The East India Company and ‘global’ British expansion circa 1762–1852

In appraising the contribution made by the East India Company to global British expansion in the period between 1762 and 1852, I am deliberately overlooking the fundamental change that occurred in the relationship between the Company and the British parliament with the reforms of 1773, and especially Pitt's India Act of 1784. This resulted in a clear subordination of the former to the latter through the establishment of the Board of Control as a body with powers of supervision over the Court of Directors. Peter Marshall has shown that ensuring the complete submission of the Company to parliament resulted from a deliberate policy decisionFootnote ⁴ by a metropolitan government which had drawn lessons from the American War of Independence and was keen to ensure that no such events could ever happen in India—where many at the time suspected that the East India Company had secret plans to establish an independent state.Footnote ⁵ It seems to me, however, that, despite its subordination to parliament, the East India Company retained a separate corporate identity until at least 1833, if not even later, and a residual sovereignty until 1813. Regarding the latter point, I refer to Huw Bowen's remark that it was only in 1813 that, somewhat inadvertently, a clause was introduced in the Charter Act that asserted parliament's undoubted sovereignty over all the Company's territories.Footnote ⁶ Prior to that, the question of sovereignty had remained somewhat undecided, and that is why I take a sceptical view of Michael Duffy's bland assertion, in his study of British expansion between 1793 and 1815, that ‘the use of Company sepoys for overseas expeditions . . . extended British military power in the eastern world’.Footnote ⁷ The relationship between Company sepoys and British military power should be problematized at the least before such assertions are made. Regarding the former point, I would argue that, even devoid of proper sovereignty after 1813, the Company remained a corporate organization that had interests of its own, which were not necessarily congruent with ‘global’ British interests as perceived by the imperial government and the British parliament in London. I am not arguing that there was any general incompatibility between Company and global British interests. But I find an audit of the Company's contribution to British expansion in terms of cost-benefit, based on an array of specific case studies, a legitimate endeavour, in particular because of the paucity of such studies.

In 1762, the Company participated in an expedition against Spanish Manila, a little-known episode in the Seven Years’ War (1756–1763), which pitted Britain against a Franco-Spanish alliance cemented by a ‘pacte de famille’ between two branches of the Bourbons. After an interval of more than three decades, during which it focused mostly on securing its own possessions in India, it was led to play an important part in a series of wars against the Dutch and the French which resulted in the establishment of British domination over most of the Indian Ocean area.

The Manila expedition of 1762 was part of a plan devised by British headquartersFootnote ⁸ to strike at the very heart of Spanish commercial power, by targeting the two main hubs of Spanish global trade. First, Havana in Cuba, where the Spanish convoys assembled before crossing the Atlantic laden with treasure from the Mexican and South American silver mines, and, second, Manila in the Philippines, which was the terminal of the route followed by the legendary ‘Acapulco galleon’, which once a year brought a cargo of Mexican silver to the Asian markets and took back to the Americas Chinese silk and Asian spices. The reason why the East India Company was roped into participating in the Manila expedition was simply that the British state did not have enough troops and ships of its own in the East to mount an expedition without Company support. To obtain the support of the Company authorities in Madras (which at the time were not yet subordinated to Calcutta), London dangled in front of them the prospect of a sizeable loot of treasure which was supposed to be ready for the taking at Manila,Footnote ⁹ as well as the possibility of the annexation of new territories. Although the idea of Manila as a part of the Madras Presidency strikes us as fanciful, Company officials appear to have considered it a possibility. The Madras authorities, which had few troops available, were hard-pressed to supply 650 sepoys (London had asked for twice as many) from their newly constituted ‘Coast Army’ as well as ships and 30 ‘gun lascars’ to man the ship guns. These were to constitute almost half the total of the troops earmarked for the expedition, which also included 300 Frenchmen who had been taken prisoners at Pondicherry in 1761. Militarily, in spite of the improvised and heterogeneous nature of the force thus hastily assembled, the expedition was initially a success, as Manila, which was defended only by a ragtag local militia, fell to the British almost without combat.Footnote ¹⁰ However, the wealth expected to lie within its walls failed to materialize,Footnote ¹¹ and the British occupation soon met with considerable resistance outside Manila from local Spaniards and Filipinos. Relations became tense between officers of the King's Army and their counterparts in the Madras Army, and some of the former berated the performance of the sepoys, who were also accused of atrocities against civilians by some Spanish priests.Footnote ¹² In the meantime, peace negotiations started in Paris between the belligerents, and the British delegation, apparently unaware that Manila had been taken, failed to have included in the final Treaty of Paris any clause regarding the Philippines.Footnote ¹³ By 1764, the British in Manila had to consider withdrawal, which proved messy because of the uncertain situation on the ground as well as a shortage of vessels. Some sepoys were not repatriated to India before 1767 and 100 of them, mostly the sick and wounded, including some deserters, stayed behind. They forged relationships with local women, and their descendants are still recognizable in two towns on the island of Luzon.Footnote ¹⁴ The expedition, which had been partly financed by Madras, eventually yielded nothing in terms of treasure or territorial gain, and resulted mostly in the establishment of a colony of ex-sepoys, which had certainly not been an outcome desired by the Company and could even have been detrimental to its interests. From the ‘global’ British point of view, however, the outcome was less unsatisfactory since the expedition had contributed, albeit in a small way, to the overall British victory in the Seven Years’ War. Altogether the campaign was not marked by a great degree of harmony between the Company and the London authorities, inaugurating a pattern that would recur in the following decades. Besides it left a bad taste in the mouth of the sepoys, who, in spite of having received a significant amount of batta (prize money), on their return expressed a measure of discontent and were henceforth somewhat wary of overseas expeditions. That led Lord Cornwallis, once he became governor-general some 20 years later, to recommend as a policy the regular despatch of batches of sepoys to garrison Fort Marlborough, a Company outpost in Bencoelen (Bengkulu), in the island of Sumatra,Footnote ¹⁵ with the aim of familiarizing them with overseas service.

When the sepoys were again required for overseas expeditions, after three decades spent fighting in India to extend Company rule, some problems remained. The campaign against Dutch Ceylon in 1795–1796 once again mobilized mostly Madras troops (1,800 sepoys out a total expeditionary force of 3,200), although Bengal sepoys were also sent, but they had to be withdrawn because of their protests about the amount of batta (prize money) given, which they found insufficient.Footnote ¹⁶ The Army sent from India did not meet with significant resistance from the Dutch, and Ceylon briefly became part of the Madras Presidency. The island was a worthy prize, as the Company inherited the valuable Dutch East India Company's monopoly over the cinnamon trade. It also occupied a strategic position, having in Trincomalee the best anchorage in the Indian Ocean. However, as soon as 1798, it was placed under the ‘dual’ administration of the Company and the Crown. The reason for this bizarre arrangement was the fiscal reforms the Company tried to introduce. It had inherited a difficult financial situation from the Dutch, but its use of South Indian fiscal agents, known as aumildars, alienated the local dominant landowning groups, leading to a revolt in 1796–1797. In order to conciliate the local elite, and avoid further political turmoil, London then found it expedient to partly cut the link between Madras and Colombo, a decision that drew a protest from Governor-General Richard Wellesley, but was supported by his superior, Henry Dundas, the president of the Board of Control of the East India Company.Footnote ¹⁷ Three years later, London decided to put an end to an ambiguous and unwieldy situation and to place the island under the sole rule of the Crown. When, in April 1801, the directors of the Company announced to the government in Calcutta the decision imposed on them by Dundas, they tried to put a positive gloss on it by stressing that the Company would thus be ‘relieved from funding for the deficiency in the revenue of the Island for the support of its Civil and Military Establishments’.Footnote ¹⁸ However, it appeared that such ‘relief’ was largely illusory, given that in the same letter the directors also issued instructions to the various governments in India ‘to furnish the King's Governor of Ceylon, upon his application for that purpose, with every assistance in their power, in case that Island should be unexpectedly attacked or exposed to danger by Internal Disturbances’.Footnote ¹⁹ More specifically, the government in Madras was asked to provide Ceylon with an advance of £60,000, a not insignificant amount, on the sole guarantee of sales of 400,000 pounds of cinnamon (over which the Company retained its monopoly for one year) at a rate of 3 shillings per pound to be realized in England in 1802. In effect Madras was asked to extend credit to Ceylon for a whole year, at some risk, since it could not be certain that the whole of the cinnamon yield would find takers in England at the price quoted. The reality of the dire financial situation of the new Crown colony was recognized more openly in October 1801 in a letter from Frederick North, the governor of Ceylon, addressed to Wellesley, in which he admitted that he would have ‘to draw to a certain amount on your Treasury, after the resumption of this Government by the Crown’.Footnote ²⁰ He expressed the hope that the amount needed would not exceed £8,000 per month over a period of 16 months (that is, a total of £128,000 rather than £60,000), to carry over until May 1803, when he trusted that ‘the produce of the pearl fishery would at cost equalize the revenue of Ceylon with its expenditure’,Footnote ²¹ a prediction that appears not to have been actually realized, as revenues for the pearl fisheries were particularly low in 1803.Footnote ²² It is clear that the imperial government could not manage Ceylon without financial help from India, but that the retention of the monopoly of the cinnamon trade by the Company was not sufficient to ensure that it would get its money back. In fact, India had to continue to pay for the deficit in Ceylon finances without having the means to recoup its losses through taxation. Considerations of overall imperial strategy, against the backdrop of the ongoing conflict with France and Holland, which placed great value on the control of Trincomalee, and the necessity of preventing any internal disturbances in the British-controlled part of the island (which could have been exploited by the Kandyan authorities) had clearly prevailed over any consideration of the East India Company's financial interests. In the following decades, the island, as we know, would be gradually transformed into a British plantocracy, with India providing the labour for the plantations, the bulk of the commercial capital (through the agency of Nattukottai Chettiar bankers from Tamilnadu), and the troops to conquer the inland kingdom of Kandy in 1815 and garrison the island until the Second World War. Altogether the Ceylon episode proved a bad deal for the Company, which had provided most of the manpower and part of the finance for the campaign, and reaped very little of the gains accruing from the annexation of that rich territory. However, it had partly itself to blame as well as the greed of its South Indian fiscal agents for such an unfavourable outcome. What was also revealed, however, was the powerlessness of Company officials in Calcutta and Madras in the face of an imperial fiat emanating from London.

The story of the Egypt expedition of 1801 is less straightforward, since it was at Wellesley's initiative—convinced, as he was, that Bonaparte's 1798 expedition had been ultimately aimed at India—that an expeditionary force of 3,000 sepoys from the Bombay and Bengal armies, originally earmarked for an attack on Mauritius, was rerouted to take part in the fight against the remaining French. When the force arrived, the French had already surrendered to British troops, but the sepoys nevertheless were ordered to march across the desert from the Red Sea to the Nile, a march that cost hundreds of lives.Footnote ²³ They were kept busy in Egypt for a few months with garrison duties before re-embarking for India. Once again the Company had expended much (Indian) blood and treasure for no gain at all, although this time it had not obeyed any direct command from London.

The next campaigns were more directly linked to India's strategic interests, but here again the Company's investment brought only limited rewards for itself. The rationale for the Company's participation in the 1810 expedition against the French islands of Bourbon (Réunion) and Ile de France (Mauritius) was that, from the sheltered harbour of Port Louis, the safest anchorage in the southwestern Indian Ocean, the French corsaires, of whom the most famous had been the Surcouf brothers, were in a position to harass the British naval convoys linking, in particular, Madras with Calcutta.Footnote ²⁴ Governor-General Lord Minto, having sent a small force of 400 Bombay sepoys to occupy the tiny island of Rodrigues in 1809, launched a much bigger expedition to capture the two main islands: 4,000 sepoys belonging to the Bengal and Bombay armies constituted one-third of the force, which dislodged the French from their last Indian Ocean strongholds. While Réunion was given back to France in 1814, Mauritius was made into a separate Crown colony, like Ceylon, mostly because of the need to conciliate the French planters who were the dominant group in the island. Although close links were established between the new colony and British India, they eventually benefited the French plantocracy more than the Company, especially when, from 1834, the export of Indian indentured labour started. The arrival of Indian ‘coolies’ in great numbers rescued the planters from the collapse of the local sugar economy which the abolition of slavery in 1833 had threatened to bring about.

The expedition to Mauritius was, however, only a preliminary to the one launched one year later against the Dutch possessions in Java and the Molucccas. The kingdom of Holland was then a French satellite under the rule of one of Napoleon's brothers, and the Dutch possessions were seen as a direct menace to India. All the more so as the redoubtable Dutch Jacobin general, Herman Willem Daendels, had been put in charge of preparing the defence of Java against a British invasion. Although he had been recalled to Holland before the British force actually landed, the measures he had taken for defence proved effective and the 12,000-strong British expeditionary corps, including 6,000 sepoys from the Bengal and Madras armies, met with determined resistance from the Dutch and was involved in some fierce fighting.Footnote ²⁵ The conquest of Java added a very rich territory to the domain of the East India Company and, with Sir Stamford Raffles installed as Resident, the Company set out to exploit the island, reorganizing the land revenue system according to Indian principles, based on the ryotwari model, and even excavating the remains of the great Hindu-Buddhist temples of Borobodur and Prambanan to emphasize the historic links between Java and India. In spite of the large financialFootnote ²⁶ and human investment it had made in its new domain, the Company was informed in 1813 that it would have to relinquish Java (as well as the rich Molucca spice islands) to the new kingdom of the Netherlands, which was about to succeed the kingdom of Holland and promised to be one of Britain's staunchest allies in Europe. While Raffles had had hopes of retaining Java as a British possession (hopes that few in the Company government in India shared), the government in London saw mostly the need to conciliate an important European ally,Footnote ²⁷ and the negotiations that started in May 1814 led to the signing of an Anglo-Dutch convention in August of the same year. The British retained the Cape and Ceylon, in which the Company had no direct interest, but relinquished Java and the Moluccas. It appears that the Company authorities were not even consulted in the matter and, in any case, they had no way of opposing London's policies. The need to conciliate the Netherlands in the future had been further increased by the reopening of the Scheldt estuary to international navigation as authorized by the Congress of Vienna. As the new united kingdom of the Netherlands. formed by the addition of the Belgic provinces, would henceforth control the port of Antwerp, which was known, in strategic parlance, as ‘a loaded gun pointed at the heart of England’,Footnote ²⁸ it became even more important to ensure its friendship.Footnote ²⁹ Not only was the Company faced with the prospect of losing a rich territory, before it had had time to recoup its investment in it, but it was also confronted in 1815, ahead of actually evacuating Java, with a more direct menace in the form of an attempted rising by the sepoys of one Bengal cavalry regiment in conjunction with the Javanese ruler of Surakarta.Footnote ³⁰ Although the plot was discovered at an early stage, and its organizers executed or deported in chains to India before they could put their plans into execution, the episode revealed the potential danger to Company rule from the involvement of its armies in foreign expeditions, a problem that would recur in the 1840s at the time of the First Afghan War. The Company was somehow compensated for the loss of Java by the acquisition in 1819 of the island of Singapore and the cession of Malacca by the Dutch (in exchange for Cochin) in 1824. Together with Georgetown on the island of Penang, these two possessions were administered as outliers of the Bengal Presidency until 1867, when they formed the separate Crown Colony of the Straits Settlements. However, the Company's interests were increasingly overlooked, as Singapore in particular, although originally built by the sweat of Indian convict labour,Footnote ³¹ gradually became a major hub of Southeast Asian trade and received more immigrants from China than from India.

It was again made clear with the rise of the Malwa opium trade in the 1820s that the overall interests of the British state, and particularly the system of alliances Foreign Secretary George Canning had built in Europe to try to counter Metternich's Holy Alliance,Footnote ³² were paramount over the interests of the East India Company. Grown in the states of Central India (Gwalior and Indore), the drug was exported to China via the ports of Portuguese India, mostly Damao, and competed on the Chinese market with the ‘Patna’ opium grown under Company supervision and smuggled into China by private traders working in close conjunction with the Company. The loss of revenue to the Company was substantialFootnote ³³ and all its efforts, first at interdicting and then, when it proved unfeasible, at controlling the trade in Malwa opium, foundered largely because of the Portuguese factor. While a single company of sepoys would have been sufficient to occupy Damao, the British government ignored all demands by the Company to annex or purchase Damao from Portugal.Footnote ³⁴ Obviously the necessity of preserving Britain's privileged relationship with its ‘oldest ally’ in Europe was deemed more important in London than the revenue the East India Company derived from the sales of opium to China, although the latter were crucial to the purchase of Chinese tea, which was becoming an essential commodity for Britain.

The foreign policy objectives of the Company government in India and of the British government in London rarely coincided, because for London, considerations of the European balance of power were always paramount. We have seen this difference at work in the case of the Dutch East Indies and Portuguese India, but, even in the case of Mauritius, it could be argued that the British decision to conciliate the French plantocracy at all costs, and to provide it with cheap manpower from India, was due to the fear that the planters may otherwise might have been tempted to agitate for the return to France of the strategically situated island. Relations with Iran are another area in which the divergence between the objectives of the two governments were most clearly displayed. The alliance with Tehran and the use of Iran as a buffer against Russian expansion—inaugurated by the Treaty of 1808, concluded at a time when Russia was allied to Napoleon, and pursued with obstinacy for the following 30 years—was seen by the rulers of India, to quote Malcolm Yapp, as ‘an expensive and unwanted albatross which had been hung round their necks by the Government in Britain, an encumbrance which stood in the way of a more reliable, independent strategy in the Gulf’.Footnote ³⁵ On the other hand, in the pursuit of an Afghan alliance in the 1820s and 1830s, there was an apparent convergence of interests between Calcutta and London, as the British Indian authorities saw there ‘some chance of relief from the vexations of the Iranian alliance’, while Palmerston had hoped to ‘bend it in the interests of his European policies’.Footnote ³⁶ In particular Governor-General Ellenborough shared the Whigs’ obsession with a dual Russian advance towards Constantinople and India, to the point of sheer paranoia. The final outcome of his policy, with the First Afghan War of 1839–43, was, however, more disastrous for the Company than for London, as the huge losses suffered by the Bengal Army in the campaign at the hands of the Afghan tribes contributed powerfully to increase the discontent brewing in its ranks, which exploded in full force in 1857. Outcomes were not always as bad for the Company and it made some territorial gains, as in the case of Burma. The two Anglo-Burmese wars were waged at the initiative of governor-generals Amherst in 1824 and Dalhousie in 1852, whom London supported without great enthusiasm. The conquest of Lower Burma in 1852 drew criticism from Richard Cobden who feared negative consequences for British finances.Footnote ³⁷ But the annexation of Arakan, Tenasserim, and Lower Burma to Bengal, although applauded by mercantile interests in Calcutta, did not result in the short term in a significant accretion of wealth to the Bengal Presidency, and the wars were onerous in terms of both money and men.Footnote ³⁸ The annexation of Aden in 1839,Footnote ³⁹ which was more or less imposed on a reluctant home government by Bombay and Calcutta, was of little interest before the opening of the Suez Canal, although it did not cost much in terms of men and money. An overall audit of the Company's contribution to British global expansion between 1762 and 1852 would have to conclude that losses clearly surpassed gains. Had not the tea trade provided constantly high profits to the Company, its foreign adventures would have severely threatened India's financial position.

The subordinate place occupied by the East India Company's interests in the global imperial order of priorities does not of course come as a complete surprise. It has a lot to do with a reconfiguration of British domestic politics, and the growing incapacity of East India interests to play a major role in dictating its course, following the stabilization which took place in 1784.Footnote ⁴⁰ Governor-generals tended increasingly to be London men rather than Company men, as exemplified by both Cornwallis and Wellesley. Although at times they could take initiatives that clashed with the views of the home government and commit the resources of India to their pursuit, in an often horrendously wasteful manner, they could not challenge the overall orientation of British policy towards the search for a European balance of power. What is more surprising, on the other hand, at least from the perspective of Washbrook's own line of reasoning, is that the Company did not manage to compensate for its weak position in imperial affairs, and the constant losses it sustained there, a weakness that could not be easily remedied by pursuing a more active policy in India itself. The answer lies mostly in the nature of the Company state, which has been analysed in terms of ‘military-fiscalism’ by several authors.Footnote ⁴¹ It meant that the Company's main preoccupation was to raise revenue so as to be able to maintain its large armies. Such a state formation is not fundamentally geared towards what one would call nowadays ‘development’. But part of the answer lies also in the difficulties the Company had in shaping Indian markets for labour and capital in a manner suitable to its interests. The role played by Indian agency in limiting the scope of Company policies in India itself is precisely the focus of the second part of this article, for I think it is a factor that has to be taken into account in explaining the overall outcome of British rule. The literature on the late Company period has tended to ignore this question. Thus, in his thorough-going investigation of the ‘twilight’ of the East India Company, Anthony Webster has focused mostly on its relationship with metropolitan capital and with British businessmen in Asia, but has largely overlooked the question of the role of Indian labour and Indian capital in the story.Footnote ⁴²

Indian agency under Company rule: the case of the labour market

The Company regime never formulated a coherent labour policy. The question of the export of indentured labour to the colonies in the 1830s, however, did force Company officials to come up with statements that revealed some of the contradictions inherent in the Company's view of the Indian labour market.

One area in which the Company was confronted at an early stage with the complexities of the Indian labour market was military recruitment. As Dirk Kolff argues,Footnote ⁴³ the Company both utilized and subverted the existing ‘military bazaar’ by which Indian powers, since the fifteenth century, had recruited most of their soldiery through the agency of intermediaries known as jemadars. When the Company, in South India in the late 1740s, started levying its first units of sepoys (indigenous soldiers trained in the European ways of warfare and clothed in European-style uniforms, following the example of its rivals in the French East India Company such as Joseph Dupleix), it had to make do with whatever human material was available: guards of the Company warehouses who were often Paraiyars (pariahs, that is, untouchables), peons, many of whom were local Christians, African and Malagasy slaves, as well as North Indian Muslims.Footnote ⁴⁴ Gradually, however, as its sepoy forces expanded, and particularly its Bengal army, it tended to fall back on tapping the traditional Indian military bazaar where it recruited mostly Rajput and Brahmins who were heirs to the purbiya (eastern Gangetic) military tradition of mercenary military service. It used the agency of jemadars to enlist them, but, as recruitment tended to become hereditary from father to son or uncle to nephew, the role of these intermediaries gradually diminished.Footnote ⁴⁵ While the Company was successful, on the whole, at recruiting indigenous soldiers, with its forces reaching, at their apex in 1857, the considerable figure of 270,000 men (as against a total of 40,000 European soldiers in both Company and royal regiments), it did not succeed in getting exactly the kind of soldiers it wanted. In the eyes of British officials, sepoys were always found wanting in one way or another: either they were considered brave but undisciplined,Footnote ⁴⁶ or not lacking in courage, but in intelligence and initiative. In spite of the Company's declared policy of respecting the social and religious sensibilities of the sepoys, it could not prevent its officer corps from falling under the spell of evangelical ideas, which led to a gradual estrangement between officers and soldiers. The increasing use of sepoy regiments outside India in various campaigns, some of which have been evoked, brought to the fore certain problems, like the difficulty of providing them with the kind of food they were used to in India.Footnote ⁴⁷ The following exchange between two British officers at the time of the Second Opium War in 1858–59 epitomizes official views of the behaviour of the sepoys outside India: ‘Indians’, it was claimed by one correspondent,

Then, of course, there was their deplorable propensity to rise in revolt when they had grievances to vent, like the soldiers of the Madras Army in Vellore in 1806, whose mutiny,Footnote ⁴⁹ triggered by an apparently trivial sartorial dispute, sent shudders through the various echelons of government. All this culminated in the revolt of the Bengal Army in 1857, which KolffFootnote ⁵⁰ analysed as the last attempt by the purbiya soldiery to defend its prominent role in the Company armies against policies that sought to diminish its role. As is well known, the revolt resulted in the demise of both the purbiya tradition and the East India Company. The Raj eventually got the army it wanted only after the trauma of the Mutiny, when the new Indian Army was reconstructed on the basis of the dubious but handy theory of the ‘martial races’,Footnote ⁵¹ a process that took more than 40 years. Of course it again exploded in 1943 with the formation of the Indian National Army from the ranks of Indian soldiers taken prisoner by the Japanese in Malaya.

More generally, the Company met with various obstacles in its attempts at tapping a reservoir of labour that its officials tended to think inexhaustible, but in fact proved often difficult to actually mobilize for large-scale projects. The building of the Ganges canal and the construction of the Hindustan-Tibet strategic road are two cases of large Company-devised engineering projects which faced serious problems of labour supply. Jan Lucassen has shown how the enormous Ganges canal project (1839–1854), the major showpiece in the Company government's effort at outdoing its native predecessors in the sheer scale of irrigation works, was bedevilled at every stage by labour scarcities and labour disputes.Footnote ⁵² As to the Hindustan-Tibet road, Chitra Joshi's research has thrown a crude light on how its construction, in the early 1850s, rested on the enormously wasteful use of convict labour on an unprecedented scale and with altogether unsatisfactory results.Footnote ⁵³

The problem of labour supply had come to the fore already in the 1830s when the Company government was pressured by London into allowing the emigration of ‘coolies’ under a system of indenture to a number of British colonies, starting with Mauritius, where, as noted above, sugar-cane plantations faced a shortage of manpower due to the desertion of ex-slaves following the 1833 abolition of slavery in the British empire. The indenture system quickly proved to be riddled with abuses of various kinds which led to its temporary suspension in 1838, pending the result of an inquiry. In the course of that inquiry, different points of view were aired by officials, missionaries, planters, and businessmen involved in the ‘coolie’ trade. While the latter vigorously pleaded for a resumption of emigration and the missionaries opposed it on the grounds that the treatment of ‘coolies’ in the depots, the ships, and the plantations was inhuman and contrary to Christian precepts, officials divided themselves into two camps. Some, on the basis of a kind of ‘pre-Arthur Lewisian’ reading of the Indian economy as one characterized by an unlimited supply of labour, developed a Panglossian view of the effects of emigration. According to those who upheld that view, the outcome of labour emigration would be entirely positive as it would bring benefits to the Indian economy in the form of a substraction of some surplus labour and of a rise in wages. The benefit to the emigrants would be in the form of a higher income and the prospect of upward mobility, and to the colonies, to rescue their plantation economies from a threatened collapse.Footnote ⁵⁴ Critics, on the other hand, refuted the view that there was ‘a superabundance of labour in British India’, claiming that, in the Bengal Presidency at least, ‘the contrary is the fact’, which would become apparent ‘if any decided stimulus were given to agricultural production’. They also doubted that emigration brought actual benefits to the emigrants.Footnote ⁵⁵ The government eventually decided in favour of resumption, combined with the introduction of an array of measures aimed at regulating the transport and employment of ‘coolies’ in the hope of correcting some of the worst abuses of the system. In spite of these measures, indenture was construed by critics of the Raj in Britain and in India as a colossal moral failure, and it was often regarded as a ‘new system of slavery’,Footnote ⁵⁶ a terrible stigma to bear in post-abolitionist Britain. While the economic benefits to India from the export of indentured labour are difficult to trace, apart from the large profits gained by those, mostly British, merchants who engaged in the ‘coolie’ trade, the political cost of the operation was high. At a later stage, indenture became a stick with which Indian nationalists could most successfully beat the colonial government until the latter had eventually no choice but to abolish it in 1916.Footnote ⁵⁷ The transport of labour from the ‘tribal’ belt of central India to the Assam tea plantations, which started in the 1840s, and was characterized by an even higher mortality rate than the transport of ‘coolies’ to the colonies,Footnote ⁵⁸ brought the same strictures to bear on the Company government and contributed similarly to undermining the moral legitimacy of colonial rule. The large-scale employment of Santal tribals as labourers by British indigo planters in conditions of quasi-servitude even became a political scandal, as it attracted the attention of the Calcutta intelligentsia in the form of a celebrated Bengali play, ‘Nil Darpan’ (‘Indigo Mirror’), written by Dinabhandu Mitra.Footnote ⁵⁹ The Indian labour market proved decidedly to be an Achilles heel of Company rule, as the authorities failed to regulate it in a way that ensured employers were supplied with the manpower they needed without having recourse to forms of coercion that bordered on servitude. A certain level of dysfunction in the mechanisms of the labour market, in which supply rarely matched demand, and which was characterized by a very high level of wastage, rather than forms of organized resistance by workers (although there were occasional strikes, such as those mentioned by Jan Lucassen on the Ganges canal building projectFootnote ⁶⁰ ), was the main manifestation of Indian agency. These failings would be partly corrected during the later period of direct Crown rule, when really impressive forms of labour mobilization took place, in particular for the building of railways. But there remained inadequacies in the way supply matched demand, which persisted long after the end of colonial rule. The Company was not much more successful in its attempts at regulating the capital market.

The Company and Indian capital

The relationship of the Company to Indian capital was marked by a paradox. While the establishment of Company rule had been facilitated, on the whole, by the availability of indigenous capital resources, once the Company was master of India, it found it more difficult to use Indian capitalists to further its interests. The fate of the great Murshidabad banking house of Jagat Seths—who financed the revolution against Siraj-ud-Daula in 1757 and, subsequent to the advent of British rule, lost their prominent role as bankers of the stateFootnote ⁶¹ —is a stark reminder of how indigenous capitalists could fall victim to a colonial transition they themselves, albeit unintentionally, had facilitated.

Things turned out somewhat differently in western India, where Lakshmi Subramanian argues for a degree of symbiosis between the Company and Indian commercial and financial capital during the 1750–1810 period, which she has characterized as the rise of an ‘Anglo-Bania order’.Footnote ⁶² Although I have reservations about this formulation, which exaggerates the degree of complicity between the Company and Indian financiers, it cannot be denied that the Company widely used the agency of Indian bankers to finance its military campaigns, and to transfer funds from Bengal to the deficit-laden Bombay Presidency. However, as Subramanian herself admits, this period of close collaboration came to an end in the 1820s, as the Company created its own system of treasuries and could hence dispense with advances from indigenous bankers. It was made possible by enhanced tax revenue from land and led to a reduced intercourse between the Company and indigenous capital. At the same time, British private capital, taking advantage of the end of the Company monopoly in 1813, increased its operations and came to dominate some sectors of the Indian economy, such as indigo plantations. However, the collapse of the main British agency houses in the crisis of 1830–1833 revealed the limits of the hold that British capital had acquired over the Indian economy.

Given the fact that, first, British private capital, concentrated in a few capital cities, did not have deep roots in the countryside, which provided most of the products India exported to the world markets, and, second, that there were as yet no mechanisms such as a stock exchange to direct local savings into investment in the ‘modern’ sector of the economy, no economic advance in India was possible without the mobilization of indigenous merchant capital. The problem for the Company regime was to find ways of directing that capital into the ‘right‘ channels. A look at the opium trade will show some of the difficulties involved. It has already been mentioned that the growth of the Malwa opium trade represented a serious challenge for the Company, competing as it did with Company-controlled trade in ‘Bengal’ or ‘Patna’ opium, and led to a loss of revenue. Amar Farooqi has shown that a wide range of Indian capitalists, both big and small, were involved in that trade, in conjunction with the rulers of some Indian princely states and Portuguese merchant-shippers. He argues for the existence of a head-on clash between Indian capital and the interests of the Company state.Footnote ⁶³ While I do not share his view of a ‘subversive’ intent in the participation of Indian capitalists in the Malwa opium trade,Footnote ⁶⁴ I see it as representative of the way in which the Company often failed to influence the actions of Indian capitalists in the direction of its interests. It is here that the agency of these indigenous operators manifested itself, rather than there being a need to impugn them with a subversive intent.

Even after it had lost its trading monopoly in 1813, the Company did not show much interest in developing an institutional framework favourable to the growth of private enterprise in India.Footnote ⁶⁵ It is worth noting that it was not before the 1850s that legislation on joint stock companies was introduced, which means that earlier investors in companies had no proper legal protection. Insolvency laws discriminated against Indians, as demonstrated at the time of the crash of the Union Bank in 1848, and therefore there was no strong incentive for them to invest in the kind of enterprises that would have opened new fields.Footnote ⁶⁶ Tirthankar Roy maintains that the half-hearted introduction of British commercial law into India, combined with the legal protection afforded to the Hindu joint family, had negative consequences for the functioning of indigenous business, resulting in large-scale market inefficiencies.Footnote ⁶⁷ The point had actually already been made by Washbrook, although with a slightly different emphasis, in a well-known essay.Footnote ⁶⁸ The reason why British commercial law could not be put fully into operation in India, however, had a lot to do with the way Indian business communities functioned and with the importance of networks, often caste-based, which benefited from certain kinds of market inefficiencies.

The synergy between the Company and sections of Indian capital, which had been an important, although probably not decisive, factor in the establishment of the Company regime,Footnote ⁶⁹ was partly destroyed in the subsequent four decades of Company rule between 1818 and 1858. Its reconstruction, in the period 1858–1914, was only partial, and there remained elements of antagonism between the British Raj and Indian capital which came to the fore again in the last decades of colonial rule.Footnote ⁷⁰

Indian agency, in the form of a passive rather than an active resistance to Company attempts to bend the labour and capital markets to the task of serving British interests, can plausibly be construed as an important contributing factor to the overall ‘messy’ economic outcome of British rule in India, as Washbrook so persuasively argues. In the post-1858 period, India's elevation to the status of a second centre of the British empireFootnote ⁷¹ earned it, contrary to what had happened in the Company period, some tangible benefits in the form of significant opportunities for its traders and workers in that vast and expanding empire. Although imperial Britain undoubtedly also derived advantage from the use of India's considerable human resources outside India, the overall balance sheet nevertheless remains uncertain.