Cato's Letter No. 91

How exclusive Companies influence and hurt our Government.

John Trenchard (Saturday, August 25, 1722)

SIR, In my last letter I have considered exclusive companies as they affect the trade and commerce of the kingdom: In this I shall view them in relation to our constitution; and shew, that they alter the balance of our government, too much influence our legislature, and are ever the confederates or tools of ambitious and designing statesmen.

Very great riches in private men are always dangerous to states, because they create greater dependence than can be consistent with the security of any sort of government whatsoever; they place subjects upon too near a level with their sovereigns; make the nobility stand upon too great an inequality in respect of one another; destroy, amongst the Commons, that balance of property and power, which is necessary to a democracy, or the democratic part of any government, overthrow the poise of it, and indeed alter its nature, though not its name: For this reason, states who have not an agrarian law, have used other means of violence or policy to answer the same ends. Princes often, either by extraordinary acts of power, by feigned plots and conspiracies, and sometimes by the help of real ones, have cut off these excrescent members and rivals of their authority, or must have run the hazard of being cut off by them. Aristocracies put them upon expensive embassies, or load them with honorary and chargeable employments at home, to drain and exhaust their superfluous and dangerous wealth; and democracies provide against this evil, by the division of the estates of particulars after their death amongst their children or relations in equal degree.

We have instances of the first in all arbitrary monarchies, as well as in all the Gothic governments formerly, and in Poland at present, which are constant states of war or conspiracy between their kings and nobles; and which side soever gets the better, the others are for the most part undone. By doing the second, the nobles of Venice keep up their equality; and Holland, Switzerland, and the free states of Germany, make the provision last named; which, as I have said, answers in some measure the purposes of an agrarian law: But by waiting for the division of overgrown substance in private hands, other states have been undone; and particularly Florence was enslaved by the overgrown power of the house of Medici.

And as great riches in private men is dangerous to all states, so great and sudden poverty produces equal mischiefs in free governments; because it makes those who by their birth and station must be concerned in the administration, necessitous and desperate; which will leave them the means, and give them the will, to destroy their country: for the political power will remain some time in their hands after their natural power and riches are gone; and they will ever make use of it to acquire that wealth by violence and fraud which they have lost by folly and extravagance. And as both of these extremes are certainly true of particular men, so they are more dangerous in numbers of men joined together in a political union; who, as they have more wealth than any particular man ever had or can have, so they will have the separate interest of every individual to assist them, arising from the dependence of friendship, relation, acquaintance, or creatures, without that emulation and envy which will always be raised by the sudden and exorbitant riches of private men. It is certain, that they both make too violent an alteration in property, and almost always produce violent convulsions in government.

Now companies bring all these mischiefs upon us; they give great and sudden estates to the managers and directors, upon the ruins of trade in general, and for the most part, if not always, bring ruin upon thousands of families, who are embarked in the society itself. Those who are in the direction and the secret of the management besides all their other advantages, draw out and divide all their principal, and what they can borrow upon their credit; persuade innocent and unwary people to believe that they divide only the profits of their trade, and, by a thousand other artifices heightening their advantages, draw them in to share in them; and when they have wound up the cheat to the highest pitch that it can go, then like rats leave a falling house, and multitudes of people to be crushed by it. This was the case of the East-India and African Companies formerly, whose stock sold for 300 per cent when it was not worth a groat; and how far it is the case of the present East-India Company, their members are concerned to enquire.

What ruin, devastation, and havock of estates! What public misery, and destruction of thousands, I may say millions, have we seen by the establishment and wicked intrigues of the present South-Sea Company, only to make a few unshapely and monstrous members in the body politick! What has that Company done for the benefit of trade, which they were established, forsooth, to promote? They have suffered numbers of our manufactures to rot in their ships, hindered private traders from carrying on an advantageous commerce to the lower parts of America and the South-Sea; and, like the dog in the manger, will neither eat themselves, nor let any one else eat; and, it is said, by their wise conduct, have lost a million or two of the Company’s principal.

The benefits arising by these companies, generally, and almost always fall to the share of the stock-jobbers, brokers, and those who cabal with them; or else are the rewards of clerks, thimble-men, and men of nothing; who neglect their honest industry to embark in those cheats, and so either undo themselves and families, or acquire sudden and great riches; then turn awkward statesmen, corrupt boroughs, where they have not, nor can have, any natural interests; bring themselves into the legislature with their pedling and jobbing talents about them, and so become brokers in politicks as well as stock, wanting every qualification which ought to give them a place there.

It is a strange and unnatural transition from a fishmonger or pedlar to a legislator: However, as such doughty statesmen, by their single abilities, can do no good, so they can do but little harm; but when united in a body under the direction of artful managers combining with great men, they can turn all things into confusion, and generally do so. When men have great sums of money to give, and will give it, they will ever find people to take it; and there can be no standing against them in a body, how contemptible soever they are in particulars. How often have the cries of the whole kingdom of England been able to prevail against the interest of the East-India Company? What by proper application in former reigns made to our courts, to ministers and favourites, and to the members of each House of Parliament, they have been able to contend and get the better of the tears and complaints of the whole kingdom besides, and to lay asleep the true and real interest of those who assisted them; and if ever hereafter our three great companies should unite together (as it is to be feared they will always do when their interests do not clash), what power is there in being to oppose them, that will be able and willing to do it? In Holland, which is a more jealous government than ours, the East-India Company governs the state, and is in effect the state itself; and I pray God that we may never see the like elsewhere!

What have we been able to do to redress the ravages brought upon us by the South-Sea project? Which yet must have produced much greater, if we had not suffered these. When it was in its meridian, I have heard some persons argue the reasonableness of their having a monopoly of the trade of England, since they were possessed of most of the property of England; and I do not see by what means it could have been prevented. They would have filled the legislature with their own members, all our great men must have been their pensioners, and the crown itself been obliged to have kept measures with them; they would have been the only shop to have gone to for money, would not have parted with it but upon their own terms, and would have been ever lying upon the catch, to purchase more privileges and advantages: so that the nobility and gentry of England must either have embarked their fortunes and expectations in this monopoly, or have been humbly contented to have been governed by a faction composed for the most part of pedlars, grocers, and brokers, or such as lately were so; and the constitution itself had been gone, and changed into a stock-jobbing cabal.

We have seen but few instances where the private traders of England, and the interests of general trade, have been able to dispute with the interests of little companies or particular societies of tradesmen, or the peculiar privileges of corporations; though they are burdens and a dead weight on the estates of every person in both Houses, lessen their income, and increase their expences: Such is the fascination and witchcraft of political confederacy! What will be the event of these combinations no man can foresee, and every wise man must dread. Indeed, I do not see how we can prevent their dismal consequences, but by paying off our debts; and, by dissipating those factious combinations, dissolve the enchantment.

After all that I have said, I must confess that the East-India Company is liable to less objections than any other trading monopoly, but not for the reasons which they give, but for a reason which is worth an hundred of theirs: for as all beneficial trades are most successfully carried on by free and open commerce, so all losing ones do less mischief when monopolized; and as the first ought to receive all possible encouragement, so the other ought to be put under suitable discouragements: And since we can have no prospect at present of that trade’s being put upon an advantageous foot, the next best thing that we can desire, is to let it go on upon the present establishment; which in all probability will soon destroy it, and perhaps put it upon a good one, if that can be: for it is certain, that if it could be carried on with its full swing, it would ease us of every penny of our money, and destroy every manufacture in the kingdom, as well as every man in it; which in a proper time may be shewn at large.

In fine, monopolies are equally dangerous in trade, in politicks, in religion: A free trade, a free government, and a free liberty of conscience, are the rights and the blessings of mankind.

T I am, &c.

 Cato's Letters

 Classical Liberals