THE DEVELOPMENT OF BRITISH TRADE AND EMPIRE
The East India Company played the decisive role in establishing Britain’s supremacy in India, generating wealth, commerce and industry back home. In doing so, it helped to prove the effectiveness of the joint-stock company as a motor of capitalist activity.
It was not preordained that Britain would be the European country that dominated India. For almost one hundred years after they bombarded Calicut in southern India in 1501, it was the Portuguese who led efforts to control trade, not only with the subcontinent but also with the spice islands of the East Indies (principally modern day-Indonesia and the Malaysian archipelago). By the end of the sixteenth century, however, the Dutch were financing highly lucrative voyages to the East Indies. In 1600, in the rush to grab a slice of this market before the Dutch controlled it all, a group of English merchants and investors founded the East India Company.
They started it with £30,000 raised in capital and a royal charter from Elizabeth I granting a fifteen-year monopoly (subsequently renewed and extended) on all English trading ventures to the East Indies. Given the Dutch competition, there was no time to waste and within months the first five ships were sailing from Torbay for Sumatra. In 1602, a trading base was established at Bantam on Java. Initially, the East India Company funded its voyages one at a time, unlike the rival Dutch East India Company – or Vereenigde Oost-indische Companie (VOC) – which was organized as a joint-stock company, a much more sensible vehicle for attracting long-term investment. By 1657, when Oliver Cromwell renewed the company’s charter, it too had become a permanent joint-stock entity.
Copying the Dutch business model was not, of itself, enough to dislodge Holland’s grip on the region. The maritime rivalry between the two powers intensified, three times breaking out into war between 1652 and 1674. It was not until the accession in 1688 of the Dutch stadtholder, William of Orange, to the British thrones that the VOC conceded its ascendancy in the East Indies, in return for which the East India Company became the dominant trading organization with India.
This division of spoils proved highly advantageous for the British company. In 1700, India was producing about a quarter of world economic output at a time when Britain was responsible for only around 3 per cent of the total. During the eighteenth and nineteenth centuries, Indian textile exports in calicoes, raw cotton and silk proved much more valuable than the spice-orientated commerce with the East Indies.
The British had gained a foothold on the Indian subcontinent as early as 1613 at Surat and shortly thereafter Sir Thomas Roe established favourable diplomatic relations with India’s Mughal emperor, Jahangir. Fortified trading posts were set up at Fort St George and Sutanuti, around which the cities of Madras and Calcutta would develop. The third of the East India Company’s great entrepôts was Bombay (Mumbai), which the Portuguese ceded as part of Catherine of Braganza’s wedding dowry to Charles II in 1661. During the eighteenth century, as Mughal rule fell apart and power fragmented across India, the East India Company increasingly enforced national security with its own private army, recruited from the Indian population as well as from Europeans. Besides threats from hostile native leaders, the company had to protect itself against the ambitions of India’s other trade-settlers, in particular the French. The latter briefly seized Madras before seeing their colonial intentions dealt a shattering blow in the Seven Years War (1756–63).
The defeat of the French and the infighting between native rulers was ably exploited by the East India Company’s man on the spot, Robert Clive. The victory of his 3,000 well-drilled soldiers against the Nawab of Bengal’s force of 50,000 at Plassey in 1757 created an indelible impression. Following the Treaty of Allahabad in 1765, the Mughal emperor Shah Allam II ceded administrative and fiscal responsibility for Bengal to the East India Company. A private company had, in effect, become the government for 20 million Indians.
For its part, the British government had long supported the East India Company, viewing it as equal to taking the risks, yet whose profits could be creamed off by the Exchequer. Nonetheless, it drew the line at letting the company become a colonial law unto itself. In 1773, Warren Hastings, the Company’s governor in Bengal, was given the elevated title of governor-general and, through his four-man council, was confirmed in his legislative powers there. In return, his appointment was made subject to the British government’s approval, and law in Bengal was to be overseen by a judiciary appointed by the British Crown.
This arrangement proved insufficient to stop the East India Company’s abuse of its position in India. Its wars of expansion were paid for by high taxation of the Bengalis (even during periods of famine) and much of the province’s wealth was repatriated by the company’s ‘nabobs’ to Britain. Eventually, Warren Hastings returned to London, where he was put on trial. After more than six years of legal debate, he was acquitted of the worst charges of malpractice but by then enough had been revealed to prompt drastic curtailment of the East India Company’s power. In 1784, the government appointed its own department, the Board of Control for India, with ultimate authority over the East India Company’s board of directors. In 1813, the company was stripped of most of its monopoly in India.
Thereafter, its trading activities were increasingly focused upon trafficking Bengali opium to China (sparking war with China and Britain’s acquisition of Hong Kong), while using the money it earned there to buy tea, which it then shipped to Britain. Most of all, it had become a tax-raising body, since – through the fortunes of war and the submission of weakened local princes – it was the effective ruler not just of Bengal but of much of eastern and southern India as well. Despite these taps on Indian wealth, the company had developed a £40 million debt. It tried to raise much needed capital by simply issuing more shares, but in truth, it had over-reached itself. The cost of paying for a 150,000-strong army was prohibitive, a state of affairs that was the direct result of a long period in which the company’s directors in Leadenhall Street had enjoyed little effective restraint over what their more ambitious employees were doing in a remote subcontinent where correspondence took months to arrive.
1583 Sir Humphrey Gilbert claims Newfoundland for England.
1585 Sir Walter Raleigh’s short-lived settlement at Roanoke is set up in modern-day North Carolina.
1600 The East India Company is founded.
1607 The Virginia Colony is established as the first permanent British settlement in the New World, at Jamestown.
1613 The East India Company’s first trading settlement in India is established at Surat.
1625 Barbados is claimed for Britain.
1655 Admiral William Penn captures Jamaica from the Spanish.
1661 Bombay (Mumbai) is ceded by Portugal to Britain.
1670 A royal charter is granted to the Hudson Bay Company to exploit the Canadian fur trade.
1713 The Treaty of Utrecht grants Britain the Spanish possessions of Gibraltar and Minorca and the formerly French Canadian domains of Acadia, including Nova Scotia. France effectively gives up its attempt to compete with the Hudson Bay Company.
1757 Robert Clive wins the Battle of Plassey in Bengal.
1765 The Treaty of Allahabad grants the East India Company administrative and fiscal responsibility for Bengal.
1759 James Wolfe captures Quebec from the French.
1763 The Peace of Paris ends the Seven Years War; France cedes its remaining Canadian territories and its claims west of the Mississippi to Britain. Spain cedes Florida to Britain.
1768–71 James Cook undertakes voyages to Australia and New Zealand.
1776 The thirteen American colonies declare independence from the British Crown. The Revolutionary War follows.
1783 Britain acknowledges the independent United States of America.
1784 The British government sets up its Board of Control for India, curtailing the authority of the East India Company.
1788 The first convicts are transported to Botany Bay in Australia.
From the royal charter of the East India Company, 1600
Whereas our most dear and loving Cousin, George, Earl of Cumberland, and our well-beloved Subjects, Sir John Hart of London, Knight, Sir John Spencer of London, Knight, William Starkey, William Smith, John Ellecot, Robert Bailey, and Roger Cotton, have been Petitioners unto us for our Royal Assent and Licence to be granted unto them, that they, at their own Adventures, Costs, and Charges, as well as for the Honour of this our Realm of England, as for the Increase of our Navigation, and advancement of Trade of Merchandise, set forth one or more Voyages, with convenient Number of Ships and pannaces, by way of Traffick and Merchandise to the East-Indies, in the Countries and Parts of Asia and Africa, and to as many of the Islands, Ports and Cities, Towns and Places, thereabouts, as where Trade and Traffic may by all Likelihood be discovered, established or had; divers of which Countries, and many of the Islands, Cities and Ports thereof, have long been discovered by others of our Subjects, albeit not frequented in Trade or Merchandise.
Finally in 1858, after the Indian Mutiny had been suppressed with tremendous barbarity on both sides, the British government assumed control of the East India Company’s possessions. Its key assets having been nationalized, the company was wound up in 1874. British rule in India would continue for a further seventy-three years, but the age of informal, privatized empire was officially over.
