Through the Sixteenth Century: Mosh Pit Court of Elizabeth: Cloth Merchant Adventurers Share Overseas Trade with a New Breed of Overseas Traders
The composition of England’s overseas commercial elite shifted within periods during this half-century. Moreover English overseas commercial trade, colonization and discovery on which we focus drifted in and out of court politics and royal priorities. They were not “pure business ventures” but mixed several goals and missions together in a single venture. Typically such adventurers were often the “Queen’s favorites”, and policy-making usually included strategies of those who brokered her politics and policy, or was reactive to private individual advocates who pressed for patents. Court-style policy making was complex and intricate but it also was hap-hazard at its best.
The Muscovy Company was the first major regulated joint stock corporation that spun away from the Cloth Merchant Adventurers back in 1553. A series of other such ventures flowed until the Levant joint stock, regulated or otherwise, ventured out into the Mediterranean in the 1580’s. In between, the Outer Ports, unable to live of the scraps of London’s overseas trade, engaged in exploration and discovery, but by the 1570’s thus far mostly focused on Ireland and what amounted to conquest, by the 1580’s however, they cast their attention to what lie west, across the Atlantic. England and Spain had drifted into all-out war that would last to 1604. The 80’s were the boom years of the Levant Company, but as they played out in the 90’s it was clearer and clearer that the northwest passage could be useful in establishing trade between England and the Far East, and also for exploring prospects in and about the Spanish colonies in todays Central America..
During those years an ebb and flow began with Gilbert in the years preceding the Spanish war, than Fobisher, and finally Raleigh who concentrated on the southern geographies of North America, from our Virginia down to West Indies. Raleigh’s ventures centered around establishing a homebase in North America from which he could exploit whatever he found there, and serve ships venturing to and from the West Indies and Caribbean, in particular privateers like himself.
It began with a charter in 1584 that led to his establishment and loss of the Roanoke colony, with an interruption caused by his involvement in the defeat of the Armada in 1588. In search of El Dorado, Raleigh, began preparations in 1594 and conducted an expedition into Guyana (Venezuela). Returning home he and Essex launched a huge attack on Cadiz (Spain) that was a spectacular success. At that point he took a break from overseas expeditions, settling down in a variety of positions in England. Essex, however, led Elizabeth’s last attempt to transform Ireland into an English plantation. The residue from the invasion led into the oft-famous Essex Rebellion, an event or affair that had at minimum interesting consequences for the Virginia Company and Virginia.
As to the mix of elites engaged in overseas venturers, the literature is consistent in identifying merchants as the core element, but it also included a blend of landed gentlemen, aristocrats, gentry, soldiers, and maritime professions who participated in the specific ventures and expeditions. Policy-making for Elizabeth’s overseas affairs was never formalized , very personalized to the extent that attention to fine details such as organization structure did not stand out. In any case, a society, governing hierarchies, and economy in flux, which England was without doubt in this period, suggest the actors engaged in the policy-making need be examined and categorized so we can better assess their motivations, goals—rivalries—relevant to the context of that period.
. R. Andrews calls attention to this larger picture. “Before the seventeenth century the supply of funds for new and young ventures in trade, discovery, or colonization was almost always inadequate”; “the Country possessed no banks, nor had it great merchant houses comparable to those that had backed the Iberian expansion”; ”Its credit system lagged behind that of various other parts of Europe”; “The City of London, consisting of a few middle-size fish and shoals of small fry , was conservative and shy of high risk or long-term investment such as [Asian] trade or [North American] colonization required”; “Discovery [in particular] had to depend largely on devotees”; [99] K. R. Andrews, Trade, Plunder and Settlement, pp. 360-1 He also observes improvement after James I, but an out and out commitment by investors to overseas market development and colonization did not manifest itself until the Restoration and after.
If Trump has tariffs, Elizabeth I had monopolies and farming (winner of the Trump & Elizabeth I in the same sentence award)
Monopolies were royal patents that granted a person or company by the sovereign administering, selling or producing a good or service to the throne. “Farming” meant leasing out the right, confirmed by a law or edict, to implement activities or functions created by that law or edict. Tax collection was an example that made much for those who were grant the right to farm it. Both monopolies and farming were usually for a set period of time, and were not automatically passed on to inheritors on death. Farming leases required an annual payment to the Crown
It must be said at the start that Elizabeth inherited from her fellow Tudors a very serious debt that hung over her finances and budget let an axe over a head. It also must be admitted that her father used both to some degree. I have seen estimates of this debt as high as 300,000 pounds—a horrendous number like trillions are today. From the beginning, the common theme of both monopolies and farming was to raise revenues for Crown expenses without having to deal with Parliament. Having decentralized much of the Crown’s policy implementation, she needed to manage the various individuals and factions within her Court who kept the gears of policy implementation turning or grinding.
The patent system was originally intended to foster economic growth, encourage investment and enterprise, and create employment for the poor; however, patents of monopoly also provided a source of extra-parliamentary revenue to the Crown, and were a means of rewarding courtiers who brought new ‘projects’ to the queen’s [Elizabeth I] attention. For this reason an increasing number were issued from the late 1580’s onwards, including some that were nothing more than sinecures. Such monopolies were usually glossed as being in some way beneficial to the commonwealth, had harmful consequences that became a serious grievance under the harsh economic conditions of the 1590’s
As I have observed Elizabeth also pursued a policy thrust of decentralizing, delegating policy implementation to the private sector, and her use during the Spanish war to finance raids and privateering at the cost of the adventurer or her favorite was also consistently employed. Lacking spare change in her pockets she tended to be used for spreading the wealth to favorites and those needing some form of reward among the aristocracy and gentry who for a variety of reasons were useful to the throne. Since farming based on customs duties involved ports of entry, London the main door, imported overseas commercial trade was saturated with these franchises and they likely were helpful in keeping the wealthier elements of her London merchant constituency continue as happy campers..
However off the beaten path to most Americans monopolies and farming are like earmarks in today’s budget bill. Our problem in this history is that both practices seriously permeated the rise of overseas commercial trade, discovery and exploration, and colonization. The Virginia Company was an example of a monopoly intended to throw off colonization to the private sector.
As one might expect, monopolies and farming led to abuses, and in most cases resulted in higher costs to those who were affected by the monopoly or the farming. If nothing else in the case of overseas commercial trade, it meant that simply paying one’s custom duties on an import meant getting caught up in this system. As the years went by, and the range of both expanded, more and more individuals and companies got caught up in what was by the 1580’s a system viewed as little more than legal corruption. The Parliament had been involved in an effort to bring this under control as early as 1571, but Elizabeth brushed it aside stating that her right to grant such monopolies and farming patents were her prerogative as queen and sovereign. That worked until the corruption generated in the hard times of the 1590’s, when Parliament in the 1597/8 session protested and commenced an investigatory commission which at the end of the session presented a petition to the Queen on the matter.
The Queen again responded it was an element of legitimate royal power, in fact the “chiefest flower in her garland” of her royal prerogatives. She loosely promised to be sensitive to her awards in the future. Precious little follow up and clean up again resulted, and the 1601 parliament erupted engaging in a serious effort to check its use. We will discuss this session and another in 1604 in the next chapter. But but the reader should take careful note at this point that by the end of her reign the issue of monopolies and farming had become very high priority issues nationally. The great merchant trading companies of the period, including the East Indies Company, were affected notably. Reaction to the 1604 Parliament did affect the design of the Virginia Company in 1605. [99]https://www.historyofparliamentonline.org/periods/tudors/monopolies-elizabethan-parliaments
Suffice it to say at this point, the offshoot merchants (and the trading companies they established) were a minority of traders or exporters at that time. They did not threaten the dominant Company Of Merchant Adventurers, who obstinately stuck to their cloth exporting to northern Europe monopoly. Protected by royal charter, the industry developed into a growh cluster, dominated and protected by a guild-like “trading company” titled the Merchant Adventurers, controlled a full one-half of English trade (by the first decade of the seventeenth century, and cloth export represented nearly seventy-five percent of English exports. From its rise beginning in the 1480’s English cloth trade skyrocked, closely tied to the London-Antwerp route, in two distict bursts. The first burst during the years of Henry VII to 1510, followed by twenty-five year relatively stagnant growth that gave way in the 1530’s to the second growth that crested in the 1550’s (the zenith was 1548 to 1550).
Import: Brenner’s Focus on Overseas Companies Change in Mission
The pivot in English overseas trade not only involves overseas trade impact on the structure of the English joint stock corporation, but also its purpose. The latter change is fundamental to understand the why behind the “business strategy” of the Virginia Company as it was constructed in 1606 and imposed upon that corporation in the royal charter, as well as understanding the mission of the permanent settlement of Virginia. I rely on Robert Brenner’s Merchant and Revolution for his assertion as to the pivot from the export only Merchant Company of Adventurers, to the export-import strategy that overseas trading joint stock ventures embraced after the incorporation of the Muscovy Company in 1555.
The rise of new trades in the Elizabethan era, extending from Morocco, Russia, Persia, Guinea to Turkey, Venice, and the East Indies [Indonesia, Japan, South East Asia and India primarily, but even aspirations to China] was based, from the start, on imports. Merchants were thus moved to found these new trades far less by chronic [domestic] economic crisis in the cloth export commerce than by periodic physical disruptions of their traditional trade routes … These disruption compelled certain merchants interested in imports to seek better access to the ultimate sources of supply. English merchants found it feasible to establish the new trades in large part, because of the weakening hold of Portugal and Spain over their commercial empires, as well as certain other favorable political shifts in the new areas of commercial penetration. Even so, they could successfully capitalize on the openings [opportunity] presented to them only because of the growing political, as well as economic, strength of English commerce and shipping in this period. Finally,, what made possible the new trades’ extraordinary long-term growth and continuing high profits over more than a century was the remarkable secular rise of domestic demand for imports in England, as well as the growth of the reexport trades with Europe.” [99] Robert Brenner, Merchants and Revolution, (Princeton University Press and Verso Press, 2003), p. 5
From exports to imports, English commercial trade, and the elites and companies attached to it, forged a new vision and role for English overseas trade. As we outline this shift from export only to the Continent to import from the globe, we can see the seeds of what will become English colonial and trade policy, and the Navigation Acts to be specific, the nature of which will play an exceedingly large role in America’s drift to Independence and Revolution.
What made import-driven commercial expansion beneficial [to England and commercial merchants] was its expanded base of occupations, workers and wealth accumulation opportunities English traders, concessionaires, and English ship-building and port facilities: import meant warehouses, and sale to interior cities and towns. [Early on] English merchants were motivated to expand English commercial horizons by the desire to emulate and, ultimately, to displace the Spanish and Portuguese in their trades for gold, spices and other commodities … They were encouraged to persevere in their efforts by the perceptibly declining power of their competitors [once again I suggest the effects of the Thirty Years War] … They found the new trades profitable over a very long period to a large extent because of the long-term growth of English home demand [99] Robert Brenner, Merchants and Revolution, (Princeton University Press and Verso Press, 2003), p. 45
Remarkably, from this dire fate flowed an opportunity that more diversified trade could build other industries, sectors and provide jobs in sectors other than textile-related. Opportunities for unemployed or for those flooding to these areas from the countryside in search of jobs meant a more diversified trade could grow occupations in manufacturing, finance, transportation/ship-building, port workers.
Some of these opportunities could be seized upon as second jobs for farmers still engaged in agriculture (winter production). England had a larger population than ever, and these jobs offer some hope for a limited consumer demand, for selected products and commodities. In any case the formation of trading company proved an essential tool or vehicle for the economic development of the kingdom, and her port cities. That their leadership soon moved in to occupy positions of wealth, power, and institutional leadership. That they were members of a new class—the gentry–, the merchant grouping has been a matter of ideological dispute—one we need not focus upon. [See Below 999]
[999] Brenner’s academic mentor, to whom Merchant and Revolution was dedicated, Lawrence Stone, described this distinction thusly: “The middle of the seventeenth century saw the eclipse of the monarchy, of the peerage, and of the Anglican Church. It saw the brief emergence into the open of radical ideas about social, economic, sexual and political equality. Admittedly all this did not last, and by the end of the seventeenth century the peers, like the Anglican clergy and the King were firmly back in the saddle….. Why did all this happen? For a long time it was customary to explain these events as a particular crisis arising from particular events, personalities and policies: the ineptitude of James, the corruption of Buckingham, the obstinacy of Stafford, Laud, and Charles I; the rise of puritanism, the growth of a sense of constitutionalism, the development of improved procedural techniques by the House of Commons. Within its terms of reference each of these explanations is satisfactory enough, and indeed together they still provide the best guide to the issues which divided men from one another when civil war broke out in 1642. .. But what they leave unexplained is the decay of respect for the Establishment as a whole [I call it the political system of Britain].
For Stone, the explanation for the civil war had three main causes: “The first was a long term decline in respect for and obedience to the Monarchy, caused partly by the personal ineptitude of kings, partly by growing financial impoverishment, partly by structural defects in the Court system [monarchical policy system], and partly by the widening gap between the moral standards, aspirations, and way of life of the Court and those of the Country [as a whole]; the Second, was the failure of the Established Church to comprehend within itself all but the Roman Catholics. [So the Established Church] managed to alienate from the Anglican Church an ever-increasing body of influential opinion; The Third, a crisis in the affairs of the hereditary elite, the aristocracy. For a time this group lost its hold upon the nation and thus allowed political and social initiative to fall into the hands of the squirearchy. [99] Lawrence Stone, the Crisis of the Aristocracy, 1558, 1641 (Oxford University Press, 1967, pp. 6-9 [999]
These English overseas trading elites became associated with England’s war with Spain, and accordingly, became privateers, and/or part of England’s militia-navy that defeated the Armada in 1588, and participated in England’s following counter punches. “They went on to assume prominent positions in the East India Company from its foundation … the greatest promoter of overseas enterprise was certainly Sir Thomas Smythe … These and similar Londoners who set the pace in redepolying the overseas commerce of the country were a minority of the City elite. A [presumably large] section of that elite played no part whatever in overseas trade. [K. R. Andrews, p.20] Many of this London-based grouping were shipowners, and as we shall discover “importing was the hall-mark of the promoters of the rich trades.” [p. 21]. In any case, interweaving wars, battle and military skills was a prominent characteristic of the late Elizabeth period and after. That would have implications for the administration and policy-making of Virginia colonial affairs.
From the 1550’s to the eve of the Civil War (1640), this second grouping would develop their own trading companies, from which our joint stock corporation will be the preferred organizational vehicle, while the search for new markets will in later years embrace North and Central America. While they would, of course, export goods from England, this new grouping eagerly embraced import as well. Import became the greatest attraction of the new merchant adventurers from which their considerable profit was based.
In turn the growth of this new grouping was itself based on and dependent on secular economic and social change in England-Britain. As we have repeatedly stated, there is a “whole lot of things going on” in England at this time, a period of considerable underlying transformation, from which the pressures and influences that led to the incorporation and colonial management of the Virginia Company. In this instance, I would stress the need for import to England, which by definition meant export from the colony.
To enhance this import business, several new trading companies, the Muscovy Company (1555) being the most known, prospered on whatever sale of English cloth was possible ,but imported furs and timber, and naval supplies. When the Levant trading Company withered up because of widespread piracy, the Muscovy Company evolved a land route from Moscow to Persia, eventually securing an Ottoman license for trade throughout their Empire (six voyages were made focused on this trade between 1557 and 1579). In any event during these critical years, English overseas trade diversified from an almost exclusive export of cloths to northern Europe, to a small, but quite profitable import trade.
The idea was to import commodities and products of the globe and sell them to the domestic market, or to resell them abroad to those wanted or needed them–leaving for itself the pick of the litter to build its own economy, satisfy its populace and elites, and develop sufficient capacity to defend the Isles and her trading routes, from hostile forces. Embedded in this transformation was a rather preliminary conception of colonization; it was not a colony that send off surplus population, and become a consumer of English goods, but rather serve as a geographical location, autonomous of native elites and governance, and a holding area for storage and repair of ships arriving from abroad. It was conceptualized as a “trading factory” for English shippers.
The Great Trading Companies
Before we discuss the Muscovy Company we first ought to understand the special, if not unique role and purpose of these “trading or merchant companies”, not only in England but throughout Europe at this moment in time. Trading companies are a phenomena that played a special role in some European countries for a limited period of time. Understanding the special nature of these trading companies is not commonly appreciated by American historians and commentators who seldom allow themselves to become bogged down in European history and context in their discussion of the Virginia colony and the Virginia Company. But it is critical we impress on the reader that the Virginia Company, a 1604 trading company, would never be a mere, simple profit driven business corporation whose investor greed messed up the early years of the Virginia colony. The Virginia Company was much more complicated than that.
To explain the nature and role of the European trading company, I turn to Fernand Braudel, and his masterpiece “the Wheels of Commerce”.
Braudel begins his section on merchant companies with the rather bold assertion that “a distinction must be made between firms [general business companies/partnerships/family businesses] and big trading companies”. While the “firm”, whatever specific form its assumes, lies at “the very heart of capitalism” and capitalist development, “large trading companies (such as the East India Companies) concerned both capital and the state. As the latter [the state] grew more important, it intervened more forcefully; capitalists had to choose whether to submit, protest, or as some did finally, pull out”. [99] Fernand Braudel, the Wheels of Commerce: Civilization and Capitalism, 15th-18th Century, Vol. 2 (1979, 1982), p. 433
As Braudel adds these trading companies occupy a specific period in European history, and as one would suspect that was because they responded to particular demands and conditions pertinent to a time period; they would adjust to changes during their period, and by the end of their period, for the most part would fall by the wayside. In his developed discussion on these trading companies observed they came into being in the late-16th, and early 17th century for the most part, England first, Holland, France would come last and later.
Braudel makes a distinction between “pure” joint stock corporation”, a complex multi-company business structure whose essential attribute was its ability to transfer (sell and buy) its shares on the market. thus shareholders would have opportunity to buy and sell the entity as they saw fit. The first England developed was the cloth-based Company of Merchant Adventurers, and a successor, the Muscovy Company in 1553. Braudel asserts post medieval versions of trading companies existed before this time period, and comments how they were used in Italy, Genoa, and the Genoese Republic as early as 1346; but they did not “as he says “catch on” (France for example never had one develop and sustain itself). Rather for him The post medieval version was a joint stock company at its core. “The joint stock company was a way of reaching a much larger investing public, a way of extending both geographically and socially the zones from which money could be drawn” [99] Fernand Braudel, the Wheels of Commerce pp. 441-2 Once investor shareholders are recruited and leadership put in place, complexity of its mission encouraged additional elements.
The distinction between a joint stock corporation and a great merchant company comes quick, and in England almost immediately; “The great merchant companies were born of trade monopolies. On the whole, they date from the seventeenth century and are peculiar to north-west Europe. With some discomfort he further suggests that for some countries, the United Provinces (Holland) and England “are generally supposed to have used their companies to conquer the world” (p. 443), but he then proceeds to define trading companies more precisely.
They had at least two, more properly, three characteristics: they were the expression of high intensity capitalist endeavour; their mission would have been unthinkable without the privilege granted by the state; and they appropriated for themselves whole sectors of overseas trade [i.e. enjoyed a geographic trading monopoly]”. This is key to our understanding of the Virginia Company which fell into this category. One must recognize these three elements as a package or multi-element form of business organization that has embraced some element of a public partner in order to enjoy a distinctive monopoly that removes competition. They were more mercantilist devise to extend the country into global affairs to create opportunity for power and profit.
Thus for Braudel a trading company monopoly depended on the union of three factors: the state, irrespective of the use and extent of its power, was never absent, and would join with “the world of trade” or capital financiers, banking, credit and debt, and customers who would become partners in a common endeavor by creating an organizational entity, and finally would obtain the right to a geographical monopoly (“a distant land”) to be exploited must be specific and formally recognized by the state.
This organizational and programmatic relationship made and distributed favors and guaranteed privileges which were essential to the company’s operations and market trade. In exchange the private companies for such tax exemptions and grant of state powers, revenues or resources required by the private trades, the latter made concessions to the state. Because of its power, it was critical the state saw such advantages for itself so that it was willing to make these concessions in return for its demands.
One such motivation for state involvement was stability of the corporations’ leadership. Braudel posits “at the top of these large enterprises were small ruling groups, obstinately attached to their privileges, thoroughly conservative, and in no sense looking for change or innovation”. In essence, the elevated position of this entity required its stability, internal consensus and loyalty to state which were deemed preconditions to achieve its mission and goals. In hindsight, Braudel notes the likelihood of effectiveness and success of this union of state and private interests was not known at the time, was in reality linked to the geography over which they had a trading monopoly. He remarks Asia was the far better place of opportunity, and adds “
Neither the Atlantic—the African and American trades—nor the European seas, the Baltic or White Sea, or even the great Mediterranean, offered operational areas that were so profitable for so long. In English history, compare the fate of the Muscovy Company, the Levant Company, and the African Company or in Dutch history the eventual collapse of the West Indies Company. For these great trading companies there was a definite and by no means fortuitous geography of success. Was this because the Asiatic trade lay exclusively in luxury products—pepper, spices, silk, calicoes, Chinese gold, Japanese silver, and before long tea, coffee, lacquer, porcelains. As Europe made steady growth her appetite for luxuries progressed. …Instead of starting from scratch as they had to in America, the Europeans in the Far East exploited and diverted to their own ends a solidly-constructed trade system [99] Fernand Braudel, the Wheels of Commerce pp. 444-447
Braudel then conducts a case study of “the English companies”. It is a complex and detailed assessment that analyzes the constant transition and evolution of English merchant adventurer trading companies over the seventeenth century and detailing the inability of many to survive beyond that. He observes that only the East India Company sustained its monopoly until 1865, but did so only after struggle during the seventeenth century and a revamping and new, if multi-year incorporation in 1708. Organizational instability, he observed, troubled not just English merchant traders but the Dutch and most definitely the French who were unable, despite several attempts, to sustain any of its trading companies. In fact, the Virginia Company did not survive long enough tas were any of the French companies. The must vulnerable element of the trading company was its geographic monopoly that could not export attractive products for domestic consumption or state need. :
The important things (for sustainability and effectiveness) are those that have consequences, and when these consequences amount to the modernizing of the[mother country] economy, [and as] the ‘business model’ of the future, the accelerated pace of capital formation and the dawn of colonization, we should think more than once about them. The chorus of protests against the monopoly of the companies seems to suggest that the game [when those factors are important] was worth the candle. Already before 1700, the world of trade had been grumbling about the monopolies. There had been complains, anger, hopes and compromise. But …it seems that while monopoly by a given company might have been borne without too much indignation in the seventeenth century, it was regarded as intolerable and scandalous in the following century. [99] Fernand Braudel, the Wheels of Commerce pp. 448-455, quote p. 453
It is interesting to note that Brenner adds to this by asserting the key reason England moved away from its cloth-based Company of Adventurers was that it did not fulfill slowly evolving needs of the English economy. “The rise of the new trades of the Elizabeth era, extending from Morocco, Russia, Persia, and Guinea to Turkey, Venice, and the East Indies, was based from [their] start, on imports. Merchants were thus moved to found these new trades far less by chronic economic crisis in the cloth export commerce than by the periodic physical disruptions of their traditional trade routes [mostly war] especially those to the Antwerp and Iberian entreports. These disruptions compelled certain merchants interested in imports to seek better access to the ultimate sources of supply. English merchants found it feasible to establish the new trades in large part because of the weakening hold of Portugal and Spain over their commercial empires, as well as certain other favorable shifts in the new areas of commercial penetration. Even so, they could successfully capitalize on the openings presented to them because of the growing political as well as economic, strength of English commerce and shipping in this period. Finally, what made possible the new trades’ extraordinary long-term growth and continuing high profits over more than a century was the remarkable secular rise of domestic demand for imports in England, as well as the growth of the reexport trades with Europe”. [99] Robert Brenner, Merchants and Revolution, p. 5ff.
In other words, the changing evolving needs of the English economy underlay the trading companies and any profit they made, thus compelling them to satisfy domestic demands on which the state and the merchants required to satisfy their own objectives. The Company of Merchant Adventurers time in the sun was increasingly challenged by an aggressive Crown looking for more loans to finance more of its expenses, and by troubles within both the continent and within the cloth industry itself.
In reaction to the last pressure, as each decade passed, the Company became more and more oligarchical and tightened restriction on membership and the autonomy of the member in trading. In this manner, the Company could better deal with fluctuations in trade and stability of its organization. In effect, rather than redefine overseas trading to enlarge its scope in goods and/or merchants, it simply doubled-down on oligarchy. It was time for England to move on if it were to grow, compete, and sustain fiscal and popular stability [see p. 44]. It was these drivers for English overseas trade that promoted the succession of merchant trading companies in the period after 1550.
If imports were the target of the new wave of English overseas traders, it is interesting to note if and to what degree colonization fit well with this focus. Trade itself in this era was the key, and the key to that was to break into and take away the early advantage of Spain and Portugal. Privateering was more the fit; if so ‘trading stations” in the New World (such as Roanoke was intended to be), not vulnerable, expensive, all-consuming permanent settlements and a colony that needed defense.
Muscovy (Russia ) Company
Incorporation and royal charter of the Muscovy (Russia) joint stock corporation in 1555 marked the formal beginning of England’s pivoting away from the stilted and overbearing pressure of the Merchant Adventurers Company on English commercial trade. England began a new era of overseas trade.
The transformative break in overseas trade began before 1550’s, 1548 was an important breakthrough when Sebastian Cabot, son of the famous John Cabot whose 1497 voyage of discovery found North America (Canada), and created an idea that was to dominate English post-pivot overseas trade: that there may well be a northwest passage, in addition to the known northeast passage across Arctic Russia), formed his cutely named company, “Mysterie and companie of the Merchants adventurers for the discoverie of Regions, Dominions, Islands, and places unknowen”.
Cabot was the guru of overseas trade in that day, and his prestige, his following and his boldness to incorporate a company rival to the cloth Merchant Adventurers and carry along with it a good many London merchants and investors. Cabot was versatile and flexible; he was in favor of whichever passage of trade was the best and his first efforts were to explore the northeast through Russia. With investors following in his wake, over 6,000 pounds was raised by some of well-know and well-place aristocrats close to Henry VII to refit and rebuild three ships to conduct a northeast passage expedition which seems to have been the favorite of the Londoners. It left London in 1553, without benefit of a royal charter. [99] See Clement Adams’s, the engraver of the map images of this expedition, advertisement of the expedition in K. R. Andrews, Trade, Plunder and Settlement, p.65-6. The timing was right as the cloth trade was in a serious crisis and the powers that be in London were “seriously concerned [that] the economic, political, and social disturbance that the depression in the nation’s main industry might cause” [99] K. R. Andrews, Trade, Plunder and Settlement, p. 67.
The 1553 fleet had a hard and time-consuming voyage, bad winds, weather, cold, no reliable maps, unable to land because of ice, they plodded through the Barents Sea, and then into the White Sea before winter came. The ships lost sight and track of each other and each went on their own way; two ships were lost and seventy froze to death—the first lives lost in search of the way to Asia and the Indies. The third ship was luck to come ashore at today’s Arkhangelsk. Richard Chancellor, its commander, went by sled to Moscow and negotiated a treaty with Ivan the Terrible to open up a trading port at Arkhangelsk..
Returning to England in 1554, Chancellor created quite a stir in London, and a request for a royal charter to incorporate the Muscovy Company with monopoly for Russia and “all areas northwards [east and west unspecified]. Armed with the charter he dashed off to Russia to complete the opening and tidy up the treaty. Successful, the ship was lost on the way back and Chancellor and all his agents drowned. “What Chancellor did was to make the northern [eastern] sea route a regular commercial highway” [99] K. R. Andrews, Trade, Plunder and Settlement, p. 68.
Still, the treaty was made operative and a rough northeast route to Asia it was hope had been found and the trade established. “These events made a cumulative impact on London. The City for the first time witnessed and took part in a long-distance, heavily capitalized trade, run by a joint stock company. Formally endowed with the monopoly of the North, England’s rightful way to the Orient, the Muscovy Company naturally became the leading sponsor and patron of geographical science, and enterprise for the next twenty of thirty years”. [99] K. R. Andrews, Trade, Plunder and Settlement, p. 69.
It was the Muscovy Company that carried the torch of English overseas trade from a base in the north to promoting and facilitating voyages and expeditions to the Caribbean, South America, and to Persia for good measure. Employed by the Company Richard Hakluyt (elder and younger) began their messianic promotion of overseas discovery and colonization.. Previous to 1553 England’s foreign trade included only a small trade with the Iberian Peninsula, but massive export of cloth to Antwerp and Hanseatic League German ports. Thanks to the Muscovy Company England was now engaged in full, export and import trade and discovery with the outside world.
A major exploratory expedition was sent to complete the northeast passage to China—but despite its thoroughness, it could not penetrate the ice on the Ob River. Combined with the death of the opportunistic and bold Cabot, and the lobbing of Gilbert for the west route (p. 71), (1564-5) no further discovery were made for the next twenty-four years. Instead, the emphasis was to try to find a land route from Moscow to the Caspian and thru Persia. In the 1570’a new possibilities of the northwest route were more in vogue [Lok-Frobisher]. Finally, in 1540 another major effort was made to complete exploration of the northeast route led by Pet and Jackson in May 1580—only one of its two small ships made it back, reporting some success in pushing deeper along the White Sea but not completing the mission. The Muscovy Company tried repeatedly (Henry Hudson leading one attempt in 1608) and that route was finally completd by the Dutch in 1879.
As to the success of the trade with Russia, it was a mixed bag. On the whole it was never close to being transformative, but several Russian commodities, rope, rope-walks, and rope-cable vastly improved English ship quality and quantity. Russian seamen were trained and more experienced. English cloth found some fashion in Russia. Trade was expanded to the Moscow area but with the death of Ivan in 1584, trade declined steadily and English ambassador and merchants were placed under increasing constraint and suspicion. The Dutch enjoyed more success in the early Stuart period, and the last gasps of the Muscovy Company were engaged in whaling and walrus-taking.[p. 79]
The Persian bypass route was first explored by Jenkinson in 1557. His expedition encountered it all, from plague, raiding, internal wars en route, famine through to the Volga delta on the Caspian, where they were subsequently held hostage by “predatory princes” or bandits, reaching Bukhara after sixteen weeks (to this point it had been eight months. There he was told that war had closed the routes out—so Jenkinson turned south into Persia.
There he discovered that Persian trade was like English trade, one way, in Persia’s case west to the Mediterranean. That meant the English goods would compete with other English goods that were traded in the Levant. The prospects for Persian trade deteriorated from this dismal first exploratory expedition. Five more expeditions followed through 1581 with no important success, no political support from the natives. By 1581 the English were resolved the best land route to China would be through the Mediterranean Levant.
The Russia Company had its difficulties in simply surviving. Scott retells [Scott, Section II: the Trade to Russia, pp. 36-65], various of its adventures and expeditions over the following decades. At first the port of Arkhangelsk near the mouth of the Northern Dvina River and the White Sea . Over time regulations were relaxed and individual exporter shareholders were able to send their goods along with the company-owned cargos. To accommodate increasing and unexpected costs the price of a share was raised repeatedly, but with few exceptions restricted membership remained in place.
When the Russians took Nerva, a second port, one on the Baltic Sea made export easier. That, however, led to trade missions by English outer ports by merchants who had not participated in the company’s monopoly Parliament in 1566 confirmed the Company’s monopoly, maintaining the dominance of London-based membership, however. Other problems befell the Company and Scott spent many pages describing a number of factors that inhibited its operation. In 1583, the Russians allowed the Dutch to trade with Russia, and from that time on trade was problematical. Scott posits that it was not possible to estimated how much profit was made by the original investors; specific trade with Persia yielded great profit in those years it happened, but in those years, based on trade with Russia alone, the Company was unprofitable [pp. 47-8].
The Russian Company was in visible decline by the 1580’s. Trade in that period was “spoken of as ‘decayed” and total membership declined to about 80, and little profit was recorded to them. In 1586 the Company’s shareholder meeting considered how shares could be converted into cash and returned to existing members, This action left only twelve investors willing to restart the Russia Company. Accordingly, they assumed control over the third company reorganization into a new joint stock corporation. By the 1590’s it appeared, even to this rump group, that profits were few and far between, and to overcome deficits annual subscription assessments were increased. Scott comments that “By 1593-4 it was recognized that unless some new outlet were found there was little hope for the future of the company, and in that year, a new subscription was made, under the management of Sir John Hart. This was known as ‘A’ of a new series [of subscriptions] and appears to have been the beginning of a [fourth version] joint stock corporation which continued for some time, perhaps, to 1607” [99] William Robert Scott, Vol II, pp. 48-9
With the formation of the East India Company in 1601, the Russia Company was more or less informally brought under its protective wing. Common membership led to joint expeditions, for example one in 1601 to find a northwest passage. In 1602 only two ships went sent to Russia, for cordage principally. From its first days (1595) Scott asserts a “considerable sum” of debt, “had been due for some time” … [it was] the greater part of the working capital of the [company]. The unprofitable nature of the Company’s mission forced the company to increase prices of its imported goods: “The strain of financial difficulties almost forced the company to exact high prices in England. It had not now the capital to follow the principle established early in its history of endeavouring ‘to give a good penniworth’. Thus it was ill-prepared to resist the wave of indignation against exclusive grants [monopolies] which found expression in the parliamentary agitation of 1604”. It was charged with being a ‘monopoly within a monopoly’ because the directors who then numbered fifteen of the 80 shareholders, had ‘made one purse and stock of all, and then became as one man’ … [and that] “it was alleged the company had raised the price of cordage in recent years by using their monopoly to create an artificial scarcity [99] William Robert Scott, p. 50.
It is a claim the reader might hold in the back of his or her mind. In the next chapter when we discuss the design and the incorporation of the Virginia Company (in 1605-6) that simultaneous with that discussion the first of the great trading companies, the Muscovy Company, was a “going concern”, and, its joint stock corporation had disintegrated into a set of closed “Matryoshka” oligarchies and no where close to an organization accountable to its shareholders. As a business organization, was near implosion due to a near failed mission-purpose and on the edge of fiscal collapse. That the Virginia Company itself, within two years of its incorporation, would suffer much the same fate for the same reasons, is not, in my opinion, a coincidence. The English joint stock corporation of that period was a business structure not suitable or capable to governing itself and lacked sustained fiscal capacity to achieve its mission and fulfill its business plan.
The ironic capstone of the post-pivot Russia Company was not its decreasing ability to make profits after Ivan’s death, or the rise of the Levant Company. Nor was it the corrupt practices of its Russian factors which crossed the line to actual embezzlement, I was Scott’s belief that an “even more serious weakness, namely the dissensions, and even dishonesties of the members amongst themselves”. If one would think the existence of an oligarchy would produce an internal consensus and an ability to operate the company so to ensure its own profit, the reader would be wrong. But to supplement Scott, I would add, that during the period of the Virginia Company’s Virginia charter the Russia Company would led its incapacities to burden the Virginia Company leaders, notably Sir Thomas Smythe, while the latter was going through its own version of mission implosion and mission collapse.
Scott describes in many pages the deterioration of the Russia Company under Smythe’s leadership in 1607 until his departure from its leadership in 1621. The stage was set for Smythe by the episode around the turn of the century which brought Smythe to Russia Company governorship. The Russia Company board oligarchy had itself degenerated into a near dictatorship of one its its founders and governor, Sir Francis Cherry. By 1605, the year during which the Virginia Company’s design and negotiations were conducted, Scott reports that “the other [Russia Company] adventurers [members] “seem to have been of the opinion that there would be difficulty in obtaining the sums belonging to the company, and a reckoning was demanded”.
An audit revealed “there was a considerable difference between what Cherry admitted he owed [the Russia Company] and what the company claimed”. An audit found that up to 1604 found owed debt totaled out to a bit less that 2400 pounds; a second audit in 1605 raised the total to 6100 pounds, In addition a further 22000 pounds was owed the company by Cherry for his “private trades”. Scott was unable to uncover further information aa to how this deficiency was resolved, but he was able to report the members’ enquiry resulted in a change of its governor [Cherry]” [who] was subsequently replaced by Sir Thomas Smythe in 1607.
The Russia Company was reorganized once again alongside the change in its leadership. Smythe once in charge put together a new expedition (ironically) to Cherry Island (a whale trading factory port) and over the next decade until 1620 subsequent expeditions, events, and trading ventures and their financing) were also sent out on various missions. In aggregate the return on investment to shareholders did not meet the profit expectations of its members. Not until 1611 did an expedition yield profits congruent with their hopes (90% profit). But if profits were elusive, a good reason was that its members and investors during this period had committed to funds which they did not did not fully pay. To finance the expeditions Smythe had taken on debt for which his members had committed themselves, but in the end did not fully pay. Scott observes “that there had been a failure in paying up a proportion of the capital [subscriptions/loans]. Thus by 1619 the condition of the Russia Company was deplorable [p. 56]
Therefore, a new investigation followed during 1619-20 which resulted in Smythe’s departure as governor, and yet another incorporation and charter for the Russia Company. In the course of Smythe’s tenure, deficiencies [see pp. 52-57] included besides the failure of many of its members to pay their subscriptions and/or loans to the Russia Company in full, or at all, but also in 1618 a Company fleet was attacked and dispersed by Zealanders (Dutch) and returned home empty—a total financial loss to the company that triggered the final 1619 set of decisions that led to reorganization and Smythe’s departure. [p. 56]. At some point later, the Dutch allegedly burned warehouses in Russia that led to 22000 pounds loss of company assets. The Company sued the Dutch for remediation but the fiscal condition of the Russia Company was totally shattered..
The company investigation concluded the Russia Company was still barely solvent [p. 57] and, in large measure, due to additional assets that later reverted back to the Russia Company. The Privy Council then conducted its own audit and found further debt obligations and deficiencies, some of which were attributed to Smythe’s management, deficiencies which were resolved. “Even allowing for these reductions, Smythe’s [Russia] company, as an investment, had proven satisfactory to those interested in it, but the real element of importance was how the new company [that was formed in 1620] succeeded in realizing the very speculative property [i.e. the Russia Company itself] its members had purchased”. In today’s language the Russia Company from that point on was “a going concern”. William Robert Scott, Vol II, pp. 57
That Smythe would be selected as the Treasurer (i.e. the equivalent to governor) of the Virginia Company during this time period, and that the same fate would befall him a decade in regards to the Virginia Company demands some sort of comment. Smythe during his tenure with the Virginia Company had simultaneously been the governor of the Russia Company and both during that period underwent a great deal of disruption and default. In several ways the charges made by Sandys and his group to Smythe in regards to the Virginia Company were also encountered by the Russia Company.
In both instances, internal audits and subsequent audits by the Privy Council found no major abuses or fraudulent improprieties made by Smythe for his personal profit. Nevertheless the end of the audits both Companies were on the edge of default and bankruptcy. Bad management, lack of fiscal and budgetary accounting, and the failure of its shareholders and investors to fully live up to their obligations led to the same fate for both joint stock corporations. I simply observe that, aside from Scott, no other Virginia Company commentator has drawn attention to the Russia Company and its impact on the Virginia Company and its shared leadership. While Smythe was under attack from Sandys (1617-22), Smythe was also facing Russia Company bankruptcy caused by serious and devastating events, which piled on top of a faulty financial state of that company.
[999] Scott identifies a fatal flaw in the design and practice of the English joint stock trading companies of this period—and he applies it to the Russia Company and East India, but it also fits the Virginia Company as well. “Underlying the troubles of both [trading companies] was a fundamental weakness of a joint stock company of the period, namely the constant payment of the [annual or voyage] profits … without providing a reserve fund. This weakness again was inherent in the popular idea that even though an undertaking had perpetual powers, the finance must consist of comparatively short-lived independent undependent undertakings [voyages]. Thus there was no incentive to set aside profits to meet unforseen contingencies even though trade to remote places, having certain elements of privateering, was subject to certain vicissitudes. It may indeed be said that membership of the Russia Company of 1608 to 1620 had little to complain of since, through they were reprimanded by the [House of] Lords, and assessed, they had been after allowing for deductions, received back their capital and handsome profits for the risk they ran. … Yet a trading corporation with perpetual powers had obligations in equity to dischare in relation to to the trade as a continuous one, and the idea of terminable capitals [equity] rendered it impossible to fulfill such functions satisfactorily, since, as has been shown there was no reason for the establishment of a strong permanent reserve fund. Therefore the early history of joint stock companies consisted of the painful learning of a fact that appears now to be almost axiomatic—namely, that just as a corporation legally has ‘perpertual succession’ so financially it should endeavour to safeguard its capital to be capable of continuous existence. “, pp. 64-5, William Robert Scott, the Constitution and Finance of English, Scottish, and Irish Joint Stock Companies, Vol II (Alpha Edition, 2019, original, 1910). [999]
Whatever extent the fault lie with the structure and capacity of the joint stock corporation and the reality it had been tasked with a mission it was in little way designed to achieve has not been minimally detailed, again with one exception, Wesley Frank Craven. But of final note in this subject, the conclusion of James I and his Privy Council in 1624 which resulted in the suspension of the Virginia Company’s Virginia charter, was that it was a joint stock corporation. From that point on none of the other colonies created by an English sovereign was a joint stock corporation.
If nothing else, observers of the Virginia Company may better understand the enlarged role of Smythe’s second-in-command, Alderman Johnson in the Virginia Company events that ultimately led to its suspension of the Virginia charter. Scott also makes reference that the Russia Company situation had direct impacts on the East India Company which Smythe was also governor. An additional observation will be followed up in the next several chapters by which I question Smythe’s time commitments in the Charters of 1607, and 1612. In both periods, Smythe was also involved in reorganization and chartering of the Russia Company.
The Trading Factory Mentality Takes Root
That said, several observations follow. North America was not, of itself, the nirvana of English overseas trade; in the beginning America was a place one could travel across to get to Asia.
Agents of the Muscovy Company … tried to approach Asia both through a Northeast Passage through the Barents and Whiles Seas as well as overland from Russia via Persia (Iran). Their Levant Company counterparts, based in Aleppo (near the Mediterranean Sea in modern Syria), established contact with the Indian subcontinent via a Central Asia route in the 1580’s. The joint stock vehicle by which these chartered ventures allocated risk and conducted their business was naturally adopted by the backers of a far grander venture for pursuing Asian interests. The East India Company (EIC), which received its charter from Elizabeth I on 31 December 1600. The group of merchants who thus acquired control of English interests in South and East Asia. …The success of this approach as well as the acquisition of the requisite knowledge and experience of the trade … required the establishment of trading factories at strategic points especially in the subcontinent and in the East Indies [99] L H. Roper, Advancing Empire: English Interests and Overseas Expansion, 1613-1688 (Cambridge University Press, 2017), pp. 86-7
To the extent one also wished to trade in North America, that required a trading factory or a military base as it did for any other overseas trading markets. Neither a military base nor a trading factory was a colonial permanent settlement—or a colony. That was a separate matter, with its own objectives and requirements. In this period, the preferred overseas settlement was a “plantation” and in this period, Ireland was the location most “planters” had in mind. North American colonization was still a generation or two in the future.
… As a result, merchants entering these new and uncertain trades developed particular techniques of organization. Merchants banded together into guild-style organizations in order to negotiate with foreign governments [useful in the trade factory strategy—less so in less developed economies] … [also] taking responsibility for their relations with local populations … With or without a monopoly, the power of such regulated companies was much enhanced by a charter. … In response to this difficulty, a characteristic form of funding developed which spread the risk [among many]—the joint stock. Which he defines as incorporation of a company where a permanent fund of capital was established from individual [merchant] investment, and profits were shared according to the proportion of total stock held by each individual … In many cases a new stock was created for each voyage, rather than creating a permanent fund, but in either case, again the security was further enhanced if a government charter could be secured. [99] pp. 398-9
There was then a fundamental difference between the joint –stock and the regulated companies. In the latter case, merchants traded on their own account under the umbrella of a protective organization. In the former case, the company traded as a corporate body. Joint stock ventures helped to establish the most exotic trades of the sixteenth and seventeenth centuries, companies being established to trade with Guinea, Muscovy, the Levant, Virginia, the East Indies, West Africa, and Hudson’s Bay. … [99] Michael J. Braddick, p. 399, p. 403
How the initial Russia joint stock corporation worked was simple enough. Described by William Robert Scott the Russia Company followed a “pure” joint stock model. Instead of each participating merchant handling their own trades and cargoes, the joint stock corporation had its own corporate export “factors” or agents to do the job for them. ”It was decided that instead of each person participating [in the voyage] by trading his own capital [product or property], a joint stock [of all product or property in the voyage] should be established”. Each shipper ‘first made choyse of certaine grave and wise persons … which should lay their heads together, and give their judgements and provide things requisite and profitable for all occasions [a board of directors] and it ws to them they deferred. So that the cost of this action should not be excessive “every man willing to bee of the societie should disburse the portion of twentie and five pounds a piece; so that in short time by this means the sum of six thousand pounds being gathered, the three shippes were bought.
With this modest capital … the enterprise was started in May 1553; and soon afterwards a sume of 10000 pounds had been expended on ‘this first discovery’, The Society was first named “The mysterie and companie of the Merchants adventureres for the discoverie of regions, dominions, islands, and places unknown”. Of the three ships in its first expedition, two “were frozen in ice with the loss of all hands, but the third … suceeded in making land near Archangel”. A trade treaty was negotiated, “ a free mart in Russia be drawn up”. Upon its return to England a charter was obtained, and a governor (Sebastian Cabot) was hired for life (he died in 1557) with a board and an executive committee. There were about 200 to 240 members. The Muscovy Company had been incorporated (1554). Companies cited in this section were formed by versions of this story. [99] William Robert Scott, The Constitution and Finance of English, Scottish and Irish joint stock companies to 1720, Vol II (Alpha Edition, Cambridge University Press, 1910), pp. 36-7
The Levant Company
As with the Muscovy Company the interest and inspiration to trade with the Levant came from merchants who saw opportunity in the making. From the start the ultimate interest was the East, By the time they requested a charter with a monopoly, Elizabeth was well into her reign and she and her councillors had sufficient experience with the Merchant Adventurers, Muscovy and other trading companies she knew what she wanted. Customs and a trade for commodities like currants and spices which were in popular demand from which tariffs could be applied confirm she wanted monies for her operations and court needs. As important for our purposes is the founding of the Levant Company confirmed several observations on the post 1550 pivot. First, like the Muscovy Company, the Levant Company developed from the bottom up, i.e. it was not a government initiative, but rather the opposite—sought by merchant opportunists largely in pursuit of wealth through overseas trade.
Secondly, the relationship with the state, Elizabeth and the Crown, was a marriage of convenience. Elizabeth had little direct interest in the Levant, or for that matter the Far East. Her focus was Europe and an English position in the Levant offered some visibility, and leverage in England’s position to counter the Iberian peninsula, France and even Rome.
What was equally useful was overseas trade could offer a badly wanted spurt in economic development, and some means of sustaining economic growth and a measure of prosperity to counter poverty and urbanization. Trade with these new merchant adventurers also supplemented Elizabeth’s alliance with the Muscovy and Merchant Adventurers Companies, her key allies in London. Elizabeth was content with this, and was willing to delegate overseas trade to the private sector, requiring them to pay for its development, and to reap its rewards in the form of customs and loans. So long as the Levant Company paid for her ambassador, he was free to also do business for the Company. This was not much different than what the Muscovy Company had worked out.
In effect, Elizabeth was quite willing to delegate non-Continental foreign affairs to the private sector—another milestone to delegating English colonization to private interests. That the early years of the Levant Company were relatively successful, over the next decade it reported some twenty-seven trade expeditions, that resulted in profits and imports, which meant customs and farming profits. This led to the merger with the Venice Company in 1591-2 in the course of which a new charter was signed and the Levant Company officially created. Many London and Outer Ports merchants wanted membership, and the Queen did from time to time take an active position in enlarging such membership, the Levant remained an oligarchy, however, but its membership expanded from twelve to thirty.
From this dynamic a new elite in English overseas trade would emerge. Even as the cloth trade was now challenged, it still persisted and still maintained its power base in London, with access to the Crown and its bureaucrats, but alongside it were those merchants who had not yet entered into overseas trading. “The leading merchants behind the Elizabethan expansion to the south and east were not, by and large, Merchant Adventurers, but they were in no way new men.
On the contrary many of them stood from the outset right beside the Merchant Adventurers within the highest circles of London, economic and political mercantile leadership. There was no difference between the members of the two groups either of wealth or social status. … Already ranked Among the City’s richest and most influential businessmen, they were able to make use of their close ties with the government to obtain, especially from the start, powerful state backing … they used their political connections to win exclusive company control over their valuable new trades” [99] Robert Brenner, Merchants and Revolution, p. 61.
Pivot from the Company of Adventurers’ overseas trade paradigm they may have wanted—but in no way were they willing to abandon its joint stock organization and protection from competition traders. The trading monopoly of the great merchant trading company was standard , and built into the new model of those who pivoted away from the Company in the early 1550’s. And no change from this model was made when another major trading company was formed in 1581 the Turkey or Levant Company)
This Company included only twelve merchants in its membership as it formed its joint stock corporation. It proceeded to launch around twenty-seven voyages between 1582-7. It made exceptional profits compared to the older Russian Company, and one would be amazed if a considerable number of merchants would be willing to sign up for Company membership with a stock purchase-but they were not allowed in. This was indeed close to a bimodal monopoly, in Turkey and in London.
They were able to accomplish this political feat due to their restricted membership in which “three of the most important mediators between the Crown and the City merchant community of the Elizabethan period. Sir George Barne [governor of the Russia Company, and a Cecil (Burghley) faction member] .. ‘Customer’ Thomas Smythe [father of the future CEO of the Virginia Company] who was either a collector or farmer of the London customs [one of Elizabeth’s monopolies] [and] Richard Martin [Master of the Royal Mint and Lord Mayor of London; his son John was a powerhouse shareholder in the Virginia Company, and a member of Drake’s expedition and Gonold’s New England coastline expedition in which “Martin’s Vineyard’ later corrupted to Martha’s Vineyard was named] [99] Robert Brenner, Merchants and Revolution, p. 61-2 Brenner reports that of the twelve patentees of the (1581) Levant Company at least eight were City of London aldermen, three were M.P.s.
In 1589 and 1590 they petitioned Elizabeth for a new patent monopoly (which she issued in 1592[ in which they merged with the Venice trading company with membership restricted to each trading company membership, but allowed in reaction to the cries by other merchants for membership to allow twenty three more onto the board if they paid the rather expensive share purchase requirements. This new trading Company, the Levant Company, was given a monopoly of the jurisdictions granted by the earlier charters
The Company despite its glowing heritage soon ran afoul of Elizabeth’s increasing demands for fees, taxes and duties, and in 1603 a new duty totaling 4,000 pounds per year. By the end of the 1590’s its board membership decided the real profits lay in the Far, not Near, East, and were increasing anxious if they did not act expeditiously, they would loose their ability to do so as the Dutch were already well engaged in that trade.
Accordingly, using Levant Company office in London, they developed petitions for a Far East English trading merchant corporation, with in 1601 Elizabeth granted to incorporate the East Indies Company. By this time, Customer Smith had passed away (1591) and his son Thomas had inherited his Levant Company membership. With yet new royal charters, issued by James I, the Levant Company continued its Near East monopoly until it was dissolved by an Act of Parliament in 1825. Brenner attributes this resilience to its restricted board membership in conjunction with its ability to incorporate ever increasing royal intrusions into its finances.
The Levant Company’s privileges were indispensable for its elaborate system of trade regulation and, in turn for the reservation of the profits of the trade to a restricted circle of merchants. As members of the regulated company, the individual Levant Company merchants traded for themselves with their own capital, but were required to adhere to rules and policies set by the corporations general court [board of directors]. These regulations were aimed at the control of company markets and the maintenance of favorable prices for company products … Their effectiveness was greatly enhanced, moreover, by formal and informal practices of recruitment to the trade that substantially limited the number of effective participants, while giving significant control to the company’s leading members [the oligarchy that essentially ran the Company] over just who was to be admitted … The Company’s charter allowed three different routes of admission—by patrimony, by apprenticeship, or by paying a fee. All sons of members were eligible for admission free of charge. Any apprentice to a company member who served seven years [or] four of them within the Company’s privileged area in the Levant, was also allowed to enter without paying a fee to the company … apprenticeship was by far the most common method of entry[99] Robert Brenner, Merchants and Revolution, pp. 66-9
While the Muscovy (Russia) Company pioneered the pivot in the 1555, the more interesting of the pivot trading companies of our Virginia story was the Turkey-Levant Company. By 1581 it is clear that the more durable and profitable English merchant companies were closely tied to the Elizabethan farming and monopoly policy system, tied into the rising Cecil family brokerage system, and shrewd enough to recognize that import products were the key to its profits and durability. Knowing full well the who and the what of the future Virginia Company, I will gently suggest it is from the Levant Company that the Virginia Company’s London subsidiary corporation will draw its London merchant base and its core leadership. We will also see from this group core founders of the future East India Company. Interestingly, one can see a close symmetry between the Levant Company’s rules for membership, and the method by which Dales’ Gift in 1612ff were awarded to Virginia Company officers and agents.
Thus a core tread in the history of the Levant Company is the periodic issue of charters and in return fees, customs, farming, and keeping the merchants onboard with her interests. Multiple charters indicate success as well as difficulty but in either case are valid indicators of constant change, and the need for flexibility as the mission changed. From the merchant perspective, the inclusion of Italian merchants, the long history of Levant trade, the shorter distance, plus the warmer climes, made the trade experience more profitable and a bit less risky.
Scott observes that many assume the Levant Company was a regulated joint stock corporation (like the Company of Merchant Adventurers) throughout its long history.
the evidence is quite conclusive that, until nearly the end of the sixteenth century the trade was conducted on a joint stock basis”. As proof he offers that “references to the membership in the charter of 1581, as consisting of partners is sufficiently clear…. the letters of the company to the factors in 1599 show that at that time all goods were consigned on account of the company, and the agents in Turkey had express instructions to confiscate anything sent in the companys’ ships and owned by an individual. In 1604 in the debate on the position of the companies in Parliament, it was mentioned the [the Levant Company] had been a joint stock until recently” [99] William Robert Scott, Vol. II, pp. 84-5. It is equally apparent that throughout its history the regulated alternative always was a possibility, as new members and efforts by new members wanted the organization opened up, and that as late as 1592, Elizabeth and her Privy Council applied some pressure to open up the trade [99] Scott, pp. 84-5
Trade with the Levant was intermittent but longstanding—and not significant in volume. Chiefly conducted by Italian (Florentine or Venetian) traders. By the 1500’s the latter trade, dubbed the “Flanders Galleys” from Venice imported small quantities of spices, both expensive and less so, but lacking dynamic growth and unable to establish a meaningful cloth trade, the Levant (today’s eastern Mediterranean ports of Lebanon, Syria, Israel and Egypt, Morocco) ran afoul of Henry VII due to their high tariffs to English imports which he instituted against theirs.[99] M. Epstein, the Early History of the Levant Company (George, Routledge & Sons Limited, 1908), see Introduction. What survived was some “alum” useful to clothmaking. According to Haklyut “very usuall and much frequented from the yeere of our Lord 1511, till the yeere 1634, and afteward also, through not so commonly, untill the yeere 1550 [when] … utterly discontinued, and in maner quite forgotten, as if it had never beene, for the space of 20 years or more” [99] PN. V, pp. 167-8, quoted in K. R. Andrews, Trade, Plunder and Settlement, p. 87.
Despite the Mediterranean being in some chaos due to pirates and unfriendly Turks, several English traders, including Thomas Cordell, Sir Edward Osborne and Richard Staper in 1578, Seemingly with some encouragement from the earl of Leicester and Sir Francis Walsingham (agents of the Queen) these traders made a difficult and uncomfortable expedition that conducted soundings among the Turks for English trade opportunity. The inspiration for the Levant, following up on Drake’s 1577 circumnavigation, which had aroused Elizabeth’s and popular enthusiasm, was yet another in the periodic spasms of attention to overseas adventure.
Hakluyt details their adventures, which are elaborated upon by K. R. Andrews. English interest was purely commercial. The Queen and her agents, upon receipt of a informal invitation by the sultan offering trade, set up Osborne and Stapler with a seven year monopoly charter, which, if successful, could be renewed for another seven years in 1581. This corporation was the first iteration of what would evolve into the Levant Company.
From the start there were complaints from other traders; if anything complaints increased and in the years of Tudor-Stuart transition, the company surrendered its charter and went without one for nearly two years before yet another was agreed. The Queen never hesitated in imposing various customs, fees and tariffs on individual products, and on some commodities it is possible the company played its own games with these impositions. In essence, in the Levant trade we see in a nutshell the complex interweaving web that farming, customs, impositions, and their effects of the price of goods sold, and the discontent created by the monopoly position of the company—which always remained more than less a closed oligarchy.
There were twelve members of the joint stock corporation that was set up in 1581, including William Harborne, a factor of Osborne, who had been influential in negotiating the access of the corporation in Turkey [p. 89]. “In May 1580 Sultan Murad III formally granted the English nation an elaborate charter of privileges putting them on equal footing with the French. The grant was in the form of a unilateral treaty, conceded by the sultan at the request of the Queen for friendship—a fictional request of course. The Queen never made such a request. [99] K. R. Andrews, p, 91.
Harborne in 1582 was appointed as the English ambassador, who was paid and accountable to the new corporation. Harborne served in this role to 1588. In his capacity as ambassador. Harborne appointed consuls in the major cities/ports of the Levant; in short order the Levant Company was in a position to encompass most of trading locations of use to the English. Trade followed and in the early years was especially profitable, principally because the goods sold in England for 3x their initial cost. What proved more difficult was using the Levant as a middle station for trade with the East. Several attempts were made to no real success.
In his start we see the beginning of the Levant Corporation which K. R. Andrews asserts was “the most important event between the forging of the sea-link with Muscovy, and the founding of the East India Company. English merchantmen could now fetch for the home market without intermediaries cotton, wool and yarn, Turkish [non-flying] carpets and cloths, galls, Persian silk, and sweet oils, sweet wines and currants … [and access to] pepper, cloves, nutmegs, cinnamon, ginger, aloes, indigo and other spices. In this respect the [Levant] trade fulfilled in considerable measure the hopes that the Muscovy Company had failed to realize”. [99] K. R. Andrews, p. 93.
Initially, Turkey and the Eastern Mediterranean monopoly), incorporated initially in 1581 as a regulated company like the Muscovy, restructured itself at some point previous to 1591 into a joint stock company. In any event, the Levant Company made serious profits on its imports to England. Still the Company encountered pirates and had to contend with the Spanish, but on the other hand joined with Venetian merchants, who opened the Adriatic and facilitated access past Gibraltar. If it made profits, the Levant import was also very expensive to the consumer—and that left a bitter taste that would haunt them after 1604. In 1605, it was again restructured into a regulated company. [99] Scott, pp.83-8
Still, such an oligarchy was not without its benefits; in one sense the Levant Company had developed into a very sizeable “London country club” around with lodged for companionship a goodly share of London’s overseas merchant elite of the time. As Brenner will argue “commercial change during the pre-Civil War period conditioned not only the rise of impressive number of eastward traders to positions of prominence, but also their emergence as a cohesive and dominant sociopolitical group … the Levant-East India merchants remained at all points closely bound to the rest of the community of [trading] company merchant, both by critical common interests and by ties of family and business; they could therefore play an important role in providing leadership for the community as a whole. [99] Robert Brenner, Merchants and Revolution, p. 83
Accordingly these new grouping of England’s commercial elites, used exports from the colony to establish a trading colonial cluster to import to the Mother Country (and be re-exported as well to other for far away lands. Such imports that were attractive to English consumer demand, and which fed into both defense and emerging manufacturing arising throughout the country were logically prioritized. “It is thus no accident that the very same merchants who first developed the Turkish and Venetian trades under charters from Elizabeth turned out to be among the leading shipowners of the period: proprietors of a growing fleet of great armed vessels, their boats could hold their own against all comers, and do so more cheaply than could the vessels of their chief competitors” [99] Brenner, p. 47; See also, p. 49.
This too will affect the Virginia Company. that is truly impressive is the degree to which the leading merchants who originally established the trade in the later sixteenth century, back to the founders of the Levantine trade in the last quarter of the sixteenth century, if not to the pioneers of the eastward expansion of the previous generation, Thirty Levant Company merchants who traded … in the 1630’s, can be linked by their own direct membership in the company. or by birth or marriage (often as a third generation) to the generation of merchants who entered the Levantine trade between … 1581 [and] 1605. … By 1640 significant numbers of the Levant Company’s richest and most active traders were thus joined in a highly ramified network of interlocking family relationships. Their web of connections helps to explain why the Levant Company merchants were so successful in exploiting the valuable privileges they derived from their close ties with government [99] Brenner, pp. 72-3 Thomas Smythe was President or Governor of the Levant Company, Muscovy Company, and the East India Company.
Even Scott, who is more accepting of conformity with the practices of the day, made negative comment regarding the Levant Company. He provides some description to a negotiation between Crown and the Company in 1581 as the Company which had just received a charter which described the incorporation in such loose terms that it did not disclose that limitations on the number of partners were restricted. Rather the charter simply confirms “that the discovers [merchant adventurers] together with those they desired to admit as partners, not exceeding twenty in all, should be a ’ society of which Osborne was to be [its] governor’.
Then the Company entered into negotiations “trying to raise a large capital [investment] to sustain this Levant negotiation, and not only have the richest merchants and companies contributed largely, but the Councillors and the Queen herself lent as much as 40,000 pounds of this amount, and her contribution came out of the treasure taken from the Spanish [privateering raids] by Drake, a portion of which had been given to the Crown. …After the formation of the company in 1581, the profits for some time were very large—the goods imported into England sold at about three times as much as those that had been exchanged for them in Turkey.
The breakout in Levant trade grew out of its 1592 merger with the Venice Company (that set off the need for reorganization, and sparked new Crown demands). Formerly the two monopolies had competed, and since demand for currants was still strong it allowed the increased number of ships to fill their holds on the return voyage with a profitable commodity. While the Levant Company did enter a period in which arguments with the Crown crippled the Company, once resolved the company returned to prosperity—and it was these profits that provided considerable capital to finance other overseas investments, such as the East India Company.
Both the Venetians and the Spaniards [at peace in that year] were jealous of the progress made by the English in this trade [they described as “extremely profitable”. Scott then goes on to mention a litany of other overseas traders displeased by the Levant Company’s exercise of the monopoly, and demanding to be allowed into the Company or the the monopoly [Scott, the Constitution and Finance of English, Scottish and Irish Joint Stock Companies, Vol II, pp. 84-5. K. R. Andrews observes that from the 1580’s to about 1620 English-Levant trade was profitable and reasonably consistent, bring many imports in high demand, and relying on an English staple, cloth-based exports, that enhanced the trading profits as well. The Levant Company increasing sent its ships in convoys to reduce logistical risks, although it also facilitated English privateering that harassed rivals of the Company [99] K. R. Andrews, Trade, Plunder and Settlement, p. 97
Braddick draws the implications of these transactions, knitted into the sweater of a charter and resulting overseas trade by summarizing that the crown was fostering trade, then, by creating a ‘rent’: a premium on the value of the trade was produced by creating a legal title in it [monopoly], effectively excluding competition. In this sense trading companies were one more concessionary interest among many, akin to some of the unpopular financial expedients of the period. We saw in chapter 6, for example how in order to raise revenue the government granted patents of monopoly. These patents were extremely unpopular and in 1624 [the year the Virginia Company lost its charter regarding Virginia] legislation was passed [by parliament] to prevent [such] grants to individuals.
Obviously this allowed for continued grants to trading companies, but the legislation was circumvented by the creation of largely fictitious corporations. The result was a continued general antipathy towards monopolies, although most public attention was directed at domestic patents. In many case, trading privileges benefited a very small number of people; in 1604 the Russia trade was handled by 15 members and the Eastland trade by thirty a century later the Levant Company had 200 members of whom only 50 were trading, and the Hudson Bay Company only 35 shareholders. Merchants excluded from privileged trades were often hostile to these privileges, and there was pretty continuous resistance to chartered trading rights. …In fact, it has been suggested that opposition to [such] concessionary interests was a significant factor in the outbreak of the civil war, and there is surely some truth to the suggestion [99] Michael J. Braddick, State Formation in Early Modern England, c. 1550-1700 (Cambridge University Press, 2000), pp. 401-3.
But giving England credit it is due, by this period the kingdom was awakening. As it developed in the Elizabethan years that followed the spirit of adventure blossomed but it was set within a larger context that shaped its behavior and its initiative. In the Forward of Appelbaum’s & Sweet above work, Karen Ordahl Kupperman sets the context for England’s entry into global overseas trade, commerce, and colonization: “
the English began within the great opposition to Roman Catholic Spain … Pacification of Roman Catholic Ireland through colonization was an old theme, and England’s safety was the principal concern there. Richard Hakluyt, the great Elizabethan promoter of American ventures, spread the Black Legend of Spanish rapaciousness supported and excused by Rome, Raleigh’s failed colony of Roanoke, first conceptualized as part of that resistance to Spain, preceded Jamestown, as did the Spanish settlement of St Augustine in Florida, whose settlement in the 1560’s was the true beginning of permanent European settlement within the future United States”. [99] Karen Ordahl Kupperman, “Forward” in Robert Appelbaum & John Sweet Wood’s, Envisioning an English Empire: Jamestown and the Making of a North Atlantic World (University of Pennsylvania Press, 2005), p. xi.
East India Company
At this point it is wise I alert the reader to my underlying reason to study the formation of the East India Company. The discussion presented in this chapter is not intended in any way to be a comprehensive analysis of that company, but rather to indicate to the reader the operation of these trading companies of this period was complicated, inefficient, and overloaded with incapacities that complicated its leadership and led to an almost continuous series of events and activities that vividly demonstrated the deficiencies of the joint stock corporation—even the East India Company which today is regarded as the most effective—and powerful—of these corporations. Accordingly, I focus mostly on the troubles the Company had in getting its act together once it had a charter and monopoly.
The truth be told, as I see it at least, is the East India Company, the prototype for the future Virginia Company, had its share of problems that were common with these merchant trading companies. They were problems that would infest the Virginia Company as well. For this reason I strongly suggest the reader put aside the rather inflated reputation the East India Company has in their mind because the Company in its early years—through mostly all of the seventeenth century—was troubled.
The story of its first decades, mostly under the leadership of Sir Thomas Smyth, is one of continued struggles, mostly in its inability to acquire stable financing from its investors for the first voyage; its second exposed the considerable risks associated with trade to India, and its third expedition encountered serious leadership issues inherent in these merchant trading company management. In the eighteenth century the Company acquired its infamous, but amazing, success in establishing a formidable occupation of India that became a cornerstone of the British Empire—those “glorious” years in no way resembled the first century of its operation. The Virginia Company in many ways inherited the problems of the first century.
The East India Company tale starts with several London-based merchant adventurers, frustrated with the Levant Company oligarchy and Crown impositions, attempted on their own a land route from the Levant to India and East. Excited by the alleged trading success enjoyed by the Dutch in the Far East, bold overseas merchants got further motivated when an immensely successful “richly-laden” Dutch fleet (1599) returned to Holland. They had been building up their capacity as well as their interest in the Far East since the mid-1590’s, but in 1599 they were determined to move fast and boldly.
The rumors of potential vast fortunes started previous to 1599. Thomas Stephens, supposedly the first Englishman who had taken up residence in India (1580), had awakened interest on Far East trade. Spain had just taken over Portugal, and its next action suspended Dutch merchants from trading with Portugal. The English believed that would motivate the Dutch to press whatever advantages they had in the Far East to take advantage of Portugal’s weakness—which it did. As early as 1595 both English and Dutch ship-building syndicates started construction on several ships capable to circumnavigating the Cape of Good Hope. The race to the Far East was on.
The Dutch, victorious in its war of revolution against Spain, the new Republic had taken on the Portuguese trading monopoly in Indonesia and the East Indies and in 1599 looked as it they had seized more advantage. The return of a successful Dutch fleet indicated to English merchant adventurers that if they didn’t move fast, and counter with strength and organization, they would lose the possibility of meaningful trade in the East Indies.[99] Mobilized thus for Far East huge opportunity, the adventurers began the process of forming and incorporating the East India Company, destined to become England’s most feared and might trading company. K. R. Andrews questions as to whether the London merchants would have came together without the fear of the Dutch competition and the ascendancy of Holland. [99] K. R. Andrews, Trade, Plunder and Settlement, p. 261.
at the turn of the century [the Levant Company’s] position seemed so precarious that the Turkey merchants of London gave their attention seriously to the only practical alternative: to compete with the Dutch and the Portuguese on the Cape route to the Indies. Consequently the Levant traders played a leading part in the formation of the East India Company. They made up at least a third of those present at the first meeting and a majority of the fifteen directors then elected, and they dominated the committees that organized the first voyage … [Indeed] Thomas Smythe, the first governor of the [East India] Company, was at the time of his election, governor of the Levant Company. Their first CEO the carried the request for incorporation, charter, and monopoly rights to trade the Far East to the Queen. ] K. R. Andrews, Trade, Plunder and Settlement, p. 261
Apparently the Far West trade they had, and were, exporting from the Levant was not what they had in mind, and after trying unsuccessfully to find an overland way to the Far East from the Levant for well over a decade, these determined merchants realized if they wanted to get to the East they had to replicate the Dutch/Portuguese use of the Cape of Good Hope (South Africa). The Levant Company was unable to pick up the opportunity (as explained below) at this turn of the century period, the solution was to incorporate yet another “greate” merchant trading company.
By September 24, 1599 Scott reports that 101 potential adventurers had purchased a 30 pound subscription to enter into a voyage to the Indies; The September 24 date was the first meeting of the proposed company, with an attendance of fifty-seven, that would evolve into the East India Company. Fifteen were elected to the board of directors. “of these as many as twenty-three can be identified as members of the Levant Company” [99] Scott, Vol II, p.91. They decided a minimum subscription 200 pounds was required, a considerable sum,, and fifteen committees were formed to set up and operate the company.
They met in the Levant Company offices and selected a board of fifteen directors. The decision made at this meeting was to form a joint stock corporation, NOT a regulated joint stock corporation in which the members could trade their own accounts. Thus they retained the old Muscovy Company’s version of a joint stock company because “the trade of the Indias being so farre remote from hence cannot be traded but in a Joint and unyted stock”. [99] Scott, Vol II, p.91. ”The membership committees at once applied to the Privy Council for a charter of incorporation (and monopoly) since the trade to India was so remote that it could not be carried only by a joint (and internally united) stock [corporation]”. Their first CEO, Sir Thomas Smythe, then CEO of the Levant Company [p. 91], carried the request for incorporation, charter, and monopoly rights to trade the Far East to the Queen.
The petition was in accord with Elizabeth’s wishes, but she requested the advocates the advocates to hold off, that is slow down their incorporation until the time of its approval fit into England’s foreign policy situation at that moment. Worried that the Portuguese would regard this voyage as an intrusion of their monopoly (and join with Spain in war with England) Smythe and his merchant adventurers had to make their case to convince her otherwise. Recruiting Hakluyt he cast the petition into a “seize the moment or lose the opportunity” to compete in the Far East. Arguing that so long as they restricted their ports to those not used by the Portuguese, the East India Company would not be a violation of England’s agreement with Portugal. The Queen was eventually satisfied; she approved the venture and issued her charter.(1601) [99] Phillip J. Stern, Empire Incorporated, p. 43. But Elizabeth still was concerned the first expedition could upset Phillip II to the extent he would aggressively interfere
Originally entitled “Governor and Company of Merchants of London trading into the East Indies“, The East India Company was empowered-tasked to serve as the trading body for the East Indian spices trade, a trade monopoly that included anything that could be imported to England from a region that extended from the Indian sub-continent, to south east Asia, and included China.
Most of the more aggressive of these merchants were Levant Company members, and at least according to Scott that company had not suited their purposes. Organized to suit the preferences of its founders, it evidently did not satisfy the needs of its larger membership.
As reported by Scott, “just about 1600 there was much division of opinion amongst the members as to whether the {Levant Company] should be still conducted on a joint stock basis or should be reorganized as a regulated enterprise”. Just as the Levant Company had been built to suit a younger group of founders (who quickly solidified into a hard and fast oligarchy), the proposed “East Indies” advocates were disposed to found their own generational vehicle to suit their purposes.
They were to be somewhat successful in this as Scott further reports the new company’s organization and charter “which while intended primarily for a joint-stock body, has many expressions that would be more appropriate to a regulated one”. The probable cause was that among the new unsatisfied grouping of merchants, there were some who had their own capital and didn’t need other investors, but wanted expertise and company owned trading factory infrastructure (ships, posts, maps, etc.) to assume the risks associated with the greater distance and there was “There was a large body … which had been accustomed to the privateering syndicates of the period, in which it was convenient to treat each separate cruise as, financially, a distinct enterprise”.
The translation of this is they wanted distinctly a different financial structure, business plan and accounting. Say it another way, the merchants who pressed for the new great merchant trading company did not enjoy a strong consensus regarding the purposes and organization of their most aggressive enterprise or endeavor. Accordingly, it seems there was a great demand for a Far East merchant trading company, but little consensus on its mission or financial design. As we shall see this dichotomy found expression in an inability to sustain payment of its membership share subscriptions. Phillip Stern summarized this in his description of the early years of the East India Company:
As great as its ambitions were, at its origins the East India Company, was, like its predecessors and contemporaries, essentially a tentative experiment fueled by a hesitant and hybrid institutional and financial structure. The company did not have a single permanent stock. Rather it was organized as a series pf consecutive quasi-independent stock subscriptions, at first opened on a per venture basis, and later established for set terms in years. In its early days the limited number of shareholders could ‘take in men under them’ [i.e. privateers, factors, agents, and overseas employees], in theory dividing any individual share into a subsidiary, shadow joint stock. As in many other ventures, the East India Company spent its early years chasing down under-and unpaid subscriptions. By April 1601 [only months in existence and previous to its first voyage] the first joint stock was 9,000 pounds in debt to various suppliers, leading the [company board of directors] to issue a further call on [their] shareholders, take out a substantial loan, and ask the Privy Council for help in leaning on recalcitrant subscribers. [99] Phillip J. Stern, Empire Incorporated: the Corporations that build British Colonialism (the Belknap Press of Harvard University Press, 2023), p. 45
Unlike the merchant adventurers who did not know what they wanted, the Crown knew precisely what it wanted: fees, taxes, customs duties, and farming opportunities from which they could secure revenues to pay their bills independent of parliament. This obsession had evolved during the Levant Company decades and had exploded in her last years as sovereign. It came to a head in the years during which the East India Company was being formed. In the late 1590’s the Levant Company had entered into a serious struggle with Elizabeth over fees and payments to the Crown. At one point the Levant Company lost its charter and monopoly for the better part of two years. Accordingly, when reports and rumors of great Far East opportunities spread through England, the Levant Company was demobilized. In these years of turmoil, the power of Elizabeth’s broker factions increased and they too entered into the negotiations as well.
For the most detailed account of the formation of the East India Company, William Robert Scott, the Constitution and Finance of English, Scottish and Irish Joint Stock companies, pp. 91-97 is a wonderful primary source history of its founding.. Scott’s discussion is invaluable as it stresses the difficulty of raising funds needed to launch the new company’s initial fleet, and the unwillingness of many investors to pay more than the initial sum required for membership—which proved insufficient for starting up the company. Scott also comments on a considerable number of members with background in privateering. [p. 97].Scott starts his discussion on page 91 and more or less finishes it with the completion of its third voyage in page 101. Those pages describe what had to be done to launch the first three voyages, and flesh out the above simplified Stern quote. My summary is included in [999] if the reader feels the need to confront a more detailed retelling of the complexity involved in the operations of the first voyages of the East India Company.
[999] According to Stern, “By late September, 1599 a hundred and one investors, mostly, but hardly exclusively Levant Company merchants had subscribed over 30000 pounds [a huge sum] for …a voyage in ‘one entire Joynt and Common Stocke’ and without ‘private traffique & unfaithful Dealing [i.e., no trading their own individual accounts and cargos]. As to whether we should regard the East India Company as joint stock or regulated, Scott suggests it actually combined a number of features of each. As Scott would later remind us the discussion on the form of organization was intense, and the constitution of the East India Company allowed practices that were more associated with a regulated joint stock company. If that seems an internal contradiction to the reader, it should. The East India Company had it both ways, and that led to no good.
Aside from Elizabeth’s reluctance to sail the ships did not yet sail. Why? Negotiations with Spain were still ongoing, and a delay in commencing the first expedition would not upset her. the larger problem was financing the expedition. Although as stated above an immense sum had been raised from investors, only a small portion which which was immediately required to be paid. Almost a year passed to September, 1600 before the board again met. Still lacking adequate funds for the expedition the decision was made to delay until at minimum of sum of 55,000 pounds was actually collected. Effort was made to double down on members who had not paid—including urging them to withdraw their membership. Smythe was reelected and committee leadership was filled. To break the deadlock on membership payments, the charter confirmed membership for only those who were mentioned in the charter which the Queen formally issued and signed on December 31st, 1600.
That charter listed 218 persons, and granted permission to operate the company along procedures outlined in the charter for fifteen years. The first four expeditions were granted outward trade exemptions, and through regulated, the export and import of silver was allowed. English ships that violated the monopoly could have their ships forfeited and subject to imprisonment, and members who had not paid by the time of the charter could be canceled. The term of the monopoly was fifteen years and renewal was possible. Despite the charter’s admonishment and punitive threats many of the members still had not paid by December 31, however.[p. 94].
An assessment was issued of 10% to all members on February 10th, 1601 finally yielded enough funds to send off the ships on February 19th 1601—apparently with notable recriminations by suppliers that remained unpaid as the ships left port [p. 94]. “The debt remained 9,000 pounds, of which 7000 were unpaid memberships”. With little hope of these members ever paying, another 10% assessment was made upon the membership. Unable to pay the crew, Governor Smythe issued them membership to replace two months of their wages, and they were cut into he profits of the voyage. Still lacking sufficient, a further 5% assessment was made to the membership. That brought the total to over 68,000 pounds. Importantly, two trading factories were established [Java and the Spice Islands]. The first Indian trading factory was set up in 1611.
Scott comments on this incredible process and difficulty in securing membership payments: “the immense difficulty experienced in obtaining sufficient capital, as shown by the various inducements offered to secure the later payments, is vital towards the understanding of the early history of the company. It explains, for instance, the failure of the attempt to float a stock for a second voyage to India in September and October 1601”. [pp. 95-6]. Scott then details the convoluted details for financing the second voyage, but further states “From September 1601 … till June 1603,,, the company devoted itself mainly to the perfecting of its internal organization [which he further describes in detail] … It is perhaps not unnatural that in these accounts attention should be drawn to certain points of contact between this [company] and the contemporary type of regulated company such as the limitation of the freedom of the terminable stocks.
The core problem with the second voyage was exposed as it sailed off the London horizon in 1604—after taking nearly two years to completing the financing for the trip (and withstanding the plague pandemic). The voyage disappeared and was thought lost—but surprise it sailed in in 1606—and the final payment of the profits was in 1609. BTW two of the four ships were lost at sea, but the profits for the trip were 94% of funds invested
There was much division of opinion amongst the members [of the Levant Company] as to whether the [East India Company] should be recognized as a regulated enterprise [not a joint stock] Traces of this point of view are to be found in the East India charter, which while intended primarily for a joint stock body, has many expressions that would be more appropriate to a regulated one. Instances of this tendency are to be found in the importance given to the freedom and in the stipulations describing the monopoly as granted to the members and their factors [implying ability to trade one’s account]. [99] Scott, p. 97 [999]
From both Scott and Stern, it is evident, if complicated and confusing, that the East India’s first three voyages resulted in a mis-mash of adjustments and time-consuming accounting to determine their success. The first two voyages had to be combined into one to make sense of their finances, but they were successful profit-wise (nearly doubling their investment, i.e. 94%). The impact of this rate of profit should not be ignored. It did take a lost of hustle to get the voyage going, but 94% profit in two years created a stir among Londoners. If nothing else, it renewed interest in discovering a northwest passage in the hopes of bypassing the intense Dutch trade in the East Indies by accessing China and Japan, strongholds of the weakened Portuguese. [99] see K. R. Andrews, Trade, Plunder and Settlement, p. 258-9
Nevertheless, we cannot ignore the virtual parade of trading corporations that followed almost immediately after the East India Company incorporation—the Virginia Company, although significant, was only one of many that complicated both the administration of overseas monopolies, by creating a network of competing and overlapping trading companies. Raising patient capital to finance trading infrastructure, and financing voyages, was the weakest link in the trading company performance and viability, and the sheer number of these companies had to further complicate matters.
No doubt fiscal and investment worries stressed the business plan of each voyage, and equally no doubt, that prompted privateering as a supplement needed to balance the books and reduce reliance on initial capital. As we shall later see a need to bring back imports to England that raised capital for Crown, farmers, custom duties and overseas traders would soon follow in its wake. Shipbuilders also flourished in this period, and one can apply a modern term, cluster development, to the aggregate benefit of the period. It was never “perfect”, but these times were decent and English ambitions, and the plans of its adventurers multiplied.
If the times were beginning to boom, they were also becoming much more complicated. The opportunities collided with each other, and combined with the strain injected into the investment community with such competing and expensive opportunities, there were going to be winners and losers. The Russia Company had to be on top of that last list. Stern, for example, considers the interrelationship of the East India Company with the weakened, if not existentially stressed Russia Company commenting “These two companies were hardly independent of one another, connected through shared membership and leadership, especially Governor Thomas Smythe, and their rivalry soon evolved into several attempts at partnership.
Smythe had particular interest in the Northwest Passage. In 1606 [the same year of the incorporation of the Virginia Company] his efforts led the two Companies to cosponsor John Knight’s expedition under the auspices of a separate jointly funded association. They also combined in the second English voyage of Henry Hudson, which was largely the project of men connected to both companies, like Smithe, Dudley, Digges and John Wolstenholme”. At one point over the next decade the Russia Company and the East India Company “created a separate eight year joint stock [company] to which each company contributed 30000 pounds, essentially effecting a partial and temporary merger”.
In the meantime, “the combined Northwest Passage ventures had led Smythe and the others to coordinate the establishment of a separate corporation [in 1612], the Governor and Company of Merchants of London Discoverers of the Northwest Passage with jurisdictional rights [that overlapped other competing discovery and trading corporations”. Somehow, Smythe also led the effort to forge and secure approval of the Virginia Company’s third charter in that year. In that vein, a hint to the reader that Smythe was consumed with many burdens during these years, a considerable number will be mentioned in the next chapter.
Typically, Virginia commentators do not discuss these trading merchant complexities, except to say they were very rich fellows, and a oligarchic monopoly was central to their operations. True enough, but we should not exaggerate Virginia’s place in this bustling time. Nor should we foget the difference between trading and a permanent settlement, i.e. a colony founding. The latter was far from a high priority when trading is what made a man rich. Matters would become even more complicated when James I took an interest in Ireland in the middle first decade of the seventeenth century. Events in the mother country did matter in the founding of Virginia and Massachusetts, and we will not understand the latter well if we ignore the former. If Virginia inherited English common law, it would also inherit the implications of English overseas trading and the vagaries of Crown and Parliamentary politics.
Finally to bring this all to some sort of conclusion Stern offers a caution that overseas trading had evolved into a complex web of contacts, interrelationships, opportunities, and unintended consequences that if nothing else complicated management and created the need for fixing one or another problem. The focus was on time schedules, keeping affairs fiscally within some parameters that allowed operations and fiscal liquidity an all-consuming obstacle for nearly all the trading companies, English or otherwise. “It is difficult to think about any company as a single entity with a coherent ‘charter’ at home, such concepts become downright impossible abroad, where something like the East India Company was deeply entangled from its start with a wide range of other companies and polities as partners, allies, rivals and enemies”. [99] Phillip J Stern, Empire Incorporated, pp. 46-7]. All of this cacophony of trading companies, is of course, shoved to the margins, in fact totally ignored in any discussion of the formation and operation of the Virginia Company who was also a participant in this overseas English morass.
Up to 1604, during the Elizabethan period, free trade was quite controversial, generating repeated legislation, to little avail. Final reform of the joint stock corporation was not achieved until 1623 “Statute of Monopolies”, but English courts did from time to time (1601 being an important court-imposed limitation) impose limits and conditions to what the royal charter could grant to a trading company. [99] See Frank Evans, The Evolution of the English Joint Stock Limited Trading Company“, Columbia Law Review, Vol. 8, No. 5 (May, 1908), pp. 339-361.
Parliament’s issue previous to 1604 was attachment to a joint stock corporation the right of its membership (shareholders/investors) to exercise a monopoly over sale of certain products derived from its foreign trade. This power was granted through a regulation, by the Crown no less, of the joint stock corporation. So, if one traded abroad for fur skins, only a member of the trading company could sell-license them in the English market. This is the razor “blade” that made the profit from the trading ‘razor”.
As one might expect, the rancid nature of this power generated a nexus of corruption, arguably the chief deficiency being that only favored individuals could take advantage of the profits derived from foreign trade. Those excluded wanted in. Since the Queen was among those who was in the inner circle, this legislation went nowhere. In 1604, a new generation of parliamentary leaders tried a new definition of free trade and attacked the lack of access problem from a different angle. Free trade in 1604 attacked the problem by submitting legislation to end “regulated joint stock companies”.
Regulated joint stock corporations could legally restrict their membership to include only those who were licensed to trade a specific product or commodity. Such regulation usually included training, an apprentice, and membership in a guild relevant to the specific products. The Company of Merchant Adventurers had forged this regulation and had convinced the Queen of its usefulness to her–and them. Regulated joint stock trading companies then could restrict who could be members, and could impose qualifications for holding higher office and board (or court) inclusion. A relative few of a company with thousands of members could hold and perpetuate their hold on the decision-making bodies of the trading company.
Moreover, an individual not of that particular occupation, nor a member of the appropriate guild, could not invest–i.e. become a member of a regulated joint stock trading company. As more and more new wealth flowed to non noble or merchants, however, a new grouping, called gentry, had disposable capital to invest–and they wanted in on foreign trade and sell of trade goods. They could not participate in foreign trade through trading company investment. This closed trading company, closely tied to the great twelve guilds, and their fraternity with the Crown was the target of gentry activists in the Blessed Parliament–and they saw an opportunity to press their dislike of regulated trading companies by taking advantage of a new (1601) joint stock corporation type that had been promulgated in 1621–the “limited” or non-regulated trading company we know as the East India Company.
the fourth item on his list had been monopolies, by which he had meant the special licenses given to individuals by the crown, granting the sole right to sell or manufacture certain commodities such as playing cards. These grants had come under heavy attack during the last two Elizabethan Parliaments, and legislation against them was passed again in 1604. But another kind of monopoly figured prominently at this session [1604] for the first time: the grants made to the great trading companies whose tight membership received complete control over large areas of overseas enterprise. Unlike their predecessors the gentry of the seventeenth century opposed and attacked several holders of this second type of monopoly [regulated joint stock trading companies] [99] Theodore K. Rabb, “Sir Edwin Sandys and the Parliament of 1604 (the American Historical Review, Vol. 69, No. 3 (April, 1964), p
Originally the East India 1599 charter was a joint stock corporation, with all the traditional monopoly rights attached thereto. But within a year the East India Company was not able to raise sufficient funds to operate its proposed East Indies voyages–investors had signed on, but many just did not pay up–but still enjoyed rights and monopolies attached to the Company. The charter included no penalties for partial payments, and so defaulted investors still enjoyed unlimited rights. So the Company attained a revision to the charter that granted rights only to those who invested and paid fully their investment. Say it in legal terminology, the new charter “limited” the rights of investors to monopolies–hence the origin of the contemporary term for English private corporation: “Limited”. In any case, the East India Company became in 1601 a limited joint stock trading corporation..
Those who invested in the stock of a limited company could become a member and enjoy whatever the rights of such conveyed on the membership. Literally, that limitation meant individuals did not have to become licensed by the company to be members. but membership was secured by simply by purchase and payment of shares. The original revised charter was limited to a period no longer than 1609, but was renewed in 1610. [99] See Frank Evans, The Evolution of the English Joint Stock Limited Trading Company“, Columbia Law Review, Vol. 8, No. 5 (May, 1908), pp. 343. The purpose of the 1604 parliament-proposed legislation was to formalize this “limitation” by creating a second type of joint stock corporation whose membership was open to any would purchase and pay for a share in the trading company. The effect of this legislation was that any investor, of any occupation or even class, could purchase a share and become an owner. with all rights and dividends thereto.
While the 1604 legislation was successful in the Commons, approved with only forty dissenting votes, it was not approved by the Lords–despite aggressive advocacy by its activist leadership. The matter again came up in the Parliament of 1605, when leaders of the merchant community proposed another regulated trading company, the Spanish Company. The legislation for the incorporation of the company as a regulated joint stock corporation failed–and from that point on it was clear, no incorporation of a trading company would be successful if it were “regulated”. Accordingly in 1606, the first official non regulated trading joint stock corporation was incorporated: the London and Virginia Company.
Using the Muscovy model, the membership of the new corporation would be limited to those who had signed the incorporation petition. Thus the East India Company excluded merchants from other cities and ports, and they were not happy campers. “representatives of the Levant-East India combine had become preponderant within what might loosely be termed the City merchant establishment, which consisted of the top socioeconomic layers among London’s privileged company merchants, and had come to constitute the core of a recomposed City merchant political elite, which exercised its authority through the aldermanic court [city council], the East India Company board of directors, and the customs-farming syndicates. [99] Brenner, p. 4
We shall in the proper time discuss these three commercial, trade, and, increasing over the years, colonization movements. Richard Brenner, his volume Merchants and Revolution presented a helpful and cohesive view of the transformation of the English commercial elites over the critical one hundred years during which England turned to overseas trade and colonialism. That his approach has attracted considerable enthusiasm and reaction that had continued for decades. But none can deny the insight nor question his soundness of research.
Ron W. Coan 