The moment of lost economic innocence
Lecture on the publication of Eminent Corporations, National Maritime Museum, 30 September 2010
It’s a difficult business following on from a fabulous story like the East India Company, so I also want to go back a little in time – before the other stories in Eminent Corporations – right, right back (and for reasons which I will explain) to 1692.
It’s the year of the Salem Witch Trials and the Glencoe Massacre. But let’s be precise about this. Let’s go back to 11.40 in the morning on 7 June 1692.
Because this was the moment, at least as far as this evening is concerned, that marked the end of traditional British piracy and the beginning of a new kind of financial piracy which linked the City of London more directly with the sea.
Why so precise? Because that was when the first rumbling was heard in the hills to the north of the city of Port Royal, Jamaica.
Shortly afterwards, the first of three enormous shocks were felt as the earthquake struck, each one more violent than the last.
By the time the third had shattered what remained of the city, two thirds of Port Royal’s notorious streets – where there was said to be one drinking establishment for every ten people – had disappeared below the waves.
What you might call seriously in the drink.
Morgan’s Fort, which guarded the city, and where many of the town’s citizens had fled in terror, collapsed under the water in just a few minutes during the second shock.
The city graveyard, including the body of the most famous pirate in the world, Henry Morgan, which had only just been buried, tore itself apart and disappeared into the harbour.
By the end of the disaster, over three thousand people were dead. Many of them had been swallowed whole by the earth.
Afterwards, people talked about dogs that were seen gnawing on limbs which still stuck out of the ground.
Port Royal was then one of the richest cities in the world. Its population of 8,000 was crammed into the streets by the harbour, spilling out on stilts over the beach.
It had two prisons, three large forts, and a maze of bars and brothels. In one month in 1661 alone, 40 new licences were handed out to new bars in Port Royal to sell a rum punch called Kill Devil.
We thought of serving a little of that afterwards, but didn’t want the museum to slide into the sea.
Port Royal was the premiere pirate city in the golden age of pirates. It never recovered from the earthquake.
It was also a symbolic moment because it marked the emergence of the British involvement in the slave trade.
When Cromwell’s fleet took control of Jamaica in 1455 there were 400 black African slaves on the island. Within half a century, that number had grown to 85,000.
Over the next century, 700,000 African slaves were brought to the sugar and tobacco plantations in Jamaica alone. Many more would set out and die in mid-Atlantic.
Many more still would pass through Kingston and the slave depots and markets there for other parts of the Americas. The pattern was set for America as a whole. The miserable ‘Barbados slave code’ came to dominate the lives of slaves as far north as Virginia.
The slave trade had been emerging for a generation, and the old Stuart regime had been involved in it. But under Charles II and James II, the plan for Jamaica had been to fill the plantations with London’s criminals and street children: the slaves were going to be white.
After the Glorious Revolution, the triumph of the new financial service sector, the Bank of England and the Whig dominated court of William and Mary, the slaves would be predominantly black.
But it wasn’t just the beginning of the slave trade. The end of Port Royal also marked the end of legal piracy and the beginning of financial speculation.
The new pirates were not made colonial governors like Henry Morgan. Under the Piracy Act of 1699, they were hunted down.
Now that the Spanish threat was at an end, the policy shifted from buccaneering to a more sophisticated shifting of Spanish trade into English hands, via finance and speculation.
A second generation of pirates emerged, with names like Blackbeard, James Kidd and Bartholomew Roberts, even more notorious than those who had operated out of Port Royal before the earthquake.
They all knew Port Royal. The former pirate capital clawed back some reputation for drinking, whoring and gambling. But the climate was too dangerous to use it as a headquarters any more, and the so-called ‘golden age’ of piracy was at an end by the South Sea Bubble in 1720.
The new age of financial piracy had begun.
The historian Ralph Hale Mottram, whose father was chief clerk of Gurney’s Bank, one of the Quaker network of banks around Barclays in our book, wrote about it like this:
“Up to about the year 1690, there still existed a chance that a united and determined body, a church or other society, might have resurrected the old taboo on usury and money-changing, and have preserved, for a period at least, the economic innocence of the world.”
But it was 1692 and it was too late. So the destruction of Port Royal marked a shift from one kind of piracy to another.
Let’s be precise about this. For the purposes of this talk I’m going to pin the blame on one man in particular. Sir Josiah Child, known primarily for his dominance of the East India Company.
Child died in 1699, the same year that the Royal Africa Company – which he and his colleagues were 25 per cent shareholders – lost its monopoly of the Atlantic slave trade.
His new piracy was wholly legal. It was respectable and dominated by the London money markets. You didn’t have to risk your life on the high seas, but it would make ports like London, Bristol and Liverpool immensely rich.
There had been bribery and monopoly in buckets in the history of money and politics, but Child was at the heart of the very first generation of financial markets.
He was the first exponent of all those skills stitched together, the ruthless combination of financial and political power to make himself and his supporters rich beyond the dreams of those who went before.
He was the first financial buccaneer.
Child was already writing economic tracts urging the adoption of free trade, and his Indian imports – damasks and cotton – were pouring into British ports and causing consternation in the English cloth industry.
But when it came to his own company, he was no free-trader. He needed capital, royal privileges and a new royal charter. Bribing kings was like bribing governments to this day and £10,000 a year bought a trading monopoly for the East India Company.
“Does Sir Josiah sell or buy?” asked Daniel Defoe in his tract The Villainy of Stock-Jobbers.
“If Sir Josiah had a mind to buy, the first thing he did was to commission his brokers to look sower, shake their heads, suggest bad news from India; and at the bottom it followed, ‘I have commission from Sir Josiah to sell out whatever I can’, and perhaps they would actually sell ten, perhaps twenty thousand pound… and initiated the crowd of jobbers into that dexterity on tricking and cheating one another, which to this day they are the greatest proficients in that this part of the world ever saw…”
Defoe was imprisoned for his next pamphlet, aimed at the Anglican church. In those days, you could end up in prison for saying some of the things we’re saying tonight.
**
So what I’m saying, in case the police are listening, is not that financial innocence was lost precisely in June 1692 – but that history is important when we look at our companies today.
Where did they come from? What are they for? What do they mean? And I’m saying we don’t have these conversations very much.
There are obscure tomes of corporate history which only academics read. There are cursory notes – written by marketing departments – that appear on websites. Otherwise that’s it.
We live in an age where the PLC is almost the proudest institution on earth. But actually, seen through an historical perspective, they are flimsy, fragile, insubstantial things, which flower briefly and then disintegrate into their constituent bits – a few brands there, a vice-president here, an office block again there.
More like multinational mayflies than megacorps.
Yet because there are no histories of these corporations, no back stories, no roots – we let them control our lives with stories about them conjured out of the air by whatever director of marketing they last employed.
The result is our strange, one-dimensional view of corporations. We suffer under the delusion that the great names of corporate power – Coca-Cola, Procter & Gamble, Wal-mart – were knocked together by God some time on Day Six of the creation of the world.
We don’t know where they came from. We don’t know why. We don’t know what they really are.
So it occurred to us that what the big brands needed was a dose of what Lytton Strachey did for the Eminent Victorians – an experimental new kind of mini-biography.
Like the Victorian giants he wrote about, we have an absolute avalanche of information about the corporations that dominate our lives – but very little actual knowledge.
So I won’t tell the stories – the tragedies really – that are in the book. The real stories of Marks & Spencer or Cadbury or Barclays, and – as I see it – their tragic compromise with financial services.
But I will say this.
In the strange week almost exactly two years ago, when the banks and everything seemed to be unravelling – I ventured into the City Business Library to start researching the book.
I used to spend quite some time there, when I was writing about the history of money. I remembered it – perhaps wrongly – as a font of hidden knowledge. Piles of ancient American business magazines stuffed into boxes. Funny 1960s books of business predictions?
They had all gone. I asked at the desk and was told that it was now the library’s policy to dispose of most material after three years, and all of it after five years.
This was very strange. Wall Street and the City of London had allowed the banking system to collapse because their risk software had little or no memory beyond ten years – barely longer than the business cycle.
Most of those taking day to day decisions about risk in the City were in their twenties and had little memory of the great rises and falls of the market. Their lack of history had hampered their ability to see events for what they really were.
I don’t suppose the City Business Library’s decision to bin anything dog-eared contributed to this historical vacuum – it was symptom not cause.
But it can’t have helped.
And, let’s face it, the excision of history from business commentary and corporate life – and its replacement by marketing mush – was definitely one of the major causes of the current miserable economic climate.
History matters. And I hope in a very small way tonight, we have launched a new kind of tradition of financial history. If so, we can with a clear conscience, go and slake ourselves in a pint of Kill Devil.