Excerpt from HI: Human Investment
Historical Examples of the Free Market utilizing Percentage As You Earn (%AYE) Finance & Finansurance for solving major problems and with large numbers of individual agreements.
Written by Brock d’Avignon, 1978; Edited by Melinda Pillsbury-Foster, 2017
Historical Probe #2
Privateering Goes to War 1775 – 1782, & 1812 – 1815
Privateers’ %AYE Financed Defense of Free-Market America
Once upon a time, 792 stock-share owned and privately armed rebel warships set sail against their government’s barriers to free trade. Over 3, 100 of His Majesty’s vessels were captured or destroyed by American Revolutionary warships, each entirely outfitted and operated with Percentage As You Earn (PAYE) finance. Joining the fray to end the Crown’s legalized monopolies, the Colonial Burgesses and later Continental Congress taxed or printed enough money to finance in a similar manner, 64 republican warships.
On 15 April 1775, four days before the Lexington Commons and Concord Bridge Battles, the Massachusetts State Ship Tyrannicide hoisted anchor. Congress requested dividends from its U.S. Navymen of 66% percent of any captured prize-ship and cargo. By contrast, typical American investors, such as little old ladies with 20-dollar gold pieces, who were interested in thwarting subsidized tea monopolies; invested into capitalist cruisers. The investors in Privateer ships, requested dividends of only 33% percent, leaving to the crew the two-thirds of whatever enemy vessels the Privateersman boarded and brought to ports’ maritime title company courts’ condemnation hearings, or government Admiralty courts to verify they were actually British ships that were captured. Not surprisingly, the skilled seamen signed aboard the instruments of war that would be loaned to them at the much lower rate:
Comparative List of American Armed Vessels: Years 1776 – 1782
Circa 1775, Americans calculated the return-on-investment in the quite literal removal of the British Roi’s taxation-subsidy cycle. Idle ships were bottled up in harbors and were thus useless to the owners. Their ” opportunity cost” was no less beneficial in risking the equal loss of the ship at sea, while enlistee privateersmen loaded a gesture of defiance at the Crown’s enforced protectionism. Since blockaded shipowners were often broke, the outfitting of the vessels was usually underwritten by a popular stock offering to other colonial rebels who had seen the strategic wisdom of a unilateral declaration of free-trade. The number of American stockholders grew:
Comparative Number of Guns Carried By the American Vessels: Years 1776 – 1782
According the author of Pirates, Privateers, and Profits, by James G. Lydon. Introd. by Richard B. Morris, both owners and operators floating on percentages, decided to structure privateering’s merit pay incentives aboard ship in three ways:
1) Smugglers like John Hancock had early defined 18 basic jobs in high-risk operations plus 2 incentives; so aboard Privateers the 2/3rds “earnings” of the crew were formally divided into brackets of 20ths by shipboard tasks.
Custom was established aboard square-rigged ships that cabin boys, for instance, no matter how many, received a sub-bracket of 1/5th of 1/20th; still a sum enough on some voyages to place a boy into the middle class economically. If seven or eight cabin boys were optional, then they decided if they wanted more hands-on task, or cut their numbers down to seven so as to receive a larger payout per cabinboy. The same 1/20th bracket concept applied, no matter how many occupied that bracket, all the way up to the First and Second Mates who split a full 20th each. Sometimes the ocean-crossing privateers captured six ships and manned them.
2) The “captain’s purse”, however, was a notably outsized 3/20ths or 15% of crew booty. There were two good reasons for the size of the captain’s purse, and they were encouraged by the crew. It was widely recognized by these sea-going mercenaries that no one dies for money.
Tactical ideas counted as did obligated duty; but risking death more than other crewmates were willing to risk, had better account for something more than the thrill of a fight. The captain allotted merit pay percentages from his purse based on sub-bracket percentages according to any specified success totaling 1/20th of the booty, equaling a third of his purse. Examples: for gallantry (the first man to board an enemy vessel would receive an extra meritorious wage, or his widow at home would); for marksmanship (the first Kentucky Rifle up in the marines’ “fighting tops” to pick off the enemy captain); for a lookout’s eyesight from the crow’s nest; or for an excellent cook. The captain usually kept 1/20th for his own.
3) The last third of the captain’s purse merit pay incentives was a 1/20th designated by the captain and the owners for the crew if they achieved some extra-un-ordinary feat. This action might be the burning of a specific revenue cutter or capturing a patrolling frigate. This 1/20th or third of the captain’s purse was often nailed to a mast, and the impossible became the routine. For instance, Privateer Captain Jonathan Haraden captured over 1, 000 British naval cannon during the Revolution. Never heard of him, hmmm.
The Revolution’s sea-power became self-financing within 3 years, which attracted more participants, Unlike most forms of capitalism that make money, privateering set out to take money back as a reprisal for financial suppression and impressment servitude. Privateers went to sea with an overload of men and materials for the purpose of re-outfitting and skeleton crew re-manning several captured prize vessels. Fortunes rose or sank in prize vessels on their way to American or French ports, Prisoners-of-war often rose to recapture prizes back from the skeleton crew; sometimes a ship changed hands and navigation several times.
For this reason of disparity of luck among the same original privateer crew, the admiralty courts judged that all hands who sailed off together would be entitled to their agreed portion of wages and dividends in the overall venture. This trend concerning reprisals was standard throughout the former colonies. All previous and future reprisals, accrued to the privateersman no matter where they are now, “in heaven, in port, at sea, in hell, or worse as prisoners in Britain” dank hulks. If the original Privateer ship was lost, it was not usually deducted from the crew’s pay but from the stockholders’ “capital gains”; although a refundable insurance bond accumulated from prizes sent in, until the original ship’s return. The admiralty courts clearly sided with the sailors since they were in fact risking their lives on the high seas whereas the stockholders were not. Many sailors became “men of property” and could vote in the title company maritime courts or State admiralty courts to sustain judges on their bench.
During this era, through the Revolution and the War for Free Trade and Sailors’ Rights, there were two female privateer captains who inherited their ships at sea. The daughters and wife of Captain Uriah Sears, returning from China trade, were surprisingly attacked by French privateers in the Caribbean on their way back in 1803, and sunk the French ship. My ancestors’ armed merchantman wommaned by Chloe, Keziah, and Hannah Sears sunk the French ship. The French had cracked the hull of their prey, allowing water to expand silks and tea to burst their planking. A British frigate out of Jamaica rescued both crews.
When a prize vessel came in, it often carried financial instructions from some of the privateersmen who captured it regarding investment in it to create yet another Privateer. Some privateersmen
used their wages from the prize to buy or barter stock shares in its venture or re-outfitting. This practice aided cash flow in the war effort and became known as “waging war” against England’s not-so-commercial empire. Several such wage warrior stockholders in a prize vessel, for some reason, made the best watchful prize crew imaginable. Thus, whenever a spyglass sighted a convoy of the Crown’s mercantilistic “business” underway with a warship, eyeing it was referred to as “taking stock” in the situation. Indeed, the word “enterprise” means to enter a captured prize. It has come to mean more peaceful ventures since yet still requiring courage to be creative.
Many privateersmen who didn’t invest in gambling that prize vessels would reach port, retained their bloody hard-won hard silver specie while sailing the currents of war. A Privateer captain could rely on his crew’s stout self-interests down in the holds of captured ships; much in contrast to the U. S. Navymen who were paid in ever-inflationary paper currency.
While subsidized British commerce lobbied in the lobby of Parliament for more restrictive laws, sail, and cannon to inflict more economic woe on the untaxable colonials—American seaboard political pressure in October 1776 rose with the tide of Congress’ inflation of money. Congress acquiesced to lower its 66% “rePAYEment” from Navymen to 50% on cargo craft captured. Congress would forego revenue if the crew captured an enemy man-o-war or British Privateer; and would pay in paper money a bounty for the destruction of any British vessel of half its adjudged value in a governmental admiralty tax court. For the Continental Navy then, the policy to attract volunteers was translated into the orders: burn, sink, & kill. To an American Privateersman’s point of view, it seemed as if Congress had institutionalized the bloodthirsty failure to bring capturable ships of any sort to any port. Glance again at Maclay’s table to see how well regarded these measures of vague “national interest” were, and how few signed aboard USN warships in the name of “national security”
Navy Captain John Paul Jones wrote Congress decrying, “the impossibility of manning a government vessel whenever a Privateer was outfitting and recruiting in the same harbor, which is most all the time. Alas without a Navy!” Some republican navy captains became desperate enough to try involuntary servitude, which crossed against the individualist grain of most other revolutionaries and what they thought they were fighting for. Congress was dominated by Privateer interests; the man they chose to command the fledgling U.S. Navy was Commodore John Barry due to an incident of principle on the Delaware River. He was selected because as Privateer Captain Barry, he had been already primed to fire a broadside into a Continental sloop commanded by a USN lieutenant under Navy Captain Seth Harding. The Navy ship had sent an impressment gang to Barry’s Privateer to conscript his privateersmen. Barry piped the would-be draft board aboard and simply pointed to a gunner’s mate holding a lighted fuse and silently saved the Revolution. It is Commodore Barry’s statue in front of Independence Hall today that stands as a testimony against upholding the sins of governance with efficient PAYE finance.
Barry knew that State mis-determinations will cause tax-revenue over-reliance, causing inept use of bonds, causing a desperate need for inflated printed money. As government loses its power base to the free-market using the same financial method: governments will excuse their lack of insurance liability on its “good faith & credit” based on its tax-supported military’s ease in killing and enslaving to “man” its programs of “national service’ — all ironically in the name of” national defense education acts for liberty. Perhaps we won’t get fooled by that line anymore than the Commodore.
Freedom makes living worthwhile, and a living worthwhile. Percentage As You Earn (%AYE) finance is determined by both “worth” and “while”. Its PAYEment systems are relevant to only those tools and services that increase a borrower’s erratic yet ever-increasing capability to be more productive. Freedom itself, in this case was the service sought, the tools were gun platforms. PAYE finance was well suited to build freedom’s defensive infrastructure in 1775, again, in 1803, as Jefferson cut the Navy budget in order to encourage privateer action against the Barbary Pirates. Six United States Marines, two US Navy ships, along with six hundred ship-wrecked Greek sailors and a Libyan army under the command of a 7-foot tall, black, Egyptian Republican Revolutionary in Haiti and a future American privateer named King Dick, captured Tripoli after sweeping across the desert. Declaring a constitutional sultanate of the United States of North Africa, its victory was given away in diplomacy to save the sensibilities of US southern states. How different American history would be if there were neither a Pentagon today nor slavery yesterday.
Thus, the investors’ strategic orders were very precise: raid only British commerce, since that was the raison d’etre of the Royal Navy blockades and its influence in Parliament. American Privateers’ orders were aimed at protecting the salubrity of all vessels in a fight, making the resale of enemy vessels profitable. Privateers captured 16,000 well-equipped “redcoats” on the high seas during the Revolution, as compared to the 8, 000 not-so-well-equipped Kingsmen that George Washington captured on land, until Yorktown. Prisoners were worth $20 at the exchange rate in America. The investors’ orders translated into: capture, extinguish fires, minimize loss of life, and run blockades to port with prize vessel, cargo, and exchangeable prisoners, Thus, new Revolutionary warships returned to sea flying the 13 gold and black striped Privateer ensign emblazoned with an American rattlesnake proclaiming, “Don’t Tread On Me”.
American Privateer’s revolutionary success in comparison to their U.S. Navy compatriots was of little note as compared to their practical success against the formidable foe of the Royal Navy. His Majesty’s incentives to gain enlistments were lumps on the head, lump sum fixed bounties, pension installments, and occasionally an insurance company’s salvage reward for recapturing a formerly British cargo ship.
The British Navy was embarrassed by American Privateer tactics being blatantly concerned with retaliation against their commercial empire. Instead of a suicidal nationalistic urge to go up against the King’s majestic ships-of—the-line with three times their armament; the American’s lightweight, fast, shallow-draft, 16-gun platforms would dart from Merchantman to Merchantman. Privateers found themselves capturing several 36-gun frigates anyway, as they turned the Merchantmens’ carronades upon King George’s folly.
The only desire the Americans ever had to dare attack the even larger “hell ships” manned by the impressment of Americans enslaved for years, was to show-off gunnery skills. The Royal Navy did not practice gunnery as did the pecunious Privateers who had to make every shot count; but relied on massive multi-decks of firepower. The Americans would quickly capture and sail away the dreadnought’ s little cargo convoy, leaving the lumbering slow warship without a purpose.
The British taxpayer quickly grew tired of paying for such worthless objects of nautical art. Lloyds of London ship insurance went up 6,000% and was the major contributing argument in the House of Commons for making peace with their break-away cousins.
Whenever a British fleet actually nabbed an American Privateer that wasn’t quite quick enough downwind, the British sailors couldn’t handle the amount of sail crowded on them because it wasn’t Navy Regulation. “Going by the book” they cut down masts and spars, and then after filling the hull with rock ballast; they wondered why it couldn’t catch other Yankee designed vessels. Meanwhile, Yankee Privateer Captain Jonathan Haraden invented the “jackass brig” air rudder to run circles around enemy ships; as well as the swinging plumb-bob to order level broadsides. When out of annunition Haraden loaded his cannon with silverware and crowbars, tearing an English Privateer to shreds off the Spanish coast. This inspired a Spaniard named Farragut to join the American Revolution, his son would command the Union Navy in the Civil War.
Thomas Paine’s 1776 challenge to Americans was to build with their forests enough Privateers to deny British business the fruits of its Navy’s tyrannical canvas and cannons. Paine had been in America one year before he gave this advice. He was probably not expecting ocean-crossing Privateers to dare attack English cities in the Thames, nor sink the Dover fishing fleet for being loyal to the royal’s protectionism. After such actions, Ben Franklin personally financed three Privateers from France with Irish crews to raid the English Channel. These too were PAYE financed and PAYEment operated.
The Royal Navy could not fathom the lack of concern American Privateers had for not carrying permission of a government to attack them; a ”letter of marque and reprisal” or in modern business license parlance, a ” certificate of public need”. The British Admiralty always referred to their own few Privateer ships as “letters of marque” and hoped they would envelope something. Fortunately, the British did recall the Elizabethan principle of a stock market deciding on the number of warships at sea instead of a maritime bureaucracy, so only early in the Revolution were any rebels hung as pirates. Yet as monarchists they could not comprehend people contracting on their own as sovereign individuals without a Sovereign authority. To Americans of the era, corporations were not creatures of the State; to the British they were chartered by the Crown. British political pressure at sea ironically caused the legitimacy of the Congress to rise, at least in the subjective eyes of the British sailor.
The Continental Congress and the various United States were happy to remedy the difficulty in gaining Royalist and Loyalist respect by issuing letters-of-marque like they were licensing the waves of the sea, 3, 000 marque “coasters” from Massachusetts alone kept their ports and sea lanes open before they returned to peaceful pursuits of happiness.
The British mind was satisfied, but to Americans such national permission was a sham. Investors were interested in eventual free trade with England. When the Crown recognized its loss by surrender and treaty, only 2 American Privateers remained at sea to become pirates in 1783. Seaboard America defined them as rebels without a cause and sent a fleet of Privateers with one Navy ship to end their aggression. Only three US Navy ships were left operable in 1782.
Most muskets and gunpowder that General Washington had to use, came from intercepted royal vessels. The General lamented to Congress for supplies for years, yet they came not from Congress but Privateers — often given him or a severe discount for mere transport to his ever retreating army. Little was said in the “London Times” about Washington or Congress; the news was all maritime disasters. When Lloyd’s of London insurance rates rose 6000%, it was time to tell the Royal Navy that the war for mercantilism’s empire in the Atlantic was over. They decided to send Cornwallis to India to impose intolerable acts upon a different set of Indians — who didn’t use such savage PAYE finance incentives against their imperialism. The British merchant-adventurers has used %AYE finance to send dissident emigrant religionists to America. It was no surprise the new Americans used this successful business model against their forceful arrogance not allowing them a voice in counter-productive government policies.
Such lessons did not go unheeded 29 years later during the War for Free Trade and Sailors’ Rights, according to Privateer Captain Coggeshall’s History of American Privateers, published in 1856; and Theodore Roosevelt’s War of 1812. This time 517 ocean-crossing American Privateers again captured over 3, 100 vessels from the British Navy and Merchant Marine. The U.S. Navy’s 23 ships didn’t do too bad either. The Navy honors names like Jones, Preble, Decatur and Rogers. However, tax-supported history books in schools do not tell the amazing tales of Privateer Captains like Haraden, Crowninsheild, and Boyle, nor commodores Barney and Barry who believed in popular defense instead of centralizing it.
Perhaps the most valuable lesson taught us by American Privateers was their keen insight into how to motivate employees within wide-spread sophisticated, contractual enterprises that floats on a percentage-of-income. Their activities were deadly yet hold managerial lessons for those into constructive pursuits of Human Investments in collegiate education for all in the free market, medicine for all in the free market, subscription anti-ballistic missile systems, mortgages without fixed installments nor repossession, and craftsperson tooling today allowing retail sales to expand. These lessons are: an objective view of organizational co-operation with individual contracts, pay scale identification by function, merit pay for both individuals and the crew, and benefits recognized for brave souls whose buckle got swashed. These were ordinary beings who could calculate the odds of risk that today we call econometrics, and gambled with their lives on improving those risks with commensurate rewards. Heroism increased their capacity to “earn” beyond the stockholders’ investment in rigging masts with “green hands”. Freedom isn’t free; yet it can have its rewards in peace.
Melinda Pillsbury Foster was the Chairman of the Libertarian Party of CA in the 80’s. Her first book, titled, “GREED: The NeoConning of America,” was published in September of 2004 and tells a fictionalized version of the years opening into the second Bush term of office. At the time Pillsbury-Foster was advised of the danger of telling the story without changing the names of the NeoCons involved. Pillsbury-Foster is now finishing a book about her years in politics and for social justice issues.