The union among the merchants of any one city or league was one for joint trading privileges only, not for corporate investment or syndicated business. Each merchant or firm traded separately and independently, simply using the warehouse and office facilities secured by the efforts of the home government, and enjoying the permission to trade, exemption from duties, and whatever other privileges might have been obtained for its merchants by the same power. The necessity for obtaining such concessions arose from the habit of looking at all international intercourse as to a certain degree abnormal, and of disliking and ill-treating foreigners. Hence the Germans in London, the Venetians in Alexandria, the Genoese in Constantinople, for instance, needed to have permission respectively from the English, the Mameluke, and the Greek governments to carry on their trade. Although they found it highly desirable for many reasons to hold a local settlement of their own in those cities, such a possession was not a necessary accompaniment of the individual and municipally regulated commerce of the thirteenth, fourteenth, and fifteenth centuries. Where but a few traders made their way to any one market, and that only irregularly, they lodged with natives, sold their goods in the open market-place, organized no permanent establishment, and had no consulate. On the other hand, where trade was extensive and constant, the settlement was like a part of the home land located in the midst of a foreign population.
As the fifteenth century progressed many influences combined to bring about a change in this system. The most important one of these influences was the growth of centralized states in the north, centre, and west of Europe. As Russia, Denmark, Sweden, England, Burgundy, and France became strong, the self-governing cities within these countries necessarily became politically weak; and the trading arrangements they had made among themselves became insecure. Strong nationalities were impatient of the claims of privilege made by foreigners settled or habitually trading in their cities; the interests of their own international policy often indicated the desirability of either favoring or opposing bodies of merchants, which in the time of their weakness the governments had treated with exactly the opposite policy; finally, the desire of their own citizens for the advantages of their own foreign trade often commended itself to the rulers as an object of settled policy. [Footnote: Schanz, Englische Handelspolitik.] In other words, national interests and municipal interests were often opposed to one another.
Internal difficulties in many cities and internal dissensions in the leagues of cities helped to weaken the towns as guarantors of the trade of their citizens. As a result of these political influences, before the fifteenth century was over the distribution of commerce was much changed and municipal control was distinctly weakened. The Italian and the German cities became less active and wealthy, while London, Lisbon, Antwerp, and many other centres grew richer. Individual cities and even leagues of cities ceased to be able to negotiate with other municipalities or with potentates to obtain trading privileges for their citizens, since such matters were now provided for by commercial treaties formed by national governments. One of the main characteristics of earlier commerce, its dependence on city governments, thus passed away.
Then came the opening up of direct commerce by sea with the East Indies, the discovery of America, and the awakening of ambition, enterprise, and effort on the part of new nations to make still further explorations and to develop new lines of commerce. The old organization of commerce was profoundly altered when its centre of gravity was shifted westward to the Atlantic seaboard, and Europe got its Oriental products for the most part by an ocean route. Cities which had for ages had the advantage of a good situation were now unfavorably placed. Venice, Augsburg, Cologne, and a hundred other towns which had been on the main highways of trade were now on its byways. Many of these towns made strenuous, and in some cases and for a time successful, efforts to conform to the new conditions. [Footnote: Mayr, in Helmolt, History of the World, VII, 64-66.] Vigorous industry, trade, and commerce continued to exist in many of the old centres, and some of the most famous "merchant princes" of history, such as the Fuggers and the Medici, built up their fortunes in the old commercial cities in the fifteenth and sixteenth centuries. Nevertheless, these were the exception rather than the rule, and such successes were due to financial rather than commercial operations. In a general sense the old commerce of Europe, so far as it followed its accustomed lines, suffered a grievous decline. More important than the decay of the old method was the growth of the new. A vast mass of new trade came into existence; spices and other Oriental products, now that they were imported by the Portuguese and afterwards by Spanish, Dutch, French, and English, by direct routes and by water carriage, were greatly cheapened in price, and thus made attainable by many more people and much more extensively consumed. The early explorers of America failed to find either the route to the East or the Eastern goods which they sought, but they found other articles for which a demand in Europe either already existed or was ultimately created. Sea-fish abounded on the northeastern coasts of America to a degree that partially made up their loss to the disappointed seekers for a northwest passage. Whale oil and whalebone were obtained in the same waters. Dye-woods, timber, and ship stores were found on the coasts farther south. Furs became one of the most valued and most permanent imports from America. Gradually, as habits in Europe changed, other products came to be of enormous production and value. Sugar stands in the first rank of these later products; tobacco, cocoa, and many others followed close upon it. As colonists from Europe became established in the New World they must be provided with European and Asiatic goods, and this gave additional material for commerce. Besides creating an increased commerce with the East and a new commerce with the West, the awakened spirit of enterprise and the new discoveries widened the radius of trade of each nation. Men learned to be bold, and the merchants of each European country carried their national commerce over all parts of Europe and far beyond its limits to the newly discovered lands. English, Dutch, French, and Danish merchants met in the ports of the White Sea and in those of the Mediterranean, and competed with one another for the commerce of the East and the New World. Trading to a distance was the chief commercial phenomenon of the sixteenth century, and was more influential than any other one factor in the transformation of commerce then in progress. Distant trading proved to have different requirements from anything that had gone before: it needed the political backing of some strong national government; it needed, or was considered to need, a monopoly of trade; and it needed the capital of many men.
These requirements were not felt in Portugal and Spain as they were in the other countries of Europe, because each of those countries had control of an extensive and lucrative field of commerce, and because in them government itself took the direction of all distant trading. The Portuguese monopoly of the trade with the coast of India and with the Spice Islands was practically complete. Through most of the sixteenth century her ships alone rounded the Cape of Good Hope; her only rivals in trade in the East were the Arabs, who had been there long before her, and their traffic was restricted to a continually diminishing field.
Until Portugal was united with Spain in 1580, and after that until Holland broke in on the Portuguese-Spanish monopoly of the East Indies in 1595, her control of Eastern commerce was as nearly perfect as could be wished. [Footnote: Cunningham, Western Civilization, II., 183-190.] Government regulation of this commerce extended almost to the entire exclusion of individual enterprise. The fleets which sailed to the East Indies were determined upon, fitted out, and officered by the government, just as those of Venice were. [Footnote: Saalfeld, Geschichte des Portugessche Kolonialwesens, 138, etc., quoted in Cunningham, II., 187.] The Portuguese annual fleet sent to the Indies counted sometimes as many as twenty vessels. In the one hundred and fifteen years between 1497 and 1612 eight hundred and six ships were sent from Portugal to India, [Footnote: Hunter, Hist. of British India, I., 165.] all equipped for the voyage and fitted out by the government with cannon and provided with armed forces.
The management of the fleet was in the hands of the government office known as the Casa da India. The merchants who shipped goods in these vessels and brought cargoes home in them were, it is true, independent traders, carrying on their business as a matter of private enterprise;[Footnote: Cunningham, Western Civilization, II., 187.] but they were subject to government regulations at every turn and supported by government at every step. At first foreign merchants were admitted to the Eastern trade under these conditions, but subsequently it was restricted to Portuguese, and ultimately became a government monopoly. Under this system Lisbon became one of the greatest commercial cities of the world. Venetian, Florentine, German, Spanish, French, Dutch, and Hanse merchants took up their residence in Lisbon, purchased East Indian goods from the merchants who imported them, and dealt in other imports and exports resulting from this activity of trade.[Footnote: Mayr, in Helmolt, History of the World, VII., 70.] In Spain the government regulation of commerce was scarcely less close. All goods which were sent from Spain to America must be shipped from the one port of Seville, and they must be landed at either one or other of two American ports—Vera Cruz, in Mexico, or Portobello, on the Isthmus of Panama. Two fleets were sent from Seville each year, one for each of these destinations. All arrangements for these fleets, all licenses for those who shipped goods in them, and all jurisdiction over offences committed upon them were in the hands of the government establishment of the Casa de Contractacion at Seville. [Footnote: Veitia Linage, Spanish Rule of Trade to the West Indies, book I., chap. iii.] No intruders were allowed in the Spanish colonies; the only persons who could take part in the trade were merchants of Seville, native or foreign, who were specially licensed by the government. Monopoly as well as government support was thus secured to the distant traders between Spain and her colonies in the West and in the East Indies.
For two hundred years this system of government fleets in Portugal and Spain was kept almost intact. Since the government provided merchants with military defence and economic regulation, since it minimized competition among them and guaranteed to them a monopoly of commerce in the regions with which they traded, there was small need of organization or of a union of forces among them. Consequently commercial companies are almost unknown in Portuguese and Spanish history. [Footnote: Moses, Spanish Rule in America, 166-171.] In Spain and Portugal government control of trade was at a maximum. In the other countries of Europe, notwithstanding occasional plans for such control, as in the Netherlands in 1608, [Footnote: Jameson, Usselinx,43.] the part which government took in commercial matters was much less, the part taken by private merchants was far greater. In fact, many of the earliest trading ventures were of an almost purely individual character. The patent given by Henry VII. to the Cabots in 1497, similar letters granted in 1502 to certain merchants of Bristol, [Footnote: Rymer, Faidera (2d ed.), XIII., 37.] a grant to Robert Thorne in 1527, the long series of authorized expeditions from 1575 to 1632 in search of the northwest passage, the charters given to Humphrey Gilbert in 1578 and to Sir Walter Raleigh in 1584, and many other patents made out in the sixteenth century to prospective colony builders, all were granted to individuals or to groups of loosely organized adventurers. [Footnote: Brown, Genesis of the United States, I., 1-28.] In contrast both with government—controlled commerce and with purely private trading and enterprise, the chartered companies of England, Holland, France, Sweden, and Denmark arose. They were by no means self-controlled and independent companies; they were dependent on their governments for many rights and privileges and for constant support, protection, and subsidy. On the other hand, the governments expected them not only to develop a profitable trade but to furnish certain advantages to the nation, such as the creation of colonies, the increase of shipping, the provision of materials for use in the navy, the humiliation of political rivals, the preservation of a favorable balance of trade, and ultimately the payment of imposts and the loan of funds. They stood, therefore, midway between unregulated individual trading, in which the government took no especial interest, and that complete government organization and control of trade which has been described as characterizing the policy of Portugal and Spain.
Some fifty or sixty such companies, nearly contemporaneous, and on the same broad lines of organization, are recorded as having been chartered by the five governments mentioned above, a few in the second half of the sixteenth century, the great proportion within the seventeenth century. [Footnote: Some are enumerated in Cawston and Keane, Early English Chartered Companies, a still larger number in Bonnassieux, Les Grandes Compagmes du Commerce.] Of course, some of these companies were still-born, never having gone beyond the charter received from the government; some existed only for a few years; and some were simply reorganizations. The formation of these companies marks a distinct stage of commercial development, and furnishes a valuable clew to the foundation and early government of European colonies in America.
England, Holland, France, Sweden, and Denmark, as well as Scotland and Prussia, each had an "East India Company"; Holland, France, Sweden, and Denmark each had a" West India Company"; England, Holland, and France each had a "Levant" or "Turkey Company"; England and France each had an "African Company"; and a date might readily be found in the seventeenth century when all these were in existence at the same time. The following list of such companies shows their number and simultaneity. The list cannot claim to be exhaustive or absolutely accurate, for the history of many such organizations is extremely obscure, the dates of their foundations questionable, and some companies chartered at the time were, perhaps, not commercial in their nature.