Defoe on Trade, Commerce, and Credit

It is easy to presume that business writing is a relatively recent genre of literature. One would think that novels have been around far longer. Reality can be surprising though and it happens that business literature has been around for centuries and, in the English language at least, novelistic writing hardly predates it by much. In fact, arguably the first English language novels were written by a man who previously had a long business career, Daniel Defoe. Though not an entirely successful career – he had to find his way into writing somehow – Defoe eventually turned to producing business and economic literature, much of it on the subject of finance.

Defoe

Defoe was born Daniel Foe in London in 1660 to Protestant nonconformist parents. Decades later, Defoe would become the famous author of Robinson Crusoe and Moll Flanders, among the first English novels, if not the first. In his life, Defoe witnessed several ‘great’ events in British history, including the Great Plague of London in 1665, the Great Fire of London in 1666, and the Great Storm of 1703. Two of these were the subject of further books by Defoe, A Journal of the Plague Year published in 1722 and The Storm in 1704.

Business Career

Defoe’s business career is less widely known than his literary work. As a Protestant dissenter, Defoe was barred from attending Oxford or Cambridge, then the only two universities in England. Instead, he studied at a ‘dissenting academy’ at Newington Green under Charles Morton, who years later left Britain for the Massachusetts Bay Colony to teach at Harvard. Deciding not to become a Presbyterian minister, the career for which he was trained; Defoe aimed instead for a career in business. In his early life, Defoe traded in products as varied as hosiery and brandy, goods both domestic and imported. He even borrowed money to make perfume from African civets and established a firm employing a new form of diving bell to recover sunken treasure.

However, the first of two bankruptcies came in 1693. Defoe had become an insurance underwriter, accepting risk from marine insurance policies in exchange for premium income. In 1693, during a war between Britain and France, an Anglo-Dutch merchant convoy was attacked by a French fleet, resulting in the loss of around ninety ships. Defoe was among the underwriters on the hook for losses, driving him into bankruptcy with debts of £17,000. He fled from his creditors and changed his name from ‘Foe’ to ‘Defoe’. After some years keeping a low profile, he founded a brick-and-tile factory, restoring some wealth. Thereafter, he went on to repay most of his obligations, reducing his debt to £5,000 by 1705.

It was in this period that Defoe became a writer. Having already failed once in business, one might think writing would keep Defoe out of trouble … but far from it. As a steadfast nonconformist, Defoe wrote controversial content. In one pamphlet published in 1702, titled “The Shortest Way With The Dissenters”, Defoe mocked the extreme language of High Church Anglicans and, writing as though he were one of them, appeared to endorse violence against religious dissenters. Of course, Defoe was a dissenter himself, but his satire was too extreme for both sides of the religious tension. The pamphlet led to Defoe’s arrest for seditious libel.

The writer was fined, sentenced to stand in a pillory for three days, and imprisoned in Newgate Prison. While confined, his brick-and-tile works collapsed and he was bankrupt again. After appeals to prominent men, including the Quaker proprietor of colonial Pennsylvania, William Penn, Defoe was released by Robert Harley, then a minister in the government and a future Chancellor of the Exchequer. Soon thereafter, in 1704, he began a tri-weekly newspaper called Review, which he operated until 1713. His journalistic career was furthered by his publication of a collection of accounts of the Great Storm of 1703, regarded as a significant work in the history of journalism to this day.

South Sea Bubble

After his release from prison, Defoe wrote in support of Harley and even served as something of a spy for the government. After some time in opposition, Harley returned to government as Chancellor and one of his projects for the management of the public debt was the creation of the South Sea Company. Under the scheme, a firm was chartered with a monopoly on British trade in the South Atlantic and creditors of the state were encouraged to exchange their bonds for stock in the new company. Years later, the firm placed itself at the center of a massive boom in stock market speculation. The collapse of its shares is still among the most famous market crashes in history and Defoe was a witness to, and even an actor in, the events.

The years after his release from prison were formative to his writings on business and trade. During the South Sea Bubble, Defoe wrote in favor of the South Sea Company project in a pamphlet titled “An Essay on the South Sea Trade”, published in 1712. On a closely related note, a large amount of the content in Defoe’s Review concerned public credit. Further, Defoe travelled extensively during his business career and now as a spy. This helped him complete a mammoth work, A Tour thro’ the Whole Island of Great Britain, published across three volumes between 1724 and 1726. Indeed, Defoe also wrote travel literature.

English Tradesman and English Commerce

After publishing successful novels, Defoe went on to condense his knowledge of business in a new book, The Complete English Tradesman. ‘Condense’ may not be the right word; the book, printed in two volumes in 1726 and 1727, ran almost one thousand pages long. The work instructed tradesmen in such varied knowledge as the importance of separating one’s emotions from trade and keeping accurate books and records to providing guidance on how to marry wisely. The first volume was meant to be a textbook of sorts for new merchants and the second volume was intended to be useful even to the professionals. Both newcomers and professionals could benefit from the author’s knowledge and experience, he argued.

“And be it that those unfortunate creatures that have thus blown themselves up in trade, have miscarried for want of knowing, or for want of practising, what is here offered for their direction, whether for want of wit, or by too much wit, the thing is the same, and the direction is equally needful to both.”
Author’s Preface, The Complete English Tradesman, Daniel Defoe

In the book, Defoe focused on domestic commerce which was a subject neglected by other treatises on trade written in that mercantilist era, obsessed as it was with international balances of trade between nations and colonies. Further, if his work at the Review was shaped by debates about public credit, The Complete English Tradesman shifted attention to private credit. Among its lessons is that of the need to arrest growing losses before sinking too deep into ruin, and ruining one’s creditors in the process, reflecting Defoe’s own failures in business. Perhaps Defoe found some silver lining in eventually accepting his failure; he tells the story of a broke tradesman who recognized at last that he was bankrupt and “had no more the terror upon him of bills coming for payment”.

“… credit is maintained by just and honourable dealing, so that just dealing depends very much upon the tradesman’s punctual payment of money in all the several demands that are upon him …”
Chapter 25, The Complete English Tradesman, Daniel Defoe

One enthusiastic 19th century biographer of Defoe, William Chadwick, called The Complete English Tradesman “the best book that De Foe ever wrote” and that “perhaps it is the best book that ever was written in the English language.” Quite high regards indeed – but the work also attracted attention close to the time it was published, even as far away as North America, where Defoe’s book was reprinted by none other than Benjamin Franklin, who also donated a copy to his subscription library.

The Complete English Tradesman was followed in 1728 by A Plan of the English Commerce, which focused on international trade and was written to a more general audience rather than to entrepreneurs specifically. This work provided a review of English trade policy and defended state support for domestic production as a substitute for imports. Defoe subscribed to mercantilist doctrine which called for such policies.

Just as he had in the days of the South Sea Company, Defoe still fantasized about trade with distant lands. Defoe insisted, as though struggling to sufficiently inspire his readers, that the potential riches to come from trade were massive relative to what had been unlocked so far. To illustrate his point, the author repeated an expression that had previously been included in The Complete English Tradesman: “Estate is but a Pond, but Trade is a Spring”.

Lesson

Defoe was intensely familiar with commercial life in London, having been a businessman himself prior to becoming famous as a writer. In various books and many more pamphlets, he commented on business, economics, and finance, in each case applying his skill as a writer to a different and new genre, business literature. Some of his work was a product of his times, particularly that which concerned the South Sea Company and mercantilist trade policy. However, his work on more general topics, such as that in The Complete English Tradesman, is both detailed and fairly timeless.

More from the Tontine Coffee-House

Read about what Defoe, and other writers like Alexander Pope and Jonathan Swift, had to say about the South Sea Bubble. Also, learn about the shipping disaster that bankrupted Defoe and other marine insurance underwriters.