library were confiscated. Among the rest, an annuity of 200,000 livres,
(8000 pounds sterling,) on the lives of his wife and children, which
had been purchased for five millions of livres, was forfeited,
notwithstanding that a special edict, drawn up for the purpose in the
days of his prosperity, had expressly declared that it should never be
confiscated for any cause whatever. Great discontent existed among the
people that Law had been suffered to escape. The mob and the Parliament
would have been pleased to have seen him hanged. The few who had not
suffered by the commercial revolution, rejoiced that the quack had
left the country; but all those (and they were by far the most numerous
class) whose fortunes were implicated, regretted that his intimate
knowledge of the distress of the country, and of the causes that had led
to it, had not been rendered more available in discovering a remedy.
At a meeting of the Council of Finance, and the general council of the
Regency, documents were laid upon the table, from which it appeared that
the amount of notes in circulation was 2700 millions. The Regent was
called upon to explain how it happened that there was a discrepancy
between the dates at which these issues were made, and those of the
edicts by which they were authorised. He might have safely taken the
whole blame upon himself, but he preferred that an absent man should
bear a share of it, and he therefore stated that Law, upon his own
authority, had issued 1200 millions of notes at different times, and
that he (the Regent) seeing that the thing had been irrevocably done,
had screened Law, by antedating the decrees of the council, which
authorised the augmentation. It would have been more to his credit if he
had told the whole truth while he was about it, and acknowledged that
it was mainly through his extravagance and impatience that Law had
been induced to overstep the bounds of safe speculation. It was also
ascertained that the national debt, on the 1st of January, 1721,
amounted to upwards of $100 millions of livres, or more than 124,000,000
pounds sterling, the interest upon which was 3,196,000 pounds. A
commission, or visa, was forthwith appointed to examine into all the
securities of the state creditors, who were to be divided into five
classes, the first four comprising those who had purchased their
securities with real effects, and the latter comprising those who could
give no proofs that the transactions they had entered into were real and
bona fide. The securities of the latter were ordered to be destroyed,
while those of the first four classes were subjected to a most rigid and
jealous scrutiny. The result of the labours of the visa was a report,
in which they counselled the reduction of the interest upon these
securities to fifty-six millions of livres. They justified this advice
by a statement of the various acts of peculation and extortion which
they had discovered, and an edict to that effect was accordingly
published and duly registered by the parliaments of the kingdom.
Another tribunal was afterwards established, under the title of the
Chambre de l'Arsenal, which took cognizance of all the malversations
committed in the financial departments of the government during the late
unhappy period. A Master of Requests, named Falhonet, together with
the Abbe Clement, and two clerks in their employ, had been concerned
in divers acts of peculation, to the amount of upwards of a million of
livres. The first two were sentenced to be beheaded, and the latter
to be hanged; but their punishment was afterwards commuted into
imprisonment for life in the Bastile. Numerous other acts of dishonesty
were discovered, and punished by fine and imprisonment.
D'Argenson shared with Law and the Regent the unpopularity which had
alighted upon all those concerned in the Mississippi madness. He was
dismissed from his post of Chancellor, to make room for D'Aguesseau; but
he retained the title of Keeper of the Seals, and was allowed to attend
the councils whenever he pleased. He thought it better, however, to
withdraw from Paris, and live for a time a life of seclusion at his
country-seat. But he was not formed for retirement, and becoming moody
and discontented, he aggravated a disease under which he had long
laboured, and died in less than a twelvemonth. The populace of of Paris
so detested him, that they carried their hatred even to his grave.
As his funeral procession passed to the church of St. Nicholas du
Chardonneret, the burying-place of his family, it was beset by a riotous
mob, and his two sons, who were following as chief-mourners, were
obliged to drive as fast as they were able down a by-street to escape
personal violence.
As regards Law, he for some time entertained a hope that he should be
recalled to France, to aid in establishing its credit upon a firmer
basis. The death of the Regent, in 1723, who expired suddenly, as he
was sitting by the fireside conversing with his mistress, the Duchess
de Phalaris, deprived him of that hope, and he was reduced to lead
his former life of gambling. He was more than once obliged to pawn
his diamond, the sole remnant of his vast wealth, but successful play
generally enabled him to redeem it. Being persecuted by his creditors at
Rome, he proceeded to Copenhagen, where he received permission from the
English ministry to reside in his native country, his pardon for the
murder of Mr. Wilson having been sent over to him in 1719. He was
brought over in the admiral's ship, a circumstance which gave occasion
for a short debate in the House of Lords. Earl Coningsby complained that
a man, who had renounced both his country and his religion, should
have been treated with such honour, and expressed his belief that his
presence in England, at a time when the people were so bewildered by the
nefarious practices of the South Sea directors, would be attended with
no little danger. He gave notice of a motion on the subject; but it
was allowed to drop, no other member of the House having the slightest
participation in his lordship's fears. Law remained for about four years
in England, and then proceeded to Venice, where he died in 1729, in
very embarrassed circumstances. The following epitaph was written at the
time:--
"Ci git cet Ecossais celebre,
Ce calculateur sans egal,
Qui, par les regles de l'algebre,
A mis la France a l'Hopital."
His brother, William Law, who had been concerned with him in the
administration both of the Bank and the Louisiana Company, was
imprisoned in the Bastile for alleged malversation, but no guilt was
ever proved against him. He was liberated after fifteen months, and
became the founder of a family, which is still known in France under the
title of Marquises of Lauriston.
In the next chapter will be found an account of the madness which
infected the people of England at the same time, and under very similar
circumstances, but which, thanks to the energies and good sense of a
constitutional government, was attended with results far less disastrous
than those which were seen in France.
THE SOUTH SEA BUBBLE
At length corruption, like a general flood,
Did deluge all, and avarice creeping on,
Spread, like a low-born mist, and hid the sun.
Statesmen and patriots plied alike the stocks,
Peeress and butler shared alike the box;
And judges jobbed, and bishops bit the town,
And mighty dukes packed cards for half-a-crown:
Britain was sunk in lucre's sordid charms.
--Pope.
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 600,000 pounds 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
eastern coast of South America. Everybody 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 1,775,027 pounds 15 shillings 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 2,500,000
pounds 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 30,981,712 pounds, 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 stockjobbing, 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 stockjobbers.
Exchange Alley was every day blocked up by crowds, and Cornhill was
impassable for the number of carriages. Everybody 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, ["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.'"]
Then stars and garters did appear
Among the meaner rabble;
To buy and sell, to see and hear,
The Jews and Gentiles squabble.
The greatest ladies thither came,
And plied in chariots daily,
Or pawned their jewels for a sum
To venture in the Alley.
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 300 pounds for every 100 pounds 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 60 pounds each for every 100 pounds. 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.