An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗

the name of their treasurer, subscribed very

artfully three hundred and fifteen thousand pounds into the stock

of the new. By a negligence in the expression of the act of

parliament, which vested the East India trade in the subscribers

to this loan of two millions, it did not appear evident that they

were all obliged to unite into a joint stock. A few private

traders, whose subscriptions amounted only to seven thousand two

hundred pounds, insisted upon the privilege of trading separately

upon their own stocks, and at their own risks. The old East India

company had a right to a separate trade upon their own stock till

1701 ; and they had likewise, both before and after that period,

a right, like that or other private traders, to a separate trade

upon the �315,000, which they had subscribed into the stock of

the new company. The competition of the two companies with the

private traders, and with one another, is said to have well nigh

ruined both. Upon a subsequent occasion, in 1750, when a proposal

was made to parliament for putting the trade under the management

of a regulated company, and thereby laying it in some measure

open, the East India company, in opposition to this proposal,

represented, in very strong terms, what had been, at this time,

the miserable effects, as they thought them, of this competition.

In India, they said, it raised the price of goods so high, that

they were not worth the buying ; and in England, by overstocking

the market, it sunk their price so low, that no profit could be

made by them. That by a more plentiful supply, to the great

advantage and conveniency of the public, it must have reduced

very much the price of India goods in the English market, cannot

well be doubted; but that it should have raised very much their

price in the Indian market, seems not very probable, as all the

extraordinary demand which that competition could occasion must

have been but as a drop of water in the immense ocean of Indian

commerce. The increase of demand, besides, though in the

beginning it may sometimes raise the price of goods, never fails

to lower it in the long-run. It encourages production, and

thereby increases the competition of the producers, who, in order

to undersell one another, have recourse to new divisions or

labour and new improvements of art, which might never otherwise

have been thought of. The miserable effects of which the

company complained, were the cheapness of consumption, and the

encouragement given to production ; precisely the two effects

which it is the great business of political economy to promote.

The competition, however, of which they gave this doleful

account, had not been allowed to be of long continuance. In 1702,

the two companies were, in some measure, united by an indenture

tripartite, to which the queen was the third party ; and in 1708,

they were by act of parliament, perfectly consolidated into one

company, by their present name of the United Company of Merchants

trading to the East Indies. Into this act it was thought worth

while to insert a clause, allowing the separate traders to

continue their trade till Michaelmas 1711 ; but at the same time

empowering the directors, upon three years notice, to redeem

their little capital of seven thousand two hundred pounds, and

thereby to convert the whole stock of the company into a joint

stock. By the same act, the capital of the company, in

consequence of a new loan to government, was augmented from two

millions to three millions two hundred thousand pounds. In 1743,

the company advanced another million to government. But this

million being raised, not by a call upon the proprietors, but by

selling annuities and contracting bond-debts, it did not augment

the stock upon which the proprietors could claim a dividend. It

augmented, however, their trading stock, it being equally liable

with the other three millions two hundred thousand pounds, to the

losses sustained, and debts contracted by the company in

prosecution of their mercantile projects. From 1708, or at least

from 1711, this company, being delivered from all competitors,

and fully established in the monopoly of the English commerce to

the East Indies, carried on a succesful trade, and from their

profits, made annually a moderate dividend to their proprietors.

During the French war, which began in 1741, the ambition of Mr.

Dupleix, the French governor of Pondicherry, involved them in the

wars of the Carnatic, and in the politics of the Indian princes.

After many signal successes, and equally signal losses, they at

last lost Madras, at that time their principal settlement in

India. It was restored to them by the treaty of Aix-la-Chapelle;

and, about this time the spirit of war and conquest seems to have

taken possession of their servants in India, and never since to

have left them. During the French war, which began in 1755,

their arms partook of the general good fortune of those of Great

Britain. They defended Madras, took Pondicherry, recovered

Calcutta, and acquired the revenues of a rich and extensive

territory, amounting, it was then said, to upwards of three

millions a-year. They remained for several years in quiet

possession of this revenue; but in 1767, administration laid

claim to their territorial acquisitions, and the revenue arising

from them, as of right belonging to the crown ; and the company,

in compensation for this claim, agreed to pay to government

�400,000 a-year. They had, before this, gradually augmented their

dividend from about six to ten per cent. ; that is, upon their

capital of three millions two hundred thousand pounds, they had

increased it by �128,000, or had raised it from one hundred and

ninety-two thousand to three hundred and twenty thousand pounds

a-year. They were attempting about this time to raise it still

further, to twelve and a-half per cent., which would have made

their annual payments to their proprietors equal to what they had

agreed to pay annually to government, or to �400,000 a-year. But

during the two years in which their agreement with government was

to take place, they were restrained from any further increase of

dividend by two successive acts of parliament, of which the

object was to enable them to make a speedier progress in the

payment of their debts, which were at this time estimated at

upwards of six or seven millions sterling. In 1769, they renewed

their agreement with government for five years more, and

stipulated, that during the course of that period, they should be

allowed gradually to increase their dividend to twelve and a-half

per cent; never increasing it, however, more than one per cent.

in one year. This increase of dividend, therefore, when it had

risen to its utmost height, could augment their annual payments,

to their proprietors and government together, but by �680,000 ,

beyond what they had been before their late territorial

acquisitions. What the gross revenue of those territorial

acquisitions was supposed to amount to, has already been

mentioned ; and by an account brought by the Cruttenden East

Indiaman in 1769, the neat revenue, clear of all deductions and

military charges, was stated at two millions fortyeight thousand

seven hundred and forty-seven pounds. They were said, at the same

time, to possess another revenue, arising partly from lands, but

chiefly from the customs established at their different

settlements, amounting to �439,000. The profits of their trade,

too, according to the evidence of their chairman before the house

of commons, amounted, at this time, to at least �400,000 a-year ;

according to that of their accountant, to at least �500,000;

according to the lowest account, at least equal to the highest

dividend that was to be paid to their proprietors. So great a

revenue might certainly have afforded an augmentation of

�680,000 in their annual payments ; and, at the same time, have

left a large sinking fund, sufficient for the speedy reduction of

their debt. In 1773, however, their debts, instead of being

reduced, were augmented by an arrear to the treasury in the

payment of the four hundred thousand pounds ; by another to the

custom-house for duties unpaid; by a large debt to the bank, for

money borrowed; and by a fourth, for bills drawn upon them from

India, and wantonly accepted, to the amount of upwards of twelve

hundred thousand pounds. The distress which these accumulated

claims brought upon them, obliged them not only to reduce all at

once their dividend to six per cent. but to throw themselves upon

the mercy of govermnent, and to supplicate, first, a release from

the further payment of the stipulated �400,000 a-year ; and,

secondly, a loan of fourteen hundred thousand, to save them from

immediate bankruptcy. The great increase of their fortune had, it

seems, only served to furnish their servants with a pretext for

greater profusion, and a cover for greater malversation, than in

proportion even to that increase of fortune. The conduct of their

servants in India, and the general state of their affairs both in

India and in Europe, became the subject of a parliamentary

inquiry: in consequence of which, several very important

alterations were made in the constitution of their government,

both at home and abroad. In India, their principal settlements or

Madras, Bombay, and Calcutta, which had before been altogether

independent of one another, were subjected to a governor-general,

assisted by a council of four assessors, parliament assuming to

itself the first nomination of this governor and council, who

were to reside at Calcutta ; that city having now become, what

Madras was before, the most important of the English settlements

in India. The court of the Mayor of Calcutta, originally

instituted for the trial of mercantile causes, which arose in the

city and neighbourlood, had gradually extended its jurisdiction

with the extension of the empire. It was now reduced and confined

to the original purpose of its institution. Instead of it, a new

supreme court of judicature was established, consisting of a

chief justice and three judges, to be appointed by the crown. In

Europe, the qualification necessary to entitle a proprietor to

vote at their general courts was raisted, from five hundred

pounds, the original price of a share in the stock of the

company, to a thousand pounds. In order to vote upon this

qualification, too, it was declared necessary, that he should

have possessed it, if acquired by his own purchase, and not by

inheritance, for at least one year, instead of six months, the

term requisite before. The court of twentyfour directors had

before been chosen annually; but it was now enacted, that each

director should, for the future, be chosen for four years ; six

of them, however, to go out of office by rotation every year, and

not be capable of being re-chosen at the election of the six new

directors for the ensuing year. In consequence of these

alterations, the courts, both of the proprietors and directors,

it was expected, would be likely to act with more dignity and

steadiness than they had usually done before. But it seems

impossible, by any alterations, to render those courts, in any

respect, fit to govern, or even to share in the government of a

great empire; because the greater part of their members must

always have too little interest in the prosperity of that empire,

to give any serious attention to what may promote it. Frequently

a man of great, sometimes even a man of small fortune, is willing

to purchase a thousand pounds share in India stock, merely for

the influence which he expects to aquire by a vote in the court

of proprietors. It gives him a share, though not in the plunder,

yet in the appointment of the plunderers of India; the court of

directors, though they make that appointment, being necessarily

more or less under the influence of the proprietors,