«For most of the twentieth century, tin was the site of new forms of international regulation which became a model for other commodities. The onset of ...»
The International Tin Cartel
For most of the twentieth century, tin was the site of new forms of international regulation
which became a model for other commodities. The onset of the depression of the 1930s saw
a collapse in commodity prices, and governments of tin producing countries decided to form
a cartel to return the industry to comparative prosperity. This is a detailed study of how the
tin industry found itself in difficulty and how the cartel developed its policies of control over production and stocks, together with its enduring legacy after World War II.
These policies proved very controversial and the ensuing conflicts provided many economists with arguments to support a critique of the very principle of cartelization.
Examination of the sources of these conflicts shows that they had little to do with economic issues, but reflected deeply held ideological conceptions. They also show that the economic criticisms are without any empirical foundation. This study of a cartel brings together two levels of analysis that are normally kept separate; international co-operation, and national organization, and demonstrates how each affected the other. It is based on a comprehensive review of a wide range of archival sources which are sufficiently rich and frank that they provide an insider’s sense of how a cartel actually worked.
The book covers topics including the tin industry, depression of the 1930s, commodities, British imperial economic policy and international trade relations. Its discussion spans a range of countries including Bolivia, Malaya, Siam, the Dutch East Indies and Nigeria. It will be of particular interest to higher level students and researchers in these subject areas, as well as professionals who monitor commodity markets.
John Hillman taught Sociology and International Development Studies at Trent University, Ontario, from 1968 to 2004 where he is now Professor Emeritus.
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John Hillman First published 2010 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2010.
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© 2010 John Hillman All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.
British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Hillman, John, 1939– The international tin cartel / John Hillman.
Includes bibliographical references and index.
1. Tin industry--History. 2. Cartels--History. I. Title.
HD9539.T5H55 2010 338.8’87696--dc22 2009035609 ISBN 0-203-85661-9 Master e-book ISBN ISBN10 0-415-55412-8 (hbk) ISBN10 0-203-85661-9 (ebk) ISBN13 978-0-415-55412-1 (hbk) ISBN13 978-0-203-85661-1 (ebk) Contents
15 The International Tin Committee and World War II, 1939–1942 292 viii Contents 16 The International Tin Committee and its critics 319
A study of this scope could only be undertaken in a particularly supportive intellectual environment. A special debt of gratitude goes to Thomas Symons, Founding President of Trent University, who created an institution which encouraged the tackling of large
projects. Discussions with colleagues at Trent have sustained this one and they include:
Pradeep Bandyopadhyay, Eric Helleiner, David Morrison and Andrew Wernick. Scholars who are familiar with tin have helped refine my position and they include: Gill Burke, Manuel Contreras, John Thoburn and Helmut Waszkis. Some of my students have also been indispensable. Piet Straatman assisted in the clarification of colloquial Dutch. Nadien Godkewitsch and Aqeel Zaman helped in locating and checking some archival sources.
Material support for this project has come from grants from the Committee on Research of Trent University, and the Social Sciences and Humanities Research Council of Canada.
Much of the primary research was undertaken with the assistance of my wife, Ruth, who read newspapers, checked references, organized xeroxing and listened to several unrefined nuggets as they were extracted from the archives. Without her help and support, the results of this inquiry would have been far more limited.
Some of the material has been already been published. I am grateful to Mining History Journal for permission to use ‘The Politics of Equity: Administering Tin Restriction in Nigeria, 1931–1933’, vol. 4, 1997, to the Board of Regents of the University of Wisconsin system for the use of ‘Chartered Companies and the Development of the Tin Industry in the Belgian Congo, 1900–1939’, African Economic History, vol. 25, 1997 and to Cambridge University Press for the use of sections from ‘Malaya and the International Tin Cartel’, Modern Asian Studies, vol. 22, pt. 2, May 1988, ‘Bolivia and the International Tin Cartel, 1931–1941’, Journal of Latin American Studies, vol. 20, no. 1, May 1988, and ‘The Freerider and the Cartel: Siam and the International Tin Restriction Agreements, 1931–1941’, Modern Asian Studies, vol. 24, no. 2, May 1990.
Acronyms AISI American Iron and Steel Institute AMM American Metal Market AOGIT Anglo-Oriental and General Investment Trust AOMC Anglo-Oriental Mining Corporation ASARCO American Smelting and Refining Company ATMN Associated Tin Mines of Nigeria BC Belgian Congo BM Billiton Maatschappij BMC British Metal Corporation BMTS British and Malayan Tin Syndicate CFL Compagnie des Chemins de Fer du Congo Supérieure aux Grand Lacs Africains CGF Consolidated Goldfields of South Africa CMO Compañía Minera de Oruro CoP Certificate of Production CTMB Consolidated Tin Mines of Burma CTS Consolidated Tin Smelters EIC East India Company EMJ Engineering and Mining Journal EPL Exclusive Prospecting Licence ESB Economisch-Statistische Berichten ESC Eastern Smelting Company FIC French Indo-China FMS Federated Malay States GMB Gemeenschappeleijke Mijnbouwmaatschappij Billiton IAMS Industrial Australian and Mining Standard IRRC International Rubber Regulation Committee ITC International Tin Committee ITP International Tin Pool ITRDC International Tin Research and Development Council ITRI International Tin Research Institute LME London Metal Exchange LTC London Tin Corporation LNTM London Nigerian Tin Mines MRC Metals Reserve Corporation xii Acronyms MTRJ Malayan Tin and Rubber Journal NEI Netherlands East Indies NIEO New International Economic Order NYT New York Times PME Patiño Mines and Enterprises RFC Reconstruction Finance Corporation SAMEJ South African Mining and Engineering Journal SEK Société des Etains de Kinta STC Straits Trading Company STS Siamese Tin Syndicate TIMM Transactions, Institution of Mining and Metallurgy TPA Tin Producers’ Association UFMS Unfederated Malay States UMHK Union Minière du Haut Katanga VOC Vereenigde Oostindische Compagnie VYB Vivian, Younger & Bond WCM Wild Cat Monthly 1 Introduction On United Nations Day, 24 October 1985, Pieter de Koning, Manager of the Buffer Stock of the International Tin Council, informed Ted Jordan, Chairman of the Committee of the London Metal Exchange, that he was no longer in a position to meet his financial obligations.1 Overnight, £900 million in paper assets vanished and the price of tin dropped from £8,900 to £5,500 per tonne. Bankruptcies of dealers and miners followed in its wake and the economy hardest hit of all, Bolivia, sought relief in the production of cocaine.
International commodity agreements are always fragile but none had ever collapsed in such a dramatic fashion. Over most of the three decades of its effective history (1956–1985) the International Tin Council had been regarded as offering a solution to the difficulties created by markets in primary commodities. With its demise any enthusiasm for such agreements as an integral part of the creation of more equitable and prosperous international economic order evaporated.2 The ‘obvious’ lesson was drawn by the British government
whose representative, Alan Clark, stated that:
Experience with the tin agreement and other commodity agreements has shown that market intervention provisions such as buffer stocks and quota arrangements have severe defects: at best they are of doubtful benefit to producers and consumers and at worst they distort markets fundamentally and carry the risk of disastrous failure … The Government’s general policy towards commodities is based upon the premise that the best way to assist producers and consumers is to enable markets to work efficiently.
We therefore support liberal arrangements and deregulation. We seek to work with our European Community partners to put these principles into practice both in relation to commodity agreements and in the current round of multilateral trade negotiations in GATT which will have an important bearing on wider commodity trade questions of interest to both developed and developing countries.3 The International Tin Council was the last in a series of intergovernmental agreements which regulated the tin market over most of the twentieth century. Yet the operation of a deregulated market, which has produced both extremely low and high prices, does not appear to have been a superior method of coordinating the activities of producers and users of this indispensable metal. The failure of the International Tin Council should not be taken as a licence to dismiss the experience of commodity control.
International control of tin began in response to the first economic crisis of the interwar period, 1921–1922 and was resumed in response to the second, 1929–1931. On both those occasions, the problem was sufficiently severe that governments set aside market orthodoxy and co-operated in rescuing their producers from its travails.
2 The International Tin Cartel The first of these interventions, the Bandoeng Pool, was short-lived, being made redundant by the boom of the mid-1920s and is relevant only to the history of tin. The second, the International Tin Restriction Agreements, 1931–1946, were more durable since they had to address the challenges posed by the depression of the 1930s and World War II. They were also far more significant, not only in the history of tin but in the whole history of primary commodities, especially during the crisis of the 1930s.
Tin was the first intergovernmental agreement which gave its regulatory authority, the International Tin Committee (ITC), the power to control production. This was seen not only as a solution to the problem of tin but also as a model that could be adapted to deal with other troubled commodities. Tin was followed by intergovernmental agreements for sugar, tea, wheat and rubber.4 Expectations were even higher since rescuing these sections was seen as making a major contribution to the recovery of the overall international economy. It is therefore not surprising that tin has been at the centre of many of the more general debates about primary commodities.
When a small group of individuals determines the overall level of production their decisions are inevitably controversial, especially when they do so in the name of governments.
These controversies engaged several different groups. Specific decisions of the ITC directly affected members of the industry, miners, smelters, brokers and industrial users. Their responses, together with the decisions themselves, were subject to extensive scrutiny and commentary by journalists5 and politicians.
Given the overall significance of the tin experiment, it became the subject of much more comprehensive analyses undertaken by professional economists who became drawn into its controversies. They divide into two camps which reflect the predisposition of their respective intellectual cultures. Anglo-Americans were generally very critical of the ITC,6 while their continental counterparts were generally supportive.7 The arguments from the latter group have been ignored or distorted, whereas those from the former have succeeded in shaping the enduring reputation of the ITC.
The dominant critical perspective not only drew on the theoretical power provided by neoclassical economics but it also found supporting evidence in the vociferous complaints from those who considered themselves adversely affected by the ITC, especially where these were echoed in the mining and financial press. Unfortunately, those who were anxious to build a strong case against the ITC relied on a theory which was ill-suited to deal with a commodity such as tin and overlooked the evidence that would provide a better test of its conclusions.
On occasion, those who were responsible for the administration of the ITC provided a public defense of their actions but they were well aware of the limitations of such a forum as a means of convincing or silencing their critics. Fortunately, they have left behind an extensive record of the way in which they actually came to their decisions which now permits the whole experiment in tin control to be reconsidered.