Colonization and Companies

In the sixteenth, seventeenth, and eighteenth centuries, a great deal of Europe's long-distance trade, cross-cultural contact, and colonial enterprise was designed, engineered, and managed not by monarchies or the state, but by companies. These companies, whether primarily designed for plantation or long-distance trade, generally possessed royal charters that detailed rights to wage war, conduct diplomacy, control commerce, and administer settlements in the known and undiscovered world. While their propriety and viability has been a matter of debate since their creation, such bodies were a crucial feature of early modern European empires.

EARLY EXPERIENCES

The ideas of corporate partnership with both public and private rights had intellectual and legal roots in the late medieval financial associations of the Mediterranean, northern European guilds, and other kinds of corporate bodies, such as towns, universities, and ecclesiastical establishments. Perhaps the most famous early experiment with such an arrangement was the Hanseatic League, an association of traders from various northern German cities and states. The Hanseatic League dominated the late medieval Baltic and Russian trades, maintaining its own enclaved settlements, legislative assemblies, and military.

The Hanseatic League and other such efforts to protect intra-European trade ultimately gave way to the rising power of European national states by the sixteenth century. However, European monarchies and republics often lacked the resources or will to protect directly extra-European overseas commerce and colonization. Such efforts demanded much more capital, sustained over much vaster distances and longer periods of time, than these states could or would muster. It also necessitated an even more elaborate organization, not just for commerce but also for diplomacy, defense, and governance abroad than was within reach of any individual merchant.

Though the Spanish and Portuguese empires, the pioneers of European expansion, were for the most part the business of the monarchy and state, companies did emerge as crucial to this project. Companies for trade or associations of conquistadores were usually more or less unchartered partnerships, coordinated or theoretically sanctioned by state institutions like the Spanish Council of the Indies and its subordinate, La Casa de Contratacion, (House of Trade) or the slightly more independent Portuguese Estado da India (State of India).

The Consulado de Sevilla, which began as guild for the Spanish American traders, soon had a de facto monopoly on legal Atlantic commerce. Spanish officials and political economists also began to entertain the idea of chartered monopoly companies as a solution to smuggling, piracy, and attacks from European rivals. Portugal's Brazil Company (1649–1720) was responsible for organizing the Atlantic trade into fleets and armed convoys, and became even closer to a monopoly after individuals' voyages were outlawed in 1660. Still, other Portuguese attempts to form companies in the seventeenth century were less successful, including the Companhia do Comércio da India Oriental (East Indies, 1628–1633), and the Companhia de Cachéu e Rios de Guiné and Companhia do Cabo Verde e Cachéu (West Africa, 1676 and 1696 respectively).

Since other European leaders were largely reluctant or unable to challenge the Iberian empires directly, such efforts were left primarily to private "adventurers" with either tacit or explicit state endorsement. Though the exploits of privateers, explorers, and merchants like Francis Drake (ca. 1543–1596), Walter Raleigh (ca. 1554–1618), and John Hawkins (1532–1595) are perhaps the most famous, important challenges to Portuguese and Spanish maritime and colonial dominion were organized collectively in "regulated" companies, like the English Russia (or Muscovy) Company (1553) and the Levant (or Turkey) Company (1581). These were guildlike conglomerates in which merchants funded and prosecuted their own trade but shared chartered rights, some infra-structure, and diplomatic representation.

THE JOINT-STOCK COMPANY

This model did not, however, prove adequate for the political and commercial risks of trading in areas of the world that were more distant, dangerous, and uncertain. For this, northern European traders, particularly in England and the United Provinces of the Netherlands, turned to the joint-stock company. This kind of company was much more novel, though increasingly in use in the sixteenth and seventeenth centuries for local trades and industries, such as mining, fisheries, manufacturing, public works, and financial services. The joint-stock company solved a range of political and entrepreneurial problems specific to long-distance trade and colonization. Unlike in the regulated company, capital stock was raised through investment, not the trade itself. This allowed companies to accumulate much more money, which would be more permanent, liquid, and able to absorb much greater risks.

The joint-stock system also involved new constituencies in overseas activities, including the gentry and nobility, which had little place in a regulated or unincorporated trade. Politically, these bodies were corporate singularities, legal "persons" with an expectation of institutional permanence and "perpetual succession." They also had the rights and duties of self-governance and did so through an often sophisticated hierarchical internal and external political organization. Neither public nor private, these companies were bodies politic in themselves.

From the mid-sixteenth through the seventeenth century, there was an explosion in the number of joint-stock companies, particularly in the English Atlantic: the Guinea Company (1618) and later the Royal African Company (1672) in West Africa; the Somers Island (Bermuda) Company (1615) and the Providence Island Company (1630) in the West Indies; and the Newfoundland Company (1610), the Virginia Company (1606), and the Plymouth (1606) and later Massachusetts Bay Company (1629) in North America. A good number of these companies lasted only decades, but they laid the foundations for the English slave trade, Atlantic commerce, and "foreign plantations" in the Americas.

The Massachusetts Bay Company, though never having much of a trade, continued to govern its colony almost to the end of the seventeenth century. In fact, much of the literature and propaganda behind these companies, like Richard Hakluyt's (ca. 1552–1616) Discourse on Western Planting (1584), insisted that commerce was only one goal of such expansion, which also promoted Protestantism, could rival Spain, and add to the national "fame." Furthermore, settlement and exploration had the potential to open a new path to Asia through a much-pursued "Northwest Passage." The Hudson's Bay Company (1670), which commanded the English fur trade and settlements in Canada, was founded with this initial goal in mind.

Unlike the English, early Dutch expansion in the Atlantic was prosecuted under the auspices of one all-encompassing company. The Dutch West India Company (West-Indische Compagnie, 1621) was given a monopoly on all Dutch trade in the Atlantic basin. It established slave-trading forts in West Africa and settlements in the West Indies and North America, most notably the New Netherlands (later lost to the English and restyled New York). Though it was ultimately unprofitable, the Dutch West India Company took a leading role in establishing colonies, regional monopolies, and well-armed fleets and garrisons against the Iberian powers. Though some contemporaries saw such efforts as unsuccessful, raids on Spanish and Portuguese shipping in the company's first decade yielded over five hundred prize ships. In 1624 its forces briefly seized the Brazilian town of Bahia, and the company soon had established itself in parts of Brazil, Venezuela, and the Caribbean. The Dutch West India Company's only real source of profit, though, was its monopoly on the gold trade, which also led to a more permanent Dutch presence in West Africa as well.

Ultimately, perhaps the most profitable and powerful of these new joint-stock companies were the English and Dutch efforts to rival the Portuguese in Asia. As early as the seventeenth century, the English East India Company (1600) and the Dutch East India Company (Verenigde Oost-Indische Compagnie, 1602) began to dominate the Eurasian trade in spices and other Asian goods; they also established and governed colonial cities, maintained military forces, fought wars, and conducted diplomacy. They set the stage for future European expansion in Asia, and served as models for a number of other European efforts at prosecuting a trade in the East.

France, Sweden, Denmark, the Holy Roman Empire (Austrian Netherlands/Ostend), and Scotland all established their own East India companies in the seventeenth or eighteenth centuries, with varying success. The Company of Scotland (1695–1707) even planted a short-lived colony in Panama with the twin goals of strategically disrupting Spanish American power and using the isthmus as a bridge between the West and East Indies—an idea only realized two centuries later in the Panama Canal.

COMPANY, STATE, AND EMPIRE

The independence from their respective states marked the crucial difference between these Dutch and English companies and their Iberian rivals. Still, as European national and dynastic rivalries spread across the globe, these companies assumed powerful roles in actively defining the future of European empire more generally. Controversies over such companies were at the heart of seventeenth-century political economy debates that shaped contemporary and future imperial policies. The East India companies in particular also contributed to empire as critical players in the seventeenth-century "financial revolution," underpinning state expansion as a source of revenue, through customs, excise, and state debt.

The most explicit use of companies for state building was found in late seventeenth-century France. There were French attempts in the early seventeenth century to rival Dutch and English expansion, under the stewardship of Cardinal Richelieu (1585–1642, chief minister of France from 1624 to 1642), but the Compagnie du Corail (Barbary Coast), Compagnie de la Nouvelle-France (Americas), and the Compagnie des Indes orientales were almost immediately failures. More dramatically, Jean-Baptiste Colbert (1619–1683, intendant and comptroller-general under King Louis XIV [1638–1715] from 1661 to 1683), used his Compagnie des Indes orientales and Compagnie des Indies occidentals as part of a broader scheme of state imperial expansion, commerce, finance, and even as farmers of colonial revenue, such as tobacco. Unlike in England or the Netherlands, the French state was the largest investor in these projects and had a greater hand in their administration.

This power of colonial companies did have its limits. Interlopers, pirates, and smugglers were difficult and costly to contain, and profits were hard to sustain. The French companies in particular were notoriously unsuccessful as business enterprises. Furthermore, early eighteenth-century crises in stock markets that emerged alongside these companies sent shocks through this system.

In 1720 the "bubbles" burst on two notorious overseas colonial schemes. A frenzied run and crash in the stock of the French Mississippi Company, which was initially chartered to trade in and govern Louisiana but was soon quixotically given control of all French Asian trade, caused a financial crisis in France that some historians list among the long-term causes for the French Revolution (1789–1799). In 1719, the British South Sea Company (1711), which had been vested with a monopoly on the South Sea trade and the Atlantic slave trade, attempted to assume the entire British state debt. Although the stock had no real assets behind it, speculation drove up its price from about £100 (British pounds) to over £1000 in six months. When the bubble of speculation burst, the ensuing panic led in 1720 to a crash in the company, the inchoate British stock market, and the political system that had so wholeheartedly backed it.

Meanwhile, as modern European national states continued to grow, they began to assume a much more direct role in their colonial empires. By the end of the seventeenth century, the English Crown and Parliament had created a Board of Trade (1696) to govern the Atlantic trade, put the Royal African Company and Newfoundland fisheries under increasing scrutiny, and attempted to absorb American colonies previously held under proprietary charters. In the next century, emerging liberal economic ideologies, most notably those detailed in Scottish economist Adam Smith's (1723–1790) Wealth of Nations (1776), argued that monopolies and colonial companies were detrimental to trade and national wealth. The Compagnie des Indes had its exclusive privileges withdrawn in 1764, and the Dutch West India Company was absorbed by the state in 1791 and abolished in 1794. The English East India Company, which had acquired its own territorial empire in South Asia by midcentury, fell under increasing state scrutiny and was progressively shorn of its monopoly (1813), trade (1833), and governance (1858) and was eventually abolished entirely (1873).

As the northern Europeans were abandoning the system of colonial companies, the Spanish Crown began to entertain numerous proposals for monopoly companies in an attempt to keep its American empire afloat. The Havana Company (1740) was given a monopoly on the tobacco trade of Cuba (1740), and the Barcelona (Catalan) Company (1755) was chartered for trade to Santo Domingo (in present-day Dominican Republic), Puerto Rico, and Margarita (in Venezuela).

The most famous and successful of these eighteenth-century efforts was the Real Compañia Guipuzcoana de Caracas (1728), or the Caracas Company. This company set about developing Venezuela's economy and defending it from the Dutch. The Caracas Company was soon granted an indefinite monopoly, but under the pressure of wars with Britain and abuses within the company, Spain began to favor free trade as a means for rescuing its declining empire. The Caracas Company was absorbed into the newly chartered Philippines Company in 1785, which turned out to be the last holdout among these Spanish monopoly companies. It endured, if only in name, until 1834. Though free trade and liberal political philosophy on the one hand, and imperialism as a political ideology on the other, reached their apotheosis in the nineteenth century, European powers increasingly turned back to private companies as agents for colonization. Indeed, joint-stock companies became the vanguard of certain European colonial efforts, particularly in Africa. Corporations like George Goldie's (1846–1925) Royal Niger Company, Cecil Rhodes's (1853–1902) DeBeers Consolidated Mining Company and British South Africa Company, the British and German East Africa companies, and, perhaps most famously, Belgian King Leopold II's (1835–1909) International African Association, which acquired the Congo under the "Partition of Africa" in 1885, among many others, were critical in administering and defining modern European colonial empires.

see also Cacao; Coffee Cultivation; Company of New France; Conquests and Colonization; Massachusetts Bay Company; Virginia Company.

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