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The CHOAM, Combine Honnete Over Advanced Mercantiles was an economic entity, created by political and military forces; it was also sustained by them, and in turn maintained those powers.
CHOAM was a creation of the empire, brought about as a reaction to the formation of the Spacing Guild and this marked the true beginning of the Imperium, and became one of its chief elements. They were inseparable.
Prior to the Butlerian Jihad, there was no single ruling power or economic organization among the inhabited worlds. Virtually every state had access to interplanetary trade and interstellar travel, and none could be excluded. Trade between the planets, systems and the stars was essentially anarchic and space piracy was common.
After the Jihad, interstellar trade fell in Dark Ages without machines to guide ships through hyperspace, becoming very slow and expensive. The economy (which resembled the ancient great caravan routes) had sprung up on various planets with rich, widely separated cultures who dealt only in the most expensive and least bulky items, such as luxury goods. This kind of trade worked out in 300 years before the development of CHOAM and 50 years thereafter.
The Spacing Guild brought itself to the attention of the Imperium and Emperor Saudir I in 12 BG. Swiftly realizing that the only feasible way to deal with the Guild was on a basis of mutual advantage, Saudir called for a Financial Synod to convene on Aerarium IV in 10 BG, and include representatives of the Guild, Landsraad and the imperial House.
The age-controlling properties of the spice enhanced the feelings of the feudal states of the Landsraad toward the Guild and the return of extensive trade. They were aware of their vulnerability to the effects of trade and had an added reason to wish to control the Guild. It gradually became apparent that the Guild and the feudal houses had interests that ran in tandem. Both wanted the return of trade, but only in a fashion which would permit each institution to survive.
Unlike the Guild, the feudal houses cared about the economic benefits of trade, and just as deeply about the possible sociopolitical effects of cultural interaction. For years neither the Guild nor the feudal powers could find a way to accomplish all their aims.
One of the problems was the ambitions of the most powerful of the Great Houses. Those houses that had ambitions to become the Imperial House saw in the Guild an opportunity to elevate themselves if they could seize control of this new means of trade but the Guild refused to deal with them and compromise with the feudal powers in general proved impossible for years.
While the Synod remained unable to resolve its problems, matters were never permitted to deteriorate so that the gathering broke up. The Guild was especially concerned that this not happen, for they knew that the outcome of the Synod would determine whether or not they survived.
The deadlock was broken after 2.5 years by emperor Saudir and his chief financial officer, the Dioicetes Asetirides. During the latter half of the third year on Aerarium when it began to appear that the deadlock might destroy the Synod, the emperor called the delegates into full session and presented to them the plan for the formation of CHOAM.
The structure of CHOAM consists of shareholders, and, as in a public company, major shareholders are given directorships to lead in the board of directors. In this case, however, all shareholders are nobles from the Landsraad, which consists of the Minor Houses, the Great Houses and the Imperial House. The Great Houses predictably hold the directorships of the company, but the Emperor is able to give out directorships and revoke directorships at whim.
It seems certain that the plan Saudir proposed envisioned the creation of a development corporation which would have a monopoly on interstellar and intersystem trade.
1% of the gross profits from this trade would be collected each year and placed in a fund to be distributed to the members of CHOAM (on the basis of the shares they held in the corporation) . Such distributions would occur only after deductions from the fund for any projects for the advancement of existing trade or the development of new markets.
Membership in CHOAM was limited to the feudal governments who ruled at least one planet.
This arrangement was assigning the emperor only 20% of the shares, far less than the emperor had every right to. In granting the emperor only 1/5 of the shares of CHOAM, he placed the Imperial House in a position where it would have to depend on many other of the feudal powers if it were to control the corporation.
Originally, the CHOAM directors were the members of the Landsraad High Council. After the first few decades of operation, however, the composition of the board was changed to reflect the distribution of economic power among the Great Houses. Sometime toward the end of the first century AG, membership on the board of directors of CHOAM was offered to any house which did more than 500 million solari's worth of trade through the Guild in a Standard year.
Directors naturally voted their own shares in the meetings of the board, and also those of any house that wished to grant them a proxy. This was also one of the reasons Shaddam IV and the Harkonnens moved so quickly after the Atreides took over Arrakis: Leto's popularity would probably have shifted the balance of power on the board, since he had become a member due to the wealth of the spice trade of Arrakis.
The plan seemed more than fair with respect to the participation of the emperor. Moreover it also had the great advantage of cementing the power of the feudal powers vis-à-vis the remaining non-feudal states in the empire. In closing intersystem and interstellar trade to non-feudal states, Saudir offered an unequaled opportunity to the feudal powers to remove their most persistent worry. Not only did such an agreement offer the chance of restriction of these governments to their own worlds, it also strengthened the very states that were most threatened by nonfeudal powers. The weakest feudal states were generally those that were closest geographically to non-feudal governments, those that had to compete on an almost daily basis with differing societies.
The shares were based on their trade without their systems over the past ten years. Such a sharing arrangement had some obvious advantages, one of the most compelling being the stipulation that once a government achieved membership, it could never fall below one share in fee corporation. Thus, though shares in CHOAM were to be redistributed, on the basis of trade done, once every 100 years, participants would enjoy some benefit from off-planet trade even if they could no longer participate. The governments were all aware that natural resources were not permanent.
The fiscal information for each of the participants was so accurate and so complete that it was clear to many of the states that the emperor had been aware for many years of extensive tax fraud on their part. Others discovered to their surprise that internal corruption or inefficiency had been robbing them of a proper return on their own resources. The figures shocked some more than others, some pleasantly and others unpleasantly, but few escaped unseamed. When the time came for debate on the disposition of shares, many negative arguments were instantly ended.
The creation of CHOAM also created the connection between Great Houses and control of off-world trade; it became one constant factor to define what a Great House is and vastly strengthened them. For example the shares in CHOAM, produced - within a decade - such a substantial increase of resources to a Great House, and subsequently the income of most of the participating houses, that the possibility of a successful revolt almost disappeared.
The entire economy of the empire entered a 500-year period of rapid growth and expanded by conquest, until it controlled all the habitable planets available to the current navigation abilities of the Guild. The new trade was supported easily after the formation of CHOAM. The steady expansion not only replaced the losses but added to the available resources of the system.
But as trade began to penetrate to the limits of travel, and the expansion of the economy began to slow, the commercially weaker members of the empire began to suffer. The first issues came in the societal financial aspects and then they spread to the political sphere. Some 700 years after the formation of CHOAM, and 200 after the economy's rate of expansion began to slow, the membership of the participating partners of CHOAM started to change.
For example Ecaz, Harmonthep and Grumman appeared in the records of the meetings of CHOAM as an independent voters; Harmonthep, did not last long as an independent, and when it disappeared from the records of the meetings of CHOAM it vanished from the historical record altogether.
A far more important indication of internal unrest was seen in the vote exercised by the emperor. Having begun with only 20% of the votes of the corporation, within 5 centuries the emperor had increased his share to 25%, and with the votes of those members whom he controlled, he commanded in fact closer to 35% of the partners' votes. While still short of an outright majority, the Great Houses could not fail to see the meaning of the trend. Since the emperor could almost always persuade at least 15% more of the partners to his arguments, in almost all instances the partners affirmed the position of House Corrino.
In general, though, what we have of the records of the meetings of CHOAM are a testimony to the stability of the worlds of the empire. While it is true there is a Steady growth in the power of the emperor in the meetings of the Directorate, the emperor and his supporters never controlled more man 60% of the vote, and the emperor himself never more than 40%. In addition, while there was a continuing turnover in the membership from century to century, the change was never more than 10%, a rate of change which the political and economic balance of the empire could easily support. Such a rate of change proved that some entrepreneurs had succeeded in raising the status of their minor house to the exalted level of the Great Houses. The certainty of the chance of social mobility made the restrictions of the faufreluches (class system) tolerable.
Even when House Corrino was defeated by the Atreides, it did not immediately affect the management of CHOAM other than to transfer the shares once controlled by House Corrino to the new emperor Paul Atreides. At that time these represented 38% of the votes of the Directorate.
The profound alteration in the affairs of CHOAM resulted from the crusade launched against those houses — and there were many — who went into revolt against the new government. The shares of all defeated houses were taken over by House Atreides, and after the battles were over, the Imperial House for the first time was in outright control of CHOAM with 51% of its shares. In addition, the priesthood of Muad'Dib, the power of which had waxed during the crusade, owned 5% of the shares. This shift in the control of CHOAM accounts for much of the ensuing hatred of House Atreides. Not only were the citizens of the empire exposed to an increasingly despotic rule, they had lost much of then-wealth.