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An Inquiry into the Nature and Causes of the Wealth of Nations
rities of Ireland, &c.
the Historian of Rome
of Bath and Wells, on Sunday, July 12, 1835
ib. 78 ib. ib. 79 ib. ib. 80
NOTICES TO CORRESPONDENTS. We have been in the habit of returning answers to our Correspondents by the post, but in future we shall, in most cases, answer them by the pages of the Magazine. It will save us time, and them money.
Consequently, we inform our numerous and esteemed friends, who are mysterions in initials, from great A to angular Z inclusive, that they will find at our Publishers' most satisfactory replies.
However, we must add, that only suspecting several light effusions guilty of heaviness, we tried them by the ordeal of the fire. We were mistaken, for they proved to be splendid—but they perished in asserting their brilliancy.
MARINE INSURANCE VIL
It is strange how human institutions, founded with the best intentions, and based upon solid principles, will, in the course of time, become perverted and productive of serious evil; but so it is with every thing in this world--religion, patriotism, every virtue as well as every vice, are all made use of as so many rounds to the ladder of interest which the world would climb. Now, there is no arrangement between parties which appears, in itself, more productive of mutual benefit than that of marine insurance. The merchant, who hath his argosies at sea, by sacrificing an inconsiderable portion of his anticipated gains, is not racked with tormenting doubts and fears, tossing his head upon a restless pillow, as he reflects that his whole fortune is at the mercy of the winds and waves, and that the next morning he may find himself a ruined man: on the contrary, by this invention of insurance, he can lie down in peace, aware that should fortune not smile upon his venture, at least, he knows the full extent of his loss, and can meet and defy her malice. On the other hand, the number of vessels insured, and the small portion of risk taken upon each vessel, so di. vides the liabilities of those who insure, that notwithstanding occasional heavy losses, these losses have to be repaid to the merchant in such fractional parts, that they are not felt, and the general balance being in favour of the insurers, many hundreds obtain by it a respectable and honourable livelihood. It is, in fact, a gain to both parties. If the merchant is fortunate, he can well afford to pay his insurance ; if he is not, he is indemnified against loss. A merchant may be a clear-headed, enterprising, and intelligent man, and may speculate with judgment, but all his well-combined speculations may be overthrown, and he may be a ruined man, from disasters arising from the elements, over which we have no control, and whose uncertainties we can reduce to no calculations. These chances are provided against by marine insurance, and the merchant is left free to exercise his judgment, and to speculate in security. Before this arrangement, the clever and intelligent had but a partial advantage over others less gifted, as fortune might favour the latter, and be adverse to the former ; now they are in a manner secured against fortune, and as they speculate with judgment or otherwise, so will they prosper or fail. Insurance has produced the effect of securing fair play to judgment and intelligence.
Such were the proposed, and have been for a long time, the advantages of marine insurance : now we will examine into evils which have crept into this otherwise beneficial arrangement.
Observe, first, that it is now, as before, equally beneficial to all the parties concerned on shore.
If the ship arrives safely into port, the insurers receive their money, the merchant profits by his venture, and is able and willing to pay it.
Nov. 1835,-VOL. XIV.NO. LV.
If the ship goes down, the insurers pay the money, and the merchant is indemnified to the amount of his insurance.
If ships go down, they must be replaced, and the shipbuilders do not care how many go down.
If the cargoes are sunk, there is more employment for the manufacturers, as the order must be completed de novo, and the manufacturers do not care how many cargoes go down. If the year has been very tempestuous, and the losses at sea very numerous, all the better for the shipbuilder and manufacturer, and none the worse for the merchant who is insured, and, strange to say, all the better for the insurance brokers, who are never sorry to see two pages of casualties on Lloyd's books, for premiums mount up immediately, and the present loss is more than indemnified by future profits.
It would appear strange, that although in the loss of ships and cargoes, there is a loss of so much wealth to the country, that all parties should still be no losers or gainers, but so it is by this arrangement; for the insurance money paid by the merchants may be considered as a fund laid apart by the mercantile community to meet their exigencies, and although the losses are paid out of this fund, still there is more than sufficient left for the fundholders to live in competence. It is a loss which has been, and is, every year provided against-a loss to the nation at large, but not felt by the individual.
It appears, then, that to three parties it is a matter of profit, and to the fourth one of indifference, that ships should founder. Let us examine what effects are produced by this strange anomaly of profit derived from loss.
In the first place, in conjunction with the unexampled stupidity of the tonnage admeasurement, which is about to be abolished, it prevents any improvements in shipbuilding, for where would be the use in exerting skill or science upon a fabric which is not intended to last above six or seven years ? This is a very important consideration : the merchants vessels are, to our men-of-war, in the ratio of thousands to hundreds, and was it the interest of merchant shipbuilders to build for durability, it would also be their interest to build upon the most improved models. It is well known that many of our men-of-war, in our present navy list, are seventy, eighty, and ninety years old, and as sound now as when first built, but ten years is now about the space of existence allotted to a merchant vessel. We must explain the reason of this.
Insurance brokers are neither sailors nor shipbuilders, still they wish to ascertain how far the vessel may be seaworthy, on board of which is placed the cargo which they insure. They have a list of the merchant vessels, and, as the only criterion they can act upon is, that new vessels are better than old ones, the new built vessels are invariably preferred. A new vessel stands highest on the list, and is marked A. i. When she has run a very few years, she loses a portion of her caste, and receives another mark as É. 1, and in consequence the premium of insurance is raised in proportion to the character of the vessel, and her freight lowered. Now this is very absurd, as a well-built vessel of twenty years standing is infinitely preferable to a new one put together according to the present fashion, but still it suits all parties. The shipowner buys his vessel much cheaper, and the shipbuilder runs them up as fast as he can sell them. Marine insurance now stands in the place of good timbers, good planking, or well-modelled forms; and as long as the vessel has A. 1 opposite to her in Lloyd's list, it is no matter if she is obliged to keep her pumps going every two hours.
In the second place, the wealth lost to the nation by the effects of marine insurance, is enormous ; for, as we have observed, although the individuals concerned are all gainers, or protected from loss, still the loss is positive to the nation at large. Ships must be indeed very slightly put together to founder on the open seas; but as they are now built, with small timbers a foot or more apart, thin planking and thinner sealing, they not only founder at sea, but should they drive on shore, graze a sand bank, or touch a coral reef, there is a hole immediately in their bottoms, or a separation of the timbers; their cargoes are spread over the waters, or sunk into the depths of the ocean, the hull is soon in fragments, she is posted in Lloyd's books, accounts are settled, another ship is ordered, and there is an end of the matter.
Thirdly-Marine insurance renders a thorough knowledge of navigation, on the part of the master and mates, or of seamanship either in them or their crew, quite supererogatory. Perhaps the less they know about it the better, for the interest of all parties.
Fourthly– To the extent to which it is now carried, it is the occasion of the most infamous fraud. Hardly a month passes over without the suspicious destruction of a vessel taking place, and many acts of this description, difficult as they are to be proved, have been substantiated in our courts of justice. These enormities only tend to raise the rate of insurance, for the brokers will naturally take them into their calculations with other contingencies. We do not intend to cast the least imputation against the insurance brokers themselves. We are aware that they are gentlemen and honourable men, and that insurance, although a species of gambling, is not by any means equal to that which is carried on at the Stock Exchange. The insurance brokers, as we have pointed out, are of the greatest benefit to the merchants, and all their transactions are bona fide and fair; but they are the honest parts of a system which has led to serious evils: they are not aware of the mischief silently working, and if they were, they could not repair it, for while there is danger, men will insure. As they are not the authors of the evils, but only innocent accessaries, with them the remedy cannot originate.
But we now come to the last and most important consideration. The fact is, that there are other parties interested in the case, but whose claims have been overlooked. We refer to the British seamen who sail in these frail speculations—to the loss of human life occasioned by the indifference of all parties concerned, knowing that their property is secured. And here we must make a short digression upon the impolicy, and even the barbarity, of a portion of our English laws. We have always, in our legislation, too much regarded property, life too little. If we should entrust to the care of the proprietor of a stage-coach a frangible package, such as glass or china, and, by either the incompetence of the coachman, or the ill condition of the coach, it becomes damaged or destroyed, we are able to recover the
full value of it; but if the said coachman, by his negligence or his incompetence, breaks our neck, our surviving relatives or representatives have no remedy, though our life might have been worth thousands per annum to our family.
But this egregious discrepancy is carried still further in its absurdity as regards the trackless road of the ocean. Against the mismanagement of the captain, master, or the incompetence of the crew, the passenger has no remedy for either life or property, excepting insurance, which only tends to make those intrusted with them more reckless of both.
But to return to our subject—the awful expenditure of human life, through the malformation and slight construction of the generality of our merchant vessels. The seamen that navigate them are essentially offered up to the shrine of mammon. As we before observed, vessels are classed at Lloyd's, not by their actual strength or their intrinsic means of resistance to the perils of the winds and the waves, but simply by their newness. It is therefore the interest of builders to construct, and merchants to employ, ships that are continually, and so slightly run together that there shall be no chance of their ever getting old. A 1. is the puff for the freight. The consequence of all this is, that the shipowner has no inducement to purchase or contract for the building of a strong and safe ship : she will be liable to become old, in the first place, and, secondly, she must of necessity cost him double the price of a weak and an unsafe one ; and as he will get no abatement in the insurance for a strong ship, but an increase if his ship is so strong as to become old, he has every inducement to purchase such mere ricketty sieves as will just save appearances, and thus, not altogether unknowingly, sport with the invaluable lives of that class of men to which England owes all her greatness.
We wish every lover of his country to contemplate the enormity of this system—a system that really and truly rewards contingent murder by wholesale with great gain, and pours fortunes into the lap of the luxurious and comparatively idle landsman, at such a vast cost of life to the hardy and labouring sailor.
When the seaman enters on board a merchant vessel he has no means of ascertaining its sea-worthiness. It may be gaudily painted, and have exceedingly pretty decorations carved about the stern, with a most enticing figure-head, but, notwithstanding all this, he may be, even whilst he is admiring the smartness that every where attracts his eye, stepping on board his coffin. If the shipowner and the merchant be so amply protected by the underwriter, and the underwriter by his premium, surely honest Jack, to say nothing of casual passengers--honest Jack, who adventures his all, that is, his life-and how precious is that all to the nation !-should, by the nation be protected. It is a consideration of an importance almost vital to the country: for this protection, justice, fair play, morality, loudly call. Surely the sympathies of his countrymen should, yes, and will, make that call impressive. Do not let the poor fellow be drowned like a rat, in order to save a few pounds to Aaron, Isaacson, Abraham and Co., when he might, in some future emergency, face undauntedly the shot of the foe, and perhaps turn aside invasion, and convert the