the epoch-making east india company -- 5/5/20
Today's selection -- from The Anarchy by William Dalrymple. In 1600, a group of enterprising English formed the East India Company (EIC), which over the next 300 years would allow the English to subjugate India and would carry England from a lesser status to that of the most powerful nation on earth:
"Sir James Lancaster's 1591 voyage into the Indian Ocean [to try and break into the lucrative spice trade] was the first English attempt to reach the East via the Cape. Both its funding, and its armed shipping, was provided by Auditor Smythe and his Levant Company. But in the event, only one of Lancaster's four ships, the Edward Bonaventure, made it back from the Indies, and that on a skeleton crew. The last survivors, five men and a boy, worked it home with its cargo of pepper which they had earlier looted from a passing Portuguese ship. Lancaster himself, marooned on the Comoro Islands with the rest of his crew after he was shipwrecked during a cyclone, finally found his way home in 1594. On the way he had been stuck in the doldrums, ravaged by scurvy, lost three ships and seen almost all his fellow crew members speared to death by angry islanders. It was lucky that the Levant Company had deep pockets, for the voyage was a devastating financial failure.
"In contrast to these ragged buccaneers, their more sophisticated Portuguese and Spanish rivals had been busy for over a century establishing profitable and cosmopolitan empires that ranged across the globe -- empires whose massive imports of New World gold had turned Spain into the richest country in Europe, and given Portugal control of the seas and spices of the East, so bringing it in a close second place. Indeed, the only rival of the Iberians, gallingly for the English, was the tiny and newly independent republic of Holland, whose population was less than half that of England, and which had thrown off the rule of Spain only twenty years earlier, in 1579.
"It was the recent astonishing success of the Dutch that had brought this diverse group of Londoners together. Three months earlier, on 19 July, Admiral Jacob Corneliszoon van Neck of the Dutch Compagnie Van Verre -- the Company of Distant Lands -- had successfully returned from Indonesia with a vast cargo of spices -- 800 tons of pepper, 200 tons of cloves and great quantities of cinnamon and nutmeg. The voyage made an unprecedented 400 percent profit: 'There never arrived in Holland ships so richly laden,' wrote one envious Levant Company observer.
"By August, following this 'successe of the viage performed by the Dutche nation', English merchants had begun discussing the possibilities of setting up a company to make similar voyages to buy spices not, as before, from Middle Eastern middlemen, who trebled the price as their commission, but instead direct from the producers, half the way around the world, in the East Indies. The prime movers in this initiative were again Smythe's cabal of Levant Company merchants who realised, as one wrote from the Greek island of Chios, that this Dutch 'trading to the Indies has clean overthrown our dealings to Aleppo'.
"The final straw was when the Dutch sent a delegation to London to try to buy up English shipping for further voyages eastwards. This was too much for the pride of Elizabethan London. The Amsterdam Agents, waiting in the Old Steelyard of the Hamburg Company, were told, 'Our merchants of London have need of all our ships and none to sell to the Dutch. We ourselves intend forthwith to have trade with the East Indies.' The meeting at the Founders' Hall was the direct result of that retort. As they told Elizabeth' s Privy Council in their petition, they were moved 'with no less affection to advance the trade of their native country than the Dutch merchants were to benefit their commonwealth ... For the honour of our native country and the advancement of trade ... to set forth a voyage this present year to the East Indies.'
"Fully one-quarter of the subscribers to the voyage, and seven of the original fifteen directors of the enterprise, were the Levant Company grandees. They feared, with reason, that the Dutch had ruined their existing investment in the spice trade, and they provided not only one-third of the subscription, but also many of the ships and the offices where the initial meetings took place. 'The Company of Merchants of London trading to the East Indies' was thus originally an outgrowth of the Levant Company and a mechanism for its shareholders to extend its existing trade to the Far East by developing the sea route, and to raise as much new capital as possible.
"This was the reason Smythe and his associates had decided to found a new company, and open it to any subscriber who would contribute, rather than merely extend the remit of their existing monopoly. For, unlike the Levant Company, which had a fixed board of fifty-three tightly knit subscribers, the EIC was from the very first conceived as a joint stock corporation, open to all investors. Smythe and his associates had decided that, because of the huge expenses and high risks involved, 'a trade so far remote cannot be managed but by a joint and united stock'. Costs were, after all, astronomically high. The commodities they wished to buy were extremely expensive and they were carried in huge and costly ships that needed to be manned by large crews and protected by artillery masters and professional musket-men. Moreover, even if everything went according to plan, there would be no return on investment for several years.
"The idea of a joint stock company was one of Tudor England's most brilliant and revolutionary innovations. The spark of the idea sprang from the flint of the medieval craft guilds, where merchants and manufacturers could pool their resources to undertake ventures none could afford to make individually. But the crucial difference in a joint stock company was that the latter could bring in passive investors who had the cash to subscribe to a project but were not themselves involved in the running of it. Such shares could be bought and sold by anyone, and their price could rise or fall depending on demand and the success of the venture.
"Such a company would be 'one body corporate and politick' -- that is, it would be a corporation, and so could have a legal identity and a form of corporate immortality that allowed it to transcend the deaths of individual shareholders, 'in like manner', wrote the legal scholar William Blackstone, 'as the River Thames is still the same river, though the parts which compose it are changing every instance' ."