Law was for the time the most powerful man in France. A momentary whisper that he was out of health sent the funds down, and eclipsed the gayety of nations. He was admitted into the Regent's privy council, and made Controller-general of the finances of France. The result was inevitable; there was as yet nothing behind the promises and the shares of the Mississippi Company. If finance could have gone on forever promise-crammed, things would have been all right. But you cannot feed capons so, as Hamlet tells us; and you cannot long feed {186} shareholders so. Law's scheme suddenly collapsed one day, and brought ruin on hundreds of thousands in France. While, however, it was still afloat in air, its gaudy colors dazzled the eyes of the South Sea Company in England.
[Sidenote: 1710-1720—The bubble swells]
At the north-west end of Threadneedle Street, within view of the remains of Richard the Third's Palace of Crosby, stands a solid red-brick building, substantial, respectable, business-like, dignified with the dignity of some century and a half of existence. Time has softened and deepened its ruddy hue to a mellow, rich tone, contrasting pleasantly with the white copings and facings of its windows, and suggesting agreeably something of the smooth brown cloth and neat white linen of a well-to-do city gentleman of the last century. Yet that solemn, massive, prosperous-looking building is the enduring monument of one of the most gigantic shams on record—a sham and swindle that was the prolific parent of a whole brood of shams and swindles; for that building, with honesty and credit and mercantile honor written in its every line and angle, is all that remains of the South Sea House. It is a melancholy place—the Hall of the Kings at Karnak is hardly more melancholy or more ghost-haunted. Not that the house has now that "desolation something like Balclutha's" which Charles Lamb attributed to it more than half a century ago. The place has changed greatly since Elia the Italian and Elia the Englishman were fellow-clerks at the South Sea House. Those dusty maps of Mexico, "dim as dreams," have long been taken away. The company itself, having outlived alike its fame and its infamy, lingering inappropriately like some guest that "hath outstayed his welcome time," was wound up at last within the memory of living men. The stately gate-way no longer opens upon the "grave court, with cloisters and pillars," where South Sea stock so often changed hands. The cloisters and pillars have gone; the court has been converted into a hall of a sort of exchange, where merchants daily meet. The days of the desolation of the South Sea House are as much a thing of its past as {187} its earlier splendor. Its corridors are now crowded with offices occupied by merchants of every nationality, from Scotland to Greece, and by companies connected with every portion of the globe. Only at night, on Saturday afternoons, and during the still peace of a City Sabbath, do the noise of men and the stir of business cease in the South Sea House. Yet, nevertheless, when one thinks of all that has happened there, of the dreams and hopes and miseries of which it was the begetter, it remains one of the most melancholy temples to folly that man has yet erected.
The South Sea Company had been established in 1710 by Harley himself, and was going along quietly and soberly enough for the time; but the example of the Mississippi Company was too strong for it. The South Sea Company, too, made to itself waxen wings, and prepared to fly above the clouds. The directors offered to relieve the State of its debt on condition of obtaining a monopoly of the South Sea trade. The nation was to take shares in the company in the first instance, and to deal with the company, for its commercial and other wares, in the second; and by means of the exclusive dealing in shares and in products it was to pay off the National Debt. In other words, three men, all having nothing, and heavily in debt, were to go into exclusive dealings with each other, and were thus to make fortunes, discharge their liabilities, and live in luxury for the rest of their days. Stated thus, the proposition looks marvellously absurd. But it is not, in its essential conditions, more absurd than many a financial project which floats successfully for a time. Money-making, the hardest and most practical of all occupations, the task which can soonest be tested by results, is the business of all others in which men are most easily led astray, most greedy to be led astray. Sydney Smith speaks of a certain French lady whose whole nature cried out for her seduction. There are seasons when the whole nature of man seems to cry out for his financial seduction. The South Sea project expanded and inflated as the {188} Mississippi Scheme had done. Its temporary success turned the heads of the whole population.
[Sidenote: 1720—The bank competes]
Hundreds of schemes, still more wild, sprang into sudden existence. Some of the projects then put forward, and believed in, surpass in senseless extravagance anything satirized by Ben Jonson. So wild was the passion for new enterprises, that it seemed as if, at one time, anybody had only to announce any scheme, however preposterous, in order to find people competing for shares in it. The only condition of things in our own time that could be compared with this epoch of insane speculation is the railway mania of 1846, when, for a brief season, George Hudson was king, and set up his hat in the market-place, and all England bowed down in homage to it. But the epidemic of speculation in the reign of the railway king was comparatively harmless and reasonable when compared with the midsummer madness of the South Sea scheme.
The South Sea scheme was brought before the notice of the House of Commons in 1720. The Chancellor of the Exchequer was Mr. Aislabie. We have already seen Mr. Aislabie as one of the secret committee who recommended the impeachment of Oxford and Bolingbroke. How well he was fitted for his office will appear from the fact that he was altogether taken in by the project, and by the financial arguments of those who brought it forward. Sunderland and Stanhope were taken in likewise—but there was nothing very surprising in that. A statesman of those days did not profess to understand anything about finance or economics, unless these subjects happened to belong to his department; and the statesman was exceptional who could honestly profess to understand them even when they did. Walpole, however, was a minister of a different order. He was the first of the line of statesmen-financiers. He saw through the bubble, and endeavored to make others see as clearly as he did himself. Walpole assailed the project in a pamphlet, and opposed it strenuously in his place in Parliament. He was {189} not at that time a minister of the Crown; perhaps, if he had been, the South Sea Bill might never have been presented to Parliament; but the nation and the Parliament were off their heads just then. The caricaturists and the authors of lampoon verses positively found out the South Sea scheme before the financiers and men of the city.
On January 22, 1720, the House of Commons, sitting in what was then termed a Grand Committee, or what would now be called Committee of the whole House, took into consideration a proposal of the South Sea Company towards the redemption of the public debts. The proposal set forth that, "the Corporation of the Governor and Company of Merchants of Great Britain, trading to the South Sea and other parts of America, and for encouraging the fishery, having under their consideration how they may be most serviceable to his Majesty and his Government, and to show their zeal and readiness to concur in the great and honorable design of reducing the national debts," do "humbly apprehend that if the public debts and annuities mentioned in the annexed estimate were taken into and made part of the capital stock of the said Company, it would greatly contribute to that most desirable end." The Company then set forth the conditions under which they proposed to convert themselves into an agency for paying off the national debt, and making a profit for themselves.
The proposal fell somewhat short of the general expectation, which looked for nothing less than a sort of financial philosopher's stone. Besides, the Bank of England was willing to compete with the South Sea Company. If the Company could coin money out of cobwebs, why should not the Bank be able to accomplish the same feat? The friends of the Bank reminded the House of Commons of the great services which that corporation had rendered to the Government in the most difficult times, and urged, with much show of justice, that if any advantage was to be made by public bargains, the Bank should be preferred before a Company that had never {190} done anything for the nation. Well might Aislabie, the unfortunate Chancellor of the Exchequer, whose shame and ruin we shall soon come to tell of, exclaim in the speech which he made when defending himself for the second time before the House of Lords, that "the spirit of bubbling had prevailed so universally that the very Bank became a bubble—and this not by chance or necessity, or from any engagement to raise money for the public service, but from the same spirit that actuated Temple Mills or Caraway's Fishery." In plain truth, as poor Aislabie pointed out, the Bank started a scheme in imitation of the South Sea Company, and the House of Commons gave time for its proper development. The Bank offered its scheme on February 1st, and by that time the South Sea Company had seen their way to mend their hand and submit more attractive proposals. Then the Bank, not to be out-rivalled, soon made a second proposal as well. The House took the rival propositions into consideration. Walpole was the chief advocate of the Bank. No doubt he had come to the reasonable conclusion that if there could be any hope of success for such a scheme, it would be found in the Bank of England rather than in the South Sea Company. Mr. Aislabie, the Chancellor of the Exchequer, made himself the champion of the Company, and assured the House that its propositions were of far greater advantage to the country than those of the Bank. Under his persuasive influence the House agreed to accept the tender, as we may call it, of the Company, and the Chancellor of the Exchequer, Mr. Secretary Craggs, and others, were ordered to prepare and bring in a bill to give legislative sanction to the scheme.
[Sidenote: 1720—The Bill passed]