THE SOUTH SEA BUBBLE AND THE BIRTH OF THE ROYAL EXCHANGE ASSURANCE
CORPORATION.
To get rich quick in the shortest possible space of time with the least
possible expenditure of effort is a natural ambition. To a man we want
to acquire riches, and at all events when we are young we encourage
a secret hope that we shall wake up on some glorious morning to find
we have achieved them. So much of honourable ambition presumes wealth
as its starting-point. With the most of us, however, the hope is kept
secret--a dream to be played with rather than a definite project to be
realised. But every now and then the hope breaks its bounds and spreads
with the rapidity and the violence of a contagion, from man to man,
and from woman to woman. There have been several periods during which
the contagion has raged. Many will remember the autumn of the year
which ended with the Jameson Raid. In those months women were almost
as conspicuous as men in Throgmorton Street. Dealers in South African
securities would buy in the morning and sell in the afternoon and put
any sum up to £10,000 in their pockets as a consequence. But the fever
has never exhibited itself in so virulent and blatant a degree as
during the second decade of the 18th Century--a decade made famous by
the South Sea Bubble.
It is strange to realise that the man, who brought all that hubbub of
fashion back to the neighbourhood of the Royal Exchange, was a tall
and ungainly pockmarked Scotchman, Law by name--at one time lying in a
London Prison under sentence of death for murder. Law escaped to Paris
and there founded the Mississippi Company, which, during the first
years of the century sent France wild with a frenzy of speculation.
Some southerly wind blew the madness over to England, and in 1711
Robert Harley, Earl of Oxford, founded the South Sea Company, to
take over England’s Floating Debt of ten million pounds. The Government
guaranteed six per cent. for a term of years, and the Company was given
the monopoly of trade with the Southern Atlantic Coasts of America. One
or two solid brains, such as Sir Robert Walpole, stood out against the
scheme, but speculation was in the air and they had no following.
[Illustration: SOUTH SEA BUBBLE BROADSHEET. 1720.]
It must be conceded that the name of the company was in itself a stroke
of genius. The South Seas! The words have from the earliest days of
Elizabeth had some queer romantic appeal to the people of England.
Read “Hakluyt’s Voyages,” and you cannot but rise from your reading
with a recognition that, beyond all the visions of gold and jewels and
wealth which they may suggest, the South Seas have their own particular
call. Even that pedestrian century--the 18th--could not be deaf to it;
and there never was an idea so sure to arouse your imagination or to
loosen your purse-strings as that of adventure in the South Seas. Your
adventure might be vicarious; it might only be visible to you in the
swelling of your banking account, but you had a hand in the voyage--in
a sense you sailed those sunlit and wind-ruffled waters.
It seemed as if in response to the call, Change Alley had become the
centre of England. Sedan chairs and coaches so jostled one another
in the streets which surrounded it that a man on foot was known to
have taken one good hour before he could cross the roadway. Women
filled that narrow alley with their hoops, and so loud was the noise
between the walls that the stock would be at one price at one end and
at another price at the other and no one in the middle would know the
difference.
“Then stars and garters did appear
Among the meaner rabble;
To buy and sell, to see and hear
The Jews and Gentiles squabble.
The greater ladies thither came,
And plied in chariots daily,
Or pawned their jewels for a sum
To venture in the Alley.”
All were for getting rich quickly. Life was costly--in some respects
more costly comparatively than it is to-day. A fine gentleman would
pay £126 for a suit of clothes, and that sum left out of account his
silk stockings and his shoe buckles, his embroidered gloves and his
clouded cane. Lord Mayor Sawbridge was stopped by highwaymen on Turnham
Green, when he was returning home from Kew, and sent back to the
Mansion House as naked as on the day when he was born--of so much value
were the fine clothes he wore. Money was the great need and throughout
the day such a roar arose from Exchange Alley as must have set the old
Grasshopper trembling and quivering on the top of the Exchange.
In 1720, George the First proposed that the South Sea Company should
take over not merely the floating but the entire debt of England,
which at that time amounted to £31,000,000. Even the staid Bank of
England could stand it no longer. It came in with a proposal to take
over the debt itself in the place of this upstart Company. But the
upstart Company had several notable people behind it, amongst them the
famous--or shall we say infamous?--Countess Von Platen; and the South
Sea Company carried the day against the Bank of England. The shares
jumped from 130 to 300. The King’s proposal was debated for two months
in the House of Commons and for forty-eight hours in the House of
Lords, and on April 7th of that year the Bill became law.
Strangely enough, the South Sea Stock immediately fell. The Directors
asked for a million more capital, offering £300 for £100. They got it,
and they got more. Before Midsummer, the stock had risen to 800 per
cent. The satirists, as you can imagine, got to work, but what did
they matter? Satire, from the days of Aristophanes, has never stopped
a rush. It will hold up this or that person, this or that group of
people, to the ridicule of future generations, but it has no check
upon them while they live. Neither Juvenal nor Molière deterred. The
“Precieuses Ridicules” died not of satire but of their own inanition.
The satirist and his fellows might rave as they liked against Change
Alley and the South Seas but not one sedan chair dropped out of the
crowd in consequence.
It was not everybody, however, who was able to get near enough, or, if
he did get near enough, to purchase the coveted stock. Other companies,
therefore, with other projects no more unreasonable, sprang up in the
same neighbourhood. The advertised capital of these companies ran, as
a rule, into millions. And why not? The public was gullible. It was
a matter of prestige--of the appeal rather than of actual cash. The
nominal capital of the various undertakings floated during the years
when the South Sea Company was at its zenith amounted to five times the
entire currency of England and Europe. No one asked any questions--all
were too anxious to buy.
Here are a few of the proposals: a scheme for furnishing funerals to
any part of Great Britain; another for making looking glasses and coach
glasses, with a capital of £2,000,000; a third for the transmutation
of quicksilver into malleable fine metal; a fourth for ensuring and
increasing children’s fortunes; a fifth for building and rebuilding
houses throughout all England, with a capital of £3,000,000 (this, by
the way, is a scheme which might have a chance to-day). Yet a further
philanthropic set of gentlemen floated a scheme for supplying the
town of Deal with fresh water. Another set, this time more ingenious
than philanthropic, proposed to make deal boards out of sawdust. And
all these schemes obtained their votaries. The cry went up “Give us
something to buy,” and the response was not inadequate.
Two schemes stand out especially through the grandeur of their
simplicity. The longer one lives, the more clearly it is proved to one
that the old and simple dodges never fail. If you want to practice
that amiable form of robbery known as the confidence trick, be sure to
practice it in its most primæval form. An old man named Le Brun knew
the ropes. He had been suitably educated, for as a boy he had sailed
with Sir Henry Morgan when Morgan devastated Panama. He had been with
Patterson in Darien. He had owned a privateer himself in the days when
a privateer was a polite name for a pirate, but like the men of his
class he had lived like a fighting cock when he had the money, and in
his old age he was poor. The fame of Law in Paris attracted him over
the Channel. The fame of the South Sea Company and the doings in Change
Alley brought him hot-foot back again. He was, as it were, in his own
country. He set out a wonderful project. You had only to possess £5
to reap the full benefit of it. He had an office in Change Alley. It
was called simply, broadly, sympathetically--“Office of Insurance and
Annuity for Everybody.” “Anybody,” Mr. Le Brun announced, “who paid him
five pounds was to be assured of receiving a life income of £100 per
annum, as soon as a sufficient number had subscribed!” A great number
subscribed--but not a sufficient number. The number had to be ever so
great before Mr. Le Brun could be able to put his wonderful scheme into
operation.
A still simpler device was imagined by a gentleman whose name (alas!)
is not known. He propounded a company for carrying on an undertaking
of great advantage, “but nobody to know what it is.” The capital of
this singular undertaking was to be a mere fleabite--half a million
pounds in five thousand £100 shares. But--and here the anonymous
benefactor showed his discretion--you had only to deposit £2 a share
and you obtained by the mere fact of that deposit £100 a year on each
share. This worthy person opened his office in the morning. By the time
business in Change Alley ceased and the ladies and gentlemen retired
to the lighted candles of the West End, he had secured deposits to the
tune of £2,000. The next morning the office was closed and it was never
opened again. These schemes were iridescent as the mayfly, and had just
as long a life. They sparkled and glinted in the sunlight through a
day, and the next morning they were not.
After the shares of the South Sea Company had risen to 800 per cent.,
a good many prudent people began to realise their fortunes, and stocks
accordingly fell. The Directors asked for more money, obtained it, and
the shares in August had risen to no less than a thousand per cent. But
the end was near, and in the month of September the Bubble burst. A
member of Parliament of that day wrote to Lord Chancellor Middleton:
“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.” The Bank of England made an
effort. It asked for a subscription of three million pounds for the
restoration of credit, but did not get it. The South Sea Stock fell to
135, and bankers and goldsmiths who had lent money on South Sea Bonds
were compelled to fly the country. Parliament was summoned to meet,
and George the First returned post haste from Hanover. An enquiry was
instituted into the management of the Company and a series of frauds
was discovered in which members of the Government were shamefully
involved. Mr. Secretary Craggs and Mr. Aislabie, the Chancellor of
the Exchequer, went down with a crash. People did not exact from
the Ministers of the Crown in those days the same high standard of
propriety which is demanded to-day. But the scandal in this case
was too great for extenuation. Aislabie went to prison, and bonfires
were lighted in the London streets on the day he was sent there. Mr.
Secretary Craggs no doubt would have gone on the same road but his son,
for whose sake, it was currently said, he had amassed a million and a
half out of the Bubble, died suddenly, and the father was stricken with
apoplexy. The Countess Von Platen, with her two nieces, was proved to
have been given £20,000 worth of fictitious stock as an inducement to
her to use her influence to push the Bill through Parliament. There
were reasons why action could not be taken against her. The curious may
turn to Thackeray’s wonderful picture of the Court of Hanover in the
“Four Georges,” where he will be rewarded by one of the most startling
and dramatic stories which history has ever had to tell.
In the midst of these times, inauspicious for solid business proposals,
if ever times were, the Royal Exchange Assurance Corporation was
born. A Mr. Case Billingsley, of the firm of Bradley and Billingsley,
Solicitors, himself a member of the Mercers’ Company, proposed a
scheme for marine insurance, and gave to it the title of the “Public
Assurance Office.” He opened a list at the Mercers’ Hall on the 12th
August, 1717, and asked for a subscription of £1,250,000, of which
£100,000 was to be paid up. The list was closed in January of the
following year. But during the months when the list was open, the
proposer of a rival scheme, Sir John Williams, amalgamated with him.
The list being closed, Case Billingsley applied to the Attorney General
for a Charter. A Charter was refused, although in this case Sir Robert
Walpole supported it; Billingsley had moreover the support of Lord
Onslow, a member of the Government, and of Lord Chetwynd, who was
interested in a similar scheme. A good many people did not look further
than the end of their noses. Lady Cowper, the wife of Lord Chancellor
Cowper, frankly wrote of both Onslow’s and Chetwynd’s proposals as
“Bubbles,” and stated that they were on the same plane as the South Sea
Company--frauds upon the public--no more, no less.
Billingsley, however, and his Directors did not lie down under the
refusal. They cast about and bought up for a song an old Charter of
Queen Elizabeth’s time, which had nothing whatever to do with Assurance
in any form. It was a Charter of the Mines Royal, Mineral and Battery
Works, which in itself was an amalgamation dating back three years.
Under this Charter, with its curious coat of arms of a miner working
by candle light and extracting from the earth a veritable sleet of
golden drops, the Billingsley Assurance Company set up to practice
Marine Insurance. From the outset it is clear that the Company did a
profitable business, for it declared, and so far as we know paid, a
dividend in 1719.
It did not, however, pursue its affairs without opposition. Petitions
were presented against the Company by private underwriters who foresaw
ruin ahead of them, on the ground that it was doing business which the
Charter did not entitle it to do. It is impossible to say what might
have happened to this Company had not some ingenious mind amongst its
Directors recognised, or had not some hint been given by one of His
Majesty’s Ministers, that King George’s Civil List was short of six
hundred thousand pounds. The two Insurance Companies--that fathered
by Lord Chetwynd and now known as the “London Assurance Corporation,”
and the “Royal Exchange Assurance Corporation,” which was covered by
the wing of Lord Onslow--proposed to make good this deficiency in
return for their Charters. Accordingly in the year 1720, on May 4th,
King George recommended his faithful Commons to grant the requests of
these Corporations, and the Bill conceding them their Charters received
the Royal Assent on June 10th. It was after the Charter was granted
that the Royal Exchange Assurance Corporation took the title which it
has since retained. Billingsley was, as we have said, a member of the
Mercers’ Company. He had established the offices of the Corporation in
the Royal Exchange, and no name could have been more suitable.
But it is to be observed that this was the year during which the South
Sea Bubble swelled and burst. The Royal Exchange Assurance Corporation
failed to fulfil the conditions of its Charter almost as soon as it had
received it. The Corporation was organised on a sound financial basis,
for in 1720, it had a surplus of £14,000 odd, after all obligations had
been discharged. But it owned stock in the South Sea Company, and when
that Company crumbled and all credit was shaken to its foundations,
the Royal Exchange Assurance Corporation passed through a troublous
time. It declared a dividend, but it could not pay it, and by September
of that year it was short of two instalments of £50,000 each, which
it owed to the Civil List. A subsequent Act of Parliament, however,
relieved the Royal Exchange Assurance Corporation and the London
Assurance Corporation of their liabilities in this direction, after
they had paid between them something like a quarter of a million.
The subsequent history of the Royal Exchange Assurance has been one
of sound business and consequent prosperity. It began with Marine
insurance and in 1721 added life and fire.