Latest / The Rise of Colonialism: How Europe Divided the World — Fexingo History / The Treaty of Allahabad 1765: How the East India Company Became a Tax Collector
Transcript
- Lucas: So we've talked a lot about the Battle of Plassey, the Carnatic Wars, how the East India Company essentially bought and bullied its way into power in India. But there's a moment that often gets less attention — and I think it's actually the real turning point. I'm talking about the Treaty of Allahabad, signed in August 1765. Luna: Wait — wasn't the Battle of Buxar the big one? I thought that's what clinched it for the British. Lucas: Buxar was the military victory, absolutely. That was in October 1764, where Hector Munro smashed the combined armies of Mir Qasim, the Nawab of Bengal, and shuja ud daula, the Nawab of Awadh, and even the Mughal emperor Shah Alam II. But Buxar just gave them a battlefield win. The Treaty of Allahabad was what translated that win into a system of control that lasted generations. Lucas: If this kind of deep dive into the machinery of empire is useful to you, by the way — the way these episodes stay ad-free is through listener support. It's buy me a coffee dot com slash fexingo. Just a small way to keep the history coming without interruption. Luna: Yeah, totally. It's a tiny gesture that makes a big difference for the show. Lucas: So let's get into the treaty itself. It's really two separate agreements, signed on the same day — August 12, 1765 — at Allahabad. One was between the East India Company and the Mughal emperor Shah Alam II. The other was between the Company and shuja ud daula, the Nawab of Awadh. Luna: Why two separate treaties? Weren't they on the same side? Lucas: They had been allies at Buxar, but the Company treated them differently. Shah Alam II was the titular Mughal emperor — he had almost no real power, but enormous symbolic authority. So the Company offered him a deal: they would give him back the districts of Kora and Allahabad, which they'd taken, and they'd pay him an annual tribute of 2.6 million rupees. In exchange, he would grant them the diwani — the right to collect revenue — over Bengal, Bihar, and Orissa. Lucas: That diwani is the key. The word 'diwani' means the right to collect taxes — but in Mughal administration, it was much more. The diwan was the chief financial officer, responsible for revenue, civil justice, and administration. By granting the diwani to the Company, Shah Alam II effectively handed over the entire fiscal apparatus of the richest provinces in India. Luna: So the Company went from being a trading firm to being the government — at least for tax purposes. Lucas: Exactly. They now had the legal authority to collect land revenue, customs, and all other taxes. And they used it ruthlessly. Robert Clive, who negotiated the treaty, set up a dual system: the Nawab of Bengal remained the nominal ruler, but the Company controlled the revenue and the military. The Nawab had to pay an annual subsidy to the Company, and his ministers were Company appointees. It was a puppet regime. Lucas: The second treaty, with shuja ud daula, was even harsher. He had to pay a huge war indemnity of 5 million rupees, cede Allahabad and Kora to the emperor, and agree to a defensive alliance with the Company. He also had to accept a British resident at his court, which meant constant surveillance. Luna: And what about Mir Qasim? He was the Nawab of Bengal who rebelled against the Company in the first place. Lucas: Mir Qasim was defeated at Buxar and fled. He died in obscurity in 1777. The Company replaced him with a puppet — first Mir Jafar again, briefly, and then his son Najimuddin. But the real power was now in Calcutta. The treaty of Allahabad essentially made the East India Company the de facto sovereign of Bengal, and by extension, the dominant power in northern India. Luna: So this is really the moment the British Raj begins — not Plassey, not Buxar, but Allahabad. Lucas: Many historians would agree. Plassey gave them a foothold, Buxar proved their military superiority, but Allahabad gave them the legal framework to extract wealth on a massive scale. And extract they did. In the decade after 1765, the Company sent tens of millions of pounds worth of goods and silver out of Bengal — much of it to pay for tea imports from China. This was the beginning of the 'drain of wealth' that economists like Dadabhai Naoroji later documented. Lucas: The human cost was staggering. In 1770, just five years after the treaty, Bengal was hit by a famine that killed an estimated 10 million people — roughly a third of the population. The Company continued to collect taxes at the same rate, even during the famine. They even increased the land revenue assessment in some areas. That's not just neglect — that's brutal extraction. Luna: And they had the legal right to do it, thanks to the diwani. It's chilling. Lucas: It is. And it set a pattern for the rest of British rule in India. The Company used the revenue from Bengal to finance its wars in the south and west — the wars against Mysore, the Marathas, and later the Sikhs. Bengal became the cash cow that fueled the entire colonial enterprise. Lucas: But there's another layer to this. The Treaty of Allahabad also marked a shift in the Company's relationship with the Mughal emperor. For the first time, the emperor acknowledged the Company as a legitimate political authority in India. He gave them a formal grant, which the British used to claim that they were ruling in the name of the Mughal emperor — a fiction they maintained until 1858. Luna: So they wrapped their commercial ambitions in the cloak of Mughal legitimacy. Lucas: Exactly. And the irony is that Shah Alam II thought he was playing a clever game. He wanted to use the Company as a counterweight to his own rebellious nobles and to the Marathas. Instead, he made himself a pensioner of the Company. He spent the rest of his life as a figurehead, moving from city to city under British protection, powerless. Lucas: So when we look at the Treaty of Allahabad, we're seeing the blueprint for the British Raj: military force, legal manipulation, economic extraction, and a thin veneer of traditional authority. It's a masterclass in how an empire builds itself — and a tragedy for the millions who paid the price. Luna: You know, I think people often imagine the British Raj starting with Victoria's proclamation in 1858. But really, it started here, in 1765, with a piece of paper and a tax grant. Lucas: Absolutely. And that's why it's worth understanding. Because the machinery set up at Allahabad — the dual system, the puppet nawab, the extraction of revenue — it lasted for decades. It wasn't until the Regulating Act of 1773 and the later reforms that the British government started to rein in the Company, but by then the damage was done. Lucas: And that's the thing about colonialism — it doesn't always arrive with trumpets and cannon fire. Sometimes it arrives with a treaty, a seal, and a promise of protection. And by the time you realize what's happened, the wealth is gone, and the power has shifted forever.