Stock - History

History

During the Roman Republic, the state contracted (leased) out many of its services to private companies. These government contractors were called publicani, or societas publicanorum as individual company. These companies were similar to modern corporations, or joint- stock companies more specifically, in couple of aspects. They issued shares called partes (for large cooperatives) and particulae which were small shares that acted like today's over-the-counter shares. Polybius mentions that “almost every citizen” participated in the government leases. There is also an evidence that the price of stocks fluctuated. The great Roman orator Cicero speaks of partes illo tempore carissimae, which means “share that had a very high price at that time." This implies a fluctuation of price and stock market behavior in Rome.

Around 1250 in France at Toulouse, 96 shares of the Société des Moulins du Bazacle, or Bazacle Milling Company were traded at a value that depended on the profitability of the mills the society owned. As early as 1288, the Swedish mining and forestry products company Stora has documented a stock transfer, in which that the Bishop of Västerås acquired a 12.5% interest in the mine (or more specifically, the mountain in which the copper resource was available, Great Copper Mountain) in exchange for an estate.

The earliest recognized joint-stock company in modern times was the English (later British) East India Company, one of the most famous joint-stock companies. It was granted an English Royal Charter by Elizabeth I on December 31, 1600, with the intention of favouring trade privileges in India. The Royal Charter effectively gave the newly created Honourable East India Company (HEIC) a 15-year monopoly on all trade in the East Indies. The Company transformed from a commercial trading venture to one that virtually ruled India as it acquired auxiliary governmental and military functions, until its dissolution.

Soon afterwards, in 1602, the Dutch East India Company issued shares that were made tradeable on the Amsterdam Stock Exchange, an invention that enhanced the ability of joint-stock companies to attract capital from investors as they now easily could dispose of their shares.

The innovation of joint ownership made a great deal of Europe's economic growth possible following the Middle Ages. The technique of pooling capital to finance the building of ships, for example, made the Netherlands a maritime superpower. Before adoption of the joint-stock corporation, an expensive venture such as the building of a merchant ship could be undertaken only by governments or by very wealthy individuals or families.

Economic historians find the Dutch stock market of the 17th century particularly interesting: there is clear documentation of the use of stock futures, stock options, short selling, the use of credit to purchase shares, a speculative bubble that crashed in 1695, and a change in fashion that unfolded and reverted in time with the market (in this case it was headdresses instead of hemlines). Dr. Edward Stringham also noted that the uses of practices such as short selling continued to occur during this time despite the government passing laws against it. This is unusual because it shows individual parties fulfilling contracts that were not legally enforceable and where the parties involved could incur a loss. Stringham argues that this shows that contracts can be created and enforced without state sanction or, in this case, in spite of laws to the contrary.