South Sea Bubble: the shoemaker’s son who sparked Britain’s first financial crisis

**Thomas Levenson** (0:00)
This was the first time. People didn't know what was happening.

**Gillian Tett** (0:04)
Do you see these kind of episodes of mania as being intrinsic to capitalism?

**Thomas Levenson** (0:09)
I mean, one of the things about the South Sea Bubble itself is it's almost always told as a morality tale. Look at what greed does for you. It drives you mad, it ruins nations and so forth. You know, it reflects the badness of the individuals involved and the system.

**Robin Wigglesworth** (0:33)
Today, on The Story of Money, one of the most notorious financial crashes in history.

**Gillian Tett** (0:41)
The scene is autumn 1720, and we're in London in this tiny quaint cobble street called Exchange Alley.
It's now called Change Alley, and it's just 10 minutes walk away from the Financial Times headquarters, where I am right now. But it was once a thriving hub where jobbing traders gathered in Jonathan's coffee house to buy and sell shares. And on this particular morning in 1720, it was absolutely chockablock, because the news has emerged that the South Sea Company's share price has fallen below 150 pounds, which is down a whopping 90% from their peak in the summer.

**Robin Wigglesworth** (1:20)
Yes, we are going to be talking about the South Sea Company. Thousands and thousands have lost their savings, from working class shopkeepers and footmen to some of the great thinkers of the era, like Isaac Newton and Edmund Halley. Even King George himself has lost money. And people are angry. They want somebody to blame.

**Gillian Tett** (1:43)
And like any good disaster movie, there is a person in particular in the frame who's called John Blunt. And he was the architect of the South Sea Company. He was a shoemaker's son who had risen up the social ranks to become the head of the most powerful company in the country.
And the crisis he helped to engineer would take 300 years for Britain to pay it off.

**Robin Wigglesworth** (2:08)
Yep. The last of the South Sea Bubble debts was actually only payback in 2015 under Chancellor George Osborne. I remember that. I actually covered it for the FT. But was it fair to blame the entire bubble, this epoch-defining bubble, on just one person?
Or was there something bigger at play here?

**Gillian Tett** (2:28)
So today we're telling the story of the South Sea Bubble, one of the most famous events in financial history, the world's first international stock market crash.

**Robin Wigglesworth** (2:38)
But it's a funny one, right Gillian, because it's also one of the most poorly understood events in financial history, actually. And at its heart, it's not actually about the South Seas at all. Really, it's all about government debt, British government debt specifically.

**Gillian Tett** (2:55)
So Robin loves talking about debt, but we're going to be talking about a very important wrinkle today. So welcome to The Story of Money with me, Gillian Tett and me, Robin Wigglesworth.
To get into the South Sea Bubble, we're joined by a special guest who's an expert at this. Thomas Levenson, author of many books, including Money for Nothing, the South Sea Bubble, which of course is relevant today. Tom is a professor of science writing at MIT. So great to have you with us, Tom.

**Thomas Levenson** (3:38)
Wonderful to be here. Thank you.

**Robin Wigglesworth** (3:40)
We are going to start our story in 1710 So this is Britain right at the end of the reign of Queen Anne, the last of the Stuart monarchs.
This is a nation bubbling with change. It's the eve of the Industrial Revolution. The age of enlightenment is on the horizon. And although there's no steam engines or powerlums quite yet, Britain is starting to build a naval trading empire.

**Thomas Levenson** (4:07)
This is one of my favorite periods in English slash British history.

**Robin Wigglesworth** (4:11)
Yes.

**Thomas Levenson** (4:12)
You have wild political change. This is one of the periods when there's the most, not necessarily mobility, but possibility. Britons were trying everything. There was this sort of wild economic, you know, irrational exuberance.
Daniel Defoe, who's a marvelous character running through this whole period. One of his early works is an essay on projects, which are, you know, all the basic startups and enterprises that people were doing. And this is a huge tome with all kinds of wild stuff, you know, that people were willing to try anything and privately raised money for what they were doing.

**Gillian Tett** (4:46)
Sounds a lot like the Silicon Valley bubble today, doesn't it?

**Thomas Levenson** (4:49)
It really is a bit. And of course, you know, an awful lot of those would-be enterprises didn't go anywhere in sort of catastrophic fashion, as do most startups today.