The other side of Libra – An historical perspective
This week a joint venture between Reliance, one of the largest companies in India, and Facebook, a tech mega-house was announced. This creates a framework where one of the world’s biggest mobile phone markets will potentially be plugged into a payment system with the possible use of the new facebook ‘currency’ called Libra. This developing path forces us to remember the history of not only India but Asia as a whole.
This new ‘currency’ business is not new at all, it just has a different face. Hundreds of years ago a private firm was issuing its own trading coin. The organisation had grown so powerful that it had its own army which was larger than that of its country of origin. In India it was simply known as ‘The Company’. Formally it was The Honourable East India Company or East India Trading Company, which held a royal charter from Queen Elizabeth I of England. While force was used in India, the origins began with simple trade – the exemption of custom duties in the 17th century by the Mughal Emperor Jahangir and the setting up of factories. As time went on, The Company controlled currency, and taxation, in India. It was directly involved in politics as well as trade and had risen to colonial overlord as the Mughal Empire deteriorated. What started off simply dealing in commodities turned into something very different.
The Company’s largest asset was the trade route between India and China. The pivot was Singapore where the ships turned to sail into the South China Sea. The commodity on board was Opium which was exchanged for silver. That trade was so important it ignited the Opium Wars when the Chinese refused to import the drugs. It led to Hong Kong becoming British in 1841. Following the Indian Rebellion of 1857, a.k.a India’s First War of Independence or the Indian Mutiny, the British Crown took control of The Company’s assets & administration and there we officially had the British Raj. The India-China trade remained just as important which is why there was the Second Opium War between 1856 and 1860 against the Qing dynasty. By 1876 Queen Victoria was crowned Empress of India.
The coinage system remained in place even after independence all the way through to 1950 when India became a Republic. The question is why was The Company allowed to issue its own currency in India? This foreign private company had so much unaccounted power and was left unchecked. We can assume the motivations of The Company to be mostly for financial and commercial gain, but in the end it manifested into something more sinister. Mughal India fell and ultimately the people were exploited.
Although no company in the world, even the huge ones today, is as powerful as the East India Company was then, can governments take a back seat to watch such collaborations unfold? Does the world need a new crypto currency or payment system controlled by a private company? Does India or any country need to rely on that to modernise? And what is wrong with using the Indian Rupee? It is no longer the highly risky currency it might have been in the past. The Reserve Bank of India reports more than $450bn in reserves and has weathered the recent Covid-19 storm much better than others. The Rupee’s volatility is comparable to South Korea’s Won and it is more stable than the currencies of Indonesia, Turkey, Brazil, Mexico, and even the UK on some measures.
Now that we live in a world of democracies and fast technology, what is the most valuable commodity? Is today’s data yesterday’s opium? Is today’s Libra trying to be yesterday’s Silver Rupee or Gold Mohur? Why wait to find out.
SKA