Related links: http://www.richmondfed.org/publications/research/region_focus/2010/q4/economic_history_weblinks.cfmMaritime industry ; Economic history

David A. Price

English

Research Papers in Economics

32 Region Focus | Fourth Quarter | 2010 
W
hen Elizabeth I became
queen in 1558, following
the death of her sister,
Queen Mary I, she found that she had
inherited a mess: England’s navy had
shrunk to a dangerously small number
of ships, the country was vulnerable
to attack by the powerful Spanish
empire, and the treasury had little
money with which to build up the
fleet or to do anything else. England
also lacked the flow of wealth that
Spain enjoyed from overseas colonies;
by this time, Spanish conquistadors
had already defeated the Aztecs of
Mexico and the Incas of Peru and had
been hauling away the incredible
riches of those regions. England, in
short, was outmatched militarily and
economically.
Elizabeth’s solution was to turn to
the marketplace: She allowed private
enterprises to form
pirate expeditions, in
essence, to capture
Spanish shipping and
bring home its treasures.
Many of these plunder-
ing enterprises were
joint-stock companies in
which members of
respectable London 
society — including 
merchants, gentry, and
even Elizabeth herself —
purchased shares. The
returns from the enter-
prises enriched the
Crown and stimulated
the English economy.
Even more significantly, in the long
run, Elizabeth’s policy built up the
human capital that would enable
England in the following century to
establish itself successfully in North
America.
Historians today distinguish lawful
“privateers” — captains and crews
attacking foreign ships with the 
permission of a sovereign — from
pirates, who were mere robbers. With
regard to the anti-Spanish voyages in
Elizabethan England, however, this
distinction is not always easy to draw.
In theory, they were privateers: They
were required to hold licenses, known
as “letters of reprisal,” and to comply
with other restrictions on the raiding
of foreign commerce. In practice,
however, the official responsible for
oversight of privateers, the Lord High
Admiral, was notoriously corrupt and
was lax in enforcing the rules if the
price was right. Thus the privateers
often were privateers in name only.
Tons of Silver
Perhaps the most famed of the queen’s
privateers was Francis Drake, who
began a 14-year run of extraordinary
exploits in 1573 with raids against the
Spanish in present-day Panama. Aided
by local Cimaroons — former African
slaves who had escaped from their
Spanish owners, and who were glad to
make common cause with Spain’s 
enemies — Drake and his men trav-
eled overland across the Isthmus and
ambushed a Spanish caravan; its 190
mules were carrying tons of silver
ingots and another £100,000 or 
so in gold coins. Although converting
money values across centuries is a 
highly imprecise science, research by
economic historians suggests a conver-
sion factor of roughly 134; in other
words, Drake’s £100,000 haul in gold
coins alone would be worth approxi-
mately £13.4 million ($21 million) today.
Drake’s next great, and highly prof-
itable, adventure began on Dec. 13,
1577, with his departure from
Plymouth, England, for raids on
Spanish ports and shipping around
South America. His 100-foot flagship,
the Golden Hind (that is, the golden
deer), was joined by four other vessels.
They reached the Atlantic coast of
South America in two months, and
then took another seven months to
The Queen’s Private Navy
BY DAVID A. PRICE
ECONOMICHISTORY
How Elizabeth’s 
privateers 
strengthened
England, rewarded
investors, and 
led the way to the 
English New World
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This portrait of Queen Elizabeth I, with 
her hand resting on a globe, suggests her 
ambition to make England a world power.
Privateers helped her do so — and also
defended England against the attempted
invasion by the Spanish Armada 
in 1588, depicted behind her.follow the coast southward and to traverse the Strait of
Magellan near the continent’s southern tip. By that time,
three of the four ships traveling with the Golden Hind had
been abandoned, and the fourth had returned to England
after becoming separated from Drake. 
Drake nonetheless kept going, attacking Spanish ships as
he followed the coast of Chile, ultimately capturing a large
Spanish treasure ship, the Nuestra Señora de la Concepción, on
March 1, 1579. The ship had ample artillery with which to
fend off an attacker, but Drake was able to employ the 
element of surprise — English privateers had been unknown
in the Pacific. The Golden Hind hid its guns and slowed to
give the appearance that it was merely another merchant
ship, then attacked when the Nuestra Señora came within
hailing distance. Drake’s crew required six days to transfer
the ship’s riches, including 80 pounds of gold and 26 tons 
of silver. 
Anticipating that the Spanish might be waiting for him
on his return trip, Drake decided instead to cross the Pacific
and return home via a western route. He first sailed north-
ward to upper California, which he claimed for Elizabeth
and named New Albion. (The Spanish had visited the area
before him, however.) He spent a month in the San
Francisco Bay in the summer of 1579, then made his 
way around the world. It was the first circumnavigation 
of the globe by an Englishman. Moreover, because
Ferdinand Magellan had died during his 1519-1522 journey,
Drake was the first commander of any nation to complete
the voyage.
Following Drake’s arrival in England on Sept. 26, 1580,
not quite three years after he left, Elizabeth gave him a
knighthood. He was also a hero to the shareholders, who
reportedly received a 4,600 percent return on their invest-
ments — that is, for every £1 they put in, they received £47
after expenses. Three and a half centuries later, John
Maynard Keynes would credit the voyage with cleaning up
Elizabeth’s balance sheet and helping to finance the great
British trading companies:
Indeed, the booty brought back by Drake in the Golden
Hind may fairly be considered the fountain and origin
of British foreign investment. Elizabeth paid off out of
the proceeds the whole of her foreign debt and invest-
ed a part of the balance (about £42,000) in the Levant
Company; largely out of the profits of the Levant
Company there was formed the East India Company,
the profits of which during the seventeenth and 
eighteenth centuries were the main foundation of
England's foreign connections; and so on.
Drake’s next two voyages were explicitly both commer-
cial and military, seeking Spanish treasure for investors while
also carrying out Elizabeth’s orders to attack strategic tar-
gets.  First was his 1585-1586 raid on Spanish interests in the
Caribbean. His fleet plundered the port city of Santo
Domingo, the colonial capital, located in the present-day
Dominican Republic, and ransomed the town of Cartagena
on the Caribbean coast of present-day Colombia. The 
following year, Drake led a 23-ship fleet in successfully
attacking the port of Cadiz in the Spanish homeland,
destroying some 37 Spanish naval and merchant ships, as
well as plundering Spanish merchant ships in the area. 
Single-Handed Victory
Among the English sailors taking part in the Cadiz raid was
a 27-year-old named Christopher Newport. From there,
Newport would rise quickly in the world of privateering;
sailing under Drake was apparently a good credential.
Within a few years, in 1589, Newport was second in com-
mand of the Margaret, a privateer ship financed by several
London merchants. The following year, he was captain of
the Little John, which sailed with several other ships to the
Caribbean to patrol for Spanish vessels. 
During an attack on two ships carrying treasure from
Mexico to Havana, the privateers encountered tough resist-
ance and Newport lost his right arm. To make matters worse,
the battle ended without any treasure — one of the Spanish
ships sank and the other escaped. 
Despite this rocky start to Newport’s career as a captain,
he would spend 13 years privateering successfully in the
Caribbean. His most renowned voyage during those years
came in 1592, when he commanded a fleet of four ships that
plundered Spanish towns on the island of Hispaniola and in
Honduras. Two of the ships then returned to England 
with the loot, while the other two — including Newport’s 
flagship, the Golden Dragon, stayed behind to seek further
adventure. 
They joined forces with another English privateer fleet;
in keeping with the practice of the time, the leaders of the
two fleets would have negotiated “consortship” agreements
defining their responsibilities and the division of the 
fruits of their joint labors. On August 3, the combined fleets 
spotted and captured an enormous treasure ship, the 
Madre de Dios. It was the greatest plunder of the century,
freighted with £500,000 worth of gems, silks, and spices.
When Newport brought it back to port in England, he had
made his name as the nation’s foremost mariner of the
Caribbean. The fortunate shareholders in the voyage 
included the queen.
Newport’s Caribbean journeys continued. Near the end
of Elizabeth’s reign in 1603, John Chamberlain, a gossipy
Londoner, reported to a friend:
Here is fresh news out of Spain of one Newport, a 
seaman, that with two ships hath taken five frigates
laden with treasure coming from Cartagena and
Nombre de Dios [a Panamanian port] towards the
Havana; if all be true that is reported, it will prove the
greatest prize that I ever heard of, for they that are
most modest talk of two millions at least. The King of
Spain hath sent out eight men-of-war to waylay and
intercept him.…
Region Focus | Fourth Quarter | 2010  3334 Region Focus | Fourth Quarter | 2010 
CALLING THE SHOTS • continued from page 31
Newport, like his fellow privateers, did not face a loss of
social status from his predatory occupation. On the con-
trary, he married into a wealthy family and even served on
the vestry of his church. Privateering was an activity, rare for
the England of the era, that involved social classes from the
highest to the lowest ranks. In 1596, Newport bought a share
in a privateer company himself.
Privateering as State Policy
The financial benefits that Elizabeth and her nation
received from privateering are obvious. An ambassador to
England from Venice later opined, “Nothing is thought to
have enriched the English more or done so much to allow
many individuals to amass the wealth they are known 
to possess as the wars with the Spanish in the time of 
Queen Elizabeth.” Kenneth R. Andrews, then an economic 
historian at the University of Hull, estimated in 1964 that
privateering during her reign amounted to between 10 per-
cent and 15 percent of England’s total imports. One Julius
Caesar — not the Roman emperor, but an admiralty judge
who would later serve as Elizabeth’s Chancellor of the
Exchequer — wrote in 1590 that Elizabeth’s own gains from
privateering up to that point had amounted to more than
£200,000, or roughly £26.8 million ($42 million) in today’s
currency.
At the same time, Elizabeth’s policy weakened the
Spanish: Not only did they lose treasure, their merchant
fleet suffered the capture of more than 1,000 ships. Gary
Anderson and Adam Gifford, Jr., economists at California
State University, Northridge, argued in a 1991 article that
privateering acted as a substitute for a standing national
navy, and in fact was a form of private production of naval
power. 
In addition to the financial and military benefits of priva-
teering, it made a crucial contribution to England’s future
through its effect of building up human capital. As England
lacked any settlements in the New World during Elizabeth’s
time other than the short-lived Roanoke colony, it would
have been far-fetched to predict that England would ever
have a significant presence there — let alone that it would
someday dominate most of the East Coast of North
America (including the area that comprises the present-day
Fifth District of the Federal Reserve System). Any reason-
able observer would have assumed that the New World
would continue to be dominated by Spain and, to a 
much lesser degree, by France. An unintended consequence
of privateering was that it enabled England, at no cost to 
the Crown, to develop a cadre of captains and sailors with
experience in crossing the Atlantic and navigating the
Caribbean.
It is thus unsurprising that when the first Jamestown
colonists set out on the River Thames in late December of
1606, at least two of their three ships were commanded by
former privateers. Newport was the admiral of the voyage
and the commander of the flagship, the Susan Constant.
Bartholomew Gosnold, another former privateer, captained
the Godspeed. (The background of John Ratcliffe, captain of
the third ship, the Discovery, is unknown.) Still another 
ex-privateer, George Somers, would lead the expedition that
rescued the Jamestown colony in May of 1610 after the 
so-called Starving Time. The Elizabethan privateering 
companies created the path to an English New World.  RF
Anderson, Gary M., and Adam Gifford, Jr. “Privateering and the
Private Production of Naval Power,” Cato Journal, Spring/Summer
1991, vol. 11, no. 1, pp. 99-122.
Andrews, Kenneth R., Elizabethan Privateering: English Privateering
During the Spanish War, 1585-1603. Cambridge, England: Cambridge
University Press, 1964.
Andrews, Kenneth R. “Christopher Newport of Limehouse,
Mariner.” William and Mary Quarterly, Jan. 1954, 3d ser., vol. 11, 
no. 1, pp. 28-41. 
Cordingly, David, Under the Black Flag: The Romance and the Reality
of Life Among the Pirates. New York: Random House, 1995.
Rabb, Theodore K., Enterprise & Empire: Merchant and Gentry
Investment in the Expansion of England, 1575-1630. Cambridge, Mass.:
Harvard University Press, 1967.
R EADINGS
managers would better serve their teams by focusing on 
the factors of Wins Produced, when faced with lots of 
information they tend to focus on what’s easiest to see at the
moment.
Berri and Schmidt draw some compelling conclusions
about why the experts get it wrong, but they are not without
their critics. Since Wages of Wins was published, other 
statisticians and basketball experts have argued that they 
disregard key factors in their models and overstate 
their results. In response, Berri and Schmidt write that the 
criticism stems from the fact that “Wins Produced is not
consistent with popular perceptions. Given the problems
with popular perceptions, though, this result shouldn’t be 
a surprise.” Whether or not you agree with them, you 
may think twice before celebrating your favorite team’s new
draft pick.   RF

Economic history : The Queen's private Navy

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Economic history : The Queen's private Navy

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