Monday, January 31, 2011

From Trade to colonisation

"In the middle of the seventeenth century, Asia had a far more important places in the world than Europe." So wrote J. Pirenne in his 'History of the Universe', publishd in Paris in 1950. He added, " The riches of Asia were incomparably greater than those of the European states." 
Such was the situation when the East India Compay began its trading activities in the early 17th century. Initially, the British traders had come to India with hopes of selling Britain's most popular export item to Continental Europe - British Broad cloth, but were disappointed to find little demand for it. Instead, like their Portuguese counterparts, they found several indian trade items they could sell quite profitably in their homeland. Competing with other European traders, and competing with several other trade routes to Europe ( the Red Sea route through Egypt, the Peian Gulf Route through Iran, and the northern Caravan Route  through Afghanistan, Persia and Turkey), the early British were in no position to dictate terms. They   had  to seek concession                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              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with a measure of humility and offer trade terms that offered at least some benefits to the local rulers and merchants. While Aurangzeb (who had perhaps, seen the connection between growing European Trade concessions and falling revenues from the overland trade) attempted to limit and control the activities of the East India Company was willing to persevere; fighting and cajoling for concessions, it built trading bases wherever it could along either side of the lengthy Indian coastline.
               Such was the situation when the East India Company began its trading activities in the early 17th century. Initially, the British traders had come to India with hopes of selling Britain's most popular export item to Continental Europe - British Broadcloth, but were disappointed to find little demand for it. Instead, like their Portuguese counterparts, they found several Indian-made items they could sell quite profitably in their homeland. Competing with other European traders, and competing with several other trade routes to Europe (the Red Sea route through Egypt, the Persian Gulf Route through Iraq, and the Northern Caravan Route through Afghanistan, Persia and Turkey), the early British Traders were in no position to dictate terms. They had to seek concessions with a measure of humility and offer trade terms that offered at least some benefits to the local rulers and merchants. While Aurangzeb (who had, perhaps, seen the connection between growing European Trade concessions and falling revenues from the overland trade) attempted to limit and control the activities of the East India Company, not all Indian rulers had as many compunctions about making trade concessions. Besides, the East India Company was willing to persevere; fighting and cajoling for concessions, it built trading bases wherever it could along either side of the lengthy Indian coastline.
In this period, relations between Indian and Britisher were not lacking in cordiality and the East India Company included employees from both worlds. Friendships between the two nationalities developed not only within the context of business relations, but even beyond, to the point of inter-marriage. Unaffected by the pompous stuffiness of the British gentry, the British employees of the East India Company made the most of life in India - dressing in cool and comfortable Indian garments, enjoying Indian pastimes and absorbing local words in their dialect. With as yet unprejudiced eyes, these British traders delighted in the delicate craftsmanship and attractiveness of Indian manufactures and took good advantage of their growing popularity in Britain and France. So lucrative was the trade that even though India would accept nothing but silver (or gold) in return, the East India Company prospered.
Considering the long route (around the African Cape) that the British had to take in reaching England, it was surprising that they made as much money as they did. But other factors outweighed this disadvantage. First, owing to their legally sanctioned monopoly status in England, they had substantial control on the British market. Second, by buying directly at the source, they were able to eliminate the considerable mark-up that Indian goods enjoyed en-route to Europe. Thirdly, the East India Company probably enjoyed better economies of scale since their ships were amongst the largest in the Indian Ocean. In addition, they were able to develop new markets for Indian goods in Africa, and in the Americas.
And finally, (and perhaps, most significantly), as Veronica Murphy reports in 'Europeans and the Textile Trade' (Arts of India 1550-1900), "although the East India Company was not itself engaged in the transatlantic slave trade, the link was very close and highly profitable." In fact, in the 18th century, the British dominated the Atlantic slave trade transporting more slaves than all the other European powers combined. In 1853, Henry Carey - author of 'The Slave Trade, Domestic and Foreign' wrote: "It (the British System) is the most gigantic system of slavery the world has yet seen, and therefore it is that freedom gradually disappears from every country over which England is enabled to gain control." The Atlantic slave trade was hence, a vital contributor to the financial strength of the East Indian Trading Companies.
So much so that by the middle of the 17th century, the East India Company was re-exporting Indian goods to Europe and North Africa and even Turkey! Unsurprisingly, this was to have a severely deleterious effect on the Ottomans, the Persians, the Afghans, since much of the revenues of these states came from the India trade. It also seriously impacted the revenues of the Mughals, and while the activities of the Arab and Gujarati traders were not entirely eliminated, their trade was much curtailed, and largely reduced to the inter-Asian trade which continued unabated. In any case, the Mughal state was unable to resist centrifugal forces and rapidly disintegrated. This left the East India Company with considerably more leverage and emboldened it to expand its activities, and demand even greater concessions from Indian rulers.
But even as the Indian rulers were granting more concessions, there was a rising chorus of voices bemoaning the loss of "European" silver to Asia. At the end of the 17th century, the silk and wool merchants of France and England were unwilling to put up with the competition from Indian textiles which had become the rage in the new bourgeoisie societies of Europe. Not only did they seek bans on such trading activities of the East India Company, they also sought and won restrictions on the purchase of these items in their respective nations. These prohibitions, while not entirely eliminating the smuggling of such items, nevertheless squeezed out most of the trade, impacting the revenues of the regional Indian states that had only recently broken off from the centralized Mughal state and Bengal was the first to face the consequences.

Having lost the opportunity to profit from the Indian textile trade, the East India Company was not hesitant in changing character. In 1616, Sir Thomas Roe, an envoy of the East India Company had declared to the Mughals that war and trade were incompatible. But already in 1669 (even before the bans on the textile trade), Gerald Ungier, chief of the factory at Bombay had written to his directors: " The time now requires you to manage your general commerce with the sword in your hands" In 1687 came the reply from the directors, advocating a Goa like British dominion in India. The French Dupleix was more or less of similiar view. Still earlier, in 1614, the Dutch Jan Pieterzoon Coen, had written to his directors: "Trade in India must be conducted and maintained under the protection and favour of your weapons, and the weapons must be supplied from the profits enjoyed by the trade, so that trade cannot be maintained without war or war without trade." (from Auguste Toussaint's: History of the Indian Ocean)
The Opium Trade of the 18th century (which eventually led to the Opium Wars) , when the Royal British Navy worked more or less hand in hand with the commercial interests of the East India Company, exemplified precisely such a link between war and trade. From the intertwining of war and trade, colonization was only a small step away. Plassey was a portentious indicator of a new dynamic in Indo-British relations.

Contrary to the views of several apologists for colonial rule, who still argue that the defeat of India had solely to do with "congenital flaws" or the centuries old "ennui" or " weak character of the Asian", or the "inability of the Indians (and other Asians) to govern themselves", R. Mukerji (in Rise and Fall of the East India Company) advanced a different thesis . He argued that there were compelling economic imperatives that drew the European India Companies into the path of imperialism. He pointed out that although monopoly rights assured the India Companies of the exclusive privileges of buying and selling, it did not guarantee that they could buy cheap. For that, political control was essential.

A second problem for the East India Company was that their profits were in direct conflict with those of their British-based competitors. Under these circumstances, as long as the profit motive was paramount (which it was), the Battle at Plassey, and the Opium Wars could be seen as logical outcomes of circumstances where continued profits by legal and honorable means were simply not possible. But, had the East Company comprised of "Gentlemen Traders" as some historians have claimed, they could not have switched so easily from trading in Indian Textiles, to trading in Opium for Tea which, in modern language - would surely be described as a form of "drug-running"! Had the traders of the East India Company been "men of honour", denied the right to profitable trade, they would have simply gone bankrupt, as so many do in the world of business!

Yet, what is even more significant is that even after The East India Company had regained sizeable profits from the Opium trade, it served as no deterrence to future acts of aggression. It had become like the proverbial man-eating tiger, that having tasted blood once, would be driven to tasting it again and again. After Plassey, the East India Company had been able to force the cultivation of opium in sufficient quantities in India, and hence, procure sufficient volumes of tea for the British market, reaping significant profits. Yet, now military attacks were also to be directed against Indian (and other Asian) ships engaged in the inter-Asian trade. These attacks were to lay the ground-work for the battles against the Coromandel rulers and the Marathas whose revenues from this trade dwindled. While Plassey may have been a matter of "survival" for the East India Company, the subsequent battles were not in that category. Some historians tried to argue that competition with the French precipitated the battles in South India, but such a view is contradicted by a Frenchman, no less!

Abbe de Pradt, author of "Les Trois Ages des colonies, Paris, 1902" wrote that with the victory at Plassey and the establishment of sovereign rights, England had demonstrated to all of Europe that it was no longer necessary for it to send precious metals obtained from the "New World" to India. She could trade on the basis of revenue acquired from taxing subjects and commodities, whereas other European countries had to trade at a "loss", with "metal currency". The extension of English sovereignty in India, would exempt Europe from sending capital into India. Specifically, Abbe de Pradt wrote: " the people who have enough control over India to reduce substantially the exportation of European metallic currency into Asia rule there as much for Europe's benefit as for their own; their empire is more common than particular, more European than British; as it expands, Europe benefits, and each of their conquests is also a real conquest for the latter." Chastizing European opponents of the British conquest, he wrote: "all the sound and fury now echoing across Europe about England's hegemony in India are the shrieks of a blind delirium, as an anti-European uproar; it might be thought that England was taking away from every European state what it was conquering from those of Asia, whereas, on the contrary, every part of Asia that she takes for herself, she, by that very fact, takes for Europe."

In fact, this view tallies quite closely with the observations of several later analysts who found it paradoxical that inter-European rivalries and conflicts reduced in the 18th century when compared to the 17th century, and decreased still further after Plassey. In essence, the race for the colonization of India had been won by the British, and what Abbe de Pradt was saying was that it was in French interest to enjoy the "general" benefits of this victory and not bemoan the loss of "specific" benefits from the British victory.

N.K Sinha, author of an "Economic History of Bengal" summarizes the situation in these words: "For more than two centuries the Europeans had found that the trade with Bengal whether carried on by companies or by the individual free traders or by illicit means had always been so much in favor of Bengal that the balance had to be supplied in cash. Now after Plassey supplies were at last found in Bengal " by means independence of commerce" - referring to the forced taxes that were extracted by the East India Company from the people of Bengal.

He continues: "The trade of the country merchant began to stagnate. Armenian, Mughal, Gujarati and Bengali merchants found their free trade daily fettered and loaded." The export, import, and manufacture of goods moved from the hands of independant Indian merchants to intermediaries hired by the British East India Company. Often this required force. Sepoys of the East India Company were sent to destroy the factories owned by Indian rivals to the East India Company. Independent weavers who refused to work for the pitiful wages that the East India Company offered had their thumbs cut off. After Plassey, the East India Company also moved to impose it's monopoly on the internal over-land trade. In a matter of three decades after Plassey, the East India Company achieved a virtual stranglehold on the economic and political life of Eastern India.

Just as Abbe de Pradt had predicted, the benefits of colonization did not go exclusively to the British. French, Dutch and Danish rivals were also able to take advantage of the trade monopoly established by the British East India Company. With the decline of the Indian merchants, they were able to buy Indian goods at lower prices. Secondly, corrupt employees of the British East India Company engaged in considerable price gouging, cheating and local thuggery. They preferred to repatriate this illegally acquired wealth from India through French and Dutch rivals to escape detection of their cheating and to avoid taxes and customs duties in Britain. Even as Indian rivals to the British East India were wiped out, European rivals continued to survive and flourish for another 30-40 years.

The American Furber who published his research on the East India Company in 1948 (in Cambridge, Mass.) pointed out that its French and Dutch rivals continued operating until 1769 and 1798. He also indicates that it was a very cosmopolitan association. At least one-fifth of its nominal capital of pound 3,200,00 was in Dutch hands, and a large proportion of that capital came from financiers in Amsterdam, Paris, Copenhagen, and Lisbon, who were also directly concerned in the company's affairs. Furber noted that the commercial activity of the French, the Dutch, and the Danes in the Indian Ocean during the eighteenth century clearly showed that "the time had arrived when Europeans at home or overseas who had a stake in the maintenance of European power anywhere on the Indian continent were one and all forced to take part in the work of building a British empire in India". What Furber was pointing out was not only the substantial and cosmopolitan nature of the backing the East India Company enjoyed, but also the motivations and direct self-interest of its backers.

Thus, Plassey was to be only the first of several assaults that no regional Indian power was able to fend off successfully. While united India had largely held off the Europeans, and divided India had temporarily held off divided Europe, divided India was no match for united Europe. The conquest of India continued with conclusive defeats of the Marathas in 1818, the Sikhs in 1848 and the annexation of Awadh in 1856. 1857 was a brave attempt to rollback the victories of the East India Company, but instead it now brought on the might of the entire British imperial government. The Indian colonies of the British East India Company became British Colonial India - and so began a new phase of colonial plunder from the sub-continent. A phase that saw constant challenges to British hegemony in the region, but it was not till 1947 that a new era could be ushered.

Hence, for almost 200 years, there was a systematic transfer of wealth from India to Europe. Although Britain may have been the primary beneficiary, it's allies in Europe and the new world benefited no less. British Banks used their Indian capital to fund industry in the US, Germany and elsewhere in Europe. The industrial revolution and the development of modern capitalism was based on the colonization of India and the rest of the world. It was the forced pauperization of the colonized world that allowed nations such as Britain, or the US to industrialize and "modernize". Any serious analysis of modern capitalism must take this into account.