Merchants and the EIC

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Merchants and the EIC
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From Successor States to Colonial Rule

• This period of transition remains a site of
  vigorous debate, with many arguments about the
  precise relationship between Indian merchants,
  the European companies, and the Indian State
• Much of the original groundwork for this was laid
  in studies during the late 70s and 80s, as usual
  the Cambridge and Aligarh school views are
  contrary

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Karen Leonards argument

• Role of Indigenous bankers crucial to the running
  of the Mughal Fiscal system prior to 1750 in
  coining, transfer of funds, credit.
• Lack of state protection drives merchants away
  from mughal territories (Surat) towards European
  trading towns in the 17th C
• The lack of support from a crucial financial
  sector is a major cause of Mughal decline

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Problems with this argument

• Based purely on secondary sources with no primary
  research
• Ignores competition b/w merchants for the earlier
  period
• Relies heavily on evidence after Mughal power had
  already declined (1719) fails to make a strong
  case for the earlier period
• No proof of problems with credit and transfer of
  funds in Aurangzebs time
• Fails to contextualize the actual relative
  strengths of Indigenous vs. Foreign credit and
  capitala problem of hindsight

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The Utility of the Argument

• While not a factor in Mughal decline, Leonards
  argument strongly applies to the successor states
• Spurs further debates and studies that illustrate
  how this functioned in the rise of the EIC
• The relationship between Indigenous merchants and
  the European traders appears to be both
  competitive and collaborative.

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Bengal, 1730-1760s

• Bengal remained economically strong and
  well-governed all through the transition from the
  Mughals to the Nawabs to the EIC (due to
  expanding trade and agriculture)
• Other than the EIC, French, Dutch, Indigenous
  groups such as Marwaris re-located to Bengal in
  the late 1600s, where they already had contacts

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Types of Transactions

• Strong commodity markets in Rice, Opium, Sugar,
  Saltpeter, Cloth (most imp.)
• Additional transactions in providing credit to
  merchants trading in these commodities
• As Nawabs come to power, traders also become
  involved in revenue farming and in moving tribute
  to Delhi

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House of Jagat Seth

• Bid on 2/3rd of Revenu at 10 1,060,000
• Int. loans from Zamindars 1,350,000
• Re-coining 5m. At 7 350,000
• 37.5 Int. of 4m. Loaned (misc)1,500,000
• Int. on currency exchanges 700,000
• ___________________________________
• Total
  4,960,000
• From Sushil Chaudhury, Prelude to Empire, p. 73.

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Problems among Merchants

• Trade in specific commodities became very
  competitive, ex. Saltpeter
• Traders sought exclusive contracts with producers
  to ensure supplies, also attempted to cut out the
  competition
• Became highly dependent on credit provided by
  Financiers to close on deals quicklymake
  advances to ensure delivery

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Problems specific to the EIC

• French appeared to be becoming more friendly with
  the Nawabs after 1750
• Due to the Seven Years War in Europe tensions b/w
  French and EIC high
• EIC aware of extensive corruption in its own
  company, abuse of dastaks cutting in on both the
  companys profits and the revenues due to the
  nawab

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Why was abuse growing?

• Most English traders in Bengal for a little while
  to make their fortune before returning to England
• Disgruntled with terms of service, they quickly
  engage in private trade
• To do this successfully form alliances with
  Indigenous traders, agents, and financiers

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Robert Clive
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The Beginning of Bengal Conflict

• Fear of Maratha raids and Ahmad Shah Abdalis
  invasion in the early 50s leads Nawab to post
  armies in the west
• Meanwhile the English committee at Calcutta,
  contrary to treaty agreements begins to fortify
  their area, in anticipation of French attacks.
• Nawab Siraj-ud Daulah, recently come to the
  throne, protests, but is ignored. Looking at EIC
  involvement in succession disputes in the Deccan
  he suspects the company of conspiring against him

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The Black Hole

• After the ignored warning, Siraj-ud Daulah sends
  army to raid Calcutta and destroy the
  fortifications
• Most officers flee in boats, those left behind
  are put in the Companys prison, where due to
  overcrowding some die of heat exaustionthe
  legend of the Black Hole of Calcutta is born
• The Companys governors in Madras order Robert
  Clive to negotiate another treaty with the Nawab
  and bargain for the restoration of Calcutta.

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The Plassey Conspiracy

• Unknown to the Directors of the Company and
  Siraj-ud Daulah Clive enters into an agreement
  with the Nawabs uncle, Mir Jafar to enact a
  coup.
• Lacking funds they negotiate with the family of
  Jagat Seth a leading financier offering him a
  payout from the treasury and exclusive trading
  monopolies
• Clive himself secures the promise of a Jagir from
  Mir Jafarin a second secret treaty these two
  agree to cut out the merchants

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Road To Plassey

• The funds from the merchants make it possible for
  large parts of the Bengal army under Mir Jafar to
  be bribed to not fight during the English-led
  coup
• When negotiations with the Nawab fail, Clive and
  the Bengal army clash at the Battle of Plassey in
  1757
• After much of the army does not fight, Siraj ud
  Daulah is unable to win and flees. Later he is
  captured and killed.

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Aftermath of Plassey

• Once on the throne Mir Jafar had to make good on
  his promises
• Rs. 10,000,000 to EIC for Calcutta (comp)
• Rs. 4 million to Navy (costs of war0
• Rs. 1.2 million to select comm. (inc. clive)
• Rs.1.6 million to Clive for service plus a
  jagir of Rs. 300,000 a year
• No money or agreements were provided either to
  Jagat Seth or Omichand

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Some effects of Payments

• Mir Jaffar was left with an impoverished treasury
  and could no longer make annual payments either
  to mansabdars or as indemnities to the company
• Clive retired to England to begin a political
  career as one of the richest nabobs
• In 1763-65 Mir Jaffar is replaced by Mir Kasim,
  his son in law, when he objects to the
  arrangement with revenues
• The EIC emerges as the real power behind the
  throne

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Battle of Buxar, 1765

• Mir Jaffar escapes to Awadh and seeks the help of
  the Nawab of Awadh and Mughal Emperor Shah Alam
  to recover Bengal
• Their combined forces are defeated by the Bengal
  and EIC army in 1765
• Shah Alam gives the Diwani of Bengal to the
  EICwhich becomes the formal basis for colonial
  rule. Also agrees to an English resident at the
  Mughal and Awadh courts

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Impact of Buxar

• Revenues of Bengal used to substitute bullion for
  trade leads to unexpected problems
• Other indigenous and foreign competitors squeezed
  out of the market as well and a bullion shortage
  adds to decline of trade
• Unused to administration the EIC would resort
  even more to revenue farmingexcessive taxation
  and famine lead to the deaths of 1/3 of the
  population
• Bengal moves to a colonial-style economy,
  revenues used for further expansion, officials
  continue in private trade leading to scandal
• Clive sent back to India to clean up corruption