Jan 29, 2014

The Economics of Portuguese trade

Portuguese and Malabar Pepper

Two things triggered this article. One was a recipe for picked eggs from Sharaboji 2’s Tanjore kitchen, dating back to the 18th century which I tried recently. A very interesting but alien tasting dish made of ingredients which we still use regularly, but in differing proportions. As I was munching the eggs, I wondered how this really spicy dish was a favorite of that king with 3 wives and 24 concubines (as you can imagine another article is on the way). Then again, the other day Ramu Ramakesavan, a history enthusiast and blogger asked a question about the commercial aspects of the trade between the Portuguese and Malabar and posed a question about the fairness of it, i.e. if not the people of Malabar had been amply compensated and if so how. He was also wondering why I had stated that the Portuguese had plundered Malabar for over 250 years. As it was a very interesting question (Unfortunately a number of anglicized school text books emphasize the glory of Vasco Da Gama’s landing at Kappad) I thought that I should provide an elaborate answer. As I do so, let me also refer the reader to my article in Pragati on globalization which will provide a better perspective. The paragraphs which follow provide a general overview of a couple of hundred years in a few pages, so it was quite challenging. So here goes…
Until Pero Da Covilha (See my article linked) reached the shores of Calicut, a full eight years before the Vasco De Gama and his ships reached Calicut to change history, the Portuguese did not really have firsthand information on the wealth of spices in Calicut. What they knew was bits and pieces from earlier traders and travelers to the Indies and the Orient. Perhaps, it was Covilha who laid the very keel for the ships journey; however like most spies, for he was one, Covilha received no public credit for his work. Pero Da Covilha and Alfonso de Paiva, great friends themselves, were dispatched by King John II, to record the routes and happenings at various places in the Malabar area and primarily to find the mythical land of Prestor John. As Peter Koch notes - Calicut at that time was one of the richest ports of the world. It was the commercial hub for Arab Muslim and Asian traders. Fleets of junks from China and the Indies sailed to its crowded ports, and once docked, unloaded their abundant cargoes of precious gems, silks and spices that were to be sold at destined local markets. Anxiously awaiting their arrival were numerous Arab traders willing to pay a handsome price for just about any goods shipped from the orient. Once purchased, these were shipped through the Persian Gulf or Gulf of Aden, and from there, they were distributed to markets in Africa, Middle East and Europe. Pêro da Covilhã, while in Africa, noted and informed Paul II that if the extreme south tip were rounded by Portuguese mariners they could easily reach Calicut from Sofala or Malindi and take possession of the spice trade. In ten years’ time, this observation by Pêro da Covilhã would convince Vasco da Gama to sail from the east coast of Africa directly to Calicut. Covilha concludes his report to Dom John 2 thus - “The majority of the spices leave Calicut for Cairo, crossing the Red Sea. From Cairo they go on to Venice. If one day we want to take on this trade for ourselves, we simply have to block the Moorish ships’ access to the Red Sea.”

Then came Vasco Da Gama and his policy of using violence and force to usurp the trade from the Muslim Arab traders. It was not a question of peaceful coexistence or fair trade which Calicut was famed for, but forcefully obtaining a monopoly. The Zamorin refused and the Portuguese were never to create an amicable settlement with the Zamorin, though some periods of peace can be found during studies. He was followed by an even crueler Cabral and later the slightly better statesman viceroy Albuquerque. The initial period was full of battles between the Zamorin and the Portuguese with the latter asserting their might with heavy guns on their ships and with the cavalry they carried. The rivalry between the Zamorin and the Cochin King was cleverly manipulated by the Portuguese with the latter providing resources and facilities for the Portuguese to settle down in Cochin (also partly in Northern Kolathunadu) and conduct their trades. However even these periods are characterized by continued battles between them and other kings (as well as the Zamorin) in an effort to consolidate their hold on the resources that the people of Malabar possessed, that being spices, especially pepper. After they had conquered Goa, the Portuguese entrenched themselves there, but laid an iron fence on the western seas with their Cartaz – permit system and fighting vessels, disallowing any private ocean trade between the Malabar shores and the red sea ports, which trade which had been in vogue since time immemorial. Using force to effectively control the trade and the sea trade routes also helped the Portuguese determine and fix the purchase prices for the pepper and other articles. Their naval armadas were of course disrupted with some regularity by the Kunjali marakkar led paros (unfairly termed corsairs by the west) who were supported by the Zamorin, but in the large picture, they were nothing more than a nuisance to the Portuguese.

In the years that followed the age of discovery, the Portuguese amassed fortunes with the sales of the produce from Malabar and enriched Lisbon and the royalty as well as the Fidalgos of Portugual (Of course others also profited, be they the Danes, the early English and Fuggers of Germany). The peaceful coexistence in Calicut was not a given anymore and the prospect of justice even more difficult to enforce. While we will come to the specifics later, one must note that the purchases were made at a price which in theory was unacceptable, not in practice enough to cover the large expenses by the Zamorin in holding fort and keeping a military balance with the Portuguese as well as the rivals in the South and the North. Also it must be borne in mind that the many wars meant forceful removal of a lot of wealth, personnel, costs of reparation as well as destruction of infrastructure and cultivation. After a while when things became difficult, the traders simply moved out of Calicut and moved up north to Mangalore and Goa, where the masters were. (Many of those aspects are covered in the large number of articles in Historic alleys, tabulated under the Category – Malabar Portuguese).
As the spice trade progressed, the colonies of Portugal increased and became richer commercially. As is evident, by 1511, the Portuguese had wrested away control of the spice trade of the Malabar Coast from the Muslims and Arabs and as it continued, on until the end of the 16th century, the Portuguese monopoly on the spice trade to India was exceptionally profitable for them. Did Malabar prosper? No it continued to be what it was, though not suffering from poverty and while the social structure remained mostly in place, with each war that transpired, the suzerain’s debts increased and finally the feuding Malabar North, Center and South parts including Cochin, fell prey to the Mysore Sultans when the social fabric and economic strength were ripped apart and thrown into utter disarray. Those shreds never came together, ever again. Was it so destined, would it have happened even otherwise? I do not know – perhaps…

Let us go back to the early days, the period April – August is when the monsoon winds brought sailing ships to Malabar. That was when the markets of Calicut bustled with wares, be they spices or textiles, be they copper or iron ingots. The ships would dock and the traders speaking many a language came in to discuss and finalize (or pick up pre-agreed quantities) deals to fill their dhows and ships. Some were bound (later in the year actually) eastwards; some westwards to the Gulf ports or the Red sea ports. Those would disgorge their contents in the Arab ports where much of the produce would make their way overland on camels to Alexandria to be again laden into ships bound for the European ports. Each step meant multiplication of the cost and eventually the lowly pepper corn, cultivated as a parasite plant on Malabar trees would be equivalent to its weight in Gold – thus getting the name black Gold. When the Portuguese saw the difference between the cost and the Venetian price and later discovered the sea route around the Cape of Good Hope, they saw the easy pickings. Initially Gama expected that the Zamorin would side with them (because they believed initially that he was a Christian) and expel the Arabs from the lucrative trade, but as we know he did not. They also actively encouraged and developed Cochin as a rival to Calicut. Here you must keep in mind that Calicut by itself was not the producer of the articles for trade (except perhaps pepper from the interior, coconuts, coir & arecanuts); it was a major port where fair trade was promoted and a place where security was assured by the Zamorin’s forces. The port was well connected overland and water to the interior parts of Kongnadu and other parts of Vijayanagara. What was exported out in the 15th century? Pepper of course, but also ginger, coconuts, cloth, arecanut, coir, cardamom, sandalwood, rice (from Orissa) and in return imported or bartered Gold, silver, copper, silk, horses, aromatics and so on. To get an idea, the most expensive import was a horse which cost as much as 800 cruzado, i.e 9,000 Calicut panams, a lot of money.
The rest is history. Let us now turn those pages ….

When threatened from the sea, the rulers of Malabar had no idea how to confront it, nor did they recognize the far reaching consequences. In all of previous history threats had come only by land and wars were fought honorably. This was a different enemy and only the Moplahs and Arabs recognized the threat. It took a while for them to convince their Hindu counterparts, but by then it was too late, not that they had a solution anyway. By 1550 Cochin had surpassed Calicut in terms of port trade. The Chinese had stopped coming to Calicut, and the Arab ships had no more opportunities to play their trade. Cochin on the other hand was flourishing. The city was bustling with many a trader, Portuguese married casados as well as mixed blood mesticos. Private traders were trying to get into the Portuguese state monopolized trade networks and their Portuguese parentage as well as a two decade experience with the locals was coming of use. With the Portuguese forming their base in Goa, Cochin or Cochim De Baxio became a center for Casado commerce. These Portuguese descendants had started direct trade after taking care of the spice sourcing themselves and paying a small rate of duty (3 ½ -6 %) to the Cochin Raja as compared to that levied by the Eastado da India. The Zamorin tried to retaliate and bring a balance by fighting Cochin for supremacy, but the Portuguese came to the support of Cochin many a time, with small forces but superior firepower. Also by then the method of blocking Calicut with flotillas enforcing the need for cartazes was starting to work. As days went by, the Kunhali supported guerrilla warfare in the seas became effective and Arab ships started to filter in and out, but a larger effort to marshal Turkish and Egyptian support to rout out the Portuguese failed, with the result that the position of Calicut at the fore of ocean trade finally declined with rapidity. Cochin was to follow quickly for they were then just a feeble royal power propped up by the Portuguese and surrounded by enemies.

But by 1600 the fortunes of Cochin also declined and Kanara pepper exports had doubled those of Malabar pepper. The compensation of being to send a ship of their own to Lisbon also did not quite work out for Cochin, for their link with Bengal (Cotton and other goods) had also been broken by then. Many of the Casados and mesticos started to move out and back to places like Bombay and Goa. The trade centers had thus moved from Calicut to Cochin to Goa and Bombay.
The sourcing - Ma Huan was the first to document a system in which ‘big pepper-collectors’ toured the countryside to purchase the spice and gather it into interior Nair storehouses. The foreign merchant’s resident in Malabar’s port cities mostly purchased the pepper from these middlemen. This system continued on till the sixteenth century, despite Portuguese efforts to establish direct trade relations with the cultivators. These pepper collectors perhaps moplahs, gathered to themselves all the pepper and ginger from the Nayres and husbandmen, and ofttimes they purchased/contracted the new crops beforehand in exchange for rice, barterable material such as clothes which they stored at the go downs near the sea.

The economics - To put it simply, pepper was purchased at 2.5 cruzados per quintal. This same quintal of pepper in Europe fetched 50-80 cruzados or more at times, which meant a great profit even after considering shipping and infrastructure costs. In 1500 the Calicut price per bahar was 360 panams and so the sale at the new fixed cost meant a loss of 200 panams per bahar to the local traders. This was obviously the reason why the local rulers and the Arab traders retaliated fiercely, for their livelihood was at stake.
One of the interesting inputs we get to look at is that the Portuguese income in 1506 was about 350,000 ducats out of which 300,000 were spent on internal expenses. That left about 50,000 for the eastern explorations. The cost per ship was about 12,000 and considering about 10 ships per annum, it works out to 120,000. Thus the annual outlay was 170,000-200,000 ducats out of which a fourth was advanced from the royal treasury while the rest came from Florentine or German financiers.

Nevertheless, it was called the spice alchemy whether they acquired the spices by force (initial forays) or as in later days by a monopolistic purchase at fixed prices, unaffected by demand and sold it at gold prices. Later when the trade became more private run, the financiers had to pay 30% of the sales price to the Casa Da India.
But what were the average annual volumes? Kieniewicz ‘s paper provides a good summary. Starting at 1.5million kilograms or 1500 tons, it averages to 2,000 tons per annum until 1600. Out of this about a third reached Lisbon and the rest to other ports. By 1515 Lisbon was getting close to 1400 tons. Malabar production was fluctuating around 5000 tons, and Lisbon’s consumption was thus only a third of what was produced, with the other parts going to China, the east coast and various other inland destinations, bypassing the Portuguese controls.

But as we saw in previous discussions, Antwerp cartels came into play, the royal house of Lisbon racked up large debts and by 1543 the debt rose to the tune of 2 million cruzados. They got around it by changing the rules. Also the budgeting system was set up in such a way that the expenses were to be offset by the income from duties, cartazes and so on in India while the trade profits were booked by the Lisbon royalty. This system failed mainly because of the rising costs of maintaining their presence in India and extreme corruption in Cochin and Goa. By 1570 the royal monopoly was disbanded and it was redrafted in such a way that all ships had to stop at Lisbon and pay an 18-50 cruzados duty per quintal of spices.
By 1607, as the Portuguese grip weakened, the Malabar costs had gone upto 7-9 cruzados per quintal. Some 5,000-10,000 people migrated from Portugal per annum to Indian shores in the years 1500 -1700, and each profited personally as well, with at least two thirds returning back. Nevertheless, the net profits declined due to increasing costs and corruption. From 250,000 or more cruzados per annum of royal profit, it declined to under 90,000 cruzados towards the end of the 16th century. However the national incomes rose and the Portuguese creditworthiness in the markets remained high. In hindsight, one could argue that their profits would have improved had they practiced a more peaceful coexistence in Malabar and Goa and this might have resulted in reduced costs of infrastructure. As it happened, the expatriate Portuguese in Goa whiled away most of that money, but that story of decadence is best narrated another day.

The toiler who tended to the pepper vines in Malabar did not prosper in the succeeding years, decades and centuries, nor did the Nair and Namboothiri land holders. The Moplahs were affected severely as their livelihood was under threat and after their relationship with the Zamorin and the Hindus were affected following the Kunjali debacle, their turmoil increased further. The Zamorin’s owing to his continued warring with Cochin racked up large debts and his power in this fragmented city declined steadily till he was virtually bankrupt and eventually his domains were gobbled up by the marauding Mysore sultans. Malabar never prospered after the 16th century whereas the Portuguese as we saw improved their per capita incomes.
Interestingly, around 1500, India's economic output was around 40% and larger than all of Western Europe and 100 times larger than the economic output of Portugal. But by 1600, the gap with Western Europe was only around 10% and the gap with Portugal was still huge. An interesting though approximated and empirical graph created from a research letter by JP Morgan’s Michael Cembalest (with due acknowledgements and thanks) and shows contextual GDP growth since the time of Jesus. Take a look at the passage of time and India’s fortunes.

Now we can go back to the starting para of my article on the Casa da India and understand my vexation.
It was as if fate decreed it in return for the plunder of Malabar for 250 years. A deeply religious Lisbon, locked in rituals like the inquisition, then Europe’s 4th largest city, was planning a merry start of the All Saints day on Saturday 1st, Nov 1755. As the sleepy city woke up, a massive earthquake (9.0R) shook Lisbon for all of 10 minutes, bringing it down to dust and then proceeded to light it with fires which burned for a whole week destroying much of what she had made with the trade money. The city which was defined thus – “He who has not seen Lisbon has seen nothing”, was not visible any more. Many tens of thousands of people were killed and their fortunes destroyed, bringing the once proud country rapidly to its knees with a thud, for perhaps it was the wrath of God!

But that was another era. The cultivators if there are any left, and traders of Malabar never learnt the economics of trade if you look at the situation today. According to Indian Spices Board, as the country shipped 26,700 tons of pepper in 2011-12, exports fell to 16,000 tons in 2012-13 with pepper selling at a rough cost per kilogram of 4US $ in the world market. Global pepper production peaked in 2003 with over 355,000 tons and Vietnam today is the world's largest producer and exporter of pepper, producing 34% of the world's pepper. Other major producers include India (19%), Brazil (13%), Indonesia (9%), Malaysia (8%), Sri Lanka (6%), China (6%), and Thailand (4%). Even that second place is under threat. But then again, everything has changed, like the taste of food. Today in developed countries, taste is dictated by large companies like America’s McCormick. Their spice chambers and technological innovation centers decide how much of spices go into flavor mixes used in the food industry. The easy to cook, easy to eat and easy to buy dishes or mixes eventually decide the taste of food you eat. And in this humdrum world, the spicy pepper is no longer king; I read that dried Capsicum has finally taken over the perch in that 600 year race and so, one day, not so far in the future, my friend, Malabar pepper chicken may end up as a memory from the past..
The political Economy of Commerce Southern India – 1560-1650 - Sanjay Subrahmanyam
Malabar and the Portuguese- KM Panikkar
The pepper wreck – Filipe Vieira de Castro
Twilight on the pepper empire – AR Disney
Foundations of the Portuguese empire – Baily W Diffie & George D Winius
Profits from Power- Frederic Chapin Lane
The Taste of Conquest: The Rise and Fall of the Three Great Cities of Spice - Michael Krondl

Note: this is a superficial study and I have deliberately skimmed the surface to keep the lay reader’s interest. If I got into the price fluctuations and so many other cost factors, the reader would be induced into a deep slumber.

For more details on that interesting world chart, read this three part article

Some Currency rates for better understanding
Calicut panam = 26 reis, Cochin panam 22 reis
Parados or Xerafim = 300 reis, Cruzado 360-400 reis
Cruzado = 0.86 ducat – 11 gm gold = 15 panam


Ramu Ramakesavan said...


Good post. Thanks for writing a nice blog answering several of my questions about spice trade between Zamorin and the Portuguese. I appreciate it very much.

I like your idea of providing a list of references at the end of the blog. I plan to do the same in my future blogs.


invisible me said...

Other than pepper(which in itself was a megascale business), didnt Malabar coast trade any other important commodity? I remember reading a part of p k balakrishnan book that arab and roman trade manuals don't report any other spice other than pepper with any importance.

another point mentioned in the same book was the nonchalant approach of rulers towards business items production. Especially when one realizes the importance of a commodity, it is natural to expect rulers to promote it's production more systematically. It didn't happen with any Malabar rulers. Is there anything factual with such an argument which points to the carefree approach of rulers immature to understand anything.

may be my only question is , was Kerala such a backward production wise and as a society as depicted in p k balakrishnans book

Maddy said...

hello invisible me..
thanks for the comment, yes i agree that pepper was not the only commodity, and that there were others, but i chose the most valuable one for this article. it was also the commodity that traveled the longest distance to reach the consumer and worth its weight. Unfortunately the caste system rigors and militant times meant that the rulers paid little heed to agriculture.

Which book of PK Balakrishnan are you referring to?

Maddy said...

thanks Ramu,
glad you liked it..Malabar history is quite convoluted and does not follow usual norms, so it is very interesting, but requires a good understanding of the times.

Yes, I have built up a big library on the history of Malabar and the nearby libraries have been a great help.

ajay joy said...

Thanks for your reply, maddy
I was referring to the book 'jaathivyavasthithiyum keralacharithravum' by P K Balakrishnan.

The book was basically intended to prick at the bubbly golden past created for keralam by nationalist historians. So almost all historical incidents and sources are mentioned in that book to show the primitive stage of society, rulers as well as administration.

Even the Pacheco led Kochi defense during siege was mentioned to buttress the point of inferior and inefficient soldiering of then great Zamorin. The unsophisticated crude iron technology in keral as well as the dearth of ironsmith professionals made it the inevitable defeat before the alien forces. The battle campaigns of Zamorin were lampooned as infantile wastage of resources.

The point of absence of spices other than Pepper about trade in Malbar coast as recorded by Romans and Arabs is raised by PK to direct the user to the yet to be explored and exploited Western Ghats( already filled with wild grown spices) as society was not technologically able to clear and extend itself to dense western forests. Even for pepper, PK deduces it to be naturally grown rather than careful and systematic farming despite the fact that it was richly rewarding. This, he reasons, was because of the 'hunting and gathering' nature of primitve society.

The same point was discussed to mention the severe lack of food grains all across Kerala for which we depended on imports from oher parts of India. Even the coconut cultivation on a systematic line is attributed to the Dutch innovations. Kindly forgive me if anything wrongly written about the arguments in the book, as I am recollecting certain arguments and the book is not with me right now

The book now has an iconic status among the iconoclasts in web world ! especially during Onam to refute the image of rich historical kerala.

Anyhow, for the novices like me interested in reading about Kerala history, your blog is an immense source of rich information and analysis. especially it's fine readability.

Maddy said...

Thanks Ajay..
OK now i know which book you are referring to and I have it. So let me study it and come with with either a detailed reply or an article on the supply side of the spice trade one of these days.

you must realize that there were three types of writers in kerala, one the writer belonging to the upper class like KM panikkar or KVK Iyer, second the leftist critical writer who would write with a diametrically opposite bent and third the aggrieved writer with an oppressed class bent and a chip on his shoulder due to the years of oppression.

and add to it you have critical malayali who enjoys picking faults and making wild make your pick from them is not easy and the end result is that facts are lost

but then again, that is the fabric of our swantham keralam...

ajay joy said...

Yes exactly Maddy. The discursive argumentative malayali!
waiting for your study.

Gita said...

Im from amballavattam family tellichery. Our family tree states that our earliest ancestor kunhimatha alias neeli came from kadathanad( 7km from badagara) in 1775 due to oppression and were known as kadathanadans by the people of telicherry.there used to be a temple in our taravad which was destroyed by tipu and the present ambalavattam temple has been built in the same place.

Maddy said...

Thanks gita
for the information...all adds up