Authors: Tirthankar Roy
The alternative view, offered by Christopher Bayly and others, explains the origin of the British empire by pointing out the congruence of interests between Indian merchants and the Company in India. The collapse of the Mughal empire in the second and the third decades of the eighteenth century had led to a dispersal of commerce, banking, coinage and skilled services to new regional centres. Patna, Benares, Pune, Murshidabad, Hyderabad, or Jaipur, acquired the same level of
significance that Lahore, Delhi and Agra had enjoyed before. Regionally rooted moneyed classes emerged. Some of them realized that their own interests would be better served by the European traders than by the bankrupt regional courts. The Company found collaborators who would be willing to accept, even plot, a change of regime. The Company, in this view, fell into an Indian pattern of state formation that had been unfolding for some time. In a less political sense, the regime that came in place has been called the ‘Anglo-Bania order’ by Lakshmi Subramanian.
It is true that in the late-eighteenth century, when the old Indian states were embroiled in strife and collapse, sections of Indian merchants perceived advantages in forming alliances with the English Company. It is also true that a great deal of Indian money was working for the Company, and vice versa, in the eighteenth century. There was indeed a relationship of deep mutual dependence between the European merchants and their Indian counterparts. And yet, if from this evidence we conclude that there was ordinarily a warm and friendly partnership between the European and the Indian capitalists, we would go too far. The relationship was full of contradictions, and these contradictions should suggest to us another very different drive behind the Empire.
Whatever else the Anglo-Bania order may have been, it was not a model of trust and friendship; quite the opposite in fact. European visitors to India rarely had nice things to say about their Indian partners—the merchants, the weavers and the peasants, though they admired the Indians for their skills. And while many complained of ‘the mischief they cause under-hand’ (John Henry Grose, 1772), and wrote about the Indians’ propensity to employ ‘low cunning, stratagem, and deceit’ (Thomas Tennant, 1804), few writers went so far as the doctor John Fryer (1670) who called the Indian merchant a ‘vermin’, ‘blood-sucker’, ‘horse-leech’, ‘flea’, ‘worse broker than the Jews’, ‘an expert in lying, dissembling, and cheating’, and a ‘map of sordidness’. But even when they were more tempered in tone, the Europeans almost never liked the Indian merchants as individuals, and the sentiment was returned.
There were many reasons behind the uneasy relationship. Business ethics were identical with the customs of castes and communities in India; the Europeans and the Indians shared neither the same customs nor similar levels of motivation to engage in local traditions. It was not as if one of them was more honest than the other; their mental models of good conduct were different. Moreover, while earlier
potentials for dispute had been limited because the scale of contractual transactions was smaller, the Europeans expanded the use of long-period contracts, without there being a corresponding development of contract law. The prospect of breach of contracts increased greatly as a result. For example, ‘the problem of bad debts’, writes the historian Om Prakash in a 1998 book, ‘plagued all commodities the Europeans procured in India’. Two economists, Rachel Kranton and Anand Swamy, who have recently studied opium and textile contracts, write, ‘enforcement problems appear to be widespread: producers default on advances often by engaging in outside sales, and buyers renege on price commitments often by manipulating quality criteria.’
Distrust on the economic plane was aggravated by a lack of social affiliation. The Indians never admitted the Europeans into their inner circles. Personal friendship between business associates on two sides of the race divide was conspicuously rare. This might seem surprising, when we consider how badly the Europeans needed to form personal ties with the Indians in the seventeenth and eighteenth centuries. The average employee of the Company—a young male, who would spend the best part of his youth in India confined to the factory premises—had no other means of obtaining female companionship than by getting friendly with the
Indians. Many of them did take this road, but the women involved in such partnerships came from the less wealthy classes than the Banias and the Brahmins, and even then, many had to cut off ties with their parental homes due to rigid societal norms. The Europeans’ closest business associates in India were, socially speaking, a forbidden territory.
Between the Europeans and the Indians, there was partnership no doubt. But it was a partnership that was backed up neither by contract law nor by social bonding. Being based on nothing more than crude self-interest, it was a recipe for distrust. The relationship between Indian merchants and European merchants, in this way, developed an anarchic fringe. But if the Anglo-Bania order was discordant because of frequent breach of contract and social obstacles to fellow feeling, breach of contract could still fuel the Company’s desire to control political power by making it more interested in securing the political means to enforce contracts. The writ that was in force in Bombay, Madras and Calcutta needed to run in all of India to ensure a future for Indo-European business. In other words, a theory of discord supplies an alternative view of colonization just as plausible as the theory of partnership.
Historians are unlikely to reach an agreement on what kind of motivation led to the empire. Amidst
discords, many fruitful partnerships did develop. Many Indians did earn the confidence of the Company’s representatives. Moreover, the Company itself was an ambiguous entity being pulled in different directions in the mid-eighteenth century. In making the point, I cannot do better than cite the historian Holden Furber. ‘The real antithesis,’ Furber wrote in 1940, ‘is between those who stood to profit from the extension of empire in India and those who had been accustomed to profiting solely through trade, the former group being drawn from every class of English society and the latter consisting of the London merchants, ship-owners and sea captains dominant in the company’s courts of proprietors and director.’ Between 1690 and 1740, the cleavage was widening, just as the collapse of the Mughal empire supplied the means and the motivations to those who believed that an empire was more profitable than trade.
In this short history of the Company, the well-known story is retold, but by using an angle of vision somewhat unusual in the historical scholarship on the subject. Many histories have been written about the Company, describing the organization in the context of British
politics and expansion. In this book by contrast, the Company is in the main a window into the distinctive globalization that occurred in the Indian subcontinent in the seventeenth and eighteenth centuries. The story suggests that any attempt to deal with Indian business history during this time needs to refer to Europe’s own expansion overseas, show how the concept of a firm changed, connect traditional modes of doing business with the modern, Britain with India, India with China, politics with economics, and one empire with another. It indicates the great new profitable opportunities that opened up with European trade in the Indian Ocean, and the large transaction costs that early modern commercialization engendered.
Beyond these general themes, the book is interested in two large questions. How should we explain the transformation of the Company from a trader to an empire-builder, with reference to its own organizational structure and to the opportunities that came its way? Subsequent chapters will illustrate the answer I have hinted at earlier in this chapter, which focuses on the divided nature of the organization. The second question is, what effects did the Company, as a trader and as an empire, impart upon the economy and business organization in India? Again, the answer outlined in this chapter will be embellished as we proceed with the
story. The concluding chapter will consider the second question more fully.
Before we get to these themes, it is necessary to recreate the big picture. The story begins with the combination of enterprise and exploration for which Elizabethan London has earned a unique place in global history.
IT IS HARDLY possible to identify the precise moment when the Company as an idea was born. After all, European interest in India had grown from medieval times and for very compelling reasons too. However, the decade before the official inauguration of the firm in 1600 and the decade after this event saw the idea of organized trading voyages to the Indian Ocean reach maturity.
On 12 February 1583, a group of Englishmen sailed from Falmouth on a ship called the Tyger, bound for West Asia. The group included the merchants John Newberry, John Eldred and Ralph Fitch, a jeweller William Leedes, and a painter James Story. Newberry
was a merchant-explorer who had two years before undertaken a daring overland trip to Hormuz and back, picking up Arabic on the way. Fitch was a leather merchant, and possibly the most senior member of the party. Eldred was a thirty-one-year old trader in Levantine silks. Newberry, Fitch and Eldred had been close to two shareholders of the English Levant Company. These shareholders part-sponsored the expedition. The Company had been doing business in Constantinople for some years, and brought back samples of cotton cloth from India, silks from China, and spices of the Indonesian archipelago. The goal of the expedition was to explore a way to reach the sources of these goods.
The party reached Tripoli in Syria, crossed the Lebanese mountains to reach Aleppo, and from there sailed along the Euphrates to Al-Fallûjah. At this point Eldred stayed on to trade in spices, and the rest of the group journeyed on to reach Hormuz. Hormuz belonged to the Persian empire, but in practice, the Portuguese ruled this port so vital to their policy of blockading the Indian Ocean routes to all but friendly ships. Their friends, the Venetian merchants, did not want English merchants in West Asia. In a recent contest between the Spanish monarch and a Portuguese nobleman for the Portuguese throne, the English took
the nobleman’s side and their rivals the Venetian merchants supported the Spanish Crown. Not surprisingly, then, the travellers were promptly arrested at Hormuz. The Portuguese chief justice or aveador-general decided that they were spies, ignoring the letters of introduction they had obtained from Queen Elizabeth, addressed to the emperors of India and China.
The party was sent on a Portuguese galleon to Goa to be interrogated by the viceroy Don Francisco de Mascarenhas. Thirteen days into captivity, Story became a Jesuit, ‘partly for feare’, and was released. The release of the rest of the group was secured by the intervention of an English Jesuit Thomas Stevens, who was a known figure in Goa. Once freed, the party lost no time setting up business in Goa. However, the Jesuits kept the pressure on to convert them to Catholicism, and allegedly hatched a plot to get them rearrested. Fearing further trouble the party escaped Goa late in 1584.
The group travelled overland to Belgaum, and onward to Bijapur, Burhanpur, Mandu and Ujjain. A few miles away from Ujjain, the party came into a resplendent procession of Emperor Akbar. Early the following year, the group reached Agra. Although the party appeared to have been well received at the court, it is not known if any of these men actually met the emperor to deliver the letter of the Queen to him. The group now divided.
Fitch was to travel to Bengal. Newberry was to go to England over the land route, and return with a ship to Bengal and meet Fitch there. Newberry did set out on the journey, but was not heard of again. Leedes took up service with the Mughal court and never returned to England. The others continued on to ‘Bengala’, the legendary land that supplied so many finely woven cloths to the markets of west and east Asia.
Fitch went from Agra to Benares, the Bengal port of Saptagram, and navigated through the treacherous waters of the Sundarbans to reach Bakla. Since he does not mention either overland journey or changing ship, it would be safe to assume that the town and kingdom of Bakla were located somewhere on the lower Meghna river, or one of its tributaries, possibly the Tentulia. The
Ain-i-Akbari
of Abul Fazl, the Mughal court officer and chronicler, mentioned some years after Fitch visited the place that the town was destroyed by a giant tidal wave from the sea, taking two hundred thousand lives with it. Bakla reappeared as a Mughal zamindari (estate run by a tax-collecting landlord or zamindar), but on a different and safer location. From old Bakla, Fitch travelled to Sripur and Sonargaon, two midsize kingdoms of the lower Bengal delta, and to Pegu in Burma. Throughout the journey, he carefully noted the tradable goods to be found, from the pepper of Cochin, cloves of
the Moluccas, diamonds of Golconda, rubies of Pegu, to the ‘great store of Cotton cloth [from Bengal], and much Rice, wherewith they serve all India, Ceilon, Pegu, Malacca, Sumatra, and many other places.’ From Pegu, Fitch sailed for England, where he reached on 29 April 1591.
Master Ralph Fitch, one of the minor members of the party, became the most famous among them when the records of the travel appeared in print. Some of the geographical details in the book drew upon the accounts of a Venetian merchant Cesare Fedirici. But this was the first travelogue of India by an Englishman. Fitch became a hero. Ten years after the fleet returned, Shakespeare wrote in
Macbeth
, ‘Her husband’s to Aleppo gone, master o’ the Tyger’, making reference to a voyage that evoked immense popular interest in his time. The expedition had not achieved anything to serve trade directly. But it sowed the seeds for the idea that a trade treaty between two kingdoms, Mughal India and Tudor England, could be possible. This objective would be better served some decades later by means of an organized body of merchants, a united Company.
Three weeks before Fitch’s return, London merchants had sponsored the first of three voyages undertaken by
one of the most famous merchants and mariners of the time, James Lancaster. The ill-fated expedition saw one of the two main ships go down under a giant wave off the Cape, and the other struck by lightning. The surviving ship did reach the Malacca Straits, thanks to the help received from a Gujarati sailor whom the ship picked up at Zanzibar. The only real success of the expedition occurred in Penang, where it waylaid a Portuguese ship loaded with silk and spice. When returning from Penang, Lancaster’s crew had a curious encounter with a sailor who had been left for dead upon the uninhabited St. Helena, and survived a Robinson Crusoe existence for more than a year. Shortly after being picked up he died, allegedly of excessive joy at having met Englishmen. Before he died, he made a most opportune gift of forty goats to the badly provisioned ship. Lancaster then went to the West Indies, lost his ship off the coast of Brazil, and eventually returned empty-handed in a French vessel in 1594. The trip ended in financial failure, but the upside was that the naval engagement in Penang revealed the vulnerability of Portuguese power in the eastern waters.
Lancaster proved his worth as a ship captain, an explorer of great courage, and as the only sailor equally knowledgeable about both the Atlantic and the Indian Ocean highways. Born in England, Lancaster was raised
among the Portuguese and spoke the language well, which made him especially suitable to lead the expedition that was to set off the very next month to Brazil in the hope of causing trouble to the Portuguese. The party met this aim to some extent, but not before losing one of its ablest commanders. These setbacks delayed the planning of the next trip to the east, and underscored the need for organizational skills to deal with the Portuguese.
In 1599, the City’s moneyed men were again ready to sponsor a trip.
On 24 September 1599, an assembly of burghers, mariners, soldiers and notables gathered in the Founders’ Hall in the City of London to discuss finances and logistics for another trip. The mariners, among whom were present Lancaster, Fitch, John Davis, Henry Middleton and members of Cavendish and Drake’s fleets, persuaded the more circumspect merchants to subscribe capital. Of the burghers, Richard Staper, instrumental in the formation of the Levant Company, and Fitch’s companion Eldred, were already converts to the cause. Given these crossovers, it would not be wrong to say that in a sense the company formed with the
objective of exploring the Indian Ocean was the Levant Company in a new form. What the mariners had to tell their audience was not only what profits awaited them in spices, but also how few and poorly defended the Portuguese trading stations in the east were. In the next few days, the amount of money raised exceeded £70,000, an impressive sum. Directors were elected, and divided into two committees, one to oversee the shipping, and the other to negotiate with the Crown the royal license to trade.
A petition signed by 215 individuals was submitted to the Queen for the inauguration of the new company. Their commission was not going to be an easy one. Although the Queen was in favour of the enterprise, the pro-Catholic lobby inside the Parliament was against a move that was seen as a potential source of conflict with the Spanish Crown. One of the more interesting outcomes of the ideological clash was the preparation of a fact-finding report based on all documentary and oral evidence available then, on India and Southeast Asia. At the end of a somewhat chaotic list of kingdoms, chiefs, and places, beginning with Diu and ending with Manila, the report concluded, ‘In all these, and infinite places more, abounding with greate welth and riches, the Portugals and Spaniards have not any castle, forte, blockhouse, or comaundment, as wee are able to prove’.
The report clinched the issue. On the last day of 1600, the Queen delivered a charter to the merchants, when preparations for the first voyage was already under way. The company, until then provisionally called the Society of Adventurers to the East Indies, started business under the name, The Company of the Merchants of London Trading to the East Indies.
What did a royal charter mean? It created a corporate body legally entitled to own property in its name anywhere in the authorized areas of operation, and entitled to frame its own organizational rules. The Company held exclusive license to trade in the realms of operation, and was authorized to sub-contract the license. In effect, the traders on behalf of the Company were the apprentices, sons and ‘factors’ hired by the shareholding members of the governing board. The Company was authorized to carry bullion out of the country. On its part of the bargain, it was expected to bring back at least as much bullion as it carried out. The precise sharing of the trading profits between the Queen and the Company was not clearly stated. Any confiscated goods, however, were to be shared 50-50 between them. The charter was to be periodically reviewed. The authorized realm was a huge chunk of the globe, spanned by the Cape of Good Hope at one end and the Strait of Magellan at another, separated by 10,000 miles of open sea by the shortest route.
Not all mariners and merchants had been party to the Founders’ Hall group. One such, Edward Michelbourne, had influence in the Court and was offered as a candidate for command of the enterprise. Sensing an impending division, the City merchants stood firm and insisted that ‘men of their own qualitye’, rather than ‘gentlemen’ of the court, would suit the enterprise better. Eventually, their perseverance won. But Michelbourne was too influential to be ignored, as we shall see.
Lancaster, bestowed with the imposing title governor and general, was to lead the first trading mission under the flag of the Company. The first voyage had five ships in all. The largest was Red Dragon, 600 tons with a crew of 202 men and commanded by Lancaster. The other four were Hector, Ascension, Susan and a ship carrying food. Susan was the very first ship purchased by the Company. Excepting Red Dragon, the ships weighed between 240 and 300 tons, and had about 300 persons in all. The main vessel was a sturdy ship, heavily armed, but perhaps too large for the tropical waters by contemporary standards.
What merchandise and supplies did these ships carry? On the assumption of twenty months at sea, the food
loaded was worth £6600. What was termed ‘investment’, were in fact articles of gifts for foreign kings, and cost £4500. These goods consisted of iron, tin, broadcloth and other sundry textiles. The major items of expenditure, however, were bullion to conduct trade, and occasionally make presents, and the salary bill of the sailors. The Queen’s charter specified that £30,000 worth of bullion could be carried in the first four voyages of the Company.
In these early ventures, profits were too difficult to estimate, and the payment to the crew was allowed a degree of flexibility. The ‘bill of adventure’ was a sum of money paid as commission on profits. For example, £500 was to be paid to the pilot-major John Davis of Sandridge, possibly the most famous navigator of his time, if the voyage made 100 per cent profit, double that amount if it made 200 per cent, and so on. In addition to his fixed salary of £100, Davis had access to an allowance of £200 for trade on his own account. No clear rules were made upon the means to earn a profit. The border line between piracy and commerce was indeed very fine. Every sailor was in principle available for battle. Although needless provocation was to be avoided, the sailors had no qualms about raiding a poorly defended solitary ship. Besides mariners and sailors-cum-soldiers, the ships carried ‘factors’, merchants carrying a sum of
money advanced by the Company to trade only on the Company’s account. As an incentive, they were also allowed a sum of money as ‘adventure’, or private trade. The word adventure literally meant private enterprise of uncertain prospects.
On a February morning of 1601, the first voyage set off from the docks at Woolwich. When it reached the Cape, after a reasonably peaceful journey, the crew was devastated by scurvy, and not enough hands were available to run five ships. Hobbling along to the Indian Ocean with four ships, the expedition faced better sailing conditions. But the prospect of trade was still far away.
From the Cape, Lancaster headed straight for Aceh in Sumatra in search of pepper. The kingdoms of the pepper-growing islands already did business with the Europeans. But Englishmen there were none yet in this world. The Sultan of Aceh received Lancaster with a warm welcome. Giant elephants carried him and his companions to the palace, to join a banquet complete with beautiful bejeweled dancing girls. All very well, but where was the pepper? The English found little in the market, being sold at far higher prices than they had expected to pay, and much of it already booked by the Portuguese and the Dutch. One option was to establish a trading station in the country, which would have the time to accumulate supplies steadily. Such a post would
need to be defended against the European rivals. But a Portuguese proposal of a fortified trading station had already been indignantly dismissed by the king. There was, however, another solution to the dilemma.