Is it possible that a company with only 35 permanent employees could rule India? If you think that companies like Amazon have great influence, at Economipedia we invite you to learn about the history of the East India Company, one of the first multinationals in history.
It all started at the beginning of the 17th century, when the East India Company was created in the year 1600. Its founders were a group of merchants who in the past had been pirates and corsairs under the orders of the corsair Francis Drake. To start up their business project, they had to disburse a capital of 70,000 pounds. With its offices located in London and with only 35 permanent workers on staff, the company began to take its first steps.
The objective of the East India Company was to achieve a monopoly on trade with the East. This meant competing with Dutch commercial power. To do this, its founders requested a charter from Queen Elizabeth I of England. Said certificate not only granted trade rights, but also enabled the East India Company to engage in armed conflicts and fight other merchants. In fact, the company came to have an army so large that it brought together up to 260,000 men.
Expansion of company power
After signing a treaty with the Mughal emperor Jahangir in 1613, the company began to establish a series of trading posts in India. In this way, through the trading posts, the company would progressively cover the trade of products such as silk in China, the precious tea or spices such as pepper.
However, the power that the company exercised over India would increase, eventually breaking out in conflict with the Mughal Empire, which resulted in the company’s victory after the decisive Battle of Plassey in 1757. Robert Clive, who had commanded the army of the East India Company, began to administer Bengal occupying the position of governor, establishing taxes that the Indian population had to pay.
In 1803 the company again faced the Mughal armies and was victorious, which caused Delhi to fall to their power. With the company expanding its territories and trade, some 20 million Indians remained under its administrative domain. And it is that, as the English politician Edmund Burke pointed out, the East India Company was “a State disguised as a merchant”.
Given the political and commercial power that the company wielded in India, its shareholders were the de facto owners of the Indian subcontinent. Thus, the shareholders had to determine who was the governor who administered the territories.
But the power of this great political-commercial corporation would go beyond India and its tentacles would eventually reach China. This is how this great entity introduced the opium trade in a manner contrary to the law, which turned millions of Chinese into addicts to this substance. Precisely, the introduction of opium in China allowed the English to find an advantage in the commercial exchanges of products such as silk, tea or porcelain. This opium trade would end up giving rise to the opium wars in China.
It is clear that the history of the East India Company is far from unblemished, as the corporation also traded slaves and was largely responsible for the famines suffered in India.
What was the influence of the company?
There is no doubt that the company made huge profits from its business activities in India. Proof of this is that when the British arrived in India, its GDP represented 3% worldwide. Meanwhile, the GDP of the Mughal Empire accounted for 37% of the world. Well, with the English conquest, the tables were turned.
But, the power of the company went beyond the purely commercial aspects. His political influence was unquestionable. This, to such an extent that the foreign policy of Great Britain was to protect the interests of the East India Company.
British politics and the company were intimately linked, either through bribery or through lobbying. Thus, the company paid 1,200 pounds a year to the most prominent politicians, or it could be the case that many politicians were shareholders of the powerful commercial entity.
The influence of the East India Company in politics is something that has endured. Thus, today, the influence of large companies in the political sphere is notorious. In this way, we find many situations in which the State must come to the rescue of private companies. Precisely when the company entered into conflicts with other nations, it claimed to be a national entity that Great Britain should protect.
All this dragged the British army to fight in several wars for the interests of the East India Company. So, the army fought and defeated the enemies of the company. Then, once the war was won, the commercial entity took effective control of the territories.
Decline and dissolution
Despite the large commercial volume that the company had, it was not free of financial problems. Despite having a large number of trading posts and collecting large amounts in taxes, the company was on several occasions close to bankruptcy. An example is what happened in 1772 (long before the decline of the company), when the entity requested a loan of 400,000 pounds from the Bank of England. Shortly after they discovered that the amount was insufficient, as they required the enormous figure of 1 million pounds to be able to meet their debts.
The poor financial situation that the company went through led the British state to carry out the first rescue in the history of a private company. Given the declining panorama of the company in the second half of the 19th century, the British government took control of the entity in 1858 and in 1874 it was dissolved.