BOOK REVIEW
A law unto itself
The Corporation That Changed the World by Nick Robins

Reviewed by Sreeram Chaulia

The British East India Company was a colossus responsible for the creation of the iniquitous modern world. Historian Nick Robins' trenchant new history of this giant re-examines the world's most powerful corporation during the Age of the Enlightenment in terms of its shadow over the global economy of today. It is an attempt to expose its destructive legacy so that future interactions betweenWestern corporations and Asian countries are based on principles of fairness.

From the 17th to the 19th century, the East India Company shocked its age with executive malpractice, stock-market excesses and human oppression, outdoing the felons of our times such as Enron. Its contemporaries across the political spectrum saw the "Company" as an overbearing and fundamentally problematic institution.

Karl Marx called it the standard bearer of Britain's "moneyocracy". Adam Smith, the economist deeply suspicious of mighty corporations, was horrified at the way in which the Company "oppresses and domineers" in India. Edmund Burke, the father of modern conservatism, declared India to be "radically and irretrievably ruined through the Company's continual drain of wealth".

Established in 1600 by royal charter, the Company's operations stretched from the Atlantic Ocean to India, Southeast Asia, China and Japan. Colonial rule in India was the eventual outcome of the Company's forays, but its ultimate purpose was profit-making with an eye to shareholders and the annual dividend in London.

Personal and private profits were the abiding motives of this Company, which "reversed the centuries-old flow of wealth from West to East and engineered a great switch in global development" (p 7). Robins challenges romantic reinterpretations of the Company's past, now under way in Britain, for ignoring the abuse, misery, devastation and plunder that marked its presence in India. His point is that the Company should be assessed on the basis of its extortion, corruption and impunity rather than peripheral contributions to "discovering" Oriental culture.

Throughout its life, the Company had to justify its existence by citing the customs revenues it earned and the gifts it could offer. Presents and bribes to princes and parliamentarians were "part of the fundamental costs of business" (p 28). A favorable relationship with the crown and Asian elites were essential for retaining barriers to entry that sustained the Company's trade monopoly.

From the beginning, armed force was the key for the Company to access Asian markets. Its governors boasted of "conducting commerce with a sword in your hands" (p 29). An all-powerful "Secret Committee" defined the Company's political and military strategies to achieve economic gain.

Force and fraud went hand in hand to obtain market dominion. The Company was ever ready to contemplate conquest for commercial interest. It echoed the motto of its rival, the Dutch East India Company, "We cannot carry on trade without war, nor war without trade" (p 40).

The first wave of East India traders focused on spices from what is now called Indonesia. They "traded where necessary and plundered were possible" (p 43). Sir Josiah Child, governor of the Company in the 1680s, conceived a radical plan to transform it into a sovereign power and "formidable martial government" in India.

This initial thrust was repulsed by Mughal armies. After the death of Emperor Aurangzeb in 1707, the Company secured duty-free trading rights in Bengal, Hyderabad and Gujarat by means of hefty bribes. From 1720, it was the undisputed blue-chip mercantile stock on the London stock exchange, extracting healthy profits from textiles through collaboration of local Indian potentates such as Nabakrishna Deb.

The Company undermined the revenue base and the local economy of the rulers of Bengal, India's richest province in the 1750s, by depriving vast numbers of natives of their livelihood. Regulatory pressures and competition from other European trading houses threatened the commercial position of the Company.

In retaliation for being expelled from Bengal, the Company's warrior baron, Robert Clive, mounted an amphibious offensive sprinkled with intrigue and conspiracy that won the day at the Battle of Plassey in 1757. Victory gave the Company command of public revenues and the internal market of Bengal.

After another triumph at the Battle of Buxar in 1764, Bihar and Orissa were at the mercy of "John Company" and progressively pauperized by unrequited trade. From economic independence, Indian weavers were forced into slavery, unable to sell to others and obliged to accept whatever the Company paid. Military force expanded to squeeze raw materials from producers. Methods of Company repression included fines, imprisonments, floggings and forced bonds.

Profiteering and insider trading by company executives reached their acme as bans on corruption were ostentatiously ignored. Illegal syndicates to monopolize the betel-nut, salt and tobacco trade and persistent overestimation of the financial value of acquisitions were routine shenanigans in the Company. Clive led a remorseless grab campaign on the riches of an entire people and rerouted the flow of wealth to the West.

The Company increased eastern India's vulnerability to natural disaster and triggered a famine in 1770 that cost more than 1.2 million lives. Instead of introducing time-tested revenue relief during distress, it raised taxes and purchased grain by force for hoarding. The sheer barbarity and violence of the Company's conduct during the famine were "one of the worst examples of corporate mismanagement in history" (p 94). Callousness toward Indian lives was a natural result of its political tyranny.

Millions more Indians lost their lives when the Company's stock crashed in London in the mid-1770s. After the bubble burst, the English government introduced a new post of governor general of India to curtail the Company's freedom. The principle of extraterritorial liability for corporate malpractice was founded when Clive's successor in Bengal, Harry Verelst, was found guilty of human-rights abuses in 1777. From 1774, three councilors  appointed by Parliament sought to overthrow Warren Hastings, the Company's governor of Bengal, on charges of corruption.

The backlash of state regulation was, however, short-lived. Hastings weathered the storm and embarked on wars and mercenary missions to crush peasant revolts. Natives unable to pay exorbitant taxes were slaughtered or "confined in open cages". The traditional rights of Indian producers were harmed to an extent that the productive capacity of Bengal was inevitably reduced. Frantic military expeditions and wars followed to fleece the last ounce out of a hemorrhaging Indian economy.

The robbery and wanton pillage of India by the Company were popular in Britain. Burke's impeachment trial of Hastings lasted seven years, and an unfair English judicial system guaranteed that it would be a lost cause. Hastings' defense that India was a primitive and inferior land in which different standards of justice should be applied was upheld by the minders of Pax Britannica. Imperial pride and patriotism interfered in efforts to bring the Company to justice.

Hastings' successor, Lord Cornwallis, introduced the English model of landlordship in India to build up a political class of gentry (zamindars) who would support Company rule. Twenty million small landholders were dispossessed of their rights as a "rule of property" was pushed through. "India was not European or Christian, and so was ultimately subjected to a second-class settlement, treated as a piece of property rather than a living community of people" (p 140).

In the 19th century, the Company's military operations burgeoned and its army grew tenfold. Lord Wellesley, the governor general up to 1805, had a voracious appetite for land and fortresses, looting rare Indian treasures and shipping them to museums and country houses in Britain. In Malabar, tax rates were raised and land for plantation was usurped by Company agents.

Laborers, including children, were kidnapped to work as slaves "with clothes stuffed in their mouths to keep them quiet" (p 144). Rebellions were stamped out by the Company's strong-arm tactics that proclaimed, "The more villages you burn and the more cattle and other property that are carried off, the better" (p 145). By 1820, military impulse was the master, not the servant, of business opportunity.

With the opening of trade and the surge of new British entrepreneurs in the 1830s, the Company lost its monopoly. To make up for the loss, its tea sales to China were doubled and paid for with contraband smuggling of opium. The need to maintain a monopoly over opium production in India to sneak the poison into China led the Company to wage wars on the Marathas and Sindh. The Company also sent out military support to British forces in the 1842 Opium War against China that opened a new chapter of colonialism in Asia. In Britain, the imperial benefit of opium trade justified its blatant illegality.

In its twilight years in India, the Company was guided by an arrogance of power resting on the alleged superiority of Western civilization. Racist scorn and verbal abuse by Company staffers mounted, with "nigger" becoming a common expression for Indians in the 1840s and 1850s. John Stuart Mill, the Company's loyal executive for three decades, put the icing on the cake by envisaging dictatorship over India as an "educative force and a legitimate mode of government in dealing with barbarians" (p 161).
Increasing racial and administrative haughtiness lay at the root of the Revolt of 1857 that terminated the Company's rule of India. British troops recaptured lost territories after the revolt with extreme savagery, paralleling "a ferocious bloodlust in British society" (p 164). From 1858, direct rule by the British crown was installed in India, but Indians had to continue to pay dividends on the stock of the extinct Company in the form of interest on transferred debts until World War II.

The British establishment "has not yet confronted its corporate imperial past", what with monuments to Clive and other Company notables enjoying pride of place in the heart of the current power structure of the United Kingdom (p 170).

The Company was allowed free rein in its heyday and is now being given a sympathetic makeover in exhibitions and events commemorating "nabobs" and their penchant for Indian culture. Nostalgia for bygone imperial domination, coupled with Prime Minister Tony Blair's new call for Britain to become a mini-America, still cloud an honest appraisal of the Company's black deeds.

Robins draws a number of lessons from the Company's history. Enforceable systems of justice have to hold powerful corporations to account for damage to society and the environment. Both managerial personnel and shareholders should ensure that their hunger for financial returns does no harm.

Mergers, acquisitions and cartels to widen the market and narrow competition have to be prevented by a global competition authority outside the environs of the World Trade Organization. Robins concludes that the chief obstacle to democratizing world markets and rebuilding "ethical equality between East and West" is the administration of US President George W Bush, which seeks to free businesses of any form of redress for their actions overseas.

In 1700, India and China accounted for 47% of world gross domestic product while Western Europe's share was a mere 26%. By 1870, the Asian giants slumped to a combined 29% of world GDP and Western Europe leaped to 42%. The East India Company was the primary device for this reversal of world scales. In the 21st century, with China and India once again rising to world economic prominence, monitoring and controlling Western multinational corporations is a cardinal responsibility.

The Corporation That Changed the World: How the East India Company Shaped the Modern Multinational by Nick Robins. Pluto Press, London, September 2006. ISBN: 0-7453-2523-8. Price: US$24.95, 218 pages.

(Copyright 2007 Asia Times Online Ltd.