What was the British East India Company? - Part 2

It was one of the most powerful and influential company in the world. An agent of commerce and imperialism of the British Empire, explore the history of the British East India Company.

Expansion

The power of the English East India Company grew under King Charles II. Besides giving them their first territory to control – Bombay - the King also expanded the authority of the Company to include issuing money, raising armies, forming local alliances, exercising judicial powers, and conducting diplomacy. 

Expansion to India

By the 18th century, the Company marked their footprints in Bombay, Madras, and Calcutta with English settlements changing the cities’ landscape. Its commercial operation continued to flourish, especially when Emperor Farrukhsiar exempted the Company from paying customs duties in Bengal.

At the same time, political situation changed among the Europeans in India. The Portuguese and the Dutch declined in importance while the French Compagnie des Indes rose to prominence. Founded in 1664, it established a factory in Surat in 1668, the city of Pondicherry in Madras in 1674, and another factory in Calcutta in 1690.

In local politics, the British and the French competed for influence leading up to military conflict known as the Carnatic War (1744 – 1763). In 1748, both powers supported their each claimants for the position of Nawab of Arcot and Hyderabad. Robert Clive of the Company Army rose into prominence when he successfully defended Arcot from its French-backed Nawab, thus securing the city within the sphere of British influence.

With the breaking out of the Seven Years’ War in Europe, hostilities worsened in 1757 as the French-supported Nawab of Bengal, Siraj-ud-Daula, took control of British held Calcutta. Clive went to retake the city. Following Calcutta, he fought against the Nawab’s forces in the Battle of Plassey which many dubbed as the signal of the rise of the British Empire in India. Soon the Nawab fell and the whole province of Bengal went to British hands. For his efforts Clive became the first governor of Bengal.

Robert Clive after the Battle of Plassey by Francis Hayman

As the dominant power in the province and close relation with the Mughal Emperors, Emperor Alamgir offered a concession to the Company to administer Bengal, Bihar, and Orissa (later formed the Presidency of Bengal). With these, the British held 3 Presidencies in India - Bengal, Madras, and Bombay. The Concession granted them the right to collect taxes so long as they send a fix share of tax revenue to the Mughal Emperor. But along with powers to administer, they also took over control of the local army, thus expanding its number of native troops serving its armed forces.

Clive saw the responsibility as too much for the Company to handle and offered Prime Minister William Pitt for the Crown to accept the administration of the 3 provinces. Pitt, however, rejected the idea seeing the profit from the provinces would be wasted in the hands of King George III. As a result, the Company accepted the offer.

The English used the existing local government apparatus in administering the provinces, in effect continued the existing inefficiencies. Worst many Company officials made names for themselves as shrewd businessmen but also as a corrupt and inefficient government administrators. Their incapacity and corruption that Clive himself decried led to a massive famine that took the lives of a third of the populations in 1769. The devastation led to the Company’s depletion of resources and brought it the brink of bankruptcy. Only with the Parliament in London’s intervention did the company survived at the cost of reforms. The Regulating Act formed the office of the Governor-General in Bengal which the Parliament approved to govern the 3 Presidencies.

Among the first Governor-Generals was Lord Charles Cornwallis, the disgraced General of the Siege of Yorktown, who instituted the Permanent Settlement. Under the Permanent Settlement, the Company would allow a landed gentry called Zamindar to own lands in exchange for remittance of fixed amount land revenues. Soon enough the Permanent Settlement made land revenue as part of the top list of source of revenue of the Company.

Furthermore, with the weakening of the Mughal Empire, Cornwallis felt that the power vacuum must be taken by Britain. Soon the Company provided technical services and commercial opportunities to various local princes who gave in British demand for concessions on collection of taxes. As a result of this, the British East India Company expanded its influence, thus building the foundation of the British Raj.

Part of the Company’s success came from its ability to conceal its true intentions. They showed themselves not as conquerors but rather as source of technical and commercial support. Henceforth, many Indian princes welcomed the Company in exchange for allowance and tributes. Another was the capacity of the Company to show itself as viable business partner convincing many influential royals, businessmen, and financiers to welcome the British.

Resistance from Indian Lords

But not all local princes bowed to the British, in the 1790’s the Tipu Sultan of Mysore warred against the British to resist their attempts to influence local affairs. The Tipu Sultan marched west to capture the vital spice center of Malabar to become his new economic center. Ultimately, his resistance failed in 1799 when he capitulated to the British and his territory Mysore taken over.

Lord Cornwallis receiving 2 of Tipu Sultan's sons as hostages, 1793

More and more princely state fell to the British East India Company or at least to its orbit becoming spheres of influence. In 1816 Nepal fell to the British and found its foreign affairs handled by the Company. The Maratha Confederacy, the successor to the might of the Mughal, fell in 1818. Sind followed in 1843 and Punjab and the Sikh Empire resisted and fought in the 2 Sikh Wars (1845 – 1846 & 1848 – 1849), but they failed ultimately.

Expansion to Southeast Asia

While the Company concentrated much of their efforts to India, they did not lose interest to Southeast Asia. After the Ambona Incident, the East India Company backed off from the Spice Islands leaving only a single trading post in the Bantam. Bantam served later as supply station for English ships heading to China. But in a war in 1682, the island fell to the Dutch East India Company and the English moved their post to Bengkulu in Sumatra. 

But with the decline of the power the Dutch East India Company and the rise of England as the Mistress of the Sea in the 18th century, the Company returned to Southeast Asia to establish new trading hubs. Along with the growing importance of China trade, the Company covertly intensified its trade in Southeast Asia. Using “country traders” or independent traders financed by the Company, they bought valuable goods like pepper and tin from Dutch holdings for the Company.

The Company tried to expand openly to Southeast Asia in the 1760’s as the Seven Years’ War also flared up in Europe between the English against the Spanish. In 1762, Company ships transported British and native Indian soldiers or Sepoys to capture the Spanish-held Manila in hope of crushing the Spanish Empire in the east and establish a station for its ship heading to China. When peace returned to Europe, however, the British agreed to leave the Philippines and sought another port elsewhere.

In 1784, Francis Light succeeded in giving the Company its most sought port in Southeast Asia. He persuaded the Sultan of Kedah to give to the company Pulo Pinang later known as Penang.

Eastern Side of the Penang Island, 1810

In 1819, Stamford Raffles, governor of Benkulen, convinced the Prince of Johor to hand over an island in the tip of the Straits of Melaka named Singapore. Singapore flourished amidst Dutch fury over the legality and the interloping of the British. Finally in 1824, both sides agreed to settle their spheres of influence with the British giving up Benkulen to the Dutch in exchange for Singapore and Melaka, thus beginning British domination over the Malaya Peninsula. 

Economic Activities

Slave Trade

During the 1620’s the Company started to ship slaves from Indonesia and Africa, mostly from Mozambique and Madagascar, to their factories and facilities in India and Indonesia. The trade continued to flourish but motions to stop it came up in 1833 during the Company’s renewal of Charter. Eventually, the abolition was seen as a source of great loss of profit and the issue disappeared. Another reason for slavery’s survival was local tradition. As the Company practiced respect for local customs, it deemed it impractical to stop it. Virtual abolition of slavery came in 1843 when the British administration stopped selling slaves and recognize complaints of slave owners against their slaves.

Tea and Opium Trade

Following slave and textile trade, from the middle of the 18th century the Company expanded their tea trade, especially with China. But the Company faced a trade deficit with the Chinese as they paid more silver to them than they received. They then took measures to balance the trade with dubious and ruthless means by exporting opium to China and addicting millions. It resulted to vast import orders from the Chinese and huge silver inflow for the East India Company. In 1802 and 1803 exports of opium to China worth about £250,000. The evil trade later resulted to the Opium War in 1839, where the Company fought and won a victory and the legalization of the drug trade and the opening of the East Asian country to international trade.

Reform, Decline, and Demise

Reforms by London

The East India Company underwent numerous scrutiny. Many challenged the Company’s monopoly of Asian trade. Others questioned the capability of the Company to manage its holdings, thus brought in waves of reform to its administration. But as industrialization demanded freer flow of goods, the practicality of the Company’s existence came ever more threatened. Changes also in the policies of the Company eventually led to its downfall.

Not yet a century old, the Company faced a threat to its monopoly. Many merchants who failed to purchase the Company’s stocks wanted to continue their pursuit of trade with India. But the Company’s Charter prevented them from doing so. William Courteen challenged the Company’s dominance in 1635 when King Charles I granted them a Charter giving them the same privileges as the existing. The Company called Courteen Association later became known as the Assada Merchants. Their business, however, took to a bad turn. Mismanaged and riddled by accusation of piracy ruined their reputation with the Indians and the 2 East India Companies decided to cooperate. Finally in 1657 under England’s Lord Protector Oliver Cromwell, the 2 merged into a single company once again.

Few decades later came another threat to the dominance of the English East India Company. In 1691 another company, named The English Company Trading to the East Indies or simply new East India Company, attempted to break the existing monopoly of trade in India. A parliament act in 1694 allowed it to continue its operation. Yet, the 2 companies ceased competition and under the Godolphin Award of 1708 merged them to form the United Company of Merchants of England Trading to the East Indies. The Charter awarded ordered the Company to pay the country £3,200,000 and a clause stating 3 years prior notice of the revocation of its privileges if it failed to remit to the England the mentioned amount.

In management, shareholders held much power until 1773 when Parliament passed the Regulating Act that led to government intervention to the affairs of the company. The Act came as the cost of the Parliament saving the Company from bankruptcy after the devastating 1769 famine.

It ordered the appointment of a Governor-General to Fort William in Bengal with the task of supervising the administration of Madras (Chennai) and Bombay (Mumbai). A Council of 4 members ruled as well along with the Governor-General. To administer justice, a Supreme Court of 4 English judges began to reside in Calcutta (Kolkata). The Act, also replaced the annual election of 24 directors with the election of 6 judges a year, with each serving 4 years. Prices of shares, which meant also voting rights, increased from £500 to £1,000.

But the Act, showed many defects such as vague definition of the powers of the judges in Calcutta and the lack of veto power of the Governor-General. Eventually, in 1784, the India Act tried to improve the Regulation Act. It gave the company rights over trade and daily administrative affairs but reserved vital political policies to a 3 director committee answerable only to the government.

Several acts followed that weakened the absolute independence of the British East India Company. In 1813, trade monopoly disappeared along with their ban of missionaries from entering India. Its trading rights disappeared in 1833 becoming only a managing body. The loss of its trading monopoly came as a result of rising demands for opening India to exports of British made textile. And in 1853, it lose government patronage.

Indian Mutiny and Abolition

In 1813, the Company relaxed its ban of missionaries from coming to India. Churches and schools started appearing in British settlements gaining converts. This changes, however, made Indians feel threatened by missionaries attempting to change their culture and tradition. Other reforms followed like the banning of sati (suttee) known as widow burning.

The most known reformer in British India was the Marquess of Dalhousie who served as Governor-General from 1848 to 1856. Under his rule, the Doctrine of Lapse allowed the Company to take over Princely state by banning their adopted heirs to assume their positions. As a result of this doctrine, many princes loss their positions and wanted revenge, thus, it furthered threats of mutiny and rebellion rose.

Lord Dalhousie, 1847

Mutinies were not new. In 1806, Muslim Sepoys mutinied in Madras in sympathy to the fallen Tipu Sultan of Mysore. Another mutiny broke out in Barackpur in Bengal who refused to fight in the 1st Burmese War in 1824. Both mutinies, however, ended with settlement and status quo remained. The events, nonetheless, showed the possible threats of mutiny.

Eventually, many of Dalhousie’s reforms and previous policies angered Indians, in particular Sepoys serving in the Company’s army. It resulted to a mutiny that threatened British control over India. Luckily for the British, the mutiny that grew to a rebellion failed. But with the end of the mutiny came the end of the Company as well. Parliament abolished the British East India Company for its failure to prevent the mutiny and the whole of India fell to the crown’s control under the Government of India Act ushering the British Raj. The Company continued to be a legal entity until 1874 when it finally disappeared. 

See also:

Indian Mutiny of 1857

What was the British East India Company? - Part 1

Bibliography:

Websites:

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Editors of Encyclopedia Britannica. “East India Company.” In Encyclopedia Britannica. Accessed on April 23, 2017. URL: https://www.britannica.com/topic/East-India-Company

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