Published by EH.NET (August 2000)

Geoffrey Jones, Merchants to Multinationals: British Trading Companies in

the Nineteenth and Twentieth Centuries. Oxford: Oxford University Press,

2000. x +404 pp. ISBN 0-19-829450-6.

Reviewed for EH.NET by Mira Wilkins, Department of Economics, Florida

International University, Miami, Florida.

Geoffrey Jones’s book is on British merchant houses in the nineteenth and

especially, the twentieth centuries, trading firms that had foreign direct

investment (FDI) outside the United Kingdom. Jones is an authority on the

history of multinational enterprise; he has written extensively on

manufacturers that became multinationals and on banks that expanded

internationally; his Evolution of International Business (published in

1996) was a general history. In the present volume, he turns his attention to

British traders. And, what a rich subject this turns out to be. This is an

archive-based work that provides information not available elsewhere.

Many studies have been made of British international trade; Jones’s concern is

with the companies that made this trade a reality. He is interested in how

these firms functioned and how they performed (whether these family firms

reflected a “decline” in Britain’s global role). He pays attention to both

substance and form. Thus, he finds that when a number of these companies moved

from partnerships to incorporation this did little to change the pattern of

ownership and control; often incorporation was designed to perpetuate rather

than to end family dominance (p. 97).

After a brief introductory discussion on theories of multinational enterprise,

Jones tells his reader about the complex origins of the nineteenth and

twentieth century British merchant houses. He writes of the foreign merchant

houses in Britain that evolved into merchant bankers (Rothschild and Schroeder

for example) and suggests that the great majority of the leading British

merchant banks were set up by emigrant merchants. By contrast, the trading

companies as distinct from the merchant bankers tended overwhelmingly to have

British roots (p. 24), although the roots could be established by expatriates.

For example, Wilson, Sons & Co. was set up in Bahia, Brazil, in 1837 by two

brothers of British birth; the firm subsequently opened a London head office in

1845 (p. 28). Yet, frequently the distinctions between merchants and merchant

bankers was muddy (p. 42, on 1870). Interlocking partnerships, separate houses

(set up by family members and associates), new locales and shut-downs of older

ones made for a webbed network with continuities and discontinuities.

British merchants were clearly in the vanguard of the creation of the

international economy that had emerged by 1914. Their activities went with

(followed) the expansion of British imperial frontiers; yet, they also went

beyond “empire,” playing a major role in Latin America. The traders were

closely connected with the expansion of British shipping. There were also

associated with the growth of overseas banks.

At home, three centers for the mercantile developments emerged: Liverpool,

London, and Glasgow (the principal trading companies, as of 1870, were

identified with each center, see p. 43). Jones shows how each group of

merchants arose and how the three centers interacted with one another. He is

careful to document the particular British exports and imports that the firms

handled and how rapidly the merchant houses engaged in trade that involved far

more than two countries.

The story that Jones unravels is global. Traders did not confine themselves to

commerce; they became involved in storage facilities (from warehouses to timber

yards), in manufacturing abroad (from jute mills to sugar mills, from silk

filatures to cotton spinning and weaving, from flour mills to breweries), as

well as in producing primary products (sugar, fruits, tea, rubber, nitrates,

coal, oil). Typically, the traders participated in banking activities,

providing credit to customers and suppliers, financing trade, and by necessity

dealing in foreign exchange; they also became active in “investment banking,”

aiding and prompting company flotations. In addition, the traders became agents

for British insurance companies. handling not only trade-related insurance but

far more extensive insurance transactions. The developments took on a jagged

and uneven process. The degree of backward integration varied substantially

from firm to firm and from one host country to another. Many of the firms

engaged in labor intensive operations and had in less developed countries huge

numbers of employees (after Bird & Co.’s merger with F.W. Heilger in 1917, the

new firm employed over 100,000 individuals in India; in 1930 Jardine Matheson

employed about 113,000 in China; in 1945, James Finlay’s total work force

principally in India, Ceylon, and Kenya came to 160,000); “local” employees in

each case were supervised by relatively small expatriate staffs.

Through time, the merchants increased their diversification, in product lines

and including substantial intra-regional trade (particularly in Asia). Here,

there is, of course, the problem of defining a region. While the British

trading companies did not take part in intra-regional Latin American trade,

they did participate in intra-regional Western Hemisphere trade, thus bringing

Latin American commodities to US markets. Over the decades, on most continents,

their role in host economies deepened, with added FDIs. By 1914, Jones suggests

that the traders “functioned in part as venture capitalists, identifying

opportunities and placing potential British investors in touch with them” (pp.

50-51). This was done in the main by their assisting in floating separate “free

standing firms,” that, in turn, made the overseas investments. The merchant

houses often had managing agency arrangements with the free-standing firms;

they might handle the trade of these firms; they were a critical part of the

cluster associated with the free-standing firms. Jones’s work adds to the

existing literature on free-standing firms, confirming the validity of the

concept. The trading firms that Jones studies operated within business groups.

Jones is superb in showing the variety; he not only discusses the traders but

also their long-standing and complex external business relationships.

Jones knows well the stories of individual traders and reveals the differences

between and among trading houses. For 1913-1914, he ranks major firms by

estimated size of capital, by major host regions, and by “outposts,” that is,

areas where the firms had a presence although not a large one (pp. 54-55).

Interestingly, of the ten “multi-regional business groups” in 1914 that he

documents, seven had a US presence, while four had Indian business (the next

highest ranking country). Typically the largest British trading companies

required a US office. However, the really sizable activities of most of these

firms was in the East, where regional trading companies were of immense

importance and also in Latin America, where the firms were crucial in

developing international trade. Only one of the multi-regional groups had

African trade; indeed, the trade with Africa seems to have been differently

constituted (pp. 75-80).

Jones is excellent in tracing the multiple problems British trading companies

faced in the years of the First World War, the 1920s, the 1930s, and of the

Second World War. It was not a happy time for companies that lived through

international commerce. As the world economy was torn asunder, these firms felt

the consequences. Jones writes that the entrepreneurial dynamism of the

pre-1914 era “looked decidedly weaker subsequently….” (p. 114). The sharp

post World War One downturn more than the War itself was the turning point.

Nonetheless, he finds that “it is robustness of the traders and their ability

to sustain ‘reinvention’ strategies which is so striking” (p. 350). By 1945,

the roster of British traders still closely resembled the list in 1914. In the

post-Second World War period, the companies – many of which operated within the

British Empire – now faced new uncertainties with decolonization, as the

“umbrella of British colonial rule” was removed.

The “corporate landscape” for the British trading houses changed dramatically

in the 1950s, 1960s, and 1970s. In 1958, Inchape was floated on the London

Stock Exchange, a holding company with 17 subsidiaries, based mainly in Britain

and India; beginning that year, Inchape acquired full ownership of a large

group of family trading companies with long histories in East and South East

Asia. It was in the post Second World War years that Lonrho assumed importance

as a trading company; it had its origins in 1909 as a London-based mining

enterprise in Rhodesia (now Zimbabwe); it took the name Lonrho in 1963;

meanwhile, beginning in the early 1960s, it acquired substantial trading

interests along with other investments (it remained, however, involved in

mining); in the late 1960s and in 1975, it took over the trading firms John

Holt and part of Balfour Williamson. But, finally, in the late 1990s Lonrho

divested its non-mining interests to return to its origins and concentrate on

mining. Booker McConnell (as the firm–the successor to the 1900 merger of

Booker Brothers & Co., founded in 1834, and John McConnell & Co.–was known

after 1968) diversified from a sugar trader and producer in British Guiana (the

largest property owner there in the 1920s) to a vast international business.

Jones traces the complex story of the many trading company mergers and

acquisitions. In the 1960s and 1970s, several British overseas banks bought

trading companies, but they soon sold off their non-financial assets. In the

changed post-World War II world, in the 1950s, 1960s, and 1970s, host country

groups or governments frequently acquired (often through nationalizations)

British trading companies that had important roles in their particular

economies, or alternatively, took over major parts of their international

business. It became harder for the trading companies to recruit personnel, as

the risks of retention of the very business itself multiplied.

Yet Jardine Matheson and John Swire continued on, notwithstanding Chinese

nationalizations; and Booker McConnell survived the 1976 Guyana expropriations.

In 1979, in terms of turnover, the London Times ranked Inchcape (19),

Lonrho (20) and Booker McConnell (64) among the top British “industrials.” The

huge United Africa Company (UAC) was excluded from the Times list,

because it was a subsidiary of Unilever; also omitted was the sizable Jardine

Matheson, because of Hong Kong registration. Incape in 1979 operated in 44

countries and sold the products of 2,750 manufacturers.

Many of the trading companies served the automobile industry (in the first half

of the twentieth century as agencies, before sales and assembly affiliates were

established by car companies); in the post-Second World War years, as

dealerships (in the trading companies’ traditional markets but also in the

United Kingdom). The British trading companies did this for American, Japanese,

German, and British car companies. Automobile industry historians have

understood this, but a scrutiny of the trading companies provides the other

side of the coin. The trading companies’ experience in post-Second World War

representation beyond dealerships (i.e. as wholesalers and assembly plant

operators in their traditional markets) is explained well in Jones’s volume.

In the 1960s and 1970s a number of British trading firms started to manufacture

in less developed countries in non-traditional sectors; these projects tended

not to be successful, for the trading companies had no advantage. Often these

ventures were short-lived. In search of new opportunity, companies made

investments in developed countries in a range of manufactured products; when

there was unrelated diversification, the results were frequently


As I read this book, it provoked me to ask many questions. In 1998, Jones

published an edited book, entitled the Multinational Traders, which

covered German, Dutch, Swedish, Swiss, as well as Japanese merchant houses.

That volume argued that the British were far from alone in having important

trading companies. In the present book, there are brief references to trading

companies of these other nationalities, but neither Merchants to

Multinationals nor Multinational Traders dealt systematically with

the differences by nationality in the trading in specific commodities. Why, for

example, did the large British grain traders, Sanday and Smyth, lose out to

international grain traders of other nationalities? why in the twentieth

century was Clayton more important than any British raw cotton trading house?

There are hints to the answers to these questions in Merchants to

Multinationals, but one would like to see a sequel on trading companies

involved in particular commodities that for much of the nineteenth and

twentieth centuries represented a sizable portion of world trade. These

companies participated on a large scale in intra-company commerce.

This is a splendid book. It not only delineates the trading companies’

expansion (and contraction), but also puts that story in the context of the

evolving world economy. It shows how in the first round of internationalization

before 1914, trading companies played a major role and how in the 1990s, as a

new round of globalization emerged, the trading company era was in “end game.”

As the century concluded, key surviving companies were no longer “trading

companies.” By the end of the 1980s, for example, Booker McConnell had become a

food distributor. Lonrho with about 190,000 and Inchape with about 50,000

employees “broke themselves up” in the mid-1990s. On the other hand, at the

close of millennium, John Swire & Sons (with 120,000 employees) and Jardine

Matheson (with 170,000) persisted. With changes in China, the trading companies

were able to return to the arena of their historical competency. Swire

participated in a variety of Chinese ventures, from Coca Cola bottling to paint

manufacture. In quite different industries, in 1996, Jardine Matheson had 70

joint-ventures in China! These multinational enterprises were, however, by the

1990s far from confined to the “China trade.” Jones attributes the continuity

of these two firms to the on-going “family” control, which meant the absence of

pressure from British “capital markets,” i.e. institutional investors. They

were firms that developed skills, whose management learned Chinese, and which

had “real advantages.”

This book is original and subtle, careful to pick up nuances, and to delineate

properly its topic. It is a major accomplishment. Jones is ready to generalize

and to theorize, but he does not oversimplify. The book will set the reader

reflecting on British economic development and the British role in the global

economy. It is essential reading for every economic and business historian

interested in the history of multinational enterprise, in British economic

history, and also in where British business fits in the evolution of the “world


Mira Wilkins is one of the foremost authorities on multinationals and

globalisation. She wrote a two-volume study of American multinationals, as well

many other studies of this subject. On British overseas business, she coined

the phrase ‘free-standing companies’ to describe the large number of firms

established in Britain that operated exclusively abroad.