One of the fastest legal ways to make a fortune in the 17th and 18th century was through prize money. In the U.K., captured merchant ships and their cargoes were sold at auctions run by Admiralty Prize Courts. Countries who issued letters of marque had similar organizations. If it was a warship, the vessel could be sold to a rival navy, e.g. the Royal Navy “bought” several U.S. ships during the American Revolution and the War of 1812.
Corporations would buy the ships from a rival, i.e. the Dutch East India Company might want to purchase a captured ship from the British East India Company because it could use the ship and purchase the cargo that could be resold for a healthy profit.
Privateers from the American colonies went to sea during the Revolution in record numbers. Each consortium had its own payout table based on the Royal Navy’s model.
Prize money was divided among the crew so that every member received a share. So how does the prize system work?
The payout is divided into eighths and split among five groups of men based on their rank. If the ship was captured based on orders issued by an admiral, he received one eighth (12.5%) off the top. The captain is assigned a quarter or 25% and the ship’s lieutenants, senior Marine officer, surgeon and master split one-eighth or 12.5%. The warrant officers – the gunner, carpenter, quartermaster, bo’sun, etc. – also divide up 12.5%. The midshipmen, mates, Marine sergeant also receive 12.5% and the remainder of the crew divide 25%.
Assume the captured merchant ship and brings £15,000 pounds Sterling at a prize court auction. Royal Navy frigates with crews of around 220 officers and men took the majority of prizes. Normally, there were five men in the lieutenants group and five more in the warrant officer category. Add in a dozen midshipmen and mates and a crew of 195 for a total of 218 including the captain.
The captain’s share is worth £3,750. For a man making just over £100 per year, from a financial perspective, taking a prize is a life-changing event.
The five officers divide £1,875 or £375 each. The 12 in the midshipmen, sergeants and mates category get £156.25 each and the 195 seamen receive £19.20 apiece. To put this in perspective, during the American Revolution, a Lieutenant in the Royal Navy earned £100/year so a prize was worth four years pay and for an ordinary seaman making £11.3/year, the prize was almost two years salary.
The Continental pay scale was lower than the Royal Navy and men were paid in Continental Dollars that were almost worthless by the end of the war. It was better to take a prize ship to a foreign port and be paid in Dutch Guilders or Pounds Sterling.
The bottom line was more prizes equaled more bonus money. Now you know why there were so many privateers! It was war for profit as well as patriotism.