How Boston benefited from a massive drugs trade and post-Colonial commerce.

Boston is the most gentile of US cities. It's beautiful 18th Century architecture is, politically, post-Colonial. But the trade that built it is steeped in British history and, even, reflects an intertwined commercial relationship with the British Empire. But many of those buildings were paid for with the proceeds of trades that exploited differences in legal systems, in ways that today legislators and regulators mistakenly say are new-ish.

NBThis article leans heavily on research by Martha Bebinger with WBUR in Boston, Massachusetts. Her detailed paper is referenced below.

World Money Laundering Report - Learning

It's called legal arbitrage - or regulatory arbitrage - and it means that someone exploits the fact that while something may be illegal in one country, it is legal in another.

It's something that is exploited to convert tax evasion into tax avoidance.

This arbitrage is at the heart of the search, by criminals, for untraceable and untrackable assets and/or value.

It is usually assumed that this means cash or cryptocurrency (for example) but barter, counter-trade, forfeiting and simple smuggling are just as useful.

In 1842, the Island of Hong Kong was ceded, in perpetuity under the Treaty of Nanjing and 1860 Kowloon was ceded and in 1998 “The New Territories” were leased to Britain on terms that ended the lease in 1997. All eyes were on Britain and how it created an opium crisis as a result of which the Qing Dynasty gave up the territory as part of a settlement deal the end the first, and then the second Opium wars.

But, according to research by Martha Bebinger with WBUR in Boston, Massachusetts, Britain was far from alone in supplying opium.

Bebinger says that Perkins and Co was shipping vast quantities – one shipment alone was 150,000 pounds, that’s about 70,000 kilograms. A year later, shipments were much larger.

The famous Boston Tea Party, an uprising against taxation on tea imposed by Britain on deliveries to the colony of Massachusetts, was in 1773. About 350 chests of tea belonging to the British East India Company were thrown into Boston Harbour. The British imposed more stringent measures on the colony’s trade including levying a fine equivalent to the lost tax. It was the final straw for the insurrectionists in the north and three years later, there was the Declaration of Independence by 13 states, although what we now know as the United States of America was still a far-off dream.

Boston was part of the Slave Trade although slaves were rarely shipped to that port: Slaves from Africa were transported to the Caribbean and the Southern American Colonies and tobacco, sugar and rum were bought; they were transported to Boston and other ports where more goods such as hardwood, firs and hides were added and the ships sailed to Britain and other European countries. It is called “The Triangular Trade” but actually there were more than four ports in most voyages.

All the trades were, by the laws of the time, legal.

It should therefore come as no surprise that Boston became the centre for an opium trade that did not touch the new United States of America other than to dump vast amounts of money into it for the trade was part of a different triangular shipping system: goods including the Opium went from Turkey to Canton then ships carrying, ironically, tea and other Chinese goods such as and porcelain and silk set off for Boston, often via ports such as Bristol in England.

So, barter left goods in China and those collected were sold in Boston for cash in what would today be called “The Black Market Peso Exchange” but in those days, there was no problem in using the money and Bebinger lists the ways that the proceeds of the Opium Trade built much of the gentile Boston we know today.

But, importantly, Perkins and the others engaged in the trade did not have to launder their profits: while smoking and selling Opium had been illegal in China since 1729, it was not illegal in America and both British and American traders stored their opium outside China’s territorial waters and sold to Chinese traders off the ships, so avoiding committing the crime themselves.

It’s not unlike the way internet traders operate today.

The connection between Boston and Bristol is shown in Bebinger's article when she talks of The Cabot family. The connections are even more wide: The Weld family, big in Boston, was known in Malaysia where the British East India Company had several ports.

Trade with China was thought to be the preserve of the British but while China pragmatically engaged in trade, it wasn't because it favoured the British. Indeed, when Lord McCartney in the 1790s engaged in what he documented as "An Embassy to China" while he was fêted and grand gifts presented when he arrived for audiences, his party was more or less left to travel the country on its own, albeit under watch from spies. McCartney famously pointed out that Chinese foundries were pumping out high quality scissors for far less than the cost in Sheffield, England.

Yet, this set the scene for the USA’s love affair with cash derived from the trade in illegal substances and while opium, per se, never became a serious social problem as it did in China, its derivative heroin would fly into the US, along with marijuana, the silent and devastating long-term effect of wars in Vietnam and Korea.

As marijuana became a drug associated with freedom and rebellion and as a more or less middle-class drug, the amounts of cash flooding into American banks gave rise to the idea that the flow of goods could be constrained if the flow of cash could be constrained.

But that was then and this is now, right?

Not exactly: in 2010, the US Department of Justice produced a report called "New England : High Intensity Drug Trafficking Area" which says "international airports and maritime ports further facilitate illicit drug smuggling into and through the region. In 2008, Boston Logan International Airport, New England’s largest air transportation centre, ranked 28th in the world for passenger traffic. Major airports are also located in Hartford; Providence; Burlington, Vermont; Manchester, New Hampshire; and Portland and Bangor, Maine. Major commercial seaports are located in Bridgeport, Groton, New London, and New Haven, Connecticut; Boston and Fall River, Massachusetts; Portsmouth, New Hampshire; and Eastport, Portland, Sandy Point, and Searsport, Maine."

And the money? "New England is a global financial centre that is linked electronically to world markets as well as to numerous domestic and foreign markets in drug source and transit zones."

The only significant difference seems to be that Boston and the rest of New England is now a destination for drugs and an importation point rather then simply somewhere to build a wonderful environment, remote from the dodgy trades that generated the money.


Further Reading:

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