. 19
( 25)


from receiving my present or fee from the parties.

The office of judge is in itself so very honourable, that men are
willing to accept of it, though accompanied with very small
emoluments. The inferior office of justice of peace, though attended
with a good deal of trouble, and in most cases with no emoluments at
all, is an object of ambition to the greater part of our country
gentlemen. The salaries of all the different judges, high and low,
together with the whole expense of the administration and execution of
justice, even where it is not managed with very good economy, makes,
in any civilized country, but a very inconsiderable part of the whole
expense of government.

The whole expense of justice, too, might easily be defrayed by the
fees of court; and, without exposing the administration of justice to
any real hazard of corruption, the public revenue might thus be
entirely discharged from a certain, though perhaps but a small
incumbrance. It is difficult to regulate the fees of court
effectually, where a person so powerful as the sovereign is to share
in them and to derive any considerable part of his revenue from them.
It is very easy, where the judge is the principal person who can reap
any benefit from them. The law can very easily oblige the judge to
respect the regulation though it might not always be able to make the
sovereign respect it. Where the fees of court are precisely regulated
and ascertained where they are paid all at once, at a certain period
of every process, into the hands of a cashier or receiver, to be by
him distributed in certain known proportions among the different
judges after the process is decided and not till it is decided; there
seems to be no more danger of corruption than when such fees are
prohibited altogether. Those fees, without occasioning any
considerable increase in the expense of a law-suit, might be rendered
fully sufficient for defraying the whole expense of justice. But not
being paid to the judges till the process was determined, they might
be some incitement to the diligence of the court in examining and
deciding it. In courts which consisted of a considerable number of
judges, by proportioning the share of each judge to the number of
hours and days which he had employed in examining the process, either
in the court, or in a committee, by order of the court, those fees
might give some encouragement to the diligence of each particular
judge. Public services are never better performed, than when their
reward comes only in consequence of their being performed, and is
proportioned to the diligence employed in performing them. In the
different parliaments of France, the fees of court (called epices and
vacations) constitute the far greater part of the emoluments of the
judges. After all deductions are made, the neat salary paid by the
crown to a counsellor or judge in the parliament of Thoulouse, in rank
and dignity the second parliament of the kingdom, amounts only to 150
livres, about 6:11s. sterling a-year. About seven years ago, that sum
was in the same place the ordinary yearly wages of a common footman.
The distribution of these epices, too, is according to the diligence of
the judges. A diligent judge gains a comfortable, though moderate
revenue, by his office; an idle one gets little more than his salary.
Those parliaments are, perhaps, in many respects, not very convenient
courts of justice; but they have never been accused; they seem never
even to have been suspected of corruption.

The fees of court seem originally to have been the principal support
of the different courts of justice in England. Each court endeavoured
to draw to itself as much business as it could, and was, upon that
account, willing to take cognizance of many suits which were not
originally intended to fall under its jurisdiction. The court of
king's bench, instituted for the trial of criminal causes only, took
cognizance of civil suits; the plaintiff pretending that the
defendant, in not doing him justice, had been guilty of some trespass
or misdemeanour. The court of exchequer, instituted for the levying of
the king's revenue, and for enforcing the payment of such debts only
as were due to the king, took cognizance of all other contract debts;
the planitiff alleging that he could not pay the king, because the
defendant would not pay him. In consequence of such fictions, it came,
in many cases, to depend altogether upon the parties, before what
court they would choose to have their cause tried, and each court
endeavoured, by superior dispatch and impartiality, to draw to itself
as many causes as it could. The present admirable constitution of the
courts of justice in England was, perhaps, originally, in a great
measure, formed by this emulation, which anciently took place between
their respective judges: each judge endeavouring to give, in his own
court, the speediest and most effectual remedy which the law would
admit, for every sort of injustice. Originally, the courts of law gave
damages only for breach of contract. The court of chancery, as a court
of conscience, first took upon it to enforce the specific performance
of agreements. When the breach of contract consisted in the
non-payment of money, the damage sustained could be compensated in no
other way than by ordering payment, which was equivalent to a specific
performance of the agreement. In such cases, therefore, the remedy of
the courts of law was sufficient. It was not so in others. When the
tenant sued his lord for having unjustly outed him of his lease, the
damages which he recovered were by no means equivalent to the
possession of the land. Such causes, therefore, for some time, went
all to the court of chancery, to the no small loss of the courts of
law. It was to draw back such causes to themselves, that the courts of
law are said to have invented the artificial and fictitious writ of
ejectment, the most effectual remedy for an unjust outer or
dispossession of land.

A stamp-duty upon the law proceedings of each particular court, to be
levied by that court, and applied towards the maintenance of the
judges, and other officers belonging to it, might in the same manner,
afford a revenue sufficient for defraying the expense of the
administration of justice, without bringing any burden upon the
general revenue of the society. The judges, indeed, might in this
case, be under the temptation of multiplying unnecessarily the
proceedings upon every cause, in order to increase, as much as
possible, the produce of such a stamp-duty. It has been the custom in
modern Europe to regulate, upon most occasions, the payment of the
attorneys and clerks of court according to the number of pages which
they had occasion to write; the court, however, requiring that each
page should contain so many lines, and each line so many words. In
order to increase their payment, the attorneys and clerks have
contrived to multiply words beyond all necessity, to the corruption of
the law language of, I believe, every court of justice in Europe. A
like temptation might, perhaps, occasion a like corruption in the form
of law proceedings.

But whether the administration of justice be so contrived as to defray
its own expense, or whether the judges be maintained by fixed salaries
paid to them from some other fund, it does not seen necessary that the
person or persons entrusted with the executive power should be charged
with the management of that fund, or with the payment of those
salaries. That fund might arise from the rent of landed estates, the
management of each estate being entrusted to the particular court
which was to be maintained by it. That fund might arise even from the
interest of a sum of money, the lending out of which might, in the
same manner, be entrusted to the court which was to be maintained by
it. A part, though indeed but a small part of the salary of the judges
of the court of session in Scotland, arises from the interest of a sum
of money. The necessary instability of such a fund seems, however, to
render it an improper one for the maintenance of an institution which
ought to last for ever.

The separation of the judicial from the executive power, seems
originally to have arisen from the increasing business of the society,
in consequence of its increasing improvement. The administration of
justice became so laborious and so complicated a duty, as to require
the undivided attention of the person to whom it was entrusted. The
person entrusted with the executive power, not having leisure to
attend to the decision of private causes himself, a deputy was
appointed to decide them in his stead. In the progress of the Roman
greatness, the consul was too much occupied with the political affairs
of the state, to attend to the administration of justice. A praetor,
therefore, was appointed to administer it in his stead. In the
progress of the European monarchies, which were founded upon the ruins
of the Roman empire, the sovereigns and the great lords came
universally to consider the administration of justice as an office
both too laborious and too ignoble for them to execute in their own
persons. They universally, therefore, discharged themselves of it, by
appointing a deputy, bailiff or judge.

When the judicial is united to the executive power, it is scarce
possible that justice should not frequently be sacrificed to what is
vulgarly called politics. The persons entrusted with the great
interests of the state may even without any corrupt views, sometimes
imagine it necessary to sacrifice to those interests the rights of a
private man. But upon the impartial administration of justice depends
the liberty of every individual, the sense which he has of his own
security. In order to make every individual feel himself perfectly
secure in the possession of every right which belongs to him, it is
not only necessary that the judicial should be separated from the
executive power, but that it should be rendered as much as possible
independent of that power. The judge should not be liable to be
removed from his office according to the caprice of that power. The
regular payment of his salary should not depend upon the good will, or
even upon the good economy of that power.


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

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 neglected.

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 displeasure.

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 branch.

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 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 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

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 Spain.

In 1724, this company had undertaken the whale fishery. Of this,
indeed, they had no monopoly; but as long as they carried it on, no
other British subjects appear to have engaged in it. Of the eight
voyages which their ships made to Greenland, they were gainers by one,
and losers by all the rest. After their eighth and last voyage, when
they had sold their ships, stores, and utensils, they found that their
whole loss upon this branch, capital and interest included, amounted
to upwards of 237,000.

In 1722, this company petitioned the parliament to be allowed to
divide their immense capital of more than thirty-three millions eight
hundred thousand pounds, the whole of which had been lent to
government, into two equal parts; the one half, or upwards of
16,900,000, to be put upon the same footing with other government
annuities, and not to be subject to the debts contracted, or losses
incurred, by the directors of the company, in the prosecution of their
mercantile projects; the other half to remain as before, a trading
stock, and to be subject to those debts and losses. The petition was
too reasonable not to be granted. In 1733, they again petitioned the
parliament, that three-fourths of their trading stock might be turned
into annuity stock, and only one-fourth remain as trading stock, or
exposed to the hazards arising from the bad management of their
directors. Both their annuity and trading stocks had, by this time,
been reduced more than two millions each, by several different
payments from government; so that this fourth amounted only to
3,662,784:8:6. In 1748, all the demands of the company upon the king
of Spain, in consequence of the assiento contract, were, by the treaty
of Aix-la-Chapelle, given up for what was supposed an equivalent. An
end was put to their trade with the Spanish West Indies; the remainder
of their trading stock was turned into an annuity stock; and the
company ceased, in every respect, to be a trading company.

It ought to be observed, that in the trade which the South Sea company
carried on by means of their annual ship, the only trade by which it
ever was expected that they could make any considerable profit, they
were not without competitors, either in the foreign or in the home
market. At Carthagena, Porto Bello, and La Vera Cruz, they had to
encounter the competition of the Spanish merchants, who brought from
Cadiz to those markets European goods, of the same kind with the
outward cargo of their ship; and in England they had to encounter that
of the English merchants, who imported from Cadiz goods of the Spanish
West Indies, of the same kind with the inward cargo. The goods, both
of the Spanish and English merchants, indeed, were, perhaps, subject
to higher duties. But the loss occasioned by the negligence,
profusion, and malversation of the servants of the company, had
probably been a tax much heavier than all those duties. That a
joint-stock company should be able to carry on successfully any branch
of foreign trade, when private adventurers can come into any sort of
open and fair competition with them, seems contrary to all experience.

The old English East India company was established in 1600, by a
charter from Queen Elizabeth. In the first twelve voyages which they
fitted out for India, they appear to have traded as a regulated
company, with separate stocks, though only in the general ships of the
company. In 1612, they united into a joint stock. Their charter was
exclusive, and, though not confirmed by act of parliament, was in
those days supposed to convey a real exclusive privilege. For many
years, therefore, they were not much disturbed by interlopers. Their
capital, which never exceeded 744,000, and of which 50 was a share,
was not so exorbitant, nor their dealings so extensive, as to afford
either a pretext for gross negligence and profusion, or a cover to
gross malversation. Notwithstanding some extraordinary losses,
occassioned partly by the malice of the Dutch East India company, and
partly by other accidents, they carried on for many years a successful
trade. But in process of time, when the principles of liberty were
better understood, it became every day more and more doubtful, how far
a royal charter, not confirmed by act of parliament, could convey an
exclusive privilege. Upon this question the decisions of the courts of
justice were not uniform, but varied with the authority of government,
and the humours of the times. Interlopers multiplied upon them; and
towards the end of the reign of Charles II., through the whole of that
of James II., and during a part of that of William III., reduced them
to great distress. In 1698, a proposal was made to parliament, of
advancing two millions to government, at eight per cent. provided the
subscribers were erected into a new East India company, with exclusive
privileges. The old East India company offered seven hundred thousand
pounds, nearly the amount of their capital, at four per cent. upon the
same conditions. But such was at that time the state of public credit,
that it was more convenient for government to borrow two millions at
eight per cent. than seven hundred thousand pounds at four. The
proposal of the new subscribers was accepted, and a new East India
company established in consequence. The old East India company,
however, had a right to continue their trade till 1701. They had, at
the same time, in 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.

It might be more agreeable to the company, that their own servants and
dependants should have either the pleasure of wasting, or the profit
of embezzling, whatever surplus might remain, after paying the
proposed dividend of eight per cent. than that it should come into the
hands of a set of people with whom those resolutions could scarce fail
to set them in some measure at variance. The interest of those
servants and dependants might so far predominate in the court of
proprietors, as sometimes to dispose it to support the authors of
depredations which had been committed in direct violation of its own
authority. With the majority of proprietors, the support even of the
authority of their own court might sometimes be a matter of less
consequence than the support of those who had set that authority at

The regulations of 1773, accordingly, did not put an end to the
disorder of the company's government in India. Notwithstanding that,
during a momentary fit of good conduct, they had at one time collected
into the treasury of Calcutta more than 3,000,000 sterling;
notwithstanding that they had afterwards extended either their
dominion or their depredations over a vast accession of some of the
richest and most fertile countries in India, all was wasted and
destroyed. They found themselves altogether unprepared to stop or
resist the incursion of Hyder Ali; and in consequence of those
disorders, the company is now (1784) in greater distress than ever;
and, in order to prevent immediate bankruptcy, is once more reduced to
supplicate the assistance of government. Different plans have been
proposed by the different parties in parliament for the better
management of its affairs; and all those plans seem to agree in
supposing, what was indeed always abundantly evident, that it is
altogether unfit to govern its territorial possessions. Even the
company itself seems to be convinced of its own incapacity so far, and
seems, upon that account willing to give them up to government.

With the right of possessing forts and garrisons in distant and
barbarous countries is necessarily connected the right of making peace
and war in those countries. The joint-stock companies, which have had
the one right, have constantly exercised the other, and have
frequently had it expressly conferred upon them. How unjustly, how
capriciously, how cruelly, they have commonly exercised it, is too
well known from recent experience.

When a company of merchants undertake, at their own risk and expense,
to establish a new trade with some remote and barbarous nation, it may
not be unreasonable to incorporate them into a joint-stock company,
and to grant them, in case of their success, a monopoly of the trade
for a certain number of years. It is the easiest and most natural way
in which the state can recompense them for hazarding a dangerous and
expensive experiment, of which the public is afterwards to reap the
benefit. A temporary monopoly of this kind may be vindicated, upon the
same principles upon which a like monopoly of a new machine is granted
to its inventor, and that of a new book to its author. But upon the
expiration of the term, the monopoly ought certainly to determine; the
forts and garrisons, if it was found necessary to establish any, to be
taken into the hands of government, their value to be paid to the
company, and the trade to be laid open to all the subjects of the
state. By a perpetual monopoly, all the other subjects of the state
are taxed very absurdly in two different ways: first, by the high
price of goods, which, in the case of a free trade, they could buy
much cheaper; and, secondly, by their total exclusion from a branch of
business which it might be both convenient and profitable for many of
them to carry on. It is for the most worthless of all purposes, too,
that they are taxed in this manner. It is merely to enable the company
to support the negligence, profusion, and malversation of their own
servants, whose disorderly conduct seldom allows the dividend of the
company to exceed the ordinary rate of profit in trades which are
altogether free, and very frequently makes a fall even a good deal
short of that rate. Without a monopoly, however, a joint-stock
company, it would appear from experience, cannot long carry on any
branch of foreign trade. To buy in one market, in order to sell with
profit in another, when there are many competitors in both; to watch
over, not only the occasional variations in the demand, but the much
greater and more frequent variations in the competition, or in the
supply which that demand is likely to get from other people; and to
suit with dexterity and judgment both the quantity and quality of each
assortment of goods to all these circumstances, is a species of
warfare, of which the operations are continually changing, and which
can scarce ever be conducted successfully, without such an unremitting
exertion of vigilance and attention as cannot long be expected from
the directors of a joint-stock company. The East India company, upon
the redemption of their funds, and the expiration of their exclusive
privilege, have a right, by act of parliament, to continue a
corporation with a joint stock, and to trade in their corporate
capacity to the East Indies, in common with the rest of their fellow
subjects. But in this situation, the superior vigilance and attention
of a private adventurer would, in all probability, soon make them
weary of the trade.

An eminent French author, of great knowledge in matters of political
economy, the Abbe Morellet, gives a list of fifty-five joint-stock
companies for foreign trade, which have been established in different
parts of Europe since the year 1600, and which, according to him, have
all failed from mismanagement, notwithstanding they had exclusive
privileges. He has been misinformed with regard to the history of two
or three of them, which were not joint-stock companies and have not
failed. But, in compensation, there have been several joint-stock
companies which have failed, and which he has omitted.

The only trades which it seems possible for a joint-stock company to
carry on successfully, without an exclusive privilege, are those, of
which all the operations are capable of being reduced to what is
called a routine, or to such a uniformity of method as admits of
little or no variation. Of this kind is, first, the banking trade;
secondly, the trade of insurance from fire and from sea risk, and
capture in time of war; thirdly, the trade of making and maintaining a
navigable cut or canal; and, fourthly, the similar trade of bringing
water for the supply of a great city.

Though the principles of the banking trade may appear somewhat
abstruse, the practice is capable of being reduced to strict rules. To
depart upon any occasion from those rules, in consequence of some
flattering speculation of extraordinary gain, is almost always
extremely dangerous and frequently fatal to the banking company which
attempts it. But the constitution of joint-stock companies renders
them in general, more tenacious of established rules than any private
copartnery. Such companies, therefore, seem extremely well fitted for
this trade. The principal banking companies in Europe, accordingly,
are joint-stock companies, many of which manage their trade very
successfully without any exclusive privilege. The bank of England has
no other exclusive privilege, except that no other banking company in
England shall consist of more than six persons. The two banks of
Edinburgh are joint-stock companies, without any exclusive privilege.

The value of the risk, either from fire, or from loss by sea, or by
capture, though it cannot, perhaps, be calculated very exactly,
admits, however, of such a gross estimation, as renders it, in some
degree, reducible to strict rule and method. The trade of insurance,
therefore, may be carried on successfully by a joint-stock company,
without any exclusive privilege. Neither the London Assurance, nor the
Royal Exchange Assurance companies have any such privilege.

When a navigable cut or canal has been once made, the management of it
becomes quite simple and easy, and it is reducible to strict rule and
method. Even the making of it is so, as it may be contracted for with
undertakers, at so much a mile, and so much a lock. The same thing may
be said of a canal, an aqueduct, or a great pipe for bringing water to
supply a great city. Such under-takings, therefore, may be, and
accordingly frequently are, very successfully managed by joint-stock
companies, without any exclusive privilege.

To establish a joint-stock company, however, for any undertaking,
merely because such a company might be capable of managing it
successfully; or, to exempt a particular set of dealers from some of
the general laws which take place with regard to all their neighbours,
merely because they might be capable of thriving, if they had such an
exemption, would certainly not be reasonable. To render such an
establishment perfectly reasonable, with the circumstance of being
reducible to strict rule and method, two other circumstances ought to
concur. First, it ought to appear with the clearest evidence, that the
undertaking is of greater and more general utility than the greater
part of common trades; and, secondly, that it requires a greater
capital than can easily be collected into a private copartnery. If a
moderate capital were sufficient, the great utility of the undertaking


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