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Asleep by a frozen sea or a financial innovator? The Hudson's Bay Company, 1714-63.

Joseph Robson's accusation in 1752 that the Hudson's Bay Company (HBC) had "for eighty years slept at the edge of a frozen sea" created an image of the early history of the company which has, to a large extent, persisted. (1) Most of the assessments of the company's performance by historians have focused on its activities in North America and its performance relative to its French rivals. The aim of this article is not to conduct a comparative study of British and French approaches to the fur trade in North America, but rather to re-examine the performance of the HBC during the fifty years from the end of the War of the Spanish Succession (1702-13) until the end of the Seven Years War (1756-63) from a different viewpoint--that of its managers in Britain. This analysis reveals that the HBC's approach to management gave it considerable operational flexibility within North America while allowing it to protect the interests of its British shareholders.

Despite its small size, the HBC enjoys a lively historiography. The most pointed criticism of the HBC during this period came from W.J. Eccles in the late 1970s and early 1980s. Eccles challenged Harold Innis's classic argument that the advantage that Britain gained in the fur trade was the result of superior British manufactured trade goods. (2) Eccles noted the increase in the French share of the fur trade and maintained that, although French participation in the fur trade was essentially politically motivated, "had the Seven Years War not intervened, the Hudson's Bay Company might well have been driven to the wall by the Canadians." (3) As recently as 2010, in her review of the HBC's victory in the 1749 parliamentary enquiry regarding its monopoly, the verdict delivered by Marie Peters was that "despite a battery of petitions and apparently persuasive evidence in 1749, no action was recommended. It seemed that a major opportunity for expansion of trade and settlement was lost." (4) Even among its admirers, the small size of the HBC prior to the Seven Years War has dampened enthusiasm for the quality of its management. In the Wealth of Nations, first published in 1776, Adam Smith credited the HBC with carrying on the trade with a considerable degree of success on account of its small size, which enabled it to have nearly the same degree of vigilance and attention as a copartnery. (5) In 1958, E. E. Rich, the author of the official history of the HBC based on its extensive archives, described the company prior to the Seven Years War as "quiet, well ordered and by no means spectacular." (6) In 1987, Frits Pannekoek described the HBC during this period as a "small, reasonably successful business." (7)

The operations of the HBC in North America are particularly significant for historians interested in the development of Canada and the interactions between European fur traders and native peoples. (8) Ann Carlos and Frank Lewis's Commerce by a Frozen Sea (Philadelphia, 2010) is the most recent of the economic studies. It also focuses largely on the HBC's North American operations. (9) The HBC's growth in North America prior to the Seven Years War was constrained by its policy of trading at forts on the coast of Hudson's Bay and not expanding into the interior of the continent. As Arthur Ray and Donald Freeman noted, there were practical difficulties which the HBC faced in expanding into the interior. A fundamental problem was that birch trees, which could be used to build canoes, do not grow on the shores of Hudson's Bay. (10) The policy of trading at posts on the bay meant that the HBC had much lower transportation costs than its rivals. (11) However, the policy also caused the HBC to lose market share to its competitors. Daniel Francis and Toby Marantz observed that, in contrast to the HBC, the French were "energetic in carrying the trade to the Indians." (12) After the conquest of New France, the North West Company captured the bulk of the fur trade in the late eighteenth and early nineteenth centuries. (13)

By examining the operations of the HBC from the viewpoint of its managers in London, this article provides different insights into the health of the company than are evident from a focus on North America. In particular, the HBC's use of financial securities to manage its cash flow is an important aspect of its operations which has not been examined in detail and which has a major bearing on the Innis-Eccles debate. The size of this portfolio, combined with its cost structure, gave the HBC considerable flexibility to raise the price offered to First Peoples for furs without exposing its proprietors to significant risk. Moving beyond the issues associated with the fur trade, an analysis of the HBC as a British company can also shed light on historiographical debates about the merits of chartered trading companies and the manner in which London merchants dealt with problems of credit and liquidity in the eighteenth century.

The HBC, along with the Royal African Company (RAC) and the East India Company (EIC), has been drawn into a heated debate amongst historians about the merits of joint-stock chartered trading companies. (14) Ann Carlos and Stephen Nicholas challenged the traditional view of the early trading companies as failures and argued that they successfully employed techniques to control overseas managers, such as incentive contracts, which were to become common in multinationals. (15) Carlos and Nicholas contended that, because of the high volume of their transactions, the "vertically integrated" structure adopted by the EIC, the RAC and the HBC was optimal. (16) This view was opposed by S.R.H. Jones and Simon P. Ville who viewed the chartered companies as rent-seeking monopolists. Jones and Ville listed a series of allegations concerning the companies--that they had persistent problems with their overseas agents, that their information was inaccurate and out of date, and that they were overburdened with detail. (17) Jones and Ville attributed the survival of the companies to political rather than economic considerations:

   The adoption of the joint stock form enabled royalty, courtiers,
   and other influential investors to share in monopoly profits. The
   companies also served as a useful means of projecting state power
   in an age of mercantilism, initiatives in the form of gifts,
   letters of goodwill, and the deployment of diplomatic, naval, and
   military personnel being an integral part of foreign policy. (18)


After some sparring between the two sides in the December 1996 issue of the Journal of Economic History, the debate ended inconclusively with Jones and Ville posing the question, "Why, if the trading companies and their directors were so smart, did they waste resources securing and defending their privileges when they supposedly possessed a decisive competitive advantage?" (19)

The recent historiography of both the RAC and the EIC has emphasized the importance of political rather than economic influences on these two companies to a greater extent than the historiography of the HBC. In part, this is a reflection of the relative sizes of the three joint-stock chartered trading companies and their financial significance in London. The capital value of EIC stock in 1720 was 3,194,080 [pounds sterling] while, for the HBC, it was 103,950 [pounds sterling]. (20) The capital of the RAC after its reorganization in 1712 stood at 451,350 [pounds sterling]. (21) In the case of the RAC, William Pettigrew observed that the constitutional challenges of the 1690s intensified the politicization of the slave trade and saw independent slave traders argue that the right to trade in enslaved Africans was a natural right, thus challenging the RAC's monopoly. (22) Steve Pincus has used the attacks on the RAC and the EIC in the wake of the Glorious Revolution as case studies which illustrate differences between Tory (pro-monopoly) and Whig (anti-monopoly) theories of political economy. (23) Philip Stem's, The Company-State, throws fresh light on the history of the EIC by arguing that the company was deeply concerned with the governance of its overseas territories well before the grant of the diwani (the right to collect taxes) for the states of Bengal, Bihar, and Orissa in 1765, the point when the EIC has usually been seen making a transition from its "commercial" to "imperial" phases. (24) The major study of the HBC as a state-like institution only starts after the merger with the North West Company in 1821, but an article by Edward Cavanagh in 2011 echoed Stem's description of the EIC and argued that the HBC was acting as a "company-state" in the eighteenth century. (25) However, with the notable exception of the 1749 parliamentary enquiry into its monopoly, which the HBC won, the HBC spent very little time in the political limelight in the eighteenth century compared to the two other joint-stock trading companies. Size is part of the explanation, but so too is an understanding of the HBC's financial health.

The analysis of the HBC's operations in this article can also help to improve our understanding of how eighteenth-century merchants in London managed their finances. Jacob Price, a pioneer in the field who identified the key concerns of merchants, emphasized the focus of merchants on problems relating to credit and liquidity. (26) For a few trades, notably the tobacco trade, we have a reasonable understanding of how these issues affected merchant operations. (27) However, even for the tobacco trade, we have a much better understanding of the Glasgow trade than we have of the London trade. As Price noted, "If our information on the capital structure of the London trade is so sparse as to be only tantalizing, our data for Glasgow are considerably fuller and richer." (28) In 1995, David Hancock observed that London's merchants, who were the driving force behind overseas trade, had remained largely unstudied. (29) The situation has improved somewhat since then, with the appearance of more recent work on their family networks, social life, and cultural milieu. (30) However, we still have comparatively little scholarship which examines their commercial operations in the eighteenth century and how they solved problems of credit and liquidity. (31) Although the RAC and the EIC were also London-based and left behind detailed financial records, it is important to recognize the limitations of the work on the RAC and EIC with respect to the study of eighteenth-century merchant enterprise. The RAC was not commercially robust. The exemption of private traders from the requirement to pay a contribution toward the upkeep of the RAC's forts in 1712 severely damaged the RAC's financial viability. Its survival in the first half of the eighteenth century can be attributed, at least in part, to its ability to secure parliamentary subsidies for its forts. (32) As for the EIC, its size, financial resources, and exercise of territorial sovereignty overseas were not typical of merchant operations. As K.N. Chaudhuri noted, "The East-India companies did not set the general institutional nonn of long-distance trade in the seventeenth and eighteenth centuries, which was firmly based on private partnerships and individual family-owned business houses both in Asia and Europe." (33) The detailed financial records of the relatively small HBC are, therefore, a particularly valuable source for the study of eighteenth-century British merchant enterprise. The analysis that follows demonstrates that the HBC was a pioneer in its use of financial investments to complement the traditional merchant business of managing the flow of commodities.

I. Company Strategy

Before turning to how the HBC generated revenues, controlled costs, and managed its cash flow, it is useful to examine the perspective of the people actually running the company. What were company managers trying to achieve and how did they try to achieve it? What, in other words, was the HBC's strategy?

The company's strategic choices prior to 1714 were indeed very limited. Once trade was established, the dominating factor in the company's early history was armed conflict with the French in Hudson's Bay, whether in the form of French settlers from New France or regular forces from France. (34) French victory in a naval battle in 1697, which saw a French flagship defeat two armed company freighters and a Royal Navy frigate despite being heavily outgunned, left the French in control of all but one of the company's major posts on Hudson's Bay. The HBC recovered all of its Hudson's Bay posts in the 1713 Treaty of Utrecht, but the imprecise delineation of the HBC's territory meant that the French could continue to pose a threat to the company's business operations. (35)

The HBC's management strategy from 1720 to 1763 was to generate cash through the careful control of costs. Proceeds from the business were thus not re-invested in the business. Rather, the company distributed cash to shareholders (in the form of dividends) and managers (in the form of "loans") or invested it in a growing portfolio of financial securities. An alternative strategy, driven by exploration and geographical expansion, would have involved more investment in forts and ships, thereby increasing fixed costs but providing a platform for accelerated growth. The origin of the HBC strategy of managing the operation for cash rather than growth can be traced to 1720, when an ambitious capital expansion scheme collapsed. The architect of this strategy was Sir Bibye Lake (1684-1743). (36)

Lake was the dominant figure in the HBC during the first half of the eighteenth century, but it was his involvement with the RAC which earned him most contemporary press coverage. He first appeared on the management committee (similar to a modem board of directors) of the HBC in 1709 and the RAC in 1720 and remained on both until his death. Like his father, Thomas, Sir Bibye was a lawyer. His father had been the largest holder of HBC stock, was a significant holder of RAC stock, and dabbled in more speculative ventures such as the Hollow Sword-Blade Company. (37) Sir Bibye not only acquired his father's appetite for joint-stock companies but also was involved in a number of legal disputes, not related to the HBC, after the War of the Spanish Succession. (38) From the viewpoint of the RAC, which was still a joint-stock company in 1720 but under constant attack in Parliament, Lake must have seemed like the ideal recruit--a lawyer not afraid of a fight with experience in a joint-stock company.

While the HBC governor--the equivalent of a modem chairman/CEO--played a central role in setting company strategy, the firm maintained the appearance of a family operation because of its modest size and the fact that during the eighteenth century, continuity of management and succession planning were hallmarks of the HBC committee who ran it. The character of HBC management might have been quite different had Lake's stock expansion plan (discussed below) succeeded in 1720, forcing the HBC to expand aggressively to satisfy its shareholders. Instead, the salient features of the HBC committee in 1720 were the longevity of its members' service and the fact that a number of them, who joined at roughly the same time as Bibye Lake, were sea captains. Captain John Merry joined the committee in 1706 and held the post of deputy-governor from 1712-29. (39) Captain Samuel Jones was first elected in 1712, served as deputy-governor from 1729-35, and remained on the committee in the mid-1730s. (40) Captain John Fullartine had served at Hudson's Bay and, after returning to London, was on the committee from 1711-38. (41) Although a few committee members had outside interests, this was a group which was very much focused on the business of the HBC. In the twelve-month period prior to the 1749 parliamentary enquiry, the full committee met forty-eight times. (42)

The evidence suggests that prior to 1720, Lake was interested in expansion. In June 1719 an expedition under the command of a former committeeman, James Knight, left Gravesend in search of copper and gold sources which had been reported by indigenous informants. The hope was that this expedition would also uncover a northwest passage to Asia. Tragically, Knight, along with two ships and their entire crew of perhaps fifty men, were never seen again. The failure of this expedition was not trivial. Its estimated cost was 8,000 [pounds sterling], or roughly twice the HBC's annual expenditure on trade goods in the first half of the eighteenth century. (43) It was not until Anthony Henday's expedition of 1754 and, more significantly, the voyages of Samuel Heame in the late 1760s and early 1770s, that the HBC would again seriously pursue exploration of the interior. It was only in 1774 that a trading post was established in the interior--Cumberland House in what is now the province of Saskatchewan.

The decisive factor that led Lake to manage the business for cash rather than pursue exploration and growth was the crash in the London stock market in 1720 known as the South Sea Bubble, which ultimately made significant capital expansion within the framework of a joint-stock company, such as the HBC, unrealistic. Indeed, while Knight's fate was still uncertain, Lake had proposed a scheme to increase the capital stock of the company in August 1720.44 There were two elements to the scheme. The first was a three-for-one stock split to bring the capital stock from 31,500 [pounds sterling] to 94,500 [pounds sterling], a figure that more accurately reflected the value of the company's assets. (45) The benefit to shareholders of this first element was that their dividends would triple, assuming a constant dividend rate. The second element of the scheme was more ambitious--a rights issue. (46) This would have involved existing shareholders subscribing to a new issue of 283,500 [pounds sterling], to be paid in instalments of 10% every three months. This would have translated into new money for the HBC and would have completely altered the scale of its operations. At the General Court (assembly of shareholders) of 23 August 1720, Lake stated that the stock of the company was too small to enlarge the trade. (47) The scheme was approved by the General Court a week later. The company undoubtedly required more capital if it was to fund more expeditions, move inland and construct new factories, but it is difficult to conceive of even the most ambitious plans requiring an extra 283,500 [pounds sterling]. Clearly, Lake sought to take advantage of a rampant stock market. If share prices continued to appreciate, Lake and the other shareholders would have been able to sell their new shares at a profit. The staggered payments under the scheme also meant that existing shareholders would have had a significant leverage opportunity. If the market had continued to rise, existing shareholders could have sold their right to acquire new shares at a profit after making only a single 10% payment. Almost coincidental with the approval of the scheme, the stock market crashed. The ambitious second element was formally dropped at a General Court meeting on 28 November 1720 where the governor informed the Court that the posture of affairs had much altered since last August. The three-for-one stock split proceeded, and since a modest amount of new capital had already been subscribed, capitalization rose to 103,950 [pounds sterling]. (48)

Had the South Sea Bubble not burst in the summer and autumn of 1720, Bibye Lake's challenge as governor would have been much altered. Sooner or later, when stock market growth slowed, investors in the HBC would have begun to demand dividend returns on their shares which were not radically out of line with the returns available on alternative investments (such as the 8% dividends which became the norm for the East India Company). As the HBC's capital base would have been 378,000 [pounds sterling] had the scheme gone ahead, dividends of over 30,000 [pounds sterling] annually would have been required. This would have required a threefold expansion or more in the scale of the company's business. In the absence of entirely new lines of business such as the discovery of metal deposits, the only other option would have been to establish new fur trading posts inland. This would have required the company to explore new territory in the west and to compete aggressively with the French to the south. The failure to increase the capital base to 378,000 [pounds sterling] was a blessing in disguise. It meant that shareholders had not bought in at grossly inflated prices, and moreover they benefitted from windfall dividend yields as a result of the three-for-one stock split.

The South Sea Bubble tarnished the reputation of joint-stock companies as investments and the collapse of the rights issue forced Bibye Lake into a strategy of carefully controlling costs and managing the business for cash. After 1720, even modest attempts at expansion would need to be funded through retained earnings, which themselves were being invested in a rapidly growing portfolio of financial securities. The company also needed to satisfy the dividend expectations of shareholders and, in this regard, they were extremely successful: from 1722 until the end of the American War of Independence, there were only two years when dividends fell to 7% instead of persisting at the usual 8% or 10% rate. (49) In fact, the company only failed to pay a dividend in 1783, for the first time since 1718, after a squadron of French ships destroyed the company's two most important trading posts on Hudson's Bay.

Thanks to steady dividends, the HBC's gave the managers of the company a strong vote of confidence in the 1749 parliamentary review of the company's monopoly. It helped that a small group controlled the HBC shareholder base. An analysis of HBC shareholder composition in ten-year snapshots leading up to the 1749 parliamentary enquiry reveals that current and future committee members effectively controlled the company, although their domination would diminish by the middle of the eighteenth century. (50) In 1718, those committee members held roughly two-thirds of shares. Sir Bibye Lake, along with his father and father-in-law, held nearly one-fourth of them. From 1720, the governor was required to hold a minimum of 1,800 [pounds sterling] worth of shares, and voting rights at the General Court were restricted to those who held over 900 [pounds sterling] of shares. The share expansion scheme of 1720 diluted the dominance of insiders somewhat; however, current and future management committee members still held a small majority of shares in 1728 and 1738. Sir Bibye Lake personally held over 10% of shares in 1728 and 1738. During the last five years of Lake's governorship (1738-1743), the majority of stock transfers involved current and future committee members and the percentage of shares transferred to others was typically less than 3% annually. (51) By 1748, current and future committee members still held over 40% of shares and would have held close to a majority of shares which were not held either by the King (who owned slightly less than 3% of shares) or were temporarily held by the Chancery as they were the subject of inheritance disputes (roughly 10% of shares). Despite the appearance that the company was being run for the benefit of insiders, in effect as a partnership, other shareholders were not dissatisfied. In the first half of the eighteenth century, there were very few investment opportunities that offered the relatively high and predictable yield of HBC shares. (52)

However, the HBC's consistent financial results masked a deteriorating competitive situation. The volume of the fur trade in New France was always much larger than the HBC's trade. For the period 1718-61, W.J. Eccles estimated that the French fur trade was, at a minimum, two-and-a-half times as large as the HBC's. (53) These relative proportions are supported by English fur import statistics for 1765, which indicate that imports from former French territory in Canada following its conquest were about two-and-a-half times greater than those from Hudson's Bay. (54) The French fur trade was also more varied than the HBC's. It has been estimated that, for the period 1713-61, beaver fur imported into La Rochelle (the port used in the French fur trade) constituted only about 40% of furs imported from New France. (55) Moreover, as the French began to push their fur trade westwards in the 1730s, the value of their fur imports into France increased: statistics for La Rochelle indicate a nearly 70% jump between the two ten-year periods of 1718-27 and 1728-37. (56) This contrasted with the decline in HBC beaver fur imports from their 1730-31 peak. HBC managers were not insensitive to growing French market share, but they resolutely stuck to their strategy of managing their business for cash rather than growth. To understand why the HBC was able to do so, it is necessary to examine the operations of the company, starting with how it generated revenue in Britain.

II. HBC's Revenue Profile

Beaver fur was the HBC's core business. As part of the 1749 parliamentary enquiry into the company's business, the HBC divulged a detailed breakdown of its sales for the previous ten years. (57) During this period, beaver fur accounted for roughly three-quarters of total revenues, which ranged from just under 23,000 [pounds sterling] to just over 30,000 [pounds sterling] per annum. The major use of beaver fur was in the production of beaver hats. For most of the eighteenth century, the fashion for men was for three-cornered hats which, depending on the quality of the hat, used some combination of beaver and less expensive furs. Britain had benefitted from the influx of Huguenot hatmakers from France following the revocation of the Edict of Nantes in 1695 and a thriving hatmaking industry developed, centred on Southwark in London. (58) We do not have good data for domestic British demand for hats, but the rapid development of the export trade in high-value beaver hats was a key feature of the development of the hatting industry in Britain. As early as 1695, it was estimated by members of the London hatting trade that 40% of their annual production was for the export market. (59) Between 1720 and 1750, the value of beaver hat exports from England more than tripled. (60) The British hatmaking industry was boosted by the Hat Act of 1732 which forbade the export of hats from the British colonies. Several large hatmakers dominated the export trade, with the largest reported to have exported more than 12,000 [pounds sterling] worth of hats annually in the 1730s. (61) By far the largest export market for beaver hats was Portugal, followed by Spain. (62) The Methuen Treaty of 1703, which facilitated trade with Portugal, was clearly a contributing factor to this increase. It has been estimated that England exported a total of some twenty-one million beaver hats between 1700 and 1770. (63) In addition to an increase in the export market for hats, there was also an increase in fur re-exports from England. Between 1700 and 1725, the value of this business increased by about a third, with Holland and Germany being the most important markets. (64) This improving demand early in the century resulted in significant price increases for beaver fur. Ann Carlos and Frank Lewis have calculated a composite price index for beaver pelts in London that shows that they rose by roughly 50% between the early 1720s and the 1740s, increasing by a further 60% between the 1740s and 1750s. (65) The company was able to take advantage of these price increases because it was able to maintain reasonable supplies of beaver fur until the start of the Seven Years War. (66) Supplies of beaver fur showed a pattern of increase in the 1720s, reaching an all-time peak in 1730-31. Supplies declined in the early 1730s to levels similar to the early 1720s. After a spike in the late 1730s and early 1740s, supplies for the remainder of the 1740s were only slightly lower than they had been in the early 1720s.

On the surface, diversification seems to be a strategy which might have offset the impact of declining supplies of beaver but it amounted to little. The company archives are full of references to exotic products such as goose feathers and narwhal tusks but, in practice, the only significant product other than beaver was marten fur, representing 10%-15% of revenues in the 1740s. Perhaps the HBC was reluctant to commit too heavily to martens as demand for marten fur, used in clothing, was very dependent on fashion, as Henry Sperling noted in his 1749 testimony to Lord Strange's committee. (67) The core competencies of eighteenth-century merchants were financial management and organization of the myriad logistical requirements of overseas trade, not fashion sense.

The large price increase for its core product, beaver fur, was the fundamental reason why the HBC was able to pay steady dividends and increase retained earnings under Bibye Lake's governorship without substantially expanding its operations. There are a number of potential explanations for the more than doubling of price for beaver fur between the 1720s and 1750s. Elizabeth Mancke has shown that the HBC committee controlled the quantities to be offered at each auction. (68) Of course, the HBC was not the only supplier of beaver fur to the English market. While the French prohibited beaver fur exports to Britain, New York merchants based in Albany were also active in the fur trade. There is some suggestion that furs from New France were secretly exported to Albany, but the quantities involved seemed merely to compensate for dwindling American fur stocks. About one-third of the beaver fur imported into Britain in the 1720s came from New York. (69) New York merchants were not obliged to sell their furs at public auction but the HBC auction in March effectively set the price for New York furs. (70) HBC furs were better quality than New York furs and generally commanded a significant price premium (perhaps 20-40%). British merchants buying for export could buy Canadian furs in Amsterdam and this would have had some impact on beaver prices in London but, essentially, the price for the British market was set by the HBC auctions. Inventory management by the HBC would, therefore, have influenced the market price for beaver but the underlying explanation for the increase in prices had to be related to increases in demand.

Demand for beaver fur in Britain was ultimately related to demand for beaver hats, a luxury consumer good. It may therefore be tempting to view the fate of the HBC's business in Britain as being essentially a case of riding the wave of the eighteenth-century "consumer revolution," a notion launched with the publication of The Birth of a Consumer Society in 1982. (71) An expanding British middle class, seeking to emulate aristocratic manners, was consuming an ever expanding array of goods, including beaver hats.

However, from the viewpoint of the HBC's management, the market for the HBC's furs was a wholesale market. In this respect, the British operations of the HBC were not dissimilar to those of other chartered companies and unregulated trades involved in the bulk import of commodities such as tobacco and sugar. There were relatively few importers selling to relatively few wholesale clients. (72) The needs of British consumers were secondary to those of the wholesale market and this suited the companies who were seeking reliable revenue sources. Many wholesale customers were suppliers to both British and continental European markets, thereby reducing their exposure to temporary demand fluctuations in a single market. In Britain, wholesalers supplied hatmakers, who satisfied domestic British demand for hats and exported large quantities of hats to the Iberian Peninsula. (73) Pelts, on the other hand, went mainly to Germany, Holland, and Russia. Furthermore, by avoiding direct participation in the retail market, the HBC was able to contain marketing costs in Britain. Even in the wholesale market, the HBC was able to simplify their marketing by selling via auction.

The contacts required for the export trade and the large amounts of liquid capital required for the purchase of beaver fur at auction led to the domination of the hatmaking trade by relatively few large merchants. (74) Even more significantly for the HBC, the need for capital and contacts led to a concentration of trade amongst large furriers. In the year immediately preceding the parliamentary enquiry, some 60% of HBC sales involved just four large buyers--Henry Sperling, Hennan Berens, Anthony Lutkens, and Samuel Robinson. (75) These big buyers were skinners and not feltmakers. They also had close ties to the HBC. Berens and Sperling were shareholders. Sperling's daughter married Sir Bibye Lake's son and two of Berens's descendants became HBC governors in the nineteenth century. A striking characteristic of these large furriers was their strong orientation toward the export market. From its London base, the Sperling firm, for example, was linked to seven major overseas markets on three continents.

The HBC needed large customers to provide an assured market for their furs because their ability to expand production was limited and supplies of beaver fur were under pressure, as stocks depleted around the major trading posts and French competition intensified. From the HBC's point of view, large customers such as the Sperlings were highly desirable. They were financially stable (roughly a third the size of the HBC itself), paid promptly (usually within weeks of an auction thanks to a 5% discount offered by the HBC), and assumed much of the risk in developing new markets such as Russia. (76)

III. Controlling Costs

A comprehensive understanding of HBC's business model requires an analysis not only of how the company generated revenue, but also of how it managed costs. It is only by examining its cost structure that we can gain a full appreciation of its capacity to withstand price competition.

The British-manufactured products that the HBC supplied to First Peoples as trade goods did not provide the company with a significant competitive advantage. During the first half of the eighteenth century, France essentially supplied the same trade goods as Britain in the Levant and in the North American fur trade, but at lower prices, and sold them more aggressively in more overseas markets. The merchants in the companies sought to compensate for the deficiencies in British manufactured goods by including re-exported goods in trade (as the French did). However, the cost structure of the HBC led it to deliberately constrain its overseas marketing, both in terms of pricing and distribution.

The HBC's fixed costs were relatively high given its level of turnover and it needed to pay dividends to keep its shareholders happy, but its expenditure on trade goods was low. Therefore, the HBC committee was principally concerned with controlling fixed costs and the key to controlling fixed costs was limiting expenditure on new forts in Rupert's Land and on new ships to reach those forts. Sir Bibye Lake would have been well aware of the perils of not being able to generate sufficient income to cover expenses related to overseas forts from his experience as sub-governor of the Royal African Company, which was incapable of maintaining its forts without a parliamentary subsidy.

The HBC committee in London attempted to manage even the most minute aspects of the company's operations. They approved all salaries and terms of employment, purchased all trade goods and attempted to regulate the terms of trade in detail. The HBC governor was assisted by a deputy and seven other committee members, who, during the most active periods in the early spring and late autumn, met at least weekly at the company's premises on Fenchurch Street. There were only a few members of staff in London but the company had a relatively large number of employees for the size of the business. There were typically more than a hundred men distributed among the four main factories (posts) on Hudson's Bay, which were located at the mouths of rivers emptying into the bay. The three or four ships which were sent annually to Hudson's Bay each had crews of twenty to thirty men. (77) Most employees were not highly paid, particularly the Orkney islanders who formed the bulk of the servants at the factories and typically earned less than 10 [pounds sterling] per year plus room and board. (78) It was only the men in charge of the factories and the ship captains whose earnings approached those of the committee men in London. (79)

The committee in London attempted to control the pricing of its goods overseas, too. The HBC published a "standard of trade" which prescribed the amount of trade goods to be exchanged for each type of fur. The rationale for this pricing approach is the subject of some controversy in the historiography of the fur trade. E.E. Rich took the view that First Peoples did not behave in the same way as Europeans in that their supply of furs appeared to be insensitive to changes in the quantities of trade goods offered. (80) Arthur Ray held that the motivations for First Peoples to engage in trade were to satisfy their personal needs for European goods and to acquire status through the redistribution of goods. (81) Under this theory, an increase in the volume of trade goods offered per fur could paradoxically lower the quantity of furs provided. Ann Carlos and Frank Lewis have challenged this view of unorthodox First Peoples economic behaviour, arguing that where there was competition between the HBC and the French, the quantity of trade goods offered increased and indigenous trappers responded by increasing fur supplies. (82) In other words, there was some limited local pricing flexibility. Until the 1750s, the typical practice was for the posts to offer fewer trade goods than prescribed under the official standard, creating what was known as an "overplus." The more competition a post faced for its trade, the smaller the typical overplus became. In the 1750s, trading posts even offered slightly more trade goods for furs than specified in the official standard. Carlos and Lewis have argued that indigenous peoples increased their consumption of luxury goods, such as liquor and tobacco, as fur prices increased and their needs for basic goods such as guns and kettles were satisfied. The HBC's pricing policy probably reduced the potential for competition between its trading posts, but gave the French, who had a more flexible approach to pricing, an advantage. For example, the HBC's official standard of trade valued one beaver skin as equal to three marten skins despite the French valuing one beaver skin as equal to one or two marten skins. In a letter dated 12 August 1727, Joseph Myatt from Albany Fort on the Bay apologized to the HBC committee for having traded martens at two per beaver and said that had he not done so, the First Peoples would have taken the small furs back and traded them with the French. (83) The company's inflexibility on trade terms meant that although marten offered by far the highest profit margin of any fur, the French had the bulk of the trade in light furs. (84)

The HBC's cost structure helps to explain some of its management priorities. In the year prior to the 1749 parliamentary enquiry, operating costs were roughly 25,000 [pounds sterling]. The biggest cost item was described as merchandise exported, and amounted to 10,000 [pounds sterling]. This figure contained both trade goods and provisions for employees such as meat, cheese, rope, and candles. Trade goods represented about 4,000 [pounds sterling] of this figure. It should be noted that some trade goods would also have been manufactured at Hudson's Bay but trade goods represented a small proportion of operating costs. Expenses related to shipping and servants in Hudson's Bay were about equal at 5,000 [pounds sterling] each. Duty charges were 3,500 [pounds sterling]. Re-exporters were entitled to claim a drawback on these duties when furs were sent abroad. Central administrative expenses, including the salaries of committeemen, were about 1,500 [pounds sterling]. This 25,000 [pounds sterling] of operating expense was set against operating revenue of 31,000 [pounds sterling] to produce a 6,000 [pounds sterling] operating profit. The company earned about 1,000 [pounds sterling] in interest on East India bonds and Bibye Lake's widow, Mary Lake, repaid some 2,000 [pounds sterling] of her husband's loans. This cash inflow would have been sufficient to pay dividends of 8,000 [pounds sterling] but the company also paid over 3,000 [pounds sterling] to committeemen, which may have been for the repayment of loans. Figure 1 below, based on the Grand Journal, breaks down the HBC's costs.

From a management viewpoint, attention to overheads was understandable as the bulk of operating expenses related to factories, ships, men, and provisions. (85) The company's concern with overheads is reflected in a sophisticated attempt to account for individual factories and ships as profit centres. (86) The HBC's low expenditure on trade goods exposed it to accusations of outrageous profit margins. This charge, of course, overlooked overheads and, once total costs are considered, the operating profit margin was about 20%.

While this cost analysis has been based on an analysis of the Grand Journal for 1748/9, this was not an atypical year in terms of HBC expenditure on trade goods. Looking at the data for the preceding ten years which the HBC supplied to Lord Strange's committee, annual revenues averaged 27,345 [pounds sterling] with an average annual expenditure on trade goods of 3,674 [pounds sterling] (13.4% of revenues). (87) This is very much in line with the 12.9% revealed in the 1748/9 analysis. In a 1742 analysis of trade at the company's largest, York Fort, Ann Carlos and Frank Lewis also calculated that aboriginals received 14% of the ultimate value of their furs in the form of trade goods. (88)

HBC management resisted expansion of the business which would have increased overheads, but their hand would be forced, albeit in a modest way, by French competition. The major initiatives which resulted in cost increases were motivated by concerns regarding the French. Construction of a stone fort near modern Churchill, Manitoba (Prince of Wales Fort) began in 1732, shortly after the start of the westward expansion of the French fur trade. The French had been competing in the hinterland of Fort Albany on James Bay since 1714 but their move westward would bring them into the hinterland of York Fort, the main HBC factory, situated 100 kilometres to the southeast of Prince of Wales Fort. Maintenance of the HBC's beaver fur supplies was only made possible by an increase in production from the fort at Churchill, which helped to compensate for a decline in returns from York Fort. (89) There was a significant jump in HBC overheads between 1743 and 1744 when hostilities broke out with France. (90) Construction of Prince of Wales Fort was accelerated. The walls of Prince of Wales Fort were eventually forty feet thick. York Fort was rebuilt. A new ship, the Prince Rupert, was built and manned, and an existing ship, the Seahorse, was fitted and manned as well. The two ships were to remain in Hudson's Bay to protect Prince of Wales Fort and York Fort from attack by sea. Driven by this increased cost, dividends were cut from 10% to 8% in 1746. Even with the increase in overheads after 1744, the picture derived from the Grand Journal analysis for 1748/9 indicates that the HBC was generating a healthy level of operating profit and cash.

The HBC's policy of restricting the number of overseas posts that they maintained meant that they dealt with middlemen in Rupert's Land as well as in Britain. The HBC dealt mainly with Cree who obtained furs hundreds of miles inland from the HBC's posts on Hudson's Bay. During this period, relationships between the HBC and First Peoples were not, on the whole, acrimonious. The HBC's imposition on native land was minimal and both sides gained economically from trade.

HBC management was very interested in the needs of indigenous consumers despite their relatively small expenditure on trade goods. The major trade goods manufactured in England were firearms (guns, gunpowder, and ammunition) as well as cloth. The committee sought and received extensive feedback on the quality of trade goods from servants at Hudson's Bay. Thomas McCliesh's letter from Albany Fort of 16 July 1716 is a good example. (91) McCliesh requested that the company send him short guns and small kettles as these were preferred by First Peoples who had to transport them in canoes and use them in the woods. He also indicated that they did not care about the fineness or coarseness of cloth as long as it was thick. The importance of liquor in the trade is a matter of some debate. McCliesh claimed that "I can have more done towards the encouragement of the trade in small furs for two gallon of brandy than for forty beaver in any other goods in the factory." The significance of this statement lies in the official trade standard of a gallon of brandy as equal to four beaver. The official value of brandy shipped to Hudson's Bay for trade purposes was substantially less than the value of firearms or cloth, although the quantities of liquor shipped increased significantly between 1720 and 1760.92 This may not, however, reflect its real value as brandy had an important ceremonial function. Brandy was used by the HBC when welcoming the First Peoples to trade. French fur traders were also reported to have made liberal presents of brandy to First Peoples despite official disapproval of the use of brandy in the trade. (93) A vital differentiator for the HBC in competing with the French was Brazil tobacco. As E.E. Rich noted, "tobacco continued to be the one staple of the trade in which the English, with their trade privileges in Portugal, had the pull over the French." (94) In a letter from York Fort dated 20 July 1739, James Isham described how Indians were extremely grateful for a pipe of tobacco when they came to trade. (95) In the year prior to the parliamentary enquiry, the HBC spent roughly 1,000 [pounds sterling] on Brazil tobacco in October and November--roughly a quarter the value of trade goods. This is consistent with a pattern of increasing consumption of luxuries by First Peoples in this period of high beaver prices. This leads to the intriguing conclusion that the consumer revolution which really interested the HBC was in North America, not in Britain.

IV. Managing Cash Flow

The HBC, like other chartered trading companies, acted as an intermediary which created regional trade networks by interposing itself between suppliers and customers, both within Britain and overseas. They did not produce anything of consequence and they preferred to keep their marketing responsibilities as simple as possible. Their core skill and the key to their survival was their ability to manage their cash flow. For the HBC, the major financial concern was liquidity rather than credit. There were some trades, such as the tobacco trade, where merchants did extend large amounts of credit directly. However, for the HBC, credit was a relatively minor concern. The business was conducted on the basis of barter in Rupert's Land and the use of auctions minimized the exposure of the company to credit risk when goods were sold in Britain. The key financial concern for the HBC was management of its working capital or, in other words, the timing of its cash inflows and outflows.

Cash flow was extremely important to the HBC because the business was inherently seasonal. This seasonality was driven by the company's shipping cycle, which in turn was dictated by weather conditions. With ice breakup in Hudson's Bay typically in July and freeze-up in November or earlier, there were three or four months in which ships could safely navigate in the bay. Given that the journey from England to Hudson's Bay took some twelve weeks, with the return journey about half that length due to the prevailing winds and currents, it was only possible to make one round trip per year to Hudson's Bay. In practice, ships had to leave England before the end of May to arrive at the bay in summer, conduct the necessary business, and return safely to England in the autumn.

The seasonality of the HBC's business can be illustrated by examining the concerns of its directors at different points during the year. The following description is taken from the minutes of the committee and sub-committee meetings over the course of the year immediately prior to the 1749 parliamentary enquiry. April and early May were devoted to preparation for the departure of ships to Hudson's Bay from Gravesend on 10 May. The Admiralty was requested to provide a convoy for eighty leagues west of the Orkneys on 13 April, rough drafts of general letters to the factories on Hudson's Bay were reviewed on 22 April, and the pay of ship captains was authorized on 4 May. Payment of suppliers was authorized after the ships left and East India bonds were ordered to be cashed in on 25 May. The summer was generally quiet. Correspondence to Lisbon regarding supplies of Brazil tobacco was discussed on 6 July but the real activity started again in October. It was reported that the ships arrived back off Bournemouth on 5 October. East India bonds were cashed on 8 October and the letters from the factories were reviewed. On 11 October, it was decided to hold a public auction on 24 November and advertising arrangements for the sale were discussed. Duty on the imported furs was authorized to be paid on 19 October and seamen's wages were dealt with on 26 October. The quantities of furs to be put up for sale were agreed on 16 November. On 24 November, a General Court was convened in the morning, the fur auction was held in the afternoon, and a Committee of Sales met in the evening to review the results of the auction. Sale proceeds were used to purchase East India bonds and pay returned servants in December. January and February were spent evaluating and selecting suppliers for a wide range of trade goods as well as agreeing on staffing requirements in ships and factories for the coming year. A ship was to be sent out to each of four factories. The total complement of men was to be 108 on the ships and 132 at the factories. Early March was spent preparing for the second public auction, which was held on 16 March, and the annual cycle started again. Through analysis of cash transactions as recorded in the Grand Journal, these activities have been translated into seasonal cash flow in Figure 2 below.

What is evident from figure 2 is that the company's cash inflows and outflows were mismatched. Revenue came in at the beginning and end of the year while the major outflows were in the middle. This had created frequent liquidity crises in the HBC's early years, forcing the company to rely on expensive short term debt and loans from committee members. (96) The solution to this cash flow problem that the company developed was to invest retained earnings in East India bonds. East India bonds were bought in December and January using proceeds from the November auction. Substantial sales of East India bonds took place in the spring to pay dividends and equip ships and in the autumn to pay the bulk of salaries. Total sales of East India bonds for the year were approximately 13,000 [pounds sterling]. A cash payment to committeemen created a need to sell more bonds than were purchased in this year, but the company had on hand a stock of close to 20,000 [pounds sterling] in East India bonds in 1748.97 With this level of liquid assets, the company had no real debt requirement. Figure 3 illustrates how the HBC used East India bonds to manage its working capital requirements.

Ten years after the parliamentary enquiry, in the year of the conquest of Quebec, the HBC's investment portfolio had doubled and included a broader range of Bank, East India, and South Sea securities. (98) As its portfolio of financial securities expanded, the HBC brought in another senior figure with vast experience in the city and the world of stocks--William Baker. As an admiring Duke of Newcastle wrote to Pelham on 1 November 1748, "Baker would certainly make the best commissioner of trade except [Sir John] Barnard in all England." (99) Baker was a former alderman and chairman of the East India Company. He was the leading Carolina merchant of his day and was brought into Parliament by the administration in the 1740s. His appointment as deputy governor of the HBC in 1750 coincided with the diversification of the company's investment portfolio and, in the ten years of his deputy governorship, that portfolio doubled in size. Baker became governor of the HBC in 1760.

V. Conclusion

An understanding of how the HBC managed its business from Britain casts the company's performance in a different light and can also shed light on the historiographical debate concerning the ability of the HBC to withstand French competition. From the viewpoint of HBC shareholders, the fur trade was both profitable and predictable. For the company's managers, the HBC was also generating cash surpluses which could be used as collateral for other business ventures, either in the form of direct loans or short term sales of stock to the company. The HBC was, however, not a large business and its size was intentionally constrained. The decision to tightly control costs rather than expand by establishing trading posts inland, which resulted in a declining market share, made sense in an environment of rising fur prices but left the company very exposed to a downturn in the London fur market or to a reduction in supply. It is unclear how profitable the French gain in market share from their westward expansion was, but the growing population of New France, whose economy was dominated by fur trading, gave the French a strong incentive to continue to develop the fur trade. (100) Would this, in the absence of the Seven Years War, have driven the HBC "to the wall" as W.J. Eccles suggested? The answer is probably not for some time. The HBC's cost structure gave it considerable flexibility to raise the price offered to indigenous peoples for furs without exposing its proprietors to significant risk. Even a 50% increase in the cost of trade goods would only have cost 2,000 [pounds sterling] and could have been paid for either by a 2% reduction in the dividend rate or the sale of 5% of the company's 1759 securities portfolio. Committeemen would not, however, have been able to dip into company funds quite as freely. In its use of a portfolio of securities to manage its cash flow, the HBC's experience represents an important stage in the evolution of merchant finance. As Stanley Chapman observed, "eighteenth-century merchants were still primarily concerned in handling the commodities of the import-export trade, while the nineteenth century saw a shift to the provision of services." (101) This study shows that the management of the HBC had already moved well beyond simply organizing the exchange of commodities in the first half of the eighteenth century.

The HBC's performance in the first half of the eighteenth century certainly exposed it to criticism, most notably in the context of the 1749 Parliamentary enquiry into its monopoly. However, the company effectively countered that criticism in A Short State of the Countries and Trade of North America (London, 1749), in which Arthur Dobbs argued that the HBC's profiteering had allowed the French to undersell the HBC, expand southward and westward of Hudson's Bay, and capture the best furs from First Peoples. (102) However, the essential economic case against the company--that it was profiteering and not exploiting the opportunity to develop colonies--was refuted by both the material presented to Lord Strange's committee and witness testimony. Sir John Barnard's intervention also exposed the formulaic quality of the petitions against the HBC. (103) Unlike the apparent helplessness of the Levant Company in the face of French competition, the HBC approach to dealing with the French appeared attractively self-reliant, if not entirely effective and, whereas the RAC required a parliamentary subsidy for its forts, the HBC was self-sustaining.

In the context of North America, there was certainly an element of truth in the accusation that the HBC had slept by the edge of a frozen sea prior to the Seven Years War. However, viewed as a British company, the HBC was a financial innovator and its financial strength gave it a greater ability to withstand competition than has been recognized.

(1) Joseph Robson, An Account of Six Years ' Residence in Hudson Bay (London, 1752).

(2) Harold Innis, The Fur Trade in Canada (New Haven, 1930), p. 391.

(3) William J. Eccles, "The Fur Trade and Eighteenth Century Imperialism," William and Mary Quarterly 40, 3rd series (1983), pp. 341-62 and "A Belated Review of Harold Adams Innis's The Fur Trade in Canada," Canadian Historical Review, 60 (1979), p. 430.

(4) Marie Peters, "State, Parliament and Empire in the Mid-18th Century: Hudson's Bay and the Parliamentary Enquiry of 1749," Parliamentary History, 29, pt. 2 (2010), pp. 171-72.

(5) For Smith's discussion of the HBC, see The Wealth of Nations, Cannan's 1904 ed. (Chicago, 1976), book V, chapter I, part III, article I, pp. 266-67.

(6) Ernest Edward Rich, The Hudson's Bay Company, 1670-1763 (London, 1958), p. 660.

(7) Frits Pannekoek, The Fur Trade and Western Canadian Society 1670-1870 (Ottawa, 1987), p. 9.

(8) For a historiographical overview of the fur trade, see Michael Payne, "Fur Trade Historiography" in T. Binnema, G. J. Ens, and R.C. Macleod (eds.), From Rupert's Land to Canada, (Edmonton, 2001), pp. 3-22. Payne notes the broadening of the historiography from a focus on the economic operation of the fur trade to one where the fur trade is seen as "one of many influences" on the history of the North West.

(9) Elizabeth Mancke's A Company of Businessmen: The Hudson's Bay Company and Long Distance Trade. 1670-1730 (Winnipeg, 1988) is one of the few economic studies to examine the HBC in Britain. However, Mancke's study stops before the major French expansion and market share gain in the 1730's. She also does not explore the HBC's financial management to the same extent as this article.

(10) Arthur Ray and Donald Freeman, Give Us Good Measure (Toronto, 1978), p. 35. As will be discussed below, there were also financial considerations in London that led the HBC to delay the establishment of inland trading posts until after the Seven Years War.

(11) It has been estimated that conveyance represented one-half of the operating costs of the North West Company (Pannekoek, p. 10). The HBC's cost structure is discussed later in this article.

(12) Daniel Francis and Toby Marantz, Partners in Furs (Montreal, 1983), p. 38.

(13) The North West Company controlled some 78% of the fur trade when competition with the HBC was most intense in the early nineteenth century (Pannekoek, p. 9).

(14) A joint-stock company is owned by shareholders. The other form of chartered company was known as a regulated company, which was essentially an association of merchants who traded on their own account and did not have a common pool of capital.

(15) A. Carlos and S. Nicholas, "Giants of an Earlier Capitalism: The Chartered Companies as Modern Multinationals," Business History Review, 62 (1988), pp. 398-419.

(16) Ibid., p. 400. The use of the term "vertically integrated" by Carlos and Nicholas refers to the fact that both the British and overseas operations of these companies were run by employees of the companies. It does not refer to company ownership of their suppliers.

(17) S.R.H. Jones and S.P. Ville, "Efficient Transactors or Rent-Seeking Monopolists? The Rationale for Early Chartered Trading Companies," Journal of Economic History, 56 (1996), pp. 904-06.

(18) Ibid., p. 913.

(19) S.R.H. Jones and S.P. Ville, "Theory and Evidence: Understanding Chartered Trading Companies," Journal of Economic History, 56 (1996), p. 925.

(20) W.R. Scott, The Constitution and Finance of English, Scottish and Irish Joint-stock Companies to 1720, volume 2 (Cambridge, 1910), p. 206 for the EIC and p. 237 for the HBC.

(21) Ibid., p. 31.

(22) William Pettigrew, Freedom's Debt, The Royal African Company and the Politics of the Atlantic Slave Trade, 1672-1752 (Chapel Hill, 2013), p. 6.

(23) Stephen Pincus, 1688: The First Modem Revolution (New Haven, 2009), p. 399. Pincus views the Whig attacks on the EIC and RAC as being inspired by a pro-manufacturing, anti-French economic policy.

(24) Philip J. Stem, The Company-State: Corporate Sovereignty and the Early Modern Foundations of the British Empire in India (New York, 2011). Stem argues that the EIC was already behaving as a "company-state" in the seventeenth century.

(25) See John S. Galbraith, The Hudson 's Bay Company as an Imperial Factor (Berkeley, 1957) for the traditional study of the HBC as a "company-state." For a more recent perspective, see Edward Cavanagh, "A Company with Sovereignty and Subjects of its Own? The Case of the Hudson's Bay Company, 1670-1763," Canadian Journal of Law and Society, 26 (2011), pp. 25-50.

(26) Jacob Price, "What Did Merchants Do?: Reflections on British Overseas Trade, 1660-1790," Journal of Economic History, 49 (1989), pp. 267-84.

(27) The tobacco trade has been studied in several works by Jacob Price including his Capital and Credit in British Overseas Trade (Cambridge, Mass., 1980), as well as T.M. Devine's The Tobacco Lords (Edinburgh, 1975).

(28) Price, Capital and Credit, pp. 23-24.

(29) David Hancock, Citizens of the World (Cambridge, 1995), p. 6.

(30) Richard Grassby's Kinship and Capitalism (Cambridge, 2001) emphasizes the importance of family networks while Perry Gauci's Emporium of the World (London, 2007) illustrates how merchants participated in the financial and political life of the City.

(31) Nuala Zahedieh's The Capital and the Colonies (Cambridge, 2010) is a notable addition to merchant historiography for the late seventeenth century. It is based on an analysis of the London portbooks for 1686. Eighteenth-century portbooks have not survived.

(32) The RAC was dissolved as a joint-stock company in 1752.

(33) K.N. Chaudhuri, "Reflections on the Organizing Principle of Pre-Modem Trade," in J.D. Tracy (ed.), The Political Economy of Merchant Empires (Cambridge, 1991), p. 440.

(34) See Glyn Williams, "Highlights of the First 200 Years of the Hudson's Bay Company," The Beaver (Autumn 1970), pp. 9-13 for a summary description of the conflict in the bay.

(35) When Sir Bibye Lake of the HBC and Colonel Bladen from the Board of Trade went to Paris in 1719 to negotiate the implementation of the terms of the Treaty of Utrecht, they were already complaining about French encroachment on HBC territory (Rich, The Hudson's Bav Company, 1670-1763, pp. 484-85).

(36) The best biographical overview of Lake is E.E. Rich "The Perpetual Governor," The Beaver, (Autumn 1974).

(37) A List of the Names of the Members of the Corporation for Making Hollow Sword-Blades in England, Concerned in the Joint-Stock for Purchasing Forfeited Estates in Ireland (London, 27 September 1705).

(38) One of his legal disputes was with Thomas Coram over land in America. The legal battle lasted from 1714-31, when it was finally resolved in Lake's favour (see Calendar of State Papers Colonial, America and West Indies, July 1731, pp. 26-31).

(39) Merry and Lake were the two HBC representatives who went to Holland to argue the company position in the negotiations that ended the War of the Spanish Succession (Rich, Hudson's Bay Company, 1670-1763, pp. 418-19).

(40) Jones became involved with the HBC through his role as a trustee of the estate of Lake's predecessor. Sir Stephen Evans (Rich, Hudson's Bay Company, 1670-1763, p. 469).

(41) See K.G. Davies (ed.), Letters From Hudson Bay, 1703-40 (London, 1965), pp. 361-68.

(42) HBCA, A1/37, 2281-2348, Committee minutes.

(43) Arthur S. Morton, History of the Canadian West (Toronto, 1973), p. 141.

(44) Relative to the South Sea Company and even the RAC, which had issued additional stock earlier in the year, the FIBC was relatively slow to get on the bandwagon in August. E.E. Rich suggested that Bibye Lake's absence in Paris in 1719 may explain the delay in the HBC initiative (Rich, The Perpetual Governor, p. 21). Lake only became an RAC director in 1720. Whatever the reason for the delay, it meant that the HBC was able to withdraw the major part of the proposal and avoid the most serious negative consequences of the stock market crash.

(45) For each one share held, shareholders would receive two additional shares.

(46) A rights issue gives existing shareholders the right to purchase additional shares at a specified price.

(47) HBCA, A2/1, fol. 36, General Court minutes, 23 August 1720.

(48) HBCA, A2/1, fol. 38, General Court minutes, 28 November 1720.

(49) Dividends of 10% were the norm for HBC until 1745. They fell to 8% until 1762 and were restored to 10% in 1763. Dividends of roughly 8% became the norm for East India Company stock but fell to slightly under 6% during the Seven Years War.

(50) HBCA, Grand Journal. For 1718: A15/6, pp. 172, 211,212. For 1728: A15/8, pp. 125-26. For 1738: A15/9, pp. 97, 100. For 1748: A15/10, pp. 157-58, 162.

(51) HBCA, A43/4, stock transfer book, pp. 41-67.

(52) The FIBC's dividend rate was typically 1-2% higher than the EIC and bond yields were only 3-4%.

(53) W.J. Eccles, "A Belated Review of Harold Adams Innis's The Fur Trade in Canada," Canadian Historical Review, 60 (1979), p. 72. By the mid-1770s, the HBC's fur exports from Rupert's Land to Britain represented less than a fifth of total British fur imports from what is now Canada. In Britain, the HBC also had to compete with fur imported from the American colonies. The American fur was, however, of a poorer quality and tended to sell at a substantial discount to the HBC's fur.

(54) Murray Lawson, Fur: A Study in English Mercantilism, 1700-1775 (Toronto, 1943), appendix E.

(55) Edward R. Adair, "Anglo-French Rivalry in the Fur Trade," in J.M. Bumsted (ed.), Canadian History Before Confederation (Georgetown, 1979), p. 136.

(56) Ibid., pp. 135-6.

(57) Papers Presented to the Committee Appointed to Inquire into the State and Conditions of the Countries Adjoining to Hudson's Bav, and of the Trade Carried on There (London, 1749), no. 24: pp. 29-33.

(58) Peter Earle, The Making of the English Middle Class (London, 1989), p. 24.

(59) David Comer, "The Tyranny of Fashion," Textile History, 22 (1991), p. 155.

(60) Lawson, M., Fur: A Study in English Mercantilism 1700-1775 (Toronto, 1943), appendix H.

(61) Rosemary Weinstein, The History of the Worshipful Company of Feltmakers, 1604-2004 (Chichester, 2004), p. 39.

(62) Lawson, M. Fur: A Study in English Mercantilism 1700-1775, appendices G and H. Many of the hats exported to Portugal and Spain were, in turn, re-exported to Brazil and the Spanish colonies in the Americas.

(63) Carlos and Lewis, Commerce by a Frozen Sea (Philadelphia, 2010), p. 25.

(64) Lawson, M. Fur: A Study in English Mercantilism 1700-1775, appendix F.

(65) Carlos and Lewis, Commerce by a Frozen Sea, tables 2, 31.

(66) Arthur Ray provides a summary of returns from all of the HBC's posts (expressed in terms of their trade value) in his Give Us Good Measure (Toronto, 1978), table 18, pp. 168-74. Ann Carlos and Frank Lewis provide totals of beaver skins traded at each post in their Commerce by a Frozen Sea, table A. I, appendix A. Both sets of figures give the same general picture.

(67) Henry Sperling's testimony to Lord Strange, 24 April, 1749 in Sheila Lambert (ed.), House of Commons Sessional Papers of the Eighteenth Century 1741-50, vol. 18 (Wilmington, Delaware, 1975), p.246.

(68) Elizabeth Mancke, A Company of Businessmen (Winnipeg, 1988), pp. 22-41.

(69) Ibid., p. 34.

(70) William Roberts, "Samuel Storke: An Eighteenth Century London Merchant Trading to the American Colonies," Business History Review, 39 (1965), p. 165.

(71) Neil McKendrick, John Brewer and J.H. Plumb, The Birth of a Consumer Society (London, 1982). McKendrick was seeking to inject some balance into the debate about the industrial revolution by focusing on demand and not just supply. Interest in a consumer revolution also coincided with the broadening of historical enquiry to encompass new fields such as the formation of identities by different social groups. The idea of interlinked commercial and social development is most clearly articulated in Paul Langford's influential A Polite and Commercial People (Oxford, 1989). To a large extent, these historiographical trends in British history are reflected in the historiography of the fur trade, where recent studies have explored how interactions between fur traders and native peoples shaped identities in the Canadian North West (see footnote 8 above).

(72) See Stanley Chapman, Merchant Enterprise in Britain (Cambridge, 1992), pp. 27-28.

(73) See above.

(74) Corner, "The Tyranny of Fashion," pp. 166-68.

(75) HBCA, A 48/2, pp. 52-63, Fur Sale Book.

(76) In keeping with a long historical pattern, North American fur destined for Russia (and sometimes via Russia to China) travelled through Holland, where the Sperlings maintained key contacts.

(77) There were 132 men at the factories on Hudson's Bay and four ships were sent out with a complement of 108 men in the year prior to the parliamentary enquiry, HBCA A15/10, Grand Journal.

(78) In a letter to the HBC committee in 1731, Richard Norton at Churchill River, who was given the task of building Prince of Wales Fort, indicated that he had hired sixteen servants in the Orkneys. They were hired for a period of five years at a salary of 3 [pounds sterling] for the first year, rising to 10 [pounds sterling] in the fifth year, Kenneth G. Davies (ed.), Letters From Hudson Bay 1703-40 (London, 1965), p. 162.

(79) An ordinary committee man was paid 100 [pounds sterling] per year (Rich, Hudson's Bay Company, 1670-1763, p. 490).

(80) Ernest Edwin Rich, "Trade Habits and Economic Motivation among the Indians of North America," Canadian Journal of Economics and Political Science, 26 (1960), pp. 35-53.

(81) Arthur Ray and Donald Freeman, Give Us Good Measure: An Economic Analysis of Relations Between the Indians and the Hudson's Bay Company Before 1763 (Toronto, 1978), pp. 241-5.

(82) See Carlos and Lewis, Commerce by a Frozen Sea (Philadelphia, 2010), chapter 3.

(83) Davies, K.G. (ed.), Letters from Hudson Bay 1703-1740 (London, 1965), p. 122.

(84) Arthur Ray, "Buying and Selling Hudson's Bay Company Furs" in D. Cameron (ed.), Explorations in Canadian Economic History: Essays in Honour of Irene M. Spry (Ottawa, 1985), pp. 100-105.

(85) One of the ways in which the HBC controlled fixed costs was by owning its ships. These tended to be relatively small (160 tons or less), thereby reducing the exposure of the company to losses through shipwrecks. By way of comparison, ships used in the Levant trade were roughly twice as large. The HBC was fortunate in that it lost only two ships during the period of this study (Mary I in 1724 and Hudson's Bay IV in 1736). Although marine insurance rates fell during the eighteenth century, as Ralph Davis noted, marine insurance in the eighteenth century was not comprehensive and owners would be faced with substantial costs if a ship was lost, even though it was insured. Ralph Davis, The Rise of the English Shipping Industry (Newton Abbott, 1962), p. 320. In order to guard against the risk that ships would not be able to make it to Hudson's Bay due to weather conditions, Arthur Ray observed of the company's posts on Hudson's Bay that "the company attempted to keep a two years' supply of goods in the warehouse." A. Ray, "The Early Hudson's Bay Company Account Books as Sources for Historical Research: An Analysis and Assessment," Archivariu 1 (1975-76), p. 18.

(86) See discussion in Hugh Grant, "Bookkeeping in the Eighteenth Century: The Grand Journal and Grand Ledger of the Hudson's Bay Company," Archivariu 43 (1993), pp. 149-52.

(87) Papers Presented to the Committee (London, 1749), nos. XXIII and XXIV.

(88) Carlos and Lewis, Commerce by a Frozen Sea, p. 58.

(89) The decline in returns at York Fort was the combined effect of French competition and the depletion of beaver stocks. Carlos and Lewis have estimated that the French were capturing some 40% of the trade in the York Factory hinterland by the 1750s and beaver stocks in the hinterland of York Fort dropped by half between 1720 and 1750, Commerce by a Frozen Sea, pp. 143-44 and table A. I, appendix A.

(90) Papers Presented to the Committee (London, 1749), no. XXIII, p. 28. Charges for carrying on the HBC trade rose from 12,772 [pounds sterling] in 1743 to 20,201 [pounds sterling] in 1744, an increase of almost 60%.

(91) K.G. Davies, Letters from Hudson Bay 1703-40, pp. 46-50.

(92) The quantity of alcohol shipped to York Fort for trade with native peoples quadrupled between 1720 and 1760 according to Carlos and Lewis, Commerce by a Frozen Sea, p. 92.

(93) Edwin Ernest Rich, The Fur Trade and the Northwest to 1857 (Toronto, 1967), p. 103.

(94) Rich, Hudson's Bay Company, 1670-1763, p. 391.

(95) K.G. Davies, Letters from Hudson Bay 1703-40, p. 282.

(96) See Rich, Hudson's Bay Company, 1670-1763, p. 473. To illustrate, at a Committee meeting on 8 October 1714, the company received offers of 1,700 [pounds sterling] from four committee members, to be repaid within eight months, and a further loan of 2,000 [pounds sterling] from a Mr. Robert Sherard, to be repaid within six months, HBCA, Al/33, p. 108.

(97) HBCA, A18/1, f. 5, balance of HBC books. E.E. Rich noted that "during Sir Bibye's regime, the total of investment was kept at about the level of 20,000 [pounds sterling]" (The Hudson's Bay Company, 16701763, p. 651). The value of investments increased to roughly 35,000 [pounds sterling] in 1745, 59,000 [pounds sterling] in 1763 and 89,000 [pounds sterling] in 1769 (Ibid., p.652).

(98) Over half of the portfolio was invested in Bank annuities in 1759, HBCA, A18/1, balance of the books, 30 Jun. 1759.

(99) Cited in Shirley Matthews' entry for Baker in R. Sedgwick (ed.), History of Parliament 171554, vol. 1 (London, 1971).

(100) Fur was always the principal export produced by New France and the major source of its revenue, E.R. Adair, "Anglo-French Rivalry in the Fur Trade During the Eighteenth Century" in J. Bumsted (ed.), Canadian History Before Confederation (Georgetown, 1979), p. 134.

(101) Chapman, Merchant Enterprise in Britain (Cambridge, 1992), p. 77.

(102) Dobbs, A Short State of the Countries, p. 17.

(103) Sir John Barnard was a leader of merchant opinion in the City of London and a former Lord Mayor. In 1747, a statue was erected in his honour in front of the Royal Exchange. An account of Barnard's argument in support of the HBC is contained in a collection of papers at the University of Toronto, Thomas Fisher Rare Book Library, Mss. 09253, notes regarding the Commons Committee of Enquiry.

Mike Wagner received an MBA from Concordia University and a doctorate in History from the University of Oxford. He is interested in trade and the politics of trade in the seventeenth and eighteenth centuries, particularly concerning the British chartered trading companies. He has recently written articles on the Russia and Levant companies and is currently conducting research on the East India Company.
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