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Authors: Niall Ferguson

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It was a tradition that went back to the days of Thomas Pitt and before. In 1701, while Governor of Madras, Pitt had come across the perfect way to remit his gains to England. ‘My grand affair’, he called it, ‘my great concern, my all, the finest jewell in the world’. At the time, the Pitt Diamond was the largest the world had ever seen, weighing some 410 carats; when cut it was valued at £125,000. Pitt never revealed the full story of how he came by it: almost certainly it came from the Mughal Emperor’s mines at Golconda, though Pitt denied this. In any event, he later sold it to the Prince Regent of France, who incorporated it into the French crown. But the jewel literally made his name: henceforth he was known as ‘Diamond’ Pitt. There was no more powerful symbol of the wealth an ambitious and able Englishman could make in India, and where Pitt led many others hastened to follow. Clive too sent his gains back to England in the form of diamonds. Altogether around £18 million was transferred to Britain from India by such means. In the decade from 1783 the drain totalled £1.3 million. As Gholam Hossein Khan put it:
The English have besides a custom of coming for a number of years, and then going away to pay a visit to their native country, without any one of them shewing any inclination to fix himself in this land ... And as they join to that custom that other one of theirs, which every one of those emigrants holds to be of Divine obligation, I mean, that of scraping together as much money in this country as they can, and carrying it in immense sums to the kingdom of England; so it is not surprising that these two customs, blended together, should be ever undermining and ruining this country, and should be an eternal bar to it ever flourishing again.
 
Of course, not every East India Company writer became a Clive. Of a sample of 645 civil servants who went to Bengal, more than half died in India. Of the 178 who returned to Britain, a fair number – around a quarter – were not especially wealthy. As Samuel Johnson said to Boswell: ‘A man had better have ten thousand pounds at the end of ten years passed in England, than twenty thousand pounds at the end of ten years passed in India, because you must compute what you
give
for money; and a man who has lived ten years in India, has given up ten years of social comfort and all those advantages which arise from living in England’.
Nevertheless, a new word was about to enter the English language: the ‘nabob’, a corruption of the Indian princely title of
nawab
. The nabobs were men like Pitt, Clive and Hastings, who brought their Indian fortunes back home and converted them into imposing stately homes like Pitt’s at Swallowfield, Clive’s at Claremont or Hastings’s at Daylesford. Nor did they confine themselves to buying real estate. It was with money he had made in India that Thomas Pitt bought the Parliamentary seat of Old Sarum, that notorious ‘rotten borough’ which his more famous grandson later represented in the House of Commons. It was magnificent hypocrisy on William Pitt’s part when he complained in January 1770:
The riches of Asia have been poured in upon us, and brought with them not only Asiatic luxury, but, I fear, Asiatic principles of government ... The importers of foreign gold have forced their way into Parliament, by such a torrent of private corruption, as no private hereditary fortune could resist.
 
‘We have sitting among us’, he grumbled twelve years later, ‘the members of the Rajah of Tangore and the Nawab of Arcot, the representatives of petty Eastern despots’.
In Thackeray’s
Vanity Fair
, Becky Sharp imagines herself – as the wife of the collector of Boggley Wollah – ‘arrayed ... in an infinity of shawls, turbans, and diamond necklaces, and ... mounted upon an elephant’, since ‘they say all Indian nabobs are enormously rich’. Having returned to London on account of a ‘liver complaint’, the nabob in question
drove his horses in the Park; he dined at the fashionable taverns ... he frequented the theatres, as the mode was in those days, or made his appearance at the opera, laboriously attired in tights and a cocked hat ... He was very witty regarding the number of Scotchmen whom ... the Governor-General, patronized ... How delighted Miss Rebecca was at ... the stories of the Scotch aides-de-camp.
 
A more timorous and unmartial figure than Jos Sedley it would be hard to imagine. Yet in truth the profits of the nabobs were increasingly underwritten by an enormous military establishment in India. By the time of Warren Hastings, the East India Company had more than 100,000 men under arms, and was in a state of near perpetual warfare. In 1767 the first shots were fired in what would prove a protracted struggle with the state of Mysore. The following year, the Northern Sarkars – the states of the east coast – were won from the Nizam of Hyderabad. And seven years after that, Benares and Ghazipur were seized from the Nawab of Oudh. What had started as an informal security force to protect the company’s trade had now become the company’s
raison d’être
: fighting new battles, conquering new territory, to pay for the previous battles. The British presence in India also depended on the Navy’s ability to defeat the French when they returned to the fray, as they did in the 1770s. And that cost even more money.
It was easy to see who got rich from the Empire. The question was, who exactly was going to pay for it?
The Taxman
 
Robert Burns was just the sort of man who might have been tempted to seek his fortune in the Empire. Indeed, when his love life went awry in 1786 he thought seriously of taking himself off to Jamaica. In the end he missed his intended ship and elected, on reflection, to stay in Scotland. But his poems, songs and letters can still give us an invaluable insight into the political economy of the eighteenth-century Empire.
Burns was born in 1759, at the height of the Seven Years War, the son of a poor Alloway gardener. His early literary success, though gratifying, paid no bills. He tried his hand at farming, but that was little better. There was, however, a third possibility open to him. In 1788 he applied to one of the Commissioners of Excise to become, in effect, a taxman. It was something that embarrassed him a great deal more than his celebrated drinking and wenching. As he confided in a friend: ‘I will make no excuses ... that I have sat down to write you on this vile paper, stained with the sanguinary scores of “thae curst horse leeches o’ th’ Excise” ... For the glorious cause of LUCRE I will do any thing, be any thing’. But ‘five and thirty pounds a year was no bad dernier resort for a poor Poet’. ‘There is’, he admitted, ‘a certain stigma affixed to the character of an Excise-Officer, but I do not intend to borrow honour from any profession; and though the Salary be comparatively small, it is luxury to any thing that the first twenty-five years of my life taught me to expect.’ ‘People may talk as they please of the ignominy of the Excise, but what will support my family and keep me independant [
sic
] of the world is to me a very important matter’.
In swallowing his pride for the sake of a taxman’s salary, Burns became a link in the great chain of imperial finance. Britain’s wars against France had been funded by borrowing and yet more borrowing, and the magic mountain atop which British power stood, the National Debt, had grown in proportion with the new territories acquired. When Burns started work for the Excise it stood at £244 million. A crucial function of the Excise was therefore to raise the money necessary to pay the interest on this debt.
Who paid the Excise? The main dutiable articles were spirits, wines, silks and tobacco, as well as beer, candles, soap, starch, leather, windows, houses, horses and carriages. Notionally the tax was levied on the producers of liable commodities. But in practice it fell on consumers, since producers simply added the excise to their prices. Every glass of beer or whisky a man drank was taxed, and every pipe he smoked. As Burns said, his business was ‘grinding the faces of the Publican & the Sinner on the merciless wheels of the Excise’. But even the virtuous had to pay. Every candle a man lit to read by, even the soap he washed with, was taxed. For the nabobs, of course, these taxes were scarcely noticeable. But they ate up a substantial proportion of an ordinary family’s income. In effect, then, the costs of overseas expansion – or to be precise of the interest on the National Debt – were met by the impoverished majority at home. And who received that interest? The answer was a tiny elite of mainly southern bondholders, somewhere around 200,000 families, who had invested a part of their wealth in ‘the Funds’.
One of the great puzzles of the 1780s is therefore why it was in France – where taxes were much lighter and less regressive – rather than in Britain that political revolution finally came in the 1780s. Burns himself was one of those Britons to whom the idea of revolution appealed. It was he, after all, who gave the revolutionary era one of its most enduring anthems in ‘A Man’s a Man for a’ that’. An instinctive meritocrat, Burns bitterly resented ‘the stately stupidity of self-sufficient Squires, or the luxuriant insolence of upstart Nabobs’. Despite his own complicity as a taxman, he even wrote a populist attack on the excise tax, ‘The De’il’s awa’ wi’ th’ Exciseman’. But Burns had to abandon his political principles in order to keep his job. After he was spotted singing a revolutionary anthem in a Dumfries theatre, he had to write an obsequious exculpatory letter to the Commissioner of the Scottish Board of Excise, pledging to ‘seal up [his] lips’ on the subject of revolution.
The poor drinkers and smokers of Ayrshire were far from the worst-off subjects of the British Empire, however. In India the impact of British taxes was even greater, for the spiralling cost of the Indian Army was the one item of imperial expenditure the British taxpayer never had to pay. Disastrously, the ratcheting up of taxes in Bengal coincided with a huge famine, which killed as many as a third of the population of Bengal – some five million people. To Gholam Hossein Khan, there was a clear connection between ‘the vast exportation of coin which is carried every year to the country of England’ and the plight of his country:
The decrease of products in each District, added to the innumerable multitudes swept away by famine and mortality still go on augmenting the depopulation of the country ... For as the English are now the rulers and the masters of this country, as well as the only rich men, to whom can those poor people look up to for offering the productions of their art, so as to benefit by their expenses? ... Numerous artificers ... have no other resource left than that of begging or thieving. Numbers, therefore, have already quitted their homes and countries; and numbers unwilling to leave their abodes, have made covenant with hunger and distress, and ended their lives in the corner of their cottages.
 
It was not just that the British repatriated so much of the money they made in India. Increasingly, even the money they spent while there tended to go on British goods, not Indian. Nor did the bad times end there. Another famine in 1783 – 4 killed more than a fifth of the population of the Indian plains; this was followed by severe scarcities in 1791, 1801 and 1805.
Back in London, the shareholders were feeling uneasy, and the East India Company’s share price in this period makes it clear why. Having soared under Clive’s Governor-Generalship, it slumped under Hastings. If the cash cow of Bengal were to starve to death, the company’s prospective earnings would collapse. Nor could Hastings any longer rely on military operations to replenish the company’s coffers. In 1773 he accepted the offer of 40 million rupees from the Nawab of Oudh to fight the Rohillas, an Afghan people who had settled in Rohilkund, but the costs of this mercenary operation were not much less than the fee, which was in any case never paid. In 1779 the Marathas defeated a British army sent to challenge their dominance of Western India. A year later Haider Ali of Mysore and his son Tipu Sultan attacked Madras. As revenue imploded and costs exploded, the company had to rely on bond sales and short-term borrowing to remain afloat. Finally, the directors were forced not only to reduce the annual dividend but to turn to the government for assistance – to the disgust of the free market economist, Adam Smith. As Smith noted contemptuously in
The Wealth of Nations
(1776):
Their debts, instead of being reduced, were augmented by an arrear to the treasury ... of ... four hundred thousand pounds, by another to the custom-house for duties unpaid, by a large debt to the bank for money borrowed, and by a fourth for bills drawn upon them from India, and wantonly accepted, to the amount of upwards of twelve hundred thousand pounds.
 
By 1784 the company’s debt stood at £8.4 million and Hastings’s critics now included a powerful array of politicians, among them Henry Dundas and Edmund Burke – the former a hard-nosed Scottish power-broker, the latter a tremendous Irish orator. When Hastings resigned as Governor-General and returned home in 1785, they secured his impeachment.
Hastings’s trial, which ended up lasting an exhausting seven years, was more than the public humiliation of a chief executive before a meeting of disgruntled shareholders. In truth, it was the whole basis of the company’s rule in India that was on trial. The original grounds of impeachment debated in the Commons charged Hastings
With gross injustice, cruelty and treachery against the faith of nations, in hiring British soldiers for the purpose of extirpating the innocent and helpless people ... the Rohillas ...
With various instances of extortion and other deeds of maladministration against the Rajah of Benares ...
[With] The numerous and insupportable hardships to which the Royal Family of Oude [Oudh] had been reduced ...
With impoverishing and depopulating the whole country of Oude [Oudh], rendering that country, which was once a garden, an uninhabited desert ...
With a wanton, and unjust, and pernicious exercise of his powers, and the great situation of trust which he occupied in India, in overturning the ancient establishments of the country, and extending an undue influence by conniving extravagant contracts, and appointing inordinate salaries ...
With receiving money against the orders of the Company, the Act of Parliament and his own sacred engagements; and applying the money to purposes totally improper and unauthorized [and with] enormous extravagances and bribery in various contracts with a view to enrich his dependants and favourites.
 
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