Section III.: Of Privileged Trading Companies.

A government sometimes grants to individual merchants, and much oftener to trading companies, the exclusive privilege of buying and selling specific articles, tobacco for example; or of trafficking with a particular country, as with India.

The privileged traders, being thus exempted from all competition by the exertion of the public authority, can raise their prices above the level that could be maintained under the operation of a free trade. This unnatural ratio of price is sometimes fixed by the government itself, which thus assigns a limit to the partiality it exercises towards the producers, and the injustice it practises upon the consumers: otherwise, the avarice of the privileged company would be bounded only by the dread of losing more by the reduction of the gross amount of its sales, in consequence of increased prices, than it would gain by their unnatural elevation. At all events, the consumer pays for the commodity more than its worth; and government generally contrives to share in the profits of the monopoly.

It has been said, for the most ruinous expedient is sure to find some plausible argument or other to support it, that the commerce with certain nations requires precautionary measures, which privileged companies only can enforce. At one time the plea is, that forts must be built, and marine establishments kept up; as if in truth it were worth while to traffic sword in hand, or an army were necessary to protect plain dealing; or as if the state did not already maintain at great charge a military force for the protection of its subjects! At another, that diplomatic address is indispensable. The Chinese, for instance, are a people so bigoted to form and prone to suspicion—so entirely independent of other nations, by reason of their remote position, the extent of their territory, and the peculiar character of their wants, that is a matter of special and precarious favour to be allowed to deal with them. We must, therefore, elect either to go without their teas, silks, and nankeens, or be content to submit to precautions, which can alone insure the continuance of the trade; for the dealings of individuals might endanger the continuance of that good humour, without which the mutual intercourse of the two nations would be at an end.

But, let me ask, is it so certain that the agents of a company, who are too apt to presume upon the support of the military power, either of the nation or at least of the company,—is it quite certain, that such agents are more likely to keep alive an amicable feeling than private traders, in whom more deference to local institutions might be expected, and who would have an immediate interest in keeping clear of any misunderstanding that should endanger both their persons and their property?

But, supposing the worst that could happen, and granting, for argument's sake, that the trade with China can not be conducted otherwise than by a privileged company, does it follow, that with out one we must needs give up the taste for Chinese productions? Certainly not. The trade in Chinese goods will always exist, for this plain reason, that it suits both parties, the Chinese and their customers. But shall we not pay dearer for those goods? There is no ground for thinking so. Three-fourths of the European states have never sent a single ship to China, and yet are abundantly supplied with teas, with silks, and with nankeens, and that too at a very cheap rate.

There is another argument of more general application, and still more frequently urged; viz. that a company, having the exclusive trade of any given country, is exempt from the effects of competition, and, therefore, buys at a less price. But, in the first place, it is not true that the exclusive privilege exempts from the effect of competition: the only competition it removes, is that of the national traders, which would be of the utmost benefit to the nation; but it excludes neither the competition of foreign companies, nor of foreign private traders. In the next place, there are many articles that would not rise in price in consequence of the competition, which some people affect to be alarmed at, though in truth it is a mere bugbear.

Suppose Marseilles, Bordeaux, L'Orient, were all to fit out vessels to bring tea from China, we have no reason to believe that all their ventures together would import more tea into France, than France could consume or dispose of. All we have to fear is, that they should not import enough. Now, if they were to import no more than other merchants would have imported for them, the demand for tea in China will have been just the same in both cases; consequently, the commodity will not have become more scare there. Our merchants would hardly have to pay dearer for it, unless the price should rise in China itself; and what sensible effect could the purchases of a few merchants of France have upon the price of an article consumed in China itself, to one hundred times the amount of the whole consumption of Europe?

But, granting that European competition would operate to raise the price of some commodities in the eastern market, is that a sufficient motive for excepting the trade to that part of the world from the general rules that are acted upon in all other branches of commerce? Are we to invest an exclusive company with the sole conduct of the import or export trade between Germany and France, for the sole purpose of getting our cottons and woollens from Germany at a cheaper rate? If the commerce of the East were put upon the same footing as foreign trade in general, the price of any one article of its produce could never long remain much above the cost of production in Asia; for the rise of price would operate as a stimulus to increased production, and the competition of sellers would soon be on a par with that of purchasers.

But, admitting the advantage of buying cheap to be as substantial as it is represented, the nation at large has a right to participate in that cheapness; the home consumers ought to buy cheap as well as the company. Whereas in practice it is just the reverse, and, for a very simple reason: the company is not exempt from competition as a purchaser, for other nations are its competitors: but as a seller it is exempt; for the rest of the nation can buy the articles it deals in nowhere else, the import by foreigners being wholly prohibited. It asks its own price, and can command the market, especially if it be attentive to keep the market always understocked, as the English call it; that is, if the supply be just so far short of the demand, as to keep alive the competition of purchasers.

In this manner, trading companies not only extort exorbitant profits from the consumer, but moreover saddle him with all the fraud and mismanagement inseparable from the conduct of these unwieldy bodies, with their cumbrous organisation of directors and factors without end, dispersed from one extremity of the globe to the other. The only check to the gross abuses of these privileged bodies is the smuggling or contraband trade, which, in this point of view, may lay claim to some degree of utility.

This analysis brings us to the point in question; are the gains of the privileged company, national gains? Undoubtedly not; for they are wholly taken from the pockets of the nation itself. The whole excess of value, paid by the consumer, beyond the rate at which free trade could afford the article, is not a value produced, but so much existing value presented by the government to the trader at the consumer's expense. It will probably be urged, that it must at least be admitted, that this profit remains and is spent at home. Granted. but by whom is it spent? that is the point. Should one member of a family possess himself of the whole family income, dress himself in fine clothes, and devour the best of every thing, what consolation would it be to the rest of the family, were he to say, what signifies it whether you or I spend the money? the income spent is the same, so it can make no difference.

The exclusive as well as excessive profits of monopoly would soon glut the privileged companies with wealth, could they depend upon the good management of their concerns; but the cupidity of agents, the long pendency of distant adventures, the difficulty of bringing factors abroad to account, and the incapacity of those interested, are causes of ruin in constant activity. Long and delicate operations of commerce require superior exertion and intelligence in the parties interested. And how can such qualities be expected in shareholders, amounting sometimes to several hundreds, all of them having other matters of more personal importance to look after?

Such are the consequences of privileges granted to trading companies: and these consequences, it must be observed, are in the nature of things inseparable; circumstances may reduce their efficacy, but can never. remove them altogether. The English East India Company has met with more success than the three or four French ones that at different times made the experiment. This company is sovereign as well as merchant; and we know, by experience, that the most detestable governments may last for several generations; witness that of the Mamelukes in Egypt.

There are some minor evils also incident to commercial privileges. The grant of exclusive rights frequently exiles from a country a branch of industry and a portion of capital that would readily have taken root there, but are compelled to settle abroad. Towards the close of the reign of Louis XIV. the French East India Company, being unable to support itself, notwithstanding its exclusive rights, transferred the exercise of its privileges to some speculators at St. Malo, in consideration of a small share in their profits. The trade began to revive under the influence of this comparative liberty, and would, on the expiration of the company's charter, in 1714, have been as active as the then melancholy condition of France would have permitted: but the company petitioned for a renewal, and obtained one, pending the ventures of some private traders. Soon afterwards, a vessel of St. Malo, commanded by a Breton of the name of Lamerville, appeared upon the French coast, on its return from the East Indies, but was refused permission to enter the harbour, on the plea, that it was in contravention of the company's rights. Consequently, he was compelled to prosecute his voyage to the nearest port in Belgium, and carried his vessel into Ostend, where he disposed of the cargo. The governor of the Low Countries, hearing of the enormous profits he had made, proposed to the captain a second voyage, with a squadron to be fitted out for the express purpose; and Lamerville afterwards performed many similar voyages for different employers, and laid the foundation of the Ostend Company.

Thus, the French consumer must necessarily have suffered by this monopoly: and so, in fact, he did. But, at any rate, it will be supposed, the company must have benefited. Just the contrary: the company was itself ruined; in spite of the monopoly of tobacco, the lotteries, and other subsidiary grants bestowed on them by the government. "In short," says Voltaire, "all that remained to France in the East was the regret of having, in the course of forty years, squandered enormous sums, to bolster up a company that never made a six-pence profit, never made any dividend from the resources of its commerce, either to its share-holders or creditors; and supported its establishments in India, solely by the underhand practice of pillage and extortion upon the natives."

The only case in which the establishment of an exclusive company is justifiable, is, when there is no other way of commencing a new trade with distant or barbarous nations. In that case, the charter is a kind of patent of invention, and confers an advantage, commensurate to the extraordinary risk and expense of the first experiment. The consumers have no reason to complain of the dearness of products, which, but for the grant of the charter, they would either not have enjoyed at all, or have enjoyed at a still dearer rate. But such grants should, like patents, be limited to such duration only, as will repay and fully indemnify the adventurers for the advances and risk incurred. Any thing further is a mere free gift to the company, at the expense of the nation at large, who have a natural right to get what they want wherever they can, and at the lowest possible price.

What has been said with respect to commercial is equally applicable to manufacturing privileges. The reason why governments are so easily entrapped into measures of this kind is, partly because they see a statement of large profits, and do not trouble themselves to inquire whence they are derived; and partly because this apparent profit is easily reduced to numerical calculation, no matter whether wrong or right, correct or incorrect; whereas the loss and mischief resulting to the nation are infinitely subdivided amongst the members of the community, and operate after all in a very indirect, complex, and general way, so as to escape and defy calculation. Some writers maintain arithmetic to be the only sure guide in political economy; for my part, I see so many detestable systems built upon arithmetical statements, that I am rather inclined to regard that science as the instrument of national calamity.