What Brought Down the East India Company? | History Hit

What Brought Down the East India Company?

Henry Sawyer

14 Aug 2020

The question of how best to manage transcended international corporations like Amazon or Apple remains an unresolved issue for Western governments. Governments fear that these ultra-powerful businesses threaten not only fair market competition, but potentially democracy itself.

Fortunately, today there are many checks and balances that limit the power and dominance of individual corporations.

Many of these were influenced by the story of the British East India Company (EIC), a joint-stock company that, at its height, held a total monopoly on the trade of a subcontinent and governed the destiny of hundreds of millions of people.

Map of the Indian peninsula from 1760 (Credit: Public Domain).

The Birth of the Company

The story of the EIC’s rise from a merchant house in the City of London to the ruler of the subcontinent is long and complicated. This is because the EIC’s timeline of growth was not spread across several decades like that of Apple or Amazon, but rather two centuries.

When performing at its best, the EIC was a highly lucrative enterprise for the British government, and a key component in its increasing dominance of global trade. Politically, it would act as an indispensable ally on numerous occasions for the British Military, most notably during the Seven Years’ War (1756-1763) with the EIC’s defeat of the French in India.

Yet no matter how well the EIC served Great Britain, its loyalty was ultimately to the shareholder, not Parliament or the Crown. This clash of commitment and interests had the potential to become a severe issue.

Still, for the first 170 years of the Company’s existence (1600-1770), the EIC remained unregulated and enjoyed a free-reign in extracting as much wealth as it wanted from its footprint on the Indian Peninsula. By 1873, however, the EIC ceased to exist.

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The Great Famine of 1770

1765 marked a significant high-point for the EIC. Rising tensions with several different Mughal factions in upper India manifested into a decisive battle at Buxar in 1764. The Company’s victory marked a critical shift in its trajectory.

Previously merely a trading company, the company became the de-facto governors of a significant territory, Bengal, with the 1765 Treaty of Allahabad.

This victory marked a peak in the EIC’s relationship with Great Britain. A once small company of merchants had succeeded in defeating the French the decade prior and now laid claim to a valuable region in upper India.

Control of Bengal, however, would be a test of whether the joint-stock company could effectively govern a state. In practice, the EIC would prove highly efficient at extracting revenue from Bengal through taxation and a monopoly on commodities like food.

The Mughal emperor Shah Alam transfers tax collecting rights for Bengal, Bihar and Orissa to the governor of Bengal, and thus the East India Company, August 1765, Benjamin West (Credit: Public Domain).

These economic policies would prove catastrophic in 1769/1770, however, as the Company’s monopoly on food exacerbated an existing food shortage caused by a failed monsoon and drought in 1769. What resulted was the Great Famine of 1770, the death sentence to upwards of 10 million Bengalis.

Despite the deep shock and protest amongst the British government and public, the Great Famine was the ‘first strike’ for the EIC not because of the humanitarian cost, but rather because it undermined the EIC’s ability to maintain itself financially.

The famine had debilitated the very tool the EIC needed to extract wealth from Bengal; local farmers and labourers.

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A drop in productivity soon manifested into spiralling military and administrative costs, worsened by a lack of demand for its tea in North America. The EIC’s identity as a highly profitable enterprise for the British government henceforth began to erode.

To warrant its continued support, Parliament moved to chip away at the EIC’s independence and free-reign. The 1773 Regulating Act formalised that the EIC was not just an economic organisation but a political one. As such it was subservient to Parliament’s sovereignty and control.

Regulatory acts would follow for the next 60 years, in 1784, 1786, 1793, 1813, and 1833. These reforms diluted the Company’s power and made it into an unofficial extension of the Civil Service.

The Company was, however, still a semi-independent organisation that enjoyed a range of trading and economic rights and privileges unrivalled by any other merchant company in the empire.

Company painting depicting an official of the East India Company, c. 1760 (Credit: Public Domain).

At the turn of the 1800s, the EIC had been victorious in another series of conflicts which expanded its territories further. By the 1850s these territories would dominate the majority of the subcontinent.

Thus, despite having become a financial burden for the Bank of England and the British government, both sides had reached a status quo; the EIC would continue to remain the direct controller of India, as long as it continued to serve the broader interests of the government and empire abroad.

There was no rational reason for the British government to act against Company rule and threaten this central pillar of British global dominance and wealth.

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The Indian Rebellion

This status quo would change with the Indian Rebellion of 1857 and its seismic effect on the British government, society and empire.

Regardless of the complex broader causes of the rebellion, the Company was implicated and held accountable due to the fact that it was their own army of Sepoys – Indian Infantryman – that mutinied en masse.

The revolt would spread across the subcontinent in several separate pockets. It was a serious rebellion that threatened not just Company rule but any future for the British in India.

Centuries of time and an inordinate amount of investment were threatened over a matter of months.

Indian mutiny map showing the position of troops on 1 May 1857, from ‘A handbook for travellers in India, Burma, and Ceylon’, 1911 (Credit: Public Domain).

The British military machine would eventually prove victorious but at a great financial, human and reputational cost.

Grave crimes were committed by both sides during the rebellion.

Some British actions remain a stain on the history of the British Empire and a source of nationalist resentment in India. 800,000 Indians would perish. 6000 Europeans, 15% of the entire European population in India, also died. The East India Company’s position was now untenable.

In 1858 the fate of Company rule in India was sealed with the Government of India Act. The act effectively nationalised the EIC, handing all power and control of its territories to the Crown and its government, thus giving life to the British Raj.

Without its territories, the EIC was reduced to a shadow of its former self. Its long history was coming to an abrupt conclusion. The Company would live out the remainder of its days with the financial woes that had characterised it over the previous half a century.

Queen Victoria’s proclamation to the Indian people at the commencement of direct rule by the British Crown, 1858 (Credit: Public Domain).

Lacking any purpose for the British, the East India Company was formally dissolved by an act of Parliament in 1873, concluding its storied history.

Would Company rule have continued long into the future had it not been for the rebellion? Unlikely. The EIC undoubtedly, however, sent itself to an early grave through its policies and actions. The crisis produced by the 1857 rebellion gave the Crown and Parliament no other option but to assume direct control and defence of this ‘jewel’ of its global empire.




Henry Sawyer