The Mills of Toulouse
Updated: May 15
The city of Toulouse is situated in the Garonne River plain of southwestern France. It is close to the Mediterranean Sea and the Atlantic Ocean, and it is in the shadow of the Pyrennes. The old medieval city sat upon the higher right bank of the Garonne River and was the seat of the Counts of Toulouse who oversaw the Languedoc region. The Languedoc was the cultural jewel of medieval France, home of troubadours and chivalric romances. The Garonne valley was also one of the major cereal-producing regions of the kingdom. Therefore, the milling of flour was a significant industry in the city of nearly 50,000 as of the 12th century.
Toulouse was exceptionally situated to make use of water-powered mills. The river drops over 40 feet (12 meters) in elevation as it passes through the city. Milling probably had been taking place along the banks of the river since at least the mid-11th century. The earliest documented mills are in the 12th century clustered around three natural fords of the Garonne River. These were at Chateau Narbonnais, Daurade, and Bazacle with Bazacle being the furthest downstream. These early mills were known as "moulins à nef" or "floating mills". These were essentially structures built on boats or pontoons that floated in the middle of the river. The Garonne River, though, was subject to periodic destructive floods and high water.
In 1190, the Count of Toulouse, Raymond V, permitted the mill owners to build a chausse or dam as well as adjacent land mills. Floods still made operating the mills a risky business therefore the various mill owners sought to share costs and risks. They formed a mutual insurance co-operative against floods starting in 1194. Over the three locations, nearly sixty oak and iron mills were constructed atop wooden pavements filled with stone. This narrow "carriageway" stretched out into the river and allowed the mill buildings to be anchored with reinforced piles. This enabled the mills to take full advantage of the fall of the river.
Damaging flooding still remained a problem. Bazacle, being downstream, would have benefited from a higher causeway, but the other two mills fought to set the height of the causeways to their advantage. Despite their efforts, both the Daurade and Narbonnais mills suffered crippling damage from a flood in 1346. In the years that followed, France suffered from poor harvests, warfare, and the Black Death. Many struggled, and many, some of the mill owners included, incurred larges debts that they failed to repay. Despite being given perpetual leases on the riverfront and agreeing to share profits, the owners of the mills struggled to raise capital.
Perhaps it was a lawsuit against one of the Bazacle owners for a decade-old debt that spurred the Bazacle mill owners to try something more innovative. In 1372, they created what can be described as a joint-stock corporation. A twelve-foot manuscript written in Latin and Occitan (a Romance language spoken in southern France during this time period) establishes the Société des Moulins de Bazacle and perhaps preserves the moment when the oldest known European corporation was created. The document provides the legal identification of the firm, it outlines the by-laws, states the valuation of assets, and establishes the distribution of shares.
Initially, mill owners received notarized papers indicating their investment in the corporation. These papers were called uchaux. An uchaux represented one-eighth of a mill. The value of the shares was dependent upon the profit the mills made. Being anonymous, owners of these shares, known as pariers, were able to pass them from hand to hand. They had the right to sell the shares or make them part of an inheritance. It did not take long for the ownership to be transferred to the Toulouse bourgeoisie. At least 60 shareholders were from the upper society of Toulouse. One no longer had ownership in a physical mill but ownership in the corporation. It was the corporation that owned the physical assets. The pariers met annually to elect a board of directors or bailles. The bailles were given the power to make everyday decisions without having to consult the shareholders. The directors appointed a chief executive, a treasurer, accountants, and a lawyer. Also at this annual meeting, they modified by-laws and determined the distribution of dividends.
Legally, a share was treated like any other property. Individual property rights were upheld and the owners of shares were able to dispose of them as they pleased. On the other hand, the corporation was a legal entity of itself separate from the shareholders. This shield individual owners from liability as well as debt collectors. The corporation provided a means by which risk and expenses were pooled, capital raised, and the profit shared. The directors acted to manage the company with respect to the common interest of the shareholders. The Société des Moulins de Bazacle proved to be successful. French authors often praised the profitability and technology of the mills. They lasted until near the end of the 19th century after which they were converted to hydroelectric generators.
Most historians will concede that England and the Netherlands created the first joint-stock companies in the 17th century. Germain Sicard, back in 1957, argued that the mills at Bazacle are the true forerunners of today's corporate structure. He believed that the strong municipal self-governance and a strong sense of property rights helped created the conditions for a unique form of ownership. Sicard's work has recently been revisited. It does raise some questions about the history of corporations. Could the concept of a corporation evolve independently arising naturally as a solution to the problems of allocating and controlling capital? If so, then certainly the conditions in Medieval Toulouse present a way of better understanding how corporations appear. But if they didn't appear independently, then corporations perhaps have a longer history than what is generally accepted. It is known that the Chinese of the 8th and 9th centuries formed corporation-like entities. Taking this and the mills of Toulouse into consideration, then one must recognize that corporate entities are much older than the English and Dutch of the 17th century. The East India Company and Dutch East India Company, for sure, helped elevate the corporate structure to the next level and utilized its advantages to the fullest. Yet looking at when the Société des Moulins de Bazacle was organized, its success and its impact should not be underestimated.
The Origins of Corporations: The Mills of Toulouse in the Middle Ages: Germain Sicard, Matthew Landry, trans.
The Development of Corporate Governance in Toulouse: David Le Bris, William N. Goetzmann, Sebastien Pouget (National Bureau of Economic Research)