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It is always a mistake to read history backward. We know that the East India Company eventually grew to control almost half the world’s trade and become the most powerful corporation in history, as Edmund Burke famously put it, “a state in the guise of a merchant.” In retrospect, the rise of the Company seems almost inevitable. But that was not how it looked in 1599, for at its founding few enterprises could have seemed less sure of success.

At that time England was a relatively impoverished, largely agricultural country, which had spent almost a century at war with itself over the most divisive subject of the time: religion. In the course of this, in what seemed to many of its wisest minds an act of willful self-harm, the English had unilaterally cut themselves off from the most powerful institution in Europe, so turning themselves in the eyes of many Europeans into something of a pariah nation. As a result, isolated from their baffled neighbors, the English were forced to scour the globe for new markets and commercial openings further afield. This they did with a piratical enthusiasm.

Sir Francis Drake set the tone. Drake had made his name in the early 1560s as a buccaneer raiding Spanish mule trains laden with silver on their way from mine to port along the Panama isthmus. With some of the profits of these raids, Drake had set off in 1577 on his three-year circumnavigation of the globe in the Golden Hinde. This was only the third time a global voyage had ever been attempted, and it was made possible by developments in compasses and astrolabes—as well as by worsening relations with Spain and Portugal.

Drake had set sail in “great hope of gold [and] silver…spices drugs, cochineal,” and his voyage was sustained throughout by intermittent raids on Iberian shipping. Following his capture of a particularly well-laden Portuguese carrack, Drake returned home with a cargo “very richly fraught with gold, silver, pearls, and precious stones,” valued at over £100,000, one of the most profitable of all the voyages of discovery. This harrying and scavenging off the earlier and richer Iberian empires that then controlled South and Central America was licensed by the Crown and was essentially a form of Elizabethan state-sanctioned organized crime controlled by the oligarchs of Whitehall and Charing Cross. When Drake’s rival, Sir Walter Raleigh, and his crew returned from a similar raid, they were immediately denounced by the Spanish ambassador as “pirates, pirates, pirates.”

Many of those the Spanish ambassador would also have considered pirates were present at Founders’ Hall on September 24, 1599, when politicians, merchants, adventurers, and soldiers gathered with one purpose: to petition the ageing Queen Elizabeth I, then a bewigged and painted woman of sixty-six, to start up a company “to venter in the pretended voiage to ye Est Indies and other Ilands and Cuntries thereabouts there to make trade…by buying or bartering of suche goodes, wares, jewelles or merchaundize as those Ilands or Cuntries may yeld or aff orthe…(the whiche it maie please the Lorde to prosper.” The Company’s potential investors knew that this group, whatever their talents as freebooters, had to date shown little success in the more demanding skills of long-distance trade or in the art of planting and patiently sustaining viable colonies. Indeed, compared to many of their European neighbors, the English were rank amateurs at both endeavors.

Their search for the legendary Northwest Passage to the Spice Islands had ended disastrously, not in the Moluccas, as planned, but instead on the edge of the Arctic Circle, with their galleons stuck fast in pack ice, their battered hulls punctured by icebergs, and their pike-wielding crew mauled by polar bears. They had also failed at protecting their infant Protestant plantations in Ireland, which were under severe attack in 1599. English attempts to bully their way into the Caribbean slave trade had come to nothing, while attempts to plant an English colony in North America had ended in outright disaster.

Even the two most experienced mariners and Eastern explorers in London, both of whom were present in the Founders’ Hall, had arrived back from their travels with little more than wonderful tales to show for their efforts, and with neither crews nor cargoes intact. Ralph Fitch was the first. In 1583 he had set out from Falmouth on the Tyger. Sent to the East to buy spices by Auditor Smythe’s new Levant Company, Fitch had gone overland from the Levantine coast via Aleppo, but had only got as far as Hormuz before he was arrested as a spy by the Portuguese. From there he was sent in chains to Goa where they threatened to subject him to the strappado—the Inquisition’s answer to bungee jumping, where a man was dropped from a height attached to a rope. The bone-jarring jerk when the rope halted his rapid descent was said to be even more exquisitely agonizing than the rack, the Elizabethans’ own preferred form of torture.

Fitch was helped to escape by Father Thomas Stevens, an English Jesuit long based in Goa, who stood surety for him, and he duly succeeded in traveling through the rich sultanates of the Deccan to the sixteenth-century Mughal capital of Agra, and hence, via Bengal, to the Moluccas. On his return to London three years later, he regaled the city with his traveler’s tales and became such a celebrity that his ship was mentioned by Shakespeare in Macbeth: “her husband is to Aleppo gone, master o’ th’ Tiger.” But while Fitch brought back many enticing details of the pepper trade, he had arrived home with no actual pepper.

The Levant Company’s next attempt to break into the spice trade, this time by the sea route, was even more of a disaster. Sir James Lancaster’s 1591 voyage into the Indian Ocean was the first English attempt to reach the East via the Cape. Both its funding, and its armed shipping, was provided by Auditor Smythe and his Levant Company. But in the event, only one of Lancaster’s four ships, the Edward Bonaventure, made it back from the Indies, and that on a skeleton crew. The last survivors, five men and a boy, worked it home with its cargo of pepper, which they had earlier looted from a passing Portuguese ship. Lancaster himself, marooned on the Comoro Islands with the rest of his crew after he was shipwrecked during a cyclone, finally found his way home in 1594. On the way he had been stuck in the doldrums, ravaged by scurvy, lost three ships, and seen almost all his fellow crew members speared to death by angry islanders. It was lucky that the Levant Company had deep pockets, for the voyage was a devastating financial failure.

In contrast to these ragged buccaneers, their more sophisticated Portuguese and Spanish rivals had been busy for over a century establishing profitable and cosmopolitan empires that ranged across the globe—empires whose massive imports of New World gold had turned Spain into the richest country in Europe and given Portugal control of the seas and spices of the East, so bringing it in a close second place. Indeed, the only rival of the Iberians, gallingly for the English, was the tiny and newly independent republic of Holland, whose population was less than half that of England, and which had thrown off the rule of Spain only twenty years earlier, in 1579.

It was the recent astonishing success of the Dutch that had brought this diverse group of Londoners together. Three months earlier, on July 19, Admiral Jacob Corneliszoon van Neck of the Dutch Compagnie Van Verre—the Company of Distant Lands—had successfully returned from Indonesia with a vast cargo of spices: eight hundred tons of pepper, two hundred tons of cloves, and great quantities of cinnamon and nutmeg. The voyage made an unprecedented 400 percent profit: “There never arrived in Holland ships so richly laden,” wrote one envious Levant Company observer.

By August, following this “successe of the viage performed by the Dutche nation,” English merchants had begun discussing the possibilities of setting up a company to make similar voyages to buy spices not, as before, from Middle Eastern middlemen, who trebled the price as their commission, but instead direct from the producers, half the way around the world, in the East Indies. The prime movers in this initiative were again Smythe’s cabal of Levant Company merchants who realized, as one wrote from the Greek island of Chios, that this Dutch “trading to the Indies has clean overthrown our dealings to Aleppo.”

The final straw was when the Dutch sent a delegation to London to try to buy up English shipping for further voyages eastwards. This was too much for the pride of Elizabethan London. The Amsterdam agents, waiting in the Old Steelyard of the Hamburg Company, were told, “Our merchants of London have need of all our ships and none to sell to the Dutch. We ourselves intend forthwith to have trade with the East Indies.” The meeting at the Founders’ Hall was the direct result of that retort. As they told Elizabeth I’s Privy Council in their petition, they were moved “with no less affection to advance the trade of their native country than the Dutch merchants were to benefit their commonwealth…For the honor of our native country and the advancement of trade to set forth a voyage this present year to the East Indies.”

Fully one-quarter of the subscribers to the voyage, and seven of the original fifteen directors of the enterprise, were the Levant Company grandees. They feared, with reason, that the Dutch had ruined their existing investment in the spice trade, and they provided not only one-third of the subscription but also many of the ships and the offices where the initial meetings took place. “The Company of Merchants of London trading to the East Indies” was thus originally an outgrowth of the Levant Company and a mechanism for its shareholders to extend its existing trade to the Far East by developing the sea route, and to raise as much new capital as possible.

This was the reason Smythe and his associates had decided to found a new company, and open it to any subscriber who would contribute, rather than merely extend the remit of their existing monopoly. For, unlike the Levant Company, which had a fixed board of fifty-three tightly knit subscribers, the East India Company was from the very first conceived as a joint stock corporation, open to all investors. Smythe and his associates had decided that, because of the huge expenses and high risks involved, “a trade so far remote cannot be managed but by a joint and united stock.” Costs were, after all, astronomically high. The commodities they wished to buy were extremely expensive and they were carried in huge and costly ships that needed to be manned by large crews and protected by artillery masters and professional musket-men. Moreover, even if everything went according to plan, there would be no return on investment for several years.

The idea of a joint stock company was one of Tudor England’s most brilliant and revolutionary innovations. The spark of the idea sprang from the flint of the medieval craft guilds, where merchants and manufacturers could pool their resources to undertake ventures none could afford to make individually. But the crucial difference in a joint stock company was that the latter could bring in passive investors who had the cash to subscribe to a project but were not themselves involved in the running of it. Such shares could be bought and sold by anyone, and their price could rise or fall depending on demand and the success of the venture.

Such a company would be “one body corporate and politick”—that is, it would be a corporation, and so could have a legal identity and a form of corporate immortality that allowed it to transcend the deaths of individual shareholders, “in like manner,” wrote the legal scholar William Blackstone, “as the River Thames is still the same river, though the parts which compose it are changing every instance.”

Forty years earlier, in 1553, a previous generation of London merchants had begun the process of founding the world’s first chartered joint stock company: the Muscovy Company or, to give it its full and glorious title, the Mysterie and Companie of the Merchant Adventurers for the Discoverie of Regions, Dominions, Islands, and Places Unknown. The original aim was to explore an idea first mooted by classical geographers, who believed their world to be an island, surrounded by an ocean, which meant there had to be a northern route to the spices and gold of the Far East as well as that by the Cape—and that passage would be free from all Iberian rivalry.

Although the Muscovy Company directors soon came to the conclusion that the northern route did not exist, in the process of looking for it they discovered, and successfully traded along, a direct overland route with Persia via Russia. Before Ottoman Turkish conquests cut the road in 1580, they sent out six successful voyages to Isfahan and the other great bazaar towns of the region, and managed to post a respectable profit.

In 1555 the Muscovy Company was finally granted its royal charter laying out its privileges and responsibilities. By 1583 there were chartered Venice and Turkey companies, which merged in 1592 to become the Levant Company. The same year the slave-trading Sierra Leone Company was founded. The East India Company was thus following a fairly well-trod path, and its royal charter should have come through without complication. Moreover, the queen wanted to keep the City on her side in case of a threatened rebellion by the unruly Robert Devereux, Earl of Essex, and she proved surprisingly receptive to the petition.

But almost immediately orders came from the court of the Privy Council suspending both the formation of the Company and the preparations for the voyage. The peace negotiations with Spain which had followed the death of King Philip II in 1598 were progressing, and their lordships, “thinking it more beneficiall…to enterteyne a peace, than that the same should be hindered” by a quarrel, made the decision that the adventurers should “proceade noe further in this matter for this yere.”

The merchants, none of whom were from the nobility, and so had little standing or influence at court, had no option but to wait. For twelve months it looked as if the ambitious idea of founding an English company to trade with the East would remain just that—a midsummer dream.

It was only when the Spanish peace talks foundered in the summer of 1600 that the Privy Council had a change of heart and felt confident enough to stress the universal freedom of the seas and the right of all nations to send ships wherever they wished. Almost exactly a year after the petition had been drafted, on September 23, 1600, the subscribers were finally given the go-ahead: “It was her Majesty’s pleasure,” they were told, “that they shuld proceade in ther purpose…and goe forward in the said viage.” On December 31, 1600, the last day of the first year of the new century, the “Governor and Company of Merchants of London trading to the East Indies,” a group of 218 men, received their royal charter.

Adapted from The Anarchy: The Relentless Rise of the East India Company, by William Dalrymple, published by Bloomsbury. Copyright © 2019 by William Dalrymple. All rights reserved.