The first public
looter of Hindusthan: East India Company
apr 3rd, 2009
in fact, it was only the *second*. the first and
the most successful and most ruthless of all time is the catholic church.
but the brits really did try hard to match the
unrivaled record of brutality and destruction that is trademark vatican. Rajeev
Srinivasan
The world's first
multinational
Nick Robins
Published 13 December 2004
NS Essay 1- Corporate greed, the ruination of traditional
ways of life, share-price bubbles, western imperialism: all these modern
complaints were made against the British East India Company in the 18th
century. Nick Robins draws the lessons
In The Discovery of India,
the final and perhaps most profound part of his "prison trilogy",
written in 1944 from Ahmednagar Fort, Jawaharlal Nehru described the effect of
the East India Company on the country he would shortly rule. "The
corruption, venality, nepotism, violence and greed of money of these early
generations of British rule in India,"
he wrote, "is something which passes comprehension." It was, he
added, "significant that one of the Hindustani words which has become part
of the English language is 'loot'".
For most of the succeeding 60 years,
the East India Company sank from view. No plaque marked the site where its
headquarters had stood in the City of London
for more than two centuries. It was regarded as something that could be
consigned to the history books, its deeds to be squabbled over by academics and
imperial romantics. But the onset of globalisation has revived interest in a
company that could be seen as a pioneering force for world trade. Exhibitions
at the British Library and the V&A, plus a string of popular histories,
have sought to revive the reputation of the "Honourable East India
Company". Its founders are now hailed as swashbuckling adventurers, its
operations praised for pioneering the birth of modern consumerism and its
glamorous executives profiled as multicultural "white moguls".
Yet the East India Company, romantic
as it may seem, has more profound and disturbing lessons to teach us. Abuse of
market power; corporate greed; judicial impunity; the "irrational
exuberance" of the financial markets; and the destruction of traditional
economies (in what could not, at one time, be called the poor or developing
world): none of these is new. The most common complaints against late 20th- and
early 21st-century capitalism were all foreshadowed in the story of the East
India Company more than two centuries ago.
In The Wealth of Nations (1776), Adam Smith used the East India
Company as a case study to show how monopoly capitalism undermines both liberty
and justice, and how the management of shareholder-controlled corporations
invariably ends in "negligence, profusion and malversation". Yet
nothing of Smith's scepticism of corporations, his criticism of their pursuit
of monopoly and of their faulty system of governance, enters the speeches of
today's free-market advocates.
Smith's vision of free trade entailed
firm controls on corporate power. And, as did his own times, subsequent history
shows how right he was. If it is to contribute to economic progress, the
corporation's market power has to be limited to allow real choice, and to
prevent suppliers being squeezed and consumers gouged. Its political power also
needs to be constrained, if it is not to rig the rules of regulation so that it
enjoys unjustified public subsidy or protection. Internal and external checks
and balances must curb the tendency of executives to become corporate emperors.
And clear and enforceable systems of justice are necessary to hold the
corporation to account for any damage to society and the environment. These are
tough conditions, and have rarely been met, either in the age of the East India
Company or in today's era of globalisation.
Today, we can see the East India
Company as the first "imperial corporation", the very design of which
drove it to market domination, speculative excess and the evasion of justice.
Like the modern multinational, it was eager to avoid the mere interplay of
supply and demand. It jealously guarded its chartered monopoly of imports from Asia. But it also wanted to control the sources of supply
by breaking the power of local rulers in India and eliminating competition
so that it could force down its purchase prices.
By controlling both ends of the
chain, the company could buy cheap and sell dear. This meant organising coups
against local rulers and placing puppets on the throne. By the middle of the
18th century, the company was deliberately breaching the terms of its
commercial concessions in Bengal by trading in
prohibited domestic goods and selling its duty-free passes to local merchants.
Combining economic muscle with extensive bribery and the deployment of its
small but effective private army, the company engineered a series of
"revolutions" that gave it territorial as well as economic control.
After Robert Clive's victory at the
Battle of Palashi in 1757, the company literally looted Bengal's
treasury. It loaded the country's gold and silver on to a fleet of more than a
hundred boats and sent it downriver to Calcutta.
In one stroke, Clive netted a cool £2.5m (more than £200m today) for the
company, and £234,000 (£20m) for himself. Historical convention views Palashi
as the first step in the creation of the British empire in India. It is
perhaps better understood as the company's most successful business deal.
It was the unrivalled quality and
cheapness of textiles that had lured the East India Company to Bengal, and it
would be Bengal's weavers who felt the full
force of the company's new-found market power. Never rich, the weavers
nevertheless had a better standard of living than their counterparts in
18th-century England.
At a time when the British state was intervening on the side of the employer -
for example, to set maximum levels for wages - India's weavers were able to act
collectively, aiding their ability to negotiate favourable prices. But the East
India Company eliminated the weavers' freedom to sell to other merchants, and
so crushed their limited but important market autonomy. It imposed prices 40
per cent below the market rate, and enforced them with violence and
imprisonment. Many weavers were driven to despair. One account reports that,
among the winders of raw silk, "instances have been known of their cutting
off their thumbs to prevent their being forced to wind silk".
As the company transformed itself
from a modest trading venture into a powerful corporate machine, so its systems
of governance completely failed to cope with the new responsibilities that it
faced. As Philip Francis, one of its leading critics, put it, in- stead of
seeking "moderate but permanent profit", the company had recklessly
pursued "immediate and excessive returns". Corruption assumed
epidemic proportions and speculation overtook its shares, stoked up by insider
trading led by Clive and other executives.
In the history of financial crises,
the South Sea Bubble is often regarded as the only premodern crash worthy of
note. But the East India Company also engineered its own stock-market boom,
ending in a share-price slump that rocked the world. The company's share price
doubled in the decade following Palashi, stoked by ever more extraordinary
acquisitions, such as the takeover of Bengal's
entire tax system in 1765. In London,
the company's management and shareholders fought for control of a money machine
they believed would yield unlimited returns. A swarm of "bulls" and
"bears" descended on the company's shares, with shareholders voting
for a doubling of the annual dividend from 6 to 12 per cent in order to cash in
on the new-found wealth. This upward spiral of "infectious greed" -
to use a phrase employed by Alan Greenspan, chairman of the US Federal Reserve,
more than two centuries later - came to an end in May 1769 when news of renewed
conflict in India reached
the London
markets. The share price fell 16 per cent in a single month, and would continue
a downward course for the next 15 years, reaching the depths in July 1784 after
a fall of 55 per cent.
Yet the human tragedy was just
beginning. In Bengal, the annual monsoon rains
had failed. But what turned a manageable natural disaster into a catastrophe
was the manipulation of local grain markets by East India
speculators, driving up the price of food beyond the reach of the poor.
"As soon as the dryness of the season foretold the approaching dearness of
rice," went one eyewitness account, "our Gentlemen in the Company's
service were as early as possible in buying up all they could lay hold
of." The situation was compounded by the company's decision to increase
the rate of tax to ensure that revenue levels remained stable. Estimates vary,
but up to ten million people may have died of starvation. When the full story
became known in Britain,
there was fury at the firm's negligence. As Horace Walpole wrote at the time:
"We have murdered, deposed, plundered, usurped - nay, what think you of
the famine in Bengal, in which millions perished, being caused by a monopoly of
provisions by the servants of the East Indies."
The company's fortunes had now turned
sharply downwards. By the end of 1772 it was, in effect, bankrupt. A final
slump in its shares precipitated a Europe-wide financial crisis, and forced the
company, begging for a bailout, into the arms of the government. But not only
was the East India
Company the mother of the modern multinational corporation, it also stimulated
one of the first movements for corporate reform.
Well-versed in the history of the
Roman Republic, Britain's elite feared that, just as the proceeds of Rome's
conquest of Asia (western Anatolia) had been used to subvert its ancient
freedoms, so the company's takeover of Bengal would bring despotism back home.
If left unchecked, argued one editorial, the company could "repeat the same
cruelties in this island which have disgraced humanity and deluged with native
and innocent blood the plains of India". Prior to his
conservative turn during the French revolution, Edmund Burke pressed repeatedly
for the company to be made accountable to parliament and for its system of
exploitation to be ended. "Every rupee of profit made by an Englishman is
lost for ever to India,"
he concluded, a judgement that would probably be echoed today by millions of
people working at the wrong end of the multinational bargain.
All the tools with which we are now
familiar were deployed to tame the firm: codes of conduct for company
executives, rules on shareholder abuse, government regulation, and ultimately,
as with so many failed firms, nationalisation.
Government intervention over a
hundred years transformed the company from a purely commercial institution to
an agent of the British state. It was only in the wake of the great rebellion
against company rule, which shook northern India in 1857-58, that its
anachronistic position as a profit-making ruler was put to an end. Direct
control of the company's territories passed to the crown, and the British Raj
was born.
Yet in spite of all the parliamentary
inquiries and waves of regulation, few of the company's executives were ever
brought to book. Clive narrowly escaped parliamentary censure in 1773, only to
die by his own hand. Parliament then turned its attention to Warren Hastings,
governor-general of Bengal, voting twice to
recall him for mismanagement. Both times this was rebuffed by the company's
shareholders and, as a last resort, and at Burke's instigation, the medieval
practice of impeachment was revived and used against him. Among the charges was
that Hastings had introduced a company monopoly
over the production of opium and, in an attempt to smuggle the crop into China, had
awarded the contract at a knock-down price to the son of the East India Company
chairman, who promptly sold it on for a tidy profit. Hastings
was also the first to seek deliberately to break China's ban on the importation of
opium. His attempt failed, but would be pursued by his successors, with tragic
consequences. Burke won Commons majorities in support of his case, and in
February 1788, the trial of Hastings
began in the Lords with Burke delivering a four-day opening speech against him.
What makes Burke's challenge to
Hastings and the East India Company so compelling are the principles on which
it was based. "The laws of morality," he declared, "are the same
everywhere . . . there is no action which would pass for an act of extortion,
of peculation, of bribery, and oppression in England, that is not an act of
extortion, of peculation, of bribery, and oppression in Europe, Asia, Africa
and the world over." Against the relativism that increasingly viewed India as an
inferior land in which different standards of justice should apply, Burke
unfurled the standard of absolute values, protesting against "geographical
morality". In the heat of his reactions to the French revolution, Burke
would oppose Tom Paine's Rights of Man. But in the case against Hastings, Burke argued for companies to be
judged by their respect for what we would understand as universal human rights.
The trial was interrupted, first by George III's madness and then by the French
revolution. After eight long years, Hastings
was acquitted of all charges, a result that surprised nobody, given the
political complexion of the Lords.
Yet there is one instance where the
company's impunity was broken. In 1774, a group of Armenian merchants launched
a civil case for damages against Hastings's
predecessor, Harry Verelst. Led by Gregore Cojamaul and Johannes Padre Rafael,
the merchants alleged that Verelst had arbitrarily locked them up in Bengal six
years earlier, confiscating their property and removing their freedom to trade.
It is a testimony to the British legal system that in December 1774, the Lord
Chief Justice decided in favour of the Armenians, judging that Verelst had been
guilty of "oppression, false imprisonment and singular depredations".
Verelst had to pay £9,000 in damages, as well as full costs. Thousands of miles
away from the scene of the crime, the principle of extra-territorial liability
for corporate malpractice was established in 1770s London.
Many in business regard the current
upsurge of global litigation against corporations such as Talisman, Unocal and
Shell as somehow new and unjustified. Yet Verelst's case provides a powerful
precedent, demonstrating that more than 200 years ago, a senior executive of
the world's first multinational was tried and found guilty of what we would now
consider human rights abuses.
It is not, however, Cojamaul's statue
that stands outside the Foreign Office in Whitehall,
but Robert Clive's. That such a rogue still has pride of place at the heart of
government suggests that Britain
has not yet confronted the connections between its corporate and imperial
pasts. This is not mere forgetfulness, but the mark of a continued belief that
the unrestrained pursuit of market power and personal reward is to be praised
at the highest levels. In India,
the East India Company's mismanagement remains part of the national
consciousness; here, knowledge of the company's corruption and abuse is almost
entirely lacking. We still do not recognise the "imperial gene" that
remains at the heart of modern corporate design.
Perhaps Nehru can help us. In The Discovery of India, he examined the
consequences of England's
long domination of India
in terms of karma, the spiritual law of cause and effect. "Entangled in
its meshes," he wrote, "we have thus struggled in vain to rid
ourselves of this past inheritance and start afresh on a different basis."
Independence was a necessary starting point for India, wrote Nehru, but Britain, too,
needed to "start afresh". As we approach the 250th anniversary of
Palashi, we do not need further glorification of the East India Company's
contribution to consumerism or of the celebrity of its executives. We need an
honest reckoning with the human costs of its quest for market domination.
Nick Robins's Imperial Corporation: reckoning with the East
India Company will be published next year.
http://www.newstatesman.com/200412130016.htm