Excerpt from:
Extraordinary Popular Delusions & the Madness of Crowds
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 600,000l. 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. Every body 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 hundred fold in gold and silver ingots by the natives. A report, industriously spread, that Spain was willing to concede four ports on thee 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
1,775,027l. 15s. 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 2,500,000l. 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 22d 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
30,981,712l., 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 2d 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 stock-jobbing, 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. Every body 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,
“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 300l. for every 100l. 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 60l. each for every 100l. 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 every
where. 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 40,000l. by his speculations.17 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 shew that dozens
of schemes, hardly a whit 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 fox-hunting 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 shewed, more completely
than any other, the utter madness of the people, was one started by an
unknown adventurer, entitled “A 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 100l. each, deposit 2l. per share. Each
subscriber, paying his deposit, would be entitled to 100l. 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 98l. 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 2000l. 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 time, when, at periodic
intervals, 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:
- Petition of several persons, praying letters patent for carrying on a fishing trade by the name of the Grand Fishery of Great Britain.
- 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.
- 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.
- 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.
- 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.
- Another petition for a Greenland trade.
- Petition of several merchants, gentlemen, and citizens, praying to be incorporated for buying and building of ships to let or freight.
- Petition of Samuel Antrim and others, praying for letters patent forsowing hemp and flax.
- 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.
- Petition of Thomas Boyd and several hundred merchants, owners and masters of ships, sail-makers, weavers, and other traders, praying acharter of incorporation, empowering them to borrow money for purchasing lands, in order to the manufacturing sail-cloth and fine holland.
- 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.
- 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.
- Petition of several of his majesty’s loyal subjects 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.
- Petition of Thomas Surges and others his majesty’s subjects thereto subscribing, in behalf of themselves and others, subscribers to a fund of 1,200,000l. for carrying on a trade to his majesty’s German dominions, praying to be incorporated by the name of the Harburg Company.
- 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.
- Petition of several merchants of London, praying a charter of incorporation for carrying on a salt-work.
- 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.
- 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:
For the importation of Swedish iron.
For supplying London with sea-coal. Capital, three millions.
For building and rebuilding houses throughout all England Capital, three millions.
For making of muslin.
For carrying on and improving the British alum-works.
For effectually settling the island of Blanco and Sal Tartagus.
For supplying the town of Deal with fresh water.
For the importation of Flanders lace.
For improvement of lands in Great Britain. Capital, four millions.
For encouraging the breed of horses in England, and improving of glebe and church lands, and for repairing and rebuilding parsonage and vicarage houses.
For making of iron and steel in Great Britain,
For improving the land in the county of Flint. Capital, one million.
For purchasing lands to build on. Capital, two millions.
For trading in hair.
For erecting salt-works in Holy Island. Capital, two millions.
For buying and selling estates, and lending money on mortgage.
For carrying on an undertaking of great advantage; but nobody to know what it is.
For paving the streets of London. Capital, two millions.
For furnishing funerals to any part of Great Britain.
For buying and selling lands and lending money at interest. Capital, five millions.
For carrying on the royal fishery of Great Britain. Capital, ten millions.
For assuring of seamen’s wages.
For erecting loan-offices for the assistance and encouragement of the industrious. Capital, two millions.
For purchasing and improving leaseable lands. Capital, four millions.
For importing pitch and tar, and other naval stores, from North Britain and America.
For the clothing, felt, and pantile trade.
For purchasing and improving a manor and royalty in Essex.
For insuring of horses. Capital, two millions.
For exporting the woollen manufacture, and importing copper, brass, and iron. Capital, four millions.
For a grand dispensary. Capital, three millions.
For erecting mills and purchasing lead-mines. Capital, two millions.
For improving the art of making soap.
For a settlement on the island of Santa Cruz.
For sinking pits and smelting lead ore in Derbyshire.
For making glass bottles and other glass.
For a wheel for perpetual motion. Capital, one million.
For improving of gardens.
For insuring and increasing children’s fortunes.
For entering and loading goods at the Custom-house, and for negotiating business for merchants.
For carrying on a woollen manufacture in the North of England.
For importing walnut-trees from Virginia, Capital, two millions.
For making Manchester stuffs of thread and cotton.
For making Joppa and Castile soap.
For improving the wrought-iron and steel manufactures of this kingdom. Capital four millions.
For dealing in lace, hollands, cambrics, lawns, &c. Capital, two millions.
For trading in and improving certain commodities of the produce of this kingdom, &c. Capital three millions.
For supplying the London markets with cattle.
For making looking-glasses, coach-glasses, &c. Capital, two millions.
For working the tin and lead mines in Cornwall and Derbyshire.
For making rape-oil.
For importing beaver fur. Capital, two millions.
For making pasteboard and packing-paper.
For importing of oils and other materials used in the woollen manufacture.
For improving and increasing the silk manufactures.
For lending money on stock, annuities, tallies, &c.
For paying pensions to widows and others, at a small discount. Capital, two millions.
For improving malt liquors. Capital, four millions.
For a grand American fishery.
For purchasing and improving the fenny lands in Lincolnshire. Capital, two millions.
For improving the paper manufacture of Great Britain.
The Bottomry Company.
For drying malt by hot air.
For carrying on a trade in the river Oronooko.
For the more effectual making of baize, in Colchester and other parts of Great Britain.
For buying of naval stores, supplying the victualling, and paying the wages of the workmen.
For employing poor artificers, and furnishing merchants and others with watches.
For improvement of tillage and the breed of cattle.
Another for the improvement of our breed in horses.
Another for a horse-insurance.
For carrying on the corn trade of Great Britain.
For insuring to all masters and mistresses the losses they may sustain by servants. Capital, three millions.
For erecting houses or hospitals for taking in and maintaining illegitimate children. Capital, two millions.
For bleaching coarse sugars, without the use of fire or loss of substance.
For building turnpikes and wharfs in Great Britain.
For insuring from thefts and robberies.
For extracting silver from lead.
For making china and delft ware. Capital, one million.
For importing tobacco, and exporting it again to Sweden and the north of Europe. Capital, four millions.
For making iron with pit coal.
For furnishing the cities of London and Westminster with hay and straw. Capital, three millions.
For a sail and packing-cloth manufactory in Ireland.
For taking up ballast.
For buying and fitting out ships to suppress pirates.
For the importation of timber from Wales. Capital, two millions.
For rock-salt.
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
cardmaker 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 adultrate brass.”
The eight of diamonds celebrated the company for the colonisation 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.
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 3d
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 22d 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 2d 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
any body 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 Coxe’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.20
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 15l. per
cent deposit, 3l. per cent premium, and 5l. 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
writer21 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 novellist 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
over-bearing 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 Tiber. 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
stock-jobbers, and that nothing could tend more to the reestablishment 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 engraft 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; every body
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 shew 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 any body 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 from
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, including 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
entrusted 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 on 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 case 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.24 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 bill. 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 Entrée, 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 entrusted 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 1,259,325l., upon account of stock stated to have been sold to
the amount of 574,500l. 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 on 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 50,000l. of
this stock; to the Duchess of Kendal, 10,000l.; to the Countess of Platen,
10,000l.; to her two nieces, 10,000l.; to Mr. Secretary Craggs, 30,000l.;
to Mr. Charles Stanhope (one of the secretaries of the Treasury),
10,000l.; to the Sword-blade company, 50,000l. It also appeared that Mr.
Stanhope had received the enormous sum of 250,000l. 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 794,451l. 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 70,000l.; Mr. Craggs, senior, for 659,000l.;
the Earl of Sunderland’s for 160,000l.; and Mr. Stanhope for 47,000l. 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 entrusted, 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 for 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 250,000l. 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. Stanhope. 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 mal-practices.
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, and Co., was expelled from the House on the following
day, committed to the Tower, and ordered to refund the sum of 250,000l.
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 every where expressed, and menacing mobs again assembled
in London. Happily no disturbance 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 5,000l. out of his fortune of upwards of
183,000l.; Sir John Fellows was allowed 10,000l. out of 243,000l.; Sir
Theodore Janssen, 50,000l. out of 243,000l.; Mr. Edward Gibbon, 10,000l.
out of 106,000l.; Sir John Lambert, 5000l. out of 72,000l. 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 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
60,000l. But his fortune was overwhelmed in the shipwreck of the year
1720, 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 especially 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 20l. or 1s. 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 106,543l. 5s. 6d., exclusive of antecedent
settlements. Two different allowances of 15,000l. and of 10,000l. 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 33l. 6s. 8d. 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.27
