated; the authority of the East India Company had been replaced with direct rule by the British Crown, leading in turn to a number of reforms in the way that British India was governed; and they stood on the cusp of an investment boom occasioned by the introduction of limited liability into the company law of Britain and India and by the effects of the outbreak of the US Civil War on India’s foreign trade. The agency houses in India, although varying in size and differing from each other in individual respects, shared certain common characteristics. First, they worked on commission, acting as agents for manufacturers or merchants in Britain, although this did not preclude them from trading in their own right, using their own capital; second, they either had diversified or would diversify into various non-trading activities in and around the locality of their commercial operations; third, some of them accepted ‘heavy public deposits of savings’, thereby acquiring the functions of merchant banks; fourth, a number had close connections with the City of London, or wealthy families in Lancashire and Glasgow; and fifth they were ‘largely the work of family and clan groups among whom the Scots were particularly prominent’.1 Such Scottish connections, however, were not necessarily directly with Scotland itself – frequently they reflected

1

S. D. Chapman, Merchant Enterprise in Britain (Cambridge, 1992), pp. 107–13. For the background to Scottish merchant capitalism in India, see J.G. Parker, ‘Scottish Enterprise in India, 1750–1914’, in R.A. Cage (ed.) The Scots Abroad (London, 1985), pp. 191–217. Parker’s account is stronger on the period 1750–1830, when the Scottish presence in India was closely linked to the activities of the East India Company, than the period after the reforms of the 1830s when the key factor became connections to the mercantile needs of industrial Britain. 15

ENTERPRISING SCOTS

links between Calcutta or Bombay and expatriate Scottish family firms in the port cities of Liverpool and London. Of the Calcutta agency houses, in fact, the majority acted on behalf of merchants in London. But twenty-six were directly linked to the industrial areas of northern Britain through agencies for manufacturers and merchants in Liverpool (twelve agencies), Manchester (seven agencies) and Glasgow (seven agencies). Among the latter were Gladstone Wyllie & Co, acting for James Finlay & Co, the large Scottish cotton manufacturer; Jardine Skinner & Co (the Calcutta wing of the Jardine Matheson group of family firms), which represented J. Ewing & Co, the turkey-red dyers of Glasgow; and Richardson Finlay and Co, whose family firm in Glasgow traded in Batavia in Dutch-ruled Java as well as in Calcutta. The Clydeside presence on the Hooghly also included a more modest partnership, Mackinnon Mackenzie & Co, who were the agents for the Glasgow merchants and shipowners, Wm. Mackinnon & Co.2 These two firms, sharing the ‘Mackinnon’ name, were neither connected with the City of London nor with a rich family in Glasgow. Their origins were altogether much more humble. The commercial and industrial city of Glasgow sits astride the River Clyde, which flows westwards into an ever-widening estuary until, some twenty-five miles down-river, near the port of Greenock, it opens out into the Firth of Clyde, the largest body of sheltered water in Britain. Historically, the river, the estuary, the Firth and the related sea lochs constituted a single regional maritime economy, in which the coastal communities, large and small, were linked by vessels that carried goods and passengers between the various ports, harbours and quays. It was a region that cradled maritime enterprise and shipbuilding, and it had served as Scotland’s backdoor to the world – to Ireland, to north-west England, and eventually across the Atlantic to North America and the Caribbean. Commanding the entrance to this maritime zone is the small burgh of Campbeltown, nestling at the head of a small sea loch, or bay, at the south-eastern end of the long peninsula of Kintyre. Protected by the peninsula at its back from the westerly winds of the North Atlantic, Campbeltown looks eastwards, beyond the island of Arran, to the relatively sheltered waters of the Firth. In 1841, a young man named William Mackinnon left Campbeltown to seek employment in Glasgow. Glasgow at that time was a city of a quarter of a million people, and was already Scotland’s leading industrial centre. Its recent growth had been based upon cotton spinning and weaving, with associated bleaching, dyeing, printing and chemical-manufacturing activities, but in the 1840s the development of the iron-smelting capacities of neighbouring Lanarkshire towns was also turning it into a centre for trade in pig-iron and the manufacturing of metal goods. A steam packet service to Liverpool had been started in 1834, and the deepening of the River Clyde, by the Trustees of 2

Thacker’s Bengal Directory, 1863 (Calcutta, 1863), Part IX, Commercial. 16

EAST INDIA MERCHANTS, 1823–61

the Clyde Navigation Trust, meant that the foreign trade of the region, formerly handled by the deep-water port of Greenock, was shifting up-river to the city’s harbour area. By the early 1840s, ‘large vessels, many of them upwards of 300 tons burden, from America, the East and West Indies, and the Continent of Europe, are often to be found three deep along nearly the whole length of the harbour’.3 It was a busy, expanding centre of trade and industry, attracting immigrants from the rest of Scotland, particularly the Highlands, as well as from Ireland, and it was already notorious for its high density of population, areas of poor housing and inadequate sanitation.4 Glasgow was connected to Campbeltown, as it was to other ports in the Clyde region, by a daily steam packet service, and there was in the city a Kintyre Club which had been founded in 1825 to assist immigrants from the peninsula to adapt to the new urban environment. It was therefore a natural magnet for young men from Kintyre seeking to make their way in the world. William Mackinnon was born in Campbeltown on 31 March 1823. Campbeltown then had a population of about four and a half thousand people. Herring fishing and distilling were the principal sources of income and employment, but the burgh was also a market town and commercial centre for the agricultural communities of southern Kintyre. Culturally, it was a ‘frontier’ town, one of a string of small burghs on the rim of the Highlands that served as a meeting place between Gaeldom and Lowland Scotland. The depopulation of southern Kintyre as a result of famine and warfare in the seventeenth century had led to resettlement by Lowland Scots from Ayrshire and Galloway, while the town itself, created a royal burgh in 1701, had long attracted English-speaking immigrants. Consequently, there were two parish churches, one belonging to ‘the Highland charge’ and conducting services in Gaelic, the other serving an English-speaking congregation.5 The Mackinnons, reputed to have moved to Campbeltown from the island of Arran, were Highlanders in origins and sentiment, but had already crossed the linguistic divide and employed English as the family language. William was born in a small house in what was then New Road. His parents were Duncan and Isabella Mackinnon (nee Currie). When the parish minister married them on 7 November 1798, Duncan was employed as a ‘staymaker’ in the town. Around 1820, however, he became an excise constable. William was the youngest member of the family, with all of the privileges of affection and protection that that status brought. Only one brother, Peter (b. 1818), had survived infancy and childhood, but three

3

New Statistical Account of Scotland, Vol. 6 (Edinburgh, 1845), p. 198. J. Cunnison and J.A.S. Gilfillan (eds), The Third Statistical Account of Scotland, Vol. V: The City of Glasgow (Glasgow, 1958); A. Gibb, Glasgow: The Making of a City (London, 1983). 5 The Statistical Account of Scotland, Vol. 10 (Edinburgh, 1794), pp. 517–67; The New Statistical Account of Scotland, Vol. 7 (Edinburgh, 1844), pp. 453–68. 4

17

ENTERPRISING SCOTS

sisters – Elizabeth (b. 1810), Catherine (b. 1814), and Flora (b. 1816) – managed to live into adulthood. Despite their humble circumstances, Duncan and Isabella, like most Scots of their time, believed in providing their children with an education. Elizabeth, for example, obtained sufficient schooling that when she was widowed early she was able to earn her livelihood as a schoolmistress. William attended an elementary school in Kirk Street before entering Campbeltown’s burgh school.6 Here the Rector and two or three assistants taught a curriculum that included English, arithmetic, book-keeping, geography, mathematics, navigation, Latin, Greek and French, and thereby provided their pupils with the educational foundations for a commercial career. William’s closest school friend was Jamie Hall. James Macalister Hall, who was two months younger than William, was the eldest son of William Hall, a former weaver from Pollokshaws in Glasgow who had set up as a grocer and general merchant in Campbeltown. The slight, almost frail, William probably relied on the more robust Jamie in the rough-and-tumble of the school playground. Moreover, since William’s grandmother and Jamie’s mother shared the maiden name of Macalister, it is more than likely that the two boys were related. The friendship forged between them was one of the main bonds in an alliance between the Mackinnon and Hall families on which a business empire would be founded. For growing boys, Campbeltown in the 1820s and 1830s was a lively and exciting place. The harbour and the loch, in particular, was a scene of constant activity, as ‘the rendezvous of hundreds of fishing smacks and wherries. There is a continual movement in its waters – the flapping and filling of its brown sails, the shouts of the men, and the whirr of the chain cable as the anchor is dropped, keep the port continually astir. Large vessels, also, are perpetually coming and going.’7 Fast revenue cutters were based in Campbeltown and conducted anti-smuggling patrols over the entire western seaboard of Scotland, from the Isle of Man to the Outer Hebrides. They provided steady employment for seamen from the burgh, including William’s uncle and cousins. Peter Mackinnon, Duncan’s brother, joined the customs service and by 1796 worked his way up to mate of the Prince of Wales. His two sons, including James, who rose to the rank of second mate of the Wellington cutter in 1844, followed him in turn.8 The schoolboy William was a regular visitor to James Mackinnon’s home, as a favourite of his ‘cousin Margaret’, and company for her when James was at 6

Sheriff J. Macmaster Campbell, ‘Sir William Mackinnon, Bart.’, The Campbeltown Courier, 20 and 27 January 1934, also in British India S.N. Co. Press Cuttings and Articles, 1890–1964, National Maritime Museum, Greenwich, BIS/37/1. 7 Rev. Donald MacLeod, Life of Norman MacLeod, D.D. (1876), quoted (with reference to years 1812–24) in Alexander Sinclair, Kintyre and the Kintyre Club (Glasgow, 1884), pp. 23–4. 8 Customs and Excise, Campbeltown Outport Records, Register of Officer’s Admissions and Securities, 1764–1895, Scottish Record Office, (SRO), Edinburgh, CE 82/4/1. Details 18

EAST INDIA MERCHANTS, 1823–61

sea. James and Margaret had three sons – Peter (b. 1832), John (b. 1841) and Duncan (b. 1844). William called them ‘nephews’, although strictly speaking they were cousins, and each were to play an important role within the group of family firms which he and Jamie Hall would establish. William probably left school at the age of thirteen (about the time of his father’s death in 1836). By then, his elder brother Peter was away to sea. However, the seaman’s trade was not for William. Instead he was apprenticed to a grocer, and after a few years he opened his own shop. The census of 1841 found him living as a grocer on Main Street, together with his widowed mother, then sixty years old, and his unmarried sister, Flora. Some indication of the family’s status at that time is the fact that their closest neighbours were a farm servant, a mangle keeper, the wife of a seaman, a cotton spinner and an excise officer.9 As he was obtaining his first practical business experience, William’s family circle was expanding. In 1833 his sister Catherine had married a mariner named Archibald Gray, who originally hailed from Elie in Fife, and started to raise a family that would comprise five children. Meanwhile, in 1836 Elizabeth married a local man, Alexander MacNeill, who was a ship’s carpenter but also had a master’s certificate. He was employed in the West Indian trades out of Greenock, and died at Demerara in British Guyana in 1838, leaving Elizabeth a widow with two children. William was therefore part of a growing extended family of Mackinnons, Grays and McNeills – a vigorous clan with sea faring and government service embedded in its traditions and expertise. When he was eighteen years old, in 1841, William had a serious illness that left him with a permanently weakened left lung.10 His grocer’s business failed shortly afterwards and he had to seek new employment. He moved to Glasgow, to find his way in the commercial life of the growing city. Details of his apprenticeship are scanty.11 However, circumstantial evidence suggests that he served as a clerk in either or both of two firms. The first, William Connal &

of James Mackinnon’s career in the revenue service can be found in the discharge tickets and other official documents in Miscellaneous Family Papers, 1808–75, Papers of Duncan Mackinnon, National Library of Scotland (hereafter Nat. Lib.) Acc. 6168/15. 9 Census of 1841, Enumerator’s Books for Campbeltown Parish, General Register Office, Edinburgh. 10 William Mackinnon to Duncan Mackinnon, 12 December 1879, Nat. Lib. Acc.6168/8. 11 There are at least two versions of how he made his way – the first, that he ‘was employed in a silk warehouse and afterwards in the office of a merchant engaged in the Eastern Trade’ (Obituary, Glasgow Herald, 23 June 1893, in Biographical Notices, Vol. VIII (Mitchell Library, Glasgow), 248); the second that he started in a clerkship with a mercantile firm but moved to an improved position with a Portuguese merchant, who three years later offered him a partnership which he turned down (J.M. Campbell, ‘Sir William Mackinnon’, Campbeltown Courier, 20 and 27 Jan 1934, BIS/37/1; George Blake, BI Centenary: 1856–1956 (London, 1956), 18). Neither of these can be confirmed by independent evidence. The Portuguese merchant, indeed, may never have existed. 19

ENTERPRISING SCOTS

Co, was one of Glasgow’s leading colonial merchant houses, originally involved in the West Indian trades, more especially in the importation of sugar, but by the 1840s it was also substantially interested in importing tea from China. The senior partner, William Connal, was an investor in shipping lines – notably as one of the first trustees of the Cunard Company – and in the 1840s he helped pioneer a direct sailing ship line between the Clyde and Calcutta which was eventually taken over by George Smith & Sons.12 Among William Connal’s assistants was his nephew, Michael Connal, who befriended William Mackinnon, some six years his junior. Michael Connal had been in London during the 1830s, and became a partner there in the firm of Scott Bell & Co, commission merchants. He retained the partnership despite returning to Glasgow to work for his uncle and to become a partner in William Connal & Co in 1845.13 During this period there occurred the great Disruption of 1843, when the Church of Scotland was torn apart by the issue of patronage in the appointment of ministers. William Mackinnon and Michael Connal both left the established church to join the new Free Church of Scotland, which had a strong following among the rising business classes of Glasgow and the West of Scotland, and both would eventually become leading lay figures in the Free Church. The other firm that may have employed William at some point was Sam. Higginbotham, Son, & Gunnis, cotton spinners and weavers. Its partners’ roots lay in the Manchester area but their presence in Glasgow reflected the close relationship that had developed between the cotton manufacturers and merchants of Lancashire and Clydeside. George Gunnis of this firm had a son, George Ponton Gunnis, who, instead of joining his father’s business, set himself up as a merchant in Glasgow. William, who first met George Ponton Gunnis in 1845, later described him as his ‘oldest and most intimate friend’ outside of the immediate Campbeltown circle.14 By 1849 G.P. Gunnis had formed a partnership with Siegfried Liebert, a member of Manchester’s German community, as S.A. Liebert & Co, with offices at 11 Princes Square, Glasgow. William Mackinnon’s commercial training and experience in Glasgow between 1841 and 1846 pointed him towards the cotton textile trades and in the direction of India. This reflected wider economic trends. Faced with the emergence of local competition in European markets, the cotton manufacturers and merchants of Lancashire and Clydeside were turning for outlets for their products to India and other eastern markets (which were liberated

12

Memoirs and Portraits of One Hundred Glasgow Men, Vol. 2 (Glasgow, 1886), pp. 87–90; C.A. Oakley, The Second City (London, 1947), pp. 101–2. 13 The principal source for Michael Connal’s life and times is John C. Gibson, Diary of Sir Michael Connal, 1835 to 1893 (Glasgow, 1895). Unfortunately, this is almost totally devoid of his business interests and activities. 14 W. Mackinnon to D. Mackinnon, 30 July 1879, Nat. Lib. Acc. 6168/8. 20

EAST INDIA MERCHANTS, 1823–61

between 1813 and 1833 from the trading monopoly of the East India Company). By the late 1840s, India was importing some 15 per cent of British exports of cotton manufactures by value15 – largely through the efforts of the agency houses in Calcutta and Bombay. However, William’s first step towards joining the ranks of these firms came not through his Glasgow connections, but rather through his own family. Sometime during the 1840s, William’s elder brother, Peter, went into partnership with Jamie Hall’s father, and Peter took himself off to Liverpool to represent the firm of Hall & Mackinnon in that port. However, Peter and William Hall also had their eyes on India, where an acquaintance named Robert Mackenzie, a former bank clerk in Campbeltown, had a small general trading enterprise in Bengal. William Mackinnon and James Macalister Hall, it seems, were sent out to join Robert Mackenzie in India with a view to the development of a trade between Calcutta, Liverpool and the Clyde. William arrived in Calcutta in 1846, and immediately proceeded some four hundred miles up-country, to Ghazipur on the Ganges River, where Robert Mackenzie had just opened a general merchant’s business based upon on the agency for the new river steamship service of the India General Steam Navigation Company. By 1847 he was back on the Hooghly, at a village called Cossipore a few miles north of Calcutta, where Mackenzie had a house and a sugar mill and where the firm of Mackinnon Mackenzie & Co began its days. The formal deeds of co-partnery between William Mackinnon and Robert Mackenzie were signed in December 1847.16 Jamie Hall arrived in India to join the partnership in January 1849, but shortly thereafter went up to Ghazipur to look after the business there and to establish the firm of Mackenzie Hall & Co. By the early 1850s the Ghazipur firm was engaged in general trade, in managing an oil mill, and in factoring for local European estate owners, as well as the steamer agency. Of the two concerns, Mackenzie Hall & Co in Ghazipur and Mackinnon Mackenzie & Co in Cossipore, the latter was soon the more successful, and by 1853 it had relocated to Calcutta. This occurred largely through William Mackinnon’s efforts to shift it out of local Indian commerce into the import-export trades – for which purpose he drew upon his Glasgow friends, Connal and Gunnis. In May 1849 William returned briefly to Glasgow, to open an account with the Union Bank and to seek consignments of goods from Glasgow and Manchester as well as credit for Mackinnon Mackenzie & Co.’s purchases on its own account. Michael 15 D.A. Farnie, The English Cotton Industry and the World Market, 1815–1896 (Oxford, 1979), p. 117. 16 Mackinnon Mackenzie & Co: Abstract of Co-Partnery, 1884, Mackinnon Papers, School of Oriental & African Studies, London (hereafter MP), India File 15. However, the survival of a notebook recording cotton prices in Calcutta from January 1847 onwards suggests that the firm may have been in operation from as early as December 1846 (Mackinnon Mackenzie & Co, Cotton Price Notebook, 1847–53, Inchcape (unclassified)).

21

ENTERPRISING SCOTS

William Mackinnon, James Hall and Robert Mackenzie in Bengal, c. 1850

Connal’s London house, Scott Bell & Co, which already did business in south India through Binny & Co in Madras, became Mackinnon Mackenzie & Co’s London correspondents, agreeing to accept the firm’s drafts up to a limit of £15–20,000 and to give credit on goods shipped from Glasgow. The following year, the City of Glasgow Bank agreed to provide a continuous supply of credit, up to £10,000 limit, to finance joint commercial operations between Scott Bell & Co and Mackinnon Mackenzie & Co.17 Wm Connal & Co, G.P. Gunnis, and S.A. Liebert & Co were also among the firms which started to consign goods to Mackinnon Mackenzie & Co in Calcutta. William recruited additional manpower for his expanding business. His ‘nephew’ Peter, eldest son of James and Margaret, went out to India to be an assistant in Mackinnon Mackenzie & Co. in 1850, and in 1851 a former school-friend, Neil Macmichael, left the cotton firm of C.Todd and Higginbotham in Glasgow to go up to Ghazipur to relieve Jamie Hall and assist Mackenzie there. 17

Scott Bell & Co to William Mackinnon, Glasgow, 18 July and 13 October 1849 (copies), Inchcape (unclassified); Mackinnon Mackenzie & Co, Private Ledger, Inchcape (unclassified). 22

EAST INDIA MERCHANTS, 1823–61

The young men from Campbeltown were joining a sizeable Scottish expatriate community in Calcutta and its environs. The city was the principal seat of government for the whole of British India and a major commercial and financial centre, matched only by Bombay in western India, and Scots were active in both trade and administration. The focal point for many was the Scots Kirk, which in 1843 had gone over to the Free Church under the leadership of Alexander Duff, who had been the Church of Scotland’s first ever foreign missionary and was also a founding editor of the Calcutta Review.18 For William, Jamie Hall and Peter Mackinnon, church services on the Sabbath meant a break in a life otherwise bound by the office and the bachelor ‘chummery’, and in which hours of work were long and hard. Peter Mackinnon later recalled how ‘When I went out to India first and we lived above the office, it was no uncommon thing for us all – Uncle, Jamie and I – to go down in pajamas to office at 7 o’c for a couple of hours, and to be working from after dinner to 11 and 12 o’c at night.’19 However, friendships made in and through the church also meant a widening social circle for visits and dinners. Among the new contacts made through the Free Church in these years were James MacDonald, a Paisley man employed in banking, William Haworth, a coffee planter, and Dr David Begg, a medical man turned indigo planter and merchant. By 1852, William was back in Glasgow again. The web of business transactions he was spinning between Calcutta, Glasgow, Liverpool, Manchester and London appeared to demand the presence of one of the three Mackinnon Mackenzie & Co partners in the Glasgow on a regular basis. As a newcomer to the cotton trade between the Clyde and Calcutta, it needed active representation to compete with the other Calcutta houses. The firm of Wm. Mackinnon & Co., merchants and agents, was therefore set up, with offices at 116 St Vincent Street. It acted as a forwarding merchant, entrusted with exporting goods owned by others to the commission agents, Mackinnon Mackenzie & Co, entrusted with selling these goods in Indian markets.20 However, its establishment also had another purpose – to enable the partners to enter the market for sailing ships on the Clyde. In 1852 William made his first purchase (jointly with Hall Mackinnon & Co., Liverpool, and George P. Gunnis) of a small sailing vessel, the Queen, to be employed on sea routes into and out of Calcutta.21

18

George Smith, Life of Alexander Duff, 2 vols. (London, 1879). P. Mackinnon to D. Mackinnon, 3 May 1876, Nat. Lib. Acc. 6168/9. 20 For the development of the specialised functions of commission agents, acceptance houses, forwarding merchants and export warehouses within the chain of middlemen connecting British manufacturers to international customers, see S.D. Chapman, ‘British Marketing Enterprise: The Changing Roles of Merchants, Manufacturers and Financiers, 1700–1860’, Business History Review, 53 (1979), pp. 205–34. 21 Glasgow Post Office Directory (1853); Merchant Shipping Register, 1851–2, Collector of Customs, Glasgow. 19

23

ENTERPRISING SCOTS

******* The establishment of Wm. Mackinnon & Co in 1852 marks the point at which it becomes possible to observe the structure and strategy of the emergent Mackinnon-Hall mercantile and shipping group. Three family firms – Wm. Mackinnon & Co of Glasgow, Hall Mackinnon & Co (later Mackinnon Frew & Co) of Liverpool and Mackinnon Mackenzie & Co of Calcutta – collectively conducted a trade in goods between Britain and India, and for a time between India and Australia. They also owned and managed sailing ships that carried these goods, as well as the goods of others, between the three countries. It was an arrangement that built upon the small sums of capital already accumulated, as well as the commercial contacts already made, in Glasgow, Liverpool and Calcutta, and it employed the sea-faring knowledge and expertise of various members of the two families. In combining shipping with a trade in goods, it reflected earlier methods of conducting maritime business rather than the newer, nineteenth century tendency to separate both functions. By embracing Australia as well as Britain and India, the firms’ strategy was to exploit flexibility of operations between three differing patterns of supply of and demand for goods and services – taking advantage of the differing needs of a growing industrial economy, a large ‘traditional’ Asian economy, and relatively young, raw colonies of settlement. Such flexibility was particularly important in the shipping field, where imbalances in import-export trades, more especially in volume of goods, or seasonal variations in production of commodities, could mean difficulties in finding cargo to or from a particular port at a particular time. They also required the shipowner to have a feel for the rhythms and practices of the Indian Ocean maritime region. However, the relatively inexperienced Mackinnon-Hall firms were only partially successful in developing this strategy. Their failures in Australian trades eventually reinforced a tendency to concentrate upon the Clyde and Mersey to Hooghly trades and to diversify into new forms of activity in India through the managing agency potential of the Calcutta house. Wm. Mackinnon & Co, although junior to Hall Mackinnon & Co, quickly became the driving force of the UK end of the business. It may have started out as a sole proprietorship, but the reorganisation of William and Jamie’s interests that followed the death of Robert Mackenzie in May 1853 resulted in it becoming a co-partnership between the two friends. The original intention appears to have been that William and Jamie would alternate periods of residence and management between Glasgow and Calcutta. Although some such system did operate, William was nevertheless the resident partner in Glasgow for most of the 1850s and 1860s. The principal functions of the Glasgow house were to arrange exports from the Clyde and the Mersey – mainly cotton textiles, but occasionally other goods like pig iron, iron rail and iron plates. This it did either by purchase on the firm’s own account, on joint account with others, or on consignment from 24

EAST INDIA MERCHANTS, 1823–61

manufacturers or other merchants for sale on a commission basis. It was important for a new firm to widen its circle of contacts with businesses which might be willing to consign goods or enter joint account arrangements, and a good deal of William’s time was devoted to cultivating the leading figures in more established firms in Glasgow, Manchester and London. He was also indefatigable in seeking out credit for his firm’s activities, through the discounting of commercial paper, by advances from other mercantile houses or in securing bank loans. Wm. Mackinnon & Co purchased sailing ships, usually with the Liverpool house and other minority shareholders, on the 64th system of shares, and chartered others for voyages to India or Australia. It also sought to encourage Glasgow and Liverpool shipowners despatching vessels to Calcutta to consign them to Mackinnon Mackenzie & Co as ship agents. The Liverpool firm shared the ownership of ships with Wm. Mackinnon & Co, and looked after these vessels when they were in the port of Liverpool. It loaded ships in Liverpool with Manchester piece goods owned by or consigned to the Glasgow or Calcutta firms, and arranged cargoes of Cheshire salt for Calcutta. Finally, it disposed of the cargoes of produce brought by vessels returning from India. The firms did no produce business into the Clyde before the early 1860s, because the market was relatively small. Although the largest produce markets were in London’s Mincing Lane, they tried wherever possible to steer the trade towards Liverpool, where higher prices could sometimes be obtained for commodities like jute – and where the Liverpool house, renamed Mackinnon Frew & Co in 1858,22 could get a commission. Mackinnon Mackenzie & Co in Calcutta was the flywheel of the entire business, without which little else would have been possible. After Robert Mackenzie’s death in 1853 it became a partnership between William and Jamie, the latter winding up his interest in the Ghazipur concern. Jamie wanted to rename the Calcutta firm Mackinnon Hall & Co, but was dissuaded by William on the grounds that the name should be kept in reserve until the partners opened a London house. Peter Mackinnon (‘nephew’) was admitted as a junior partner in 1854, while Jamie’s younger brother, Peter Hall, became a junior partner in 1861.23 James Hall, Peter Mackinnon and Peter Hall, in a rotation to permit home leave, managed the firm throughout the 1850s and 1860s. Its main functions were to receive and sell imported

22

William Hall retired from the firm in 1857 and a partnership was offered to William Frew, a master mariner from Campbeltown who had been William Mackinnon’s principal assistant in Glasgow. Frew went down to Liverpool to join Peter Mackinnon in the autumn of 1858. 23 Mackinnon Mackenzie & Co: Abstract of Deeds of Co-Partnery, 1884, MP India File 15. Peter Hall had previously been employed in the customs service in Tarbert, Loch Fyne, as a merchant’s clerk in Australia, and as an assistant in Mackinnon Mackenzie & Co. 25

ENTERPRISING SCOTS

goods, mainly cotton textiles that were disposed of through a network of Indian dealers in the bazaar, and to purchase and ship Indian produce for export. Mackinnon Mackenzie & Co also acted as agents in the port of Calcutta for vessels owned or chartered by the Glasgow and Liverpool firms, or consigned to it on a commission basis by third parties, and it eventually undertook the management of enterprises in India into which the family partners diversified. It was a busy, and expanding, concern. The trade with Australia was an off-shoot of the Clyde-Mersey-Hooghly nexus, and was an attempt to develop a direct connection between Calcutta and Australia in which ships would carry southwards both Indian produce and re-exported British manufactured goods, and return with whatever cargoes could be obtained for Calcutta. The colonies of New South Wales and Victoria were experiencing a dramatic boom in trade and immigration as a result of the gold discoveries of the early 1850s, and rising prices sucked in large supplies of foodstuffs and manufactures. The gold rushes revived the emigration from Scotland to Australia, which had slackened off in the 1840s, and in Glasgow there occurred an ‘Australian mania’ as merchants and shipowners redirected their attention to these distant colonies.24 The Mackinnons and Halls were engaged in their own particular version of that ‘mania.’ In addition to the two vessels that Mackinnon Hall already owned and operated out of Liverpool, a further four wooden sailing ships intended for the Clyde-Calcutta-Australia trades were bought by William Mackinnon and placed on the Glasgow registry between 1852 and 1856.25 They were mainly cheap wooden ships that had been built in Canadian yards and then sent across the Atlantic, usually with timber cargoes, for speculative sale in British ports. However, the Mackinnon-Hall firms also made use of vessels chartered from other Clyde and Liverpool owners. There was plenty of tonnage available on the Clyde and Mersey in the early-to-mid 1850s for those who knew where to find cargoes. In the port of Glasgow between 1852 and 1858, for example, the number of ships on register rose from 500 to 640, and the total tonnage from 156,064 to 228,873 tons.26 The first connections to Australia were made through Robert Mackenzie, who had relatives there, and who went down to Melbourne to investigate the

24 G.V. Portus, ‘The Gold Discoveries, 1850–1860’, in Cambridge History of the British Empire, VII, Part 1 (Cambridge, 1933), pp. 245–71; David S. Macmillan, ‘Scottish Enterprise in Australia, 1789–1879’, in P.L. Payne (ed.) Studies in Scottish Business History (London, 1967), pp. 319–44. 25 They were the Queen, 867 tons, built in New Brunswick, Canada, in 1852; the bark Peony, 344 tons, built in Sunderland in 1852; the Antarctic, 820 tons, built in Quebec in 1854; and the bark Bessie Young, 348 tons, built in New Brunswick in 1856. (Merchant Shipping Register prior to the Merchant Shipping Act, 1851–2 to 1854–55, and Merchant Shipping Register under the Merchant Shipping Act of 1854, Vol. 1, Collector of Customs, Glasgow.) 26 Abstract of Ships on Register, 1852–60, Collector of Customs, Glasgow.

26

EAST INDIA MERCHANTS, 1823–61

commercial possibilities. However, he drowned on the return trip, when the Aurora was wrecked off Cape Howe in southeast Australia in May 1853. To sort the problems left behind by Mackenzie’s death, and to try to set the Australian ventures on a sound footing, William Mackinnon left Glasgow for Australia in 1854, spending some months in Sydney and Melbourne. His visit took place against a background of distrust of Australian trade in Glasgow as a result of a temporary collapse in prices and the failure of several firms associated with the colonies. Having made arrangements for the conduct of trade with various expatriate Scottish houses in Sydney, Melbourne and Geelong, William returned home to Glasgow via Calcutta. Most of the cargoes subsequently sent to Australia comprised Bengali produce – sugar, rice, wheat, oats and gram – together with mixed trade goods, including tea and pepper re-exported from Calcutta, but there were occasional exceptions, such as a cargo of sugar from Mauritius. However, things did not go well with the trade to New South Wales and Victoria. There were losses at sea, on the long hazardous route down through the Straits of Malacca, the Java Sea and the Torres Straits to Sydney and Melbourne.27 The vessels were underinsured, meaning additional financial loss to Wm. Mackinnon & Co and its associates. William’s relations with the expatriate Scottish-Australian merchants – Lindsay Matheson & Co of Sydney, Wm. Hammill & Co of Melbourne and Law Dodd & Co of Geelong – were no less painful, and ended in debt as each of firms collapsed in turn between 1856 and 1859. Eightyeight thousand rupees were written off Mackinnon Mackenzie & Co’s results for 1859 in consequence of these failures, with a further twenty-two thousand carried forward against 1860.28 Only Neil Macmichael was now left among William’s Australian contacts. Neil had been sent down from Ghazipur to Australia after William’s departure from there in 1854, and obtained a partnership in the small firm of MacIntosh Hirst & Co of Sydney. The winding up of this firm in 1861, with debts to William and his friend Gunnis,

27

In addition to the wreck of the Aurora in 1853, the Queen was lost with all hands late in 1856, and this was followed by the stranding of the Antarctic on the South Sands near Penang early in 1857. On hearing the latter news, William wrote despairingly: ‘I am very sorry about the “Antarctic”, and getting sick of ships. If we sell her as I fancy we must do, I fear we won’t get another. The amount you name as likely to be drawn on us, £2,500 for her repairs, is alarming – and really the sooner we get out of such property the better.’ (W. Mackinnon to P. Mackinnon, 4 March 1857, MP, Misc. Commercial File 59). 28 W. Mackinnon to N. Macmichael, 7 April and 29 Oct. 1856, MP Misc. Commercial File 56; A. Matheson to W. Mackinnon, May 1855–July 1856, MP Misc. Commercial File 26; W. Mackinnon to P. Mackinnon, 24 Jan. 1857 MP Misc. Commercial File 58; W. Mackinnon to P. Mackinnon, 7 Aug. 1857 (copy), Inchcape (unclassified); W. Mackinnon to Hammill, 15 Oct. and 18 Nov. 1858, MP Misc. Commercial File 60; W. Mackinnon to J.M. Hall, 19 April 1859, MP Misc. Commercial File 61; W. Mackinnon to J.M. Hall, 2 April and 24 May 1859, MP Misc. Commercial File 58; H. Law to W. Mackinnon, MP Misc. Commercial File 62. 27

ENTERPRISING SCOTS

finally persuaded William that his enthusiasm for Australia may have been somewhat misplaced. ‘We’ll have to be very careful indeed’, he concluded sadly, ‘if we are to have any dealings henceforth with the Colonies.’29 William Mackinnon’s failure to develop a Calcutta-Australia traffic resulted partly from the one-way nature of the trade, in which little came back from Australia to Calcutta. This made it a risky affair, all the more so since it was being conducted within the roller coaster of boom and bust in the Australian economy of 1850–1857, and in the financial and commercial ties between Scotland and Australia. His Melbourne and Geelong correspondents almost certainly failed because of the financial crisis of 1857. (Law Dodd & Co, for example, were commission agents for Dennistouns, the large Glasgow merchant house which ‘stopped’ in 1857). Although the losses on their Australian ventures turned the Mackinnon-Hall firms in new directions, William had been impressed and excited by his brief visit to Australia and retained a lingering desire to return some day to the creation of a Calcutta-Australian link. William and Jamie’s initial reaction to the Australian fiasco was to get out of owning and managing their own vessels, and to invest instead in a larger enterprise under more experienced hands. Lewis Potter, of Potter Wilson & Co, was one of Glasgow’s more prominent shipowners, with substantial Liverpool connections. In 1850 he had formed the Clyde and Australian Shipping Company to run ships on the Clyde-Mersey to Australia routes, and in 1858 floated a similar enterprise, the Glasgow and Eastern Company, to purchase five vessels for the Clyde-Mersey to Calcutta route. William Mackinnon agreed to take a small stake in the existing company, the Clyde and Australian, and to take sixty shares (worth £4,000) in the new concern, the Glasgow and Eastern. In return, the Glasgow and Eastern ships, together with any others under Potter’s management which happened to be sent to Calcutta, would be consigned to Mackinnon Mackenzie & Co as agents in Calcutta.30 By 1861, the Glasgow and Eastern was runnning some of its ships on around-the world-voyages, via Calcutta and New York or Boston, as well as on Glasgow-Liverpool-Calcutta and return. However, the old salts in Liverpool, Peter Mackinnon and William Frew, were less happy than the younger men to see their capital tied up in vessels under someone else’s control. They turned instead to investment in more efficient ships of their own – that is towards new iron sailing ships custom-built for the UK to India trades. The Glasgow and Calcutta houses took shares in the two vessels with which this initiative was begun – the Ghazepore and the Robert Mackenzie, each 820 tons and built by Simons of Glasgow in 1859 and 1860.

29

W. Mackinnon to P. Mackinnon, 25 June 1861 (copy), Inchcape (unclassified). W. Mackinnon to J.M. Hall, 17 May 1858, MP Misc. Commercial File 57; W. Mackinnon to P. Mackinnon, 1 May 1860 (copy), Inchcape (unclassified).

30

28

EAST INDIA MERCHANTS, 1823–61

Throughout the 1850s profits from the trades between Britain and India sustained the losses in the Australian connection and generated the savings that were ploughed into new ships. Using their own or Lewis Potter’s ships when possible, or chartered vessels and cargo space in the holds of other ships when necessary, the partnerships ran a two-way trade, both on their own account and on commission from others. Cotton textiles, metal goods and salt went out from Glasgow and Liverpool to Calcutta, and jute, oil seeds, rice, indigo, saltpetre, and shellac came back to Liverpool and London. These were activities that demanded constant attention to detail – to stocks, to prices in the various markets, to the state of accounts, to sources of financing, to exchange rate and interest rate movements. In short, they required a wide range of commercial intelligence to be shared between the three firms, but especially the Glasgow and Calcutta houses, by way of a regular weekly correspondence. In the Mackinnon-Hall concerns, as in similar establishments, mail day, bringing the arrival of the latest information by the steam packet service between Britain and India, was a particularly hectic time. Since most of the business was financed, directly or indirectly, from short-term credit obtained in Glasgow, it was the duty of Mackinnon Mackenzie & Co to ensure that there was a constant flow through Wm. Mackinnon & Co of homeward remittances on sales made and commissions earned in India. Cotton textiles were the backbone of the business. This was not just because they contributed most to turnover and profit, but also because Mackinnon Mackenzie & Co’s success in selling cotton goods in India persuaded constituent firms, or their individual partners, to put up money for minority shares in Mackinnon-Hall ships or joint-account speculation in homeward produce cargoes. In this sphere of activity William continued to develop his ties with Glasgow and Manchester cotton men. George Gunnis and Siegfried Liebert remained his most active supporters. By the early fifties their firms – S.A. Liebert & Co in Glasgow and Gunnis & Liebert in Manchester – were into cotton printing as well as dealing in grey goods. Their textiles went out to Calcutta accompanied by such instructions as ‘Gunnis desires you to sell off his prints as they arrive as the new pattern will interfere with the old. This is a good rule with all shipments.’31 A Glasgow firm whose business William courted assiduously was the large and imposing merchant house of J & A Dennistoun, which had branches in England, the United States, France and Australia – but not in India, where it consigned its goods to Jardine Skinner & Co of Calcutta. For a while William entertained hopes that he might wean some or all of the Dennistoun’s account away from Jardine Skinner, but he lost interest when the financial crisis of 1857 caused Dennistouns to suspend trading for about a year. Nevertheless, the circle of Glasgow constituents expanded over time to include several West of Scotland 31

W. Mackinnon to P. Mackinnon, 25 Feb. 1856, MP Misc. Commercial File 59. 29

ENTERPRISING SCOTS

cotton manufacturers – Salmond Connel & Co, spinners, Yates Brown & Howat, muslin weavers, Muir Brown & Co, calico printers and turkey red dyers, and William Stirling & Sons, also turkey red dyers. From such firms came a variety of textiles – yarns, calicos, muslins, prints and turkey red prints – for sale on commission, or as purchases by the Mackinnon-Hall partnerships. They were also a source of new ideas about how sales in Calcutta might be developed – as in the suggestion by John Matheson of William Stirling and Sons that Mackinnon Mackenzie & Co should have its own line of designs in turkey red prints, just as it had with Gunnis in ordinary prints, and that ‘if you can only hit the native taste & give them novelty every season, we are sure to make a good thing out of it’.32 The Glasgow-Calcutta trade in cotton goods in the 1850s was an active one, with exports in the region of £200,000 – £300,000 per annum, but it was also volatile. There were problems of producing for distant markets from which it took five or six weeks to receive information, and in which frequent changes of taste or fashion occurred, as well as ‘extraneous’ shocks like the Indian Mutiny which depressed sales. These difficulties in turn meant that manufacturers and merchants tended to work with large stocks with a slow turnover.33 Wm. Mackinnon & Co attracted the business of Glasgow manufacturers by offering them a direct channel of communications to commission agents in Calcutta – and some expectation that instructions issued through William Mackinnon to the piece goods department of Mackinnon Mackenzie & Co would receive attention. The Mackinnon partnerships may also have opened up access to Indian markets for mediumsized cotton firms which had not previously used agents in that part of the world. In London, William Mackinnon retained a close association with Scott Bell & Co, and through their Manchester house, J.J. Bell & Co, he enjoyed access to Manchester piece goods. Scott Bell & Co, because of proximity to Mincing Lane, also took more interest in produce shipments from Calcutta than most other constituents, and their offices served William as a London base when he had occasion to conduct business in the city. Nevertheless, relations were not always easy, and in February 1858, he contemplated a break with Scott Bell & Co when an alternative London-Manchester connection was dangled in front of him. The approach came from John Pender of Manchester, who would eventually make his name in the field of international submarine telegraph communications, but who was still involved in the cotton trade when William first met him (in 1856). Originally from the

32

W. Mackinnon to J.M. Hall, 12 Aug. 1858, MP Misc. Commercial File 58; for John Matheson see Memoirs and Portraits of One Hundred Glasgow Men, Vol. 2 (Glasgow, 1886), pp. 219–22. 33 A. Slaven, ‘A Glasgow Firm in the Indian Market: John Lean and Sons, Muslin Weavers’, Business History Review, XLIII (1969), pp. 496–522. 30

EAST INDIA MERCHANTS, 1823–61

Vale of Leven in Dumbartonshire, Pender commenced his business life in Glasgow, where he became a calico printer and merchant, but in the 1840s he transferred the bulk of his activities to Manchester. There, as a widower, he married a wealthy heiress, and between his wife’s money and his own earnings he was worth, William believed, between four and five hundred thousand pounds a year by the late 1850s. Despite his removal to Manchester, he retained his links to the West of Scotland, including ownership of a country estate at Minard on Loch Fyne in Argyllshire. William was flattered and a little anxious at being sought out by such a relatively significant figure. Pender, and his London associate, J.A. Gibb, were seeking to arrange new channels for their shipments to Calcutta, and were running their eyes over Mackinnon Mackenzie & Co. The discussions also included the possibility of Calcutta to Hong Kong trade through Gibb’s firm in Hong Kong, and a proposal that Wm. Mackinnon & Co should be merged with Pender’s concerns so that William could move to Manchester to become Pender’s ‘finance man’. However, William was unwilling to get involved with Gibb’s imports of opium from Calcutta into Hong Kong or to undermine the independence of his own firms, and in the end no arrangements were entered into with Gibb & Co. Nevertheless Pender, whose sales of Manchester goods had a turnover of one to one-and-a-quarter million pounds per annum, became a new, and important, constituent for the Mackinnon-Hall partnerships.34 The attraction of Pender’s account clearly signalled that Mackinnon Mackenzie & Co was on the rise in Calcutta. By the beginning of the 1860s, William Mackinnon had managed to develop a sizeable trade in cotton goods outwards from Glasgow and Liverpool. The lack of any systematic record of the volume, value and composition of these prevents any detailed account, but the general impression is of a steady build up in shipments through the early to mid fifties until they were severely checked in 1857. The Mutiny depressed trade in Calcutta for a few months (and Jamie and the two Peters joined a volunteer defence force) and then the financial crisis of the later months depressed trade in Glasgow and elsewhere. From 1858 there came a strong revival in shipments, boosted in part by the arrival of John Pender within the circle of constituents. During 1858 total shipments were worth £90,000, and this figure was apparently on a rising trend.

34

Hugh Barty-King, ‘Sir John Pender’, in D.J. Jeremy (ed.) Dictionary of Business Biography, Vol. 4 (London, 1985), pp. 609–13; Hugh Barty-King, Girdle Round the Earth: The Story of Cable and Wireless (London, 1979), pp. 3–5; W. Mackinnon to J.M. Hall, 24 Feb. 1858, MP Misc. Commercial File 57; John Vincent (ed.), The Diaries of Edward Henry Stanley, 15th Earl of Derby(1826–93) (London, 1994), pp. 57 and 117; W. Mackinnon to J.M. Hall, 24 Feb., 18 March, 17 May, 22 May, 15 June, 6 Aug. and 8 Nov. 1858, MP Misc. Commercial File 57; W. Mackinnon to J. Pender, 21 June, 23 July and 8 Dec. 1858, MP Misc. Commercial File 60. 31

ENTERPRISING SCOTS

William and the Glasgow house were much less involved with produce shipments from India than with the outward trade in cotton goods. Commodity shipments were important to the entire business – as a source of return cargoes for the ships, as an additional stream of profit for Mackinnon Mackenzie & Co, and as an alternative method of transferring homewards profits made on sales of cotton goods. They were purchased in Calcutta by Mackinnon Mackenzie & Co, but consigned either to Mackinnon Frew in Liverpool, to Scott Bell & Co in London or to William Macnaughton, a Greenock man who was a produce broker in Mincing Lane. William Mackinnon in Glasgow kept track of the shipments, passed on orders from constituents, communicated market intelligence and advice on purchases to Calcutta, and organised the occasional financing of ‘speculations’ in produce. ***** By 1861, the men from Campbeltown had succeeded in creating mercantile firms of moderate size and prosperity. The combined capital of the Calcutta and Glasgow houses was in the region of £40,000,35 which even by the standards of the time was not a very large figure. Mackinnon Mackenzie & Co may have been on the rise among the Calcutta agency houses, but it was not yet at the front rank. In comparison with the leading houses, it did not accept outside deposits and showed little inclination to do so. Nor did it enjoy close connections to the City of London, and few of its Lancashire or Glasgow constituents (John Pender apart) could be described as wealthy or influential. The Mackinnons and Halls moved within, and worked mainly with others among, the lower-to-middling ranks of expatriate mercantile enterprise. The development of their business activities was a fairly common story of ‘family capitalism’ at work.36 Family firms were the typical form of European business organisation through the eighteenth and the greater part of the nineteenth century – in industry as well as in commerce and finance. They derived their distinguishing characteristics from the specific socio-economic environments in which they operated, and the values and traditions of their cultural background. In the case of the Mackinnons and Halls, three sets of social and cultural influences can be identified – religion, community and nationality. Mackinnon Mackenzie & Co was distinct from most of the other agency houses in Calcutta in its close connections with the Free Church of Scotland. Its resident partners were invariably elders or deacons in the Free Church in Calcutta, and sat on its Financial and Corresponding Board. Mackinnon

35

The figures were £28,000 for Mackinnon Mackenzie & Co and £8,000 for Wm. Mackinnon & Co late in 1859.(W. Mackinnon to J.M. Hall, 22 Nov. 1859, MP Misc. Commercial File 59.) 36 For this topic, see G. Jones and M.B. Rose (eds), Family Capitalism, a special issue of Business History, 35, 4 (1993). 32

EAST INDIA MERCHANTS, 1823–61

Mackenzie & Co as a firm was the church’s treasurer. In Glasgow too, William Mackinnon worshipped in the Free Church and gave generously to financial appeals in support of its educational and missionary work in Bengal. A strong family piety suffused the ethic of the firms,37 and strengthened the bonds of trust based on kinship that enabled business to be transacted over the very long distances between Calcutta, Glasgow and Liverpool. It was a set of beliefs which, alongside strict Sabbatarianism and an aversion to alcohol, inculcated a work ethic that sustained long hours of labour and a willingness to suffer the discomfort of regular travel in the interest of family and firm. The men of the Mackinnon firms identified themselves most strongly with Kintyre, in which they were raised, and Glasgow which was their adopted city. Commercial success there brought entry to the lower reaches of the city’s business elite – especially for William Mackinnon, who married Janet Colquhoun Jameson, the daughter of a Glasgow solicitor, on 12 March 1856. The wedding took place in the bride’s home at 13 Woodside Crescent, and Jamie Hall came home from India to be best man. The Jamesons were friends of Michael Connal, which probably explains how the couple met. William and Janet settled down to life in a new house at 10 Buckingham Terrace, near the Botanic Gardens. William’s father-in-law was a respected figure in the city, a member of the old ‘Whig clique’ which had pushed for the reform of the franchise in 1832 and the abolition of the East India company’s monopoly of trade with China in 1833.38 Robert Jameson became the principal legal adviser to the Mackinnon-Hall firms until his death in 1874, and helped to extend William’s network of useful business and social contacts within the Glasgow community of merchants and manufacturers. It was an urban elite which was strongly Liberal in its politics and free-trading in its economics. As one of Glasgow’s several East India merchant houses, Mackinnon Mackenzie & Co occupied a specialised niche within the city’s importexports trades, which were dominated by commerce with the Americas. Exports across the Atlantic of textiles, coal, iron, metal goods, machinery and spirits, and inward cargoes of timber, grain, cotton and sugar, supported a thriving mercantile system, within which those who traded with Asia and Australia were a sub-group. Access to relatively short sea-routes across the North Atlantic gave the Clydeside region a measure of comparative advantage in trading with the Americas, and had resulted in concentrations

37 When Peter Mackinnon was left to manage Mackinnon Mackenzie & Co on his own for the first time, in 1855, William offered this advice: ‘I trust and even pray that you may be kept and guided in all your ways and in all you do by Him whose good hand has been about and around you hitherto. Amid the multiplicity of business, Peter, don’t forget preparation for the life to come; and let me ask you here to keep up our practice of family worship no matter who is in the house with you. I’m sure you will never regret it.’ (W. Mackinnon to P. Mackinnon, 22 December 1855, MP Misc. Commercial File 59.) 38 J. Strang, Glasgow and Its Clubs (Glasgow, 1864), pp. 451–2.

33

ENTERPRISING SCOTS

of Scottish enterprise in particular locations – on the Chesapeake in the eighteenth century and on the St Lawrence in the early nineteenth century. In commerce with India, however, no such natural advantage applied – indeed the reverse was the case. For this reason, perhaps, Glasgow’s East India merchants were especially prone to developing their businesses through alliances with expatriate Scottish merchant firms in Liverpool, Manchester or London, as well as in the port cities of South and Southeast Asia. Techniques of business networking, based upon trust stemming from the similar regional, cultural and religious backgrounds of the participants, were well developed among Scottish mercantile firms in Asia, and the so-called ‘clannishness’ of the Scots has been repeatedly commented upon.39 The Scots abroad, in England or overseas, seem to have recognised that they were a national minority within the British and imperial structures, and to have been prepared to support each other in business and politics.

39

Stanley Chapman, Merchant Enterprise in Britain: From the Industrial Revolution to World War I (Cambridge, 1992), esp. pp. 107–28; also Stephanie Jones, Two Centuries of Overseas Trading: The Origins and Growth of the Inchcape Group (London, 1986), pp. 6–9. For a comparable ethnically-conscious mercantile community at work abroad, see I.P. Minoglou, ‘The Greek Merchant House of the Russian Black Sea: A NineteenthCentury Example of a Traders’ Coalition’, International Journal of Maritime History, 10, 1 (1998), pp. 61–104. 34

1 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5

2

The British India Steam Navigation Company, 1856–70 By the middle of the 1850s a transition from sail to steam in maritime transport and communications was underway around the coasts of Europe and North America and on the shorter North Atlantic crossings. However, the steamship built of wood or iron and driven by paddle or screw propeller was still a rare sight in the Indian Ocean and its adjoining seas. Paddle steamers burning wood or coal could be found on the great rivers of western and southern Asia – the Tigris, Indus, Ganges and Irrawaddy – where pioneering investment in the new technology by the East India Company had helped to extend the Company’s authority. This gave rise to regular river steamer services run by government or, increasingly, by private firms. Out at sea, however, steamships remained exotic creatures. They were used in small numbers by the Bengal Marine and the Indian Navy (Bombay Marine) for coastal communications, and by the Peninsular & Orient Steam Navigation Company for the mail service it operated from 1853 onwards through the Mediterranean, by the ‘overland route’ through Egypt, and then on from Suez to Bombay.1 The vast preponderance of cargo and passengers, between ports within the Indian Ocean as well as between the Indian Ocean and the Atlantic, still moved in the holds and on the decks of wooden sailing ships of various sizes and types. The infrequency of the steam vessel and its dependence, directly or indirectly, on government support reflected its commercial marginality beyond European waters. Although the steamship meant liberation from wind propulsion and consequently the ability to maintain regular sailing schedules – qualities much to be prized in the monsoon-dominated Indian Ocean – it was also still extremely costly to operate so far from the industrial and commercial conditions which had spawned it. The technology was new and raw. Engines were inefficient and

1

Daniel R. Headrick, The Tools of Empire: Technology and European Imperialism in the Nineteenth Century (Oxford, 1981), H.L. Hoskins, British Routes to India (London, 1928), and D. Thorner, Investment in Empire: British Railway and Steam Shipping Enterprise in India, 1825–1849 (Philadelphia, 1950). The introduction of shallow-draft steamers into the rivers of India, and elsewhere, is considered by R.V. Kubicek, ‘The Role of Shallow-Draft Steamboats in the Expansion of the British Empire, 1820–1914’, International Journal of Maritime History, 6 (1994), pp. 85–106. For the contribution of P&O, the leading British firm involved in deep-sea operations, see D. Howarth and S. Howarth, The Story of P&O: The Peninsular and Oriental Steam Navigation Company, revised ed. (London, 1994). 35

ENTERPRISING SCOTS

consumed large quantities of coal, which was scarce and expensive beyond the North Atlantic basin, and skilled manpower for maintaining and repairing iron ships and marine engines was also in short supply outside Europe and North America. Only governments, or private companies supported by the public purse, could afford to brandish the new technology. The picture, however, was not unchanging. Reductions in costs of ship construction, the introduction of the surface condenser, and the invention of the compound engine by marine engineers on Clydeside all held out the prospect of improvements in the commercial viability of steamshipping, even in the less favourable conditions of the Indian Ocean. Meanwhile private capital in India was beginning to experiment with the steamship in the subcontinent’s coast and country trades. By 1854 the Bombay Steam Navigation Company, owned by Parsi and European merchants in that city, had opened up a regular service to Karachi. In Calcutta around the same date the Apcars, a family firm of Armenian origin, introduced two steamers into the small fleet of ‘opium clippers’ with which they conducted the shipping of opium to Southeast Asia and to China.2 At the same time, opinion within Indian governing circles was beginning to question the cost of the Bengal Marine and Indian Navy (Bombay Marine) and to press for the transfer of their mail and transport activities to private enterprise. This would be the first step towards the eventual winding-up of the two British Indian naval organisations (which occurred in 1861 and 1863 respectively).3 Thus, when William Mackinnon and Jamie Hall made their first entry into steamshipping in September 1856, they were catching a tide in favour of the development of steamship lines in Indian waters. Their diversification into steamshipping came about as much by accident as design. Despite their hard-won experience with sailing ships, they had very little experience of the new steam technology, other than a familiarity with the coastal steamer services of the Firth of Clyde, and that was a very slender foundation on which to build a business in India. However, the shipping circles in which the Mackinnons and Halls moved in Glasgow and Liverpool in the 1850s were alive with schemes for the promotion of steamer companies and steamship lines, and it would have been unusual if they did not attempt to dabble in this field. During 1856, indeed, William and Jamie floated no less than three such projects. The first was a scheme for a steam tug service on the

2

W.H. Coates, The Old Country Trade of the East Indies (London, 1911), pp. 135 and 151–2. 3 P. Tuson, The Records of the British Residency and Agencies in the Persian Gulf (London, 1979), pp. 8–9; Thomas K. Lynch, The Navigation of the Euphrates and Tigris, and the Political Rights of England Thereon (London, 1884), p. 168; C.R. Low, History of the Indian Navy, 1613–1863, Vol. 2 (London, 1877); From Government of India, Marine Department, 12 July 1861, Confidential Print 263, Abstract of Letters Received from India (hereafter Abstracts), India Office Library and Records (hereafter IOLR) L/P&S/19. 36

1

1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Hooghly, to assist sailing ships entering or leaving the river against the tides, but this failed to find financial backers. The second was for a small steamship to be placed on the coastal route between Calcutta and Galle, on the southernmost point of Ceylon, to connect there with the Suez-Australia steam packet service. This would enable Mackinnon Mackenzie & Co to hitch itself to the consortium of Glasgow businessmen that won the contract for the Suez-Australia mails in October 1856, and perhaps also become the Calcutta agents for that Suez-Australia line. William pursued these proposals for almost a year – but to little avail.4 The third idea was for a coastal steamer service eastwards from Calcutta to the ports of Burma. In the aftermath of the Second Burmese War of 1852, which added Lower Burma to the East India Company’s possessions, the government of the Bengal Presidency was reviewing arrangements for communications with the newly acquired territory. Word leaked out that it might be willing to contract with a private company for the delivery of mails. James Hall, home for William’s wedding, touted the idea of ‘a Screw Co. for Rangoon and Moulmein’ around London in the summer of 1856, and found interest there among expatriate Scots involved in the Burmese rice trade. In September 1856, a small private limited liability company, the Calcutta and Burmah Steam Navigation Co, was formed. It brought together Mackinnon Mackenzie & Co’s interest in obtaining the Calcutta agency for the proposed line with the desire of likeminded firms for the agencies in the Burmese ports. The origins of the British India Steam Navigation Company, which would eventually become one of the world’s largest shipping concerns, lay in this little enterprise – a single steamship line between Calcutta and the Burmese rice ports, worked by a couple of inefficient second-hand steamers owned by a company with an initial capital of only £20,000. The Calcutta and Burmah

4

The consortium was led by John Orr Ewing of the turkey red dying firm and included two of William’s connections – William Connal Jr and John Pender – among its members. It formed the European and Australian Mail Co to work the contract, but could not make up its mind whether it wanted to subcontract a Galle-Calcutta branch service or do it itself. The Eastern and Australian Co bought three large steamers, the European, the Columbian, and the Oneida, which had originally been built for carrying mails across the Atlantic but had been used as transports during the Crimean War. However, it had great difficulty running these vessels profitably on the Suez-Sydney leg of the journey, and lost £700,000 within the first year of operation. It therefore abandoned the contract, which was subsequently awarded to P&O, and in May 1858 the Company was wound up. (J.M. Hall to W. Mackinnon, 2 July 1856, MP Private Letters File 24; W. Mackinnon to J.M. Hall, 25 Feb. 1857, MP Misc. Commercial File 59; W. Mackinnon to J.M. Hall, 25 May 1857, to W. Connal, 3 June 1857, to J. Orr Ewing, 3 June 1857, to W. Hammill, 17 May 1858, MP Misc. Commercial File 57; H. Robinson, Carrying British Mails Overseas (London, 1964); see also ‘Copy of Contract with the European and Australian Royal Mail Company, etc.’, Great Britain, Parliamentary Papers, XLI (1857–58), p. 209, and ‘Memorial from the European and Australian Mail Company’, G.B., Parliamentary Papers, LXII (1860), p. 57.) 37

ENTERPRISING SCOTS

Co was a pioneering venture, fraught with difficulties and problems, and its early years were times of struggle and uncertainty. The first problem was to secure the contract for the delivery of mails from Calcutta to the Burmese ports, without which the running of small, energy-inefficient screw steamers between Calcutta and Burma was unlikely to be commercially viable. Within three weeks of the Company being formed, it purchased two second-hand steamers to send out to Calcutta. They were the Cape of Good Hope, a 500 ton steamer which the ill-fated General Screw Company had used to carry mails between Cape Town and Durban in 1854, and the Baltic, a 536 tons vessel which had been built by Denny’s of Dumbarton in 1854 for Wilson & Co. of Hull. They were dispatched almost immediately on the long voyage round the Cape to India. The reason for such haste was that the new firm faced competition for the Burma contract. ‘Livingston Withers & Co’, William advised Mackinnon Mackenzie & Co, ‘have made and will make great efforts to forestall us. We will, I trust, have our boats out first; this I believe will be the great point.’5 The ploy succeeded – Livingston Withers & Co, a London firm, agreed to hand over the contract it was awarded to the Calcutta and Burmah Co for the equivalent of one fifth of the annual subsidy.6 But to achieve this end, the Calcutta and Burma had been hurried into buying vessels and despatching them to India without sufficient regard for their seaworthiness or suitability for their task. The Cape of Good Hope arrived safely enough in Calcutta in March 1857, although it needed a refit to carry passengers in the tropics (paid for by unexpected windfall earnings from transporting troops during the Mutiny). The Baltic on the other hand made a very miserable start: The ‘Baltic’ sailed on 8 December but her machinery getting slightly deranged she put in at first to Portsmouth and again to Plymouth, sailing thence finally on the 17th December. Another accident to her machinery led Captain Durham to go into Bahia, where the ship was detained nearly two months for repairs and incurred expenses to the amount of upwards of £1,400. After leaving Bahia Capt. Durham thought fit to call at the Cape of Good Hope for coals, incurring the expense of upwards of £700, and at last arrived at Calcutta on 5 July. Your directors think there is just cause for dissatisfaction with Capt. Durham and they have instructed the Calcutta agents to make a strict enquiry as to his conduct on the voyage.7

To add to its problems, the company’s board was soon riven by conflict. At its formation, three directors had been elected – William Mackinnon, representing the Mackinnon Mackenzie interest; John Halliday, a Scotsman whose trading firms in Burma had the company’s agencies at Akyab and 5

W. Mackinnon to P. Mackinnon, 24 Dec. 1856, MP Misc. Commercial File 57. W. Mackinnon to J. Halliday, 15 Dec. 1856, MP Misc. Commercial File 59; Calcutta and Burmah S.N. Co, Directors’ Minutes, 20 Jan., 8 Feb. 1857, 18 April 1858, BIS/1/1. 7 Calcutta and Burmah S.N. Co, Shareholders’ Minutebook, 25 Sept. 1857, BIS/1/27. 6

38

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Bassein; and George Duncan, another expatriate Scot, who ran a line of sailing vessels between London and Calcutta. There was no designated chairman. William’s position within the triumvirate was a weak one, because he and Jamie had only a little capital to put into the company at incorporation (£3,000 plus a half-share in the Cape of Good Hope). However, he took the opportunity of a further increase in capital in 1857 to secure investment from friends in Glasgow, Campbeltown and London, and to have two of them, George P. Gunnis and David Begg (senior partner of Begg Dunlop & Co in Calcutta), elected to the board. He calculated that this would give him a decisive influence over the company’s affairs. Such a strategy required Halliday and Begg to support him in his disagreements with George Duncan, but he found that since they, like Duncan, were resident in London, they were just as susceptible to Duncan’s influence as his own. The bickering between William Mackinnon and George Duncan, which blighted the management of the infant concern, may have been a matter of personality. William was full of youthful enthusiasm but was unaccustomed to working with business partners other than of his own choosing, and he found it tiring and time-consuming to have to travel back and forth to London to deal with the company’s affairs. Duncan was a crotchety, and more conservative, older man. Nevertheless, their clash raised some important questions about the development of the business. These included the role of Mackinnon Mackenzie & Co. – the size of its commissions, its relationship with the other agents and whether or not the company might be betterserved by a salaried manager in Calcutta. There was also the issue of whether new vessels for the company should be built on the Thames, under the general supervision of Duncan, or on the Clyde under William’s watchful eye. This may simply have been a disagreement over who should get the fees for such work, but in William’s mind there was already a sense of the superiority of Clyde shipbuilding over that on the Thames. The dispute rumbled on through 1857, 1858 and into the early months of 1859 – when disagreement flared up over how to replace the Cape of Good Hope, which had been lost in a collision with a P&O mail steamer on the Hooghly. William wanted a vessel to be built by Scotts of Greenock whereas the London directors, led by Duncan, considered Scotts’ engines to be too experimental and favoured a Thames builder. William decided that he should try to remove Duncan from the board and get the management of the firm moved to Glasgow. After various boardroom manoeuvres, Duncan was replaced by Robert Salmond of the City of Glasgow Bank in March 1857, and a resolution, proposed by George Gunnis, authorised the directors to transfer the registered office of the company to Glasgow at any time of their choosing.8 William Mackinnon

8

W. Mackinnon to J.M. Hall, 4 April 1857 (copy), Inchcape (unclassified), and 8 June 1857, MP Misc. Commercial File; Calcutta and Burmah S.N. Co, Shareholders’ Minutebook, 17 March 1860, BIS/1/27. 39

ENTERPRISING SCOTS

took undisputed control of the firm of which he would be chairman for another 33 years, and the management of which would be his principal claim to fame as a businessman and shipowner. The trump card which William Mackinnon played to secure his authority within the Calcutta and Burma S.N. Co, and the direction of its affairs from Glasgow rather than London, was the amalgamation of the company with another firm, the Bay of Bengal S.N. Co. William and Jamie Hall had quietly established this new firm during the months of wrangling within the Calcutta and Burmah. Jamie had returned to India in the early months of 1857 with instructions to seek out additional mail contracts from the government. When he discovered that a contract for delivering mails along the coast from Calcutta to Madras might be in the offing, William decided that Mackinnon Mackenzie & Co should bid for this and, if successful, transfer it to another company to be floated in Glasgow by himself, Gunnis and Robert Salmond of the City of Glasgow Bank. The Bay of Bengal Co was duly formed in 1858 and its first steamer, the Governor Higginson, began to ply between Calcutta and Madras in 1859. The threat that this new firm might become a competitor on the Calcutta-Rangoon line if William Mackinnon should break with the Calcutta and Burmah Co was sufficient for David Begg to swing his influence and voting power decisively behind William after the latter’s dramatic resignation from the Calcutta & Burmah’s directorate. The two companies were formally amalgamated in July 1860, just in time to take advantage of another contract obtained by Jamie Hall from the government of Madras for a monthly service between Madras and Rangoon. The office of the reconstructed Calcutta and Burmah S.N. Co was duly relocated to Wm. Mackinnon & Co’s address at 132 St. Vincent Street, Glasgow.9 The shift in power within the Calcutta and Burma S.N. Co between 1857 and 1860 was accompanied by movement in the pattern of shareholding (Table 2.1). The proportion of shares held by residents of London and Home Counties fell by almost ten per cent, while that of the Mackinnon and Hall families increased by 7 per cent and that of residents in India and Burma, recruited by Mackinnon Mackenzie and Co, also rose by some 7 per cent. The Glasgow-Calcutta interests led by William Mackinnon and James Macalister Hall were in the ascendant over London-based capital. This coincided with an upturn in the company’s fortunes. Between 1860 and 1862, the company’s fleet grew from three to nine steamers, worth £134,434, and dividends were paid at 8 per cent per annum plus bonuses on fully-paid shares. The new vitality was more than a matter of favourable trading conditions in the Bay of Bengal. The management of the firm in Glasgow was strength-

9

Although it transpired that the 1856 Companies Act, under which the Calcutta and Burmah had been incorporated, prohibited the transfer of its registered office from London to Glasgow, effective control was shifted to the latter city in September 1860, leaving the registered office in London as a mere accommodation address. 40

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Table 2.1 Calcutta and Burmah S.N. Co: distribution of shares, 1857–60 (%) 1857

1860

Mackinnon & Hall families West of Scotland London & Home Counties Other UK India & Burma Total

15.3 29.3 40.6 9.2 5.6 100

22.2 29.4 31.2 4.1 13.1 100

Total value

£70,000

£100,000

Source: Companies House, London, File 133.

ened by the appointment of Peter Macnaughton, a Greenock man with a sound knowledge of shipping matters, as company secretary.10 Because the company now shared offices with Wm. Mackinnon & Co, William could give its affairs the close day-to-day attention it had lacked in London. In the main this involved obtaining the finance for the purpose-built steamships which he was determined should be added to the company’s fleet and, by their improved efficiency, reduce working expenses on the contract lines. The policy found expression in 1861 with the launch of the Coringa (builder A. & J. Inglis, Glasgow) and the Moulmein (builder Simons, Renfrew), which were the first of the company’s steamers to be placed on the Glasgow shipping register. The determination of the Glasgow office to keep abreast of the shipbuilding and marine engineering developments on the Clyde was expressed by Peter Macnaughton: Compare the expenses of working the ‘Rangoon’ and ‘Coringa’ with that of the old boats, and see what a great disadvantage we would be placed at in competition with vessels fitted with all the modern improvements. Every six months there is some alteration in the construction of steamers to make them more economical in the working. Surface condensers, which permit fresh water to be used in the boilers, are coming into great favour and effect a material saving. The engines are also being made of smaller dimension & smaller nominal power, with boilers working at a high pressure, say 35 to 40 lbs, and even double that, thereby producing an equal power to that obtained from larger and more expensively worked engines.11

For a firm working at, or beyond, the frontier of commercial viability for steamshipping, such considerations were vital. The transfer of the Calcutta 10

Peter was the brother of William Macnaughton, the produce broker in London to whom Mackinnon Mackenzie & Co consigned shipments of Indian produce. He held his post as company secretary in Glasgow until his death in 1886. 11 P. MacNaughton to P. Mackinnon, 25 July 1861, Inchcape (unclassified). 41

ENTERPRISING SCOTS

and Burmah Co to Glasgow ensured it would have ready access to the skills and experience in what was emerging as the world’s leading centre of ship-building and marine engineering. The shift in power within the company also transformed the role of Mackinnon Mackenzie & Co. From being merely one of the company’s agents, it now became the principal one – responsible for overseeing all the day-to-day steamer operations in the Bay of Bengal, and for co-ordinating and directing a network of agents in the other ports. One of its first tasks was to find successors to the agents in Moulmein and Rangoon, who became bankrupt in 1859. (The agencies were transferred to Gardiner Brooke & Co in Moulmein and to John Halliday’s house, Halliday Bulloch & Co (later to Bulloch Bros) in Rangoon.) Similarly, the start of the line from Madras via the ports of the Northern Circars to Rangoon in 1861 meant a need to find agents in the ports along that route. In Madras, the agency went to an existing firm, Dymes & Co, but in Bilimpatam, the last port of call on the Indian coast before Rangoon, the agency was used to provide a new opening into trade for Archie Hyslop, who was a protégé of William Mackinnon’s.12 Such use of steamship agencies to create business opportunities for young men from Mackinnon and Hall family and social circles would become a prominent feature of Mackinnon Mackenzie’s operational methods. Finally, in September 1861, the emergence of Mackinnon Mackenzie’s leading role was recognised in its formal appointment as managing agents in India, to ‘conduct the entire business of the Company at all the different places to which vessels might ply’. In return it received a commission of 13.5 per cent on the gross earnings of the steamers, plus a further 1.5 per cent on gross earnings if the company’s return on capital reached 15 per cent.13 By the late months of 1861, therefore, the concern that would become the British India Steam Navigation Company was emerging from its chrysalis. William Mackinnon and Peter Macnaughton in Glasgow harnessed the technology and capital of Clydeside for steamshipping in the Bay of Bengal, while James Hall, Peter Mackinnon and Peter Hall in Calcutta sat at the centre of a growing web of agents responsible to them for putting that technology and capital to work. The firm was also marked by other features which defined its character for passengers and shippers around the coasts of India – most notably, the Sabbatarian principles of its founding directors which laid down that its steamers should not depart any port on Sunday, that no work should take place aboard steamers in port on a Sunday, that officers and European crewmen were expected to attend church while in port on a

12

Hyslop had been employed in W. Mackinnon & Co in Glasgow before being sent to Geelong, where had been set adrift by the collapse of William’s business ventures in Australia. 13 Calcutta and Burmah S.N. Co, Directors’ Minutes, 17 and 24 September 1861, BIS/1/1. 42

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Sunday, and that services should be held at sea on a Sunday.14 But if the Calcutta and Burmah Co had established a distinctive foothold in Indian coastal shipping, its future was by no means secure. It was still a small and fragile concern, conducting little more than a packet service between a few ports. It was also still a minor part of the Mackinnon family’s overall business. At least two-thirds of Mackinnon Mackenzie & Co’s earnings came from piece goods and produce dealing, while Wm. Mackinnon & Co had £6,700 invested in sailing ships for the UK-Calcutta trades as against only £2,500 for coastal steamshipping in India.15 Above all, its very existence depended on government mail contracts, for which it was but one of several possible contenders. The Madras-Rangoon contract was for one year only, and would terminate in January 1862, while the original Calcutta-Rangoon contract was due to expire in July 1862. In the meantime, such firms as Todd Findlay in Rangoon and Gladstone Wyllie in Calcutta were experimenting with rival non-contract steamer services on some of the routes. One Calcutta house, Grant Smith & Co, even wrote to the Government of India to protest against the ‘monopoly’ that had been conferred on the Calcutta and Burmah S.N. Co and to express the view that commercial prospects would be sufficient to stimulate coast and country steamshipping ‘were the trade entirely unfettered’.16 Faced with such competition, William Mackinnon decided that he should visit India once again, to try to put contractual relationships with the government on a firmer footing. He left Glasgow in October 1861 bearing an outline scheme for the renewal and ‘consolidation’ of existing services, coupled with proposals line from Calcutta to Rangoon direct and then on to Singapore and for an even longer line from Calcutta around the coasts of India to Bombay. It was an ambitious scheme, reflecting William’s natural optimism and gambling instinct, but the outcome of his visit would exceed even his wildest expectations. ***** Leaving Jamie Hall in charge in Glasgow, William set off for India accompanied by his wife, Janet, by John Matheson of William Stirling & Co, the Glasgow turkey red dyers, and by Matheson’s wife. Passing through London, he had an interview with Lord Elgin, who was due to succeed Lord Canning as Governor-General of India.17 From London, the party travelled

14

Calcutta and Burmah S.N. Co, Directors’ Minutes, 3 Feb. 1857 and 3 April 1858, BIS/1/1. 15 W. Mackinnon to J.M. Hall, 23 Dec. 1858, MP Misc. Commercial File 58; W. Mackinnon to P. Mackinnon, 1 May 1860 (copy), Inchcape (unclassified). 16 Messrs Grant Smith & Co to Government of India, 29 Dec. 1860, IOLR: Proceedings, India – Post Office, Range 189, Vol. 4. 17 He found Elgin to be ‘a Scotchman of very great & very varied experience’ who 43

ENTERPRISING SCOTS

by way of Brindisi, Alexandria and the ‘overland’ route to Suez. The rigours of the journey clearly taxed the travellers’ stamina and tolerance. Because the railway from Alexandria to Cairo had been washed away by floods, the party was forced to travel up the Nile on a small river steamer belonging to the Egyptian government. They were ‘cooped up for the space of two days and a night in a crazy craft, shaking and jangling slowly forward against the rapid current’, the ladies huddled below deck and the men above deck in the rain.18 After sight-seeing in Cairo and at the pyramids, a railway journey across the desert took them to Suez, where the P&O’s steamers for Bombay, Calcutta and Singapore/Hong Kong all awaited their passengers. ‘We were conveyed in small steamers on board our several stately ships lying at anchor well out in the Gulf of Suez, that operation being effected amidst endless heaps of luggage, a hubbub of squalling children, and quite a profusion of adult crusty tempers, roused into unwonted activity by the roasting heat of the day and the general confusion of the scene.’ 19 A slow journey through the baking oven of the Red Sea gave way to the relief of the ocean breezes on the one week’s sail from Aden across the Arabian Sea to the welcome of Bombay’s ‘magnificent’ harbour. The Mackinnons and Mathesons arrived in Bombay on 12 November 1861. William had intended a stop-over of only two or three days but this was extended to more than a fortnight when he discovered, quite unexpectedly, that opportunities to promote of his steamship interests also existed in western India. This came about through yet another link in the chain of expatriate Scottish enterprise that supported his rising business career. William’s host in Bombay was John Fleming of W. Nicol & Co, one of the city’s oldest European trading houses, through which John Matheson sold his cotton goods in western India. John and his brother, James Nicol Fleming, both senior partners in W. Nicol & Co, were the sons of a leading Glasgow merchant and former Lord Provost, John Fleming of Claremont. They came out from Glasgow as young men to join the firm that had been established in Bombay in the 1820s by their maternal uncle, William Nicol (an Aberdonian once employed in the Bombay Marine). By 1861 this Scottish expatriate firm was one of the biggest in the city, owning an ironworks, sawmill, timber yard, docks and wharves as well as warehouses and offices. The Fleming brothers, as founders in 1858 of the Elphinstone Land and Press Company, were also deeply involved in land reclamation and the development of Bombay harbour.20 John Fleming had merchant houses in London (Smith Fleming &

admired Dutch rule in Java and promised to take an interest in steamshipping matters. (W. Mackinnon to P. Mackinnon, 10 October 1861 (copy), Inchcape (unclassified).) 18 John Matheson, England to Delhi (London, 1870), p. 17. 19 Matheson, England to Delhi, p. 34. 20 R.J.F. Sulivan, One Hundred Years of Bombay: History of the Bombay Chamber of Commerce, 1836–1936 (Bombay, 1936), pp. 10 and 70–3; A. Muir and M. Davies, A 44

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Co) and Karachi (Fleming & Co) as well as in Bombay, and had recently invested in a small steamship which ran on the Bombay-Karachi route in competition with the mail contractor, the Bombay Steam Navigation Company. On hearing of William’s intention to try to get a government subsidy for a Calcutta-Bombay line, John Fleming put it to him that he should also bid for the Bombay-Karachi contract, which would shortly be due for renewal. Furthermore, there was a Bombay-Persian Gulf contract in the offing, for which the Government of Bombay was seeking approval from London and for which the Bombay S.N. Co was already negotiating.21 If William were to be successful in competing against this Parsi-owned firm, Fleming would withdraw his own steamer from the Bombay-Karachi route, and W. Nicol & Co would become William’s steamship agents for western India. Through his new contacts, William quickly obtained access to senior members of the Governor of Bombay’s council, and found them anxious to support his proposals for a Calcutta-Bombay steamship line, a BombayPersian Gulf line, and a Bombay-Karachi line. He was told that the Government of Bombay was dissatisfied with the way that the Bombay S.N. Co was performing the mail service on the Karachi route, and got the impression that the way would be cleared for the Calcutta and Burmah Co to take it over from the Bombay S.N. Co. At no point was there any overt recognition of the fact that the Bombay company was essentially a local Indian firm, whereas the Calcutta and Burmah was a British one, and that the transfer of the mail contract from one to the other might be seen as a case of the state favouring British over Indian capital. The real issues involved may indeed have been efficiency and cost rather than nationality, but in becoming party to such arrangements, William laid himself and his steamship company open to later accusations of collusion with government officials to suppress Indian shipping.22 The Mackinnons and Mathesons left Bombay at the end of November, travelling via Galle and Colombo in Ceylon to Madras, the capital of the southernmost province of British India. There William had brief discussions about his proposed Calcutta-Madras-Bombay and existing MadrasRangoon steamship services (the Government of Madras had an interest in

Victorian Shipowner: A Portrait of Sir Charles Cayzer, Baronet of Gartmore (London, 1978), p. 19; D.A. Dow, Redlands House: Hospital, Hostel and Home (Glasgow, 1985), p. 15. 21 From Bombay (Public), 21 July 1859, Confidential Print 12, from Bombay, 22 June 1860 , Confidential Print 129, from Bombay (Political Department), 12 Jan. 1861, Confidential Print 196, Abstracts, IOLR L/P&S/19. 22 The nationalist historiography in which the decline of Indian shipping and shipbuilding is laid at the feet of British government and capital, and more especially the British India S.N. Co, is represented by Asoka Mehta, Indian Shipping (Bombay, 1940) and N.G. Jog, Saga of Scindia: Struggle for the Revival of India Shipping and Shipbuilding (Bombay, 1969). 45

ENTERPRISING SCOTS

communications with Burma because the latter was garrisoned by troops from Madras Province). After this, William and Janet left in a Calcutta and Burmah S.N. Co vessel that had been sent down for their special use. The scene of the campaign to wheedle mail contracts out of officialdom shifted to Calcutta, and to a fateful meeting with Sir Henry Bartle Frere, a member of the Governor-General’s Supreme Council, to whom William had been given an introduction by his brother, William E. Frere. William’s first contact with Sir Henry Bartle Frere early in January 1862 – apparently at one of the semi-public breakfast parties which Frere held at his Calcutta home23 – was a major event in his career. In Frere he found a patron, mentor and life-long friend, a man who could provide a channel of communication into the highest governing circles in India and also supply a geo-strategic dimension to the way in which he thought about the development of steamship lines. Frere was one of the most distinguished Anglo-Indians of his day. The son of an English ironmaster in Wales, he was educated at Haileybury and joined the East India Company’s service in 1834. After a period as a revenue officer in the Deccan, he became private secretary to Sir George Arthur, Governor of Bombay in 1842, and married Catherine, Sir George’s second daughter. Further service in the Deccan was followed by appointment in 1851 as Commissioner for Sind, where his energy in public works and his role in keeping the region quiet during the Mutiny were recognised in 1859 with a KCB and appointment to the Supreme Council.24 When William Mackinnon arrived on his doorstep, Frere was engaged in discussions with other members of the Council about the future of the Indian Navy (Bombay Marine). In an attempt to reduce public expenditure, it had been agreed that the Bengal Marine should be wound up and that the Royal Navy would assume sole responsibility for the maritime defence of India. However, there were still voices calling for the Bombay Marine to continue as a government transport service. Frere was of the opposite view, believing that the government’s transport needs should be contracted to the private sector and used to promote the development of a mercantile marine within Indian waters. ‘We have in the coasting trade of India itself’, he commented, ‘the means of creating a local steam marine, which in time of need might render most valuable service to the State; but we have hitherto done little as a Government to assist in developing this branch of our resources.’ He suggested an immediate inquiry into how ‘local coasting steamers’ might be promoted ‘by making use of them as far as possible in the transport of troops and stores, and for post-office purposes’.25 Consequently, when William

23

J. Martineau, The Life of Sir Bartle Frere (London, 1908), Vol. 1, p. 298. Martineau, Life of Sir Bartle Frere, Vol. 1, pp. 1–298; ‘Sir Henry Bartle Edward Frere, I.C.S.’, in C.E. Buckland (ed.), Dictionary of Indian Biography (London, 1906). 25 Minute by Sir H.B.E. Frere, 6 Jan. 1860, Confidential Print No. 72, Abstracts, IOLR L/P&S/19. 24

46

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Sir Henry Bartle Frere

outlined his plans for a series of inter-connecting steamship services around India and its spheres of maritime influence, from Singapore at the end of the Straits of Malacca to Basra at the head of the Persian Gulf, Frere is said to have exclaimed that he was the man he had been looking for years. The two men quickly took to each other personally. Frere later recalled how ‘I saw him officially on the subject of his line and was struck by the singular combination of foresight and enterprize with caution – by the clearness of his judgement, and by his frank, simple and straightforward way of dealing.’26 Frere threw the full weight of his influence behind William’s proposals. Within days of their first meeting the Supreme Council of India resolved that: if private enterprise, instead of being discouraged by the competition of Government vessels, is once firmly established, and lines of coasting steamers are run between all the principal ports of Indian territory, not only can the private

26

Martineau, Life of Sir Bartle Frere, p. 298; Frere to Lord Ripon, 8 Jan. 1882, Brit. Lib. Manuscripts, Add. Ms. 43617. 47

ENTERPRISING SCOTS

steamers, being mainly supported by private freight and passage money, afford to take the additional business of a large customer like the Government on cheaper terms, but also the advantage accrues of a large fleet of vessels adapted for transport, kept in times of peace without cost to the Government, and yet available as a reserve of transport in case of any sudden emergency.27

William and the Calcutta and Burmah Co, in short, were pushing at a door being opened by the Government of India’s decision to privatise its maritime transport facilities. The services southeastwards from Calcutta were quickly arranged. Contracts for a fortnightly mail service from Calcutta to the Burmese ports, and a monthly branch line from Rangoon to Moulmein, together with a monthly service from Calcutta to Rangoon direct and coasting thereafter to Singapore, were signed in August 1862.28 The contracts for western India were expedited by Frere’s appointment as Governor of Bombay, where he arrived in April 1862 and gave William the first formal interview of his new office. William’s account conveys the cordiality of their relationship: I had a long interview with Sir Bartle this evening. . . . His Government approve & will bear their share of the Coast line Calcutta to Bombay, the steamers to call at convenient points for this govt. Col. Marriott’s disapproval therefore will be set aside. He approves also as you know of the Persian Gulf Line but fears if he withdrew the advertisement [for public tender] it would lay the Govt. open to attack from parties here, altho’ of course they are by no means bound to accept any tender. It would be quite satisfactory to him & I believe his Council if the Govt. of India thought fit to accept my tender without reference to the advertisement. In fact, he said he would be glad to hear the matter had been so arranged. Sir Bartle has been exceedingly kind & has given me a great deal of time yesterday and today to these matters.29

Frere had a more direct, and personal, interest in the steam line from Bombay to the Persian Gulf than in any of the other proposed lines to which he was lending his support. He and his circle of civil and military friends were leading proponents of the view that the Persian Gulf held strategic importance for British India, as the entrance and exit to a potential second ‘overland’ route between the Mediterranean and the Indian Ocean. When fully developed by railway and steamship, this route through Mespotamia (Iraq) would give metropolitan Britain more direct and speedy access to the

27 Resolution of the Government of India, 16 Jan. 1862, in From Bombay (Marine Dept.), 8 Feb. 1862, Confidential Print No 26, Abstracts, IOLR L/P&S/19. 28 From Marine Department, 12 August 1862, and Resolution of Government in the Financial Department, 20 Oct. 1862, IOLR Proceedings, India – Post Office, Range 189, Vol. 5. 29 W. Mackinnon to Captain Rennie, 26 April 1862, MP Misc. Commercial File 58.

48

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

plains of northern India that the existing ‘overland’ route through Egypt and by sea between Suez and Bombay. The origins of Frere’s attachment to this strategic route lay in his period as Commissioner for Sind, between 1851 and 1859, when he had taken a leading part in the construction of a harbour at Karachi and in the development of a rail-river route into the Punjab that would turn Karachi into the principal port for north and north-west India. A consortium of British companies emerged to build a railway line from Karachi through the desert to the River Indus, to conduct steamshipping on two hundred miles of the most navigable stretch of that river, and from the up-river town of Moultan to construct another railway line as far as Lahore and Amritsar in the Punjab, and finally on to Delhi. This work, begun in the 1850s and still underway in the 1860s, was carried out by four London-based companies with government guarantees of a return on capital. They were effectively under common ownership and direction, and all four were chaired by William Patrick Andrew, a former Indian postmaster who had become a leading propagandist for railways and telegraphs in India.30 Frere lent his full support to Andrew and his fellow railway promoters. In public speeches and in his writings he linked the ‘Indus Valley route’ which Andrew was busy developing, with the proposed ‘Euphrates Valley’ route, for which Andrew was also the principal agitator and propagandist. Karachi, as the closest Indian port to the Persian Gulf, stood to benefit from any development of a railway from the Mediterranean through present-day Syria and Iraq to Basra. Frere and Andrew shared the vision of an alternative ‘British’ route to India which would avoid Egypt (believed to be too much under French influence), which would bolster British power in southern parts of the Turkish Empire and in Persia, and which would transport British imperial forces along the shortest possible route between Britain and India’s northwest frontier, so as to defend the bulwarks against the danger of Russian expansion. Thus Frere, speaking at the annual meeting of the Scinde Railway in London in 1857, pointed out the military benefits which would derive from the Indus Valley rail-river system’s ability to switch troops between different mountain passes on India’s North-West frontier. ‘The Euphrates Valley Railway’, he claimed, ‘would give them [the British] command of the seaboard of the Persian Gulf; the completion of that railway would practically make Chatham nearer to any point of action in the Persian Territory than any military force which could be brought to bear upon it from Central Asia.’31 In the same year, W.P. Andrew and Lord Shaftesbury led a deputation

30 ‘An Old Indian Postmaster’, Indian Railways and Their Probable Results (London, 1848); W.P. Andrew, The Scinde Railway and Its Relation to the Euphrates Valley and Other Routes to India (London, 1856); W.P. Andrew, The Indus and Its Provinces (London, 1857); W.F.B. Laurie, Sketches of Some Distinguished Anglo-Indians (London, 1887), pp. 260–78. 31 Andrew, The Indus and its Provinces, p. 29; also quoted in Laurie, Distinguished AngloIndians, p. 400.

49

ENTERPRISING SCOTS

comprising mainly MPs and peers, but including Frere’s brother-in-law, Sir Frederick Arthur, to impress upon Prime Minister Palmerston the urgency of the ‘great national object’ of the short route to India. This had been rendered all the more pressing ‘since it had been determined to open up the valley of the Indus by the application of steam’.32 Frere’s enthusiastic response when William Mackinnon came calling on him with his steam line proposals in January 1862, therefore, was based on more than the desirability of privatising steamship operations in Indian coastal waters, or of using public funds to stimulate a steam-driven mercantile marine based in Indian ports. It also substantially reflected Frere’s foreign policy goals and his perception that here was a chance to put in place one of the main elements – the Basra-Karachi sea-borne segment – of a great steam route between Britain, Persia and the north-west frontier of India which he and members of his Anglo-Indian circle hoped to see develop into Britain’s strategic artery for the struggle with the Russian Empire. As Governor of Bombay, with responsibility for the conduct of British India’s foreign policy in the Persian Gulf, he was now ideally placed to use William Mackinnon’s steamships as agents of British power in the Gulf. Through Frere, William Mackinnon first became aware that the advance of steam transport had strategic and political implications as well as the more obvious commercial ones. It was a lesson he would never forget. However, his principal concern at this time was to handle the financial consequences of the large extension of state support for his little steamship company. In the summer of 1862 he left negotiations in India in the hands of Mackinnon Mackenzie & Co and W. Nicol & Co and returned hurriedly to Glasgow. There he arranged an increase in the company’s nominal capital from £120,000 to £200,000 and a call-up of capital on its part-paid shares, for the purposes of buying several new steamers from Clyde yards. On receipt of the news that the Bombay-Karachi and Bombay-Persian Gulf contracts had been awarded to him, he also arranged for a change in the company’s name from the Calcutta and Burmah S.N. Co to the British India Steam Navigation Company.33 This matched its new status as the Government of India’s ‘official’ steamship operator. William needed to manage the expansion of the firm without losing control of it, and was aware of the great public interest there was likely to be in the shares of his private company when news of its contracts became known. To forestall outside financial intervention, he called an extraordinary general meeting to amend the company’s Memorandum of Association. The transfer of shares could now only take

32 Andrew, The Indus and Its Provinces, p. 301. For the general background to the proposal for a railway through Mesopotamia, see Hoskins, British Routes to India, pp. 321–42. 33 Calcutta and Burmah S.N. Co, Directors’ Minutes, 4 and 10 July, 8 and 20 August, BIS/1/1; Joint Stock Cos. Registration Office to Board of Trade, 24 Nov. 1862, and Board of Trade to P. Macnaughton, 28 Nov. 1862, BT/41/558/1393.

50

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

place with the prior knowledge of the directors, who had the power to purchase and dispose of any such shares at the price stated.34 His control of the new British India S.N. Co (BI) assured, William returned to India again in November 1862. There, the contract for a monthly steamship line between the two great cities of Calcutta and Bombay (by far the longest and most ambitious of his proposed coasting routes) was taking time to arrange, mainly because it had to secure the support of all three provincial governments. Moreover, the case for subsidising this line had to be argued on the grounds of promoting trade, especially along the Coromandel and Malabar coasts, rather than for reasons of its usefulness for postal or military purposes. The contract was eventually awarded in December 1862, but because neither the Post Office nor any of the various departments of government were willing to pay for the line from their own budgets, it had to be assigned a special open account within the Government of India’s financial department. This was a measure of the political support it received from senior figures within the government, more especially Frere.35 By 1864 BI had contracts with varying dates of expiry for a total of seven steamship lines worth approximately £55,000 per annum.36 The contracts also included subsidiary rights to transport government passengers (civil and military), arms and munitions, specie and general goods at agreed rates. In return, BI had to deliver the mails on time, by maintaining specified speeds over each route, and had to make its steamers available to the government in times of emergency. It was now a large maritime enterprise, privately owned but close to state patronage, and comparable to the railway companies which in the 1850s and early 1860s received contracts guaranteeing them a specific rate of return on capital for constructing and managing railways within India.37 BI’s steamer services were the maritime branch of the same partnership between the state and private capital in the development of India’s transport infrastructure. BI’s coastal lines complimented and supported the overland transport revolution being carried out by the railways, and together

34 Extraordinary General Meeting, 26 September 1862, Calcutta and Burmah S.N. Co, Shareholders’ Minutebook, BIS/1/27. 35 D. Begg to W. Mackinnon, 226 December 1861, MP India File 2; W. Nicol & Co to Government of Bombay, 1 Oct. 1862, enclosure in Govt. of Bombay to Govt. of India, 17 Oct. 1862, IOLR, Proceedings, India – Post Office, Range 189, Vol. 5; W. Mackinnon to Chief Secretary, Government of Bombay, 13 Dec. 1862, and Mackinnon Mackenzie & Co to Capt. Rennie, Marine Dept., Govt. of India, 21 March 1863, IOLR, Proceedings, India – Post Office, Range 189, Vol. 6; J.M. Hall to W. Mackinnon, 5 March 1864, MP Private Letters File 31. 36 This figure has been calculated by working back from the £62,000 received in 1866 for slightly more frequent services on some lines (BISN Co Directors’ Minutes, 25 September 1866, BIS/1/2). 37 E. Davidson, The Railways of India (London, 1868); W.J. MacPherson, ‘Investment in Indian Railways, 1845–72’, Economic History Review, vii (1955).

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the two harnessed the power of the steam engine to the service of the Indian government and the Indian economy. If the subsidies of £55,000 per annum paid to BI were to be seen as the equivalent of 5 per cent on capital, which was the norm for the railway companies at the time, this would indicate the possibility of the company being capitalised up to £1,100,000. Between 1862 and 1865, BI’s nominal capital was raised to £1,000,000 and the paid-up capital to £342,685. This was achieved at little cost to the original (pre-1862) shareholders, who were twice rewarded by creative accounting procedures which raided reserves and revalued the stocks of coal in India, thereby enabling the issue of new part-paid bonus shares worth £61,250 in all. These bonus shares, together with the use of dividends to pay first calls on new shares and the sale of part-paid shares to new investors for a premium, permitted the existing shareholders, including the Mackinnons and Halls, to slide smoothly into the new, enlarged concern. Widening the circle of investors, and bringing in outsiders without losing control, proved no great difficulty, in part because the British and Indian economies were both in the grip of a financial boom. Money was plentiful and cheap, and opportunities for investment were being sought all round. William Mackinnon returned home to Glasgow from India in June 1863 as a significant figure in the evolving relations between Britain and the Indian subcontinent. He had become a major ‘public contractor’ to the Government of India, a prop to its administrative structures and a servant to their policy goals. From a merchant and shipowner engaged almost exclusively in commercial activities, he had emerged as a businessman whose sphere of operations was the more politicised interface between government and business. Between the needs of government for services from the private sector and the desire of firms to supply such services at a handsome profit to themselves there lay a world of contract tendering, lobbying and influencepeddling in which he suddenly found himself at home. In entering that world, he built on contacts which had gradually developed between the men of Mackinnon Mackenzie & Co and officials in Calcutta, as well as even stronger connections between his new allies, the Fleming brothers, and officials in Bombay. He brought to the massaging of these contacts all his personal charm, skills as a negotiator, and recently-acquired knowledge of steamship technology and finance, and he succeeded in laying himself alongside new visions of the use of steampower that were surfacing in governing circles of India. Perceptions of a modern, steam-driven and government-supported mercantile marine in Indian waters, able to do the bidding of government under normal conditions but to come wholly under government control in times of civil or military emergency, were attractive to a ruling elite operating at some considerable distance from the metropolitan sources of new technology. The notion that steamship lines and railway lines were not only tools of economic development, extending and deepening markets and bringing profits to those who funded and managed them, but also tools for the attainment of broader political and administrative objectives was something that William learned 52

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

from Anglo-Indian governing circles. However, in securing the support of Sir Henry Bartle Frere, who was one of the chief proponents of the application of steampower to the exercise of state authority in foreign relations, William also transformed himself and his steamship company into active ‘agents of empire’. He drew the conclusion that governments were willing to pay well for access to the new tools of empire. As befitted its new status as a large contractor to the Government of India, BI (and Wm. Mackinnon & Co) moved to larger offices in Glasgow, taking over premises formerly occupied by the Monkland Iron Company at the corner of Hope Street and West George Street. From there, with the benefit of fresh capital and the assistance of generous amounts of short-term credit from the City of Glasgow Bank, William and Jamie Hall organised the purchase and despatch to India of a steady stream of steamships. One of these new vessels, however, failed to arrive in the Indian Ocean. The unfortunate Bussorah, built by Hill & Co of Glasgow, sank off Islay in the Inner Hebrides in the February storms of 1863. Jamie Hall, waiting anxiously in Glasgow for news of the steamer, wrote to William that: My hope of the safety of the crew is reduced to the smallest possible. . . . A body was seen floating past one of these wild and inaccessible points on the coast of Islay, but . . . from the great quantity of wreck belonging to her which has come ashore within so short a radius from Colonsay, I fear she must have gone to pieces somewhere not very far from there. Off Oronsay is one of the wildest parts of the coast I ever saw – ten miles out at sea perpendicular rocks rise out of the ocean with deep water all round – part of the same reef as Skerryvore – a vessel might be dashed to pieces there and fall off into deep water.38

The captain of the Bussorah, which went down with all its crew, was William Mackinnon’s brother-in-law, Archibald Gray. The push to serve the needs of the Government of India had human costs as well as financial gains for the Mackinnon family. ***** BI’s coast and country lines operated into and out of two hub port-cities. From Calcutta, Mackinnon Mackenzie & Co managed the lines which proceeded from the Hooghly down both sides of the Bay of Bengal, together with the ‘cross line’ which went from Madras and the east coast of India across the Bay to Burma. This was the network of routes pioneered by the Calcutta and Burma S.N. Co, and was the more ‘mature’ or developed of the two. From the Bombay hub, Wm. Nicol & Co. managed three lines – southwards towards the Malabar Coast, northwards towards Karachi, and

38

J.M. Hall to W. Mackinnon, 25 Feb. 1863, MP Private Letters File 27. 53

PERSIA (IRAN) Basra

Brahmap utra

s

Ga

ng

30ºN

es

aw

Bundar Abbas

du

dy

In

ad

Bushire

Irr

PERSIAN GULF

Karachi Muscat

INDIA

Chittagong

Calcutta

Surat

ARABIA

Akyab 20ºN

ARABIAN SEA

Bombay

Vizagapatam Cocanada

B AY OF BENGAL

Rangoon Bassein

Marmagoa MA

Tavoy Madras

LA

Mangalore

BA

Calicut

R

Cochin

10ºN 20º 20

HORN OF AFRICA Galle

CEYLON Penang

SUMATRA

I N D I A N

O C E A N

500 miles 60º 60 60ºE

Map 2 British India S.N. Co’s services, 1870

80 70ºE 80º

80ºE 80º 80

80 90ºE 80º

100ºE 100º 100

0º

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

north-westwards to the Persian Gulf. This western Indian ‘system’ was nominally under the authority of Mackinnon Mackenzie & Co, as managing agents for the entire BI fleet. Nevertheless, much of the routine work of running the contract lines and the more developmental work with new lines in the Arabian Sea fell to the local knowledge and expertise of Wm. Nicol & Co. The two hub cities were also functionally connected, at a time when they had not yet been linked by railways, by BI’s steam service between them, which initially ran as a monthly service but was increased to a fortnightly service in 1864. In the Bay of Bengal, the lines from Calcutta to Burma – to the ports of Chittagong, Akyab, Rangoon and Moulmein – occupied a sizeable proportion of BI’s tonnage. By 1870, with increases in the frequency of the contract services, there were over 100 sailings a year between Calcutta, Akyab and Rangoon. Because there were no railway connections between Burma and Bengal, passenger traffic went entirely by sea. A traveller on the lower stretches of the Hooghly River, therefore, would be likely to meet the occasional BI vessel setting out for Burma, ‘breaking the surrounding silence with the sounds so familiar on the Clyde or Thames, and matted all over like a large aquatic tent, beneath which a sheeted throng of passengers found shelter from the sun.’39 When one such steamer, the Persia, was caught in a cyclone off Sandheads at the mouth of the Hooghly in October 1864, and sank with the loss of all aboard except two lascar seamen, there were 18 European passengers (including three children) in cabin accommodation and 120 Indian passengers, all on deck.40 Fortunately for the company and its passengers, loss of life on such a scale was an unusual occurrence. The cargo carried downwards from Calcutta included re-exports from Europe, mainly cotton textiles and metalwares, together with silk goods from north India and jute gunnies (sacking) from the emerging Calcutta jute mills which were intended for the bagging of Burma’s rice exports. The gunny trade was a seasonal one, tied to the rice harvest. The company’s steamers experienced competition from sailing ships going down to the Burmese rice ports to load there on charter, but by 1869 Mackinnon Mackenzie & Co had instituted a system of rebates to merchant houses involved in the rice trade which sent their gunnies to Burma exclusively by BI steamers.41 BI’s cargo trade, however, was very much a one-way affair, with exports from Calcutta greatly exceeding in value the imports from the Burma ports. This was because BI’s vessels were simply unsuited for the transport of Burma’s teak and other timbers, and there was as yet little demand in Calcutta for Burma’s principal export, rice. Upward cargoes from Burma to Calcutta were therefore relatively small loads of miscellaneous mixed goods, or sundries. By the end of

39 40 41

Matheson, England to Delhi, p. 232. J.M. Hall to W. Mackinnon, 10 October 1864, MP Private Letters File 33. Mackinnon Mackenzie & Co to Secretary, Glasgow, 27 April 1869, BIS/6/72. 55

ENTERPRISING SCOTS

the decade BI steamers were transporting roughly one-half of all recorded trade between Calcutta and Burma. At Rangoon, which became something of a secondary hub within the Bay of Bengal system, the steamers from Calcutta overlapped with those on the ‘cross line’ from Madras and Bimlipatam (in South India) to Rangoon. Although this monthly ‘cross line’ carried some cargo – mainly government stores sent to Madras Presidency troops in Burma or rice from Burma on the return leg – it was predominantly a passenger service. It offered relatively inexpensive deck passages to migrant workers from South India who sought employment in the docks, wharves, saw-mills and rice mills of the Burmese ports. It initiated the transport and communications links between South India and Burma which enabled the Chettiar banking/ money-lending caste to exploit new business opportunities in the ‘rice frontier’ of the Burma Delta.42 Rangoon, more centrally located in the Irrawaddy delta than the other rice ports, was emerging as the focal point for maritime and commercial activity in Burma, and BI’s agency there became something of a prize. Lower Burma – hot, humid and forested – was also a ‘frontier’ area for British merchants and traders. Most of the resident traders were expatriate Scots who had followed the advance of British Indian authority into the region and were willing to bear the hardships of a life away from Calcutta. BI’s managing agents were sensitive to the continual complaints of this mercantile community, whether shippers denouncing the inadequacies of the timetables or passengers dissatisfied with the standards of catering. They bore the brunt of much vituperation in the English-language press – such as the resident of Akyab (clearly not a compatriot) who denounced BI as a ‘scrubby Scotch Screw Company’.43 Mackinnon Mackenzie also kept an eye on the performance of the agents in the Burma ports, more especially at Rangoon where James Bulloch of Halliday Bulloch & Co was suspected of being less than wholeheartedly devoted to the company’s cause. Nevertheless, when the bankruptcy of James Halliday’s London firm in 1865 forced his resignation from the BI board and led to the reconstitution of the Rangoon firm as Bulloch Bros, the Rangoon agency was transferred to the new firm. The Bulloch brothers, James and George, had become too powerful in the Burma ports to be alienated from BI, and BI’s presence in Burma would be bound up with the rice-trading and rice-milling Bulloch Bros until the 1930s.44 42

M. Adas, The Burma Delta: Economic Development and Social Change on an Asian Rice Frontier, 1852–1941 (Madison, Wis., 1974), and ‘Immigrant Asians and the Economic Impact of European Imperialism: The Role of the South Indian Chettiars in British Burma’, Journal of Asian Studies, 33 (1973–4). 43 Letter of 5 May 1862 in The Overland Englishmen, enclosure in P. Mackinnon to W. Mackinnon, 9 May 1862, MP, City of Glasgow Bank File 12. 44 P. Hall to W. Mackinnon, 23 May and 10 June 1865, MP India File 6; B.I.S.N. Co Directors’ Minutes, 28 Dec. 1865, BIS/1/2. James and George Bulloch, whose line of sailing ships from London to Burma would become known as the ‘Bay Line’, were 56

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Above all, the managing agents were concerned to prevent competition for their Burmese steamship lines. The main threat, they believed, was likely to come from yet another Glasgow-based enterprise. Among the several Scottish expatriate firms in Burma was Todd Findlay & Co. of Moulmein, which also had a branch house in Rangoon. The firm possessed a small steamer, the Ava, with which it carried goods between the two ports and occasionally to Calcutta, to the irritation of Mackinnon Mackenzie & Co. However, Todd Findlay & Co. were also the agents for a syndicate established in Glasgow to commence steamshipping on the Irrawaddy River, the main thoroughfare in Burma. Late in 1863 this syndicate purchased the government’s four elderly river steamers and acquired a five year contract for the conveyance upcountry of mails, stores and troops. The Irrawaddy Flotilla and Burmese Steam Navigation Company, which was established in Glasgow to undertake this contract from 1 January 1865, brought together the mercantile interests of T.D. Findlay & Co, the shipping interests of Patrick Henderson & Co, whose sailing ships were involved in the rice trade from Burma, and the ship-building interests of William Denny & Bros.45 The emergence of the firm, and the fact that its name implied intentions wider than river navigation, brought a flutter of concern to the Mackinnons and Halls, and there was bitterness that Peter Denny, who built so many of the BI vessels, was party to what could easily become a rival enterprise. However, Denny’s participation acted as a bridge between William Mackinnon and the other interests in the Irrawaddy Flotilla, opening the way for an eventual agreement about recognition of each other’s ‘spheres of influence’ in Burma. Following five years of skirmishing over the Irrawaddy Flotilla’s right to operate on the Burma coast, William and the BI board agreed in 1870 to buy out the Flotilla’s two coasting steamers for £25,000.46 Thereafter, the two firms settled into harmonious relations, respecting each other’s dominant position on the Burmese coast and rivers respectively. South of Burma, passenger traffic and cargoes grew thinner, and the monthly Calcutta-Singapore line, begun in 1862, failed to justify any increase in its frequency. Because of the administrative separation of the Straits

originally from Glasgow, where their brother Matthew still ran the family distilling and whisky wholesaling firm, Bulloch Lade & Co. James and Matthew were both married to daughters of Peter Clouston, a marine insurer who was Lord Provost of Glasgow from 1860–63. Nevertheless, the Bullochs moved in different social circles from the Mackinnons and Halls and maintained an independence in business matters as well. 45 A. McCrae & A. Prentice, Irrawaddy Flotilla (Paisley, 1978), pp. 58–66; A.G. McCrae, Pioneers in Burma (University of Glasgow, Occasional Papers in Economic and Social History No 2, 1986); A Short History of T.D. Findlay & Son Ltd; East India Merchants, 1839–1951 (typescript, n.d.). 46 P. Macnaughton to Mackinnon Mackenzie & Co, 28 Jan., 15 Feb., 2 & 9 March 1867, BIS/6/4; BISN Co Directors’ Minutes, 6–7, 27 Oct., 3, 10 Nov. 1869, 1 April, 5 May 1870, BIS/1/2–3. 57

ENTERPRISING SCOTS

Settlements from India in 1867 there was a slackening of demand for conveyance of official passengers and government stores. Moreover, the fast, direct steamers owned by the Apcars and by Jardine Skinner & Co of Calcutta monopolised the most valuable cargo which was exported from Calcutta to Singapore – the opium intended for consumption by the Chinese population of the Malayan peninsula or for re-export to other parts of Southeast Asia. Although there were other cargoes – gunnies and cereals from Calcutta, rice from the Burma ports, and spices on the return leg from the Straits – the trade conducted by BI between Calcutta and the Straits Settlements was worth only about a fifth of that between Calcutta and Burma.47 From Calcutta to the southwest, along the eastern shores of the Indian subcontinent, BI’s steamers operated the long coasting line to Bombay. This began as a monthly service in 1863, but proved so successful that it was transformed into a fortnightly service with some additional financial assistance from the Government of India.48 Steamers left Calcutta and Bombay on the first and fifteenth days of each month and took three weeks to complete the voyage, making 14 regular calls en route and others by request. Because of the shallowness of the Pamban Channel between Ceylon and India, the steamers went southwards round the island, calling at either Galle or Colombo. From Calcutta to Ceylon the steamers were effectively under the direction of Mackinnon Mackenzie & Co; from Ceylon to Bombay they were within Wm. Nicol & Co.’s sphere of influence. This Indian Coast line was a much more complex operation than the Calcutta-Burma lines. In the course of any single voyage the same steamer might be carrying goods over the long distance between Calcutta and Bombay, intermediate passenger traffic and cargo between, say, Calcutta and Madras, and travellers and cargo taken aboard at the smaller ports for transfer to bigger vessels in the larger ports. A great deal therefore depended on the judgements of the commanders and the various port agents about how much to load and how much to turn away so as to leave space for cargo or passengers at ports further along the route. In these days before the telegraph, it was not an easy balance to get right, and the line’s early years were punctuated by complaints by shippers and agents about late deliveries or about cargo being ‘shut out’.49 At the first three ports of call south of Calcutta, the Mackinnon Mackenzie influence was strengthened by the placing of their own men in agencies – William Mackinnon’s protégé Archie Hyslop at Bimlipatam and Vizagapatam, and yet another Hall brother, Stuart, at the important port of Cocanada (modern

47

Proceedings: Financial Department, Separate Revenue, No 16, Feb. 1873, IOLR P/667. A. Monteath, Dir. Gen. of Post Office of India, to Secy., Financial Dept., 31 July 1868 (No 108), and Govt. of India to Secretary of State for India, 17 August 1868 (No 110), Proceedings, India: Separate Revenue, Range 436, Vol. 35, IOLR. 49 J.M. Hall to W. Mackinnon, 20 Feb. 1864, MP Private Letters File 31; P. Macnaughton to Mackinnon Mackenzie & Co, 8 June 1867, BIS/6/4, and 30 April 1868, BIS/6/6. 48

58

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

Kakinada), on the Godavery delta. But south of the Godavery the managing agents had to choose between a variety of existing firms of whom they knew little. The key decision was undoubtedly the replacement of Dymes & Co by Binny & Co as Madras agents in 1865. Binny’s, established since 1799 and the pre-eminent British agency house in Madras, had been associated with Mackinnon Mackenzie’s London ‘friends’, Scott Bell & Co, for so many years that is was perhaps surprising that they had not been first choice as BI’s Madras agents. Whatever the reason for the original omission, it was quickly rectified in recognition of Binny’s influence over the commerce of the smaller ports of the Coromandel Coast, among firms which might in turn become BI agents there, and also its political contacts with the Government of Madras.50 Like Bulloch Bros. in Burma, Binny’s were now seen as the dominant force in South India. On the Calcutta-Bombay coasting line, BI had rather more competition from sailing ships and even other steamers than on the Burma lines. Even so, by the end of the 1860s, BI steamers represented one third of all vessels, other than country craft, which entered and cleared Calcutta with cargoes to and from Indian coast ports. As in the Burma trades so too in the Coast trades, BI tended to rely for cargo on the more on high-value exports and re-exports from Calcutta – cotton goods, silk and silk goods, and jute gunnies – than the lower-value imports from the Coast ports – hides and skins, oil seeds and salt. The latter still went mainly by sailing ship and ‘country craft’. The one Coast commodity which could afford steam freights was raw cotton from the Godavery delta and the Coromandel Coast. This was especially true during the period of high prices of the early-to-mid 1860s when the ‘cotton famine’ caused by the US Civil War stimulated production and exports in South India as well as western India. The collapse of that boom in 1865–6 contributed to the general depression of the rest of the decade, and to the slackness in trade about which BI’s managing agents complained from time to time. Surprisingly perhaps, in the light of the distances involved, a relatively high proportion of the steamers’ cargo space was taken up by goods travelling between the two terminal ports. For example, 46 per cent of the merchandise imports into Calcutta by BI steamers on the Coast line in 1868/9 to 1870/1 originated in Bombay. From Bombay to Calcutta, the goods were principally cotton textiles, while from Calcutta to Bombay they were jute goods and Benares sugar.51 From Ceylon northwards to Bombay, calling at several ports on the Malabar Coast as well as at Carwar in the Carnatic, the fortnightly CalcuttaBombay Coast line became the southern arm of the steamer services managed

50

J.M. Hall to W. Mackinnon, 24 April and 12 June 1865, MP Private Letters File 34; Anon, The House of Binny (Madras, 1969), pp. 1–69. 51 P. Hall to W. Mackinnon, 10 June 1865, MP India File 6; Mackinnon Mackenzie & Co to Secretary, Glasgow, 2 July 1869, BIS/7/72. 59

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by Wm. Nicol & Co. To undertake its agency responsibilities this firm had established a separate steamer department, of which Edwyn S. Dawes was the first effective head. Dawes, the son of a Staffordshire clergyman, had previously been employed as a deck officer with P&O before coming ashore to work in P&O’s telegraph office in Bombay. There he met William Mackinnon in 1862 and, stressing the need for the BI to adopt P&O’s management practices, had solicited his support for appointment to Nicol & Co.’s steamship agency.52 Dawes laid the foundations for BI operations in the Arabian Sea, where the maritime environment was rather different from the Bay of Bengal. ‘We have not the valuable carrying trade on this side that there is in the Eastern and principally from the hardy class of seamen & regular winds on this coast during nine months in the year, & although we shall no doubt establish a good carrying trade we shall not I fear be able to run down the native craft as you appear to have done in Bengal.’ 53 BI also faced more competition from steamships in the Bombay hub than it did in Calcutta. The same boom of the early-to-mid sixties in Bombay which had brought Wm. Nicol & Co.’s partners within the BI ambit, and which had helped to finance the expansion of BI, had thrown up two rival concerns. The first was the Bombay Coast and River S.N. Co – a phoenix reconstituted in 1863 from the ashes of the old Bombay S.N. Co and which, under the management of J.A. Shepherd, ran a regular line from Bombay southwards to the many small ports between Bombay and Cochin. The second was an even more ambitious enterprise, the Bombay and Bengal Steamship Company, which was under the management of Stearns Hobart & Co of Bombay. It was intended principally to challenge P&O on the Suez-Bombay route but also sent its vessels eastwards to Madras and Calcutta and therefore competed to some extent with BI’s Coast line.54 Of the two, the Coast and River Co gave BI’s managers more trouble. The Bombay and Bengal Co was a nuisance between Bombay and Calcutta, attempting to divert cargo away from the mail steamers and offering attractive rates for through-traffic from Suez and Bombay to Calcutta. However, the Coast and River Co took on BI’s steamers in a head-on battle for the trade of the Malabar Coast. Both companies regarded the Malabar Coast as a prize because it had a thriving trade to Bombay, in fruits, spices and various timber products transported on country craft. It was also an emerging centre of European coffee-growing and there were planters’ stores and first class passengers to be carried. But it was also a difficult coast to navigate, more

52 E.S. Dawes to Lambert, 15 Sept. 1861, 28 Aug. 1862, and to W. Mackinnon, 27 June and 26 Aug. 1862, Letterbook of Edwyn Sandys Dawes, 1860–65. (I am extremely grateful to Mr Sandys Dawes for his permission to consult his great-grandfather’s personal papers.) 53 E.S. Dawes to W. Mackinnon, 13 Nov. 1863, Dawes Letterbook, 1860–65. 54 W.H. Coates, The Old Country Trade of the East Indies (London, 1911), pp. 143–5 and 146–9.

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BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

especially during the months of June to August when the South West monsoon blew fiercely in from the Indian Ocean and most sailing vessels gave it a wide berth. Dawes would recall how: In the year 1862 I went out to Bombay with Mr Mackinnon who gave out his intention of running steamers between Bombay and Calcutta touching at the coast ports. It was pronounced madness by nautical men. The Captain of the P&O steamer said to me, if your friend had passed the coast during the monsoon as much as I have done he would not think of it. Well, towards the end of June when the monsoon was at its height, I sent off the little steamer Kurrachee . . . and from that day to this the steamers have run regularly at all seasons of the year.55

Dawes had established that small coasting steamers could indeed navigate inshore in the teeth of the monsoon, without ending up on the beach, and that BI’s coast line could therefore function all year round. Nevertheless, the steamers of the 1860s were still not able to beat out of a Malabar Coast port against the full fury of the South West monsoon, with the result that calls at Malabar ports had to be suspended from 1 June to 15 August of each year. In the struggle between BI and the Coast and Rivers Co for Malabar trade and traffic, the Bombay-based firm made the quicker and more effective start. Time, however, was on BI’s side in the rates war that ensued. The Coast & River Co was over-capitalised – there had been much issuing of new equity and watering of stock during the height of Bombay’s share speculation. When the bubble burst in 1865, the following tide of liquidations and bankruptcies, which brought down the Bank of Bombay in February 1867, swept over the Coast & River as well. William Mackinnon took advantage of its demise to purchase four of its steamers. By the end of the decade, BI was in sole occupancy of the Bombay-Malabar liner trade and was carrying cargo worth an average 1.7 million rupees per annum.56 However, since this was only about 8 per cent of the total value of Bombay-Malabar trade in the middle of the decade, it would appear that steam had still made little impact on local country craft. The line from Bombay northwards to Karachi was predominantly a mail and passenger service. Indeed, it started in 1863 as an extension of P&O’s Suez-Bombay line, the steamers waiting in Bombay for the ‘overland’ mails and passengers from Britain and then carrying them onwards to Karachi. From there it was intended that some, at least, would travel on up the developing Sind-Punjab rail-river route into northern India. Only with the introduction of regular sailing schedules in 1866 did the line begin to take account of local passenger and cargo needs. However, there was little cargo on offer. This was partly because Karachi harbour, despite improvements, had

55 56

E.S. Dawes to Sir Arnold Kemball, 18 Sept. 1871, Dawes Letterbook, 1868–74. Proceedings: Financial Department, Separate Revenue, No 4, April 1873, IOLR P/667. 61

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a sand bar at its entrance that confined its use to shallow-draught vessels with small cargo-carrying capacity, but mainly because steamships could not compete in freight rates with the country craft that plied between Sind and Bombay. At the very height of the cotton boom, some raw cotton came down by steamer, but even this was halted by the introduction of government inspections designed to prevent adulteration of raw cotton exports. From time to time the Bombay and Bengal Steamship Co put steamers on to oppose BI on this route. The practice ceased when the combination of its struggle with P&O and the collapse of the cotton boom proved too much for the Bombay and Bengal and it went into liquidation. Richard Burton, the explorer, travelling on the line in the mid-1870s, noted sourly that it had ‘fallen prey’ to BI who charged ‘the dearest passage of the nineteenth century’, and continued: ‘How long this absurd monopoly will last is hard to say. . . . The inevitable ‘canny Scot’ rules the roost, and doubtless will fight hard to keep rivals out of the kitchen.’57 The longest line solely under Wm. Nicol & Co.’s management was the one covering the 1690 miles from Bombay to Basra at the head of the Persian Gulf. This monthly service, which became fortnightly in 1866, originally went via Karachi but Dawes soon obtained permission for it to bypass Karachi and head straight for the Gulf.58 The first stop was therefore Muscat, the capital city of Muscat-Oman, which was intended to be the main centre for BI operations in the Gulf. However, political troubles in Oman in 1866 undermined these plans. The Imam, Thuwaini ibn Said, who had been helpful and welcoming to the company, was deposed and murdered by his more anti-British son. Furthermore, Dawes persuaded the BI board that instead of a single coaling station for the Gulf steamers, centrally located at Muscat, there should be coaling depots at each end of the line, that is, at the Bombay and Basra termini. For these reasons, Muscat was soon dropped from the steamer route, and the line became associated with the northern, Persian (Iranian) shores of the Gulf.59 With calls at Bundar Abbas, Linga (Lingeh) and Bushire, it tapped into southern Persia’s maritime trade with India. A major difficulty, however, was to find suitable agents in these Persian ports. The company operated with a succession of temporary representatives until Edwyn Dawes took on the Bushire agency in 1866. By this time, Dawes had left Bombay to establish his own firm in London, in partnership with one of 57

R.F. Burton, Sind Revisited (London, 1877), Vol. 2, p. 11. The Persian merchants in Bombay objected to the Karachi stop, but it is not clear whether this was for purely commercial reasons or because (as Dawes suspected) they disliked travelling in the company of the Hindus who used the Bombay-Karachi section of the line. (E.S. Dawes to W. Mackinnon, 28 Oct. and 27 Nov. 1863, Dawes Letterbook, 1860–5; E.S. Dawes to Secretary, B.I.S.N. Co, 20 Nov. 1890, Correspondence, Calcutta Office, BIS/7/37.) 59 A. Johnstone to W. Mackinnon, 25 Nov. 1864, 28 Feb. and 13 March, 1866, MP India File 10. 58

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BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

William Mackinnon’s nephews, and saw BI’s agencies in the Gulf as a way of establishing branches of his London firm in that region. The agencies at Bushire and Bundar Abbas were therefore assigned to the new house of Gray Paul & Co. Robert Paul, the resident partner, was a Glaswegian who had previously worked in Mackinnon Mackenzie’s piece-goods department. Now, like Archie Hyslop and Stuart Hall in eastern India, he was being given the opportunity to use a BI agency as the launch pad for a mercantile business. From Bushire, the line went northwest to Basra on the Shatt-al-Arab, the principal port of Mesopotamia (Iraq) which was then part of the Ottoman Empire. British Indian interest in this region had been sustained since the 1830s by a British Residency in Baghdad, which was supported by two small steamers that plied the Tigris River between Basra and Baghdad under a firman from the Ottoman government. In 1861–2, this river service was privatised as part of the same set of arrangements as had brought Government of India contracts to BI. The Euphrates and Tigris S.N. Co was established by three Irish brothers who traded in Baghdad and in London as the firm of Lynch Bros. The mails carried by BI from Bombay to Basra therefore continued upriver to Baghdad on this firm’s two steamers, which operated a regular cargo service on the Tigris, and the two companies made arrangements for through-booking of goods and passengers.60 BI’s first agent in Basra was the Government of India’s representative in the town, a man named W.P. Johnston, but when he died in 1869 the agency passed to Gray Paul & Co. The entry of BI steamers into the Persian Gulf coincided with a generally prosperous phase in the trade between Bombay and the Gulf. Total trade in value rose from 19.6 million rupees in 1860–1 to 23.3 million rupees in 1868–9. From Bombay upwards, cargoes were cotton textiles and metal goods (mainly re-exports from Britain), sugar, cereals, dyestuffs, and substantial amounts of specie. Downwards from the Gulf came dates from Basra, opium, pearls and carpets from Bushire and Bundar Abbas, and raw cotton, silk, wool, grains and horses from both Persia and Iraq.61 During the cotton boom of the early-to-mid sixties raw cotton figured more prominently among the imports into Bombay than it did in the latter part of the decade. The value of the cargo trade made the Bombay-Gulf line BI’s third most important line, after the Calcutta-Burma and Calcutta-Coast lines.

60

Hoskins, British Routes to India, pp. 423–6; R. Owen, The Middle East in the World Economy, 1800–1914 (London, 1981), p. 181; Lynch, Navigation of the Euphrates and Tigris, pp. 167–8; Secretary of State to Govt. of Bombay, No 90 of 16 Sept 1862, and No 12 of 17 June 1863, Selections from Despatches . . . By the Secretary of State in Council, IOLR V/6; BT31/37919/2241 Vol. 1; Stephen Lynch & Co, Baghdad, to W. Mackinnon, 19 Aug. 1863. 61 ‘Report by Col. Pelly on the Trade of the Persian Gulf’, G.B. Parliamentary Papers, [hereafter PP]1871 (456), li. 407. 63

ENTERPRISING SCOTS

This long steam line from Bombay to Basra differed from all of BI’s other lines in one important respect. On their other routes, BI steamers served territories that were under British rule, and the subsidies paid by the Government of India were essentially for ‘internal’ purposes – to carry the mails, to support civil administration and military control, to promote the growth of trade, and to assist the movement of people, including migrant labourers, between different parts of British-ruled South Asia. BI’s contract lines on the coasts of India and Burma owed their existence to a wellestablished imperial order – they were ‘servants of empire’. However, in the waters of the Persian Gulf the BI steamers operated well beyond the formal frontiers of British authority. Here they were ‘agents of empire’, tools of the interventionist ‘informal imperialism’ espoused by Henry Bartle Frere and conducted locally by his protégé and client, Col. Lewis Pelly. As British Resident in the Gulf from 1862 onwards, Pelly intervened forcefully in the local politics of the region, supported by the gunboats of the Royal Navy.62 In providing communications and logistical support for Pelly’s Residency at Bushire, BI was therefore associated with his campaign to exert influence over the Arab states on the southern shores of the Gulf. Pelly was a small shareholder in BI, and used his reports to his superiors to stress not only the commercial significance of the Gulf for British India but also the key role being played by BI in the harvesting of its trade. On the other hand, his impetuosity and appetite for political interventionism could be counterproductive for a shipping firm that needed a peaceful political framework within which to operate – as was demonstrated by his role in Muscat’s political problems in 1866. ‘Col. Pelly’, Edwyn Dawes observed, ‘was perhaps a little too willing to have a collision with the native authorities on the rights of British subjects. Our policy I think must be as far as possible to keep in with the native authorities, as long as we can do so without being subjected to injustice.’63 There were clearly dangers for BI and its agents in too close an identification with Pelly’s brand of imperial vigour. Nevertheless, William Mackinnon befriended Pelly during the course of his Indian travels of 1861–63, and kept up a correspondence with him. Pelly provided information about political developments in the Gulf, offered glowing reports about future prospects for the growth of trade in the Gulf, to the benefit of both BI and Gray Paul & Co, and advised William to keep his eye on the expansion of opium exports in particular.64 In the correspondence, Pelly gave the impression that he regarded his first priority keeping the Gulf secure

62 R.G. Landen, Oman Since 1856 (Princeton, 1967), pp. 86–95 and 163–205; J.B. Kelly, Britain and the Persian Gulf, 1795–1880 (Oxford, 1968), pp. 500–75 and 638–716. 63 E.S. Dawes to R. Paul, 20 Nov. 1868, Dawes Letterbook, 1868–74. 64 L. Pelly to W. Mackinnon, 13 Oct. 1865, 16 Jan. 1866, 19 Dec.1868, and 14 Aug. 1869, MP Private Letters File 175; Pelly to W. Mackinnon, 24 April 1866 and 29 Aug. 1868, Pelly Papers, IOLR Mss.Eur.F.126.

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BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

for the future completion of the transportation route from the Mediterranean to the Indus. In this he followed the wishes of ‘Sir Bartle [who] takes the greatest of interest in the Gulf questions & who was the first who turned my attention – now 15 years ago – to the prospects of the Euphrates line.’65 Although the bulk of BI’s activities comprised regular services on defined lines under contract from the Government of India, its managers also undertook other work. From about 1864 onwards, BI’s fleet was always somewhat larger than was necessary for the performance of its contract services. This was partly because penalty clauses in the contracts obliged it to keep a few spare steamers in hand as a reserve against accidents. Coasting services, involving inshore navigation and frequent calls at small ports, were relatively risky, and strandings on uncharted shoals or sandbanks, or collisions with other vessels entering or leaving port, were commonplace. There were also the hazards of the weather, particularly the cyclones of the Bay of Bengal. In October 1864, for example, a cyclone devastated shipping in the Hooghly. Among the many vessels which were dashed against each other or thrown up onto the river bank were several BI steamers, and the company had to recruit a team of shipyard workers in Glasgow to go out to Calcutta to repair the damage. In such conditions it was a wise precaution to have a few steamships in reserve. But BI’s fleet also expanded as a result of its modernisation policy, which took older vessels off the contract lines, and through its practice of buying up steamships which became available for sale in India in order to deprive potential competitors. The re-sale of such excess tonnage outside Indian waters always took some time to arrange. In the meanwhile profitable employment had to be found for the vessels. In both the Bay of Bengal and the Arabian Sea there was plenty of trooping work to be done, and BI competed for the business against other owners. Sometimes this involved relatively short charters for the transport of small units – as in the regular relief’s of garrisons in places like Singapore or Aden – and sometimes there were entire regiments to be moved. In 1863, for example, BI steamers transferred the 38th Regiment of Native Infantry from Calcutta to Chittagong, and carried over 300 men of the 68th Light Infantry from Rangoon to New Zealand.66 Such was the scale of trooping work available, indeed, that one large new steamer, the Asia, was ordered from Dennys in Dumbarton in 1865 with decks arranged so as to make them particularly suitable for troop transport. BI’s mail contracts with the Government of India carried a clause which permitted the government to charter its steamers in time of military or civil emergency, and normally the invoking of such a power would have caused some interference with the company’s regular

65

Pelly to Mackinnon, 29 Aug. 1868, IOL&R Mss.Eur.F.126; see also Pelly to Sir H.B. Frere, 18 Aug. 1868, IOLR Mss.Eur.F.126. 66 Mackinnon Mackenzie & Co to Home Department, Govt. of India, 20 Dec. 1866, No 25 of Sept. 1867, Proceedings: Separate Revenue, Range 437, Vol. 10, IOLR. 65

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lines. However, the first occasion on which it was used, to secure transports for the 1867–8 Abyssinian Expedition, happened to coincide with a slack period in India’s coastal trades. BI’s managers were therefore happy to see the government provide employment for all of its spare steamers and a few that were temporarily removed from the contract lines. Nine BI vessels were used in the punitive expedition against Emperor Theodore of Ethiopia. William Mackinnon, with an eye towards discussions about contract renewals going on in Calcutta, was keen to see that the company received due recognition, particularly for the way the separate condensers of the engines were used to supply the troops ashore with fresh water.67 A different type of employment for BI’s spare steamers was also available to the Bombay agents – the transport of Moslem pilgrims to and from Jeddah. This was a seasonal passenger traffic to and from the Red Sea port which began in October–November for pilgrims who also wanted to spend Ramadan in Mecca, but which was at its peak between February and August. Steamships were in demand for such a trade because the complex wind patterns of the Red Sea rendered it a tricky and hazardous place for sailing ships. BI first entered the trade in 1864, with a charter to convey a Begum and her party from Aden to Jeddah. Edwyn Dawes believed that William Mackinnon would object, on religious grounds, to the company becoming involved with the pilgrim trade, and tried to hide the nature of this charter from the Glasgow office, but on finding that no protest at the voyage was forthcoming he was emboldened to take matters a stage further.68 He proposed that BI should send one or two of the older, ex-government steamers into the Red Sea, to ply back and forth between Suez and Jeddah with pilgrims from Egypt and the Mediterranean littorals, and thereby persuade one or other of the Egyptian shipping firms in the Red Sea to buy up some of BI’s unwanted, excess tonnage. The strategy proved successful, for in 1866 the government of Egypt, (which controlled the Mejidiah steamship company operating in the Red Sea) bought two old BI steamers, the Sydney and the Australian, for £37,000. As part of the terms of the sale, BI had to agree not to carry passengers or cargo between Suez and Jeddah, except as part of a longer voyage originating outside the Red Sea.69 The arrangement

67

Wm. Mackinnon & Co to W. Nicol & Co, 17 Dec. 1867, MP Private Letters File 35; P. Macnaughton to Mackinnon Mackenzie & Co, 2, 17 and 25 Jan., 30 April, 18 June 1868, BIS/6/6; W. Mackinnon to J. MacDonald, MP Private Letters File 135. For the expedition against Theodore, see N. Rodgers, ‘The Abyssinian Expedition of 1867–68: Disraeli’s Imperialism or James Murray’s War?’, Historical Journal, 27, 1 (1984), pp. 129–50. 68 E.S. Dawes to Capt. Beyts, 28 April 1864, and to J.M. Hall, 11 July 1864, Dawes Letterbook, 1860–5. 69 E.S. Dawes to J.M. Hall, 28 Aug. and 7 Oct. 1864, Dawes Letterbook, 1860–5; P. MacNaughton to Mackinnon Mackenzie & Co, 11 and 25 April, 9 May, 16 Sept. 1865, and 17 March 1866, BIS/6/1; P. MacNaughton to Mackinnon Mackenzie & Co, 29 July 1869, BIS/6/9; BI Directors’ Minutes, 27 Oct. 1869, BIS/1/2. 66

BRITISH INDIA STEAM NAVIGATION COMPANY, 1856–70

left BI free to operate on the Persian Gulf to Red Sea route, and every year from 1865 onwards a BI steamer left Basra early in February, calling at Bushire, Linga, Bundar Abbas and Muscat to pick up pilgrims, and returning them home again after the Haj to Mecca. This involvement with the pilgrim trade provided the first footsteps towards a further diversification of BI’s liner network. ***** BI’s shipping services contributed in no small way to the quickening pace of commercial life which occurred around the seaboard of South Asia in the 1860s, although they did so less in terms of goods transported than of passengers carried and commercial intelligence conveyed. BI’s relatively small, general-purpose steamers, like the coasting steamers of the Firth of Clyde and the Irish Sea on which they were patterned, had a limited cargo space, for which comparatively high rates were charged. They were not well placed to compete with Western sailing ships or Asian ‘native craft’ for the great bulk trades in the likes of grain or timber. BI had commenced but in no way completed the transition from sail to steam in Indian coastal waters. Nevertheless, the introduction of regular local steamship lines, with defined sailing schedules known to the public, meant an improvement in facilities for those who wanted to travel between ports, whether cheaply on the open deck or with the greater comfort of cabins and a dining saloon. It also speeded the flow of commercial information between local firms, and brought advantages for those merchants and traders dealing in high-value goods for which speed of transit or specified time of arrival merited the payment of the steamer freights. By the end of the decade, BI was the pre-eminent shipper of mails, money, passengers and fine cargo around the coasts of India and its near neighbours. It had created regular steam lines where none had existed before, along routes on which it introduced more frequent scheduled sailings over time. It offered new transport facilities on which many members of the travelling public, and the merchant communities and local officials at the many ports, came to depend. It had built a network of agents and sub-agents to foster its interests and to mediate with its customers – although the fact that it invariably selected British firms (usually expatriate Scottish houses by preference) meant that its activities gave no direct boost to local Indian firms. It had also blocked the rise of a potential rival in Burma and had seen off two competitors in western India. In the process, BI had grown physically and benefited financially. By 1870, on a paid-up capital of £442,000, it had assets worth £633,788, including 23 steamers valued at £441,000, and financial reserves of £111,444.70 BI had no real equivalent in Britain, where the carriage of mails had been transferred to the railways, and the coasting liners 70

Balance Sheet, BISN Co Report of Directors, 1870, Inchcape. 67

ENTERPRISING SCOTS

at work, particularly on the longer routes of the North Sea and Irish Sea between Scotland and England, were owned by small firms organised collectively into conferences (cartels).71 BI was very much larger than any of the British coastal shipping companies, owing its size and dominance ultimately to its close links with the Government of India. Just how much the company owed to its mail contracts is indicated by Table 2.2, which sets out the results of the company’s profit and loss account. The figures for balances after depreciation of steamers and other equipment (which cannot be taken as an accurate measure of BI’s profitability, because of randomness in the rate of depreciation) seem to indicate that the best trading years were 1864–5, at the height of the cotton boom, and 1867–8, when the Government chartered a large part of the fleet for the Abyssinian Expedition. By 1866, the mail contracts were worth a total of £62,000 per annum, and given that balances after depreciation significantly exceeded that figure only in 1867–8 (as a result of chartering to the government) the conclusion must be that BI’s profitability, and its ability to pay dividends to shareholders, depended almost entirely upon government funds. When one adds to this the influence exerted on private passengers and shippers by the fact that BI was the official mail carrier, approved by government, and also that government departments tended to send passengers and cargo by the steamers at rates agreed in the mail contracts, it is clear that BI enjoyed significant advantages over non-contract steamship lines. This is not to deny the contribution made to BI’s performance by the managerial skills of Mackinnon Mackenzie & Co in Calcutta and Wm. Nicol & Co in Bombay, or the business acumen and shipping knowledge of the chairman, secretary and Board in Glasgow and London. Nevertheless, in a maritime environment so far removed from the industrial and commercial conditions that had spawned the steamship, state support was still the vital factor making for success or failure in the ownership and management of steamship lines. Table 2.2 BI: profit and loss account results, 1864/5 to 1869/70 Year ending 28 Feb.

Balance before deprec. (£)

Depreciation of steamers (£)

Balance after deprec. (£) % Capital

1864–5 1865–6 1866–7 1867–8 1868–9 1869–70

82,025 69,485 122,273 215,625 111,454 110,959

23,690 18,406 56,635 111,864 53,000 53,652

58,336 51,079 63,638 103,761 58,454 57,307

24.5 14.9 16.7 24.4 13.4 12.9

Source: BISN Co Directors’ Minutes, BIS/1/2–3. 71

J. Armstrong, ‘Coastal Shipping: The Neglected Sector of Nineteenth Century British Transport History’, International Journal of Maritime History, 6 (1994), pp. 175–88. 68

3

Extending the system: Australia, Indonesia and Arabian waters, 1862–70

1

1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5

Steamship lines gradually developed across the Indian Ocean maritime region in the course of the 1860s. A handful of shipping companies flourished there with the assistance of government contracts and the shelter provided by the great bulk of the African continent from the more competitive commercial steamshipping conditions to be found European and North Atlantic waters. On the long, deep-sea routes from Suez and Aden to India, Australia and the Far East, the P&O company was pre-eminent. This ‘flagship’ of British imperialism in the East,1 was joined from 1861 by a French counterpart, Messageries Impériales, whose steamship lines from Marseilles to Alexandria and from Suez to Singapore, Saigon, Hong Kong and Yokohama expressed the all the aspirations and elegance of Napoleon III’s Empire. The British and French rivals manoeuvred around each other for passenger traffic and for the fine freights – silks, raw silk, opium, bullion and specie – which were the perfect accompaniment for inter-continental mail liners.2 Meanwhile, on the margins of the Indian Ocean – on rivers, along coasts, and between islands – smaller and less glamorous steamship lines emerged to conduct, on a smalller scale and with more regard to local economic conditions, the same mix of mails, passengers and relatively high value cargo as was being carried by the premier deep-sea shipping firms. Among these short-sea ‘cousins’, the largest and most influential was easily the British India S.N. Co. William Mackinnon and James Macalister Hall, and the family interests which controlled BI, were not content with the contracts signed with the Government of India in 1862–4. Alive now to the strategic as well as commercial significance of steamship lines, they were on the constant look out for additional ‘country’ routes within the Indian Ocean maritime region – that is, for the purposes of international commerce conducted over longer distances than the domestic coasting trades of British India. What had been achieved with BI’s ‘country’ or ‘intra-Asian’ services to Singapore and Basra could conceivably be replicated on other maritime routes. Any development

1

Freda Harcourt, ‘The P&O Company: Flagships of Imperialism’, in S. Palmer and G. Williams (eds), Charted and Uncharted Waters (London, 1984). 2 H.L. Hoskins, British Routes to India (London, 1928), pp. 413–14; D.A. Farnie, East and West of Suez: The Suez Canal in History, 1854–1956 (Oxford, 1969), pp. 62–3. 69

ENTERPRISING SCOTS

of new lines in the Indian Ocean, however, was subject to two principal constraints. The first was the willingness of the Government of India, or any other local government in the region, to put up cash for regular steam services over particular routes. William Mackinnon and his associates were most unwilling to risk any new venture without a mail contract, or some other form of state support. The second was the fact that the powerful P&O company, which possessed Imperial mail contracts arranged by the General Post Office in London, stood astride the main steamer routes in the Indian Ocean and China Sea – from Suez and Aden to Bombay, from Bombay to Ceylon (Sri Lanka) and Calcutta, and from Bombay to Singapore and Hong Kong. It would be likely to oppose vigorously any attempt to compete with, or otherwise interfere with, its services on these routes. BI and its parent partnerships would have to work around P&O’s presence to avoid the wrath of the larger and more influential firm. The prospects initially looked best on the south-eastern flanks of the maritime region. Here, P&O’s presence was relatively weak. Its Australian service went south-westwards from Galle in Ceylon, across the vast open waters of the Indian Ocean, directly to Fremantle in Western Australia and then eastwards along the southern coastline of Australia to Melbourne and Sydney. It also had a service from Bombay eastwards via Galle to Singapore and on to Bombay. South of Singapore, however, there was no British mail route – and the possibility of an additional route to Australia through the Java Sea and the Torres Straits had occurred to a number of armchair strategists. This idea was particularly appealing to the Mackinnon and Halls once BI started a line from Calcutta to Singapore, and it generated ambitions of a Calcutta to Australia line, intersecting with, and exchanging mails, passengers and cargo with, the P&O steamer at Singapore. In pursuing that goal, however, the Mackinnons and Halls unexpectedly found themselves taking up yet another coastal steamshipping venture – one with a contract from the government of the Netherlands Indies to run a network of short-distance, coastal and inter-island services throughout the Indonesian archipelago. This initiative in turn exposed the Mackinnons and Halls to greater risks than they faced in India. It gave them responsibilities to a foreign colonial government with whose language, culture and politics they were unfamiliar; it drew their steamships into waters of which they had no experience and into trades that they could only know at second hand; and it required them to take control of an established steamship company, legally and operationally separate from BI, and transform it into a ‘sister’ concern. William Mackinnon’s ambitions to develop a steam line between Calcutta and Australia were rooted in his previous, and unsuccessful, attempts to generate a trade with sailing ships through the Torres Straits separating Australia and New Guinea. What did not succeed with sailing ships might be achieved with steamers – if mail contracts could be won. His first attempt in this direction took place as early as 1858, when Mackinnon Mackenzie & Co was still actively trading to Sydney and Melbourne. Through his connections 70

EXTENDING THE SYSTEM, 1862–70

there, he offered to run a monthly steamer service between Singapore and Sydney, connecting at Singapore with the P&O’s mail steamer to and from the Far East and with a proposed Calcutta and Burmah Co line to Singapore. He wanted the colonial governments in Australia to put up a subsidy of £60,000 a year for five years.3 It was an audacious approach from a man who was still only part owner of two small steamers, and typical of his business opportunism. Not surprisingly, the Australian authorities showed no interest. Then, while travelling around India in 1861–2, in pursuit of new contracts for BI, William met Sir Charles Nicholson, who was the Speaker of the Legislative Council of the relatively new colony of Queensland.4 Through Nicholson, William learned that the Queensland government was concerned at the way that the prevailing shipping routes, passing round the south of the Australian continent, made Queensland the last colony to receive political communications, commercial intelligence and ordinary news from Europe. It therefore wanted to start a steam packet service via the Torres Straits to Singapore. In May 1862, William made an offer through Nicholson to undertake such a monthly steamer service between Singapore and Moreton Bay (Brisbane) for £60,000 per annum.5 However, the government of Queensland was unable to get the other colonial governments to contribute to such a service. The offer was renewed in September 1864, when it seemed that the government of Queensland would receive political and financial support from New South Wales for a Torres Straits line.6 Such a line, William pointed out, would improve Queensland’s links not only with Europe but also with Asia, and ‘a direct communication to and from Calcutta would facilitate the introduction of coolie labourers to the Colony, where their services are so much required’.7 On this occasion, however, the subsidy requested was only £40,000 per annum – because on part of the Singapore-to-Brisbane route the mails would be carried by the vessels of yet another firm, under the same direction as BI, which would commence contract services in the Indonesian archipelago on 1 January 1866. Between his 1862 and 1864 bids, William had discovered a way to get another colonial government to contribute to the costs of developing steamship connections between Calcutta and Brisbane. The Netherlands Indies became his stepping-stone to the east coast of Australia.

3

W. Mackinnon to W. Hammill, 4 March 1858, MP Misc. Commercial File 60. Nicholson, a Londoner, was a medical graduate of Edinburgh University, and had a distinguished career in New South Wales, in politics and as a provost of the University of Sydney, before becoming involved in the affairs of Queensland. 5 W. Mackinnon to Sir Charles Nicholson, 3 May 1862, MP Misc. Commercial File 58. 6 Sir John Young, Governor, New South Wales, to Colonial Office, 21 Sept. and 21 Nov. 1864, CO 201/531. 7 W. Mackinnon to Chief Secretary to Government of Queensland, 24 September 1864, BIS/6/1; also in BISN Co Directors’ Minutes, 12 Dec. 1864, BIS/1/2. 4

71

ENTERPRISING SCOTS

The government of the Netherlands Indies, like the government of British India, wanted to harness the power of the steamship to its authority in the island of Java and on various scattered possessions in the so-called Outer Islands of the Indonesian archipelago. Since 1852 it had contracted with a Dutch shipowner, Cores De Vries, for an official steam-packet service between Batavia (modern Jakarta) and Singapore, linking with the European mail steamers there, and from Batavia to the principal ports in Dutch possession in the wider Indonesian archipelago. The arrangements were different from those in British India, where there were a series of separate postal contracts each based on the delivery of mails within specified periods on specified routes. Instead, the government of the Netherlands Indies offered a single contract, paying a general subsidy for the conduct of steamship services on specified routes over which the mails would be carried free, and official passengers and freight would be conveyed at agreed rates. Despite differences in methods, the aims of government policy in the Netherlands Indies were similar to those in British India. If anything – given that the Dutch ruled over a straggle of large and small islands – efficient coastal and inter-island communications were even more essential than they were to the authorities of British India. However, relations between the Dutch colonial administration and its steam-packet contractor were strained. The service provided by Cores de Vries, from a base in Surabaya on the northeastern coast of Java, was regarded as inefficient and expensive. The government in Batavia was disappointed that de Vries was the only bidder for a contract which it eventually, and very reluctantly, agreed to give him for the years 1861–65. His dominance reflected that fact that steamshipping in the Indonesian archipelago was even less developed, and more dependent on official support, than in the waters surrounding the Indian sub-continent, and there were few local rivals hovering in the wings. However, the Netherlands Indies government was determined to attract new capital and enterprise into coastal and inter-island steamshipping, and wanted to break the stranglehold of Cores de Vries if it could. To these ends, it went out to public tender in 1863, with a contract for a new official steam-packet service for the ten years from 1866 to 1875. Two bids were received by the due date of 21 July 1863 – one was from the firm of Van Vlissingen-Dudok van Heel of Amsterdam and the other from Henry Oliver Robinson, a civil engineer from London. What Robinson was doing in Java at that time is not clear; nor how he came to submit a bid which, in its fine margin, seemed to indicate a prior knowledge of his competitor’s bid. Nevertheless, despite the extreme narrowness of the winning tender, and despite protests in both the Netherlands Indies and in Holland about such an important contract going to a foreigner, Robinson was awarded the contract. The government of the Netherlands Indies regarded the losing bidder, Paul van Vlissingen, as little more than a stalking horse for the discredited Cores de Vries.8 8

J.N.F.M. à Campo, Koninklijke Paketvaart Maatschappij: Stoomvaart en Staatsvorming in de 72

EXTENDING THE SYSTEM, 1862–70

It is doubtful whether, in their haste to ditch Cores de Vries, the governments in Batavia and The Hague enquired closely into Robinson’s ability to perform the contract, for he was apparently a man with little or no shipping experience. Even so, Robinson intended to work the contract himself. In April 1864, he floated in London the Netherlands India Steam Navigation Company. The company had a nominal capital of £300,000 and a board of directors that included a retired Rear Admiral, the Dutch Consul-General in London and Richard Martin of the London bank, Martin & Co.9 Robinson was styled ‘managing director’ of the new firm, which proposed to purchase the small fleet of vessels operated by Cores de Vries and add further tonnage to it. However, Robinson’s approach to William Mackinnon about a possible interchange of passengers and cargo with BI at Singapore seems to have sparked William’s interest in the concern. Just how much he knew about the events surrounding Robinson’s contract is uncertain. He may have received information about events in the Netherlands Indies, and introductions to some of the participants, from the British Indian officials who accompanied Lord Elgin on a visit to Batavia in 1862. But whatever the state of his knowledge and contacts, he reacted quickly. Matters came to a head early in June 1864, when Robinson visited Glasgow to look over ships under construction there, and also to discuss with William future relations between their two companies. William, however, responded with a counter-offer – that he and his associates should take over the fledgling firm. On 6 June he and George P. Gunnis (almost certainly acting with support from the City of Glasgow Bank) signed an agreement with Robinson to that effect. An Extraordinary General Meeting of the Netherlands India S.N. Co on 20 July cleared the way for the take-over by removing most of the original directors and replacing them with David Begg, William P. Andrew and Sir Frederick Arthur from London, and William Mackinnon, George Ponton Gunnis and Robert Salmond from Glasgow.10 By April 1865, the process was complete. The last of the original directors, including Robinson, had retired, and the Netherlands India S.N.Co now had a board with virtually the same composition as BI’s board of directors. Of the 12,000 shares issued, the Mackinnon and Hall families held 10.1 per cent, and other residents of the West of Scotland 27.8 per cent, with the majority of the shares, including Robinson’s, being held in London. In fact, the names on the new firm’s share

Indonesische Archipel, 1888–1914 (Hilversum, 1992), pp. 40–9; J.A. Kok, De Scheepvaartbeschimering in Nederland en in Nederlandsch-Indië (Leiden, 1931), pp. 138–43; M.G. de Boer, ‘De Geschiedenis: Opkomst der Stoomvaart in den Indischen Archipel’, in Een Halve Eeuw Paketvaart, 1891–1941 (Amsterdam, 1941), pp. 15–19. 9 Dissolved Companies Files, BT31/938/1212C. 10 John Stephen’s Diary, 2 and 24 June 1864, University of Glasgow Archives, UGD4/7/3; Resolutions of EGM, 20 July 1864, Netherlands India S.N. Co, BT31/938/1212C; C.H. Lovell to W. Mackinnon, 11 June 1864, MP India File 13; J.M. Hall to W. Mackinnon, 28 June and 1 Aug. 1864, MP Private Letters Files 31–2. 73

ENTERPRISING SCOTS

register were practically identical to those on the British India S.N.Co’s list, save for the presence of Robinson with his 2,000 vendor’s shares.11 BI’s new ‘sister’ firm could not be in every respect an exact copy of the original. For one thing, the steam-packet contract required that the steamships employed in the Indonesian archipelago should be registered in Holland or the Dutch East Indies, should fly the Dutch flag and should be commanded by Dutch nationals. To find ways to meet such conditions, William Mackinnon led a party of the directors to Holland in the summer of 1865. Discussions there led to a new paper company being set up in The Hague, in which those holding equity in the London-registered company automatically became share-holders. The creation of the Nederlandsch Indische Stoomvaart Maatschappij (NISM) gave William and his associates an interface with the Dutch government, and created the impression among the public in Holland and the Dutch East Indies that the steam-packet contract was being carried out by a Dutch firm. William recruited a Dutch national named William Poolman to be NISM’s Resident Director in The Hague. Poolman had been a merchant in Java and participated in railway promotion there, before returning to Holland to establish the Netherlands India Trade Bank of Amsterdam and the Netherlands India Railway Company.12 His knowledge of Dutch officialdom, as well as colonial commerce, would be invaluable to NISM. William’s introduction to Poolman almost certainly came through Alexander Fraser, who became NISM’s manager or chief-agent in Batavia. Because the Mackinnons and Halls had no merchant house of their own in the Netherlands Indies, the arrangement whereby Mackinnon Mackenzie & Co acted as BI’s managing agents in India, in return for a commission on its steamer earnings, could not be replicated in Batavia. Instead, William had to seek out a firm or individual outside the inner family circle to play this important role. He was fortunate to secure the services of Alexander Fraser, one of a number of expatriate Scots to be found within the British mercantile community along the Straits of Malacca and the Sunda Straits. Alexander Fraser was a partner in the firm of Maclaine Watson & Co., which had been set up in Batavia in the early 1820s by two young Scots, Gillean Maclaine and Edward Watson.13 At some point, Fraser had also set up houses of his own – Fraser Eaton & Co. in Surabaya, on the northern-eastern coast of Java, and A.C Fraser & Co. in Rotterdam. As well as having links to the trade of the British Straits Settlements, he was a prominent member of the Chamber of Commerce in Batavia, was married into a Dutch family, and had a wide circle

11

BT31/938/1212C. Nieuw Nederlandsch Biografisch Woordenboek, X (1937), 748–9. 13 Other members of his family, James and Lewis Fraser, were dominant figures in the corresponding house of Maclaine Fraser & Co in Singapore, and had their own firm in London, under the name J. & L. Fraser & Co. 12

74

EXTENDING THE SYSTEM, 1862–70

of Dutch contacts, both mercantile and official.14 Fraser was appointed NISM’s chief-agent in Batavia with effect from 1 January 1866, on a salary rather than commission, and set about recruiting agents in the various ports to be served by the company. The agency at Surabaya went to his own firm, Fraser Eaton & Co., and at Semarang, also on the northern Java coast, it went to yet another Scottish expatriate house, MacNeill & Co. The networking ties between the Scottish interests on Java and the Mackinnon-Hall family interests were also strengthened by Fraser personally and Maclaine Watson & Co as a firm becoming share-holders in the new concern, and by NISM’s purchase of Maclaine Watson’s own steamship in 1867. Fraser and Maclaine Watson in Indonesia stood in relation to the inner family core of the Mackinnon business network in much the same way as the Fleming brothers and W. Nicol & Co in western India. Unlike BI, whose secretary was based in Glasgow and operated under the wing of W. Mackinnon & Co, NISM’s head office was located in London. This was partly for reasons of proximity to The Hague and partly because William’s former preference for conducting business in Glasgow was giving way to an acceptance of the need to work in the metropolis. The company secretary, R.H. Evans, worked out of various London offices until 1867, when he moved permanently to 13 Austin Friars, to share offices with another Mackinnon family firm, Gray Dawes & Co. From there Evans assisted William Mackinnon in securing for Alexander Fraser the means to commence activities in the Indonesian archipelago. During 1865 and 1866, a small fleet of steamers was hastily assembled and despatched to Batavia. Through Poolman, William secured a special dispensation from the payment of a duty on 4 per cent on the import of ships built outside the Dutch empire, and ensured that the Dutch government and press were apprised of the quality and character of the Scottish-built steamers to be sent out to Batavia. By the end of the first year of operations, NISM had assembled a fleet of eight steamships totalling 4,109 Dutch tons (or 3,699 English tons).15 From Calcutta, Mackinnon Mackenzie & Co. arranged the transfer of two spare steamers to NISM, and Peter Mackinnon, William’s ‘nephew’, went down to Batavia to advise Fraser and his associates on Mackinnon Mackenzie’s fleet management and accounting methods. William Mackinnon acquired the steam-packet contract in the Dutch East Indies mainly for the opportunity it presented to place his steamship interests astride a major sea route between India and Australia. Nothing having come of his own direct approaches to the Queensland government for a mail

14 Some insight into Fraser’s background and contacts can be obtained from the ‘Memo by A. Fraser on the List of Applicants for the Post of Resident Director at the Hague, 11 Oct. 1884’, MP Private Letters File 21; for Maclaine Fraser & Co., see W. Makepeace et al., One Hundred Years of Singapore (London, 1921), Vol. 2, p. 207. 15 Neerlands Vloot en Rederijen (Rotterdam), 1866.

75

ENTERPRISING SCOTS

contract, Alexander Fraser would become his agent in pursuit of that goal. Fraser in Batavia was located strategically between the British colonies in Australia and the British possessions in Southeast Asia and eastern India, and potentially had access to financial support from the government of the Netherlands Indies. At first it seemed that the gamble might pay off. A decision by the British Treasury to terminate P&O’s contract for the Australian mails via Suez and Galle with effect from 12 February 1866, and to go out to further public tender,16 threw open the whole question of subsidised British steamshipping to Australia. Meanwhile the colonial ministry in Holland, attracted by the prospect of markets in Australia for Java’s coffee, sugar and other tropical commodities, let it be known that it was prepared to authorise the allocation of Fl.100,000 to support the development of a line between Java and Queensland. William Mackinnon in turn indicated through Poolman that BI/NISM would be interested in coming to terms. (He was particularly anxious to keep any such Dutch subsidy out of the hands of a competitor Dutch firm that was giving NISM difficulties in the Netherlands Indies).17 Nothing, however, came of these various initiatives. The impecunity of the Queensland government and disagreements between the various Australian colonies over the appropriate strategy for mailship communications (most wanted a speedier and more direct mail service than could be obtained via Batavia and Singapore) dragged out the proceedings. The government of the Netherlands Indies and William Mackinnon were both left dangling in limbo. Three years later, in 1869, there was another flurry of activity, involving expressions of support from the Chamber of Commerce and Industry of Batavia as well as from the Legislative Council of Queensland, for the introduction of a mail service between Singapore and Australia. Fraser corresponded with a shipping firm in Australia over a possible private arrangement with the Queensland government, and he pressed the government of the Netherlands Indies to renew the funding for trial voyages between Java and Queensland which had been allowed to lapse in its budget. It was intended that any contract obtained, from either Brisbane or Batavia, would be handed over to the British India S.N. Co. This reflected the prevailing belief within the Mackinnon-Hall partnerships that NISM was not yet strong enough to do more than act in a supporting role to the ambitions of BI’s chairman and board.18 16 Treasury to Colonial Office, 16 Nov. 1864, CO 201/532/3, and Sir John Gray (New South Wales) to Colonial Office, 14 Feb. 1865, CO 201/533. 17 Evans to W. Mackinnon, 24 Aug. and 4 Oct. 1866, M.P. Private Letters File 18; Koloniaal Verslag, 1866, p. 322; P. Macnaughton to Mackinnon Mackenzie & Co, 14 Oct. 1869, BIS/6/9; P. Mackinnon to W. Mackinnon 23 September 1866, MP City of Glasgow Bank File 13; à Campo, Koninklijke Paketvaart Maatschaapij, pp. 317–18. 18 H.H. Eldred to A. Fraser, 7 Aug. 1869, P. Macnaughton to Mackinnon Mackenzie & Co, 14 Oct. 1869, and Eldred to Fraser (telegram), 28 Dec. 1869, BIS/6/9; Belmore,

76

EXTENDING THE SYSTEM, 1862–70

NISM was having difficulties in establishing itself within the Indonesian archipelago. The contract obliged NISM to carry out the following services: (1) twice-monthly between Batavia and Singapore, via the island ports of Mentok and Riau, with a feeder line between Mentok and Palembang in south-east Sumatra; (2) four times per month along the northern coast of Java, linking Batavia to Semarang and Surabaya; (3) a once a month round-trip from Surabaya to the principal ports in the Celebes (Sulawesi) and Moluccas (Surabaya-Makassar-Banda-AmbonBuru-Ternate-Manado-Surabaya; (4) monthly between Batavia and the ports of Pontianak and Singkawang on the western coast of Sumatra; (5) twice-monthly between Batavia and the ports of Benkulu and Padang on the west coast of Sumatra; and (6) once a month between Surabaya, the island of Bawean and Banjarmasin on the south coast of Borneo. The services were substantially the same as those carried out by Cores de Vries between 1861 and 1865. But there was to be a greater frequency on some of the routes, and the subsidy payment was some 40 per cent less than he received (Fl.293,827 as against Fl.500,000). The tariffs for government passengers and goods had also been reduced by 20 per cent.19 Taking on such a contract would have been a challenge for any new enterprise, and there were all kinds of practical problems to be overcome. As in India, the fleet effectively worked out of two ports, Batavia and Surabaya, and had to be managed and maintained in both locations. To help oversee these operations, Fraser recruited Samuel van Hulstyn, a Dutchman who operated sailing ships out of both Surabaya and Batavia, as NISM’s Marine Superintendent (and to deputise for Fraser in the latter’s absence).20 There were also the same kinds of difficulties of operating coasting steamers as those experienced by BI in India – tropical storms, inadequate harbours, sands and shallows. But NISM’s situation was further complicated by the fact that it faced a nagging competition. By failing to adopt Robinson’s intended strategy of buying-out the fleet of Cores de Vries, and any goodwill which went with it, and by deciding instead to equip NISM with new Scottish-built vessels, William Mackinnon left the way open to competition. When Cores de Vries

Governor, New South Wales, to Colonial Office, 8 Sept. 1869, CO 201/552; Koloniaal Verslag, 1870, p. 459; E.S. Dawes to G. Mackenzie, 19 Nov. 1869, Dawes Letterbook, 1868–7. 19 Koloniaal Verslag, 1863, p. 102; Kok, De Scheepvaartbeschimering, pp. 143–4. 20 Van Hulstyn’s firms were S. van Hulstyn & Adams & Co of Surabaya and P. Landberg & Zoon & S. van Hulstyn of Batavia (Neerlands Vloot en Reederijen). 77

INDO-CHINA

PHILIPPINES

10ºN 40 40º

SOUTH CHINA SEA

PAC I F I C OCEAN

CELEBES SEA Menado

Singapore Singkawang

RIAU

Ternate

BORNEO

Equator

Pontianak

Padang

0ºº 0

SUMATRA Mentok

CELEBES

MOLUCCAS

Banjarmasin

Palembang Benkulu

BURU

Ambon

JAVA SEA BAWEAN

BANDA Makassar

BANDA SEA

Batavia Semarang Surabaya

INDIAN OCEAN

FLORES SEA

JAVA TIMOR

10ºS 20º 20

AUSTRALIA

250 miles 100ºE 100º 100

110ºE 100º 100

Map 3 Netherlands India S.N. Co’s lines, 1870

120ºE 100º 100

140º 140130ºE

EXTENDING THE SYSTEM, 1862–70

died in 1865, six of his steamers (roughly half of his former fleet) were acquired from his executors by the firm of Besier & Jonkheim of Rotterdam and Surabaya. Behind this relatively small concern stood Fop Smit, the scion of a powerful Rotterdam shipping family. Besier & Jonkheim then conducted a vigorous competition with NISM for private passenger and cargo traffic on the most lucrative routes, between Batavia and Singapore, on the line to Makasser, and along the northern coast of Java. The result was that, although NISM received a growing volume of government business, Besier & Johnkheim undercut it in attracting the equally important private traffic. NISM operated at a loss in 1866 and 1867, and barely broke even in 1868. Such was the extent of the company’s difficulties that the directors not only waived their own fees for these years but were obliged in 1868 to cut Fraser’s salary and the commissions paid to the agents in Semarang and Surabaya.21 Time and the government contract were on the side of the NISM, whose steamers were larger, more modern and more efficient than those in Besier & Jonkheim’s small fleet. However, William Mackinnon and the Board in London were too impatient to wait for Besier & Jonkheim to abandon their opposition, and decided to buy them out. This they did with the purchase of Besier & Jonkheim’s five remaining vessels in a deal involving cash of £64,000, the sum at which William valued the opposition steamers, plus shares in NISM.22 With the opposition out of the way, the company was able to pay it first dividend – a modest 5 per cent in 1869 – but buying-out the opposition was an expensive proposition for NISM. It needed to enlarge its capital (which rose from an initial £38,918 in 1865 to £201,645 by 1869–70) through calls on the original shareholders and the issue of some 1,151 new shares. Most of the latter went to people in the Netherlands and Java who had been bought out in the deal with Besier & Jonkheim. In return, the company acquired some goodwill and support in Dutch shipping and commercial circles – and five small elderly ships. The acquisition of the Netherlands India S.N. Co was an act of sheer opportunism by William Mackinnon. It might assist him in his goal of developing an India–Australia steam line or prove a distraction from that long-running ambition. In either case, it meant a deeper involvement with commerce and shipping in the Indonesian archipelago than he or his family partners had ever envisaged. William’s hopes – indeed passion – for a

21

à Campo, Koninklijke Paketvaart Maatschappij, p. 50; Memo on the NISM (n.d.), Algemeen Rijksarchief, The Hague (hereafter ARA)-II KPM Archief, 1/11; S. van Hulstyn to W. Mackinnon, 5 June 1868, and enclosures, A. Fraser to Van Hulstyn, 27 April 1868, and Van Hulstyn to Fraser, 5 June 1868, MP India File 7. 22 Sir William Dunbar to W. Mackinnon, 8, 10 and 20 April 1867, MP City of Glasgow Bank File 2. Although the size of the share element in the purchase price is unknown, it may be noted that the Smit family acquired 786 NISM shares with £15.00 paid and worth £11,790 (or roughly 6% of the total share issue of 1870) for its trouble in supporting Besier & Jonkheim, while the latter firm received only about 131 shares (BT31/938/1212C). 79

ENTERPRISING SCOTS

Calcutta to Sydney line via the Straits of Malacca, the Java Sea and the Torres Straits had something in common with his friend William Andrew’s obsession with a steam route from Karachi via the Persian Gulf and Mesopotamia to the Mediterranean. Both contained more than a hint of daydreaming – an unwillingness to accept the geographic, commercial, and political realities that made the other routes (to India via Suez and to Australia around Cape Leeuwin in Western Australia) the favoured ones, and a wish somehow to find the key to unlocking the gates to their ‘alternative’ highways. William and his firms, of course, were already involved in Andrew’s and Frere’s schemes for the Gulf and Mespototamia, and this connection would have a bearing on attempts to extend BI’s services westwards of the Indian subcontinent. Along the western flanks of the Indian Ocean, conditions were less conducive for the development of ‘country’ steamship lines. Indian merchants and owners of sailing vessels carried on trade with a range of countries, mainly Arab and Muslim, whose rulers possessed neither the means nor the inclination to subsidise a steam service. To the far south-west of the region there beckoned the British colonies of Natal and the Cape of Good Hope, which might conceivably be linked to British India by steamship – but the distances were long and the costs high. A possible stepping-stone towards South Africa might be found in the shipping trades from Calcutta to Mauritius, which took Indian labourers, rice and other cereals to that sugarproducing island. However, the colonial government of British-ruled Mauritius was too weak and poor to pay for a steam-packet service to India, as Mackinnon Mackenzie & Co discovered when it tried to interest it in such a proposition in 1869–70.23 An additional complication was the fact that the P&O stood astride the main sea lanes of the Arabian Sea – from Suez and Aden to Bombay, and from Bombay to Galle and on to Calcutta, Singapore and Hong Kong – and in developing any new shipping business in those waters, the Mackinnons and Halls needed to tread carefully. P&O’s shadow first fell across the Mackinnon group in connection with trade between western India and China – which involved exports from Bombay of opium, raw cotton, ivory and precious gems, and imports into Bombay of silk goods, raw silk and tea. In 1864, news surfaced that the Parsiowned China Merchant S.N. Co, which competed with P&O for these fine freights to and from China, was in poor shape and might be wound up. Wm. Nicol & Co made enquiries to see if BI might want to take over the business. They were discouraged, however, by the managing agents in Calcutta. As Jamie Hall pointed out to William, ‘to take up that trade would be a fair offer of a fight to the P&O Co. I don’t know whether you feel as

23 P. Macnaughton to Mackinnon Mackenzie 7 Co, 5 Aug. and 7 Oct. 1869, BIS/6/9; Mackinnon Mackenzie & Co to Secretary, Glasgow, 10 Sept., 26 Oct. and 9 Nov. 1869, BIS/7/72, and 11 Jan. 1870, BIS/6/73.

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strong as I do on this point but I regard anything like an opposition from the P&O Co in any of our lines as the greatest we have to fear.’24 The same reluctance to challenge P&O in its established long-distance routes and trades, coupled with a desire to have P&O reciprocally recognise BI’s preeminence in India’s coasting trades, also surfaced when an arrangement was made for BI to inter-change traffic with Messageries Impériales at Galle in Ceylon. A formal agreement between the two companies was delayed because P&O did not like the prospect that BI steamers would take opium down to Galle from Bombay, and thereby help Messageries to compete for one of P&O’s most valuable cargoes. P&O had transformed itself into the main carrier of Malwa opium from western India and its profits depended substantially on this very high value cargo.25 Dawes commented that: ‘Mackinnon is very thick with the P&O people and funks doing anything that would at all appear like throwing down the gauntlet of opposition to them. . . . Perhaps he is right. The P&O Company with their immense reserve & large resources are very powerful & opposition from them would be a very serious matter.’26 The arrangement eventually went ahead, but to the satisfaction of neither party. BI, yielding to P&O pressure, restricted opium shipments from Bombay to Galle, while the Messageries steamers frequently had too little cargo space for the raw cotton and other goods which BI brought to Galle for transhipment. The relative strengths of BI and P&O were tested again in July–August 1867, when the Post Office in London called for tenders for the mail service from Suez to Bombay. William Mackinnon and James Hall offered to refrain from bidding against P&O for the contract, if P&O would in turn abandon its Galle-Madras-Calcutta line and exchange goods and passengers with BI steamers at Galle and Singapore. The effect would be to transform BI’s Calcutta-Indian Coast and Calcutta-Singapore services into feeder lines for P&O’s Bombay-China services. P&O, however, refused to abandon its line to Calcutta or to enter into any formal commitment to avoid competing with BI’s coastal services. BI’s Board concluded that P&O held all the cards and that it would be wise to refrain from bidding for the Suez-Bombay mails. However, out of BI’s attempt to pose as a potential rival to P&O some benefit was obtained. A through-traffic agreement was entered into between the two companies which, with effect from 1 March 1868, harmonised the transfer of passengers and freight between their respective shallow-water and deep-sea spheres of activity. This constituted recognition by the two firms that a working relationship, respecting each other’s areas of expertise and influence,

24

J.M. Hall to W. Mackinnon, 22 June 1864, MP Private Letters File 32. F. Harcourt, ‘Black Gold: P&O and the Opium Trade’, 1847–1914’, International Journal of Maritime History, 6 (1994), pp. 1–83. 26 E.S. Dawes to W. Nicol (Karachi), 3 Oct. 1864, Dawes Letterbook, 1860–5. 25

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was preferable to any direct competition in Asian waters, and the two settled down to a long and relatively harmonious relationship.27 There was, however, another dimension to the modus vivendi gradually worked out between BI and P&O. Although the latter’s presence blocked BI from any direct Bombay-Aden-Suez line across the Arabian Sea, it left the way clear for a more indirect, or coasting, line which would interchange traffic with P&O steamers at Aden. This proposed ‘Arabian’ line would link western India and the Persian Gulf with southern Arabia and the Red Sea. It would proceed from Bombay to Muscat, and from there make calls at the southern ports of the Arabian peninsula as far as Aden. From Aden it would pass through the Red Sea to Suez, with probable calls at Jeddah as well as Suakin or Massawa on the African shore. William Mackinnon signalled an interest such a line to the Government of India as early as 1866, with support from Frere’s government in Bombay.28 Both Frere and William Mackinnon hoped that the commercial stimulus given by BI steamers to trade on the Indian coasts could be replicated around the shores of the Arabian peninsula, where the Governor of Bombay exercised an informal authority. Although neither the Government of India nor the India Office were willing to offer a mail subsidy for the route, William persisted with the scheme. He confided to a friend that ‘I have taken a great fancy for this line because it really would bring these old countries once more into living contact with the living world, and open up a highway for every good and civilising influence.’29 The proposed line would inter-connect (at either Muscat or Karachi) with BI’s Bombay-Gulf service to secure the transfer of passengers and cargo from the Gulf, because the steamers employed in the pilgrim trade had shown that there was at least a seasonal passenger traffic between the Persian Gulf and the Red Sea, and for a potentially high-value cargo there was opium from Persia (Iran). Just as Indian opium complicated BI’s relations with P&O at Bombay, so Persian opium provided BI with a lever to improve that relationship. William Mackinnon had moral qualms about the opium trade, and refused to participate in it directly,30 but by the mid 1860s he had come to accept the necessity of shipping opium owned by other people on BI steamers. The transport of

27

BISN Co Directors’ Minutes, 15 and 24 Aug. 1867, BIS/1/2; P. Macnaughton to Mackinnon Mackenzie & Co, 17 Feb. and 6 April 1868, BIS/6/6. 28 From Bombay (General Department), 28 April 1866, Confidential No 53 of 1866, and from Gov. General (Post Office), 16 Aug. 1866, Confidential No 86 of 1866, Abstracts from India, IOLR/P&S/19. 29 W. Mackinnon to J. Macdonald, 29 Dec.1866, MP Private Letters File 134. 30 He once told Jamie Hall that if Mackinnon Mackenzie & Co ever earned any commission on opium it should not be credited to his (William’s) account, adding that ‘I have great doubts about it, although I would be sorry to say another person was doing wrong in acting differently.’ (W. Mackinnon to J.M. Hall, 23 Dec. 1858, MP Misc. Commercial File 58). 82

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Persian opium westwards to Aden, for transfer to P&O steamships proceeding to Europe and China, was consequently a central plank of the ‘Arabian line’ scheme. During the 1860s, Persia had emerged as a significant exporter of ‘the drug’, its exports doubling in volume between 1860 and 1869. Most of this trade by-passed Bombay, where there was a substantial tax on imported opium, and it either went overland through Central Asia to China or by sailing ship to Batavia for re-export to China and the countries of Southeast Asia.31 However, the voyages of BI steamers during the pilgrim seasons of 1869 and 1870 opened up another route for Persian opium to the East. They transported chests of ‘the drug’ for transhipment to P&O and Messageries Impériales steamers at Aden, from where it was shipped directly to Southeast and East Asia, without being landed in Bombay. Some of the capital employed in this rerouting of Persian opium belonged to BI’s agents in the Gulf ports.32 There remained the matter of a mail contract for a new line, without which William was reluctant to proceed. Here Frere’s influence was brought to bear. Throughout his period as Governor of Bombay (1862–7), Frere consistently supported BI’s proposals for more frequent sailings or improved arrangements on its existing contract lines. William had a private channel of communication to Frere through his brother-in-law, Sir Frederick Arthur, and kept him abreast of the Board’s intentions. The local BI management in Bombay also took pains to keep the Governor informed.33 However, even Frere’s support was insufficient to secure the large mail subsidy William asked for an ‘Arabian line’ in 1866 – principally because there were counter-forces in the Supreme Council in Calcutta pressing the Government of India to withdraw from the subsidising of steamshipping. In 1867, Frere left Bombay for Britain, taking up a seat on the Secretary-of-State’s India Council in London. William proposed to offer him a place on the BI Board, but was persuaded not to do so on the grounds that Frere could not with propriety

31 Memorandum on Persian Gulf by G.C. [Sir George Clerk], 17 July 1868, Political and Secret Memoranda: Zanzibar, Muscat & Persia, 1868, IOLR L/P&S/18/B2; Memorandum by Ronald Thompson, 6 May 1869, in J.A. Saldana, Précis of Commerce and Communication in the Persian Gulf, 1801–1905 (Calcutta, 1906), p. 63. 32 Saldana, Précis of Commerce, p. 118; Mackinnon Mackenzie & Co to Secretary, Glasgow, 4 May 1869, BIS/6/72; P. Macnaughton to Mackinnon Mackenzie & Co, 8 July 1869, BIS/6/9. 33 Edwyn Dawes records how, in April 1864, he arranged for the Frere and his party to join a small group from W. Nicol & Co for a champagne breakfast and cruise on the Arabia which was newly-arrived from the Clyde: ‘The Governor was profuse in his compliments upon the ship & her arrangements, & carefully looked into everything. . . . I had a big chat with him on Company affairs generally and was surprised to find him so well posted up in them. He evidently has the interests of the Company at heart. His notebook more than once came out to note down points in which the Government interests & our own might be served.’ (E.S. Dawes to W. Mackinnon, 13 April 1864, Dawes Letterbook, 1860–5.)

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combine a BI directorship with membership of the India Council.34 Nevertheless, Frere continued to express his views within governing circles about the importance of coastal steamshipping as a vehicle for maintaining and extending British Indian influence along the western shores of the Indian Ocean, more especially in the Arabian peninsula. In a memorandum for the Secretary of State for India in July 1868, he painted a picture of the coastal steamer as a sort of substitute for the patrolling frigate, providing early intelligence of illegal activities and/or political disorder. It would also be a means of stimulating employment for maritime Arabs who otherwise might become involved in piracy. His concept was that of the subsidised steamship line as the backbone of a policy of ‘legitimate commerce’ in Arabia, which would offer alternative occupations to those which the Royal Navy was trying to suppress. This would come about through the growth of trade in goods and commodities made possible by more regular shipping services and an inflow of new capital and enterprise, mainly from India. He had ‘no doubt’, he wrote, ‘that the steamers now regularly running from Bombay to Busra have greatly conduced to discourage a revival of piracy since the Indian naval squadron was withdrawn; and I believe that the extension and greater frequency of steamer traffic along the coasts of Arabia and East Africa would tend greatly to check slavery, as well as piracy.’35 In bracketing the Arab slave trade from East African with piracy on Arabian shores, Frere went beyond William Mackinnon’s immediate needs for a political justification for a subsidised steamship line between the Persian Gulf and the Red Sea. Relations between India, Muscat-Oman and Zanzibar had long accustomed British Indian officials to think of the Arab-Swahili coast of East Africa as a political and commercial extension of Arabia. However, the main reason for envisaging the introduction of steamship lines into the East African maritime trades was that Frere – and through him William Mackinnon – was beginning to take a keen interest in geo-political issues surrounding the East African slave trade. Through reports from the Government of Bombay’s Residents in Zanzibar, Pelly and Playfair, and more especially through the influence of his friend, David Livingstone, who twice stayed with him in Bombay on the way to or from Africa, Frere became a committed opponent of the maritime slave trade. He was therefore a proponent of a vigorously interventionist policy in East Africa as well as in the Gulf.36 In 1867 a proposal surfaced that there should be a mail line between Bombay and Zanzibar, as a means of enabling British merchants to compete with Americans, Germans and Indians in the trade of East Africa.

34 J.M. Hall to W. Mackinnon, 23 Jan. 1868, MP Private Letters File 35; Sir Frederick Arthur to W. Mackinnon, 6 Feb. 1868, MP Misc. Personal File 1. 35 Memorandum on the Draft of Despatches Regarding the Affairs of Muscat and Zanzibar by H.E.B. Frere, addendum of 20 July 1868, IOLR L/P&S/18/B2. 36 J. Martineau, The Life of Sir Bartle Frere (London, 1908), Vol. 1, p. 504.

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The Government of Bombay approached W. Nicol & Co to enquire about BI’s attitude towards a mail contract for such a line. W. Nicol & Co seem to have been favourably disposed, because they already had a foot in the trade between Bombay and Zanzibar.37 However, William and the BI board were rather less impressed with the prospect . Bombay’s total trade with East Africa in 1865–6 was only 49 crores of rupees – as compared with 236 crores for its trade with the Persian Gulf – and they declined to become involved with Indian trade to and from East Africa.38 As W. Nicol & Co subsequently pointed out, ‘such a line would not be remunerative, for very little is exported to Zanzibar from India, the trade being to a large extent in the hands of the Americans, and what is exported from Zanzibar to India, with the exception of ivory, is of a rough character . . . which cannot afford to pay steam freight’.39 What Frere and William Mackinnon had in mind at this point was not a direct steamship line between Bombay and Zanzibar but rather a line between the Arabian peninsula and East Africa, as an extension of, or intersecting with, William’s ‘Arabian’ line linking the Persian Gulf and the Red Sea. The maritime slave trade of the western Indian Ocean was principally a matter of connections between the Omani-ruled states of Muscat-Oman and Zanzibar. The independently minded sea-faring communities of the creeks and coves of the Arabian Peninsula had come to be seen as a menace by British officials. In using their dhows to support various factions within Arab politics, to prey on passing merchantmen, or to join the great migration that swept south every year in the monsoon winds to buy men and women in the slave markets of Zanzibar, they were a threat to the ‘good order’ the British were trying to impose in the region.40 Fostering ‘legitimate trade’ in East African waters was therefore part of the same task of fostering it in and around the Arabian Peninsula. BI’s steamers would promote new opportunities for trade in goods 37

In 1863 or 1864 they had set up in Zanzibar, with a capital of £70,000, a retired Indian Navy captain named H.A. Fraser. In addition to representing Smith Fleming & Co and W. Nicol & Co in the trade of the island, Fraser had started up a sugar plantation and mill at a place called Kokotoni some twenty miles from Zanzibar town. (R. Coupland, The Exploitation of East Africa, 1856–1890 (London, 1939), pp. 178–80; Memorandum by Lt.Col. Playfair on the Trade and Prospects of Zanzibar, 3 October 1864, enclosure in Political Despatch to Bombay, no. 31, 16 Oct. 1865, India Office, Selections from Despatches, IOLR V/6.) 38 British India S.N. Co Directors’ Minutes, 28 Aug. 1867, BIS/1/2; Report on the External Commerce of the Presidency of Bombay for the Year 1865–66 (Bombay, 1866). 39 Wm. Nicol & Co., Agents for B.I., to Chief Secretary of Government, Bombay, 1871 (no. 6 of April 1873), India, Proceedings, Separate Revenue, Vol. 667, IOLR. 40 See, for example, Frere’s dismissal of Bahrein as ‘little better than a nest of pirates and slave-dealers’. (Presidential address to Section E (Geography), 39th Meeting of the British association for the Advancement of Science, Exeter, 1869, quoted in F.V. Emery, ‘Geography and Imperialism: The Role of Sir Bartle Frere’, The Geographic Journal, 150 (1984), p. 346.) 85

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and commodities while providing logistical support for the efforts of the British Indian authorities to suppress slave dealing and ‘piracy’ by political means. However, in their emerging concern with East Africa, Frere and William Mackinnon may also have responding to changes that were partly of their own making. Prior to the entry of BI steamers into the Persian Gulf, the port of Muscat, commanding the Gulf of Oman and the Strait of Hormuz, had been the great entrepôt for Gulf trade, handing roughly one half of all commerce and shipping entering or leaving the Persian Gulf. The introduction of BI’s line along the northern shores of the Gulf, however, promoted direct trade between India and the ports of Iran and Iraq and undermined Muscat’s entrepôt function – particularly once BI steamers stopped calling there on the way to and from Bombay. From the 1860s, Muscat went into a long-term commercial decline that was checked only briefly, in the mid-1870s.41 It is possible that the expansion in the East Africa slave trade which European observers noted in the 1860s was connected to this change in Muscat’s trading position – that it resulted from Omani merchants and shipowners diverting capital and enterprise from the trades in the Gulf, where they were losing out to BI steamers, to trades in East African waters that were still relatively free from British commercial and naval presence. If so, the Omani enjoyed only a brief respite – for Frere, Mackinnon and the BI steamers followed them there in the early 1870s. ***** Between the late 1850s and the late 1860s the fortunes and prospects of the Mackinnons and Halls as shipowners had been transformed almost out of all recognition. Starting in 1856 with a small stake in a tiny steamship company, undertaken as a speculative aside from their investments in sailing ships, they found themselves by the end of the 1860s controlling the destinies of two steamship companies, BI and NISM, which together owned some forty vessels and were worth about £640,000. The Mackinnons and Halls had successfully tapped the government financial support so necessary to the conduct of steamship operations in distant waters, where fuel, maintenance and crewing costs were higher than in European or North American conditions. They had done so relatively quietly – through contracts with local, colonial governments rather than the large ‘imperial’ contracts available to the likes of P&O or Messageries Imperiales – and avoided becoming embroiled in the political debates and public agitation which often surrounded the awarding mail contracts in London. Despite the lack of a high public profile, BI and NISM, controlled and managed by the same group of

41

Landen, Oman Since 1856, pp. 109–31; N.R. Dalziel, ‘British Maritime Contacts with the Arabian Gulf and the Gulf of Oman, 1850–1900’ (Ph.D., University of Lancaster, 1989), pp. 248–60. 86

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merchant-shipowners, operated what was the largest network of coast and country steamshipping in Asia. Although the proposed extension of its reach to Australia and southern Africa had stopped well short of the waters of these settlement colonies, the network had an enormous geographic spread. After 1866 it was possible for a traveller, or a bale of cargo, to join a Mackinnon group steamer at Basra at the head of the Persian Gulf and from there to proceed via Bombay and Madras or Calcutta to Singapore, Batavia, and finally to Banda in the Spice Islands of Indonesia. This was a distance roughly equivalent to that covered by P&O steamers between Suez to Hong Kong, but involved many calls at small to medium sized ports and frequent changes of vessel. The efforts of William Mackinnon and his partners to develop this steamship ‘empire’ had been carried along by the broader political trends of the time: by official thinking in British India and in the Dutch East Indies about the need for a role for both the state and private capital in developing maritime transport and communications; by the perceived benefits – military and political as well as commercial – of regular steam connections within and beyond territorial boundaries; and by the grand strategic thinking about imperial communications and defence, and about imposing British influence on weaker neighbours, that came from influential figures like Sir Henry Bartle Frere. In most of their day to day activities for the governments of British India and the Netherlands Indies, the Mackinnon group and its two steamer companies acted as ‘servants of empire’. That is, they provided routine services for and within an established imperial order. Through the connections with Frere, however, BI and its vessels had been drawn into a position of supporting and advancing British authority and influence in the Persian Gulf, thus becoming ‘agents of empire’. By the later 1860s that excursion into ‘informal imperialism’ started to acquire wider horizons. Now southern Arabia, the Arabian and African littorals of the Red Sea, and the long East African coast south of Cape Gardafui came into view as places where BI and its steamers might in the future play the same role of active ‘agents’ of British imperialism.

87

4

Business networking, 1860–70 The creation of the British India S.N. Co and the take-over of the Netherlands India S.N. Co were acts of personal and familial business diversification. The partners in the Mackinnon-Hall merchant houses, together with other members of their families, used their profits from mercantile endeavour, as well as financial credit from sources available to them, to take control of the two steamer companies through minority holdings. Of the three family firms, only Wm. Mackinnon & Co held any equity in the steamship concerns – NISM shares worth £2,750 and representing only 12 per cent of its ‘outside’ investments in 1868. Clearly, then, BI and NISM were not subsidiaries of the Mackinnon-Hall merchant partnerships in the normal sense. Rather they were ‘free-standing companies’, legally and organisationally independent, and lacking ownership by any parent company.1 To concentrate on legal formalities, however, would be to miss the fact that the two incorporated steamship concerns were the products of networking activities which defined their strategic purposes and directions, and that the business network responsible for this was created by the Mackinnon-Hall families and controlled by William Mackinnon. In essence, the steamship companies were affiliates or associates within a larger grouping of commercial and financial interests which controlled and guided their operations. Our understanding of international business diversification processes have been greatly enhanced in recent years by advances in scholarship on two fronts. First came the realisation that what is called ‘foreign direct investment’ (or FDI) was carried out by British capitalism in the nineteenth century by different techniques from those of the large multinational manufacturing concerns which established foreign subsidiaries and affiliates in the twentieth century. The identification of up to thirty British-based ‘investment groups’ engaged in the financing of new enterprises in distant parts of the world, and the discovery that the thousands of ‘free-standing companies’ incorporated in 1

For the concept, and the debate it has provoked among business historians about definitions and purposes, see M. Wilkins, ‘The free-standing company, 1870–1914: an important type of British foreign direct investment’, Economic History Review, 2nd series, 41 (1988), pp. 259–82, and M.Casson, ‘Institutional Diversity in Overseas Enterprise: Explaining the Free-Standing Company’, T.A.B. Corley, ‘Free-Standing Companies, their Financing and Internalisation Theory’, and J.-F. Hennart, ‘Free-Standing Companies and the Internalisation of Markets for Financial Capital’, Business History, 36, No. 4 (1994), pp. 95–132. 88

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Britain as vehicles for international operations were organised into distinctive clusters,2 drew attention to the very large numbers of British firms engaged in overseas direct investment between roughly 1850 and 1930, and to the great diversity of the new enterprises which they established. These studies also to pointed to the fact that merchant houses or trading companies, as well as financial institutions, supplied the active core of such ‘groups’ or ‘clusters’. Many companies incorporated in Britain for business activities overseas ‘were recognised by contemporaries to be the creatures of small groups of entrepreneurs, commonly organised in unincorporated partnerships or loose syndicates, who sustained their controlling position by the weight of personal reputation and patronage, the prestige of their central financial or mercantile firms, the creation of webs of interlocking directorships, or the exaction of long-term agency or management contracts, rather than by large holdings of shares’.3 Such perceptions from historical research in turn overlapped with the work of theorists of organisational behaviour, who began to identify networking as a viable and flexible alternative to bureaucratic structures in the achievement of organisational goals, and of business historians who began to explore networking forms of corporate organisation as alternatives to the managerialist, hierachical structures of big business or to the firms growing through internalising processes designed to reduce external transaction costs.4 Networking, it has become ever more clear, is the key to understanding much of the British business world of the nineteenth and early twentieth centuries, both at home and across the wider globe where British entrepreneurs liberally sowed their subsidiary and affiliate concerns. The shipping industry was one field in which networking was actively pursued. Family-led enterprises in various port cities created networks ‘based on interpersonal knowledge, interdependence, private communication, and reputation based incentives . . . [They] supported transactions in tangible and especially intangible assets, such as knowledge or skills . . . [They] exhibited considerable flexibility in terms of their capacity to mobilise different resources appropriate for specific types of services.’5

2

S. Chapman, ‘British-based investment groups before 1914’, Economic History Review, 2nd series, 38 (1985), pp. 230–51, and Wilkins, ‘The free-standing company.’ 3 C.A. Jones, International Business in the Nineteenth century: The Rise and Fall of a Cosmopolitan Bourgeoisie (Brighton, 1987), p. 17. 4 The seminal work was W.A. Powell, ‘Neither Market nor Hierarchy: Network Forms of Organization’, Research in Organisational Behaviour, 12 (1990), pp. 295–336. Other works extending the theoretical breakthrough include N. Norhia and R.G. Eccles, Networks and Organizations: Structure Form and Action (Boston, 1992), M. Ebers (ed.), The Formation of Inter-Organisational Networks (Oxford, 1997), and M. Casson, Information and Organization: A New Perspective on the Theory of the Firm (Oxford, 1997). 5 G.H. Boyce, Information, Mediation and Institutional Development: The Rise of Large-Scale Entreprise in British Shipping, 1870–1919 (Manchester, 1995). 89

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The Mackinnon-Hall family firms constituted the inner core of such a business or enterprise network, and were becoming significant agencies for diversification processes involving the investment of funds from Britain as well as capital mobilised locally in India. Together the two elements – the controlling private partnerships and their associated limited liability companies – made up the Mackinnon business group. Such business groups were the common organisational forms of British capitalism in Asia and Latin America during the nineteenth and early twentieth centuries. The essential features of the system were ‘the core trading company surrounded by a cluster of non-wholly-owned firms which engaged in repeat transactions with one another. Contracts formed a very important component of the links between the parent and the affiliated firms, but the parent was more than a market provider of consulting, distribution, and financial services, because there were also ties of equity and cross-directorships, and because the contracts were repeatedly renewed.’6 The Mackinnon group, although still in its infancy, already demonstrated many of these characteristics. There was no single parent company – two of the three family mercantile partnerships, the ones in Glasgow and Calcutta, shared that function – but otherwise the crosslinkages of equity holdings, directorships, agency and secretarial contracts, and shared head-office accommodation were all to be found within the warp and weft of its activities. However, in addition to the inner family core – the ‘clan’ – and the body of its affiliated firms, there was also a third element, one which transformed the group into an enterprise network, and without which the diversification activities of the inner core would not have succeeded. This was the outer penumbra of allies and associates on which it relied for capital, information, influence and other forms of support in creating and enlarging new affiliated concerns. Within the business network to which William Mackinnon provided leadership, none of these three elements – core, main body and periphery – were stable entities. Each evolved and changed over time, in an almost organic manner, and adjusted their relationships to each other as they went along. This complicates any attempt to analyse the structure and function of the network as a whole. ***** In 1865 the structure of the group (inner core plus affiliates) was as set out in Figure 4.1. It had a sailing ship arm, based in Liverpool, to transport goods owned by or consigned to the Glasgow and Calcutta houses, as well as cargoes for third parties. During the early 1860s, when shipping freights were buoyant, Mackinnon Frew added six new sailing ships to two it already owned, with financial assistance from other family firms. The group thus

6 G. Jones and J. Wale, ‘Merchants as Business Groups: British Trading Companies in Asia before 1945’, Business History Review, 72 (1998), p. 389.

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BUSINESS NETWORKING, 1860–70

Mackinnon Frew & Co (Liverpool)

W. Mackinnon & Co (Glasgow)

Mackinnon Mackenzie & Co (Calcutta)

Sailing Ships Affiliates – Shipping

Affiliates – Commodities and Manufacturing

British India S.N. Co (Glasgow) Netherlands India S.N. Co (London)

Ramgurgh [Tea] Co (Calcutta) Western Cachar [Tea] Co (Glasgow) Glasgow Jute Co (Glasgow) India Jute Co (Glasgow)

Figure 4.1 The Mackinnon Group, 1865

possessed a moderate sized fleet of iron-hulled sailing ships that carried cargoes of piece goods, metalwares and salt outwards from Glasgow and Liverpool to Calcutta, and cargoes of jute, indigo, oil seeds and saltpetre homewards to London and Liverpool. Nevertheless, the family’s shipping interests were now even more strongly located in coastal steamshipping in Asia, through its directing and managing the affairs of the British India and Netherlands India S.N. companies. The ‘clan’ controlled the two steamship companies through minority holdings which were little as 23 per cent of BI’s total shares and 9 per cent of NISM (see Table 4.1).7 The diversification into steamships was especially significant for Mackinnon Mackenzie & Co, which held BI’s managing agency contract on generous terms (eventually agreed as 13.5 per cent on gross earnings and a further 5 per cent on net company profits). By the late 1860s Mackinnon Mackenzie & Co derived some 53 per cent of its profits from the managing agency for BI, as compared with only 16 per 7

The very low family proportion of NISM equity reflects the fact that, unable or unwilling to put up the sums that would give them a share-holding comparable to that in BI, they made great efforts to sell on their allocated shares in NISM to small shareholders in Campbeltown and Argyll who would support their authority within the company. 91

ENTERPRISING SCOTS

Table 4.1 British India and Netherlands India S.N. Cos: distribution of shares (% of total), 1870

Mackinnon & Hall families West of Scotland residents London & Home Counties Other UK residents India & Burma residents Netherlands Netherlands Indies

BI

NISM

23.1 10.1 37.1 15.1 14.7

8.9 30.2 26.1 6.3 12.2 16.3

100 £442,000

Total value

100 £201,765

Sources: Companies House, London, File 133; PRO:BT31/938/1212C

cent from import-export trades and 14 per cent from agency work for sailing ships from Britain.8 W. Mackinnon & Co enjoyed a smaller income stream from BI. The firm served as agents for the company in Glasgow, and obtained some commissions for work associated with overseeing the ordering, construction, and fitting out of steamers in Clyde yards, and the ordering of spares and parts for the upkeep of the steamers in India. By contrast, the Calcutta and Glasgow houses had no direct relationship with NISM. They obtained no commissions for management and little if any for services rendered. Instead, their partners obtained returns through dividends on shares. In controlling the affairs of the two companies, therefore, they had an incentive to maximise turnover in the case of BI and to maximise dividends in the case of NISM. Despite the predominance of shipping – both sail and steam – within their business profiles, the Glasgow and Calcutta houses were not averse to pursuing other opportunities which presented themselves. Like many of the agency houses in Calcutta in the 1860s, the Mackinnon-Hall partnerships took an interest in the emerging fields of tea planting and jute spinning and weaving. Their financial commitments in these directions were modest – a few thousand pounds in each of four small companies – and far smaller than their stake in BI and NISM. Nevertheless, it was an indication that they were unwilling to place all their bets on steamshipping alone, and felt the need for a broader pattern of business diversification. Their entry into tea planting took place during Calcutta’s ‘tea mania’ of 1862–66, which was Calcutta’s equivalent of the cotton-led investment boom going on in Bombay at the same time. A bull market in the city, fuelled by profitable results from the pioneering tea companies and the availability of 8

Calculated from annual accounts in MP India File 24. 92

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easy credit, led to intense speculation in tea shares. Many dubious, if not indeed fraudulent, tea properties were placed before investors at the height of the boom.9 One of William Mackinnon’s old Calcutta friends, William Haworth, had experimented with tea on his estate in the Hazaribagh district of Chota Nagpur, to the west of Calcutta, and in 1862 he succeeded in getting William’s support to carry the work forward. The Ramgurgh Co Ltd was floated as a Calcutta-based concern, with Mackinnon Mackenzie & Co as the managing agents. In 1863 William arrived back in Glasgow with yet another prospect in his pocket – three estates in the Cachar District – for which he floated the Western Cachar Co, with a nominal capital of £100,00 and a board comprising most of his close Glasgow friends and associates.10 In addition to these two joint-stock companies, he took a personal share in a private tea garden venture in Upper Assam, and Mackinnon Mackenzie & Co as a firm invested in two other private properties, in Assam and Eastern Bengal. By 1865, the partners or the firms were involved in the ownership or management of half-a-dozen tea properties, only two of which were corporately organised. However, the tea companies were something of a disappointment. Haworth’s Ramgurgh estate received insufficient rainfall to guarantee regular crops, while the Western Cachar Co turned out to have been a typical boom flotation. Its estates were planted with less than half the acreage of tea claimed by the vendors, and when this became known its board meetings were stormy affairs.11 William Mackinnon ignored the clamour from shareholders to wind up his two tea companies, and also persisted with his other tea interests. The entry into jute manufacturing also took place at the peak of the investment boom of the early 1860s. The mechanised jute industry of Dundee was in full swing, but it was not yet clear if that industry could be successfully transferred to Bengal, from where it drew its raw materials. There were only a couple of jute mills at work in Calcutta in 1864, when William Mackinnon, with his customary mixture of vision and opportunism, purchased buildings in Serampore, a town on the west bank of the Hooghly upriver from Calcutta, for the establishment of a jute spinning and weaving company. The scheme quickly became intertwined with yet another project

9 R.S. Rungta, Rise of Business Corporations in India, 1851–1900 (Cambridge, 1970), pp. 94–108; Sir Percival Griffiths, The History of the Indian Tea Industry (London, 1967), pp. 96–108. 10 Western Cachar Co, Memorandum & Articles of Association, 1863, MP Misc. Commercial File 64. 11 At the meeting in March 1868, William Connal Jr ‘broadly accused not only the Vendors with deception, but you [William Mackinnon] as being party too it, that he had taken shares at your solicitation and by your advice, and that he held you and Mr Macneil morally if not legally bound to reimburse him. . . . He was exceedingly violent and rabid.’ (R. Jameson to W. Mackinnon, 13 March 1868, MP Misc. Commercial File 11; see also P. Mackinnon to W. Mackinnon, 27 Feb. 1868, MP City of Glasgow Bank File 15.)

93

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– to establish a jute mill in Glasgow that would use raw materials supplied by Mackinnon Mackenzie and Co and in turn train engineers and skilled workers for the Serampore factory that would be managed by the Calcutta house. Two companies were therefore floated in Glasgow. The Glasgow Jute Co, set up in July 1865 with a nominal capital of £500,000, was effectively a joint venture with James Nicol Fleming and other Glasgow interests, while the India Jute Co, incorporated in March 1866 with a nominal capital of £250,000, was more directly linked to the Mackinnon group’s interests and attracted a larger family investment (17 per cent of the initial capital). 12 However, a combination of the post-1866 trade depression and the mismanagement of the Glasgow Jute Co delayed the opening of the Serampore mill and ensured that it would start its operations from a small base. The Mackinnon group of 1865 was a medium-sized, moderately-diversified conglomerate, with interests in trade, transport, commodity production and manufacturing. The range and character of its operations, however, were also increasing as a result of the emergence of a second generation of family firms for whom new opportunities trickled down from the operations of the Liverpool, Glasgow and Calcutta houses. As his business ‘empire’ grew, William Mackinnon became a patriarchal figure to whom sundry nephews, cousins and other members of his extended family looked for employment, commercial training and experience, and eventually assistance in starting up their own firms. Over the years he did much to guide the education and upbringing of his nephews and cousins, and when the time came to place them in a business setting he did so with an eye to the interests of the ‘clan’ as a whole. One of those who looked to him for this purpose was Archie Gray, a nephew who had been a deck officer with BI in India but returned to Scotland hoping to find employment at home. The Grays were an unfortunate branch of the family,13 and William felt a strong sense of obligation towards them. In October 1865, he wrote to Edwyn Dawes, who had given up the management of the BI steamers in Bombay and was now living in Surbiton, Surrey, to propose that ‘perhaps an arrangement might be made whereby you and my nephew Archd. Gray (who is also most unwilling to return to India) should endeavour to work up a quiet business in Ship Agency and Chartering and in Insurance. We could give large insurances in Steamers and Ships which would help as a start, and many of our Coal Charters might 12

Glasgow Jute Co, Scottish Records Office, BT2/202; India Jute Co, Scottish Records Office, BT2/232/1. 13 Archie’s younger brother, John, had died in Calcutta in 1858, when he was only seventeen years old, and his father had been drowned when the Bussorah was lost off the Hebrides in 1863. Another brother, Duncan, after serving in the BI agency in Rangoon, and having had a liaison there with a widow of whom family and colleagues strongly disapproved, was sent to be BI agent in Chittagong. By 1864, he was reported to be ‘fast killing himself with drink’. (J.M. Hall to W. Mackinnon, 23 Aug. 1864, MP Private Letters File 32.) 94

BUSINESS NETWORKING, 1860–70

be thrown your way.’14 He later suggested that the two younger men be joined by a bankrupt friend, John Halliday (the co-founder of BI), and that the new firm of Gray Dawes & Co should take over Halliday’s offices in Leadenhall Street in the City of London. Halliday was a spent force, and died in 1869. By then, Gray Dawes & Co, along with BI’s London office and the secretariat of the Netherlands India S.N. Co, had moved to a more permanent address, at 13 Austin Friars. From there, Archie and Edwyn ran a business along the lines envisaged by William Mackinnon. They chartered sailing ships with coal cargoes from Northeast England and South Wales, to be dispatched to various ports in Asia on behalf of BI and NISM. They acted as marine insurance brokers, arranging policies at Lloyds for BI and NISM steamers and for Mackinnon Frew sailing ships, and organising a private insurance syndicate through which William, Jamie and some of the family or close friends underwrote the risk of accident to BI or NISM steamships. Archie was also allocated some of the work of looking after the construction or purchase of new steamers for NISM, and was therefore a fairly frequent visitor to Glasgow. Edwyn Dawes, because of his former association with the P&O company, was used by William as a gobetween in his various negotiations with that firm. Gray Dawes were in practice, although not yet in name, the London agents for BI and NISM. William Mackinnon probably lent Archie Gray and Edwyn Dawes the money needed to start up their firm; they certainly depended upon him for the generation of business. Consequently, he enjoyed the deference and respect due to a senior partner in the concern although he had no legal standing in it. To Edwyn Dawes, William was ‘Our good friend and adviser, Mr Mackinnon’ who had to be consulted on any significant matter of business.15 Gray Dawes & Co, in addition to working for BI and NISM in London, took responsibility for BI’s agencies in the Persian Gulf and for developing trade between the Gulf and Bombay as well as between the Gulf and London via Bombay. This initiative succeeded largely because of the earlier rapport between Dawes and the Persian merchants of Bombay, which stood him in good stead in 1866–7 when he established Gray Paul & Co at Bushire and Bundar Abbas, on Persia’s southern shores. To assist Robert Paul at these ports, Dawes in 1868 recruited another of William Mackinnon’s protégés – George Sutherland Mackenzie, who was rescued from a bank clerkship in the little Highland town of Dingwall and sent to learn the piece-goods trade in

14

W. Mackinnon to E.S. Dawes, 17 Oct. 1865 (copy), Inchcape (unclassified); also quoted in G. Blake, BI Centenary, 1856–1956 (London, 1956), p. 226. 15 ‘I feel that in the success of our business we owe all to you,’ Dawes once assured William, ‘and your wish is law to me as it always has been. If I had anything before me to do, or something to give up, if it was your wish, it would be cheerfully done however distasteful it might be to me.’ (E.S. Dawes to W. Mackinnon, 24 June 1874, Dawes Letterbook, 1874–6.) 95

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Manchester and Calcutta before joining Robert Paul in Bushire.16 When Gray Dawes secured the BI agency at Basra in 1870, George was sent to open a new firm there, under the title Gray Mackenzie & Co. Gray Dawes & Co owned half of the capital in Gray Paul and Gray Mackenzie, the other 50 per cent belonging to the resident partners. From London, Gray Dawes sent out shipments of cotton textiles obtained from William’s constituents – principally S.A. Liebert & Co, William Stirling & Co, John Goodair & Co, and J. & J. Cochrane, all of Glasgow – and attempts were made to work up a return trade in pearls, opium, dates, wool and other produce. Duncan MacNeill was another nephew for whom William Mackinnon created a business niche. Duncan, orphaned by the time he was twelve years old, was taken under William’s wing,17 and in 1858, went out to Calcutta to become an assistant in David Begg’s firm, Begg Dunlop & Co. There he would gain familiarity with the cultivation of and dealing in indigo, coffee and tea which lay outside Mackinnon Mackenzie & Co’s expertise. Looking further ahead, there was the possibility that Begg Dunlop & Co might be amalgamated with Mackinnon Mackenzie & Co once David Begg retired from his senior partnership.18 In the event, although Begg retired and Duncan became a partner in the firm, no merger with Mackinnon Mackenzie & Co took place, largely because of the opposition of the other partners. Duncan, increasingly dissatisfied with his situation, left Begg Dunlop & Co in 1866, when its substantial investments in tea estates during Calcutta’s ‘tea mania’ were exposed by the collapse of the boom. He then hung around London, trying to wind up his connections with Begg Dunlop while making a living as a bill broker in the City with the help of another of William’s friends, James Macdonald of General Credit & Discount. But Duncan was also a tea specialist, and in 1868 he came up with the idea of a warehouse in London from which to sell fine teas on commission. The initiative was undoubtedly connected with the fact that tea estates in India in which he and William had invested were beginning to yield crops. Out of this was born

16 George was the third son of Sir William Mackenzie, a medical graduate of Aberdeen University who eventually rose to the rank of Inspector-General of the Madras Medical Service. William Mackinnon first met Sir William Mackenzie in Bombay in 1861, through the Flemings. (‘Sir George Sutherland Mackenzie (1844–1910)’, Dictionary of National Biography, Second Supplement, Vol. 2 (London, 1912), pp. 528–9; W. Mackenzie to W. Mackinnon, 22 Feb. 1862, MP India File 14.) 17 William assumed the responsibility for completing Duncan’s education, sending him for a time to a Protestant school in Switzerland recommended by Dr Duff. He then took Duncan to live in his own house in Glasgow while he served an apprenticeship in Wm. Mackinnon & Co. 18 W. Mackinnon to J.M. Hall, 31 July 1858, MP Misc. Commercial File 58; W. Mackinnon to J.M. Hall, 9 Oct. 1857 (copy) and to P. Mackinnon, 2 April 1860 (Copy), Inchcape; D. MacNeill to W. Mackinnon, 9 May 1860, MP Private Letters File 24.

96

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the firm of Duncan MacNeill & Co, established in 1870 to combine teabroking with bill-broking and other financial middleman transactions. The new firm opened for business at 7 Lothbury, in the same magnificent building that had been built for the General Credit and Discount Co around the corner from the Bank of England.19 Duncan MacNeill & Co was a partnership between Duncan MacNeill and his cousin, John Mackinnon (the younger brother of Peter Mackinnon of Mackinnon Mackenzie & Co), who had also had a spell as an assistant with Begg Dunlop. When it opened, the firm had a capital of only £12,000 and assets comprising a few shares in Mackinnon Frew ships and in various W. Mackinnon & Co or Begg Dunlop & Co affiliates.20 However, the principal source of future business growth for Duncan and John lay in India. Begg Dunlop & Co was still struggling financially, and it was ripe for some asset-stripping. Duncan returned briefly to Calcutta in 1870 to take over the managing agency contracts for tea properties in which he and/or William Mackinnon had a dominant interest. He also assumed the agency for a river steamshipping concern in which William’s friends John Pender and David Begg had been the principal shareholders but which had gone into liquidation after Begg’s death in 1868. Duncan and William intended to revive the firm and put it into competition with the India General S.N. Co, using Mackinnon Mackenzie & Co’s tea cargoes from Assam to give it an initial boost.21 To look after these agencies, Duncan and John opened their Calcutta house, MacNeill & Co, in August 1872. By 1872, therefore, the group structure (Figure 4.2) was rather more elaborate than it had been seven year earlier, with three new family partnerships developing on the margins of the main subsidiary interests of the older partnerships – Gray Dawes & Co in steamshipping-related activities and Duncan MacNeill & Co/Macneill & Co in the planting, transportation and selling of tea. In generating new family partnerships to handle emerging areas of the group’s interests, William Mackinnon was relying upon trust deriving from kinship for the proper conduct of functions which otherwise might have to be internalised within one or other of the older family firms. It also gave him and the family-led group a stronger presence in London and a second vehicle for the pursuit of openings for profitable diversification within north-east India. Why he encouraged Duncan MacNeill & John Mackinnon to set up their own firm in Calcutta, rather than join Mackinnon Mackenzie & Co, is not at all clear. There may have been sensitivities about bringing new partners into Mackinnon Mackenzie & Co, but it was equally possible that he already had in mind some rough and

19

For the General Credit and Discount building, see D. Kynaston, The City of London: Vol. 1, A World of Its Own, 1815–1890 (London, 1994), p. 245. 20 Duncan MacNeill & Co Ledger, 1870–1, Inchcape Guildhall MS. 27, 612. 21 P. Hall to W. Mackinnon, 1 Sept. 1870, MP Private Letters File 55. 97

ENTERPRISING SCOTS Mackinnon Frew & Co (Liverpool)

W. Mackinnon & Co (Glasgow)

Mackinnon Mackenzie & Co (Calcutta)

Duncan MacNeill & Co (London)

MacNeill & Co (Calcutta)

Sailing Ships

Affiliates – Shipping Gray Dawes & Co (London)

Subsidiaries (Gulf) Gray Paul & Co Gray Mackenzie & Co

British India S.N. Co (Glasgow) Netherlands India S.N. Co (London)

Affiliates – Commodities and Manufacturing India Jute Co (Glasgow) Ramgurgh [Tea] Co (Calcutta) Western Cachar [Tea] Co (Glasgow) Private Tea Estates

River steamer agency Private Tea Estates

Figure 4.2 The Mackinnon Group, 1872

ready division of responsibilities between the two Calcutta houses in the future exploitation of business opportunities in India. ***** The rise of the family’s affiliated companies, more especially the two steamship concerns, would not have been possible without the support of a range of individuals and firms. These ‘outside’ interests, which made up the outer perimeter of the enterprise network, had their own reasons for associating with the ‘clan’ in the development of new concerns. They brought to the alliance intangible benefits like information and influence as well as the more tangible support of investment in, or preferential business for, the ‘free-standing companies’ clustering around the Mackinnon-Hall partnerships. Indeed, by far the greater part of the capital mobilised for the group’s development came from the outer periphery rather than the inner core. Who were these allies and how did they help to shape the structure of the group? Those outside the family who invested in the two steamshipping affiliates (Table 4.1) were mainly resident in Britain – in the West of Scotland, London and the home counties, and elsewhere (mainly Lancashire) – although BI had a number of shareholders residing in India and NISM recruited shareholders living in the Netherlands and the Netherlands Indies. However, place of residence is a blunt method for analysing the social 98

BUSINESS NETWORKING, 1860–70

composition of investment. A more helpful way of understanding the character of the outer periphery is to see it as comprising three separate clusters of personal, familial and corporate activity which overlapped with the operations of the Mackinnon family firms. They were: first, West of Scotland mercantile, manufacturing and banking interests, together with Glasgow links to Lancashire; second, Scottish expatriate merchants houses in Asia, with links back to the external trade of London or Liverpool as well as Glasgow; and third, serving or retired British Indian officials with links to financial institutions in London which were engaged in investment in India (see Figure 4.3). Many of the West of Scotland investors in BI and NISM – especially the latter – were petty merchants and tradesmen in Campbeltown and Glasgow who had social connections to the Mackinnons and Halls, and who each took only a small number of shares. Only a few of the cotton manufacturers or merchants who consigned their goods to Calcutta through Wm. Mackinnon and Co chose to invest in the steamship companies. Since the transport innovations were intended to improve trade within Asian rather than between the Clyde and Asia, most were probably disinclined to see any

Campbeltown and Glasgow Merchants and Manufacturers

Lancashire Cotton Men

MackinnonHall Family Firms

Tea and Jute Cos

City of Glasgow Bank

Expatriate Scottish Merchant Houses in Asia and London

British India and Netherlands India Steam Navigation Companies General Credit And Discount Co ‘Anglo-Indian’ Officials

London Financial Groups

Figure 4.3 The Mackinnon enterprise network, 1860s 99

ENTERPRISING SCOTS

advantages for themselves in the development of BI and NISM. One who did not share that view, and who invested in a substantial way, was William Mackinnon’s old friend George P. Gunnis, who became a director in both of the shipping companies. His participation was also significant in that it drew in a Lancashire connection through his partner, Siegfried Liebert of Manchester, and Liebert’s friends, the Lees family, who were cotton-spinners in Oldham. The other important element in the West of Scotland cluster was the group of men associated with the management of the City of Glasgow Bank. To follow this link, and understand its relevance for the family ‘inner core’, it is necessary to look briefly at the financial side of the MackinnonHall family firms’ activities. As a merchant in the 1850s, William Mackinnon was a customer of three banks in Glasgow – the Union, the Western and the City of Glasgow – but gradually the social and business circles within which he moved pointed him ever more in the direction of the City of Glasgow Bank. Founded in 1839, the City of Glasgow Bank, was one of a group of joint-stock banks which sprang up in Glasgow during the 1830s and early 1840s to meet the needs of the rapidly expanding West of Scotland economy. These Glasgow banks, more deeply involved in financing mercantile and manufacturing activities than the older Scottish banks head-quartered in Edinburgh, tended to be more adventurous in their lending policies. They were therefore more at risk when there was a down-turn in the business cycle.22 The City of Glasgow Bank grew rapidly during its early years. Under the expansionist policy of Robert Salmond, its manager from 1842 onwards, it established a network of branches throughout Scotland and the Isle of Man. With 116 such branch offices in place by 1857, it commanded the largest banking network in Scotland. It also competed vigorously for the deposits of the Glasgow working classes. From these sources, significant sums flowed into the head office on Virginia Street to support a programme of lending to merchant houses, insurance companies, and a US railroad.23 William Mackinnon was a client of the Bank throughout the 1850s, and found Salmond to be very obliging towards his Glasgow and Calcutta firms in extending credit and discounting of bills of exchange. During 1857 William became a shareholder in the Bank, in the hope of acquiring an agency for it in Calcutta. These hopes, however, were dashed by the financial crisis of 1857, during which the Bank ceased operations for several months. The City of Glasgow Bank directors set up a committee of shareholders to help them 22

For the history of Scottish banking during the middle decades of the nineteenth century, see, inter alia, S.G. Checkland, Scottish Banking, A History, 1695–1973 (Glasgow, 1975) pp. 281–499, and R. Saville, Bank of Scotland, A History, 1695–1995 (Edinburgh, 1995) pp. 337–425. 23 R.E. Tyson, ‘The City of Glasgow Bank and the Crisis of 1857’, in D.H. Aldcroft and A. Slaven (eds), Enterprise and Management: Essays in Honour of Peter L. Payne (Aldershot, 1995), pp. 151–4. 100

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put the Bank’s affairs back onto a secure footing, and gave William the role of representing the Bank in London. His work there, in retiring the Bank’s acceptances, in selling some railway securities held by the Bank and in borrowing up to £105,000 against others, contributed to an improvement in the Bank’s liquidity and assisted with its reopening on 31 December 1857.24 As a result of these efforts, he was invited to take up a seat on the board. After some swithering, he agreed to do so in July 1858, ‘simply because I fancied I could be useful to the Bank’.25 From July 1858 to September 1861, William performed his duties as a director assiduously, while attending to the development of his own firms in Glasgow and Calcutta. He seldom missed a meeting of the Board, and helped to oversee the policies that restored health and public esteem to the institution. These included some adjustment to the number and distribution of the Bank’s branches, the pruning of management costs in the head office, the writing-down of capital by 10 per cent, the shift of Robert Salmond to the Bank’s directorate and his replacement as manager by Alexander Stronach, formerly the Bank’s accountant, and a revival of dividends to shareholders.26 During these years W. Mackinnon & Co maintained its account, and had normal commercial relations, with the Bank, and in 1860 Mackinnon Mackenzie & Co became the Bank’s agents for speculating in Government of India paper. However, after the autumn of 1861, when he departed for India with John Matheson, William’s connections with the City of Glasgow Bank grew less close and more irregular. Most of his time was now spent in India or London, and he attended meetings of the Board only intermittently. Indeed, by the early months of 1863, he was intent upon retiring from the board. He was dissuaded from this, however, by Jamie Hall, who reminded him how much business their firms still did with the Bank and how helpful his directorship was in looking after their interests The Bank assisted William Mackinnon to capitalise his two steamship companies by a variety of means. It gave support in his struggle to take control of the Calcutta and Burmah S.N. Co in 1859–60, by way of cash advances against shares held in the concern.27 It was similarly accommodating with

24 W. Mackinnon to J.M. Hall, 26 Nov. 1857, MP Misc, Commercial File 57; John Orr to W. Mackinnon, 18, 19 and 20 Nov. 1857, and R. Salmond to W. Mackinnon, 21 Dec. 1957, MP City of Glasgow Bank File 10; J. Muir, Report to the Liquidators of the City of Glasgow Bank upon the History of the Bank’s Involvements with the Western Union Railroad, and the Position Occupied by Mr William Mackinnon (Glasgow 1880) [hereafter cited as Muir, Western Union Railroad], pp. 20–1. 25 W. Mackinnon to J. Pender, 3 July 1858, and to J. Halliday, 9 July 1858, MP Misc. Commercial File 60. 26 City of Glasgow Bank, Annual Reports of the Directors (1859–61) [Mitchell Library, Glasgow]. 27 W. Mackinnon & Co to R. Salmond, City of Glasgow Bank, 22 March 1860, and W. Mackinnon to J.M. Hall, 24 March 1860, MP City of Glasgow Bank File 24.

101

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credit facilities between 1862 and 1865, when the Calcutta and Burmah was transformed into the British India S.N. Co and the Netherlands India S.N. Co was acquired.28 There were also strong personal links. Robert Salmond, the first manager, became a major shareholder and a director in both BI and NISM. His successor, Alex Stronach, was a shareholder in both steamship companies, as was Sir William Dunbar MP, the one-time chairman of the Bank’s Edinburgh Committee who became the Bank’s Deputy Governor in 1862 and a director of NISM in 1865. On the other hand, there was little direct investment by the Bank in the equity capital of the steamship companies – other than 425 shares in NISM acquired by the Bank in the late 1860s when William Mackinnon needed to buy out the opposition in Indonesian waters.29 The Bank’s primary purpose was short-term commercial finance rather than long-term investment finance, and it played its part in the rise of BI and NISM mainly through the credit it extended to those who wanted to purchase shares or respond to call-ups on part-paid shares. Alongside the Clydeside cluster of investors, linked essentially to W. Mackinnon & Co, was a second cluster of investors connected primarily with Mackinnon Mackenzie & Co. These were the partners in Scottish expatriate agency houses in Asian port cities, and some of their ‘corresponding’ firms in London. David Begg, senior partner in Begg Dunlop & Co, which specialised in dealing in indigo and the newer tea crops of Bengal, was a personal friend of William Mackinnon’s and had supported his diversification into steamshipping from the start. Most of the other ScottishAsian houses that put capital into the steamer companies, however, had in view some share in the management of the lines, whether a single agency in one port or the general direction of a group of agencies in specific maritime regions. This was particularly the case with John Halliday and his successors, the Bulloch brothers, who dominated BI’s sub-network of steamers agencies in Burma, with Alexander Fraser, Fraser Eaton & Co and Maclaine Watson & Co who exercised influence over NISM’s management and agency arrangements in the Indonesian archipelago, and with the Fleming brothers of W. Nicol & Co who were dominant in the management of the steamers in the shallow waters of the Arabian Sea. For such firms, and those who ran them, Mackinnon Mackenzie & Co was merely ‘first among equals’. These supporters were very important in that provided not only capital but also commercial information and mercantile influence, and they attached the reputation of their names to the BI and NISM enterprises. William Mackinnon was very conscious of how much he owed to them, and showed a strong sense of personal loyalty to the men who allied with him in this way.

28

Most notably through the marginal credits of £10,000 that W. Mackinnon & Co secured for W Nicol & Co in August 1865, against the security of BI shares ‘and Mr Mackinnon’s personal guarantee’. (10 August 1865, ‘City of Glasgow Bank, Excerpts from the Directors’ Minutes’ (University of Glasgow Archives) UGD 108/2.) 29 BT31/938/1212C. 102

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Within this segment of the ‘outer fringe’, William’s relations with the Fleming brothers became particularly close. During the boom of 1862–65, the Fleming brothers channelled back into Britain the profits made by W. Nicol & Co in Bombay. John once again took up residence as senior partner of his London house of Smith Fleming & Co. James Nicol, who retired from W. Nicol & Co and Smith Fleming & Co after reputedly making £300,000 from cornering raw cotton supplies in Bombay, invested the proceeds in a new Glasgow merchant house which traded under the name James Nicol Fleming.30 Although the Flemings had a reputation among the more staid Mackinnons and Halls as being ‘fast folk’, they became regular visitors at William Mackinnon’s homes in Glasgow and Kintyre. James Nicol, indeed, became a Kintyre resident, marrying the Provost of Campbeltown’s daughter and buying a country house and estate at Keil on the southern tip of the peninsula. The relationship was of a business as well as social nature. In July 1863, James Nicol became a director of the City of Glasgow Bank, having been nominated by William, and the two men became allies in a number of business ventures. J.N. Fleming, for example, took 64th shares in several of Mackinnon Frew’s new iron sailing ships.31 He and William were the moving spirits in the Glasgow Jute Company which was formed in July 1865, with a nominal capital of £500,000, to convert an empty linen works in the east end of Glasgow, which was mortgaged to the City of Glasgow Bank, into a working jute mill. However, the idea that that Glasgow might rival Dundee or Calcutta in jute spinning or weaving proved to be a forlorn hope – and by 1870, the enterprise was dead in the water.32 Meanwhile, John Fleming, the elder of the two brothers, joined William and Jamie Hall in land speculation in the Sundarbans of the Lower Ganges during 1865, hoping to profit from the ultimately abortive Port Canning railway and harbour project. To reciprocate he gave Mackinnon Mackenzie & Co access to shares in his own older, and financially more respectable, Elphinstone Reclamation Co in Bombay. John

30

‘Men You Know’, The Baillie, 6 Nov. 1878; William Wallace (ed.), Trial of the City of Glasgow Bank Directors (Glasgow 1905), evidence of Dugald Bell , pp. 272–3. 31 I am indebted for information on this point, and on James Nicol Fleming more generally, to unpublished research by Mr A. Logan Mitchell (private communication). 32 The management of the Glasgow Jute Co was entrusted to W. & J. Fleming & Co, the former linen-weaving firm which had vacated the factory. However, William and his fellow directors exercised far too little supervision and control over the Glasgow manager, and by December 1870 things were in a bad way. W. & J. Fleming was eventually sequestrated (wound-up) in February 1871, amid press reports calling attention to the mismanagement and neglect of the Glasgow Jute Co. William Fleming had milked the company of £23,980, and it never properly recovered from his mismanagement. (W. Mackinnon to J. MacDonald, 9 Feb. 1869, MP Private Letters File 135; J.N. Fleming to W. Mackinnon, 29 Dec. 1870, MP Private Letters File 38; R. Jameson to W. Mackinnon, 16 Feb. 1871, MP Misc. Commercial File 11; The Glasgow Herald, 18 Feb. 1871.) 103

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was also drawn into the speculation in tea plantations in the hill country of Bengal and Assam in which William personally and Mackinnon Mackenzie as a firm also began to indulge. Yet, despite the growing alliance of interests between the Fleming and the Mackinnon-Hall firms, and despite the Flemings’ relatively large share holdings in BI and NISM, neither brother was offered a directorship of BI or NISM. The possibility that they might emerge as rivals for control of the steamship companies was considered too real for such a risk to be allowed. Conversely, the presence of John Fleming’s merchant house in London helps to explain why, despite the growing importance of the metropolis for the conduct of their business, William Mackinnon and Jamie Hall never opened the London house they had once contemplated. The reason for this was their reluctance to compete directly with merchant houses in London which formed part of the outer fringe of the enterprise network. Business alliances or coalitions were based on concepts of reciprocity, and as long as the family partnerships relied on the support of merchant houses in London for their operations in steam shipping or tea planting it behoved them not to compete head on with these firms in London markets. Three such Scottish expatriate London houses were part of the network. The oldest was Michael Connal’s concern, Scott Bell & Co. After Connal broke with the firm in 1863, there was a winding down of the business it did with Mackinnon Mackenzie & Co, and when it failed during the Overend Guerney crisis of 1866 there was no loss to the Mackinnons and Halls. The second was Halliday Fox & Co, a partnership between John Halliday, the co-founder of the Calcutta and Burmah S.N. Co, and Edward Fox, a metal broker. For a time their offices provided BI with an official registered address, and William with an accommodation address, in London. During the boom years of 1862–64 a good deal of joint account business was done between Mackinnon Mackenzie & Co and Halliday Fox & Co – in copper from Australia to Calcutta, iron wares and cotton goods from London to Calcutta, and produce homewards. However, Halliday Fox & Co went bankrupt in 1865, leaving William Mackinnon to look for new London offices and some means of helping John Halliday back into business.33 These two failures left Smith Fleming & Co, of 7 Mincing Lane, as the sole London correspondents of Mackinnon Mackenzie & Co, and the source of much joint account business, particularly in shipments of tea, indigo and oil seeds from Calcutta to London. Smith Fleming & Co was John Fleming’s London house. So long as John Fleming – who had introduced William Mackinnon to governing and business circles in Bombay, whose Bombay firm held BI’s most important

33

P. Mackinnon to W. Mackinnon, 17 April 1862, MP City of Glasgow Bank File 12; S. Liebert, 10 Sept. 1864, MP Misc. Commercial File 19; J.M. Hall to W. Mackinnon, 8 Nov. and 24 Dec. 1864, MP Personal Letters File 31; P. Mackinnon to W. Mackinnon, 23 March 1866, MP City of Glasgow Bank File 13. 104

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agency in India after Mackinnon Mackenzie & Co, and who had joined in plantation and property speculation in Bengal – was a key figure within the network’s outer penumbra, there would be little room for William Mackinnon to establish a rival merchant house in London. Gray Dawes & Co, a junior family firm with an emphasis towards ship agency work and commercial links to the Persian Gulf, beyond W. Nicol & Co’s sphere of operations, was the closest that he came to opening a London counterpart to W. Mackinnon & Co and Mackinnon Mackenzie & Co. If the Fleming brothers were denied a place in the directorate of the shipping companies, two of Sir Henry Bartle Frere’s closest associates, by contrast, held seats on both boards. They were Sir Frederick Arthur, Frere’s brother-in-law, and William P. Andrew, the former Postmaster-General of India who was busy developing railways in the valleys of the Indus and trying to promote them in the Euphrates-Tigris valley. These men represented the third strand in the outer fringe of the business network – a small group of former British-Indian officials (or ‘Anglo-Indians’ as they described themselves), who were more important for the political connections they brought with them than the amounts of capital they invested. Most were members of Frere’s circle of intimates (Frere held no shares in his own name, but small parcels of NISM shares were registered in the names of each of his three daughters), and they tended to be retired from service in India. A campaign to secure shareholders from among active ‘Government men of influence’ in Bombay and Calcutta,34 proved largely unsuccessful. Only a few of the serving officials offered shares in BI (usually at par and therefore at less than their market value) were prepared to risk compromising their positions. Those who did included Sir Mathew Sausse, a High Court Judge in Bombay, Sir William Mansfield, the Commander in Chief of the Army in India, and Col. Lewis Pelly, the Resident at Bushire in the Persian Gulf, who was very close to Frere. Through this third cluster’s wider contacts, William Mackinnon obtained access to government offices in India and also to the India Office in London, where figures such as Sir John Kaye proved accommodating to his interests. Each of the three principal elements of ‘outside’ support on which the Mackinnon-Hall families drew to establish and enlarge their steamship lines in the Indian Ocean made different and specific contributions to the network – financial from the Clydeside and Lancashire cluster, commercial and managerial from the expatriate merchant cluster, and political from the ‘Anglo-Indian’ cluster. It was an effective combination. *****

34

J.M. Hall to W. Mackinnon, 7 September 1864, MP Private Letters File 32. 105

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One consequence of the networking arrangements employed to create BI and NISM was to point William Mackinnon more strongly towards London as a place of business. This came about mainly through his need to maintain contact with the political and administrative figures responsible for Indian affairs. As a public contractor to the Government of India, and a seeker of new contract business in the Indian Ocean region, he had to keep an ear attuned to the political intelligence that flowed through the imperial capital. A convenient place to gather information, and to mingle with military men and civil servants who like himself were interested in the development of transport and communications routes in Asia, was the Royal Geographical Society, of which he became a fellow in 1864. However, his access to ‘AngloIndian’ ruling circles, hard-won in numerous meeting rooms and antechambers in India and London, had a financial edge to it as well, and drew him into the world of City of London investment in India. The years between 1855 and 1865, which saw the arrival of limited liability into British company law, were a time of considerable expansion in the number, size and variety of banks and other institutions engaged in financing Britain’s industrial and commercial development. It was a time, too, of rising international investment, as firms in the City of London and elsewhere increasingly turned to supplying demands for capital in the Empire, in the USA and Latin America, and in parts of Europe.35 Railway construction was diffusing to various parts the world, and public finances in overseas territories and modernising countries were being asked to bear a range of infrastructural and ‘social-overhead’ activities. There were therefore large opportunities for British lending abroad. The financial sector had already acquired that functional bifurcation in which the banks located in the great industrial centres of the Midlands, the North and Scotland were engaged principally in providing working capital for local manufacturers and merchants, some of which found its way into overseas operations, while merchant bankers and other specialised financial institutions in the City took up the arguably more risky tasks of lending to foreign and colonial governments and of mobilising the very large sums required for railway investment at home and abroad. By 1863, ‘a major bull market’ had emerged in the British financial sector, during which ‘almost 700 new companies were registered, and the City was awash with speculative froth.’36 Some of that froth washed over William Mackinnon. 35

For the rise of British overseas investment during the nineteenth century see, among others, P.L. Cottrell, British Overseas Investment in the Nineteenth Century (London, 1975), M. Edelstein, Overseas Investment in the Age of High Imperialism: The United Kingdom, 1850–1914 (London, 1982), M. Edelstein, ‘Foreign Investment and Empire, 1860–1914’, in R. Floud and D. McCloskey (eds), The Economic History of Britain Since 1700, Vol. II (Cambridge, 1981), and P.J. Cain and A.G. Hopkins, British Imperialism: Innovation and Expansion, 1688–1914 (London, 1993), pp. 181–201. 36 D. Kynaston, The City of London. Vol. 1: A World of Its Own, 1815–1890 (London, 1994), p. 220. 106

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The financial boom in Britain coincided with William’s success in securing Government of India mail contracts, and eased his ability to raise capital for BI. His achievements in India, however, also attracted the attention of figures in the City of London who were busily engaged in floating new firms for investment in the sub-continent. In 1862, W.P Andrew recruited William Mackinnon as a director of the Scinde, Punjaub and Delhi Bank Corporation, which he set up as a banking adjunct to his railway and river steamship companies at work in the Indus valley.37 These latter firms were in turn loosely connected with the London, Brighton and South Coast Railway Co, the former Managing Director of which was Samuel Laing, an Essex MP and City financier, who had recently been Indian Finance Minister in Calcutta. In 1863 Laing, who held a few shares in BI though nominees, encouraged William to bring his Glasgow and Calcutta associates into two new concerns – the Land Mortgage Bank of India Ltd, in which William became a director, and the General Credit and Finance Co of London Ltd. The General Credit and Finance Co was established as the London end of an Anglo-French banking alliance. Its directors included Edward Blount of the Paris bank, Laffitte Blount et Cie, who had previously been associated with Laing in railway promotion in France, and who in 1870 became President of the large Société Generale of Paris. Most of the board, however, comprised London-based men with Indian and Middle Eastern experience or, in the case of Lord Brassey, significant railway-financing interests.38 William lobbied his new contacts among its promoters on behalf his old friend, James Macdonald, who had retired from banking in Calcutta. Macdonald was appointed as General Credit’s first manager. This was a very different financial institution from the Scottish banks, or even the London commercial banks, with which William was familiar. General Credit, one of several new City institutions established in the aftermath of the Companies Act of 1862, was an imitation of the Crédit Mobiler type of finance company that had developed in France during the 1850s. Its purposes were essentially to negotiate international loans and to promote and invest in new enterprises, particularly railway companies, within Europe and beyond. William’s connections to this investment company – as a shareholder, an associate of some of the directors, and a friend of the general manager – opened up a doorway into international finance. It was an opening he wished to exploit and extend. Between 1863 and 1866, William headed small syndicates of family and friends in Scotland and India who took up allotments of shares in new concerns floated by General Credit and Finance – including the Land Mortgage Bank of India (Crèdit Foncier Indien) Ltd., of which William

37

See the Scinde, Punjaub & Delhi Bank Corporation Ltd., BT31/714/96C. P.L Cottrell, Investment Banking in England, 1856–1881: A Case Study of the International Financial Society (New York and London, 1985), Vol. 1, pp. 104–6; S.J. Reid (ed.), Memoirs of Sir Edward Blount (London, 1902), esp. pp. 49–50.

38

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became a director, and the Anglo-Egyptian Bank. They also dabbled in the shares of the General Credit and Finance itself. However, they do not appear to have been party, other than as ordinary shareholders, to General Credit’s substantial involvement in railway-financing. Most of the new investment companies with which William associated himself – including the Scinde Punjaub and Dehli Bank and the Land Mortgage Bank of India – were typical bubble creations. They failed to survive the inevitable downturn, which came with the crisis of May–June 1866 which brought down the large financial house of Overend Guerney. Although General Credit and Finance escaped the collapse, it survived in a severely weakened condition. Consequently, it was reconstituted in November 1866 as the General Credit and Discount Company, with the intention that it give up the financing of new companies in favour of bill market operations.39 It lost several directors with a financial background, including Laing, but gained others with mercantile experience, including William Mackinnon, who in January 1867 swapped his seat in the Land Mortgage Bank for one in General Credit and Discount. William’s role as a director was to provide a link to the Glasgow banks, and any re-discounting needs they might have, and more especially to members of the merchant communities in Scotland and in London who might require discounting services or other forms of credit. William regularly advised his old friend, James MacDonald, on the financial standing and credit-worthiness of such individuals, and was occasionally called upon to do other tasks. Despite its new orientation as a discount company, General Credit did not entirely abandon its earlier investment role. It was still entwined in the consequences of its previous railway financing, and it also involved itself for time to time in such new business as underwriting bond issues for the government of Egypt or new share issues for the Scinde Punjaub and Delhi Railway. This provided continuing opportunities for William and his nephew Duncan MacNeill to speculate in new issues through the small private syndicates of family and friends. William’s involvement with General Credit and Discount was not an essential part of the business networking he had used to establish BI and NISM. It was rather a by-product of that process. Nevertheless, having his feet under the boardroom table of a largish City institution soon began to affect his relationship with parts of the network, more especially the City of Glasgow Bank. On the one hand, being able to do business for the family firms through James Macdonald added to an already established tendency to spread their deposit and discounting needs over a wider range of institutions. As Jamie Hall put it: James Macdonald’s ‘shop is a most convenient one for us and our account a good one for him.’40 Transactions with the City of Glasgow 39 W.T.C. King, History of the London Discount Market (London, 1936), 257–8; PRO: BT31/1301/3324. 40 J.M. Hall to W. Mackinnon, 3 Feb. 1868, MP India File 5.

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Bank consequently declined in volume.41 On the other hand, William’s City of London connections, relatively slight though they were, rendered him more valuable to the Glasgow bank and brought pressure on him to remain on its board, from which he wanted to resign. His co-directors elected him as Chairman of the Bank for the financial year 1865–66, but he was able to attend only a third of its meetings. He accepted re-election as a director in July 1866 only reluctantly, and with the need to safeguard the Bank from the effects of the Overend Guerney crash high in his mind. However, by February 1868, with the immediate pressures of the financial crisis behind him, he once again contemplated retiral from the board – but met the same resistance to the idea from the other directors and the manager. William’s value to the Bank had increased since he took responsibility for sorting out the affairs of a US railroad in which the Bank had a majority holding42 – an act which is in turn only explicable by reference to his connections with General Credit and Discount in London. The City of Glasgow Bank found itself after the financial crisis of 1857 in possession of large securities in a railway company which had been floated in the State of Wisconsin. The Racine and Mississippi Railroad Co had been established to connect the lake town of Racine, on Lake Michigan, with the Mississippi river, thereby providing a connection between the trade of these two waterways as well as improving transportation and marketing opportunities for the farmers of southern Wisconsin and northwestern Illinois.43 The Bank directors had little knowledge of the American economy or of business conditions there; and very little experience of railway finance, even in a Scottish context. Consequently, they relied heavily on the advice of Richard Irvin, an expatriate merchant banker in New York, who acted as the middleman between the Bank and the railroad company. Meanwhile, George

41 Mackinnon Mackenzie & Co’s last ‘exchange operation’ for the Bank in Calcutta took place in 1864–5 and the last recorded credits authorised for W. Mackinnon & Co’s account occurred in January 1866. Similarly, an analysis of W. Mackinnon & Co’s discounting arrangements between 1857 and 1870 reveals that the bill business it did with the City of Glasgow Bank represented a declining share of the total, most of the decline taking after 1866. (Meetings on 16 June 1864 and 16 Jan. 1866, ‘Excerpts from Directors Minutes’, UGD 108/2; ‘Notes by Mr J. Wyllie Guild, C.A., Glasgow’ (1881), 42–3, MP City of Glasgow Bank File 33.) 42 ‘I had an opportunity of bringing the subject of your retirement up with Stronach yesterday’, Jamie wrote from Glasgow, ‘but I confess to very little purpose. My idea is that you won’t retire with his consent until the American Railway interest is realized in some form or other. The bare mentioning of it makes him shrink. . . . My idea is he would resign if you left at present.’ (J.M. Hall to W. Mackinnon, 26 Feb. 1868, MP City of Glasgow Bank File 15.) 43 For a detailed account of the history of what became the Western Union Railroad, see R.E. Tyson, ‘Scottish Investment in American Railways: the Case of the City of Glasgow Bank, 1856–1881’, in P.L. Payne (ed.) Studies in Scottish Business History (London, 1976), pp. 387–416.

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A. Thomson, another emigrant Scot formerly employed as a stockbroker in New York, had been appointed to represent the Bank’s interests in the affairs of the railway, and had used this position to take effective control of the railway’s management for himself. The problem for the Bank was that the railway was only partly constructed and was not yet a paying proposition. Consequently, ‘it very soon became clear that, unless the directors were prepared to encounter the loss of their advances . . . with accruing interest, they must make up their minds to “nurse the line”, i.e. they must advance more money to enable the railroad to be completed to such an extent as to connect Lake Michigan with the Mississippi, without which it could not ultimately prove a paying concern’.44 Rather than write-off their loans against the securities as bad debt, the board, assured by Irvin that the railway would eventually come good, advanced more and more money to Thomson. This policy they pursued through the years of the US Civil War, hoping that once the war was over a buyer for the Bank’s very large stake in the railway would be found. By June 1866 lending to what had now evolved into the Western Union Railroad had grown to £597,612, against securities which were nominally worth $3,882,668. It was the largest debt on the Bank’s books. The Overend Guerney crisis further postponed efforts to find a buyer, but in October 1866, a delegation comprising James Macalister Hall and Henry Dunlop (a former chairman of the Bank) went to New York to consult with Irvin and seek out prospective American buyers. Jamie, who had no formal connection with the Bank, was entrusted with such a mission because of William Mackinnon’s standing, for it was as William’s business partner, oldest friend and closest confidant – J.N. Fleming described the two men as being like brothers45 – that Jamie went to New York to find a purchaser for the railway. Discussions with various interested parties eventually resulted in an offer from the Chicago and North-Western Railroad Co in February 1867. G.A Thomson and Richard Irvin were both hostile to this offer, and the directors swithered about whether or not to accept it. At this point, William Mackinnon attempted to intervene decisively, by transferring the effective day-to-day considerations of the railway’s affairs from Glasgow to London, where he was ensconced on the board of the General Credit & Discount Co. In March 1867, he secured a decision that a London Committee of the Western Union Railroad should be established. This Committee, comprising Jamie Hall, John Fleming, and James Macdonald (with William Mackinnon and James Nicol Fleming in regular attendance), was authorised ‘to exercise a general superintendence over the affairs of the railroad, to correspond direct

44 Lord President, in ‘Opinions of the Judges in Note for the Liquidators of the City of Glasgow Bank against William Mackinnon, First Division’ (23 Dec. 1881). 45 Evidence of James Nicol Fleming (Chicago, 20 April 1881), ‘Action of Liquidators: Appendix B: Evidence taken in America’, 674, UGD 108/10/2.

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from time to time with the president, the agents in New York, and any of the other officers of the Company, when necessary; and generally to give to these gentlemen . . . such directions and instructions as to them may appear requisite in connection with the Company’s affairs.’46 The Committee’s secretary, who did the bulk of the routine work, was Charles S. Leresche, another of William’s old Calcutta friends and also James Macdonald’s son-inlaw. Leresche’s Calcutta agency house, Potter & Co, had been brought down by the Overend Guerney crisis, so he was unemployed and cooling his heels in London when William approached him in June 1867 to become secretary to the London Committee of the Western Union Bondholders and Stockholders. What was the purpose of interposing a London Committee between the Bank, the railroad, and the Bank’s New York agent? William’s explanation was that it was intended to relieve the Bank’s manager from the very heavy pressure of work involved in the correspondence with Racine and New York, as well as to conceal the Bank’s relationship to the railway. ‘I think it was not desirable’, he commented, ‘to have the Bank’s name appearing in connection with it, for it was a large account, and an account we were forced into, and one we wanted to get rid of with the least possible delay.’47 However, he also had other purposes in mind. The Committee would focus consideration of the railway’s future in a London setting, where he now spent much of his time, and place him more firmly at the centre of events instead of on the periphery of a complex triangle of transactions between Glasgow, New York and Racine. Equally importantly, it would secure the assistance of James Macdonald, who was much more experienced in railway finance than anyone associated with the City of Glasgow Bank. Finally, William had it in mind that if there was no immediate sale of the railway securities the assistance of General Credit and Discount might be obtained in the further financing of the railway through the issue and sale of new bonds.48 His strategy in other words was to try to get help from General Credit and Discount in either getting rid of the City of Glasgow Bank’s problem progeny or giving further sustenance to it. Like James Nicol Fleming, the other moving spirit behind the arrangement, he was of the view that railway investment was not the proper business of a ‘Scotch Bank’,49 and was seeking a way to move the railway from the ambit of the City of Glasgow Bank to the sphere of General Credit and Discount, with possible private benefits to himself.

46

‘Action of Liquidators, Appendix E: Correspondence, Documents and Accounts, 1857–78’, 1454, UGD 108/10/5. 47 Evidence of William Mackinnon, 18 May 1881, ‘Action of Liquidators, Appendix A’, 207, UGD 108/10/1. 48 W. Mackinnon to A. Stronach, 21 June 1867, ‘Action of Liquidators, Appendix E’, 1486, UGD 108/10/5. 49 Evidence of James Nicol Fleming, ‘Action of Liquidators, Appendix B’, 679, UGD 108/10/2. 111

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The work of Leresche and the London Committee eventually led to an offer to acquire control of the railway from Alexander Mitchell, the president of a Milwaukee bank and a director with controlling interests in two MidWestern railways. Mitchell, yet another emigrant Scot, had been in business in Glasgow before leaving for the USA, was a school friend of Alex Stronach, the Bank’s manager, and was also known to some of the Bank directors. William Mackinnon saw Mitchell as a potential ally, and reformulated his plans into a scheme whereby Mitchell and his American associates would buy one half of the Bank’s interest in the railway while William and his London associates, including the General Credit and Discount, would acquire the other half.50 However, James Macdonald proved unwilling for General Credit and Discount to invest in the railway. He was now too well-informed about the Western Union Railway, and too sceptical about its prospects, to allow himself to be drawn into such a proposal, even when it was being urged upon him by his son-in-law and one of his closest friends. William consequently threw himself and his influence entirely behind Mitchell’s bid. The deal was done at a meeting held in the offices of General Credit and Discount on 26 April 1869. It was not, in truth, a particularly good deal. The Bank handed over sufficient stock in the Western Union Co to give Mitchell control of that company. The total value of the bonds also held by the Bank was written-down from $4 million to $3 million, on which Mitchell agreed to pay 3 per cent interest for three years and 7 per cent thereafter. In effect, the Bank sold its control of the railway for £325,000 in cash and a promise that Mitchell would do something which Thomson had never done, that is to so manage the railway as to be able to pay interest on the bonds.51 The Bank drew a line under its US railway account. It now had securities in the Western Union Railroad Co and the related Racine Warehouse & Dock Co valued at $4,874,330. Against that stood its advances to the railway, which were valued at £905,166.52 Despite all William’s efforts, the Bank remained seriously over-extended in its financial commitments to the Western Union Railway, and highly dependent upon people in the USA over whom it had little influence or control to look after its financial interests there. The arrangement with Alex Mitchell presented William Mackinnon with the opportunity he had long sought – to withdraw from the City of Glasgow Bank’s direction with some dignity and little sense of work being left undone. He resigned on 18 July 1870.53 His directorship in the Bank, whose lines of 50

W. Mackinnon to A. Stronach, 28 Dec. 1868, 28 Jan 1868, and 3 Feb. 1869, C.S. Leresche to A. Stronach, 8 Jan. 1868, and W. Mackinnon to C.S. Leresche, 3 Feb. 1869, ‘Action of Liquidators, Appendix E’, 1634–1645, UGD 108/10/5. 51 The full text of the agreement can be found in the Minute of the Meeting of the London Committee, 28 April 1869, ‘Action of Liquidator, Appendix E’, 1688–90, UGD 108/10/5. 52 Tyson, ‘Scottish Investment’, Table 4, p. 415. 53 He did so in a letter that reviewed the difficulties he had had performing the duties of a 112

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credit had helped him first to build up his mercantile business in Glasgow and Calcutta, and then to diversify into steamshipping, had ceased to be useful. He now had multiple channels of access to commercial finance, including sources in London. Furthermore, during the Overend Guerney financial crisis of 1866 he had taken the decision not to employ the family firms’ own capital in trade between Britain and India. Although apparently intended as a shortterm reaction to the crisis, this reliance on commission work alone became a permanent feature of his mercantile strategy and greatly reduced the need to raise credit for the family firms themselves. Only the hope of making something out of the Bank’s difficulties with its American railway, both for himself and General Credit and Discount, had kept him on the Bank’s board in the years after 1866. William’s involvement with the Western Union Railroad was more than an unwelcome burden, and a distraction from his primary roles as a merchant and shipowner. It was also a formative episode in the development of his career, and in the evolution of his business thinking. Through the complex affairs of that distant railway he first obtained an insight into, and an interest in, the techniques of railway financing. This awakened an ambition to add railway financing to the range of activities to which he devoted his time and energies. The satisfaction of that ambition, however, would lie in London rather than Glasgow. From the world of commerce and shipping, with which he was familiar and at ease, his Anglo-Indian friends and contacts had introduced him to the world of high finance in the imperial metropolis. It was a new and exciting business environment, in which he wished to make his mark. Specifically, he wanted to bring an investment opportunity to the boardroom of the General Credit and Discount, as he had seen others do, and have it taken up and pushed by the City firm with which he was now associated. He may have been trying to forge a closer working relationship between the Bank and General Credit, but above all he wanted the esteem of the City men gathered around the boardroom table. He had been provided with an opening into the City of London but had yet to find a way to exploit it. ***** Entanglement with the City of Glasgow Bank’s ‘problem’ account drew William Mackinnon and Jamie Hall away from the core business of their enterprise network, trade and shipping in the Indian Ocean maritime region, during the later 1860s, but the distraction was not a serious one. At this time,

director since 1861 and which placed stress on the fact that, since his purchase of Balinakill estate in Kintyre, he no longer had a residence in Glasgow, one of the normal qualifications for a director. (W. Mackinnon to A. Stronach, 18 July 1870, MP Misc. Commercial File 66.) 113

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the senior family firms experienced sufficient success to be able to seed new junior firms, to consolidate their footholds in coastal shipping and commodity production in India, while reducing their exposure to the vagaries of the cotton trade between Britain and India, and to see off potentially difficult competition for their new steam-packet service in the Indonesian archipelago. Although the later 1860s were more depressed than the boom years of the early 1860s, this merely served to slow down the diversification activities of the ‘clan’ which began in the late 1850s, and which had turned William Mackinnon and James Macalister Hall into moderately wealthy men. The combined capital of their Glasgow and Calcutta houses grew from £36,000 in 1859 to £190,620 in 1868,54 and taking account of their shares in BI, NISM and other properties and investments, their total personal wealth was probably over £140,00 each around 1870. For a self-made man like William Mackinnon, still in his late forties, this was a tidy sum, and his lifestyle began to reflect his growing fortune. In addition to maintaining a town house at 8 Woodside Terrace in Glasgow, William acquired a country estate. Like many successful Glasgow merchants before him, he announced his arrival among the city’s business elite by adopting the plumage of the rural gentry. He did so, indeed, with such enthusiasm that Peter Denny, the shipbuilder, promptly nicknamed him ‘The Laird’. In 1869 he purchased the land and mansion house at Balinakill, in the northwest corner of the Kintyre peninsula. It was a beautiful location, with hills behind on which his guests could shoot in season, a gentle wooded slope leading down to the little village of Clachan where most of the estate workers lived, and a foreshore with a jetty for boating, the whole estate looking westwards to the Paps of Jura and the Atlantic Ocean. Here William and Janet began to entertain regularly, particularly in the spring and autumn months. Especially significant forms of entertainment for family, friends and those he wished to impress, such as men from the India Office, were trial trips on BI or NISM steamers preparing to leave the Clyde. Small parties were wined and dined, often at the shipbuilder’s expense, on cruises in the Firth of Clyde, around the Inner Hebrides, or to the Giant’s Causeway off the Antrim coast. For those from London and the Home Counties who could not make the trip north, William began to hold court with working breakfasts and dinners at the Burlington Hotel on his regular visits to the metropolis. William and Janet remained childless and found their pleasure in the company of family and close friends like the Halls, Gunnis’s, Beggs and Macdonalds, not only in Scotland and London but also on the Continent. During the summer, a favourite spot was the spa resort of Bad Homburg, near Frankfurt, which had been recommended by the Lieberts. Excursions to the South of France and Italy began to be made in the winter months, and were often timed to coincide with the arrival or departure of a Mackinnon or Hall to and from Calcutta via Brindisi.

54

P. Mackinnon to W. Mackinnon, 6 Feb. 1868, MP City of Glasgow File 15. 114

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William’s life had become a peripatetic one, although ultimately anchored by a strong sense of his roots in Kintyre. Jamie Hall’s lifestyle mirrored William’s in several respects. He too became a member of Glasgow’s prestigious Western Club and purchased a townhouse – at 15 Woodside Crescent, next door to the Jamesons – and a country estate – at Tangy, on the western flanks of Kintyre – where he lived during periods of leave from Calcutta. However, unlike William, he had remained a bachelor.55 He greatly admired David Begg for having made his fortune in India and then retiring home to enjoy it, and he was determined to follow this example. After several suggestions to William that he should be allowed to withdraw from their partnership, he pulled out of Wm. Mackinnon & Co and Mackinnon Mackenzie & Co in 1869, although retaining his directorship in BI. He urged William to follow suit, but knew him too well to have much hope that his advice would be followed: ‘My notion, William, is that you will only put the harness off when you can’t carry it any longer.’56 William indeed, a childless man with a wife who apparently made no strong demands on his time or affections, had allowed himself to become obsessed with his work. His waking periods were so largely taken up with business matters that even when visiting friends he would retire to a spare bedroom to conduct his extensive correspondence – and on one occasion he even wrote his letters from Bad Homburg ‘at the Dentists while the memsahib is suffering under his hands’.57 To replace Jamie, and to permit Peter Mackinnon and Peter Hall to spend more time at home in Scotland, three junior partners were admitted to Mackinnon Mackenzie & Co in 1870 – Neil Macmichael, who had returned to the firm from Sydney late in 1864; T.M. Russell who had been sent out to Calcutta in 1860 on the recommendation of Alex. Stronach of the City of Glasgow Bank, and had eventually taken charge of the important steamship department; and Duncan Mackinnon, younger brother to Peter (of Mackinnon Mackenzie & Co) and John Mackinnon (of MacNeill & Co). Like others before him, Duncan Mackinnon had benefitted from William’s guidance and protection – having been placed in an apprenticeship with William Stirling & Co, one of Glasgow’s oldest and most distinguished merchant houses Glasgow, and then sent out to Calcutta in 1866 to become an assistant in Mackinnon Mackenzie & Co. Jamie’s retirement also left William as the only senior partner in the Glasgow and Calcutta houses, and as the undisputed head of the Kintyre-based kinship group and the cluster of business enterprises it was building around itself. He was now a patriarch and landowner as well as an entrepreneur.

55 His proposal to David Begg’s daughter, Susan, shortly after William’s own wedding in 1856, was rejected (J.M. Hall to W. Mackinnon, 29 May 1856, MP Private Letters File 24) and he apparently formed no other attachments after that. 56 J.M. Hall, to W. Mackinnon, 3 Feb. 1868, MP India File 5. 57 W. Mackinnon to J. MacDonald, 8 July 1867, MP Private Letters File 134.

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It was not unusual for a single family to dominate a large overseas business group in the nineteenth century – in the way, for example, that the Keswick family from Dumfries-shire rose to pre-eminence within the Jardine Matheson group in East Asia.58 Nevertheless, the determined manner in which William Mackinnon advanced the business careers and interests of his family, both within his own firms and by the seizure of opportunities arising along the margins of their activities, is an outstanding example of the use of a kinship structure to create a diversified business group which was also the core of a large and active enterprise network. That an extended family or clan might provide the framework for, and undertake the co-ordinating functions of, a business organisation is neither a fanciful nor original idea. At least one student of organisational theory has identified modern industrial organisations which ‘closely resemble the clan form’ and in which ‘a variety of social mechanisms reduces differences between individual and organizational goals and produces a strong sense of community’. The key difference between such clan organisations and internalised, hierarchical firms is that the former ‘do not require explicit auditing and evaluation’ because ‘performance evaluation takes place through the kind of subtle reading of signal that is possible among intimate co-workers’.59 In other words, clan organisations rely upon a recognition of legitimate authority, sometimes of a traditional kind, and a common set of values and beliefs to ensure collaboration towards a common goal. Such a description aptly applies to the earlier, non-industrial form of business organisation represented by the Mackinnon group – particularly to the patriarchal authority exercised by William Mackinnon over the family firms and their affiliates, and to the set of beliefs in personal probity, loyalty to kin, thrift, the merits of formal education as well as practical experience, abstinence from alchohol and Sabbath-day observance that was shared by the Mackinnons and Halls. Those values, it seems clear, were rooted in the Highland society from which they came, and from its recent clan-based past in which kinship, both actual and fictive, was the main organising principle for social life. Highland Scots, however, were not alone in operating clan-based business groups outside their home territory. Similar phenomena were to be found among the Greek merchant communities in the Black Sea region in the nineteenth century,60 as well as the business networks of the overseas Chinese in Southeast Asia that were sustained by the ‘cultural values of familism,

58

M. Keswick (ed.), The Thistle and the Jade: A Celebration of 150 Years of Jardine Matheson & Co (London, 1982). 59 W.G. Ouchi, ‘Markets, bureaucracies and clans’, in G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds), Markets, Hierarchies and Networks: The Coordination of Social Life (London, 1991), p. 252. 60 I.P. Minoglu, ‘The Greek Merchant House of the Russian Black Sea: A Nineteenth Century Example of a Traders’ Coalition’, International Journal of Maritime History, 10 (1998), pp. 61–104. 116

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personal trust and autonomy’ which were part of ‘the Confucian periphery’.61 The Mackinnon group therefore was neither unique nor wholly unusual in discovering that the conduct of inter-connected international business activities might be best approached – especially in a world where communications and transport were still comparatively slow – by way of methods based on local autonomy and trust rather than bureaucratic managerial control from a single centre.

61

Wong Siu-lun, ‘Cultural Values and the State in Hong Kong and Singapore’, in R.A. Brown (ed.) Chinese Business Enterprise in Asia (London, 1995), p. 138. 117

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Part 2

Suez and after The Canal not only vastly shortened distances to the east . . . but also proved entirely unsuitable for sailing ships. The result was that steamers . . . were suddenly able to compete successfully with sail at Bombay, some 6,200 miles from Britain. . . . Furthermore, the peculiar advantage the Canal conferred on steamers suddenly introduced ordinary tramp steamers on a voyage twice the length of those they had previously engaged in. This extra distance increased the value of improved fuel efficiency and led to the near universal adoption of the energy efficient, but still expensive, compound engine. C. Knick Harley, ‘Aspects of the Economics of Shipping, 1850–1913’, in Lewis R. Fischer and Gerald E. Panting (eds) Change and Adaptation in Maritime History (St. John’s, Newfoundland, 1985), pp. 176–7

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5

The Suez Canal, India and the Netherlands Indies, 1869–82 The opening of the Suez Canal in November 1869 was one of the most important landmarks in nineteenth century maritime history. Although it impacted only a little on shipping in northern European or North Atlantic waters, it revolutionised the shipping trades between Europe and Asia and strongly influenced those between Europe and Australasia as well. The Canal considerably shortened distances between European and Asian ports, but did so by a route which was much more favourable to steamships than sailing ships (because of the costs to the latter of towage through the canal, and the fickle nature of the winds of the Red Sea). Steamships via the Canal now became competitive with sailing ships around the Cape of Good Hope and a tide of new steam tonnage poured through the Canal in the early years of its opening, in a search for cargoes and passengers. The Canal therefore hastened the transition from sail to steam in Asian trades. Sailing ships either became confined to the less remunerative bulk cargoes or were diverted onto the very long shipping routes, such as those from Europe to Australia or the Pacific coast of South America, where steam remained less competitive until the widespread adoption of triple and quadruple expansion engines towards the end of the century.1 However, the opening of the Canal was more than a challenge to the owners of sailing ships plying to and from Asia around the Cape. It was also a threat to steamship companies already operating in the Indian Ocean, for whom distance from Europe had previously provided some

1 There is a large literature on the impact of the Suez Canal, including J.A. Fairlie, ‘The Economic Effects of Ship Canals’, Annals of the American Academy of Political Science, XI (1898), M.E. Fletcher, ‘The Suez Canal and World Shipping, 1869–1914’, Journal of Economic History, 18 (1958), F. Spooner, ‘The Suez Canal and the Growth of the International Economy, 1869–1914’, in Mediterraneo e Oceano Indiano (Florence, 1970), and D.A. Farnie, East and West of Suez: The Suez Canal in World History, 1854–1956 (Oxford, 1969). Most of this literature, however, with the partial exception of Farnie, is concerned with the effects of the canal on shipping between Europe and Asia rather than shipping within Asian waters. This chapter is largely based upon an earlier essay – J.F. Munro, ‘Suez and the Shipowner: The Response of the Mackinnon Shipping Group to the Opening of the Canal, 1869–84’, in L.R. Fischer and H.W. Nordvik (eds), Shipping and Trade, 1750–1950: Essays in International Maritime Economic History (Pontefract, 1990) – which broke new ground in evaluating the canal’s impact on steamship lines already at work in Asian waters.

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shelter from the competition of technologically and commercially more efficient enterprises located in Europe. For such concerns, the opening of the Canal was like the unlocking of a floodgate. Some, like the Bombay and Bengal Steamship Company, simply foundered; others, like P&O, caught with two ageing fleets with separate establishments and crews, one in the Mediterranean and the other in the Indian Ocean, had to undergo painful and expensive reconstruction to stay afloat.2 How did William Mackinnon and his associates respond to the new maritime environment? What were the consequences of the opening of the Suez Canal for the British India and Netherlands India Steam Navigation Companies? BI and NISM differed in one important respect from the P&O, the Messageries Impériales (from 1871, the Messageries Maritimes) and the Bombay and Bengal steamship companies. These latter firms were primarily engaged in long-distance, deep-water lines from Suez to Bombay, Colombo, Singapore and other major ports, where competition was most acute in the years immediately following the opening of the canal. BI and NISM on the other hand were active in the shallow-water, short-distance coast and country trades, which were less immediately threatened by steamships using the Canal. They therefore enjoyed something of a breathing space in which to adjust to change, and to prepare themselves for the new era inaugurated by the shift from sail to steam in inter-continental shipping. Moreover, because they dominated coasting operations in their respective spheres, their potential as feeders/distributors for the new Canal lines gave them a strong card to play in the shipping politics of the early-to-mid 1870s. Consequently, BI and NISM were in a position to become major beneficiaries of the Suez Canal. William Mackinnon was well aware of the implications of the canal for shipping. Thanks to his French banking connections (through General Credit and Discount), he discussed the possible development of a steam line through the Canal with a representative of the Canal Company more than a year before the work was completed. He also received from Jamie Hall, who was a guest of the P&O at the opening ceremony, a first hand account of the indignity that befell that company’s steamer, which seemed to symbolise the problems faced by the more venerable British concern: We got to Port Said on Tuesday morning. On Wednesday we did not go with the fleet to Ismailia because no number had been arranged us. We did leave on Wednesday and failed to get through (because of a large Egyptian vessel ahead of us which was stopped by the fouling of her screw). We did on Thursday morning what we might have done on Wednesday afternoon, pass her, but were again stopped at the entrance to Lake Trinsah by ‘Le Chetif’, an Egyptian frigate

2

Boyd Cable, A Hundred Years of the P and O (London, 1937), pp. 162–77; David Howarth and Stephen Howarth, The Story of P&O (London, 1994), pp. 95–101; Farnie, Suez, pp. 167–8. 122

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grounded, and while there saw the fleet pass down the Canal to Suez on the other side. It was mortifying.3

Nevertheless, William was reluctant to antagonise the P&O, even in its troubled condition, by using the Canal to start a steamship line between Britain and India, and he directed his thinking elsewhere. Partly this was towards a revised version of his ‘Arabian line’ scheme, but mainly towards the problems of defending BI’s and NISM’s existing coast and country lines against any possible challenge. Heading off competition for cargo and passengers, for liner routes, for mail contracts, and even for scarce coal supplies, from the steamships pouring through the Canal, and from their owners or managers, would be necessary before full advantage could be taken of opportunities for diversification into new routes and new trades. The most immediate problem was the impact upon fuel supplies from a sudden increase in steam tonnage in eastern waters. Mackinnon Mackenzie & Co warned in July 1869 that ‘If the Suez canal will be opened as it is said towards the end of the year, a great impetus will be given to steam traffic to Bombay, and coals will necessarily advance in value for a time till the increased consumption is met by large shipments from England.’4 For BI and NISM, whose steamers were equipped with relatively inefficient, fuel-hungry, first-generation engines, coal costs were a major consideration. The sheer scale of their fuel needs – BI was the largest single purchaser of coal in Calcutta – rendered their operations particularly sensitive to movements in coal markets. A large part of the work of the secretaries in Glasgow and London, and of the managers in Calcutta and Batavia, was therefore taken up with exchanging intelligence about coal markets and in arranging purchases and shipments. The expected rise in prices did indeed occur. However, substantial stock-piling of coal in advance of the Canal’s opening, the careful timing of dealings in the coal markets, experiments in mixing Australian and Bengali coal with supplies from Britain, the purchasing of supplies only in the major ports, where lowest prices prevailed, and the distribution of coal to the minor ports in the form of bunkerage, all helped to cushion BI and NISM from the worst effects of the coaling crisis.5 After 1874, the problem disappeared completely, as the switch of sailing tonnage into coal cargoes, the use of coal for bunkerage in canal steamers, and the emergence of new sources of supply within the Indian Ocean region eventually brought prices down

3

J.M. Hall, to W. Mackinnon, MP Private Letters File 36. Mackinnon Mackenzie & Co to Secretary (Glasgow), 23 July 1869, BIS/6/72. 5 The tactics for dealing with fuel supplies can be observed most clearly in the weekly correspondence between BI’s Secretary and Managing Agents, which was dominated by coal matters between 1869 and 1875. (Correspondence: Secretary (Glasgow) to Mackinnon Mackenzie & Co, BIS/6/9–12, and Correspondence: To Secretary (Glasgow), BIS/6/72–5.) 4

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below the pre-1869 level. A long-term decline in coal freights from British to Asian ports helped considerably to reduce the costs of steamers operating east of Suez.6 Difficulties over fuel costs proved temporary, but they strengthened the resolve of William Mackinnon and his fellow directors to improve the fuel efficiency of BI’s and NISM’s steamships. This was a policy to which they were even more inclined from the fear of rivalry from more efficient canal steamers. The nagging worry which BI’s managers communicated to Glasgow through 1869 and 1870 was that the owners of the new steamships penetrating the Indian Ocean via the Canal would not confine themselves to competing with P&O and Messageries on the oceanic routes. They might also find it worth their while to enter the coastal trades, intruding more especially perhaps on the line between Bombay and Calcutta. BI would be illprepared to meet such a challenge because its steamers were ageing, and many had been run hard in government service during the Abyssinian campaign, with the result that engines and boilers were showing signs of wear and tear. Consequently, it was decided to re-equip the fleet by returning the steamers progressively to Clyde yards to be fitted with newer high-pressure boilers and compound engines. The first steamship to pass through the newly-opened canal from south to north, from Red Sea to Mediterranean, was BI’s steamer India en route to the yard of Wm. Denny & Co, Dumbarton. ‘You are aware perhaps’, Edwyn Dawes wrote, that during the last two years a most important saving of fuel has been effected by the application of high pressure to marine engines and by this compound system the saving of fuel is some 30–40 per cent. But for the canal, this discovery would have been a very serious one for the company for it might have enabled competition to put more economical steamers on their stations and derive a considerable benefit before the company could get the old-fashioned steamers home for alteration. As it is, the company has at once faced the change and one by one the steamers requiring new boilers are sent home for the new machinery.7

Throughout the early 1870s a constant stream of small BI steamers passed through the Canal on the way to or from such a refit in various Clyde yards. NISM, operating at a further distance from Suez, was at less immediate risk from the intrusion of tramp steamers onto its lines. Nevertheless, the policy of refitting steamers with new boilers and compound engines was extended from BI to NISM in 1872, when William Mackinnon insisted that two steamers being bought in India for NISM should be compounded before going into service. Appropriately, perhaps, the first vessel in the NISM fleet to be 6

The cost of freighting coals from South Wales to Bombay, for example, fell from 25/– to 32/– in 1870 to 14/6 to 22/– in 1882. (E.A.V. Angier, Fifty Years’ Freights, 1869–1919 (London, 1920). 7 E.S. Dawes to Col. L. Pelly, 12 Aug. 1870, Dawes Letterbook, 1868–74. 124

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sent home from Batavia to the Clyde for an engine re-fit was the William Mackinnon.8 Meanwhile, further reductions in BI’s costs were being secured through economies in crewing. Instructions to Mackinnon Mackenzie & Co to reduce the overall size of crews had some effect on the number of Indian seamen employed. The main burden of the reforms, however, fell on the European captains, officers and engineers, whom William and his fellow directors regarded as being much too expensive for the changing maritime environment. The system of captains’ commissions was ended, and a restructuring of engineers’ pay and conditions was introduced. Such paring of crew costs and savings in fuel costs from engine re-fits were necessary pre-conditions for the ‘general reduction upon our rates of freight and passage money [which] should be made . . . to meet the change in trade caused by the opening of the Suez Canal, and thereby probably disarming opposition’.9 Pre-emptive cuts of up to 20 per cent of the advertised rates were put in place on BI’s various lines in 1870. The NISM managers in Batavia appear to have come under less pressure from the board of directors to secure immediate savings and reductions of rates. Nevertheless, hints of possible local competition, from a disgruntled former shareholder in the company, were sufficient to induce a reduction in rates on the Java north coast service in 1872.10 But rates reductions in themselves might not be enough to deflect the threat from tramp canal steamers on contract lines. If tramps were to offer for cargo on the coast and country routes which BI and NISM had made their own, the most effective response would be for the two companies to put vessels of their own into tramping activities, in direct opposition to the competitors. However, in such a contest the relatively small, general-purpose vessels used by BI and NISM would be at a disadvantage from their more limited cargocarrying capacity. What the Clyde men of the Mackinnon group feared most was the ‘east coaster’, the cargo-steamer originally developed for North Sea trades that now began to appear in the Indian Ocean. The decision was therefore taken to order for BI four new steamers of ‘enlarged carrying capacity’, the first two of which, the 1,700 tons Arcot and Patna, went out to India in 1871 and 1872, just in time to meet the first real challenge of tramp steamers on the Calcutta berths. To provide the same sort of flexibility of response for NISM, most of the small, elderly and less efficient steamers taken over from Besier & Johnkheim were replaced with more modern and larger Clyde-built vessels, five of which were added to the NISM fleet for this purpose in 1871–2.11

8 E.S. Dawes to Shepherd, 27 June 1872, Dawes Letterbook, 1868–74; R.H. Evans, Secretary, NISM Co, to W. Mackinnon, 3 Dec. 1874, MP Private Letters File 19. 9 P. Macnaughton to Mackinnon Mackenzie & Co, 3 Feb. 1870, BIS/6/10. 10 S. van Hulstyn to W. Mackinnon, 11 Sept. 1871, MP India File 7. 11 The largest of these was the Shiraz, intended for the group’s line from Britain through

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All the evidence suggests that William Mackinnon, his partners and his associates had a keen sense of the short-term commercial consequences of the opening of the Suez Canal, and that they moved quickly to defend the position which BI and NISM held on Asian coasts. If their concern focused more on BI than NISM, this reflected not merely BI’s premier position in their interests and affection but also the fact that it seemed the more immediately open to challenge. For the Netherlands India S.N. Co, indeed, the most significant short-term influence was possibly less the opening of the Suez Canal in 1869 than the Anglo-Dutch Treaty of 1871. By delimiting respective British and Dutch spheres of interest in Southeast Asia, this laid the foundations for further colonial annexations in the region, and in particular gave the Dutch a free hand against the state of Atjeh at the northern end of Sumatra. The First and Second Atjeh Expeditions of 1873 and 1873–4, made heavy demands on NISM’s fleet. Six or seven of the company’s biggest steamers had to be pulled off the contract lines in March to May 1873 and again in November 1873 to January 1874, to help transport to northern Sumatra the thousands of troops and labourers, together with stores and equipment, needed for the campaigns, and also to evacuate the sick and wounded. Alexander Fraser did what he could to plug the gaps in services with extra vessels chartered from BI. However, as with BI’s experience with the Abyssinian Expedition of 1868, the Atjeh Expeditions of 1873–4 meant a substantial boost to NISM’s earnings.12 But if there were possible dangers for BI and, to a lesser extent NISM, from the opening of the Canal, there were also new opportunities to be found in the break up of the old P&O/Messageries duopoly by the new steamship lines being introduced between Europe and Asia. Through-traffic agreements with such lines were a form of defence for BI and NISM, securing a recognition of the group’s established ‘sphere of influence’ in the coasting trades and making the newcomers less likely to intrude upon them. They also helped to ensure that the two companies would obtain a share of any increase in traffic stemming from the opening of the Canal. ‘Allow me again to impress upon you’, BI’s Secretary wrote to the Managing Agents in 1870, ‘the importance which the Directors attach to thro’ traffic generally, as likely to form in the future a very considerable portion of the earnings of the steamers, and their

the Canal to the Persian Gulf but purchased from Gray Dawes & Co to meet NISM’s needs for larger tonnage. Renamed the William Mackinnon, it was at 1,147 tons some three times larger than the biggest of the former Cores de Vries vessels which were being replaced. (Neerlands Vloot en Rederijen, 1870–72; S. van Hulstyn to W. Mackinnon, 17 July 1871, MP India File 7, and Evans to W. Mackinnon, 20 July 1871, MP Private Letters File 18.) 12 M.C. Ricklefs, A History of Modern Indonesia (London, 1981), pp. 136–7; Anthony Reid, The Contest for North Sumatra (Kuala Lumpur, 1969), pp. 79–118; Koloniaal Verslag, 1873, p. 108, 1874, p. 101; E.S. Dawes to Johnstone, 3 Oct. 1873, Dawes Letterbook, 1868–74; P. Macnaughton to Mackinnon Mackenzie & Co, 12 June 1873, BIS/6/16. 126

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desire that, by judicious arrangements and the exertions of the outport agents, it may receive every encouragement.’13 P&O, whose through-traffic arrangements with BI pre-dated 1869, hoped to persuade the BI board not to make similar agreements with other lines, but in this it was unsuccessful. BI entered into through-traffic agreements in 1870 with George Smith of Glasgow’s City Line and such Liverpool firms as Rathbones and T. & J. Harrison. However, it was agreed that P&O should get a 10 per cent reduction over the rates arranged with other steamship owners, and in return P&O rebated 5 per cent commission to BI’s coast agents to encourage them to book cargo and passengers through to P&O.14 NISM’s links with long-distance steam operators were also extended. Through-traffic exchange arrangements with P&O and John Holts at Singapore led to NISM’s introduction in 1870 of a non-subsidised and direct Batavia-Singapore service, avoiding the delays caused by calls at intermediate ports on the contract line. Then in 1871 NISM came to an agreement with the new Stoomvaart Maatschappij Nederland (Netherlands Steamship Co), an Amsterdam-based firm which introduced the first Dutch steamship line through the Suez Canal to Batavia. Two directors of the Nederland Co, Messrs Boelen and Boissevain, were invited to the trial trip of a new NISM steamship on the Clyde in August 1871, but declined to travel all the way to Scotland. Sir Frederick Arthur was therefore despatched from London to Amsterdam to negotiate an agreement with them. This bound the two companies to tranship goods through Batavia exclusively in each other’s steamers at agreed rates. The agreement was for only two years in the first instance, and appears to have been terminated in the wake of the Nederland Co’s displeasure at NISM’s managers in Batavia making through-traffic arrangements with another firm in 1873.15 However, such were the realities of commercial steamshipping in and to the Indonesian archipelago that NISM continued to have non-exclusive through-traffic arrangements with the Nederland Co, as well as with the Rotterdam Lloyd company which started a second service between Holland and the Netherlands Indies in 1875. A further worry was that the Canal, by making it easier to place and maintain steamships east of Suez, would encourage more competitive tendering for BI’s and NISM’s mail contracts when they came up for renewal. BI was particularly susceptible to such a challenge, because it held ten 13

P. Macnaughton to Mackinnon Mackenzie & Co, 21 April 1870, BIS/6/10. J.M. Hall to W. Mackinnon, 17 Jan. 1870, MP Private Letters File 37; BISN Co Directors’ Minutes, 30 March & 23 Nov. 1870, BIS/1/2–3; P. Macnaughton to Mackinnon Mackenzie & Co, 6 Jan. to 18 July 1870, BIS/6/10–11. 15 M.G. de Boer, Geschiedenis der Amsterdamsche Stoomvaart (Amsterdam, 1921–22), Vol. 1, 197–8; ‘Agreement about Thro’-Goods between the Nederlandsch-Indische Stoomvaart Mij. and the Stoomvaart Mij. Nederland, 1871–72’, ARA-II: Stoomvaart Maatschappij Nederland (SMN) Archief, nr. 91; R.H. Evans to W. Mackinnon, 4 Sept. 1871 and 17 Oct. 1873, MP Private Letters File 18. 14

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contracts relating to a variety of routes, most of which came up for renewal at different dates. There was consequently the danger that even quite a small rival could undermine BI by picking off its contracts one by one. At this point, therefore, William’s skills as a negotiator, and his experience in dealing with India’s officialdom, were brought back into action. In 1861–63 he had won the mail contracts that gave BI supremacy around the coasts of India; now, a decade later, he secured a renewal and consolidation of these contracts, and laid the foundation for the rapid growth which BI enjoyed after the opening of the Canal. Although Sir Henry Bartle Frere exercised a supportive influence on the India Council, William’s principal allies on this occasion were Sir John Kaye of the India Office and more especially Alexander Monteath, Director General of the Indian Post Office. Monteath was a fellow Scot, the son of a small landowner from Crieff in Perthshire, who had joined the East India Company’s service early in 1857, and had worked his way up to become Under Secretary in the Home Department in Calcutta, with responsibility for education. By 1863 he was Acting Director General of the Post Office, and succeeded to the post permanently in 1867. During his period in office, a number of innovations and reforms were introduced, including travelling post offices on railways and steamers and the first postal directories and manuals.16 Monteath was also an elder of the Free Church of Scotland in Calcutta, and normally worshipped in the pew in front of that used by the Mackinnons and Halls. There he struck up a friendship with the resident Mackinnon Mackenzie & Co partners, who always found him well-disposed towards BI and prepared to be helpful in discussions over contractual obligations and contract renewals. In 1871, Monteath was granted leave to study Post Office arrangements in Britain, and was promptly invited by William Mackinnon to a trial trip party on the Clyde and then on to William’s new country house at Balinakill. The two men spent several days closeted together in August 1871, going over William’s grand design. This was a scheme to extend the frequency of service on some of BI’s contract lines, to open up some entirely new lines, and to consolidate all of BI’s contracts into one single contract with a longer lifespan than the three-to-five years of the existing contracts. (The model for this single consolidated contract was the one NISM had from the government of the Netherlands Indies.) William explained to Monteath that ‘the new and extended services’ he sought ‘would involve an increase of several thousand tons of steamers to the BI Co.’s fleet, and a proportionate outlay of capital, but this of course we should provide if an extension of the contracts for a period of 7–10 years were granted. Such an extension would

16

The fullest single account of Monteath’s career is to be found in the Resolution by Govt. of India, Finance Department, 30 July 1880 (No 1446 of Aug. 1880), Proceedings – India, Separate Revenue, Vol. 1546, IOLR. 128

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also enable us at once to conclude for Government an average reduction of 15% or 20% in the existing tariff rates for Government traffic.’17 Monteath returned to Calcutta and presented the scheme to the Government of India, where it met with opposition. Objections arose not on the obvious grounds that the purpose of the consolidating the contracts was to bypass public tendering. Instead, the various departments and provincial governments objected to the maintenance of particular lines, either because they were no longer necessary for postal purposes or because the services could equally well be provided by government steamers.18 William Mackinnon interpreted the latter opposition as ‘a desire on the part of the marine authorities to secure if possible a reconstruction of the Indian Marine without reference to the disadvantages which might arise from the general interests of commerce & the Empire’.19 He decided to go out to India to counteract the hostility. The Government of India, hearing that he was on his way, placed the whole matter in the hands of a committee chaired by Monteath. William left Britain on 23 November 1872, accompanied by Janet and by Edwyn Dawes, who would act as secretary and personal assistant. On arrival he did the rounds of departments in Bombay and Calcutta, and he presented to Monteath’s committee a statement that the Government of India received a full return from its subsidies to BI and that the costs of a government transport scheme would be much greater than its proponents suggested. When the committee reported in February 1873 it paid no attention to the wider policy debate about private versus public transport of the mails, but confined its comments to the need, or otherwise, of each of the eleven proposed lines. Those connecting Indian ports with Burma and the Straits Settlements were regarded as necessary on postal and commercial grounds. The weekly line from Bombay to Karachi and the Persian Gulf was justified on the political grounds that ‘Every British sail that appears in the Gulf adds to our political power and influence there.’ On the other hand, the Committee saw no good reason to support an entirely new line to carry mails from the Persian Gulf and Karachi to Aden (which William wanted as a means of connecting the group’s Gulf and London interests). The line under most serious threat of discontinuation was the long one from Calcutta to Bombay, for which the committee could not justify a subsidy on either postal or military grounds. It would have recommended withdrawal of the payment for this line but for two concessions which Monteath secured from William Mackinnon in private negotiations. The first was that BI would take on the mail service between Basra and Baghdad, via the Tigris River, at a subsidy considerably lower than that paid to the Euphrates and Tigris S.N. Co;

17

W. Mackinnon to A. Monteath, 2 Oct. 1871, MP Private File 166. Extract from Proceedings of Marine Dept., 2 Jan. 1873, and enclosures (No 16 of Feb. 1873), Proceedings, India, Separate Revenue, Vol. 667, IOLR. 19 W. Mackinnon to A. Monteath, 10 Jan. 1872, MP Private Letters File 166. 18

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the second that it would run an additional steamer between Bombay and Karachi, as an extension of the Calcutta-Bombay line, which would enable the Post Office to close its land line to Karachi across the Sind desert. The resulting savings to the Post Office were considered sufficient reason to continue financial support for the Calcutta-Bombay line. Alex Monteath had clearly gone out of his way to find a means whereby BI’s Calcutta-Bombay line, which held together its otherwise disparate services from its two portcity hubs, could continue to be subsidised by the Government of India. The Governor-General-in-Council, on receiving the report of the committee, agreed in March 1873 that a contract for ten lines should be entered into with BI, for the period 1 May 1874 to 30 April 1884, for an aggregate subsidy of Rs.7, 25,000 (or approximately £72,500) per annum. There would be three mail lines between Calcutta and the various Burma ports, one between Calcutta and Singapore and one between Moulmein and Singapore, as well as one linking Madras and the Coromandel ports with Rangoon. The Calcutta-Bombay mail line was renewed, as were the lines from Bombay to Karachi and to Basra. Finally, and despite the committee’s reservations, William Mackinnon achieved his goal of a mail contract for a monthly service between Aden, Karachi and the Persian Gulf. Although there were only two entirely new contract lines – the Basra to Karachi and Aden one and a Moulmein to Singapore one – services was also increased in frequency on most of the old lines. The consolidated contract, with its ten years to run, represented a considerable strengthening of BI’s relationship with the Government of India.20 1873 was also the year in which NISM’s contract with the government of the Dutch East Indies (due to expire at the end of 1875) would go out to public tender. Alexander Fraser invited William Mackinnon to pay him a visit in Batavia, to discuss strategy before returning to Britain. Although no record of such a trip survives, circumstantial evidence suggests that William did indeed visit Java, in February 1873, and that when he returned home to Scotland in May 1873 he was much better informed about the prospects facing NISM in the Indonesian archipelago. NISM was beginning to pay its way under the management of Alexander Fraser and Samuel van Hulstyn. Annual dividends of 5–8 per cent between 1869 and 1872, together with prospects that, because of the earnings from the First Atjeh Expedition, 1873 would be an even better financial year, meant that the company was becoming an asset rather than a liability. One measure of its changing significance was that the renewal of its

20 Messrs A.M. Monteath, J.A. Crawford and Col. B.E. Bacon to Secretary, Government of India Financial Department, 19 Feb. 1873 (No 2 of April 1873), Proceedings, India, Separate Revenue, Vol. 667, IOLR; Contract between Secretary of State for India in Council and B.I. Steam Navigation Co (14 April 1875), BIS/4/3; evidence of W. Mackinnon, 14 July 1873, ‘Report from Select Committee (Cape Colony and Zanzibar Mail Contracts)’, P.P. 1873 (334), p. 96.

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contract was allowed to take precedence over bidding for new Australian business. During 1871–2, Fraser had visited both Australia and Europe in pursuit of a proposed mail service between Singapore and Sydney (about which he and William Mackinnon also corresponded with the Colonial Office and the Government of Queensland). The Government of the Dutch East Indies was willing to contribute to the costs of such a line. However, in March 1873, apparently on William’s instructions, Peter Mackinnon gave formal notice to the Colonial Office in London that BI and NISM were withdrawing from the discussions about a Singapore-Sydney line. This resulted partly from doubts about the Group’s ability to take on an Australian line at a time of so many demands on their steam tonnage. It stemmed mainly, however, from apprehension that the continuing squabbles between the Australian colonies would have a negative impact on the Government of the Netherlands Indies and complicate the forthcoming attempt to renew NISM’s own mail contract.21 Consequently, when the Government of Queensland finally decided, later in 1873, to subsidise a mail service from Singapore to Brisbane from its own revenues, William Mackinnon, who had pursued such a contract for so long, was no longer in the hunt. The subsidy went instead to the Eastern and Australian Mail Steamship Company, managed by McTaggart, Tidman & Co of London. The tender conditions for the Netherlands Indies contract were announced in June 1873. Bids were sought for services on eleven lines for the fifteen-year period 1876 to 1890. Because the Mackinnons and Halls lacked the proximity to government in Batavia that they enjoyed in Calcutta, there was no question of them bypassing public tendering to enter into private negotiation with the government of the Netherlands Indies. They were also obliged to leave most of the work of preparing a tender to Fraser and Van Hulstyn in Batavia, to whom William offered typically bullish advice: ‘You will have several powerful competitors and must face the difficulty. We have an immense advantage over any new parties, and can undertake the New Contract at a cheaper rate than anyone else. The whole amount of subsidy bears a small proportion of the entire traffic, and with half our present subsidy we could, I am satisfied, earn a fair dividend. Our fleet is ample for all requirements, and we can add to it without making calls.’22 Despite such a show of confidence, based upon the knowledge that the compound engine and a decline in coal prices east of Suez would transform NISM’s working costs, the anxiety among the directors in Glasgow and

21

Normanby, Governor of Queensland, to Colonial Office, 28 Nov. 1871, and enclosures, CO 234/27/1066; Colonial Office Confidential Print, Australian 30 (1872) and Australian 38 (1873), CO 881/3; S. Van Hulstyn to W. Mackinnon, 17 July 1871, MP India File 7; R.H. Evans to W. Mackinnon, 7 March 1873, MP Private Letters File 18; J.M. Hall to W. Mackinnon, 11 March 1873, MP Private Letters File 38. 22 W. Mackinnon to A. Fraser, 12 Nov. 1873, MP Private Letters File 18. 131

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London during the later months of 1873 was enhanced by rumours that there would be at least two other bids. In the event, the Nederland Co, in dispute with NISM over through traffic arrangements and inclined to challenge its local dominance, stepped back from a bid on the advice of its agent in Batavia, and the new, small Rotterdam firm, the Nederlandse Stoomboot Maatschappij, proved no match for NISM. When the tenders were opened on 6 January 1874, the bid submitted by Fraser, at Fl.3.90 per geographic mile or just over half the rate per mile obtained from the existing contract, was the lower of the two. NISM duly obtained the new contract for the years 1876 to 1890, receiving in return for services on eleven inter-island and coastal routes an annual subsidy of Fl.198,051 (£16,504) and an interest-free loan of Fl.1, 200,000 (£100,000). Although the more competitive Dutch system of contracting meant that NISM received less generous state support than BI obtained in India, the Mackinnon group’s inner circle expected that reductions in costs and growth of trade would compensate for the lower level of public funding.23 ***** Renewal of BI’s and NISM’s mail contracts in 1873 was the architrave of William Mackinnon’s post-Suez strategy, and with the contracts won the two firms entered a period of consolidation and growth. Between 1869 and 1882, the BI fleet grew from 23 vessels totalling 21,752 tons and valued at £441,000, to one of 58 steamers totalling 98,832 tons and valued at £894,429 (Table 5.1). In the process it became the largest single company-owned fleet in the world, as measured by tonnage. NISM expanded somewhat more modestly, to a fleet of 26 steamers totalling 24,872 tons and worth £184,175. Even so, its growth over the 1870s was such that by the end of the decade it was the largest corporately-owned steamship fleet registered in Holland.24 Much of this expansion in the capacity of the two fleets was based on an investment in new tonnage to meet additional demands for services, as well as to replace vessels that were lost at sea or had become too inefficient through age. Between 1870 and 1882, BI purchased 103,530 tons of new build and NISM acquired some 26,939 additional tons, not all of it new build. The difference between the two firms is also reflected in the relative scale of their steamers. The new steamers being built for BI in the early 1870s were 23 À Campo, Koninklijke Paketvaart Maatschappij, pp. 51–2; De Boer, Geschiedenis, Vol. 2, pp. 93–4; Kok, De Scheepvaartbeschimering, pp. 144–5; W. Mackinnon to J.M. Hall, 20 Nov., 1873, P. Mackinnon to D. Mackinnon, 24 Dec.1873 and 7 Jan. 1874, J.M. Hall to D. Mackinnon, 7 Jan 1874, Nat. Lib. Acc. 6168/11; E.S. Dawes to T.M. Russell, 9 Jan. 1874, Dawes Letterbook, 1868–74. 24 Neerlands Vloot en Rederijen, 1880, p. 252. (The relevant figures were NISM 24,445 tons, S.M.Nederland 21,054 ton, Kon.Ned.S.M. 19,220 tons, Ned.Amer.S.M. 16,267 tons.)

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Table 5.1 BI and NISM fleets, 1869–82 BI Number 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882

23 26 23 30 34 41 50 47 48 55 58 60 58 58

Tonnage (gross)

Value £000s

21,752 24,342 24,480 34,120 42,200 54,278 64,082 60,763 64,749 75,909 84,243 95,882 96,675 98,832

441 451 373 482 604 962 1,165 1,042 957 837 1,159 1,116 1,033 894

NISM Number 13 13 15 15 19 25 23 24 25 25 25 25 24 26

Tonnage (gross)

Value £000s

5,042 5,042 9,059 9,059 13,659 18,561 19,796 19,432 21,644 22,423 22,423 22,889 22,445 24,872

– – – – – – – – – – – 174 162 184

Sources: BISN Co Annual Reports, 1869–82; Neerlands Vloot en Rederijen, 1869–80

between one and two thousand tons each, but by the early eighties they were usually between three and four thousand tons. The average tonnage of the fleet rose from 945.7 tons in 1869 to 1,704 tons in 1882. By the latter date, NISM’s average tonnage was still only 956.6 tons, and in order to secure larger vessels it was tending to buy them second hand from BI rather than investing in new build. The firm in the Indonesian archipelago remained, as it had always been, BI’s little sister, and a recipient of its cast-offs. BI, its dominance in Indian coastal waters confirmed by the new contract and its through-traffic agreements with the deep-sea liner operators, was extremely well-placed to take advantage of the stimulus which the Canal gave to India’s maritime foreign and country trades. India’s foreign sea-borne trade increased in value by 28.6 per cent between 1869–70 and 1881–2 (from 890.5 to 1,248.4 million rupees) but since the rupee was depreciating at this time the rate of growth by volume was significantly higher. The rate of growth of coastal trade was even greater – 61.6 per cent in value between 1869–70 and 1881–2 (from 209.1 to 472.1 million rupees).25 BI was operating in the sector experiencing the more rapid growth. Its steamers’ holds were filled with the rice, sugar, cotton, wheat, oilseeds, gunny bags, piece goods and metalwares of an expanding coastal traffic, and the vessels carried an increasing number of cabin and deck passengers. However, BI was doing more than simply holding its share of a growing trade. The tonnage of shipping at

25

British India Trade and Navigation Statements, various dates, IOLR V/17/6–63. 133

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Table 5.2 Coasting trade of British India, 1872/3 to 1882/3: tonnage of vessels clearing ports with cargoes

1872–3 1873–4 1874–5 1875–6 1876–7 1877–8 1878–9 1879–80 1880–1 1881–2 1882–3

Total tonnage 000s

Percentage of total tonnage British British B.Indian steam sail steam

B.Indian Local sail craft

3,452 3,722 4,724 5,169 5,499 5,753 5,353 5,573 5,820 5,976 6,858

29.6 41.2 45.9 52.0 48.1 54.4 59.2 62.8 64.8 65.4 67.1

4.6 3.4 2.4 2.1 2.4 2.8 2.8 2.5 1.7 2.2 2.5

9.2 3.8 2.9 2.8 5.1 4.9 3.0 1.4 1.1 0.6 1.3

5.8 8.1 7.9 8.3 7.4 5.5 6 4.3 4.2 4.2 4.1

47.3 40.7 38.7 32.4 33.9 29.6 28.9 27.5 26.5 26.3 23.5

Sources: British India Trade and Navigation Statements, various dates, India Office Library & Records V/17/6–33

work along India’s coasts practically doubled between 1872 and 1883 (see Table 5.2). Almost all of that growth came about through an increase in steam tonnage – for it was during the decade or so after the opening of the Suez Canal that the transition from sail to steam was substantially completed in Indian waters. In 1872–3, sail accounted for approximately 64 per cent of the tonnage engaged in coasting activities as against 36 per cent by steam; in 1882–3 the positions were more than reversed, with steam now accounting for 71 per cent of coastal tonnage. Furthermore, that change was largely achieved by ships registered in Britain rather than in India. The share of British-registered vessels – owned predominantly but not entirely by the British India S.N. Co – rose from 29.6 per cent of Indian coastal trade in 1872–3 to 67.1 per cent in 1882–3. A combination of a reduction in its operating costs and the extension of its subsidised contract lines seems to have rendered BI more competitive than even small indigenous sailing craft, the share of which went into rapid decline (although its total tonnage remained constant). The trades in which the BI steamers were employed during the 1870s were not significantly different from those in which they were at work during the 1860s. Even so, there were some new trends to which the firm’s managing agents in Calcutta had to respond. For example, the growth of direct shipping between British ports and Rangoon reduced the role of Calcutta as an entrepôt for the Burmese ports. Similarly, on the western side the rise of direct shipping between Europe, Aden and the Persian Gulf ports (a development in which BI itself participated) reduced the former entrepôt role played by Bombay in the maritime trade of the Gulf and East Africa. Some 134

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compensation for these changes, however, was to be found in the growth of the rice trade from the Burmese ports southwards to the Straits Settlements – which enabled BI responded to double the frequency of its CalcuttaRangoon-Singapore service and introduce a monthly Calcutta to Straits Settlements coasting service. The company also benefitted from a rise in passenger traffic on the Madras-Rangoon line, as migrants from Orissa responded to the growing commercial and employment opportunities in Lower Burma, and on the sea routes between Gujerat and Bombay as a renewed surge of economic growth sucked immigrants into the city of Bombay. But the largest impact on BI’s operations came from the sheer scale of additional demand for cargo space at all the ports, large and small, along the shoreline of India and its near neighbours. The BI fleet was called upon to carry out varied tasks – such as conveying mails and passengers according to fixed timetables, bulking up cargoes from the smaller Malabar, Coromandel or Burma coast ports into the larger ports for export and conversely breaking down import cargoes from the larger ports for distribution to the smaller. It also competed for the large cargoes between the principal ports, like the sugar and rice which went round from Calcutta to Bombay, often in the holds of canal steamers willing to do a little tramping in India while waiting for return cargoes to Europe. How best to provide, equip and manage a fleet for these varied purposes was a matter requiring some fine judgement, and in the great burst of ordering new steamships which followed from the consolidation of the Indian postal contracts William Mackinnon and the board got the balance wrong. They sent out to India in 1874 too many large steamers and not enough small ones to meet the needs of Mackinnon Mackenzie & Co. Even so, when the time came for yet another round of investment in new tonnage for BI, in 1877–8, William seems to have been persuaded that what was needed was larger and more specialised steamers. These included the first of BI’s special-purpose vessels – two steamers, built by Denny’s of Dumbarton, with holds and deck lifting-equipment designed for exporting timber from Burma (at a time when growing quantities of Burmese teak were being shipped to India to meet the needs of railway construction). As William explained: ‘we were induced to go in for special timber ships because we had ascertained that if we did not there were other parties quite ready for it. One of them [the steamers] can go anywhere with timber, and we expect you will find employment to Bombay with one, with an occasional voyage to Madras. They will have water ballast and will carry large cargoes of rice cheaply. We shall not officer or equip them like the mail carriers.’26 In the same year, 1877, the BI board also decided to order four other steamers ‘of a larger size, all fitted with water ballast, and

26

W. Mackinnon to D. Mackinnon, 22 Aug. 1877, Nat. Lib. Acc. 6168/7; see also W. Mackinnon to D. Mackinnon, 11 May 1876, Nat. Lib. Acc. 6168/7, and P. Mackinnon to D. Mackinnon, 27 June 1877, Nat. Lib. Acc. 6168/10. 135

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capable of carrying heavy deadweight cargoes’, and ‘which it is expected will compete successfully with any vessels that may oppose them’.27 Increasingly, during the 1870s, BI’s leadership seemed inclined to look to future growth of demand for tonnage, and to provide more than may have been strictly necessary at the time. The post-Suez years were also a time of rapid growth in the maritime commerce of Indonesian archipelago. Between the late 1860s and the late 1870s, for example, the exports of the Netherlands Indies doubled in value and almost doubled by weight. It is uncertain how much this owed to the Canal and how much to the liberalisation of the Dutch colonial economy, more particularly on Java. The gradual dismantling of the state-run system of compulsory cultivation known as the Culture System and the growth of private enterprise in plantation agriculture and commerce, changes symbolised by the Sugar Law and the Agrarian Law which were passed in 1870, created conditions conducive to a growth in coastal and inter-island trade.28 So too did the gradual penetration of Dutch private enterprise into the island of Sumatra. New types of traffic that caught the eye of the NISM’s managers in Batavia included imports of rice from Bangkok and Saigon, imports of agricultural machinery from Europe to be delivered to local ports in Java, and exports of tobacco from the Deli district of eastern Sumatra. In making arrangements for extensions of contract lines with the government or running steamers on the firm’s own account they no doubt had an eye to these and other commercial opportunities. Nevertheless, complaints could still be made in 1877 that ‘the unsatisfactory feature’ of NISM’s performance ‘is the small proportion of the total earnings that comes from commerce’.29 The cause of such concern was the Dutch colonial government’s pre-occupation with the conquest of Atjeh. Following the expeditions of 1873–74, the Dutch forces effectively became besieged on the northern tip of Sumatra, suffering severely from tropical diseases and needing to be constantly reinforced. In addition to transporting large numbers of troops and labourers on the regular liners, NISM introduced a specialised vessel into its fleet – the 1,468 ton Graf van Bijlandt, which was built and equipped by Caird & Co. of Greenock for the specific purpose of serving as a hospital ship. It took a lessening of military activities from 1877–8 onwards for the ratio of government and private passenger traffic to begin to return to normal, and for NISM to be able to turn its attention to the attraction of private cargo to its steamers. Even then NISM was not wholly free from Atjeh entanglements. In the interests of propping up its military and administrative presence in Atjeh,

27

BISN Co. Annual Reports, 1878 and 1879, BIS/1/30. J.A.M. Caldwell, ‘Indonesian Export and Production from the Decline of the Culture System to the First World War’, in C.D. Cowan (ed.), The Economic Development of SouthEast Asia (London, 1964), p. 77; Ricklefs, History of Modern Indonesia, pp. 118–19; J.S. Furnivall, Netherlands India: A Study of Plural Economy (Cambridge, 1944), pp. 174–224. 29 J.M. Hall to D. Mackinnon, 15 Nov. 1877, Nat. Lib. Acc. 6168/12. 28

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and in the hope of attracting the trade of Atjeh’s pepper ports to Dutch-ruled ports, the government of the Netherlands Indies arranged for the introduction of NISM contract lines to and from Atjeh, along both the east and west coasts of Sumatra. These began on 1 January 1876, but were of little practical benefit to NISM. As the governors of Riau on the west coast of Sumatra and the residents of the east coast ports continually complained, there was very little growth of trade on these lines.30 The problem for NISM was that it was unable to compete for the pepper, gambier and sago exports of northern Sumatra against the already well-established Chinese merchants and shipowners operating from British-ruled ports across the Straits of Malacca. NISM was more secure in the relatively busy trades of the northern Java coast, as well as on routes to the east of Batavia where private trade was slight. When competition appeared in such waters, NISM was usually able to see it off.31 The north and eastern districts of Sumatra, by contrast, lay closer to Penang and Singapore than to Batavia, and fell within the commercial ambit of these two British-ruled entrepôt ports. Consequently, NISM’s efforts to channel trade towards Batavia faced an uphill struggle. Commercial reality, in fact, tended to make NISM work within the grain of Sumatran trade rather than against it. Thus in 1877, it made an (unsuccessful) attempt to enter the trade in tobacco between Deli and Singapore, and in 1879 it extended the sailings of its Atjeh steamers to Penang and (on return trips) to Singapore. The Straits of Malacca, in which NISM was attempting to compete with British and Chinese shipowners based in the Straits Settlements, was an area of overlap between BI and NISM interests. BI had its own services from Calcutta and Rangoon to Penang and Singapore, and ports in between. Its Straits Coasting Service called at ports in eastern Sumatra as well as on the Malayan peninsula. BI too faced local competition in these waters. In the early 1870s, the Chinese firm of Singh Moh & Co of Penang, which had been a substantial shipper of rice on BI vessels between Burma and Rangoon, began to run its own tramping steamer between Penang, Rangoon and Negapatam. This action drew a strong response from William Mackinnon. In 1873 he instructed Mackinnon Mackenzie & Co to start new services from Rangoon to Madras and the Straits Settlements, without waiting for the Government of India’s agreement, ‘so as to checkmate the Chinaman’. If necessary, he added’ ‘put on a special steamer to run the day before or the 30 ARA, Mail Reports, Nos. 28, 82, 169, 175, 544, 595, and 760 of 1878, Nos. 50 and 637 of 1880, No. 110 of 1881, and No. 151 of 1882. 31 In 1878–80, for example, two Arab merchants in Batavia started a monthly steamer service to Semarang via Cheribon. NISM responded by starting its own non-contract line over the same route and by investing in two fast paddle steamers which were more suited than screw steamers to the shallow waters of some of the smaller north Java ports. These actions compelled the Arab owners of the ‘Forwards’ Steamshipping Co’ to sell up. (Koloniaal Verslag, 1879, p. 101, 1880, p. 86, and 1881, pp. 90–1.)

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same day as the Chinaman, and see that it be a vessel that can easily beat his. We must defend ourselves vigorously at all ports when thus assailed.’32 Despite such bluster, BI’s actions were ineffective. By 1879 Singh Moh & Co was running two steamers between Penang and Burma. William Mackinnon was even more incensed when, in 1876, a contract from the Government of the Straits Settlements, for the delivery of mails from Singapore to Malacca and ports in between, went to the small Burma Steamship Co, led by a Captain A. Bowers, although BI’s bid was apparently lower in price. Subsequent attempts to buy out the ‘upstart’ concern failed, and BI’s Straits Coasting line, faced both by this competition and unsettled political conditions along the Straits, continued to perform poorly.33 At this point, William Mackinnon became convinced that there needed to be a closer working relationship between BI and NISM in the Straits of Malacca. In June 1876 he wrote to Samuel van Hulstyn, Alexander Fraser’s right-hand man in Batavia, about his discussions with Fraser in London: I also mentioned to Fraser the movements of Captain Bower with his 3 steamers in the Straits, & I wish particularly to have your advice & help in the way of organizing and carrying out such opposition to him as will probably prevent his adding more ships to those he now works. The question affects both the NI Co and the BI Co. . . . I should like to see a strict & close alliance between the NI Co and the BI Co, & anything you can do to promote that object will be appreciated here. We must try to carry more through traffic between all ports & we might be able to secure most of the opium going to Java as well as much of the rice & other cargo to & from the Burmah and Dutch ports. My nephew Duncan Mackinnon is now in Calcutta & I should like you and Fraser to correspond with him on everything that concerns the general interest. The two companies are so nearly identical in ownership that their interests are really one. I should like you & Fraser as shareholders in the BI Co & to have you give a watchful eye to what is being done for it by the NI Company and other agents near you.34

This was a significant moment in William Mackinnon’s business leadership. His understanding of the need to bring his two steamship companies into

32

W. Mackinnon to D. Mackinnon, 3 June 1873, Nat. Lib. Acc. 6168/7; also Mackinnon Mackenzie & Co. to Secretary, BISN Co, 13 Aug. and 27 Sept. 1872, and 29 Jan. 1873, BIS/6/75-76. 33 BI Directors Minutes, 12 Oct., 1876, BIS/1/3; P. Mackinnon to D. Mackinnon, 1 June and 1 Nov. 1876, Nat. Lib. Acc. 6168/9; W. Mackinnon to D. Mackinnon, 9 Nov. 1876, Nat. Lib. Acc. 6168/7; P. Macnaughton to Mackinnon Mackenzie & Co, 3 May 1877, BIS/6/24. 34 W. Mackinnon to S. Van Hulstyn, 28 June 1876, enclosure in W. Mackinnon to D. Mackinnon, 28 June 1876, Nat. Lib. Acc. 6168/7. 138

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closer operational partnership was an accurate assessment of what needed to be done. He also appreciated that the policy rested upon close co-operation between the managers in Calcutta and Batavia, and that essential to this in turn was an active and efficient agent in Singapore. Concluding that ‘we have been indifferently served’ by Hamilton Gray & Co of Singapore ‘for many years back’, and that this was a view that ‘the Java people of NIS Co hold . . . even more strongly’, he decided to replace that firm ‘without delay’.35 Yet somehow the moment was allowed to pass – probably put on hold by Alexander Fraser’s decision to retire from business in Java in 1877, and the subsequent difficulties in making suitable arrangements for NISM’s local management. Fraser took up residence in London, where he joined the board of the Netherlands India S.N. Co, and his departure from Batavia was followed shortly thereafter by that of Samuel van Hulstyn. There were also distractions from events in eastern Africa and from the collapse of the City of Glasgow Bank in 1878. Whatever the reasons, Hamilton Gray & Co stayed in place as the BI and NISM agents in Singapore, and were replaced by Boustead & Co only in 1884. Had William succeeded immediately in strengthening local working arrangements between his two steamship firms, and they in turn had embedded themselves more strongly in the trades of the Straits of Malacca, the future for NISM in particular might well have turned out rather differently. William was aware of his steamer companies’ needs for active and continuing support from their agents at the various ports, in this period of expanding trade and potentially greater competition. Although he was obliged to leave relations with the agents in the Indonesian archipelago largely in the hands of Fraser and his successors, he took a close interest in Mackinnon Mackenzie’s arrangements on behalf of BI, whether in minor ports like Bilimpatam, Cuddalore or Tuticorin or in the shipping hubs of Rangoon, Madras or Bombay. A constant stream of instructions and suggestions passed from him to the managing agents in Calcutta. ‘In dealing with agencies such as Nicol & Co, B Bros [Bulloch Brothers] and Binny & Co, and indeed with all agencies,’ he advised, ‘I strongly recommend great courtesy of language and the avoidance of anything like bumptiousness . . . The firms I have named have all considerable influence for good or evil, and I should not like without great provocation to quarrel with any of them.’36 Events in India were not always under his control, and agencies came and went as firms rose and fell, or partnerships changed. Thus, having intervened in 1874 in a squabble between Mackinnon Mackenzie & Co. and W. Nicol & Co. over levels of commission, and in particular having squashed the suggestion that Mackinnon Mackenzie & Co should open its own house in Bombay, fate took a hand. In 1878, the collapse of the City of Glasgow Bank

35 36

W. Mackinnon to D. Mackinnon, 28 June 1876, Nat. Lib. Acc. 6168/7. W. Mackinnon to D. Mackinnon, 29 July 1874, Nat. Lib. Acc. 6168/7. 139

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brought down both W. Nicol & Co. of Bombay and J. Fleming & Co. of Karachi, and Mackinnon Mackenzie & Co. was obliged to set up its own offices in both cities to look after BI’s agencies. James Lyle Mackay, a promising assistant in Mackinnon Mackenzie & Co.’s steamer department, was sent round to Bombay to take charge.37 This penetration into the Bombay shipping world was the most significant development in Mackinnon Mackenzie & Co’s maritime activities since it had first obtained BI’s managing agency. ***** Despite fears that the opening of the Suez Canal would encourage Britishbased steamship owners to compete with BI in Indian waters, it took time for such opposition to manifest itself. The BI directors tried to discourage its emergence by ensuring that there was plenty of tonnage available to meet the needs of the merchants at the various coastal ports. William Mackinnon also tried to obtain a monopoly over the Government of India’s cargo business, although this was not part of the mail contract arrangements. He put the case through Alexander Monteath of the Indian Post Office, pointing out that BI had ‘at great cost made ample provision for the performance of the increased mail services, the intercoastal traffic, and the transport of Govt. troops and stores’, and that ‘in providing tonnage so much in excess of contract requirements, they had specially in view the possible wants of Govt for transport purposes.’ He duly secured a Government of India ruling that, in consideration of BI’s services to the government and the fact that it was effectively the government’s mercantile marine reserve, BI’s vessels ‘shall alone be employed for the conveyance of Government stores by steam vessels from port to port in India, otherwise than by a Government vessel.’38 However, such exclusive access to government business did not succeed in thwarting the ambitions of potential rivals – and may indeed have encouraged them by annoying shipping agents who were now denied a share of that business. Of the Calcutta agency houses engaged in ship agency work in 1877, Mackinnon Mackenzie & Co. was ranked first, having consigned to it 258 vessels totalling 248,848 tons; second was Nicol Fleming & Co (James Nicol Fleming’s Calcutta firm) with 161 vessels at 198,004 tons; and third was Turner Morrison & Co, with 118 vessels (mainly sailing ships) totalling

37 P. Mackinnon to D. Mackinnon, 12 and 22 May 1874, Nat. Lib. Acc. 6168/9; BISN Co Directors’ Minutes, 13 Nov. 1878, BIS/1/3; Stephanie Jones, Trade and Shipping: Lord Inchcape, 1852–1932 (Manchester, 1989), p. 20. 38 W. Mackinnon to A. Monteath (demi-official), 25 Feb. 1876, Dawes Letterbook, 1874–6; Resolution by the Government of India, Financial Department, 7 July 1876, No. 14 of July 1876, Proceedings, India, Separate Revenue, Vol. 966, IOLR.

140

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146,326 tons.39 Turner Morrison & Co was the Calcutta end of a Liverpool shipping concern whose leading figure, A. Turner, was also chairman of the Fleetwood-based British Shipowners Co. In March 1878 Turner floated the Asiatic S.N. Co, with the support of T.H. Ismay and W. Imrie of the Liverpool-based White Star Line and the Harland & Wolff shipyard of Belfast. The new firm was established to operate a small fleet of steamers in the Bay of Bengal, with Turner Morrison acting as managing agents. Four steamers, designed principally for carrying cargo and deck passengers, were ordered from Harland & Wolff and despatched to Calcutta, where they arrived in 1879.40 This was the most serious challenge to BI since its establishment, and William Mackinnon tried to head it off. In May and June 1879, he put out feelers to the White Star men, Ismay and Imrie, to see if they come to an arrangement whereby direct competition might be avoided, and in September 1879, Edwyn Dawes suggested to the Asiatic Co’s directors that if they were to work lines from Calcutta and Bombay via Galle to Mauritius and the Cape, thereby staying clear of BI’s mail routes, BI would give them active support.41 The efforts were to no avail, because the gulf in thinking between the two sides was very wide. Turner Morrison and their Rangoon agents denounced BI as a state-backed monopoly which, swollen with profits, had kept freight and passenger rates unnaturally high and held back the commercial development of the territories it served. They insisted that free enterprise competition was bound to arise against it. Meanwhile, William Mackinnon accused Turner Morrison of seeking to reap what it had not sown, and to deprive BI of its rewards for being a pioneering and innovative enterprise.42 The two firms, BI and the Asiatic Co, became locked in a fierce struggle on the routes between Calcutta, Madras and the Burma ports. BI was forced to reduce its rates for all categories of cargo and passengers, and it placed spare steamers on the berth alongside the Asiatic Co’s ones, so as to attract away as much of the Asiatic Co’s traffic as it could. William Mackinnon also used his influence within the London-Calcutta liner conference to try to deprive the

39

‘Consignees of Steamers and Sailing Vessels entered inwards at Customs House, Calcutta, 1877’, MP Private File 253. 40 W.A.Laxon, Asiatic Steam Navigation Co Ltd (Kendal, 1963), 1; Asiatic S.N.Co Directors’ Minutes, 1878–9, National Maritime Museum [unclassified when consulted]; P. Mackinnon to D. Mackinnon, 27 Feb. 1878, Nat. Lib. Acc. 6168/10. 41 W. Mackinnon to W. Imrie, 3 May 1879, enclosure in P. Mackinnon to D. Mackinnon, 8 May 1879, and P. Mackinnon to D. Mackinnon, 12 June 1879, Nat. Lib. Acc. 6168/10; W. Mackinnon to D. Mackinnon, 25 June 1879, Nat. Lib. Acc. 6168/8; Asiatic S.N.Co. Directors’ Minutes. 42 H.B Turner to D. Mackinnon, ? March 1878, Nat. Lib. Acc. 6168/13; Turner Morrison & Co to Dept. of Finance & Commerce, 18 July 1879, No. 592 of Oct. 1879, and Gillanders Arbuthnot & Co to Chief Commissioner, Burma, 16 March 1880, No. 1580 of Sept. 1880, Proceedings, India, Separate Revenue, Vols. 1382 and 1546, IOLR. 141

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Asiatic Co of through-traffic from London. The Asiatic Co fought back by initiating a Madras to Ceylon service, backed by an agreement with certain Chettiar merchants that they would ship exclusively by the Asiatic steamer. However, the competition quickly entered stalemate. The Asiatic Co was too small to do serious damage to BI. On the other hand, it had sufficiently powerful backers in Liverpool and strong enough support within the mercantile communities of Calcutta, South India and Burma not to be bullied off the shipping routes by BI. In fact, the rates war between the two firms appears to have generated enough additional traffic and revenues to keep both happy. To the delight of the Burmese authorities, for example, it stimulated a large increase in the volume of migrant labourers entering that country from Calcutta and Madras.43 The directors of the Asiatic Co declared that ‘the enormous development of the trade and the good will and support of the native merchants have afforded ample proof that there is ample scope for the enterprise of a Co’ while Peter Mackinnon, observing the events from Glasgow, noted that ‘Jamie and Uncle William are both in the mind that bye and bye a working arrangement will have to be submitted to. There may be some truth in the remark that a friendly opposition will be beneficial to the company.’44 ***** BI and NISM experienced overall growth in their coastal and inter-island business during the twelve or thirteen years following the opening of the Suez Canal. This took place mainly on the lines that were already in place in 1869, or on small extensions to them which involved additional ports, extra sailings or more frequent calls. NISM’s contract services in the Indonesian archipelago, for example, grew from 47,740 geographic miles in 1871 to 89,280 in 1881. But for both firms there were also opportunities to open up new lines over deeper waters and longer distances, adding an international dimension to their local or concerns. In the case of NISM, this was largely a matter of the continuing search for an effective connection with Australia. The Mackinnon group having stepped aside from the bidding for the Singapore-Queensland mail contract of 1873, Alexander Fraser subsequently turned to an alternative scheme. This 43 Between 1877–8 and 1880, BI’s deck fares from Calcutta to the Burma fell from Rs.18 to Rs.5–Rs.7.8, and the number of passengers rose from 5,000 to 15,405; on the Madras line a reduction in the deck passage from Rs.18–Rs.25 to Rs.12–Rs.15 resulted in an increase in the number of travellers from 11,000 to 19,537. (G.D. Burgess, Secretary to Chief Commissioner of British Burma, to Revenue and Agricultural Dept., 19 Oct. 1881, No.952 of June 1882, Proceedings, India, Separate Revenue, Vol. 1912, IOLR.; see also Cheng Siok-Hwa, The Rice Industry of Burma (Singapore, 1968), pp. 121–2. 44 Asiatic S.N.Co., Directors’ Minutes, 21 April 1882; P. Mackinnon to D. Mackinnon, 2 Oct. 1879, Nat. Lib. Acc. 6168/10.

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was for a round-Australia coasting service, to be conducted by NISM from Batavia. The service would not carry mails and would not therefore be bound by the strict timetable imposed on mail steamers. The concept, it was hoped, would appeal to all of the Australian colonies, as well as to the commercial community of Batavia. The Government of the Netherlands Indies agreed in March 1874 to subsidise between five and ten experimental voyages for Fl.20,000 per trip, the steamers to travel alternately clockwise and anticlockwise around Australia and call at all the major ports. For this purpose, a second-hand steamer, the Glendarroch (subsequently renamed the Atjeh) was purchased in Glasgow for NISM. However, the experiment was soon abandoned because, despite the government subsidy, NISM made a loss of Fl.101,000 (£8,416) on the first two voyages. Costs in Australia were higher than expected, the established firms there had a tight control over cargo traffic, and there was a lot less return-traffic to Batavia than had been hoped for.45 Another attempt at forging an Australian connection was made in 1877, when the government of South Australia, which had responsibility for the administration of the remote Northern Territories, agreed to match the funds put up by the government of the Netherlands Indies so long as Port Darwin and Adelaide were included in the steamers’ itinerary. A Java-South Australia service of sorts was conducted for three years, with losses being made on most voyages, until the South Australian government pulled out of the arrangement in 1880.46 By this date, however, William Mackinnon and the rest of the Group’s inner circle had finally abandoned the strategy of building an Australian line on the back of NISM’s locally-subsidised services, and were engaged in talks which would give them a more direct and powerful point of entry to the Australian seaboard. NISM was left with the consolation prize of a fledgling line from Java to China. Fraser had vigorously pursued this idea with the Dutch colonial government, and succeeded in securing a subsidy in the face of the countervailing expressions of interest from the Nederland Co and Chinese merchants. The service started modestly in 1880, with four voyages per annum. However, it showed sufficient promise – with cargoes of sugar and opium re-exports up to Hong Kong and European and Chinese passenger traffic on both legs – for the frequency to be increased to a monthly service the following year, and for NISM to purchase two of BI’s 2,000 ton steamers, the Camorta and the Compta, so as to have suitable vessels for the purpose. The government of the Netherlands Indies, in agreeing to support a more frequent service during 1882 to 1884 to the tune of Fl.120, 000 per annum, stipulated that Singapore

45

ARA Mail Report No. 164 of 1874; Koloniaal Verslag, 1873, p. 103, 1875, p. 104; E.S. Dawes to A. Fraser, 31 July 1874, Dawes Letterbook, 1874–76 46 Koloniaal Verslag, 1877, p. 106, 1878, p. 104, 1879, p. 100, 1880, p. 86; Netherlands India S.N. Co Annual Report, 1881; R.H.Evans to W. Mackinnon, 5 Jan. 1880, MP Private Letters File 19. 143

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should be excluded from the itinerary. This was a clear indication of its growing sensitivity about the dominance of that British port within Southeast Asian maritime trade.47 BI mainly took the opportunity to exploit the Suez Canal by diversifying from intra-Asian shipping into inter-continental steamshipping between Asia and Europe. Despite some idle talk in 1870–71 of a line between Holland and Batavia in which NISM would participate, there was little prospect of NISM being involved in such a line between the Netherlands Indies once the Nederland Co was on the route, to be followed by the Rotterdam Lloyd. The prospects were rather different for BI in the trades between Britain and India, more especially to Calcutta. William Mackinnon was initially hesitant about starting up a line from Britain to Calcutta because good relations with the P&O were central to the defence of BI’s coastal trades, and it did not seem sensible to challenge the P&O on its routes via Suez to Bombay and Calcutta. The group’s first line through the Canal, therefore, ran from London via Aden and Karachi to the Persian Gulf, with a connecting feeder line between Aden and the East African entrepôt of Zanzibar. Only when the consolidated Indian mail contract was under their belts, and the alliance with P&O secured by agreements for preferential rates, did the Mackinnons and Halls have the confidence to start a service from London to Calcutta, via Colombo and Madras. The origins of that decision lay in the fact that during 1873–4 a constant succession of new BI vessels went round from the Clyde to the Thames, to be put on the loading berths by the firm of Gellatly, Hankey and Sewell for outward cargoes and passengers to India. From running what was an informal one-way steamship line to Calcutta, it was a natural step to begin a regular two-way service. However, the new business was not to be left to BI alone, but was to be shared with a private syndicate got up by William Mackinnon. As BI’s Minute Book coyly recorded: ‘The Directors having long felt the necessity for a through line under their control for the development of the Through Traffic, they agreed to provide the Ava and Almora for the purpose and to take one third of a third ship, in connection with a combination of the large shareholders in the Coy and other friends, who are prepared to provide two new ships and take half of the third.’48 This arrangement enabled William Mackinnon to secure the additional investment in large steamers needed for the oceanic routes at a time when BI was still hard pressed to finance new vessels for its coast and country trades. It was also a means of strengthening

47

W. Mackinnon to D.Mackinnon, 27 Sept. 1876, and J.M. Hall to D. Mackinnon, 27 Sept. 1876, Nat.Lib. Acc.6168/7 & 11; Stoomvaart Maatschappij Nederland, Annual Report for 1878, ARA-II SMN Archief 394; ARA Mail Report No.593 of 1879; Koloniaal Verslag, 1879, p. 101, 1880, p. 86, 1881, p. 1881, and 1882, p. 89; Netherlands India S.N.Co., Annual Reports, 1882–3. 48 BISN Co Directors’ Minutes, 21 Dec. 1873, NMM BIS/1/3. 144

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the outer perimeter of the enterprise network, by forging a closer alliance with men and firms who would benefit directly from the Mackinnon group’s new oceanic steamshipping initiatives. The British India Association (BIA), the private syndicate established to replace Mackinnon Frew & Co as the focus for the group’s inter-continental shipping investments, included the partners of the inner family firms together with three relatively new members of the network – Edward Gellatly of Gellatly Hankeys (who were influential within the Port of London), Binny & Co of Madras, (which would have a direct steamship connection with London for the first time), and Peter Denny, the Clyde shipbuilder. The alliance with Peter Denny was especially significant. Wm. Denny & Bros. in Dumbarton had emerged as William Mackinnon’s favourite yard for the construction of BI steamers (just as Cairds of Greenock were his preferred builders for NISM). As Table 5.3 shows, the Denny yard constructed some two thirds of the new tonnage added to the BI fleet between 1870 and 1880. William Mackinnon did not spread his orders widely around the Clyde yards – 87% of all new build for BI and NISM came from only three firms – and he clearly preferred to buy from men he knew and felt he could trust. He enjoyed good relations with Cairds and Inglis – in 1877, for example, W. Mackinnon & Co and Gray Dawes & Co jointly ordered one steamer on their own account from each of Cairds and Inglis to keep them in work ‘when things were dull’49 – and he relied upon them to keep Dennys on their toes. Nevertheless his ties to Peter Denny became particularly close. Denny, having taken control of the family shipbuilding business in Dumbarton in the Table 5.3 BI and NISM: builders of new steamships, 1870–82 Yard Wm. Denny & Co., Dumbarton A&J Inglis, Glasgow Caird & Co., Greenock Scotts, Greenock Blackwood, Port Glasgow W. Simons & Co, Renfrew R. Napier & Sons, Glasgow Connel & Co., Glasgow Totals

British India S.N. Co. Number Tonnage

Netherlands India S.N. Co Number Tonnage

30 11 5 3 2 1 0

65,287 14,546 4,452 4,433 0 2,766 2,014 0

1 0 10 0 4 0 0 1

1,457 0 9,871 0 3,818 0 0 960

52

93,498

16

16,106

Sources: Annual Reports, Directors’ Minutes and Various Correspondence.

49

P. Mackinnon to D. Mackinnon, 10 July and 15 Aug. 1877, Nat. Lib. Acc. 6168/10. 145

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early 1850s, had quickly developed the practice of investing in shipping companies. Until the mid-1870s his shipping ventures had been carried out mainly with James Galbraith of P. Henderson & Co., leading to the establishment of such firms as the Albion Shipping Co., the Irrawaddy Flotilla, and the British and Burmese S.N. Co. Now, with his membership of the British India Association, he put not only his capital but even more importantly his wide knowledge of shipping and shipbuilding at the disposal of the Mackinnon group. He and William met regularly, both socially and for business purposes, in Glasgow, at Balinakill and in London, and exchanged inside information about shipping matters. William drew on Peter Denny to keep abreast of technological developments in shipbuilding, and in return gave him information about other shipbuilders’ construction methods and prices. He deliberately steered orders in Denny’s direction from time to time, even when he was not the lowest bidder. Denny also received free passage on BI ships for himself and his partner, John McAusland, when they visited India in 1871, and reciprocated by bearing the costs of the trial trips in new BI steamers from the Clyde which William used to entertain friends and

Peter Denny 146

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those he wished to impress during the summer months. It was a relationship of mutual interdependence.50 The joint BI/BIA line to Calcutta, managed by Gray Dawes & Co in London and Mackinnon Mackenzie & Co in Calcutta, began operations in September 1874, with the sailing of the Association’s steamer Chyebassa from London. It was a time of slack trade, and several firms – including P&O, Wilsons of Hull, the Ducal Line under Westrays, James Finlay’s Queen Line, and Norwood’s Red Cross Line – were jostling with each other for cargo and passengers outwards from London to India. The Mackinnon group, however, possessed an advantage over these other enterprises, in the shape of its extensive feeder/distributor services in India, and William gave strict instructions to Duncan in Calcutta as to how the ‘home line’ and the India lines should work together: These boats must do a regular service to & from London, Colombo, Madras & Calcutta. At Colombo interchange of traffic for the Tuticorin & Malabar Coast ought to take place. I wish very much to divert the Malabar Coast homeward traffic to these steamers at Colombo. You know the B.I.S. boats come round from Bombay half-empty and it should suit them very well to carry cargo downwards to Colombo for London & such on this line + take it on board there. Then at Madras we want interchange traffic both ways for Northern ports. You can carry cargo at B.I.S. rates for Madras & Colombo which on being discharged there will allow room for home cargo. Don’t allow your desire to earn the largest possible amount of commission in Calcutta to lead you to fill up there entirely – leave something for Madras as Binny & Co will be shareholders. Work the ships for the best advantage to the owners & and with a view to developing properly the B.I.S. through traffic. You must give quick despatch in Calcutta, at least equal to anything done by Smiths or the Ducal line.51

With the power of the India coast and country lines behind it, the BI/BIA line quickly established itself. The passenger trade was a little sticky, because its steamer accommodations were not as well equipped or as comfortable as those of the P&O or Wilsons and it could not charge premium fares. However, the new line soon obtained full cargoes while competitors were running half empty, and its arrival on the scene clearly had an impact on the other steamship firms. Late in 1874 Peter Denny elicited from Thomas Sutherland, the feisty Aberdonian who was responsible for the reconstruction of P&O in 50 A. Slaven, ‘Dr Peter Denny’, in A. Slaven and S.G. Checkland, Dictionary of Scottish Business Biography, Vol. 1 (Aberdeen, 1986), pp. 214–17; Paul L. Robertson, ‘Shipping and Shipbuilding: The Case of William Denny and Brothers’, Business History, 16 (1974), pp. 37–41; BISN Co Directors’ Minutes, 27 Oct. 1871, and 21 Aug. 1878, BIS/1/3; Netherlands India Contracts, 1874, and P. Denny to W. Denny, 31 Nov. 1877 and 6 June 1878, Wm. Denny & Co., Records of Tendering, 1862–1909, University of Glasgow UGD3/25/1; W. Mackinnon to D. Mackinnon, 10 and 17 Aug. 1878, Nat. Lib. Acc. 6168/8. 51 W. Mackinnon to D. Mackinnon, 24 Feb. 1875, Nat. Lib. Acc. 6168/7.

147

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the aftermath of the opening of the Suez Canal, the admission that P&O might be willing to work its Calcutta line in association with another firm. Meanwhile Wilsons offered to sell four of its steamers to William Mackinnon for £235,000 and the Ducal Line let it be known that it was looking for a way to reduce competition and push rates up to a more remunerative level.52 Out of these desires for a limit on inter-firm rivalry, and building on the mutual trust between P&O and the Mackinnon group firms which came from years of working together in the Indian Ocean, there emerged under Sutherland’s leadership the world’s first international liner conference (or cartel). The Calcutta Conference, set up in August 1875, was intended to be a means of sharing cargo outwards from London and homewards from Calcutta, at agreed rates of freight, and in September 1877 it adopted the system of deferred rebates to attract and hold the loyalties of those who shipped by Conference steamers.53 Although details of the early operations of the Calcutta Conference do not survive, the evidence suggests that the group’s ‘home line’ fared relatively well within the Conference and might have survived reasonably well outside it. It not only had the advantage of a network of agents throughout the India Ocean maritime region able to influence traffic towards it, but also had at its disposal the tea shipments controlled in Calcutta by Mackinnon Mackenzie & Co and MacNeill & Co. Tea, like opium or silk, was a lucrative fine freight, ideal in its value to bulk ratio as a cargo for lines of fast passenger steamships. Such was the strength of the BI/BIA position, in fact, that it gradually obtained pre-eminence over concerns for which conference membership did not provide a sufficient long-term defence. In December 1877, during a general downturn in shipping, William agreed to buy out Wilsons’ two remaining steamers in the Calcutta trades, the Eldorado and the Navarino, and their share in the Conference, for £77,500. Later still, during the shipping depression of 1882, the Ducal steamers of the Eastern S.S.Co. came under the influence of the Association through a charter party arrangement in which they shared their voyages between London and Calcutta with BIA steamships.54 By 1882, the BI/BIA combination, with three BI and five Association steamships allocated to fortnightly sailings between London and Calcutta, and with six Ducal steamers in tow, shared predominance in the UK-Calcutta trades with P&O. 52 E.S. Dawes to W. Mackinnon, 14 Aug. and 24 Nov. 1874, Dawes Letterbook, 1874–6; P. Mackinnon to D. Mackinnon, 7 March 1875, Nat. Lib. Acc. 6168/9. 53 A. W. Kirkaldy, British Shipping: Its History, Organisation and Importance (London, 1914), pp. 174–202; K.A. Moore, The Early History of Freight Conferences, National Maritime Museum, Maritime Monographs and Reports, 51 (1981), pp. 27–8; B.M. Deakin and T. Seward, Shipping Conferences: A Study of their Origins, Development and Economic Practices (Cambridge, 1973), pp. 23–7. 54 W. Mackinnon to D. Mackinnon, 16 Oct., 5 Dec. and 17 Dec. 1877, Nat. Lib. Acc. 6168/7; P. Mackinnon to D. Mackinnon, 19 Dec. 1877, Nat. Lib. Acc. 6168/10; BISN Co Directors’ Minutes, 25 Oct. 1882, BIS/1/4.

148

Steamships on the Hooghly

SUEZ AND AFTER

The London-Calcutta line was the first to be opened by William Mackinnon and his associates without a mail contract or some other form of government support. It therefore represented a new confidence in his Group’s ability to operate in the ‘free market’ for steamship lines. It was also noticeable that, whereas the Group’s sailing ships between Britain and India had operated mainly from the Mersey and the Clyde, William was now relocating their successors, the steamships, to the Thames. Why he should have chosen to do so is not entirely clear. The decision was undoubtedly influenced, however, by the fact that, in a UK regional context, London and the south-east of England was the largest source of passenger traffic to and from India, and was also the main importer of the cargoes of tea and other fine freights back from India. Operating on the London-Calcutta route left the substantial trades between Glasgow, Liverpool and India to George Smith’s City Line, which was the only significant steamship operator on this ‘west coast’ route for most of the 1870s. There was undoubtedly room for more steam tonnage in these ‘west coast’ trades, but William made no attempt to compete with the City Line. Instead, the opportunity was allowed to pass to a man who had been associated with him, but with whom he had had a disagreement. Charles William Cayzer, a Londoner, had been BI’s storekeeper in Bombay until 1874, when he retired on the grounds of ill health, and thereafter sought the assistance of Edwyn Dawes in securing new employment. The proposed agency at Algiers for BI’s London-Persian Gulf Line having fallen through, Dawes offered him a position with Gray Dawes & Co, looking after the provisions and stores for the BI and Association, which he took up in the summer of 1875. However, at some point in 1876 Cayzer tried to get a partnership in Gray Dawes & Co which William Mackinnon – angered and perhaps amazed by his presumption – intervened to deny him. Cayzer then took himself off to Liverpool, to set up a ship brokerage and management business there with a former BI captain, and to secure the support of powerful Glasgow interests (including the shipbuilders, Alex. Stephens & Sons of Linthouse, and the cotton-manufacturing and tea-planting James Finlay & Co) for the establishment of a steamship line from Glasgow to India.55 On hearing of Cayzer’s plans for the opening of what became the Clan Line, William commented sourly: ‘I hope he will keep to Glasgow, L’pool & Bombay line. If he does he will do us no harm.’56 *****

55 BISN Co Directors’ Minutes, 4 Dec. 1874, BIS/1/3; E.S. Dawes to C.W. Cayzer, 17 Apr. 1874, 5 March and 20 May 1875, and Dawes to W. Mackinnon, 23 July 1875, Dawes Letterbook, 1874–6; A. Muir and M. Davies, A Victorian Shipowner: A Portrait of Sir Charles Cayzer, Baronet of Gartmore (London, 1978), pp. 42–59; also Monica Clough, ‘Sir Charles William Cayzer’, in Slaven and Checkland, Dictionary of Scottish Business Biography, Vol. 2, pp. 271–2. 56 W. Mackinnon to D. Mackinnon, 10 Sept. 1878, Nat. Lib. Acc. 6168/8.

150

SUEZ CANAL, INDIA AND THE NETHERLANDS INDIES, 1869–82

The British India S.N. Co and the Netherlands India S.N. Co were among the greatest beneficiaries of the opening of the Suez Canal. Taking advantage of the subsequent growth in trade to consolidate their dominant positions in coastal steamshipping in their relevant spheres of influence around India and within the Indonesian archipelago respectively, they also strengthened their relationships with the governments and the local commercial communities that they served. Directly and indirectly, they assisted the inner core of family firms which controlled their fortunes to enter the steamship trades between Britain and India (as well as between Britain, Arabia and East Africa), and to move into the mainstream of British passenger liner companies. These developments in turn propelled their chairman, William Mackinnon, into the front rank of British shipowners of the time. BI and NISM experienced a rapid rate of growth over the 1870s. BI’s turnover – as measured by net steamer earnings (i.e. with the deduction of ordinary expenses) before allowances for repairs and depreciation (Table 5.4) – grew by over 150 per cent, from just under £200,000 in 1870 to around £500,000 in 1882. NISM’s turnover, measured by the revenues from all its government business and by estimates of net steamer earnings after repairs and depreciation,57 shows a similar pattern of growth up to 1879, but with a tendency to fall back thereafter. Steamer earnings weighted by tonnage employed reveal the annual fluctuations in trading conditions – more especially the downturns in maritime trade in 1874–5 and again in 1878–9 – and also indicate that there was a long-term decline in earnings per ton, as a result of reductions in freight and passenger rates and increases in fleet size. This, however, must not necessarily be taken as a decline in profitability, because other costs, including the price per ton of new steamships, were also falling over the period. Dividend payments, in fact, tend to show (Table 5.5) a reasonably healthy picture, with both companies paying good returns to their respective shareholders. The distribution policies of the two companies, however, were rather different. The BI board obviously aimed for long-run stability in dividends while the NISM board appears to have allowed annual dividends to reflect actual trading conditions, with the result that in particular years returns to NISM shareholders were significantly higher than to BI shareholders. The reasons for such behaviour almost certainly lie in the differing relationship of the Mackinnon and Hall families to the two firms. Whereas in the case of NISM they took their profits only in the form of dividends, plus commission on any work carried out in Britain by Gray Dawes & Co or W. Mackinnon & Co, in the case of BI they were additionally rewarded

57

The estimates of net steamer earnings for 1869–78 have been arrived at by applying the average annual ratio of known net steamer earnings (after repairs and depreciation)to government revenues for the years 1879–82 to the government revenues for the years 1869–78. 151

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Table 5.4 BI and NISM steamer earnings, 1869–82

1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882

BI Net steamer earnings (before depreciation) £ £ per ton

NISM Government receipts Florins

Net steamer earnings (after depreciation) £ actual £ estimated

£ per ton

178,620 181,663 275,055 287,099 290,473 340,733 230,510 429,325 481,022 322,993 345,878 475,200 515,300 495,257

2,748,922 2,894,546 2,975,122 3,390,052 5,432,814 5,573,776 6,185,538 6,918,025 6,624,034 5,689,226 5,803,522 5,104,176 4,811,241 4,554,594

– – – – – – – – – – 67,864 47,591 46,064 34,298

5.27 5.54 3.17 3.61 3.84 2.9 3.01 3.43 2.95 2.45 3.02 2.07 2.05 1.37

8.21 7.46 11.24 8.41 6.88 6.28 3.6 7.06 7.43 4.25 4.1 4.96 5.33 5.01

26,559 27,966 28,745 32754 52490 53,852 59,763 66,840 64,000 54,968

Sources: BISN Co Directors’ Minutes, 1869–82; Koloniaal Verslag, 1870–83; NISM Co Annual Reports, 1880–3.

Table 5.5 BI and NISM: capital and dividends, 1869–83

1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882

British India S.N. Co Paid-up capital Dividends £ %

Netherlands India S.N. Co Paid-up capital Dividends £ %

442,000 442,000 442,000 442,000 442,000 486,775 487,000 525,565 525,565 525,565 525,600 564,200 566,200 566,200

201,645 201,765 201,765 214,500 214,500 221,500 229,500 250,500 250,500 250,500 250,500 250,500 250,500 268,500

15.5 12 12 12 15 15 12 12 12 12 11 11.2 12 12

5 7 8 8 20 15 18 18 20 14 16 40 12 12

Sources: Companies House London, File 133; PRO: BT/31/938/121C; BISN Co Annual Reports; memo on NISM Co capital and dividends (n.d.), MP Private Letters File 23.

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for being the managing agents in India. Mackinnon Mackenzie & Co’s commission was based on turnover rather than profitability (7.5 per cent on ordinary steamer earnings). Consequently, William Mackinnon and his partners could ensure that only moderate dividend payments were made to BI shareholders – which among other things avoided giving an impression to the Government of India that the firm was overly profitable, and too generously subsidised – while at the same time receiving a good return to themselves. The result of this policy was a sizeable ploughback of BI’s profit into new tonnage, and a generous depreciation allowance on the steamers (averaging 15.9 per cent per annum between 1869 and 1882) for accounting purposes. The very substantial build-up in BI’s fleet, in short, leading to an availability of spare tonnage to compete with interlopers and pioneer new lines, followed from a policy of moderate rewards to shareholders. So too did the creation of large financial reserves – amounting to almost £500,000 million by 1882. The differences between BI and NISM in patterns of dividend distribution did not necessarily mean that NISM’s interests were neglected in the short term – after all the tonnage at NISM’s disposal grew at roughly the same rate as BI’s over the period 1869–82. The real differences came in lack of provision for the longer term. NISM had only modest financial reserves – worth a mere £79,735 in 1882 – and it was not nearly so well-cushioned as BI to face future downturns in shipping markets or so well-placed to fund a further modernisation of its fleet. It would be the more exposed of the two companies to the changing commercial conditions of the 1880s.

153

6

The Persian Gulf, the Zanzibar mail contracts, and the London-Gulf line, 1869–82 The opening of the Suez Canal had a significant impact on the maritime commerce of South and South-east Asia. It also strengthened the European imperial presence in these regions, by speeding up civil and military transport and communications. However, the effects of the Canal were potentially even greater on the northern and western fringes of the Indian Ocean. A great swathe of coastal waters – from Basra at the head of the Persian Gulf, around the shores of the Arabian peninsula to the Red Sea, and from the Red Sea southwards round Cape Gardafui and along the Somali coast to the equatorial regions of eastern Africa – was suddenly connected directly to the shipping world of the Mediterranean and beyond. Territories which formerly lay at the end of long shipping routes from Europe around southern Africa to the Indian Ocean ports, and whose isolation from European trade and politics had been eroded only to a limited degree by overland commerce and communications, were now in shipping terms closer to Europe by several weeks and by thousands of miles. Here was a zone of ancient Arab mercantile and maritime enterprise which now had thrust through it, from Alexandria to Aden and onwards, a transport and communications route employing the latest and most efficient maritime technology. A change of such magnitude could not help but have repercussions on the commerce and shipping of the Middle East and eastern Africa. It also significantly enhanced the geo-strategic importance of the territories bordering the Red Sea and the Persian Gulf. European statesmen had to consider the naval and military implications of the new route for their imperial possessions in Asia and the Pacific – as well as for the southern flanks of the Turkish and Persian empires that stood between that route and these possessions on the one hand and the advance of Russian power in Central Asia on the other.1 Among those poised to respond to the opportunities and challenges presented by the Canal on the northern and western flanks of the Indian Ocean, in waters and seaboard territories where the British and British Indian governments exercised varying degrees of naval and political influence, were the men of the Mackinnon group. William Mackinnon quickly appreciated that the Canal offered opportunities to link the existing passenger and cargo trades of Arabian waters

1

There is a very large literature on this theme, much of which has been subsumed into D.A. Farnie, East and West of Suez: The Suez Canal in World History (Oxford, 1969). 154

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to new steamshipping operations conducted via the Red Sea and Suez. However, in contrast to his sure-footedness in handling his core business in and around India, his efforts to define his goals in respect of the Indian Ocean’s western and north-western peripheries, and to translate these into action, proved to be more hesitant and less successful. A major reason for this was that he had no personal knowledge of these regions, beyond the Red Sea route on which he had travelled to and from India, and he therefore depended for information and insight on other people, whose purposes were not necessarily fully convergent with his own. More particularly, as a shipowner whose instincts were to lay himself alongside the needs of the state for steam communication and transport, he was liable to find himself tossed about by the shifting winds and currents of British policies in and towards these parts of the world. From as early as March 1869 William had been working on with Archie Gray and Edwyn Dawes on a plan to start a steamship line from London through the Canal to the Persian Gulf. From London, Gray Dawes & Co were already exporting Manchester and Glasgow piece goods by sailing ship to their associated house in Bushire, and importing a range of Gulf produce. Meanwhile, BI’s experience with pilgrim traffic between the Gulf ports and Jeddah on the Red Sea, and with opium cargoes from Bushire to Aden, convinced William that a ‘cheap’ steamer via the Canal ‘would make handsome profits during the opium & pilgrim seasons’. It ‘might also do well by bringing dates in [to London] for the first of the season to a better market than other ships’.2 His ambitions were limited to exploring the market for steam freights to and from London along the Red Sea and Gulf littorals – coastal regions which Lewis Pelly had depicted as ripe for expansion – and to helping the younger men in what was essentially his London house to make their mark in the Gulf. As Dawes explained: ‘there is a considerable & growing trade and up to the present time no steamers are employed on it. We shall work in conjunction with the British India Coy and exchange cargo & passengers with their steamers at Muscat, to & from India. We also have working arrangements with the P&O Coy for taking forward to China Persian opium which we should tranship to their steamers at Aden. One of the most important sources of income will however be the conveyance of pilgrims from Persia to Mecca at certain periods of the year.’3 By February 1870, William had decided to contract for three steamers on behalf of a private family syndicate, so as to start a regular monthly line and ‘get a firm hold of the Gulf carrying trade’.4 He had received information about two proposals that could materially affect his proposed line. The first

2 3 4

E.S. Dawes to G. Mackenzie, 16 July 1869, Dawes Letterbook, 1868–74. E.S. Dawes to Henry, 29 Nov. 1869, Dawes Letterbook, 1868–74. E.S. Dawes to G. Mackenzie, 11 Feb. and 11 March 1870, Dawes Letterbook, 1868–74. 155

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was yet another attempt to interest the government in London in a Euphrates Valley Railway scheme. If such a project were to get off the ground, it would mean a sizeable sea-borne traffic to and from Basra. News that such discussions were taking place with the Turkish ambassador and the Foreign Office in February and March 1870 contributed to his enthusiasm for a London-Gulf steamship line, and to his decision to give BI’s vacant Basra agency to the Gray Dawes/Gray Paul partners. The second, and seemingly more immediate prospect, was the imminent appearance of a British government contract for a mail service between Aden and Zanzibar. This, William realised immediately, could be used to support the development of a Gulf line – by creating a branch line that would tranship at Aden goods and passengers to and from East Africa. Such thinking reflected the close links between the commerce and politics of the Persian Gulf and of maritime East Africa. The monsoon-driven, dhowborne trades between the Gulf and East Africa sustained the rule of the same family dynasty in Muscat-Oman, at the entrance to the Gulf, and in Zanzibar, the off-shore island that acted as an entrepôt port for the Arab-Swahili coast. By 1869–70, governing circles in Britain and in India were in some difficulty over their relations with both Muscat-Oman and Zanzibar. On the one hand, the growing humanitarian campaign in Britain against the maritime slave trade of East Africa, which sent a flow of slaves northwards to the Arabian peninsula despite diplomatic and naval attempts to prevent it, tended to undermine British relations with the Sultan of Zanzibar. On the other hand, British and British Indian interests in a friendly and stable relationship with the strategically-placed state of Muscat-Oman were complicated by internal political disorder there, conditions which in turn made the Sultan of Zanzibar reluctant to pay an annual subsidy to Muscat which kept its treasury afloat. There was the further consideration for British policy-makers that the Sultan of Zanzibar’s ability to pay a subsidy to his dynastic relations in Muscat seemed to rest, directly or indirectly, on the revenues generated by the slave trade within East Africa. Any abolition of the latter could mean the end of the subsidy. Sir Henry Bartle Frere, William’s patron and friend, and one of the Anglo-Indian officials most strongly committed to the abolition of the slave trade, was in the thick of the debate about what should be done. He argued within the India Council that the Indian Treasury should assume the costs of the subsidy to Muscat, in return for the Sultan of Zanzibar proscribing the slave trade within East Africa, and that the Sultan should also be compensated by both Britain and India for the economic and financial consequences of the abolition. In January 1870, a Whitehall interdepartmental committee came up with a proposal involving the termination of the Zanzibari subsidy to Muscat and a gradual abolition of the East African slave trade, to be overseen by a strengthened British consular presence in Zanzibar. To support that consular power, and ensure that it enjoyed speedy communications with both London and India, a subsidised mail service 156

THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

between Aden and Zanzibar was suggested.5 At that time, mails to Zanzibar from Britain or India were carried by steamer to the Seychelles islands, where they might lie for weeks waiting for a sailing ship to carry them on to Zanzibar. Such slow and irregular communications clearly constrained any close and sustained exercise of British Indian influence in East Africa. While some British shipowners showed interest in a direct mail service from London to Zanzibar via the Canal, William Mackinnon’s plans to operate an Aden-Zanzibar service as an extension of a London-Gulf service, offered improved communications in several directions. They would link Zanzibar not only with London but also with the Persian Gulf ports and Bombay. Being more closely aligned to trade routes and networks within the Indian Ocean than a London-Zanzibar direct line, they could also be presented as a more positive measure towards combatting the maritime slave trade of East Africa. By 1 April 1870, William let it be known to the Foreign Office’s Slave Trade Department that he intended to introduce such a Zanzibar branch line as part of a general contract with the Government of India – for which purpose he sought an annual subsidy of £15,000.6 Whether because of political sensitivities surrounding the proposed line, or simply because BI had come to be the Government of India’s ‘official’ steamship operator in the Indian Ocean, there appears to have been no thought of putting the new Zanzibar line out to public tender. However, the project to open the first steamship line from Britain to the Gulf soon ran into trouble. The attempt to revive the Euphrates Valley Railway scheme stalled because the British government, under Gladstone, refused to contemplate the expense of an additional route to India when the Suez Canal was already proving its worth. The Aden-Zanzibar mail contract got lost in inter-governmental squabbles about whether Britain or India should pay for the costs of the policies proposed for Zanzibar, and the three steamers being built on the Clyde were affected by the post-Suez construction boom which led to delays in delivery. When the first vessel, the Shiraz, went into service in December 1870, some eight months later than planned, it found so little cargo and so few passengers available in London for the Gulf that it started on its maiden voyage from Glasgow, more or less empty. On its second visit to the Gulf it found so little traffic homewards that it was diverted into a pilgrim voyage to Jeddah and back. As a consequence of its losses it was sold to the Netherlands India S.N. Co. Dawes commented

5

R.J Gavin, ‘The Bartle Frere Mission to Zanzibar, 1873’, Historical Journal, V (1962), pp. 122–34; J.B. Kelly, Britain and the Persian Gulf, 1795–1880 (Oxford, 1968), pp. 624–8. 6 W. Mackinnon to Foreign Office, 1 April 1870, and minute thereon, FO 84/1333; J.M. Kaye (India Office) to W. Mackinnon, 18 May 1870, MP Private Letters File 78; BISN Co, Directors’ Minutes, 31 May 1870, BIS/1/3; evidence of A.M. Monteath, ‘Report of the Select Committee (Cape of Good Hope and Zanzibar Mail Contracts)’, P.P. 1873 (334), p. 101. 157

SUEZ AND AFTER

gloomily that ‘the Gulf trade holds out little prospect and we are not pressing the [other] steamers forward’7 The Baghdad and the Ispahan, when finally delivered, fared little better. They were diverted off the Gulf route into tramping voyages to the Red Sea, Karachi and Bombay. The Ispahan was lost with all hands off Cape Finisterre late in February 1872, and the sale of the Baghdad to the BI in April 1872 ended the Mackinnon family’s first attempt to develop an inter-continental steamship line between Britain and Asia. There were several reasons for the lack of success. Although Gray Paul & Co, at Bushire and Bandar Abbas, and Gray Mackenzie & Co, newly established at Basra, were anchored in place by commissions on agency work for BI steamers between India and the Gulf, they had as yet relatively little success in developing trade between the Gulf and Britain, and were poorly placed to influence traffic towards London-based steamships. They were almost certainly undercapitalised for trades which required them to extend credit to Persian and Arab merchants, so as to obtain goods from the landwards interior, and they were relatively inexperienced in the markets for British textiles there, still learning what appealed to local tastes. They also faced competition from longer-established merchant houses of MiddleEastern origin, like the Jewish family firm of Sassoon & Co or the Armenian firm, Malcolm & Co.8 However, the main difficulty was that the start of the new steamship line coincided with abnormal conditions in southern Iran. Southern and Central Persia, Lewis Pelly told William, have suffered two successive years of such absolute droughts as exceeds anything before experienced within the memory of this generation. The result has been awful famine, and uncounted mortality among human beings and the carriage animals of the country. Of course, the export trade in grain fell at once, and we are now importing somewhat by your steamers from Kurrachee. The high rate and indeed almost absence of carriage checks all produce or goods seeking the coastline and vice versa. Credit is bad, and I think no British merchant could safely venture on any but cash transactions with the interior. In Yedz, which was one of our most industrial towns, the famine has been particularly severe, and the Zoroastrians have died or deserted the place. This of course materially affects the trade of Bundar Abbas. Opium too has fallen off.9

Such conditions, which also prevailed in southern districts of Iraq, materially affected the levels of trade conducted by the ports of Bandar Abbas, Bushire and Basra until the mid-1870s. 7

E.S. Dawes to W. Mackinnon, 22 Nov. 1870, MP Private Letters File 166; Dawes to Mackenzie, 10 March and 21 April 1871, and Dawes to Paul, 19 May 1871, Dawes Letterbook, 1868–74. 8 These comments are based upon the extensive correspondence which Edwyn Dawes conducted with his partners in the Gulf, and others, between 1869 and 1872, Dawes Letterbooks, 1868–74. 9 L. Pelly to W. Mackinnon, 13 July 1871, MP Private Letters File 175. 158

THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

The difficulties facing his steamships between London and the Gulf confirmed William Mackinnon’s views about the need for government support for pioneering steamship lines, and strengthened his resolve to press for public funds for an Aden-Zanzibar branch line. Such an opportunity presented itself with the hearings of the House of Commons Select Committee on the Slave Trade in July–August 1871, when Sir Henry Bartle Frere appeared as the main spokesmen for the use of mail steamers within an active policy of slave trade suppression. In becoming the eyes and ears of the British civil and naval authorities through regular ‘patrolling’, in encouraging voluntary labour migration through cheap deck passage rates, and in stimulating commodity trades to replace the traffic in human beings, mail steamers would be the backbone of ‘legitimate commerce’. He pointed to the stimulus that mail contracts had given to trade around the coasts of India, and concluded that ‘frugal liberality’ in subsidising a steamship line ‘would be quite the best way of developing that commerce which would bring slavery to a natural end’. It was left to Major-General Rigby, a former consul and political agent in Zanzibar, to inform the MPs that BI’s directors were ‘very anxious indeed to tender for a line from Aden to Zanzibar’.10 Meanwhile, Alexander Monteath was about to leave London for India, to present William Mackinnon’s ideas about a monthly steam service from the Persian Gulf ports to Karachi, Aden, the Red Sea, Mediterranean ports and London. The two men hoped that the Government of India would subsidise for postal purposes that section of the line between the Gulf ports and Aden, as part of the general process of consolidating BI’s mail contracts. Before departing, Monteath told the British Post Office that, although the Government of India was unlikely to support the development of African steamship lines generally, it might be inclined to include the Aden-Zanzibar line in its general contract if the British Post Office were willing to put up £2,000 to £5,000 towards the costs.11 Neither line of attack produced immediate results. The Select Committee’s inconclusive report, suggesting that there should be international cooperation in policies towards Zanzibar, meant an absence of official action towards the East African slave trade. At the same time, contract negotiations with the Government of India became bogged down in the latter’s lengthy internal consultation processes. While awaiting movement in either direction, William continued to lobby hard.12 He even found time to lend a hand

10

‘Report from the Select Committee on the Slave Trade (East Coast of Africa)’, P.P. 1871 (420), pp. 38 and 47. 11 A. Monteath to J. Tilley, 16 Nov. and 18 Dec.1871, T1/7192A/9737. 12 ‘Past experience in the Persian Gulf and elsewhere proves beyond question that in localities where the slave trade exists, steam communication exercises a powerfully repressive influence on that traffic, while it tends to develope legitimate commerce.’ (W. Mackinnon to Lord Granville, 17 Feb. 1872, T1/7345A/18256.) 159

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to yet another effort to push the Euphrates Valley scheme. Further Russian advances in Central Asia and proposals for a Franco-Russian railway line there revived British interest in a railway though Iraq, and the House of Commons returned to the subject once again. William Mackinnon and Robert Paul, the latter hotfoot from the Gulf, appeared to give evidence before the Select Committee on 25 March 1872, in support of Frere and other members of his Anglo-Indian circle. William pushed the general case for government support for steam communications in Asia. He also gave his opinion that construction of a railway from the Mediterranean to the head of the Gulf would stimulate trade from southern Iraq and the western districts of Iran, and stressed the strategic significance of the railway ‘in the contingency which in certain circumstances you can easily imagine, of the Suez Canal being blocked up’.13 Gladstone’s economising government, however, did not share these views. The Select Committee was broadly favourable to a railway, which might cost as much as £10 million, and wished to see further negotiations with Turkey to advance its construction. However, the government would not budge. It stood its ground and comfortably saw off the railway’s promoters and their supporters in the Commons.14 Gladstone and his ministers were less firm in resisting the pressure of humanitarian forces usually associated with political support for the Liberal party. While much of the parliamentary focus was on the Euphrates Valley railway, Frere had had been busy on the second front. He conducted a wellorchestrated public campaign over the need to suppress the East African salve trade, securing the support of the Anti-Slavery Society and making use of the publicity emanating from Stanley’s ‘discovery’ of Livingstone. Gladstone and his ministers, needing a boost to their government’s popularity, bowed to this pressure in the autumn of 1872. They decided to send Frere on a special mission to Zanzibar to settle the complex matters of the slave trade and the Sultan’s political and financial relations with Muscat-Oman.15 As a result, the Treasury moved quickly to settle with BI for a ten-year contract for a monthly Aden-Zanzibar mail service at a cost of £10,000 per annum. The service would start on 6 December 1872 so that there would be a steamer on station in time for Frere’s mission. Mackinnon Mackenzie & Co were instructed to put a steamer in first-rate condition on the line, because of the

13

Report from the Select Committee on Euphrates Valley Railway, P.P. 1872 (322), pp. 69–71. 14 R. Kumar, India and the Persian Gulf Region, 1858–1907: A Study in British Imperial Policy. (London, 1965), pp. 140–1; Farnie, East and West of Suez, pp. 116–17, 151; 15 Gavin, ‘The Bartle Frere Mission’, pp. 138–44; Kelly, Britain and the Persian Gulf, pp. 630–2. F. Harcourt, ‘Gladstone, Monarchism and the ‘New Imperialism’, 1868–74’, Journal of Imperial and Commonwealth History, XIV (1985), pp. 33–6, conveys something of the fervour which the press, H.M. Stanley, Frere and the Anti-Slavery Society between them managed to whip up over East Africa and the Slave Trade during the summer of 1872. 160

THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

difficulties of effecting repairs in either Aden or Zanzibar, and selected the eight-year old Punjaub to inaugurate the line.16 When the Punjaub left Aden on 4 January 1873, on its second voyage to Zanzibar, it had a section of Frere’s party on board. The rest proceeded to Zanzibar on the steam yacht HMS Enchantress. The group included William’s friend Lewis Pelly, a shareholder in NISM as well as in BI, who had been summoned from the Gulf to put his knowledge of both the Gulf and Zanzibar at Sir Bartle’s disposal. While Frere was in East Africa and Muscat – failing to persuade the Sultan of Zanzibar to proscribe the slave trade but paving the way for the ultimatum delivered by the Consul, John Kirk, which secured that object – William Mackinnon was in India. There he brought the Government of India around to agreeing to the single consolidated mail contract that would be BI’s sheet anchor until well into the 1880s. When he returned to Britain in May 1873, with the Zanzibar-Aden mail contract already in his pocket and knowing that a Karachi-Aden mail contract from the Government of India would be his in 1874, he must have expected that he could now turn at last from politics and lobbying to the development of his new steamship lines for Arabian and Afro-Arabian waters. He was probably therefore more that a little surprised to discover that there was one final hurdle to be overcome. The trouble came from southern Africa, into the shipping politics of which he had unwittingly stumbled, and it was orchestrated by another Scottish shipowner, Donald Currie, with whom William had hitherto had only distant, if relatively amicable, relations. When, in 1871, the British Post Office had been invited to look into the establishment of a mail service from Aden to Zanzibar, it included in its enquiries among various shipowners, and apparently on its own initiative, the further possibility of a service from Aden to Natal and the Cape. In doing so, it was responding to a campaign largely got up by the Cape Argus newspaper for a subsidised mail line round the eastern shores of Africa to Aden, in addition to the existing service down the Atlantic from Britain to southern Africa. The case for this additional service was that, since Aden had telegraphic connection with Britain, communications to and from the southern African colonies could proceed just as quickly around the eastern as around the western shores of the African continent. Although evidence for any real need was slight, the Post Office secured expressions of interest in an Aden-Cape mail line from several shipowners engaged in southern African shipping, as well as from William Mackinnon. However, when William discovered that the Government of India would not back an Aden-Zanzibar contract and that there might be rivals for an Aden-Cape contract, he decided to submit a joint bid with the Union Steam Ship Co (which carried the mails on the Atlantic routes

16 Treasury to Post Office, 10 August 1872, Post Office to Treasury, 29 Oct. 1872, and Treasury to Post Office, 30 Oct. 1872, T1/7345A/18256; P. MacNaughton to Mackinnon Mackenzie & Co, 12 and 19 Sept., and 1 Nov. 1872, BIS/6/15;

161

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between Britain and southern Africa). That bid, submitted to the Treasury on 25 June 1872, offered a mail service between Aden and Zanzibar by BI and between Zanzibar and the Cape by the Union S.S. Co. for a combined subsidy of £25,000 (of which BI would receive £10,000).17 William and his fellow directors were unaware, however, that the Union S.S. Co.’s motives were different from their own. In offering to run steamers from the Cape to Zanzibar for £15,000 per annum the Union S.S. Co was really seeking to secure an extension of its existing contract to carry the mails between Britain and the Cape on the Atlantic route. On 30 October 1872, the Treasury, in a hurry to make arrangements for Zanzibar, agreed to extend the Union S.S. Co.’s ‘western’ contract for another three years and six months in return for it taking on an ‘eastern’ contract to Zanzibar for eight years, on the grounds that these two contracts would now neatly terminate on the same date. Both parties, however, had reckoned without Donald Currie. A member of a shipowning family working mainly in the North Sea trades out of Leith, Currie had developed his own moderately-sized Castle Line between London and Calcutta during the 1860s. Moving, like so many others, from sail to steam after the opening of the Suez Canal, he decided in 1872 to take his new steamers out of the highly competitive London-Calcutta trades and place them on the Atlantic routes to the Cape and Natal. He became the Union S.S. Co.’s main rival and naturally expected to be in the bidding when the southern African mail contract eventually came up for renewal, only to find himself cleverly side-stepped by the Union Co’s Zanzibari ploy.18 Currie, however, refused to be checkmated. Drawing upon his contacts in southern Africa, and particularly among the Cape merchants in London, he launched an attack on the contracts through the press and the lobbying of government departments and MPs. His campaign resulted in two debates in the House of Commons during June 1873 and the establishment of a Select Committee to look into the matter.19 William Mackinnon and Alex Monteath were summoned to appear before the Select Committee on 14 July 1873. By that time, the Committee’s work had largely been done and Monteath, despite having had to come all the way from India, was subjected to only a few straightforward questions about his correspondence with the British Post Office and his attitudes towards public tendering for mail contracts. The questioning of William Mackinnon on the

17

P. Macnaughton (BISN Co) and J. Mercer (Union S.S. Co) to Treasury, 25 June 1872, T1/7345A/18256; BISN Co Directors’ Minutes, 29 August 1872, BIS/1/3. 18 For a full biography of Currie see Andrew Porter, Victorian Shipping, Business and Imperial Policy: Donald Currie, the Castle Line, and Southern Africa (Woodbridge and New York, 1986). 19 Porter, Victorian Shipping, pp. 61–8; Hansard’s Parliamentary Debates, 3rd ser., 216 (16 May–7 July 1873), pp. 686–711, 1195–215, and 1445–51. 162

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other hand was more lengthy and robust. Its principal thrust was to explore the charge which had been laid against him in the House on 19 June, by the Chancellor of the Exchequer, Robert Lowe, who was anxiously seeking a way of deflecting the anger over the Treasury’s arrangements with the Union S.S. Co. BI’s interest in the Aden-Zanzibar contract, he alleged, was exactly the same as the Union’s – both were willing to do something for less than it would cost ‘because they wished to make it the means of getting something else’.20 In other words, William had offered to do an Aden-Zanzibar service as a means of getting a renewal of his Indian contracts. This allegation was relatively easily countered by William pointing out that the Government of India had so little interest in an Aden-Zanzibar contract, and was so reluctant to contribute to it, that it could never have the pivotal effect that Lowe had alleged. He also outlined the thorough way in which the Government of India had handled BI’s mail contracts, with its inter-departmental and inter-provincial consultations and the establishment of a special committee to investigate, negotiate and report. This carried an implicit criticism of the haste with which the Treasury in London had gone about matters with the Union S.S. Co.21 In the event, William and BI escaped public criticism. The Select Committee’s report aimed its fire at the muddle and confusion in the various government departments in London, especially the Treasury, and recommended that the government, having already having retreated as a result of the fuss from the renewal of the Union S.S. Co.’s ‘western’ contract, should renegotiate the ‘eastern’ contract with that company. That was achieved by a contract which gave the Union S.S. Co £20,000 for the Cape-Zanzibar route, which was twice what BI had accepted for Aden-Zanzibar. The two firms settled down to working their respective sections of the line that the British government had subsidised all the way down the eastern shores of Africa. The row over Zanzibar shipping subsidies in 1873 may be interpreted in various ways. At one level it was no more than another spat over the award of mail contracts, involving disappointed interests and demands for parliamentary scrutiny, which bubbled up from time to time throughout the history of British mail contracting in the nineteenth century. Alternatively it can be seen as yet another example of inter-departmental disagreement over policy in Whitehall that permitted outside lobbying groups to exercise leverage over government.22 At yet another level, it may plausibly be presented as a clash between competing imperial interest groups, on the one hand the Indian and humanitarian and on the other the southern African

20

Hansard, 3rd ser., 216, p. 1199. ‘Report from the Select Committee (Cape of Good Hope and Zanzibar Mail Contracts)’, P.P. 1873 (334), pp. 94–9. 22 F. Harcourt, ‘British Oceanic Mail Contracts in the Age of Steam, 1838–1914’, Journal of Transport History, 9 (1988), pp. 1–18; C.R. Perry, ‘The General Post Office’s Zanzibar Shipping Contracts, 1860–1914’, The Mariner’s Mirror, 68 (1981), pp. 57–67. 21

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colonial, with Gladstone’s government finding that it could not please both.23 What few commentators on the Zanzibar contracts have noted, however, is the extent to which the political impetus which led to the Gladstone government’s troubles, and to the demise of its Chancellor of the Exchequer, came from a specific British Indian pressure group that was busy trying to secure financial support for steam communications over a large swathe of Middle Eastern and African coastline. This lobbying for Indian Ocean transport innovation carried into processes of allocating mail contracts in London issues that were much broader than the postal or even trade-promoting considerations which normally faced the British Post Office or the Treasury. The practice of using mail steamers as agents of imperial power, to maintain and extend influence in maritime littorals beyond the formal boundaries of British authority, which had been developed through the use of Indian mail contracts in the Persian Gulf, was being extended into southern Arabia, the Red Sea and East African waters. It was being done by a group of men – Frere, Pelly, Andrew, Monteath and William Mackinnon among them – for whom the Arab-Swahili coast of East Africa was essentially an outlier of maritime Arabia. Asserting British authority in Zanzibar, to ensure the abolition of the slave trade and the rise of commodity trades, was seen to be at one with maintaining British Indian authority in the Persian Gulf and the Arabian peninsula, so as to protect existing and future commercial developments and to secure influence over the strategic routes between the Mediterranean and India. The opening of the Suez Canal and the transformation of the Red Sea into the pre-eminent waterway between Europe, Asia and Australia gave new significance to the largely Arabinhabited coastlines on both sides of the steamer route. At the same time, fears that the Suez Canal Company was too much under French influence reinvigorated the belief held in some quarters in the strategic significance of the Persian Gulf and Iraq, and the need to exert British authority over the Arab communities that guarded the entrance to the Gulf. Running like a thread through these almost visionary ideas, rendering technological and commercial substance to the maintenance of British authority in Arabian waters, were William Mackinnon’s steamship lines connecting Basra and Karachi with Muscat, Aden, Suez and Zanzibar. The Union S.S. Co’s contracts were something of a side-show to, and the agitation got up by Donald Currie a convenient smokescreen for, the main event – which was the promotion of British and British Indian shipping, trade and political influence along the western and north-western flanks of the Indian Ocean. *****

23

Porter, Victorian Shipping, p. 68. 164

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A decision to restart the London-Gulf line was taken early in July 1873. However, it was now to be conducted by BI rather than by a private family syndicate. Operations began with chartered vessels but in 1874 William Mackinnon decided that these should be replaced by BI steamships being released from Indian coastal services by the bigger and newer steamers being delivered to Calcutta and Bombay. ‘I wish to use our ships of lowest value on this London & Gulf service and reserve the large and costly ships for work in India or occasional runs home’, he noted.24 Along the northern and western flanks of the Indian Ocean he would be able to find regular employment for older and smaller vessels no longer needed within BI’s expanding and more modern fleet. It also kept them in safe hands, rather than see them sold off to potential competitors in India and elsewhere. Such vessels (like the Punjaub which started the Aden-Zanzibar service) would already have been largely written-off in the company’s books. There were therefore very low capital costs for BI in starting new steamer services in and to these Arabian waters. The steamer earnings and mails subsidies would be needed only or mainly to cover working costs. Nevertheless, it took time for BI steamers to become available in sufficient numbers for the purpose, and it was only in the spring of 1875 that a fully-fledged monthly BI London-GulfZanzibar system finally came into existence. In the meantime, its prospects were strengthened by additional contracts that William Mackinnon arranged with foreign governments. The French were less obliging than was hoped. They refused docking and coaling facilities at Algiers, preventing it from becoming a major port-of-call (and a source of pilgrim traffic to Jeddah), but they awarded BI a small contract for mails to the Comoros Islands as an extension of the Aden-Zanzibar line. The Portuguese government, by contrast, which still lacked any subsidised imperial steamship line of its own, agreed through its London consul-general, Viscount Alfredo Duprat, to make BI its mail carrier between Lisbon and its colonial possessions in Mozambique and Goa. The contract, signed in December 1874, was worth £6,000 per annum towards the maintenance of William’s ‘Arabian’ network, and his pleasure was signalled by instructions to the Bombay agents to show ‘every consideration’ to the Governor of Goa when he travelled with BI.25 By making Lisbon the first port of call after London, the Gulf steamers collected mail, passengers and cargo for the Portuguese possessions in Mozambique and Goa. They then proceeded via Alexandria and Suez to Jeddah, in the Red Sea, where Muslim pilgrims returning from the haj to Mecca might embark and local Red Sea cargoes would be transhipped. At Aden, British and Portuguese mails and traffic for eastern Africa would be transferred to the local feeder service, and onward traffic from East Africa or

24

W. Mackinnon to D. Mackinnon, 29 July 1874, Nat. Lib. Acc. 6168/7. BISN Co Directors’ Minutes, 18 and 21 Dec.1874, 19 Jan., 10 Feb., and 4 June 1875, BIS/1/3. 25

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the lower reaches of the Red Sea for India or the Gulf would be taken aboard. British mail for Karachi would also be collected from the P&O steamers. From Aden the steamers proceeded directly to Karachi, where Fleming & Co oversaw transhipments to BI steamers heading south to Bombay, including the Portuguese mails for Goa, and where consignments of such Indian produce as rice and sugar would be taken aboard before the steamers turned northwestwards to Bushire and Basra. On the return leg, consignments of wheat or dates would be unloaded at Karachi, either for local consumption or transhipment to Bombay, and the Goa and Karachi mails, as well as exports from Sind, would be collected. At Aden the Karachi mails and Iranian opium would be transferred to P&O vessels, while produce from Zanzibar and Mozambique, as well as the Portuguese mails from Mozambique to Lisbon, would be taken on board. (The British and British Indian mails and passengers which had come up from Zanzibar on the feeder line would normally transfer to the P&O line.) At Jeddah, depending on the time of the year, the wealthier Moslem pilgrims from the Gulf, India or East Africa who could afford the rates of passage charged by a regular steam line would disembark. Those proceeding to Egypt and thence to the Eastern Mediterranean would be picked up. After navigating the Suez Canal, there would be a call at Lisbon to disembark passengers and discharge mails and cargoes from Mozambique and Goa, before the final arrival back in London. There a wide variety of produce, including dates from Iraq, opium from Iran, coffee and hides from the Yemen, and ivory and cloves from East Africa, would be unloaded. It was a complex operation which, like BI’s coasting services around India, required careful co-ordination of the work of the steamer agents, and their close attention in turn to the needs and interests of the great variety of merchants, government departments and private passengers who used the lines. This task was rendered no easier by the fact that several of the key ports-of-call had no direct communication between them other than by the steamers themselves. Aden and Zanzibar, for example, were linked by telegraph only in 1879. Furthermore, several of the trades in which the steamers were employed were seasonal in character, and when it came to arranging cargoes, different weights and measures were employed in the various ports. The working of the line could also be complicated by the difficulties of the agents in local trades and in their conduct of their other responsibilities to BI. The opening of the Suez Canal relieved BI from its former agreement with the Egyptian government not to engage in local shipping activities in the Red Sea and encouraged the firm to make much greater use of the Red Sea in both its regular ‘home’ lines and irregular tramp steamshipping. This in turn created a need for agents in the Red Sea area. At Aden, dominating the southern entrance to the Red Sea, BI secured the services of the experienced Parsi firm, Cowasjee Dinshaw & Bros., which had previously acted for the failed Bombay and Bengal Steamship Co. Cowasjee Dinshaw also had branch houses at Jeddah and at Hodeida in the Yemen, and was able to steer local imports and exports towards the London-Gulf steamers. At Suez in the north 166

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and at Jeddah in the centre of the Red Sea, BI operated with a number of local agents until 1873, when G Beyts & Co obtained the agencies in both ports. Captain Beyts had been BI’s senior commander on the Bombay station, and had been employed in a variety of special missions – to China, Mauritius and Egypt – before deciding that he wanted to come ashore and take up the company’s agency in Suez. However, William and others persuaded him to take responsibility for the Jeddah agency as well. This was much against his will, for he knew and disliked Jeddah’s fierce climate, and only accepted the agency on assurances that he could reside at Suez while a younger man did the work at Jeddah. A.B. Wylde was appointed to the assistantship at Jeddah in 1874. As a further inducement to Beyts, William arranged his appointment as the British Consul at Jeddah. This consulship had fallen vacant because of the unpopularity of the location, but the Foreign Office and India Office agreed that there was a continuing need for the post to be filled, to help regulate the pilgrim traffic to and from British territories or on British-flagged vessels. Sir Bartle Frere had therefore been invited to look into the matter on the return leg of his special mission to Zanzibar and Muscat. This simply resulted, however, in lobbying by William and Sir Frederick Arthur for the appointment of Beyts to the post, on the grounds of his suitability and of the desirability of having someone well-placed to report on the slave trade between the African and Arabian shores of the Red Sea (in which Frere took an interest following his return from Zanzibar).26 Beyts was duly appointed in 1874, although Wylde would do much of the work. As BI agents, Beyts & Co looked after the interests in the Red Sea of the regular London-Gulf steamships as well as the vessels which made seasonal ‘Hadjee voyages’, as they were called, between Bombay or the Gulf and the Red Sea. They also had ambitions to compete with the Egyptian government steamers which, under the name of The Khedival Mail Line, operated local services between various Red Sea ports. A spare BI steamer, the Medina, was placed at their disposal for this purpose. Beyts and Wylde took their consular roles seriously – making sure that the Turkish authorities closed down the public slave market in Jeddah in 1874, and providing regular reports to the Foreign Office on the Red Sea slave trade.27 However, they quickly found themselves embroiled in a vicious dispute with a coterie of shipowners and merchants at Jeddah where, a Foreign Office memo observed, ‘a disgraceful state of affairs had sprung up’ between 1871 and 1874. ‘One or two English

26

Memo by A.W.M., Political and Secret Dept., 23 April 1877, IOLR L/P&S/18/B16; Confidential Memorandum of W.H.W., Foreign Office, 7 Nov. 1877 (No 317 of July 1878), Proceedings, India, Foreign, Vol. 1218, IOLR; Abbas Ibrahim Muhammad Ali, The British, the Slave Trade and Slavery in the Sudan, 1820–1881 (Khartoum, 1972), pp. 46, 52, and 56–8. 27 G. Beyts to Lord Derby, 15 Jan. 1874, FO 84/1412, and Memorandum on the Red Sea Slave Trade by A.B. Wylde, 25 Nov. 1876, FO 84/1450. 167

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and several Indian subjects of more than doubtful character had established themselves at Jeddah, principally with the view of engaging in the “pilgrim traffic”. These individuals, acting more or less in concert with the Dutch firm of Van der Chys & Co, and with the Turkish authorities, had obtained a monopoly of that traffic.’28 The scandals associated with this ring included the overloading of pilgrim vessels, the overcharging of passengers, and the stranding of returning pilgrims at a considerable distance from their home. In refusing to collaborate with the ring, and in attempting to subject its members to India’s Native Passenger Ship Acts, Beyts laid himself open to counter-charges. The result was that he ‘became involved in ceaseless discussions with his colleagues, with the Turkish and Egyptian sanitary officials, with the resident merchants, and with the authorities at Jeddah, arising out of allegations made against him of systematic abuse of his consular position in favour of the firm of Beyts & Co in matters connected with the pilgrim traffic’.29 Matters came to a head early in 1877, when the opposition reported Beyts & Co to the Aden authorities for a breach of the Native Passenger Ships Acts. The evidence suggests that Beyts was actually trying to assist a group of pilgrims from Java, who were being swindled by the Dutch members of the ring, but in doing so he sent them down to Aden in the Medina, whose licence to carry passengers had expired 23 days earlier. A court in Aden fined the master of the Medina the sum of Rs.10,000, and the Aden authorities refused to renew the passenger certificates of the Medina and two other BI vessels. The affair angered William Mackinnon, weakening as it did the aurora of moral rectitude with which he tried to surround BI, and it rekindled doubts about the wisdom of being involved in the pilgrim trade. On his instructions, BI withdrew from seasonal pilgrim voyages from India and the Gulf to Jeddah, and even the chartering of spare steamships to third parties for this purpose was enough to arouse the chairman’s ire. The local coasting steamer Medina was also removed from the Red Sea, and Beyts and Wylde were left to find their own means of participating in its maritime trades. The Government of India and, to a lesser extent, the Foreign Office regarded Beyts as having been compromised by the way in which he combined consular and commercial activities. Nevertheless, in the absence of any other strong contenders, he retained the consulate, leaving Wylde to assume the more public profile in the conduct of its work. The London-Gulf steamers continued to make their advertised calls at Jeddah after 1877 but, with the agency there now stripped of BI support in local and regional trades, the port failed to fulfil the expectations that had been placed on it during the early 1870s.

28

Confidential Memorandum by W.H.W., 7 No.1877, Proceedings, India, Foreign, Vol. 1218, IOLR. 29 Memo by A.W.M., 23 April 1877, IOLR L/P&S/18/B16. 168

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There were troubles too at Karachi, where the London-Gulf line intersected with the Bombay-Gulf line. There, until 1878, J. Fleming & Co operated as agents under the supervision of W. Nicol & Co of Bombay, where jealousy of Gray Dawes & Co and its Gulf associates was rife. There was therefore a tendency to subject the needs of the London-Gulf line, under Gray Dawes & Co’s management, to those of the Bombay-Gulf line, under W. Nicol & Co’s management. A further reason for such conflict was a dispute within BI’s directorate over the wisdom of running the steamers from London all the way into the Gulf. A majority faction, led by Jamie Hall, took the view that the line from London should terminate at Karachi, while only William Mackinnon leaned towards the option of continuing all the way to the head of the Gulf. The introduction of weekly sailings between Bombay-Karachi and the Gulf ports under the new Indian contract was demonstrating that the Gulf trades, although growing, were not expanding sufficiently rapidly to justify the tonnage which BI was now allocating to them. Edwyn Dawes was well aware of the poor trading conditions in the Gulf – his correspondence with his partners in Bushire and Basra in 1874 and 1875 veered between anger over how little they were achieving and encouragement to do better – but he clung to the belief that a regular steamship service from London to Basra would transform the situation, and the prospects of his Gulf firms. It took all of his powers of persuasion to get William to swing the other directors behind a decision to run the London-based steamships on into the Gulf instead of completing their voyage at Karachi. Even so, this agreement took the form of a compromise – between Karachi and Basra the monthly steamer to and from London would do the work of one of the weekly Bombay-Gulf mail steamers, and it would therefore only proceed along the northern (Iranian) shore of the Gulf.30 The compromise was not a happy one. It meant that the steamers once again by-passed Muscat-Oman and the southern (Arabian) shores of the Persian Gulf. This in turn undermined the political justification for subsidising an Aden-Zanzibar feeder service. The change also resulted in a muddle over the preparation of voyage accounts, which concealed the financial results of the London-Gulf line from the board in London. The Russo-Turkish War briefly masked the underlying problems. It produced a surge in the Gulf trades because it diverted to the Gulf ports, more especially to Basra and Bushire, the exports and imports of Iran and Iraq which would normally have gone overland to and from the Black Sea and the Caspian. William decided to introduce a two-weekly London-Gulf service to answer the growing complaints of Karachi merchants about being shut out of cargo space for London by the volume of exports from the Gulf, while agitation from Karachi’s merchant community for a more frequent direct postal connection with Aden, almost certainly stirred up by J. Fleming & Co,

30

E.S. Dawes to W. Mackinnon, 26 Jan., 11 and 22 March 1875, Dawes to Mackenzie, 30 March 1875, and Dawes to R. Paul, 9 April 1875, Dawes Letterbook, 1874–6. 169

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brought financial support for the increased service from Monteath at the Indian Post Office. However, 1878 would prove to be only a temporary highwater mark in the history of the London-Gulf service. Doubts remained whether there was a sufficiently strong and stable trade between Britain and the Persian Gulf to justify the use of London-based steamers in the Gulf – especially against the alternative of terminating at Karachi where further harbour improvements and railway construction in the Indus valley were opening up the wealth of the Punjab. The uncertainty stemmed from the problems experienced by BI and its agents in the Gulf – including the tenacity of the long-established channels of trade between the Gulf and India, and the competition of the Indian, Parsi and other Asian merchants who organised them. More fundamentally, the difficulties in developing trade with Britain reflected the failure of interior lines of communication within the Gulf to develop at a rate that could match the levels of maritime transport which BI and others could make available, and consequently to generate additional growth in trade volumes. The men of the Mackinnon group, accustomed to the way in which, in India, in the Netherlands Indies and elsewhere, internal transport and communications were being developed in the form of roads, railways and river steamers, were ill-prepared for a part of the world where neither government policy nor private enterprise was able to secure similar results. Consequently, despite

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THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

their technology and command of the sea, their shipping and trading made relatively little progress. Gray Paul & Co at Bushire and Bundar Abbas were operating on the southern fringes of the Persian Empire. The immediate coastline, to which they enjoyed easy access, was barren and lightly populated. Most of the Iranian population lived in the plateaux of the interior, where the large administrative centres and commercial cities were located. Between the coastal ports and the more developed interior lay extensive tracts of land and mountain ranges over which there were no paved roads or railways, only rough tracks on which people and goods had to be carried by pack animals. Bushire, where Gray Paul & Co’s operations were principally centred, was particularly ill suited as a location from which to undertake the commercial penetration of the Iranian interior. The site of an old East India Company ‘factory’ and the headquarters of British India’s Resident in the Gulf, it may have been reasonably central for keeping a watch on the maritime affairs of the Gulf, but it was a poor commercial location. It lacked any form of harbour, so that goods had to be landed and loaded by lighter in an open roadstead, and it was isolated from the Iranian interior by a very high range of mountains. The steep and twisting tracks over these mountains could be traversed only by the sturdiest of mules, and brigandage was common. From Bushire to the nearest city, Shiraz, was a journey of 180 miles over ‘six severe passes’, the highest of which was 7,000 feet above sea level.31 Although conditions were less extreme between Bundar Abbas and the cities of Yedz and Kerman in eastern Iran, the great heat and discomfort to be found at Bundar Abbas meant that Paul and Mackenzie treated that port as a secondary commercial centre, which they visited only from time to time. The high costs of internal transportation in southern Iran also reflected the slow recovery in the animal population from the devastating droughts of 1870–71, in that pack animals remained scarce. For much of the 1870s, in fact, southern Iran seems to have teetered on the edge of famine, a condition which may have been exacerbated by a switch from cereals to opium as one of the few cash crops able to bear the costs of transport over long distances. Consequently, local officials were very sensitive to the exporting of wheat or other foodstuffs by sea, and would ban the practice from time to time. The bulk of Iran’s foreign trade was in fact conducted not southwards, to the Gulf ports, but rather northwards and westwards, towards the Caspian and Black Seas. About half of it passed through the city of Tabriz, destined for Asia Minor and Southern Russia. This commerce the Russians were well-

31 For a description of conditions in Bushire, and in the mountains between Shiraz and Bushire, see G.N. Curzon, Persia and the Persian Question (London, 1892), Vol. 2, pp. 197–236; also Memo by Major Champaign, enclosure in R. Thomson (Tehran) to Lord Salisbury, 30 July 1879 (No 12 of November 1879), India, Proceedings, Foreign, Vol. 1835, IOLR.

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placed to develop through their steamshipping on the Volga and the Caspian. It was therefore natural that Robert Paul and George Mackenzie came to regard their struggle to succeed in trade in the Iranian interior as part and parcel of the same competition with Russia for influence in Iran that British diplomacy was pursuing in Tehran.32 Given the marginality of their location on the coast, together with the costs and inconvenience of meeting the needs of customers and suppliers in the interior, the search for a means to improve internal transport preoccupied Gray Paul and Co. and its parent firm, Gray Dawes & Co. The idea emerged that the solution to their problems lay in the Karun River, which flowed into the Shatt-al-Arab below Basra and which promised access by navigable waters northwards into western Iran in the direction of Shustar and Kermanshah. This was first raised in correspondence between Dawes and Mackenzie in 1869, following a visit by Mackenzie to Mohammerah, the Persian-ruled town at the mouth of the Karun. From Shustar on the Karun it seemed on the map to be a considerably shorter distance overland to Esfahan (Ispahan), and then on to Tehran, than it was to reach the same cities from Bushire.33 If the Karun could be opened to steam navigation, the whole centre of gravity of Gray Paul’s activities could be shifted westwards from Bushire to the Shatt-al-Arab, which was also served by BI’s Gulf steamers. The concept of steam navigation on the Karun was not exactly novel, but Dawes was determined to make it his own. He sought advice from Frere and Sir Henry Rawlinson, Frere’s colleague on the India Council, who had represented the Government of India at both Baghdad and Tehran. Rawlinson tried to discourage Dawes on the grounds that navigation of the Karun would be impeded by a reef of rocks at Ahwaz, about 180 miles upstream from Mohammerah, and that the route from Shustar to Esfahan, which crossed the precipitous Zagros Mountains, was next to impassable.34 William Mackinnon also advised Dawes that opening a business at Mohammerah would simply be a distraction from the real work to be done at Bushire and Bandar Abbas, and turned down a proposal from that BI should start a steamer line on the Karun.35 Dawes approached the India Office in the rather forlorn hope that there might be a subsidy available for steamshipping on the Karun, and Gray Paul & Co, through Lewis Pelly,

32

The best account of this diplomatic history is F. Kazemzadeh, Russia and Britain in Persia, 1864–1914: A Study in Imperialism (New Haven, 1968); see also C. Issawi, ‘European Economic Penetration, 1872–1921’, in P. Avery, G. Hambly and C. Melville (eds), The Cambridge History of Iran, Vol. 7 (Cambridge, 1991), pp. 590–607. 33 E.S. Dawes to G. Mackenzie, 19 Nov. 1869, Dawes Letterbook, 1868–74. 34 The Karun River between Mohammerah and Shustar is described in some detail in Curzon, Persia and the Persian Question, Vol. 2, pp. 330–87. 35 E.S. Dawes to R. Paul, 2 Dec. 1869, to Mackenzie, 17 Dec. 1869, and to W. Mackinnon, 20 June 1871, Dawes Letterbook, 1868–74. 172

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approached the British minister in Tehran for assistance in securing permission to navigate the Karun. But Alison in Tehran concluded that the Persian government was too busy with the famine to have any interest in British steamships in one of its more remote provinces, and failed to pursue the matter. This may have been a sensible decision, but it also tended to bear out Frere’s earlier tart observation that ‘Mr. Alison belonged to the old school of diplomatists who considered the proper thing to do nothing.’36 Although William was reluctant to let Dawes have a steamer on the Karun, he was not averse to helping him out by other means. In 1872, the Austrian aristocrat, Baron Reuter, obtained a major concession from the Government of Iran, which yielded substantial monopoly powers over the Iranian economy, including the right to open banks, extract mineral resources and construct railways and roads. William, on hearing the news, went to see Hugh Matheson of Matheson & Co, London, who was one of Reuter’s main backers. Hugh Matheson had retired from Jardine Matheson & Co in Hong Kong to establish his own merchant house in London. He was a supporter of Free Church of Scotland missions in China (in the same way as William Mackinnon was a supporter in India) and he was a fellow trustee of the Duff Missionary Fund, which had been established by the Free Church to provide support to Alexander Duff and other retired missionaries. He and William Mackinnon got to know each other through that connection.37 Matheson was a significant figure in the City, being involved in overseas railway and mining investment, particularly in China and in Spain. William and Dawes had heard that Reuter’s project would include railway communications between the interior plateau and the Gulf ports, and hoped that this might tie in with ideas they had about the construction of a light, narrow-gauge railway over the mountains from Bushire to Shiraz. However, they discovered that the intention was to build railways mainly in the northern parts of the country, which they believed would be of greater assistance to Russian trade than to their own attempts to open up trade from the Gulf. They therefore felt little sense of disappointment when, largely as a result of Russian opposition, the Shah revoked the concession.38

36

Dawes to Paul, 12 Jan. 1869; Dawes Letterbook, 1868–74. Matheson represented the Free Church’s missionary work in China and William Mackinnon its work in India. Their correspondence about the affairs of the Fund from 1865 onwards can be found in MP Miscellaneous Commercial File 26; see also Mrs. H.M. Matheson (ed.), Memoirs of Hugh M. Matheson (London 1899) and Charles Harvey, ‘Hugh Mackay Matheson’, Dictionary of Business Biography, Vol. 4 (London, 1985), pp. 187–91. 38 Dawes to St.John, 3 May 1871, Dawes to Mackenzie, 16 May 1873, and Dawes to E. Grant Duff, M.P., 6 June 1873, Dawes Letterbook, 1868–74; for the Reuter Concession and the politics surrounding it, see Issawi, ‘European Economic Penetration’, p. 593, D. Wright, The English Among the Persians (London, 1977), pp. 102–3, and Kazemzadeh, Russia and Britain in Persia, pp. 100–34. 37

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The plan for the Karun was reverted to in 1875, at a time when BI’s London-Gulf service was being put on a regular footing, and following George Mackenzie’s exploration of the route from Esfahan over the Zagros mountains to Shustar and thence down the river to Mohammerah. Mackenzie concluded that goods could be delivered at Esfahan via the Karun and Shustar for only 35 krans per load of 350 lbs. as against 60 krans overland from Bushire to Esfahan. Mackenzie then went up to Tehran late in 1875, intent upon obtaining a concession from the Shah. The attempt was backed by the Earl of Derby at the Foreign Office and Lord Salisbury at the India Office, both of whom were concerned by Russia’s apparently growing political and commercial influence in Iran. The Minister in Tehran, Ronald Thomson, also worked tirelessly to present the case for the opening of the Karun – but to no greater effect than Alison’s ‘do nothing’ approach of 1871. Despite some moments of promise during the course of the negotiations, the project foundered on the Iranian government’s suspicions that Britain’s official support stemmed from a desire to transfer Mohammerah from Iranian to British rule.39 Enough interest had been taken in the scheme, however, for the old doubts about its viability to resurface. ‘Captain Prideaux’, the Viceroy of India reported to London, ‘lately had the opportunity of proceeding some fifty miles up the Karoon River. He doubts if the river at any season would be navigable for any vessels except of very light draught. He did not see a single village or sign of habitation during the whole of his trip, and his impression . . . is that the river is but ill-adapted for a commercial highway.’40 Another flurry of diplomatic activity occurred in 1878–9, during which BI assured the Foreign Office that it was prepared to ‘place a steamer on the river as soon as the Persian Govt. give their consent’ and that the river was ‘admirably adapted for steam navigation from the sea to Shuster’.41 Yet a further round took place during 1881–2. On each occasion, however, the British officials and the Gray Dawes ‘division’ of the Mackinnon group were left frustrated with the Iranian government’s obduracy, and unhappy with the way that Russian railway and steamshipping enterprises retained central and northern Iran within a Russian sphere of influence. By 1882, Edwyn Dawes was no closer to seeing a BI or other Mackinnon group steamer on the Karun River than he had been in 1869. In the meantime, Gray Paul & Co did what it could to stimulate trade via Bushire and Bundar Abbas. To all intents and purposes, this meant imports of piece goods being exchanged against exports of opium, for few other goods

39 Dawes to Bourke, Foreign Office, 19 April 1875, to Rawlinson, India Office, 25 Oct. 1875, and to Paul, 27 Oct. 1875, Dawes Letterbook; correspondence between Thomson and Derby, Feb.–Nov. 1876, FO 60/382; Govt. of India, Foreign Dept. to S.of S. for India, 12 April (No. 19), 11 May (Secret No. 21) and 11 June (No.125) 1876, IOLR L/P&S/7/8. 40 From Gov.-General in Council, 8 Dec. 1876 (Secret No. 24 of 1877), IOLR L/P&S/19. 41 Minute on Salisbury to Thomson, 6 Sept. 1878, FO 60/414.

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THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

could bear the internal transport costs. By 1875, Gray Paul & Co. controlled about one third of the opium exports of Esfahan, where George Mackenzie made strenuous efforts to cultivate the local merchant community, but had a much smaller share of the crop from Yedz which was exported via Bundar Abbas.42 Opium exports from Bushire and Bundar Abbas rose roughly six-fold over between the early 1870s and the early 1880s – from 1,400 chests in 1872–3 to 7,700 chests in 1880–81 – and most of this increase was accounted for by exports to China via Aden.43 However, it was not a particularly lucrative trade. The costs of overland transport to the sea meant that prices of Iranian opium at point of export were double that of Benares or Patna opium exports from India, and merchants and shipowners engaged in it had to accept lower margins of profit.44 Futhermore, Iranian opium exports to Aden, for transhipment to P&O steamships en route to Hong Kong, only made commercial sense as a mainstay of BI’s London-Gulf line because of an import duty imposed on Iranian opium in Bombay. Once that duty was removed, as it was in 1882, BI’s older line from the Gulf to Bombay became the natural feeder of P&O’s Iranian opium shipments. The relative lack of success in opening up Iran to sea-borne trade was only partly offset by achievements in Iraq. As in Iran, so too in Iraq the main centres of population, and of commercial and financial activity, lay inland from the sea. The ancient city of Baghdad, some 350 miles inland from the Gulf port of Basra, was the focal point for the trade of the fertile area which stretched around it on the upper reaches of the River Tigris. It was also an entrepôt for the foreign trade of western Iran. Most of the commerce of Baghdad went overland by mule and camel to the north and west, proceeding to and from Turkey via such towns as Mosul and Aleppo. However, some trade passed between Baghdad and Basra by way of the Tigris, on which, in the course of the 1860s, steamer traffic had developed. The Euphrates and Tigris S.N. Co, owned by Lynch Bros of London, operated two small steamers on the river with the permission of the Turkish administration. From 1867 it faced competition from the modest river fleet of the Oman-Ottoman line, which was a mixed public-private enterprise closely associated with the Turkish administration.45 The Euphrates & Tigris Co had a contract with the Government of India to deliver mails between Basra and Baghdad, a journey which took some four-to-five days by steamer as against 30–40 days by local sail boats. At Basra it interchanged mails, passengers and cargo with

42

Dawes to Mackenzie, 26 Feb. 1875, Dawes Letterbook, 1874–6. J.A. Saldanha, Precis of Commerce and Communication in the Persian Gulf (Calcutta, 1906), p. 65; Revenue Despatch to India, No 51, 3 July 1884, IOL&R V/6/312. 44 Statistics and Commerce Despatch to India, 5 Jan. 1882, IOLR V/6/310. 45 R. Owen, The Middle East in the World Economy (London, 1981), pp. 180–1; Anon., ‘The Story of the Euphrates Company’, in C. Issawi (ed.), The Economic History of the Middle East, 1800–1914 (Chicago, 1966), pp. 146–53. 43

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the BI steamers from Bombay and Karachi. Produce coming down river, by steamer and local craft, was mainly wool, wheat and barley, while the area around Basra itself supplied dates and some cereals for export. In 1870, the total seaborne trade of Iraq was worth only about £500,000 per annum.46 It was also susceptible to disruption, for the riveraine areas of the lower Tigris and the Shatt-al-Arab were relatively lawless and disturbed during the early 1870s (probably as a result of drought). In 1872, the British vice-consul at Basra complained about a large gang which was terrorising the town and which, among other crimes, had attempted to break into the premises of Lynch & Co. It was almost certainly the same gang which, on 13 June 1872, attacked the BI steamer Cashmere as it lay at anchor in the river. The attackers killed an unfortunate lascar fireman, who was decapitated while emerging from a stoke-hole, and wounded several members of the crew before making off with cash and personal belongings worth Rs.47,602. Most were subsequently caught and punished by the local Turkish authorities – including nine who were executed – but despite lodging a claim BI obtained no compensation for the losses.47 Such incidents, however, did not prevent William Mackinnon from harbouring ambitions to push BI and Gray Dawes more deeply into Iraqi commerce. The key to penetration was river navigation between Basra and Baghdad, but the problem was how to turn the key in the lock. Lynch Bros had attempted to run a London-Gulf steamer, and worked closely with D. Sassoon & Co, who were Gray Dawes & Co’s main competitors. They were therefore regarded as hostile and unlikely to co-operate in developing the river traffic. William’s first thoughts were therefore to by-pass Lynch Bros and the Euphrates and Tigris Co, and to work instead with the Turkish administration. In 1872, he put to the Turkish government an ambitious scheme for a monthly subsidised steam line from Constantinople via the Canal and the Red Sea to Basra. He also wanted permission to run steamers on the Tigris river and grants of agricultural land in the Basra district, and he offered to purchase, if necessary, the Oman-Ottoman river steamers.48 Nothing came of the initiative, and William changed tack. Discovering that the Government of India considered its Basra-Baghdad mail contract with Lynch Bros to be too expensive, he agreed with Alex Monteath (while renegotiating BI’s Indian contracts) that BI would undertake a weekly Basra-Baghdad river mail service at roughly half the rate being paid to the Euphrates and Tigris S.N. Co. The point was not for BI to take on the service – which it would not want to do

46

Owen, The Middle East, 182. J.G. Lorimer, Gazeteer of the Persian Gulf, Oman and Central Arabia, 1, Pt.1 (Calcutta, 1915), 1445 and 1458–60; Mackinnon Mackenzie & Co to Secretary, BISN Co, 18 and 25 June, and 16 July 1872, BIS/6/75. 48 BISN Co Directors’ Minutes, 1 Aug. 1872, BIS/1/3; E.S. Dawes to H. Lamb, 15 Oct. 1872, Dawes Letterbook, 1868–74. 47

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THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

at that price – but to use the threat of the loss of the contract as a means of putting pressure on Lynch Bros. However, the ploy failed. Thomas Lynch, an Irishman of apparently excitable temperament, secured from the India Office the right to bid again for the Basra-Baghdad mail service and then accepted the same terms as those to which William had already agreed. ‘The negotiations with the Lynch’s are broken off’, Peter Mackinnon observed. ‘It is just as well as they are a troublesome party to deal with . . . [but] we can always fall back on the Turks whose steamers are equal if not superior to Lynch’s.’49 By the early months of 1875 an agreement had been made by Gray Mackenzie & Co for through-traffic arrangements between BI vessels and the river steamers of the Oman-Ottoman firm, at lower rates than offered to the Euphrates & Tigris Co. Gray Mackenzie & Co apparently became the Basra agents for the Turkish concern. There was also talk of Gray Mackenzie opening a branch at Baghdad to compete directly with Lynch & Co. there. However, the alliance with the Turkish firm, while politically astute, was not a commercial success. The Oman-Ottoman had difficulty in keeping its five or six steamers in a state of good repair, and in maintaining a regular service to connect with each of the weekly steamships which BI was now running into and out of Basra. Consequently, when Thomas Lynch finally signalled his willingness to accept the deal that had been on offer in 1873, William and Dawes seized the olive branch. They agreed in August 1878 to an arrangement which increased the capital of the Euphrates and Tigris S.N. Co, by the allocation of £20,000 fully paid stock to BI ‘or persons nominated by the Chairman of the Co’. This effectively gave the Mackinnon group a 40 per cent share in the Company. William Mackinnon also obtained the right to nominate two directors, which he exercised with the appointment of Edwyn Dawes and his old friend, Sir Charles Nicholson, to the board. Management of the firm remained in the hands of Lynch Bros. at Basra and Stephen Lynch & Co. at Baghdad.50 The deal between William Mackinnon and Thomas Lynch was struck against the background of the boom caused by the Russo-Turkish war of 1877–8, which had had a dramatic effect on the trade of Basra and the demand for tonnage on the Tigris. A visitor in May 1878 noted: At Bussorah . . . I saw, besides the river steamers, 7 large ocean-going steamers at anchor at one time, loading and unloading merchandize. The River Steamers, I was told, were unable to carry all the cargo offered for shipment between Bussorah and Baghdad. I also observed an unusual number of large caravans between Baghdad and Kermanshah, many of which were going to or coming from Tabriz. 49

P. Mackinnon to D. Mackinnon, 21 Nov. 1873, Nat. Lib. Acc. 6168/9. W. Mackinnon to D. Mackinnon, 13 July 1878, Nat. Lib. Acc. 6168/7; E.S. Dawes to W. Mackinnon, 6 and 8 Aug. 1878, Nat. Lib. Acc. 6168/13; Extraordinary General Meeting of the Euphrates & Tigris S.N. Co., 2 Dec. 1878, BT 31/37919/2241, Vol. 1. 50

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Anyone acquainted with Bussorah only a few years ago could not fail to be struck with its altered and improved appearance. Instead of the unbroken line of Palm Groves which concealed the Town at some distance behind them and the river on which nothing but a few Buggalows were to be seen, the bank now presents an imposing line of substantial European-looking houses, offices and godowns, while the river itself is alive with boats and barges going to and from the steamers whence the rattle of the steam winch is heard uncessantly. The general bustle and movement are in striking contrast with the still monotony of former years.51

In such conditions the Euphrates & Tigris Co made good profits through high freights (the rate per ton charged for Baghdad to Basra being the same as for Basra to London)52 and William’s ambitions to expand the river company’s operations were boosted. However, he had not fully reckoned with the Turkish administration. Whether to assist the Oman-Ottoman concern or out of fear of foreign domination of the river, the Turks had consistently limited foreign steamship enterprise to the two vessels secured by the British government by the firmans of 1834 and 1842. Consequently, when a third vessel, the Khalifeh, was brought out in sections for assembly at Basra in 1879, for use in introducing a weekly service, it was denied permission to operate on the river. A request to the Turkish authorities for permission to increase the company’s effective tonnage through the use of towing barges was also turned down. The easing of boom conditions, once the Russo-Turkish War was over, relieved the immediate pressure and the three steamers were them employed in a rotational arrangement which kept two running at any one time. Nevertheless, William Mackinnon and BI were still some short of aligning internal transport links and their trade-generating capacity within Iraq with the carrying capacity of their liners from Bombay and London. Overall, there would appear to have been a somewhat greater growth of trade from Basra than from Bushire and Bandar Abbas between 1870 and 1882. Its nature, however, was not entirely suited to the needs of a regular London-Basra steamship line. Except in the boom years of 1878–9, much of the traffic outwards from Basra consisted of dates from the Shatt-al-Arab itself. Gray Mackenzie & Co were largely instrumental in promoting the growth in date exports, by introducing packing in wooden boxes that found more favour with importers in Britain and the USA than the traditional skins and baskets. Their shipments rose to 6,718 tons by 1879 and to 11,868 tons by 1882.53 However, the trade in dates was highly seasonal – most of it took 51 Major R.M. Smith (Director of Persian Telegraphs) to Major Bateman Champion, 1 June 1878, FO 60/414. 52 Lt.-Col. S.B. Miles (Political Agent in Turkish Arabia) to Govt. of India, 13 Oct. 1879 (No. 818), Proceedings, India, Separate Revenue, IOLR. 53 Statement of Dates Exported from Basra to Various Ports, 1879–84, by Gray Mackenzie & Co (No. 31 of March 1886), India, Proceedings, Foreign, Vol. 2738 IOLR.

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THE GULF, ZANZIBAR AND THE LONDON-GULF LINE, 1869–82

place during September to December each year – and it was therefore more suited to tramping steamships than to liners which needed relatively consistent cargo flows over the whole year. As tramp steam tonnage became increasingly available in Basra towards the end of the 1870s – with vessels from Holt’s Oceanic Steamship Co among others making calls at the Gulf ports – it reduced the commercial prospects of a regular and direct line to London. At the peak trading year of 1878–9, Gray Dawes & Co despatched BI steamers from London to the Gulf every second week, and unloaded arriving ships with equal frequency. Thereafter, events conspired to reduce the level of activity. The Gulf trades returned to something closer to normality after peace between Russia and Turkey re-opened the old routes to the north, and such products as Persian carpets and woollen goods once again went out to world markets via Tabriz. Then another serious drought – this time in northern and central Iraq in 1880–1 – meant social disorder and further checks to trade between Baghdad and Basra. Arab communities took to raiding the river traffic, attacking the steamer Kalifeh on one occasion, and the Muntafik tribe, rising in revolt against Turkish rule, besieged Baghdad for some weeks.54 Meanwhile, it was becoming clear that the resistance of the Turkish and Persian authorities to the wider opening of river shipping into and out of the Shatt-al-Arab could not be broken. Hopes for construction of a Euphrates Valley Railway evaporated away, as they had done so often before. Mackinnon Mackenzie & Co’s take-over of BI’s Karachi and Bombay agencies, following the collapse of the City of Glasgow Bank in 1878, strengthened the hands of those within the Mackinnon Group who wanted to see the London steamers serve the interests of western Indian connections with Europe rather than Gulf ones. The abolition of the duty against Iranian opium in Bombay removed the point of shipping it to Aden. The tide therefore turned against the through steamship connection between London and the Gulf. In 1881, the service reverted to a monthly frequency, and in the following year it was finally agreed that Karachi should become the terminal port for the London-based steamers. Goods and passengers to and from the Gulf would now have to be transhipped at Karachi to and from the Bombay-based steamers of the Bombay-Gulf line. BI and its agents remained entrenched in the Gulf, but it was a position ultimately dependent upon older commercial relationships between western India and the Gulf. India’s trade with the Persian Gulf – worth 19.6 million rupees in 1870–1 and 16.65 million rupees in 1881–2 – had remained relatively stable through the period 1870–82 and it was also significantly larger in value than the trade between Britain and the Persian Gulf. The hopes of William Mackinnon and those who advised him that the introduction of a steamship line between London and the Gulf would 54

Lorimer, Gazeteer of the Persian Gulf, Vol. 1, Pt.1, pp. 1056–7. 179

SUEZ AND AFTER

transform conditions in Iran and Iraq, had been replaced by 1882 by a more realistic sense of the region’s commercial prospects. Small volumes of opium, dates and pilgrims, it transpired, were an inadequate basis on which to develop a regular liner trade between Europe and the Persian Gulf. The thinking behind the use of Indian and British revenues to support pioneering steamship lines in Arab-dominated waters was based on the fallacy that improved communications with Europe and the rest of the world economy would be sufficient to stimulate trade and development. The Mackinnon group’s experiences in the Red Sea and Persian Gulf zones, however, questioned such beliefs, which had been largely fostered in the special circumstances of British-ruled India. Possession of new shipping technology was not enough in the face of determined resistance by commercial rivals (almost brutally so in the Red Sea), the hostility or indifference of rulers, and the instability to be found on the seaboard peripheries of land-based Asian political systems. Above all the other constraints, however, was the inadequacy of transport and communications facilities on the landward side of the ports served by BI steamships. Until the links between the Gulf ports and the interior regions of Iran and Iraq could be modernised and enlarged, the Gulf’s trade with Europe via the Suez Canal would be modest – and expectations aroused by the opening of the Canal would remain unrealised.

180

7

Eastern Africa, 1872–82 Along the eastern shoreline of Africa, as in the Red Sea and the Persian Gulf, William Mackinnon, BI and Gray Dawes & Co spent much of the 1870s in trade-promoting activities – running steamships to a regular timetable, setting-up local agencies, attempting to develop interior lines of communication, and trying to secure British consular support for these pursuits. However, these African margins of BI’s ‘Arabian’ system possessed their own distinguishing characteristics. In particular, the group’s operations on eastern African shores acquired a philanthropic or humanitarian dimension – in which goals of opening up the foreign trade of less developed regions, and incorporating them more fully into the expanding nineteenth century international economy, became overlaid with the additional objectives embodied in the mid-Victorian concept of ‘Commerce and Christianity’.1 At the African end of the ‘Arabian’ steamship network a Christian evangelisation movement, linked to popular anti-slave trade sentiment, was at work in a way that could not be found in the Muslim countries of the Gulf and the Red Sea. Thanks largely to the legacy of David Livingstone, these forces became intertwined with the development of trade and transport in eastern Africa, and with the harnessing of steampower to break down the barriers of geographic distance. Consequently, in penetrating Africa from Asia, William Mackinnon and his firms moved into an environment that was distinctive in British imperial terms as well as in specifically local political and economic conditions. In doing so they acquired an ambiguity about their motives and purpose. To the patriotism with profits that characterised their operations in the Persian Gulf an additional element of philanthropy now came to be attached.2

1

For a critique of these ideas, see A. Porter, ‘ “Commerce and Christianity”: The Rise and Fall of a Nineteenth Century Missionary Slogan’, The Historical Journal, 28, 3 (1985), pp. 597–621. 2 For earlier accounts of William Mackinnon’s involvement with East Africa in the 1870s see, among others, R. Coupland, The Exploitation of East Africa, 1856–1890 (London, 1939); J. Flint, ‘The Wider Background to Partition and Colonial Ocupation’, in R. Oliver and G. Mathew (eds), History of East Africa, Vol. 1 (Oxford, 1963), J. Galbraith, Mackinnon and East Africa, 1878–1895: A Study in the ‘New’ Imperialism (Cambridge, 1972), and G.N. Sanderson, ‘The European Partition of Africa: Origins and Dynamics’, in R. Oliver and G.N. Sanderson (eds), The Cambridge History of Africa, Vol. 6, from 1870 to 1905 (Cambridge, 1985). What follows differs quite significantly from the existing historiography, more especially in its stress on the role of Frere. 181

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The key to these differences was the way that William Mackinnon hitched himself and his firms to the pro-consular career of Sir Henry Bartle Frere. Frere was a brilliant self-promoter and publicist, and a good public orator, who moved easily within British government circles and influenced much of their Indian and imperial policy. He thought and wrote in terms of grand designs of imperial expansion, and of the geo-strategic significance of railway and steamship routes in linking together the various British-ruled territories. William Mackinnon on the other hand was a quiet man who shunned publicity and disliked open praise, who seldom openly expressed a view on political or social matters, and whose instincts and interests were those of a businessman with an eye on the balance sheet. Yet between these two very contrasting figures there had developed a strong bond. Indications of William’s loyalty and deep sense of gratitude to Frere, and his willingness to follow wherever he led, lie in his admission that Frere was a man ‘whom I should like above all men to serve & oblige, as we are indebted to him for more favours and efficient help than any other’. Or again that ‘Sir Bartle Frere as you know has been about the best & steadiest friend the Company [BI] ever had, & his personal kindness to me I can never forget.’3 In the 1870s, as in the 1860s, Frere was the thinker and Mackinnon the doer; and where Sir Bartle led William followed. The anti-slave trade mission to Zanzibar of 1873 was a turning point in Frere’s career. He had long approached Africa through an Anglo-Indian perspective, in which Zanzibari affairs were a minor foreign policy concern for the governments of Bombay and British India, a mere by-product of relations with the Arab world. However his travels in eastern Africa – visiting Zanzibar, various Arab-Swahili coastal towns, Mozambique and the Comoros Islands – gave him direct experience of African conditions for the first time. His horizons now expanded to embrace the developmental prospects of the great swathe of territory down Africa’s Indian Ocean shorelines as well as of the vast interior regions which various geographical expeditions, including those of his friend David Livingstone, were making known to the western world. Perhaps too, he sensed that his failure to prevent the collapse of the Bombay Presidency Bank in 1866, which soured his final years as Governor of Bombay,4 had marked him down as someone who was too ‘financially unsound’ for that final step to the office of Viceroy of India. This contrasted with the public recognition he received on his return from his mission to Zanzibar, including an honorary degree from the University of Cambridge, appointment as a Privy Councillor and election to the Presidency of the Royal Geographical Society. Africa rather than India

3

W. Mackinnon to D. Mackinnon, 19 July and 11 Oct. 1877, Nat. Lib. Acc. 6168/7. J.R. Cogen, ‘Contrary Proconsul: Sir Bartle Frere and the Collapse of the Presidency Bank of Bombay’, in R.D. Long, The Man on the Spot: Essays in British Empire History (Greenwood, Conn., 1995).

4

182

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now became the principal focus of his energies and ambitions. The anti-slave trade treaty signed by Seyyid Bargash, he commented ‘was merely the latchkey delivered to them [the British people] by the Sultan of Zanzibar, by which they could enter into his house when they pleased’, and ‘the objects of the mission could only be thoroughly accomplished by the expenditure of English energy, enterprise, money, and by steadfastness of purpose’.5 He devoted the next four years of his life to promoting the ‘opening up’ of eastern Africa by British science, commerce and religion. The task was given momentum by the great outpouring of national sentiment surrounding David Livingstone’s death, the extraordinary story of the return of his body to Britain (including ‘free passage’ on BI’s steamer Calcutta between Zanzibar and Aden), and the public mourning at his funeral in Westminster Abbey in April 1874. From these events there emerged the Livingstone ‘heroic myth’, to which Frere and others of his circle contributed.6 Frere strove to stimulate British missionary activity in eastern Africa, collaborated with the Anti-Slavery Society to pursue the slave trade into the Red Sea and the Egyptian-ruled Sudan, and was instrumental in establishing an African Section of the Society of Arts, which existed to promote British manufactures and commerce. In the slipstream of his new-found enthusiasm for Africa there followed William Mackinnon, the British India S.N. Co and Gray Dawes & Co. The subsidy for a BI steamship line between Aden and Zanzibar had been sought out and justified on the grounds of combating the maritime slave trade between East Africa and the Arabian Peninsula. However, there is little William Mackinnon’s actions or writings in 1872–3 to suggest that he was particularly concerned about social and economic conditions within Eastern Africa. When he had a moment during these busy months to devote to East African affairs, it was taken up with extremely practical and relatively mundane issues of concern to any shipowner. How to maintain a steamer regularly on the line, how to secure a coal depot on the island of Zanzibar so that the steamers could be constantly fuelled, how to obtain a reliable local agent, and whether the import duty on cargoes at Zanzibar might be avoided for goods transhipped between BI vessels and those of the Union S.S. Co, were the matters that occupied his attention. In dealing with these matters, he sought the advice and assistance of John Kirk, the British consul in Zanzibar, to whom a connection had been made through Frere. Kirk, born a son-of-the-manse in Barry in Angus, possessed a medical degree from the University of Edinburgh and had been a member of Livingstone’s Zambesi

5

Closing remarks made at the 15th meeting of the Royal Geographical Society, 7 July 1873, Proceedings of the Royal Geographical Society, 17 (1872–3), p. 354. 6 For the making of the ‘Livingstone myth’, see John M. Mackenzie, ‘David Livingstone and the Worldly After-Life: Imperialism and Nationalism in Africa’, in David Livingstone and the Victorian Encounter with Africa (London, 1996), and D.O. Helly, Livingstone’s Legacy: Horace Waller and Victorian Mythmaking (Athens, Ohio, 1987). 183

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Expedition of 1858–64. He was appointed by Frere (then Governor of Bombay) as Agency Surgeon in Zanzibar in 1866, and became successively Vice-Consul and Acting-Consul before being confirmed as Consul, again through Frere’s influence, in 1873.7 Like William Mackinnon and Lewis Pelly, John Kirk owed a considerable debt to Frere’s powers of patronage. He became William’s eyes and ears in eastern Africa, in much the same way as Pelly had been in the Persian Gulf, keeping him abreast of all relevant local developments and encouraging him in expectations of future growth of traffic for his steamships. ‘I look on you as the real suppressor of the slave trade’, Kirk wrote flatteringly in 1874. ‘Sir Bartle and I have had a share and paved the way, but without you had stepped in and done what you are doing all would have been labour in vain. We shall thank God soon replace the Slave Traffic by something better and I have no doubt you will soon see ample rewards . . . in the shape of dividends for all your outlay.’8 Kirk became William’s friend, supporter and confidant, enjoying his hospitality at Balinakill when home on leave in September 1874 and obtaining the privilege of free travel on BI steamers when on private journeys.9 He was much closer to the centre of authority in Zanzibar than any of William’s associates in Baghdad and Tehran, and was therefore relatively well placed to influence local policy in William’s favour. William and BI also needed local agents in Zanzibar. As in the Gulf ports, so to in Zanzibar, this requirement was met by sending out younger men from various firms within the group, and associating them with Gray Dawes & Co. The latter, as the London agents, were expected to co-ordinate shipping at both ends of the ‘Arabian’ system. When sailings first started, in December 1872, an agent of sorts was already in place on the island, in the shape of Captain H.A. Fraser, who had been linked with W. Nicol & Co of Bombay since 1864. However, Fraser took off for the goldfields of the eastern Transvaal late in 1874, and the agency passed to Archie Smith, who had been sent out from W. Mackinnon & Co’s office in Glasgow.10 Smith was joined in Zanzibar in 1875 by Edmund N. Mackenzie (the brother of George Mackenzie of Bushire and Basra) who had served an apprenticeship in Gray Dawes & Co ‘s London office. Finally, Archie Brown, who had been William Mackinnon’s ‘piece-goods man’ in Glasgow, arrived in Zanzibar in 1876. Although the firm of Smith Mackenzie & Co. operated from 1875, a formal

7

For Kirk’s early career, see Coupland, Exploitation of East Africa, pp. 38–61, and R. Coupland, Kirk on the Zambesi (Oxford, 1928). 8 J. Kirk to W. Mackinnon, 21 Jan. 1874, MP Private Letters File 86. 9 Mrs Kirk’s Diary, 7–15 Sept. 1874, Kirk Papers (National Library of Scotland) Acc.9942/32; J. Kirk to W. Mackinnon, 16 Oct. 1874, 20 Oct. 1875 and 8 Feb. 1876; BISN Co Directors’ Minutes, 11 Jan. 1876, BIS/11/3. 10 Smith had been sent out as a result of advice from Frere, whose assessment of Fraser’s business capabilities are to be found in Maj. C. Euan Smith to W. Mackinnon, 6 Feb. 1873, MP Private Letters File 10. 184

N ile

EASTERN AFRICA, 1872–82

ARABIA SOCOTRA

GULF OF ADEN

om

al

i

Co

as

t

10ºN 20 20º

S

Mogadishu

BUG AN DA

Mt. Kenya

Lake Victoria

0º

Lamu

Swah i l i Co a s

t

Congo Basin

Equator Kismayu

Mt. Kilimanjaro Ujiji Tabora

Lake Tanganyika

Mombasa

PEMBA

SEYCHELLES

ZANZIBAR Dar es Salaam Kilwa Kisiwani Lindi 10ºS 20 20º

COMOROS

Lake Nyasa

NOSY BE MAYOTTE

gu Po r tu

rie

s

Mozambique

AR

to

ASC

rri Te

Quelimane

e

MAURITIUS

DA G

zi

Sofala

MA

be

es

m Za

Shire

+

20ºS 40 40º

REUNION

Inhambane

TRANSVAAL

INDIAN OCEAN

NA TA L

Delagoa Bay

Durban

30ºS 40º 40

500 miles 60 30ºE 60º

40ºE 60 60º

Map 5 Eastern Africa in the 1870s

185

50ºE 60 60º

SUEZ AND AFTER

partnership agreement was not entered into until 1877. The three local partners held 50 per cent of the nominal capital of £5,000 and the rest was held by the parent firm of Gray Dawes & Co. The establishment of Smith Mackenzie & Co put into place the final piece in the London-Gulf-Zanzibar triangle for which William Mackinnon and Edwyn Dawes had been working since 1869.11 William regarded the Aden-Zanzibar line as an experiment which would take time to yield profits. Its early years, in fact, coincided with economic depression in Arab-Swahili Africa. The hurricane of 1872 devastated the shipping of Zanzibar and hit hard at the production of cloves and other commodities on the islands of Zanzibar and Pemba, while the Sultan’s closing of the slave markets had a depressing effect on commerce generally but on the ivory trade from the East African mainland in particular. BI’s managers in India also saw the new steamship line as a pioneering one. They decided that, because of its great distance from the company’s marine depot at Bombay and the difficulty of effecting repairs, there would need to be a frequent turnover in the vessels placed on the line. This put additional pressures on the captains and crews, for whom these were unknown waters, who discovered that the monsoon weather could be worse on East African than on Indian coasts and who faced unfamiliar fogs off the Somali coast. Despite this, serious accidents were rare – although the unfortunate Cashmere, which had already experienced piracy at Basra, was wrecked on Cape Guardafui in 1877 with the loss of eight lives among the passengers and crew. Among those who travelled the route as a passenger was Rose Pender, the wife of William’s friend, John Pender, who visited Zanzibar in connection with his projected submarine telegraph cable from Aden down Africa’s eastern flanks to South Africa. On board the Burmah in August 1878, Rose found that standards were not quite those of the more luxurious passenger liners to which she was accustomed: [because] there were very few passengers, we had it pretty well to ourselves. The captain and the officers were very nice, and we got up a good rubber every afternoon; the cockroaches were the only things that disturbed my comfort, and they swarmed so much that I gave up sleeping in my cabin at once, and had my bed made on the skylight all the way to Aden . . . We made good passage to Aden, but the route is always dangerous, and our captain was a little anxious at times, as fogs are prevalent and currents uncertain. One or two mail steamers have been wrecked on the coast; but once round Cape Guardafui all was smooth sailing . . .12

11 Dawes to W. Mackinnon, 7 Jan. 1875, to A. Smith, 7 May and 30 July, 1875, and to E. Mackenzie, 27 Aug., 22 Oct. and 19 Nov. 1875, Dawes Letterbook, 1874–6; Kirk to W. Mackinnon, 8 Feb. 1876, MP Private Letters File 86; Dawes to D. Mackinnon, 8 Sept. 1876, Nat. Lib. Acc. 6168/11. An account of the origins of the firm can also be found in Anon., The History of Smith, Mackenzie and Company Limited (London, 1938), pp. 9–11. 12 Rose Pender, No Telegraph; Or a Trip to our Unconnected Colonies (London, 1878), p. 99.

186

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No sooner were things in place for steamers between Aden and Zanzibar than William Mackinnon was actively pursuing a southwards extension of the line. Reports from Frere indicated good opportunities for a steamship line along the route from Zanzibar to the north-east corner of Madagascar. Along this searoute – calling at Kilwa, Ibo and Mozambique on the coast, at Johanna in the Comoros Islands, and at the French island outposts of Mayotte and Nosy Be off north-east Madagascar – Frere had found a flourishing maritime commerce conducted mainly by Indian merchants and traders. They said ‘that they would gladly welcome the certainty of a regular means of transport for their really large shipments in exchange for the present unsatisfactory transport by dhows and native craft’.13 Frere suggested to William that to the south of Zanzibar he should develop a coasting line, similar to those BI operated in India. This would gather up passengers and cargoes and deliver them north to Zanzibar, there to interchange with the direct steamers between Aden and Zanzibar. Thus the Zanzibar-Aden feeder line for the London-Gulf line would in turn obtain its own feeder line or lines. William was attracted by this concept, and late in 1873 he pressed a reluctant BI board into accepting a small subsidy from the French government for a monthly mail service between Zanzibar and the French-ruled islands of Mayotte and Nosy Be, off Madagascar. The attraction was less the commercial prospects of Mayotte and Nosy Be themselves and more the opportunity for a steamer on this southerly route from Zanzibar to make a round trip involving other destinations. It would call on the way out at the Comoro Islands and on the way back at the Portuguese port of Mozambique – from where the Union S.S. Co’s vessels were bringing cargoes of ivory up to Zanzibar. The Portuguese-ruled coastline south of Cape Delgado was within the Union Co’s ‘sphere of influence’ as agreed by the two companies in their joint bid for the Zanzibar mail contract. However, it was also territory where prospects for coastal steamship traffic were being pressed upon Frere, Kirk and Mackinnon by the government of Natal and its agent, Frederick Elton. The Natal interest was particularly in the availability of deck passage for voluntary labour migrants from the Mozambican ports to the colony’s plantations.14 Frere, for one, was convinced, that ‘if steamers were to touch regularly at Mozambique and perhaps one or two other Portuguese East African ports, a considerable trade would

13 Maj. C. Euan Smith to W. Mackinnon, 8 March 1873, MP Private Letters File 10. (Smith was Frere’s aide-de-camp and acted as a conduit to Mackinnon at this time.) 14 N.A. Etherington, ‘Labour Supply and the Genesis of South African Confederation in the 1870s’, Journal of African History, 20 (1979), pp. 242–3, and ‘Frederick Elton and the South African Factor in the Making of Britain’s East African Empire’, Journal of Imperial and Commonwealth History, 9 (1980–81), pp. 255–74; B.A. Le Cordeur, ‘Natal, the Cape and the Indian Ocean, 1846–1880’, Journal of African History, 7 (1966), p. 251; ‘Resolutions Relative to the Introduction of Labourers from the East Coast of Africa Passed by the Legislative Council, Natal, on 10 September 1874’ (forwarded to W. Mackinnon by John Kirk), MP Miscellaneous Commercial File 77.

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Shipping at Zanzibar

spring up between the Portuguese coast and the British Cape Colonies to the south, as well as with Zanzibar to the north’.15 To William it began to appear that Zanzibar could become a hub for the development of two southern African coasting lines – one via Mozambique and the Comoros to northeastern Madagascar and one via Mozambique and Delagoa Bay to Natal. To exploit such opportunities, he sought and obtained a supplementary ‘extension’ to the Lisbon-Goa-Mozambique contract with the Portuguese government. This ‘extension’ contract (worth £3,000 per annum) would carry the Portuguese mails southwards from Mozambique to Quelimane, the main port for the Zambesi valley, and thence to Inhambane and on to Delagoa Bay, where a railway line into the Boer Republic of Transvaal was under consideration. He also negotiated an agreement with the Union S.S. Co for an interchange of mails, passenger and traffic at Delagoa Bay rather than Zanzibar and for the Union Co to make over to BI that proportion of the subsidy for the Cape-Zanzibar contract which accrued to the section of the line between Delagoa Bay and Zanzibar. The Union S.S. Co, whose principal interests lay in its Atlantic routes, was more than ready to pull out of eastern African waters. It would give up running steamers to the north of Delagoa Bay, and pay BI £11,000 per annum for the conveyance of mails to Zanzibar, in return for an understanding that BI would make no attempt to compete with it in Natal.16 These arrangements, however, quickly hit a snag.

15 16

The Times, 22 July 1873, p. 12, col. d. BISN Co Directors’ Minutes, 28 April, 6 Oct. and 18 and 21 Dec. 1874, BIS/1/3; 188

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The Treasury refused to sanction the further division of the Cape-Zanzibar mail subsidy between the two companies because Donald Currie, determined to pursue his feud with the Union S.S. Co, had objected to the arrangement. With his unerring instinct for putting a spanner in other people’s works, Currie succeeded in creating an irritating situation. The Union Co was obliged to continue to deliver the mails from Natal to Zanzibar, which it did not want to do, while BI, which wanted to open up a south-east African ‘coasting’ service with its small spare vessels, felt obliged to hand over the Portuguese extension contract to the Union Co. William Mackinnon’s southern thrust was halted at the northern end of the Mozambique Channel. At this point, in 1875, he started to focus his attention on the commercial development of Zanzibar and the Sultan’s territories on the coastal mainland. He was encouraged to do so by the revival that was taking place in East African trade from its low point of 1873, a recovery that benefited BI steamers more than the Union Co ones.17 The Aden-Zanzibar branch line broke even for the first time on the eve of the Sultan of Zanzibar’s visit to England in June and July 1875. This visit was organised by Kirk and Clement Hill of the Foreign Office (who had been on Frere’s Zanzibar Mission) with the object of impressing Bargash and his advisers with the power and splendour of imperial Britain. The Sultan and his entourage travelled on the regular BI steamer from Zanzibar to Aden, whence one of the larger BI vessels, the newly launched Canara, was specially chartered to bring them all the way to the Thames. Bargash’s visit, Frere informed the British public, would hopefully lead to measures to suppress the slave trade on the East African mainland and ‘to better development of the endless resources of his African coastline’, where ‘there is a field quite as ample as on the opposite shores of India for every form of application of European enterprize and capital’ and a region ‘so abounding in every material necessary to support a great population, and to feed a vast commerce with both Europe and Asia’.18 The key to unlocking this ‘treasure house’ was maritime transport. Consequently, somewhere within the month-long round of receptions and visits for the Sultan and his entourage, Kirk and Frere arranged for William and Edwyn Dawes to meet Bargash and members of his party. The immediate outcome was an agreement, dated 14 July 1875, that Gray Dawes & Co and their associates in Zanzibar should become the Sultan’s business agents, purchasing on his behalf ‘machinery, ships, implements or anything else’ and selling his tropical produce on P. Mackinnon to D. Mackinnon, 16 April 1874, Nat. Lib. Acc. 6168/9; Dawes to W. Mackinnon, 23 June, 2 July, 22 Sept., 23 Sept. and 28 Nov. 1874, Dawes Letterbook, 1874–6. 17 During 1875, BI steamers carried exports from Zanzibar to Aden worth £311,116 compared with £33,478 sent to Natal on Union Co. vessels, while the figures for imports to Zanzibar were 3,109 tons and 212 tons respectively. (J. Kirk to Earl of Derby, 1 March 1876, enclosure in Foreign Office to Colonial Office, 8 Feb. 1877, CO 179/125/1842.) 18 H.B.E. Frere, ‘Zanzibar and its Sultan’, Macmillan’s Magazine, June 1975, p. 191. 189

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commission.19 Bargash, impressed by his exposure to British technology, was in a mood to innovate at home. However, once he returned to Zanzibar very little new business was forthcoming – other than an order which for the construction of an armed steamship, to be added to the Sultan’s small fleet. This was a commission to which William gave his personal attention, obtaining tenders from three Clyde yards before placing the contract with Peter Denny,20 because he was already well-advanced in the development of schemes in which he needed the full co-operation of the Sultan. Between July 1875, when the excitement of the Sultan’s visit stimulated William’s thinking about what might be done at the Zanzibar end of his steamship network, and March 1877, when the order for the armed steamship arrived, William was at work on no less than three inter-related Eastern African projects. The first involved the construction of a wagon road from a port on the East African mainland to the head of Lake Nyasa (now Lake Malawi) which would in turn open up a possible new chain of transport and communications along the lake system of the Great Rift Valley. The second was a proposed increase in the level of BI’s shipping activity along the eastern African coast, including the extension of its services southwards along the Mozambique coast towards the South African colonies. The third was a concession from the Sultan that would grant to a trading company to be set up by William the rights to farm the customs of the islands of Zanzibar and Pemba and to administer the coast of the East African mainland on the Sultan’s behalf. In the development of each of these three schemes Frere and Kirk played a significant part. The road-construction project may be seen as an East African counterpart of the various schemes for the development of interior lines of communication from the ports of Bushire and Basra. Transport facilities on the East Africa mainland were much more backward than in Iran or Iraq. Even pack animals (which were the standard form of overland transport in the Gulf territories served by BI’s steamers) were absent. Goods had to be conveyed between the interior and the coast by human portage, which was so expensive that only ivory, with its high value to bulk ratio, could bear the costs of transport over any distance between the interior and the coastal ports. For years, explorers’ accounts and missionary literature had painted a picture of fertile and relatively densely-populated territories to be found in the distant interior, notably around Lakes Nyasa and Victoria. These were territories waiting to be joined to the world economy by anyone who could solve the inland transport problem. However, a crucial difference between East Africa

19 Copy of Agreement with H.H. The Sultan of Zanzibar, 14 July 1875, enclosure in E.S. Dawes to A. Smith, 30 July 1875, Dawes Letterbook, 1874–6. 20 J. Kirk to Wylde, 6 March 1877, Nat. Lib. Acc. 9942/7; W. Mackinnon to J. Kirk, 26 July 1877, and to Sultan Bargash, 26 July 1877, MP Private File 87; entry for 25 July 1878, Records of Tendering, 1862–1909, Denny Papers UGD3/25/1.

190

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and the territories along the northern shores of the Persian Gulf lay in the fact that in East Africa the market economy was most fully developed on the Arab-Swahili coast and off-shore islands, where water transport was available, rather than in the regions of the deeper interior which the men of the Mackinnon group were trying to reach in the Gulf. Why William Mackinnon should have concerned himself so immediately and directly with a road construction scheme is therefore, on the face of it, something of a puzzle. In fact the road was neither a straightforward business proposition in its own right nor a simple contribution to philanthropic and humanitarian goals. To understand the relationship between its commercial objectives and the anti-slave trade rhetoric that over-arched them it is necessary to enter the world of missionary and geographic endeavour. The origins of William Mackinnon’s road to Lake Nyasa (Lake Malawi) lay in Scotland, and more especially in the initiatives which led to the establishment of the Free Church of Scotland’s Livingstonia Mission on the shores of the lake. Following Livingstone’s funeral in 1874, discussions were held by interested parties within the Free Church with a view to commemorating in some tangible way the life and work of the man who had become Victorian Scotland’s greatest national hero. William’s old Calcutta friend, Dr Alexander Duff (Convenor of the Free Church’s Foreign Mission Committee), had already consulted Frere about the most favourable location for a Free Church mission station in Eastern Africa, and had been advised that a Somali Mission should be established, in association with the Church’s Bombay Institute. However, another of the Church’s leading missionary figures, Dr James Stewart of Lovedale in the Eastern Cape, pressed for a mission to be located in the areas of the Shire River and Lake Nyasa. Livingstone had explored there, and it offered a convenient route by water into a part of eastern Africa that had been severely ravaged by the landward slave trade.21 Livingstone’s Zambesi Expedition had established that, because of major cataracts, the Zambesi itself could not be a major water route into the interior. However, it also raised hopes of access by the Zambesi’s Shire River tributary into Lake Nyasa (Malawi), the southernmost of the chain of lakes which ran down East Africa’s Great Rift Valley. By the early 1870s Lake Nyasa had come to be regarded as a location for future British commercial endeavour and colonial settlement. The Rev. Horace Waller, for example, who had been on the Zambesi Expedition and was now editor of Livingtone’s

21

Sources on the origins of the Livingstonia Mission include Sir Henry Bartle Frere, Eastern Africa as a Field for Missionary Labour (London, 1874), esp. pp. 109–19, James Stewart, ‘On the Origin and History of the Livingstonia Mission’, unpublished typescript, University of Cape Town Archives (hereafter UCT) BC106/2c(i), Anon., Livingstonia: The Mission of the Free Church of Scotland to Lake Nyassa (Edinburgh, 1876), and G. Smith, Life of Alexander Smith (London, 1879). For the general context, see J. McCracken, Politics and Christianity in Malawi, 1875–1940 (Cambridge, 1977), pp. 17–33. 191

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Last Journals, described Lake Nyasa as the ‘great heart from which commerce will be pumped into the country’.22 After some debate, Stewart’s view prevailed, and a meeting was held in Glasgow on 3 November 1874 to muster financial backing. Several Scottish businessmen who had been active supporters of missionary activity in Asia and Africa attended the meeting, including William Mackinnon and his ‘nephew’ Peter who both agreed to subscribe £500.23 On the basis of the financial pledges given that evening, the Livingstonia Mission was born. The first expeditionary party went out to Lake Nyasa in 1875, there to assemble the little steam launch, the Ilala, which gave free range of the lake. William secured, through his friend Duprat, an exemption for the expedition from the 30 per cent import duties levied by the Portuguese administration in Mozambique. He was also elected to membership of the Glasgow Livingstonia Committee. The second defining point in William Mackinnon’s conversion to the cause of ‘legitimate commerce’ in the interior of eastern Africa, as well along its shores, came in September 1876, when he accompanied Frere and others to the Brussels Geographical Conference. Frere, who had developed an interest in geography and exploration of remote regions while serving in India, had risen to senior office within the Royal Geographical Society, and helped to preside over the Society’s continuing promotion of the exploration of Africa. He was an exponent of the view that exploration reflected an active national culture and exported British influence throughout the world. ‘Exploration was a key that opened doors to British expansion, carrying with it the civilizing influences of government, religion and trade. Few imperialists expressed this paternalistic axiom with more conviction or clarity.’24 He therefore had much to offer to, and much in common with, the monarch who had summoned the Brussels Geographical Conference. Leopold II of Belgium, an honorary member of the RGS, was the ruler of a small and relatively new kingdom with no overseas colonies or possessions. For some time, and without much success, he had been dabbling in projects of overseas expansion through which either he personally or his country might obtain wealth and status. By 1876, his attention was focused on East and Central Africa, and he concluded that the way forward for his ambitions was to secure international co-operation in ‘opening-up’ these regions to European trade

22

Address to the African Section of the Society of Arts, on ‘Livingstone’s Discoveries in Connection with the Resources of East Africa’, 12 March 1875, Journal of the Society of Arts, 23 (1874–5), p. 361. 23 Minutes of Meeting Held in Queen’s Hotel, Glasgow, 3 Nov. 1874, UCT BC106/ 2c (ii). 24 F.V. Emery, ‘Geography and Imperialism: the Role of Sir Bartle Frere’, The Geographical Journal, 150, 3 (1984), p. 346. For an examination of the interplay between geography and imperialism in a range of contexts and from a variety of angles, see M. Bell, R. Butlin and M. Heffernan (eds), Geography and Imperialism (Manchester, 1995). 192

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and investment.25 He approached his friend, and cousin, the Prince of Wales to secure a British delegation for the proposed conference on the subject, and the Prince in turn consulted Frere, who had accompanied him on his extensive tour of India in 1875–6 and with whom he had become quite close. Frere therefore effectively decided the composition of the British delegation. This included three explorers of Africa (Samuel Baker, J.A. Grant, and Verney Lovett Cameron) a number of senior figures within the Royal Geographical Society, and William Mackinnon. William, although a member of the RGS, was scarcely to be numbered amongst its luminaries, and his presence on the delegation can only be accounted for by Frere’s influence. ‘I have come to London’, he wrote to Duncan Mackinnon, ‘on my way to Brussels to attend a conference there called by the King of the Belgians on East African affairs and the trade in slaves. Sir Bartle Frere, Sir Henry Rawlinson & some others are going & we are to have a special steamer sent for us to Dover & special trains to Brussels as well as I believe rooms at the Palace.’26 He was impressed by the scale and the splendour of the event, and flattered that he should be involved in consultations with a European monarch. From that moment on, he became committed to the vision which Leopold laid before the conference – of the construction of a network of roads across the central African interior, linking up with navigable stretches of rivers and lakes to create new transport and communications routes and to open the great internal plateau of Africa to commerce and Christianity. This chimed with what he had seen of the effects of road building in India, held out prospects of the development of interior trade routes to link with his African steamship line, and raised hopes of future business opportunities in river and lake steam navigation comparable to those in which he was already engaged in northeast India and in Iraq. Like Frere, he may also have believed that ‘the influence of one steamer in the centre of the African continent was equal to that of a hundred missionaries’.27 Leopold offered an organisational framework through which a road network might be created. He proposed the formation of an international body, the Association Internationale Africaine, which would be supported by national committees in each of the participating countries. At Frere’s suggestion, Leopold was elected President of this new organisation, and the British delegation returned home intent upon setting up a British national committee. Not everyone was impressed by Leopold’s vision. The explorer Richard Burton predicted that ‘The Brussels affair will end in a failure. In Africa there

25

For Leopold’s colonial ambitions and the Brussels Conference, see R. Anstey, Britain and the Congo in the Nineteenth Century (Oxford, 1962), pp. 57–64, Galbraith, Mackinnon and East Africa, pp. 43–4, and, for a more colourful version, T. Pakenham, The Scramble for Africa (London, 1991), pp. 11–23. 26 W. Mackinnon to D. Mackinnon, 2 Sept. 1876, Nat. Lib. Acc. 6168/7. 27 The Times, 6 Feb. 1874, p. 5, col. f. 193

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is no medium between private enterprise and a great Chartered Company like the late Honable East Indian.’28 Frere, by contrast, was enthusiastically committed to it. But Frere was also a man in a hurry. By October 1876 he was aware of developments which would prevent him from playing any large part in Leopold’s scheme, and he was unwilling to let the creation of a British committee of the International Association proceed in a leisurely way through the normal Royal Geographical Society channels. Instead, he tried to force the pace by making use of William Mackinnon’s Glasgow contacts. Frere arrived in the city on 9 November 1876, to attend ‘a meeting of influential Glasgow men to be held . . . on the subject of opening up a road from Kilwa to Lake Nyassa with a view to the initiation of commercial enterprise and the putting down of the slave trade, as also the extension of mission stations’.29 The purpose was to create a Scottish branch of the as-yet-to-be-established British committee of the Association Internationale Africaine, and thereby give support to the efforts that were being made in London. At a dinner party in Frere’s honour, William introduced him to some twenty Scottish businessmen connected with the Glasgow Livingstonia Committee. They included James Stevenson, a chemicals manufacturer who took a keen interest in steam navigation on Lake Nyasa and in a possible wagon road between Lake Nyasa and Lake Tanganyika. The following day, Frere spoke to the Glasgow Chamber of Commerce about Leopold’s proposed organisation and then addressed a large public meeting – at which he drew attention to the wealth waiting to be unlocked on the African mainland by the putting down of the slave trade and the construction of roads, praised the work of the Church of Scotland and the Free Church of Scotland missions in the Lake Nyasa region, and stressed how ‘my friend Mr Mackinnon and his company’ had been employing their steamers along African shores in such a way that ‘now you find there is growing up upon that coast a commerce unknown before, of which no man can tell the limits’. He emphasised the strategic importance of two proposed roads in East Africa – one from the Swahili coast to the north end of Lake Nyasa and the other northwards from there to Lake Tanganyika – and proposed the formation of ‘a Scottish branch of the British National Society’.30 Such a committee was immediately established. Its thirty-five members comprised a cross-section of the city’s business and political elite, including the Lord Provost, four MPs and various businessmen associated with the Free Church or the Livingstonia Mission. William Mackinnon, Peter Mackinnon and Jamie Hall were among its numbers, although William, who had arranged and orchestrated the entire proceedings, had adopted a relatively low profile during the public meetings.

28 29 30

Burton to Kirk, Kirk Papers (National Library of Scotland) Acc. 9942/18. P. Mackinnon to D. Mackinnon, 9 Nov. 1876, Nat. Lib. Acc. 6168/9. The Glasgow Herald, 11 Nov. 1876, p. 7. 194

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Frere’s purpose lay in speeding-up the formation of a British committee of the International Association, but in this he would be disappointed. Complications over the proposal that the Prince of Wales should become the president of such a body slowed down its formation, and in January 1877 a special sub-committee of the Royal Geographical Society decided that British exploration in Africa should be undertaken independently of Leopold’s scheme. Shortly thereafter Frere departed the scene, to take up a new post in Cape Town as Governor of Cape Colony and High Commissioner for South Africa. This left the Scottish ‘branch’ of the non-existent British body in something of a limbo – and it was eventually wound up.31 Before that occurred, however, and in order to set its work in motion, William Mackinnon and James Stevenson initiated a scheme which they had been planning with James Young and James Stewart since September 1876.32 They got together with Sir Fowell Buxton and some of his associates in London missionary circles ‘in raising £5,000 to start at once in road-making on a small scale’. The long term object of the exercise was said to be to influence the direction of trade between the interior and the coast, for if ‘a good highway could be made from the north end of lake Nyasa to Kilwa or a port near there it would take all the trade of the lake basin to the Zanzibar territory instead of having it at present through Portuguese territory’.33 Northwards from Lake Nyasa there beckoned Lake Tanganyika, on which William Mackinnon suggested to the Sultan that an armed steamship, flying the Zanzibari flag, should be placed.34 The river route to Lake Nyasa via the Lower Zambesi and the Shire had two serious defects – first, navigational hazards on the Shire (cataracts and seasonal variations in water levels), and second, the very high level of tariffs

31 Precisely when the Scottish ‘branch’ ceased to function is not known. An insight into the tensions that led to its break-up is provided by an account from one of James Stevenson’s relatives: ‘Eight years ago Sir Bartle Frere proposed that in Glasgow they should take part in raising money for the Belgian International Association. A powerful committee was formed . . . But when they came to examine the constitution of the International Association, they found that the Roman Catholic Powers would have a majority of votes, Belgium and other small powers having so many, and that the subscribers would be raising money for them to pay away. The Committee was accordingly dissolved.’ (J. Stevenson to Lord Edmund Fitzmaurice, 15 May 1884, FO 84/1811.) There may have been more to it than that, however. The winding-up of the Glasgow body took place sometime between 1878 and 1881, when William Mackinnon’s public reputation was under severe strain from the collapse of the City of Glasgow Bank, when he was trying to avoid any appearance in the city, and when he would have been poorly placed to resist any attempt to terminate his and Frere’s creation. 32 H.W. MacMillan, ‘The Origins and Development of the African Lakes Company, 1878–1908’ (unpublished Ph.D. thesis, University of Edinburgh, 1970), pp. 82–3. 33 W. Mackinnon to J. Kirk, 9 Jan. 1877, MP IBEACo File 1c. 34 W. Mackinnon to Seyyid Bargash, 10 Jan. 1878, MP IBEACo File 60.

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imposed on goods entering the Zambesi by a protectionist Portuguese government. But such barriers to the development of steam transport on the lakes might be bypassed if the lakes could be connected overland with a port in the Sultan’s dominions. William recognised the difficulties and expense involved in such a project, and he had no intention of paying for the construction of a road all the way to Lake Nyasa out of his own pocket. Instead, he was prepared to help finance the first forty or fifty miles of a road he hoped others would complete – and in the expectation that the Sultan would reward his gesture in the form of useful commercial concessions. Bargash, responding to news of the Brussels Conference and the meetings in Glasgow, and to pressure from John Kirk, had written to the Foreign Office to say that he would do all he could to assist those concerned with the openingup of the interior of the mainland.35 What William Mackinnon had in mind, and looked to Kirk to secure, was the lease of a harbour at the coastal terminus of the new road. There he also wanted rights to levy duties on goods entering and leaving that harbour, rights to improve the port and its trading facilities, and grants of land for commercial exploitation alongside the road leading out of the port.36 In other words, while putting money into a road which served the humanitarian objectives espoused by missionary circles and by enthusiasts like Frere and Leopold, William was also – and it seems principally – motivated by a desire to secure a port of his own on the East African mainland. The key to this objective lay in his evolving strategy for the promotion of the group’s shipping and mercantile interests along Africa’s Indian Ocean shoreline. From January 1875 onwards, the Post Office and Foreign Office periodically consulted the BI board about converting the Aden-Zanzibar mail service from a monthly to a fortnightly one, and sending all mails to East Africa by that route. However, William Mackinnon and the board could not see how sufficient cargo could be obtained to justify a second steamer on direct voyages from Aden to Zanzibar and back. Only if the second steamer called at such ports as Lamu, Mombasa or Bagamoyo on the way to and from Zanzibar might sufficient revenues be generated for a fortnightly service. What began to be contemplated was that the Mackinnon group firms should challenge the long-standing pattern of East African trade, whereby the island of Zanzibar acted as an entrepôt for the foreign trade of much of the Swahili coast. For decades, the trade of the various mainland ports had largely been in the hands of Indians. The formal prohibition of Western merchants from the Mrima, that part of the coast opposite Zanzibar, appears no longer to have been strictly enforced in Sultan Bargash’s time. Nevertheless European and

35

Barghash to Earl of Derby, Foreign Office, 13 Dec. 1876, FO 84/1454, and Derby to Frere, 12 Jan. 1877, FO 84/1497; Kirk to Wylde, 6 March 1877, Nat. Lib. Acc. 9942/7. 36 W. Mackinnon to J Kirk, 9 Jan. 1877, MP IBEACo File 1c, and Kirk to Mackinnon, 5 Feb. 1877, MP Private Letters File 86. 196

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American merchants had become accustomed to locating their enterprises on Zanzibar island and to dealing with the mainland through Indian and ArabSwahili intermediaries. The prospect now being discussed was that BI steamers and Gray Dawes agents should be placed in direct competition with Arab dhows and Indian merchants in the local maritime trades. This would have financial and political repercussions for the Sultan, and would need his co-operation.37 If BI were able to shift part of its operations to a mainland port, this would also provide a solution to what had become a nagging irritant in relations with the Sultan – namely the latter’s continuing reluctance to waive duties on cargoes transhipped at Zanzibar. This William regarded as a constraint on the development of Zanzibar as a shipping hub. By the middle of 1876 he and the BI board were looking at the idea of creating another hub port on the East African mainland, which would not only tap the maritime trade of the Swahili coast but also become a centre from which BI’s drive into the waters of south-east Africa could be sustained. Aware of official dissatisfaction with the Union S.S. Co, and of a report by Vice-Consul Elton which highlighted the Union Co’s failure to provide a regular service to the smaller Portuguese ports, they approached the Foreign Office with an offer to provide a coasting service between Zanzibar and Delagoa Bay for a subsidy equal to that paid to the Union Co.38 East Africa, William and the board expected, would become both a centre of expanded steamshipping operations in its own right and a stepping-stone towards South Africa. Just as in the mid1860s the Netherlands Indies mail contracts were valued for their potential to open the way to the British settlements in Australia, so in the mid-1870s a presence on the Swahili coast began to be seen as a way of opening contact with the British settlements in South Africa. The intention to ease the Union Co aside, and become the dominant steamshipping concern all the way down the eastern shores of Africa, was given a further powerful thrust by Frere’s appointment as Governor of Cape Colony and High Commissioner for South Africa. His main remit from Disraeli’s Conservative government was to unite the British colonies and the Boer republics into a single South African Confederation. No sooner was the appointment announced in early December 1876 than Frere summoned William from Scotland to confer with him. The new High Commissioner had already identified the coalfields of Natal as a source of energy for the rise of steam power in the western Indian Ocean, and was anxious to secure a fortnightly steamer service between Aden and Natal, calling at ports in the Sultan’s and Portuguese territories, as a prop to his new administration in

37 BISN Co Directors’ Minutes, 19 Jan. 1875, BIS/1/3; E.S. Dawes to A. Smith, 30 July 1875, and Dawes to E.N. Mackenzie, 7 April 1876, Dawes Letterbook, 1874–6; J. Kirk to W. Mackinnon, 8 Feb. 1876, and 5 Feb. and 19 April 1877, MP Private Letters File 86–7. 38 BISN Co Directors’ Minutes, 11 July 1876, BIS/1/3; P. MacNaughton, Secretary BISN Co, to T.V. Lister, Foreign Office, 22 July 1876, CO 48/484/1502.

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South Africa.39 Once Frere arrived at the Cape he pressed on the Colonial Office and the Foreign Office his vision of a stronger steamship connection between Natal, East Africa and India – to be undertaken by BI. The advantages he saw as a ‘considerable’ growth of trade between South Africa and Zanzibar ‘if equal pains were taken to make the service as punctual and convenient as that between Zanzibar and Aden’. There would be trade in minerals and tropical commodities between South Africa and India, an importation of Indian labour into Natal, and a capacity to bring Indian troops quickly into South Africa in the case of emergency – all on the back of the steampower to be unleashed from the Natal coalfields. In an accompanying memo, William asked for a 10-year contract at £22,000 per annum for a fortnightly service between Natal and Aden, which would interconnect at the latter port with P&O and BI steamers for India and Europe.40 There was little prospect that the Treasury would immediately loosen its tight grip on public finances, and Frere and William were probably engaged in laying down a marker for the future. They were setting out what they hoped to achieve in the way of developing inter-Imperial connections – in one great steam-bound girdle around the western flanks of the Indian Ocean – when the Zanzibar mail contracts came up for renewal in the early 1880s. By September 1877, William’s ambitions for BI’s future in African waters had grown to embrace services from Aden to South Africa, linking with liner traffic between Britain and India, together with a direct service from London to East and South Africa.41 The steamers would call at various ports along the shoreline of eastern Africa, and in the process would erode Zanzibar’s position as the main entrepôt for international commerce on that section of the coast between Lamu and Kilwa. Arab-Swahili Africa as a whole would no longer perform a simple support role to the group’s activities in the Persian Gulf, but was marked it out as a maritime zone deserving stronger developmental efforts and increased investment in its own right. Furthermore, with Frere ensconced in a position of authority in South Africa and able to link William’s ambitions to the British government’s plans for political and economic unification in South Africa, particularly the railway from Delagoa Bay into the Transvaal, the group was very well placed to secure a forward thrust of its interests into southern Africa. The acquisition of a port on the 39

P. Mackinnon to D. Mackinnon, 7 Dec. 1876, Nat. Lib. Acc. 6168/9, and W. Mackinnon to J. Kirk, 9 Jan. 1877, MP IBEACo File 1c. Frere’s observations on the strategic significance of the Natal coalfields had been made to the African Section of the Society of Arts on 6 Feb. 1874 (Journal of the Society of Arts, 22 (1873–4), p. 204), and also in his essay on ‘Zanzibar: A Commercial Power’ (Macmillan’s Magazine, July 1875, p. 288). 40 Memo by Sir B. Frere, 5 Feb. 1877, and enclosure, Memo regarding Steam Services on the East Coast of Africa, by W. Mackinnon, 8 Jan. 1877, CO 48/484/1502; also in FO 84/1498. 41 W. Mackinnon to D. Mackinnon, 23 March and 13 Sept. 1877, Nat. Lib. Acc. 6168/7. 198

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East African mainland, nominally under the Sultan’s authority but free of his fiscal regime – where the Mackinnon group firms might develop their own centre for maritime operations between Aden and Natal and get round many of the practical difficulties which had hitherto dogged their African arrangements – fitted well into such strategic thinking. The expenditure of a small amount of money on the construction of a few miles of road was an inexpensive way of reaching out towards that objective. The only questions were which port and whether the Sultan would give a lease. The road party nominally under the authority of the Scottish ‘branch’ of the International Association arrived in Zanzibar in June 1877. It had instructions to start construction from Kilwa, which was the closest port within the Sultan’s domains to the road’s eventual destination on Lake Nyasa and which William intended to make the first port-of-call for a new steamship line southwards of Zanzibar. However, the road party had also been told to take final instructions from John Kirk, who set the group to work from Dar-es-Salaam, on the mainland coast a little to the south-west of Zanzibar. Kirk justified the change of plans on the grounds that the route inland from Kilwa was too little known and that Dar-es-Salaam’s fine natural harbour rendered it the future premium port on the East African mainland. Dar-esSalaam’s port was as yet little developed, for Arab-Swahili mariners preferred Bagamoyo, a little to the north, which was also closer to Zanzibar. William was displeased by Kirk’s decision but eventually came round to accepting the turn of events. By October 1877 the road party was under the command of a former Royal Engineers sergeant named William Mayes and included two brothers from Edinburgh, Frederick and John Moir, who would later make their reputation in trade along the Zambesi-Shire Valley route. Construction had advanced some 15 miles inland from Dar-es-Salaam. However, Kirk had not yet put to the Sultan any proposal that Dar-es-Salaam should be leased to William Mackinnon, partly because the dispute over the relative merits of Kilwa and Dar-es-Salaam delayed matters and partly because during that delay William Mackinnon managed to over-reach himself. In writing to Kirk in January 1877, to set the road-construction project in place, William hinted at the existence of another, more grandiose, project for East Africa: The other and larger scheme about which I once wrote to you I still think ought to be useful to Africa and the world. Sir Bartle Frere thinks so also, and I had an opportunity through him lately of mentioning it to the Duke of Sutherland who would probably be disposed to go into it. Colonel Gordon I hear has come home and if he would put himself at the head of it there would be no difficulty in my opinion of getting 20 men to subscribe £200,000 or a quarter of a million. That amount of money with good energetic men to direct its expenditure would do a great work in Africa.42 42

W. Mackinnon to J. Kirk, 9 Jan. 1877, MP IBEACo File 1c. 199

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What he had in mind was the creation of a large trading company which would take over and develop the whole of the Sultan of Zanzibar’s mainland territories, by assuming the farming of the Sultan’s customs and using the revenues to attract further capital into transport and infrastructural projects. This was much more than his harbour and road scheme writ large. In fact, it was so novel and unexpected, so far removed from the immediate needs of his shipping concerns, that it surprised even those close to him like Jamie Hall and Peter Mackinnon. It was an exercise in opportunism that had it origins in the discussions which he and Edwyn Dawes had had with the Sultan in London in July 1875. These went into the state of the Sultan’s finances, and sowed the seeds of the idea that Gray Dawes & Co might make some future bid for Zanzibar’s customs farm – a proposition that was explicitly put to Dawes by Kirk in November 1876.43 However, in developing that idea, William Mackinnon drew heavily on another project with which he and Dawes were already familiar. The inspiration for what he now proposed was almost certainly the Reuter Concession of 1872, which he had discussed in some detail with Hugh Matheson. Both the concession which Baron Reuter obtained from the Shah of Persia and the concession which William wanted from the Sultan of Zanzibar envisaged (for the same period of seventy years) a core of customs-farming activities around which transport and financial infrastructures would be developed. Both drew from British statesmen expressions of astonishment that any ruler should contemplate yielding to private interests as much sovereignty as was being demanded. Like Baron Reuter on the Iranian plateau, William Mackinnon on the East Africa coast sought rights to trade; to own property and erect buildings; to construct railways, roads, canals and telegraphs, and to levy tolls on them; to prospect for and exploit mineral resources; and to issue currency and establish a bank or banks.44 He hoped to secure financial backing for the project from the circle of investors that met at the Stafford House mansion of the Duke of Sutherland. George Levinson Gower, the third Duke of Sutherland, had also been in the Prince of Wales’s entourage during the tour of India, and became close friends with Frere, who in turn introduced him to William. The knowledge that the Duke, one of the wealthiest men in Britain who also had

43

E.S. Dawes to J. Kirk, 15 Dec. 1875, Dawes Letterbook, 1874–6, and Dawes to D. Mackinnon, 17 Nov. 1876, Nat. Lib. Acc. 6168/11. 44 For the terms of the Reuter Concession, see F. Kazemzadeh, Russia and Britain in Persia, 1864–1914 (New Haven and London, 1968), pp. 105–8; these may be compared with the terms of the draft concession put to the Sultan in March 1877, enclosed in Edwyn Dawes to Gerald Waller, 8 March 1877, MP IBEACo File 2. The similarity between the two projects was not lost on contemporaries. Sir Douglas Forsyth, a member of the Duke of Sutherland’s circle, advised William to put a greater emphasis on the suppression of the slave trade in the stated objectives of the project, so that when it came to be made public it would avoid comparison with the notorious Reuter Concession (J.D. Forsyth to W. Mackinnon, 26 Oct. 1877, MP IBEACo File 61.) 200

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the ear of the Prince of Wales, seemed disposed to back an East African trading company encouraged William to bring forward this proposal hard on the heels of his road-building scheme and before the latter had secured its prime objective. The plan was first outlined to Seyyid Bargash by Kirk and by William’s envoy, Gerald Waller, in April 1877.45 To Kirk’s amazement, Bargash seemed willing to entertain the idea, which was put to him as a way of headingoff encroachment on his territories by the Khedive of Egypt, whose forces were expanding southwards.46 After some amendment to take account of suggestions from Kirk and the Sultan, the scheme was submitted to the British government for its approval and support. ‘If successful’, William assured the Foreign Office, it ‘must not only root out slavery from His Highness’s dominions but must also tend greatly to develop the great resources of that part of the African continent, and to open out vast regions to the commerce and energy of this country’.47 He wanted to secure the prior backing from the British government that Baron Reuter and Hugh Matheson had failed to obtain, and the lack of which had contributed to their difficulties in Iran. The proposal went the rounds of the various government departments in Whitehall. At the Colonial Office it was observed that ‘The prime mover appears to be Mr. Mackinnon . . . who has great influence over Sir Bartle Frere. The professed objects of the Company are rather philanthropic than commercial, though in what proportion the results are to be apportioned between humanity and profit does not appear. Mr. Mackinnon has however all his life been a very sharp and very successful trader, especially along the East Coast of Africa.’48 Consideration by government departments and ministers was a slow process, and only in February 1878 did the Cabinet finally agree that the project could go ahead. It offered, however, a less than wholehearted endorsement. His project, he was informed, ‘commends itself to such support as H.M.G. can properly afford to such an undertaking’, but it could not receive ‘formal sanction’. Furthermore, the government reserved the right of freedom of action in the event that complications with other countries arose from the scheme.49 Despite his very obvious disappointment

45 Gerald Waller was a brother of Rev. Horace Waller, Livingstone’s erstwhile companion and now his editor, who was also a member of the anti-slavery movement and of the Frere clique. Horace Waller, for example, accompanied Frere on his visit to Glasgow in November 1876. The Wallers were John Kirk’s brothers-in-law. 46 E.S. Dawes to G. Waller, 8 March 1877, MP IBEACo File 2; J. Kirk to W. Mackinnon, 19 April 1877, MP Private Letters File 87; W. Mackinnon to D. Mackinnon, 16 Oct. 1877, Nat. Lib. Acc. 6168/7. 47 W. Mackinnon to Lord Derby, 23 Aug. 1877, FO 84/1499. 48 Minute by Malcolm, 28 June 1877, on Foreign Office to Colonial Office, 23 June 1877, CO 179/125/7705. 49 Sir J. Pauncefote, Under Secretary of State, Foreign Office, to W. Mackinnon, 19 Feb. 1878, FO 84/1526.

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at the tenor of this message, William went ahead with a final set of negotiations over what he described to Bargash as ‘the great scheme for civilisation which your Highness has confided to me’.50 Gerald Waller arrived back in Zanzibar in late April 1878. He was accompanied by Rev. G.P. Badger, a distinguished Arabist who had interpreted for the Frere Mission in 1873 and throughout the Sultan’s visit to London in 1875, and whom Bargash had specifically requested be present for the negotiations. However, Bargash, who had previously seemed so supportive, now began to make demands for changes to the terms of the proposed concession that would significantly constrain the commercial returns to the concessionaires. Waller and Kirk interpreted the demands as signalling the Sultan’s refusal to go forward with the scheme. There are suggestions that the negotiations were wrecked by the irascible Badger, acting on behalf of Lord Salisbury who had just moved from the India Office to the Foreign Office and was anxious to avoid entanglements in East Africa.51 However, these seem less convincing than the alternative explanation that the Sultan met strong objections to the scheme from key figures within local Zanzibari politics. The latter included his own advisers, who pointed out that he could do better financially by simply throwing all the East African ports open to trade, as well as Taria Topan, the Ismaili merchant who had the contract for the Zanzibar customs farm. Taria Topan had emerged as a competitor to BI and Smith Mackenzie & Co, by chartering steamers to trade between Zanzibar and Bombay, and he was closely associated with American mercantile interests in Zanzibar who would have good reason to object to the emergence of a powerful competitor with devolved sovereign rights.52 The concession, in fact, challenged so many vested interests that the fact that the Sultan backed away from it was less remarkable than that he should have

50

W. Mackinnon to Sir J. Pauncefote, 22 Feb. 1878, FO 84/1527, and W. Mackinnon to Seyyid Bargash, 19 Oct. 1877, MP IBEACo File 8. For more detailed accounts of the correspondence and negotiations surrounding the Mackinnon Concession of 1877–8 (but which differ from mine in certain respects) see Coupland, Exploitation of East Africa, pp. 300–18, and Galbraith, Mackinnon and East Africa, pp. 47–70. 51 Galbraith, Mackinnon and East Africa, 67–8. Certainly, Badger conveyed to Bargash what was described as ‘advice’ or ‘hints’ from Salisbury, and Badger thought it ‘not improbable that they co-operated to induce him to use greater caution in the matter’ (G.P. Badger to Lord Salisbury, 3 July 1878, FO 84/1528). However, Bargash himself, in thanking Salisbury for the private advice, gave no indication that it had contributed to the stiffening of his position in the negotiations. Rather, he laid stress on ‘the difficult position in which we are placed, especially with regard to our subjects on the mainland, who dreaded that they would be ruined were we to grant the demands made by the concessionaires’ (Bargash to Salisbury, 19 May 1878, translated by Badger and enclosed in Badger to Salisbury, 4 July 1878, FO 84/1527). 52 A. Smith to W. Mackinnon, 14 May 1878, MP IBEACo File 59, and J. Kirk to W. Mackinnon, 31 May 1878, MP Private Letters File 88. 202

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seriously considered it in the first place. Bargash made the strength of the opposition clear to William: As regards the other difficulties, such as the claim put forward by the Company for the exclusive right to trade in certain articles, the unlimited right of imposing duties (or taxes), and the appropriation of such to themselves, these claims have given rise to difficulties which we were not able to solve; inasmuch as certain chiefs of our subjects have remonstrated with us, saying that if we concede them to you we shall deliver then up to ruin, ‘for the Company will deprive us of our living and certainly destroy us from off the interior (Continent)’. We ourselves know full well that such fears have no foundation, for your object is to build up, not to destroy; but it is impossible to bring them over to that idea at present, inasmuch as they cling to the fancy that if we accept the Draft of the Concession as you have presented it to us, their trading operations will be at an end.53

William would complain later that the failure to obtain the concession lay with the ‘dilatoriness of our Foreign Office’, and also ‘that they are quite alive to this fact’.54 The Foreign Office view, on the other hand, was that the negotiations broke down because the Government refused ‘to go further than to promise the protection to which all British subjects are entitled in a foreign country – which did not suit the concessionaires’.55 In fact, the attempt to transfer the Reuter Concession into an East African setting had been based upon William’s misreading of the Sultan’s easy expressions of goodwill and friendship that had come his way between 1875 and 1877. It was only when the proposal became public in Zanzibar, and faced very real opposition, that Bargash’s hardening of attitude brought home to William and his associates something of the political and commercial realities of Arab-Swahili Africa. Dashed in his hopes of upstaging Baron Reuter and Hugh Matheson, William Mackinnon reverted to his original, and more limited, objective of the lease of a single port on the East African mainland. Some recompense for his disappointment might be obtained by leasing Dar-es-Salaam as a base for BI’s operations in African waters. By December 1878, he was attempting, through Archie Smith, to purchase properties in Dar-es-Salaam from which to conduct BI and Gray Dawes activities, and had put proposals to the Sultan for a grant of the customs farm for Dar-es-Salaam and of rights to develop its

53

Seyyid Bargash to W. Mackinnon, 22 May 1878, MP IBEACo File 61. W. Mackinnon to Gordon, 27 July 1882, Nat. Lib. Ms 20311; W. Mackinnon to Bargash, 28 Jan. 1887, Stanley Papers (British Library), RP 2435 ii Batch 3. 55 Memorandum by H.P.A. (Sir Percy Anderson), 27 April 1885, FO 84/1737; Salisbury’s position was that Mackinnon was ‘not in earnest’ in 1877–8 (minute on Memo by W. Mackinnon, 7 May 1887, FO84/1863) and that ‘the project fell through owing to his unwillingness to go through with it’ (minute on W. Mackinnon to Salisbury, 8 Dec. 1888, FO84/1934). 54

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harbour.56 Shortly thereafter, he added a proposal to replace the road with a railway, which would be financed by the revenues from customs and harbour dues, and the exploitation of the strip of land some four or five miles on either side of the route which he now asked Bargash to grant.57 Once again, however, William was to be disappointed. When the proposed lease of Dares-Salaam came to be considered by Bargash and his advisers in April–May 1879 it quickly became clear that the local forces aroused by his large scheme would also oppose his more modest objective. Hostility towards William Mackinnon and Gray Dawes & Co manifested itself in Zanzibar in a variety of ways. One bone of contention was the steamship that William had arranged to build for the Sultan on the Clyde. This vessel, named the Glasgow, arrived in Zanzibar in June 1878, but it was not the success for which William had hoped. Bargash had in mind something like a Royal Navy man-of-war; he got an armed steam-yacht. The origins of this misunderstanding lay in confusion between Smith Mackenzie & Co and the Sultan’s representative when the specifications for the vessel were first drawn up in Zanzibar. So angry was Bargash at what he regarded as ‘the unfair treatment he has obtained from the contractors’ that he refused even to discuss the Glasgow with Kirk. Holmwood, the Vice-Consul, warned William that if he wanted to get Dar-es-Salaam he would have to come personally to Zanzibar and take the ship off the Sultan’s hands.58 A further complication came about through Archie Smith falling out with the Sultan, partly over shipments of muskets but largely because of a quarrel with one of Bargash’s servants. As a consequence, Taria Topan and the American interest persuaded Bargash to transfer his agency from Smith Mackenzie & Co to the American house of Maclean Morris & Co.59 The loss of commission on the small amounts of business transacted by the Sultan was far less significant than the symbolic end of the special relationship with the ruler of Zanzibar – the pain of which was rendered more acute by a lingering dispute over Bargash’s payment of the bill for the Glasgow. John Kirk, on whose influence William relied so much, now turned against him. He advised Bargash to grant William neither the customs house farm nor the exclusive right to the harbour at Dar-es-Salaam, apparently out of concern for the erosion of the Sultan’s sovereignty.60 This unexpected decision, however, probably carried less weight with Bargash than the objec56

G. Waller to W. Mackinnon, 30 Dec. 1878, and 10 Jan. 1879, MP Private Letters Files 243–4. 57 W. Mackinnon to Seyyid Bargash, 7 March 1879, enclosure in J. Kirk to Foreign Office, 30 May 1879, FO 84/1547. 58 J. Kirk to W, Mackinnon, 28 June 1878, MP Private Letters File 88, and F. Holmwood to W. Mackinnon, 1 June 1879, Private Letters File 89. 59 G. Waller to W. Mackinnon, 11 Jan. 1879, MP IBEACo File 9, and J. Kirk to E.S. Dawes, 28 April 1879, MP IBEACo File 61. 60 J. Kirk to Foreign Office, 30 May 1879, FO 84/1547. 204

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tions of Taria Topan and other local people who had opposed the large ‘Mackinnon Concession’ in May 1878 and who now, a year later, worked on the Bargash’s growing disenchantment with William and his associates to block the concession of the port. William was welcome to go on with the road construction, Bargash wrote to him, but he could not be conceded the port. ‘If a line of steamers is established to run between Zanzibar and Dar es Salaam many passengers and traders would in that case prefer to land in Dar es Salaam & abandon Baj Moyo [Bagamoyo] & so the ivory duty which has been paid in Baj Moyo up to the present will devolve to Dar es Salaam.’61 Bargash was setting his face against the potential of William’s steamships to transform local patterns of shipping and trade in East Africa, by undermining their segmentation between Western firms on the one hand and Indian and Arab-Swahili capital on the other. Keeping BI and Smith Mackenzie & Co firmly on Zanzibar and preventing their move to the mainland could avoid such dangers. William Mackinnon – too distant from the intrigues that surrounded Bargash’s court, abandoned by Kirk, and overly dependent on Bargash’s fading memories of former goodwill – lacked the effective means of securing a foothold on the East African coast. This second check to his African ambitions was accompanied by yet a third. Early in 1879 the hopes which he and Frere harboured for a future steamship line from London to Natal came crashing down in the shambles of Frere’s South African policies. The shock of the defeat of a British force by the Zulu impi at Isandhlwana and the related loss of the Prince Imperial, son of Napoleon III of France, punctured Frere’s political influence in Britain. In attempting to reconcile the Afrikaner population of the Transvaal to confederation with the British colonies by suppressing the Zulu state (as well as building them a railway to Delagoa Bay), Frere had greatly over-reached his authority. He became the focus for an attack by the Liberal opposition, led by Gladstone, on all that was wrong in the active foreign and colonial policies of the Disraeli government. He was censured by the Cabinet on 19 March 1879 for provoking the Zulu War, and was removed from his post as High Commissioner (and therefore responsibility for Natal and the Transvaal) in May 1879.62 For William this was a personal blow even more than a business setback and he was determined to show solidarity with his political mentor and friend. Frere, he decided, should be offered a seat on the boards of both BI and NISM ‘if he resents the censure of the Government

61

Seyyid Barghash to W. Mackinnon, 3 May 1879, MP IBEACo File 61. For Frere’s South African policies, the origins of the Zulu War, and his relations with the government in London, see J. Martineau, The Life of Sir Bartle Frere (London, 1908), Vol. 2, W.B. Worsfold, Sir Bartle Frere (London, 1923), and L. Thomson, ‘The Subjection of the African Chiefdoms, 1870–1898’ and ‘Great Britain and the Afrikaner Republics, 1870–1899’, in M. Wilson and L. Thompson (eds), The Oxford History of South Africa, Vol. II (Oxford, 1971). 62

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despatch and retires’.63 Frere in fact clung on in South Africa for a while, as Governor of Cape Colony, in the hope of salvaging something from the wreckage. However, his ability to steer colonial and British Treasury funds towards the subsidisation of BI’s steamships in southern African waters now lay strewn on a mountainside in Zululand. William could expect no significant assistance from him in the foreseeable future. By the middle of 1879, therefore, William had achieved very little of what he had been working for in eastern Africa since 1875. He did not immediately abandon all interest in the Sultan’s dominions. Although he ordered construction of the road to be terminated once it reached the River Kangani, some seventy miles from Dar-es-Salaam, its care and maintenance was continued for a further year in the hope that it would be taken over by Leopold’s International Association. That shadowy body, however, was already shifting the focus of its attention to the Atlantic side of central Africa and had little use for what had been undertaken by its small and essentially unofficial Scottish ‘branch’ in the hinterland of Dar-es-Salaam. The road had been abandoned to the ravages of the local climate when, in December 1880, and almost as an afterthought, William offered it to the Livingstonia Mission. By then, his former collaborators on the road project, James Stevenson and the Moir brothers, had switched their attention to the Zambesi-Shire river route, and had established the Livingstonia Central Africa Company (later renamed as the African Lakes Co) to maintain communications between Quelimane and Lake Nyasa. The offer of the road was declined ‘as of no use to the mission’.64 Kirk, who had privately encouraged William in the road scheme while officially casting doubt on its commercial prospects, tried to reassure him that its seventy-odd miles represented a great work of philanthropy which was much appreciated by the local people, and that it had stimulated cultivation around it.65 The truth was that it had achieved neither its overtly public nor its more private objectives. The ebbing away of his formerly friendly relationship with the Sultan, the deflating of Frere’s powers of influence and patronage, and the unwillingness of the British government to give more than qualified approval to the concessionary trading company scheme left William Mackinnon bereft of those layers of political support which he had expected to use to promote his group’s steamshipping and merchanting interests in Africa. The failure to secure a base in Dar es Salaam was the final blow, and meant that BI’s operations along the African shoreline would have to be reviewed and reorganised during the middle of 1879. Gone now was the easy talk of a direct steamship line all the way from London to Natal, or even from London to East Africa. The Aden-Zanzibar line would continue to be a feeder line, with

63 64 65

J.M. Hall to Duncan Mackinnon, 25 March 1879, Nat. Lib. Acc. 6168/14. MacMillan, ‘African Lakes Company’, p. 88, n.3. J. Kirk to W. Mackinnon, 5 Feb. 1881, MP Private Letters File 81. 206

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passengers and cargo to and from London transhipping at Aden. BI’s steamers would also continued to sail directly between Aden and Zanzibar without making calls at any port on the East African mainland. None of the shipping developments that lay behind William’s bid for territorial concessions in East Africa came to fruition. Nevertheless, he retained some room for manoeuvre. One small crumb of comfort was the renewal of BI’s mail contracts with the Portuguese government in January 1878. This was followed by the Treaty of Lourenco Marques between Britain and Portugal, signed in May 1879.66 The treaty was part of a wider process of liberalising the Portuguese colonial empire, involving negotiations with Britain over Goa, Mozambique and the mouth of the Congo (Zaire river). Its purpose was bring about a shift from protectionist to free trade policies in Portuguese East Africa, through free navigation on the Zambesi and British-Portuguese collaboration in the construction of a railway from Delagoa Bay (Lourenco Marques) to the Transvaal. To William Mackinnon and the BI directorate it held out prospects of a growth in trade along the coastline of south-east Africa, and a step closer to South Africa. In July 1879 they gave notice to the Union S.S. Co that they would resume the Mozambique-Delagoa Bay extension contract, and in October 1879 they commenced a monthly service between Zanzibar and Delagoa Bay, with calls at Mozambique, Quelimane, and Inhambane. However, the Treaty of Lourenco Marques was not ratified by the Portuguese parliament. Before it could be, the government in Lisbon changed to one less inclined to cooperate with the British. There was therefore none of the expected surge of British investment into Portuguese East Africa, nor any of the general expansion of trade that was supposed to follow. BI’s new coasting line between Zanzibar and Delagoa Bay therefore lacked the uplift which had been anticipated. The BI vessels now steaming southwards to Delagoa Bay operated as a new direct service all the way from Bombay around the Arabian and East African coastlines to the very margins of British-ruled South Africa. For William’s solution to the failure to establish a hub port in East Africa had been to rethink the basis on which his African line had hitherto been managed. In part, the solution presented itself by accident. So successful was an experiment in 1879 to run a steamer all the way from Bombay to Zanzibar, thereby saving Indian customers the time and expense of transhipping at Aden, that William decided that its principles should be applied to a line all the way from Bombay to Delagoa Bay. This would avoid transhipment costs at Zanzibar as well as Aden. He instructed that three ‘larger steamers’ be set aside in Bombay for the purposes of conducting a new monthly line to Aden,

66

For Portuguese policies in Mozambique at this time, and more especially the background to the Treaty of Lourenco Marques, see M. Newitt, A History of Mozambique (London, 1995), pp. 317–33, and Anstey, Britain and the Congo, pp. 844–90. 207

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Zanzibar and Delagoa Bay (Lourenco Marques).67 This strategy, of course, threw the weight of maintaining, repairing and provisioning the ships in the African waters on the marine superintendent and engineers in the Bombay depot rather than in the East African base that William had hoped to establish. That round-trip voyages of over 12,000 miles between Bombay and southern Africa could now be contemplated conveys something of the modernisation which had occurred in the BI fleet in the course of the 1870s. It also made sense commercially, for just as the greater part of Zanzibar’s trade was still with western India, so too over 50 per cent of the exports of the Mozambique ports went to Bombay. Beyond Delagoa Bay, Natal was closed to BI steamers – blocked by the competing presence of the Union and Castle lines, and by the political complications of the rivalry between them. The Union Co’s contract to deliver the mails to Zanzibar via Natal was due to expire on 9 February 1881, and there were few voices within British governing circles to question the Treasury view that a Natal-Zanzibar mail contract had been rendered unnecessary by the introduction of telegraph communications between South Africa and Britain, via Zanzibar and Aden. Despite some last minute manoeuvres, including attempts to embroil BI in a joint service between Aden and Natal, the Union Co was unable to shake the Treasury’s resolve. It consequently withdrew from the waters north of Natal, selling off one of its steamers to the Sultan of Zanzibar.68 William Mackinnon and BI were left in sole possession of liner services along the whole length of the African coast between Delagoa Bay and Cape Guardafui – at least until they came to seek a renewal of the Aden-Zanzibar mail contract in 1882–3. One man whose voice would carry much less weight in these future deliberations was Sir Henry Bartle Frere. Following the election of April 1880, and the return to office of Gladstone, who had been extremely critical of Frere during his Mid-Lothian campaign, Frere’s hold on the Governorship of Cape Colony became even more tenuous, and he was recalled in August 1880. His departure from Cape Town coincided with the outbreak of revolt in the Transvaal, which was the final blow to the policy of confederation which he had been sent out to South Africa to promote, and which further damaged his political standing. William was saddened by his old friend’s troubles, but he was also in difficulties of his own. Legal matters detained him in Scotland

67

BISN Co Directors’ Minutes, 22 July 1879, BIS/1/3; Treasury to Colonial Office, 27 June 1879, and enclosure, P. MacNaughton to General Post Office, 16 June 1879, CO 179/131/10251; W. Mackinnon to D. Mackinnon, 11 Sept. 1879, Nat. Lib. Acc. 6168/8. 68 Treasury to Foreign Office, 25 June 1880, enclosure in Treasury to Colonial Office, 2 July 1880, CO 48/498/9890; BISN Co Directors’ Minutes, 10 Feb. and 7 April 1881, BIS/1/3; Treasury to Foreign Office, 23 April 1881, enclosure in Political Despatch to India, No. 51, 26 May 1881, IOLR V/6/309; G. Waller to W. Mackinnon, 17 Sept. 1880, MP Private Letters File 246. 208

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and he was unable to get to London to join the group of friends and sympathisers who welcomed Frere home. He remained as anxious as he had always been to support Frere in private and in public, and for his part Frere was now finally free to accept a seat on the BI board. (The death of Sir Frederick Arthur, on 1 June 1878 had deprived William and BI of the man who effectively had been Frere’s proxy over the years.) In November 1880 Sir Bartle was allotted 40 fully paid-up shares at par (that is at a substantial discount) and elected to a directorship.69 William also tried to help Frere recover something of his self-esteem by involving him in various tasks associated with the company – for example, discussions at the Council of Shipowners over regulations imposed on users of the Suez Canal by the Egyptian government. Frere’s heart was not in shipping matters, however, and he spent much of his time defending his South African policies and actions against the charges of recklessness and incompetence that had been levied against him. The principal architect of BI’s presence along the African coastline, and of William’s involvement in the affairs of Zanzibar and Mozambique, was now something of a broken reed. Nevertheless, he clearly valued William’s support and he attempted to be of service to his old friend. In January 1882, unknown to William, he wrote to Lord Ripon at the India Office to suggest that William should receive an honour from the Queen. The grounds given for such recognition betray Frere’s own concerns and preoccupation with Africa, for although he referred to the various ways in which William’s steamships had assisted the Government of India, the emphasis was very much upon philanthropic endeavour in Africa: He is a man of most unostentatious habits. He & Mrs Mackinnon live in a very simple but liberal Scotch fashion in a quiet valley in Argyllshire, universally respected for the unpretending liberality with which they make good use of the means to assist every good work within their reach – whether local or connected with India or Africa. When I was first asked to undertake a mission to Zanzibar, I pointed out to him the great assistance our efforts to suppress the Slave Trade might derive from regular steamers on that coast. The result was that he offered at once to run ‘experimental steamers’ as his contribution to the suppression of the Slave Trade & he commenced the existing service of regular East African Mail Steamers at a considerable sacrifice & with little prospect of immediate profit. The consequence has been a great extension of legitimate commerce on that coast & a very effectual check to the long sea slave trade – which Sir John Kirk assures me exists now only among the islands where it is covered by the French flag . . . The Sultan of Zanzibar has on more than one occasion given emphatic expression to his sense of the great benefits conferred on his Govt & people – financially and otherwise – by Mr Mackinnon’s enterprise, which has not been confined merely to

69

BISN Co Directors’ Minutes, 13 and 17 Nov. 1880, NMM BIS/1/4; BISN Co Annual Report, June 1881, BIS/1/30. 209

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the establishment of steamer lines. Mr Mackinnon has largely contributed to almost every great effort on that coast for checking slavery.70

From Frere’s pen, which had contributed to the making of the Livingstone Legend, there came the first shaping of William Mackinnon’s public image as a great humanitarian who happened to be a steamship owner and a businessman. ***** The introduction of BI’s steamship line brought a quickening to the maritime commerce of eastern Africa during the 1870s. BI’s steamers were not the only ones at work – in addition to the Union S.S. Co.’s Natal-Zanzibar line, a variety of chartered or speculative tramp steamers turned up in eastern African ports over the years before the Sultan of Zanzibar started his own line to Bombay in 1882. Nevertheless, in terms of total tonnage and regularity of sailings, BI’s steamship service was supreme. Its influence can be seen most clearly in trade between Britain and eastern Africa, within which it was virtually the only new agent. When its vessels started running between Aden and Zanzibar in 1872, British exports to eastern Africa were worth £112,050 per annum and imports from eastern Africa £121,875. Ten years later, in 1882, the figures were £160,299 and £361,644 respectively.71 Meanwhile, total trade between India and eastern Africa rose in value from 4.38 million rupees in 1871–2 to 7.7 million rupees in 1881–2.72 The extent to which BI’s steamship lines contributed to this growth of trade with India is less than clear because, until the start of the Bombay-Delagoa Bay line in 1879, its services proceeded by relatively roundabout routes involving transhipment costs in Aden and Karachi. But it is unlikely that the seven-fold increase in British-registered tonnage entering Zanzibar between 1871 and 187973 was unconnected with the rise in the value of trade between India and East Africa. If William Mackinnon, BI and Gray Dawes & Co played an important role in promoting trade in eastern Africa in the 1870s, it is far from certain that their efforts made any significant contribution to the task of combating the slave trade. Although mail subsidies had been won from the British government in 1873 on the grounds that ‘legitimate commerce’ would drive out the maritime slave trade between East Africa and the Arabian peninsula, BI’s lines did not link Zanzibar directly with Oman and the Arab territories

70

Sir H.B. Frere to Lord Ripon, 8 Jan. 1882, Brit. Lib. Add MS 43617. Annual Statements of the Trade and Navigation of the United Kingdom, P.P., 1876 (c.1571) and 1884 (c.3278). 72 British India Trade and Navigation Statements, IOLR V/17/6–22. 73 Memo by Sir John Kirk, 21 April 1882, FO 84/1657. 71

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along the southern shore of the Persian Gulf, with which the long distance maritime slave trade was associated, and even the indirect route to Muscat via Aden had been abandoned after a few years. The effective enforcement of treaties with rulers at both ends of this old water-borne connection, and the role of the Royal Navy squadron in harassing shipping along it, were far more important in suppressing what Frere called the ‘long sea slave trade’ than anything that BI’s steamers could do. Within eastern Africa, too, BI was far too little involved in local coasting, or short-distance, trades – at least until its steamers started calling at Mozambique ports after 1879 – to offer any real competition to slave-carrying dhows or sailing ships. Only in helping to enlarge international markets for African products other than slaves might BI be said to have fulfilled the role envisaged of it by the concept of ‘legitimate commerce’, but in this respect the concept had a fateful flaw. For trade in ‘legitimate’ commodities did not necessarily push out a trade in slaves – the two could co-exist side by side – nor would it of itself necessarily transform the labour conditions under which commodities for export were produced and transported. So long as the institution of slavery remained legal, and labour in short supply, a growth in export production would have the effect of generating a demand for slave labour, and thereby encourage the expansion of the internal slave trade.74 The commodities which left eastern Africa in the holds of BI steamers – cloves, gum, ivory and rubber in the main – were either produced or transported for sale by slave labour, or generated incomes with which slaves might be purchased for other agricultural or domestic purposes. That BI’s steamers may have been more instrumental in promoting the landward slave trade in eastern Africa than in suppressing the maritime slave trade was an outcome that neither Frere nor William had envisaged, nor would have admitted to. However, trade and transport innovation remained the means by which they believed that the transactions in human beings would be overcome. That such an approach might also promote William’s business interests lays him open to a charge of hypocrisy, of using the rhetoric of the anti-slavery movement as a cover for baser motives. Evidence to support that charge is hard to come by, for there seems to be little doubt, from such brief comments as he offered on the subject, that during the 1870s William became emotionally and intellectually opposed to slavery and the slave trade. He shared the sentiments both of those among whom he moved in Free Church circles in Scotland and the anti-slavery circles in London to whom he had been introduced by Frere. A fairer judgement might be that he adopted too readily the ideas and arguments of ‘legitimate commerce’ because they suited his needs as a businessman – but in doing so he was merely acting in accordance with the received wisdom of the day. His various African ‘enterprises’ seldom took him too far from the needs of BI and Gray Dawes & 74

S. Miers, Britain and the Ending of the Slave Trade (London, 1975), pp. 146–53. 211

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Co. When they did so, notably in his willingness to collaborate with Leopold’s African Association, the reasons for this were not some blind commitment to an anti-slavery or ‘legitimate commerce’ ideology. Rather, they lay in the fact that William was developing a third strand to his business career. As well as being a merchant and shipowner, he aspired to be an international financier with a leaning towards railways and railway-related investments.

212

8

‘Aristocratic capitalism’, railways and the Central African project, 1876–82 Personal and familial networking could be a significant tool for creating and expanding a business organisation. It was used during the 1860s to create the Mackinnon group’s Indian and Indonesian steamship enterprises, and in the 1870s to expand these operations into the coastal waters of the Red Sea and Eastern Africa as well as to initiate a steamship line between Britain and India. The group also called on its outer circle of friends and allies in a more moderate way to finance and support its on-going diversification into transport, manufacturing and tea planting within India (Chapter 9). However, the motives of individuals and family groups were not necessarily predisposed towards profit maximisation as the sole, or even predominant, purpose of business activity, and their approach to business affairs was suffused by values and attitudes which accorded merit and respect to other aspects of life – social, cultural, political and religious. Consequently, personal and familial networking tended not just to draw resources, information and influence inwards, into the family-run business organisation from outside, enabling it to sustain and develop its core competencies, but also tended to draw them outwards – into support of a range of activities outside the family’s core business interests. Wealth generated through successful enterprise might be employed elsewhere than in the further promotion of the business organisation – in the pursuit of personal whims, hobbies or ambitions which, if permitted to be carried to extreme, could ultimately even endanger the family firm itself. Evidence of such influences at work can be seen in the way that, from about 1876 onwards, William Mackinnon began to engage in a form of ‘social networking’ that combined personal financial ambition, rather than ambitions for the family group as a whole, with the development of connections valued as much, if not more, for the prestige and social status they bestowed than for any monetary returns that might be forthcoming. The grocer’s boy from Campbeltown now aspired to rub shoulders with, and win the approbation of, aristocratic figures whom he regarded as his social superiors. By 1876, the immediate pressures on William Mackinnon from the opening of the Suez Canal – the need to defend BI and NISM from rival concerns, to renew their government contracts, to modernise their fleets, and to take the opportunity to launch two new steamship lines from London – had begun to ease. The rewards from these endeavours were also beginning to flow, so that he now enjoyed greater personal wealth. His reputation in 213

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London business circles – as the chairman of two very successful (if very private) steamship companies as well as a long-serving director of the respected General Credit and Discount Co – was on the rise. Nevertheless, he stood on the outer fringes of the City of London – as someone who was not a fully-fledged member of the cluster of financial institutions at its heart but occupied the less prestigious ground of commerce and shipping. Unlike Hugh Matheson of Matheson & Co, whom he admired and seemed to wish to emulate, he had never had a merchant house of his own in London, and therefore failed to follow the route from commerce into merchant banking that was a common form of diversification for such firms.1 His taste for speculative investment flutters he had largely pursued through private syndicates organised around General Credit and Discount’s foreign government loan issues. However, difficulties associated with the Egyptian loan of 1873 and the financial downturn of 1873–75 reduced General Credit and Discount’s investment activities. Poor results, the falling value of securities held, and declining dividends for shareholders turned its operations even more towards bill discounting and other relatively safe forms of lending.2 This further limited William’s speculative investment operations, and he subsequently shifted from portfolio to direct investment, putting money into ‘free-standing companies’ floated by other people in the City. This transition had something of a distinctive character about it. While on the one hand it drew on his accumulated business experience, and often had a broad connection with the needs and interests of the Mackinnon group firms, on the other hand it tended to be driven by considerations of social status and involved participation in enterprises from which rewards came through social ‘recognition’ as much as from financial profit. Most of what he now attempted to do was undertaken in association with, or in hopes of building connections to, certain aristocratic figures to whom he was introduced by his close friend and patron, Sir Henry Bartle Frere. Just as Frere introduced William into Anglo-Indian official circles in Calcutta and London in the 1860s, and pushed his involvement with the world of geography and exploration centred on the Royal Geographical Society, so too, following his leading role in the Prince of Wales’ visit to India in 1875–6, Frere became William’s connection to ‘friends at Court’. His links to the men around the Prince of Wales opened up to William the world of aristocratic and landed values, which fitted well with his efforts to cultivate the life-style of the landed gentry in his Balinakill estate. ‘The Laird’, as William was known to the Dennys, or ‘Balinakill Himself’, as he was known to Peter Hall and his cronies, was a man on the rise in Scottish society, as the possessor of a country seat and the head of a new and thrusting business ‘clan’.

1

S.D. Chapman, The Rise of Merchant Banking (London, 1984). P.L. Cottrell, Investment Banking in England, 1856–1881 (New York and London, 1985), p. 552. 2

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Despite his humble origins, his preference for private pleasures, and his dislike of public ‘show’ he was not averse to seeking business links to those he considered his social superiors, and to enjoying their respect – or their flattery. In thus combining business opportunism with the search for social acceptance, William entered a world of ‘aristocratic capitalism’, in which various titled figures, whose incomes came from landed estates, dabbled in business ventures designed to broaden their sources of wealth and drew into their schemes men possessing capital, information and connections that could be usefully harnessed.3 One of the landed figures who swam into William’s ken during 1876–7 was the Duke of Sutherland. George Granville Leveson-Gower, the third Duke, was the owner of large estates in the English Midlands which were rich in agriculture, coal and iron – as well as even more extensive, but less productive, lands in the Scottish Highlands. In terms of the value of rents, he was the fifth richest landowner in Britain, and he entertained lavishly from his country seats at Lilleshall and Trentham in Staffordshire, and Dunrobin in Sutherland. He was very much interested in railways, having inherited a family seat on the board of the London and Northwestern Railway Company, one of Victorian Britain’s leading railway concerns, and he was socially extremely well-connected. A member of the Prince of Wales’s ‘Marlborough House set’, which the Queen and many others regarded as ‘fast’, he and the Prince enjoyed the excitement of following the metropolitan fire brigade to fires all over London.4 He was on the Prince’s tour of Egypt of 1869 as well as his tour of India of 1875–6, during which both men became close to Bartle Frere. Above all, and of great interest to William, was the fact that he invested widely. ‘He was extremely wealthy and was able to cultivate a range of diverse, even exotic, investments. He sponsored the Highland Railway to the extent of almost a quarter of a million pounds. His portfolio of investments was hardly rivalled in that mid-Victorian age. He owned shares in railways, canals, sugar plantations, irrigation schemes, oil ventures and much more, some at home, some abroad.’5 This was ‘aristocratic capitalism’ of a very high order, and it intrigued and attracted a William Mackinnon who was constantly on the lookout for new business and social connections. The Duke’s technique was to gather around him advisers from official and financial backgrounds and to bring them together with other interested parties

3

The descriptive term ‘aristocratic capitalism’ is not the same as the ‘gentlemanly capitalism’ of Cain and Hopkins, who accept that ‘Landed wealth was the product of capitalist enterprise, even if it also produced rentier incomes, but it clearly lay outside the service sector’ [in which ‘gentlemanly capitalism’ is to be found]. (P.J. Cain and A.G. Hopkins, British Imperialism: Innovation and Expansion,1688–1914 (London, 1993), p. 27.) 4 P. Magnus, King Edward the Seventh (London, 1964), p. 88. 5 E. Richards and M. Clough, Cromartie: Highland Life, 1650–1914 (Aberdeen, 1989), p. 269; see also E. Richards, Leviathan of Wealth (London, 1973). 215

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in ad hoc investment syndicates that met from time to time at his London mansion, Stafford House. William’s first entry into these circles came in late 1876 or early 1877, as a result of Frere’s introductions shortly before his departure for South Africa. William’s project for a concession of the East African mainland from the Sultan of Zanzibar was the focal point for such a Stafford House syndicate.6 It is likely that William developed the scheme (or rather ‘borrowed’ it from Hugh Matheson) as something he could bring to the table in Stafford House to show his bona fides. However, by the summer of 1878, when Bargash’s new conditions raised serious doubts about the financial viability of the scheme, the attention of the Duke and his advisers had already turned elsewhere. The outbreak of the Russo-Turkish War and the British occupation of Cyprus now revived public interest in the old plans for a Euphrates Valley Railway. The Duke summoned a gathering at Stafford House on 6 July 1878 to create ‘An Association for promoting the construction of a Railway from the Persian Gulf to Constantinople and the Mediterranean, affording alternative routes to British India and for developing the resources of Asia Minor’. William did not attend this inaugural meeting, but several of his London circle of friends did so, and he was elected to the executive committee of the new body. The Association, with the Duke as President and W.P. Andrew as Chairman, proposed to construct a railway line from Constantinople to Baghdad and then on to Basra, at a cost of £20–25 million. The purposes were to develop the Ottoman Government’s lands in Asia Minor and provide an alternative route to the Suez Canal. However, the project required active support from the British and Turkish governments, more especially in the form of a guarantee of the interest on the capital of the railway company to be formed. Although Prime Minister Disraeli (Lord Beaconsfield) met the Association’s interests in dispatching the explorer, Verney Lovett Cameron, to survey possible routes for the railway, he quickly backed away from the financial costs involved, and the project foundered.7 William continued to woo the Duke. He became a member of the Stafford House South African Aid Committee which the Duke established in 1879, with a mainly aristocratic and military composition, to ‘furnish trained nurses and hospital comforts and to supplement arrangements for promoting the convalescence of the sick and the wounded’ caught up in their friend Frere’s

6

Some correspondence between William and the Duke’s representatives about the conduct of the negotiations with the Sultan survives (for example, J.D. Forsyth to W. Mackinnon, 26 Oct. 1877 and H. Green to W. Mackinnon, 27 Nov. 1877, MP IBEACo File 61), as does a bundle of the concessionary documents considered in Stafford House (Stafford House and Mansion House Committees, Papers of the Third Duke of Sutherland, D.593/P/26/8/2, Staffordshire Records Office), but there are no minutes of any discussions held there. 7 Association Minute Book, and related documents, Stafford House D.593/P/26/3/1–4; V.L. Cameron, Our Future Highway, 2 vols. (London, 1880); D.A. Farnie, East and West of Suez: The Suez Canal in History (Oxford, 1969), p. 271. 216

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South African War.8 He also invested a small sum in the Strathpeffer Spa Company, through which the Duke and his factors began to develop hydropathic and leisure facilities in the small Ross-shire village that became Britain’s most northerly spa resort, and he agreed to try coals from the Duke’s collieries in the English Midlands in the engines of the BI/BIA steamers sailing out of London. However, his most singular success with the Duke came through the intervention of a third party, Robert Morier, the British minister in Lisbon. Between 1876 and 1879, Morier and Joao de Andrade Corvo, the Portuguese foreign and colonial minister, were jointly engaged in an attempt to clear up a range of outstanding issues between their two governments in respect of tariffs, commercial relations and transport links between British and Portuguese imperial possessions.9 One set of negotiations culminated in the Treaty of Goa of December 1878, which made provision for free trade between Goa and British India and for linking the port of Marmagoa with the Indian railway system at New Hubli in southern Maharashtra. The latter proposal was attractive to the Portuguese government, because it held out the prospect that Marmagoa would tap a much wider commercial hinterland than before and become a port of some significance. Conversely, the Government of India was unhappy with an arrangement that threatened to draw off the trade of the southern Deccan to a foreign port. Initially it was intended that there should be a single railway line, to be built and operated by a company guaranteed by both Portugal and British India. However, the Government of India objected to guaranteeing the interest on a railway line which would focus the trade of the region on Marmagoa rather than the British-ruled port of Karwar. The treaty therefore provided for two separate lines to meet at the border between Goa and British India. The one within Indian territory would be being privately financed and the Government of India reserved the right to construct a competing line to Karwar.10 Morier, who was also an old friend of Bartle Frere’s, was in London in April and May 1879, sorting out some last-minute problems which had arisen over another treaty with the Portuguese. Being aware of how much store his ally, Corvo, set on the proposed Goa railway, he took what he described as the ‘strange or abnormal’ step of seeking out the Duke of Sutherland to finance its construction.11 The Duke in turn involved William in the scheme, no doubt aware of 8

Sutherland Papers, D593/P/26/4/1–2. For Morier and his role in the development of British-Portuguese relations, see A. Ramm, Sir Robert Morier: Envoy and Ambassador in the Age of Imperialism, 1876–1893 (Oxford, 1973), pp. 1–112. 10 Confidential No.53: From Governor-General in Council (Foreign Dept.), 28 Sept. 1876, No. 193, and Confidential No.48: From Governor-General (Foreign Dept.), 5 Aug. 1881, No. 98, IOLR L/P&S/19. 11 R. Morier to Sr. Braamcamp, 20 Feb. 1881, and to Lord Granville, 15 March, 1881, FO 63/1130; Morier to Granville (Private and Confidential), 1 March 1881, PRO 30/29/183. 9

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his contacts with Viscount Duprat, the Portuguese consul in London, and of the fact that his steamships served the port of Marmagoa in local coastal trades as well as in the mail service between Lisbon and Goa. A Stafford House committee comprising the Duke, two of his advisers (Sir Henry Green and Sir Douglas Forsyth), Frederick Youle of the London County Bank and William Mackinnon was set up. At William’s suggestion it was agreed to seek from the Portuguese government a guarantee on the capital for the entire line from Marmagoa to New Hubli, including that section in British Indian territory. Following Corvo’s agreement to this in principle, a formal offer to construct the railway from Marmagoa to the junction with the Indian railway system was submitted on 13 May 1879.12 On returning to Lisbon, Morier continued to offer information and assistance. The friendly Fontes-Corvo government now having fallen, Morier detected a growing political opposition to the alliance with Britain which had been the cornerstone of that ministry’s policy, and he therefore advised William and the committee to proceed with a survey of the proposed line as quickly as possible.13 Intertwined with the negotiations over the Marmagoa railway, and dependent, Morier believed, for a successful outcome on the construction of that railway, was a further set of British-Portuguese discussions concerning relations in south-eastern Africa. These resulted in the Treaty of Lourenco Marques of May 1879, which was signed on the very day that Corvo left office. The Treaty was intended to liberalise trade in Mozambique, to increase commercial interaction between the British and Portuguese territories in southern Africa, and to give Britain access to the magnificent natural harbour at Delagoa Bay (Lourenço Marques) for both commercial and military purposes.14 It also envisaged the construction of a railway line between Delagoa Bay and the Transvaal. The latter was a long-standing project, over which the Colonial Office alternatively blew hot and cold because of the opposition of Natal interests. Nevertheless, it had become a corner-stone of the policy of confederation which Frere had been sent out to South Africa to pursue. This was mainly because its construction was seen as a way of reconciling the Afrikaner population of the Transvaal to the British annexation of their territory that had occurred shortly before Frere’s arrival as High Commissioner. Frere was of the view that the line should be financed and administered by a consortium of Dutch, Belgian, Portuguese and British

12 Ramm, Morier, pp. 44–5; Duke of Sutherland, W. Mackinnon et al. to de Andrade Corvo, 13 May 1879, Sutherland Papers D593/Q/2/2/7. 13 R. Morier to W. Mackinnon, various dates, June–October 1879, MP Private Letters File 171–2. 14 For the general context of the Treaty of Lourenco Marques, see Ramm, Morier, pp. 73–94, E. Axelson, Portugal and the Scramble for Africa, 1875–1891 (Johannesburg, 1967), pp. 20–37, and R. Anstey, Britain and the Congo in the Nineteenth Century (Oxford, 1962), pp. 84–90.

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capitalists,15 and it is more than likely that the prospect of a Stafford House committee becoming involved in the financing of a Delagoa Bay railway formed part of the discussions which Morier had with William and the Duke in London in the spring of 1879. Certainly William expressed the hope that because the Delagoa Bay Railway ‘has a certain connection with the Goa line [that] may give me some little say in the managing of it’.16 His interest in the commercial prospects that would be opened up by the railway was further signalled by his decision to start a BI line from Zanzibar to Delagoa Bay in October 1879. Whatever expectations the Duke and William may have harboured about the railway to the Transvaal, however, ebbed away when, following the fall of the Fontes-Corvo government, the rise of strong Portuguese objections to a treaty which many regarded as being too onesided, and the outbreak of the Transvaal revolt in December 1880, the Portuguese Cortes failed to ratify the Treaty of Lourenço Marques. This left the Goan project as the main fulcrum of the railway-promoting partnership between William and the Duke. The Stafford House Committee spawned the financial syndicate known as the ‘Marmagoa and New Hubli Survey’ (with offices provided by William at 13 Austin Friars), and a survey of the proposed line was commissioned. This indicated that a line of 124 miles from Marmagoa to New Hubli (about 50 miles of it within Portuguese territory) would cost about £166,000 to build, would attract cotton, salt, timber and general traffic, and would return about 4 per cent per annum on capital.17 However, although the Portuguese government proved willing to guarantee the interest on the capital for the entire line, the Committee could not raise enough money in London on the basis of that guarantee alone. It was obliged to approach the Government of India for a guarantee on the section of the line from the Goan border to New Hubli. This in turn resulted in some delay, because it enabled the Government of India to re-open the case for its own preferred option of a line to Karwar. Only the intervention of the Secretary of State for India, the Marquis of Hartington, who over-ruled the Viceroy in December 1880 and insisted that the Hubli-Marmagoa route was commercially superior to the Hubli-Karwar route, saved the project and enabled it to go ahead. A new agreement between the British Indian and Portuguese governments followed in January 1881, whereby each guaranteed that section of the line in their respective territories.18 That agreement in 15

Frere to Herbert (Colonial Office), 3 Nov. 1878, quoted in W.B. Worsfold, Sir Bartle Frere (London, 1923), p. 100. 16 W. Mackinnon to H.S. Sanford, 28 October 1879, Sanford Papers (Tennessee State Library and Archives). 17 Report of Sir John Hawkshaw, Son & Hayter, 14 Sept. 1880, Sutherland Papers D 593/P/26/6. 18 ‘Correspondence Respecting the Marmagoa Harbour and Railway’, P.P., 1881 [C.3019], LXVIII, pp. 397–478, and ‘Memorandum on the West of India Portuguese Guaranteed Railway’, by WNS, 1892, IOLR L/P&S/18/D98. 219

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turn opened the way for the flotation in London of two new railway companies with identical boards of directors – the West of India Portuguese Guaranteed Railway Co Ltd., registered in April 1881, for the construction of harbour works at Marmagoa and of fifty miles of railway to the frontier with British India, and the Southern Mahratta Railway Company Ltd, registered in May 1882, to complete the work to New Hubli. The Duke of Sutherland and William Mackinnon were the largest shareholders in the two companies and were represented on their boards by Sir Douglas Forsyth (Chairman) and Edwyn Dawes respectively.19 The Southern Mahratta was the larger of the two companies – having a nominal capital of £3 million as compared with the W.I.P.G.R.’s £800,000 – because in negotiations with the Government of India during 1881 further opportunities had emerged for it to construct railway lines in British Indian territory. These resulted in a contract of May 1882 to construct about 450 miles of railway lines connecting the government’s South Deccan line with the lines of the East Indian Peninsular Railway and the Mysore Railway as well as with the Marmagoa line of the W.I.P.G.R.20 William Mackinnon, for so long a major contractor of shipping services to the Government of India, was now also a railway contractor for it, on a modest scale. The railway-promoting instincts of William and the Duke were not confined to southern Maharashtra, and they pursued other opportunities. Early in 1880, for example, the Duke and Sir Henry Green went to Egypt with a view to securing from the new Khedive a lease of the Egyptian railway system. Their mission was regarded in Mackinnon circles as rather a forlorn hope,21 as indeed it proved to be, but no doubt if anything had come of it William and his family circle would have become involved. For his part, William devoted some time in 1882 to a scheme to construct a railway for the Nizam of Hyderbad, into which he wished to draw Hugh Matheson and Charles Magniac of Matheson & Co as well as the Duke. But he pulled out of the project because of contractual complications and the reluctance of his prospective directors.22 Around this time too, he helped to promote the Java Railways Co, which was registered in The Hague and despite its rather grand title existed to construct a relatively short rural railway line between Tegal and Balapoelang in northwest Java, under a concession from the government of the Netherlands Indies.23 For this purpose it had a capital of Fl. 1,440,000 or £144,000, and William’s interest was represented on its board of ‘commissaries’ by Alexander Fraser, the former manager of NISM in Batavia. 19

For details of shareholdings in the Southern Mahratta Railway Co see BT 31/34179/16850. 20 Stock Exchange Intelligence (1885), p. 419. 21 G. Waller to W. Mackinnon, 2 Feb. 1880, MP Private Letters File 246. 22 H. Matheson to W. Mackinnon, various dates, 4–16 Oct. 1882, and W. Mackinnon to The Sirdar, 7 Oct. 1882, MP Balinakill File 13. 23 Annual Report of the Java Railways Co, 26 June 1886, MP Misc. Commercial File 64. 220

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None of these projects, however, matched the moderate success which the Duke and William had enjoyed in western India. William’s achievements in the field of railway finance were relatively limited, but they allowed him to dabble in a field that had intrigued him ever since his involvement with the City of Glasgow Bank’s US railroad in the 1860s. How much they had been undertaken for prestige and how much for profit is not at all clear. He once claimed that ‘I am not at all in love with this Rly work and only give a helping hand because of the kindly private pressure brought to bear on me,’24 but this may simply have been a way of concealing his purposes. It is certainly the case that his all speculations with the Duke of Sutherland were related to the development of interior lines of communications from the ports served by his steamships. In that sense, they were at one with his river steamshipping investments on the Brahmaputra and Tigris rivers. In seeking to generate further traffic for his steamship lines, and the agency houses which looked after them, through development of the commercial hinterland of particular ports, he was pursuing not only his own private concerns but also the wider interests of his business group. The same, however, cannot be entirely said of the schemes and projects in which he became involved through his association with a second ‘aristocratic capitalist’ – Leopold II, King of the Belgians. Here was another figure who drew his wealth from landed estates, who like the Duke of Sutherland was close to Edward, Prince of Wales, who invested in a range of business enterprises at home and abroad – and who ruled a small country to boot. William’s links to Leopold and the Belgian aristocrats around him, like his connections to the Duke of Sutherland, had its roots in Frere’s brief period as a member of the Prince of Wales’s circle. But while the Duke’s interests drew William into railways, Leopold’s also pulled him into an extremely ambitious and highly risky venture to create a personal kingdom in the interior of central Africa. Initially Leopold’s ambitions overlapped with Frere’s, Kirk’s and William’s own concerns with trade and politics in eastern Africa. In pursuing the dream of a BI steamship line from London all the way down the eastern African coast to South Africa, and in grappling with issues as to how ‘legitimate commerce’ might be promoted and the slave trade undermined, William and the Frere circle saw Leopold as a powerful potential ally. For his part, Leopold regarded William and the Frere circle as levers to be employed in influencing business and government opinion in London.25 Leopold’s ambitions centred on the navigable waterways of the central African interior – the rivers of the great Congo (Zaire) basin together with the lakes of the Rift Valley. Initially, he approached this region from two 24

W. Mackinnon to Sanford, 28 Oct. 1879, Sanford Papers. For the origins and purposes of Leopold’s Central African project see, among others, N. Ascherson, The King Incorporated (London, 1963), pp. 85–118; Anstey, Britain and the Congo, pp. 57–83; and A. Roeykens, Les Debuts d l’Oeuvre Africaine de Leopold II, 1875–79 (Brussels, 1955). 25

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directions – from the Indian Ocean side, via the trade routes from the Swahili coast to the lakes and on into the Upper Congo, and from the Atlantic side, via overland routes that linked the Lower Congo to the upper stretches of the river, by-passing the great cataracts that prevented direct navigation between the two. On the Indian Ocean coast, Frere, Kirk and William were already at work to strengthen the British political and commercial presence, and Leopold’s aims for the interior seemed compatible with theirs for the coast. Leopold, however, did not entirely trust his new British collaborators. When H.M. Stanley arrived in Zanzibar in April 1879, to recruit labourers for work on the lower Congo, he also came armed with instructions from Col. Strauch, secretary of Leopold’s International African Association, to enquire about the state of William Mackinnon’s negotiations with the Sultan of Zanzibar. He was to oppose any trade monopoly that William might be seeking by pressing on Bargash the merits of free trade, and to attempt to secure for Leopold the concession of a port on the East African coast independently of William’s own endeavours.26 In following these instructions, Stanley warned the Sultan that the British had secret plans for his territory which he, Stanley, had ‘picked up [when] in company with the Prince of Wales, the Duke of Sutherland, and others’.27 That Leopold’s agent should thus contribute to the opposition against the lease of Dar-es-Salaam is more than a little ironic, because William had already decided to offer facilities in that port to the Belgian Committee of the International Association. In March 1879 he negotiated an agreement with Leon Lambert, Leopold’s personal banker. If the Sultan granted a lease, then the Belgian Committee would be allocated shares in the company set up to exploit it, would be allocated land in the port on which to establish a base, and would be permitted to purchase land for the establishment of four or five stations along the route towards Lake Nyasa.28 This made for a sensible division of labour – the costs of developing transport and trade in the hinterland of Dar es Salaam being left to Leopold and his Belgians, while William and his associates concentrated on the maritime side of things. Strauch’s instructions to Stanley pre-dated the Mackinnon-Lambert agreement, so that Stanley’s intervention was partly an accident of timing – but matters were not helped by William’s desire for secrecy that led to him keeping Leopold’s name out of the proposal to lease a port on the East African coast.

26

Col. Strauch, A.I.A., to Stanley, 5 Feb. 1879, and annex ‘Notes for Reference for Mr Stanley’, Stanley Papers RP 2435 i Box 3; also Congo Journal, 1878–82, entries for 14–20 April and 30 May 1879, Stanley Papers, RP 2435 i Box 4. 27 J. Kirk to E.S. Dawes, 28 April 1879, MP IBEACo File 61. 28 Lambert to W. Mackinnon, 21 March 1879, and W. Mackinnon to Lambert, 22 March 1879. In the absence of any surviving records of the ‘Scottish committee’ of the A.I.A., it is impossible to say with any certainty whether William could still claim to be an agent of that body or was acting in a purely personal capacity. Either way, he now clearly regarded himself as being in alliance with the Belgian Committee. 222

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Leopold II

William continued to court the monarch’s approval and assist his operations in East Africa. Possession of a seaport was by now tied up in his mind with the attainment of yet another idea floated in 1879 – that Col Charles Gordon, whose exploits in the southern Sudan had turned him into the antislavery movement’s newest hero, second only to Livingstone in reputation, should be recruited to take charge of Leopold’s proposed stations in the East African interior. Egged on by Horace Waller, he enthused over the prospect: ‘Gordon with the means the King could place at his disposal could I believe control all the chiefs between the seaboard and [Lake] Tanganyika in 2 or 3 years & open up the whole country to commerce and religion. He could weld the whole into an organized kingdom able to defend itself against all others.’29 Gordon, however, was not to be snared. William also agreed to act as the Association’s agent in an experiment to employ Indian elephants in East African exploration. In May 1879, his instructions to J.L. Mackay of Mackinnon Mackenzie & Co’s Bombay office resulted in the purchase of four elephants from the Government of Bombay, the hiring of men to look after

29

W. Mackinnon to Sanford, 28 Oct. 1879, Sanford Papers. 223

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them, and the despatch of the party to Zanzibar by BI’s steamer Chinsura. The purpose was to establish whether elephants would be any more immune than other pack or draft animals to the tsetse fly that so greatly inhibited land transport in East Africa. ‘The King of the Belgians is greatly pleased’, William reported. ‘I saw him in Brussels as we were on our way here [Bad Homburg]. He has been very polite to me & I am pleased I have been able to help him in the matter.’30 However, the elephant expedition failed in its purposes – only one of the four animals reached the Belgian station on Lake Tanganyika, and on its return journey in June 1880 the party, under an Englishman named Carter, was attacked and slaughtered at Tabora by the warriors of the Nyamwezi chief, Mirambo.31 This disaster ended Leopold’s interest in elephant transport – including a second project, to which William had already devoted much time and attention, which was to transfer Indian elephants to Africa for the purposes of creating of a centre for catching and training African elephants. Meanwhile, following H.M Stanley’s much-publicised journey from east to west across central Africa – from Lake Tanganyika, down the Lualaba and Congo rivers, to Boma on the Lower Congo – Leopold also began to penetrate the central African region from the Atlantic coast. In November 1878, he hired Stanley to open up a route around the cataracts which separated the lower and upper stretches of the Congo, and to create a string of trading posts converging on the strategic broad pool above the cataracts which, with characteristic immodesty, Stanley had named after himself. William’s ‘hobnobbing with the King of the Belgians’ as Jamie Hall called it,32 could do little or nothing to advance the interests of BI’s shareholders and its directors, or of his partners in Mackinnon Mackenzie & Co, or even of his proteges in Gray Dawes & Co, on the western shores of Africa. There was therefore little to interest the group in William’s extending his co-operation with Leopold in East Africa into co-operation with the King on the Congo. That he was prepared to do so indicates that his involvement with Leopold had acquired a strongly personal edge. In March 1879, Leopold came to London to tap the wealth and influence of the Duke of Sutherland, and those clustered around him. He met at Stafford House with six people – the Duke, the Marquis of Londonderry, William Mackinnon, James Hutton (a Manchester merchant), Donald Currie of the Castle Line (with whom William was beginning to collaborate in steamship matters in south-east Africa), and a certain J. Edward Taylor. The purpose was to secure London investors for the Comité des Études du Haut Congo, a société en participation which had been set up in Brussels to fund

30

W. Mackinnon to D. Mackinnon, 25 June 1879, Nat. Lib. Acc. 6168/8. For the Carter expedition, in which John Kirk also took a close interest, see Coupland, Exploitation of East Africa, pp. 334–5. 32 J.M. Hall to D. Mackinnon, 25 March 1875, Nat. Lib. Acc. 6168/14. 31

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Stanley’s work in the Congo separately from the International Association and more directly under Leopold’s control. William had already agreed with Lambert to invest in the enterprise, in return for Belgian participation in the Dar-es-Salaam scheme, and may have had a hand in arranging the meeting with Leopold in London. Leopold suggested to these prospective investors that ‘if the territory above the falls [in the Congo River] could be brought into communication with the sea, a great field would be opened up for trade and for the improvement and civilisation of the native population’, to which the Duke responded that ‘in the present depressed condition of trade any new outlet for the products of industry would be welcomed’.33 It was agreed to go ahead with the formation of a committee of English subscribers which would nominate two representatives to the Council in Brussels. However, although some sixteen individuals were recruited to its ranks, the Upper Congo Exploration Committee developed little momentum. By 22 April, worries expressed by Donald Currie – that shares in the Comité carried unlimited liability and therefore a very high level of risk – weighed sufficiently with the Duke and others that a decision was taken to postpone a subscription to the Brussels-based concern. William took issue with Currie’s objections and re-affirmed his intention to subscribe independently.34 Of the six men to whom Leopold spoke on 26 March, only William and James Hutton gave their support to his enterprise. Hutton exported cotton textiles to WestCentral Africa through the Dutch firm, Afrikaansche Handelsvereeniging, which traded on the lower Congo and was itself a subscriber to the Comité des Études. He therefore had a much more obvious reason than William to be committed to the project. Nevertheless, the concern did not last long. Leopold was deeply disappointed by the lack of financial backing from the Duke’s circle in London, which he had expected to be well disposed to his scheme, and when this was followed by the fraudulent collapse of the Afrikaansche Handelsvereeniging in Holland, he decided to transform the Comité into a wholly personal vehicle, financed from his own pocket. After the remaining subscribers had been consulted and their consent to the scheme obtained, a general meeting of the Comité was held in November 1879. It agreed that Lambert should refund to the subscribers their investments plus 5 per cent out the future profits made by the trading posts which

33 ‘Private Meeting of Gentlemen interested in the subject of the Etude du Haut Congo held at 10.00 a.m. on 26 March 1879’, Sutherland Papers D 593/P/26/5/1. 34 Meetings on 29 March and 1, 5 and 22 April 1879, Minute Book of the Upper Congo Exploration Committee, Sutherland Papers D 593/P/26/5/1; J. Hutton to Leopold, 17 March 1879, Archives du Cabinet du Roi Leopold II [hereafter ACRL], Fonds Congo File 64 (Archives of the Royal Palace at Brussels); Leopold to Strauch, 17 March and 29 April 1879, Leopold-Strauch Correspondence, Museum of the Dynasty, Brussels. (Leopold was not at all happy with William’s persistence, for in the second of these two letters (29 April) he told Strauch: ‘There is no need for me to counsel you not to show joy or congratulate him [Mackinnon] on retaining his subscription.’)

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Stanley was busy setting up in the Congo. The subscribers would also get a ‘right of preference’ for ‘every commercial, industrial or financial operation issued by the stations or by himself [Lambert for Leopold] in connection with the Congo in all public adjudication’s or subscriptions’.35 With these provisions the Comité was dissolved. The failure to obtain an immediate and direct stake in Leopold’s Congo enterprise did not diminish William’s interest in the matter. On the contrary, his inherent opportunism, his nose for financial subventions from political sources, and his unwillingness to abandon a promising connection once it had been made, rendered him one of the few British businessmen willing to associate with Leopold. Whether or not he was aware of the King’s initial mistrust, he strove hard to win his approval. Thus, in February–March 1880 he engaged in yet another, eventually fruitless, attempt to recruit Gordon to Leopold’s service, either in East Africa or on the Congo (as a replacement for Stanley who was considered as too spendthrift). The correspondence reveals that he had not yet entirely abandoned hopes of securing a concession on the Swahili coast, and that he still clung to the vision that he and his friends would develop the maritime zone while Leopold and his associates would invest in the further interior.36 William was also used by Brussels to channel protests to the Foreign Office against the claims of Brazza, the French explorer, to French sovereignty in the lower Congo region, and to arrange the charter of a steamer in Calcutta to convey 300 labourers recruited in Zanzibar round to the mouth of the Congo. Although such efforts slackened during 1881(when he was embroiled in his court case), William did enough to remain on Leopold’s list of those to be cultivated. As well as regular messages of thanks, he received from time to time such tokens of appreciation as invitations to dinner at the royal palace at Laeken or to the Royal Garden Party held there in May 1882. Why did William Mackinnon cling to Leopold’s coat tails as the King’s focus of interest shifted from eastern Africa to the mouth of the Congo? At least three factors were at work. First, as a result of his various meetings with Leopold from September 1876 onwards, William fell for the King’s personal charm. This was easy to do because Leopold possessed an undoubted ability to command loyalty and respect. Stanley, on first meeting Leopold, described him thus:

35 ‘Comité des Études du Haut Congo: Report of the General Meeting held on the 17th Nov. 1879’, Stanley Papers (British Library) RP 2435 i Box 3; see also Anstey, Britain and the Congo, pp. 79–80. 36 Gordon to W. Mackinnon, 5 Feb., 12 Feb., 3 March, and 4 March 1880, W. Mackinnon to Gordon (draft), 11 March 1880, and W. Mackinnon to Kirk, 12 March 1880, Nat. Lib. Ms 20311; Strauch to W. Mackinnon, 2 Feb. and 22 March 1880, MP Private Letters File 225; H. Waller to W. Mackinnon, 2 March and 5 May 1880, MP Private Letters File 251.

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The King is one of the most charming of men. He stands 6 feet 5 inches or thereabouts, and wears a fine brown beard. I am told that he has devoted himself to Africa because his wealth is enormous and he has no son. He appears to have invested some money at an early day in the Suez Canal and that his shares have realized £1,100,000 sterling. This sum was to have been settled on the Duke of Brabant his son, who died at an early age of 10 in 1869. Judging from the few times I have seen him I think he is a statesman of the first order, and as a man he is most amiable and possesses those qualities which bind followers to loyalty. His people dote on him, & well they might because of the hearty way he treats his officials & all manner of men who approach him.37

This pen-portrait conveys something of the impression that Leopold made on those around him, and that drew William into his circle of loyal allies. ‘How kind and considerate he is’, William wrote to a friend. ‘No one who knows him can fail to respect and love him.’38 William was obviously flattered by occasional opportunities to mix socially with Leopold and those around him, which usually occurred while he was on the way to or from Bad Homburg. Part of the attraction, however, lay in the second factor – the belief, which William shared with Frere and Kirk, that in Leopold they had found a kindred spirit. They saw Leopold as someone who, like themselves, was devoted to the ‘opening-up’ of Africa to the benefits of commercial interaction with the West, by which means the slave trade and slavery would be undermined and African society ‘modernised’. This was a task waiting to be done as much in the Congo basin as in East Africa or the Egyptian Sudan, and with the same kind of tools. William applauded the King’s ‘great & generous efforts in the cause of the degraded people of Africa’ and expressed the wish to do more ‘to show him how thoroughly I sympathise in the sentiments which prompt him to espouse so warmly the cause of poor downtrodden Africa’.39 Firm in his conviction that Leopold’s purposes were essentially philanthropic, he seems to have been disinclined to question them. Consequently, while Stanley fairly quickly came to the view that ‘it is pretty evident that under the guise of an International Association he [Leopold] hopes to make a Belgian dependency of the Congo basin’,40 William was content to accept the assurances offered by Col. Strauch, the Secretary of the A.I.A. and Leopold’s right-hand man, that ‘Our efforts in Africa are . . . quite disinterested. We follow no particular course. We labour for the benefit of humanity . . . in the interests of the civilised world and of the natives of Africa.’41 37

Congo Journal, 1878–82, 4 Feb. 1879, Stanley Papers, RP 2435 i Box 4. W. Mackinnon to Sanford, 21 August 1880, Sanford Papers. 39 W. Mackinnon to Strauch (draft), ? Oct. 1880, MP Private Letters File 226; W. Mackinnon to Sanford, 14 April 1879, Sanford Papers. 40 Congo Journal, 1878–82, 11 Aug. 1879, Stanley Papers, RP 2435 i Box 4. 41 Strauch to W. Mackinnon, 19 Nov. 1881, MP Private Letters File 226. 38

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The third factor was William’s method of developing new business connections. Throughout his career he had sought the patronage of either the public purse or private wealth to support and sustain the ‘lumpy’ fixed capital investments in modern transport and communications – steamships and now railways – with which he had become associated and through which he generated his wealth. Seen in this light, Leopold was another in a line of patrons that included Sir Henry Bartle Frere and the Duke of Sutherland – individuals who were capable of clearing a path towards, and of delivering financial support for, new business ventures. It would therefore be wrong to depict William Mackinnon simply as a man whose naiveté and humanitarianism turned him into a willing dupe of a charming but wily monarch. His entrepreneurial instincts, his propensity to seek out business opportunities wherever they presented themselves, were almost certainly also in play. Just as in East Africa, where his support for measures to combat the slave trade were intertwined with the interests of his steamship line and its agents, so too in respect of Leopold’s Congo enterprise account must be taken of William’s emergence as a railway promoter. While there is no hard evidence that William already harboured plans for a railway in the Lower Congo, his involvement in so many railway projects, with the Duke of Sutherland and others, during 1878 to 1882 suggests that the possibility was not far from his mind. He had already floated the idea of a railway from the Swahili coast to Lake Nyasa, and it did not take much foresight to recognise that the road bypassing the Congo waterfalls, which Stanley was busy constructing, could be replaced by a railway. That being so, William’s readiness to ally himself with Leopold, and to take advantage of the offer to former subscribers to the Comité des Études of rights of participation in future projects in the Congo basin, may be more easily explained. However, making himself useful to Leopold’s ambitions in the Congo, against the prospect of future investment opportunities there, was not the only outcome of William Mackinnon’s dalliance with the King of the Belgians. Even more extraordinarily, it led him into a business venture in the USA, a country in which he taken no interest since restructuring the City of Glasgow Bank’s Western Union Railroad holdings in the late 1860s. The origins of this unlikely development lay in William’s relationship with Henry Shelton Sanford, a resident of Brussels and one of the group of people that Leopold had gathered around him to give an international cloak of respectability to his Central African project. Sanford, born in Connecticut in June 1823, which made him almost the same age as William, had been an American diplomat in his younger days, ultimately serving as the US minister in Belgium from 1861 to 1869. Following his dismissal by President Grant, he and his wife decided to stay on in Brussels. There his private wealth, the result of successful investments in industrial stocks and Mid-Western land during the Civil War, enabled them at first to live well and to move within diplomatic, political and court circles. However, Sanford had also speculated unwisely after the Civil War, as a ‘carpet-bagger’ hoping to take advantage of 228

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the cheap prices of land in the southern states. By the time he and William became acquainted in the later 1870s his financial position had greatly weakened and he was living well beyond his means.42 Sanford, despite having no African connections of any kind, was selected to represent the American committee of the Association Internationale Africaine at a meeting in Brussels in 1877, and thereafter was employed by Leopold for various tasks – in particular the recruitment of Stanley for service in the Congo in 1878. Where and when William first met Sanford is not clear. Since the Sanfords also patronised the spa at Bad Homburg near Frankfurt and entertained lavishly at their house in Brussels, it was probably a social event which first brought them together in 1878. William found Sanford to be a helpful point of contact with Leopold. Being resident in Brussels, he met the King more regularly than William and was more privy to his strategic thinking. He was therefore able to give William insights into Leopold’s plans, as well as information about what was going on in the Congo, independently of William’s other principal correspondent, Col. Strauch of the A.I.A. It was not long, however, before Sanford began to exploit the connection for his own purposes – by trying to interest William in a scheme to develop land and other property in and around the town of Sanford, on the shores of Lake Monroe in East-Central Florida. The proposal, for which Sanford claimed to have the backing of the Pèreires Brothers of the Crédit Mobilier of Paris and the prospective support of the Barings Bank in London,43 was to create a joint-stock company to acquire the property which Sanford owned, and finance its further development. That this was a project born out of financial difficulty was not lost on William – for in January 1880 he agreed to lend Sanford £8,000 against a personal promissory note. Archie Gray, in making the payment on his behalf, offered the quite unnecessary comment that ‘Sanford is in a corner for money’.44 Nevertheless, William encouraged Sanford to go ahead with the plan to create a joint-stock company, his motive being more to exploit an avenue to Leopold than any interest or faith in the potential of Florida land. He offered to get a group of London friends together to put up £10,000 – but he warned that ‘You know that in all this affair my object has been to do you a service if I can, and not to make any money for myself, nor yet to make a good investment.’45 Sanford spent much of March 1880 in London, while William was at Balinakill, trying to secure subscriptions to his proposed company from those whose names William had supplied. But the effort met with little success. Several of William’s friends

42 J.A Fry, Henry S. Sanford: Diplomacy and Business in Nineteenth Century America (Reno, Nev., 1982), pp. 1–111. 43 H.S. Sanford to W. Mackinnon, 15 Oct. 1879 and 5 Feb. 1880, MP Private Letters Files 188–9; W. Mackinnon to Sanford, 27 Jan. 1880, Sanford Papers. 44 A. Gray to W. Mackinnon, 14 Jan. 1880, MP Private Letters File 189. 45 W. Mackinnon to Sanford, 27 Jan. 1880, Sanford Papers.

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who would normally join him in a ‘spec’ backed away from this one, and even Edwyn Dawes, normally very sensitive to William’s wishes, was reluctant to have anything to do with the enterprise. Consequently, when the Florida Land & Colonization Company was registered in April 1880, the only subscribers other than William and his friend Eli Lees were the partners in the two junior family firms in London. A few stragglers, including Alex Fraser and Arthur Norris, William’s London solicitor, came aboard later. By February 1881 the paid-up capital was only £64,550. Most of this represented the assets of the company – 26,106 acres of land, including the township of Sanford, a plantation of 100 acres and an orange grove of six acres, which Sanford sold to the company for £10,000 in cash (against which William had a promissory note of £8,000) and £50,000 in shares. The group had put up £15,000 in total, leaving the concern with a working capital of only £4,550.46 This was no major commitment by William or the group to property investment in Florida. For all that, a connection to Florida had been made – and certain consequences followed. Sanford, whom his wife described as ‘a capital diplomatist and capable of making treaties or saying nothing in half a dozen different languages, but not at all a man of business’,47 took the view that Florida Land and Colonization was his company. He came up with various proposals to acquire additional land, or rights to select land, and to invest in various services in the town of Sanford. These brought him into conflict with the board and managers in London, who had a much more realistic view of the company’s prospects. They were also suspicious because of the lack of appearance of the French investors whom Sanford had promised would take four-fifths of a capital of £2 million, and about the extent to which Sanford had free title to the property he had sold to the company. William, who was then spending most of his time in Scotland, tried to stay aloof from these squabbles. Nevertheless, he had found the little Florida company a convenient way of tidying up some loose ends. Gerald Waller, under-employed in William’s London office as a result of the abandonment of the East African project, was switched to the Florida scheme (as company secretary), and a former lay missionary named Beardall, who had overseen the last stages of road construction in East Africa, was also sent out to Florida to become an assistant to the manager there. Then too William appointed as manager of the company in London the unlikely figure of George A. Thomson, who had been the managing director of the Western Union Railroad until that company’s ‘London board’, under William’s guidance, sold out to other interests and pushed Thomson aside. Now virtually penniless, Thomson had approached William with information that would help him in the Bank case,

46

Florida Land and Colonization Co Ltd., BT 31/2663/14178. Gertrude Sanford, postscript to H.S. Sanford to W. Mackinnon, 4 April 1880, MP Private Letters File 191.

47

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and was rewarded by being made manager in London of Florida Land and Colonization, relieving Edwyn Dawes of the task. As of September 1880, the little Florida concern had all the appearance of a system of out-door relief for people who had recently helped William Mackinnon, and for whom financial provision had to be made. Nevertheless, with such men aboard, the project developed something of a life of its own. Waller, who visited Florida in the summer months of 1880 and 1881 – and discovered that Sanford’s reputation and standing in the State was not quite what it had been purported to be in London48 – was enthusiastic about the commercial prospects there, more especially for citrus farming. Simply holding and developing the assets that had been purchased from Sanford was no longer enough. ‘This little Co.’, Waller informed the Duke of Sutherland’s secretary, ‘hopes to secure one million acres of land from the State Govt. of Florida . . . to cost about one shilling per acre. This, in a country as get-at-able as the U.S. which has increased its population more than eleven millions and a half in the last ten years, is pretty sure to prove remunerative I think, and a good investment, and so Mr Mackinnon thinks.’49 However, squabbling between Sanford on the one hand and Thomson, Dawes and London-based board on the other – over the location and nature of the land to be selected – resulted in the Company losing the opportunity to purchase Florida State land to a local concern. Hopes of acquiring fresh tracts of undeveloped land then shifted to 3,000 acres of US Government land along the line of a proposed railway in East-Central Florida. The intention was to use the 3,000 acres of additional land as a vehicle for refloating the Florida Land and Colonization Co as a public company, and attracting a wider range of investors. However, by the time that the purchase of the US Government land was completed, in June 1882, that objective was abandoned in the face of the realisation that there was no great appetite for Florida land among the investing public in London. Instead, a small circle of William’s closest family and friends took up debentures worth £25,000 to pay for the additional land, the interest on the debentures being met from the few thousand pounds per annum which were being realised from the sale of lots in Sanford township.50

48 G. Waller to W. Mackinnon, 14 Dec. 1881, MP Private Letters File 249; Waller’s report on his visit to Florida in May–June 1880 is to be found in MP Misc. Commercial File 65. 49 G. Waller to H. Wright, 10 Jan. 1881, Sutherland Papers D.593/Q/2/1/2. 50 G. Waller to H. Wright, 29 July 1881, Sutherland Papers, D.593/Q/2/1/2; G. Waller to W. Mackinnon, 18 Aug. 1881, MP Private Letters File 249; G.A. Thomson to W. Mackinnon, 24 Sept. 1881 and 30 June 1882, MP Private Letters File 238; H.S. Sanford to W. Mackinnon, 15 March, 29 July and 8 Aug. 1881, MP Private Letters Files 193–4; W. Mackinnon to Sanford, 18 June, 27 July, 6 Aug, 26 Nov., and 3 Dec. 1881. The names of those prepared to take up the debentures of the Florida Land and Colonization Co read like a roll-call of men who had most reason to feel grateful to

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Why did William Mackinnon try to breathe some life into a tiny company that was little more than a financial subvention to Henry Sanford under the guise of a business venture? He, and indeed his family and friends, recognised that the enterprise was commercially unattractive. He warned Sanford after one of the frequent spats over company policy that ‘the present directors would willingly resign and leave you to nominate a Board and to work the concern as you think most conducive to your own large interest.’51 Why then dabble in property speculation in a territory about which he knew next to nothing, where his family firms had no other business interests, and from which he realistically expected few financial returns? The answer was partly that he had been deceived by Sanford into making a financial commitment (on the understanding that the bulk of the capital would come from sources in Paris) and that thereafter he and the inner family retained lingering hopes that they might find some means to recoup their original investment. William was reluctant to be drawn too deeply into Sanford’s Florida speculations, but equally he valued the Sanford connection too much to make a clean break with the former Ambassador. The value lay in the channel to Leopold, and to Brussels politics, that Sanford provided. In sinking a few thousand pounds into Florida scrubland William was playing for higher stakes in the Congo basin. The tactic resulted in the most extraordinary – and wholly marginal – act of business diversification ever undertaken by the Mackinnon group. ***** William Mackinnon’s emergence as a putative railway promoter seems to show that in the 1870s and 1880s the financing of overseas railways had not yet become the preserve of large institutions in the City of London. For at least the shorter and less expensive lines, private syndicates of wealthy men could still provide the core of new railway enterprises independently of merchant banks or finance houses. This was a form of business networking that drew on income from a variety of sources – land, urban rents, trade, shipping and manufacturing – and which resulted in the creation of ‘freestanding’ railway companies the purposes of which were often linked as much to the specific business and social interests of the promoters as to hopes of a profitable speculation. What was distinctive about William’s dabbling in this William Mackinnon – two Clyde shipbuilders, Peter Denny and John Inglis; two members of the Frere circle, John Kirk and Lewis Pelly, as well as Kirk’s brother Alexander who was a marine engineer and (like William) formed a link between these two groups; the senior partners in the London-based family firms, Edwyn Dawes, Archie Gray and Duncan MacNeill; and the Lees family of Oldham, whose London solicitor was also William’s solicitor and who had done well out of their investments in William’s steamship companies. 51 W. Mackinnon to Sanford, 6 Dec. 1881, Sanford Papers. 232

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field, along with the Duke of Sutherland and others, was that it largely took place outside the boundaries of British India – in Goa or Hyderbad – or on the peripheries of its sphere of influence around the Indian Ocean – that is, in the Persian Gulf or eastern Africa. This was because he and his associates were latecomers to the field, and opportunities within British-ruled India were now very limited. The policy of encouraging private railways through guarantees of interest from the government, which had given India its first trunk lines in the 1850s and 1860s, had now been replaced by a one of the state funding and management of new lines. (Part of the political difficulty surrounding the Southern Mahratta Railway Co was that its promotion cut across that settled policy.) Consequently, prospective railway promoters with Indian connections were forced to look outside, or beyond, British India – to areas where political conditions were less conducive to the large fixed investments required for railway lines, where the potential risks were higher, and where the likelihood that schemes for railway promotion would fail more often than they succeeded. By comparison with India, most of the Middle East and all of Africa were seriously deficient in steam transport technology – whether railways or river and lake steamshipping – and it seemed obvious to William Mackinnon and other mid-Victorians that these were regions into which steam power was bound to be introduced at some point in the future. The questions were how, when and by whom. In forging an association with Leopold II with a view to developing transport and communications routes in central Africa – at first from the Indian Ocean side and then on the Atlantic side – William Mackinnon was transferring into the African context an emergent pre-occupation with railway promoting in which he had already enjoyed a limited success. It was something he would continue to pursue, as an adjunct to his dominant shipping interests, wherever opportunities presented themselves.

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9

Family, group and network, 1870–82 The very substantial growth in their steamshipping interests during the 1870s had consequences for the family firms within the business group and for the enterprise network to which William Mackinnon provided leadership. Not all were affected equally, or in the same way, but none could avoid the pressures unleashed by the shipping revolution east of Suez or ignore the new commercial opportunities that emerged. Reactions and responses to such forces, however, were also interwoven with other factors. Family demographics meant that those in charge of the older houses in Glasgow, Liverpool and Calcutta were ageing, so that issues of retirement and succession were beginning to play a part in the strategy of these businesses. Conversely youth and energy was to be found among the newer firms started in the late 1860s. Meanwhile, William Mackinnon’s gradual translation from the business life of Glasgow to the business life of London meant the replacement of Glasgow and Liverpool by London as a focal point for group operations within Britain. The structure and strategies of the Mackinnon group underwent further evolution as a result of family circumstances (including William’s role as head of the ‘clan’), changing market conditions, and developments among the group’s external penumbra of allies and associates. Of the family firms within the group in 1872 (Figure 4.2), the oldest, Mackinnon Frew & Co of Liverpool, fared least well in the post-Suez era. This was partly a matter of bad luck, but mainly the result of the significant transformation taking place in the maritime environment. The upswing in shipping freights of the late 1860s had persuaded Mackinnon Frew & Co to invest in additional tonnage (with help from other family members and their firms), and three new identical iron-hulled sailing ships were added to the firm’s small fleet in late 1868 and early 1869, just as the Suez Canal was about to open. The Mackinnon Frew vessels appear to have found plenty of demand for their services during the early years of the decade, although heavy losses at sea cast a gloom over the Liverpool branch of the family.1 There was nevertheless still sufficient confidence in the future of sailing ships for Mackinnon Mackenzie & Co to put up 25 per cent of the costs of two replacement vessels for Mackinnon Frew & Co in 1875.2 This, however, was 1 The Cossipore in 1870, the Serampore in 1873 and the new Jeypore in 1874 all sank on voyages with the loss of their entire crews. (W. Mackinnon to D. Mackinnon, 8 May and 3 June 1874, Nat. Lib. Acc. 6168/7.) 2 P. Mackinnon (Rosemount) to D. Mackinnon, 2 July, 6 Aug. and 24 Dec. 1874, 25 Jan. and 25 Feb. 1875, Nat. Lib. Acc. 6168/9.

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the family’s final fling with sailing ships. By 1877, the tonnage of steamships plying between Calcutta and Britain led to such a glut of cargo space available in Calcutta, and to such a fall in shipping freights that Mackinnon Mackenzie had considerable difficulty in finding homeward cargoes for the Mackinnon Frew ships. It was obliged to divert them into poorly paying voyages to ports around India or into the sugar trades of Mauritius. Such was the depth of the slump that William Mackinnon was even compelled to buy out the Frew family interest in order to keep his older brother’s business going.3 Conditions were scarcely any better in 1878 and 1879, leading William to observe that ‘I fear sailing ships are past their day’ and to express hopes of persuading Peter to get out of sail and take on the management of steamships instead. 4 However, Peter, who had spent his whole life in sail, was unwilling to make the move. He retreated into semi-retirement, spending more and more time in Campbeltown, where he had acquired a house at Davaar, on the seashore at the entrance to Campbeltown Loch. By 1882 his firm, which had operated some six or seven vessels between Liverpool and Calcutta, possessed only two. As Mackinnon Frew & Co’s star faded, Gray Dawes & Co’s shone ever more brightly. Archie Gray and Edwyn Dawes, originally put into business to look after various fringe aspects of the group’s interests, found themselves occupying an ever more strategic position. Their work focused on three functions. First, in addition to arranging marine insurance with various ‘outside’ firms, Gray Dawes & Co managed the private insurance syndicate through which William, various members of the ‘clan’ and their closest associates undertook the underwriting of a large part of the fleets under their control. Usually this meant the newer and more modern vessels. Such insurance was a tidy little sideline for all concerned, because BI and the British India Association, on whose steamers the bulk of this insurance business was done, had relatively good safety records during the 1870s. But the insurance syndicate had another function as well. It became a means by which William rewarded individuals who helped him in various ways, mainly in his relations with government, but then fell on hard times. Insurance ‘lines’ were opened in the names of such individuals, at no cost to themselves, and at the end of the year they collected a share of whatever profits the syndicate had made. They were also able to borrow from Gray Dawes & Co against the expected income from the insurance account. Among those who benefited from such arrangements were Sir John Kaye of the Political and Secret Department of the India Office, and Major Charles Euan Smith, who had been Frere’s personal assistant during the mission to Zanzibar and

3

P. MacNaughton to Mackinnon Mackenzie & Co, 1 Fe. 1877, BIS/6/24; P. Mackinnon to D. Mackinnon, 8 Feb. 1877, Nat. Lib. Acc. 6168/10; W. Mackinnon to D. Mackinnon, 29 March, 13 Sept., and 2 and 6 Dec. 1877, Nat. Lib. Acc. 6168/7. 4 W. Mackinnon to P. Mackinnon, 3 Sept. 1878 and 11 Sept. 1879, Nat. Lib. Acc. 6168/8. 235

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Muscat.5 Such private subventions had more of the character of recompense for services rendered in the past than payments for services to be rendered in the future. However, they would have been regarded as being of questionable probity if they became publicly known. The second strand of the Gray Dawes business was its overall direction of three subsidiary firms – Gray Paul, Gray Mackenzie and Smith Mackenzie – in commerce between London, the Persian Gulf and East Africa and in the management of the BI agencies in these regions. These subsidiaries struggled to establish themselves in the foreign trade of their respective regions and for most of the 1870s the profits from import-export activities were both a small and a fluctuating part of Gray Dawes & Co’s income. Yet some growth there was, particularly towards the end of the decade, and by December 1882 Gray Dawes & Co’s assets included 50 per cent of the £26,733 capital in the Bushire concern, the £31,246 capital in the Basra concern, and the £26,381 in the Zanzibar concern.6 However, Gray Dawes & Co’s prospects for growth lay mainly in its third function – ship agency work in London. This was dramatically transformed by the introduction of the Group’s steamship lines from London in 1874–5. Instead of the odd chartered sailing ship or steamer, Gray Dawes now found itself looking after a regular succession of steamships entering and leaving the London docks. These were vessels on BI’s service from London via Lisbon and Karachi to the Gulf, and more especially on the premier BI/BIA service from London to Colombo, Madras and Calcutta, and return. Although loading and unloading of vessels on the berth was left to the specialist firm of Gellatly Hankey & Co, Gray Dawes otherwise undertook all of the multifarious tasks of a liner agency in a major port. It also provided secretarial and managerial services for the British India Association. The consequences were significant. The firm’s half-yearly profits, which were as little as £6,169 in the first six months of 1875, grew to a peak of £21,062 in the first half of 1879, before falling back a little thereafter, and the firm’s capital virtually trebled over the same period, from £56,000 in 1874 to £170,500 in 1880. Most of this growth came from ‘steamer commissions’, which contributed 20 per cent of profits in the first half of 1877 rising to over 50 per cent in the second half of 1880.7 Gray Dawes & Co replaced Mackinnon Frew & Co as the principal vehicle for managing the group’s investments in deep-water, inter-continental shipping.

5

E.S. Dawes to Sir John Kaye, 18 Sept. 1872, 15 July 1873, 19 Jan. and 23 March 1874, and E.S. Dawes to W. Mackinnon, 2 July 1875, Dawes Letterbook, 1874–6; W. Mackinnon to Euan Smith (extract), 28 June 11876, Dawes Letterbook, 1876–8. 6 Gray Dawes & Co, Capital Accounts Relating to Bushire, Busreh, Baghdad, Zanzibar, Mozambique, Mombasa, Vol. 1411, Inchcape. 7 Gray Dawes & Co: Partners’ Private Ledgers, Vol. 1, 1874–81, Inchcape Collection, Guildhall Library, London [hereafter cited as Inchcape Guildhall], Ms. 27,609. 236

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Although George Arthur, Sir Frederick’s son and Bartle Frere’s nephew, joined the partnership in December 1874, the arrangement was not a success, and he departed again in September 1877, leaving Archie Gray and Edwyn Dawes to oversee the growth of the firm. Of the two, Archie Gray was the senior partner. He also enjoyed William Mackinnon’s affections, as a nephew, and participated in family holidays and celebrations from which Dawes was excluded. Despite that, William came to look more to Dawes than to Archie Gray in matters of business. This reflected a closeness between the two men which developed over the years, as William came to conduct his affairs increasingly from the suite of offices at 13 Austin Friars, and was cemented by the period when Dawes spent as William’s personal secretary in India in 1872–3. Consequently, Dawes found William more receptive than Jamie Hall or any of the other BI directors to the need for steamship support for his subsidiary firms in the Gulf and East Africa, and William defended Dawes against the petty jealousies that emanated from time to time from Bombay and Calcutta. William entrusted Dawes with much of the work related to developing steamship operations out of London – for example, maintaining the relationship with Sutherland and the P&O – and drew him into several of his new projects. He also took to placing with Gray Dawes & Co young men destined for employment with Mackinnon Mackenzie & Co who might previously have cut their teeth with W. Mackinnon & Co. If Edwyn Dawes became William’s right-hand man in shipping, and in matters relating to the Gulf and East Africa, his right-hand man in finance, and in matters relating to India, was Duncan MacNeill. William was especially keen to build up MacNeill & Co in Calcutta, as an adjunct to Mackinnon Mackenzie & Co and as an alternative vehicle for the diversification of group interests in India. The junior firm started business in 1872 with an open line of credit from Mackinnon Mackenzie & Co to the value of five lacs of rupees. One of its first acts was to take over from Begg Dunlop & Co control and management of the Equitable Coal Co. This company had a depot at Howrah, on the west bank of the Hooghly, from which it supplied river and sea-going steamships as well as the various mills opening up in the city, and it possessed several coal mines in the moffusil (countryside) beyond the city. Since BI was the largest purchaser of Bengali coal in Calcutta, and coal prices were high in the early 1870s as a result of the opening of the Canal, it made good commercial sense for the Mackinnon group to secure a local source of coal. William Mackinnon even supported MacNeill & Co’s entry into jute manufacturing, in which Mackinnon Mackenzie & Co was already engaged. He and James Macdonald were the largest single investors in the Ganges Manufacturing Co Ltd., a sterling company set up in 1875 to establish a jute mill at Seebpore on the Hooghly, under MacNeill & Co management, and both joined its board of directors. Some 40 per cent of the £70,800 capital paid up by April 1876 came from the Mackinnon and Hall families, with the rest from long-established members of their outer circle – including Macdonald, Gunnis, Dawes, Alex Stronach, Sir Frederick Arthur, and the Lees family 237

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of Oldham.8 Similar levels of support from the inner core and the outer fringe went into an expansion of the MacNeill tea planting operations, into which Mackinnon Mackenzie had also previously diversified. The MacNeillmanaged tea estates were at first financed through rupee companies registered in India, including the Khatta Khall and Cossipore tea companies. From the mid-1870s, however, they came to be financed from London – through the Tarrapore Tea Company Ltd, which was originally a rupee company but was reincorporated as a sterling company in London in 1876, as well as the Scottpore Tea Company Ltd of 1878, and the Salonah Tea Company Ltd of 1881. The consequent increase in the tea acreage under its control raised MacNeill & Co to the first rank of managing agents in the plantation sector, well ahead of Mackinnon Mackenzie & Co.9 Closely connected with the group’s tea interests was the Rivers Steam Navigation Co, which operated on the Brahmaputra river under MacNeill & Co’s management. William Mackinnon and the ‘clan’ bought this concern from its original owners and reincorporated it in London in November 1873. The family provided 52.5 per cent of its initial capital – and William Mackinnon, the largest single investor, became chairman.10 Since the Rivers Co served the tea districts of Cachar and Assam, in which lay most of the estates managed by Mackinnon Mackenzie & Co and MacNeill & Co, it was a natural adjunct to the group’s diversification into the plantation sector. Its vessels took planters’ stores, coal and general goods up-river to Cachar and Assam, and brought shipments of tea and jute down-river. They also conveyed plantation labourers in both directions. The Rivers Co flourished during 1870s. By 1882 it had a paid-up capital of £102,415 and a fleet of eight steamers, together with eighteen barges and flats. This included at least four new purpose-built river steamers constructed by Peter Denny and shipped out to Rangoon for fitting out by the Irrawaddy Flotilla Company before being placed on the Brahmaputra. The successful revival of this formerly ailing river shipping concern compelled its old rival, the India General S.N. Co, to enter into a collaborative agreement to share the river traffic and exclude third parties.11

8

Ganges Manufacturing Co Ltd., BT 31/14542/10035. In 1885–6 MacNeill & Co with 14,300 planted acres under its control was ranked fourth among the members of the India Tea Association, while Mackinnon Mackenzie & Co with 4,400 acres was only eleventh (R.K. Renford, The Non-Official British in India to 1920 (Delhi, 1987), p. 59, f. 104). 10 P.J. Griffiths, A History of the Joint Steamer Companies (London, 1979), p. 32; Memorandum and Articles of Association, Rivers S.N. Co, Companies House, London, File No. 7806; Rivers S.N. Co. Share Certificate Book, 1874, Inchcape RSN/181. 11 Griffiths, Joint Steamer Companies, p. 35; Rivers S.N. Co Directors’ Report and Balance Sheet to 31 Dec. 1882, Inchcape (unclassified); D.J. Lyon (ed.), The Denny List, Vol. 1 (London, 1975), Nos. 198–9 and 209–10. 9

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By 1882, Duncan MacNeill & Co’s capital in London had grown to £116,82912 while that of the Calcutta house was probably broadly equivalent, and their London-registered affiliates had a combined capital of over £500,000. This was an impressive record of growth and development, comparable to that achieved by W. Mackinnon & Co and Mackinnon Mackenzie & Co in the 1860s. The MacNeill & Co branch of the family tree was perhaps the most important locus of the clan’s diversification activities during the 1870s (Figure 9.1). Certainly, in its complex of tea, jute, coal and river-shipping activities it more than matched in scale the cluster of trade and shipping activities gathering around Gray Dawes & Co. Much of this it owed to the encouragement and support which William Mackinnon gave to Duncan MacNeill and John Mackinnon. Duncan in particular, who took care of the London end of the business, was often in the company of William, who treated him like a younger brother. The two speculated together in foreign government loan issues during the early 1870s and Duncan, a plump floridfaced bachelor in his thirties, was a regular visitor to Balinakill, enjoying walking, shooting and trial trips on BI steamers on the Clyde. He accompanied William and Janet on their excursion to the Holy Land in the spring of 1874, and he routinely formed part of the family groups that sported themselves in Bad Homburg in the summer and Cannes and Nice in the winter months. However, Duncan’s life-style changed somewhat in 1877, when he met and married Louisa Agnew (from a prominent Galloway family), and settled down to married life, first in the suburban setting of Woking in Surrey and then in Wimbledon. John Mackinnon, who spent most of the 1870s in charge of the Calcutta firm, with only short spells in Britain, soon followed Duncan’s example. Returning to London for some ‘home leave’ in 1878 he surprised the rest of the family by announcing his engagement to Lucy Mackenzie, the daughter of Dr William Mackenzie and sister of George Mackenzie of Bushire and Edmund Mackenzie of Zanzibar. Such marriages strengthened the internal cohesion of the ‘clan’. Despite MacNeill & Co’s rise among the agency houses of that Calcutta, Mackinnon Mackenzie & Co remained the fly-wheel of the entire operations, and the core source of family wealth. The biggest challenge of the 1870s for Mackinnon Mackenzie & Co was to manage the very large increase in steamship agency business which came its way. The opening of the Canal, the consolidation of BI’s postal contracts, the growth of trade around the coast of India, and the introduction of the joint BI/BIA line between London and Calcutta all resulted in a growth of Mackinnon Mackenzie & Co’s activities. The firm’s earnings from BI’s managing agency virtually trebled during the twelve years following the opening of the Canal – from 189,000 rupees to 570,000 rupees. In the meantime its earnings from agency work for sailing ships and steamers engaged in deep-water trades (mainly between Britain 12

D. MacNeill & Co: Private Ledgers, Vol. 1, 1877–82, Inchcape Guildhall Ms. 27,531. 239

SUEZ AND AFTER Mackinnon Frew & Co (Liverpool)

W. Mackinnon & Co (Glasgow)

Mackinnon Mackenzie & Co (Calcutta)

MacNeill & Co (Calcutta)

Sailing Ships

Gray Dawes & Co (London)

Subsidiaries Mackinnon Mackenzie & Co (Bombay) Mackinnon Mackenzie & Co (Karachi)

Duncan MacNeill & Co (London)

Affiliates – Shipping British India S.N. Co (Glasgow) Netherlands India S.N. Co (London)

Subsidiaries Gray Paul & Co (Persia) Gray Mackenzie & Co (Iraq) Smith Mackenzie & Co (Zanzibar)

Affiliates – Commodities and Manufacturing India Jute Co (Glasgow) Western Cachar [Tea] Co (Glasgow) Ramgurgh [Tea] Co (Calcutta) Garden Reach Cotton Mill Assoc. (Calcutta)

Affiliates British India Association (London) Florida Land and Colonization Co (London)

Affiliates Equitable Coal Co (Calcutta) Rivers S.N. Co (London) Ganges Manufacturing [Jute] Co (Calcutta) Khatta Khall Tea Co (Calcutta) Cossipore Tea Co (Calcutta) Tarrapore Tea Co (London) Scottpore Tea Co (London) Salonah Tea Co

Figure 9.1 The Mackinnon Group, 1881

and Calcutta), which had been sluggish during the early 1870s, showed a significant improvement after the introduction of the ‘home line’ in 1875 (Figure 9.2). Although this ship agency business was a cyclical one – fluctuations in both sets of earnings reveal that the shipping recessions in 1874–5 and 1877–9 affected coastal as well as deep-sea operations – nevertheless the general trend was upwards. Such growth required an expansion in the staff of the ‘steamer’ and ‘ship and canal steamer’ departments. Consequently, from the mid-1870s young Scots were recruited in a steady stream and sent out to Calcutta to become assistants in these departments. Among them were Ronald Macdonald, one of the sons of James Macdonald of General Credit and Discount, R.G. Currie, a relative of William Mackinnon’s on his mother’s side, A.M. Monteath, the elder son of Alex Monteath of the Indian Post Office who ‘learnt his trade’ with Gray Dawes & Co before leaving for Calcutta, and Tom Hall, a nephew of Jamie and Peter Hall, who had previously been placed with Gellatly Hankey. From the latter firm came another young Scot who would eventually rise to great heights within Mackinnon Mackenzie & Co and the group as a whole. ‘I have concluded an 240

FAMILY, GROUP AND NETWORK, 1870–82 600

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Figure 9.2 Mackinnon Mackenzie & Co’s shipping agency earnings, 1870–82 (rupees 000s)

engagement for three years with James L. Mackay’, Peter Mackinnon wrote in April 1874, ‘to start for Calcutta on 23rd inst. from Southampton, his salary to be Rs 300/–, Rs 350/– and Rs 400/– per month. He was five years in a canvass maker’s office in Arbroath, and has been 21⁄2 years with Gellatly Hankey & Co. Hankey speaks well of his smartness and is sorry to part with him.’ The appointment was obviously made with the start of the ‘home line’ in mind, for Peter added that Mackay ‘came out of a good school and the insight he would get [at Gellatly Hankey] into the working of the steamers going round would be of service to him’.13 Unlike many of the other young recruits of the period, James Lyle Mackay had no ties of kinship or family friendship with the Mackinnons and Halls, and owed his appointment and subsequent promotion entirely to his own abilities, which were not inconsiderable. For a young man joining Mackinnon Mackenzie & Co in the 1870s, the ‘steamer’ or ‘ship and canal steamer’ departments were the place to be, since the other areas of the firm’s business were doing less well. Indeed, the trade in imports into and exports from Calcutta, which had been the original raison d’être of Mackinnon Mackenzie & Co, now virtually disappeared. By 1870, the returns to the firm from the sales of cotton goods and other imports already represented a small proportion of total earnings (less than half the income generated by the BI contract). Thereafter it was on a declining trend, with losses being made in several years. This largely reflected conditions in 13 P. Mackinnon to D. Mackinnon, 2 April and 27 May 1874, Nat. Lib. Acc. 6168/9; for an account of the early life and career of James Lyle Mackay, see Stephanie Jones, Trade and Shipping: Lord Inchcape, 1852–1932 (Manchester, 1989), pp. 1–19.

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Glasgow: first, the decision taken in 1866 that W. Mackinnon & Co and Mackinnon Mackenzie & Co should withdraw from trade on their own behalf, and confine themselves to working on commission for others; second, the post-Civil War depression of 1866–70 which accelerated the long-run decline of the cotton industry within the city of Glasgow, pushing what remained into neighbouring towns like Paisley,14 and reduced the number and range of W. Mackinnon & Co’s constituents; and third, a loss of interest in the cotton trade which came from James Hall’s retirement from the Glasgow firm and William Mackinnon spending so much time on shipping and financial business in London. To this was added increasingly competitive conditions in the Indian market – sales and profits slumped so much in 1874 and 1876 that W. Mackinnon & Co’s exports to Calcutta were actually suspended in these years. Only a sense of loyalty to a handful of old constituents who had also invested in various family-led enterprises kept the cotton goods trade going through the 1870s. Among these few survivors was George P. Gunnis’s Manchester firm and it was probably no coincidence that Gunnis’s death in 1879 was followed within a couple of years by the complete cessation of Mackinnon Mackenzie & Co’s imports of piece goods into Calcutta. Exports of Indian produce from Calcutta were also constrained during the 1870s by the decision to undertake only commission work. Other limiting factors were the financial difficulties of Smith Fleming & Co, who were the principal consignees of Mackinnon Mackenzie & Co’s produce shipments to London. Produce exporting was a highly volatile business, and although opportunities for profitable speculations still existed, William had largely set his face against it – particularly if it involved the firm’s own capital. When in 1877 Mackinnon Mackenzie & Co made large (and very profitable) shipments of jute to Britain, William let his displeasure be known from his Balinakill fastness. ‘We must not become speculators in produce. It will only lose money & give trouble. Our sound commission business is large enough to tax the energies of all . . . and I trust we will have no more produce operations. If you had as much experience of such things as I have you would not think on such business. . . .’15 In the face of such strong risk-aversion, and a failure to develop links to new trading partners in Britain, Mackinnon Mackenzie’s produce exports were increasingly confined to a small trade on behalf of Australian constituents that had been worked up by Neil Macmichael. This involved exports to Sydney, Melbourne and Geelong of sugar, rice, and oilseeds, which Mackinnon Mackenzie & Co purchased from smaller firms along the Indian coasts. Such concerns – like Stuart Hall’s firm, Hall Wilson & Co, on the Coromandel coast – were BI agents as well as traders in their own right, and

14

W.W. Knox, Hanging by a Thread: The Scottish Cotton Industry, 1850–1914 (Preston, 1995), pp. 17–38; A.J. Robertson, ‘The Decline of the Scottish Cotton Industry, 1860–1914’, Business History, 12, 2 (1970), pp. 116–28. 15 W. Mackinnon to D. Mackinnon, 23 March 1877, Nat. Lib. Acc. 6168/7. 242

FAMILY, GROUP AND NETWORK, 1870–82

the outlet to Australian markets through Mackinnon Mackenzie & Co was a very welcome addition to their BI commissions. The general effect of William Mackinnon’s insistence on commission work, together with the sheer volume of business on the shipping side, was slowly to squeeze Mackinnon Mackenzie & Co out of the import-export operations in which it had first established itself in Calcutta. Something similar, however, was also happening in respect of the firm’s other (nonshipping) agency work. At first, it was not obvious that the principal new developments of the 1870s – the emergence of MacNeill & Co alongside Mackinnon Mackenzie & Co and the rise of the British India Association alongside BI – would have any significant effect on Mackinnon Mackenzie & Co’s own diversification policies. During the early 1870s, some of its earlier investments began to bear fruit. The India Jute Co mill at Serampore had a number of good years, producing income in the form of dividends on its shares and commission for its managing agency; and even the tea estates began to show a return. Against such a generally buoyant background, the decision was taken to go into yet another new venture – cotton-spinning. The underlying concept was that of import-substitution – replacing the declining sales of imported Glasgow and Manchester cottons with sales of yarns produced in Calcutta itself – and William Mackinnon established a private investment syndicate in Britain to raise the funds for this purpose. Mackinnon Mackenzie & Co, which would have the managing agency, put up £25,000, or one quarter of the initial capital. The other principal investors were two old cotton-spinning friends, George P. Gunnis and Eli Lees (who would provide technical and commercial expertise as well as capital), and Peter Denny, the Dumbarton shipbuilder (whose involvement presumably reflected a closer business relationship with William than any interest in cotton-spinning per se). This Garden Reach Cotton Mill Association took its name from the riverside district of Calcutta where land for the construction of the mill was purchased from BI. The mill opened experimentally in 1876, spinning local cotton at counts of 20s but at costs which proved uncompetitive with imported Manchester yarn. With persistence, a shift to higher counts, and improved productivity per spindle, its prospects gradually improved over the years, and it started paying dividends in 1880. The cotton mill, however, proved to be the last significant act of diversification by Mackinnon Mackenzie and Co. The general trend in the firm’s investment portfolio was an increasing concentration on shipping at the expense of both commodity production and manufacturing. Although the value of the firm’s equity investments rose over time – from 191,100 rupees in 1868 to 1,133,400 rupees in 1878 – the proportion of the total represented by shipping grew from 12.1 per cent in 1868 to 59.4 per cent by 1878 and 66.9 per cent by 1883.16 This investment went into the Mackinnon 16

J.F. Munro, ‘From Regional Trade to Global Shipping: Mackinnon Mackenzie & Co 243

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Frew sailing ships constructed between the late 1860s and mid-1870s, and then into the British India Association steamers constructed from the mid1870s onwards. The increase was achieved partly by ploughing some of the profits from the BI managing agency into new tonnage for deep-water operations, and partly from running down the firm’s equity holdings in jute and in tea. Consequently, although it retained its managing agency contracts for the India Jute Co and for various tea properties, Mackinnon Mackenzie & Co reduced its direct involvement in the risks and rewards of ownership in these sectors. The slackening of Mackinnon Mackenzie & Co’s diversification into tea did not, however, mean a reduction in the group’s interest in the commodity. On the contrary, tea cargoes were a crucial factor in the development of one of the group’s newer ventures, the liner trades between Calcutta and London. Tea was a fine freight, with a high value-to-bulk ratio, and commanded premium rates on the steamship lines that replaced the fast-sailing tea clippers after the opening of the Canal. For the likes of BI/BIA and P&O, combining passenger and cargo traffic, tea was an ideal cargo. William Mackinnon was well aware that access to the large shipments of tea made by Mackinnon Mackenzie & Co and MacNeill & Co gave his ‘home line’ an edge in securing and maintaining a share in the liner market. This was made most explicit when, in 1876, an error by an assistant in Mackinnon Mackenzie & Co resulted in some 2,400 chests of tea from MacNeill & Co being shipped from Calcutta by a vessel other than BI’s Almora. In a fury, William demanded action against the man concerned and stressed the guiding policy for Mackinnon Mackenzie & Co in tea shipments: ‘I trust you in concert with MacNeill & Co will hereafter endeavour to send all the tea we can control by our own ships. The Cities would oppose us if they could, & we must not play into their hands. I would rather ship by P&O than any other vessels except our own.’17 But if it was to the advantage of the group that as many chests of tea as possible should be loaded into the holds of its vessels, it did not follow that control of the production of the tea should be vested in the same firm as did the loading of the steamers. On the contrary, it would ease Mackinnon Mackenzie & Co’s relations with other shippers of tea from Calcutta, and prevent it from being seen to put its own interests before theirs, if any growth in the group’s tea interests were to take place under the wing of the legally and corporately separate MacNeill firms. From such reasoning, it seems, a roughand-ready division of labour began to be worked out between the family firms. MacNeill & Co looked after any new investment to be made in planted acreage, supplied various planters stores and machinery, and transported the tea by river steamer (and rail link) to Calcutta. Mackinnon Mackenzie & Co,

within the Mackinnon Enterprise Network’, in G. Jones (ed.), The Multinational Traders (London, 1998), p. 54. 17 W. Mackinnon to D. Mackinnon, 21 Aug. 1876, Nat. Lib. Acc. 6168/7. 244

FAMILY, GROUP AND NETWORK, 1870–82

meanwhile, took care of its own older planted acreage as well as the shipment of the two firms’ tea cargoes from Calcutta to London. There in turn Duncan MacNeill & Co undertook sales of tea on commission for both firms. The net effect of such arrangements was to further limit the possibility of any merger between Mackinnon Mackenzie & Co and MacNeill & Co (something which William still hankered after as late as 1877) and to foster Mackinnon Mackenzie & Co’s specialisation in steamship management and agency work within the ever more diversified business group. Between 1870 and 1882, Mackinnon Mackenzie & Co’s profits were good – averaging 22.7 per cent per annum – and its capital roughly doubled, from 1,712,000 rupees in 1870 to 3,584,000 rupees in 1882. The number of partners needed to manage this growing business also increased, so that the firm, which had only three partners following Jamie Hall’s retiral in 1869, had eight by 1882. The five newcomers were Neil Macmichael, Duncan Mackinnon, and Thomas M. Russell, who were admitted to partnerships in 1870, William P. Alexander, who was admitted in 1873, and Edward (Eddie) Wylie who was admitted in 1881.18 This promotion of younger men from the ranks of the assistants who had served the firm in the 1860s made it possible for the older partners to be ordinarily resident in Scotland. William Mackinnon, now the sole senior partner, took in charge in Calcutta during the months of November 1872 to April 1873, when he was in India to negotiate the consolidation of the BI contracts. This, it transpired, was his last visit to Calcutta. Although he contemplated returning to take up his seat again from time to time, Janet’s distaste for the city and reluctance to accompany him invariably deflated such ambitions. He therefore oversaw the business from a distance, exercising authority either by correspondence with the younger partners in Calcutta or more indirectly though Peter Mackinnon and Peter Hall, who were by now also resident in Scotland and looking after matters at W. Mackinnon & Co. He was consulted over almost ever aspect of the firm’s operations and at times would get angry and frustrated when those in charge in Calcutta did not immediately carry out his wishes. ‘He is a little nettled by the long letter that has been sent home about the instructions which had been sent out in September’, Peter Mackinnon wrote on one such occasion. ‘It is now a little difficult to get Uncle Wm to take up and consider these questions, but once he has done so, he considers the matter is disposed of and that his views should be carried out, and it is a pity there should be so much reference home.’19 William’s principal agent in exerting his authority in Calcutta was his cousin, Duncan Mackinnon. Duncan, the younger brother of Peter and John, had joined Mackinnon Mackenzie & Co as an assistant in 1864, when he was 20 years old. Despite his relative youth, he became a director in the firm in

18 19

Mackinnon Mackenzie & Co, Abstract of Deeds of Co-Partnery, 1884, MP India File 15. P. Mackinnon to D. Mackinnon, 9 May 1877, Nat. Lib. Acc. 6168/10. 245

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1870, and in 1873 he returned to Scotland to marry Jeannie M. Hall, the younger sister of Jamie and Peter Hall.20 This further strengthening of the bonds between the Mackinnons and the Halls delighted everyone – partly because Jeannie, then 27 years old, was a lively and attractive young woman who was everybody’s favourite ‘younger sister’, and partly because the union of Duncan and Jeannie held out the strongest prospects for continuing the family leadership of the cluster of businesses they had created. Since William, Jamie and Peter Mackinnon were all childless men, and Peter Hall’s oldest child had recently died, the very future of family control of Mackinnon Mackenzie & Co, and with it the business group as a whole, seemed to rest on Duncan and Jeannie. The young couple departed for Calcutta with the good wishes of all ringing in their ears, together with William’s hopes that ‘Jeannie & you will prove active and useful members of the Free Kirk in Calcutta & encourage & cheer the missionary workers there.’21 More significantly, William decided that Duncan should now become better known in official circles in the city. He instructed him in the etiquette of visiting and visiting cards, and provided letters of introduction to a range of civil and military officers who had been helpful to William during his own recent visit to Calcutta, as well as others supplied by Sir Frederick Arthur. In thus assisting Duncan to enter the wider public life centred upon the government departments in Calcutta, William was clearly designating him as his successor at the head of Mackinnon Mackenzie & Co, and the person to whom he entrusted the task of conducting the relationship with officialdom upon which BI and Mackinnon Mackenzie & Co were so dependent. William kept up a regular correspondence with Duncan, advising him about almost every aspect of the firm’s activities. Among the many topics that passed between them were relations with Bulloch Brothers in Rangoon and W. Nicol & Co in Bombay, the management of the tea estates, arrangements for remitting BI’s profits homewards, the development of the new cotton mill, the departmental disposition of the various assistants, the needs of assistants and partners for leave for health reasons, and arrangements for rotating the partners between Britain and India so that there would always be at least two active partners in Calcutta at any one time.22 William was also pleased and proud when his strategy of promoting Duncan as the public face of Mackinnon Mackenzie & Co paid off in 1877 with Duncan’s appointment as a Calcutta Port Commissioner and his election, at 33 years of age, as President of the

20

The wedding took place in the Church of Scotland at Dalintober in Campbeltown on 1 October 1873. Duncan’s best man was Archie Galbraith, a boyhood friend who was also J.N. Fleming’s brother-in-law and a partner with J.N. Fleming in a Manchester merchant house. (Register of Marriages, 1873, General Register Office, Edinburgh.) 21 W. Mackinnon to D. Mackinnon, 20 Nov. 1873, Nat. Lib. Acc. 6168/7. 22 W. Mackinnon to D. Mackinnon, 14 Jan. 1874, 14 April, 26 July, 18 Oct. and 20 Dec. 1876, Nat. Lib. Acc. 6168/7. 246

FAMILY, GROUP AND NETWORK, 1870–82

Bengal Chamber of Commerce. This was the first time that any member of the firm had been so honoured, and symbolised the fact that, from its very humble beginnings in the late 1840s, Mackinnon Mackenzie & Co had finally arrived in the first rank of the expatriate business houses of Calcutta. However, Duncan’s life was also touched by personal tragedy, which would have a bearing upon the disposition of family leadership within the firm. Jeannie never took to life in Calcutta and when, in 1878, she and Duncan were expecting their first child, she insisted on returning home to Scotland for its birth. The baby, born in Campbeltown on 10th October 1878, was a little girl who lived for only two days. Duncan and Jeannie were still in grief – and Jeannie it seems not yet fully recovered from the difficult childbirth – when the need for Duncan’s presence in Calcutta drove them out to India again in March 1879. Within days of their arrival back in the city, Jeannie took a fever – and died on 4 April 1879. The news hit the family at home like a great blow, and Duncan was distraught. A few months later, in October 1879, he appears to have suffered a nervous breakdown while trying to make arrangements to return Jeanie’s remains to Scotland. His subsequent erratic behaviour in charge of Mackinnon Mackenzie & Co so alarmed William and Peter Mackinnon that he was put under pressure to remove himself from Calcutta as quickly as possible.23 Peter Mackinnon of Rosemount, who had settled to a comfortable middle age in Campbeltown and Glasgow, was obliged to go out to take charge in Calcutta. Duncan returned to Scotland in August 1880, and Jeannie’s disinterred remains were reburied, along with those of their infant daughter, in the Campbeltown cemetery. ‘Tuesday last was a solemn day with us here at Kilkerran Kirkyard’, Peter Hall recorded, ‘and what made it all the more sad was the placing of the small coffin on top of the big one.’24 Duncan Mackinnon, with his family around him and given tasks to do in Glasgow and London, gradually rediscovered his composure, and in November 1882, in a very quiet and private ceremony, he married Margaret Macdonald, the daughter of James Macdonald of General Credit and Discount. He was, however, no longer the man whom the Mackinnons and Halls had confidently expected to drive forward their business interests in Calcutta. Mackinnon Mackenzie & Co was a highly profitable operation that enabled the Mackinnons and Halls to diversify their operations internationally, more especially into intercontinental steamship lines, as well as within India. It did so through its development of complementarity with other family-owned firms, by its direct investment in such joint activities as the British India Association steamers, and by its releasing funds to the individual partners to pursue their own interests. Thus William’s share in the firm’s capital grew from 644,000 rupees in 1870 to 905,00 rupees in 1882,

23 D. Mackinnon to W. Mackinnon, 11 April and 7 Nov. 1879, and 3 May 1880, Nat. Lib. Acc. 6168/5. 24 P. Hall to P. Mackinnon, 26 Aug. 1880, Hall Letterbook I.

247

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while over the same period he withdrew from the firm some 707,000 rupees or approximately £70,000.25 The heart of its profitability was the generous managing agency contract with the British India S.N. Co which, even more than their own equity holdings in the company, enabled the partners to reap the benefits of the expansion in trade and shipping in South Asian waters following the opening of the Suez Canal. Mackinnon Mackenzie & Co’s continuing success, however, contrasted with the fortunes of the family’s Glasgow house, W. Mackinnon & Co. The vitality of W. Mackinnon & Co of Glasgow, which had played a leading role within the group in the 1850s and 1860s, ebbed away during the 1870s. This resulted partly from the decline in its exporting of cotton goods to Calcutta, and the consequent transfer of its piece-goods staff to Smith Mackenzie & Co in Zanzibar. Mainly, however, it stemmed from the fact that William Mackinnon, losing regard for the cotton goods trade, turned his back on Glasgow and used London as the location from which to initiate new business adventures. Although he retained his partnership in the firm, he had by 1871 run down his capital to as little as £7,323 (less than 15 per cent of the total)26 and ceased to take any real interest in its affairs. W. Mackinnon & Co became a place where the surviving partners of Mackinnon Mackenzie & Co, in semi-retirement from Calcutta, did a small amount of business while enjoying the country life of Kintyre. Peter Mackinnon, with his house at Rosemount in Campbeltown, and Peter Hall, from Torrisdale Castle to the north of Campbeltown, looked in on the Glasgow office from time to time to oversee its affairs. The firm still made profits of a few thousand pounds per annum, but this came mainly from dividends on former investments, more especially bank securities. A further stream of income came from BI commissions for looking after BI repair and replenishment relations with various Clyde shipyards – William, as BI chairman, personally conducted all negotiations for the construction of new vessels from Balinakill. However, there was very little in the way of new business in the 1870s, other than keeping the accounts of the British India Association. Indeed, William squeezed the firm very hard in the middle of the decade, to help pay for the new tonnage needed by BI and NISM. He ordered the sale of the firm’s shares in the Union and City of Glasgow banks, finally severing his banking links in the city. He also drew more heavily against his own capital in the firm, to the point where his share was reduced to a debit of £8,348 by May 1877 and only the healthier balances of Peter Hall kept the firm afloat.27 Thereafter, the firm got a slightly new lease of life, with the admission of Neil Macmichael and Duncan

25 These figures are calculated from the Mackinnon Mackenzie & Co annual accounts in MP India File 24. 26 Peter Hall’s Private Ledger (in private possession). 27 P. Mackinnon to W. Mackinnon, 3 Nov. 1873, MP City of Glasgow Bank File 24, and 31 May 1877, MP India File 24.

248

FAMILY, GROUP AND NETWORK, 1870–82

Mackinnon as partners in 1878. However, it had become little more than a vehicle for remitting partners’ profits from Calcutta to Glasgow, and lending these out (at interest) to various bits of the group or network that needed short-term funding. ‘There is really no occasion for an office in Glasgow’, Peter Hall admitted in 1880, ‘and I daresay Macnaughton [the BI Secretary] would be glad to go to London.’28 The prospect that W. Mackinnon & Co might close and that the BI secretariat (which William had fought so hard to bring to Glasgow) might be transferred to London, illustrates how far the British centre of gravity of the Mackinnon group moved from Glasgow to London in the years between 1865 and 1875. That shift was probably inevitable, given the Group’s rise as shipping contractors to the governments of India, the Netherlands Indies, Britain, Portugal and even France. The officers of state or the diplomatic representatives with whom William had to deal on such matters were all to be found in the metropolis. Although invitations to Balinakill, or to trial trips on the Clyde, brought such figures north to Scotland from time to time, for business mixed with pleasure, this was no substitute for the continuous and routine dialogue that was possible in London. The capital too was a major node – indeed the world’s most important single node – for information flows relevant to the conduct of business on an international scale, and a presence there was conducive to the garnering of a range of political, commercial and financial information to be deployed in the development of a business strategy. London was also a major source of passenger traffic between Britain and India, and a significant centre for the marketing of tropical produce. As the group’s commercial interests shifted from exporting cotton goods from the Clyde and the Mersey to Calcutta towards exporting tea from Calcutta to London, the replacement of Glasgow and Liverpool by London in the Group’s shipping strategies followed naturally. Finally, London, as the hub of the British financial system, offered abundant access to the commercial finance the group needed and enabled it to turn its back on the Glasgow banks that had supported it in its infancy. The expansion of the shipping companies during the 1870s was based partly on occasional bursts of large volumes of short-term borrowing from London sources like the City Bank and General Credit and Discount. Moreover, the substantial intra-group flow of resources that was routinely carried out by way bills of exchange drawn on each other was sustained by the discounting facilities of the General Credit and Discount Co. ***** The basic structure of the Mackinnon group of 1881 (Figure 9.1) was not too different from what it had been in 1872, but the number of subsidiary and 28

P. Hall to P. Mackinnon, 11 March 1880, Peter Hall Letterbook I. 249

SUEZ AND AFTER

affiliate firms had grown in number and character. Essentially this reflected the emergent pattern of specialisation within the group, with shipping activities focused upon Gray Dawes & Co and Mackinnon Mackenzie & Co, and tea planting and trading activities focussed on MacNeill & Co. What the diagram tends not to reveal, however, is the extent to which the two old family firms in the northwest of Britain, Mackinnon Frew & Co and W. Mackinnon & Co, became empty shells in the course of the 1870s, and how far the vitality of the group had shifted from a Glasgow-Liverpool-Calcutta axis to a LondonCalcutta axis. Nor does it indicate the way that inter-marriage between the junior members of the Mackinnon family and members of other partner families ensured that, despite the greater commercial complexity and geographic spread, the enlarged group remained an essentially kin-based business organisation. Above all, perhaps, it fails to convey a true sense of the scale of the group, and of the increase in its size that had occurred in the 1870s. In 1881, the combined capital of the group was £2.87 million (the partnerships’ capital being approximately £905,000, the joint stock shipping companies’ £916,500 and the non-shipping joint stock companies’ £1,045,600) and its assets (valued at £2.2 million for steamships alone) were probably worth close to £3.5 million. These figures would seem to make it one of the largest, if not indeed the largest, of Britain’s overseas mercantile business groups – and probably the biggest such organisation anywhere in the world at the time.29 This position had been achieved almost entirely on the back of the commercial stimuli unleashed by the opening of the Suez Canal. Over the year from 1870 to 1882, the group had expanded its existing activities and entered into entirely new ventures, but it also grew by internalising within itself certain functions previously carried out by other firms. Mainly this occurred when firms that were part of the outer fringe of the enterprise network failed or otherwise ran into trouble, and the group stepped in to pick up parts of their operations. This happened, for example, in the early 1870s, when assets associated with Begg Dunlop & Co were taken over by MacNeill & Co, and more especially in 1878 when W. Nicol & Co and J. Fleming & Co failed, and Mackinnon Mackenzie & Co took over their BI agencies and opened its own branch firms. The outer penumbra of the network was unstable and changing – as old allies (individuals and firms) died and the development of new familycontrolled enterprises called for the creation of links to new allies. The network that existed in 1881 is represented by Figure 9.3. Since 1870, the

29 The only attempt at a systematic comparison of business groups or ‘investment groups’ by size is by Stanley Chapman, whose figures are for 1900–1914 rather than the 1880s. However, reading backwards from 1900–1914 would seem to suggest that only a couple of other clusters of overseas enterprise – the Jardine Matheson group in Asia and the Balfour Williamson group in Latin America – were conceivably as large as the Mackinnon group in 1881 (S.D. Chapman, Mercantile Enterprise in Britain (Cambridge, 1992), pp. 254–5.)

250

FAMILY, GROUP AND NETWORK, 1870–82

Lancashire cotton men

Tea, jute, coal, etc. Mackinnon-Hall family firms Expatriate Scottish merchant houses

Clydeside businessmen British India Assoc.

British India and Netherlands India steam navigation companies

London shipping interests

General Credit and Discount Co Frere Circle Duke of Sutherland

Railways – S.W. India

Leopold II

Figure 9.3 The Mackinnon enterprise network, 1881

London-based elements of the network had grown and evolved – with new links to allies in London shipping circles (including P&O, Gellatly Hankey and the Westrays) and the transformation of the Frere connection from an avenue towards Anglo-Indian financial operations into an opening towards ‘aristocratic capitalism’ and the financing of railways. The Scottish expatriate merchant element was still there, although now reduced in scale and significance by the decline of some formerly active allies. So too was the circle of business figures in Clydeside – the decline in the cotton manufacturing connection being offset in part by the emergence of the shipbuilding interest in the shape of Peter Denny and John Inglis. The most striking feature, however, is the total disappearance of the City of Glasgow Bank, 251

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whose collapse in 1878 also brought down William Mackinnon’s closest ‘outside’ allies, the Fleming brothers, and embroiled him in a tedious and time-consuming lawsuit. Of all the events that transformed the outer fringe of the network, the bank failure in Glasgow was the most significant.

252

10

The failure of the City of Glasgow Bank, 1878–82 In the late afternoon of 1 October 1878 the City of Glasgow Bank closed its doors against further business. The fact that the Bank was in trouble, and would have to cease trading, had been known only to its management – plus a few senior officers of the major Edinburgh-based banks, who had been called in to assist but decided that matters within the Glasgow institution had gone too far for any rescue package. The news of the Bank’s demise therefore came suddenly and caught the general public by surprise. The next day, a curious crowd gathered outside its head offices on Virginia Street, requiring the precautionary stationing of special constables around the building, but in the event there was no trouble. Whether because of memories of the Bank’s earlier closure and re-opening in 1857, or because the other Scottish banks let it be known that they would honour City of Glasgow Bank notes in circulation, there was no general run on the banks in Glasgow. By contrast, there was much excitement in the smaller cities and towns of Scotland as depositors sought to withdraw their money, many demanding only gold. The panic, however, was short-lived and, as public confidence returned, attention in the press quickly turned from the dangers of a bank mania to the question as to who or what had brought the City of Glasgow Bank to its knees. In the meanwhile, the backwash from the closure spread through the rest of the British financial system, bringing a tightening of money rates in London and Manchester and elsewhere, and even reaching as far as India, where the credit-worthiness of firms with Glasgow connections quickly came under question. Despite initial anxieties, it soon became apparent that this was no harbinger of a general financial crisis in the 1857 or 1866 mould. The City of Glasgow Bank’s problems were uniquely its own, and its collapse did not herald the onset of serious trouble for the British financial services sector as a whole.1 Even so, the Bank’s failure had a considerable economic and social impact within Scotland. Although only one other financial institution closed – the much smaller Caledonian Banking Company, which went out of

1 There is a substantial literature on the failure of the City of Glasgow Bank, which was one of the most singular events in the economic and business history of Glasgow. In addition to its consideration in more general works of banking history, including S.G. Checkland, Scottish Banking: A History, 1695–1973 (Glasgow, 1975), pp. 469–78, and R. Saville, Bank of Scotland: A History, 1695–1995 (Edinburgh, 1996), pp. 421–5, it

253

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business for about ten months – it brought about a sharp reduction in the share values of the other Scottish banks. It also gave a severe check to the growth of the West of Scotland economy, and above all it brought ruin in its train to a large number of individuals and small businesses across Scotland – as the shareholders in the Bank discovered the extent of their commitments under the unlimited liability with which it had been incorporated. A handful of relatively large trading houses – in Glasgow, London and India – also became bankrupt in the wake of the Bank’s demise. These were the very firms whose own business difficulties had brought about the Bank’s troubles in the first place. Within days of the Bank closing its doors, details began to leak out about its mismanagement. The Glasgow Herald expressed the outrage of the city’s middle classes. ‘The light thrown day by day on the conduct of the directors’, it stated, ‘puts a blacker aspect on their culpability. They have made shipwreck of a noble institution; they have recklessly divided the plunder among themselves and their friends; and they have inflicted misery and ruin on thousands of innocent sufferers. Scotland was proud of its banking system, but they have smirched its fair fame beyond recleansing.’2 The Bank, it transpired, had managed to accumulate liabilities exceeding its capital and reserves by something in the region of £5million, and the directors had hidden this dire situation from shareholders and the public alike through the issue of fraudulent annual balance sheets since at least 1873. Moreover, some three-quarters of the Bank’s total debt were attributable to only four accounts – the ‘infamous accounts’ or the ‘deadly accounts’ as they became known – which belonged to men associated with the Bank’s directorate. These accounts were: James Morton and James Morton & Co, Australia merchants, Glasgow Smith, Fleming & Co, East India merchants and commission agents, London James Nicol Fleming, East India merchant and commission agent, Glasgow J. Innes Wright & Co, East India merchants and commission agents, Glasgow Total

£2,438,000 £1,833,000 £1,269,000 £477,000 £6,017,000

has received detailed treatment in R.E Tyson, ‘The Failure of the City of Glasgow Bank, 1878’, Business Archives Council of Scotland Newsletter, 6 (1971–2), pp. 6–9, R.E.Tyson, ‘The Failure of the City of Glasgow Bank and the Rise of Independent Auditing’, The Accountant’s Magazine, 78 (April 1974), pp. 126–31, and R.N. Forbes, ‘Some Contemporary Reactions to a Banking Failure’, The Three Banks Review, 121 (March 1979), pp. 42–57. 2 The Glasgow Herald, 7 Oct. 1878. 254

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

The origins of much of this debt dated back to the Overend Guerney crisis of 1866 but the sums had accumulated over succeeding years – as those in debt were unable to reverse the fortunes of their business ventures and increasingly relied on the Bank to keep them afloat. For many years James Morton had been a close business associate of Lewis Potter, one of the Bank’s longestserving directors, in the conduct of trade and shipping between Scotland and Australia, and in particular in the property speculations of the New Zealand and Australian Land Company. Potter’s influence enabled Morton to become the Bank’s largest single debtor. The other three accounts were all linked to India and to the former director, James Nicol Fleming. In addition to Fleming’s own debts, substantial sums were owed by other family firms – Smith Fleming & Co, the London house of his older brother, John, and J. Innes Wright & Co, the Glasgow firm of his cousin, John Innes Wright. James Nicol Fleming’s Glasgow house lost substantial sums in the crash of 1866, but he went on to open up new firms in Manchester and Calcutta with the aid of advances from the Bank. He also appears to have conducted business in Glasgow with and through J. Innes Wright & Co. When, in 1876, the size of his personal debt to the Bank eventually persuaded the rest of the directors to ask for his retirement from the Board, he was succeeded as a director by Wright. From 1866 to 1876 Potter and J.N. Fleming had operated between them a policy of unrestricted advances towards a few privileged individuals and firms, in ways that were largely concealed from the other directors. The manager, Alexander Stronach, abetted them in this until his replacement by his brother, Robert, late in 1875. Only at that point did the Board as a whole become fully aware of the extent to which the Bank had become over-extended financially, and it chose to continue to conceal the situation within the Bank’s balance sheets. As these details became public in October 1878, disgust and despair swept through the city. ‘There has been an unscrupulous use of facilities too lavishly bestowed on some men of enterprise’, Michael Connal noted in his diary. ‘What a calamity! Many friends involved whose resources must be abridged.’ And a few days later: ‘Oh! What a wreck of character and what a stain on the city . . . The Free Church and Sabbath School teaching is sneered at because some of the managers of the City Bank stood prominent in these matters.’3 In the prevailing mood of anger and retribution, the procurator fiscal for Lanarkshire moved quickly. On 19 October warrants were issued for the arrest of the serving directors, the manager and the secretary of the Bank, and by 29 October they were all in custody, formally charged with two counts of fraud and theft. Meanwhile, James Nicol Fleming disappeared from Glasgow. Rumour suggested that he had fled to Spain but the police were more inclined to believe that he was in hiding in London. A ‘hue and cry’ warrant was issued, authorising his arrest wherever he was to be found, but by the time his

3

J.C Gibson (ed.), Diary of Sir Michael Connal, 1835 to 1895 (Glasgow, 1895), pp. 171–2. 255

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James Nicol Fleming former colleagues at the Bank came to trial, in January 1879, he had moved to the relative safety and comfort of the USA. The directors and manager all received prison sentences for their part in the downfall of the Bank – Lewis Potter and Robert Stronach eighteen months each, and the others eight months each.4 Of those originally charged, only Charles Leresche, the Bank’s secretary, escaped punishment. Police enquiries subsequent to his arrest established that Leresche had been excluded from any direct contact with the ‘deadly accounts’, and he himself agreed to act as a witness for the prosecution. As a result, the charges against him were dropped and he did not stand trial.5 For William Mackinnon and his family and friends in Scotland, who had watched these events unfold with considerable alarm, the fact that Leresche did not appear in the dock was a matter of some relief. Of all those responsible for the Bank’s affairs during the 1870s he was the one closest to their own inner circle. Even so, the connection to the Bank through Leresche (who had 4 For a complete transcript of the trial, its preliminaries and its outcome, see W. Wallace (ed.), Trial of the City of Glasgow Bank Directors (Glasgow, 1905). 5 The Glasgow Herald, 30 Dec. 1878.

256

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obtained his post in 1871 through William’s influence) was only one of several strands tying William Mackinnon and his family firms to the Banks’ affairs and, in the mind of the general public, to the scandal of its demise. Although William had resigned from the bank’s directorate in 1870, and had sold his shares in the Bank in 1874, he was the only former member of the Board to have achieved national prominence. There were also residual links between the Bank and the Mackinnon group. The elderly Robert Salmond, who had founded the Bank and assisted William Mackinnon to finance the group’s expansion between 1857 and 1870, was still on the boards of BI and NISM. Above all, William was known in the West of Scotland to have had close business and social relations with the two Fleming brothers, John and James Nicol, whose financial travails had contributed so powerfully to the Bank’s failure. He had in fact been instrumental in introducing J.N. Fleming to the Bank, and in securing his appointment as a director. By now, William Mackinnon had transferred the main seat of his entrepreneurial activity to London, and he must have believed that he had shaken off his Glasgow business background. Nevertheless, it was impossible to protect him and his family firms from the tide of rumour and moral outrage that swept though the West of Scotland in the later months of 1878. The rumours mainly concerned the connections with the Flemings. Thus James Nicol Fleming’s flight from justice, it was widely believed, had been conducted by sea. One version of events was that ‘he left the Argyllshire coast by means of a specially-chartered steamer’, while another, which circulated in trade and shipping circles in Greenock, maintained that ‘the new British India steamer Simla which left the Tail of the Bank might have taken Mr Fleming on board off Canytyre & proceeded with him to Spain’.6 The truth was more prosaic. Fleming, who had been in and out of W. Mackinnon & Co on the day after the Bank stoppage, was well aware of the likely course of events. ‘Poor fellow’, Peter Mackinnon wrote, ‘he looks much cut up. I never saw him so low. I suppose when the City Bank’s accounts are gone into, his large indebtedness . . . will show up.’7 Fleming took himself off to London to escape his creditors, and from there, once the warrant for his arrest had been issued, he fled to the USA. Much more serious than fanciful charges of abetting J.N. Fleming’s flight were rumours that the Mackinnons and Halls had lost large sums of money as a result of their connections both with the Bank and with the Fleming 6 Manchester Guardian, 24 Oct. 1878; J.W. Wood, Glasgow Herald Office, Greenock, to J. Dickie, 28 Nov. 1878, enclosure in Dickie to P. Hall, 29 Nov. 1878, Hall Mss. Bundle 1. A rumour which still survives as a folk tradition in the Campbeltown area had William Mackinnon’s private yacht picking J.N Fleming up at his home at Keil, on the southern tip of the Kintyre peninsula, and spiriting him off to Spain. This was most unlikely because at the time William possessed no sea-going yacht, only a small steam launch suitable for inshore work. 7 Peter Mackinnon to Duncan Mackinnon, 2 Oct. 1878, Nat. Lib. Acc. 6168/10.

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brothers.8 Such suspicions could affect the credit-worthiness of their firms. W. Mackinnon & Co in Glasgow and Mackinnon Mackenzie & Co in Calcutta briefly found local banks unwilling to undertake transactions for them. These difficulties were further complicated by the fact that the General Credit & Discount Co suspended its discounting operations in London for some weeks after the collapse of the Bank. The General Credit was one of the City of Glasgow Bank’s largest creditors (the biggest being the Union Discount Corporation of London) and it had played some part in the sequence of events that brought the Bank down. The Bank had borrowed money from General Credit against the security of its Western Union Railroad securities, and it was the unwillingness of General Credit to advance more than the £90,000 already lent that drove the directors towards the Edinburgh banks and the decision to suspend.9 General Credit, however, had also been doing business directly with those whose large debts brought the Bank down – in June 1878, for example, it advanced £60,000 ‘for account of Mr J.N. Fleming & other interests’.10 William Mackinnon was still a director of this London financial institution, which was managed by his close friend James Macdonald, whose son-in-law, Charles Leresche, was in turn secretary of the City of Glasgow Bank. That General Credit should have been willing to lend so much in the months preceding the Bank’s closure suggests that none of the three was fully aware of its grim financial conditions or the state of its principal debtors. Although the extent of the General Credit’s liabilities after the Bank’s closure are unknown, the position was sufficiently serious for it to suspend discounting and to be forced to realise some of its assets.11 The Mackinnon group firms were in a relatively sound financial position in 1878 and readily worked their way through the short-term contraction of credit. One reason for this was that, despite the worries of others, they had very few continuing business connections with either the Bank or the Fleming brothers.12 Although it is impossible to say how much the failure of the Bank and the Fleming firms cost either William Mackinnon personally or the group as a whole, it seems unlikely to have been more than a few thousand pounds. The reduction in business transacted by the Glasgow house, and the group’s transition from general merchanting to shipping, had

8

J.M. Hall to William Mackinnon, 31 Oct. 1878, MP Private Letters File 39. The Manchester Courier, 21 Oct. 1878. 10 P. Hall to J. Macdonald, 18 June 1878, Hall Letterbook I. 11 Peter Mackinnon to Duncan Mackinnon, 3 and 17 Oct. 1878, Nat. Lib. Acc. 6168/10; J.M. Hall to William Mackinnon, 27 Oct. 1878, MP Private Letters File 39. 12 The day after the Bank’s closure Jamie Hall commented from Glasgow that W. Mackinnon & Co ‘have good cover for everything but £5,000 from SF&Co [Smith Fleming] and all the paper in their portfolio save £6,000. . . . They have not a single bill out that had been discounted at the CGB and their current account with the Bank is £400 at credit. The B.I.S.N. Co is at £700.’ (J.M. Hall to Duncan Mackinnon, 2 Oct. 1878, Nat. Lib. Acc. 6168/13.) 9

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weakened the older ties to the Bank and the Flemings. Moreover, William Mackinnon had gradually become aware – at least in a general way – of the financial struggles of the Flemings and their firms, and was unwilling to become too deeply involved with them in any business arrangement. In fact, his relationship with the two brothers had evolved into one in which he played the role of successful friend who periodically held out a helping hand to those who had fallen on hard times. At first it was John who needed assistance. Following the collapse of their Liverpool agents, Nicol Duckworth & Co, in 1870, things seemed to go from bad to worse for John Fleming and his firms in London, Bombay and Karachi. Times were relatively difficult for firms engaged in Indian commerce – with recessions in 1873–4 and again in 1877–8 – and in particular those involved with sailing ships, like the Flemings, were feeling the competition of steamers in UK-India trades. John’s problems were compounded, however, by the fact that in addition to the needs of Smith Fleming & Co in London, W. Nicol & Co in Bombay, and J. Fleming & Co in Karachi, he had also taken upon himself the task of maintaining two struggling firms in the Burmese trades (T.D. Findlay & Co of Glasgow and its corresponding house of Todd Findlay & Co of Rangoon) as well as the Colombo firm of Fowlie, Richmond & Co. On top of that he was doing his best to carry the business interests of his younger brother.13 By 1878, the strain was becoming too great. ‘Times are very hard here just now’, Peter Hall wrote to Calcutta in September of that year, ‘and I fear much the winter won’t pass over without some smarting among some people in the E.I. trade. Our London friends [Smith Fleming & Co] must be pretty tight at present.’14 Indeed they were – and John Fleming had just borrowed £15,000 from William Mackinnon.15 Meanwhile, Smith Fleming & Co’s debts to the City of Glasgow Bank, which had risen from £260,332 in 1870 to £919,820 in 1871 (as a result of the failure of Nicol Duckworth & Co), had further doubled in size, to reach £1,833,000 by 1 October 1878. But if John Fleming’s business houses were in trouble in 1878, his brother’s were in dire straits. James Nicol Fleming’s firm in Manchester, Fleming Galbraith & Co (which he established in 1871 with his brother-in-law, Archie Galbraith), seems to have been successful enough. On the other hand, the firm of J. Nicol Fleming and Co, which he set up in Calcutta in 1868, proved to be a major loss-making operation. In 1874, James Nicol went out to Calcutta to try to turn things around. His partner there, William Grant, had withdrawn from the firm, leaving its affairs in some disorder. William Mackinnon asked Duncan Mackinnon to put James up and give some dinner parties for him.

13

Evidence of John Fleming in Wallace, Trial of the City of Glasgow Directors, p. 212. P.Hall to T.M. Russell, 26 Sept. 1878, Hall Letterbook I. 15 J. Fleming to William Mackinnon, 25 Sept. 1878, MP City of Glasgow Bank [hereafter COGB] File 4. 14

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Such marks of Mackinnon Mackenzie & Co’s favour were no doubt intended to assist James within the competitive world of Calcutta business. A new firm, Nicol Fleming & Co, was duly set up, involving a partnership with yet another of J.N. Fleming’s many cousins, Dyce Nicol, who had a merchant house in London – but again to little avail. William remained very supportive – ‘I have a great regard for him and would like much to see him prosper’ – and authorised a loan from Mackinnon Mackenzie & Co to Nicol Fleming & Co against the somewhat dubious security of an old stock of coal.16 By then, however, James had lost his seat on the City of Glasgow Bank, having been compelled to resign by his fellow directors, and nothing could save his firms from extinction. He began the process of winding up his business affairs. He withdrew from the Manchester and Calcutta firms, declaring his intention to confine himself to farming in Kintyre and living, it was rumoured, ‘on the interest of his wife’s settlement’.17 William Mackinnon, who ‘was very sorry to learn he [James] has not improved his position much by his Calcutta business’,18 was determined to stand by a friend in need. Together with John Fleming, he tried to tidy up some of Nicol Fleming & Co’s unfinished business, merely to arrive at the conclusion that that firm would have to go into liquidation and that Mackinnon Mackenzie & Co should take over the lease of its Calcutta premises. To show solidarity with his old friend and ally, William spent Christmas Day of 1877 at James Nicol’s house at Keil, along with Jamie Hall and his sister Grace. In the midst of the presumably subdued celebrations, William agreed to help out financially – by buying out James’s interests in Mackinnon Frew & Co’s sailing ships for approximately £10,000 and lending him a further £1,500.19 ‘I am very sorry indeed for James Fleming’, he wrote to Duncan in Calcutta. ‘He has been sorely tried & beaten down, and this complication of NF&Co [Nicol Fleming & Co] appears to weigh heavily on him. He has much vigour and business knowledge & ability, and I have often thought that if he were entirely free from all his entanglements & if we required sufficient help in Calcutta for 2 or 3 years we might be able to utilise his services with advantage to ourselves as well as to him.’20 Ten months later, James Nicol Fleming was a fugitive from the law – the central figure in a financial scandal that rocked Scotland and had the potential to pull down William Mackinnon. The Mackinnons and Halls had continued to consort with the Fleming brothers as the latter fell ever deeper into debt during the course of the1870s. William in particular showed a predisposition to assist them financially that

16 William Mackinnon to Duncan Mackinnon, 10 Aug. 1876 and 16 May 1877, Nat. Lib. Acc. 6168/7. 17 Peter Mackinnon to Duncan Mackinnon, 24 July 1877, Nat. Lib. Acc. 6168/10. 18 William Mackinnon to Duncan Mackinnon, 13 July 1877, Nat. Lib. Acc. 6168/7. 19 William Mackinnon to Duncan Mackinnon, 26 Dec. 1877, Nat. Lib. Acc. 6168/7. 20 William Mackinnon to Duncan Mackinnon, 12 Dec. 1877, Nat. Lib. Acc. 6168/7.

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reflected both personal friendship and gratitude for the way that the Flemings had helped to transform BI’s steamship services into an India-wide operation. Given that, how well informed was he about the state of their business affairs, about the scale of their dependence on the City of Glasgow Bank, and about the methods by which J.N. Fleming ensured that money would flow from the Bank’s coffers to his own and his brother’s firms? The evidence points towards his having only a limited knowledge of what was taking place. William certainly knew that John’s own business group was struggling during these years. However, he seems to have had little hard information about the true scale of these problems or the fact that John’s various firms were being kept afloat only by very large advances from the City of Glasgow Bank. Equally, although he was well aware by 1877 of James Nicol’s abject failure at reconstructing his mercantile fortune, he does not seem to have known anything of the way that James had manipulated his directorship in the Bank to his own ends or the true extent of his debt to the Bank. Peter Mackinnon, who acted as William’s personal assistant when he was in Scotland, and who therefore probably knew as much as William did, believed as late as 2 October 1878 that James owed the Bank somewhere between £150,000 to £160,00021 – a large sum, but one that was only a fraction of the true figure. The failure of the Bank and the revelations that followed seem to have caught William and the others in his family circle completely by surprise. It was certainly a series of events for which they had laid no plans. The closure of the Bank, the collapse of Smith Fleming & Co and the rest of John Fleming’s mercantile network in South Asia, the arrest and trial of the Bank’s directors, and the disappearance of James Nicol Fleming all involved them in a scramble to sort out various problems. This included establishing who owed what to whom, and whether and when the accounts would be settled, and mobilising funds from India to ensure continuing liquidity at home. It meant finding buyers among themselves or their friends for the shares in BI, NISM and other group enterprises of which the Flemings, their connections such as the Galbraiths, and others like the Salmonds and Stronachs, now hurriedly divested themselves. They also had to do this in such a way as to avoid depressing the share values.22 It meant replacing Robert Salmond with Alex Fraser (now retired from Batavia and living in London) on the boards of BI and NISM. And above all it meant making appropriate arrangements for BI agencies in various Indian Ocean ports. In Burma, the closure of Todd Findlay & Co left gaps in the agency network in Rangoon and Moulmein,

21

Peter Mackinnon to Duncan Mackinnon, 10 Oct. 1877 and 2 Oct. 1878, Nat. Lib. Acc. 6168/10. 22 P. Hall to A. Galbraith and J. Galbraith, 5 Oct., 1878, and to William Mackinnon, 17 and 21 Oct. 1878, and 10 Sept. 1879, Hall Letterbook I; J.M. Hall to Duncan Mackinnon, 23 Oct. 1878, Nat. Lib. Acc. 6168/13; William Mackinnon to J. Macdonald, 27 June 1879, MP Misc. Commercial File 67. 261

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which were quickly filled by the appointment of Bulloch Bros and a Mr W. Kennedy respectively. What to do with the agencies in Bombay and Karachi, however, was an altogether more difficult problem. The closure of W. Nicol & Co deprived BI of its most important agency in India after Mackinnon Mackenzie & Co. Instructions were telegraphed to Calcutta to send J.L. Mackay round to Bombay to take charge of the agency there in the name of Mackinnon Mackenzie & Co, and also to make temporary arrangements for Karachi where Fleming & Co had closed. This was a significant career step for Mackay, giving him responsibility for BI operations in Western India. He moved quickly and decisively to establish a Mackinnon Mackenzie & Co presence in Bombay, and secured the services of a former Fleming & Co assistant, named McIver, to take temporary charge of the agency in Karachi. Duncan Mackinnon and the other active partners in Calcutta wanted these arrangements to become permanent, thereby creating Mackinnon Mackenzie & Co branches in the two cites, but back in Scotland there were doubts about such a policy of branch development. William in particular was more attracted by the idea of transferring the Bombay agency to a well-established local firm, because it was not clear if the Bombay and Karachi branches could operate on the basis of commissions alone, thereby avoiding the need to use Mackinnon Mackenzie & Co’s capital in trade.23 A further complication was John Fleming’s desire to have the BI agencies returned to him. Somewhat extraordinarily, given the size of its debts, Smith Fleming & Co’s creditors agreed in November 1878 that the firm should be wound up by voluntary liquidation rather than through bankruptcy. This in turn meant that John Fleming was legally free to start a new business and he had ambitions to re-establish himself in India, using his former BI agencies as a means to that end. He therefore pressed William to return them to him.24 William was clearly torn between loyalty to one of his oldest friends and the need to avoid any further entanglement in his discredited affairs. It was a difficult decision. ‘I told John Fleming on Saturday’, he wrote to Jamie Hall, ‘our resolution not to give him the agency at present. I thought he would have fairly fainted. He was greatly distressed. It was very painful to me.’25 That John had become an embarrassment to both of them was made even more clear by Jamie’s admission that he had written to Duncan Mackinnon that ‘I did not think it would be needful that he should offer John Fleming quarters in Bombay on his arrival, or perhaps politic in the present position of things.’26 Only some months later, once the

23

P. Hall to W.P. Alexander, 29 Oct. 1878, Hall Letterbook I; William Mackinnon to Duncan Mackinnon, 8 Feb. 1879, Nat. Lib. Acc. 6168/8. 24 J. Fleming to William Mackinnon, 28 Jan. 1879, MP COGB File 4. 25 William Mackinnon to J.M. Hall, 25 Feb. 1879, Nat. Lib. Acc. 6168/14. 26 J.M. Hall to William Mackinnon, 24 Feb. 1879, MP Private Letters File 39; D. Mackinnon to J. Fleming, 30 Dec. 1879, Nat. Lib. Acc. 6168/5. Duncan Mackinnon 262

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

publicity surrounding the trial of the directors had died away, did William and Jamie salve their consciences – by giving John Fleming drafts of £2,500 and £2,000 respectively against their private accounts with Mackinnon Mackenzie & Co. These John drew on as capital when, in December 1879, he started up in business again in Bombay, under the name of Melville & Co.27 The small act of charity towards John Fleming contrasts with the marked breakdown of relations with James Nicol Fleming – who by his actions at the Bank and his flight to the USA had put himself beyond the pale as far as the Mackinnons and Halls were concerned. Although John’s downfall came about through bad luck and folly, James had been revealed as a fraudster and criminal – and his notoriety in Glasgow carried for all of them the dangers of guilt by association. This was particularly true of William Mackinnon, who had been James Nicol’s patron on his return to Glasgow from India in 1863 and who had served with him on the Board of the Bank until 1870. That William must also have been party to the internal corrosion within the Bank was a thought that occurred to many people once the scandal broke, and which surfaced from time to time in the press. Rumours of William’s collusion with J.N. Fleming and others in bringing down the Bank were circulating around Glasgow within days of the closure – rumours that seemed to originate from sources close to the Bank’s liquidators.28 It seemed unfair to many that William and the rest of his family circle had escaped the cruel burden of unlimited liability which had crushed so many of the Bank’s shareholders. Nevertheless, there was still the possibility that his wealth might be tapped, and some form of public retribution obtained, if criminal liability for the Bank’s mismanagement could be established. Central to this was the question as to when the system of over-generous lending backed by fraudulent accounting actually began. Was it only in 1873, the year at which the investigators appointed by the other Scottish banks happened to stop their

was less charitably disposed to John Fleming. He prohibited James Mackay from offering Fleming accommodation and hospitality in Bombay: ‘John Fleming is not an ordinary individual and after the way the Glasgow papers wrote and people talked of my uncle, mainly no doubt owing to his friendship with JF and JNF, I suspect the seniors at home don’t think it would be judicious to show too much friendliness yet.’ (D. Mackinnon to J.L. Mackay, 28 Nov. 1879, Nat. Lib. Acc. 6168/5.) 27 J. Fleming to Duncan Mackinnon, 3 and 12 Dec. 1879, and 12 Jan. 1880, Nat. Lib. Acc. 6168/14; see also Mackinnon Mackenzie & Co accounts for 1879–80, MP India File 24. 28 ‘Don’t be alarmed about the nasty remarks regarding poor Uncle [William] in the CGB affair’, Peter Hall wrote to Duncan in Calcutta. ‘The remarks are simple envy and jealousy because none of us are in the list of shareholders. There is a dead set on him, the object, I fully believe, simply to extort money. When the list of shareholders first appeared, many were surprised & annoyed that his name did not appear on it. As the remarks went, it would be a good name to have a pull at, and I believe search was instituted in the Bank Books to find out if in the transfer of his Stock in 1874 a flaw could not be found.’ (P. Hall to Duncan Mackinnon, 23 Oct. 1878, Nat. Lib. Acc. 6168/13.) 263

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backwards trawl through the Banks’ accounting practices, or was it even earlier – when William Mackinnon was still a director? The Glasgow correspondent of the Manchester Courier thought the latter more likely. The Bank had entered ‘this rotten system of financing . . . certainly more than five years ago, for then the efforts to conceal it became so desperate as to necessitate the cooking of the accounts; but it may have been as long as ten years ago.’29 A few days later a Glasgow Herald editorial was even more explicit, stating its ‘desire to carry the investigation for fraudulent proceedings back beyond 1873. We have repeatedly urged that it is quite possible that some important contributories, in past directors, might be brought in to help bear the burden, and so lighten it to the present shareholders.’30 In other words, if William Mackinnon, the only ‘past director’ of any consequence and certainly the only one possessing a business fortune, could be brought to book the liquidators of the Bank would be able to relieve him of large sums of cash. Amid the ‘innuendoes and insinuations thrown at Mackinnon in connection with the Bank’s affairs’31 there therefore lurked the possibility that William might find himself in the dock alongside those who had been directors between 1873 and 1878, or become the subject of separate criminal proceedings. It was a possibility that he took seriously and James Hall, acting on his behalf, consulted Donald Beith, a solicitor whose family origins lay in Campbeltown and who was now a partner in the prominent firm of Murray, Beith, Murray in Edinburgh. Beith’s opinion was that there was more likelihood of a civil suit than criminal proceedings32 and he advised avoidance of all contact with those involved in the forthcoming trial of the Bank directors. Consequently, William kept a low profile during the months between October 1878 and February 1879, spending most of his time in London and passing through Glasgow only hurriedly on the way to and from Kintyre. None of the Mackinnons or Halls participated in the trial. It was left to R.H. Evans, the secretary of the Netherlands India S.N. Co, for example, to come up from London to be a character witness for Robert Salmond. This deliberate effort at distancing themselves from the publicity surrounding the event had the desired effect. During the trial proceedings in late January and early February 1879 William’s name surfaced only occasionally and in passing, and public anger and hostility was focused on those actually in the dock rather than someone whom many believed should also be there.

29

The Manchester Courier, 21 Oct. 1878. The Glasgow Herald, 23 Oct. 1878. 31 P. Hall to T.M. Russell, 29 Oct. 1878, Hall Letterbook I. 32 ‘He has little doubt that the liquidators will try to get money out of you, and that it may be found better to compromise the matter by the payment of something to get rid of the worry of the thing, but that you have nothing more to fear.’ (J.N. Hall to William Mackinnon, 27 Oct. 1878, MP Private Letters File 39.) 30

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Meanwhile, William’s thoughts turned to the civil action that might be forthcoming. The liquidators of the Bank comprised prominent Edinburgh and Glasgow chartered accountants together with the secretary of the Clydesdale Bank, the group being led by the redoubtable George Auldjo Jamieson. They had unleashed a flood of litigation in the Scottish courts – mainly against debtors or shareholders reluctant to recognise their obligations – and it seemed only a matter of time before they got round to the Bank’s wealthiest former director. It proved to be a long and hard winter. On top of all the normal pressures of business William suffered a viral infection ‘which threatened to extend to an old weak spot in the left lung’33 and he had to deal with the many disturbances caused by the collapse of the Bank. By March 1879 the strain was beginning to show.34 With the arrival of spring, however, and no sign of any move by the liquidators, William’s mood improved and normal life returned to the family business group. During 1879 and into the early months of 1880 memories of the troublesome weeks of October 1878 gradually faded, and it began to appear that the Mackinnons and Halls had finally escaped from the complications of the bank failure. But the relief was premature. The liquidators were not finished with William Mackinnon. Their determination that he should be made to pay for his association with the failed institution, and the misery it had caused, had been converted into a long and detailed investigation of the Bank’s records for any evidence of wrong-doing during his period as a director. The investigation, carried out by a Glasgow accountant, James Muir, focused on the affairs of the American railway line with which William had been particularly concerned during the late 1860s. By May 1880 the liquidators believed they had gathered enough ammunition to sustain an assault on the biggest name formerly associated with the Bank. Rumours about an impending action sent William and Jamie scurrying through to Edinburgh to consult with Donald Beith. Although the likely form of the action was unknown, it was believed that it would centre on advances made by the Bank to the Western Union Railroad. William was both despondent and defiant. ‘Many an hour’s hard work I had at that [the railway] doing my very best to protect the bank, and this is the reward. I shall of course fight it out & out as I would any ordinary barefaced attempt to extort money.’35 When the summons was eventually issued in the Outer House of the Court of Session in Edinburgh on 30 June 1880 it became clear 33

William Mackinnon to Duncan Mackinnon, 12 Dec. 1878, Nat. Lib. Acc. 6168/8. ‘I should like a few weeks quiet now’ he wrote to Duncan, ‘and rest free from all business as I don’t feel that I have recovered from the constant worry and depressing cares and anxieties of the past winter. I feel I have much to be thankful for all thro’ . . . but it was uphill work, being rather hindered than helped by those who ought to have cheerfully assisted to bear the burden & fight the battle.’ (William Mackinnon to Duncan Mackinnon, 21 March 1879, Nat. Lib. Acc. 6168/8.) 35 William Mackinnon to H.S. Sanford, 27 May 1880, Sanford Papers. 34

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what the liquidators had in mind. They sued William for £122,565 2s 8d, a sum alleged to have been lost to the Bank when they, the liquidators, sold its Western Union securities as part of the process of realising the Bank’s assets. The essence of their claim was that the deal that William had brokered eleven years before, with Alexander Mitchell of the Milwaukee and St Paul Railroad, had been a poor one for the Bank and had resulted in the liquidators having to sell the Western Union securities for less than their true worth.36 In all, the liquidators realised about £687,300 from the sale of the Bank’s American railway securities, but this fell well short of the £1,016,000 that had been advanced against them in the Bank’s books. The claim against William Mackinnon was based on the allegation that bonds and stock exchanged for 6 per cent bonds of the Chicago, Milwaukee and St. Paul Railroad in the course of liquidating the railway securities had carried a debt against them of £583,041 in the bank’s accounts, but the liquidators had received only £460,476 when they then sold the new bonds on to a USBritish financial syndicate. The difference of £122,565 was said to be ‘the loss sustained by the Bank in consequence of the defender’s fault, and his violation and neglect of duty as one of the Directors of the Bank’.37 William and his associates began to prepare his defence. They were well aware of the efforts to sell the railway securities in the USA and had already formed the view that the liquidators and their agents had made a poor fist of their disposal. The brunt of the defence, therefore, was to establish that the alleged losses resulted more from the actions and decisions of the liquidators in selling the securities in 1879 than any over-valuation of the securities by the Bank while William was a director. A ‘team’ was put in place to marshal the evidence and arguments.38 During August and September 1880 William and Donald Beith were in daily communication about the evidence

36 For the complicated history of the sale of the Bank’s Western Union securities, see R.E. Tyson, ‘Scottish Investment in American Railways: The Case of the City of Glasgow Bank, 1856–1881’, in P.L. Payne (ed.), Studies in Scottish Business History (London, 1967), pp. 406–9. 37 ‘Unclosed Record in Causa: The City of Glasgow Bank and Liquidators Thereof, against William Mackinnon’, First Division, 14 Jan. 1881, MP COGB File 47. 38 In Glasgow, Charles Leresche delved into the Bank’s records for any relevant information, and in London, a prominent accountant, R.P. Harding, was hired to advise on the accounting practices associated with the action. More remarkably, G.A Thomson, the former managing director of the Western Union Railroad, came forward to assist. Thomson had been employed by the liquidators for a period in 1878–9, as one of their agents in selling the railway securities in the USA, and reacted to the disappointment of being dropped from that role by switching to William’s side. Thomson’s principal contribution to the defence was the preparation of a pamphlet to be published in William’s support. He was also the progenitor of the idea that because the liquidators held William ‘responsible for the American securities’ they should have given him the first right of purchase, at the price standing in the Bank’s books. (G.A. Thomson to William Mackinnon, 15 Sept. 1880, MP COGB File 25.)

266

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coming forward from a search of the Bank records conducted on behalf of both parties, and they were confident of success. ‘The more the case is gone into I think it looks better for me’, William wrote, ‘and this is certainly the view my Edinburgh agent takes so far as yet appears.’39 William and Beith suspected that the liquidators had ‘sacrificed’ the American railway securities in the interests of a quick sale, and believed they could establish this in court.40 William certainly appeared to be in a favourable position, since the brunt of proving that he was responsible for the alleged losses fell on his opponents. When his lawyers’ counter-arguments against the action were formally lodged with the Court of Session in January 1881, they pointed out that the liquidators had turned down an offer (from the Chicago, Milwaukee and St Paul Railroad) that would have realised £120,000 more than they eventually got. Furthermore, William Mackinnon had received no notice of the liquidators’ intentions to sell the railway securities. ‘Had notice been given to the defender he would have been prepared, although not bound, to take over the securities held by the Bank and to pay the amount of the advances made thereon and interest, and the pursuers are not therefore entitled to charge him with any deficiency arising on the realisation of the securities by them.’41 The liquidators’ claim for £122,565 may well have been in the nature of a ‘fishing trip’, to see if William would reach an out-of-court settlement. Alternatively, they may have intended to press the action but began to doubt the chances of success. Whatever the case, by mid-November 1880 the liquidators were no longer content with a single action, and launched another one in the First Division of the Court of Session. This second action was raised under Section 165 of the Companies Act of 1862. It alleged that William Mackinnon was negligent in his duty as a director of the Bank because he had failed ‘to take care that not more than the nett profits arising and accruing to the Company should be divided each year among the partners, and that dividends should only be paid out of the nett profits of the Company’. The liquidators argued that interest due on the Bank’s American railway securities prior to 1870 had not be paid, but had been treated as a credit in the annual profit and loss account, on the basis of which dividends were then paid to the shareholders. They sought the sum of £311,666 16s 9d, which they estimated as the amount of interest that had been so ‘misapplied’, and claimed that William had ‘been guilty of misfeasance or breach of trust in relation to the Bank’.42

39

William Mackinnon to R.P. Harding, 11 Aug. 1880, MP COGB File 31. William Mackinnon to D. Beith, 4 Dec. 1880, and Beith to William Mackinnon, 6 Dec. 1880, MP COGB File 35. 41 ‘Unclosed Record in Causa: The City of Glasgow Bank and Liquidators Thereof, against William Mackinnon’, MP COGB File 47. 42 ‘Note for G.A. Jamieson and others (Liquidators of the City of Glasgow Bank) against William Mackinnon’, 13 November 1880, MP COGB File 47. 40

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These were serious charges, and William was incensed. ‘I feel as if the attempt made to ruin me is a dishonest attempt, intended to extract money from me by the fear of a protracted law-suit.’43 He attempted to have the action thrown out by the Court of Session in January 1881– on the grounds that it was ‘an unfair and oppressive proceeding’, that it was too late in being initiated and that it was neither relevant nor competent under the 1862 Act. When that tactic failed, his counsel petitioned for leave to appeal to the House of Lords.44 These increasingly desperate efforts to have the second action set aside reflected William’s growing concern at the probable effects of protracted litigation on his reputation as a business man and on the creditworthiness of both himself and his firms. As his counsel put it: ‘the position of a merchant, whose credit is everything, with a claim of £300,00 hanging over his head, is one I am sure the Court will give due regard to.’45 The judges, although sympathetic, were not to be moved, making clear their intention to hear the facts of the case. By now, William was devoting almost all of his time to the demands of his defence. He was seriously distressed by his situation and alarmed at the apparent determination of those wishing to pursue him. ‘I feel my enemies the Liquidators and those acting with them’ he wrote in February 1881, ‘are bitter and malicious in their action, and that truly without cause. They have given me much work and worry, and seem relentless. If they fail in these actions it will not be their fault if they do not try to raise some others.’46 Since his lawyers couldn’t get the second, and potentially more damaging, action thrown out of court, the next best thing would be to have it heard as soon as possible, and limit the period of waiting and uncertainty. To this the judges of the Court of Session were more amenable. After several meetings with William’s representatives, Lord Shand agreed that the date for ‘the proof’, that is the public examination of witnesses, should be set for 11 May 1881, and that various steps should be taken in presenting written evidence so as to limit the number of days that would be required. Preparations for the defence were intensified, including the addition to the ‘team’ of Wyllie Guild, a Glasgow accountant reputed to be the most able in Scotland after George Auldjo Jamieson. Such a reliance on the accountancy profession was dictated by the fact that the case would hinge on the nature of the Bank’s various accounts at different dates, and the trustworthiness of the accounting practices they embedded. It would be a highly technical trial, demanding from its participants both a detailed knowledge of the tortuous financial and

43

William Mackinnon to R. Irvin, 15 Jan. 1881, MP COGB File 50. ‘Answers for William Mackinnon to Note for Liquidators’, 4 Jan. 1881, and ‘Note for Liquidators against William Mackinnon’, First Division, 18 Jan. 1881, MP COGB File 47; ‘Petition of William Mackinnon for leave to Appeal in Note (Liquidators of City of Glasgow Bank), First Division, 1 Feb. 1881, MP COBG File 25. 45 ‘Petition for Leave to Appeal’, 3 Feb. 1881, MP COGB File 47. 46 William Mackinnon to R. Irvin, 11 Feb. 1881, MP COGB File 50. 44

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THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

William Mackinnon, May 1881

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managerial history of the Western Union Railroad and a command of accountancy principles and procedures. The trial commenced in the Court of Session on 11 May 1881. Although extensively covered by the Scottish Press, its proceedings, dominated by complex and sometimes highly detailed evidence, seem unlikely to have gripped the interest or imagination of the general public. The pursuers led with evidence from James Muir, who had done most of the spadework against William, as well as two of the liquidators, G.A. Jamieson and John Cameron. James Hall was also called to give evidence about his visit to the USA on behalf of the Bank in 1866 and about what he knew of the various expressions of interest in the purchase of the Bank’s railway shares at that time. The defence led with evidence from Wyllie Guild, and also called George A. Thomson, the former manager of the Western Union Railroad, Charles Leresche, the former secretary of the Bank who had also been the secretary of the London Committee for the Railroad, and R.P. Harding, a London accountant. It took six full days for examination and cross-examination to be conducted, and it was not until Wednesday 18 June that William Mackinnon took the stand to give evidence on his own behalf. He reviewed the history of his connections with the Bank, and his role in managing its railway account before his resignation from the Board. The thrust of his statement was that ‘The account was a large and anxious one’ but ‘his expectation and belief was that these securities, if properly handled, would ultimately be good for the whole of the advances and interest thereon’.47 His recollection was that when he left the Bank directorate in 1870 the amount advanced against the railway was £800,000, and he had been considerably surprised by the larger sum that became known after the Bank’s collapse. No amount of cross-examination shook him from the view that the securities held by the Bank were enough to cover the capital and interest advanced on them. ‘I congratulate you most cordially on your admirable appearance yesterday’, Wyllie Guild wrote to William, ‘– it was the one thing wanting to complete the failure of the Pursuers’ case. The general impression here [Glasgow] is that the whole affair has collapsed – and I sincerely hope that the Court will take the same view.’48 The Court, having heard all the evidence, then adjourned until 21 June 1881, when it met to consider legal arguments. These took no less than nine days to present, further prolonging William’s anxiety. The entire lengthy history of the railway was re-examined by the counsel for both parties and arguments were presented as to the wisdom or otherwise of decisions taken at various points in time. The counsel for the liquidators maintained that it had been established that, during William’s period as a director, interest debited to the railway and not paid had in turn been credited to the profit and loss account and divided as dividend. Against this the counsel for the defence

47 48

The Daily Review, 19 May 1881. W. Guild to William Mackinnon, 19 May 1881, MP COGB File 9. 270

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

argued that William had not initially been aware of the way that the interest was being handled in the accounts, but once he became so he protested against it – at first in terms of the level of interest being charged and then, shortly before he left the directorate, against the practice itself. However, the other directors had overruled him. The counsel for the liquidators also tried to throw into question the merits of the Mitchell agreement of 1869, on the grounds that other and potentially better offers were waiting in the wings. The defence countered this by arguing that the Mitchell agreement was in fact the best that was available, and threw back at the liquidators the charge that they had mishandled the Bank’s interests through their incompetent handling of negotiations with Mitchell in 1878–9. Much of the argument revolved around highly speculative claims as to what the railway securities were really worth at particular points in time and whether in the light of such valuations the judgements of William and the others concerned with the railway account were correct. Finally the defence, bearing in mind the public interest in the trial, managed to get on record the fact that ‘the circumstances which had attached discredit to the subsequent management of the bank were circumstances to which Mr Mackinnon was entirely external. Mr Mackinnon’s business was a very extensive one, and the amount of bills discounted for him by the City of Glasgow bank was only a tenth of the total discount in the course of his trade . . . There was no suggestion that he was ever indebted to the bank for accommodation in any other form, or any suggestion either that through his friends, relations or, or connections, he was ever indebted to the bank.’49 It was a long, slow process, and even William felt the need to withdraw from the proceedings from time to time. However, by 26 July the presentation of evidence and arguments was complete, and the four judges ‘made avizandum of the case’ – that is withdrew to consider their opinions. William’s initial relief that the public rigours of the trial were over, and the quiet confidence of those around him that they had put up a successful defence, gave way to some annoyance that no early decision could be expected. As summer passed into autumn without any sign that a decision was forthcoming, his resigned patience turned into anxiety. Enquiries conducted in strict confidence elicited the information that the judgement was likely to be favourable to William, and that the reason for the delay was that one of the Judges was elderly and slow.50 In the event it took almost six months for the Judges to declare their opinions. This occurred two days

49

The Scotsman, 24 June 1881. A full record of the trial is available in the form of verbatim court reports published in the Scottish Press and gathered together as ‘City of Glasgow Bank Liquidation [Newspaper Cuttings]’, Vol. 6 – 1879 (The Mitchell Library, Glasgow). 50 A. Forrester to William Mackinnon, various dates, July–October 1881, MP COGB File 6 (Andrew Forrester was Beith’s partner in Murray, Beith, Murray). 271

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before Christmas 1881, and William, having waited so long for a decision, was determined to make the most of the occasion. He was accompanied to the Court of Session that day by a group of friends who assembled to show their support. They included Sir Henry Bartle Frere, Sir Lewis Pelly and Anthony Norris, William’s London solicitor, who had travelled up to Edinburgh to stand by him in his hour of need – or triumph. The judges’ decisions were entirely and thoroughly in William’s favour. Moreover, they did not confine themselves to the second action alone, but passed comment on the first action in such a way that it too was unlikely ever to succeed. The Lord President announced that he was refusing the pursuers’ claim on three counts: first, because the Liquidators could not, in the state at which the liquidation had then reached, equitably distribute to the shareholders any sum that might be awarded; second, because the claim was barred by the lapse of time, together with the actions of the manager and directors of the bank between 1870 and 1878 and of the Liquidators in disposing of the railway securities without consulting William; and third, because ‘there was an entire failure to establish that the respondent was party to any proceedings which could properly or fairly be described as paying dividend out of capital’.51 The other three judges all concurred. The Court therefore found for William Mackinnon and awarded him expenses against the Liquidators. ‘When the judges, one after the other, all the bench’, William later wrote, ‘gave their decisions in most unmistakeable language and in a tone complimentary to me, we felt that the snare of the fowler had been broken and we had escaped away.’52 The outcome, which was greeted with cheers by William’s friends in the courtroom, received wide publicity. The Edinburgh daily, The Scotsman, commented that the case ‘had raised questions far outside the City of Glasgow Bank’s affairs. If the views of the liquidators were to prevail, there is scarcely a bank or a commercial undertaking of any kind that is not managed on false and fraudulent principles . . . [but] The practice which they founded upon as being in itself proof of fraud, is declared to be, when honestly adopted, wholly devoid of fraud, and entirely consistent with common-sense.’53 The Times was also favourable. Its Scottish correspondent claimed that public sympathy had all along been ‘very decidedly with Mr Mackinnon’, largely because of the way that the liquidators had singled him out, as a wealthy man, rather than taking action against all the directors. Although the allegations against him were factually true, ‘the question was whether this amounted to defalcation, and if so, whether Mr Mackinnon ought to be held accountable for it. Public opinion hoped that both questions would be answered in the negative, and the result has gratified public opinion.’ He concluded that ‘What the public feel most

51 52 53

The Scotsman, 24 Dec. 1881. W. Mackinnon to Gordon, 27 July 1882, Nat. Lib. 20311. The Scotsman, 24 Dec. 1881. 272

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

strongly . . . is that Mr Mackinnon had no private or selfish end to serve by the policy to which he was a party.’54 William and his defence team had emphatically succeeded in distinguishing his actions as a director from those of the men who had received jail sentences in February 1879. Not everyone welcomed the outcome of the lawsuit. The Glasgow Herald, which had been consistently hostile to William and had pushed for action against him, took the line that the accounting practices accepted by the Court of Session may not have been strictly illegal, but they were certainly reckless. It argued that any ‘managers and commercial managers’ that employed them should be considered ‘if not guilty of false and fraudulent conduct, at least to be in the fair way of making shipwreck of the undertaking. This is what the City of Glasgow Bank did during the period that Mr William Mackinnon was a director.’55 Such opinion, however, was a rare sour note in a chorus of favourable public comment. William was euphoric at what he regarded as a total vindication of his business acumen and his personal integrity. He had 1,000 copies of the judgement printed and distributed to all his family, friends and acquaintances in Scotland, London and India. He talked of financing either of his two QCs if they should wish to enter politics – and even of standing for Parliament himself. He was particularly moved by the reception he received on his return from Edinburgh to Balinakill. ‘I got home yesterday & had quite an ovation waiting me at the Gate, the whole village young and old were there & very loud in their demonstration of joy, & nearly all my time since . . . has been taken up reading the kindly letters of congratulations which have come from nearly 200 friends besides about 50 telegrams . . . One of the heartiest little notes I have is from the Duke of Sutherland.’56 Despite the rejoicing, William had not yet succeeded in escaping the clutches of the Bank’s liquidators. The latter were clearly stung by the turn of events, and in January 1882 gave notice of their intentions to appeal to the House of Lords and to continue to pursue the first action in the Court of Session. However, it was a short-lived scare. Some of the more important of the shareholders had had enough and revolted against the continued pursuit of William Mackinnon. On 18 January 1882, Murray, Beith and Murray received notification that the first action and the proposed appeal to the Lords were being abandoned. William’s long and nervous entanglement with the processes and procedures of the Scottish legal system was at an end. The threat to his public reputation had been removed. Or nearly so. One small cloud reappeared on the horizon. On 23 January 1882, only four days after the liquidators gave up against William, James Nicol Fleming was arrested at his brother-in-law’s house in Manchester.

54 55 56

The Times, 26 Dec. 1881. The Glasgow Herald, 26 Dec. 1881. William Mackinnon to H.S. Sanford, 28 Dec. 1881, Sanford Papers. 273

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James, it seems, had wearied of life in exile, and returned to England in October 1881.57 The Manchester police, alerted to his presence, had staked out Archie Galbraith’s house for several days before arresting James there. He was promptly despatched to Glasgow, to be charged in the Sheriff Court with falsifying the books of the City of Glasgow Bank on various dates between 1873 and 1875. After eight days in the Duke Street jail, he was released on bail. For William, J.N. Fleming’s return to face justice carried the danger that yet another long trial surrounding the affairs of the Bank would drag him back into public controversy or legal difficulty, or both. This explains his alarm when a letter to the editor of The Glasgow Herald, signed ‘Scrutator’ (who may have been William’s arch-enemy, James Muir), referred to the arrest of J.N. Fleming and declared that the fact that the Bank’s advances to the US railway had exceeded its capital raised an important question. ‘Were the balance-sheets never tampered with long ago in order to conceal these difficulties; and if so, to what extent have they been; and how long is it since they began to be falsified? This is a question which has never been publicly answered.’58 It seemed that James Nicol’s trial might re-open wounds that had scarcely had time to heal. However, when it began in the High Court in Edinburgh on 4 July 1882, it quickly became clear that a deal had been struck. James pleaded guilty to three of the eight charges facing him – the same three charges of falsifying balance-sheets on which the other Bank directors had been found guilty – and the Crown dropped its prosecution of the other five. After pleas of mitigation, on grounds of ‘physical and mental suffering’ during years in exile, James was sentenced to eight months’ imprisonment – the same as the lesser sentences passed out in February 1879 to the more insignificant culprits among the Bank’s directors. James got off lightly, and William avoided ensnarement in another lengthy trial and its surrounding publicity. By July, 1882, it seems, the Press, the public and the authorities had grown weary of the litigation flowing from the failure of the City of Glasgow Bank; the mood of anger and the desire for retribution had subsided.

57

John Fleming had alerted William to James’s impending return, while writing to request £500 towards the £2,000 that James hoped to raise to re-establish himself in business. Although William seems to have corresponded ‘very kindly’ with John Fleming over the matter, it does not seem that his normal charitable tendencies extended to putting up cash for James. (J. Fleming to William Mackinnon, 4 Oct. 1881, MP Misc. Commercial File 11.) 58 The Glasgow Herald, 21 Feb. 1882; A. Forrester to William Mackinnon, 25 Feb. 1882, MP COGB File 7. Just exactly when the falsification of the Bank’s accounts had started was a question to which many wanted an answer. Only two days after the Bank’s closure, Duncan Mackinnon, concerned that while ‘my uncle would not tolerate any wrong handling of accounts’ he might have been misled by Bank officials, travelled to Keil to put that question to James Nicol Fleming. James reassured him that ‘the falsification of the accounts began so far as is known in 1873, the year he [James] was chairman.’ (D.Mackinnon to W.P. Alexander, 23.Oct. 1878.) 274

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

The anti-climax of James Nicol Fleming’s trial brought the whole sorry mess to an end. ***** The failure of the City of Glasgow Bank was an event of some significance. It cut a swathe through Scottish business life, bringing sequestration and personal ruin in its train. It influenced the framing of the Banking and Joint Stock Companies Act of 1879, which introduced compulsory and independent auditing. It weakened one of London’s biggest discount houses, the General Credit and Discount, and hastened its eventual merger with a major rival. Its ramifications were even felt in such distant places as Penang and Batavia in Southeast Asia.59 Although the proximate causes of the Bank’s collapse lay in mismanagement, and the misdemeanours of individual directors, the deeper causes lay in the adventurous policies of international lending that it adopted during the 1850s and 1860s. In a city linked to US railway expansion through its exports of pig iron and iron rail, linked to Asian markets through its exports of textiles and metal goods, and linked to Australia and New Zealand though Scottish emigration and the supply of all the industrial necessities needed by settlers in new lands, it was perhaps natural that the banks, the City of Glasgow among them, should acquire some degree of exposure to international and imperial demands for trade credit and foreign direct investment. But overseas ventures carried higher risks. One of the major difficulties facing the City of Glasgow Bank was its lack of managers and directors with a knowledge of overseas markets for its financial services, and the conditions that prevailed there – other than from among those who were themselves its major customers. Too often its board lacked any independent source of advice. When that was coupled with a culture of secrecy fostered by the manager, Alex Stronach, the danger that the Bank might over-extend itself in international ventures was always very real. It all too frequently became a source of funding for Scottish expatriate entrepreneurs who had been turned down by more experienced London financial institutions. When firms trading with, and investing in, India and Australia got into difficulty during the financial crisis of 1866 and the economic depression of 1873–4, the more unscrupulous among them, led by James Morton and James Nicol Fleming, took every advantage of the weaknesses at the heart of the Bank’s management. William Mackinnon and his firms had been party to, and encouraged, the international orientation of the Bank’s lending policies from the mid-1850s. From 1866 onwards, however, they reduced their dependence on the Bank by

59 Among the several overseas firms that had depended on the Bank’s credit, and which closed as a result of its failure, were Lorrain and Gillespie of Penang and Lorrain & Co of Batavia, the corresponding houses of W.S. Lorrain & Gillespie, merchants of Glasgow.

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developing connections to City of London institutions. More fundamentally, they avoided the financial difficulties that hit their friends and allies in the Fleming group of family firms. This was partly a result of William’s decision of 1866 not to employ his firms’ own capital in trade with India and partly a consequence of their diversification into steamship lines possessing the sheet anchors of government mail contracts. Consequently, the Mackinnons and Halls neither contributed to the Bank’s growing difficulties nor suffered unduly from its demise. The autumn and winter of 1879 were a certainly a time of difficulty and distraction but there was no significant threat to the group’s core business interests. Much more serious was the decision of the liquidators to pursue William Mackinnon in the courts of law. Even more than by his connections with the Fleming brothers, he had opened himself to prosecution through his failure to attend properly to his duties as a director of the Bank during the latter part of the 1860s. He had also done so by assuming responsibility for solving the difficulties associated with the Bank’s American railway investment, partly in the hope that this might bring opportunities for himself and/or General Credit. Consequently, the months between May 1880 and February 1882 were the most difficult William Mackinnon ever had to endure. Realising that his public reputation was at stake, and that any damage to it could affect not only his family firms but also his place in the circles of ‘aristocratic capitalism’ to which he was so attracted, he threw himself wholly into the preparation and conduct of his defence. His mood waxed and waned with the various turns and twists in the legal process, and he attended to other business only fitfully and with half a mind to what was going on in and around the Court of Session. His railway-promoting activities in London slackened off during the period of the lawsuit, and his involvement with Leopold’s African project withered temporarily. He abandoned his seat on the board of directors of the General Credit and Discount, where Duncan MacNeill replaced him. BI mail contracts for East Africa were up for renewal in 1882, and he had to leave much of the preparation for the negotiations to others. His growing distaste of business life in Glasgow was reinforced. He stayed out of the city as much as he could, and grew even further detached from the affairs of W. Mackinnon & Co. His absence probably contributed to the winding-up of the Scottish ‘branch’ of the International African Association. It was a period of severe stress and strain which overlapped with the deaths of two of his oldest and closest friends (George Ponton Gunnis in July 1879 and James Macdonald in March 1881) and from which he experienced in February 1882 a psychological reaction leading to lassitude and an inability to cope with his correspondence.60 In the end, the struggle was worthwhile. He emerged in the eyes of all but a few as someone who had been vigorously and unnecessarily hounded by vengeful men, and as someone whose

60

William Mackinnon to G.A. Thomson, 23 Feb. 1882, MP Private Letters File 238. 276

THE FAILURE OF THE CITY OF GLASGOW BANK, 1878–82

contributions to the direction of the Bank had been honourable in intent and achievement – in contrast to the shoddy and disreputable actions of those who had brought the institution down. It was a victory bought at the price of short-term distraction from wider opportunities and responsibilities, but it finally left him free to renew his pursuit of his own and his family firms’ evolving business interests. This included the realisation of a long-standing dream – a break-through into Australian trade and shipping.

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Part 3

Shipping power and imperial rivalries Your ships are everywhere, and you are certainly a king of men. H.M. Stanley (Sydney, New South Wales) to Sir William Mackinnon, 22 Dec. 1891 There is ‘the danger that in the trade which has got a bounty, and in other trades which hoped to get one, people would divert their energies from managing their own businesses to managing those persons who control the bounties’. Alfred Marshall, Principles of Economics, 8th edn (London, 1920), I, p. 473

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11

The Australian opening, 1880–93 During the early months of 1880, Thomas McIlwraith, the new Premier (first minister) of Queensland, was in London to promote the interests of his colonial government. McIlwraith, who came originally from Ayr in southwest Scotland, had abandoned his studies at Glasgow University in 1854 to join the great exodus from Scotland to the goldfields of Australia. He subsequently became a railway engineer and contractor, and a pastoralist. His investments in sheep runs eventually focused on properties in Queensland, where he also involved himself in cattle ranching. McIlwraith, a colourful, ebullient and pugnacious character, was elected to the Queensland legislature in 1870 and rose swiftly within the colony’s rumbustious politics, becoming secretary for public works and mines in 1874 and Premier in 1879.1 He was in London in 1880 to attend to several matters of immediate concern to his government, principally the management of Queensland’s Agency-General in London and the placing of contracts for iron for railway construction in the colony. However, he also brought with him wider ambitions, and some partially formulated proposals, to advance the economic development of Queensland through investment in transport infrastructure and the attraction of more British capital and migrants to the Colony. In drumming up interest in these schemes, McIlwraith made contact with William Mackinnon and his business network – and opened up a new chapter in the long history of the group’s flirtation with Australia. Although neither man had met before, or otherwise been in touch, McIlwraith quickly sought out his fellow Scot, and he and Mackinnon were soon deep in discussion of two projects. The first concerned steamships, reflecting William’s long-standing ambitions to secure government financial support for an entry into shipping to and from Australia – about which McIlwraith must have been well aware. The second involved railways, reflecting William’s growing reputation as a railway financier, his association with one of Britain’s wealthiest individuals, the Duke of Sutherland, and McIlwraith’s hopes that both would support a proposed railway in the western districts of Queensland. Of the two schemes, the shipping one was the more immediately attractive to William Mackinnon.

1

‘Sir Thomas McIlwraith (1835–1900)’, Australian Dictionary of Biography (1851–1890), Vol. 5 (Melbourne, 1972), pp. 161–4; C.A. Bernays, Queensland Politics During Sixty Years (Brisbane, 1919), pp. 56 and 87; and D. Waterson, Personality, Profit and Politics: Thomas McIlwraith in Queensland, 1866–1894 (St Lucia, Queensland, 1984). 281

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Ever since the Colony of Queensland had been created – in December 1859 – its government had wanted to see the development of steamship communications northwards through the Torres Straits. The prevalent shipping routes passed along the southern flanks of the Australian continent – from Fremantle in Western Australia to Sydney in New South Wales – and this left Queensland as a distant Cinderella colony. It was the last of the Australian colonies to receive mail from Britain and the rest of Europe; its trade often needed the additional expense of transhipment at ports in New South Wales and Victoria; and its government watched helplessly as people stepped off emigrant ships long before these vessels ever arrived in Queensland. In response to such conditions, Queensland pushed for the introduction of mail services to and from Europe northwards via the Torres Straits. However, it obtained little support from the other colonies for such a second service, except as a bargaining device when the P&O contract for the delivery of mails by the southern route was up for renewal. Eventually, Queensland went its own way and in 1873 awarded a contract for a mail service from Brisbane to Singapore, to connect with the P&O mail steamers there, to the Eastern and Australian Mail Steamship Company. Disagreement over the renewal of this contract in 1880 – Eastern and Australian wanted a larger subsidy and to terminate the service in Sydney rather than Brisbane, which rather defeated the point of the exercise – brought McIlwraith’s government to reconsider its strategy. A through service, all the way from Brisbane to London, was now the desired outcome. The position was set out succinctly by McIlwraith’s Postmaster General: The Torres Straits steamers [of Eastern and Australian] have entirely failed to open up a direct trade between the colony and the mother country via Singapore . . . They are engaged in a branch service . . . Yet there is evidence that wellappointed steamers, taking advantage of the Canal do carry on a profitable trade – both in passengers and cargo – between London and Australia . . . The early expiration of the Torres Straits Mail contract [for Singapore to Brisbane] suggests the inquiry whether Queensland, too, cannot secure the establishment of a ‘through’ steamship line which, while providing the mail service required by the northern ports, will also confer tangible benefit upon the commerce of the colony. Every direct steamer from England would bring her complement of passengers or immigrants to increase our active population, and a full cargo of merchandise to supply our numerous wants. For return cargo she would secure gold, tin, copper, wool, sugar, and – if the Strathleven’s trip prove fortunate – frozen meat. Herein would certainly be found the essential elements of remunerative trade, and probably also of new prosperity to the colony.2

2 Memo by the Postmaster General of Queensland (C.H. Buzacott) on the Torres Straits Mail service, 19 January 1880, CO 234/40/4812.

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The reference to the Strathleven was to the experimental voyage by chartered steamer which had been arranged by the London shipping firm, McIlwraith McEacharn & Co, in which Thomas McIlwraith’s brother Andrew was senior partner. The Strathleven arrived at the London docks on 2 February 1880 with a cargo of frozen beef, mutton and butter from Sydney and Melbourne, its successful voyage pointing to the likely development of an export trade in frozen meat based upon steamships fitted with refrigerated holds.3 Any shipping concern entering Australian trades at this time faced the prospect of new kinds of cargo – always provided that it was capable of making the necessary investment in refrigeration. Even without such attractions, a subsidised steamship line from London to Brisbane was a pleasing proposition for William Mackinnon. He had long hankered for a Calcutta-Brisbane-Sydney line (as late as 1878 he was thinking that BI might take over NISM’s Java-Australia mail contract for this purpose),4 and his Gray Dawes/British India Association operations were now well established in deep sea liner trades through the London-Calcutta line. He lost no time in making an arrangement with McIlwraith. For his part, McIlwraith was in no doubt that Mackinnon’s firms were the ones to undertake the task. Queensland’s Agent-General had placed advertisements in the British press in February 1880, calling for tenders for a combined postal and emigration service between the U.K. and Queensland. Two such bids were received, but McIlwraith declared both to be ‘ineligible’ on various grounds and entered into direct negotiations with William Mackinnon, who had not tendered.5 On 6 May 1880, it was agreed that the British India Association would launch a monthly Queensland Royal Mail Line between London and Brisbane in return for an annual mail subsidy of £55,000 and the right to transport government-assisted emigrants to Queensland at £16 a head.6 However, the new service did not begin until 11 February 1881, when the Merkara left London for a voyage to Brisbane, which it reached on 13 April. Several factors delayed the inauguration of the London-Queensland line. The most serious was a hitch in the ratification of the contract with the Queensland government. The opposition in the Queensland Legislature put up a stiff resistance to the agreement, and surrounded it with the web of allegations of political corruption which it had managed to spin around

3

J.T Critchell and J. Raymond, A History of the Frozen Meat Trade (London, 1969), pp. 30–2, and J.R. Vickery, ‘Centenary of the Export of Frozen Meat and Butter’, Food Technology in Australia, 312, No. 11 (1979), pp. 486–90. 4 W. Mackinnon to D. Mackinnon, 20 Sept. 1878, Nat. Lib. Acc. 6168/8. 5 T. McIlwraith to A. Palmer, 22 March 1880, McIlwraith-Palmer Correspondence (John Oxley Library, Brisbane, hereafter cited as JOL)/OM64–19/76. 6 ‘Copies of Minutes of the Executive Council, and Telegrams between the Government and Contractors, in reference to the New Mail Service between London and Queensland’, BIS/4/6; also printed in Queensland, Legislative Assembly, Votes and Proceedings (1880), II, pp. 1029–42. 283

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Thomas McIlwraith and fellow Ministers, Queensland, 1879 (John Oxley Library Neg. No. 146246)

McIlwraith’s activities in London. The Premier was accused of acting dishonestly – over arrangements for tendering for the supply of iron rails for Queensland’s railways, over the shipping of the rails in vessels owned or chartered by McIlwraith McEacharn & Co, and over the award of emigration contracts involving McIlwraith McEacharn sailing ships in which Thomas McIlwraith was himself a shareholder. The opposition was also suspicious of the circumstances in which the mail contract with William Mackinnon had been arranged by private negotiation rather than public tender, and believed that this might have been done so that that McIlwraith McEacharn & Co would benefit from it.7 The controversy came at a sensitive time for William (who faced the lawsuit in Edinburgh). His public reputation might have suffered if it became known, as it would a few years later, that he had in fact ‘offered the management of the line in the colony to the Premier’s brother’s firm, and the brokerage in London to Messrs McIlwraith & Co’, but that,

7 S.W. Griffiths to E.S. Dawes, 14 March 1884, ‘Correspondence with Messrs Gray Dawes & Co’, Queensland, Legislative Assembly, Votes and Proceedings (1885), I, p. 618.

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fortunately, Thomas McIlwraith had turned down both offers.8 In the event, the Premier forced the ratification of the mail and emigration contract through the legislature in October 1880 by laying it on the table of the House and defying the opposition to muster enough votes to kill it. The following year, a Royal Commission, which had been despatched to London to take evidence, cleared McIlwraith of all charges of corruption. ‘The colony’, it concluded, ‘has not been shamefully plundered by a ring of speculators in the London office; . . . there was no such ring of speculators; and . . . the charge of connivance against the Premier is without foundation.’9 Meanwhile, although it never matched the bare-knuckled fight taking place in Queensland, a row broke out within the Group’s inner circle, revealing tensions that had been building up during the 1870s. At first, when it appeared that the London-Brisbane steamship line would be undertaken as an extension of the BI/BI Association’s London-Calcutta line, there was a general welcome for the new venture. However, when it became clear that such an arrangement would be permitted only for one year, as a transitional measure, and that thereafter the postal needs of Queensland would require a more direct routing, via Batavia rather than Calcutta, doubts began to surface. Essentially, there was disagreement between the older GlasgowCalcutta segment of the group, represented by retired or active partners in Mackinnon Mackenzie & Co, and newer London-based elements centred on Gray Dawes & Co, which in shipping matters was still overshadowed by the dominant voices of the older Glasgow and Calcutta family partners. A London-Brisbane line, wholly under Gray Dawes management, would give Edwyn Dawes greater freedom of action than he had previously enjoyed and create in Australia an alternative to the Gulf and East Africa as a sphere of operations for the firm’s capital. When, with the ratification of the contract by the Legislative Assembly, William Mackinnon’s enthusiasm for the Queensland line revived, he swept aside the opposition of his former partners and friends. ‘We shall do it’, he assured Thomas McIlwraith, ‘in better style in every way than we are bound to by contract’.10 Edwyn Dawes was given his head, leaving Peter Hall, a member of the losing faction, to comment that ‘I am sorry to observe that the Queensland line has been early entered on. It would in my opinion have been wiser to have confined ourselves to India where we have done well, and where the business is certainly large enough. Extending to Australia will lead to further extensions to protect and foster this unsatisfactory line.’11

8

E.S. Dawes to S.W. Griffiths, 11 January 1884, JOL/OM64–19/37. ‘Report of the Royal Commission Appointed to Take Further Evidence and to Report on the Allegations Contained in Mr Hemmant’s Petition’, Queensland, Legislative Council, Votes and Proceedings (1881), II, p. 426. 10 W. Mackinnon to T. McIlwraith, 18 November 1880, JOL/OM64–19/8. 11 P. Hall to J.M. Hall, 24 Jan. 1881, Peter Hall Letterbook II. 9

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140ºE

145ºE

150ºE

155ºE

Torres Straits

10ºS 40 40º

Gulf of Carpentaria

CORAL SEA

15ºS 20 20º

Cooktown

Townsville Bowen

20ºS 0º

Cloncurry Mackay

QUEENSLAND Rockhampton Longreach Bundaberg 25ºS 20º 20 Charleville Gympie Roma

Darling D ow n s

Brisbane

SOUTH AUSTRALIA

30ºS 40º 40

NEW SOUTH WALES Sydney 35ºS

250 miles

Railways

Map 6 Queensland in the 1880s

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THE AUSTRALIAN OPENING, 1880–93

The furore over the Queensland contract and the distraction of the Bank lawsuit had the effect of delaying William Mackinnon’s ‘s participation in the second of McIlwraith’s schemes. Prior to 1880, railway development in Queensland had largely taken the form of construction by the colonial government of lines proceeding from east to west into the rural hinterlands of three of the coastal ports – Brisbane, Rockhampton and Townsville.12 Now McIlwraith planned to build a grand trunk line some 800 miles in length on a north-south axis through western Queensland. This line would start at Charleville, the western terminus on the existing east-west line from Brisbane, and then proceed northwards to Port Parker on the Gulf of Carpentaria. It would link up the southern and central east-west lines (from Brisbane and Rockhampton respectively), would open up new areas in the west, more especially the north-west, of Queensland to pastoral settlement, and would serve the transports needs of such remote mining districts as copper-rich Cloncurry.13 McIlwraith wanted private British capital to help bear the costs of the proposed railway. William and the Duke of Sutherland, both at the time involved with the Marmagoa and South Mahratta railways, were clearly interested in his ambitious proposal,14 but took no action before McIlwraith returned to Queensland in June 1880. Neither William nor the Duke were members of the syndicate of bankers and businessmen he left behind in London to finance a survey for the proposed railway. Thereafter, William kept a watching brief on the scheme, being advised on its progress by McIlwraith during the latter’s subsequent visit to London in January–June 1881 and drawing on G.A. Thomson’s American railway experience for guidance on its technical and financial aspects.15 However, it was not until April–May 1883 that William, stimulated by the prospect that Matheson & Co might take up shares in the syndicate, finally committed himself to membership of what was now the Australian Trans-Continental Railway Syndicate.16 He was looking to repeat his success in railway promotion in south-west India, and indeed began

12

R. Fitzgerald, A History of Queensland: From the Dreaming to 1915 (St. Lucia, Queensland, 1982), pp. 261–8. 13 The earliest details of the scheme may be found in Henry Kimber & Co to T. McIlwraith, 5 May 1880, JOL/OM64–19/6, and ‘Copy of Draft Memo: Queensland Scheme’, with a covering note by H. Wright, 7 May 1880, Stafford House Papers, D. 593/Q/2/1/2. 14 H. Wright (for Duke of Sutherland) to W. Mackinnon, 7 May 1880, Sutherland Papers D.593/Q/2/2/8. 15 T. McIlwraith to W. Mackinnon, 24 Feb. 1881, MP India File 14, G.A Thomson to W. Mackinnon, 2 March 1881, MP Misc. Commercial File 35, and G.A. Thomson to W. Mackinnon, 9 March 1881, MP Private Letters File 238. 16 The syndicate was formally incorporated on 12 May 1881, but seems to have proceeded only very slowly in raising the initial capital of £16,040. Of the 40 Founders’ shares, William Mackinnon held four while Hugh Matheson and Charles Magniac, who also joined the syndicate in 1883, had eight. (BT 31/2803/15354.) 287

SHIPPING POWER AND IMPERIAL RIVALRIES

to sell off shares in the West of India Portuguese and Southern Mahratta railway companies to fund his participation in the Queensland railway scheme. His interest, however, was more than simply financial. The syndicate had it in mind to bring in labourers from India to construct the railway, and McIlwraith’s government had drawn up draft regulations to cover this. If things fell into place, the transport of coolie labour would be a strong incentive for BI to commence its long-discussed steamship line from Calcutta to Australia.17 General Fielding, the head of the syndicate, was delighted by the turn of events. ‘Your friend Mackinnon’, he wrote to the recently-knighted McIlwraith, ‘has joined the Board of the AT Ry Synd & has been allowed to take a substantial interest in it. This is, in my opinion, a very great advantage as his desire is that the present syndicate should themselves subscribe the capital necessary to carry out the undertaking. Mackinnon is a tower of strength and an admirable counterpoise to the vacillation and want of pluck shown by Matheson & Co.’18 A further spur to investment in Queensland was the apparent initial success of the London-Brisbane steamship line. Although the service began shakily in 1881, barely making enough to cover depreciation on the steamers, thereafter results rapidly improved. Between 1881 and 1884, the number of the BI Association’s Queensland’s voyages doubled, the average net steamer earnings (including subsidy) rose from £1,113 to £2,241, and the ratio of net earnings to gross earnings also improved considerably.19 Furthermore, this success contrasted with an opposite trend in the Association’s LondonCalcutta service, where the conference to which it was a party was being challenged by two new-comers, the Anchor and Clan Lines, with a consequent collapse of freight rates. By 1883–4, the fledgling Brisbane line was outperforming the longer-established Calcutta one, and demonstrating the value of a subsidised line over an unsubsidised one at a time of general depression in shipping. Only the Queensland earnings and the waiving of Mackinnon Mackenzie & Co’s Calcutta agency fees enabled the Association to pay dividends in 1883–4. William Mackinnon was pleased with this apparent vindication of his decision to take up McIlwraith’s contract. ‘The Australian traffic’, he wrote to the formerly sceptical Jamie Hall, ‘everywhere is developing in a marvellous way . . . and it seems bound to increase more rapidly still. On the Queensland round there is omnibus traffic which in good times would be very helpful.’20

17 ‘Correspondence Respecting the Proposed Introduction of Coolies from British India’, Queensland Legislative Assembly, Votes and Proceedings (1882), Vol. 2; E.S. Dawes to Sir Thomas McIlwraith, 7. Dec. 1882, JOL/OM64–19/27. 18 Maj. General W.H.A. Fielding to Sir Thomas McIlwraith, 13 May 1883, JOL/ OM64–19/34. 19 British India Association Annual Reports, 1881–4, MP Misc. Commercial File 75. 20 W. Mackinnon to J.M. Hall, 29 Dec. 1883, MP Private Letters File 40.

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Convinced that in the Queensland economy they had found the source of a bonanza, William Mackinnon and Edwyn Dawes became eager to invest in a range of enterprises with which McIlwraith was associated. Thus William took shares in McIlwraith’s pastoral company, The Darling Downs and Western Land Company, when it was floated in 1881, and in 1884 he led a drive to sell up to £100,000 of the company’s debentures in London – mainly to his own friends and associates.21 Dawes fell even more deeply under McIlwraith’s spell. He became a shareholder in McIlwraith’s Queensland Investment and Land Mortgage Co, which was floated in London to attract British capital to Queensland securities, and was appointed a member of the London Board of the Queensland National Bank. This was a private bank in Brisbane of which McIlwraith had been a director, which financed his bid for the premiership in 1879, to which he transferred the government’s account as soon as he became premier and the growth of which he fostered through a range of government business.22 Dawes was especially influenced by the idea of an impending boom in the Australian frozen meat trade, and in 1884, on McIlwraith’s advice, he committed Gray Dawes & Co to the purchase of a meat packing and freezing works on Poole Island, near Bowen, one of Queensland’s most northerly ports. By then, however, McIlwraith was out of office, forced to resign the premiership by a vigorous opposition that had hounded him since 1879. The issue that brought down McIlwraith’s ministry was the TransContinental Railway. When finally presented to the Queensland Legislative Assembly in June–July 1883, as a scheme for a land-grant railway, along the lines of the Canadian Pacific, it failed to muster enough political support.23 The squatters (extensive graziers) of Queensland, who carried considerable clout, disliked the land-grant principle, which they saw as a threat to their leases and their way of life. McIlwraith dissolved the legislature but failed to win the ensuing election, and he retired to the backbenches to nurse his various business interests. The railway syndicate in London remained in existence for some years, against the possibility that the scheme might be revived some day. Nevertheless, the vision of western Queensland being opened up to settlement in the same manner as the Canadian prairies had effectively evaporated in the harsh glare of a fractious political environment. William Mackinnon and the Duke, their hopes in the Queensland railway

21

W. Mackinnon to T. McIlwraith, 14 March 1884, JOL/OM64–19/38; E.S. Dawes to W. Mackinnon, 25 March 1884, Gray Dawes & Co Private Letterbook, Inchcape GD/1374; D.B Waterson, ‘Pastoral Capitalism and the Politician: Thomas McIlwraith and Two Land Companies, 1877–1900’, Royal Historical Society of Queensland Journal, 12, No. 6 (1986), pp. 401–16. 22 Fitzgerald, History of Queensland, pp. 309–12; T. Gough, ‘Tom McIlwraith, Ted Dury, Hugh Nelson and the Queensland National Bank’, Queensland Heritage, 3, No. 9 (1978). 23 Queensland Legislative Assembly Debates, 6th session, 8th Parliament, 29 June and 3 July 1883. 289

SHIPPING POWER AND IMPERIAL RIVALRIES

thus deflated, sought to obtain some compensation in a different scheme. Through McIlwraith, William became involved with Sir Julius Vogel, a former premier of New Zealand, who was also a member of the Australian Trans-Continental Railway Syndicate.24 Vogel had his own ambitious plans for a railway from the port of Albany in Western Australia to Adelaide in South Australia, which would effectively link up the emergent railway systems throughout Australia. It was a scheme which, in terms of distances to be covered and lack of any prior economic development along the route to be covered, was even more visionary than McIlwraith’s western Queensland line. In the aftermath of the political failure of the Queensland line, and in order to get a foothold in Vogel’s railway project, Thomas McIlwraith, William Mackinnon and the Duke of Sutherland all purchased land from Vogel at a place called Eucla, on the Western Australian side of the border with South Australia. Eucla was the spot where the telegraph lines of South Australia and Western Australia connected, and it possessed the only good harbour for hundreds of miles, so it seemed destined to become a focal point for economic development once Vogel’s railway line was built.25 However, this proved to be an ill-judged speculation. Vogel failed to find sufficient backing in London for his wildly imaginative Albany-Adelaide railway scheme, and abandoned it to return to New Zealand to re-enter politics there. This left William, the Duke and McIlwraith holding large parcels of land rendered all the more worthless by the complete absence of water in the area. From 1884, McIlwraith’s ability to steer government business and support in the direction of the Mackinnon business network was much prescribed, and much of the shine came off the glittering promises he had held out to the Mackinnon group. William remained in good terms with him, meeting him socially from time to time in London and Scotland and continuing to do business with his brother Andrew. William remained on the board of the Darling Downs and Western Land Co until pressure of work forced him to resign in 1891. Nevertheless, after 1884, William and Dawes focused their attention mainly on the Group’s shipping interests in Australia. They had indeed more than enough to do, because the lucrative contract that McIlwraith had dangled before them in February 1880 proved

24 Vogel, originally from London, had a long career in journalism and politics in New Zealand before becoming Prime Minister between 1873 and 1876. He was associated with a programme of substantial government borrowing, investment in public works and immigration (broadly comparable to Thomas McIlwraith’s policies in Queensland). He served as New Zealand’s Agent-General in London from 1876 to 1880, and then between 1880 and 1884 dabbled in a variety of business ventures. (A. McLintock (ed.), An Encyclopedia of New Zealand (Wellington, 1966), 3, pp. 490–2.) 25 Sir Julius Vogel to W. Mackinnon, 28 June, 29 Sept. and 13 Oct. 1883, H. Wright to W. Mackinnon, 23 Oct. 1883 and R. Herbert to Sir Julius Vogel, 7 Oct. 1883, MP Misc. Commercial File 42.

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to be something of a lure, drawing William Mackinnon and the group ever deeper into the maritime affairs of Australia and exposing them to greater financial risks. ***** William Mackinnon’s optimism about the Queensland economy derived in part from the early profitability of his Queensland Royal Mail Line. That line was largely dependent for its success on the government of Queensland – and not just in terms of the subsidy for the conveyance of mails. Most of the earnings of the steamers came from the outward voyages from London rather than the inward voyages from Brisbane and the northern Queensland ports. On the outward voyages most of the traffic consisted of passengers and goods financed by the government of Queensland – emigrants, rails and railway equipment, and government stores. The new line was effectively a government shipping service, financed directly and indirectly by the substantial increases in public expenditure initiated by McIlwraith’s ministry between 1879 and 1883. Thus, while the steamers found it difficult to attract normal fare-paying passengers, most of whom for reasons of comfort and tourist appeal continue to travel by the P&O and Orient lines via Sydney, they quickly became fully occupied in the government of Queensland’s enhanced emigration programme. Contractually, the BI Association had claims on all of the assisted emigrants despatched by Queensland’s Agent-General in London. When this option was first exercised in 1881, it threatened to squeeze out of the trade the three firms, including McIlwraith McEacharn & Co, which had formerly carried emigrants to Queensland by sailing ship. However a compromise was worked out whereby the mail steamers took emigrants to five northern ports of Queensland and the sailing ships to two southern ports, including Brisbane, in return for the mail steamers being guaranteed the carriage of five thousand tons of rail to Brisbane.26 Even so, the introduction of the steamship line, together with the preference of the Agent-General and the emigrants themselves for steam passages, would have led to the end of the sailing ships in the trade were it not for a substantial increase in the total volume of traffic. This was brought about by greater government funding and the passing of the Queensland Immigration Act of 1882. Among other provisions, the latter introduced a new category of assisted emigrant, the ‘bounty’ emigrant, who would be recruited by the shipping companies rather than by the Agent-General’s office. This enabled Gray Dawes & Co to become emigration agents for the Queensland government, working for the purpose through a network of sub-agents throughout the British Isles.

26

Agent-General to Colonial Secretary, 2 May, 20 June and 2 Aug. 1881, AgentGeneral’s Correspondence (AGE) 11, Queensland State Archives, Brisbane. 291

SHIPPING POWER AND IMPERIAL RIVALRIES

A formal agreement for the delivery of such ‘bounty’ emigrants by Gray Dawes & Co was signed in August 1883.27 A substantial upward shift took place in the recruitment of emigrants for Queensland – the 3,190 assisted migrants of 1880 rose to 14,095 in 1882 and 15,395 in 1883. Consequently, not only were the three sailing ship owners, including McIlwraith McEacharn, able to retain a share of the traffic, but William and Dawes were encouraged to increase the frequency of steam voyages to Queensland, transforming what began as a monthly service into a fortnightly one. This was made possible by the BI Association’s investment in two new steamships, the Bulimba and Waroonga, with larger passenger-carrying capacity and improved facilities, and also through the chartering of additional vessels. The latter arrangement was very helpful to the Association on its London-Calcutta line, because it was able to divert competing steam tonnage off that route onto the London-Brisbane one. In July 1882, the Association entered into a charter-party agreement with the Ducal Line (Eastern Steamship Co), by which the latter yielded up its places on the London berths for Calcutta to the Association’s steamers in return for a percentage of the steamer earnings. The Ducal steamers were in turn found employment by Dawes in the expanding emigrant traffic to Queensland.28 Wm. Mackinnon & Co and Gray Dawes & Co subsequently bought up shares in the Eastern Steamship Co as they became available – to the point at which by May 1888 they held 54 per cent of the total equity in that firm. However, Dawes advised William that, despite their majority control, management of the concern should be left in the hands of the other interested party, J.B. Westray & Co. ‘As you are aware’, he commented, ‘we purchased shares in the Ducal Line not so much with the object of a direct return upon the investment as to protect our own interests. . . . We have considerably restricted the competition from London to Colombo, Madras and Calcutta during the trying times we have been passing through, and the Ducal ships have been of incalculable service to us in holding the Queensland trade.’29 At first sight, therefore, the rise of the Queensland Royal Mail Line had the opposite effect from the one feared by those who opposed the introduction of a London-Brisbane service. Rather than detract from and undermine the group’s Indian business, the Queensland trade became a prop to its UK-India steamship line. The Queensland Royal Mail Line was the longest single continuous passenger steamship line in the world. Its steamers, operating on a more

27 Agent-General to Colonial Secretary, 9 Feb. 1882, AGE/12, and 25 Aug., 6 Sept. and 3 Oct. 1882, AGE/14; Agent-General’s Annual Reports, 1883–4, Queensland Legislative Assembly Votes and Proceedings; Queensland Legislative Assembly, Debates (1881), II, pp. 60, 66, 91 and 177; Agreement for Agent-General for Emigration to Queensland and Gray Dawes & Co, 23 Aug. 1883, BIS/4/10. 28 BI Association Annual Reports, 1882 and 1883, MP Misc. Commercial File 75. 29 E.S. Dawes to W. Mackinnon, 17 May 1888, MP India File 3.

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easterly route across the Indian Ocean, spent more time in the tropics than comparable emigrant vessels. Its route – directly from Aden to Batavia and from there directly to Queensland – also meant there was little relief from the heat and the tedium of shipboard life for passengers on the long outward voyage, for Queensland quarantine regulations prevented any disembarkation – even to stretch the legs – at Batavia. Baron von Hübner, an Austrian diplomat who was travelling northwards on the Queensland coast on the Dorunda in 1883, recorded the obvious relief of emigrants coming in the other direction: ‘We passed one day the steamer, belonging to the same company, which had left London nearly two months ago. It was crowded with emigrants. Massed upon deck, they saluted us enthusiastically. These good people seemed enchanted to be drawing near the end of their long voyage.’30 The passengers would have included the eighty to one hundred single females who travelled on every steamer, taking advantage of the free passage offered by the Queensland government to those willing to take up employment in the colony, and who spent the entire voyage in seclusion under the watchful eye of a stern matron and her assistants. The conditions they and the other passengers experienced as they crossed the Indian Ocean and the Java Sea must have been similar to those experienced by Von Hübner travelling in the opposite direction – including the monotony of a diet of tinned meat and vegetables, the ‘pestilential smell’ of bilge water ‘which poisons the cabins’, and the ‘innumerable cockroaches of monstrous size’ which ‘are shipped on board with the coals’ and ‘gnaw rather than bite the hair and the nails’.31 The Queensland Royal Mail Line was also distinctive in being one of the few steamship lines to employ Indian seamen in the passenger trades between Britain and Australia: The sailors – Lascars from the neighbourhood of Calcutta – are fragile creatures, with small, well-modelled hands and feet. They have the walk and movements of a cat. . . . When ‘Lights out’ is sounded, you see them on the main deck, squatting close packed into two long rows, their hands resting on their knees and their knees dovetailed between those of the man opposite. They never cease chattering, and talk of nothing but rupees, annas and women, that is marriage. They then stretch themselves upon the deck, each where he was squatting while the chatter lasted. They are fast asleep in a moment, and the engine and elements keep up the conversation.32

Men who once crewed emigrant steamers on the Bay of Bengal, or plied their trade on the seas between London and Calcutta, now came a long way south of the equator, and contributed their labour to the considerable success that

30 31 32

Baron von Hübner, Through the British Empire (London, 1886), Vol. 1, p. 321. Von Hübner, Through the British Empire, 1, pp. 325-6. Von Hübner, Through the British Empire, 1, p. 357. 293

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the Mackinnon group’s UK – Queensland service enjoyed during the earlyto-mid 1880s. That success also led to the transformation of the BI Association into a joint stock company, British India Associated Steamers Ltd., with a view to attracting new capital into the concern. At incorporation in May 1885, shares in the BI Associated Steamers Ltd were exchanged for those in the BI Association, of which the group’s inner core firms or their partners held 56.8 per cent (see Table 11.1). Capitalised at £250,000, BI Associated Steamers Ltd was now the third-largest shipowning firm within the group. The transfer of its secretaryship from W. Mackinnon & Co, Glasgow, to Gray Dawes & Co, London, consolidated the latter’s rising influence within the business network. One of the first acts of the reconstructed concern was to order from Peter Denny of Dumbarton a large new steamship, the 5,000-ton Jumna. This steamer was fitted out with the latest quadruple expansion engines, refrigeration plant, and hydraulic deck machinery, making it one of the advanced general-purpose vessels of its day. It was capable of carrying 500 passengers and was reputedly the second largest steamer employed on Australian routes at the time. It set out on its maiden voyage in September 1886 amidst a fanfare of publicity. Even more perhaps than the Chyebassa’s inauguration of a London-Calcutta service in 1874, or the Merkara’s inaugural voyage to Brisbane in 1880, the Jumna’s outward departure from London docks in 1886 marked the group’s entry into the mainstream of British passenger liner trades and its emergence as a truly imperial shipping conglomerate. Despite all the outward show of enterprise and achievement, however, Peter Hall’s fears that ‘further extensions’ would be necessary ‘to protect and foster this unsatisfactory [Queensland] line’ did not lack foundation. The outflow of emigrants and their belongings from Britain masked problems in generating homeward traffic from Queensland to London. On the return voyage, the steamers were able to attract only a small fraction of the number of passengers carried outwards. Cargo homewards was also in short supply. The appointment of various merchant firms as agents in the ports of call along the Queensland coast – including Keppel Bay (Rockhampton), Bowen, Townsville and Cooktown – had the effect of steering some cargo traffic towards the London-bound steamers – including hides, tallow, some sugar and seasonal wool cargoes. However, there were generally insufficient volumes on offer to cover the costs of the return trip. The ‘additional’ steamers, including the Ducal ships, which were used to maintain a fortnightly service, could at a pinch be sent down to Newcastle in New South Wales, to load coal for India in the hope of obtaining cargoes for the UK once they had discharged in Calcutta or Bombay. But no such solution was available for the group’s own monthly mail steamers, which had to maintain regular sailing times over a defined route. Such difficulties had two consequences. The first was a decision to give greater attention to the frozen meat trade from Queensland, which the Strathleven’s voyage had shown to be technically possible if not yet commercially secure. Dawes, optimistic that 294

THE AUSTRALIAN OPENING, 1880–93

Table 11.1 The Mackinnon Group in Australia: shareholdings (%) BI Associated BI & Queensland Queensland S.S. Australasian Steamers Agency Co United S.N. Co 1885 1885 1886 1888 Mackinnon Mackenzie/Partners Gray Dawes/Partners MacNeill/Partners Gellatly Hankey/ Partners Binny/Partners Denny/Partners McIlwraith McEacharn/Partners Burns Philp/Partners BI Associated Steamers Others Total share value

23.2

38.8

6.5

15.3

21.6 12 8

27.8 0 0

7.6 4.2 1.8

7.8 1 0.5

6 7.6 0

0 0 33.4

0 8.6 11.7

0 4.3 1.3

0 0

0 0

2.9 0

4.5 15

21.6

0

56.6

50.1

£126,780

£235,150

£250,000

£9,000

Sources: Public Records Office, BT 31/3481/21122; Inchcape Archives, BIQA/135; PRO, BT 31/2869/15828; Inchcape Archives, AUSN/1/10

the future lay in that direction, wrote to William in April 1882 to claim that the ‘frozen meat question is pressing and I have several colonists and merchants calling lately for a discussion’.33 As a result of his entreaties, it was agreed that two of the Association’s steamers should be fitted out with refrigerated holds. However, it took some time for this work to be completed. It wasn’t until January 1884 that Gray Dawes & Co could enter into a contract with McIlwraith McEacharn & Co, as agents for the Queensland Freezing and Food Export Co of Brisbane, for the steamer Dorunda to uplift 150 tons of frozen meat on each of five consecutive voyages from that port.34 The Dorunda’s first such cargo left Queensland in May 1884.35

33

E.S. Dawes to W. Mackinnon, 11 April 1882, MP Misc. Commercial File 75. G. Mackenzie to Sir Thomas McIlwraith, 7 May 1884 and McIlwraith to Mackenzie, 8 May 1884, JOL/OM64–19/40; E.S. Dawes to Sir Thomas McIlwraith, 15 Aug. 1884, JOL/OM64–19/41, and McIlwraith to Dawes, 6 Oct. 1884, OM64–19/94. 35 The introduction of refrigeration into the steamers of the Queensland line had the further effect of making travel more comfortable for passengers. By comparison with other passenger services between Europe and Australia, which passed through the tropics in a roughly north-south direction, the steamers of the Queensland Royal Mail Line crossed the Indian Ocean in a roughly northwest-to-southeast direction, and spent much longer 34

295

The Dorunda in Queensland waters

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A second solution to the lack of homeward cargoes was to attempt to influence trade towards the northern, Torres Straits route to Europe, through the development of a feeder line on the Queensland coast. ‘When the Mail Steamers first began to run’, Dawes later recalled, ‘we found our interests seriously affected by the scarcity of lighters and the action of Australasian Steam Navigation Company in sweeping traffic from the Queensland ports through to Sydney, and failing to come to terms with them for an interchange of goods and passengers, we organised the Queensland Steam Shipping Company for coasting and lighterage purposes.’36 In effect, the Australasian S.N. Co, a Sydney-based coastal shipping concern, was seen as operating a feeder line to the P&O and Orient Line services, gathering up trade from the Queensland ports and carrying it southwards for transfer to competitor shipping lines. Its coasting activities would have to be opposed if the Queensland Royal Mail Line were to obtain its ‘proper’ share of Queensland’s exports to the U.K. But the formation of the little Queensland S.S. Co for this task in August 1881 also served another purpose. It was a convenient means of bringing McIlwraith McEacharn into alliance with the Mackinnon group and ensuring that it obtained some benefit from the 1880 contract. It rendered tangible William Mackinnon’s reassurance to Thomas McIlwraith that ‘I see your brother frequently and hope to be able from time to time to carry out satisfactory business arrangements with him.’37 The Queensland S.S. Co brought together the small-scale coasting activities in Queensland and New South Wales of three firms – McIlwraith McEacharn & Co of London and Melbourne, Burns Philp & Co of Sydney and Townsville, and Gilchrist, Watt and Parbury of Sydney. It combined them with the capital and influence of the Mackinnon group to create a fleet of small vessels capable of competing with the Australasian S.N. Co in the transport of goods and passengers, and of bidding against it for local mail contracts.38 It was not, however, an enterprise with which William Mackinnon initially had any close involvement. Almost certainly because of the dissension within the group over the direction of its Australian policy, neither he nor his Mackinnon Mackenzie & Co partners put much cash into the firm. Gray Dawes & Co and McIlwraith McEacharn & Co were left to raise such capital

in hot tropical weather. Refrigerated holds, helping to keep food fresh and providing ice for cool drinks, were a boon to passengers, more especially the large numbers of emigrants on the outwards voyage. 36 E.S. Dawes to Hon. S.W. Griffiths, 11 Jan. 1884, JOL/OM64–19/37. 37 W. Mackinnon to T. McIlwraith, 18 Nov. 1880, JOL/OM 64–19/8. 38 For the Australian roots of the Queensland S.S. Co, see N.L McKellar, From Derby Round to Burketown: The A.U.S.N. Story (St. Lucia, Queensland, 1977), p. 50; K. Buckley and K. Klugman, The History of Burns Philp: the Australian Company in the South Pacific (Sydney, 1981), pp. 13–14; H.C. Perry, Memoirs of the Hon. Sir Philip Philp, K.C.M.G., 1851–1922 (Brisbane, 1923), pp. 98–9; and Burns Philp & Co, Queensland Handbook of Information (Brisbane, 1884), p. 29. 297

SHIPPING POWER AND IMPERIAL RIVALRIES

as they could from along the Australian coast and from whatever non-family members of the network Dawes could persuade to put up funds (see Table 11.1). William installed his old friend Sir Charles Nicholson on the board, and he ensured that the post of secretary went to Charles Leresche, now that the complications of the City of Glasgow Bank case were behind them. Otherwise he took no great interest in the business, or in the coasting trades of Australia, until the alarm bells started to ring in 1884. At first, the Queensland S.S. Co seemed to slip easily into its role as a prop to its big brother, the deep sea inter-continental mail line. It paid dividends of 12 per cent for its first full year of operations and 6 per cent for its second, and increased its fleet from five to nine vessels over the same period. During 1884, however, it began to dawn on the London directors that all was not well on the east coast of Australia. Dawes, dismayed by the negligence and incompetence of Parbury Lamb & Co, the Brisbane agents, began to lay plans for an agency to represent both the BI Association and the Queensland S.S. Co in that port, and he despatched Charles Leresche to Australia to sort out arrangements for local management. Leresche discovered the situation in Brisbane to be even worse than imagined, with the accounts in confusion, Parbury Lamb & Co in conflict with the agents in the other ports, and a rates war going on with the Sydney-based Australasian S.N. Co and its ally, Messrs Howard Smith & Co of Melbourne. The effects of all of this were being hidden from London by the absence of proper reports and accounts.39 In the meantime, T.B. Robinson, manager of McIlwraith McEacharn’s Rockhampton subsidiary, Walter Reid & Co, visited London and wrote a memorandum for the Board. The memo, while primarily a plea for bigger and better steamers to be sent out to Australia, admitted that the Queensland S.S. Co was losing the competition between steamship lines for goods and passengers which the formation of the Queensland S.S. Co had sparked off along the Queensland and New South Wales coasts.40 Such was the state of affairs that the Queensland S.S. Co was unable throughout the years 1884–87 either to present accounts or to pay dividends to its shareholders, and the scale of its losses will probably never be known. Charles Leresche’s relationship with William Mackinnon was relatively close, and William had relied on his advice on a number of occasions. Consequently, Leresche’s reports from Australia – stressing the importance of the local agency network as a source of cargo for the Brisbane-London steamers and pleading for William to intervene more directly in the affairs of the Queensland S.S. Company – awakened William’s interest in the little

39

E.S. Dawes to Sir Thomas McIlwraith, 15 and 29 Aug. 1884, JOL/OM64–19/41–2; C. Leresche to W. Mackinnon, 7 Oct. 1884, MP Misc. Commercial File 18. 40 T.B. Robinson, ‘Queensland Steam Shipping Coy.’, 8 Oct. 1884, AUSN Co File, University of Sydney Library, Rare Books Department (also in Norman Lang McKellar Collection, Mitchell Library, Sydney (hereafter ML)). 298

THE AUSTRALIAN OPENING, 1880–93

coasting enterprise.41 Leresche made two principal recommendations. The first was that the Group should take local management of its shipping interests in Australia into its own hands. Plans for this were in fact already underway, and would be achieved by the creation of the British India and Queensland Agency in 1885. This firm, essentially a partnership between Mackinnon Mackenzie & Co, Dawes & Co and McIlwraith McEacharn & Co (see Table 14.1), would act as the agents in Brisbane of the Queensland Royal Mail line as well as managing agents for the Queensland S.S. Co. It also looked after a monthly line which was finally started by Mackinnon Mackenzie & Co in 1885, between Calcutta and the principal Australian ports, as far round as Adelaide. This BI cargo line brought down to Australia a variety of Indian produce, but more especially tea, and came to depend for return cargoes on the transport of live horses from Australia to India, for both military and civilian use.42 By such means, and almost as an afterthought to all the other initiatives, William Mackinnon’s long-standing dream of a steamship line from Calcutta to Australia was finally realised. The creation of the British India and Queensland Agency, staffed by men who had gained their shipping experience within Gray Dawes & Co or Mackinnon Mackenzie & Co, meant the emergence of a further key nodal point within the management of the Mackinnon Group’s ever-expanding system of steamship services. However, while it might bring some order to the affairs of the Queensland S.S. Co, it could do nothing to stem the ruinous competition with the Australasian S.N. Co that had plagued the little coasting concern since its inception. Here Leresche’s second recommendation came into play – which was that shares in the Australasian S.N. Co should be acquired, so as gain either influence or control over that firm. Such advice appealed to William Mackinnon’s acquisitive nature, and events were moving in his direction. When, in July 1885, some shareholders in the A.S.N. Co, disheartened by the uninsured loss of the firm’s best steamer, the Cahors, began to sell their shares, he was quick to snap them up and to lay plans for a full take-over. By October 1886, the board of the Australasian S.N. Co, which had itself been terminally weakened by the competition with the Queensland S.N. Co as well as by the loss of the Cahors, was prepared to sell out. The deal was finally done in December 1886 – the A.S.N. Co being sold to the controlling interests in BI Associated Steamers for £200,000. The take-over of the Australasian S.N. Co, and its amalgamation with the Queensland S.S. Co to form the Australasian United S.N. Co, the largest coastal shipping firm on the eastern Australian seaboard, was a complex and protracted process. It took several months to complete and required Dawes

41

C. Leresche to W. Mackinnon, 22 Dec. 1884, MP Misc. Commercial File 18. British India & Queensland Agency Co to Mackinnon Mackenzie & Co, 5 Oct. 1885, BIS/7/56; for the conduct of the trade between Calcutta and Australia, see correspondence in BIS/7/57. 42

299

SHIPPING POWER AND IMPERIAL RIVALRIES

to undertake a lengthy perambulation of Australia.43 It was also highly contentious in that it embroiled William Mackinnon in a dispute with his Australian associates in McIlwraith McEacharn & Co and Burns Philp & Co over the terms on which the Queensland S.S. Co and the Australasian S.N. Co were to be brought together, and in particular the methods of allocating the agencies for the newly merged business. Passions ran high and friendships were strained. Andrew McIlwraith complained that his firm was being reduced to ‘the crumbs that fall from the rich man’s table’ and that William Mackinnon was behaving as a ‘dictator all round’. Even Sir Thomas McIlwraith alleged that the Queensland S.S. Co was being ‘smothered by Mackinnon and his money bags’ and that ‘when he has done with the carcass there will not be many marrow bones left’.44 The strongest criticism, however, came from James Burns, of Burns Philp & Co, who visited London to discuss the agency issue and wrote home that: ‘Mackinnon seems to ape Bismarck and wants to hold the only key to the position and have everybody on their knees before him. . . . He is a thin-faced wizened old chap and has been a keen, shrewd businessman. This keenness has degenerated into cold blooded selfishness, however, and he is now a monument of what some City men may become.’45 William was rocked by the strength of feeling generated by his proposal to separate the new agencies of the Australasian United from the older agencies of the Queensland S.S. Co, and eventually made a tactical retreat. He permitted the lion’s share of the agencies of the new firm in the various Australian ports to go to the local firms that had been associated with the Queensland S.S. Co. Nevertheless, he had succeeded in his wider goal of reducing the influence within the amalgamated company of the Australian shipowners whom he blamed for the fiasco of the Queensland S.S. Co. His was now clearly the dominant voice in the Australasian United S.N. Co, with the Mackinnon Mackenzie partners and the British India Associated Steamers owning over 30 per cent of the shares. However, his defence of what had originally been conceived as a minor prop to the Queensland Royal Mail Line had involved the group in acquiring a coasting concern with a capital as large as that of BI Associated Steamers itself, and a fleet of 35 vessels of which many were elderly and infirm. The Australasian United S.N. Co operated seven steamship lines, offering a variety of services from and connections with ports on the eastern side of Australia – from Adelaide in Southern Australia to Normanton in the

43 McKellar, From Derby Round to Burketown, pp. 65–83, relates the events and negotiations in Australia in some detail. 44 A. McIlwraith to M. McEacharn, 24 Dec. 1886 and 7 Jan. 1887, McIlwraith McEacharn Correspondence. (I am indebted to Mr J.E. Bounder of McIlwraith McEacharn Ltd. of Melbourne for the opportunity to consult this correspondence.) 45 J. Burns to R. Philp, 22 April 1887, quoted in Buckley and Klugman, History of Burns Philp, p. 33.

300

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Gulf of Carpentaria. These included a weekly inter-city service between Melbourne and Sydney, a distance of 564 miles, as well a weekly mail line between Melbourne and various ports as far as Cookstown in northern Queensland, a distance of 2048 miles. It had contracts with the Queensland government for the delivery of intra-Australian mails worth £13,770 per annum, and an agreement for pooling of traffic with a potential major rival, Howard Smith & Sons of Melbourne. It also had a South Pacific extension, in the form of a monthly service from Sydney, to New Caledonia, the New Hebrides and Fiji.46 The AUSN Co, with a fleet of some 35 steamers worth approximately £404,000, was somewhat larger than the Netherlands India S.N. Co, and its formation confirmed the group’s expertise within the field of coastal shipping. As a result of its acquisition, the Mackinnon group’s steamers now followed the shorelines, and hopped from island to island, across half the world – from the Mozambique Channel to the Fiji Islands. It was a shipping empire of truly global dimensions. The latest addition to the Mackinnon group’s extensive maritime reach was presented to the British public as an imaginative stroke by a successful and confident shipping group, now secure in its links with Australia.47 The underlying reality, however, was somewhat different. The AUSN Co had been acquired as a prop to a steamship line between London and Brisbane for which the commercial prospects still looked uncertain several years after inauguration. Revenues on the outward voyage were highly dependent upon the needs of a single customer, the government of Queensland, which might change at any moment with the winds of political fortune. Meanwhile, constant struggles to generate revenues for homeward voyages to the UK via the Torres Straits routes had resulted in greater and greater sums being invested in Australian shipping. This proceeded to the point where the group’s stake in coastal shipping in Australia was even larger than its interests in the oceanic mail line which the involvement in local shipping arrangements had originally been intended to support. The group now had a commitment to Australian coastal steamshipping matching in scale and local pre-eminence its activities in India and Indonesia. It did not necessarily follow, however, that this would consolidate the London-Brisbane line’s tenuous foothold in UK-Australian shipping. *****

46 For details of the AUSN Co’s operations at this time, see ‘Report on the Working Party of the Company and Analysis of the Company’s accounts Received in Brisbane for the Year Ending 31st December 1893’, ML/MSS 4548/125, as well as McKellar, From Derby Round to Burketown, pp. 105–45. 47 Thus the editor of the shipping journal, Fairplay, strongly advised his readers to take shares in the AUSN if they were lucky enough to be offered them. (Fairplay, 25 March 1887, UGD3/15/1.)

301

SHIPPING POWER AND IMPERIAL RIVALRIES

As William, Dawes and the men of the BI & Queensland Agency, led by James Munro, were busy putting the Australasian United S.N. Co on its feet, emigrant traffic from Britain to Queensland, the life-blood of the LondonBrisbane service, began to dry up. The ‘Liberal’ government led by Samuel Griffiths which took over from McIlwraith’s ‘Conservative’ government late in 1883 initially continued the emigration and shipping policies of its predecessor. Despite their hostility to the mail contract when in opposition in 1880, Griffiths and his colleagues seem to have become reconciled to it by the time they came to office. However, from 1886, they had become increasingly concerned by the level of expenditure on assisted emigration, and were determined to reduce it. An end to the ‘bounty’ arrangement with the shipping companies in July 1886 led BI Associated Steamers to begin to wind down its fortnightly service, although the brunt of the change was borne by the Ducal Steamers (for which Westray and Dawes now had to find alternative employment). The main fall in emigrant numbers, however, followed the Immigration Amendment Act of 1887, by which the Griffiths government sought to reduce the £239,306 per annum which had been spent on average on assisted migration between 1881 and 1887 to somewhere in the region of £50,000 per annum. There was also a desire to limit the inflow of what the Minister of Lands described as the ‘refuse class’, by significantly increasing the rates to be paid by migrants for their assisted passages.48 The volume of migration from Britain to Queensland now went into a decline that was further exacerbated by a slowing down in the rate of growth of the Queensland economy that made it less attractive to prospective migrants. The total numbers of assisted emigrants fell from 11,715 in 1887 to 3,101 by 1890 and to a mere 13 in 1893.49 During the early 1890s, as slow growth turned into depression, migration dried up altogether, and the mail steamers sailed with more and more empty cabins. In the meanwhile, the second major financial support to the LondonBrisbane line also declined. Since 1884, successive Postmaster-Generals of Queensland had complained about the annual subsidy of £55,000 charged against their budget for a service which, because of improvements in alternative services by the southern route, actually carried an ever-decreasing, and minority, share of Queensland’s mails to and from Europe. By 1888, it became clear that it would be significantly cheaper for Queensland to join the new ‘Federal Mail Service’ for Australia, to which contributions were calculated on the basis of population numbers, than to support an ‘independent’ mail service via the Torres Straits. Political and public opinion consequently swung against the Queensland Royal Mail Line. When the contract came up for renewal in 1889, BI Associated Steamers was obliged to accept a

48

Queensland Legislative Assembly, Debates, July–Oct. 1887, pp. 559 and 663–4. Agent-General’s Annual Reports, 1888–94, Queensland Legislative Assembly, Votes and Proceedings. 49

302

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reduction in the subsidy to only £19,800 per annum.50 At the same time too, Queensland’s trade was slowing down, rendering it even more difficult for the Royal Mail Line to divert cargoes from sailing vessels and from the other steamship lines serving eastern Australia. Furthermore, the men of the British India and Queensland Agency had discovered that much of the cargo traffic from Queensland down to Sydney, particularly the well-paying sugar and fruit cargo, was not destined for transhipment to the UK. It went instead to markets in New South Wales and Victoria. In other words, the original premise on which Dawes had based the Group’s involvement in Australian coastal shipping was highly suspect, and investment in coasting vessels did not necessarily mean that traffic could be diverted to the homeward London steamers.51 Although the absence of voyage accounts prevents any measurement of the performance of the London-Brisbane line, all the evidence suggests that during the late 1880s it ceased to be the financial counterweight to BI Associated Steamers’ London-Calcutta line that it had been in the early-to-mid 1880s. Thus, in 1887 and again in 1888, Mackinnon and the directors of Associated Steamers had to raid the company’s insurance fund in order to pay a ‘normal’ dividend (the firm’s other reserves having been converted into shares in the Australasian United S.N. Co). Although 1889, when freights were high in both the Indian and Australian trades, was a good financial year, this was rather overshadowed by the loss of the mail steamer Quetta in the Torres Straits in February 1890, with the loss of 129 lives. In 1891, for the first time ever, the London-based steamers made an overall loss and no dividend could be paid (Table 11.2). In effect, the gradual reduction of the subsidy element on the London-Brisbane line was opening it up to the same volatile, and generally depressed, conditions as prevailed on other international shipping routes at this time. On the Australian seaboard, the elimination of competition and the group’s dominant position as owners of the largest coasting firm had some initial benefits. Rationalisation of agencies and gradual fleet modernisation meant that net earnings per steamer and overall profits rose during the first three years of operation, 1887–9 (Table 11.2). Thereafter, however, the Australasian United S.N. Co began to encounter constraints on coastal shipping operations that had been emerging almost unseen during the earlier cut-throat rivalry and the drama of the amalgamation. The first was railway construction, which, at various points around the Australian coast, meant a

50

Post Office and Telegraph Department Annual Reports, 1886–9, Queensland Legislative Assembly, Votes and Proceedings. 51 There are no detailed statistics for Australian coasting traffic, or for the transhipment of cargoes from AUSN Co to BI Associated Steamers vessels, but the weakening commitment of the BI & Queensland Agency to the feeder/distributor role of the coasting lines, and their appreciation of the realities of trade flows on the eastern seaboard, can be seen in the AUSN Co Correspondence Book, June–Dec. 1891, ML/ MSS 4548/1326. 303

Table 11.2 BI Associated Steamers Ltd and Australasian United S.N. Co Ltd, 1886–93

1886 1887 1888 1889 1890 1891 1892 1893

Paid-up capital (£000s) BIAS AUSN

BIAS

250 250 250 250 250 250 300 325

11 11 10 11 12 12 13 11

0 193 250 250 287 343 343 343

No. of steamers AUSN

Book value of fleet (£000s) BIAS AUSN

Net earnings per steamer (£) BIAS AUSN

Dividends (%) BIAS

AUSN

0 35 35 35 34 30 30 28

421 377 339 327 379 523 635 563

1,381 1,090 1,584 5,627 1,406 –2,016 –2,332 –522

5 5 6 7 5 0 0 0

0 5 6 6 3 4 0 0

0 404 429 526 576 533 508 492

0 623 924 1,050 541 773 1,160 430

Sources: Annual Reports of British India Associated Steamers Ltd and Australasian United S.N. Co, Inchcape Archives.

THE AUSTRALIAN OPENING, 1880–93

diversion of passengers and traffic to land routes. The BI & Queensland Agency first noticed the change in 1887, when the railway line from Sydney to Brisbane was opened to light traffic and the mails between the two cities were switched from the AUSN Co to the railway. But the competition really began to bite in 1891, when the line along the Queensland coast northwards from Brisbane to Maryborough and Bundaberg practically wiped out the company’s passenger traffic in southern Queensland and diverted cargo to and from the Gympie gold mines to the railway system.52 The second constraint on the AUSN Co was the rise of labour militancy among Australia’s seamen and dock-workers, as a slowing down of economic growth and combination amongst employers reduced employment opportunities.53 A national seamen’s strike in Australia in August–October 1890 had a considerable impact on steamer earnings and company profits. Recovery in 1891 was hampered by a rates war in Southern Australian waters, which brought down freight rates between Queensland and South Australia. Although financial results were better in 1892, the directors wisely decided to refrain from payment of a dividend and to set the income aside as a cushion against the disasters which overwhelmed Australia and the company in 1893. Widespread flooding in Queensland and New South Wales which disrupted production and trade, a financial crisis throughout Australia which brought bank after bank tumbling down and by late May left only three banks open for business in Queensland, the onset of determined opposition by the Adelaide Steamship Company (itself being pressed by its bankers), a severe reduction in freight rates, the collapse of proposed pooling arrangements, and another seamen’s strike – all these occurred within the fateful year of 1893.54 Net earnings of £430 per AUSN Co steamer in 1893 were the lowest since the firm started operations (they fell even further, to £42 per steamer in 1894). The Australian economy and its related shipping trades were locked into a depression from which they did nor recover until 1896, by which time the shareholders in the AUSN Co had endured four years without dividends. ‘The prospects of the AUSN Co, so golden and glorious at the start’, one of its managers would later recall, ‘proved to be the gilt of illusion.’55 All of this, in turn, impacted upon the steamers of the Queensland Royal Mail Line. ‘I feel in no little perplexity,’ Dawes wrote plaintively to

52 Post Office and Telegraph Department, Annual Report for 1887; memo by F.C. Barnes of the BI & Queensland Agency, n.d., ML/MSS 4548/16b; E. Bland, BI & Queensland Agency, to AUSN Co, 17, 24 and 31 July, 19 Sept., and 16 and 23 Oct. 1891, AUSN Co Correspondence Book, June–Dec. 1891, ML/MSS 4548/126. 53 G.R. Henning, ‘Steamships and the 1890 Maritime Strike’, Historical Studies, 15 (1973), pp. 562–93, and ‘Edwyn Sandys Dawes and Australian Maritime Labour’, Journal of Transport History, n.s. III, No. 2 (1982), pp. 81–90. 54 Directors’ Minute Book, Australasian United S.N. Co, Inchcape, AUSN/1320; ‘Report on the Working Party . . .’, ML/MSS 4548/125. 55 F.C. Barnes to Mackay, 19 Dec. 1943, ML/MSS 4548/114.

305

SHIPPING POWER AND IMPERIAL RIVALRIES

McIlwraith, ‘the changes that have taken place in the last five years having been of a character we never contemplated.’ In 1889, when the LondonBrisbane mail contract had been renewed, ‘we were in the full swing of an active business and emigration, and we provided a number of new and costly steamers’, but in the following years the mail line ‘unassisted by emigration, has been so unprofitable that in the working and depreciation of these costly but now unsuitable steamers our losses have reached a figure we would hardly like to mention’.56 ***** As political and economic conditions turned against the Queensland Royal Mail Line and the Australasian United S.N. Co, William Mackinnon’s attention was largely focused elsewhere. There were problems in defending the group’s interests in the Dutch East Indies and the Scramble for Africa increasingly preoccupied him. McIlwraith had already complained in 1886 that ‘it is fearfully difficult to get him to work. He has too many irons in the fire to get him to grasp anything.’57 But thereafter he became even more frustrated by an inability to get William to attend to matters relating to Australia. For his part, McIlwraith was unable to do very much to assist the business group whose presence in Australia he had done so much to engineer. He remained active in Queensland politics, and regained the premiership for short periods (in 1888 and in 1893). But he was no longer the commanding figure that he had been in the early 1880s, when his great outburst of public expenditure and government borrowing had fuelled the boom in the Queensland economy. By the end of the decade, his own business ventures were struggling and during the early 1890s they were kept afloat only with substantial support from the Queensland National Bank. When that bank in turn was saved from collapse in 1893 only by government intervention, McIlwraith, rather like William Mackinnon before him, found himself faced with charges of mismanagement bordering on corruption. He was eventually driven from public life.58 Even had William had more time to spare, it is unlikely that that he would have been able to do very much to turn the adverse tide of events in Australia after 1887. Nor can he and Dawes have foreseen the severe depression that would hit Queensland and the rest of Australia in the early 1890s. A great many other British businessmen and financial institutions who had involved themselves with Australia during the boom years of the 1870s and 1880s were also caught out when things finally went sour. Even so, they cannot wholly

56

E.S. Dawes to Sir Thomas McIlwraith, 18 Dec. 1894, JOL/OM 64–19/213. Sir Thomas McIlwraith to Sir Julius Vogel, 21 May 1886, JOL/OM 64–19/130. 58 Australian Dictionary of Biography, Vol 5, p. 163; Gough, ‘Tom McIlwraith . . . and the Queensland National Bank’. 57

306

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escape the charge that they allowed themselves to be seduced too readily by Thomas McIlwraith’s powers of patronage and influence. They also took on a more risky exposure to Australian economic and political conditions than was wise, because their characteristic reaction to any difficulty was to try to buy their way out of trouble. This policy left them and the group in control of ever larger shipping tonnage and made the collapse of demand for such tonnage even more difficult to bear. By 1893, fully-paid shares in British India Associated Steamers Ltd. were down to around two-thirds of their original value, and part-paid shares reduced from £35 to £1 (with the result that William’s own investment in the firm had fallen in value from £23,845 to £3,887). Shares in the Australasian United S.N. Co were down in value by roughly one-third.59 In other words, group investments of approximately £390,000 in a London-Brisbane line and Australian coasting lines in 1887–8 were worth only around £198,000 in 1893. Nor were these the only losses. William lost several thousand pounds through his entanglements with McIlwraith’s various enterprises and schemes. Gray Dawes & Co too had to write off the £69,000 it sank in its investment in the freezing plant in Bowen. Inexperience with freezing techniques (resulting in poor quality of meat landed in the UK) and problems with regularity of supply of livestock from Queensland’s pastoralists led to a need to suspend operations in 1886. It is therefore difficult not to conclude that the pessimists within the inner family circles, including Peter and Jamie Hall, who had been so reluctant to become involved with Queensland in the first place, had been vindicated by events. The group had acquired a foothold in the UK-Australian liner trades, and a pre-eminence in the coasting trades of eastern and southern Australia, but this had been achieved at a substantial cost which would only be recouped if and when Australia recovered from the worst depression it had ever experienced. If, on balance, Thomas’s McIlwraith’s enticement of William Mackinnon and his firms into Queensland had been a poor deal for the group, did Queensland benefit from the relationship? Were McIlwraith’s political opponents right in 1880 when they argued that that there would be no significant gains for the colony from the mail contract with William Mackinnon? Between 1881 and 1895 the Queensland Treasury paid a total of £611,700 to subsidise a London-Brisbane line which, as successive Postmaster-Generals pointed out, wasn’t really necessary for postal purposes and therefore amounted to a line which was subsidised for general commercial purposes. What commercial benefits accrued? The inauguration of the line

59

Since, like the other shipping concerns controlled by the group, these were private limited liability companies, their shares were not publicly traded and had no stock exchange valuation. The valuations for 1893 come from the inventory of William Mackinnon’s estate as of 7 October 1893 (Scottish Records Office, Edinburgh, SC/51/32/43). 307

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undoubtedly facilitated an enlarged immigration programme which in turn helped to ensure that, from 1881 until 1889, net migration exceeded natural population increase as a source of population growth in Queensland.60 But that programme involved additional expenditure on top of the subsidy and would probably have been carried out by sailing ships or charted steamers even if the Queensland Royal Mail Line had not existed. A more concrete result of the subsidy, perhaps, was that the introduction of a regular steamship line encouraged the growth of direct trade between Queensland and Britain. In 1880, before the line commenced, Queensland’s trade with the UK was 24.8 per cent of its total trade by value; by 1890 this had risen to 32.9 per cent and by 1894 to 40 per cent.61 Imports from the UK, however, rose faster than exports, reflecting the needs and tastes of a population of recent immigrants, and even as late as 1894 New South Wales remained a more important market for Queensland products than Britain. Among exports, the one area of growth that can be most directly attributed to the introduction of the London-Brisbane line is the frozen meat trade. The exporting of frozen meat from Queensland ports was pioneered almost single-handedly by the Mackinnon group, and even though the Gray Dawes investment in a freezing plant was a dramatic failure, the availability of refrigerated space on BI Associated Steamer and Ducal Line vessels gradually encouraged local Queensland capital into more efficient enterprises. Queensland’s exports of 206,783 cwts of frozen beef to the UK in 1893 made it second only to the United States as a source of frozen and chilled beef in that year.62 Even so, £661,700 appears to have been a very large sum to pay to promote a trade which, together with all other forms of meat exporting, was still worth only £546,347 per annum in 1893. Queensland, it appears, benefited little more from the McIlwraith-Mackinnon alliance forged in the early months of 1880 than did the network of individuals, firms and interests to which William Mackinnon provided leadership.

60 Registrar-General’s Annual Reports, 1881, 1888 and 1895, Queensland Legislative Assembly, Votes and Proceedings. 61 Calculated from trade figures in ‘The Statistics of Queensland’, 1885, 1889 and 1894, Queensland Legislative Assembly, Votes and Proceedings. 62 Agent-General’s Annual Report for 1893, Queensland Legislative Assembly, Votes and Proceedings.

308

12

India: competition, collaboration and consolidation, 1882–93 The Mackinnon group’s entry into Australian shipping and other business ventures began during the upswing in the business cycle that took place between 1879 and 1882, and was in many respects the last phase in a diversification of shipping interests started by the opening of the Suez Canal. However, the Australian initiative was fairly quickly overtaken by a transformation in the international economic environment that had commenced in the mid-1870s but was most pronounced in the years between 1882 and 1896. Decelerating economic growth in Britain, reflected in turn in a slowdown in its trade with foreign countries and imperial territories, was accompanied by an ‘internationalisation’ of the business cycle. This saw Britain and France experience severe depression during the middle 1880s. Then, after a short recovery towards the end of the decade, both were joined from 1891 onwards by Germany, the United States and much of the rest of the world, in an even deeper downturn in economic activity.1 Overall, it was a time of slackening world trade, of widespread economic instability, and of falling prices for manufactures and commodities. It was also a period of heightened international tensions, as old European imperial rivalries were exacerbated by prevailing economic conditions and newer industrial powers such as Germany began to acquire colonial possessions. Across the tropical world – in Southeast Asia, the Pacific and Africa – techniques of ‘informal imperialism’ were being abandoned or by-passed in a scramble for territorial possessions while in China the European powers competed with each other to stake out new ‘spheres of influence’. British India, in which the Mackinnon group’s core business interests were located, was affected by these political developments in that some of the arenas of great power rivalry lay close to its borders and because it was a major source of military manpower for the British Empire as a whole. Nowhere were the changing economic conditions felt more keenly than in the British mercantile marine. Freight rates for cargo carried into and out of British ports (Figure 12.1) declined by 50 per cent between 1880 and 1893. This is an index for all deep sea shipping, but specific indices for coal between Britain and Bombay and for jute between Calcutta and Britain show that

1

This period in world economic history is succinctly reviewed in W. Arthur Lewis, Growth and Fluctuations, 1870–1913 (London, 1978). 309

SHIPPING POWER AND IMPERIAL RIVALRIES 120.0

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1881

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1889

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UK OCEAN FREIGHTS

Figure 12.1 Shipping freights, 1880–93 (index) individual trades tended to follow the same overall pattern of decline, short respite and further decline to be seen in the main index.2 Indeed, given that the indices for trade between Britain and India were significantly lower than the general index of all ocean freights by 1893, it would appear that that sector of British trade and shipping was particularly hard hit in the early 1890s. Such reductions in shipping freights were caused partly by increased productivity within the shipbuilding industry, which delivered larger vessels at a lower price per ton as well as more efficient steamships with improved marine engines that reduced the working costs of shipping firms. But they were also the outcome of intense inter-firm rivalry within the shipping industry, brought about by the relative ease of entry of newcomers into the field and by the spread of steamship technology from Britain into the yards and merchant fleets of other Western nations. At a time when British overseas trade was slowing down, total steam tonnage in the British mercantile marine roughly doubled in size, and total world steam tonnage grew even faster.3 The Mackinnon group, with such a large part of its assets in steamshipping, was likely to face a squeeze on earnings and profits, and to have to work hard to defend its share of the market. Furthermore, a group 2 The data for UK ocean freights are from Lewis, Growth and Fluctuations, Table A.11, pp. 280–1, and for UK–Bombay coal and Calcutta–UK from E.V. Angier, Fifty Years of Freight, 1869–1919 (London, 1920). 3 British steam tonnage rose from 22,723,468 in 1880 to 7,207,610 in 1900, while world steam tonnage (including US river and lake vessels) rose from 5,450,179 in 1880 to 16,212,323 by 1900. (A.W. Kirkaldy, British Shipping: Its History, Organisation and Importance (London, 1914), Appendix XVII.)

310

INDIA, 1882–93

whose core businesses were located in India would come under pressure from another factor – the long-run decline in the value of the rupee against the pound sterling, and many other world currencies, as a result of the fall in the price of silver relative to gold by roughly a half between 1873 and 1894.4 While such currency depreciation stimulated Indian agricultural exports, it constrained inward investment. Companies raising funds in Britain and purchasing capital goods in pounds sterling for operations in India faced the problem of converting profits in ever declining rupee values into sterling for payment of dividends and further purchases of capital goods. By and large, it was not a good time for British firms to be engaged either in shipping or in business enterprise in India. ***** As ever, the foundation for the Mackinnon group’s entire operations rested upon BI’s Indian coastal shipping services, and the relationship with the Government of India that brought funding and other forms of official support to BI’s activities. The mail contract that William Mackinnon and Alexander Monteath had managed to secure for the company in 1874 was due to terminate on 30 April 1884, and by 1882 both BI’s directors and the Indian Post Office had turned their attention to the process of contract renewal. This took place amidst growing evidence that opinion in official circles in India was moving against the company and its ‘monopoly’ of mail contracts and of government shipping business. Such hostile sentiments were particularly strong within the administration of Burma which, unlike other provinces, had no overland communications with the rest of British India and relied heavily upon sea-borne communications.5 The entry of the Asiatic S.N. Co into Indian coastal shipping, and its complaints about official favouritism towards BI, had already persuaded the Government of India that, when the opportunity arose, the consolidated mail contract of 1874 should be unravelled. Tendering for mail contracts would be opened up to competitive bidding. Guidelines to this effect were issued in 1882 by F.R. Hogg, Monteath’s successor as Director-General of the Post Office in India. They made it clear that mail contracts would no longer be used for promoting trade (although military and political considerations might apply), that

4

Lewis, Growth and Fluctuations, pp. 171–2; J. Foreman-Peck, A History of the World Economy: International Economic Relations since 1850 (Brighton, 1983), pp. 160–7. The rupee’s decline, from about 2s in 1871 to 1s 2d in 1892, also caused budgetary problems for the Government of India by increasing the burden of the ‘home charges’ paid in the UK. (D. Kumar (ed.), The Cambridge Economic History of India, Vol. 2, c.1757–c.1970 (Cambridge, 1983), pp. 769–70.) 5 A.M. Monteath to W. Mackinnon, 6 July 1881, and enclosure, C. Bernard (Rangoon) to F.R. Hogg, 24 May 1881, MP Private Letters File 167; J.M. Hall to W. Mackinnon, 6 March 1882, MP Private Letters File 40. 311

SHIPPING POWER AND IMPERIAL RIVALRIES

contracting for the transportation of government freight would be separated from the mail contracts, and that each subsidised line would be subject to separate tenders.6 In March 1883 tenders were invited for mail contracts on only six lines – Calcutta to Rangoon direct, Calcutta to Rangoon via intermediate ports, Madras to Rangoon, Bombay to Karachi direct, and Bombay to Karachi via intermediate ports, and Karachi to Basra. The main effects of the change would be to withdraw public support from the long Calcutta-Bombay coasting line that linked BI’s operations out of the two hub cities, as well as from the Calcutta-Singapore line and the Karachi-Aden section of the line from London via Karachi to Bombay. It would also compel BI to bid for each of the remaining lines separately. The appointment of Alexander Monteath to the BI board in January 1882, following his retirement from the Indian civil service, was the initial step in preparing the company’s defence. He and William Mackinnon devised a strategy that proceeded on two fronts. The first was to try to persuade the Government of India to renew BI’s consolidated (1874) contract at the existing level of payment but with BI delivering greater ‘value-for-money’ through faster or more frequent services on various routes. The crux of the argument deployed in support of this position was the importance of maintaining the BI fleet’s ‘emergency reserve’ capabilities for both India and the Empire. It was an argument given greater effect by the Egyptian crisis of 1882, when Indian troops were despatched to join the British forces on the Nile and the Government of India chartered eighteen BI steamers to assist in transporting the Indian contingent to Suez. This first major Indian military expedition since the Ethiopian campaign of 1868 was a god-send to William Mackinnon and the BI directors, enabling them to project the company as a loyal servant of empire engaged in the patriotic duty of supporting British power and influence in a troubled world. Frere lobbied government ministers in Britain, to remind them of the advantage to the Government of India ‘of commanding, in the event of war, the services of a very large and very efficient fleet of transports, at very moderate rates’.7 This echoed the argument put even more forcefully by William Mackinnon that ‘The command over a fleet so large and well appointed . . . is a point of considerable importance to the Government of India in case of war; and, even in a purely financial aspect, importance attaches to the practical restraint upon the market rate of hire for extraordinary war services as well as for the ordinary local transport requirements of the Government.’8 BI’s

6 F.R. Hogg to Dept. of Finance and Commerce, 2 June 1882 [No. 366 of March 1883] and 5 Jan. 1883 [No. 379 of March 1883], Proceedings: India, Separate Revenue, Vol. 2101, IOLR. 7 Sir H.B. Frere to Lord Northbrook, 22 Feb. 1883, FO 84/1803. 8 W. Mackinnon to Director General of the Post Office of India, 19 July 1883 [No 114 of February 1884], Proceedings – India, Separate Revenue, Vol. 2328, IOLR.

312

INDIA, 1882–93

contribution to the Egyptian campaign was appreciated within governing circles in India – but not sufficiently so to offset the view that steam tonnage was now readily available for charter in India in times of emergency and that subsidising BI for trooping purposes was no longer necessary. The efforts of William Mackinnon and the BI directorate failed to persuade the Indian administration to abandon its new, more limited and more competitive mail contracting policy. The second strand of the strategy was to head off competition for the six lines on which the Government of India was prepared to offer mail contracts. Principally this meant squaring the Asiatic S.N. Co. In April 1883, William Mackinnon and Edwyn Dawes met T.H. Ismay of the White Star Line to hammer out the general shape of an agreement between BI and the Asiatic Co. The discussions and subsequent correspondence offered enough assurances for the board of BI’s most serious rival to decide against tendering for any of the new Indian mail contracts, and the terms of the alliance between the two firms were eventually formalised in a memorandum of 8 May 1884. This included common rates of freight and rebates to shippers on the routes that the Asiatic Co already occupied, joint opposition to ‘outside steamers’ coming onto any route in which both were active, the Asiatic Co’s withdrawal from a route between Negapatam in South India and the Straits Settlements (in which BI had recently acquired an interest), and agreement that the Asiatic Co could place one new steamer on the Indian coastal lines for every six new BI vessels.9 Thus the need for a clear run at the mail contracts had brought William Mackinnon and the BI board round to finding a solution to the nagging competition that BI had experienced in the Bay of Bengal since 1879. No such peace was on offer on the coasts of western India, where the small locally-registered firm, the Bombay and Persia S.N. Co, under its managing director, A. J. Shepherd, had proved a constant thorn in the flesh of BI managers in Bombay. Although it appears that efforts were made through Dawes, who was a personal friend of Shepherd’s, to keep the Bombay and Persia Co out of contention, nevertheless the Bombay-based firm turned out to be the only other contestant in the tendering process. When the bids were opened in Calcutta, BI had offered for all six of the remaining mail contracts, but the Bombay and Persia had put in an offer for two – the direct service from Bombay to Karachi and the Karachi-Basra route. In advising the Government of India how to proceed, F.R. Hogg of the Indian Post Office took the view that BI’s offer to conduct three lines in the Arabian Sea and Persian Gulf for 185,000 rupees a year was better value than Bombay and Persia’s offer to do two of them for 156,000 rupees a year – even although Bombay and Persia had actually underbid BI for the Bombay-Karachi route. He added that ‘apart from this I believe that the resources of the Bombay and

9

23 May and 23 July 1883, and 12 May 1884, Directors’ Minutes, Asiatic S.N. Co. 313

SHIPPING POWER AND IMPERIAL RIVALRIES

Persia are very poor, and that it is altogether an unreliable company’.10 Once again, an Indian-based concern – Shepherd had two Moslem businessmen as partners in his venture – was denied a mail contract on the basis of an official preference for BI. While the Post Office and the Marine Department may have had good reasons for regarding the Bombay and Persia S.N. Co as an inefficient concern, it is hard to escape the conclusion that other factors came into play in the decision to set aside the lowest bid for the Bombay-Karachi mails. Not least, perhaps, were the efforts made by William Mackinnon to help Hogg’s son find employment in Queensland.11 William Mackinnon’s influence with certain civil servants, despite his prolonged absence from India, proved sufficiently strong to help secure for BI the mail contracts that were an important symbol of government support as well as a source of revenue. However, it was a less resounding success than his previous triumphs. The extent of the subsidised steamer system was considerably reduced, and over the greater part of its network of liner services BI would now have to operate on a purely commercial basis. The company also lost its preferential position in transporting government stores and passengers on its lines, whether mail lines or not. The total annual payment to BI from the government of India fell from 803,000 rupees per annum to 358,000 rupees per annum, and over the ten-year period of the contracts (to 1894) that sum would have a declining international value because of the falling rupee exchange rate.12 William Mackinnon and Alexander Monteath, among others, found it hard to accept such a reduction in the level of government assistance, and scarcely had the contracts been signed than they began attempts to persuade the Government of India to subsidise the CalcuttaBombay line once more. In doing so, they made full use of complaints from officials and merchants in the smaller coastal ports, more especially along the Northern Circars, at greater irregularity in the delivery of mails. This resulted from BI’s managers rescheduling timetables to meet the needs of local passenger and cargo traffic rather than the demands of the Post Office. After a great deal of effort, and a large volume of correspondence between Glasgow, London, Calcutta and Madras, it was eventually agreed in 1886 that the Government of India would subsidise two local coasting lines in the Madras province for 15,000 rupees each – one between Madras city and Bimlipatam and the other between Tuticorin and Colombo (to convey labourers from south India to the tea estates of Ceylon). This was a minor victory for the senior figures within BI’s directorate who wished to cling to older practices and

10

F.R. Hogg to Dept. of Finance and Commerce, 12 Nov. 1883 [No 109 of Feb. 1884], Proceedings – India, Separate Revenue, Vol. 2328, IOLR. 11 A. Monteath to W. Mackinnon, 13 Sept. 1883 and 15 Oct. 1884, MP Private Letters File 168. 12 Details of the contract terms may be found at 20 Feb. 1884, BI Directors’ Minutes, BIS/1/4. 314

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relationships, but it was still some way from restoring the former subsidy to BI’s entire coastal operations between Calcutta and Bombay. The struggles over mail contracts between 1882 and 1886 reflected a shift in the relationship between BI and the Indian administration. The attitudes and values of the 1860s and 1870s, when both officials and company men looked upon BI as a parastatal organisation, almost a branch of the Indian government, were giving way to recognition of the differing interests of each. An arms-length relationship between government and business, more akin to that in Britain itself, became the accepted norm. Among Indian civil servants, the change probably marked the passing of that generation attuned to the forms of patronage conducted by, and under, the old East India Company. Meanwhile, the younger men now managing the BI operations out of Bombay and Calcutta welcomed the liberation from the controls and regulations that went with being the mail contractor. Over a very large part of the steamship network they now took the opportunity to seek out and exploit the commercial opportunities that stemmed from greater flexibility to manage the services. Thus James Mackay in Bombay queried William Mackinnon’s desire to re-establish a contracted Calcutta-Bombay line with the observation that ‘the longer we work without a contract the greater do the advantages of being free appear to be.’13 These included the ability of steamers to wait for cargoes in the small ports south of Bombay rather than sail half empty because a mail timetable had to be kept. Similarly Mackinnon Mackenzie & Co in Calcutta answered the complaints of the Madras government about the lack of attention to first-class passengers (i.e. Europeans) on the coast service by observing that the former mail contract, no longer in operation, had obliged BI to carry such passengers at fixed rates. In the free market that now prevailed the vessels could get more income from deck passengers ‘and we don’t think it unreasonable in these circumstances that we should prefer the natives.’14 BI, in part a creature of the Indian administration and its values, was now having to adjust more closely to the commercial realities of India. The evidence suggests that, despite William Mackinnon’s deep emotional attachment to mail contracts, BI had arrived at a point where public service, and official support and approval, were no longer necessary components of its business success. Neither the large reduction in annual payments from the Government of India nor the recurrent depressions in international trade and shipping were sufficient to check BI’s continuing growth and development. In 1882, BI possessed 58 steamers totalling 96,675 tons, and had reserve funds of £489,555; by 1893 this had grown to 88 steamers totalling 197,724 tons and reserves of £796,450. Over the same period, the value of the firm’s principal

13

J.L. Mackay to P. Macnaughton, 18 Nov. 1884, BIS/8/7. Mackinnon Mackenzie & Co to E.M. James, Director General, Indian Post Office, 8 Sept. 1885, BIS/7/35.

14

315

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assets (steamers, other craft and coal stocks) almost doubled – from £978,699 to £1,769,722. Throughout the period it consistently paid shareholders annual dividends of 12 per cent per annum, although it reduced this to 10 per cent in 1893 and had to raid the reserves to do so. BI rode the storm that battered most shipping firms in this period. It did so partly because of its continuing domination of the Indian coastal trades, which ensured that new entrants into Indian foreign trades, such as Bibby, Brocklebanks or the Austro-Hungarian Lloyds, were obliged to make through traffic-agreements with BI that precluded or limited coasting voyages in Indian waters. Meanwhile, the alliance with the Asiatic S.N. Co, which evolved into the pooling of earnings on the Calcutta-Bombay and Calcutta-Burma routes and joint-charter operations on other lines, was matched by one on the CalcuttaSingapore line with Apcar & Co and Jardine Skinner & Co. These two firms, representing the ‘China Steamers’ engaged in the exporting of opium from Calcutta to Singapore and Hong Kong, agreed in 1886 to enter into a pooling arrangement with BI, which shipped goods between Calcutta, Burma and Singapore. Total earnings on general traffic were divided as 70 per cent to Apcars and Jardines and 30 per cent to BI, while BI was limited to only 10 per cent of opium freights. The deal, negotiated by Peter Mackinnon, was a good one for BI. It brought higher levels of earnings than might be expected from BI’s more indirect operations between Calcutta and Singapore, and almost certainly reflected the desires of Apcars and Jardines to limit BI encroachment on their lucrative opium trades to Southeast Asia.15 Across most of the vast extent of its Indian coast and country network, BI was sheltered from any sustained and continuous competition – facing only the minor irritant of intermittent rate wars with A.J. Shepherd on routes into and out of Bombay. Nevertheless, collaboration with other steamship owners could not wholly protect BI from falling freight rates. Indeed, the company’s net steamer earnings per ton declined over the years in line with the fall in rates for raw jute between Calcutta and the UK (Figure 12.2). Only in 1885, when 19 BI steamers were chartered to take troops from India to the Red Sea port of Suakin in support of Wolsley’s bid to relieve Gordon in Khartoum, and a further 12 vessels were employed as troop transports in the campaign to take possession of Upper Burma,16 did net steamer earnings per ton break free from the grip of the general trends in shipping freights. Falling earnings and the declining value of the rupee put a squeeze on BI’s profits to which the board and the managers responded by trying to cut costs. Most notably they imposed constraints on the pay and perks of the European officers and crew

15

10 Feb. and 16 April 1886, BISN Co Directors’ Minutes, BIS/1/4; Correspondence – Calcutta Office BIS/7/51; also comments on the arrangements in Directors’ Memo Book, BIS/2/1. 16 Correspondence – Calcutta Office, BIS/7/58. 316

INDIA, 1882–93 120.0

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Figure 12.2 BI net earnings, 1880–93 (index) members, building up a legacy of strained industrial relations that would ultimately lead to a pay strike by the captains in 1896. They also paid close attention to the productivity of the fleet. They introduced increasingly large vessels with improved cargo-carrying capacity, fitted out with triple- and quadruple-expansion engines to improve fuel efficiency and with ratios of engine power to tonnage designed to produce the moderate speeds more appropriate to shipping services no longer tied to demanding mail schedules. Meanwhile older and slower steamers were retained as long as possible, to avoid passing into the hands of Indian, or India-based, competitors. Between 1882 and 1893 the tonnage of the BI fleet grew faster than both the volume of British-registered tonnage engaged in Indian coastal trade and the total volume of tonnage employed in that trade.17 This suggests that BI more than held its own in the shipping sector that comprised 75 per cent of its business. Nevertheless, the company’s progress was highly cyclical, with steamer earnings and company profits reaching low points in 1884, 1887, and 1893, amidst loud complaints from managers and directors about falling freights. The downturn of 1890–3 was particularly severely felt. ‘I see the shortcomings on the earnings of 1892 will be very large’, William Mackinnon wrote to Mackay in Calcutta, ‘certainly 15 lacs in the country trade & possibly half that in the direct line. We must exercise the strictest economy

17 The figures were: BI fleet from 96,675 tons in 1882 to 197,724 in 1893 (104%); volume of British-registered tonnage in Indian coastal trade from 4,710,030 tons in 1882 to 8,821,222 tons in 1893 (87%); and volume of total tonnage in Indian coastal trade from 11,803,504 in 1882 to 20,382,030 tons in 1893 (72.6%).

317

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in every Department [because ] I should not like to have to reduce the dividend.’ The only consolation was that BI was not alone: ‘Every shipowner at the present time must be must be sinking heaps of money.’18 The burden of secular decline in freight rates impacted more strongly on the ‘home lines’ between Britain and India, on which competition was particularly fierce, than on the Indian coasting routes where BI remained dominant and had pooling arrangements with its few rivals. ‘We have a splendid Coasting Trade’, Jamie Hall wrote to William Mackinnon in 1886. ‘I don’t know any company that has a better or more profitable one, but unfortunately almost all our long sea services are drains more or less on its income.’ He particularly urged the abandonment of the London-KarachiBombay line, the successor to the London-Basra line, ‘which has been a sink of money since its first start’.19 In 1883, in somewhat mysterious circumstances, BI lost the contracts from the Portuguese government to carry the mails from Lisbon to Goa and Mozambique. This deprived the LondonKarachi- Bombay line of an important source of revenue. In 1884 the subsidy for mails between Aden and Karachi disappeared within the Government of India’s reorganisation of its postal contracts. Meanwhile, Karachi failed to develop as a port, mainly because of lack of investment in harbour improvement, and BI could not compete with the large volume of tonnage on the London-Bombay route because of its more indirect service via Karachi. Even the Sind, Punjab and Delhi Railway, for which BI’s London-Karachi service was supposed to provide a sea connection, failed to overcome Karachi’s inadequacies as a port, and in 1886 it was forced to amalgamate with a number of state-owned railways.20 By the middle of the 1880s the first line started by BI out of London after the opening of the Suez Canal was bleeding to death. However, it was only in 1889 that William Mackinnon finally yielded to Jamie Hall’s entreaties and agreed to terminate the London-Karachi service. This followed the death of his old friend W.P. Andrew, who had been so tied up with the development of Karachi’s transport and communications, and the closure of Mackinnon Mackenzie & Co’s branch in Karachi. The line was shut down, the shareholders were told, ‘partly owing to the low rates of freight which have been ruling thereon, caused to some extent by the appearance of foreign steamers heavily subsidised, and partly because the Company was able to utilize the tonnage elsewhere to greater advantage’.21 The ‘elsewhere’ was eastern African waters, where William Mackinnon and the BI board were busy trying to develop an alternative ‘home line’. The London-Calcutta line, which BI shared with the BI Association, fared only a little better. Although it offered a passenger service, its steamers were

18 19 20 21

W. Mackinnon to J.L. Mackay, 13 Jan. 1893, BIS/8/3. J.M. Hall to William Mackinnon, 21 Dec. 1886, MP Private Letters File 42. Kumar, Cambridge Economic History of India, Vol. 2, pp. 753–4. BISN Co Annual Report, June 1891. 318

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less lavishly fitted out than the P&O ones. They enjoyed less esteem with the travelling public or senior figures in the Indian administration (which paid for much of the passenger traffic on the route), and failed to attract premium fares. Essentially, BI/BIA and the P&O ran their London-Calcutta passenger services in tandem, P&O catering for the upper civil and military ranks of Anglo-India and BI/BIA for the middling and other ranks. As Kipling put it, BI offered ‘freedom and cockroaches’ whereas P&O ‘acted as though twere a favour to allow you to embark’.22 The line’s main strength lay in its access to tea cargoes homewards from Calcutta, but the shipping conference which regulated that trade proved to be a relatively weak one. It was unable to prevent the Anchor and Clan lines forcing their way into membership, backed by shippers of tea, with consequent increases in the tonnage employed and reductions in freight rates. By 1887 twelve steamers a month, of which Mackinnon group owned one third (two BI/BIA and one Ducal), were carrying tea out of Calcutta.23 ‘On the London and Calcutta Line’ Edwyn Dawes warned William Mackinnon, ‘results are tending in the same direction’ as the ‘heavy and continuous losses’ on the London-KarachiBombay line. ‘Apart from competition amongst the regular lines we have to face the constantly increasing competition of cheap cargo steamers entering and leaving the trade at the discretion of their owners, and the combination of shippers to force freights for all descriptions of cargo down to the dead level of rates for rough goods.’24 His foreboding that things would get worse rather than better was borne out by large losses on the line in the early 1890s. These led to a decision in 1892 that, ‘in consequence of the deplorable condition of the Calcutta trade, both out and home’, the weekly BI/BIA service should be reduced to a fortnightly one during three months of the year.25 The failings of the UK-India ‘home lines’, on which so many hopes had been placed during the 1870s, emphasised the need for William Mackinnon and the BI board to seek out and develop alternative steamer routes within the network of intra-imperial communications. Some new opportunities arose within India’s ‘country’ trades. Thus in 1883 BI took a third share, along with the Netherlands India S.N. Co and the Penang firm of Huttenbach Liebert & Co, in a line between Madras and Negapatam in South India and ports in the Straits of Malacca. This line, employing four small vessels, had a contract from the colonial government of the Straits Settlements to deliver South Indian labourers as deck passengers, and it also transported rice and

22

Quoted in James Morris, Pax Britannica: The Climax of an Empire (London, 1975), p. 53. Fairplay, 22 April 1887, in UGD 3/15/1. 24 ‘Copy of Letter addressed to the Chairman of the British India Steam Navigation Company, written on board the P&O steamer ‘Kaiser-I-Hind’ between Colombo and Adelaide, May 1887’, ML MSS 4548/276. 25 4 July 1892, Directors’ Minutes, British India Associated Steamers Ltd, Inchcape Ms 27,480. 23

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live cattle. In 1885 a monthly line from Calcutta to the Australian ports was begun. This was a source of some pride, but also lingering doubts about whether there was enough traffic on the route to justify steamer rates and whether it could pay its way without any government contract work. A desire to introduce new services between India and various locations in the western Indian Ocean also grew in the course of the later 1880s, when it became clear that the coastal trades in India were not growing as rapidly as they had in the 1870s – with the result that the new tonnage added to the BI fleet after the award of the Indian mail contracts in 1884 was having to look beyond Indian coastal services for employment.26 The development of lines from India to Zanzibar, Portuguese East Africa and Mauritius appeared to the directors to be a possible solution to this problem of over-capacity. Such hopes overlapped with other group ambitions relating to eastern Africa, and enjoyed one success in the form of a contract from the government of Mauritius to deliver mails between Colombo and Mauritius that enabled BI to maintain a monthly connection between Calcutta, the South Indian coast and Mauritius between 1890 and 1893. None of this deepening of the company’s network of Indian Ocean services into and out of Calcutta and Madras, however, was a proper substitute for the faltering UK-India ‘trunk’ lines in either prestige or the volume and character of the steam ships employed. For William Mackinnon and most of the BI board the real alternative lay in developing steamer routes from Britain and India to South Africa, via the ports of East Africa. Their plans to match the BIA’s UKBatavia-Brisbane line on the eastern side of the Indian Ocean with a BIoperated UK-Mombasa-Zanzibar-Delagoa Bay line on the western flanks of the Indian Ocean reflected the intense competition they were experiencing in UK-India trades and their desire to keep ahead of the competition through the use of their political contacts in Britain. From the mid-1880s, eastern Africa became a focal point for the aspirations of many on the BI board, more especially its chairman, and for sections of his business network. ***** For the family-owned agency houses in India, as much as for BI in its coast and country trades, the period 1882 to 1893 was a time of consolidation. It was a time for defending and holding onto gains made in the 1870s, in the face of economic conditions that encouraged both an intense rivalry between firms and a propensity to combine to reduce the worst effects of the struggle. One outcome of coping with economic instability and deflationary pressures was a slackening in their diversification activities. Managerial attention focused more on how to make earlier initiatives and investments pay than on where to find new opportunities. This was particularly true of Mackinnon

26

W. Mackinnon to Mackinnon Mackenzie & Co, 5 Feb. 1890, MP India File 26. 320

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Mackenzie & Co, which experienced a narrowing of its managing agency functions. It remained a prosperous concern, thanks mainly to its managing agency for BI and its growing volume of work for other British steamship companies engaged in deep sea trades to and from India. Between 1882 and 1893 its profits averaged 28.5 per cent per annum, and the firm’s capital, including its Bombay and Karachi branches, grew from 3.5 million rupees to 6.7 million rupees (roughly £268,480) over the same period.27 However, given the rupee’s declining international value, this was a less impressive performance than it appears, and some parts of the firm’s operations were in real difficulty. The Garden Reach Cotton Mill, for example, struggled to find a niche in the market between the finer yarns imported into Calcutta from Lancashire and the coarser, less expensive yarns produced by the Bombay mills. It proved so unsuccessful that by 1893 there was talk of converting it to a jute mill.28 The two jute mills managed by Mackinnon Mackenzie & Co and MacNeill & Co also had a bumpy ride in the mid-1880s, as overproduction and falling prices brought sharp reductions in profits. But they benefited from the establishment of the Indian Jute Manufactures Association of 1884 – which set about controlling output, by restricting the number of looms and hours worked, and constraining the wages paid to workers in the industry.29 Even so, this was no time for additional investment in jute manufacturing, and the family firms merely marked time in this field between 1882 and 1893. Prospects in tea-planting appear to have been a little better. Here too cyclical overproduction and falling prices were countered by a producer’s organisation, the Indian Tea Association, which worked to reduce wages and the costs of recruiting labour for the plantations, 30 and was active in representing the interests of tea shippers against the shipowners’ Calcutta homeward conference. Nevertheless, falling prices served to widen markets for tea in Britain and elsewhere, and tea acreages continued to increase in north and south India. Mackinnon Mackenzie & Co, however, took little part in this expansion. Instead, it disengaged from the management of tea plantations – by bringing its existing tea plantations under a single corporate

27

Mackinnon Mackenzie & Co Accounts, MP India File 24. Annual reports of the Garden Reach Cotton Mill Association and Garden Reach Spinning and Manufacturing Co, MP India File 19; J.L. Mackay to P. Mackinnon, 4 Aug. 1891 and 5 April and 3 May 1893, J.L. Mackay’s Private Letterbook, Inchcape 204. 29 Annual reports of the India Jute Co and the Ganges Manufacturing Co, MP India File 19; E.D. Wylie to W. Mackinnon, 22 April and 7 June 1884, MP Private Letters File 254; J.L. Mackay to P. Mackinnon, 28 July, 28 Oct. and 9 Dec. 1891, 6 Jan., 13 April and 16 Aug., 1892, J.L Mackay’s Private Letterbook, Inchcape 204; R.S. Rungta, Rise of Business Corporations in India, 1851–1900 (Cambridge, 1970), p. 168; D.R. Wallace, The Romance of Jute: A Short History of the Calcutta Jute Mill Industry from 1855 to 1909 (Calcutta, 1909). 30 For ITA’s work in controlling labour costs, see R.K. Renford, The Non-Official British in India to 1920 (Delhi, 1987), pp. 58–69. 28

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structure, the Kondoli Tea Co, in 1885 and then in turn selling the new firm to the Salonah Tea Co, which was managed by MacNeill & Co, in 1889.31 Any additional family investment in tea-planting after 1882 also went into firms managed by MacNeill & Co. This was mainly to finance increases in the acreage under crops by existing concerns, although one new firm – the Greenwood Tea Co – was floated in 1888. Mackinnon Mackenzie & Co’s shift away from tea-planting was intended to bring about a greater specialisation of function between the family firms in India, leaving Mackinnon Mackenzie & Co to concentrate on ship agency activities and MacNeill & Co to look after the family interests in tea planting. Such an arrangement was very advantageous within the politics of the tea trade – MacNeill & Co represented the Mackinnon group within the planters’ organisation, the India Tea Association, while Mackinnon Mackenzie & Co represented it within the shipping conference that determined the costs and terms of exporting tea from Calcutta. However, the tactic of working on both sides of the production/distribution divide depended upon ties of family sentiment to ensure that Mackinnon Mackenzie & Co, as shipping agents, received most of the consignments of tea cargoes made by MacNeill & Co as shippers. The arrangement did not always work smoothly. Because speed was at a premium in tea exporting, and Mackinnon Mackenzie & Co could not guarantee that a BI/BIA steamer would be available for every chest of tea coming forward, there was no formal requirement on the staff of MacNeill & Co to ship only through Mackinnon Mackenzie and BI. This loophole enabled MacNeill & Co staff to overlook Mackinnon Mackenzie & Co in arranging tea shipments, and from time to time, the senior partners in the two firms – William Mackinnon and Duncan MacNeill – had to be called upon to remind the men of MacNeill & Co where their true loyalties lay. From their side, MacNeill & Co staff were equally quick to complain if the Mackinnon Mackenzie men, seeking cheaper supplies of coal for BI and other steamers, bypassed MacNeill’s Equitable Coal Co.32 MacNeill & Co’s position within the tea trade had also been strengthened by the success of its Rivers S.N. Co (of which William Mackinnon was chairman as well as the largest individual shareholder) in river shipping on the Lower Ganges and Brahmaputra rivers. The steamers and flats of the Rivers S.N. Co provided a crucial link between the group’s Calcutta-based manufacturing and oceanic transport operations and the agricultural and mineral resources of the wider rural hinterland. They brought to Calcutta jute from East Bengal and tea from Cachar and Assam, and took up-river the

31

Kondoli Tea Company Ltd., BT 31/3483/21137; Henderson to W.P Alexander, 24 June 1889, W. Mackinnon & Co, Private Letter Book, Inchcape, MMC/1363. 32 J.L. Mackay to W. Mackinnon, 30 June and 1 July 1891, J.L. Mackay’s Private Letter Book, Inchcape; E.D. Wylie to W. Mackinnon, 10 April 1888, MP Private Letters File 259. 322

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‘planters’ stores’ imported from Britain and labourers from Bihar. Although providing a general service, their transport activities crucially under-pinned the group’s own investments in tea planting. In 1882 the Rivers S.N. Co was still a relatively modest concern, with a paid up capital of £102,145 and a fleet of only eight steamers and eighteen flats. But in that year it secured a contract for the delivery of mails to Assam, by a fast daily service between two river ports, and this infusion of government funding resulted in a significant increase in the size of the fleet. In turn its fast modern vessels (built mainly by Peter Denny, who had a large equity stake in the firm) gave it an edge in the struggle with a new competitor, the Assam Railways and Trading Company. This firm, which had been established in London in 1881 to mine coal and build a short railway to serve the plantations near Dibrugarh in Assam, also diversified into river steamshipping, with five second hand vessels. However, the ensuing rivalry with the Rivers S.N. Co was short-lived. The Assam Railways and Trading Company had over-reached itself financially, and was brought to the edge of insolvency by the depression of 1884–5.33 It consequently sold its fleet to the Rivers Co in 1887, together with a contract to transport its coal deliveries up and down the river Brahmaputra and an agreement to supply coal as fuel to the Rivers Co at preferential rates. This arrangement in turn aroused the hostility of the Rivers Co’s old ally, the India General S.N. Co, and a brief rates war took place between the two firms until the Rivers Co agreed to share the spoils. By 1888, the short spasm of interfirm competition on the Brahmaputra and Lower Ganges was over, and the Rivers Co, its operating costs significantly reduced by the availability of coal in Assam, was well placed to ride the expansion of the tea industry. It did so through the widespread use of ‘planters’ agreements’ offering rebates to firms and groups of estate owners which agreed to ship only by Rivers Co or India General steamers.34 By 1893, its capital had more than doubled – to £277,415 – and it possessed a fleet of 46 steamers and tugs and 78 flats. It also provided over a third of MacNeill & Co’s annual income. Given MacNeill & Co’s strategic position in the tea trade – as both a producer and an internal carrier of the commodity – it made financial sense to shift the group’s tea investments away from Mackinnon Mackenzie & Co to MacNeill & Co. MacNeill & Co was still the smaller and more junior of the two agency houses. Its capital in 1893 was only about half that of Mackinnon Mackenzie & Co, and it had fewer partners. On the other hand, it was the more dynamic and enterprising firm. This may have lent an edge to the slight friction which arose from time to time, as the more intensively competitive conditions led the resident partners and assistants of both firms to look first to their own

33

Anon, The Story of the Assam Railways and Trading Company Limited, 1881–1951 (London, 1951), pp. 29–43; From Public Works Department, 29 May 1885 (Confidential No 28 of 1885), IOLR, L/P&S/19. 34 Directors’ Minutes, Rivers S.N. Co, 1888–93, Inchcape RSN/1199. 323

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needs. Such friction, however, also reflected the fact that from the mid-1880s the members of the Mackinnon family who had founded the two firms, and still guided their strategic direction, lived in Britain and had to rely for local management in Calcutta on men who did not necessarily share their sense of the mutual interests between the two concerns. William Mackinnon’s prolonged absence from India and from his seat at the head of Mackinnon Mackenzie & Co meant that that he increasingly exercised less direct influence over the day-to-day affairs of the firm. This was exacerbated by the gradual retreat of other family partners to the comforts of home life in Scotland or southern England. The last members of the inner family circle to be resident partners at Mackinnon Mackenzie & Co were Peter Hall and Duncan Mackinnon. The latter returned for a short tour of duty in 1883, making it clear all the while that he regarded the city’s climate as inimical to his health.35 Thereafter, leadership within the firm rested on a succession of non-family partners who had worked their way up from the ranks of the assistants – especially E.D. Wylie, the son of an old Free Church missionary friend of William Mackinnon’s, and J.L. Mackay, who in 1884 moved from the Bombay office to a partnership in Calcutta. By the early 1890s, Mackay was the dominant force within the Calcutta firm (although still a junior partner). He was also an active member of the Bengal Chamber of Commerce and the Calcutta Port Commission, and had secured a seat on the Viceroy’s Legislative Council.36 He had achieved through his own efforts (and the standing of Mackinnon Mackenzie & Co) everything that William Mackinnon had hoped to obtain for Duncan Mackinnon in the 1870s. William Mackinnon corresponded regularly with the men running the Calcutta office, offering advice on matters ranging from BI agency arrangements in southern India to the need for Indian currency reform, but he was too distant to be able to intervene except in the most strategic matters. It was largely his decision, for example, to close Mackinnon Mackenzie & Co of Karachi in 1888. This reflected both his long-standing uncertainty about the need for a branch in Karachi and his determination that Mackinnon Mackenzie & Co should engage in commission work only, avoiding trade on its own account. The continuing problems of BI’s London-Karachi line together with a realisation that steamer agency earnings in Karachi were too small to support a firm that did not also engage in general trade produced a decision to sell the branch house. Its ownership passed to the two assistants (D. McIver and W. Mackenzie) who ran it.37 However, despite the speeding-

35 Duncan Mackinnon’s correspondence for these months is to be found in Nat. Lib. Acc. 6168/6. 36 S. Jones, Trade and Shipping: Lord Inchcape, 1852–1932 (Manchester, 1989), pp. 24–48. 37 P. Mackinnon to Mackinnon Mackenzie & Co, 10 Feb. 1888, and enclosure, P. Mackinnon to D. McIver, 10 Feb. 1888, W. Mackinnon & Co Letterbook, Inchcape MMC/1363.

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up of mail and telegraph communications between Glasgow, London and Calcutta, William Mackinnon became increasingly less inclined from the mid-1880s to try to direct the general affairs of Mackinnon Mackenzie & Co from Britain. In his growing preoccupation with events in the outer reaches of his business group’s empire – in Australia, the Indonesian archipelago and eastern Africa – he seems to have given J.L. Mackay a somewhat freer hand than previous resident partners in Calcutta. This enabled Mackay to concentrate on managing the BI fleet and the network of sub-agencies around the Indian coast, in the new market conditions created by the reduction in government mail contracts. Conversely, however, there was no further diversification of Mackinnon Mackenzie & Co’s operations within India. Mackay and his immediate predecessors lacked the authority to take the firm into new enterprises, and the surviving senior partners, William and Peter Mackinnon, were looking elsewhere for business opportunities. Between 1882 and 1888, the firm invested some of its profits in Australian shipping – helping to finance the rise of British India Associated Steamers Ltd, and through it the creation of the Australasian United S.N. Co. Increasingly, however, and particularly after 1888, its profits merely accumulated as reserves in the form of government securities and cash in the banks.38 It is difficult to tell whether this lack of diversification (which was intensified by the firm’s shift out of tea planting) signalled a belief on William Mackinnon’s part that investment opportunities were declining in India, relative to Australia or Africa, or simply meant that his pursuit of fresh fields for investment elsewhere led him to neglect alternative opportunities in India. However, the fact that he and other members of the family were still investing in MacNeill & Co enterprises suggests that the former was the case. ***** By and large, the so-called ‘Great Depression’ of the 1880s and 1890s was not unduly unkind to the Mackinnon group firms at work in India. Since they were no longer engaged in the importation of cotton textiles and other manufactures from Britain, they avoided the problems caused by falling prices and profits in these trades – although Mackinnon Mackenzie & Co’s cotton mill in Calcutta caught the backlash. They successfully exploited such new opportunities as appeared in these more straitened times – most notably in producing, exporting and transporting tea, at a time of rising levels of

38 By 1892, Mackinnon Mackenzie & Co had three times as much money in securities and cash in hand than it had invested in associated concerns. For analysis of the firm’s investment patterns, and related issues, see J.F. Munro, ‘From Regional Trade to Global Shipping: Mackinnon Mackenzie & Co within the Mackinnon Enterprise Network’, in G. Jones (ed.), The Multi-National Traders (London, 1998), pp. 48–65.

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consumption caused by the improving real incomes of British working classes. India remained the geographic heartland of the Mackinnon group and its wider penumbra of contacts, and the economic conditions of the 1880s and early 1890s had further encouraged networking behaviour within the subcontinent. New inter-organisational links were formed – through alliances with specific firms engaged in the same fields of endeavour, such as the Asiatic S.N. Co and the Assam Railways and Trading Co, or through participation in the cartels and producers associations that flourished in these more difficult times. The Mackinnon group and its individual components were now mature, respected and influential elements within British expatriate enterprise in India. However, BI, the group’s shipping arm in India, and the principal source of its income and wealth, found it increasingly hard to cope with the pressures to which it became subject from about 1887 onwards – over-capacity in the Indian coastal trades, significant falls in freight rates in the trades between Britain and India, a declining rupee exchange rate, and the first appearance of subsidised foreign competition along Indian shores. Although the principal victim of these developments was the inter-continental line from London to Karachi and Bombay, the company’s overall growth was also slowing down. This indicated a need to open up new spheres of activity for the company’s steamships beyond Indian waters and Indian ports. Such considerations overlapped with, and influenced, William Mackinnon’s increasing detachment from the agency houses and associated firms in India. Once the negotiations about BI’s mail contracts were completed, he took an ever decreasing part in the direction of their affairs. His attention, interests and enthusiasms now lay elsewhere. Indeed, by 1891 he was actively considering his retirement from the Calcutta firm that he and Robert Mackenzie had established forty-five years before. India no longer absorbed his energies or his entrepreneurial opportunism.

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13

Indonesia: nationalism in Dutch colonial policy, 1882–90 One reason for William Mackinnon’s distraction from Indian business affairs after 1884–5 was the necessity of having to cope with a serious challenge to the future prospects of the Netherlands India S.N. Co (NISM) within the Indonesian archipelago. His great achievement in creating the Australasian United S.N. Co in 1886–7 meant that the Mackinnon group now dominated steamshipping in coastal waters throughout the great swathe of territory comprising India, Indonesia and Australia, and it had become the world’s largest maritime conglomerate. However, pleasure in that accomplishment was short-lived, and much gloss taken off the triumph, by the fact that, even as the Australasian United S.N. Co came into being, events were already in train that would bring about the demise of the Netherlands India S.N. Co. Indonesian trade and shipping had served as a stepping-stone to Australia for William Mackinnon and his associates. Ironically, however, no sooner had the final stride in that direction been taken than the intermediary platform was whipped away from beneath them, leaving a yawning gap between their operations in South Asia and in Australia. The on-going integration of the deep-sea and shallow-water shipping activities of the four main companies within the Mackinnon group was swept away by a Dutch determination to exclude British shipping from their colonial possessions. The neomercantilist tendencies of the 1880s and 1890s – which saw European powers react to recurrent economic depression by raising levels of protection in home and colonial markets as well as by acquiring new colonial territories – threatened the activities of William Mackinnon and his business group at several points across their sprawling trade and transport empire. Nowhere, however, did they do so more centrally and more directly than in the Dutch East Indies. ***** In 1882, the immediate prospects of BI’s ‘little sister’, the Netherlands India S.N. Co (NISM), appeared good. The company still had eight years to run in its contract with the government of the Netherlands Indies and a recent good run of financial results had enabled the payment of highly satisfactory dividends. NISM’s success had its drawbacks – ‘the recent large dividends are encouraging competitors against us and for the same reason Govt. is trying to put everything on our shoulders that costs them 327

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money.’1 Nevertheless William Mackinnon and his friends on the Board had every reason to be confident about the future. This confidence manifested itself in a willingness to develop new services, with or without government subsidy. Thus, between 1882 and 1884 NISM took over a small liner service between Penang in Malaysia and Atjeh on Sumatra, which was hitherto engaged in supplying the Dutch forces in Atjeh. It redeployed its four steamers into a new service, run jointly with BI, that linked Negapatam on India’s Coromandel Coast with northern Sumatra and the British-ruled Straits Settlements. This was the first effective collaboration between BI and NISM in integrating its South and Southeast Asian liner services, and marked the beginning of a process of developing mutual support between the various components of the Mackinnon group’s steamship enterprises. In 1882, BI sold two of its steamers, the Camorta and the Compta to NISM, to enable the latter to undertake a monthly service between Batavia and Hong Kong, under subsidy from the government of the Netherlands Indies. When, in 1884, the government of the Netherlands Indies withdrew its subsidy for an experimental Java-Hong Kong service, NISM’s directorate decided that the line should continue – but with calls at Singapore and Saigon which had been prohibited by the terms of the previous government contract. At Singapore, of course, NISM’s liners could interchange traffic with BI’s Calcutta-Singapore service and create a Calcutta-Hong Kong connection for BI.2 NISM also became the Batavia agents for both the BI Associated Steamers’ London-Brisbane ‘Royal Mail Line’ and BI’s Calcutta-Australia service. However, the opportunity to use the vessels on these lines to develop passenger and cargo trades between Java and Australia was severely constrained by the enforcement of strict quarantine rules by the Queensland government. Such measures, limiting contact between ship and shore to indirect lighterage operations, were ostensibly meant to prevent emigrants from Britain picking up tropical diseases in Java and bringing them to Brisbane. The British consul, however, suspected that they were really intended ‘to put a stop to the importation of Javanese coolies’ into Australia’.3 Whatever their true purpose, they prevented BIA and BI steamers from doing little more than coaling at Batavia on the outward legs of their voyages. On the return leg, no such prescriptions applied and the Queensland mail steamers, under Edwyn Dawes’ management, began to make

1

R.H. Evans to W. Mackinnon, 26 Sept. 1881, MP Private Letters File 20. Further details of these new NISM services may be found in company annual reports, MP India File 17, and Koloniaal Verslag, 1882–5. 3 Report of Consul McNeill on the Trade, Commerce and General Matters relating to the Island of Java for the Year 1886 (Foreign Office, No 143 of 1887) (Sydney University Rare Book Department). For an inquiry into a breach of Queensland health regulations, which resulted in passengers from the UK contracting cholera in Batavia, see ‘Dorunda Inquiry 1886’, MSS 4548/104 (Mitchell Library, Sydney). 2

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up for the relative lack of return cargo from Queensland to London by regularly filling up their holds in Batavia. By the latter half of 1886, the Queensland Royal Mail Line, taking away sugar, rice and various other products from Batavia, was ranked third (behind only the two main Dutch shipping firms, the Nederland Co and Rotterdam Lloyd) among steamship companies exporting commodities from Java to Europe.4 NISM was becoming ever more supportive of the group’s Indian and Australian shipping interests. Nevertheless, the company’s centre of gravity, and main source of earnings, still lay in the thirteen lines that it operated within the Indonesian archipelago under contract from the government of the Netherlands Indies, and with the benefit of a subsidy that in 1885 amounted to 340,735 guilders. By 1885–6 shadows were gathering over these coastal and inter-island operations. The economy of the Netherlands Indies, and more especially of Java, had entered a deep depression caused by collapsing commodity prices. Java’s principal export crop, sugar, was badly hit by falling prices caused by the spread of cane sugar production to a number of new locations within the world economy – including Natal, Queensland and Fiji – and even more by the rise of sugar beet cultivation in Europe. It suffered as well from a blight that spread disease to the sugar crop in Java from 1882 onwards. Meanwhile prices for coffee, the second export commodity, were affected by the extensive spread of coffee planting in Brazil and other Latin American countries. The output of both crops fell in Java in the mid-1880s.5 The sheer weight of Java within the regional economy tended in turn to depress trade elsewhere in the archipelago. Virtually the only bright spot at this time of economic gloom was to be found in north-east Sumatra, where a new export crop, tobacco, was attracting substantial investment, foreign as well as Dutch. However, because of proximity across the Straits of Malacca, eastern Sumatra’s commercial links tended to be with Singapore and the Malay peninsula rather than with Java to the south. The depression severely hit NISM’s earnings from non-governmental sources and also reduced the volume of official traffic (which was already in decline from the windingdown of hostilities against Atjeh in northern Sumatra). The collapse in earnings through 1884 and 1885 forced the directors to abandon depreciation allowances on the steamers, to transfer cash from insurance and reserve funds to pay dividends to shareholders, and to postpone a much-needed modernisation of the fleet. The board had been slow to replace the older vessels on the contract lines, possibly because the attention of so many of its members was focused in the early 1880s on Australia and on BI’s contract negotiations

4 ‘Exports from Java by steamship in the last six months of 1886’, ARA-II: KPM Archief, No 1, File: 1886 e.r. jaren. 5 P. Creutzenberg, Changing Economy in Indonesia. Vol. 1. Indonesia’s Export Crops, 1816–1940, Tables 4 and 5, pp. 50–2; D.J.M. Tate, The Making of Modern South-East Asia. Vol. 2. Economic and Social Change (Oxford, 1979), pp. 55 and 60–1.

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with the Government of India. This neglect was further compounded by the poor trading conditions of the mid-1880s. Consequently, by 1885 half of the company’s 32 steamers were 10 years old or more, and four of them had been in service since the start of NISM’s services in 1865. Operating with such an ageing fleet meant that complaints were beginning to arise about the standards of service that the company provided – particularly on the more remote inter-island routes on which the older vessels plied.6 These, however, were not the only criticisms against the company. Within Dutch mercantile and administrative circles in Indonesia complaints were also beginning to emerge about the monopolistic nature of the ‘steampacket service’, which allegedly resulted in high and arbitrary tariffs for private (nongovernment) trade. Calls arose for the break-up of the single, archipelagowide system of state-subsidised coastal shipping.7 This was the Netherlands Indies equivalent of the anti-monopoly sentiment that BI had already faced in India. It seemed possible indeed that Dutch policy in Indonesia might follow the route which the Indian administration had already attempted – that is, to break up the single, all-embracing mail contract into several individual contracts, in the hope of encouraging smaller steamship companies in local coastal trades and introducing some degree of competition into the contracting system. However, events in Indonesia moved in an entirely different, and somewhat unexpected, direction – towards nationalist corporatism rather than towards free market liberalism. Between March 1885, when the Director of the Office of the Interior of the Netherlands Indies first sent home to The Hague a draft proposal for tendering for a steampacket service in the Indonesian archipelago after 1890, and February 1886, when the Raad (Legislative Council) of the Netherlands Indies passed a motion on these ‘conditions for tendering’, sentiment within Dutch colonial government and business circles swung in favour of maintaining the single contract but at the same time ensuring that it could no longer be held by a foreign (non-Dutch) firm. ‘It is a matter of the utmost importance’, the Raad stated, ‘that an unrestricted or restricted admission of the foreign flag would not come about through the maintenance of a regular steamship service through the whole Indonesian archipelago.’8 What exactly the Raad had in mind was made clear some three months later with the introduction into the ‘conditions of tendering’ document of a new article (Article XX) entitled ‘Provision for Guaranteeing the National Character of the Steamship Service’. Its clauses stated that the vessels employed under

6 M.G. De Boer, Geschiedenis der Amsterdamsche Stoomvart (Amsterdam, 1921–2), Vol. 2, p. 94. 7 J.N.F.M. à Campo, Koninklijke Paketvaart Maatschappij: stoomvaart en staatsvorming in de Indonesische archipel, 1884–1914 (Hilversum, 1992), p. 56; De Boer, Geschiednis, Vol. 2, pp. 95–6. 8 Mail Report No 73, February 1886, ARA.

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contract for the post-1890 service should be under the Dutch flag, that the captains, navigation officers and engineers should be Dutch nationals, and that the contractors and those standing surety for them (in the tendering process) should Dutchmen belonging to either Dutch or Netherlands Indies companies. Any company holding the contract must have its head office either in the Netherlands or the Netherlands Indies and have a board of directors of which at least two thirds held Dutch nationality.9 These provisions, more especially the ones relating to the nationality of the contracting company and its directors, went considerably further than any previous requirements for contracting with the government of the Netherlands Indies. They were intended to make it much more difficult, if not indeed impossible, for NISM to bid for a new contract when it was put out to tender in 1888. In November 1886, following a debate in the StatesGeneral in The Hague, these exclusionist clauses were accepted as Dutch national policy, and the following month the Dutch government announced its intention of ensuring ‘the Dutch character of the company’ that would acquire the new contract.10 NISM, known to be a British rather than a truly Dutch concern, had the status of a ‘guest rather than a member of the family’,11 and like a guest that had overstayed its welcome was now to be shown the door. What had turned a respectable – and respected – servant of the Dutch colonial regime into an unwanted visitor? The conjuncture of deep economic depression and governmental consideration of the future of the steam packet service made NISM into a convenient scapegoat for the commercial ills which were affecting Java, and also its trade with the ‘outer islands’ of the archipelago. NISM, with its foreign ownership, its allegedly high passenger and freight rates, and its ostensibly inflexible sailing schedules, had to bear the brunt of much unease and distress. Most specifically, NISM was charged with failing to compete effectively with the Chinese-owned steamers which, usually under the British flag, were penetrating in ever greater numbers into the inter-island trades of the Indonesian archipelago. These vessels tended to draw traffic in the direction of Singapore rather than Batavia, thus depriving the latter of revenues and commercial opportunities. Having spent large sums on developing a new harbour for Batavia at Tandjong Priok, Dutch official and mercantile interests were disappointed by its failure to attract local

9 Mail Report No 338, May 1886, ARA, and enclosure: ‘Voorwaarden van Aanbesteding voor het Onderhouden van Gerelde Stoomvaartdiensten in den Indischen Archipel gewende de jaren 1891 t/m 1900.’ 10 Second Chamber, Memorie van Antwoord, 4 Nov. 1886, and First Chamber, 5th Sitting, 20 Dec. 1886, Begrooting van Nederlandsch-Indie, 1887, ARA-II, KPM Archief. 1/11. 11 Jan Boissevain of the Netherlands Co, quoted in à Campo, Koninklijke Paketvaart Maatschappij, p. 60.

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Southeast Asian shipping.12 The competition between Dutch and Chinese merchants and shipowners was particularly acute along the Straits of Malacca, across which a Sumatra under varying degrees of Dutch rule and control faced a Malayan peninsula under varying degrees of British authority and with sea-ports hosting substantial expatriate Chinese communities. There was some substance to the complaints about NISM’s weakness in this area. The Straits of Malacca, where BI’s sphere of operations overlapped with those of NISM, had long been an area in which the Mackinnon group found it difficult to exert a powerful presence. BI too struggled to cope with energetic and enterprising Chinese steamship owners in the rice trade between Rangoon, Penang and Singapore, and its problem in finding proactive agents in Singapore had limited BI and NISM’s ability to provide mutual support to each other in the competitive conditions of the Straits of Malacca. The position was summarised by Augustus Huttenbach, who in 1886 became the agent for BI and NISM in Penang: This [Malay] coast has . . . hitherto formed a neutral zone between the BI and NI lines, the former touching it as their terminus from British India and the latter finishing their run from Netherlands India. European enterprise did not take up the trade at all, our local merchants all being inclined to a quick turnover and short operations . . . and consequently the whole extensive coasting trade, being alone able to employ almost as much tonnage as the B.I. Co employs in a similar trade, has fallen entirely into Chinese hands. . . . For two such closely allied companies as the BI and NI to have ever allowed such a Chinese supremacy in this trade shows what I might almost call a grave tactical error. The Straits are a centre in themselves and if our Companies had occupied the centre from the commencement, fortified it and kept it well in hand, a good deal of annoyance and loss would have been saved to both Companies, especially to the NI which has felt and still feels everyday so much the pernicious influence of the Chinese system.13

Huttenbach’s dislike of the Chinese merchants who used cheap second-hand steamers, crewed by Chinese seamen and expatriate European officers of various nationalities, to develop lively and profitable shipping services in and through the Straits of Malacca had an edge to it that was almost racist in character. His sentiments, however, do not appear to have differed greatly from those of Dutch merchants and shipowners facing Chinese competition in Indonesian waters.

12 It was probably no coincidence that the first major statement about NISM’s failings to compete with Chinese steamshipping, and the need for a strong Dutch-owned firm to replace it, came from the pen of a former director of the harbour works at Batavia, J.A.de Gelder (à Campo, Koninklijke Paketvaart Maatschappij, p. 56). 13 Extracts from memo by A. Huttenbach to Netherlands India S.N. Co, enclosure in memo to BISN Co by Huttenbach & Co, Penang, 25 April 1887, BIS/7/11.

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Even so, for the key figures in the drive to exclude NISM from the archipelago ethnicity mattered less than the fact that so many of these successful Chinese enterprises operated under the British flag, from Britishruled ports, more especially Singapore. They had helped to ensure that Singapore, rather than Batavia, became the key entrepôt port in Southeast Asia. British colonialism and British shipping were the real threats. This was certainly the view of the one man who had most to gain from a Dutch colonial maritime policy that left the packet service intact, as a single archipelago-wide operation, while excluding a British presence from it. Jan Boissevain was managing director of the Nederland Co (SMN), the premier Dutch steamship line on the route between Holland and Java. His operations depended upon shipping firms within Indonesia, of which NISM was by far the largest and most dominant, to transport to Batavia the products and the passengers which his steamers carried to Europe, and similarly to distribute within Indonesia the cargo and passenger traffic they brought in from Europe. Like P&O and other liner companies operating between Britain and India, his firm needed the support of a local coastal shipping network. His relationship with NISM, however, was relatively distant, formal and cool – in 1886 the two firms were busy arguing over the through-rates to be charged for goods transhipped to each other’s steamers. Having stood aside from the bidding for the Netherlands Indies contract in 1874, he was determined not to repeat that mistake again. Boissevain, struggling like other shipowners and managers with falling freight rates between Europe and Asia, may have been concerned about the entry of the Queensland Royal Mail Line into Java’s export trades, and the potential for that line, working in concert with NISM, to grow into a serious competitor. He was certainly incensed by what he regarded as NISM’s failure to bring to his vessels in Batavia the one Indonesian agricultural commodity that in terms of value and growth in volume stood aside from the generally depressed state of the Indonesian regional economy. Deli tobacco, from east central Sumatra, was a highquality product, much in demand for the manufacture of cigars and highly prized as liner cargo for Europe. It was a trade, however, from which Boissevain felt excluded. In 1886 he attempted to obtain a contract for delivering Deli tobacco to Europe, but was unsuccessful because there was no direct steamer service between East Coast Sumatra and Batavia and the tobacco consequently had to bear transhipment costs on NISM’s more indirect service.14 The bulk of Sumatra’s tobacco exporting was in fact conducted via Penang and Singapore. From the latter port it was largely in the hands of the Ocean Steamship Co, or Blue Funnel Line, of Liverpool, whose energetic agent, a Dutchman named T.C. Bogaardt, ran a regular feeder line from Sumatra with four small steamers.15 The problem was that

14 15

De Boer, Geschiednis, Vol. 2, p. 92. For a discussion of the organisation of the shipping of Deli tobacco, the inadvisability 333

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NISM’s contract services with East Coast Sumatra had been arranged with the government of the Netherlands Indies in 1874, before the rise of Deli tobacco, and with postal and administrative purposes in mind, and they were not well suited to the new commercial conditions. However, Boissevain concluded that NISM was actually in collusion with the Blue Funnel Line, and indeed that its policy throughout the entire period of its existence had been to collaborate with the British ‘competition’ in Singapore. He described the situation as ‘bizarre’, adding that he was aware that the directors of Rotterdam Lloyd (the second Dutch steamship line on the Holland-Java route) took a similar view.16 In essence then, the effort to exclude NISM from a new contract in the Indonesian archipelago expressed Dutch envy of Singapore’s success as the premier centre for trade and shipping in Southeast Asia, and anger at the competition from the mainly British and Chinese firms who operated in and through the British-ruled freeport. There is no evidence to support the suspicions and allegations that NISM, as a British-owned firm, was party to a conspiracy to the development of Singapore instead of Batavia. Although it was occasionally obliged to bend in the direction of commercial realities in the region – as when it re-routed its Batavia-Hong Kong line through Singapore once the government of the Netherlands Indies ceased to subsidise it – the great bulk of its operations were undertaken in accordance with the wishes of the Dutch colonial government, following terms and conditions laid down in Batavia. Its real failing was that William Mackinnon and his fellow directors in London, as well as NISM’s local management in Batavia, continued to think and act primarily as government contractors, and did too little to identify and respond to the changing needs of private trade in Indonesia. (There was as yet, for example, too little of the freedom of action that came to Mackinnon Mackenzie & Co in Indian coast and country trades after 1884.) They had also failed to develop close relations with the deep-sea liner companies operating into and out of Java, in the way that BI managed to do with the lines into and out of Calcutta and Bombay. This in part reflected the fact that the more active members of the directorate did most of their daily business in London, while its sole Dutch representative was located in The Hague for political and administrative purposes rather than in Amsterdam or Rotterdam for commercial or shipping purposes. That individual was also always a retired functionary from the Dutch East Indies of NISM trying to oppose Alfred Holt’s Blue Funnel Line in the trade, and the Nederland Company’s plans to start a Deli–Batavia service in conjunction with the Rotterdam Lloyd, see Memorandum by A. Huttenbach for the Netherlands India S.N. Co, 18 July 1886, BIS 7/11. For T.C. Bogaardt, see F.E. Hyde, ‘British Shipping Companies and East and SouthEast Asia, 1860–1939’, in C.D. Cowan (ed.), The Economic Development of South-East Asia (London, 1964), pp. 30–1. 16 Nota, Sept. 1886, Amsterdam, ARA-II KPM Archief. 1/11. (The memorandum is unsigned, but internal evidence points to Boissevain as the author.) 334

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rather than someone active in the business life of Holland.17 By 1885–6, the managerial system that had been put in place twenty years earlier was becoming cumbersome and inefficient – and inappropriate to the fast footwork needed in the more competitive conditions of the 1880s. However, the conflict over the proposed new contract was more than an argument over who should export Sumatra’s tobacco crop, or even whether Batavia needed government assistance to offset the commercial attractiveness of Singapore. There was also a political dimension to the discussions of the contract, which explains why Dutch civil servants and politicians responded sympathetically to the anti-NISM agitation stirred up by men like Boissevain and De Gelder and why the tighter nationality conditions for steamship contracting passed so quickly through the Dutch parliament. By 1885–6, the scramble for colonies was underway across the tropics, and the Dutch state was having to react to a range of external events that impacted upon its interests in Africa and in Southeast Asia. Dutch authority in the Indonesian archipelago was still a vast patchwork of direct rule, indirect rule and informal influence. The possibility existed that aggressive action by larger European powers might lead to some encroachment into what the Dutch regarded as their sphere of influence and to an undermining of Dutch relations with various indigenous states. No direct threat had yet emerged. However, the British grant of a royal charter to the British North Borneo Company in 188I and the British and German agreement to partition the eastern half of New Guinea in 1884–5 had set northern and eastern boundaries to Holland’s Southeast Asian territories. This was sufficient to encourage the Dutch to pay greater attention to the defence of their territories. Hitherto, Dutch rule had depended on an alliance with Britain and the protection afforded by the British Royal Navy. Now, with the rise of Germany and its bid for colonies across the globe, together with a British willingness to collaborate in that process, the British alliance appeared both less reliable and less desirable. In 1886, the same year that the new conditions for the Indonesian packet service were published, the Dutch considerably strengthened their naval presence in the Netherlands Indies – to the point that more than half of the Dutch navy’s men-of-war and their trained crews now served in Indonesian waters.18 The specific connections between the

17

In 1884 the office of Resident Director in The Hague went to Jonkheer Willem van Raders, who had been Director of Public Works in the Netherlands Indies in the 1870s, and was responsible for the controversial decision to locate the new harbour for Batavia at Tandjong Priok. (Nieuw Nederlandsch Biografisch Woordenboek, VI (1924), pp. 1160–2.) 18 A.M.C van Dissel, ‘The Maritime Defence of the Dutch East Indies: A Quantitative Approach’, in G. Jackson and D.M. Williams (eds), Shipping, Technology and Imperialism: Papers Presented to the Third British-Dutch Maritime Conference (Aldershot, 1996), pp. 162–75, provides statistical evidence of the rise in the Dutch naval presence in the archipelago from 1886 onwards but, unfortunately, does not explore the policy discussions behind the increase. 335

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naval and maritime aspects of Dutch colonial policy have not been explored in detail. Nevertheless, it seems that a transfer of the steamship contract into Dutch hands was perceived as appropriate and conducive to the provision of logistical support for Dutch naval and political influence in the archipelago. In this respect the move to end NISM’s contractual rights in Indonesia did indeed represent ‘the first, defensive shift towards [Dutch] imperialism’ in southeast Asia.19 William Mackinnon and the directors of the Netherlands India S.N. Co were slow to appreciate the commercial and political pressures that were closing in on them. Correspondence from Batavia, from their Joint Chief Agents, J.A. Schroder and B.C. De Jong,20 gave no hint of the manoeuvrings going on in and around the Raad. The board does not appear to have become aware of the anti-NISM tide until October–November 1886. By then the agitation had reached Holland and the board of the Nederland Co had taken the formal decision to enter a pact with Rotterdam Lloyd to take over from NISM in Indonesia. It was too late to offer any practical opposition to Article XX in the Dutch parliament or to mount any public defence of the company’s record in the archipelago. The company’s directorate had been wrong-footed – largely because of the decay of its network of information and influence in the Dutch East Indies since Alexander Fraser’s retirement from business there – and its arch-rival, Jan Boissevain, gloated at its discomfort. ‘The NISM’, he wrote to his agents in Batavia, ‘which does not seem to have respected the whole movement here, now begins to be shaken up, in that they will have to reorganise completely to compete with a Dutch company.’21 1887 and 1888 were difficult years for William Mackinnon and his fellow directors. On the one hand, they had to continue to work the existing contract lines, and deal with the multifarious problems that arose on a day-today level. This included replacing vessels lost at sea or which were now far too old for continued service, a task made easier by recovering freights and levels of profitability. They also had to look to the future and explore new commercial opportunities for NISM. This included negotiations with Huttenbach, the Penang agent, over the introduction of new local services in the Straits of Malacca, which the Batavia agents feared would simply have the

19

M. Kuitenbrouwer, ‘Colonialism or Imperialism? Dutch Overseas Expansion, 1870–1914’, in S. Groenveld and M. Wintle (eds), State and Trade. Government and the Economy in Britain and the Netherlands since the Middle Ages (Zutphen, 1992), p. 117. 20 Schroder was a former business partner of Alex Fraser and succeeded him as ‘Chief Agent’ in 1879; De Jong, a former steamer captain, had been NISM’s Marine Superintendent until appointed to share management responsibilities with Schroder in 1883. 21 J. Boissevain, Amsterdam, to J. Daendels & Co, Batavia, 18 Nov. 1886, ARA-II KPM Archief, No 1, file: 1886 e.r. jaren. 336

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effect of increasing Chinese competition on other lines.22 On the other hand, they had to deal with the very real threat to the future of NISM posed by the new contract conditions and the now overt antagonism of the Nederland Co and Rotterdam Lloyd. The new contracting conditions, NISM’s shareholders were informed in June 1887, ‘are of so unusual and stringent a character, that unless they be considerably modified, the Company may prefer not to tender, but rather to re-adjust its services so as to meet the altered circumstances.’23 What the directors had in mind was the possibility that, even if NISM in its existing form might be precluded from tendering, some reconstruction of the company’s interests could be undertaken to get round the legal impediments of Article XX. The scheme involved the creation of a stalkinghorse for NISM, in the form of a new, small, Dutch-registered shipping company, the ‘Company Holland’, which would be set up in such a way as to meet the conditions of nationality and make a bid for the post-1890 contract. If this was successful, NISM would be liquidated and all its assets transferred to the new concern. Even if the bid was unsuccessful, NISM could still be merged with the ‘Company Holland’ on the expiry of the present contract, ‘and thus having the Dutch flag can carry on the opposition under that name’.24 Either way, there would be a strong, continuing Mackinnon group presence in Indonesia after 1890. The plan was essentially the work of Alex Fraser, and there were serious doubts about its viability. William Mackinnon in particular found it difficult to envisage how a new concern could be created with a directorate of which two-thirds were Dutch citizens and still keep management within existing hands.25 His preferred approach to the problem was to try to persuade the Dutch government that NISM really was a Dutch company, registered in the Netherlands and employing Dutch citizens in all responsible positions in the Netherlands Indies, and that therefore it should be eligible to bid for the new contact.26 However, the rejection of these advances left him no option but to fall in behind the idea of a new concern. This was set in train by the decision of an extraordinary general meeting of the shareholders in mid-December 1887, to establish a new company in the Netherlands ‘to

22 R.H. Evans to W. Mackinnon, 26 April 1887, and ‘Memo by A. Huttenbach on Future Management of Steamers on Straits Line, Feb. 1888’, MP Private Letters File 22. 23 23rd Annual Report, Netherlands India S.N. Co, 10 June 1887, MSS 4548/276 (Mitchell Library, Sydney). 24 Memorandum by A. Fraser on the Establishment of a new Dutch Company, 16 Nov. 1887, MP Private Letters File 22. 25 Marginal comments on memorandum by R.H. Evans on Draft Statutes of proposed new Dutch Company, 29 Nov. 1887, MP Private Letters File 22. 26 W. van Raders to R.H. Evans (n.d.), enclosure in Evans to W. Mackinnon, 6 Dec. 1887, MP Private Letters File 22; ‘Memorie van Toelichtin’, by Springer Van Eyk, Minister for the Colonies, ‘Overkomst betreffende de paketvaart in den NederlandschIndie Archipel, gewende 1891tot en mer 1905’, Bijlagen van het Verslag der Handlingen van de Tweede Kamer der Staten-General, 1887–8, p. 6.

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the intent that the business of the same may be in connection with, or continuation or extension of, this Company’s business’.27 The firm would be based in Amsterdam, under the management of F. Bogaardt & Co (which was the family firm of T.C. Bogaardt, the Blue Funnel Line’s Singapore agent), and three of NISM’s larger steamers would be transferred to it to give it the semblance of a working entity. From The Hague, NISM’s Dutch director, Willem van Raders, poured scorn on the idea that any stalking-horse enterprise might somehow find it easier to compete in Indonesian waters. ‘The Home and Colonial Governments’, he wrote, ‘have made up their minds to give the privilege of the mail service to a regular Dutch Co. If this is so, and I am sure it is, they will protect the privileged Coy against all the existing ones. And do you think they would be such simpletons as to grant longer than necessary existence to a Coy which is capable of harming the Coy they wish to sustain.’28 Van Rader’s political instincts and contacts, it transpired, were more finely tuned than those of the London directors, for the ‘Company Holland’ never had a chance to become the vehicle for a Mackinnon group bid for the new contract. Jan Boissevain and the Dutch government, having succeeded in putting William Mackinnon and his friends onto the wrong foot, were not about to let them recover their balance. Although the deadline for submission of tenders was April 1888, Boissevain and two associates had submitted their own proposals well before that date – in June 1887. They then spent October and November 1887 in discussions with ministers and other officials – while NISM’s directors were still debating what should be done. Behind the Boissevain syndicate stood not only two of Holland’s leading shipping firms but also several Dutch banks and the important Netherlands Trading Company, which handled exports and sales of government-owned commodities from Indonesia. It was a powerful combination, with lots of connections into Dutch political life, and the Dutch government quickly came to a decision to award it the contract rather than await the formal deadline for submission of tenders. In February 1888, it laid before the Second Chamber of the States-General legislation to award the contract to the Boissevain syndicate for the period 1890–1905. The contract would have a more extensive network of subsidised lines in the archipelago and an annual payment (of 673,785 guilders) that was almost twice the amount received by NISM. The subsidisation of coastal shipping by the state, rather than declining as in British India, was to be expanded in the Netherlands Indies, and any foreign participation in the sector was to be excluded – all in the name of defending Dutch national interests in Southeast Asia.

27

Netherlands India S.N. Co, Extraordinary General Meeting, 19 Dec. 1887, BT31/938/1212C. 28 Van Raders to Evans, enclosure in Evans to W. Mackinnon, 6 Dec. 1887, MP Private Letters File 22. 338

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In introducing the Bill, the Minister of Colonies, Sprenger van Eyk, stressed the necessity of ensuring that the packet service contract passed into the hands of a genuinely Dutch concern. Only such a firm would have the means and motivation ‘to prevent the trade of foreign ports from being favoured over those of Holland or the Dutch East Indies’.29 He defended the decision to abandon open public tendering by asserting that private negotiation was the only way to achieve the attraction of Dutch capital to the project. In open competition it was always possible that a foreign firm, especially one already in possession of such a contract, could find a way around even the more strict nationality conditions introduced in November 1886. And he added as an inducement to the parliamentarians the fact that the majority (roughly two-thirds) of the steamships needed to work the contract would be new vessels to be built in Dutch shipyards. In effect, the contract with its higher rates of remuneration was also a subsidy to the hard-pressed Dutch shipbuilding industry. By contrast with what happened in November 1886, when Article XX had obtained parliamentary approval, William Mackinnon and his co-directors were able on this occasion to mount a brief defence of NISM’s interests in the States-General. Through Van Raders, they obtained the support of a relatively prominent Dutch parliamentarian, L.W.C. Keuchenius, who was well versed in the affairs of the Dutch East Indies.30 Keuchenius raised objections to Article XX, on the grounds that its conditions were quite clearly directed at ‘the English character’ of NISM and were also of dubious legality. His aim was to attempt to keep open the possibility of a counter-offer from either NISM or the ‘Company Holland’. However, the main brunt of his opposition to the Bill was to challenge, clause by clause, the costs of each of the thirteen proposed lines, pointing out that NISM would be willing to do the same service at a considerably lower price. Over the 15year length of the contract, he alleged, the savings to the government of the Netherlands Indies could be as much as six million guilders.31 In this he was following William Mackinnon’s orders that NISM should pitch a counter-bid

29

‘Memorie van Toelichting’, Handlingen van de Tweede Kamer, 1887–8, p. 3. Levinus Wilhelmus Christian Keuchenius, born in Batavia and educated at the University of Leiden, was a Roman Catholic and a political conservative. After a career in legal administration and journalism in Batavia, he entered Dutch politics as a parliamentarian in 1879 and took a close interest in a whole range of colonial issues. Ironically, only weeks after he presented NISM’s case in the Second Chamber, there was a change of government in Holland and he became Colonial Minister (on 29 April 1888). By then, however, the law of 19th March authorizing the Governor-General of the Netherlands Indies to enter into a contract with the Boissevain syndicate had already received royal assent and, despite whatever sympathy he may have retained towards NISM, he was powerless to give any further assistance. (Nieuw Nederlandsch Biografisch Wordenboek, I (1911), pp. 1246–9.) 31 47th and 48th Sittings, 23–24 Feb. 1888, Handlingen van de Tweede Kamer der StatenGeneral, 1887–88, pp. 740–53. 30

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at only 50 per cent of Boissevain’s figure, against the chance that an appeal to the pocket might outweigh the appeal to Dutch patriotism.32 In the event, it was forlorn hope. The Minister of Marine defended the higher costs of the new contract on the grounds that they would result in better-equipped ships, quicker voyages, better facilities for passengers, and improvements in arrangements for feeding trade into the ocean-going shipping lines, more especially by the new direct services that would be introduced between East Coast Sumatra and Batavia. He also stressed the advantage of having the fleet at the disposal of government ‘in more troubled times’.33 Faced with such arguments, only a handful of parliamentarians supported Keuchenius, and the Bill obtained an easy passage. It is ‘a matter of surprise and regret’, William Mackinnon wrote to Keuchenius, ‘that the Chamber should have sanctioned an agreement not only contrary to the law and practice of the country, but so entirely out of harmony with the traditions of equity and high principle which have hitherto been associated with the Dutch name.’34 The tone of pained resignation accurately reflected William’s feelings. He believed that he and his company had been let down by the Dutch authorities, to which they had given years of honest and faithful service. He had also been made brutally aware of how little political influence he and his associates carried in Indonesia and Holland. That he was resigned to the loss of the contract even before the final decision in parliament is suggested by his failure to involve the British government in the dispute, despite his lines of communication into the India Office and the Foreign Office. He treated the matter strictly as a commercial affair within the domestic competence of the Dutch government rather than as an international issue of trade protectionism over which he should seek the assistance of his own government. For its part, the Foreign Office kept itself informed on what was going on in The Hague,35 but made no effort to intervene. Anglo-Dutch relations would not be disturbed by this manifestation of Dutch nationalist sentiment. The Koninklijke Paketvaart Maatschappij (KPM) was established in July 1888 to take on the steampacket service with effect from 1 January 1891. However, all was not yet lost for the Mackinnon group. NISM still dominated coastal and inter-island shipping in the archipelago, and was well placed to offer serious (and potentially damaging) opposition to the new concern, ‘The

32

R.H. Evans to W. Mackinnon, 6 March 1888, Private Letters File 22. Handlingen van de Tweede Kamer der Staten-General, 1887–88, pp. 754–6. 34 Extract from Minutes of Directors, Nederlandsch Indische Stoomvaart Maatschappij, London Office, 20 March 1888, enclosure in W. Mackinnon to L.W.C. Keuchenius, 23 March 1888, Papers of L.W.C. Keuchenius, Koninklijke Biblioteek, The Hague, 68 E 4/265. 35 H.P. Fenton to Lord Salisbury, 6 April 1888, and enclosure ‘Law of 19th March authorizing the conclusion of a contract for the packet service in the Netherlands Indies archipelago, from 1891 to 1905 inclusive’, FO 37/720. 33

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results of such competition would not be unsatisfactory for this Company [NISM], as with a re-arrangement of its services under which all unprofitable lines would be abandoned to the mail contractors, the Steamers would still stand a fair chance of making good earnings in the directions where traffic is greatest.’36 Further evidence of a willingness to challenge Boissevain and his associates came with the introduction in August 1888 of a monthly steam line between Amsterdam and Batavia by the ‘Company Holland’, directly opposing the Netherlands Co’s service. In December 1888 the Java Agency Co was established to take on the agencies in Batavia of the ‘Company Holland’, the BI Associated Steamers Ltd, and NISM’s China Line.37 How much of this was a statement of real intent to remain active in Indonesian waters and how much it was mere window-dressing, designed to put pressure on Boissevain and get him to arrive at some arrangement with the Mackinnon group, is not entirely clear. Three possibilities existed. William Mackinnon might reach an accommodation with Boissevain and his associates that would enable both parties to share the coastal trade of Indonesia and/or trade between Indonesia and Holland in some amicable fashion; or the two might contest each other for those trades; or NISM might sell out its assets and interests to KPM and withdraw from the archipelago. A series of meetings and exchanges of correspondence began in May 1888, when Jan Boissevain and William Mackinnon (the latter returning from a visit to Leopold II) held discussions in the carriage of a train between Brussels and Calais. Boissevain also made a two-day visit to London in November 1888. This dialogue established that the Dutchman would not contemplate a working arrangement with NISM under any circumstances.38 On the other hand, he was anxious to avoid a stand-up fight with the Mackinnon group and he wanted to buy some of NISM’s newer steamers in order to be able to start KPM’s comprehensive services in 1891. In the meantime, William Mackinnon lost any stomach he might previously have had for a contest. His health was not good, and East Africa was wholly absorbing his energies, so the third option became increasingly attractive to him. By early 1889, at the latest, the public display of hostility to Boissevain and the KPM had merely become a means of trying to obtain the best possible price for NISM’s assets. Boissevain was told that he could have all of NISM’s fleet and shore establishments if he agreed to grant the ‘Company Holland’ the same arrangements for through traffic as were enjoyed by the Nederland and Rotterdam Lloyd companies.39 However, Boissevain stood firm against any deal that would let the Mackinnon group have a toe-hold in the liner trades between Holland and Indonesia, and it was William Mackinnon’s will that

36 37 38 39

25th Annual Report, Netherlands India S.N. Co, 31 May 1889. Java Agency Co Ltd, Inchcape Guildhall, MS 27, 770. For a detailed account of the negotiations, see De Boer, Geschiednis, Vol. 2, pp. 109–15. Telegram: W. Mackinnon to Boissevain, 20 March 1889, MP India File 25. 341

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crumbled. In June 1889, he announced his willingness to sell the three steamers of the ‘Company Holland’, thereby effectively signalling the end of opposition to KPM’s take-over of NISM’s predominant position in Indonesian shipping. An agreement with KPM for the eventual sale of 17 NISM steamers and three ‘Company Holland’ steamers followed quickly thereafter. Since this was a larger number than Boissevain had originally intended to purchase, and the price of £275,000 was well above the book value of the vessels, Mackinnon had secured some compensation for the loss of the contract. The further sale of three steamers to BI (to continue the Negapatam-Straits service as a solely BI operation), and the company’s remaining seven steamers to T.C. Bogaardt (for use in the Straits of Malacca) completed the disposal of the fleet. There would be no Mackinnon group presence in Indonesian coastal trades after the expiry of NISM’s contract in December 1890. ‘With the close of the current year’, NISM’s shareholders were told, ‘the Company’s career as Mail Contractor with the Government of the Netherlands India will come to an end; but it is gratifying to the Directors to know that this is owing solely to the influence of national sentiment, and not to any short-coming on the part of the Company. At no period of its history has it failed either to meet the demands of the Government or to provide fully for the requirements of commerce.’40 ***** Given a system of public tendering for shipping contracts, the possibility always existed that NISM could lose out to a rival bidder in 1888. After all, the circumstances under which it obtained its first footing in Indonesia in 1865 were somewhat unusual, and when it won a renewal of the contract in 1874 Dutch steamshipping to – and in – Indonesia was still in its infancy. By the mid-1880s, the shipowners of Amsterdam and Rotterdam were much better placed to mount a challenge to NISM. On the other hand, the ‘sitting tenant’ always enjoyed significant advantages over newcomers, as BI had demonstrated in the tendering for Indian contracts. It was therefore by no means certain that NISM or its ‘Company Holland’ offshoot would have failed to secure a further extension to its steam packet contract – if the Dutch state had not intervened. Political considerations determined that the rules of the game would be changed. These considerations partially reflected conditions pertaining to the Dutch domestic economy. At a time when Holland’s continental neighbours – France in 1881 and Germany in 1884 – began to give generous subsidies to their shipping and shipbuilding industries, in an effort to challenge the British pre-eminence in these fields, it would have been unusual if a Dutch government had not also looked around for some means to assist its shipowners and shipbuilders. The predominant

40

26th Annual Report, Netherlands India S.N. Co, 30 May 1890. 342

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influence, however, was a concern over the future of Dutch rule in the Indonesian archipelago, where a combination of local rivalries with British commerce and colonialism and the onset of new global rivalries for colonial possessions seemed to indicate the need for stronger, more interventionist policies. The transition from NISM to KPM shipping services was an event of some significance within the history of Dutch colonialism in Indonesia. The national (or home) government had intervened to set aside the system of public tendering for the transport of mails and government passengers and cargoes – which had been used since the 1850s – precisely because it wanted to secure a particular outcome. ‘The rationale was that a strong and cooperative monopolistic firm might be expected to become a more useful ally than a jibbing self-interested contractor. For that reason, the Dutch parliament acquiesced in doubling the subsidy . . . The crucial point, however, was that the new contract aimed to establish a cordial understanding, a gentleman’s agreement to cooperate as fully as possible in order to realize common goals and promote expansion.’ In return for strong state support, KPM gave the government many privileges, of which ‘the most important was the right to instant requisition of as many ships as the government wished, at a pre-fixed price’. After 1890, ‘the government supported the paketvaart [packet service] in its maritime expansion in many ways, which in turn contributed to the logistic capabilities of the colonial government. . . . Its ships were indispensable for the transport of troops during campaigns against the ‘internal enemy’. . . . The Company’s services were instrumental in cutting off independent communications of local powerholders. It opened many pioneering services for the stimulation of indigenous production and the consolidation of pacification.’41 In short, the alliance between Dutch shipowners and the state embedded in the KPM contract was the means of putting into place a more active and aggressive policy of extending Dutch authority and influence over the indigenous communities of the archipelago, and a more competitive challenge to British and expatriate Chinese shipping in Indonesian waters that had come to be considered the rightful and exclusive preserve of Dutch capitalism. This was, in almost its purest form, the line of reasoning about the strategic relationship between steamship lines and imperial authority that had been employed to put BI in place in the Persian Gulf in the 1860s and in Eastern Africa in the 1870s. There was therefore a certain irony that its adoption by the Dutch, at a time of heightened rivalries between European powers, should have as its first casualty such servants of British imperialism as William Mackinnon and his enterprise group. The Netherlands India S.N. Co, with its overwhelmingly

41

À Campo, Koninklijke Paketvaart Maatschaapij, pp. 636–7; see also J.N.F.M. à Campo, ‘Engines of Empire: the Role of Shipping Companies in British and Dutch Empire Building’, in Jackson and Williams (eds), Shipping, Technology and Imperialism, pp. 63–94. 343

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British capital and directorate, had no place in the Indonesia that forwardthinking Dutchmen were beginning to seek to create in this era of ‘new imperialism’. It was instead a relic of an earlier, more liberal era in international relations, from the 1850s to the 1870s, when British and Dutch colonialism and capitalism had enjoyed a relatively easy intimacy in Southeast Asia, respecting and even supporting each other’s political initiatives and economic activities. After 1890, Indonesia would become a more narrowly Dutch preserve, from where the expatriate Scottish mercantile community, which William Mackinnon had tapped into while setting up NISM in the 1860s, largely disappeared– and where Clyde-built steamers plied the coasts in increasingly fewer numbers. The loss of the Netherlands Indies contract was a blow to the Mackinnon group, but perhaps not as great as it might have been. NISM had always been something of an ‘add-on’ concern which, because of Dutch sensitivities over foreign participation in what was supposed to be reserved colonial coastal shipping trades, had been kept functionally and operationally separate from the rest of the group’s associate companies. There was no direct family interest in the management of the fleet in Southeast Asia, and it had only been from 1882 onwards that a process of gradually integrating NISM’s activities with those of the rest of the group’s shipping ventures had begun. That process, moreover, had not gone very far before the threat to NISM’s position had emerged in 1886, and further integration was put on hold. It was therefore possible for William Mackinnon, his family and his associates to walk away from twenty-five years of contracting for the government of the Netherlands Indies with an air of regret and wounded pride, but without much damage to their Indian, Australian, Afro-Arabian or British interests. What cannot be so easily excused or set aside, however, was the decision, taken once the contract had been lost, to wind-up NISM and abandon all shipping activities within the archipelago. The end of NISM, it is true, released £440,000 to be paid to the shareholders, thereby bringing greater financial liquidity to the group at the very time when British trade and shipping entered the deep depression of the early 1890s. That, however, was an unexpected outcome of, rather than a reason for, the liquidation of the group’s assets in Indonesia. It might well have been possible, as a number of the directors believed, for a somewhat slimmed-down NISM to have continued to operate within the archipelago, competing with KPM where the demand for shipping was greatest – on the Java coast or between Batavia and Singapore. Alternatively, if that strategy was considered too risky, the group could have concentrated its post-1890 efforts on Indonesia’s foreign or ‘country’ trades that were outside KPM’s contract lines – that is in the development of Batavia’s connections with South China, Australia, India and Europe in which it already had a foothold. This strategy was implicit in the creation of the Java Agency Co, to co-ordinate the activities of several group lines, but it was abandoned when that firm too was wound-up with the rest of the group’s Indonesian assets. Finally, some residual part of 344

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NISM and the ‘Company Holland’ could have been relocated from Batavia to Singapore, perhaps in conjunction with the business activities of T.C. Bogaardt. The group’s Southeast Asian operations would then acquire the Singapore orientation of which so many Dutch critics had falsely accused it in the mid-1880s. None of these options were pursued after June 1889. The withdrawal from Indonesia resulted from the collapse of William Mackinnon’s resolve to maintain a foothold within the waters of the archipelago. Although several of his associates, such as Alex Fraser and Edwyn Dawes, showed signs of wanting to maintain a presence there, his was the final decision. Two factors influenced that decision. The first was his essentially conservative business philosophy. Over the years, his natural business opportunism had become tempered by risk avoidance. He had acquired the mind-set of a public contractor, whose principal goal was to secure financial and material support from governments for the development and maintenance of transportation systems – mainly steamship lines but also railways – that would deliver military and political as well as economic and corporate returns. Official support had symbolic as well practical benefits – it marked his enterprises out as privileged entities, approved and licensed by the authorities, and thereby gaining in status and standing over the lesser firms that scrabbled for existence in the market place. When that position of privilege was lost – as it was partially in India between 1882 and 1885 and entirely in Indonesia between 1885 and 1889 – William Mackinnon found it more difficult than the younger men of the group to cope with the psychological sense of loss, or to envisage how things might be put on a more strictly commercial footing. The second factor was the enormous geographic spread of his enterprise network, and the conflicting demands that this made on his attention at any point in time. By 1888–9, when his Australian lines were beginning to run into financial trouble and the difficulties over NISM’s future were at their height, William Mackinnon was already deeply embroiled in a new and major venture in East Africa that absorbed his time and his energies. For good or ill, his priority for the future development of the group now lay along the long African coastline of the Indian Ocean rather than among the islands of the Indonesian archipelago.

345

14

Imperial politics: Egypt and the scramble for Africa, 1882–6 In the spring of 1882, with the tribulations of the City of Glasgow Bank behind him, William Mackinnon returned to London determined to pick up the threads of various affairs that he had been compelled to set aside, and to play an active part again in the business and political life of the metropolis. He arrived back at an interesting moment. Gladstone’s Liberal government was already struggling with the two great issues – relations with Ireland and with Egypt – that would directly or indirectly dominate much of British politics in the 1880s. Of the two, Egypt had the greater relevance for William Mackinnon, whose political attitudes and values were largely determined by foreign and imperial affairs which had a bearing on his business activities and aspirations. The British invasion of Egypt in August 1882, to put down the nationalist movement led by Arabi Pasha,1 was the first of three major events that transformed Great Power relations in the 1880s. It was quickly followed by the onset of international trade depression in 1883–4 and by Germany’s bid for colonial possessions in various parts of the tropical world in 1884–5. The 1880s and 1890s became decades of heightened rivalry between state systems, expressed mainly in a competition for colonial territories. They were also a time of intensified competition between shipping companies of various nationalities, and the struggle to create or extend liner routes across the world’s oceans and seas were in turn linked with strategic considerations about the transport and communications systems needed to maintain and extend overseas empire. Maritime enterprise and imperial power became ever closer bed-fellows, and a new stage emerged in William Mackinnon’s involvement with the politics of imperialism. The invasion of Egypt triggered the scramble for colonial possessions in Africa,2 and aroused suspicions about Britain’s imperialist appetites among 1

For the events leading up to the invasion of Egypt, and the reasons for Gladstone’s government to remain there rather than pull out again quickly, as had been intended, see R. Robinson and J. Gallagher, Africa and the Victorians: The Official Mind of Imperialism (London, 1961), pp. 76–159, and H.C.G. Matthew, Gladstone, 1809–1898 (Oxford, 1997), pp. 382–401. A.G. Hopkins, ‘The Victorians and Africa: A Reconsideration of the Occupation of Egypt, 1882’, Journal of African History, XXVII (1986), pp. 370–89, offers a counterweight to Robinson and Gallagher’s stress on the strategic importance of the Suez Canal as the cause of the invasion and reasserts the significance of the ‘bondholders’ in British policy-making. 2 Gladstone’s Egyptian policy was not the only force unleashing the Scramble – French 346

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rulers of Muslim states across the Middle East. These were, of course, regions in which the Mackinnon group’s operations were already intertwined with the maintenance of British influence. The edifice of British consular authority in East Africa and the Persian Gulf supported by the mail steamers of the British India S.N. Co and by the commercial presence of Gray Dawes & Co subsidiaries could hardly avoid the backwash from events in Egypt. Moreover, the principal architect of that system, Sir Henry Bartle Frere, had added visions of future steam transport and communications routes – between Britain, India and South Africa and also internally within eastern Africa – to the goals to be achieved by the Mackinnon group. These too were likely to be affected by the international political consequences of the Egyptian campaign. Eastern Africa was on the margins of the Mackinnon group’s shipping and trading empire, much less significant in terms of investment and profits than India, Indonesia or Australia. Even so, the defence and extension of the group’s interests there demanded a high level of political activity from the group’s leader, because existing state structures were unable or unwilling to promote the modernised internal transport infrastructures on which the growth and development of steamship lines depended. In India, Indonesia and Australia, the group operated within a relatively settled imperial framework and could rely on local administrations to initiate or oversee harbour improvements, the construction of road and rail routes, the development of river and lake shipping, and other policies likely to stimulate sea-borne trade. In Africa, by contrast, none of these conditions prevailed. Consequently, maritime commerce would grow comparatively slowly, and the volume of trade could prove inadequate to sustain regular, year-round liner operations. Along its shores, steamship companies tended to look to support from the imperial state both to sustain participation in sea-borne trade and to break down internal barriers to the growth of trade. ***** William Mackinnon was deeply affected by the invasion of Egypt, in which BI steamers played a part in bringing troops from India, and regarded the events in almost apocalyptic terms. ‘We are living in strange times all the world over’, he wrote to his new friend, General Gordon. ‘Old systems are breaking up. There is a general upheaval in society and a tendency to lawlessness

military advances were already underway in Senegal before August 1882, and Leopold of Belgium had already started to lay the foundations of a personal fiefdom in the Congo basin – but it served more than any other single factor to stimulate Great Power rivalries in Africa. For a general overview of the Scramble, see G.N. Sanderson, ‘The European Partition of Africa: Origins and Dynamics’, in R. Oliver and G.N. Sanderson (eds), The Cambridge History of Africa, Vol. 6 (Cambridge, 1985), pp. 96–158; T. Pakenham’s The Scramble for Africa (London, 1991) offers a more colourful and racy account of the personalities and events. 347

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everywhere which may lead to terrible events.’ 3 These, however, were the views of an onlooker, for he had played no part in the agitation leading up to the invasion of Egypt. During the months when the British Cabinet drifted into military intervention against Arabi, and into an entanglement from which it was unable to extricate itself, William and his associates had their attention fixed mainly further to the south, to the long eastern coastline of Africa beyond the Gulf of Aden. Their drive southwards to the British settlements and coal fields of Natal had not yet been completed, and even BI’s presence in East African waters was now in danger – for the Aden-Zanzibar mail contract was due to expire at the end of December 1882, without any guarantee of renewal. In April 1882, the BI board submitted a proposal to the Foreign Office that the mail service should be continued, and also that the service be transformed from a monthly to a fortnightly one, ‘with a continuation if so desired to Delagoa Bay and Natal’.4 This was a pre-emptive move, carried out in response to a warning that BI had a fight on its hands to maintain the subsidy from the imperial Treasury for its sole African line. ‘Kirk writes me a long letter today about the Contract’, Edwyn Dawes told William Mackinnon. ‘Lord Granville & Gladstone have decided to let it lapse and Kirk says that unless we push, it will assuredly go. He fears that French ascendancy will be the result.’ 5 The true centre of opposition to the AdenZanzibar contract, in fact, lay not with the Foreign Minister or the Prime Minister, but in the Treasury, whose officials, with memories of the events of 1873, were determined to terminate it. The contract, they pointed out, cost £10,000 a year but yielded only £250 per annum in postage paid, and it had been rendered redundant by construction of a telegraph line down the eastern coast of Africa.6 Gladstone and Granville were more than happy to go along with this economising move, partly because the original object of the contract, the suppression of the maritime slave trade of East Africa, could be said to have been achieved. However, they reckoned without the determination of the Frere circle to retain its conduit into East Africa. John Kirk, in particular, who was on leave in Britain from his post in Zanzibar, threw himself into efforts to continue the mail contract. He put pressure on Granville to change his mind, using the argument that the end of the contract would mean a French pre-eminence in East Africa.7 Kirk, a notorious Francophobe, was suspicious of French power in Madagascar and the Comoro

3

W. Mackinnon to Gordon, 18 July 1882, Brit. Lib. Add. 51305. BISN Co Directors’ Minutes, 27 April, 1882, BIS/1/4. 5 E.S. Dawes to W. Mackinnon, 11 April 1882, MP Misc. Commercial File 75. 6 Treasury to Colonial Office, 2 Jan. 1882, CO 179/144/213, Foreign Office to Treasury, 4 Feb. 1882, T1/13228/2402, and Treasury to Foreign Office, 22 March 1882, enclosure in Treasury to Colonial Office, 22 March 1822, CO 179/144/5223. 7 ‘Were France to gain the carrying trade on the coast our position commercially and politically would be seriously compromised. Trade would before long take another course; 4

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Islands, believing that it presented a threat to British influence in the southern Indian Ocean generally and to his own position in Zanzibar specifically. He and William Mackinnon were also concerned by rumours of a new French line from Marseilles via Suez and Zanzibar to Madagascar, which certain Marseilles businessmen were said to be starting up with the assistance of the new, and generous, general shipping subsidies introduced by the French government in 1881.8 At a time of heightened tensions between Britain and France over Egypt, the idea that France should also be prevented from stealing a march on Britain in the Indian Ocean found some resonance in the Foreign Office.9 Kirk and Mackinnon also arranged for a Manchester merchant and MP, John Slagg, to initiate a debate on the mail contract in the House of Commons in May 1882, which enabled the friends of ‘legitimate commerce’ in Africa to rally in support of its renewal. The Postmaster General, faced with the argument that steamship services to Zanzibar would cease without the mail contract, agreed to reconsider the matter.10 During the course of the summer, consultations took place between Kirk, Mackinnon and Frere over how best to take advantage not only of that opening but also of the British military occupation of Egypt that had just taken place. What emerged was a revised version of earlier plans for a subsidised steamship line all the way from Britain, down the eastern African shoreline, to Natal. What now came into focus was a projected line from Suez to Durban, which would parallel and compete with any French line from Marseilles to Madagascar. ‘This would be beyond the requirements of a slave trade policy’, Kirk wrote, ‘but well worth the cost as a national line of communication. After what has taken place in Egypt it is most important not to leave the Red Sea ports in other hands.’ 11 Large ocean-going steamers would ply the line, calling at the major ports en route, and interchanging traffic with BI/BIA Indian and Australian steamers at Suez. They would also

the Sultan would be induced to grant concessions openly hostile to our commerce.’ (Memorandum by J. Kirk, 1 May 1882, FO 84/1657.) 8 J. Kirk to W. Mackinnon, 30 Sept., 30 Nov. and 13 Dec. 1882, MP Private Letters File 91. The French shipping and shipbuilding subsidies, to which Mackinnon and Kirk were reacting, were the maritime counterpart of the protective tariffs for French industry and agriculture introduced in the same year. This neo-mercantilist economic policy, which initiated a shift towards protection and subsidy throughout continental Europe in the 1880s and 1890s, was arguably even more relevant to the rise in international tensions during the period than Britain’s entry into Egypt. The new subsidies stimulated the development of French steamship companies and an increase of some 50 per cent in French steamship construction between 1881 and 1884, but without significantly improving France’s share in maritime transportation. (M. Clough, France: A History of National Economics, 1789–1939 (New York, 1939), pp. 240–1; R. Meeker, History of Shipping Subsidies (New York, 1905), pp. 43–50.) 9 Minute by Granville on Treasury to Foreign Office, 22 March 1882, FO 84/1657. 10 Supply Debate, 5 May 1882, Hansard, 3 S., 269, (3 May–2 June 1882), pp. 246–63. 11 J. Kirk to C. Hill (private), 16 Sept. 1882, FO 84/1657. 349

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be supported in the Red Sea and on the shores of Mozambique and Natal by small local coastal steamers which would feed into and distribute from the main line. On the Swahili coast however, the 5 per cent duty on goods transhipped at Zanzibar would be a constraint on a local feeder service. Instead the ‘oceanic’ steamers would call at four coastal ports in addition to Zanzibar, so that goods could be carried to and from the Swahili coast free of transit duty.12 This proposed attack on the entrepôt function of Zanzibar island also happened to fit well with proposals that Kirk was working out for new consular arrangements in East Africa. For the overall plan to succeed, it would require financial support from at least three quarters – the British, Egyptian and Portuguese governments. Central to success was renewal of the Aden-Zanzibar mail contract. Here Kirk was best placed to influence events – he had the ear of a number of figures within official circles, as well as a recognised responsibility for British interests in East Africa. Mackinnon and Frere lobbied hard, stressing the various benefits of BI’s mail service to East Africa, including the stimulus to trade and the support of the naval squadron based in Zanzibar. They intimated their desire to ‘extend the line of steamers southwards and increase the ports of call’, thereby ‘giving a connected mail service from the Cape of Good Hope to Aden, India and China’ and an alternative route from the Cape to England.13 However, they left most of the running to Kirk, who had devised an arrangement likely to appeal to the economisers within government while at the same time strengthening British consular power in East Africa. This he described as ‘a scheme for slave trade suppression based on a reduction of naval force, which is so costly, and an increase of political stations or consulates on the coast combined with a systematic encouragement of trade by mail steamers’.14 His proposals were presented to a special Cabinet committee which was set up late in 1882 to mediate between continued Treasury and Post Office resistance and the support for contract renewal coming from other departments of government.15 Various other shipowners were sniffing round the contract – including Charles Cayzer, Donald Currie and even the Sultan of Zanzibar, who let it be known that his little fleet of steamers, which he normally employed in a somewhat irregular service between Zanzibar and Bombay, would be available to carry the mails from Aden to Zanzibar. However, the Cabinet committee concluded that, rather than go out to public tender, a contract should be entered into

12

J. Kirk to W. Mackinnon, 13 Jan. 1883, MP Private Letters File 92. ‘Memorandum on the renewal of the Contract for running Mail Steamers to Zanzibar’, enclosure in Fawcett (Post Office) to Treasury, 12 Aug. 1882, T1/13228/13962; Memorandum by Sir Bartle Frere on Zanzibar Mail Service, 25 Aug. 1882, FO 84/1657. 14 J. Kirk to W Mackinnon, 22 July 1882, MP Private Letters File 91. 15 ‘Zanzibar, 1882–3. Committee to enquire into the working of steam communication on the East Coast of Africa’, Monk Bretton Papers (Bodleian Library, Oxford), Box 60. 13

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with William Mackinnon within the framework of a general restructuring of consular arrangements in Zanzibar, as suggested by Kirk. The scheme, to which the Chancellor of the Exchequer eventually agreed in February 1883, centred on a decision to remove the Royal Navy’s warship on station in Zanzibar, effectively ending some three decades of dhow-chasing by naval vessels in East African waters. The emphasis in British anti-slave trade efforts now shifted away from the maritime trade with Arabia towards the internal, landwards trade on the Swahili coast. The savings to the Admiralty (some £45,000 in the first year and £20,000 per annum thereafter) would more than offset the costs of placing between three and five British consular officials at ports on the coast, under the supervision of the consul-general in Zanzibar. They would also cover the costs of an Aden-Zanzibar mail service that would include regular calls by the steamers in support of the new vice-consulates at four designated ports on the mainland – Lamu, Mombasa, Kilwa and Lindi. The consul-general would be able to travel free of charge on the mail steamers in the conduct of his duties, and could divert the steamers for the purposes of visiting other parts of the coast up to four times per annum. The costs of the mail contract passed from the Post Office to the Foreign Office’s Slave Trade Vote, while control and payment of the Political Agency and Consulate-General in Zanzibar finally passed from the Government of India to the British Government.16 A contract with the British India S.N. Co was duly entered into, to take effect from 23 September 1883 for a period of five years.17 These were significant changes in the aims and methods of British influence in Zanzibar. Imperial rather than Indian purposes – the proscription of the slave trade rather than protection of the interests of Indian merchants and traders – were to have greater priority than in the past. They would be pursued through an authority structure projected directly onto the Swahili coast, in parallel with the Sultan’s own system of administration. The changes aroused concern that Kirk was drawing Britain too deeply into African affairs. ‘The consequence of permeating Zanzibar with Consular influence’, a senior Treasury official wrote, ‘will be to establish an English control, always of the verge of a Protectorate, with corresponding responsibilities. I deprecate the policy, whether directed to the repression of slavery or regarded as a check to French intrigues.’18 Such fears were not entirely misplaced. Kirk favoured the eventual establishment of a British protectorate 16

Minute of Treasury Board, 26 April 1883, T1/15258/7833; Treasury to Post Office, May 1883, T1/15258/8436; Foreign Office to India Office, 18 July 1883, enclosure in Political Despatch, No. 6, 31 Jan. 1889, IOLR V/6/321; ‘Memorandum respecting the Change of Policy in Suppression of Slave Trade in Zanzibar, (by C. Hill), FO 84/1631. 17 ‘Contract with the B.I.S.N. Co for the Conveyance of the Mails between the Port of Aden and the Port of Lindi; with Treasury Minute thereon’, P.P.,1884 (5), xlvii, 467. Because of the time taken over the inter-departmental discussions, the old contract had been renewed for the first six months of 1883. 18 Minute by L.C. (Leonard Courtney?), 20 Feb. 1882, T1/15258/7833. 351

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over Zanzibar and its mainland territories,19 and in the meanwhile the arrangements for closer control he intended to introduce there could well be described as creating a protectorate from below rather than imposing one from above. In presenting the Foreign Office with his scheme for a monthly or fortnightly steamship service between Suez and Natal, William Mackinnon sought financial support of up to £8,500 for the Suez-Aden section of the line, £13,000 for Aden-Zanzibar, and £8,500 for Zanzibar-Natal.20 Thanks to Kirk’s ingenuity, he obtained £7,950 for a monthly Aden-Zanzibar service,21 but that was the limit of the government’s generosity. Whatever the French might be about, British governments were not prepared to subsidise shipping for purely commercial purposes. Moreover, the supposed connection between the line and slave trade suppression in the Red Sea, or along the shores of Portuguese-ruled southeast Africa, was too intangible to shake hard cash from an economy-minded government which had had to find very large sums to finance its Egyptian adventure. However, William hoped that his scheme might benefit indirectly from that larger expenditure. In January 1883 he offered, through the Foreign Office, to take over the mail and transportation services conducted in the Red Sea by the Poste Khedive company, under contract from the Egyptian Government. Those steamer services, he claimed, had been carried out in an inefficient manner and in such a way as to foster rather than to stem the slave trade across the Red Sea from Africa to the Arabian Peninsula. The take over of the Poste Khedive by BI, he argued, would not only remedy these defects, but would stimulate trade between Red Sea ports and ports in the Persian Gulf, India and East Africa.22 However, this attempt to bring BI back into the Red Sea coastal trades that it had abandoned in 1877 proved abortive. The proposal received support within the Foreign Office, from the Cabinet committee on sea-borne communications with Zanzibar, and from the Government of India, which saw in it a means of improving food supplies to Aden and of ‘introducing greater regularity and system into the pilgrim traffic between India and Jeddah’.23 On

19

‘If the French take Madagascar we should have Zanzibar, for it cuts their line of communication and is the centre of a paying trade.’ (J. Kirk to W. Mackinnon, 13 Dec. 1882, MP Private Letters File 91.) 20 W. Mackinnon to Lord Granville (private), 25 Jan. 1883, FO 84/1657. 21 William had good reason to be grateful to Kirk, and he showed his appreciation in typical manner. In 1883, shortly before Kirk’s return to Zanzibar, he instructed Dawes to open a line for Kirk in the lucrative, family-based insurance syndicate that carried the larger part of the risk on the BI and NISM steamers. (Kirk to W. Mackinnon, 15 Sept., 1886, MP Private Letters File 93.) 22 Memorandum by W. Mackinnon, Chairman, British India S.N. Co, 24 Jan. 1883, FO 84/1657; also in Proceedings – India, Separate Revenue, Vol. 2102, IOLR. 23 Govt. of India to Secretary of State for India, 22 June 1883, Proceedings – India Separate Revenue, 2102, IOLR. 352

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the other hand, the embryonic British administration in Egypt, which was intent upon putting the Khedive’s government back onto a sound financial footing, so as to be able to withdraw from the country again, was unsympathetic to such blatant asset stripping. It advised that the Poste Khedive should be allowed to reform itself and expressed doubt that the Egyptian government would ever wish to depend ‘entirely upon a Foreign Line for the transport of their troops, pilgrims and stores, and for the requirements of their quarantine service’.24 William Mackinnon had little leverage in Cairo, and he let the matter drop. The collapse of Egyptian authority in the Sudan, in the face of the Mahdiyya revolt, enhanced the strategic role of the Poste Khedive along the Sudanese shore of the Red Sea, particularly at the port of Suakin which supplied Khartoum. This made it even less likely that the Egyptian government would allow the Poste Khedive to be acquired by a third party. He was also diverted from the pursuit of Red Sea coasting services by a political issue that arose in the aftermath of the British occupation of Egypt. With British troops now in place alongside the Suez Canal, an opportunity presented itself for British shipowners and other interested parties to challenge the monopoly powers of the Suez Canal Company. Despite Disraeli’s purchase of the Khedive’s shares in the Company, it was still predominantly French owned and controlled. British shipping and commercial interests connected to Asia and Australia were the main customers of the Canal – some 80 per cent of tonnage passing through the waterway was British-registered – and they believed that it was run more in the interests of the shareholders in France than of its clients. There were three principal complaints – the inadequate capacity of the Canal (which resulted in congestion, delays and expense for shipowners), the high level of tolls being charged by the Company, and the insufficiency of British representation in the management of the enterprise, preventing the other complaints from being addressed. The discontent gave rise to demands for a second, British-owned canal between the Mediterranean and the Red Sea, and a rash of proposals for alternative canal routes to the Gulf of Suez or the Gulf of Akabah.25 The Mackinnon group’s services between London, India and Australia made it one of the larger users of the Canal, and William Mackinnon, naturally anxious to effect reductions in costs, participated actively in the agitation. He operated on two fronts. First, in May 1883 he joined with other shipowners, including representatives of the P&O, Ducal, Orient and Anchor lines, to establish the Association of Steamship Owners Trading with the East, for the purpose of lobbying for

24

Lord Dufferin, H.M. Minister, Constantinople, to Foreign Office, 17 Feb. 1883, Proceedings – India, Separate Revenue, 2102, IOLR. 25 For a detailed account of the origins, character and outcomes of the 1883 agitation over the Suez Canal Company, see D.A. Farnie, East and West of Suez: The Suez Canal in History, 1854–1956 (Oxford, 1969), pp. 303–24. 353

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the creation of another canal.26 Second, he gave support to the Palestine Channel scheme being promoted by the Duke of Sutherland and the Duke of Marlborough.27 The establishment of a syndicate to raise funds for a survey of a canal route from Acre on the Mediterranean via the natural rift valley of the Jordan River and Dead Sea to the Gulf of Akabah was probably intended more as a way of putting pressure on De Lesseps and the board of the Suez Canal Company than a serious attempt a floating a rival concern. The idea of a canal through Palestine had been around since 1855, and its enormous financial, technical and political difficulties were too well known, and too well publicised, for the project to have any chance of long-term success. However, William was encouraged to take an interest in the concept by General Charles Gordon, who was indulging his passion for digging for antiquities in the Holy Land and thought a canal through Palestine to be eminently feasible,28 and his participation in the scheme enabled him to tap the Duke of Sutherland’s aristocratic network for information useful to him and to the Association of Steamship Owners. The shipowners and others – including William’s Antipodean associates, Sir Thomas McIlwraith and Sir Julius Vogel – kept up the pressure on the British government over the summer months. An agreement in June 1883 between the government and the Suez Canal Company for the construction of a second, parallel canal by the Company satisfied neither those who wanted a British canal for reasons of national pride nor those who wanted a guaranteed reduction in tolls. At the heart of the debate was De Lesseps’ claim to exclusive rights, granted by the Egyptian government, to undertake any canal construction through the Sinai peninsula. Lacking government support to challenge that right, the British shipowners were eventually forced to accept Gladstone’s suggestion that they should reach their own compromise with De Lesseps and the Suez Canal Company. There was disagreement among the shipowners over the olive-branch held out by De Lesseps in November 1883. William, who wanted both a British-owned canal and a substantial reduction of rates on the existing Canal, found himself at odds with Thomas Sutherland of the P&O, who was more willing to abandon the British canal and to reach an accommodation over tolls that would be acceptable to the shareholders of the Suez Canal Company. However, he failed in his attempt, through Frere, to get Conservative support for a policy of opposing the proposed settlement with De Lesseps,29 and bowed to the 26 The Times, 11 May 1883, 9c; Farnie, East and West of Suez, p. 310; W. Mackinnon to H.S. Sanford, 24 July 1883, Sanford Papers. 27 Duke of Marlborough to Granville, 10 May 1883, Account of Interview in Favour of Palestine Channel, 10 May 1883, and Granville to Duke of Marlborough, 12 May 1883, PRO 30/29/152. 28 Gordon to W. Mackinnon, 15 July, 12 Aug. and 15 Sept. 1883, Nat. Lib. Ms 20311. 29 Sir Henry Bartle Frere to Sir Stafford Northcote, 22 Nov. 1883, Brit. Lib. Manuscripts 50030.

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inevitable. The agreement reached between the shipowners and the Company on 30 November 1883 made provision either for the enlargement of the capacity of the existing Canal or the construction of a second canal by the Company. It also introduced a system for linking toll charges to levels of dividends, and allowed for seven new directors, nominated by the shipowners, to join the board of the Company. Although De Lesseps had some difficulty in securing acceptance of the agreement in Paris, he eventually prevailed. The seven new British directors took their seats on the board in September 1884. Among them was William Mackinnon, confirmed by his appointment as one of the leading figures in the British shipping industry. An ability to influence the policies and future direction of the Suez Canal Company provided some compensation for the failure to obtain British or Egyptian government support for BI in the Red Sea – and for the fact that one strand of the scheme for a Suez-Durban steamship line had not been achieved. However, the loss of the proposed Red Sea section was not crucial to the South African project. A BI line connecting South Africa with Britain, India and Australia might still have been put in place by steamers from Durban interchanging traffic with other BI/BIA steamers at Aden. The fate of the plan was therefore ultimately decided on the Mozambique coast rather than in the Red Sea, and in Lisbon rather than Cairo. BI’s contracts to deliver mails from Lisbon to Goa and Mozambique, and to various ports along the Mozambique coast, came to an end in 1883. While negotiating with the British government over the Zanzibar mails, William Mackinnon appeared confident of the renewal of this Portuguese contract. However, his old friend, Viscount Duprat was no longer in post as consul in London, and therefore no longer available to act as a broker in negotiations with the government in Lisbon. The mail services were now to be settled by public tender in Lisbon, but no representative of the BI board went there to present the company’s case. Instead bids were submitted through BI’s local agents, Knowles, Rawles & Co. William and the board paid for this complacency. The fate of the Goa contract is unclear – it seems to have gone to a Portuguese firm which then had difficulty in carrying it out. The Lisbon-Mozambique and Mozambique coast contract, however, was subject to some murky politics in Lisbon, from which Donald Currie of the Castle Line emerged the winner. The Mozambique mails would now travel by the Atlantic route via the Cape, and the coastline of Portuguese East Africa became a ‘no-man’s land’ between competing British shipowners and their respective commercial and political supporters. Donald Currie was determined to keep Mackinnon’s Indian and East African connections out of the South African waters in which, after years of struggle with the Union Co, he had managed to establish a preeminence.30 The loss of the Mozambique contract (which was compounded by the Governor of Mozambique’s large unrecovered debts to BI) was a major

30

A. Porter, Victorian Shipping, Business and Imperial Policy (Woodbridge, 1986), pp. 122–5. 355

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blow to William Mackinnon. Together with the loss of the Goa contract it weakened BI’s London-Karachi-Bombay line, and along with the British government’s refusal to finance mail transport between Natal and Zanzibar it punctured his aspirations for a Suez-Natal line. Such was his desire to keep that dream alive, and to retain the merest toehold on the Mozambique coast, that he was even prepared to reach an accommodation with Currie to share the distribution of the mails along the northern section of that coast. This made the port of Mozambique the southern terminus of the BI line that started in Bombay and proceeded down the eastern African shoreline, with calls at Lamu, Mombasa, Zanzibar, Kilwa, Lindi, Ibo and Mozambique.31 There was a price to be paid, however. Currie had won the contract partly with the assistance of a Portuguese speculator, Captain J.C. Pavia de Andrada, who was well-connected in Lisbon political circles. In 1878 Andrada had obtained an enormous concession which granted rights to carry out mining, cultivation and tax-gathering activities over a vast area along both sides of the Zambesi valley, but for which he subsequently failed to raise sufficient funds for development purposes.32 He was in danger of having the concession revoked when Currie threw him a life-line. Currie persuaded William Mackinnon to join him in putting up enough money to purchase the Andrada concession for a new concern, the London-registered Companhia Africana. William, who preferred a strategy of co-operating with Currie rather than confronting him head on, put £7,500 into the joint venture. He claimed to have no great personal interest in or expectations for the Concession,33 and it seems unlikely that he regarded it as some sort of substitute for his earlier failure to obtain a concession from the Sultan of Zanzibar. His involvement with Currie and Andrada is probably best understood as an example of his networking technique, comparable to his dealings with McIlwraith and Vogel in Australia, or Sanford in Florida. Nevertheless, his lending his name and money to the project caused concern not only in the Foreign Office but also among his erstwhile associates in the African Lakes Company.34 William Mackinnon’s proposals for a Suez-Durban steamship line, the maritime equivalent of the later Cape-to-Cairo railway of Cecil Rhodes,

31

13 July 1883, BISN Co Directors’ Minutes, BIS/1/4. E. Axelson, Portugal and the Scramble for Africa (Johannesburg, 1962), pp. 120–3. 33 Memorandum Regarding the Andrada Concessions (by William Mackinnon), 3 Jan. 1885, FO 84/1731. 34 H.W. MacMillan, ‘The Origins and Development of the African Lakes Company, 1878–1908’ (Ph.D. thesis, University of Edinburgh, 1970), 104. The Companhia Africana began operations, as an associate of Donald Currie & Co, late in 1883, opening commercial establishments at Quelimane and Inhambane. However, in 1884–5, it was hit by the trade depression affecting the whole of eastern Africa. With a capital of only £22,085, debts to Donald Currie and Co of £10,298, and mounting losses on its trading account, the firm was clearly going nowhere, and it was wound up shortly thereafter. (Companhia Africana annual reports, 1884 and 1885, MP Misc. Commercial File 64.) 32

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cannot simply be dismissed as the empty dream of an impractical visionary. Through the dint of hard work, perseverance, active political lobbying, the effective use of business networking, and some good luck he had already pioneered the development of short- and long-distance steamship lines over very large stretches of sea and ocean. A Suez-Natal line was one of the great remaining challenges within the Indian Ocean maritime region. However, its realisation faced enormous difficulties. The sea-borne trades and passenger traffic of the eastern African coastline were comparatively slight in value, were largely seasonal in character, and tended to lack the high value to bulk commodities (other than cloves and ivory) that steamship owners prized. These did not yet appear to be waters in which regular, year-round liner operations could be conducted without state support – support which William Mackinnon struggled to obtain or to hold. The British Treasury was disinclined to assist. The mails for the South African colonies were adequately conveyed by the Atlantic route. Ideas about imperial unification had not yet reached the point where it might be deemed useful or necessary to link South Africa via steamship lines to India or to the even newer sphere of imperial authority in Egypt (in which the British presence only became permanent after 1888). Over the vast distances between Natal and Egypt, only a residual responsibility for the suppression of the slave trade through the Consulate-General in Zanzibar was grudgingly accepted in London, and that was too slender a basis to support a steamship line linking these two extremes of British rule in Africa. By 1884, therefore, William Mackinnon and the BI board were still no further towards achieving their goal of extending their liner network to South Africa than they were when Sir Henry Bartle Frere first floated the idea. ***** William Mackinnon’s failure to obtain a renewal of his Portuguese contracts probably owed as much to his own actions as to Donald Currie’s skills in wrestling such business away from others. For a man who wanted and needed the Portuguese authorities to be well disposed to his interests in western India and eastern Africa, he was exceedingly cavalier in his attitude towards Portuguese interests along the Atlantic coast of Africa. Early in 1883, while the fate of the Mozambique mail contract still remained to be decided, the onset of the Scramble for colonial territories in Tropical Africa faced him with a choice – whether to ally himself and his network with Portuguese colonialism in Africa or with Leopold II of Belgium. Unhesitatingly, and without apparent regard for the effects on his interests anywhere else, he lined up behind Leopold. While Donald Currie’s refusal to sign up to Leopold’s Comité des Études in 1879 had left him with a free hand to court the Portuguese in Africa, William Mackinnon’s eagerness to associate with Leopold conversely gave him little option but to support the monarch when a dispute arose with the Portuguese. The issue that divided the two shipowners, and many 357

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others in British politics, was that of Portuguese rights at the mouth of the Congo (Zaire) River – a problem which transformed the Scramble for Africa from an essentially Franco-British affair into a multi-national one, and gave Bismarck an opportunity to impose himself on the direction of events in central Africa.35 In November 1882 the French Chamber of Deputies, responding to Britain’s unilateral action in Egypt, ratified the treaty obtained by the explorer, Brazza, that would give France access from Gabon onto the north bank of the Congo at Stanleypool. This in turn alarmed the British government, believing that it signalled the prospect of French sovereignty being extended to the Lower Congo. There British firms and merchant houses, the southern flank of the Liverpool ‘palm oil ruffians’ of the Niger, were predominant within a traders’ frontier of commerce and politics. The British government therefore proposed to recognise historic Portuguese rights to sovereignty over the mouth of the Congo, because the Portuguese were more likely than the French to respect British interests in an area that it had no wish to acquire for itself. Granville at the Foreign Office intended to adopt the draft Congo Treaty that had been the third part of the Morier-Corvo programme to set BritishPortuguese colonial relations on a new footing. His decision, however, was a serious miscalculation. British commercial and missionary interests on the Lower Congo, unaware that the Treaty was intended to pre-empt French action, preferred the political status quo along the river to the imposition of Portuguese rule, with its tariffs on trade and its alleged complacency towards slavery. At the same time, Leopold and his associates, busily developing administrative ‘stations’ between the Lower and the Upper Congo, feared that Portuguese possession of the lower stretches of the river would choke off the commercial exploitation of the great river basin (their plans for which they still cloaked in philanthropic and humanitarian rhetoric). A loose alliance against the Treaty developed between these two somewhat disparate forces, with James Hutton, the Manchester merchant, occupying a key co-ordinating role. Hutton was a director (soon to be chairman) of the Manchester Chamber of Commerce, as well as a director of the National Africa Company that traded on the Niger and a supplier of manufactured goods to traders on the Congo. He represented a Manchester business community that was experiencing a general slow-down in its exporting of cotton textiles to India, as well as increasingly cyclical conditions of manufacturing and trade. It was also a business community that harboured hopes of new markets in the Far

35 The political and diplomatic history of the Anglo-Portuguese Treaty on the Congo, leading to the Berlin Conference of 1884–5, is dealt with in considerable detail in Axelson, Portugal and the Scramble for Africa, and R. Anstey, Britain and the Congo in the Nineteenth Century (Oxford, 1962). What follows is informed by these works, but focuses on William Mackinnon’s participation in the events so as to understand his motives and ambitions, and the links to his other activities.

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East and in Africa, and that could be aroused by threats to free trade even in areas like West and West-Central Africa that took only a small proportion of total exports from Manchester and Liverpool.36 As a result of Hutton’s activities, a flood of objections to the proposed Treaty poured into the Foreign Office between November 1882 and April 1883 – from Chambers of Commerce, from commercial and shipping bodies, and from individual firms with western African connections. The agitation also spilled over into the pages of the Press and into the House of Commons. ‘Is England alive to the fact’, Hutton asked, ‘that, by allowing Portugal to annex the Congo and the adjacent territory, her Majesty’s Government hands over to her command of the only important and navigable river by which Central Africa can be approached, and also the control over a trade which already amounts to one twentieth part of our entire commerce with the whole continent of Africa? – a trade which, though now comparatively not of magnitude, will before many years if left free and unfettered, probably become as valuable to our industries as that of India and China.’ 37 William Mackinnon joined the campaign of agitation somewhat belatedly. He had gradually re-established his connections to Leopold during 1882, and made himself useful by assisting in the recruitment of Zanzibaris for Stanley’s operations on the Congo and in trying – once again unsuccessfully – to persuade General Charles Gordon to enter the service of the International African Association. He also received an invitation for himself and John Kirk to visit Brussels to discuss Congo affairs, particularly the proposed BritishPortuguese Treaty. At the end of January 1883 the two men, accompanied by Edwyn Dawes, crossed the Channel for a week of lavish hospitality and entertainment in Belgium, during which Leopold, although confined to bed for medical reasons, gave them several interviews.38 Leopold’s purpose was to use William and Kirk to promote resistance to the Treaty within Whitehall and Westminster, and on their return to London the two men went to work. William did the rounds of the Foreign Office, War Office and Colonial Office, passing on documents prepared in Brussels and securing interviews with various officials and junior ministers, including Sir Charles Dilke and Joseph Chamberlain, the two Radical ministers in Gladstone’s government. He obtained Granville’s ear, lobbied Gladstone through Lord Kinnaird, a Scottish peer and Free Churchman, and used Frere to get to Lord Northbrook, another senior member of the Cabinet. He and Frere also worked up and 36 For the general context see, inter alia, A. Redford, Manchester Merchants and Foreign Trade, Vol. 2: 1850–1939 (Manchester, 1956), B.M. Ratcliffe, ‘Commerce and Empire: Manchester Merchants and West Africa’, Journal of Imperial and Commonwealth History, 7, 3 (1979), pp. 293–320, and W.G. Hynes, The Economics of Empire: Britain, Africa and the New Imperialism, 1870–95 (London, 1979). 37 The Times, 3 April 1883, p. 4, col. e. 38 29 Jan.–6 Feb. 1883, Notebook: Brussels, London, Zanzibar, 1883–4, Kirk Papers, Nat. Lib. Acc. 9942/37; W. Mackinnon to H.S. Sanford, 5 Feb. 1883, Sanford Papers.

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presented to various parties proposals for the Royal Navy to police the Lower Congo while leaving the banks free of European rule, and then plans for an International Commission for Free Navigation to do the same task.39 His position on the proposed Treaty he summed up as follows: I am satisfied British interests on this question are identical with Belgian interests. Portuguese pretensions and demands if conceded will prove equally detrimental to both from any and every point of view; but especially will they prove detrimental to the best & truest interests of the poor natives of the territories concerned as well as the natives far beyond. On enquiry I believe you will find everyone connected with it utterly opposed to any treaty which would alter the ‘status quo’ or concede any additional territorial rights to Portugal, and I trust H.M.’s Govt. may be able to reconsider the matter before committing itself in any treaty which can interfere with the existing perfect freedom of trade on the Congo & the territories beyond.40

William clearly enjoyed the agitation against the treaty, which was a change from the routine of presiding over his shipping companies and went well beyond the level of lobbying and influence-peddling in which he normally engaged as a shipping contractor.41 Above all, perhaps, he was encouraged by the reminder that his connections to Leopold, as much as his ties to Frere and the Duke of Sutherland, placed him on the periphery of the circle surrounding the heir to the British throne. Leopold had also called upon the Prince of Wales, his ‘Cousin Bertie’, to intervene on his behalf. In turn, one of the Prince’s aides, Sir Francis Knollys, visited William on a couple of occasions – to be briefed on the campaign, to co-ordinate respective interviews with Granville at the Foreign Office, to provide William with an

39

W. Mackinnon to Devaux, 12 Feb., 9 March, 14 March, 19 March, 23 March, 27 March and 14 April 1883, ACRL, Fonds Congo File 1; Memorandum on the Congo International Association by M. Strauch, left by Mr Mackinnon, 12 Feb. 1883, Memo by J. Pauncefote on the ‘Association Internationale du Congo’, 26 Feb. 1883, and Frere to Lord Northbrook, 22 Feb. 1883, FO 84/18; Gladstone to Lord Kinnaird, 18 March 1883, MP Private Letters File 4; W. Mackinnon to Granville, 19 March 1883 FO 84/1804; Memorandum on the Future of the Congo, left by Mr Mackinnon on 9 April 1883, FO 84/1805; Leopold to W. Mackinnon, 4 March 1883, ACRL, Fonds Congo File 2. 40 W. Mackinnon to J. Chamberlain, 19 March 1883, enclosure in W. Mackinnon to Devaux, 19 March 1883, ACRL, Fonds Congo File 1. 41 His lobbying activities were assisted by a ‘mole’ within the government. H. Austin Lee, private secretary to Sir Charles Dilke and then to Lord Edmond Fitzmaurice, had proved helpful during the campaign over the Zanzibar mail contract and, like Kirk, was rewarded by a line in the group’s marine insurance syndicate. However, Lee’s financial needs were more pressing than Kirk’s, and Gray Dawes & Co advanced him £500 against future income from the insurance line. Lee continued to supply William with inside information on foreign affairs until 1885. (Lee to W. Mackinnon, 3 and 8 May, and 8 and 11 Aug. 1883, MP Private Letters File 107.) 360

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introduction to Chamberlain, and to relay the results of the Prince’s intervention.42 The International Association of the Congo, Leopold told the Prince, ‘asks nothing from anyone, and does not want anything, other than the liberty to continue in peace and in a permanent manner the mission which it takes from the philanthropic sentiments of its founders’.43 The Prince secured from Granville a promise that Britain would not recognise Portuguese sovereignty beyond the river town of Boma, leaving the Association’s line of stations, further upriver, outside the Portuguese zone. This was welcomed in Brussels, but regarded as a second-best solution behind that of no treaty at all.44 Meanwhile, John Kirk, in his role as adviser on African affairs, was working quietly against the treaty within the Foreign Office. He explained to Brussels that ‘the only hope of making negotiations abortive was I saw in blocking the Treaty in details and giving in this way time for the public to express an opinion, above all to delay matters until the meeting of Parliament.’ 45 Both he and William helped to brief MPs, mainly from the Manchester area and connected to James Hutton, in the period leading up to the debate in the Commons on 3 April 1883. This debate in turn finally brought home to the government the strength of the opposition to any deal with Portugal. A treaty which might have passed through the Commons in the aftermath of a ratification of the Treaty of Lourenço Marques had little hope of success on its own. Granville and the men of the Foreign Office set about revising the treaty in the hope of producing a version that would satisfy public opinion in both Britain and Portugal. For the next two or three months, before returning to his post in Zanzibar, John Kirk played out his double role – on the one hand advising the Foreign Office about the most suitable terms for a new treaty, while on the other suggesting changes that would make such a treaty more acceptable to Leopold, and all the while keeping Leopold abreast of the dialogue between London and Lisbon. ‘I have a good deal of power’, Kirk wrote to Brussels, ‘to stop anything that seems dangerous but comparatively little means of setting the Govt. on a new line.’ 46 He also showed an

42 Sir Francis Knollys to Devaux, 10 and 12 March 1883, and W. Mackinnon to Devaux, 14 March 1883, ACRL, Fonds Congo File 1. 43 Leopold to Prince of Wales, 13 March 1883, ACRL, Fonds Congo File 1. This letter also drew a distinction between the International Association of the Congo (which was entirely funded and controlled by Leopold) and the original International African Association to which Frere, Mackinnon and others had signed up, by pointing out that ‘another International Association also works from Zanzibar to Tanganyika to establish stations of the same type so as to create a chain across Africa’. 44 Extract from Granville to Prince of Wales (n.d.), enclosure in Knollys to Devaux, 12 March 1883, W. Mackinnon to Devaux, 14 March 1883, and Devaux to W. Mackinnon, 19 March 1883, ACRL, Fonds Congo File 1. 45 Kirk to Devaux, 20 Feb. 1883, Kirk Papers, Nat. Lib. Acc. 9942/59. 46 Kirk to Devaux, 19 April 1883, Nat. Lib. Acc. 9942/59.

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awareness of the dangers of the deeper game he was playing by holding back information from William Mackinnon: ‘I have to be very careful in speaking even to him. It would only cut me off from the means of being of use if anything I know confidentially were to get abroad. I cannot tell him half of what I say to you which is for the King’s private information.’47 William, at Leopold’s urging, was busy trying to stir up another debate in Parliament, this time in the Lords rather than the Commons. However, efforts to invite Lord Carnarvon (who as Colonial Secretary had sent Frere out to the Cape) to introduce a motion in the Lords proved unsuccessful. Most parliamentarians, having been promised a revision of the treaty, were content to hold their fire until the new terms were known. Much of the steam had temporarily gone out of the public agitation over the future of the Congo. The Frere circle’s endeavours within the corridors of power contributed to the reconsideration of British policy in the Congo region, although the public agitation stimulated by James Hutton was the much more important influence. Mackinnon and Kirk, with Frere’s blessing and assistance, had put a lot of time and effort into defending Leopold’s interests – but to what end? Unlike Hutton, they could not claim to be acting on behalf of specific British commercial interests in West-Central Africa. Why then were they such vigorous allies of the Belgian monarch? Essentially, the answer lay in the failure of their own, and Leopold’s, earlier efforts to develop overland transport facilities between the Swahili coast and the East African lakes. Now much more aware of the difficulties and costs of such innovation, they saw the navigable waters of the Upper Congo as an alternative means of access to the trade and natural resources of the African interior. They were anxious to exploit whatever opportunities might arise from Leopold’s activities in the Congo. As Kirk put it to William even before the storm broke over the British-Portuguese treaty: ‘I wish the Congo scheme could be diverted into English hands who might well work with the King on this. In my opinion the Congo is the way of the immediate future into Africa and the route worked by commercial men would be a commercial success. I only wish we had such a good road open to us on the East Coast.’ 48 Their aspirations, in short, were for the creation of a British commercial organisation which, under the umbrella of Leopold’s International Association, would penetrate the Congo basin, introducing a railway and river steamships to ‘open-up’ the foreign trade of this vast region. It was also a vision with which Leopold, anxious to head off Portuguese encroachment on his personal fiefdom, seemed willing to co-operate. Two schemes for the immediate development of the Congo were discussed when William and Kirk were in Brussels in February 1883. The first was for a railway line linking the Lower Congo with

47

Kirk to Devaux, 4 May 1883, ACRL Fonds Congo File 2 (also in Nat. Lib. Acc. 9942/59). 48 Kirk to W. Mackinnon, 30 Sept. 1882, MP Private Letters File 91. 362

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Stanleypool, where the internal navigation of the Congo could begin. Leopold said he was willing to fund such a railway from his own resources although, apparently unknown to his British guests, he was already negotiating with Ferdinand de Lesseps, Brazza’s patron, for the creation of Frenchfinanced railway company.49 The second was for a trade and navigation company, which Leopold wanted to set-up as an Anglo-Franco-Belgian concern but which William Mackinnon wanted limited to an AngloBelgian enterprise. Fortunately for William, attempts by Leopold’s banker, Lambert, to find subscribers in Paris proved abortive – the Paris branch of the Rothschilds in particular refused to allow its name to be used for the purpose. Leopold therefore came round to William’s position and committed himself to the creation of a company in London through which all the commercial exploitation of the Upper Congo would be undertaken. The idea seems to have been to separate the commercial activities of the Association from the political and administrative functions for which it would retain responsibility, although Leopold was concerned not to let the British company become so large that the tail would wag the dog. Following consultations with James Hutton, William expressed himself confident of seeing the way ‘to a strong commercial combination’,50 which would bring together the leading British and Dutch firms trading on the Lower Congo into a single organisation for the penetration of the upper river. Numerous obstacles lay in the way of such an enterprise – not least the threat of Portuguese tariffs on the trade of the Congo and the relative absence of political security for any capital investment on the Upper Congo. William Mackinnon was very sensitive to the latter difficulty following his negotiations with the Foreign Office over East Africa and Gordon’s repeated refusal to work for the International African Association because it lacked international recognition and legitimacy. ‘When Gordon was last here [in London]’, Leopold’s chef du Cabinet told William in his Belgian English, ‘he went abruptly and with military frankness to the F.O. and asked for that reconnaissance. They sent him to the devil.’ 51 As long as Leopold’s presence on the Congo amounted to the activities of a private, and ostensibly philanthropic, body, it could be treated with disdain by European governments, including the British, and it would also fail to attract any significant investment from reputable commercial concerns or financial institutions. William was therefore heartened by his knowledge of Henry Sanford’s confidential mission to Washington, to try to secure recognition of the International Association by the American government. Unable to influence such a development, however, and by now caught up in the agitation over

49

Kirk to C. Hill, 18 Feb. 1883, FO 84/1803; Leopold to Strauch, 20 Jan. 1883, LeopoldStrauch Correspondence. 50 W. Mackinnon to Devaux, 14 March 1883, ALRL Fonds Congo File 1. 51 J. Devaux to W. Mackinnon, 29 Oct. 1883, MP Private Letters File 4. 363

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the Suez Canal Company, his role in the debate over the future of the Congo became confined to sporadic interventions into the lengthy and tortuous negotiations being conducted between London and Lisbon. He was used by Leopold in June 1883, for example, to raise objections to a rumoured deal between Portugal and France, which would give each the south and north banks of the Congo respectively, and again in December 1883 to counter Portuguese allegations of the Association’s monopolistic commercial intentions with promises of free trade policies in the zone of the Association’s operations.52 With no immediate prospect of establishing a trade and navigation company for the Congo, he was forced to play a waiting game until the conclusion of the Anglo-Portuguese negotiations. The revised treaty was signed on 26 February 1884, setting off yet another round of agitation and debate. During this phase of anti-Portuguese commotion, William’s role was much more low-keyed. Although he initially attended some meetings of interested parties, to discuss what line should be taken with the treaty, he was content to stand aside from James Hutton’s orchestration of yet another outpouring of public protest against the treaty – something which Hutton conducted with such vigour and on such a scale that it embarrassed even Leopold.53 This time, William did not engage in the quiet lobbying of officials and ministers in which he had excelled in the spring of 1883. His quiescence stemmed partly from the absence of specific directions from Leopold – who favoured modification of the treaty rather than the outright rejection for which Hutton was agitating, and who appears to have received private assurances from Granville that further concessions would be sought from, and agreed to, by Portugal.54 It resulted mainly, however, from other, more personal preoccupations. At the beginning of February 1884, Sir Henry Bartle Frere fell ill, and he remained in a serious condition until late March. During that period, William was a regular visitor to his bedside, and his concern for the health of his closest friend and adviser pushed aside most other matters. A brief recovery in Frere’s condition enabled William to give some attention to Congo matters – a visit to Paris and Brussels in late March was followed by his lobbying of W.E. Forster, a former member of Gladstone’s Cabinet, whom he believed to be favourably disposed to British recognition of the International Association. Thereafter Frere’s health deteriorated once again. William happened to be preparing his will at this point, and his concern for his sick and impecunious friend was such that he inserted a provision bequeathing £10,000 to Frere and his wife

52 Leopold to W. Mackinnon, 4 June 1883, FO 84/1806, W. Mackinnon to T.V. Lister, 28 Dec. 1883, FO 84/1808; Lister to W. Mackinnon, 4 Jan. 1884, FO 84/1809. 53 ‘Tell Hutton not to date his letter from Brussels’, Leopold instructed Strauch on one occasion. ‘They say in London that it is me that directs the Manchester Chamber of Commerce.’ (Leopold to Strauch, 12 May 1884, Lepold-Strauch Correspondence.) 54 Devaux to W. Mackinnon, 24 Feb. and 6 March 1884, MP Private Letters File 4.

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‘in remembrance of many kindnesses received by me at his hands’.55 It is a measure of the depth of William’s feelings for Frere that he and his wife were the only individuals outside the Mackinnon family itself to be so recognised in the will. A month after the will was signed, Frere was dead, passing away on 29 May 1884 at the age of 69 years. The newspaper obituaries gave full coverage to his life and times, but inevitably gave most space to the failures in South Africa that had ended his public career. However, William Mackinnon and his business group remembered him, and marked his passing, as one of the principal architects of British steamship enterprise in the Indian Ocean. On the day of his funeral, BI steamers at sea and in harbour between London and India, and at work all around the Indian Ocean from Zanzibar and Basra to Rangoon and Singapore, flew their flags at half-mast in honour of the man whose ‘eminent qualities, which were so conspicuously manifested by him in the public service, were ever made available to the Board [of the BISN Co] and the interests entrusted to it’.56 While William first comforted and then mourned Frere, who had been his bridge to Leopold, the debate about the future of the Congo moved on. It entered the arena of international politics, where neither William nor what he called ‘the Manchester party’ had any great capacity to influence events directly and where they were obliged largely to respond to eddies and currents from the interplay between the European powers. In April 1884, the International Association of the Congo was recognised as a political entity by both the United States and France. While these actions set the Association on the path towards transformation into the Congo State, they offered no solution to the competing interests of Britain, France, Portugal and the Association in the Lower Congo. Here the decisive intervention came from Bismarck, who on 7 June 1884 informed the British government that Germany would not accept the Anglo-Portuguese Treaty. Since co-operation with Germany was the cornerstone of British foreign policy in the aftermath of the invasion of Egypt, his action immediately killed the attempt to put Portugal in control of the mouth of the Congo as an alternative to, or surrogate for, British authority. Bismarck now proceeded to take control of events, persuading first the French and then the British governments that the way forward was an international conference to settle all outstanding issues about freedom of trade and navigation on the Congo and Niger Rivers. The Conference of Berlin opened on 15 November 1884 and closed on 26 February 1885. Through its formal proceedings and the multilateral horsetrading that went on around it, a set of agreements were put in place that gave Leopold possession of the most of the Congo basin (including large parts of both banks of the lower river so as to allow open access to the Atlantic

55

W. Mackinnon’s will, signed on 21 April 1884, at Murray, Beith and Murray, Edinburgh, Scottish Records Office SC 51/32/43. 56 3 June 1884, BISN Co Directors’ Minutes, BIS/1/4. 365

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Ocean), that transformed the Association into an internationally-recognised sovereign power, to become known as the Congo Free State, and that established the Congo basin and most of East Africa as a free trade zone, in which protectionist import tariffs were prohibited. Thanks to Bismarck’s patronage, and British acquiescence in return for a free hand on the Niger, Leopold obtained his own Central African state – leaving France and above all Portugal to nurse their grievances.57 During the months between Bismarck’s rejection of the Anglo-Portuguese Treaty and the end of the Berlin Conference, while the diplomats wheedled and postured, William acted as Leopold’s agent in London. He transmitted documents and messages between the Laeken Palace and the Foreign Office, and passed on to the King any scraps of information he could obtain from friendly officials or MPs. It was an important enough role, maintaining channels of communication that could not go through the Belgian diplomatic representatives in London, but it had little significant bearing on events. Unlike Sanford, who managed to promote Leopold’s interests at the Berlin Conference while officially representing the USA, William was operating on the margins of the international negotiations. The matters he took up in London at the request of Brussels, or of Sanford at Berlin, included British recognition of the Association, French claims to both banks of the river at Stanleypool, Leopold’s demands for compensation from the French for the stations that Stanley had established on the Kwilu River (in an attempt to counter Brazza), and the Association’s negotiations with Portugal over their respective borders.58 He also offered advice to Brussels over how to obtain the Sultan of Zanizibar’s assistance in the recruitment of labour from his territories, and badgered both the Foreign Office and the Colonial Office about permission for the Association to recruit labour in a variety of British territories. ‘I have as you know’, William boasted to Sanford, ‘easy access to all at the F.O.’,59 but in truth his welcome there was wearing thin. Once Britain recognised the International Association it was made very clear to him that the Foreign Office would prefer to deal with a properly accredited agent of the Association than with a private individual playing an intermediary role.60

57

The standard academic work on the Berlin Conference and its outcomes is S.E. Crowe, The Berlin West Africa Conference (London, 1942); a more colourful and entertaining account can be found in T. Pakenham, The Scramble for Africa (London 1991), pp. 239–55. 58 W. Mackinnon to Borchgrave, 27 June, 2 Sept., 28 Nov., 2 and 20 Dec. 1884, 5 Jan. and 5 Feb. 1885, ACRL Fonds Congo File 82; Leopold to Strauch, 19 and 30 June 1884, Loropld-Strauch Correspondence; Sanford to Borchgrave, 29 Nov, 3 and 21 Dec. 1884, ACRL Fonds Congo File 98; W. Mackinnon to C. Hill (copy), 5 Jan. 1885, Sanford Papers; Sanford to W. Mackinnon, 25 Nov. 1884, FO 84/1692. 59 W. Mackinnon to Stanford, 12 Dec. 1884, Sanford Papers. 60 W. Mackinnon to Stanford, 28 March 1885, and Stanford to Leopold, 30 March 1885, ACRL Fonds Congo File 98. 366

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In presenting the public face of the Association in Britain, William was assisted from August 1884 onwards by H.M. Stanley, who had returned to Europe from the Congo. William had none of Kirk’s antagonism to Stanley,61 and offered him hospitality and friendship. By this time, William had been instrumental in securing the services of the man who would be Stanley’s successor as the Association’s administrator on the Congo – Col. Sir Francis de Winton. Leopold was delighted at the contrast between this patrician figure and the rough-hewn adventurer who had caused him so many difficulties with the French because of his squabbles with Brazza. ‘Sir Francis,’ he informed Stanley with relish,’ is a friend of Lord Wolseley, was secretary to Lord Lorne (son-in-law of Queen Victoria) and is well known to the Prince of Wales.’ 62 De Winton’s appointment was further evidence of the support for Leopold’s Congo venture from the British aristocratic circles with which William Mackinnon was now associated. Lord Lorne, the eldest son of the Duke of Argyll, was also the nephew of the Duke of Sutherland. He was married to Princes Louise, one of the Queen’s daughters, and had been Governor-General of Canada between 1878 and 1883.63 Back in London, and cooling his heels while trying to secure another appointment – either as Viceroy of India or Governor of New South Wales – he gravitated towards William Mackinnon’s dinner table at the Burlington Hotel and secured William’s help in steering De Winton, who had been his secretary in Canada, towards Leopold’s patronage. While William Mackinnon was thus engaged as the quasi-ambassador of the putative Congo State, the business opportunities which he had been promised, and for which he worked, were no closer to realisation. Indeed, if anything their prospects were muddied both by Leopold’s search for international recognition, which meant that he was once again thinking of attracting capital into the Congo from a range of European countries and not just Britain, and by Hutton’s close involvement in the business politics of the Niger region through George Goldie’s National Africa Company. ‘There is an idea’, William noted, that ‘Hutton’s big Co’ should ‘absorb all the other interests [on the Niger] & extend to the Congo & include our Brussels project.’64 The end of the Berlin Conference, and Leopold’s emergence as 61

Kirk never lost an opportunity to carry on his long-standing feud with Stanley. In March 1883, for example, he wrote to Brussels that one of the greatest difficulties he found in mobilising British support for the International Association was ‘that the Congo work has become associated personally with Mr Stanley. Now Mr Forster and all others with whom I come in contact would as soon give jursidiction over British subjects to the Portuguese as Stanley. Bold explorer as he is, nobody here trusts him and unfortunately I know too much of him to be able to say a word in his favour.’ (Kirk to Devaux, 21 March 1883, Nat. Lib. Acc. 9942/59.) 62 Congo Journal, 1 Aug. 1884, Stanley Papers RP 2435 i Box 4. 63 For Lorne and his wife, see J. Wake, Princess Louise: Queen Victoria’s Unconventional Daughter (London, 1988). 64 W. Mackinnon to Sanford, 15 Dec. 1884, Sanford Papers. 367

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head of a new African state, brought little further clarity to the situation. Between Leopold, his advisers and his supporters there was a plethora of often vague and conflicting ideas about how the economic development of the Congo basin was to proceed. Sanford, for one, believed that now that the diplomatic phase was over, those who had worked to create the Congo State should reap their reward. ‘I think the time & the opportunity I have been awaiting have now come, when something practical, useful and profitable can be accomplished’, he told William, and urged him to ‘think over a Congo scheme, on the basis of your East India Co’.65 William, however, was too well aware of Sanford’s lack of business sense and financial skills to be drawn. Although he would let the Florida Land and Colonization Co limp on as a vehicle for providing some financial support for Sanford, he had no desire to allow him access to any project for commercial development in the Congo. As late as May 1885, William told Leopold that he was still working on the scheme for ‘the combination in one company of all the important Dutch and English trading houses’ on the lower river.66 Leopold, however, had no interest in allowing such a potentially powerful body to gain a foothold in the Congo State. In the absence of any signals of support from Brussels, together with the cool response from the concerns he was trying to persuade into collaboration and his lack of leverage over them, William’s project was going nowhere. Meanwhile, Leopold, assured by returning Belgian officers that the upper Congo would turn out ‘to be a new Java, with magnificent timber and the country capable of growing spices, tobacco, cotton and rice’, encouraged William to devise a project for securing the emigration of Indian peasant families into the Congo. This proposal William reformulated as a scheme for an Anglo-Belgian or Anglo-Indian plantation company which would recruit Indian labourers on short-term contracts.67 Leopold, having acquired a personal state in Africa more quickly than even he could have imagined possible, clearly had neither a blueprint for its economic transformation nor nearly enough funds to begin its development. Amid the welter of projects, proposals and counter-proposals, all sides agreed that the construction of a railway from a deep-water port on the lower Congo to Stanleypool on the upper Congo, bypassing the cataracts that lay between, was the key to inward investment and economic development in the Congo basin. This therefore had priority over all other schemes. Stanley in particular made the provision of a railway into a personal crusade, and ever since his return from the Congo had been bombarding Leopold’s men in Brussels with demands for speedy action. ‘Without a railway’, he exclaimed, ‘the revenue of the [Congo] State at 5% on exports will never exceed £20,000

65

Sanford to W. Mackinnon, 10 and 15 Feb. 1885, MP Private Letters File 205. W. Mackinnon to Leopold, 27 May 1885, ACRL Fonds Congo File 82. 67 Leopold to W. Mackinnon, 19 May 1885, and W. Mackinnon to Leopold, 27 May 1885, ACRL Fonds Congo File 82. 66

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per annum. With a railway the revenue will increase the 1st year after opening to £100,000 & to half a million a few years later. This is the secret. Without a railway the State cannot thrive. With a railway the State officials can live luxuriously & in safety without the King’s personal subsidy. This is the policy.’ 68 But how could a railway be financed? Whatever it might cost, Leopold’s pockets were not deep enough, and conventional sources of railway finance were extremely wary of any involvement with such an underdeveloped territory. For this reason, the French group around De Lesseps and Brazza, whom Leopold first approached about a railway (apparently one that would serve French interests on the north bank of Stanleypool as well as Leopold’s on the south bank), came up with the idea of a national lottery to fund it.69 Such an imaginative approach to railway financing, however, failed to get off the ground. Belgian and German bankers, whom Leopold approached once German recognition had been promised, declared themselves willing in principle to finance a railway, but asked first for a report on the economic prospects of the Congo and then for a survey of the possible route for a railway.70 While the negotiations with the bankers dragged on into 1885, the ever impatient Stanley found himself being fobbed off with lofty assertions that matters were in hand. William Mackinnon and James Hutton, who had expectations of participation in the financing of a railway, were left equally uncertain about the King’s intentions and his progress. ‘The friends of the Association are gradually cooling here [Britain]’, Stanley told Sanford, ‘because of this indirectness which is almost perverse but certainly intentional I think. If the king is striving to effect a railway alone on the Continent, and does not wish any assistance from here, why not say so and put an end to the suspense of friends like Hutton and Mackinnon. They asked me about it, and I assumed that I was as much in the dark as anyone.’71 In fact, he had good reason to believe that James Hutton and William Mackinnon had grown weary of waiting for Leopold to clarify his plans, and their place in them, because they had already taken up an alternative scheme of railway investment, on the other side of the African continent. This new proposal – to construct a railway from the East African coast to Mount Kilimanjaro – had all the appearance of an attempt to forestall a German land grab, in what was one of the most fertile and environmentally interesting corners of East Africa. In 1885, while all eyes were still on Egypt and the Congo, the Scramble reached Zanzibar and the Swahili coast. *****

68

Stanley to Borchgrave, 9 June 1885, Congo Journal, Stanley Papers RP 2435 i Box 4. Devaux to W. Mackinnon, 28 Jan. 1885, MP Private Letters File 5. 70 De Lalaing to Stanley, 31 Aug. 1884, Congo Journal, Stanley Papers RP 2435 i Box 4, and Borchgrave to Stanley, 28 June 1885, Stanley Papers RP 2435 ii Batch 2. 71 Stanley to Sanford, 15 July 1885, Sanford Papers. 69

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During the early 1880s only distant echoes of the old Franco-British maritime rivalry disturbed the largely peaceful relations between the European powers along the Indian Ocean shores of Africa. However, on 3 March 1885, hard on the heels of the conclusion of the Berlin Conference, the Scramble came to East Africa. On that date the Kaiser declared a German protectorate over Usagara and neighbouring districts, lying to the west of Dar es Salaam and Bagamoyo and outside the recognised boundaries of the Sultan of Zanzibar’s sovereignty. In June 1885 a similar protectorate was established over the coastal territory of Witu, on the northern flanks of the Sultan’s sphere of influence but in a district where the extent of the Sultan’s authority had long been challenged by the local Arab ruling clan. In both of these areas, German adventurers had obtained concessions from indigenous authorities which Bismarck was determined to employ as components of a grandiose bid for colonial possessions throughout Tropical Africa – in Togo, the Cameroons, and South-West Africa as well as in East Africa – and in the Pacific. Whatever may have converted Bismarck’s former hostility to the acquisition of a German overseas empire into such an enthusiastic grab for territory,72 his actions challenged the British policy of exercising influence in East Africa through the Sultan of Zanzibar. They also forced a re-assessment of British interests in the region – whether and how these might be protected in the face of German colonial initiatives and the need to remain on good terms with Germany diplomatically so as to off-set French opposition to the British occupation of Egypt.73 Among those with most to lose from the German land grab were Seyyid Bargash of Zanzibar and Sir John Kirk, who for a decade and a half had been linked together in an alliance aimed at sustaining the sovereignty of the Zanzibari state while advancing British commercial and humanitarian interests through it. William Mackinnon, who had been party to, and one of the main props of, that system of informal authority was also exposed by the sudden German intervention in East African politics. 72

The extensive literature on this topic includes A.J.P. Taylor, Germany’s First Bid for Colonies (London, 1938); H.A. Turner, ‘Bismarck’s Imperialist Venture: Anti-British in Origin?’, in P. Gifford and W.M. Louis (eds), Britain and Germany in Africa: Imperial Rivalry and Colonial Rule (New Haven and London, 1967), pp. 47–82, H. Pogge von Strandmann, ‘Domestic Origins of Germany’s Colonial Expansion under Bismarck’, Past and Present, 42 (1969), pp. 140–59, H-U. Wehler, ‘Bismarck’s Imperialism, 1862–90’, Past and Present, 48 (1970), pp. 119–55, and F. Stern, Gold and Iron: Bismarck, Bleichröder and the Building of the German Empire (London, 1977), pp. 394–435. 73 The standard sources on the partition of East Africa include R. Coupland, The Exploitation of East Africa (London, 1939), J. Flint, ‘The Wider Background to Partition and Colonial Occupation’, in R. Oliver and G. Mathew (eds), History of East Africa, Vol. 1 (1963), pp. 352–90, and J. S. Galbraith, Mackinnon and East Africa, 1878–1895 (Cambridge, 1972), ch. 3, pp. 71–109. This section covers much of the same ground traversed by these scholars, especially Galbraith, but differs from their accounts largely in placing William Mackinnon’s actions within the context of Kirk’s scheme for ‘closer administration’ of the coast and of Mackinnon’s commmercial and shipping interests as well as his railway-financing ones. 370

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Kirk and Mackinnon were both taken by surprise by the German actions. During 1884, Kirk had been engaged in putting in place his scheme for closer consular control over the East African mainland. He installed vice-consuls in Lamu and Mombasa, the two northerly ports designated within the arrangement with the British India S.N. Co, found accommodation for another vice-consulate at Kilwa, and used the new steamer schedules to make tours of inspection on various parts of the parts of the mainland.74 ‘The coast’, he reported to William, ‘is quite neglected and not a dollar expended on the smallest improvement. How easy it would be to govern this country and make it rich. . . . This ought to be a British protectorate.’ 75 With BI steamers now at Kirk’s command, the British consular presence in East Africa was adopting a more mercantile hue, and the vice-consuls also acted as commercial agents for the steamers. The plan which Kirk and William Mackinnon agreed between them in the summer of 1882 had envisaged representatives of the Gray Dawes/Smith Mackenzie firms being placed alongside the vice-consuls, to do the work of finding cargoes and passengers for the steamers, and generally to stimulate sea-borne trade from the designated ports and their hinterlands. Kirk indeed had urged William to move quickly to buy up land for the establishment of branch houses in the ports, before news of the arrival of a regular steam service pushed up local property prices.76 William, however, had been in no great hurry to put his part of the plan into operation. Between 1883 and 1885 much of his energy was devoted to the agitation over the Suez Canal Company and to the affairs of the Congo. In the meanwhile Gray Dawes & Co, the parent firm of Smith Mackenzie & Co, underwent a reconstruction of its partnerships, brought about partly by the death of William’s nephew, Archie Gray, in April 1883. By 1884, the senior partners each had a defined area of responsibility for the firm’s affairs within various parts of the world – Edwyn Dawes for Australia, George Mackenzie for the Persian Gulf, and Duncan Mackinnon for the London-Calcutta line and its related activities. Zanzibar, however, was left somewhat out on a limb, with no one specifically in charge of pushing Smith Mackenzie’s operations there. Above all, perhaps, the time was not ripe for a substantial investment of funds into new branches in Lamu, Mombasa, Kilwa and Lindi. During 1883–4, maritime trade in East Africa was depressed, leading to the collapse in January 1884 of Roux Frassinet & Co, the largest French firm in Zanzibar, and a general tightening of credit among the island’s Western business community. This was followed by drought and famine in the more northerly parts of the East African interior, resulting in thousands of deaths and a disruption of the caravan trades.77 For all these reasons, Smith Mackenzie & 74 Kirk to FO, 8 Jan and 16 March 1884, FO 84/1677, and Kirk to FO, 23 Sept. 1884, FO 84/1678. 75 Kirk to W. Mackinnon, 13 March 1884, MP Private Letters File 92. 76 Kirk to W. Mackinnon, 17 Dec. 1882, MP Private Letters File 91. 77 Kirk to W. Mackinnon, 19 Jan. and 16 Dec. 1884, MP Private Letters File 92.

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Co remained rooted to Zanzibar Island and had established no branches on the Swahili coast when, early in 1885, Bismarck decided to recognise the treaties that Carl Peters of the German Society for Colonization had obtained in Usagara. Had the men of the Mackinnon group been in place as Kirk had wanted, and had the British government found itself defending an established British mercantile presence on the Swahili coast, the subsequent colonial partition of East Africa might well have taken a different course. In 1885 the Mackinnon group’s stake in East Africa was tiny. It amounted to little more than the monthly perambulation of a single BI steamer up and down the coast, together with a modest commercial establishment on Zanzibar island which had a capital of only some £20,000 and which combined the BI agency with a trade mainly in exports of cloves to Europe.78 This hardly constituted a major business commitment in what was still a relatively remote and little regarded corner of the world economy. It would have been no major loss to the family interests within the group to abandon East Africa and redirect their capital to other corners of the world. Such a retreat, however, would have been to set aside William Mackinnon’s longheld ambitions to promote the growth of the group’s interests within in the region and to use its foothold there as a stepping stone to southern Africa. There was therefore never any real prospect of withdrawing from East Africa in the face of German colonialism. Nevertheless, it was something of a surprise that William, clearly reluctant to commit funds to business expansion at a time of trade depression in the region, responded to the new German protectorate by associating himself with an expensive, not to say madcap, scheme to build a railway from the East African coast to the slopes of Mount Kilimanjaro, some 150 miles inland. The project was not of his making. It came about as a result of discussions between Frederic Holmwood, Kirk’s deputy as British consul in Zanzibar, and James Hutton and the Africa Committee of the Manchester Chamber of Commerce. The decision of Hutton and his associates to intervene in East Africa is something of a puzzle. There were no Manchester-based trading concerns in the region, sales of Manchester cottons were relatively unimportant as compared with Indian products, and Manchester itself was no centre of international railway investment. Holmwood’s railway – which he promised would provide access to land suitable for European settlement around Kilimanjaro and also further north in the Kenya highlands79 – was a chimera. It would involve investing

78

Of the original partners in Smith Mackenzie & Co, Archibald Brown had died in 1881 and Archibald Smith in 1882. This left E.N. Mackenzie as the sole resident partner, with J.W. Buchanan (who came down to Zanzibar from the Persian Gulf) as his assistant. When Mackenzie died in 1887, Buchanan succeeded to the resident partnership. 79 ‘Zanzibar and East African Trade’, Letter addressed by Consul Holmwood to Mr J. Hutton, President of the Chamber of Commerce of Manchester, 10 April 1885, enclosure in Hutton to Granville, 20 April 1885, FO 84/1737. 372

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at least £700,000 (and probably a great deal more) in linking a port and a mountain over a route on which there was no existing British commercial activity, far less any unified political structure to give it security. Many doubted its viability. ‘I can say with perfect confidence’, wrote Percy Anderson of the Foreign Office, ‘that Manchester will not advance a six pence unless the money is safe.’ 80 Stanley teased Hutton about his ‘railway to the Snow Fiend Mountain,’ and threatened to write to The Times to expose ‘how ‘practical’ the men of Manchester had become.81 Stanley’s concern was that the support of Hutton and ‘the Manchester party’ for the Kilimanjaro railway meant that they were losing interest in the Congo railway. This suggests the possibility that the sudden switch of direction to East Africa was intended, at least in part, to put pressure on Leopold II to declare his hand on the Congo railway.82 Given the absence of any specifically Manchester or Liverpool interests on the Swahili coast, the Kilimanjaro scheme was probably as much a by-product of the push to open up the Congo to British capital as a knee-jerk reaction to the German advance in East Africa. The overt goal of the Kilimanjaro railway project was to persuade the British government to declare a British protectorate over the area around the mountain, to match the German protectorate over Usagara. The idea of such a protectorate had been raised a year earlier by Harry Johnston, a young English naturalist with a large streak of romance and fantasy in his make up, who had visited the mountain on an expedition to study the flora and fauna and claimed that one of the local Chagga chiefs had expressed a wish to come under British rule.83 A Foreign Office interest in pursuing the matter, as a counterweight to German annexations in the Cameroons, was finally scotched by Gladstone, who expressed his opposition in a famous phrase that summed up the low priority to be given to the region. He was, he wrote, ‘puzzled and perplexed’ at the Foreign Office’s willingness to ‘concoct a scheme such as that touching the mountain country behind Zanzibar with an unrememberable name’.84 At the time, in 1884, neither William Mackinnon, to whom Johnston brought his scheme in London, nor John Kirk, to whom

80

Memorandum on Kilimanjaro by H.P.A., 27 April 1885, FO 84/1737. Stanley to W. Mackinnon, 6 June 1885, MP Private Letters File 217. 82 In a paper read at the Society of Arts on 6 March 1885, Holmwood made it clear that discussions with Hutton and others for a railway to Kilimanjaro pre-dated the news of the German protectorate over Usagara (F. Holmwood, ‘The Trade between India and the East Coast of Africa’, Journal of the Society of Arts, 33 (1884–5), pp. 417–25. This suggests that the origins of Hutton’s Kilimanjaro project lay in considerations other than a desire to check the Germans in East Africa. 83 H.H. Johnston, The Kilimanjaro Expedition (London, 1886); Sir Harry H. Johnston, The Story of My Life (Indianapolis, 1923), pp. 116–36; R. Oliver, Sir Harry Johnston and the Scramble for Africa (London, 1959), pp. 52–88. 84 Gladstone to Granville, 12 Dec. 1884, quoted in Galbraith, Mackinnon and East Africa, p. 88. 81

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the Foreign Office turned for advice, were prepared to support the proposal for a Kilimanjaro protectorate. It did not fit their blueprint of how to advance British influence and activity on the East African mainland – that is, working from bases in the coastal ports to tap the trade of the inland districts, under the authority and flag of the Sultan of Zanzibar.85 By April 1885, with the Germans in possession of Usagara, that reticence had disappeared, and William Mackinnon took the opportunity to add a coastal and maritime dimension to the Kilimanjaro project. He revived the idea of a lease of the Swahili coast from the Sultan, as the only means by which the funds for a railway to Kilimanjaro could be financed – presumably by hypothecating the customs revenues for the payment of interest on a loan– as well as a way of securing one or more ports from which the trade of the region could be carried by his steamers.86 In this way, a British protectorate in the interior could be made to cohere with the consular and mercantile ambitions of Kirk and Mackinnon within the Sultan’s coastal strip. Two uncertainties surrounded the revised proposal. The first was how much of the Swahili coast should be sought in a concession from the Sultan. William Mackinnon, who still possessed ground in Dar es Salaam on which to establish a trading establishment, wanted the lease to run from at least that port northwards, but his Manchester associates, recognising that the Germans would have an interest in Dar es Salaam as a point of entry for their Usagara protectorate, proposed that the southern limit of the concession should be at Sadaani.87 This would leave at least three ports – Pangani, Tanga and Mombasa – from which railway communications with Kilimanjaro might be commenced. Embedded within this decision to seek only a reduced version of the 1878 concession was an acceptance that the Swahili coast and the inland districts to its west were likely to be divided into German and British ‘spheres of influence’. Such a possibility had already been floated in discussions between the two governments, and in June 1885, just as he was about to recognise a protectorate over Witu, Bismarck accepted the idea of a joint commission, with France as a third party, to delimit the international boundaries of the Sultan’s territories and to define the British and German spheres within them. He also, in August 1885, sent a German naval squadron to Zanzibar, to compel the Sultan to recognise the German protectorates in Usagara and Witu, and to give access to Usagara through Dar es Salaam. The

85 Kirk raised a string of objections to Johnston’s protectorate in 1884, but later claimed that his main objection lay in the absence of any arrangement for a maritime connection – ‘I said I would have nothing to do with it unless the port of Mombasa were included as quite within the plan for I knew an inland scheme would fail.’ (Kirk to W. Mackinnon, 7 June 1886, MP Private Letters File 93.) 86 Lord Aberdare, W. Mackinnon, J. Hutton et al. to Granville, 22 April 1885, and enclosure, draft of proposed concession from the Sultan of Zanzibar, FO 84/1737. 87 Lord Aberdare to Granville, 24 April 1885, FO 84/1737.

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British East Africa Association, as the group around Hutton now styled itself, possessed neither on Kilimanjaro nor anywhere else on the East African mainland treaties with local African authorities comparable to those which the Germans had in Usagara and Witu. This would give the Germans the upper hand in any negotiations. In a hasty and belated attempt to rectify the situation, Hutton established a small company in November 1885 to purchase from Harry Johnston a concession which the latter had previously obtained from chiefs in the Taveta area, between Mombasa and Kilimanjaro. The transfer of this somewhat spurious document, which gave Johnston rights only over three square miles of empty land near Taveta, was hurried through so that a copy of it could be given to Kitchener, the British representative on the Joint Commission, to take out to Zanzibar.88 It was the sole basis for any British claims to territory on the East African mainland. A second uncertainty was whether the Sultan of Zanzibar was any more likely to grant now what he had already refused in 1878–9. Relations between William Mackinnon and Smith Mackenzie & Co on the one hand and Bargash on the other were at a very low ebb by 1885, and there was little prospect of negotiations being opened on a private basis, even with Kirk’s assistance. Kirk indeed reported from Zanzibar that any approach for a concession ‘would only have a chance of success if conducted by H M Govt., or . . . with their direct support’ 89 – and that was a level of support for the project that no one in the Foreign Office was willing give. In the face of Bargash’s continued unwillingness to make any lease, and the decision to set up a Joint Commission to divide his mainland territories between Britain and Germany, much of the steam went out of the Kilimanjaro project. Indeed, after the first flurry of excitement caused by the announcement of the German protectorate, doubts emerged about the nature and extent of the threat to British interests in East Africa. Germany was far less protectionist in its economic policies than France or Portugal, and the Berlin Conference had imposed a low tariff regime on much of East Africa. None of the places likely to come under German rule or informal sway had yet been penetrated directly by British capital. There was even a body of opinion, to which Kirk was party, that the German colonial adventure in East Africa was likely to fail through lack of experience and/or sound financial backing. Of all those involved with the Kilimanjaro project, only William Mackinnon had anything to fear from the German presence, and that was more in terms of future constraints than present difficulties. A division of the Sultan’s mainland territories between Britain and Germany was likely to leave Kilwa and Lindi within the German zone. This threatened the plan to open Smith Mackenzie 88

Hutton to W. Mackinnon, 2 Nov. 1885, and Hutton to Johnston, 2 Nov. 1885, FO 84/1744; Oliver, Sir Harry Johnston, pp. 73–4 and 887–8. 89 Minute on Lord Aberdare, W. Mackinnon, J. Hutton et al. to Granville, 22 April 1885, FO 84/1737. 375

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branches, as well as the continued calling of BI steamers, at these ports. Above all, perhaps, was the worry that a German foothold on the East African coast would divert mainland trade away from Zanzibar into a direct trade with Germany, and lead to German competition on the shipping routes between East Africa and Europe. Until 1885–6, BI had largely had its own way in East African steamshipping. The Sultan’s irregular and loss-making services, while indicating a possible market for direct services across the Indian Ocean between Zanzibar and India, were a nuisance rather than a serious challenge to BI’s more indirect line via Aden. The rumoured French line from Marseilles to Madagascar via Zanzibar had emerged in reality as a local Indian Ocean service – connecting Mauritius, Madagascar, Mozambique and Zanzibar – that fed into BI’s Zanzibar-Aden line rather competing with it.90 However, Germany’s transition in 1884 into a power with colonial ambitions was accompanied by its transformation into a power with maritime aspirations, both policies designed to appeal in the main to the businessmen of Hamburg who had been incorporated within the more inward-oriented German Zollverein. A bill was introduced in the Reichstag in 1884 to finance the development of German mail lines to India, Australia and the Far East, to which was subsequently added a clause to provide a subsidy for a line from Hamburg via Rotterdam or Amsterdam to Zanzibar and other ports in East Africa.91 The implications of the development were not lost on the men of the Mackinnon group. ‘You would observe in yesterday’s newspaper’, Jamie Hall wrote to William in October 1884, ‘the extended mail service schemes through subsidies which the German government are said to be undertaking. Germany is opening up a new career for herself and I dare say we may have her to reckon with in some of her services in time.’ 92 By 1886, that prophecy seemed to have particular relevance for BI’s East African services. Kirk, returning to Britain with first-hand experience of the German activities in Zanzibar and on the mainland, warned William that ‘a leading idea with all the Germans I have met is to compete with us in the steam carrying trade on the East Coast & if possible run us off by means of subsidized German vessels. Feeling the hold we have on East Africa they know they must drive us out before they can do much. In this Bismarck will back them.’ 93 It was a signal William could not afford to ignore, but about which he was in a position to do little until the decisions of the delimitation commission were known. *****

90 91 92 93

Kirk to Foreign Office, 24 Jan. 1884, FO 84/1677. R. Meeker, History of Shipping Subsidies (New York, 1905), pp. 84–5. J.M. Hall to W. Mackinnon, 28 Oct. 1884, MP Private Letters File 42. Kirk to W. Mackinnon, 15 Sept. 1886, MP Private Letters File 93. 376

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The Kilimanjaro railway scheme in abeyance, Hutton and William Mackinnon turned their attention to the Congo once again. In September 1885, Stanley, believing that his continuing employment by Leopold hinged upon the establishment of a Congo railway, went to Brussels to beard the king. Shortly thereafter, and no doubt as a result of Leopold being told that the goodwill of his British supporters was evaporating, Hutton received an invitation from the Congo Free State to create a company for the construction of a narrow gauge railway from Vivi (on the lower Congo) to Stanleypool.94 During the next few months, Hutton, Stanley, and William Mackinnon devoted considerable time and effort to this project. By midDecember they had drawn up preliminary plans, had formed a private syndicate to raise funds, and had visited Brussels for several days of detailed discussions. Out of this came a provisional agreement to establish a ‘Royal Congo State Railway and Navigation Co’ which would be guaranteed 6 per cent on its capital from the Congo State’s customs revenues. By the end of February 1886, all of the necessary paperwork for the formation of the company had been prepared and despatched to Brussels. This, however, was Hutton’s and Stanley’s project. William Mackinnon gave it his support – he attended the appropriate meetings and offered his advice, drawn from participation in railway schemes in various parts of the world – but he was not in the driving seat. The men of the railway syndicate came from Hutton’s associates and contacts in Manchester and London, and did not include other members of the Mackinnon group or of the Duke of Sutherland’s investment circle with whom William had been accustomed to explore railway-financing proposals. Unlike the Kilimanjaro railway project, he had nothing specifically of his own to add to the scheme, and on one occasion Stanley even accused him of being half-hearted in its support.95 This was probably a misrepresentation, reflecting Stanley’s own insecurity and his need for William’s support in an enterprise dominated by Hutton and his friends, but it is also an indication of the relatively marginal position that William, and the interests of his firms, occupied within the scheme. Leopold, however, was no more prepared to accept a predominantly British railway company in the Congo than he had been to accept the predominantly British trade and navigation company that William had earlier tried to bring into existence. His negotiations with Hutton, Stanley and Mackinnon were designed to buy time, until other, or additional, sources of capital could be found on the Continent. In February 1886 the Congo State signed a contract with German and Belgian bankers for a loan of 100 million francs – but nothing seems to have come from that agreement because by April 1886 Jules Devaux was reporting a continuing story of

94 For a detailed account of the Congo railway project that followed from this invitation, see Anstey, Britain and the Congo, pp. 190–202. 95 Stanley to W. Mackinnon, 14 Jan. 1886, MP Private Letters File 217.

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financial flop and muddle in the affairs of the Congo State: ‘The famous German loan is a failure. The French lottery is a failure; the railway seems to be very nearly the same. There are heavy difficulties with France about the delimitation of frontiers, our purse here is bleeding constantly and getting very tight; in fact everything goes wrong and yet His Majesty is full of go.’ 96 In the intervening period, between February and April, discussions over the railway company became bogged down in arguments between respective legal representatives over the terms and conditions of the proposed charter from the Congo State and of the national judicial system to which the company should be subject. These issues may have been genuine matters of import still to be settled between the two sides, or further stalling tactics by Leopold in his attempt to give a more international, and specifically more Belgian, hue to the enterprise. Something of the political pressure he was under is hinted at by the admission that ‘the Government is represented as having delivered over the [Congo] State to the English Railway Syndicate & very shortly taken to task on this account; again it is reproached for undervaluing the services of Belgians, to whom inferior posts only are entrusted.’ 97 It was therefore not surprising that the issue that finally brought the negotiations to an impasse was the unwillingness of the syndicate’s members to agree to a request from Leopold that the iron rails for the railway should be purchased from Belgium.98 By June 1886, it was clear that the project had stalled.99 The men looking after the State’s interests, William noted, ‘are not men of large views or of much practical experience. . . . This caused a great deal of discussion conducted by them in the watchful spirit that may doubtless be necessary in Europe when dealing with concessionaires whose object is to get a concession which they can sell to other parties at a great profit to themselves.’ He felt keenly such an apparent distrust of the motives of himself and his collaborators, and made clear that his support for the venture was more of a personal than of a financial nature. ‘Nothing but my devotion to the King would have tempted me to undertake the work I have done in this affair and it will be an immense disappointment if we fail.’ 100 But fail they did. The coup de grâce was delivered in September 1886 when Leopold finally informed the syndicate that ‘international obligations’ prevented him from reaching agreement with it. Within days, Captain Albert Thyss, a military engineer who had undertaken survey work in the Congo before becoming Leopold’s adviser on the technical aspects of the railway, came forward with a Belgian syndicate that was willing to take on the task of

96 97 98 99 100

Devaux to W. Mackinnon, 9 April 1886, MP Private Letters File 5. Count de Borchgrave to Stanley, 19 Jan. 1886, Stanley Papers RP 2435 ii Batch 2. Stanley to W. Mackinnon, 21 May and 18 Sept. 1886, MP Private Letters File 218. Stanley to Sanford, 20 June 1886, and W. Mackinnon to Sanford, Sanford Papers. W. Mackinnon to Sanford, 5 June 1886, Sanford Papers. 378

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financing it.101 Disappointment and disillusionment set in among the trio – Hutton, Stanley and Mackinnon – who had worked so hard to support Leopold’s Congo venture. None felt more badly than Stanley, who told William that ‘every day the King is closing the Congo against the English & seems resolved to make it more and more Belgian’.102 This sense of abandonment by Leopold in the face of Belgian national interests deflated the long-held hopes of William Mackinnon and the Frere circle, as well as of Hutton and ‘the Manchester party’, that the political and administrative structures being erected in the Congo basin could provide an umbrella under which British capital could penetrate the region. It was a significant moment in their relations with the monarch. Although none broke completely with Leopold – Hutton came closest to doing so – from 1886 onwards their priorities lay elsewhere than in the Congo basin. ***** Between 1882 and 1886 William Mackinnon rode the political backwash from the British invasion of Egypt in pursuit of a range of schemes for transport innovation in Africa – a steamship line from Egypt to South Africa, a second ship canal through Egypt (or failing which through Palestine), a railway in East Africa, and a railway and river steamers on the Congo. Of these projects, only the first was of his own devising. It was the equivalent for southern Africa of the inter-continental steamship lines he had driven through Suez to India, Indonesia and Australia. The rest were the aspirations and dreams of others, to which he attached himself and tried to turn to his own advantage. But exactly where did that advantage lie? The schemes he pursued down the eastern flanks of Africa, from Egypt to Natal, were all connected to his role as leader of an Indian Ocean-based shipping and trading enterprise network, as were the modest gains from his efforts – a seat on the board of the Suez Canal Company, the renewal (in a modified form) of BI’s Zanzibar mail contract, and a slender bargaining position within the colonial partition of the East African mainland. But little of that explains the very large amounts of time and effort expended in support of Leopold’s Central African project. There were, it is true, exciting, if difficult and highly risky, investment prospects for those who controlled the Congo River, possibilities that could not help but appeal to an arch business opportunist like William Mackinnon. Nevertheless, the Congo, opening westwards into the Atlantic Ocean, was geographically too remote from the Indian Ocean for there to have been any immediate business synergy with the group’s core

101

Count de Borchgrave to Stanley, 12 Sept. 1886, Stanley Papers RP 2435 ii Batch 2; Stanley to W. Mackinnon, 18 Sept 1886, MP Private Letters File 218; and Thyss to Leopold, 25 Sept. 1886, ACRL Fonds Congo File 107. 102 Stanley to W. Mackinnon, 12 Sept. 1886, MP Private Letters File File 218. 379

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activities in the Indian Ocean maritime region. A further consideration was the opportunity that arose for William Mackinnon to build connections, through James Hutton, to the Manchester and Liverpool interests in West and West-Central Africa. In approaching Africa from the east, from India, William, BI and the Gray Dawes firms were operating outside the mainstream of British shipping and mercantile relations with tropical Africa. These had historically been via the Atlantic Ocean, leaving a legacy of British colonial possessions on the coast of West Africa and lively trading communities in the Niger Delta and at the mouth of the Congo. Along the eastern shores, William had as allies only James Kirk and a somewhat tenuous British commitment to slave trade suppression. It would have been attractive to him to forge links to Hutton so as to secure support from the ‘west coasters’ for what he was trying to achieve on the east coast. William, having allowed his Glasgow business roots to wither, could not speak for, or mobilise the political resources of, a major British industrial and commercial region in the way that Hutton had shown he was capable of doing. Nevertheless, all the evidence suggests that the association with Hutton was a by-product, rather than the main objective, of William’s efforts to promote the interests of Leopold and the Congo State. Ultimately, his Congo entanglements were as much about personal social values as entrepreneurial opportunism or business networking. He was aware that British aristocratic circles whose approbation he wanted – those around the Duke of Sutherland and the Prince of Wales – were broadly supportive of Leopold and his affairs, and that it would do his standing in their eyes no harm were he to put his shoulder to the wheel. More significantly, he had developed a strong personal admiration for Leopold and accepted his message that an international philanthropic body was a better vehicle for the advance of Christianity and Commerce in tropical Africa than any scheme based on national interest. His description of Leopold’s plans for the Congo as ‘the noblest and most self-sacrificing scheme for Africa’s development that has ever been or ever will be attempted’,103 was more than hyperbole for political effect – it seems genuinely to have represented his views of the nature of the project. That faith was dented by the failure to secure any business benefits for himself, and his group, or for British commerce and finance more generally, and especially by the evidence that from 1886 Leopold’s project was beginning to turn in a more narrowly nationalistic direction than it had hitherto been portrayed. But it was never abandoned. Involvement in the Congo project was probably never intended simply to open up new territory for the diversification activities of the Mackinnon group, and in pursuing it with such vigour William Mackinnon ran the risk of diverting his time and attention away from the more immediate needs and interests of his family firms and their associated companies. Certainly, there is 103

W. Mackinnon to Clement Hill, 5 Jan. 1885 (copy), Sanford Papers. 380

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plenty of evidence to suggest that his participation in the arena of imperial politics between 1882 and 1886 was at the expense of some slackening in his business leadership role. His decision in 1884 to retire from his Glasgow house, W. Mackinnon & Co, may be interpreted as the last act of someone who had fully translated from the business life of Glasgow to that of London, and who could safely leave the care of the firm’s investments to the other partners.104 However, in conducting the affairs of his remaining concerns, he was increasingly relying on others – Alex Monteath within BI, Alex Fraser within NISM, James Mackay at Mackinnon Mackenzie & Co, Duncan MacNeill in the Rivers Co, and Edwyn Dawes within British India Associated Steamers Ltd – to do much of the work he would once have done himself. Significant erosion also occurred in the outer perimeter of his business network. The fortunes of the General Credit and Discount Co were flagging and it was the subject of a campaign by Henry Labouchere, the journalist MP, to force it into liquidation. The pressure obliged it to merge with its old rival, the United Discount Co, in 1885, to create the new Union Discount Co.105 Duncan MacNeill, who held William’s former directorship in General Credit, failed to find a place on the board of the new firm, and the group’s links with this major London financial institution faded away. William took no steps to forge alternative ties to the City. None of these developments could be said to have been harmful to the group by 1886 when, with the creation of the Australasian United S.N. Co, it stood at the apogee of its maritime power and influence. However, 1886 was also the year when the countervailing pressures of European nationalism began to bear in on the group’s far-flung business interests – when the Belgians in the Congo, the Germans in East Africa, and above all the Dutch in Indonesia began to make it clear that the group’s technical, managerial and financial expertise was not enough to guarantee it a role outside the boundaries of the British Empire.

104 W. Mackinnon & Co, Agreement altering composition of partnership, 1885, Inchcape Guildhall Ms 27, 850. 105 G. and P. Cleaver, The Union Discount: A Centenary Album (London, 1985), pp. 23–7.

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15

Interludes: a Scottish election, an African expedition and a Persian railway, 1885–7 The mid-1880s were a time of uncertainty and hesitancy in the affairs of the Mackinnon group. Although it was successfully consolidating its position as the dominant force in the coastal steamshipping of India and Australia, it was beginning to face a strong challenge to its position in Indonesia and its longdistance lines between Britain and India were in the grip of depression. Meanwhile, on the peripheries of its sphere of operations – in the Persian Gulf and eastern Africa – there was commercial stalemate. Trade was flat, profits were slack, and transport innovation had stalled. Overall, it was difficult to see where opportunities might lie for further expansion and diversification, once the upswing in the business cycle reappeared. Such uncertainties about the group’s future strategic direction both mirrored and fed into the faltering efforts of William Mackinnon to define his own role within the social, political and business life of late Victorian Britain. His substantial efforts on behalf of Leopold II were failing to translate into concrete business opportunities for himself, his family and friends. He had finally abandoned his Glasgow firm and was no longer linked to the direction of any major British financial institution. He had no children for whose future he needed to make provision, and the deaths of so many old friends – above all Henry Bartle Frere – made him aware of his own mortality. For all these reasons he was casting around for some new sense of direction. Three episodes that took place between the summer of 1885 and the summer of 1887 illustrate his state of mind, and give pointers to the motives which eventually brought him to commit himself, with his family and some members of his business network, to his last great venture, in East Africa. The first was the general election of November 1885, in which he hazarded himself for the first time in the arena of British parliamentary politics; the second, a year later, was his launch of Stanley into ‘the heart of darkness’, in a mission to bring relief to one of General Gordon’s loyal lieutenants; and the third was an invitation, which came almost out of the blue, to engage himself in a patriotic effort to open up the Persian Empire to British trade and political influence. Each, in their different ways, had a bearing on the making of the Imperial British East Africa Company. *****

382

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By the mid-1880s, William and Janet Mackinnon had grown accustomed to a life of alternating periods of residence at Balinakill and at the Burlington Hotel. The winter months in Kintyre were usually spent quietly, visits to friends and relatives being interspersed with family worship and attention to the large volume of correspondence delivered from all over the world by the local postman. William built his own church in the village of Clachan, and continued to be a major financial contributor to the Free Church of Scotland. During the summer months, however, especially in August and early September, Balinakill came alive with visitors. Men who normally took their affairs to the Burlington Hotel now made their way north by train and ferry to enjoy fishing and shooting on the estate, drives through the countryside, trial trips on BI/NISM steamers from the Clyde, or more intimate cruises by steam yacht round the sea-lochs of Argyll. For the latter purpose, William normally borrowed the Oriental, the yacht owned by his cousin, Peter Mackinnon, but in November 1885 he took possession of his own yacht, the Cornelia, which was purchased and refurbished for him by John Inglis, the Glasgow shipbuilder. Foreign Office functionaries, old Anglo-Indian cronies, new business acquaintances, Belgian courtiers, and explorers of Africa all made their way to Balinakill for a brief encounter with Scottish country life – although not everyone enjoyed the austerity of the Free Church Sabbath which was to be found there.1 Amidst all the comings and goings between Kintyre and London, William nurtured an ambition to represent his home area at Westminster. He had toyed with the idea of a seat in parliament since at least 1882. It was common practice for successful shipowners with an eye on government contracts to seek entry to parliament – his contemporaries who had already done so included Donald Currie and Thomas Sutherland – and several of his Scottish friends were also urging him to take this step. Lord Lorne in particular put it to him in 1884 that he should seek to become the MP for the county of Argyll.2 The constituency had been for many years the personal political fiefdom of Lorne’s father, the Duke of Argyll, who was one of the Whig grandees within the Liberal Party and a former Secretary of State for India. Lorne was aware that the seat would be vacated at the next general election by his younger brother, Lord Colin Campbell, as a result of the personal scandal surrounding his divorce. Lorne, who had held the seat before becoming Governor-General of Canada, did not want to fight it again himself. He pleaded an inability to fund a campaign in such a far-flung constituency and had himself selected for a London constituency instead.

1

Harry Johnston provides a description of Balinakill in September of 1883 which is critical of the lack of warmth in the house, the sparseness of the fare and the strange Sunday rituals indulged in by the Mackinnon household, but his account has the ring of metropolitan condescension about it. (Sir Harry H. Johnston, The Story of My Life (Indianapolis, 1923), pp. 137–8.) 2 J.M. Hall to W. Mackinnon, 28 Oct. 1884, MP Private Letters File 41. 383

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He suggested that William Mackinnon should represent the Liberal cause in Argyll.3 What seems finally to have determined William to enter the public political arena, however, was the fall of Khartoum. Like others who knew and admired Gordon, he had followed with close interest the press coverage of Gordon’s increasingly precarious position in the capital of the Egyptian Sudan and of the painfully slow progress of the military force sent to his relief. The news in February 1885 of Gordon’s death at the hands of the Mahdi’s men filled him with a contempt for Gladstone and his government which not even the hasty chartering of BI steamers for the reinforcement of British forces in Egypt and the Sudan could assuage. ‘What a mess this miserable Govt have brought the country into’, he complained.4 By May, James Hall was actively seeking to secure for him the nomination as Conservative candidate for the Argyll constituency. Jamie, who had become involved in local Kintyre politics as a county councillor, was confident of William’s chances of obtaining ‘the full support of the Conservative Party’.5 There were several difficulties inherent in these arrangements, however, quite apart from William’s complete innocence in the ways of party politics and his inexperience in public speaking. Rural Kintyre was part of the vast, sprawling Argyllshire parliamentary constituency, from which the burgh of Campbeltown was excluded. This meant that he would be denied electoral support from an important part of the district in which he was best known, and would need to seek it from areas as far north as Oban or as far west as Tiree in the inner Hebrides in which he was little known outside Free Church circles. Moreover, Argyll was a Liberal stronghold in which anyone espousing the Conservative cause would face an uphill battle. To William’s (and Jamie’s) surprise, the fall of Gladstone’s government in June 1885, clearing the way for an autumn general election, was quickly followed by an invitation from the Duke of Argyll along the lines already proposed by the Marquis of Lorne – namely that William should become the Liberal candidate for the constituency.6 The Duke’s intervention, for all its obvious attractions, put William in something of a quandary. Although by upbringing and background a Liberal, his long association with Frere, together with Gladstone’s treatment of Frere during the Mid-Lothian campaign, had drawn him towards Conservative views on imperial policy, and he was on the verge of declaring himself openly for the Conservative Party. On

3 J. Wake, Princess Louise: Queen Victoria’s Unconventional Daughter (London, 1988), p. 277. While it is true that Lorne was in debt after his return from Canada (which may explain his gravitation towards William Mackinnon’s company) it seems likely that his reluctance to contest the Argyll seat had more to do with trying to avoid the electoral consequences of his brother’s scandalous divorce in this morally strict corner of the UK. 4 W. Mackinnon to Sanford, 23 Feb. 1885, Sanford Papers. 5 J.M. Hall to W. Mackinnon, 2 May 1885, MP Private Letters File 41. 6 J.M. Hall to W. Mackinnon, 27 July 1885, MP Private Letters File 41.

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the other hand, Liberal Party affiliations were becoming fluid. The Dukes of Argyll and of Sutherland had already broken with Gladstone over his Irish land bill, fearing the consequences for landlord-tenant relations on their large estates in the Highlands, and a full-scale split in the party over Irish home rule would come a year later, in 1886.7 Meanwhile, the local Liberal association in Argyll was split into factions on one side or another of the two great Scottish issues of the moment – land reform, in the wake of the Napier Commission report on crofting tenure, and a proposal to disestablish the Church of Scotland. In the midst of all this uncertainty, William decided to hedge his bets. He let it be known that he was a Liberal by persuasion, and hired the local Liberal agent to act for him in the forthcoming election, but he entered the contest as a declared Independent, beholden to no political party. This brought him the patronage of the Duke and the support of the local Conservatives, who declined to put up a candidate for the seat, but also the enmity of those opposed to landlords and Tories. ‘His game’, noted an agent of the Scottish Liberal Association, ‘is to please Tories and Liberals alike, and beat the crofter candidates. . . . But he has a difficult course to steer.’8 William’s election address, published in August 1885, stressed his determination to ‘put country before party’, more especially in ‘those grave matters of Foreign & Colonial policy which are of the most vital importance to this great Empire.’ The emphasis was very much on imperial affairs. William pledged himself to support all practical measures to maintain and increase the commerce of India, demanded that Britain take more effective control of Egypt because it was ‘of paramount importance to the safety of the Indian Empire’, and suggested the creation of a Sinking Fund to deal with Egyptian debt. He wanted measures to protect India against the aggressive intentions of Russia, supported the idea of Imperial Federation, and proposed that there should be more expenditure on naval defence. Against the vision of a strong empire, built around the British position in India, he offered only an eclectic collection of domestic policies – stricter licensing laws, a ban on fishing on Sundays, government support for the teaching of Gaelic and the Bible in Highland schools, opposition to the disestablishment of the Church of Scotland, amendment of property laws to make capital investment in land easier, and support for ‘any well-considered scheme for the removal of such real grievances as exist among the crofters and the cottars’.9 This was the programme that he took to the hustings in September and November 1885 7 I.G.C. Hutchinson, A Political History of Scotland, 1832–1924 (Edinburgh, 1986), pp. 154–5; D. Cannadine, The Decline and Fall of the British Aristocracy (London, 1990), pp. 511–13. For a general account of Scottish politics in the 1880s, see also M. Fry, Patronage and Principle: A Political History of Modern Scotland (Aberdeen, 1987), ch. 4, pp. 88–118. 8 J. Patten to Lord Rosebery, 12 Sept. 1885, Rosebery Papers (National Library of Scotland) Ms 10042. 9 The Glasgow Herald, 21 August 1885.

385

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– in a series of meetings held in villages and small towns scattered the length and breadth of the very large constituency. Absent from his manifesto and speeches, however, was any mention of Africa beyond Egypt and the Sudan. With the Scramble for Africa well underway, and with William soon to obtain public recognition for his association with Africa, rather than with India, it was a striking omission. The lack of any specifically African platform tends to undermine the proposition, advanced by some historians, that William Mackinnon was, or had become, a man obsessed with Africa. It may simply have been, however, that he still regarded his African ventures as private matters rather than matters of state policy, and therefore not appropriate to the arena of public debate. The closest that African affairs came to intruding into William’s apprenticeship in electoral campaigning was the appearance of H.M. Stanley at some of his public meetings during October. Stanley, renowned in Scotland as the ‘man who found Livingstone’, had a large pulling-power in rural Argyll, and he used his visit to Balinakill (in order to discuss the proposed Congo railway) to lend support to the Mackinnon campaign. However, that usually involved little more than appearing on the platform with William and making a short speech of support at the end of the meeting, for he was under instructions from Leopold not to get too deeply involved in Britain’s general election. ‘I have just returned from the North’, Stanley wrote. ‘Mackinnon is doing his duty manfully though it is very much against the grain. They do not heckle him very much and he is wise enough to keep clear of places where there is determined opposition. Oban was not thoroughly aware of his appearance, otherwise there I fancy he would have had it hot. He has the true grit of a gentleman, plucky as anything and very cool, withal so genial in manner that with his white hair and his reputation for good deeds he disarms opposition in the main.’ 10 Others were less impressed by his performance in the hustings. To many traditional Liberals, he came across as a man with decidedly conservative leanings11 and this had the effect of bringing the entry of a Radical Liberal into the lists, in the shape of J.S. MacCaig, a banker in Oban. William’s main difficulty, however, was that he had allied himself with aristocratic and land-owning privilege at a time when the extension of the franchise to all male adult householders cast doubt over the electoral wisdom of such a stance. ‘I shall have a very cordial support’, he claimed, ‘from at all events the respectable people in the County, including nearly every one of the Landowners, but nobody can yet tell me what the result of the immence addition to the Electorate will be.’ 12

10

Stanley to Sanford, 11 Nov. 1885, Sanford Papers. ‘Mackinnon is alarming the general run of Liberals by his ill-disguised Toryism.’ (Patten to Rosebery, 22 Sept 1885, also Patten to Rosebery 19 Nov. 1885, Nat. Lib. Ms 10042.) 12 W. Mackinnon to Stanford, 23 Oct. 1885, Sanford Papers. 11

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Throughout the Highlands and Islands the main effect of the 1884 Reform Act was in fact to enfranchise the men of the crofter (small peasant farming) communities which had survived the famines and clearances of an earlier generation and which by the 1880s were actively engaged, through both direct action and political agitation, in a campaign to right ancient wrongs and to secure greater security of tenure for themselves and their heirs.13 Representing that campaign in the election in Argyll was Donald H. Macfarlane, the former Irish nationalist MP for County Carlow and the president of the Highland Land Law Reform Association, whom The Scotsman, the organ of the Edinburgh middle classes, denounced as a ‘carpetbagger’ and a Parnellite.14 Macfarlane’s participation in Highland politics drew upon the parallel Irish seam of unrest over land tenure, and contributed to the demands of crofters’ leaders that instead of the recommendations of the Napier Commission what was needed in Scotland was legislation equivalent to the Irish Land Act of 1881. He was one of six men approved by the HLLRA to fight Highland constituencies as crofters’ candidates in the general election of 1885. The contest over crofters’ rights in Argyll therefore took place between Macfarlane, representing the ordinary people of the countryside out of passion and conviction, and William Mackinnon, representing the landlord elite more by default than design. By a curious twist of fate, it was also a struggle between two men who had last faced each other on the banks of the Hooghly – for Macfarlane too had been a Calcutta merchant, and was well known to the Mackinnon clan. Born in Caithness but raised in Australia, he had been David Begg’s partner in Begg Dunlop & Co, Calcutta, when Duncan MacNeill was sent out to join that firm. It was largely through his opposition that no merger of Begg Dunlop & Co with Mackinnon Mackenzie & Co ever took place. Such old connections, unknown to the wider public, no doubt gave an extra edge to the contest. Macfarlane’s religion was a disadvantage in the face of a predominantly Presbyterian electorate – after leaving India, his marriage to an Irish woman had led to conversion to Roman Catholicism and the espousal of Irish nationalism15 – but against that he was a native Gaelic-speaker who could communicate directly with the large number of newly-enfranchised electors who spoke or read only in that tongue, and he was a well-known proponent of crofters’ rights. His support was particularly strong in the northern districts of the country, as well as on the islands of Mull, Coll and Tiree, whereas William Mackinnon tended to find his support in the more southerly districts, where crofting and Gaelic were less strongly entrenched. To the majority of the electorate of Argyll in October–November 1885, William’s

13

For the general background, see J. Hunter, The Making of the Crofting Community (Edinburgh, 1976), and I.M.M. MacPhail, The Crofters’ War (Stornoway, 1989). 14 The Scotsman, 30 Nov. 1885, p. 4. 15 MacPhail, The Crofters’ War, p. 157. 387

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message about the need to defend and sustain the Empire was largely irrelevant – and although he was not unsympathetic to the needs and aspirations of the crofters, he simply had no clear-cut policy to alleviate their condition. The outcome of the contest was a triumph for Macfarlane. When the results of the poll were declared on 6 December, he had obtained 3,340 votes as against 2,836 for William Mackinnon and a mere 670 for MacCaig.16 The pattern was repeated across the Highlands, as four of the six crofters’ candidates were successful in the polls. William Mackinnon had paid a heavy electoral price for years of associating with ‘aristocratic capitalism’, in the pursuit of overseas railways and personal social standing.17 His rejection by the electorate of Argyll was painful, and his difficulty in coming to terms with defeat was heightened by the success of others. James Hutton, on whose coattails he was riding in Africa, was elected as a Conservative MP in Manchester North, and even his old friend, Sir Lewis Pelly, managed the trick, by becoming Conservative MP for Hackney North, in London. What might have been, had he not stood in front of the crofters’ political steam-roller in 1885, was further illustrated by the general election of June 1886. The crofters having by then obtained the legislation they sought and the Liberal Party having broken in two over Gladstone’s Home Rule Bill, a Conservative candidate succeeded in wresting Argyll away from its traditional Liberal allegiance. By that time, however, it was too late. Smarting from his experience, William had turned his back on parliamentary politics.18 Two consequences flowed from William’s ill-judged attempt to enter Parliament. First, by trying to adopt a neutral position over party allegiances he earned the mistrust of the Liberal establishment in Scotland, including that of its leader, Lord Rosebery. This would come back to haunt him when he needed Rosebery’s help. Second, the bitter taste of defeat encouraged him to cling to, rather than discard, the stance of the man who was above party politics. This posture, first adopted for its expected electoral benefits, now became the hallmark of his activities in the public arena. Here was a man, he wanted it known, who involved himself in public affairs for reasons of patriotism and philanthropy rather personal gain or party advantage. To

16

The Scotsman, 7 Dec. 1885, p. 6. William Mackinnon’s parliamentary aspirations were not the only casualty of the struggle between landlord and tenant. His old Anglo-Indian friend, Sir Arnold Kemball, who had been Commissioner for the Duke of Sutherland’s estates since 1879, was so distressed by the rent-strikes and other aspects of the tensions arising from the crofters’ ‘revolt’ on the Duke’s Highland estates that he resigned his post shortly after the results of the general election were declared. (E. Richards and M. Clough, Cromartie: Highland Life, 1650–1914 (Aberdeen, 1989), pp. 305 and 338; Kemball to Duke of Sutherland, 26 Dec. 1885, Sutherland Papers, D593/P/24/3/1.) 18 William lent his yacht Cornelia to the Conservative candidate, Col. Malcolm, for use in his campaign, but otherwise took no part in the general election of 1886. (J.M. Hall to W. Mackinnon, 26 June 1886, MP Private Letters File 42.) 17

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project that image, however, and to maintain the public persona he had adopted for the Argyll election, this essentially very private man, who normally shunned publicity, had to find a suitable vehicle. He found it within the year – in a high-profile expedition to one of the more remote corners of eastern Africa. ***** In October 1886, representatives of the British and German governments met in London to agree to a division of the Sultan of Zanzibar’s territories on the East African coast and of the vast area lying to the westwards as far as the Great Lakes. The agreement, building on the work of the tripartite delimitation commission, took the view that the Sultan’s sovereignty extended to no more than a strip of coastal land ten miles in depth, from Tungi Bay in the south to Kipini, at the mouth of the Tana River, in the north. Beyond Kipini, the Sultan’s authority was limited to the island of Lamu and the immediate vicinity of a few towns on the Somali (or Benadir) coast. The two governments then proceeded to draw a line on the map from the mouth of the Umba river, on the Swahili coast, to the eastern shores of Lake Victoria, creating a German ‘sphere of influence’ to the south of it and a British ‘sphere’ to the north. The line was drawn in such a way, curving round the northern foothills of Mount Kilimanjaro, as to recognise German rather than British rights to the fertile mountain region. Both parties, the Germans to the south and the British to the north, were free to make such arrangements as they wished with the Sultan of Zanzibar over the disposal of his territories within their respective ‘spheres’. John Kirk, at home on leave from Zanzibar and acting as an adviser to the Foreign Office, presented the results of these deliberations to William Mackinnon as if a pistol had been fired to start a race between Britain and Germany to occupy the East African interior: ‘Thus we have Mombasa under the Sultan and a free run inland to the Lake shore, but not Kilimanjaro. We have the best of any line for a rail if ever any is made. We also have the Equatorial Province now held by the brave Emin Bey, well guarded and quiet to this day.’ He assured William that the Germans have not ‘fully understood that they have lost what undeniably is the best route to the Lake and the Upper Nile and also the most promising district as well as the best shoreline’.19 In truth, Kirk was putting a brave face on things. His enthusiasm for the new British ‘sphere of influence’ stemmed from a desire to save something from the dismantling of the Sultan’s sovereignty on the East African mainland, which he had spent most of his life defending and sustaining, and to enlist William Mackinnon and his business network in that task. He had already concluded that the old system of British

19

Kirk to W. Mackinnon, 6 Nov. and n.d. (but early Dec.) 1886, MP Private Letters File 94. 389

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informal imperialism could no longer be sustained in the face of German expansion and that a more active policy was required in East Africa.20 He was also aware, however, that the policy of Lord Salisbury’s government was one of co-operating with Germany in East Africa, that its interest in the new ‘sphere of influence’ was essentially pre-emptive in character, and that it was not committed to creating a protectorate there or establishing any kind of administration. British commercial activity within the ‘sphere’ was limited to the twice-monthly visits of the BI steamer to Mombasa and Lamu, and there were no British business activities, as distinct from British Indian ones, capable of paying for, or pressurising the British government into paying for, the costs of some form of administration. Kirk knew that the German ‘sphere’ had the better short-term commercial prospects – because of the great overland caravan trade that drew ivory supplies from deep in the interior, including Uganda and eastern districts of the Congo basin, down to the port of Bagamoyo.21 He was also aware that William Mackinnon, while concerned at the possibility of German competition in East African shipping, was not inclined to invest capital in any commercial undertaking in Mombasa and its hinterland. If there was to be a race to compete with Germany in acquiring and developing land on the East African mainland, William was not yet at the starting line. There were good reasons for this position. William had plenty to do at the time to look after his interests in Australia, Indonesia and India, irrespective of events on the African margins of his business empire. He remained a member of James Hutton’s East Africa Association and in September 1886 had sent J.W. Buchanan of Smith Mackenzie & Co across from Zanzibar to Taveta, between Mombasa and Kilimanjaro, to secure fuller and more legallybinding versions of the treaty which Harry Johnston had obtained there. However, Buchanan’s reports on the commercial potential of Taveta appear to have contributed to William’s distinct lack of enthusiasm for the British ‘sphere’.22 His previous efforts to secure a commercial foothold on the

20

‘The Sultan has served us well but none know better than I that his rule cannot last. . . . It is hopeless now to prop up the present system. I therefore wish our Govt to face facts & shape the future by securing to British trade a good footing and one that can be developed. . . . The fact is we must now either take administration of a slice of the coast or retire, for any other course will cause endless friction, and make the Germans injure the vestiges of our trade and influence.’ (Kirk to W. Mackinnon, 11 Oct. 1886, MP Private Letters File 94.) 21 See Kirk to W. Mackinnon, 18 and 23 March 1887, MP Private Letters File 95, where Kirk reveals his knowledge of the significance of Bagamoyo’s ivory trade in the context of the dangers to Zanzibar if the Germans were to divert it to Dar es Salaam. 22 ‘I quite understand your unwillingness to have a hand in any East African concern. There is little to encourage you, and having done what was needed to keep the door open at Kilimanjaro I think you cannot do better than withdraw your agent.’ (Kirk to W. Mackinnon, 11 Oct. 1886, MP Private Letters File 94.) 390

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mainland had centred on the ports of Kilwa and Dar es Salaam, with their access to Lakes Nyasa and Tanganyika. These were now in the German ‘sphere’, as was the Kilimanjaro district for which Mombasa had been seen as a port of entry. The commercial prospects of much of what Germany had agreed to leave to British exploitation were uncertain, but seemed less attractive than the territory the Germans had staked out for themselves, and William had hitherto taken little or no interest in the more northern territories. Above all, he had convinced himself that no commercial company could be successful in East Africa without a concession from the Sultan of tax-raising powers on the coast and without a royal charter, similar to that awarded to the Borneo Company in 1881, which would grant powers to administer territory in the name of the British crown. Neither of these was on immediate offer. Kirk, however, in attempting to recruit William Mackinnon to the cause of territorial expansion in East Africa, threw into the correspondence the one name best calculated to evoke a response – ‘brave Emin Bey’, holding tight to his fastness on the upper waters of the Nile valley. Emin Bey was a German scholar-adventurer who had taken service with the Khedive’s administration in the Sudan.23 By the early 1880s he was in charge of the most southerly part of Egypt’s imperial possessions – the Equatoria Province, which lay along the White Nile with its headquarters at Lado, some 1,000 miles upriver from Khartoum. The revolt of the Mahdi against Egyptian rule in the Sudan in 1883–4 cut Equatoria off from communications with Egypt. Emin moved his headquarters south to Wadelai, further away from the threat of conflict with the Mahdi’s followers, and opened up a slim thread of communications with the outside world through CMS missionaries in Buganda and then on to Zanzibar. With a substantial force of trained troops and a couple of river steamers at his disposal, he was able to maintain a small fragment of the Egypto-Sudanese empire on the headwaters of the Nile. By the autumn of 1886, when the Anglo-German division of East Africa was underway, news of Emin’s position began to percolate through to government and missionary circles, and to the newspapers, in Britain. A public agitation arose for an expedition to be sent to his relief, taking the munitions and other supplies he had requested to enable him maintain his rule in Equatoria. Among church and anti-slavery groups in particular, the mantle of the martyred Gordon was seen as having passed to Emin, whose mini-state was represented as a haven of peace, stability and civilisation in the face of the forces of slave-raiding and slave-trading released once again by the Mahdiyya. Gordon having been left to his fate, something should

23

The classic study of the origins and conduct of the Emin Pasha Relief Expedition is Iain R. Smith, The Emin Pasha Relief Expedition, 1886–1890 (Oxford, 1972). I am indebted to this work for much of what follows, although I have added my own emphases and argument. 391

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be done for his lieutenant – although views differed as to whether the object of the exercise should be to reinforce Emin or rescue him. The agitation was particularly strong in Scotland, where one of Emin’s friends, a former missionary named R.W. Felkin, was now a doctor in Edinburgh and employed the agencies of the local press and the Scottish Geographical Society to press for a relief expedition to be organised. For John Kirk (and others) a particularly intriguing aspect of Emin’s situation was the knowledge that Emin had offered to place his province under British protection if British rule were to be extended into East Africa.24 A British protectorate with one foot in Mombasa and the other on the upper Nile seemed a realistic proposition to Kirk, and in the absence of any official action towards securing that goal he looked to William Mackinnon and his associates to set things in motion. By early November 1886 he was pressing William to finance an expedition to the upper Nile and to employ H.M. Stanley to lead it.25 William was well aware of the public campaign in Scotland for assistance to be sent to Emin. He was an Honorary Vice-President of the Scottish Geographical Society and moved in the same church circles as the men of the African Lakes Company, based in Glasgow, who began to contemplate a relief expedition via the Lake Nyasa and Lake Tanganyika route.26 He was also under pressure from Stanley to mount an expedition himself. Stanley’s interest in such an adventure had a long pedigree. In 1884 he had corresponded with Leopold’s officials in Brussels about a possible expedition via the Congo River system to rescue Lupton Bey, another of the Khedive’s administrators who had been cut off in the Bahr el Ghazal province, in the south-west corner of the Sudan.27 Before anything came of the proposal, however, Lupton and the Bahr el Ghazal had been captured by the Mahdi’s troops. In March 1886, well before public agitation to relieve Emin had arisen in Britain, he suggested to Leopold that ‘Assisted by a subsidy from England Your Majesty might at once order the Congo forces to cross the frontier, and commence the re-establishment of order in the Equatorial Provinces, in the name of Egypt.’28 Stanley had spent two frustrating years in Europe between 1884 and 1886, anxious to return to Leopold’s service in central Africa but

24

The offer was made in July 1886 (Emin to Mackay, 6 July 1886, Mackay to Kirk, 7 July 1886, and Emin to Kirk, 7 July 1886, all enclosed in Holmwood to Iddesleigh, 18 Oct. 1886, FO 84/1775). 25 ‘Stanley will be the best agent. You know how he & I have stood so when I say employ him you know I mean it.’ (Kirk to W. Mackinnon, 6 Nov. 1886, MP Private Letters File 94.) 26 See W. Currie, Africa Lakes Co, to Stanley, 30 Dec. 1886, Stanley Papers RP 2435 ii Batch 3. By that date the company’s plans were apparently quite advanced, because Currie offered to sell Stanley a portable boat ‘we ordered a little while ago’. 27 Strauch to Stanley, 21 Jan. 1884 and Borchgrave to Stanley, 8 Sept. 1884, Congo Journal, Stanley Papers RP 2435 i Box 4. 28 Stanley to Leopold, 18 March 1886, Congo Journal, Stanley Papers RP 2435 i Box 4. 392

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denied this by Leopold’s desire to court Brazza and his French backers, to whom Stanley’s presence in the Congo was anathema. An expedition to the Sudan to try to assert Leopold’s influence there, preferably under his command, appealed to Stanley as a way out of his dilemma. By November 1886 he too, like Kirk, was pressing the idea of a British venture to relieve Emin, urging the need for speedy action. ‘Think of the years this man has patiently waited at the post of duty’, he told William. ‘All whom I have sounded upon the subject join with me in wishing that his rescue may be accomplished.’29 James Hutton, reacting to the same importuning by Kirk and Stanley, wanted the British East Africa Association to respond to the Anglo-German delimitation of territory and the news of Emin’s request for help by establishing a commercial company to operate in the new British ‘sphere of influence’ and at the same time undertake the relief of the Pasha. William Mackinnon would have nothing of a commercial company; he was not ready to invest capital on the East African mainland. But he was open to the idea of a single limited intervention which, at relatively little cost, might help to lay the foundations for a company in the future. Initially, he hoped that the British government would send an expedition and he had been party to the lobbying of the Foreign Office to secure that end. By late November it was clear that Salisbury and his Cabinet, aware of the Gladstone government’s difficulties over the relief of Gordon, would not be drawn into a Sudanese adventure, but that it would leave the door open for a private initiative. What particularly interested William was the news from the British representative in Cairo that the Egyptian government, which had no interest in reclaiming the lost Sudanese province on the upper Nile, was prepared to contribute £10,000 towards an expedition that would assist Emin and his men to withdraw from Equatoria Province if they so desired. Stanley, in offering his services to lead an expedition free of charge, had calculated that it would cost only £20,000 to mount a rescue mission that could reach Emin by June 1887, and return to the sea coast by December 1887.30 That meant that an initiative which would bring considerable publicity to the new British ‘sphere of influence’ in East Africa and could be used to advance the interests of the British East Africa Association there might be launched for a mere £10,000. It seemed too good an opportunity to miss. On 27 November 1886 William Mackinnon asked for government approval for his intention to establish a small committee ‘to organise & send out an expedition to open communications with & carry relief to Emin’, expressing the hope that the expenses might be defrayed from sales of the large quantities of ivory Emin was believed to have in his possession.31 On 11 December he telegraphed to

29

Stanley to W. Mackinnon, 15 Nov. 1886 (copy), Stanley Papers RP 2435 ii Batch 3. Stanley to W. Mackinnon, 15 Nov. 1886 (copy), Stanley Papers RP 2435 ii Batch 3. 31 W. Mackinnon to Lord Iddesleigh, 27 Nov. 1886 (copy), Stanley Papers RP 2435 ii Batch 3. 30

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Stanley, who had left London for a lecturing tour in the USA, ‘Your plan and offer accepted. Authorities approve. Funds provided. Business urgent. Come promptly.’32 While awaiting Stanley’s arrival from New York, William set about creating a committee to fund and manage the project. By 29 December, when it held its first meeting, it had eight members, including William as Chairman and Sir Francis de Winton (now back from serving Leopold on the Congo) as secretary.33 Two of the committee represented outside interests – G. Dawnay of the War Office and Col J.A. Grant of the Royal Geographical Society – but the rest – Stanley, Pelly, Horace Waller and Lord Kinnaird – were members of William Mackinnon’s own little coterie.34 Other associates of William’s – Kirk, Hutton, George Mackenzie and Peter Denny – and one of Stanley’s – A.L. Bruce, an Edinburgh brewer who was David Livingstone’s son-in-law – joined the committee later. The money came mainly from the Mackinnon group. Of the £15,945 eventually raised by private subscription to pay for the costs of the expedition (that is excluding the contribution of the Egyptian government) no less than 63 per cent of the total was provided by members of the Mackinnon family, their partners in the family firms or very close business allies like Peter Denny.35 The group would assist in other ways as well. Gray Dawes & Co did the London outfitting and supply of the expedition, Smith Mackenzie & Co assisted with the recruitment of porters in Zanzibar, and BI provided the transport for Stanley, his men and their supplies, and the weapons and ammunition provided by the War Office to their destinations on the African coast – first to Zanzibar and then the mouth of the Congo. What William and the inner core of his business network hoped to gain in return is not entirely clear. The expedition would be highly publicised – Stanley’s reputation and contracts to supply several major newspapers with details of the expedition’s progress ensured that that would be so – and it would therefore go some way, especially in Scotland, to restoring William’s public profile as philanthropist and patriot that had taken a knock in the election of 1885. It would also give Stanley something to do now that the Congo Railway Syndicate had failed. William had been conscious of Stanley’s increasing frustrations and on at least a couple of occasions had intervened with Leopold to see if something could be done for him. But the only explicit reference to any business goals behind the expedition is William’s comment

32

Telegram: W. Mackinnon to Stanley, 11 Dec. 1886, FO 84/1795. De Winton had ambitions to be appointed as a governor of a British colony or protectorate; he had therefore turned down the Duke’s offer to succeed Sir Arnold Kemball as Commissioner for the Sutherland estates. 34 Sir Francis de Winton to FO, 30 Dec. 1886, FO 84/1796. 35 For a full list of the subscribers, and the sums they contributed, see H.M. Stanley, In Darkest Africa (New York, 1890), Vol. 2, p. 513 or Smith, Emin Pasha Relief Expedition, p. 302. 33

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to Stanley that ‘you may be able to tell us all about the prospects of Hutton’s B.E.A. association and of Emin Pasha at the end of it’.36 This stray remark makes it appear that William Mackinnon had in mind a somewhat grander version of J.W. Buchanan’s recent safari to Taveta – an exercise in gathering commercial intelligence and signing treaties with indigenous authorities along the route between Mombasa and Wadelai, together with the acquisition of more detailed information about Emin’s intentions for the future of his province. But it would subsequently become clear that his hopes, if not his expectations, were rather wider than that. If the Mackinnon ‘clan’ made the project possible, Stanley was in no doubt that the expedition was really his. He arrived back in London around Christmas and threw himself into a whirlwind of activity to get the mission underway. Now secure in his appointment as leader, he also introduced a serious complication into arrangements by pointing out (as he had failed to do before departing for the USA) that he was still on a retainer from Leopold and would need the King’s permission to participate in the expedition. A meeting between Stanley and Leopold in Brussels on 30 December, to sort the matter out, gave Leopold an opportunity to intervene in the affair to his own advantage. Leopold promptly wrote to William Mackinnon to make it clear that there was a price to be paid for Stanley’s services. He would only release Stanley for the purpose if the expedition took the long route to Equatoria – up the Congo River. Stanley too revealed to William – apparently for the first time – that he preferred the Congo route to any of the possible routes to Wadelai from the east coast of Africa. This was on the grounds that though it was longer it would also be quicker, because the expedition and its stores could be transported by river steamer over a large part of the way.37 Stanley had almost certainly favoured this route all along, as a way of ingratiating himself with Leopold once again,38 and it is hard to avoid the conclusion that William Mackinnon and the other members of the committee had been manipulated by Stanley and Leopold. They had

36

W. Mackinnon to Stanley, 11 Jan. 1887, Stanley Papers RP 2435 ii Batch 3. W. Mackinnon to Stanley, 4, 5, 6 and 10 Jan. 1887, Stanley Papers RP 2435 ii Batch 3. 38 Stanley would later claim that in a meeting with Mackinnon and Hutton in October 1886, he had outlined four possible routes and had expressed a preference for the one via the Congo (Stanley, In Darkest Africa, Vol. 1, pp. 32–3) and in his letter to William in November 1886, setting out the outline of his plans, Stanley also referred to an undisclosed preferred route: ‘That which offers the least obstacles for the march of the Expedition is also that on which the moral help of Her Majesty’s Government would be most effective.’ (Stanley to W. Mackinnon, 15 Nov. 1886, Stanley Papers RP 2435 ii Batch 3.) However, William Mackinnon’s words to Stanley in January 1887, in which he gathered ‘from your important letter of yesterday’ that ‘other things being equal you might have decided on the Congo route as being shorter, easier and perhaps less dangerous’ (W. Mackinnon to Stanley, 5 Jan. 1887, Stanley Papers RP 2435 ii Batch 3), seem to imply that William was not aware of Stanley’s preference for the Congo until that point. 37

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Henry Morton Stanley, 1886

interfered with William’s plans in East Africa in 1879, and were now set to do so once again. There were admittedly difficulties about the possible routes from the east coast. The most direct route on the map, which William, Kirk, and others like Sir Percy Anderson at the Foreign Office seemed to have had in mind, was due north-west from Mombasa, across the Kenya Highlands and then on into Equatoria. This, however, passed through the territory of the Masai pastoralists, who had a reputation for harassing caravans, and it was unexplored in its latter stages. An alternative route, from Bagamoyo via the 396

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southern end of Lake Victoria and then Buganda, by which Emin maintained his communications with the outside world, was considered dangerous because of the personality and policies of Mwanga, the Kabaka of Buganda. But Stanley’s appointment as leader of the expedition – and Kirk’s setting aside of his personal hostility towards him – were predicated upon Stanley’s reputation as someone who was eminently, even brutally, capable of overcoming the dangers and difficulties of African exploration. William was irritated – indeed angered – by Leopold’s intervention, but agreed to accept a compromise arrangement whereby the expedition would be sent out to Equatoria by the Congo route but return by a route that would take it eastwards to a port on the Swahili coast. He did so in the hope that Leopold would put the facilities of the Congo State at Stanley’s disposal, and on the understanding that ‘the King should agree that no work for the Congo State should be required from you until the work of the expedition was completed & you had returned with your men to the East Coast.’ 39 Such a proscription, however, was a dead letter. Unknown to William or his other associates, Stanley had already agreed to act as Leopold’s agent in extending the frontiers of the Congo State towards the Sudan and in attempting to persuade Emin to attach the Equatoria Province to the Congo State.40 The expedition had been high-jacked by Leopold. Instead of a pioneering column pushing its way through the new British ‘sphere of influence’ from Mombasa to Lake Victoria and the headwaters of the Nile, it became an exercise in projecting Leopold’s influence deeper into central Africa. The Congo route was not the preferred option of those, other than Stanley, who had set the mission in motion. John Kirk in particular complained that ‘it does not help us’, and would only be of assistance to the Congo State in which ‘we seem to have no share, while Englishmen are being excluded as much as possible’.41 Nor did it suit Emin (who had been promoted to the rank of Pasha by the Egyptian government). On being 39

W. Mackinnon to Stanley, 6 Jan. 1887, Stanley Papers RP 2435 ii Batch 3. There appears to be no written record of Leopold’s instructions to Stanley on these matters, although the Count de Borchgrave, Leopold’s chef du cabinet, wrote to ‘confirm’ them as Stanley left for the Congo. (Borchgrave to Stanley 1 Feb. 1887, Congo Journal, Stanley Papers RP 2435 i Box 4.) Leopold later wrote to Stanley, while the expedition was underway, that ‘I trust you have been again able to so some good work for the Congo State which owes you so much’, to which Stanley added a note in his Journal that this referred to ‘the engagement of Emin Pasha as Governor of the Equatorial Provinces under the State’. (Leopold to Stanley, 29 July 1888, Congo Journal, Stanley Papers RP 2435 I Box 4.) Leopold also made more explicit reference to his hopes that Stanley would be able ‘by treaties with the chiefs or by any other way . . . to improve the frontier of the Congo State . . . so as to make it touch at least at one point the different great lakes giving us a harbour on each.’ (Leopold to Stanley, 30 Dec. 1888, (copy), Stanley Papers RP 2435 ii Batch 2.) The details of the terms to be offered to Emin are to be found in Stanley, In Darkest Africa, Vol. 1, p. 411. 41 Kirk to W. Mackinnon, 14 Jan. 1887, MP Private Letters File 14. 40

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informed that the expedition was on its way, he made it clear that he saw his future line of communications as running through, and his political connections as being with, the new territory assigned to Britain but not yet claimed.42 Why then did William Mackinnon acquiesce in the arrangement into which he had been manoeuvred by Stanley and Leopold? Other than a general propensity to defer to Leopold, he was concerned about the time factor. Stanley (and Leopold) assured him that it would take 18 months for an expedition to get to the upper Nile from an east coast port, and return. He wanted quicker results than that and, in his ignorance of conditions in the central African interior, he accepted the argument that an expedition which started up the Congo and returned to the Swahili coast would be speedier – and also cost no more – than one which proceeded directly from the east coast. He still fretted that a breakdown of steamers on the river or lack of cooperation from local Belgian officials might dissipate that advantage,43 but the wily Leopold, knowing him well, found a means of overcoming any remaining reluctance. On 7 January 1887, Count de Borchgrave sent Stanley a letter which was obviously intended to be shown to others in London. This set out Leopold’s public position – that the Congo State had nothing to gain by the expedition passing through its territory, that the King had suggested this route so as to be able to lend Stanley’s services, which he could not do for the 18 months of a mission commencing on the east coast port, and that the Congo State’s steamers would be placed at the disposal of the expedition. Equally significantly, it also announced that the Congo railway company established by Captain Thyss in Brussels had been set up merely for the purpose of conducting a survey of the route, that it was about to increase its capital from £40,000 to £80,000, of which £10,000 and the right to appoint two directors was being reserved ‘for her English friends’, and that shares in the ‘survey’ company would carry with them preferential rights to subscribe to the company that would eventually build and manage the line between the lower and upper Congo.44 In short, participation in the railway that would unlock the wealth of the Congo basin, which Mackinnon and Hutton believed to have been closed to them, was now opened up again – albeit on a minority basis, and in return for accepting the Congo route for the Emin Pasha expedition. When exactly Stanley conveyed this information to William is not clear. It probably came too late to have materially affected his decision to accept the compromise arrangements, but it would have helped to ease lingering doubts about the wisdom of that choice.45 William’s alliance

42

‘Whatever may be said, our road is not to the Congo nor to the Tanganyika but straight across the Lango and Masai countries to the coast.’ (Emin to Kirk, 20 Aug. 1887, Kirk Papers, Nat. Lib. Acc. 9942/8.) 43 W. Mackinnon to Stanley, 11 Jan. 1887, Stanley Papers RP 2435 ii Batch 3. 44 Borchgrave to Stanley, 7 Jan. 1887 (incomplete), Stanley Papers RP 2435 ii Batch 2. 45 The letter from Borchgrave was discussed by a sub-committee of the Relief Committtee 398

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with Leopold, which had been strained by the disappointment over the Congo Railway Syndicate, was delicately reconstructed as a consequence of Emin Bey’s plea for help. On 19 January 1887, William hosted large a farewell dinner for Stanley at the Burlington Hotel – it was attended by most of the Mackinnon family and its circle of London friends as well as various Foreign Office and military figures – and two days later Stanley left on what would be his last great African adventure. Following discussions in Cairo, he proceeded southwards from Suez, gathering various members of his party en route. At Zanzibar he completed the recruitment of the six hundred porters who would do the hard work of getting him to Wadelai, and persuaded Tippu Tip, the leading ArabSwahili ivory trader in the eastern parts of the Congo basin, to accept a position serving Leopold as governor of the Stanley Falls area, in the Upper Congo. From Zanzibar, BI’s steamer Madura carried the entire contingent, including Tippu Tip’s entourage, round to Banana, at the mouth of the Congo. It was one of the largest, best-equipped and most heavily-armed private expeditions – its armaments included one of the new and formidable Maxim guns – ever to set out for the African interior. By 21 April, it was at Leopoldville, on Stanley Pool, where the steamers promised by Leopold failed to materialise and Stanley was obliged to borrow or commandeer vessels for the next stage of the journey. They included the Florida, which was being assembled at Stanley Pool for the Sanford Exploring Company, an ivorytrading firm which Henry S. Sanford had set up in an attempt to benefit from all his work for Leopold. By June, Stanley and most of the party were some 1,000 miles from Leopoldville – at Yambuya, on the Aruwimi tributary of the Congo, which would be the main base for the final push, partly by river and partly overland, to Equatoria. William Mackinnon and the committee, kept constantly informed of the expedition’s progress by telegraph and by more detailed letters from Stanley,46 were delighted by the pace of events, and William felt vindicated in his decisions to mount the expedition and to accept the Congo route. Stanley, he wrote to Sanford, ‘had made excellent progress up to the latest account s we had from him & now we can hardly expect anything further until we have direct messages from Wadelei. The opportunity which his going there offers of extending British influence from the [east] coast up to Wadelai is one which if, as you say, is not taken advantage of now, will be lost forever. You know my sentiments in regard to matters of this kind, &

on 9 January 1887, when William Mackinnon was at Balinakill, but the minutes make no reference to the offer on the railway. (Minutes of Emin Pacha Relief Committee, 9 Jan. 1887, Stanley Papers, RP 2435 ii Batch 3.) The earliest reference to any knowledge of Leopold’s offer (beyond Stanley himself) appears to be Hutton’s mention of yet another letter, from Strauch, ‘asking if we are disposed to subscribe towards the new company, as the King wants to make it international to some extent’. (Hutton to Sanford, 23 Feb. 1887, Sanford Papers, Box 23, Folder 3.) 46 Stanley to W. Mackinnon, 22 April and 23 June 1887, MP Private Letters File 218. 399

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how I deprecate the shrinking policy of our rulers.’47 Such self-congratulation, however, was misplaced. Stanley’s difficulties were only beginning, and it would be December 1889 before he and what was left of his expedition would emerge on the Swahili coast. Instead of the twelve months confidently predicted by Stanley, and blithely accepted by William Mackinnon, the journey from coast to coast would take two years and ten months to complete – and in the process it would realise hardly any of the hopes that William, Kirk and their Foreign Office friends had placed upon it. ***** In April 1887, as Stanley and his men struggled to transport their stores and equipment over the escarpment separating the lower from the upper sections of the Congo, William Mackinnon was in detailed discussions with the Foreign Office in London over the means by which a different escarpment might be overcome. The aim was to connect the interior plateau of Iran by steam communication with the Persian Gulf. The scheme, to develop a combined river-rail route between Mohammerah on the Shatt-al-Arab and Burujird (Borujerd) on the western edge of the plateau, had certain parallels with Leopold’s blundering, and still inconclusive, attempts to build a railway to bypass the cataracts on the Congo. Both aimed to employ steam technology to provide hitherto land-locked territories with access to maritime trade and shipping, and thereby to promote their incorporation into the European-centred international economy of the period. In the Congo basin, however, transport innovation was associated with a form of monarchical imperialism which had much in common with the earlier financing of the conquest of the central Americas by Their Most Catholic Majesties, and which faced a relative political vacuum, where there were hardly any indigenous African political or military systems capable of stemming its penetration of the interior plateau. The proposal for a Persian railway, by contrast, emerged out of British diplomacy with a proud and fiercely independent Asian ruler, determined to control access to the tableland of the interior, and it had as its political context not the recent febrile Western European rivalries over Africa but an older, deeper strand of competition between British authority in India and the advance of Russian power in Central Asia. This was a foreign policy sphere of much greater importance to British governments and Foreign Ministers than sub-Saharan Africa. During the spring of 1885, indeed, Britain and British India had been placed briefly on a war footing as a result of Russian advances on the frontiers of Afghanistan. British policy-makers regarded Persia (Iran), like Afghanistan, as a buffer state between British India on the one hand and Russian power in Central Asia and the Caucuses on the other.48 The Shah of Persia for his part 47 48

W. Mackinnon to Sanford, 29 Sept. 1887, Sanford Papers. A.P. Thornton, ‘British Policy in Persia, 1858–1890’, English Historical Review, 69 400

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followed a foreign policy that was based on balancing the competing interests of Britain and Russia in his country. He had consistently fended off suggestions of ways to improve communications between the British-dominated Persian Gulf and the interior plateau, most of which centred on the opening of the river Karun to navigation by foreign-owned shipping and the construction of a road or light railway from a point on the river to a point on the western edge of the plateau where the great majority of the Iranian population lived. Meanwhile, the Russians, by completing a railway from Batumi on the Black Sea to Baku on the Caspian Sea in 1884, had strengthened the northern routes of access into Iran and further opened up the tableland not only to the trade of Russia but also to the enterprise of the Greek merchants of the Black Sea ports. Although roughly half of Persia’s foreign trade was conducted via the Persian Gulf – not only though such Persian ports as Bushire and Bander Abbas but also via Baghdad and Basra in Iraq – nevertheless there was a perception that the southern and western routes, and with them British trade and influence, were losing ground. ‘Something should be done now,’ one of the India Office’s advisers proclaimed, ‘to prevent Turkish Arabia and Southern Persia slipping out of our hands, commercially and politically, into those of Russia.’ 49 At this point, the Shah unexpectedly took a hand – intimating to the British legation in May 1886 that he was now ready to consider a British-financed railway from the Karun River, with the possibility of opening the river to navigation once construction was complete.50 In responding to this opening, the British government turned to George Mackenzie and William Mackinnon, as the foremost representatives of British commercial interests in the Gulf. For the men of the Mackinnon group, the Persian Gulf had become something of backwater. Its direct trade with Britain had proved insufficient to support a regular shipping line to and from London; the British occupation of Egypt in 1882 had deprived it of its strategic significance as potential secondary route between Britain and India; and it had lost ground within the Gray Dawes partnership to the commercial attractions of Queensland. Gray Paul & Co and Gray Mackenzie & Co continued to represent BI along the Persian coast and at Basra, and carried on trade on their own account – mainly involving imports of British and Indian textiles and metalwares and of French loaf sugar, together with exports of dates and cereals from Basra and of opium, dried fruit and nuts, raw cotton and pearls from the Persian ports. Trade, however, was far from buoyant – overall it was growing only slowly and

(1954), pp. 554–79, and 70 (1955), pp. 55–71; R.L. Greaves, Persia and the Defence of India, 1884–1892 (London, 1959). 49 Col. R. Murdoch Smith to Sir John Stokes, 2 Aug. 1885, enclosure in Stokes to Sir Julian Pauncefote, 4 Aug. 1885, FO 60/476. 50 Salisbury to Drummond Wolff, 29 Feb. 1888, FO 60/491; Greaves, Persia and the Defence of India, pp. 143–4. 401

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in certain lines, such as opium exports from Bushire and Bander Abbas, it slackened perceptibly in the mid-1880s.51 It had also become more competitive as new firms with connections in Bombay, London or Manchester moved in to try to claim a share of the business pioneered by the Gray Paul/Gray Mackenzie concerns. For these reasons, the Mackinnon group was disinclined to invest further in the Persian Gulf region. Indeed, in the first half of 1886 the Gray Dawes partners withdrew £31,173 from the Basra and Bushire firms, leaving them capitalised at about a half of what they had been worth in 1880.52 This action – representing a switch of funds towards Queensland – indicated a distinct lack of confidence in the immediate prospects of Persian Gulf trade. The lack of improvements in internal methods of transport within Iraq and Iran, resulting in turn in a slow rate of growth of trade between the seaports and the cities of the interior, had long been a principal constraint on the group’s activities in the Gulf. During the early to mid-1880s, there had been little sign of change. Indeed, in 1883 the Turkish government reacted to the British invasion of Egypt by revoking the firman that sanctioned the two steamers on the Tigris river which were operated by the little Euphrates and Tigris S.N. Co, in which the group had an interest. Thanks to William Mackinnon’s contacts with the Foreign Office, the British government sent a strong note of protest to Constantinople. This had the effect of making the Turks back away from the attempt to put the Euphrates and Tigris company out of business, and the firm’s contract with the Government of India, to deliver mails from Basra to Baghdad, was duly renewed in 1884.53 However, the Turkish administration remained hostile and obstructionist, partly out of a desire to assist its own Oman Ottoman shipping concern, and in 1888 it once again demanded the closure of the British postal service between Basra and Baghdad.54 The Euphrates and Tigris S.N. Co could only operate under the limited terms of an old arrangement to serve the communications needs of British representatives in Baghdad, and the rival Oman Ottoman company was considered to be too undercapitalised and poorly managed to provide an

51 J.A. Saldanha, Precis of Commerce and Communication in the Persian Gulf (Calcutta, 1906), pp. 42–65 (IOL&R, L/P&S/C248/A). 52 Account Book, Capital and Private, Inchcape IBEA 1411. The loss of confidence in East African trade was even greater, the capital of Smith Mackenzie & Co being reduced from £24,166 in December 1885 to only £7,200 in June 1886. 53 Lee to W. Mackinnon, 5 and 12 July 1883, MP Private Letters File 107; J.G. Lorimer, Gazeteer of the Persian Gulf, Oman and Central Arabia (Calcutta, 1915), 1, Pt. 1, pp. 1534–7; Nos. 1438 to 1448 of Dec. 1883 and Nos. 640–642 of April 1884, Proceedings-India, Separate Revenue, Vols. 2102 and 2328, IOLR. 54 Memorandum by Dr R. Bowman on the ‘Oman Ottoman’ Steamers, 12 July 1883, Memorandum by Sir G. Dallas Respecting the Bagdad-Bussorah Post, 19 June 1888, India Office to Foreign Office, 18 July 1888, and Acting Consul-General Talbot to Sir W. White, 6 Sept. 1888, Confidential Print, Turkey No. 63, FO 424/160.

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efficient commercial river shipping service. The stand-off on the Tigris consequently strengthened the ambitions of those, like George Mackenzie, who wanted to see the Karun River become an alternative route by which to tap the trade of western Iran. The Karun, which flowed into the Shatt-alArab to the southeast of Basra, lay on the Persian side of the border between the Persian and Ottoman Empires, and it had come to be seen as the first crucial link in a chain of transport innovation and investment that could connect the British maritime presence on the Gulf with interior market networks centred on the cities of Isfahan and Tehran. The Shah’s offer of May 1886, to co-operate with the British government in developing the route, held out a lifeline to the Mackinnon group’s interests in the Gulf. If successfully brought to a conclusion, the proposals could revive the flagging prospects of the Gray Paul/Gray Mackenzie partnerships, open up a new waterway for the Euphrates and Tigris company’s river steamers, and generally boost BI’s shipping operations in the Gulf. For William Mackinnon in particular the opportunity for railway investment in Persia offered some consolation for his recent lack of success in railway promotion in Australia and the Congo, and was all the more welcome for being brought to him by the British government, implying some degree of official commitment and support. The receipt of the Shah’s offer resulted in the establishment in London of a small committee to advance the project. Its membership initially comprised Sir Philip Currie of the Foreign Office, Sir Owen Bourne of the India Office, Sir Ronald Thomson, the former British Minister at Tehran, and George Mackenzie – whom it was agreed should consult William Mackinnon and bring forward a firm proposal.55 The bare bones of a scheme were fairly quickly assembled and made known to Tehran. There should be an international company, with its headquarters in London, to finance and manage a narrow gauge railway from the most navigable point on the Karun to Burujird (Borujerd), with an eventual extension to Tehran and various branch lines. The Shah would have to provide land for the railway, including stands of timber, and allow the company to farm the customs of Bushire, Mohammerah and Shuster for a period of years, to enable it to pay up to 7 per cent per annum on the capital investment for the railway. ‘It is essential to the execution and success of these projects’, the Foreign Office stressed, ‘that the Karun should be opened to navigation by the Company.’ It also informed the British legation that ‘commercial houses of high standing’ would be prepared to take up the scheme and that ‘Baron Reuter will cooperate in the enterprise.’ 56 In short, the proposed railway and river navigation company would probably be a joint venture between the Mackinnon group and Baron Reuter and his financial backers, presumably including Matheson & Co.

55 56

Minute by Sir P. Currie on India Office to Foreign Office, 27 May 1886, FO 65/1286. Foreign Office to Nicolson (telegram), 4 June 1886, FO 60/484. 403

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However, when these proposals were put to the Shah and his ministers, it became clear that they went well beyond what the Persian government had in mind. Customs farming in Persia was a perquisite of the Amin-es-Sultan, or Prime Minister, who would be unlikely to agree to hand over any part of it to a British company, while the Shah himself resolutely refused to cede navigation rights on the Karun. He intended to give such a concession to a Persian concern once a railway had been built over the very difficult terrain between the river and the western edge of the plateau. Voices also began to be raised (possibly from more pro-Russian elements within the government) that the British river-rail scheme was a threat to the country’s security.57 For all of these reasons, negotiations between the Foreign Office and the Shah dragged on into the early months of 1887. A draft contract sent out to Tehran in January 1887 made some attempt to compromise with the Shah’s position – the company would conduct river operations only until an additional railway line could be built alongside the river from Mohammerah to the town of Ahwaz, where it would link up with the line to Burujird and Tehran, and the customs farm would be relinquished once the company had received ‘a dividend on cost of railway’ of 10 per cent per annum for five years. In transmitting these revised proposals, the Foreign Office asserted ‘that responsible commercial firms in this country would be prepared to take it up and to bring it before the public in the manner best calculated to secure the subscription of the necessary capital’.58 Such confidence was misplaced. A few months later, William Mackinnon, who had been party to the discussions leading to the preparation of the draft contract, let it be known that the scheme as it stood was not enough. He now informed the Foreign Office that it would be ‘hopeless to expect the public to subscribe the capital necessary for any portion of the proposed railway without some guarantee from the Imperial Govt. or from the Govt. of India’. Such a guarantee, which should provide the equivalent of 3 per cent on capital, would cost between £50,000 and £60,000 per annum and would be in addition to the lease of the Customs by the proposed company. ‘The material interests of British commercial development,’ he claimed, ‘as well as the equally important consideration of political influence, seem to me sufficient warrant & inducement to undertake the limited financial liability’ of such a guarantee. ‘It only requires such facilities as a railway under British control would provide to make the Persian Gulf trade second only to that of India & our great colonies’, and ‘it is of great political importance to this country to secure at least the southern part of Persia as much as possible from the intrigue of other powers.’ In seeking to head off any claim that the commercial benefits from such a subvention

57

Nicolson to Currie (private), 8 June 1886, FO 60/479; Nicolson to Currie, 29 Oct. 1886, FO 60/480; Nicolson to Salisbury, 21 and 30 March 1887, Nicolson to Currie, 30 March 1887, FO 60/486. 58 Foreign Office to Nicolson, 11 Jan. 1887, FO 60/485. 404

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would accrue mainly to himself and his family firms, he stated that he had no desire to invest in such an enterprise but would help to promote it because ‘if carried out promptly & energetically it could not fail to be a great value and importance to the general interests of this country & of India’.59 The appeal to the public purse on grounds of patriotic virtue was typical of William Mackinnon’s approach to the financing of transport innovation along the Asian and African margins of the Empire. However, his view that it would be ‘hopeless’ to proceed without a financial guarantee from the British or Indian governments almost certainly reflected difficulties he was experiencing in putting together a syndicate to ‘bring out’ the railway once a concession had been obtained from the Shah.60 Those he approached were apparently nervous about the risks of investing in Persia and unwilling to proceed without the backing of the British or British Indian governments, less perhaps for the money this would provide than for the political – and ultimately military – security it offered. Such hesitation was as large a constraint on the success of the project as the reluctance of the Shah’s government to grant the customs revenues and freedom of river navigation which had been demanded – because Lord Salisbury’s Conservative government had no intention of supplying a guarantee. It referred the scheme to the Government of India, with Salisbury’s recommendation for ‘careful consideration’, in the hope that the Indian taxpayer might foot the bill. The Viceroy proved willing to support the scheme financially – and to do so against the majority view of his own Council – but only if the Imperial Treasury shared the costs, something which Salisbury brusquely ruled out as ‘impossible’.61 Consequently, by the summer of 1887 the latest project to open up river-rail communications in south-west Iran had reached an impasse, with neither William Mackinnon nor Lord Salisbury nor the Shah willing to commit themselves to what each thought the other two should do. Matters were no further forward by February 1888, when Salisbury briefed Sir Henry Drummond-Wolff, his choice as new Minister to Tehran. One of the main problems, he pointed out, was finding the means to provide sufficient security for capital, without which ‘it is not to be hoped that British capitalists will be ready to invest their money in an enterprise which contains so many elements of risk.’ He concluded that ‘as we cannot offer a guarantee and British capitalists hesitate to come forward without one, it will not do to press our scheme too strongly’.62 By then, William Mackinnon and his friends

59

Memorandum by W. Mackinnon on Proposed Persian Railway & Navigation Concession, 4 April 1887, FO 60/490. 60 Mackenzie to Sanderson, 28 June 1887, FO 60/490, refers to the existence of such a syndicate, but without revealing its composition. 61 Foreign Office to India Office, 6 April 1887, India Office to Foreign Office, 12 May and 27 June, 1887, and minutes on latter by PS and Lord Salisbury, FO 60/490. 62 Salisbury to Drummond-Wolff, 29 Feb, 1888, FO 60/491. 405

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and associates had largely turned their backs on the Persian railway, deeply disappointed by the absence of concrete support from the British government. The scheme which promised to revitalise the group’s businesses in the Gulf having failed, William turned his attention once again to the question of how to promote its interests in eastern Africa, and even George Mackenzie found himself devoting more time and energy to the group’s East African margins than to the Persian Gulf in which he had spent most of his working life. It consequently came as a considerable anti-climax when, in October 1888, Drummond-Wolff finally succeeded in getting the Shah to sanction free navigation on the Karun, from Mohammerah to Ahwaz, some seventyfive miles up river, where a barrage prevented further direct navigation.63 The Euphrates and Tigris S.N. Co’s steamer, Blossé Lynch, was quickly transferred from the Tigris to the Karun, to take advantage of the opening, although it soon had to be replaced by a vessel more suited to the river (a shallow-draft stern-wheeler, the Shusan). In 1890, BI agreed to make Mohammerah a port of call for its steamers on the line between Bombay and Basra. But none of this, although hailed as a diplomatic coup, was the commercial breakthrough for which the Mackinnon ‘clan’ had hoped. Local Iranian officials continued to be obstructive, the lower Karun itself flowed through such sparsely populated territory that there was very little trade to divert to the steamer, and the new service ran at a loss.64 The river only had value as a transport route if it could be linked by an overland railway or road to the tableland of the interior. In the absence of any viable scheme to secure that crucial stage, dreams of a deeper commercial penetration of Persia faded away and the railway to Tehran joined a growing list of failed railway projects with which William Mackinnon had been associated. ***** During 1886–7 the future direction of William Mackinnon ‘patriotic’ endeavours along the frontiers of British influence in Asia and Africa was far from clear. Despite the calls on him from friends, business acquaintances and representatives of the State to become more actively engaged in the affairs of East Africa, he limited his expenditure in that region to the despatch of the Emin Pasha Relief Expedition, while at the same time giving serious

63

Drummond-Wolff to Salisbury, (telegram) and Salisbury to Drummond-Wolff (Telegram), 25 Oct. 1888, FO 97/590. The British Minister secured this modest concession in return for a vague promise that Britain would take ‘such steps as best calculated to prevent any infringement of the integrity of Persia’ in the event of any attack by a third party. 64 G.H. Curzon, Persia and the Persian Question (London, 1892), Vol. 2, pp. 333–4; also correspondence in Proceedings, India, Foreign, Vols. 3501–3 and 3738, and Proceedings, India, Separate Revenue, Vols. 3497 and 3734. 406

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consideration to a potentially large investment and significant business opportunity at the head of the Persian Gulf. Of the two options facing him, there seems little doubt that a railway into Iran would deliver greater, and more immediate, benefits to his family firms and his wider business network than a trading company operating from Mombasa. However, the Persian option was closed by Salisbury’s refusal to provide a financial guarantee, and left him facing only the prospects on the eastern African frontier. His inconclusive dealings with Salisbury over the railway project also probably influenced his negotiations with the British government over East Africa, contributing to Salisbury’s perception of him as a reluctant or half-hearted imperialist65 and to the lack of urgency with which Salisbury dealt with his proposals for a chartered company. What the Iranian episode demonstrated above all, however, was that in William Mackinnon’s version of imperialism trade followed the flag. His was a business-driven vision of transport and trade development in less developed regions in which private enterprise sought the financial support and political security which only the imperial State, or its devolved colonial administrations, could provide. Without such backing – which he was as prepared to accept from a Dutch, Portuguese or even a Belgian imperial system as from a British one – he would not hazard his own capital, far less that of his family and friends. Yet despite such a clear view as he expressed over the proposed Persian railway – namely that the task of introducing steam transport technology into Asian or African territories could not be undertaken by private enterprise alone – he was about to abandon caution and commit himself to a very high risk project in East Africa, in which the nature and extent of official support for private enterprise was ill-defined and ambivalent. It would be the biggest single mistake of his business career.

65 See comments on Mackinnon’s East Africa concession scheme of 1877–8, in Minute by Salisbury on Memo by W. Mackinnon, 7 May 1887, FO 84/1863, and Minute by Salisbury on W. Mackinnon to Salisbury, 8 Dec. 1888, FO 84/1934. It is unlikely to be a coincidence that these views were expressed after Mackinnon refused to go further with the Persian railway scheme without a government guarantee.

407

16

A false dawn: East Africa and the western Indian Ocean, 1887–90 The Imperial British East Africa Company, with William Mackinnon as President of its Court of Directors, obtained a royal charter from Queen Victoria in September 1888. It was one of three chartered companies established with support from British governments which were reluctant to spend money in acquiring new colonial possessions in Tropical Africa, but which were equally reluctant to leave the field entirely to other European powers and therefore encouraged private enterprise to take up the task of acquiring and administering new territory in the name of the Crown. The Imperial British East Africa Company was the weakest of the three new organisations. The Royal Niger Company was based upon a well-established trading organisation on the Niger and could draw upon the profits of a nearmonopoly of trade which its charter enabled it to exercise on the lower and middle reaches of the river. The British South Africa Company had at its disposal the great wealth of the diamond magnate, Cecil Rhodes, and his associates, the prospects of further mineral riches in the territories into which it proposed to move (especially the gold fields known to exist in Mashonaland), and the manpower resources of a white frontier society in Cape Colony. By contrast, the Imperial British East Africa Company (or IBEA Co) had behind it only the uncertain commitment of a looselyorganised, and geographically-diverse, shipping and trading group whose main interests lay elsewhere than in Africa. It was also set up to acquire territory in a part of East Africa where there was no existing British enterprise, where the value of trade was small by international standards, in which the market economy was weakly developed and where future economic prospects were largely unknown. Not surprisingly, therefore, IBEA Co was also the shortest-lived of the three British chartered companies in Africa. It was in serious trouble by 1891, a mere three years after receiving its charter, and only the complexities of extricating it from the political situation it had helped to create in East Africa kept it going until 1895. By then its founder was dead – leaving behind a reputation as someone who, although acting from the best of motives, had presided over one of the more muddled and sorry episodes in British imperial history. The short life of this most highly publicised of William Mackinnon’s various ventures inevitably raises questions about the relationship between aims, methods and achievements. Did the Imperial British East Africa Company fail because its objectives were unattainable, or because the means 408

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employed to achieve them were inappropriate? What exactly were these objectives anyway? Were they essentially political in character – an attempt to create a counterweight to the advance of German colonialism in East Africa by a cluster of publicly-spirited individuals concerned by the unwillingness of the British government to take responsibility for its so-called ‘sphere of influence’ in the region – or were they founded in business considerations, ultimately driven by the search for financial profit? If there were business objectives at work, what could these possibly be, given the relative poverty and underdevelopment of the territory concerned and the need for substantial investment in infrastructure for any economic potential to be realised? Why, in short, should such an apparently hard-headed, and hitherto relatively successful, entrepreneur as William Mackinnon involve himself and his family-centred business network in an enterprise which so obviously differed from anything they had tackled before, which was so far removed from their principal spheres of activity in India, Indonesia and Australia, and which seemed to offer so few prospects of an immediate return on capital? Henry Morton Stanley, one of several men influential in pushing William Mackinnon towards the creation of a chartered company, would claim that ‘the object of the Company was mainly commercial and, left alone by politicians, Mackinnon was the man to make it remunerative’.1 Other men close to the action took a very different view. ‘There is no question that the objects of the founders of this Company were purely humanitarian’, was the opinion of Percy Anderson of the Foreign Office, ‘though it was hoped that it might pay its way’.2 Most modern scholarship, unable or unwilling to locate the origins of IBEA Co in William Mackinnon’s business background, has been inclined to share Anderson’s ‘not-for-profit’ interpretation. Thus John Galbraith, in a detailed account of the rise and fall of the company, concludes that its purposes were essentially political in nature – that its directors ‘believed that they were acting not primarily as businessmen but as imperialists and that the greatest dividends would not be in personal profit but in securing to Britain territories which would be valuable economically and strategically’. This was particularly true of William Mackinnon, who in the last years of his life ‘manifested all the attributes of a convert to the religion of imperialism’, who was ‘a far more ardent imperialist than the cautious politicians of Whitehall’ and who ‘attempted by private means to accomplish great public ends’.3 A similar conclusion, although placing stress more on

1

Dorothy Stanley (ed.), The Autobiography of H.M. Stanley (London, 1909), p. 446. Memorandum on Uganda by H. Percy Anderson, Foreign Office Confidential Print, FO 881/6249. 3 J.S. Galbraith, Mackinnon and East Africa, 1878–1895: A Study in the ‘New Imperialism’ (Cambridge, 1972), pp. 238–9. For those who wish to make comparisons, my account of IBEA Co’s history differs from Galbraith’s in a number of respects – particularly over its links to the Emin Pasha Relief Expedition and to the attempted reconstruction of BI’s liner services in the western Indian Ocean. 2

409

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William Mackinnon’s personality than his ideological commitment, is offered by Pakenham’s popular and colourful history of the Scramble for Africa. IBEA Co was the product of the ‘other’ Mackinnon – ‘an idealist and romantic, struggling to escape from behind the cash register’, who because of his ‘unrequited love affair with Africa’ was prepared to undertake a risky venture in which ‘a simple canny Scot would never have become involved’.4 However, this prevailing view of William Mackinnon as a man who set aside financial sense and business responsibilities in an attempt to ensure that the Union Jack flew over a part of the East African mainland is difficult to reconcile with the William Mackinnon who had previously ignored John Kirk’s plea to install agents in four East African coastal ports because the commercial conditions were not right or who had turned down James Hutton’s proposal to establish a trading company in the newly-acquired British ‘sphere of influence’. It is also hard to reconcile with a William Mackinnon who had just walked away from a rail and river navigation project in Iran because it did not command sufficient support from the British government or who had acquired a reputation along the Australian coast as a tight-fisted shipowner who drove a hard bargain. Is it possible that business as well as political imperatives lay behind IBEA Co, and that failure stemmed as much from the fact that these objectives could not be met as from any political complications? Such strategic business thinking might be concerned more with the way that the company served the wider interests of the group and network which gave it birth than with its own immediate commercial prospects. As C.C. Wrigley has pointed out, IBEA Co was run by shipowners and merchants who had ‘every interest in persuading the imperial government to ensure that the total trade of East Africa was expanded and that most of it would be handled by British agents and carried in British ships’, and who furthermore ‘stood to gain largely from the opening of East Africa even if the Company itself were bankrupted’.5 There is clearly a need to understand where IBEA Co stood in relation to the Mackinnon group as a whole, and to take account of what was happening in the wider world economy as well as the narrower confines of Whitehall and Westminster, because William Mackinnon was a shipowner, merchant and railway promoter on a global stage. He was moreover a businessman of a very particular type – a public contractor who had spent almost his entire career operating along the interface between business and the state. There he was accustomed to telling politicians and civil servants what they wanted to hear in the hope or expectation of public subventions for his various

4

T. Pakenham, The Scramble for Africa (London, 1992), p. 342. C.C. Wrigley, ‘Neo-Mercantile Policies and the New Imperialism’, in C. Dewey and A.G. Hopkins (eds), The Imperial Impact: Studies in the Economic History of Africa and India (London, 1978), p. 26. 5

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ventures, and had to be equally skilled in translating the information he gleaned in return into new business opportunities. In the shadowy world where those who sought to sell something to the state tried to divine what the state might need and be willing to pay for, the possibilities for mutual misunderstanding were considerable. ***** The Imperial British East Africa Company was William Mackinnon’s opportunity to put into practice ideas about the development of trade along the Arab-Swahili coast which he had harboured since the mid-to-late 1870s. The concession schemes of 1878–9 were to be revived, taking into account the political changes that had occurred in the region as a result of the German intervention. Essentially that meant a focus on the port of Mombasa and its hinterland as far as Lake Victoria and the Upper Nile, rather than Dar-es-Salaam and its hinterland as far as Lakes Nyasa and Tanganyika. The long-term goals were to find a means of access overland to the steam navigation potential of the Great Lakes and the Upper Nile, and to link the trade-promoting effects of new transport technology in the interior regions to the commercial development of the coastal maritime zone. That zone in turn was to be linked to the wider world economy by BI’s steamship lines, for William Mackinnon’s ‘empire’, like that of a Venetian Doge, was more of the sea than of the land. Consequently, whatever was taking place ashore was linked to what was happening at sea. Within these broad parameters, William Mackinnon and his inner family circle had in mind an incremental approach to the attainment of objectives, following the step-by-step methods, alternating caution with acceptance of risk, by which they had built up their business group as a whole. However, although William had a sense of the sequence in which the various elements of the East African scheme should come together, gradually widening the financial exposure of his family and friends at each stage, he was able to exercise little control over the timetable. The Emin Pasha Relief Expedition was the first step in the process. Like the beaters sent out ahead of the guns on the moors above Balinakill, Stanley and his men were supposed to flush out Emin Pasha’s intentions for the future of Equatoria Province, and to obtain treaties with local African authorities between Equatoria and the coast which would give some legitimacy to any administration within the British ‘sphere’. Within days of despatching Stanley from London, William Mackinnon made the next move. He let it be known to the Foreign Office that he was willing ‘to rent the Mombasa block of Customs on liberal terms’. He also told the Sultan of Zanzibar that he was prepared to reopen negotiations for concessions of a ‘somewhat similar description’ to those which ‘Your Majesty was so gracious as to grant me eight years ago’ and which, if they had taken effect, ‘would have saved all the complications which have since arisen to Your Highness’s detriment & 411

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