TheHudson’sBayCompany,beforetheirmisfortunesinthelatewar,hadbeenmuchmorefortunatethantheRoyalAfricanCompany。Theirnecessaryexpenseismuchsmaller。Thewholenumberofpeoplewhomtheymaintainintheirdifferentsettlementsandhabitations,whichtheyhavehonouredwiththenameofforts,issaidnottoexceedahundredandtwentypersons。Thisnumber,however,issufficienttopreparebeforehandthecargooffursandothergoodsnecessaryforloadingtheirships,which,onaccountoftheice,canseldomremainabovesixoreightweeksinthoseseas。Thisadvantageofhavingacargoreadypreparedcouldnotforseveralyearsbeacquiredbyprivateadventurers,andwithoutitthereseemstobenopossibilityoftradingtoHudson’sBay。Themoderatecapitalofthecompany,which,itissaid,doesnotexceedonehundredandtenthousandpounds,maybesidesbesufficienttoenablethemtoengrossthewhole,oralmostthewhole,tradeandsurplusproduceofthemiserable,thoughextensivecountry,comprehendedwithintheircharter。Noprivateadventurers,accordingly,haveeverattemptedtotradetothatcountryincompetitionwiththem。
Thiscompany,therefore,havealwaysenjoyedanexclusivetradeinfact,thoughtheymayhavenorighttoitinlaw。Overandaboveallthis,themoderatecapitalofthiscompanyissaidtobedividedamongaverysmallnumberofproprietors。Butajointstockcompany,consistingofasmallnumberofproprietors,withamoderatecapital,approachesverynearlytothenatureofaprivatecopartnery,andmaybecapableofnearlythesamedegreeofvigilanceandattention。Itisnottobewonderedat,therefore,if,inconsequenceofthesedifferentadvantages,theHudson’sBayCompanyhad,beforethelatewar,beenabletocarryontheirtradewithaconsiderabledegreeofsuccess。Itdoesnotseemprobable,however,thattheirprofitseverapproachedtowhatthelateMr。Dobbsimaginedthem。Amuchmoresoberandjudiciouswriter,Mr。Anderson,authorofTheHistoricalandChronologicalDeductionofCommerce,veryjustlyobservesthat,uponexaminingtheaccountsofwhichMr。Dobbshimselfwasgivenforseveralyearstogetheroftheirexportsandimports,anduponmakingproperallowancesfortheirextraordinaryriskandexpense,itdoesnotappearthattheirprofitsdeservetobeenvied,orthattheycanmuch,ifatall,exceedtheordinaryprofitsoftrade。
TheSouthSeaCompanyneverhadanyfortsorgarrisonstomaintain,andthereforewereentirelyexemptedfromonegreatexpensetowhichotherjointstockcompaniesforforeigntradearesubject。Buttheyhadanimmensecapitaldividedamonganimmensenumberofproprietors。Itwasnaturallytobeexpected,therefore,thatfolly,negligence,andprofusionshouldprevailinthewholemanagementoftheiraffairs。Theknaveryandextravaganceoftheirstock—jobbingprojectsaresufficientlyknown,andtheexplicationofthemwouldbeforeigntothepresentsubject。Theirmercantileprojectswerenotmuchbetterconducted。ThefirsttradewhichtheyengagedinwasthatofsupplyingtheSpanishWestIndieswithnegroes,ofwhich(inconsequenceofwhatwascalledtheAssientocontractgrantedthembytheTreatyofUtrecht)theyhadtheexclusiveprivilege。Butasitwasnotexpectedthatmuchprofitcouldbemadebythistrade,boththePortugueseandFrenchcompanies,whohadenjoyedituponthesametermsbeforethem,havingbeenruinedbyit,theywereallowed,ascompensation,tosendannuallyashipofacertainburdentotradedirectlytotheSpanishWestIndies。Ofthetenvoyageswhichthisannualshipwasallowedtomake,theyaresaidtohavegainedconsiderablybyone,thatoftheRoyalCarolinein1731,andtohavebeenlosers,moreorless,byalmostalltherest。Theirillsuccesswasimputed,bytheirfactorsandagents,totheextortionandoppressionoftheSpanishgovernment;butwas,perhaps,principallyowingtotheprofusionanddepredationsofthoseveryfactorsandagents,someofwhomaresaidtohaveacquiredgreatfortuneseveninoneyear。In1734,thecompanypetitionedthekingthattheymightbeallowedtodisposeofthetradeandtonnageoftheirannualship,onaccountofthelittleprofitwhichtheymadebyit,andtoacceptsuchequivalentastheycouldobtainfromtheofSpain。
In1724,thiscompanyhadundertakenthewhale—fishery。Ofthis,indeed,theyhadnomonopoly;butaslongastheycarriediton,nootherBritishsubjectsappeartohaveengagedinit。OftheeightvoyageswhichtheirshipsmadetoGreenland,theyweregainersbyone,andlosersbyalltherest。Aftertheireighthandlastvoyage,whentheyhadsoldtheirships,stores,andutensils,theyfoundthattheirwholeloss,uponthisbranch,capitalandinterestincluded,amountedtoupwardsoftwohundredandthirty—seventhousandpounds。
In1722,thiscompanypetitionedtheParliamenttobeallowedtodividetheirimmensecapitalofmorethanthirty—threemillionseighthundredthousandpounds,thewholeofwhichhadbeenlenttogovernment,intotwoequalparts:Theonehalf,orupwardsofsixteenmillionsninehundredthousandpounds,tobeputuponthesamefootingwithothergovernmentannuities,andnottobesubjecttothedebtscontracted,orlossesincurred,bythedirectorsofthecompanyintheprosecutionoftheirmercantileprojects;theotherhalftoremain,asbefore,atradingstock,andtobesubjecttothosedebtsandlosses。Thepetitionwastooreasonablenottobegranted。In1733,theyagainpetitionedtheParliamentthatthree—fourthsoftheirtradingstockmightbeturnedintoannuitystock,andonlyone—fourthremainastradingstock,orexposedtothehazardsarisingfromthebadmanagementoftheirdirectors。Boththeirannuityandtradingstockshad,bythistime,beenreducedmorethantwomillionseachbyseveraldifferentpaymentsfromgovernment;sothatthisfourthamountedonlytoL3,662,7848s。
6d。In1748,allthedemandsofthecompanyupontheKingofSpain,inconsequenceoftheAssientocontract,were,bytheTreatyofAix—la—Chapelle,givenupforwhatwassupposedanequivalent。AnendwasputtotheirtradewiththeSpanishWestIndies,theremainderoftheirtradingstockwasturnedintoanannuitystock,andthecompanyceasedineveryrespecttobeatradingcompany。
ItoughttobeobservedthatinthetradewhichtheSouthSeaCompanycarriedonbymeansoftheirannualship,theonlytradebywhichiteverwasexpectedthattheycouldmakeanyconsiderableprofit,theywerenotwithoutcompetitors,eitherintheforeignorinthehomemarket。AtCarthagena,PortoBello,andLaVeraCruz,theyhadtoencounterthecompetitionoftheSpanishmerchants,whobroughtfromCadiz,tothosemarkets,Europeangoodsofthesamekindwiththeoutwardcargooftheirship;andinEnglandtheyhadtoencounterthatoftheEnglishmerchants,whoimportedfromCadizgoodsoftheSpanishWestIndiesofthesamekindwiththeinwardcargo。ThegoodsbothoftheSpanishandEnglishmerchants,indeed,were,perhaps,subjecttohigherduties。Butthelossoccasionedbythenegligence,profusion,andmalversationoftheservantsofthecompanyhadprobablybeenataxmuchheavierthanallthoseduties。Thatajointstockcompanyshouldbeabletocarryonsuccessfullyanybranchofforeigntrade,whenprivateadventurerscancomeintoanysortofopenandfaircompetitionwiththem,seemscontrarytoallexperience。
TheoldEnglishEastIndiaCompanywasestablishedin1600
byacharterfromQueenElizabeth。InthefirsttwelvevoyageswhichtheyfittedoutforIndia,theyappeartohavetradedasaregulatedcompany,withseparatestocks,thoughonlyinthegeneralshipsofthecompany。In1612,theyunitedintoajointstock。Theircharterwasexclusive,andthoughnotconfirmedbyActofParliament,wasinthosedayssupposedtoconveyarealexclusiveprivilege。Formanyyears,therefore,theywerenotmuchdisturbedbyinterlopers。Theircapital,whichneverexceededsevenhundredandforty—fourthousandpounds,andofwhichfiftypoundswasashare,wasnotsoexorbitant,northeirdealingssoextensive,astoaffordeitherapretextforgrossnegligenceandprofusion,oracovertogrossmalversation。
Notwithstandingsomeextraordinarylosses,occasionedpartlybythemaliceoftheDutchEastIndiaCompany,andpartlybyotheraccidents,theycarriedonformanyyearsasuccessfultrade。Butinprocessoftime,whentheprinciplesoflibertywerebetterunderstood,itbecameeverydaymoreandmoredoubtfulhowfaraRoyalCharter,notconfirmedbyActofParliament,couldconveyanexclusiveprivilege。Uponthisquestionthedecisionsofthecourtsofjusticewerenotuniform,butvariedwiththeauthorityofgovernmentandthehumoursofthetimes。Interlopersmultiplieduponthem,andtowardstheendofthereignofCharlesII,throughthewholeofthatofJamesIIandduringapartofthatofWilliamIII,reducedthemtogreatdistress。In1698,aproposalwasmadetoParliamentofadvancingtwomillionstogovernmentateightpercent,providedthesubscriberswereerectedintoanewEastIndiaCompanywithexclusiveprivileges。
TheoldEastIndiaCompanyofferedsevenhundredthousandpounds,nearlytheamountoftheircapital,atfourpercentuponthesameconditions。Butsuchwasatthattimethestateofpubliccredit,thatitwasmoreconvenientforgovernmenttoborrowtwomillionsateightpercentthansevenhundredthousandpoundsatfour。Theproposalofthenewsubscriberswasaccepted,andanewEastIndiaCompanyestablishedinconsequence。TheoldEastIndiaCompany,however,hadarighttocontinuetheirtradetill1701。
Theyhad,atthesametime,inthenameoftheirtreasurer,subscribed,veryartfully,threehundredandfifteenthousandpoundsintothestockofthenew。ByanegligenceintheexpressionoftheActofParliamentwhichvestedtheEastIndiatradeinthesubscriberstothisloanoftwomillions,itdidnotappearevidentthattheywereallobligedtouniteintoajointstock。Afewprivatetraders,whosesubscriptionsamountedonlytoseventhousandtwohundredpounds,insistedupontheprivilegeoftradingseparatelyupontheirownstocksandattheirownrisk。TheoldEastIndiaCompanyhadarighttoaseparatetradeupontheiroldstocktill1701;andtheyhadlikewise,bothbeforeandafterthatperiod,aright,likethatofotherprivatetraders,toaseparatetradeuponthethreehundredandfifteenthousandpoundswhichtheyhadsubscribedintothestockofthenewcompany。Thecompetitionofthetwocompanieswiththeprivatetraders,andwithoneanother,issaidtohavewell—nighruinedboth。Uponasubsequentoccasion,in1730,whenaproposalwasmadetoParliamentforputtingthetradeunderthemanagementofaregulatedcompany,andtherebylayingitinsomemeasureopen,theEastIndiaCompany,inoppositiontothisproposal,representedinverystrongtermswhathadbeen,atthistime,themiserableeffects,astheythoughtthem,ofthiscompetition。InIndia,theysaid,itraisedthepriceofgoodssohighthattheywerenotworththebuying;andinEngland,byoverstockingthemarket,itsunktheirpricesolowthatnoprofitcouldbemadebythem。Thatbyamoreplentifulsupply,tothegreatadvantageandconveniencyofthepublic,itmusthavereduced,verymuch,thepriceofIndiangoodsintheEnglishmarket,cannotwellbedoubted;butthatitshouldhaveraisedverymuchtheirpriceintheIndianmarketseemsnotveryprobable,asalltheextraordinarydemandwhichthatcompetitioncouldoccasionmusthavebeenbutasadropofwaterintheimmenseoceanofIndianCommerce。Theincreaseofdemand,besides,thoughinthebeginningitmaysometimesraisethepriceofgoods,neverfailstoloweritintherun。Itencouragesproduction,andtherebyincreasesthecompetitionoftheproducers,who,inordertounderselloneanother,haverecoursetonewdivisionsoflabourandnewimprovementsofartwhichmightneverotherwisehavebeenthoughtof。Themiserableeffectsofwhichthecompanycomplainedwerethecheapnessofconsumptionandtheencouragementgiventoproduction,preciselythetwoeffectswhichitisthegreatbusinessofpoliticaleconomytopromote。Thecompetition,however,ofwhichtheygavethisdolefulaccount,hadnotbeenallowedtobeoflongcontinuance。In1702,thetwocompanieswere,insomemeasure,unitedbyanindenturetripartite,towhichthequeenwasthethirdparty;andin1708,theywere,byActofParliament,perfectlyconsolidatedintoonecompanybytheirpresentnameoftheTheUnitedCompanyofMerchantstradingtotheEastIndies。IntothisactitwasthoughtworthwhiletoinsertaclauseallowingtheseparatetraderstocontinuetheirtradetillMichaelmas1711,butatthesametimeempoweringthedirectors,uponthreeyears’notice,toredeemtheirlittlecapitalofseventhousandtwohundredpounds,andtherebytoconvertthewholestockofthecompanyintoajointstock。Bythesameact,thecapitalofthecompany,inconsequenceofanewloantogovernment,wasaugmentedfromtwomillionstothreemillionstwohundredthousandpounds。In1743,thecompanyadvancedanothermilliontogovernment。Butthismillionbeingraised,notbyacallupontheproprietors,butbysellingannuitiesandcontractingbond—debts,itdidnotaugmentthestockuponwhichtheproprietorscouldclaimadividend。Itaugmented,however,theirtradingstock,itbeingequallyliablewiththeotherthreemillionstwohundredthousandpoundstothelossessustained,anddebtscontracted,bythecompanyinprosecutionoftheirmercantileprojects。From1708,oratleastfrom1711,thiscompany,beingdeliveredfromallcompetitors,andfullyestablishedinthemonopolyoftheEnglishcommercetotheEastIndies,carriedonasuccessfultrade,andfromtheirprofitsmadeannuallyamoderatedividendtotheirproprietors。
DuringtheFrenchwar,whichbeganin1741,theambitionofMr。
Dupleix,theFrenchgovernorofPondicherry,involvedtheminthewarsoftheCarnatic,andinthepoliticsoftheIndianprinces。
Aftermanysignalsuccesses,andequallysignallosses,theyatlastlostMadras,atthattimetheirprincipalsettlementinIndia。ItwasrestoredtothembytheTreatyofAix—la—Chapelle;
andaboutthistimethespiritofwarandconquestseemstohavetakenpossessionoftheirservantsinIndia,andneversincetohaveleftthem。DuringtheFrenchwar,whichbeganin1755,theirarmspartookofthegeneralgoodfortuneofthoseofGreatBritain。TheydefendedMadras,tookPondicherry,recoveredCalcutta,andacquiredtherevenuesofarichandextensiveterritory,amounting,itwasthensaid,toupwardsofthreemillionsayear。Theyremainedforseveralyearsinquietpossessionofthisrevenue:butin1767,administrationlaidclaimtotheirterritorialacquisitions,andtherevenuearisingfromthem,asofrightbelongingtothecrown;andthecompany,incompensationforthisclaim,agreedtopaythegovernmentfourhundredthousandpoundsayear。Theyhadbeforethisgraduallyaugmentedtheirdividendfromaboutsixtotenpercent;thatis,upontheircapitalofthreemillionstwohundredthousandpoundstheyhadincreaseditbyahundredandtwenty—eightthousandpounds,orhadraiseditfromonehundredandninety—twothousandtothreehundredandtwentythousandpoundsayear。Theywereattemptingaboutthistimetoraiseitstillfurther,totwelveandahalfpercent,whichwouldhavemadetheirannualpaymentstotheirproprietorsequaltowhattheyhadagreedtopayannuallytogovernment,ortofourhundredthousandpoundsayear。
Butduringthetwoyearsinwhichtheiragreementwithgovernmentwastotakeplace,theywererestrainedfromanyfurtherincreaseofdividendbytwosuccessiveActsofParliament,ofwhichtheobjectwastoenablethemtomakeaspeedierprogressinthepaymentoftheirdebts,whichwereatthistimeestimatedatupwardsofsixorsevenmillionssterling。
In1769,theyrenewedtheiragreementwithgovernmentforfiveyearsmore,andstipulatedthatduringthecourseofthatperiodtheyshouldbeallowedgraduallytoincreasetheirdividendtotwelveandahalfpercent;neverincreasingit,however,morethanonepercentinoneyear。Thisincreaseofdividend,therefore,whenithadrisentoitsutmostheight,couldaugmenttheirannualpayments,totheirproprietorsandgovernmenttogether,butbysixhundredandeightthousandpoundsbeyondwhattheyhadbeenbeforetheirlateterritorialacquisitions。
Whatthegrossrevenueofthoseterritorialacquisitionswassupposedtoamounttohasalreadybeenmentioned;andbyanaccountbroughtbytheCruttendenEastIndiamanin1768,thenetrevenue,clearofalldeductionsandmilitarycharges,wasstatedattwomillionsforty—eightthousandsevenhundredandforty—sevenpounds。Theyweresaidatthesametimetopossessanotherrevenue,arisingpartlyfromlands,butchieflyfromthecustomsestablishedattheirdifferentsettlements,amountingtofourhundredandthirty—ninethousandpounds。Theprofitsoftheirtradetoo,accordingtotheevidenceoftheirchairmanbeforetheHouseofCommons,amountedatthistimetoatleastfourhundredthousandpoundsayear,accordingtothatoftheiraccountant,toatleastfivehundredthousand;accordingtothelowestaccount,atleastequaltothehighestdividendthatwastobepaidtotheirproprietors。Sogreatarevenuemightcertainlyhaveaffordedanaugmentationofsixhundredandeightthousandpoundsintheirannualpayments,andatthesametimehaveleftalargesinkingfundsufficientforthespeedyreductionoftheirdebts。In1773,however,theirdebts,insteadofbeingreduced,wereaugmentedbyanarreartothetreasuryinthepaymentofthefourhundredthousandpounds,byanothertothecustom—housefordutiesunpaid,byalargedebttothebankformoneyborrowed,andbyafourthforbillsdrawnuponthemfromIndia,andwantonlyaccepted,totheamountofupwardsoftwelvehundredthousandpounds。Thedistresswhichtheseaccumulatedclaimsbroughtuponthem,obligedthemnotonlytoreduceallatoncetheirdividendtosixpercent,buttothrowthemselvesuponthemercyofgovernment,andtosupplicate,first,areleasefromfurtherpaymentofthestipulatedfourhundredthousandpoundsayear;and,secondly,aloanoffourteenhundredthousand,tosavethemfromimmediatebankruptcy。Thegreatincreaseoftheirfortunehad,itseems,onlyservedtofurnishtheirservantswithapretextforgreaterprofusion,andacoverforgreatermalversation,thaninproportioneventothatincreaseoffortune。TheconductoftheirservantsinIndia,andthegeneralstateoftheiraffairsbothinIndiaandinEurope,becamethesubjectofaParliamentaryinquiry,inconsequenceofwhichseveralveryimportantalternationsweremadeintheconstitutionoftheirgovernment,bothathomeandabroad。InIndiatheirprincipalsettlementsofMadras,Bombay,andCalcutta,whichhadbeforebeenaltogetherindependentofoneanother,weresubjectedtoagovernor—general,assistedbyacounciloffourassessors,ParliamentassumingtoitselfthefirstnominationofthisgovernorandcouncilwhoweretoresideatCalcutta;thatcityhavingnowbecome,whatMadraswasbefore,themostimportantoftheEnglishsettlementsinIndia。TheCourtoftheMayorofCalcutta,originallyinstitutedforthetrialofmercantilecauseswhicharoseincityandneighbourhood,hadgraduallyextendeditsjurisdictionwiththeextensionoftheempire。Itwasnowreducedandconfinedtotheoriginalpurposeofitsinstitution。Insteadofitanewsupremecourtofjudicaturewasestablished,consistingofachiefjusticeandthreejudgestobeappointedbythecrown。InEurope,thequalificationnecessarytoentitleaproprietortovoteattheirgeneralcourtswasraisedfromfivehundredpounds,theoriginalpriceofashareinthestockofthecompany,toathousandpounds。Inordertovoteuponthisqualificationtoo,itwasdeclarednecessarythatheshouldhavepossessedit,ifacquiredbyhisownpurchase,andnotbyinheritance,foratleastoneyear,insteadofsixmonths,thetermrequisitebefore。Thecourtoftwenty—fourdirectorshadbeforebeenchosenannually;butitwasnowenactedthateachdirectorshould,forthefuture,bechosenforfouryears;sixofthem,however,togooutofofficebyrotationeveryyear,andnottobecapableofbeingre—chosenattheelectionofthesixnewdirectorsfortheensuingyear。Inconsequenceofthesealterations,thecourts,bothoftheproprietorsanddirectors,itwasexpected,wouldbelikelytoactwithmoredignityandsteadinessthantheyhadusuallydonebefore。Butitseemsimpossible,byanyalterations,torenderthosecourts,inanyrespect,fittogovern,oreventoshareinthegovernmentofagreatempire;becausethegreaterpartoftheirmembersmustalwayshavetoolittleinterestintheprosperityofthatempiretogiveanyseriousattentiontowhatmaypromoteit。Frequentlyamanofgreat,sometimesevenamanofsmallfortune,iswillingtopurchaseathousandpounds’shareinIndiastockmerelyfortheinfluencewhichheexpectstoacquirebyavoteinthecourtofproprietors。Itgiveshimashare,thoughnotintheplunder,yetintheappointmentoftheplunderersofIndia;thecourtofdirectors,thoughtheymakethatappointment,beingnecessarilymoreorlessundertheinfluenceoftheproprietors,whonotonlyelectthosedirectors,butsometimesoverruletheappointmentsoftheirservantsinIndia。Providedhecanenjoythisinfluenceforafewyears,andtherebyprovideforacertainnumberofhisfriends,hefrequentlycareslittleaboutthedividend,orevenaboutthevalueofthestockuponwhichhisvoteisfounded。Abouttheprosperityofthegreatempire,inthegovernmentofwhichthatvotegiveshimashare,heseldomcaresatall。Noothersovereignseverwere,or,fromthenatureofthings,evercouldbe,soperfectlyindifferentaboutthehappinessormiseryoftheirsubjects,theimprovementorwasteoftheirdominions,thegloryordisgraceoftheiradministration,as,fromirresistiblemoralcauses,thegreaterpartoftheproprietorsofsuchamercantilecompanyare,andnecessarilymustbe。Thisindifference,too,wasmorelikelytobeincreasedthandiminishedbysomeofthenewregulationswhichweremadeinconsequenceoftheParliamentaryinquiry。ByaresolutionoftheHouseofCommons,forexample,itwasdeclared,thatwhenthefourteenhundredthousandpoundslenttothecompanybygovernmentshouldbepaid,andtheirbond—debtsbereducedtofifteenhundredthousandpounds,theymightthen,andnottillthen,divideeightpercentupontheircapital;andthatwhateverremainedoftheirrevenuesandnetprofitsathomeshouldbedividedintofourparts;threeofthemtobepaidintotheexchequerfortheuseofthepublic,andthefourthtobereservedasafundeitherforthefurtherreductionoftheirbond—debts,orforthedischargeofothercontingentexigencieswhichthecompanymightlabourunder。Butifthecompanywerebadstewards,andbadsovereigns,whenthewholeoftheirnetrevenueandprofitsbelongedtothemselves,andwereattheirowndisposal,theyweresurelynotlikelytobebetterwhenthree—fourthsofthemweretobelongtootherpeople,andtheotherfourth,thoughtobelaidoutforthebenefitofthecompany,yettobesoundertheinspectionandwiththeapprobationofotherpeople。
Itmightbemoreagreeabletothecompanythattheirownservantsanddependantsshouldhaveeitherthepleasureofwastingortheprofitofembezzlingwhateversurplusmightremainafterpayingtheproposeddividendofeightpercentthanthatitshouldcomeintothehandsofasetofpeoplewithwhomthoseresolutionscouldscarcefailtosetthem,insomemeasure,atvariance。Theinterestofthoseservantsanddependantsmightsofarpredominateinthecourtofproprietorsassometimestodisposeittosupporttheauthorsofdepredationswhichhadbeencommittedindirectviolationofitsownauthority。Withthemajorityofproprietors,thesupportevenoftheauthorityoftheirowncourtmightsometimesbeamatteroflessconsequencethanthesupportofthosewhohadsetthatauthorityatdefiance。
Theregulationsof1773,accordingly,didnotputanendtothedisordersofthecompany’sgovernmentinIndia。
Notwithstandingthat,duringamomentaryfitofgoodconduct,theyhadatonetimecollectedintothetreasuryofCalcuttamorethanthreemillionssterling;notwithstandingthattheyhadafterwardsextended,eithertheirdominion,ortheirdepredations,overavastaccessionofsomeoftherichestandmostfertilecountriesinIndia,allwaswastedanddestroyed。
TheyfoundthemselvesaltogetherunpreparedtostoporresisttheincursionofHyderAli;and,inconsequenceofthosedisorders,thecompanyisnow(1784)ingreaterdistressthanever;and,inordertopreventimmediatebankruptcy,isoncemorereducedtosupplicatetheassistanceofgovernment。DifferentplanshavebeenproposedbythedifferentpartiesinParliamentforthebettermanagementofitsaffairs。Andallthoseplansseemtoagreeinsupposing,whatwasindeedalwaysabundantlyevident,thatitisaltogetherunfittogovernitsterritorialpossessions。Eventhecompanyitselfseemstobeconvincedofitsownincapacitysofar,andseems,uponthataccount,willingtogivethemuptogovernment。
Withtherightofpossessingfortsandgarrisonsindistantandbarbarouscountriesisnecessarilyconnectedtherightofmakingpeaceandwarinthosecountries。Thejointstockcompanieswhichhavehadtheonerighthaveconstantlyexercisedtheother,andhavefrequentlyhaditexpresslyconferreduponthem。Howunjustly,howcapriciously,howcruellytheyhavecommonlyexercisedit,istoowellknownfromrecentexperience。
Whenacompanyofmerchantsundertake,attheirownriskandexpense,toestablishanewtradewithsomeremoteandbarbarousnation,itmaynotbeunreasonabletoincorporatethemintoajointstockcompany,andtograntthem,incaseoftheirsuccess,amonopolyofthetradeforacertainnumberofyears。Itistheeasiestandmostnaturalwayinwhichthestatecanrecompensethemforhazardingadangerousandexpensiveexperiment,ofwhichthepublicisafterwardstoreapthebenefit。Atemporarymonopolyofthiskindmaybevindicateduponthesameprinciplesuponwhichalikemonopolyofanewmachineisgrantedtoitsinventor,andthatofanewbooktoitsauthor。Butupontheexpirationoftheterm,themonopolyoughtcertainlytodetermine;thefortsandgarrisons,ifitwasfoundnecessarytoestablishany,tobetakenintothehandsofgovernment,theirvaluetobepaidtothecompany,andthetradetobelaidopentoallthesubjectsofthestate。Byaperpetualmonopoly,alltheothersubjectsofthestatearetaxedveryabsurdlyintwodifferentways:first,bythehighpriceofgoods,which,inthecaseofafreetrade,theycouldbuymuchcheaper;and,secondly,bytheirtotalexclusionfromabranchofbusinesswhichitmightbebothconvenientandprofitableformanyofthemtocarryon。
Itisforthemostworthlessofallpurposes,too,thattheyaretaxedinthismanner。Itismerelytoenablethecompanytosupportthenegligence,profusion,andmalversationoftheirownservants,whosedisorderlyconductseldomallowsthedividendofthecompanytoexceedtheordinaryrateofprofitintradeswhicharealtogetherfree,andveryfrequentlymakesitfallevenagooddealshortofthatrate。Withoutamonopoly,however,ajointstockcompany,itwouldappearfromexperience,cannotlongcarryonanybranchofforeigntrade。Tobuyinonemarket,inordertosell,withprofit,inanother,whentherearemanycompetitorsinboth,towatchover,notonlytheoccasionalvariationsinthedemand,butthemuchgreaterandmorefrequentvariationsinthecompetition,orinthesupplywhichthatdemandislikelytogetfromotherpeople,andtosuitwithdexterityandjudgmentboththequantityandqualityofeachassortmentofgoodstoallthesecircumstances,isaspeciesofwarfareofwhichtheoperationsarecontinuallychanging,andwhichcanscarceeverbeconductedsuccessfullywithoutsuchanunremittingexertionofvigilanceandattentionascannotlongbeexpectedfromthedirectorsofajointstockcompany。TheEastIndiaCompany,upontheredemptionoftheirfunds,andtheexpirationoftheirexclusiveprivilege,haveright,byActofParliament,tocontinueacorporationwithajointstock,andtotradeintheircorporatecapacitytotheEastIndiesincommonwiththerestoftheirfellow—subjects。Butinthissituation,thesuperiorvigilanceandattentionofprivateadventurerswould,inallprobability,soonmakethemwearyofthetrade。
AneminentFrenchauthor,ofgreatknowledgeinmattersofpoliticaleconomy,theAbbeMorellet,givesalistoffifty—fivejointstockcompaniesforforeigntradewhichhavebeenestablishedindifferentpartsofEuropesincetheyear1600,andwhich,accordingtohim,haveallfailedfrommismanagement,notwithstandingtheyhadexclusiveprivileges。Hehasbeenmisinformedwithregardtothehistoryoftwoorthreeofthem,whichwerenotjointstockcompaniesandhavenotfailed。But,incompensation,therehavebeenseveraljointstockcompanieswhichhavefailed,andwhichhehasomitted。
TheonlytradeswhichitseemspossibleforajointstockcompanytocarryonsuccessfullywithoutanexclusiveprivilegearethoseofwhichalltheoperationsarecapableofbeingreducedtowhatiscalledaRoutine,ortosuchauniformityofmethodasadmitsoflittleornovariation。Ofthiskindis,first,thebankingtrade;secondly,thetradeofinsurancefromfire,andfromseariskandcaptureintimeofwar;thirdly,thetradeofmakingandmaintaininganavigablecutorcanal;and,fourthly,thesimilartradeofbringingwaterforthesupplyofagreatcity。
Thoughtheprinciplesofthebankingtrademayappearsomewhatabstruse,thepracticeiscapableofbeingreducedtostrictrules。Todepartuponanyoccasionfromthoserules,inconsequenceofsomeflatteringspeculationofextraordinarygain,isalmostalwaysextremelydangerous,andfrequentlyfatal,tothebankingcompanywhichattemptsit。Buttheconstitutionofjointstockcompaniesrendersthemingeneralmoretenaciousofestablishedrulesthananyprivatecopartnery。Suchcompanies,therefore,seemextremelywellfittedforthistrade。TheprincipalbankingcompaniesinEurope,accordingly,arejointstockcompanies,manyofwhichmanagetheirtradeverysuccessfullywithoutanyexclusiveprivilege。TheBankofEnglandhasnootherexclusiveprivilegeexceptthatnootherbankingcompanyinEnglandshallconsistofmorethansixpersons。ThetwobanksofEdinburgharejointstockcompanieswithoutanyexclusiveprivilege。
Thevalueoftherisk,eitherfromfire,orfromlossbysea,orbycapture,thoughitcannot,perhaps,becalculatedveryexactly,admits,however,ofsuchagrossestimationasrendersit,insomedegree,reducibletostrictruleandmethod。Thetradeofinsurance,therefore,maybecarriedonsuccessfullybyajointstockcompanywithoutanyexclusiveprivilege。NeithertheLondonAssurancenortheRoyalExchangeAssurancecompanieshaveanysuchprivilege。
Whenanavigablecutorcanalhasbeenoncemade,themanagementofitbecomesquitesimpleandeasy,anditisreducibletostrictruleandmethod。Eventhemakingofitissoasitmaybecontractedforwithundertakersatsomuchamile,andsomuchalock。Thesamethingmaybesaidofacanal,anaqueduct,oragreatpipeforbringingwatertosupplyagreatcity。Suchundertakings,therefore,maybe,andaccordinglyfrequentlyare,verysuccessfullymanagedbyjointstockcompanieswithoutanyexclusiveprivilege。
Toestablishajointstockcompany,however,foranyundertaking,merelybecausesuchacompanymightbecapableofmanagingitsuccessfully;ortoexemptaparticularsetofdealersfromsomeofthegenerallawswhichtakeplacewithregardtoalltheirneighbours,merelybecausetheymightbecapableofthrivingiftheyhadsuchanexemption,wouldcertainlynotbereasonable。Torendersuchanestablishmentperfectlyreasonable,withthecircumstanceofbeingreducibletostrictruleandmethod,twoothercircumstancesoughttoconcur。
First,itoughttoappearwiththeclearestevidencethattheundertakingisofgreaterandmoregeneralutilitythanthegreaterpartofcommontrades;andsecondly,thatitrequiresagreatercapitalthancaneasilybecollectedintoaprivatecopartnery。Ifamoderatecapitalweresufficient,thegreatutilityoftheundertakingwouldnotbeasufficientreasonforestablishingajointstockcompany;because,inthiscase,thedemandforwhatitwastoproducewouldreadilyandeasilybesuppliedbyprivateadventures。Inthefourtradesabovementioned,boththosecircumstancesconcur。
Thegreatandgeneralutilityofthebankingtradewhenprudentlymanagedhasbeenfullyexplainedinthesecond,bookofthisInquiry。Butapublicbankwhichistosupportpubliccredit,anduponparticularemergenciestoadvancetogovernmentthewholeproduceofatax,totheamount,perhaps,ofseveralmillions,ayearortwobeforeitcomesin,requiresagreatercapitalthancaneasilybecollectedintoanyprivatecopartnery。
Thetradeofinsurancegivesgreatsecuritytothefortunesofprivatepeople,andbydividingamongagreatmanythatlosswhichwouldruinanindividual,makesitfalllightandeasyuponthewholesociety。Inordertogivethissecurity,however,itisnecessarythattheinsurersshouldhaveaverylargecapital。
BeforetheestablishmentofthetwojointstockcompaniesforinsuranceinLondon,alist,itissaid,waslaidbeforetheattorney—generalofonehundredandfiftyprivateinsurerswhohadfailedinthecourseofafewyears。
Thatnavigablecutsandcanals,andtheworkswhicharesometimesnecessaryforsupplyingagreatcitywithwater,areofgreatandgeneralutility,whileatthesametimetheyfrequentlyrequireagreaterexpensethansuitsthefortunesofprivatepeople,issufficientlyobvious。
Exceptthefourtradesabovementioned,Ihavenotbeenabletorecollectanyotherinwhichallthethreecircumstancesrequisiteforrenderingreasonabletheestablishmentofajointstockcompanyconcur。TheEnglishcoppercompanyofLondon,theleadsmeltingcompany,theglassgrindingcompany,havenoteventhepretextofanygreatorsingularutilityintheobjectwhichtheypursue;nordoesthepursuitofthatobjectseemtorequireanyexpenseunsuitabletothefortunesofmanyprivatemen。
Whetherthetradewhichthosecompaniescarryonisreducibletosuchstrictruleandmethodastorenderitfitforthemanagementofajointstockcompany,orwhethertheyhaveanyreasontoboastoftheirextraordinaryprofits,Idonotpretendtoknow。Themine—adventurers’companyhasbeenlongagobankrupt。AshareinthestockoftheBritishLinenCompanyofEdinburghsells,atpresent,verymuchbelowpar,thoughlesssothatitdidsomeyearsago。Thejointstockcompanieswhichareestablishedforthepublic—spiritedpurposeofpromotingsomeparticularmanufacture,overandabovemanagingtheirownaffairsill,tothedimunitionofthegeneralstockofthesociety,caninotherrespectsscarceeverfailtodomoreharmthangood。
Notwithstandingthemostuprightintentions,theunavoidablepartialityoftheirdirectorstoparticularbranchesofthemanufactureofwhichtheundertakersmisleadandimposeuponthemisarealdiscouragementtotherest,andnecessarilybreaks,moreorless,thatnaturalproportionwhichwouldotherwiseestablishitselfbetweenjudiciousindustryandprofit,andwhich,tothegeneralindustryofthecountry,isofallencouragementsthegreatestandthemosteffectual。