East India Company: #2 - Bengal Famine

As the Mughal empire slid into anarchy, in the south, the French and the British often supported opposing kingdoms against each other as they jostled for influence and trading privileges, writes William Dalrymple in The Anarchy. Their involvement gradually led to a very consequential realization:

“The Europeans now had a clear and consistent military edge… and small numbers of them were capable of altering the balance of power.”

All those centuries of continuous warfare in Europe had perfected their military strategies, tactics and weaponry.

Yet the Europeans only aimed to use their military power to support someone on the (regional) throne for trading privileges. There were new kingmakers in town:

“(EIC) would become the focus for the attentions for all the dethroned, dispossessed, and dissatisfied rulers.”

But increasingly, the Europeans got a share of the kingdom’s revenue for installing (and preserving) the man on the throne. At the same time, the EIC knew that the country viewed them as foreigners, and thus they lacked the “moral power” of legitimacy to become rulers themselves.

At this point came Robert Clive, and with him began the era where the EIC would declare war on various Indian princes. Clive’s moves had two decisive effects: (1) The French got muscled out of Bengal for good; and (2) The EIC got the rights to collect tax in Bengal. And they went about revenue collection ruthlessly, with no thought for sustainability… unlike the Mughals who had settled and thus didn’t look as India as a place (only) to loot. The contrast in attitudes would show up disastrously during the Bengal famine.

The Bengal famine started in 1768 with little rain, and worsened in 1769 (no rain). In the past, before and during the Mughal era, “elaborate systems of grain stores, public works and famine relief measures” had helped alleviate such periodic catastrophes. The EIC, on the other hand, demanded the same tax revenue, and engaged in “grain hoarding, profiteering and speculation”.

By 1770, with 3 million dead, London realized the EIC contribution to the horror:

“We have outdone the Spaniards in Peru.”

The domestic backlash against the EIC was starting in England. Plus, the newly rich “nabobs” (Brit for ‘nawab’) returning to England from India stirred resentment. It was an open secret that the EIC had many British MP’s in their pocket. The EIC was now under attack at home on multiple fronts: “near genocide in India”, “corrupting Parliament”, and  “social mountaineering of the returning nabobs”. Disgruntled EIC employees who had been edged out or felt cheated washed the company’s dirty linen in public.

Things got worse. While its employees were minting money, the EIC itself was in dire straits! The sheer amount they needed as loan led to the collapse of many banks all over Europe. It triggered fury: how could the company be in such bad state when its employees were minting money? The stock plummeted, and many lost money, including many MP’s. Someone had to pay.

And thus, a formal investigation was launched into the EIC by Parliament. But the Company was saved for the same reason that most financial institutions were bailed out during the financial crisis of 2008:

“The Company now came close to generating half of Britain’s trade and was, genuinely, too big to fail.”

A new Regulatory Act was passed to bring the EIC “under greater scrutiny”. While it was just a slap on the wrist, the seeds for the ultimate dismemberment of the Company (after the Revolt of 1857) had been sown…