Outsourcing Empire. How Company-States Made the Modern World

Phillips, Andrew; Sharman, J.C.
Reviewed for Connections. A Journal for Historians and Area Specialists by
Elizabeth Cross, Georgetown University, Washington D.C.

Although he eventually became an enthusiastic imperialist, Otto von Bismarck understood one of the core strategic problems of empire: its chronic unprofitability. In 1868 he wrote: “The advantages which people expect from colonies for the commerce and industry of the mother country are mainly founded on illusions, for the expenditure very often exceeds the gain” (p. 168). This core problem – that colonizing European powers desired empires, but found them expensive to establish, manage, and police – is precisely the issue that Andrew Phillips and J.C. Sharman take up in their new book. The authors provide a new disciplinary reading of a thesis that will be familiar to historians following the recent work of Philip Stern, Arthur Weststeijn, and others. Stern, who coined the term “company-state” employed here, argues that the British East India Company was, from its origins, a political actor imbued with sovereign powers as much as it was an economic one.1 From the vantage point of political science and international relations, as Phillips and Sharman argue, company-states were “syncretic Frankenstein monsters” (p. 2) that combined attributes that we now recognize as belonging to either sovereign states or private corporations in ways that defy current understandings of public and private. But as a method of combining sovereign and commercial prerogatives, of ‘outsourcing’ empire to non-state actors to undertake it – and, in theory, pay for it – the company-state provided a “transferrable template” (p. 199) that was widely emulated, if not always successfully, by aspiring colonizers across Europe.2

The book aims at two major interventions concerning the company-state’s place in narratives about the origins of the modern international system and the rise of the West. Phillips and Sharman aim to move scholarly narratives away from Eurocentric and “state-centric hagiographies of the modern liberal international order” (p. 215) by demonstrating the role that company-states played in mediating contact between Western and non-Western powers in a multipolar, early modern international system dominated by empires, not nation-states. Through this emphasis on the multipolarity of the early modern world order, they argue that Western power emerged through subtle means of negotiation and insinuation with powerful non-Western polities (a role performed by the company-state) instead of through military and industrial supremacy.3 The book succeeds admirably in this argument, yet in insisting upon the exceptionality of the company-state form itself – something the authors claim emerged from what they call the West’s uniquely “permissive ideational context” (p. 17) – there are moments where ideas of Western cultural exceptionalism manage to creep back in.

The authors begin with an examination of how the company-state model – epitomized by the English (EIC) and Dutch (VOC) East India Companies – proved more adaptable than “more statist forms of direct overseas expansion” (p. 23) like the Portuguese Estado da India or the French Compagnie des Indes. By relying on financing through commercial investors, the VOC and EIC were able to avoid dependence on their home states and manage their own protection costs. This granted them enormous leeway to insinuate themselves into local power structures: alternating between aggression and deference, “company states…could play the role of supplicant, partner, or suzerain as circumstances demanded” (p. 55). This model proved more durable in Asia than in the Atlantic world, the authors claim, due to geography. The multitude of short-lived West India and Africa companies faced stronger competition from private trade at home and a greater likelihood “of being chain-ganged into the geopolitical conflicts of their state sponsors” (p. 64). The one exception to this rule was the Hudson Bay Company, which avoided these entanglements and survives to this day in the form of a flagship Canadian department store.

The second half of the book takes up the downfall of the company-states after 1750 and their “abortive resurrection” in the 19th century (p. 11). By virtue of their monopolistic rigidity and hybrid political-economic functions, company-states often struggled to adapt to new circumstances and to “reconcile the imperatives of power and profit-seeking” (p. 109).4 As the EIC vied with France for control of the Indian subcontinent, it abandoned “its passive military posture” (p. 137) and embarked on an aggressive program of militarization and territorialization. The financial costs of this transformation made the EIC more dependent on Parliament for funding, which invited government oversight and interference in ways that would have been unthinkable a century before. This “renewed scrutiny” from Parliament and the public showcased how “British thinkers” were “challenging mercantilist ideas and beginning to articulate a new science – political economy – that posited an increasingly sharp distinction between the public realm of political power and the private realm of the market” (p. 110). The EIC’s transgression of this divide led critics to claim its economic functions for the self-regulating marketplace and its sovereign powers as the rightful prerogatives of the state. This unilateral reclaiming of sovereignty by the state explains, Phillips and Sharman argue, the fundamental weakness of the short-lived 19th century company-states. In the territorially acquisitive era of the New Imperialism, states turned back to the company model to outsource the costs of maintaining empire to capitalists, but they were unwilling to share the rights of “war rule, and diplomacy” (p. 154) with their new, and entirely fiscally dependent, creations. Between their lackluster performance and the humanitarian disasters sometimes associated with their rule – for which Leopold II’s Congo Free State offers a clear example – the failures of the 19th century company-state only serve to demonstrate the durability of “shared beliefs about…states as the exclusive locus of public authority” (p. 201).

The book succeeds in demanding that non-state actors be taken seriously as geopolitical players and in questioning extant narratives about the origins of the modern international system. What is largely absent from this macro-level analysis is any reflection about the impacts that company-states had on their colonized subjects, a theme only taken up in passing with reference to the Bengal Famine of 1770 or the crimes of the Congo Free State. The book also has a comparatively haphazard approach to the “ephemeral company states” (p. 175) other than the VOC and EIC, whose main significance to the authors is that their existence proves the widespread emulation of the company-state form by other European colonizers in the early modern period and afterwards. But this approach has its limits, when one considers the geopolitical significance of the Anglo-Dutch model’s chief competitors, such as the French Compagnie des Indes. The authors dismiss the French company as “a state-owned and directed enterprise…[of] little commercial success” (p. 137), but simultaneously note that the aggressive rivalry with the French played a significant role in the transformations and ultimate downfalls of the VOC and the EIC. French competitors were the first to adopt the practices of militarization and territorialization, leaving the British to co-opt these strategies, even when not commercially lucrative to do so. Institutions like the Compagnie des Indes may not have quite fit the model of the “company-state,” but in many ways they more clearly anticipated the pattern of hierarchical relationships between state and company that emerged in the 19th and 20th centuries. The absence of a comparative lens is similarly apparent in the discussion of “the new British “science” of political economy” (p. 211). New historical work has fundamentally challenged the idea of a simple transition between “mercantilism” and “liberalism,” in part by showing the foundational role that French theorists played in the creation of this new “science” of political economy.5 In other words, the process by which commercial ideologies and practices were shared between colonizing powers was more complex and haphazard than the authors are perhaps willing to acknowledge. However, in presenting the company-state as a clear interdisciplinary lens of historical analysis, Outsourcing Empire invites new such interventions and questions from historians and political scientists alike.

1 Philip J. Stern, The Company-State. Corporate Sovereignty and the Early Modern Foundations of the British Empire in India, New York 2011; Arthur Weststeijn, The VOC as Company-State. Debating Seventeenth-Century Dutch Colonial Expansion, in: Itinerario 38 (2014), pp. 13-34.
2 For emulation, see Sophus A. Reinert, Translating Empire. Emulation and the Origins of Political Economy, Cambridge, MA 2011.
3 As also argued in J.C. Sharman, Empires of the Weak. The Real Story of European Expansion and the Creation of the New World Order, Princeton 2019.
4 On the differences between the VOC and the EIC when it came to enforcement of their monopolies and their adaptivity, see Emily Erikson, Between Monopoly and Free Trade. The English East India Company, 1600-1757, Princeton 2014.
5 See, for instance, the approaches in Catherine Larrère, L’Invention de l’Économie au XVIIIe siècle. Du droit naturel à la Physiocratie, Paris 1992; Paul Cheney, Revolutionary Commerce. Globalization and the French Monarchy, Cambridge, MA 2010; Loïc Charles / Frédéric Lefebvre / Christine Théré (eds.), Le Cercle de Vincent de Gournay. Savoirs économiques et pratiques administratives en France au milieu du XVIIIe siècle, Paris 2011; Rafe Blaufarb, The Great Demarcation. The French Revolution and the Invention of Modern Property, New York 2016.

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