Memoirs of Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay (read book txt) 📖

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 22d 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 2d 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.