5.6 The British Navy and the British State

Court possessed the ability to finance King Philip’s wars until the military disasters of the 1580s in a manner that “was at least as ‘responsible’ as the U.S. in the twentieth century or as Britain in the eighteenth century” (2008, p. 29, quotation from the abstract). The Spanish, however, did not finance their army, navy, or borrowing through specialized elite perpetually lived organizations, but through the traditional personalized connections of the court. The Russians were able to build a large army, but as Tilly describes the Russians, “They [Ivan the Great and his successors] needed an army that was dependent as possible upon them, and upon whose loyalty, they themselves could depend. But they lacked money to buy the men and allegiance they required. So they decided to use land” (Tilly, 1992, p. 140, quoting Blum, 1964, pp. 170–1). Just as in feudal England, the Russians financed their large army by granting it direct control of economic assets. In neither Russia nor Spain did specialized and separate elite organizations arise.

By the eighteenth century, their military power allowed the British, French, and the Dutch to overwhelm every other state on the planet. The continuous warfare between them from the late seventeenth through the early nineteenth centuries afforded the context in which political control of the military took place. They developed more sophisticated organizations and institutions that allowed them to outperform all other societies (Schultz and Weingast, 2003; Tilly, 1992). Nevertheless, military competition must be seen in the context of other central changes that made up the doorstep conditions, the ability to support more sophisticated organizations, both within and outside of the state. Not until the eighteenth century did widespread support for perpetually lived organizations both inside and outside of the state become a reality. The emergence of perpetually lived organizations and political control of the military created the conditions for a transition to take place.

5.6 The British Navy and the British State

In the eighteenth-century military struggle of the British and the Dutch against the French, British sea power – The Command of the Ocean, to use Rodger’s (2004) title – gave Britain the key advantage at several crucial points. We want to understand how the British Navy as an organization evolved from a loose structure of widely dispersed control over military assets and activities to one under central and direct control of the political system; how the navy accomplished this by consciously developing perpetually lived organizations within the state and within a network of large elite

firms in direct competition with one another; and how personal relationships among elite individuals were replaced by impersonal relationships among perpetually lived organizations.

In the Seven Years’ War (1754–63), also known as the French and Indian War, the British defeated the French in Canada because the British Navy prevented the French Navy from provisioning their forces in Canada. Although the British Navy had a significant numerical superiority over the French, in order to realize its advantage, the British had to keep the French Navy in one place. Once out on the open ocean, the French Navy could obtain local superiority by combining tactical planning with surprise. Corralling and defeating the French Navy on the open ocean was impossible. Success required that the British Navy maintain an effective blockade of French ports and, when the French fleet did come out, to decisively defeat or contain it. To protect its own merchant fleets, provision its armies and allies, and concentrate its superior numbers and weapons, the British Navy had to pin down the French fleet (Rodger, 2004, p. 279). The British Navy’s ability to bottle up the French fleet turned the tide of war.

The problem with blockading France, as Rodger explains, is that no navy in 1700 could keep a large fleet of ships at sea for more than a month or so. The low quality of provisions meant that the men and officers on ships became enfeebled and sick in a short time (Rodger, 2004, p. 291). Yet in 1758, Admiral Hawke’s fleet stayed at sea continuously for six months. Hawke stayed off the French coast until the French fleet came out of Brest on November 16. Hawke fought the French and confined the French fleet to the harbor at Quiberon Bay, where the French stayed under British blockade for the remainder of the war.

Keeping the fleet at sea required not better sailors, ships, or tactics, but an administrative system to secure high-quality provisions and supplies on a regular basis: “It was precisely in these matters of administration that the British opened a decisive superiority over their enemies, particularly over the French” (Rodger, 2004, p. 291; see also Ch. 19). How did this transformation come about?

The navy had long been organized in a classic natural state form. Individual towns and cities provided ships and officers. The policy goes back to at least the eleventh century and the scipfyrd in which military service to the crown was discharged by the supply of a ship, officers, and crew (Rodger, 1997, pp. 26–7). As late as the fourteenth century, less than 10 percent of the ships in the navy were royal ships (Rodger, 1997, p. 118 and Appendix III). The navy was a coalition of ships, captains, and crews. In the sixteenth century, the Tudors began to centralize the navy, but administrative

control remained widely dispersed in shipyards, armories, and victuallers. Moreover, the continued importance of patronage networks affected the development of officers and crews. Pursers of individual ships were responsible for provisioning their ships.25

In the 1630s, Charles I attempted to increase the size of his navy by levying the infamous “ship money” tax. The tax was laid on individual towns, theoretically in lieu of them actually providing ships (Rodger, 1997, p. 381). Parliamentary debate over ship money became a central issue in the origins of the English Civil War (1642–9). Indeed, this was a constitutional debate: Were the dispersed financial and naval resources of the country to be monetized and tapped by the central authority of the crown, or were they to be consolidated under the control exercised by parliament?

The English Civil War, Restoration (1660), and Glorious Revolution (1688–9) left the British Navy with a deeply divided officer corps, many of whom had fought against one another, and a disorganized administrative structure. When war broke out with France in 1689, a combined AngloDutch fleet was completely unprepared, on the English side, to put effective ships to sea. The situation was so bad that the “House of Commons solved the problem in its own fashion by throwing the entire Victualling Board into the Tower.”26 The low point occurred in the summer of 1693, when the fleet failed to fulfill its charge to escort a convoy to the Western Mediterranean, resulting in the French taking ninety-two merchantmen and selling their prizes for 30 million livres, more than the entire French naval budget for 1692.

The navy was not an easy policy instrument for the state to wield in 1700. The old navy structure reflected the logic of the natural state. Three boards shared the responsibility for building and supplying the navy – the Board of Victualling, the Board of Ordinance, and the Navy Board (including its relationship with independent shipyards) – each closely tied to its own network of elite suppliers and contractors capturing ample economic rents (Rodger, 2004, pp. 189–90).

Before the eighteenth century, naval credit was deeply enmeshed in the system of naval supply. Suppliers held “navy debts” either directly in the form of formal debt instruments or more commonly in the form of invoices for supplies that they had delivered but for which the navy had yet to pay. These invoices and relationships were personal. In 1665, Denis Gauden,

25Rodger (1986) provides an accessible overview of the structure of the British Navy.

26Rodger (2004) p. 193. Chapters 12 and 13 detail the problem of administration and politics in the aftermath of the Glorious Revolution.

the surveyor-general of the Victualling Board, was owed “£425,993 6s 8d, including advances to pack next year’s meat over the winter . . . After the war Gauden’s accounts were found to be substantially accurate, no better system of victualling could be proposed but to renew his contract with addition of some partners lest he should die in office” (Rodger, 2004, p. 105). Gauden’s mode of operation was intensely personal. As with the treasurers in early American states, Gauden personally arranged for credits from suppliers that he used to purchase goods. Gauden then waited to be reimbursed by the government. As long as the debts owed to the suppliers were personally linked to individuals in the navy, such as Gauden, competition among suppliers could not be sustained. Which supplier would be paid first? The answer to that question would determine which supplier survived. Potential suppliers realized that personal credit arrangements would result in one supplier possessing a distinct advantage over the others. As a result, potential suppliers remained potential, not actual suppliers.

The development of an external financial market in government debt, specifically Navy Bills, allowed the finances of the Victualling Board and the Navy Board to be put on a new footing. In anticipation of revenues, the Navy Board was able to issue short-term credit instruments in the form of navy bills, payable “in the course.” Contractors were paid with bills, which they could hold until their repayment in course or which they could discount on a secondary market (Carlos, Neal, and Wandscheider, 2009; Rodger, 2004, p. 293). The new credit arrangements were central to new relationships with suppliers. The various naval organizations paid their debts with bills negotiable on a secondary market. The financial markets monitored the creditworthiness of the navy and reflected their beliefs in the interest they paid on navy bills. Suppliers could quickly realize their payments by discounting the bills, removing one source of personal connection between the suppliers and the navy. This process also lowered the risk of repayment to individual suppliers.

Symmetrically, the navy began letting contracts to several suppliers under competitive conditions. The navy encouraged large firms to develop that did not have exclusive contracts but with which the navy could credibly commit to engage in an ongoing business. The firms were large and limited to elite business organizations, so the supply process was not characterized by open entry; the navy encouraged only a few firms to compete for business.27

27Here it would be nice to know the identities of the suppliers, whether they were formal corporations, and their connections with the government. We do not know that, however.

Nonetheless, the elite competition was enough to secure both an increase in quality of the supplies provided and a decrease in the cost of supplies as well. The navy could credibly commit to honor its promises to these firms, because each individual firm could and did take the navy bills with which it was paid to the financial markets and get cash immediately. This eliminated the necessarily personal decisions made under the old system of which debts would be paid first, the impersonal and perpetually lived organizations in the financial markets could also credibly threaten the government and the navy in particular if either was slow in paying their debts, because new debt issues would be at higher interest rates.

The transformation of the system involved the creation of competition in combination with perpetually lived organizations on both sides of the process of naval supply. Rodger describes the overall effect of the Victualling Board development:

Beyond naval operations, the work of the Victualling Board has a wider significance for the agricultural and economic history of Britain. The Board was the largest single purchaser on the London markets for agricultural products, and its policy of managing the markets so as to encourage the growth of large firms, while at the same time promoting competition, was at least influential, and possibly critical, in the growth of a sophisticated and integrated national and eventually international agricultural market (Rodger, 2004, p. 307).

The new system enabled the provision of high-quality food that enabled Hawke to remain on station for six months, chase Conflans into Quiberon Bay, and prevent the provisioning of French troops in Canada and elsewhere around the world. By the 1750s, the British Navy had become a sophisticated organization of organizations; several of its component organizations were independent and had perpetual life – the Admiralty, the Navy Board, the Victualling Board, and the Ordinance Board among them. Developments in the navy were balanced by corresponding developments in perpetually lived elite organizations in the economy. One set of organizations emerged in financial markets that dealt in the various naval debt instruments and provided specialized monitoring of the current and future state of navy finances (tuned to each specific division within the navy structure). Another set of economic organizations developed in the form of elite, but competitive suppliers. Competition among suppliers eliminated the personal and rent-conveying natural state relationships that prevailed for centuries and that precluded significant increases in the quality of naval supplies. Elite competition transformed this system by reducing rents and providing the

right incentives, separating the suppliers from their old role as creditors of the navy. To work, these new arrangements required perpetually lived organizations.

The three-cornered interaction of the navy supply boards, the financial markets, and naval suppliers did not develop in a vacuum. England in the seventeenth century had been racked by revolution and conspicuous evidence of a lack of consolidated political control of the military. A lively literature discusses the events leading to the Glorious Revolution of 1688–9, and these need not be retold here.28 After the Restoration (1660), the English dominant coalition divided into two factions that came to be called the Tories and the Whigs by the end of the century. Tories tended to draw from the traditional countryside and generally supported the king, while the Whigs tended to draw from the commercial trading economy and commercial agriculture and opposed the king (Carswell, 1973, pp. 40–41). Both factions were part of the dominant coalition and represented a narrow portion of English society (Clark, 1985). Charles II (1660–85) and his ministers proved to be effective natural state coalition managers. Although the Whigs raised many grievances about Charles’s rule, the king retained sufficient support among the Tories to thrive in power. His brother and successor, King James II (1685–8), however, failed miserably at managing the coalition, turning his brother’s erstwhile supporters, the Tories, against him. The nearly united elite opposition ousted James in a coup and sought a new king under new constitutional circumstances.

The new coalition made many constitutional changes, including the basis for a perpetually lived state, a central ingredient in creating perpetually lived public and private organizations. The two factions did so by creating a new consensus in parliament about the rules of government and citizen duty. The Tories and Whigs agreed, among other things, that parliament, as a corporate body with self-constituting membership and perpetual life, possessed the ability to make law that was sacrosanct, above the king. As a corporate body, parliament embodied the sole source of taxation. In the Declaration of Rights, they announced that any king who failed to abide by these rules risked the same fate as James II (Jones, 1972, p. 318). Members

28Among economic and political historians, see, for example, Jha (2008), North and Weingast (1989), Stasavage (2003), Sussman and Yafeh (2006), and among the vast literature in English history, see, for example, Jones (1972), and Schwoerer (1981). For recent work on the effects of the Glorious Revolution see Quinn (2006), Robinson (2006), and Stasavage (2006).