Echoes Dispatches From Economic History
The Ravenge, a galleon used by Sir Francis Drake against the Spanish Armada. Source: Library of Congress Prints and Photographs Division
Queen Elizabeth, Venture Capitalist for Marauders
On Jan. 27, 1596, Sir Francis Drake died of dysentery aboard his ship off Portobelo, in what is now Panama. He was buried at sea in a lead coffin. It was a sad end to one of the great lives of the 16th century.
Drake had helped the English fleet defeat the Spanish Armada and acquired a vast fortune for himself through a series of daring raids. He also undertook an adventure on Queen Elizabeth I's behalf that would require a historical feat of circumnavigation, severe risks to personal safety -- and a significant infusion of venture capital.
The first of 12 sons, Drake was soon drawn to the sea. His father apprenticed him to the master of a bark engaged in the trade between England and France. Drake proved so adept as a sailor that the master left the ship to him in his will.
At 23, Drake sailed with his cousin, Sir John Hawkins, in a fleet to attack the Spanish in the New World. While theoretically at peace, England and Spain had become increasingly antagonistic and Queen Elizabeth turned a blind eye to English privateers who were attacking Spanish shipping.
Drake's first adventure in privateering, however, almost ended in disaster when he and Hawkins were trapped by the Spanish in the Mexican port of San Juan de Ulua. They barely escaped with their lives. Drake made several more voyages and in 1572 he raided Nombres de Dios, then the main Spanish port on the Caribbean coast of Panama, through which the gold and silver of Peru had to pass on its way to Spain.
Drake returned to Plymouth with a fortune in Spanish treasure.
In 1577, Queen Elizabeth secretly authorized Drake to sail a fleet to the Pacific Ocean. The "business model" for the voyage was simple: Strike at the unsuspecting and largely undefended towns and shipping along the coast of Spain's South American empire, take their valuables, then cross the Pacific to the East Indies. There, use the treasure to buy spices cheaply and then return to England by way of the Cape of Good Hope.
It would be the first circumnavigation of the world by an English fleet, and only the second by any nation. It was a high-risk venture indeed. But it promised huge rewards.
Of the six vessels that made up the fleet (it began with five, but Drake soon captured a Portuguese ship in the Atlantic) only one, called the Golden Hind, made it back to England. Originally named the Pelican, Drake renamed it after the crest of one of his principal backers, Sir Christopher Hatton.
Another financial backer was the queen herself. Hatton and the queen, along with other investors, were acting as venture capitalists. They put up the money, while Drake and his crew put up their skills and daring, not to mention their lives. If the voyage succeeded, they all stood to make a fortune. If it failed, the backers would be out a lot of money, and Drake and his crew would be dead in some foreign land.
The fleet departed Plymouth on Nov. 15, 1577, but bad weather forced it to return. They finally departed for good on Dec. 13. They spent the winter in San Julian, a gloomy and remote bay on the coast of wind-swept Patagonia, where they were unlikely to be discovered by the Spanish. Three ships had already been lost.
By September 1578, Drake had made it through the Strait of Magellan into the Pacific. But it was a rough passage. One ship sank and the crew on another gave up and turned back. Now, with only the Golden Hind under his command, Drake attacked Callao, Peru's principal port. Then he had the good fortune to capture the Nuestra Senora de la Concepcion, a Spanish ship carrying treasure between the Peruvian mines and Manila.
Dumbstruck to find themselves under attack by an English ship, the Spanish surrendered quickly. The plundered treasure included 80 pounds of gold and 26 tons of silver.
Attacking ships as he went, Drake then sailed as far north as California, where he landed and claimed the place for Queen Elizabeth, naming it Nova Albion. Exactly where he landed is still hotly disputed. (He also failed to note San Francisco Bay, which he sailed past.)
From California, Drake took his ship across the Pacific, making for the Spice Islands. There they traded some of their treasure for spices that would be worth many times as much delivered to England. The haul would have been even more impressive had the Golden Hind not grounded on a reef; much of the spices had to be thrown overboard to refloat the ship.
Still, Drake sailed triumphant into Plymouth on Sept. 26, 1580, almost three years after his departure. Only 59 of the expedition's original 144 crew members were still alive. The queen awarded Drake a knighthood.
It was the least she could do. Her share of the proceeds amounted to a staggering 160,000 pounds, well in excess of all other crown revenues combined that year, and more than enough to allow her to pay off her foreign debt. Drake later reported that the backers of the voyage received 47 pounds for each pound they invested.
High risk, in this case at least, had resulted in very high reward.
(John Steele Gordon is the author of numerous books, including "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt." The opinions expressed are his own.)
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