In Our Time - The South Sea Bubble

Episode Date: December 20, 2012

Melvyn Bragg and his guests discuss The South Sea Bubble, the speculation mania in early 18th-century England which ended in the financial ruin of many of its investors. The South Sea Company was founded in 1711 with a view to restructuring government debt and restoring public credit. The company would ostensibly trade with South America, hence its name; and indeed, it did trade in slaves for the Spanish market even after the Bubble burst in 1720. People from all walks of life bought shares in the South Sea Company, from servants to gentry, and it was said the entire country was gripped by South Sea speculation mania. When the shares crashed and the company collapsed there was a public outcry and many people faced financial ruin, although some investors sold before the crash and made substantial amounts of money. For example, the bookseller Thomas Guy made his fortune and founded a hospital in his name the following year. But how did such a financial crisis develop and were there any lessons learnt following this early example of a stock market boom and bust?With:Anne Murphy Senior Lecturer in History at the University of HertfordshireHelen Paul Lecturer in Economics and Economic History at the University of SouthamptonRoey Sweet Head of the School of History at the University of LeicesterProducer: Natalia Fernandez.

Thank you for downloading this episode of In Our Time, for more details about In Our Time, and for our terms of use, please go to BBC.co.com.uk slash Radio 4. I hope you enjoy the programme. Hello, in September 1720, England was plunged into economic crisis when the South Sea Company collapsed, one of the first examples of a financial boom and bust, and one which gave rise to the term bubble, to refer to such an incident of spectacular stock market failure. This was a history often written by its losers. Every valuable, every pleasant thing, wrote the poet Alexander Pope,

who'd invested heavily in the South Sea stock, is sunk in an ocean of avarice and greed. Pope wasn't the only one to lose money on the venture. People from all walks of life, from servants to politicians, to lords and ladies, had been drawn into the scheme and faced bankruptcy when the market crashed. However, not everybody lost money, some even gained from it. It was not perhaps such a financially ruinous incident as we'd become to think of,

and the million people who invested in the South Sea Company may, perhaps, be undeserving of their reputation for blind, greed and folly. With me to discuss the South Sea bubble art Rowey Suite, head of the School of History at the University of Leicester, Helen Paul, a lecturer in economics and economic history at the University of Southampton, and Anne Murphy, Senior Lecture in History at the University of Hertfordshire. Roe Sweet, can you give us the political backdrop

to the establishment of the South Sea Company in 1711, nine years before the bust? Yes, well, South Sea Company is established in 1711, and largely the initiative of Robert Harley, who by this time was the equivalent to what we call the Prime Minister. He's the Lord Treasurer, amongst other things. And his ambition is to try and establish a counterpart to the East India Company and the Bank of England,

which were dominated by the Whigs. Now, Harley was a Tory, so he was anxious that the financial influence in the country shouldn't be completely dominated by the Whigs. And this is particularly pertinent because in the early 18th century, the country is dominated by intense political partisanship between the Whigs and the Tories. After the Grooist Revolution in 1689, you've got the 1694 Triennial Act, which means that there are elections every three years,

which means that party feeling is always very, very high because you're continually going to the polls and the election. And so drawing the early 18th century, you've got a lot of shift. alliances between Whigs and Tories and also the Court Country Alliance. And this is exacerbated because the monarch at the time is Queen Anne. She's quite sickly. She's quite elderly. She's lost her children. Her husband has died. She's not really taking a very active interest in politics.

So the politicians are moving centre stage and jostling for supremacy. So Robert Harley, the Tory is on the rise. And the Whigs, people like Marlborough and Godolphin, are. on the wane, if you like. And so Harley sees establishing the South Sea Company and with the ambitions to take over some of the debt and to trade profitably in the South America as being a counterpart to this Whig influence.

Before the idea of a company taking over a national debt, which seems like a fairytale at the moment, but still there we are. There's the war of the Spanish succession that played into this as well, didn't it? Yes. So the reason why the national debt is rising this time and by 1714, it's about 48 million, is that Britain's been involved in two long and expensive wars. So following the glorious revolution, William of Orange,

brings Britain into the nine-year's war against Louis XIV. And then from 1701, Britain's been involved in the war of the Spanish succession, which is a battle essentially to try and prevent the Bourbons from gaining ascendancy in Europe by uniting the Spanish and the French empires. So Britain has been fighting this, And it's seen as a Whig war that Marlborough, of course, was the great general of the war of a Spanish succession. And there's a suspicion that it's being prolonged purely for Whig interest. And so Harley wants to both to try and end the war and also to get the debt into manageable proportions.

So can we just be absolutely clear, Rayleigh, before we go on, what was the purpose of the founding of the Satsy Company? Did they specifically, so listen, did they send up to save, take over the government debt? They were intending to take over a portion of the government debt, not the entire government debt, but a portion of a government debt. And they were also intending to trade. And there used to be a view that it was simply a financial shell, but there was actually viable prospects of trading with South America. They were given them a monopoly of trade from the Orinoco d'Inty Tierra del Fuego. And so there was actually a real possibility of trade and it being a profitable company like the East India company. Well, a bit of a trickier that Spain had more or less a strangled.

It did, but then with the piece of Utrecht, they got the Asiento, which gave him a monopoly of slaving to, monopoly on the slave trade to South America. Anne Murphy, the South Sea bubbles gained a lot of notoriety, but there were earlier bubbles, weren't the early incidents which we could now cheerfully call bubbles? That's right. By the time we get to 1720, the London's financial markets are actually a generation old. They've been established in the 1690s, and this is the result. of the first war that Rowe had mentioned. The nine years war which follows the glorious revolution

stimulates the development of financial markets in three ways. Firstly, it stimulates the development of companies that are creating metals and ordinance, things that are needed for war. Secondly, it stimulates the creation of companies that are replacing goods, that are not coming in, not being imported, because the war is preventing imports.

And thirdly, and most importantly, the war is extremely costly, as Rowie has mentioned. And this means that government needs to find new ways of raising money to fund this war. But I want to talk for a moment about previous booms and busts. Let's just talk about one. The tulip mania in Holland will do is a good example. Well, the tulip mania is in the 1630s,

and this is an incident in Holland where tulips become extremely desirable goods and the price of those goods rise exponentially. In London though, the first boom and bust is this boom and bust in the 1690s which relates to the war and these companies that I've been talking about that emerge at that time. This creates There's an awful lot of money that stays at home at this time

and this money is put into these companies that creates a stock market boom. The stimulation that's been created by war though is also the downfall for these companies and the bust comes quite quickly. So the first boom and bust for London is in the 1690s. But that lives an important legacy for the early 18th century.

It creates the beginning of a government debt, it creates experience of markets, and it creates experience in certain individuals. In particular, John Blunt, who's the chief architect of the South Sea bubble, is very active in the 1690s as well. How was the government handling its debt before the South Sea company was set up? Well, the government is handling its debt in three ways. It's created lottery schemes, which are very popular. and they're attractive to a broad spectrum of individuals, so it can raise money that way. It sells annuities, which again are very popular,

but they're very costly, and they're quite inflexible. And the government is also using the moneyed companies to support its debt-raising activities. The first one of those is, of course, the Bank of England, which is set up in 1694. And the Bank of England does two things. It lends to government, and also it's one of the first companies

that does the debt for equity swaps. that the South Sea Company is to become so famous for later. So all these factors are in place before the South Sea Company is set up. And you have the two essentials that are really necessary for the creation of the South Sea scheme. You have a lot of costly and inflexible debt that the government needs to manage. And you have the opportunity for managing that debt by using these companies, either the Bank of England or the South Sea Company, to effect a swap from the debt for the company shares,

which will reduce costs for government and hopefully offer something more lucrative to the public creditors. Was that seen at the time briefly to be something that that was a perfect, that was okay, that a private company taking over a national debt was fine? Yes. Part of a national debt was fine. It's actually just a change of lender, really. What's being switched here is the many, lenders, the individuals who have bought annuities or who've bought lottery tickets from the government,

for one lender, the Bank of England or the South Sea Company. So it's not that a private company is, in essence, taking over the debt. What it's doing is just consolidating the debt in one set of hands rather than many sets of hands. And this helps because it makes administration easier and it brings costs down. and that's what the government wants. So it's a desirable thing to do. Alan Paul, what part did the Sassie company play in the slave trade? As Rowe said at the beginning, it was thought of to be a shell of one stage,

but now we know it did things or he tried to do things. One of them was the slave trade. It did indeed. It had in itself this Asiento contract, but it also worked with an existing company. Which revived that. Asiator contract, meaning they could trade in slaves with the southern... with the Spanish held pieces of America.

The Spanish Empire was so vast and so extensive that they couldn't then also move themselves onto the African coast, that the African coast was really under the control of local African leaderships, but various forts were given to different European nations and the Spanish didn't have any. So the Spanish had always, for a long time, had just given a contract to somebody else,

any other European nation that could provide them with slaves and they needed the slaves for their colonial manufacturer or whatever they were doing. And the sale of this contract to British slave traders wasn't very unusual because the British had so many forts along the coast. They had quite a lot of expertise in the trade. And in reality, the South Sea Company just worked with an existing slaving company called the Royal African Company. And they did ship thousands of people across the Atlantic. It was a mirage, there's certainly a large number of people, a large number of ships, did cross. And any time there was a break in trade, they would start up again.

They also, after the bubble, went into the whaling trade. So it wasn't as if it was simply, they had no interest in trade at all, it was simply a financial scam from the beginning, which is what some people had thought. But the slave data, I suppose, wasn't really available to previous generations of historians or it wasn't accessed by them. they'd never quantified it. And there were other things besides slaves, there was cloth and so on,

but it wasn't very successful, was it? It was, I suppose, moderately successful, given that every time there was a breakdown in relations between Britain and Spain, the Spanish would retaliate against the South Sea Company. But in the end, I suppose that the way that the slaving industry was structured, changed. You had a lot of interlopers into the trade and all the rest of it. But you don't need to be as successful as East India Company,

which is, if you like, the high water mark of these sorts of things, in order to think the South Sea Company could have hung on in there and maybe could have possibly grabbed a colony if the Spanish Empire had disintegrated. And that prize, even if it was a remote prize, was one reason for taking an interest in these shares. So we've brought Spain into play, we've got the magazine in play,

and now bringing France to bear as an influence. on the Southsea Company. Can you just draw that to our attention? Indeed. France at the time also was plagued by the high debts of war, Louis the 14th Wars and all of its expenditure had really

almost pushed a country to the limit. And Louis's financial wizard Demerettes had been trying to change this with a gradualist approach. When Louis died, the regent replaced

Demaretz with John Law. John Law was a Scottish gambler who'd done quite well and he was put in charge of French finances. I'm sorry it's a bit of a short bit of a but that's what happened. Yes. Well yes and Law certainly had a colourful background. He'd been involved in a duel

and escaped. He'd been a gambler and he knew a bit about money and they put him in charge of our economy. Then what happened? Then what happened? Actually Law had a system where he was going to try to do very important things like introduce a proper national paper currency.

He was going to try to consolidate various trading companies into a big, a general company, which is known to us now as the Mississippi company. And he did try to make

the company shares more accessible to a wider range of investors by allowing them to play in installments. So why did he go wrong in a way that affected Britain? I suppose when he did go wrong,

he simply allowed his system to get a bit out of control. It was probably done at too fast a speed and he started to increase the money supply to the point that became inflationary. He started fiddling around trying to make these Mississippi shares really very interesting to the public

but it created a short-term boom. And when he tried to rein that in, speculators took their money and they went elsewhere and they often went across to London. And people in London had been watching what law had been doing and copying some of his innovations,

the way he marketed shares, for instance, to make their shares seem more attractive. So in this sense, you have an international movement of a capital from A to B, you get a boom on one economy, one stock market, and then you get contagion effects. Then when the boom ends, when the bubble bursts, people take their money and go to the next place.

And the same thing, you get an increase in the... the share price there as well. But just to put a full stop to that, the French were badly burnt by this bust, and it sort of cowed them for decades to come in their financial endeavours. It certainly did, because I think he had gone so far. He had had such control and had a holistic plan,

and when it went wrong and badly wrong, it did put them right off any kind of financial jiggery-pokery for quite some time. It's wonderful, isn't it? This most sophisticated of states, probably in the world, took on this Scottish cowboy gambler. and let him run their economy. He busted and he ended up pernurious, of course, like all... Anyway, never mind.

We didn't go to that. That's a different programme. Can you tell us, Roe, can you follow up from what Helen has said about French speculators moving to London and making London a more of a financial centre? Can we talk in terms of London's power as a centre before we get this bubble going? Yes, well, as Anne was saying, it's really,

starts growing up as a financial centre in the 1690s once you've got greater political stability and this is also accompanied by a significant expansion in trade. You've got the East India Company which the new East India Company 1690 and then that's amalgamated of the old one

in 1709. An East India Company would be in spectacularly successful. Spectacular successful and so you've got rapidly rising profits from commerce and trade and London of course is this great entrepot port where all the products from the overseas trade are being important to London,

it takes up the vast proportion of the entire country's trade. And so all those goods are being traded. You've got the emerging market in securities, which Anne's been talking about. You've got emerging market in insurance, so life insurance, marine insurance, some fire insurance, you get some fire insurance agency being set up at this period.

So there's an awful lot of financial activity going on. And the previous centre had been Amsterdam. That had been the entrepreneur port of the 17th century and, of course, the great golden age of the Dutch Republic. But the Dutch Republic is on the wane by this point, that it's become, the economy's become slightly ossified. They're quite risk-averse. And Amsterdam doesn't even allow the flotation of joint stock companies,

which is one of the things that the boom, which Anne was talking about in the 1690s. So you're getting investment actually from Amsterdam in the 1690s into London. So a lot of Dutch merchants are investing in the business. Bank of England. You've got a large Jewish community by this time. Oliver Cromwell, of course, famously lets the dues back in and they quickly become established

as part of the financial centre of London. And you've also got French investors as well. And one of the other things about the 1690 is that you have the lapsing of the licensing act, which means that you have a very rapid increase in the amount of printed

material available. So you've got regular newspapers provided news about stocks and shares, about prices, and about the sale of securities, which means that news can spread very quickly, and not just in London, but further afield, so people know what's going on, and they can invest, because they can read of the newspaper, what's stocks are rising, they can ask for money to be invested. But London's still a very small place, and the city of London where all the activity is happening is a very, very concentrated area, and most of the business

is in what they call Exchange Alley between Lombard Street and Cornhill, which is full of these coffee houses, where the news is happening, where it's this very dynamic environment where everybody who wants to know what's happening will go to the coffee house, get the information, they can then go to East India House or the Bank of England of the Royal Exchange,

they can invest their money, they can share the news. And so there's any free, feebrile atmosphere in London. And it's growing so rapidly, between 1719-10, it grows by 25%. This is one of the really dynamic periods of London's growth, and a lot of it is driven by this, financial expansion. Alan Paul, can we go back to politics for a moment?

Where are we between, as it were, 1711 and 1720, in the political manoeuvrings between the Tories, Harley and the Tories, and the Wigs increasingly under Walpole? Well, we get the new Hanoverian regime coming in with the Death of Queen Anne at 1714. So you've got, then you've got this Whig ascendancy, as it were, and then you get a split in the Whigs between Walpole and Townsend and Sunderland and Stanup Ed's in the... 1717 and this also matches on to a split between King George the first and his son, the Prince of Wales,

they have a falling out too. And so there is some opportunity for people to be played off against each other. But in terms of what happens with the South Sea Company as we go up towards the bubble, basically it had been seen as a Tory company but by the time it gets up to trying to take another portion of the national debt and it battles with the Bank of England over that it effectively just bribes people of all sorts you know that's how it manages a very old-fashioned way

to get political support it gives people Did you say bribes of all sorts? Bribes, yes bribes that's right I mean how much sort of bribes how big was it? Did they do them next change alley or whatever it is? I think they wouldn't dare because it was too public.

Brown envelopes and all that sort of stuff. It would be interesting to know exactly the method that this was done. But they had a funny way of saying, I'll basically assign you some shares and then the capital gains of that. If the price goes up, will give you the difference. So you've apparently got these

shares. But you've got an incentive to help my company because the bigger the price rise, the more capital gains, you're assigned by me, I'll pay you whatever the difference is between price A and price B.

So this company is cheerfully bribing its friends who are like them, they're sort of reflected colleagues in the court, the aristocracy, the city and the relevant political party. Indeed. This on which the financial security was built. Well, to go back to the East India Company and its great success,

it bribed people too. Do you think bribeer is a mechanism of the market? It might well be. And weirdly, has it changed? much nowadays. We're not relevant in that. We don't do contemporary. That's a bit of... Yeah, that's somebody else. Let's get to

Anne Murphy. Let's get to the boom period. The boom itself, which was just over a few months. So let's take 1720 or just a little bit in 1719. As it were, it's jogging along, isn't it really? And then Shazam, boom, as they say. And there are

several factors of play here. And it's not all about the Soutty Company at this point. So in 17... It'd be nice if you concentrated on it. Yes. So 1719, you've already got this atmosphere of economic activity really starting to pick up. So there's more interest in the stock market. As Rowe said, you've got a market that functions very well at this point.

Already also in 1719, you've got the rumours that the South Sea Company has something big in mind. I think nobody is quite sure how big at this point. But there's certainly an incentive to buy South Sea Company shares. By the time you get to 1720... Did they have anything bigger, or are we, mirrors and wire again? No, they had something big in mind. Are you going to tell us?

Yes. So what they try to do in 1720 is to convert most of the government debt into South Sea Company shares. Now, as we've said, this has been done before in very small ways, and the South Sea Company does it on a small scale in 1719. But the aim in 1720 is to do.

do this on a grand scale, to take almost all the government debt, except those obligations owed to the Bank of England and to the East India Company, and try to encourage the debt holders to swap that debt for South Sea Company shares. Is this hubris or grid, or are they interchangeable? I think they're probably interchangeable. This is, on some levels, a sound scheme, but it's a sound scheme that overreaches itself, and it's a scheme that is not particularly well managed. So they say let's go for it really They say we can do a lot more for you You can take a lot more of your debt on you just buy our stocks and come in

And then the thing begins to gather Incredible pace very quickly, doesn't it? Helen Paul can you just give us some idea of the pace? Well you see And the effect on the rest of the market Oh well the effect on the rest of the market You get people going into the stock market Who perhaps had been unable to do so before

They're now able to come in because they now know about it. They've got these subscription shares and installment packages and ways to pay by degrees so that more people can come into the market. And it becomes, therefore, something that lifts the whole of the market with the South Sea, although the South Sea company price rise

is the most spectacular part of it. Everyone else gets lifted as well. It's something like over two or three months it goes from 150 to a thousand pounds, doesn't it, the share price? Well, it's a bit... I haven't got my notes beside me, but it's something like that. Well, we can be a bit vaguer than that because the sources disagree and at various prices. But even...

Anne wants to come in. She's got the sauces. No, I'm not precisely... I think that's... The general feeling is that, yes, it goes from around the level of 150 to about 1,000 over the summer. Where we tend to disagree is just exactly how high it gets. Nobody particularly agrees on that. I think the interesting point there is how that price is achieved, though. And as Helen says, the real key here is that you don't have to pay for your shares all at once. You pay an instalment so it makes it very easy for people to get into the market.

And also that the South Sea Company and the other companies are lending people money in order to buy their shares. So you have a vicious circle of easy credit and stock market boom. Helen, it also kicks off a booming bubble. In that summer, all sorts of other companies say, we can promise you everything as well. Well, there are umpteen other companies do appear, some of which, when you look at the history books, are actually just joke companies, which have, nobody probably took seriously at the time. So there's this famous one of a company to be trading in something, nobody to know what it is, or words to that effect. And it's not very likely that that was ever taken seriously. I think it's a trading is something very important, but nobody knows what it is.

Yes. Well, that doesn't say it was trading. Yes. But it's equivalent in a way. to the dot-com bubble where you get a large number of different companies suddenly appearing, some of which are viable and some of which aren't, and some which are well thought out. So you've got one or two things that appear that are probably quite sensible, a couple of insurance companies, and then a lot of other people, but these projector types were around all the time. Now there's an opportunity to reel out their project again.

But you have this sort of Starship master. a rocket in the middle of London over those few summer months and other others are coming in the slip stream and saying yeah we can do this we can do this as well there's an intensifying hysteria isn't a very sweet and people are piling in new investors they've never invested

before people of great wealth think I can have even greater wealth scientists even royal inventors and poets and all that sort of stuff they're going in as well yes and I think this is why it's one of reasons why it's got such a powerful hold on the sort of imagining

of the 18th century that so many of the elite were actually implicated in it. It's been estimated that 75% of both the House of Commons and the House of Lords were investors and that three quarters of the entire investing public were investing in the South Sea bubble. So you've got everybody

from Isaac Newton to Gauvrinella to John Pope, John Gae, Alexander Pope. You've also got a lot of women investing. So the Duchess of Morbara, she was a very canny investor. She sold out at the peak and then lent money to other people to invest in the Syfrey Company. I'd exorbitant. Right.

Yeah. She was a sound woman. And that's one of the interesting things that there are a lot of women investors. Probably about 20% of the investors were women. Well, they could. And the stock market is still in its very early stages. It hasn't become formalized, institutionalized. And the scope for women to invest.

They can. And so about 12% of Sisy's stock is held by women. 20% are investors, the investors are women. So obviously they're amongst the smaller investors. but that's one of the things that contemporaries picked up on. If you look at a lot of a commentary, they're talking about prostitutes selling their jewels in Jury Lane and investing and servants pawning their possessions in order to invest.

Now, this is largely apocryphal, but it betrays the anxiety that women are investing in the stock market. And of course, women are bringing their irrationality and their vanity and their avarice, and they're sort of corrupting and tainting the stock market in a way. And so I think long term, one of the negative consequences of the South Sea Mobile, is that it creates prejudices against women's investment in the stock market.

But there was, it has been called a mania and hysteria. Are these two words, you're all nodding, so we're okay with those two words. This is not hyperbole. It's true. Well, that's how it's seen at the time. Well, that's what we're talking about. Yeah. So, I mean, Helen, as an economist will probably tell you that it was entirely rational behavior going on in the way in which people invested in these shares. But of course, in the 18th century, people weren't economic analysts. And so they wouldn't have understood it in that time. And they saw it as a mania. and a compulsion of this madness that had seized the nation. Because this is paper money, it doesn't make sense. He don't understand how it works. We've got to ask Anne Murphy, how did the bubble burst? There are several factors at play. First is the removal of foreign funds.

Rowe explained earlier that a lot of foreign funds coming into the market. In the summer of 1720, those foreign funds start to ebb away. So the foreign people who'd invested in the South Sea Company start to sell out, move their money to other places. The cheap credit that the South Sea Company has been providing is unsustainable, so that source of funding tends to dry up as well. The other thing that happens is that the South Sea Company shoots itself in the foot. It implements, with the help of Parliament,

an act to control all these little joint stock companies, all the bubble companies that Helen was talking about. And this act to control the bubble companies, to restrict them, to stop them setting up anymore, creates a dip in the market, which also has an effect on the South Sea Company. And things really take off from there. As fast as the market in shares has risen,

it falls in the autumn of 1720. Is there a Black Tuesday, or is there a black-hearted villain, or is there some genius who takes out masses of money and everybody says, we're in trouble if that genius, like Walpole, Prime Minister, suspiciously profitable. He was to become Prime Minister in a year or two, suspiciously profitable, we think, like a lot of other

persons in high authority in government. Never mind. Was there one or two things? Because we'd like one or two things. I mean, causes are okay, but one or two things would be useful. I don't think there are one or two things that we can pinpoint at this point. The information in the market is good enough, but not good enough to create a Black Tuesday. But there must have been cries in the streets

when the losers knew that they were losers, Helen. Well, absolutely. When people lose, especially with large amounts, they make a lot of fuss. And certainly if people in the elite lost, then they made a huge amount of fuss. And when you see the House of Commons debates, there was certainly an opportunity to talk about South Sea sufferers. What, of course, doesn't happen is that people don't say,

I did make some money. They just clam up. So we know about the losers far more than we know about anybody else. It's one case where the losers wrote most of the history. Well, that's absolutely right. A lot of them were writers. Yes, exactly. And they'd been greedy, but they railed against the avarice of everybody else.

Well, exactly. And in some cases, they'd lost paper gains. They thought they were going to be, they were tremendously rich to start with, or they were doing well to start with. And then they lost their paper gain that they, if they'd sold out here instead of here, they would have made this amount, and they only made a small amount,

or they made a small loss, or whatever. So it's hard to know, unless you actually have these people's actual account books, exactly how badly they were. So cries weren't up in the Palace of Westminster, but also among artists, Brighters, as we've mentioned two or three times and so on. Can you give us some idea of the clamour that came from these different sections of society, really sweet.

Yeah, well, there's always a great outpouring of satire and ballads and criticism. So the stock market and London's financial markets, they've been subject to satire before. I mean, the reasons we've been talking about that stock market wasn't. or wasn't looked upon with universal approval by everybody, and there's always a suspicion of paper, money and credit,

which people didn't really understand. But there is a upsurge of people writing satire against speculation, people like Gay, Swift, Pope. You can find criticisms of the South Sea bubbles. You've got Gay's Panajaric, his epistle to, or mock Panajaric, pistol to Mr Thomas Snow, who's one of the bankers who sold out right at the peak. And you've got various plays,

about the stock market where you have the normal traips of some prostitutes selling their jewels and the women infecting their place of their irrationality, this kind of thing. You've also got a lot of outcry coming from the provinces in that when Parliament was debating the South Sea bubble, you get a whole series of petitions coming from various parts of the country asking for the culprits to be punished, which really says more about attitudes of political corruption than the fact that throughout the country everybody was being struck into poverty because they had lost money. It fitted in with a whole rhetoric of anti-corruption,

moral reform, anxiety about luxury that is quite prevalent. And also a hogarths painting. Yeah, Hogarths and Paul's Cathedral. And the whole series of prints come out as well. A lot of them actually from the Dutch Republic because, of course, that's a great centre of printing, but also because there have been bubbles in the Dutch Republic before. so they reuse some of the prints,

but there's a whole series. Helen. Thank you. The Hogarth print, which you mentioned, also in one corner has the Pope and two Jews playing a gambling game and has a parade of women going to a house crowned with Ku Klolt's horns.

You've got to remember that finance, these new Voreish people, often were associated with outsider groups like foreigners, Jews, Catholics, non- Anglican Protestants and the like. And there was, from the elite, these people who'd inherited their landed estates or whatever, there was prejudice, and that prejudice does seep in

to discussions about the stock market. Sorry, I'm sorry, I'm sorry about the disruption of a social order as well, that you've got people making a lot of money very quickly, and so the traditional social order is being upset. Did the Nouveau-Rish phrase come in then? They didn't talk about people as Nouveau-Rish in those terms, but they talked about jumped-up people or people who are inflated. We got jumped up.

New-Vary, because of the country we live in a minute. I mean, John Blunt, for example, who's the man, the architect behind it, he was just the son of a Baptist shoemaker, and then he's going around, making huge amounts of money, investing in it, being quite ostentatious. It's the ostentatious wealth that they disliked. And lovely, I'm going back to a question and asked you before, and sort of say, if there's no matter, we can move on quickly,

didn't people, and the outcry, say these few people are responsible, we know that they've manipulated it and manipulated us, and these are the responsible people. I keep citing Walpole, why not? He did suspiciously profitably out of it all, and he was in charge of a lot of it. Yes, there were certainly members of the government, members of the ministry,

who are recognised as having much more of a hand in this than they should have done. The directors of the Salsi Company also become the major scapegoats, all of them, not just the ones who were clearly the leaders of the scheme, but also the directors that were relatively innocent in all of that.

So, Helen Paul, how damaging was the impact of this on the British economy and on London as a financial centre? Probably not as damaging as you might think from all of this noise and all of these poems and all the rest of it, which Ruby has been mentioning. There's no real sign of a breakdown in the social order or the economy. The Georgian society continues on, the company continues on, the financial market,

continues and all the rest of it. It probably helps a bit that the French have also had their own problems so they're not going to invade or bring the Jacobites with them. But actually, despite all that's been said, there's not a sign of huge increase in bankruptcies or anything like that. Why did you become such an archetype then? Why do we still talk about it? Why are we doing a programme about it?

Well, you invited us. It's round. People talk about bubbles. It's referred to all the time. I mean, it's in some collective unconscious, as someone who might have said, of us that the South Sea bubble was the archetype. Why, what made it the archetype? Possibly because it's one of the first big ones in the British economy. It's something that affects a lot of people in the elite who then create this morality saga.

It involves, it's packaged in a way that involves all sorts of scandal. There's also, as we were saying with the prostitutes and all the rest of it, It's packaged in sexual scandal. It's packaged in anti-foreign a scandal, a corruption scandal. It's simply very good newspaper copy. And you have this print culture. But actually, compared to other things that then happened, like, say, the Great Crash in the 1929 crash,

it's nothing comparable to that. You don't get the rise of somebody akin to Hitler appearing because of a prolonged period of gloom like the 30s. I think part of it is that it's so closely associated with the political elite. It's the fact that the political elite are so implicated, and particularly Walpole, because this is the start of his tenure of power. And it's quite interesting that one of the prints which is produced at the time in 1721,

the Brabant's Screen, which is this idea of Warpole is the great screenmaster who covers up for people who are involved in corruption, and lets Robert Knight, who's the treasurer escaped to Europe, and they pretend that they're trying to extradite him and actually saying, nudge, nudge, wink, wink, stay there, we don't mind. And so there's this idea that Walpole is deeply in hock with the financial elite and corrupt. And this is, this print is republished again in 1742 just about the time of Walpole's fall. And so there's this very deeply embedded sense of Walpole and political elite being implicated in corruption,

which is associated with the South Seat bubble. I think that's one of the, it becomes symptomatic of the Walpolean regime. And then it's rehearsed again in the end of the 18th century by William. Cox in his life of Walpole. And that's one of the key sources for the 18th century. So I think its association with Warpole is one of the reasons why it assumes such prominence in the history of the 18th century. Anne Murphy, were there any... No, first of all, what happened to the South Sea Company after the bubble was pricked?

So the South Sea Company continues, and it continues into the 19th century. It is a shadow of its former self, but there has to... to be a way of continuing on with the annuities and the debt that the company has taken on. They have to maintain that. There's no way of going back. So the South Sea Company has to be preserved

in some sense. And did it provide for it to people who... Was it always in hot? Was it always failing to provide? It was reasonably profitable. I mean, it carries on trading. If you kept hold of your shares until the end of 1720, you've got a reasonable return.

And from 1723, it's doing okay. 1730s it's managing to annoy the Spanish quite regularly and it's one of the reasons of the war of Jenkins's ear in 1739 that they're refusing to cooperate with a, well not cooperate but refusing to do what the Spanish want them to do

and then it takes up wailing I mean it's all right it's not going to make your huge amount of money but it's all right. Helen Ball what was this did this provide a model for economists studying what happens

in the boom and bus situation Is it useful as a model, even though it isn't as big as this or as big as that or the first of this? I'm not entirely sure because I think economists, modern economists like a lot of data and they like to know exactly what happened on which day. And it's a bit tricky to do that when the sources aren't quite as good to do this modern econometrics work that perhaps a mainstream economist would like to do. I suspect that a lot of them know what the South Sea bubble was, like most people, they don't know all the ins and outs

because there's so much of the political history side or the social history side that is beyond their ken, as it were. So it tends to be just something that they know about and are interested in rather than a model. But at the time, finally, race, did people think we must legislate against this happening in the future? This is a terrible thing. Well, there were attempts to legislate,

and there's John Barners Act in 1734, But people still set up joint stock companies, people still investing the stock market. There's a suspicion, deep-seated suspicion of finances, but it doesn't really stop the stock market developing. I'm very sorry about that. Thank you very much. Matthew Ray Sweet and Helen Paul. Next week we'll be talking about the Roman cult of Mithras. Thank you very much for listening. There are many more Radio 4, arts and discussion programmes to download for

free. Find these on the website at BBC.com.ukuk slash radio four.