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MALAYAN
PEASANT SMALLHOLDERS AND THE STEVENSON RESTRICTION SCHEME, 1922 - 28
by Lim Teck Ghee
(Part I)
Introduction
PRIOR TO 1920, the rubber industry in Malaya
had enjoyed a successful development which was the envy of most other
industries. It had, within two decades, been nurtured from a few desultory
trees decorating some gardens to a countless mass, covering the length and
breadth of the Peninsula and spilling into Siam and the Archipelago, and had
become a vast export commodity reaping great economic returns. Much of the
credit for this could be legitimately claimed by the colonial administration
which, initiating bold policies, organising, bargaining and frequently even
dipping into its own resources, had been the vital catalyst in the
development, particularly of the plantation industry. There was little break
in the rubber success story. In 1913, for a brief period, the price of rubber
fell alarmingly. In 1914 there was a temporary dislocation of international
trade including that of rubber; but when the guns in Europe
fell silent and the peace and brotherhood of all nations was proclaimed once
again, the Malayan rubber industry appeared on the threshold of a new era of
prosperity. Indeed, the year 1919 had seen the industry set an all-time
record production of 204,000 tons, more than half the total world
production.(1)
(1) See Appendix 1
Origins of the Stevenson Restriction Scheme
But this was the lull before the storm. In 1920 a trade depression began to
spread among the industrial nations of the world, and the demand for rubber
declined sharply as factories and manufacturing plants either curtailed or
stopped production. This decline was reflected by a steady fall in rubber
prices, which threw the plantation sector into panic. Accustomed to regular
profits, many plantation owners had expanded carelessly, if not recklessly,
with little consideration to the possibility of over-production, and had been
lulled into operating on an extravagant scale which did not make them the
fittest producers in the industry.
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The sudden cessation of profits and the looming prospect of
losses, for the first time in the history of the industry, found them
generally unprepared and a strong clamour soon arose from their ranks for
government intervention. It was pressed upon administrators that only the
introduction of a policy compulsorily restricting rubber output could save
the day, and the government which had previously guided the industry with
some finesse now lost its nerve at this crucial moment.
The campaign by the British-dominated plantation rubber industry and its
supporters to foist rubber restriction on the world took place on several
levels in Malaya, Britain and the other rubber-producing colonies and would
make an admirable case study in political economy, showing how a small group
of capitalist interests could decisively influence governments into adopting
a scheme which went against the grain of their past economic policy. This is,
however, not the place for it, and for our purpose it is intended only to
provide a brief account of the events leading to restriction and to discuss
the stakes of the peasantry in restriction.
The plantation industry had mooted a policy of restriction as early as 1919
but the proposal, although arousing much interest in Malaya,
was shelved when the war ended and rubber prices rose. In 1920 the cry
for restriction was raised again, this time more loudly and insistently and,
crumbling under the pressure of plantation interests on him, the High
Commissioner in April 1921 informed the Colonial Office that there was sufficient
reason for such a scheme. A few days prior to this, a delegation
of the Rubber Growers' Association, a powerful and highly organized body of
plantation interests with influence in Britain, Malaya and Ceylon, had met
officials of the Colonial Office in London and had been informed that the
British government objected to the introduction of legislation imposing
compulsory restriction.(2) Failure to convince the
metropolitan authorities did not deter these restriction zealots, and a high-powered
campaign of 'advertisements, speeches, articles, memoranda and all the other
avenues of propaganda' took place to convert the public and the government to
their point of view.(3) Back in the Peninsula, a Trade
Commission appointed to investigate the causes and possible remedies of the
economic depression lent its support to the restriction
lobby. Its report issued in October 1921 declared:
All roads lead to restriction and we are driven back
upon compulsory restriction as the only certain means of bringing early
relief to a sorely embarrassed industry .... The revival of
demand for rubber is likely to be slow, too slow, at all events, to be of
much use to a number of estates now producing at a loss....
It is our view that a wise government must take some risks when the interests
of the whole community are bound up in the salvation of a staple industry.(4)
(2) A detailed account of the
restriction moves in London and the changing response of the Colonial Office
can be obtained from the following documents: CO 717/12/20120; 717/12/34256;
717/13/ 35843; 717/14/46897; 171/17/52613; 717/24/24495 and 717/24/35164.
(3) Charles R. Wittlesley, Governmental
Control of Crude Rubber (Princeton, 1931),
p. 17.
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(4) Report of the Commissions appointed to enquire into and
report upon (a) the present state of trade depression and (b) the extension
of credit facilities (Government Printer, Singapore, 1921), p. 11.
A FEW WEEKS after the release of the report, a Committee was
appointed by the Colonial Office specifically to investigate the rubber
situation.(5) The report of the Stevenson Committee
recommended that the Government should take action to reduce the amount of
rubber exported from producing countries only if the Dutch government agreed
on a similar policy for the Netherlands East Indies. The Dutch government
was, however, unwilling to participate in any restriction scheme and five
months after its first report, in a surprising volte face, the Committee
issued a supplementary report in which it abandoned its original stand that
Dutch co-operation was essential and recommended that Malaya and Ceylon, the
two British rubber-producing colonies, should adopt restriction
unilaterally.(6) This recommendation was accepted by the Secretary of State
and by the British government,(7) and restriction legislation was enacted in
Malaya and Ceylon.(8) The Stevenson rubber restriction scheme, which came
into effect in November 1922, was to have a great influence on the
development of the Malayan rubber industry and particularly the peasant
rubber industry.
(5) The committee comprised the Chairman, Sir James
Stevenson, former Managing Director of John Walker and Sons Ltd., and
Commercial Adviser to the Colonial Office; two members of the Colonial
Office, G. E. A. Grindle and S. H. Leake; an official of the Malay States
Agency, E. Brockman; and five members of the plantation industry, Sir Stanley
Bois, Chairman of the RGA, E. J. Byrne of the Dunlop Rubber Co., W. M. Duncan
of the Straits Rubber Co., Eric Millar of Harrison Crosfield
and Sir E. Rosling of Anglo Ceylon and General
Estates Co. It might be noted that Stevenson, the Chairman, had considerable
investments in plantation rubber and that the findings of the Stevenson
Committee closely resemble that of the RGA.
(6) Both the reports can be found in CO
717/24/24495.
(7) The report was presented to and approved
by the Cabinet during the last fifteen minutes of a meeting. Churchill, the
Secretary of State who presented the report, later remarked that 'evidently
the Cabinet either felt that the scheme was so excellent that it required no
discussion or that it was so complicated that discussion was impossible'. The
London Economist, London 26 September 1925, p. 487; quoted in Whittlesley, Governmental Control of Crude Rubber, p. 28.
(8) The Export of Rubber (Restriction)
Enactment 1922 was passed in the Federal Council on 24 October
1922. Federal Council Proceedings 24 October 1922, p. 57.
THE FACTORS which prompted the Stevenson Committee to change its original
view have been examined by various authorities.(9) It has been suggested that
there was a grave threat of American interests buying up British plantations
should there be no relief in sight. Another explanation was that the British
government was concerned over its foreign exchange position of which rubber
earnings was a main
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contributor. Churchill, the Secretary of State when the
scheme was approved declared in 1923 that one of the principal means of
paying off Britain's war debts to the United States was its rubber
earnings.(10) It has been pointed out that England, alone had a quarter of a
million investors in the rubber industry and that the weakness of the
industry was having an adverse effect on the London market. Yet another
explanation was that the authorities were confident that the
British-controlled interests were sufficiently large to ensure success. None
of these explanations, however, explain why restriction should have been
necessary in October 1922 when it was not deemed so in May 1922. Whatever the
reasons for the change in opinion by the Stevenson committee, the important
role of plantation interests in bringing the decision of unilateral
restriction about must be acknowledged, and Swettenham's
declaration that 'if it had not been for the Rubber Growers' Association
there would have been no restriction' is probably justified.(11)
(9) Among the literature available on
the Stevenson Restriction is Whittlesley,
Governmental Control of Crude Rubber; K. E. Knorr,
World Rubber and Its Regulation (California, 1945); and J. W. F. Rowe,
Studies in the Artificial Control of Raw Material Supplies No. 2 Rubber
(London and Cambridge Economic Service, March 1931).
(10) Evening Standard, London, 12 March 1923, quoted in Whittlesley, Governmental Control of Crude Rubber, p. 39.
(11) Whittlesley,
Governmental Control of Crude Rubber, p. 18.
THROUGHOUT the entire proceedings, the subject ostensibly discussed was
the survival of the rubber industry - plantation and
smallholding. But was it really so ? There was no doubt
that the plantation industry had a vital interest in restriction. It has been
pointed out that the plantation industry was ill-equipped to withstand the
depression conditions ù the structure of its capitalization, its reliance on
an imported labour force, the high proportion of relatively rigid overhead
costs in total production costs: all tended to make an inflexible system
which was slow to adjust to the poor prices. Moreover, a 'short-sighted
policy of taking dividends up to the hilt in the past',(12) together with an
extravagant scale of operations, had aggravated the situation so that a
scheme of artificially bolstering rubber prices was essential to restore the
profits of the industry, if not to prevent many companies from actually going
under. A statement by the Colonial Secretary in The Times of 1 August 1925
leaves no doubts at all about this primary objective of the Stevenson
restriction scheme. He said:
The scheme was introduced for the purpose of
saving the extremely valuable position in the plantation rubber industry
built up by British enterprise in the East and no one would dispute that it
is not proving effective in obtaining this object.
(12) There were three main categories of rubber
producers in the FMS ù large plantations, over 100 acres; medium plantations,
under 100 acres; and smallholdings, under 25 acres.
The distinction between the smallholding and the other two sectors of the
industry has always been clearly understood in official circles as shown in
the official statistics of the industry, although the category of
smallholdings could cover a great variety of types ranging from small units
of a few acres worked by the peasant
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and his family to large units of 20 acres or more
employing outside labour. The official definition will be kept to in this
study; but, where it is necessary, further distinction will be drawn between
the small and large smallholdings.
Peasants and Restriction
The peasant rubber industry at this time could not be considered so
insignificant that its interests should be entirely ignored. In the Federated Malay States alone, there were 340,000
peasant agricultural holdings with mature rubber found in 140,000 of them and
immature rubber on many others. A census of rubber areas in September 1921
also found 415,799 acres of smallholdings scattered throughout the four
states, an area comprising 33.37 per cent of the total planted rubber area in
the states.(13) This very large body of rubber producers was very much less
inclined towards a restriction scheme, and for good reason. Unlike the
planters, peasant small holders were more flexible in their operations; they
were not employers of wage labour to any great extent, their overhead costs
were slight and the problem of capital investment did not loom so large.
Although the low rubber prices inflicted considerable hardship, particularly
on peasants who were solely dependent on rubber for their livelihood, the
great majority took the reversal in their stride. Those with kampong and padi fields paid more assiduous attention to these
subsistence cultivations, whilst others without a subsistence agricultural
base to fall back upon, turned to cash cropping of minor crops or began
opening small patches of food crops. Peasants also engaged in a wide variety
of occupations such as hawking, fishing and timber-cutting.
-At-the same time, they reduced their expenditure on non-essential items,
and where possible substituted their own produce for what they had
previously purchased.
(13) Census of Areas
under Rubber Cultivation in the Federated Malay States as in September,
1921', enclosure in High Commissioner to Secretary of State, Desp. 602 of 30 October 1923, CO 717/29/ 56773.
This peasant ability to survive the slump is not to deny that small producers
would not have welcomed moves to restore stability to the rubber market or
for some form of government assistance. Peasants who had borrowed money to
open up land, and there were many of them, and whose trees were not mature,
were especially hard-hit; but as a whole the sector was in a very much
stronger position to withstand the depression, and there was considerable
feeling among peasants that restriction was not in their interests and that,
if it was intended to introduce a restriction scheme, it should not apply to
them. A few administrators had recognised these feelings. Brockman, a former
Chief Secretary managing the Malay States Agency in London at the time that the restriction
campaign was being waged by the Rubber Growers' Association, had noticed that
the demand for restriction was coming from the European plantations. He had
warned that restriction could be a breach of faith by the government with its
colonial subjects and was concerned about the possibility of differential
treatment towards Europeans and Asians should such a scheme be
implemented.(14) But these warnings were ignored, and in the final
headlong plunge towards restriction, the interests of the peasant producers
were almost completely abandoned.
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(14) These warnings were given in his letter containing his
observations on restriction. In this letter Brockman quoted from a letter
from a smallholder to the Malay Mail, 5 January 1921, in which the writer
pointed out that it was unfair to restrict the output of smallholders simply
because estates could not produce at their price and Brockman maintained that
this was the attitude of many 'if not most of the Asiatic cultivators'. Sir
E. Brockman to Under Secretary, Colonial Office, 8 March 1921, CO
717/18/11486. An early indication that peasant rubber interests would be
disregarded in any restriction scheme had been provided by the Report of the
Rubber Industry Protection Commission in 1918. The Resident of Pahang and the
Chief Secretary then had felt compelled to speak out against the Commission's
unsympathetic attitude towards the peasant smallholder and its bias towards
the plantation industry. See Expression of views in FMS on report of Rubber Commission,
enclosures in CS to HC, 17 October 1918, High Commissioner's Office File
1808/18.
A large part of the responsibility for what amounted to a sell-out of peasant
interests must be placed on the Malayan administration which was supposed to
have been articulating the peasant case but which merely added its voice to
the chorus of unsubstantiated allegations that restriction was good for the
peasants and that the peasant sector urgently wanted it. It has been
suggested by one observer that since the outbreak of war the rubber industry
in Malaya had been moving towards control by the imperial authorities and
that the restriction scheme was a culmination of this process.(15) One
inference which might be drawn is that the local authorities would have been
powerless to intervene in the events unfolding in London. Indeed, the
principal bargaining parties in the final negotiations leading to restriction
were the British government and representatives of the plantation rubber
industry. But the Malayan authorities had not only capitulated to the demand
for restriction long before Whitehall but were also putting forward
exaggerated stories about smallholdings being abandoned and harbouring
diseases should restriction not be imposed, besides allowing other parties to
usurp their responsibilities towards peasants. Swettenham,
a retired Malayan hand, with influence in the Colonial Office, was therefore
able to misrepresent the peasant position and claim that the Rubber Growers'
Association was the only body which could influence the smallholders who
belonged to no organization. 'They are natives', he explained, 'and do not
understand the situation', and he warned that if restriction was not imposed
and the depression continued 'only the strongest European companies will
survive'.(16) In the Federal Council when the restriction bill was
introduced, the High Commissioner, replying to a question, whether the
government had obtained the consent of the smallholders, assured that 'the
Residents were already giving it the most careful attention'.(17)
This was not true.
(15) J. H. Drabble, The Plantation Rubber Industry in Malaya
Up to 1922', Journal of the Royal Asiatic Society, Malaysian Branch XL, i (1967), pp. 73-4.
(16) F. Swettenham
to G. Grindle, Colonial Office, 4 April 1921, enclosure in Foreign Office to
Under-Secretary, Colonial Office, 31 March 1921, CO 717/16/15606.
(17) FCP 24 October 1922, B 60.
(to be continued)
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Appendix I
World Production of Natural Rubber 1920 - 40
(‘000 tons)
Year Malaya Indies
Siam Ceylon Other Asia
Africa S America Total
(Including Pacific)
1920
174
76
-
40
15
6
41 352
1921
151
72
-
39
14
5
21 302
1922
212
102 1
47
17
3
21 403
1923
182
137
2
37
21
6
20 405
1924
176
151
3
37
25
5
26 423
1925
211
195
5
46
33
8
33 529
1926
277
208
4
59
35
10
31 624
1927 232
232
5
56
39
9
37 610
1928
294
228
5
57
39
8
25 656
1929
456
255
5
81
43
6
23 869
1930
443
241
4
76
40
5
16 825
1931
422
257
5
62
39
4
12 801
1932
406
212
4
49
30
3
6 710
1933
445
281
7
64
42
2
10 851
1934
480
380 18
79
62
3
10 1032
1935
370
287
28
54 71
6
14 830
1936
359
311
35
50 85
8
18 866
1937
492
434
36
70 102
11
21 1166
1938 245
301
42
49 103
13
19 872
1939 362
370
42
62
120
14
20 990
1940 541
537
44
89 142
16
26 1395
Source: A. McFadyean, The History of Rubber
Regulation, 1934-43 (London 1944)
Satistical Supplement, Table 3, pp.228-9.
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