by Nick Bunker
The nearest royal officials had no doubt that this was so. From Massachusetts the governor, Thomas Hutchinson, warned his superiors in London that the flames of insurrection would inevitably spread to Boston. Recovered from his injuries, the customs officer Charles Dudley wrote a long letter to the admiral, calling the attack “this dark affair,” the work of a conspiracy, planned with cool deliberation. Montagu agreed entirely. On the evening of June 10, when the midshipman from the Gaspée arrived with the news of its destruction, the admiral swiftly drafted a dispatch and sent it express to England.
If the British government had functioned as governments should, an incident so extreme should have led to a firm official response or even, perhaps, to some deep reappraisal of the way they tried to run the northern colonies. Here was an act of the blackest treason, committed by men whose wealth and status should by rights have made them pillars of society. From an imperial point of view, it should have been clear that New England required thorough reform, but the timing could not have been worse. After five weeks at sea the admiral’s dispatch arrived to find the politicians grappling with a crisis of another kind.*2
In July the government usually fell asleep, as Parliament ended its annual session and rose for the long recess. But in 1772 its peaceful doze was interrupted by bad news from all sides. From Europe the mail brought word of revolution and upheaval of a kind that might lead to another war with France. At home the price of corn was soaring again, causing agitation and disorder. In the words of James Boswell, looking on aghast from Scotland, it was a year of “confusion, dismay and distress.” Worst of all, the financial markets chose that summer to collapse in the most alarming panic since the South Sea Bubble.24
* * *
*1 Now called Vineyard Haven.
*2 Five weeks was a normal journey time for an Atlantic crossing from west to east, while a voyage in the opposite direction usually took about three weeks longer, because of the prevailing winds and currents. These are only averages, however, and often ships would suffer long delays on account of bad weather. Conversely, if conditions were exceptionally good a sailing ship could reach England from America in less than four weeks.
Chapter Three
A BANKRUPT AGE
Not a day passes but we hear of suicides.
—A VIRGINIA TOBACCO MERCHANT, WRITING HOME FROM ENGLAND IN THE SUMMER OF 17721
As chance or fate would have it, the crash began on the very day that the Gaspée met her end. On the morning of June 10, as the schooner burned away toward her waterline, a firm of bankers in London failed to open its doors for business. The banking house was called Neale, James, Fordyce and Down, and its failure could not have been more visible or more disgraceful.
The firm might have seemed safe enough, with a fine new office in Threadneedle Street, close to the Bank of England, but for weeks a few people in the know had been muttering about its plight. While three of the partners were old-fashioned bankers—honest, dull, and easily deceived—the fourth was a trader in stocks called Alexander Fordyce. His name had already become a byword for excess. Another Scotsman, tall and debonair, he lived between a house in Mayfair and a mansion in the suburbs. At the age of forty-three, Fordyce was “the greatest speculator in London,” in the words of one contemporary. That morning the city awoke to learn that he had vanished, leaving behind him debts of half a million pounds.2
Ever since Christmas his bank had been dying by inches, as each bet he made on the market went badly wrong. Nervously, his partners watched their assets dwindle, while Fordyce kept a secret ledger known as Waste Book Number Five in which he hid the details of his dealings. In desperation, he made one last throw of the dice, staking everything they had left on what seemed to be a certainty of profit.
By now, the city was full of rumors about the East India Company, its mountain of debt from India, and its glut of unsold tea. Sooner or later, the price of its stock would collapse, and so Fordyce did what any trader might. In the spring he sold the company’s stock short, betting that the price would fall, but as the weeks went by, instead it simply drifted sideways and then it even began to rise. By early June, his straits were dire, and his brokers were after him for cash to cover his losing position. Fordyce hurried around the city, looking in vain for help, until at last, on the evening of the ninth, he knew that all was lost. One final, hopeless session with his clerk, poring over the accounts by candlelight; and then, in the early hours, he drove home to his splendid house at Roehampton in Surrey, where his splendid wife was entertaining guests.
Wild-eyed with Madeira, Fordyce ranted and raved, ate greedily, drank his best champagne, and gave the servants Burgundy with which to toast his health. Then off he scurried into hiding, looking for a chance to slip away across the English Channel. “The blow was struck, the bubble burst,” one of the guests would remember. “The speculation so replete with ruin had failed, altogether failed; Alexander Fordyce was a bankrupt and a beggar.”3
Had this been an isolated incident, a simple case of fraud by just another rascal, his name would swiftly have been forgotten. But when the Fordyce bank went down, it took with it ten more in the capital and another nine in Scotland. Twelve days after he disappeared, a run came close to wrecking every bank in London. As the months went by, the crisis spilled over into Holland and then across the ocean to America, where in Rhode Island the Browns were left with a heap of worthless IOUs from Amsterdam. Most dangerously of all, the crisis would nearly break the East India Company as well.
Quite apart from the turmoil and the hardship it caused, men and women talked about the Fordyce affair so avidly because it seemed to say so much about the times in which they lived. Soon after his disgrace, he inspired a stage play, a comedy by Samuel Foote called The Bankrupt. The era was “a bankrupt age,” said the author, with men like Fordyce displaying all its least attractive features. Selfish, corrupt, and a social climber, he played for the highest stakes and lost a fortune, but so did many others far less famous.
“We have become a gambling nation,” Lord North told the House of Commons in 1774, as he announced a new public lottery. It was one of the shrewdest comments he would ever make. This was an era when his own half brother, a bishop in the Church of England, had to take up residence in Italy with his wife when her extravagance and gambling debts left the couple close to ruin. The British had always liked to take risks, and gaming was an ancient vice, but in the years just before the crisis in the colonies they acquired a new addiction to chance and hazard. They borrowed money and laid bets on a scale not seen before. At the card table, on the racecourse, and in the world of finance, gaming became a way of life, symbolized by the great wooden lottery wheels, six feet across, kept by the Treasury in a chamber overlooking Whitehall.4
When Americans write about the period, sometimes they portray the mother country as a decrepit, tired, and obsolete place, with a powerful navy but a moribund economy. The truth was very different. If the colonies contained dynamic people like the Browns, so did Great Britain, and in much larger numbers. Far from being exhausted or inert, the British were exactly the reverse, an energetic but reckless nation, eager to explore every opportunity for profit.
In about 1760, suddenly the pulse of economic life in the British Isles began to accelerate. With hindsight, we can see that this was so more clearly than anyone could in the eighteenth century. New roads, new mines, and new canals, and scores of patents, filed for new inventions: we can make lists, draw lines on a graph, and show how the nation was starting to change forever, as the Industrial Revolution began. But at the time, although men and women could feel that something new was occurring, they found it strange or unsettling, they found the process hard to quantify, and they could not always tell if it was destructive or benign. They could not see a clear dividing line between wild speculation and sound investment for the long term.5
In some eyes, like Edward Gibbon’s, Britain seemed to be a beacon of progress, leading the world toward the future. With its
pots and pans from Birmingham and its ships with copper bottoms, the kingdom had a great deal to be proud of. It had its spinning jennies and canals and engineers to build fine new machines. It had James Watt, with his steam engine; Josiah Wedgwood, selling his wares as far away as Russia; and a king who loved astronomy and gadgets and every new technique to make the soil more fruitful. But from another point of view, the nation seemed at risk of imminent decline.
Addicted to gambling, luxury, and debt, the British had come to seem like a headstrong and greedy people. According to James Boswell, the crash of 1772 arose from the same assortment of human frailties. The crisis took its origins, he said, from opulence, from carelessness, and from “the desire of being precipitantly rich.” It was the kind of tirade that often appeared in an age when writers such as Boswell enjoyed condemning luxury almost as much as they liked spending money themselves. But his economic views were very widely shared, especially in America; and in two different ways, the speculating habits of Great Britain would play their part in its rift with the colonies.6
The first was a question of attitudes and perception. In the years before the revolution, a gradual process of alienation occurred, as even Americans fond of the mother country began to lose their patience with the way it functioned. In the case of the banking crash, it took only six weeks for the news to reach Virginia, where the tobacco growers relied on loans from London and Glasgow. For nearly a year, the flow of credit dried up. Although the blight on their business was only temporary, it deepened their exasperation with the empire. American visitors to England sailed home to the colonies with tales of vanity and default. When the Virginia Gazette carried long reports about Alexander Fordyce, its readers drew their own conclusions. They decided that the British were a busted flush, decadent and unreliable. Here again we find a cultural divide between the Old World and the New, a divide almost as deep as the one between the Royal Navy and Rhode Island.
Second, the crash and its aftermath were simply too much for the British political system to cope with. As it became the first industrial nation, Great Britain became more volatile, behaving in a manner ever harder to predict. Every year some new problem appeared, worrying the king and his cabinet, whether it be the run on the banks or the rising price of bread. Everywhere they looked, they found the signs of change, but with economic theory in its infancy they could not fit them into a pattern or explain how one thing related to another. When they encountered a crisis, such as the banking crash, all they could do was patch together a solution, with only the dimmest grasp of what its side effects might be.
Across the Atlantic, the unintended outcome of their policies would prove to be calamitous. Behind all of this lay the basic truth: that a new Great Britain was emerging, urban and industrial, harder to understand than the old and also more unstable. As they tried to govern their own complicated country, Lord North and his friends allowed America to slip away.
SPLENDOR AND MAGNIFICENCE
The British adored the art of caricature. If we wished to draw a cartoon of the nation in the 1770s, we could portray it in many different ways, because the country had so many facets. All the time, the British were spinning more cotton and making new machines, but despite the acceleration after 1760 this new economy was still too small to dominate the picture. Instead, a cartoonist who looked at the kingdom purely from a narrow, statistical point of view might have portrayed it as an ancient cart horse, trudging along with a wagonload of baggage from the past.
Estimates are hard to make, but the best suggest that although Britain had already become a nation of shopkeepers, its wealth was still increasing only very slowly. Taken as a whole, its gross domestic product was merely inching forward, growing by significantly less than 1 percent each year. Perhaps as many as two-fifths of the population still earned their living either close to the soil, farming or working in trades that relied in one way or another on agriculture, or as domestic servants. Their output changed only modestly from one decade to the next. For more than a century the yield from the land had risen steadily, thanks to the reclamation of wasteland and bog or to new farming methods copied from the Dutch, but then, for thirty years or so after 1740, the rural economy stood still or in places even shrank. And because it was still so large within the British scheme of things, if farming output did not grow the kingdom as a whole could not advance swiftly.7
But that was only part of the story; and if we left it at that, we would come away with a travesty of Britain at the time. Nobody likened the country to an old gray mare. On the contrary, observers often saw something very different: an economic nation that had lost its balance, with deepening divisions between widespread poverty and pockets of rapidly increasing affluence. However sluggish the countryside might be, in London and many other towns and cities a visitor would find Europe’s most highly paid workers and all the usual signs by way of lavish consumption that a boom was occurring. In the decade before the American crisis, a handful of people made very large fortunes indeed in those sectors of the economy that were on a roll.
The most exciting growth took place in the trade in commodities brought home from the colonies or from Asia. While the tea trade was roaring ahead, the flow of tobacco from Maryland and Virginia also reached a new peak on the eve of the American Revolution, having doubled in the space of thirty years. Much the same was true of Caribbean sugar, where volumes had grown by 30 percent since the early 1760s. But precisely because these sectors were doing so well, it was hard, if not impossible, for outsiders to join in. In the case of tobacco, a tight little circle of merchants in Glasgow and London had locked up much of the importing business. As for sugar, the price of land in the old core of the British West Indies—Barbados, Jamaica, Nevis, and Antigua—had risen to levels that kept newcomers at bay. In principle, tea was rather different—anyone with money could buy the East India Company’s stock or bid for tea at its sales—but, as we have seen, in fact the business was tightly controlled by another small coterie. And so, for the most part, the ambitious had to go elsewhere for opportunities.
A few hoped to profit from the latest advances in science and technology. In this respect, the period supplied two excellent role models in the shape of the potter Josiah Wedgwood and his friend and neighbor Matthew Boulton, the factory master and engineer from Birmingham who financed James Watt. Their long careers defy any attempt at a brief summary, but, putting it very simply, we can say that they were innovators in design, in marketing, and in techniques of mass production, making objects of high quality at a price consumers could afford. They were also very unusual.
Both men were in their prime, their names familiar to anyone who read the press, but Boulton and Wedgwood had few imitators, and neither would have featured on a list of the period’s richest tycoons. Instead, the businesspeople who prospered the most were not the pioneers of industry but the speculators: men who dealt in paper assets or in real estate. While the commodity trade grew so explosively, the financial sector experienced a boom of its own, fed by falling interest rates and bankers eager to lend money. By 1772, this boom was nearly ten years old, with origins that lay in the last great war against the French. The conflict left a damaging legacy, not only in America, but also at home. Of course, the Seven Years’ War had cost an enormous sum, and taxes had to rise, but the economic injury that it caused was more profound than simply the huge increase in the national debt.
The problem arose from the way the war was won. The British might have relied on the navy, which was relatively cheap and cost-effective, but instead they committed ground troops in Europe as well. By 1761, when the British had 100,000 men in Germany, where supplies were scarce and expensive, the army’s annual budget had reached nearly £10 million, double the amount spent on the fleet. Huge contracts were awarded for the supply of food, forage, and munitions, and the military contractors, men like Sir George Colebrooke, did very handsomely indeed. So did the bankers, British and Dutch, who procured the bullion the government needed or underw
rote the bonds it issued.8
When the war ended in 1763, the contracts unwound, and the bond issues ceased, but the effects were lasting. In spending a military budget so immense, the government poured money into the hands of its suppliers, who were either bankers already or swiftly turned to finance after the Treaty of Paris. Looking for ways to reinvest the fortunes they had made, they created a new breed of private banking houses, not only lending money but also trading avidly themselves in commodities and stocks.
In the space of a decade, the number of private banks in London more than doubled, until there were fifty, including the one that Fordyce brought to its knees. The same thing occurred in Scotland, where a dozen new banks appeared, founded by men enriched by military contracts, by sugar, or by tobacco. Before the war, the shires of England had only ten country banks, as they were known; in the 1760s, their numbers began to soar, reaching nearly a hundred by the end of the decade.9
By 1770 credit was easy to find, and it was cheap. After seven years of peace, the government had little need to borrow, and instead London lent freely to speculators like Alexander Fordyce. His career was emblematic of the period, not only in the way in which he rose and fell, but also in the motives that led him to behave as he did. The son of a provost or mayor of Aberdeen, he came from a talented family, with brothers who excelled in medicine and in the church, but Fordyce hoped to surpass them all and join the ranks of the aristocracy.
