Byzantine Empire, Bosporus, Silk Road, Dutch East India Company, English East India Company, Tea Act and Opium Wars

Posted by PITHOCRATES - March 11th, 2014

History 101

(Originally published May 15th, 2012)

To encourage Risk Takers to Travel Halfway around the World Mercantile States granted Monopoly Charters

The modern world began because Europeans had a penchant for silk and spices.  Something they enjoyed during Roman times.  When the Romans ruled the world.  And the Mediterranean Sea was nothing more than a Roman lake.  But when the empire stopped conquering new lands and sending the spoils of war home they had to turn to other means to pay for the cost of empire.  Taxes.  To pay for the Roman government and their public spending.  And the Roman legions.  This excessive government spending led to the fall of the western half of the empire.  But the eastern half lived on for another 1,000 years or so.  Why?  Because the capital of the Byzantine Empire was Constantinople.  On the Bosporus.  Trade crossroads of the world.

This city was so rich everybody wanted to conquer it.  So they could have all those riches.  For everything that came along the Silk Road from China crossed into Europe at the Bosporus.  Soon Muslims fought Christians in the Holy lands.  Then more Christians came.  The Crusaders.  Those who didn’t die went back to Europe with some of those Chinese luxuries.  Spices.  Silk.  Porcelain.  Etc.  Sparking a renewed interest in these finer things in Europe.  Especially the spices.  For European cooking was horribly bland at the time.  The Ottoman Turks eventually took Constantinople.  Renamed it Istanbul.  And controlled that lucrative trade.  Making those much sought after Asian goods rather expensive in Europe.  Which they had no choice but to pay.  Because if you wanted those luxuries you had to go through Istanbul.  Until the Portuguese sailed around Africa and found a direct route to those cherished goods, that is.

It was the Commercial Revolution.  A new age of international trade.  A trade even more profitable than what the Ottoman Turks controlled.  Because big ocean-going vessels can carry more cargo than anything coming over land on the Silk Road.  And these new European maritime powers wanted that wealth.  And the power it would provide.  To encourage risk takers to get into those wooden ships and travel halfway around the world they granted monopoly charters.  The Dutch East India Company (VOC) was one of the largest.  And one of the wealthiest.  But this was not your typical company.  The VOC established overseas colonies.  It waged war.  Established treaties.  Even coined its own money.  Because of this thousands of VOC ships stuffed full of valuable cargoes sailed to Antwerp and Amsterdam, making the Dutch very wealthy.  And powerful.

The Tea Act allowed the Company to Ship their Tea Directly to America and exempted them from any Duties

Of course the Dutch weren’t the only ones doing this.  They had competition.  Portugal.  Spain.  France.  And England.  Who would bump into each other numerous times fighting for control of this trade.  And those colonies.  The English and the Dutch would fight 4 wars.  Which is how Dutch-founded Manhattan became part of the British Empire and, subsequently, one of America’s greatest cities.  The English East India Company gave the VOC a run for its money.  Parliament even passed legislation to give the English a monopoly on all trade with their American colonies.  The Navigation Acts.  Which stated that all trade to and from America had to be on English ships.  And all trade had to go through an English port.  Where the ships were unloaded and the cargoes inspected.  And taxed.  Then they could reload their cargoes and continue on their journey.  All tenets of mercantilism.  This kept the lower-priced Dutch goods out of America.  And prevented the Americans from selling to the Dutch directly for higher prices.  So it shut down the Dutch from all American trade (except for a prosperous black market). And brought in some lucrative tax revenue for England.  While extending shipping times and increasing prices for the Americans.  Which they were not happy about in the least.

The English East India Company (the Company) was similar in structure to the VOC.  And soon made the Indian subcontinent a wholly owned subsidiary of the Company.  But it wasn’t cheap.  Waging war was costly.  As was managing those conquered territories (something the Romans had also learned).  Then a famine in Bengal in 1770 claimed about one-third of the local population.  Making laborers more scarce.  And more expensive.  All at a time when the sales of their imported goods were falling in Europe.  There were warehouses full of unsold Chinese tea that they couldn’t sell.  Making for a bad time for the Company.

Higher costs and lower sales spelled trouble.  And that’s what the Company had a lot of.  Trouble.  So the Company turned to Parliament for help.  And Parliament helped.  By allowing the Company to ship their tea directly to America without having to unload it in a British port.  Or pay a duty on that tea.  Which would greatly reduce their costs.  And allow them to sell it in America cheaper than they did before.  So Parliament passed the Tea Act in 1773.  Making life better for all involved.  But the Tea Act left in place another tax in the previous Townshend Acts.  Which was a bigger problem than getting cheaper tea (which they could get on the black market from the Dutch).  These taxes on the British subjects in America were unconstitutional.  Because there were no Americans sitting in Parliament.  This was taxation without representation.  A much bigger issue than cheap tea.  So they threw that first ‘cheap’ tea into Boston Harbor.  The Boston Tea Party being a major step towards war with the mother country.  And American independence.

Britain became the Lone Superpower after Abandoning their Protectionist Mercantile Policies and Adopting Free Trade

The American Revolutionary War was not the only headache the British got from their mercantile policies.  Part of those policies required maintaining a positive balance of trade.  So there was always a net inflow of bullion into the mother country.  That’s why raw materials shipped into Britain from America.  And finished goods shipped out to America.  Finished goods are more valuable than raw materials.  So the Americans had to make up for this balance of trade in bullion.  Resulting in a net inflow of bullion into the mother country.  Very simple.  As long as you can manufacture higher valued goods that other people want to buy.

And this is the problem they ran into with the Chinese.  For though the British wanted those Chinese spices, silk and porcelain the Chinese didn’t want anything the British manufactured.  Which meant Britain had to pay for those luxuries with bullion.  Including all that Chinese tea they craved.  Which resulted in a net outflow of bullion to the Chinese.  The British fixed this problem by finding the one thing that the Chinese people wanted.  Indian opium.  Grown in Bengal.  Of course, this turned a lot of Chinese into opium addicts.  The addiction problem was so bad that the Chinese banned opium.  But the British were able to smuggle it in.  They sold so much of it that they used the proceeds to buy their tea.  Thus reversing the bullion flow.

Not the finest hour in the British Empire.  The Chinese and the British would go on to fight a couple of wars over this opium trade.  The Opium Wars.  Which the British did all right in.  Even gaining Hong Kong in the bargain.  They didn’t build any long-lasting love with the Chinese people.  But Hong Kong turned out pretty nice under the British.  Especially after they abandoned their protectionist mercantile policies and adopted free trade.  Which made the British the lone superpower for about a century as they modernized the world by leading the way in the Industrial Revolution.  And the Chinese in Hong Kong were very happy indeed to be there when the communists took over the mainland.  And caused a famine or two.  For they lived comfortably.  In a state founded on mercantilism.  That achieved its greatest prosperity during the free trade of capitalism that followed Britain’s mercantile ways.

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Governments turn People into Addicts to generate Tax Revenue

Posted by PITHOCRATES - January 4th, 2014

Week in Review

During the days of the British Empire Great Britain had a problem.  They loved Chinese tea.  But the British had nothing the Chinese wanted in trade.  Except for one thing.  Silver.  Hard money.  Which was a problem for Britain.  They were running out of hard money.  So they came up with an ingenious way to solve that problem.  By getting as many Chinese hooked on opium as possible.  So they could trade Indian grown opium for Chinese tea.  It worked out great for the British.  But the Chinese didn’t like it.  And fought two opium wars with the British.  Which did not end well for them.

North Korea has a hard money problem, too.  And they, too, turned to drugs.  Crystal meth.  Which North Korea manufactured in state-run labs.  Destined for China.  Where they tried to get as many people addicted to crystal meth as possible.  So they can sell it in exchange for Chinese currency.  Which they could use to buy Chinese food.  To help ward off famine in North Korea.  This worked pretty well for North Korea.  But only gave China another addiction problem.

In the United States the government found other ways to raise revenue.  The first two big sources of addiction-revenue were cigarette and alcohol taxes.  But it soon proved not enough.  They then got people addicted to playing the lottery.  When that revenue proved to be insufficient they then got people addicted to casino gambling.  But government spending had grown so great that this revenue was still not enough.  So the government is looking at other things to get people addicted to (see Why Legalizing Marijuana Is a Smart Fiscal Move by Bruce Bartlett, The Fiscal Times, posted 1/3/2014 on Yahoo! News).

Perhaps the dominant factor driving marijuana legalization is the desperate search for new revenue by cash-strapped state governments. The opportunity to tax marijuana is potentially a significant source of new revenue, as well as a way of cutting spending on prisons and law enforcement. The California Secretary of State’s office, for example, estimates savings in the hundreds of millions of dollars from both factors. The following summary is from a proposed state ballot initiative in California (No. 1617)…

It is not surprising that revenue considerations should be critical in the marijuana legalization movement. That was previously the reason why cigarettes were not banned until the 1920s despite a strong nationwide movement to do so. In the wake of Prohibition, governments simply needed cigarette tax revenue too badly. And when Prohibition ended, the need for new revenue after the Great Depression decimated government budgets was a driving force.

Indeed, according to author Daniel Okrent, expectations of the revenue from taxing legal liquor were so great in 1932 that some people thought it might permit the repeal of income taxes. It’s worth remembering that in 1900, taxes on alcohol and cigarettes constituted half of all federal revenues. Indeed, the only reason Prohibition was possible in the first place was that the income tax established in 1913, which was greatly expanded by World War I, would replace the revenue lost from the liquor tax after Prohibition.

There have been no great cuts to revenue like that following Prohibition.  Government spending has just grown so great that it far exceeds the nation’s ability to pay for it with current taxes and borrowing.  So they are looking to make people addicted to marijuana to help pay for their large public sectors.  As well as their vote-buying welfare state.  And when this proves insufficient they can turn to other sources of revenue.  Such as decriminalizing and taxing heroin.  Cocaine.  Crack.  Crystal meth.  Opium.  Even prostitution.  People are already doing these things.  So they can’t be any worse than marijuana.  As long as only responsible adults indulge in these activities.  Just as only responsible adults will smoke marijuana in Colorado.  For think of the tax revenue heroin, cocaine, crack, crystal meth and opium could generate.  For those drugs are really addictive.  And just think how much old rich men would enjoy 18 year old prostitutes.  Prostitution would be a booming business to tax.  These young women could generate great tax revenue for the government by just doing what consenting adults want to do.

We could do these things to find new sources of revenue.  Or we could NOT make people addicts.  Or NOT sell women into prostitution.  Instead we could cut the size of the public sector and the welfare state.  So we can cut spending.  Which would eliminate the need to produce new tax revenue in the first place.  Allowing people to keep their hard-earned money instead of handing it over to the government.  To pay for generous pensions and retiree health care for others.

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North Korea Manufactures and Sells Meth to Chinese addicts to bring Hard Currency into the Country

Posted by PITHOCRATES - August 25th, 2013

Week in Review

Keynesian economists, and those on the left, think there is nothing wrong with printing money.  Because they don’t understand money.  What it truly is.  So what is money?  It’s a temporary storage of wealth.  It is not wealth.  Doctors make a lot of money because they have learned great skills.  Skills few people have.  And doctors are willing to exchange these skills for money.  The wealth is a doctor’s skills.  The money temporarily holds this wealth until the doctor finds something to trade that money for.  From someone else that has wealth.  Who created something of value the doctor is willing to trade for.

All money did was make this trading of valuable things easier.  So we could trade with anyone even if they don’t want anything we can make or do.  A doctor doesn’t have to find someone who wants their gallbladder removed who has a television set if the doctor wants a television set.  The doctor can just go to a store and buy one.  Because of money.  Making the exchange of goods and services far easier than in a barter system.

Those who think money is wealth and that we should just print it and hand it out to the people are missing one very important point.  If you did this no one would have to work.  Those on the left would applaud that.  But if no one worked there would be no valuable things to trade.  And if there are no valuable things to trade then your money is worthless.  For if there is nothing to buy what good is having money?

North Korea has a lot of money.  But their money is worthless.  Because they just print it.  While their economy contains no valuable things to trade.  Not a big problem in a closed economy.  And you make your people slaves.  But it’s a problem if you want to trade with the outside world for the luxury items the lucky few in the ruling elite enjoy.  For if you have no valuable things in your economy then you must trade for valuable things with hard currency.  Money that isn’t worthless paper.  So North Korea came up with a way to get hard currency (see How North Korea got itself hooked on meth by Max Fisher published 8/21/2013 on The Washington Post).

A new study published in the journal North Korea Review says that parts of North Korea are experiencing a crystal meth “epidemic,” with an “upsurge” of recreational meth use and accompanying addiction in the country’s northern provinces…

So how do people in North Korea, a country where markets are so tightly regulated that even video CDs can be considered dangerous contraband and where social controls are often beyond Orwellian, manage to get hold of meth..?

The problem actually goes back to the 1990s, when North Korea experienced a famine so devastating that virtually the entire world believed the country would collapse at any moment. But it didn’t, in part because Pyongyang finally decided to open up the world’s most closed economy just a small crack, by allowing a degree of black market trade across North Korea’s border with China. The idea was that the black market would bring in food, which it did, preventing North Korea’s implosion.

The black market trade into China has remained that little bit open ever since, either because Pyongyang authorities can’t close it now or because they see some trade as beneficial, probably both. Some provinces along the border have seen their economies liberalize a tiny, tiny bit — most notably North Hamgyung, which is named in the North Korea Review report as particularly blighted by meth addiction.

In the years after the border with China opened that little crack, two other things have happened that led to the current meth crisis. First, medicine ran out and the once-not-terrible health system collapsed — more on this later. Second, North Korea started manufacturing meth in big state-run labs. The country badly needs hard currency and has almost no legitimate international trade. But it was able to exploit the black market trade across the Chinese border by sending state-made meth into China and bringing back the money of Chinese addicts.

This is where things started to spin out of control for North Korea. The state-run meth factories and the cross-border black market trade started to mingle. And some of that meth ended up migrating back across the border and into North Korea, through the black market trade that brings in Chinese rice and DVDs and the like.

This is where the collapse of the North Korean health system becomes relevant. As Isaac Stone Fish reported in a great 2011 Newsweek story, many regular North Koreans started using meth to treat health problems. Real medicine is extremely scarce in the country. But meth is much more common, which means that the prices of medical drugs are artificially inflated, while the price of meth is artificially low. In a culture without much health education and lots of emphasis on traditional remedies, people were ready to believe that meth would do the trick for their medical problems, and many got addicted.

Poor Chinese.  First the British got them addicted to opium.  Then North Korea got them addicted to meth.  It appears the Chinese people are nothing but pawns in the game of international trade.

Back in the days of mercantile Britain trade was all about who collected the most hard currency.  Basically gold and silver in those days.  The British loved Chinese tea.  And were filling ships full of the stuff to bring it back to Britain.  The problem was that the Chinese didn’t want anything the British were selling.  So Chinese goods were flowing to Britain.  But no British goods were flowing to China.  And without having exports to offset imports Britain was forced to trade the only thing they had that China wanted.  Their hard currency.  Their silver.  So Chinese goods flowed out of china.  And Britain’s hard currency flowed out of Britain.  So China was accumulating piles of hard currency while Britain saw their piles diminish.  Which was the exact opposite mercantile Britain wanted.  So they did something about it.  Thanks to India.

India was part of the British Empire.  And she grew opium poppies.  Something some Chinese did want.  So the British used this opium demand to stop the flow of hard currency out of the empire.  And traded Indian opium for Chinese tea.  This solved the trade deficit problem.  But it created a lot of addicts in China.  The addiction problem got so bad that it spawned two wars.  The Opium Wars.  Which did not end well for China.  And things did not get better in the century or so that followed.  And now here is North Korea.  Turning Chinese into addicts to get hard currency out of China (and into North Korea).  Just like the British did.  Of course, North Korea is nothing like the mighty British Empire.  So one would believe that China is allowing this addiction problem to happen.  As it is probably a smaller price to pay than the refugee problem should North Korea collapse.  And they may like that North Korean buffer between them and South Korea.  Japan.  And the United States.

North Korea is everything the left would like to have in the United States.  Tightly regulated markets.  National health care.  No rich people accumulating private property.  Where they frown on profits.  The even put people before profits.  Just like liberals want to do.  There’s no talk radio.  No Rush Limbaugh.  No Fox News.  No free trade.  No low-cost imports to undermine union manufacturing.  No obesity.  Because there is no junk food.  And no 32 ounce sugary beverages.  And a government that can do what is right for the people without having to worry about a Tea Party challenger in the next primary election.  North Korea is liberal nirvana.  Yet life there is horrible and wretched.  Because it’s everything liberals want.  But nothing the people want.

Liberals want to keep expanding government.  To have more government intervention into the free market.  But where does it end?  How far do they want to take things towards North Korea before they say they have enough?  And why anyone should worry about this is because as horrible and wretched life is in North Korea, those in the ruling elite have it pretty darn good.  Because the people in charge of these regimes never suffer like the people outside of the ruling elite.  So the farther they move towards North Korea the less they have to worry about an election taking away their comfy life.  This is why we should worry about a government growing larger.  For throughout world history life like that in North Korea has been the norm.  While life like that in the United States has been the exception.  And the United States has only been around for 225 years (counting from the ratification of the U.S. Constitution).  A crazy new fad the entitled ruling elite (i.e., liberals) would like to do away with.  So they can rule like they did in the good old days.  Much like they do today in North Korea.  Where the supreme ruler, Kim Jong-un, has an obesity problem.  One of the few in North Korea that isn’t gripped with a gnawing hunger every minute of every day.  This is life in a country where the ruling elite hates capitalism.  And puts people before profits.  This liberal nirvana.  Those in power live well.  While everyone else suffers.

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Laws banning Alcohol and Drugs didn’t stop Alcohol Violence or Drug Violence

Posted by PITHOCRATES - January 31st, 2013

Politics 101

Prohibition Violence spilled onto the Streets where Gangsters shot up each other with Thompson Submachine Guns

Men have always drunk in this country.  A lot.  After the working day was over they went to their corner saloon.  And drank away their pay.  Getting inebriated.  And making a lot of bad decisions.  Such as drinking away their pay.  Getting into fights.  Engaging the services of prostitutes hanging out at the saloons.  Catching a venereal disease or two.  Taking them home to the wife.  Worse, some of these drunken men were beating their wives.

Alcohol violence was taking a toll on the American family.  In particular on the women in those American families.  This alcohol violence was creating a war on women.  These drunken men were beating their wives.  And inflicting them with venereal diseases.  Causing great harm to their wives.  And destroying their families.  They needed to do something.  And that something led to the temperance movement.  Which ended in Prohibition.  An outright ban on alcoholic beverages.

And it worked.  Alcohol violence on women committed by their husbands decreased.  As did the rate of venereal disease infections on married women.  As Prohibition shut down the local saloons.  And all the problems they caused.  But it didn’t stop everyone from drinking.  There was such a large demand despite Prohibition that others stepped in to meet that demand.  Organized crime.  Prohibition violence spilled onto the streets where gangsters shot up each other, and innocent bystanders, with Thompson submachine guns.  As the profitability of the illicit alcohol trade erupted in violent gang wars.  Allowing crime bosses like Al Capone to take over cities.  And corrupting their police forces.  Causing even more trouble than the original alcohol violence on married women.  So they repealed Prohibition.  And the people could drink once again.  As they always wanted to.

The Illicit Drug Trade picked up where Prohibition left off in terms of Gun Violence

The British were addicted to Chinese tea.  They couldn’t get enough of it.  Or other Chinese luxuries like silk and porcelain.  The only problem was that the Chinese didn’t want anything from Britain.  So as the Chinese goods flowed to Britain silver flowed from Britain to China to pay for their goods.  Causing a huge trade imbalance.  Which the British corrected with the opium grown in India.  And being that opium was addictive more and more Chinese were using opium.  Which reversed the net silver flow.  Allowing the British to enjoy their tea, silk and porcelain.  Which they traded Indian opium for.  Causing an addiction problem in China.  And a destruction of Chinese society.  That the Chinese responded to with the Opium Wars.

Drug addiction has destroyed many families.  And societies.  Throughout the world.  Which is why hard drugs like heroin and cocaine are illegal in most countries.  For they are very addictive.  Drug addicts lose their jobs.  Their wives.  Girlfriends.  And families.  As they sink into addiction without a job they often turn to crime to pay for their habit.  Become thieves.  Or prostitutes.  Where they often suffer abuse.  End up in jail.  Or catch AIDS from sharing needles with other intravenous drug users.  Cocaine use spread in more affluent circles.  While crack cocaine devastated poorer circles.  Which is why most of the world has criminalized these drugs.  Despite this demand remains high.  Cocaine use has fallen in the West.  But only because some users have switched to methamphetamine.  Which is cheaper.  More powerful.  And longer lasting.

Like with alcohol someone stepped in to meet this demand.  Organized crime.  And boy did they unleash drug violence onto the world.  From the street gangs shooting each other (and innocent bystanders) to control turf.  To the cartels higher up the distribution channels.  The illicit drug trade is big money.  Very big money.  Picking up where prohibition left off.  For it is the criminal element that truly benefits from banning anything.  The drug trade is so lucrative that it is now even funding al Qaeda.  Even though Islam strictly forbids the use of drugs.  But they have no problem taking a percent of the drug trade that flows from South America through Africa on its way to Europe.  Where it can destroy European societies.  Something al Qaeda has no problem with.

People already Breaking the Law will not be Stopped by another New Law

There is an epidemic of gun violence in the U.S.  Committed not by people who support and defend their Second Amendment right to own a gun.  For wanting to do that is not helped by shooting lots of innocent people.  In fact if one is prone to conspiracy theories one could say that the rise in gun violence is oddly coincidental to the Obama administration’s pursuit of gun control regulation.  Especially following Fast and Furious.  A program used by the Obama administration to try and stir up anti-gun sentiment.  Like that the current epidemic of gun violence is stirring up.  Which the conspiracy theorist could find a little too coincidental.   But I digress.

The people committing these acts of gun violence are some pretty disturbed people.  They have mental health issues.  Or are extremely angry about something.  Perhaps because they can’t get a job in the worst economic recovery in U.S. history.  Thanks to President Obama’s economic policies designed more for politics and social justice than actual job creation.  Who knows?  The only thing for certain is that this rise in gun violence corresponds with President Obama’s time in office.  For he didn’t campaign on the need for new gun control legislation.  But like his position on gay marriage he evolved to this position.  After witnessing a rise in gun violence during his time in office.

Whatever the cause is will new gun control legislation change anything?  Well, if we can learn anything from Prohibition and the War on Drugs, yes.  It will change things.  It will give organized crime another lucrative illicit trade.  But unlike alcohol and drugs their customers will not be people just trying to get a drink or a high.  It will be hardened criminals.  Who are shooting each other on the streets to defend their turf.  And at all levels of the illicit drug trade going right up to the cartels at the top.  So the criminals will have their guns.  And there will be new gang wars as criminal elements fight each other to control the gun trade.  Which may even increase the gun violence in places like Chicago.  Which is already one of the deadliest U.S. cities.  Despite having some of the most restrictive gun control laws in the nation.

So why do they have more gun deaths in Chicago than most cities?  Because there is a high demand for guns by the criminal element in Chicago.  Will a federal ban change that?  Will it put an end to gun violence?  Did it stop alcohol violence during Prohibition?  Does it stop drug violence now?  No.  A gun ban will not change what’s happening in Chicago.  For guns aren’t causing the gun deaths in Chicago.  It’s the people using the guns.  And people already breaking the law will not be stopped by another new law.

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Byzantine Empire, Bosporus, Silk Road, Dutch East India Company, English East India Company, Tea Act and Opium Wars

Posted by PITHOCRATES - May 15th, 2012

History 101

To encourage Risk Takers to Travel Halfway around the World Mercantile States granted Monopoly Charters

The modern world began because Europeans had a penchant for silk and spices.  Something they enjoyed during Roman times.  When the Romans ruled the world.  And the Mediterranean Sea was nothing more than a Roman lake.  But when the empire stopped conquering new lands and sending the spoils of war home they had to turn to other means to pay for the cost of empire.  Taxes.  To pay for the Roman government and their public spending.  And the Roman legions.  This excessive government spending led to the fall of the western half of the empire.  But the eastern half lived on for another 1,000 years or so.  Why?  Because the capital of the Byzantine Empire was Constantinople.  On the Bosporus.  Trade crossroads of the world.

This city was so rich everybody wanted to conquer it.  So they could have all those riches.  For everything that came along the Silk Road from China crossed into Europe at the Bosporus.  Soon Muslims fought Christians in the Holy lands.  Then more Christians came.  The Crusaders.  Those who didn’t die went back to Europe with some of those Chinese luxuries.  Spices.  Silk.  Porcelain.  Etc.  Sparking a renewed interest in these finer things in Europe.  Especially the spices.  For European cooking was horribly bland at the time.  The Ottoman Turks eventually took Constantinople.  Renamed it Istanbul.  And controlled that lucrative trade.  Making those much sought after Asian goods rather expensive in Europe.  Which they had no choice but to pay.  Because if you wanted those luxuries you had to go through Istanbul.  Until the Portuguese sailed around Africa and found a direct route to those cherished goods, that is.

It was the Commercial Revolution.  A new age of international trade.  A trade even more profitable than what the Ottoman Turks controlled.  Because big ocean-going vessels can carry more cargo than anything coming over land on the Silk Road.  And these new European maritime powers wanted that wealth.  And the power it would provide.  To encourage risk takers to get into those wooden ships and travel halfway around the world they granted monopoly charters.  The Dutch East India Company (VOC) was one of the largest.  And one of the wealthiest.  But this was not your typical company.  The VOC established overseas colonies.  It waged war.  Established treaties.  Even coined its own money.  Because of this thousands of VOC ships stuffed full of valuable cargoes sailed to Antwerp and Amsterdam, making the Dutch very wealthy.  And powerful.

The Tea Act allowed the Company to Ship their Tea Directly to America and exempted them from any Duties

Of course the Dutch weren’t the only ones doing this.  They had competition.  Portugal.  Spain.  France.  And England.  Who would bump into each other numerous times fighting for control of this trade.  And those colonies.  The English and the Dutch would fight 4 wars.  Which is how Dutch-founded Manhattan became part of the British Empire and, subsequently, one of America’s greatest cities.  The English East India Company gave the VOC a run for its money.  Parliament even passed legislation to give the English a monopoly on all trade with their American colonies.  The Navigation Acts.  Which stated that all trade to and from America had to be on English ships.  And all trade had to go through an English port.  Where the ships were unloaded and the cargoes inspected.  And taxed.  Then they could reload their cargoes and continue on their journey.  All tenets of mercantilism.  This kept the lower-priced Dutch goods out of America.  And prevented the Americans from selling to the Dutch directly for higher prices.  So it shut down the Dutch from all American trade (except for a prosperous black market). And brought in some lucrative tax revenue for England.  While extending shipping times and increasing prices for the Americans.  Which they were not happy about in the least.

The English East India Company (the Company) was similar in structure to the VOC.  And soon made the Indian subcontinent a wholly owned subsidiary of the Company.  But it wasn’t cheap.  Waging war was costly.  As was managing those conquered territories (something the Romans had also learned).  Then a famine in Bengal in 1770 claimed about one-third of the local population.  Making laborers more scarce.  And more expensive.  All at a time when the sales of their imported goods were falling in Europe.  There were warehouses full of unsold Chinese tea that they couldn’t sell.  Making for a bad time for the Company.

Higher costs and lower sales spelled trouble.  And that’s what the Company had a lot of.  Trouble.  So the Company turned to Parliament for help.  And Parliament helped.  By allowing the Company to ship their tea directly to America without having to unload it in a British port.  Or pay a duty on that tea.  Which would greatly reduce their costs.  And allow them to sell it in America cheaper than they did before.  So Parliament passed the Tea Act in 1773.  Making life better for all involved.  But the Tea Act left in place another tax in the previous Townshend Acts.  Which was a bigger problem than getting cheaper tea (which they could get on the black market from the Dutch).  These taxes on the British subjects in America were unconstitutional.  Because there were no Americans sitting in Parliament.  This was taxation without representation.  A much bigger issue than cheap tea.  So they threw that first ‘cheap’ tea into Boston Harbor.  The Boston Tea Party being a major step towards war with the mother country.  And American independence.

Britain became the Lone Superpower after Abandoning their Protectionist Mercantile Policies and Adopting Free Trade

The American Revolutionary War was not the only headache the British got from their mercantile policies.  Part of those policies required maintaining a positive balance of trade.  So there was always a net inflow of bullion into the mother country.  That’s why raw materials shipped into Britain from America.  And finished goods shipped out to America.  Finished goods are more valuable than raw materials.  So the Americans had to make up for this balance of trade in bullion.  Resulting in a net inflow of bullion into the mother country.  Very simple.  As long as you can manufacture higher valued goods that other people want to buy.

And this is the problem they ran into with the Chinese.  For though the British wanted those Chinese spices, silk and porcelain the Chinese didn’t want anything the British manufactured.  Which meant Britain had to pay for those luxuries with bullion.  Including all that Chinese tea they craved.  Which resulted in a net outflow of bullion to the Chinese.  The British fixed this problem by finding the one thing that the Chinese people wanted.  Indian opium.  Grown in Bengal.  Of course, this turned a lot of Chinese into opium addicts.  The addiction problem was so bad that the Chinese banned opium.  But the British were able to smuggle it in.  They sold so much of it that they used the proceeds to buy their tea.  Thus reversing the bullion flow.

Not the finest hour in the British Empire.  The Chinese and the British would go on to fight a couple of wars over this opium trade.  The Opium Wars.  Which the British did all right in.  Even gaining Hong Kong in the bargain.  They didn’t build any long-lasting love with the Chinese people.  But Hong Kong turned out pretty nice under the British.  Especially after they abandoned their protectionist mercantile policies and adopted free trade.  Which made the British the lone superpower for about a century as they modernized the world by leading the way in the Industrial Revolution.  And the Chinese in Hong Kong were very happy indeed to be there when the communists took over the mainland.  And caused a famine or two.  For they lived comfortably.  In a state founded on mercantilism.  That achieved its greatest prosperity during the free trade of capitalism that followed Britain’s mercantile ways.

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LESSONS LEARNED #37: “The Decriminalization of Drugs. Damned if you do. Damned if you don’t.” -Old Pithy

Posted by PITHOCRATES - October 28th, 2010

Drugs are Killing Some of our Kids’ Cool Celebrity Role Models…and Some of Our Kids

Kids going through adolescence look up to role models.  Celebrity role models who look cool.  So they can aspire to that level of cool.  To have more friends.  Be popular.  To be popular with kids of the opposite sex.  And nothing does that like behaving like a celebrity.  Dressing like them.  Smoking like them (Joe Camel didn’t make kids smoke; movie stars and musicians did).  Having sex like them (in public like Alanis Morissette sings about in You Oughta Know).  And getting high like them.

Black Sabbath fired their front man Ozzy Osborne for his excessive drug use.  Steven Adler was fired from Guns n’ Roses for his excessive drug use.  Adler used the same drug cocktail that killed John Belushi, Chris Farley, River Phoenix and Jean-Michel Basquiat, to name a few.  One of Adler’s speedballs, though, gave him a stroke and left him with a speech impediment.  Osborne?  It’s hard to see or hear him and not think ‘drugs’.  Keith Richards, too.  (Some claim that it’s a miracle that either has lived so long.)  Amy Winehouse’ irregular heart beat resulted from a long use of cocaine.  John Entwistle died from a cocaine-induced heart attack.  Ol’ Dirty Bastard died from a cocaine & prescription drug induced heart attack.  Heath Ledger died from an accidental overdose of a prescription drug cocktail (oxycodone, hydrocodone, diazepam, temazepam, alprazolam and doxylamine).  Bradley Nowell died from a heroin overdose just before Sublime’s major label album debut (which included three hits).  Danella Westbrooke lost the cartilage in her nose (and her profile) due to the massive amounts of cocaine she sniffed.  And there are a host of other celebrities whose past drug use is catching up to them in their old age.  Such as David Crosby’s liver disease.  His liver transplant resulted from his many years of drug abuse.

These are some expensive black market drugs.  But this isn’t a problem if you have a lot of money.  If these drugs were decriminalized, they would be cheaper.  And much more plentiful.  Meaning that they wouldn’t be limited to the rich and famous.  If they were less expensive, kids starting their drug exploration wouldn’t have to limit their exploration to the less expensive stuff (stealing from their parents’ medicine cabinet, sniffing butane, smoking marijuana, etc.).  They could broaden their horizon.  And why not?  They’re going to do it anyway.  And not everyone becomes an addict.  Or dies.

The British East Indian Company Used Indian Opium to Fix Their Balance of Trade with China

In the 19th century, mercantilism ruled.  It was all about balance of trade.  Nations wanted to export their goods.  And import gold and silver that paid for those goods.  Both Great Britain and China pursued these policies.  This became a problem for Great Britain whose people grew very fond of Chinese silk and porcelain and other Chinese exotic goods.  But the Chinese weren’t buying anything British.  Great Britain was importing more than she was exporting to China.  This meant there was a net silver flow from Great Britain to China.  And this wasn’t good mercantilism.  For the British.  It was very good mercantilism for the Chinese.  The British needed something to sell to the Chinese.  Something that only they could sell so the Chinese would have no choice but to buy from Great Britain.  And the British East India Company had just the thing.  Indian opium.

And it worked.  It reversed the balance of trade.  Silver was leaving China at an alarming rate.  But it was also turning the majority of Chinese males near the coastal cities into junkies.  Business suffered.  The civil service suffered.  With less available to buy the standard of living fell.  A dysfunctional civil service compounded that problem.  Rampant opium use was undermining Confucian values.  The Chinese begged the British to destroy the Indian poppy fields.  The British replied that, with the huge Chinese demand for opium, if they didn’t sell it, someone else would.  It would only cost the British their lucrative trade.  It wouldn’t solve the Chinese opium addiction problem.

Well, that led to war.  Two of them.  The Opium Wars.  Neither of which ended well for the Chinese.  They lost a lot.  Chinese coastal cities became virtually British.  Hong Kong became British.  Trade favored the British and other foreign nationals.  It led to much bitterness and resentment.  And to the Boxer Rebellion in 1898 to throw the imperialists out of China.  Which didn’t work all that well either.  But the British did help the Chinese to break their opium addiction.  If the Chinese worked from within to reduce consumption, the British would cut back on their opium importations.  Opium use declined in China.  As did opium imports.  With the decline in consumption, no new sources of opium rushed to fill an unmet demand.

The Americans and the Russians to Collaborate over Afghanistan’s Poppy Fields, The Netherlands Making their Legalized Marijuana less Legal

Well, there are still poppy fields in Southwest Asia.  And a high demand for heroin not too far away.  In Russia.  And it’s killing them.  Literally.   Some tens of thousands die each year from overdoses.  The collateral damage (broken families, lost jobs, the spread of AIDS from shared needles, neglected children, etc.) from drug addiction probably touches 10 times that number.  And the drug trade crime kills who knows how many more.  From the poppy fields in Afghanistan through the Central Asian states into Russia herself, there is an explosion of violence for this lucrative drug trade.  How bad is it?  Russia may return to Afghanistan to help the Americans in eradicating these poppy fields and shutting down the drug laboratories.  (For those who do not know, the Russian/Soviet war in Afghanistan was Russia’s Vietnam War.  And, let us not forget that both of these wars became proxy wars between America and the former Soviet Union.  So America and Russia working together in Afghanistan is a big thing).

Russia is even advising America against the ballot initiative in California to legalize marijuana.  Viktor Ivanov, Russia’s top drug official, went to Los Angeles to campaign against the ballot proposal.  He warned that legalizing marijuana will start a downward spiral into drug addiction.  We can understand heroin.  But marijuana?  A soft drug?  The Netherlands have long had legalized marijuana there.  It works there.  Why not in California?

Well, Netherland has had its problems with its marijuana coffee shops and cafes.  There’s been trouble in their border areas.  Tourists coming in just to get high.  And a lot of people have been going there.  Business is booming.  High demand.  Which have brought in crime as people vie to supply that demand.  There have been problems with school kids so they’ve banned these coffee shops/cafes within certain distances of schools.  And they’ve been selling a more potent cannabis, which is knocking the casual user on their ass.  Or impairing their motor skills.  And, with the rising amount of trouble from the drug tourists, they’re restricting sale to Dutch citizens only.  One other note.  Drug enforcement has been stepped up at Schiphol airport.  Why?  To counter a rising cocaine traffic coming in from the Caribbean. 

Drugs, Drug Wars and the War on Drugs Take their Toll as they Kill and Destroy

Kids are experimenting with drugs.  They’ll start with the softer stuff.  Like in the Netherlands.  But they’ll probably move on to something more potent.  Like in the Netherlands.  There appears to be a progression.  From less dangerous drugs to more dangerous drugs.  You can bet that John Belushi, Chris Farley, River Phoenix and Jean-Michel Basquiat, et al, started their drug use with something less dangerous than cocaine-heroin speedballs.  And look at them now.  Of course you can’t because their dead and buried.  But you get the point.

Epidemic use in China destroyed a millennium-old culture.  Ended a dynasty.  Caused multiple wars.  They finally kicked the habit.  With the help of the British (who helped give them the problem in the first place).  But the poppy fields just found new users.  In Russia.  And elsewhere.  It’s so bad that former enemies are joining forces on a former battleground to fight a new common enemy.  And the Russians are warning Californians not to legalize marijuana.  We’ve certainly come a long way from the days of the Cold War where the Soviets would have helped that initiative pass to help bring down their one-time enemy.

Drugs are a problem.  A big problem.  They kill and destroy.  Drug wars kill and destroy.  As does the war on drugs.  Damned if you do.  Damned if you don’t.  So what to do?  Well, imagine two worlds.  One where drugs are plentiful and cheap.  And one where no one uses drugs.  Which world you’d rather live in?  Which world do you want your children to live in?  I thought so.  And there’s your answer.

www.PITHOCRATES.com

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