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 defiance.
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 Ј3,000,000 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 would not be a sufficient reason for establishing a joint-stock company; because, in this case, the demand for what it was to produce, would readily and easily be supplied by private adventurers. In the four trades above mentioned, both those circumstances concur.