East India Company
On the 31st of December 1600, Queen Elizabeth I granted a charter to a group of merchants and explorers, giving birth to what would become the largest corporation the world had ever seen. The company they formed would eventually command armies twice the size of Britain's own, govern hundreds of millions of people, and account for half of all global trade. It would trigger famines that killed millions, ignite wars that reshaped continents, and plant the seeds of an American revolution. How did a trading company chartered to sell spices end up ruling an entire subcontinent? What did it mean for a private corporation to hold powers of taxation, imprisonment, and warfare over the lives of ordinary people? And how does a company born in an inn opposite a church in Bishopsgate end up leaving a scar across the history of Asia that is still felt today?
Francis Drake sailed from England in 1577 in search of Spanish gold and silver, but what he returned with proved just as valuable. When Drake's ship, the Golden Hind, reached the Moluccas, the Sultan Babullah received him. In exchange for linen, gold, and silver, the English walked away with a haul of cloves and nutmeg. The return on Drake's circumnavigation was staggering: investors received roughly 5,000 percent on their money. That number lit a fire under London's merchant class.
The Portuguese and Spanish had a monopoly on the routes to these islands, and England wanted a way in. When England went to war with Spain and Portugal in 1585, legal trade was cut off entirely, and Queen Elizabeth turned to privateering. The prize that truly galvanised English ambitions came on the 13th of August 1592, when Walter Raleigh and the Earl of Cumberland seized a massive Portuguese carrack called the Madre de Deus at the Battle of Flores. When she was brought into Dartmouth, she was the largest vessel England had ever seen. Her cargo held jewels, pearls, gold, silver coins, pepper, cloves, cinnamon, nutmeg, and a ship's rutter: a handbook containing the China, India, and Japan trade routes. That handbook was worth as much as the spices.
By 1599 a circle of prominent merchants and adventurers had gathered to turn ambition into a charter. Ralph Fitch, who had spent nine years travelling overland through Mesopotamia, the Persian Gulf, and India before returning to England in 1597, was consulted on Indian affairs and became one of their most valuable sources of intelligence.
On the 22nd of September 1599, the group stated their intention to invest £30,133 in a voyage to the East Indies. Two days later they reconvened, and by the time they were done they had raised that figure to £68,373. A year later, on the 31st of December 1600, the Queen responded favourably. George, Earl of Cumberland and 218 others, including James Lancaster and several former Lords Mayor of London, received a royal charter granting the Governor and Company of Merchants of London trading into the East Indies a fifteen-year monopoly on all English trade east of the Cape of Good Hope and west of the Straits of Magellan.
The penalty for trading without the company's licence was severe: forfeiture of ships and cargo, with half going to the Crown and half to the company, plus imprisonment at the royal pleasure. Thomas Smythe was named the company's first governor. Twenty-four directors, called committees, made up a Court of Directors. Business was initially transacted at the Nags Head Inn, opposite St Botolph's church in Bishopsgate.
King Charles II took the company's powers even further. In a series of five acts around 1670, he granted the company the rights to acquire territory, mint money, command fortresses and troops, form alliances, make war and peace, and exercise civil and criminal jurisdiction over any areas it acquired. What had begun as a trade licence had become something closer to a sovereign state.
The company's first Indian factory was established in 1611 at Masulipatnam on the Andhra Coast, and its second in 1615 at Surat. In the same year, James I instructed Sir Thomas Roe to visit the Mughal Emperor Jahangir to negotiate a commercial treaty. The mission succeeded. Jahangir's letter to James I promised that English merchants would have free liberty in any part of his dominions, and that neither Portugal nor any other power would dare to molest them.
That diplomatic cover mattered enormously, because the Indian Ocean was a violent place. English traders regularly fought the Dutch and the Portuguese. In 1612 the company won a significant victory over the Portuguese at the Battle of Swally near Surat. In September 1695, the pirate Captain Henry Every attacked a Mughal convoy returning from Mecca near the Straits of Bab-el-Mandeb. He took some £40,000 of silver from the escort ship, and then overtook the treasure-laden Ganj-i-Sawai, the largest ship operational in the Indian Ocean. The total loot from that vessel ran between £325,000 and £600,000, including 500,000 gold and silver pieces. The Ganj-i-Sawai became known as the richest ship ever taken by pirates.
The consequences for the company were severe. The furious Emperor Aurangzeb ordered four company factories closed and their officers imprisoned. Parliament declared the pirates enemies of humanity, and the government put a £500 bounty on Every's head. The result was what sources describe as the first worldwide manhunt in recorded history. To keep the Mughals from expelling them entirely, the company promised to pay all financial reparations. When the company had itself provoked a war with the Mughals in 1686, attacking the governor of Bengal by sea, the result was a siege of Bombay, a fine, and the humiliation of company envoys prostrating themselves before Emperor Aurangzeb's court to beg forgiveness.
The death of Mughal Emperor Aurangzeb in 1707 changed everything. His empire fractured into anarchy. Maratha, Afghan, and usurper armies fought over Delhi. The company, which had spent its first century carefully cultivating its position within the Mughal court, was positioned to take advantage. The Mughal Empire had been the richest in the world in 1700. The company spent the century that followed, as historian Dalrymple puts it, attempting what he calls "the single largest transfer of wealth until the Nazis."
The primary instrument of the company's military expansion was the Sepoy: locally recruited soldiers trained and equipped with European methods. Line infantry with disciplined musket fire and field artillery proved repeatedly superior to the mounted forces that had dominated South Asian battlefields for a thousand years. The Mughals had integrated cannon so thoroughly into their armies that they fought with cannon mounted on elephants. None of that was enough against company sepoys in disciplined formation.
The Battle of Plassey in 1757 marked the turning point at which the company began its direct rule of large territories. By 1858, most of what is now India, Pakistan, Bangladesh, and Lower Burma was either governed directly by the company or controlled through princely states bound to it by treaty. The company had also installed a young Mughal prince as Emperor while positioning itself as his protectors, making the arrangement appear legitimate while exercising real power from Bengal.
Under this rule, the company used torture to extract taxes. It reduced much of the population to poverty. Its policies directly caused the Great Bengal Famine of 1770, in which 10 million people starved to death. What had once been the world's leading producer of textiles was forced to become a captive market for British-made cloth instead. Statues, jewels, and other valuables were removed from the palaces of Bengal to the country houses of England.
The British began trading with China in 1699. By 1715 the company had established a permanent factory in Guangzhou. In the 1770s the company began selling opium to Chinese merchants in exchange for porcelain and tea. The resulting opioid addiction outbreaks spread across China in the years around 1820. The Qing dynasty outlawed the opium trade in both 1796 and 1800, but British merchants continued the trade illegally. Eventually the Qing destroyed tens of thousands of chests of opium. The First Opium War broke out in 1839 and ended with the Treaty of Nanjing in 1842, under which China was forced to grant British merchants special trading rights and cede the island of Hong Kong.
Back in Britain, the company's finances were chronically unstable despite its enormous reach. By 1772, the EIC stock price had risen sharply, then spectacularly collapsed. A trader named Alexander Fordyce lost £300,000 shorting company stock, leaving his partners liable for an estimated £243,000 in debts. When this became public, between 20 and 30 banks across Europe collapsed during the British credit crisis of 1772-1773. In India alone, the company had bill debts of £1.2 million.
The company held eighteen million pounds of tea in British warehouses that it could not sell. On the 14th of January 1773, its directors asked Parliament for a government loan and unlimited access to the tea market in the American colonies. Both were granted. The result was that the East India Company was given a competitive advantage over colonial American tea importers, which led directly to the Boston Tea Party of 1773, when protesters boarded British ships and threw the tea overboard. Governor Thomas Hutchinson refused to allow the tea to be returned to Britain, a decision that became one of the immediate triggers of the American Revolution.
The Indian Rebellion of 1857 ended the company's rule. Under the Government of India Act 1858, the British Crown assumed direct control of present-day Bangladesh, India, Pakistan, and Myanmar, forming what became known as the British Raj. The company's armies were absorbed by the British government. Its administrative machinery was taken over entirely.
The company did not disappear immediately. It continued in a vestigial form, managing the tea trade on behalf of the British government and supplying the island of Saint Helena, until the East India Stock Dividend Redemption Act of 1873 came into force. The company was formally dissolved on the 1st of June 1874. Its shareholders had already voted to accept an annual dividend of 10.5 percent, guaranteed for forty years, to be funded from tax revenue raised in India. The debt obligations the British government assumed on the company's behalf were not extinguished until the Second World War.
The Times, commenting on the Act in April 1873, wrote that the company had accomplished a work such as no other trading company in the whole history of the human race had ever attempted, and such as none was likely to attempt again. The company's records, which document the governance of much of Asia for over two centuries, are not held at the National Archives at Kew but instead at the British Library, as part of its Asia, Pacific and Africa Collections. The East India Club, founded in 1849 for the company's officers, still exists as a private gentlemen's club at 16 St James's Square in London.
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Common questions
When was the East India Company founded and dissolved?
The East India Company was founded on the 31st of December 1600 when Queen Elizabeth I granted its royal charter, and was formally dissolved on the 1st of June 1874 under the East India Stock Dividend Redemption Act 1873. It operated for over 270 years, transitioning from a trading company to a governing power before being nationalised following the Indian Rebellion of 1857.
How large were the East India Company's armies?
At its peak, the East India Company maintained three presidency armies totalling about 260,000 soldiers, which was twice the size of the British Army at certain times. These forces were largely composed of Sepoys, locally recruited soldiers trained and equipped with European methods.
What caused the Great Bengal Famine of 1770 and how many people died?
The Great Bengal Famine of 1770 was caused by policies enacted under East India Company rule, including the use of torture to extract taxes and measures that reduced much of the population to poverty. An estimated 10 million people starved to death during the famine.
How did the East India Company cause the Boston Tea Party?
In January 1773, the East India Company received government approval for a loan and unlimited access to the American colonial tea market. This gave the company competitive advantages over colonial American tea importers, leading protesters to board British ships in Boston harbour in 1773 and throw the tea overboard in what became known as the Boston Tea Party.
What role did the East India Company play in the opium trade with China?
The East India Company began selling opium to Chinese merchants in the 1770s in exchange for porcelain and tea, causing widespread addiction outbreaks across China by around 1820. After the Qing dynasty outlawed the trade in 1796 and 1800 and destroyed tens of thousands of chests of opium, the resulting conflict escalated into the First Opium War of 1839, which ended with the Treaty of Nanjing in 1842 and the cession of Hong Kong to Britain.
Where are the East India Company's historical records held today?
The records of the East India Company are held at the British Library in London as part of the Asia, Pacific and Africa Collections, not at the National Archives at Kew where other British government records are stored. Published catalogues cover the company's ships' journals and logs from 1600 to 1834, and many records are freely available online through an agreement with the Families in British India Society.
All sources
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