Growing up in the United States can leave one with a curious idea of history. Revolutions are about independence, civil wars are about countries splitting apart, and colonies are about colonists. So what kind of a “colony” was, say, India?
Indeed, what kind of a colony was India? Up until the eve of the American Civil War, as a point of comparison, the colonial overlord wasn’t even a country but a publicly-traded company: Britain had, in words of Andrew Phillips and JC Sharman, “outsourced” the whole business of empire. This seems so strange that today the point is often just glossed over, with Britain and the East India Company conflated (not without some at least moral justification) in the post-Imperial mind. History’s easier when empire is just empire.
Outsourcing Empire suffers from the apparent drawback that its thesis seems self-evident once stated. The book blurb summarizes it nicely:
From Spanish conquistadors to British colonialists, the prevailing story of European empire-building has focused on the rival ambitions of competing states. But … from the seventeenth to the twentieth centuries, company-states—not sovereign states—drove European expansion.
The East India Company (EIC) and Dutch East India Company (VOC): right. No need to read the book, then.
But this seems not to have been quite said before and the mere saying of it shines a new light on some of history’s darker passages.
Andrew Phillips and JC Sharman (with a possible nod to Philip Bobitt’s nomenclature of “state-nation”, “market-state”, etc. in The Shield of Achilles) coin the term “company-state”: corporate entities (with Boards of Directors, capital, shareholders, etc.) that exercise that otherwise would be considered sovereign powers: maintaining armies, taxing local populations, dispensing justice, etc. They are different, therefore, from state-directed enterprises, like Portugal’s Estado da Índia, which however commercial its objectives, was a direct instrument of the Crown. Company-states were granted monopolies to compensate for the risk; the various state-like functions were necessary to maintain and protect the monopoly.
The EIC and VOC are the two main examples of a structure that might be seen as something of a blip—an anomaly to suit a certain situation—and to some extent, they were. The authors make the point that only these two were remotely successful and both in the end fell victim to their internal contradictions.
But Philips and Sharman argue, convincingly, that this particular modus operandi—an independent corporate structure combined with a monopoly and a license to do whatever was necessary to maintain and protect that monopoly—allowed empire on the cheap, paid for by private capital: without the silver and gold from the Americas that funded the Hapsburgs and the initial monopoly on spices that paid for Portugal’s Estado da Índia, the relatively impecunious states of northern Europe were left with little choice. That companies were focused on making money meant they could ignore many of the things that would tie countries in knots: company representative could, for example, make kowtow to foreign potentates in a way that would have been unseemly for more formal embassies.
The model was copied by the Swedes, Danes and even the Genoese, albeit with less ability to project force. The model was also extended to both Africa and the Americas (including the Russians in Alaska), where they had, on the whole, even less success: the exception that proved the rule was Hudson Bay Company, which seems to have made a long-term go of it (and is the only one of these entities that still exists) due to it relatively small size and remote area of operations. The absorption of the EIC into a more formal British Empire following the disaster of the Indian “Mutiny” of 1857-59 should, by rights, have been the model’s deathknell, but the concept was rejuvenated for the final push of last 19th-century colonization. These—in Africa and the Pacific, and with such new players as Germany and Belgium—didn’t last long.
Philips and Sharman point out that far from being hegemonic, the companies for much of the time could only operate by sufferance of local rulers. The Mughals could have booted the British from India any time before about the mid-18th century. It was, indeed, the decline of the Mughals that forced the EIC to actually take control of significant territory, something they had avoided—due to the great costs involved—up to that point. Local rulers made use of the interlopers: their commerce, their ships, their military assistance. The Hudson Bay Company’s native American trading partners could easily have ejected them from North America but did not, the short-term benefits of their presence outweighing longer-term strategic considerations until it was too late.
The authors point to these state-companies as being critical, for better or worse, in the development of the modern world, and not just by being the sharp end of the imperial spear. “The first joint-stock companies—the Muscovy Company and the Levant Company—were founded in England in 1553 and 1581” and were the predecessors of the EIC in the corporate form that later became ubiquitous and central to capitalism. This in turn forced the development of the recognition of the difference between the public and private spheres. While the authors for the most part adopt a dispassionate tone, this is not a pretty history, starting in state-sanctioned piracy and ending with treating large swathes of humanity as commodities.
It is tempting to see modern reincarnations of the state-company in certain modern multinationals as well as major state-owned enterprises. Philips and Sharman say these comparisons are a stretch. However, large companies—from the United Fruit Company to oil companies and today’s Internet multinationals—remained and remain integrated with state policy. Those who consider capitalism kin to piracy will find the family tree in Outsourcing Empire.
Peter Gordon is editor of the Asian Review of Books.