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In the heart of Kolkata in India’s east stands the neoclassical Writers’ Building, an arched, colonnaded testament to the fragility of what once seemed invincible corporate muscle.
Built in the late 1770s, the Writers’ Building once housed the junior clerks — who were known as “writers”, as they spent much of their time hand-copying documents — of the fearsome East India Company, the British trading concern that imposed, with its vast private army, an iron-fisted “company” rule over much of south Asia in the 18th century.
Today, the pasty young British writers are long gone, their erstwhile offices, now in the throes of renovation, most recently filled with the portly, lethargic officials of independent India’s state of West Bengal. The building’s once all-powerful owner, the East India Company, is gone too, dissolved in 1874 after a revolt by Indian troops in the company’s service finally prompted the British government to take direct control of the business and its increasingly controversial activities.
The brute-force tactics of the East India Company — and its rival, the Dutch East India Company (Vereenigde Oost-Indische Compagnie, or VOC), which had its own enclaves in Indonesia — may seem far removed from today’s contemporary businesses and their carefully calibrated negotiations with host country governments.
Yet the fall of the East India Company and others of its ilk — often described as the first modern multinationals — remains a cautionary tale for modern global companies and their tendency to use political and economic strength to wrest advantage from poorer countries. While trade and commerce can undoubtedly benefit both companies and countries mutually, these relationships can be fraught with peril too.
Indeed, the multinational that exploits the weakness — or rapacity — of local leaders to build a favourable economic position might be able to bring in lucrative profits for a while. But, as with the East India Company, an excessive focus on maximising shareholder returns, and a failure to bring tangible benefits to host societies, can be unsustainable and risk popular resentment.
Perceived parallels with the apparently predatory excesses of some modern global companies, exploiting natural resources or cheap labour in the developing world, are spurring a revival of academic and popular interest in the East India Company’s turbulent history.
“The lines between economics and politics, business and power, commerce and sovereignty that we draw today are in fact a very recent phenomenon — and often an illusion,” says Professor Philip Stern, a historian at Duke University in the US and author of The Company-State, a book on the East India Company. “Governments are deeply interested in commerce and lots of corporations, especially ones that are multinational and multijurisdictional in nature, are also very involved in managing people, resources and territory.
“Today, we do not expect businesses to act like governments, but they’ve never lost that capacity, though it may recede at times, or be occluded or hidden.”
The forerunner of the East India Company was set up by royal charter in 1600, competing and battling with its Dutch and short-lived Portuguese counterparts to dominate trade in the Indian Ocean.
The company’s traders had private armies, waged open war against defiant local leaders, and gained political and diplomatic support for their aims. By the 18th century they had established effective political control over vast swaths of south Asia. In all of this the East India Company had the backing and blessing of the British parliament — of which many of the company’s shareholders were, conveniently, members.
In the 18th century the East India Company expanded its army and won a number of victories against the French. In 1765, after using a combination of force and bribery to install its puppet as the local ruler of Bengal, the company forced the weak Mughal empire to give it the right to collect taxes from the regions of Bengal, Orissa and Bihar. The privatisation of the Mughal empire’s tax collection to a company accountable only to shareholders paved the way for abuses and financial trouble.
Today’s multinationals, whether from the powerful economies of the west, Japan or emerging superpower China, may lack their own direct military might. But they do tend to operate with the political backing of their powerful home country governments. They often are the beneficiaries of comprehensive global trade agreements that seek to modify developing countries’ domestic policies and laws, usually to make them more amenable to western companies’ interests.
India, for example, has been under heavy pressure from Washington to change its intellectual property laws, amid complaints from politically influential western pharmaceutical companies that India’s courts are rejecting patents on their innovative new medicines. Though India argues it has struck a balance between patent-holders’ rights and concern about access to medicine for the poor, calls for New Delhi to changes its laws recur in US-India bilateral forums.
In conflict environments, private companies operate with the protection of the highly trained, heavily armed forces of their own private security companies, such as the US-based Academi, which was born out of the erstwhile Blackwater Security Company and describes its mission as “supporting our clients’ efforts to protect our citizens, and expand economic opportunity”.
Echoes of the East India Company and the VOC, with their fortified, guarded enclaves, are visible in Saudi Arabia, where thousands of foreign oil workers and their families live in secure company compounds, enjoying personal freedoms considered anathema to much of the highly conservative host society.
It matters little that many of these foreigners work, directly or indirectly, for the Saudi government’s own state oil company, Saudi Aramco, or its partners, which are integral parts of the global oil trade. Their lifestyle, and these compounds, have come under repeated attack.
Beijing has been one of the few friends of Myanmar’s isolated military regime, which was subject to economic sanctions by many western governments. Chinese companies took advantage of the vacuum, buying up natural resources such as timber and at the same time building modern infrastructure such as highways.
But rather than creating desperately needed jobs for Myanmar’s youth, thousands of Chinese workers were imported, fuelling deep popular resentment. That anger, coupled with anxiety among the military elites about potential over-reliance on China, finally boiled over.
In 2011, amid fierce public protests — and with fresh overtures from other prospective business partners, the Myanmar government cancelled a $3.6bn Chinese-backed hydroelectric project, infuriating its former patrons. Four year on, relations remain sensitive, with continuing local protests against the Chinese Letpadaung Copper Mine. Chinese companies’ interests in many African countries are also a source of deep ambivalence in those nations, with the ultimate consequence yet to be seen.
Yet despite apparent echoes of 17th-century trading companies, no modern businesses have as much unchecked power as the East India Company accumulated in India at its height. In addition, far more rapid communication, better mechanisms of accountability and the capacity for more easily co-ordinated opposition at home and abroad mean companies are more careful of their public image. Any crisis or scandal today forces a quicker response than in the heyday of the East India Company. From the perspective of corporate longevity, that may be no bad thing.