The Corporation That Changed The World

Title: The Corporation That Changed The World – How the East India Company Shaped the Modern Multinational

Editor: Nick Robins

Publisher: Orient Longman 2006 (First)

ISBN: 81-250-3022-0

Pages: 190

Nick Robins is a prominent international author on corporate and financial matters, whose expertise is brought to arresting detail in the threadbare discussions of a powerful multinational company, formed in 1599, which exerted its tentacles far and wide and destroyed the lives of millions of Indians in the process, the East India Company (EIC). Founded as a joint-stock company for the task of carrying out trade with the East, the company gained territorial possessions and acted like a soverign power with no regard to the well being of the subject people. It systematically overthrew the political, economic, social and cultural framework of India by aggression, diplomacy and outright cheating. When the people rose up in revolt, the agitation was put down severely, but the aim of the revolutionaries succeeded in rooting out the company from India. Robins describes all these aspects in a sympathetic way and points out the pitfalls in today’s mindless globalization rhetoric.

In the 15th century, Portugal handled 75% of European spice trade. Protestant revolt in Holland resulted in blockade of Antwerp and Dutch traders were ousted from Lisbon. This forced the Dutch to ply their ships direct to India and pepper prices tripled. Spurred by the immense profits garnered by the Portuguese and Dutch traders, Queen Elizabeth signed the royal charter for establishing a British company in 1599. This was a joint-stock company, in which the investors pooled their money for making the dangerous journey to India. They were also given privileges to mint own coins in overseas territories, exercise justice in its settlements and the right to wage war. It grew several-fold and by 1774, 14% of England’s trade input was from this company. It operated in a more democratic way as compared to Dutch VOC. Each shareholder, possessing shares of £500 could participate in the election, and everyone having £2000 worth shares could contest for the post of director. The organisation was strictly hierarchical and the officers employed overseas could carry on private trade with other Asian ports. The company was given monopoly of bringing the oriental produce to England. EIC first established factories in today’s Indonesia, but wars with the Dutch expelled them from the Spice Islands. Textiles was the item of choice it exported from India, causing much hardships to British textile mill owners and labourers, as “The company had long been the target of protests from protectionist interests, critical of its growing imports of Indian calicoes. ‘When the East India ships come in’, they argued, ‘half our weavers play’. Others contended that competition from India kept wages in the wool and silk industries at starvation levels. The pressure was intensified when 5,000 weavers marched on Parliament. On their return journey, the weavers attacked East India House and broke open its doors, forcing the intervention of local milita” (p.52-53).

Company’s territorial ambitions were galvanized when Siraj-ud-Daula, the Nawab of Bengal invaded Calcutta in 1756. He was summarily defeated in 1757 at the Battle of Plassey, in which 50,000 Bengali troops surrendered to the 3,000 company troops, out of which only 1,000 were Englishmen. It could snatch victory due to the treacherous intervention of Mir Jaffar, Daula’s trusted minister. In recognition of the company’s superior position, the then Mughal emperor, Shah Alam II granted them the diwani (tax collection rights) of Bengal in 1764. A commercial organization could now collect land taxes forcibly from the public, give a portion to the toothless Mughal and reexport the remaining to England. Thus, the Company in collusion with the Mughal robbed India of her riches. Till that moment in history, gold flowed to India to pay for textiles. With this momentous step, the flow reversed. Robert Clive pocketed for himself a large share and was tried in England for financial misdemeanours. Speculation and grabbing of rice by company’s tax collectors exacerbated the Bengal famine of 1769-70, in which an estimated 10 million people (1/3rd of the Bengali population) perished. The excesses and immoral operations of the company overseas evoked outrage back home, resulting in the Regulating Act of 1773, which ushered in more government control.

EIC also contributed to the American war of independence in an indirect way. In the mean time, the company had engaged in importing tea from China, which was very lucrative. Most of the tea was reexported to America. Taxes in England caused the company’s tea to be dearer in America, which could not compete with smuggled tea from elsewhere in Europe. The new Tea Act abolished the tax in England and levied it upon arrival in America. This caused heated opposition from the colonists, resulting in the famous Boston Tea Party of 1773. The high handed deals of company officials attracted much scorn from intellectuals at home, like Edmund Burke, who was known for his humanist approach and who proceeded with impeachment motion against Warren Hastings, the governor-general of the company. His accusations against Hastings ran thus, “It is with confidence that, ordered by the Commons, I impeach Warren Hastings Esquire, of high crimes and misdemeanours. I impeach him in the name of the people of India, whose laws, rights and liberties, he has subverted, whose properties he has destroyed, whose country he has laid waste and desolate. I impeach him in the name and by virtue of those eternal laws of justice he has violated. I impeach him in the name of human nature himself, which he has cruelly outraged, injured, and oppressed, in both sexes, in every age, rank, situation and condition of life” (p.135). George Dempster (1732-1818), a former director of the company and an MP also opposed British rule in India.

Increased expenditure of military strained the finances of the company. Between 1763 and 1805, soldiers in its payroll increased from 18,000 to 154,500. It defeated Tipu in 1792 and annexed Malabar. Company’s losses mounted from £9 million in 1792 to £30 million in 1809. It sought to regain the losses from taxes, which the Indian taxpayer had to bear. Protectionist measures in England also weighed against free trade with India, in the form of 78% duty on calicoes and 31% on muslins. In the meantime, Industrial Revolution picked up in England, resulting in increased automation and reduced operating costs, which made the mills 400 times more productive than the Indian weaver. Indian textiles suddenly found themselves to be at a disadvantage and its market collapsed. This caused loss of jobs in India and William Bentinck remarked that Indian plains were bleached with the bones of weavers. To offset the losses in textiles, company turned to Chinese tea. But, they had nothing to offer the Chinese other than gold, which they were reluctant to do. Instead, they smuggled opium to China by bribing the officers. The company had a monopoly of opium production in Bihar and hence could set the price. Its cultivation in Malwa under the Marathas brought down prices, which prompted the company to attack and defeat them. Increased production from Malwa however reduced the prices. It exported 2,000 chests of opium (of 63.5 kg) in 1800 which bounced to 105,000 chests in 1879. The health and wealth of the Chinese were in the wicked company’s hands. When China banned the imports, the Royal Navy itself intervened and ensured free flow of the narcotic drug in two Opium wars.

In the 19th century, India’s role as an exporter of finished product weakened and it fell to the role of a supplier of raw materials for the emerging British industries. In 1811, India’s exports consisted of textiles (33%), opium (24%), indigo (19%), raw silk (8%) and raw cotton (5%), whereas it changed to textiles (nil), opium (30%), cotton (19%), indigo (11%) and sugar (10%) in 1850. The company’s special trading privileges ended in 1833 and the first war of independence in 1857 forced the crown to abolish the company and take over its Indian possessions in 1858. The company was formally wound up in 1874, with shares converted to government bonds.

Robins ends with a long chapter on similarities of the erstwhile company with modern multinational corporations which are also not bound by national laws. He argues that an Ethic gene must be included in the company law. The Alien Tort Claims Act (ATCA) in America is described to be a step in the right direction, citing the case of Unocal which was indicted for its unscrupulous deals in Burma.

The book is highly recommended.

Rating: 3 Star