Honourable Company: A History of The English East India Company (64 page)

Public opinion, such as it was in the eighteenth century, failed to appreciate these niceties. Dimly aware that the British nation had somehow acquired by proxy a remote but exotic slice of south Asia, it was becoming all too familiar with the catalogue of misdemeanours and oppressions that were evidently jeopardizing this exciting development. Grisly tales of peculation and skulduggery flowed from the pens, ‘dipped in the ink of infamy’, of Alexander Dow, born in Benkulen but who had served in the Bengal army, and of William Bolts, one of Johnstone’s less reputable partners. Both men had fallen foul of Clive. At him they therefore directed their jibes, thus neatly deflecting any attack on the Nabobs as a whole. Consequently, when Sulivan attempted to obtain parliamentary sanction for his reforms, the debate degenerated into a slanging
match between Clive and the cohorts loyal to Johnstone. With the kettle publicly blackening the pots and the pots publicly blackening the kettle, it was hardly surprising that a motion to set up a Select Committee for investigating ‘the most atrocious abuses that ever stained the name of civil government’ received general applause.

To this Select Committee of the House, a Secret Committee was added before the end of 1772. The first was to review past abuses; the second was to pave the way for immediate legislation. For yet another crisis in the Company’s affairs had blown up, this time in the shape of imminent bankruptcy. The economic fall-out threatened to engulf the nation. Parliament was sitting in emergency session. Any chance of the Company being allowed to set its own house in order had passed for good.

The new crisis stemmed from financial irresponsibility at home highlighted and exacerbated by a major disaster in India. For more than a year rumours of one of the ghastliest famines ever to afflict Bengal had been fuelling the flames of indignation against the Company and its extortionate servants. The calamity, begun with the failure of the 1769 monsoon, raged throughout 1770. No official report was ever published but a century later Sir William Hunter compiled a well-authenticated summary from the official records.

All through the stifling summer of 1770 the people went on dying. The husbandmen sold their cattle; they sold their implements of agriculture; they devoured their seed-grain; they sold their sons and daughters, till at length no buyer of children could be found; they ate the leaves of the trees and the grass of the field; and in June 1770 the [British] Resident at the Darbar [of Murshidabad] affirmed that the living were feeding on the dead. Day and night a torrent of famished and disease-ridden wretches poured into the great cities…The streets were blocked up with promiscuous heaps of the dying and dead.

Estimates of the mortality varied between a third and a half of the entire population of Lower Bengal. The resultant decline in the province’s prosperity was identified by Hunter as ‘the key to the history of Bengal during the succeeding forty years’.

Although the Company’s servants could hardly be blamed for a natural disaster, the revenue assessment was in fact increased by ten per cent during the height of the famine and there were several accusations of
British collusion in the inevitable hoarding and profiteering. No relief measures of any significance were undertaken and Clive’s decision to make the inland trade a monopoly of the Company’s servants appeared, probably unfairly, to have exacerbated matters. Worse was the contrasting opulence of the Nabobs which now appeared in a positively obscene light. All this was fuel for the Select Committee but it was the famine’s effect on the Company’s finances which precipitated the real crisis.

Ever since Clive had assumed the
diwani
the Company had been living on credit. Military and administrative expenses had continued to escalate, the revenue surplus had never approached the
£2
million per annum envisaged, and those repeatedly increased dividends plus the £400,000 per annum to the state had compounded the problem. A doubling in the value of the Company’s Indian trade had to some extent disguised the situation but, to finance this investment, heavy debts had been incurred in India and more bills of exchange had been made available to returning Nabobs. These also served to delay an appreciation of the financial effects of the famine. In fact it had cut deep into the revenue receipts and dramatically reversed the trade expansion. The scale of the problem became apparent in the summer of 1772 when, amid a general credit crisis, the Company found itself liable for over £1.5 million in bills of exchange alone. Even its considerable stocks of tea, written down in value as a result of the glut of cheaper contraband tea, could not meet such liabilities.

After agonized debate the directors decided to suspend dividend payments and apply to the Government for a £1 million loan. Stock values immediately plummeted and the Government, sensing another South Sea Bubble about to burst, summoned Parliament. If it was a case of saving the nation’s credit, it was also understood that, in return for the necessary loan, the Company would have to pay dearly in terms of its independence. With this in mind the Secret Committee was soon hammering out the necessary legislative proposals. Meanwhile the Court of Directors, under enormous Ministerial pressure but in the teeth of bitter opposition from the Court of Proprietors, had come forward with its own suggestions. The final bill, which became Lord North’s Regulating Act of 1773, was thus a compromise between these two sets of proposals.

As was to be expected with a piece of panic legislation, it would prove far from satisfactory, compounding the Company’s difficulties rather than solving them. It was, however, the first big step in state intervention. ‘Here began the participation of government in the administration
of India’ (Dame Lucy Sutherland). It also established a political precedent and a procedural system for further encroachment, while its soon apparent failings made such encroachment both inevitable and imminent.

To be fair, the 1773 Regulating Act was never intended as more than a temporary expedient. Renewal or amendment after five years was envisaged; the Company’s charter itself was anyway due for renewal in 1780. George III, an interested and active party, declared that it laid ‘the foundation for a constant inspection from Parliament into the affairs of the Company which must require a succession of regulations every year’. But recurrent parliamentary interference was not what Lord North had in mind. His idea was to supervise and reform the Company by less direct methods. Thus two provisions, one raising the stock qualification for voting in the Court of Proprietors to £1000 and the other changing the annual election of all the directors to an annual election of only a quarter of them, were designed not only to ensure a greater continuity in the direction and less ‘splitting’ among the shareholders but thereby to make the exercise of ministerial support and management that much easier.

Additionally the bill provided for Government access to all correspondence with India which dealt with revenue, political or military subjects. Revenue matters were studied by the Treasury and there in particular this provision resulted in a growing understanding of the complex issues raised by Indian administration. (John Robinson, author of the 1778 analysis already quoted, was a Treasury Secretary.) But as yet it does not seem to have resulted in much active participation by government in the day-to-day running of the Company. For this the Government relied on the Act’s most important provision: the creation of a governing Council in Calcutta, its five members nominated by Parliament and including three representing the Government’s interests who could – and, invariably and implacably, would – outvote the two Company members. The Council was headed by Warren Hastings, the incumbent Governor who now became the first Governor-General with an ill-defined supervisory authority over the Bombay and Madras Presidencies and Benkulen. Finally the Act set up a Supreme Court of Justice in Calcutta with, again, an ill-defined jurisdiction over the Company’s servants. It was supposedly designed to satisfy Sulivan’s repeated requests for some means of disciplining them; but, since the judges were
nominated by the Crown, the Court proved more inclined to challenge the Company’s authority than to support it.

The final legislation consisted of three bills, one authorizing the loan, the second that was the Regulating Act itself, and a third, easily ignored in the excitement over state intervention and apparently of very marginal significance, which allowed the Company to claim back all customs duty paid on tea that was subsequently re-exported to the American colonies. Again this measure was presumably in response to Sulivan’s earlier pleas for some easing of the excessive duties charged on the Company’s tea trade. More than half the tea being drunk in England was now in fact being imported into Europe by the Company’s Continental competitors and then smuggled duty-free across the Channel and the North Sea. Simultaneously large stocks of duty-paid tea were accumulating unsold in the Company’s warehouses. Under the new dispensation these stocks were to be ‘dumped’ on the American market where, before the year was out, the colonists duly dumped them in Boston’s harbour. The incident was to have serious repercussions.

But of more relevance to the Company’s history may be the relationship, as yet only dimly perceived, between the financial difficulties which precipitated each dose of state intervention and the fiscal handicaps under which the Company conducted its tea trade. A detailed examination of this relationship badly needs to be undertaken. Although it was still understood that the state should not interfere in the Company’s purely commercial activities, it can be no coincidence that concessions in the duty on tea accompanied every draught of the state pathogen and would go a long way towards sugaring its final death-dealing dose.

Tea apart, the Regulating Act, according to Professor Roberts’s neat summary, had thus ‘neither given the state a definite control over the Company, nor the Directors a definite control over their servants, nor the Governor-General a definite control over his Council, nor the Calcutta Presidency a definite control over Madras and Bombay’. Such imprecision, the product of poor drafting as well as muddled thinking, told more in India than in London. No sooner had the three councillors from London taken their seats in Calcutta’s council chamber than ferocious disagreements arose on every single issue. Hastings and Barwell, the two Company men, found their past policies condemned and reversed, their agents removed, and their integrity impugned. The personal clash between Hastings and Philip Francis, ablest of the newcomers, was destined to last three decades and to occasion one duel, much
brilliant polemic, the most sensational trial of the century, and a vast literature. They will be considered elsewhere. Here it is sufficient to note that as early as 1776 the Government accepted the need to remove Hastings and Barwell and duly deployed its influence in the Court of Directors to secure a vote for their recall.

But now the limitations of the new settlement as it affected London became apparent. Amid tumultuous scenes and after a twelve-hour debate attended by the leaders of the Government, the Opposition, and the Lords, the Court of Proprietors rejected the proposal. Hastings, who had already restored some order to Bengal’s finances and reformed the revenue administration, was held up as a symbol of integrity and of the Company’s independence, while the triumphant majority in the Court of Proprietors came to see themselves as a bastion of Company tradition against state interference. This was certainly an over-simplification. Consisting on the one hand of the Bengal Squad including the Johnstone clan plus part of the parliamentary Opposition and, on the other, of the reform-minded Sulivan-Hastings group, the victors represented an improbable coalition which required as much ‘management’ as the Ministerial majority in the Court of Directors. But success did generate a certain sense of purpose. Evidently the heavily drugged corpus of the Company, if sufficiently provoked, could yet administer a hefty kick. Henceforth this grouping represented the spirit of defiance.

(The only Bengal interest which it did not embrace was that of Clive. After weathering a final attack on his administration and
his jagir
from the Select Committee, a sick and embittered Clive had committed suicide in 1774; but not before renewing his vendetta with Sulivan and poisoning the minds of Francis and the new Councillors against Hastings.)

Frustrated by the Court of Proprietors, Lord North threatened to refer Hastings’s dismissal to Parliament, whereupon Lauchlin MacLean, Hastings’s agent in London, proffered his master’s resignation. This was possibly the result of a misunderstanding, possibly an ingenious ploy hatched by MacLean, one of several plausible and intriguing – in both senses – adventurers operating on the speculative margins of the Company. Either way, the news deflated the crisis and 1777 passed in expectation of Hastings’s early return. In April 1778 it emerged that he had not resigned, had never intended to resign, and was now, thanks to the death of one of the Councillors, in a stronger position than before. News
of another death, that of his assumed successor as Governor-General, further confirmed his renascence, while at home Sulivan, his patron, secured enough votes to get himself reinstalled, for at least the fourth time, in the Court of Directors.

All this was bad news for North’s Government. It was, though, as nothing compared to the American tidings of Burgoyne’s surrender at Saratoga and of the French entry into the war. Briefly the probable loss of Britain’s transatlantic empire eclipsed all else, paralysing the administration and shattering the confidence of its leader. When the Court of Proprietors again lashed out, this time to reject the proposals drawn up by Robinson to amend the Regulating Act, North merely limped off to seek Sulivan’s backing, thus signalling the near collapse of Ministerial control over the Directorate. Sulivan’s price was a renewed commitment to Hastings’s Governor-Generalship and a strengthening of the Governor-General’s authority over his Council and over the subsidiary presidencies. In the press of American business, the Regulating Act was simply renewed annually until, in 1781, it was superseded by another temporizing measure which addressed neither the crisis in Government-Company relations nor that in the Calcutta Council chamber. ‘A paltry performance’ was Sulivan’s verdict.