In Disguise of a Merchant

Last​ summer, in the world we have lost, I took a long Uber ride through Bristol. It was long because my Ethiopian driver was eager to tell me how much his country had changed in recent years, and how much of this was because of China. In the last decade, Chinese companies were responsible for more than 350 construction projects in Ethiopia – airports, railway stations, shopping malls, service agencies and more – helping it become the fastest growing economy in Africa. Chinese investment also paid for a glitzy new African Union headquarters in the capital, Addis Ababa, where the continent’s heads of state assemble annually to discuss cross-border affairs. Much of its equipment and staff training was supplied by Huawei. In 2018, it was reported that bugs had been discovered throughout the building and that, for five years, information had been passing to servers in China. Whatever the truth of these accusations, they raise the question of what may be involved when organisations attached to a particular state intervene in an extensive and sustained way in another country and continent, even if their interest appears – and is proclaimed to be – commercially driven. They also raise questions about the nature of Huawei itself, which has investments in more than 170 countries.

One of the virtues of this intelligent and well-researched book by Andrew Phillips and Jason Sharman is that it provides long and wide historical contexts in which such questions can be posed. The authors’ central argument is that ‘some of the most important actors in the crucial formative stages of the modern international system were neither states nor merchant companies’ but ‘hybrid entities’ that combined elements of both and which they call ‘company-states’. These were chartered associations of traders that were endowed by their founders, or gradually came to lay claim to extensive sovereign powers in one or more foreign locations, and possessed considerable though fluctuating levels of autonomy. They were overwhelmingly European creations and instruments.

The concept of a corporation, ‘an association of individuals that has a legal entity distinct from the identity of these individuals’, had become increasingly powerful in European legal and political thought from the 12th century. Europeans also tended to take for granted the existence of ‘territorially non-exclusive forms of rule’, with monarchs, great landowners, civic patricians, the Church and other bodies able to exercise their own modes of government and authority in tandem, if not always in harmony. Having emerged from these essentially plural and divided domestic orders, Europeans didn’t require a great leap of the imagination to conceive of overseas trading companies which might also have the power to set their own legal and fiscal rules, mint money and even raise troops. The regimes most attracted to experimenting with these hybrid devices were at once greedily ambitious and acutely conscious of their own limitations and vulnerabilities.

All early modern European polities were aware of the vast size of the great Asian empires, the desirability of some of the commodities they produced, especially spices and textiles, and the unattractiveness of their own exports in these faraway places. Establishing trading posts which might facilitate entry into indigenous commercial networks in Asia was an obvious strategy, and one that was particularly appealing to certain Protestant powers. During the 16th century, England had already set up companies to trade with Russia and the Levant. In 1600, Elizabeth I chartered the East India Company (EIC) with monopoly rights for trade in the Indian Ocean region. Two years later, the Dutch East India Company was founded, the Vereenigde Oostindische Compagnie (VOC). These two organisations are prime examples of the hybrid form of territorial-cum-capitalist power that Phillips and Sharman seek to identify and chart. Both of them proved highly successful, if only for a while.

The prominence and peculiar energy of these two companies stemmed again from a combination of weakness and strength. By 1600, both the English and the Dutch had developed advanced maritime industries, and had proved willing to risk and invest in long sea journeys and sea warfare. Both had largely missed out, however, on the earlier, most profitable, phases of European exploration and conquest, which had been spearheaded by Spain and Portugal. They were both also being challenged on their own continent by stronger, bigger Catholic powers, with England threatened by invasion first from Spain, then France, and the Dutch fighting a war for independence from the Habsburgs which lasted from the 1560s until the 1640s.

Extreme insecurity and danger at home – and possibly, for some of those involved, a sense of Calvinist mission – helps to account for the extreme violence used by the VOC from its inception. Quickly establishing a base in Batavia (now Jakarta) in 1619, it had built up a force of 150 ships and 15,000 men by 1650, and moved into Malacca, Ceylon and briefly Taiwan. It took a firm line with anyone who got in its way, exterminating indigenous inhabitants in the Banda Islands, and waterboarding and then decapitating English agents of the rival EIC who dared to trespass into Ambon in the same vast region. ‘The Gentlemen in the Fatherland decide things as they see fit,’ one VOC official remarked grimly. ‘But we do things here as we best understand and decide them.’

Phillips and Sharman argue, by contrast, that before 1750 the EIC had little choice but to remain relatively restrained. Chased out of the Spice Islands by the Dutch, it clung to the few coastal trading posts it had been able to acquire on the Indian subcontinent, rarely with more than a thousand troops at its disposal. Although some of its officers had aggressive ambitions, after 1615 the company was formally subordinate to the Mughal emperor, and for a long time remained dependent not just on indigenous traders and go-betweens, but on local rulers who generally refused to allow it to construct its own fortifications. Most of the company’s early agents focused on the challenging task of staying alive and on trying ‘to doe our business’, as one of them wrote, ‘with a great deal of submission and not much charge’.

There is an insufficiently addressed tension in this book, indeed, between the authors’ desire to make much of the transnational and transcontinental significance and impact of so-called company-states, and their careful documentation of just how puny and ephemeral many of these organisations turned out to be. Even in Asia, their involvement in China and Japan was largely blocked until the 19th century, though the VOC did manage to establish a modest and profitable outpost at Dejima, off Nagasaki. In Africa, their position was weaker still, though again not negligible. The Royal African Company, established by Charles II in 1672, was both a vicious trader in slaves and a strictly marginal player. It was dependent on the protection, networks and captive-taking of local West African rulers. Disease wiped out most of its own agents. Out of every ten men the company dispatched to Africa, six died in their first year of service. Only one in ten survived to return home with whatever profits they had managed to accumulate.

In Africa, as in other continents, companies were also confronted with organised military violence. Sometimes, as when the English were slaughtered at Ambon in the 1620s, this was at the hands of European rivals. When the Company of Scotland, established in 1695, tried to move into Panama some of its two thousand members were wiped out by local Spanish soldiers who saw no reason to follow the rules of civilised warfare when dealing with an intruding rabble of piratical civilians, and Protestants to boot. But the danger didn’t come only from Europeans. Phillips and Sharman repeat, rightly, an argument often made, namely, that, until the 1800s, there was no guaranteed technological imbalance on land between the armaments available to non-European forces and their invaders. In 1727, Dahomey, a formidable kingdom in present-day Benin, which possessed its own standing army and gunpowder weaponry, found it easy enough to expel the Royal African Company from its fort at Whydah. Even in 1802, an outpost of the new Russian-American Company in Alaska was obliterated by Tlingit warriors, many of them armed with guns manufactured in the United States.

The Americas in general were rarely a productive zone for company-states. In Asia, sheer distance from home sometimes provided opportunities for profitable buccaneering, but much of the Atlantic world was only six weeks’ sail from Europe, and others had got there first. The ships of the Dutch West India Company, an organisation that was already failing by 1650, preyed successfully on Portuguese galleons. But when the company tried to move into Brazil, it was obstructed by the 200,000 Portuguese settlers already established there. The one company-state that managed to flourish in the Americas was the Hudson’s Bay Company. Always a small enterprise, with only sixty agents in the 1670s, most of this company’s victims were furry animals. Dependent on Cree Indians and other indigenous traders and hunters for its supply of pelts, the company kept a low profile, never sought government aid, refused even to make public the identity of its directors, and worked hard to keep new white settlers to a minimum. It was this last policy which in the end – though only in the 1860s – led to the withdrawal of the company’s charter. By that time its writ technically ran over a twelfth of the land surface of the globe, but these vast domains contained only some 13,000 white settlers. Politicians in London and Canada became anxious that, in the wake of its civil war, a resurgent United States might start to move into these huge empty spaces, and so took direct control.

Phillips​ and Sharman identify the growing power, reach and pretensions of formal states as the critical force that worked against the success and further proliferation of company-states after 1700. Norms changed, especially regarding the use of organised violence. Sovereign states developed qualms about recruiting mercenary troops and privateers, as distinct from making use of their own regular armies and navies. By the same token, and as Sharman has written elsewhere, it came to be assumed that ‘only states should have the right to engage in war, rather than private parties, as was historically the norm’.

At one level, then, it was the rising incidence, cost and transcontinental scale of warfare in the long 18th century – and the reorganisation and strengthening of the state machinery attendant on this – that made European powers more impatient of the claims and separate jurisdictions of company-states. By the 1720s, even the once mighty VOC was palpably in decline; it was dissolved in the 1790s, with its former territories becoming colonies of the Dutch government. The apparent grand exception to this trend, the conspicuous success experienced around this time by Britain’s East India Company, was, Phillips and Sharman argue, nothing of the sort. True, during the 1750s the EIC allied with regular British land and sea forces to assume power in Bengal. By 1815, it had assembled an army of a quarter of a million men and claimed hegemony in the subcontinent. But all of this came at a considerable price, and not just for Indians. The company’s relations with the British state had always been ambivalent. Its increasing territorial and military pretensions after 1750 attracted growing attention and demands for closer supervision and regulation from British governments and MPs. It also aroused scorn and even disgust.

In the wake of Adam Smith, monopoly trading companies appeared retrograde and unsuited to wider purposes. As P.J. Marshall has argued, when Edmund Burke began to launch his assaults on the EIC in the 1770s, it wasn’t because of any aversion to the project of empire itself but because he believed that imperial spaces could and should be decently administered, and that the company was grievously failing in its duty to India. He also thought the British Empire was too important to be left to a set of irresponsible traders: ‘a state in disguise of a merchant’, ‘a great public office in disguise of a counting house’, was unseemly as well as pernicious. The EIC was finally absorbed by the British government in the wake of the Indian Rebellion in 1857, but its independence was by then already restricted and its monopoly privileges a thing of the past, abolished by Acts of Parliament in 1813 and 1833 as free trade fever set in.

The late 19th century witnessed a brief flowering of new European company-states. By then, the feeling that such bodies were something of an embarrassment, probably corrupt and certainly infra dig, was far more widespread. Bismarck made use of such companies to assist the newly unified Germany’s attempt to catch up in the imperial stakes, granting charters for the administration of recently created protectorates in Africa, New Guinea and the Marshall Islands. But he didn’t invest in them adequately, and they didn’t prosper (the New Guinea Company, founded by a syndicate of Berlin bankers, survived only from 1885 to 1899). Those involved found that they were often vulnerable to expressions of contempt on the part of officials of the German Empire. When a former vice-admiral assumed the position of supreme plenipotentiary of the New Guinea Company, he was ‘deeply offended when German naval officers failed to salute him on the grounds that officers did not salute those from private companies’.

It is with the widening gulf between private, commercial enterprises and nation-states that this book concludes. In the early modern period, company-states had played significant roles in establishing transcontinental commercial and cultural connections, and as auxiliaries of various European empires. But, ultimately, Phillips and Sharman insist, theirs is ‘a comparative study of the failure of company-states’. By the 20th century, the divisions between public and private had become ‘definitively’ consolidated. The sovereign state was universally dominant. No longer could companies exert ‘any independent influence as actors within the … international system’; there was now no possibility of ‘private aircraft carriers, attack submarines, armoured divisions, or fighter squadrons’.

Well, yes and no. One of the limitations of this book, good though it is, is that in one sense it is profoundly Eurocentric. Although the authors occasionally allude to the existence of other empires, the nature of their topic leads them to focus overwhelmingly on European maritime empires. Since these empires disintegrated in the 20th century, it can be tempting to assume that we now live in a world of autonomous, sovereign states. Yet the ‘international system’ remains more protean than this. Dramatic in their scope though the maritime empires once were, it is overland empires that have proved more resilient, and variations of them are still with us. The United States, Russia, China and India call themselves nation-states, but all of them are in reality products of, and marked by, different imperial enterprises; and their respective rulers on occasion still behave accordingly. Think of Donald Trump’s casual suggestion last August that the US purchase Greenland. At the time, many put this down to Trump being Trump. In fact, he was acting in conformity with many of his predecessors. US presidents proposed purchasing Greenland in the 1860s and 1940s, and American politicians did succeed in buying other vast tracts of land, Alaska, for instance, and the huge Louisiana Purchase in 1803.

Using superior economic resources to win control over territory may seem relatively benign. But Washington never sought to establish the opinions of the people it was purchasing along with these lands, any more than Trump seems to have been interested in establishing whether Greenlanders actually wanted to become Americans. In other words, imperialism can take many different forms, and the habits of empire are sticky. I thought of this while listening to my Ethiopian cab driver last summer. There is no doubt that China and its companies have bestowed many boons on Ethiopia and elsewhere in Africa. Yet, as others have remarked, there are parallels between this Chinese activity and the so-called informal colonialism once practised by the British in parts of South America. In that region, too, myriad British private companies built up and financed railways, banks, roads and new business enterprises. In the process, the British state – though it never had a substantial formal empire on that continent – secured an at times extensive influence there.

Which brings us back to Huawei. Many Western critics accuse the company of acting as a vehicle and agent of Beijing. But perhaps it is something more than this, a kind of modern company-state operating in a world where kinds of empire still exist. After all, a company-state no longer requires ‘private aircraft carriers, attack submarines, armoured divisions, or fighter squadrons’. It only needs to possess, as Huawei does, the advanced technologies and cyber techniques which allow it to control and subvert all these expensive weapons of war. One wonders whether Huawei’s executives and agents, operating far away from China, ever allow their minds and their aspirations to drift. Do they sometimes allow themselves to think that while ‘the Gentlemen in the Fatherland decide things as they see fit … we do things here as we best understand and decide them’?