Long extracts were reprinted in the London Magazine and as one correspondent warned Warren Hastings, despite its exaggerations and clear prejudices, ‘it is swallowed very greedily by the public whose eyes are fixed on the correction of these abuses by the interposition of Parliament’.45 For Horace Walpole it proved everything he had long suspected about the evils of the Company. Bolts ‘carried the accusations home to Lord Clive; and … represents him as a monster in assassination, usurpation and extortion, with heavy accusations of his monopolizing in open defiance of the orders of the Company … To such monopolies were imputed the late famine in Bengal and the loss of three million of the inhabitants. A tithe of these crimes was sufficient to inspire horror.’46
Bolts concluded his rant with a warning about the financial stability of the Company: ‘The Company may be compared to a stupendous edifice,’ he wrote, ‘suddenly built upon a foundation not previously well examined or secured, inhabited by momentary proprietors and governors, divided by different interests opposed to each other; and who, while one set of them is overloading the superstructure, another is undermining the foundations.’47
It proved a prophetic passage. For, only five months later, the EIC’s financial foundations gave way in the most spectacular fashion.
On 8 June 1772, a Scottish banker named Alexander Fordyce disappeared from his office, leaving debts of £550,000.* His bank, Neal, James, Fordyce and Down, imploded soon after and declared bankruptcy. Another institution with large investments in Company stock, Douglas, Heron & Company, otherwise known as the Ayr Bank, closed its doors the following week, so initiating a financial crisis that quickly spread across Britain into Europe.
In the week that followed, across the North Sea there were several failures of Dutch banks with speculative holdings in East India Company stock. Ten more banks folded across Europe within a fortnight, twenty more within the month: thirty banks going down like dominoes in less than three weeks.48
This had global repercussions, ranging from suicides in Virginia to, closer to home, the bankruptcy of Sir George Colebrooke, the chairman of the East India Company, which did little to restore confidence in his management. The Bank of England had to intervene, but the Bank itself was under threat. ‘We are here in a very melancholy Situation: Continual Bankruptcies, universal Loss of Credit, and endless Suspicions,’ David Hume wrote to Adam Smith from Edinburgh in June. ‘Do these Events any-wise affect your Theory? Or will it occasion the Revisal of any Chapters [of The Wealth of Nations]?’49
A month later, on 10 July 1772, a packet of bills worth the enormous sum of £747,195, remittances from India sent by Company officials returning home, arrived at India House in Leadenhall Street. There were now real anxieties about the state of EIC finances, as remittances sent for cashing in London between 1771 and 1772 looked to be heading towards the £1.5 million mark.50 Questions were asked as to whether the EIC should sanction payment of these remittances, but the account committee insisted on honouring the bills, ‘as it was alleged that the credit of the Company might be hurt in the severest manner by refusing’.
At the same time, the famine was finally leading to Bengal land revenues falling. Meanwhile, overpriced EIC tea was lying unsold in vast quantities in its London warehouses: unsold stock had risen from around £1 million in 1762 to more than £3 million in 1772. This coincided with military expenses doubling from 1764 to 1770, while the cost of the 12.5 per cent dividend had added nearly £1 million a year* to the EIC expenses. The books were now very far from balancing.51 In the second half of the year, the Company defaulted first on its annual customs payments, and then on its loan repayments to the Bank of England. As knowledge of the crisis began to circulate, EIC stock plummeted sixty points in a single month. It was shortly after this that the EIC was forced to go cap in hand to the Bank of England requesting a vast loan.52
On 15 July 1772, the directors of the Company applied to the Bank of England for a loan of £400,000. A fortnight later, they returned, asking for an additional £300,000. The Bank could raise only £200,000. There were unpaid bills of £1.6 million and obligations of over £9 million, while the Company’s assets were worth less than £5 million.53 By August, the directors were telling the government in confidence that they would actually need an unprecedented bailout of a further £1 million.*
Already the EIC was in deep debt: between 1769 and 1772 the Company had borrowed £5.5 million** from the Bank of England and as the chairman wrote to Warren Hastings in Calcutta, ‘our domestic distresses came fast upon us – a general gloom springing from this immense bankruptcy has brought the public credit almost to stagnate, affected our sales in a deep degree and brought the Bank of England (our single resource) to be severely cautious’.54 The report written by Edmund Burke shortly afterwards painted a picture of Company servants ‘separated both from the country that sent them out and from the country in which they are’, and foresaw that the EIC’s financial problems could potentially ‘like a mill-stone, drag [the government] down into an unfathomable abyss … This cursed Company would, at last, like a viper, be the destruction of the country which fostered it at its bosom.’55
At the same time it was widely recognised that it was Indian wealth that was now helping propel Britain’s economy and that ‘the first and most immediate consequence’ of the failure of the EIC would be ‘national bankruptcy’, or what amounted to the same thing, ‘a stop to the payment of interest on the national debt’.56
The economic and political theorist Thomas Pownall wrote how ‘people now at last begin to view those Indian affairs, not simply as financial appendages connected to the Empire; but from the participation of their revenues being wrought into the very frame of our finances … people tremble with horror even at the imagination of the downfall of this Indian part of our system; knowing that it must necessarily involve with its fall, the ruin of the whole edifice of the British Empire’.57 This was certainly the view of the King. George III wrote that he believed ‘the real glory of this nation’ depended on the wealth of India which offered ‘the only safe method of extracting this country out of its lamentable situation owing to the load of debt it labours under’.58
On 26 November, Parliament was recalled to discuss the East India Company’s financial crisis, as well as the now widespread allegations of corruption and malpractice made against individual EIC servants: the contrast between the bankruptcy of the Company and the vast riches of its employees was too stark not to be investigated. There was also a personal element to this: 40 per cent of MPs owned EIC stock and their finances had all been severely damaged by the fall in its value.
It was now increasingly obvious that if Parliament did vote to bail out the Company to the tune of £1.4 million* there would have to be a quid pro quo, and a measure of parliamentary supervision of the EIC in return for authorising such an immense loan. It was widely recognised for the first time that the EIC was incapable of reforming its own affairs and that, unless Parliament intervened, Bengal and its vast revenues would be lost.
As William Burrell MP declared: ‘Sir, let no gentleman think this is a trivial question of Ministry or Opposition. No sir, it is the state of the Empire; and perhaps upon it depends whether Great Britain shall be the first country in the world, or ruined or undone.’59
On 18 December 1772, the directors of the East India Company were summoned to the Houses of Parliament. There they were fiercely examined by General John Burgoyne’s Select Committee, which had been set up to investigate EIC abuses in India, and particularly accusations of embezzlement and bribe-taking. Charges of corruption were levelled against several EIC servants, including Clive, who Burgoyne described as the ‘oldest, if not principal delinquent’. The Select Committee in its final report calculated that ‘presents’ worth over £2 million** had been distributed in Bengal between 1757 and 1765, and said that the ‘very great sums of money … appropriated’ by Clive and his henchmen ‘to the dishonour and detriment of the state’ should be reimbursed to the C
rown.60
Clive responded on 21 May 1773 with one of his most famous speeches, saying he objected strongly to being treated like ‘a common sheep-stealer’. After Plassey, he thundered, ‘a great prince was dependent on my pleasure; an opulent city lay at my mercy; its richest bankers bid against each other for my smiles; I walked through vaults which were thrown open to me alone, piled on either hand with gold and jewels! Mr Chairman, at this moment I stand astonished by my own moderation.’
Clive talked powerfully in his own defence for two hours. Making a final plea, ‘leave me my honour, take away my fortune’, he walked out of the chamber, tears in his eyes, followed by loud and repeated cries of ‘Hear, hear!’ Entering his carriage, he drove back home, not knowing whether he had ‘a sixpence to call his own in the morning’.61 The debate lasted long into the night, with a growing majority of speakers rising to attack Burgoyne’s motion. The Resolution was eventually rendered harmless by a series of amendments and another praising Clive’s ‘great and meritorious services to this country’. In the end, after an all-night debate, Clive had been cleared by a vote of 95 for censure to 155 for clearing his name.62
The Prime Minister, Lord North, may have lost one battle, but he was still determined to bring the EIC to heel. Shortly after Burgoyne’s bill of censure had been defeated, he declared, ‘I think, sir, it is allowed that Parliament have a right over the East India Company … Such continual excesses, such frauds at home, oppressions abroad, that all the world may cry out, let it go to the Crown.’63 His aim was to take all the EIC’s Indian territories, and the 20 million Indians who lived there, under the authority of the state. As one MP put it, the House must ‘make some attempt to rescue so many unhappy, industrious natives of the country from the yoke of this government they now live under’.64
But in this, too, North ultimately failed. The Company enjoyed chartered privileges, guaranteed by the Crown, and its shareholders were tenacious in their defence of them. Moreover, too many MPs owned EIC stock, and the EIC’s taxes contributed too much to the economy – customs duties alone generated £886,922* annually – for it to be possible for any government to even consider letting the Company sink. Ultimately, it was saved by its size: the Company now came close to generating nearly half of Britain’s trade and was, genuinely, too big to fail.
In these circumstances, the outlines of the deal between the Company and Parliament soon became clear, and with it the new partnership with the state that would result. The colossal loan of £1.4 million* that the Company needed in order to stave off its looming bankruptcy would be agreed to. But, in return, the Company agreed to subject itself to a Regulating Act, defined by Lord North’s India Bill of June 1773, which would bring the EIC under greater parliamentary scrutiny. Parliament would also get to appoint a Governor General who would now oversee not just the Bengal Presidency but those of Madras and Bombay as well.
On 19 June 1773, Lord North’s bill passed its final reading by 47 votes to 15. The world’s first aggressive multinational corporation was saved by one of history’s first mega-bailouts, an early example of a nation state extracting, as its price for saving a failing corporation, the right to regulate and rein it in. But despite much parliamentary rhetoric, the EIC still remained a semi-autonomous imperial power in its own right, albeit one now partially incorporated within the Hanoverian state machinery. In itself, the Regulating Act did little to muzzle the worst excesses of the EIC, but it did create a precedent, and it marked the beginning of a steady process of state interference in the Company that would ultimately end in its nationalisation eighty years later, in 1858.
The man to whom Parliament first gave the job of Governor General was not some political appointment new to India, but a 41-year-old Company veteran. Warren Hastings was one of the most intelligent and experienced of all Company officials, plain-living, scholarly, diligent and austerely workaholic. The same Act also called for three government-appointed councillors to oversee Hastings’ work on behalf of Parliament. Among these was a brilliant and widely read but oddly malevolent and vindictive, as well as insatiably ambitious, young parliamentary secretary. Philip Francis was the son of an Irish Protestant clergyman who had been born in Dublin but brought up in London, who, as he wrote, ‘set out in life without the smallest advantage of birth or fortune’. Acutely self-conscious of his status as an upwardly mobile outsider, ‘ever on his guard against himself’, he was a skilled political operator with a love of subterfuge, deviousness and intrigue: he is the prime candidate for the authorship of the letters of ‘Junius’, inflammatory essays attacking George III and his ministers, which were published between 1768 and 1772, and widely reprinted in colonial America and continental Europe.65 It was the failure of Hastings and Francis to work together, and Francis’s ambition to get Hastings recalled and himself become the ruler of Bengal in his place – ‘this glorious empire which I was sent to save and govern’ – that was to lead to many further problems for the Company and effectively paralyse its goverment in India in the years to come.66
The other casualty of the Regulating Act and the parliamentary debates which swirled around it was, perhaps surprisingly, Clive himself. Although he was ultimately vindicated by Parliament, he never recovered from the bruising treatment he received at the hands of Burgoyne and his Select Committee. Despite escaping formal censure, he was now a notorious and deeply unpopular figure and widely regarded around the country as Lord Vulture, the monstrous embodiment of all that was most corrupt and unprincipled about the East India Company.
Shortly after the passing of the Regulating Act, Clive set off abroad on the Grand Tour, dining with some of his former Compagnie des Indes adversaries as he passed through France. For a year, he toured the classical sites of Italy, collecting artworks and meeting some of the most powerful and fashionable figures in Europe; but he never recovered his peace of mind. He had always suffered from depression, and twice in his youth had tried to shoot himself. Since then, despite maintaining an exterior of unbroken poise and self-confidence, he had suffered at least one major breakdown. To this burden was now added agonising stomach pains and gout. Not long after his return to England, on 22 November 1774, at the age of only forty-nine, Robert Clive committed suicide in his townhouse in Berkeley Square.
His old enemy Horace Walpole wrote about the first rumours to circulate around London. ‘There was certainly illness in the case,’ he wrote, ‘but the world thinks more than illness. His constitution was exceedingly broken and disordered, and grown subject to violent pains and convulsions. He came to town very ill last Monday. On Tuesday his physician gave him a dose of laudanum, which had not the desired effect. On the rest, there are two stories; one, that the physician repeated the dose; the other that he doubled it himself, contrary to advice. In short, he has terminated at 50, a life of so much glory, reproach, art, wealth, and ostentation!’67
The truth was more unpleasant: Clive had actually cut his jugular with a blunt paperknife. He was at home with his wife Margaret, his secretary Richard Strachey and Strachey’s wife Jane. Jane Strachey later recorded that after a game of whist, which had been interrupted by Clive’s violent stomach pains, Clive walked out of the drawing room ‘to visit the water closet’. When after some time he failed to return, Strachey said to Margaret Clive, ‘You had better go and see where my Lord is.’ Margaret ‘went to look for him, and at last, opening a door, found Lord Clive with his throat cut. She fainted, and servants came. Patty Ducarel got some of the blood on her hands, and licked it off.’68
Clive’s body was removed at the dead of night from Berkeley Square to the village church in Moreton Say where he was born. There the suicide was buried in a secret night-time ceremony, in an unmarked grave, without a plaque, in the same church where he had been baptised half a century earlier.
Clive left no suicide note, but Samuel Johnson reflected the widespread view as to his motives: Clive, he wrote, ‘had acquired his fortune by such crimes that his consciousness of them impelled him t
o cut his own throat’.69
On 19 October 1774, the three Crown councillors appointed by the statutes of the Regulating Act, Philip Francis, General Clavering and Colonel Monson, finally docked in Calcutta. They were immediately offended to be given a seventeen-, not a twenty-one-gun salute, and by the ‘mean and dishonourable’ reception: ‘there were no guards, no person to receive us or to show the way, no state.’70
Warren Hastings then compounded their sense of grievance by receiving them for luncheon at his house in informal attire: ‘surely Mr Hastings might have put on a ruffled shirt,’ wrote Philip Francis’s brother-in-law and secretary. General Clavering immediately wrote a letter of complaint to London. By the end of an ill-humoured luncheon, Warren Hastings was already considering resigning. The new political dispensation could not have got off to a more unforunate start.
Worse was to follow. The following day, 20 October, in the first formal business meeting of the new councillors, their first act was to inquire into the recent Rohilla War and to ask why Hastings had lent Company troops to the Company’s ally, Shuja ud-Daula of Avadh. Hastings’ aim had been to help Shuja stabilise his western frontier by stopping the incursions of the unruly Rohilla Afghans, but Francis rightly pointed out that the Company’s troops had effectively been leased out as mercenaries and under Shuja’s command had participated in terrible atrocities on the defeated Afghans.
The Anarchy: The East India Company, Corporate Violence, and the Pillage of an Empire Page 30