The EIC was founded at the end of the 16th century as a trading company, and was given a monopoly on trade with the Far East, where its principal areas of trade were India and China.  So long as the EIC's chief business was trade, it was left to manage its own affairs.  However, Clive's victory at the battle of Plassey in 1757 made the EIC a ruling power in India, and henceforth it was felt necessary for the British government to exercise some control over the territories thus acquired.  The Regulating Act of 1773 raised the governor of Bengal to the rank of governor-general, and provided that his nomination, though made by the EIC, be approved by the British government; it also established a council, which together with the governor-general exercised legislative authority, and a supreme court of judicature, whose members were appointed by the Crown. The India Bill of  1784 created a department of the British government, the Board of Control, to exercise political, military and financial superintendence over the British possessions in India;  the bill marked the shift of the direction of Indian policy from the EIC to the governor-general in India and the ministry in London.  While trade monopolies are useful in establishing trade in new markets, once these markets have been firmly established they have a contrary effect, stifling free trade.  In 1813, with the India market firmly established, the British government abolished the EIC  monopoly on trade with India, while leaving its monopoly on trade with China intact until 1833, when this monopoly was also abolished.  The EIC, with its antiquated structure, could not hope to compete successfully in the free trade market, and consequently, in 1834, after the abolition of its last monopoly, it withdrew from all commercial activities and dispersed its trading fleet, restricting its activities to the administration of India.  The Indian Mutiny of 1857 demonstrated in no uncertain terms the folly of a private corporation founded as a trading company attempting to administer a vast colonial empire, and the Government of India Act of 1858 ended all EIC powers.  The EIC was abolished not because it posed a threat to the British government, but because it no longer served the purposes for which it had been founded.
 

Michael Palmer
Claremont, California
mpalmer@netcom.com

This is a brief overview of the EIC written by Michael Palmer in response to a query and previously published on the Emigration-Ships mailing list in June 1999.

last updated 20.04.02ef

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