The East India Company: The Original Corporate Raiders - 2
By William Dalrymple
At the height of the Victorian period there was a strong sense of embarrassment about the shady mercantile way the British had founded the Raj. The Victorians thought the real stuff of history was the politics of the nation state. This, not the economics of corrupt corporations, they believed was the fundamental unit of analysis and the major driver of change in human affairs. Moreover, they liked to think of the empire as a mission civilisatrice : a benign national transfer of knowledge, railways and the arts of civilization from west to east, and there was a calculated and deliberate amnesia about the corporate looting that opened British rule in India.
A second picture, this one commissioned to hang in the House of Commons, shows how the official memory of this process was spun and subtly reworked. It hangs now in St Stephen’s Hall, the echoing reception area of parliament. I came across it by chance late this summer, while waiting there to see an MP.
The painting was part of a series of murals entitled the Building of Britain. It features what the hanging committee at the time regarded as the highlights and turning points of British history: King Alfred defeating the Danes in 877, the parliamentary union of England and Scotland in 1707, and so on. The image in this series which deals with India does not, however, show the handing over of the Diwani but an earlier scene, where again a Mughal prince is sitting on a raised dais, under a canopy. Again, we are in a court setting, with bowing attendants on all sides and trumpets blowing, and again an Englishman is standing in front of the Mughal. But this time the balance of power is very different.
Sir Thomas Roe, the ambassador sent by James I to the Mughal court, is shown appearing before the Emperor Jahangir in 1614 – at a time when the Mughal empire was still at its richest and most powerful. Jahangir inherited from his father Akbar one of the two wealthiest polities in the world, rivaled only by Ming China. His lands stretched through most of India, all of what is now Pakistan and Bangladesh, and most of Afghanistan. He ruled over five times the population commanded by the Ottomans – roughly 100 million people. His capitals were the megacities of their day.
In Milton’s Paradise Lost, the great Mughal cities of Jahangir’s India are shown to Adam as future marvels of divine design. This was no understatement: Agra, with a population approaching 700,000, dwarfed all of the cities of Europe, while Lahore was larger than London, Paris, Lisbon, Madrid and Rome combined. This was a time when India accounted for around a quarter of all global manufacturing. In contrast, Britain then contributed less than 2% to global GDP, and the East India Company was so small that it was still operating from the home of its governor, Sir Thomas Smythe, with a permanent staff of only six. It did, however, already possess 30 tall ships and own its own dockyard at Deptford on the Thames.
Jahangir’s father Akbar had flirted with a project to civilize India’s European immigrants, whom he described as “an assemblage of savages”, but later dropped the plan as unworkable. Jahangir, who had a taste for exotica and wild beasts, welcomed Sir Thomas Roe with the same enthusiasm he had shown for the arrival of the first turkey in India, and questioned Roe closely on the distant, foggy island he came from, and the strange things that went on there.
For the committee who planned the House of Commons paintings, this marked the beginning of British engagement with India: two nation states coming into direct contact for the first time. Yet, in reality, British relations with India began not with diplomacy and the meeting of envoys, but with trade. On 24 September, 1599, 80 merchants and adventurers met at the Founders Hall in the City of London and agreed to petition Queen Elizabeth I to start up a company. A year later, the Governor and Company of Merchants trading to the East Indies, a group of 218 men, received a royal charter, giving them a monopoly for 15 years over “trade to the East”.
The charter authorized the setting up of what was then a radical new type of business: not a family partnership – until then the norm over most of the globe – but a joint-stock company that could issue tradable shares on the open market to any number of investors, a mechanism capable of realizing much larger amounts of capital. The first chartered joint-stock company was the Muscovy Company, which received its charter in 1555. The East India Company was founded 44 years later. No mention was made in the charter of the EIC holding overseas territory, but it did give the company the right “to wage war” where necessary.
Six years before Roe’s expedition, on 28 August 1608, William Hawkins had landed at Surat, the first commander of a company vessel to set foot on Indian soil. Hawkins, a bibulous sea dog, made his way to Agra, where he accepted a wife offered to him by the emperor, and brought her back to England. This was a version of history the House of Commons hanging committee chose to forget.
The rapid rise of the East India Company was made possible by the catastrophically rapid decline of the Mughals during the 18th century. As late as 1739, when Clive was only 14 years old, the Mughals still ruled a vast empire that stretched from Kabul to Madras. But in that year, the Persian adventurer Nadir Shah descended the Khyber Pass with 150,000 of his cavalry and defeated a Mughal army of 1.5 million men. Three months later, Nadir Shah returned to Persia carrying the pick of the treasures the Mughal empire had amassed in its 200 years of conquest: a caravan of riches that included Shah Jahan’s magnificent peacock throne, the Koh-i-Noor, the largest diamond in the world, as well as its “sister”, the Darya Nur, and “700 elephants, 4,000 camels and 12,000 horses carrying wagons all laden with gold, silver and precious stones”, worth an estimated £87.5m in the currency of the time. This haul was many times more valuable than that later extracted by Clive from the peripheral province of Bengal.
The destruction of Mughal power by Nadir Shah, and his removal of the funds that had financed it, quickly led to the disintegration of the empire. That same year, the French Compagnie des Indes began minting its own coins, and soon, without anyone to stop them, both the French and the English were drilling their own sepoys and militarizing their operations. Before long the EIC was straddling the globe. Almost single-handedly, it reversed the balance of trade, which from Roman times on had led to a continual drain of western bullion eastwards. The EIC ferried opium to China, and in due course fought the opium wars in order to seize an offshore base at Hong Kong and safeguard its profitable monopoly in narcotics. To the west it shipped Chinese tea to Massachusetts, where its dumping in Boston harbor triggered the American war of independence.
By 1803, when the EIC captured the Mughal capital of Delhi, it had trained up a private security force of around 260,000- twice the size of the British army – and marshaled more firepower than any nation state in Asia. It was “an empire within an empire”, as one of its directors admitted. It had also by this stage created a vast and sophisticated administration and civil service, built much of London’s docklands and come close to generating nearly half of Britain’s trade. No wonder that the EIC now referred to itself as “the grandest society of merchants in the Universe”.
Yet, like more recent mega-corporations, the EIC proved at once hugely powerful and oddly vulnerable to economic uncertainty. Only seven years after the granting of the Diwani, when the company’s share price had doubled overnight after it acquired the wealth of the treasury of Bengal, the East India bubble burst after plunder and famine in Bengal led to massive shortfalls in expected land revenues. The EIC was left with debts of £1.5m and a bill of £1m unpaid tax owed to the Crown. When knowledge of this became public, 30 banks collapsed like dominoes across Europe, bringing trade to a standstill.
In a scene that seems horribly familiar to us today, this hyper-aggressive corporation had to come clean and ask for a massive government bailout. On 15 July 1772, the directors of the East India Company applied to the Bank of England for a loan of £400,000. A fortnight later, they returned, asking for an additional £300,000. The bank raised only £200,000. By August, the directors were whispering to the government that they would actually need an unprecedented sum of a further £1m. The official report the following year, written by Edmund Burke, foresaw that the EIC’s financial problems could potentially “like a mill-stone, drag [the government] down into an unfathomable abyss … This cursed Company would, at last, like a viper, be the destruction of the country which fostered it at its bosom.”
The East India Company really was too big to fail. So it was that in 1773 it was saved by history’s first mega-bailout
But unlike Lehman Brothers, the East India Company really was too big to fail. So it was that in 1773, the world’s first aggressive multinational corporation was saved by history’s first mega-bailout – the first example of a nation state extracting, as its price for saving a failing corporation, the right to regulate and severely rein it in. (Continued)