[1719-1720 A.D.] decrepit lord, or the grave of an extinct noble family; a policy very different from that glorious and enlightened nation, who made it their pride to hold out to the world illustrious examples of merited elevation: Patere honoris scirent ut cuncti viam." The opponents of the Peerage Bill did not fail to use the obvious argument, that although the prerogative of the crown might be abused by the creation of peers, as in the late reign, to secure a majority for the court, there was a greater danger in so limiting the peerage as to make the existing body what Walpole called "a compact impenetrable phalanx.' THE SOUTH SEA BUBBLE The great event of the sixth year of the reign of George I was the exciting affair of the South Sea scheme - an event upon which, after the lapse of nearly two hundred years, we may still look with greater interest than upon the treaties and the wars of which Carlyled has said, with some truth, that they are to us as the "mere bubblings up of the general putrid fermentation of the then political world." Few people of that time clearly understood what this famous South Sea project meant; and it is somewhat difficult to make it intelligible now. In the infant days of the national debt the great terror of statesmen was its increase and duration. At the accession of Queen Anne, the debt amounted to sixteen millions; at her death it had reached fifty-two millions. In 1711 there was a floating debt of about ten millions. Harley, then lord-treasurer, proposed to create a fund for that sum; and to secure the payment of interest, by making certain duties of customs permanent. Capitalists who held debentures were to become shareholders in a company incorporated for the purpose of carrying on a monopoly of trade to the Spanish coasts of South America; making the new fund a part of their capital stock. Thus was established the South Sea Company. When the Peace of Utrecht was completed, Spain refused to permit any approach to the free trade which would have made such a commercial company of value. One ship only was allowed to be sent annually. A few factories were established, and the one ship sailed in 1717. Alberoni broke the treaty, and seized the British goods. But the company had other means for the employment of capital; and many opulent persons were amongst its shareholders and directors. At the opening of the session of parliament in November, 1719, the king said to the commons, "I must desire you to turn your thoughts to all proper means for lessening the debts of the nation." In January, 1720, a proposal was read to the house of commons from the South Sea Company, in which it was set forth that if certain public debts and annuities were made part of the capital stock of the company, it would greatly contribute to that most desirable end adverted to in his majesty's speech. Before that speech was delivered Sir John Blunt, a South Sea director, had been in communication with the ministers, who gave a favourable ear to his projects. There was an annual charge upon the revenue of eight hundred thousand pounds, for irredeemable annuities granted in the reigns of William and Anne. To buy up these annuities was the advantageous point in the proposal of the company. The house of commons agreed in the necessity of reducing the public debts. "Till this was done," said Mr. Brodrick, who moved that other companies should be allowed to compete, "we could not, properly speaking, call ourselves a nation." The Bank of England accordingly sent in a rival proposal; [1720 A.D.] and the two companies went on outbidding each other, till the South Sea Company's large offer to provide seven millions and a half to buy up the annuities was accepted. The annuitants were not compelled to exchange their government security for the company's stock; and the chief doubt seemed to be whether the greater number would consent to this transfer. Although the terms offered by the company to the annuitants were not encouraging, there was a rush to accept them. To hold stock in a company whose exclusive trading privileges might realise that "potentiality of wealth which is never "beyond the dreams of avarice," was a far grander thing than to receive seven, eight, or even nine per cent. upon annuities. Within six days of the announcement of the company's terms, two-thirds of the annuitants had exchanged their certain income for the boundless imaginary riches of South America. Upon this foundation was built the most enormous fabric of national delusion that was ever raised amongst an industrious, thrifty, and prudent people. It had been long manifest that there was a great amount of superfluous capital, especially of the hordings of the middle classes, which wanted opportunities for employment. To obtain interest for small sums was scarcely practicable for the mass of those who were enabled to keep their expenditure below their incomes. Before the beginning of the century, companies, more or less safe, had been formed to meet this desire for investments. In spite of the long wars of the reigns of William and Anne, and the jacobite plots and rebellions which threatened the Protestant succession, the country was going steadily forward in a course of prosperity. Wherever there is superfluous wealth, beyond the ordinary demands of industry for capital, there will be always projectors ready to suggest modes for its co-operative uses. In the summer of that year, the South Sea year, "the dog-star rages" over Exchange alley with a fury that has never been equalled; because no capitalist, even to the possessor of a single shilling, was then too humble not to believe that the road to riches was open before him. Subscribers to projects recommended by one or more persons of known credit," were only required to advance ten shillings per cent. A shilling, and even sixpence per cent. was enough to secure the receipt for a share in the more doubtful undertakings. Shares of every sort were at a premium, unless in cases where the office that was opened at noon on one day was found closed on the next, and the shillings and sixpences had vanished with the subscription books. But the great impulse to the frantic stock-jobbing of that summer was the sudden and enormous rise in the value of South Sea stock. In July, Secretary Craggs wrote to Earl Stanhope, who was abroad with the king, "it is impossible to tell you what a rage prevails here for South Sea subscriptions at any price. The crowds of those that possess the redeemable annuities is so great, that the bank, who are obliged to take them in, has been forced to set tables with clerks in the streets." The hundred-pound shares of the South Sea Company went up to a thousand pounds in August. The shares of the Bank of England and of the East India Company were transferred at an enormous advance. Smaller companies of every character-water companies, fishery companies, companies for various manufactures, companies for settlements and foreign trade-infinite varieties, down to companies for fatting hogs and importing jackasses from Spain-rushed into the market amidst the universal cry for shares and more shares. The directors of the South Sea Company opened a second, a third, and a fourth subscription. They boldly proclaimed that after Christmas their annual dividend should not fall short of fifty per cent. upon their £100 shares. The rivalry of the [1720 A.D.] legion of projects of that season was odious to these great lords of the money market. The government itself began to think that some fearful end would come to the popular delusion; and a royal proclamation was issued against "mischievous and dangerous undertakings, especially the presuming to act as a corporate body, or raising stocks or shares without legal authority." It was calculated that the value of the stock of all the companies, with corporate authority or no authority, amounted at the current prices to five hundred millions sterling; being five times as much as the circulating medium of Europe, and twice as much as the fee simple of all the land of the kingdom. The attempt of the South Sea Company to lessen the number of their competitors was the prelude to their own fall. At their instance, writs of scire jacias were issued, on the 18th of August, against four companies; and the subscribers to these, and to all other projects not legalised, were ordered to be prosecuted by the officers of the crown. A panic ensued. In a day or two, the stocks of all the companies not incorporated rapidly fell; and with the downward rush went down every description of stock. Before August, knowing and cautious holders of South Sea stock began to sell out. Walpole, who had originally opposed the scheme, did not carry his opposition to the extreme of neglecting his opportunity of largely adding to his fortune, by investing at the proper time, and selling out at the proper time. The earl of Pembroke applied to Walpole for his advice as to the great question of selling when the shares were at their culminating point. The adroit financier coolly answered: "I will only tell you what I have done myself. I have just sold out at £1,000 per cent., and I am fully satisfied." By the middle of September holders of South Sea stock were crowding the Exchange, not as eager buyers, but as more eager sellers. The stock was at 850 on the 18th of August; in a month it had fallen to 410. Mr. Brodrick, on the 13th of September, writes that the most considerable men of the company, "with their fast friends, the tories, jacobites, and papists," had drawn out; "securing themselves by the losses of the deluded thoughtless numbers, whose understandings were overruled by avarice, and hopes of making mountains of mole-hills. Thousands of families will be reduced to beggary. The consternation is inexpressible; the rage beyond expression; and the case is so desperate, that I do not see any plan or scheme for averting the blow." On the 29th of September, South Sea stock had fallen to 175. This greatest of bubbles had burst. Many persons of rank and station were not so prudent as Walpole and the earl of Pembroke had been. The duke of Portland, Lord Lonsdale, and Lord Irwin were provided with colonial governments to enable them to live. Merchants, lawyers, clergy, physicians passed from their dream of fabulous wealth and from their wonted comforts into poverty; some "died of broken hearts; others withdrew to remote parts of the world, and never returned." It has been observed by Craiki that "the calamitous effects of the madness were rather individual and immediate, than permanent or general. There was little, if any, absolute destruction of capital. The whole mischief consisted in a most quick and violent shifting of property from one hand to another." But the derangement of the ordinary course of industry was to be added to this shifting of property. Serious as was this temporary evil; furious as it made the sufferers in their reproaches against every one but themselves; eager as it rendered the legislature for confiscation of the property of the South Sea directors, the national credit was not permanently impaired by the infatuation which produced so much private misery. In this respect, the issue of the South Sea scheme was essentially different from the Mississippi scheme of [1721-1722 A.D.] John Law in France, which also exploded in that fatal year for projectors; producing there what was equivalent to a national bankruptcy. When the South Sea crash came, there was an alarm for its public consequences. But Walpole, who had again joined the government, though in a subordinate office, applied his great financial abilities to avert the difficulties which this convulsion might occasion to the state; and instead of joining the first ery for vengeance upon the South Sea directors, he calmly said in parliament that if London were on fire wise men would endeavour to extinguish the flames before they sought for the incendiaries. When the king opened the session on the 8th of December, the royal speech recommended measures "to restore the national credit." Walpole was regarded by all parties as the man to effect this. WALPOLE TO THE RESCUE (1721-1722 A.D.) To endeavour to equalise, to the most inconsiderable extent, the losses and gains of individuals by the extravagant rise and sudden depression of South Sea stock, would have been a task far beyond the province of any minister of state. The financial abilities of Walpole were necessarily directed to the very difficult labour of disentangling the government from the embarrassments of the South Sea Company. The English ministry had never attempted to sustain the value of the company's shares by arbitrary edicts; or to interfere with their fall by regulations that were based upon other principles than the great natural laws by which the money market, like every other market, must be governed. The French ministry, when the scheme of Law for relieving its exhausted finances by a paper currency, based on the imaginary riches of Louisiana, was in the course of breaking down, gave its orders that individuals should not retain in their possession any sum beyond a small amount of gold and silver, and should be compelled to carry on their transactions in Law's substitute for money. The shares were not to fall according to the rate at which their owners were willing to sell them, but to sink in nominal value, by a monthly reduction, till they had reached half their original price, at which rate they were to be fixed. All this, of course, was the merest convulsion of despotism. The regent had shifted a large amount of the debts of the state to the deluded people, and no attempt was made to retrieve the national credit. Walpole had to pursue a policy which was the only possible one under a limited monarchy; and which indeed was not beset with the difficulties that the government of the regent would have had to encounter in any struggle to be honest. The French finances were hopelessly embarrassed by a long course of extravagance, before Law thought he could perform the part of the magician in the Arabian story, making a scrap of paper pass as a piece of silver. The English finances were healthy, though the national debt amounted to fifty or sixty millions. The French government adopted the schemes of Law, to furnish the means of new extravagances. The English government went into the scheme of the South Sea Company, with the view of redeeming a portion of the national debt, and thus of lessening the amount of taxation. Voltaire records that he had seen Law come to court with dukes, marshals, and bishops following humbly in his train. The English court was not free from shame in the South Sea project. Half a million of fictitious stock had been created by the directors, previous to the passing of the bill. The duchess of Kendal, as well as other favourites of the king, had large douceurs out of the profits which the directors made by the transfer of these shares; and it is lamentable to add that |