An Empire on the Edge

by Nick Bunker

  Sulivan, the oldest of the three, had emerged from obscurity in Ireland, making his way to Bombay as a trader before joining the company’s staff in 1741. Returning to England with a fortune, he became a director, thanks to his unrivaled knowledge of the company’s activities in India. His friend Purling, born about 1720, began his career as an ordinary seaman, but as the fleet expanded he rose to the rank of captain, sailing twice to China. Like Sulivan, he used the money he made to buy a seat in the House of Commons. Born in 1729, Colebrooke came from a banking family but his grandfather had been a tailor. An avid speculator in commodities of all kinds, he acquired his riches first by winning military contracts during the war with France and then by insider dealing in government bonds at the time of the peace talks in Paris.

  None of the three could allow the company’s headlong expansion to cease. During the excitement that followed the grant of the diwan, both Sulivan and Colebrooke borrowed heavily to buy the company’s stock, with Purling among their creditors; and this, and Purling’s close ties to the shipping lobby, left him equally eager for growth at any cost. Like the supercargoes in Canton, the triumvirate had to keep the business on the boil or risk the loss of more than they had won.16

  And then, in the spring of 1769, the letters home from India began to carry bad news. Despite its successes in Bengal, the company remained exposed to enemies in the south. Another war broke out, with the kingdom of Mysore, a war that seemed to threaten the loss of Madras. Worse still, it was rumored that the French were poised to intervene, with an army waiting on the island of Mauritius. When word of all this arrived in London, the price of the company’s stock began to drop. Even when it emerged that the reports were false, the price did not recover, and so Colebrooke and his friends looked for a way to support it. Every six months, the company met to declare a dividend. So they kept on increasing it, until the company was paying its investors nearly £400,000 each year. To meet the cost of doing so, the directors sent ever more ships to Canton, expecting their sales of tea in London to supply the cash they required.

  With the China trade doing so well and the yield from the land tax in Bengal increasing year by year, the company’s earnings rose in 1771 to a peak of more than £1 million. But enormous though they seemed to be on paper, the bulk of these profits arose in India, and the hard currency that flowed home to London came to a far smaller sum. And while the tea trade appeared to be thriving, it absorbed huge quantities of silver from Cádiz: this was a problem too. Inevitably, the price of bullion had risen in Spain, threatening to erode the profit margins on which the company relied. In response, Sulivan and his friends thought of yet another cunning but disastrous plan.

  With what appeared to be brilliant ingenuity, the directors had found a new way to make India yield up its treasure. In the late 1760s, as a way to obtain bullion in Bengal they began to allow their managers in Calcutta to write out IOUs to local English merchants, most of whom worked for the company itself and had accumulated their own private hoards of silver. From Calcutta the bullion sailed to China, while the IOUs came home to London to be redeemed when the tea was sold. For the people of Bengal, this stratagem could only lead to hardship, draining wealth from the province that might have gone to finance tools, livestock, and irrigation. But for the British, the plan seemed to be ideal. The scheme gave the company the working capital it needed and allowed its traders to send money back to England in what seemed to be a cheap and efficient way. But what if the officials in Bengal were tempted to go too far by issuing IOUs on a scale the East India Company had never foreseen? This is precisely what occurred.

  On the plains of India, everything depends on the monsoon; but in the summer of 1769 the rains came too late to the valley of the Ganges. In places they never fell at all. Even before the drought, the economy had begun to wither under the blight of the land tax. Eager to strip every rupee they could from Bengal, the British had also driven up the price of food by stockpiling scarce supplies of grain to be sold at a profit. By the end of October, a famine had begun. It continued far into the following year. The victims filled the streets of Calcutta, where, it is said, nearly eighty thousand people died.

  By the time the famine had run its course, the East India Company believed that ten million people had lost their lives. Modern estimates point to a far lower figure, but one that still runs into millions. And the suffering was worst in precisely those locations, in Bihar and around Murshidabad, where so much of the land revenue arose. So the receipts from the tax began to dwindle, while the company continued to spend heavily. Once again, there was talk of war, not only in the south, but also against a new enemy, the Marathas in the west. Running scared of simultaneous attacks on Bombay and Madras, the company’s men in India scrambled for cash to hire more sepoys and pay for fortifications.

  In the summer of 1770, as they saw the riches of Bengal vanishing before their eyes, they sent grim letters home, warning the directors about their dire predicament. It would be at least a year before they could expect a reply. In the meantime, they took the only option available, and drew even more heavily on the company’s credit. At the end of that year, the managers in Calcutta issued a mountain of new IOUs, which came to be known as the Bengal bills. Hoping for the best, they borrowed more than £1 million and charged it all to their superiors in London.17

  It took another six months for the shareholders in England to learn that something was badly awry. At first, the reports were vague, but in the middle of 1771 they reached the ears of a Scottish investor called William Crichton. As we shall see, Crichton would later play an essential part in the events that led to the Boston Tea Party, but at this stage it seems that he was simply nervous about the value of his portfolio. Among the company’s shareholders, there was a small but vocal group of dissidents, of whom he was one, who had begun to ask awkward questions. In June, after hearing rumors about the Bengal bills, Crichton raised the issue with the board, only to be brushed aside. And then at last, after the holidays, the story leaked into the press, presumably from him. The price of the company’s stock began to fall. For the directors, so deeply in debt, it was too late to turn back. On September 25, the shareholders were due to meet to hear the board recommend a dividend. The latest tea auction had been a disaster, as we saw, and that, coupled with the huge liabilities that were building up in India, should have made them opt for caution. But with so much at stake, instead the directors chose to tough it out.

  Their chief accountant drew up a misleading statement of the company’s affairs, choosing a balance sheet date that allowed him not to include the full cost of the Bengal bills. Armed with these dubious figures, Purling and Colebrooke persuaded the meeting to approve the payment of the dividend at its old high level. And then, a week later, over dinner at his home in Piccadilly, Sir George organized a covert operation to support the company’s stock. Hiding their identities by dealing through a Dutch bank, he and his friends began to buy it secretly on the Amsterdam exchange.

  For a while Crichton and his fellow dissidents withdrew, and the fuss about the balance sheet died down. The shares continued to trade above £200. But by the end of 1771 it was only a matter of time before the reckoning arrived. For as long as the company made a handsome profit from the tea it sold, it could fund its debts, redeem the Bengal bills, and continue to pay a generous cash return to investors. But when the price of tea collapsed, as it was bound to do, the game would be up, and the company would sink beneath the weight of its indebtedness. Meanwhile, in America, the brief period of calm that Lord North seemed to have created was already drawing to a close. An attack upon the king’s authority was about to occur, and one which arose from the same oceanic trade in tea.

  Six thousand miles from Bengal, the British Empire encompassed another dominion where men and women dealt greedily in commodities: Rhode Island, the little province in New England founded in the seventeenth century by the most original of all the Puritans, the remarkable Roger Williams. Here an incident occurre
d in 1772 that foreshadowed the great schism between King George III and his subjects in America. Its origins lay in the international trading system which the British had brought into being.

  From China to the Caribbean the British operated a private economic empire far too reliant on tea, tobacco, indigo, wheat, and rice, a system built on debt and therefore a system inherently prone to volatility and occasional episodes of panic. Politically their position was equally insecure. On the western side of the Atlantic, they had wayward colonies they could not control, each one with local habits of dissent. Sooner or later these two elements of instability in the empire, political and economic, were sure to compound together in a crisis too deep for the king and his ministers to overcome. This was what happened in Boston Harbor in December 1773, but eighteen months earlier the Tea Party had been preceded by something quite as striking in Rhode Island.

  Used to sailing to Africa and the West Indies, where they bought and sold slaves, the people who lived by Narragansett Bay earned their living mostly from the seaborne traffic in rum, sugar, molasses, tea, and a host of other items, much of which was legal but a great deal of which was contraband. If the British dared to interfere decisively to stamp out smuggling in Rhode Island, the outcome was likely to be violent, and all the more so because the culture of Providence and Newport left no room for compromise. Of all the American colonies, Rhode Island was the freest, the most radical, and the one least inclined to follow royal instructions.

  And so it was here that the countdown to war began. Early in 1772, with the East India Company heading toward its nemesis, a flood of illegal tea came surging across the ocean from Holland and Scandinavia, where the glut from China had filled the storerooms until they overflowed. Much of the tea looked for American landfall on the coast between Cape Cod and Long Island Sound. When the Royal Navy heard of what was going on, it tried to put a stop to this pernicious activity. In response, the region’s mariners fired the first shots of the revolutionary crisis.

  * * *

  * To put these figures in perspective: in 1771, the Chinese empire had a population of about 270 million; Bengal, about 50 million; Great Britain, about 7.7 million, with about another 3.2 million in Ireland; British North America, about 2.5 million.

  Chapter Two

  “THIS DARK AFFAIR”:

  THE GASPÉE INCIDENT

  Rhode Island, Mr. H., is a strange form of government.

  KING GEORGE III, SPEAKING TO GOVERNOR THOMAS HUTCHINSON OF MASSACHUSETTS1

  It was a dreadful winter: the coldest, it was said, for two generations. In New England the temperature fell to forty below, and storms caused a host of shipwrecks up and down the coasts. In Virginia a blizzard left three feet of snow in George Washington’s backyard, while in Boston on Christmas Day a citizen could clamber across the harbor on the ice. But even while the freeze continued, the season for contraband began.

  The British ran a network of spies in Europe whose latest bulletins carried word of unusually large sales of tea in Denmark and Sweden. Transmitted by the Admiralty in London, the reports arrived in America in the fourth week of January to be read by the British naval commander in Boston. No sooner had he passed the word to his officers on patrol than evidence appeared confirming what the spies had said. In the middle of February the admiral learned of a Dutch ship moored off the coast of Maine, full of tea bound for Boston. Ten days later he received news of another smuggling vessel, this time from South America, carrying rum and sugar. Soon afterward informers told him that yet another Dutchman was approaching with still more smuggled tea, and hourly expected somewhere close to Salem.2

  It was organized crime on an enormous scale, calling for stern measures from the navy. Rear Admiral John Montagu rose to the occasion with alacrity. Many Bostonians loathed Montagu—John Adams spoke of his “brutal, hoggish manners”—partly because they thought he owed his post to nepotism; but that, you may be sure, was a wicked Yankee libel against a sailor whose career had been exemplary, despite his cursing, his swearing, and his taste for claret.

  Born into the landed gentry, he counted among his many cousins the Earl of Sandwich, the First Lord of the Admiralty. In his thirties the young captain Montagu had sat for a while in Parliament as a silent member for a constituency his relative controlled. But Lord Sandwich worked immensely hard, he did not care for fools, and he would not give a rank so senior to a stooge, even one from his own family. Since Montagu joined the service in his teens, he had fought in two wars against the French, commanded eight battleships, and shot by firing squad a fellow officer. In Admiral Montagu we behold a man who understood the meaning of duty. Before he left England, he received strict orders to keep his squadron at sea as much as possible in order to enforce the laws of trade. The admiral kept a daily journal, which displays the diligence with which he tried to do so.3

  To cover the coast from Labrador to Florida, the navy gave him two dozen ships, most of them small and built to hug the shore. Under constant insult from the ocean their hulls and rigging needed frequent repairs, but his budget allowed for only one dockyard, up north at Halifax, Nova Scotia. As if he were playing a vast game of chess, Montagu shuttled his captains back and forth, in and out of refit, constantly urging the shipwrights to work more swiftly.

  One of the ships he moved most often was a schooner called the Gaspée. Her role was to cruise to and fro across the bays where smugglers might lurk. By the autumn of 1771 she was bruised and battered after a long spell at the mouth of the Delaware. So the Gaspée took a rest at Halifax before spending November in the Gulf of Maine. In the depths of winter she hunted around Cape Cod, returning to Boston just in time for the reports from Europe about an upsurge in the volume of smuggled tea. On January 25, 1772, Admiral Montagu ordered the Gaspée out to sea again to watch the most suspect section of the shore. In the eyes of the navy the worst of the smugglers came from Martha’s Vineyard or Rhode Island, where the nooks and crannies of the coast supplied the best kind of cover. So off went the Gaspée under the command of a keen young Scotsman called William Dudingston.

  Later, when he achieved his fifteen minutes of fame, opinions would differ about Lieutenant Dudingston. While an American called him “a very dirty low fellow,” the first official British history of the Revolutionary War took a very different view, praising him as an officer “vigilant and active, in the execution of his duty.” The Scotsman had every reason to enforce the law severely. While in peacetime most naval officers kicked their heels at home on half pay, he belonged to the happy few with a command on active service. Aged thirty-one, the son of a laird on the coast of Fife, he came from a family crippled by debt, and Dudingston himself had borrowed heavily. An officer of his rank earned only four shillings a day, but in colonial waters he could double or treble his salary if he found guilty ships to seize.4

  He had a host of targets from which to choose. Along the American coast hundreds of vessels made thousands of voyages each year, often breaking the law, knowingly or not, because the British had put in place an impossibly complicated tariff of customs duties and an equally complex set of regulations to ensure that they were paid. Some of the rules had existed for many decades, like the Navigation Acts, which obliged the trade of the colonies to pass through British ports. Others were new, mostly dating from Grenville’s abortive plan to pull the colonies into line. Of all the recent measures, the threepenny Townshend tax on tea caused the most resentment, but many others were almost as irritating. Even the smallest coasters were obliged to carry official papers showing the origin and destination of their cargoes and proving that all the duties had been paid. So complex were the rules and so liable to lead to friction that even some officials in London had begun to despair about the system, arguing that while it produced little money, it damaged the empire by angering honest traders who might be tempted to rebel as a result.

  Just how little did the taxes yield? Only one produced a significant sum, the penny duty on a gallon of molasses. Even in the best yea
r in the 1770s the tax revenue from America came to a total of only £47,000, a small fraction of the empire’s running costs. General Gage had bills to pay, so did the Royal Navy, and the customs service needed their salaries too. So did the governors, the judges, and the rest of the small cohort of officialdom. Add everything up, and the total came to roughly £400,000 each year. Even if we include the revenues the British government received from the tobacco trade, another £200,000 in duties paid by consumers at home, the outcome is the same: the colonies never came close to meeting the cost of their defense and their administration.5

  That being so, why bother to tax them at all? Why not scrap all the duties and all the red tape? Do that and trade would thrive along the coast and up the rivers that led inland. Freed from its task of patrolling the coast, the navy could come home or cruise the Caribbean instead, while the colonials spent the extra money in their pockets on English hardware and woollen cloth. But the British had yet to fall in love with free trade, something that would have to wait until after the war with America was lost, when Adam Smith acquired his admirers in high places. Besides, every politician knew that sooner or later the British would have to fight the French again. Only the previous year the Falklands crisis had very nearly led to war, and it was taken for granted that one day the king of France would try to reconquer the possessions he had lost. If so, the British would need every penny they could find.

  And so the taxes and the regulations remained in place, with all their tiresome bureaucracy. So much the better for a young lieutenant with debts to pay in Fife. If William Dudingston caught an American vessel without the right papers, he would not only receive a share of the proceeds when the boat and her cargo were sold. He would also know that he had served the empire well. During the last war with France, when the Americans openly traded with the enemy, the British armed forces had come to regard almost every local merchant as a smuggler and a cheat.