Key Arguments

• Smith states that "Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade," grounding the claim in historical observation.
• He describes competitive foreign trade as "a species of warfare" in which traders must "buy in one market, in order to sell with profit in another" while facing "many competitors in both," requiring them to watch "occasional variations in the demand" and especially "variations in the competition, or in the supply" and to adjust quantity and quality of assortments accordingly.
• He contends that such operations "can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company."
• As a concrete contemporary implication, he predicts that once the East India Company’s exclusive privilege expires and it trades merely as a corporation among other adventurers, "the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade."
• He cites the Abbe Morellet’s list of fifty‑five joint-stock foreign‑trade companies founded since 1600 that "have all failed from mismanagement, notwithstanding they had exclusive privileges," adding that even correcting for minor factual errors, there are still additional failed companies beyond Morellet’s list.

Source Quotes

It is merely to enable the company to support the negligence, profusion, and malversation of their own servants, whose disorderly conduct seldom allows the dividend of the company to exceed the ordinary rate of profit in trades which are altogether free, and very frequently makes a fall even a good deal short of that rate. Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell with profit in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people; and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare, of which the operations are continually changing, and which can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company.

Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell with profit in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people; and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare, of which the operations are continually changing, and which can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company. The East India company, upon the redemption of their funds, and the expiration of their exclusive privilege, have a right, by act of parliament, to continue a corporation with a joint stock, and to trade in their corporate capacity to the East Indies, in common with the rest of their fellow subjects.

The East India company, upon the redemption of their funds, and the expiration of their exclusive privilege, have a right, by act of parliament, to continue a corporation with a joint stock, and to trade in their corporate capacity to the East Indies, in common with the rest of their fellow subjects. But in this situation, the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade. An eminent French author, of great knowledge in matters of political economy, the Abbe Morellet, gives a list of fifty-five joint-stock companies for foreign trade, which have been established in different parts of Europe since the year 1600, and which, according to him, have all failed from mismanagement, notwithstanding they had exclusive privileges.

But in this situation, the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade. An eminent French author, of great knowledge in matters of political economy, the Abbe Morellet, gives a list of fifty-five joint-stock companies for foreign trade, which have been established in different parts of Europe since the year 1600, and which, according to him, have all failed from mismanagement, notwithstanding they had exclusive privileges. He has been misinformed with regard to the history of two or three of them, which were not joint-stock companies and have not failed.

Key Concepts

• Without a monopoly, however, a joint-stock company, it would appear from experience, cannot long carry on any branch of foreign trade.
• to buy in one market, in order to sell with profit in another, when there are many competitors in both; to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition, or in the supply which that demand is likely to get from other people; and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare, of which the operations are continually changing, and which can scarce ever be conducted successfully, without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a joint-stock company.
• the superior vigilance and attention of a private adventurer would, in all probability, soon make them weary of the trade.
• an eminent French author, of great knowledge in matters of political economy, the Abbe Morellet, gives a list of fifty-five joint-stock companies for foreign trade, which have been established in different parts of Europe since the year 1600, and which, according to him, have all failed from mismanagement, notwithstanding they had exclusive privileges.

Context

Book V, Part III, after criticizing perpetual monopolies; Smith explains why joint‑stock organization is structurally ill‑suited to competitive foreign trade and anticipates the fate of the East India Company in a free‑trade environment.