It has been ten years now since this remarkable book was first published, and a testament to its vitality that you can still pick it up in the Hong Kong airport bookshops. No musty tome this. An understanding of the English East India Company is crucial to comprehending the shape of Asia today.
The Company was a mercantilist venture that monopolized trade in and out of England to the East Indies, a broad term meaning anything from Turkey to Japan. King Elizabeth granted its first royal charter in 1600 when it was known as the 'Company of Merchants of London trading into the East Indies'.
It left two legacies, neither ever the vision of its architects. First were the free-trading open ports of East Asia – Penang, Singapore, Hong Kong – that supported a maritime empire. Second was the Raj, the military dominance of the Indian subcontinent. This latter development arose from the surprising outcome of the Battle of Plassey won by Robert Clive in 1756, when a small British force ousted a huge Indian army in thanks to pluck and superior firepower. Suddenly the Company found itself administering all of Bengal, which it was not suited for. It increasingly relied on the Crown for support and eventually any resemblance to a trading company bled away.
The Asian crisis has given this book a new perspective, and that is to look at the Company as a study of corporate governance. The Company's shareholders tended to rebel in times of poor trade. They were interested only in quick returns, and viewed declining profits as evidence of mismanagement.
The management, however, came out of these battles the stronger. Three men monopolized power in the Company's first 57 years, providing stability in the boardroom that cushioned the vagaries of trade, such as weather patterns or relations with the Dutch.
An amusing theme throughout the Company's history is its obsession with island ports. Hong Kong and Singapore were not one-offs, rather they were the only successes. The first was Pulo Run in what is now Indonesia’s Banda Islands chain, prized for its nutmeg and which an English ship accidentally bumped into in 1603. Although the Dutch forced the English out, for a time James I fancied himself 'King of England, Scotland, Ireland, France, Pulo Ai and Pulo Run'.
Other attempts ended in ignominy. Trivitore and Divi islands hugging the Indian coast; Negrais at the mouth of the Irrawady; Mergui off the Kra Peninsula; Pulo Condore near the coast of Vietnam – all were praised as the answer to the Company’s prayers for a safe haven, all ended in one sort of disaster or another.
A fascinating case is Balambangan Island, located just off Sabah in Malaysian Borneo. It was settled in 1772 to engage in (or plunder) trade between China and Southeast Asia and abandoned in 1773. Its fortunes were revived in 1802 when the British imported Chinese labour and planted spice groves, and Balambangan was touted as a global trade entrepot, until its promoter was transferred to Penang – but yet again this proto-Singapore returned to obscurity.
Hong Kong itself came about because country traders such as William Jardine lamented the decline of the Company. In 1833, manufacturers in Britain supporting free trade forced the Company's charter to abandon its monopoly on dealings in Canton. This created a problem for country traders (traders engaged in intra-Asian trade, which fell out of the Company's remit and was a constant source of friction). They needed the front of the Company to do any business in Canton, and to distribute opium. After 1833, then, these mercantile interests sought an offshore port.
The book's most interesting subject is, of course, the transformation of a trading company into an empire in India. That same drive for island havens resulted in Bombay. Madras was built because an Englishman needed a fortress to defend against the Dutch, preferably one near his mistress. "Calcutta," Keay writes, "as one might surmise from the city of today, was born not out of courage or design but out of commercial greed and political mayhem".
Bombay and Madras are now called Mumbai and Chennai, a fashion FinanceAsia reluctantly follows out of respect to the current rulers. But whatever the name, the legacy of this peerless business venture remains.
Reviewed by: Jame DiBiasio
Rating: Four stars
