Part 3l of Chapter 1 of Book 5 of The Wealth of Nations Simplified

The South Sea Joint Stock Company Icon

August 1, 2021

111 The South Sea Joint Stock 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.
  • Before the South Sea Company entered it, the Portuguese and French companies were already ruined by it.

As compensation, they were allowed to annually send a ship to trade directly to the Spanish West Indies.

  • It made 10 voyages.
  • 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 in reality, 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 that king allowed them 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.

112 In 1724, it entered the whale-fishery which they had no monopoly of. No other British citizens engaged in it.

Their ships made 8 voyages to Greenland.

  • They gained by 1 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, was more than £237,000.

113 In 1722, it petitioned parliament to be allowed to divide their immense capital of more than £33,800,000.

All of it was lent to government, into 2 equal parts.

  1. 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’s executives .

  1. The second half was to remain as a trading stock.

It was to be subject to those debts and losses.

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 amounting only to £3,662,784 8s. 6d.

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.

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.

114 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 Spain the same European goods that 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.

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