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Factory System

By the eighteenth century, the English East India Company had established a string of trading establishments stretching from the Persian Gulf and the Red Sea to the Indian subcontinent, across the Bay of Bengal to the straits of Malacca and the China seas. The Company possessed three main trading settlements in India – Bombay, Madras, and Calcutta – each with subordinate factories belonging either in the ‘upcountry’ or up and down the coastline. The Company had no regular settlement in China and all trading had to be carried on from on board the ships at Canton through supercargoes. It was these Asian settlements and factories that supplied the Company with a wide range of trading commodities; ‘cotton and silk piece goods from India and China, bulk goods such as saltpetre, pepper, indigo, and coffee, raw silk, tea, and various exotic articles such as dyed wool from the Kirman district of Persia, Chinese lacquered ware and porcelain, and cowries used in West African trade.’


The general letters to the East, from the Company’s Committee of Correspondence, and the replies received from Asia constituted the main vehicle through which the EIC’s commercial operations were carried out. By 1709, the Company had developed a standardised method for the letters which continued unaltered until the very end of its trading activities. The annual general letters to each major commercial establishment, which were often as long as one hundred folio pages, were put under eight classified headings, each with numbered paragraphs. The lists of goods to be ordered from each presidency each season usually followed immediately after these general headings. EIC ships to China were managed by supercargoes, who received detailed instructions on what goods were to be bought from China each season, and who dealt with the Hong merchants (the guild of merchants responsible for foreign trade) in Canton.

The kinds of goods the Company ordered, and therefore the composition of its import cargoes, changed a great deal over the course of the seventeenth and eighteenth centuries. Pepper was the dominant commodity in the 1600s; it was an attractive cargo due to light weight, easy transportation and high value. Other spices besides pepper came to the fore after 1630. Indian goods – indigo, saltpetre, calicoes and silk, later became the most common items imported into Britain. After the great surge of spice imports in the early seventeenth century, calicoes, cotton piece goods (such as Madras prints) and silks took over as the most profitable trade products for the Company. Later in the eighteenth century, Calcutta, and the province of Bengal, became the core centre of East India Company activity. The Company’s China trade increased in importance as the tea trade dramatically expanded in the second half of the eighteenth century.

This was the result of the Company constantly striving to divert most of its resources into the most profitable commodities. As Lawson explains, ‘The Company itself also took a hand in ensuring its own prosperity through what would be seen in the late twentieth century as diversification of its product lines. In 1621 for example, pepper, indigo and other spices made up the bulk of East India Company cargoes; by 1677 calicoes, chintz, cotton-piece goods and raw and manufactured silks dominated. By the end of this period, in 1709, tea, obtained through a rapidly expanding China trade, then appeared as a prominent commodity in Company cargoes.’ The result of diversifying into these favourable markets, together with a buoyant oceanic trade structure, was the amassing of ‘immense profits’ over the seventeenth and eighteenth centuries.


The Company’s Directors relied on very detailed commercial instructions to their servants in India and China to procure the goods they required. Although much depended upon the commercial acumen and methods adopted by the Company’s representatives in Asia, in the hope that they would purchase goods of sufficient quantity and appropriate quality, the Directors sought to leave as little as possible to chance by very precisely defining the goods they wished to bring to the market in London. They regularly assessed the Company’s sales figures, calculated rates of profitability on different commodities and gathered feedback from buyers. For textiles, the directors defined the number, weight, length, width, colour, and pattern of cloth they required; while for tea they prescribed the type and qualities of the varieties they wished to receive. The Company’s calculations of the profitability of particular goods or trade products from a particular area was inexact but had an understandably important influence on future orders. The Court of Directors regularly advised their servants to reduce investment in particular goods if they ‘turn[ed] but to little advantage’. The Company also regarded the level of bidding in the auctions as a most sensitive indicator of the demand conditions which subsequently influenced their own pricing policy and the orders sent to Asia. They adhered to these practices throughout the eighteenth century, and regularly provided those in Asia with details of sales, prices, and samples of goods sold by all of the European East India Companies.

Yet, despite all this, because of the complicated time schedule and difficulties in forecasting the quantities which were to be contracted for, there was ‘considerable discrepancy between planning and performance’. Notwithstanding the relatively sophisticated nature of the East India Company’s operations, long-distance maritime trade in the early modern period was a complex business. The Company was well aware of the fluctuating nature of Eurasian trade and the delays and misinformation that frequently arose when conducting commerce over vast distances. The Company relied on its complex system of information exchange between London and its Asian settlements to try and overcome these difficulties. The time-lag in communication between Europe and the East obviously still placed a large amount of strain on how effectively the Company could engage with its servants overseas, monitor their work, and order goods.

The Company could never guarantee that the quantity and types of goods they ordered would be sent back to London. The system of trade relied on intricate communication and information networks, but also required Company servants in Asia to exercise considerable amounts of discretion and initiative. While the Company’s factors in India were in charge of procurement, they relied on numerous merchants and brokers to supply goods and contract with producers too. Very often, orders from London were not fulfilled due to difficulties with the supply of and access to the goods requested. Company servants frequently just sent back what was available, or new goods they felt the Directors would be happy to receive. With the trade in textiles, one result of this was a constant flow of new varieties, colour combinations and patterns of textiles into London. Chaudhuri argued that ‘The wide separation of markets and the perpetual risk of a disequilibrium between supplies and demand made the East India Company specially aware of the problem of minimizing and monitoring the discrepancy between planning and implementation… In spite of all the efforts made by the [Asian factories] it just happened sometimes that the goods came in too late for the departing ships. If there were many competitors in the market and the standard of sorting the cloth was too strict, short deliveries were unavoidable.