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Authors: Niall Ferguson

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The shift from spices to cloth also implied a relocation of the East India Company’s Asian base. Surat was now gradually wound down. In its stead three new ‘factories’ (as they were sometimes known) were established – fortified trading posts which today are among Asia’s most populous cities. The first of these was on the south-east coast of India, the fabled shore of Coromandel. There, on a shore site acquired in 1630, the company built a fort which, as if to advertise its Englishness, was christened Fort St George. Around it would spring up the city of Madras. Just over thirty years later, in 1661, England acquired Bombay from Portugal as part of Charles II’s dowry when he married Catherine of Braganza. Finally, in 1690, the company established a fort at Sutanuti on the east bank of the River Hugli. This was then amalgamated with two other villages to form a larger town renamed Calcutta.
Today, it is still possible to discern the remains of these British ‘factories’, which were in many ways the enterprise zones of early empire. The fort at Madras is still more or less intact, complete with its church, a parade ground, houses and warehouses. There was nothing original in this layout. The earlier Portuguese, Spanish and Dutch trading posts had been built along much the same lines. But under the new Anglo-Dutch arrangement, places like Chinsura belonged to the past. Calcutta was the future.
Yet no sooner had the East India Company solved the problem of Dutch competition than it ran into another, far more insidious source of competition, its own employees. This is what economists call the ‘agency problem’: the fundamental difficulty the proprietors of a company have in controlling their employees. It is a difficulty which grows in proportion to the distance between those who own the shares and those on the payroll.
Here a word needs to be said not just about distance but about the wind. By 1700 it was possible to sail from Boston to England in four to five weeks (in the other direction the journey took five to seven weeks).
4
To reach Barbados generally took around nine weeks. Because of the direction of the Atlantic winds, trade had a seasonal rhythm: ships left for the West Indies between November and January; ships for North America, by contrast, left from midsummer until the end of September. But journey times were much longer for those heading to and from India: to reach Calcutta from England via Cape Town took, on average, around six months. The prevailing winds in the Indian Ocean are south-westerly from April to September, but north-easterly from October to March. To sail for India meant leaving in the spring; you could only return home in the autumn.
The much longer journey times between Asia and Europe made the East India Company’s monopoly at once easy and hard to enforce. Compared with the North American trade, it was hard for smaller rival companies to compete for the same business: whereas hundreds of companies carried goods to and from America and the Caribbean by the 1680s, the costs and risks of the six-month voyage to India encouraged the concentration of trade in the hands of one big operator. But that big operator could only with the utmost difficulty control its own staff when it took them half a year just to reach their place of work. Letters of instruction to them took just as long. East India Company employees therefore enjoyed a good deal of latitude – indeed, most of them were wholly beyond the control of their London paymasters. And since the salaries they were paid were relatively modest (a ‘writer’ or clerk got a basic £5 a year, not much more than a domestic servant back in England) most company employees did not hesitate to conduct business on the side, on their own account. This was what would later be lampooned as ‘the good old principles of Leadenhall Street economy – small salaries and immense perquisites’. Others went further, leaving the company’s employ altogether and doing business exclusively for themselves. These were the bane of the directors’ existence: the interlopers.
The supreme interloper was Thomas Pitt, the son of a Dorset clergyman, who entered the service of the East India Company in 1673. On reaching India, Pitt simply absconded and began buying goods from Indian merchants, shipping them back to England on his own account. The Court of the company insisted that Pitt return home, denouncing him as ‘a desperate young fellow of a haughty, huffing, daring temper that would not stick at doing any mischief that lay in his power’. But Pitt blithely ignored these requests. Indeed, he went into business with the company’s chief officer in the Bay of Bengal, Matthias Vincent, whose niece he married. Faced with a lawsuit, Pitt settled with the company by paying a fine of £400, which by now was small beer to him.
Men like Pitt were crucial in the growth of the East India trade. Alongside the official trade of the company, an enormous private business was developing. What this meant was that the monopoly over Anglo-Asian trade, which the crown had granted to the East India Company, was crumbling. But this was probably just as well, since a monopoly company could not have expanded trade between Britain and India as rapidly without the interlopers. Indeed, the company itself gradually began to realize that the interlopers – even the wayward Pitt – could be a help rather than a hindrance to its business.
It would be quite wrong to imagine that the Anglo-Dutch merger handed India over to the English East India Company. The fact remained that both Dutch and English traders were minor players in a vast Asian empire. Madras, Bombay and Calcutta were no more than tiny outposts on the edge of a vast and economically advanced subcontinent. The English at this stage were merely parasites on the periphery, reliant on partnerships with Indian businessmen:
dubashes
in Madras,
banyans
in Bengal. And political power continued to be centred in the Red Fort in Delhi, the principal residence of the Mughal Emperor, the Muslim ‘Lord of the Universe’ whose ancestors had swept into India from the north in the sixteenth century and had ruled the greater part of the subcontinent ever since. English visitors like Sir Thomas Roe might attempt to disparage what they saw when they visited Delhi (‘Religions infinite; laws none. In that confusion what can be expected?’ was Roe’s verdict in 1615), but the Mughals’ was a wealthy and mighty empire, which dwarfed the European nation states. In 1700 the population of India was twenty times that of the United Kingdom. India’s share of total world output at that time has been estimated at 24 per cent – nearly a quarter; Britain’s share was just 3 per cent. The idea that Britain might one day rule India would have struck a visitor to Delhi in the late seventeenth century as simply preposterous.
It was only by the Mughal Emperor’s permission – and with the consent of his local subordinates – that the East India Company was able to trade at all. These were not always forthcoming. As the company’s Court of Directors complained:
These [native] governors have ... the knack of trampling upon us, and extorting what they please of our estate from us, by the besieging of our factorys
5
[
sic
] and stopping of our boats upon the Ganges, they will never forbear doing so till we had made them sensible of our power as we have of our truth and justice ...
 
But that was more easily said than done. For the time being, appeasing the Mughal Emperor was a crucial part of the East India Company’s business, since loss of favour meant loss of money. Visits had to be paid to the Mughal court. Company representatives had to prostrate themselves before the Peacock Throne in the Red Fort’s inner court, the Diwan-i-am. Complex treaties had to be negotiated. Bribes had to be paid to Mughal officials. All this called for men who were as adept at wheeling and dealing as they were at buying and selling.
In 1698, despite their previous misgivings, the company decided to send none other than the interloper Thomas Pitt to Madras as Governor of Fort St George. His salary was just £200 a year, but his contract now explicitly acknowledged that he could do business on his own account as well. A fine specimen of the poacher turned gamekeeper (who could still do a bit of poaching on the side), Pitt almost immediately had to contend with an acute diplomatic crisis when the Emperor, Aurungzeb, announced not only a ban on trade with Europeans but their arrest and the immediate confiscation of their goods. Even as he was negotiating with Aurungzeb to have the edict revoked, Pitt had to defend Fort St George against Duad Khan, the Nawab of the Carnatic, who hastened to execute the Emperor’s edict.
By the 1740s, however, the Emperor was losing his grip over India. The Persian Nadir Shah Afshar sacked Delhi in 1739 at the head of an Afghan-Turkic army; Afghans led by Ahmed Shah Abdali invaded northern India repeatedly after 1747. In addition to these ‘tribal breakouts’, the Mughals’ erstwhile deputies in the provinces – men like the Nawab of Arcot and the Nizam of Hyderabad – were carving out kingdoms for themselves. To the west the Marathas ruled without reference or regard to Delhi. India was entering a phase of internecine warfare that the British would later characterize dismissively as ‘anarchy’ – proof that the Indians were unfit to govern themselves. In truth, this was a struggle for mastery in India no different from the struggle for mastery in Habsburg-dominated Europe that had been raging since the seventeenth century. Precisely the threats from the north forced Indian rulers to govern more effectively, modernizing their tax systems to pay for large standing armies, much as their counterparts in Europe were doing at the same time.
The European settlements in India had always been fortified. Now, in these dangerous times, they had to be garrisoned in earnest. Unable to muster enough manpower from its English staff, the East India Company began to raise its own regiments from among the subcontinent’s warrior castes – Telugu peasants in the south, Kunbis in the west and Rajputs and Brahmins from the central Ganges valley – equipping them with European weapons and subordinating them to English officers. In theory, this was simply the company’s security division, intended to protect its assets in time of war. In practice, it was a private army, and one that would soon become crucial to its business. Having begun as a trading operation, the East India Company now had its own settlements, its own diplomats, even its own army. It was beginning to look more and more like a kingdom in its own right. And here was the key difference between Asia and Europe. The European powers could fight one another to their hearts’ content: the winner could only be European. But when the Indian powers went to war, the possibility existed that a non-Indian power might emerge as victor.
The only question was, which one?
Men of War
 
Gingee is one of the most spectacular forts in the Carnatic. Perched on a steep hill that rises abruptly out of the haze of the plains, it dominates the hinterland of the Coromandel coast. But by the middle of the eighteenth century it was garrisoned not by the British, nor by the area’s local rulers. Gingee was in the hands of the French.
The English conflict with the Dutch had been commercial. At root, it had been strictly business, a competition for market share. The struggle with France – which was to rage in every corner of the globe like a worldwide version of the Hundred Years War – would decide who would
govern
the world. The outcome was far from a foregone conclusion.
BOOK: Empire: The Rise and Demise of the British World Order and the Lessons for Global Power
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