The Anarchy: The Relentless Rise of the East India Company

by William Dalrymple

Buxar was a short and confused battle, but a bloody one: Company forces lost 850 killed, wounded or missing, of the 7,000 men they brought to the field – more than an eighth of their total; Mughal losses were many times higher, perhaps as many as 5,000 dead. For a long time the day’s outcome was uncertain. But for all this, it was still, ultimately, one of the most decisive battles in Indian history, even more so than the more famous Battle of Plassey seven years earlier.

The three great armies of the Mughal world had come together to defeat the Company and expel it from India. When instead it was the Mughals that were defeated, the Company was left the dominant military force in north-east India. Buxar confirmed the Company’s control of Bengal and the coast and opened the way for them to extend their influence far inland to the west. The Company, which had started off as an enterprise dominated by privateers and former Caribbean pirates, had already transformed itself once into a relatively respectable international trading corporation, with a share price so reliable its stock was regarded almost as a form of international currency. Now the Company was transformed a second time, not just as a vehicle of trade operating from a scattering of Indian coastal enclaves, but as the ruler of a rich and expansive territorial empire extending across South Asia.

For this, above all, was the moment this corporate trading organisation succeeded in laying the ground for its territorial conquest of India. A business enterprise had now emerged from its chrysalis, transformed into an autonomous imperial power, backed by a vast army, already larger than that of the British Crown, and was poised now to exercise administrative control over 20 million Indians. A body of merchants had been transformed into the de facto sovereign rulers of much of northern India. As one contemporary observer put it: ‘Through many unexpected contingencies, an incorporated so...

When, twenty years later, the tea merchant and traveller Thomas Twining stopped his boat trip up the Ganges to visit the now deserted site of the Battle of Buxar, he wrote in his diary that ‘here then may be said to terminate the extraordinary series of military achievements which brought the finest parts of Asia under the dominion of British merchants, who first appeared in the character of needy adventurers on the coasts of India. There are, perhaps, few events in history more remarkable than these transactions. Results so disproportionate to the means which produced them seem quite inexplicable.’67

Twining had a point. The Company had gambled everything – and won. The Mughal Empire now lay at its feet, comprehensively defeated, and the stage was set for the most extraordinary corporate takeover in history.68

In the end it was his urbane French soldier of fortune, Jean-Baptiste Gentil, who negotiated his surrender that July. Gentil pointed out to the Company that, under British protection, a defeated Shuja could be reinstalled to provide a useful buffer state between the rich lands of Bengal and the lawless anarchy of the contested lands around Delhi, which continued to pass, chaotically and bloodily, between rival Afghan and Maratha armies.

To his surprise Shuja found that ‘the English gentlemen took off their hats, and showed all marks of respect, according to the custom of their country and behaved with great affability. They stood before him, closing their hands together [i.e. clapping].’72 He was reinstated in a reduced version of his old kingdom, under the watchful eye of a British Resident and guarded by a regiment of Company sepoys, for whose presence he had to pay a huge subsidy, in addition to an immense war indemnity of Rs5 million.*73

As ever, Clive’s sense of timing – or perhaps his luck – was uncanny. When the Kent docked at Madras in April 1765, news was immediately brought on board of Munro’s victory at Buxar, the occupation of Avadh and the death of the recently restored Mir Jafar. Aware of the positive effect this would have on the Company’s share price, Clive’s first action was to write secretly in cipher to his agent in London to mortgage all his property and to buy as many Company shares as possible.82 Next he wrote to the directors. As ruthless and incisive as ever, he realised how radically this news changed the entire political landscape: ‘We have at last arrived at that critical Conjuncture, which I have long foreseen,’ he wrote to the chairman of the EIC. ‘I mean that Conjuncture which renders it necessary for us to determine whether we can, or shall, take the whole [Mughal Empire] to ourselves.’

His first appointment was with Shuja ud-Daula. Clive appreciated the logic of the solution Gentil had first proposed: that rather than taking the whole of Avadh directly under Company administration, a much wiser course would be instead to reinstate a grateful Shuja as the Company’s puppet-dependant and milk him of his resources, while nominally taking him under protection.

On the following morning, the 12th, the Emperor was enthroned on a silk-draped armchair, perilously perched upon Clive’s dining-room table. The ceremony, which took place inside Clive’s tent, did not last long. As Ghulam Hussain Khan puts it: ‘A business of such magnitude, as left neither pretence nor subterfuge, and which at any other time would have required the sending of wise ambassadors and able negotiators, as well as much parley and conference with the East India Company and the King of England, 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.’88

It was a hugely significant moment: with one stroke of the pen, in return for a relatively modest payment of Rs2.6 million,* and Clive’s cynical promise on behalf of the Company to govern ‘agreeably to the rules of Mahomed and the law of the Empire’, the Emperor agreed to recognise all the Company’s conquests and hand over to it financial control of all north-eastern India. Henceforth, 250 East India Company clerks backed by the military force of 20,000 Indian sepoys would now run the finances of India’s three richest provinces, effectively ending independent government in Bengal for 200 years. For a stock market-listed company with profit as its main raison d’être, this was a transformative, revolutionary moment.

Even though the Company’s military power was now placed within a ritualised Mughal framework, the radical change on the ground brought about by what the Company referred to as the Treaty of Allahabad was immediately apparent. As the Riyazu-s-salatin noted shortly afterwards: ‘The English have now acquired dominion over the three subahs [provinces] and have appointed their own district officers, they make assessments and collections of revenue, administer justice, appoint and dismiss collectors and perform other functions of governance. The sway and authority of the English prevails … and their soldiers are quartering themselves everywhere in th...

Clive took great care to distance the EIC from the humdrum affairs of daily administration: even the existing methods of revenue collection were maintained, run out of Murshidabad offices that were still entirely staffed with Mughal officials. But frock-coated and periwigged British officials were now everywhere at the apex of the administrative pyramid, making all the decisions and taking all the revenues. A trading corporation had become both colonial proprietor and corporate state, legally free, for the first time, to do all the things that governments do: control the law, administer justice, assess taxes, mint coins, provide protection, impose punishments, make peace and wage war.

Up to now, gold bullion had represented 75 per cent of the EIC’s imports to Bengal, and was the source for much of the ‘prodigious ancient riches of the province’. But now the Company no longer had to ship anything from Britain in order to pay for the textiles, spices and saltpetre it wished to buy and export: Indian tax revenues were now being used to provide the finance for all such purchases. India would henceforth be treated as if it were a vast plantation to be milked and exploited, with all its profits shipped overseas to London.91

As a result, in the words of Richard Becher, the new Company Resident in Murshidabad, ‘the first Consideration seems to have been the raising of as large Sums from the Country as could be collected’ – in other words simply to secure as large a revenue as possible through land taxes, and then to transfer that surplus to London bank accounts.

For Clive and his shareholders it was another triumph: ‘Fortune seems determined to accompany me to the last,’ Clive wrote to his friend and biographer, Robert Orme. ‘Every object, every sanguine wish is upon the point of being completely fulfilled, and I am arrived at the pinnacle of all that I covet, by affirming the Company shall, in spite of all the envy, malice, faction and resentment, acknowledge they are become the most opulent company in the world.’93 To Clive’s immense personal profit, the value of EIC stock climbed dramatically, nearly doubling in value in eight months.

But for the people of Bengal, the granting of the Diwani was an unmitigated catastrophe. The Nawab was no longer able to provide even a modicum of protection for his people: tax collectors and farmers of revenue plundered the peasantry to raise funds from the land, and no one felt in the least bit responsible for the wellbeing of the ordinary cultivator. Merchants and weavers were forced to work for the Company at far below market rates; they also seized by force textiles made for their French and Dutch rivals. Merchants who refused to sign papers agreeing to the Company’s harsh terms were caned or jailed or were publicly humiliated by being made to rub their noses on the ground.

Ghulam Hussain Khan, by far the sharpest observer of his time, was quick to realise what this would mean on the ground. Firstly, it signified the effective extinction of his entire social class. The Mughal nobility, whose power had ultimately rested on their expertise as cavalrymen, were now effectively unemployed as the Company replaced them with infantrymen they recruited largely from rural Hindu Rajput and Brahmin backgrounds.

He estimated that these changes would throw between 40,000 and 50,000 troopers out of employment across Bengal and Bihar, besides dispersing ‘the thousands and thousands of merchants’ who followed ‘that numerous cavalry’. This is turn had an important economic and civilisational effect: ‘The even more numerous artisans whom the noblemen had always kept busy, sometimes in their own houses’ found their patrons no longer capable of sustaining them or their in-house kar-khanas. Alternative employment was hard to find, for ‘the English are now the rulers and masters of the country’ and ‘because their arts and callings are of no use to the English’, the artisans could only thieve or beg.

Moreover, wrote Ghulam Hussain Khan, the Company’s conquests represented an entirely different form of imperial exploitation from anything India had previously experienced. He articulated, long before any other Indian, both what being a subject colony entailed, and how different this strange and utterly alien form of corporate colonialism was to Mughal rule. ‘It was quickly observed that money had commenced to become scarce in Bengal,’ he wrote. Initially no one knew whether ‘this scarcity was owing to the oppressions and exactions committed by the rulers, or the stinginess of the public expenses, or lastly of the vast exportation of coin which is carried every year to the country of England.’

This, he wrote, was quite different from the system of the Mughals, who though also initially outsiders, determined ‘to settle forever [in India] and to fix the foot of permanency and residency in this country, with a mind of turning their conquest into a patrimony for themselves, and of making it their property and inheritance’: These bent the whole strength of their genius in securing the happiness of their new subjects; nor did they ever abate from their effort, until they had intermarried with the natives, and got children and families from them, and had become naturalized. Their immediate successors having learned the language of the country, behaved to its inhabitants as brothers of one mother and one language … [Hindus and Muslims] have come to coalesce together into one whole, like milk and sugar that have received a simmering.

As Macaulay later put it, the Company looked on Bengal ‘merely as a Buccaneer would look on a galleon’.101 It took five years for the full effects of this regime of unregulated plunder to become apparent; but when it did so the results were unparalleled in their horror. The stage was now set for the great 1770 Bengal famine.

The monsoon of 1768 brought only the lightest of rains to north-east India. Then the following summer, 1769, no rain fell at all. Instead, the intense heat continued unabated, the rivers dwindled, the tanks dried and the pukhurs – the fish ponds at the centre of every Bengali village – turned first to sticky mud, then to dry earth, then to dust.

‘All through the stifling summer of 1770, the people went on dying,’ wrote Sir William Hunter. ‘The husbandmen sold their cattle, they sold their implements of agriculture; they devoured their seed grain; they sold their sons and daughters, till at length no buyers of children could be found. They ate the leaves of the trees and the grass of the field; and in June the Resident at the durbar affirmed that the living were feeding off the dead. Day and night a torrent of famished and disease-ridden wretches poured into the great cities … [so that soon] the streets were blocked up with promiscuous heaps of the dying and the dead.’

By June 1770, the devastation was unfolding across the entire province. Five hundred a day were now dying of starvation in the streets of Murshidabad.8 Rice was scarce even in Calcutta, where 76,000 died on its streets between July and September. ‘The whole province looked like a charnel house,’ reported one officer. The total numbers are disputed, but in all perhaps 1.2 million

By July 1770, when it was clear that the rains had disappointed for a third year, Mohammad Reza Khan was writing to his masters in Calcutta not only of the vast numbers of dead and dying, but also of the fires sweeping through the tinder of the empty granaries. Disease killed many others, including an outbreak of smallpox which carried away the young Nawab, Saif ud-Daula: ‘How can I describe the misery of the people from the severe droughts and the dearness of the grain?’ he wrote.

On the report of such generosity, the English and Dutch [in Patna] took the hint, and on his example, lodged the poor in several enclosures, where they were regularly fed and tended. In this manner, an immense multitude came to be rescued from the jaws of imminent death … But [elsewhere in Bengal] such a proceeding never came to anyone’s head. Indeed some who had been appointed overseers of the poor proved so intent on their own interest, that so far from working to procure plenty of grain, they were foremost in the use of violent methods to engross it.

Moreover, the Company administration as a whole did not engage in any famine relief works. Nor did it make seed or credit available to the vulnerable, or assist cultivators with materials to begin planting their next harvest, even though the government had ample cash reserves to do so. Instead, anxious to maintain their revenues at a time of low production and high military expenditure, the Company, in one of the greatest failures of corporate responsibility in history, rigorously enforced tax collection and in some cases even increased revenue assessments by 10 per cent.

Platoons of sepoys were marched out into the countryside to enforce payment, where they erected gibbets in prominent places to hang those who resisted the tax collection.19 Even starving families were expected to pay up; there were no remissions authorised on humanitarian grounds. Richard Becher in Murshidabad was appalled by what he saw and wrote to Calcutta for instructions: ‘Am I really quietly to stand by and see them commit the vilest acts of oppression, without being able to render the aggrieved redress?’ he asked.

‘The creatures of our government enrich themselves at the people’s expense, nay even their ruin.’20 As a result of such heartless methods of revenue collection, the famine initially made no impression on Company ledgers, as tax collections were, in the words of Warren Hastings, ‘violently kept up to their former standards’.21 In February 1771, the Council was able to tell the directors in London that ‘notwithstanding the great sev...

By the end of the summer of 1770, the effects of the Company’s policies were now so horrific that they could not be avoided by even the richest and most obtuse Company officials locked away in their walled Calcutta mansions.

As Bengal lay racked by famine, ‘with the greatest part of the land now entirely uncultivated … owing to the scarcity of the inhabitants’, in London, Company shareholders, relieved to see tax revenues maintained at normal levels, and aware that the share price was now higher than it had ever been – more than double its pre-Diwani rate – celebrated by voting themselves an unprecedented 12.5 per cent dividend.29

Already, by the end of 1771, the mood was beginning to change in London. Word was spreading about the Company’s inhumanity in Bengal: the number of dead and dying was simply too vast to hide.

His words were echoed in the House of Lords by the former Prime Minister. William Pitt, Lord Chatham, came from a dynasty whose fortunes were made in India: his father, ‘Diamond Pitt’, brought back from his governorship of Madras the fortune that had made possible Pitt’s career. Pitt did not, however, like to be reminded of this, and now raised the alarm that the EIC was bringing its corrupt practices back from India and into the very benches of the Mother of Parliaments.

In early 1772, the London Post published a series of graphic articles exposing the crimes and murders allegedly committed by the Company in India.

As the year progressed, and as more and more articles, pamphlets and books were published revealing the catastrophic death tolls in Bengal, India became ‘part of the daily newspaper diet’ of London, and public opinion swung increasingly against the Company, its returned Nabobs in general, and Clive, their most prominent and conspicuous exemplar, in particular.

That summer, the Company became the focus for much scandalous gossip in London. There was already in print a brilliant satire attacking the directors of the EIC – Debates in the Asiatic Assembly.

That summer, the attacks on the Company took many forms. Some accused the Company of near-genocide in India; others of corrupting Parliament; others again focused on the social mountaineering of the returned Nabobs, with their dripping Indian diamonds, their newly bought estates and their rotten boroughs. Many raised the valid point that a private corporation enjoying a government trading monopoly ought not to be running an overseas empire:

One especially powerful attack on the Company’s record was published by a returned EIC official, the Scottish philosopher, historian and mercantilist Alexander Dow, who concluded his scholarly translation from the Persian of Ferishta’s History of Hindostan with an excoriating attack on the Company’s rule of Bengal. Humane, informed and well argued, Dow’s attack was the product of one individual’s appalled anger at the incompetence and barbarism of the Company’s tenure of Bengal

In the space of six years, half the great cities of an opulent kingdom were rendered desolate; the most fertile fields in the world laid waste; and five millions of harmless and industrious people were either expelled or destroyed. Want of foresight became more fatal than innate barbarism; and [the company’s servants] found themselves wading through blood and ruin, when their object was only spoil.

However, by far the most influential and damaging of the many tracts against the EIC to be published in 1772 was William Bolts’ Considerations on Indian Affairs.

Bolts wrote of Company officials ‘unjustly imprisoning the natives and black [Indian] merchants and by violence extorting great sums of money from them’.

Bolts’ most thought-provoking idea was that the Company’s claim to have obtained the Diwani by the Treaty of Allahabad was in fact a legal nonsense, invented by Clive to mask the reality of his military conquests. The Company, he wrote, ‘are become sovereigns of extensive, rich and populous Kingdoms, with a standing army of above 60,000 men at their command’. The Nawab of Bengal and Shah Alam were merely ‘nominal nabobs … puppets’, dangling at the EIC’s whim, and the land held not by law or treaty but ‘possessions acquired and held in reality by either violence or usurpation’.

Bolts’ solution was for the Crown to take over Bengal as a government colony, so ending the asset-stripping of the province by a for-profit Company.

but later would become much more common: for the first time a writer grappled, for example, with the question of how to deal with a multinational whose tentacles extended well beyond national frontiers. It also asked important questions about containing an over-powerful and unusually wealthy proprietor: what would happen, asked Bolts, if one very rich magnate were to become too wealthy and powerful for a nation state to control? What would happen if someone could buy the legislature and use his wealth to corrupt MPs for his own business ends?

Bolts concluded his rant with a warning about the financial stability of the Company: ‘The Company may be compared to a stupendous edifice,’ he wrote, ‘suddenly built upon a foundation not previously well examined or secured, inhabited by momentary proprietors and governors, divided by different interests opposed to each other; and who, while one set of them is overloading the superstructure, another is undermining the foundations.’47 It proved a prophetic passage. For, only five months later, the EIC’s financial foundations gave way in the most spectacular fashion.

On 8 June 1772, a Scottish banker named Alexander Fordyce disappeared from his office, leaving debts of £550,000.* His bank, Neal, James, Fordyce and Down, imploded soon after and declared bankruptcy. Another institution with large investments in Company stock, Douglas, Heron & Company, otherwise known as the Ayr Bank, closed its doors the following week, so initiating a financial crisis that quickly spread across Britain into Europe.

In the week that followed, across the North Sea there were several failures of Dutch banks with speculative holdings in East India Company stock. Ten more banks folded across Europe within a fortnight, twenty more within the month: thirty banks going down like dominoes in less than three weeks.48

A month later, on 10 July 1772, a packet of bills worth the enormous sum of £747,195, remittances from India sent by Company officials returning home, arrived at India House in Leadenhall Street.

At the same time it was widely recognised that it was Indian wealth that was now helping propel Britain’s economy and that ‘the first and most immediate consequence’ of the failure of the EIC would be ‘national bankruptcy’, or what amounted to the same thing, ‘a stop to the payment of interest on the national debt’.56