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His contention is that the answer lies in superior knowledge and institutions. Stable institutions and knowledge management were the keys to kingdom. Superior navigational knowledge and maritime skills made a significant difference. As did the superior organisational structure of the East India companies. The form of the joint stock company provided these entities with a large pool of capital, enabled them to spread out risks and to spend a great deal on infrastructure such as building forts and cities. Indian traders were based largely on clan and community. Also, the East India companies specialised in large-scale contracts. The English East India Company was essentially an alliance between a set of risk-averse merchants and a set of risk-taking sailors and soldiers. Between them, these unlikely partners laid the seeds of the empire. Roy tells us about the high transaction costs imposed by geography on the Indian trade and by poor law-enforcement mechanisms. Poor connectivity made the hinterland inaccessible. The port cities while more or less independent of the land-based agrarian empires, were still dependent for goods and sometimes skills, on the hinterland. To law-enforcement mechanisms, Indian rulers had little reply. As a result, spot sales dominated the trade. The differences between the old way of working and the new were highlighted in the emergence of the port cities of Bombay, Madras and Calcutta which rapidly superseded the ancient centres of Surat, Masulipatnam and Hooghly. Roy argues that the former symbolised a different business culture altogether. In contrast to the port towns of ancient and medieval India, Bombay, Madras and Calcutta were drivers of trade. They existed only because of the profits of trade. It was they who controlled the hinterland and not the other way round. It was they who helped make the laws, while in Surat and Masulipatnam it was not traders who made the laws; these latter cities did not belong to merchants in the way Bombay, Madras and Calcutta did. The result was that with these cities, Indian merchants found opportunities to make greater profits than ever before. Roy writes a compelling story. His story makes one wonder about the other half of his argument: Not just in what way European merchants were superior, but why was it that their Asian counterparts never saw what the Europeans had and never tried to emulate it, if they did see it. The single factor, above all, responsible for the success of the English in India was the collaboration of Indian merchant capital. Whether it was in the official trade of the East India companies or in the private trade of European officials, they all depended on local private partners. The English never wanted political power in India. The question is why the Indian merchants never moved in to occupy this political space? Or is it that they never realised the difference that an active state could make to the way markets function? The British colonial government in the nineteenth century made a great and lasting difference to market integration by improving communications and to transfer of technology and skills by improving knowledge systems. Whether it was indigo, cotton and jute production or setting up foundries and textile mills, the knowledge inputs India received were significant. The Indian state had in the pre-European period, been sadly lacking on all these counts.Roy contrasts the weak and opportunistic support offered to Indian business by the land-owning warlord elites of India with the solid support of the East India Company. Indian merchants chose the company and signed the death-knell of the small principalities that had dominated the Indian political space thus far.
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