This article deals with the relationship between opium revenue farming and the development of capitalist enterprises in Southeast Asia. It examines the role which opium played in the transformation of all Asian economies during the late eighteenth and nineteenth centuries. While few would deny that the unprecedented expansion of the opium trade by European traders had a major, usually destructive impact on Asian economic systems and political and social institutions, the long-term results of opium in the Asian, particularly Southeast Asian, economies are less well understood. Most specifically, the opium farming systems which existed in virtually every Southeast Asian state (as well as parts of China and India) were important adjuncts of capitalist development in the region.
The practice of farming out portions of the state's revenue was a common one in pre-modern Southeast Asia. In order to collect a tax from their population without spending scarce resources on bureaucracy and infrastructure, most colonial governments, together with indigenous political entities, preferred to 'farm out' revenue collection to private individuals. They would auction off the right to collect a specific tax or to hold the monopoly on the distribution and sale of some excisable item, such as liquor or opium. The monopolist, or farmer, as he was called, provided his own organisation to carry out the task and charged as much as he felt economically realistic to the consumer, paying his overhead and rent to the government and pocketing the remainder as his profit.
There were many different types of farms in nineteenth-century Southeast Asia, including farms for liquor, pork, prostitution, gambling, markets, tolls, capitation taxes and others. Of all the various farms which we find in nineteenth-century Southeast Asia, opium was by far the most lucrative. Opium generated a high level of cash flow and thus created large pools of capital. There were, then, numerous links between capitalist development in Southeast Asia and the opium farms and farmers. More importantly, however, the farms also financed commodity production and helped to generate the infrastructure for consumer economies. These institutions helped to create and finance the state structures that protected businessmen and their profits. I have argued elsewhere that free trade in ports such as Singapore and Hong Kong was possible only because opium revenues provided such reliable and lucrative flows of cash to the colonial governments. In fact, all Asian governments depended upon opium farms for major portions of their revenue. (1)
If we look only at the returns to governments from these institutions, it is clear that the entire colonial project was heavily reliant on opium revenues. In fact, we could even argue that it would have been impossible without them. Certainly this was the case for Singapore and the other Straits Settlements, where opium accounted for between 30 and 60 per cent of the locally collected revenue in every single year for the entire century after 1819, and generally averaged between 40 and 50 per cent of total annual revenues. Other colonies were less dependent on opium and drew revenues from a variety of other sources including trade, land rent, capitation and export production. Nevertheless, opium revenues still came to make up an important and often crucial share of their colonial budget.
Between 1886 and 1895, the Netherlands Indies' farms supplied 18 per cent of the colony's revenue. This figure is based on the total revenues, which included profits from colonial enterprises and trading commodities delivered to Holland. If we look only at tax revenues, opium actually constituted about 35 per cent. In French Cochinchina opium was the single largest revenue-generating operation for two decades; between 1861 and 1882 the Saigon farm contributed about 30 per cent of the colonial revenues. …