The Simplified Wealth of Nations of Adam Smith, Book 5, Chapter 1n: The Hudson's Bay and South Sea Companies
Chapter 1n: The Hudson's Bay Company (1660-1752) and South Sea Company
Before their misfortunes in the recent war, the Hudson's Bay Company was much more fortunate than the Royal African Company.
- "Their necessary expence is much smaller."
- They maintained up to 120 persons in their settlements and habitations, which they named as forts.
- 120 persons are sufficient to prepare the cargo of furs and other goods for their ships beforehand.
- Their ships can seldom remain more than eight weeks in those seas because of the ice.
- For several years, private adventurers could not have this advantage of having a cargo ready prepared.
- Without this advantage, it was impossible to trade to Hudson's Bay.
- The company's moderate capital does not exceed £110,000.
- It might be enough to enable them to engross the whole trade and surplus produce of that miserable but extensive country.
- No private adventurers have ever attempted to compete with them.
- This company always enjoyed an exclusive trade even if they may have no legal right to it.
- Its moderate capital was divided among very few proprietors.
- But a joint stock company with a moderate capital and a few proprietors are almost like a private copartnery.
- "It may be capable of nearly the same degree of vigilance and attention."
- It is no wonder that the Hudson's Bay Company was able to carry on their trade successfully before the recent war.
- Their profits probably never approached to what the late Mr. Dobbs imagined them.
- Mr. Anderson is a much more sober and judicious writer and author of The Historical and Chronological Deduction of Commerce.
- He very justly observes the accounts Mr. Dobbs received of its exports and imports.
- He made the proper allowances for their extraordinary risk and expence.
- He revealed that its profits do not much exceed ordinary profits.
The South Sea Company
The South Sea Company never had any forts or garrisons to maintain.
- It was entirely exempted from a great expence.
- But they had an immense capital divided among so many proprietors.
- Folly, negligence, and profusion naturally prevailed in their management.
- "The knavery and extravagance of their stock-jobbing projects are sufficiently known."
- Explaining those projects would be off-topic.
- "Their mercantile projects were not much better conducted."
- Their first trade was supplying negroes to the Spanish West Indies.
- They had exclusive privilege of that trade because of the Assiento contract granted by the treaty of Utrecht.
- Not much profit was expected by this trade.
- The Portuguese and French companies which enjoyed it before the South Sea Company were ruined by it.
- As compensation, they were allowed to annually send a ship to trade directly to the Spanish West Indies.
- Of the 10 voyages made, they gained considerably only by the Royal Caroline voyage in 1731.
- They were losers by almost all the rest.
- Their factors and agents imputed their failure to the Spanish government's extortion and oppression.
- But perhaps it was principally due to the profusion and depredations of those very factors and agents.
- Some of them acquired great fortunes in a year.
- In 1734, the company petitioned the king that they might be allowed to:
- dispose of the trade and tonnage of their annual ship because of the little profit which they made by it, and
- accept such equivalent as they could obtain from the king of Spain.
In 1724, this company entered the whale-fishery which they had no monopoly of.
- No other British subjects engaged in it.
- Of the eight voyages their ships made to Greenland, they gained by one and lost by all the rest.
- After their 8th and last voyage, they sold their ships, stores, and utensils.
- They found that their whole loss including the capital and interest amounted to more than £237,000.
In 1722, this company petitioned parliament to be allowed to divide their immense capital of more than £33,800,000.
- All of it was lent to government, into two equal parts.
- The first half of more than £16,900,000 was to be put on the same footing with other government annuities.
- It was not to be subject to the debts contracted or losses incurred by the company directors.
- The second half was to remain as a trading stock.
- It was to be subject to those debts and losses.
- The petition was too reasonable not to be granted.
- In 1733, they again petitioned parliament that 3/4 of their trading stock might be turned into annuity stock.
- Only 1/4 was to remain as trading stock.
- This stock was under the bad management of their directors.
- By this time, their annuity and trading stocks were reduced by more than 2 million each, by several payments from government.
- This 1/4 amounted only to £3,662,784 8s. 6d.
- In 1748, all the company's demands on the king of Spain because of the Assiento contract were given up by the Treaty of Aix-la-Chapelle.
- Their trade with the Spanish West Indies was ended.
- The remainder of their trading stock was turned into an annuity stock.
- The company ceased to be a trading company.
The South Sea Company's trade on its annual ship was the only trade it was expected to profit from.
- It had competition in foreign and home markets.
- They competed with Spanish merchants at Carthagena, Porto Bello, and La Vera Cruz.
- Those merchants imported from Cadiz the same European goods the company imported.
- They competed with English merchants in England.
- Those merchants imported the same goods of the Spanish West Indies imported by the company.
- The goods of the Spanish and English merchants were perhaps subject to higher duties.
- But the loss from the negligence, profusion, and malversation of the servants of the company probably was a tax much heavier than all those duties.
- It seems contrary to all experience that a joint stock company should be successful in foreign trade when they compete openly and fairly with private adventurers.
Next: Chapter 1p: The Britsh East India Company