A Very English Deceit/Malcolm Balen
This is an account of one of the biggest financial scandals in England’s history – The South Sea Bubble – and well told, briskly but informatively by Malcolm Balen.
In brief when George I acceded to the the throne as the first Hanoverian at the start of the eighteenth century the National Debt, largely as a result of financing war against France, stood at £28m.
To pay it back John Blunt came up with a scheme modelled on that by John Law in France whereby a trading company specialising in South Sea trade and commerce should acquire the debt and the public would be able to acquire shares in it.
It seems barely credible that in the frenzy to acquire these shares no one seemed concerned that the company was not actually trading and – beyond its own momentum – had no assets.
There were three subscriptions what now would be termed I.P.O s. The shares rose and rose and everyone tried to get on the bandwagon not least the two mistresses of George I and corrupt politicians who were bribed or lent money to buy.
The Chancellors of the Exchequer Robert Harley and John Aislabie exercised little control and less regulation whilst the Secretary to the Treasury Charles Stanhope almost certainly received loans on favourable terms to buy shares.
The prime mover was John Blunt.
He was the son of a Rochester shoemaker, joined the Company of Scrivener’s and started his own bank, the Sword Bank, which rivalled the Bank of England.
Blunt’s inspiration was a Scottish aristocrat John Law. Law came south, killed a rival over a woman in a duel, was imprisoned and escaped to France.
He set up a company specialising in trade in New Orleans which acquired the French national debt: so successful was this that the French economy at the time of the regency of Louis XV prospered.
Law is now regarded as less of a chancer and more a financial genius. Blunt copied his ideas but at least the Mississippi company traded, unlike the South Sea equivalent.
The bubble had to burst and when it did shareholders were not just left with worthless stock when the price plummeted but were in some cases committed to buy at a greater price than its actual one.
Many faced financial ruination. The man who presided over the downfall in an entirely self-serving way was Prime Minister Robert Walpole.
For such schemes to succeed you need greed and dishonesty in equal measure. Each chapter begins with a reference to a more contemporary scandal e.g. Robert Maxwell, or the dot.com boom, to illustrate that greed is still out there.
Many history books run into 900+ pages and it’s impossible to absorb all the detail. This account is 336 pages and confines itself to the main players: Law, Blunt and Walpole.
