An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

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 l643, 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

twentyfive 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

shopkeepers 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 ministers.

 

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