The East India Company: how a trading corporation became an imperial ruler
The East India Company was founded during the rule of Queen Elizabeth I and grew into a dominating global player with its own army, with huge influence and power. Writing for History Extra, Professor Andrea Major gives an insight into one of history's most powerful companies, and its rise to political power on the Indian subcontinent…
In 1600, a group of London merchants led by Sir Thomas Smythe petitioned Queen Elizabeth I to grant them a royal charter to trade with the countries of the eastern hemisphere. And so, the ‘Honourable Company of Merchants of London Trading with the East Indies’ – or East India Company, as it came to be known – was founded. Few could have predicted the seismic shifts in the dynamics of global trade that would follow, nor that 258 years later, the company would pass control of a subcontinent to the British crown. How did this company gain and consolidate its power and profit?
At the same time as Elizabeth I was signing the East India Company (EIC) into existence in 1600, her counterpart in India – the Mughal emperor Akbar – was ruling over an empire of 750,000 square miles, stretching from northern Afghanistan in the northwest, to central India’s Deccan plateau in in the south and the Assamese highlands in the northeast. By 1600, the Mughal empire (founded by Akbar’s grandfather, Babur, in 1526) had come of age and was embarking on a century of strong centralised power, military dominance and cultural productiveness that would mark the rule of the ‘Great Mughals’. The Mughal court possessed a wealth and magnificence to overshadow anything that Europe could produce at the time, while India’s natural produce and that of its artisans was coveted all over the world.
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When the East India Company first visited the Mughal court in the early 17th century, it was as supplicants attempting to negotiate favourable trading relations with Akbar’s successor, Emperor Jehangir. The company had initially planned to try and force their way into the lucrative spice markets of south-east Asia, but found this trade was already dominated by the Dutch. After EIC merchants were massacred at Amboyna (in present day Indonesia) in 1623, the company increasingly turned their attention to India.
With Emperor Jehangir’s permission, they began to build small bases, or factories, on India's eastern and western coasts. From these coastal toeholds, they orchestrated the profitable trade in spices, textiles and luxury goods on which their commercial success was predicated, dealing with Indian artisans and producers primarily through Indian middlemen. Meanwhile, the ‘joint stock’ organisation of the company [in which ownership was shared between shareholders] spread the cost and risk of individual voyages between investors. The company grew in both size and influence across the 17th and 18th centuries. Although always volatile, EIC shares became an important bellwether of the British economy and the company emerged as one of London's most powerful financial institutions.
- Listen | William Dalrymple explains how a single London corporation took over the Mughal empire and became a major imperial power on this episode of the HistoryExtra podcast
A player in politics
Initially a junior partner in the Mughal empire’s sophisticated commercial networks, in the 18th century, the EIC became increasingly involved in subcontinental politics. They grappled to maintain their trading privileges in the face of declining central Mughal authority and the emergence of dynamic individual successor states.
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European competitors also began to have an increased presence on the subcontinent, with France emerging as a major national and imperial rival during the War of Austrian Succession and the Seven Years War. This particularly increased the strategic importance of the EIC's Indian footholds, and the country’s coastline became crucial to further imperial expansion in Asia and Africa. As well as maintaining a large standing army consisting primarily of sepoys (Indian mercenary soldiers trained in European military techniques), the EIC was able to call on British naval power and crown troops garrisoned in India.
Such military advantages made the EIC a powerful player in local conflicts and disputes, as did the financial support offered by some local Indian merchants and bankers, who saw in the EIC's increasing influence an unmissable commercial opportunity. After military victories at the battles of Plassey (1757) and Buxar (1764), the EIC was granted the diwani of Bengal – control over the administration of the region and the right to collect tax revenue. At the same time, the company expanded its influence over local rulers in the south, until by the 1770s the balance of power had fundamentally changed. Expansion continued and rivals such as the Maratha people in western India and Tipu Sultan of Mysore were defeated. By 1818, the EIC was the paramount political power in India, with direct control over two thirds of the subcontinent’s landmass and indirect control over the rest.
A ‘colony of exploitation’
The first years of EIC rule were notorious for their corruption and profiteering – the so-called ‘shaking of the pagoda tree’ or ‘rape of Bengal’. Individual nabobs (as EIC employers were derisively dubbed) amassed massive personal fortunes, often at the expense of their Indian subjects. Yet the late 18th century also saw the development of what would become the basis of the EIC state in India, as traders sought to become administrators and develop systems of rule compatible with both their Georgian ideas of political economy and the specific circumstances in India.
India’s large population and sophisticated social, political and economic institutions made imperialistic ideas of terra nullius (empty land) inapplicable in India, and as a result the EIC did not achieve the level of control over the resources of land and labour that characterised British settler communities in Canada, Australia, New Zealand, the Cape, and the Caribbean. India was a ‘colony of exploitation’, rather than one of settlement; its value to the EIC lay primarily in the profits that could be made by controlling its internal markets and international trade, appropriating peasant production and, above all, collecting tax revenue. These taxes paid for both a large standing army, and a sizeable cadre of EIC employees and covenanted civil servants who worked in India, but did not ultimately settle there.
The EIC’s rise to political power in India was the subject of heated debate back in Britain. EIC activities in the wake of the 1757 battle of Plassey as a company with huge influence and power – and one which is unafraid to further its interests by nefarious means –were viewed with suspicion – as poet William Cowper put it, the EIC: “Build factories with blood, conducting trade / At the swords point, and dyeing the white robe / Of innocent commercial justice red”.
Against the backdrop of the loss of the American colonies, the emergence of the anti-slavery movement and the French Revolution, the ‘India Question’ took on considerable political importance in Britain. The perceived immorality of EIC actions in India, the fear of private and institutionalised corruption, and tensions between British and ‘Asiatic’ forms of governance resonated with wider concerns about what it meant to be an imperial power, and the responsibilities Britons had to their non-white subjects overseas. Metropolitan concern with EIC activities in the second half of the 18th century manifested itself in popular hostility to returning nabobs, and culminated with the impeachment and trial of former governor general Warren Hastings [for mismanagement and personal corruption] in 1788–95.
The ‘India Question’
Attempts to regulate EIC activities began in the 1770s, with North’s Regulating Act (1773) and Pitt’s India Act (1784), which both sought to bring the company under closer parliamentary supervision. Meanwhile a series of internal reforms under governor general Charles Cornwallis in the late 1780s and early 1790s saw the EIC's administration radically restructured in order to eradicate private corruption. This was intended to improve both the lustre of its public image and the efficiency of its revenue-extracting machine. After the acquittal of Hastings and the implementation of the Cornwallis reforms, the company attempted to rehabilitate its reputation. It aimed to reposition itself as a benevolent and legitimate ruler that extended the limits of civil society and brought both security of property and impartiality of justice to India.
Reforms such as the remodelling of the judiciary and the 1793 Permanent Settlement agreement (which fixed the rate of land tax) took place under the rubric of ‘improving’ Indian society. The EIC increasingly justified its presence in India by using the rhetoric of a ‘civilising mission’, epitomised by the publicity given to showpiece social reform legislation such as the abolition of the rare but controversial practice of sati (widow-burning). However, the actual impact of its activities on local economies and societies was often very different. These reforms were primarily aimed at securing EIC control, facilitating Britain’s longstanding pursuit of wealth, and ensuring her strategic advantage by excluding European rivals from the subcontinent.
The first half of the 19th century was marked by economic depression in India. Excessive land tax demands and lack of investment stunted agricultural development, while traditional industries such as textiles were decimated by the import of cheap manufactured goods. Catastrophic famines, most notably in Bengal (1770) and in the Agra region (1837–8) were exacerbated by the EIC’s tax policies, its laissez faire attitudes towards the grain market, and failures of state relief.
While by the early 19th century British attitudes to India were characterised more by ‘pride and complacency’ than by ‘self-flagellation' (to quote historian Peter Marshall), criticism of EIC’s activities and their consequences – both intended and unintended – did not disappear entirely. Rather, these issues remained close to the surface of British public debate. They found expression through a range of issues, sources and media – for example through the vocal, but short-lived activities of the British India Society (1839–43) [Established to ‘enlighten’ people about conditions in India].
Nor did the Indian population simply meekly acquiesce to East India Company dominance. Dispossessed Indian rulers sent numerous delegations to London to protest mistreatment and breach of treaties on the part of the EIC, while various forms of both direct and indirect resistance were endemic throughout the period. Indeed, as historian Sir Christopher Bayly noted, when the fighting that would ultimately bring about the end of the East India Company broke out in 1857, the event was “unique only in its scale”.
In the wake of the uprising of 1857 (often referred to in Britain as the ‘Indian Mutiny’, and in India as the ‘First War of Independence’), observers in Britain were quick to critique the mistakes of the East India Company. Yet the ship had already sailed: once the uprising had been suppressed – with great brutality and loss of life on both sides – control of India passed from the East India Company to the crown, ushering the period of high imperialism in India epitomised by the Raj.
Andrea Major is professor in British colonial history at the University of Leeds
This article was first published by HistoryExtra in January 2017