A chartered company was an organization of merchants who were the recipients of a royal charter, granting them the exclusive right to trade as a monopoly in specific areas of the world.[i] The significance of chartered companies was their role in the development of colonization and imperialism.[ii] As the only domestic organization in their specific trading areas, they were endowed with powers of jurisdiction and administration to maintain order in the overseas settlements. [iii] Chartered companies represented an innovative development as they were commercial organizations acting as political entities in the colonies. No other company exemplified the role of a civil authority, more than the English East India Company.
The English East India Company was formally established when Queen Elizabeth signed their charter in December 31, 1600, assigning a monopoly to the Company.[iv] The Company started off as a group of 218 merchants whose purpose was purely to trade in the East Indies, Asia and Africa. It would grow into a large corporation that possessed an army, ruled over seventy million acres of land and be responsible, directly and indirectly, for one fifth of the world’s population.[v] The Company eventually ceased to be a trading enterprise but became a powerful imperial agency, one of revenue greater than that of Britain and owned by businessmen and shareholders.[vi] The Company contributed to the state even though the company was not a state-controlled enterprise and its actions were purely motivated by profit. From 1750 to 1776, the significance of the English East India Company is that in pursuit of its own commercial interests, it greatly served the national interest of the state because its commercial interest coincided with the national interest of the state. Most importantly, this concurrence of interests led to the successful progress for both the company and the state. The success of the Company was a result of the concurrence of commercial and national interests as this assured support from the state in commercial ventures. Similarly the other way around, the state greatly benefited from the concurrence of commercial and national interest, as its imperial interests could only be met through a chartered company, the English East India Company. In other words, a crown sponsored imperialistic enterprise would not have been able to serve the national interest at the same level of success as the Company.
Despite the fact that the Company enjoyed a domestic monopoly, it was an oligopoly in the world market. Plus the lack of regulation in India, the company’s conduct of commerce began to be more competitive, hostile and violent, a change from the guilds. By the middle of the eighteenth century, the Company began armed trading. Armed trading included military territorial acquisition of key cities, cities that were vital sources of Britain’s imported resources from India. [vii] The Company had many military successes such as the Battle of Arcott in 1751, the Battle of Plassey in 1757 and the Battle of Bhaksar in 1764, all of extended the Company’s territory.[viii] Most important was the Battle of Plassey which formally established the British rule in India and the Company’s monopoly in India.[ix] Dutch, French and Portuguese influences were eliminated and East India Company awoke to the fact that it had an empire to govern.[x] These military ventures were not implemented in favour of the national interest nor was it directed by the Crown but rather for commercial gain. . After death of Emperor Auranzgeb, there was waning central authority in India and the companies stationed there were lured into local politics to protect trade and stability.[xi] East India’s main competitor in India was the French. The French governor, Dupleix wanted to extend his own power and place his candidate, Sal Abat Jang on the throne.[xii] Non-interference would result in a French monopoly in India. Robert James, Secretary of the Company said in 1767 “we don’t want conquest and power; it is commercial interest only we look for”.[xiii]Its victory at Plassey caused the Company’s stock prices to rise twenty percent. Therefore, the Britain’s colonization of India had been accomplished by a company whose purpose was not to improve the national prestige but to secure its supply in India and thus its profit which inadvertently served the national interest.
The Company’s military victories in India were a direct result of the concurrence of the state’s national interest and the Company’s commercial interest. The fact that they both desired a British dominance in India led to the Company’s success. The Queen granted the charter in hopes of colonizing India and for the customs due she would receive from the company.[xiv] The exclusive trading rights protected the Company from domestic competition, allowing high prices for greater profit.[xv] Greater profits offset the high expense of military ventures. In 1659, Charles II extended the power of the Company to allow them to wage wars, conduct diplomacy with foreign princes, acquire territories and raise and command armies.[xvi] This shows the Crown as a cooperating force in the Company’s commercial efforts but ultimately instilling its imperial interests indirectly through the Company. Royal troops were even sent in support of the company. Vice-admiral, Charles Watson, commanded the naval forces that played a key role in the Company’s success at Plassey.[xvii] This co-operation between the Company and the state had arisen from the shared interests of both Company and state which led to the company’s military victories and its commercials successes.
The Company was not only imperially beneficial to the state but its success in India yielded great influence on the domestic economy. It was “the great money engine of the state”.[xviii] Francis Baring, a director of the Company calculated that in 1776 alone the Company’s direct materially benefited to the public summed up to 2.7-2.8 million pounds through its direct payment to the government, ship owners and suppliers,[xix] excluding the income of the Company members. He believed no other corporation in his kingdom had made so great a contribution to the support or wealth of the state in proportion to its profits as his company. [xx] From 1752-1754, Ralph Davis of English imports calculated that imports from Asia constituted 46 percent of imports, a 22 percent increase from its proportion in 1660.[xxi] It was also generally thought by the public and government ministers that the increase of jobs and wealth from the Company’s work in India was a principal support of the country, especially under calamities. [xxii]
The Company was a source of credit. The Company frequently loaned money to the government during times of need specifically during war. The Company’s loans rose from £2 million in 1698 to £4.8 million in 1744 during the War of Austrian succession.[xxiii] Some Company members asserted that on average, the state received over £5 million a year throughout the Company’s life.[xxiv] The loans helped with the renewal of commercial privileges. The government had threatened to instil crushing export duties on silver bullion (the currency in which the Company trades with India).[xxv] Therefore, to maintain their monopoly, again for commercial motivations, the Company served the national interest. The financial alliance between the Company and the state was the engine of Britain’s development to a “fiscal-military state”.
The state had also financially supported the Company in their times of need. In early 1780’s, there was a period when the Company was facing bankruptcy and the government granted relief of payment to Treasury. The company also received short term loan of total £6.4 million from the Bank of England from 1776 to 1813.[xxvi] The state’s financial support is rooted in its invested interest in the survival of the Company. The Company yielded too great an economic and imperial influence. Therefore, the Company’s contributions to the state were key to its survival as it assured financial protection from the state.
The Company also benefited the state militarily. The Company’s conquest of Bengal meant control of the saltpetre market, the greatest source of the most vital military ingredient in the world, giving Britain the opportunity to cut off hostile nations of war from their military supplies. The Company also supplied the state 500 tons of saltpetre annually.[xxvii] In 1758 France was cut off from saltpetre and its only substitute being bad quality domestic gun powder was a key factor in France’s surrender to Britain in the Seven Years War in 1763.[xxviii] As aforementioned, the purpose of the Company’s conquest was mainly to obtain a monopoly in India, not to help defeat the French. The government also sought the use of Company troops and ships alongside the regular troops.[xxix] The Company’s troop had numbered up to 200,000 men while the regular troops in India numbered only 20,000 men. However, the Company never agreed to the union of its army with the regular troops despite immense pressure from the political ministers.[xxxi] This is proof that the Company was never under the state’s control and merely adhering to the king out of self-interest. The Company’s army was created out of commercial reasons for territorial acquisition and also as a commodity to be rented for local princes.[xxxii] Again, the Company was a source of resources that served the greater national interest but the resources occurred through commercial ventures.
Finally, it is important to discuss the significance of the fact that the Company was motivated by profit incentives rather than being directly controlled by the state. It was more successful, and arguably necessary, for a company with private motivations to undertake the task of the East India Company than by a state-sponsored imperialistic organization. Primarily, the state itself did not have the necessary funds to sponsor such an organization. In early 17th century, the Royal Navy could spare only up two to four small ships. King James I could not even pay the wages of the servants of his palace with regularity. Therefore, the state had to extend the power to those, the merchants, who would through profit incentives find ways to obtain the investment required and to fend for themselves. Its support was the charter which was absolutely necessary for overseas trade. Its charter, shareholders and limited liabilities (as it was a corporation) protected investors from the high costs and risk of overseas trade.[xxxiii] Individual ventures had fail as seen by the pre-chartered companies’ attempts of Edward Funton, James Lancaster and Corenelius de Houtman.[xxxiv]
Many state-made companies were not as successful as companies that were created by merchants. State-made companies were numerous, insignificant and lasted a short time. They were created by monarchs who were inspired by the wealth earned by already existing companies.[xxxv] Private management was seen to be more profitable and efficient than when run by the state. When Charles II obtained Bombay by marrying Catherine of Braganz, he delegated it to the Company in 1668 because while it remained a royal possession, it was unprofitable.[xxxvi] Although, this situation is not within the time scope discussed in the paper, it still emphasizes the same point in that state-sponsored activities would be not as profitable as privately organized ventures. The French company that fought against the East India Company in the 1750s was an example of a company that was directed by the state, considered the arm of the state, and directed by French governor, Dupleix.[xxxvii] Evidently, it was pushed out of Indian by the East India Company.
In conclusion, the East India Company served the national interest of Britain, imperially, financially and even military. Though, the Company’s actions were completely dictated by commercial interests, its commercial interests coincided with the nation interest. It was this concurrence of the interests that fulfilled the state’s imperial, military and financial goals and also, the Company’s commercials goals. The success of the state’s imperial ambition would only have been possible through a chartered company, the English East India Company. The state’s invested interest in the operations of the Company, as a source of resource and the governor of its empire in India, meant the survival of the company was vital to the national interest. Thus, the state protected the Company through political and financial support and this contributed to the commercial success of the Company. The relationship of the Company and the British state is a fundamental interdependent relationship between the private and public sector. The state provides the business with political privileges and financial support while the business stimulates the economy, financially supports the state and adds the national prestige of the state. While, private enterprises can serve the national interest more successfully than through state control, this is not to say that the business can replace the state. East India Company’s rule of India was short-lived mainly due to the corruption of the Company. Its officers exploited the natives with high taxes of twenty percent and the wealth of India seeped into the hands of government hands.[xxxviii] Although, the business can serve the national interest, profit is still its main goal. The Company’s was eventually striped of its power beginn
- [i] John Micklethwait, Adrian Wooldridge, The Company: A Short History of a Revolutionary Idea (United States of America: Modern Library Paperback Edition, 2005), 17
- [ii] David Hannay, The Great Chartered Companies (London: Williams and Norgate Ltd., 1926), 1
- [iii] Rudolph Robert, Chartered Companies and their Role in the Development of Overseas Trade (London: G. Bell and Sons Ltd., 1969), 65.
- [iv] Brian Gardner, The East India Company: A History (New York: McCall Publishing Company, 1971), 21
- [v] Gardner, 11.
- [vi] Gardner, 1.
- [vii] K.N Chaudhuri, Companies and Trade: Essays on Overseas Trading Companies during the Ancien Regime (Leiden University Press, 198), 31.
- [viii] H.V Bowen, The Business of Empire: the East India Company and Imperial Britain, 1756-1833 (United States of America: Cambridge University Press, 2006), 3
- [ix] Stephen R. Brown, Merchant Kings: When Companies Ruled the World 1600-1900 (Vancouver: Douglas & McIntyre, 2009), 303
- [x] Robert, 82.
- [xi] Brown, 114.
- [xii] Brown 117
- [xiii] Bowen, 3.
- [xiv] Gardner, 19
- [xv] Chaudhuri, 30.
- [xvi] Brown, 107.
- [xvii] Bowen, 44
- [xviii] Bowen, 30.
- [xix] Bowen, 40
- [xx] Bowen, 40.
- [xxi] James D. Tracy, The Rise of Merchant Empires (New York: Cambridge University Press, 1990), 104
- [xxii] Bowen, 40.
- [xxiii] Bowen, 30.
- [xxiv] Bowen, 30.
- [xxv] Brown, 114.
- [xxvi] Bowen, 36.
- [xxvii] Brown 114
- [xxviii] Brown, 134.
- [xxix] Bowen, 44.
- [xxxi] Bowen, 47.
- [xxxii] Brown, 114.
- [xxxiii] Robert, 14-15.
- [xxxiv] Hannay, 11.
- [xxxv] Hannay, 11.
- [xxxvi] Hannay, 189.
- [xxxvii] Merchant King
- [xxxviii] Robert, 75
Bowen,H.V.. The Business of Empire: the East India Company and Imperial Britain, 1756-1833. United States of America: Cambridge University Press, 2006
Brown,Stephen R.. Merchant Kings: When Companies Ruled the World 1600-1900. Vancouver: Douglas & McIntyre, 2009.
Chaudhuri,K.N.. Companies and Trade: Essays on Overseas Trading Companies during the Ancien Regime. Comparative Studies in Overseas History. 3. Leonard Blusse. Leiden University Press, 1981.
Gardner,Brian. The East India Company: A History. New York: McCall Publishing Company, 1971.
Hannay,David. The Great Chartered Companies. London: Williams and Norgate Ltd., 1926.
Micklethwait,John and Adrian Wooldridge. The Company: A Short History of a Revolutionary Idea. United States of America: Modern Library Paperback Edition, 2005.
Robert,Rudolph. Chartered Companies and their Role in the Development of Overseas Trade. London: G. Bell and Sons, Ltd., 1969.
Tracy,James D.. The Rise of Merchant Empires. New York: Cambridge University Press, 1990.