Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
The South-Sea Bubble
At length corruption, like a general flood,
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 western 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 hundredfold in gold and silver ingots by the natives. A report, industriously spread, that Spain was willing to concede four ports, on the coasts of Chili and Peru for the purposes of traffic, increased the general confidence, and for many years the South-Sea Company's stock was in high favour.
Philip V of Spain, however, never had any intention of admitting the English to a free trade in the ports of Spanish America. Negotiations were set on foot, but their only result was the assiento contract, or the privilege of supplying the colonies with negroes for thirty years, and of sending once a year a vessel, limited both as to tonnage and value of cargo, to trade with Mexico, Peru, or Chili. The latter permission was only granted upon the hard condition, that the King of Spain should enjoy one-fourth of the profits, and a tax of five per cent on the remainder. This was a great disappointment to the Earl of Oxford and his party, who were reminded much oftener than they found agreeable of the
"Parturiunt montes, nascitur ridiculus mus."
But the public confidence in the South-Sea Company was not shaken. The Earl of Oxford declared that Spain would permit two ships, in addition to the annual ship, to carry out merchandise during the first year; and a list was published, in which all the ports and harbours of these coasts were pompously set forth as open to the trade of Great Britain. The first voyage of the annual ship was not made till the year 1717, and in the following year the trade was suppressed by the rupture with Spain.
The king's speech, at the opening of the session of 1717, made pointed allusion to the state of public credit, and recommended that proper measures should be taken to reduce the national debt. The two great monetary corporations, the South-Sea Company and the Bank of England, made proposals to parliament on the 20th of May ensuing. The South-Sea Company prayed that their capital stock of ten millions might be increased to twelve, by subscription or otherwise, and offered to accept five per cent instead of six upon the whole amount. The bank made proposals equally advantageous. The house debated for some time, and finally three acts were passed, called the South-Sea Act, the bank Act, and the General Fund Act. By the first, the proposals of the South-Sea Company were accepted, and that body held itself ready to advance the sum of two millions towards discharging the principal and interest of the debt due by the state for the four lottery funds of the ninth and tenth years of Queen Anne. By the second act, the bank received a lower rate of interest for the sum of 1,775,027l. 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 22nd of January, 1720, the House of Commons resolved itself into a committee of the whole house, to take into consideration that part of the king's speech at the opening of the session which related to the public debts, and the proposal of the South-Sea Company towards the redemption and sinking of the same. The proposal set forth at great length, and under several heads, the debts of the state, amounting to 30,981,712l., 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 2nd of February, that the proposals of the latter were most advantageous to the country. They were accordingly received, and leave was given to bring in a bill to that effect.
Exchange Alley was in a fever of excitement. The company's stock, which had been at a hundred and thirty the previous day, gradually rose to three hundred, and continued to rise with the most astonishing rapidity during the whole time that the bill in its several stages was under discussion. Mr. Walpole was almost the only statesman in the house who spoke out boldly against it. He warned them, in eloquent and solemn language, of the evils that would ensue. It countenanced, he said, "the dangerous practice of 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 stock-jobbers. 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,12*
"Then stars and garters did appear
The greatest ladies thither came,
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 everywhere. They soon received the name of Bubbles, the most appropriate that imagination could devise. The populace are often most happy in the nicknames they employ. None could be more apt than that of Bubbles. Some of them lasted for a week, or a fortnight, and were no more heard of, while others could not even live out that short span of existence. Every evening produced new schemes, and every morning new projects. The highest of the aristocracy were as eager in this hot pursuit of gain as the most plodding jobber in Cornhill. The Prince of Wales became governor of one company, and is said to have cleared 40,000l. by his speculations.13* 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 foxhunting parsons, once so common in England. The shares of this company were rapidly subscribed for. But the most absurd and preposterous of all, and which 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 2,000l. 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,
Now buried in the depths below,
Meantime, secure on Garraway cliffs,
Another fraud that was very successful was that of the "Globe Permits," as they were called. They were nothing more than square pieces of playing-cards, on which was the impression of a seal, in wax, bearing the sign of the Globe Tavern, in the neighbourhood of Exchange Alley, with the inscription of "Sail-Cloth Permits." The possessors enjoyed no other advantage from them than permission to subscribe at some future time to a new sail-cloth manufactory, projected by one who was then known to be a man of fortune, but who was afterwards involved in the peculation and punishment of the South-Sea directors. These permits sold for as much as sixty guineas in the Alley.
Persons of distinction, of both sexes, were deeply engaged in all these bubbles; those of the male sex going to taverns and coffee-houses to meet their brokers, and the ladies resorting for the same purpose to the shops of milliners and haberdashers. But it did not follow that all these people believed in the feasibility of the schemes to which they subscribed; it was enough for their purpose that their shares would, by stock-jobbing arts, be soon raised to a premium, when they got rid of them with all expedition to the really credulous. So great was the confusion of the crowd in the alley, that shares in the same bubble were known to have been sold at the same instant ten per cent higher at one end of the alley than at the other. Sensible men beheld the extraordinary infatuation of the people with sorrow and alarm. There were some both in and out of parliament who foresaw clearly the ruin that was impending. Mr. Walpole did not cease his gloomy forebodings. His fears were shared by all the thinking few, and impressed most forcibly upon the government. On the 11th of June, the day the parliament rose, the king published a proclamation, declaring that all these unlawful projects should be deemed public nuisances, and prosecuted accordingly, and forbidding any broker, under a penalty of five hundred pounds, from buying or selling any shares in them. Notwithstanding this proclamation, roguish speculators still carried them on, and the deluded people still encouraged them. On the 12th of July, an order of the Lords Justices assembled in privy council was published, dismissing all the petitions that had been presented for patents and charters, and dissolving all the bubble companies. The following copy of their lordships' order, containing a list of all these nefarious projects, will not be deemed uninteresting at the present day, when there is but too much tendency in the public mind to indulge in similar practices:
LIST OF BUBBLES.
The following Bubble Companies were by the same order declared to be illegal, and abolished accordingly:
Besides these bubbles, many others sprang up daily, in spite of the condemnation of the government and the ridicule of the still sane portion of the public. The print-shops teemed with caricatures, and the newspapers with epigrams and satires, upon the prevalent folly. An ingenious card-maker published a pack of South-Sea playing-cards, which are now extremely rare, each card containing, besides the usual figures, of a very small size, in one corner, a caricature of a bubble company, with appropriate verses underneath. One of the most famous bubbles was "Puckle's Machine Company," for discharging round and square cannon-balls and bullets, and making a total revolution in the art of war. Its pretensions to public favour were thus summed up, on the eight of spades:
"A rare invention to destroy the crowd
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
The eight of diamonds celebrated the company for the colonization of Acadia, with this doggrel:
"He that is rich and wants to fool away
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 3rd of June, that the stock fell at once from eight hundred and ninety to six hundred and forty. The directors were alarmed, and gave their agents orders to buy. Their efforts succeeded. Towards evening confidence was restored, and the stock advanced to seven hundred and fifty. It continued at this price, with some slight fluctuation, until the company closed their books on the 22nd of June.
It would be needless and uninteresting to detail the various arts employed by the directors to keep up the price of stock. It will be sufficient to state that it finally rose to one thousand per cent. It was quoted at this price in the commencement of August. The bubble was then full-blown, and began to quiver and shake, preparatory to its bursting.
Many of the government annuitants expressed dissatisfaction against the directors. They accused them of partiality in making out the lists for shares in each subscription. Further uneasiness was occasioned by its being generally known that Sir John Blunt, the chairman, and some others, had sold out. During the whole of the month of August the stock fell, and on the 2nd of September it was quoted at seven hundred only.
The state of things now became alarming. To prevent, if possible, the utter extinction of public confidence in their proceedings, the directors summoned a general court of the whole corporation, to meet in Merchant Tailors' Hall on the 8th of September. By nine o'clock in the morning, the room was filled to suffocation; Cheapside was blocked up by a crowd unable to gain admittance, and the greatest excitement prevailed. The directors and their friends mustered in great numbers. Sir John Fellowes, the sub-governor, was called to the chair. He acquainted the assembly with the cause of their meeting; read to them the several resolutions of the court of directors, and gave them an account of their proceedings; of the taking in the redeemable and unredeemable funds, and of the subscriptions in money. Mr. Secretary Craggs then made a short speech, wherein he commended the conduct of the directors, and urged that nothing could more effectually contribute to the bringing this scheme to perfection than union among themselves. He concluded with a motion for thanking the court of directors for their prudent and skilful management, and for desiring them to proceed in such manner as they should think most proper for the interest and advantage of the corporation. Mr. Hungerford, who had rendered himself very conspicuous in the House of Commons for his zeal in behalf of the South-Sea company, and who was shrewdly suspected to have been a considerable gainer by knowing the right time to sell out, was very magniloquent on this occasion. He said that he had seen the rise and fall, the decay and resurrection of many communities of this nature, but that, in his opinion, none had ever performed such wonderful things in so short a time as the South-Sea company. They had done more than the crown, the pulpit, or the bench could do. They had reconciled all parties in one common interest; they had laid asleep, if not wholly extinguished, all the domestic jars and animosities of the nation. By the rise of their stock, monied men had vastly increased their fortunes; country gentlemen had seen the value of their lands doubled and trebled in their hands. They had at the same time done good to the Church, not a few of the reverend clergy having got great sums by the project. In short, they had enriched the whole nation, and he hoped they had not forgotten themselves. There was some hissing at the latter part of this speech, which for the extravagance of its eulogy was not far removed from satire; but the directors and their friends, and all the winners in the room, applauded vehemently. The Duke of Portland spoke in a similar strain, and expressed his great wonder why 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.n 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. 14*
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—
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 writer15* is quite wrong, when he says, "that such an era as this is the most unfavourable for a historian; that no reader of sentiment and imagination can be entertained or interested by a detail of transactions such as these, which admit of no warmth, no colouring, no embellishment; a detail of which only serves to exhibit an inanimate picture of tasteless vice and mean degeneracy." On the contrary,—and Smollett might have discovered it, if he had been in the humour—the subject is capable of inspiring as much interest as even a novelist can desire. Is there no warmth in the despair of a plundered people?—no life and animation in the picture which might be drawn of the woes of hundreds of impoverished and ruined families? of the wealthy of yesterday become the beggars of to-day? of the powerful and influential changed into exiles and outcasts, and the voice of self-reproach and imprecation resounding from every corner of the land? Is it a dull or uninstructive picture to see a whole people shaking suddenly off the trammels of reason, and running wild after a golden vision, refusing obstinately to believe that it is not real, till, like a deluded hind running after an ignis fatuus, they are plunged into a quagmire? But in this false spirit has history too often been written. The intrigues of unworthy courtiers to gain the favour of still more unworthy kings; or the records of murderous battles and sieges have been dilated on, and told over and over again, with all the eloquence of style and all the charms of fancy; while the circumstances which have most deeply affected the morals and welfare of the people have been passed over with but slight notice as dry and dull, and capable of neither warmth nor colouring.
During the progress of this famous bubble, England presented a singular spectacle. The public mind was in a state of unwholesome fermentation. Men were no longer satisfied with the slow but sure profits of cautious industry. The hope of boundless wealth for the morrow made them heedless and extravagant for to-day. A luxury, till then unheard-of, was introduced, bringing in its train a corresponding laxity of morals. The 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 re-establishment of public credit than a law to prevent this infamous practice. Mr. Walpole then rose, and said, that "as he had previously hinted, he had spent some time upon a scheme for restoring public credit, but that the execution of it depending upon a position which had been laid down as fundamental, he thought it proper, before he opened out his scheme, to be informed whether he might rely upon that foundation. It was, whether the subscription of public debts and encumbrances, money subscriptions, and other contracts, made with the South-Sea company should remain in the present state?" This question occasioned an animated debate. It was finally agreed, by a majority of 259 against 117, that all these contracts should remain in their present state, unless altered for the relief of the proprietors by a general court of the South-Sea company, or set aside by due course of law. On the following day Mr. Walpole laid before a committee of the whole house his scheme for the restoration of public credit, which was, in substance, to ingraft nine millions of South-Sea stock into the Bank of England, and the same sum into the East India company, upon certain conditions. The plan was favourably received by the house. After some few objections, it was ordered that proposals should be received from the two great corporations. They were both unwilling to lend their aid, and the plan met with a warm but fruitless opposition at the general courts summoned for the purpose of deliberating upon it. They, however, ultimately agreed upon the terms on which they would consent to circulate the South-Sea bonds, and their report, being presented to the committee, a bill was brought in, under the superintendence of Mr. Walpole, and safely carried through both Houses of Parliament.
A bill was at the same time brought in, for restraining the South-Sea directors, governor, sub-governor, treasurer, cashier, and clerks from leaving the kingdom for a twelvemonth, and for discovering their estates and effects, and preventing them from transporting or alienating the same. All the most influential members of the house supported the bill. Mr. Shippen, seeing Mr. Secretary Craggs in his place, and believing the injurious rumours that were afloat of that minister's conduct in the South-Sea business, determined to touch him to the quick. He said, he was glad to see a British House of Commons resuming its pristine vigour and spirit, and acting with so much unanimity for the public good. It was necessary to secure the persons and estates of the South-Sea directors and their officers; "but," he added, looking fixedly at Mr. Craggs as he spoke, "there were other men in high station, whom, in time, he would not be afraid to name, who were no less guilty than the directors." Mr. Craggs arose in great wrath, and said, that if the innuendo were directed against him, he was ready to give satisfaction to any man who questioned him, either in the House or out of it. Loud cries of order immediately arose on every side. In the midst of the uproar Lord Molesworth got up, and expressed his wonder at the boldness of Mr. Craggs in challenging the whole House of Commons. He, Lord Molesworth, though somewhat old, past sixty, would answer Mr. Craggs whatever he had to say in the House, and he trusted there were plenty of young men beside him, who would not be afraid to look Mr. Craggs in the face, out of the House. The cries of order again resounded from every side; the members arose simultaneously; 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, front Coxe's Walpole, that the very name of a South-Sea director was thought to be synonymous with every species of fraud and villany. Petitions from counties, cities, and boroughs, in all parts of the kingdom, were presented, crying for the justice due to an injured nation and the punishment of the villanous peculators. Those moderate men, who would not go to extreme lengths, even in the punishment of the guilty, were accused of being accomplices, were exposed to repeated insults and virulent invectives, and devoted, both in anonymous letters and public writings, to the speedy vengeance of an injured people. The accusations against Mr. Aislabie, Chancellor of the Exchequer, and Mr. Craggs, another member of the ministry, were so loud, that the House of Lords resolved to proceed at once into the investigation concerning them. It was ordered, on the 21st of January, that all brokers concerned in the South-Sea scheme should lay before the house an account of the stock or subscriptions bought or sold by them for any of the officers of the Treasury or Exchequer, or in trust for any of them, since Michaelmas 1719. When this account was delivered, it appeared that large quantities of stock had been transferred to the use of Mr. Aislabie. Five of the South-Sea directors, ineluding Mr. Edward Gibbon, the grandfather of the celebrated historian, were ordered into the custody of the black rod. Upon a motion made by Earl Stanhope, it was unanimously resolved, that the taking in or giving credit for stock without a valuable consideration actually paid or sufficiently secured; or the purchasing stock by any director or agent of the South-Sea company, for the use or benefit of any member of the administration, or any member of either House of Parliament, during such time as the South-Sea bill was yet pending in parliament, was a notorious and dangerous corruption. Another resolution was passed a few days afterwards, to the effect that several of the directors and officers of the company having, in a clandestine manner, sold their own stock to the company, had been guilty of a notorious fraud and breach of trust, and had thereby mainly caused the unhappy turn of affairs that had so much affected public credit. Mr. Aislabie resigned his office as Chancellor of the Exchequer, and absented himself from parliament until the formal inquiry into his individual guilt was brought under the consideration of the legislature.
In the mean time, Knight, the treasurer of the company, and who was 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 upon the table. General Ross, one of the members of the Committee of Secrecy, acquainted them that they had already discovered a train of the deepest villany and fraud that hell had ever contrived to ruin a nation, which in due time they would lay before the House. In the mean time, in order to a further discovery, the Committee thought it highly necessary to secure the persons of some of the directors and principal South-Sea officers, and to seize their papers. A motion to this effect having been made, was carried unanimously. Sir Robert Chaplin, Sir Theodore Janssen, Mr. Sawbridge, and Mr. F. Eyles, members of the House, and directors of the South-Sea company, were summoned to appear in their places, and answer for their corrupt practices. Sir Theodore Janssen and Mr. Sawbridge answered to their names, and endeavoured to exculpate themselves. The House heard them patiently, and then ordered them to withdraw. A motion was then made, and carried nemine contradicente, that they had been guilty of a notorious breach of trust—had occasioned much loss to great numbers of his majesty's subjects, and had highly prejudiced the public credit. It was then ordered that, for their offence, they should be expelled the House, and taken into the custody of the sergeant-at-arms. Sir Robert Chaplin and Mr. Eyles, attending in their places four days afterwards, were also expelled the House. It was resolved at the same time to address the king to give directions to his ministers at foreign courts to make application for Knight, that he might be delivered up to the English authorities, in 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.16* 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 at various days, and at various prices, from 150 to 325 per cent. Being surprised to see so large an account disposed of, at a time when the company were not empowered to increase their capital, the Committee determined to investigate most carefully the whole transaction. The governor, sub-governor, and several directors were brought before them, and examined rigidly. They found that, at the time these entries were made, the company was not in possession of such a quantity of stock, having in their own right only a small quantity, not exceeding thirty thousand pounds at the utmost. Pursuing the inquiry, they found that this amount of stock was to be esteemed as taken in or holden by the company for the benefit of the pretended purchasers, although no mutual agreement was made for its delivery or acceptance at any certain time. No money was paid down, nor any deposit or security whatever given to the company by the supposed purchasers; so that if the stock had fallen, as might have been expected, had the act not passed, they would have sustained no loss. If, on the contrary, the price of stock advanced (as it actually did by the success of the scheme), the difference by the advanced price was to be made good to them. Accordingly, after the passing of the act, the account of stock was made up and adjusted with Mr. Knight, and the pretended purchasers were paid the difference out of the company's cash. This fictitious stock, which had been chiefly at the disposal of Sir John Blunt, Mr. Gibbon, and Mr. Knight, was distributed among several members of the government and their connexions, by way of bribe, to facilitate the passing of the bill. To the Earl of Sunderland was assigned 50,000l. 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 to the stock that had been bought for him by Turner, Caswall, and Co., he knew nothing about it. Whatever had been done in that matter was done without his authority, and he could not be responsible for it. Turner and Co. took the latter charge upon themselves; but it was notorious to every unbiassed and unprejudiced person that Mr. Stanhope was a gainer of the 250,000l. 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 disturbances took place.
This was the day on which Mr. Craggs the elder expired. The morrow had been appointed for the consideration of his case. It was very generally believed that he had poisoned himself. It appeared, however, that grief for the loss of his son, one of the secretaries of the Treasury, who had died five weeks previously of the small-pox, preyed much on his mind. For this son, dearly beloved, he had been amassing vast heaps of riches: he had been getting money, but not honestly; and he for whose sake he had bartered his honour and sullied his fame, was now no more. The dread of further exposure increased his trouble of mind, and ultimately brought on an apoplectic fit, in which he expired. He left a fortune of a million and a half, which was afterwards confiscated for the benefit of the sufferers by the unhappy delusion he had been so mainly instrumental in raising.
One by one the case of every director of the company was taken into consideration. A sum amounting to two millions and fourteen thousand pounds was confiscated from their estates towards repairing the mischief they had done, each man being allowed a certain residue, in proportion to his conduct and circumstances, with which he might begin the world anew. Sir John Blunt was only allowed 5,000l. 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 of audi alteram partem, his opinion is entitled to consideration. "In the year 1716," he says, "my grandfather was elected one of the directors of the South-Sea company, and his books exhibited the proof that before his acceptance of that fatal office, he had acquired an independent fortune of 60,000l. 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.17*
Notes for this chapter
A South Sea Ballad; or, Merry Remarks upon Exchange Alley Bubbles. To a new tune, called "The Grand Elixir; or, the Philosopher's Stone Discovered."
Coxe's Walpole, Correspondence between Mr. Secretary Craggs and Earl Stanhope.
Gay (the poet), in that disastrous year, had a present from young Craggs of some South-Sea stock, and once supposed himself to be master of twenty thousand pounds. His friends persuaded him to sell his share, but he dreamed of dignity and splendour, and could not bear to obstruct his own fortune. He was then importuned to sell as much as would purchase a hundred a year for life, "which," says Fenton, "will make you sure of a clean shirt and a shoulder of mutton every day." This counsel was rejected; the profit and principal were lost, and Gay sunk under the calamity so low that his life became in danger.—Johnson's Lives of the Poets.
'The wretch he starres, and piously denies.'...
Much-injur'd Blunt! why bears he Britain's hate?
A wizard told him in these words our fate:
'At length corruption, like a gen'ral flood,
So long by watchful ministers withstood,
Shall deluge all; and av'rice, creeping on,
Spread like a low-born mist, and blot the sun;
Statesman and patriot ply alike the stocks,
Peeress and butler share alike the box,
And judges job, and bishops bite the Town,
And mighty dukes pack cards for half-a-crown:
See Britain sunk in Lucre's sordid charms
And France reveng'd of Anne's and Edward's arms!'
'Twas no court-badge, great Scriv'ner! fir'd thy brain,
Nor lordly luxury, nor city gain:
No, 'twas thy righteous end, asham'd to see
Senates degen'rate, patriots disagree,
And nobly wishing party-rage to cease,
To buy both sides, and give thy country peace."
Pope's Epistle to Allen Lord Bathurst.
The South-Sea project remained until 1845 the greatest example in British history of the infatuation of the people for commercial gambling. The first edition of these volumes was published some time before the outbreak of the Great Railway Mania of that and the following year. .
End of Notes
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