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Published online by Cambridge University Press: 07 April 2011
In the final three decades of the nineteenth century, the world price of silver fell dramatically. On the London silver market, the price dropped almost without check, from an average of 60d. per ounce in 1870 to 28d. per ounce in 1900. For those countries on the silver standard (and at the beginning of the period this included all the states of Southeast Asia), the result was a substantial, continuous depreciation of their currencies against gold-based currencies, most notably sterling. In turn this threatened to disturb severely the foreign trade and capital inflows of those states at a time when they were becoming more closely integrated into the international economy. For example, frequent changes in the exchange rate introduced an element of speculation into trade with gold-standard countries, with the result that merchants' calculations of profit margins were frequently thrown into confusion by sudden fluctuations in the exchange. Moreover, with the exchange value of their currency falling, these states found themselves paying increasingly more in terms of the local currency to secure the same sterling value of imports. This was a particularly important consideration for those countries dependent upon imports of capital goods, for example, mining machinery or railway equipment, as these were obtained almost solely from the gold-standard states of western Europe.
1 de Cecco, Marcello, Money and Empire: The International Gold Standard, 1890–1914 (Oxford, 1974), p. 239, Table 8.Google Scholar
2 The Netherlands East Indies had adopted the gold standard as early as 1877, two years after the Netherlands itself had abandoned silver — Allen, G.C. and Donnithorne, Audrey G., Western Enterprise in Indonesia and Malaya (London, 1957), p. 183Google Scholar, French Indo-China remained tied to silver until 1930 — Robequain, Charles, The Economic Development of French Indo-China (London, 1944), p. 145Google Scholar. The realignment to gold was of course not restricted to Southeast Asia. Among the other countries which carried through the reform at the turn of the century were Austria-Hungary (1892), Chile (1892–95), India (1893), Russia (1896), Japan (1897), and Mexico (1905).
3 The following is based on Ingram, James C., Economic Change in Thailand, 1850–1970 (Stanford, 1971), pp. 149–52.Google Scholar
4 Branches of three European banks were opened in Siam in this period — the Hongkong and Shanghai Bank (1888), the Chartered Bank of India, Australia and China (1894), and the Banque de L'Indo-Chine (1897).
5 Ingram; op. cit., App. D. pp. 336–37.
6 Memorandum, “Closing of the Royal Mint to the free coinage of silver dollars. Proposals made by the Financial Adviser”, Rivett-Carnac, 22 Aug. 1899, Files of the Financial Adviser (henceforth F.F.A.) 23/1. Rivett-Carnac's proposals were continued in two further memoranda of 9 and 11 Sept. 1899, F.F.A. 23/1. These records are held in the library of the Ministry of Finance in Bangkok.
7 Prince Mahit to King, 23 Aug. 1899, National Archives, Bangkok (henceforth N.A.), 5th reign, Ministry of Finance (Khlang) series, (henceforth r.5 Kh.) 10/7.
8 Memorandum, Rivett-Carnac, 9 Sept. 1899, N.A. r.5 Kh. 10/7. Unfortunately, no record of these meetings of the Council could be found in the National Archives; nor do the documents which are available make clear the exact reasons for Prince Devawongse's opposition to the measure at this stage. However, it should be noted that Prince Devawongse had a strong personal dislike of Rivett-Carnac, essentially because the Adviser repeatedly attempted to publicize his own views on Siam's political relations with Britain and France. Indeed, at exactly this time, August/September 1899, Prince Devawongse's influence was instrumental in securing the rejection of another of Rivett-Carnac's major proposals, the raising of a European loan.
9 Ingram, op. cit., App. D, pp. 336–37.
10 Ministry of Finance to banks, legations, newspapers, informing them of the decision to abandon the silver standard, Nov. 1902, F.F.A. 23/1.
11 Ingram, op. cit., App. D, pp. 336–37.
12 Memorandum, “A Gold Standard for Siam”, Rivett-Carnac, 19 Nov. 1902, F.F.A. 23/1.
13 Ibid.
14 Prince Mahit to King, 20 Nov. 1902, N.A. r.5 Kh. 26/13.
15 Prince Devawongse to King, 22 Nov. 1902. N.A. r.5 Kh. 26/13.
16 Prince Mahit to Prince Sommot, 22 Nov. 1902, N.A. r.5 Kh. 26/13.
17 The Royal Mint Amendment Act, 1902 simply stated that the Ministry of Finance would no longer issue baht to the public in exchange for silver coin or bullion. In technical terms, the Royal Mint was “closed to the free coinage of silver”.
18 Notification enclosed, Prince Mahit to King, 24 Nov. 1902, N.A. r.5 Kh. 26/13.
19 Memorandum, “Interview between Managers of Local Banks and Financial Adviser regarding the closing of the Mints”, Rivett-Carnac, 28 Nov. 1902, F.F.A. 23/1.
20 Ibid. The Banque de L'Indo-Chine decided to settle separately through the French Minister in Bangkok.
21 Rivett-Carnac to Frederick Verney (Siamese Legation, London), 12 Jan. 1903, F.F.A. 23/1.
22 Prince Mahit to King, 29 Nov. 1902, N.A. r.S Kh. 20.1/22.
23 Manager of H.S.B. (Bangkok) to Rivett-Carnac, 2 Dec. 1902, F.F.A. 23/1.
24 Prince Mahit to King, 6 Dec. 1902, N.A. r.5 Kh. 20.1/22. This was a rash move by the bank, and Rivett-Carnac retaliated by threatening to withdraw the Government's account. The incident was smoothed over only after the London directors of the bank had sent a formal apology to the Government for the action of their local manager. A few months later, the Financial Adviser succeeded in having the manager transferred from Bangkok. Correspondence in F.F.A. 23/1.
25 The Singapore quotation for the Mexican dollar was used merely to indicate changes in the price of silver.
26 Memorandum, “Gold Standard Scheme”, Rivett-Carnac, 11 Dec. 1902. F.F.A. 23/1.
27 This implied that the banks still stood to lose with regard to the baht deposits of their non-Government customers. However, in view of the much smaller revaluation of the baht than had originally been intended, these losses would now have been relatively light.
28 On the basis of this last clause, Rivett-Carnac claimed that the Government had triumphed in its dispute with the banks. Writing on 12 Jan. 1903 to Frederick Vemey at the Siamese Legation in London (F.F.A. 23/1), the Adviser asserted that the banks “tried to bluff the Government out of their measure by putting enormous claims for compensation but when they saw that I was not to be frightened, they promptly came to amicable negotiations … the Banks here caved in”. Walter Williamson, Rivett-Carnac's successor as Financial Adviser, provided a more sober assessment. In a “Memorandum on the Currency History of Siam 1907–1923” written in June 1923 (F.F.A. 30/22), he argued, “It is evident that the Banks obtained complete satisfaction, and that the Ministry of Finance admitted at least a moral claim on their part to be saved any loss resulting from the action of the Government in altering the rate of exchange.”
29 The average price per ounce in the London market rose from 24d. in 1902 to 30d. in 1907 (Marcello de Cecco, Money and Empire, p. 239, Table 8).
30 Memorandum, “Gold Standard Scheme”, Rivett-Carnac, 17 Dec. 1902, F.F.A. 23/1.
31 Hon-Chan, Chai, The Development of British Malaya, 1896–1909, 2nd ed. (Kuala Lumpur, 1967), ch. 2.Google Scholar The rate of 5 baht:$3 was of course a familiar one in Bangkok and Singapore for it had been the rate maintained between the baht and the Mexican dollar from 1857 to Nov. 1902. However, as part of the Singapore authorities' gold standard scheme, the Mexican dollar (and the British dollar of 1895), were to be demonetized in the Straits Settlements and Federated Malay States and replaced by the Straits dollar. In February 1904 it was assumed in Bangkok (and Singapore) that the exchange value of the new Straits coin would be permanently fixed as 51=2s. Therefore, with the baht advanced to 16.67 baht: £1., the traditional rate of 5 baht:$3 would be re-established with the Straits currency.
32 Singapore was a major transhipment port for Siamese trade. For example, in the early 1900s over one-third of Siam's rice exports were initially shipped to Singapore. Ingram, James C., “Thailand's Rice Trade and the Allocation of Resources”, The Economic Development of South-East Asia, ed. Cowan, C.D. (London, 1964), p. 107Google Scholar.
33 Report of the Financial Adviser upon the Budget of the Kingdom of Siam, R.S. 123 (1904/5). p. 13.
34 The exchange value of the Straits dollar was finally fixed in January 1906 at $l:2s. 4d. Chai, op. cit., p. 95.
35 Williamson was about to depart for Europe on leave, and Rivett-Carnac had been asked to return temporarily to Siam as acting Financial Adviser during his absence.
36 Memorandum, “Proposed Forward Purchases of Ticals by Banks”, Williamson, 3 Nov. 1905, F.F.A. 23/2. Report of the Financial Adviser upon the Budget of the Kingdom of Siam, R.S. 123 (1904/5), pp. 14–15.
37 Memorandum, “Government Selling Price of Ticals”, Rivett-Carnac, 14 Nov. 1905, F.F.A. 23/2; N.A. r.5 Kh. 26/13.
38 In 1905 the Government imposed substantial increases in its land tax to compensate for the loss of revenue caused by the closure of provincial gambling dens.
39 Memorandum, “Government Selling Price of Ticals”, Rivett-Carnac, 14 Nov. 1905, F.F.A. 23/2; N.A. r.5 Kh. 26/13. A brief reference to the theoretical aspects of this question must be made. The distribution of the burden of a revaluation is determined by the structure of the market on both the demand and supply sides. In the case of Siamese rice exports, Rivett-Carnac's analysis would appear to be broadly correct. Rice, a relatively homogeneous product, sold in a very competitive market. It was therefore unlikely that the burden of the revaluation could have been shifted to the foreign customer in the form of higher foreign currency prices for Siamese rice. On the supply side, it would seem that the relatively few well-organized rice-millers in the Bangkok area would have been able to impose virtually the whole drop in the baht value of the crop onto the thousands of unorganized rice farmers in the kingdom. However, these market forces could have been upset by, for example, the development by some foreign customers of an attachment to the particular strain of rice grown in Siam, or by the growth of small up-country mills which broke the monopsonist position of the Bangkok millers. But in the absence of very refined data, it would be impossible to show the actual force of these latter factors, though it is unlikely that they would have had much influence in the present case.
40 “Memorandum on the Currency History of Siam, 1902–1923”, Williamson, June 1923, F.F.A. 30/22.
41 King to Prince Devawongse, 5 Dec. 1905, N.A. r.5 Kh. 26/13.
42 Prince Mahit to King, 2 Dec. 1905, N.A. r.5 Kh. 26/13.
43 Strobel to Prince Devawongse, 12 Dec. 1905, N.A. r.5 Kh. 26/13.
44 Phrayā Suriyā to King, 22 June 1906, N.A. r.5 Kh. 26/13.
45 Of course the gold-standard mechanism adopted by a particular country could take several forms — a gold-specie, a gold-bullion, a gold-exchange standard — and need not necessarily have involved the issue of a gold coin.
46 Report on the meeting of the Council of Ministers, 25 June 1906, N.A. r.5 Kh. 26/13.
47 King to Phrayā Suriyā, 29 June 1906, N.A. r.5 Kh. 26/13.
48 The immediate cause of the baht shortage was the implementation in June 1906 of a scheme to make the baht the principal coin in circulation in the southern province of Puket. For an analysis of this scheme, see Brown, Ian, “The Ministry of Finance and the Early Development of Modern Financial Administration in Siam, 1885–1910” (Ph.D. diss., London, 1975). pp. 233–41.Google Scholar
49 Memorandum, “Shortage of Ticals in the Treasury”, Williamson, 18 Oct. 1906, N.A. r.5 Kh. 26/15; F.F.A. 23/2.
50 Note 19 Oct. 1906, attached to Williamson's memorandum of 18 Oct. 1906, N.A. r.5 Kh. 26/15; F.F.A. 23/2. Phrayā Suriyā to King, 22 Oct. 1906, N.A. r.5. Kh. 26/15.
51 Williamson to Phrayā Suriyā, 22 Oct. 1906, N.A. r.5 Kh. 26/15.
52 Ibid. Williamson's emphasis.
53 Ibid.
54 Phrayā Suriyā to King, 22 Oct. 1906, N.A. r.5 Kh. 26/15.
55 King to Phrayā Suriyā, 24 Oct. 1906, N.A. r.5 Kh. 26/15.
56 Phrayā Suriyā to King, 31 Oct. 1906, N.A. r.5 Kh. 26/15.
57 Indeed, on 22 Oct. the Ministry had made substantial forward contracts with the banks for the supply of baht and the banks took delivery on 14 Nov. “Memorandum on the Currency History of Siam, 1902–1923”, Williamson, June 1923, F.F.A. 30/22. This apparent inconsistency may perhaps be explained by the fact that Phrayā Suriyā, whilst acknowledging the need to supply substantial quantities of baht to the banks during the rice-export season, was possibly angered by Williamson's repeated insistence that the Ministry of Finance was obliged to meet immediately all the demands of the banks for baht. It is also possible that Phrayā Suriyā saw in a moderate restriction of the supply of baht to the banks an effective method of forcing up the exchange rate.
58 King to Phrayā Suriyā, 1 Nov. 1906, N.A. r.5 Kh. 26/15.
59 Bangkok Times, 2 Nov. 1906.
60 Ibid., 28 Dec. 1906.
61 Phrayā Suriyā to King, 19 May 1907, N.A. r.5 Kh. 26/15.
62 After reaching a peak of 32d. per ounce in Jan. 1907 the price of silver dropped to 25d. per ounce in Dec., Bangkok Times, 1 Feb. 1908.
63 Ibid., 3 Jan, 1908. Annual Diplomatic and Consular Report from H.M, s Consuls in Siam, 1909 (for 1907), XCV1II, pp. 33–66.
64 Bangkok Times, 2 Nov. 1906.
65 Report on the meeting of the Council of Ministers, 29 Apr. 1907, N.A. r.5 Kh. 26/15.
66 Bangkok Times, 2 Dec. 1907. The change was made in connection with a gold-standard act then being prepared by Phrayā Suriyā. It was found that at the current rate of 13⅓ baht: £1, it was impossible to state precisely in Siamese weights the exact amount of gold in a proposed 10 baht gold coin. (Note, Williamson, 2 Dec. 1907, F.F.A. 23/2).
67 Bangkok Times, 23 July 1907.
68 “Memorandum on the Currency History of Siam, 1902–1923”, Williamson, June 1923, F.F.A. 30/22.
69 Report on the meeting of the Council of Ministers, 29 Apr. 1907, N.A. r.5 Kh. 26/15.
70 Phrayā: Suriyā to King, 19 May 1907, N.A. r.5 Kh. 26/15.
71 Ibid. This was a constant theme of Phrayā Suriyā's analysis at this time, (see also his letter King, 22 June 1906, N.A. r.5 Kh. 26/13), though at no point did the Minister explain adequately how he reached this unexpected conclusion. It was argued earlier (fn. 39) that a revaluation of the baht was almost certain to result in a fall in the baht income of the rice farmers. However, to some extent the fall in the farmers' baht income could be partially off-set by price changes. For example, one possible effect of a revaluation would be a fall in internal prices in Siam, principally because the major Siamese export, rice, was also a major item in internal production and consumption. Moreover, a revaluation would also secure a reduction in the baht price of imports, though the effect this on the real income of the rice cultivators would depend, first, on the extent to which the fall in the baht price was passed on to the consumer (rather than cornered by import merchants the form of increased commission charges) and, second, the proportion of rice farmers' incomes spent on imported goods. It is unlikely that these price changes would have been of sufficient magnitude to ensure that the rice cultivators, though experiencing a fall in their baht income, would enjoy a rise in real income.
72 Between Apr. 1907 and Mar. 1908, £536,000 were sold to support the exchange. “Memorandum on the Currency History of Siam, 1902–1923”, Williamson, June 1923, F.F.A. 30/22. These sterling reserves were part of a £3 million loan raised in London, Paris, and Berlin in Jan. 1907.
73 “Memorandum on Exchange”, Strobel, 9 Jan. 1908, N.A. r.5 Kh. 26/15.
74 At the time Hong Kong was still on the silver standard. Therefore, when the price of silver fell in 1907 t he Hong Kong quotation for the dollar fell with it. The result was a sharp revaluation of the baht against the dollar in Hong Kong, pricing Siamese rice out of the China market.
75 “Memorandum on Exchange”, Strobel, 9 Jan. 1908, N.A. r.5 Kh. 26/15.
76 Ibid.
77 Ibid.
78 King to Phrayā Suriyā, 11 Jan. 1908, N.A. r.5 Kh. 26/15.
79 Bangkok Times, 13 Jan. 1908.
80 Phraya Suriyā's resignation is considered in detail in Ian Brown, “The Ministry of Finance and the Early development of modern financial administration in Siam”, pp. 186–92.
81 Indeed, throughout most of the period 1908–18, the Treasury accumulated a large volume of sterling from its sales of baht to the banks.
82 Keynes, J.M., Indian Currency and Finance (London, 1913), pp. 135–40Google Scholar. The sterling reserves fell from £30.9 million in Sept. 1907 to £11.15 million in Sept. 1908. In addition, part of the proceeds of sterling loans raised in that period were used to support the rupee. Therefore, Keynes estimated that “the total deterioration in the Secretary of State's position during the first year of the depression [Sept. 1907–Sept. 1908] was not far short of £25,000,000” (p. 139).
83 Chai, op. cit., pp. 94–95.
84 Annual Diplomatic and Consular Reports from H.M. s Consuls in Siam 1908 (for 1906), CXV, pp. 705–34.
85 Ibid.
86 Bangkok Times, 28 Dec. 1906. Chai, op. cit., p. 95.
87 Bangkok Times, 15 Feb. 1907.
88 Ibid.
89 Report on the Meeting of the Council of Ministers, 29 Apr. 1907, N.A. r.5 Kh. 26/15.
90 Phrayā Suriyā to King, 7 May 1907, N.A. r.5 Kh. 20.1/22.
91 Prince Chanthaburi to King, 13 Oct. 1908, N.A. r.5 Kh. 10/9.
92 Memorandum, “Gold Standard Act”, Williamson, 17 Apr. 1908, F.F.A. 23/8.
93 Prince Chanthaburi to King, 18 May 1908, N.A. r.5 Kh. 26/16.
94 Report on the Meeting of the Council of Ministers, 18 May 1908, N.A. r. 5 Kh. 26/16. This meant that approximately half of the proceeds of the 1907 loan had now been ear-marked for the exchange reserve fund, though the transfer of this additional £500,000 to the exchange account was regarded as merely a temporary measure.
95 Prince Chanthaburi to King, 4 Nov. 1908, N.A. r.5 Kh. 26/16.
96 This was secured by a clause which stated that the “theoretical unit of the Siamese Monetary System shall be the gold tical of 56.25 centigrammes of pure gold”. A gold coin was in fact never issued.
97 Report of the Financial Adviser upon the Budget of the Kingdom of Siam R.S. 128 (1909–10), p. 9. Bangkok Times, 20 Nov. 1908.
98 “Note on the Creation of the Gold Standard Reserve Fund”, Williamson, 27 Feb. 1911, F.F.A. 23/14. “Memorandum on the Currency History of Siam, 1902–1923”, Williamson, June 1923, F.F.A. 30/22.
99 The price rose from 49½d. to 82½d. per ounce in eight months. Report of the Financial Adviser upon the Budget of the Kingdom of Siam, 1920/21, p. 10.
100 Ibid.
101 For a detailed account of this crisis, see James C. Ingram Economic Change in Thailand, 1850–1970, pp. 155–61. Unless otherwise noted, the account here is based on that of Professor Ingram and Williamson's “Memorandum on the Currency History of Siam, 1902–1923”, F.F.A. 30/22.
102 Report of the Financial Adviser upon the Budget of the Kingdom of Siam R.S. 126 (1907/8), p. 11. Even if this were the case there seems to be no obvious reason, beyond moderate expense and inconvenience, why the recoining operation could not have been carried out at a foreign mint.
103 This is in strong contrast to the Straits Settlements where pressure for the abandonment of silver came principally from the Singapore Chamber of Commerce. See Kemmerer, E.W., “A Gold Standard for the Straits Settlements”, Political Science Quarterly 19, 4 (1904): 636–49CrossRefGoogle Scholar, and Chai, op. cit., chap. 2.
104 For example, in the three years 1900–1902, rice accounted for about 80% of the total value of Siamese exports and 45% of the total value of foreign trade as a whole.
105 Rivett-Carnac had joined the Financial Department of the Government of India in 1872. He held a series of positions as an accountant throughout India until 1895 when he was transferred to Burma, becoming Deputy Auditor General in 1898. This was the position he held when he applied for the post in Siam. India Office List, 1905.
106 I have considered this subject in detail in “British Financial Advisers in Siam in the Reign of King Chulalongkorn”, Modern Asian Studies 12, 2 (1978): 193–215CrossRefGoogle Scholar.
107 A more detailed analysis of the allocation of the Government's resources between reserves and public works projects is contained in my article in Modern Asian Studies referred to above.
