3. The company faced stiff competition in the spice trade from the Dutch
Trading in spices from the Spice Islands had been long established by the Dutch by the time the East India Company became involved in the activity, and the newcomer was hampered in its dealings accordingly. In 1608, English ships began stopping in India, trading with the Mughals there, and in 1610 its first factory was established, on the Bay of Bengal. Profits from Indian trade were high, and after receiving an extension of the monopoly from James I in 1609, the company asked his majesty to send a diplomatic envoy to the Mughal Empire to establish exclusive trade rights and gain territory to be occupied by company facilities and employees.
In 1612 James I sent Thomas Roe to meet with Emperor Jahangir. The East India Company was given exclusive rights to erect settlements and factories. In return, Jahangir was to receive rare goods and gold from the company. Jahangir was so pleased with the arrangement that he sent a letter to James I, promising to protect the settlements and company property from enemies. “Neither Portugal nor any other shall dare to molest their quiet” he wrote, adding “I have commanded all my Royal governors to give them freedom…to buy, sell, and to transport into their country at their pleasure”. It was the beginning of the British Empire in India.
4. The company acquired additional property in India despite competition
The East India Company (EIC) continued to face stiff competition from their Dutch counterpart, (VOC) but they set their differences aside when ships from both attacked Portuguese shipping along the coast of China, enabling the EIC to establish factories in China. It also expanded in India, by 1647 23 factories were in operation on the subcontinent, with its major facilities at Bombay (Bombay Castle), Bengal (Fort William) and Madras (Fort George). With the reduction of Portuguese and Spanish trade, the competition between the EIC and VOC grew intense (the Mughal Emperor favored the EIC) and was a major cause of the Anglo-Dutch Wars.
By the early 1600s the VOC was the wealthiest commercial entity in the world, paying its investors annual dividends as high as 40%, and employing 50,000 people across the globe. It had its own fleet of 200 ships. The EIC was far smaller, but intensely competitive, given that the profits from a single voyage to the Spice Islands could easily exceed 400%. Further competition arose when Charles I, a Catholic, granted a license to the Courteen Association of mostly Catholic investors to compete with the EIC in 1635, at any location not already occupied by the EIC.
5. The company gained the right to acquire territory, create armies, and form foreign alliances under Charles II
In the second half of the 17th century Charles II of England granted rights to the EIC which were extraordinary then and now. The EIC was allowed to mint its own coin, and issue paper currency backed by specie. It was given the authority to acquire territory by purchase, treaty, or conquest. The territories thus acquired were to be administered by the company, rather than the crown or parliament, and civil authority was placed in the hands of company officers. The company was authorized to raise and command armies, and erect fortifications, for the defense of its property, in the Spice Islands, India, China, Japan, and other areas where it operated facilities.
Meanwhile, the fur trade with the expanding colonies in North America became more lucrative, supplemented by the growing European taste for the milder forms of tobacco grown there. Once again, as far as the fur trade was concerned, the Dutch beat the English to the punch. The Dutch settlement at New Amsterdam, part of the overall holdings of New Netherlands, had been established by the VOC, and Dutch ships controlled the fur trade, until the Anglo-Dutch wars saw New Amsterdam transferred to the British as New York, after it changed hands due to the presence of warships twice.
6. Wars in India affected the EIC and the VOC in the late 17th century
The 17th century was one of more or less continuous warfare in Europe and around the world. Nations fought over the issues of religion, succession, trade, and colonization, often brought into warfare because of alliances made to protect trade rights. They also fought the indigenous peoples of the lands they exploited. In North America a series of wars between European settlers and the Native tribes were fought, with both sides supported by Europeans allied with them, chiefly the English, French, and Dutch. The same happened in India, though the fighting was between the East India Company and competitors, a trade war in the truest sense of the phrase.
Sidi Yaqub, was a chieftain and Mughal admiral who led a fleet against the EIC during a period of hostilities known as Child’s War. Josiah Child was the governor of the EIC who opposed the proposals of the Mughal empire for a trade agreement, preferring to impose terms more profitable to the EIC. During the hostilities, the Mughal fleet blockaded and besieged the EIC factory and fortress at Bombay for over a year. The Mughal emperor Aurangzeb oversaw a campaign which reduced the EIC presence in India to the fortress at Madras after Bombay surrendered. EIC envoys were forced to prostrate themselves before the Mughal emperor as part of the peace agreement between the Mughal Empire and the EIC before trade relations could resume.
7. The 18th century saw the growth of the EIC into a world power
The Anglo-Dutch wars of the 17th century led to the decline of the VOC and the steady expansion of the EIC until the British company, through its control of trade and its private armies, rivalled the British Empire as a world power. Eventually the EIC – not the British government – took over all of India, ruled it through company officers, and controlled the populace through its private armies, usually composed of local troops hired for the purpose. In India they were usually Sepoys, and several British officers learned their trade leading Sepoy troops, Wellington among them. The EIC also armed its ships, to protect them against ships of hostile nations and against pirates during the so-called Golden Age of Piracy in the Indian Ocean in the late 17th and early 18th centuries.
Activity by English pirates against his own treasure ships drew the outrage of Emperor Aurangzeb near the end of the 17th century, and in revenge he ordered attacks against the EIC, closing factories and throwing company officers into his dungeons. The EIC responded by offering the Mughal emperor reparations, and by placing a bounty on the head of the pirate chiefly responsible – Henry Every. The price on his head made Every the target of the first worldwide manhunt in history. The EIC also persuaded Parliament to specifically exempt Every from Royal or Gubernatorial pardon. Every eluded capture, and his treasure stolen from the Mughal was never found.
8. The East India Company bought into its competition to create a monopoly
In the latter half of the 17th century a company intended to compete with the EIC and prevent it from becoming a monopoly was created by an act of Parliament. EIC stockholders (all of whom were directors) bought a majority of stock in the new company, and thus controlled it and its finances. In the early 18th century the two companies were merged. The EIC and Parliament became wary of each other, Parliament controlling the company’s charter, and the EIC controlling vast amounts of British trade, and virtually all of the trade in the critical products of spices and tea. The EIC developed lobby groups to maintain its influence in Parliament.
By the middle of the 18th century the EIC was in the position of dictating terms to Parliament, which was dependent on the company for loans which enabled it to protect its colonies in North America and the West Indies. The government also depended on the EIC to protect its possessions in the East Indies from the expanding influence of the French. In the early 18th century the East India Company used its influence to receive from Parliament a monopoly on importing tea into England, where it sold it to British merchants, who either sold it in Britain or exported it to the colonies in North America. Tea became a product subject to the highest taxes in Britain, with the EIC paying 25% in taxes as tribute for the monopoly it received.
9. Robert Clive secured most of the Indian subcontinent for the East Indies Company
Robert Clive’s career began with him serving as a factor (a company agent) for the EIC in the factory at Fort Saint George, Madras, in 1744. By that time the French East India Company had been nationalized by the French government. When the French seized Madras during the War of the Austrian Succession, beginning in 1744, Clive and some others with him escaped to the EIC post at Fort St. David (Duddalore) where Clive joined the company army. He distinguished himself as a soldier during the war, and when it ended with the Treaty of Aix-le-Chapelle he elected to retain his commission in the company army rather than return to his position as a factor, which was in reality little more than a clerkship.
The end of the war between the British and French governments did not end the conflict between the East Indies companies, nor the fighting between various factions in India over sectional rule. The conflicts known as the Carnatic Wars led to fighting between Indian entities and French and British company troops. Clive further distinguished himself at the siege of Arcot, when Indian entities and French troops attempted to capture the post and secure Madras for the French. The EIC and the Sepoy troops withstood a siege of six weeks, earning Clive recognition for his services as a soldier (he had no military training) in Parliament. Clive returned to England to recover.
10. Clive served in India during the Seven Years War
In 1755 Clive returned to India as a deputy governor of the East India Company, posted at Fort St. David. He also held a commission as a lieutenant-colonel in the British Army. He combined both positions to use company troops against French colonial posts in India, and Indian factions supporting the French or otherwise hostile to company interests. Through his exertions, supported by others of the company and the Royal Navy, the EIC steadily increased its holdings in India and nearby lands. He also enriched himself, through quitrents and tribute over the areas he seized for the EIC.
Through his efforts, the East India Company acquired most of the Indian subcontinent, including modern day Pakistan, India, and Bangladesh, and administered the holdings through the establishment of puppet governments who reported to EIC officials. The system remained in place for a century before Parliament replaced it with the system known to history as the British Raj. The EIC controlled what crops were planted, and where, to maximize their value to the company, with little concern of the effect of shortages of food suffered by the populace. The company’s private armies suppressed dissent, its ships protected its trade, and its officers negotiated favorable trade terms with Parliament.
11. The practice of monopolization was supported by Parliament
The EIC protected its trade interests by paying high taxes on many of the commodities in which it dealt, in exchange for legislation which granted it de facto monopolies, allowing it to charge higher prices. One area in which it maintained a monopoly was in the importation of tea to Great Britain. The high taxes it paid for the privilege resulted in heavy competition from smugglers, particularly the Dutch. By 1767 the EIC was losing nearly half a million pounds annually in the tea trade. Parliament agreed to refund the taxes paid on tea sold for consumption in England, but increased the taxes paid by British merchants on tea shipped to the American colonies.
Parliament also invoked the Townsend Acts, which included another tax on tea to be paid by the colonists. By 1773 the EIC was nearing bankruptcy (for reasons including disastrous policies in India) and persuaded Parliament to restore the refund of taxes paid for British consumption of its tea which had been repealed the preceding year. It also allowed the EIC to ship tea directly to the colonies, assigning agents there who would distribute the tea for consumption. The 1773 Tea Act actually lowered the price of tea to the consumer. EIC ships carrying tea to America found they were unwelcome when they arrived in Boston, and their cargo was disposed of in the Boston Tea Party.
12. The East India Company’s Army and Navy continued to grow after the Seven Year’s War
The Seven Year’s War, known in North America as the French and Indian War, was fought on the Indian subcontinent as well. There it was fought primarily using the private armies of the East India Company, supported by its ships, which included the armed merchant ships known as East Indiamen, as well as warships purchased by the company. The influence of the EIC was strong enough that sailors on its ships were made exempt from the Royal Navy’s practice of impressment – the forced conscription of sailors to man its ships. The EIC enjoyed the exemption throughout the Napoleonic Wars of the early 19th century.
By the end of the Seven Year’s War the EIC commanded 26,000 troops, mostly Sepoys, in India and under Clive and his successors it continued to expand. The American Revolutionary War was fought in India as well, between French and British entities, and the EIC used the conflict to further expand its territories and the military strength to defend them. Originally established as security forces, by the end of the Revolutionary War 70,000 trained and well-armed troops served in the armies of the EIC, divided among the Presidencies of the subcontinent under British control (Bombay, Madras, and Bengal).
13. The East India Company created its own military academy to train its officers
In 1809 the East India Company created a military academy, having already established a training academy for its civilian factors and clerks. It was called the East India Military Seminary, in Addiscombe, Surrey, near London. Its first class of cadets were between the ages of 13 and 16, and they faced a two-year curriculum which would teach them the military arts. Despite the focus on military discipline cadets quickly earned a less than savory reputation with the local civilian population, known for fighting and off-campus drinking. Upon graduation cadets could expect posting to India, where they served as officers in the company army.
Many of the officers who studied at the East India Military Seminary served with distinction with the East India Company, rising to positions as Directors, Governors, and Presidents in India, as well as in military rank. A career with the East India private army was often more lucrative than in the British Army, and the opportunities for military advancement were more frequent, given the irritating persistence with which the Indians expressed their discontent over being ruled by a foreign corporation. The East India Military Seminary remained in operation for the life of the EIC.
14. The East India Company established and monopolized the opium trade in China
In the late 18th century the EIC eliminated the private cultivation of opium in Bengal and created a monopoly in the opium trade by licensing growers and establishing quotas in Bengal. China banned the importation of opium, and the EIC circumvented the ban by selling opium to vendors in Calcutta, who then smuggled it, with EIC support, into China. By the end of the 1700s, nearly 1,000 tons of opium were being smuggled into China annually. The EIC used its troops and ships to combat piracy along the opium trade routes, protecting the illegal shipments from being interdicted by Chinese and Malaccan ships.
After the importation of illegal opium reached nearly 1,500 tons annually, China made the activity subject to the death penalty. The result was a series of wars known as the Opium Wars. The end of the First Opium War led to the cession of Hong Kong to Great Britain, and to the legalization of the opium trade with China. The EIC continued to monopolize the opium trade in India and Afghanistan, shipping the opium to third party traders who operated in China. Eventually, competition from opium growers in Turkey and other regions outside of the control of the EIC led to its reducing its interest in the production of opium and shifted it to other products.
15. The East India Company controlled farm outputs to maximize trade value
Particularly in India, the EIC established quotas in agricultural output based on the values to be gained in trade, controlling prices by responding to demand, without concern for the impact on local populations. These attitudes exacerbated the effects of famine within the Indian subcontinent on several occasions during the 18th and 19th centuries. The effects of starvation and the EIC’s response to it led to several rebellions and wars in India, and the cost of controlling the population increased steadily. Armies raised from the native population often were themselves contentious. The EIC throughout its existence practiced the policy that a British officer of any rank was senior to a native officer of any rank.
Thus, a British subaltern outranked the most senior Indian officers, who were limited in the rank they could achieve, a glass ceiling, as it were, created by company policy. The resentment of the natives in the ranks was often fueled by British condescension towards them, and created a simmering pool of discontent within the ranks of the company’s armies. The suppression of mutinous troops was another drain on company resources. The EIC did not, for the most part, suppress the religious practices of the Hindu and Muslin faith’s, at least not as a matter of policy.
16. The British government made several attempts to rein in the power of the EIC
By the end of the 18th century Parliament was aware of the power of the EIC and attempted to rein it in through a series of legislative acts over the succeeding years. Some succeeded, at least initially, others did not. What did evolve, over the first half of the 19th century, was an increased linking of the company and the government, with each influencing the other in ways which focused primarily on profits for the company, and increased tax revenues for the government. The “subjects” brought to the British Empire through the company’s expansion were of less concern for either.
In 1813 Parliament renewed the EIC’s charter for another twenty years, but the resistance in India of many of His Majesty’s “subjects” had strained resources to the breaking point. Parliament reiterated that the Crown was sovereign over the EIC’s territories (though the EIC retained control), and eliminated its monopoly on all trade other than tea and the lucrative trade with China (ignoring the fact that the opium trade was illegal, at least as far as China was concerned). The EIC needed the profits from the opium trade to fund its armies and to provide the cash with which to purchase tea.
17. The tea trade remained the backbone of the EIC following the Napoleonic Wars
The tea trade, which the EIC retained a monopoly on for tea grown in India and its other land holdings, remained the focus of the company’s business. Tea was purchased in India from local rajas, who were little more than vassals of the company, and who remained in power thanks to EIC money and troops. The expenses of the system, particularly those borne by the company to maintain its armies, strained its cash reserves to the limit. The opium trade, which shipped opium to China despite the resistance of the Chinese governments, was implicitly acknowledged by the British government.
Allowing the EIC to profit from the opium trade freed Parliament from providing too much support to the EIC in the form of reduced taxation, or the support of regular British Army regiments in India. Meanwhile the EIC continued to manipulate the price and availability of tea in global markets. By the end of the Napoleonic Wars in 1815, the EIC was essentially a commercialized entity of the British government, which controlled over half of the world’s trade, despite the steadily growing resentment of the exploited peoples of India and China.
18. The East India Company built substantial infrastructure in London
At its inception, the East India Company’s headquarters was in leased quarters in Bishopsgate. In 1638 it moved into a Leadenhall street mansion known as Craven House. In the early 18th century the house was entirely rebuilt, and was known as East India House. It was from this location that the Indian subcontinent was officially governed by the company for over a century. Other locations which were the site of EIC activities included the East India Dock Company, which constructed the East India Docks for the purpose of supporting the ships of the India trade. There was an import dock and an export dock.
The EIC established the East India College in 1806 as an institution to train its future employees. It was the civilian counterpart of the Military Seminary, and its training included languages, history, philosophy, law, and other subjects deemed necessary by the company to prepare men to administer its territories. Most of the students selected to attend were there as a result of patronage (as were most of the jobs with the EIC). The practice allowed the EIC to ingratiate itself with members of Parliament and of the English nobility, often allowing them to dispose of evidence of indiscretions by having them educated and sent to India or other far off lands.
19. The East India Company introduced a system of promotions based on merit
When the British East India Company was formed and throughout its first two centuries of existence, the vast majority of its positions were filled through patronage. The system strengthened its political position but weakened its administrative abilities, which became more and more critical as time went on. Beginning in the latter years of the 18th century it introduced a system of promotions based on performance, supported by its training institutions in England. While promotions in its military remained largely based on seniority of time in service, civil positions became more competitive among those of proven ability.
It never fully eliminated the practice of patronage, but it developed a responsive and able civil service administration of a sorts in some areas of India, which eventually served as the model for the British and Indian civil service in India. Nonetheless, throughout the period in which the EIC served as the government of its holdings in India, corruption was commonplace on the subcontinent, and in the offices of the company in London. Scores of English businessmen made themselves millionaires through their positions within the company, in India and other areas controlled by their employer.
20. The East India Company was responsible for collecting taxes from Indian subjects
Beginning in about 1765, Robert Clive delegated the collection of taxes from Indian subjects to Indian deputies, who were paid by taking a commission based on the total amount collected. It was a system which was obviously ripe for corruption. After Clive left India for the final time, taking a vast amount of personal wealth with him, Warren Hastings was made governor-general for all of the company’s holdings in India, and Indian collection of taxes was eliminated, with the responsibility for revenue collection in the hands of company employees.
Some of the company employees hired by Hastings were from the native population, a practice he observed in the company armies and applied to its civilian employees as a means of assuring loyalty. Hastings was accused of corruption and his seven-year investigation and trial in England resulted in his being acquitted. He was awarded a 4,000 pounds annual payment by the company for the rest of his life. Under his administration of India, he unwittingly allowed the caste system to be solidified by employing high-caste scholars to advise the British in the writing of the body of law. He was followed as governor-general by Charles Cornwallis, who dismissed the Indians in the company’s service.
21. Charles Cornwallis instituted reforms which benefited the company and institutionalized racism
Charles Cornwallis (who surrendered the British Army at Yorktown during the American Revolutionary War) arrived as governor-general of India and initiated reforms which affected company operations both in trade and in administration. He removed the Indians in the company’s employ, and had the Hindu and Muslim laws translated into English. In 1793 he imposed the Cornwallis Code, which established the British as the top of the imposed class structure which recognized both caste and religious hierarchies. He also changed the means of tax collection on property through a reform called the Permanent Settlement. Landowners were taxed based on the value of the land, whereas previously taxes were based on the income the land produced.
Cornwallis believed the changes would benefit the tenant landholders as much as the land owners, because improvements made by tenants would enhance the value held by the owner. Instead the Permanent Settlement did the opposite, the landowners were left free to abuse the tenants by claiming for themselves as much of the crops from the land as they wished, since the produce of the land was no longer subject to taxation. Cornwallis led the EIC troops in the Third Anglo-Mysore War (1790-1792) which further expanded the holdings of the EIC through conquest, and for which Cornwallis was elevated in the British peerage to a Marquess for his success.
22. Ships were built in India for the China trade, and banned from British ports
The EIC used Indian labor and design under the supervision of British officers to build many of the ships used for the China trade. The vessels were built and crewed by Indian sailors, out of mostly teak hulls and decks. The trade between India and China was dominated by such ships for the century between the mid-17 and mid-18th. The ships were built to be fast while carrying large cargoes, and sturdy enough to mount guns for protection against pirates. It was in these vessels that the opium smuggling into China began, and the vessels returned bearing Chinese silks, tea, and other commodities for trade.
The great tea clippers which had their heyday in the first half of the 19th century were built to support the tea trade, when speed was of the essence. Clippers were built by all maritime nations, but their hulls, designed for speed, were unable to carry enough cargo to make them profitable, other than in the tea and spices trades. The EIC built ships to carry its goods in India and Great Britain, though the vessels built in India were banned from entering British and European ports, limiting their use to the Indian Oceans and the South Pacific.
23. The modern Indian Navy has its roots in the East India Company
India has a long naval tradition, which existed before the arrival of the English, French, and Dutch, but the modern Indian Navy’s roots can be traced to the East India Company in the 1600s. In 1612 the EIC built a port facility at Suvali, a small village near Surat, to support a navy to protect commerce from piracy. The naval force was formalized as the Honourable East India Company’s Marine in September, 1612. The small navy was kept busy dealing with pirates along the coast and in river estuaries, and during its patrols its officers, who were British employees of the EIC, charted much of the Indian and Chinese coasts.
In 1686 the navy had outgrown the port of Suvali, and the force’s headquarters was moved to Bombay and renamed the Bombay Marine. From 1824 – 1826 the Bombay Marine fought in the First Anglo-Burmese War, a conflict between the EIC and Burma, which ended in a victory for the EIC and territorial expansion in Burma. At the end of the war, which was not the end of EIC territorial expansion, the British East India Company – a private company – had its own army, its own navy, had conquered territory in its own name, and controlled half of the world’s trade, from an office building in London.
24. The Great Rebellion of 1857 brought the company to its end
In 1857 troops of the EIC throughout India rose in rebellion against their British masters. The troops – known as Sepoys – gave the rebellion its most widely used name of the Sepoy Mutiny. In India it is known as the First War of Independence. At the time of the rebellion, more than 300,000 Sepoys were in the EIC armies, which were divided into three separate entities, the Bombay Army, Madras Army, and the Bengal Army. About 50,000 British troops were divided between the three armies, also employed by the EIC. The Bengal Army contained a large number of Sepoys who were higher-caste natives. The rebellion began in the Bengal Army.
It was rapidly and brutally suppressed by the EIC using Sepoy troops which remained loyal to the EIC. During the rebellion religious strife emerged and massacres of prisoners and civilians were frequent. Atrocities were perpetuated by all sides and were widely reported in the press in Great Britain, where sentiment against the Indians hardened. But in the aftermath of the rebellion, sentiment turned against the EIC and its administration of India. In August, 1858, the British government enacted the Government of India act of 1858, transferring the control of India to the British Crown.
Queen Victoria added the title Empress of India to her stylings, and the period known as the British Raj began in India following the Sepoy Rebellion. Most of the East India Company bureaucracy remained in place, though no longer employed by the company. The company itself remained in existence for another fifteen years, administering the tea trade for the British government, though it no longer had a monopoly. It also assumed the role of keeping the British outpost at St. Helena supplied, due to its importance to British ships and as a source of saltpeter, an essential component of gunpowder.
It was dissolved formally in 1874 by acts of Parliament. The company’s army and navy were absorbed by their counterparts under the British Crown. The Bombay Marine became Her Majesty’s Indian Navy. Most of the policies of the EIC regarding its military arm remained in effect under the Raj, as did those of the administration for some time. British influence continued to expand in the Indies through the middle of the 20th century, when Indian independence was finally granted as the British Empire broke apart in the aftermath of World War II.
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