Choosing the Winning Side

Many people in my generation stay in India but work for multinational corporations / MNC-s (myself presently included). The economic benefits of such choices accrue more to the foreign companies than to India. This is the second part of a three-part series (read part 1 here) exploring the economic and emotional factors behind such decisions.

  • Part 1. Non-mutinous sepoys (why Indian soldiers decided to join the first multinational corporation of the world, the East India Company)
  • Part 2. Choosing the winning side (why Indian bankers chose to back the East India Company)
The above picture marks the accession to the throne of Mubarak al-Daula to the throne of Murshidabad, Bengal. Notice how a British officer of the East India Company is central to the scene. The Company’s Indian financial backers are not prominent in the picture, but they played a most crucial role. | Wikimedia Commons [Public Domain]

Bankers to the credit-worthy foreigners

Apart from the sepoys who joined the East India Company, another set of people chose the “foreign multinational” over Indian “entities”. Numerous bankers all across the country provided vast amounts of credit to the East India Company to finance the company’s militarization and numerous conquests against Indian states. One might even argue that the choice of this smaller set of people was even more pivotal.

Once again, the Battle of Plassey which was fought over control of the state of Bengal provides a great reference point to this trend. Bengal was probably the single richest province in the world at that time. Yet, the rulers of Bengal, the Nawabs, and their nominal overlords, the Mughals in Delhi, were already showing signs of decay and decline. The Nawabs for instance were completely dependent on the financial backing of the Jagat Seths, the most prominent bankers in Bengal at that time. Jagat Seth (which literally translates into “banker of the world”) was an epithet given to the family of Mahtab Rai — this single family held more sway over the matters of state than any other. When the policies and actions of the then Nawab of Bengal, Siraj-ud-Daulah did not sit well with the Seths, the Seths to support the East India Company and their appointee, Mir Jafar, instead. The Seths’ backing ultimately swayed the battle in favor of the British and marked the first major British victory on Indian soil.

A few years after the establishment of British rule in Bengal, the Seths realized that they had helped replace one bad ruler (Siraj-ud-Daulah) with an even worse one (the East India Company). The Seths even went on to publicly disavow the East India Company, but it was too late by that time.

Bankers across the country back the British

In the subsequent decades, multiple other bankers all over North India chose to finance the conquests of the East India Company against various Indian states (e.g. the Marathas, Tipu Sultan of Mysore). Even more surprisingly, it was not as if the King or Queen of Britain was sending tremendous amounts of money to support the wars in India. At that time, the royal eye was more keenly focused on their other great colony in North America — which they eventually lost around 1775 after the American War of Independence.

Analyzing the bankers’ choice

The question then arises — why did all these bankers across the country make the same decision? Once again, the most important reason was a matter of pure economics. The bankers had better odds of recovering their loans from the East India Company, a nascent but promising organization, than if they financed the Indian states, many of which were crumbling into a state of decay. Thus it was the credit-worthiness of the foreign entity that swayed the bankers decision in their favor.

The decisions of the bankers might seem anti-nationalistic now, but just like the sepoys, they were just following their instincts and choosing the more stable entity. In their case, they chose an entity that showed promise of being more long-lived and hence honoring their debts. And boy were the bankers right about that!

A better corporate culture

There is another aspect about the East India Company that must be discussed here. We now live in the age of global mega-corporations (Google, Apple, Amazon, Facebook are household names and have revenues that are greater than many countries). Yet, back in the 1750-s, the East India Company was one of the first multinational corporations of its kind. In fact, India did not have any mega-corporations back then. Small family businesses existed in India since a long time, but the overarching powers of the states were still held by Kings, Nawabs and such. Essentially, post-Mughal India was a conglomeration of multiple monarchies mostly at war with each other. To make things worse, the monarchic form of government always suffered from infighting, bitter accession battles (e.g. princes killing their fathers or brothers to seize the throne), and lack of proper governance. To rise to a position of repute in such a form of government, you had to be related by blood to the monarchs, or be of the proper lineage. Barring some rare exceptions, there was no way by which a commoner could rise through the ranks and hold the position of a Nawab or a similar title.

On the other hand, the concept of a corporation was something very alien to India. Just consider some of the following aspects of a corporation that were alien to the world of monarchies.

  • The potential of a common man to rise to high positions. Warren Hastings was born to a family of little wealth or repute, joined the Company as a clerk, and worked his way up the highest office of the Governor General. Imagine the chances of that in a monarchic form of government.
  • A board of governors overseeing the actions of the highest officials. For example, the same Warren Hastings was impeached by trial and was forced to resign from his post in 1785)
  • Public shareholding of the company (the East India Company was listed on the British Stock Exchange as early as the 1600-s)

Indians hardly benefited from the above aspects of corporation. Yet, there was something rotten in the monarchic form of government that would eventually lead to monarchies being overthrown all over the world (starting with the French Revolution of 1799). One might imagine that the Indian sepoys and the bankers instinctively smelled the stench of decay in the old order of things (the monarchic Indian states) and decided to back the more stable entity instead.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store