The daring story of The East India Company….
Although I was born in the UK, I am of Indian origin. I am ashamed to say that I have never taken the time to understand how it was not the British Government but an unregulated company that as a by-product of creaming profits for the benefit of shareholders emerged to dominate India. It grew to control almost half the world’s trade, came to direct a country of millions with a few thousand men and before the tech giants of today maintained the title of one of the world’s most powerful corporations over two centuries.
The East India Company is the subject of this post. An astounding venture when we consider the obfuscation over its genesis and success. An incredible tale full or daring, political shenanigans and violence, with the British Government only stepping in to take ownership of the spoils when the company was deemed too corrupt but by then too big to fail. It brings to mind some of the ingredients that led to the 2008 financial crisis because although it is said history never repeats…it does echo.
The first element of this tale to appreciate is that India pre the 15th century was not one country in the way it is perceived today. Before the Mughals invaded in 1526 (I believe it is invaded but have seen research suggest it was an ‘invitation’ by certain Indian princes), It was composed of independent kingdoms. This backdrop is important to the eventual success of The Company.
The Mughals operated a centralised rule with a sturdy military and administrative system. At the top presided the Emperor with a very sophisticated imperial court. He controlled the nobles under him, including directing their education and to whom they married. These were vitals tools to secure his dominance. The Emperor set the laws and taxation across the land the Mughals oversaw. Beneath him was a system of delegated government where governors of provinces which included ruling Indian elites were responsible to the centre, which was eventually based in Delhi. Initially within these government bodies, Hindus were permitted to hold positions of responsibility as the first Mughal Emperor Barbar, was very tolerant of Hinduism encouraging the building of temples and allowing it to burgeon with the Mughal religion of Islam. But this tolerance was not shared by all future Emperors paving the way for discontent.
Although the Mughals employed a system of succession, the eldest son would not automatically become Emperor on his father’s death. The princes each had to prove themselves resulting in fierce battles which meant the most capable individual did not always ascend to the throne. At its pre-eminence, by 1700, through war and political shrewdness the Mughal empire stretched across all of India and also included Pakistan, Afghanistan and Bangladesh controlling c25% of global GDP. (As a side note, the other great Islamic empire that existed at a similar time was the Ottoman empire). So it was that during the 16th and 17th Century, through Mughal rule, India was outward looking fostering commercial and cultural interactions with the rest of the world that revealed the abundance and sophistication in place.
But let’s step back to the formation of The Company. The East India Company was formed in 1600 under the rule of Elizabeth I. However its future actions were governed by national pride and importantly by the personal self interest in wealth accumulation of The company people who set foot in India. It raised capital by selling shares to investors and was commanded by a ‘Board’. In another echo of the present, England had cut itself off from Europe and was scouring new markets for the purposes of trade. Initially England (and The Company) tried to compete with the Dutch for spices from the East Indies but they were beaten back by better funding and appreciable skills. The Company needed new, less competitive opportunities. Hence in the early 1600’s they looked to the affluence of the East.
During the 16th and 17th Century, European trading companies set up in India, procuring goods such as jewels, tea, opium, silk, cotton, saltpetre (an active ingredient in gunpowder) to sell and profit from abroad. The Company understood that to be able to participate in these lucrative dealings they had to enter India as supplicants to the Mughals. So they began to court relations with Emperor Jahangir setting the stage for negotiations on commercial concessions. At the same time they curried favour with local leaders and kings, recognising that this was a way to solidify control. Over the next 200 years with many ups and down The Company came to skilfully manage the politics and military situations they found themselves in as they spread their tentacles throughout India particularly fortifying positions on the coast where the Mughals and competition were weaker. Defeating both local and French opposition they were able to manoeuvre themselves into an unassailable position. The rise of The Company could not have been accomplished without co-operation from local leaders and money lenders. The Company controlled army was composed of Indian mercenary soldiers along side British soldiers which at one point towards the peak of its success numbered 260,000 — twice the size of the then British army. A formidable force.
It was close to the end of the reign of Emperor Aurangzeb (1707) that the Mughal empire began to fracture and decline. Aurangzeb was very intolerant of Hinduism, bringing in sharia rule. Continuing to conquer territory, his command of local leaders became unstable. Uprisings resulted in Southern India moving to the authority of the Hindu Marathi’s and Calcutta in the East became increasingly under the dominance of The Company. However It was upon his death that the fortunes of The Company took off as successive weak Mughal Emperors allowed them to grow in confidence and ambition supported by wily military tactics. By keeping consecutive Emperors in power as puppets for The Company to act behind, it was able to control much of the West and East of India ‘ruling’ 50–60 million people (approximately two thirds of the country) with Company men only numbering in the thousands. At this time it accounted for around half of Britains trade.
But this success fostered further greed and myopia as The Company became more ruthless in its plunder, transforming from a trade organisation to one that now thrived on tax collection from the locals. The heartlessness in which it managed the 1770 famine in Bengal was exacerbated through their avarice. Some reports suggest two million people died and it led to large shortfalls in revenues and a company which in 1772 was in significant debt, having to turn to the UK State for support. In 1773 the Government engineered a bailout in return for control although didn’t officially take it away from The Company until 1858. Under Government direction, although there were many positive reforms implemented in India (improvement in infrastructure, instigation of a British legal system for example), much of this was done to maintain authority and continue to facilitate wealth back to England.
I won’t say much here but Britain maintained jurisdiction of India until 1947 when a struggle for self government was successful resulting in Pakistan carving out of India and a granting of Indian Independence; the end of British rule.
It is fascinating how ‘accidents’ can have such influence on the path of history. England didn’t set out to rule India. It was a consequence of someone else’s design yet we are living with the reverberations of it today — both good and bad. As a person of Indian origin who is immersed in the world of finance, I am conflicted in what I have learnt. There are many parables to be drawn from the story of the rise and fall of The East India Company. The ambition, entrepreneurship and wealth creation were brilliant in the execution for most of their dominance. But power can corrupt, particularly when you are too big to fail, underlining how unfettered greed overcomes morals and heinous behaviour can ensue. Something we seem incapable of eradicating from our nature. If history really does echo, we can only wonder if events like these will forever happen, binding us to a cycle to which we see no end.