More on the Financing of Malayan Rubber, 1905-23

Abstract

IN a recent article in this journal, Richard T. Stillson examines some financial aspects of the early history of the Malayan rubber industry.' Mr Stillson offers some very interesting observations and propositions both about the development of that industry and, more generally, about the role played by financial institutions in the process of economic development. For instance, he properly draws attention to the indirect benefits which foreign-owned financial institutions may bring to a developing country; and we would not challenge his view that institutional connexions with important foreign capital markets may confer beneficial liquidity on long-term local assets which would otherwise be very illiquid in a purely local capital market. Unfortunately, however, Mr Stillson does not succeed in establishing the validity of certain specific propositions which he advances about Malaya. The purpose of this comment is to show that there are methodological and historical inadequacies underlying three central aspects of Mr Stillson's work, namely: (i) his estimates of the total and annual flow of British capital into the Malayan plantation rubber industry from I904 to I922; (2) his contention that the average proportion of agency house financing to total British investment in the Malayan rubber plantation industry, I904-22, was considerably lower than is described in most studies; (3) his analysis of small-holder planting, said to have been partly in response to financial incentives created by the activities of the rubber companies.