A trading company became a government, with its own army and tax system.
On December 31, 1600, Queen Elizabeth I granted a charter to the Governor and Company of Merchants of London Trading into the East Indies, establishing what would become the English East India Company.1 The charter gave the company a monopoly on English trade east of the Cape of Good Hope and west of the Straits of Magellan.
Within two centuries, a commercial enterprise had evolved into something without precedent, a private corporation that governed territory, collected taxes, maintained an army of over 260,000 soldiers, and administered justice across a subcontinent.2
The East India Company dominated trade in tea, textiles, spices, and opium across Asia. It introduced the tea trade to Britain, established the opium trade with China, and played a decisive role in the colonization of the Indian subcontinent.2 The company's private army was larger than the British standing army.
The 1757 Battle of Plassey, won by Robert Clive with a force of 3,000 against 50,000, gave the company effective control over Bengal and its tax revenues.1 The Bengal famine of 1770, in which as many as ten million people died under company administration, exposed the lethal consequences of granting a commercial enterprise sovereign power over a civilian population.2
The British government dissolved the company in 1874, transferring its governmental functions to the Crown.2