Detail of an orrery by Benjamin Martin of London, made in 1767 and used for lectures in astronomy at Harvard University in Boston, Massachusetts, USA. One of the projects for which copycat companies invited investment undertook to provide courses not in Astronomy, but in Astrology. Another would put your money into extracting silver from lead. Far more tempting was a joint stock investment company to build hospitals for illegitimate children. Desirable as this may have been as charity (Handel performed his ‘Messiah’ every year to raise money for the Foundling Hospital in London), as an investment it was sure to fail since the hospitals could never turn a profit.
Part 1 of 2
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.
Part Two
The South Sea Bubble, a scene imagined by Edward Matthew Ward in 1846, adopting the style of one of William Hogarth’s cartoons. King George I was one of those who lost heavily; many others were ordinary citizens who could not so readily afford their losses. A committee of investigation was set up to look into the conduct of the Company, and some high-profile figures who were compromised by accusations of corruption fled the country; others, sadly, committed suicide. Further harm came from the copycat companies that tried to cash in on the get-rich-quick spirit of the day.
A SECOND was to manufacture butter out of beech trees;* a third was for a wheel for driving machinery, which once started would go on forever, thereby furnishing a cheap perpetual motion.* A fourth projector, going beyond all the rest in audacity, had the impudence to offer stock for sale in an enterprise “which shall be revealed hereafter.” He found the public so gullible and so greedy that he sold £2000 worth of the new stock in the course of a single morning.* He then prudently disappeared with the cash, and the unfortunate investors found that where he went with their money was not among the things to “be revealed hereafter.”
The narrow passage leading to the London stock exchange was crowded all day long with struggling fortune hunters, both men and women. Suddenly, when the excitement was at its height, the bubble burst, as Law’s scheme in France had a little earlier. Great numbers of people were hopelessly ruined, and the cry for vengeance was as loud as the bids for stocks had once been.
This one is not quite as absurd as Montgomery supposed. Beech nuts are still sometimes pressed to make cheap vegetable oil, for lamps, haircare and culinary use; a beech nut margarine would be a brave investment, even so. Coffee might have made a better project: the nuts are quite bitter and astringent, and in the late Victorian age were quite in vogue roasted as a substitute.
Perpetual motion is now recognised as a scientific impossibility. In 1775, the Royal Academy of Sciences in Paris let it be known that no further consideration would be given to supposed perpetual motion machines.
Close to £300,000 in today’s money. See Measuring Worth.
