Hell Hath No Fury Like Defrauded Investors
In 1720, the South Sea Company Stock Bubble had popped and the British people found themselves retreating inward and looking for a scapegoat.
Through the essays of Cato’s Letters, A Matter of Fact and the Origin of Commerce, we see that the collective was angry and confused at the series of events that unfolded. The public had concluded that the stock-jobbers were the sole cause of the crisis, and overlooked the government’s and their own faults.
Following the market collapse, a panic ensued that angered the people of England. Compared to the normal methods of making money at the time involving manual labor, buying stock in a company seemed like a great way to build wealth. Trenchard and Gordon remarked that “a multitude of families are ruined, and suddenly sunk from plentiful circumstances to abject poverty”.1 The fact that families were made better off by the scheme fueled their rage when it all disappeared.
According to the Cato Letters, the people were like “a man robbed in his house” and were “delivering up helpless women and orphans, with the ignorant and unwary, but industrious subject, to be devoured by pick-pockets and stock-jobbers;”. 2 3 Here we can see that people were apparently unaware of the risks and were being defrauded by the so-called terrible stock-jobbers.
The essays capture the anger of the people and direct it at the perceived villains; stock-jobbers. But is this justice or tyranny of the majority? Or, are certain interested parties using the anger of the scorned to exact their revenge? Perhaps, Cato’s Letters can shed some light.
The mob of angry Brits had declared the stock-jobbers to be the architects of their country’s demise. According to Cato’s letters, the stock-jobbers “have robbed and cheated all men, except their accomplices, so all men are concerned to see justice done to themselves”.4 The stock-jobbers were burdened with all of the blame for the catastrophe that occurred, and they were complicit and malicious in their scheme.
Scorned stock owners referred to them as “monsters, therefore, stand single in the creation: they are stock-jobbers; they have served a whole people as Satan served Job: and so far the Devil is injured by an analogy that can be made between him and them”.5 This elucidates a key point in the mob’s anger; they thought that the stock-jobbers were evil and acted alone. This paved the way for justice to be brought upon the stock-jobbers who in the mind of the mob, had caused the panic to ensue.
If you believe that the criminals are monsters, then how do you deal with them?
The authors of Cato’s Letters say “the answer is short and at hand, hang them; for whatever they deserve, I would have no new tortures invented, nor any new death devised.”. 6 It is clear that they think the only correct punishment for the stock-jobbers is to die and are tapping into the public’s anger to justify it.
The authors antagonize the people further by suggesting that “if the ordinary channels of justice could be stopped,” then the “enraged, the abused people, might be prompted by their utmost passion, and having their resentment heightened by disappointment, might, it is to be feared, have recourse to extraordinary ways; ways that are often successful, tho’ [sic] never justifiable.”. 7 8 Not only are the authors inciting the crowd to execute the stock-jobbers, but also are flirting with the idea of unhinged mob justice.
While Cato’s Letters make clear that the public wanted to exact justice on the evil stock-jobbers, other documents cast light on other parties at fault, hinting at the confusion of the public. In a hypothetical defense trial of the stock-jobbers and directors, Timothy Telltruth explains how the people are also to blame in “A Matter of Fact”.
He proclaims that it was the personal “follies and avarice” of the public investors that had caused the massive run up of the stock. 9 They were investing on their own volition into the stock of the company and if they were burned in the process, then they were no different from “those who have had an ill run at dice”. 10
But it wasn’t just the people who had made bad decisions. The government of England was also at fault.
This entire scheme started because the government had run up a massive pile of debt and needed a way to finance it.
In the Origin of Commerce, Anderson explains that the government had corruptly made this deal to fix their debt problem. After all, how could the government not know about the company’s inability to generate profits and still go through with the deal? Anderson claims the “ministry had nothing in view but the eating of the nation as part of its present heavy load of debt,”. 11 Telltruth similarly implicates the government by asserting they “placed… too large a share of the Public [sic] credit, hoping, that if they could fix it there, in the opinion of the people in general” in order to “easily, or suddenly, at least extricate itself,”. 12 Both of these passages seem to show that the government was acting in its best interest, and not those of the people.
The deal they had struck with the South Sea Company was to enrich the government and the directors. And if the public ever found out, they had an exit strategy. The authors of Cato’s Letter tell a different story. They imply the implementation and execution of the deal “has not answered the good and wise ends designed by the Parliament;”.13 The authors have skillfully absolved the government and the people of their wrongdoing, to push a narrative that the stock-jobbers were the ones to blame. The people had come to believe that all their problems were the result of wicked stock-jobbers who had robbed them blind, and now, they were going to use the pulpit of the government to “load every gallows in England with directors and stock-jobbers”.14
While the English were accustomed to war and plague, this new financial calamity had not only made their lives better beforehand, but also ruined their country afterwards. Cato’s Letters paint a picture of an angry mob, beaten and downtrodden by the stock-jobbers; and now, they are going to get revenge.
On the other hand, Telltruth and Anderson counter these claims with nuance about the blame to be held by the people and the government who created and contributed to the problem. But in hindsight, it is easy to see how multiple parties are at fault. The panic and abruptness of the calamity certainly clouded the opinions and judgments of the English people.
Written by Michael Pena
Edited by Alexander Fleiss & Christine Lee
1 John Trenchard and Thomas Gordon, Cato’s Letters, or Essays on Liberty, Civil and Religious, and Other Important Subjects, ed. Ronald Hamowy, vol. 1, (Indianapolis: Liberty Fund, 1995), 43.
2 Ibid, 43.
3 Ibid, 48.
4 Ibid, 46.
5 Ibid, 45.
6 Ibid, 45.
7 Ibid, 46.
8 Ibid, 46.
9 Timothy Telltruth, Matter of Fact, or, The Arraignment and Tryal of the Di---rs of the S--- S--- Company (London: Printed for John Applebee, W. Boreham, and A. Dodd, 1720). 27.
10 Ibid, 28.
11 Adam Anderson, An Historical and Chronological Deduction of the Origin of Commerce, from the Earliest Accounts to the Present Time…, vol. 1 (London: Printed for A. Millar et al., 1764), 285.
12 Timothy Telltruth, Matter of Fact, or, The Arraignment and Tryal of the Di---rs of the S--- S--- Company
(London: Printed for John Applebee, W. Boreham, and A. Dodd, 1720). 27.