The company that changed the world
England’s East India Company (EIC) was established by a royal charter on one cold New Year’s Eve in 1600. It was established in order to take part in beneficial space trade, the monopoly on which Spain had till 1588. Firstly, the company conducted separate voyages to India. Few years later, in India were built first factories, and since that time Britain begun its ardent activity in the region. The company had a full monopoly for all the trade between Britain and Asia. The greatest impact this company had in India. Some of the country’s major cities grew on the back of the Company’s trade, not least Bombay (Mumbai), Calcutta (Kolkata) and Madras (Chennai). In different periods, the EIC sold spices, cotton, silk, tea, coffee and opium. As well as in trade, it was also involved in political and cultural life of the region. Native people were made to adopt English cultural values such as the language, clothes, and manners. Moreover, the company became a serious political power, which controls all the important events in India. The EIC transformed into the profit-making agency, which used all ways to build up the capital.
It is interesting to know how the EIC could become the most influential and powerful company in its history. The EIC was not the only company on the international market. It had many competitors such as Portuguese, Spanish and Dutch companies. All of them had a long history of their existence and presence in Asia. But one of the things what differed the EIC, was its management. People, who leaded the company, played the greatest role in its development. One and the first significant figures was Sir Josiah Child. He ruled the company in 1680s, when
it faced the peak of the boom. He was the first, who pointed out that the profit and power must go together. Under his ruling, the EIC began to use questionable practices. In his managing, Child used two main steps: 1) he made a new alliance with the Crown to guarantee the company’s privileges; 2) he made the company a sovereign power in India, which could influence not only economically, but also politically. The formation of the EIC is a very difficult and ambiguous question. Here are the main factors that brought it to the world level:
1) defense of competitors. Only after the collapse of Portuguese and Dutch companies, the EIC gained the monopolistic state;
2) duty-free trading rights. Firstly, the company was to pain duties both while importing and exporting. But after the power in India appeared in hands of pro-British officials, all the trading duties between two countries were declined;
3) military demotions. The fear was a good weapon in a struggle for the domination, and military forces provided such a fear;
4) subterfuges to squeeze prices. Other words, it was the policy of damping. Native producers were removed from the market as they were not able to compete and cover their losses.
That was the first example in the history how multinational companies in their acquisitiveness could deny moral principles.
Nick Robins called The EIC “a model company”. It means that the EIC was a mother for the future multinational companies. Nowadays, we consider a company to be multinational if it has representation in many countries, millions of employees and huge income. All these were true for the EIC. But it was not the only company with such abilities. In the eighteen century, there also existed the Portuguese and Dutch companies with international activities. What made the British company unique, was “the way it bridged the medieval concept of the corporation as
an essentially public body with the industrial model of an enterprise acting primarily in the interests of its shareholders”. This could be described as a company of mutual interests, both for the state and private sector. The first part gained political influence abroad; the second obtained numerous profits. What else made the company unique was its structure. The EIC consisted of numerous small companies; each of them had its own goals and sphere of interest. The company owned not only factories, but also docks, warehouses and ships. It means that the company itself controlled all the stages of goods transportation. One more peculiarity of the EIC was the mechanism of the joint stock ownership. It enabled the separation of the merchants and investors. Even people, who had never been to India, could get benefits from the company’s activity through the dividends. It also shared risks what was very important in those times, when the trip from India to Britain could take two years, and everything could happen during this period of time. As we can see, this mechanism of joint ownership made the company more dynamic, independent and, as a result, more profitable. The reflection of its success was the company’s share price. As it happens now, in eighteen century, the share price communicates to the market about the company’s recent state and its future prospects. All these facts describe the EIC as an advanced company of its time.
The collapse of such a company could not be immediate. It took a long time for the EIS to escape. The beginning of the end started in 1769, when hard monsoon rains led to the female. Here we can point out the first reason of the company’s collapse – mismanagement. The Indians warehouses were almost empty, but the company’s management decided not to interrupt delivery and ravaged warehouses completely. As a result, a huge famine killed millions of people. Mismanagement was a real threat to company’s success. Bribes and insider training were commonplace and led to the bed quality of company’s commodities.
The Regulating Act of 1773, East India Company Act 1784 resulted in company’s ultimate control under the Crown. Managers decided to concentrate on India and made it the vassal of the company. But this struggle led to financial difficulties and the company had nothing to do, but to ask help in Britain. The situation in Britain had changed since eighteen century. The 1800s was the time of the Industrial Revolution. The EIC did not meet the requirements of modern times and laissez-faire economic ideology. As a result, the Government of India Act 1833 that remove the company’s trading monopoly. The Indian Mutiny of 1857 was the last step. In 1873, the East Indian Company ceased to exist.
The Company’s story of more than two centuries has profound morals: multinational companies want not just trade, but the power; and that trade can generate real wealth, but it can equally create misery and devastation.
Robins, Nick. The Corporation that Changed the World. How the East India Company Shaped the Modern Multinational. London: Pluto Press, 2006.