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The mother of modern corporatism

Karl Marx described how the East India Company 'conquered India to make money out of it'. Sixty years after the end of the Raj, Nick Robins dusts off its history and finds lessons for today in the birth of corporate globalisation

August 1, 2007
9 min read

It is now 60 years since the British Raj finally came to a close with independence in 1947, and 150 years since the outbreak of the ‘Indian Mutiny’, more commonly (outside the UK) called ‘the first war of Indian independence’. India will also be marking the 250th anniversary of the fateful battle of Plassey, when the private army of the London-based East India Company defeated the forces of the nawab of Bengal, thereby ushering in more than two centuries of British domination in the subcontinent.

For some, this historical trinity will serve to highlight the rise, fall and more recent resurgence of India as a global power. When the East India Company was first established on new year’s eve 1600, Mughal India commanded 22 per cent of global GDP, with Britain producing less than a tenth as much. By the time Britain finally departed India’s shores three and a half centuries later, its national income was more than 50 per cent greater than its former colony. Now, of course, India is once more seen as a global economic star, confidently shaking off its imperial past.

Down with the East India Company!

Yet it would be wrong simply to consign the East India Company to a box marked ‘fallen empires’. Since India is often the place where corporate practice is seen at its most extreme, whether at Union Carbide’s Bhopal factory or Enron’s Dabhol power project, or now with Wal- Mart entering India’s retail markets, it is useful to see how the East India Company twisted the region’s economy in the first era of corporate globalisation.

The rise and fall of this mother of the modern corporation exposed on a global stage a level of malpractice that terrified its contemporaries and prefigured today’s crisis of market power, financial speculation and evasion of accountability. From the beginning, the company was controversial in Britain for the monopoly control it had over all trade with Asia. Its closeness with the court often spilled over into naked corruption.

But it was with the acquisition of Bengal, which followed in the wake of Plassey, that the company became the focus of powerful criticism from those who feared that its new-found wealth would be used to subvert Britain’s hardwon liberties. For one writer in the Gentleman’s Magazine of April 1767, the issue at stake was ‘whether the freedom or the slavery of this island shall result’, defiantly concluding his piece by declaring,’Down with that rump of unconstitutional power, the East India Company!’

Driven on by a relentless desire for executive and shareholder gain, the company crashed following the implosion of the ‘Bengal bubble’ on the London stock market in 1769.That same year, perhaps as many as 10 million Bengalis starved in a cruel famine made worse by the company’s hoarding of limited grain stocks and its decision to raise the rate of taxation to maintain its revenues.

In the decades that followed, some of the leading minds of the age sought to expose the company’s oppressive practices in India.The company became the subject of ferocious critique in Adam Smith’s Wealth of Nations, in which Smith argued that over-mighty corporations were just as much the enemy of the open market as the over-mighty state. The philosopher-politician, Edmund Burke, took up the baton, introducing legislation in 1783 to make the company accountable to parliament. Burke argued that its corporate charter carried with it intrinsic duties: ‘This nation never did give a power without imposing a proportionable degree of responsibility.’

When this measure failed as a result of an unholy alliance of business and court, Burke took up an almost hopeless struggle to impeach the company’s most senior executive in India, the former governor-general Warren Hastings. In spite of Smith’s profound analysis and Burke’s passionate rhetoric, imperial interests won out against principle, consigning India to an empire of extraction and scorn.

To have the founder of liberal economics and the father of modern conservatism both struggling to tame the company says something for the bipartisan threat that this corporation posed to Enlightenment Britain. And they were joined by many others, among them poets, playwrights and pamphleteers, who expected future generations to take a similarly hard look at the company’s performance as a corporation.

‘Historians of other nations (if not our own),’ wrote the poet Richard Clarke in 1773,’will do justice to the oppressed of India and will hand down the Memory of the Oppressors to the latest Posterity.’ In the introduction to his long satire entitled The Nabob, or Asiatic Plunders, Clarke urged on his fellow countrymen ‘to perpetuate an honest indignation against these enemies of mankind’.

And, of course, it was East India Company tea that was dumped by American patriots in Boston harbour in December 1773, with one activist arguing that they were faced with ‘the most powerful Trading Company in the Universe’, an institution ‘well-versed in tyranny, plunder, oppression and bloodshed’.The uprising that eventually led to America’s independence was sparked as much by hostility to corporate monopoly as it was to taxation without representation.

Now it’s our turn

From the ruins of the East India Company’s fort at the pepper port of Tellicherry on the west coast to the grandeur of Chennai’s Fort St George on the east, the company’s physical presence in India continues to impress today.The mark is greatest in Kolkata, a ‘company town’ of immense proportions.

This physical presence is matched by a powerful legacy presence in India’s public memory, stretching back to the nationalist struggle for independence. For India’s first prime minister, Jawaharlal Nehru, the company lay at the root of the oppression that he had fought against.’The corruption, venality, nepotism, violence and greed of money of these early generations of British rule in India,’ Nehru thundered in The Discovery of India, ‘is something which passes comprehension.’ ‘It is significant,’ Nehru noted, ‘that one of the Hindustani words which has become part of the English language is loot.’

This critical analysis continues to lie close to the surface today. In September 2006, for example, opponents to a planned coalmine at Phulbari in Bangladesh accused the British firm,Asia Energy, of behaving like the East India Company. For many Indians the company’s story has two profound morals: first, that multinational companies want not just trade, but power; and second that division and betrayal among south Asians facilitates foreign rule.

A new mood of national assertiveness is impacting upon India’s handling of the company’s legacy.Writing recently in the Financial Times, the chief executive of Ranbaxy, Malvinder Hohan Singh, caught the mood.’Five hundred years ago, a company was formed in London that directly led to British rule in India,’ he wrote.’There appears to be some concern that there is evidence of a reverse trend.’

This theme of reversal has also influenced India’s popular media, most strikingly in the TV advertisement for Rajnigandha pan masala. Set in London, the advert shows an Indian tycoon stopping his car in front of the East India Company’s headquarters and telling his secretary that he wants to buy the firm: ‘They ruled us for 200 years, and now it’s our turn.’

Reckoning with John Company

The East India Company deserves to be looked at as what it was – a profit-making corporation that generated great wealth, but contributed to immense suffering. Just as corporations today should be judged by the impacts of their core business rather than their often peripheral donations to charitable causes, so the East India Company has to be assessed on the basis of its underlying activities rather than the occasional philanthropy of its executives.

The continuing reluctance in Britain to examine the full scope of the East India Company’s impact is part of a more general amnesia about the historical role of business. It remains an oddity that although companies are among the most powerful institutions of the modern age, our histories still focus on the actions of states and individuals, politics and culture, rather than on corporations, their executives and the consequences of their activities. If we are to fully understand our corporate present, then we must understand our corporate past – and this means grappling with the legacy of John Company.

Far from being a dusty relic, the East India Company demonstrates that the quest for corporate accountability is a perpetual exercise in controlling the energies of merchants and entrepreneurs so that their private passions do not undermine the public interest. For Britain, much can be gained by confronting this legacy.

From Adam Smith, we can draw the imperative of keeping corporate size in check – of special importance in today’s economy, where globalisation is fostering ever-increasing commercial concentration. And from Burke we can take the essential importance of placing corporate conduct within a framework of justice, establishing legal mechanisms to hold corporations to account, and fill the void that allows scandals such as Bhopal to continue largely unaddressed.

At its heart, the East India Company’s business model combined speculation at home with aggression abroad. It was Karl Marx, writing in the 1850s as the company limped towards its end in the bloody ‘mutiny’, who pithily captured the drive that lay behind its remorseless rise to power. It was not any imperial project that had led it on, he wrote, but rather the company had ‘conquered India to make money out of it’.This applies to this day.

To borrow a couplet from Ghalib, the Urdu poet who saw his beloved Shahjahanabad (Delhi) destroyed by the British at the Mutiny’s end:

zakhm gardab gaya, lahu na thama,

‘though the wound is hidden, the blood does not cease to flow’.

Nick Robins is author of The Corporation that Changed the World: How the East India Company shaped the modern multinational (Pluto Press, 2006).

For details of activites around the 150th anniversary of the 1857 war of Indian independence, contact committee1857@yahoo.co.uk

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