(iPoster) Regulation, Revenue, and Reform: How Britain was Shaped by Its Empire

• In Event: Poster Session: Politics and History

Abstract

How and when did states decide to engage in colonial expansion? Colonialism was a collaborative effort between European states and chartered trading companies. The agents of these companies performed a variety of functions on behalf of the state: they travelled to distant places, introduced foreign goods to the domestic economy, contracted with local political authorities, and waged wars with other European traders. In these endeavours, they received considerable financial and political support from the European states that chartered them. At the same time, with the immense wealth that they acquired, these trading firms also posed threats to the very state institutions that supported them. Given this setup, how was colonial expansion shaped by agency problems?
I consider this question in the context of 18th century Britain and study how institutional reform occurred after the English East India Company (EIC) had the opportunity to collect land revenue in Bengal in 1757. Using formal theory and qualitative archival research, I show that both the British state as well as the EIC were hesitant to assume revenue collection powers in India, despite the significant financial gains that they expected. British MPs were worried that the EIC could acquire too many financial resources and use them to exert influence over policy. The EIC, on the other hand, was wary of excessive regulation by the British state.
I incorporate this tradeoff between economic gains and policy loss in a dynamic formal model. The results show that while the British state as well the EIC stood to benefit financially from expanding the collective pie, in equilibrium, they exercised mutual forbearance and avoided colonial expansion for many periods. Ultimately, the decision to expand came only after (1) the British state had managed to build the institutional capacity to supervise the actions of the EIC and (2) the EIC was sufficiently reliant on the British state for its functioning such that it could no longer credibly threaten its institutions. I support this model with qualitative evidence from debates between the EIC and the British Parliament.
My project contributes to the literatures in historical political economy, comparative politics, and international relations. Political scientists and economists have long been interested in understanding how former colonies continue to affected by their experiences of colonisation. However, there is a dearth of research on how the colonial metropole was in fact transformed by colonialism as well. I seek to fill this gap by shedding light on how opportunities for colonial gains stimulated institutional development in the colonial metropole and altered European states’ relationships with their agents.

Author

• Moksha Sharma, University of Chicago