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Welcome to USAGOLD's "Gilded Opinion" pages. We invite you to browse our index of outstanding gold-based commentary. Each article or essay is selected on the basis of its long-term relevance for understanding the role gold plays in the individual's portfolio, the overall political economy, or both.
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Extraordinary Popular Delusions And
The Madness Of Crowds
By Charles Mackay 1841, 1852
THE SOUTH SEA BUBBLE
At length corruption,
like a general flood,
Did deluge all, and avarice creeping on,
Spread, like a low-born mist, and hid the sun.
Statesmen and patriots plied alike the stocks,
Peeress and butler shared alike the box;
And judges jobbed, and bishops bit the town,
And mighty dukes packed cards for half-a-crown:
Britain was sunk in lucre's sordid charms.
--Pope.
The South Sea Company was originated by the celebrated Harley,
Earl of Oxford, in the year 1711, with the view of restoring public
credit, which had suffered by the dismissal of the Whig ministry,
and of providing for the discharge of the army and navy debentures,
and other parts of the floating debt, amounting to nearly ten
millions sterling. A company of merchants, at that time without
a name, took this debt upon themselves, and the government agreed
to secure them, for a certain period, the interest of six per
cent. To provide for this interest, amounting to 600,000 pounds
per annum, the duties upon wines, vinegar, India goods, wrought
silks, tobacco, whale-fins, and some other articles, were rendered
permanent. The monopoly of the trade to the South Seas was granted,
and the company, being incorporated by Act of Parliament, assumed
the title by which it has ever since been known. The minister
took great credit to himself for his share in this transaction,
and the scheme was always called by his flatterers "the Earl
of Oxford's masterpiece."
Even at this early period of its history, the most visionary ideas
were formed by the company and the public of the immense riches
of the eastern coast of South America. Everybody had heard of
the gold and silver mines of Peru and Mexico; every one believed
them to be inexhaustible, and that it was only necessary to send
the manufactures of England to the coast, to be repaid a hundredfold
in gold and silver ingots by the natives. A report, industriously
spread, that Spain was willing to concede four ports, on the coasts
of Chili and Peru, for the purposes of traffic, increased the
general confidence; and for many years the South Sea Company's
stock was in high favour.
Philip V of Spain, however, never had any intention of admitting
the English to a free trade in the ports of Spanish America. Negotiations
were set on foot, but their only result was the assiento contract,
or the privilege of supplying the colonies with negroes for thirty
years, and of sending once a year a vessel, limited both as to
tonnage and value of cargo, to trade with Mexico, Peru, or Chili.
The latter permission was only granted upon the hard condition,
that the King of Spain should enjoy one-fourth of the profits,
and a tax of five per cent. on the remainder. This was a great
disappointment to the Earl of Oxford and his party, who were reminded
much oftener than they found agreeable of the
"Parturiunt montes, nascitur ridiculus mus,"
But the public confidence in the South Sea Company was not shaken.
The Earl of Oxford declared, that Spain would permit two ships,
in addition to the annual ship, to carry out merchandise during
the first year; and a list was published, in which all the ports
and harbours of these coasts were pompously set forth as open
to the trade of Great Britain. The first voyage of the annual
ship was not made till the year 1717, and in the following year
the trade was suppressed by the rupture with Spain.
The King's speech, at the opening of the session of 1717, made
pointed allusion to the state of public credit, and recommended
that proper measures should be taken to reduce the national debt.
The two great monetary corporations, the South Sea Company and
the Bank of England, made proposals to Parliament on the 20th
of May ensuing. The South Sea Company prayed that their capital
stock of ten millions might be increased to twelve, by subscription
or otherwise, and offered to accept five per cent. instead of
six upon the whole amount. The Bank made proposals equally advantageous.
The House debated for some time, and finally three acts were passed,
called the South Sea Act, the Bank Act, and the General Fund Act.
By the first, the proposals of the South Sea Company were accepted,
and that body held itself ready to advance the sum of two millions
towards discharging the principal and interest of the debt due
by the state for the four lottery funds of the ninth and tenth
years of Queen Anne. By the second act, the Bank received a lower
rate of interest for the sum of 1,775,027 pounds 15 shillings
due to it by the state, and agreed to deliver up to be cancelled
as many Exchequer bills as amounted to two millions sterling,
and to accept of an annuity of one hundred thousand pounds, being
after the rate of five per cent, the whole redeemable at one year's
notice. They were further required to be ready to advance, in
case of need, a sum not exceeding 2,500,000 pounds upon the same
terms of five per cent interest, redeemable by Parliament. The
General Fund Act recited the various deficiencies, which were
to be made good by the aids derived from the foregoing sources.
The name of the South Sea Company was thus continually before
the public. Though their trade with the South American States
produced little or no augmentation of their revenues, they continued
to flourish as a monetary corporation. Their stock was in high
request, and the directors, buoyed up with success, began to think
of new means for extending their influence. The Mississippi scheme
of John Law, which so dazzled and captivated the French people,
inspired them with an idea that they could carry on the same game
in England. The anticipated failure of his plans did not divert
them from their intention. Wise in their own conceit, they imagined
they could avoid his faults, carry on their schemes for ever,
and stretch the cord of credit to its extremest tension, without
causing it to snap asunder.
It was while Law's plan was at its greatest height of popularity,
while people were crowding in thousands to the Rue Quincampoix,
and ruining themselves with frantic eagerness, that the South
Sea directors laid before Parliament their famous plan for paying
off the national debt. Visions of boundless wealth floated before
the fascinated eyes of the people in the two most celebrated countries
of Europe. The English commenced their career of extravagance
somewhat later than the French; but as soon as the delirium seized
them, they were determined not to be outdone. Upon the 22nd of
January 1720, the House of Commons resolved itself into a Committee
of the whole House, to take into consideration that part of the
King's speech at the opening of the session which related to the
public debts, and the proposal of the South Sea Company towards
the redemption and sinking of the same. The proposal set forth
at great length, and under several heads, the debts of the state,
amounting to 30,981,712 pounds, which the Company were anxious
to take upon themselves, upon consideration of five per cent.
per annum, secured to them until Midsummer 1727; after which time,
the whole was to become redeemable at the pleasure of the legislature,
and the interest to be reduced to four per cent. The proposal
was received with great favour; but the Bank of England had many
friends in the House of Commons, who were desirous that that body
should share in the advantages that were likely to accrue. On
behalf of this corporation it was represented, that they had performed
great and eminent services to the state, in the most difficult
times, and deserved, at least, that if any advantage was to be
made by public bargains of this nature, they should be preferred
before a company that had never done any thing for the nation.
The further consideration of the matter was accordingly postponed
for five days. In the mean time, a plan was drawn up by the Governors
of the Bank. The South Sea Company, afraid that the Bank might
offer still more advantageous terms to the government than themselves,
reconsidered their former proposal, and made some alterations
in it, which they hoped would render it more acceptable. The principal
change was a stipulation that the government might redeem these
debts at the expiration of four years, instead of seven, as at
first suggested. The Bank resolved not to be outbidden in this
singular auction, and the Governors also reconsidered their first
proposal, and sent in a new one.
Thus, each corporation having made two proposals, the House began
to deliberate. Mr. Robert Walpole was the chief speaker in favour
of the Bank, and Mr. Aislabie, the Chancellor of the Exchequer,
the principal advocate on behalf of the South Sea Company. It
was resolved, on the 2nd of February, that the proposals of the
latter were most advantageous to the country. They were accordingly
received, and leave was given to bring in a bill to that effect.
Exchange Alley was in a fever of excitement. The Company's stock,
which had been at a hundred and thirty the previous day, gradually
rose to three hundred, and continued to rise with the most astonishing
rapidity during the whole time that the bill in its several stages
was under discussion. Mr. Walpole was almost the only statesman
in the House who spoke out boldly against it. He warned them,
in eloquent and solemn language, of the evils that would ensue.
It countenanced, he said, "the dangerous practice of stockjobbing,
and would divert the genius of the nation from trade and industry.
It would hold out a dangerous lure to decoy the unwary to their
ruin, by making them part with the earnings of their labour for
a prospect of imaginary wealth. The great principle of the project
was an evil of first-rate magnitude; it was to raise artificially
the value of the stock, by exciting and keeping up a general infatuation,
and by promising dividends out of funds which could never be adequate
to the purpose. In a prophetic spirit he added, that if the plan
succeeded, the directors would become masters of the government,
form a new and absolute aristocracy in the kingdom, and control
the resolutions of the legislature. If it failed, which he was
convinced it would, the result would bring general discontent
and ruin upon the country. Such would be the delusion, that when
the evil day came, as come it would, the people would start up,
as from a dream, and ask themselves if these things could have
been true. All his eloquence was in vain. He was looked upon as
a false prophet, or compared to the hoarse raven, croaking omens
of evil. His friends, however, compared him to Cassandra, predicting
evils which would only be believed when they came home to men's
hearths, and stared them in the face at their own boards. Although,
in former times, the House had listened with the utmost attention
to every word that fell from his lips, the benches became deserted
when it was known that he would speak on the South Sea question.
The bill was two months in its progress through the House of Commons.
During this time every exertion was made by the directors and
their friends, and more especially by the Chairman, the noted
Sir John Blunt, to raise the price of the stock. The most extravagant
rumours were in circulation. Treaties between England and Spain
were spoken of, whereby the latter was to grant a free trade to
all her colonies; and the rich produce of the mines of Potosi-la-Paz
was to be brought to England until silver should become almost
as plentiful as iron. For cotton and woollen goods, with which
we could supply them in abundance, the dwellers in Mexico were
to empty their golden mines. The company of merchants trading
to the South Seas would be the richest the world ever saw, and
every hundred pounds invested in it would produce hundreds per
annum to the stockholder. At last the stock was raised by these
means to near four hundred; but, after fluctuating a good deal,
settled at three hundred and thirty, at which price it remained
when the bill passed the Commons by a majority of 172 against
55.
In the House of Lords the bill was hurried through all its stages
with unexampled rapidity. On the 4th of April it was read a first
time; on the 5th, it was read a second time; on the 6th, it was
committed; and on the 7th, was read a third time, and passed.
Several peers spoke warmly against the scheme; but their warnings
fell upon dull, cold ears. A speculating frenzy had seized them
as well as the plebeians. Lord North and Grey said the bill was
unjust in its nature, and might prove fatal in its consequences,
being calculated to enrich the few and impoverish the many. The
Duke of Wharton followed; but, as he only retailed at second-hand
the arguments so eloquently stated by Walpole in the Lower House,
he was not listened to with even the same attention that had been
bestowed upon Lord North and Grey. Earl Cowper followed on the
same side, and compared the bill to the famous horse of the siege
of Troy. Like that, it was ushered in and received with great
pomp and acclamations of joy, but bore within it treachery and
destruction. The Earl of Sunderland endeavoured to answer all
objections; and, on the question being put, there appeared only
seventeen peers against, and eighty-three in favour of the project.
The very same day on which it passed the Lords, it received the
Royal assent, and became the law of the land.
It seemed at that time as if the whole nation had turned stockjobbers.
Exchange Alley was every day blocked up by crowds, and Cornhill
was impassable for the number of carriages. Everybody came to
purchase stock. "Every fool aspired to be a knave."
In the words of a ballad, published at the time, and sung about
the streets, ["A South Sea Ballad; or, Merry Remarks upon
Exchange Alley Bubbles. To a new tune, called ' The Grand Elixir;
or, the Philosopher's Stone Discovered.'"]
Then stars and garters did appear Among the meaner rabble; To
buy and sell, to see and hear, The Jews and Gentiles squabble.
The greatest ladies thither came, And plied in chariots daily,
Or pawned their jewels for a sum To venture in the Alley.
The inordinate thirst of gain that had afflicted all ranks of
society, was not to be slaked even in the South Sea. Other schemes,
of the most extravagant kind, were started. The share-lists were
speedily filled up, and an enormous traffic carried on in shares,
while, of course, every means were resorted to, to raise them
to an artificial value in the market.
Contrary to all expectation, South Sea stock fell when the bill
received the Royal assent. On the 7th of April the shares were
quoted at three hundred and ten, and. on the following day, at
two hundred and ninety. Already the directors had tasted the profits
of their scheme, and it was not likely that they should quietly
allow the stock to find its natural level, without an effort to
raise it. Immediately their busy emissaries were set to work.
Every person interested in the success of the project endeavoured
to draw a knot of listeners around him, to whom he expatiated
on the treasures of the South American seas. Exchange Alley was
crowded with attentive groups. One rumour alone, asserted with
the utmost confidence, had an immediate effect upon the stock.
It was said, that Earl Stanhope had received overtures in France
from the Spanish Government to exchange Gibraltar and Port Mahon
for some places on the coast of Peru, for the security and enlargement
of the trade in the South Seas. Instead of one annual ship trading
to those ports, and allowing the King of Spain twenty-five per
cent. out of the profits, the Company might build and charter
as many ships as they pleased, and pay no per centage whatever
to any foreign potentate.
Visions of ingots danced before their eyes,
and stock rose rapidly. On the 12th of April, five days after
the bill had become law, the directors opened their books for
a subscription of a million, at the rate of 300 pounds for every
100 pounds capital. Such was the concourse of persons, of all
ranks, that this first subscription was found to amount to above
two millions of original stock. It was to be paid at five payments,
of 60 pounds each for every 100 pounds. In a few days the stock
advanced to three hundred and forty, and the subscriptions were
sold for double the price of the first payment. To raise the stock
still higher, it was declared, in a general court of directors,
on the 21st of April, that the midsummer dividend should be ten
per cent., and that all subscriptions should be entitled to the
same. These resolutions answering the end designed, the directors,
to improve the infatuation of the monied men, opened their books
for a second subscription of a million, at four hundred per cent.
Such was the frantic eagerness of people of every class to speculate
in these funds, that in the course of a few hours no less than
a million and a half was subscribed at that rate.
In the mean time, innumerable joint-stock companies started up
everywhere. They soon received the name of Bubbles, the most appropriate
that imagination could devise. The populace are often most happy
in the nicknames they employ. None could be more apt than that
of Bubbles. Some of them lasted for a week, or a fortnight, and
were no more heard of, while others could not even live out that
short span of existence. Every evening produced new schemes, and
every morning new projects. The highest of the aristocracy were
as eager in this hot pursuit of gain as the most plodding jobber
in Cornhill. The Prince of Wales became governor of one company,
and is said to have cleared 40,000 pounds by his speculations.
[Coxe's Walpole, Correspondence between Mr. Secretary Craggs and
Earl Stanhope.] The Duke of Bridgewater started a scheme for the
improvement of London and Westminster, and the Duke of Chandos
another. There were nearly a hundred different projects, each
more extravagant and deceptive than the other. To use the words
of the "Political State," they were "set on foot
and promoted by crafty knaves, then pursued by multitudes of covetous
fools, and at last appeared to be, in effect, what their vulgar
appellation denoted them to be -- bubbles and mere cheats."
It was computed that near one million and a half sterling was
won and lost by these unwarrantable practices, to the impoverishment
of many a fool, and the enriching of many a rogue.
Some of these schemes were plausible enough, and, had they been
undertaken at a time when the public mind was unexcited, might
have been pursued with advantage to all concerned. But they were
established merely with the view of raising the shares in the
market. The projectors took the first opportunity of a rise to
sell out, and next morning the scheme was at an end. Maitland,
in his History of London, gravely informs us, that one of the
projects which received great encouragement, was for the establishment
of a company "to make deal-boards out of saw-dust."
This is, no doubt, intended as a joke; but there is abundance
of evidence to show that dozens of schemes hardly a whir more
reasonable, lived their little day, ruining hundreds ere they
fell. One of them was for a wheel for perpetual motion -- capital,
one million; another was "for encouraging the breed of horses
in England, and improving of glebe and church lands, and repairing
and rebuilding parsonage and vicarage houses." Why the clergy,
who were so mainly interested in the latter clause, should have
taken so much interest in the first, is only to be explained on
the supposition that the scheme was projected by a knot of the
foxhunting parsons, once so common in England. The shares of this
company were rapidly subscribed for. But the most absurd and preposterous
of all, and which showed, more completely than any other, the
utter madness of the people, was one, started by an unknown adventurer,
entitled "company for carrying on an undertaking of great
advantage, but nobody to know what it is." Were not the fact
stated by scores of credible witnesses, it would be impossible
to believe that any person could have been duped by such a project.
The man of genius who essayed this bold and successful inroad
upon public credulity, merely stated in his prospectus that the
required capital was half a million, in five thousand shares of
100 pounds each, deposit 2 pounds per share. Each subscriber,
paying his deposit, would be entitled to 100 pounds per annum
per share. How this immense profit was to be obtained, he did
not condescend to inform them at that time, but promised, that
in a month full particulars should be duly announced, and a call
made for the remaining 98 pounds of the subscription. Next morning,
at nine o'clock, this great man opened an office in Cornhill.
Crowds of people beset his door, and when he shut up at three
o'clock, he found that no less than one thousand shares had been
subscribed for, and the deposits paid. He was thus, in five hours,
the winner of 2,000 pounds. He was philosopher enough to be contented
with his venture, and set off the same evening for the Continent.
He was never heard of again.
Well might Swift exclaim, comparing Change Alley to a gulf in
the South Sea,--
Subscribers here by thousands float, And jostle one another down,
Each paddling in his leaky boat, And here they fish for gold,
and drown.
Now buried in the depths below, Now mounted up to heaven again,
They reel and stagger to and fro, At their wit's end, like drunken
men
Meantime, secure on Garraway cliffs, A savage race, by shipwrecks
fed, Lie waiting for the foundered skiffs, And strip the bodies
of the dead.
Another fraud that was very successful, was that of the "Globe
Permits," as they were called. They were nothing more than
square pieces of playing cards, on which was the impression of
a seal, in wax, bearing the sign of the Globe Tavern, in the neighbourhood
of Exchange Alley, with the inscription of "Sail Cloth Permits."
The possessors enjoyed no other advantage from them than permission
to subscribe, at some future time, to a new sail-cloth manufactory,
projected by one who was then known to be a man of fortune, but
who was afterwards involved in the peculation and punishment of
the South Sea directors. These permits sold for as much as sixty
guineas in the Alley.
Persons of distinction, of both sexes, were deeply engaged in
all these bubbles, those of the male sex going to taverns and
coffee-houses to meet their brokers, and the ladies resorting
for the same purpose to the shops of milliners and haberdashers.
But it did not follow that all these people believed in the feasibility
of the schemes to which they subscribed; it was enough for their
purpose that their shares would, by stock-jobbing arts, be soon
raised to a premium, when they got rid of them with all expedition
to the really credulous. So great was the confusion of the crowd
in the alley, that shares in the same bubble were known to have
been sold at the same instant ten per cent. higher at one end
of the alley than at the other. Sensible men beheld the extraordinary
infatuation of the people with sorrow and alarm. There were some,
both in and out of Parliament, who foresaw clearly the ruin that
was impending. Mr. Walpole did not cease his gloomy forebodings.
His fears were shared by all the thinking few, and impressed most
forcibly upon the government. On the 11th of June, the day the
Parliament rose, the King published a proclamation, declaring
that all these unlawful projects should be deemed public nuisances,
and prosecuted accordingly, and forbidding any broker, under a
penalty of five hundred pounds, from buying or selling any shares
in them. Notwithstanding this proclamation, roguish speculators
still carried them on, and the deluded people still encouraged
them. On the 12th of July, an order of the Lords Justices assembled
in privy council was published, dismissing all the petitions that
had been presented for patents and charters, and dissolving all
the bubble companies. The following copy of their lordships' order,
containing a list of all these nefarious projects, will not be
deemed uninteresting at the present day, when there is but too
much tendency in the public mind to indulge in similar practices
:-
"At the Council Chamber, Whitehall, the 12th day of July,
1720. Present, their Excellencies the Lords Justices in Council.
"Their Excellencies, the Lords Justices in council, taking
into consideration the many inconveniences arising to the public
from several projects set on foot for raising of joint stock for
various purposes, and that a great many of his Majesty's subjects
have been drawn in to part with their money on pretence of assurances
that their petitions for patents and charters, to enable them
to carry on the same, would be granted: to prevent such impositions,
their Excellencies, this day, ordered the said several petitions,
together with such reports from the Board of Trade, and from his
Majesty's Attorney and Solicitor General, as had been obtained
thereon, to be laid before them, and after mature consideration
thereof, were pleased, by advice of his Majesty's Privy Council,
to order that the said petitions be dismissed, which are as follow
:--
"1. Petition of several persons, praying letters patent for
carrying on a fishing trade, by the name of the Grand Fishery
of Great Britain.
"2. Petition of the Company of the Royal Fishery of England,
praying letters patent for such further powers as will effectually
contribute to carry on the said fishery.
"3. Petition of George James, on behalf of himself and divers
persons of distinction concerned in a national fishery; praying
letters patent of incorporation to enable them to carry on the
same.
"4. Petition of several merchants, traders, and others, whose
names are thereunto subscribed, praying to be incorporated for
reviving and carrying on a whale fishery to Greenland and elsewhere.
"5. Petition of Sir John Lambert, and others thereto subscribing,
on behalf of themselves and a great number of merchants, praying
to be incorporated for carrying on a Greenland trade, and particularly
a whale fishery in Davis's Straits.
"6. Another petition for a Greenland trade.
"7. Petition of several merchants, gentlemen, and citizens,
praying to be incorporated. for buying and building of ships to
let or freight.
"8. Petition of Samuel Antrim and others, praying for letters
patent for sowing hemp and flax.
"9. Petition of several merchants, masters of ships, sail-makers,
and manufacturers of sail-cloth, praying a charter of incorporation,
to enable them to carry on and promote the said manufactory by
a joint stock.
"10. Petition of Thomas Boyd, and several hundred merchants,
owners and masters of ships, sailmakers, weavers, and other traders,
praying a charter of incorporation, empowering them to borrow
money for purchasing lands, in order to the manufacturing sail-cloth
and fine Holland.
"11. Petition on behalf of several persons interested in
a patent granted by the late King William and Queen Mary, for
the making of linen and sail-cloth, praying that no charter may
be granted to any persons whatsoever for making sail-cloth, but
that the privilege now enjoyed by them may be confirmed, and likewise
an additional power to carry on the cotton and cotton-silk manufactures.
"12. Petition of several citizens, merchants, and traders
in London, and others, subscribers to a British stock, for a general
insurance from fire in any part of England, praying to be incorporated
for carrying on the said undertaking.
"13. Petition of several of his Majesty's loyal snbjects
of the city of London, and other parts of Great Britain, praying
to be incorporated, for carrying on a general insurance from losses
by fire within the kingdom of England.
"14. Petition of Thomas Burges, and others his Majesty's
subjects thereto subscribing, in behalf of themselves and others,
subscribers to a fund of 1,200,000 pounds, for carrying on a trade
to his Majesty's German dominions, praying to be incorporated,
by the name of the Harburg Company.
"15. Petition of Edward Jones, a dealer in timber, on behalf
of himself and others, praying to be incorporated for the importation
of timber from Germany.
"16. Petition of several merchants of London, praying a charter
of incorporation for carrying on a salt-work.
"17. Petition of Captain Macphedris, of London, merchant,
on behalf of himself and several merchants, clothiers, hatters,
dyers, and other traders, praying a charter of incorporation,
empowering them to raise a sufficient sum of money to purchase
lands for planting and rearing a wood called madder, for the use
of dyers.
"18. Petition of Joseph Galendo, of London, snuff-maker,
praying a patent for his invention to prepare and cure Virginia
tobacco for snuff in Virginia, and making it into the same in
all his Majesty's dominions."
LIST OF BUBBLES.
The following Bubble Companies were by the same order declared
to be illegal, and abolished accordingly :--
1. For the importation of Swedish iron.
2. For supplying London with sea-coal. Capital, three millions.
3. For building and rebuilding houses throughout all England.
Capital, three millions.
4. For making of muslin.
5. For carrying on and improving the British alum works.
6. For effectually settling the island of Blanco and Sal Tartagus.
7. For supplying the town of Deal with fresh water.
8. For the importation of Flanders lace.
9. For improvement of lands in Great Britain. Capital, four millions.
10. For encouraging the breed of horses in England, and improving
of glebe and church lands, and for repairing and rebuilding parsonage
and vicarage houses.
11. For making of iron and steel in Great Britain.
12. For improving the land in the county of Flint. Capital, one
million.
13. For purchasing lands to build on. Capital, two millions.
14. For trading in hair.
15. For erecting salt-works in Holy Island. Capital, two millions.
16. For buying and selling estates, and lending money on mortgage.
17. For carrying on an undertaking of great advantage, but nobody
to know what it is.
18. For paving the streets of London. Capital, two millions.
19. For furnishing funerals to any part of Great Britain.
20. For buying and selling lands and lending money at interest.
Capital, five millions.
21. For carrying on the Royal Fishery of Great Britain. Capital,
ten millions.
22. For assuring of seamen's wages.
23. For erecting loan-offices for the assistance and encouragement
of the industrious. Capital, two millions.
24. For purchasing and improving leasable lands. Capital, four
millions.
25. For importing pitch and tar, and other naval stores, from
North Britain and America.
26. For the clothing, felt, and pantile trade.
27. For purchasing and improving a manor and royalty in Essex.
28. For insuring of horses. Capital, two millions.
29. For exporting the woollen manufacture, and importing copper,
brass, and iron. Capital, four millions.
30. For a grand dispensary. Capital, three millions.
31. For erecting mills and purchasing lead mines. Capital, two
millions.
32. For improving the art of making soap.
33. For a settlement on the island of Santa Cruz.
34. For sinking pits and smelting lead ore in Derbyshire.
35. For making glass bottles and other glass.
36. For a wheel for perpetual motion. Capital, one million.
37. For improving of gardens.
38. For insuring and increasing children's fortunes.
39. For entering and loading goods at the custom-house, and for
negotiating business for merchants.
40. For carrying on a woollen manufacture in the north of England.
41. For importing walnut-trees from Virginia. Capital, two millions.
42. For making Manchester stuffs of thread and cotton.
43. For making Joppa and Castile soap.
44. For improving the wrought-iron and steel manufactures of this
kingdom. Capital, four millions.
45. For dealing in lace, Hollands, cambrics, lawns, &c. Capital,
two millions.
46. For trading in and improving certain commodities of the produce
of this kingdom, &c. Capital, three millions.
47. For supplying the London markets with cattle.
48. For making looking-glasses, coach glasses, &c. Capital,
two millions.
49. For working the tin and lead mines in Cornwall and Derbyshire.
50. For making rape-oil.
51. For importing beaver fur. Capital, two millions.
52. For making pasteboard and packing-paper.
53. For importing of oils and other materials used in the woollen
manufacture.
54. For improving and increasing the silk manufactures.
55. For lending money on stock, annuities, tallies, &c.
56. For paying pensions to widows and others, at a small discount.
Capital, two millions.
57. For improving malt liquors. Capital, four millions.
58. For a grand American fishery.
59. For purchasing and improving the fenny lands in Lincolnshire.
Capital, two millions.
60. For improving the paper manufacture of Great Britain.
61. The Bottomry Company.
62. For drying malt by hot air.
63. For carrying on a trade in the river Oronooko.
64. For the more effectual making of baize, in Colchester and
other parts of Great Britain.
65. For buying of naval stores, supplying the victualling, and
paying the wages of the workmen.
66. For employing poor artificers, and furnishing merchants and
others with watches.
67. For improvement of tillage and the breed of cattle.
68. Another for the improvement of our breed of horses.
69. Another for a horse-insurance.
70. For carrying on the corn trade of Great Britain.
71. For insuring to all masters and mistresses the losses they
may sustain by servants. Capital, three millions.
72. For erecting houses or hospitals, for taking in and maintaining
illegitimate children. Capital, two millions.
73. For bleaching coarse sugars, without the use of fire or loss
of substance.
74. For building turnpikes and wharfs in Great Britain.
75. For insuring from thefts and robberies.
76. For extracting silver from lead.
77. For making China and Delft ware. Capital, one million.
78. For importing tobacco, and exporting it again to Sweden and
the north of Europe. Capital, four millions.
79. For making iron with pit coal.
80. For furnishing the cities of London and Westminster with hay
and straw. Capital, three millions.
81. For a sail and packing cloth manufactory in Ireland.
82. For taking up ballast.
83. For buying and fitting out ships to suppress pirates.
84. For the importation of timber from Wales. Capital, two millions.
85. For rock-salt.
86. For the transmutation of quicksilver into a malleable fine
metal.
Besides these bubbles, many others sprang up daily, in spite of
the condemnation of the Government and the ridicule of the still
sane portion of the public. The print-shops teemed with caricatures,
and the newspapers with epigrams and satires, upon the prevalent
folly. An ingenious card-maker published a pack of South Sea playing-cards,
which are now extremely rare, each card containing, besides the
usual figures, of a very small size, in one corner, a caricature
of a bubble company, with appropriate verses underneath. One of
the most famous bubbles was "Puckle's Machine Company,"
for discharging round and square cannon-balls and bullets, and
making a total revolution in the art of war. Its pretensions to
public favour were thus summed up, on the eight of spades :--
A rare invention to destroy the crowd Of fools at home, instead
of fools abroad. Fear not, my friends, this terrible machine,
They're only wounded who have shares therein.
The nine of hearts was a caricature of the English Copper and
Brass Company, with the following epigram :--
The headlong fool that wants to be a swopper Of gold and silver
coin for English copper, May, in Change Alley, prove himself an
ass, And give rich metal for adulterate brass.
The eight of diamonds celebrated the Company for the Colonization
of Acadia, with this doggrel :--
He that is rich and wants to fool away A good round sum in North
America, Let him subscribe himself a headlong sharer, And asses'
ears shall honour him or bearer.
And in a similar style every card of the pack exposed some knavish
scheme, and ridiculed the persons who were its dupes. It was computed
that the total amount of the sums proposed for carrying on these
projects was upwards of three hundred millions sterling, a sum
so immense that it exceeded the value of all the lands in England
at twenty years' purchase.
It is time, however, to return to the great South Sea gulf, that
swallowed the fortunes of so many thousands of the avaricious
and the credulous. On the 29th of May, the stock had risen as
high as five hundred, and about two-thirds of the government annuitants
had exchanged the securities of the state for those of the South
Sea Company. During the whole of the month of May the stock continued
to rise, and on the 28th it was quoted at five hundred and fifty.
In four days after this it took a prodigious leap, rising suddenly
from five hundred and fifty to eight hundred and ninety. It was
now the general opinion that the stock could rise no higher, and
many persons took that opportunity of selling out, with a view
of realising their profits. Many noblemen and persons in the train
of the King, and about to accompany him to Hanover, were also
anxious to sell out. So many sellers, and so few buyers, appeared
in the Alley on the 3rd of June, that the stock fell at once from
eight hundred and ninety to six hundred and forty. The directors
were alarmed, and gave their agents orders to buy. Their efforts
succeeded. Towards evening confidence was restored, and the stock
advanced to seven hundred and fifty. It continued at this price,
with some slight fluctuation, until the company closed their books
on the 22nd of June.
It would be needless and uninteresting to detail the various arts
employed by the directors to keep up the price of stock. It will
be sufficient to state that it finally rose to one thousand per
cent. It was quoted at this price in the commencement of August.
The bubble was then full-blown, and began to quiver and shake,
preparatory to its bursting.
Many of the government annuitants expressed dissatisfaction against
the directors. They accused them of partiality in making out the
lists for shares in each subscription. Further uneasiness was
occasioned by its being generally known that Sir John Blunt, the
chairman, and some others, had sold out. During the whole of the
month of August the stock fell, and on the 2nd of September it
was quoted at seven hundred only.
The state of things now became alarming. To prevent, if possible,
the utter extinction of public confidence in their proceedings,
the directors summoned a general court of the whole corporation,
to meet in Merchant Tailors' Hall, on the 8th of September. By
nine o'clock in the morning, the room was filled to suffocation;
Cheapside was blocked up by a crowd unable to gain admittance,
and the greatest excitement prevailed. The directors and their
friends mustered in great. numbers. Sir John Fellowes, the sub-governor,
was called to the chair. He acquainted the assembly with the cause
of their meeting, read to them the several resolutions of the
court of directors, and gave them an account of their proceedings;
of the taking in the redeemable and unredeemable funds, and of
the subscriptions in money. Mr. Secretary Craggs then made a short
speech, wherein he commended the conduct of the directors, and
urged that nothing could more effectually contribute to the bringing
this scheme to perfection than union among themselves. He concluded
with a motion for thanking the court of directors for their prudent
and skilful management, and for desiring them to proceed in such
manner as they should think most proper for the interest and advantage
of the corporation. Mr. Hungerford, who had rendered himself very
conspicuous in the House of Commons for his zeal in behalf of
the South Sea Company, and who was shrewdly suspected to have
been a considerable gainer by knowing the right time to sell out,
was very magniloquent on this occasion. He said that he had seen
the rise and fall, the decay and resurrection of many communities
of this nature, but that, in his opinion, none had ever performed
such wonderful things in so short a time as the South Sea Company.
They had done more than the crown, the pulpit, or the bench could
do. They had reconciled all parties in one common interest; they
had laid asleep, if not wholly extinguished, all the domestic
jars and animosities of the nation. By the rise of their stock,
monied men had vastly increased their fortunes; country-gentlemen
had seen the value of their lands doubled and trebled in their
hands. They had at the same time done good to the Church, not
a few of the reverend clergy having got great sums by the project.
In short, they had enriched the whole nation, and he hoped they
had not forgotten themselves. There was some hissing at the latter
part of this speech, which for the extravagance of its eulogy
was not far removed from satire; but the directors and their friends,
and all the winners in the room, applauded vehemently. The Duke
of Portland spoke in a similar strain, and expressed his great
wonder why anybody should be dissatisfied: of course, he was a
winner by his speculations, and in a condition similar to that
of the fat alderman in Joe Miller's Jests, who, whenever he had
eaten a good dinner, folded his hands upon his paunch, and expressed
his doubts whether there could be a hungry man in the world.
Several resolutions were passed at this meeting, but they had
no effect upon the public. Upon the very same evening the stock
fell to six hundred and forty, and on the morrow to five hundred
and forty. Day after day it continued to fall, until it was as
low as four hundred. In a letter dated September 13th, from Mr.
Broderick, M.P. to Lord Chancellor Middleton, and published in
Coxo's Walpole, the former says,--"Various are the conjectures
why the South Sea directors have suffered the cloud to break so
early. I made no doubt but they would do so when they found it
to their advantage. They have stretched credit so far beyond what
it would bear, that specie proves insufficient to support it.
Their most considerable men have drawn out, securing themselves
by the losses of the deluded, thoughtless numbers, whose understandings
have been overruled by avarice and the hope of making mountains
out of mole-hills. Thousands of families will be reduced to beggary.
The consternation is inexpressible-- the rage beyond description,
and the case altogether so desperate that I do not see any plan
or scheme so much as thought of for averting the blow, so that
I cannot pretend to guess what is next to be done." Ten days
afterwards, the stock still falling, he writes,--" The Company
have yet come to no determination, for they are in such a wood
that they know not which way to turn. By several gentlemen lately
come to town, I perceive the very name of a South-Sea-man grows
abominable in every country. A great many goldsmiths are already
run off, and more will daily. I question whether one-third, nay,
one-fourth, of them can stand it. From the very beginning, I founded
my judgment of the whole affair upon the unquestionable maxim,
that ten millions (which is more than our running cash) could
not circulate two hundred millions, beyond which our paper credit
extended. That, therefore, whenever that should become doubtful,
be the cause what it would, our noble state machine must inevitably
fall to the ground."
On the 12th of September, at the earnest solicitation of Mr. Secretary
Craggs, several conferences were held between the directors of
the South Sea and the directors of the Bank. A report which was
circulated, that the latter had agreed to circulate six millions
of the South Sea Company's bonds, caused the stock to rise to
six hundred and seventy; but in the afternoon, as soon as the
report was known to be groundless, the stock fell again to five
hundred and eighty; the next day to five hundred and seventy,
and so gradually to four hundred. [Gay (the poet), in that disastrous
year, had a present from young Craggs of some South Sea stock,
and once supposed himself to be master of twenty thousand pounds.
His friends persuaded him to sell his share, but he dreamed of
dignity and splendour, and could not bear to obstruct his own
fortune. He was then importuned to sell as much as would purchase
a hundred a year for life, "which," says Fenton, "will
make you sure of a clean shirt and a shoulder of mutton every
day." This counsel was rejected; the profit and principal
were lost, and Gay sunk under the calamity so low that his life
became in danger.--Johnson's Lives of the Poets.]
The ministry were seriously alarmed at the aspect of affairs.
The directors could not appear in the streets without being insulted;
dangerous riots were every moment apprehended. Despatches were
sent off to the King at Hanover, praying his immediate return.
Mr. Walpole, who was staying at his country-seat, was sent for,
that he might employ his known influence with the directors of
the Bank of England to induce them to accept the proposal made
by the South Sea Company for circulating a number of their bonds.
The Bank was very unwilling to mix itself up with the affairs
of the Company; it dreaded being involved in calamities which
it could not relieve, and received all overtures with visible
reluctance. But the universal voice of the nation called upon
it to come to the rescue. Every person of note in commercial politics
was called in to advise in the emergency. A rough draft of a contract
drawn up by Mr. Walpole was ultimately adopted as the basis of
further negotiations, and the public alarm abated a little.
On the following day, the 20th of September, a general court of
the South Sea Company was held at Merchant Tailors' Hall, in which
resolutions were carried, empowering the directors to agree with
the Bank of England, or any other persons, to circulate the Company's
bonds, or make any other agreement with the Bank which they should
think proper. One of the speakers, a Mr. Pulteney, said it was
most surprising to see the extraordinary panic which had seized
upon the people. Men were running to and fro in alarm and terror,
their imaginations filled with some great calamity, the form and
dimensions of which nobody knew.
"Black it stood as night-- Fierce as ten furies--terrible
as hell."
At a general court of the Bank of England held two days afterwards,
the governor informed them of the several meetings that had been
held on the affairs of the South Sea Company, adding that the
directors had not yet thought fit to come to any decision upon
the matter. A resolution was then proposed, and carried without
a dissentient voice, empowering the directors to agree with those
of the South Sea to circulate their bonds, to what sum, and upon
what terms, and for what time, they might think proper.
Thus both parties were at liberty to act as they might judge best
for the public interest. Books were opened at the Bank for a subscription
of three millions for the support of public credit, on the usual
terms of 15 pounds per cent. deposit, per cent. premium, and 5
pounds. per cent. interest. So great was the concourse of people
in the early part of the morning, all eagerly bringing their money,
that it was thought the subscription would be filled that day;
but before noon, the tide turned. In spite of all that could be
done to prevent it, the South Sea Company's stock fell rapidly.
Their bonds were in such discredit, that a run commenced upon
the most eminent goldsmiths and bankers, some of whom having lent
out great sums upon South Sea stock were obliged to shut up their
shops and abscond. The Sword-blade Company, who had hitherto been
the chief cashiers of the South Sea Company, stopped payment.
This being looked upon as but the beginning of evil, occasioned
a great run upon the Bank, who were now obliged to pay out money
much faster than they had received it upon the subscription in
the morning. The day succeeding was a holiday (the 29th of September),
and the Bank had a little breathing time. They bore up against
the storm; but their former rivals, the South Sea Company, were
wrecked upon it. Their stock fell to one hundred and fifty, and
gradually, after various fluctuations, to one hundred and thirty-five.
The Bank, finding they were not able to restore public confidence,
and stem the tide of ruin, without running the risk of being swept
away with those they intended to save, declined to carry out the
agreement into which they had partially entered. They were under
no obligation whatever to continue; for the so called Bank contract
was nothing more than the rough draught of an agreement, in which
blanks had been left for several important particulars, and which
contained no penalty for their secession. "And thus,"
to use the words of the Parliamentary History, "were seen,
in the space of eight months, the rise, progress, and fall of
that mighty fabric, which, being wound up by mysterious springs
to a wonderful height, had fixed the eyes and expectations of
all Europe, but whose foundation, being fraud, illusion, credulity,
and infatuation, fell to the ground as soon as the artful management
of its directors was discovered."
In the hey-day of its blood, during the progress of this dangerous
delusion, the manners of the nation became sensibly corrupted.
The Parliamentary inquiry, set on foot to discover the delinquents,
disclosed scenes of infamy, disgraceful alike to the morals of
the offenders and the intellects of the people among whom they
had arisen. It is a deeply interesting study to investigate all
the evils that were the result. Nations, like individuals, cannot
become desperate gamblers with impunity. Punishment is sure to
overtake them sooner or later. A celebrated writer [Smollett.]
is quite wrong, when he says, "that such an era as this is
the most unfavourable for a historian; that no reader of sentiment
and imagination can be entertained or interested by a detail of
transactions such as these, which admit of no warmth, no colouring,
no embellishment; a detail of which only serves to exhibit an
inanimate picture of tasteless vice and mean degeneracy."
On the contrary, and Smollett might have discovered it, if he
had been in the humour--the subject is capable of inspiring as
much interest as even a novelist can desire. Is there no warmth
in the despair of a plundered people?--no life and animation in
the picture which might be drawn of the woes of hundreds of impoverished
and ruined families? of the wealthy of yesterday become the beggars
of to-day? of the powerful and influential changed into exiles
and outcasts, and the voice of self-reproach and imprecation resounding
from every corner of the land? Is it a dull or uninstructive picture
to see a whole people shaking suddenly off the trammels of reason,
and running wild after a golden vision, refusing obstinately to
believe that it is not real, till, like a deluded hind running
after an ignis fatuus, they are plunged into a quagmire ? But
in this false spirit has history too often been written. The intrigues
of unworthy courtiers to gain the favour of still more unworthy
kings; or the records of murderous battles and sieges have been
dilated on, and told over and over again, with all the eloquence
of style and all the charms of fancy; while the circumstances
which have most deeply affected the morals and welfare of the
people, have been passed over with but slight notice as dry and
dull, and capable of neither warmth nor colouring.
During the progress of this famous bubble, England presented a
singular spectacle. The public mind was in a state of unwholesome
fermentation. Men were no longer satisfied with the slow but sure
profits of cautious industry. The hope of boundless wealth for
the morrow made them heedless and extravagant for to-day. A luxury,
till then unheard-of, was introduced, bringing in its train a
corresponding laxity of morals. The overbearing insolence of ignorant
men, who had arisen to sudden wealth by successful gambling, made
men of true gentility of mind and manners, blush that gold should
have power to raise the unworthy in the scale of society. The
haughtiness of some of these "cyphering cits," as they
were termed by Sir Richard Steele, was remembered against them
in the day of their adversity. In the Parliamentary inquiry, many
of the directors suffered more for their insolence than for their
peculation. One of them, who, in the full-blown pride of an ignorant
rich man, had said that he would feed his horse upon gold, was
reduced almost to bread and water for himself; every haughty look,
every overbearing speech, was set down, and repaid them a hundredfold
in poverty and humiliation.
The state of matters all over the country was so alarming, that
George I shortened his intended stay in Hanover, and returned
in all haste to England. He arrived on the 11th of November, and
Parliament was summoned to meet on the 8th of December. In the
mean time, public meetings were held in every considerable town
of the empire, at which petitions were adopted, praying the vengeance
of the Legislature upon the South Sea directors, who, by their
fraudulent practices, had brought the nation to the brink of ruin.
Nobody seemed to imagine that the nation itself was as culpable
as the South Sea Company. Nobody blamed the credulity and avarice
of the people,--the degrading lust of gain, which had swallowed
up every nobler quality in the national character, or the infatuation
which had made the multitude run their heads with such frantic
eagerness into the net held out for them by scheming projectors.
These things were never mentioned. The people were a simple, honest,
hard-working people, ruined by a gang of robbers, who were to
be hanged, drawn, and quartered without mercy.
This was the almost unanimous feeling of the country. The two
Houses of Parliament were not more reasonable. Before the guilt
of the South Sea directors was known, punishment was the only
cry. The King, in his speech from the throne, expressed his hope
that they would remember that all their prudence, temper, and
resolution were necessary to find out and apply the proper remedy
for their misfortunes. In the debate on the answer to the address,
several speakers indulged in the most violent invectives against
the directors of the South Sea project. The Lord Molesworth was
particularly vehement. "It had been said by some, that there
was no law to punish the directors of the South Sea Company, who
were justly looked upon as the authors of the present misfortunes
of the state. In his opinion they ought, upon this occasion, to
follow the example of the ancient Romans, who, having no law against
parricide, because their legislators supposed no son could be
so unnaturally wicked as to embrue his hands in his father's blood,
made a law to punish this heinous crime as soon as it was committed.
They adjudged the guilty wretch to be sown in a sack, and thrown
alive into the Tyber. He looked upon the contrivers and executors
of the villanous South Sea scheme as the parricides of their country,
and should be satisfied to see them tied in like manner in sacks,
and thrown into the Thames." Other members spoke with as
much want of temper and discretion. Mr. Walpole was more moderate.
He recommended that their first care should be to restore public
credit. "If the city of London were on fire, all wise men
would aid in extinguishing the flames, and preventing the spread
of the conflagration before they inquired after the incendiaries.
Public credit had received a dangerous wound, and lay bleeding,
and they ought to apply a speedy remedy to it. It was time enough
to punish the assassin afterwards." On the 9th of December
an address, in answer to his Majesty's speech, was agreed upon,
after an amendment, which was carried without a division, that
words should be added expressive of the determination of the House
not only to seek a remedy for the national distresses, but to
punish the authors of them.
The inquiry proceeded rapidly. The directors were ordered to lay
before the House a full account of all their proceedings. Resolutions
were passed to the effect that the calamity was mainly owing to
the vile arts of stockjobbers, and that nothing could tend more
to the re-establishment of public credit than a law to prevent
this infamous practice. Mr. Walpole then rose, and said, that
"as he had previously hinted, he had spent some time upon
a scheme for restoring public credit, but that, the execution
of it depending upon a position which had been laid down as fundamental,
he thought it proper, before he opened out his scheme, to be informed
whether he might rely upon that foundation. It was, whether the
subscription of public debts and encumbrances, money subscriptions,
and other contracts, made with the South Sea Company should remain
in the present state?" This question occasioned an animated
debate. It was finally agreed, by a majority of 259 against 117,
that all these contracts should remain in their present state,
unless altered for the relief of the proprietors by a general
court of the South Sea Company, or set aside by due course of
law. On the following day Mr. Walpole laid before a committee
of the whole House his scheme for the restoration of public credit,
which was, in substance, to ingraft nine millions of South Sea
stock into the Bank of England, and the same sum into the East
India Company, upon certain conditions. The plan was favourably
received by the House. After some few objections, it was ordered
that proposals should be received from the two great corporations.
They were both unwilling to lend their aid, and the plan met with
a warm but fruitless opposition at the general courts summoned
for the purpose of deliberating upon it. They, however, ultimately
agreed upon the terms on which they would consent to circulate
the South Sea bonds, and their report, being presented to the
committee, a bill was brought in, under the superintendence of
Mr. Walpole, and safely carried through both Houses of Parliament.
A bill was at the same time brought in, for restraining the South
Sea directors, governor, sub-governor, treasurer, cashier, and
clerks from leaving the kingdom for a twelvemonth, and for discovering
their estates and effects, and preventing them from transporting
or alienating the same. All the most influential members of the
House supported the bill. Mr. Shippen, seeing Mr. Secretary Craggs
in his place, and believing the injurious rumours that were afloat
of that minister's conduct in the South Sea business, determined
to touch him to the quick. He said, he was glad to see a British
House of Commons resuming its pristine vigour and spirit, and
acting with so much unanimity for the public good. It was necessary
to secure the persons and estates of the South Sea directors and
their officers; "but," he added, looking fixedly at
Mr. Craggs as he spoke, "there were other men in high station,
whom, in time, he would not be afraid to name, who were no less
guilty than the directors." Mr. Craggs arose in great wrath,
and said, that if the innuendo were directed against him, he was
ready to give satisfaction to any man who questioned him, either
in the House or out of it. Loud cries of order immediately arose
on every side. In the midst of the uproar Lord Molesworth got
up, and expressed his wonder at the boldness of Mr. Craggs in
challenging the whole House of Commons. He, Lord Molesworth, though
somewhat old, past sixty, would answer Mr. Craggs whatever he
had to say in the House, and he trusted there were plenty of young
men beside him, who would not be afraid to look Mr. Craggs in
the face, out of the House. The cries of order again resounded
from every side; the members arose simultaneously; everybody seemed
to be vociferating at once. The Speaker in vain called order.
The confusion lasted several minutes, during which Lord Molesworth
and Mr. Craggs were almost the only members who kept their seats.
At last the call for Mr. Craggs became so violent that he thought
proper to submit to the universal feeling of the House, and explain
his unparliamentary expression. He said, that by giving satisfaction
to the impugners of his conduct in that House, he did not mean
that he would fight, but that he would explain his conduct. Here
the matter ended, and the House proceeded to debate in what manner
they should conduct their inquiry into the affairs of the South
Sea Company, whether in a grand or a select committee. Ultimately,
a Secret Committee of thirteen was appointed, with power to send
for persons, papers, and records.
The Lords were as zealous and as hasty as the Commons. The Bishop
of Rochester said the scheme had been like a pestilence. The Duke
of Wharton said the House ought to show no respect of persons;
that, for his part, he would give up the dearest friend he had,
if he had been engaged in the project. The nation had been plundered
in a most shameful and flagrant manner, and he would go as far
as anybody in the punishment of the offenders. Lord Stanhope said,
that every farthing possessed by the criminals, whether directors
or not directors, ought to be confiscated, to make good the public
losses.
During all this time the public excitement was extreme. We learn,
front Coxe's Walpole, that the very name of a South Sea director
was thought to be synonymous. with every species of fraud and
villany. Petitions from counties, cities, and boroughs, in all
parts of the kingdom, were presented, crying for the justice due
to an injured nation and the punishment of the villanous peculators.
Those moderate men, who would not go to extreme lengths, even
in the punishment of the guilty, were accused of being accomplices,
were exposed to repeated insults and virulent invectives, and
devoted, both in anonymous letters and public writings, to the
speedy vengeance of an injured people. The accusations against
Mr. Aislabie, Chancellor of the Exchequer, and Mr. Craggs, another
member of the ministry, were so loud, that the House of Lords
resolved to proceed at once into the investigation concerning
them. It was ordered, on the 21st of January, that all brokers
concerned in the South Sea scheme should lay before the House
an account of the stock or subscriptions bought or sold by them
for any of the officers of the Treasury or Exchequer, or in trust
for any of them, since Michaelmas 1719. When this account was
delivered, it appeared that large quantities of stock had been
transferred to the use of Mr. Aislabie. Five of the South Sea
directors, ineluding Mr. Edward Gibbon, the grandfather of the
celebrated historian, were ordered into the custody of the black
rod. Upon a motion made by Earl Stanhope, it was unanimously resolved,
that the taking in or giving credit for stock without a valuable
consideration actually paid or sufficiently secured; or the purchasing
stock by any director or agent of the South Sea Company, for the
use or benefit of any member of the administration, or any member
of either House of Parliament, during such time as the South Sea
Bill was yet pending in Parliament, was a notorious and dangerous
corruption. Another resolution was passed a few days afterwards,
to the effect that several of the directors and officers of the
Company having, in a clandestine manner, sold their own stock
to the Company, had been guilty of a notorious fraud and breach
of trust, and had thereby mainly caused the unhappy turn of affairs
that had so much affected public credit. Mr. Aislabie resigned
his office as Chancellor of the Exchequer, and absented himself
from Parliament until the formal inquiry into his individual guilt
was brought under the consideration of the Legislature.
In the mean time, Knight, the treasurer of the Company, and who
was intrusted with all the dangerous secrets of the dishonest
directors, packed up his books and documents, and made his escape
from the country. He embarked in disguise, in a small boat on
the river, and proceeding to a vessel hired for the purpose, was
safely conveyed to Calais. The Committee of Secrecy informed the
House of the circumstance, when it was resolved unanimously that
two addresses should be presented to the King; the first praying
that he would issue a proclamation, offering a reward for the
apprehension of Knight; and the second, that he would give immediate
orders to stop the ports, and to take effectual care of the coasts,
to prevent the said Knight, or any other officers of the South
Sea Company, from escaping out of the kingdom. The ink was hardly
dry upon these addresses before they were carried to the King
by Mr. Methuen, deputed by the House for that purpose. The same
evening a royal proclamation was issued, offering a reward of
two thousand pounds for the apprehension of Knight. The Commons
ordered the doors of the House to be locked, and the keys to be
placed upon the table. General Ross, one of the members of the
Committee of Secrecy, acquainted them that they had already discovered
a train of the deepest villany and fraud that Hell had ever contrived
to ruin a nation, which in due time they would lay before the
House. In the mean time, in order to a further discovery, the
Committee thought it highly necessary to secure the persons of
some of the directors and principal South Sea officers, and to
seize their papers. A motion to this effect having been made,
was carried unanimously. Sir Robert Chaplin, Sir Theodore Janssen,
Mr. Sawbridge, and Mr. F. Eyles, members of the House, and directors
of the South Sea Company, were summoned to appear in their places,
and answer for their corrupt practices. Sir Theodore Janssen and
Mr. Sawbridge answered to their names, and endeavoured to exculpate
themselves. The House heard them patiently, and then ordered them
to withdraw. A motion was then made, and carried nemine contradicente,
that they had been guilty of a notorious breach of trust--had
occasioned much loss to great numbers of his Majesty's subjects,
and had highly prejudiced the public credit. It was then ordered
that, for their offence, they should be expelled the House, and
taken into the custody of the sergeant-at-arms. Sir Robert Chaplin
and Mr. Eyles, attending in their places four days afterwards,
were also expelled the House. It was resolved at the same time
to address the King, to give directions to his ministers at foreign
courts to make application for Knight, that he might be delivered
up to the English authorities, in ease he took refuge in any of
their dominions. The King at once agreed, and messengers were
despatched to all parts of the Continent the same night.
Among the directors taken into custody, was Sir John Blunt, the
man whom popular opinion has generally accused of having been
the original author and father of the scheme. This man, we are
informed by Pope, in his epistle to Allen, Lord Bathurst, was
a dissenter, of a most religious deportment, and professed to
be a great believer. He constantly declaimed against the luxury
and corruption of the age, the partiality of parliaments, and
the misery of party spirit. He was particularly eloquent against
avarice in great and noble persons. He was originally a scrivener,
and afterwards became, not only a director, but the most active
manager of the South Sea Company. Whether it was during his career
in this capacity that he first began to declaim against the avarice
of the great, we are not informed. He certainly must have seen
enough of it to justify his severest anathema; but if the preacher
had himself been free from the vice he condemned, his declamations
would have had a better effect. He was brought up in custody to
the bar of the House of Lords, and underwent a long examination.
He refused to answer several important questions. He said he had
been examined already by a committee of the House of Commons,
and as he did not remember his answers, and might contradict himself,
he refused to answer before another tribunal. This declaration,
in itself an indirect proof of guilt, occasioned some commotion
in the House. He was again asked peremptorily whether he had ever
sold any portion of the stock to any member of the administration,
or any member of either House of Parliament, to facilitate the
passing of the hill. He again declined to answer. He was anxious,
he said, to treat the House with all possible respect, but he
thought it hard to be compelled to accuse himself. After several
ineffectual attempts to refresh his memory, he was directed to
withdraw. A violent discussion ensued between the friends and
opponents of the ministry. It was asserted that the administration
were no strangers to the convenient taciturnity of Sir John Blunt.
The Duke of Wharton made a reflection upon the Earl Stanhope,
which the latter warmly resented. He spoke under great excitement,
and with such vehemence as to cause a sudden determination of
blood to the head. He felt himself so ill that he was obliged
to leave the House and retire to his chamber. He was cupped immediately,
and also let blood on the following morning, but with slight relief.
The fatal result was not anticipated. Towards evening he became
drowsy, and turning himself on his face, expired. The sudden death
of this statesman caused great grief to the nation. George I was
exceedingly affected, and shut himself up for some hours in his
closet, inconsolable for his loss.
Knight, the treasurer of the company, was apprehended at Tirlemont,
near Liege, by one of the secretaries of Mr. Leathes, the British
resident at Brussels, and lodged in the citadel of Antwerp. Repeated
applications were made to the court of Austria to deliver him
up, but in vain. Knight threw himself upon the protection of the
states of Brabant, and demanded to be tried in that country. It
was a privilege granted to the states of Brabant by one of the
articles of the Joyeuse Entree, that every criminal apprehended
in that country should be tried in that country. The states insisted
on their privilege, and refused to deliver Knight to the British
authorities. The latter did not cease their solicitations; but
in the mean time, Knight escaped from the citadel.
On the 16th of February the Committee of Secrecy made their first
report to the House. They stated that their inquiry had been attended
with numerous difficulties and embarrassments; every one they
had examined had endeavoured, as far as in him lay, to defeat
the ends of justice. In some of the books produced before them,
false and fictitious entries had been made; in others, there were
entries of money, with blanks for the name of the stockholders.
There were frequent erasures and alterations, and in some of the
books leaves were torn out. They also found that some books of
great importance had been destroyed altogether, and that some
had been taken away or secreted. At the very entrance into their
inquiry, they had observed that the matters referred to them were
of great variety and extent. Many persons had been intrusted with
various parts in the execution of the law, and under colour thereof
had acted in an unwarrantable manner, in disposing of the properties
of many thousands of persons, amounting to many millions of money.
They discovered that, before the South Sea Act was passed, there
was an entry in the Company's books of the sum of 1,259,325 pounds,
upon account of stock stated to have been sold to the amount of
574,500 pounds. This stock was all fictitious, and had been disposed
of with a view to promote the passing of the bill. It was noted
as sold at various days, and at various prices, from 150 to 325
per cent. Being surprised to see so large an account disposed
of, at a time when the Company were not empowered to increase
their capital, the committee determined to investigate most carefully
the whole transaction. The governor, sub-governor, and several
directors were brought before them, and examined rigidly. They
found that, at the time these entries were made, the Company was
not in possession of such a quantity of stock, having in their
own right only a small quantity, not exceeding thirty thousand
pounds at the utmost. Pursuing the inquiry, they found that this
amount of stock, was to be esteemed as taken in or holden by the
Company, for the benefit of the pretended purchasers, although
no mutual agreement was made for its delivery or acceptance at
any certain time. No money was paid down, nor any deposit or security
whatever given to the Company by the supposed purchasers; so that
if the stock had fallen, as might have been expected, had the
act not passed, they would have sustained no loss. If, on the
contrary, the price of stock advanced (as it actually did by the
success of the scheme), the difference by the advanced price was
to be made good to them. Accordingly, after the passing of the
act, the account of stock was made up and adjusted with Mr. Knight,
and the pretended purchasers were paid the difference out of the
Company's cash. This fictitious stock, which had been chiefly
at the disposal of Sir John Blunt, Mr. Gibbon, and Mr. Knight,
was distributed among several members of the government and their
connexions, by way of bribe, to facilitate the passing of the
bill. To the Earl of Sunderland was assigned 50,000 pounds of
this stock; to the Duchess of Kendal 10,000 pounds; to the Countess
of Platen 10,000 pounds; to her two nieces 10,000 pounds; to Mr.
Secretary Craggs 30,000 pounds; to Mr. Charles Stanhope (one of
the Secretaries of the Treasury) 10,000 pounds; to the Swordblade
Company 50,000 pounds. It also appeared that Mr. Stanhope had
received the enormous sum of 250,000 pounds as the difference
in the price of some stock, through the hands of Turner, Caswall,
and Co., but that his name had been partly erased from their books,
and altered to Stangape. Aislabie, the Chancellor of the Exchequer,
had made profits still more abominable. He had an account with
the same firm, who were also South Sea directors, to the amount
of 794,451 pounds. He had, besides, advised the Company to make
their second subscription one million and a half, instead of a
million, by their own authority, and without any warrant. The
third subscription had been conducted in a manner as disgraceful.
Mr. Aislabie's name was down for 70,000 pounds; Mr. Craggs, senior,
for 659,000 pounds; the Earl of Sunderland's for 160,000 pounds;
and Mr. Stanhope for 47,000 pounds. This report was succeeded
by six others, less important. At the end of the last, the committee
declared that the absence of Knight, who had been principally
intrusted, prevented them from carrying on their inquiries.
The first report was ordered to be printed, and taken into consideration
on the next day but one succeeding. After a very angry and animated
debate, a series of resolutions were agreed to, condemnatory of
the conduct of the directors, of the members of the Parliament
and of the administration concerned with them; and declaring that
they ought, each and all, to make satisfaction out of their own
estates for the injury they had done the public. Their practices
were declared to be corrupt, infamous, and dangerous; and a bill
was ordered to be brought in for the relief of the unhappy sufferers.
Mr. Charles Stanhope was the first person brought to account for
his share in these transactions. He urged in his defence that,
for some years past, he had lodged all the money he was possessed
of in Mr. Knight's hands, and whatever stock Mr. Knight had taken
in for him, he had paid a valuable consideration for it. As to
the stock that had been bought for him by Turner, Caswall, and
Co. he knew nothing about it. Whatever had been done in that matter
was done without his authority, and he could not be responsible
for it. Turner and Co. took the latter charge upon themselves,
but it was notorious to every unbiassed and unprejudiced person
that Mr. Stanhope was a gainer of the 250,000 pounds which lay
in the hands of that firm to his credit. He was, however, acquitted
by a majority of three only. The greatest exertions were made
to screen him. Lord Stanhope, the son of the Earl of Chesterfield,
went round to the wavering members, using all the eloquence he
was possessed of to induce them either to vote for the acquittal
or to absent themselves from the house. Many weak-headed country-gentlemen
were led astray by his persuasions, and the result was as already
stated. The acquittal caused the greatest discontent throughout
the country. Mobs of a menacing character assembled in different
parts of London; fears of riots were generally entertained, especially
as the examination of a still greater delinquent was expected
by many to have a similar termination. Mr. Aislabie, whose high
office and deep responsibilities should have kept him honest,
even had native principle been insufficient, was very justly regarded
as perhaps the greatest criminal of all. His case was entered
into on the day succeeding the acquittal of Mr. Starthope. Great
excitement prevailed, and the lobbies and avenues of the house
were beset by crowds, impatient to know the result. The debate
lasted the whole day. Mr. Aislabie found few friends: his guilt
was so apparent and so heinous that nobody had courage to stand
up in his favour. It was finally resolved, without a dissentient
voice, that Mr. Aislabie had encouraged and promoted the destructive
execution of the South Sea scheme with a view to his own exorbitant
profit, and had combined with the directors in their pernicious
practices to the ruin of the public trade and credit of the kingdom:
that he should for his offences be ignominiously expelled from
the House of Commons, and committed a close prisoner to the Tower
of London; that he should be restrained from going out of the
kingdom for a whole year, or till the end of the next session
of Parliament; and that he should make out a correct account of
all his estate, in order that it might be applied to the relief
of those who had suffered by his malpractices.
This verdict caused the greatest joy. Though it was delivered
at half-past twelve at night, it soon spread over the city. Several
persons illuminated their houses in token of their joy. On the
following day, when Mr. Aislabie was conveyed to the Tower, the
mob assembled on Tower-hill with the intention of hooting and
pelting him. Not succeeding in this, they kindled a large bonfire,
and danced around it in the exuberance of their delight. Several
bonfires were made in other places; London presented the appearance
of a holiday, and people congratulated one another as if they
had just escaped from some great calamity. The rage upon the acquittal
of Mr. Stanhope had grown to such a height that none could tell
where it would have ended, had Mr. Aislabie met with the like
indulgence.
To increase the public satisfaction, Sir George Caswall, of the
firm of Turner, Caswall, & Co. was expelled the House on the
following day, and ordered to refund the sum of 250,000 pounds.
That part of the report of the Committee of Secrecy which related
to the Earl of Sunderland was next taken into consideration. Every
effort was made to clear his Lordship from the imputation. As
the case against him rested chiefly on the evidence extorted from
Sir John Blunt, great pains were taken to make it appear that
Sir John's word was not to be believed, especially in a matter
affecting the honour of a peer and privy councillor. All the friends
of the ministry rallied around the Earl, it being generally reported
that a verdict of guilty against him would bring a Tory ministry
into power. He was eventually acquitted, by a majority of 233
against 172; but the country was convinced of his guilt. The greatest
indignation was everywhere expressed, and menacing mobs again
assembled in London. Happily no disturbances took place.
This was the day on which Mr. Craggs, the elder, expired. The
morrow had been appointed for the consideration of his case. It
was very generally believed that he had poisoned himself. It appeared,
however, that grief for the loss of his son, one of the Secretaries
of the Treasury, who had died five weeks previously of the small-pox,
preyed much on his mind. For this son, dearly beloved, he had
been amassing vast heaps of riches: he had been getting money,
but not honestly; and he for whose sake he had bartered his honour
and sullied his fame, was now no more. The dread of further exposure
increased his trouble of mind, and ultimately brought on an apoplectic
fit, in which he expired. He left a fortune of a million and a
half, which was afterwards confiscated for the benefit of the
sufferers by the unhappy delusion he had been so mainly instrumental
in raising.
One by one the case of every director of the Company was taken
into consideration. A sum amounting to two millions and fourteen
thousand pounds was confiscated from their estates towards repairing
the mischief they had done, each man being allowed a certain residue,
in proportion to his conduct and circumstances, with which he
might begin the world anew. Sir John Blunt was only allowed 5,000
pounds out of his fortune of upwards of 183,000 pounds; Sir John
Fellows was allowed 10,000 pounds out of 243,000 pounds; Sir Theodore
Janssen, 50,000 pounds out of 243,000 pounds; Mr. Edward Gibbon,
10,000 pounds out of 106,000 pounds.; Sir John Lambert, 5000 pounds
out of 72,000 pounds. Others, less deeply involved, were treated
with greater liberality. Gibbon, the historian, whose grandfather
was the Mr. Edward Gibbon so severely mulcted, has given, in the
Memoirs of his Life and Writings, an interesting account of the
proceedings in Parliament at this time. He owns that he is not
an unprejudiced witness; but, as all the writers from which it
is possible to extract any notice of the proceedings of these
disastrous years, were prejudiced on the other side, the statements
of the great historian become of additional value. If only on
the principle of audi alteram partem, his opinion is entitled
to consideration. "In the year 1716," he says, "my
grandfather was elected one of the directors of the South Sea
Company, and his books exhibited the proof that before his acceptance
of that fatal office, he had acquired an independent fortune of
60,000 pounds. But his fortune was overwhelmed in the shipwreck
of the year twenty, and the labours of thirty years were blasted
in a single day. Of the use or abuse of the South Sea scheme,
of the guilt or innocence of my grandfather and his brother directors,
I am neither a competent nor a disinterested judge. Yet the equity
of modern times must condemn the violent and arbitrary proceedings,
which would have disgraced the cause of justice, and rendered
injustice still more odious. No sooner had the nation awakened
from its golden dream, than a popular, and even a Parliamentary
clamour, demanded its victims; but it was acknowledged on all
sides, that the directors, however guilty, could not be touched
by any known laws of the land. The intemperate notions of Lord
Molesworth were not literally acted on; but a bill of pains and
penalties was introduced -- a retro-active statute, to punish
the offences which did not exist at the time they were committed.
The Legislature restrained the persons of the directors, imposed
an exorbitant security for their appearance, and marked their
character with a previous note of ignominy. They were compelled
to deliver, upon oath, the strict value of their estates, and
were disabled from making any transfer or alienation of any part
of their property. Against a bill of pains and penalties, it is
the common right of every subject to be heard by his counsel at
the bar. They prayed to be heard. Their prayer was refused, and
their oppressors, who required no evidence, would listen to no
defence. It had been at first proposed, that one eighth of their
respective estates should be allowed for the future support of
the directors; but it was speciously urged, that in the various
shades of opulence and guilt, such a proportion would be too light
for many, and for some might possibly be too heavy. The character
and conduct of each man were separately weighed; but, instead
of the calm solemnity of a judicial inquiry, the fortune and honour
of thirty-three Englishmen were made the topics of hasty conversation,
the sport of a lawless majority; and the basest member of the
committee, by a malicious word, or a silent vote, might indulge
his general spleen or personal animosity. Injury was aggravated
by insult, and insult was embittered by pleasantry. Allowances
of 20 pounds or 1 shilling were facetiously moved. A vague report
that a director had formerly been concerned in another project,
by which some unknown persons had lost their money, was admitted
as a proof of his actual guilt. One man was ruined because he
had dropped a foolish speech, that his horses should feed upon
gold; another, because he was grown so proud, that one day, at
the Treasury, he had refused a civil answer to persons much above
him. All were condemned, absent and unheard, in arbitrary fines
and forfeitures, which swept away the greatest part of their substance.
Such bold oppression can scarcely be shielded by the omnipotence
of Parliament. My grandfather could not expect to be treated with
more lenity than his companions. His Tory principles and connexions
rendered him obnoxious to the ruling powers. His name was reported
in a suspicious secret. His well-known abilities could not plead
the excuse of ignorance or error. In the first proceedings against
the South Sea directors, Mr. Gibbon was one of the first taken
into custody, and in the final sentence the measure of his fine
proclaimed him eminently guilty. The total estimate, which he
delivered on oath to the House of Commons, amounted to 106,543
pounds 5 shillings 6 pence, exclusive of antecedent settlements.
Two different allowances of 15,000 pounds and of 10,000 pounds
were moved for Mr. Gibbon; but, on the question being put, it
was carried without a division for the smaller sum. On these ruins,
with the skill and credit of which Parliament had not been able
to despoil him, my grandfather, at a mature age, erected the edifice
of a new fortune. The labours of sixteen years were amply rewarded;
and I have reason to believe that the second structure was not
much inferior to the first."
The next consideration of the Legislature, after the punishment
of the directors, was to restore public credit. The scheme of
Walpole had been found insufficient, and had fallen into disrepute.
A computation was made of the whole capital stock of the South
Sea Company at the end of the year 1720. It was found to amount
to thirty-seven millions eight hundred thousand pounds, of which
the stock allotted to all the proprietors only amounted to twenty-four
millions five hundred thousand pounds. The remainder of thirteen
millions three hundred thousand pounds belonged to the Company
in their corporate capacity, and was the profit they had made
by the national delusion. Upwards of eight millions of this were
taken from the Company, and divided among the proprietors and
subscribers generally, making a dividend of about 33 pounds 6
shillings 8 pence per cent. This was a great relief. It was further
ordered, that such persons as had borrowed money from the South
Sea Company upon stock actually transferred and pledged at the
time of borrowing to or for the use of the Company, should be
free from all demands, upon payment of ten per cent. of the sums
so borrowed. They had lent about eleven millions in this manner,
at a time when prices were unnaturally raised; and they now received
back one million one hundred thousand, when prices had sunk to
their ordinary level.
But it was a long time before public credit was thoroughly restored.
Enterprise, like Icarus, had soared too high, and melted the wax
of her wings; like Icarus, she had fallen into a sea, and learned,
while floundering in its waves, that her proper element was the
solid ground. She has never since attempted so high a flight.
In times of great commercial prosperity there has been a tendency
to over-speculation on several occasions since then. The success
of one project generally produces others of a similar kind. Popular
imitativeness will always, in a trading nation, seize hold of
such successes, and drag a community too anxious for profits into
an abyss from which extrication is difficult. Bubble companies,
of a kind similar to those engendered by the South Sea project,
lived their little day in the famous year of the panic, 1825.
On that occasion, as in 1720, knavery gathered a rich harvest
from cupidity, but both suffered when the day of reckoning came.
The schemes of the year 1836 threatened, at one time, results
as disastrous; but they were happily averted before it was too
late. The South Sea project thus remains, and, it is to be hoped,
always will remain, the greatest example in British history, of
the infatuation of the people for commercial gambling. From the
bitter experience of that period, posterity may learn how dangerous
it is to let speculation riot unrestrained, and to hope for enormous
profits from inadequate causes. Degrading as were the circumstances,
there is wisdom to be gained from the lesson which they teach.
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