Introduction
In 1711, a new joint stock company called the South Sea Company was announced, akin to the successful East India Company (1600) and Hudson’s Bay Company (1670). In 1719, it was awarded the job of paying off the national debt, promising investors eye-catching returns for upwards of £1000 per share, and sparking a frenzied optimism among investors that copycat companies were happy to share in.
A SCOTCHMAN named Law had started a similar project in France, known as the ‘Mississippi Company,’ which proposed to pay off the national debt of France.* Following his example, the South Sea Company now [1719] undertook to pay off the English National Debt,* mainly, it is said, from the profits of the slave trade between Africa and Brazil.* Sir Robert Walpole had no faith in the scheme, and attacked it vigorously; but other influential members of the Government gave it their encouragement.*
A speculative craze followed, the like of which has never since been known. Bubble companies sprang into existence with objects almost as absurd as those of the philosophers whom Swift ridiculed in ‘Gulliver’s Travels,’* where one man was trying to make gunpowder out of ice, and another to extract sunbeams from cucumbers.
A mere list of these companies would fill several pages. One was to give instruction in astrology, by which every man might be able to foretell his own destiny by examining the stars.
John Law (1671-1729) founded the Mississippi Company in 1684, to exploit a monopoly on trade with the French colonies of North America and the West Indies. Renamed the Company of the West in 1717, and the Company of the Indies two years later, it fell victim to frenzied speculation that was not justified by the realities (Law’s marketing was altogether too slick) and the company was wound up in 1721.
The Company was formed in 1711, and in 1719 was chosen over the Bank of England as the Government’s partner in paying down the National Debt, a consequence of prolonged war. Peak excitement in July 1720 was followed by a spectacular crash. The Company survived the scandal, and continued to pay out dividends on its shrinking share of the National Debt until it was wound up in 1854.
By the Peace of Utrecht in 1713, ending The War of the Spanish Succession, the South Sea Company was awarded the Asiento Contract to supply 4,800 slaves per annum to Spanish colonies over a period of thirty-three years. Despite the crash of 1720, the Company survived and continued to manage the Asiento contract, which was renewed in 1748. Two years later, however, slave-trading rights were sold back to Spain for £100,000.
Sir Robert Walpole (1676-1745) is now recognised as Britain’s first Prime Minister, though the title was not used in his day. He was in office as First Lord of the Treasury from 1715 to 1717, as Paymaster General from 1720 and First Lord of the Treasury again from 1721 to 1742. The ‘other members’ had in some cases been influenced by bribery.
‘Gulliver’s Travels’ was written by Jonathan Swift, and published in 1726. It was the Academy at Lagado, capital of Balnibarbi, that proposed these fine schemes, but Swift’s satire was (as so often happens in politics) barely distinguishable from the reality. See also The Language of Balnibarbi.
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