Book V, Chapter I, 9

The South Sea company had no forts or garrisons to maintain and was therefore spared one great expense borne by other joint-stock companies engaged in foreign trade; but it had an immense capital divided among an immense number of proprietors. It was natural, then, to expect folly, negligence, and extravagance throughout the management of its affairs. The dishonesty and extravagance of its stock-jobbing schemes are well enough known, and an account of them would be beside the present subject. Its trading ventures were scarcely better managed. The first trade it undertook was supplying the Spanish West Indies with enslaved Africans, a trade in which it received an exclusive privilege under what was called the Assiento Contract, granted by the treaty of Utrecht. But little profit was expected from this trade, since both the Portuguese and French companies that had held it on the same terms before had been ruined by it. As compensation, the company was allowed to send a ship of a specified tonnage each year to trade directly with the Spanish West Indies. Of the ten voyages permitted to this annual ship, the company is said to have made a substantial profit on one, that of the Royal Caroline, in 1731, and to have lost money, to varying degrees, on almost all the rest. Its factors and agents blamed their failure on the extortion and oppression of the Spanish government; perhaps it was chiefly due instead to the extravagance and theft of those very factors and agents, some of whom are said to have amassed great fortunes in a single year. In 1734, the company petitioned the king for permission to relinquish the trade and tonnage of its annual ship, given how little profit it yielded, and to accept whatever compensation it could obtain from the king of Spain.

In 1724, this company took up whaling. It had no monopoly of the fishery, but while it pursued the business, no other British subjects appear to have entered it. Of the eight voyages its ships made to Greenland, it profited from one and lost on all the others. After the eighth and last voyage, when it had sold its ships, stores, and equipment, it found that its total loss in this branch, including capital and interest, amounted to upwards of £237,000.

In 1722, the company petitioned parliament for permission to divide its immense capital of more than thirty-three millions eight hundred thousand pounds, all of which it had lent to government, into two equal parts. One half, or upwards of £16,900,000, would be placed on the same footing as other government annuities and sheltered from debts contracted or losses incurred by the company's directors in pursuing their trading ventures. The other half would remain, as before, a trading stock exposed to those debts and losses. The petition was too reasonable to refuse. In 1733, the company petitioned parliament again, asking to convert three-fourths of its trading stock into annuity stock, leaving only one-fourth as trading stock exposed to the risks of its directors' mismanagement. By then several different payments from government had reduced both its annuity and its trading stocks by more than two millions each, so that the remaining fourth amounted to only £3,662,784:8:6. In 1748, by the treaty of Aix-la-Chapelle, all the company's claims against the king of Spain arising from the assiento contract were surrendered in return for what was thought to be an equivalent. Its trade with the Spanish West Indies ended; the rest of its trading stock became annuity stock; and the company ceased, in every respect, to be a trading company.

It should be observed that in the trade carried on by the South Sea company's annual ship—the only trade from which it was ever expected to earn a substantial profit—it faced competitors both abroad and at home. At Carthagena, Porto Bello, and La Vera Cruz, it had to compete with Spanish merchants who brought from Cadiz European goods of the same kind as its ship's outward cargo. In England it had to compete with English merchants who imported from Cadiz goods of the Spanish West Indies of the same kind as its homeward cargo. The goods of both the Spanish and English merchants may, indeed, have been subject to higher duties. But the losses caused by the negligence, extravagance, and misconduct of the company's servants were probably a much heavier tax than all those duties. That a joint-stock company could successfully conduct any branch of foreign trade in which private merchants can compete with it at all openly and fairly seems contrary to all experience.

The old English East India company was established in 1600 by a charter from Queen Elizabeth. On the first twelve voyages it fitted out for India, it seems to have traded as a regulated company, with separate stocks, though only aboard the company's common ships. In 1612, its members united their capital in a joint stock. Its charter was exclusive and, though not confirmed by an act of parliament, was then believed to confer a genuine exclusive privilege. For many years, therefore, unauthorized traders caused it little trouble. Its capital, never greater than £744,000, with shares of £50 each, was not so enormous, nor its business so extensive, as to offer either a pretext for gross negligence and extravagance or cover for gross misconduct. Despite some extraordinary losses, partly caused by the hostility of the Dutch East India company and partly by other accidents, it traded successfully for many years. In time, however, as the principles of liberty came to be better understood, it became increasingly doubtful whether a royal charter not confirmed by an act of parliament could confer an exclusive privilege. The courts did not decide this question consistently: their decisions varied with the government's authority and the temper of the times. Unauthorized traders multiplied and reduced the company to great distress toward the end of the reign of Charles II., throughout that of James II., and during part of that of William III. In 1698, a proposal was put to parliament to advance two millions to government at eight per cent., provided the subscribers were incorporated as a new East India company with exclusive privileges. The old East India company offered seven hundred thousand pounds, nearly its entire capital, at four per cent. on the same conditions. But public credit was then in such a state that it was more convenient for government to borrow two millions at eight per cent. than seven hundred thousand pounds at four. The new subscribers' offer was accepted, and a new East India company established as a result. The old company, however, retained the right to trade until 1701. At the same time it had shrewdly subscribed, in its treasurer's name, three hundred and fifteen thousand pounds to the new company's stock. Because of careless wording in the act of parliament that vested the East India trade in the subscribers to this loan of two millions, it was not clear that they were all obliged to unite their capital in a joint stock. A few private traders, whose subscriptions came to only seven thousand two hundred pounds, insisted on the privilege of trading separately with their own stocks and at their own risk. The old East India company had the right to trade separately with its own stock until 1701; and both before and after that date it had, like other private traders, the right to trade separately on the £315,000 it had subscribed to the new company's stock. Competition between the two companies, the private traders, and one another is said to have nearly ruined both companies. Later, in 1750, when parliament was asked to place the trade under a regulated company's management and thereby open it to some extent, the East India company argued forcefully against the proposal, recounting what it considered the miserable effects of that earlier competition. In India, it said, competition drove prices so high that goods were not worth buying; in England, by flooding the market, it brought prices so low that no profit could be made. There can be little doubt that the more plentiful supply greatly reduced the price of Indian goods on the English market, much to the benefit and convenience of the public. But it seems unlikely to have raised their price greatly in the Indian market: all the extra demand competition could generate must have been a mere drop in the immense ocean of Indian commerce. Moreover, although increased demand may sometimes initially raise the price of goods, in the long run it invariably lowers it. It encourages production and so increases competition among producers, who, to undersell one another, resort to new divisions of labor and new improvements in technique that might otherwise never have been conceived. The miserable effects the company complained of were cheaper consumption and encouragement of production—precisely the two effects that political economy has as its great object to promote. Yet the competition it described so mournfully was not allowed to last long. In 1702, the two companies were united to some extent by a three-party indenture, with the queen as the third party; and in 1708, an act of parliament fully consolidated them into one company under their present name, the United Company of Merchants trading to the East Indies. A clause was deemed worth inserting in the act allowing the separate traders to continue trading until Michaelmas 1711, while empowering the directors, on three years' notice, to buy out their small capital of seven thousand two hundred pounds and thereby convert the company's entire stock into a joint stock. The same act, following a new loan to government, increased the company's capital from two millions to three millions two hundred thousand pounds. In 1743, the company advanced another million to government. But since this million was raised not by a call on the proprietors but by selling annuities and incurring bond debts, it did not increase the stock on which proprietors could claim a dividend. It did increase their trading stock, however, since it was just as liable as the other three millions two hundred thousand pounds for losses and debts incurred in the company's trading ventures. From 1708, or at least from 1711, the company, freed of every competitor and firmly established as the monopolist of English commerce with the East Indies, traded successfully and paid its proprietors a moderate annual dividend out of its profits. During the French war that began in 1741, the ambitions of Mr Dupleix, the French governor of Pondicherry, drew it into the wars of the Carnatic and the politics of the Indian princes. After many remarkable successes and equally remarkable losses, it finally lost Madras, then its principal settlement in India. Madras was restored to it by the treaty of Aix-la-Chapelle; and about this time a spirit of war and conquest seems to have seized its servants in India and never to have left them. During the French war that began in 1755, its forces shared in the general good fortune of Great Britain's. They defended Madras, took Pondicherry, recovered Calcutta, and acquired the revenues of a rich and extensive territory, then said to amount to upwards of three millions a year. They held this revenue peacefully for several years; but in 1767 the government claimed their territorial acquisitions and the revenues from them as rightfully belonging to the crown, and the company agreed, in settlement of this claim, to pay government £400,000 a year. Before this, it had gradually raised its dividend from about six to ten per cent.; on its capital of three millions two hundred thousand pounds, that meant an increase of £128,000, from one hundred and ninety-two thousand to three hundred and twenty thousand pounds a year. At about this time it was trying to raise the dividend still further to twelve and a-half per cent., which would make its annual payments to its proprietors equal to the £400,000 a year it had agreed to pay government. But for the two years covered by its agreement with government, two successive acts of parliament prevented any further increase in the dividend, intending thereby to hasten repayment of its debts, then estimated at upwards of six or seven millions sterling. In 1769, it renewed its agreement with government for another five years, stipulating that during that period it could gradually raise its dividend to twelve and a-half per cent., though by no more than one per cent. in any one year. Thus, even when this dividend reached its maximum, the increase could add only £680,000 to its annual payments to proprietors and government combined beyond what they had been before its recent territorial acquisitions. The supposed gross revenue of those acquisitions has already been mentioned; an account brought by the Cruttenden East Indiaman in 1769 put their net revenue, after all deductions and military expenses, at two millions forty-eight thousand seven hundred and forty-seven pounds. At the same time they were said to have another revenue, partly from land but chiefly from customs duties imposed at their various settlements, of £439,000. Their trading profits, too, according to their chairman's testimony before the house of commons, were then at least £400,000 a year; according to their accountant, at least £500,000. Even the lower estimate at least equaled the highest dividend payable to their proprietors. Such a great revenue could surely have supported an increase of £680,000 in their annual payments while leaving a substantial sinking fund sufficient to pay down their debt quickly. Yet in 1773, instead of diminishing, their debts had grown: there were arrears to the treasury on the four hundred thousand pounds, unpaid duties owed to the custom-house, a large debt to the bank for borrowed money, and a fourth debt of upwards of twelve hundred thousand pounds in bills drawn on them from India and recklessly accepted. The distress caused by these accumulated demands compelled them not only to cut their dividend at once to six per cent. but to cast themselves on the mercy of government and plead, first, for relief from further payments of the stipulated £400,000 a year and, second, for a loan of fourteen hundred thousand to avert immediate bankruptcy. Their great increase in fortune, it seems, had merely furnished their servants with a pretext for greater extravagance and cover for greater misconduct than even that increase in fortune would suggest. The conduct of their servants in India, and the general state of their affairs in both India and Europe, became the subject of a parliamentary inquiry, which led to several important changes in the structure of their government at home and abroad. In India, their principal settlements of Madras, Bombay, and Calcutta, previously wholly independent of one another, were placed under a governor-general assisted by a council of four assessors. Parliament reserved to itself the first appointment of this governor and council, who were to reside in Calcutta, now the most important English settlement in India, as Madras had been before. The court of the Mayor of Calcutta, originally instituted to try commercial cases arising in the city and its neighborhood, had gradually extended its jurisdiction as the empire expanded. It was now confined again to its original purpose. In its place, a new supreme court of judicature was established, consisting of a chief justice and three judges appointed by the crown. In Europe, the holding required to entitle a proprietor to vote in the general courts was raised from five hundred pounds, the original price of a share in the company's stock, to a thousand pounds. To vote on the strength of that holding, a proprietor who had purchased it rather than inherited it was also required to have held it for at least one year instead of the previous six months. Previously the court of twenty-four directors had been chosen annually; now each director was to be chosen for four years, with six retiring in rotation each year and ineligible for reelection when the six new directors were chosen for the coming year. These changes were expected to make both the proprietors' and directors' courts act with more dignity and steadiness than before. But no change seems capable of making those courts fit to govern, or even share in governing, a great empire: most of their members must always have too little stake in its prosperity to pay serious attention to advancing it. A wealthy man, or sometimes even a man of modest means, is often willing to buy a thousand pounds' share of India stock merely for the influence he expects his vote in the court of proprietors to bring him. It gives him a part, if not in the plunder itself, then in appointing those who plunder India. Although the court of directors makes those appointments, it must remain to some degree under the influence of the proprietors, who elect the directors and sometimes overrule their appointments of servants in India. If he can wield this influence for a few years and thereby provide for a number of friends, he often cares little about the dividend, or even the value of the stock that gives him his vote. He rarely cares at all about the prosperity of the great empire in whose government that vote gives him a share. No other sovereigns ever have been, or by the nature of things ever could be, so utterly indifferent to their subjects' happiness or misery, the improvement or waste of their dominions, and the honor or disgrace of their administration as most proprietors of such a mercantile company are, and from irresistible moral causes must be. Some new regulations resulting from the parliamentary inquiry were more likely to increase this indifference than diminish it. A resolution of the house of commons, for example, declared that once the £1,400,000 lent to the company by government had been repaid and its bond debts reduced to £1,500,000, it could then, and not before, pay a dividend of eight per cent. on its capital. Whatever remained of its revenues and net profits at home was to be divided into four parts: three paid into the exchequer for public use, and the fourth reserved as a fund either to reduce its bond debts further or to meet other unforeseen needs it might face. But if the company were poor stewards and poor sovereigns when all its net revenue and profits belonged to it and were at its disposal, it was surely unlikely to become better when three-fourths belonged to others and even the remaining fourth, though to be spent for the company's benefit, could be spent only under others' supervision and with their approval.

The South Sea company had no forts or garrisons to maintain. It therefore avoided a major expense that other joint-stock companies engaged in foreign trade had to bear. But it had a huge capital shared among a huge number of owners. It was only natural to expect foolishness, carelessness, and waste throughout the management of its affairs. Its dishonest and extravagant schemes for trading company shares are well known, and explaining them would take us away from this subject. Its trading ventures were not managed much better. Its first venture was supplying enslaved Africans to the Spanish West Indies. Under what was called the Assiento Contract, granted by the treaty of Utrecht, it had the exclusive right to that trade. But no one expected it to make much profit there. The Portuguese and French companies that had held the same right on the same terms had both been ruined by it. So, as compensation, the South Sea company was allowed to send a ship of a specified size each year to trade directly with the Spanish West Indies. That annual ship was allowed ten voyages. The company is said to have made a substantial profit on one, the voyage of the Royal Caroline in 1731, and to have lost money, to varying degrees, on almost all the others. Its factors and agents blamed the failures on the Spanish government's extortion and oppression. But the chief cause may have been those very factors' and agents' waste and theft. Some of them are said to have made large fortunes in just one year. In 1734, the company petitioned the king for permission to give up the trading rights and shipping allowance for its annual ship because they brought in so little profit. It asked instead to accept whatever equivalent payment it could obtain from the king of Spain.

In 1724, the company had taken up whaling. It had no monopoly on that trade, but while it pursued it, no other British subjects appear to have done so. Its ships made eight voyages to Greenland. It profited from one and lost money on every other voyage. After the eighth and final voyage, it sold its ships, supplies, and equipment. It then found that its total loss on this part of the business, including capital and interest, came to more than £237,000.

In 1722, the company asked parliament to let it divide its huge capital of more than thirty-three millions eight hundred thousand pounds into two equal parts. It had lent all this money to the government. One half, or more than £16,900,000, would be treated like other government annuities and protected from debts the company's directors incurred or losses they suffered in their trading ventures. The other half would remain trading stock and bear those debts and losses as before. The petition was so reasonable that parliament granted it. In 1733, the company again asked parliament to turn three-fourths of its trading stock into annuity stock. Only one-fourth would remain trading stock, exposed to the risks of its directors' bad management. By then, several payments from the government had reduced both its annuity stock and its trading stock by more than two millions each. The remaining fourth therefore amounted to only £3,662,784:8:6. In 1748, under the treaty of Aix-la-Chapelle, the company gave up all its claims against the king of Spain arising from the assiento contract in return for what was thought to be an equivalent. Its trade with the Spanish West Indies ended, its remaining trading stock became annuity stock, and the company ceased to trade in any way.

We should note that the company faced competitors both abroad and at home in the trade it conducted with its annual ship. This was the only trade from which anyone had expected it to make any substantial profit. At Carthagena, Porto Bello, and La Vera Cruz, it competed with Spanish merchants. They brought European goods from Cadiz to those markets, the same kinds of goods as its ship carried outward. In England, it competed with English merchants who imported goods from the Spanish West Indies through Cadiz, the same kinds its ship brought home. The Spanish and English merchants' goods may have faced higher duties. But losses from the company's employees' carelessness, waste, and misconduct probably cost it far more than all those duties. Experience suggests that a joint-stock company cannot successfully conduct any foreign trade when private traders can compete with it openly and fairly.

The old English East India company was established in 1600 under a charter from Queen Elizabeth. On the first twelve voyages it organized to India, it seems to have operated as a regulated company. Its members used separate stocks, though they sailed only on the company's shared ships. In 1612, they combined their funds into a joint stock. The charter gave the company an exclusive right. Although no act of parliament confirmed it, people at the time believed it gave the company a genuine monopoly. For many years, therefore, unauthorized competitors caused it little trouble. Its capital never exceeded £744,000, and a share cost £50. Neither the capital nor the scale of its business was so large as to provide an excuse for extreme carelessness and waste or a cover for serious wrongdoing. Despite some exceptional losses, caused partly by the Dutch East India company's hostility and partly by other mishaps, it traded successfully for many years. Over time, however, people came to understand the principles of liberty better. They increasingly questioned whether a royal charter unconfirmed by an act of parliament could grant a monopoly. Courts gave conflicting answers, changing with the government's position and the mood of the times. Unauthorized traders multiplied. Toward the end of Charles II.'s reign, throughout James II.'s reign, and during part of William III.'s reign, they put the company under great pressure. In 1698, subscribers proposed lending the government two millions at eight per cent., on condition that parliament make them a new East India company with exclusive rights. The old East India company offered to lend seven hundred thousand pounds, almost its entire capital, at four per cent. on the same terms. But public credit was then in such a condition that borrowing two millions at eight per cent. was more convenient for the government than borrowing seven hundred thousand pounds at four. It accepted the new subscribers' offer, and a new East India company was established. The old company, however, retained the right to trade until 1701. It had also cleverly subscribed three hundred and fifteen thousand pounds to the new company's stock in its treasurer's name. The act of parliament gave the subscribers to the two-million loan the East India trade. But because its wording was careless, it was unclear whether they all had to combine their funds into a joint stock. A few private traders, whose subscriptions totaled only seven thousand two hundred pounds, claimed the right to trade separately with their own capital and at their own risk. The old company could trade separately with its own stock until 1701. Both before and after that date, it could also trade separately, like those other private traders, on the £315,000 it had subscribed to the new company's stock. The two companies' competition with the private traders and with each other is said to have nearly ruined them both. Later, in 1750, someone proposed to parliament that the trade be managed by a regulated company, which would open it up to some extent. Opposing the proposal, the East India company strongly described what it regarded as the disastrous effects of the earlier competition. In India, it said, competition had driven prices so high that goods were not worth buying. In England, it had flooded the market and driven prices so low that selling them brought no profit. A larger supply must indeed have substantially lowered the price of Indian goods in England, greatly benefiting the public and making those goods more accessible. But it seems unlikely to have raised their price much in India. All the extra demand that competition could have created would have been a drop in the vast ocean of Indian commerce. Besides, while greater demand can sometimes raise prices at first, it always brings them down in the long run. It encourages production and increases competition among producers. To undersell one another, they develop new forms of division of labor and new improvements in production that might never otherwise have been imagined. The disastrous effects the company complained of were lower prices for consumers and encouragement of production. These are exactly the two effects political economy should aim to bring about. In any case, the competition it described so bitterly did not last long. In 1702, a three-party agreement partly united the two companies, with the queen as the third party. In 1708, an act of parliament fully merged them into one, under their present name, the United Company of Merchants trading to the East Indies. The act included a clause allowing the separate traders to continue trading until Michaelmas 1711. At the same time, it empowered the directors to buy out their small capital of seven thousand two hundred pounds on three years' notice. That would bring all the company's capital into one joint stock. The same act increased the company's capital from two millions to three millions two hundred thousand pounds following a new loan to the government. In 1743, the company advanced another million to the government. It raised this million not by asking its owners to contribute, but by selling annuities and taking on bond debt. The new money therefore did not increase the stock on which owners could claim a dividend. It did increase its trading stock, however, since this money, like the other three millions two hundred thousand pounds, could be used to cover losses and debts from the company's trading ventures. From 1708, or at least from 1711, the company was free from all competitors. Its monopoly on English trade with the East Indies was firmly established. It traded successfully and paid its owners a modest dividend from its profits each year. During the French war that began in 1741, the ambitions of Mr Dupleix, the French governor of Pondicherry, drew it into the Carnatic wars and the politics of Indian princes. After striking victories and equally striking losses, it eventually lost Madras, then its main settlement in India. The treaty of Aix-la-Chapelle returned Madras to it. Around this time, a desire for war and conquest seems to have seized its employees in India, and it has never left them. During the French war that began in 1755, its armed forces shared the generally good fortune of Great Britain's forces. They defended Madras, captured Pondicherry, retook Calcutta, and acquired revenues from a large and rich territory. At the time, those revenues were said to exceed three millions a-year. The company enjoyed them undisturbed for several years. But in 1767, the government claimed that its territorial acquisitions and the revenues from them rightfully belonged to the crown. In return for the government dropping this claim, the company agreed to pay it £400,000 a-year. Before this, it had gradually raised its dividend from about six to ten per cent. On its capital of three millions two hundred thousand pounds, this meant an increase of £128,000, from one hundred and ninety-two thousand to three hundred and twenty thousand pounds a-year. Around this time it was trying to raise the dividend further, to twelve and a-half per cent. That would have brought its yearly payments to its owners up to the amount it had agreed to pay the government each year: £400,000 a-year. But two successive acts of parliament prevented it from raising the dividend during the two years covered by its agreement with the government. The acts were intended to let the company pay down its debts faster. Those debts were then estimated at more than six or seven millions sterling. In 1769, it renewed its agreement with the government for five more years. It arranged to be allowed to raise its dividend gradually to twelve and a-half per cent., but by no more than one per cent. in any year. Even at its maximum, therefore, this increase in the dividend could add only £680,000 to its combined annual payments to its owners and the government, compared with the payments it made before its recent territorial acquisitions. I have already mentioned the estimated gross revenue from those acquisitions. An account brought by the Cruttenden East Indiaman in 1769 put the net revenue, after every deduction and military expense, at two millions forty-eight thousand seven hundred and forty-seven pounds. At the same time, it was said to have another revenue, drawn partly from land but mainly from customs duties at its various settlements, of £439,000. According to its chairman's testimony before the house of commons, its trading profits then came to at least £400,000 a-year; according to its accountant, at least £500,000. Even the lower figure equaled the largest dividend it was to pay its owners. Such a large revenue could certainly have covered the £680,000 increase in its annual payments while leaving a substantial fund to reduce its debts quickly. Yet by 1773 its debts had grown instead. It had fallen behind on its payment of four hundred thousand pounds to the treasury and on duties owed to the custom-house. It owed the bank a large sum of borrowed money. It had also recklessly accepted bills drawn on it from India totaling more than twelve hundred thousand pounds. These accumulated claims put it in such difficulty that it had to cut its dividend immediately to six per cent. It also had to seek the government's mercy, asking first to be freed from further payments of the agreed £400,000 a-year and second for a loan of fourteen hundred thousand to avoid immediate bankruptcy. Its greatly increased fortune seems only to have given its employees an excuse for still greater waste and a cover for even greater misconduct than that increase alone would suggest. Parliament investigated the behavior of its employees in India and the overall condition of its affairs in India and Europe. The investigation led to several major changes in the way the company was governed at home and abroad. In India, its main settlements of Madras, Bombay, and Calcutta had previously been entirely independent of one another. They were now placed under a governor-general assisted by a council of four assessors. Parliament reserved the first appointment of the governor and council for itself. They were to live in Calcutta, which had replaced Madras as the most important English settlement in India. The court of the Mayor of Calcutta had originally been set up to hear commercial cases arising in the city and surrounding area. As the empire expanded, the court had gradually widened its authority. It was now restricted to its original purpose. In its place a new supreme court was established, with a chief justice and three judges appointed by the crown. In Europe, an owner now needed a thousand pounds in company stock to vote at the general meetings, instead of five hundred pounds, the original price of a share. An owner who bought this stock, rather than inheriting it, also had to hold it for at least one year before voting, instead of the previous six months. Previously, all twenty-four directors had been elected every year. Under the new rules, each was to serve four years, with six leaving office in rotation each year. Those six could not be reelected in the election to replace them for the coming year. People expected these changes to make both the owners' meetings and the directors' meetings more dignified and consistent in their decisions. But no changes seem capable of making those bodies fit to govern a great empire or even to share in governing it. Most members will always have too little stake in that empire's prosperity to give serious thought to advancing it. A man with a large fortune, or sometimes even a small one, will often buy a thousand pounds of India stock just to gain influence through his vote at an owners' meeting. This does not give him a share of the plunder of India, but it does give him a role in choosing those who plunder it. The directors make those appointments, but the owners elect the directors and sometimes overrule their appointments of employees in India. The directors therefore must be influenced by the owners to some degree. If a shareholder can wield that influence for a few years and get jobs for some of his friends, he often cares little about the dividend or even the value of the stock that gives him his vote. He rarely cares at all about the well-being of the great empire he has a role in governing. No other rulers have ever been, or by the nature of things could be, so utterly unconcerned about their subjects' happiness or misery, the development or ruin of their territories, or the honor or disgrace of their administration. Yet most owners of such a trading company are bound to be this unconcerned, for powerful reasons rooted in their incentives. Some of the new regulations resulting from parliament's investigation were likely to increase this indifference rather than reduce it. For example, the house of commons resolved that only after the company had repaid its government loan of £1,400,000 and reduced its bond debts to £1,500,000 could it pay a dividend of eight per cent. on its capital. Any revenue and net profits remaining at home would then be divided into four parts. Three would go to the exchequer for public use, while the fourth would be kept as a fund to reduce bond debts further or meet other unexpected needs of the company. But the company had been a poor manager and a poor ruler when it kept and controlled all its net revenue and profits. Surely it would not manage better when three-fourths belonged to others, while even the fourth reserved for its benefit had to be spent under other people's supervision and with their approval.