In a world full of giant global corporations that seem to rule the world, neither Apple, Amazon, nor Google has the history that the British East India Company has. It was incorporated in 1600 and developed as a trade organization. But it became something much more: effectively a nation-state.
It would go on to reap huge profits from its relationships with India, Persia, China, and Indonesia for over two centuries. England became flush with tea, textiles, and spices and made the rich in London even richer. Annual returns of 30% where not unheard of, as the Company bled entire countries dry in service of the British.
In its prime, the English East India Company was the largest of its kind and bigger than many nations around the world. It held an imperial status in large portions of India and the East and was one of the world’s most productive economies in the 17th and 18th centuries.
Even when its grip on trade fell away, it transformed into an empire builder owning and commanding around 260,000 troops. This was more than twice the size of many standing armies and was enough to scare away much of the opposition that it faced.
The wild success of this corporation led to the British Empire bringing industrialization and capitalism to India, creating the British Raj of the 19th and 20th centuries which would go on to help shape the modern economy and the modern India, for good and for bad. But where did it all begin?
1600s: The Origins
On New Year’s Eve in 1600, Queen Elizabeth I granted a charter to London merchants so that they could have exclusive trading rights within the East Indies. This was a territory that stretched from Africa’s Cape of Good Hope eastward to Cape Horn in South America, circling almost all of the globe in the process.
This created a monopoly for these merchants, who became known as the English East India Company. No other British Isles subjects were allowed to trade legally in this area.
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It eliminated some competition that these London merchants would face from domestic rivals, but they very soon were facing battles with the Spanish, Portuguese, and the Dutch East Indies Company, the last of which was founded less than 2 years later.
Across western Europe, there was a huge appetite for goods from the East such as jewelry and spices. But in order to get their hands on these goods, merchants would have to traverse risky routes that often led to skirmishes with rival traders or fighting deadly diseases such as scurvy.
Researchers suggest that the mortality rate just within the Company was around 30 percent. However, the promise of riches could tempt many a merchant, and in what became known as “the Company” they created the largest and longest-lasting joint stock company in history.
Whilst the monopoly allowed the Company to trade exclusively, whilst generating income for the crown, the Company allowed its employees to participate in private training on the side. It kept employee pay down and provide adequate incentives for recruitment.
Impact in India
When European traders arrived in India, they sought to curry favor with local kings and rulers. This included the mighty Mughal Empire that extended across India.
The East India Company was technically private but because the royal charter and soldiers granted them political weight. Indian rulers invited Company bigwigs to court and extract bribes from them whilst hiring them to take part in regional wars. The Indian rulers would play the Europeans off against each other and the English Company would often face off against the French and the Dutch.
However, when the Mughal Empire collapsed in the 18th century, many Indian merchants feared the ensuing instability and fled to territories ruled by European powers. The Mughal Empire had focused much of its power in the interior of India whilst the European powers were allowed to fortify coastal territories like Bombay, Madras, and Calcutta.
However, this led to issues with sovereignty. The Company was meant to act in the name of the crown, but the crown could not give written orders without months of delay as they traveled from England to India. Most laws were thus created by local officers in the English East India Company.
From Company to Imperial Power
One of the largest turning points for the East India Company was the Battle of Plassey in 1757. The battle saw 50,000 Indian troops take on just 3,000 Company soldiers, expecting an easy victory.
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However, the Company had learned that there were other expressions of power than military might, and won the battle thanks to backhanded deals struck by Robert Clive with Indian bankers to guarantee many of the soldiers did not fight. Clive’s victory granted the Company swathes of taxation powers in Bengal, the richest province in India.
But this victory also changed the business plan for the Company from trade to taxation. This was confirmed by the 1784 India Act passed by William Pitt, the Prime Minister of Britain.
The actions of the Company did not end in India. As with many imperial powers, it sought to expand. The company smuggled opium to China in exchange for tea.
China had banned opium and so the Company used the black market of Indian growers and smugglers to generate profit from their exploits. Tea flowed into London, generating thousands of pounds of profit for the Company’s investors but at the cost of millions of Chinese men wasting away in the dark, dingy opium dens.
China cracked down on the trade, but Britain sent warships to fight for their lucrative business opportunities. This triggered the Opium War of 1840. The Company and the British were not to be beaten though and they defeated the Chinese, seizing control of Hong Kong but revealing their dark motives to the rest of the world.
It seemed for the first time people were waking up to the abuses of power half a world away which were paying for their fine surroundings and lifestyles. In the mid-19th century, the opposition was growing to the East India Company’s behavior and Parliament was beset by free-market thinkers like Adam Smith.
In the end, the East India Trading Company began to come to an end in the 1870s. It seemed that the public concern over their behavior had become too much.
Or had it? Historians have suggested though that this may have been less to do with the moral outrage of the Company’s activities, but with the wily politicians and businessmen of the age. It seems they realized that more money could be generated by trading with partners with a strong economic background than by subjugating an entire nation-state.
They simply continued to follow the money.
Top Image: An official of the East India Company, c.1760. Source: Dip Chand / Public Domain.
By Kurt Readman