The Myths of the South Sea Bubble
By Julian Hoppit
Transactions of the Royal Historical Society, Sixth Series Vol.12 (2012)
Abstract: The South Sea Bubble of 1720 looms large in popular depictions of eighteenth-century Britain. But in many respects it is seriously misunderstood. This article begins by exploring mythic ‘facts’ about the events of 1720, but is also concerned to explore why the Bubble was mythologised long after the event. On several levels, therefore, the Bubble has itself been bubbled.
Excerpt: The Bubble, which was blown and burst in 1720, centred upon the joint-stock South Sea Company which had been founded in 1711 with monopoly trading rights to much of South America, even though the well-established Spanish and Portuguese empires there made the region largely out-of-bounds. In fact, trade was always of minor importance to the company, for it had been established to help the Tory government organise the national debt and exploit public credit after nearly twenty years of expensive warfare. Its political origins, as a counterweight to the Whiggish Bank of England and East India Company, were fundamental. As such it was a vital part of the ‘ﬁnancial revolution’ that took place in the generation after the Glorious Revolution of 1688–9. That revolution centred upon how the government established a permanent and funded national debt by employing parliamentary promises of future tax revenues to repay what had been borrowed. But initially there was much about this that was uncertain and experimental. Some of those problems were mainly administrative and organisational, but some were political, not least because of the potential threat to creditors of a Jacobite restoration. Consequently, very high interest rates often had to be offered in order to attract lenders. After the successful peace of 1713, which reconﬁrmed the Revolution settlement of 1689 and the Hanoverian succession, and when interest rates were now much lower, governments naturally looked for ways to renegotiate the debts of the 1600s and 1700s so as to lessen their burden.