A STUDY IN COMPETITION
•
AND MONOPOLY
By
P. T. BAUER
Reader 2'11 Agricultural Economics I
University of Londo,,;
Fellow of Gonville and Caius
College, Cambridge
•
•
PERPUSTAKAAN
NEGARAMALAYSI
A
THE LONDON SCHOOL OF ECONOMICS
AND POLITICAL SCIENCE
(University of London)
. LONGMANS,
GREEN
AND
CO.
LONDON . NEW YORK . TORONTO
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•
CONTENTS
PAGE
ABBREVIATrONS
INTRODUCTION.
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IX
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PART I
Xl
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THE IND USTRY TO 1933
CHAP.
1
2
THE STRUCTURE OF THE INDUSTRY
THE IMPACT OF THE DEPRESSION
NETHERLANDS EAST INDIES
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ON
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MALAYA
AND
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1
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THE
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15
3
4
GENERAL REVIEW OF THE RUBBER SLUMP.
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PRODUCTION DURING THE SLUMP
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25
42
5
THE POSITION OF THE SMALLHOLDINGS
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56
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PART II
THE ESTABLISHMENT OF INTERNATIONAL
REGULATION
6
7
RESTRICTION NEGOTIATIONS AND THE INTERNATIONAL AGREEMENT OF 1934
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THE ESTABLISHMENT OF REGULATION.
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75
88
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PART III
RUBBER REGULATION IN PEACE AND WAR
8
9
PERPUSTAKAAN III
124
NEGARAMALAYSI
A
EARLY DIFFICULTIES,
1934-35.
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THE SCHEME IN PROSPERITY AND RECESSION,
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1936-39.
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10
11
ADMINISTRATIVE CHANGES AND THE RENEWAL OF THE SCHEME
12
THE PLANTING PROVISIONS OF RUBBER REGULATION
13
THE CRITERIA OF REGULATION:
EFFICIENT PRODUCERS.
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NORMAL
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CRITICAL RETROSPECT
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14
RUBBER REGULATION DURING THE WAR,
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1939-41
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STOCKS
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AND
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138
154
173
191
203
PART IV
LABOUR AND TECHNIQ,UE
15
16
PLANTATION LABOUR
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DEVELOPMENTS IN TECHNIQ.UE
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..
Vll
217
254
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Vlll
THE
o
RUBBER
INDUSTRY
PART V
THE THREAT TO THE MONOPOLY OF
NATURAL RUBBER
CHAP.
17
18
THE RISE OF SYNTHETIC RUBBER
NATURAL RUBBER,
1941-45
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PAGE
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287
303
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309
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PART VI
THE PRESENT POSITION AND PROSPECTS OF
THE INDUSTR Y
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19
20
PROSPECI'S AND POLICIES
THE POSI'I10N
INDUSTRY
AND
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PROSPECTS
OF
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THE
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MALAYAN
RUBBER
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341
THE VALUE OF THE AGRICULTURAL AND MI ING OUTPUT OF
MALAYA, 1929 AND 1932 (Ch. 2) .
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.
355
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o
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APPENDICES
A
B
SUPPLEMENTARY DATA ON THE RESPONSE OF PRODUCERS TO
SLUMP PRICES (Ch. 3).
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.
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C
THE DATA UNDERLYING THE RUBBER-RICE COMPARISON (Cho
D
THE ECONOMICS OF PLANTING DENSITY
E
THE REDUCTION IN ESTATE COSTS,
5)
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1929-33
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359
361
363
365
STATISTICAL APPENDICES
I
II
III
RUBBER PRODUCTION, PRICES AND ACREAGES IN MALAYA AND
THE NETHERLANDS EAST INDIES, 1929-33
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PERPUSTAKAAN
NEGARAMALAYSI
A
MALAYAN MIGRATION AND EMPLOYMENT
INDEX
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o
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o
1934 41.
.
STATISTICS, 1926 40
THE STATISTICS OF RUBBER REGULATION,
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369
378
393
399
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PART I
THE INDUSTRY TO 1933
CHAPTER 1
THE STRUCTURE OF THE INDUSTRY
UBBER is produced from the latex which occurs in the bark
of the tree Hevea brasiliensis. The latex which issues when the
is cut is collected, coagulated with an acid (generally formic
or acetic acid) and the coagulum is washed and dried to produce
crude rubber. All the processes are essentially simple. Tapping
is the opening of the latex vessels in the tree by an incision in the
bark. The flow of latex is generally affected less by the thickness
of the cut than by its length, and satisfactory amounts can be
obtained by a very thin cut. Some bark removal is, however,
inevitable, and this naturally varies not only with the skill of the
tapper but also with the frequency of tapping and with the tapping
system adopted. If a tree is left untapped bark reserves will be
greater, with the possibility of higher yields later; where bark
removal exceeds bark renewal it will eventually be necessary to
suspend or slow down tapping, or else to tap on imperfectly renewed
bark. The drying of the coagulated latex consists of passing it
through a series of rollers, and is conducted in a very simple plant
known on the estate as the factory. On smallholdings the' factory'
is a shed housing one or two hand-mangles; the water is often
eliminated simply by pressing with hands and feet. Final drying
is done by placing the rubber in a hot chamber (usually termed
smoke-house), or simply by exposing it to the sun.
Although there are certain differences in methods of cultivation
and, of course, great differences of size, the basic processes (and the
equipment) are essentially the same both on estates and smallholdings.
PERPUSTAKAAN
NEGARAMALAYSI
A
I
With the important exceptions of certain changes in acreage
and in the cost of production (both of which are dealt with sub1
•
2
THE
RUBBER
INDUSTRY
sequently 1), the structure of the industry altered very little bet~e.en
the late 1920's and the outbreak of the Pacific war. For simplicIty
of exposition this chapter describes the industry as it was in 1929.
The planted area at the end of 1929 was estimated by the late
Dr. Whitford 2 at 7,635,000 acres in the East, and at 75,000 acres
elsewhere. The total of 7,710,000 was made up as follows:
I
TABLE
Areas Planted with Rubber at the end of 1929
(Thousand acres, to the nearest five thousand) a
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Malaya
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N.E.I. •
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Ceylon.
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Sarawak
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India (including Burma).
British North Borneo
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French Indo-China
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Siam •
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Total
•
Other countries
Grand total
Mature
Immature
470
1,030
50
175
40
•
2,475
2,125
490
85
130
80
100
35
5,520
2,115
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Total
2,945
3,155
540
260
170
120
295
150
40
195
115
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7,635
75
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7,710
•
• As will be seen from the text, many of these figures are only approximations, and to
indicate this, Dr. Whitford's estimates have been rounded off.
Though Dr. Whitford's figures were based on official estimates,
most of them should be regarded only as approximations, while
that of the N.E.I. native acreage (and consequently of the total
N.E.I. area) was largely a guess. Dr. Whitford's estimates gained
wide acceptance and were generally adopted by the Commercial
Research Department of the Rubber Growers' Association
(R.G.A.).3 His figure of 2,115,000 acres for the immature acreage
PERPUSTAKAAN
NEGARAMALAYSI
A
The latest acreage figures are shown in Tahle II of Statistical Appendix II j
changes in the cost of production are reviewed in Chs. 3 and 16.
2 A fOlmer manager of the Crude Rubber Department of the Rubber Manufacturers'
Association of America. His five Reports on Plankltion Rubber, issued between 1928
and 1934 by the Rubber Manufacturers' Association of America (R.M.A.), contain
much valuable material. Tables I and II of this chapter are largely derived from
Dr. Whitford's Report on Plankllion Rubber 1930.
3 Repeated revisions of his figures by Dr. Whitford between 1929 and 1934 will not
be followed here, as no accurate figures were available until the advent of regulation,
and even after 1934 some important gaps remained, notably of the planted area of the
N.E.1. natives and of Siam.
Dr. Whitford's estimates of the acreage of India and Siam subsequently turned out
to have been too low, which led to sOIfle complications in the early years of rubber regulation. At the end of 1929 the planted areas of India and Siam were each about 100 OOQ
acres in excess of Dr. Whitford's figures.
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1
•
THE
STRUCTURE
OF
THE
INDUSTRY
3
was, however, below that of the R.G.A., whose statisticians
estimated it at 2,700,000 acres. Dr. Whitford seems to have overestimated the mature N.E.I. native acreage in 1930 and correspondingly understated the immature acreage. In the light of subsequent
information an estimate of 5,200,000 mature and 2,600,000 immature acres at the end of 1929, though probably conservative, seems
as close as possible always remembering the uncertainty of the
native area in the N.E.I.
The comparatively small immature acreages in Malaya and
Ceylon, which were accurately estimated, deserve some explanation.
They reflect the policy pursued under the Stevenson restriction
scheme (1922- 28), when new planting was not prohibited but was
officially discouraged, and with few exceptions no land was
alienated for rubber planting. New planting was thus confined
to owners of land to which a title had already been issued, but
which was not yet under rubber. This was either land planted
with other crops, or unplanted land held in reserve. Estates
undertook some new planting on unplanted reserve land,
which many of them had. Smallholders rarely have unplanted
reserve land, and much of the planting they undertook was on
land which had been under other products, chiefly coconuts or fruit
trees; they thus had to sacrifice another source of income to
plant rubber. This policy much restricted the scope of new planting
in Malaya and Ceylon.
.
Dr. Whitford's division of the total acreage between estates and
smallholdings was also largely based on official fi gures, but again
with the important exception of the N.E.I. His figures are as
follows:
TABLE II
•
PERPUSTAKAAN
Planted Area
atE
the G
end of
1929
betweenL
Estates
and
Smallholdings
N
A
Rdivided
AMA
AY
S
I
A
(Thousand acres, to the nearest five thousand)
Malaya .
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N.E.!.
.
.
.
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Ceylon.
.
.
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Sarawak.
.
.
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India (including Burma) .
British North Borneo
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French Indo-China .
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Siam
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·
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Estates
1,775
1,355
370 a
10
115
75
295
170 a
250
55
45
150
•
3,995
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Smallholdillgs
1,170
1,800
3,640
•
4
THE
RUBBER
INDUSTRY
Thus in 1929, according to these figures 52 per cent. of the
total area was cultivated by estates and 48 per cent. by smallholders.
The smallholders were all Asiatics. Moreover, an appreciable
proportion of the estate acreage in Ma~ay.a, Ceylon, British No~th
Borneo and India also belonged to AsIatIcs, who thus, accordmg
to Dr. Whitford, had a clear majority (54 per cent.) of the total
planted acreage. As it was later to be revealed that the Siamese
and Indian acreages and the smallholdings area in Ceylon and the
N.E.I. were all substantially under-estimated, it is certain that at
the end ofl929 smallholders owned over one-half of the planted area,
and that the Asiatic-owned acreage was over 60 per cent. of the total.
The distinction between estates and smallholdings has been of
great importance since the earliest days of the industry. The
estates are large or at least fair-sized units of several hundred
or several thousand acres each, operated with substantial capital
and employing large labour forces in receipt of a fixed daily wage .
The majority of the smallholding acreage is in the hands of peasant
proprietors, each with a holding of, say, two to five acres, who
work with family labour, occasionally being assisted by outside
workers paid on a share basis. In some of the producing territories
much of the acreage officially classed as smallholdings is in larger
holdings of 15-100 acres each, usually tapped with the help of
outside labour, either on a share basis, or in receipt of piece-rates
and paid according to the amount of rubber brought in. This
type of property is sometimes known as a medium holding, and the
greater part of the acreage is owned by absentees, non-resident
businessmen, artisans and tradesmen, or Indian moneylenders.
Even when the smallholdings or medium holdings rely on outside
labour, their dependence is appreciably less than that of the estates
and is generally confined to tapping only.
The estates, especially the European-owned estates, also differ
from smallholdings and medium holdings by the adoption of an
elaborate hierarchy for the production of rubber (to be reviewed
subsequently). Putting it briefly, cultivation, tapping, manufacture
and packing are carried out by outside labourers; above the
labourer there stands the foreman, over the foreman the conductor
who is supervised by the assistant manager, who in turn has ~
manager above him; on European-owned estates the further stages
in the hierarchy include visiting agents, engineers and accountants
the agency house, the secretarial firm, the board of directors and
the shareholders. The ~st is not complete. On smallholdings and
medium holdings the identical commodity is produced by the owner
•
PERPUSTAKAAN
NEGARAMALAYSI
A
•
/
THE
STRUCTURE
OF
THE
INDUSTRY
5
and his family, assisted perhaps by a few share tappers or contract
tappers, possibly under a Chinese kepala (foreman).
The great bulk of the estate acreage is European-owned 1 ;
in Malaya about one-quarter of the estate area is in Asiatic, largely
Chinese, ownership. The smallholclings and medium holdings are
in Asiatic ownership; in the N.E.I. (where there are few medium
holdings) the holdings are practically all in Indonesian hands ;
el.iiewhere a varying but generally appreciable proportion is in
Chinese or Indian ownership. Apart from the N.E.I. it is, therefore, definitely inaccurate to refer to all smallholders as natives.
There is a certain similarity between the larger medium holdings
and the Asiatic-owned estates in methods' of finance and technique
of production; but on the whole the distinction between estates
and smallholdings has always been clear.
Although the official line of division between estates and smallholdings has varied somewhat between different territories, it has
generally been drawn at 100 acres. 2 From fragmentary data it
would appear that in the late 1920's and in the 1930's, between
one-third and one-half of the total acreage in Malaya officially classed
as smallholdings consisted of holdings of between 15- 20 and 100
acres each, and that about four-fifths or five-sixths of the acreage
of meclium holdings was Chinese-owned. In Malaya the great
majority of Chinese and Indian owners of smallholdings are absentee
owners of medium holdings. Very few of the Chinese and Indian
estate labourers have had the opportunity of planting and developing
rubber smallholdings, partly because of the ban on the alienation
of land for rubber planting from 1922 to 1928 and again since
1930, and partly because of the reluctance of the authorities to
alienate land to this type of owner; lack of capital for the acquisition
of land and the development of the holding was also a factor, but
one of subsidiary importance. In Ceylon, Sarawak and Siam the
proportion of medium holdings within the general smallholdings
acreage was probably of the same order as that in Malaya. s The
PERPUSTAKAAN
NEGARAMALAYSI
A
In discussions of the rubber industry references to European estates usually include
the comparatively small American- and Australian-owned acreage. Although the
largest single unit in the rubber industry is American-owned, only about 5 per cent. of
the estate acreage is in American hanru.
2 In the N .E. 1. the official distinction was based on differences of land tenure and
the local population held land on titles (where these were issued) of a different type from
those issued to other owners. This lends further justification to the use of the term
, native' when referring to smallholders in the N .E.1.; it is also in accordance with
official practice.
S This is suggested by occasional British and U.S. consular reports and by surveys
conducted for the administration of rubber restriction.
1
THE
6
RUBBER
INDUSTRY
ownership of a property of over 15 acres, or of several smallholdings
totalling more than 15 acres, would generally lift the owner .,abo:re
the peasant class, and it is thus misleading to regard the officIal
1
smallholdings acreage as entirely in the bands of this class. In
contrast, the bulk of N.E.I. native acreage is owned by peasant
proprietors, each with a few acres.
It is often implied or suggested that the bulk of the smallholding area is to be found in the immediate vicinity of the
villagers' houses. This is incorrect. There are often rubber trees,
or patches of rubber trees, around the villagers' houses, frequently
interplanted with fruit trees. Though the aggregate acreage of
these patches is not inconsiderable, it is only a small part of the
total area, which mostly consists of entire stretches of rubber,
starting usually some little distance behind the Malay dwellings,
and often separated from these by a belt of padi fields. The trees
in the villages enjoy the advantages of a regular supply of fertiliser,
but this
more than offset by their greater age and by the
effect of much worse tapping. The rubber in the extensive stretches
some distance from the villages is generally much better than the
patches in the villages. This applies quite clearly both to Malay
and to Chinese holdings in most of the important rubber-producing
districts of Malaya, and the difference is often very striking.
The difference in the condition of the holdings in or around the
villages and the much larger stretches of smallholders' rubber in
the interior is one reason, though not the only one, for the inadequacy of roadside observation (which was used for many purposes
by the authorities, as well as by unofficial observers) as a source of
information on smallholders' rubber. Reliance on data from
holdings near the roads is likely to provide biased samples. Such
holdings are often planted on land with a previous history of cultivation and were usually the first to be planted in the neighbourhood. Their trees, apart from being older than those further in
the interior, usually suffered most from the bad tapping of the
early days. Moreover, the holdings nearest to the roads are
general.ly reste.d less than those in the interior, being last to go out
of tappmg dunng a slump or at low rates ofrelease under restriction,
because of the lower transport costs to the nearest dealer or larger
PERPUSTAKAAN
NEGARAMALAYSI
A
In acc~rdance with general official. practice, in this study all properties of under
100 acres will he referred to as smallholdmgs; where a distinction is necessary how
the smaller holdings, owned by resident owners and generally operated with~ t ':':'
labour, will he referred to as peasant holdings and the larger small holdings u ou lIe
.
1
emp oymg some outS)·de Ia b our, as m ed·)um hid·
0 mgs.
The peasant holdings , fgenera
·d y
.
hid·
0 res) ent
d
I
th
owners correspon more Ol" ess to e native 0 lOgS of popular parlance .
1
•
THE
•
S TR UCTURE
OF
THE
IND USTR Y
7
village. Again, in many districts Chinese smallholders followed the
Malays, and the better Chinese holdings lie behind the Malay areas.
Moreover, the rubber trees in and around the villages are often
tapped by the wife and children of the smallholder, while the
homogeneous holding in the interior is tapped by the owner or by
a professional tapper. Similar considerations apply to the smallholdings near the principal rivers and thus to the value of riverside
observation.
To conclude this brief preliminary discussion of the different
classes of rubber producer with a comparison in terms of output,
49 per cent. of the 1929 production came from estates owned
by European and American interests, 7·5 per cent. from Asiaticowned estates, 40·5 per cent. from smallholdings, the remaining
3 per cent. being wild rubber'!
The liInitations of the acreage figures already given, and of
others to be given subsequently, should be clearly realised. Most
rubber statistics have always been prepared for business men who
have a deep mistrust of round figures, believing these to be evidence
of careless work. Hence the pseudo-accuracy of many rubber
statistics which sometimes becomes quite grotesque as, for instance,
when in roundabout estimates of the approximate native rubber
acreage of a N.E.!. residency the precise number of trees in that
area is given to the nearest digit. The worst example of pseudoaccuracy occurred during the currency of regulation, when in
1934-36 a rather haphazard tree census in Sumatra and Borneo
(whose rubber-growing residencies are several times the size of
Great Britain) claimed to have found 5~2,365,725 trees, and from
an estimate of the average density inferred that the area totalled
1,683,328 acres. Subsequent experience of the hazards of this
kind of estimating has not led to any improvement. In 1939 a
more detailed survey of these residencies was started; results so
far, based on 46 per cent. ofthe area, show that the original estimates
understated the actual area by about 1t million acres, one-half
of the total area. But the revised figure of acreage is given as
3,179,092 acres; the figure is probably subject to a margin of error
of at least half-a-million acres or more.
All the main elements reviewed above are subject to some error.
The estimate of the total acreage under rubber is hazardous,
particularly because no really reliable figures of the N.E.!. native
acreage or of the total planted area of Siam have ever been
PERPUSTAKAAN
NEGARAMALAYSI
A
Dr. George Rae, in a paper read before the Midland Section of the Institution of the
Rubber Industry, January 1931.
.
1