The Amfioen Societëit (1745–1794): Opium,intra-Asian trade and the commercial world of Batavia in the eighteenth century

Introduction

In 1745, the official trade in opium in Dutch colonial Java was restructured due to the formation of the Amfioen Societëit (Opium Society). The objective of the Societëit was to reinforce the monopoly of the Dutch East India Company (Vereenigde Oostindische Compagnie or VOC) over the import of opium into Java, and to establish full control of the wholesale market by capturing the private ‘illegal’ trade in opium engaged in by VOC servants and high officials. The VOC's vision was that by bringing this competition into the fold and imposing an additional barrier to the wholesale market, smuggling by foreign and local actors would also cease. Opium was central to the local political economy in Java and the intra-Asian trade, and generated revenue that was critical to sustaining the VOC in Asia and its colonial centre of Batavia (present-day Jakarta). ¹ Indeed, the general history of the Societëit from the perspective of the VOC has been well covered – namely, the factors underlying the creation of the Societëit and the reasons for its dissolution. ² With the VOC at the centre, however, these narratives have largely divorced the Societëit from the local context, treating it as a primarily top-down institution conceived by and for the VOC in order to serve its own interests and those of a small circle of VOC servants and Batavian colonial elites. The VOC's tenuous control of this trade was limited to the maritime frontier and, while the Societëit monopolized the wholesale commerce in opium, the market in Java functioned due to the continued engagement of those who controlled opium's distribution and retail sale.

In practice, therefore, the Societëit was also geared to serve the intertwined interests of a host of diverse local actors involved in the opium trade in Java and beyond. The success of the opium trade in Java relied on the collaboration of actors with knowledge of and control over the retail trade – the part of the market where the VOC's influence was much more limited. Local – namely, Chinese – merchants, taxateurs (‘valuers’) and pachters (‘tax farmers’) were crucial to the success of the Societëit's wholesale trade, but we know little of the extent and nature of their involvement, or how they tried to increase their share in the opium business vis-à-vis the VOC. Who were these local actors? What incentives fuelled their participation in the Societëit? And what were the actual and perceived benefits in collaborating?

Opium in Java

The establishment of the Societëit was a further step in the VOC's attempts to monopolize the import and wholesale trade in opium in Java and capture the exchange for its exclusive benefit. The VOC, however, targeted a pre-existing market. Opium was being brought to South East Asia by Muslim, Portuguese and other European traders for centuries prior to the Dutch, and their involvement in the trade just before the seventeenth century was still limited. ³ At first, the VOC exported only small quantities of Malwa raw opium from Surat to Batavia, but from the 1650s onwards, it began direct exports from its Hugli factory in Chinsura, just north of present-day Calcutta. The market for opium in Malabar was more limited in comparison to Batavia, but demand increased when the VOC acquired the monopoly for the import of opium into parts of Java from the Sultan of Mataram in 1677. ⁴ The VOC's trade in opium was now ‘determined at Batavia’, and orders rose sharply, increasing to 100,000 pounds per annum by the last quarter of the seventeenth century. ⁵ By the beginning of the eighteenth century, the Dutch were the single biggest purchasers of opium in the market in Bengal, and the VOC bought as much opium as all its European and Indian competitors combined. ⁶ Raw opium was packaged into chests and shipped to Batavia, where it was sold at public auction to the highest bidder. ⁷

Batavia was the centre of the VOC's trade and opium's (official) entry point into the inland market of Java and the surrounding islands of the archipelago, as well as other markets in South East Asia and China. While the Dutch intervention in this trade in the second half of the seventeenth century had a significant impact, firstly by increasing supplies and secondly by introducing tobacco, which greatly facilitated its consumption, these transformations were made to a pre-existing market controlled largely by local and Chinese traders. ⁸ Opium was profitable for the VOC due to local consumption and its value in the intra-Asian trade, where it was re-exported alongside other South East Asian commodities such as tin, sugar, rice, spices, camphor and medicinal herbs. The local Javanese consumed opium, but at far lower levels than the Chinese population, who fuelled demand and also controlled sales, distribution and the re-export trade. Opium was sought after by Chinese maritime traders, mainly from Fujian and Guandong, who seized on the reopening of trade in the early Qing Empire to diversify their portfolios, and who carried opium from Batavia and other parts of South East Asia to China's south-east coast. ⁹ As George Bryan Souza has emphasized, opium was a ‘transformational commodity’, and its role was not limited to its importance as an exchange commodity. ¹⁰ In Java, opium as both a commodity and currency was deeply intertwined with the development of trade in other sectors – most notably, the production of agricultural commodities such as sugar. Chinese traders and mill owners, who dominated the sugar industry, used opium to compensate labourers. The migrant labourers who worked on the sugar plantations were drawn from the Chinese diaspora who had settled in Java and other parts of South East Asia, and were either opium smokers on arrival or developed a habit soon afterwards. ¹¹ Opium and opium capital thus played an inextricable role in the development of the local economy in Java and were significant to the portfolios of the private actors who shaped Batavia's commercial milieu.

In both Bengal and Java, the VOC's direct control over the opium trade was largely limited to the maritime frontier, and it therefore relied on local agents to arrange the purchase and redistribution of opium inland, as well as manage and enforce the system of taxation. In Bengal, the VOC did not purchase directly from or negotiate directly with the producers. Instead, it relied on the services of local paikars (‘suppliers’) or koopleyden (‘merchants’), who directly supplied the Dutch factory at Hugli or linked the VOC with other agents, known as gomasthas. From the mid eighteenth century onwards, however, the Dutch were forced to contend with the emerging political dominance of the English East India Company (EIC), which sought to disrupt these pre-existing networks. After the Battle of Plassey in 1757 and its acquisition of the diwani (revenue collection rights) in 1765, the EIC used its political leverage to make radical interventions in the opium trade by imposing, firstly, monopsonistic rights and, in 1773, a full monopoly, which only took real effect in 1775. ¹² The VOC, however, tried to circumvent attempts by the EIC to monopolize the supply of opium by continuing to use its network of trusted local agents. In 1764, for example, following what was referred to as the Hugli Resolution of 25 February, the director, George Lodewijk Vernet, reaffirmed the names of 10 koopleyden with whom he was personally acquainted, who had ‘important capital’ and to whom VOC funds could be entrusted ‘without worry’. ¹³

The VOC was able to compensate for its inability to establish direct control over the supply of opium in Bengal by acquiring the monopoly for its import and sale in Java. ¹⁴ Nevertheless, its power was still limited to the port city of Batavia and the hinterland known as the Ommelanden. To extract as much revenue as possible, the VOC sought the highest profits at auction in Batavia and imposed import and export taxes, a system of licenses and other surcharges. Purchasers had to acquire licenses, which amounted to three per cent of the price paid at auction, in order to import opium into Mataram and islands of the archipelago other than Java. ¹⁵ The actual distribution of opium was left to the retailers, and the rights to collect taxes were farmed out to local – namely, Chinese – ‘tax farmers’ or pachters, who collected fees at various tolpoorten (‘toll gates’) across Java. Indeed, this system of taxation and revenue collection was not uncommon and was later employed in China, where Qing officials taxed opium's circulation after its import through farming or by subcontracting the rights to its taxation to businessmen involved in its retail sale and distribution. ¹⁶

The VOC only ever exerted tenuous control over the maritime frontier of this trade, and its import monopoly was subject to constant usurpation. At no point in its history, and certainly not during the lifetime of the Societëit, was the VOC successful in eliminating the so-called ‘illicit trade’. ¹⁷ It did not have the resources to police the vast waters around Java, and the topography of the archipelago, with its vast coastline and collection of small islands, was ideal for the smugglers. The ubiquitous presence of ‘breeding grounds for smugglers and deceivers’ seeking to carve out their own slice of this lucrative trade was a constant concern for the VOC. ¹⁸ The sluikhandel or morshandel in opium was considered one of the major causes of the VOC's diminishing revenue and contravened the instructions of the board of directors, known as the Gentlemen Seventeen, issued in 1685 to maintain the trade in opium ‘with all vigour’ for the VOC and ‘keep private individuals outside of it’. ¹⁹ In the latter half of the eighteenth century, this was particularly costly for the VOC, which was increasingly faced with an acute lack of funds and, by the 1740s, entering into a ‘period of decline’. ²⁰ While the VOC was usually in deficit, as expenditures were generally greater than income, the revenue generated from the commercialization of Bengal opium minimized this shortfall, at least in the comptoir in Batavia. ²¹

The private actors involved in smuggling included ‘inlanders’ (local Javanese), Chinese merchants and junk traders, Bugis, Ambonese vrijburgers (‘free citizens’), European burghers and Armenians. The VOC did baulk, however, at the ‘increasing insolence’ of its own servants. ²² In Java and Bengal, it could not stamp out this illicit trade, nor could it oversee the officials and labour force responsible at the docks, warehouses and customs houses. VOC servants in Bengal colluded with those in Batavia to smuggle significant amounts of opium on VOC ships. In 1727, for example, five VOC ships coming from Bengal registered no chests of opium but, after anchoring, a very considerable haul was found that, according to most suspicions, had been unloaded by the shipping authorities involved, but they were acquitted as no concrete evidence could be found to prove their guilt. ²³ As long as opium remained profitable, the servants of the VOC would continue to involve themselves in its illicit trade, and the comptoir of Batavia would be starved of the opium revenue on which it was increasingly reliant. The VOC was thus forced to come up with a solution that it could reasonably enforce and that fell within the scope of its limited authority. Any compromise had to appeal to the vested interests of those already involved in the business of opium in Batavia within and beyond the scope of the VOC.

The Amfioen Societëit: a local solution to a local problem?

In 1745, the former governor general of Batavia, Willem van Imhoff, thus proposed the creation of a private, joint-stock, privileged ‘society’ of private investors, who would be (legally) tasked with the wholesale trade of opium in Java. In the preamble of the plan submitted to the Raad van Indië (The Council for the Indies) for discussion, Imhoff concluded that the primary concerns were smuggling and ‘the local manner of selling opium’, which led to fluctuations in the market, especially the price and demand for VOC opium. ²⁴ Moreover, it was claimed that the Societëit would yield numerous benefits, not just to the shareholders and the VOC, but also to the colony as a whole. It was argued that societies such as this were ‘generally considered profitable’, as they generated not only revenue on merchandise, but also ‘good interest’ on capital advances, and lowered risks, as small losses could be offset by the ‘larger body’. ²⁵ In November 1745, the VOC granted the Societëit a 10-year octrooi (‘charter’), ceding to it the exclusive right of the wholesale trade in opium in Batavia, while reaffirming its monopoly on the import trade. It is surprising that historians of the VOC have not dwelt further on the implications of this remarkable, some might say brazen, act. Indeed, granting this set of privileges did not fall within the VOC's purview. It was a prerogative nominally reserved for the sovereign authority of the States General of the Dutch Republic. ²⁶

In return, the Societëit was obliged to purchase 1,200 chests of opium from the VOC each year at a fixed price of 450 rijksdaalders per chest, and it was charged a lower amount for quantities above the minimum delivery quota. ²⁷ Each share was priced at the considerable sum of 4,800 guilders, which amounted to a total starting capital of 1.5 million guilders. All of the shares were purchased within the first 16 days. ²⁸ In Batavia, the majority of the participants were senior VOC servants and wealthy burghers. Imhoff's successor, the new governor general and director of the Societëit Jacob Mossel, purchased 40 shares. His salary was 7,200 guilders per annum as director of the Societëit. ²⁹ The shareholders of the Societëit thus pointed to the existence of a highly capitalized elite class, who had built their fortunes in Batavia through the intra-Asian trade, and who reinvested their considerable fortunes in the colony. The rights and privileges afforded by the VOC to this small circle of political and commercial elites also denoted Batavia's evolution as an imperial centre – one that was consolidating its own sphere of sovereignty away from patria and taking independent measures to solve specifically localized problems.

It was hoped that these private investors would compensate for the VOC's structural weaknesses in combatting smuggling, as they would be incentivized to monitor the illegal activities of their subordinates so as not to jeopardize their ‘official’ trade in opium, which is estimated to have made the VOC a gross average annual profit of 125 per cent. ³⁰ Indeed, the common assumption has been that the majority of the shareholders in Batavia were those previously involved in the illicit trade. This, however, is difficult to prove in any certain terms as there are few records indicating who from within the VOC was engaged in smuggling and to what extent. Information regarding the scale of their personal trade in terms of the volume of opium smuggling and its overall significance to their individual commercial portfolios is also hard to establish. As such, the overall sum of ‘illegal’ opium capital, and the extent to which it corresponded to or superseded the value of the shares and dividends they individually received from their participation in the Societëit, is also unclear. If the illicit trade was so profitable and the penalties against smuggling were rarely enforced, what exactly did this group of commercial and political elites gain from pooling their capital and resources with other individuals who were ultimately their competitors? To answer this question, an analysis of the personal and family archives of prominent VOC shareholders is necessary, in order to reconstruct the profits derived from opium to their personal trade before and after their involvement with the Societëit.

By legalizing the illegal trade and thus allowing the VOC to take a cut of the latter, the Societëit was indeed presented as a radical solution to a complex problem. This did not, however, spell any major internal changes to the VOC's purchasing system in Hugli, which was challenged by an external set of forces and continued, unsuccessfully, to be responsible for combatting smuggling. The question that arises, however, is: How did the creation of the Societëit spell changes to the internal market in Java beyond the small circle of elite shareholders? In the first 15 years of the Societëit, the trade was more lucrative to the VOC than ever before, as it reaped a profit of about 500 to 600 guilders per chest sold, and the trade in opium was 40 per cent of its total trade. ³¹ This period of initial success was equally lucrative for the shareholders, who were paid dividends of at least 366 per cent or six million guilders. ³² But what does this tell us about the dynamics of the opium trade in Java and the strength of local commercial actors in the long eighteenth century? On the one hand, the Societëit's acquisition of the wholesale monopoly erected another barrier to the market and segmented it further. On the other, it seems that it did not fundamentally overhaul the pre-existing infrastructure of the wholesale sector or taxation of the trade, and thus had little impact on the pachters and those in control of the retail or re-export sale and distribution of opium. Moreover, for the retail trade controlled by Chinese opium traders and farmers, the creation of the Societëit did not result in any abrupt changes, as opium was still sold at auction and they continued to dominate the list of purchasers. Indeed, their strength in the market was such that it was widely concluded that:

it is the Chinese who indisputably control three-fifths of this trade and whose interests entail that opium is held at a high price at Batavia and along Java in order to help them sell it, and they are always taking care to increase the opium sold by the Society and make it more powerful. ³³

It is important to note that no retail purchaser of opium is listed as having purchased one of the 300 shares available in the Societëit. Why is only open to speculation. While the success of the legal trade in opium depended on the interaction between the wholesaler – the VOC and now the Societëit – and the retailers, these were intertwined but still separate worlds. While their interests intersected at the auction house in Batavia, the shareholders of the Societëit were drawn from the elite colonial stratum of Batavian society, who reinforced and lobbied for their own interests. Importantly, these were not circles that even the highest-ranked Chinese kapitans necessarily sought to enter, or where they could wield the same level of influence. While their interests converged around the mutual interests of generating capital through opium, this divergence reflected the inherent divisions and segregated political and social milieu of eighteenth-century Batavia.

To say that these divisions were immutable and that the commercial world of Batavia was impenetrable to non-VOC actors and the colonial elite, however, would be a gross overstatement. Indeed, as Souza has demonstrated in his general overview of the purchasers of the Societëit, this group of people reflected another commercial elite and consisted of a far more diverse set of people. ³⁸ This was true not only in terms of the ethnic, religious and communal make-up of the purchasers, but also in terms of their commercial weight and social standing. The Societëit catered to the demands of high-ranking, moneyed merchants, who were most likely already involved in the trade, as well as middling and petty traders, along with other individuals seeking to generate opium capital. These purchasers were mainly Chinese, including people of mixed descent or peranakan, but also included free burghers and European, Armenian, Javanese, Malay and ‘Muslim’ – including South Asian – traders. ³⁹ Moreover, while men inevitably dominated, the trade was not closed off to women, who also recognized the profitability of opium. In-depth and further examination of the purchase records indicates that while the presence of women such as Chinese widows and Balinese vrouwen (Balinese women) was minimal, it was not insignificant. What could their participation contribute to our broader and as-yet-limited understanding of the role of women in the trade of early modern Batavia?

How exactly did the Societëit open the possibilities for such a diverse list of participants? The answer to this can be found in the clause of the charter concerned with purchase arrangements, which facilitated the entry of diverse participants into the market. As stipulated by the charter, opium could be paid for not only in ‘cash, gold, silver, or jewels’, but also, and perhaps most importantly, on credit. ⁴⁰ The credit arrangement by which opium could be purchased in advance was based on a system of obligaties. ⁴¹ The terms of these obligaties and their use by the diverse groups previously mentioned, as well as the general figures pertaining to the number of purchasers and who they were, have been brought to light by Souza in his preliminary examination of their records. ⁴² Obligaties were promissory notes or debenture bonds, which were subject to interest and a repayment period of (ostensibly) four months. ⁴³ To obtain an obligatie, the buyer had to submit an aanvraag (‘request’) to have their risk and credit-worthiness vetted, and provide the names of two – sometimes three – guarantors. ⁴⁴ Beyond the information provided in the obligaties regarding the group and individual identities of these purchasers and potentially their networks, other questions are raised by the existence of this credit arrangement. Why did the Societëit allow for the purchase and financing of opium on credit via obligaties and not, for example, through bills of exchange? What does this say about the exigencies of the local market and why did the purchasers themselves employ obligaties? In sum, what more does the use of obligaties indicate about the networks and levels of trust and risk-sharing among those involved in the opium trade within the local mercantile world of Batavia during the period in question?

At this stage, some preliminary remarks can be made about the significance and implications of this clause in the Societëit's charter. First, it fulfilled a core objective in the plan, which was to generate additional revenue from the ‘good interest’ on credit advances of opium. Second, it underscores the fact that this was a charter that was formulated in situ and therefore responsive to the exigencies of the local context and the capital needs of local actors. Indeed, one of the key challenges facing all opium traders, even highly capitalized merchants, was how to gather sufficient capital to purchase opium and meet the associated surcharges imposed by the VOC, such as export duties, as well as the transport and manpower costs of its distribution or re-export. In short, the capital subscribed by the sale of shares allowed the Societëit to act as a kind of commercial bank, which had an expectation of profits from the sale of opium and the interest charged on the extension of credit through obligaties.

While the opium trade was lucrative, it was also unpredictable, and the market was subject to sharp fluctuations based on supply, which directly affected the wholesale price of opium. Obligates fulfilled the primary capital needs of the local market and, with their relatively long-term arrangements of four months, acted as a financial buffer that helped local merchants manage the risks inherent to the trade. Moreover, given opium's penetration into other circuits of the intra-Asian trade, coupled with its importance to the agricultural sector of the local economy, this credit arrangement allowed merchants to divert or reinvest opium-derived capital and profits into other branches of commerce and production, and thereby develop their commercial portfolios further.

In this respect, opium's penetration into the financial networks of Java and the Societëit's central role in facilitating the expansion of credit are key to understanding opium’s function as a form of commodity money. As such, the Societëit should also be positioned alongside other formal credit institutions that existed in Batavia, such as the Bank Courant en Bank van Lening (1746–1794) and the Weeskamer (Orphan Chamber), which housed and provided credit to and for the local mercantile community in Batavia. At present, we know little about how Chinese merchants in the early modern period employed these institutions to finance and facilitate their trade, and expand their commercial portfolios. How, for example, did they complement or provide better credit arrangements than communal organizations such as kongsis, the Kong Koan (Chinese Council) in Batavia and temple associations? ⁴⁵ A more extensive analysis of the obligaties to reconstruct the quantities and value of the opium bought on credit by Chinese merchants and other private traders, as well as how frequently opium was purchased and on what terms, will greatly contribute to our understanding of their engagement with external credit institutions. This analysis also has implications for understanding the early modern opium trade. The body of historiography on the topic, especially for Java, is significantly more limited than the literature that exists for the modern period. How did the strategies of early modern opium traders in the diaspora compare or differ, and to what extent did they inform the techniques employed by their successors?

The records of the obligaties also contain potential insights into patterns of risk-sharing and the pooling of resources and capital across a network of cross-cultural actors. The personal information of the applicants that was divulged as part of obtaining an obligatie included their place of residence, occupation and rank. Moreover, in many cases, their guarantors were drawn from outside their group, lineage or community. ⁴⁶ Building on these general observations, how exactly can we read and reconstruct the networks and cross-cultural partnerships from obligaties in terms of the collateral/assets they provided, and the frequency and riskiness of their guarantorship in terms of the volume and value of the wholesale opium purchased? Given the fact that, as Souza has uncovered, primary purchasers were also guarantors and vice versa, what does this indicate about the size and scope of this group of opium traders if risk was shared and transferred within a relatively small group of businessmen (or businesswomen)? Reconstructing the type and value of the collateral pledged as borgen, and the extent to which it was made up of both mobile and immobile assets, including property, will also provide new insights into the profiles of this commercial class. Can we identify powerful firms or partnerships, individual entrepreneurs or even early modern opium barons, and the extent of their institutional linkages? How did purchasers and guarantors relate to each other in the local market of Batavia, and what can we determine about the levels of mutual trust and confidence given the inherent risks associated with liability? The process by which credit was extended was based on the purchaser's reputation and solvency. This implies that information was provided to the officials of the Societëit by individuals who had some degree of familiarity with the purchasers in question and, therefore, endorsed their solvency, which would help to reveal networks and perceptions of trust. On what basis were individuals denied credit, and what could this imply about their commercial and social standing? It is insufficient to rely solely on the sources of the Societëit to try to ascertain the centrality of opium to the portfolios of every major purchaser or to judge its importance in underwriting their agricultural enterprises. These records are, however, a solid starting point, which, if combined with an exhaustive analysis of the substantial notarial archives of the National Archive in Jakarta, should prove fruitful.

Conclusion

This discussion has not extended to evaluating the fluctuating success of the Societëit or its ultimate demise. Indeed, as the authors cited here have demonstrated, after its inception, the Societëit enjoyed a period of success, but supply difficulties in Bengal and the persistence of smuggling continued to hamper its ability to compete with the ongoing illicit trade. Indeed, smuggling continued in all its previous forms: it continued to penetrate the maritime frontier and was carried on in foreign ships and by European private traders. Opium was smuggled out of the VOC's warehouses by its own officials in collusion with locals and European burghers, and it was brought in by Chinese traders, who employed the small islands off the north coast of Java to house opium before clandestinely routing it through inland smuggling networks and safe houses. ⁴⁷ By the time of its dissolution in 1794, the clique of high VOC officials in Batavia who had lobbied for the Societëit's creation, and had profited the most from this deal, no longer existed or had repatriated. Indeed, the Societëit had, for a time, satisfied the goals of a colonial interest group, but the original cartel no longer existed. As such, it was increasingly considered an unnecessary middleman, and the VOC resumed both streams of the wholesale trade, taking over the Societëit's role of selling opium at auction. The opium business was therefore a many-headed hydra that the VOC could never slay. For those involved in cultivating this business in Java and beyond, the rise and fall of the Societëit did not ultimately define their fates. This is testament to the strength and leverage of these actors, but also underscores the fact that it was often the VOC that had to adapt to the market, rather than the other way round. Indeed, the history of the opium trade in early modern Java is less a story of VOC dominance than one of inextricably intertwined interests, where collaboration and negotiation with those who controlled and had knowledge of the market was necessary. It is precisely to this class of actors – from the highly capitalized opium merchants to the petty traders, taxateurs and pachters who worked with but also against the VOC – that we must shift our attention.