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History's Hinge - 'Ain Jalut

[Administration]

Though England began colonising in earlier centuries (e.g. Ireland and North America), the British Empire only began to appear after her unification with Scotland in the 18th century.

The means of expansion was her shipping and the impetus was trade. These same two factors applied equally to Holland and in empire building, these two nations are perhaps unique up until the 20th century and the birth of the American world economic empire.

The common pattern for empires, as established throughout history by the likes of Persia, Greece, Rome, the Mongols and Spain, is invasion and occupation. As a small, seafaring nation, this was never an option for Britain (nor Holland).

Unlike her continental neighbours such as Austria-Hungary, France, Germany and Italy, which used large armies to establish conventional empires of occupied nations, Britain sent forth her merchants by sea, who established exclusive trading zones which attracted more merchants and their attendants.

There was a second impetus for British expansion overseas: wars with her continetal neighbours, France especially.

British North America expanded enormously and immediately upon the defeat of France in the Seven Years' War, due in large part to the martial qualities of her American settlers. In India, it was Britain's Indian allies versus those of France and it was the growing strength of France in the South Pacific that caused Britain to settle New Zealand.

This thread will now explore in more detail how Pax Britannica came about.


Excerpt From Last Night At The Proms (Rule Britannia)

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An anachronous map of British and, prior to the Acts of Union 1707, English imperial possessions

The British Empire was the largest empire in history and for a substantial time was the foremost global power. It was a product of the European age of discovery, which began with the maritime explorations of the 15th century, that sparked the era of the European colonial empires.

By 1921, the British Empire held sway over a population of about 458 million people, approximately one-quarter of the world's population. It covered about 36.6 million km� (14.2 million square miles), about a quarter of Earth's total land area. As a result, its legacy is widespread, in legal and governmental systems, economic practice, militarily, educational systems, sports (such as cricket, rugby and football), and in the global spread of the English language. At the peak of its power, it was often said that "the sun never sets on the British Empire" because its span across the globe ensured that the sun was always shining on at least one of its numerous colonies or subject nations.

During the five decades following World War II, most of the territories of the Empire became independent. Many went on to join the Commonwealth of Nations, a free association of independent states.

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Full-scale replica of an 18th century East India merchantman

The mechanism by which private investment was encouraged by the British government in overseas trade was the private joint-stock company. This was described in 1776 by Adam Smith in his An Inquiry into the Nature And Causes of the Wealth of Nations:

Book Five - Of the Revenue of the Sovereign or Commonwealth

CHAPTER I - Of the Expenses of the Sovereign or Commonwealth

PART 3 - Of the Expense of Public Works and Public Institutions

ARTICLE 1 - Of the Public Works and Institutions for facilitating the Commerce of the Society

Of the Public Works and Institutions which are necessary for facilitating particular Branches of Commerce.

- Joint stock companies, established by Royal Charter or by Act of Parliament, differ in several respects, not only from regulated companies, but from private copartneries.

- The trade of a joint stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of those proprietors seldom pretend to understand anything of the business of the company, and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint stock companies, who would, upon no account, hazard their fortunes in any private copartnery. Such companies, therefore, commonly draw to themselves much greater stocks than any private copartnery can boast of. The trading stock of the South Sea Company, at one time, amounted to upwards of thirty-three millions eight hundred thousand pounds. The divided capital of the Bank of England amounts, at present, to ten millions seven hundred and eighty thousand pounds.

- The Royal African Company, the predecessors of the present African Company, had an exclusive privilege by charter, but as that charter had not been confirmed by Act of Parliament, the trade, in consequence of the Declaration of Rights, was, soon after the revolution, laid open to all his Majesty's subjects. The Hudson's Bay Company are, as to their legal rights, in the same situation as the Royal African Company. Their exclusive charter has not been confirmed by Act of Parliament. The South Sea Company, as long as they continued to be a trading company, had an exclusive privilege confirmed by Act of Parliament; as have likewise the present United Company of Merchants trading to the East Indies.


A Brief History of British Joint Stock Companies

The English started joint stock companies. The earliest recognized company was the The Virginia Company. The British East India Company, sometimes referred to as "John Company", was one of the more famous joint-stock companies. It was granted an English Royal Charter by Elizabeth I on 31 December 1600, with the intention of favouring trade privileges in India. The Royal Charter effectively gave the newly created Honourable East India Company (HEIC) a 21-year monopoly on all trade in the East Indies. The Company transformed from a commercial trading venture to one that virtually ruled India as it acquired auxiliary governmental and military functions, until its dissolution in 1858.

During the period of colonialism, the joint stock company Europeans, initially the British, trading with the Near East for goods, pepper and calico for example, enjoyed spreading the risk of trade over multiple sea voyages. The joint stock company became a more viable financial structure than previous guilds or state regulated companies. The first joint-stock companies to be implemented in the Americas were The Virginia Company and The Plymouth Company.

Transferable shares often earned positive returns on equity, which is evidenced by investment in companies like the British East India Company, which used the financing model to manage trade in India. Joint stock companies paid out divisions, dividends, to their shareholders by dividing up the profits of the voyage in the proportion of shares held. Divisions were usually cash, but when working capital was low and it was detrimental to the survival of the company, divisions were either postponed or paid out in remaining cargo which could be sold by shareholders for profit in the market.

It also made it affordable to support early colonists in America. Jamestown, for instance, was financed by the Virginia Company. It is because of Joint stock companies that the colonization and settlement of America was made possible.

However, in general, incorporation was only possible by Royal charter or private act, and was limited owing to government's jealous protection of the privileges and advantages thereby granted. As a result, many businesses came to be operated as unincorporated associations with possibly thousands of members. Any consequent litigation had to be carried out in the joint names of all the members and was impossibly cumbersome.

In the UK, registration and incorporation of companies without specific legislation was introduced by the Joint Stock Companies Act 1844.

[Administration]

The areas of the Virginia Company founded and organized by Bartholomew Gosnold of Grundisburgh in Suffolk, England and granted an exclusive charter by James I to the London and Plymouth companies; also showing the overlapping (yellow) area granted to both companies.

London Company

The London Company (also called the Charter of the Virginia Company of London) was an English joint stock company established by royal charter by James I of England on 10 April 1606 with the purpose of establishing colonial settlements in North America. It was one of two such companies, along with the Plymouth Company, that was granted an identical charter as part of the Virginia Company. The London Company was responsible for establishing the Jamestown Settlement, the first permanent English settlement in the present United States in 1607, and in the process of sending additional supplies, inadvertently settled the Somers Isles, alias Bermuda, the oldest-remaining English colony, in 1609.

The territory granted to the London Company included the coast of North America from 34th parallel (Cape Fear) north to the 41st parallel (in Long Island Sound), but being part of the Virginia Company and Colony, The London Company owned a large portion of Atlantic and Inland Canada. The company was permitted by its charter to establish a 100 mile square (26,000 km�) settlement within this area. The portion of the company's territory north of the 38th parallel was shared with the Plymouth Company, with the stipulation that neither company found a colony within 100 miles (160 km) of each other.

On 14 May 1607, the London Company established the Jamestown Settlement on the James River about 40 miles upstream from the mouth of the Chesapeake Bay at Cape Henry. Later in 1607, the Plymouth Company established its Popham Colony in present day Maine, but it was abandoned after about a year. By 1609, the Plymouth Company had dissolved. As a result, the charter for the London Company was adjusted with a new grant that extended from "sea to sea" of the previously-shared area between the 34th and 40th parallel. It was amended in 1612 to include the new territory of Bermuda.

The London Company struggled financially for a number of years, with results improving after sweeter strains of tobacco than the native variety were cultivated and successfully exported from Virginia as a cash crop beginning in 1612. In 1624, the company lost its charter, and Virginia became a royal colony.


The 1609 grant to the Virginia Company of London "from sea to sea" is shown demarcated in red. The later grant to the Plymouth Council of New England is shown in green

Plymouth Company

The Plymouth Company (the Plymouth Adventurers, also called the Virginia Company of Plymouth or simply Virginia Bay Company) was an English joint stock company founded in 1606 by James I of England with the purpose of establishing settlements on the coast of North America.

It was one of two such companies, along with the London Company, chartered with such a purpose as part of the Virginia Company. The territory of the company was the coast of North America from the 38th parallel to the 45th parallel, but being part of the Virginia Company and Colony, The Plymouth Company owned a large portion of Atlantic and Inland Canada. The portion of company's area south of the 41st parallel overlapped that of the London Company, with the stipulation being that neither company could found a settlement within 100 miles of an existing settlement of the other company.

In 1607, the company established the Popham Colony at the mouth of the Kennebec River in present-day Maine. The settlement was founded in the same year that the London Company had established the Jamestown Settlement, but unlike Jamestown, the Popham settlement was abandoned after only one year.

The company thus fell into disuse and in 1609, the Virginia Colony charter was reorganzied to grant the London Company exclusive rights to most of the previously shared territory along the coast.

In 1620, after years of disuse, the company was revived and reorganized as the Plymouth Council for New England.

[Administration]

1723 SSC Sixpence
The SSC (South Sea Company) coins were minted in 1723, after they discovered silver and shipped it back from Indonesia in 1722. The coins minted were Crowns, Half Crowns,Shillings and Sixpence.

SOUTH SEA BUBBLE, the name given to a series of financial projects which originated with the incorporation of the South Sea Company in 1711, and ended nine years later in general disaster.

The idea at the root of the parent scheme was that the state should sell certain trading monopolies to a company in return for a sum of money to be devoted to the reduction of the national debt, and in the form which it took in 1711 it possibly owes its existence to Daniel Defoe, who discussed it frequently with Edward Harley (1664-1735), brother of Robert Harley, earl of Oxford. In 1711 the South Sea Company was formed, and was granted a monopoly of the British trade with South America and the Pacific Islands, the riches of which were popularly regarded as illimitable. Its promoters, mainly wealthy merchants, took over nearly �,o,000,000 of the national debt, on which they were to receive interest at the rate of 6% in addition to �8000 a year for the expenses of arrangement. The �600,000 was secured on certain customs duties. The company prospered, and in 1713, when the Asiento treaty was signed with Spain, it received the lucrative monopoly of the slave trade with Spanish America. It was the special pride of the Tories, who regarded it as a rival to the Whig institution, the Bank of England. In 1716 it obtained further concessions under the new Asiento treaty, and in 1717 it advanced a further sum of �2,000,000 to the government, but its prospects were greatly darkened by the outbreak of war between England and Spain in 1718. Yet it continued to thrive, and early in 1718 the king became its governor.

Towards the end of 1719 the directors of the company put before the government, the head of which was Charles Spencer, 3rd earl of Sunderland, a more ambitious scheme. In return for further concessions the company offered to take over the whole of the national debt and to pay �3,00,000 for this privilege. At this time the amount of the debt was �51,300,000, the greater part of which consisted of terminable annuities, money lent to the state in return for a fixed income for life. The company would receive interest at the rate of 5% until 1727, when it would be reduced to 4%. The advantage which the government hoped to obtain from this bargain was obvious; it would rid itself of the unpopular and burdensome debt. The advantages hoped for by the company were much greater, although perhaps not equally obvious. The aim of the directors was to persuade the annuitants of the state to exchange their annuities for South Sea stock; the stock would be issued at a high premium and thus a large amount of annuities would be purchased and extinguished by the issue of a comparatively small amount of stock. Moreover, when this process had been carried out the company would still receive from the government a sum of something like �1,500,000 a year. Seriously alarmed at the proposals of the South Sea Company, the directors of the Bank of England offered the government �5,000,000 for the same privilege, but the company outbid them with an offer of �7,5 6 7, 000. This was accepted, the necessary act of parliament being passed in April 1720. It is interesting to note that one of the most sturdy opponents of the scheme was Sir Robert Walpole.

The year 1719, when the South Sea scheme was projected, was remarkably favourable to an undertaking of the kind. It was the year when France went delirious over John Law and his Mississippi Company, and the infection spread to England. But before April 1720, when everything was ready, a terrible reaction had begun in France, confidence and prosperity giving way to ruin and disaster. Nevertheless, the directors proceeded with their plan, and in a few weeks they had persuaded over one-half of the government annuitants to become shareholders in the company. Meanwhile the stock of the company had been appreciating steadily in value, and when the new scheme was launched the public began to purchase it more eagerly than before. From 1282 at the beginning of the year the price rose to 330 in March, and in April the directors sold two and a quarter millions of stock at 300. In May the price rose to 550, in June to 890, and in July it touched moo. At this tremendous premium the directors sold five millions of stock.

By this time the extraordinary success of the South Sea Company had produced a crowd of imitators, and the result was a wild mania of speculation, and its inevitable end - a crash. Hundreds of companies were formed, some of them being fortunate enough to secure the active support of royal and titled personages; thus the prince of Wales, afterwards George II., became governor of the Welsh Copper Company. Some of these new companies, like the Royal Exchange and the London Assurance, were perfectly legitimate and honourable undertakings, but the great majority put forward the most audacious and chimerical proposals for extracting money from the public. One was "for a wheel for perpetual motion"; another was for a "design which will hereafter be promulgated," and it has been estimated that the total capital asked for by the promoters of these schemes amounted to �300,000,000. Profiting by the sad experience of France, the British government made an attempt to check this movement, and an act was passed for this purpose early in '720. A proclamation of the 11th of June against the promoters of illegal companies followed, and the directors of the South Sea Company persuaded the lords justices, who were acting as regents during the absence of the king, to abolish 86 companies as illegal.

In August the fall in the price of South Sea stock began, and in September, just as the "insiders" had sold out, it became serious. Instead of being a buyer every one became a seller, and the result was that in a few days the stock of the South Sea Company fell to 175, while the stocks of many other companies were unsaleable. In November, South Sea stock fell to 135, and in four months the stock of the Bank of England fell from 263 to 145. Thousands were ruined, and many who were committed to heavy payments fled from the country. The popular cry was for speedy and severe vengeance, both on the members of the government and on the directors of the unfortunate company.

Parliament was called together on the 8th of December 1720, and at once both houses proceeded to investigate the affairs of the company, the lower house soon entrusting this to a committee of secrecy. To stem the tide of disaster Sir Robert Walpole proposed that the Bank of England and the East India Company should each take over nine millions of South Sea stock, but although this received the assent of parliament it never came into force. More to the liking of the people was the act of January 1721 which restrained the directors from leaving the kingdom and compelled them to declare the value of their estates. The committee of secrecy reported in February 1721, and it proved that there had been fraud and corruption on a large scale. The company's books contained entries which were entirely fictitious, and the favours which the directors had secured from the state had been purchased by gifts to ministers, some of whom had also made large sums of money by speculating in the stock. The chief persons implicated were John Aislabie (1670-1742), chancellor of the exchequer; James Craggs, joint postmaster-general; his son James Craggs, secretary of state; and to a lesser degree the earl of Sunderland and Charles Stanhope, a commissioner of the treasury. Aislabie, who was perhaps the most deeply implicated, resigned his office in January, and in March he was found guilty by the House of Commons of the "most notorious, dangerous and infamous corruption"; he was expelled from the house and was imprisoned. Both the elder and the younger Craggs died in March, while owing to the efforts of Walpole both Sunderland and Stanhope were acquitted, the latter by the narrow majority of three. By act of parliament the estates of the directors were confiscated; these were valued at �2,014,123, of which �354,600 was returned to them for their maintenance, the balance being devoted to the relief of the sufferers.

Under the guidance of Walpole parliament then proceeded to deal with the wreck. �11,000,000 had been lent by the directors of the South Sea Company on the security of their own stock, the debtors of the company including 138 members of the House of Commons. This debt was remitted on payment of 10% of the sum borrowed, this being afterwards reduced to 5%, and the �7,567,000 due from the company to the government was also remitted. More serious, perhaps, was the case of those persons who had exchanged the substance of a government annuity for the shadow of a dividend on South Sea stock. They asked that the state should again guarantee to them their incomes, but in the end they only received something like one-half of what they had enjoyed before the bubble.

The South Sea Company with a capital of nearly �40,000,000 continued to exist, but not to flourish. Various changes were made in the nature of its capital, and in 1750 it received �100,000 from the Spanish government for the surrender of certain rights. Its commercial history then ended, but its exclusive privileges were not taken away until 1807. In 1853 the existing South Sea annuities were either redeemed or converted into government stock. The London headquarters of the company were the South Sea House in Threadneedle Street.

- 1911 Edition of the Encyclopaedia Britannica