America's First Colonists Were Profit-Seeking Speculators

en.wikipedia.orgVirginea Pars map, including Roanoke Island, drawn by John White during his initial visit in 1585.England's first colonies in the New World were profit-seeking corporations, and like any wave of firms entering a radically new sector, it took some flameouts and consolidation for what might be called England's America industry to really get off the ground.

Born at the same moment, the Virginia Companies of London and Plymouth would come to know radically different fates. The former struggled mightily for nearly a decade before flaming out. The Plymouth company would help make the Pilgrims' story possible. It would take a third company backed by investors with entirely different motives than the first two to make America work.

--You'll recall from our profile of the British East India Company last year that many colonies were founded not by governments themselves but rather by private individuals who raised funds to finance expeditions. This concept lies at the root of the word adventure. Sometimes they would form joint stock companies, which would finance expeditions to prospective lands with the hope of splitting up whatever commerce they were able to drum up on the other side of the sea.

The first two English adventurers to attempt to make it in America were Sir Walter Raleigh and his half brother Humphrey Gilbert. We can get a sense of their motivations from the following account, dated 1583 - 37 years before the pilgrims - from Captain Edward Hayes, who commanded one of Gilbert's ships back from Newfoundland, site of the first-ever English colony in America:

…although we cannot precisely judge (which only belongeth to God) what have been the humours of men stirred up to great attempts of discovering and planting in those remote countries, yet the events do shew that either God's cause hath not been chiefly preferred by them, or else God hath not permitted so abundant grace as the light of His word and knowledge of Him to be yet revealed unto those infidels before the appointed time.

Yeah. God and money don't mix so good.

The 1584 charter granted by Queen Elizabeth to Raleigh to settle America, which Raleigh called "Virginia," further emphasizes this. It basically says: go over there and do what you want, it's all yours. There's nothing in the document about religion, or even claiming the land in the name of England (though that is implied).

You may know what happened next: Over the next three years, Raleigh financed expeditions to set up a beachhead settlement on Roanoake Island, on modern-day North Carolina's Outer Banks. But some time between 1587 and 1590, the entire colony vanished. You can read about some of the theories why here, but it probably ended in terror: the only clues left at the site were the words "CRO" and "CROATOAN" carved into a tree and post, indicating the presence of Native Americans. This failure plays into the legend of the divine providence we now say was accorded from on high to the pilgrims.

Raleigh ended up taking a 40,000-pound loss on the enterprise, and it would be more than a decade before an Englishman got the idea to try the enterprise again.

In the meantime, the Earl of Southampton, best known as a quasi-muse of William Shakespeare, put together funds for a series of voyages that would again to tap into American natural resources. This technically violated the charter given to Raleigh, though he did not realize what had occurred until the price of London-traded sassafras suddenly dropped in the summer of 1602.

The sallies had the effect of re-energizing interest in American projects, and in 1606, two groups of investors, one from London, the other from Plymouth and other parts of western England petitioned King James for charters. The King dutifully stamped out a charter granting rights to two separate colonies. You can see the text of the charter here. But the colonies' purpose was clear: "dig, mine, and search for all Manner of Mines of Gold, Silver, and Copper." George Cawston, an early 20th century American historian who studied the early colonies writes about Virginia's first settlers as if they were employees. "No privileges were yet granted to the settlers, who were thus left at the mercy of the Governor, himself the agent of a soulless corporation whose main object was gain."

So on May 14, 1607, England's second attempt at a full-time colony in the modern U.S. commenced when 104 men and boys landed at Jamestown, Virginia. Right away hostility from the locals and greedy settlers threatened to tank the enterprise.

But from Jamestown we get the legend of John Smith, whom historians now consider as much masterful salesman as courageous Englishman, because on his return trip to England he convinced London's financiers to keep investing in America. Thus, in 1609, the first American joint stock company was formed: The Treasurer and Company of Planters of the City of London for the First Colony in Virginia, or, simply The London Company.

We get our next account from historian Robert Rudolph. To attract demand for the company's stock, the earliest subscribers were promised large tracts of land, and if you hazarded to "adventure your person" you'd get a 100-acre plot on the other side, guaranteed. Plus, you names would be officially added to the charter, something your descendants might appreciate.The original share price was £12.10, about £2,600 in 2013. In May 1609, an eight-ship voyage set sale for Jamestown.

But by that point, John Smith was still nursing a severe leg injury sustained when from nearly accidentally having his legs blown off, and evidently no one else was up to the task of glossing over the jungle-like conditions of Virginia in the summer. So as voyages returned "laden with nothing but bad reports," interest in the America project flagged, and subscribers began defaulting.

As a result, the company's operations in Virginia began to founder. The company tried borrowing money to stay alive as a going concern. In 1610, it got a loan for an expedition led by Lord de la Warr (Sound familiar? Say it out loud…) to turn its investments around. As Governor, de la Warr proved an able leader, but he died at sea in 1618. In a last-ditch effort, company officials enticed skilled Italian and Polish workers to settle in the South, and turned to tobacco as a cash crop. It didn't work. The company failed to issue a "dividend" until 1616 - and it came in the form of land, not cash! By 1624, King James had seen enough and revoked the company's charter. The crown assumed full control of the plantations the company had established in southern Virginia.

For a successful English colony to take hold, more than greed would be required.

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The rights to the Plymouth colony - the second half of the original 1607 American charter - had lain dormant since soon after they were first issued, when an attempt to settle an area near present-day Bath, Maine failed.

In 1620, having fled to the Netherlands but still in search of a new permanent home, the Pilgrims saw an opportunity. They lobbied a firm in London called the Merchant Adventurers to finance a voyage to America. The Merchant Adventurers paid the passage in exchange for a seven-year labor contract with the company, though the Pilgrims were also guaranteed some equity. (The religious tolerance demonstrated by company officials is no small matter.) As the New York Times' Kate Zernicke wrote last year:

Historians say that the settlers in Plymouth, and their supporters in England, did indeed agree to hold their property in common - William Bradford, the governor, referred to it in his writings as the "common course." But the plan was in the interest of realizing a profit sooner, and was only intended for the short term; historians say the Pilgrims were more like shareholders in an early corporation...

"It was directed ultimately to private profit," said Richard Pickering, a historian of early America and the deputy director of Plimoth Plantation, a museum devoted to keeping the Pilgrims' story alive.

The Pilgrims ended up at the point we know today as Plymouth but lacked a license to settle there. So they asked the Merchant Adventurers to sign a contract on their behalf with a man named Sir Ferdinando Gorges, who'd secured the dormant Plymouth rights and was in the process of rechartering the company under the name "The Council established at Plymouth, in the County of Devon, for the Planting, Ruling, Ordering, and Governing of New England,' to settle large swaths of land in "New Plymouth."

As Caleb Johnson, a member of the General Society of Mayflower Descendants, writes:

The Mayflower Compact was a "quick fix", but even the Pilgrims knew they would need the [authority] of the English government behind them if they wanted to continue living at Plymouth. When news from Plymouth returned to England in May, 1620 along with the Mayflower, the Merchant Adventurers led by John Peirce went to the Council of New England to get the Pilgrims the rights to live and establish a government of their own at Plymouth. The result was the 1621 Pierce Patent, which in a sense supersedes the Mayflower Compact.

As at Jamestown, difficulties initially surfaced in and around Plymouth. The Council got a bit overzealous in issuing commercial charters to individual English merchants, and Bradford would go on to complain of lazy and incompetent settler neighbors. You can see the outlays of the land grants, and how the pilgrims basically subleased Gorges' territory (they're not formally listed anywhere).

Some of these men got into the habit of swindling American Indians. This, in turn, led the Indians to deem all settlers enemies, and the resulting ill will never really dissipated. These merchants also sought to hedge the small margins they were realizing by drastically overcharging the pilgrims for the basic goods they needed.

"But by thrift and industry," George Cawston writes, the pilgrims triumphed. By 1627, they'd accumulated enough wealth that a group led by Myles Standish could buy out the Merchants' stake in Plymouth. The Pilgrims formed a government and until 1640 elected their own governor.

So the Pilgrims were more successful than the Jamestowners, and that's why we know them today. However, never numbering more than several hundred - and eschewing any form of financial enterprise - they ultimately lacked the means of getting America itself off the ground.

That distinction would fall to the Massachusetts Bay Company, established in 1627 by a group of wealthy investors from western England known as Puritans. Their religious views were not quite as radical as the austere Pilgrims', but a crackdown on non-conformists in England shifted the organization's focus from profit-seeking to something else, according to Robert Brennan:

The combination the wealth of the companies' backers, along with a more sustained wave of settlers fleeing intolerance, allowed the Massachusetts Bay Company's to become England's first large-scale successful American colony. Eventually they absorbed Plymouth colony. We know the rest of the story from there.

One final note: although the Massachusetts Bay Company became successful, it was not America's most successful company. That distinction belonged to the Dutch West India Company, a nationalized corporation set up by the Netherlands government, which between 1624 and 1664 set up a thriving trading hub at the mouth of the Hudson called New Amsterdam ...