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Philip V of Spain, however, never had any intention of admitting
the English to a free trade in the ports of Spanish America.
Negotiations were set on foot, but their only result was
the assiento
contract, or the privilege of supplying the colonies with
negroes for
thirty years, and of sending once a year a vessel, limited
both as to
tonnage and value of cargo, to trade with Mexico, Peru,
or Chili. The
latter permission was only granted upon the hard condition,
that the
King of Spain should enjoy one-fourth of the profits, and
a tax of
five per cent. on the remainder. This was a great disappointment
to
the Earl of Oxford and his party, who were reminded much
oftener than
they found agreeable of the
"Parturiunt montes, nascitur ridiculus mus,"
But the public confidence in the South Sea Company was
not shaken. The
Earl of Oxford declared, that Spain would permit two ships,
in
addition to the annual ship, to carry out merchandise during
the first
year; and a list was published, in which all the ports and
harbours of
these coasts were pompously set forth as open to the trade
of Great
Britain. The first voyage of the annual ship was not made
till the
year 1717, and in the following year the trade was suppressed
by the
rupture with Spain.
The King's speech, at the opening of the session of 1717,
made pointed
allusion to the state of public credit, and recommended
that proper
measures should be taken to reduce the national debt. The
two great
monetary corporations, the South Sea Company and the Bank
of England,
made proposals to Parliament on the 20th of May ensuing.
The South Sea
Company prayed that their capital stock of ten millions
might be
increased to twelve, by subscription or otherwise, and offered
to
accept five per cent. instead of six upon the whole amount.
The Bank
made proposals equally advantageous. The House debated for
some time,
and finally three acts were passed, called the South Sea
Act, the Bank
Act, and the General Fund Act. By the first, the proposals
of the
South Sea Company were accepted, and that body held itself
ready to
advance the sum of two millions towards discharging the
principal and
interest of the debt due by the state for the four lottery
funds of
the ninth and tenth years of Queen Anne. By the second act,
the Bank
received a lower rate of interest for the sum of 1,775,027
pounds 15
shillings due to it by the state, and agreed to deliver
up to be
cancelled as many Exchequer bills as amounted to two millions
sterling, and to accept of an annuity of one hundred thousand
pounds,
being after the rate of five per cent, the whole redeemable
at one
year's notice. They were further required to be ready to
advance, in
case of need, a sum not exceeding 2,500,000 pounds upon
the same terms
of five per cent interest, redeemable by Parliament. The
General Fund
Act recited the various deficiencies, which were to be made
good by
the aids derived from the foregoing sources.
The name of the South Sea Company was thus continually
before the
public. Though their trade with the South American States
produced
little or no augmentation of their revenues, they continued
to
flourish as a monetary corporation. Their stock was in high
request,
and the directors, buoyed up with success, began to think
of new means
for extending their influence. The Mississippi scheme of
John Law,
which so dazzled and captivated the French people, inspired
them with
an idea that they could carry on the same game in England.
The
anticipated failure of his plans did not divert them from
their
intention. Wise in their own conceit, they imagined they
could avoid
his faults, carry on their schemes for ever, and stretch
the cord of
credit to its extremest tension, without causing it to snap
asunder.
It was while Law's plan was at its greatest height of
popularity,
while people were crowding in thousands to the Rue Quincampoix,
and
ruining themselves with frantic eagerness, that the South
Sea
directors laid before Parliament their famous plan for paying
off the
national debt. Visions of boundless wealth floated before
the
fascinated eyes of the people in the two most celebrated
countries of
Europe. The English commenced their career of extravagance
somewhat
later than the French; but as soon as the delirium seized
them, they
were determined not to be outdone. Upon the 22nd of January
1720, the
House of Commons resolved itself into a Committee of the
whole House,
to take into consideration that part of the King's speech
at the
opening of the session which related to the public debts,
and the
proposal of the South Sea Company towards the redemption
and sinking
of the same. The proposal set forth at great length, and
under several
heads, the debts of the state, amounting to 30,981,712 pounds,
which
the Company were anxious to take upon themselves, upon consideration
of five per cent. per annum, secured to them until Midsummer
1727;
after which time, the whole was to become redeemable at
the pleasure
of the legislature, and the interest to be reduced to four
per cent.
The proposal was received with great favour; but the Bank
of England
had many friends in the House of Commons, who were desirous
that that
body should share in the advantages that were likely to
accrue. On
behalf of this corporation it was represented, that they
had performed
great and eminent services to the state, in the most difficult
times,
and deserved, at least, that if any advantage was to be
made by public
bargains of this nature, they should be preferred before
a company
that had never done any thing for the nation. The further
consideration of the matter was accordingly postponed for
five days.
In the mean time, a plan was drawn up by the Governors of
the Bank.
The South Sea Company, afraid that the Bank might offer
still more
advantageous terms to the government than themselves, reconsidered
their former proposal, and made some alterations in it,
which they
hoped would render it more acceptable. The principal change
was a
stipulation that the government might redeem these debts
at the
expiration of four years, instead of seven, as at first
suggested. The
Bank resolved not to be outbidden in this singular auction,
and the
Governors also reconsidered their first proposal, and sent
in a new
one.
