Risk and Failure in Tax Farming: De Bruijn & Cloots of Lisbon and the Portuguese Tobacco Monopoly, 1722–1727

Abstract

AbstractBy examining how a Dutch firm in Lisbon operated two Portuguese tobacco tax farms from 1722 to 1727 and failed subsequently, this article brings together, on the one hand, research on the relationship between state and business groups through a monopolistic rent provided by the empire and, on the other hand, a growing literature discussing institutional and economic variables, as well as human agency, in business failure in early modern Europe. The article aims to achieve two goals. The first is to shed light on the perspective of the Dutch tax farmers, highlighting why they chose to incur the risks of managing a nationwide sales monopoly and the business model they implemented to maximize profits and mitigate risks, while the second is to examine the general and specific reasons behind their ultimate downfall. It concludes that, despite the organizational innovations they introduced and that led them to exploit interconnected businesses, the Dutch partners were unable to overcome the negative effects of conjunctural and contingent factors that temporarily squeezed the domestic consumption of tobacco.