It doesn't happen often, but every now and again, the mechanisms of the Free Market (peace and blessing be upon it) fail, and a private enterprise screws up so royally that governments are forced to intervene on behalf of the common good. We may well be standing witness to such an event – only time will tell if the BP Blowout will be the sort of watershed event that results in a near-complete realignment of political order, at least in its realm of enterprise.
The experience of the British East India Company certainly fits the parameters, and like BP, its proprietors should have been well aware of the potential for disaster within its ranks and holdings. Also like BP, the East India Company misread its mandates, badly bungled the response, and whined like Holy Hell when the Queen told Company leaders that she'd had enough of their crap.
Join me, if you will, in the Cave of the Moonbat, where tonight we'll set the stage for a scene of long-running corporation-caused death, devastation, and uncertainty – and no, I don't mean the Gulf coast.
Disclaimer
I'm not going to try to assert that the HEIC's experience in India is a perfect corollary to that of BP in the Gulf of Mexico – or even that Brits are unable to run international corporations for more than 150 years without seeing them explode spectacularly – so I'm not going to torture the analogy into a side-by-side comparison or something like that. Clearly, a modern industrial disaster on the floor of the ocean is vastly different from an armed insurrection in colonial India a century and a half ago, but in terms of the mentalities at work and remedies required, there are/may be some striking similarities in the two different corporate worlds.
The Governor and Company of Merchants of London Trading into the East Indies, est.1600
It's 1600, and things are finally starting to look merry in old England. Only 25 years before, she had been recovering from profound religious strife – now, as A Midsummer Night's Dream is playing its first run ever, the mighty Elizabeth I grants a charter incorporating the joint-stock venture that would eventually become the East India Company. Not so long ago, she might have thought twice about committing the fleet to sailing past rival Spain, but with the Epic Fail that was the Spanish Armada of 1588 (note: extreme pro-Elizabeth bias), Felipe II had shot his naval wad, as it were, and set his country on course for an agonizingly long decline. As far as the Brits were concerned, the sea-lanes to the southern tip of Africa were now open for business.
Private investors were soon sending vessels to seek new routes to the East. A 1591 expedition saw the ship Edward Bonaventure sail around Cape of Good Hope, do some trading on the Malay Peninsula, and return in 1594. Another 3-ship expedition was lost at sea a couple of years later, but by 1598, people were starting to petition the Queen for monopoly trading rights. In the end, she charged a little over £68,000 for her signature, which granted a group including the Earl of Cumberland and 215 "Knights, Aldermen, and Burgesses" exclusive rights to all English trade east of the Cape of Good Hope and west of the Straits of Magellan for a period of 15 years.
Such arrangements were all the rage at the time – several of the earliest British American colonies (including the first) were the result of joint-stock ventures. It was an easy way for the crown to raise revenue, as it (seemingly) promised large profits with (seemingly) little risk. Long-term commitments and unforeseen exigencies? Pashaaw – by selling something as ephemeral as trading rights and lands they didn't actually control, the queens and kings of England had found a means of creating wealth out of nothing, and thus avoided having to increase tax burdens.
The Long-Term Muscle-In
That's not to say that the monarchs were afraid to use the "stick" part of the carrot approach. Even though the profits were starting to roll in from the small "factories" (trading posts, as in places where things are "factored") on the Malay Peninsula and the southeast coast of India, a string of less-than-profitable missions led King James in 1609 to re-grant the Company's charter in perpetuity – but with the stipulation that they'd lose it if they failed to turn a profit three years in a row. This lit a fire under the hose-clad butts of the Company men, and they became more aggressive about horning in on Dutch and Portuguese concerns in South- and Southeast Asia. In 1612, a relatively minor engagement of English galleons and Portuguese naus (plus a bunch of small barks, one of which was used as a fire ship) near Surat, on the northwest coast, marked end of the Portuguese monopoly and the beginning of England's rise in India.
The Battle of Swally resulted in more than just an English toehold on the subcontinent – it also convinced the Company that it was going to have to supply its own navy if its far-flung ports were to be protected. Seeking to establish something worth protecting, in 1615, the proprietors convinced the king to send a diplomatic mission to the Mughal Emperor Jahangir (r. 1605-1627). Far more concerned with keeping rebellious subject states in line than in messing around with European adventurers, Jahangir nevertheless liked the sound of the promises the ambassador, Sir Thomas Roe, was making. Jahangir sent a letter back to King James that fairly salivates at the prospect of new European "rarities," and in the process betrays a certain heart-rending naiveté:
Upon which assurance of your royal love I have given my general command to all the kingdoms and ports of my dominions to receive all the merchants of the English nation as the subjects of my friend; that in what place soever they choose to live, they may have free liberty without any restraint; and at what port soever they shall arrive, that neither Portugal nor any other shall dare to molest their quiet; and in what city soever they shall have residence, I have commanded all my governors and captains to give them freedom answerable to their own desires; to sell, buy, and to transport into their country at their pleasure.
For confirmation of our love and friendship, I desire your Majesty to command your merchants to bring in their ships of all sorts of rarities and rich goods fit for my palace; and that you be pleased to send me your royal letters by every opportunity, that I may rejoice in your health and prosperous affairs; that our friendship may be interchanged and eternal.
via Indian History Sourcebook
Once their boots were in the door, the Company used a mix of diplomacy, economics, and weaponry to push the Portuguese to the periphery of Indian affairs – like in 1634, when the Mughal Emperor granted trade concessions for the entirety of Bengal, or in 1660, when King Charles II received the city of Bombay (and the Moroccan port of Tangier) as part of the dowry of his Portuguese proxy-bride/Queen consort Catherine of Braganza. Trade was focused on cotton, silk, indigo dye, saltpeter, and tea, with an eye toward cutting into the Dutch spice business as the English moved through the Straits of Malacca and on to the South China Sea. The establishment of permanent bases was another priority; though an early attempt at planting a factory near the mouth of the Hooghly River failed, in 1690, the trading post (and later, gigantic city) of Kolkata took root. In 1711, "John Company" (a common nickname) got his first toehold in China with the establishment of a factory in Guangzhou, where Indian tea was traded for Chinese silver (the opium would come later).
Giving Away a Store That's Not Yours
The brief, crazy reign of Oliver Cromwell (1649-1658) had more impact on Great Britain, Ireland, and Hispaniola than it did India, but upon the Restoration of Charles II, the Company was showered with royal benevolence. Starting around 1670, it was permitted to make autonomous territorial acquisitions, to mint its own money, to command forts and troops, to form alliances with local princes and chieftains, to make war and peace, and to exercise both civil and criminal jurisdiction over areas it controlled. The basis for this enviable group of prerogatives was saltpeter, one of the three main components of gunpowder – in 1672, the Governor of the East India Company got the crown to bid at auction on a large shipment of the stuff (the first time the crown had purchased a commodity through such a base means), and the following year, the king bought 700 tons at £37,000. It was the beginning of an arms trade that would see Indian saltpeter fired out of British cannons and muskets on six continents over the next 150 years.
Recognizing the lucrative nature of what the Company was into, private merchants and ex-Company men – derisively called "Interlopers" by the inner circle – tried to organize some competition. Parliament, fianlly understanding that the munificence of various kings had created something of a monster, passed a reorganization act in 1694 that allowed for the creation of a "parallel" trading company backed by £2 million in what amounted to government bonds.
The reaction of the powerful lords of the original Company would be recognizable to any MBA today: they bought up enough of the outstanding debt that they exercised de facto control of their competition. This was finally recognized in 1708, when the two companies merged, along with the government, into the greatest expression of mercantilism the world has ever known – the United Company of Merchants of England Trading to the East Indies, otherwise known as the Honorable East India Company.
Weird Historical Sidenote: The reorganization of the HEIC followed close on the heels of the Act of Union of 1707, which officially united the kingdoms of England and Scotland. Since Wales had been union-ized with England in 1536, the Act meant that all the kingdoms of the island of Great Britain were now under of one crown, and could make official their already century-long use of a flag consisting of St. George's cross superimposed over the cross of St. Andrew (top). When Ireland was incorporated into the United Kingdom in 1801, the flag was altered to include St. Patrick's cross (bottom), though there's still some debate as to whether it was done right.
Too Big To Fail
Though the Company continued to seek greater autonomy, elements in Parliament recognized a cash cow when they saw one, and weren't going to let this one get away. At its incorporation, the HEIC had basically purchased a three-year monopoly from the government by extending a £3.2 million "loan"; such shakedowns occurred periodically for decades thereafter. The wealth and power the HEIC increased every time the crown was obligated to cede a few more years' worth of monopoly. By 1720, 15% of all British imports originated in India, and the clout of Company men in the lobbies of Parliament rose accordingly – and once they were ensconced in the halls of power, they would prove as difficult to remove as an oil executive from a Cheney-run policy planning session.
In 1742, the crown was willing to sell a bit more of its soul, this time to help pay for the Britain's participation in the War of the Austrian Succession (1740-1748), and there weren't many places to turn for the kind of money the king was looking for. John Company stepped in, lending £1 million in exchange for a 40-year monopoly. There was also some fighting on the Indian front, with the British losing Madras to the French, and at one point seeing the entirety of their forces driven back to a single settlement (where, incidentally, Robert Clive made a name for himself at the Siege of Arcot. Things went better for the Brits in Europe, and the Treaty of Aix-la-Chapelle returned the geopolitical scene more or less to the status quo ante bellum, including the return of Madras to the Company.
Through it all, the HEIC went right on acquiring lands and concessions – a process begun in earnest after the death of the long-reigning Mughal EmperorAurangzeb (r. 1658-1707). Without his leadership, things quickly devolved into a mess of rebellious princes and difficult-to-pronounce names, as noted in the 1911 Encyclopedia Britanica:
In the Deccan proper, the Nizam-ul-Mulk founded an independent dynasty, with Hyderabad for its capital, which exercised a nominal sovereignty over the entire south. The Carnatic, or the lowland tract between the central plateau and the eastern sea, was ruled by a deputy of the nizam, known as the nawab of Arcot, who in his turn asserted claims to hereditary sovereignty. Farther south, Trichinopoly was the capital of a Hindu raja, and Tanjore formed another Hindu kingdom under a degenerate descendant of the line of Sivaji. Inland, Mysore was gradually growing into a third Hindu state, while everywhere local chieftains, called palegars or naihs, were in semi-independent possession of citadels or hill-forts.
As the Mughal Empire crumbled, regional warlords and princes declared independence, tried to deal with a swirling world of alliances and betrayals, and fought with one another over trade, power, or any number of other reasons. The Company was always there to offer protection and assistance...for a price. The Emperor, for example, was propped up for a few more years, in exchange for the HEIC being excused from paying customs duties in Bengal. This didn't sit all that well with the Bengali nawab, Siraj Ud Daulah, who marched against the Company and its Governor, Robert Clive, almost immediately upon assuming the throne in 1756. Among his early victories was the capture of Calcutta, the loss of which cost the Company £2 million and (possibly) the lives of more than a hundred British citizens who had been incarcerated in the infamous (and unverifiable) Black Hole of Calcutta on the night of June 20.
Clearly, the Company could not tolerate such a nawab, so Clive cut a deal with the nawab's commander-in-chief, in the process screwing over a rich Bengali merchant who acted as go-between. This contest over the throne of the Nawab of Bengal would set the stage for one of the most important battles the average American has never heard of.
"A man who no more knows his destiny than a tea leaf knows the history of the East India company" – The Hitchhiker's Guide to the Galaxy
With the Portuguese long-gone and the Dutch on the decline, the French had been making subcontinental inroads since the days of Cardinal Richelieu (French East India Company est. 1642) and mercantilism god Jean Baptiste Colbert (mid/late 1600s). They were largely based out of the southeastern coastal town and region of Pondichéry – especially since the factories they established in towns that also held British concerns (Surat, Masulipatam, and Bantam) were all flying the Union Jack by 1720. Beginning in 1742, the French in India were ably led by Marquis Joseph François Dupleix, who served as both inspiration and rival to Robert Clive as he amassed a vast personal fortune and skillfully played (perhaps invented) the "Nabob Game" of diplomacy, puppet rulers, and near-endemic warfare.
Dupleix had worked his way into the good graces of the Mughal court – which could still dispense rich diplomatic and economic favors, even if it wasn't going to be much help on the battlefield – and set things up for another Anglo-French showdown before being recalled to face corruption charges in 1754. Without a Dupleix to lead the defenses – or fund them; Dupleix's out-of-pocket payments for the wartime fortification of Pondichéry were the subject of a bitter lawsuit after his return to Paris – the region fell to the British during the Seven Years' War. Though Pondichéry was returned to the French at the conclusion of the hostilities (small price to pay for the Brits gaining control of Quebec), and they continued to maintain a presence in India for two more centuries, the French would never again challenge British power.
The Battle of Plassey (23 June, 1757) is what set that power firmly in place. At the head of about 1000 Europeans and 2000 sepoys (British-officered native troops) Clive had taken up positions before a mango grove near the town of Plassey as the last monsoon rain fell that year. The Nawab's army was 50,000 strong and backed by French artillery, but Shiraj made some fatal miscalculations that obviated his numerical advantage. For one, his artillerymen left their gunpowder out in the rain, so after an initial all-out bombardment (that had little effect) they were basically cannon-less. Even more importantly, his second-in-command chose that moment to betray his nawab.
Seeing his forces turn on one another compelled Shiraj to mount a camel and seek to remove his august presence from the field of battle, though he was captured and assassinated a few days later. In all the excitement, the Nawab's troops had all but forgotten to shoot at the Europeans – Clive lost 22 men, with around 50 wounded. Casualties were similarly light on the Nawab's side – 500 killed and wounded – but the implications of the victory were enormous. Mir Jafar was recognized by Clive as the new Nawab of Bengal, and to show his gratitude...
Clive was taken through the treasury, amid a million and a half sterling's worth of rupees, gold and silver plate, jewels and rich goods, and besought to ask what he would. Clive took £160,000, a vast fortune for the day, while half a million was distributed among the army and navy of the East India Company, and provided gifts of £24,000 to each member of the Company's committee, as well as the public compensation stipulated for in the treaty.
Wikipedia
The Company also got a promise of annual payments of £100,000 to defray military and administrative costs, while Clive received a £27,000 "quit-rent" (basically, an annual feudal salary) for his personal holdings around Calcutta. The windfall from the battle thus made Robert Clive, at age 35, one of the wealthiest Britons in the world.
Rule, Britannia!
The rewards and honors kept showering down, even after ill health forced Clive to return to England – he was created Baron of Plassey in County Clare, Ireland, awarded a seat in the House of Commons, was knighted a Companion of the Order of the Bath, and all the other the other stuff that comes with being a rock star. Historian Lord McCauley, writing around the same time George Washington and the Founders were getting their images gilt and bronzed by a new generation of Americans, painted a pretty rosy picture of what he left behind:
"[Clive] gave peace, security, prosperity and such liberty as the case allowed of to millions of Indians, who had for centuries been the prey of oppression, while Napoleon's career of conquest was inspired only by personal ambition, and the absolutism he established vanished with his fall."
Though his long-term legacy is still hotly debated, what's not is that in the short term, Clive set a terrible example. The Company grew positively rapacious during the years that Clive pursued his political career in England, and made so many demands on Mir Jafar that the nawab finally spoke up. This cost him his throne – he was deposed in favor of his son-in-law – but even his Company-picked successor proved less than willing to let the HEIC treat the treasuries of Bengal like an Iraqi oil field.
The situation was deteriorating rapidly, and "Clive of India" was pressed back into service. Mir Jafar died while Clive was in transit, and left his old benefactor the sum of £70,000, but this time, Clive missed most of the military action; the bloodiest phase of this last great revolt was over by the time he arrived in India. It had been touch-and-go for a while there: The new nawab, Jafar's son-in-law Mir Kasim, who had been installed at the Company's behest but had proven non-compliant, attempted to impose regulations upon the out-of-control Company – standing up for Bengali sovereignty, injecting some fairness into the way the Company handed out get-out-of-customs-free passes, outlawing the Company's bribery-based underground economy, that sort of thing.
Such a leveling of the playing field was abhorrent to the proto-free marketeers in the Company, and tensions escalated to the point of open rebellion. Mir Kasim convinced the Nawab of the neighboring northern region of Oudh, as well as the Mughal Emperor in Delhi, to take up arms against John Company, lest Northern India go the way the South. Their combined forces encountered those of the HEIC at the town of Bihar, on the banks of the Ganges, in October, 1764.
The Company forces – around 18,000, with the vast majority being native sepoys – were under the command of General Hetor Munro, a Scotsman who'd spent his entire adult life in the military. He'd already had to deal with what is described as a major mutiny among his own sepoys – which ended when he had 20 of the ringleaders strapped to the front of cannons as they were fired off – but was able to competently (some might say brilliantly) exploit the disorganization and prima-donnaship going on on the other side of the field. They might have brought more than twice as many soldiers to the field, but the Emperor and two Nawabs were unable to settle on a common strategy in time to stave off defeat. It was not a low-casualty, minimal-gunfire affair like Plassey; Bihar was a full-on pitched battle, and one that truly set the stage for the British takeover of India.
In for a penny, in for a pound
Into the maelstrom stepped Clive, who promptly settled up with the Nawab of Oudh by returning to him all his territories save two provinces, which he handed over to the Emperor. The Company could afford to be patient; it knew it had other means of putting the screws to the Nawab. Indeed...
The Nawabs surrendered their independence little by little over many years. To pay for the protection of British forces and assistance in war, Awadh (Oudh) gave up first the fort of Chunar, then the districts of Benares and Ghazipur, then the fort at Allahabad; all the time the cash subsidy which the Nawab paid to the Company grew and grew.
Wikipedia
Mir Kasim was rendered landless and follower-less; he died in 1777, after more than a decade of penniless wandering. The Emperor cut a separate peace, one in which he effectively surrendered taxation authority in Bengal to the Company – and placed a private, foreign corporation in charge of the lives of millions of people and £4 million/year in revenues. In terms of administration of these vast new territories, the Company preferred to use compliant, co-opted, or bought-off locals - understanding the value of the Roman Senate even during the imperial period, Clive wrote of the native political structures that were left in place to support British rule:
"We are sensible that, since the acquisition of the dewany, the power formerly belonging to the soubah of those provinces is totally, in fact, vested in the East India Company. Nothing remains to him but the name and shadow of authority. This name, however, this shadow, it is indispensably necessary we should seem to venerate."
Nevertheless, Clive's economic and political reforms had little effect in curbing the corruption endemic to the looting of Bengal – things continued to get worse, culminating in a horrific famine from 1769 to 1773. Upwards of a third of the population (of around 30 million) died, and once-rich Bengal became a desolate region of bandits and Thuggee.
Clive wasn't around for that part. Having secured an empire for his king and company, he sailed for England in 1767, and sought to re-enter politics. Guys like Clive tend to attract as many enemies as they do friends, however, and as the 1911 Britannica puts it:
Every civilian whose illicit gains he had cut off, every officer whose conspiracy he had foiled, every proprietor or director, like Sulivan, whose selfish schemes he had thwarted, now sought their opportunity [to exact their revenge].
From 1772, Clive endured withering attacks from Parliament, and was made to defend his gross accumulation of wealth. Feeling he had acted within the moral dictates of his time and place, Clive noted all the stuff he could have taken, and admitted,
"By God... I stand astonished at my own moderation"
Parliament vindicated him – even offered him command of British forces in North America, where stuff was starting to get dicey – but Robert Clive committed suicide by stabbing himself with a pen knife on November 22, 1774. Why? Some say it was to defend his honor, others that he was addicted to opium, still others that he was trying to deal with a symptom of an illness while opiated. He was 48.
Historiorant:
This started as a diary about the Sepoy Insurrection of 1857, but obviously, I fell a few years short. I'm also about an hour-and-a-half late for my old History for Kossacks posting deadline, so I guess I'll to pull a CNN-style "leave it right there" and pick up the story next time.
Oh, and sorry about the sizes of some of the images in this diary - the HTML Shredder was even less kind than usual this evening...