One of many greatest, most dominant firms in historical past operated lengthy earlier than the emergence of tech giants like Apple or Google or Amazon. The English East India Firm was included by royal constitution on December 31, 1600 and went on to behave as a part-trade group, part-nation-state and reap huge earnings from abroad commerce with India, China, Persia and Indonesia for greater than two centuries. Its enterprise flooded England with inexpensive tea, cotton textiles and spices, and richly rewarded its London traders with returns as excessive as 30 p.c.
“At its peak, the English East India Firm was by far the most important company of its sort,” says Emily Erikson, a sociology professor at Yale College and creator of Between Monopoly and Free Trade: The English East India Company. “It was additionally bigger than a number of nations. It was primarily the de facto emperor of enormous parts of India, which was one of the vital productive economies on the planet at that time.”
However simply when the East India Firm’s grip on commerce weakened within the late 18th century, it discovered a brand new calling as an empire-builder. At one level, this mega company commanded a non-public military of 260,000 troopers, twice the dimensions of the standing British military. That sort of manpower was greater than sufficient to scare off the remaining competitors, conquer territory and coerce Indian rulers into one-sided contracts that granted the Firm profitable taxation powers.
With out the East India Firm, there could be no imperial British Raj in India within the Nineteenth and twentieth centuries. And the wild success of the world’s first multinational company helped form the fashionable international economic system, for higher or worse.
East India Firm Based Underneath Queen Elizabeth I
On the final day of 1600, Queen Elizabeth I granted a charter to a bunch of London retailers for unique abroad buying and selling rights with the East Indies, an enormous swath of the globe extending from Africa’s Cape of Good Hope eastward to Cape Horn in South America. The brand new English East India Firm was a monopoly within the sense that no different British topics may legally commerce in that territory, however it confronted stiff competitors from the Spanish and Portuguese, who already had buying and selling outposts in India, and in addition the Dutch East Indies Firm, based in 1602.
England, like the remainder of Western Europe, had an urge for food for unique Jap items like spices, textiles and jewellery. However sea voyages to the East Indies have been tremendously dangerous ventures that included armed clashes with rival merchants and lethal ailments like scurvy. The mortality charge for an worker of the East India Firm was a stunning 30 p.c, says Erikson. The monopoly granted by the royal constitution a minimum of protected the London retailers towards home competitors whereas additionally guaranteeing a kickback for the Crown, which was in determined want of funds.
Most of the hallmarks of the fashionable company have been first popularized by the East India Firm. For instance, the Firm was the most important and longest-lasting joint inventory firm of its day, which signifies that it raised and pooled capital by promoting shares to the general public. It was ruled by a president, but additionally a “board of management” or “board of officers.” In contrast to in the present day’s comparatively staid company board conferences, the East India Firm’s conferences have been raucous affairs attended by tons of of stockholders.
And whereas the East India Firm constitution granted it an ostensible monopoly in India, the Firm additionally allowed its staff to interact in personal buying and selling on the aspect. At first, the Firm didn’t have some huge cash to pay its staff for this extremely harmful work, so it wanted to offer different incentives.
“That incentive was to commerce for their very own personal curiosity abroad,” says Erikson. “Staff of the East India Firm would commerce each inside and out of doors of the principles that the Firm granted. There have been so many alternatives to fudge, cheat and smuggle. Take into consideration jewellery, which is a really small and really costly factor which you can conceal on your self simply.”
East Indies Commerce Fueled Shopper Tradition
Earlier than the East India Firm, most garments in England have been made out of wool and designed for sturdiness, not trend. However that started to alter as British markets have been flooded with cheap, superbly woven cotton textiles from India, the place every area of the nation produced material in several colours and patterns. When a brand new sample arrived, it will all of the sudden develop into all the fashion on the streets of London.
“There’s this chance of being ‘in the proper fashion’ that hadn’t existed earlier than,” says Erikson. “Loads of historians suppose that is the start of shopper tradition in England. As soon as they introduced over the cotton items, it launched this new volatility in what was fashionable.”
In India, Commerce and Politics Mix
When the British and different European merchants arrived in India, they needed to curry favor with native rulers and kings, together with the highly effective Mughul Empire that prolonged throughout India. Though the East India Firm was technically a non-public enterprise, its royal constitution and battle-ready staff gave it political weight. Indian rulers invited native Firm bosses to court docket, extracted bribes from them, and recruited the Firm’s muscle in regional warfare, typically towards French or Dutch buying and selling firms.
The Mughul Empire concentrated its energy within the inside of India, leaving coastal cities extra open to overseas affect. From the beginning, one of many causes the East India Firm wanted a lot pooled capital was to seize and construct fortified buying and selling outposts in port cities like Bombay, Madras and Calcutta. When the Mughul Empire collapsed within the 18th century, struggle broke out within the inside, driving extra Indian retailers to those company-run coastal “mini kingdoms.”
“The issue was, how would the East India Firm rule these territories and by what precept?” says Tirthankar Roy, a professor of financial historical past on the London Faculty of Economics and creator of The East India Company: The World’s Most Powerful Corporation. “An organization will not be a state. An organization ruling within the title of the Crown can not occur with out the Crown’s consent. Sovereignty grew to become an enormous downside. In whose title will the corporate devise legal guidelines?”
The reply, generally, was the East India Firm’s native department officer. The London workplace of the corporate didn’t concern itself with Indian politics. Roy says that so long as commerce continued, the Board was joyful and didn’t intervene. Since there was little or no communication between London and the department places of work (a letter took three months every means) it was left to the department officer to put in writing the legal guidelines governing firm cities like Bombay, Madras and Calcutta, and to create native police forces and justice methods.
This may be the equal of Exxon Mobil drilling for oil in coastal Mexico, taking up a significant Mexican metropolis utilizing personal armed guards, after which electing a company center supervisor because the mayor, choose and executioner.
From Mercantile Firm to Empire Constructing
A serious turning level within the East India Firm’s transformation from a worthwhile buying and selling firm right into a full-fledged empire got here after the Battle of Plassey in 1757. The battle pitted 50,000 Indian troopers below the Nawab of Bengal towards simply 3,000 Firm males. The Nawab was offended with the Firm for skirting taxes. However what the Nawab didn’t know was that the East India Firm’s army chief in Bengal, Robert Clive, had struck a backroom cope with Indian bankers in order that many of the Indian military refused to struggle at Plassey.
Clive’s victory gave the East India Firm broad taxation powers in Bengal, then one of many richest provinces in India. Clive plundered the Nawab’s treasure and shipped it again to London (retaining a lot for himself, in fact). Erikson sees the East India Firm’s actions in Bengal as a seismic shift in its company mission.
“This fully modifications the Firm’s enterprise mannequin from one which had been centered on worthwhile commerce to at least one that centered on tax assortment,” says Erikson. “That’s when it grew to become a extremely damaging establishment, for my part.”
In 1784, the British Parliament handed Prime Minister William Pitt’s “India Act,” which formally included the British authorities in ruling over the East India Firm’s land holdings in India.
“When this act got here into being, the Firm ceased to be a really important commerce energy or a big governing energy in India,” says Roy. “The right British Empire took maintain.”
The Opium Wars and the Finish of the East India Firm
The exploits of the East India Firm didn’t finish in India. In one in every of its darkest chapters, the Firm smuggled opium into China in change for the nation’s most prized commerce good: tea. China solely traded tea for silver, however that was laborious to come back by in England, so the Firm flouted China’s opium ban by means of a black market of Indian opium growers and smugglers. As tea flowed into London, the Firm’s traders grew wealthy and hundreds of thousands of Chinese language males wasted away in opium dens.
When China cracked down on the opium commerce, the British authorities despatched warships, triggering the Opium Struggle of 1840. The humiliating Chinese language defeat handed the British control of Hong Kong, however the battle shed additional gentle on the East India Firm’s darkish dealings within the title of revenue.
By the mid-Nineteenth century, opposition to the East India Firm’s monopoly standing reached a fever pitch in Parliament fueled by the free-market arguments of Adam Smith. Erikson says that in the end, the dying of the East India Firm within the 1870s was much less about ethical outrage over company corruption (of which there was a lot), however extra about English politicians and businessmen realizing that they may make much more cash buying and selling with companions who have been on a stronger financial footing, not captive patrons of a company state.
Though the East India Firm dissolved greater than a century in the past, its affect as a ruthless company pioneer has formed the best way trendy enterprise is performed in a world economic system.
“It’s laborious to know the worldwide political construction with out understanding the function of the Firm,” says Erikson. “I don’t suppose we’d have a world capitalist financial system that appears the best way it does if England hadn’t develop into so uniquely highly effective at this level in historical past. They transitioned into a contemporary industrial pressure and exported their imaginative and prescient of manufacturing and governance to the remainder of the world, together with North America. It’s the cornerstone of the fashionable liberal international political order.”