The East India Company was founded as The Company of Merchants of London Trading into the East Indies by a coterie of enterprising and influential businessmen, who obtained the Crown’s charter for exclusive permission to trade in the East Indies for a period of 15 years.
The company had 125 shareholders, and a capital of seventy-two thousand pounds. Initially, however, it made little impression on the Dutch control of the spice trade and at first it could not establish a lasting outpost in the East Indies. Eventually, ships belonging to the company arrived in India, docking at Surat, which was established as a trade transit point in 1608. In the next two years, it managed to build its first factory (as the trading posts were known) in the town of Machilipatnam in the Coromandel Coast in the Bay of Bengal.
The high profits reported by the company after landing in India (presumably owing to a reduction in overhead costs effected by the transit points), initially prompted King James I to grant subsidiary licenses to other trading companies in England. But, in 1609, he renewed the charter given to the company for an indefinite period, including a clause which specified that the charter would cease to be in force if the trade turned unprofitable for three consecutive years.
The company was led by one governor and 24 company directors who made up the Court of Directors. They were appointed by, and reported to, the Court of Proprietors. The Court of Directors had ten committees reporting to it.
Traders were frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian Ocean.
A key event providing the company with the favor of the Mughal emperor Jahangir was their victory over the Portuguese in the Battle of Swally in 1612.
Perhaps realizing the futility of waging trade wars in remote seas, the English decided to explore their options for gaining a foothold in mainland India, with official sanction of both countries, and requested the Crown to launch a diplomatic mission.
In 1615, Sir Thomas Roe (1581–1644) was instructed by James I to visit the Moghul emperor Jahangir, who ruled over most of the Indian subcontinent, along with Afghanistan. The purpose of this mission was to arrange for a commercial treaty that would give the company exclusive rights to reside and build factories in Surat and other areas. In return, the company offered to provide goods and rarities from the European market to the emperor. This mission was highly successful and Jahangir sent a letter to the King through Sir Thomas Roe.
The company, under such obvious patronage, soon managed to eclipse the Portuguese, who had established their bases in Goa and Bombay, which was later ceded to England. It managed to create strongholds in Surat (where a factory was built in 1612), Madras (Chennai) in 1639, Bombay in 1668, and Calcutta in 1690. By 1647 the company had 23 factories and 90 employees in India. The major factories became the walled forts of Fort William in Bengal, Fort St. George in Madras, and the Bombay Castle.
In 1634 the Mughal emperor extended his hospitality to the English traders to the region of Bengal and in 1717 completely waived customs duties for the trade. The company’s mainstay businesses were by now in cotton, silk, indigo, saltpeter, and tea. All the while, it was making inroads into the Dutch monopoly of the spice trade in the Malaccan straits.
In 1711 the company established a trading post in Canton (Guangzhou), China, to trade tea for silver.
In 1657 Oliver Cromwell renewed the charter of 1609 and brought about minor changes in the holding of the company. The status of the company was further enhanced by the restoration of the monarchy in England.
By a series of five acts around 1670, King Charles II provisioned the company with the rights to autonomous territorial acquisitions, to mint money, to command fortresses and troops, to form alliances, to make war and peace, and to exercise both civil and criminal jurisdiction over the acquired areas.
The company, surrounded by trading competitors, other imperial powers, and sometimes hostile native rulers, experienced a growing need for protection. The freedom to manage its military affairs thus came as a welcome boon and the company rapidly raised its own armed forces in the 1680s, mainly drawn from the indigenous local population.
By 1689 the company was arguably a “nation” in the Indian mainland, independently administering the vast presidencies of Bengal, Madras, and Bombay and possessing a formidable and intimidating military strength. From 1698 the company was entitled to use the motto “Auspico Regis et Senatus Angliae” meaning, “Under the patronage of the King and Parliament of England.”
The prosperity that the employees of the company enjoyed allowed them to return to their country with the ability to establish sprawling estates and businesses and obtain political power. Consequently, the company developed for itself a lobby in the English parliament.
However, under pressure from ambitious tradesmen and former associates of the company a deregulating act was passed in 1694. This act allowed any English firm to trade with India, unless specifically prohibited by act of parliament, thereby annulling the charter that was in force for almost one hundred years.
What followed in the next decades was a constant see-saw battle between the company lobby and the parliament. The company sought a permanent establishment, while the parliament would not willingly relinquish the opportunity to exploit the company’s profits by allowing it a greater autonomy.
In 1712 another act renewed the status of the company, though the debts were repaid. By 1720 fifteen percent of British imports were from India, almost all passing through the company, which reasserted the influence of the company lobby. The license was prolonged until 1766 by yet another act in 1730.
At this time, Britain and France became bitter rivals, and there were frequent skirmishes between them for control of colonial possessions. The skirmishes did escalate to the feared war, and between 1756 and 1763 the Seven Years’ War diverted the state’s attention towards consolidation and defense of its territorial possessions in Europe and its colonies in North America. The war also took place on Indian soil, between the company troops and the French forces.
Around the same time, Britain surged ahead of its European rivals with the advent of the Industrial Revolution. Demand for Indian commodities was boosted by the need to sustain the troops and the economy during the war, and by the increased availability of raw materials and efficient methods of production. As home to the revolution, Britain experienced higher standards of living and this spiraling cycle of prosperity. Demand and production had a profound influence on overseas trade. The company became the single largest player in the British global market, and reserved for itself an unassailable position in the decision-making process of the government.
The rapid rise of the East India Company was made possible by the catastrophically rapid decline of the Mughals during the 18th century. As late as 1739, when Clive was only 14 years old, the Mughals still ruled a huge swathe of Indian Territory. The destruction of Mughal power by Nadir Shah, and his removal of the funds that had financed it, quickly led to the disintegration of the empire. That same year, the French Compagnie des Indes began minting its own coins, and soon, without anyone to stop them, both the French and the English were drilling their own sepoys and militarising their operations.
By 1803, when the EIC captured the Mughal capital of Delhi, it had trained up a private security force of around 260,000- twice the size of the British army – and marshalled more firepower than any nation state in Asia. It was “an empire within an empire”, as one of its directors admitted. It had also by this stage created a vast and sophisticated administration and civil service, built much of London’s docklands and come close to generating nearly half of Britain’s trade. No wonder that the EIC now referred to itself as “the grandest society of merchants in the Universe”.
The EIC was a model of corporate efficiency: 100 years into its history, it had only 35 permanent employees in its head office. Nevertheless, that skeleton staff executed a corporate coup unparalleled in history: the military conquest, subjugation and plunder of vast tracts of southern Asia. It almost certainly remains the supreme act of corporate violence in world history.