Modern Chartered Companies

IN CONNECTION with the colonial expansion of Europe in the late nineteenth century, there appeared a brief revival of the type of organization known as the chartered company. The hallmark of these--- called privileged companies or sovereign companies---was their possession of authority to govern as well as to carry on commerce in territory placed under their jurisdiction. They were empowered to establish forts and police systems, to lay out roads, encourage colonization, levy duties and taxes. They were, in the words of a French commentator, veritable compagnies de gouvernement. Yet they were not state owned, nor were they ordinarily subsidized or guaranteed by states. Neither were they purely private commercial enterprises. Subtle lines of state control always existed in the form of personal unions between the directors of the companies and the nation's governing class; they were organized under special charters which clothed them with authority and functions foreign to the purely business corporation; they measured their success less in business terms, such as dividends to stockholders, than in terms of imperial expansion. The interest of the modern chartered companies for this study lies in the fact that they represent a unique device by which private enterprise and investments abroad were harnessed to national policy abroad in a period of colonial conquest.

The chartered companies of the nineteenth century were primarily tools of the colonial expansionists, both of those in governmental offices and those outside. The device of the chartered company enabled the private and the official colonialists to pool their energies in a common cause, and from their standpoint it had several special advantages. First, the chartered company did not put in play such grave responsibilities as would governmental action itself, and thus it afforded a convenient screen behind which a government could pursue expansionist purposes in an exploratory, tentative way. A chartered company could engage in bold enterprises, and, if all went well, the fruits of its efforts could then be. accepted officially; but if difficulties arose, such as clashes with rival colonial powers or disastrous native uprisings, the company could be disavowed. Second, the chartered company enabled impatient colonialists to escape the checks exercised by anti-colonialists in government offices and in parliament over the official operations of government. A company could engage in the headlong rush for empire while legislators debated; it was subject to no troublesome votes for appropriations. Indeed, it seems that sometimes the main service of the chartered company to the colonial cause was to circumvent the anti-expansionist elements in government and public opinion by avoiding their jurisdiction until they could be presented with accomplished facts. Third, the colonialists argued that the chartered company was a more elastic and adaptable form of organization than regular governmental agencies, therefore better able to meet the peculiar problems encountered in unorganized regions. It not only avoided the traditional restraints of bureaucracy and parliamentary control, but could enlist private capital in its service and could make use of private individuals---hunters, explorers, adventurers of all kinds---who would rarely become government officials. The fourth and final advantage of the chartered company as a method of colonial expansion, often stressed by defenders of the method in England and by its advocates in France, was its supposed cheapness. A company could defray part of its expenses by trading operations which would be beneath the dignity of an imperial government. The same staff could perform commercial and governmental functions in opening up a new country, with consequent economy. The prestige of a company calling for vindication by force of arms was not so great as that of a government; hence, it could afford to run greater risks, adopt bolder methods, and maintain smaller garrisons. Best of all, said the colonialists, while acquiring a magnificent empire for the nation a chartered company costs the taxpayers nothing at all.

These were all arguments advanced by those who approved of chartered companies as instruments of imperial expansion. In actual practice, some of the chartered companies did involve their governments in serious diplomatic difficulties. They were usually quite successful as devices for sidestepping parliamentary control. Some of them displayed the virtues of elasticity and adaptability, others did not; this characteristic seemed to depend more upon the men at the helm than upon the form of organization. Finally, the low-cost operations of the chartered companies often necessitated expensive military operations by their governments, and in most cases (half the English cases and all the non-English) the governments soon had to assume direct responsibility for administering and developing the regions laid open by the companies. So the charge for continuing the work begun by chartered companies fell upon the taxpayers. Some of the chartered companies also contrived to secure considerable sums from their governments as compensation for developmental work or as indemnity for the transfer of rights and titles.



The British chartered companies were the first and by far the most successful of all those founded during the colonial movement of the late nineteenth century. Indeed, they provided the pattern for the rather forced imitations of the method adopted by continental colonizers. The British companies were in some respects reminiscent of the famous chartered companies of earlier centuries---the East India Company, and others---but they differed in certain fundamentals, particularly in the absence of monopoly features. This difference, by the way, was not always perceived or copied by the continental imitators. The "typical" career of a modern English chartered company might be outlined in bold strokes as follows:

A small group of enterprising traders see visions of commerce and empire in territory not yet under the sway of any European power. They persuade native rulers to sign documents granting them privileges in the territory. Assisted and sometimes impelled by ardent nationalist expansionists of the type that form the membership of colonial societies---explorers, geographers, missionaries, military men, traders, promoters---they form a company. Members of the aristocracy accept places on the governing board along with the men of energy who are promoting it, and thus the enterprise acquires unquestioned respectability as a national project as well as an informal but very effective channel of communication with the government. At this point a special royal charter is requested and granted; this is done by an Order in Council without submission to parliament. The charter not only allows the company the ordinary privileges of corporate action, but confers wide powers of political administration upon it within a territorial sphere that is left intentionally vague. The government reserves certain ultimate rights of control over the company, particularly in matters that effect foreign nations or the rights of natives. The company sells its stock, not merely to those who hope for gain, but to patriotic individuals eager to feel themselves a part of a glorious and romantic national work. The company probably sets out in the genuine hope of making a pecuniary profit from commercial operations along with enlargement of the empire, but the expansionists of other nations are active in the same or adjacent territories, and in order not to be anticipated and to establish effective imperial claims over as wide an area as possible it hastens ahead, scattering its efforts, to the neglect of that intensive work in a restricted area which might yield profits to the stockholders. The typical chartered company does not pay dividends, and if a shareholder is so lacking in taste as to raise the dividend question at an annual meeting his attention is directed to new territory won, colonization projects carried out, increases in imports and exports, and the glory of the empire. While those who merely hold stock in the chartered company must be content for the most part with non-monetary, psychic income of this sort, the moving spirits of the enterprise, in addition to earning knighthood, may also derive handsome profits from other enterprises in the region under development---shipping, trading, mining---which are facilitated by the activities of the chartered company. Sooner or later---in half the cases quite soon, in half much later---the British government finds it desirable for various reasons to assume direct administrative responsibility for the company's territory. The company receives compensation for past services and for the abandonment of its governmental prerogatives, whereupon it reverts to the status of a private trading corporation and perhaps begins to pay dividends. The brief sketches below show how this pattern runs through the actual histories of modern British chartered companies.



After buying in 1877-8 a concession with full governmental powers which the American Trading Company of Borneo had earlier obtained from the Sultan of Brunei, Mr. (afterwards Sir) Alfred Dent approached the British government for a royal charter. From the first this merchant seems to have had ideas more distant and ambitious than the mere establishment of trading posts. The government hesitated, fearing possible diplomatic complications and remembering the strictures which the liberal movement of the late eighteenth and early nineteenth centuries had heaped upon the old colonial companies. Meanwhile, Mr. Dent assured himself the support of prominent colonialists and men of very honorable position, bringing into the enterprise Sir Rutherford Alcock, Admiral of the Fleet Sir Harry Keppel, Sir Thomas (later Lord) Brassey, Admiral R. C. Mayne, Mr. R. B. Martin, M. P., and others. In 1881 the British North Borneo Provisional Association, Ltd., was founded to take over the concession, and in November of that year the Liberal government of Gladstone granted the desired royal charter---the first in nineteenth-century England.

It is interesting that the Liberals under Gladstone and Granville should have been the ones to revive the chartered colonial company after the previous Tory government had hesitated and delayed. They took care, however, that the chief objections which the spirit of liberalism had found in the old companies were guarded against in the North Borneo charter by specific provisions for the protection of the natives and by the strict prohibition of any attempts to establish a trading monopoly. This was a significant difference, indeed, for the essence of the old charters had been monopoly. This charter became a model for the later ones. It recognized the concession obtained by the company from native rulers, granted the company full power to organize as a corporation and to carry on both commercial and governmental activities in North Borneo, and obligated it to submit all differences with the Sultan to the arbitration of the British government as well as to follow the government's suggestions with regard to relations with foreign powers. The company's principal agent in Borneo was to be nominated with the approval of the government, and the Crown reserved the right to revoke the charter upon violation of any of its provisions. The control and management of the company were always to remain in the hands of British citizens, and the concessions were not to be transferred without the consent of the government.(1)

The government doubtless granted the charter in the consciousness that it would be an indirect means of bringing North Borneo under the British flag, though it could not say so openly owing to the susceptibility of foreign nations and the "little Englanders" at home. The step was taken despite diplomatic protests from Holland and Spain. Lord Granville, defending the government's policy in the House of Lords, said that when application was made for a charter three possible courses were open: the government could annex this vast territory, it could allow Mr. Dent and his associates to undertake the administration, or it could leave North Borneo to the inevitable absorption of foreign nations. There were grave objections to the first and third solutions which did not apply to the second.(2)

The authorized capital of the company was two million pounds, of which £383,000 was issued at once. Those who took the shares were not ordinary profit-seekers, however. If any of them were, they must have been unhappy, for a French commentator writing in 1898 (ten years after the territory had become a British protectorate and seventeen years after the founding of the company) observed that the stockholders "hardly know the satisfaction of drawing dividends."(3) The founders of this and of other chartered companies "engaged their names and their capital less in the certainty of financial success than in the hope of making the enterprises serve as a powerful national interest."(4) Indeed, the company undertook no commercial operations on a large scale itself but confined itself to the administrative and governmental sphere. It encouraged the entrance of other capital, and derived most of its revenue from the sale of land and concessions. The fruits of its policy showed not in dividends, but in the growing import and export figures of North Borneo as a whole. The hopes of the founders on the political side were realized in 1888 when the territory of the company became a British protectorate. Its actual administration, however, remains to this day in the hands of the British North Borneo Company, the Crown reserving only control over foreign relations and the right to approve the appointment of governors.(5) This is the only one of the nineteenth-century chartered companies which has survived in its character as a "compagnie de gouvernement."



In 1877 a former captain in the Royal Artillery, George Goldie Taubman (later Sir George Taubman Goldie) visited the then little known region of the Niger in West Africa. He had invested some of a small fortune in one of the trading companies on the river, and with persistence, tact, and business acumen soon amalgamated a number of small firms into the United African Company. The enterprise prospered exceedingly, but its directing spirit sought much more than business success. His aim from the first had been to add new territory to the British Empire. In 1881 he applied for a royal charter, but the government raised various objections, among them the low capitalization of the company and the possibility of difficulties with foreign states whose nationals also had trading Posts in the region. Partly to meet these objections, the company was reorganized in 1882 into the National African Company and its capital raised from £125,000 to $1,000,000. A titled member of the aristocracy was persuaded by the founder to become its nominal head. The government still hesitated. Meanwhile, rival French companies had become active in the Niger valley, encouraged by Premier Gambetta. The National African Company proceeded aggressively against this political and commercial competition and forced the French to sell out by cutting prices one-fourth in all the localities where they had trading posts. At the Berlin Conference of 1884-5 the British representative was able to state that Great Britain alone possessed trading interests on the lower Niger. Immediately, however, a new menace appeared, for the German explorer Flegel was dispatched from Berlin in 1885 by the German Colonial Society to make treaties with the rulers of the rich, fertile, and populous kingdoms reputed to exist north of the British sphere. The National African Company got wind of the project and sent one of its agents, Joseph Thomson, to steal a march on the Germans. He did his work in the nick of time, and, returning down the river with treaties bearing the X marks of the native sultans, met Flegel's canoes coming up.(6)

In 1885 Great Britain declared a formal protectorate over a small coastal area in Nigeria, and the next year the National African Company received its coveted charter from the Queen, becoming the Royal Niger Company.(7) Lower Nigeria had been won for Britain, but the contest in the vast interior was only beginning. French "scientific expeditions" and military missions, as well as German "explorers" pushing into the interior of what is now northern Nigeria time and again found their territorial ambitions frustrated by the company's agents, who are said to have made more than four hundred treaties with native chiefs. The restless energy of the Royal Niger Company's political activities under Sir George Goldie bore fruit in the very favorable territorial agreements which Great Britain was able to make in subsequent negotiations with France and Germany.

The Royal Niger Company was the only one of the modern British chartered companies which proved a paying investment for its stockholders. It declared regular yearly dividends of 6 and 6 1/2 per cent. In 1900 it reverted to the status of a private company when the government assumed an official protectorate over northern and southern Nigeria. The government paid the company £865,000 in settlement and took over its political functions.(8)


As early as 1877, the Sultan of Zanzibar had offered to Sir William Mackinnon, Chairman of the British Steam Navigation Company, a seventy-year lease of the customs and administration of his extensive domain on the east African coast, but the British Foreign Office was unwilling at that time to promise the support which Sir William deemed necessary, and negotiations were dropped. By the middle of the 1880's, however, the tales of explorers, merchants, and missionaries had roused the interest of Europe, and the scramble for Africa, which resulted in virtually complete partition of the continent within ten years, was getting under way. The British were particularly disturbed about 1884-5 by the energetic pretensions of an impetuous young German, Dr. Karl Peters, who had founded a company for German Colonization and was rapidly staking out an empire in East Africa with increasing support from his government. Negotiations with Bismarck led to an Anglo-German agreement of 1886 which delimited the zones of English and German influence, but the ultimate possession of many square miles coveted by imperialists on both sides was likely to depend in part upon effective occupation. Especially was this true of the fertile interior kingdom of Uganda, whose possession became an acute question in 1890. Under these circumstances the British government looked with favor upon a resumption of Sir William Mackinnon's negotiations with the Sultan of Zanzibar, and these resulted on May 24, 1887, in a concession to a group of prominent capitalists organized under the name of the British East Africa Association. This group was shortly thereafter incorporated by royal charter as the Imperial British East Africa Company (September 3, 1888). It became the instrument of penetration which helped to establish British claims to the Sultan's domains along the littoral, to the hinterland beyond, and to Uganda.

The charter itself did not differ in essential respects from those of the companies already reviewed.(9) On account of the pressure of rapidly moving events in Africa, however, the East Africa Company found its policies dictated to an unusual extent by "imperial interests," sometimes brought to its attention by direct intimations from the government, sometimes by its own interpretation of duty to the nation or by the demands of "public opinion"---which it also knew how to inspire on occasion.(10) First of all, it extended its original plans to include operations on the island of Lamu, because the Germans seemed about to establish themselves there. Then it sent expensive expeditions into the interior of far-off Uganda to save that region from the aggressive Dr. Peters. In this instance, says the company's historian, "Her Majesty's Government very clearly intimated that they looked to the Company to assert and maintain British rights in Africa, which were represented to depend on effective occupation."(11) These activities prevented practical work calculated to bring the shareholders a return on their capital, but the motives which had inspired the founders of the company had not by any means been purely commercial.(12)

Once Uganda had been secured for Britain, however, by the Anglo-German treaty of July 1, 1890, the patriotic directors of the British East Africa Company showed themselves not at all averse to claiming compensation from the government for their services. A cleverly managed propaganda for a subsidy was pressed in letters to the newspapers, books, articles, editorials, and the arguments were clothed with all the humanitarian, religious, and patriotic adornments of imperialist sentiment. Could the company rightfully be expected to bear expenses incurred for essentially national purposes? it was asked. The implicit assumption was that the expansionists at the head of the company and in the government were better interpreters of national wishes than parliament, for it was admitted that the cost of the Uganda expedition "was an item which the government themselves would have hesitated to put to a vote in the House of Commons."(13)

The first proposal was that the government should at least guarantee the interest on the capital necessary for a railway to the interior, since a railway would provide an effective means of combating the slave trade. Salisbury publicly urged this argument, but the government hesitated to ask for the approval of parliament. It finally requested parliament to vote merely a small sum for a preliminary survey, but even this had to be postponed, due to the opposition of the Liberals. The company then agreed to go ahead with the survey, on the government's pledge to re-introduce the bill and reimburse the company later. "Had the survey been postponed for another year, the difficulty of getting Parliament to commit itself to the policy which the railway represented would have been much increased. The pledge upon which the company was induced to advance the expenses of the expedition involved an obligation which the House of Commons could not repudiate."(14)

Meanwhile, the company had threatened to withdraw altogether from Uganda, pointing out that distant outposts were an unproductive burden on its resources. This was a powerful threat, for there had been a series of bitter three-cornered wars in that region among the followers of the English protestant missionaries, those of the French Catholic missionaries, and the Mohammedans, and only with the arrival of the British East Africa Company's force under Captain Lugard in 1890 had the British brand of Christianity triumphed. Now it was justifiably feared that should the company withdraw its troops the English missionaries and their converts might be slaughtered. Furthermore, such a withdrawal would lower the prestige of the British name and be nothing short of a national calamity---in the opinion of the London Times . ". . . Having put our hands to the plough, if only through the agency of a chartered company, we are bound in honour not to turn back."(15) The Church Missionary Society, whose treasurer also happened to be a director of the Imperial British East Africa Company, came forward and advanced several thousand pounds to the company to postpone its evacuation of Uganda for a year---a clever propaganda stroke, for though the wealthy directors could easily have raised this sum themselves the Church contribution presented the issue as one of religion and altruism.(16)

Though the new ministry which shortly came into office was opposed to the railway subsidy which the company demanded, public opinion made it difficult for them to refuse support. The government finally paid the cost of postponing the withdrawal from Uganda until March 1, 1893, and meanwhile sent a commissioner to investigate and report on the best means of dealing with that region. He reported that "the history of British East Africa for the last five years, and its present condition, show us clearly that the experiment of combining administration and trade in the same hands has proved a failure, so far as this part of Africa is concerned; and that the sooner this system is discontinued the better it will be for native races, for British commerce, for Zanzibar, and, as I believe, for the Company itself."(17) After much haggling over the price, the British government in 1895 bought out the British East Africa Company, which thus ceased to exist after six years of activity. It had been a useful instrument of conquest, but as an administrator its record was bad, and if the stockholders got any return on their money it was at the expense of the government.

The British South Africa Company, most famous of the modern chartered companies and often referred to merely as "The Chartered" was the creation of Cecil Rhodes, who came to South Africa as an impecunious youth and rose to fortune and power with the diamond and gold industries. Like other chartered companies, this one began with certain concessions obtained from a native sovereign---specifically, mining rights granted by Lobengula to Rhodes and his associates over the whole of what is now southern Rhodesia. Rhodes came to London in 1889 and bought out other groups that had conflicting claims, then approached the government with an elaborate scheme for the development and government of Bechuanaland, Matabeleland and Mashonaland, for the extension of railways and telegraphs to the Zambesi, for the encouragement of colonization and trade, as well as for the exploitation of the mineral concessions. He petitioned for recognition and moral support in the form of a Royal Charter, which would also authorize the necessary administrative measures to preserve law and order in the territory to be developed. Lord Knutsford in the Colonial Office was soon won over; there could be little harm in letting Rhodes and his company go ahead, shouldering all the responsibility and risk of claiming for England a country which might be a valuable addition to the Empire.(18) Lord Salisbury in the Foreign Office felt that such far-reaching objects properly fell within the province of the government, but, being convinced that the House of Commons would not vote money for such purposes, gave his blessing to Rhodes' project.(19)

Rhodes and his associates were asked to draft a charter. It was also intimated to them privately that it would be advisable to include in their plan of organization directoral posts for men of social and political prestige who would command more respect in England than the promoters themselves, who were mainly connected with South African affairs. Acting on the hint, Rhodes persuaded the Duke of Abercorn, one of the noblest peers of the realm, to become Chairman of the Company, and the Duke of Fife, son-in-law of the Prince of Wales, was given a place on the Board. Then Rhodes, with his "sure instinct of finding the key log in a jam," sought out Albert Grey (subsequently Earl Grey and Governor-General of Canada), who as a member of the South Africa Committee had been one of Rhodes' keenest opponents, and by patient argument entirely won him over, making him, too, a member of the Board.(20) The charter, indeed, provided that these three should be directors for life. Thus, personal interlocking of the company with the governing class as well as formal, legal provisions in the charter, made certain that adequate account would be taken of imperial interests, and the popular appeal of the whole undertaking was greatly enhanced.

The charter itself did not differ essentiaIly from those that had gone before.(21) There was the same recognition of concessions already obtained and power to seek new ones, the same grant of general administrative powers, the same reservation by the government of the right to intervene in the Company's affairs, especially as they related to native populations or foreign states, the same vagueness with respect to territorial boundaries (there was no limit specified on the north, where it was hoped expansion would go as far as possible), the same prohibition of monopoly, the same safeguards designed to maintain the British character of the Company.

Both praise and blame have been heaped upon the British South Africa Company for its rapid northward sweep, to the accompaniment of clashes with the Portuguese, war against the Matabeles in 1893, and a native rebellion in 1896.(22) The Jameson Raid, described in Chapter 7, was carried out with the Company's troops. The British South Africa Company served first and foremost the aims of those who believed in imperial expansion; its commercial projects were subordinated to the quest for empire. Indeed, though organized as a commercial company, it did not pay a single dividend during the first thirty-three years of its existence---that is, so long as it remained a sovereign chartered company. Nevertheless, it had no difficulty getting subscribers, either at first or in repeated new issues by which it increased its capital.(23) Rhodes issued its stock in one pound shares, and thousands of citizens in all walks of life were proud to participate in the romantic and patriotic enterprise with which he had succeeded in firing their imaginations. Many, of course, were drawn in by the lure of gold associated with South African development, but others owned a share or two merely in order to have the privilege of attending the annual stockholders' assembly. These meetings, held in one of the largest halls in London, served Rhodes as a platform from which he spread his gospel of British expansion, and there was much more interest in Rhodes himself and the progress of his imperial dreams than in the balance sheet of the company.

The British South Africa Company continued its administrative duties in Southern Rhodesia until 1923, when that province became a self-governing colony. The following year the Company's territories north of the Zambesi were given the status of Crown protectorates. At the same time, the Imperial Government refunded to the Company a portion of the expenditures which it had incurred in discharging the obligations of its charter, and the government of Southern Rhodesia assumed its share of the burden as a public debt. The South Africa Company was also allowed to retain land it had appropriated for agricultural and ranching purposes and to hold title to extensive land concessions in Northern Rhodesia and Nyasaland. It also retained its original mineral, rights, covering the whole of Rhodesia, north and south, and a majority interest in the railway system. With the relinquishment of its governmental functions and the payment made to it, the Chartered Company was able to refund 5s. on every £1 share (25 per cent), and commenced to pay regular dividends.(24)



For years, in his public expressions, at least, Bismarck opposed all colonial expansion abroad, but when in the 1880's he finally turned to a program of overseas colonization for Germany it was the method of colonization by chartered company that he proposed to use. It has been called an English characteristic to construct a policy after the fact and a German to formulate an abstract theory as a guide to practice. This was the case with regard to the revival of chartered companies as tools of colonization. For while England slipped into their use undesignedly as a response to particular circumstances when they arose, Bismarck in Germany consciously set out to construct a colonial policy around them. He did not wish to establish "hothouse colonies " like those of the French-imperial provinces conquered by military columns, demanding garrisons and troops---but to protect developments which German commerce might make on its own initiative. "The flag follows trade" and "First the trader, then the soldier" were his colonial slogans. Chartered companies on the English model appealed to him as an admirable device for stimulating and administering a colonial expansion consistent with this policy. Furthermore, he hoped through the chartered companies to avoid governmental responsibility in the new possessions so far as possible, because colonial frictions with other powers might endanger his carefully built system of alliances, because of the weakness of the German navy, and because of the expenses to which direct colonial administration would commit an unwilling Reichstag.(25)

In no case did the chartered company policy work out according to plan. Only two companies actually undertook to exercise sovereign rights, and their activities did not avoid implicating the government in friction and expense. Several other companies could not even be persuaded to accept a charter. Bismarck's imitation of what had appeared in England as a spontaneous development seemed artificial and forced.



German merchants had built up a considerable trade with East Africa, but it remained for Karl Peters, the "impetuous and erratic son of a mild Saxony pastor, " to win part of it for the empire. He had become enthused with the romance of imperial expansion on a long visit to England, and returning home in 1883 he sought support for one colonial venture after another, from founding a settlement in Brazil to helping the Boers against England, until he finally settled on East Africa. The patriotic occasion of the Kaiser's birthday, March 28, 1884, was chosen for the founding of a new organization known as the Society for German Colonization, and financed by this society Peters and a group of kindred spirits set sail for East Africa in the autumn of 1884.(26)

They were out to anticipate the English and travelled in all the glamour of aliases, disguised as workmen. A few weeks on the coast, a few days in the interior, and Peters returned to Berlin, pockets bulging with "treaties" obtained from native chiefs in the usual way---a few trinkets and liberal applications of grog, marks on the dotted line, and a ceremonious salute to a flag these people had never seen before. In Berlin Peters laid siege to Bismarck for a charter of protection (Schutzbrief) which the Chancellor, always cautious, at first refused. But when Peters threatened to carry his treaties to King Leopold for the benefit of the Congo Association, Bismarck suddenly about-faced and issued the charter on February 27, 1885.

This charter was extremely brief and differed from the nineteenth-century British charters in essential particulars. Indeed, it was more like the charters of the old colonial companies in that it did not prohibit trade monopoly and laid no obligations upon the company in return for its privileges. It conferred on the Society for German Colonization, soon renamed the German East African Company, "all sovereign rights over the territory acquired by the company, jurisdiction over the natives and other inhabitants," on the one proviso that it remain German.(27)

Immediately upon the receipt of its charter the East African Company embarked upon no less than eleven expeditions. These brought it into direct collision with England and France as well as with the Sultan of Zanzibar, whose protests led Bismarck to dispatch a squadron of warships to the scene. International negotiations in 1886 delimited the German and British spheres of influence and established Germany as an East African power, but left many areas of rivalry unsettled. Karl Peters, yearning for more excitement than prosaic problems of administration seemed to offer, set out for the vast unexplored interior, the upper Nile region and Uganda. In a series of irresponsible exploits he and his aides alarmed the English by concluding a treaty with the native king of Uganda, invaded the French sphere of influence in Madagascar, and trespassed on Italian preserves in Somaliland---all in the dream of creating a German "India" in Africa. The East African Company's agents were seriously threatening the friendly relations with England which Bismarck had just succeeded in reëstablishing, so again and again the Chancellor disavowed all official responsibility for their adventures. He absolutely ignored the treaties made by Peters in Uganda, Somaliland, and Madagascar.

To add to the difficulties created for the German government by the East African Company, it proved too weak to deal with native insurrections in its domains. In September, 1888, a serious revolt broke out, the company sought the assistance of the government, and Bismarck found himself, against his will, obliged to intervene. German ships, men, and gold had to be poured into East Africa to quell the revolt. Maladministration and the conquistador behavior on the part of adventurers like Peters continued to bring the rule of the company into bad repute. The Anglo-German agreement of 1890 dealt a heavy blow to its ambitions by ceding to England districts in Witu, Uganda, and Nyasaland where the company's agents had been most active. The area left to Germany, however, was a very large one, twice the size of the home country, and potentially rich. But the East African Company was too weak financially and politically to develop these vast regions. It had to relinquish its sovereign rights, having failed utterly to fulfill Bismarck's hopes for his colonial program, and on January 1, 1891, its territory passed under the direct administration of the German empire.

Like other chartered companies, so long as the German East African Company retained its sovereign rights its activities were more absorbed by its political functions than by a search for commercial profit. Indeed, "it seemed to be true that the capitalists who consented to underwrite the first shares of the company were motivated much more by patriotism than by the spirit of gain."(28) After abandoning its sovereign powers the company became an ordinary commercial enterprise, and, with the aid of a generous annual indemnity which its settlement with the German government had provided, it was able to retrieve some of its early losses and paid its first dividend in 1901 As a private commercial company it did much to develop East Africa, opening up the territory by means of roads, railroads, telegraph lines, and steamship services.(29)



Colonial interests in the South Seas were actively fostered by the German government in the 1880's, as we have had occasion to observe in connection with the history of Samoa and Bismarck's attempt to get a subsidy for the successor of the Godeffroy firm.(30) The Pacific islands were not only of obvious economic value, but---and this was a weighty reason---they were strategically important as coaling stations and naval bases. In May, 1884, a syndicate of Berlin bankers, headed by a close associate of Bismarck's, von Hansemann, and secretly supported by the Chancellor, founded the New Guinea Colonial Company for the purpose of occupying the unclaimed northern portion of New Guinea. An explorer, Dr. Finsch, was soon dispatched to further this aim and with two warships in the background planted a number of German flags about the island. On May 17, 1885, the New Guinea Company received an Imperial Charter from the government, having combined in the meantime with the Deutsche-See-Handels-Gesellschaft (Godeffroy successor) and the firm of Robertson and Hernsheim, which had also been active in the South Seas trade.(31)

The charter of the New Guinea Company, like that of the East African Company, granted monopolistic privileges:---" the exclusive right of taking possession of and of disposing of the unclaimed lands, and of concluding with the natives contracts relative to the soil and the right of property." Its sovereign powers were somewhat more specifically defined than those that had been given to the East African Company, however, and the right to make the laws which should apply to natives and other inhabitants, as distinct from administration, was reserved to the imperial government. The charters of both companies were qualified further by a statute passed on April 16, 1886, which reserved to the Emperor the right to promulgate laws applicable to their territories, to conduct all foreign affairs, and to organize and command all the military forces in the protectorates.

The New Guinea Company failed to realize the hopes of Bismarck. It suffered both from an overly-centralized control by the "gentlemen of the green table"---bankers and speculators---who directed its affairs from Berlin, and from corruption and ignorance among its officials. A veritable anarchy in its local administration reflected this weakness at the center. The company's agents failed to interest themselves in the country and its potentialities, and there was a tremendous turnover in personnel, as many as seventy-seven officials changing in one year. In 1889 the company sought to separate its economic from its political activities by creating a subsidiary for the cultivation of coffee and cocoa. But all sorts of misfortunes beset its development program: drouths and floods, fever and shipwreck. Discouraged by these poor results, the company surrendered its administrative duties to imperial officials for three years, beginning in 1889, but retained its other privileges. In 1892 it resumed its full rights, but rapidly ran into debt and was unable to raise additional capital. At the end of its resources, it asked the government in 1895 to relieve it altogether of its charter, a request .refused at first by the Reichstag, but finally granted in 1899. It received an indemnity of 4,000,000 marks from the empire, which it agreed to invest in plantations. Unlike the East African Company, it failed even as a private enterprise to do any substantial work in the protectorate.(32)



The firm of Robertson and Hernsheim carried on trade in the Marshall Islands, and in 1878 made a treaty with a native chief which secured Jaluit as a coaling station for the German government. In 1886 the government extended its protection to the Marshall Islands and neighboring groups, offering a charter at the same time to the firm, which refused on the ground that it lacked the necessary ships, money, and soldiers to undertake control of the islands. Finally, in 1887, after urging from the government, Robertson and Hernsheim united with a branch of the Deutsche-See-Handels-Gesellschaft to form the Jaluit Company, which agreed to support the imperial officials in the islands in return for the possession of all unclaimed land, the monopoly of the guano and pearl industries, and the right to be consulted about the laws. The Jaluit Company thus acquired privileges, but never received a charter or exercised sovereign powers.(33)

The German Southwest African Company was formed to save the ventures of the pioneer merchant, Lüderitz, who had been accorded imperial support for the acquisition of a harbor and territory at Angra Pequena in 1883-4. The economic developments which Lüderitz had planned failed to pay returns, and he was all but ready to sell out to an English company, and might have done so, had it not been for the efforts of the friends of colonization at home, such as the bankers Bleichröder and Hansemann and, above all, the Chancellor himself. The German Southwest African Company took over his holdings, added some more, and sent out three exploring expeditions whose reports were discouraging. The nature of the country was such as to demand large sums of capital for its development, and these were not forthcoming from skeptical investors at home. " By the end of the first year the company had lost 45,159 M., and found itself financially unable to support a government of any kind, to explore the interior, or to control the natives. For this reason, it continually refused to accept the charter conveying sovereign rights, with which Bismarck offered again and again to invest it, according to his cherished plan. Indeed, instead of a charter, the Chancellor was obliged, against his will, to send in 1886 an imperial commissioner, Dr. Goering, to take charge of the interior, since the company was only pretending to function on the coast." In 1888 the company sank to the position of a privileged commercial enterprise with monopoly rights over certain mining districts and lands, Dr. Goering extended his administration over the entire protectorate, and what little political rule the company had exercised ceased altogether.(34)

Further up the west coast of Africa in Togoland and Cameroon the policy of colonization by chartered companies was even less successful. There the private German trading companies refused to incur any responsibility whatever for administration or exploration, and these two provinces had to be ruled from the outset by an imperial commissioner.



In France, as in Germany, the example of successful territorial acquisition by English chartered companies fired colonial enthusiasts with a desire for emulation. The question was discussed in France all during the 1890's in organs like the Bulletin of the Comité de l'Afrique Française and in a flood of private and semi-official studies and reports on the old chartered companies or their recent English successors. In France, as in Germany, those who desired colonial expansion saw in the chartered company an enticing instrument for their purposes, but even less in France than in Germany, and less in both countries than in England, were there adventuresome and independent empire builders ready to proceed on their own initiative to present the government with new commercial and political territories. The chartered company theory was deduced a priori from the basic desire for imperial aggrandizement, but by 1899 when the decision was finally reached to use chartered companies the French colonial sphere had already been quite definitely marked out. The concessionnaire companies subsequently established became, therefore, devices for the development and exploitation of colonies already acquired for France by her explorers and her military men, and not means of further expansion. They were not pioneers like the English companies, but were given well-defined concessions. Again, unlike the English companies, they were endowed with monopoly rights, and they set out to make profit, not to extend the imperial sway of France. Some, indeed, seemed more interested in making profits from the French government by what would be called in the vernacular an "indemnity racket" than in undertaking sound development work. The difference in spirit of the British and French companies is apparent if one tries to imagine the British South Africa Company claiming payment from the British government on the ground that the government had failed to keep foreign traders from trespassing on its domain! This is not the place, however, to go into the lamentable failure registered by the policy of colonial development through concessionnaire companies in the French African colonies. The short-sighted money-grabbing policies of the concessionnaires led to ruthless exploitation rather than long-run development, to mistreatment of the native population which made a public scandal in France after 1906 when it was exposed to complications with foreign nations over the exclusion of outside traders, and, on the whole, the companies themselves did not even make profits. These problems pertained, however, to French colonial administration rather than to international politics.(35)

The Belgian King Leopold's Independent Association of the Congo which marked the beginning of the nineteenth-century scramble for Africa, was, itself, an enterprise similar to the chartered companies of old, though it had an independent existence rather than a charter and was soon recognized internationally by the Berlin Congress of 1885 as a state.

Established originally as a humanitarian and scientific enterprise with the announced object of opening the Dark Continent to the benefits of European civilization, it passed about 1890 into a new phase and became an irresponsible instrument for extortion of profits on rubber and ivory to the benefit of Leopold and the financiers associated with him. News of atrocities reaching the outside world aroused humanitarians, led to diplomatic protests from government signatories to the Berlin Act, and eventually to the intervention of the Belgian parliament, which made the hitherto personal enterprise of King Leopold a Belgian colony.(36)

Such agencies of penetration as the South Manchurian Railway Company, the Chinese Eastern Railway, and the Oriental Development Company which have figured in the history of the Far East are akin to the chartered companies in that they have exercised rights of administration quasi-governmental in nature. In each of the companies mentioned, however, the governmental participation and control was more direct and formal than in the case of the typical chartered companies. European observers have sometimes classed the United Fruit Company with the great chartered companies of the past and their successors of the late nineteenth century. It is true that the United Fruit Company has built towns, railways, hospitals, created and deposed governments, ruled vast plantations with a free hand, and in some cases exercised almost sovereign powers over large portions of Central America. Yet it has always differed in two decisive respects from the chartered companies discussed in this chapter: it has never possessed a special grant of governmental authority, and it has not sought to acquire territory for an empire. Its operations have been wholly directed to profit-making, whereas with the chartered company of the nineteenth century commerce was secondary, and imperial aggrandizement came first.

Chapter Twelve

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