Honourable East India Company

Corporatism, private army, drugs … does it sound familiar?

The corporation that changed the world
How the East India Company shaped the Modern multinational
Nick Robins

“It all started with a walk. Back in 2000, […] I decided one lunch-break to walk to the site of the East India Company’s headquarters. I was in for a surprise. When I reached the corner of Leadenhall and Lime Street where East India House had stood for over 200 years, there was nothing – no sign, no plaque, nothing to mark the fact that this was the location where the world’s most powerful corporation had once been based. In a country that is drenched in the culture of heritage, this absence puzzled me: why had this historic company been so completely erased from the face of London?… read more in “In My Own Words: The global legacy of the East India Company“, Nick Robins

East India House, in the early 19th century

Excerpt from The world’s first multinational, Nick Robins, New Statesman:

[…] 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, … 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'”.

[…] the onset of globalisation has revived interest in a company that could be seen as a pioneering force for world trade. […] Its founders are now hailed as swashbuckling adventurers, its operations praised for pioneering the birth of modern consumerism […]

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 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 […] 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. […]

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 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. […] 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.

[…] 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. […]

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. […] the East India Company eliminated the weavers’ freedom to sell to other merchants, and so crushed their limited but important market autonomy. […]

[…] the East India Company also engineered its own stock-market boom, ending in a share-price slump that rocked the world. […]

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 […]. 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. […] “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.”

[…] “Every rupee of profit made by an Englishman is lost for ever to India,” (Edmund Burke ) 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. […] 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. […] the 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 […] Hastings was also the first to seek deliberately to break China’s ban on the importation of opium. […]

[…] Hastings was acquitted of all charges […]

[…] In 1774, a group of Armenian merchants launched a civil case for damages against Hastings‘s predecessor, Harry Verelst. […] the merchants alleged that Verelst had arbitrarily locked them up in Bengal six years earlier, confiscating their property and removing their freedom to trade. […] 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”. […]

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.

[…] (today) Robert Clive‘s (statue stands outside the Foreign Office in Whitehall). 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“. […] 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. Read the article

Nick Robins’ articles in Open Democracy and New Statesman
Book review by Satya Sagar
Book review, The Hindu Business Line
Lesson of Empire: India 60 years after independence, Nick Robins and Patrap Chatterjee
Opium in global mercantilism