East India Company
In 1577, Francis Drake set out on an expedition from England to plunder Spanish settlements in South America. He sailed the Golden Hind across the Pacific Ocean and reached the Moluccas, also known as the Spice Islands. There he met Sultan Babullah and exchanged linen, gold, and silver for a large haul of exotic spices including cloves and nutmeg. Drake returned to England in 1580 after completing his circumnavigation. Investors received a return of some 5,000 percent on their money. This enormous profit started an important element in the eastern design during the late sixteenth century.
Soon after the defeat of the Spanish Armada in 1588, captured Spanish and Portuguese ships enabled English voyagers to travel the globe. London merchants presented a petition to Elizabeth I for permission to sail to the Indian Ocean. The aim was to deliver a decisive blow to the Spanish and Portuguese monopoly of far-eastern trade. James Lancaster led the first English expedition to reach India that way in 1591. He sailed around the Cape of Good Hope to the Arabian Sea with two other ships financed by the Levant Company.
The biggest prize that galvanised English trade came at the Battle of Flores on the 13th of August 1592. Walter Raleigh and the Earl of Cumberland seized the Madre de Deus, a large Portuguese carrack. When she arrived in Dartmouth she carried chests of jewels, pearls, gold, silver coins, ambergris, cloth, tapestries, pepper, cloves, cinnamon, nutmeg, benjamin, red dye, cochineal and ebony. Her rutter contained vital information on China, India, and Japan trade routes. In 1596 three more English ships sailed east but all were lost at sea. A year later Ralph Fitch returned from a nine-year overland journey to Mesopotamia, the Persian Gulf, the Indian Ocean, India and Southeast Asia.
In 1599, a group of prominent merchants and explorers met to discuss a potential East Indies venture under a royal charter. The group included Stephen Soame, then Lord Mayor of London; Thomas Smythe, a powerful London politician and administrator; Richard Hakluyt, writer and proponent of English colonisation of the Americas; and several other sea-farers who had served with Drake and Raleigh. On the 22nd of September they stated their intention to venture into the East Indies and invested £30,133. Two days later they reconvened and resolved to apply to the Queen for support.
They convened again a year later on the 31st of December 1600 and succeeded in obtaining the charter. Elizabeth granted her charter to their corporation named Governor and Company of Merchants of London trading into the East Indies. For fifteen years the charter awarded the company a monopoly on English trade with all countries east of the Cape of Good Hope and west of the Straits of Magellan. Any traders there without a licence faced forfeiture of ships and cargo as well as imprisonment at the royal pleasure. Thomas Smythe became the first governor of the company with twenty-four directors making up a Court of Directors.
Sir James Lancaster commanded the first East India Company voyage in 1601 aboard the Hector. In March 1604 Sir Henry Middleton commanded the second voyage. General William Keeling led the third voyage aboard Red Dragon from 1607 to 1610 along with Hector under Captain William Hawkins and Consent under Captain David Middleton. Early in 1608 Alexander Sharpeigh was made captain of the Ascension and commander of the fourth voyage. Two ships sailed from Woolwich on the 14th of March 1608 but this expedition was lost.
Initially the company struggled in the spice trade because of competition from the Dutch East India Company. The Dutch gained the upper hand by establishing a stronghold in the Spice Islands now Indonesia. They enforced a near-monopoly through aggressive policies that eventually drove the EIC to seek trade opportunities in India instead. The English company opened a factory trading post in Bantam on Java on its first voyage. Imports of pepper from Java remained an important part of the company's trade for twenty years.
Company ships docked at Surat in Gujarat in 1608. The company's first Indian factory was established in 1611 at Masulipatnam on the Andhra Coast of the Bay of Bengal. Its second factory followed in 1615 at Surat. In 1615 James I instructed Sir Thomas Roe to visit the Mughal Emperor Nur-ud-din Salim Jahangir to arrange for a commercial treaty. This mission gave the company exclusive rights to reside and establish factories in Surat and other areas. The emperor sent a letter to James through Sir Thomas Roe.
The company eclipsed the Portuguese Estado da Índia which had established bases in Goa, Chittagong, and Bombay. Portugal later ceded Bombay to England as part of the dowry of Catherine of Braganza on her marriage to King Charles II. By 1647 the company had 23 factories and settlements in India with 90 employees. Many major factories became some of the most populated and commercially influential cities in Bengal including Fort William in Bengal, Fort St George in Madras, and Bombay Castle.
In 1707 Bengal and other regions under Mughal rule fell into anarchy after the death of the Mughal Emperor Aurangzeb. A series of large-scale rebellions and the collapse of the Mughal taxation system led to effective independence of virtually all pre-1707 Mughal fiefs. The EIC took advantage of this chaos by slowly assuming direct control of the province of Bengal. They fought numerous wars against the French for control of the east coast of the subcontinent.
Robert Clive led the company to victory against Joseph François Dupleix commander of the French forces in India during the Seven Years' War. In 1757 the Law Officers of the Crown delivered the Pratt, Yorke opinion distinguishing overseas territories acquired by right of conquest from those acquired by private treaty. This legal distinction allowed the Crown to claim sovereignty over conquered lands while leaving property rights in question.
The primary source of the Company's profits in Bengal became taxation in conquered and controlled provinces. Factories became fortresses and administrative hubs for networks of tax collectors that expanded into enormous cities. The Mughal Empire was the richest in the world in 1700 but the East India Company tried to strip it bare for a century thereafter. Bengal suffered the worst of Company tax farming highlighted by the Great Bengal famine of 1770.
In 1634 the Mughal emperor Shah Jahan extended his hospitality to English traders to Bengal. By then customs duties were completely waived for the English in Bengal. The Company's mainstay businesses included cotton, silk, opium, indigo dye, saltpetre and tea. Saltpetre also known as potassium nitrate served as a primary ingredient in gunpowder. Sir John Banks negotiated contracts for the king including loans and exports of 250 tons of saltpetre in 1672.
The company started selling opium to Chinese merchants in the 1770s in exchange for goods like porcelain and tea. This caused a series of opioid addiction outbreaks across China in 1820. The ruling Qing dynasty outlawed the opium trade in 1796 and 1800 but British merchants continued illegally nonetheless. The Qing destroyed tens of thousands of chests of opium already in the country. This series of events led to the First Opium War in 1839 which involved a succession of British naval attacks along the Chinese coast over several months.
As part of the Treaty of Nanjing in 1842 the Qing were forced to give British merchants special treatment and the right to sell opium. The Chinese also ceded territory to the British including the island of Hong Kong. By 1801 Henry Dundas reported to the House of Commons that the company had become the single largest player in the British global market.
Bengal in particular suffered the worst of Company tax farming highlighted by the Great Bengal famine of 1770. Statues, jewels, and various other valuables moved from the palaces of Bengal to townhouses of the English countryside. Dalrymple calls it the single largest transfer of wealth until the Nazis. What was in the 17th century the production capital of the world for textiles became a market for British-made textiles.
The East India Company's archives suggest its involvement in the slave trade began in 1684 when Captain Robert Knox was ordered to buy and transport 250 slaves from Madagascar to St Helena. The company began using and transporting slaves in Asia and the Atlantic in the early 1620s according to Richard Allen. Eventually the company ended the trade in 1834 after numerous legal threats from the British state and the Royal Navy in the form of the West Africa Squadron.
In May 1772 EIC stock price rose significantly. In June Alexander Fordyce lost £300,000 shorting EIC stock leaving his partners liable for an estimated £243,000 in debts. When this information became public twenty to thirty banks across Europe collapsed during the British credit crisis of 1772, 1773. In India alone the company had bill debts of £1.2 million. Isaac de Pinto predicted that peace conditions plus an abundance of money would push East Indian shares to exorbitant heights.
On the 14th of January 1773 directors asked for a government loan and unlimited access to the tea market in American colonies both granted. This led to the Boston Tea Party of 1773 where protesters boarded British ships and threw tea overboard. Governor Thomas Hutchinson refused to allow the tea to be returned to Britain. These incidents contributed to the American Revolution and independence of the American colonies.
The prosperity officers enjoyed allowed them to return to Britain and establish sprawling estates and businesses while obtaining political power such as seats in the House of Commons. Ship captains sold their appointments to successors for up to £500. Pressure from ambitious tradesmen and former company associates pejoratively termed Interlopers by the company led to the passing of the deregulating act in 1694.
This act allowed any English firm to trade with India unless specifically prohibited by act of parliament thereby annulling the charter that had been in force for almost 100 years. When the East India Company Act 1697 was passed in 1697 a new parallel East India Company floated under state-backed indemnity of £2 million. The powerful stockholders of the old company quickly subscribed £315,000 in the new concern and dominated the new body. The two companies wrestled with each other for some time both in England and in India.
The company's trade monopoly with India abolished in Charter Act 1813. Monopoly with China ended in 1833 ending trading activities rendering its activities purely administrative. A constant battle between company lobby and Parliament followed for decades. The company sought permanent establishment while Parliament would not willingly allow greater autonomy so relinquish opportunity to exploit profits.
In aftermath of Indian Rebellion of 1857 and under provisions of Government of India Act 1858 British Government nationalised company. British government took over Indian possessions administrative powers machinery and armed forces. Company had already divested itself commercial trading assets in India in favour of UK government in 1833 with latter assuming debts and obligations serviced from tax revenue raised in India.
Shareholders voted to
accept annual dividend of 10.5% guaranteed for forty years likewise funded from India with final pay-off to redeem outstanding shares. Debt obligations continued beyond dissolution only extinguished by UK government during Second World War. Company remained in vestigial form continuing to manage tea trade on behalf of British Government until East India Stock Dividend Redemption Act 1873 came into effect the 1st of January 1874.
This act provided formal dissolution of company on the 1st of June 1874 after final dividend payment and commutation or redemption of stock. Where possible stock redeemed through commutation exchanging holdings for other securities or money agreed with stockholders. Stockholders who did not agree to commute holdings had stock compulsorily redeemed on the 30th of April 1874 by payment of £200 for every £100 of stock held. The Times commented on the 8th of April 1873 about the proceedings.
Company headquarters London was East India House in Leadenhall Street. After occupying premises in Philpot Lane from 1600 to 1621 then Crosby House Bishopsgate from 1621 to 1638 and Leadenhall Street from 1638 to 1648 moved into Craven House Elizabethan mansion known as East India House by 1661. Building completely rebuilt enlarged 1726, 1729 further remodelled expanded 1796, 1800 finally vacated 1860 demolished 1861, 1862 site now occupied by Lloyd's building.
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Common questions
When was the East India Company founded and what charter did it receive?
The East India Company received its royal charter from Queen Elizabeth I on the 31st of December 1600. This charter granted the corporation a monopoly on English trade with all countries east of the Cape of Good Hope and west of the Straits of Magellan for fifteen years.
Who were the key figures involved in establishing the East India Company in 1599?
A group including Stephen Soame, Thomas Smythe, and Richard Hakluyt met to discuss the venture on the 22nd of September 1599. They invested £30,133 and later secured the royal charter that established the Governor and Company of Merchants of London trading into the East Indies.
How did the East India Company profit from Bengal after 1707?
Following the death of Mughal Emperor Aurangzeb in 1707, the company assumed direct control of Bengal and shifted its primary profit source to taxation. Factories became fortresses and administrative hubs for tax collectors, leading to events like the Great Bengal famine of 1770.
What role did the East India Company play in the Opium War against China?
The company began selling opium to Chinese merchants in the 1770s which led to addiction outbreaks and the First Opium War starting in 1839. The Treaty of Nanjing in 1842 forced the Qing dynasty to allow British merchants to sell opium and ceded territory including Hong Kong to Britain.
When was the East India Company officially dissolved and what happened to its stockholders?
Formal dissolution occurred on the 1st of June 1874 following the East India Stock Dividend Redemption Act 1873. Stockholders who did not agree to commute holdings had their stock compulsorily redeemed by payment of £200 for every £100 of stock held on the 30th of April 1874.