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An Inquiry Into The Nature And Causes Of The Wealth Of Nations - Chapter 1, Part 3

1. Introduction And Plan Of The Work

2. Book 1, Chapter 1

3. Chapter 2

4. Chapter 3

5. Chapter 4

6. Chapter 5

7. Chapter 6

8. Chapter 7

9. Chapter 8

10. Chapter 8 continue

11. Chapter 9

12. Chapter 10

13. Chapter 10 continue

14. Chapter 11

15. Chapter 11 continue

16. Chapter 11 continue.

17. Chapter 11 continue..

18. Chapter 11 continue...

19. Conclusion of the Chapter 11

20. Book 2 Introduction

21. Chapter 1

22. Chapter II

23. Chapter II continue

24. Chapter II continue

25. Chapter 3

26. Chapter 4

27. Chapter 5

28. Book 3, Chapter 1

29. Chapter 2

30. Chapter 3

31. Chapter 4

32. Book 4, Chapter 1

33. Chapter 1 continue

34. Chapter 2

35. Chapter 3, Part 1

36. Chapter 3, Part 2

37. Chapter 4

38. Chapter 5

39. Chapter 5 continue

40. Chapter 6

41. Chapter 7, Part 1

42. Chapter 7, Part 2

43. Chapter 7, Part 3

44. Chapter 7, Part 3 continue

45. Chapter 8

46. Chapter 9

47. Book 5, Chapter 1, Part 1

48. Chapter 1, Part 2

49. Chapter 1, Part 3

50. Chapter 1, Part 3 continue

51. Chapter 1, Part 3 continue B

52. Chapter 1, Part 4

53. Chapter 2, Part 1

54. Chapter 2, Part 2

55. Chapter 2, Part 2 continue

56. Chapter 2, Part 2 continue B

57. Chapter 2, Part 2 continue C

58. Chapter 2, Part 2 continue D

59. Chapter 3

60. Chapter 3 continue

PART III. Of the Expense of public Works and public Institutions.

The third and last duty of the sovereign or commonwealth, is that of
erecting and maintaining those public institutions and those public
works, which though they may be in the highest degree advantageous to
a great society, are, however, of such a nature, that the profit
could never repay the expense to any individual, or small number of
individuals; and which it, therefore, cannot be expected that any
individual, or small number of individuals, should erect or maintain.
The performance of this duty requires, too, very different degrees of
expense in the different periods of society.

After the public institutions and public works necessary for the defence
of the society, and for the administration of justice, both of which
have already been mentioned, the other works and institutions of this
kind are chiefly for facilitating the commerce of the society, and
those for promoting the instruction of the people. The institutions for
instruction are of two kinds: those for the education of the youth, and
those for the instruction of people of all ages. The consideration of
the manner in which the expense of those different sorts of public works
and institutions may be most properly defrayed will divide this third
part of the present chapter into three different articles.

ARTICLE I.--Of the public Works and Institutions for facilitating the
Commerce of the Society.

And, first, of those which are necessary for facilitating Commerce in

That the erection and maintenance of the public works which facilitate
the commerce of any country, such as good roads, bridges, navigable
canals, harbours, etc. must require very different degrees of expense
in the different periods of society, is evident without any proof. The
expense of making and maintaining the public roads of any country must
evidently increase with the annual produce of the land and labour of
that country, or with the quantity and weight of the goods which it
becomes necessary to fetch and carry upon those roads. The strength of
a bridge must be suited to the number and weight of the carriages which
are likely to pass over it. The depth and the supply of water for a
navigable canal must be proportioned to the number and tonnage of
the lighters which are likely to carry goods upon it; the extent of a
harbour, to the number of the shipping which are likely to take shelter
in it.

It does not seem necessary that the expense of those public works should
be defrayed from that public revenue, as it is commonly called, of which
the collection and application are in most countries, assigned to the
executive power. The greater part of such public works may easily be
so managed, as to afford a particular revenue, sufficient for defraying
their own expense without bringing any burden upon the general revenue
of the society.

A highway, a bridge, a navigable canal, for example, may, in most cases,
be both made add maintained by a small toll upon the carriages which
make use of them; a harbour, by a moderate port-duty upon the tonnage
of the shipping which load or unload in it. The coinage, another
institution for facilitating commerce, in many countries, not only
defrays its own expense, but affords a small revenue or a seignorage
to the sovereign. The post-office, another institution for the same
purpose, over and above defraying its own expense, affords, in almost
all countries, a very considerable revenue to the sovereign.

When the carriages which pass over a highway or a bridge, and the
lighters which sail upon a navigable canal, pay toll in proportion to
their weight or their tonnage, they pay for the maintenance of those
public works exactly in proportion to the wear and tear which they
occasion of them. It seems scarce possible to invent a more equitable
way of maintaining such works. This tax or toll, too, though it is
advanced by the carrier, is finally paid by the consumer, to whom it
must always be charged in the price of the goods. As the expense of
carriage, however, is very much reduced by means of such public works,
the goods, notwithstanding the toll, come cheaper to the consumer than
they could otherwise have done, their price not being so much raised by
the toll, as it is lowered by the cheapness of the carriage. The person
who finally pays this tax, therefore, gains by the application more than
he loses by the payment of it. His payment is exactly in proportion to
his gain. It is, in reality, no more than a part of that gain which he
is obliged to give up, in order to get the rest. It seems impossible
to imagine a more equitable method of raising a tax. When the toll upon
carriages of luxury, upon coaches, post-chaises, etc. is made somewhat
higher in proportion to their weight, than upon carriages of necessary
use, such as carts, waggons, etc. the indolence and vanity of the rich
is made to contribute, in a very easy manner, to the relief of the
poor, by rendering cheaper the transportation of heavy goods to all the
different parts of the country.

When high-roads, bridges, canals, etc. are in this manner made and
supported by the commerce which is carried on by means of them, they can
be made only where that commerce requires them, and, consequently,
where it is proper to make them. Their expense, too, their grandeur and
magnificence, must be suited to what that commerce can afford to
pay. They must be made, consequently, as it is proper to make them. A
magnificent high-road cannot be made through a desert country, where
there is little or no commerce, or merely because it happens to lead to
the country villa of the intendant of the province, or to that of some
great lord, to whom the intendant finds it convenient to make his court.
A great bridge cannot be thrown over a river at a place where
nobody passes, or merely to embellish the view from the windows of a
neighbouring palace; things which sometimes happen in countries, where
works of this kind are carried on by any other revenue than that which
they themselves are capable of affording.

In several different parts of Europe, the toll or lock-duty upon a canal
is the property of private persons, whose private interest obliges
them to keep up the canal. If it is not kept in tolerable order, the
navigation necessarily ceases altogether, and, along with it, the whole
profit which they can make by the tolls. If those tolls were put under
the management of commissioners, who had themselves no interest in
them, they might be less attentive to the maintenance of the works which
produced them. The canal of Languedoc cost the king of France and the
province upwards of thirteen millions of livres, which (at twenty-eight
livres the mark of silver, the value of French money in the end of
the last century) amounted to upwards of nine hundred thousand pounds
sterling. When that great work was finished, the most likely method, it
was found, of keeping it in constant repair, was to make a present of
the tolls to Riquet, the engineer who planned and conducted the work.
Those tolls constitute, at present, a very large estate to the different
branches of the family of that gentleman, who have, therefore, a great
interest to keep the work in constant repair. But had those tolls been
put under the management of commissioners, who had no such interest,
they might perhaps, have been dissipated in ornamental and unnecessary
expenses, while the most essential parts of the works were allowed to go
to ruin.

The tolls for the maintenance of a highroad cannot, with any safety,
be made the property of private persons. A high-road, though entirely
neglected, does not become altogether impassable, though a canal does.
The proprietors of the tolls upon a high-road, therefore, might neglect
altogether the repair of the road, and yet continue to levy very
nearly the same tolls. It is proper, therefore, that the tolls for
the maintenance of such a work should be put under the management of
commissioners or trustees.

In Great Britain, the abuses which the trustees have committed in
the management of those tolls, have, in many cases, been very justly
complained of. At many turnpikes, it has been said, the money levied is
more than double of what is necessary for executing, in the completest
manner, the work, which is often executed in a very slovenly manner, and
sometimes not executed at all. The system of repairing the high-roads by
tolls of this kind, it must be observed, is not of very long standing.
We should not wonder, therefore, if it has not yet been brought to that
degree of perfection of which it seems capable. If mean and improper
persons are frequently appointed trustees; and if proper courts of
inspection and account have not yet been established for controlling
their conduct, and for reducing the tolls to what is barely sufficient
for executing the work to be done by them; the recency of the
institution both accounts and apologizes for those defects, of which,
by the wisdom of parliament, the greater part may, in due time, be
gradually remedied.

The money levied at the different turnpikes in Great Britain, is
supposed to exceed so much what is necessary for repairing the roads,
that the savings which, with proper economy, might be made from it, have
been considered, even by some ministers, as a very great resource, which
might, at some time or another, be applied to the exigencies of the
state. Government, it has been said, by taking the management of the
turnpikes into its own hands, and by employing the soldiers, who would
work for a very small addition to their pay, could keep the roads in
good order, at a much less expense than it can be done by trustees,
who have no other workmen to employ, but such as derive their whole
subsistence from their wages. A great revenue, half a million, perhaps
{Since publishing the two first editions of this book, I have got good
reasons to believe that all the turnpike tolls levied in Great Britain
do not produce a neat revenue that amounts to half a million; a sum
which, under the management of government, would not be sufficient to
keep, in repair five of the principal roads in the kingdom}, it has been
pretended, might in this manner be gained, without laying any new burden
upon the people; and the turnpike roads might be made to contribute to
the general expense of the state, in the same manner as the post-office
does at present.

That a considerable revenue might be gained in this manner, I have no
doubt, though probably not near so much as the projectors of this plan
have supposed. The plan itself, however, seems liable to several very
important objections.

First, If the tolls which are levied at the turnpikes should ever be
considered as one of the resources for supplying the exigencies of
the state, they would certainly be augmented as those exigencies
were supposed to require. According to the policy of Great Britain,
therefore, they would probably he augmented very fast. The facility with
which a great revenue could be drawn from them, would probably encourage
administration to recur very frequently te this resource. Though it
may, perhaps, be more than doubtful whether half a million could by any
economy be saved out of the present tolls, it can scarcely be doubted,
but that a million might be saved out of them, if they were doubled; and
perhaps two millions, if they were tripled {I have now good reason to
believe that all these conjectural sums are by much too large.}. This
great revenue, too, might be levied without the appointment of a single
new officer to collect and receive it. But the turnpike tolls, being
continually augmented in this manner, instead of facilitating the inland
commerce of the country, as at present, would soon become a very great
incumbrance upon it. The expense of transporting all heavy goods from
one part of the country to another, would soon be so much increased, the
market for all such goods, consequently, would soon be so much narrowed,
that their production would be in a great measure discouraged, and
the most important branches of the domestic industry of the country
annihilated altogether.

Secondly, A tax upon carriages, in proportion to their weight, though a
very equal tax when applied to the sole purpose of repairing the roads,
is a very unequal one when applied to any other purpose, or to supply
the common exigencies of the state. When it is applied to the sole
purpose above mentioned, each carriage is supposed to pay exactly for
the wear and tear which that carriage occasions of the roads. But when
it is applied to any other purpose, each carriage is supposed to pay
for more than that wear and tear, and contributes to the supply of some
other exigency of the state. But as the turnpike toll raises the price
of goods in proportion to their weight and not to their value, it is
chiefly paid by the consumers of coarse and bulky, not by those
of precious and light commodities. Whatever exigency of the state,
therefore, this tax might be intended to supply, that exigency would
be chiefly supplied at the expense of the poor, not of the rich; at the
expense of those who are least able to supply it, not of those who are
most able.

Thirdly, If government should at any time neglect the reparation of the
high-roads, it would be still more difficult, than it is at present, to
compel the proper application of any part of the turnpike tolls. A large
revenue might thus be levied upon the people, without any part of it
being applied to the only purpose to which a revenue levied in this
manner ought ever to be applied. If the meanness and poverty of the
trustees of turnpike roads render it sometimes difficult, at present,
to oblige them to repair their wrong; their wealth and greatness would
render it ten times more so in the case which is here supposed.

In France, the funds destined for the reparation of the high-roads
are under the immediate direction of the executive power. Those funds
consist, partly in a certain number of days labour, which the country
people are in most parts of Europe obliged to give to the reparation of
the highways; and partly in such a portion of the general revenue of the
state as the king chooses to spare from his other expenses.

By the ancient law of France, as well as by that of most other parts of
Europe, the labour of the country people was under the direction of a
local or provincial magistracy, which had no immediate dependency upon
the king's council. But, by the present practice, both the labour of the
country people, and whatever other fund the king may choose to assign
for the reparation of the high-roads in any particular province or
generality, are entirely under the management of the intendant; an
officer who is appointed and removed by the king's council who receives
his orders from it, and is in constant correspondence with it. In the
progress of despotism, the authority of the executive power gradually
absorbs that of every other power in the state, and assumes to itself
the management of every branch of revenue which is destined for any
public purpose. In France, however, the great post-roads, the roads
which make the communication between the principal towns of the kingdom,
are in general kept in good order; and, in some provinces, are even a
good deal superior to the greater part of the turnpike roads of England.
But what we call the cross roads, that is, the far greater part of the
roads in the country, are entirely neglected, and are in many places
absolutely impassable for any heavy carriage. In some places it is even
dangerous to travel on horseback, and mules are the only conveyance
which can safely be trusted. The proud minister of an ostentatious
court, may frequently take pleasure in executing a work of splendour and
magnificence, such as a great highway, which is frequently seen by the
principal nobility, whose applauses not only flatter his vanity, but
even contribute to support his interest at court. But to execute a great
number of little works, in which nothing that can be done can make any
great appearance, or excite the smallest degree of admiration in any
traveller, and which, in short, have nothing to recommend them but their
extreme utility, is a business which appears, in every respect, too mean
and paltry to merit the attention of so great a magistrate. Under such
an administration therefore, such works are almost always entirely

In China, and in several other governments of Asia, the executive power
charges itself both with the reparation of the high-roads, and with the
maintenance of the navigable canals. In the instructions which are
given to the governor of each province, those objects, it is said, are
constantly recommended to him, and the judgment which the court forms of
his conduct is very much regulated by the attention which he appears
to have paid to this part of his instructions. This branch of public
police, accordingly, is said to be very much attended to in all those
countries, but particularly in China, where the high-roads, and still
more the navigable canals, it is pretended, exceed very much every thing
of the same kind which is known in Europe. The accounts of those works,
however, which have been transmitted to Europe, have generally been
drawn up by weak and wondering travellers; frequently by stupid and
lying missionaries. If they had been examined by more intelligent
eyes, and if the accounts of them had been reported by more faithful
witnesses, they would not, perhaps, appear to be so wonderful. The
account which Bernier gives of some works of this kind in Indostan,
falls very short of what had been reported of them by other travellers,
more disposed to the marvellous than he was. It may too, perhaps, be in
those countries, as it is in France, where the great roads, the great
communications, which are likely to be the subjects of conversation
at the court and in the capital, are attended to, and all the rest
neglected. In China, besides, in Indostan, and in several other
governments of Asia, the revenue of the sovereign arises almost
altogether from a land tax or land rent, which rises or falls with the
rise and fall of the annual produce of the land. The great interest of
the sovereign, therefore, his revenue, is in such countries necessarily
and immediately connected with the cultivation of the land, with the
greatness of its produce, and with the value of its produce. But in
order to render that produce both as great and as valuable as possible,
it is necessary to procure to it as extensive a market as possible,
and consequently to establish the freest, the easiest, and the least
expensive communication between all the different parts of the country;
which can be done only by means of the best roads and the best navigable
canals. But the revenue of the sovereign does not, in any part of
Europe, arise chiefly from a land tax or land rent. In all the great
kingdoms of Europe, perhaps, the greater part of it may ultimately
depend upon the produce of the land: but that dependency is neither so
immediate nor so evident. In Europe, therefore, the sovereign does not
feel himself so directly called upon to promote the increase, both in
quantity and value of the produce of the land, or, by maintaining good
roads and canals, to provide the most extensive market for that produce.
Though it should be true, therefore, what I apprehend is not a little
doubtful, that in some parts of Asia this department of the public
police is very properly managed by the executive power, there is not the
least probability that, during the present state of things, it could be
tolerably managed by that power in any part of Europe.

Even those public works, which are of such a nature that they cannot
afford any revenue for maintaining themselves, but of which the
conveniency is nearly confined to some particular place or district,
are always better maintained by a local or provincial revenue, under the
management of a local and provincial administration, than by the general
revenue of the state, of which the executive power must always have the
management. Were the streets of London to be lighted and paved at the
expense of the treasury, is there any probability that they would be so
well lighted and paved as they are at present, or even at so small an
expense? The expense, besides, instead of being raised by a local tax
upon the inhabitants of each particular street, parish, or district in
London, would, in this case, be defrayed out of the general revenue
of the state, and would consequently be raised by a tax upon all the
inhabitants of the kingdom, of whom the greater part derive no sort of
benefit from the lighting and paving of the streets of London.

The abuses which sometimes creep into the local and provincial
administration of a local and provincial revenue, how enormous soever
they may appear, are in reality, however, almost always very trifling in
comparison of those which commonly take place in the administration and
expenditure of the revenue of a great empire. They are, besides, much
more easily corrected. Under the local or provincial administration of
the justices of the peace in Great Britain, the six days labour
which the country people are obliged to give to the reparation of the
highways, is not always, perhaps, very judiciously applied, but it is
scarce ever exacted with any circumstance of cruelty or oppression. In
France, under the administration of the intendants, the application is
not always more judicious, and the exaction is frequently the most
cruel and oppressive. Such corvees, as they are called, make one of the
principal instruments of tyranny by which those officers chastise any
parish or communeaute, which has had the misfortune to fall under their

Of the public Works and Institution which are necessary for facilitating
particular Branches of Commerce.

The object of the public works and institutions above mentioned, is
to facilitate commerce in general. But in order to facilitate some
particular branches of it, particular institutions are necessary, which
again require a particular and extraordinary expense.

Some particular branches of commerce which are carried on with barbarous
and uncivilized nations, require extraordinary protection. An ordinary
store or counting-house could give little security to the goods of the
merchants who trade to the western coast of Africa. To defend them from
the barbarous natives, it is necessary that the place where they are
deposited should be in some measure fortified. The disorders in the
government of Indostan have been supposed to render a like precaution
necessary, even among that mild and gentle people; and it was under
pretence of securing their persons and property from violence, that both
the English and French East India companies were allowed to erect the
first forts which they possessed in that country. Among other nations,
whose vigorous government will suffer no strangers to possess any
fortified place within their territory, it may be necessary to maintain
some ambassador, minister, or consul, who may both decide, according
to their own customs, the differences arising among his own countrymen,
and, in their disputes with the natives, may by means of his public
character, interfere with more authority and afford them a more powerful
protection than they could expect from any private man. The interests
of commerce have frequently made it necessary to maintain ministers in
foreign countries, where the purposes either of war or alliance
would not have required any. The commerce of the Turkey company
first occasioned the establishment of an ordinary ambassador at
Constantinople. The first English embassies to Russia arose altogether
from commercial interests. The constant interference with those
interests, necessarily occasioned between the subjects of the different
states of Europe, has probably introduced the custom of keeping, in all
neighbouring countries, ambassadors or ministers constantly resident,
even in the time of peace. This custom, unknown to ancient times, seems
not to be older than the end of the fifteenth, or beginning of the
sixteenth century; that is, than the time when commerce first began to
extend itself to the greater part of the nations of Europe, and when
they first began to attend to its interests.

It seems not unreasonable, that the extraordinary expense which the
protection of any particular branch of commerce may occasion, should be
defrayed by a moderate tax upon that particular branch; by a moderate
fine, for example, to be paid by the traders when they first enter into
it; or, what is more equal, by a particular duty of so much per cent.
upon the goods which they either import into, or export out of, the
particular countries with which it is carried on. The protection of
trade, in general, from pirates and freebooters, is said to have given
occasion to the first institution of the duties of customs. But, if
it was thought reasonable to lay a general tax upon trade, in order
to defray the expense of protecting trade in general, it should seem
equally reasonable to lay a particular tax upon a particular branch of
trade, in order to defray the extraordinary expense of protecting that

The protection of trade, in general, has always been considered as
essential to the defence of the commonwealth, and, upon that account,
a necessary part of the duty of the executive power. The collection and
application of the general duties of customs, therefore, have always
been left to that power. But the protection of any particular branch of
trade is a part of the general protection of trade; a part, therefore,
of the duty of that power; and if nations always acted consistently, the
particular duties levied for the purposes of such particular protection,
should always have been left equally to its disposal. But in this
respect, as well as in many others, nations have not always acted
consistently; and in the greater part of the commercial states of
Europe, particular companies of merchants have had the address to
persuade the legislature to entrust to them the performance of this part
of the duty of the sovereign, together with all the powers which are
necessarily connected with it.

These companies, though they may, perhaps, have been useful for the
first introduction of some branches of commerce, by making, at their
own expense, an experiment which the state might not think it prudent
to make, have in the long-run proved, universally, either burdensome or
useless, and have either mismanaged or confined the trade.

When those companies do not trade upon a joint stock, but are obliged
to admit any person, properly qualified, upon paying a certain fine,
and agreeing to submit to the regulations of the company, each member
trading upon his own stock, and at his own risk, they are called
regulated companies. When they trade upon a joint stock, each member
sharing in the common profit or loss, in proportion to his share in this
stock, they are called joint-stock companies. Such companies, whether
regulated or joint-stock, sometimes have, and sometimes have not,
exclusive privileges.

Regulated companies resemble, in every respect, the corporation of
trades, so common in the cities and towns of all the different countries
of Europe; and are a sort of enlarged monopolies of the same kind. As no
inhabitant of a town can exercise an incorporated trade, without first
obtaining his freedom in the incorporation, so, in most cases, no
subject of the state can lawfully carry on any branch of foreign trade,
for which a regulated company is established, without first becoming a
member of that company. The monopoly is more or less strict, according
as the terms of admission are more or less difficult, and according as
the directors of the company have more or less authority, or have it
more or less in their power to manage in such a manner as to confine the
greater part of the trade to themselves and their particular friends. In
the most ancient regulated companies, the privileges of apprenticeship
were the same as in other corporations, and entitled the person who had
served his time to a member of the company, to become himself a member,
either without paying any fine, or upon paying a much smaller one than
what was exacted of other people. The usual corporation spirit, wherever
the law does not restrain it, prevails in all regulated companies. When
they have been allowed to act according to their natural genius, they
have always, in order to confine the competition to as small a number of
persons as possible, endeavoured to subject the trade to many burdensome
regulations. When the law has restrained them from doing this, they have
become altogether useless and insignificant.

The regulated companies for foreign commerce which at present subsist
in Great Britain, are the ancient merchant-adventurers company, now
commonly called the Hamburgh company, the Russia company, the Eastland
company, the Turkey company, and the African company.

The terms of admission into the Hamburgh company are now said to be
quite easy; and the directors either have it not in their power to
subject the trade to any troublesome restraint or regulations, or, at
least, have not of late exercised that power. It has not always been so.
About the middle of the last century, the fine for admission was fifty,
and at one time one hundred pounds, and the conduct of the company was
said to be extremely oppressive. In 1643, in 1645, and in 1661, the
clothiers and free traders of the west of England complained of them to
parliament, as of monopolists, who confined the trade, and oppressed the
manufactures of the country. Though those complaints produced no act
of parliament, they had probably intimidated the company so far, as to
oblige them to reform their conduct. Since that time, at least, there
have been no complaints against them. By the 10th and 11th of William
III. c.6, the fine for admission into the Russia company was reduced to
five pounds; and by the 25th of Charles II. c.7, that for admission
into the Eastland company to forty shillings; while, at the same time,
Sweden, Denmark, and Norway, all the countries on the north side of the
Baltic, were exempted from their exclusive charter. The conduct of those
companies had probably given occasion to those two acts of parliament.
Before that time, Sir Josiah Child had represented both these and the
Hamburgh company as extremely oppressive, and imputed to their bad
management the low state of the trade, which we at that time carried
on to the countries comprehended within their respective charters. But
though such companies may not, in the present times, be very oppressive,
they are certainly altogether useless. To be merely useless, indeed,
is perhaps, the highest eulogy which can ever justly be bestowed upon a
regulated company; and all the three companies above mentioned seem, in
their present state, to deserve this eulogy.

The fine for admission into the Turkey company was formerly twenty-five
pounds for all persons under twenty-six years of age, and fifty pounds
for all persons above that age. Nobody but mere merchants could be
admitted; a restriction which excluded all shop-keepers and retailers.
By a bye-law, no British manufactures could be exported to Turkey but in
the general ships of the company; and as those ships sailed always
from the port of London, this restriction confined the trade to that
expensive port, and the traders to those who lived in London and in its
neighbourhood. By another bye-law, no person living within twenty miles
of London, and not free of the city, could be admitted a member; another
restriction which, joined to the foregoing, necessarily excluded all but
the freemen of London. As the time for the loading and sailing of those
general ships depended altogether upon the directors, they could easily
fill them with their own goods, and those of their particular friends,
to the exclusion of others, who, they might pretend, had made their
proposals too late. In this state of things, therefore, this company
was, in every respect, a strict and oppressive monopoly. Those abuses
gave occasion to the act of the 26th of George II. c. 18, reducing
the fine for admission to twenty pounds for all persons, without any
distinction of ages, or any restriction, either to mere merchants, or to
the freemen of London; and granting to all such persons the liberty of
exporting, from all the ports of Great Britain, to any port in Turkey,
all British goods, of which the exportation was not prohibited, upon
paying both the general duties of customs, and the particular duties
assessed for defraying the necessary expenses of the company; and
submitting, at the same time, to the lawful authority of the British
ambassador and consuls resident in Turkey, and to the bye-laws of the
company duly enacted. To prevent any oppression by those bye-laws, it
was by the same act ordained, that if any seven members of the company
conceived themselves aggrieved by any bye-law which should be enacted
after the passing of this act, they might appeal to the board of trade
and plantations (to the authority of which a committee of the privy
council has now succeeded), provided such appeal was brought within
twelve months after the bye-law was enacted; and that, if any seven
members conceived themselves aggrieved by any bye-law which had been
enacted before the passing of this act, they might bring a like appeal,
provided it was within twelve months after the day on which this act was
to take place. The experience of one year, however, may not always
be sufficient to discover to all the members of a great company the
pernicious tendency of a particular bye-law; and if several of them
should afterwards discover it, neither the board of trade, nor the
committee of council, can afford them any redress. The object, besides,
of the greater part of the bye-laws of all regulated companies, as well
as of all other corporations, is not so much to oppress those who are
already members, as to discourage others from becoming so; which may
be done, not only by a high fine, but by many other contrivances. The
constant view of such companies is always to raise the rate of their own
profit as high as they can; to keep the market, both for the goods which
they export, and for those which they import, as much understocked as
they can; which can be done only by restraining the competition, or by
discouraging new adventurers from entering into the trade. A fine, even
of twenty pounds, besides, though it may not, perhaps, be sufficient
to discourage any man from entering into the Turkey trade, with an
intention to continue in it, may be enough to discourage a speculative
merchant from hazarding a single adventure in it. In all trades, the
regular established traders, even though not incorporated, naturally
combine to raise profits, which are noway so likely to be kept, at all
times, down to their proper level, as by the occasional competition of
speculative adventurers. The Turkey trade, though in some measure laid
open by this act of parliament, is still considered by many people as
very far from being altogether free. The Turkey company contribute to
maintain an ambassador and two or three consuls, who, like other public
ministers, ought to be maintained altogether by the state, and the trade
laid open to all his majesty's subjects. The different taxes levied by
the company, for this and other corporation purposes, might afford a
revenue much more than sufficient to enable a state to maintain such

Regulated companies, it was observed by Sir Josiah Child, though they
had frequently supported public ministers, had never maintained any
forts or garrisons in the countries to which they traded; whereas
joint-stock companies frequently had. And, in reality, the former seem
to be much more unfit for this sort of service than the latter. First,
the directors of a regulated company have no particular interest in the
prosperity of the general trade of the company, for the sake of which
such forts and garrisons are maintained. The decay of that general trade
may even frequently contribute to the advantage of their own private
trade; as, by diminishing the number of their competitors, it may
enable them both to buy cheaper, and to sell dearer. The directors of
a joint-stock company, on the contrary, having only their share in
the profits which are made upon the common stock committed to their
management, have no private trade of their own, of which the interest
can be separated from that of the general trade of the company. Their
private interest is connected with the prosperity of the general trade
of the company, and with the maintenance of the forts and garrisons
which are necessary for its defence. They are more likely, therefore,
to have that continual and careful attention which that maintenance
necessarily requires. Secondly, The directors of a joint-stock company
have always the management of a large capital, the joint stock of the
company, a part of which they may frequently employ, with propriety, in
building, repairing, and maintaining such necessary forts and garrisons.
But the directors of a regulated company, having the management of no
common capital, have no other fund to employ in this way, but the casual
revenue arising from the admission fines, and from the corporation
duties imposed upon the trade of the company. Though they had the same
interest, therefore, to attend to the maintenance of such forts
and garrisons, they can seldom have the same ability to render that
attention effectual. The maintenance of a public minister, requiring
scarce any attention, and but a moderate and limited expense, is a
business much more suitable both to the temper and abilities of a
regulated company.

Long after the time of Sir Josiah Child, however, in 1750, a regulated
company was established, the present company of merchants trading to
Africa; which was expressly charged at first with the maintenance of all
the British forts and garrisons that lie between Cape Blanc and the Cape
of Good Hope, and afterwards with that of those only which lie between
Cape Rouge and the Cape of Good Hope. The act which establishes this
company (the 23rd of George II. c.51 ), seems to have had two distinct
objects in view; first, to restrain effectually the oppressive and
monopolizing spirit which is natural to the directors of a regulated
company; and, secondly, to force them, as much as possible, to give
an attention, which is not natural to them, towards the maintenance of
forts and garrisons.

For the first of these purposes, the fine for admission is limited
to forty shillings. The company is prohibited from trading in their
corporate capacity, or upon a joint stock; from borrowing money upon
common seal, or from laying any restraints upon the trade, which may
be carried on freely from all places, and by all persons being British
subjects, and paying the fine. The government is in a committee of nine
persons, who meet at London, but who are chosen annually by the freemen
of the company at London, Bristol, and Liverpool; three from each place.
No committeeman can be continued in office for more than three years
together. Any committee-man might be removed by the board of trade and
plantations, now by a committee of council, after being heard in his own
defence. The committee are forbid to export negroes from Africa, or to
import any African goods into Great Britain. But as they are charged
with the maintenance of forts and garrisons, they may, for that purpose
export from Great Britain to Africa goods and stores of different kinds.
Out of the moneys which they shall receive from the company, they are
allowed a sum, not exceeding eight hundred pounds, for the salaries
of their clerks and agents at London, Bristol, and Liverpool, the
house-rent of their offices at London, and all other expenses of
management, commission, and agency, in England. What remains of this
sum, after defraying these different expenses, they may divide among
themselves, as compensation for their trouble, in what manner they think
proper. By this constitution, it might have been expected, that the
spirit of monopoly would have been effectually restrained, and the first
of these purposes sufficiently answered. It would seem, however, that
it had not. Though by the 4th of George III. c.20, the fort of Senegal,
with all its dependencies, had been invested in the company of merchants
trading to Africa, yet, in the year following (by the 5th of George III.
c.44), not only Senegal and its dependencies, but the whole coast, from
the port of Sallee, in South Barbary, to Cape Rouge, was exempted from
the jurisdiction of that company, was vested in the crown, and the trade
to it declared free to all his majesty's subjects. The company had been
suspected of restraining the trade and of establishing some sort of
improper monopoly. It is not, however, very easy to conceive how, under
the regulations of the 23d George II. they could do so. In the printed
debates of the house of commons, not always the most authentic records
of truth, I observe, however, that they have been accused of this. The
members of the committee of nine being all merchants, and the governors
and factors in their different forts and settlements being all dependent
upon them, it is not unlikely that the latter might have given peculiar
attention to the consignments and commissions of the former, which would
establish a real monopoly.

For the second of these purposes, the maintenance of the forts and
garrisons, an annual sum has been allotted to them by parliament,
generally about 13,000. For the proper application of this sum, the
committee is obliged to account annually to the cursitor baron of
exchequer; which account is afterwards to be laid before parliament.
But parliament, which gives so little attention to the application of
millions, is not likely to give much to that of 13,000 a-year; and the
cursitor baron of exchequer, from his profession and education, is
not likely to be profoundly skilled in the proper expense of forts and
garrisons. The captains of his majesty's navy, indeed, or any other
commissioned officers, appointed by the board of admiralty, may
inquire into the condition of the forts and garrisons, and report their
observations to that board. But that board seems to have no direct
jurisdiction over the committee, nor any authority to correct those
whose conduct it may thus inquire into; and the captains of his
majesty's navy, besides, are not supposed to be always deeply learned
in the science of fortification. Removal from an office, which can
be enjoyed only for the term of three years, and of which the lawful
emoluments, even during that term, are so very small, seems to be the
utmost punishment to which any committee-man is liable, for any fault,
except direct malversation, or embezzlement, either of the public money,
or of that of the company; and the fear of the punishment can never be
a motive of sufficient weight to force a continual and careful attention
to a business to which he has no other interest to attend. The committee
are accused of having sent out bricks and stones from England for the
reparation of Cape Coast Castle, on the coast of Guinea; a business
for which parliament had several times granted an extraordinary sum of
money. These bricks and stones, too, which had thus been sent upon so
long a voyage, were said to have been of so bad a quality, that it was
necessary to rebuild, from the foundation, the walls which had been
repaired with them. The forts and garrisons which lie north of Cape
Rouge, are not only maintained at the expense of the state, but are
under the immediate government of the executive power; and why those
which lie south of that cape, and which, too, are, in part at least,
maintained at the expense of the state, should be under a different
government, it seems not very easy even to imagine a good reason.
The protection of the Mediterranean trade was the original purpose or
pretence of the garrisons of Gibraltar and Minorca; and the maintenance
and government of those garrisons have always been, very properly,
committed, not to the Turkey company, but to the executive power. In
the extent of its dominion consists, in a great measure, the pride and
dignity of that power; and it is not very likely to fail in attention
to what is necessary for the defence of that dominion. The garrisons at
Gibraltar and Minorca, accordingly, have never been neglected. Though
Minorca has been twice taken, and is now probably lost for ever, that
disaster has never been imputed to any neglect in the executive power.
I would not, however, be understood to insinuate, that either of those
expensive garrisons was ever, even in the smallest degree, necessary for
the purpose for which they were originally dismembered from the Spanish
monarchy. That dismemberment, perhaps, never served any other real
purpose than to alienate from England her natural ally the king of
Spain, and to unite the two principal branches of the house of Bourbon
in a much stricter and more permanent alliance than the ties of blood
could ever have united them.

Joint-stock companies, established either by royal charter, or by act of
parliament, are different in several respects, not only from regulated
companies, but from private copartneries.

First, In a private copartnery, no partner without the consent of the
company, can transfer his share to another person, or introduce a new
member into the company. Each member, however, may, upon proper warning,
withdraw from the copartnery, and demand payment from them of his share
of the common stock. In a joint-stock company, on the contrary, no
member can demand payment of his share from the company; but each member
can, without their consent, transfer his share to another person, and
thereby introduce a new member. The value of a share in a joint stock
is always the price which it will bring in the market; and this may be
either greater or less in any proportion, than the sum which its owner
stands credited for in the stock of the company.

Secondly, In a private copartnery, each partner is bound for the debts
contracted by the company, to the whole extent of his fortune. In a
joint-stock company, on the contrary, each partner is bound only to the
extent of his share.

The trade of a joint-stock company is always managed by a court of
directors. This court, indeed, is frequently subject, in many respects,
to the control of a general court of proprietors. But the greater part
of these proprietors seldom pretend to understand any thing of the
business of the company; and when the spirit of faction happens not to
prevail among them, give themselves no trouble about it, but receive
contentedly such halfyearly or yearly dividend as the directors think
proper to make to them. This total exemption front trouble and front
risk, beyond a limited sum, encourages many people to become adventurers
in joint-stock companies, who would, upon no account, hazard their
fortunes in any private copartnery. Such companies, therefore, commonly
draw to themselves much greater stocks, than any private copartnery
can boast of. The trading stock of the South Sea company at one time
amounted to upwards of thirty-three millions eight hundred thousand
pounds. The divided capital of the Bank of England amounts, at present,
to ten millions seven hundred and eighty thousand pounds. The directors
of such companies, however, being the managers rather of other people's
money than of their own, it cannot well be expected that they should
watch over it with the same anxious vigilance with which the partners in
a private copartnery frequently watch over their own. Like the stewards
of a rich man, they are apt to consider attention to small matters
as not for their master's honour, and very easily give themselves a
dispensation from having it. Negligence and profusion, therefore, must
always prevail, more or less, in the management of the affairs of such a
company. It is upon this account, that joint-stock companies for foreign
trade have seldom been able to maintain the competition against private
adventurers. They have, accordingly, very seldom succeeded without an
exclusive privilege; and frequently have not succeeded with one. Without
an exclusive privilege, they have commonly mismanaged the trade. With an
exclusive privilege, they have both mismanaged and confined it.

The Royal African company, the predecessors of the present African
company, had an exclusive privilege by charter; but as that charter had
not been confirmed by act of parliament, the trade, in consequence of
the declaration of rights, was, soon after the Revolution, laid open to
all his majesty's subjects. The Hudson's Bay company are, as to their
legal rights, in the same situation as the Royal African company. Their
exclusive charter has not been confirmed by act of parliament. The South
Sea company, as long as they continued to be a trading company, had an
exclusive privilege confirmed by act of parliament; as have likewise the
present united company of merchants trading to the East Indies.

The Royal African company soon found that they could not maintain the
competition against private adventurers, whom, notwithstanding the
declaration of rights, they continued for some time to call interlopers,
and to persecute as such. In 1698, however, the private adventurers
were subjected to a duty of ten per cent. upon almost all the
different branches of their trade, to be employed by the company in
the maintenance of their forts and garrisons. But, notwithstanding this
heavy tax, the company were still unable to maintain the competition.
Their stock and 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

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 a certain 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

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, occasioned 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 the name of their treasurer,
subscribed very artfully three hundred and fifteen thousand pounds into
the stock of the new. By a negligence in the expression of the act of
parliament, which vested the East India trade in the subscribers to
this loan of two millions, it did not appear evident that they were
all obliged to unite into a joint stock. A few private traders, whose
subscriptions amounted only to seven thousand two hundred pounds,
insisted upon the privilege of trading separately upon their own stocks,
and at their own risks. The old East India company had a right to a
separate trade upon their own stock till 1701; and they had likewise,
both before and after that period, a right, like that or other
private traders, to a separate trade upon the 315,000, which they had
subscribed into the stock of the new company. The competition of the
two companies with the private traders, and with one another, is said to
have well nigh ruined both. Upon a subsequent occasion, in 1750, when
a proposal was made to parliament for putting the trade under the
management of a regulated company, and thereby laying it in some
measure open, the East India company, in opposition to this proposal,
represented, in very strong terms, what had been, at this time, the
miserable effects, as they thought them, of this competition. In India,
they said, it raised the price of goods so high, that they were not
worth the buying; and in England, by overstocking the market, it sunk
their price so low, that no profit could be made by them. That by a more
plentiful supply, to the great advantage and conveniency of the public,
it must have reduced very much the price of India goods in the English
market, cannot well be doubted; but that it should have raised very much
their price in the Indian market, seems not very probable, as all the
extraordinary demand which that competition could occasion must have
been but as a drop of water in the immense ocean of Indian commerce. The
increase of demand, besides, though in the beginning it may sometimes
raise the price of goods, never fails to lower it in the long-run. It
encourages production, and thereby increases the competition of the
producers, who, in order to undersell one another, have recourse to
new divisions or labour and new improvements of art, which might never
otherwise have been thought of. The miserable effects of which
the company complained, were the cheapness of consumption, and the
encouragement given to production; precisely the two effects which it
is the great business of political economy to promote. The competition,
however, of which they gave this doleful account, had not been allowed
to be of long continuance. In 1702, the two companies were, in some
measure, united by an indenture tripartite, to which the queen was the
third party; and in 1708, they were by act of parliament, perfectly
consolidated into one company, by their present name of the United
Company of Merchants trading to the East Indies. Into this act it was
thought worth while to insert a clause, allowing the separate traders
to continue their trade till Michaelmas 1711; but at the same time
empowering the directors, upon three years notice, to redeem their
little capital of seven thousand two hundred pounds, and thereby to
convert the whole stock of the company into a joint stock. By the
same act, the capital of the company, in consequence of a new loan
to government, was augmented from two millions to three millions two
hundred thousand pounds. In 1743, the company advanced another million
to government. But this million being raised, not by a call upon the
proprietors, but by selling annuities and contracting bond-debts, it did
not augment the stock upon which the proprietors could claim a dividend.
It augmented, however, their trading stock, it being equally liable
with the other three millions two hundred thousand pounds, to the losses
sustained, and debts contracted by the company in prosecution of their
mercantile projects. From 1708, or at least from 1711, this company,
being delivered from all competitors, and fully established in the
monopoly of the English commerce to the East Indies, carried on a
successful trade, and from their profits, made annually a moderate
dividend to their proprietors. During the French war, which began in
1741, the ambition of Mr. Dupleix, the French governor of Pondicherry,
involved them in the wars of the Carnatic, and in the politics of the
Indian princes. After many signal successes, and equally signal losses,
they at last lost Madras, at that time their principal settlement in
India. It was restored to them by the treaty of Aix-la-Chapelle; and,
about this time the spirit of war and conquest seems to have taken
possession of their servants in India, and never since to have left
them. During the French war, which began in 1755, their arms partook
of the general good fortune of those of Great Britain. They defended
Madras, took Pondicherry, recovered Calcutta, and acquired the revenues
of a rich and extensive territory, amounting, it was then said, to
upwards of three millions a-year. They remained for several years in
quiet possession of this revenue; but in 1767, administration laid claim
to their territorial acquisitions, and the revenue arising from them,
as of right belonging to the crown; and the company, in compensation
for this claim, agreed to pay to government 400,000 a-year. They had,
before this, gradually augmented their dividend from about six to ten
per cent.; that is, upon their capital of three millions two hundred
thousand pounds, they had increased it by 128,000, or had raised it
from one hundred and ninety-two thousand to three hundred and twenty
thousand pounds a-year. They were attempting about this time to raise
it still further, to twelve and a-half per cent., which would have made
their annual payments to their proprietors equal to what they had agreed
to pay annually to government, or to 400,000 a-year. But during the two
years in which their agreement with government was to take place, they
were restrained from any further increase of dividend by two successive
acts of parliament, of which the object was to enable them to make a
speedier progress in the payment of their debts, which were at this time
estimated at upwards of six or seven millions sterling. In 1769,
they renewed their agreement with government for five years more,
and stipulated, that during the course of that period, they should be
allowed gradually to increase their dividend to twelve and a-half per
cent; never increasing it, however, more than one per cent. in one year.
This increase of dividend, therefore, when it had risen to its utmost
height, could augment their annual payments, to their proprietors and
government together, but by 680,000, beyond what they had been before
their late territorial acquisitions. What the gross revenue of those
territorial acquisitions was supposed to amount to, has already been
mentioned; and by an account brought by the Cruttenden East Indiaman in
1769, the neat revenue, clear of all deductions and military charges,
was stated at two millions forty-eight thousand seven hundred and
forty-seven pounds. They were said, at the same time, to possess
another revenue, arising partly from lands, but chiefly from the customs
established at their different settlements, amounting to 439,000. The
profits of their trade, too, according to the evidence of their chairman
before the house of commons, amounted, at this time, to at least
400,000 a-year; according to that of their accountant, to at least
500,000; according to the lowest account, at least equal to the highest
dividend that was to be paid to their proprietors. So great a revenue
might certainly have afforded an augmentation of 680,000 in their
annual payments; and, at the same time, have left a large sinking fund,
sufficient for the speedy reduction of their debt. In 1773, however,
their debts, instead of being reduced, were augmented by an arrear to
the treasury in the payment of the four hundred thousand pounds; by
another to the custom-house for duties unpaid; by a large debt to the
bank, for money borrowed; and by a fourth, for bills drawn upon them
from India, and wantonly accepted, to the amount of upwards of twelve
hundred thousand pounds. The distress which these accumulated claims
brought upon them, obliged them not only to reduce all at once their
dividend to six per cent. but to throw themselves upon the mercy of
govermnent, and to supplicate, first, a release from the further payment
of the stipulated 400,000 a-year; and, secondly, a loan of fourteen
hundred thousand, to save them from immediate bankruptcy. The great
increase of their fortune had, it seems, only served to furnish their
servants with a pretext for greater profusion, and a cover for greater
malversation, than in proportion even to that increase of fortune.
The conduct of their servants in India, and the general state of
their affairs both in India and in Europe, became the subject of a
parliamentary inquiry: in consequence of which, several very important
alterations were made in the constitution of their government, both
at home and abroad. In India, their principal settlements or Madras,
Bombay, and Calcutta, which had before been altogether independent of
one another, were subjected to a governor-general, assisted by a council
of four assessors, parliament assuming to itself the first nomination
of this governor and council, who were to reside at Calcutta; that city
having now become, what Madras was before, the most important of the
English settlements in India. The court of the Mayor of Calcutta,
originally instituted for the trial of mercantile causes, which arose in
the city and neighbourhood, had gradually extended its jurisdiction
with the extension of the empire. It was now reduced and confined to the
original purpose of its institution. Instead of it, a new supreme court
of judicature was established, consisting of a chief justice and three
judges, to be appointed by the crown. In Europe, the qualification
necessary to entitle a proprietor to vote at their general courts was
raised, from five hundred pounds, the original price of a share in the
stock of the company, to a thousand pounds. In order to vote upon this
qualification, too, it was declared necessary, that he should have
possessed it, if acquired by his own purchase, and not by inheritance,
for at least one year, instead of six months, the term requisite before.
The court of twenty-four directors had before been chosen annually; but
it was now enacted, that each director should, for the future, be chosen
for four years; six of them, however, to go out of office by rotation
every year, and not be capable of being re-chosen at the election of
the six new directors for the ensuing year. In consequence of these
alterations, the courts, both of the proprietors and directors, it was
expected, would be likely to act with more dignity and steadiness
than they had usually done before. But it seems impossible, by any
alterations, to render those courts, in any respect, fit to govern, or
even to share in the government of a great empire; because the greater
part of their members must always have too little interest in the
prosperity of that empire, to give any serious attention to what may
promote it. Frequently a man of great, sometimes even a man of small
fortune, is willing to purchase a thousand pounds share in India stock,
merely for the influence which he expects to aquire by a vote in the
court of proprietors. It gives him a share, though not in the plunder,
yet in the appointment of the plunderers of India; the court of
directors, though they make that appointment, being necessarily more or
less under the influence of the proprietors, who not only elect those
directors, but sometimes over-rule the appointments of their servants in
India. Provided he can enjoy this influence for a few years, and thereby
provide for a certain number of his friends, he frequently cares little
about the dividend, or even about the value of the stock upon which
his vote is founded. About the prosperity of the great empire, in the
government of which that vote gives him a share, he seldom cares at all.
No other sovereigns ever were, or, from the nature of things, ever could
be, so perfectly indifferent about the happiness or misery of their
subjects, the improvement or waste of their dominions, the glory or
disgrace of their administration, as, from irresistible moral causes,
the greater part of the proprietors of such a mercantile company are,
and necessarily must be. This indifference, too, was more likely to be
increased than diminished by some of the new regulations which were
made in consequence of the parliamentary inquiry. By a resolution of the
house of commons, for example, it was declared, that when the 1,400,000
lent to the company by government, should be paid, and their bond-debts
be reduced to 1,500,000, they might then, and not till then, divide
eight per cent. upon their capital; and that whatever remained of their
revenues and neat profits at home should be divided into four parts;
three of them to be paid into the exchequer for the use of the public,
and the fourth to be reserved as a fund, either for the further
reduction of their bond-debts, or for the discharge of other contingent
exigencies which the company might labour under. But if the company were
bad stewards and bad sovereigns, when the whole of their neat revenue
and profits belonged to themselves, and were at their own disposal, they
were surely not likely to be better when three-fourths of them were to
belong to other people, and the other fourth, though to be laid out for
the benefit of the company, yet to be so under the inspection and with
the approbation of other people.

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