An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

credit gradually declined. In 1712, their debts had become so

great, that a particular act of parliament was thought necessary,

both for their security and for that of their creditors. It was

enacted, that the resolution of two-thirds of these creditors in

number and value should bind the rust, both with regard to the

time which should be allowed to the company for the payment of

their debts, and with regard to any other agreement which it

might be thought proper to make with them concerning those debts.

In 1730, their affairs were in so great disorder, that they were

altogether incapable of maintaining their forts and garrisons,

the sole purpose and pretext of their institution. From that

year till their final dissolution, the parliament judged it

necessary to allow the annual sum of �10,000 for that purpose.

In 1732, after having been for many years losers by the trade of

carrying negroes to the West Indies, they at last resolved to

give it up altogether ; to sell to the private traders to America

the negroes which they purchased upon the coast; awl to employ

their servants in a trade to the inland parts of Africa for gold

dust, elephants teeth, dyeing drugs, etc. But their success in

this more confined trade was not greater than in their former

extensive one. Their affairs continued to go gradually to

decline, till at last, being in every respect a bankrupt company,

they were dissolved by act of parliament, and their forts and

garrisons vested in the present regulated company of merchants

trading to Africa. Before the erection of the Royal African

company, there had been three other joint-stock companies

successively established, one after another, for the African

trade. They were all equally unsuccessful. They all, however, had

exclusive charters, which, though not confirmed by act of

parliament, were in those days supposed to convey a real

exclusive privilege.

The Hudson’s Bay company, before their misfortunes in the late

war, had been much more fortunate than the Royal African company.

Their necessary expense is much smaller. The whole number of

people whom they maintain in their different settlements and

habitations, which they have honoured with the name of forts, is

said not to exceed a hundred and twenty persons. This number,

however, is sufficient to prepare beforehand the cargo of furs

and other goods necessary for loading their ships, which, on

account of the ice, can seldom remain above six or eight weeks in

those seas. This advantage of having a cargo ready prepared,

could not, for several years, be acquired by private adventurers

; and without it there seems to be no possibility of trading to

Hudson’s Bay. The moderate capital of the company, which, it is

said, does not exceed one hundred and ten thousand pounds, may,

besides, be sufficient to enable them to engross the whole, or

almost the whole trade and surplus produce, of the miserable

though extensive country comprehended within their charter. No

private adventurers, accordingly, have ever attempted to trade to

that country in competition with them. This company, therefore,

have always enjoyed an exclusive trade, in fact, though they may

have no right to it in law. Over and above all this, the moderate

capital of this company is said to be divided among a very small

number of proprietors. But a joint-stock company, consisting of a

small number of proprietors, with a moderate capital, approaches

very nearly to the nature of a private copartnery, and may be

capable of nearly the same degree of vigilance and attention. It

is not to be wondered at, therefore, if, in consequence of these

different advantages, the Hudson’s Bay company had, before the

late war, been able to carry on their trade with a considerable

degree of success. It does not seem probable, however, that their

profits ever approached to what the late Mr Dobbs imagined them.

A much more sober and judicious writer, Mr Anderson, author of

the Historical and Chronological Deduction of Commerce, very

justly observes, that upon examining the accounts which Mr Dobbs

himself has given for several years together, of their exports

and imports, and upon making proper allowances for their

extraordinary risk and expense, it does not appear that their

profits deserve to be envied, or that they can much, if at all,

exceed the ordinary profits of trade.

The South Sea company never had any forts or garrisons to

maintain, and therefore were entirely exempted from one great

expense, to which other joint-stock companies for foreign trade

are subject; but they had an immense capital divided among an

immense number of proprietors. It was naturally to be expected,

therefore, that folly, negligence, and profusion, should prevail

in the whole management of their affairs. The knavery and

extravagance of their stock-jobbing projects are sufficiently

known, and the explication of them would be foreign to the

present subject. Their mercantile projects were not much better

conducted. The first trade which they engaged in, was that of

supplying the Spanish West Indies with negroes, of which (in

consequence of what was called the Assiento Contract granted them

by the treaty of Utrecht) they had the exclusive privilege. But

as it was not expected that much profit could be made by this

trade, both the Portuguese and French companies, who had enjoyed

it upon the same terms before them, having been ruined by it,

they were allowed, as compensation, to send annually a ship of

acertain burden, to trade directly to the Spanish West Indies. Of

the ten voyages which this annual ship was allowed to make, they

are said to have gained considerably by one, that of the Royal

Caroline, in 1731 ; and to have been losers, more or less, by

almost all the rest. Their ill success was imputed, by their

factors and agents, to the extortion and oppression of the

Spanish government ; but was, perhaps, principally owing to the

profusion and depredations of those very factors and agents; some

of whom are said to have acquired great fortunes, even in one

year. In 1734, the company petitioned the king, that they might

be allowed to dispose of the trade and tonnage of their annual

ship, on account of the little profit which they made by it, and

to accept of such equivalent as they could obtain from the king

of Spain.

In 1724, this company had undertaken the whale fishery. Of this,

indeed, they had no monopoly ; but as long as they carried it on,

no other British subjects appear to have engaged in it. Of the

eight voyages which their ships made to Greenland, they were

gainers by one, and losers by all the rest. After their eighth

and last voyage, when they had sold their ships, stores, and

utensils, they found that their whole loss upon this branch,

capital and interest included, amounted to upwards of �237,000.

In 1722, this company petitioned the parliament to be allowed to

divide their immense capital of more than thirty-three millions

eight hundred thousand pounds, the whole of which had been lent

to government, into two equal parts; the one half, or upwards of

�16,900,000, to be put upon the same footing with other

government annuities, and not to be subject to the debts

contracted, or losses incurred, by the directors of the company,

in the prosecution of their mercantile projects ; the other half

to remain as before, a trading stock, and to be subject to those

debts and losses. The petition was too reasonable not to be

granted. In 1733, they again petitioned the parliament, that

three-fourths of their trading stock might be turned into annuity

stock, and only one-fourth remain as trading stock, or exposed to

the hazards arising from the bad management of their directors.

Both their annuity and trading stocks had, by this time, been

reduced more than two millions each, by several different

payments from government ; so that this fourth amounted only to

�3,662,784:8:6. In 1748, all the demands of the company upon the

king of Spain, in consequence of the assiento contract, were, by

the treaty of Aix-la-Chapelle, given up for what was supposed an

equivalent. An end was put to their trade with the Spanish West

Indies; the remainder of their trading stock was turned into an

annuity stock ; and the company ceased, in every respect, to be a

trading company.

It ought to be observed, that in the trade which the South Sea

company carried on by means of their annual ship, the only trade

by which it ever was expected that they could make any

considerable profit, they were not without competitors, either in

the foreign or in the home market. At Carthagena, Porto Bello,

and La Vera Cruz, they had to encounter the competition of the

Spanish merchants, who brought from Cadiz to those markets

European goods, of the same kind with the outward cargo of their

ship ; and in England they had to encounter that of the English

merchants, who imported from Cadiz goods of the Spanish West

Indies, of the same kind with the inward cargo. The goods, both

of the Spanish and English merchants, indeed, were, perhaps,

subject to higher duties. But the loss occasioned by the

negligence, profusion, and malversation of the servants of the

company, had probably been a tax much heavier than all those

duties. That a joint-stock company should be able to carry on

successfully any branch of foreign trade, when private

adventurers can come into any sort of open and fair competition

with them, seems contrary to all experience.

The old English East India company was established in 1600, by a

charter from Queen Elizabeth. In the first twelve voyages which

they fitted out for India, they appear to have traded as a

regulated company, with separate stocks, though only in the

general ships of the company. In 1612, they united into a joint

stock. Their charter was exclusive, and, though not confirmed

by act of parliament, was in those days supposed to convey a real

exclusive privilege. For many years, therefore, they were not

much disturbed by interlopers. Their capital, which never

exceeded �744,000, and of which �50 was a share, was not so

exorbitant, nor their dealings so extensive, as to afford either

a pretext for gross negligence and profusion, or a cover to gross

malversation. Notwithstanding some extraordinary losses,

occassioned partly by the malice of the Dutch East India company,

and partly by other accidents, they carried on for many years a

successful trade. But in process of time, when the principles of

liberty were better understood, it became every day more and more

doubtful, how far a royal charter, not confirmed by act of

parliament, could convey an exclusive privilege. Upon this

question the decisions of the courts of justice were not uniform,

but varied with the authority of government, and the humours of

the times. Interlopers multiplied upon them; and towards the

end of the reign of Charles II., through the whole of that of

James II., and during a part of that of William III., reduced

them to great distress. In 1698, a proposal was made to

parliament, of advancing two millions to government, at eight per

cent. provided the subscribers were erected into a new East India

company, with exclusive privileges. The old East India company

offered seven hundred thousand pounds, nearly the amount of their

capital, at four per cent. upon the same conditions. But such was

at that time the state of public credit, that it was more

convenient for government to borrow two millions at eight per

cent. than seven hundred thousand pounds at four. The proposal of

the new subscribers was accepted, and a new East India company

established in consequence. The old East India company, however,

had a right to continue their trade till 1701. They had, at the

same time, in