[Excerpt from "Public Goods and Private Solutions in Maritime History," Quarterly Journal of Austrian Economics 7, no. 2 (Summer 2004): 3–27.]
The Sea as a Frontier
Life at sea, especially in the days before steamships, radio, and radar, was remarkably similar in certain respects to life on the various land “frontiers.”2 In both cases, many of the common activities were unfamiliar to the average citizen, and their very remoteness gave them an exotic flavor. In addition, governmental decrees often went unheeded, a high degree of self-reliance was taken for granted, eccentric behavior was not necessarily treated as a criminal offense, one’s daily work frequently involved hardship and danger, reciprocal relations regarding benefits and responsibilities were the norm, and voluntary cooperation was very common. Perhaps above all, traditions provided a framework for solving problems and resolving disputes. Customary law, not authoritarian (or state-created) law,3 was normally the basis for conflict resolution. Seafaring men functioned, to a high degree, in a world apart. And this was a world in which, for centuries, governmentally provided goods played a rather small role.
Privateering
One of the most instructive of all examples from maritime history is that of privateering, that is, the employment of profit-seeking, private armed ships during wartime.4 This practice persisted for roughly 700 years and was a widely recognized part of international maritime law. In the context of the present paper, its significance is that it demonstrates that national defense need not be monopolized by the state. Scholars in many disciplines have largely ignored the history of privateers. But this is a part of history which is too rich and well documented just to be erased. Those who assume that only governments can provide for the “common defense” must then criticize privateering along one or more of several lines. If privateers were merely pirates by a different name, then they could hardly be relied upon to aggress only against a nation’s enemies. If privateers were ineffective fighters whose actions did nothing to further the war effort, then their employment was pointless from a public interest standpoint. If privateering was unprofitable, then it could not be relied upon to arise spontaneously when needed. If, on the other hand, privateers followed civilized rules of conduct, imposed significant losses on the enemy, and were sufficiently profitable to appear whenever needed, then the case against privateering must be dismissed.
Privateering as a kind of naval warfare evolved out of restitution for a loss on the seas imposed on the citizen of one nation by a citizen of another (Petrie 1999, pp. 2–3). The offended party sought a permit—called a “letter of marque and reprisal”—from his government to seek out ships flying the flag of the other nation. If he was able to capture such a vessel, he was empowered to sell the vessel and her cargo at auction, thereby recouping at least part of his earlier loss.5 The first letter of marque and reprisal was issued in Tuscany in the twelfth century; while the first English example dates from 1243 (Garitee 1977, pp. 3–4). By the fourteenth century, letters of marque and reprisal were common throughout the Mediterranean. “Once such licenses were popularized, any reprisal without a permit became piracy in the eyes of the courts” (Garitee 1977, p. 3). Early on, there were occasional problems with holders of letters of marque and reprisal who violated their licenses by committing criminal acts. However, this steadily diminished as privateers became bonded and maritime courts more consistently enforced the relevant statutes. By the sixteenth and seventeenth centuries, privateering had changed into a well-regulated instrument of war for maritime nations (Starkey 1990, pp. 22–31). By the nineteenth century, letters of marque “were issued only in time of war to supplement the public vessels of the respective navies” (Petrie 1999, p. 3).
Although the practice has been looked on with disfavor by many, it is undeniable that privateering was frequently undertaken on a large scale. The American colonies of Britain commissioned 113 privateering ships during King George’s War of 1744–48, and four or five hundred during the Seven Years’ War of 1756–63 (Garitee 1977, pp. 7–8). During the American Revolutionary War, the British commissioned at least 700 such vessels—94 from Liverpool alone (Williams 1966, pp. 257, 667–69). The American secessionists who opposed them sent about 800 to sea (Stivers 1975, p. 29). “The great number of ships employed in this venture testifies to its widespread popularity and profit” (McFee 1950, p. 120). Some 526 American vessels were commissioned as privateers in the War of 1812, although only about half that many ever actually got to sea (Kert 1997, pp. 78, 89). Even the sparsely-populated Canadian maritime provinces of New Brunswick and Nova Scotia joined the war by sending 47 privateers to sea against their American neighbors (Kert 1997, p. 78). It seems fair to say that the Anglo-American peoples were particularly fond of and suited for privateering. Elizabethan England, for instance, was “almost totally dependent upon the private initiative and individual enterprise of its privateering establishment. Private armed vessels became the characteristic style of maritime warfare rather than a nuisance factor or a mere supplement to the navy” (Garitee 1977, p. 5).
On the continent of Europe privateering was also undertaken with enthusiasm by the French, Dutch, Spanish, and Portuguese, among others. For example, the French ports of Dunkirk, Calais, Boulogne, Havre, Cherbourg, St. Malo, Morlaix, Brest, Nantes, and La Rochelle were all sources of private armed ships, which were usually referred to as “corsairs.” During the War of the League of Augsburg (1689–97), the privateers from St. Malo alone made 40 to 50 sorties during each year of the war (Lord Russell 1970, p. 22). During the War of the Spanish Succession (1702–12), French privateers roamed as far as Ireland, Portugal, and Rio de Janeiro in search of English and Dutch ships (Lord Russell 1970, p. 31). During that same conflict, the British sent an enormous number of privateers to sea, 1,343 to be exact (Starkey 1990, pp. 88–89).
Despite the obvious popularity of privateering, was it really just piracy masquerading as national defense? It is true that the primary function of the privateer was to capture merchant vessels flying the flag of the enemy, because it was the sale of those vessels and their cargoes which made privateering lucrative. Therefore, privateers were usually very fast vessels of modest size which carried large crews but were lightly armed (Footner 1998, pp. 101–21). They were not really expected to engage the enemy’s naval vessels in combat. Further, were the officers and crews of privateers really cutthroats who followed no code of conduct, who recognized no rules or customs, and who only fought when the risks were small and the monetary reward was expected to be great? Some certainly have thought so. William McFee is probably representative of that negative viewpoint. He asserts that “the difference between a pirate and a privateer was largely academic” and that privateering “was barren of good will, and it put a premium on lawlessness” (McFee 1950, pp. 105, 129).
Recent scholars seem to disagree strongly with such an assessment. Both profit and patriotism usually motivated those who invested in, or served as part of the crew of, a privateer (Garitee 1977, pp. 47–64). Some privateers fought heavily armed naval vessels even when they could have escaped, and others attacked enemy shipping even when there was little or no prospect of profit. For example, the American privateer General Armstrong fought a desperate, and ultimately, losing action against a squadron of British warships at Fayal in the Azores on the night of September 26–27, 1814 (Garitee 1977, pp. xiii–xv). That same privateer had, a year earlier, battled a British frigate, a ship several times her size and power. In the winter of 1812–13, while off the coast of Brazil, the American Comet captured three British merchant ships after a successful gunbattle with the large Portuguese warship that was serving as their escort (Garitee 1977, pp. 150–51).
In addition to their frequent bravery under fire, the evidence suggests that, in general, those who commanded privateering ships acted as both sober business managers and gentlemen. The great majority of privateers were characterized by “a decent, civilized greed. … Like sportsmen, privateers played by a code of rules” (Petrie 1999, p. 69). “[A] well-developed body of law underlay and circumscribed the privateering business in the eighteenth century; moreover, there were considerable economic incentives to encourage privateering venturers to operate within the regulatory framework” (Starkey 1990, p. 31).6
First of all, since the usual goal was to capture a ship rather than destroy it, the actions of privateers probably led to fewer deaths and less property damage than did the typical naval approach. Under most circumstances privateers effected a transfer of property instead of the destruction of property. After using its cannon to inflict minor damage on the hull and rigging of an enemy ship, a privateer usually ranged alongside and captured the vessel by “boarding,” that is, by overpowering her crew through sheer force of numbers. The ship and its cargo were fair game, but the personal possessions of the crew or any passengers that might be aboard were not subject to seizure. Quite tellingly, the treatment accorded the prisoners taken by a privateer was normally of a high order. British shipmaster W.A. Bingham went to the trouble and expense of publishing in an American newspaper a declaration of his appreciation for the “very kind and humane treatment” he and his crew enjoyed after being captured by the Baltimore privateer Dolphin in 1813 (Cranwell and Crane 1940, p. 103). Another Englishman extended a remarkable invitation to his American captors. He asked them to visit him at his London home after the war (Maclay 1899, pp. 460–61). In his memoirs, George Coggeshall recalled that while in command of the privateer schooner Leo, he had “voluntarily released more than thirty British prisoners notwithstanding the American government gave a bounty … of one hundred dollars per head for British prisoners brought into the United States” (1970, p. 210). Clearly, these accounts do not sound like tales of seagoing criminals.
A second key concern involves the effectiveness of privateers. Did they, in fact, inflict significant damage on the enemy? Here the evidence in their favor seems overwhelming. Indeed, in Europe between 1600 and 1815, privateers “probably contributed much more than warships to the actual harm done the enemy” (Anderson and Gifford 1991, p. 101). On the other side of the Atlantic, “without the presence of the American privateers in the Revolutionary War and the War of 1812, the United States would never have been able to hold off the British Navy” (Kert 1997, p. 81). In fact, during the later stages of the War of 1812, the American privateers constituted “the nation’s only effective offensive maritime force” (Garitee 1977, p. 61).
American privateers swept the Atlantic and even penetrated within a few leagues of the mouth of the Mersey. The merchants and shipowners of Liverpool, instead of fitting out private armed vessels with the energy that had characterized them in former days, put their trust in the Lords Commissioners of the Admiralty, and found, too late, that the king’s cruisers, like the modern policeman, were too often absent from the spot where their services were most required. The depredations of the American privateers on the coasts of Ireland and Scotland at length produced so strong a sensation at Lloyd’s that it was difficult to get policies underwritten, except at enormous rates of premiums. (Williams 1966, p. 433)
The foregoing comments are powerfully positive judgments of privateers’ effectiveness. Furthermore, such judgments are well supported by the available data. French privateers “captured not less than 1,300 Spanish and Dutch ships” in the 1672–79 war against Holland and Spain (Lord Russell 1970, p. 20). Between 1689 and 1697 the French “corsairs” operating out of only one city—St. Malo—alone took “no less than 3,384 English and Dutch merchant ships and 162 escorting men-of-war” (Macintyre 1975, p. 83). During the War of the Spanish Succession (1702–12), private armed French ships captured or destroyed more than 1,000 ships belonging to either the English or the Dutch (Lord Russell 1970, pp. 31–32). Over the first 14 months of the Seven Years’ War (1756–63), French privateers captured 637 British vessels (Williams 1966, p. 115). Part of the explanation for this French success was a lack of effort by the British Navy. Many of the “commanders of the King’s ships appear to have been shamefully lax in the unpleasant duty of convoying merchant vessels, and in pursuing the privateers of the enemy” (Williams 1966, p. 116). On the other hand, British naval officers did seek out French merchant vessels, of which at least 794 were taken as prizes (Starkey 1990, pp. 178–79). The reason for their enthusiasm for the latter activity is that naval personnel, like privateers, were awarded prize money for capturing merchant ships carrying valuable cargoes. In the first few years of the Napoleonic Wars, specifically 1793 to 1797, the British lost “no less than 2,266 vessels, a large proportion of which were captured by the [French] corsairs” (Lord Russell 1970, p. 39).
In the case of the United States, it is interesting to compare the record of the public warships with that of the privateers. During the Revolutionary War, the ships of the Continental Navy took 196 British prizes, while the privateers took at least 600 (Maclay 1899, p. viii). Moreover, as the war progressed, the number of privateers increased from 136 in 1776 to 449 in 1781 before declining to 323 in 1782. During those same years, the number of active public warships decreased from 31 to nine to seven, respectively (Maclay 1899, p. viii). In short, the British Navy succeeded against the Continental Navy, even though it failed to curtail the activities of American privateers. In the War of 1812, the U.S. Navy captured or destroyed 165 British merchant ships and 15 naval vessels. American privateers, on the other hand, took only three British naval vessels (a task for which they were really not designed), but a minimum of 1,300 merchant ships (Garitee 1977, p. 243). A Baltimore newspaper of the time put the figure at 1,750. One recent writer has said that the British lost 2,500 ships, with the majority taken by privateers (Petrie 1999, p. 1). “Even a maritime establishment as large as Britain’s in 1815 could not ignore such figures nor enjoy the prospect of greater losses at sea if the war were extended another year or more” (Garitee 1977, p. 244).
On the other side of the same conflict, the Canadian privateers also contributed to the cessation of hostilities. The privateers from the maritime provinces were few in number but both active and successful. They probably captured or destroyed close to 600 American ships (Kert 1997, p. 80). One in particular created consternation along the eastern seaboard, the Nova Scotian schooner Liverpool Packet. She was such a threat to shipping, that the Congress even considered cutting a canal across Cape Cod in order to reduce shipowners’ losses (Kert 1997, p. 84). From the American perspective therefore, “the privateers of New Brunswick and Nova Scotia provided a major incentive for peace” (Kert 1997, p. 78).
To propose that privateers often had a significant, perhaps even deciding, impact on the course of wars between maritime nations seems beyond dispute. Only one question remains. Was privateering sufficiently profitable to assure that its practitioners would want to offer their services during wartime? There is an immediate, intuitive answer to that question. Those who undertook to build, equip, arm, and man a ship in preparation for a raiding cruise were, naturally, men with expertise in nautical matters. In other words, they were usually shipowners, merchants, and shipmasters. In time of war, their ordinary commercial activities were being curtailed by the enemy’s actions: blockades, coastal attacks, diminished markets in which to sell their cargoes, privateering itself, and so forth. They had every reason to engage in privateering, both in patriotic outrage against the enemy and as a means to recover at least some of their lost income. For example, shortly after the War of 1812 was declared, large numbers of privateering vessels appeared, ready for sea, in both Canadian and American ports (Kert 1997, pp. 78, 88).
Quantitatively, the data on profits are rather limited, few account books and ledgers having survived, and they reveal somewhat mixed results, as one should expect. After all, privateering was a very risky business. It will help to illuminate the usual risk environment if one keeps in mind that 28 percent of all American and 21 percent of all Canadian privateers were either wrecked, destroyed, or captured during the War of 1812 (Kert 1997, p. 90). Most fundamentally, one must inquire as to the cost to build and outfit a typical privateering vessel, as well as the magnitude of its revenues. At the apex of privateering activity, from the late eighteenth to the early nineteenth century, the outfitting cost was roughly $40,000 at contemporaneous prices, although this could vary considerably with the size of the ship (Garitee 1977, p. 125; Williams 1966, pp. 661–64; Starkey 1990, p. 305). Furthermore, since the average value of a ship taken as a prize during the War of 1812 was around $13,500, any privateer of the time that took at least four prizes was likely to prove profitable (Garitee 1977, pp. 197–98). And the extant records indicate that, during that war the average number of prizes taken by both Canadian and American privateers was at least six (Kert 1997, p. 90).
In his meticulous study of privateering as a business, Jerome Garitee found that 58 percent of the Baltimore privateers were profitable. The mean average proceeds to the owners from the cruises of those successful vessels were $116,712 per privateer (Garitee 1977, pp. 271–74). That indicates an average return on assets of about 192 percent. High profits also seem to have been achieved frequently by American privateers in the mid-eighteenth century. Two different researchers have found evidence of annual rates of return on the order of 130–140 percent (Swanson 1991, p. 218; Lydon 1970, p. 253). On the other hand, some privateering ventures brought minimal profits or even losses to the investors. Nevertheless, the fact that some privateers achieved very high returns apparently served as a powerful incentive which brought forth large numbers of private armed ships over several centuries of warfare.
It is clear that privateers were not pirates, and investments in privateering were often very lucrative. Moreover, privateering “had a marked impact on Atlantic commerce in the 1740s, just as it did in earlier wars and would continue to do in the subsequent conflicts of the eighteenth and early nineteenth centuries” (Swanson 1991, p. 2). Why, then, did privateering disappear? Many have assumed that the technological developments during the latter half of the nineteenth century—steam power, armored warships, and rifled cannon—made private ships of war obsolete, but that is false (Anderson and Gifford 1991, p. 118). Privateering disappeared precisely because it worked so well. It was effectively legislated out of existence in 1856 by means of the Declaration of Paris. The signatory nations7 wished to eliminate privateering, because it offered a low-cost but effective alternative to those nations who did not want to undertake the massive expenditures required by public navies (Anderson and Gifford 1991, pp. 118-19). “Privateering was not a market that can be shown to have ‘failed’”(Anderson and Gifford 1991, p. 120). Clearly, national defense, at least insofar as naval warfare is involved, need not be the exclusive province of the government.
- 2See Anderson and Hill (1979) for some parallel characteristics of the American West.
- 3Benson (1990, pp. 11–36) carefully explains the differences between customary law and authoritarian law.
- 4Sechrest (2003) has further details about privateers.
- 5Originally, the amount that could be recovered was limited, and the individuals whose property could be taken were specified (Garitee 1977, p. 3). Once privateers had become a common part of warfare, such limitations disappeared.
- 6Among other possibilities, these incentives included loss of the amount of the surety bond (Garitee 1977, p. 17; Kert 1997, p. 92), loss of the letter of marque, an adverse judgment in the prize courts, damage to one’s commercial reputation, and even charges of piracy.
- 7Those nations were Great Britain, France, Prussia, Austria, Russia, Sardinia, Turkey, Belgium, Denmark, the German Confederation, the Netherlands, Norway, Portugal, and Sweden. The United States did not sign the declaration, but renounced the practice in the Hague Peace Conference of 1899.
