Harley’s idea was to found a trading company. It was a move that appeared conventional enough. Trade and war were the unholy twins of commerce. It suited both the financial nostrums and the bellicosity of England to develop a new company which would trade abroad and, if necessary, kill natives in order to repatriate the proceeds. Daniel Defoe, who was a lifelong admirer of Sir Walter Raleigh, had long been captivated by the spirit of Elizabethan adventurism and impressed by the vast profits that Spain was still coining from its colonies. Galleons from Mexico and South America were held to carry dazzling cargoes of gold, silver and jewels, but Defoe had consistently argued that there was an even greater profit to be made if the trade was better managed. There is no evidence that Blunt and Harley were swayed by Defoe’s arguments, but he reflected the spirit of the times. There was, the pair agreed, a huge commercial prize to be won in South America, offering a ready market for English cloth, with an endless supply of gold and silver in payment.
But Harley was also taking a politically radical step: he intended the proposed trading company to become a new financial institution to rival the Bank of England and the East India Company. On 2 May 1711, when he announced the new company’s formation, he declared that not only would it trade in the South Seas but it also aimed to take over the ‘floating’ portion of the national debt, put at £9 million: this was the debt that could be paid off if the government had enough money, rather than the fixed sums it had agreed to pay to annuitants for many years ahead at generous rates of interest. The company would ask the government’s creditors to exchange the money they were owed, directly, for shares in the new trading venture. To help service the interest on the debt, the company itself would be paid more than half a million pounds a year by the government.
Harley’s spirits were high, and found a ready outlet in symbolism. The company was awarded a coat of arms, designed by the College of Heralds and emblazoned with the motto A Gadibus usque Auroram – ‘From Cadiz [still held to be the empire’s last outpost] to the Dawn’. And, in keeping with its heraldry, it was given a suitably grandiose, if overly optimistic, monopoly on trade. It was granted the right to the ‘sole trade and traffick, from 1 August 1711, into unto and from the Kingdoms, lands etc. of America, on the east side from the river Aranoca, to the southernmost part of the Terra del Fuego, on the west side thereof, from the said southernmost part through the South Seas to the northernmost part of America, and unto, into and from all countries in the same limits, reputed to belong to the Crown of Spain, or which shall hereafter be discovered’.
Ominously, however, there would have to be a peace deal with Spain and France if the lands which were ‘reputed to belong to the Crown of Spain’ were to yield their supposed riches to the company’s trading vessels. There were therefore two big catches: peace had to be struck on advantageous terms; and the conceded territories had to yield the fabulous wealth which it was so fondly imagined they possessed. The government’s propaganda machine, ably spearheaded by Daniel Defoe and Jonathan Swift, went into action. They printed lists of exports which might prove suitable on the markets of South America, from silk handkerchiefs to Cheshire cheese, and they spun stories of South American wealth, the ready market for exports and the generous profits to be made from the slave trade. Portugal had been actively engaged in the traffic in African slaves for more than two centuries; Spain had built a lucrative sugar empire by importing slave labour to the New World. Harley was right to think the profits could be immense: between 1698 and 1708 a stake in the Portuguese slave trade to Jamaica had earned the English government £200,000 a year in bullion. Within half a century, Britain would be shipping a third of a million slaves to the New World and the national economy would depend on the trade.
Aided by his propagandists, Harley’s plan succeeded in capturing the imagination of investors. Some of them were political opponents who saw a chance to make money. Some were Dutch or Italian financiers, some were merchants, some were goldsmiths. Blunt and his team of directors also bought thousands of pounds’ worth of shares, believing they would make their fortune from the enterprise. Intellectuals such as Swift and Isaac Newton held stock, as did a large number of women. So too, curiously, did government departments.
But if Harley was genuinely attracted by the bold adventurism of the project, by the prospect of faraway riches which would replenish the war-weary coffers of the Exchequer, there were to be other consequences far closer to home. Blunt had won for himself a political and financial lever, a place in society and a position in the City. The Bank of England, officially, might have managed to protect its position, but a rival had been born and – whether it considered it or not – the Bank could not predict what sort of creature it might become. A company which had begun life by making sword blades had turned to land speculation. From land, it was now venturing out to sea. Where next?
On 10 September 1711 the South Sea Company was formally created, with Harley as its Governor. Nine of the thirty appointments were political, and five came from the Sword Blade Bank itself.
Not one of them had any experience of trading with South America.
For now, the political and financial path which had led to the formation of the company appeared to be one and the same. Harley genuinely wanted peace with Spain and France, and believed he could extract, as its price, the right to trade in the southern seas. But first he had to negotiate a deal. Peace, if it was to be struck, had to be struck quickly, so as to enable the South Sea Company to trade successfully and pay off the portion of the national debt it had shouldered. Harley had already begun the process, but he had failed to inform Parliament, and he did not yet have its consent.
Harley had the support of his party and of the country: both thought the war had to end. But the Whig-dominated House of Lords was in a rage, and mobilised for attack. Their aim was to bring down the Tory ministry in a political contest that ranged the old aristocratic Whig order against the upstart who was running the country. In some desperation, Harley tried to delay the return of Parliament, which was in recess. But confrontation at some point was inevitable, a sure sign of which was the propaganda war unleashed by Harley and his pet pamphleteer, Daniel Defoe.
For polemical persuasiveness Defoe had few equals. In his pamphlets on The Balance of Europe, an Essay upon the National Credit of England, and in Reasons why this Nation ought to put a Speedy END to this Expensive WAR, where Defoe argued his most trenchant case of all, the ink flowed as thick and fast as the imagery:
How have we above twenty years groaned under a long and a bloody war? How often has our most remote view of peace gladdened our souls and cheered up our spirits. Our stocks have always risen and fallen, as the prospects we had of that amiable object were near or remote.
Now we see our treasure lost, our funds exhausted, all our public revenues sold, mortgaged, and anticipated, vast and endless interests entailed upon our posterity, the whole kingdom sold to usury, and an immense treasure turned into an immense debt to pay; we went out full, but we are returned empty.
But even with Defoe on his side, Harley faced a struggle to get his policy accepted. When he could avoid a vote on his peace moves no longer, he found himself defeated by a majority of one. His policy lay in tatters. But Harley was adamant that he would not be forced from office, and circumvented the Lords’ hostility by creating a dozen peers to back his peace policy, and with it secure the future of the fledgling South Sea Company. Emboldened, he moved against his Whig enemies by charging the Duke of Marlborough and Robert Walpole with corruption over the Army’s accounts, sending Walpole to the Tower.
For Harley it was now imperative to circumvent Parliament and strike a peace deal, whatever the cost. Despite the peace negotiations led by the poet and diplomat Matthew Prior the spring campaign against the French was about to start, with the Duke of Ormonde leading British, German and Dutch forces in Flanders. So the British politicians decided to sabotage their own battle plan. The