Discussion Paper 0923, "Politicians and Public Reaction to the South Sea Bubble: Preaching to the Converted?", by Helen Paul
The South Sea Bubble of 1720 has commonly been thought of as a disaster for the stock market and Georgian society. Recent revisionist work has queried whether the economic dislocation was indeed severe. The South Sea Company itself continued to trade in slaves with the Royal Navy’s assistance. However, the outcry at the crash led to the trial of the South Sea Company directors for bribery. It also helped to establish Robert Walpole as the pre-eminent statesman of his generation. This paper seeks to show that there was a silent majority who had either gained from financial innovations or were untouched by them. The vocal opponents of the South Sea directors had incentives to overstate their losses. Some were the type of uninformed traders who were likely to lose out in any stock market. Their presence was used as an excuse for a parliamentary enquiry. This paper will follow the rhetoric used to justify the witch-hunt and the means by which politicians sought to raise support for their activities. Evidence from pamphlets and the Commons debates will be used. Politicians benefited from a culture which condemned ‘stock-jobbing’ and the nouveau riche. However, the only real losers were those who had been involved in Exchange Alley in the first place. The show trials did not lead to the closure of the Alley. Many of the directors were quietly given back some of their confiscated property. The trials were an early example of political spin
Keynames: South Sea Bubble, financial market crash, government policy, stock market, history of economic thought
JEL Classification: B11, N23, N43