The Corporation That Changed the World: How the East India Company Shaped the Modern Multinational [Paperback]

I don't remember when or how I learned about this book but I finally got around to reading it on a recent vacation. A great dense, short read.

I am reliably informed that school kids nowadays are taught in detail about this important and fascinating subject. Certainly in China and India, the way the East India Company "Changed the World" has for decades informed part of their self identity and their economic history narratives. But for the rest of you, who may feel like me that this subject was under represented in our education, this excellent book is the best way to to make amends.

And what a story it is. All economic life is here. I started to make a list (in alphabetical order) of the facets and issues which the company's history throws up; Agency / principle issues, Boston tea party, business ethics, capture of the political system, corruption, drug dealing, economies of scale, exploitation, famine, government bail-outs, gunboat diplomacy, imperialism, insider dealing, military conflict, monopoly, outsourcing of government services, protectionism, racism, regulation, speculation, terms of trade. And I am sure you will find more! Also notable figures from history crop up in connection; Adam Smith, Duke of Wellington, Edmund Burke, John Stuart Mill, Karl Marx, Thomas Malthus.

So why did this company change the world? The answer is that it did so in many small ways, but the big central point is this; 300 years ago, both China and large parts of what is now India were in all practical ways, more economically accomplished and well placed than Europe. They had thriving production in goods that Europe soon fell in love with, like spices, cotton clothes, porcelain and later tea. Europe and Britain on the other hand produced nothing that caused such consumer desire in these oriental countries, and therefore gold and silver had to flow in the opposite direction. The nub of the later part of the story of the EIC is how it reversed this dynamic, essentially through quite controversial means; military, political and dodgy deal shenanigans in India, and facilitating the dealing of Indian grown opium in China. It is therefore completely justified for the title to claim that the East India Company was; "The Corporation that Changed the World".

Like me, you may have had an education which emphasised the inventiveness of the plucky British industrialist, which missed out this sharper, darker history, full of greed and plunder. The reasons for the former neglect of this subject, (and the lack of visible reminders of this massive company in London), are perhaps a mixture of slight national shame and a poor fit with the inventiveness and free market narratives that have since been adopted to explain British economic success. But things are changing for the better.

With a history background and a City related job, Nick Robins is obviously the right person to contribute to this enlightenment. His rich, broad approach spans the company's diverse story. The business dimension such as the company's fluctuating share price and its original and innovative financial arrangements are included, of interest perhaps to today's city guys who hustle a living on the same London streets. Also included are the more literary and cultural references of interest to history junkies, which also link notable people and events of that time to the story.

Besides the big point regarding the pivoting of the international economic upper hand in favour of Britain, there are many smaller things to take away from this epic saga. The company's activities have links with many of the notable events and issues in the history of the last 400 years, and one could imagine that the study of the not that "Honourable Company" would be a good vehicle for a complete education in politics, economics and moral philosophy / business ethics. As I said earlier, all life is here. ...

Imagine a long overdue BBC Four documentary series covering the different periods of the company's history. All those old ships and reconstructions of historical events, ... mmm pure bliss for a Sunday night!

The Corporation that Changed the World:
How the East India Company Shaped the Modern Multinational
by Nick Robins

"The Corporation ... " is an appreciated introduction to the history and debate of the exploits of the East India Company in India and China, its modus operandi, and its background in corporation history. It is full of information and explanations, and perhaps inevitably, historical baggage.

The uninitiated is certainly dropped into the "deep end" of a debate - for good or bad. The history is valuably recorded particularly due to its corporation focus. Often the reader is assumed to have previous background information e.g. a paragraph introducing Robert Clive is missing; no description is given of the Company's famous quarterly auctions in London; the impeachment of Warren Hastings is mentioned out of nowhere; and sentences such as "His [Josiah Child's] strategy was, of course [?], complete madness" are unexpected. The section on the "British imperial myth" re the "black hole of Calcutta" of June 1756 states that a "Combination of cowardice and lack of preparation meant that Fort William was quickly overwhelmed" but some detail is warranted. We are told the hands of weavers were amputated or self-mutilated then we are told "no other evidence exists for this or similar incidences". Perhaps the mythology is part of the history.

Then there is the classic: "McDonald's cannot flourish without McDonnell Douglas, the designer of F-15's" with terrifying time leaps of a few hundred years to Enron, and the Union Carbide tragedy presumably to bolster arguments. Envisage Ronald McDonald parachuting into Calcutta or Beijing after a blanket bombardment by F-15's. Likewise we leap from Robert Clive's wealth at age 33 in 1758 to Vodaphone's management bonus's in 2000. These are the only four modern corporations to get even a passing mention.

Finally, we have a conspiracy theory lurking in the background: "the erasure of the East India Company is highly suspicious". Apparently the Dutch remember the East India Company but this is "a far cry from the erasure of memory evidenced over the water in London". The erasure by whom? Why? No one is defending imperialism, exploitation, or the opium or slave trade, or that an honest understanding of the Company's legacy is not valuable.

There are two graphs of the East India Company share price 1693 - 1874 and a subset 1757 - 1784 which add some factual evidence. The 1757 - 1784 graph includes a "boom & bust" in 1767 - 1772 where the share price increased from $150 to $250 and retreated back to $150. By modern standards this is no catastrophe! Graphs of the yearly dividends would be helpful, and presumably available, rather than the sporadic information in the text. It appears that the company was a high dividend company with a 6% - 12% return but references to "steady capital gains" are incorrect on the evidence of the share price graphs.

The earlier 1657 - 1691 period, "perhaps the best days of the Company's life" (why "perhaps"?), is not graphed but had a total return of 840% over the 34 years. This calculates as an average dividend of 27.7% compared with unstated bank rates at the time. Or since we are told "for most of the 1670's ... a 20% dividend but in 1680 ... a 50% dividend ... to be repeated in each of 1682, 1689 and 1691", a spreadsheet calculates an average 16.3% in the other years. There was a 2:1 share split "bonus" in 1682 but it is not clear why the share price would not be diluted even with the dividend maintained and why the Company's capital stock increased as a result. An investment of £100 in 1654 would have turned into £940 over 34 years but the spreadsheet indicates immensely more if the dividends were reinvested in the Company.

Sir Josiah Child Governor (Chairman) or Deputy Governor of the Company throughout the 1680's is better introduced particularly with two quotable quotes re corporate behaviour from 1687:
(On his own staff) "The great trouble we labour under is that you cannot get out of your old formes, and your cavilling way of writing and perverting, or neglecting, our plain and direct orders as if you were not subordinate but a coordinate power with us." And:
(On the British Government) "Be guided by my instructions and not by the nonsense of a few ignorant country gentlemen who have hardly the wit enough to manage their own private affairs, and know nothing at all about questions of trade."

Finally, was the East India Company the company "Too big to fail"? It did receive £1.4 million in a government intervention in 1773 when it faced financial distress. But it did not lose its purpose in 1874 - the purpose continued, the company was democratically & legally wound up by the British government although for the last 16 years shareholders were guaranteed dividends.

The benefit of understanding the East India Company is both the evaluation of its actions and to understand modern corporations. Nick Robins makes a substantial contribution to both these objectives.

Malcolm Cameron
3 January 2013