Following excerpts adapted from the author's book, Peace, Poverty and Betrayal: A New History of British India
by Roderick Matthews
Why is there a large, modern political unit called ‘India’? And why is it a liberal democracy? To find answers, we must look at what happened in South Asia between 1600 and 1947.
The aim of this book is to lay out a fresh account of the British presence in South Asia across those years. The point is not to ask whether British rule in India was a good or a bad thing; like all governments it can be seen as both. Nor does it matter whether we approve of what happened. For good or ill the British governed in India for nearly two centuries, 1765– 1947. That would be a long time for any regime that was irredeemably bad, and the hardy endurance of British rule might suggest that it brought sufficient benefit to enough people to have survived for so long.The thrust of the argument that follows here is that this was indeed the case.
So how did a small island come to rule a large subcontinent? How did British India ever appear?
Whigs and Empire
The key to making sense of all this lies in understanding Britain’s rise to global prominence through the eighteenth century. That rise was principally because the British managed to solve a perennial problem—how to transfer political power peacefully between individuals and across generations.
After a traumatic period of war and disruption (1640–89), the elite classes in Britain came to a series of compromises, for the sake of a greater prize—a peaceful and productive society, in which people felt secure, and were allowed to express forms of imagination and creativity that benefited the wider group. This was far from an idealistic or utopian system; its supporting philosophy—Whiggism—was largely pragmatic.
Eighteenth-century British Whigs were not egalitarians, and neither were the early industrialists who pioneered new technical and commercial activities at that time. Their collective priority was to create and enjoy wealth in an environment of civil peace, not to reform the fundamental rules of society.
The Whig compromise was essentially a balancing act within a class, not an inclusive settlement between classes. Whigs were wary of holding power over each other, but were not unduly concerned about the dangers of wielding authority over anyone outside their circle. Here was an elite that was suspicious of excessive concentrations of power, and possessed a narrow sense of political responsibility; Whigs believed that the government should look after everyone’s interests, in due proportion to their social importance. This provided a viable foundation for the creation of national liberal institutions, but it could only ever lend a very self- interested style of guidance to the transnational colonial system that grew out of it, because the limitations involved remained invisible to those who worked within them.
The transnational system that grew out of domestic Whig practice was inherently unresponsive, characterized by arrogance among those at the top, who took care to distance themselves from those at the bottom. It had insuperable gradients of power within it, though these were somewhat mitigated by the principles of conditional liberty that Whigs professed to believe in. But with the acquisition of overseas territories, the Whig political model was soon stretched far beyond its natural scale.
The corruption of power—something that Whigs thought they had addressed among themselves—lurked within the restricted degree of vertical dialogue within their system, and while they gradually addressed this at home through political reform, the longer arms of Whig government—in Ireland,America and eventually India—remained tainted with arbitrary power.
Satisfied with their own arrangements, and fiercely proud of parliamentary government, the British came to believe that their form of domestic peace was more than a local cultural achievement, and was increasingly explained by Britons in terms of other things—superior national character, Protestantism, whiteness, or even just the bracing climate of a northern island. Self-congratulation disguised the greatest flaws in the nascent empire—its defective accountability and its predisposition towards hierarchy. But the beneficial economic aspects of the new imperial structure put Britain ahead of not just contemporary Europe, but the rest of the world.
In 1600, Europe and Asia were broadly equal in technology. It was the next century that saw Europe draw ahead, with rational science and capitalist forms of finance and public credit. All this laid the foundations for both industrialization and colonialism, and helped set up a stereotypical division between an active, vigorous West and an ancient, slothful East.
The great British achievement was to create a culture in which political activity did not involve lethal risk, and which allowed free enquiry, open debate and the reasonable expression of dissent.This produced a range of tangible benefits, which the British took with them to India, where many Indians willingly recognized the attractions of the culture, adopted its attitudes and accepted its institutions. Meanwhile the British began to learn about the various problems that inevitably grew out of government which was not self-government. This education helped to guide the domestic British political system in its own process of reform.
The arrival of consensual, secular politics in Britain released national energies of such dynamism that two subsequent political systems, both on a continental scale, were eventually to arise out of it—a decentralized Whig republic in North America and a centralized liberal democracy in India.
The British worked out how to take the violence out of personal politics, and how to generate and transfer political power in an orderly manner. This was done before the development of democracy, and directly paved the way for its arrival. Indians managed a reciprocal discovery— how to take the collective violence out of mass politics—using an analysis that fully appreciated all the causes and effects of political action.This too created a platform upon which democracy could be built.
The Anglo-Indian connection was thus instrumental in creating the first stable liberal democracies in both Europe and Asia.This was not a coincidence; there were evident historical processes at work. The enmeshed quality of the Anglo-Indian relationship goes right back to its earliest days. There was always an indigenous Indian liberal constituency; all the social reforms sponsored by the British had extensive local support.
Here it is also appropriate to emphasize that, across the longer view, the substance of the Anglo-Indian link was not primarily economic.The British made money in India, but they always made more money elsewhere.The substance of the link, its real value to Britain, was not primarily economic: it was geostrategic.
Overemphasis on economics leaves too many questions unanswered, especially in terms of speculation about a massive outflow of wealth from India to Britain.‘Imperialism’—a troubling and inexact term—was never an economic doctrine.There was never close agreement among the economists who tried to define it: between 1902 and 1920, Hobson, Kautsky, Hilferding, Rosa Luxemburg, Lenin and Schumpeter all came up with different interpretations.
Imperialism was a jumble of cultural and political attitudes, born of victory and sustained by dominion, fond of hierarchy and uncritical of supremacism. But in its British avatar, it was also tempered with humanitarian concerns and an occasional taste for self-criticism.
Within the disorderly pile of ideas that constituted imperialism, there was always scope for a wide range of governing attitudes to flourish, some of which were inherently contradictory. The aspiration towards fitting Indians for self-government was the most obvious; educating Indians in British law and political theory was another.
There was collusion on many levels from the very start of British rule in India, and the construction of the later imperial system would not have been possible without the collaboration of Indians, many of whose descendants are still enjoying the privileges they earned.
Indians—rich, powerful Indians—were complicit every step of the way, including the original Bengal revolution of 1757, and the infamous famines of 1770 and 1943.This does not mean just dubashes (interpreters) and banians (agents) on the quayside, hoping to do a little business, though they have their place in the story. It means entire classes with social status and economic clout.
There is a determined refusal among many modern Indians to admit this, but it is inconceivable that the British Indian project could have extended so far or lasted so long without serving the interests of powerful elements within Indian society. The deal was that they were allowed to keep their social influence and, crucially, their land.
Almost uniquely in world history, the British conquest of India involved very little change in the ownership of land—at least from conquered to conquerors.The British took virtually no land for themselves and, on the whole, did not settle. Even as late as the 1860s, a powerful argument against the sale of ‘waste’ lands in India was that the availability of cheap land might encourage Europeans to migrate in force and assemble estates.
The major change in landownership brought about by British rule was from small peasants to larger landowners.This provides an important clue as to why the British succeeded politically for so long.
When the British arrived, India had an exploitative hierarchical social system, the centrepiece of which was the rural economy. By their own published standards, the British did too little to change this, and eventually ended up supporting it. They tried to redesign the legal framework of landholding, but not the social structures that surrounded it.This made it easier to run the country without making enemies. It was the very heart of the successful British strategy of ‘oblige and rule’.
The demands of domestic British politics required that colonial status had to be seen as beneficial to colonized people, and the tenancy reforms enacted by the British were part of fulfilling this need. But eventually the politics of Indian society forced the British to maintain the status quo, and make alliances with the most powerful sources of support available to them. It was left to the Indian National Congress in the early years of independence to bring about any degree of rural change.
Eighteenth-century India fell under British rule because of two circumstances. One was India’s political disunity, the other was the sophisticated land revenue system which made landholding a profitable business. Most European colonization of that period was of relatively empty lands, which made settlement slow and often only marginally rewarding; the interiors of Canada and Australia offered little to newcomers. But India was populous, wealthy and sophisticated—providing a self-financing road to conquest.
The French were the first to realize the opportunities this presented, and in the 1740s they based their bid for power in the Carnatic on notional grants of land revenue. But they failed to capitalize. The British learned, and did. The French, largely through circumstance, attempted to turn Hyderabad into a client state, which turned out to be a poor choice.The British, largely through circumstance, chose Bengal, which proved to be a lucrative, sustainable and defensible choice.
The East India Company (1): Greed
The East India Company (EIC) had a long, troubled history. Founded in 1600, it had recurring structural problems with trade in the East—competitors, costs and markets. Its original difficulty was that it could buy in the East but not trade; in India and China, people would sell commodities but they did not want European goods in return.
The EIC had its best trading years from 1714 to 1740, years of international peace, but war with France from the 1740s onwards drew it into power politics. It then played a central role in the British conquest of India as a military and governmental vehicle, though the transition was slow and somewhat confused. The Company’s income rose relentlessly after it became a revenue collector in Bengal in 1765, but its expenses also expanded enormously, and it could only find regular profit in the tea trade with China.
This roller-coaster history has been narrated often and well,1 but for current purposes we must understand that after 1757, when the Company’s ‘Direction’ took on governmental responsibilities, the EIC cannot be simply characterized in commercial terms. As a Company of ‘sovereign merchants’, it became an anomaly; contemporaries regularly referred to it as such. It became less and less like a commercial company, and to insist that it was is to miss all the subtlety and interest in its status and nature.
It has recently become fashionable to demonize the EIC. In 2012 the main charges were vigorously set out by Nick Robins. His main points were that the EIC single-mindedly pursued ‘personal and corporate gain’, and found itself ‘ruling over large swathes of India for a profit’.
These accusations are very general, and can only carry weight if they are confined to a period of something like 1757–72, during which a great deal of malfeasance went on in Bengal. But even then, the charges are misdirected; they could only accurately relate to the large-scale embezzlement perpetrated by the Company’s servants, which the Company was unable to control and from which neither it nor its shareholders drew any benefit. On the contrary, during those years the Company was seriously harmed, both financially and politically, by the depredation. It began to lose its autonomy as a result, and never fully regained it.
Any picture that we draw of the EIC must take into account at least the following facts and factors. From 1767 it was under close governmental supervision, and after 1784 its business activities in India steadily declined. In 1813 its commercial accounts were entirely separated from its governmental exchequer, and by 1833 it took no part in trade. By then it was an administrative shell. Investment in its stock was like buying government bonds.
After 1784 the EIC was not in any respect truly like a privately owned company; it was effectively a government. And, like all governments, it was primarily concerned with its own welfare and preservation.
The EIC certainly became an extractive state, setting its tax demands high and collecting them with rigour. But the motivation was not personal greed. After 1767 the British government itself was extracting money from the EIC, at the rate of £400,000 per annum. The Company, in its turn, was naturally keen to raise funds in Bengal to appease the politicians, and thus maintain its chartered privileges. It was also given an additional, unacknowledged responsibility of supplying what politicians called a ‘tribute’ from India, which meant shipping goods to London which had been paid for with Indian tax revenues, in order to realize cash.This was a neat way of taking wealth out of India without removing bullion, but it was also a process that took no account of commercial concerns, and acted effectively as a cap on profitability.
In reality, the EIC was in a weak position in London; it relied on Parliament for the continuation of its monopoly trading privileges.At the same time it was an insecure institution in India, and had to fight hard for its very existence. In both theatres, it was motivated primarily by selfpreservation.There was little profit in trade with India after 1757, and the largest part of the money that went to individuals was not funnelled through the Company. By the end of the 1760s the Company was Rs 10 million in debt in Calcutta.
The EIC was a hybrid creature which evolved out of necessity. In its mature form it ranks as the third great British institutional compromise, after the creation of the Anglican Church in the sixteenth century and the limited monarchy in the seventeenth.The crucial compromise that the EIC represented was that, after 1765, its continued existence avoided the question of who owned Bengal. It was important that it fell neither to the Crown, which was thus denied the extra patronage and revenue, nor to the Company, so that individuals could not enrich themselves unsupervised.
To confuse the EIC with a private company is to fall into the trap designed by John Robinson, adviser to Prime Minister William Pitt the Younger. Under Pitt’s India Act of 1784 the Company retained its outer form as a commercial body but ceded control of its governmental responsibilities to a Board of Control, consisting of politicians. This allowed politicians to take credit when they chose, or to leave any blame with the directors.
Pitt’s Act was only one of a series of significant developments in both Britain and India, stretching from 1757 to 1793, by which the EIC became a complex, multi-purpose institution held together only by its name.The structure, function and nature of the organization changed dramatically, and any account that fails to understand this risks lapsing into inaccuracy, anachronism and absurdity.
The EIC struggled to make regular profits after 1757. The move into government produced revenue but brought massive expenses too, and the British national treasury was repeatedly obliged to bail out the Company. £1.4 million was advanced to the Company in 1773. Another £4 million was loaned in 1810–12, largely because of Richard, Marquess Wellesley’s expansionist wars. Indeed, so straitened was the Company’s mercantile arm by the financial demands of the ‘territorial Company’ that it was unable to pay the excise on its tea imports on fifteen occasions between 1804 and 1813.
After 1757 the Company moved into government in India; after 1784 it was absorbed into government in Britain. By then it had ceased to be a commercial body in any real sense of the word. Nor was it private. Once a year a government minister presented an India budget which was then voted through Parliament. More specifically, the parts of the Company that drove territorial expansion had little connection with the parts that controlled its dwindling mercantile activities.
The historian CH Philips, who spent a lifetime studying the EIC, wrote: ‘it should be noted that the senior directors of the Company, who managed its political business, were concerned only in a minor degree with its commercial affairs.’
By the 1790s the Company did its business through around a dozen separate committees. There were no merchant princes making decisions fuelled by greed. How, might we ask, was greed in play when the directors were paid fixed salaries, and the Company’s dividend was capped, by statute, at 8 per cent in 1784, and then at 10.5 per cent in 1793? How could holding land ‘for profit’ make any sense when in the same year the Company voluntarily fixed its own rental income from Bengal at the permanent figure of Rs 286 lakhs? How could a Company single-mindedly chasing profits contrive to be £40 million in debt by 1828?
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Roderick Matthews is a writer and Indian historian. Born in 1956, he studied Modern History at Balliol College, Oxford, and has written articles and reviews for a number of British and Indian publications. His previous books include The Flaws in the Jewel, Jinnah vs Gandhi, and The Great Indian Rope Trick.
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