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

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 committeeman 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 he 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

committeeman 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 pay

ment 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 coparnery 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