South Sea Company

"South Sea Bubble" redirects here. For the Noël Coward play, see South Sea Bubble (play).

South Sea Company
Company typePublic
IndustrySlave trade, Speculation, Whaling
FoundedJanuary 1711; 313 years ago (1711-01)
Defunct1853; 171 years ago (1853)
Headquarters
London
,
Great Britain
1754 engraving of Old South Sea House, the headquarters of the South Sea Company, which burned down in 1826,[1] on the corner of Bishopsgate Street and Threadneedle Street in the City of London
The Dividend Hall of South Sea House, 1810
Heraldic grouping above main entrance to the surviving South Sea House, Threadneedle Street, rebuilt after the fire of 1826
An early trade label of the South Sea Company, for export of finest English serge cloth. The letters circumscribing the seal below should read "SS&FC", for "South Sea and Fishery Company"[2]
1723 pro-forma power of attorney signed by a shareholder of the South Sea Company showing the Company's coat of arms and the Latin motto A Gadibus usque Auroram ("From Cadiz to Dawn", Juvenal, Satires, 10)
The South Sea Bubble by Edward Matthew Ward, 1847. A Hogarthian image of the 1720 "South Sea Bubble" now in the Tate Britain

The South Sea Company (officially: The Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America and for the encouragement of the Fishery)[3] was a British joint-stock company founded in January 1711, created as a public-private partnership to consolidate and reduce the cost of the national debt. To generate income, in 1713 the company was granted a monopoly (the Asiento de Negros) to supply African slaves to the islands in the "South Seas" and South America.[4] When the company was created, Britain was involved in the War of the Spanish Succession and Spain and Portugal controlled most of South America. There was thus no realistic prospect that trade would take place, and as it turned out, the Company never realised any significant profit from its monopoly. However, Company stock rose greatly in value as it expanded its operations dealing in government debt, and peaked in 1720 before suddenly collapsing to little above its original flotation price. The notorious economic bubble thus created, which ruined thousands of investors, became known as the South Sea Bubble.

The Bubble Act 1720 (6 Geo. 1 c. 18), which forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse.

In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy diminished substantially. The founders of the scheme engaged in insider trading, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme.[5] Company money was used to deal in its own shares, and selected individuals purchasing shares were given cash loans backed by those same shares to spend on purchasing more shares. The expectation of profits from trade with South America was talked up to encourage the public to purchase shares, but the bubble prices reached far beyond what the actual profits of the business (namely the slave trade) could justify.[6]

A parliamentary inquiry was held after the bursting of the bubble to discover its causes. A number of politicians were disgraced, and people found to have profited immorally from the company had personal assets confiscated proportionate to their gains (most had already been rich and remained so). Finally, the Company was restructured and continued to operate for more than a century after the Bubble. The headquarters were in Threadneedle Street, at the centre of the City of London, the financial district of the capital. At the time of these events, the Bank of England was also a private company dealing in national debt, and the crash of its rival confirmed its position as banker to the British government.[7]

  1. ^ Thornbury, Walter, Old and New London, vol. 1, p. 538
  2. ^ "Cloth Seal, Company, 1711–1853, South Seas & Fisheries". www.bagseals.org.
  3. ^ Journals of the House of Commons, volume 16: 1708–1711, p. 685.
  4. ^ Paul, Helen (2009). "The South Sea Company's slaving activities" (PDF). Discussion Papers in Economics and Econometrics. ISSN 0966-4246.
  5. ^ Marshall, Dorothy (1962). Eighteenth Century England, pp. 121–130.
  6. ^ Paul, Helen J. (2013). The South Sea Bubble: an economic history of its origins and consequences. London. ISBN 978-0-415-70839-5. OCLC 925312648.{{cite book}}: CS1 maint: location missing publisher (link)
  7. ^ Thornbury, Walter. "Threadneedle Street". Old and New London. Volume 1 (London, 1878). pp. 531–544 – via British History Online. Accessed 21 July 2016.