1493_ Uncovering the New World Columbus Created - Charles C. Mann [34]
Elizabeth and James were wary but persuaded. Unwilling to pay the high interest rates moneylenders charged poor credit risks, though, the sovereigns delegated colonization to an entity that could independently support it: a joint-stock company. An ancestor to the modern corporation, joint-stock companies consisted of groups of wealthy people who pooled their resources to fund a commercial enterprise, being repaid by shares of the proceeds. By working with other investors, members of the company can limit their participation in an uncertain enterprise to a small part of the total sum. If a colony failed, the total loss would be huge but the loss to each individual investor would be tolerable—painful, to be sure, but not disastrous.
As the economic historian Douglass C. North has argued, the joint-stock company was more than a novel means of making money; it was one of many institutional arrangements European societies were developing to mobilize resources efficiently. (North shared the 1993 Nobel Memorial Prize in Economics, largely for working out these ideas.) These institutional arrangements secured property rights (necessary because people will not risk investing if they believe that their gains can be taken away); opened markets (necessary to prevent entrenched interests from stifling innovation); and strengthened democratic governance (necessary to check rulers’ excesses). All permitted trade and commerce to be independent, which led to research and investment becoming routine—a constant activity that people could profit from with little state interference. “What counts is work, thrift, honesty, patience, tenacity,” wrote the Harvard economist David S. Landes. In his classic Wealth and Poverty of Nations (1999), Landes argued that Europe had developed ways of organizing people and resources—private joint-stock companies, for instance—that fostered and rewarded individual initiative, which in turn promoted these virtues. Other places did not develop them. The result of these innovations, North argued, was economic growth so robust that it led to “a new and unique phenomenon”: the ascension of European societies to world power.
English joint-stock companies were not immediately successful. The first was created in 1553. Fifty-three years later, when the Virginia Company received its charter, England had just ten. Three of these ventures were created to plant colonies in the Americas. (A fourth American project used a similar risk-sharing arrangement, but was not formalized as a joint-stock company.) Every one of these American enterprises had failed. Soberingly, the attempt, in the 1580s, to take over Roanoke Island, off the North Carolina coast, resulted in great expense—three costly voyages across the Atlantic—and the total obliteration of the colony.3
Despite this dismal record, the Virginia Company believed it worth trying again. At its inception, the company consisted of two investor groups, one in Plymouth and one in London. The Plymouth group focused on what is now New England, and quickly launched a colony on the coast of Maine. It disintegrated within months, and the Plymouth investors threw in the towel. The London group set its sights on Chesapeake Bay and in practice took over the entire venture. Its ships set sail from London on December 20, 1606.
Although Roanoke had been wiped out by its Indian neighbors, the Virginia Company directors reserved their fears for distant Spain. They ordered the colonists—their employees, in today’s terms—to reduce the chance of detection by Spanish ships by locating the colony at least “a hundred miles” from the ocean. The instructions didn’t mention that this location might already be inhabited. True, the directors viewed conflict with the Indians as unavoidable. But they viewed the conflict as a problem mainly because they