The Islamic Link to Success at Jamestown
The arrival of the earliest English settlers in Jamestown is one of the cornerstones of American history. But few people know that the voyage was inspired and made possible by a financial innovation -- the joint-stock company -- that emerged in direct response to Queen Elizabeth’s outreach to the Muslim world.
The Virginia Company was chartered by King James in 1603 as a joint-stock enterprise, a novel arrangement which his predecessor had found extremely useful for long-distance overseas trade. As its name suggests, a joint-stock company is an association owned by its shareholders in proportion to the amount of capital (or “stock”) that they invest.
The capital is then deployed to a common purpose -- most often to fund a commercial voyage. The subsequent profits -- or losses -- would then be split between shareholders on the merchants’ return. There were earlier medieval examples of small guilds coming together across Europe to form a similarly conceived structure, but they had never involved overseas trade, and operated on a much smaller scale.
The advantages of the joint-stock company were considerable. The British crown could sanction such endeavors without any direct investment, and it could reap the profits from new trade routes while disavowing any losses. Meanwhile, merchants gained access to capital, enabling more risky endeavors and more long-term investment, as missions were no longer jeopardized by freak losses.
Where the distances and expenditure involved in trade to far-flung places was often too great for individual merchants, the joint-stock company’s collective capital could mitigate risk. This proved to be an extremely successful model, one that paved the way for the creation of the modern public limited company.
The first English joint-stock company was formed in 1555 and was known as the Muscovy Company. It defined itself as “one body and perpetual fellowship and communality,” whose aim was to trade English wool in Muscovy (modern-day Russia) and the Safavid Empire (today’s Iran). Two hundred and forty subscribers invested 25 pounds each to raise the 6,000 pounds required for the initial arduous voyage to Persia via Moscow.
Anthony Jenkinson, who led the expedition, was a colorful and endlessly resourceful merchant. He made his way, after a number of setbacks and diversions, to the Persian capital of Isfahan in 1562, where he tried but (perhaps not surprisingly) failed to trade England’s heavy wool for Persian silk.
Some 20 years later, Elizabeth was persuaded by her advisers to use the joint-stock model to enrich her Protestant kingdom, now perilously isolated from Catholic Europe and from her principal markets in the Netherlands, which were then under Spanish control. Under the principle that the enemy of my enemy is my friend, she reached out to the Islamic world in an effort to create an anti-Spanish axis.
The greatest imperial power at this time outside of Europe was the Ottoman Empire, which controlled the flow of goods into Europe along the Silk Road through Constantinople. In 1578 Elizabeth sent William Harborne, England’s first ever merchant-ambassador, to Constantinople to trade with Sultan Murad III.
Murad welcomed Harborne, jokingly referring to him as the “Lutheran ambassador.” The sultan granted the Englishman unprecedented commercial privileges that lasted more than 300 years, and struck up a cordial correspondence with Elizabeth that lasted almost 20 years. He wrote to her as “Elzabet, queen of Anletar,” describing her as the “noble prince of the most mighty worshippers of Jesus.” She responded in kind, writing to Murad as “sole and above all, the most sovereign monarch of the East Empire” and lavishing him with gifts.
The Spanish and Venetians were appalled that the Protestant English were now trading with the “infidels,” but Elizabeth was so pleased with Harborne’s success that in 1581 she approved another joint-stock initiative: the Turkey Company.
Just 12 merchants stood the startup costs, agreeing in return to give the crown customs duties on the export of cloth, tin and lead (for making armaments) and the import of silk, cotton, carpets, drugs, spices, currants and indigo. Initial costs were estimated at a substantial 45,000 pounds, but by the late 1580s the company was sending 19 ships weighing between 100 and 300 tons and crewed by nearly 800 seamen on an average of five voyages a year to trade in Ottoman-controlled Mediterranean ports.
The trade soon became worth 100,000 pounds a year (trade with Venice was less than half this figure), and profits on some voyages were estimated at more than 70,000 pounds, producing returns of nearly 300 percent. To put the Anglo-Islamic trade into some perspective, commerce with Venice at this time was worth no more than 50,000 pounds a year.
Trade with the Muslim world was so successful that a similar initiative was chartered in 1600 to break into the Indian Ocean trade. The East India Company was founded with 101 investors pledging more than 30,000 pounds each.
Thus began the inexorable march to the creation of the British empire, a model of commercial-imperial rule that would end up claiming nearly a quarter of the earth’s surface.
When plans were floated to invest in Virginia, London’s merchants turned once again to the joint-stock model that had brought them such profits in the East. The problem with Virginia was that it offered none of the sophistication and infrastructure of trade with the Ottomans.
Substantial capital investment would be required, with uncertain prospects of return -- unlike trade with the Islamic world, where mechanisms and exchanges were already in place. As one writer put it, “a great store of treasure and wealth must be spent and many years overpassed” before Virginia could be expected to turn profit.
By the time the chartered company had raised 30,000 pounds of direct investment from its stockholders in 1613, the East India Company possessed over 2 million pounds of joint stock. It was only the promise of the tobacco trade that saved the colony from oblivion.
But without that first joint-stock investment, and the profitable experience of trading with the Ottomans, Virginia could have gone the way of the earlier Roanoke Colony in North Carolina.
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