The monopoly practices started by the British merchants in India, was fueled by greed and untrammeled scramble for wealth. Those people had come from a society that was molded on the lines of serfdom and feudal relations and they were not familiar with the rules of a free society. Their business enterprises were limited by gild type industrial mores and the monopoly practices were not offensive to them. In their society, the competition was limited and the rich and the powerful dictated what they could do or could not do. In such societies therefore, there was no opportunity to make sudden wealth, but the wealth of India fascinated them and they resorted to an orgy of greed. It gave them the necessary impulse to solve their financial woes. The influence of Jagat Seths, the Court financiers of the Mughal Emperors in Bengal, who lent money to the British merchants, and Arjunji Nathiji of Surat in Western India, laid the foundation of the British Empire. Those native bankers possessed large capital and they supplied the British merchants with cash for their bills of Exchange on Madras, Bombay and Calcutta. In south India, the local banker was Nattukottai Chetties, whose business extended even to Ceylon, Burma and the Eastern Islands. Both the trade and the political conquests provided Britain with huge funds, much beyond their own need, and they opened the finance companies and started lending money to others. Money was the main nerve of all their resources.
There were hardly any Finance Companies in Britain before the invasion of Plassey. Finance companies came to England late, because there was no need for it. The founders of the first British finance companies were the same people, who brought monies from India, Court of Directors of the East India Company and later on, the Executives of the Indian railroad. They formed three finance companies, the London Financial Association, capital one million pounds; International Financial Association, capital three million pounds and General Credit and Finance, capital ten million pounds; those finance companies were set up to exploit colonial markets. Money begets money.
The London merchants also made advances on bottomry and respondentia bonds, some kind of a
Mercantile credit remitted from capital accumulated in India. The English private merchants in Bengal who were using European channels to remit money home, employed that capital for foreign commerce, for instance trade of France, Sweden, Denmark, Spain and Portugal. The English capital also moved to the colonies in the Western Hemisphere and was found in foreign stock especially in France. The extraordinary capital requirement of the American War had no difficulty in meeting its needs particularly when the Dutch were disinvesting. “The rage for subscribing “, wrote Thomas Coutts, the banker in 1782, “continues meanwhile to pervade all ranks of men and I believe they began to be almost frightened at the treasury, at the amount of the sum offered”. Thomas Coutts was also beneficiary of the loot of India. He went on to establish Coutts & Co. a major British bank, of Edinburgh and London and established himself and his family as distinguished public servants in England and Scotland.
The other type of investments made were the mortgage on real property. In the first half of the eighteenth century the London Assurance lent money for mortgages only occasionally but the amounts involved were small, never exceeding about ten thousand pounds and confined to period before the American War of Independence. But by 1899 the joint resources of the Equitable and the Sun Fire in mortgage loans amounted to about a million pounds. The amounts advanced by the Sun Fire increase from petty amounts in December 1750 to over one hundred thousand pounds by 1760 which increased to about a million pounds by 1778 on account of an overwhelming streams of funds arriving from India. The Equitable showed the same pattern of behavior. Its real period of expansion was from 1788 to 1798 when the total amounts so invested rose to about a million pounds. Prominent people took mortgage loans. They included two Prime Ministers, the Duke of New Castle and the Marquees of Lansdowne. The Royal Exchange lent about half a million pounds to help the construction of Regent’s Street in 1816, the Equitable, and a similar sum for improvements in the Strand in 1829. The Marquees of Bute borrowed at the same company while building his docks at Cardiff. The amount lent for industrial purposes in the 18th century was negligible, as there was no industrial revolution as yet and Britain had already become a banker to the world. Industrial Revolution slogans were coined to hide the Indian loot.
The eighteenth century also saw the remarkable development of the insurance industry. The origin of the fire insurance went back to the years after the catastrophic fire of 1666, but the sudden growth of the insurance industry, as a major business, became an outstanding feature of the century. Equitable Life Insurance started in 1768 and Phoenix Fire Office in 1783, both after the loot of Plassey arrived and issued annuities and other type of insurance to cover the various perils of life.
The British could use only so much money at home. It was a very frugal and a poor country, so those traders and bankers found avenues for investments abroad. They invested some in Europe and some in the United States on the railway projects. The British investments in the United States before 1836 amounted to about one hundred million Pounds in such projects as canals, railways, of which more than half was a charge on public credit. The bulk of the credit was procured from England. The first American State security quoted in London appeared in 1817. The British also consumed some capital at home. Some investments took place in textile machinery during 1834-36, to the extent of about four million pounds, was quoted and the market was also flooded with railway projects. The railway system secured only a fourth of its capital in London. In 1836, the Parliament authorized the issue of about twenty five million pounds for railways. Another fifteen million authorized earlier between 1830-35 helped connect the industrial districts, Manchester and Birmingham to London.
The wealth accumulating in the hands of the British capitalists was faster than they could spend, so they started looking at other places to making loans. They went to the revolutionary governments in South America who were smitten with nationalist zeal; they accepted any and every financial term as long as they could lay their hands on weapons in support of their revolutions. So, the British charged them fee to lend the money, fee to maintain the loan and fee to service the loan. Revolutions come and go but the loans stay on the books, as the nations and governments do not have the luxury of declaring bankruptcies. The British never lent to individuals in foreign cultures. That pattern has stayed as one sees the lending patterns of the World Bank and the IMF in third world economies. The British made a killing on those loans and the looted money from India kept multiplying.
The effect of that loot on the British people was also transforming. Prior to the loot, hunger and poverty was all too common in Britain, which was heart wrenching in any case, as people could not afford to eat and relied upon coarse breads and similar improvisations. In 1778, the beef or mutton cost about 3d per lb. and pork was slightly more expensive at 4 d per lb. (one pound sterling was 240 d) and people earned barely about five pound sterling a year. The winter seasons were particularly bad as it brought cold and misery; people rarely ate fresh meat, green vegetables or fruits of any kind because of the cost except may be birds. The winter chill brought people together around an orbit of blazing fire. People were poor, “working men wore blue bonnets and long coats with knee breeches and rough -spun hose. Working women wore the plaid, which frequently covered both their heads and shoulders and often went barefooted, for the cheap heavy boots of that age hurt the feet.” The better classes were only slightly better. The men wore swallow tailed coat with vest and knee breeches, stockings and buckled shoes, whereas the ladies wore enormous hats, towering head dresses and hooped petticoats. They had simple tools and implements and they made their own sheets, smokes and towels from coarse hemp and flax and baskets from animal hides. The loot of India changed all that and the economic salvation of the British people was accomplished with all the beastly passion that the site of prosperity brings before the eyes of hungry people.
In those flushed times, another group of people emerged, t
he moneyed aristocracy, who collaborated with the political leaders and made possible the handling of the trade of the Empire. Before the start of the British commercial journeys to the ‘East of the Cape of Good Hope’, there was only the king and his men and now the symbiotic relationship between the merchants and the government became a key in their pursuit of money from India and the state facilitated the pursuit of that goal. That symbiotic relationship erected a solid edifice upon which the foundation of the Empire was built. William Pitt started asking for advice from Thomas Coutts and Francis Baring, expressing views on proposed cooperation on financial and military matters and buying and selling of the government securities. Select group of men emerged in Britain who dominated the business and politics of England and started buying select estates with the new found wealth. Pitt’s estate at Swallowfield, Francis Baring’s at Stratton Park bought from Duke of Bedford for £150,000, are monuments to the loot of India. They went ahead and indulged in planting gardens, collected arts and paintings and followed such pursuits as portrait paintings and became connoisseurs of expensive art. People like Richard Atkinson, Lord Lansdowne, Adam Shortt, Edmund Burke, Thomas Coutts, James Paull, Samuel Gurnes, Moses Montefiore, Thomas Tooke, Robert Peele, Thomas Burdett and the like became trustees of Museums, National gallery and many of them joined the Boards of various corporations and also appeared as Board members on the Bank of England. They all became friends, statesmen, financiers, merchant bankers and their firms; men known to each other enjoyed government patronage. They combined business and politics with the life of country squires and the distinction between the business community and the government virtually disappeared.
Amongst this new found prosperity, there was heart wrenching poverty, filth and squalor which typically were the life of the ordinary people of Britain. The ‘moneyed aristocracy’ lived on the west side of London. In the East where ordinary people lived, there was want, suffering, disease and misery. Charles Dickens characterized the journey to the East End of London as ‘one of the saddest and most extraordinary journeys in the world’. In the west were health, wealth and happiness. In the East people herded like pigs without latrines or laundry facilities of any kind. Angela Burdett Coutts who eventually inherited the wealth of Thomas Coutts, who was her grandfather, started many of the charities helped to mitigate the misery of those people.
CHAPTER FIVE:
PREDATORY WARS
During the eighteenth century, Britain was shaken by many crises starting from the financial crises of 1720 known as the South Sea Bubble, brought on by the collapse of a speculative bubble in the Slave Trade. These crises brought Walpole to power and established the Whigs as the political party in power for the next half century. In 1743, Britain entered the war of Austrian succession as an ally of Austria against France and the conflict dragged on until 1748. Soon after the war of European succession, Britain got embroiled with France and the Seven Year War became a war of survival for Britain. Then followed the many conflicts leading to the American Revolutionary War and the peace did not dawn in England until the Napoleonic wars were fought in the beginning of the nineteenth century. Napoleon rose to power in 1799 and in 1805, Britain won a sea victory at Trafalgar, fought the peninsular war from 1808 to 1813, when they opposed Napoleon on the Iberian Peninsula and finally the Napoleonic wars ended with Willington’s victory at Waterloo in 1815. Obviously, Britain spent a lot of money, which it did not have, nor could it rise internally from the resources of her own people. Britain did not have much of a tax base, though initially, Britain did borrow some money from private sources as there were no banking institutions at that time. The Bank of England did not have the resources nor was its charter in place until 1771.
The British people paid a much smaller portion of their national income in taxes than its counterparts in Europe as its economy was very puny. The Royal revenue during the reign of Queen Elizabeth I was no more than two percent of gross national product and to give some idea in terms of actual numbers, the account of Queen’s purse for the years 1559 to 1569 showed interesting entries: Among the items, a linen cloth bought and made in to towels by Mrs. Lowell, £26.2.7; to Peter Trinder Goldsmith, for repairing and mending the Queen’s jewels for £32.15.10. Binding of four books for the Queen Majesty, £1.6.8. Perfumes of sundry kinds for her Majesty’s use £68.7. In later years, near the beginning of the eighteenth century, Britain never raised in taxes any where even close to four percent of national income. Even during the war years, with which this narrative is concerned with, the British nation raised much less tax revenue than France who lost to Britain because of the lack of funds, as it could not expand and modernize its Navy. The French gross national product was twice that of Britain and its taxation rates were much higher and yet it could not do anywhere close to expanding its Navy as was done by Britain.
To pay for those wars, Britain had relied upon the trade of India and progressively used India for funds beginning from the very inception of those trade relations. The Indian merchants and traders lent to Britain even for initial commerce, as they had little resources of their own. The money lenders of Surat, the Trading coastal town on the west coast of India, lent to Britain as early as 1630, when they first came to India seeking facilities for trade and later in Bengal, from Dadni merchants for their ‘investments’. They also borrowed cash from Jagat Seths (Court Financiers of Mughal Emperors). The Jagat Seths collected at least two third of the entire revenues of Bengal on behalf of the Nawab and coined at least five million rupees a year for the trade of Bengal. The Jagat Seths were like the Reserve Bank of today; they controlled the exchange rates, set the interest rates, did the bill brokering and were the suppliers of credit. Those local money lenders and bankers were immensely wealthy and their fortunes ran in to millions and they held a degree of wealth and power immeasurably greater than the wealth of all the traders and merchants put together who came and went looking for the riches in India. The Indian merchants and traders who lent to EIC, carried barrels of gold, bullion money, pearls, gems and other precious commodities and their fortune ran in to millions. India was a very opulent advanced economy accounting for about one fifth of humanity and most Europeans traveled to India seeking fortune. The above is a preamble to what happened in 1757. Britain knew that there were loads of gold in India and when Britain was faced with the Seven Year War of survival with France, it was normal for Britain to target India for its financial needs and went through the Plassey operation, an undeclared secret war of choice, an unjust, an immoral war, and raided the Mughal Treasury at Murshidabad, which operation was successfully carried out in 1757 as described under the Chapter, ‘No Plassey, No Empire.’
Britain won all those French wars because the military power was linked very closely with the economic power. Look at history and one will see that the victory has always gone to the side with the most material resources. In international relations too, the country with the most material resources and strong economic base has always enjoyed the power balance. Britain went on to build its Empire by expropriating the riches of India and this is the subject of this book.
During the war years, Britain did run up a considerable National Debt but soon after 1768, Britain started refunding the borrowed money and on the contrary became a lender of last resort all over the world. It lent to France for the reparation loans, it lent to the Russians, the Europeans and in South America. Its citizenry started many public sector projects without any participation of public money and invested in Anglo American trade and sowed the seeds of future prosperity. Where did the money come from? It is an interesting question. In the British historical writings, they make sweeping statements such as ‘the Bank of England was able to manage the payment of loans’ and yet they do not tell where the money came from. There is no flesh and bone in their writings. Similar statements appear about the origin of capital for their major financial firms who were involved in the trade ‘East of the Cape of Good Hope’. To pay for the French wars, the British histori
cal writings show that Pitt levied an income tax at the rate of ten percent in 1798, which was repealed in 1802, but the early French wars were long since over and Napoleon rose to power only in 1799 and the British sea victory at Trafalgar occurred much later in 1805. Also, how much tax did they raise in absolute terms is any ones guess. It has been an interesting mystery because no historian has ever probed this question, partly because most historians of those times were British and Britain controlled the information to those outside their sphere of influence.
1757- East of the Cape of Good Hope Page 12
