The
Evolution
of Market
Structure
in Nineteenth-Century Japan
Collective
Continuous
Transactions
in the Fish Fertilizer
Market
Satoru
NAKANISHI
Nagoya University
THE
tinuous transaction relationships between groups,and
PURPOSE
of
this
study
is
to
examine
the
formation
of
con
the
processes by which they were transformed,as
they can be
found in the fertilizer market in nineteenth-century
Japan,and
by
doing this to shed light on the kind of evolution the market struc
ture underwent
in the midst of institutional changes from a pre
modern society to a modern society.
1
Before launching into that examination,I would like to explain a
few analytical concepts.In this study we shall be examining several
forms of market transactions that,if we focus on the aspect of the
1In discussing the transition from a premodern society to a modern society ,I am not adopting in this article the•gdevelopment stage theory,•haccording to which soci eties of a certain particular shape emerge in succession.This is why I have used the word evolution instead of development.The word evolution is sometimes used with a spe cial connotation,but here I use it in the ordinary meaning of intensification of com plexity and adaptation.For more on this idea,see Geoffrey M.Hodgson,Economics and Evolution:Bringing Life Back into Economics(Cambridge:Polity Press,1993).
88JAPANESE YEARBOOK
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strength(fixedness)of
the transaction relationship,we can roughly
divide into three transaction forms:
1.transactions among divisions or departments within one and
the same business organization(i.e.,internal
transactions);
2.continuing
transactions among certain particular transaction
partners(i.e.,continuous
transactions);and
3.one-off transactions among numerous nonparticular
transac
tion partners(i.e.,short-term
spot transactions).
The fixedness of these transaction
relationships
is,of course,
strongest in the first form and weakest in the third form.2
When a business makes a transaction internal,a
considerable
amount of savings in costs(the costs of finding a transaction part
ner,checking
on the partner's trustworthiness,negotiations
with
the partner,inventory
supervision,etc.)can
be generated,and
to a
certain extent merchandise
of a stable quality and price can be
secured;the disadvantages of such transactions are that it is impossi
ble to change transaction partners,it
is desirable from the
stand-point of the organization as a whole that the transaction amounts
estimated beforehand actually be achieved among the divisions of
the organization,and
the ability to react to individual changes in
market conditions becomes dulled.In short-term spot transactions,
on the other hand,flexible changes to other partners in one's trans
actions and to transaction
amounts in response
to individual
changes in market conditions become possible,but
in some cases
each individual
economic
unit cannot secure the transaction
amount,or
the quality,it is hoping for;also,the
risks are greater.
For this reason,our
focus will fall upon continuous transactions,
which combine both stability and flexibility in a transaction rela
tionship.Now,there
are two types of continuous transactions to be
found in Japan's economic history:individual
continuous transac
tions in which two(or more)specific transaction partners deal only
with each other(one
another)on
a continuing basis;and collective
continuous transactions in which a member belonging to a certain
2Oliver E.Williamson ,Markets and Hierarchies:Analysis and Antitrust Implications (New York:The Free Press,1975)can be cited as a good example of those who have discussed the evolution of contractual relations from the effectiveness of various types of transaction contracts.
group deals only with a member of a certain other group on a con
tinuing basis.
To preempt the conclusion,in
the fertilizer market in nine
teenth-century
Japan we can find all three sorts of transactions:
internal,continuous,and
short-term spot transactions,but,from
the point of view of dictating the market structure of the fertilizer
market as a whole,it was the continuous transaction(in
particular
the collective continuous transaction)that
played the greatest role.
At this point I would like to use a diagram to illustrate the con
cept of a collective continuous transaction(see
Figure1).Let
us
suppose that a,b,and
c are sellers belonging to a certain group,
while d,e,k,and
m are sellers who do not belong to any group,and
that f,g,and h are buyers who belong to a certain group,while i,j,n,
and o are buyers who do not belong to any group.Then,even
though a may sell to different buyers every time a makes a transac
tion,a always sells only to f, g,or h,who are members of the same
group,and
never sells to i,j,n,or
o.Both b and c follow the same
pattern of behavior when they sell.Again,a may sell predominantly
to one particular member of the other group(say,for
example,to
f),and though a does not sell to f all the time,he does so with great
frequency.Similarly from the point of view of the buyers:f,g,and
h
might not always buy from the same member of the seller group,
but they continue to buy from a,b,or c,and never from d,e,k,or m.
Another thing to note is that,while a,b,and c do not always sell,and
f,g,and
h do not always buy,the same amount in every transaction,
the amount sold and bought by their respective groups as a whole
maintains a rough balance,and
transactions outside the two groups
are excluded. In short,it was the collective continuous transaction
that secured for the buyer group the expected amounts of mer
chandise of the quality that it could rightfully expect.And it was the
collective continuous transaction that aimed at stable transactions
that would avoid the instability with regard to transaction amounts
that was inherent in internal and individual continuous transac
tions.
This analytical concept was arrived at inductively from historical,
data;it could be seen,for example,in
transactions among mer
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FIGURE1.A Schematic Diagram of Collective Continuous Transactions
Note:Transaction relationships are indicated by lines.Market participants who did not belong to a group were in reality more numerous than those who belonged to a group,they were not regular participants,and,as indicated in the diagram,the number of those just enter ing and those withdrawing from the market is believed to have been high.The broken lines indicate barriers formed internally within the market.
chants who belonged to the licensed commercial associations(kabu nakama)in early-modern Japan.3
In the case of the fertilizer market,it was also found in transac tions between distant localities,and again in modern times.In this study,I refer to the fertilizer market structure formed through col lective continuous transactions as a•gdivided•hmarket structure . What I mean by this is a market structure in which certain groups enter into continuing transaction relationships among themselves,
sometimes in such a way that these form a linked chain,thus creat ing within the market barriers that restrict the sphere of activities of new entrants into the market,with the already existing forces work ing within those barriers to enforce exclusivity while maintaining and expanding market share.
3For more details on the functions of licensed commercial associations
,see Tetsuji
Okazaki,Edo no shijo keizai-rekishi seido bunseki kara mita kabu nakama[The market
economy in the Edo period:kabu nakama as seen from an analysis of historical institu
tions](Tokyo:Kodansha,1999).
Now,since these barriers were not put up around the market but within the market,there is no question of complete exclusion of new market participants.Also,these barriers were something that
the existing forces erected spontaneously,and the groups joining together to put them up were equal•\there was nothing of a hierar chical nature about them.In this sense,the collective continuous
transactions that form the focus of discussion in this study are a dif ferent concept altogether from the systematization of the distribu
tion process in twentieth-century Japan by the hierarchical system atizations that are the giant corporations.4
One more thing:though the barriers were created inside the market,it sometimes happened that the governing authority took
on the role of securing the barriers.
Such a market structure was formed in the middle of the nine teenth century and at the end of the same century,but the continu ity,exclusivity,and equality as well as the relationship with the gov
erning authority that together formed the foundation for that structure differed considerably,as dictated by the economic institu tion existing in each of these periods,and the main task of this study will be to discuss those similarities and dissimilarities within the context of the shift in economic institutions between the two periods.By•geconomic institution•hI mean the aggregate of all the elements that restrict economic activities,and these restrictions include not only restrictions imposed politically and legislatively but also restrictions that social conventions and economic units sponta neously build up.5
I am assuming that such a shift in economic institutions comes about through a cyclic process that occurs somewhat as follows. Technological innovations in production and changes in the struc ture of consumer demand mutually influence one another,and,as
4As regards long-term negotiated transactions in postwar Japan between giant cor porations and subcontracting companies,one can find more details in Juro Hashimoto,•gChoki aitai torihiki keisei no rekishi to ronri•g[The history and theory of the formation of long-term negotiated transactions],in Nihon kigyo shisutemu no sengo shi[The postwar history of Japan's enterprise systems](Tokyo:University of Tokyo Press,1996).
5My thoughts on economic institutions have been inspired by Douglass C .North, Institutions,Institutional Change and Economic Performance(Cambridge:Cambridge Uni versity Press,1990).
92JAPANESE YEARBOOK ON BUSINESS
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they exert pressure for an updating of the distribution process that links production and consumption,they strive to make the existing stable economic institution more liquid.If their demands are fee ble,the economic institution may be temporarily shaken up a bit , but,after undergoing slight alteration,it will return to its former. state.If,however,the demands are strong,or the economic environ ment changes greatly as a result of external factors,the economic institution cannot return to its former state and changes begin to take place in the economic institution.
What are most capable of autonomously responding to changes in the economic institution are the people who have at their finger tips information about the production of tangible and intangible commodities and about consumer demands•\that is,the principal actors in distribution.The ways in which they respond produce new patterns of exchanging commodities.These newly emerging pat terns of exchange produce further technological innovation in pro duction and changes in the structure of consumer demand ,and this leads into the next cyclic process.In this next cyclic process
, each economic unit has its own accumulation of wisdom from the previous cycle,and a more sophisticated cyclic process evolves.Nat urally,how much the accumulation of wisdom influences the evolu tionary process depends on the situation,so these cyclic processes are not to be thought of as progress,but rather as a continuous unfolding.
Now,what I mean by the•gprincipal actors in distribution•his not limited to merchants;it includes such things as enterprises and
,in societies where a tribute economy is central,subcontractors who collect tribute taxes.Accordingly,in order to situate these cyclic processes in the long term,it would be necessary to consider as
exchange patterns not only market transactions but also such things as reciprocity,tribute,and redistribution .6
This having been said,the•gprincipal actors in distribution•hin the period of transition from the premodern to the modern age that is the object of this study were merchants who carried on trans actions with merchants from distant parts of the country,and it was
6In this sense the ideas of Karl Polanyi
,who has relativized market institutions,are important.See his Dahomey and the Slave Trade:An Analysis of an Archaic Economy(Seat tle,Wash.,and London:University of Washington Press,1966).
through
their
autonomous
responses
to the situations
they faced
that market
transactions
became
the core
of patterns
of exchange
of social
wealth.The
discussion
in each
section
that follows
will,
therefore,proceed
in the following
order:
1.the
existing
forms
of market
transactions;
2.technological
innovations
in production
and changes
in the
structure
of consumer
demand;
3.transformation
of the economic
institution;
4.the
autonomous
responses
among
merchants
from
distant
parts
of the country;and
5.the
formation
of new forms
of market
transactions.
THE STRUCTURE OF THE FISH FERTILIZER MARKET IN THE EIGHTEENTH CENTURY
In nineteenth-century Japan,fish fertilizer overwhelmingly domi nated the fertilizer market,and the principal fish fertilizer was her ring fertilizer produced in Hokkaido.For that reason,my discus sion will be limited to the Hokkaido herring fertilizer market .7
In Hokkaido in the northern part of Japan the production of herring fertilizer began in the eighteenth century.The products were carried as far away as the Kinki district,where the most advanced commodity economy in Japan existed,and they were mainly con sumed by farmers in that district(see the map on the following page).The distribution of herring fertilizer was under the monopo listic control of merchants from the Omi region of the Kinki district
(known as•gOmi merchants•h),and their monopolistic control was supported by two economic institutions established by the Mat sumae clan,which was the feudal ruler of Hokkaido.These two institutions were the fishing-and-trading-place contracting system
7The factual sections that follow are based on my book Kinsei -Kindai Nihon no shijo kozo:•gMatsumae nishin•hhiryo torihiki no kenkyu[Market structure in early-modern and modern Japan:A study of•gMatsumae herring•hfertilizer transactions](Tokyo:Univer sity of Tokyo Press,1998).A review of this book by Teiichiro Fujita appeared in Japan ese Yearbook on Business History17(2000),pp.137-43.In early-modern times ,Hokkaido was referred to as Ezogashima(•gIsland of the Ezo•h),but for the sake of uniformity I refer to it by the name it has been known by since modern times:Hokkaido .
94JAPANESE YEARBOOD ON BUSINESS HISTORY-2003/20
ノ
H・kk・id6ノ ' 4Matsuma←chi EsashiHakodate Fukuyama SeaofJapan H。k、,ik、di、t,i。t6PacificOcean .◆Tsuruga Omi JP喰Edo(Tokyo)議
欝_一
畦
。_
.一 漣.㌔ 雛綱▲畳(basho ukeoi seido)and the oki-no-kuchi(literally,•ggateway to offshore waters")system.
The Matsumae clan divided the territory of Hokkaido into two parts,that part inhabited by the people we call the Wajin in this arti cle,who formed the majority race in Japan and who were the gove
rning race,and that part inhabited by the governed race,the Ainu. The former area was called •g•gMatsumae territory"(Matsumae-chi),
and the latter,•gEzo territory•h(Ezo-chi),and the movement of peo ple from one territory to the other was restricted by the clan.In the first half of the eighteenth century the clan further divided the Ezo territory,which had many excellent fishing sites surrounding it, into about fifty zones,or places(basho),for carrying out fishing and trading,and it introduced a fishing-and-trading-place contracting system(hereafter,trading-place contracting system)whereby it granted a Wajin contractor monopolistic rights over fishing and commerce with the Ainu within that contractor's designated
fishing-and-trading place(hereafter,trading
place).As a considera
tion for being granted those rights,the
contractor paid the feudal
lord a contracting fee(unjokin).The
contractors were restricted to
Wajin merchants operating in either of two ports in Matsumae
terri-tory:the clan capital of Fukuyama Port,and Hakodate Port.In
eigh-teenth-century Hokkaido,the
most powerful merchants were Omi
merchants whose headquarters
were in the Omi region but who
maintained
branch offices in Fukuyama.Therefore
it was mostly
Omi merchants who became the trading-place
contractors,and
mostly Omi merchants who would hire Wajin and/or Ainu to go out
fishing and buy the catches made by them in the trading places the
merchants were contracted for,who would have the catches pro
cessed into fertilizers,and
who would transport the fertilizers to
Fukuyama.The
merchants who operated in Hakodate were con
tracted for trading places on the Pacific side of Ezo territory,but
since the herring fishing sites were mainly found on the Sea of
Japan side of Ezo territory,those
merchants who dealt in herring
fertilizer were principally based at Fukuyama.
The herring fertilizer that was taken to Fukuyama was sent from there to parts outside Hokkaido.Restricting economic activities at this point was the oki-no-kuchi system.The Matsumae clan had desig nated three ports in Matsumae territory(Fukuyama,Hakodate,and
Esashi)as the only ports from which trade could be carried out between Hokkaido and parts outside Hokkaido,and it imposed a tax on all goods that left the three ports as well as on all goods that came into the three ports.Agents(ton'ya)were appointed in all three ports whose duty was to inspect ships'cargoes and collect the tax—or•goki-no-kuchi custom•h(oki-no-kuchi kosen)-on behalf of the feudal lord.These agents,who held different authority from that held by the normal shipping agents,formed a licensed commercial association(kabu nakama)whose members were known respectively as the Fukuyama agents,the Hakodate agents,and the Esashi agents.This oki-no-kuchi system was made possible by the fact that Hokkaido is an island and so all external commerce had to be con ducted by ship.
The agents in the three ports were allowed to receive an•gagent commission•h(ton'ya kosen) after they had collected the•goki-no-kuchi custom•hon behalf of the Matsumae clan and paid it to the clan
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lord.They
also carried
out ordinary
mercantile
business
in their
respective
ports.In
addition,they
took on the responsibility
of act
ing as guarantors
for trading-place
contractors,a
function
that was
referred
to as kotowari-yado.What
this meant
in practice
was that,
when
a trading-place
contractor
was unable
to pay the Matsumae
clan the contracting
fee,the
agent
would
assume
the duty of paying
the clan the contracting
fee on the contractor's
behalf,acting
as
that
contractor's
guarantor.In
return
for this service
the agent
would
hold
the right
to be in charge
of that contractor's
trading
commodities
at the port,for
which
he could
keep a fixed sum taken
out of the total amount
involved
in the transactions.
The
trading-place
contractors
were,as
mentioned
already,
restricted
to merchants
based
at Fukuyama
or Hakodate,and
each
of them
was obliged
to take on a Fukuyama
agent
or a Hakodate
agent
to act as his kotowari-yado
guarantor.As
a result,the
Fukuyama
and Hakodate
agents
were deeply
involved
in the distribution
of the
products
handled
in the trading
places.Esashi
agents,on
the other
hand,were
involved
in the movements
in and out of Esashi
of fish
caught
in the vicinity
of Esashi.
Merchants from other parts of Japan,such as the Omi mer chants,were not allowed to act as agents,so for the most part they moved into trading-place contracting.Like the agents at the three ports,Omi merchants also formed their own association,and work ing in collaboration they became influential sponsors of the Matsu mae clan through such activities as providing funds when the clan needed funds.In compensation for their support and sponsorship, the clan accorded them privileges,such as exempting them from payment of the•goki-no-kuchi custom•hand allowing them to carry on trade without having to choose agents to act as their kotowariyado guarantors.
The Omi merchants
collaborated
in chartering
ships and paying
for shipping
fees.They
would
have cargoes
of products
from
Hokkaido
trading
places,herring
fertilizer
among
them,trans
ported
from Fukuyama
to Tsuruga
Port in the Hokuriku
district,
whence the cargoes were sent by overland
routes and across Lake
Biwa to the Kinki district,where
the goods were sold.The
cargoes
handled
by Omi merchants
were referred
to as nidoko cargoes,and
the shipowners
whose ships were chartered
by the Omi merchants
were known as nidoko shipowners.These
shipowners
also formed
their
own association.In
this manner,the
largest
portion
of
Hokkaido
herring fertilizer in the middle of the eighteenth
century
was sold in the Kinki district,and
its production
and distribution
processes were controlled
by Omi merchants.
THE STRUCTURE OF THE FISH FERTILIZER MARKET IN THE FIRST HALF OF THE NINETEENTH CENTURY
Changes in the Structures of Production and Consumer
Demand
and the Transformation of Economic
Institutions
The Omi-merchant-controlled
monopolistic
routes
for distributing
herring
fertilizer
that had been
formed
in the eighteenth
century
underwent
great
changes
from
the end of the eighteenth
century
through
the first half of the nineteenth
century
as a result of a change
in the nature
of the two key economic
institutions:the
trading-place
contracting
system
and
the oki-no-kuchi
system.Let
us
look,there-fore,at
the changes
that occurred
on the production
and consump
tion sides,for
they were what
prompted
the changes
in the nature
of both
those institutions.
On the production
side,we find that,in the second half of the
eighteenth century,the disparity between the amount of fish caught
in the fifty-or-so designated trading places and the amount caught
in nondesignated parts of Hokkaidôbecame
quite noticeable.Most
herring was caught along the Sea of Japan side of the Ezo territory,
and there always used to be abundant herring catches around vil
lages located in the vicinity of Esashi Port,which was in the Mat
sumae territory of Hokkaido(and
therefore outside the designated
trading places).But
because schools of herring would normally
migrate counterclockwise from Ezo territory down to the vicinity of
Esashi,the increased activities of trading-place contractors,appar
ently combined with excessive fishing in the trading places,brought
about a sharp reduction in the amount of herring being caught in
the vicinity of Esashi.
Because of this situation,the
Wajin fishermen
of the Esashi
region wanted to be able to go to some of the trading places in
order to fish there,and
in the first half of the nineteenth century
the Matsumae clan gave them permission to do so.But since each
98JAPANESE YEARBOOK
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trading
place's
contractor
had an exclusive
right over fishing
in his
place,the
Esashi fishermen
were allowed
to do their
own fishing
in
the trading
places
on condition
that they handed
over to the con
tractor
a certain
specified
amount
of their
catches.Also,because
the contractors
had an exclusive
right over trading
in their
trading
places,the
fishermen
from Esashi were obliged
as well to have the
contractors
purchase
from
them
that part of the catches
that they
did not hand
over to the contractors.After
strong
protestations
from
the Esashi
fishermen,the
Matsumae
clan made
one conces
sion:when
Esashi fishermen
had finished
their
stint of fishing
activ-ities
and
were
about
to return
to their
own villages,they
were
allowed
to take back with them
as much
of their
last catch as could
fit into their
own boats.
Later,in
the middle of the nineteenth
century,the
clan also
allowed the villagers in the Esashi region to send ships to the trad
ing places for the purpose of purchasing herring directly from
fishermen from the Esashi region,up to a specified limit set by the
clan.The
effect of this was that,by the middle of the nineteenth
century,the
exclusive right over trade that the contractors enjoyed
in their own trading places had to some extent been restricted.
These trends were assisted by changes taking place in consumer
demand.Along
with advances in the production of all kinds of com
modities in various parts of Japan,in the first half of the nineteenth
century herring fertilizer came to be used not only in the Kinki dis
t
rict but in the Hokuriku district as well.Furthermore,when
it grad
ually became clear that herring fertilizer was a more effective fertil
izer per unit cost than the sardine fertilizer that had been of most
common use in the Kinki district,the
use of herring fertilizer grew
rapidly.The
effect of this growth in demand was that merchants,
noting the promising nature of Hokkaido herring fertilizer transac
tions,responded
with fresh incursions into the Hokkaido market.
Among the merchants who made fresh incursions into Hokkaido from the second half of the eighteenth century on,there were many who were big enough to have their own ships.They contributed
large sums of money to the Matsumae clan and succeeded in being appointed contractors in charge of trading places in the remotest parts of Ezo territory•\trading places that the clan itself had till then been directly operating.As far as the clan was concerned,the
appearance of new sponsors meant that the clan no longer needed to rely on the funding capacity of Omi merchants.It did away with the privileges Omi merchants had held and went so far as to collect the•goki-no-kuchi custom•hfrom them as well.Many of the Omi mer chants faced a business crisis when they lost their privileges,and,as a result,a considerable number of them pulled up stakes in Hok kaido and withdrew to the Omi region.Also,nidoko shipowners, who had been employed in collaborative arrangements with Omi merchants,canceled their dealings with Omi merchants when sta ble cargo commitments could no longer be assured;these embarked on their own commercial activities as shipowner mer chants.At the same time,those Omi merchants who had been act ing as trading-place contractors on a large scale,themselves began owning their own ships.8
In this manner the monopolistic herring fertilizer distribution
routes that Omi merchants controlled
started to become more
fluid,and new distribution routes were built by new and old large
scale contractors
who owned ships,by shipowner merchants,by
agents in the three ports(whose
position had been relatively
enhanced when the oki-no-kuchi
system was applied across the board
through
the abrogation
of Omi merchants'privileges),and
by
fishermen from villages near Esashi.
The Formation of New Distribution Routes through the
Independent Responses
of Merchants
from Distant Localities
Three
new distribution
routes,each
of a different
nature,came
to
be formed,beginning
from
the end of the eighteenth
century.We
can call them Route
A,Route
B,and
Route
C,and
I list the key play
ers in each route
summarily
in Table1.
Route
A was formed
the earliest,at
the end
of the eighteenth
century.It
was formed
when
the local
Hokkaido
merchants,who
had moved
into the vacancies
created
among
trading-place
contrac
tors when
some of the Omi merchants
pulled
out of the contracting
system
in the latter
half of the eighteenth
century,linked
up with
Fukuyama
and Hakodate
agents,whose
positions
had been enhanced
8For a longer treatment of the management practices of shipowner merchants ,see the article by Masahiro Uemura,•gMarine Transport Management in Early-Modern Japan,•hJapanese Yearbook on Business History15(1998),pp.119-44.
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TABLE1.The Herring Fertilizer Market Structure in the Mid-19th Century
Route A Route B Route C
Key players Small contractors who did not own ships
Large contractors who owned ships
Esashi region fisher-men
Fukurama &Hakodate agents
Esashi agents Former nidoko
ship-owners,now ship-owner merchants
Small shipowner mer chants from Hokuriku district
Osaka shipping agents Shipping agents in the Hokuriku district ports
[Collective continuous
transactions] actions][Short-term spot
trans-[Internal transactions]
Formation period End of18th c.,early First half of19th c.Middle of19th c. 1 9th c.
Fish catch exported Approx.18,000tons Approx.7,500tons Approx.15,000tons
from Hokkaidoin(from Fukuyama)(from Fukuyama)
1869(estimated)
Note:The greatest part of the fish catch exported from Fukuyama and Esashi ports was her ring.Since the proportion of herring in the seafood products exported from Hakodate was small,the figures for Route A and Route B have been limited to Fukuyama Port.The figures for1869exports from Hokkaido via the three routes have been taken from S. Nakanishi,Kinsei-Kindai Nihon no shijo kozo[The market structure in early-modern and modern Japan](Tokyo:University of Tokyo Press,1998),p.131.The amount was calcu lated on the basis of100koku being equal to15tons in weight .
by the abrogation of Omi merchants'privileges,and
with shipowner
merchants
who were former nidoko shipowners to form a close
alliance in which they mutually benefited from one another's func
tions.Thus,the
local Hokkaido merchants who went into the busi
ness of being contractors ran comparatively small businesses and
had no ships of their own,so they made prior agreements with cer
tain shipowner merchants to sell to those shipowner merchants,at
either Fukuyama Port or Hakodate Port,the trading-place products
that they(the merchants)bought;they
then chartered the ships of
those shipowner merchants to pick up the products at the trading
places and transport them to Fukuyama or Hakodate.The
Fuku
yama and Hakodate agents,responsible
for acting as kotowari-yado,
stood between the contractor merchants and the shipowner mer
chants
as guarantors
for the forward
transaction
contracts
and
played
an important
role
in determining
the transaction
prices.
The agents
from
Fukuyama
and Hakodate
loaned
funds
to the trad
ing-place
contractors,and
vice versa,or
the agents
from
one port
lent funds
to agents
from
the other
port,thus
strengthening
ties
among
themselves
within
a guild-like
association
.
The nidoko-shipowners-turned-shipowner-merchants
also formed
a guild-like association among themselves.They
transported
the
herring fertilizer they purchased at Fukuyama or Hakodate and
sold it in the port of Osaka,the hub of the ports in Kinki district.
There,shipping
agents received the cargoes and sold them to
Osaka fertilizer middlemen.These
shipping agents and fertilizer
middlemen had joined in forming their own association ,and they
followed the exclusive trade practice of dealing only with someone
who was a member of their association.The
practice was backed by
such sanctions as stopping all dealings with anyone who violated the
practice.
Thus we have a distribution route made up of small contractors
who did not own any ships,agents
from Fukuyama or Hakodate ,
shipowner merchants who were former nidoko shipowners,shipping
agents in Osaka,and
fertilizer middlemen
in Osaka.The
main
stakeholders in this route who were engaged in the same businesses
formed their own respective associations,joined
together in collec
tive continuous transactions,and
excluded from the route any new
comers.
Route B had as its principal stakeholders Omi merchants who
did trading-place contracting on a large scale and who remained in
Hokkaido even after the second half of the eighteenth century ,and
big merchants who came into Hokkaido when the herring fertilizer
market expanded in the latter half of the eighteenth century and
who went into the same contracting business.Both
types of mer
chants owned shops in Osaka and/or Edo,the economic centers of
Japan in those days.The Omi merchants,who
had been in Hok
kaido from years before,had
to buy their own ships when they
stopped.making contracts to charter the nidoko ships,while the big
trading-place contractors who were recent newcomers to Hokkaido
had their own ships to begin with.Both
types of merchants used
their own ships to transport the products of the trading places to
102JAPANESE YEARBOOK
ON BUSINESS HISTORY-2003/20
their own shops in Osaka
and/or
Edo,where
they sold the prod
ucts.In
this way they developed
a vertical integration
type of busi
ness operation
in which were combined
production,transportation,
and sales at a distributing
center.9Thus
they formed
at the begin
ning of the nineteenth
century
a new distribution
route based on
internal
transactions.
Sometime
later,in
the middle
of the nineteenth
century,as
a
result
of Esashi
region
fishermen
entering
into
herring
fertilizer
production
at the trading
places
and also as a result
of the spread
of
herring
fertilizer
use to farming
villages
in the Hokuriku
district,
small
shipowner
merchants
from
the Hokuriku
district
were
encouraged
to enter
the Hokkaido
market.Now,since
the principal
stakeholders
in the existing
routes
A and B refused
to deal with the
newcomers,the
latter
formed
their
own route,Route
C,of
which
the hub was Esashi Port.
In Route
C,Esashi
agents
purchased
the herring
fertilizer
that
the fishermen
from
the Esashi region
brought
back in the holds
of
their
ships when
their
fishing
stints in the trading
places were over,
as well as the herring
fertilizer
that Esashi merchants
brought
back
in the ships that they had sent to trading
places
for the purpose
of
purchasing
herring;they
then
sold these
goods
to the small ship
owner
merchants
from
the Hokuriku
district,who,avoiding
Fuku
yama and Hakodate,thronged
to Esashi Port.These
Hokuriku
mer
chants
transported
the goods
to various
ports
in the Hokuriku
district,where
they sold the cargoes
to shipping
agents
in each port.
The Esashi
agents
and the shipowner
merchants
from
Hokuriku
mutually
relied
on each other's
services
for such things
as the settle
ment
of bills of exchange,but
neither
group
formed
an association
of their
own members,and,because
there
were so many of them
in
each group,there
was fierce competition
among
them.For
this rea
son,the
principal
form
of transaction
in Route
C was that of a short
term
spot transaction,and
there was no exclusivity
practiced
against
new entrants.
9The•gvertical integration•hspoken of here refers to the entry of a business entity that is engaged principally in commercial operations into the phases of production and transportation;its meaning thus differs from the sense in which Alfred D.Chan dler,Jr.uses it to mean the entry of a giant manufacturing enterprise into a distribution process.See A.D. Chandler,Jr.,The Visible Hand:The Managerial Revolution in American Business(Cambridge,Mass.:The Belknap Press of Harvard University Press,1977).
The Emergence of a•gDivided•hMarket Structure, and the Shaking of That Structure
In the herring fertilizer market of the middle of the nineteenth cen tury there thus were formed three distribution routes,each charac terized by its own principal form of transaction:continuous transac tion(Route A);internal transaction(Route B);and short-term spot transaction(Route C).Since Route A and Route B each maintained exclusiveness with regard to the other routes,each route ended up having a•gdivided•hmarket structure, with both the production cen ters and the distributing(trading)centers of each route separated from their counterparts in the other routes.The three routes were formed in stages;creation of the market was not a matter of existing forces acquiring new trading partners to deal with in response to an expanding market,but,because the principal stakeholders in any existing route excluded new entrants to the market,a matter of new stakeholders creating a new distribution route outside any existing distribution route.
Let us pause
and reflect
briefly
on the causes
for the creation
of
such
a structure.First
of all,the
formation
of continuous
transac
tion relationships
in Route
A was facilitated
by the oki-no-kuchi
sys
tem.Secondly,the
formation
of Route
C was facilitated
by the
Matsumae
clan's
permission
for trading-place
products
to move
into
and
out of Esashi
Port without
going
through
the hands
of
trading-place
contractors.Thirdly,there
was so much
scope
for
opening
up new fishing
sites in the trading
places
that it was possi
ble for new entrants
into the market
to form
new distribution
routes
without
stealing
away any transactions
from
existing
distribution
routes.
Still,for a newly created market to be stable while maintaining
exclusiveness,it is necessary for the market as a whole,including the
existing distribution
route(s),to
be in expansion mode.Because
there was scope in the middle of the nineteenth century for open
ing up new fishing sites with the trading places,regardless of the dis
tribution route,things
moved along with comparatively stability,
and neither competition within the distribution routes nor opposi
tion between distribution routes became acrimonious.But
as Esashi
merchants kept sending ships to the trading places to purchase her
ring and had them increase the amount of herring they purchased,
104JAPANESE YEARBOOK ON BUSINESS HISTORY-2003/20
eventually the Esashi merchants began competing with the trading place contractors over the buying in of fish caught by Esashi region fishermen in the trading places.By the1860s a scramble for share was taking place between Route A and Route C stakeholders,and the•gdivided•hmarket structure began to totter.
THE STRUCTURE OF THE FISH FERTILIZER MARKET IN THE SECOND HALF OF THE NINETEENTH CENTURY Technical Innovation in Herring Fishing and
Transformation of Economic Institutions
The competition between Route A and Route C over securing her ring fertilizer in the trading places and the much stronger demand for fish fertilizer that followed in the wake of advances in commod ity production in all parts of Japan made it imperative to raise her ring fertilizer productivity,and in the1860s new technology spread through the herring fishing industry.Until then herring fishing was carried out with gill nets set out by two or three fishermen working from one boat.But a new method was developed in which about twenty people working from two boats set out pound nets.This new method not only dramatically increased the amount of fish caught per fisherman,but it also meant a shift from a stage in which her ring fishing could be a one-family operation to a stage in which a large number of hired fishermen had to be employed.Technologi
cal innovation also occurred in the method of processing the her ring into fertilizer, so that herring fertilizer was markedly improved in regard to preservation.
The emergence of the pound net increased the number of her ring being caught in the designated fishing sites around the Ezo ter ritory of Hokkaido.In the small villages around the Esashi region in Matsumae territory,which were located downstream,as it were,of the migratory flow of herring schools,the numbers of herring being caught kept decreasing and decreasing.The number of fishermen from those villages forced to go to fish for a living in the trading places kept increasing,and competition over securing her ring fertilizer in the trading places grew more and more fierce.As is shown in Table1,in1869the amount of herring fertilizer distrib uted through Route C came close to matching the amount distrib
uted through Route A,which means that the monopolistic right of contractors to conduct trade in the trading places had already been fairly eroded even before the tradingplace contracting system was abolished.
The Meiji Restoration of1868marked the beginning of Japan's full-fledged shift from a premodern society to a modern one
,and in 1869both the trading-place contracting system and the oki-no-kuchi
n system were abolished.Through their abolition,the former trading places were thrown open to all fishermen,and the privileges of the trading-place contractors and the agents of the three ports were curtailed.10The result was that Route A and Route C began fusing into one,and the herring fertilizer market became more fluid.Most of the small contractors moved their bases to the trading places that they had been contracting for before they lost their privileges;they became•gsupply merchants•hwho supplied fishermen with advances of money and/or commodities.Many of the fishermen from Esashi region villages took up permanent residence in Ezo territory and relied on advances as they carried on with their fishing and fertilizer production.The system worked this way:fishermen would sell her ring fertilizer to the supply merchant who had advanced them money and/or commodities,in this way settling any debts to the supply merchant;the supply merchant,having collected enough herring fertilizer from several fishermen to make up a shipload
, would sell it all to a shipowner merchant.Meanwhile,the big mer
chants with branch offices in Osaka who had their own ships contin ued,even after the loss of their privileges,to carry on largescale operations in the trading places where they had been contractors before;because they transported the herring fertilizer to Osaka in
their own ships,and their Osaka shops sold the fertilizer ,nothing was changed in their modus operandi and Route B continued on as before.
The Formation of a New Distribution Route by Mitsui•£•¥Co., and the Responses of Existing Forces
The abolition of premodern privileges opened the way for a large number of newcomers to the herring fertilizer market.The one 10 The Matsumae clan was disestablished in1869,and Ezo-chi and Matsumae-chi were fused into an administrative district named Hokkaido.
106JAPANESE YEARBOOK ON BUSINESS HISTORY-2003/20
that eventually became the most powerful new entrant to the mar ket was Mitsui&Co.,which later became the largest general trading company in modern Japan.
Having judged that the growing demand in farming villages for herring fertilizer made herring fertilizer transactions look very promising,Mitsui&Co.set up branch offices in Hokkaido in the
1880s;the herring fertilizer it bought through the Hokkaido offices was then sold through the company's Tokyo head office and Osaka branch office.Of the already existing two distribution routes,the
major one involved supply merchants collecting herring fertilizer from fishermen in repayment of advances of money and/or com
modities and selling this to shipowner merchants,who transported these kaizumi cargoes to distributing centers like Osaka and sold them to shipping agents,who in turn sold them to fertilizer middle men.11Mitsui&Co.,on the other hand,drew up a consignment contract with a Hokkaido merchant to act as that merchant's agent and to sell his cargo of fertilizer,loaned the merchant money through a documentary bill of exchange,paid for the shipping costs,and had the herring fertilizer unchinzumi cargo transported to the Mitsui&Co.offices in Tokyo and Osaka,where the cargo was sold directly to fertilizer merchants without going through any ship ping agents.This meant that Mitsui&Co.entered the herring fer tilizer market with a completely new form of transaction.From the money it received from the fertilizer merchants,Mitsui&Co.sub
tracted the shipping costs,the amount of money it had loaned through the bill of exchange,and a commission for its consignment selling,and it transferred the remainder to the Hokkaido mer chant.
As far as the supply merchants in Hokkaidoôwere concerned,the new development meant that they now were able to use two forms of transaction that were qualitatively different,by either selling to shipowner merchants or selling directly to fertilizer merchants in Tokyo or Osaka through a consignment contract with Mitsui&Co.,
11The term•gkaizumi•hreferred to a cargo that the shipowner had purchased ,so he was transporting his own cargo.The term•gunchinzumi•hused in the next sentence referred to a cargo that was owned by somebody else,and the shipowner was paid for transporting it.Thus kaizumi could be translated as•gtransport of a cargo that the shipowner has bought,•hand unchinzumi could be translated as•gtransport of a cargo for which the freight charges have been paid.•h
and for this reason the number of supply merchants that did busi ness with Mitsui&Co. increased.Because the possession of a right of choice between two forms of transaction gave Hokkaido mer chants the upper hand in transactions,Mitsui&Co.took another step to create a situation that would be more to its own advantage:it began to enter into consignment contracts directly with solidly established Hokkaido fishermen who were not receiving advances from any supply merchants.
Thus it was that Hokkaido supply merchants and Mitsui&Co. ended up competing with each other to secure herring fertilizer . The powerful stakeholders•\supply merchants,shipowner mer chants, shipping agents,and so on•\joined forces and made an effort to secure their own distribution route so as to counter the moves of Mitsui&Co.The core of the resistance came from the for mer small trading-place contractors,former nidoko shipowners who had become shipowner merchants,and the shipping agents and middlemen from Osaka•\all of whom had been instrumental in forming Route A in the middle of the nineteenth century .Bene fiting from their past experience in securing market share through collective continuous transactions,they once again spontaneously formed associations of members of the same profession and went back to engaging in collective continuous transactions.
In1884the supply merchants in Hokkaido established Hokkaido Kyodo Shokai(Hokkaido Cooperative Trading Company)for the purpose of maintaining access to cargoes of fish through supplying and lending,and for the purpose of increasing their funding and credit capability,in order to fight against the encroachments of Mitsui&Co.Later,in1887,the shipowner merchants who had for merly been nidoko shipowners established an organization called Hokuriku Shingikai(literally,the•gHokuriku Friendly Deliberative
Council•h);its functions were twofold:(1)to draw up guidelines on the hiring of seamen,the forms of transactions that might be engaged in with shipping agents in different parts of the country, and the punishment of those who broke the rules;and(2)to put restrictions on competition among shipowner merchants.Their
main aim was to oppose those distributors who used the unchinzumi method,which had the potential for destroying,even eradicating completely,the kaizumi way of business that was their livelihood .
108JAPANESE YEARBOOK ON BUSINESS HISTORY-2003/20
Even the shipping agents and fertilizer middlemen from Osaka, who had already formed associations of members from their own professions,finally laid down official rules in1885;they agreed on exclusive trading practices among themselves similar to what they had practiced in the first half of the nineteenth century,and they decided on punishments(such as blacklisting or the imposition of monetary fines)for anyone who violated the rules.
The Formation of a•gDivided•hMarket Structure and the Withdrawal of Mitsui•£•¥Co.
Thus it came to be that the merchants who contributed to the fund i ng of the Hokkaido Kyodo Shokai,the shipowner merchants who became members of the Hokuriku Shingikai,and the Osaka ship ping agents and fertilizer middlemen joined together in a collective continuous transaction relationship to oppose moves by Mitsui& Co.,to maintain their old forms of doing business,and to keep their share of the market.The competition between Mitsui&Co.and existing strong forces first appeared as a competition over acquisi tion of herring fertilizer in the production centers,but because powerful fishermen were able to deal with both Mitsui&Co.and Hokkaido merchants,it was difficult for Mitsui&Co.to force unfa vorable conditions unilaterally upon the fishermen when getting them to conclude consignment contracts.On the other hand, because many of the small-scale fishermen had accumulated debts with supply merchants and had put up their land and/or fishing gear as security,if Mitsui&Co.wanted to do business with them it first had to take over their debts and square their accounts with the supply merchants(after which they would eventually have to repay Mitsui&Co.).Thus the costs involved in concluding contracts with the small-scale fishermen were high.For this reason,Mitsui&Co.'s
sphere of activity in Hokkaido was limited,and a•gdivided•hmarket structure within which internal barriers existed was formed in the herring fertilizer market at the end of the nineteenth century.
As we see in Table2,one barrier existed between,on the one hand,the former large trading-place contractors who were still pur suing vertically integrated operations in which production, trans port,and sales in distributing centers were linked,and,on the other hand,Mitsui&Co.;the latter was unable to handle any of the
TABLE2.The Herring Fertilizer Market Structure at the End of the19th Century [Production[Hokkaid6[Transporta-[Distributing[Consump-process]relaysites]donprocess】center]doncenter] L・・g・飴・m・・ 論 撒 畿 皇乙需 「 鵠1要 盤 ,aひF…ili・e・[int・ ・n・l co磁acto「s ship・t。,,atdi、t,ibu-me「chan鵬 なan・ ・】 dngcenter
書
綿
総鮮 α
膓黙
麟
衆h諮
濫 、,膿
縞
Seafbod merchants ■'一'一'一 '一'■.■ 一'口'幽'顧'■(Ently) merchantstrans .] (Hokkaid6(Hokuriku(Shipping Ky6d6Sh6kai)Shingikai)agents'guild)Note:The broken lines indicate barriers formed internally within the market .Mitsui&Co. experienced difficulty making transactions with small-scale fishermen.
catches of fish of the former.For this reason Mitsui&Co.,feeling
restricted in its activities by having only consignment contract trans
actions,had its Osaka branch office become a member of the Osaka
shipping agents'guild;this
enabled it to some extent to handle,
within the existing transaction patterns,herring
fertilizer brought
to Osaka by shipowner merchants.To judge from the inventories of
stock at the end of the fiscal years,the herring fertilizer acquired
from this source amounted to about one-fourth of what was han
dled by the Osaka office(the
other three-fourths
being consign
ment goods).What
Mitsui&Co.was
doing,then,was
concluding
individual continuous contracts with a small number of parties,and
short-term consignment contracts with a large number of parties,in
the production centers;concluding
continuous contracts for trans
port with certain steamship companies/shipowners,in
the trans
port process;and in the distributing centers selling consigned goods
directly to fertilizer merchants.At the same time,by joining the ship
ping agents'guild it was participating in collective continuous trans
110JAPANESE YEARBOOK
ON BUSINESS
HISTORY-2003/20
actions
with regard
to the cargoes
of shipowner
merchants.In
other
words,Mitsui&Co.had
adopted
a mixture
of transaction
forms.
The existing powerful stakeholders,on the other hand,by spon taneously creating a•gdivided•hmarket structure that would limit their mutual competition within the established routes,restricted the competition with Mitsui&Co.to the production centers and Osaka.In the production centers the supply merchants increased the amount of supplying and lending they extended to a large num ber of small-scale fishermen,and thus prevented Mitsui&Co.from
gaining access to their own route.In their dealings with large,pow erful fishermen,too,they used funds borrowed from shipowner merchants to offer the fishermen more advantageous conditions, and by securing a certain amount of fish catches they stole potential transaction partners away from Mitsui&Co.Down in Osaka,where the shipping agents'guild and the fertilizer merchants'guild retained exclusive and fixed transaction relationships,Mitsui&Co.
was forced to join the shipping agents'guild if it wanted to make any transactions in the Osaka market,and thus the powerful stake holders bottled up Mitsui&Co.within the confines of existing forms of transaction.In practice,the Osaka branch office of Mitsui
&Co.,once it had become a member of the Osaka shipping agents' guild,was allowed,as a member of the guild,to oversee the negotia tions over,and conclusion of,agreements between the guild and the Hokuriku Shingikai.This meant that Mitsui&Co.had its hands tied by the transaction practices of both the Hokuriku Shingikai and the Osaka shipping agents'guild.
To put the matter
from
the opposite
perspective,Mitsui&Co.'s
entry into the market
limited
competition
among
the existing
stake
holders
and
spurred
them
on to collaborate
among
themselves,
thus propelling
the herring
fertilizer
market
at the end of the nine
teenth
century
in the direction
of less competition
and greater
sta
bility.As
a result,Mitsui&Co.was
unable
to obtain
a sufficient
amount
of profit
from the herring
fertilizer
market,and
in the early
1900s it pulled
out of the Hokkaido
herring
fertilizer
market.12But
12Around the time that Mitsui&Co .withdrew from the Hokkaido herring fertilizer market,it had become keen on dealing in imported soybean meal fertilizer.The com pany's soybean meal transactions are treated in Satoru Nakanishi,•gHiryo ryfitsit to Kinai shijo•h[Fertilizer distribution and the Kinai market],in Shohin ryütsii no kindai shi[A modern history of merchandise distribution],ed.Satoru Nakanishi and Naofumi
by its withdrawal
from
that market,the
incentive
for unity
among
the existing
powerful
stakeholders
weakened.Also,because
the
businessess
of shipowner
merchants,who
had reaped
great profits
by taking
advantage
of big price
differences
between
regions,
started
falling
apart
once
price
differences
between
different
regions
shrank
as modern
transportation
networks
developed,the
Hokuriku
Shingikai
folded
sometime
around1902.This
brought
about
a collapse
in the collective
continuous
transaction
relation
ships
created
by the existing
stakeholders,and
at the start
of the
twentieth
century,when
modern
forms
of transactions
that made
use of steamship
unchinzumi
gave convincing
proof
of their
eco
nomic
rationality,the
herring
fertilizer
market
once
again
became
fluid.
CONCLUSION
In the fish fertilizer market in Japan in the nineteenth century,a competition-limiting•gdivided•hmarket structure was formed in which a plurality of distribution routes,revolving around collective
continuous transaction relationships,existed side by side(while maintaining exclusiveness)in the production centers and distribut ing centers both in the mid-nineteenth century and at the end of
the nineteenth century.There was a qualitative difference,however,
between the continuous transaction relationships in the two parts of the century.The continuous transaction relationhips in the pre modern society of the mid-nineteenth century were links based on privileges guaranteed by the governing authority,and they were formed as a result of the pursuit of an economic rationality
restricted within the framework of strong regulation by a political
Nakamura(Tokyo:Nihon Keizai HyOronsha,2003),and in Takehisa Yamada,•gThe Evolution of Fertilizer Trading in the Meiji and Taisho Eras,•hJapanese Yearbook on Busi ness History19(2002),pp.103-26.I might take this opportunity to point out that Fig ure3(p.114of Yamada's article)indicates that Mitsui&Co.was engaged in fish fertil
izer transactions with production center fishermen and production center merchants in the1900s,but the fish fertilizer that Mitsui&Co.dealt with in the early1900s was fish fertilizer that it had itself produced in Hokkaido at its own fishing sites,and it did not deal with Hokkaido merchants or fishermen.And in1906it sold the fishing sites and withdrew completely from all Hokkaido fish fertilizer transactions.
