Investment in Empire: British Railway and Steam Shipping Enterprise in India, 1825-1849 [Reprint 2016 ed.] 9781512819038

Table of contents :
Preface
Table of Contents
1. The Setting in Britain and in India
2. Steam Navigation to India: Rise of the P. & O.
3. From Steam Navigation to Steam Railways: R. M. Stephenson
4. The Ε.I.R. and Its Rivals in the Ganges Valley
5. The G.I.P. in the Bombay Deccan
6. The Struggle for the Guarantee, 1846–49
7. The Guaranteed Interest Railway Contract: Private Enterprise at Public Risk
Selected Bibliography
Index

Citation preview

Investment in Empire

FIRST R A I L W A Y for

Scale of M i U s SO 100

100

G t l S Z EL

400

PROJECTS

INDIA

I n v e s t m e n t in Empire British Railway and Steam

Shipping

Enterprise in India

1825-1849 by DANIEL THORNER

Philadelphia UNIVERSITY OF PENNSYLVANIA 1950

PRESS

Cofyright

1950

UNIVERSITY OF PENNSYLVANIA PRESS Manufactured

m the United States of A merica

LONDON: GEOFFREY CUMBERLEGE OXFORD UNIVERSITY PRESS

For My Parents

Preface

And thou shalt lend unto many nations} and thou shall not borrow. And the Lord shall make thee the head, and not the tail.

Deuteronomy 28:12-13. H E self-assertion of India and China, each in its own way, constitutes one of the most significant historical developments of our times. T h e expansion of western E u r o pean capitalism put an end to the traditional isolation of those great eastern countries and brought about drastic changes in their ancient civilizations. Although contacts between modern European countries and the chief nations of the East date back many hundreds of years, the century in which the greatest changes were wrought was the nineteenth. T h e real "opening-up" of India and China began in the second quarter of the nineteenth century. It was not until then that the expanding European countries could bring into operation the two chief instruments for the modern penetration of the eastern world, the steamship and the steam railway. T h e consequences of their introduction into India have been and are of the utmost importance. T h e economic activity occasioned by the new railways gave rise to the Indian business class which provided the core of modern Indian nationalism. But this and other internal consequences of the application of steam to India are not the subject of the present slender volume. Rather, the concern of this work is the Vll

viii

PREFACE

;process by which steamship and railway lines for India were launched. These undertakings, particularly the railways, involved a large-scale investment of British capital in India. The terms under which this capital moved, and, more precisely, the struggle to secure these terms, form the heart of this inquiry. Our field of concern, then, is in the domain of international economic relations or, more strictly, the economic nexus between an imperial power and a huge dependency. The years with which we are concerned, 1825-49, set the stage for what may be called the original large-scale movement of British capital to India, 1850-73. The great bulk of this capital export was for railways, and the terms of investment were set by a standard type of contract—the guaranteed interest railway contract first signed in London in August, 1849. The capital which moved from England to India under these terms formed the largest single unit of international investment in the nineteenth century. Whereas the construction of railways in India has been the subject of a large body of literature—see the works of Davidson, Bell, Tiwari, and Sanyal cited in the bibliography —no systematic analysis has ever been made of the negotiations which produced the railway contract itself. The present work is offered in the belief that this subject is significant in itself and not without relevance today. A surprising number of questions under discussion in the middle of the twentieth century about the relations of industrialized countries with "underdeveloped" areas (President Truman's "Point 4 " ) , were already the subject of sharp controversy in the middle of the nineteenth century. It is a pleasure to acknowledge here the aid and assistance which I have received from all quarters since I began work

PREFACE

ix

in this field more than a dozen years ago. Throughout this time the Department of History at Columbia University— chaired successively by Professors Austin P. Evans, Carlton J . H . Hayes, John A. Krout, and Robert L. Schuyler—has encouraged me to bring my study to a conclusion; under its auspices I received fellowships from Columbia University in 1938-39 and in 1939-40, the latter year being spent in London doing research in the archives of what was then the India Office. My work in 1939-40 was aided also by a PreDoctoral Field Fellowship from the Social Science Research Council; a Demobilization Award for 1946-47 from that same body was of indispensable assistance to me in resuming my studies in the summer of 1946. Although this inquiry was shelved during most of the war years, the nature of my work in various United States Government agencies helped to broaden my approach to the whole field. Service in 1941-42 at the office of the United States Coordinator of Information brought me in daily touch with America's foremost authority on India, Dr. W . Norman Brown, who gave me the benefit of his unusual sense of the practicalities of India's traditional civilization. Subsequent work at the United States Foreign Economic Administration put me in frequent and beneficial contact with experienced American and foreign railway and shipping men. A brief interlude of service in the United States Merchant Marine from March to October, 1944, gave me an interval in which to turn my thoughts again to the present study—a preliminary version of Chapter 6 was completed aboard a Liberty ship in the English Channel in July, 1944. From the end of 1944 to the early part of 1946 I was stationed in the New Delhi field office of the United States Foreign Economic Administration. A major part of my work there had to do

χ

PREFACE

with railway matters and involved visits to India's leading railway shops; I had occasion to travel by road, rail, or air over the routes linking New Delhi with Bombay, Calcutta, Madras, Ajmer, and Karachi. Discussions with Indian and British railway officials and members of the Railway Board helped me to obtain a better grasp not only of contemporary Indian railway problems but of the nineteenth-century background as well. Librarians and keepers of archives in Great Britain, India, and the United States have gone far out of their way to facilitate my research. Particular thanks are due to M r . R. Wright, Superintendent of the Records at the former India Office, Dr. Horace I. Poleman and Colonel Willard Webb of the Library of Congress, and Dr. S. N. Sen, Archivist of the Government of India in New Delhi. Miss Virginia Ackerley (Mrs. Sherman Graff), Secretary of the Department of History at Columbia University, and Miss Laura Barrett, then with the Social Science Research Council, helped me upon innumerable occasions. T h e entire manuscript was read with great care by, and benefited from the numerous suggestions of, Professor Leland H . Jenks, of Wellesley College and the Harvard Research Center in Entrepreneurial History; and Professors J. Bartlet Brebner and Robert L. Schuyler, of Columbia University. Discussions with Professor Brebner made clearer to me the extent to which British economic policy toward India was affected by domestic British developments in the 1840's. Professor Schuyler, my faculty adviser throughout the past dozen years, has always allowed me to draw freely upon his time and his seasoned judgment. For advice and suggestions at one stage or another of my work, I am indebted to more individuals than I can possibly

xi

PREFACE

name here. These include Dr. Vera Anstey, of the London School of Economics} Professors Arthur F . Burns, of Columbia University j John D e Francis, of Johns Hopkins University} Ralph W. Hidy, of New York University} and Thomas Peardon, of Barnard College; Dr. Harold H . Mann} Mr. Η . M . Trivedi, of the Scindia Steam Navigation Company} my wife} Professor Holden Furber and other colleagues in the South Asia Regional Studies Department at the University of Pennsylvania. Responsibility for statements of fact and opinion rests, of course, with me. For final typing of the manuscript I must thank Mrs. Camella Wilson. Bala-Cynwyd, Pennsylvania July 1949

DANIEL

THORNER

Table of Contents PACE

Frontispiece—Map India

of First Railway Projects for ii VII

PREFACE CHAPTER

1.

T H E S E T T I N G IN B R I T A I N AND IN INDIA

2.

S T E A M NAVIGATION TO INDIA: R I S E OF T H E P . & O .

22

MAP

24

3.

1

OF STEAM SHIPPING ROUTES, ENGLAND TO INDIA

F R O M STEAM NAVIGATION TO S T E A M

RAILWAYS:

R . M . STEPHENSON 4.

THE

E.I.R.

AND

ITS

44 RIVALS

IN

THE

GANGES

VALLEY

69

5.

T H E G . I . P . IN T H E B O M B A Y D E C C A N

96

6.

T H E S T R U G G L E FOR T H E G U A R A N T E E

119

7.

T H E GUARANTEED INTEREST RAILWAY CONTRACT: P R I V A T E E N T E R P R I S E AT P U B L I C R I S K

168

SELECTED BIBLIOGRAPHY

183

INDEX

191

xiii

1 The Setting in Britain and in India India can never again be a great manufacturing country, but by cultivating her connexion urith England she may be one of the greatest agricultural nations. R . M . Grindlay, 1837. The turning of the first soil for their [railway] construction τυτΙΙ be the visible infestment in the East of the civilization of the West. J . B. Smith, Railways for Bombay,

T

1849.

O M E R C H A N T S and manufacturers of early Victorian Britain, India was an unsatisfactory place. British businessmen could not reconcile themselves to the fact that England's greatest overseas possession took only one-tenth as much per capita of British manufactures as Brazil, which did not even belong to Britain. Lancashire textile interests had another and perhaps equally great grievance. They deplored India's deficiencies as a supplier of raw materials. Lancashire then existed in a state of uneasy dependence upon the slave-owning American South for its chief staple, cotton. Such cotton supplies as came from India were relatively small in quantity and absolutely poor in quality. Leaders of British industry might have adjusted themselves to these unhappy facts if Britain's economy had been stationary or declining. But Britain had just passed through the Industrial Revolui

2

INVESTMENT IN E M P I R E

tion, and production was continuing to expand at an amazing pace. During the first half of the nineteenth century British output of coal tripled, that of iron quintupled, and that of factory-made cotton goods rose fifteen times. From year to year, therefore, British businessmen demanded more raw materials and sought larger outlets for their finished goods. Throughout the century, the best authorities of the day encouraged them to believe that there was no limit to the possible and profitable development of economic relations with India. The days had passed when India was considered an El Dorado, pronounced the London Times in 1847; but if there were no diamonds at the ancient mines of Golconda, there was "the worth of a ship-load of diamonds in the Cotton-fields of the Deccan." An article in the Economist that same year was more enthusiastic: there was no "tropical" raw material "for the production of which India is not as well, or better adapted than any other country; while its dense and illustrious population would seem to offer an illimitable demand for our manufactures." A decade later one of the members of Parliament best informed on India even declared that "India was capable of consuming as much of our manufactures as we now exported to all the w o r l d . . . . " The Economist matched him in 1859 with the assertion that India possessed "the most extensive undeveloped resources of any country in the world." 1 Such sanguine descriptions of India's immense population and vast undeveloped resources simply made British businessmen appreciate more keenly the tantalizing gap between the potentialities and the actualities of that far-off land. The first step toward making Indian actuality measure up to its alleged potentialities was the curbing of the East India Company's special prerogatives. In 1813, thanks largely to

T H E SETTING

3

the pressure of merchants and industrialists whose wealth and political influence had waxed with the Industrial Revolution and with profitable operations during the Napoleonic Wars, Parliament ended the East India Company's monopoly of trade with India. Twenty years later Parliament terminated the East India Company's control over the movements of private British merchants within India, and also ended the Company's last exclusive commercial privilege by canceling its monopoly of British trade with China. During those twenty years the quantity of British goods exported to India increased sharply. Machine-made British textiles moved into the more accessible markets of India, and virtually wiped out some of the handicraft centers for which India had been famous since remote antiquity. But in real value, British trade with India was f a r from impressive and failed to attain the dimensions expected of it.2 T o put this trade on a modern footing, British businessmen campaigned for the application to India of two of the principal achievements of the Industrial Revolution—the steamship and the steam railway. Systematic efforts to obtain Government support for steamship lines from Britain to India's chief ports began in the 1820's and reached their climax in the late 1830's. T h e principal manifesto of the advocates of steam shipping to India was a remarkable document published early in 1837 by Captain Robert Melville Grindlay, founder of what is today the well-known banking firm of Grindlay and Co. Captain Grindlay was then the foremost spokesman in London of the committees which had been formed in Calcutta and other Indian ports for promoting steam communication with Britain. H e appealed to his British compatriots to wake up to the opportunities which lay before them in

4

I N V E S T M E N T IN E M P I R E

India. In every age, declared Grindlay, one people had been foremost. The world was changing rapidly, but that truth still held. In their day it was Britain which was foremost, and she should be sure to stay there by cultivating her advantages. It might be argued, Grindlay conceded, that British spirit and enterprise were unlikely to neglect suitable resources and advantages. " I t is quite true that in general, the people of this country have not been slow, either to discern or to improve the sources of commercial greatness; but it is equally true, that there has been at least one striking exception. India, with its widely extended boundaries, and myriad population, has at no time occupied that place in the public opinion to which it was entitled." Two conditions, said Grindlay, explained that neglect. One was the "exclusive principle" by which the East India Company had controlled India's trade j the other was the great distance which separated Britain from "the most magnificent of her dependencies." But now the exclusive principle was dead, and steam shipping was ready to overcome the "impediment" of distance. The significance of this was incalculable. Steam would annihilate space and make possible the movement of goods at greatly reduced rates. More important, by providing a steady and certain means of transport, it could bring into being "regular and rapid channels" of mercantile correspondence, an indispensable prerequisite for a flourishing trade. Although Grindlay's major concern was unquestionably commercial, he did not neglect other considerations. Steam communication would enable the parents and relatives of East India Company officials to keep in better touch with their loved ones, many of whom had left home in Britain as "mere boys." Steam and other devices would undoubtedly

T H E SETTING

5

help in time to raise the level of Indian society and civilization. "National honour" and "patriotism" required Britain to hold on to her Indian possession and improve it. Britain's "national interest" required her to guard India against possible danger, say f r o m Russia, which was accused of desiring to make trouble. " T h e political safety of India is intimately connected with its commercial prosperity, and consequently with its commercial value to this country." Grindlay argued that his position was quite consistent "with the received doctrines of political economy." Should India be separated f r o m Britain and then be governed in a wise, free, and enlightened fashion (like the United States a f t e r its separation), then India's commercial value would not decline. But no such possibility was visible. If Britain withdrew, then India's "ignorant," "rapacious," and " u n principled" Princes would return to power; or, alternatively, Russia would expand aggressively southward. In either case, warfare, insecurity, brigandage, and rapine would serve to check commercial enterprise. " O u r commerce," concluded Grindlay, "will not survive the destruction of our political power, and Steam Communication will be an important agent in the preservation of the latter." I n short, duty, profit, and national interest required Britain to hold on to India. Grindlay's forecast of the economic consequences of continued British power in India was truly remarkable: T h e manufactures of England have in some instances superseded those of India. O f the trade which has been attended with such a result, England at least has no right to complain; and though India may have suffered thereby some temporary inconvenience [the Governor-General had reported some years earlier that the bones of the cotton weavers were bleaching the plains of H i n d u s t a n — A u t h o r ] , she possesses in her internal resources, the means of recovering and

6

INVESTMENT IN E M P I R E

of converting the trade with England into a mine of wealth and prosperity. India can never again be a great manufacturing country, but by cultivating her connexion with England she may be one of the greatest agricultural nations. She may furnish the raw commodity, which the local advantages of England enable that nation more beneficially to work up. Here too, England will gain a double advantage by securing in India, at once a field for raising the raw material, and a market for the consumption of manufactured goods. T h e Cotton and Silk of India may at some future time afford the principal, perhaps the only supply for our looms. A Continental war would cut off our supplies of Silk from France and Italy,—a war with the United States would shut up the storehouse of our Cotton. These occurrences, it may be said, are not immediately probable, but what prudent man will trust his fortune to mere probability, when he can have comparative certainty? T h e native merchants concerned in the Silk trade of Calcutta, know the value of the English connection, and are most anxious for the establishment of the only means that can improve it to its full extent. Are the merchants of London, and Liverpool, and Bristol,—are the manufacturers of Manchester, and Macclesfield, and Nottingham, less discerning or less spirited than the natives of Bengal? Are they slower in perceiving an advantage, or less energetic in seeking to realize it? This cannot be believed. 3 T h e campaign f o r steam shipping to India eventuated at the end of 1 8 4 0 in an agreement f o r a regular service to be operated by the P . & O. (Peninsular and Oriental Steam Navigation C o m p a n y ) , with the aid of annual subsidies f r o m both the British Government and the East India Company. But half a dozen years elapsed before more than a mere handful of vessels were in regular operation on the P. & O.'s routes. D u r i n g those years British exports to India leveled o f f ; some commodities occasionally even registered decreases, while in several years the total v o l u m e of exports actually declined. A similar process showed itself in British imports f r o m India. R a w cotton imports f r o m Bombay were declared

T H E SETTING

7

by the Economist of August 28, 1847, to have fallen from 88 million pounds in 1844, to 34 million pounds in 1846. In this same issue, the Economist recorded the notorious fact, deducible alike from the tendency which the supply of some of the most important articles of Indian produce show to fall off, and from the stagnant, or rather declining, state of the export of our manufactures to those markets—and, perhaps, still more so, from the extremely unprofitable and unsatisfactory result which has attended both the export and import trade with India for some time past,—that there exist some great and serious impediments to the realisation of the just and fair hopes entertained with regard to our Indian trade.

The lamentable state of the economic scene in India was analyzed by British businessmen, publicists, and officials with all the acuity at their command. The central conclusion which they reached was that the low level of Britain's trade with India was directly connected with the lack of good internal transport. Ordinarily, old-fashioned methods of carrying goods by bullock-cart over miserable roads were so slow and so expensive that British manufactures could reach only a small fraction of India's vast population, then estimated at about 150 millions. The same high costs of transport limited India's exports to only a few commodities. These included indigo from eastern India, which for part of each year could move easily down to Calcutta by river craft, and cotton from western India. The latter was carried to Bombay on the backs of bullocks which trod their slow and costly way over the dirt trails that crossed the ridges of India's western mountains. Along the route, rain occasionally poured down on the bags of cotton which, often as not, had never been properly cleaned. By the time it reached Bombay for shipment to England, the product was in a very sorry state. At the great

8

I N V E S T M E N T IN E M P I R E

Liverpool exchange, Indian cotton was not a preferred product: its high cost of transport necessarily kept its price up, even though in quality it was much inferior to the longerstapled varieties from the United States. The outcome of this analysis was a realization that steam shipping, while beginning to tie England and India closer together, furnished in itself no guarantee that British goods could actually penetrate on a large scale into the interior, or that Indian raw materials could be brought down to the coast. The logical step forward was to cover India with a network of railways. Just as steam shipping had been the focus of discussion in the 1830's, so at the chief British mercantile houses concerned with India the outstanding question in the 1840's was railways. Writing in 1848 on India's need for railways, a leading British merchant pointed to a sharp contrast between India and the countries of Europe and America. In the latter, railways had added to such existing facilities as roads and navigable rivers. India unfortunately had an almost complete lack of proper transport facilities; the country as a whole was without good roads. A means of conveyance like railways— quicker, cheaper, and surer than pack animals or clumsy carts —was in India "indispensable, not to the improvement, but to the establishment of commercial and industrial enterprise. . . Without transport, civilization was "stationary" and education could not spread. "The door is closed which might admit private capital, and a vast empire containing the most useful and various productions, most of them susceptible of indefinite increase, is available neither as a market to sell or to buy." 4 A field report by Colonel W. H . Sykes—who was later to become Chairman of the East India Company's Court of

T H E SETTING

9

Directors and one of its foremost defenders in Parliament— produced some interesting conclusions about the relation between poverty and transport in the cotton country one hundred miles inland from Bombay. The poverty of the people there, declared Colonel Sykes, "is not the poverty of want: every cultivator throughout the country has a superfluity of the mere requisites for the support of animal life. This poverty is pecuniary poverty, and it bears heavily on him in the relation in which he stands to the Government and his creditors. H e cannot convert a sufficiency of grain into money to pay his taxes to the former, nor to fulfill even in part his engagements to the latter." Colonel Sykes' remarks were cited prominently in 1844 in the first prospectus for Indian railways submitted in London to the East India Company. In commenting upon Sykes' report, John Chapman, the outstanding pioneer of railways in western India and author of the prospectus, observed: " A clearer case of poverty arising from want of roads, and of a country ready to spring into prosperity on the making of them cannot exist." a H y d e Clarke, perhaps the most penetrating railway economist of the day, was more concerned with capitalizing on India's poverty than with analyzing it. "Paradoxical as it may sound," he wrote in 1845, "the very poverty and misery of the inhabitants of India, rightly considered, in connexion with the acknowledged capabilities of the soil, is rather a matter of encouragement than otherwise, to speculations of useful enterprise." T h e speculator had the surest prospect of "a large eventual gain" from the development of the resources of "a virgin soil" [sic]. Clarke admitted that there were wellfounded complaints about British economic policies in India, which drew onerous land revenues from the people and vir-

10

I N V E S T M E N T IN E M P I R E

tually "compelled" them to buy British goods. But he was not interested in dilating on them. After all, the wretchedness of the Indians could not continue long, when improved facilities of communication have brought these benighted people and their ways under the observation and influence of the civilized world . . . any measures which would promote the sale and transmission of the raw products, particularly the staples of wool, silk, dyes, rice, sugar, etc., to the steam manufactories of E n g land, would at once improve the condition of the country in the most legitimate way, namely, by encouraging to the fullest extent the cultivation of the soil, now so direfully neglected. Once this was accomplished, it would be no hardship to the Hindoos to be 'compelled' to receive their cottons in a manufactured shape, at a less exchangeable cost of labour than they could make them at themselves; and the land revenue would become lighter to the payer as a natural consequence.'

The influential merchants in Britain and India who initiated and supported the drive in the 1840's for the introduction of railways in India knew from previous experience that it would be a major task to enlist the aid and support of the East India Company. They were aware that the dominant interests in the venerable old Company had bitterly resented the elimination of their commercial privileges by Parliament in 1813 and 1833; and that those interests were suspicious of all further changes and innovations, lest they bring about the downfall of the Company itself. The railway promoters therefore strove to convince the heads of the East India Company that railways would reduce the Company's expenses in India and strengthen its political and military power. Thus at the time of the East India Company's humiliating disaster in Afghanistan in 1842, and during the bitterly fought wars with the Sikhs in the late 1840's, the railway backers stressed the services which railways would have been able to render, had they been available.7

T H E SETTING

11

H y d e Clarke, the talented railway economist, cleverly argued with the East India Company in 1845 that it was no misplaced philanthropy which dictated the need for railways, but practical political wisdom. Just as the Romans had built roads, so latterly the Russian Tsar, "with no love for civilization, has found it necessary to adopt the formation of railways in his vast and benighted territories. . . T h e Tsar had acted, "not with any consideration for the personal comfort of his subjects, but as a necessary means of strengthening and extending his rule." Similarly, the East India Company and its officials constituting the Government of India should consider "what would best give unity and strength to their vast empire, promptness and certainty in the execution of the orders of the ruling power. . . ." The political need for railways was apparent, Clarke argued, but had the East India Company comprehended this? Upon looking at the social condition of the wretched inhabitants of the East, however, we feel bound to say that they do not appear to have gained more in this behalf by their subjection to British rule, than the hordes of the Steppes have under the benign influence of the Russian eagle;—whilst in these respects both fall immeasurably behind the examples of Roman colonization. It is not, therefore, with any hope of inspiring the company of British merchants trading to India with an expensive sympathy for the social and moral advancement of their millions of native subjects that we urge the formation of a well-considered means of railway communication,—but as a necessary means of giving strength, efficiency, and compactness to their political rule in those territories.8

Returning to the same subject a little later in 1845, Clarke summed up his views from a somewhat different angle, but in the most authentic early Victorian terms. Self-interest, he asserted, was the mainspring of all things in the world. There was "no instance upon record of civilized governments taking

12

I N V E S T M E N T IN E M P I R E

the initiative in any grand scheme for the amelioration of the condition of a barbarous people, for the mere sake of doing good." It was commerce which "in all times has been the precursor of civilization." Clarke added in 1846 that "no careful thinker can avoid coming to the conclusion, that the excitement of railway construction in India will, of itself, cause an increased demand for English goods, so that at each step one operation will be found harmonising and cooperating with another, like a well planned and highly finished train of wheelwork." In short, as Clarke candidly remarked, "the real operation, after all, is to make the Hindoos form the railways, and enable us to reap a large portion of the profits." 9 In many senses the decisive influence in setting the pattern for the development of railways in India was Britain's previous experience with railways at home. By the time the first contracts for building lines in India were signed in 1849, Great Britain already had a quarter of a century of railway history behind it. During those twenty-five years many of the central railway questions of modern times had emerged as public issues. These included the problem of wise choice of trunk routes to constitute a sound framework for a national network} the control of railway finance, rates, and fares; and the prevention of monopolistic practices. By the 1840's it was clear that the railways, whatever their ownership, were quasipublic enterprises and would have to be placed under some kind of state control. But violent debate raged over the form which this regulation should take. These policy debates were in the forefront of the minds of those concerned in the 1840's with railways for India. The proponents of strict governmental control of railways were particularly anxious to spare India the malpractices and abuses which had characterized the first quarter of a century of railways in Britain. Before

T H E SETTING

13

turning to the Indian story, it is, therefore, essential to review the course of Britain's own railway development. The beginnings of railways in Britain date from the decade after the defeat of Napoleon in 1815. T h e rapid expansion of British industry and commerce in those years brought with it transport needs which the existing canals and roads could not satisfy. The enormous profits of the canal companies in this period helped to attract the interest of ambitious businessmen to the transport field and furnished an inducement to investors to entrust railway promoters with their funds. In broad outline Britain's railway development took place in three separate spurts, each a decade apart. A flurry of promotion and construction in the middle 1820's was repeated on a larger scale in the middle 1830's, and climaxed by a veritable railway mania in the middle 1840's. T h e first phase was part of the short-lived "wave of business elation" that swept England in 1824-25 and collapsed early in 1826. Of the railway companies which were started in these years, the Stockton and Darlington, and, a bit later, the Liverpool and Manchester, proved to be substantial enterprises and survived. Most of the others were floated for speculative purposes, the promoters endeavoring to pump up the price of the stock, and then dumping their shares at a profit. The small dimensions of this first phase of railway building are indicated by the fact that during it only a few hundred miles of railways were put into operation. 10 T h e burst of railway activity in the 1830's was a much more formidable affair. T h e capital accumulations which could be tapped by skillful railway promoters were much greater than in the previous decade. An indication of the availability of capital is the fact that in the early 1830's more than £160 million of Government securities were converted

14

I N V E S T M E N T IN E M P I R E

from 4 per cent to 3/4 per cent. By 1835, new textile mills, banks, and steamship companies served to absorb part of the new capital formations. About one hundred railway projects were presented to the public in the years 1835 to 1837. Although some of these were genuine enterprises, the great bulk were speculative schemes similar to those of the 1820's. The outcome of this second railway orgy was an addition of about fourteen hundred miles to the railway network of Britain. The actual construction of these lines absorbed capital for half a dozen years. By 1844, some two thousand miles of railway were in operation. The profits of the existing lines, considered as a whole, were scarcely high enough to generate the colossal railway mania from 1844 to 1847. The shares of a great many railways, at the beginning of 1844, were not even selling at par. About a dozen railway companies, however, had kept on paying dividends of 6 and 7 per cent right through the business depression of the late thirties and early forties, and a few had even paid steadily as much as 10 per cent. Meanwhile, capital was accumulating at a rate which dwarfed that of the 1830*s. A surplus of some £60 million of British capital, according to Jenks, entered the market each year seeking investment. In 1843 there was said to be £20 million to £25 million of capital lying idle in the City east of Temple Bar (the financial district of London). In those same years the commercial rate of discount dropped to ΐ γ 2 per cent. There was no difficulty in 1844 in converting £250 million of Government stock from 3τ/ζper cent to 3*4 per cent, and in that year the 3 per cents touched par for the first time in almost a century. With holders of funds seeking anxiously for investment possibilities, and with the main skeleton of the British rail-

T H E SETTING

15

way network not yet articulated, there occurred a most striking conjunction of capital and opportunity. The last and greatest of the British railway manias burst forth. Within a few months in 1844 lines had been projected involving an aggregate paper capital reaching the unbelievable sum of £563,203,000. All levels of society from the ranking peers down through the lower middle classes were soon infected. The belief that there was no limit to the profits to be made from railways was encouraged by the Railway Times and by the Economist. One of the few papers which, from the beginning, warned that the mania would lead to disaster was the London Times. People with capital to invest paid no heed to these warnings. In the competition for the funds of the excited investing public, sharp practices became commonplace. Promoters put down the names of prominent personages as backers of new lines, whether or not the individuals listed had ever heard of the new projects. Members of Parliament were bribed in a number of ways to speed legislation authorizing particular schemes. New companies were milked by promoters and directors, who concealed their operations by issuing false financial statements or paying dividends not out of earnings but out of capital. Promoters undertook any kind of scheme that would catch the public eye. Lines were not planned with any kind of overall network in mind, but simply begun in helter-skelter fashion. Promoters did not necessarily lay out the best routes between towns, nor did they always refrain from duplicating or even triplicating existing lines or schemes. The great dimensions of the railway mania of 1844-47 stand out in the following figures: out of the myriad of projects spawned in those years, Parliament passed acts authorizing some six hundred new schemes (or extensions of

16

I N V E S T M E N T IN E M P I R E

old ones). The proponents of these were authorized to raise £250 million of capital, of which they had obtained about three-fifths by 1849. T h e number of miles in operation rose from two thousand in 1844 to more than five thousand in 1849, by which time the basic lines of present-day Britain had been laid down. In their early years the railways were virtually unregulated by the Government and allowed to develop in their own haphazard, frenzied pattern. By "private" acts of Parliament, the railways were granted corporation rights similar to those for turnpikes and canals. In these acts of incorporation the railways were authorized to raise capital for specific projects and empowered to compel private persons to sell landed property needed for the railways' right-of-way. T h e only significant restriction placed on the railways was one limiting annual dividends to 10 per cent, and even that was imposed on only one line, the Liverpool and Manchester. When critics began to argue in 1836 that the railways were really monopolies and should be controlled by the state, the railway interests reacted indignantly. " T h e companies," in Clapham's words, "forgetful of the very great interference with property from which they sprang, became very sensitive about proprietary rights." Suggestions that the Government limit or revise railway rates were termed "a very extraordinary interference with property." In 1839-40 a Parliamentary committee undertook a general review of railway affairs; its positive recommendations dealt primarily with the prevention of accidents. Its work did lead, however, to the setting up of a Railway Department at the Board of Trade, and that Department exercised a measure of control over railway construction. As the greatest of the railway manias was getting under way in 1844, the

T H E SETTING

17

President of the Board of Trade was none other than William Ewart Gladstone, then a rising young Tory. Spurred on by the flood of railway projects then being presented to Parliament, Gladstone made a most determined effort to set up a system of broad state control of railways and railway finance. Gladstone himself sat as chairman of a new Parliamentary committee which called before it the outstanding railway promoters and directors of the day. These witnesses conceded that each railway was a monopoly in its own sphere and that competition among railways could not be relied on to prevent monopolistic abuses. Practically all of the witnesses supported an increase in the power of the state over the railways. George Carr Glyn, the greatest of the bankers for the railways, even declared that, if a new start were being made, he would be in favor of a state system. 11 Gladstone thereupon introduced into Parliament in June, 1844, a bill for the comprehensive regulation of all new railways (i.e., railways not yet chartered by Parliament). Its clauses would have given the Government the power either to buy up any new railway fifteen years after it had been chartered, or to alter the rates and fares of such railways which had earned 10 per cent for three consecutive years. In the latter cases, the Government was to be given authority to exert a strict and continuing control over profitable lines. All the resources of the private railway interests were mobilized against Gladstone's bill. Glyn and others now denied that railways were inherently monopolies or that railway conditions required control by the Government. Railway shares, they argued, were private property, and centralized control by the state over railways was "un-English." The laissez faire position of the railway interests was endorsed and strongly backed by the Economist, and by Cobden, Bright, and other

18

INVESTMENT IN EMPIRE

members of the "Manchester School." The railway interests made it plain to the Cabinet, headed by Sir Robert Peel, that they were prepared to provoke a Parliamentary crisis over the bill. To avoid this, the Cabinet, presumably in the person of Peel himself, put pressure on Gladstone, and the latter had to yield. All the key financial clauses in Gladstone's bill were so weakened in the course of passage through Parliament that the law as enacted was, in Clapham's term, a mere "fatuity." 12 Gladstone was much discouraged by his defeat and because of this and other important differences with the Cabinet, he resigned his office early in 1845. Headship of the Railway Department of the Board of Trade passed that year to Lord Dalhousie, the future Governor-General of India. Like Gladstone, Dalhousie struggled long and hard in 1845-46 to impose a significant degree of state control over Britain's chaotic railway system. But the opposition of the railway interests and their allies was too much for him. Another railway act passed by Parliament in 1846 was as devoid of content as its predecessor of 1844. The railways remained virtually uncontrolled right through the mania of 1844-47 and into the great commercial crash of 1847-48. Although the Cabinet could not carry out its plans to regulate railways at home, it was in a stronger position to enforce its will regarding railway affairs in Britain's greatest possession, India. All that promoters of domestic railways needed from the Government was the passage of an act of incorporation by Parliament for their particular project; and the promoters of British railways were directly and indirectly wellrepresented in the Parliaments of the 1840's. By contrast, promoters of railways for India had a much more difficult task. They had not only to obtain a Parliamentary act of

T H E SETTING

19

incorporation, but they also had to negotiate a contract governing their relations with the East India Company, the semi-public body which administered India. Further, both of these steps had to proceed concurrently to be effective, and in both of them promoters of Indian railways were, in the final analysis, at the mercy of the Cabinet in office. T h e interests presenting Indian railway bills in Parliament were much weaker than those sponsoring domestic British projects and their proposals could much more easily be blocked or killed there by the Cabinet. In their dealings with the East India Company, the promoters of Indian railways were not facing an autonomous body, but rather one which could not take a major decision without the approval of a committee appointed by the British Cabinet. This committee was known as the Board of Control, and its President was a member of the British Cabinet. Despite their seemingly weak position the promoters of railways for India early set their sights very high. They sought to persuade the East India Company to grant them railway contract terms equal, or superior, to the best obtained up to the 1840's by railway companies in western Europe, Britain, or America. In particular, they strove to make the East India Company underwrite their projects by guaranteeing them an annual dividend—that is, if the proposed railways did not earn enough in a given year to pay a dividend, then money for the purpose would have to be given to the railways out of the public revenues drawn by the East India Company from the people of India. The leading promoters of railways for India presented their demands with a boldness and self-confidence which the circumstances of their position certainly did not seem to warrant. T h e promoters, however, had one great trump card: the undeniable need of

20

INVESTMENT IN E M P I R E

the British economy in the 1840's for a speedy development of India as a source of raw materials and a market for finished goods. This card the promoters played for all it was worth. The course and the outcome of their campaign for railways upon their own terms form the central theme of this book.

NOTES 1. Times (London), June 14, 1847. The Economist, August 28, 1847, and March 26, 1859. J. B. Smith, M.P., in Hansard'» Pari. Debates, 3rd series (June 23, 1857), CXLVI, 266-82. See also: W. P. Andrew, Indian Railways (3rd ed.: London, 1848), and H. J. Habakkuk's chapter in Vol. II of the Cambridge History of the British Empire, especially pp. 775, 780. 2. Albert H. Imlah's article on "Real Values in British Foreign Trade, 17981853," underlines the need for caution in making estimates of the actual dimensions of British trade in this period. Journal of Economic History, VIII (November, 1948), 133-52. 3. Captain Robert Melville Grindlay, A View of the Present State of the Question as to Steam Communication with India (London, 1837), pp. 1-4, 23-28, 30-3 1. Grindlay's arguments were strikingly similar to those used by the mercantilists in the seventeeth and eighteenth centuries about Britain's colonial empire generally. Extracts from his pamphlet were printed in the Asiatic Journal (London), January, 1837, Part I, pp. 98-100. 4. A Letter to Lord John Russell on the Subject of Indian Railways, by "An East India Merchant" (London, 1848), pp. 113-14. 5. Draft Prospectus of the Great Indian Railway, with notes by John Chapman, October, 1844, citing a "Second Report" by Col. W. H. Sykes. Railway Home Correspondence, Series "A," Vol. I, No. 1. These are manuscript records which formerly were in the collections of the India Office, London. With the ending of that office on August 15, 1947, custody of the records passed to the Commonwealth Relations Office. 6. Hyde Clarke's series on "Railways in India," 3rd article, Railway Register (London, September, 1845), II, 178, 18 1-82. 7. See the testimony given in 1858 by Juland Danvers and Sir James Melvill before the Select Committee on East India (Railways). Pari. Papers, House of Commons, 1857-58, XIV, qq. 77-80, 226, 261, 267, 3847-49. Cf. Ηera-path's Railway Journal, VII (April 5, 1845), 493. 8. Railway Register, II (July, 1845), 3-5. See a similar argument in William Patrick Andrew's Indian Railways (ist ed.: London, 1846), p. 8. 9. Hyde Clarke, "Railways in India," Railway Register, II (September, 1845), 182; and his Practical and Theoretical Considerations on the Manage-

THE

SETTING

21

ment of Railways in India (London, 1 8 4 6 ) , p. 4. In citing the latter passage, Leland Jenks points out that Clarke expected railways eventually to raise India's wealth and capabilities "enormously above" mid-nineteenth century standards. T h a t this actually happened, Jenks observes, is hard to see; f o r the first threequarters of a century, at least, the railways destroyed more occupational opportunities than they opened. Jenks, Migration of British Capital to 1875 ( N e w York, 1 9 2 7 ) , pp. 2 2 6 - 2 7 ; and his important article on "British Experience with Foreign Investments," Journal of Economic History, Supplement IV ( D e cember, 1 9 4 4 ) , p. 75 and passim. 10. T h e remarks on British railways in this and succeeding p a r a g r a p h s are based on W . T . Jackman, Development of Transportation in Modern England ( C a m b r i d g e , 1916), Vol. I I ; L. H. Jenks, Migration of British Capital to 1875 ( N e w York, 1 9 2 7 ) , chs. ii-v; J . H. Clapham, Economic History of Modem Britain (Cambridge, 1 9 3 0 ) , Vol. I, ch. i x ; W . W . Rostow, British Economy in the Nineteenth Century ( O x f o r d , 1948) ; F. E. Hyde, Mr. Gladstone at the Board of Trade ( L o n d o n , 1934). T h e epithet " m a n i a " was, of course, the name given by contemporaries to the extraordinary preoccupation of the British business public with railways f r o m 1844 to 1847. 11. Clapham, Economic History of Modern Britain, I, 418. 12. A possible exception to this was the clause providing f o r the right of the state to purchase new railways; as enacted, the state was empowered to do this a f t e r a period of twenty-one years f r o m the date of charter of the railway.

2 Steam Navigation to India: Rise of the P. & O. Each of the presidencies of Bengal and Bombay has a pet flan of its own. We have flans comprehensive and incomprehensible; by the Red Sea route, the Euphrates route, and the Cape route. There have been schemes on paper, companies on faper, and subscriptions on paper. Besides Reports and Resolutions, Parliamentary and unparliamentary, the number of pamphlets that have issued from the press upon this subject is so vast, that probably the copies unsold and unread would afford a sufficient supply of fuel to work a steamer from Bombay to Aden against the monsoon. Asiatic Journal,

T

1839.

H E campaign of the railway promoters in the 1840's to gain the backing of the British Government and the East India Company bore a remarkable similarity to the efforts in the 1830's to persuade those same bodies to subsidize steam navigation between Britain and India. Not only was the general pattern of events similar, but identical individuals participated in the two campaigns. T o a very large extent the leading line in India, the East Indian Railway from Calcutta to Delhi, began as little more than an inland extension of the Peninsular and Oriental Steam Navigation Company (the celebrated P . & O.). Indeed, without the support and participation of leading figures f r o m the P . & O., the promoters 22

RISE OF T H E P. & O.

23

of the East Indian Railway would scarcely have been able to carry through their five-year fight (1844-49) to extract the most advantageous terms from the British Government and the East India Company. The struggle for governmental aid to steam shipping was, in many respects, simply a dress rehearsal of the later and greater campaign for the introduction of railways into India. The solid core of pressure both for steam navigation and for railways came from the great mercantile houses of London and the other leading British ports trading to India and China. Acting simultaneously with the British houses—but by no means always in harmony with them—were the mercantile firms of Calcutta, Madras, and Bombay. These British houses domiciled in India—"Anglo-Indian," as they were termed in the nineteenth century—had originally been founded chiefly by civil servants and agents of the East India Company. Many of them were agents, correspondents, or partners of the great London agency houses.1 As early as 1825, merchant houses of London and Calcutta subsidized the construction and voyage of the steamer Enterprize from Southampton around the Cape of Good Hope to Calcutta. This was only six years after the first transatlantic steam voyage in 1819, by the American steamer Savannah, and a full four years before the first crossing of the Atlantic in 1829 by a British-built steamship, the Curacoa. From the point of view of nautical innovation, the successful voyage of the Enterprize to Calcutta was a remarkable achievement. Commercially, however, the trip was an admitted failure, because it had been so expensive and had taken so long—nearly four months, somewhat longer than the time of the best sailing ships of the day. Throughout the rest of her years the Enter-prize never left the Indian Ocean, her principal em-

RISE OF T H E P . 8c O.

25

ployment being on the river systems emptying into the Bay of Bengal. 2 Although a few hopefuls later repeated—with identical results—the experience of the Enterp-ize around the Cape of Good Hope, the hardheaded Anglo-Indian merchants realized that a shorter and more profitable route would have to be found. The first alternative to be tested was the ancient and historic route via the Mediterranean and Egypt, called the "Overland" because of the necessity for a land passage from Alexandria to Suez, on the Red Sea. This route early won the staunchest support of the Government of Bombay and the Bombay mercantile community. By bringing Bombay (on the west coast of India) a thousand miles closer to England than either of the east coast ports of Calcutta and Madras, the Overland route would greatly increase Bombay's importance vis-ä-vis Calcutta, then the hub of India's political, economic, and military life. T h e Government of Bombay, which acted throughout the nineteenth century in close intimacy with the Bombay mercantile interests, pressed the East India Company in the 1820's to open up a steam route from Suez down the Red Sea and eastward across the Arabian Sea to Bombay. After repeated prodding, the East India Company reluctantly consented to supply the engine for a wooden steamer whose hull would be built and launched in the Government shipyard at Bombay. 3 This vessel, which the Bombay Government tactfully called the Hugh Lindsay after the Chairman of the Court of Directors of the East India Company, was launched late in 1829 and in the following March made a safe and speedy trip in thirty-three days from Bombay to Suez. The mail carried on this voyage reached England in a grand total of fifty-nine days, an impressively brief period for that age.

26

I N V E S T M E N T IN E M P I R E

The costs of operation were so great on this and on several later voyages of the Hugh Lindsay that the East India Company soon forbade any further steam trips to the Red Sea. Aside from the expense, the directors of the East India Company were concerned with the possible consequences of more rapid communication with India. As a vested interest long accustomed to regarding India as their private preserve, they feared all changes, particularly any which might speed up greatly the operations of British merchants and other private citizens in India. 4 The Company's worst fears were soon justified. Before committees of the House of Commons in 1832, and again in 1834, the merchants pressed home their case for the opening of subsidized steamer service between Britain and India. The conclusions of the House of Commons' 1834 Committee on Steam Navigation to India constituted a sweeping paper victory for the proponents of the Overland route. The Committee resolved that steam communication with India via the Red Sea was practicable, that under proper arrangements the initial expenses could be greatly reduced, and that a regular service should be opened, the net costs of which should be defrayed equally by the British Government and the East India Company. 8 To the dismay of the advocates of the Red Sea passage, the committee simultaneously supported an alternative route from Alexandretta, on the Syrian coast, overland to the Euphrates, and then down that river for one thousand miles to the Persian Gulf, and on to India. The Euphrates route, as yet unsullied by the fumes of any steamer, had originally been placed before the committee with the warm endorsement of the East India Company. High considerations of

R I S E O F T H E P . & O.

27

state were frankly urged by the East India Company, in its strange appearance as an agitator for this untried "innovation." British official circles were then in the midst of one of their periodic nineteenth-century panics that the great Russian Bear was about to waddle across the Near and M i d dle East, preparatory to the seizure of India. T o the East India Company and to the British Government it was essential that a strong government both preserve order and keep Russia out of the whole area from Syria through Baghdad to the Persian Gulf. A steam route along the Euphrates, it was authoritatively stated, would serve to counteract Russia, by giving Britain " a vested interest and a right to interfere."® T h e mercantile houses generally looked at the Euphrates proposal coldly, considering it far inferior to the Red Sea line; the more cynical of them viewed it as yet another effort of the East India Company to defer any effective action. T h e British Government and the East India Company did not have much success in their efforts to operate steamers on the Euphrates in the years 1 8 3 5 - 3 7 ; in fact, one of the tiny vessels sent there capsized in a sudden storm with the loss of almost all hands. Meanwhile the supporters of the R e d Sea service were busy capitalizing on the hearty endorsement o f their route by the 1834 Commons' Committee. Local steam committees in Calcutta, Madras, and Bombay filed petition after petition with signatures in its favor, hired or supported lobbyists in London, and put out pamphlet after pamphlet. Partly as a result of this pressure from the Indian ports, as well as from mercantile circles in Britain, arrangements between the East India Company and the British Government were announced in August, 1835, f o r adding two large steamers to the fleet of the Indian Navy (the name used after

28

INVESTMENT IN E M P I R E

1830 for the Bombay Marine). To the delight of Bombay and the discomfiture of Calcutta, the two new vessels were to be used solely on the Bombay-Suez run. 7 For their part, the London merchants in 1836 formed a London Steam Committee which soon proceeded to set up an East India Steam Navigation Company. The new company proposed to link Britain via the Suez-Overland route with all the Indian ports, China, and Australia. The reaction in Calcutta to this plan was quite mixed. While looking favorably on the broad aims of the new company, the Calcutta merchants and officials recoiled from the naming of Bombay as the company's initial terminus. The Calcutta community had lost all patience with the existing system of communication between Bengal and Britain, which involved either a long, tedious sail around Africa, or breaks in the journey at Bombay, Suez, Alexandria, Malta, and Gibraltar. In the interests of their Presidency, Bengal—the richest and most important in India—they proposed what came to be known as the "Comprehensive Plan" of communication via the Red Sea, whereby one great company would link Britain with the three chief ports of India, including Calcutta. The Comprehensive scheme was regarded favorably by the British Government, now chastened somewhat by the failure of the Euphrates expedition, but it was adamantly opposed by the East India Company, which early in 1837 placed its two new steamers on the Bombay-Suez run. Besides pointing to the heavy expenses incurred in providing these two vessels, the East India Company argued that Calcutta as well as Bombay would benefit by them because postal runners regularly made the journey between the two cities in a fortnight's time. 8 With little support from India and strong opposition from

RISE O F T H E P . & O.

29

the East India Company, the young East India Steam Navigation Company soon foundered. Its sponsors, the London Steam Committee, did not withdraw from the field but strove to find a common platform on which the Calcutta interests would join them. Great progress was registered in October, 1838, when most of the leading India houses in London provisionally accepted a revised Comprehensive Plan submitted by the chief London lobbyist for the Calcutta interests. A committee of outstanding East India merchants and bankers topped by Timothy A. Curtis, Governor of the Bank of England, was appointed to organize a new steamship company. They scored a triumph in the following April when the Calcutta interests confirmed their support of the project and authorized remittance of their funds to the Curtis group." Having secured the cooperation of Calcutta, the Curtis group now sought from the British Government and the East India Company an annual subsidy totaling £100,000. At the same time they desired to secure for their shareholders the privilege of limited liability, which could be obtained with the least expense through a royal charter. Without the subsidy and the charter, there was little chance of meeting the heavy costs and hazards involved in the operation of steam vessels to India. T h e East India Company bitterly resisted the pressure brought upon it by the Government—some of whose members supported the Curtis proposal—and by the powerful merchants led by Curtis, some of whom had previously taken leading roles in breaking the East India Company's monopoly of trade with India and China in 1813 and 1833 respectively. T h e Company pointed to the additional steamers which it was steadily adding to the Bombay-Suez line, and to its decision to place its entire navy on a steam basis. Better arrangements were also announced for handling

30

I N V E S T M E N T IN E M P I R E

mail in the Mediterranean section of the complicated England-to-India service.10 In reply, the Comprehensives asserted that the service as a whole was mismanaged, highly irregular, and at times quite unsafe. These sweeping charges were based on a series of blunders and misfortunes in the Company's Bombay-Suez service in 1838-39. In June, 1838, one batch of mail from Calcutta was delayed so long at Bombay that it took 135 days to reach London; the next batch from Calcutta was again delayed at Bombay, and finally despatched via the Persian Gulf route, where Arabs later captured part of it and scattered the letters over the desert. The Calcutta community's vexations and disappointments reached their climax in the summer of 1839 when, upon two successive occasions, the East India Company's steamers left Bombay for Suez without waiting for mails known to be en route from Calcutta. Indignation thereupon mounted to unprecedented heights, leading on October 5, 1839, to the largest meeting ever held in Calcutta on steam navigation. A fiery petition was adopted, pressing the Governor-General to urge upon the East India Company the wisdom of concluding an immediate agreement with the Curtis group for conveying the mails between Britain and India. 11 At this critical moment, when a new level of unified action between the London and Calcutta mercantile interests seemed to have been achieved, the ranks of the Calcutta interests were split wide open by the actions of Τ . Ε. M. Turton, who had previously been one of the most active promoters of the Comprehensive project. Although denying any intention of injuring the Comprehensive scheme, and in fact professing his ardent support of it, Turton announced that the time had come for more than "mere talk" and "mere complaint." H e

RISE OF T H E P. 8t O.

31

suggested some immediate action, such as the obtaining of a steamer and sending it back and forth on a quarterly run f r o m Suez to Calcutta, as a sort of "Precursor" to the Comprehensive scheme. H a d not the Steam T u g Company, then operating on the Hooghly River at Calcutta, begun with only one vessel? "Cannot we begin with one steamer?" Turton had not confined himself to "mere talk." Even prior to the meeting of October 5, he now revealed, he had persuaded a number of Calcutta merchants to join him in communicating with "parties in England, authorizing them to buy, if possible, and if not, to build, a vessel that could triumphantly face any monsoon." 12 In the aroused state of feeling in Calcutta, Turton and his fellow Precursorites succeeded in obtaining a measure of support, and later even formed a company of their own. T h e leaders of the Comprehensives vehemently attacked Turton's actions, claiming that they confused the issue and split the broad comprehensive scheme into fragments. Both sides appealed to Curtis in London for his endorsement. While awaiting his response, each group strove for the maximum support in Calcutta. In the course of the intense struggle that followed, Turton proclaimed "open war against the Comprehensive [s]." T h e bulk of the Calcutta community, however, refused to follow him, and at nearly every critical test in 1840 voted him down. They could not understand what useful purpose would be served by a lone steamer traveling the long Calcutta-Suez run, when the great desideratum was regular, dependable service provided by a whole fleet of vessels.13 Confirmation of the majority view came from Curtis in a letter to the Precursors dated April 4, 1840, wherein he completely repudiated Turton's proposal as a "false step" which

32

I N V E S T M E N T IN E M P I R E

threatened to frustrate the entire Comprehensive scheme. H e warned that "the effect of the agitation of this Precursor question has undoubtedly been to damp the spirits and zeal of many friends of the Comprehensive plan, as they apprehend the clashing of the two will make them both fall to the ground." In closing, he demanded the immediate abandonment of the Precursor scheme, failing which, he would himself withdraw f r o m the steam navigation field. Curtis did not have to carry out his drastic threat at this time because at an important meeting in July, 1840, the Calcutta steam interests rejected Turton's position, reaffirmed their support of Curtis, and again authorized the transmission of their funds to Curtis. 14 T h e same mail which brought Curtis' letter also carried the East India Company's reply to the great Calcutta petition of October, 1839. T h e Honourable Company refused to consider any changes in its much-criticized Bombay-Suez run, though it proclaimed its readiness to encourage "any welldevised measures, by which the established means of communication might be extended. . . ." T h e steps which the British Government and the East India Company now took separately, but not unconnectedly, to improve the steamer service between Britain and Egypt and between Suez and India, undermined the plans of both the Comprehensives and the Precursor!tes, and brought into being, under its present name, the far-rangiqg P . & O. Line (Peninsular and Oriental Steam Navigation Company). 1 5 T h e original founder and chief financial backer of the Peninsular company was Richard Bourne, a Dublin stagecoach proprietor who held the contract for conveying the mails in Ireland. Bourne also owned the Dublin and London Steam Packet Company which, at the inducement of the

RISE O F T H E P . Sc O.

33

Spanish Minister to London, had opened up a service in 1835 to the Iberian Peninsula. As London agents for the Peninsular service, Bourne appointed the firm of Willcox and Anderson, who were then engaged in the shipping commission business and were part owners of several small sailing vessels trading chiefly with Vigo and Lisbon. Out of the combined lines grew the Peninsular Steam Navigation Company, with Willcox and Anderson serving as the two managing directors. Brodie McGhee Willcox was half-Scottish and half-English, while Arthur Anderson was an Orkney Islander whose inexhaustible energy was matched only by his outstanding competence in the harsh practicalities of business operation. 16 In 1837, at the suggestion of Lord William Bentinck, M . P . (previously Governor-General of India f r o m 1828 to 1835), the House of Commons appointed a Committee on Steam Navigation with India to follow up the work of the similar Committee of 1834. Bentinck himself was named Chairman of the 1837 Committee. H e is reported to have secured useful data from the Peninsular Company on its experience with steam vessels and to have suggested that it enter the India service. T h e Peninsular Company declined, it is said, because they had their hands f u l l that year obtaining a contract from the British Government for the conveyance of the mails as far as Gibraltar, and establishing that service on a sound basis.17 Three years later, in 1840, Willcox and Anderson were ready for new oceans to conquer. While Curtis was trying to disentangle the Calcutta Comprehensives and Precursorites, the British Government by-passed the India interests and inquired of the Peninsular Company whether it would be interested in handling the mails on the first half of the Britain

34

INVESTMENT IN E M P I R E

to India service, that is, as far as Alexandria. T h e Peninsular Company was eager to take advantage of this opportunity to obtain a second lucrative government mail contract, particularly since the first one in 1837 had "saved the Company f r o m failure and possible extinction." T o obtain the additional vessels needed for the anticipated extension of its service to Alexandria, the Peninsular Company persuaded the Liverpool owners of a crack new transatlantic steamer, appropriately called the Liverpool, to fuse with them; the Company also arranged to buy another large steamer then being built at Glasgow for the transatlantic run. 18 Nor did the P . & O. see why it should limit itself only to the first half of the Britain to India service, when the second half was being conducted so unsatisfactorily by the East India Company's steamers. T o clear the channel for its entry into the Suez-to-india service (the "Oriental," as it was called), the Peninsular Company appealed to the Comprehensives and Precursorites to drop their individual schemes. Both groups were invited to join their forces and funds to those of the Peninsular. But the hard-headed Peninsular managers did not wait for their predecessors and rivals to come to terms. In April, 1840, they announced their prospective entry into Asian waters by reorganizing themselves under the new style of Peninsular and Oriental Steam Navigation Company. Partly as an added inducement to the India houses to enlist under their banner, they designated as Chairman of the P . & O. Board one of the most prominent and influential India merchants of the day, Sir George Gerard de Hochepied Larpent. T h e head of the recently founded East India and China Association, Larpent was also a London agent of Turton's Precursorites. 19 T o Curtis and the surprised Comprehensives, the P . & O.

RISE OF T H E P . & O.

35

rose up as a new colossus which had summarily adopted their plan and now threatened them with complete displacement. T h e London Comprehensives, some of whom had been working steadily for steam navigation with India ever since the voyage of the Enterprise in 1825, did not yield easily to the newcomer. T h e y struck back hard with the public announcement in July, 1840, that they had finally formed their own company, the East India» Steam Navigation Company (this is to be carefully distinguished f r o m its short-lived predecessor, the East India Steam Navigation Company of 183637). Curtis became Chairman of the Board. Its Secretary was thirty-two-year-old Rowland Macdonald Stephenson— later to be the outstanding pioneer of railways in India—who f r o m 1836 to 1840, as Secretary of the London Steam Committee, had been assimilating the hard lessons of business promotion. I n defiance of the P . & O., Curtis and his company went ahead with their plans for obtaining a charter of incorporation under which they intended to operate a fleet of vessels to the East; they despatched to Calcutta, in October, 1 840, the first of what they hoped would be a long line of steamers. Turton and his h a n d f u l of backers in Calcutta meanwhile had formed the Eastern Steam Navigation Company and placed an order in Glasgow f o r a steamer to be called, somewhat tardily, the Precursor.20 Despite these activities of its rivals, the P . & O. drove ahead. As the P. & O.'s bid for the mail service to Alexandria proved the lowest one submitted, the Government, in August 1840, awarded it a contract which carried an average annual payment of £34,200. T h e Comprehensives had known that they stood little chance of interfering with the P . & O.'s efforts to get the Alexandria mail contract, but they mustered all their strength to block the P . & O. f r o m obtaining a royal

36

INVESTMENT IN E M P I R E

charter of incorporation with limited liability. Under such a charter, the P . & O. would receive authority to sell shares with limited liability to the public, in order to raise capital for their service to India. Such a charter virtually amounted to a Government endorsement of any project for which it was given. For a steam service to the East, no more than one royal charter was likely to be granted. If the P. & O. obtained one, its rivals could not hope to compete with it, for then the P. & O. would be operating with limited liability, while the liability of shareholders in rival companies would be unlimited. Despite their influence and wide connections, Curtis and his associates failed to hold back the P. & O. On the last day of December, 1840, the royal seal was placed on the P . & O.'s charter of incorporation. A few weeks later, the East India Company authorized the P. & O. to undertake a special service f r o m Suez to Calcutta, and offered the company a special subsidy of £20,000 per year for the purpose. As the London Times remarked, the Comprehensive scheme was at last to be carried out, "but by means differing from those at first contemplated. . . ." 21 T h e East Indian Steam Navigation Company buckled and collapsed under these heavy blows. Curtis withdrew entirely from the field, but not without a somber message to his Calcutta supporters: T h e Precursor was the apple of discord thrown in to divert the people of India from the main and great object, and unhappily succeeded too well. . . . W h e t h e r any secret motive was lurking under the plausible pretext of agitating the precursor question; whether any underhanded plot was laid in England, by which commission or advantages of a pecuniary nature were to be obtained, I know not ; but it seems very remarkable, that no sooner had the question of a comprehensive plan assumed a substantial form, than up started a new idea to perplex and mislead the minds of those who, though anxious

37

RISE OF T H E P. & O.

for the accomplishment of the great point, give t h e m s e l v e s little or no trouble about the best m a n n e r of carrying it into execution. . . . " T h e creeping comprehensive," as it w a s sneeringly called, w a s certain of its success, had the people of India been true to their text, instead of having a l l o w e d themselves to be misled by plausible harangues. If the people of India

[i.e., the British m e r c h a n t s ]

second the

Oriental

C o m p a n y [ P . & O . ] , and discard us, I think they n e v e r deserve to have friends in their service again. 2 2

T h e P . & O. took Curtis' malediction in their stride; it was neither the first nor the last to be bestowed on them in their long and turbulent career. 23 Nor did T u r t o n in Calcutta appear visibly affected. W h e t h e r Curtis' charges against T u r t o n were more than the parting curse of a disappointed and ruined promoter is difficult to establish f r o m the available evidence. 24 W h e t h e r or not the Calcutta and other Anglo-Indian merchants shared the f u l l vehemence of Curtis' attitude toward the P . & O., there is little doubt that they abstained from giving it financial support. As late as 1847, three-quarters of the P . & O. shares were held in Ireland, presumably by Richard Bourne and his business allies. In time, the P . & O.'s efforts to absorb both the Comprehensives and the Precursorites succeeded, but only a f t e r interminable squabbles. In the course of these, Sir George L a r p e n t resigned his post as chairman in 1842 and was never again associated with the P . & O. Hera-path's Railway Journal and Commercial Weekly, one of the outstanding business periodicals of the day, attacked the P . & O.'s business methods so repeatedly and so vitriolically that the P . & O . brought suit against it f o r libel. U n d e r the energetic management of Willcox and Anderson, the P . & O. continued to expand. N e w services were rapidly extended to Singapore and China. By the end of the 1840's, the P . & O's grip on the Indian Ocean trade was so

38

I N V E S T M E N T IN E M P I R E

great that its few and fading rivals looked upon it as a Government-sponsored colossus which was threatening to paralyze other British maritime enterprise in the East. 25 Thus the twenty-five year campaign for the opening of steam navigation to India ended in the triumphant appearance of the modern P . & O. W h e n the merchants of Calcutta, Bombay, London, and Liverpool first endeavored in the 1820's to open such a service, the East India Company displayed its customary reluctance to sanction or support any "innovation." This resistance of the East India Company simply had to be overcome, if the plans of the Anglo-Indian merchants were to have any chance of success. For the support of the East India Company, together with that of the British Cabinet, was essential to the obtaining of lucrative mail contracts, other governmental subsidies, and the right of incorporation with limited liability. T o secure these, the promoters of steam shipping knew that they had to do much more than show that they would be able to run ships and maintain a dependable service. They had to work up a campaign of political pressure so strong that both the East India Company and the British Cabinet would accede to their wishes. T h e Anglo-Indian merchants early won the support of the Cabinet, but it was not until the end of the 1830's that they made the East India Company yield. W h e n the East India Company did give way, it was not to the original promoters who had borne the hardships of the fifteen-year campaign f o r steam shipping. T h e Directors of the East India Company were not anxious to strengthen their longstanding opponents, the Anglo-India mercantile houses (which had done so much to break the East India Company's monopoly of British trade with India and China). Rather, taking advantage of the dissensions and controversies which

RISE O F T H E P . & O.

39

separated Bombay merchants from Calcutta merchants, and Calcutta merchants from London merchants, the East India Company bypassed them all and awarded its coveted support and contract to a complete newcomer to the eastern seas, the P. & O.

NOTES 1. T h e mercantile houses of early Victorian India are described in a Sketch of the Commercial Resources and Monetary and Mercantile System of British India (London: Smith, Elder, and Co., 1837), pp. 62-92; and in the "Commercial Morality and Commercial Prospects of Bengal," Calcutta Review, LX ( 1 8 4 8 ) , 163-89. A valuable account of the operations of the agency houses both of India and of Britain was given in the testimony of Sir George Larpent before the House of Commons Select Committee on Manufactures, Commerce, and Shipping, pp. 126-46, Pari. Papers, 1 833, VI, especially 140 S. Some suggestive remarks on the British agency houses and on their Anglo-Indian correspondents are made by H. J. Habakkuk in the Cambridge History of the British Empire, II, 751-805. For the late 18th century setting in which many of the Anglo-Indian houses were founded, the authoritative work is Holden Furber's John Company at Work (Cambridge, Mass., 1 9 4 8 ) ; further relevant material is furnished by C. H. Philips in his East India Company, 1784-1831 (Manchester, 1940). 2. W. S. Lindsay, History of Merchant Shipping and Commerce (London, 1876), IV, ch. ix; H. L. Iloskins' British Routes to Irtdia (London, 1928), ch. iv. 3. Other steam voyages around the Cape of Good Hope are mentioned in Hoskins' British Routes to India, p. 96n; pressure f r o m Bombay for the Overland route is described in Lindsay, op. cit., pp. 343-55, and in Hoskins, op. cit., ch. v. The work of the Bombay Marine (called a f t e r 1830 the "Indian Navy") is detailed by C. R. Low, History of the Indian Navy (London, Richard Bentley and Son, 1877), I, 520-3 1. 4. T h e voyage of the Hugh Lindsay is described by its Commander, J. H. Wilson, in his pamphlet Facts connected -with the Origin and Progress of Steam Communication between India and England (London, 1 8 5 0 ) ; the role of the Bombay merchants and officials, organized in the Bombay Steam Committee, is stressed by one of them, Robert W. Crawford, in his letter published in the London Times, November 23, 1869. 5. Report from the Select Committee on Steam Navigation to India, Pari. Papers, 1834, XIV, 3-4. 6. Ibid., pp. 3-4; f e a r of Russia was voiced by the novelist, Thomas Love

40

I N V E S T M E N T IN E M P I R E

Peacock, who held the post of Senior Assistant Examiner in the East India Company and was the latter's expert on steam navigation. Peacock's testimony is illuminating (ibid., Minutes, pp. 1-13) ; his desire f o r a "right to interfere" is revealed in answer to Q. 67. A heavily condensed treatment of the 18th century background of British, French, and Russian rivalry in the Middle East in its bearing upon India is given by A. L. P. Dennis, Eastern Problems at the Close of the Eighteenth Century (Cambridge, Mass., 1901). Dennis' fifty-page bibliography affords a convenient listing of the older work on this subject. Subsequent 20th century literature by Charles-Roux and others is too immense to record here. 7. T h e reaction of Calcutta and Madras to the Euphrates proposal and their campaign f o r priority to the Red Sea route fill many pages of the Asiatic Journal; particularly instructive is the article "Steam Communication with India," Asiatic Journal, February, 1837, Part I, pp. 89-104. The earliest and perhaps the outstanding pamphlet on the subject is Captain Robert Melville Grindlay's A View of the Present State of the Question as to Steam Communication with India by the Red Sea (London, 1837), affords a convenient summary account; his appendixes reproduce some valuable documents, many of which had been collected in Grindlay's pamphlet. 8. T h e prospectus of the East India Steam Navigation Co., dated October 1 1, 1836, is reprinted in Grindlay, o f . cit., pp. 74-78; the reaction of the Bengal Steam Committee to the naming of Bombay as terminus is given in a letter of December 26, 1836, reprinted in Lardner, o f . cit., pp. 99-107; and also in the Asiatic Journal, June, 1837, II, 105-8. The Bengal Committee, in this letter, clearly referred to the "comprehensive scheme" (to run via the Red Sea) which they supported vigorously against the London Committee's proposal to end operations, in the initial period, at Bombay. The President of the Board of Control, Sir John Hobhouse, early in 1837 tried in vain to get the East India Company to support the principle of a Comprehensive service to all three of India's leading ports: statement of Hobhouse before the House of Commons' Select Committee on Steam Communication with India, Pari. Pafers, 1837, VI, 20. 9. T h e opposition of the East India Company to the East India Steam Navigation Company of 1836-37 is clearly revealed and documented in Hobhouse's statement to the 18 37 Commons' Committee on Steam Communication with India, o f . cit., pp. 15-18. Hobhouse also brought out the fact that the British Cabinet was opposed to the scheme in the form in which it had been presented, though they desired to see a Comprehensive service established; o f . cit., pp. 16-18. T h e activities of the Curtis group are chronicled in the Asiatic Journal, November, 1838, II, 238-39 and August, 1839, II, 247. 10. Steam Communication between Suez and Bombay, etc., Pari. Pafers, 1850, LIII, 1-42; cf. Hoskins, o f . cit., and Lindsay, o f . cit., IV, ch. ix. 11. Asiatic Journal, January, 1840, II, 7-14.

RISE O F T H E P . & O.

41

12. Ibid., p. 11. Steamers from Calcutta, strange as it may seem, were in a better position to make the run to the Red Sea during the southwest monsoon (June to September) than were steamers from Bombay. By swinging south around Ceylon and then following a westerly course toward the African coast, the Calcutta steamers would be pushed north toward the Red Sea by the monsoon. Steamers from Bombay, on the other hand, had to face the full force of the monsoon. This they were unable to do, until later in the century vessels of much greater horsepower than the first steamers were put into use. 13. Asiatic Journal, May, 1840, II, 3-5, and November, 1840, II, 196-98; see also January, 1840, II, 13; February, 1840, II, 99-104; March, 1840, II, 203-4; April, 1840, II, 3 39-40; June, 1840, II, 95-97; August, 1840, II, 3 10-11; September, 1840, II, 1-2; and December, 1840, II, 257-58. 14. Curtis' letter of April 4, 1840, was published in the Asiatic Journal, September, 1840, II, 1-2. The Calcutta meeting of July 28, 1840, at which support for Curtis was reaffirmed, was reported in the Asiatic Journal, November, 1840, II, 196. 15. Asiatic Journal, September, 1840, II, 1. 16. Lindsay, o f . cit., ch. x ; R. J. Cornewall-Jones, The British Merchant Service (London, 1898), pp. 146-49; Adam W. Kirkaldy, British Shiffing: Its History, Organization and Imfortance (London, 1919), pp. 72-75 ; John Nicolson, Arthur Anderson, a Founder of the P. & O. (Paisley, 1914). 17. Boyd Cable (pseud, for Ernest Andrew Ewart), A Hundred Year History of the P. & O. (London, 1937), pp. 42, 78. 18. There is an interesting interconnection here among the East India Company, the Cunard Line, and the P. & O. Samuel Cunard was the Canadian agent for the East India Company. He was influential enough to gain, in 1839, the much-coveted British Government subsidy f o r carrying the North Atlantic mails by steamship. It was several of the rivals of Cunard—like the Trans-Atlantic Company of Liverpool—who, after their defeat, threw in their lot with the P. & O. and helped it to get going in the East. Cf. Boyd Cable, A Hundred Year History of the P. & O., p. 66; C. R. Fay in the Cambridge History of the British Emfire, II, 393. 19. Boyd Cable, A Hundred Year History of the P. & O., pp. 65-77; Arthur Anderson, Steam Communication with India (London, 1840), fassim. Larpent's career as an outstanding East India merchant deserves a full-scale biography. His operations span almost the entire half-century from 1800 to 1850. The firm of Cockerell and Co. (in which he was originally a junior partner) was one of the greatest East India houses of that age. Larpent himself was active in the successful campaigns to end the East India Company's monopoly of trade with India and, later, with China. His firm was one of the first to back the drive for the opening of steam navigation between Britain and India. He himself was a founder and served as first chairman of the East India and China Association, the organ of the private British mercantile houses trading with the distant East. Larpent's other business interests included British railways, docks, insurance,

42

I N V E S T M E N T IN E M P I R E

Mauritius sugar, and extensive overseas trade. A powerful figure in the business world of London, Larpent was also respected by the politicians of the day. In 1841, he campaigned successfully as Whig candidate to represent a Nottingham Constituency in Parliament. Even a f t e r his bankruptcy in 1847, he continued to associate with the great figures of his time. For Larpent's career, see his testimony before the House of Commons' Select Committee on East India Produce, Pari. Pafers, 1840, VIII, qq. 2381-83, 2455-68; Rail-way Register, V (April, 1847), 113-14} Lord Broughton's (Sir John Hobhouse) Recollections, VI (London, 1911), 36. 20. The Mining Journal, Railway and Commercial Gazette, X ( 1 8 4 0 ) , 217, 225; Herafath?s Railway Journal, II ( 1 8 4 0 ) , 555; Asiatic Journal, I I (November, 1840), 240, and II ( M a y , 1841), 9 ; Testimony of Andrew Henderson before the Select Committee on Contract Packet Service, pp. 102-4, 151-52, Pari. Pafers, 1849, X I I ; material on the complicated story of the Eastern Steam Navigation Company is contained in the Asiatic Journal, II (February, 1840), 4 9 3 ; also in Herafath's Railway Journal, IV ( 1 8 4 2 ) , 534. For Rowland Macdonald Stephenson, see below, ch. iii. 21. Arthur Anderson, "A Statement of the Principal Facts connected with the Establishment and Extension of Steam Communications with India, China, etc., by the Peninsular and Oriental Steam Navigation Company," in Second Report from the Select Committee on Steam Communications with India, etc., Pari. Papers, 1851, X X I , Appendix No. 4. Boyd Cable, o f . cit., p. 251. London Times, March 22, 1841, as cited in Asiatic Journal, II (April, 1841), 355. 22. Asiatic Journal, II (January, 1841), 1-2. Early in February, 1841, Curtis declared himself insolvent. Mining Journal, XI ( 1 8 4 1 ) , 55, 59. 23. C f . Η. M . Trivedi, "India's Merchant Marine," Far Eastern Survey, XVIII (New York, March 9, 1949), 49-52. 24. There seems little doubt that Turton was constitutionally capable of such action, f o r his later defalcations as 'Registrar of the Supreme Court at Calcutta moved the Governor-General in 1849, Lord Dalhousie, to express his "indignant detestation" of T u r t o n ' s conduct and to record the desire "of sending to merited punishment in Botany Bay this worst of all robbers, a robber of the widow and the fatherless." Minute of Governor-General Dalhousie, J u l y 20, 1848, concurred in by three Members of Council—"Registrar of the Supreme Court of Calcutta," Pari. Pafers, 1849, X X X I X , 14-15. Turton's position as Registrar was such that, to the intense frustration of the Government of India, there was no legal means by which punishment could be inflicted on him. T h e Governor-General in Council considered Turton's crimes so enormous that they seriously weighed a proposal to enact against him a special Bill of Pains and Penalties, under which he could have been punished without trial in a regular court. 25. HerafatVs Railway Journal, IV ( 1 8 4 2 ) , 534; V ( 1 8 4 3 ) , 1234-37; I X ( 1 8 4 7 ) , 644-45; Asiatic Journal, March, 1841, I I , 252; Boyd Cable, A Hundred Year History of the P. & O., p. 6 6 ; Select Committee on Contract

RISE OF T H E P. & O.

43

Packet Service, Testimony of Andrew Henderson, Pari. Papers, 1849, X I I , 102-111, 113 and 151. See also Pari. Papers f o r 1850, Vol. LIII, containing Correspondence between Η. M. G. and the Ε. I. Co., and also the P. & O. regarding Steam Communication between Suez and Bombay, Suez and Calcutta. . . .

3 From Steam Navigation to Steam Railways: R. M. Stephenson In 1840, the success of the Peninsular and Oriental Company convinced him· [Λ. M. Stephenson] that the time was rife for a yet more extended project. . . . He conceived it possible to girdle the world with an iron chcnn, to connect Europe and Asia from their furthest extremities by one colossal Railway. A portion of this scheme is still too far in the future for us to do more than indicate its vastness. The remainder, all that falls unthin our scope, was to connect so much of the two continents as should enable a locomotive to travel from Calcutta to London with but two breaks, one at the Straits [of Dover], and one at the Dardanelles. Calcutta Review, 1856. H E pattern of the struggle for steam railways in India, which followed hard on the close of the campaign for steam shipping, reproduced all but one of the chief features of its predecessor} that exception, however, concerned the most decisive feature, the outcome. At the end of the railway campaign there was no such dramatic reversal as that which left Curtis and his group high and dry. T h e course of this campaign and the reasons for the difference in outcome form the principal subject of the present chapter and of the three which follow it. 44

ROWLAND Μ. STEPHENSON

45

Active campaigning for railways in India began soon after the P. & O.'s success in obtaining governmental support for its line to the east. T h e key figure in this shift from steam ships to steam railways was Rowland Macdonald Stephenson. T o him, shipping lines and railways were all part of his plan for a vast communications scheme which would eventually link Britain not only with its great eastern empire, India, but also with that other immeasurable market, China. Stephenson was not the first to talk of railways for India. Railways for India were "in the air" in the early 1840's, and some preliminary notions had even been broached in the 1830's. 1 Rather, Stephenson's importance lay in his clear grasp of the need to set up a railway network designed for India as a whole, and in the unrelenting zeal with which he strove to carry through the most important line of all, that from Calcutta up through the heart of northern India to Delhi. Calcutta was then the capital of India, the seat of government. It was India's leading port, the foremost center of British commerce with India, and the headquarters of the richest and most important British firms in the country. T h e Ganges Valley, for which Calcutta served as the port of entry, had the largest concentration of India's population and of British and Indian military forces. Stephenson was the founder of the Calcutta-Delhi line and, indeed, the outstanding pioneer of Indian railways. As such, a few words on his background and early history are in order. T h e Stephenson family had been engaged in commerce and interested in India for several generations before the birth of Rowland Macdonald in 1808. Early in the eighteenth century, one of his ancestors, Edward Stephenson, had gone from Calcutta to Delhi on behalf of the East India Company, to arrange its first commercial treaty with the

46

INVESTMENT IN E M P I R E

Court of the Moguls. Stephenson's father, after whom young Rowland had been named, was a well-known and respected figure for most of his life. H e was a partner in the business firm of Remington, Stephenson, Remington, and Toulmin; owned an estate at Rum ford; was treasurer of St. Bartholomew's Hospital; and a Member of Parliament for Leominster in 1828. In that year he attracted a certain amount of notoriety by absconding to Savannah, Georgia, with all the cash of his firm. The scandal connected with this incident would seem to have aroused in his namesake a determination to redeem the family's good name. Young Rowland Macdonald Stephenson went to Harrow and then, in 1830, became a civil engineer. Like two of his brothers (who served as East India Company officials), he early became interested in India. H e is said to have become, in 1836, Secretary to the London Steam Committee (see above, p. 28) j in 1840 he was the Secretary of the shortlived rival to the P. & O., Curtis' East Indian Steam Navigation Company. After the P. & O.'s victory, Stephenson turned his attention to preparing the way for the introduction of railways in India. When he made his first private proposals to the East India Company in 1841, he was rebuffed as the proponent of "a wild project"; the somber view of the Company was that "India was hardly prepared for railways." H e made the acquaintance of engineers serving the East India Company, but his arguments for railways did not convince them either. In 1842 he took to journalism, soon becoming editor of a new London magazine, the Monthly Times, which was intended to furnish Englishmen in India with a convenient summary of what was happening back home. For a while he also served gratuitously as Secretary of the P. & O. (for this work, and for his later activities on

ROWLAND Μ. STEPHENSON

47

behalf of Indian transport generally, the P. & O. in 1845 awarded him a special grant of £200). Throughout these years Stephenson never gave up his chief objective, to convince the East India Company to underwrite railways in India. Rather than continue his unsuccessful efforts at home, he sailed in 1843 for Calcutta, to argue his case in the field with the officials of the Government of India. 2 Stephenson's work in India was a classic example of successful promotion. Finding that knowledge of railways was quite scanty, he refrained from a hasty publicizing of his own project. Instead, he made the public railway-conscious. From time to time he "published in the native as well as in the English local journals, the reports of the various European railway companies, with statements of their expenditure and income, the traffic in goods and passengers, as well as the general effect which has been observable in every district through which a line of railway has been laid down." 3 Parallel with this educational activity, Stephenson systematically collected all available data and documents on the routes between Calcutta and Mirzapur, that "great central entrepot for merchandize and produce of all descriptions." H e made the acquaintance of the leading merchants of Calcutta, and gained the confidence of the senior officials of the Government of India and of the Presidency of Bengal. After having thus established himself as a responsible promoter, and having diffused railway knowledge throughout the Presidency, Stephenson proceeded to lay his own proposal before the expectant public of Bengal. In the Englishman of Calcutta, January 1, 1844, Stephenson outlined no less than six major lines, which would pass through all the chief areas of military and commercial importance, and link the main cities of the country. His chief

48

I N V E S T M E N T IN E M P I R E

project, of course, was the line from Calcutta through the coal fields to Mirzapur and Delhi, with an extension onward to Ferozepore on the banks of the Sutlej River in the Punjab. This line would be bisected at Mirzapur by a line coming up from Bombay via the valley of the Nerbudda River. H e also proposed a line from Bombay across the Indian peninsula through Hyderabad to the coast of the Bay of Bengal, along which it would swing up to Calcutta. Near Hyderabad, a branch from this trans-Indian line would drop down through Cuddapah to Madras. In its turn, Madras would be linked to the Malabar coast by a line passing through Bangalore and Mysore to Calicut. Finally, Madras would be connected with the extreme southern tip of India, via Arcot, Trichinopoly, and Tinnevelly. 4 This article, which may be termed the reveille of Indian railroads, displayed Stephenson's characteristic breadth of outlook. At a time when the whole concept of railways was new in India, a lesser man might have confined himself solely to the great project of a line from Calcutta to Delhi and the Punjab. Not R. M . Stephenson; he reduced this mere twelvehundred-mile line to its proper proportions by putting forward, at the outset, a basic network for the whole country comprising some five thousand miles. At the same time he disarmed possible critics by frankly stating that his proposals were tentative and subject to revision as fuller information became available. H i s account of the basic considerations which guided him in the selection of lines is highly instructive. " T h e first consideration is as a military measure for the better security with less outlay, of the entire territory, the second is a commercial point of view, in which the chief object is to provide the means of conveyance f r o m the interior to the nearest ship-

ROWLAND Μ . STEPHENSON

49

ping ports of the rich and varied productions of the country, and to transmit back manufactured goods of Great Britain, salt, etc., in exchange." 5 After this opening article, Stephenson elaborated his notions with indefatigable energy and unusual powers of persuasion. His arguments carried conviction with the highest officers of the Government, including the Deputy Governor of Bengal, William Wilberforce Bird. With obvious official encouragement, Stephenson in July, 1844, directly addressed the Government of Bengal, asking whether it would extend its support and approval to railway construction, "in the event of a company being formed in London, or elsewhere, of unexceptionable respectability, and with sufficient capital to accomplish their objects." The Government of Bengal answered on August 8, 1844, with an extraordinary burst of enthusiasm. Every consideration, said Frederick James Halliday, Secretary to the Government of Bengal, would be extended to "a well-constituted company." Further, wrote Halliday, in words of historic importance, "the Deputy Governor desires me to add that he is deeply sensible of the advantages to be gained by construction of Rail Roads along the principal lines of communication throughout the country, and is anxious to afford to any well-considered project for that purpose, his utmost support." T o make Stephenson's success complete, the Deputy Governor made his position unmistakable to Bengal, the rest of India, and to the East India Company in London, by ordering the exchange of correspondence published in the Calcutta Gazette, official organ of the Bengal Government. 8 Under the peculiar relations which then existed in India, the support of the Government of Bengal carried with it, almost automatically, the support of the Government of

50

INVESTMENT IN E M P I R E

India. For until the year 1854, the Governor-General was also ex officio the Governor of Bengal and supervised the administration of the "Lower Provinces" included in the great Presidency of Bengal. Absurd as it may sound, the same individual who was Governor-General of India had to exchange correspondence with himself and give official sanction to many of his own actions in his other capacity as Governor of Bengal.7 The support of the Government of Bengal assured, and thus the main purpose of his stay in India achieved, Stephenson made ready to leave for London. Before his departure, however, he was careful to reinforce his position with the chief merchants of Bengal. H e wrote to a dozen of the leading houses, on the eve of the publication of the exchange of letters in the Gazette, advising them of the favorable attitude of Deputy Governor Bird. H e reminded them of "the great national importance of such undertakings to this country, and the results which must follow both to the community of India, and to a very large class in England, from the impulse and extension which will necessarily be imparted to the commerce and trade between the two countries." The first practical measures having been taken toward the introduction of railways into Bengal, they were about to be followed up, wrote Stephenson, by the establishment in London of a company for the purpose. H e wished to have them, as the principal mercantile houses, express their views on the commercial benefits which were likely to result from railways in Bengal, and to indicate whether they would consider such an undertaking, if placed under efficient control and good management, an eligible investment for capital.8 The replies of the merchants furnished Stephenson with worthy ammunition for his later work in England, for the

ROWLAND Μ. STEPHENSON

51

merchants almost to the last man placed themselves on record that railways would bring great trade benefits to Bengal. They were more timid about committing themselves on the profitability of a railway venture. Stephenson had invited this caution, for his letter to the merchants had not specified the precise direction of the line to be built, nor had he furnished any significant materials for assessing the prospects of the undertaking. Two mercantile houses, those of Colvin, Ainslie, Cowie and Co., and Macintyre and Co., nevertheless flatly declared that railways had everything in their favor and looked like sound investments. Most of the other firms declined to comment on profitability. C. J. Richards, the youngest partner of Gisborne and Co.,® thought the line to Mirzapur probably would not pay its way, would not be a good investment, and thus would bring no commercial benefits. Doubts assailed him about his fearfulness, and, perhaps in a desire to find himself proved "a croaker," Richards declared his willingness to serve on the Calcutta committee of a more suitable railway. Babu Ram Ghopaul Ghose of the firm of Kelsall and Ghose was enthusiastic about the projected line to Mirzapur. Not only would it have extensive trade to carry, wrote the Babu, but large passenger traffic seemed likely. H e felt that Indian merchants, Government officials, and religious pilgrims would all flock to it, until in time all would travel by it, except a "very few old, antiquated Hindoos. . . . T h e only serious objection would be on the part of the females; but even this stronghold of native prejudice we hope to see successfully undermined by the civilizing influence of steam." 10 Armed with the support of the Bengal Government and backed by the good wishes of the Calcutta mercantile community, Stephenson sailed on September 18, 1844, for Eng-

52

I N V E S T M E N T IN E M P I R E

land. Promptly upon his return he reestablished contact with the British commercial houses with which he had been dealing in one way or another since the days of the London Steam Committee of 1836. Chief among these were the outstanding East India firms of the day: Cockerell and Co., whose senior partner was Sir George Larpent; Palmer, MacKillop, and Dent; Fletcher, Alexander and Co.; and Crawford, Colvin and Co. Working in cooperation with these and other East India houses, Stephenson mapped out a plan of campaign. First came the call for public support. This was embodied in a terse impressive document which Stephenson quickly placed before the investing public of Britain in the form of a brief Report upon the Practicability and Advantages of the Introduction of Railways into British India. In the text of the Reporty Stephenson drove home the leading grounds for railway building in India. Trade and traffic on the principal interior routes in India were greater than in western Europe before railways had been undertaken; the Indian terrain, especially the Ganges Valley, was well adapted for cheap railway construction; and the support of governmental authorities in India would avert those expensive legal battles which had eaten so heavily into the capital of European railway companies. Thus all parties would be ensured "the most ample returns . . . and advantages far exceeding the limits of ordinary calculation and belief." These persuasive arguments were buttressed by an imposing array of documents, testimonials, and key factual data which Stephenson presented as attachments to his Report. The star feature, of course, was his exchange of letters with the Government of Bengal. The chief conclusion which Stephenson drew for the benefit of his affluent readers was that the time was ripe for the formation of a joint stock company

ROWLAND Μ. STEPHENSON

53

to build railways in India. In proposing the title of East India Railway Company (familiarly abbreviated as the E . I . R . ) , Stephenson manifested again the broad sweep of his business outlook, for this name would be appropriate for carrying out in succession all the various lines of railway which India needed. 11 It seemed only reasonable to Stephenson that the experience which his "Company will have acquired in the construction of the first line, from Calcutta to Mirzapur, will enable them to undertake the other lines, under infinitely superior advantages and with much greater confidence, both on their own parts and on that of the public, than can be enjoyed by any other parties. . . ." 12 Stephenson added another reason for preferring his company, the E.I.R., to its only significant rival, the Bombay Great Eastern Railway, shares in which had been issued earlier that year from Bombay. 13 While he was in Calcutta, Stephenson wrote, he had noticed the appearance of the prospectus of this company and had observed the rush of applications for its shares. A similar action might have been carried out on his own project, but he had deliberately decided otherwise. During his stay in India, he went on judiciously, he had "deemed it expedient to make more than usually strict inquiry . . . [into] the course which had led to the comparative failure of so many of the speculations which for several years past have been brought forward in Calcutta. . . ." Specifically denying that he imputed to any of the parties concerned "willful or intentional malpractices," he confined himself to the comment that the result in most instances had been "singularly infelicitous." From this he drew the conclusion that it was unsound practice for large companies with headquarters in Calcutta (or, by pointed implication, anywhere else in India, including Bombay) to control enterprises in which

54

I N V E S T M E N T IN E M P I R E

substantial amounts of capital from abroad had been invested. 14 British capitalists interested in India were thus bluntly warned to invest in companies directed and managed f r o m London. Having thereby disposed of the Bombay Great Eastern Railway and shown himself to be the true protector of the British investing public, Stephenson and his associates made ready to come to grips with the East India Company. Well might Stephenson prepare with care for this first formal encounter with the anomalous old Company, for much depended on its outcome. H e and his associates hoped to get official approval and support from the "Honourable Company," on the basis of which they would go ahead to form their own railway company and raise the necessary capital from the public for the construction of the Calcutta-Μirzapur line. Stephenson himself broached the subject on December 2, 1844, with an historic letter to the East India Company. Reminding the Company of his long concern with the question of Indian railways, Stephenson drew attention to several interesting documents attached for the consideration of the Court of Directors (the governing body of the East India Company). First and foremost was the Calcutta Gazette of August 24, 1844, which contained the promise of support f r o m Deputy Governor Bird. This was reinforced by Stephenson's Re-port, which was prefaced by a dedication, appropriately enough, to Governor Bird, from whom Stephenson had received "so much encouragement to proceed in an undertaking which is calculated to bestow more substantial and lasting benefits upon British India, in every point of view (politically, morally, and commercially) than have been conferred by the introduction of any previous measure of amelioration or improvement." 15 Considering his cold reception at

ROWLAND Μ . STEPHENSON

55

the hands of the East India Company in 1841-43, surely Stephenson must have relished this opportunity to confront the Company with these signs of the high regard in which his undertaking was held by the Government of Bengal. After this auspicious beginning, Stephenson suddenly put forward the sweeping proposal that the East India Company underwrite the prospective railway undertaking against the possibility of any loss to its shareholders. For this first line, he asked, would the Court of Directors consider adopting the plan "so successfully introduced by the French Government, of guaranteeing a minimum dividend of 4 per cent . . . ? " For once Stephenson moved hesitantly, as if he were on uncertain terrain which he had not mastered. Although he conceded that such a guarantee would be a "deviation" f r o m the established practice of the East India Company, he made no effort to create a receptive mood for his innovation. H e ignored the crisp language of his initial letter to the Government of Bengal: " T o prevent misunderstanding in regard to the nature of the assistance which is expected of the Government, I beg to observe that no pecuniary aid is required." N o r did he attempt to reconcile his present request with the explicit statement in his January 1, 1844, article in the Englishman, that his projects were to "be carried out without entailing any expense upon the Government, directly or indirectly." 1 8 All that he produced in support of his bold demand was a vague reference to the importance of railways to the interests of India. H e concluded by appending two additional memoranda for the Court of Directors, one detailing the conditions of a guaranteed minimum dividend and the other furnishing an abstract of the terms imposed by the French Government upon railway companies in France. 17 It is difficult to believe that the request for a guarantee

56

INVESTMENT IN E M P I R E

originated with Stephenson himself. Both at the beginning and at the end of his work in India in 1844, Stephenson had indicated unequivocally that no pecuniary aid f r o m the Government would be required. Upon Stephenson's return from India toward the end of October, 1844, however, he found quite a different attitude prevailing among the London merchants who were his backers and who presumably had helped him make his costly trip to India. "All equally agreed in the conclusion, that the object was too vast and too distant, and the returns too uncertain and remote, to admit of any wellgrounded expectation that the capitalists of this country would be induced to invest money in it without direct pecuniary assistance from the Government of India." Thus the E.I.R.'s demand for a guarantee originated in London about November, 1844, and was first presented to the East India Company in the following month. 18 Little did Stephenson realize that even before the end of his first five-year campaign (1841-45) to get railways for India considered seriously, he was embarking on a second five-year campaign (1844-49) to extract a guarantee from the East India Company. Sensing almost immediately the hostility of the Court of Directors to this request, he hurried to define and delimit it, in a vain endeavor to make it more palatable. T h e guarantee, he proposed, was to be given only "in order that a full and fair trial of the Railway system may be made in Bengal, at as early a period as practicable." Except for this trial line from Calcutta to the Burdwan coal districts, the guarantee was not to be extended to any other line which Stephenson's group might build, nor, for that matter, to any line whatsoever projected by any other company. 18 As the Court remained unmoved, Stephenson and his associates—who now formed themselves, under the chairmanship

ROWLAND Μ . STEPHENSON

57

of Sir George Larpent, into the Provisional Committee of the East India Railway Company—tried further concessions. T h e rate of guaranteed interest demanded was lowered from 4 per cent to 3 per cent, and the guarantee could be dropped altogether, after the trial line had been worked for twelve consecutive months at a profit of at least 3 per cent. T o meet the Court's opposition to the principle or precedent of a guarantee, Larpent and Stephenson suggested that it be replaced by a lump sum bonus or contribution, to be paid only for a fixed period of years. When these devices failed to move the Court of Directors, Larpent and Stephenson issued a warning on the danger of delay. As they laid the Prospectus of the Provisional Committee before the Court on January 28, 1845, they pressed for speedy action lest the many foreign enterprises daily being submitted to the British public drain off "the large sums of money which . . . would be subscribed" for railways in India. T h e Court was still unimpressed. T h e Provisional Committee met on February 25, and publicly resolved "that the guarantee of the East India Company . . . or some equivalent pecuniary assistance and indication of the approval of the Court of Directors, is a preliminary and indispensable condition to the proposed measure." 20 Since the Court was still unconvinced, Stephenson and Larpent reluctantly concluded that in pressing for a guarantee they were pushing ahead prematurely. Their efforts, it was true, had succeeded in getting the East India Company to look upon railways as a serious subject; but the Court of Directors, it became clear, would not proceed to give their support and money to railways upon the evidence presented by a group of railway promoters, even if they were spokesmen for some of the most influential mercantile houses in

58

I N V E S T M E N T IN E M P I R E

London. Stephenson resigned himself to the necessity of a second educational campaign, to meet the "great objections and difficulties" which were troubling the East India Company. These became plain to all when the Court of Directors, swinging into action on May 7, 1845, with its first official pronouncement on railways for India, referred the whole subject to the Government of India for further investigation. In its dispatch to the Governor-General, Lord Hardinge, the Court showed a deep concern over the practicability of railways for India, which rested partly on a broad misconception of their future role. In England, the Court wrote, railways were sustained by passenger traffic and derived the least part of their revenue from freight. India was in exactly the reverse condition. Instead of a dense and wealthy population, the people of India are poor, and in many parts thinly scattered over extensive tracts of country. B u t . . . India abounds in valuable products of nature, which are in great measure deprived of a profitable market by the want of a cheap and expeditious means of transport. It may therefore be assumed that remuneration for Railroads in India must, for the present, be drawn chiefly from the conveyance of merchandise, and not from passengers.

This serious miscalculation of the potential railway passenger traffic of the country—since the opening of the first lines in the 1850's the Indian railways have always carried a relatively heavy passenger traffic per mile of line in operation— can be explained only in part by the fact that no fairly comprehensive census of India was taken until 1872. Peculiar to India, the Court feared, were the following difficulties of climate and circumstances: "periodical rains and inundations . . . violent winds, and . . . a vertical sun . . . ravages of insects and vermin upon timber and earth-work . . . destructive

ROWLAND Μ. STEPHENSON

59

effects of . . . spontaneous vegetation . . . the unenclosed and unprotected tracts of country through which railroads would pass . . . [and] the difficulty and expense of securing the services of competent and trustworthy engineers." Despite these hazards, the Court boldly proclaimed that wherever railways could be "advantageously introduced and maintained," they were "eminently deserving of an encouragement and cooperation from the Government." It would be unwise, though, to make the first attempt on more than a limited scale. T o select a "feasible line of moderate length as an experiment for railroad communication," and to survey railway matters on the spot in scientific fashion, the Court announced that it would send a skilful, experienced railway engineer from England. Lord Hardinge was asked to depute two highly qualified engineers from the Company's service in India to assist in the investigation. After the conclusion of the work of the engineers, Hardinge was to pass judgment upon their report and to specify his views upon the rules to be set up for governmental control over railways in India. When Stephenson and his associates studied the copy of the dispatch handed over to them by the Court of Directors, no doubt they were encouraged by its statement of support for the construction and management of railroads in India "by means of private enterprise and capital." Historically, of course, major engineering works like irrigation systems and trunk roads in India had been a function of governmental rather than private enterprise. One of the fears which beset Stephenson and other railway promoters throughout the 1840's was that, once the advisability of railways for India was conceded, the East India Company itself would undertake the task. Along these lines there was cause for concern in the warning given by the East India Company's dispatch

60

I N V E S T M E N T IN E M P I R E

of May 7, stating that "the great trunk lines should . . . be liable to become ultimately the property of Government." T h e dispatch's chief provision was a flat rebuff to the principal desire of the E.I.R.'s promoters. T h e Court of Directors announced that it considered the request for guaranteed interest a "mode of cooperation liable to many objections, and likely to prove very unsatisfactory." Here the East India Company was expressing views identical with those of the Prime Minister, Sir Robert Peel. When the demand for a guarantee had been brought to the attention of the British Cabinet, Peel "repudiated it in strong terms, as not only unprecedented, but very indiscreet." 21 Peel's experiences with railways at home in Britain were scarcely such as would predispose him to look favorably upon the demands of British promoters of railway ventures far afield in the Empire. Surely, too, there must have been a note of incongruity in the E.I.R.'s repeated statement in the winter of 1844-45 that, without a guarantee, capital could not be raised in Britain for Indian railways—for during the calendar year 1844, railway schemes of every conceivable kind of merit and demerit had been projected in Britain, involving an aggregate paper capital of £563 million. Doubtless Britain could not finance an unlimited number of railways at home and abroad, but a great many of these were purely speculative schemes which were soon abandoned.22 T h e East India Company, however, did not completely close the door to financial aid, for the Court of Directors said it would be prepared, after receiving the views of the Government, to consider "the mode and extent of such pecuniary assistance as it shall be proper for the Government of India to afford towards the execution of at least the first approved Line of Railroad in that country." 28

ROWLAND Μ . S T E P H E N S O N

61

The Court's dispatch of M a y 7 was the signal for a fresh burst of activity by Stephenson's group. Three positive facts encouraged them. T h e Court had recognized the potential value of railways, had expressly welcomed private companies as the vehicle for their operation, and, despite the rejection of the guarantee, had indicated a willingness to consider some other form of pecuniary aid. Stephenson's Provisional Committee thereupon formally established themselves a few days later in May, 1845, as a joint-stock enterprise called the East Indian Railway Company, with power to raise a capital of £4 million. T h e Board of Directors of the new company was most impressive. Its thirteen members included eight of the most prominent East India houses trading with Calcutta, Bombay, and Madras; three important representatives of British shipping interests dealing with the East; one former governor of the Northwestern Provinces; a former major general of the East India Company's army; and one representative of the banking house of Barclay, Brothers and Co. Associated with these luminaries were two other prominent British bankers; and to them were added, some months later, two prominent figures f r o m domestic British railways. Sir George Larpent continued as Chairman of the E . I . R . ; Bazett D . Colvin became its Vice-Chairman; and Rowland M . Stephenson was named its Managing Director. 24 A portion of the shares was, from the start, reserved for allotment in India. Stephenson wrote on June 2 to his old friends and supporters in Calcutta, asking them to serve on the Bengal Local Committee of his Company. Similar steps were taken for Bombay and Madras. H e must have enjoyed the need to tell the Indian committees that applications for shares had flooded in so rapidly (and, of course, largely f r o m

62

I N V E S T M E N T IN E M P I R E

"parties of the highest respectability") that the railway's "Directors have experienced considerable difficulty in the selection, and have in most cases been compelled of necessity to abridge the number of shares allotted and to reject many." True to his principle of discouraging speculative activities by local groups in India, Stephenson in his initial letter warned the committees, pending further word from the Board of Directors, to incur no expenses "beyond that of postage." 25 In a letter to the Court of Directors describing the formation of the new company, Larpent and Stephenson emphasized once more the substantial character of their enterprise: " T h e Directors of this Company are all gentlemen closely connected and intimately identified with the interests and prosperity of the British possessions in India; and in apportioning the shares in the capital of the Company great care has been taken to give it all the solidity and permanency which the importance of the undertaking demands." The East Indian Railway Company—or, in its customary abbreviation, the E.I.R.—now placed itself at the disposal of the Court of Directors in the carrying out of the "common object." Larpent and Stephenson did not spell out here, as they had in writing to their local committee in India, their ultimate goal of building the two great trunk lines which would connect Calcutta with northwestern India, and Bombay with Calcutta. For the present, it was enough to ask the Court of Directors, whose uncertainties about the prospects of Indian railways were still so fresh in everyone's mind, to confirm the momentous news which had reached the E.I.R. privately, that the Right Honourable the Governor-General of India had thrown his weighty support to the introduction of railways into India. 29 In one of those frequent mischances arising from the tor-

ROWLAND Μ . S T E P H E N S O N

63

tuous mail service of early Victorian Britain, Lord Hardinge's judgment on railways had been winding its way from Calcutta to London at the very time the Court of Directors was drafting its M a y 7 dispatch. Hardinge's views, as embodied in a letter of April 19, 1845, signed by F . J . Halliday, Secretary to the Government of Bengal, reached the Court only on June 6. Although he was living in the midst of those peculiar difficulties and circumstances of India which troubled the Court so deeply, Hardinge was quite undisturbed by them. H e calmly reported that the plains of "Hindoostan" offered remarkable facilities for building railways which would be of immense value to the commerce, government, and military control of the country. T h e importance of railways for handling troops was expressed in the carefully calculated terms of a man long accustomed to war: with railways, he said, it would be possible to produce "a larger and speedier effect by means of smaller numbers." In a manner so outspoken that it must have delighted Stephenson and his friends, Hardinge came out flatly for a guaranteed rate of interest. While conceding that there were "serious objections" to such a guarantee, Hardinge stated his belief that capital for railways could not be raised in India, "unless under a guarantee from Government of a rate of interest certainly not less than 3 per cent." H e did not discuss the question of raising the necessary capital in Britain (this, presumably, was a matter for the Court to decide). Despite his sharp differences with the Court, Hardinge's recommendation for immediate action was exactly the same as that of the Court's May 7 dispatch; experienced railway engineers should be sent f r o m England to report on the practicability of what seemed to be the most suitable line, that f r o m Calcutta to Mirzapur. Hardinge's letter of April 19 thus dovetailed

64

INVESTMENT IN E M P I R E

nicely with the Court of Director's dispatch of May 7, 1845, to set the stage for the next important phase in the development of Indian railways: the first official railway mission to India.27

NOTES 1. In his account of the Development of Indian Railways (Calcutta, 1930), N. Sanyal follows R. C. Dutt in dating the first notion of railways in India to 183 1-32, when an abortive project was put forward for a line in Madras. This was really not a steam railway, since the hauling power was to be supplied only by animals. Pari. Papers, 183 1-32, House of Commons, Report from the Select Committee on the Affairs of the East India Company, III, Part II, 671-75. Hope for a railroad from Calcutta to Meerut is referred to in the A static Journal for May-August, 1834, Part II, pp. 4-5. More serious was the lengthy report in 1836 by Captain A. P. Cotton, Civil Engineer, Madras, on a line to connect Madras with Bombay via Bangalore and Poona. Sanyal, op. cit., p. 4. Cotton's project was followed by the construction of a most curious experimental line. It ran for three and one-half miles southwest of Madras, connecting Red Hills and the stone quarries near Little Mount. The fact that the line existed, and the mode of operation on it, are attested by a story in the Madras Herald for January 16, 1838: "We had another most gratifying sail [«£.'] on the Red Hill Railway last Monday afternoon. There was a moderate breeze from the N. by E., and as the road runs very nearly at right angles, or E. by S. and W. by N., the wind was equally favourable going and returning. The carriage is a small conveyance fitted-up with springs; it is large enough to carry four or five persons, and is furnished with a small lug-sail. The wheels are low, and in some places the road has suffered much by the last monsoon; yet, in spite of these obstacles, the carriage travelled at least twelve miles an hour; and when the wind freshened, it was necessary to ease off the sheet to prevent the vehicle going at a greater velocity than would be at all agreeable, or, in the present state of the rails, safe." Cited in the Asiatic Journal for June, 1838, Part II, pp. 81-82. For other early railway curiosa, see the Asiatic Journal, II (October, 1836), 79; II (November, 1836), 15 1 ; II (March, 1837), 170; II (July, 1837), 200-1; II (August, 1837), 293 ; II (April, 1838), 224; and II (November, 1839), 191. By 1840, references to railway matters in the Asiatic Journal, the Calcutta Review, and other periodicals, become too numerous to record here. 2. Edward Stephenson's work in Delhi, 1715-17, where he helped persuade the Mogul Emperor to exempt the East India Company's trade in Bengal from all duties and tariffs, is mentioned in Robert Orme, History of the ΜHi-

ROWLAND Μ . STEPHENSON

65

tary Transactions of the British Nation in Indostan, II, Part 1 (London, 1778), p. 19; cf. James Burgess* Chronology of Modern India (Edinburgh, 1913), pp. 156-58 ; James Mill's History of British India (5th ed.; London, 1858), III, 22-25, and T h o m a s Maurice, Indian Antiquities (London, 1800), I, 71. In his preface, the latter author thanks Rowland Macdonald Stephenson's father f o r helping to make possible his lengthy opus. A detailed account of the business operations of Stephenson's f a t h e r and the circumstances of his flight to America is given in the second edition of Hilton Price's Handbook of London Bankers (London, 1890-91), 137-42. Further information on the Stephenson family and on R. M . Stephenson's early life is given in his obituary in the Times ( L o n d o n ) , November 22, 1895; in Joseph Foster's Peerage, Baronetage, and Knightage of the British Empire (London, 1879), II, 692; the Post Office Railway Directory f o r 1848 ; and in testimony given by Stephenson in 185 8 before the Select Committee on East India ( R a i l w a y s ) . Pari. Pafers, House of Commons, 1857-58, XIV, qq. 3547-49. His testimony parallels a description of him published in the Times f o r July 5, 1845, and reprinted in Herapath's railway magazine f o r J u l y 12, 1845, VII, 1127. According to an article which Stephenson wrote in 1856, he conceived a plan as early as 1840, "to girdle the world with an iron chain, to connect Europe and Asia f r o m their furthest extremities by one colossal railway." He had in mind a railway f r o m London to Calcutta, perhaps to be extended later to China; it would be broken only at the English Channel and the Turkish Straits. See the article entitled " T h e World's H i g h w a y , " in the Calcutta Review f o r March 1856, XXVI, 142-76. This article was written by Stephenson and later reprinted under his name, according to William S. Lindsay's authoritative History of Merchant Shipping and Commerce (London, 1876), IV, 338n. In a booklet published in 1850, Stephenson indicated publicly that he was already planning a National Highway f r o m Ostend or Havre to India. Railways: an introductory sketch . . . by R. M . Stephenson (London, 1850), Part I, p. 95n. Stephenson enjoyed a favorable press at almost every stage of his long public career; he retired only a f e w years before his death in 1895, at the age of 8 7. For samples of the relatively rare criticism of him, see Thomas Holcroft's Statement of Facts and Correspondence