Joint-Stock Companies

Compared to other European nations in 1600, England was relatively poor.

The need for farmers decreased following the new agricultural techniques, and the poor multiplied in the streets of cities such as London and Bristol; becoming an increasingly burdensome presence and problem.

A Pain to Spain

Richard Hakluyt, a geographer interested in explorers and travel narratives, suggested to Queen Elizabeth that the New World colonies could serve two purposes. They could challenge Spanish domination of the New World and, the growing poorer classes could be transported there, easing England’s population pressure.

Elizabeth was not persuaded to invest public money in a venture likely to fail. She was not opposed to private investors taking such a chance. Raleigh had tried and failed. It became clear that the wealth of an individual was not enough, and the joint-stock company arose.

The joint-stock company was the forerunner of the modern corporation. In a joint-stock venture, stock was sold to high net-worth investors who provided capital and had limited risk. These companies had proven profitable in the past with trading ventures. The risk was small, and the returns were fairly quick.

Investing in a colony was a bigger risk, as the colony might fail. The start-up costs were huge and the returns might take years. Investors needed more than a small sense of adventure.

Often, second sons from noble families led the English Colonial Expeditions. Under the English law, only the first-born male could inherit property; second sons with a thirst to find their own riches were the leaders.

Merchants who dissented from the Church of England were willing investors in New World colonies. There were plenty of Puritans who had the capital and with the Catholic-leaning Stuart monarchs assuming the throne the Puritans’ motive to move became stronger.

With a large landless population to serve as workers, and motivated, adventurous, or devout investors, the joint-stock company became the vehicle by which England finally settled the Western Hemisphere.

Source: Joint-Stock Companies
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