When Companies Wielded the Power of States

By Andrew Phillips and J.C. Sharman. Mr. Phillips is an associate professor of international relations at the University of Queensland and Mr. Sharman is a professor of international relations at the University of Cambridge.

They refer to these companies as "Janus-faced entities." Janus was the two-faced Roman god, among other things, of duality.

Excerpts:

"After the European voyages of discovery in the 15th and 16th centuries, the most important trading networks between West and East weren’t built by kings or private merchants but by “company-states” like Britain’s East India Company, which combined the profit motive of corporations with the governmental powers of sovereign states."

"The original company-states . . . were founded under royal or parliamentary charters to undertake the long-distance trade and colonization that rulers were too poor to finance themselves but too ambitious to forgo. These companies disposed of wealth and firepower that rivaled and sometimes even eclipsed that of their state patrons. At the peak of its power in the early 19th century, the East India Company maintained an army of over 250,000 troops and ruled one-fifth of humanity. The Hudson’s Bay Company controlled approximately one-tenth of the world’s terrestrial surface, in what is now Canada, while the Royal African Company was pivotal in funding and coordinating the trans-Atlantic slave trade."

"Edmund Burke denounced the East India Company as “a state in disguise of a merchant, a great public office in disguise of a counting house.”"

"this ambiguity wasn’t a bug but a deliberate and highly profitable feature, allowing them to play up whichever aspect of their dual identity served their interests best."

"Who did these interlopers represent, monarchs or merchants? Company-states deftly manipulated local confusion over their identity to overcome resistance and extract the maximum commercial and diplomatic benefit. When necessary, company employees would humiliate themselves before the powerful, kowtowing to the Chinese emperor or trampling crucifixes for the amusement of the Japanese Shoguns. But in Africa and the Spice Islands, company-states didn’t hesitate to deploy soldiers to enslave and exterminate."

"They pioneered the limited liability corporation and the separation of ownership from management through a joint-stock structure, while managing employees and production networks across the globe."

"At their height in the 17th and 18th centuries, European company-states dwarfed today’s multinationals. In 1637, the Dutch East India Company was valued at the equivalent of $7.9 trillion today. But in the 19th century, changing ideas about the proper spheres of state and business fatally diminished their legitimacy; the East India Company was effectively nationalized in 1858."