H. V. Bowen

Merchants and Sovereigns: The Impermanence and Conundrum of Empire
In 1943, Winston Churchill famously declared that “empires of the future will be empires of the mind.” Robert Clive, military commander of the East India Company, together with other Company agents, undoubtedly had a very different concept of empire in mind when in 1757 his victory in the Battle of Plassey and subsequent conquest of Bengal transformed the Company irrevocably into a formidable military power in South Asia. In “The Business of Empire,” Bowen presents a multilayered study of how a trading company, established through a charter granted by Elizabeth I in 1600, dealt with various quandaries, both at home and aboard, arising from the annexation of Bengal, and discusses the impact of the Company’s newfound spoils on the British economy.

Prior to Bengal, the Company already occupied a special place in the British economy. Given its unique position as arbiter of trade with South Asia, the Company’s intricate business arrangements necessitated its participation in London’s fledgling financial markets, mobilizing funds needed to support commercial activities and helping deepen Britain’s debt and stock markets. Post-1757, the Company became increasingly seen as the custodian of a highly significant national concern; indeed, contemporary observers noted that “the future of Company, nation, and empire had become interwoven.” After Bengal, the Company managed to secure control over revenue receipts amounting to 2-4 million pounds per annum, and additional inroads into India allowed the Company, by 1833, to control over half a million square miles of territory with nearly 94 million inhabitants who paid more than 22 million pounds in taxes per year. It is thus no surprise that many at the time assumed that a substantial revenue surplus would be utilized “to pump the prime of Company trade,” an expectation that would prove to be overly optimistic in the face of rising costs associated in part with the conquistadorial impulses of Company men. By the early nineteenth century, the Company had a standing army of 200,000 men, and its seafaring manpower accounted for about one-fifth of the British merchant marine.

The conquest of Bengal uncovered institutional failings so severe that the British government had to step in to ensure that, among other things, corporate misconduct abroad did not translate into institutional instability at home. It was initially sought to correct the weaknesses inherent in the Company’s electoral and decision-making processes, which were being hampered by politicking and rent-seeking. Regulation of the Company’s financial affairs began with restrictions on the amount of dividends payable to shareholders, and governmental oversight of the Company’s commercial affairs became increasingly stringent as the directors were soon required to submit detailed accounts of Company undertakings to both parliament and treasury. Further, in 1769, a ‘crown plenipotentiary’, in essence an ambassador to the South Asian area, was appointed in order to allow London to have a greater say in diplomatic affairs in India. Pitt’s India Act of 1784, seen as the high point of the government’s efforts to bring a profligate Company to heel, created a board of commissioners who oversaw “all acts, operations, and concerns which…relate to the civil or military government or revenues of the British territorial possessions in the East Indies.” After these series of reforms, the Company effectively functioned as an appendage of the British government, although the Company’s directors continued to exercise significant executive privileges.

As both trader and sovereign, the Company was in a very real sense compelled to transform its administrative machinery into an ‘imperial bureaucracy’. Recognizing the need to professionalize the Company’s vast apparatus of empire, the directors established the East India College in the early nineteenth century to serve as a capable training ground for Company employees. Furthermore, those in the Company’s employ were dissuaded from the pursuit of personal profit at the expense of the Company via significant augmentations in pay: Bowen notes that the average salary in the Bengal civil service rose from 150 pounds per annum before 1757 to 2,261 pounds per annum by 1783. In due course, the Company’s administrative structure was held up as an admirable model for the British civil service, and the directors were able to claim that they were able to ‘hold the line’, on behalf of the crown, in the East Indies.

Ultimately, the Company’s Indian possessions failed to translate into substantial direct transfers into Her Majesty's Treasury. At times, payments of customs duties were even suspended. And, despite the directors’ confidence in their collective business acumen, the Company even failed to master the vagaries of trade with Asia. Bowen provides several reasons why the Company did not manage to expand its export trade. Firstly, the directors’ approach to overseas trade was so conservative as to preclude trading in high-value items such as furniture and glassware; this unadventurous approach to business with Asia only served to bolster the opinion that independent trading could offer the best means of deepening the British penetration of Asian markets. Secondly, the Company’s intricate trading arrangements were perennially encumbered with exorbitant shipping costs. Thirdly, the rampant agency problem which afflicted East Indies personnel plagued the Company to such an extent that, despite efforts at professionalizing its bureaucracy, the fortunes of the East India Company to the end of its days as a monopoly remained hostage to the interests of the ‘men on the scene’. In view of these structural problems and seemingly insurmountable roadblocks, it should not come as a surprise that the Company eventually lost its government-granted monopoly of trade with its Indian possessions, which, as mentioned above, had by and large failed to live up to its promise to become the richest jewel in the British crown. In the Company’s triangular trade with India and China, the China leg became, in the words of a parliamentary committee, “the most important branch of the Company’s concerns”, propelled by the British demand for tea from Canton. According to Bowen, consignments to China accounted for nearly 54% of the value of all commodities sent to Asia between 1785 and 1810, while China goods accounted for more than two-thirds of the Company’s income earned in London between 1803 and 1808.

With the loss of its commercial monopoly with the East Indies, it was only a matter of time before the Company eventually lost its status as Britain’s premiere trading vehicle with the Orient. With the passage of the Charter Act of 1833, the Company found itself stripped of its commercial privileges. Nearly three decades later, the management of the Company’s East Indies empire was effectively nationalized by the British government.

This book ought to be read as a cautionary tale. From a relatively humble maritime trading venture, the Company became an imperial power, equipped with both a near-stranglehold on trade with the East and an intricate nexus of alliances between London potentates and Indian rulers, only to be laid low by complacency in the face of economic dynamism. In analyzing the intersections between the Company’s governance of both business and empire, Bowen leaves us with the thought that, in the case of the East India Company, the management of an imperial possession as vast as India proved to be incompatible with the management of interoceanic trade.… (lisätietoja)