II Business Perspectives in the History of Communications

Where does this study stand in the history of communications? It is obvious that the history of communications can be viewed from several different perspectives. It might be understood as the history of logistics or transport, the history of journalism, or postal history, the history of postal organizations, the history of personal networks, or the history of the development of the speed of communications, just to mention a few.

Also the history of information transmission includes different angles. Roughly, it can be divided into two: personal contacts and public communications. In both cases, information is transmitted in spoken or written (or printed) form through various networks or public transport and delivery systems.

Traders – whether they were merchants, agents, brokers, bankers, shipowners, underwriters or other businessmen, sometimes even women – were individuals, who used all kinds of personal communications in their everyday life. They were also heavy users of public communications, sometimes also involved in their contents. In principle, any kind of communication could include a business aspect.

A short introduction to the research already conducted in the fields of personal as well as public information transmission may be useful for the reader. Both these ‘categories’ may include a local and an overseas dimension, although their respective emphasis may vary.

For example, Graeme J. Milne has studied the information order of the mercantile community of Victorian Liverpool, i.e. which members of society had access to which kinds of information, how much it cost to acquire it, and how institutions were formed to disseminate or restrict it.¹⁹ This approach includes a question about the limits between personal and public communications. As Milne noted, although frequently marginalised in economic theory, information of all sorts was a central preoccupation of 19th-century business. For example, placing information with its costs, benefits and uncertainties, at the centre of the historical analysis of these operations can therefore offer a more appropriate interrogatory approach than the powerful, but sometimes ahistorical, tools of classical economics.²⁰

Several other historians have lately studied the personal networks of particular merchant houses or mercantile communities. As an example, Sheryllynne Haggerty has examined the transshipment of knowledge in the business environments of Philadelphia and Liverpool in the late 18th century. She notes that various means of communications were already available for traders, allowing them to assess, manage and reduce their risks. Newspapers were crucial in providing information in an increasingly impersonal environment, but the written word in the form of personal letters was also important, not only for recording and directing business, but for introductions and transmitting gossip – very necessary in keeping up to date with the state of people’s reputations. Haggerty divides the field of communications into printed, written and spoken word, with a fourth category of religion, family and friendships.²¹

Gordon Boyce continues the idea with a more economic viewpoint as follows: the commercial communities, where business, family, religious and political ties were often interwoven, provided necessary information and capital even for large enterprises. Within the closely-knit commercial communities of British ports, successful operation of the basic network mechanism generated over time the interpersonal learning, mutual interest and enhanced reputations needed to support larger operations.²²

In a local business environment, the reliability and reputation of business partners and counterparts were continuously under the microscope in different formal and informal business activities, including correspondence, participation in events, associations, etc. When considering foreign business opportunities, the reputation of foreign partners was extremely important. All means were used to keep the most reliable connections for foreign business up to date.²³

In Finland, Mika Kallioinen and Jari Ojala have recently studied the business communications networks of specific merchant houses with overseas trade.²⁴ In Britain, e.g. Graeme J. Milne’s Trade and Traders in Mid-Victorian Liverpool covers several aspects of this topic.²⁵ There is also a major ongoing project by the name Mercantile Liverpool at the University of Liverpool, involving a mix of quantitative and qualitative studies to broadly cover the networks of Liverpool merchants in 1851–1911. Kalevi Ahonen has also examined a great number of merchant house correspondences in the United States to cover the trade between America and Baltic Russia, touching furthermore upon the difficulties in obtaining information on both sides of the Atlantic.²⁶

Merchant networks can be studied from different angles. A good recent example is Mika Kallioinen’s Verkostoitu tieto, which covers the networks of a Turku-based merchant house in the mid-19th century. It is based on the following classification: 1) technology, meaning new forms of communications, their adaptation, improvements in the speed of information transmission, 2) communications as means of social interaction, network as a channel of information, 3) cultural basis of communications; confidence, international ‘entrepreneurial culture’, and 4) information of business activities; contents, availability, usefulness.²⁷ Even if the perspective is wide, the merchant house aspect predominates in the study, and it does not therefore cover the public communications aspect.

In addition to the research on personal networks, important studies also exist covering different kinds of public communications: the general news circulation, early newspapers, carrying mails, and speed of communications.

Ian K. Steele’s The English Atlantic²⁸ includes several interesting viewpoints concerning early overseas information transmission. Steele divides the English Americas of 1675–1740 into four main areas which received and forwarded information from the mother country in a very different way. The sugar route for the West Indies, the tobacco route for Chesapeake, the Western route for Philadelphia, New York and Boston, as well as the Northern routes for Canada all had their typical traffic and information streams. Steele’s work covers the development of sea transport (‘news-bearing ships’), mail routes and post offices, newspapers and packet boat service, as well as some good case examples of news circulation following important historical events. Additionally, Steele notes that emigrants and diseases, e.g. smallpox and yellow fever, also spread along the same routes.

Another extensive and equally interesting study about the development of the speed of information transmission is made by Allan R. Pred. Although mainly concentrating on this development between American cities, the Urban Growth and the Circulation of Information gives a wide view of the ways in which the information flows proceeded during the last ‘pre-telegraphic’ half century. Pred’s study covers the spread of information through newspapers, postal services and coastal trade, as well as inter-urban travelling, and the spread of innovations and diseases. His model of large-city rank stability is of special interest.²⁹

What Pred describes as an urban city system on the north eastern coast of the United States, was rather parallel with the major cities in Britain. The city merchant middlemen (e.g. importers and shipping merchants), agent middlemen (e.g. auctioneers, brokers, commission merchants, and factors) and retailers were the most important capital accumulators, but even the so-called manufacturing establishments combined small scale production with retailing or wholesaling functions, or gained provisions by offering repair services. The system included coastal and interregional distribution of hinterland production, hinterland and coastal distribution of interregional and foreign imports, foreign export of hinterland commodities and re-export of trade commodities. While the wholesaling-trading system dominated the urban economy, the relative importance of its functions varied over time and from city to city.³⁰ The more developed the urban systems of an area were during the period, the more important was the speed of business information transmission.

The history of printed business communications goes back to ancient times, as John J. McCusker has shown in his studies on the early modern Italian business press, and the business press in England before 1775. His essays on the early financial and commercial newspapers published in the Italian and other European business centres cover a period of more than two and a half centuries prior to the 1780s.³¹

At the turn of the 18th century there were four basic types of commercial and financial newspapers published in London during a business week: the Bills of Entry, the Commodity Price Current, the Marine List and the Exchange Rate Current. Several hundred Bills of Entries were printed and published every day. They were subscribed to not only by individual merchants but by the London coffee houses, government agencies, etc. Merchants also subscribed to the newspapers for their overseas correspondents on a regular basis.³²

The business newspapers – as well as the national papers – were widely spread. Large numbers of commodity price currents of Venice can be found in the archives of the Netherlands, and large numbers of Amsterdam commodity price currents in the archives of Indonesia. The British Post Office prioritized incoming Lloyd’s List news in its London Post Office, and all newspapers carried by mail were for long periods free of postage fees and stamp duty.³³

According to McCusker, ‘quicker distribution of business news meant that businessmen could react more rapidly to changes in market conditions’, while newspapers were ‘filled with information gathered, published, distributed, and sent off in the post all in the same afternoon or evening; these business newspapers spread the news of prices and the rest much more quickly than in the past’.³⁴

In practice, however, the newspapers could not be in Indonesia faster than the following sailing ship would take them there, forwarded by the ship’s captain or an individual traveller. This meant something like an approximately five months delay after the rapid ‘posting’ of the news. In Central Europe, the mail coaches normally managed to bring the news from one country to another within a couple of weeks or even a shorter time, depending on the distance.

Why then was the speed of information so important for a trader, whether he was a merchant, an agent, a broker or a banker? Those who knew first about the market changes – prices, exchange rates, declining or growing stocks, etc. – could naturally make money. Businesses like the cotton trade across the Atlantic were typically influenced by speculations. New York merchants, usually being the first to learn of radical price changes for cotton in Liverpool were often ruthless in their exploitation of the market in Charleston, Savannah, Mobile and New Orleans, while interests in those cities, being the first in the South to acquire New York news, could make quick back-country purchases before the word of price adjustments became public property. Similarly, hastily dispatched representatives of New York mercantile houses could frequently take advantage of early news of domestic price changes in Philadelphia, Baltimore, and other major cities, with entrepreneurs in those cities frequently repeating the process in their respective hinterlands.³⁵ In this kind of trade, the impact of the telegraph would be the greatest.

Despite the progress in developing electric communications, which started in the mid-19th century, most business activities still required physical movements of documents, as they did up to the age of the fax and Internet. As Yrjö Kaukiainen has pointed out, the improvements in communications widened the already existing speed gap between the transport of information and of bulk goods, giving merchants an opportunity to sell the cargo further before it had even arrived. The bill of lading, a certificate of specific goods being loaded on a specific ship, normally signed by the master, legally respected the actual cargo. This document could be sent by a fast mail steamer to the port of arrival, and the recipient of the goods could make further transactions before the actual arrival of the ship.³⁶ Money was changing hands quicker than ever before.

While the pace of business transactions was typically slow, merchants could gain from completing sales deliveries and purchase acquisitions as quickly as possible, being able to avoid the unnecessary tying up of capital in goods-in-transit or goods-in-stock. In places where the intervals between information receipt were shorter and transport services were more frequent and rapid, the merchant could in the course of a year complete a greater number of capital turnovers, or action cycles, than his counterpart with similar capital resources but slower communications.³⁷

Shipments were usually paid by a bill of exchange, which was considered a legal promise to pay a certain sum of money on a particular date, most usually in three month’s time. A supplier issued a bill for the value of the goods he was shipping and for which he expected to be paid at some definite future date; the supplier agreed to ‘draw a bill’ on the buyer, who acknowledged responsibility for eventual payment by writing on the bill his ‘acceptance’. The acceptance signified that the buyer was a good risk for a lender, as the acceptance house was liable to the financing house in the event of default. After acceptance the bill was sold to a financier; a lender would then ‘discount’ the bill (buy it for less than the sum payable in the future) and the supplier would thereby borrow. The difference was the interest charged on the loan. When the goods were sold, the supplier was able to pay the debt and withdraw the bill. The bill could change ownership (be rediscounted) during its currency should the original lender suddenly need cash. Bills of exchange therefore were a valuable means of facilitating both national and international trade at a time when transport was slow and communication difficult.³⁸

The German Ernst Samhaber depicts in his book Merchants make history how a Hamburger merchant, John Parish, used the system for his credit. He shipped Baltic grain to Western Europe and imported West Indian merchandise – coffee, sugar, rum, tobacco and tea – via Liverpool. He paid for the grain with colonial merchandise and for the colonial merchandise with grain. While the cargo was still at sea, he made out a bill of exchange, on which they advanced money. As security he handed over the ship’s papers, the bills of lading. He himself bore the major part of the risk, only partly covered by insurance, and simply added the premium to the price of the grain and the colonial merchandise.³⁹

In the North Atlantic cotton trade, where prices could change sharply, importers in Liverpool tried to guard themselves against price falls by making forward sales as soon as they had made their purchases in America. Speculators and others purchased the forward-sold cotton either to safeguard their future supply or in the hope of profiting if the price of cotton did rise while in transit.⁴⁰

Until the early 19th century, notable financial development had already taken place. There was the establishment of a de facto gold standard, the evolution of specialised merchant banks, the growth of a market in mortgages, the increasing use of bills of exchange to settle domestic and international obligations, the rise of the stock exchange, the development of marine and fire insurance, and the appearance of a financial press. The effects of these innovations were felt on other activities. Improvements in credit and commercial services boosted the shipping industry, promoted overseas trade and assisted the balance of payments by generating invisible earnings. The expansion of overseas commerce encouraged the rise of mercantile firms whose size enabled them to mobilize the capital and credit needed for long-distance trade.⁴¹

International bankers like the Rothschilds and Barings, both of German origin, were very powerful in the British overseas business. While the Rothschilds established banks in Vienna, Paris, London and Naples, the Barings concentrated to a much greater extent on overseas transactions. They bought and sold merchandise and securities on commission as well as for themselves, they operated their own ships, kept the accounts of selected depositors, and acted as financial agents for merchant houses and governments all over the world, especially in Latin America and the British Empire.⁴²

The business practices and the common use of financial instruments, combined with growing world trade and investment flows, caused a growing need for fast business information transmission. Although there was a continuous improvement in the speed of communications during 1820–1870, the improvements were far from even.⁴³ Each of the important world trade routes had its own historical background, and the development of the speed of information transmission varied markedly from one place to another. In fact, technical improvements played only a partial role in the development, while many other factors have been rather untouched in historical research.

To put this specific study on the ‘map’ of the history of communications, its focus is on the public long-distance mail systems, concentrating on the current possibilities to maintain personal networks of overseas business relations. Whether the mail carried consisted of personal letters or trade documents has no specific importance from this perspective.

The study thus concentrates on overseas business information transmission, leaving out the local merchant networks and means of communications. Spoken information, like ‘news of mouth’, rumours and personal travelling, is only implicitly involved – mails and passengers were usually carried by the same ships. Before the time of the telegraph, the speed of information transmission was the same as the speed by which a person could travel. While studying the development of mail transport, the other related aspects are also automatically involved. The chosen methods will be explained in the following chapter.