The Agency House

We turn now from questions of growth to those of structure, to the morphology of our subject. The characteristic unit of private British trade with the East, both China and India, was the ‘Agency House’. This type of firm, though primarily a trading house, also acted as bankers, bill-broker, shipowner, freighter, insurance agent, purveyor, etc. It maintained intimate connections, commercial and financial, with its branch houses or agents all over the world. It was, in short, the medium through which ‘backward’ areas such as China were brought into economic relation with Great Britain.

The Agency System was the outcome, mainly, of geographic distance between the origin of capital and its actual sphere of operations, and of technical difference between two levels of economy. It was of first importance in the 19th-century British expansion overseas. The development of ‘large-scale’ machine industry involved a constant endeavour to increase output, since profits depended on lowering the cost per unit of production. Large-scale production brought with it the problem of selling more than the domestic market could absorb. Contemporaries recognised that ‘this deficiency of ample market at home’ could best be met by consigning the surplus abroad to be sold for what it could bring—even if at a loss—in order to maintain the volume of output. Hence the development of ‘consignment trade’; an operation in which British manufacturers, especially in the cotton industry, made up goods to stock not to order, and shipped the surplus stock to an Agency House abroad to be sold on commission, taking in return long Bills, which, however, could easily be discounted in the London money market.