Adam Smith and the Honourable East India Company

The East India Company emerged as the ultimate sovereign body in India in the second half of the eighteenth century. This development sparked intense interest in ‘Indian affairs’ among politicians, pamphleteers and political economists who commented variously upon the transformation of a private corporation into imperial ruler. Adam Smith opposed the East India Company’s territorial expansion in India, but refrained from recommending nationalization of the Company’s possessions. His attention was diverted towards the abolition of the Company’s special trading privileges that delivered it from competition in the East Indies trade. At the same time, Smith highlighted the ‘three duties of the sovereign’ that a joint-stock operation without an exclusive privilege could ‘very successfully’ perform, namely, defence, justice, and public works. The provision of ‘public works and public institutions’ that ‘facilitate commerce in general’ and promote long-term economic growth was consistent with the ‘perfect system of natural liberty and justice’, Smith avowed. The East India Company continued to discharge these responsibilities until the Indian territories were transferred in 1858 to the British crown.