The Anarchy: The Relentless Rise of the East India Company

by William Dalrymple

By 1803, when its private army had grown to nearly 200,000 men, it had swiftly subdued or directly seized an entire subcontinent. Astonishingly, this took less than half a century. The first serious territorial conquests began in Bengal in 1756; forty-seven years later, the Company’s reach extended as far north as the Mughal capital of Delhi, and almost all of India south of that city was by then effectively ruled from a boardroom in the City of London.

It was not the British government that began seizing great chunks of India in the mid-eighteenth century, but a dangerously unregulated private company headquartered in one small office, five windows wide, in London, and managed in India by a violent, utterly ruthless and intermittently mentally unstable corporate predator – Clive. India’s transition to colonialism took place under a for-profit corporation, which existed entirely for the purpose of enriching its investors.

Sir Thomas Roe,

Jahangir

Captain William Hawkins,

In many ways the East India Company was a model of commercial efficiency: one hundred years into its history, it had only thirty-five permanent employees in its head office. Nevertheless, that skeleton staff executed a corporate coup unparalleled in history: the military conquest, subjugation and plunder of vast tracts of southern Asia. It almost certainly remains the supreme act of corporate violence in world history.

Yet perhaps the most crucial factor of all was the support that the East India Company enjoyed from the British Parliament. The relationship between them grew steadily more symbiotic throughout the eighteenth century until eventually it turned into something we might today call a public–private partnership.

Rotten Boroughs.

For the Company always had two targets in its sights: one was the lands where its business was conducted; but the other was the country that gave it birth, as its lawyers and lobbyists and MP shareholders slowly and subtly worked to influence and subvert the legislation of Parliament in its favour. Indeed, the East India Company probably invented corporate lobbying. In 1693, less than a century after its foundation, the EIC was discovered for the first time to be using its own shares for buying parliamentarians, annually shelling out £1,200 a year to prominent MPs and ministers.

Although its total trading capital was permanently lent to the British state, when it suited, the East India Company made much of its legal separation from the government. It argued forcefully, and successfully, that the document signed by Shah Alam in 1765 – known as the Diwani – was the legal property of the Company, not the Crown, even though the government had spent an enormous sum on naval and military operations protecting the EIC’s Indian acquisitions. But the MPs who voted to uphold this legal distinction were not exactly neutral: nearly a quarter of them held Company stock, which would have plummeted in value had the Crown taken over.

With no stake in the just governance of the region, or its long-term well-being, the Company’s rule quickly turned into the straightforward pillage of Bengal, and the rapid transfer westwards of its wealth.

A good proportion of the loot of Bengal went directly into Clive’s pocket. He returned to Britain with a personal fortune, then valued at £234,000, that made him the richest self-made man in Europe. After the Battle of Plassey in 1757 – a victory that owed as much to treachery, forged contracts, bankers and bribes as it did to military prowess – he transferred to the EIC treasury no less than £2.5 million* seized from the defeated rulers of Bengal – unprecedented sums at the time.

Mughal historian Ghulam Hussain Khan put it: ‘A business of such magnitude, and which at any other time would have required the sending of wise ambassadors and able negotiators, and much negotiation and contention with the ministers, was done and finished in less time than would usually have been taken up for the sale of a jack-ass, or a beast of burden, or a head of cattle.’3

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 east 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.

By 1803, when the EIC captured the Mughal capital of Delhi, and within it, the sightless monarch, Shah Alam, sitting blinded in his ruined palace, the Company had trained up a private security force of around 200,000 – twice the size of the British army – and marshalled more firepower than any nation state in Asia.

The EIC was, as one of its directors admitted, ‘an empire within an empire’, with the power to make war or peace anywhere in the East. 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.

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 £1.5 million and a bill of £1 million* in unpaid tax owed to the Crown. When knowledge of this became public, thirty banks collapsed like dominoes across Europe, bringing trade to a standstill.

But the East India Company really was too big to fail. So it was that the following year, in 1773, the world’s first aggressive multinational corporation was saved by one of history’s first mega-bailouts – 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.

This book does not aim to provide a complete history of the East India Company, still less an economic analysis of its business operations. Instead it is an attempt to answer the question of how a single business operation, based in one London office complex, managed to replace the mighty Mughal Empire as masters of the vast subcontinent between the years 1756 and 1803.

Seir Mutaqherin, or Review of Modern Times by the brilliant young Mughal historian Ghulam Hussain Khan,

Ibrat Nama, or Book of Admonition of Fakir Khair ud-Din Illahabadi,

Tarikh-i Muzaffari of Mohammad Ali Khan Ansari of Panipat,

Shah Alam Nama of Munshi Munna Lal,

Lord Mayor himself, Sir Stephen Soame,

Sir Thomas Smythe,

Sir Francis Drake

This harrying and scavenging off the earlier and richer Iberian empires that then controlled South and Central America was licensed by the Crown and was essentially a form of Elizabethan state-sanctioned organised crime controlled by the oligarchs of Whitehall and Charing Cross.

Sir Walter Raleigh,

Many of those the Spanish ambassador would also have considered pirates were present that day in the Founders’ Hall. The Company’s potential investors knew that this group of mariners and adventurers, whatever their talents as freebooters, had to date shown little success in the more demanding skills of long-distance trade or in the art of planting and patiently sustaining viable colonies. Indeed, compared to many of their European neighbours, the English were rank amateurs at both endeavours.

In contrast to these ragged buccaneers, their more sophisticated Portuguese and Spanish rivals had been busy for over a century establishing profitable and cosmopolitan empires that ranged across the globe – empires whose massive imports of New World gold had turned Spain into the richest country in Europe, and given Portugal control of the seas and spices of the East, so bringing it in a close second place. Indeed, the only rival of the Iberians, gallingly for the English, was the tiny and newly independent republic of Holland, whose population was less than half that of England, and which had thrown off the rule of Spain only twenty years earlier, in 1579.

By August, following this ‘successe of the viage performed by the Dutche nation’, English merchants had begun discussing the possibilities of setting up a company to make similar voyages to buy spices not, as before, from Middle Eastern middlemen, who trebled the price as their commission, but instead direct from the producers, half the way around the world, in the East Indies.

The final straw was when the Dutch sent a delegation to London to try to buy up English shipping for further voyages eastwards. This was too much for the pride of Elizabethan London. The Amsterdam Agents, waiting in the Old Steelyard of the Hamburg Company, were told, ‘Our merchants of London have need of all our ships and none to sell to the Dutch. We ourselves intend forthwith to have trade with the East Indies.’18 The meeting at the Founders’ Hall was the direct result of that retort.

‘The Company of Merchants of London trading to the East Indies’ was thus originally an outgrowth of the Levant Company and a mechanism for its shareholders to extend its existing trade to the Far East by developing the sea route, and to raise as much new capital as possible.20

For, unlike the Levant Company, which had a fixed board of fifty-three tightly knit subscribers, the EIC was from the very first conceived as a joint stock corporation, open to all investors. Smythe and his associates had decided that, because of the huge expenses and high risks involved, ‘a trade so far remote cannot be managed but by a joint and united stock’.21 Costs were, after all, astronomically high. The commodities they wished to buy were extremely expensive and they were carried in huge and costly ships that needed to be manned by large crews and protected by artillery masters and professional musket-men. Moreover, even if everything went according to plan, there would be no return on investment for several years.

Forty years earlier, in 1553, a previous generation of London merchants had begun the process of founding the world’s first chartered joint stock company: the Muscovy Company, or to give it its full and glorious title, The Mysterie and Companie of the Merchant Adventurers for the Discoverie of Regions, Dominions, Islands and Places Unknown.

In 1555, the Muscovy Company was finally granted its royal charter laying out its privileges and responsibilities. By 1583 there were chartered Venice and Turkey companies, which merged in 1592 to become the Levant Company. The same year the slave-trading Sierra Leone Company was founded. The East India Company was thus following a fairly well-trod path, and its royal charter should have come through without complication.

This turned out to offer far wider powers than the petitioners had perhaps expected or even hoped for. As well as freedom from all customs duties for their first six voyages, it gave them a British monopoly for fifteen years over ‘trade to the East Indies’, a vaguely defined area that was soon taken to encompass all trade and traffic between the Cape of Good Hope and the Strait of Magellan, as well as granting semi-sovereign privileges to rule territories and raise armies. The wording was sufficiently ambiguous to allow future generations of EIC officials to use it to claim jurisdiction over all English subjects in Asia, mint money, raise fortifications, make laws, wage war, conduct an independent foreign policy, hold courts, issue punishment, imprison English subjects and plant English settlements.

But the truth was that this was small fry compared with what the Dutch were already achieving on the other side of the Channel. For in March 1602, while Lancaster was still in the Moluccas, the different Dutch East India Companies had all agreed to amalgamate and the Dutch East India Company, the VOC (Vereenigde Oostindische Compagnie), had received its state monopoly to trade with the East. When the Amsterdam accountants had totted up all the subscriptions, it was found that the VOC had raised almost ten times the capital base of the English EIC, and was immediately in a position to offer investors a 3,600 per cent dividend.37

Compared to this, the English Company was for many years an extremely modest venture, and one with relatively limited ambitions. For all the initial excitement at the Founders’ Hall, the merchants had raised only a relatively paltry £68,373 capital, as opposed to the Dutch who had by then pulled together a magnificent £550,000* for their rival venture. Since then, further Dutch subscriptions had poured in, while the English Company had, on the contrary, found it difficult to squeeze out even what the initial subscribers had promised.

The result of this inadequate funding was a small company with small fleets, and no permanent capital of its own, merely individual subscriptions for individual voyages. The English at this stage simply did not have the deep financial pockets of the Dutch. Moreover, Virginia and the New World had increasingly captured the imagination of the richer English nobles, not least because it seemed a more affordable and less risky option: the offer of ten shillings for a plot of 100 fertile acres in Virginia was a far more attractive option than £120** for ten volatile shares in East India stock.

Many more voyages set off throughout the early seventeenth century, mostly generating modest profits, but from the first the EIC was unable to prevail against better armed, better financed and more skilfully sailed fleets of Dutch East Indiamen.

1623, the English factory (trading station) at Amboina in the Moluccas was attacked by the Dutch VOC troops and ten Englishmen were tortured and killed. This opened several decades of conflict between England and Holland in which, despite occasional successes, the English consistently came off worse. At one point a Dutch fleet even sailed up the Thames and attacked Sheerness, destroying the ships in Chatham and Rochester dockyards.

After several more bruising encounters, the EIC directors decided they had little option but to leave the lucrative Spice Islands and their aromatic spice trade to the Dutch and focus instead on less competitive but potentially more promising sectors of the trade of Asia: fine cotton textiles, indigo and chintzes. The source of all three of these luxuries was India.

On 28 August 1608, Captain William Hawkins, a bluff sea captain with the Third Voyage, anchored his ship, the Hector, off Surat, and so became the first commander of an EIC vessel to set foot on Indian soil.

India then had a population of 150 million – about a fifth of the world’s total – and was producing about a quarter of global manufacturing; indeed, in many ways it was the world’s industrial powerhouse and the world’s leader in manufactured textiles. Not for nothing are so many English words connected with weaving – chintz, calico, shawl, pyjamas, khaki, dungarees, cummerbund, taffetas – of Indian origin.

It was certainly responsible for a much larger share of world trade than any comparable zone and the weight of its economic power even reached Mexico, whose textile manufacture suffered a crisis of ‘de-industrialisation’ due to Indian cloth imports.45 In comparison, England then had just 5 per cent of India’s population and was producing just under 3 per cent of the world’s manufactured goods.46 A good proportion of the profits on this found its way to the Mughal exchequer in Agra, making the Mughal Emperor, with an income of around £100 million,* by far the richest monarch in the world.

The Mughal capitals were the megacities of their day: ‘They are second to none either in Asia or in Europe,’ thought the Jesuit Fr Antonio Monserrate, ‘with regards either to size, population, or wealth. Their cities are crowded with merchants, who gather from all over Asia. There is no art or craft which is not practised there.’ Between 1586 and 1605, European silver flowed into the Mughal heartland at the astonishing rate of 18 metri...

By the early seventeenth century, Europeans had become used to easy military victories over the other peoples of the world. In the 1520s the Spanish had swept away the vast armies of the mighty Aztec Empire in a matter of months. In the Spice Islands of the Moluccas, the Dutch had recently begun to turn their cannons on the same rulers they had earlier traded with, slaughtering those islanders who rode out in canoes to greet them, burning down their cities and seizing their ports.

With this in mind, the Company realised that if it was to trade successfully with the Mughals, it would need both partners and permissions, which meant establishing a relationship with the Mughal Emperor himself.

Jahangir was, after all, an enormously sensitive, curious and intelligent man: observant of the world around him and a keen collector of its curiosities, from Venetian swords and globes to Safavid silks, jade pebbles and even narwhal teeth. A proud inheritor of the Indo-Mughal tradition of aesthetics and knowledge, as well as maintaining the Empire and commissioning great works of art, he took an active interest in goat and cheetah breeding, medicine and astronomy, and had an insatiable appetite for animal husbandry, like some Enlightenment landowner of a later generation.