The Simplified Wealth of Nations of Adam Smith, Book 5, Chapter 1g: Government Expenses -- Commercial Institutions
Chapter 1g: Commercial Institutions
| Particular institutions are necessary to facilitate particular branches of commerce.
| These require a particular and extraordinary costs.
91 The commerce done with uncivilized nations needs extraordinary protection.
An ordinary counting-house gives little security to the goods of the merchants trading to the African west coast.
Their warehouses should be fortified against the barbarous natives.
The Indian government's disorders rendered such fortifications necessary even among that mild and gentle people.
The English and French East India Companies were allowed to build their first forts in India under pretence of securing their persons and property from violence.
Other governments are vigorous enough to prevent strangers from having any forts within their territory.
In such nations, it may be necessary to maintain an ambassador.
He may decide, according to their own customs:
the differences among his own countrymen, and
their disputes with the natives.
By his public character, he will be able to:
interfere with more authority, and
better protect his countrymen, than any private man.
Commercial interests made it necessary to maintain ministers in foreign countries.
The Turkey Company's commerce first established an ambassador at Constantinople.
The first English embassies to Russia arose from commercial interests.
There was constant interference of commercial interests among the European states.
It probably introduced the custom of keeping permanent ambassadors in neighbouring countries.
This custom was unknown in ancient times.
It seems not older than the end of the 15th or the start of the 16th century.
This was when:
commerce first extended itself to most European nations, and
European nations first attended to commercial interests.
92 The extraordinary cost of protecting any particular branch of commerce should be defrayed by a moderate tax on that branch.
a moderate fine to be paid by the traders when they first enter the trade, and
a percentage duty on the goods they export or import to or from the country where protection is needed.
This tax is more equal than the moderate fine.
The protection from pirates and free-booters created the first customs duties.
If it were reasonable to lay a general trade tax to pay for the protection of the general trade, it would be equally reasonable to lay a particular trade tax for the protection of that particular trade.
93 The protection of general trade was always:
essential to national defence and
the executive power's duty.
The collection and use of the general customs duties was always left to the executive power.
The protection of any particular trade is a part of the protection of the general trade.
Therefore, it is a part of the executive power's duty.
It should always be left to the executive.
However, in most European commercial countries, particular companies of merchants have persuaded the legislature to fully entrust this duty to them.
Regulated Companies and Joint Stock Companies
94 These companies might have been useful to introduce some commerce.
They made an experiment at their own expence which the state did not think it prudent to make.
But in the long-run, they proved universally burdensome or useless.
They mismanaged or confined the trade.
95 Regulated companies are companies which:
do not trade on a joint stock,
are obliged to admit any qualified person who:
pays a certain fine
agrees to submit to company regulations, and
has each member trading on his own stock at his own risk.
Joint stock companies are companies which:
trade on a joint stock
has each member sharing in the common profit or loss in proportion to his share in this stock
Regulated and joint stock companies sometimes have, sometimes do not have, exclusive privileges. 96Regulated companies resemble the corporations of trades.
Such corporations are so common in all European cities.
Regulated companies are enlarged monopolies of the same kind.
No one can:
exercise an incorporated trade without first obtaining his freedom from the corporation.
lawfully carry on foreign trade without first becoming a member of the regulated company for foreign trade.
The monopoly is more or less strict:
as the terms of admission are more or less difficult, and
as the company directors have more or less power to confine the trade to themselves and their friends.
In the most ancient regulated companies, the privileges of apprenticeship were the same as in other corporations.
Apprenticeships entitled the apprentice to become a member after serving his time to a member of the company:
without paying any fine or
upon paying a much smaller fine.
"The usual corporation spirit, wherever the law does not restrain it, prevails in all regulated companies."
"When they have been allowed to act according to their natural genius, they have always, in order to confine the competition to as small a number of persons as possible, endeavoured to subject the trade to many burdensome regulations."
They have become altogether useless and insignificant when the law has restrained them from doing this.
97 The regulated companies for foreign commerce presently in Great Britain are:
Hamburgh Company or the ancient merchant adventurers company