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**Thomas Levenson** (0:00)
If you do see him as the first Prime Minister of Britain, he is, I believe, the longest serving Prime Minister ever. He was there at critical moments in the formation of both Britain's political system and its financial system, and yet I think his reputation is mostly of being this fat, autocratic, corrupt guy who fell upwards. I mean, yeah, he was overweight, but other than that, I think he was a remarkable figure in British history.

**Robin Wigglesworth** (0:25)
I gather that Prime Minister was actually initially an insult.

**Thomas Levenson** (0:30)
Absolutely, and Walpole explicitly rejected that. He said, I'm not the Prime Minister. Well, yeah, but if it walks like a duck and talks like a duck, you know, maybe it's a duck.

**Robin Wigglesworth** (0:48)
Today, on The Story of Money, we're going to be looking at how Britain's economy bounced back after Britain's first huge financial crisis in the 1700s. How just one man rode the path of success to become Britain's first de facto Prime Minister.

**Gillian Tett** (1:07)
And if you're wondering what this is, well, it's the South Sea Bubble. And the man in the frame who helped Great Britain out of the disaster was Robert Walpole.

**Robin Wigglesworth** (1:18)
Yeah, so it's April 1721, and Robert Walpole has achieved something unprecedented. He's taken control of the three most important positions in Britain's government. The first time in history, one person held all three of them. He has control of policy, finances and law.

**Gillian Tett** (1:37)
He would go on to rule Britain almost single-handedly for the next 20 years. And it was the collapse of the South Sea Company, which didn't just topple Britain's economy, it also helped him to get there.

**Robin Wigglesworth** (1:50)
Yeah, and if you want to hear about how the South Sea Bubble happened, you can go back to our previous episode on the formation of the South Sea Company and how crazy things got. But today we're going to be talking specifically about the aftermath, because Robert Walpole's Rise to Power is not just one of those curious outcomes of the South Sea Bubble, it kind of shows how finance and financial events can have a huge impact on the fate of the world. In this case, well, reshaping the entire British political system and triggering the start of its new financial order as well.

**Gillian Tett** (2:24)
Absolutely, so what we're talking about today is how did Britain clean up its economy after this financial disaster? But also, how we can spot bubbles, what we need to do to avert them, and a bubble else why the aftermath of bubbles, which is so often ignored, matters enormously.
True. Welcome to The Story of Money with me, Gillian Tett.

**Robin Wigglesworth** (2:48)
And me, Robin Wigglesworth. And we are once again joined to talk about the aftermath of the South Sea Bubble by Thomas Levenson, the author of Money for Nothing, the South Sea Bubble and the Invention of Modern Capitalism, a killer title, among many other books, frankly, Tom. You've written quite a lot. So Tom, thanks so much for being here today again.

**Thomas Levenson** (3:21)
Thank you for having me. I was worried you might get tired of me.

**Robin Wigglesworth** (3:23)
It's great to be here. Tom, I mean, can you give us a quick recap of the South Sea Bubble? For listeners that might not know, what was the South Sea Company? And why did it cause such a gigantic disaster?

**Thomas Levenson** (3:37)
Sure. So the South Sea Company was, you know, in one way familiar. It was a joint stock company. There were plenty of those around, East India Company being the most famous. And it was set up in 1711 to basically, from the government's point of view, just, you know, take care of some of the government debt. Take the debt, turn it into equities, and put that onto the market in the form of South Sea shares. And the people involved in the South Sea Company were not boring people. They were buccaneers and they wanted both the thrill of the ride and to get, you know, obscenely rich, which they achieved briefly in 1720, when they performed essentially the same function, taking in now much more government debt and turning it into shares and putting it out on the market.
But this time, there were flaws in the structure of the deal, and boy did it turn out that the South Sea Company leaders were incredible hype men, making Elon Musk look like an amateur. You know, the result was the stock shot up in 1720 from 100 or so, 110 at the beginning of the year, up to 1,000 by August, and back down to the low hundreds by December. It was epic from a distance. It's an enormously fun ride to watch, but of course, it ruined an enormous number of people, and it ruined new sorts of people who hadn't previously been deeply involved in the financial markets. You know, the baker and the hairdresser and the stagecoach builder were investing as well as the smart money boys. You could be a 17th century yeoman farmer and never ever think about a bank or who was in and who was out at court and all that.