The East India Company & the American War of Independence

The American War of Independence was influenced by the fortunes of the British company that was operating in South Asia, the East India Company (EIC). In the 1770s, the EIC was under severe financial pressure. Its revenues from India and China had plummeted and its operating expenses had skyrocketed. To make things worse, parliamentarians and jurists in England were trying to have the EIC’s management arrested on charges of corruption and cruel conduct in the colonies. These controversies led to a run on EIC’s shares and the company was pushed to the brink of bankruptcy.

The government of Lord Frederick North decided that the EIC could not be allowed to fail. The company was too big. Its operations were too extensive. It employed too many people. It controlled much of the trading between Britain, India, Persian Gulf, and China. It had too much debt. It had too many important connections in Persia, India, and China. Since the British government did not want to burden England’s taxpayers, they decided to bailout the EIC by raising revenues from the British colonies in North America.

In 1773, the British parliament passed the Tea Act, which would bring the tax system in the North American colonies in line with England and facilitate the mobilization of revenues for the EIC’s bailout. But the North American colonies reacted furiously to the proposal of higher taxation. A pamphlet campaign began in Pennsylvania. In these pamphlets, the EIC was depicted as a gang of rapacious plunderers, tyrants, pirates, and bloodsuckers. The pamphleteers accused Lord North’s government of being in league with the EIC’s crooked management.

If the political establishment in England had refrained from openly admitting that the taxes were being raised to fund the bailout of the EIC, it is possible that their subjects in the North American colonies would have accepted the tax increase after some protests. The EIC was one of the most detested companies in England and its colonies. The North American colonies refused to let their money go to the EIC.

Several ships carrying tea were turned back by the colonists. In November 1773, three ships carrying tea belonging to the East India Company managed to enter Boston. One of these ships was the Dartmouth. On December 16, colonists dressed as Indians boarded the Dartmouth and dumped its tea into the ocean. This led to a chain of events which culminated in the Declaration of Independence on July 4, 1776. The British government’s strategy of solving the problems on one side of the world with taxes raised from the other side of the world had backfired.

Lord Cornwallis, the British general who surrendered to George Washington and the French commander, the Comte de Rochambeau, on 19 October 1781, was appointed the governor-general of India in 1786. The EIC was dissolved in 1874. In a strictly legal sense, the British Empire was born after the dissolution of the EIC—this is because the EIC was the de facto imperial power while it was in existence. In the 1760s, Robert Clive had said in his deposition before the British Parliament that “the East India Company was an imperial power in all but name.”