Part 25 (1/2)
[Sidenote: The South Sea Bubble.]
At that period, the English nation were intoxicated and led astray by one of those great commercial delusions which so often take place in all civilized countries. No mania ever was more marked, more universal, and more fatal than that of the South Sea Company. The bubble had turned the heads of politicians, merchants, and farmers; all cla.s.ses, who had money to invest, took stock in the South Sea Company. The delusion, however, pa.s.sed away; England was left on the brink of bankruptcy, and a master financier was demanded by the nation, to extricate it from the effects of folly and madness. All eyes looked to Sir Robert Walpole, and he did all that financial skill could do, to repair the evils which speculation and gambling had caused.
The desire for sudden wealth is one of the most common pa.s.sions of our nature, and has given rise to more delusions than religious fanaticism, or pa.s.sion for military glory. The South Sea bubble was kindred to that of John Law, who was the author of the Mississippi Scheme, which nearly ruined France in the reign of Louis XV., and which was encouraged by the Duke of Orleans, as a means of paying off the national debt.
[Sidenote: The South Sea Company.]
The wars of England had created a national debt, under the administration of G.o.dolphin and Marlborough; but which was not so large but that hopes were entertained of redeeming it. Walpole proposed to pay it off by a sinking fund; but this idea, not very popular, was abandoned. It was then the custom for government to borrow of corporations, rather than of bankers, because the science of brokerage was not then understood, and because no individuals were sufficiently rich to aid materially an embarra.s.sed administration. As a remuneration, companies were indulged with certain commercial advantages. As these advantages enabled companies to become rich, the nation always found it easy to borrow. During the war of the Spanish Succession, the prime minister, Harley, afterwards Earl of Oxford, in order to raise money, projected the South Sea Company. This was in 1710, and the public debt was ten million pounds sterling, thought at that time to be insupportable. The interest on that debt was six per cent. In order to liquidate the debt, Oxford made the duties on wines, tobacco, India goods, silks, and a few other articles, permanent. And, to allure the public creditor, great advantages were given to the new company, and money was borrowed of it at five per cent. This gain of one per cent., by money borrowed from the company, was to const.i.tute a sinking fund to pay the debt.
But the necessities of the nation increased so rapidly, that a leading politician of the day, Sir John Blount, proposed that the South Sea Company should become the sole national creditor, and should loan to the government new sums, at an interest of four per cent. New monopolies were to be given to the company; and it, on the other hand, offered to give a bonus of three million pounds to the government. The Bank of England, jealous of the proposal, offered five millions. The directors of the company then bid seven millions for a charter, nearly enough to pay off the whole redeemable debt of the nation; which, however, could not be redeemed, so long as there were, in addition, irredeemable annuities to the amount of eight hundred thousand pounds yearly. It became, therefore, an object of the government to get rid, in the first place, of these irredeemable annuities; and this could be effected, if the national creditor could be induced to accept of shares in the South Sea Company, instead of his irredeemable annuities, or, as they are now variously called, consols, stocks, and national funds. The capital was not desired; only the interest on capital. So many monopolies and advantages were granted to the company, that the stock rose, and the national creditor was willing to part with his annuities for stock in the company. The offer was, therefore, accepted, and the government got rid of irredeemable annuities, and obtained seven millions besides, but became debtor to the company. A company which could apparently afford to pay so large a bonus to government for its charter, and loan such large sums as the nation needed, in addition, at four per cent., was supposed to be making most enormous profits. Its stock rose rapidly in value. The national creditor hastened to get rid of irredeemable annuities--a national stock which paid five per cent.--in order to buy shares which might pay ten per cent.
[Sidenote: Opposition of Walpole.]
Walpole, then paymaster of the forces, opposed the scheme of Blount with all his might, showed that the acceptance of the company's proposal would countenance stockjobbing, would divert industry from its customary channels, and would hold out a dangerous lure to the unsuspecting to part with real for imaginary property. He showed the misery and confusion which existed in France from the adoption of similar measures, and proved that the whole success of the scheme must depend on the rise of the company's stock; that, if there were no rise, the company could not afford the bonus, and would fail, and the obligation of the nation remain as before. But his reasonings were of no avail. All cla.s.ses were infatuated. All people speculated in the South Sea stock. And, for a while, all people rejoiced; for, as long as the stock continued to rise, all people were gainers.
And the stock rose rapidly. It soon reached three hundred per cent.
above the original par value, and this in consequence of the promise of great dividends. All hastened to buy such lucrative property. The public creditor willingly gave up three hundred pounds of irredeemable stock for one hundred pounds of the company's stock.
[Sidenote: Mania for Speculation.]
And this would have been well, had there been a moral certainty of the stockholder receiving a dividend of twenty per cent. But there was not this certainty, nor even a chance of it. Still, in consequence of the great dividends promised, even as high as fifty per cent., the stock gradually rose to one thousand per cent. Such was the general mania.
And such was the extent of it, that thirty-seven millions of pounds sterling were subscribed on the company's books.
And the rage for speculation extended to all other kinds of property; and all sorts of companies were formed, some of the shares of which were at a premium of two thousand per cent. There were companies formed for fisheries, companies for making salt, for making oil, for smelting metals, for improving the breed of horses, for the planting of madder, for building s.h.i.+ps against pirates, for the importation of jacka.s.ses, for fattening hogs, for wheels of perpetual motion, for insuring masters against losses from servants. There was one company for carrying on an undertaking of great advantage, but no one knew for what. The subscriber, by paying two guineas as a deposit, was to have one hundred pounds per annum for every hundred subscribed. It was declared, that, in a month, the particulars were to be laid open, and the remainder of the subscription money was then to be paid.
Notwithstanding this barefaced, swindling scheme, two thousand pounds were received one morning as a deposit. The next day, the proprietor was not to be found.
Now, in order to stop these absurd speculations, and yet to monopolize all the gambling in the kingdom, the directors of the South Sea Company obtained an act from parliament, empowering them to prosecute all the various bubble companies that were projected. In a few days, all these bubbles burst. None were found to be buyers. Stock fell to nothing.
[Sidenote: Bursting of the South Sea Bubble.]
But the South Sea Company made a blunder. The moral effect of the bursting of so many bubbles was to open the eyes of the nation to the greatest bubble of all. The credit of the South Sea Company declined.
Stocks fell from one thousand per cent to two hundred in a few days.
All wanted to sell, n.o.body to buy. Bankers and merchants failed, and n.o.bles and country gentlemen became impoverished.
In this general distress, Walpole was summoned to power, in older to extricate the nation, on the eve of bankruptcy. He proposed a plan, which was adopted, and which saved the credit of the nation. He ingrafted nine millions of the South Sea stock into the Bank of England, and nine millions more into the East India Company; and government gave up the seven millions of bonus which the company had promised.
By this a.s.sistance, the company was able to fulfil its engagements, although all who purchased stock when it had arisen beyond one hundred per cent. of its original value, lost money. It is strange that the stock, after all, remained at a premium of one hundred per cent.; of course, the original proprietors gained one hundred per cent., and those who paid one hundred per cent. premium lost nothing. But these const.i.tuted a small fraction of the people who had speculated, and who paid from one hundred to nine hundred per cent. premium. Government, too, gained by reducing interest on irredeemable bonds from five to four per cent., although it lost the promised bonus of seven millions.
The South Sea bubble did not destroy the rage for speculation, although it taught many useful truths--that national prosperity is not advanced by stockjobbing; that financiers, however great their genius, generally overreach themselves; that great dividends are connected with great risk; that circ.u.mstances beyond human control will defeat the best-laid plan; that it is better to repose upon the operation of the ordinary laws of trade; and that nothing but strict integrity and industry will succeed in the end. From the time of Sir Robert Walpole, money has seldom been worth, in England, over five per cent., and larger dividends on vested property have generally been succeeded by heavy losses, however plausible the promises and clear the statements of stockjobbers and speculators.
[Sidenote: Enlightened Policy of Walpole.]
After the explosion of the South Sea Company, Walpole became possessed of almost unlimited power. And one of the first objects to which he directed attention, after settling the finances, was the removal of petty restrictions on commerce. He abolished the export duties on one hundred and six articles of British manufacture, and allowed thirty-eight articles of raw material to be imported duty free. This regulation was made to facilitate trade with the colonies, and prevent them from manufacturing; and this regulation accomplished the end desired. Both England and the colonies were enriched. It was doubtless the true policy of British statesmen then, as now, to advance the commercial, manufacturing, and agricultural interests of Great Britain, rather than meddle with foreign wars, or seek glory on the field of battle. The principles of Sir Robert Walpole were essentially pacific; and under his administration, England made a great advance in substantial prosperity. In this policy he surpa.s.sed all the statesmen who preceded or succeeded him, and this const.i.tuted his glory and originality.
But liberal and enlightened as was the general course of Walpole, he still made blunders, and showed occasional illiberality. He caused a fine of one hundred thousand pounds to be inflicted on the Catholics, on the plea that they were a disaffected body. He persecuted Bishop Atterbury, and permitted Bolingbroke, with his restless spirit of intrigue, to return to his country, and to be reinstated in his property and t.i.tles. He flattered the d.u.c.h.ess of Kendall, the mistress of the king, and stooped to all the arts of corruption and bribery.
There never was a period of greater political corruption than during the administration of this minister. Sycophancy, meanness, and hypocrisy were resorted to by the statesmen of the age, who generally sought their own interests rather than the welfare of the nation.
There were, however, exceptions. Townsend, the great rival and coadjutor of Walpole, retired from office with an unsullied fame for integrity and disinterestedness; and Walpole, while he bribed others, did not enrich himself.