Lessons Of Empire: India, 60 Years After Independence

by Nick Robins and Pratap Chatterjee, Special to CorpWatch

CorpWatch.org, CA

Aug 14 2007

Cartoon by Khalil Bendib

Two villagers who left their mud and wood huts last month to travel
to London — Kumuti Majhi and Phulme Majhi — were a stark contrast to
the 212,000 wealthy Indians who visited Britain last year on shopping
expeditions where they outspent Japanese tourists. The villagers’
mission, rather than the acquisition of designer clothing or the latest
electronics, was to try to save the livelihoods of their small tribe
that grows millet, fruit and spices in the lushly-forested Niyamgiri
hills in eastern India.

On August 1, 2007, the Majhis spoke out at the annual general meeting
of Vedanta Resources PLC, a British multinational that is poised to
dig a new bauxite mine that threatens the village of Jaganathpur.

While Vedanta is incorporated in Britain, it is owned by Anil Agarwal,
the world’s 230th richest man according to the Forbes 2007 list,
a former scrap metal merchant who was born in eastern India.

(See Vedanta Undermines Indian Communities, by Nityanand Jayaraman.)

The timing of the Mahji’s trip to Britain and the protests back in
India have a much wider significance. 2007 is marked by a trinity
of anniversaries that recall India’s conquest, first struggles and
eventual liberation from British rule. On August 14th, India celebrates
60 years of independence. Earlier in the year, commemorations took
place for the 150th anniversary of the great rebellion against
British rule in 1857 — known in the UK as the ‘mutiny’ and on the
sub-continent as the ‘first war of independence.’ This trinity of
historic milestones is completed with the 250th anniversary of the
pivotal battle of Plassey in June 1757, when the private army of
Britain’s East India Company (which was often referred to simply as
the "Company") defeated the forces of the Nawab (ruler) of Bengal
(in eastern India), ushering in first corporate and then imperial

It is this legacy of collusion between global corporations and
the expansionist state that makes this year so poignant and full
of enduring lessons. Its history provides timeless lessons on how
(and how not) to confront corporate power with protest, litigation,
regulation, rebellion and, ultimately, corporate redesign. Many of
today’s corporate struggles are prefigured in the resistance to the
Company’s rise to power. Again and again, "the return of the East
India Company" is used as a catch-phrase to describe the recent influx
of multinationals into India, whether global mining corporations or
foreign business more generally.

And the Mahji’s journey follows in the footsteps of others who have
travelled to London to seek redress from corporate abuse. In August
1769, for example, two Armenian merchants, Johannes Rafael and Gregore
Cojamaul arrived at London’s docks. The two were rich men and had
made their fortunes in India’s most prosperous region, Bengal.

However, Rafael, Cojamaul and two others had been summarily arrested by
the Company’s chief executive in Bengal, Harry Verelst, who then held
them for more than five months under guard. When they were released,
they found that the Company had pressured its puppet, the Nawab of
Bengal, to change the rules of the game and ban all Armenians from
the Bengal market. Sailing around the world to where the Company was
headquartered, Rafael and Cojamaul appealed to its board of directors,
complaining of their "cruel and inhuman" treatment.

The striking continuity of protest over the centuries is largely buried
in today’s celebration of India’s surge to economic prominence. Tata’s
acquisition of Anglo-Dutch steel group Corus earlier in the year has
been seen by many as symbolizing the end of Britain’s era of industrial
supremacy. Tata had already bagged the UK’s iconic tea blend, Tetley,
and its automotive arm may be lining up a bid for Land Rover. Writing
recently in the Financial Times, Malvinder Hohan Singh, the chief
executive of Indian pharmaceutical company Ranbaxy, caught the mood:
"500 years ago, a company was formed in London that directly led to
British rule in India [and] there appears to be some concern that
there is evidence of a reverse trend."

This theme of reversal has also influenced India’s popular media,
most strikingly in a TV advertisement for Rajnigandha pan masala. Set
in London, the ad shows an Indian tycoon stopping his car in front of
the East India Company’s headquarters and announcing to his secretary
that he wants to buy the firm: "They ruled us for 200 years, and now
it’s our turn."

But while the media celebrates India’s rise as the new economic
emperors, they would also do well to reflect on the history of the
world’s first major multinational.

Down with the East India Company!

Established on a cold New Year’s Eve in 1600, Britain’s East India
Company is unarguably the mother of the modern corporation. In a career
spanning almost three centuries, the Company bridged the mercantilist
world of chartered monopolies and the industrial age of corporations
accountable solely to shareholders. The Company’s establishment by
royal charter, its monopoly of all trade between Britain and Asia and
its semi-sovereign privileges to rule territories and raise armies
certainly mark it out as a corporate institution from another time. Yet
in its financing, structures of governance and business dynamics,
the Company was undeniably modern.

It may have referred to its staff as servants rather than executives,
and communicated by quill pen rather than email, but the key features
of the shareholder-owned corporation are there for all to see.

Beyond its status as a corporate pioneer, the sheer size of its
operations makes the Company historically significant on a global
scale. At its height, the Company’s empire of commerce stretched
from Britain across the Atlantic and around the Cape to the Gulf and
on to India. From its headquarters at East India House on London’s
Leadenhall Street, the Company managed an extensive import-export
business. Trading posts were established at St. Helena in the
mid-Atlantic, where Napoleon drank Company coffee in exile.

‘Factories’ were also established at Basra and Bandar Abbas in the
Middle East. But it was in India that the Company’s impacts were
most profound. Some of India’s major cities grew on the back of the
Company’s trade, not least Bombay (Mumbai), Calcutta (Kolkata) and
Madras (Chennai). Beyond these coastal ports, the Company established
a huge land empire, first as an opportunistic quest for extra revenues
and later as an end in itself.

Always with an eye to the share price and their own executive perks,
the Company’s executives in India combined economic muscle with
its small, but effective private army to establish a corporate state
across large parts of the sub-continent. Plassey was the turning point
when the Company’s forces defeated the Nawab of Bengal and placed
its puppet on the throne. This is often regarded as the contest that
founded the British empire in India. But it is perhaps better viewed
as the Company’s most successful business deal, generating a windfall
profit of £2.5 million for the Company and £234,000 for Robert Clive,
the chief architect of the acquisition.

Today, this would be equivalent to a £232 million corporate windfall
and a cool £22 million success fee for Clive.

Yet, the Company’s footprint did not stop there, but stretched on to
South-East Asia and beyond to China and Japan. Penang and Singapore
were both ports purchased by the Company in an age when territories
could be bought and sold like commodities. And if India was the site
of the Company’s first commercial triumphs, it was in China that it
made its second fortune. The Company’s ‘factory’ at Canton was the
funnel through which millions of pounds of Bohea, Congo, Souchon and
Pekoe teas flowed west to Britain, Europe and the Americas. In the
other direction came first silver and later a flood of Indian-grown
opium, smuggled in chests proudly bearing the Company chop (or logo).

>From the beginning, the Company’s monopoly control over trade with
Asia had been disputed by its competitors back in Britain. But it
was with the Company’s acquisition of unprecedented economic power
following Plassey that it came to be seen as a more structural threat
to political liberty back home. For the editor of London’s Gentleman’s
Magazine, by April 1767 it had become the ‘imperious company of East
India merchants.’ For this normally sedate magazine, the prospect
was bleak and boiled down to "whether the freedom or the slavery
of this island will result." Not surprisingly, perhaps, this fiery
article was concluded with a defiant cry — "down with that rump of
unconstitutional power, the East India Company." Six years later, as
American patriots organised to counter the threat of the Company’s
newly won monopoly of the Atlantic tea trade, Rusticus’ writing in
east coast newspaper, The Alarm, also made clear his opposition:
"Their conduct in Asia, for some Years past, has given simple Proof,
how little they regard the Laws of Nature, the Rights, Liberties
or Lives of Men." Looking back, the uprising that eventually led to
America’s independence was sparked as much by hostility to corporate
monopoly as it was to taxation without representation.

The Company’s malpractice also featured heavily in Adam Smith’s
Inquiry into the Nature and Causes of the Wealth of Nations,
published in 1776. Written in the wake of the Company’s speculative
‘Bengal Bubble,’ Smith dissected the corporation as an institution
and evaluated the factors that led to its own particular crisis.

Uniquely, Smith was emphatic in downplaying the actions of individuals
as the root cause of the problems. ‘I mean not to throw any odious
imputation upon the general character of the servants of the East India
Company,’ he wrote, stressing that ‘it is the system of government,
the situation in which they are placed, that I mean to censure.’ The
problem was one of corporate design.

For Smith, the Company held the secret to one of the greatest
puzzles of his time: explaining the distribution of benefits from the
rapidly increasing integration of the world economy. "The discovery
of America, and that of a passage to the East Indies by the Cape of
Good Hope," argued Smith "are the two greatest and most important
events recorded in the history of mankind." Smith’s belief was that
the full potential of this dramatic opening had not been realized,
owing to a combination of colonies and corporations. For the natives
of both the East and West Indies, "all the commercial benefits
have been sunk and lost" in a series of "dreadful misfortunes." In
Asia, the agents of this pain were the Dutch and British East India
Companies, monopoly corporations that he condemned as "nuisances in
every respect." Not only did people pay for "all the extraordinary
profits which the company may have made," argued Smith, but they also
suffered from "all the extraordinary waste which the fraud and abuse,
inseparable from the management of the affairs of so great a company,
must necessarily have occasioned." Smith was certainly an enemy of
the over-mighty state, but he was also opposed to the over-mighty
corporation, arguing strongly against the market power of monopolies
and the speculative dynamics of stock-market listed firms.

Perhaps what infuriated the Company’s contemporaries most through the
seventeenth, eighteenth and nineteenth centuries was its impunity,
its ability to shrug off the consequences of its actions. For an
insidious corollary to the Company’s speculative drive for market
dominion was its willingness to engage in immense crimes safe in the
knowledge that domestic and international remedies were not in place.

A large part of the problem lay in the legal void of the time,
with courts in both Europe and Asia wholly ill-equipped for bringing
corporations and their executives to account. This did not stop the
Company’s contemporaries from trying, most notably Adam Smith’s friend,
Edmund Burke.

It was Burke who first exposed how the Company had ‘radically and
irretrievably ruined’ India through its ‘continual Drain’ of wealth
— a phrase that would haunt the next 150 years of British presence
in India. In 1783, Burke introduced to make the Company accountable
to the British Parliament, arguing that its corporate charter carried
intrinsic duties: "this nation never did give a power without imposing
a proportionable degree of responsibility." It is said that when
one of the Company’s oldest Directors, William James, read Burke’s
bill, he died of shock. When Burke’s measure failed as a result of
an unholy alliance of Court and City, he took up a hopeless struggle
to impeach the Company’s most senior executive in India, the former
governor-general, Warren Hastings. Burke was merciless in his critique,
on one occasion describing how Bengali women had been violated by the
Company’s tax collectors: "They were dragged out, naked and exposed
to the public view, and scourged before all the peoples they put the
nipples of the women into the sharp edges of split bamboos and tore
them from their bodies." For seven long years, the trial continued,
ending as expected with a grateful House of Lords acquitting Hastings
of "high crimes and misdemeanours."

To get the founder of liberal economics and the father of modern
conservatism both struggling to tame the Company says something for
the bipartisan threat that the corporation posed to Britain during the
Enlightenment. And Smith and Burke were joined by many others — poets,
playwrights and pamphleteers — who expected future generations to
take a similarly hard look at the Company’s performance. "Historians
of other nations (if not our own)," wrote the poet Richard Clarke
in 1773, "will do justice to the oppressed of India and will hand
down the Memory of the Oppressors to the latest Posterity." In the
introduction to his long satire, The Nabob, or Asiatic Plunders,
Clarke urged his countrymen "to perpetuate an honest indignation
against these enemies of mankind."

A Legacy of Loot

Yet, in spite of Smith’s profound analysis and Burke’s passionate
rhetoric, imperial interests won out against principle, consigning
India to an empire of scorn and extraction. The drain of wealth was
simply too attractive to renounce — even though one lone MP did
call for Britain to withdraw from India back in the 1780s. Combining
commercial domination with control over Bengal’s tax system, the
Company was able to restructure the richest province of what had once
been the Mughal Empire for its own ends. Textiles were shipped back
to London, paid for by Bengal’s own taxes, and peasants were forced to
grow opium to be sold exclusively at below-cost prices to the Company,
who then engineered its illegal export into China. If force and fraud
were the tools by which the Company turned the terms of trade in its
favour in India, it was opium that eventually had the same effect with
the Qing Empire. For millennia, Europe had exported bullion to Asia
in return for luxury goods, and when the Company was formed in 1600,
Britain accounted for a paltry 2 percent of global output, compared
with India’s 22 percent and China’s percent. By the time Britain
finally departed India’s shores three and a half centuries later,
its national income was more than 50 percent greater than that of
its former colony. And it was the East India Company that acted as
one of the chief agents in engineering this great switch in global

"What is happening today with the rise of India and China is not some
miraculous novelty — as it is usually depicted in the Western press,"
writes historian William Dalrymple in the August 2nd issue of Time
magazine, "so much as a return to the traditional pattern of global
trade in the medieval and ancient world, where gold drained from West
to East in payment for silks and spices and all manner of luxuries
undreamed of in the relatively primitive capitals of Europe."

Centuries after the Company’s demise, its physical presence in India
continues to impress: Its remains stretch from ruins of its fort at
the pepper port of Tellicherrry on the west coast, to the grandeur
of Chennai’s Fort St. George on India’s eastern shore. The mark is
greatest in Kolkata, a "company town" of immense proportions.

But the Company’s powerful legacy also endures in India’s public memory
as an inspiration to the nationalist struggle for independence. For
India’s first prime minister, Jawaharlal Nehru, the Company lay at
the root of the oppression that he fought. "The corruption, venality,
nepotism, violence and greed of money of these early generations of
British rule in India," Nehru thundered in The Discovery of India,
"is something which passes comprehension."

Looking back at the Company’s conquest of India, Nehru noted "it is
significant that one of the Hindustani words which has become part
of the English language is loot."

Traditions of Domination and Resistance

Today, after a decade of economic liberalization in India, this
critical analysis continues to lie close to the surface. For many
Indians, the Company’s story has two profound morals: first, that
multinational companies want not just trade, but power, and second,
that division and betrayal among Indians enables foreign rule. The East
India Company was a profit-making company that generated not only great
wealth, but immense suffering, most notably in the horrific Bengal
famine of 1769-70. Just as corporations today should be judged by the
impacts of their core business rather than their often peripheral
donations to cultural events, so the East India Company has to be
assessed on the basis of its underlying activities rather than the
occasional philanthropy of its executives.

Far from being a dusty relic, the East India Company exemplifies the
constant battle within corporations between the logic of exchange and
the desire for domination. Two centuries on, it demonstrates that
the quest for corporate accountability is a perpetual exercise in
directing the energies of merchants and entrepreneurs so that their
private passions do not undermine the public interest. The lesson
from Smith is the imperative to keep corporate size in check while
globalization is fostering ever-increasing commercial concentration.

And from Burke, we can take the essential importance of placing
corporate conduct within a framework of justice, establishing legal
mechanisms to hold corporations to account.

At its heart, the Company’s business model combined speculation at home
with aggression abroad. It was Karl Marx, writing in the 1850s as the
Company limped towards its end, who pithily captured the drive that
lay behind its remorseless rise to power. It was not any imperial
project that had led it on, he wrote, but rather the Company had
"conquered India to make money out of it."

Just as in the days of the Company, India remains the place where
corporate practice meets strong resistance, such as ongoing protests
to bring justice for the thousands who were poisoned or killed in
the 1984 deadly gas leak at Union Carbide’s Bhopal factory, or the
movement in the 1990s to prevent Enron’s Dabhol natural gas power
project in Maharashtra from going on-line.

Challenges to multinational projects continue across the country today:
In March 2007, after police shot to death 14 people protesting against
investment plans of the Salim Group of Indonesia, the chemical hub in
West Bengal Nandigram was cancelled. Nor is it just foreign companies
that have faced fierce resistance. Protesters have targeted India-based
billionaires including the Tatas who planned to set up a major car
factory in Singur, West Bengal.

And like the Company, corporate impunity remains a constant concern.

Roger Moody, a British campaigner from Mines and Communities, notes
that Vedanta’s subsidiary, Sterlite Gold, stands accused of a raft of
criminal acts in Armenia, including mining more gold than permitted by
the government, deliberately under-valuing its reserves, and failing
to properly dispose of mine wastes. Last November, in Zambia, Vedanta
was indicted for willfully using a defective pipeline to dispose of
highly toxic tailings from the country’s largest copper mine, KCM,
which it purchased two years earlier. It had also been constructing
Zambia’s premier copper smelter without obtaining official permission
from the Zambian government.

Last week, the Majhis took home a small concession from London. A
Vedanta spokesperson said the company’s chairman, Anil Agarwal, would
be "very happy" to visit the controversial area with the villagers.

But, the villagers understood that would not be enough. "We are not
going to allow this [destruction] to happen," Kumuti Majhi told a
news conference in New Delhi. "We have been living in this mountain
range for generations, and we worship Niyamgiri as a living god."

Warm words were equally insufficient for Rafael and the other Armenian
merchants back in the time of the East India Company. When the
Company’s directors arrogantly brushed them aside, they went to court,
suing the Company’s chief executive in the region, Harry Verelst,
for damages. An intense legal battle then unfolded with claim and
counter-claim lasting until 1777, when the courts found Verlest guilty
of "oppression, false imprisonment and singular depredations." The
Armenians won a total of £9,700 in compensation — over £800,000 in
today’s money. Thousands of miles away from the scene of the crime,
the principle of extraterritorial liability for corporate malpractice
had been established in Georgian London.

Will Vedanta and others repeat the excesses of the British East India
Company, or can systems of accountability finally be established
that protect the rights of the weakest — just as Burke hoped for
centuries ago? Much depends on what investors, regulators and society
learn from the lessons of the past.

Corporations, like people, have life spans. The British East India
Company is long dead, but the quest for wealth it embodied endures.

So, too — as evidenced by popular movements and persistent campaigners
like Kumuti Majhi and Phulme Majhi — does resistance.

* Nick Robins is author of The Corporation that Changed the World: How
the East India Company Shaped the Modern Multinational (Pluto, 2006)