Trading to colonization

Jon Aldous 기자 승인 2023.11.21 18:32 의견 0
National geographic

In his 1950 publication, 'History of the Universe,' J. Pirenne noted that Asia held a more significant position globally than Europe in the mid-17th century, with its wealth far surpassing that of European states. This context was crucial when the East India Company initiated its trading operations in the early 17th century. Originally, British traders intended to sell British Broadcloth, a popular export to Continental Europe, in India but found little interest in it. Instead, they discovered various Indian goods that they could profitably sell back in Britain, similar to the Portuguese traders before them.

Facing competition from other European traders and various trade routes to Europe, such as 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 not in a position to impose their terms. They needed to approach negotiations humbly, offering trade deals that benefited local rulers and merchants. While Emperor Aurangzeb tried to limit the East India Company's activities, realizing the link between increasing European trade concessions and declining overland trade revenues, not all Indian rulers were as hesitant to grant trade concessions. The East India Company, determined and resilient, established trading posts along the extensive Indian coastline.

During this era, interactions between the British and Indians were often cordial. The East India Company employed individuals from both cultures, leading to friendships and even intermarriages. The British employees of the company adapted to life in India, adopting local attire, engaging in Indian leisure activities, and incorporating Indian words into their speech. They admired and appreciated the finesse of Indian craftsmanship and made the most of its growing popularity in Britain and France. The trade was so profitable that, despite India only accepting silver or gold in return, the East India Company thrived.

Despite the lengthy journey around the African Cape to England, the British managed to profit substantially from their trade, thanks to several advantageous factors. First, their legally sanctioned monopoly in England gave them considerable control over the market. Second, by purchasing directly from the source in India, they bypassed the significant markups that Indian goods accrued en route to Europe. Thirdly, the East India Company likely benefited from economies of scale with their large ships in the Indian Ocean. Additionally, they successfully opened new markets for Indian products in Africa and the Americas.

Veronica Murphy, in her work 'Europeans and the Textile Trade' (Arts of India 1550-1900), points out a significant, albeit indirect, factor contributing to their profitability: the close link between the East India Company and the highly lucrative transatlantic slave trade. The British dominated this trade in the 18th century, transporting more slaves than all other European nations combined. In 1853, Henry Carey, author of 'The Slave Trade, Domestic and Foreign,' highlighted the immense scale of this British-led system. This trade played a crucial role in bolstering the financial might of the East India Company.

By the mid-17th century, the East India Company was re-exporting Indian goods to Europe, North Africa, and even Turkey. This significantly impacted the revenues of the Ottomans, Persians, and Afghans, who traditionally benefited from trade with India. The Arab and Gujarati traders also saw a substantial reduction in their trade activities, now limited mostly to inter-Asian commerce. As the Mughal Empire weakened and disintegrated, the East India Company gained more leverage, aggressively expanding its operations and demanding greater concessions from Indian rulers.

Simultaneously, European voices were growing louder in their criticism of the loss of silver to Asia. By the end of the 17th century, silk and wool merchants in France and England, facing stiff competition from Indian textiles popular among Europe's burgeoning bourgeoisie, called for bans on East India Company trade and restrictions on buying such items. While these measures didn't completely halt smuggling, they significantly reduced the trade, affecting the revenues of the newly independent regional Indian states. Bengal was among the first to experience these consequences.


The East India Company, having missed out on profiting from the Indian textile trade, readily shifted its focus. Initially, in 1616, Sir Thomas Roe, representing the Company, informed the Mughals that war and trade were incompatible. Yet, by 1669, before the textile trade bans, Gerald Ungier, the head of the Bombay factory, had already advised his superiors to intertwine commerce with military strength. In 1687, the company's directors even proposed establishing a British dominion in India similar to Goa. This idea mirrored the sentiments of the French Dupleix and was in line with earlier Dutch strategies, as expressed by Jan Pieterzoon Coen in 1614, who advocated for a symbiotic relationship between trade and military force, as detailed in Auguste Toussaint's 'History of the Indian Ocean.'

The 18th-century Opium Trade, which led to the Opium Wars, further illustrated this nexus between war and commerce, with the Royal British Navy supporting the commercial interests of the East India Company. This blending of warfare and trade paved the way for colonization, a shift heralded by the Battle of Plassey, marking a new phase in Indo-British relations.

Countering the argument of some colonial apologists who attributed India's defeat to inherent flaws or a supposed inherent weakness in Asian character, R. Mukerji, in 'Rise and Fall of the East India Company,' proposed a different perspective. He emphasized the economic motivations driving European companies towards imperialism, noting that monopoly rights alone did not ensure the ability to purchase goods inexpensively; political control was vital for this.

Furthermore, the East India Company's profits were in direct opposition to those of their competitors in Britain. Under such circumstances, where profit was the primary goal, events like the Battle of Plassey and the Opium Wars were almost inevitable outcomes in a scenario where lawful and ethical profit-making was unfeasible. Contrary to the portrayal of the Company's traders as "gentlemen traders" by some historians, their transition from trading in textiles to opium (akin to modern drug trafficking) contradicted this image. If they had truly been men of honor, facing the impossibility of profitable trade, they would have faced bankruptcy, a common outcome in the business world.

Remarkably, even after the East India Company had secured considerable profits from the opium trade, this success did not deter further aggressive actions. The Company, seemed compelled to repeat such actions. Following their victory at Plassey, the Company not only enforced opium cultivation in India for tea trade profits but also launched military assaults on Indian and other Asian vessels involved in regional trade. These attacks set the stage for conflicts with the rulers of Coromandel and the Marathas, whose trade revenues suffered as a result. While Plassey might have been a matter of survival for the Company, the later battles were not driven by the same necessity. Although some historians suggested that rivalry with the French spurred these battles in South India, this perspective was countered by a French source.

Abbe de Pradt, in his 1902 book "Les Trois Ages des colonies," argued that Britain’s victory at Plassey and its subsequent sovereign rights showed Europe that it was no longer necessary to use precious metals from the New World for trade in India. Instead, Britain could trade based on revenues from taxing its subjects and commodities. This approach differentiated Britain from other European nations, which traded at a loss using metal currency. According to de Pradt, Britain’s control over India reduced the need for Europe to export metallic currency to Asia, making the British Empire beneficial not just for Britain but for Europe as a whole. Each British conquest in Asia was, in his view, a victory for Europe.

This perspective aligns with the observations of later analysts, who noted a reduction in inter-European conflicts in the 18th century compared to the 17th, further diminishing after Plassey. The implication is that with Britain winning the race for Indian colonization, it was in the interest of countries like France to appreciate the general benefits of this victory rather than lament the specific advantages lost to British dominance.

N.K. Sinha, in his work "Economic History of Bengal," described the shift in trade dynamics post-Plassey. For over two centuries, European trade with Bengal, whether through companies, individual traders, or illicit means, always favored Bengal to the extent that Europeans had to pay the balance in cash. After Plassey, the East India Company found a way to extract this balance from Bengal itself through coerced taxes.

Sinha further notes that the commerce of local merchants began to decline. Armenian, Mughal, Gujarati, and Bengali traders increasingly found their businesses restricted and burdened. The control of export, import, and manufacturing gradually shifted from independent Indian merchants to intermediaries working for the British East India Company, often enforced by violence. Indian factories competing with the Company were destroyed, and independent weavers who resisted working for low wages had their thumbs cut off. The Company also established a monopoly on internal trade, gaining a tight grip on the economic and political life of Eastern India within three decades after Plassey.

As Abbe de Pradt had anticipated, the advantages of colonization extended beyond Britain. French, Dutch, and Danish competitors also benefited from the trade monopoly set by the British East India Company. They could purchase Indian goods at lower prices due to the decline of Indian merchants. Additionally, corrupt Company employees often siphoned off their ill-gotten wealth through these European rivals to avoid detection and taxation in Britain. While Indian competitors were eliminated, European ones thrived for another 30 to 40 years.

American researcher Furber, in his 1948 study of the East India Company, noted that French and Dutch rivals remained active until 1769 and 1798, respectively. He also highlighted the Company's cosmopolitan nature: a significant portion of its capital came from financiers in Amsterdam, Paris, Copenhagen, and Lisbon. Furber pointed out that the commercial activities of the French, Dutch, and Danes in the Indian Ocean during the eighteenth century were integral to the establishment of British power in India. He underscored not only the diverse and substantial support for the East India Company but also the self-interest and motivations behind this backing.

Plassey marked the beginning of a series of defeats for regional Indian powers against European forces. While a united India had previously resisted European advances, a fragmented India could not withstand a cohesive Europe. The ongoing conquest of India saw the decisive defeat of the Marathas by 1818, the Sikhs by 1848, and the annexation of Awadh in 1856. The 1857 rebellion was a valiant effort to reverse the East India Company's gains but ultimately led to the imposition of direct British imperial rule. This transition marked the beginning of a new era of intensified colonial exploitation on the Indian subcontinent, which faced continuous resistance until India's independence in 1947.

For nearly two centuries, there was a systematic siphoning of wealth from India to Europe. While Britain was the main beneficiary, its European and New World allies also reaped significant gains. British banks utilized capital from India to finance industrial ventures in the United States, Germany, and other parts of Europe. The colonization of India and other parts of the world was a cornerstone of the Industrial Revolution and the development of modern capitalism. The impoverishment of colonized regions was a critical factor in enabling countries like Britain and the U.S. to undergo industrialization and modernization. This aspect is essential for any comprehensive understanding of the evolution of modern capitalism.

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