What Was the Corporation?

Philip Stern
Philip J. Stern (John West/Trinity Communications)

SpaceX and Blue Origin are paragons of the 21st century’s most ambitious endeavors. But while the technology may be new, the political and economic questions raised by their efforts to colonize space are centuries old.

In his new book, “Empire, Incorporated,” Philip Stern explores 400 years of British history to trace the role corporations played in building British colonialism. From its very inception, the corporation was a “legal fiction with very real power,” Stern writes, and moreover it was “an elusive contradiction” that was marked by failure and fraud far more often than success. But its successes built an empire that dominated the globe.

We sat down with the associate professor of History to discuss how corporations blend economics and politics, what’s different about today’s world-dominating companies and what he learned from his research. This interview has been lightly edited for length and clarity.

Why corporations? What prompted you to write this book?

Empire, INC
Empire, Incorporated: The Corporations That Built British Colonialism is the latest book written by Associate Professor of History, Philip Stern.

We live in a world where forms of private governance are all around us, yet we’re perpetually surprised by the fact that they exist. Part of what I was trying to do in this book is look at the history of how we might understand the role of nonstate bodies in shaping political communities and political power — to think about the fuzzy lines between public and private forms of governance.

You begin with the joint-stock corporation of the 16th and 17th centuries. They seem common to people today, but they were revolutionary at the time. Why?

In a simple partnership, you typically put in your own family’s money, and if that venture failed, that was it. Joint stock, however, allowed for individuals whose money comes from anywhere to invest in and govern an enterprise. Your funding and social cachet could come from a rentier aristocrat or a different colonial trade, even from state officials or the monarch.

It allowed for the accumulation of massive amounts of capital because you can take money from all over the place. It also meant that the venture could endure a failed voyage or even a failed colony because it did not rely on immediate returns for its solvency. And it opens up those kinds of enterprises to a much broader group of people. In a world that was dominated by guilds, it was a radical idea that you wouldn’t need to be an authorized expert in the trade to participate in that trade, let alone be at its helm.

There’s also a way of looking at it that focuses not on the joint-stock question, but the corporation question. When you say corporation today, we think of Apple or Microsoft or Amazon, but the corporation actually emerged in the medieval period as a way to understand, most particularly, local church governance and urban municipalities. In the 17th and 18th centuries, if you said the word “corporation” to someone, their first thought would be a town or a university. I mean, this is still with us today: Durham is a corporation, as is Duke.

So the other radical thing that was going on in the 16th century was the application of corporate status to commercial and overseas enterprises. It was both controversial and opened up the possibility of creating these ambiguous entities that mix economic and political impulses together.

What was it about those changes that enabled corporations to create a vast global empire?

The answer you tend to get is the one about how companies could accumulate capital. That is undeniably true, but one of the things I argue is that it's a lot more than that. There are a lot of other answers I give in the 300 pages of the book, but I’ll highlight two.

One, I think we focused so much on the on joint-stock corporation’s capacity for accumulating capital that we've missed their remarkable ability to go into debt. Corporations use their joint-stock status as a way of borrowing money where they have none. Shareholding itself is a form of borrowing, right? It’s investing in the hope of future returns. But you also see, over time, corporations issuing their own bonds or creating subsidiary companies that can help to finance and fund operations.

After all, many colonial corporations offered dividends not in money but in land, which they often did not actually control. In many cases, it was up to the shareholders themselves to secure the property by either becoming settlers, soldiers and the like, or finding others to do so in their place. One could say, cautiously, that a lot of settler colonialism in this sense was nothing more than a form of multilevel marketing scheme.

Bank Note from British South Africa Company
A certificate representing an issue of shares for a subsidiary railway company, held in trust by the British South Africa Company. Accessed through Wikimedia Commons.

The political analog is that the joint-stock company has this exceptional ability to render something as profound as the dispossession of indigenous territories into the property of a corporate entity, and then to defend it over time not only as the property of that body but also as the property of each of the individual shareholders. It is a very powerful way of accumulating and legitimating those forms of dispossession within European law.

The question of debt leads to the second great capacity of joint-stock companies: their capacity to fail. And to fail kind of miserably.

One thing I trace in the book are all these attempts at throwing things against the wall that don't stick. Accumulatively, that creates a variety of colonial successes or enduring colonies. But the number of attempts that are just fantasies, that are frauds or that are dismantled almost immediately, is astonishing.

Corporations have an ability to experiment with increasingly little consequence because their ambiguous legal status makes it very hard, for various reasons at different times, to hold them accountable.

Do any particular failures stand out?

There are so many. Almost all of the companies you think of us as “succeeding” start off in extremely tenuous circumstances — even the East India Company, which is probably is the most famous. Then there are any number that never make it out of the gates.

One I write about is this guy John Welbe, who traveled to what they called the South Seas in the late 17th century and came back with the grand idea to create his own company to colonize somewhere in the vicinity of the Spanish Philippines.

I call it a “get poor quick” scheme because first he tries to use some of his own money and loses all of it. He then tries to sell the idea to the Danish king, then a guy by the name of John Law. But before he could, Law’s massive colonial company and public financing scheme in France famously crashed in what came to be known as the Mississippi Bubble in 1720. Welbe also pitches George I, the King of England, and the Royal Society, the main scientific institution in Britain, which was itself a form of corporation. Incidentally, Welbe is doing all of these things while going in and out of debtors’ prison.

When he can’t get a patron, he decides to get some investors instead. In 1720, he floats the idea of a company called the Company of London Adventurers to Terra Australis, despite the fact that there already were two British companies that already plausibly could claim monopolies on that region: the East India Company and the South Sea Company. While he’s in the political process of getting a charter needed to incorporate this company, he tries to sell what he calls “permits,” the ability to pay a small amount now to reserve the right to buy a share in the future.

Captain John Welbe's Proposals
Reprint of Captain John Welbe's original proposals for establishing a company by the name of the London Adventurers for carrying on a trade to (and settling colonies in) Terra Australis, and working and improving the gold and silver mines which there abound. Accessed through the National Library of Scotland catalog of published resources.

It’s not even clear that Welbe intended the company to happen. It’s possible. It’s also possible he was running what we today might call an advance fee scam — you know the kind of thing, you get an email and it says, “Send me $100 now, and I’ll give you $10,000 later.”

Welbe comes back about a year later, once again in prison, and says, “You know what, that plan is not going to work anymore, but I've got a better plan because I've actually figured out the secrets to the philosopher’s stone and now I can actually just make gold and silver myself. All I need is some start-up money from the Crown or Parliament to get it off the ground.” Needless to say, it didn’t work, and his trail goes cold at that point.

There's something about that story that both shows how haphazard some of this was and how much frenzied speculation there was in the idea of colonial enterprise.

The fact that these companies acted across national borders seems integral to how they were able to evade the consequences of their sketchier behavior. How important is that international aspect?

It’s key. One of the things I want to show in the book is that corporate colonialism actually grows out of things that were fairly routine in the way the government worked in the 16th and 17th centuries.

Most of the English government, like many governments around the early modern world, was what I call a franchise government: Everything from tax collecting to raising armies wasn't only done directly by the state; it was done by various people with charters or patents. Responsibility for these kinds of enterprises was diffused throughout elite society.

But when they start to issues charters for enterprises that are going overseas, in a place where even the Crown would have to admit it has no sovereignty or jurisdiction, it changes the nature of them dramatically. Companies were getting the exclusive rights to go out and seek sovereignty for themselves. It's actually the projection of this form of local government onto the global scale that creates this level of ambiguity.

One premise of this book is the economics and politics of commerce and colonization are not separable from one another. It isn't just that people engage in colonial expansion for commercial benefit, though that is important. It's that for many of these, much of their business, whether you’re talking about 17th century trading companies or 19th century mining or railway companies, not to mention the many companies that came into being explicitly to establish and operate colonies, involved controlling people and territory, even if on small scales or in unusual shapes and sizes. They were doing what you might think of as the work of government.

They do this for a wide variety of reasons. There are corporations in my book that came about as philosophical thought experiments and others by people whose primary interest was in proselytization as much as profit. One guy who got a massive grant from the 17th century Newfoundland Company claimed he was operating on direct instructions from God.

By the time you get to the 19th century, the idea is that companies come into being primarily for the purpose of colonial governance. Over several centuries, even as these colonial companies evolved, they were constantly calling back to their own history as a way of justifying, legally and politically, the enterprise of corporate colonialism.

One thing that I found was surprisingly consistent across the centuries was the way company promoters and their supporters, including some extremely well-known intellectuals like Jeremy Bentham or John Stuart Mill, argue that something like a corporation was not just a good way to govern empire but much better suited to it than government itself. I think that is a powerful lesson for how the legacies of the past continue to come back in new forms.

What other lessons do you see for today’s corporate politics?

I hope people take from the book that companies are not somehow bound by or subordinate to states. They both come from the same origin point. They have the same genealogy.

When we look at companies like SpaceX colonizing Mars or the recent controversies between the Walt Disney Corporation and Florida Gov. Ron DeSantis over self-governing spaces, we have to see that there's not a self-evident answer to those tensions. Companies have this long tradition of being forms of government, and recognizing that I think helps us to think about what we might do to confront and rein in their excesses better than thinking about the political aspects of corporations as somehow anomalous or a corruption of its nature.

The other thing I came to appreciate in writing this book is that the ways we talk about corporate empires in the present as a metaphor don't allow for easy comparisons to the kinds of territorial colonial empires from the past.

There's a lot we could learn from these companies in the past, say, in the attempts at the private colonization of space. And there are many ways in which companies of today share a genealogy and thus family resemblance with those you find in my book. But I think we also need to understand that the conditions of the world have changed significantly, and that we might learn a lot from the differences as much as the similarities.

I guess what I would say, and what I do say in the book, is that this history shows above all that the corporation’s power comes from its being a kind of paradox, and how such dilemmas shaped the past can really open our eyes to a lot of what is going on around us in the present and the future.

I also became really persuaded that we need to think about empire differently. We have this tendency to think about something like the British Empire as a coherent whole, but I hope the book shows that something as world changing and deeply transformative in global history as empire can never be that simple. By looking at the competing and conflicting forms that empire took within what might be the “British Empire,” we can more deeply understand how something like that could come to be.