Credit, Currency, and Capital (Political Economies of Capitalism, 1600-1850) [1 ed.] 1032257431, 9781032257433

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Credit, Currency, and Capital

The years 1690–1727 represented a period of significant change for Scotland. It was a time of grand colonial endeavours and financial innovation, punctuated by bouts of economic turmoil and constitutional and political uncertainty. The infamous Darien Scheme, the establishment of the Bank of Scotland and the Royal Bank of Scotland, the Anglo-Scots Union, the Hanoverian Succession, and the Jacobite rising of 1715, all occurred during this short time span. Therefore, it was not only a period that presented Scotland with opportunities but also a period in which the country ultimately lost its autonomy. It was also during these years, and against this unsettled backdrop, that the Scottish Financial Revolution commenced. The complexity of the Scottish situation during the late seventeenth and the early eighteenth centuries has historically made the identification of a Scottish Financial Revolution difficult. This monograph, the first dedicated to the topic, addresses this problem and provides a model for identifying and understanding the revolution through the economic, political, and constitutional contexts of the period. Using examples of financial developments and innovation driven by Scotsmen in Scotland, Europe, and the colonies, this work defines the Scottish Financial Revolution as a series of developments that took place in Scotland when political circumstances allowed, but which also occurred outwith Scotland through the agency of members of the Scottish diaspora. This monograph is therefore the story of how Scotsmen at home and abroad contributed to financial debate and development between 1690 and 1727. Credit, Currency, and Capital: The Scottish Financial Revolution, 1690–1727 will appeal to students and scholars interested in the history of Economics and Finance. It will also be of interest to those studying the history of the Anglo-Scots Union and the complex relationship between Scotland and England. Andrew McDiarmid earned his PhD from the University of Dundee and attended the Graduate School at Yale University. He has been an adjunct professor at University College Dublin and a postdoctoral fellow at the University of Edinburgh. His work focuses on Early Modern Scotland, Britain, Ireland, and the colonies, with an interest in the history of money and the development of financial institutions. The author’s previous publications include: ‘The Equivalent Societies of Edinburgh and London, the Formation of the Royal Bank of Scotland, and the Nature of the Scottish Financial Revolution’, Journal of British Studies (2021); and ‘“Bring us wealth, or keep it among us”: The financial literature of the Edinburgh pamphlet war of 1705, and the capitalisation of the Scottish economy’, Scottish Historical Review (2022).

Political Economies of Capitalism, 1600–1850 Series editors: John Shovlin, Philip J. Stern, Duke University, USA and Carl Wennerlind, Barnard College, USA

This series seeks manuscripts exploring the many dimensions of early modern ­political economy, and especially the ways in which this period established both foundations for and alternatives to modern capitalist thought and practice. We welcome submissions that examine this history from a variety of perspectives—­ political, intellectual, cultural, economic, scientific, social, spatial, or others—and in contexts ranging from the local to the global. Potential themes include efforts to understand how natural philosophy and political economy were intertwined and how they shaped prevailing worldviews of both individual actors and states; the uneasy coexistence of liberty and coercion in labor, commodity, and financial markets; the tension between commercial activities, social virtues, and political stability; the interplay between commercial, military, and political power at home and overseas; the incongruity between ideal categories, such as free trade, and real world practices. While we will consider traditional monographs, our primary focus is on the publication of shorter interpretive and conceptual books (50–70,000 words). We believe that this format is ideal for the development of broad arguments and perspectives, providing authors with the opportunity to develop their ideas in a flexible and accessible format. We are also open to proposals for other forms of scholarship, both innovative and traditional, such as collaborative works, edited collections, and critical textual editions. Authors interested in submitting a proposal, please feel free to contact any of the series editors. Political Reason and the Language of Change Reform and Improvement in Early Modern Europe Edited by Adriana Luna-Fabritius, Ere Nokkala, Marten Seppel, and Keith Tribe Credit, Currency, and Capital The Scottish Financial Revolution, 1690–1727 Andrew McDiarmid

For more information about this series, please visit: https://www.routledge.com/Political-Economies-ofCapitalism-1600-1850/book-series/CARL

Credit, Currency, and Capital

The Scottish Financial Revolution, 1690–1727 Andrew McDiarmid

First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 Andrew McDiarmid The right of Andrew McDiarmid to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-032-25743-3 (hbk) ISBN: 978-1-032-25747-1 (pbk) ISBN: 978-1-003-28481-9 (ebk) DOI: 10.4324/9781003284819 Typeset in Times New Roman by codeMantra

To Colette

Contents

Acknowledgements Author’s Notes on Conventions Glossary A Cast of Characters

ix xi xiii xv

 1 Introduction

1

  2 The Financial Revolution at home: Scotland, 1690–1707

9

  3 ‘Land is what produces everything, silver is only the product’: the land bank debates of England, North America, and Scotland, 1650–1705

33

  4 ‘The proper question is not whether paper money be as good as silver or gold, but whether it is better than no money’: William Burnet and the New Jersey Loan Office

60

  5 ‘We are far from fairy tale Mr Chancellor’: John Law and the proposed National Bank of France, 1701–02

86

  6 For the want of ‘scots projects’: Scottish financial actors and Scottish financial institutions after 1707

103

  7 The long road to the Royal Bank of Scotland and the growth of Scottish banking, 1707–1772

131

 8 Conclusion

157

Index163

Acknowledgements

I would like to extend my gratitude to the University of Dundee for all the help and support I have received over the last decade. The feedback and support offered by Jim Livesey and Alan MacDonald have been crucial in forming the ideas in this book. I would also like to thank Anja Johansen, Martine van Ittersum, Chris Storrs, and Graeme Morton for all I have learned from them, and I particularly need to thank Derek Patrick and Billy Kenefick for first making me believe that this was all possible! Thank you to Ivar McGrath for the wise words he imparted to me in a booth at Birchalls and to Chris Fauske for his words of encouragement. I am very thankful to Carl Wennerlind and Helen Paul for reading drafts of this work, to William Deringer for his feedback on the initial proposal, and to Rob Langham at Routledge for making this a straightforward process. I am also thankful to those who attended the Money, Power and Print colloquium in 2022 and offered feedback on a draft of Chapter 4. Thank you also to Chris Whatley and Steve Pincus for their insight over the years, and a special mention to John Blicharski for taking a chance on me. Thank you to the Scottish Graduate School for Arts and Humanities and the Institute for Advanced Studies in the Humanities at the University of Edinburgh for their help and support. Thank you to Cambridge University Press for allowing extracts of A. McDiarmid ‘The Equivalent Societies of Edinburgh and London, the Formation of the Royal Bank of Scotland, and the Nature of the Scottish Financial Revolution’, Journal of British Studies, Volume 60, Issue 1, (Cambridge, 2021), to be reproduced with their permission. On a personal note, thank you to Colette for believing in me, and thank you to my mum and dad, and Pat and Alf for all their help and support in getting here.

Author’s Notes on Conventions

All dates in the text correspond to the modern Gregorian calendar. While Scotland had started the new year on 1 January since 1600, it was not until 1752 that this convention was adopted across Britain. Prior to this, the Julian calendar, with the new year starting on March 25, had been in place. This does not impact significantly in this work, but some letters discussed in Chapter 5, which were sent from England in January and February of 1702, could cause confusion. Technically, they were sent in 1701 by the standards of the day, but by modern conventions, it would now be 1702. The spelling of quotations has not been modernised, and the original punctuation has been retained. Except where stated monetary sums are in pounds sterling, and inflationary figures have been calculated using the Bank of England inflation calculator. Calculating figures is difficult, and over longer periods of time it is less accurate. The calculator provides a ballpark figure and is used to give the reader an indication of current values. A note on monarchs: In 1603, James VI of Scotland ascended to the thrones of England and Ireland. In an English sense, he then became James I, as he was the first monarch of this name to rule England. The convention used in this book is that the Scottish title takes prominence, so, for example, James VI & I (VI of Scotland, I of England). Subsequent monarchs follow the same convention. For example, William II & III (II of Scotland and III of England). No number is assigned for the Irish throne.

Glossary

Balance of Trade:  The difference between a country’s imports and exports. If the value of imports exceeds the value of exports of a country, this would be a trading deficit. Bank of Issue:  A bank with the authority to issue banknotes. Convention of the Royal Burghs:  This was a group made of Scottish members of parliament representing the burghs. It advocated for a wide range of burgh interests. Court of Session:  Scotland’s highest civil court. Clipped coin:  Where a small amount of metal was removed from the edges of coins and the combined clippings melted into bullion. The Equivalent:  The sum of £398,085 10s agreed in the Anglo-Scots Union negotiations as compensation for Scotland taking on part of the English national debt and for the incurrence of other costs associated with the union process. Fractional Reserve Bank:  A bank in which a fraction of bank deposits are backed by cash available for withdrawal. In the period under consideration in this book, this model ­allowed a bank to make loans in the form of paper notes, backed by a fraction of the loan’s value in coin. On its establishment in 1695, the Bank of Scotland, for example, held specie to the value of 25 per cent of the notes it issued. Hanoverian Succession:  This occurred in 1714 and marked the end of the Royal Stuart line by conferring the thrones of Britain and Ireland upon George, ­Elector of Hanover, Queen Anne’s closest Protestant relative. Joint-Stock:  An organisation in which the stock is sold in the form of shares and owned by shareholders. Land Bank:  A bank that issues loans, usually in the form of paper notes, secured against land pledged by the borrower. Lombard Bank:  An institution that issues loans and takes goods as collateral. Similar to a pawnbroker. Specie:  Coined metal money. Recoinage:  The process of reminting old coin or minting new coin. Union of the Crowns:  When James VI of Scotland ascended to the thrones of England and Ireland in 1603. Thereafter, he was James VI & I.

xiv Glossary Whigs and Tories:  Competing political factions in late-seventeenth- and eighteenth-­ century politics. As each party’s values developed over time, providing a clear definition of what each stood for is difficult. During the period under consideration, however, Whigs tended to believe in constitutional monarchy, were more open to reform than Tories, and supported toleration for Protestant dissenters (although not Catholics). Tories meanwhile firmly supported the English Church in its persecution of dissenters and the divine right of monarchs to rule. After the Hanoverian Succession, the Whigs became the supreme party in British politics and the Tories faded in influence.

A Cast of Characters

While everyone discussed in this book is introduced as they appear, there are a few individuals who are very important for the story that lies ahead. As such, a short biography has been provided for some of the central actors. Armour, James (fl. 1702–1722). While the details of his life are sparse, it is known that Armour was a lawyer who produced several economic works between 1702 and 1722. These primarily covered fractional reserve and land banking. He also acted as a go-between for a London-based insurance company that wished to invest in the Bank of Scotland. In partnership with the English banking project Hugh Chamberlen, he submitted a land bank proposal to the Scottish Parliament in 1704. Burnet, William (1688–1729). Son of Scottish minister, Gilbert Burnet, William Burnet was born at the Hauge in 1688. His godfather was William of Orange. An exceedingly well-educated young man, Burnet fell into the orbit of Isaac Newton, who proposed his election to the Royal Society of London in 1706. Burnet was the governor of New York and New Jersey between 1720 and 1727, during which time he oversaw the establishment of a Loan Office that issued paper money secured against land. Brown, Andrew (1679–n.d.). Lanarkshire doctor, Brown has been identified as a friend of Andrew Fletcher of Saltoun and of William II. He produced works that considered the ‘publick spirit’ of Scotland in 1702 and the union between Scotland and England in 1706. Brown was important in the context of the Scottish Financial Revolution for producing two essays on a ‘land mint’ in 1705. Campbell, Patrick, of Monzie (1675–1751). A prominent advocate and a judge of the Scottish Court of Session, Monzie was also an investor. He had money in the Darien Scheme, the South Sea Company, and the Mississippi Company. Monzie was deeply involved in the Scottish Equivalent Society and the subsequent Equivalent Company, and in 1727, he became one of the first directors of the Royal Bank of Scotland. He also tested the waters of being a financial projector, writing a land bank proposal in 1708. Drummond, Andrew (1688–1769). The founder of Drummonds Bank in London, Drummond was born in Perthshire. He apprenticed as a goldsmith in Edinburgh and established his own London-based business in 1712, before entering the

xvi  A Cast of Characters business of banking in 1717. His bank had an illustrious clientele, many of which appear in this book. Drummond, John, of Quarell (1676–1742). Merchant, banker, diplomat, and politician, Drummond is an important character in this book. He was involved with an influential circle of politicians, financiers, and merchants, who were at the centre of political decisions. A key member of the London-based Equivalent Society, Drummond and his network were important in the steps that led to the establishment of the Royal Bank of Scotland in 1727. Hodges, James (fl. 1697–1710). As a London-based Scottish pamphleteer and clergyman, Hodges was extremely popular. He wrote on the Anglo-Scottish Union, and in 1705, he produced a pamphlet that advocated for the expansion of Scottish credit through two funds, one of which was to be secured against money already invested in Darien. Law, John (1671–1729). The son of an Edinburgh goldsmith, Law first rose to prominence for killing a rival in a duel in 1694. Within a decade, he had reinvented himself as a monetary theorist and successful gambler. Between 1716 and 1720, he was at the heart of French public finance decisions, fleeing Paris after his system crashed in 1720. Maitland, Charles, 6th Earl of Lauderdale (c.1688–1744). Lauderdale was General of the Scottish Mint between 1714 and 1734, a role which had a long history in his family. He was also ‘President of the Police, Lord Lieutenant and High Sheriff of the County of Edinburgh’ and one of 16 Scottish peers in the ninth Parliament of Great Britain.1 Paterson, William (1658–1719). Hailing from Dumfriesshire, Paterson appears to have been a merchant before becoming involved in financial projects. He was central to the formation of the Bank of England and a driving force behind the Company of Scotland’s decision to establish a Scottish colony in Darien. Note 1 The Sessional Papers printed by order of the House of Lords, 1884–5, Vol. 11, (London 1851), p. 238.

1 Introduction

During the last half-century, a number of significant financial crises, some ­localised and some global, have occurred. These have included periods of crippling recession across much of the western world during the first half of the 1970s, the worldwide collapse of stock markets in 1987, the wholesale crash of U.S. savings and loan associations between 1986 and 1995, and the bursting of the ‘dot com’ bubble in 2002. The most significant financial failure of the twenty-first century to date was the global crash of 2007–08. This was an event initiated by the packaging of sub-prime American mortgages as high-yield, safe security investments for European investors and exacerbated by lax regulations and self-serving banks.1 The fallout was severe and pushed a small number of countries to the brink of financial collapse.2 This list is, of course, not exhaustive, and aside from these large-scale economic crises, there has also been the fixing of LIBOR rates, the mis-selling of Payment Protection Insurance, and any other number of financial scandals and stock market manipulations. While these crises have had a lasting impact on the world economy and have done little to improve the reputation of bankers and other financial actors with the general public, they have not slowed our appetite for new financial schemes or investments. Millions of new investors continue to enter the market every year, and in 2021 alone, U.S. investors invested more than $1 trillion into equities, a figure higher than the previous 20 years combined.3 Nor have they done anything to decelerate rapid innovations in the world of global currencies. As this book will demonstrate, money has always been something that required a bit of imagination, but in recent years, it has developed significantly. Today, money is ethereal. It exists in numerous forms and in no form at all. We store it as numbers on spreadsheets. We access it with a thumbprint in smartphone apps, and we keep it in digital wallets in currencies with names straight out of a sci-fi novel (Ethereum, Cronos, Immutable X). We wave a plastic card across a terminal and funds magically leave our account. We split bills with our friends with the swipe of a phone screen, and we buy, sell, and invest without leaving the comfort of our beds. Today, digital money innovation has vastly changed how we trade and interact financially with one another. Speculative bubbles, collapsing share prices, and disgraced bankers and stock traders are not, however, new occurrences. Nor are novel forms DOI: 10.4324/9781003284819-1

2 Introduction of currency and financial innovations that aim to increase the speed at which ­currency circulates and make monetary transactions easier. Instead, the financial ­instruments that drive the modern world economy, built on credit and non-metal currencies, supported by large-scale institutions, and with the involvement of governments, emerged from the financial revolutions of some three centuries earlier. This was a period in the histories of Europe and the Americas in which financial ideas developed at pace, new banks were established, new forms of currency were put into circulation, and innovative methods by which to expand public and private credit were instituted. Historical studies of England’s Financial Revolution have been emerging since the 1960s. These works, in which writers often disagree on the years during which the revolution took place or on the degree to which the revolution was more of an evolution, have been important in tying the event to the emergence of the English fiscal-military state and early English Empire.4 More recently, works dedicated to the event in Ireland and Sweden have also been published.5 Edited collections by Daniel Carey and Christopher Finlay, and by Ivar McGrath and Chris Fauske, have also been successful in expanding our understanding of financial debate and innovation away from the centre and into more peripheral areas, including the West Country and wider Irish experiences of the revolution.6 These collections are a particularly welcome addition to a historiography, which has traditionally been dominated by a London-centric view of the revolution. Events in Scotland, and the nature of the Scottish revolution, have not, however, been sufficiently dealt with, and until this monograph, there has been no study dedicated to the Scottish Financial Revolution. A reason for this is that defining the nature of the Scottish revolution is difficult. In England, it is much easier to identify a period of financial innovation taking hold from the 1690s – although some scholars do date the beginning of the revolution as early as the 1620s – in which an early fiscal-military state encouraged novel ­financial schemes in order to support the cost of war and the development of English state structures.7 English financial projects included a tontine in 1693, a lottery and the establishment of the Bank of England in 1694, and a short-lived land bank in 1696. At this time, there was also a boom in new joint-stock companies and significant development of the London stock market.8 In Scotland, a far smaller, far poorer, and less developed country, the revolution is harder to pin down. A consensus has, however, emerged from those working in the field that something occurred, something distinct from what happened in England or Ireland, but its full character had remained unclear.9 Of the existing work in the field, that produced by Patrick Walsh has come the closest in defining Scottish events. His research into the South Sea Bubble has greatly added to our understanding of patterns of investment and the impact of the bubble’s collapse in peripheral areas, including Scotland.10 His work on Ireland has overlapped with the financial landscape of Scotland in the period from 1690 to 1721 and has led Walsh to conclude that ‘Scotland, certainly in the pre-Union years, did experience a revolution in private if not public credit’. He goes further by adding that ‘the focus on private enterprise rather than on the financial institutions

Introduction  3 of the state marked out the Scottish case as being significantly different to either the Irish or indeed the English financial revolutions’.11 Importantly, Walsh also identifies that the nature of the revolution in Scotland was one in which ‘the focus of Scottish innovation was less on the creation of forms of public credit, and more on corporate and mercantile initiatives’. He states that ‘Scotland, unlike England, or even Ireland, did not see the emergence of either an efficient revenue bureaucracy or a funded national debt’ and that the military contexts which created the need for government borrowing in England and Ireland were ‘either absent or too politically complicated’.12 Walsh’s observations are important in allowing us to understand some of the characteristics of the Financial Revolution in Scotland, while also pointing to the complexity of the situation. There were undoubtedly initial similarities between the English and Scottish financial revolutions, but these were short-lived. Both countries experienced economic booms in the first half of the 1690s – like England, Scotland also witnessed an increase in joint-stock offerings and established a major joint-stock bank – but each suffered crises in the second half of the decade. In England, this manifested in financial problems in 1696–97, with the Bank of England suspending payments, a difficult recoinage, and problems affecting the stock market, all issues from which the country recovered quickly. Scotland’s crises cut deeper, however, and recovery was not so swift. Poor harvests in 1696 and 1697, accompanied by the increase in food prices, led to widespread starvation. Economic crisis then followed as coin flowed out of the country to cover the cost of imports, while at the same time, rural incomes were depressed by the inability of Scottish farmers to produce a surplus.13 The costs associated with the Nine Years’ War (1688–97) added to the woe, as the imposition of taxes to pay for the conflict and the disruption the hostilities caused to Scottish trade and shipping intensified the hardship. The situation was then exacerbated by the Company of Scotland’s loss of the Scottish colony at Darien in 1700. Following that moment, native investment opportunities dwindled, and those with money were forced to invest elsewhere. Further crisis then hit in December 1704 as the Bank of Scotland, in the wake of a shortage of currency to meet demands, along with rumours that a recoinage was imminent, was forced to suspend payments.14 The stop, while short-lived, became a key factor in driving Scottish writers to think about the economy, and in 1705, a significant Scottish financial literature emerged. Largely in the form of pamphlets, the innovative financial ideas contained in these proposals, which included several land banks and credit schemes, were at their core attempting to capitalise the Scottish economy. Many were also attempting to enlarge the pre-Union Scottish State, with the bulk of the proposals aiming to administer a novel financial system via a new government institution or a financial institution overseen by Parliament. Walsh’s argument that the focus on Scottish financial developments which furthered ‘private enterprise rather than on the financial institutions of the state’ is therefore correct, but this was by circumstance rather than design. State-building was built into many of these proposals in theory, but did not develop into practice, with each of the 1705 proposals rejected by the Scottish Parliament during the summer of that year. In the months which followed, Scotland and England

4 Introduction entered negotiations on the terms of a possible parliamentary union, and in 1707, this became a reality. The result was that Scotland lost many of its institutions – the Edinburgh Parliament, the Scottish Privy Council, and an autonomous Scottish Mint – prompting a political vacuum in the country as parliamentarians and nobility headed south to London. In the absence of Scottish agitation, the new British government then became largely apathetic to events north of the border.15 In the decades which followed Union, Scotland was in effect a stateless nation. Its integration into a British framework was slow to develop and only made significant progress from the 1740s. However, by the middle of the 1720s, in the wake of significant unrest prompted by food shortages, the unpopular enclosure of common lands, and the Malt Tax, a shift occurred in the attitude of the British administration towards Scotland. There was a recognition by the government in London that a link between idleness and popular unrest existed, and it was hoped that by reviving Scotland’s ailing economy, further unrest might be prevented in the future. One result of this change of policy was the establishment of the Board of Trustees for Fisheries, Manufactures and Improvements in Scotland in July 1727. This was a body that aimed to develop Scottish industry and commerce and proved to be central to Scottish development over the next century. Another key development in Scotland occurred two months prior to the establishment of the Board of Trustees for Fisheries, Manufactures and Improvements in Scotland. This was when a group of Edinburgh and London-based investors had been successful in attaining a Royal charter to establish a new bank in Scotland. The result was that innovative financial ideas around refinancing old debt into new equity, which had been circulating beyond Scotland, were imported into the country, and the Royal Bank of Scotland was formed, the country’s first new financial institution since the Bank of Scotland in 1695. Financial development in Scotland was, however, only part of the story. This book is built on a hypothesis that recognises the complexity of the Scottish situation between 1690 and 1727 as one of tremendous political and constitutional change and provides a model for understanding the Scottish Financial Revolution through this prism. It makes the case that the revolution was a series of events that occurred not only in Scotland, developing contingent upon political circumstances, but also in territories separated from Scotland, where it was driven by the agency of the Scottish diaspora. It will be demonstrated that the experiences of Scotland in the decades following 1690 – a sustenance and economic crisis in the late 1690s worsened by the financial fallout caused by the loss of Darien, a pre-­Union Parliament unprepared to back the innovative financial schemes laid before it, with many parliamentarians already with one eye on union with England, and then the loss of sovereignty and the political vacuum in the country following the Union of 1707 – allow for a wider conceptualisation of the Scottish Financial Revolution. This was a series of events in which Scotsmen advanced Scottish financial ­development when political circumstances allowed and, at other times, contributed greatly to the financial developments of other countries; the latter included proposals for a French bank in 1701, the establishment of a loan office in New Jersey in the 1720s, and the reform of French public finance between 1716 and 1720.

Introduction  5 This book will also re-evaluate the impact of two of the most important contributors to the financial ideas of the period in Scotland. These were Dumfriesshire-born, merchant and speculator William Paterson, and John Law, the son of an Edinburgh goldsmith, with both men responsible for important financial experiments carried out in foreign countries. Paterson is best known in Scotland as the architect of the Company of Scotland’s disastrous attempt at planting a Scottish colony in South America, but had been a central contributor to the plan to establish the Bank of England in 1694, and was one of the bank’s first directors. Law meanwhile made a failed attempt at establishing a land bank in Scotland in 1705 – his plan was rejected by a Parliament divided on the issue – before becoming the founder of the French Banque Générale and the subsequent ‘Mississippi Company’ between 1716 and 1720.16 He has since become better known for the collapse of his French system in 1720. This was an event triggered by the value of the Mississippi Company increasing from around 34 million livres to over 5 billion in the space of just 3 years, as Law issued shares at prices that continued to increase, while all the time pumping paper money into the French economy through his bank.17 The term ‘millionaire’ was first coined at this time in order to describe those who got rich through investing in the scheme, but after the bubble burst Law was chased out of France. The history of Paterson and Law, certainly in Scotland, has therefore been generally overshadowed by failure; Darien was a failure, and Law failed to establish a Scottish bank. This book will demonstrate, however, that not only were both men central figures in the financial developments of other countries, but, through the ideas of Law and the pragmatism of Paterson, they were also central in the formation of the Royal Bank of Scotland in 1727, after which a significant expansion in Scottish banking occurred. The impact of these men in Scotland was therefore more significant than previously thought. At the centre of this monograph is the hypothesis that the Scottish Financial Revolution was a series of events shaped by the political landscape of Scotland between 1690 and 1727. It will demonstrate that following a flurry of economic ­developments in the first 5 years of the 1690s, the revolution in Scotland was ­derailed, and for a period of more than 30 years between 1695 and 1727, no new financial institutions were formed in the country. Financially innovative ideas continued to emerge, but these ideas were either rejected by a pre-Union Parliament readying itself for a merger with England or, following 1707, met by a British administration with little interest in Scottish economic development. Scotsmen continued to operate in the financial sphere post-Union, but many found it easier to operate outwith Scotland, centring their practice in London, on the continent, or the Americas. This monograph is therefore the story of how Scotsmen at home, and Scottish merchants, bankers, and colonial officials across the Atlantic world, contributed to financial debate and development. It will demonstrate that the Scottish Financial Revolution occurred over three overlapping, but distinct, phases. Beginning in Scotland with the developments of the 1690s, the nascent revolution was slowed by the crises of the second half of the decade and compounded by the loss of Darien in 1700. Following this, a second phase, driven by the agency of members of the Scottish global community promoting innovative banking, credit, and currency ideas in Europe and the Americas, allowed the revolution to expand

6 Introduction beyond the country. Then, it was reinvigorated in Scotland through innovative ­financial ideas that established the Royal Bank of Scotland in 1727. Notes 1 L. Neal, A Concise History of International Finance: From Babylon to Bernanke, ­(Cambridge, 2015), p.295; and D. Carey, ‘Preface’, in D. Carey, and C. J. Finlay (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011), p.xiii 2 The cases of Ireland, Greece, and Italy in particular come to mind. For an overview, see D. Donovan, and A. E., Murphy, The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis, (Oxford, 2013); T. Pelagidis, and M. Mitsopoulos, Greece: From Exit to Recovery? (Washington, 2014); and R. Di Quirico, ‘Italy and the Global Economic Crisis’, in Bulletin of Italian Politics, Vol. 2, No. 2, (2010), pp.3–19 3 R. Sharma, ‘Retail Investors Riding the Bull Market could Spur a Populist Backlash’, Financial Times, 20 December 2021 4 P. G. M. Dickson, The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756, (London, 1967); H. Roseveare, The Financial Revolution, 1660–1760, (London, 1991); and J. Brewer, The Sinews of Power: War, Money and the English State, 1688–1783, (New York, 1989) 5 S. D. Moore, Swift, the Book, and the Irish Financial Revolution: Satire and Sovereignty in Colonial Ireland, (Baltimore, 2010); and A. Ögren (ed), The Swedish Financial Revolution, (London, 2010) 6 C. I. McGrath, and C. Fauske (eds), Money Power, and Print: Interdisciplinary Studies on the Financial Revolution in the British Isles, (Newark, 2008); and C. I. McGrath, ‘“The Public Wealth is the Sinew, and Life, of Every Public Measure”: The Creation and Maintenance of a National Debt in Ireland, 1716–45’, pp.171–208; R. Hermann, ‘Money and Empire: The Failure of the Royal African Company’, pp.97–120; D. Carey, ‘John Locke, Money, and Credit’, pp.25–52; P. Tonks, ‘Leviathan’s Defenders: Scottish Historical Discourse and the Political Economy of Progress, pp.73–96; and R. J. Fechner, ‘“The Sacredness of Public Credit”: The American Revolution, Paper Currency, and John Witherspoon’s Essay on Money (1786)’, pp.141–170, all in Carey, and Finlay (eds), The Empire of Credit 7 Carl Wennerlind dates the revolution as 1620–1720, while Henry Roseveare places it at 1660–1760; see C. Wennerlind, Casualties of Credit: The English Financial Revolution, 1620–1720, (Cambridge, 2011); and Roseveare, The Financial Revolution, 1660–1760 8 A. Murphy, The Origins of English Financial Markets: Investment and Speculation ­before the South Sea Bubble, (Cambridge, 2009), pp.1–2; and R. C. Michie, The London Stock Exchange: A History, (Oxford, 1999), pp.20–24 9 C. I. McGrath, and C. Fauske, (eds), Money Power, and Print: Interdisciplinary Studies on the Financial Revolution in the British Isles, (Newark, 2008); Carey and Finlay (eds), The Empire of Credit; and P. Walsh, The South Sea Bubble and Ireland: Money, Banking and Investment, 1690–1721, (Woodbridge, 2014) 10 Walsh, The South Sea Bubble and Ireland; and ‘The Bubble on the Periphery: ­Scotland and the South Sea Bubble’, in The Scottish Historical Review, Vol. XCI, No. 231,­­ (April, 2012), pp.106–124 11 Walsh, ‘The Bubble on the Periphery …’ p.112 12 Walsh, The South Sea Bubble and Ireland, p.39 13 For details see W. R. Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720 (3 Volumes, Cambridge, 1910–1912), Vol. 1, ­pp.347–351; and R. Saville, Bank of Scotland: A History, 1695–1995 (Edinburgh, 1996), pp.39–46

Introduction  7 14 A. E., Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.72 15 T. M. Devine, ‘The Modern Economy: Scotland and the Act of Union’, in T. M. Devine, C. H. Lee, and G. C. Peden (eds), The Transformation of Scotland: The Economy Since 1700, (Edinburgh, 2005), p.27 16 D. Armitage, ‘Paterson, William (1658–1719), Banking Projector’, Oxford Dictionary of National Biography, (Oxford, 2004); the two others involved in drawing up the plan were merchant Michael Godfrey, and Treasury commissioner Charles Montagu 17 Murphy, John Law, p.164; The company then became the Compagnie Perpetuelle des Indes in 1719

Secondary sources Brewer, J., The Sinews of Power: War, Money and the English State, 1688–1783, (New York, 1989) Dickson, P. G. M., The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756, (London, 1967) Donovan, D., and Murphy, A. E., The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis, (Oxford, 2013) Moore, S. D., Swift, the Book, and the Irish Financial Revolution: Satire and Sovereignty in Colonial Ireland, (Baltimore, MD, 2010) Michie, R. C., The London Stock Exchange: A History, (Oxford, 1999) Murphy, A., The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble, (Cambridge, 2009) Neal, L., A Concise History of International Finance: From Babylon to Bernanke, ­(Cambridge, 2015) Pelagidis, T., and Mitsopoulos, M., Greece: From Exit to Recovery? (Washington, 2014) Roseveare, H., The Financial Revolution, 1660–1760, (London, 1991) Saville, R., Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996) Scott, W. R., The Constitution and Finance of English, Scottish and Irish Joint-Stock ­Companies to 1720, Vols. 3, (Cambridge, 1910–1912), Vol. 1 Walsh, P., The South Sea Bubble and Ireland: Money, Banking and Investment, 1690–1721, (Woodbridge, 2014) Wennerlind, C., Casualties of Credit: The English Financial Revolution, 1620–1720, ­(Cambridge MA, 2011) Journal articles and edited collections Carey, D., ‘John Locke, Money, and Credit’, in Carey, D., and Finlay, C. J., (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011), pp.25–52 Carey, D., and Finlay, C. J., (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011) Devine, T. M., ‘The Modern Economy: Scotland and the Act of Union’, in Devine, C. H. Lee, and G. C. Peden, (eds), The Transformation of Scotland: The Economy since 1700, (Edinburgh, 2005), pp.13–33 Di Quirico, R., ‘Italy and the Global Economic Crisis’, in Bulletin of Italian Politics, Vol. 2, No. 2 (2010), pp.3–19 Fechner, R. J., ‘“The Sacredness of Public Credit”: The American Revolution, Paper ­Currency, and John Witherspoon’s Essay on Money (1786)’, in Carey, D., and Finlay, C.

8 Introduction J., (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011), pp.141–170 Hermann, R., ‘Money and Empire: The Failure of the Royal African Company’, in Carey, D., and Finlay, C. J., (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011), pp.97–120 McGrath, C. I., ‘“The Public Wealth is the Sinew, and Life, of Every Public Measure”: The Creation and Maintenance of a National Debt in Ireland, 1716–45’, in Carey, D., and Finlay, C. J., (eds), The Empire of Credit: The Financial Revolution in the British Atlantic World, 1688–1815, (Dublin, 2011), pp.171–208 McGrath, C. I. and Fauske, C., (eds), Money Power, and Print: Interdisciplinary Studies on the Financial Revolution in the British Isles, (Newark, 2008) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) Ögren, A., (ed), The Swedish Financial Revolution, (London, 2010) Walsh, P., ‘The Bubble on the Periphery: Scotland and the South Sea Bubble’, in The ­Scottish Historical Review, Vol. XCI, No. 231 (April 2012), pp.106–124 Online sources Armitage, D. (2004–09–23). Paterson, William (1658–1719), Banking Projector. Oxford Dictionary of National Biography, (Oxford, 2004) Sharma, R., ‘Retail Investors Riding the Bull Market Could Spur a Populist Backlash’, ­Financial Times, December 20 2021

2

The Financial Revolution at home Scotland, 1690–1707

Between 1690 and 1700, Scotland experienced an assortment of economic fortunes. The country had emerged ‘financially confident’ from the Glorious Revolution of 1688–89, and during the first half of the 1690s, it experienced substantial economic development.1 At the centre of this development was a boom in joint-stock ventures, with 47 such companies in operation in Scotland during the first 5 years of the decade.2 These drew investment from keen Scottish investors and included small to medium enterprises such as manufactories producing rope, cloth, and soap, as well as the large financial institutions of the Bank of Scotland and the Company of Scotland.3 Then, in the second half of the decade, a crisis hit. A bad harvest in 1696 was followed by a second in 1697. Accompanied by the inevitable increase in food prices, these led to widespread starvation. This had a pronounced human cost, with the image of starving, emaciated Scots outlined in stark terms by contemporary accounts, and prompted a period of mass migration.4 An economic crisis then followed. Much-needed imports caused Scotland’s coin to flow out of the country, while at the same time, rural incomes were depressed by the inability of Scottish farmers to produce a surplus.5 The impact of the Nine Years’ War (1688–97) added to the woe, as the imposition of taxes to pay for the conflict and the disruption it caused to Scottish trade and shipping intensified the hardship. Scotland’s poor economic condition was further exacerbated by the Company of Scotland’s loss of the Scottish colony at Darien in 1700. The decline of the nation’s economy had been swift, and as a new century dawned, only 12 of the 47 joint-stock companies that had been active just 5 years earlier were still in business.6 The eruption of economic activity during the opening years of the 1690s was the beginning of Scotland’s Financial Revolution. That it began when it did is not unexpected. Tying this revolution to the Glorious Revolution of 1688–89 – when the Protestant William of Orange took the throne from his uncle and father-in-law, the Catholic James VII & II, and a restructuring of fiscal and government institutions followed –has become commonplace when discussing England’s Financial Revolution. The constitutional reform that occurred in the wake of the Glorious Revolution was highlighted in Douglass North and Barry Weingast’s influential ‘credible commitment’ theory as being the foundation for significant economic development in England. They contended that this reform placed the Crown on a firmer financial footing, provided checks on royal prerogative, and offered more DOI: 10.4324/9781003284819-2

10  The Financial Revolution at home: Scotland, 1690–1707 secure property rights.7 In North and Weingast’s theory, these reforms in turn ­created the correct conditions for the emergence of novel financial schemes designed to lend to the government as part of England’s Financial Revolution and allowed for wider economic growth in early modern England.8 More recent work has taken the view that ‘credible commitment’ was driven by a ‘multiplicity of mechanisms’. These included legal developments and a reassertion of demands for ‘transparency and probity of the public accounts’ and, as such, contended that the constitutional framework arising in 1689 should not be given precedence as the basis for ‘credible commitment’.9 It should be stated that the theory of ‘credible commitment’ has a weaker application in Scotland, as the Crown focused on England rather than Scotland as the source of its borrowing. Nevertheless, Scotland, at least in the short term, also experienced a period of economic development following the Glorious Revolution of 1688–89. It is important to understand that Scotland and England shared many common strands in the opening years of their respective financial revolutions. As Scotland experienced a boom in joint-stock companies, so too did England, where there was a dramatic rise in the number of companies from the mid-1680s.10 Both countries established new large-scale, joint-stock banks. These were the Bank of England in July 1694 and the Bank of Scotland just under a year later. The new banks provided a cash injection for both countries, yet Scotland and England still experienced crises in the second half of the 1690s.11 In England, these manifested in financial problems during 1696–97, with the Bank of England suspending payments, issues in the stock market, and a difficult recoinage. From the turn of the eighteenth century, however, a divergence in the economic development of the two countries becomes apparent. With the cessation of the Nine Years’ War (1688–97) in 1697, England began to recover from the economic pressures it had faced, while in Scotland, the sustenance and economic crises of the mid- to late-1690s were exacerbated by new issues. Contemporaries writing during the period noted the fall in overseas Scottish trade, the increasing numbers of unemployed, the existence of widespread vagrancy, and a national exchequer practically depleted of funds.12 To many, it must have seemed that Scotland was on the edge of economic collapse. The new century brought new challenges for Scotland. In March 1700, the Scottish colony at Darien on the Isthmus of Panama was abandoned. The colonisation, which had been driven by the Company of Scotland, was the grandest endeavour of the economic activity undertaken in Scotland during the 1690s and had always carried a significant risk. The aim of the project was to establish a settlement on the narrow tract of land that separates the Atlantic and Pacific oceans, close to where the Panama Canal begins today. Success in this undertaking would, in the words of the scheme’s chief advocate, allow the company ‘to give laws to both oceans and to become arbitrators of the commercial world’.13 This was sound in theory, but negated the fact that the Spanish had laid claim to the territory almost two centuries earlier, planting a colony there in 1510, before vacating it in 1524. Despite being abandoned, the area remained vital for the transportation of Spanish silver up the coast from mines in the west of South America to Panama City, before it was transported across the isthmus by mule and then by sea back to

The Financial Revolution at home: Scotland, 1690–1707  11 Spain. The Scots had therefore focused their colonial project on ‘an area of huge financial and strategic importance’ to the Spanish.14 In addition, English objections, a lack of support from the king, the extreme conditions of South America, inadequate management, and poor planning, all contributed to the failure of the project.15 While the fallout of Darien was severe, the fact that the project was established in the first place and that it had found financial backing solely in Scotland is an indication of contemporary Scottish financial confidence and demonstrates that Scots were keen to invest in speculative financial projects. The group behind the attempt on Darien, the Company of Scotland Trading to Africa and the Indies, was created by Parliamentary Act in June 1695.16 The company has become synonymous with Darien, but at its outset, other business opportunities were considered. These included a proposed fishing enterprise, ­entry into the business of salt production, and trading on routes between Greenland, Russia, and Africa. Many of the company’s subscribers had envisioned trading to the East Indies in the model of the English and Dutch companies, but in the end, it was Darien that won out.17 The push for settling the South American outpost had come from William Paterson, a London-based Scot who was no stranger to large-scale financial projects. In Scotland, he is inextricably linked with the ill-fated attempt at Darien, but Paterson’s most successful endeavour was his involvement in establishing the Bank of England. The bank was set up in 1694 as a method of supporting long-term government borrowing, with Paterson, who had been a central driver in the project in the preceding years, named as one of the first directors.18 Shortly thereafter, he fell out of favour with his colleagues at the bank when he proposed a fund be established to help London orphans. His fellow directors feared the new scheme would drain capital investment from the bank, a rift developed, and in February 1695, Paterson resigned as director.19 Despite Paterson’s quick exit from the institution he had been central in creating, the bank quickly became and remains today, England’s most important financial institution. Paterson’s involvement in setting up the Bank of England was his greatest ­accomplishment, but it was not his only landmark achievement in English finance. In 1693, the English state ran its first tontine scheme, apparently proposed by Paterson.20 This financial instrument is a shared investment fund that offers subscribers an annuity payment at a defined interest rate secured against a nominated life. In this, it is rather like a run-of-the-mill life annuity scheme. What separates the tontine is that as nominees die and as their associated subscribers retire from the scheme, the annuity payment linked to them is distributed among active subscribers, permanently increasing their yearly dividend. This structure means that it is possible for the last subscriber to collect an annuity that had previously been divided among every other subscriber in the tontine. The English tontine of 1693 did not go on to have the same success as the Bank of England; in fact, it raised just 10.81% (£108, 100) of an intended £1,000,000. It was significant, however, for being the point at which England established a national debt.21 Paterson’s achievements in England, while not without their shortcomings, therefore stand in stark contrast to his Scottish undertakings.

12  The Financial Revolution at home: Scotland, 1690–1707 Within a few months of his departure from the bank, Paterson became aware that a group of Scottish merchants were attempting to establish an overseas trading company and was asked to become involved.22 The board consisted largely of men of Scottish descent, many of whom were residents of London. The inclusion of the London-based proprietors was by design and was intended to broaden the expertise and capital available to the company. This demonstrates, in the words of Douglas Watt, that the company was ‘first envisaged as an Anglo-Scottish endeavour’.23 By the time he became involved with the company, Paterson had been promoting the idea of settling Darien for around a decade, and by July 1696, he had convinced the board that this was where they should concentrate their efforts.24 The taking of subscriptions for the company had begun in November 1695, at which point subscribers expected the company to be conducting its business in Africa and the East Indies. Investment was swift, and in London, contributions reached £300,000 within ten days of the book opening. It was at this point that the company faced its first problem as English consternation over the new project emerged. English joint-stock companies, particularly the East India Company (EIC), as well as several London merchants, were staunchly against the new ­endeavour. The EIC petitioned the House of Lords with a list of reasons why the new Scottish company would be detrimental to English trade, and the king was so besieged by complaints that he became too exasperated to discuss any Scottish business.25 In part, this was William’s own fault. He had never been overly concerned with Scotland, and with his focus on the war on the continent and the financial issues then being experienced in England, he had taken his eye off the Scottish Parliament. This resulted in the Company of Scotland being granted a powerful charter that secured a monopoly of trade to America, Africa, and the East Indies for 31 years and provided tax exemptions for 21 years.26 The project had ‘unleashed the full fury of English economic nationalism’, English vested interest steeled themselves against the company, and calls were made for directors and promoters of the scheme in England to be impeached.27 As a result, English investors, along with those in the Netherlands, withdrew from the project. Unable to secure outside investment, the company’s board turned its attention to Scottish purses.28 It was at this point that Scots demonstrated their desire to invest. The take-up of Scottish subscriptions was exceptionally swift, and on the first day of the new subscription book being opened, 26 February 1696, £50,400 sterling was subscribed in Edinburgh, with £91,000 being pledged by the end of the month. On 5 March, a second subscription book was opened in Glasgow, and by 1 August, £400,000 in total subscriptions had been signed up for.29 Shareholders formed a relatively diverse group, with the nobility and merchant class well represented, as were the professions, and with the inclusion of a number of female investors.30 Residents of Edinburgh and Glasgow accounted for just under 33 per cent of all subscriptions, with the remainder coming from every part of Scotland, except Caithness, the only shire not represented in subscription books.31 In addition to Scottish funding, a later attempt at raising capital was made in Hamburg, a city that had developed into an important financial centre and marketplace during the seventeenth century.32 The attempt rankled an already displeased English

The Financial Revolution at home: Scotland, 1690–1707  13 administration, which successfully petitioned the Senate of Hamburg to halt the taking of subscriptions before relations with England were soured.33 Let us divert our attention away from Darien for a moment, because as already outlined, it was only one of 47 Scottish joint-stock companies that existed between 1690 and 1695. This illustrates that the market for such ventures was developing. These companies focused on diverse trades, from coach building and mining, to the manufacturing of goods such as rope, combs, gunpowder, and porcelain. Glasgow and Edinburgh were the sites of many of the enterprises, with a particular boom in 1695 when at least ten new joint-stock ventures were established. The frequency by which new joint-stock offerings entered the market declined after this year, but did not stop. Eight new companies have been identified in the years between 1696 and 1699, still largely focused on Glasgow and Edinburgh, but with businesses in Aberdeen and Wemyss also established.34 Included within the ten companies established in 1695 was the Bank of Scotland, which stands today as the only existent institution formed by Act of the pre-­Union Scottish Parliament. With the increase in Scottish business during the opening years of the 1690s, and with the Bank of England having been formed in the summer of 1694, Scotland was primed for its own major bank. Established in July, the bank was founded on private capital of £100,000 sterling, equating to £1.2 million Scots, and was the first instance in Europe, if not the world, of a private joint-stock bank, funded on private capital and entirely unconnected to the state.35 While subscriptions were not taken up as quickly as they would be for Darien, the bank was fully subscribed within two months. A third of the sum was raised in London, with the remainder coming from Scotland.36 Of the latter amount, almost £67,000, just short of half, was provided by the nobility and gentry of lowland Scotland. Merchants meanwhile raised £25,000, while professionals such as lawyers, judges, and medical practitioners provided the rest. This was markedly different from the Bank of England, which had drawn subscriptions chiefly from merchants and professionals. Additionally, where the Bank of England was run in close association with the English Treasury and had the primary functions of making public government debt and providing the English state with loan facilities, the Bank of Scotland instead sought to lend in order to promote Scottish commercial interests. Additionally, the Bank of Scotland’s charter explicitly prohibited the bank from lending to the government and only allowed for loans to the Crown to be made with parliamentary approval.37 The two banks, therefore, had little in common. The Bank of Scotland and the Company of Scotland were the largest Scottish financial undertakings of the 1690s. While neither struggled to garner subscriptions from the country, both faced problems. The first problem for the bank was the Company of Scotland. As the company was developing its plans for Darien, its board decided it would be beneficial to enter the world of banking. The company’s capital was after all sitting idle, so the determination was made to offer loans at interest to its subscribers and to issue its own paper money to cover its obligations in Scotland. The impact on the Bank of Scotland was severe. Public doubts grew about the viability of the fledgling institution, which in turn prompted customers to

14  The Financial Revolution at home: Scotland, 1690–1707 return the bank’s notes in demand of payment. The bank struggled with liquidity, and despite scrabbling to call in its loans, it could not do so quickly enough to meet demands. Fortunately, proprietors at the Company of Scotland had not found banking to be a wholly profitable venture, and in late summer of 1696, they assured the bank that the company would step back from the business of banking and instead concentrate on its plans for Darien.38 For now, the Bank of Scotland was back on solid ground. Now focused on trade and colonisation, the Company of Scotland sent five vessels from the port of Leith in July 1698, reaching the Gulf of Darien in late October. The Scottish settlers were apparently welcomed by the native people, and they set about preparing the site for New Edinburgh. The events that followed – the establishment of a harbour that was nigh on impossible to get ships out of, the prevalence of disease, infighting among colonists, mismanagement from Scotland, a lack of Crown support, and skirmishes with the Spanish – have all been covered in detail elsewhere.39 For the purposes of this chapter, it is enough to know that the project did not go well, and by the end of March 1700, the colonists were forced to surrender the territory to the Spanish. The financial fallout was severe. By this point, Scottish subscribers had paid £153,000 of the total £400,000 subscribed.40 This was not as bad as it could have been, but it was still a huge amount of money for the country. Perhaps one saving grace was that so much of Scotland’s money was tied up in the scheme that while there had been a degree of mania about investing, there had not been enough spare liquid cash with which to fund a secondary market in the shares. Unlike the later South Sea and Mississippi bubbles where share prices had been inflated and shares bought and sold for vast sums, this did not happen in Scotland. A lack of liquid funds had prevented a bubble, but the impact was still significant, with the events at Darien capping off what had been a disastrous few years for Scotland. Additionally, this period saw what Christopher Whatley has termed as a European-wide ‘rampant economic nationalism’. This had developed by the end of the seventeenth century, with the adoption of policies ‘by competitor nations that badly hurt Scottish interests’ in all its key trading markets.41 It was against this backdrop that discussions of a parliamentary union with England remerged. The debate around an Anglo-Scots Union had waxed and waned over the preceding century, with Scottish and English parliamentarians as well as monarchs taking the lead at different times. Following the Union of the Crowns in 1603, when James VI of Scotland had also become James I of England, the new king pushed the matter in his parliamentary speeches to largely uninterested English parliamentarians. Later in 1669–70, his grandson, Charles II, was unsuccessful in convincing anyone outside of his inner circle on the merits of a merger.42 Then in the aftermath of the revolution of 1688–89, Scottish parliamentarians discussed the matter, but again to no avail.43 A push from William II & III, shortly before his death in March 1702, urging English parliamentary representatives to consider the possibility of a more complete union between the two countries, was more successful. Scottish and English negotiations on the matter commenced in late 1702,

The Financial Revolution at home: Scotland, 1690–1707  15 but collapsed in early 1703, in part due to questions around compensation for the failure of Darien. In the aftermath of the unsuccessful negotiations, a tit-for-tat legislative war erupted between Scotland and England. The first shot had actually been fired in 1701, when the English Parliament passed the Act of Settlement. This was a piece of legislation designed to secure the Protestant succession following the future death of Queen Anne, and named James VI & I’s granddaughter, Sophia of Hanover, as heiress presumptive. This was an unpopular policy in Scotland, and following the breakdown of union talks, Scottish lawmakers debated how the country could distance itself from its southern neighbour. The result was the Act of Security in 1704, which would allow for the crowning of a new Scottish monarch selected by the parliament of Scotland following Anne’s death. This displeased the English, who had found the monarchical union to have been beneficial to national security, particularly during times of war, and meant that England did not need to worry about a front opening up on its northern border. English lawmakers retaliated to the Act of Security with the Alien Act in early 1705. This was a highly coercive piece of legislation that threatened to ban Scottish imports into England, prevent Scots from holding English property, and cease free movement between Scotland and England, unless negotiations on a parliamentary union were reopened. This heavyhanded tactic worked, and by August of that year, prompted by a letter from Queen Anne, an act for reopening union negotiations between Scotland and England was being read for the first time in the Scottish Parliament.44 Among the legislative battle and constitutional debate, the Bank of Scotland fell into another crisis. This was triggered by the flow of specie out of Scotland, as the failure of Darien was compounded by low levels of economic activity with a decline in Scotland’s border and coastal trade with England.45 A shortage of currency to meet demands, along with rumours that a recoinage was imminent, then forced the bank to suspend payments in December 1704.46 Those due money from the bank were offered five per cent annual interest until payments could recommence. The stop lasted four months. When the bank emerged from the crisis in the spring of the following year, it did so with its £100,000 capital fully intact. Its reputation had been damaged, however, and as 1705 progressed, the bank faced new challenges. The financial literature of the ‘pamphlet war’ of 1705 Thus far, a rather bleak picture has been painted of the Scottish Financial Revolution as a short-lived period that began in the aftermath of the Glorious Revolution, ­before being derailed by the sustenance and economic crises of the second half of the 1690s, and was all but dead after the loss of Darien in 1700. Yet, in 1705 something interesting happened. As the Bank of Scotland was finding its feet after having suspended operations, as the legislative battle between Scotland and England was intensifying, and as recriminations around the failure of Darien continued, a ‘Pamphlet War’ was ignited in Edinburgh.47 The literature covered a range of

16  The Financial Revolution at home: Scotland, 1690–1707 issues, from agriculture and trade, to religion, sovereignty, and union. Crucially, it also produced a body of financial literature.48 Comprised of pamphlets that advocated for various forms of banking, coinage reform, expansion of credit, and paper money, the financial debate was vociferous and varied.49 The men behind the proposals were similarly diverse. This included lawyers, doctors, politicians, economists, and even the convicted murderer, John Law. Some proposals were the source of radical ideas, while others were conservative. The bulk of the debate took place in the first half of 1705, with pamphlets emerging prior to the matter being debated in the Scottish Parliament during the summer.50 As Karen Bowie has demonstrated, a relaxation in state censorship and a growing book trade had allowed for the development of political communication from 1689 onwards.51 These developments, aided by a proliferation of printer/publishers in the Scottish capital, meant that by 1705, Edinburgh had the culture and the infrastructure for a significant print debate. It should also be noted that while Edinburgh was the place of publication for many pamphlets, politicians returning to constituencies, itinerant clergymen, and couriers allowed for their dispersal across Scotland.52 While many of the authors disagreed on the best method by which to improve the Scottish economy, the literature shared two over-arching themes. The first theme was state-building, in that many proposals rested on the erection of new government institutions to oversee the projects. The second theme was providing some methods by which the Scottish economy could be capitalised. The works produced over this short period were highly influenced by the poor economic conditions under which Scotland then laboured. Issues with trade and currency loomed large, and the fallout from Darien was fresh in the minds of contributors. Some writers could be accused of promoting conservative, albeit tried and tested methods, to tackle the country’s economic problems. Take for instance an anonymous pamphlet that advocated for the establishment of a new bank administering a new debased coinage. The coin would be created by mixing silver with up to ten per cent copper and struck by the Scottish Mint in the normal way.53 The author argued that the impact of debasement would be three-fold: (1) it would encourage those holding metal plate to bring it in for coining in order to benefit from a greater return, (2) the new coin would increase liquidity and allow for manufacturers and trade to be increased, and (3) it would be less attractive to those attempting to ­export coin outwith Scotland to exchange for profit.54 While logically argued, the plan was far from novel. Scotland had a history of debasing coin stretching back to the reign of Robert III (1390–1406). This had first occurred in 1393, when the rising value of silver had meant that minting pennies and half pennies at their normal weight and size solely in silver had become ­uneconomical, while reducing their size would render them impractical for everyday use.55 While debasement was not new, the 1705 plan did contain some innovation, with the proposition that the new bank would have branches across Scotland. This was way ahead of the curve. The Bank of Scotland was the sole Scottish bank until the Royal Bank of Scotland was established in 1727 and did not properly establish a branch system until 1774.56 The number of banks in Scotland only

The Financial Revolution at home: Scotland, 1690–1707  17 increased significantly from the 1740s onwards, with the emergence of numerous private banks in Edinburgh and Glasgow and a number of small provincial banks commencing operation. Between the start and end of that decade, the number of Scottish banks (issuing and non-issuing) rose from 5 to 14, and by 1769, the figure had reached 32. The expansion of Scottish banks was only slowed by the collapse of the Ayr Bank in 1772 and the associated financial crisis of that year and the next.57 As well as debasing coin, some writers in 1705 called for the value of coin to be adjusted. This practice had occurred numerous times in Scotland during the seventeenth century and meant that while there was no change to the physical coin, as there would be with debasement, there was a change in its worth, with a circulating coin thenceforth of a greater value than previously.58 The 1705 debate on this is somewhat unusual, however, with even those who advocated for the measure being less than enthusiastic about it. Those who did propose it saw it as a stopgap until a grander scheme could take hold. For example, politician and writer, William Seton of Pitmedden, proposed a ‘judicature of trade’, a body akin to England’s Board of Trade.59 The judicature would be responsible for presenting Parliament and the monarch with proposals for improving Scottish trade and would be expected to provide detailed accounts of the country’s import and export figures while also devising laws relating to national commerce.60 The eventual aim of the project was that the balance of trade would be tipped in Scotland’s favour, meaning that the nation’s exports would surpass its imports. Seton recognised that this would take time and viewed adjusting the value of coin as being necessary to aid the Scottish economy until the judicature could be effective. The increase in the value of coin would then be phased out as trade improved. Of the more innovative proposals that emerged in 1705, there was one that was particularly topical for the time. This was a plan intended to inject £250,000 of credit into Scotland, supported in part by the money that had already been invested in the Darien scheme. The proposal came from London-based Scot, James Hodges, who argued that so much Scottish wealth was tied up in Darien as to make it ‘a national fund of the highest and most universal concern’.61 He estimated that subscriptions of up to £120,000 had been invested by Scottish investors – a slight ­underestimate with £153,000 having been paid by the time colonists surrendered their territorial claim at the end of March 1700 – and that this fund should be used as security for credit of the same value.62 In addition, a second fund, that of the ‘publick revenue’, was to be established and secured against the £130,000 yearly tax burden levied against the Scottish population. These funds were to be monetised into £250,000 of paper credit notes and put into circulation in Scotland. To aid public acceptance of the notes, and in an effort to maintain their value, Hodges proposed a tax incentive. This would see taxes increased by ten per cent unless an individual chose to pay their tax burden with Hodges’ new notes, in which case the increase would be waived.63 This was not a new idea, with the linking of ­paper money to taxation having been utilised in China since at least the thirteenth century, and was acknowledged by Hodges as common practice at the Bank of Amsterdam, but it was entirely novel for Scotland.64

18  The Financial Revolution at home: Scotland, 1690–1707 It is important to understand that at the time of Hodges’ proposal, the Scottish perception of money was in a state of flux. Coined money derived from precious metals with a tangible value was now augmented by other commodity monies in paper form. Perhaps the best example of this in Scotland was the notes issued by the Bank of Scotland. These notes went into circulation in 1695 and were supported by specie held in the bank’s vaults.65 They were transferrable and could be used in transactions until the bearer took the note to the bank and exchanged it for the sum specified on it. In addition, various other bills and notes of exchange ­underwritten by individuals also circulated in Scotland. The concept, and indeed the reality, of paper money was therefore widespread across lowland Scotland. Hodges recognised the existence of this emerging dual system and understood that while his paper notes could go some way to alleviating the financial issues then impacting Scotland, these would be required to operate in tandem with existing metal coins. A key aim of the ‘publick revenue’ fund was therefore to creating liquidity in the economy by introducing paper money for the payment of taxes and in turn freeing up coin for everyday economic transactions. Undoubtedly, one of the most interesting works of 1705, Hodges proposal was one that recognised the realities of the time. He was aware that drawing subscriptions for a new fund from cash-strapped Scottish investors would not be straightforward. A decade earlier, the Bank of Scotland and the Company of Scotland had raised their capital with relative ease, but things had changed. In attempting to recycle debt arising from another project, Hodges was therefore taking a decisively novel and innovative approach. Hodges was one of many writers to promote paper money in one form or ­another in 1705. A particularly important topic in the debate, and one which we will return to in detail in the next chapter, was that of land banking. This was a banking model in which a bank would issue loans in paper notes secured on the land of the ­borrower. This was a move away from the fractional reserve model then operated by the Bank of Scotland, in which a percentage of specie was held to support a larger issuance of notes. A debate on land banking had taken place in England a decade earlier and culminated in the establishment of the short-lived National Land Bank in 1696.66 Scottish discussions at that time were more muted, with only Hugh Chamberlen, an English physician, promoting three unsuccessful Scottish land bank schemes (1693, 1700, and a joint proposal with Edinburgh lawyer, James Armour, 1704).67 Excepting these attempts, no wider debate around land banking occurred in Scotland until 1705. Without doubt, the best-known contributor to the Scottish land bank debate was John Law. An Edinburgh native, Law was the son of a goldsmith, an itinerant gambler, and later one of the most powerful men in Europe, controlling a joint-stock company that held the monopoly on French global trade. He spent the opening years of the eighteenth century travelling across Europe attempting to implement his financial ideas, before being given the opportunity to open a bank in France in 1716. Law was in the right place at the right time. In the wake of Louis XIV’s death, the country had been left bankrupt. Louis had increased state debt to support the cost of the War of the Spanish Succession (1701–13), and by the time he

The Financial Revolution at home: Scotland, 1690–1707  19 died in September 1715, the national debt had risen to somewhere between 1.2 and 1.7 billion livres. This was thrice what it had been 30 or so years earlier.68 As Louis’ successor was his five-year-old great-grandson, a regent, Philippe II, duke of Orléans, was appointed for the young king. It was Orléans who was persuaded by Law’s plans and gave the Scot the opportunity to put his theories into practice. Law began by founding the Banque Générale, a private joint-stock bank, which issued its own notes and which was built on significant government capital; two years later, the institution was nationalised and became the Banque Royale.69 Law’s success with the bank allowed him in 1717 to re-establish the Compagnie d’Occident, better known as the Mississippi Company, another joint-stock company that aimed to develop the territory of Louisiana in North America. The company expanded swiftly, acquiring the rights to almost all French overseas trade, with Law increasing the value of the company’s shares from around 34 million livres to over 5 billion in the space of just 3 years.70 The final stage of his system involved the acquisition of the lease to operate the Ferme générale, an outsourced tax collection agency through which most indirect taxes in France were collected for the Crown, and the purchase of the French Royal Mint. Law ambitiously ­attempted to refinance the French national debt, lending to the state enough to cover its existing financial obligations at the low-interest rate of three per cent.71 By the end of 1720, however, Law’s financial system had collapsed, leaving France in economic turmoil. The share price of the Mississippi Company had sky-rocketed in just a few months between spring and autumn of 1719, from 500 to 10,000 livres, supported by Law continuing to issue paper money through the Banque Royale.72 Law attempted to cool the economy down by reducing the value of the company’s shares and the bank’s notes in May 1720.73 An excess of paper money in the economy was leading to rapid inflation, and by the second half of 1720, the notes had lost their value. Law’s attempts to slow the economy led to the public losing confidence in his system, and by the end of the year, he was forced to flee the country. The Scottish economist quickly went from being one of the most powerful men in Europe to the ‘fils ainé de Satan’ (the eldest son on Satan).74 In the years which followed, he spent some time in England and refused invitations from Russia and Denmark to discuss new projects.75 He wrote in defence of his French system and awaited an invite to return to France. The invite never came, and in 1729, Law died in Venice. In 1705, this was all still ahead of Law. He was, however, already infamous by this time. In early April 1694, while in his early twenties, he had killed a man in a duel in London’s Bloomsbury Square. Fortunately, William II & III did not like to see men prosecuted for a death that had occurred as a result of a duel, and initially, he granted Law a reprieve. In response, the family of the victim, Edward ‘Beau’ Wilson, lodged an appeal and fought hard to see Law hang.76 The case became yet another source of enmity in Anglo-Scottish relations, with statesmen from north and south of the border becoming involved. Law languished in a London jail for the remainder of 1694 with little hope of freedom. Then at the end of the year, an escape was mounted, achieved by a conspiracy that possibly went as high as the king, and Law fled.77 His whereabouts during the next six years are unknown. It has been hypothesised that he may have gone to the Americas, his brother Andrew had

20  The Financial Revolution at home: Scotland, 1690–1707 set sail for Darien in 1699 and is presumed to have perished there, or more likely Law left for Holland or Ireland, moving to France after the Peace of Ryswick was signed in 1697.78 Certainly, by April 1701 he was in France, where he was once again under arrest, possibly for threatening another duel or possibly under suspicion of being a spy.79 At this time, he began to author economic works, and by 1705, he was back in Scotland promoting his land bank scheme. The 1705 land bank proposals will be covered in detail in the next chapter. It is important to understand that these proposals, along with the other financial ­offerings of 1705, failed to come to fruition. Despite these works emerging within the context of economic crisis, and as England applied pressure to treat for ­union, Scottish parliamentarians rejected the proposals laid before them.80 The Public Accounts Committee was tasked with considering some of the Scottish proposals in 1705, and as part of this, it looked over the land bank proposal that had been made a year earlier by Chamberlen and Armour. Many committee members were ‘inclyne[d] to think favourably of [the] proposal’ but were wary of acting too quickly. The response was positive enough that in mid-July, the proposal was printed and circulated in the House, and Chamberlen was invited before the committee to answer questions.81 Law’s land bank proposal was also considered closely, and he was called upon by John Campbell, duke of Argyll and Queen Anne’s High Commissioner to the Scottish Parliament, to ‘discourse him fully’ on the plan.82 There is, however, some disagreement over how interested Argyll was in Law’s scheme. William Ferguson viewed the economic debate that took place in the Scottish Parliament during the summer of 1705 as a stalling tactic by Argyll, who he believed was attempting to buy more time and support for negotiations on union.83 While this is seen as a plausible argument by Antoin Murphy, he also adds that there were many parliamentarians ‘keen to discuss’ proposals that would remedy the shortage of money then being experienced in Scotland.84 Murphy also highlights that the Bank of Scotland’s rumoured Jacobite links may also have been ‘good reason for Argyll … to offer his patronage to Law’s proposal which was contrary to the interests of the Bank of Scotland’.85 Despite these rumblings of support, by July 27, parliamentarians had decided that the ‘forceing [of] any paper credit by an act of parliament was unfit for this nation’. On the same day, they also concluded that increasing the value of Scots coin was ‘an unfit expedient’ for the country.86 This decision meant that those proposals made to issue credit or paper money, or to make any adjustments to the nation’s coin, were now closed matters. Despite Scottish parliamentarians rejecting the proposals of 1705, there was a recognition that something had to be done to address Scotland’s economic problems. To do this, the administration began legislating for a Council of Trade. This idea had not appeared out of thin air, but had instead been developing in the background as other financial proposals were considered during the summer of 1705. John Robertson has argued that a Scottish trading body was ‘long advocated’ for by Paterson and ‘endorsed’ by Seton, Chamberlen, and Law.87 This is true, Paterson had proposed a council in 1701, and Chamberlen a year earlier, and it was comparable to Seton’s 1705 ‘Judicature of Trade’. It was also endorsed as a measure in Law’s Money and Trade Considered, but Robertson’s claim does not tell the whole

The Financial Revolution at home: Scotland, 1690–1707  21 story.88 An issue with the 1705 Council of Trade was obvious from the ­outset, in that it was unclear how this organisation would deal with the problem at the centre of Scotland’s economic problems, that of under capitalisation. Law may have proposed a similar body, but this was within the context of his land bank. It was envisioned that the cash injection that came from the bank would allow for increased production of Scottish goods and in turn greater exports. A Council of Trade on its own could not achieve this. Similarly, the council of 1705 was not the same body proposed by Paterson in 1701 and lacked the revenue-raising powers of the earlier model. Paterson’s trading body was to be empowered to raise a ‘National Fund’ by collecting £1,000,000 in new taxes, including a tax on land transactions, taxes on manufactures, and a ten per cent tax on grain sales.89 As William Deringer has argued, Paterson aimed to improve Scotland’s economic situation by ‘combining a political innovation – a new, expert “Council of Trade” – with a financial one, a “National Fund of Money”’.90 The fund was to be used for a range of economic measures, including employing the poor, insuring against famine, and encouraging Scottish industry. The 1705 Council of Trade had the power to issue fines and confiscate goods in order to cover its own operating costs, but lacked the wider powers advocated for by Paterson, and was not backed by the financial levers envisioned by Law.91 Another issue affecting the Council of Trade was time. The act that brought this organisation into being began making its way through Parliament in August 1705, the very same month in which a bill for opening negotiations on union between Scotland and England was being read for the first time.92 This lack of time was then compounded by the make-up of the committee. Allan Macinnes has stated that the group was ‘dominated’ by adherents to the Court Party, the pro-union wing of the Scottish Parliament.93 Chris Whatley has meanwhile presented the case that of the 21 men selected to sit on the council, a majority of 71 per cent ‘voted more or less consistently for the union with England, with a majority in each of the three estates represented’.94 The emergence of a Council of Trade in 1705, and its mirroring of the English Board of Trade, appears to demonstrate that Scottish interests were aligned with English interests ‘in favour of landed enterprise and manufacturing’.95 When the group was established, it was with the remit to: inquire into and examine the present state and condition of the trade and commerce of this nation … [and] to prepare such overtures and proposals as they shall judge most proper and convenient for the encouragement and advantage of trade to be laid by them before the next session of parliament96 Yet, one wonders how committed this group was to this task. If we take the case of John Clerk, the member of parliament for Whithorn, for example. He noted in his memoirs that he had been chosen as a member of the Council of Trade. This must have been a successful period for him, because in the very next paragraph, he recorded that he had also been recommended to the queen and selected to act as a commissioner to treat on the matter of union.97 This illustrates the proximity of

22  The Financial Revolution at home: Scotland, 1690–1707 the founding of the Council of Trade and the renewed union negotiations. Indeed, on the very same day, 21 September 1705, that parliament passed the act which brought the Council of Trade into being, it also passed the act to begin union negotiations with England.98 That the latter affair took prominence over the former is illustrated by Clerk’s remark that ‘the chief business’ before the Scottish parliament in the second half of 1705 ‘was to pave the way for the Treaty of Union.’99 This admission, when considered in tandem with the council’s voting patterns, calls into question how much focus was being given to the council’s key objective of delivering solutions designed to advance Scottish trade. It is also important to note the significant crossover between the Council of Trade and those appointed as union commissioners, with 8 members of the 21-man council fulfilling both roles.100 The argument is made by Macinnes that two unpublished papers put before the Council of Trade had an ‘influence on the Scots agreeing to treat for Union and in shaping the conduct of the Scottish commissioners negotiating with their English counterparts in the spring of 1706’. The first of these papers outlined ‘a chronic deficit’ in Scotland’s balance of payments, while the second praised English trade regulations and stated that quality manufacturing was the key to sustained economic growth in Scotland.101 When the union came, however, in the same manner that it put an end to the Company of Scotland and the Scottish Privy Council in 1708, it also signalled the end for Scotland’s independent Council of Trade. Article 13 of the Treaty of Union stipulated ‘[t]hat the Laws concerning Regulation of Trade, Customs, and such Excises, to which Scotland is, by virtue of this Treaty, to be liable, be the same in Scotland, from and after the Union, as in England’.102 It should be noted that the English Board of Trade continued to operate. It should also be noted that the Public Accounts Committee, the group tasked with scrutinising many of the financial proposals made in 1705, displayed a similar, if less pronounced, voting pattern to the Council of Trade. Clerk was also a member of this group and recorded that he and his fellow committee members had been tasked with scrutinising ‘some projects for supplying the defect of money, which at that time seem’d to be very scarce over all the country of Scotland’.103 Seton, who had been pushing for a Council of Trade-type body in his 1705 proposal, was also a member. When it came to ratifying the Act of Union, of the committee’s 14 members, 7 voted in favour, 5 against, and 2 abstained.104 Calling this a majority is perhaps a stretch too far, but it certainly calls into question the commitment of the committee to properly scrutinise the viability of new financial models that may have represented an alternative to union with England. Drawing the reader’s attention to the make up of the Council of Trade and the voting patterns of this group and the Public Accounts Committee is not to wade into the historiographical debate around the Anglo-Scots Union, there are other excellent works that do this far more effectively.105 Instead, it is to make the point that the Public Accounts Committee, a group tasked with considering financial proposals that had the potential to alleviate Scottish economic woes and transform the

The Financial Revolution at home: Scotland, 1690–1707  23 country’s economy, and the Council of Trade, a body with the power to regulate on all aspects of trade, held in their ranks a majority that would vote in favour of union with England. It is difficult to judge how fairly the Public Account Committee considered the financial proposals of 1705. Certainly, the time taken to consider the Chamberlen/Armour proposal, along with the fact that it was published for the House and Chamberlen was called in for questioning, demonstrates the committee to have followed due process. When it comes to the Council of Trade, time was against that body from the start, and if we take Clerk’s words to be true, the real focus of the administration by the second half of 1705 was already on paving the way for a parliamentary union.106 Conclusion The Scottish Financial Revolution was borne into difficult circumstances. The boom of economic activity, which broke forth in the opening years of the 1690s, was quickly quelled during the difficult second half of the decade. The failure of Darien then compounded the country’s economic problems, and despite a flurry of innovative works emerging over the summer of 1705, the answer to the problem, at least in the eyes of a majority of Scottish parliamentarians, was not to be found in these pamphlets, but in union with England. Instead of establishing a revolutionary new banking or currency model for the country, the Scottish parliament passed an act to establish a Council of Trade on 21 September 1705, and the very same day, it also passed the act to begin union negotiations with England.107 This was a highly conservative solution, with the council having little opportunity to commence its work before it was overtaken by a focus on union negotiations. The response of parliament aside, we can see that Scottish financial development and innovation, when conditions allowed, progressed significantly. This is demonstrated by the boom in joint-stock companies between 1690 and 1695 and by the financial literature of 1705. Scottish investors, when able to, also demonstrated a keenness to invest. The case has been made here that the early years of the Financial Revolution in Scotland displayed many parallels with events in England. Importantly in the financial literature of 1705, we see the Scottish Financial Revolution was in theory, if not practice, centred on capitalising the Scottish economy and on building the Scottish state. Just as the English Revolution has been viewed through the lens of state-building, this too can be done in Scotland. The important difference being a lack of Scottish political will to put schemes into practice. In the years that followed 1707, Scotland struggled to integrate itself into a British framework. As a result, economic development was slow. The founding of the Royal Bank of Scotland in 1727 marked the first new financial institution established in the country since 1695. This 32-year gap would not appear to be indicative of a country experiencing a financial revolution and demonstrates that the revolution in Scotland was clearly overtaken by the Anglo-Scots Union.

24  The Financial Revolution at home: Scotland, 1690–1707 Notes 1 D. Watt, The Price of Scotland: Darien, Union, and the Wealth of Nation, (Edinburgh, 2007), p.87 2 W. R. Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, Vol. 1, (Cambridge, 1910), p.356 3 W. R. Scott estimates there were 150 joint stock companies in existence in England and Scotland by 1695, of which two thirds were English and the remainder Scottish, with about 15 per cent having formed before 1688. See Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, Vol. 1, pp.327–337; for specifically Scottish details see ‘Appendix: Manufacturing Enterprises in Scotland, 1560–1707’ in G. Marshall, Presbyteries and Profits: Calvinism and the Development of Capitalism in Scotland, 1560–1707, (Edinburgh, 1992) 4 C. A. Whatley, with D. J., Patrick, The Scots and the Union, (Edinburgh, 2006), p.142 5 Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies, pp.347–351; and R. Saville, Bank of Scotland: A history, 1695–1995, (Edinburgh, 1996), pp.39–46 6 D. Watt, ‘The Company of Scotland and Scottish Politics, 1696–1701’, in S. Adams, and J. Goodare (eds), Scotland in the Age of Two Revolutions, (Woodbridge, 2014), p.212; and Scott, The Constitution and Finance of English, Scottish and Irish JointStock Companies, Vol. 1, p.356 7 D. North and B. Weingast, ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, in The Journal of Economic History, Vol. 49, No. 4, (Dec., 1989), pp.803–832 8 Ibid., p.803, and p.828 9 D. Coffman and L. Neal, ‘Introduction’, in D. Coffman, A. Leonard, and L. Neal, (eds), Questioning Credible Commitment: Perspectives on the Rise of Financial Capitalism, (Cambridge, 2013), p.12 10 A. Murphy, The Origins of English Financial Markets: Investment and Speculation ­before the South Sea Bubble, (Cambridge, 2009), pp.1–2 11 Saville, Bank of Scotland, p.22–25 for an overview 12 T. C. Smout, ‘The Anglo-Scottish Union of 1707. 1. The Economic Background’, in The Economic History Review, New Series, Vol. 16, No. 3, (1964), p.459 13 Paterson quoted in J. R. McNeill, Mosquito Empires: Ecology and War in the Greater Caribbean, 1620–1914, (Cambridge, 2010), p.109 14 Watt, The Price of Scotland, p.5–6 15 Herries, A Defence of the Scots Abdicating Darien: Including an Answer to the ­Defence of the Scots Settlement there, (Edinburgh, 1700), p.22; Bruce Lenman viewed the event as a ‘supreme crisis’, in which ‘systematic attempts by King William’s agents to undermine[d] Scottish appeals for aid from the Netherlands and Hamburg’, and in which the scheme’s architect William Paterson was a ‘disastrous influence on Scottish policy’, B. Lenman, An Economic History of Modern Scotland 1660–1976, (Hamden, CT, 1977), pp.48–49; T. C. Smout viewed the inaction of directors as being central to the failure of the project, T. C. Smout, Scottish Trade on the Eve of Union 1660– 1707, (Edinburgh, 1963), p. 252; the role played other nations has been emphasised by David Armitage, D. Armitage, ‘Making the Empire British: Scotland in the Atlantic World 1542–1717’, in Past and Present, Vol. 155, (1997), pp.34–63; and more recently Douglas Watt, whilst recognising the opposition from the English, Dutch and Spanish, argued that this should have been anticipated, and has emphasised the principal reason for failure being the directors losing ‘touch with reality, influenced by the manic overconfidence of the nation’, Watt, The Price of Scotland, p.252–253 16 The Records of the Parliaments of Scotland to 1707, (RPS) K. M. Brown et al., (eds), (St Andrews, 2007–2018), 1695/5/104. Date accessed: 22 August 2018.

The Financial Revolution at home: Scotland, 1690–1707  25 17 Ibid., pp.207–218 18 D. Armitage, ‘Paterson, William (1658–1719), banking projector’, Oxford Dictionary of National Biography, (Oxford, 2004); the two others involved in drawing up the plan were merchant Michael Godfrey, and Treasury commissioner Charles Montagu 19 Ibid. 20 P. G. M. Dickson, The Financial Revolution in England, (London, 1967), p.52; Dickson states ‘It seems probable … though there is no direct evidence, that Paterson was the author of the proposal for a tontine loan which the commons accepted in December 1692’ 21 G. Gallais-Hamonno and C. Rietsch, ‘Financial Engineering in the 17th and 18th Centuries – Tontines in England, France, and Ireland’, in P. Hellwege (ed), The Past, Present, and Future of Tontines: A Seventeenth Century Product and the Development of Life Insurance, (Berlin, 2018), p.66 22 Watt, The Price of Scotland, p.32 23 Ibid., p.26 24 Whatley, with Patrick, The Scots and the Union, p.167 25 Watt, The Price of Scotland, p.32 26 Watt, ‘The Company of Scotland and Scottish Politics, 1696–1701’, p.212 27 Watt, The Price of Scotland, p.44 28 For a full account of the events of this period see Watt, ‘London Scots’ chapter in The Price of Scotland, pp.31–45 29 Watt, The Price of Scotland, pp.51–54 30 National Library of Scotland, Adv. MS 83.1.8v (Subscription list for the Company of Scotland, 1696) 31 Ibid., p.55–56 32 E. Lindberg, ‘The Rise of Hamburg as a Global Marketplace in the Seventeenth Century: A Comparative Political Economy Perspective’, in Comparative Studies in Society and History, Vol. 50, No. 3, (Jul., 2008), p.641 33 Watt, The Price of Scotland, p.101 34 Marshall, Presbyteries and Profits, Appendix: Manufacturing Enterprises in Scotland, 1560–1707, pp.284–319, this provides a list of enterprises established during the time period, not all were joint-stock; W. R. Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, Vol. 3, pp.132–195 35 S. G. Checkland, Scottish Banking: A History, 1695–1973, (Glasgow, 1975), p.23 36 R. Saville, Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996), p.4 37 Ibid., pp.2–4, and Checkland, Scottish Banking, p.26 38 Checkland, Scottish Banking, pp.33–35 39 For a wonderfully written and well-balance view of events see Watt, The Price of Scotland; also see, J. Prebble, Darien: The Scottish Dream of Empire, (Edinburgh, 2001). 40 Whatley, with Patrick, The Scots and the Union, p.173: at this time £1 sterling was equivalent to £12 scots, as such £153,000 converts to over £1.8 million scots 41 Ibid., p.160 42 J. P. Sommerville (ed), King James VI and I: Political Writings, (Cambridge, 1994), p.xxiv; and G. MacIntosh, The Scottish Parliament Under Charles II, 1660–1685, ­(Edinburgh, 2007) pp.107–108 43 RPS, 1689/3/158 44 RPS, 1705/6/53; RPS, 1705/6/67; and RPS, 1705/6/16 45 A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.72; and Smout, Scottish Trade on the Eve of Union, p.262 46 Murphy, John Law, p.72 47 T. C. Smout, Scottish Trade on the Eve of Union, 1660 – 1707, (Edinburgh, 1963), pp.262–269

26  The Financial Revolution at home: Scotland, 1690–1707 48 T. C. Smout, Scottish Trade on the Eve of Union, 1660 – 1707, (Edinburgh, 1963), pp.262–269; see W. R. McLeod and W. B. McLeod, Anglo-Scottish Tracts, 1701– 1714: A Descriptive Checklist, (Lawrence, 1979), this covers only tracts with a link to ­Anglo-Scottish affairs and is arranged alphabetically; and L. W. Hanson, Contemporary Printed Sources for British and Irish Economic History, 1701–1750, (Cambridge, 1963), this work has been arranged chronologically, with 1705 and 1706 located at pp.49–78 49 See: A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705); A. Brown, A Second Essay Concerning the Land Mint : Shewing, that the Present Necessity, and Want of Gold and Silver Money, Absolutely Requires this, or the Like Remedy, and that Very Speedily ... By the Author of the Character of the true Publick spirit, (Edinburgh, 1705); W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705); J. Clerk, The Circumstances of Scotland Consider’d, with Respect to the Present Scarcity of Money: Together with Some Proposals for Supplying the Defect thereof, and Rectifying the Ballance of Trade, (Edinburgh, 1705); J. Hodges, Considerations and Proposals for Supplying the Present Scarcity of Money, and ­Advancing Trade, (Edinburgh, 1705); H. Chamberlen and J. Armour, ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit’, in A. E. Murphy and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997), pp.20–43; and J. Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705). 50 Hanson records 27 financial pamphlets in 1705, compared to just five in 1706; see L. W. Hanson, Contemporary Printed Sources for British and Irish Economic History, 1701–1750, (Cambridge, 1963), pp.49–78 51 K. Bowie, ‘Public Opinion, Popular Politics and the Union of 1707’, in The Scottish Historical Review, Vol. 82, No. 214, Part 2 (Oct., 2003), p.228 52 C. A. Whatley, The Scots and the Union: Then and Now, (Edinburgh, 2014), p.10 53 Anon, An essay for promoting of trade, and increasing the coin of the nation. In a letter from a gentleman in the country to his friend at Edinburgh, a Member of Parliament, (Edinburgh, 1705), pp.1–4 54 Ibid., p.4–5 55 RPS1393/10/1. Date accessed: 11 May 2015; N. Holmes, Scottish Coins: A History of Small Change in Scotland, (Edinburgh, 1998), p.16 56 Checkland, Scottish Banking, pp.134–135; the bank of Scotland had established branches in Glasgow, Dundee, Aberdeen and Montrose in 1696, but had found them unprofitable and they were shortly closed. 57 L. H. White, Free Banking in Britain: Theory, Experience and Debate, 1800–1845, second edition, (Cambridge, 1984), p.27; for an overview of the crisis of 1772–73; see, P. Kosmetatos, The 1772–73 British Credit Crisis, (London, 2018) 58 See, Register of the Privy Council of Scotland, 3rd Series, Vol. 7, P. Hume Brown (ed), (Ontario, 2009), p.51; ‘The Privy Council of Scotland, a proclamation for raising the rate of money’, (Edinburgh, 1695); and Rev. Rogers Ruding, Annals of the Coinage of Great Britain and its Dependencies: From the Earliest Period of Authentic History to the Reign of Victoria, (London, 1840), p.18. 59 W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) 60 Ibid., p.14. 61 J. Hodges, Considerations and Proposals for Supplying the Scarcity of Money, and Advancing Trade, (Edinburgh, 1705), pp.7–8

The Financial Revolution at home: Scotland, 1690–1707  27 62 Whatley, with Patrick, The Scots and the Union, p.173. 63 Hodges, Considerations, p.7–8 64 P. Pfaff, ‘Paper Money in Early China’, in The BRC Journal of Advances in Business, Vol. 1, No. 1, (2011), p.59; The Bank of Amsterdam was an institution often held up as a beacon of good financial practice during the period, as were the Dutch more generally; See Macinnes, Union and Empire The Making of the United Kingdom in 1707, (Cambridge, 2007), chapter 8, ‘Going Dutch?’, pp.201–240. 65 The bank worked a fractional reserve model, meaning 25% in specie was held as ­security against the value of the note 66 The debate at this time produced numerous works, as an example see; H. Chamberlen, An Humble Proposal to the Honourable the House of Commons, (London, 1690); H. Chamberlen, Dr. Chamberlen’s petition and proposals for a Land Bank to increase trade, (London, 1693); H. Chamberlen, A short abstract of Doctor H. Chamberlen’s proposal to the honourable House of Commons the last sessions. And also of Mr. John Briscoe’s present printed proposal compared together, whereby the benefits of each to the nation, and every freeholder concern’d, may plainly appear, (London, 1694); J. Asgill and N. Barbon, A proposal for a subscription to raise one hundred thousand pounds for circulating the credit of a Land Bank, (London, 1695); J. Asgill and N. Barbon, An account of the Land bank, shewing the design and manner of the settlement, the profits to the subscribers, the advantage to the borrowers, the conveniency to the lenders, that it wil be the support of the nobility and gentry of England, and a public good to the whole nation, (London, 1695); J. Asgill and N. Barbon, The settlement of the Land Bank, (London, 1695); J. Asgill and N. Barbon, A list of the names of the subscribers to the Land Bank, (London, 1695). 67 H. Chamberlen, Papers Relating to a Bank of Credit, upon Land-Security: Proposed to the Parliament of Scotland, (Edinburgh, 1693); H. Chamberlen, A few proposals humbly recommending to the serious consideration of his majesty’s high commissioner, and the right honourable, the Estates of Parliament, the establishing a land-credit in this kingdom with several explanations of, and arguments for the same : together with full answers to all such objections, as have hitherto appeared against it, (Edinburgh, 1700); and H. Chamberlen and J. Armour, ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit’, in A. E. Murphy and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997), pp.20–43 68 G. Rowlands, The Financial Decline of a Great Power: War, Influence, and Money in Louis XIV’s France, (Oxford, 2012), pp.1–2 69 E. J. Hamilton, ‘The Political Economy of France at the Time of John Law’, in The History of Political Economy, Vol. 1, (Spring Durham, NC, 1969), p.145 70 Murphy, John Law, p.164; The company then became the Compagnie Perpetuelle des Indes in 1719 71 F. R. Velde, ‘John Law’s System’, in The American Economic Review, Vol. 97, No. 2, (May, 2007), p.277 72 Murphy, John Law, pp.188–191 73 Ibid., pp. 244–264 74 J. P. Wood, A Sketch of the Life and Projects of John Law of Lauriston, Comptroller General of the Finances in France, (London, 1791), p.40 75 Murphy, John Law, p.313 76 J. Buchan, John Law: A Scottish Adventurer of the Eighteenth Century, (London, 2018) p.34 77 For an overview of events see, Murphy, John Law, pp.28–33 78 James Buchan considers several possibilities, see John Law: A Scottish Adventurer, pp.49–54

28  The Financial Revolution at home: Scotland, 1690–1707 79 Buchan, John Law, p.55; and Murphy, John Law, p.36 80 Murphy, John Law, p.72; and Smout, Scottish Trade on the Eve of Union, p.262 81 RPS, M1705/6/5; and RPS A1705/6/13 82 9 June 1705, J. J. Cartwright (ed), The Manuscripts of His Grace the Duke of Portland, Vol. IV, (London, 1897), p.195 83 W. Ferguson, Scotland’s Relations with England: A Survey to 1707 (Edinburgh, 1977), p.228 84 Murphy, John Law, p70 85 Ibid. 86 RPS, 1705/6/36 87 J. Robertson, ‘An Elusive Sovereignty. The Course of the Union Debate in Scotland 1698–1707’, in J. Robertson (ed), A Union for Empire: Political Thought and the British Union of 1707, (Cambridge, 1995), p.212. 88 W. Paterson, Proposals and Reasons for Constituting a Council of Trade, (1701); and H. Chamberlen, A Few Proposals Humbly Recommending the Establishment of a Land Credit, (Edinburgh, 1700); Seton, Some Thoughts; and Law, Money and Trade Considered 89 Seton had similarly proposed the collection of new taxes; Seton, Some Thoughts, p.18. 90 W. Deringer, Calculated Values: Finance, Politics, and the Quantitative Age, (Cambridge, MA, 2018), p.88; Always with one eye on Darien, Paterson stated that after the crown had been paid a fixed rate, the rest of the new tax revenue would go to a National Fund, from which part would go to repaying Darien shareholders. 91 RPS, 1705/6/193 92 The August debate was prompted by a letter from the queen in July 1705, which had request it be discussed during the sitting; RPS, 1705/6/53; RPS, 1705/6/67; and RPS, 1705/6/16 93 Macinnes, Union and Empire, p.229 94 C.A. Whatley, The Scots and the Union, p.197; and ‘Appendix A: Membership of the Council of Trade, elected 1705 (voting record for/against the court in the thirty recorded division in the union Parliament, 1706–7)’, pp.381–382 95 Macinnes, Union and Empire, pp.230–231; it should be noted that Macinnes states that the proposals of Law and Chamberlen and Armour were laid before the Council of Trade for consideration. There appears to be some confusion here between the Public Accounts Committee and the Council of trade, for the council did not come into being until September, whilst the land bank proposals had been considered and dismissed by the end of July 96 RPS, 1705/6/193 97 J. M. Gray (ed), Memoirs of the Life of Sir John Clerk of Penicuik, Baronet, Baron of the Exchequer, Extracted by Himself from His own Journals, 1676–1755, (Edinburgh, 1892), p.56 98 RPS, 1705/6/193 99 Gray, Memoirs, p.56 100 Macinnes, Union and Empire, p.230 101 Gray, Memoirs, p.56 102 Articles of Union, 1707, available at https://www.parliament.uk/globalassets/documents/heritage/articlesofunion.pdf 103 Gray, Memoirs, p.54 104 The members of this committee as outlined by Clerk were ‘the earles of Galloway, Moresk, Balcarras, and Dunmore, with the Viscount of Stair for the nobility; Sr Rob. Dundass of Arniston, Sir John Lauder of Fountainhall, John Haldan of Glenegles, and William Seaton younger of Pitmeden for the Barons; Colin Campbel, Mr. Dougal Stuart, Sir David Cuningham, Mr. Rob[ert] Fraser, and my self, for the Burrous’; Gray, Memoirs, pp.50–51; how these men voted on the ratifying the act of union can be seen in RPS, M1706/10/89

The Financial Revolution at home: Scotland, 1690–1707  29 105 See Whatley, The Scots and the Union: Then and Now, (Edinburgh, 2014); and ­Macinnes, Union and Empire: The Making of the United Kingdom in 1707, (­Cambridge, 2007) 106 Gray, Memoirs, p.56 107 RPS, 1705/6/193

Primary sources Anon., An essay for promoting of trade, and increasing the coin of the nation. In a letter from a gentleman in the country to his friend at Edinburgh, a Member of Parliament, (Edinburgh, 1705) Asgill, J., and Barbon, N., An account of the Land bank, shewing the design and manner of the settlement, the profits to the subscribers, the advantage to the borrowers, the conveniency to the lenders, that it wil be the support of the nobility and gentry of England, and a public good to the whole nation, (London, 1695a) ———, A list of the names of the subscribers to the Land Bank, (London, 1695b) ———, A proposal for a subscription to raise one hundred thousand pounds for circulating the credit of a Land Bank, (London, 1695c) ———, The settlement of the Land Bank, (London, 1695d) Brown, A., An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705a) ———, A second essay concerning the Land Mint: shewing, that the present necessity, and want of Gold and Silver money, absolutely requires this, or the like remedy, and that very speedily... By the author of the character of the true publick spirit, (Edinburgh, 1705b) Chamberlen, H., An humble proposal to the Honourable the House of Commons, (London, 1690a) ———, Dr. Hugh Chamberlen’s proposal to make England rich and happy, (London, 1690b) ———, Dr. Chamberlen’s petition and proposals for a Land Bank to increase trade, ­(London, 1693a) ———, Papers relating to a bank of credit, upon land-security: proposed to the Parliament of Scotland, (Edinburgh, 1693b) ———, A short abstract of Doctor H. Chamberlen’s proposal to the honourable House of Commons the last sessions. And also of Mr. John Briscoe’s present printed proposal ­compared together, whereby the benefits of each to the nation, and every freeholder concern’d, may plainly appear, (London, 1694) ———, A proposal for erecting a general bank which may be fitly called the Land Bank of England, (London, 1695) ———, The constitution of the Office of Land-Credit, declared in a deed, (London, 1696a) ———, The Office of Land-Credit: encouragement to mony’d men, (London 1696b) ———, A few proposals humbly recommending to the serious consideration of his majesty’s high commissioner, and the right honourable, the Estates of Parliament, the establishing a Land-Credit in this kingdom with several explanations of, and arguments for the same: together with full answers to all such objections, as have hitherto appeared against it, (Edinburgh, 1700) Chamberlen, H., and Armour, J., Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit, in Murphy, A. E., and Sugiyama, C., (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997), pp.20–43

30  The Financial Revolution at home: Scotland, 1690–1707 Clerk, J., The Circumstances of Scotland considered, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705) Herries, W., A defence of the scots abdicating darien: including an answer to the defence of the scots settlement there, (Edinburgh, 1700) Hodges, J., Considerations and proposals for supplying the present scarcity of money, and advancing trade, (Edinburgh, 1705) Law, J., Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705) Paterson, W., Proposals and reasons for constituting a council of trade, (London, 1701) Seton, W., Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) Subscription list for the Company of Scotland, 1696, National Library of Scotland, Adv. MS 83.1.8v The Privy Council of Scotland, A proclamation for raising the rate of money, (Edinburgh, 1695) Secondary sources Brewer, J., The Sinews of Power: War, Money, and the English State, 1688-1783, (New York, 1989) Buchan, J., John Law: A Scottish Adventurer of the Eighteenth Century, (London, 2018) Checkland, S. G., Scottish Banking: A History, 1695-1973, (Glasgow, 1975) Deringer, W., Calculated Values: Finance, Politics, and the Quantitative Age, (Cambridge, MA, 2018) Dickson, P. G. M., The Financial Revolution in England: A Study in the Development of Public Credit, 1688-1756, (London, 1967) Ferguson, W., Scotland’s Relations with England: A Survey to 1707, (Edinburgh, 1977) Hanson, L. W., Contemporary Printed Sources for British and Irish Economic History, 1701-1750, (Cambridge, 1963) Holmes, N., Scottish Coins: A History of Small Change in Scotland, (Edinburgh, 1998) Kosmetatos, P., The 1772-73 British Credit Crisis, (London, 2018) Lenman, B., An Economic History of Modern Scotland 1660–1976 (Hamden, CT, 1977) Macinnes, A., Union and Empire: The Making of the United Kingdom in 1707, (Cambridge, 2007) MacIntosh, G., The Scottish Parliament Under Charles II, 1660-1685, (Edinburgh, 2007) Marshall, G., Presbyteries and Profits: Calvinism and the Development of Capitalism in Scotland, 1560-1707, (Edinburgh, 1992) McLeod, W. R., and W. B., Anglo-Scottish Tracts, 1701-1714: A Descriptive Checklist, (Lawrence, 1979) McNeill, J. R., Mosquito Empires: Ecology and War in the Greater Caribbean, 1620–1914, (Cambridge, 2010) Murphy, A., The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble, (Cambridge, 2009) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) Prebble, J., Darien: The Scottish Dream of Empire, (Edinburgh, 2001) Roseveare, H., The Financial Revolution, 1660-1760, (London, 1991) Rowlands, G., The Financial Decline of a Great Power: War, Influence, and Money in Louis XIV’s France, (Oxford, 2012)

The Financial Revolution at home: Scotland, 1690–1707  31 Ruding, R., Annals of the Coinage of Great Britain and its Dependencies: From the Earliest Period of Authentic History to the Reign of Victoria, (London, 1840) Saville, R., Bank of Scotland: A History, 1695-1995 (Edinburgh, 1996) Scott, W. R., The Constitution and Finance of English, Scottish and Irish Joint-Stock ­Companies to 1720, 3 Vols, (Cambridge, 1910–1912), Vol. 1 Sommerville, J. P., (ed), King James VI and I: Political Writings, (Cambridge, 1994) Smout, T. C., Scottish Trade on the Eve of Union 1660–1707, (Edinburgh, 1963) Watt, D., The Price of Scotland: Darien, Union, and the Wealth of Nation, (Edinburgh, 2007) Whatley, C. A., with Patrick, D. J., The Scots and the Union, (Edinburgh, 2006) Whatley, C. A., The Scots and the Union: Then and Now, (Edinburgh, 2014) White, L. H., Free Banking in Britain: Theory, Experience and Debate, 1800-1845, second edition, (Cambridge, 1984) Wood, J. P., A Sketch of the Life and Projects of John Law of Lauriston, Comptroller General of the Finances in France, (London, 1791) Edited collections and journals Armitage, D. ‘Making the Empire British: Scotland in the Atlantic World 1542–1717’, in Past and Present, Vol. 155 (1997), pp.34–63 Bowie, K., ‘Public Opinion, Popular Politics and the Union of 1707’, in The Scottish ­Historical Review, Vol. 82, No. 214, Part 2 (October, 2003), pp.226–260 Cartwright, J. J., (ed), The Manuscripts of His Grace the Duke of Portland, Vol. IV, ­(London, 1897) Coffman, D., and Neal, L., ‘Introduction’, in Coffman, D., Leonard, A., and Neal, L., (eds), Questioning Credible Commitment: Perspectives on the Rise of Financial Capitalism, (Cambridge, 2013), pp.1–20 Gallais-Hamonno, G., and Rietsch, C., ‘Financial Engineering in the 17th and 18th Centuries – Tontines in England, France, and Ireland’, in Hellwege, P., (ed), The Past, Present, and Future of Tontines: A Seventeenth Century Product and the Development of Life Insurance, (Berlin, 2018), pp.49–78 Gray, J. M., (ed), Memoirs of the Life of Sir John Clerk of Penicuik, Baronet, Baron of the Exchequer, Extracted by Himself from His Own Journals, 1676-1755, (Edinburgh, 1892) Hamilton, E. J., ‘The Political Economy of France at the Time of John Law’, in The History of Political Economy, Vol. 1 (Spring, Durham, NC, 1969), pp.123–149 Hume Brown, P., (ed), Register of the Privy Council of Scotland, 3rd Series, Vol. 7, (Ontario, 2009) Lindberg, E., ‘The Rise of Hamburg as a Global Marketplace in the Seventeenth Century: A Comparative Political Economy Perspective’, in Comparative Studies in Society and History, Vol. 50, No. 3 (Jul., 2008), pp.641–662 North, D., and Weingast, B., ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, in The Journal of Economic History, Vol. 49, No. 4 (Dec., 1989), pp.134–165 Pfaff, P., ‘Paper Money in Early China’, in The BRC Journal of Advances in Business, Vol. 1, No. 1 (2011), pp.55–68 Robertson, J., ‘An Elusive Sovereignty. The Course of the Union Debate in Scotland 16981707’, in Robertson, J., (ed), A Union for Empire: Political Thought and the British Union of 1707, (Cambridge, 1995), pp.198–217 Smout, T. C., ‘The Anglo-Scottish Union of 1707. 1. The Economic Background’, in The Economic History Review, New Series, Vol. 16, No. 3 (1964), pp.455–467

32  The Financial Revolution at home: Scotland, 1690–1707 Velde, F. R., ‘John Law’s System’, in The American Economic Review, Vol. 97, No. 2 (May, 2007), pp.276–279 Watt, D., ‘The Company of Scotland and Scottish Politics, 1696-1701’, in Adams, S., and Goodare, J., (eds), Scotland in the Age of Two Revolutions, (Woodbridge, 2014), pp.211–230 Online sources Armitage, D., Paterson, William (1658–1719), Banking Projector, Oxford Dictionary of ­National Biography, (Oxford, 2004) Brown, K. M., et al., (eds), The Records of the Parliaments of Scotland to 1707, (St ­Andrews, 2007–2018), 1393/10/1 ———, 1393/10/1 ———, 1689/3/158 ———, 1695/5/104 ———, 1705/6/5 ———, 1705/6/13 ———, 1705/6/16 ———, 1705/6/53 ———, 1705/6/67 ———, 1705/6/193 ———, 1706/10/89

3

‘Land is what produces everything, silver is only the product’1 The land bank debates of England, North America, and Scotland, 1650–1705

By the close of the seventeenth century, silver was widely recognised as the unit of account across the Atlantic world. It was the measure by which goods were valued, the value by which goods were exchanged, and the commodity in which contracts were paid.2 In the form of coins, silver had become a token of exchange that was universally accepted within a country’s borders and, with the application of an exchange mechanism, also beyond. Getting to this point had taken time, however. Roman conquerors had been the first to introduce standardised metal coins into the area which would become Britain. Then, when they left at the turn of the fifth century, the monetary system broke down, and within a generation, coin had ceased to be the medium of exchange.3 Over the following centuries, few coins circulated as money in the region, trade was limited, and the structures to mint and legislate for a standardised coin had to be reconstructed.4 It took until the end of the ninth century for England to re-establish a mint, and Scotland did not follow until the middle of the twelfth century.5 That silver was restored as a circulating currency was therefore part of a long rebuilding process. Silver coinage was durable, it could be exchanged for goods that might otherwise perish, and it solved the problem of coordinating barter trades. Yet, it was not without its issues. Coinage was open to being counterfeited or clipped (where a small amount of metal was removed from the edge of coins, and the combined clippings were melted into bullion), and problems with scarcity were common. Issues around coinage became so prevalent that a significant literature on the topic emerged across the British Isles and colonial territories, while clippers and counterfeiters were dealt with harshly.6 As part of this debate, many writers questioned whether silver was the best material to be used as a circulating currency. While it could be easily divided into different denominations and imprinted with a legislative mark of some form, silver was itself a commodity that was capable of fluctuating in price. Changes in its value could be caused by external shocks such as war, or coinage might be adjusted in fineness or denomination due to decisions taken by monarchs or governments.7 Many countries also had limited access to precious metals with which to produce their coinage. In the search for a solution to the ­issues related to specie a substantial literature emerged which sought to circumvent silver in favour of a more secure form of money. DOI: 10.4324/9781003284819-3

34  The land bank debates of England, North America, and Scotland Between 1650 and 1705, a series of land bank debates took place across the anglophone Atlantic world. This was a project that could be operated privately or by the state and, through the establishment of a bank of issue, would dispense paper notes. As they were secured against land, these notes were representative money. The value was not in the note itself but in the commodity that supported it. Think of it a little like remortgaging, where a landowner could unlock capital tied up in a piece of property by borrowing against it. The bank’s notes could then be used by the borrower as a circulating credit to pay his or her obligations, with the pledged land acting as security. While the debates around this banking model took place at different times in different locations during the period, there were many overlapping themes. Participants debated the advantages, or indeed disadvantages, of land-backed paper money and unpacked definitions of what exactly a paper currency, and more widely money, was.8 This chapter will concentrate on the Scottish debate of 1705, but will provide context to the earlier English and colonial debates on the topic, with an aim of demonstrating how financial ideas were disseminated and developed during the period. Transatlantic land banking, London to Boston, and back to London, 1650–96 In 1650, William Potter published a pamphlet entitled The Key of Wealth, Or, A New Way for Improving of Trade.9 While the details of Potter’s life are scarce, his work was of central importance to the development of the land bank debate in Britain and the colonies.10 The Key of Wealth set out an economic programme ­designed to increase the wealth of England through the advancement of trade. Potter recognised that private credit among merchants had grown considerably by the middle of the seventeenth century, but he also knew that it was fragile and prone to default. He, therefore, advocated for a scheme intended to move merchant groups away from potentially risky private arrangements and towards a formalised banking structure designed to reduce risk.11 To do this, he proposed that a group of merchants and tradesmen establish a shared fund, from which paper bills of fixed value, payable to the bearer and secured against the property of those subscribing to the fund, would be issued. This scheme of collateralised credit was intended to increase the velocity of money, reducing the friction involved in economic transactions, and would, Potter believed, lead to an overall increase in national output and consumption.12 Potter was so confident in the scheme’s potential that he went as far as projecting it would double England’s capital every 2 years, growing £1,000 to £1 billion in 40 years.13 Potter’s idea to issue paper notes backed by property has seen him hailed as a ‘forerunner of the land bank projectors’, yet the Key of Wealth only made a fleeting reference to the possibility that land could be used as security.14 It appears that the complexity of English land titles made this aspect of the model difficult, and Potter, therefore, focused on the goods held by subscribers as a means of securing the fund.15 It was in fact an essay written in 1653 by polymath Samuel Hartlib in response to Potter’s work which pushed the potential of a land-backed currency to

The land bank debates of England, North America, and Scotland  35 the fore and made the case that there was ‘no way to raise credit in [a] bank but by mortgage of Land’.16 While the theory that land was a secure commodity on which to base a circulating currency was established in the 1650s, the wider debate around this was slow to develop. No significant discussion on English land banking occurred until the 1690s, while Scottish debates did not take place until 1705. Some discussion ­appears to have taken place in Connecticut in the early 1660s, with Hartlib writing to the colony’s governor John Winthrop, Jr. to encourage him to establish a ‘banco of lands’ in the colony.17 Hartlib included a copy of his essay along with Potter’s Key of Wealth, but failed to convince Winthrop of the scheme’s merits. By the early 1680s, however, a debate on the topic was taking place in the neighbouring colony of Massachusetts, triggered by Potter’s writings. At the centre of this was a 1682 pamphlet, Severals relating to the fund: Printed for divers reasons as they may appear, written by English minister, John Woodbridge.18 Woodbridge was directly influenced by Potter’s ideas. The two men were personal friends, with Woodbridge thanking Potter in the opening pages of his proposal for having ‘imparted to him a Designe for the accommodation of Commerce, in the nature of a Bank of money’.19 The pamphlet described a struggling colonial economy in which trade was ‘stinted at home, and forestalled abroad; Stocks lye dead […and] Merchants, and Shop-keepers, undersell one another’.20 Woodbridge’s remedy was to establish a subscriber credit fund where members pledged the security of ‘real or personal property’ in exchange for access to credit in the form of paper bills. The bank would therefore ‘furnish a means of transacting business through its credits without the use of money’.21 He argued that a currency should be valued not for its intrinsic worth, but for its ability to stimulate commerce. Woodbridge made the case that money ‘multiplies trading; increaseth Manufacture, and provisions; [it could be used] for domestic use, and foreign ­returns; [it] abateh interest; inciteth to the purchasing of land, and heighteneth its value’.22 More money would, quite simply, make more money. Woodbridge had been advocating for this for some time, and after unsuccessfully presenting a similar proposal to the Massachusetts General Court in 1667, he had run the venture in private, first in 1671–72, and then again in 1681.23 In 1682 he was again unsuccessful in convincing the Massachusetts administration of his land bank’s potential. Despite the rejection, the land bank was an idea that would not go away, and within a few years, another attempt was made to establish one in Massachusetts. The man behind the attempt was John Blackwell, an Englishman who had arrived in the colony in 1684. Prior to his arrival in Massachusetts, Blackwell had led an eventful life. He had been co-treasurer under Oliver Cromwell, taking joint responsibility for the entire system of direct taxation and military expenditure during the Protectorate. Following the Restoration, he fell on hard times and was barred from occupying public office, while much of the land he held in Ireland was forfeited. He was widowed and quickly re-wed, marrying the daughter of the imprisoned republican general, John Lambert, in 1672. Then in the year immediately prior to his American migration, he was part of a failed attempt to establish a note-issuing bank attached to the Company of the Royal Fisheries in London.24

36  The land bank debates of England, North America, and Scotland Blackwell adjusted to Massachusetts well, and within a short time, he became the colonies’ ‘foremost financial expert’.25 In 1686, he proposed his own land bank model to the colonial assembly. It was a similar, if more detailed, plan to Woodbridge’s that was centred on a shared subscriber fund issuing bills of credit secured upon ‘lands or real estates mortgaged’, with the additional recommendation that ‘staple goods’ might provide suitable security for loans through a supplementary Lombard scheme.26 Blackwell appeared to have been drawing on his experience with the Royal Fisheries group in London,27 while also building on the debate instigated by Woodbridge earlier in the decade. He was successful in officially establishing the bank in principle with the colonial administration, an achievement due in part to how quickly he had ingratiated himself into the colony’s political networks. Soon after his arrival, he had become deeply involved in the merchant community, becoming chair of a merchant committee selected to discuss ways in which to end the economic difficulties of the colony. This was the very committee that, following the colonial assembly’s considerations, gave Blackwell’s bank the go-ahead.28 The bank drew great support from landowners, who would of course benefit from the project, and when the bank’s directors were named in 1687, these included Blackwell, along with major land speculators from the colony, with all other offices in the bank also filled by landowners.29 While Blackwell’s bank received significant support in Massachusetts and was given the go-ahead by the colonial administration, it was never realised. Just as Potter’s use of land security in England in the 1650s was thwarted by the country’s difficult and complex land titles, the Massachusetts land bank fell victim to a similar issue. In 1684, due to several violations against its terms, Massachusetts’ colonial charter was revoked.30 Two years later, Sir Edmund Andros, a favourite of James VII & II, arrived in the colony as the new governor to oversee the short-lived Dominion of New England. Andros banned town meetings, levied taxes against the colonists, and invalidated all land titles. Loyal to the House of Stuart, Andros seized the opportunity presented by revoking the charter to assert that all lands had reverted back to the Crown.31 This had a significant impact on Blackwell’s plan, because without secure land titles the land bank could not operate. He abandoned the Massachusetts project in July 1688 and left the colony to take up the governorship of Pennsylvania at the invitation of William Penn.32 Blackwell appears to have unsuccessfully promoted the scheme to Penn at this point, and by 1690, after a challenging time as governor of Pennsylvania, he returned to Boston.33 Despite the failure of Blackwell to establish a land bank, his work is important for providing a direct link between the North American land bank debate and the English debate. This is due to the publication of a modified version of his colonial pamphlet in London in 1688.34 This work has been described as ‘the first systematic presentation of the case for inconvertible paper money in the colonies’ and as being ‘the prototype of all proposals for the issue of paper money secured by land and commodities’.35 While the first statement failed to account for the contribution made by Woodbridge in Boston, that Blackwell’s work was the ‘prototype’ for ‘all’ future land bank proposals is a stronger proposition and one we will return to.

The land bank debates of England, North America, and Scotland  37 Blackwell’s pamphlet emerged on the eve of substantial financial debate in England during the 1690s. This was carried out against a backdrop of post-­ revolutionary uncertainty, continental wars, Jacobite/Williamite splits, and the development of significant financial innovations. In the years following the Glorious Revolution, English financial practices and ideas around money were developing at pace. Proposals to improve English trade and augment money stocks were ­published, a national debt was established, access to credit was enlarged, new joint-stock companies emerged, and the Bank of England was founded. In truth, financial schemes that aimed to advance English credit had never really gone away between Potter’s 1650 proposal and the revolution of 1688–89, but these did not match the torrent of works that emerged following the revolution.36 The revolutionary settlement and the crowning of William and Mary in 1689 were crucial factors in driving financial innovation. The settlement, a package of constitutional and political arrangements that established the new English state, created the correct conditions for innovative financial proposals to develop from theory into practice. Prior to 1689, the Crown might more easily default on its debt, such as in 1672 when Charles II’s financial difficulties and strained relationship with Parliament led him to stop payments from the Exchequer.37 With legal developments, demands for transparency in the public accounts, and a move ­towards a constitutional monarchy in 1689, the Crown’s finances were placed on a firmer footing, checks were placed on royal prerogative, and property rights were made more secure.38 These developments in turn allowed for the establishment of novel ways in which the government could borrow money. Financial innovation was also driven by William’s need for funds. After taking the throne, the new king had instantly launched his newly acquired kingdoms into a global war. The Nine Years’ War (1688–97) saw William take on the deposed James VII & II in Ireland, while England as part of a European coalition battled with France, and English and French Settlers fought in the colonies. Wars are of course expensive, and many of the proposals that emerged in the 1690s did so as a method of providing funding to support England’s military endeavours. The land bank was a popular, but divisive, concept of the wider financial ­debate. Discussion was often split along political lines, with Tories favouring the model as a challenge to the Whig-backed Bank of England. Such animosity arose that when the short-lived National Land Bank was formed in 1696, one member of the Commons went as far as to say that the hostility between the land bank and the Bank of England ran ‘as high as Jacobite and Williamite’.39 A stalwart of this debate was Dr. Hugh Chamberlen. The royal physician had been an advocate of banking schemes as early as 1665 and first turned his attention to land banking in 1689.40 He published numerous English and Scottish land bank proposals and made attempts in the Netherlands.41 The closest Chamberlen’s plans came to fruition was with the ‘Office of land-credit’ in England during the mid-1690s. In September 1695, he commissioned a series of advertisements in the London press welcoming subscriptions for a new land bank. He followed these up in November with the announcement that initial subscriptions of £50,000 had been made and that business would shortly commence.42 There appears, however, to have been a problem

38  The land bank debates of England, North America, and Scotland raising the money via landowners, and in December, a new advertisement inviting specie subscriptions from ‘monied-men’ appeared.43 Despite the first subscribers meeting taking place in June 1696 and a constitution for the venture being subsequently published, Chamberlen’s ‘land credit’ was never put into practice.44 As Chamberlen had been attempting to gather subscriptions for his bank, other projectors had also been making the case for their own model of English land bank.45 The one that won out was the National Land Bank, promoted by John Asgill, Nicholas Barbon, and John Briscoe and awarded royal assent in April 1696.46 Asgill, a lawyer, and Barbon, a builder and economist, had worked t­ogether on banking schemes previously. Asgill and Briscoe meanwhile had been rivals, yet despite accusations of plagiarism between the men, in early 1696, the three joined forces to submit a proposal to raise £2,560,000 for the government by ­establishing a land bank.47 At this time, the English administration was attempting to bridge a gap between revenue and expenditure of at least £2 million. War with the French was costly, and the National Land Bank represented a method to support this. Unsurprisingly, a royal charter was swiftly granted.48 By the time, the list of commissioners for taking subscriptions for the bank appeared, only Asgill and Barbon were named, with relations with Briscoe apparently soured again.49 However, while land banking was built into the constitution of the new bank, questions have been raised about how much of a land bank the institution was. Richard Kleer has stated that it had ‘nothing more than the vestiges of a land bank about it’, and that of the £2,560,000 the bank was authorised to raise, only £500,000 was upon mortgages of land, meaning the bank was a money bank in the form of the Bank of England and would largely offer paper notes backed by a 25 per cent specie reserve.50 Its credentials as a land bank were, in the end, never really tested. The bank failed to raise any significant funds, through pledged land or any other means, and after being asked in August 1696 to provide financial support for the Crown’s overseas military operations, it swiftly folded.51 The Scottish debate As covered in Chapter 2, the period around the turn of the eighteenth century was a challenging time for Scotland. In the wake of subsistence and economic crises, the financial forwardness demonstrated in the early 1690s had been replaced with uncertainty by the opening years of the 1700s. In 1705, a significant pamphlet literature on a variety of topics emerged from Scotland. This did so on the back of the ‘commercial chaos’ borne out of the economic crisis of 1704, in which specie had been drained out of Scotland as the failure of Darien was compounded by low levels of economic activity with a decline in Scotland’s border and coastal trade with England.52 A shortage of currency to meet demands, along with rumours that a recoinage was imminent, then forced the Bank of Scotland to suspend payments in December of that year.53 In March 1705, Scotland’s difficulties were further ­exacerbated when the English Parliament passed the Alien Act, a piece of legislation that threatened to significantly impact upon the economy of Scotland if the country did not enter into new union negotiations with England. Many of the

The land bank debates of England, North America, and Scotland  39 resultant pamphlets focused on financial issues and displayed the consensus that the Scottish economy had to be financially capitalised. There was a clear understanding of the interconnectedness of money and trade, with writers demonstrating that they were aware that without the augmentation of the country’s money supply, access to labour was stifled and economic opportunities were restricted.54 More money would allow for the utilisation of untapped or underemployed labour, thereby increasing production and expanding exports. This would then allow for the balance of trade to be tipped in Scotland’s favour, abating the need for coin and bullion to be exported to cover the cost of a trading deficit. The land bank emerged at this time as a popular method by which to achieve these goals. During the summer of 1705, four separate land bank proposals were considered by Scottish parliamentarians and interested Scottish readers.55 The first had been submitted to Parliament in 1704 by veteran land bank projector, Hugh Chamberlen, but was not considered until the middle of the next year. This was Chamberlen’s third Scottish proposal and his first with a partner, Scottish lawyer James Armour.56 Armour came from good business stock, his father, a Glasgow merchant of the same name, had been a proprietor of what was probably Scotland’s first linen factory in the early 1680s.57 At the ascension of James VII, Armour Sr fell foul of the new king’s religious policies and was exiled to East Jersey with other religious nonconformists, leaving his son in Scotland.58 Armour Jr had become an apprentice to an Edinburgh merchant in 1684 and later became a lawyer. From the mid-1690s, he wrote on economic matters, producing pamphlets on fractional reserve and land banks, and on ways of expanding credit. While his writings number only a handful, they are significant for covering a period of almost 30 years, over which time Armour’s ideas developed considerably.59 Armour and Chamberlen’s land bank was envisioned as a state-operated bank of issue. Via the Scottish Treasury, the bank would issue paper notes of varying denominations, supported by legislation that would allow for a total issuance of £300,000 (equating to around £3.6 million Scots).60 The paper money was to be secured against pledged land, with the process overseen by a new parliamentary commission. The notes were to be treated as loans and were to be repaid at five per cent interest per annum over a period of 25 years. This meant that over the term of the loan, the borrower would repay the principal sum, plus an additional 25 per cent. Borrowers would be required to repay their loans in the bank’s bills, of which four per cent of every five repaid would be destroyed upon return, with the pardoned one per cent used to cover the bank’s operating costs. For Armour and Chamberlen, as had been the case for Woodbridge and Blackwell in Massachusetts during the 1680s, the paper currency proposed was not a state-issued fiat money, meaning a currency that derives its worth from the legitimacy of the issuing government and has no intrinsic value. Instead, they viewed the money issued by their bank as being like silver or gold and having ‘a solid and real worth, being founded and secured on land, which has an intrinsick value’.61 When the parliamentary committee tasked with considering the proposal met in June 1705, it was divided. Some members were ‘inclyne[d] to think favourably’ of

40  The land bank debates of England, North America, and Scotland it, and all were wary of acting too quickly.62 The commission proceeded cautiously, printing and circulating the proposal in Parliament in mid-July 1705, after which Chamberlen was invited before the House to answer questions.63 By the end of the month, however, Chamberlen and Armour’s proposal had been rejected.64 A lesser-known contributor to the Scottish land bank debate was Lanarkshire doctor, Andrew Brown. Once noted as a friend of Andrew Fletcher of Saltoun and William II, Brown, who lacked the doggedness of Chamberlen and the infamy of John Law, has been largely forgotten today.65 In 1705, he wrote two essays promoting his land bank model, these were not his first foray into writing, nor were they his last.66 They did, however, represent his most accomplished and lucid works and demonstrated that Brown was capable of flashes of economic brilliance. The first tract, An essay on the new project for a land-mint, presented the institutional specifics of the scheme.67 This included how the organisation was to operate and how a new paper currency would be put into circulation. Brown’s land-mint was a bank that would offer five-year loans at five per cent interest, paid in paper notes and secured on the borrower’s land. Offices were to be erected throughout Scotland, with local representatives employed in valuing land and verifying the credentials of borrowers. While the bank’s bills were to be destroyed upon their repayment, it was envisioned that the land-mint would continue to issue new loans indefinitely, thereby introducing a significant sum of paper currency into Scotland.68 While Brown’s first essay was important for laying out the nuts and bolts of his scheme, it must be said that it is a less than stimulating read. It was really with the follow-up second essay that the author’s economic reasoning took flight. In a whirlwind of monetary theory, Brown first reduced money to its simplest function as a token of exchange. ‘[M]oney, like Proteus’ he grandly stated, ‘is convertible into everything, as also everything is convertible into it’. Next, he raised it to its zenith with the statement that money was not only ‘the mediation of commerce, making power, riches and strength, but being more immediately, and in it self, [was also] the instrument of all political actions and operations’.69 He argued that gold and silver inherited an additional value when used as money, with the ­institutional legitimacy given during the minting process imbuing the coin with ‘farr more value, than their value as mettals, and abstract from their sole finess’. This was a significant step forward in Brown’s reasoning, and from this conclusion, he was able to make the case that: if the medium of commerce and tool of political operations, may be farr less value intrinsically than after tis made money; and that the authoritative institution and impress with custome, has given it the full value of money, that then and in that case, the basis of money, provided it be otherways qualified, may be of very small value intrinsically70 In other words, the value of money as it then existed was not entirely to be found in the material it was made from, but was in part derived from the legitimacy placed in it by the governing institution. Nor was money as ‘the measure and tool of commerce and instrument of political operations’ tied exclusively to gold and silver.71

The land bank debates of England, North America, and Scotland  41 Brown went further claiming that it was not necessary for money to be composed of a rare material at all. As he made clear, ‘scarcity is not a requisite for the subject of money, gold and silver are scarce because they are used for money, rather than the other way around’. For Brown money needed only to possess the requisite qualities of being capable of being impressed with the signature of authority from the issuing institution without being in danger of counterfeiting, while also being portable, durable, and divisible.72 From here, Brown made the case for paper money. Paper, he said, can be ‘cautioned and checked, and by authoritative institution impressed’, reducing the likelihood of counterfeiting and allowing it to pass in the same way as specie.73 He recognised that paper lacked the same intrinsic value as coins fashioned from precious metals, but that this would be remedied by securing it against land, ‘the most certain & obvious value in the world’.74 The second essay convincingly conveys to the reader that the physical object of money was but a symbol of the medium of currency that supported it. This was a fundamental intellectual step in moving from a monetary system based on metal to one of paper and framed the important notion that the value was not in the paper ­itself, but in the security that underwrote it. He stated that his landmint’s notes ‘shall be no more pieces of paper, but signatures and symbols of land, equivalent and consequently of more intrinsicall value than gold and silver money, as owing no part of their value to authoritative institution or custom’.75 At the time of Brown’s writing, the Bank of Scotland was already issuing paper bills, backed by specie to the sum of 25 per cent of the notes’ worth. In theory, the paper issued by his land mint would therefore be ‘of equivalent extrinsic value, with gold and silver money’ and of more secure value than the notes issued by the Bank of Scotland.76 Brown made the case that the existence of Scottish land deeds already recognised ownership of land on paper; therefore, basing a paper currency on this security was a reasonable model. He realised that the scheme was, however, a complex concept, and he foresaw that some questions may arise around how paper bills secured upon one pledge of land could be divided into smaller denominations that might then be distributed by the borrower among numerous others. In answering this, he argued that where ‘rights are constitute on lands for security of money, it can make no difference in the validity, whither the same are in one integral right, or 100 or 500 parcelled out divisions, or divided rights’.77 In this, Brown was pointing to the principle that the burden of the debt sat squarely with the borrower, and as such, how the principle sum was divided and used did not in any way undermine or invalidate a currency that was secured upon a pledge of land. Brown also addressed talk of a paper currency being ‘forced’ upon the people of Scotland – this was a term that appeared in contemporary parliamentary debates on paper currency – and argued that the implementation of paper money should not be considered an imposition, but rather a benefit.78 The introduction of a metal currency into Scotland had, he argued, been beneficial to a people ‘to whom custom [was] a second nature’. Why therefore should ‘a law enjoyning the currency of these notes, as money, not as credit, and making them of necessary acceptance’ not be similarly advantageous?79

42  The land bank debates of England, North America, and Scotland As Brown moved towards the conclusion of his second essay, he made a bold statement. He was of the opinion that silver had become the standard material from which to make money by use of reason and convenience. It was durable and divisible, could be easily worked, and was capable of being stamped by an institution. These were all qualities that Brown applied to the paper notes of his land mint. He, therefore, asserted that should Scotland adopt a land-based paper currency, then other nations, seeing the convenience of the paper notes, over time would also begin to adopt them.80 Brown not only saw the potential of an expanded paper currency in his native Scotland but also hypothesised a complete overhaul of international currencies. Despite this grand idea, the excellent monetary theory expounded by Brown, and the re-publication of his land-mint essays in 1706, his proposal went no further Perhaps the best known of the Scottish land bank proponents was John Law. A central character of the European financial revolutions, Law had an impact that reverberated throughout the eighteenth century. The reader will remember that in the closing years of the seventeenth century, Law had become a wanted man in England. You might think this would have led him to lay low, but this was not the case. By 1704, he was in Scotland, writing his first land bank proposal, the first of five he would develop for three different countries over the next three years.81 The first was a 1704 scheme devised for England, appearing at a time when the English land bank debate was all but finished. The central ideas of the proposal were heavily influenced by the financial practices of the Bank of Amsterdam, where a customer could make a cash deposit with the bank and then carry out future business transactions via the bank’s books.82 The system increased liquidity in the Dutch capital, removing the cumbersome exchange of coin from the process, and improved the fluidity of trade. Law aimed for a similar outcome in England, making the case that a currency founded on the security of land was a viable substitute for specie. The proposal was modest by Law’s later standards and was not one which advocated for an expansion in the money supply.83 While the scheme would possibly see an increase in the speed at which money circulated, it would inject no additional funds into the English economy and would instead substitute one valuable object (specie) for another (land) as the basis for money. It was with the publication of Money and Trade Considered in 1705 that Law’s monetary theory developed significantly. In this work, he argued that Scotland was underutilising both its labour and its natural resources, a situation that could be rectified with the establishment of a land bank issuing a paper currency. In support of this proposal, Law set forth a study on the nature of money, from what constituted a currency to the interrelationship between money and trade. He reasoned that silver had come to be the material of choice for a circulating currency due to its qualities. It was versatile and durable, it could be worked to a set standard and divided, and its value was of the same in one place as another or with minimal difference.84 So suitable was it to the role of currency that Law argued it was ‘reasonable to think … [that silver] was used as money, before it was coin’d’, with silver bullion having long since been ‘the measure by which goods were valued: the value by which goods were exchanged: and in which contracts were made payable’.85 Clearly for

The land bank debates of England, North America, and Scotland  43 Law, silver being minted and impressed as money was simply a consequence of use that was already being applied to silver bullion.86 This reasoning upon how silver began to be utilised as money chimes with what Christine Desan has termed ‘the convergence story’. This is where ‘money arises immediately out of bipolar exchange … [and] individuals converge upon that medium to express the material value of objects’.87 Desan views this narrative as being ‘blunt’, falling ‘apart immediately beyond the basic outline’, yet this is what Law believed, and it is an account that matches with other writers of the period.88 Law dismissed the notion that money held any ‘imaginary’ value agreed by ‘the general consent of men’. He stated that he could not ‘conceive how different nations could agree to put an imaginary value upon any thing, especially upon silver, by which all other goods are valued’. Instead, it was reasonable to assume that ‘silver was barter’d as it was valued for its uses as a metal, and was given as money according to its value in barter’. As such, money remedied the inconveniences of barter, which in turn increased the demand for silver, instilling it was a value that was in no way imaginary.89 However, while these arguments ostensibly appear to support the use of silver as a currency, Law declared the metal had failed ‘to answer the design of money’. The fact that silver could be adjusted in fineness, allowing those in power to make adjustments to its quality, which in turn impacted its use as a commodity by which to value and exchange other goods, was a problem for a circulating currency.90 Law described a Scotland in 1705 which was grossly underutilising its labour and its resources, but argued that by augmenting the country’s money supply and capitalising the economy, this could be addressed. The interconnectedness of money and trade meant that without additional money, the workforce could not be paid wages, restricting economic opportunity and, in some cases, forcing migration to earn a living. More money would allow for the utilisation of untapped or underemployed labour and provide resources to increase the production of Scottish goods and drive Scottish exports. Through these measures, the balance of trade would be tipped in Scotland’s favour and decrease the need for coin and bullion to be exported to cover the cost of a trading deficit.91 To drive this change, Law identified a bank as being the ‘best method yet practis’d for the increase of money’.92 Supporting this cash injection on the back of Scottish land was a clear solution to Law, ‘land is what produces everything, silver is only the product’ he proclaimed.93 Law argued that land was a commodity that had increased in value over the preceding two centuries, and ‘being yet capable of improvement’, it would continue to do so. Silver, he predicted, would meanwhile decrease in value as it increased in quantity.94 Law’s bank was to be state run, with 40 parliamentary appointed commissioners granted the power to produce bank notes to be offered as loans against landed security.95 No more than £50,000 was to be struck at any time by the bank, and never if the bank had more than £25,000 sitting in its vaults. In order to safeguard against excessive depreciation of the existing silver money, Law stipulated that the value of the bank’s paper should not rise more than ten per cent above its metal counterpart, allowing for both to operate in parallel, with the payment of contracts in either currency being possible.96 Importantly, the bank had

44  The land bank debates of England, North America, and Scotland the improvement of Scotland at its core. Not only would the money issued allow for the capitalisation of the Scottish economy, but the net profits accrued by the bank would be placed into a fund to support the country’s exports. The plan was well laid out and presented a convincing set of measures to improve the Scottish economy. When it came to the Scottish parliament, however, the House was divided on the issue. Significant support was given by the powerful Argylls, while the devoted patriot Andrew Fletcher of Saltoun described it as ‘a contrivance to enslave the nation’.97 Rather fittingly, Money and Trade Considered raised the passions of some Scottish parliamentarians to such a degree that John Ker, Earl of Roxburgh, and Fletcher of Saltoun, after clashing during the parliamentary debate on the matter, met at Leith beach for a duel. Fortunately, for the pair, the outcome was not the same as Law’s 1694 duel and was abandoned when the duelists spotted a party of approaching Horse Guards.98 That such an occurrence took place does, however, point to the existence of some support for novel financial proposals in 1705, as well as indicating just how divisive the subject could be. Despite the energetic debate, by the end of July, Parliament had come to the decision that the ‘forceing [of] any paper credit by an act of parliament was unfit for this nation’.99 Law, Brown, Chamberlen, and Armour had been unsuccessful in their attempts to establish a land bank in Scotland. Law produced a second Scottish proposal during this year, the ‘1705 Act for a Land Mint’. This short work has been largely forgotten today, overshadowed by Money and Trade Considered. It presented a vastly different project and outlined a joint-stock bank in which the profits accrued went directly to private shareholders. There was to be no parliamentary involvement and no fund to support Scottish exports. Law, therefore, envisioned two very different institutional forms for his land bank within a short period of time. Untangling the timeline of which came first is difficult. Murphy has suggested that the ‘Act’ was written after Money and Trade Considered had been rejected by the Scottish Parliament. 100 He proposes that Law may have deemed the failure of Darien to have made Scottish parliamentarians reticent about backing his land bank, which, if unsuccessful, would bring more ignominy upon them. By shifting the liability to private shareholders, Murphy hypothesises that Law was hoping to gain more traction for his scheme.101 This is a logical argument. In the end, however, it made no difference and, like the proposals detailed in Money and Trade Considered, it went no further. The development of the land bank idea The land bank debates that took place in the British Isles and the colonies between 1650 and 1705 shared many similarities, while simultaneously developing the land bank model. This was a model that was tailored to fit its surroundings, and this was as true for Woodbridge in Massachusetts as it was for Brown in Scotland. The landscape, be that political, economic, or physical, was crucial in informing how the model was conceived in different locations. The proposals detailed here illustrate that three distinct groups – colonial settlers, and the English and Scottish at home, at four distinct periods – the 1650s, 1680s, 1690s, and early 1700s – sought

The land bank debates of England, North America, and Scotland  45 to overcome distinct sets of problems with the same solution. For the colonists, a land bank would prevent external shocks to the domestic economy, removing the reliance on specie and replacing it with a secure, local, paper currency. English land bank proponents of the 1650s meanwhile sought to expand trade by reducing the friction on transactions. Those of the 1690s sought to augment diminished specie stocks in an already capitalised economy, while at the same time shoring up Tory factions against attack from emerging Whig institutions. In Scotland, as had been the case in the colonies, there was a need to support the domestic economy. An augmentation of the money supply would allow for the expansion of the Scottish manufacturing sector. It would mobilise the resources and labour force of the country, which in large part lay dormant. And it would capitalise the struggling economy. The narrative of undercapitalisation was powerful and was one that would prove crucial in influencing the ideas of future Scottish writers. The proposals all shared the central aim of establishing a shared credit fund supported by land, with many also sharing more specific details around institutional structure and loan regulations. John Blackwell’s Boston proposal rewritten for the London audience shared structural similarities with that of the English National Land Bank. These included each being overseen by 21 governors, offering loans at an interest of around four per cent and with flexible repayment contracts.102 Similarities can also be seen between Law’s Money and Trade Considered and Blackwell’s Model. This includes the ratio between the proportion of land pledged and the value of the loan. Both Blackwell and Law set loans at one-half or two-thirds of the value of land pledged; this is a condition that can only be found in Blackwell and Law.103 Going as far as to say Blackwell’s bank was the ‘prototype’ that all others followed is difficult, but there are certainly similarities between his model and the land bank framework, which later emerged in England and Scotland.104 Aside from the minutiae of institutional loan policy, the differences in the land bank proposals of 1650 to 1705 signify how much financial thought had developed, particularly between the 1680s and 1705. Take, for example, Blackwell’s 1688 description of a bank as: A considerable number of persons, some of each rank, trade, calling and condition, especially in the principle place or places of trading in any country, agree voluntarily to receive, as ready moneys, of and from each other, and any persons in their ordinary dealings, bank-bills of credit, signed by several persons of good repute, joined together in a partnership, given forth on lands of good title mortgaged, and staple unperishing goods and merchandizes, deposited in fitting places to be appointed by the partnership for that purpose; to the value of about one half, or two thirds of such respective mortgages and deposits.105 This was a definition in line with the Potter and Woodbridge’s conceptualisation of a bank and was one that had remained almost unchanged since 1650. By the time Law came to promote his model, however, such definitions were antiquarian. By 1705, Scotland and England had had a major joint-stock bank based on

46  The land bank debates of England, North America, and Scotland fractional reserve banking for a decade. Banking had evolved from the kind of private ­enterprise advocated for by Blackwell, based on persons of ‘good repute’, into a matter of national interest, involving Law’s large-scale institutions established by parliamentary legislation. The intended consequences of Blackwell’s and Law’s respective banks were also vastly different. While the fundamental premise of early land bank proposals was to decrease the reliance on credit arrangements for merchants and landowners, capitalising land into money, accelerating circulation, and augmenting overall money stocks, Law envisaged his land bank as providing the institutional backing to introduce a new currency into Scotland to capitalise a struggling national economy. The significant evolution in economic thinking points to the changes that had occurred in the political and economic landscapes of the British Isles between 1688 and 1705. William and Mary’s accession had allowed for a significant remodelling of British institutions, yet the situations in England and Scotland were vastly different. From 1688, England had been almost continuously at war, first the Nine Years’ War (1688–97), then the War of the Spanish Succession (1701–13). This drove the English Financial Revolution, and significant financial innovation developed new means by which conflicts might be funded. In Scotland, the difficult second half of the 1690s and the failed Darien project had decelerated any practical applications of the country’s own financial revolution and almost bankrupted the nation in the process. Add to this a trading deficit that was draining the country of coin and a southern neighbour whose foreign policy, particularly that of waging war on France, did little to assist trading relationships, and it is clear that there were significant hurdles to overcome in order to improve Scotland’s financial prospects. The land bank debate of 1705 should therefore be understood within its Scottish context, in that it looked to capitalise the economy of small country that was potentially well resourced, but with little access to the traditional currency materials of gold and silver. Conclusion An overview of the economic situation in Scotland between 1690 and 1707 is given in this chapter and the one that proceeded it. After the boom of financial activity in the early 1690s, culminating with the establishment of the Bank of Scotland and the Company of Scotland in 1695, the situation changed. Following the hard years of the late 1690s and the loss of Darien, the Financial Revolution in Scotland continued as a revolution of ideas but with no practical application. The financial debate of 1705 demonstrated that novel financial ideas existed, but that there was a lack of political will. After the Scottish Parliament rejected the ideas laid before it, it began legislating to reopen union talks with England. It seems that for many, this was the solution to Scottish problems. Following the Union of 1707, the unwillingness of the pre-Union Scottish Parliament to back innovative financial schemes was matched by the new British administration. Against this backdrop, Scottish financial development stagnated for the next two decades. As subsequent chapters will demonstrate, however, financial innovations promoted by members

The land bank debates of England, North America, and Scotland  47 of the Scottish diaspora were already occurring beyond the territory of Scotland and would continue to do so until these ideas began to filter back into Scotland in the 1720s. Notes 1 John Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705), p.100 2 For a masterful telling of money’s creation story, and its creation myths, see C. Desan, Making Money: Coin, Currency, and the Coming of Capitalism, (Oxford, 2014) 3 P. Spufford, Money and Its Use in Medieval Europe, (Cambridge, 1988), p.9; and P. H. Webb, ‘Third-Century Roman Mints and Marks’, in The Numismatic Chronicle and Journal of the Royal Numismatic Society, Fifth Series, Vol. 1, No. 3/4, (1921), p.255 4 Desan, Making Money, p.40–41 5 N. Holmes, Scottish Coins: A History of Small Change in Scotland, (Edinburgh, 1998), p.11 6 As examples see, T. Houghton, A letter to a member of Parliament: shewing how probably the credit of the nation may be speedily raised And not only the publick debts made good without present money, but render’d serviceable to the publick, and a means to free others as well as the creditors from the difficulties that the deficiencies of funds, and scarcity of coin have occasioned, (London, 1697); W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705); J. Clerk, The Circumstances of Scotland Consider’d, with Respect to the Present Scarcity of Money: Together with Some Proposals for Supplying the Defect thereof, and Rectifying the Ballance of Trade, (Edinburgh, 1705); J. Hodges, Considerations and proposals for supplying the present scarcity of Money, and advancing Trade, (Edinburgh, 1705); and Anon, Thoughts on Our Silver Coin, both as What May be the Cause of Its Present Scarcity, and What Will Produce a Speedy Supply. By a Lover of His Country, (London, 1718); F. Griffin, Clippers clipped, or, a relation of the tryall of several persons indicted for coyning clipping and fileing of money with the condemnation execution and speeches of four eminent clippers and filers who were executed at Tyburne on Satturday Decemb. 17, 1664, (London, 1664); W. Wood, An expedient to avoid the great charge of new coyning the clipped money for the present and for the making it as useful as if it were new coyned: as also to prevent clipping for the future: humbly offered to the consideration of the honourable House of Commons, (London, 1695); H. Peacham, The Worth of a Penny, or, A Caution to Keep Money: with the Causes of the Scarcity and Misery of the Want thereof, as also How to Save It, in our Diet, Apparel, Recreations, etc., and Also What Honest Courses Men in Want May Take to Live, (London, 1703); W. Atwood, A safe and easy method for supplying the want of coin and raising as many millions as the occasions of the publick may require. Humbly offered to the consideration of the present Parliament. With some remarks upon the Bank of England, Dr. Chamberlain’s Bank, the Land bank, so called, and the National Land Bank, (London, 1695); T. Houghton, A letter to a member of Parliament: shewing how probably the credit of the nation may be speedily raised And not only the publick debts made good without present money, but render’d serviceable to the publick, and a means to free others as well as the creditors from the difficulties that the deficiencies of funds, and scarcity of coin have occasioned, (London, 1697); J. Armour, A Proposal to Supply the Defect of Money and Relief to the Poor, (Edinburgh, 1696) 7 See, Law, Money and Trade Considered 8 See, H. Chamberlen, Dr. Chamberlen’s Petition and Proposals for a Land Bank to Increase Trade, (London, 1693); J. Asgill and N. Barbon, A proposal for a subscription to raise one hundred thousand pounds for circulating the credit of a Land Bank,

48  The land bank debates of England, North America, and Scotland (London, 1695); A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705; and Law, Money and Trade considered 9 W. Potter, The Key of Wealth, Or, A New Way for Improving of Trade, (London, 1650) 10 V. Hewitt, ‘Potter, William (fl. 1650–1651), advocate of paper currency in England’, Oxford Dictionary of National Biography, (Oxford, 2004) 11 A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.48 12 W. Potter, The trades-man’s jewel, or, a safe, easie, speedy and effectual means for the incredible advancement of trade, and multiplication of riches, (London, 1650), p.1 - ‘the multiplication of money amongst any people does through the revolution thereof, draw in so much commodity amongst them, (and put men upon building houses, ships, and improving land in such sort) as their estates in other things do soon exceed such multiplied stocks of moneys, according to the aforesaid proportion’ 13 C. Wennerlind, Casualties of Credit: The English Financial Revolution, 1620 – 1720, (London, 2011), p.72 14 J. A. Schumpeter, History of Economic Analysis, (Oxford, 1994), p.292 15 John Woodbridge, a friend of Potter’s stated in his own land bank proposal in Boston in 1682, that Potter had been deterred from land security due to England’s ‘dubious & intricate Titles’, Rev. J. Woodbridge, Severals Relating to the Fund: Printed for Divers Reasons as They May Appear, (Boston, MA, 1682) in A. M. Davis (ed), Colonial Currency Reprints: 1682–1751, Vol. 1 (Boston, 1910), p.114 16 S. Hartlib, A Discoverie for Division or Setting out of Land, as to the Best Form, (London, 1653), p.32; included within this work is ‘An essay upon Master W. Potters Design: Concerning a Bank of Lands to be erected throughout this Common-wealth …’, pp.27–33 17 J. Winthrop, S. Hartlib, and G. H. Turnbull, ‘Some Correspondence of John Winthrop, Jr. and Samuel Hartlib’, in Proceedings of the Massachusetts Historical Society, Vol. 72, (1960) p.48 18 Rev. J. Woodbridge, Severals Relating to the Fund: Printed for Divers Reasons as They May Appear, (Boston, MA, 1682) in A. M. Davis (ed), Colonial Currency Reprints: 1682–1751, Vol. 1 (Boston, MA, 1910), pp.109–118 19 Woodbridge, Severals relating to the fund, p. 110; this appears to have been in 1649 while Woodbridge was in England 20 Ibid, pp.113–114 21 Davis, Colonial Currency Reprint, p.4 22 Woodbridge, Severals relating to the fund, p. 114 23 M. E. Newell, From Dependency to Independence: Economic Revolution in Colonial New England, (New York, 1998), p. 121; and Woodbridge, Severals relating to the fund, p.115 24 G. E. Aylmer, ‘Blackwell, John (1624–1701)’, Oxford Dictionary of National Biography, (Oxford, 2004); J. Keith Horsefield, The Origins of Blackwell’s Model of a Bank’, in The William and Mary Quarterly, Vol. 23, No. 1, (Jan.,1966), pp.126–130; and D. Goldberg, Property Rights: The Rise and Fall of America’s First Bank, (working paper, 2009), p.6 25 D. Goldberg, ‘The Massachusetts Paper Money of 1690’, in the Journal of Economic History, Vol. 69, No. 4, (2009), p.1096 26 J. Blackwell, A Discourse in Explanation of the Bank of credit Or An Account of the Model Rules & Benefits of The Bank of Credit, Lumbard, and Exchange of Moneys Proposed to be Erected in Boston and Managed by Persons in Partnership, as Other Merchantly Affayres, in Davis, Colonial Currency Reprints, Vol. 1, p.125 27 Keith Horsefield, ‘The Origins of Blackwell’s Model of a Bank’, p.134 28 Goldberg, Property Rights, p.6

The land bank debates of England, North America, and Scotland  49 29 Ibid, p.7 30 These included the establishment of an illegal colonial mint in 1652 and the carrying of trade against the terms of the Navigation Acts 31 R. R. Johnson, in ‘The Revolution of 1688–89 in the American Colonies’, in J. I. Israel (ed), The Anglo-Dutch Moment: Essays on the Glorious Revolution and its World Impact, (Cambridge, 1991), p.221–222 32 N. B. Wainwright, ‘Governor John Blackwell’, in The Pennsylvania Magazine of History and Biography, Vol. 74, No. 4 (Oct., 1950), pp.457–472 33 Keith Horsefield, ‘The Origins of Blackwell’s Model of a Bank’ p.124 34 Blackwell, ‘A Model for Erecting a Bank of Credit; with a Discourse in Explanation Thereof. Adapted to the Use of any Trading Countrey, Where There is a Scarcity of Moneys: More Especially for His Majesties Plantations in America’, in A. M. Davis, Colonial Currency Reprints, pp.154–187 35 J. Dorfman, ‘Captain John Blackwell: A Bibliographical Note’, in The Pennsylvania Magazine of History and Biography, Vol. 69, No. 3, (Jul., 1945), p.233, pp.233–242 36 J. Bland, Trade revived, or, A way proposed to restore, increase, inrich, strengthen and preserve the decayed and even dying trade of this our English nation, in its manufactories, coin, shiping and revenue whereby taxes may be lessened if not totally taken away, to the great content of the people : as also a way shewed how the duty of excise may be regulated for the ease and incouragement of this nations commerce, both for the outward exportation and inward consumption of all sorts of commodities : and likewise, certain ways propounded for the raising of considerable sums of money to maintain the charges of the government,without prejudice of the people, as also for the payment of all the souldiers just arrears, and the peoples just publique faith debts, (London, 1659); F. Cradocke, Wealth discovered: or, an essay upon a late expedient for taking away all impositions and raising a revenue without taxes. Published, and presented to his most excellent Majesty, King Charles the II. By F.C. a lover of his countrey. Whereunto is added his Majesties gracious order, (London, 1661); R. Murray, Corporation Credit, or, a Bank of Credit Made Currant, by Common Consent in London. More Useful and Safe than Money, (London, 1682); F. Burghill, A Proposal for the Speedy Enriching Both of the King and People, (London, 1662); W. Killigrew, A proposal, shewing how this nation may be vast gainers by all the sums of money, given to the Crown, without lessening the prerogative humbly offer’d to the King’s Most Excellent Majesty, the Lords Spiritual and Temporal, and to the knights, citizens, and burgesses, assembled in Parliament, (London, 1663); E. Forde, Experimented proposals how the King may have money to pay and maintain his fleets with ease to his people, London may be rebuilt and all proprietors satisfied, money be lent at six per cent on pawns, and the fishing-trade set up, which alone is able and sure to enrich us all, and this without altering, straining or thwarting any of our laws or customes now in use, (London, 1666); R. Murray, A proposal for the advancement of trade upon such principles as must necessarily enforce it, (London, 1676); and M. Lewis, Proposals to the King and Parliament, or, a large model of a bank shewing how a fund of a bank may be made without much charge or any hazard, that may give out bills of credit to a vast extent, that all Europe will accept of rather than mony: together with some general proposals in order to an act of Parliament for the establishing this bank: also many of the great advantages that will accrue to the nation, to the crown, and to the people, are mentioned, with an answer to the objections that may be made against it, (London, 1678) 37 See M. Milevsky, The Day the King Defaulted: Financial Lessons from the Stop of the Exchequer in 1672, (Palgrave, 2017); and J. Keith Horsefield, ‘The “Stop of the Exchequer” Revisited’, in The Economic History Review, New Series, Vol. 35, No. 4, (Nov., 1982), pp.511–528 38 See D. Coffman and L. Neal, ‘Introduction’, in D. Coffman, A. Leonard, and L. Neal, (eds), Questioning Credible Commitment: Perspectives on the Rise of Financial Capitalism, (Cambridge, 2013), pp.1–20; and D. North and B. Weingast, ‘Constitutions

50  The land bank debates of England, North America, and Scotland and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’ in The Journal of Economic History, Vol. 49, No. 4, (Dec., 1989), pp.803–832. 39 Francis Gwyn to William, and marquis of Halifax. 3 Aug 1696. Althorpe, Halifax MSS., box 4, cited in D. Rubini, ‘Politics and the Battle for the Banks, 1688–1697’, in The English Historical Review, Vol. 85, No. 337, (Oct., 1970), p.693, pp.693–714 40 A. E. Murphy (ed) Monetary Theory: 1601–1758, Vol. 1, (London, 1997), p.26 41 H. Chamberlen, Dr. Hugh Chamberlen’s Proposal to Make England Rich and Happy, (London, 1690); H. Chamberlen, An Humble Proposal to the Honourable the House of Commons, (London, 1690); H. Chamberlen and D. Thomas, A proposal for encouraging of persons, to subscribe towards a common stock of [-----} for the erecting and managing of a trade by a general fishery to be with all possible moral security of a great gain to the adventurers, and of no less honour and advantage to the publick, and is a benefit not to be attained by any other methods, as is strongly presumed from arguments that have all the appearing force of demonstration, (London, 1691); H. Chamberlen, Dr. Chamberlen’s Petition and Proposals for a Land Bank to Increase Trade, (London, 1693); H. Chamberlen, Papers Relating to a Bank of Credit, upon Land-Security: Proposed to the Parliament of Scotland, (Edinburgh, 1693); H. Chamberlen, A short abstract of Doctor H. Chamberlen’s proposal to the Honourable House of Commons the last sessions. And also of Mr. John Briscoe’s present printed proposal compared together, whereby the benefits of each to the nation, and every freeholder concern’d, may plainly appear, (London, 1694) 42 R. Kleer, ‘“Fictitious Cash”: English Public Finance and Paper Money, 1689–97’, in C. I. McGrath, and C. Fauske (eds), Money, Power, and Print: Interdisciplinary Studies on the Financial Revolution in the British Isles, (Cranbury, 2008), p.91 43 H. Chamberlen, The Office of Land-Credit: encouragement to mony’d men, (London 1696); and Kleer, ‘Fictitious Cash’, p.91 44 R. H. Inglis, The Dictionary of Political Economy, Vol. 2, (Cambridge, 2015), p.564; and H. Chamberlen, The constitution of the Office of Land-Credit, declared in a deed, (London, 1696) 45 J. Briscoe, The freehold estates of England, or, England itself the best fund or security, (London, 1695), T. Neale, The national land bank, together with money so composed, as not only to be easie understood, and easily practiced, but more capable also of supplying the government with any sum of money in proportion to what fund shall be settled: as likewise, the free-holder with money at a more moderate interest, than if such bank did consist of money alone without land, (London, 1695); C. E. Challis, ‘Neale, Thomas (1641–1699)’, Oxford Dictionary of National Biography, (Oxford, 2004); R. Murray, A proposal for the advancement of trade upon such principles as must necessarily enforce it, (London, 1676); and Murray, A proposal for a national bank, consisting of land, or any other valuable securities or depositums with a grand cash for returns of mone[y] and circulation of the bank-credit, &c. The whole to be under the care, inspection, tru[st,] and controul of the publick authority, and legal magistracy, (London, 1695) 46 J. Asgill and N. Barbon, A proposal for a subscription to raise one hundred thousand pounds for circulating the credit of a Land Bank, (London, 1695), J. Asgill and N. Barbon, An account of the Land bank, shewing the design and manner of the settlement, the profits to the subscribers, the advantage to the borrowers, the conveniency to the lenders, that it wil be the support of the nobility and gentry of england, and a public good to the whole nation, (London, 1695), J. Asgill and N. Barbon, The Settlement of the Land bank, (London, 1695), J. Asgill and N. Barbon, A List of the Names of the Subscribers to the Land Bank, (London, 1695) 47 J. F. Chown, A History of Money: From AD 800, (London, 1994), p.204; and R. D. Richards, The Early History of Banking in England, (Abingdon, 1929), p.129 48 J. K. Horsefield, British Monetary Experiments, 1650 – 1710, (Cambridge, MA, 1960), p.201

The land bank debates of England, North America, and Scotland  51 49 Kleer, ‘Fictitious Cash’, p.94 50 Ibid, p.94 and p.95 51 R. L. Greaves, ‘Asgill, John (bap. 1659, d. 1738)’, Oxford Dictionary of National Biography, (Oxford, 2004); and R. D. Sheldon, ‘Barbon, Nicholas (1637/1640–1698/9)’, Oxford Dictionary of National Biography, (Oxford, 2004) 52 A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.72; and Smout, Scottish Trade on the Eve of Union, p.262 53 Murphy, John Law, p.72 54 See: A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705); A. Brown, A Second Essay Concerning the Land Mint: Shewing, that the Present necessity, and Want of Gold and Silver Money, Absolutely Requires This, or the Like Remedy, and that Very Speedily ... By the Author of the Character of the True Publick Spirit, (Edinburgh, 1705); W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705); J. Clerk, The Circumstances of Scotland Consider’d, with Respect to the Present Scarcity of Money: Together with Some Proposals for Supplying the Defect Thereof, and Rectifying the Ballance of Trade, (Edinburgh, 1705); J. Hodges, Considerations and Proposals for Supplying the Present Scarcity of Money, and Advancing Trade, (Edinburgh, 1705); H. Chamberlen and J. Armour, ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Land-credit’, in A. E. Murphy and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997); and J. Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705) 55 H. Chamberlen and J. Armour, ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Land-credit’, in A. E. Murphy and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997); A. Brown, An essay on the new project for a landmint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705); A. Brown, A Second Essay Concerning the Land Mint: Shewing, that the Present Necessity, and Want of Gold and Silver Money, Absolutely Requires this, or the Like Remedy, and That Very Speedily ... By the Author of the Character of the True Publick Spirit, (Edinburgh, 1705); and J. Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705) 56 H. Chamberlen, Papers Relating to a Bank of Credit, upon Land-Security: Proposed to the Parliament of Scotland, (Edinburgh, 1693); H. Chamberlen, A few proposals humbly recommending to the serious consideration of his Majesty’s High Commissioner, and the Right Honourable, the Estates of Parliament, the establishing a land-credit in this kingdom with several explanations of, and arguments for the same: together with full answers to all such objections, as have hitherto appeared against it, (Edinburgh, 1700) 57 N. C. Landsmen, Scotland and Its First American Colony, 1683–1765, (Princeton, NJ, 2014), p.74; and T. M. Devine, Glasgow: Beginnings to 1830, (Glasgow, 1995), p.81; and RPS, 1681/7/65. Date accessed: 27 May 2015 58 D. Dobson, Scottish Emigration to Colonial America, 1607–1785, (Athens, GA, 2004), p.53 59 Over this time, his economic arguments evolved from a banking proposal somewhat in the mould of William Patterson’s Bank of England, on to a ‘landcredit’ scheme operating separately from the Bank of Scotland, before he later advocated for a land-based banking scheme to be administered by the Bank of Scotland; see J. Armour, A Proposal to Supply the Defect of Money, and Relief to the Poor, (Edinburgh, 1696); Armour, A

52  The land bank debates of England, North America, and Scotland Premonitor Warning: Or Advice by a True Lover of His Country Unto All Whole Hands this May Come, (Edinburgh, 1702); Armour, To the Honourable House of Commons in Parliament assembled, the humble petition and offer of James Armour, (London, 1711); Armour, Proposals for Restoring Credit; for Making the Bank of England More Useful and Profitable; ... Humbly Offered to the Consideration of Both Houses of Parliament, (London, 1721); Armour, Proposals for Making the Bank of Scotland More Useful and Profitable: And for Raising the Value of the Land-Interest of North Britain, (Edinburgh, 1722); and H. Chamberlen and J. Armour, ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Land-credit’, in A. E. Murphy and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997). 60 Chamberlen and Armour, Proposal by Doctor Hugh Chamberlen, and James Armour for a Land-credit, p.235 61 Ibid, p.237 62 RPS, A1705/6/13 63 RPS, A1705/6/8: RPS, M1705/6/5; and RPS A1705/6/13 64 RPS, 1705/6/36 65 J. Brown, Horae Subsecivae: Locke and Sydenham, with other occasional papers, (Edinburgh, 1858), p.459 66 See A. Brown, The Character of the True Publick Spirit Especially with Relation to the Ill Condition of a Nation, (Edinburgh, 1702); and Brown, A Scheme, Proposing a True Touch-Stone for the Due Trial of A Proper Union Betwixt Scotland & England, (Edinburgh, 1706) 67 A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705) 68 Ibid, p.1–2 69 Brown. A Second Essay Concerning the Land Mint, p.7–8 70 Ibid, p.9–10 71 Ibid, p.9 72 Ibid, pp.9–11 73 Ibid, p.13 74 Ibid, p.14 75 Ibid 76 Ibid, p.13 77 Ibid 78 RPS, 1705/6/36 79 Brown. A Second Essay Concerning the Land Mint, p.15/16 80 Ibid, pp.27–32 81 See J. Law, ‘Essay on a Land Bank’, A. Murphy (ed), (Dublin, 1994); J. Law, ‘1705 Act for a Land Mint’, NRS, Ms. PA7/19/175; J. Law, Money and Trade Considered, with A Proposal for Supplying the Nation with Money, (Edinburgh, 1705); J. Law, Mémoire touchant les monoies et le commerce, (1706) Paris, Archives Nationales G7, 1468, MS. 113, fos. 294r–317v; and J. Law, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, (1707), in P. Harsin, OEuvres complètespubliées pour la première fois par, vol. 1, (Paris, 1934). 82 C. Rist, History of Monetary and Credit Theory: from John Law to the Present Day, (Bristol, 1994), p.33 83 Murphy, Essay on a Land Bank, p.17 84 Law, Money and Trade, p.6/7 85 Ibid, p.7 86 Ibid, p.9 87 C. Desan, Making Money: Coin, Currency, and the Coming of Capitalism, (Oxford, 2014), pp.23–69

The land bank debates of England, North America, and Scotland  53 88 Blackwell, A Model, p.154; Brown, A Second Essay Concerning the Land Mint, p.7; and J. Locke, Some considerations of the consequences of the lowering of interest and raising the value of money, in a letter sent to a member of Parliament, (London, 1691), p.76 89 Law, Money and Trade, p.10 90 Ibid, p.61 91 Ibid, p.10–20 92 Ibid, p.39 93 Ibid, p.100 94 Ibid p.70 95 Ibid, p.84 96 Ibid, p.87 97 Murphy, John Law, p.74–75 98 For an overview see, Murphy, John Law, pp. 67–68, and p.75 99 RPS, 1705/6/36 100 NRS, Ms. PA7/19/175; and Law, Money and Trade 101 Murphy, Essay on a Land Bank, p.51 102 Blackwell, A Model for Erecting a Bank of Credit, pp. 154–187; and L. Neale, A ­Concise History of International Finance: From Babylon to Bernanke, (Cambridge, 2015), p.86 103 Blackwell, A Model, p.10; Law, Money and Trade, p.85. Law would also offer two other options: (1) To give the full price of the land based on its value in silver money – For Law silver money and land money would not be of the same worth; this is due to the fluctuations of the former; (2) An irredeemable purchase at the land’s value. Other examples: Briscoe would alter between a bill issuance of ‘three-fourths’ and ‘fourfifths’ to land value depending upon which of his tracts are read. See J. Briscoe, The following proposals for, and accounts of, a national land-bank having been printed at London. Its proveable many gentlemen who would have subscribed thereto, by reason of the distance of their dwelling from thence have heard nothing, or had [sic] but an imperfect account of it; for informing whom, true copies of several of Mr. Brisco’s papers are herewith reprinted, in order to be dispersed in several counties. The freehold estates of England, or England itself the best fund or security, (Edinburgh, 1695); J. Briscoe, May it please your honours, the last sessions of Parliament I presented the members of the honourable house with a treatise, intituled, a discourse on the late funds; wherein were proposals for a national land-bank …, (London, 1695); J. Briscoe, To the honourable the knights, citizens and burgesses, in Parliament assembled. May it please your honours; the last sessions of Parliament I presented the Honourable the Commons in Parliament then sitting, with proposals for setting up a national landbank in favour of the freeholders and trading part of the kingdom, (London, 1695); J. Briscoe, An account of the national land-bank, (London, 1695); J. Briscoe, Proposals for raising money for the National Land-Bank, (London, 1695). Chamberlen advocated a complex system based on 100 or 150 years purchase of estates 104 See also T. Neale, The national land bank, together with money so composed, as not only to be easie understood, and easily practiced, but more capable also of supplying the government with any sum of money in proportion to what fund shall be settled: as likewise, the free-holder with money at a more moderate interest, than if such bank did consist of money alone without land, (London, 1695). Here, like Blackwell, no hard and fast expiration date was to be placed upon the bills issued by his bank, instead offering flexible contracts to borrowers 105 Blackwell, A Model, p.5

Primary sources Anon, Thoughts on our silver coin, both as what may be the cause of its present scarcity, and what will produce a speedy supply. By a lover of his country, (London, 1718)

54  The land bank debates of England, North America, and Scotland Armour, J., A proposal to supply the defect of money, and relief to the poor, (Edinburgh, 1696) ———, A premonitor warning: or advice by a true lover of his country unto all whole hands this may-, come, (Edinburgh,) ———, To the honourable House of Commons in Parliament assembled, the humble ­petition and offer of James Armour, (London, 1711) ———, Proposals for restoring credit; for making the Bank of England more useful and profitable; … Humbly offered to the consideration of both houses of Parliament, (London, 1721) ———, Proposals for making the Bank of Scotland more useful and profitable: and for ­raising the value of the Land-Interest of North Britain, (Edinburgh, 1722) Asgill, J., and Barbon, N., A proposal for a subscription to raise one hundred thousand pounds for circulating the credit of a Land Bank, (London, 1695a) ———, An Account of the Land Bank, shewing the design and manner of the settlement, the profits to the subscribers, the advantage to the borrowers, the conveniency to the lenders, that it wil be the support of the nobility and gentry of England, and a public good to the whole nation, (London, 1695b) ———, The settlement of the Land Bank, (London, 1695c) ———, A list of the names of the subscribers to the Land Bank, (London, 1695d) Atwood, W., A safe and easy method for supplying the want of coin and raising as many ­millions as the occasions of the publick may require. Humbly offered to the consideration of the present Parliament. With some remarks upon the Bank of England, Dr. Chamberlain’s Bank, the Land bank, so called, and the National Land bank, (London, 1695) Blackwell, J., ‘A Discourse in Explanation of the Bank of credit or an Account of the Model Rules & Benefits of The Bank of Credit, Lumbard, and Exchange of Moneys Proposed to be Erected in Boston and managed by persons in Partnership, as other Merchantly Affayres (1686)’, in Davis, A. M., (ed), Colonial Currency Reprints: 1682–1751, Vol. 1 (Boston, MA, 1910) ———, A Model for Erecting a Bank of credit; With a Discourse in Explanation Thereof. Adapted to the Use of any Trading Countrey, Where There is a Scarcity of Moneys: More Especially for His Majesties Plantations in America, (1688)’, in Davis, A. M., Colonial Currency Reprints Bland, J., Trade revived, or, a way proposed to restore, increase, inrich, strengthen and preserve the decayed and even dying trade of this our English nation, in its manufactories, coin, shiping and revenue whereby taxes may be lessened if not totally taken away, to the great content of the people: as also a way shewed how the duty of excise may be regulated for the ease and incouragement of this nations commerce, both for the outward exportation and inward consumption of all sorts of commodities: and likewise, certain ways propounded for the raising of considerable sums of money to maintain the charges of the government, without prejudice of the people, as also for the payment of all the souldiers just arrears, and the peoples just publique faith debts, (London, 1659) Briscoe, J., An account of the national land-bank, (London, 1695a) ———, May it please your honours, the last sessions of Parliament I presented the members of the honourable house with a treatise, intituled, A discourse on the late funds; wherein were proposals for a national land-bank…, (London, 1695b), J. Briscoe, To the honourable the Knights, citizens and burgesses, in Parliament assembled. May it please your honours; the last sessions of Parliament I presented the Honourable the Commons in

The land bank debates of England, North America, and Scotland  55 Parliament then sitting, with proposals for setting up a national land-bank in favour of the freeholders and trading part of the kingdom, (London, 1695) ———, Proposals for raising money for the National Land-Bank, (London, 1695c) ———, The following proposals for, and accounts of, a national land-bank having been printed at London. Its proveable many gentlemen who would have subscribed thereto, by reason of the distance of their dwelling from thence have heard nothing, or had [sic] but an imperfect account of it; for informing whom, true copies of several of Mr. Brisco’s papers are herewith reprinted, in order to be dispersed in several counties. The free-hold estates of England, or England itself the best fund or security, (Edinburgh, 1695d) ———, The freehold estates of England, or, England itself the best fund or security, (London, 1695e) Brown, A., The character of the true publick spirit especially with relation to the ill condition of a nation, (Edinburgh, 1702) ———, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705a) ———, A second essay concerning the Land Mint : shewing, that the present necessity, and want of Gold and Silver money, absolutely requires this, or the like remedy, and that very speedily… By the author of the character of the true publick spirit, (Edinburgh, 1705b) ———, A scheme, proposing a true touch-stone for the due trial of a proper union betwixt Scotland & England, (Edinburgh, 1706) Burghill, F., A proposal for the speedy enriching both of the King and people, (London, 1662) Chamberlen, H., An humble proposal to the Honourable the House of Commons, (London, 1690a) ———, Dr. Hugh Chamberlen’s proposal to make England rich and happy, (London, 1690b) ———, Dr. Chamberlen’s petition and proposals for a land bank to increase trade, (London, 1693a) ———, Papers relating to a bank of credit, upon land-security: proposed to the Parliament of Scotland, (Edinburgh, 1693b) ———, Papers relating to a Bank of Credit, upon land-security: proposed to the Parliament of Scotland, (Edinburgh, 1693c) ———, A short abstract of Doctor H. Chamberlen’s proposal to the honourable House of Commons the last sessions. And also of Mr. John Briscoe’s present printed proposal compared together, whereby the benefits of each to the nation, and every freeholder concern’d, may plainly appear, (London, 1694) ———, A proposal for erecting a general bank which may be fitly called the Land Bank of England, (London, 1695) ———, The constitution of the Office of Land-Credit, declared in a deed, (London, 1696a) ———, The Office of Land-Credit: encouragement to mony’d men, (London 1696b). ———, A few proposals humbly recommending to the serious consideration of his Majesty’s High Commissioner, and the Right Honourable, the Estates of Parliament, the establishing a land-credit in this kingdom with several explanations of, and arguments for the same: together with full answers to all such objections, as have hitherto appeared against it, (Edinburgh, 1700) Chamberlen, H., and Armour, J., ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit’, in Murphy, A. E., and Sugiyama, C., (eds), Monetary Theory, 1601– 1758, Vol. 4, (London, 1997)

56  The land bank debates of England, North America, and Scotland Clerk, J., The circumstances of Scotland consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705) Cradocke, F., Wealth discovered: or, an essay upon a late expedient for taking away all impositions and raising a revenue without taxes. Published, and presented to his most excellent Majesty, King Charles the II. By F.C. a lover of his countrey. Whereunto is added his Majesties gracious order, (London, 1661) Forde, E., Experimented proposals how the King may have money to pay and maintain his fleets with ease to his people, London may be rebuilt and all proprietors satisfied, money be lent at six per cent on pawns, and the fishing-trade set up, which alone is able and sure to enrich us all, and this without altering, straining or thwarting any of our laws or customes now in use, (London, 1666) Griffin, F., Clippers clipped, or, a relation of the tryall of several persons indicted for coyning clipping and fileing of money with the condemnation execution and speeches of four eminent clippers and filers who were executed at Tyburne on Satturday Decemb. 17, 1664, (London, 1664) Hartlib, S., A discoverie for division or setting out of land, as to the best form, (London, 1653) Hodges J., Considerations and proposals for supplying the present scarcity of Money, and advancing Trade, (Edinburgh, 1705) Houghton, T., A letter to a member of Parliament: shewing how probably the credit of the nation may be speedily raised And not only the publick debts made good without present money, but render’d serviceable to the publick, and a means to free others as well as the creditors from the difficulties that the deficiencies of funds, and scarcity of coin have occasioned, (London, 1697); W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) Killigrew, W., A proposal, shewing how this nation may be vast gainers by all the sums of money, given to the crown, without lessening the prerogative humbly offer’d to the King’s Most Excellent Majesty, the Lords Spiritual and Temporal, and to the knights, citizens, and burgesses, assembled in Parliament, (London, 1663) Law, J., ‘1705a Act for a Land Mint’, NRS, Ms. PA7/19/175 ———, Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705b) ———, Mémoire touchant les monoies et le commerce, (1706), Paris, Archives Nationales G7, 1468, MS. 113, fos. 294r–317v ———, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, (1707), in P. Harsin, OEuvres complètespubliées pour la première fois par, vol. 1, (Paris, 1934) Lewis, M., Proposals to the King and Parliament, or, a large model of a bank shewing how a fund of a bank may be made without much charge or any hazard, that may give out bills of credit to a vast extent, that all Europe will accept of rather than mony : together with some general proposals in order to an act of Parliament for the establishing this bank : also many of the great advantages that will accrue to the nation, to the crown, and to the people, are mentioned, with an answer to the objections that may be made against it, (London, 1678) Locke, J., Some considerations of the consequences of the lowering of interest and raising the value of money, in a letter sent to a member of Parliament, (London, 1691) Murray, R., A proposal for the advancement of trade upon such principles as must necessarily enforce it, (London, 1676)

The land bank debates of England, North America, and Scotland  57 ———, Corporation credit, or, a bank of credit made currant, by common consent in London. More useful and safe than money, (London, 1682) ———, A proposal for a national bank, consisting of land, or any other valuable securities or depositums with a grand cash for returns of mone[y] and circulation of the bank-credit, &c. The whole to be under the care, inspection, tru[st, ] and controul of the publick authority, and legal magistracy, (London, 1695) Neale, T., The national land bank, together with money so composed, as not only to be easie understood, and easily practiced, but more capable also of supplying the government with any sum of money in proportion to what fund shall be settled: as likewise, the free-holder with money at a more moderate interest, than if such bank did consist of money alone without land, (London, 1695) Peacham, H., The worth of a penny, or, a caution to keep money: with the causes of the scarcity and misery of the want thereof, as also how to save it, in our diet, apparel, recreations, etc., and also what honest courses men in want may take to live, (London, 1703) Potter, W., The key of wealth, or, a new way for improving of trade, (London, 1650a) ———, The trades-man’s jewel, or, a safe, easie, speedy and effectual means for the incredible advancement of trade, and multiplication of riches, (London, 1650b) Seton, W., Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) Wood, W., An expedient to avoid the great charge of new coyning the clipped money for the present and for the making it as useful as if it were new coyned: as also to prevent clipping for the future: humbly offered to the consideration of the Honourable House of Commons, (London, 1695), Woodbridge, J., ‘Severals Relating to the Fund: Printed for Divers Reasons as They May Appear’, (Boston, MA, 1682) in Davis, A. M., (ed), Colonial Currency Reprints: 1682– 1751, Vol. 1 (Boston, MA, 1910) Secondary sources Bodenhorn, H., State Banking in Early America: A New Economic History, (Oxford, 2003) Bowie, K., Scottish Public Opinion and the Anglo-Scottish Union, 1699–1707, (Woodbridge, 2007) Chown, J. F., A History of Money: From AD 800, (London, 1994) Desan, C., Making Money: Coin, Currency, and the Coming of Capitalism, (Oxford, 2014) Devine, T. M., Glasgow: Beginnings to 1830, (Glasgow, 1995) Dobson, D., Scottish Emigration to Colonial America, 1607–1785, (Athens, GA, 2004) Goldberg, D., Property Rights: The Rise and Fall of America’s First Bank, (working paper, 2009) Inglis, R. H., The Dictionary of Political Economy, Vol. 2 (Cambridge, 2015) Keith Horsefield, J., British Monetary Experiments, 1650–1710, (Cambridge, MA, 1960); Holmes, N., Scottish Coins: A History of Small Change in Scotland, (Edinburgh, 1998) Landsmen, N. C., Scotland and Its First American Colony, 1683–1765, (Princeton, NJ, 2014) Milevsky, M., The Day the King Defaulted: Financial Lessons from the Stop of the Exchequer in 1672, (Palgrave, 2017) Murphy, A. E., (ed) John Law’s Essay on a Land Bank, (Dublin, 1994) ———, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997)

58  The land bank debates of England, North America, and Scotland Neale, L., A Concise History of International Finance: From Babylon to Bernanke, (Cambridge, 2015) Newell, M. E., From Dependency to Independence: Economic Revolution in Colonial New England, (New York, 1998) Richards, R. D., The Early History of Banking in England, (Abingdon, 1929) Rist, C., History of Monetary and Credit Theory: From John Law to the Present Day, (Bristol, 1994) Schumpeter, J. A., History of Economic Analysis, (Oxford, 1994) Smout, T. C., Scottish Trade on the Eve of Union 1660–1707, (Edinburgh, 1963) Spufford, P., Money and Its Use in Medieval Europe, (Cambridge, 1988) Wennerlind, C., Casualties of Credit: The English Financial Revolution, 1620–1720, (London, 2011) Edited collections and journals Dorfman, J., ‘Captain John Blackwell: A Bibliographical Note’, in The Pennsylvania Magazine of History and Biography, Vol. 69, No. 3 (Jul., 1945), pp.233–242 Goldberg, D., ‘The Massachusetts Paper Money of 1690’, in The Journal of Economic History, Vol. 69, No. 4 (2009), p.1095–1096 Johnson, R. R., in ‘The Revolution of 1688–89 in the American Colonies’, in Israel, J. I., (ed), The Anglo-Dutch Moment: Essays on the Glorious Revolution and its World Impact, (Cambridge, 1991), pp.215–240 Keith Horsefield, J., ‘The Origins of Blackwell’s Model of a Bank’, in The William and Mary Quarterly, Vol. 23, No. 1 (Jan., 1966), pp.121–135 ———, ‘The “Stop of the Exchequer” Revisited’, in The Economic History Review, New Series, Vol. 35, No. 4 (Nov., 1982), pp.511–528 Kleer, R., ‘‘Fictitious Cash’: English Public Finance and Paper Money, 1689–97’, in McGrath, C. I., and Fauske, C., (eds), Money, Power, and Print: Interdisciplinary Studies on the Financial Revolution in the British Isles, (Cranbury, 2008), pp.70–103 McDiarmid, A., ‘The Equivalent Societies of Edinburgh and London, the Formation of the Royal Bank of Scotland, and the Nature of the Scottish Financial Revolution’, in Journal of British Studies, Vol. 60, No. 1 (Jan., 2021), pp.88–114 Murphy, A. E., (ed) Monetary Theory: 1601–1758, Vol. 1, (London, 1997) North, D., and Weingast, B., ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’ in The Journal of Economic History, Vol. 49, No. 4 (Dec., 1989), pp.134–165 Rubini, D., ‘Politics and the Battle for the Banks, 1688–1697’, in The English Historical Review, Vol. 85, No. 337 (Oct., 1970), p.693, pp.693–714 Turnbull, G. H. (ed), ‘Some Correspondence of John Winthrop, Jr., and Samuel Hartlib’, in Proceedings of the Massachusetts Historical Society, Vol. 72 (1960), pp.36–67 Wainwright, N. B., ‘Governor John Blackwell’, in The Pennsylvania Magazine of History and Biography, Vol. 74, No. 4 (Oct., 1950), pp.457–472 Webb, P. H., ‘Third-Century Roman Mints and Marks’, in The Numismatic Chronicle and Journal of the Royal Numismatic Society, Fifth Series, Vol. 1, No. 3/4 (1921), pp.226–293

The land bank debates of England, North America, and Scotland  59 Online sources Aylmer, G. E., ‘Blackwell, John (1624–1701)’, Oxford Dictionary of National Biography, (Oxford, 2004) Challis, C. E., ‘Neale, Thomas (1641–1699)’, Oxford Dictionary of National Biography, (Oxford, 2004) Greaves, R. L., ‘Asgill, John (bap.1659, d. 1738)’, Oxford Dictionary of National Biography, (Oxford, 2004) Hewitt, V., Potter, ‘William (fl. 1650–1651), advocate of paper currency in England’, Oxford Dictionary of National Biography, (Oxford, 2004) Sheldon, R. D., ‘Barbon, Nicholas (1637/1640–1698/9)’, Oxford Dictionary of National Biography, (Oxford, 2004 (Oxford, 2004) Brown, K. M., et al., (eds), The Records of the Parliaments of Scotland to 1707 (St Andrews, 2007–2018), 1681/7/65 ———, 1685/4/33 ———, M1705/6/5 ———, A1705/6/8 ———, A1705/6/13 ———, 1705/6/36

4

‘The proper question is not whether paper money be as good as silver or gold, but whether it is better than no money’ William Burnet and the New Jersey Loan Office1

The economic debate that took place in the North American British colonies during the early eighteenth century was vibrant and varied. Contributors were a mix of settled Britons and American-born writers who were writing on a series of complex, interlinked issues. The discussion considered the importance of credit in colonial economies, the place of barter within their communities, and how the value of colonial bills could be maintained. Centrally, they also debated the impact that clipping was having on colonial coin stocks and discussed how a scarcity of coin affected their ability to carry on domestic trade.2 Arguably, this last concern, more than any other, is the one that has attracted the most scholarly attention. Several modern writers have argued that a scarcity of coin in early modern North American colonies was a myth. They contend that these territories were small open economies with the ability to adjust domestic prices to match specie supply, a measure that would allow the domestic business to continue unencumbered.3 While some colonists shared this view – for example, future Founding Father Benjamin Franklin, writing on the nature of paper currency in 1729, argued that if ‘the quantity of current coin should decrease … what coin there is will rise in value as currency, i.e. people will give more labour in manufactures for a certain sum of ready money’4 – there were others chronicling experiences of a very real shortage of coin and the negative impact this was having on the domestic economy.5 This chapter is focused on how colonists in East Jersey and New Jersey attempted to solve problems around liquidity at various times.6 It will detail the impact of Scottish proprietors on the territory of East Jersey during the 1680s, in particular, how the notion of land as the central economic unit was supplanted from the northeast of Scotland into the colony through the proprietors’ practices of allotting land at this time. It will outline the issuances of tax-backed paper money in New Jersey from 1709 onwards and the problems that arose when the British government attempted to retire this currency in 1717. Much of our focus will be drawn to the New Jersey Loan Office, a land bank established in 1723 to address currency shortages in the colony, and, in particular, the part played by Scotsman William Burnet in establishing the institution. As governor of the colony, Burnet represented the British administration, but time and time again he went against his employers by supporting the Loan Office. This chapter will consider why. DOI: 10.4324/9781003284819-4

William Burnet and the New Jersey Loan Office  61 A shortage of coin and the first issuance of paper money Colonial works on the scarcity of coin echoed complaints raised throughout the British Isles.7 The experience in the colonies was, however, even more acute. One reason for this was that other than a mint established in Massachusetts in 1652, subsequently closed during the 1680s when the English administration explicitly refused the colony the privilege of having such an institution, there was no domestic method of producing coin.8 Instead, coin came mainly through trade with Spanish and French territories and circulated largely in the hands of merchants, before quickly exiting the colonial economy. That it was so quickly withdrawn was due to the nature of life in these regions. These were underdeveloped territories, populated by inhabitants with extensive needs. Due to the Navigation Acts, colonists were largely dependent on English imports.9 These acts restricted colonial trade to England, and later Britain, only and created an unfavourable balance of trade that caused specie to flow out of the colonies and back to the metropole, creating problems for the execution of domestic transactions. Therefore, despite modern scholars doubting whether coin could become scarce in colonial economies, colonial writers of the early eighteenth century wrote about the very real impact this was having in East Jersey and later New Jersey10 A shortage of coin acted as the catalyst for the first issuance of paper money by colonial legislatures.11 When this occurred in New Jersey, it was not due to domestic trade issues, but rather the need to meet the cost of military expenditure. British expeditions north into Canada triggered the issuance of New Jersey’s first paper money in 1709, as it also did in New Hampshire, New York, Connecticut, and Rhode Island at around the same time.12 Colonies were required to contribute quotas of men and money to the military effort, and for some, paper money was the only way to cover the cost.13 By the time these notes were being issued, paper money had been in circulation in Britain, via the Bank of Scotland and the Bank of England, since the mid-1690s. The New Jersey notes were different, however. The two main British banks operated a fractional reserve model, where a proportion of specie was held in the bank’s vaults as security for paper notes. This type of bank did not appear in English-speaking North America until after the American Revolution. The colonial notes were instead administered directly by the colonial legislature and were initially backed by future taxes. Once the use of paper money had been initiated, colonial legislatures made new issuances periodically. The money was placed directly into colonial coffers and was used to cover the costs of, among other things, soldiers’ pay and government salaries. In some cases, loans were made by the legislature secured upon the property of the borrower.14 Between 1709 and 1717, the New Jersey legislature made three issuances of tax-backed notes.15 Following this, British authorities instructed subsequent governors of the colony to discourage any further bills being issued as they attempted to retire the currency. The financial situation of New Jersey, particularly in terms of liquidity, deteriorated quickly. So much so that William Burnet reported instances

62  William Burnet and the New Jersey Loan Office in the early-1720s of taxes being paid in jewellery as colonists could not access specie.16 Legislation was passed in 1722 with the design of helping colonists meet their obligations lawfully and allowed for payments to be made in wheat rather than money. With this, litigation over non-payment of loans increased as creditors refused to accept crops or livestock in place of hard cash, usually resulting in debtor’s estates being auctioned off at a discount.17 It was against this landscape of financial uncertainty and monetary scarcity that the New Jersey Loan Office emerged as a solution to the colony’s economic problems in 1723. The way in which the territory of New Jersey was settled is of fundamental importance to this story and to how the concept of the Loan Office developed. Of particular significance is the way Scottish proprietors in East Jersey from the 1680s onwards developed land as the economic unit in the region.18 Therefore, prior to the Loan Office’s establishment and operation being considered, it is felt that some context on the important part played by Scots in developing the colonies of East and New Jersey is required. The foundation of East Jersey East Jersey, while not technically a Scottish colony, was by the middle of the 1680s a region dominated by Scotsmen. In addition to Scots, the colony was home to Dutch and English settlers, and numerous American-born residents who had migrated to the area, but derived its ‘Scottishness’ from the fact that between 1685 and 1705 ‘approximately two-thirds of the board of resident proprietors in East Jersey were Scots’.19 The territory had originally been granted to Englishmen John Berkeley, Baron Berkeley of Stratton, and Sir George Carteret, both ardent royalists, at the Restoration. In 1676, the region divided, Berkeley sold his interest in the western part of the colony to a London-based Quaker group, while Carteret retained proprietorship of East Jersey.20 When Carteret died in 1680, the eastern territory was then sold to another Quaker group, this one headed by William Penn, later founder of Pennsylvania. The acquisition by Penn and 11 others meant that the whole of New Jersey was effectively now a Quaker colony.21 The 12 East Jersey proprietors swiftly expanded to 24 and included Robert Barclay of Urie, a Scotsman from Moray in the northeast of the country. Barclay was a prominent Quaker, producing an extensive number of theological works throughout the 1670s, and his involvement in the colony became central in attracting Scottish investment.22 By the early 1680s, Scotland’s economy was growing and its overseas trade was expanding. The spirit of improvement that propelled the country’s landowning class to attempt to restructure the nation’s economy, especially its agricultural sector, on a more advanced English model during the eighteenth century can be traced to the closing decades of the preceding century. The combination of such aspirations with the religious tensions of the period incubated the correct conditions for a substantial investment of resources into colonial projects.23 Barclay was offered the position of East Jersey governor for life, granting him a free proprietary share in the colony as long as he recruited another four Scottish proprietors.24 Barclay accepted the position on the stipulation that he could remain in Scotland, from

William Burnet and the New Jersey Loan Office  63 where he would promote the colony at home, as well as in neighbouring England and Ireland. With this agreed, he worked tirelessly as an advocate for East Jersey, circulating broadsheets to advertise the colony’s potential and obtaining the right to transport religious prisoners held in Scotland to the area.25 By 1684, Barclay had brokered the sale of 12 Scottish properties in the colony, amounting to half of the colony’s lands.26 Investors were not exclusively Quakers, and instead, the emphasis was placed on Scottish investment. Barclay persuaded several prominent Scotsmen to become involved. These included Lord Neil Campbell, who invested in the transportation of servants and goods to colony and purchased 8,000 acres of land, a useful purchase when Campbell was exiled to the region in 1685 following his brother’s failed rebellion against James VII.27 The Drummond brothers, the earls of Perth and Melfort, both prominent advisors to James, also became involved in the project; a statue of Perth still stands before city hall in Perth Amboy, New Jersey, today.28 A large proportion of shareholders hailed from the northeast of Scotland, some from landed families, while others had mercantile interests, and some overlapped these strata.29 By 1688, around 100 prominent Scotsmen had invested in East Jersey, and nearly 700 scots had crossed the Atlantic to the colony.30 A majority of settlers arriving between 1683 and 1688 were Presbyterian and landed as part of a family unit or with a relative.31 While some were tenants, there appears at the start to have been a preponderance towards servants, as the proprietors attempted to improve their own estates in the short term. As the settlement advanced, there was a prevalence of younger sons who had been left without lands of their own in Scotland, a feature of the inheritance system at this time, making the trip. One proprietor stated that he had invested in the colony with the aim of providing for his youngest son, ‘since [he] had not estate whereby to make him a Scotch laird’.32 These younger sons were prominent among settlers, and the focus on the importance of land became fundamental in how Scottish proprietors organised the colony. While Scottish proprietors possessed around half of the land in East Jersey, English proprietors held the rest. How each group administered their lots was vastly different. English proprietors sold freeholds at the price of two pence per acre, meaning that purchasers owned their land outright. Meanwhile, the model of parcelling up small areas of land in freehold was prohibited at any price by Scottish proprietors, and instead, they allowed only the sale of properties or fractions of properties.33 They could not prohibit the English proprietors from selling freeholds but insisted that these be taken from English territories, leaving Scottish holdings intact. Under the direction of Barclay, Scottish landholders in East Jersey sold off portions of their property to other Scots. This secondary group were termed ‘fractioners’, and more than 50 held shares in the colony by the middle of the 1680s.34 Scottish proprietors limited the size of fractions that could be sold, stipulating that no fractioner could hold an area of land smaller than 500 acres.35 Thus, as Ned Landsman has stated, the large estate became ‘the fundamental economic unit of East Jersey’, with the colony organising itself in the Scottish tradition of large landowners who would then reallocate lands to their tenants and servants.36

64  William Burnet and the New Jersey Loan Office Scottish proprietors, therefore, drew on Scottish social tradition and developed their ­holdings in East Jersey into landed estates, mirroring Barclay’s northeast home at a distance of some 3,000 miles. Despite their remoteness, events at home still had a significant impact on the colonies. The Glorious Revolution of 1688–89 was one such event. As the Scottish proprietors became consumed with the revolution at home, power in East Jersey fell to a domestic group, the Board of Proprietors of the Eastern Division of New Jersey. Formed in 1685, the group was dominated by Scottish fractioners and included all 14 resident proprietors, all of which, barring one, were Scotsmen.37 Over the next two decades, Scots held on average two-thirds of the seats on the board.38 Members of the group often abused their office, using their position to build up their own estates, showing little regard for the interests of proprietors back in Scotland by acquiring titles to the best land for themselves.39 Their allocation of lands was unpredictable, often leaving the board open to legal challenges, and their partisanship was clear, even voting themselves an extra monetary bonus for their role as proprietors.40 This new governing group did not, however, have the infrastructure of those proprietors in Scotland. They could not recruit settlers to the colony in the same way, and after 1690, coinciding with the death of Barclay, immigration reduced dramatically. By 1701, the resident proprietors were in difficulty. Their efforts to collect the rents due to them from settlers during the 1690s had met with little success. The proprietors were viewed by settlers as being preoccupied with their own financial gain and driven by self-interest.41 By putting their own well-being ahead of the colony’s, the Board of Proprietors had brought the government into disrepute. Such issues did not manifest themselves only in East Jersey, with West Jersey also experiencing problems, with mobs in both regions breaking open jails, halting court proceedings, and assaulting colonial officials.42 The lack of a centralised authority to govern the colony left the proprietors with few options, and in 1702, they petitioned the English government to take over the administration of the territories. This was accepted, and East and West Jersey became one royal province under English control. Ownership of the Scottish half of East Jersey, however, remained with the Scottish proprietors. New Jersey and the arrival of William Burnet Before the proprietors of East Jersey surrendered the government of the colony to the Crown, they, in collaboration with their neighbours in the west, submitted a memorandum to the English administration in which they outlined the conditions under which they would relinquish control. It was insisted that the proprietors would retain title to all unappropriated land in the colony and that they would possess sole power to appoint officials to conduct surveys. They also stipulated that a new legislative body should be established based on equal representation for both East and West Jersey, with assemblies meeting alternately at Perth Amboy in the east and Burlington in the west. The proprietors were successful in these demands and secured another crucial power that they, not the Crown, had the right

William Burnet and the New Jersey Loan Office  65 to appoint the governor of the colony. The Crown, however, failed to maintain this arrangement, with the governorship of New Jersey being combined with that of New York from 1702 until 1738, during which time the role became another arm of royal bureaucracy and was awarded to those who had been of good service to the English, and then British, government.43 In 1702, a Scotsman was not appointed as governor, but they were by no means excluded from the office. If we count from the time of Barclay’s involvement in the colony in 1683, until 1731 when the governorship began to be regularly filled by Englishmen or native-born Americans, a Scotsman was governor for 35 of these 48 years. The first Scottish governor of the united New Jersey was appointed in 1710. This was Edinburgh-born Robert Hunter, who was sent at the behest of the British Whig government.44However, in the wake of a Whig defeat in the British general election at the tail end of the year, Hunter found himself with little support from the incoming Tory administration. His opponents in New York and New Jersey knew he now had little influence, and thus, Hunter faced challenges in both territories. Despite strong opposition, he weathered the storm, and with the restoration of a Whig ministry at the ascension of George I in 1714, his position was reinforced. Hunter left the colony in 1719 and was replaced by William Burnet. Burnet had been born into a political world at a time of tremendous upheaval. His father, prominent Scottish clergyman Gilbert Burnet, was living in exile after falling out of favour with his former patron, the Earl of Lauderdale, John Maitland, as well as Charles II and his successor James VII. William Burnet’s birthplace was therefore the Hauge in 1688, where he was named in honour of his godfather, William of Orange, later William II & III.45 After William’s ascent to the British thrones, he rewarded Gilbert Burnet with the Bishopric of Salisbury. Burnet in turn offered positions within his diocese to several scholars, one of whom was John Craige, a gifted mathematician who had been the first to introduce Newtonian ideas into Scotland. From 1690, Craige spent his career in the see of Salisbury, holding various positions in the diocese. In the early years, he became a tutor to William Burnet. The young Burnet even spent time living with the mathematician after he had committed some unknown transgression, his father remarking in letter to Craige that he had ‘so little pleasure in him [William] that I will not suffer him much to be in my sight … I can say nothing to the boy but God pity him’.46 William’s relationship with Craige was an important one, and it was likely Craige who introduced him to Isaac Newton, who in turn proposed the young man’s election to the Royal Society of London in 1706.47 The young Burnet went on to travel Europe, meeting preeminent scholars of the time.48 He returned to England and studied law, but does not seem to have practised, and in 1712, he was married, becoming a father before being widowed in 1715.49 By the time of William Burnet’s arrival in New York in September 1720, he was therefore an exceedingly well-educated young man. A protégé of Newton, he was recognised as an international authority on mathematics and brought with him a significant library.50 He allied himself with Hunter’s old supporters, writing to the Board of Trade to inform them that he would be ‘adhering firmly to every one of Brigadeer Hunter’s friends and not giving way to a party that has gathered

66  William Burnet and the New Jersey Loan Office strength by his absence’.51 In New York, this meant aligning himself with a group composed largely of landowners which dominated the colonial assembly, while a rival faction, comprised in the main of merchants, was to remain out of favour. In New Jersey, the situation was similar, with Burnet uniting with a group of major landowners who had been granted their lands from the Crown.52 His opposition there came from those who were against the proprietary rule or had received their land grants directly from the first governor of New York, Richard Nicolls, rather than from the Crown. In order to suppress opposition in the New Jersey General Assembly, Burnet called elections in 1722, after which the body became dominated by his allies. Perhaps Burnet’s toughest political battle, however, was with his own government at home. This developed over the issue of a colonial currency and, in many ways, situated Burnet between a rock and a hard place. The administration in London threatened to relieve him of his duties if he allowed an unauthorised paper money to be put into circulation, while the administration in New Jersey could not pay him his salary if he did not allow this. It was under these conditions that the New Jersey Loan Office was established.53 The emergence of the New Jersey Loan Office The paper notes issued in New Jersey in1709 were bills of credit. They were inconvertible notes issued to cover the cost of military expeditions or the expenses of government and were usually retired through subsequent taxation. Between 1709 and 1717, new emissions were made periodically, after which British authorities attempted to retire the currency. The winding down of the tax-backed bills did not, however, signal an end to a paper currency in the colony. By the early 1720s, around £24,000 of New York and Pennsylvania paper bills still circulated in the economy, while around £1,000 of New Jersey’s own bills remained.54 The New Jersey administration refused, however, to accept the New York and Philadelphia bills for payment of taxes, while the existing New Jersey notes were not enough to maintain liquidity in the colony. Colonists, therefore, struggled to complete business transactions, obtain credit, or settle their debts. In October, the legislature met to discuss the problem, and a little over a month later, the Loan Office was established. The preamble of the 1723 Act for the Loan Office recognised the financial landscape into which the new institution was emerging. It stated that: the Silver and Gold formerly Current in this Province, is almost entirely Exported to Great Britain and else-where, and thereby the many Hardships which His Majesty’s good Subjects, within this Colony, lie under, for want of a Currency of Money, … And his Excellency the Governor having the Good and Ease of His Majesty’s Subjects of this Province at Heart, has been pleased to call their Representatives together in General Assembly, to provide Remedies for the Grievances aforesaid, who… taking into their serious Consideration the Miserable Circumstances of the Inhabitants of the several

William Burnet and the New Jersey Loan Office  67 Counties which they Represent, for want of a Medium of Trade or Currency of Money: And that… to pay the small Taxes for Support of this Government they have been obliged to cut down and pay in their Plate, Ear-Rings and other Jewels; And that many Law-Suits and Differences have arisen, and do daily arise among them, which will be the Ruin of a great Number of the said Inhabitants, if some Method be not found out for their Relief. And this Assembly having deliberately considered the many Petitions to the Purposes aforesaid, to them presented, and being sensible, of their own Knowledge, that the Matters of Fact, therein set forth, are True, and being well Informed of the Relief which the Neighbouring Provinces have found, in like Case, by a Paper Currency, and hoping the like Effects from it, and finding no other Way to Remedy the Grievances aforesaid, of His Majesty’s Subjects here55 The ‘neighbouring provinces’ referred to were New York and Pennsylvania. Like New Jersey, the latter had also been in great need of a circulating currency. The mayor of Philadelphia, James Logan, remarked in 1722 that Pennsylvania had ‘never been under such low circumstances for want of Trade and Money’, although he admitted that the situation in New Jersey was even ‘more dull’.56 The Pennsylvania legislature was ahead of their counterparts in New Jersey by some months and established their own Loan Office in March 1723. This allowed for the issuance of £15,000 of paper bills to be made in loans of no more than £100, secured on property, at a rate of five per cent interest to be repaid over eight years. In a demonstration of how serious an impact counterfeiting was having on the colonial economy, counterfeiters were to be treated with a firm hand; having both ears cut off, whipped on the ‘bare back with thirty one lashes well laid on’, before being fined or sold into servitude.57 The erection of the Philadelphia institution was a crucial influence on the New Jersey Loan Office.58 Established in November 1723, the New Jersey office was empowered to lend a total of £40,000 in bills by issuing loans of between £12,6s and £100 secured upon property with a value of twice the amount borrowed. Repayments were to be made over 12 years at a rate of five per cent interest. The commissioners tasked with overseeing the project were to destroy all returned bills except those paid as interest, which were to instead be used to pay their own salaries, with any remaining forwarded on to the colonial treasury.59 The origins of the ideas underpinning the loan office lay in the land bank model that had been developing since the late seventeenth century. Massachusetts in particular had had a lively debate on the topic throughout the 1680s, with England following suit in the 1690s and Scotland a decade later.60 These models had developed from small subscriber funds designed to decrease the reliance on credit arrangements for merchants and landowners, capitalising land into money, accelerating circulation, and augmenting money stocks, into large-scale national institutions of the type proposed by John Law in Scotland in 1705.61 Thus, by the time the New Jersey Assembly passed the Act to establish the Loan Office in 1723, it was already a well-theorised concept. It was also beginning to become more established in practice, with the colonies of South Carolina, Massachusetts, Rhode Island, and New Hampshire all founding land banks between 1713 and 1717.62

68  William Burnet and the New Jersey Loan Office The establishment of the loan office brought benefits to all sections of New Jersey Society. The landowning class was able to take advantage of the financial opportunities presented by the institution, and as leaders among the community, they were also happy to take credit for the implementation of a popular initiative. Increased access to credit also allowed landowners the opportunity to improve their position within the colony. New Jersey merchants meanwhile benefited from an increase in paying customers and a reduction in the risk that debtors would be unable to obtain sufficient funds to repay them.63 More widely, all colonists benefited from the reduced tax burden, with taxes now covered by the interest payments on loans made by the Loan Office. The British Board of Trade, however, viewed the currencies of the colonies with hostile distrust. These innovations were deemed a threat to British exporters who might find themselves in the position of having to settle accounts in devalued colonial paper money rather than with specie or bills of exchange.64 The Board, therefore, sought to regulate colonial currencies strictly and insisted upon a suspending clause in any colonial legislation for the issuance of paper money until the king’s opinion on the matter was known.65 The clause was designed to stop the colony from enjoying the benefits of any new law straight away and meant that in the event that the British administration intended to block the legislation, this would be easier if a vast sum of paper money was not already in circulation. When Burnet took up the office of governor, the British administration made their position on colonial currency clear. He was instructed not to: assent to, or pass any Act in His Majesty’s province of New Jersey under your government, whereby bills of credit may be struck or issued in liue of mony, or for payment of mony, … without a clause be inserted in said Act declaring that the same shall not take effect until the said Act shall have been approved and confirmed by His Majesty.66 The British administration did provide Burnet with some room to manoeuvre and stated that he might override these instructions if the money was genuinely required to cover the costs of government expenditure and on the condition that the bills were retired through taxation. The bills issued by the Loan Office in 1723 were, however, neither required to pay government expenditure, nor were they backed by taxes. The legislation that brought the office into being was also passed without a suspending clause.67 Really, it could not have been clearer for Burnet. Yet, he found himself caught between the instructions of the administration at home and the needs of the colony. He ran the risk of either losing his job if he failed to satisfy the British administration or losing his salary if he went against the New Jersey Assembly. The governor fell on the side of the colony, but not without bargaining for significant concessions. He demanded higher salaries for government officers in New Jersey, his choice of colonial agent to represent the colony in Whitehall, the commitment of the Assembly to raise £10,000 in taxes over the following decade, and a personal allowance of £1,000. As Thomas Purvis has observed, ‘nothing better illustrates

William Burnet and the New Jersey Loan Office  69 the vital importance of the land bank [to the colony] than what the assembly was prepared to give up for it’.68 The king eventually gave his assent to the Loan Office, and when he did so, the Assembly attempted to take back many of the concessions it had promised Burnet. They refused to pay for the agent in Whitehall, and in 1725, they forced Burnet to use other funds to cover government expenses. The governor was not, however, too hard done by, with the Assembly also granting him an additional personal payment of £500 at this time.69 In 1728, he was awarded an additional allowance of £600.70 Such financial agreements had become commonplace by this time. As the Board of Trade attempted to exert authority over Burnet, instructing him not to allow the issuance of more paper money unless funded by taxes, the General Assembly remunerated him financially to keep the colonial economy moving. Burnet’s lack of deference to the British administration in these matters, and the way in which he allowed the Loan Office to be established in New Jersey, undoubtedly made the job of his successors difficult. They could not simply arrive in the colony and dismantle the currency system. Some would try but were met with short shrift from the Assembly. Burnet was induced financially to support the Loan Office, but his writings demonstrate that he was not simply being driven by personal gain but instead held out hope for the project of a paper currency. Burnet’s ‘defence’ of paper money and Scottish support for the Loan Office One gets the impression that Burnet was a subscriber to the principle that it was easier to seek forgiveness than ask permission. Despite the Loan Office Act for striking paper bills being passed in the colony in November 1723, he failed to write to the Board of Trade until May of the following year, claiming the news could not be transmitted any sooner due to printing and shipping timetables.71 The Board appeared to be wise to this, and the governor was chastised for his tardiness in communications via later correspondence.72 When he did choose to write, however, Burnet provided clear details on why he believed paper money was necessary for the colony. Writing in May 1724, he detailed the colony’s economy as being one which did not have a great shipping trade, but instead relied ‘wholly on husbandry and raising stock’. Colonists were ‘obliged to sell [their produce] to the neighbouring great markets of New York and Philadelphia’, areas that had their own circulating paper currency. The outcome was that merchants in these areas would ‘pay the New Jersey people in nothing but paper bills, [so] that they may save all their gold and silver, to send home to England for goods’.73 Specie was clearly scarce, with payment in paper from neighbouring colonies hindering the introduction of new specie into New Jersey.74 Burnet believed that there was nothing ‘so honourable, nor safe’ as the colony striking its own notes, and made the point that paper money was still being introduced into the New Jersey economy whether the colony printed its own or not. This was a problem for Burnet, because while the absence of an alternative meant that notes from other colonies were accepted in trade, they were not legal

70  William Burnet and the New Jersey Loan Office tender for the payment of taxes nor for the settling of private debts in New Jersey. As Burnet pointed out, they ‘had often been refused, and would be so, unless they were made current by a law in New Jersey’.75 It is important to remember that at the time Burnet was governor of New Jersey, he simultaneously held the same office in New York. There paper money had been a relative success when compared to other attempts, and Burnet used this to his advantage. He claimed that notes issued in New York had appreciated in value since being issued and had risen to be ‘valued at par with the coin of England’.76 New York, of course, had some advantages over New Jersey. It was an expanding seaport, and as the British Empire had grown in size and complexity, New York had matched it.77 As the colonists became intrinsically linked to the business of empire they required a currency that was fluid and did not hinder transactions. Coin was important for commerce, but so was paper. Government-issued bills of credit and privately issued bills of exchange had created a ‘culture of credit’ within New York.78 Tax-backed paper bills were an extension of this. New Jersey meanwhile lacked this expanding Atlantic export market, but its proximity to the large trading hub of New York meant that it was drawn into a paper currency system whether it issued its own or not. Burnet has been cited as the author of two pro-paper money tracts: A Plea for Paper Currency and A Defence of Paper Money.79 In actuality, both these works derived from a letter written by Burnet to the Board of Trade from New York in November 1724.80 The communication covered native-settler relations, regulating the colonial militia, the ‘licentiousness of tenants’, and dedicated significant space to the topic of paper bills.81 The Board had, of course, already made it clear to Burnet that any proposed legislation ‘for encreasing of paper money [would] meet with no encouragement’. He was therefore aware that in defending a paper currency that had come to be viewed in an ‘odious light’, he ran the risk of seriously disadvantaging himself but did so nonetheless.82 In the letter, Burnet focused on what was required in order to support a successful circulating paper currency. Part of this could be provided by good governance, with Burnet making the case that paper money, if properly legislated for, was a sound financial instrument. He admitted that paper issued in the Carolinas and New England had been subject to deflation but reminded the Board that the New York bills had maintained their value. This led Burnet to conclude that properly legislated and regulated paper bills were ‘both of service to the trade of the plantations and of great Britain’.83 He recognised, however, that there were wider factors in whether a currency was accepted and successful, factors that were much harder to regulate for. He stated that ‘credit ought to be supported if it is possible, both by reason and common opinion’ and that ‘reason tho ever so strong will not always do alone in the beginning if common opinion is against it’. In other words, while the merits of extending credit via the introduction of a new scheme may appear obvious, it would be very hard to embed this without favourable public opinion. ‘Common opinion’, Burnet argued, ‘will generally do for a time without reason nay, against it But then it is often attended with vast mischief and danger’.84 He used the example of the South Sea Company as a cautionary tale. This was a

William Burnet and the New Jersey Loan Office  71 joint-stock company formed in 1711, which in 1713, as part of the Treaty of Utrecht at the conclusion of the War of the Spanish Succession (1701–13), was awarded the contract to deliver slaves in British ships for the Spanish Crown to the colonies of Spanish America.85 In 1719, the company then won the contract to refinance a substantial portion of British government debt, offering company equity to public creditors in exchange for their original assets. The company initially did well, with its share price in the wake of the government deal increasing swiftly from £130 to £1,000 between January and June 1720. Investors then began to question the longterm viability of the company, because while it had monopoly trading rights to much of South America, long-established Spanish and Portuguese empires meant its trading prospects were limited. Confidence in the company began waiver, and by October of 1720, the share price had collapsed to £200.86 Burnet was one of the investors who lost out, and he termed the South Sea episode as ‘a fatal instance’ in which ‘common opinion without any restraint … produced the most terrible effects possible’.87 Tied up in the importance that Burnet placed on ‘common opinion’ was the idea of trust. No matter how rational a financial system administering paper money may be, trust in the system was required. Burnet stressed that people must have confidence in the system, for him this was what kept ‘up the imaginary value [of the currency], when there is no real [o]ccasion for it’.88 This was true in the successful case of the Bank of England and equally true in the contrasting fortunes of John Law’s Mississippi Company and the South Sea Company. Public trust in a paper currency when compared to that for a gold or silver equivalent could be highly volatile. For Burnet, there was nothing more fundamental in promoting confidence in paper money than the actions of government, with the governor concluding that ‘all credit finally centers in the security of the government’.89 Burnet’s notion of paper money was therefore one underpinned by legitimacy, both in a public and a governmental sense. His theorising on the role of ‘public opinion’ in economic matters pointed towards the wider financial landscape of the period. The role played by confidence/trust in economic relationships had been changing in Scotland and England in the wake of the Glorious Revolution of 1688–89. Jointstock offerings, large and small, emerged throughout the 1690s, and ideas around banking developed.90 New banking structures moved the process of lending money from small private bankers and goldsmiths, built on individual reputations, to large financial institutions with little in the way of a track record. Confidence in the credibility of the financial institutions that emerged at this time, and in the instruments they offered, was therefore central to their success.91 A few years after Burnet’s letter, Richard Cantillon, the Franco-Irish banker and economist, advocated for the importance of confidence in financial matters. This included the confidence of investors, the confidence of merchants, and the confidence in banks.92 More recently, Craig Muldrew has argued in his work on English economic history between 1500 and 1750 that ‘most market transactions involved the extension of informal credit because of a lack of ready cash, this meant that interpersonal trust was of central importance’, further adding, ‘trust, belief, and credit all went together’. In this, Muldrew is centrally concerned with personal

72  William Burnet and the New Jersey Loan Office credit, where ‘trustworthiness or credit became a paramount part of people’s public reputation’.93 By the time of Burnet’s writing in 1724, however, personal reputation, while still important, had begun to be supplanted by trust in institutions. Burnet’s theorising recognised this and extended beyond the personal sphere. His ‘public opinion’, as with Cantillon’s ‘confidence’, was about placing trust in a financial system that was beyond the control of the individual. Support for the loan office was provided by another prominent Scotsman in New Jersey, James Alexander. Hailing from Perthshire, he had arrived in the colony in 1715 hoping to improve his fortunes in a country that required skilled engineers.94 Once there, he quickly rose to prominence. His rapid ascent has led to the suggestion that he had an influential patron, possibly John Campbell, duke of Argyll; it certainly appears that someone was looking out for him.95 In November 1715, Alexander was appointed to the position of surveyor-general of East Jersey, securing the same office in West Jersey and in New York within two years, where he used his positions to acquire lands for himself before they could fall into the hands of other speculators. He began to study law, and in 1718, he became recorder of Perth Amboy and deputy secretary of New York. He was admitted to the bar in New York in 1720, by which time he had been appointed commissioner to survey the boundary between New York and New Jersey. In 1721, he became a New York councillor, gaining the same post in New Jersey the following year. In 1722, he became attorney general of New Jersey, holding the position until 1727. He later helped to establish the American Philosophical Society, the New York Library Society, and Columbia University.96 This meteoric rise through colonial society meant that by the time Alexander’s tract in favour of paper money was included by Burnet in his May 1724 letter to the Board of Trade, he was already attorney general for New York and New Jersey. Alexander and Burnet were clearly on the same page when it came to paper money and their support for the Loan Office. Alexander drew on New York as an example of an economy operating a successful paper currency, and like Burnet argued that while the paper was current there, ‘New Jersey [could] have nothing from New York which is the chief place of its trade but paper money’. This was also a situation that was not likely to end soon, with the 1715 Act that had allowed for the most recent issuance of paper money in New York endowing the notes with a lifetime of 21 years. This was also the case with New Jersey’s other main trading partner, Pennsylvania, which had also passed legislation enacting paper money for a similar lifetime. Alexander and Burnet were therefore in agreement that New Jersey would have a paper currency whether the colony issued its own notes or not. At the time of Alexander’s writing, the Loan Office had been operational for around six months. He was, therefore, able to provide examples of the positive impact the institution had had on the colony. He stated that prior to the office, colonists had been in ‘want of a proper tender for payment of debts’, which had led to a situation whereby ‘the lawyers fees were more than all [recovered] debts’. Alexander argued that debtors had been trapped in a vicious cycle and ‘could not get out of [debt] again without being harrissed and torn to pieces at the will of his creditor and his lawyer’. He claimed that things had been so dire that ‘in one small

William Burnet and the New Jersey Loan Office  73 county in New Jersey (where there is ten [counties in total]) there was near three hundred [legal] actions commenced in the year before the [paper money] bill past’. Since the Act had passed, however, Alexander claimed there have been only five actions in the same county.97 He also claimed that since the Loan Office’s bills had become current in New Jersey, people were free of the economic constraints that had previously hindered their progress. They were able to recommence their usual business, which for many had stalled due to lawsuits, and they could also diversify. He noted that some colonists had built ‘vessels to trade with’ and suggested that this may be the first step in New Jersey settlers ‘beginning to have foreign trade of their own’, where they would ‘venture themselves to the West Indies for gold and silver to supply the place of the bills when they are sunk’. The new money had also allowed for improvements to the territory, as colonists ‘set about [the] draining of swamps (of which Jersey has a great many) fit for hemp’. Alexander stated that the ‘bent of the people is now very much upon that manufacture which without this bill they could not so easily have gone upon’. As well as hemp, the Board of Trade was advised that numerous iron works were also being carried out in the colony. This economic growth was not only of benefit to New Jersey, Alexander claimed, but also to New York and Pennsylvania, which would see their exports to New Jersey increased.98 Checking the figures for Alexander’s forecast that paper money would allow the colonists of New Jersey to increase their imports from neighbouring regions is difficult. Margaret Newell has identified that ‘the colonial domestic economy remains the ‘“final frontier” of early American economic history’, so ‘sparse and irregular’ is the available data on the subject when compared to that available for transatlantic trade.99 The work that has been done in this area, however, has argued that ‘regional exports were subject to very substantial short run fluctuations’, in which demand would rise and fall by as much as ‘70 per cent within 3 to 5 years in each colony’, meaning that the economic situation of colonists was often uncertain.100 As a more general point, New York and Pennsylvania were growing in importance in both transatlantic and regional trade, regardless of any changes occurring in New Jersey.101 By the 1770s, foreign exports emerging from New York and Pennsylvanian accounted for more than 96 per cent of those originating in the Middle Colonies, while Delaware and New Jersey exported just 3.5 per cent combined.102 Alexander’s prediction therefore that the paper money issued by the Loan Office would be the foundation of a burgeoning foreign trade for the colony could not have been more inaccurate. The impact of the Loan Office That the Loan Office did not lead to large-scale development in New Jersey’s overseas trade, as Alexander had hoped, does not mean it was a failure. Improvement of the domestic economy had always been a driving concern of those behind the institution. Indeed, two documents, one written by a group of New Jersey merchants and another by New York merchants, which were included with a letter from Burnet to the Board of Trade in December 1726 attested to the apparent success of the Loan

74  William Burnet and the New Jersey Loan Office Office. The merchants stated that since the notes had been issued in 1724, they had ‘passed current not only [in New Jersey] … but also in the province of Pensilvania without any scruple or discount thereon betwixt the currency of Pensilvania [and New Jersey]’.103 These merchants were at the sharp end of currency exchange and claimed the bills had successfully allowed them to transact business across colonial borders without the imposition of any tariffs due to exchange rates. They admitted that it had taken time for the bills to become established, with a discrepancy between the price of gold and the bills of New Jersey arising when the notes were first issued, with a premium of 15 per cent on gold above the value of the bills. This carried on throughout much of 1725, but did not affect New Jersey alone, with Pennsylvania also experiencing the same problem. By the time of writing in late 1726, this had changed, and the merchants stated that the difference in value had ‘now very much decreased, [and] decreasing so that gold may be got for 5 or 6 per cent difference [and] in small sums there is no difference … at all’.104 It was also stated that when the bills were first issued, New York merchants had refused to take them unless at a discount. This situation too had gradually changed, and by early 1726, it had reversed completely, with New Jersey bills apparently becoming preferred in New York over the colony’s own currency.105 Writing in 1740, another Scotsman, William Douglass, also emphasised the important role the New Jersey notes played in the exchange between New York and Pennsylvania, stating: ‘New York bills not being current in Pennsylvania, and Pennsylvania bills not current in New York, but Jersey bills [being] current in both … all payments between New York and Pennsylvania are made in Jersey bills’.106 Clearly the Loan Office notes had become important financial instruments in New Jersey and beyond. Merchants of New Jersey found the paper currency provided them with options when it came to negotiating bills of exchange, and if they did not like the price offered in their own colony, they might access the market of New York for an alternative transaction. Landowners continued to benefit from the increased credit offered by the Loan Office, and a second Loan Office Act of 1733 extended the loan repayment period from 12 to 16 years, at five per cent interest. The wider colonial community meanwhile benefited by a reduction in their tax burden. The office was therefore a financial institution that brought significant benefits directly to a large proportion of New Jersey Society.107 The winding down of paper money in the colony As we have seen, paper money was popular among colonists but was the source of significant objections from the British administration. In 1740, after complaints from British merchants about a poorly administered currency in New England and the Carolinas, the Board of Trade discouraged any further reliance on paper money in North America and prohibited any legislation on the matter from passing until it received the king’s approval.108 By this time, Burnet had long since left New Jersey, taking the governorship of Massachusetts and New Hampshire in 1727, before succumbing to a fever two years later.109 Lewis Morris, the first American governor of New Jersey, took up office in 1738.110 He sought to uphold the Board’s

William Burnet and the New Jersey Loan Office  75 instructions, rejecting a generous financial incentive from the colonial assembly to sign a new Loan Office Act in 1740 and found himself butting heads with the Assembly throughout the first half of the decade.111 Just prior to his death in 1746, Morris again refused another bill for the Loan Office, and as a result, the Assembly refused his heirs the payment of the last two years of his salary. His successor, the American-born Jonathan Belcher, who had also served as Burnet’s replacement as governor of Massachusetts and New Hampshire between 1730 and 1741, granted a new Loan Office Act but this was disallowed in Britain.112 The last loans made by the office were due to be repaid in 1753, by which point the majority of notes had been retired and the colonists were again paying taxes by conventional methods. The colony continued to lobby for new legislation to issue paper money via the Loan Office but were continually snubbed by the British administration. It was not until 1775 that another Act was passed for the issuance of paper money, but only on the understanding that the notes were not legal tender.113 Shortly after this, America achieved independence and the ability to decide its own monetary policy. Conclusion It is clear that the Loan Office benefited a wide range of New Jersey colonists. Landowners, freeholders, merchants, creditors, and debtors, all profited from the office’s notes. The role played by William Burnet was crucial in establishing the new institution. It was his actions, against the instructions of the British administration, that allowed the Loan Office, backed by the New Jersey Assembly, to issue £40,000 in paper notes in 1724, followed by another £25,000 in 1727. While he left the New Jersey governorship in 1727, this did not end the emissions of the notes, and by 1733, there was £100,000 in circulation, enough to meet government expenses without the need to levy taxes against colonists until 1751.114 As has been detailed here, Burnet was financially compensated for supporting the office, which calls into question his reasons for backing the venture. Yet, Burnet was a man ‘noted for his competence, intelligence, and honesty’.115 His writings on paper money, while in the form of official letters rather than a formal treatise, demonstrate he was very aware of an important issue when it came to a paper currency, that of human nature. He recognised the importance of public opinion and confidence in supporting the venture. From his position in the colonies, he knew that public support for a paper currency was strong and that the Loan Office was likely to succeed there. Above all, his actions in New Jersey demonstrated Burnet to have been a pragmatist who viewed paper money as a practical method by which to improve the economic situation in the colony. In its focus on land as the economic unit, its economic undercapitalisation, and in the lack of coin, perceived or otherwise, East Jersey represented a transatlantic echo of early eighteenth-century Scotland. As the colony developed and unified with the west, it, like Scotland which had received little encouragement from the Scottish and then British administrations when it came to instituting novel means by which to improve the domestic economy, was met with an administration

76  William Burnet and the New Jersey Loan Office reluctant  to allow the colony to implement its own financial innovations. The luxury that New Jersey had, and that Scotland did not, was one of distance. The colony’s position on the east coast of North America was far enough away from the metropole that official instructions might be easily ignored. A fact that William Burnet understood only too well. Notes 1 Anonymous, A dialog between Mr Robert Rich, and Mr Roger Plowman, (Philadelphia, 1725), p.2 2 For examples of this see A. M. Davis, (ed), Colonial Currency Reprints: 1682–1751 Vols. 1–4 (Boston, 1910–1911) 3 See L. V., Brock, The Currency of the American Colonies, 1700–1764, (New York, 1975), Davis, Colonial Currency Reprints, 1682–1751, Vols. 1–4; L. W. Labaree, B. B. Oberg, and W. B. Willcox (eds.). The Papers of Benjamin Franklin, vols. 1–34, (New Haven, 1959–1998); M. N. Rothbard, Conceived in Liberty, (Auburn, 2011), pp.624– 628; Economic historian Farley Grubb describes this argument as follows; ‘Under the quantity theory of money in an open economy with an operative specie-flow mechanism, if specie is scarce domestically, then domestic prices will decline to accommodate the smaller money supply. As domestic prices fall, the locale’s exports become more competitive abroad, and imports to the locale look less attractive relative to domestic goods. Exports increase which brings in more specie, and imports decrease which reduces specie outflow. This replenishes the locale’s money supply to desired levels. As such, chronic specie scarcity cannot exist. Temporary specie scarcity is possible, such as during a war, due to unexpected disruptions to the balance of trade, but market forces in an open economy would eventually correct these imbalances’, see F. Grubb, Chronic Specie Scarcity and Efficient Barter: The Problem Of Maintaining An Outside Money Supply In British Colonial America, (Working paper), p.2, available at https://www. nber.org/system/files/working_papers/w18099/revisions/w18099.rev0.pdf 4 B. Franklin, ‘A Modest Enquiry into the Nature and Necessity of a Paper-Currency’ in Davis, Colonial Currency Reprints, Vol. 2, p.351, pp.335–337 5 See A. M. Davis (ed), Colonial Currency Reprints: 1682–1751, Vol. 1, (Boston, 1910) 6 The colonies of East and West Jersey were merged into New Jersey in 1702 7 See H. Peacham, The worth of a penny, or, a caution to keep money: with the causes of the scarcity and misery of the want thereof, as also how to save it, in our diet, apparel, recreations, etc., and also what honest courses men in want may take to live, (London, 1703); W. Atwood, A safe and easy method for supplying the want of coin and raising as many millions as the occasions of the publick may require. Humbly offered to the consideration of the present Parliament. With some remarks upon the Bank of England, Dr. Chamberlain’s Bank, the Land bank, so called, and the National Land bank, (London, 1695); T. Houghton, A letter to a member of Parliament: shewing how probably the credit of the nation may be speedily raised and not only the publick debts made good without present money, but render’d serviceable to the publick, and a means to free others as well as the creditors from the difficulties that the deficiencies of funds, and scarcity of coin have occasioned, (London, 1697); J. Armour, A Proposal to Supply the Defect of Money and Relief to the Poor, (Edinburgh, 1696); A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705), .W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705), J. Clerk, The circumstances of Scotland

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8

9 10 11 12 13

14 15 16 17 18 19 20 21 22

consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705), J. Hodges, Considerations and Proposals for Supplying the Present Scarcity of Money, and Advancing Trade, (Edinburgh, 1705), and J. Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705) L. Jordan, John Hull, the Mint and the Economics of Massachusetts Coinage, (Lebanon, NH, 2002), and R. R. Johnson, ‘The Revolution of 1688–9 in the American Colonies’, in J. I. Israel, The Anglo-Dutch Moment: Essays on the Glorious Revolution and its World Impact, (Cambridge, 1991), p.221–222 E. J. Ferguson, The Power of the Purse; A History of American Public Finance, (Chapel Hill, 1961), p.4 See fn5 Grubb, Chronic Specie Scarcity and Efficient Barter, ‘abstract’ C. P. Nettels, The Money Supply of the American Colonies Before 1720, (Madison, 1934), p.255 The New Jersey assembly chose to issue £3,000 in paper money (or bills of credit) to be retired through collection of taxes within two years. A second expedition two years later led to the issue of an additional £5,000; Similarly, Carolina in 1703, after forces from the colony had taken action in Spanish Florida as part of the North American theatre of the War of the Spanish Succession in the in the previous year, had also introduced a paper currency, F. Grubb, Colonial New Jersey’s Paper Money Regime, 1709–1775: A Forensic Accounting Reconstruction of the Data, working paper for the National Bureau of Economic Research, (MA, 2013), p.1, available at https://www.nber.org/papers/ w19710; and D. Marley, Wars of the America’s: A Chronology of Armed Conflict in the Western Hemisphere, Vol. 2, (Oxford, 2008), pp.324–343 Nettels, The Money Supply of the American, p.255 R. A. Lester, ‘Currency Issues to Overcome Depressions in Delaware, New Jersey, New York and Maryland, 1715–37’, in The Journal of Political Economy, Vol. 47, No. 2 (Apr., 1939), p. 188, pp.182–217 New Jersey Archive, Vol. 87, cited in Kemmerer, ‘The Colonial Loan Office System in New Jersey’, in The Journal of Political Economy, Vol. 47, No. 6, (Dec., 1939), p. 869, pp.867–874 T. L. Purvis, Proprietors, Patronage, and Paper Money: Legislative Politics in New Jersey, 1703–1776, (London, 1986), p.146 N. Landsman, Scotland and its First American Colony, 1683–1765, (New Jersey, 1985), pp.109–110 A. Murdoch, Scotland and America, c.1600-c.1800, (Basingstoke, 2010), p.20 Landsman, Scotland and its First American Colony, p.102 B. Dobrée, William Penn, Quaker and Pioneer, (London, 1932), p.144 (This is in no way an exhaustive list); See R. Barclay, Truth cleared of calumnies wherein a book intituled, a dialogue betwixt a Quaker and a stable Christian (printed at Aberdeen, and upon good ground judged to be writ by William Mitchell ...) is examined, and the disingenuity of the author, in his representing the Quakers is discovered: here is also their case truly stated, cleared, demonstrated, and the objections of their opposers answered according to truth, Scripture, and right reason, (Aberdeen, 1670); William Mitchell unmasked, or the Staggering instability of the pretended Stable Christian discovered; his omissions observed, and weakness unvailed, & c., (Aberdeen, 1671); Seasonable warning and serious exhortation to, and expostulation with, the inhabitants of Aberdeen, concerning this present dispensation and day of God’s living visitation towards them, (Aberdeen, 1672); A Catechism and Confession of Faith, approved of, and agreed to by the general assembly of the patriarchs, prophets, and apostles, Christ himself chief speaker in and among them, which containeth a true and faithful account of the principles and doctrines which are most surely believed by the churches of Christ

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23 24 25 26 27

28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46

in Great Britain and Ireland, who are reproachfully called by the name of Quakers, yet are found in the one faith with the primitive church and saints, & c., (London, 1673); The anarchy of the ranters, and other libertines; the hierarchy of the Romanists, and other pretended churches, equally refused and refuted, in a two-fold apology for the church and people of God, called in derision, Quakers. : Wherein they are vindicated from those that accuse them of disorder and confusion on the one hand, and from such as calumniate them with tyranny and imposition on the other; shewing, that as the true and pure principles of the Gospel are restored by their testimony; so is also the antient apostolick order of the Church of Christ re-established among them, and settled upon its right basis and foundation, (originally 1674), reprinted Philadelphia, 1757; An Apology for the true Christian Divinity, as the same is held forth and preached by the people called, in scorn, Quakers; being a full Explanation and Vindication of their Principles and Doctrines, by many Arguments deduced from Scripture and right reason, and the testimonies of famous Authors, both ancient and modern, with a full Answer to the strongest Objections usually made against them; presented to the King; written and published, in Latin, for the information of Strangers, by Robert Barclay; and now put into our own Language, for the benefit of his Countrymen, (1676) Landsman, Scotland and its First American Colony, p.73 and p.103 Ibid, p.105 Murdoch, Scotland and America, p.19 Ibid Archibald Campbell, the 9th earl of Argyll, mounted an unsuccessful rising against the newly crowned James VII in late May of 1685. The aims of the rising were confused from the start, and as Argyll marched his men from the region of Argyll towards Glasgow, their numbers dwindled. Argyll attempted to escape but was captured and later executed on 30 June 1685. See A. Raffe, Scotland in Revolution, 1685–1690, (Edinburgh, 2019), p.16 L. G. Fryer, ‘Campbell, Lord Neil, of Ardmaddie (c.1630–1692)’, Oxford Dictionary of National Biography, (Oxford, 2004); and Landsman, Scotland and its First American Colony, p.105/6 Landsman, Scotland and its First American Colony, p.106 Purvis, Proprietors, Patronage, and Paper Money, p.10 Ibid Robert Gordon of Clunie cited in Landsman, Scotland and its First American Colony, p.107 Landsman, Scotland and its First American Colony, p.110 Ibid, p.105 Ibid, p.110 Ibid, p.109/10 Purvis, Proprietors, Patronage, and Paper Money, p.10 Landsman, Scotland and its First American Colony, p.122 Purvis, Proprietors, Patronage, and Paper Money, p.10 Landsman, Scotland and its First American Colony, p.122 Purvis, Proprietors, Patronage, and Paper Money, p.2 Ibid, p.2–3 Ibid, pp.15–16 M. Lustig, ‘Hunter, Robert (1666–1734)’, Oxford Dictionary of National Biography, (Oxford, 2004) M. Greig, ‘Burnet, Gilbert (1643–1715)’, Oxford Dictionary of National Biography, (Oxford, 2004); and Lustig, Burnet, William (1688–1729). Oxford Dictionary of National Biography, (Oxford, 2004) R. Nash, John Craige’s Mathematical Principles of Christian Theology, (Baltimore, 1991), pp.11–15

William Burnet and the New Jersey Loan Office  79 47 J. M. Dixon, The Enlightenment of Cadwallader Colden: Empire, Science, and ­Intellectual Culture in British New York, (New York, 2016), p. 18 and 52 48 These included mathematicians Johann Bernoulli, and the brothers Manfredi, philosopher Giuseppe Valletta, and physicist and mathematician Giovanni Poleni. 49 Lustig, ‘Burnet, William’ 50 Dixon, The Enlightenment of Cadwallader Colden, p.45 51 Burnet to the Board of Trade, 26 November 1720, in E. B. O’Callaghan (ed), Documents Relative to the Colonial History of the State of New-York, Vol. 5, (Albany, 1855), p.578 Burnet cited in Dixon, The Enlightenment of Cadwallader Colden, p.49 52 Lustig, ‘Burnet, William’ 53 Burnet’s instructions were that he should not ‘assent to, or pass any Act in His Majesty’s province of New Jersey under your government, whereby bills of credit may be struck or issued in liue of mony, or for payment of mony, either to you the governor, or to the commander in chief, or to any members of his majesty’s council, or of the assembly of the said province of New Jersey, or to any other person whatsoever, without a clause be inserted in said Act declaring that the same shall assent to, or pass any Act in His Majesty’s province of New Jersey under your government, whereby bills of credit may be struck or issued in liue of mony, or for payment of mony, either to you the governor, or to the commander in chief, or to any members of his majesty’s council, or of the assembly of the said province of New Jersey, or to any other person whatsoever, without a clause be inserted in said Act declaring that the same shall have been approved and confirmed by his majesty’; Additional Instructions to Governor William Burnet of New Jersey, relative to Acts authorizing Bills of Credit’, 27 Sept. 1720, in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.4 54 Purvis, Proprietors, Patronage, and Paper Money, p.145/6 55 Law of 1723, chap. lxxxvii, cited in Lester, ‘Currency Issues to Overcome Depressions in Delaware, New Jersey, New York and Maryland’, p.190 56 Logan to Amos Strettle, November 12, 1722, Letter Book of James Logan, 1717 to 173I, pp.297–298, cited in Lester, ‘Currency Issues to Overcome Depressions in Delaware, New Jersey, New York and Maryland’, p.188 57 R. A. Lester, ‘Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729’, The Journal of Political Economy, Vol. 46, No. 3, (Jun., 1938), p.338, pp.324–375 58 A. Rabushka, Taxation in Colonial America, (New Jersey, 2008), p.495 59 Purvis, Proprietors, Patronage, and Paper Money, p.148 60 Rev. J. Woodbridge, Severals relating to the fund: Printed for divers reasons as they may appear, (Boston, 1682); W. Potter, The Key of Wealth, Or, A New Way for Improving of Trade, (London, 1650); The trades-man’s jewel, or, A safe, easie, speedy and effectual means for the incredible advancement of trade, and multiplication of riches, (London, 1650); J. Blackwell, A Discourse in Explanation of the Bank of Credit or An Account of the Model Rules & Benefits of The Bank of Credit, Lumbard, and Exchange of Moneys Proposed to be Erected in Boston and Managed by Persons in Partnership, as Other Merchantly Affayres, (Boston, 1687), in Davis, Colonial Currency Reprints, p.125–126; J. Law, Money and trade considered, with a proposal for supplying the nation with money, Edinburgh, 1705, A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705), and A second essay concerning the Land Mint : shewing, that the present necessity, and want of Gold and Silver money, absolutely requires this, or the like Remedy, and that very speedily ... By the author of the Character of the true publick Spirit, (Edinburgh, 1705) 61 Law, Money and Trade Considered

80  William Burnet and the New Jersey Loan Office 62 E. McCrady, The History of South Carolina under the Proprietary Government, 1670–1719, (Westminster, 1897, 2008), p.524; and M. S. Bilder, The Transatlantic Constitution: Colonial Legal Culture and the Empire, (Cambridge, 2008), p.176–177; and R. Seavoy, An Economic History of the United States: From 1607 to the Present, (New York, 2013) 63 Purvis, Proprietors, Patronage, and Paper Money, p.150–153 64 Ibid, p.154 65 Ibid 66 ‘Additional Instructions to Governor William Burnet of New Jersey, relative to Acts authorizing Bills of Credit’, 27 Sept. 1720, in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.4 67 Purvis, Proprietors, Patronage, and Paper Money, p.155 68 Ibid. 69 Ibid, p.156 70 Ibid, 156/7 71 ‘Governor Burnet to the Lords of Trade – referring to Acts passed in New Jersey Assembly’ New York 12 May 1724, in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.87, He had written very briefly in December 1723, but skims over the details of the new currency p.74 72 ‘Letter from Governor Burnet to the Lords of Trade – about certain returns to be made’ New York 2 June 1726, in Ibid, p.177. Burnet states ‘I have received a letter from Mr Popple dated 1st October 1725 containing your Lordships’ commands to me to be more punctual in Send-Copys of publick papers, publick accounts and all proceedings for your Lordships information’. 73 ‘Governor Burnet to the Lords of Trade’ 12 May, p.74 74 Ibid - ‘the old was exhausted’ 75 ‘Governor Burnet to the Lords of Trade’ 12 May, p.87 76 Ibid 77 S. R. Zabin, Dangerous Economies: Status and Commerce in Imperial New York, (Philadelphia, 2009), P.12 78 Ibid, p.13 79 W. Burnet, ‘A Plea for Paper Currency’, in J. P. Greene, Settlements to Society: 1584– 1763, (New York, 1966), pp.293–296 ‘A Defence of Paper Money’, in A. Bushnell Hart, American History Told by Contemporaries: Building of the Republic, 1689–1783, (Washington, 2002), pp.251–254. 80 ‘Governor Burnet to the Lords of Trade’, New York 21 Nov 1724, in E. B. O’Callaghan (ed), Documents Relative to the Colonial History of the State of New-York, Vol. 5, (Albany, 1855), pp.735–740 81 Burnet to the Lords of Trade’, p.738 82 Ibid, p.736 83 Ibid 84 Ibid 85 K. Morgan, Slavery and the British Empire: From Africa to America, (Oxford, 2007), p.59 86 J. Hoppit, ‘The Myths of the South Sea Bubble’, in Transactions of the Royal Historical Society, Vol. 12 (Cambridge, 2002), pp.141–143 87 B. Bailyn, The Origins of American Politics, (New York, 1970), p.110; and ‘Burnet to the Lords of Trade’, p.736 88 Burnet to the Lords of Trade, p. 737 89 Ibid, p.738 90 A. Murphy, The Origins of the English Financial Markets, (Cambridge, 2009), p.1; and D. Watt, ‘The Company of Scotland and Scottish Politics, 1696–1701’, in S. Adams and J. Goodare, Scotland in the Age of Two Revolutions, (Woodbridge, 2014), p.212

William Burnet and the New Jersey Loan Office  81 91 D. North and B. Weingast, ‘Constitutions and Commitment: The Evolution of ­Institutions Governing Public Choice in Seventeenth-Century England’ in The Journal of Economic History, Vol. 49, No. 4, (Dec., 1989) 92 R. Cantillion, Essays on the Nature of Commerce in General, trans by H. Higgs, (New Brunswick, 2009), pp.59–79 93 C. Muldrew, ‘Trust, Capitalism and Contract in English Economic History, 1500– 1750’, in Social Sciences in China, Vol. 36, No. 1, (2015), pp.130–143 94 T. Purvis, (2000–2002). Alexander, James (1691–1756), political leader. American ­National Biography, (2018) 95 P. D. Nelson, ‘Alexander, James (1691–1756)’, Oxford Dictionary of National Biography, (Oxford, 2004) 96 Ibid 97 J. Alexander, ‘Further Reasons, for passing an Act of New Jersey Entitled an Act for an additional support of Government, and making Current forty thousand pounds in Bills of Credit, for that and other purposes therein mentioned, cited in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.94/5 98 Alexander, ‘Further Reasons’, p.96 99 M. Newell, ‘Economy’, in D. Vickers (ed), A Companion to Colonial America, ­(Oxford, 2006), p.175 100 P. Mancell, J. L. Rosenbloom and T. J. Weiss, Commodity Exports, Invisible Exports and Terms Of Trade for the Middle Colonies, 1720 to 1775, NBER working paper, pp.4–6 101 J. L. Rosenbloom and T. J. Weiss, Economic Growth in the Mid Atlantic Region: Conjectural Estimates for 1720 to 1800, (NBER Working Paper), p.17 102 Ibid, p.15 103 ‘Certificate of Perth Amboy Merchants of the Value of New Jersey Bills in Decem[be] r 1726 rece’d with Mr Burnet’s Letter of 19th Decem[be]r 1726’, in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.154 104 Ibid, p.155 105 Ibid; and Certificate of New York Merchants of the Value of New Jersey Bills in Decem[be]r 1726 rece’d with Mr Burnet’s Letter of 19th Decem[be]r 1726’, in W. Whitehead (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, (1720–1737), p.153 106 W. Douglass, ‘A Discourse Concerning the Currencies of the British Plantations in America & c.’, in Davis, Colonial Currency Reprints: 1682–1751, Vol. 3, p.322 107 As Purvis has stated, ‘no other law passed during the royal period ever brought such direct benefits to a larger percentage of property holders as the loan office’; Ibid, p.152 108 Lustig, ‘Cosby, William’, and Purvis, p.160 109 Lustig, ‘Burnet, William (1688–1729)’, ODNB 110 T. L. Purvis, ‘Morris, Lewis (1671–1746)’, Oxford Dictionary of National Biography, (Oxford, 2004); this was also the first year that the governorship of New York and New Jersey had been conferred on two different men since 1702. 111 D. L. Kemmerer, ‘The Colonial Loan-Office System in New Jersey’, in Journal of Political Economy, Vol. 47, No. 6, (Dec., 1939), p 873, pp.867–874 112 Batinski, M. ‘Belcher, Jonathan (1682–1757), merchant and colonial governor’, Oxford Dictionary of National Biography Oxford, 2004); and Kemmerer, ‘The Colonial LoanOffice System in New Jersey’, p.873 113 Kemmerer, ‘The Colonial Loan-Office System in New Jersey’, p.874 114 Purvis, Proprietors, Patronage, and Paper Money, p.159 115 Lustig, ‘Burnet, William (1688–1729)’, ODNB

82  William Burnet and the New Jersey Loan Office Bibliography Primary sources Anonymous, A dialog between Mr Robert Rich, and Mr Roger Plowman, (Philadelphia, 1725) Armour, J., A proposal to supply the defect of money and relief to the poor, (Edinburgh, 1700) Atwood, W., A safe and easy method for supplying the want of Coin, and raising as many millions as the occasions of the publick may require. Humbly offered to the consideration of the present Parliament. With some remarks upon the Bank of England, etc., (London, 1695) Barclay, R., The anarchy of the ranters, and other libertines; the hierarchy of the Romanists, and other pretended churches, equally refused and refuted, in a two-fold apology for the church and people of God, called in derision, Quakers : Wherein they are vindicated from those that accuse them of disorder and confusion on the one hand, and from such as calumniate them with tyranny and imposition on the other; shewing, that as the true and pure principles of the Gospel are restored by their testimony; so is also the ancient apostolic order of the Church of Christ re-established among them, and settled upon its right basis and foundation, (originally 1674),reprinted Philadelphia, PA, 1757 ———, Truth cleared of calumnies wherein a book intituled, a dialogue betwixt a Quaker and a stable Christian (printed at Aberdeen, and upon good ground judged to be writ by William Mitchell…) is examined, and the disingenuity of the author, in his representing the Quakers is discovered: here is also their case truly stated, cleared, demonstrated, and the objections of their opposers answered according to truth, scripture, and right reason,(Aberdeen,1670); William Mitchell unmasked, or the staggering instability of the pretended stable Christian discovered; his omissions observed, and weakness unveiled, & c., (Aberdeen,1671). ———, Seasonable warning and serious exhortation to, and expostulation with, the inhabitants of Aberdeen, concerning this present dispensation and day of God’s living visitation towards them, (Aberdeen,1672); A Catechism and Confession of Faith, approved of, and agreed to by the general assembly of the patriarchs, prophets, and apostles, Christ himself chief speaker in and among them, which containeth a true and faithful account of the principles and doctrines which are most surely believed by the churches of Christ in Great Britain and Ireland, who are reproachfully called by the name of Quakers, yet are found in the one faith with the primitive church and saints, &c., (London,1673). ———, An apology for the true Christian Divinity, as the same is held forth and preached by the people called, in scorn, Quakers; being a full explanation and vindication of their principles and doctrines, by many arguments deduced from scripture and right reason, and the testimonies of famous authors, both ancient and modern, with a full answer to the strongest objections usually made against them; presented to the King; written and published, in Latin, for the information of strangers, by Robert Barclay; and now put into our own language, for the benefit of his countrymen, (1676). Brown, A., An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705a) ———, A second essay concerning the Land Mint: shewing, that the present necessity, and want of Gold and Silver money, absolutely requires this, or the like remedy, and that very speedily… By the author of the character of the true publick spirit, (Edinburgh, 1705b)

William Burnet and the New Jersey Loan Office  83 Clerk, J., The circumstances of Scotland consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade’, (Edinburgh, 1705) Hodges, J., Considerations and proposals for supplying the present scarcity of money, and advancing trade, (Edinburgh, 1705) Houghton, T., ‘A letter to a member of Parliament: shewing how probably the credit of the nation may be speedily raised and not only the publick debts made good without present money, but render’d serviceable to the publick, and a means to free others as well as the creditors from the difficulties that the deficiencies of funds, and scarcity of coin have occasioned,’ (London, 1697) Law, J., Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705) Potter, W., The key of wealth or, a new vvay, for improving of trade: lawfull, easie, safe and effectuall : shewing how a few tradesmen agreeing together, may both double their stocks, and the increase thereof, (London, 1650a) ———, The trades-man’s jewel, or, a safe, easie, speedy and effectual means for the incredible advancement of trade, and multiplication of riches, (London, 1650b) ———, Humble Proposalls to the Honorable the Councell for Trade, … shewing what particulars, if enacted by Parliament, would… conduce to advance trade, imploy the poore, and prevent the cruelty of creditors, … tending (likewise) speedily to promote the enterprise discovered, in a late treatise, entituled, The Key of Wealth, etc, (London,1651) Seton, W., Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) Peacham, H., The worth of a penny, or, a caution to keep money: with the causes of the scarcity and misery of the want thereof, as also how to save it, in our diet, apparel, recreations, etc., and also what honest courses men in want may take to live, (London,1703) Secondary sources Bilder, M. S., The Transatlantic Constitution: Colonial Legal Culture and the Empire, (Cambridge, 2008) Brock, L. V., The Currency of the American Colonies, 1700–1764, (New York, 1975) Bushnell Hart, A., American History Told by Contemporaries: Building of the Republic, 1689–1783, (Washington, 2002) Cantillion, R., Essays on the Nature of Commerce in General, trans by H. Higgs, (New Brunswick, 2009) Dixon, J. M., The Enlightenment of Cadwallader Colden: Empire, Science, and Intellectual Culture in British New York, (New York, 2016) Dobrée, B., William Penn, Quaker and Pioneer, (London, 1932) Jordan, L., John Hull, The Mint and the Economics of Massachusetts Coinage, (Lebanon, 2002) Ferguson, E. J., The Power of the Purse; A History of American Public Finance, (Chapel Hill, 1961) Greene, J. P., Settlements to Society: 1584–1763, (New York, 1966) Grubb, F., Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply In British Colonial America, (working paper available at https:// www.nber.org/papers/w18099) ———, Colonial New Jersey’s Paper Money Regime, 1709–1775: A Forensic Accounting Reconstruction of the Data, (working paper available at https://www.nber.org/papers/ w19710)

84  William Burnet and the New Jersey Loan Office Landsman, N., Scotland and its First American Colony, 1683–1765, (NJ, 1985) McCrady, E., The History of South Carolina under the Proprietary Government, 1670–1719, (Westminster, 1897, 2008) Mancell, P., Rosenbloom, J. L., and Weiss, T. J., Commodity Exports, Invisible Exports and Terms of Trade for the Middle Colonies, 1720 To 1775, (working paper available at https://www.nber.org/system/files/working_papers/w14334/w14334.pdf) Marley, D., Wars of the America’s: A Chronology of Armed Conflict in the Western Hemisphere, Vol. 2, (Oxford, 2008) Murdoch, A., Scotland and America, c.1600-c.1800, (Basingstoke, 2010) Murphy, A., The Origins of the English Financial Markets, (Cambridge, 2009) Nash, R., John Craige’s Mathematical Principles of Christian Theology, (Baltimore, 1991) Nettels, C. P., The Money Supply of the American Colonies before 1720, (Madison, 1934) Purvis, T. L., Proprietors, Patronage, and Paper Money: Legislative Politics in New Jersey, 1703–1776, (London, 1986) Rabushka, A., Taxation in Colonial America, (NJ, 2008) Rosenbloom, J. L., and Weiss, T. J., Economic Growth in the Mid Atlantic Region: Conjectural Estimates for 1720 to 1800, (Working Paper available at https://www.nber. org/papers/w17215) Rothbard, M. N., Conceived in Liberty, (Auburn, 2011) Zabin, S. R., Dangerous Economies: Status and Commerce in Imperial NewYork, (Philadelphia, 2009) Edited collections and journals Davis, A. M., Colonial Currency Reprints, 1682–1751, Vols. 1–4. (New York, 1964) Hoppit, J., ‘The Myths of the South Sea Bubble’, in Transactions of the Royal Historical Society, Vol. 12 (Cambridge, 2002), pp.141–143 Johnson, R. R., ‘The Revolution of 1688–9 in the American Colonies’, in J. I. Israel, The Anglo-Dutch Moment: Essays on the Glorious Revolution and its World Impact, (Cambridge, 1991), pp.215–140 Kemmerer, D., ‘The Colonial Loan Office System in New Jersey’, in The Journal of Political Economy, vol. 47, No. 6 (Dec., 1939), p.869, pp.867–874 Labaree, L. W., Oberg, B. B., and Willcox, W. B., (eds), The Papers of Benjamin Franklin, Vols. 1–34, (New Haven, 1959–1998) Lester, R. A., ‘Currency Issues to Overcome Depressions in Delaware, New Jersey, New York and Maryland, 1715–37’, in The Journal of Political Economy, Vol. 47, No. 2 (Apr., 1939), p.188, pp.182–217 ———, ‘Currency Issues to Overcome Depressions in Pennsylvania, 1723 and 1729, The Journal of Political Economy, Vol. 46, No. 3 (Jun., 1938), pp.324–375 Muldrew, C., ‘Trust, Capitalism and Contract in English Economic History, 1500–1750’, in Social Sciences in China, Vol. 36, No. 1, (2015), pp.130–143 Newell, M. E., ‘Economy’, in D. Vickers (ed), A Companion to Colonial America, (Oxford, 2006), pp.172–193 North, D. C., and Weingast, B. R., ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, The Journal of Economic History, Vol. 49 (1989), pp.134–165 O’Callaghan, E. B., (ed), Documents Relative to the Colonial History of the State of New York, Vol. 5, (Albany, 1855)

William Burnet and the New Jersey Loan Office  85 Watt, D., ‘The Company of Scotland and Scottish Politics, 1696–1701’, in S. Adams and J. Goodare, Scotland in the Age of Two Revolutions, (Woodbridge, 2014) Whitehead, W., (ed), Documents Relating to the Colonial History of the State of New Jersey, Vol. 5, 1720–1737 Online sources Batinski, M., ‘Belcher, Jonathan (1682–1757), merchant and colonial governor’, Oxford Dictionary of National Biography Oxford, 2004) Fryer, L. G., ‘Campbell, Lord Neil, of Ardmaddie (c.1630–1692)’, Oxford Dictionary of National Biography, (Oxford, 2004) Greig, M., ‘Burnet, Gilbert (1643–1715)’, Oxford Dictionary of National Biography, (Oxford, 2004 Lustig, M., ‘Hunter, Robert (1666–1734)’, Oxford Dictionary of National Biography, (Oxford, 2004a) ———, Burnet, William (1688–1729). Oxford Dictionary of National Biography, (Oxford, 2004b) Nelson, P. D., ‘Alexander, James (1691–1756)’, Oxford Dictionary of National Biography, (Oxford, 2004) Purvis, T. L., (2000–02). Alexander, James (1691–1756), political leader. American National Biography, (Oxford, 2022) ———, ‘Morris, Lewis (1671–1746)’, Oxford Dictionary of National Biography, (Oxford, 2004)

5

‘We are far from fairy tale Mr Chancellor’ John Law and the proposed National Bank of France, 1701–021

In 1729, John Law died penniless in Venice. The previous 25 years had been a ­rollercoaster of fortunes for the Scottish monetary theorist. In the wake of his ­failure to establish a Scottish land bank in 1705, he had promoted a similar French scheme throughout 1706 and 1707, before endeavouring to create a bank ­modelled on the Bank of England in Turin during 1711–12.2 Each of these attempts also failed. Where Law found more success during these years was at the gambling tables of Europe. Here he applied his mathematical skill to calculate the best odds and adopted the key position of banker at the tables.3 After winning £20,000 in Italy alone, it is said that by the time he arrived in France in 1714, Law had amassed a fortune of £90,000 (somewhere in excess of £13.5 million today).4 Despite his failure to find a government willing to back his banking plans, his monetary theory developed at pace. By 1707, Law had solidified his definition of what constituted money and viewed any financial instrument that might be employed as a medium of exchange as being money. He believed company shares, particularly those of the English and Dutch East India Companies, which were transferable for the payment of debts and held a value in themselves, were an example of this.5 This was something that had appeared in embryonic form in 1704’s Essay on a Land Bank but had been omitted from Money and Trade Considered.6 The method by which Law ­promoted his schemes had also evolved. The reader will remember that his proposal for a land bank in Scotland was met by a Parliament so divided that a duel was narrowly avoided on Leith beach between two members at odds over the plan. Law, ­therefore, began to circumvent parliaments (these were after all made up of numerous, often-fickle, individuals) and instead went directly to those at the top. While Law was unsuccessful in establishing a bank in Turin, he had been ­successful in gaining access to the head of state, Victor Amadeus II, Duke of Savoy (1666–1732). He took the same approach in France and was able to convince Louis XIV to allow him to establish a bank in 1715. Unfortunately, for Law, the Sun King’s health was deteriorating, and he died before this could happen. Law’s plans were delayed but he remained hopeful. Louis had left France bankrupt, and the need for economic reform remained. By the end of the year, the French regent, Philippe II, Duke of Orléans, gave Law the go-ahead to establish a private French bank. Law continued to convince Orléans of the benefits his financial ideas could DOI: 10.4324/9781003284819-5

John Law and the proposed National Bank of France, 1701–02  87 bring to France, and over the next five years, he carried out significant public finance experiments in the country. In 1716, Law established a private joint-stock bank in France, this was  then nationalised as the Banque Royalein 1718.7 In 1717, he re-established the Compagnie d’Occident, better known as the Mississippi Company, and acquired the rights to almost all French overseas trade, increasing the company’s share price from around 34 million livres to over five billion in the space of just three years.8 He ­purchased the French Royal Mint and acquired the lease to operate the Ferme générale, an outsourced tax collection agency through which most indirect taxes in France were collected for the Crown. From here, Law attempted to refinance the French national debt, lending to the government enough to cover its existing financial obligations at the low interest rate of three per cent.9 Under Law’s management, the share price of the Mississippi Company increased swiftly, and between spring and autumn of 1719, it rocketed from 500 to 10,000 livres; a boom ­supported by Law continuing to issue paper money through his bank.10 Things seemed to be going well, with the term ‘millionaire’ first coined at this time to describe the investors Law was making rich. It was not to last. A warning that the system was overstretched came in December of 1719 as the Mississippi Company’s share price dipped before it rallied again at the end of the year. While this steadied the ship, Law was aware that there remained a problem with excess liquidity in the French economy. It was at this time that steps were taken to pressure the public to use banknotes rather than specie in their ­transactions. On  21 December, it was decreed that silver coin could no longer be used for ­payments above 10 livres, and it was forbidden to use gold coin for payments above 300 livres.11 This took immediate effect in Paris and was phased into the rest of France during early 1720. This was the first of a series of decrees designed to supplant specie with paper.12 Due to the success of the Mississippi Company, Law was appointed as Contrôlleur Général des Finances in January 1720. In his new role, he ­continued to promote paper money with evangelical fervour, demonetising gold and ­introducing a phased devaluation of silver.13 A complex, often muddled, series of policies then culminated in an arrêt of 21 May, in which Law attempted to cool the economy down by reducing the value of the company’s shares and the bank’s notes.14 The public response was at first anger, followed by a loss of confidence in Law’s ­system. The arrêt was revoked less than a week later, but the writing was on the wall for Law.15 The share price of the Mississippi Company collapsed, and the glut of paper money in circulation led to rapid inflation, with the notes losing their value during the second half of 1720. He attempted to keep the scheme afloat over the summer, but to no avail. By the end of the year, Law had been chased out of France. In the years which followed, he spent some time in England and refused invitations to discuss new projects in Russia and Denmark.16 He continued to defend his French system and awaited an invite to return to France which never came. This extraordinary story was how Law’s career as a monetary theorist ended, but how it began is less clear. Since the mid-1990s, a proposal for an English land bank dated 1704 has been considered Law’s first known work. The manuscript

88  John Law and the proposed National Bank of France, 1701–02 was a fairly recent discovery, having made its way to Dublin professor, Antoin Murphy, through the antiquarian book trade, before Murphy published it in 1994.17 Murphy deemed the manuscript as a ‘most exciting discovery’, which ‘in terms of both style and substance, … [was] unambiguously that of John Law’. It should be noted, however, that the manuscript was not without its issues. Murphy could not ­establish its provenance, and rather than being in Law’s own hand, it was in the hand of a copyist. Despite this, Murphy’s analysis of the piece, from dating the paper and contextualising references in the manuscript, to his efforts in comparing it with Law’s other works, leaves the reader in no doubt that the 1704 Essay was ­written by Law.18 While the authorship of the Essay is therefore not in doubt, whether it was Law’s first work is questionable. During 1701–02, an attempt to establish a French public bank was made. This emerged in the form of two manuscript proposals, accompanied by three letters that lobbied for the project. Two of the letters were addressed to Louis XIV’s morganatic wife, Françoise d’Aubigné, Madame de Maintenon, while the third addresses ‘M. le Chancelier’ and appears to have been written to the French finance minister, Michel Chamillart.19 Like the Essay, the proposals and letters are not in the hand of their original authors, and have instead been reproduced by a copyist. Whether Law was involved in this scheme has divided academic consensus. Murphy has stated that while he was originally impressed by the similarities between the economic reasoning contained within these works and those that are certainly by Law, in the end he was left with ‘very considerable doubts’ as to their authorship.20 Paul Harsin, the early twentieth-century chronicler of Law’s ­catalogue and the researcher who first discovered the documents relating to the French proposal, stated that ‘it seems very likely that the author of the project is none other than John Law’. He continued with a word of caution, ‘but it goes without saying that in the current state of our documentation, we cannot say more’.21 He subsequently chose not to publish the proposals in his complete collection of Law’s writings.22 In agreement was Earl Hamilton, a man who dedicated more than 50 years to examining Law’s work. He had no doubt that the Scotsman was the author of ‘two drafts of a proposal for a privately owned Bank of France’.23 Unfortunately, Hamilton provided no published evidence to back up this assertion. Then, writing in the 1970s, French politician and historian, Edgar Faure produced a significant work on Law’s French system during 1715–20, in which he highlighted several similarities between documents drawn in the main from Law’s tenure as finance minister and the bank proposal of 1701. Faure even provided an appendix citing comparisons between Law’s writings and one of the letters. Despite this, Faure did not come to a decisive judgement on the authorship of the works.24 More recently, Guy Rowlands, in his work on the ‘dangerous and dishonest men’ who acted as Louis XIV’s international bankers, has stated that ‘The plan dated 1701, written in bad French and signed by ‘Ollivier du Mont’, is almost certainly by Law’.25 (It should be noted that this statement is incorrect, with neither one of the 1701 ­proposals signed by du Mont, only the third letter bears this name). The question as to whether the disputed works were produced with the involvement of Law is therefore one which has been outstanding for some considerable

John Law and the proposed National Bank of France, 1701–02  89 time. Through a careful forensic investigation of the French proposals, this ­chapter makes the case that Law, as part of a European group, was involved in their ­creation. While there is much circumstantial evidence, particularly in the letters, which point to Law’s involvement, there is also more concrete evidence. This chapter will ­consider the circumstantial evidence, as well as analyse the style and substance of the proposals and compare them to Law’s known works. The unrave­ lling of these sources is not an easy task. As already mentioned, they are not in their original form, but are copies; all five documents have, however, been transcribed by the same copyist. Matters are further complicated by each of the three letters coming from a different source: the first was unsigned, the second marked ‘G.M.’, and the third under the name of ‘Olivier du Mont’ (henceforth these will be referred to as the ‘du Mont letters’). It is hoped that despite these challenges, the evidence presented here will convince the reader of Law’s involvement. While Law was unsuccessful in establishing a bank in Scotland, he was an incredibly important economic thinker. His ideas revolutionised French public finance and became important to the Scottish banking sector from 1727 onwards. Establishing the origins of his monetary theory, and how his theories and policies developed at the beginning of his career, is therefore important. That Law was involved in trying to start a French bank in 1701 is also of great significance for our understanding of the Scottish Financial Revolution as complex series of events that took the form of ideas and practical applications, both in Scotland and beyond. A brief overview of the proposed bank, the du Mont letters, and the context in which they emerged As the 1690s were ‘ill years’ for Scotland, so too were they for France. The failed harvests and famine that had been so devastating for Scotland in the second half of the decade had come earlier to France, with the death toll peaking at 2 million between 1692 and 1694.26 Amidst this, the country had also been at war for much of the preceding two centuries. In the 1690s, the major conflict was the Nine Years’ War (1688–97), a truly global war pitting the French against the Grand Alliance, which included England, the Dutch Republic, and the Holy Roman Empire.27 Domestically, the Paris Mint lagged in its work of striking new coin, and it became necessary to issue paper certificates to those who had handed in old coins and ­bullion for recoinage.28 These initially circulated throughout France in lieu of ­payment; however, following the French defeat at the Battle of Blenheim in August 1704 and because of the previous over-issue of the certificates to cover expenses, there was a rush to exchange them for cash. By 1706, the paper was in circulation at ‘ruinous discounts, virtually paralysing credit’.29 French military expenditure had also been increasing steadily throughout the seventeenth century, and by 1700, this meant supporting the cost of 400,000 troops who were active in theatres of war across the world.30 This was the difficult financial landscape in which the proposal for a private French bank emerged in 1701. The two French proposals, Memoire au sujet de l’Etablissement d’une banque en France and Memoire pour l’Etablissement d’une banque publique, pour le

90  John Law and the proposed National Bank of France, 1701–02 bien et commodite du commerce, et en veu de rendre l’argent commun en France, appeared at some point in 1701 and advocated for the establishment of a bank that would accept deposits, make transfers, and issue its own currency.31 It was to be truly national in its scope, centred in Paris but with branches throughout the ­country, and with a fund of 10 million livres raised through subscriptions.32 The bank would offer loans in its own banknotes secured on land, homes, or other real estate, which were to be repaid at five per cent interest, with a one per cent discount for punctual payments.33 For financial protection, a register of all contracts and any other debts that could affect any land pledged was to be established at the bank’s offices.34 The banking model fell somewhere between the operational structures of the Bank of Amsterdam and the Bank of England, providing increased velocity of transactions for merchants and expanding loan-making facilities to augment the French money supply and increase trade. The proposals were significant for being the first time that such a scheme was discussed in French financial history. The three letters that accompany the proposals were sent from London in January and February of 1702. The first two were addressed to Madame de Maintenon, and the third apparently to Chamillart.35 Each letter lobbied for the proposal to be given due consideration, with the third letter providing more detail about the economic ideas that underpinned the bank. As already mentioned, unravelling the authorship of these letters is difficult, with each being penned by a different individual. It is also unclear how involved the authors were as part of the group behind the bank, or whether they were simply lobbying on behalf of that group. The first letter appears to have come from the pen of a Frenchman. The author claimed that his support for the bank was driven by ‘the great zeal … [he had] for the king’ and also displayed an in-depth knowledge of the French court. This included mentioning several French ministers and financiers by name, and stating that the author had discussed the matter of the bank personally with many of those named. The author warned should the French fail to take up the opportunity of the bank swiftly, then ‘our enemies will profit by it’, a fact known to the author who had ‘seen the treaties’ made with ‘two of the premier powers of Germany’.36 This is interesting and establishes that those behind the proposal had also been in talks with other European powers.37 The network behind the scheme, therefore, appeared intent on its implementation somewhere in Europe, with little regard for the dividing lines being drawn by the War of the Spanish Succession (1701–13). The second letter was signed ‘G.M.’. This led Harsin to theorise that this may have been Georges de Montagne, a pseudonym previously used by Danish ­merchant Jørgen Thor Møhlen in correspondence with Louis XIV in 1699.38 At that time, Thor Møhlen had been trying to convince the French king to issue a French paper currency not backed by specie and to establish a trading company comprised of up to 200 ships and 5,000 sailors.39 Paper money was something that Thor Møhlen had some experience of. After incurring losses to privateers in the early 1690s, he had been given permission to print non-interest-bearing notes in Norway, then united with Denmark, in 1695.40 The currency was accepted as legal tender and convertible into coin but was undermined by a lack of public confidence. The government quickly withdrew them from circulation a year later.41

John Law and the proposed National Bank of France, 1701–02  91 Thor Møhlen’s memoires from his time at the French court in 1699 shed no light on whether he was involved in the 1701 proposal, but his name is an interesting one in the context of the b­ anking proposal.42 The third letter is the most intriguing. It illustrated a greater command of the economic ideas involved in the project than its counterparts and demonstrated monetary theory that can be described at the very least as ‘Lawian’. It was also the letter signed by the mysterious ‘Olivier du Mont’. Du Mont gives away little about his identity, but does state that his partners in the project are English. This seems to be at odds with the content of the first letter and weakens suggestions that Thor Møhlen was involved. It could, however, suggest that there was a larger group behind the bank and that the authors of the letters, while advocating for the bank, were not du Mont’s partners in the scheme. It is also interesting for indicating that du Mont was not English himself.43 For reasons which will become clear, Harsin has suggested that du Mont was Scottish. He also remarked that du Mont’s letter was written in a style ‘enameled with Anglicisms which prove at least that English [was his] usual language’.44 The question therefore arises, was du Mont Scottish, and was he in fact John Law? The circumstantial evidence that points to Law’s involvement In 1705, Law asserted that he had authored economic works several years ­earlier. The claim appeared in Money and Trade Considered as he reproached fellow ­projector, Hugh Chamberlen, who had accused Law of plagiarism. Law testily rebuked Chamberlen for being ‘offended at my meddling in this affair, having, as he says, borrow’d what I know of this subject from him’.45 Law acknowledged that two people might develop the same idea independently from each other and believed his ideas were distinct from Chamberlen’s. He claimed that he had in fact ‘form’d a scheme … several years before I had seen any of [Chamberlen’s] Papers: Which I can prove, if that were necessary, by persons of worth I then show’d it to’.46 Law is vague in the detail, but says enough to confirm that he had been ­writing on economic matters prior to the English land bank proposal of 1704.47 Law had certainly been in a position to learn about banking and financial ideas in the years prior to writing the Essay. While details about his whereabouts in the years following his late 1694 escape from a London Jail are sparse, it is known that Law gambled his way across Europe, visiting Holland, France, Italy, and Scotland.48 At this time, Holland and Italy were at the forefront of banking innovation. There Law would have witnessed the benefits that the Bank of Amsterdam brought to the city, and how company shares were traded on the city’s stock ­market. In Italy, there were two Venetian banks, the Banco del Rialto and the Banco del Giro, that supported trade, and the latter issued loans to the government. In Genoa, the powerful Casa di San Giorgio existed. This was an ancient bank, which had lent to the government as early as 1148, managed the state’s debt, acted as a bank of deposit, and later became a formidable trading company. Murphy has stated that the ‘inspiration for many parts of the Mississippi Company was probably kindled in Law by his study of [this] bank’.49 By 1701, Law, therefore, had knowledge of

92  John Law and the proposed National Bank of France, 1701–02 these institutions and how they worked, and would go on to often cite what he had learned about the banking systems and financial markets of these countries in his later economic works. When it comes to the Du Mont letters, there is a presence that looms large. In the first letter, this presence is referred to a friend who was travelling to meet the author in London, hopeful of a response from France which had not yet arrived.50 Harsin hypothesis that the friend, who would be travelling for a few days to reach London, may have been coming from Scotland.51 The letter also stated that this friend had previously met with Chamillart and his ministers. This is interesting and aligns with Law’s movements in 1701. We know that Law had been imprisoned for a week in Ceans, France, in early April of that year, and it is also documented that on 19 June 1702, he was granted a passport to leave the country.52 Law was therefore in France at the time the proposal was submitted to the French administration. The second letter, that signed ‘G.M’, similarly spoke of a third party. In the letter, ‘G.M’ stated that he was not the architect of the banking proposal – ‘je n’ey suis point l’autheur’ – instead an unnamed friend was cited as the proposal’s principle author.53 Interestingly, no ‘friend’ is mentioned in the letter from Olivier du Mont. While the letters are ambiguous in identifying the group behind the bank, they do clearly detail the network in the French administration tasked with considering the proposal. This included Hilaire-Armand Rouillé du Coudray, a French nobleman and later director of finance; Michel Amelot de Gournay, council to Louis XIV; Samuel Bernard, French financier; and Chamillart, controller general. Interestingly, the first letter stated that Rouillé had ‘seen the project only briefly’ but had ‘concluded that it was not practicable’.54 This is striking for two reasons. Firstly, as already stated, Law had been in France in 1701 and had taken meetings with Orléans, Chamillart and Rouillé.55 Secondly, the du Mont letters and the two proposals, which are today held in the Bibliothèque Mazarine in Paris, are bound together with a brief prepared by Rouillé in October 1715, advising the French administration to be cautious of Law’s banking proposal at that time. Also bound in the volume is a memoire on paper money dated 1710–11. Although anonymous, Harsin stated the tract was written by someone ‘very qualified’, which led him to believe that this collection of writings was not ‘free of importance’.56 There may therefore be a connection that existed at the time the Mazarine papers were grouped together, but which is now lost, between Law and the 1701 proposals. The third letter of the group, that signed by du Mont, demonstrated the clearest understanding of the economic underpinnings of the proposed bank, and it does not refer to the proposal being authored by a third party. This suggests that du Mont was the friend referred to in the earlier letters and was also the author of the banking proposals. The enigmatic pseudonym of du Mont is interesting. Prior to the widespread Anglicisation of Scottish place names in the nineteenth century, the word ‘law’ was used not only to describe legal custom but also commonly to refer to a hill in, among other places, Fife and Lothian from where the Law family hailed.57Was the moniker of du Mont, the French for mountain, the Scotsman’s way of stealthily identifying himself? Perhaps. Du Mont also ties in with the penname of Georges de Montagne (G.M). It also corresponds with a third undated proposal

John Law and the proposed National Bank of France, 1701–02  93 for a Banco del Giro in Austria, held in state archives and written by ‘Vincenzo Montano’.58 The details of this proposal are similar to the French proposals and called for a bank of deposit to be established. The bank would establish a new currency and was designed to increase the velocity of money. It was, however, not identical and was to be regulated in Holland. Saying for certain that this is the proposal referred to in the first letter, that which was made to the German states, is not possible at present. A final piece of circumstantial evidence that points to Law’s involvement comes from the first bank proposal, Memoire au sujet de l’Etablissement d’une banque en France. This takes the form of an editorial note left in the margins by the copyist. This inscription concluded that the original author of the work had not been a Frenchman and that despite the author speaking a little French well, some linguistic errors had been made in the text. As such, the copyist had corrected many of these errors, while others were left as they were in the original text.59 This is a helpful observation and could point to Law being the author. That said, the decision to make corrections has muddied the water a little, and it would have been helpful to know if the errors in the proposals tied in with Harsin’s analysis of the third letter being ‘enameled with Anglicisms’.60 Thus far, we can conclude that the author of the proposal was travelling some distance from London, was not French, and had been in contact with members of the French administration in 1701. This could be Law, but it could also be any number of other people. It is hoped a more persuasive case is detailed below. The compelling case for Law’s involvement The style and substance of the letter signed by du Mont and the two proposals for a French bank bear a striking similarity to works that can be attributed to Law. Parallels exist in fundamental economic ideas, in the language used, and in how the works were structured. It should be noted, however, that the proposal for a French bank was different in nature to the works that Law produced for England, Scotland, and France between 1704 and 1707. This is to be expected. As detailed in Chapter 3, the land bank model evolved to fit the needs of the country in which it was being marketed. A comparison of Law’s land bank proposals (1704–07) demonstrates that he adapted certain details of his model depending on the host nation. It is therefore to be expected that the ideas promoted in Money and Trade Considered for example, which were aimed at finding a solution to the financial problems experienced by Scotland, a small country with a population of around 1.1 million in 1705, would differ from a proposal made for France with a population of almost 20 million and with a proportionally sized economy.61 Therefore, a comparative study of the French proposals against Law’s other works of the period has to be undertaken at more than a purely economic level. Beginning with the similarities in style, the format of the French proposals, particularlyMemoire pour l’Etablissement d’une banque publique, is distinctly like that of the other works Law produced during the opening decade of the ­eighteenth ­century. This proposal, like Money and Trade Considered and Law’s 1707 French

94  John Law and the proposed National Bank of France, 1701–02 land bank proposal, is split into chapters, each detailing a specific part of the scheme and each providing a building block of economic reasoning to support the necessity of the bank. The 1701 proposals also provided hypothetical examples of how the scheme would work in practice, this is a mechanism employed by Law in his other works of the period. Law was also fond of acting as devil’s advocate in his writings and taking the opportunity to reply to criticisms before they were raised, this is a motif shared by the French proposals and the ‘du Mont’ letter.62 For Law and the author of the 1701 proposals, the Bank of Amsterdam was an important example of how a successful banking institution should operate. Law venerated the bank throughout his career, frequently referring to it in his works.63 When describing the benefits of the bank in 1705, Law wrote that it was: a secure place, where merchants may give in money, and have credit to trade with. Besides the convenience of easier and quicker payments, [the bank] saves the expense of casheers, the expense of bags and carriage, losses by bad money, and the money is safer than in the merchants houses, for ‘tis less lyable to fire or robbery, the necessary measures being taken to prevent them.64 The author of French proposals meanwhile described the following benefits: The Bank of Amsterdam was established, for facilitating trade, merchants give in their money, and are given credit in the bank’s book, ….it is proper as a general fund, for keeping the money of individuals, it is held in a town house, a very strong place … and the money is surrounded by stone to safeguard against fire … merchants have great advantages … their money is more secure than their homes, they don’t have need of clerks for paying and receiving… saving on time to tell, risk of dissatisfaction, … false money, [and] the expense of the bags, and carriage.65 From the focus on speedier transactions, the risks posed by fire and counterfeiting, and the expense of bags and carriage, it is clear that these statements share several commonalities. Another interesting similarity is the mention of the banking practices of Sweden in the second French proposal. While it was not uncommon for banking proposals of this period to make reference to England and the Dutch Republic, or even German states, as the sources of banking innovation, Sweden was more rarely cited. However, Law stated in Money and Trade Considered in 1705 that ‘Sweden, not Italy invented banks’, while the opening line of the French proposal stated, ‘there are several bank models in Europe; Sweden, Germany, Holland, England and Italy’.66 The shared reference to Sweden was therefore an uncommon one. In many ways, the 1701 proposals and the du Mont letter demonstrated a less developed form of Law’s monetary theory. Ideas and statements are less polished. Take, for instance, the case made for the superiority of paper money over specie.

John Law and the proposed National Bank of France, 1701–02  95 In 1705, Law, who was an undisputed advocate for paper money, stated that paper was preferable to specie because: 1 It is easier of delivery: 500 lib. in paper may be payed in less time,than 5 lib. in silver. 2 It is nearer the value in one place to what it is in another,being of easier carriage. 3 It can be easierkept, taking up less room … 4 It can be divided without loss: because it may be changed for lesser notes at the office5. It is capable of a stamp, and less liable to be counterfeit.67 The letter from du Mont three years earlier had similarly stated that: The value of the bills [of the proposed Bank of France] will be secured by a fund, and hold the certificate of the seal, and public authority, the same as other money, or as other species, and therefore [be of] the same qualities as these species … having more value, and being more much more convenient, and less prone than the other to being counterfeited.68 While the former statement is meticulously crafted, the latter contained the same monetary ideas – the convenience of a paper currency, its ability to maintain a value, and its capacity to be stamped with a seal of authority and protected from forgery – albeit in a more embryonic form. Further similarities arise when one considers how du Mont described the benefits the French bank would bring to the country’s economy. In the third letter, he stated: everyone will want to have [the bank’s bills], it will be the other money, which will pay all small debts, and so the money going out of the hands of individuals … it will travel from here to another, moving quicker than other money which is paid less than quarterly during the court of the king.69 This statement indicated that du Mont was very aware of the important part played by the velocity at which money circulated. These new bills would allow transactions to be completed more quickly, with one unit of the new currency undertaking multiple transactions in the same amount of time as specie took to complete one deal. This was also an important aspect of Law’s work, with the Scotsman similarly displaying an awareness of the importance of the money supply and the velocity at which it circulated. The model of bank proposed in France in 1701 also recognised this. Sitting somewhere between the Bank of Amsterdam and the Bank of England, it was designed to be a bank of deposit, increasing the number of trading transactions, and a bank of issue, augmenting the money stock of France. Law understood that a lack of cash limited economic growth. This economic principle, termed the ‘cash balance constraint’, was a fundamental mechanism in Law’s 1705 writings and featured prominently in Law’s subsequent French works.70 This  theory

96  John Law and the proposed National Bank of France, 1701–02 maintained that ‘employment was positively related to the amount of money in circulation’.71 A lack of money in circulation reduced employment opportunities, which in turn limited manufactures and trade, and stifled economic growth. Du Mont also demonstrated a clear understanding of this and stated that the bank and the ‘new addition of such a large fund so suddenly, trade will grow’.72 This connection between money and trade is basic when compared to Law’s later works but does represent a less polished example of his style of monetary theory. As discussed in Chapter 3, much of Law’s work during the first decade of the 1700s focussed on establishing a land bank that would offer loans secured against land pledged by borrowers. This was also the intention of the French bank that employed a wider definition of land as security for its loans and included homes and other real estates. The author of the proposal believed that employing land as security would have a positive impact on French land prices and stated that: interest being 4–5%, the land must increase in price because those who will have their assets in cash by finding an income as advantageous as the loan of their money, [will] buy [land] more readily73 This focus upon the future value of land foreshadowed Law’s theorising in Money and Trade Considered that land would continue to increase in value.74 It also chimed with Law’s thoughts when promoting a land bank in France in 1707, when he stated that: the difference between the price of land when species was more abundant and now, is a very strong reason for employing land to the uses of money and thereby reduce the demand and value of gold and silver species and increase demand and the value of land.75 Of the similarities in monetary theory between the French proposals and the work of Law, the most striking is in a shared definition of what constituted a monetary instrument. In the first French banking proposal of 1701, the author demonstrated a clear knowledge of the financial practices of the Dutch Republic and England and paid particular attention to how shares in the East India Companies of each of these countries passed as currency. The author stated that in England, shares in the ‘old, and new, indies companies’, as well as Bank of England notes and Exchequer bills passed in payment of debts, while in the Dutch Republic, it was claimed that little specie circulated, and instead, payments were made via the Bank of Amsterdam and by the use of government bonds and shares of the Dutch East India Company. The focus on company shares as a monetary instrument was one shared by Law. He spoke of this in 1704’s Essay on a Land Bank, but omitted it completely from Money and Trade Considered.76 By 1707, it had re-entered his work, and he was of the opinion that: What approximates most to a new type of money is the East India Company. The stock of this Company is divided into shares like that of the bank. They

John Law and the proposed National Bank of France, 1701–02  97 are traded each day on the exchange and the current price is published for the public’s information in the gazettes.77 A few years later, when Law was proposing a bank in Turin, he continued to compare the shares of the East India Companies with money, and when his own Mississippi Company was established, he viewed these shares as constituting money in their own right, which ultimately led him to monetise them into huge sums.78 On this matter, Murphy stated that: [Law’s] broadened vision as to what constituted a monetary instrument led him to believe that once there was a ready market for a financial asset that enabled traders to determine its value at that point in time when exchange was taking place …, then it could be used as a medium of exchange. Financial markets in generating liquid financial instruments, that is, instruments that possessed the attributes of being turned into cash without loss or delay, were, according to him, in the process of creating new types of monetary instruments. The above statement ends with Murphy proclaiming that ‘Law was one of the first economic writers to recognize this development’.79 If this is the case, then either the anonymous author of the French proposal writing in 1701 had made the same theoretical leap or John Law was that author. Conclusion Despite the 1701 proposals for a French bank and the 1702 letters being in the hand of a copyist – an occurrence that also applies to the 1704 Essay on a Land Bank and that makes determining their provenance difficult – the style and substance of these point unambiguously to the involvement of John Law. We know that Law was in France at the time the scheme was submitted to the French administration, and we know that he held meetings with the ministers tasked with considering the proposal. We also know that the proposals were written by someone for whom French was not their first language and that the letter signed by du Mont was filled with Anglicisms. The proposals also demonstrated less developed forms of Lawian monetary theory. They theorise upon land as a suitable collateral for a paper currency in a way that distinctly foreshadows the theories further defined in Money and Trade Considered. They also included shares and other financial instruments in a broad conceptualisation of the money supply, representing a mode of monetary thought that Law would never shed, and one that Murphy credits the Scotsman with being one of the first to develop.80 While the economic ideas of Law developed quickly, it is suggested here that his writing style was slower to evolve. The form of the French proposals, particularly the more fully formed Memoire pour l’Etablissement d’une banque publique, closely resembled how Law set out his economic proposals during the first decade of the eighteenth century. Multiple chapters, each defining a specific section of

98  John Law and the proposed National Bank of France, 1701–02 the overall proposal, underpinned by examples, while not a singularity of Law, represents a framework within which he worked during this period. The similarity in linguistic turns of phrase is also apparent. The du Mont letter when describing paper money provided the same, if less developed, list of benefits. And when Law described the benefits of the Bank of Amsterdam in 1705, this could almost have been lifted word for word from the proposal of 1701.81 It is clear, however, that Law was not working alone. At least two others were involved, possibly a Frenchman and possibly the Danish, Thor Møhlen, who had previously issued paper money in Norway-Denmark and lobbied Louis XIV on a bank in 1699. The du Mont letter also indicated some English partners. While the ideas represented in the work are not as fully formed as Law’s later works, nor are they as radical as his experiments in France between 1716 and 1720, they are significant for two reasons. Firstly, they provide us with a starting point from which to understand his later financial ideas. In the proposals and the du Mont letter, we can see Law starting to define concepts that would remain tenets of his monetary theory for the rest of his career. Secondly, the 1701 proposals represented the first time in French financial history that a financial institution of this type, a note-issuing bank of deposit, was ever proposed, and John Law was the man at the centre of it. Notes 1 Du Mont letter, Bibliothèque Mazarine Ms.2342/5/3, p.198 2 Mémoire touchant les monoies et le commerce’, 1706, Paris: Archives nationales, 1468, ms. 113, fo. 7; ‘Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent’, (Paris, 1707); and A. E. Murphy, ‘John Law’s proposal for a bank of Turin (1712)’, in Economies et Sociétés, Série Oeconomia, Vol. 15, (1991), pp.3–29 3 Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.38 4 Ibid, p.37 5 Ibid, p.61and p.114 6 J. Law, Essay on a Land Bank; A. Murphy (ed), (Dublin, 1994), p.63 7 E. J., Hamilton, ‘The Political Economy of France at the Time of John Law’, in The History of Political Economy,Vol. 1., No. 1 (Spring, Durham, NC, 1969), p.145 8 Murphy, John Law, p.164; The company then became the Compagnie Perpetuelle des Indes in 1719 9 F. R. Velde, ‘John Law’s System’, in The American Economic Review, Vol. 97, No. 2, (May, 2007), p.277 10 Murphy, John Law, pp.188–191 11 Ibid, p.212 12 Ibid, pp.211–212 13 Ibid, p.224 14 Ibid, pp.244–264 15 Ibid, p, 246 16 Murphy, John Law, p.313 17 A. E. Murphy (ed), and J. Law, John Law’s ‘Essay on a Land Bank’, (Dublin, 1994) 18 Murphy, Essay on a Land Bank, pp.18–19 19 Bibliothèque Mazarine Ms.2342; Ms.2342/5/1, p.185; Ms.2342/5/2, p189; and Ms.2342/5/3, p.193 20 Murphy, John Law, p.44

John Law and the proposed National Bank of France, 1701–02  99 21 Harsin, Crédit Public et Banque d’Etat en France, (Paris, 1933), p.29 and p.35 22 P. Harsin, Œuvres complètespubliées pour la première fois par, (Paris, 1934). Harsin did, however, publish the works in the 1933 work, Crédit Public et Banque d’Etat en France, du XVIe au XVIIIe siècle, (Paris, 1933)¸ but did not attribute these to Law. 23 Hamilton, ‘The Political Economy of France at the Time of John Law’, in The History of Political Economy, (Spring, Durham, NC, 1969), p.141 24 E. Faure, La Banqueroute de Law, (Paris, 1977), p.31; See appendix 2, ‘L’affaire Olivier Du Mont’, pp.640–644 25 G. Rowlands, Dangerous and Dishonest Men: The International Bankers of Louis XIV’s France, (Basingstoke, 2014), p.226 26 E. Ladurie, Times of Feast, Times of Famine: A History of Climate since the Year 1000, (New York, 1971), p.68; and E. L., Jones, The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia, (Cambridge, 1981), p.30 27 D. Onnekink, ‘The Last War of Religion? The Dutch and the Nine Years’ War’, in D. Onnekink (ed), War and Religion after Westphalia, 1648–1713, (Farnham, 2009), p.69 28 Hamilton, ‘The Political Economy of France …’, p.124 29 J. S. Bromley (ed), The New Cambridge Modern History: The Rise of Great Britain and Russia, 1688–1715/25, (Cambridge, 1971), p.302 30 J. A. Lynn, ‘Recalculating French Army Growth during the Grand Siecle, 1610–1715’, in French Historical Studies , Vol. 18, No. 4, (Autumn, 1994), p.881 31 These have normally been dated as in 1702, with the copyist stating so in the margin of the manuscript. However, with the appearance of follow-up letters in January and February 1702, the proposal must have been submitted to the French administration at some point during 1701; Harsin, Crédit Public et Banque d’Etat en France, p.33 and p.29 32 Harsin, Crédit Public et Banque d’Etat en France, p.30, the largest subscription permitted was to be 50,000 livres, while the smallest was set at 3,000 33 Mazarine Ms. 2342/5/4, Memoire au sujet de l’Etablissement d’une banque en France, p.209 34 Ibid, p.211 35 Mazarine Ms.2342/5/1, pp.185–188; Ms.2342/5/2, pp.189–193; and Ms.2342/5/3, pp.193–201 36 Mazarine Ms.2342/5/1, p.185 37 Harsin, Crédit Public et Banque d’Etat en France, p.27. At present these proposals remain lost, but 1703 would see Austria’s first attempt at founding a national bank, the Banco del Giro, indicating such matters were being discussed at this time. See W. Roberds and R. Velde, ‘Early Public Banks’, a paper given to a conference on Money in the Western Legal Tradition, (Cambridge, 2012), p.69–71 38 P. Harsin, Crédit Public et Banque d’Etat en France, p.26 39 P. J., Charliat (ed), J. Thor Möhlen, Mémoires inédits de thor Möhlen à la Cour de France (1699): précédés d’une introduction sur “Les relations économique entre la France et le Nord de l’Europe septentrionale à la fin du 17ème siècle, (Paris, 1927) 40 G. S. Cuhaj, Standard Catalogue of World Paper Money, General Issues, 1368–1960, (Lola, WI, 2014), p.1288 41 D. Goldberg, ‘Paper Money, 1450–1850, in D. Coffman et al. (eds), The Atlantic World, (New York, 2015), p.477 42 Möhlen, Mémoires inédits de thor Möhlen à la Cour de France 43 Du Mont letter, Mazarine Ms.2342/5/3, p.197 44 Harsin, Crédit Public et Banque d’Etat en France, p.26 45 Law, Money and Trade Considered, p.153 46 Ibid 47 Murphy, John Law, p.43 48 Ibid, p.35 49 Ibid, pp.41–43

100  John Law and the proposed National Bank of France, 1701–02 50 51 52 53 54 55

Mazarine Ms.2342/5/1, p.185 ibid, p.26 Murphy, John Law, p.35 and p.44 ‘I am not the author’, Mazarine Ms.2342/5/2, p.190 Mazarine Ms.2342/5/1, p.186 J. B. Massillon, Memoires de la minorite de Louis XV, (Paris, 1792), cited in Harsin, Crédit Public et Banque d’Etat en France, p.28 56 Harsin, Crédit Public et Banque d’Etat en France, p.34 57 Law is still used in Scotland today, such as Dundee Law, or the Sidlaw Hill sin Perth and Angus; “Law n.2”. Dictionary of the Scots Language. 2004. Scottish Language Dictionaries Ltd. Accessed 5 Dec 2016 http://www.dsl.ac.uk/entry/snd/law_n2; Rowlands also makes this possible link, Rowlands, Dangerous and Dishonest Men, p.226 58 V. Montano, ‘und Bankprojekt des Vincenzo Montano’, s.d., AT-OeStA/FHKA SUS versch. Vorschläge 20 Finanz- Österreichische Staatsarchiv 59 Mazarine Ms. 2342/5/4, Mémoire au sujet de l’Etablissement d’une banque en France, p.203 60 Harsin, Crédit Public et Banque d’Etat en France, p.26 61 R. Schofield, ‘British Population Change, 1700–1871, in R. Floud, and D. McCloskey (eds), The Economic History of Britain Since 1700: 1700–1860, (Cambridge, 1994), p.93, pp.60–95; and D. B. Grigg, Population Growth and Agrarian Change: An Historical Perspective, (Cambridge, 1980), p.191, (France is quoted as 19 to 19.5 millions) 62 See J. Law, Money and Trade Considered; and Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, (Paris, 1707) 63 Murphy, John Law, p.41 64 Law, Money and Trade Considered, p.36 65 Mazarine Ms. 2342/5/4, Mémoire au sujet de l’Etablissement d’une banque en France, p.203/4 66 Law, Money and Trade Considered, p.36; and Mazarine, Ms. 2342/5/5, Memoire pour l’Etablissement d’une banque publique, p.213 67 Law, Money and Trade Considered, p.85 68 Mazarine Ms.2342/5/3, p.197–198 69 Ibid, p.199 70 See ‘Mémoire touchant les monoies et le commerce’, 1706, Paris: Archives nationales, 1468, ms. 113, fo. 7 71 Murphy, John Law, p.113 72 Mazarine Ms. 2342/5/3, p.196 73 Ibid, p.227 74 Law, Money and Trad Considered e, p.70 75 J. Law, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, (Paris, 1707) – Faure makes the connection between the 1702 proposal and the 1707 mémoire, but fails to consider Money and Trade Considered 76 Law, Essay on a Land Bank, Murphy (ed), p.63 77 Law, Mémoire Pour Prouver qu’une Nouvelle Espece de Monnaie Peut Etre Meilleure que l’or et l’argent 78 Murphy, John Law, p.61 79 Ibid 80 Ibid, p.61 81 See fn 64–65

Primary sources Anon, Memoire pour l’Etablissement d’une banque publique, pour le bien et commodite du commerce, et en veu de rendre l’argent commun en France, Ms. 2342/5/5, (Paris, 1701) ———, The ‘du Mont’ letters, Ms.2342/5/1; Ms.2342/5/2; and Ms.2342/5/3, (Paris, 1702a)

John Law and the proposed National Bank of France, 1701–02  101 ———, Memoire au sujet de l’Etablissement d’une banque en France, Ms. 2342/5/4, (Paris, 1702b) Law, J., Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705) ———, Mémoire touchant les monoies et le commerce’, g/7/1468 Ms.113, (Paris, 1706) ———, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, g/7/1468 Ms.114, (Paris, 1707) ———, Mémoires sur la Monnaie, in Recueil de mémoires sur les monnaies au commencement du XVIIIe siècle, Français 11159 Montano, V., ‘und Bankprojekt des Vincenzo Montano’, s.d., AT-OeStA/FHKA SUS versch. Vorschläge 20 Finanz- Österreichische Staatsarchiv Recueil de mémoires concernant la banque de Law et différentes banques étrangères. (17161717), Français 7768 Secondary sources Faure, E., La Banqueroute de Law, (Paris, 1977) Grigg, D. B., Population Growth and Agrarian Change: An Historical Perspective, (Cambridge, 1980) Jones, E. L., The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia, (Cambridge, 1981) Ladurie, E., Times of Feast, Times of Famine: A History of Climate since the Year 1000, (New York, 1971) Massillon, J. B., Memoires de la minorite de Louis XV, (Paris, 1792) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) Roberds, W., and R. Velde, ‘Early Public Banks’, (working paper available at https://papers. ssrn.com/sol3/papers.cfm?abstract_id=2580358) Rowlands, G., Dangerous and Dishonest Men: The International Bankers of Louis XIV’s France, (Basingstoke, 2014) Edited collections and journals Bromley, J. S., (ed) The New Cambridge Modern History: The Rise of Great Britain and Russia, 1688–1715/25, (Cambridge, 1971) Charliat, P. J., (ed), Thor Möhlen, J., Mémoires inédits de thor Möhlen à la Cour de France (1699): précédés d’une introduction sur Les relations économique entre la France et le Nord de l’Europe septentrionale à la fin du 17ème siècle, (Paris, 1927) Cuhaj, G. S., (ed), Standard Catalogue of World Paper Money, General Issues, 1368–1960, (Lola, WI, 2014) Goldberg, D., ‘Paper Money, 1450–1850, in Coffman, D., et al., (eds), The Atlantic World, (New York, 2015), pp.171–190 Hamilton, E. J., ‘The Political Economy of France at the Time of John Law’, in The History of Political Economy, Vol. 1, No.1 (Spring, Durham, NC, 1969), pp.123–149 Harsin, P., Crédit Public et Banque d’Etat en France, du XVIe au XVIIIe siècle, (Paris, 1933) ———, Œuvres complètes publiées pour la première fois par, (Paris, 1934) Lynn, J. A., ‘Recalculating French Army Growth during the Grand Siecle, 1610–1715’, in French Historical Studies, Vol. 18, No. 4 (Autumn, 1994), pp.881–906 Murphy, A. E., ‘John Law’s Proposal for a Bank of Turin (1712)’, in Economies et Sociétés, Série Oeconomia, Vol. 15 (1991a), pp.3–29

102  John Law and the proposed National Bank of France, 1701–02 ———, The Evolution of John Law’s Theories and Policies 1707–1715’ in The European Economic Review, Vol. 35, Issue 5 (July, 1991b), pp.1109–1125 ———, (ed), and Law, J., John Law’s ‘Essay on a Land Bank’, (Dublin, 1994) Onnekink, D., ‘The Last War of Religion? The Dutch and the Nine Years War, in Onnekink, D., (ed), War and Religion after Westphalia, 1648–1713, (Farnham, 2009), pp.69–88 Schofield, R., ‘British Population Change, 1700–1871, in Floud, R., and McCloskey, D., (eds), The Economic History of Britain Since 1700: 1700–1860, (Cambridge, 1994), pp.60–95 Velde, F. R., ‘John Law’s System’, in The American Economic Review, Vol. 97, No. 2 (May, 2007), pp.276–279

6

For the want of ‘scots projects’ Scottish financial actors and Scottish financial institutions after 17071

Following the boom of joint-stock offerings in the early 1690s and the establishment of the Company of Scotland and the Bank of Scotland in 1695, the Scottish economy struggled. The second half of the decade brought famine and financial problems, which were compounded further by the loss of Darien in the opening years of 1700. The financial literature focused on currency and credit that emerged during 1705 was an attempt to address these issues through the capitalisation of the Scottish economy. However, rather than implementing one of the proposals made at this time, many of Scotland’s parliamentary representatives already had one eye on union with England as the solution to the country’s economic problems.2 In the short term, however, this was not to be the case. While the parliamentary union provided security for the legal, educational, and religious frameworks of Scotland, it also signalled the end of a sovereign parliament in Edinburgh. From 1707, Scottish representatives were required to take their seats at the Palace of Westminster in London, with their numbers cut from a total of 225 representatives to 45 members of parliament and 16 peers.3 In addition, Union legislation stipulated that the Company of Scotland, the nation’s grand endeavour of the 1690s and the institution behind the attempt to establish a colony at Darien, was to be wound up. The new British government implemented a firm rule in Scotland, hoping to subdue a nation that had gained a reputation for unruliness throughout the preceding century, and when this was a success, it became largely apathetic to events north of the border.4 In the years which directly followed 1707, a void developed in Scottish ­political society as elites decamped south to London and the country continued to lose its institutions. The Scottish Privy Council was first in 1708. This group dealt with the day-to-day running of the country and had existed in Scotland since at least the thirteenth century, developing out of the king’s council. Following the Union of the Crowns in 1603, the Privy Council became particularly important in the governance of Scotland. James VI & I, while sitting in England, boasted, ‘here I Sit and govern with my pen. I write it and it is done; and by a clerk of the Council I govern Scotland now, which others could not do by the sword’.5 The Privy Council was a group that might, given the chance, have influenced the British administration to legislate more favourably for Scotland, but instead it was abolished.6 Then in 1709, the Scottish Mint, an institution that had operated since the twelfth century, struck its last coin. This had been ostensibly protected by the Union agreement, DOI: 10.4324/9781003284819-6

104  For the want of ‘scots projects’ which stipulated the ‘Mint shall be continued in Scotland, under the same Rules as the Mint in England’. This did, however, hinge heavily on the caveat that the Mint would be ‘subject to such Regulations and Alterations as her Majesty, her Heirs or Successors, or the Parliament of Great-Britain, shall think fit’.7 Operating the institution within a British framework proved difficult, and despite maintaining its permanent officials until 1817, the Scottish Mint did not produce another coin after 1709. In the medium term, Scotland’s integration into the British state was a slow process and only began to take significant steps forward from the 1740s.8 Prior to this, there were challenging periods for the relationship. In 1713, an attempt to dissolve the Union was made by a group of Scottish representatives at Westminster. A repeal bill was brought before the House, citing the Malt Tax and various constitutional issues, including the abolition of the Scottish Privy Council and the bar on Scottish peers’ being peers of Great Britain, as cause for the move. The ballot was close, with the Union saved by just four votes.9 A year later in 1714, there was significant political upheaval with the death of Queen Anne and the subsequent Hanoverian Succession. The reader will remember from Chapter 2 that this had been a point of enmity in Anglo-Scots affairs since 1701. This marked the end of the Stuart line and conferred the thrones of Britain and Ireland upon George, Elector or Hanover, Anne’s closest Protestant relative. In the mix with these constitutional and political matters, Jacobite tensions simmered barely beneath the surface, erupting into unrest in 1715. A series of riots then took place during the 1720s, driven by food prices, the enclosure of common lands, and the Malt Tax. The decades that followed the Union, therefore, represent a period of significant political change punctuated by periods of significant unrest. As this book has so far demonstrated, in the years immediately prior to 1707, proposals for new financial projects gained little traction in Scotland. The unwillingness displayed by the Scottish Parliament in 1705, as it rejected the economic proposals laid before it, was then matched by the apathy of the British Parliament after 1707. This stunted the development of the Scottish Financial Revolution at home. Within these challenging circumstances, however, Scottish financial actors still involved themselves in British financial markets and with British financial institutions. How they functioned depended upon whether they were operating in Scotland or in England, and on whether their work brought them into contact with the British state. To demonstrate this, this chapter provides a case study of four men involved in financial matters during the first quarter of the eighteenth ­century and considers the choices they made during this period. They are London-based Scot Andrew Drummond, founder of Drummond’s Bank; his kinsman, John Drummond, a merchant-banker with business interests on the continent and an impressive list of connections; Charles Maitland, the Earl of Lauderdale and General of the Scottish Mint between 1714 and 1734; and Patrick Campbell of Monzie, a prominent advocate and later a judge of the Scottish Court of Session. Through their stories, we can understand the challenges faced by Scots who wished to invest or operate in Scotland post-Union and how members of the diaspora participated in the financial sphere within a British framework.

For the want of ‘scots projects’  105 Andrew Drummond and Drummonds Bank Legend has it that as a young man, Andrew Drummond walked from Edinburgh to London with a knapsack laden with Jacobite money and a handsome Malacca cane in his hand. The story may have a kernel of truth, but verifying it is difficult. The cane in question certainly appeared in two later portraits of Drummond by German painter Johan Zoffany. It is likely, however, that the cane was purchased from a fashionable boutique after Drummond’s arrival in London, rather than being brought south in his youth.10 That he carried Jacobite money is not beyond the realms of possibility. The Jacobite cause was one which resided close to home. When Drummond was less than two years old, his father was imprisoned in Stirling Castle for supporting the exiled James VII. James, the last Catholic monarch of Britain and Ireland, had been removed from the throne as part of the Glorious Revolution of 1688–89, replaced by his Protestant daughter Mary and her husband William of Orange. It is from Jacobus, the Latin for James, that Jacobites take their name. Drummond’s father spent three years in the castle before being released in 1692 ‘on proof that his mind was deranged’.11 Drummond’s younger brother William, viscount of Strathallan, continued his father’s convictions and played a prominent role in the Jacobite uprisings of 1715 and 1745. He was among the first to raise the Stuart standard in 1715, and in 1745, he commanded Jacobite forces remaining in Scotland, as the uprising’s leader Charles Edward Stuart attempted to conquer England.12 William died at Culloden in 1746. It is therefore possible that Jacobite money contributed to the weight on Drummond’s back as he took the long journey south. Drummond was apprenticed as a goldsmith in Edinburgh, and when he opened his London business in 1712, that was his trade. By September 1717, the business had developed and was then offering banking services. This transition was common among goldsmiths during the second half of the seventeenth century, as many began to take deposits and lend money before such practices were termed as ­banking.13 In the decades prior to the Glorious Revolution, goldsmith-bankers became central to the development of new financial instruments and practices, transforming the business of banking in England and Scotland in the process. They accepted deposits, they made loans and discounted bills, and perhaps most ­crucially, they issued promissory notes, a written promise to pay a stated sum to a specific person or the bearer on demand or upon a specified date.14 In London, between 1670 and 1688, there was a rapid entry into the business of being a ­goldsmith-banker, with 61 new enterprises commencing business during these years. This was, however, met with an almost equally rapid rate of exit, as 47 businesses departed from the market, with seven going through the legal process for bankruptcy, during the same period.15 Drummond’s development from goldsmith to banker was therefore commonplace for the time. Drummond’s decision to operate from London was an astute choice for the period. While those at the centre of political and commercial life had always been drawn towards the seat of power, at this time London was beginning to dominate the political and commercial spheres in a way that it had previously failed to do.

106  For the want of ‘scots projects’ This had begun with the Union of the Crowns in 1603, as James VI of Scotland’s ascension to the English and Irish thrones drew the greater nobles of Scotland to London. The process then expanded greatly following the Union of 1707, as gentry from throughout the newly merged countries migrated to the capital. Whether this was to take their seat in parliament, to seek office at court, to order their legal or business affairs, or to arrange a suitable (and preferably profitable) marriage for their offspring, London was indeed the place to be.16 The original premises of Drummonds Bank were on the east side of Charing Cross, chosen for their proximity to the mansions of the Scottish aristocracy in ‘the Scottish heart of London’.17 There Drummond avoided the competition of the commercial centre of London and instead operated an almost complete monopoly of ­financial services in the nominal Scottish colony.18Scottish residents living in London saw the security and convenience of moving part of their wealth with them, and Drummond positioned himself well to provide financial services to his ­countrymen. In the beginning, the bulk of his banking clients were Scots. The men who are the subjects of this chapter, John Drummond, Lauderdale, and Monzie, were all account holders at the bank. Other notable Scots included James Graham, 1st Duke of Montrose, keeper of the signet and secretary of state under George I, and William Murray, lord Nairne, a man who like Andrew’s brother, William, was one of the first to raise his standard in support of Stuarts in 1715.19 The bank was not exclusively a Scottish clique, however, and as the business developed, accounts were opened by prominent Englishmen. Even George III and his son, the future George IV, were account holders at the bank.20 Such illustrious clientele was a far cry from Drummonds’ modest beginnings. Legend has it (yes another one) that a sailor who visited the bank with an order for £20 prize money saw the humble establishment and offered to take just £5 on account and to return for the remainder in a month or two once business had improved.21 Despite such apparently unassuming beginnings, Drummond made the not unsubstantial profit of £315 10s 4d. in his first year as a banker.22 His first account holder was John Gordon, a Scottish regimental agent who transacted over £28,000 in business via the bank in the 12 months following September 1717.23 During this period, Drummond paid Gordon just over £113 in commission for his business. This sum was equal to more than a third of Drummonds’ profits for the first year, but it was through men with military links like Gordon that the bank made its money and expanded its business in the early years. The bank benefitted greatly from a change in government policy that came in the aftermath of the War of the Spanish Succession (1701–13). After having reduced the size of the British forces, a process driven by concerns that troops might turn their support to the Jacobite cause in peacetime, George I decided to reform the mechanisms by which military payments were made. In his determination to increase military efficiency, a new system, whereby officers found their discretionary income and their range of financial actions severely curtailed, was introduced. Army officers became accountable to government pay officers. Lieutenant colonels and colonels were key to the system’s operation, and to ease the administrative

For the want of ‘scots projects’  107 burden, they often delegated some, or all, of their regiment’s finances to an agent, such as John Gordon. And when it was time to pay soldiers or make reimbursements for weapons or uniforms, then that agent used a banker, such as Andrew Drummond.24 Agents like Gordon and colonels of British regiments, therefore, formed a large part of the fledgling bank’s business.25 Indeed, a significant sum of military money moved through Drummonds Bank. It is in fact difficult to go more than a page or two in the bank’s ledgers without coming across a captain, major, brigadier, or other military rank that was utilising the bank’s services. It is important to understand that Drummonds Bank was not one among ­hundreds operating in the capital. It has been calculated that between 1701 and 1726, only six new goldsmith-bankers began operation, during which time 33 ceased business.26 By 1725, only 24 private banks were operating in London.27 These private enterprises operated alongside the Bank of England (BoE), an institution that had seen its dominance grow in the opening decade of the eighteenth century. This was after a 1708 Act, prohibiting groups of more than six individuals from undertaking banking business in England, was passed in the British Parliament. This restricted the amount of capital that could be raised by any new bank to the six individuals and meant that the bank enjoyed a monopoly on jointstock banking until the opening decades of the nineteenth century.28 The bank also held a monopoly on issuing banknotes. These came to be accepted across Britain, with around £3 million in circulation by 1720, increasing throughout the eighteenth century to reach £13.5 million by 1795.29 Goldsmith-bankers still issued paper in the form of receipts in small amounts, but did not compete with the notes issued by the BoE. Instead, they dealt extensively in mortgage securities, an area in which the BoE rarely operated, while also being more active in the discounting of BoE notes.30 That there were multiple banking spheres operating concurrently with one another, with enough room for everyone to manoeuvre, was therefore a feature of early London banking. In London, Drummond was able to access financial opportunities that, certainly in the years directly following the Anglo-Scots Union, far outweighed those available in Edinburgh. His business did not operate in any remarkable way; money was lent, notes were cashed, lottery tickets sold, and the goldsmith business operated as one might expect, with some diamonds also being traded. What is, however, interesting is the account holders that operated around Drummonds. This was a group composed of noblemen, merchants, politicians, financiers, and military agents, often with converging financial interests. Drummond’s decision to establish his business in London, rather than in Edinburgh, allowed him to operate within this sphere and to benefit from the lucrative business of the expanding fiscal-military state. ‘Honest’ John Drummond: Merchant, banker, and diplomat In 1720, John Drummond complained of the lack of ‘scots projects’ in which to invest.31 While he wished to speculate in Scotland, the opportunities just did not exist. Drummond had spent much of the preceding three decades outside of the

108  For the want of ‘scots projects’ country, whether this was as a merchant, a banker, a foreign agent, or a diplomat, and had not been short of opportunities. He had been sent to Utrecht in 1691 at the age of 15, before heading to Amsterdam two years later to train for a commercial career. Following his apprenticeship, he became a partner in a merchant business in the Dutch capital in 1702, trading in the import of luxury goods and often providing banking services.32 In 1705, Drummond then made perhaps his most important business and personal connection. This was with James Brydges, later the Duke of Chandos, with Drummond assisting Brydges in the purchase of several paintings and books in the Netherlands.33 Brydges was a man of means, and between 1705 and 1713, he held the office of paymaster of the queen’s forces, making £600,000 for himself during his time in office.34 Through his relationship with Brydges, Drummond was soon drawn further into the economy of the British fiscal-military state.35 The two went on to be lifelong friends, with Brydges becoming a crucial ally to Drummond during difficult points in his life. Brydges connections and interests were far reaching, and Drummond became central in controlling these. Drummond’s links to the British administration – which may in part account for the military money moving through Drummonds Bank, with Brydges also holding an account there –did not, however, stop with Brydges. He corresponded with several central figures of the period. One of these was John Churchill, Duke of Marlborough, who, in a letter to Drummond in 1711, asked the Scotsman to put in a good word with the new British administration in London and to converse ‘­frequently with the persons whose friendship and confidence it is so necessary for me (Marlborough) to preserve and improve’.36 Marlborough’s belief that Drummond could assist was not misplaced and indicates Drummond’s influence by this time. Drummond had links to the leader of the new government, Robert Harley, Earl of Oxford, who had used his influence in 1704 to see that Drummond was awarded a government contract for selling Cornish tin.37 Since that time, Drummond had been providing reports on Dutch finance and trade to Oxford, as well as acting as unofficial agent to Henry St. John, Viscount Bolingbroke, and Oxford’s right-hand man for a spell.38 Also among Drummond’s network of correspondents was preeminent mathematician and physicist Isaac Newton. Newton was Master of the English Mint between 1699 and 1727, during which time Drummond provided him with information on the price of German, Dutch, and East Indies tin from his Amsterdam base.39 Drummond also offered financial services to Tory merchant and financier Edward Gibbon, a man, who like Brydges, had become wealthy through war, ­acting as a remittance contractor to the Ordnance Office for the artillery train during the military campaigns of William II & III.40 Drummond and Gibbon later became deeply involved with the London Society for the Subscribed Equivalent Debt – a group that represented London-based holders of Equivalent debt owed since the Union of 1707 and one to which we shall return to in detail in the following chapter – with both men becoming part of the first directorship of the society in the late 1710s.41 While Drummond considered Oxford to be his chief patron, certainly during the reign of Anne (1702–14), it was Brydges who offered some of the most lucrative financial deals.42 He became involved in all aspects of Brydges affairs, procuring

For the want of ‘scots projects’  109 artworks and luxury goods, as well as providing financial services. In August 1708, Brydges gave Drummond’s company the contract to supply cash to British prisoners of war, with the money being funnelled through French agents.43 Drummond did not approve of men lining their own pockets through war if this was ‘ruthlessly done’ at the expense of Britain or her allies, a moral stand for which he earned the moniker ‘Honest John’.44 He did, however, provide detailed news from the continent of the progress of peace negotiations in regular correspondences with Brydges during the War of the Spanish Succession (1701–13), information that Brydges then used to buy and sell stock accordingly.45 Later, when Drummond was in Paris, he invested heavily for Brydges in John Law’s Mississippi scheme; Brydges was already liquidating his stock by the close of 1720, but was still caught up in the bubble’s collapse.46 Drummond also acted as a representative of the South Sea Company while in the French capital and became a confidant of Law, as well as Thomas Pitt, Jr., Lord Londonderry, a prominent speculator of the period and another account holder at Drummonds Bank.47 Drummond was clearly well connected, yet despite extensive financial ­contacts to some of the major figures of the period, his own merchant business was in decline by 1712. Bankruptcy followed, and his intelligence work for the British ministry ceased. Prior to this, it had been expected that he would take up the role of deputy paymaster to Brydges. If that was to happen, Drummond was required to pay a security of £30,000, a sum that, due to his financial problems, was well beyond him. In 1712, he confided in a close friend that he hoped the ‘kindness and compassion’ of his ‘great friends’ might come to his rescue.48 His ‘great friends’ included an intimate circle comprised of Brydges; John Campbell, 2nd Duke of Argyll; and Sir Matthew Decker, one of the richest men in London and a man deeply involved with the South Sea and East India companies.49 Drummond’s hope that they might come to his rescue was therefore not beyond their means. When assistance came, it was through Bolingbroke, a man who was keenly aware of Drummond’s worth.50 In 1711, he had acknowledged that Drummond’s assistance in government business overseas had ‘been of more advantage to the Queen’s affairs, than all her ministers have done for her, who are very numerous and very expensive’.51 Bolingbroke saw that Drummond was granted a commission in March 1713 to participate in the Utrecht negotiations, the series of discussions that aimed to end the War of the Spanish Succession. There he was to act on behalf of British trade interests in discussions with envoys representing the Dutch Republic. The Scotsman’s knowledge of Dutch trade meant that he was perfectly placed to advance the British interest. Drummond appeared to be suited to the role, much to the chagrin of his Dutch friends who were surprised by the way in which he pressed the British case during the negotiations. The possibility that Drummond would be installed as consul at Ostend or as resident at Brussels was discussed, yet despite his part in the successful negotiations to end the war, neither office materialised.52 During this period, Drummond was becoming concerned at the political rivalry emerging between Oxford and Bolingbroke. He had initially dismissed rumours of a split between the pair in 1712 as ‘malicious inventions’ by English opposition party representatives in Utrecht, but he soon knew this not to be the case.53

110  For the want of ‘scots projects’ The rancour between the two, which had been simmering since 1710, boiled over into open hostility in 1713. Peace on the continent had set in motion war between the two men, with the common ground on which they had stood during peace negotiations now beginning to shift.54 Surprisingly, the split elevated Drummond in the eyes of the Dutch, with Anthonie Heinsius, the highest ranking official of the Dutch Republic, seeking to use the Drummond as a channel of contact with Whitehall.55 Internecine conflict aside, with the death of Anne in August 1714 came the end of the Oxford-Bolingbroke administration. The new king, George I, did not favour either man. Both had been deeply involved with the Treaty of Utrecht, which, while ending the war, had been in the new king’s view ‘a betrayal of the allies—of which the electorate of Hanover was one’.56 Oxford was stripped of all offices, and in 1715, he was impeached for his part in the treaty, while the accusation of Jacobitism was also levied against him. He spent time in the Tower of London before being acquitted in 1717. Bolingbroke meanwhile swore an oath to the new king, but by end of August 1714, it was made clear to him that his services were not required. While Oxford had remained to fight his impeachment, Bolingbroke borrowed money from Brydges, now Duke of Chandos, and fled to France. Accusations of treason followed, and Bolingbroke did not return to England until he was pardoned in 1725.57 The fall of Oxford and Bolingbroke, two political patrons of central importance for Drummond, left him in a dangerous position. He had after all played a role in the treaty that was now so objectionable to the Crown. But as Chandos had helped Bolingbroke, he also did the same for his old friend, rescuing Drummond, who discarded the Tories for a Whiggish conversion, following which his position rose considerably.58 He became a director of the Royal African Company in 1722 and of the Royal Exchange Assurance Company in 1726, where he acted as Chandos’ agent in the close network of ‘overlapping directorships and personal connexions’ which governed the company.59 During this period, Drummond also took on a directorship with the English East India Company (EIC), carrying on the role until 1733.60 There he became central to a programme of patronage which saw de facto prime minister Robert Walpole (yet another account holder at Drummonds) utilise the Scotsman and his friends in the EIC in order to reduce the threat of Jacobitism. Drummond, of course, had Jacobite links himself, perhaps most notably with his relation to James VII & II’s ministers, brothers James and John Drummond, the earls of Perth and Melfort, respectively. Indications of this in his immediate ­family, however, cannot be traced, and in his own correspondence, he is clear that his family connections to the Stuart’s meant little to him.61 This aside, at the EIC, he became central in administering a system designed to bring prominent Jacobites in from the cold, dispensing favours not only for Walpole but also for the Argylls.62 This began in the 1720s and continued into the 1770s, well after Drummond had left the company. These favours, which George McGilvary has argued, were ‘used to reintegrate Jacobites into mainstream Scottish life’, saw ‘a number of privileged Scots tainted with Jacobitism’ become EIC proprietors, while others, or their sons, became company employees, crew, or ‘free merchants trading in the east’.63

For the want of ‘scots projects’  111 During the 1720s and 1730s, Drummond’s wealth and importance increased. The patronage system over which he presided stretched from Scotland to the East Indies. His network involved central figures in the British administration and important actors from banking, shipping, and mercantile circles. He patronised over 100 politically powerful Scottish families, personally sending around 50 petitioners into East India posts, always on a quid pro quo basis. When a close friend, the Earl of Morton, boasted that through Drummond he held influence over Walpole, he also made it clear that of the two men, Drummond was the more important to him. Drummond of course owed a lot to Chandos. Chandos had been instrumental in moving Drummond into a position of confidence with Walpole and had made sure that the king thought favourably of him. He also provided support when Drummond later made a move into politics.64 In 1725, Drummond purchased the Quarrel estate near Falkirk, and in 1727, he became a member of parliament for the Perth burghs. The decision to run for office represented an about turn for Drummond, who had declared to Oxford in 1710 that he had no intentions of moving into politics. This was despite Argyll having offered him a seat in ‘his part of the country … [that he] could not accept’.65 By 1727, Drummond had changed his mind and described his election as ‘the first mark … of my country’s regard for me’, stressing his aim to ‘serve his country’ rather than gain personally from the position.66 In Drummond’s new career, he still held the allegiances that had served him so well in the preceding years and returned Walpole’s favour by voting with the administration in all recorded divisions between 1730 and 1740.67 Drummond was successfully returned as a member of parliament unopposed until his death in 1742 at the age of 66. For the five years prior to this, he had once again been deeply involved in diplomatic matters, acting as commissioner in the negotiation of trade agreements with the Holy Roman Emperor and the States General at Antwerp. Upon his death, the banker Andrew Drummond, deemed by John as ‘my true and worthy friend’, was named as sole executor.68 Throughout his life, Drummond was successful in ingratiating himself into important financial networks. Networks comprised of men central to the British administration, including Oxford, Bolingbroke, Brydges, the Argylls, and Walpole. The interests of these men extended to all aspects of the British administration, be that military, colonial, or domestic. A sector that became of crucial importance to Drummond’s network was banking, with the erection of the Royal Bank of Scotland (RBS) in 1727 being driven by members of the group at that time. Drummond, as we shall see in the next chapter, was crucial in the operation that led to the formation of the new bank. Charles Maitland, 6th Earl of Lauderdale and General of the Scottish Mint By the time of the Anglo-Scots Union in 1707, £1 English sterling passed for £12 Scots. The divergence between the two currencies had been increasing during the preceding centuries, but going forward this could not continue. To address this, the

112  For the want of ‘scots projects’ Treaty of Union, comprised of 25 articles covering matters of royal ­succession, law, and representation, provided legislation on the matter of coinage. This stated that ‘from and after the union, the coin shall be of the same standard and value throughout the united kingdom’.69 This began a process of recoinage between 1707 and 1709 in which Scotland’s specie was brought inline in fineness and value with that of England. The Treaty also protected the legal status of the Scottish Mint, allowing it to continue operations with its own administration, under the same rules as the English Mint.70 Ostensibly, the Scottish Mint was therefore protected. The Treaty of Union appeared to place both the Scottish and English Mints on an equal footing and at no point indicated that the Scottish institution was in any way subordinate to its English counterpart.71 Despite this, with Union the status of the Scottish Mint as an independent institution was effectively terminated, and the administration there found it was required to seek approval from the English Mint before it struck any coin. The British administration and the English Mint, particularly Master of the Mint, Isaac Newton, played a central role in overseeing the Scottish recoinage and in the operation of the Scottish Mint going forward. This made it difficult for those in charge at Edinburgh. In 1707, the General of the Mint in Scotland was John Maitland, 5th Earl of Lauderdale. He was the third member of his family to hold the position since the Restoration, with his father Charles having occupied the office for 22 years before a special commission set up to investigate corruption at the institution removed him in 1682.72 Following this, Charles’ eldest son, and John’s elder brother, Richard, lord Maitland, took up the role. An ardent Jacobite, Maitland fought at the Battle of the Boyne on 1 July 1690 and was subsequently banished to France. He was not, however, well received at the exiled Stuart court at Saint Germain and was ejected after disapproving of the king’s ‘extreme Catholic policy’.73 Following Richard’s death in 1695, John took up the office of General at the Mint, overseeing the recoinage and remaining in post until his death in 1710. Though only 22 at the time, John’s son Charles had hoped to take over from his father at the Mint. He was now Earl of Lauderdale, and in August 1710, he wrote to James Erskine, Lord Grange, reminding him that his recently deceased father ‘had all the respect for you imaginable: and would have serv’d you in any thing that lay in his power’.74 Grange, who had recently been made Lord Justice Clerk, one of Scotland’s most senior judges, was an important man, but really it was his brother, John Erskine, the Earl of Mar, that Lauderdale was trying to influence. Mar was Oxford’s principal agent in Scotland, and as such, he would decide who the next General of the Mint would be.75 Lauderdale therefore hoped that he could convince Grange to put in a word with Mar. Lauderdale’s mother also attempted to influence the decision, relaying her hope to Grange’s wife that her son might ‘sucsied his faither in the mint’.76 Neither entreaty was successful, with political manoeuvring on the part of Mar seeing the position conferred upon John Elphinstone, Lord Balmerino, in early 1711.77 Balmerino was a well-established figure, who at the time of his appointment to the Mint was also sheriff of Edinburgh, an elected peer of Scotland, and a commissioner ‘for executing the Office of Chamberlain’.78 Politician and diarist, sir George Lockhart of Carnwath was gushing in his praise

For the want of ‘scots projects’  113 of Balmerino, saying ‘he was a man of excellent parts, improven by great ­reading; being perhaps one of the best lawyers in the kingdom’.79 Despite being held in apparent esteem, his time as General of the Mint was short. In November 1712, Alexander Home, 7th Earl of Home, succeeded Balmerino, before he too quickly lost the office during the political upheaval at the ascension of George I in 1714.80 At this time, the young Lauderdale was finally chosen to fill the position. Lauderdale did not assume the role at an opportune moment. The effect of the recoinage had been detrimental to the domestic economy of Scotland. Mint accounts show that a total 103,346 lb weight of silver was coined between 1707 and 1709, producing coin with a figure of just over £100,000 sterling, a sizeable sum for Scotland.81 The recoinage had, however, followed the English custom of minting no coin smaller than sixpence, and this quickly became an issue for a Scottish economy transacting low-value business.82 When it was discovered that the Mint would not be striking smaller denomination coin, those with commercial interests made representations to the Convention of the Royal Burghs. The Convention, which had existed since at least the thirteenth century, represented all Scottish burghs on matters of taxation and foreign trade. It also lobbied the Crown and Parliament on matters affecting the burghs.83 The issue passed before the Convention on 4 December 1708. The discussion, which was steeped in the language of Union, stated: it being represented to us by severall of our merchants and trading people that it would be of importance to them and to this wholl country of North Britain that some small species of money, such as tou pence, three pence and four pence, were coind to be circulat through this part of the Kingdome84 The Convention decided that the best course of action was for the General of the Mint, which was still John Maitland at this point, to write to Newton and request that ‘a warrand be granted for coining in Scotland a sum not exceeding eight thousand pounds sterling, in tou pence, three pence and four pence pieces’.85 In addition, they directed a letter be prepared from the lord provost of Edinburgh to Newton with the same request. The request was dispatched to London, where it was given due consideration and the measures were approved by the administration in May 1709. Providing the Scottish Mint with a new indenture, the formal contract that would allow it to produce the new smaller denomination coin, proved to be a slow process, and this was not received in Scotland until April 1712. This was despite Newton being directed to prepare the paperwork in July 1710.86 In September 1711, the General of the Mint, now Balmerino, attended a meeting of the Scottish Mint’s officers. Here he promised ‘to lay befor my lord high Treasurer how necessarie it was that the mint should be opened their being severalls that had been offering bullion to be coyned as also anent other matters relating to the said mint’.87 There does appear to have been intent to strike new coins, with dies for groats (fourpence) and half groats (two pence) created in 1711, but these did not materialise. Even in the wake of the new indenture of 1712, proceedings continued to move at a sluggish pace, and by

114  For the want of ‘scots projects’ the time Lauderdale began his tenure at the Mint in November 1714, still no new coin had been minted in Scotland since the end of the recoinage in 1709. In addition to the delay in minting smaller denomination silver coins, the Treasury also refused the Scottish Mint permission to produce new copper coins. This was a ruling particularly felt by the country’s poor, the scarcity having a profound effect on the business conducted at fairs and markets.88 By the middle of the 1710s, Dutch ‘doits’, counterfeit Irish coin, and clipped coins circulated freely in Scotland as a means of alleviating the need for coin.89 Prior to his removal from office in 1682, Lauderdale’s grandfather had illegally struck a significant number of copper coins to aid currency circulation in the country. This has been estimated as being equivalent to £96,000 sterling by 1707, dropping drastically over the next three decades.90 From his time of taking office, the young Lauderdale had lobbied to produce silver coin in Scotland but did little about copper coinage. In 1717, however, he complained to the Duke of Montrose that he had been deprived of ‘the benefite of the copper coinage, which was the only considerable profit belonging to the Generall of the Mint’.91 Despite the apparent self-interest shown by Lauderdale, there was a crippling need, then being met by bad foreign and counterfeit coinage, for small denomination coin in Scotland. By this time, the silver 2d., 3d., and 4d. coin promised in 1709 had still not been struck. By the closing years of the 1720s, the powerful Archibald Campbell, Lord Ilay, had turned his attention to what had now become a crisis. He viewed the situation of ‘false coyning which is spread in a manner all over the country’ as being worse than the shortage of coin that it sought to remedy. He suggested that halfpennies and turners (two pence Scots) should be minted in Edinburgh or London in order to alleviate the need for coin.92 Ilay saw, however, that there were potential problems associated with augmenting the coin stock of Scotland. He feared that if new coinage was forthcoming, then ‘the whole of the loss upon the false money must fall upon the lower sort of the people and the poor which will inevitably produce a great clamour’. Whether such considerations played a part in the English Mint’s decision is unclear, but by 1732 still there had been no new coinage in Scotland since the completion of the recoinage, with Newton’s successor at the Mint, John Conduitt, stating that ‘there [was] no probability of any’.93 Despite the Treaty of Union stating that the Mint was to remain in existence in Scotland, the operation of this institution was problematic. Lauderdale’s official correspondence indicated the difficulty he faced as he tried to operate an independent Scottish Mint under the same rules as its English counterpart, with the former also taking direction from the latter. The relationship between the two bodies was fractious. Putting aside the complications over the minting of new coin, receiving payment for salaries and fees was also an area of friction. This was not, however, a new issue. In early 1708, Daniel Stewart, the Collector of the Bullion for Scotland, had died. Stewart was responsible ‘for defraying the charges of a free coinage [and] paying the salaries of the mint’, and held the funds to do so in a locked chest to which he held the key.94 His death was a problem for the Scottish Mint, and while his executors were working to settle his estate, they refused to release any of the money he had held at the time of his death to the Mint. This was in the middle

For the want of ‘scots projects’  115 of the Scottish recoinage, and the production of new coin slowed considerably. The situation improved somewhat in September of 1708 when Stewart’s executors relented and released a payment of £2,600 to the Mint, allowing salaries to be paid and the minting process to increase.95 By the time Lauderdale took over in 1714, and for much of his tenure, paying salaries at the Mint continued to be an issue. Prior to 1707, £1,200 sterling per annum had been paid net at Edinburgh to cover the cost of salaries at the Scottish Mint and for maintaining the institution. However, following this it was paid gross at London, with deductions made for Treasury and Exchequer fees, as well as the fees involved in remitting the money itself, leaving £1,060 to reach Edinburgh.96 In 1714, the administration at the Scottish Mint appealed to the English Treasury for an increase in funding. Included with their appeal was a report written by Aberdeen-born mathematician, David Gregory on the Scottish Mint, and a list of the roles and associated salaries at Edinburgh.97 Gregory had been a central voice in calculating the Equivalent, the payment intended to compensate Scotland for taking on a proportion of the English national debt and to cover the associated costs of Union, one of which being the recoinage.98 He had been sent from London to supervise the recoinage in Edinburgh and maintained regular contact with Newton.99 Upon receiving the request for an increase in funding, Newton was initially dismissive and highlighted that many of the posts cited by Lauderdale were now redundant. He also took aim the very top of the Scottish Mint’s administration, attacking ‘the salary of the General of the Mint whose Office is useless’.100 Newton did, however, revisit the figures over 1715–16 and suggested a compromise of £1,450 per annum to the Treasury, but this does not appear to have been put into practice.101 That funding had been reduced rankled the Edinburgh administration, but frustration boiled over when even the reduced amount was not being paid by the Treasury. Lauderdale’s father had petitioned Newton in 1709 on the matter, stating: ‘the officers and other servants of her Majestie’s Mint [were] straitned for want of their sallaries and fies especially those who have no other means of subsistance but the fruits of their Labour’. He told Newton that Scotland and England now had ‘the happiness to be of one Society’, and that as Master of the Mint in England, Newton would ‘know the methods of payments made to the officers of their sallaries of her Majesties mint in the Tower, And I humbly Conceive that the same method will be followed [in Scotland]’. Newton was reminded by Lauderdale that ‘it appears to me that both her Majesties Mints in South and North Britain are to be on one foot’.102 Yet by the middle of the following decade, late payments continued to be a problem for his son In the years immediately following the young Lauderdale taking office in 1714, no funds were paid to the Scottish Mint. While the Treasury apparently set aside £5,415 in stages between 1714 and 1720 to cover Scottish operating costs, funding was not paid in the regular manner it had been prior to 1707. The administrative process behind unlocking payments was burdensome and required a formal application for an ‘imprest’ to be made to the Treasury and then referred to the English Mint, with the aforementioned deductions being applied. It was not until 1718 that Lauderdale was authorised to pay the salaries of his staff.103

116  For the want of ‘scots projects’ Lauderdale also complained that the Scottish Mint was no longer in an operational condition and that Scots who had come forward with bullion in ‘­considerable quantitys’ had been ‘oblidged to export it again to Forreign countrys’. He claimed that the Mint’s poor condition was then exacerbated by ‘the want of a fund for defraying the charge of a free coynage’. This in Lauderdale’s view had ‘incapacitate[d] this Mint for accomodating the subjects in Scotland with the small silver coyn of 4 pence and 3 pence peices, which is so necessary and so much wanted in this Country’.104 Atholl Murray, an authority on the Scottish Mint, questioned whether the Mint could have commenced operations without help from London, pointing out that by 1721 the staff in Edinburgh, other than a few officers, had changed wholesale since the time of the recoinage.105 Regardless, Lauderdale pushed for new silver coin, and later for copper coin, with no success. After a trying tenure, Lauderdale was dismissed from office in 1734. The English Mint’s authority over its Scottish counterpart, despite both institutions being ostensibly on an equal footing, had made Lauderdale’s job difficult. It is clear that post-Union, the Scottish Mint was treated with little deference. Newton viewed the position of General of the Mint in Scotland as redundant, and recommended in 1715–16 that the office not be renewed at its next vacancy, as he had similarly done with the role of Collector of the Bullion.106 He had wanted to avoid the salaries at the Scottish mint becoming ‘an annuity without account’.107 Due to the British policy of hindering the operation of the Scottish Mint, this was, however, the eventual outcome. The policy of centralised British control over the Mint meant that those coins produced in 1709 were the last to be minted in Scotland, despite the institution retaining its permanent officials until it was abolished in 1817. Patrick Campbell of Monzie: from speculator to projector While he has rightly been described as ‘one of the most prominent Scotsmen of his time’, Patrick Campbell of Monzie was a man involved with‘numerous financial calamities’.108 Monzie was admitted as an advocate in 1709, and in 1727, he became a judge of the Court of Session, Scotland’s highest civil court. He was also involved in several prominent financial projects between the 1690s and the 1720s, many of which were indeed ‘calamities’.109 Monzie was not, however, a man of poor judgement. He, like the vast swaths of Europeans who involved themselves in the same financially speculative schemes, was keen to invest and to make a return. In 1696, when in his early twenties, he invested £100 in Scotland’s attempt to establish a colony at Darien.110 This was a popular investment choice at the time, with subscriptions being drawn from almost every part of Scotland.111 He invested in South Sea Company stock, which was again a hugely popular contemporary investment. Many South Sea investors came from outwith traditional investment circles, with Patrick Walsh stating that by the time of the South Sea Bubble in 1720, ‘it probably had one of the most internationally diverse investor bases of all contemporary major European joint-stock companies’.112 Similarly, John Law’s Mississippi Company, which through gross over-speculation on the part of Law

For the want of ‘scots projects’  117 also came to a head in 1720, drew on ­subscribers from different social spheres from across Europe, and again, Monzie was one of them.113 Yet, while each of these projects was indeed a financial disaster, Monzie was in no way responsible for them. He, like many others, was just an investor. His involvement in the grand financial schemes of the period does, however, show that Monzie was keen to invest and had an interest in financial projects. While predominantly an investor, Monzie also tested the water as a projector. This was in 1708, when he prepared a proposal for a British land bank.114 The proposal, which exists as a unique manuscript held in the National Library of Scotland, outlined a bank that aimed to raise £1,000,000 through subscription; 1000 shares would be issued, with each subscriber allowed a maximum of 10 shares, with each share secured on land valued at £1,000.115 As stated in Chapter 3, the process of borrowing from a land bank was likened to remortgaging. A landowner could borrow paper notes from the bank secured against their land. These could then be used by the borrower as a circulating credit to pay his or her obligations, in the same way we use banknotes today. This was the foundation of Monzie’s work, which presented the reader with a standard land bank proposal. While the organisation Monzie outlined in his proposal was not remarkable, that the proposal appeared when it did, in the form that it did, was unusual. By 1708, the English land bank debate had been over for more than a decade, all but extinguished by the failure of the National Land Bank in 1696. Meanwhile in Scotland, a flurry of financial projects, including several for land banks, had been rejected by the Scottish Parliament just three years earlier.116 Monzie’s attempt to resurrect the scheme at this time was therefore strange. A second odd aspect of the proposal was that Monzie’s monetary ideas bore a striking similarity to those of John Law. The reader will remember from Chapter 3 that many land bank proposals shared similarities. The writers working in the field read other works on the topic, they synthesised and developed the ideas contained within earlier proposals, and they created something novel. That Monzie would therefore have read Law’s work, particularly Money and Trade Considered, his 1705 proposal for a Scottish land bank is very likely. We would then expect to see Monzie absorbing the ideas of Law before developing his own monetary theory. This was not, however, the case. Monzie appeared in no way to be an original economic thinker. The language utilised and the monetary theory expounded in his 1708 manuscript are so similar to Law’s Money and Trade Considered, that the work can only be described as plagiarism, at least in the sense that the key ideas of Monzie’s work are taken directly from Law. To highlight every similarity between the works would be a time-consuming exercise and would also add little to our understanding of either Law’s work or Monzie’s intentions. What is far more interesting is the question of why Monzie took the time to redraft a proposal that had been rejected just three years earlier? That said, evidence, by way of a few examples from Monzie’s proposal, is required in order to illustrate the parallels in the works.117 The land bank proposals that emerged from different writers in different locations during the second half of the seventeenth century and the beginning of the eighteenth century shared many ideas. In 1705, when Law discussed his belief

118  For the want of ‘scots projects’ that silver had circulated as a currency even before it was manufactured into coin, he stated, ‘[w]hat is mean’t by being used as Money, is, that Silver in Bullion was the Measure by which Goods were valued: The Value by which Goods were exchanged: And in which Contracts were made payable’.118 This was not a unique opinion, but was instead a central tenet of the land bank debate. When Monzie’s therefore similarly stated that ‘money is used as the measure by which goods are valued as the value by [which] goods are exchanged [and] In which contracts are made payable and payments are made’, this is not the smoking gun that signifies piracy.119 Where Monzie’s fraud becomes more apparent is in his definition of a very specific economic concept, the ‘paradox of value’. This theory views a good’s value as being determined not by its usefulness but by its relative scarcity. The question would therefore be, why are luxury goods expensive but useless, while necessary goods are inexpensive? A common example of this is water and diamonds. Why is water, a fundamental necessity of human life, cheap, while diamonds, an all but useless commodity in human survival, are expensive? This example was popularised by Scottish economist and philosopher Adam Smith in his Wealth of Nations in 1776, but he was not the first to identify the paradox or to express it through the commodities of water and diamonds.120 In 1708, Monzie stated in his proposal: The value of goods is rated not as the uses they are aplyed to are more of less necesary but as they are in Quantity in proportion to [th]e demand for them. Water is of necesary use yet of little value because the quantity of water is great in proportion to the demand for it Deamonds are of less necesary use yet of great value because the demand for deamonds is great in proportion to the Quantity of them.121 Three years earlier, Law had used the same examples to describe the paradox, stating: Goods have a Value from the Uses they are apply’d to; And their Value is Greater or Lesser, not so much from their more or less valuable, or necessary Uses: As from the greater or lesser Quantity of them in proportion to the Demand for them. Example. Water is of great use, yet of little Value; Because the Quantity of Water is much greater than the Demand for it. Diamonds are of little use, yet of great Value, because the Demand for Diamonds is much greater, than the Quantity of them.122 The ‘paradox of value’ was not a concept original to Law and can be traced back to classical antiquity in the works of Plato, Socrates, and others. The theory was also popular with early modern writers on economic matters. Prior to Law and Monzie, Dutch polymath Hugo Grotius and German philosopher and theorist Samuel von Pufendorf had both written on the paradox.123 So too had astronomer and scientist Galileo Galilei, Henry VIII’s high chancellor Thomas More, and English thinker, John Locke.124 As the eighteenth century then progressed, the writer Daniel Defoe,

For the want of ‘scots projects’  119 philosopher France Hutcheson, and astronomer and assay master at the Royal Mint, Joseph Harris, all wrote on the paradox.125 The method by which Law expressed the paradox, however, through the commodities of water and diamonds, was wholly original to the Scotsman, later being plagiarised by Monzie and ‘borrowed’ by Smith.126 It may seem to the reader that Monzie is being treated harshly, after all, and as was shown in Chapter 3, Law had been accused of borrowing his land bank model from Hugh Chamberlen.127 And as preeminent financial historian J. K. Horsefield once commented, ‘in the intellectual ferment of the later seventeenth century it is rarely safe to credit any particular individual with originality’.128 In this case, we are considering the early eighteenth century, but the sentiment is the same. Monzie’s proposal was, however, so similar to the key aspects of Law’s Money and Trade Considered, published just three years earlier that it seems inconceivable to suggest that he had not lifted it from there. Law’s 1705 proposal for a Scottish land bank had been discussed at length by the Scottish Parliament, and in Edinburgh society, Monzie with his interest in financial projects could not have failed to be aware of it. The question then is why? What was Monzie hoping to achieve by rehashing a recently rejected financial scheme? Law’s 1705 proposal had not after all been universally popular. The opinions of Scottish parliamentarians had been firmly divided on the merits of the scheme. Significant support had been given by the powerful Argylls, while the devoted patriot, Andrew Fletcher of Saltoun described it as ‘a contrivance to enslave the nation’.129 And, as recounted elsewhere in this book, members of the Scottish Parliament were so at odds over Law’s proposal, that a duel on Leith beach was narrowly avoided.130 With this in mind, we must consider under what agency Monzie was operating when he chose to resurrect Law’s proposal just three years after it has been rejected by in Scotland. One answer may be linked to the Anglo-Scots Union. This had occurred a year earlier and had left many prominent Scots wondering exactly where they now fit within the new British political structure. As the new administration sought to subdue Scotland, those Scots who were elected to the new London Parliament made limited impact in the early years of the union, and by 1714, parliamentary politics in Scotland had been reduced to a ‘spoils system’.131 With a failure to properly integrate Scotland into the British state until the 1740s, many Scots were left to find their own way forward.132 Consequently, Monzie as a ‘projector’ was conceivably attempting to ingratiate himself with the new political establishment, moving beyond the role of investor to stand atop a new financial system. Another answer as to why Monzie resurrected Law’s proposal may be that he believed in the project. Since establishing the Bank of Scotland and the Company of Scotland in 1695, the Scottish Parliament had shown itself to be generally reticent when it came to the establishment of new financial institutions. In 1705, when Law’s proposal was put before the administration, despite some support, it was rejected. The English Parliament and the Crown had meanwhile shown more willingness to back financially innovative schemes; they established a tontine in 1693, a state lottery in 1694, and a short-lived land band in 1696. Therefore, Monzie

120  For the want of ‘scots projects’ perhaps saw the merits of Law’s land bank and viewed the new British Parliament, a body driven by the need to finance its military, as a more willing partner than the Scottish Parliament had been in 1705. In this scenario, he is more advocate and less plagiarist. It appears unlikely, however, that the proposal was ever submitted. Certainly, no parliamentary record between 1707 and 1710 can be found to suggest it was, and only one copy of the proposal appears to exist, held in Edinburgh, and in Monzie’s own hand. It may be that support for the project was lukewarm or possibly Monzie thought better of the plagiarism. Recent legislation had also granted the BoE a partial monopoly on issuing banknotes, with a 1708 Parliamentary Act making it unlawful for companies or partnerships of more than six people to set up banks and issue notes, thus restricting private banks to small partnerships. The focus on the BoE as the bank of the administration perhaps signalled to Monzie that it was not the time to propose a new land bank. Whatever the reason, Monzie would still ascend within important financial networks even without ‘his’ land bank. Over the next 20 years, he rose to prominence. He became an important part of Edinburgh’s Equivalent Society and a director of the Equivalent Company in 1724, before becoming one of the first directors of the RBS upon its formation 1727, holding office for almost quarter of a century. Conclusion The astute reader will have noticed that other than the four men who have been the topic of this chapter, a cast of other names have recurred throughout. The inclusion of important political figures and financial actors of the day – Law, Ilay, Argyll, Walpole, Chandos, Bolingbroke, Oxford, Newton – displays the important connections held by the four Scotsmen at the centre of this narrative. Andrew and John Drummond, Lauderdale, and Monzie were not highlighted solely for this reason. They were selected because they each display different aspects of what it meant to be a Scot involved in the financial world during this period and the challenges that came with it. Each found Scotland in the years immediately post-Union to be a financially challenging landscape. This led some to seek opportunities elsewhere, while others struggled to operate in Scotland within a British framework. When John Drummond voiced his irritation over the lack of ‘scots projects’ in which to invest in 1720,133 this was a frustration indicative of the difficult financial situation in Scotland after 1707, in which financial innovation, financial opportunities, and financial institutions were hampered. Notes 1 ‘John Drummond to William Drummond,’ 11 May 1720, National Records of Scotland (NRS) GD243/437 2 See chapter two; and A. McDiarmid, ‘“Bring us wealth, or keep it among us”: The financial Literature of the Edinburgh Pamphlet War of 1705, and the Capitalisation of the Scottish Economy’; the Scottish Historical Review, Vol. 101, Issue 2, (Edinburgh, 2022), pp.179-209

For the want of ‘scots projects’  121 3 The Records of the Parliaments of Scotland to 1707 (RPS), K. M. Brown et al., eds (St Andrews, 2007–2021), 1706/10/2. Date accessed: 16 June 2021; see sederunt for 3 October 1706 4 T. M. Devine, ‘The Modern Economy: Scotland and the Act of Union’, in T. M. Devine, C. H. Lee, and G. C. Peden (ed), The Transformation of Scotland: The Economy since 1700, (Edinburgh, 2005), p.27. 5 Quote taken from C. V. Wedgwood, ‘Anglo-Scottish Relations, 1603–40’, in Royal Historical Society Transactions, 4th series, Vol. xxxii, (1950), p. 31 6 Ibid 7 Article 16, The articles of Union (1707), available at https://www.parliament.uk/ globalassets/documents/heritage/articlesofunion.pdf 8 J. Hoppit, Britain’s Political Economies: Parliament and Economic Life, 1660–1800, (Cambridge, 2017), p.118 9 Ibid 10 H. Bolitho and D. Peel, The Drummonds of Charing Cross, (London, 1967), p.25 and p.20 11 Ibid, p.20 12 James VII & II died in 1701. After which his son, James Francis Edward Stuart, took on his father’s mantle and drove the 1715 uprising. He did not die until 1766, but by 1745 his son Charles Edward Stuart was at the helm of the movement 13 P. Temin and H.-J. Voth, Prometheus Shackled: Goldsmith Banks and England’s Financial Revolution After 1700, (Oxford, 2013), p.32 14 D. M. Joslin, ‘London Private Bankers, 1720–1785’, in The Economic History Review, New Series, Vol. 7, No. 2, (1954), p.168, pp.167–186, this was in the form of a ‘“drawn note” or cheque’; and F. T. Melton, ‘Deposit Banking in London, 1700–90’, in R. P. T. Davenport-Hines, and J. Liebenau (eds), Business in the Age of Reason, (London, 1987), p.40, pp.40–50 15 Temin and Voth, Prometheus Shackled, p.41; the figures given for 1671 are 29 entries, 11 exits, with 0 bankruptcies; 1678, 10 entries, 23 exits, and 6 bankruptcies; and 1688, 22 entries, 13 exits, and 1 bankruptcy. They state that: each entry shows the number of entrants and exits since the last observation. The last column [bankruptcies] reports that a minority of failed banks went through the legal process of bankruptcy. It was only after the South Sea Bubble of 1720 that rates of entry and exit diminished. 16 J. B. Stewart, Opinion and Reform in Hume’s Political Philosophy, (NJ, 2014), ­pp.227– 228; and Joslin, ‘London Private Bankers’, p.167 17 A. Heal, The London Goldsmith, 1200–1800: A Record of the Names and Addresses of the Craftsmen, their Shop Signs and Trade Cards, (Exeter, 1972), and Bolitho and Peel, The Drummonds of Charing Cross, p.18 18 Bolitho and Peel, The Drummonds of Charing Cross, p.29 19 R. Sunter, (2004–09–23). Graham, James, first duke of Montrose (1682–1742), ­landowner and politician. Oxford Dictionary of National Biography, (Oxford, 2004); P. Hopkins, ‘Nairne, William, styled second Lord Nairne and Jacobite first earl of Nairne (1664–1726)’, Oxford Dictionary of National Biography, (Oxford, 2004); and Bolitho and Peel, The Drummonds of Charing Cross, p.29 20 N. Munro, The History of the Royal Bank of Scotland, 1727–1927, (Edinburgh, 1928), p.331 21 F. G. Hilton-Price, Handbook of London Bankers, (London, 1876), p.158–159, cited in Bolitho and Peel, The Drummonds of Charing Cross, p.17 22 Bolitho and Peel, The Drummonds of Charing Cross, p.29. Calculating this is modern terms is difficult, but it is around £63,000 23 Bolitho and Peel, The Drummonds of Charing Cross, p.29, and Munro, The History of the Royal Bank of Scotland, p.330

122  For the want of ‘scots projects’ 24 Melton, ‘Deposit Banking in London’, p.44/45 25 Ibid, p.44; and P. Winterbottom, (2010, September 23). Drummond, Andrew (1688–1769), goldsmith and banker. Oxford Dictionary of National Biography, (Oxford, 2004) 26 Temin and Voth, Prometheus Shackled, p.41 27 Joslin, ‘London Private Bankers’, p.173 28 Melton, ‘Deposit Banking in London’, p.40 29 The Bank of England Note: A Short History, BoE, (QB 1969 Q2), p.211, pp.211–222 30 Melton, ‘Deposit Banking in London’, p.41. A discount would occur when a paper note issued by a source other than the bank where the note is being presented is bought by the bank at a reduced rate, the full worth of the note then being collected by the bank at a later date. 31 NRS, GD243/437, John Drummond to William Drummond, 11 May 1720 32 G. K. McGilvary, ‘John Drummond of Quarrel: East India Patronage and Jacobite Assimilation, 1720–80’, in A. I. Macinnes and D. J. Hamilton (eds), Jacobitism, Enlightenment and Empire, (London, 2014), p.145, pp.141–158 33 R. Hatton, ‘John Drummond in the War of the Spanish Succession: Merchant turned Diplomatic Agent’, in R. Hatton and M. S. Anderson (eds), Studies in Diplomatic History, Essays in Memory of David Bayne Horn, (Hamden, CT, 1970), p.76 34 J. Johnson, ‘Brydges, James, First Duke of Chandos (1674–1744)’, Oxford Dictionary of National Biography, (Oxford, 2004) 35 A. Graham, Corruption, Party, and Government in Britain, 1702–1713, (Oxford, 2015), p.103 36 W. Fraser (ed), Report on the Manuscripts of Charles Stirling-Home-Drummond Moray Esq. of Blair-Drummond, at Blair Drummond and Ardoch in the County of Perth, (London, 1885), Marlborough to Drummond, 13 Aug. 1711, p.144, cited in Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.70 37 Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.77 38 L. Frey and M. Frey (eds), The Treatise of the War of the Spanish Succession: An Historical and Critical Dictionary, (London, 1995), p.136–137; Bolingbroke was also an account holder at Drummonds Bank 39 Mint 19/3/545, Mint 19/3/577, and Mint 19/3/566, National Archives, Kew, Richmond, Surrey 40 Graham, Corruption, Party, and Government in Britain, p.103, and McGilvary, ‘John Drummond of Quarrel’, p.145 41 Transfer Book for the London Society (for the subscribed Equivalent debt), 1718–1724, Royal Bank of Scotland (RBS), REQ/9, p.11 42 Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.77 43 Graham, Corruption, Party, and Government in Britain, p.104, and B. Cowan, The Social Life of Coffee: The Emergence of the British Coffeehouse, (New Haven, 2008), p.285 44 Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.78 45 Ibid, p.79 46 Graham, Corruption, Party, and Government in Britain, p.234 47 Londonderry had a tangled financial relationship with Law; with the latter also being involved in funding the French regent’s purchase of the Pitt/Regent diamond, a 140.5 carat solitaire, from Pitt’s father, governor Thomas Pitt Sr., see Neal, ‘I am not Master of Events’: the Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles, (New Haven, 2012), for a full account of Law and Londonderry’s complicated financial dealings; and for an entertaining historical fiction treatment of events see J. Baumgold, The Diamond: a Novel, (New York, 2005) 48 J. J. Cartwright (ed), The Manuscripts of His Grace the Duke of Portland, Vol. V, (London, 1899), Drummond’s letter to Harley, 19 Sept. 1711, pp.175–176, cited in Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.90

For the want of ‘scots projects’  123 49 G. McGilvary, East India Patronage and the British State: The Scottish Elite and Politics in the Eighteenth Century, (London, 2008), p.6/7 50 Ibid, p.7 51 G. Parke (ed), Letter and Correspondence Public and Private of the Right Honourable Henry St John Lord Viscount Bolingbroke during the Time He Was Secretary of State to Queen Anne, Vol. I, (London, 1789), Bolingbroke to Drummond 1711, p.57 52 Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.90–91 53 Portland Papers, Vol. V, Drummond to Oxford, 14 Oct. 1712, p. 235 54 B. Coward, The Stuart Age: England, 1604–1714, Fourth Edition, (London, 2014), p.458 55 Hatton, ‘John Drummond in the War of the Spanish Succession…’, p.92 56 W. Speck, (2004–09–23). Harley, Robert, first earl of Oxford and Mortimer (1661– 1724), politician, Oxford Dictionary of National Biography, (Oxford, 2004) 57 H. Dickinson, (2004–09–23). St John, Henry, styled first Viscount Bolingbroke (1678– 1751), politician, diplomatist, and author, Oxford Dictionary of National Biography, (Oxford, 2004) 58 McGilvary, ‘John Drummond of Quarrel’, p.145 59 Graham, Corruption, Party, and Government in Britain, p.235; and McGilvary, East India Patronage, p.46 60 McGilvary, East India Patronage and the British State, p.46; and McGilvary, ‘John Drummond of Quarrel’, p.146 61 McGilvary, ‘John Drummond of Quarrel, p.147 62 A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.68 63 McGilvary, ‘John Drummond of Quarrel’, p.146 64 McGilvary, East India Patronage and the British State, p.40–48 65 J. J. Cartwright (ed), The Manuscripts of His Grace the Duke of Portland, Vol. IV, (London, 1897), Drummond’s letter to Harley, 19 Sept. 1711, p.596 66 Ibid, p.44 67 R. Sedgwick (ed), The History of Parliament: The House of Commons 1715–1754, (Martlesham, 1970) 68 Dr Hatton cited in Bolitho and Peel, The Drummonds of Charing Cross, (London, 1967), p.23 69 Article 16, The articles of Union 1707 70 Ibid 71 A. L. Murray, ‘The Scottish Mint after the Recoinage, 1709–1836’, in Proceedings of the Society of Antiquaries of Scotland, Vol. 129, (1999), p.862 72 R. W. Cochran-Patrick, Record of the Coinage of Scotland: From the Earliest Period to the Union, Vol. 1, (Edinburgh, 1876), p.xxiii; for a full account of the affair see ‘Proceedings against the Earl of Lauderdale and Others, for Official Malversations’, in T. B. Howell (ed), Cobbett’s Complete Collection of State Trials and Proceedings for High Treason and Other Crimes and Misdemeanours from the Earliest Period to the Present Time, with Notes and Other Illustrations, Vol. XI, (London, 1811), pp.157–244 73 D. Hughes, Versions of Blackness: Key Texts on Slavery from the Seventeenth Century, (Cambridge, 2007), p.119 74 Letter to Lord Grange from Lord Maitland [the 6th Earl of Lauderdale] at Hatton, (1710) NRS, GD124/15/993/1 75 Richard Scott, ‘Erskine, James, Lord Grange (bap. 1679, d. 1754)’, Oxford Dictionary of National Biography, (Oxford, 2004) 76 Letter [to the wife of Lord Grange] from the newly widowed Countess of Lauderdale GD124/15/993/2 77 A. Murray, ‘The Scottish Recoinage of 1707–9 and its Aftermath’, in The British Numismatic Journal, Vol. 72, (2003), p.123

124  For the want of ‘scots projects’ 78 G. Crawford, The Peerage of Scotland: Containing an Historical and Genealogical Account of the Nobility of that Kingdom; Collected from the Publick Records of the Nation, the Charters and Other Writings of the Nobility, and from the Most Approved Histories, (Edinburgh, 1716), p.33 79 G. Lockhart, Memoirs Concerning the Affairs of Scotland: From Queen Anne’s Accession to the Throne, to the Commencement of the Union of the Two Kingdoms of Scotland and England, in May, 1707. With an Account of the Origine and Progress of the Design’d Invasion from France, in March, 1708. And Some Reflections on the Ancient State of Scotland. To which is Prefix’d an Introduction, Shewing the Reason for Publishing These Memoirs at this Juncture, (Edinburgh, 1714), p.181–182 80 Ibid 81 PRO Mint 12/25; Newton Corr., v. pp.2–3, cited in Murray, ‘The Scottish Recoinage’, p.121; Murray states that ‘in December 1708 with 14,155 pound weight melted and 13,700 pounds minted in new crowns and half crowns’, using these figures it is possible to calculate that 103,346 lb weight of silver would produce approximately £100,024 in coin 82 ‘Of the withdrawn coins the 5s. Scots piece had been equivalent to 5d. sterling and the 3s. 6d. to 3 ½ d’, Murray, ‘The Scottish Recoinage’, p.123 83 M. Lynch, ‘Royal Burghs, Convention of’, in The Oxford Companion to Scottish History, (Oxford, 2001), p.535 84 J. D. Marwick (ed), Extracts from the records of the Convention of the Royal Burghs of Scotland, 1677–1711, Vol. 4, (Edinburgh, 1880), 1677–1711, pp.476 85 Ibid, p.474 86 Ibid 87 Murray, ‘The Scottish Mint after the Recoinage…’, p.864 88 C. A. Whatley with D. J. Patrick, The Scots and the Union, (Edinburgh, 2006), p.324 89 Ibid 90 Murray, ‘The Scottish Recoinage’, p.126 91 Lauderdale cited in Murray, The Scottish Recoinage of 1707–9’, p.126 92 Ilay cited in Murray, The Scottish Recoinage of 1707–09’, p.127 93 Ibid 94 RPS, 1705/6/135. Date accessed: 23 June 2021. 95 Murray ‘Sir Isaac Newton and the Scottish Recoinage’, p.930 96 Murray, ‘The Scottish Recoinage of 1707–9’, p.124 97 ‘Memorial Concerning the Mint of Scotland’, MINT 19/3/23–8; and Murray ‘Sir Isaac Newton and the Scottish Recoinage’, p.924 98 A. McDiarmid, ‘The Equivalent Societies of Edinburgh and London, The Formation of the Royal Bank of Scotland, and The Nature of the Scottish Financial Revolution’, in Journal of British Studies, Vol. 60, (Jan., 2021), pp.94–95 99 MINT 19/3/180, Kew 100 Newton, MINT 19/3/56, Kew 101 Newton, ‘Three partial holograph drafts similar to MINT00457 (Mint 19/3/56) but suggesting a compromise Newton has proposed to the Treasury, raising the Edinburgh Mint’s allowance to £1,450 p.a.’, MINT 19/3/57 102 Lauderdale to Newton, ‘Deplores the Edinburgh Mint’s non-payment of fees and salaries and asks Newton’s advice as to how this can be remedied’, MINT 19/3/55, Kew 103 Murray, ‘The Scottish Mint after the Recoinage’, p.867 104 Lauderdale cited in Murray, ‘The Scottish Mint after the Recoinage’, p.865 105 Murray, ‘The Scottish Mint after the Recoinage’, p.867 106 MINT 19/3/56 107 Ibid, p.866 108 N. Munro, History of the Bank of Scotland, 1727–1927, (Edinburgh, 1928), p.84; and R. Saville, Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996), p.95

For the want of ‘scots projects’  125 109 Campbell of Monzie and Finab, Perthshire and Argyllshire, National Register for Archives of Scotland, DS/UK/25005 110 J. H. Burton (ed), The Darien Papers: Being a Selection of Original Letters and Official Documents Relating to the Establishment of a Colony at Darien by the Company of Scotland Trading to Africa and the Indies. 1695–1700, (Edinburgh, 1849); The list names ‘Patrick Campbell, brother to Monzie’ (he would not become Lord Monzie until 1706 when he was retoured heir to his brother Duncan, who had died in 1697) as an investor 111 Ibid, p.55–56; Caithness was the only shire not represented in subscription books 112 P. Walsh, The South Sea Bubble and Ireland: Money, Banking and Investment, 1690– 1721, (Woodbridge, 2014), p.59 113 See Murphy, John Law; and Neal, ‘I Am not Master of Events’. 114 P. Monzie, Patrick Campbell of Monzie on Land Money, (1708), National Library of Scotland (NLS), 1.814(13) 115 Monzie, Land Money, p.15 116 See chapter two for a detailed study of the debate; See: A. Brown, An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705); A. Brown, A second essay concerning the Land Mint : shewing, that the present necessity, and want of Gold and Silver money, absolutely requires this, or the like Remedy, and that very speedily ... By the author of the Character of the true publick Spirit, (Edinburgh, 1705); W. Seton, some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705); J. Clerk, The Circumstances of Scotland Consider’d, with Respect to the Present Scarcity of Money: Together with Some Proposals for Supplying the Defect Thereof, and Rectifying the Ballance of Trade, (Edinburgh, 1705); J. Hodges, Considerations and Proposals for Supplying the Present Scarcity of Money, and Advancing Trade, (Edinburgh, 1705); H. Chamberlen, and J. Armour, Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit, in A. E. Murphy, and C. Sugiyama (eds), Monetary Theory, 1601–1758, Vol. 4, (London, 1997), pp.20–43; and J. Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money, (Edinburgh, 1705) 117 These include shared ideas on why silver was used as money. It was versatile and durable, it could be worked to a set standard and divided, and its value was of the same in one place as another, or with minimal difference; Law, Money and Trade Considered, pp.6–7; Monzie, A Land Money, p.3; Concerns over the crown’s ability to adjust the value and fineness of silver; Law, Money and Trade Considered, p.61; Monzie, A Land Money, p.4; an identical explanation of the Paradox of Value; Law, Money and Trade Considered, p.1; Monzie, A Land Money, p.3; each discuss how the value of goods, land and money over the preceding 200 years; Law, Money and Trade Considered, p.70; Monzie, A Land Money, p.6; the offering of a reward for anyone who finds two notes of the same number or of a higher number than those published; Law, Money and Trade Considered, pp.86–87 ; Monzie, A Land Money, p.16; the use of the term ‘land mint’- an uncommon term, with most projectors of similar schemes choosing instead to define the enterprise as a ‘land bank’. In fact, the only other occasions in which this author can identify the use of the term, is in Law’s ‘1705 Act for a Land Mint’, and in Edinburgh doctor, Andrew Brown’s two 1705 essays on the matter; Brown, An essay on the new project for a land-mint; and Brown. A second essay concerning the Land Mint: and Law’s‘1705 Act for a Land-mint’ is included in J. Law, Essay on a Land Bank, A. Murphy (ed), (Dublin, 1994); and Monzie’s assertion that ‘the stocks of the EIC of the bank with debentars etc. are received in some payments’, aligning with Law’s ideas on what represented a new type of currency; Monzie, A Land Money, p.10

126  For the want of ‘scots projects’ 118 Law, Money and Trade Considered, p.6/7 119 Monzie, A Land Money, p.1 120 A. Smith, An Enquiry into the Nature and Causes of the Wealth of Nations, Vol. 1, (London, 1776), p.34 121 Ibid, p.3 122 Law, Money and Trade Considered, p.1 123 See J. Hengstmengel ‘The Paradox of Value in the Teaching of the Church Fathers’, in The European Journal of the History of Economic Thought, Vol. 28, No. 5, pp.695– 707, for an overview of the topic; S. Pufendorf, De officio hominis et civis juxta legem naturalem, (1682); and H. Grotius, De jure belli ac pacis, (Paris, 1625) 124 Galileo, Dialogo sopra i due massimi sistemi del mondo, (Pisa, 1632), T. More, Utopia, (1518); and J. Locke, Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money, (London, 1692) 125 See, H. Kames, Sketches of the History of Man, (Edinburgh, 1774); J. Harris, An Essay Upon Money and Coins, (London, 1757); F. Hutcheson, A System of Moral Philosophy, (London, 1755); F. Galiani, Della moneta, (1751); N.-F. Dupre de SaintMaur, Essai sur le monnoies, (1746); Hutcheson, Philosophiae moralis institution compendi, (Glasgow, 1745); W. Pulteney, Some Thoughts on the Interest of Money in General, (London, 1738), J. Gottlieb Heineccius, Elementa juris naturae et gentium, (Wroclaw, 1742); J. Jocelyn, An Essay on Money and Bullion, (London, 1718); D. Defoe, A Review of the State of the British Nation, (London, 1713) 126 Murphy, John Law, p.57 127 Law, Money and Trade Considered, p.153; Law stated in 1705 that Chamberlen was, ‘offended at my meddling in this affair, having, as he says, borrow’d what I know of this subject from him’. 128 J. Keith Horsefield, ‘The Origins of Blackwell’s Model of a Bank’, in The William and Mary Quarterly, Vol. 23, No. 1, (Jan., 1966), p.134 129 Murphy, John Law, p.74–75 130 Ibid, p.67 and p.74–75 131 W. Ferguson, Scotland: 1689 to the Present, The Edinburgh History of Scotland, Vol. Iv, (Edinburgh: 1968), p.137 132 Hoppit, Britain’s Political Economies, p.118 133 John Drummond to William Drummond, 11 May 1720, NRS, GD243/437

Primary sources Brown, A., An essay on the new project for a land-mint, proposing a proper and practicable scheme and expedient and how to put the same under due and regular management, in this conjuncture; not only for the speedy supplying the present scarcity of money; but also for the advancing of trade and other national improvements, (Edinburgh, 1705a) ———, A second essay concerning the Land Mint: shewing, that the present necessity, and want of gold and silver money, absolutely requires this, or the like remedy, and that very speedily… By the author of the Character of the true publick spirit, (Edinburgh, 1705b) Chamberlen, H., and Armour, J., ‘Proposal by Doctor Hugh Chamberlen, and James Armour for a Landcredit’, in Murphy, A. E., and Sugiyama, C., (eds.), Monetary Theory, 1601–1758, Vol. 4, (London, 1997), pp.20–43 Clerk, J., The circumstances of Scotland consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705) Crawford, C., The peerage of Scotland: containing an historical and genealogical account of the nobility of that kingdom; Collected from the publick records of the nation, the charters and other writings of the nobility, and from the most approved histories, (Edinburgh, 1716)

For the want of ‘scots projects’  127 Defoe, D., A review of the state of the British Nation, (London, 1713) Drummond, John to Newton, ‘Incomplete report on foreign tin trade’, MINT 19/3/577, National Archives, Kew, Richmond, Surrey Dupre de Saint-Maur, N.-F., Essai sur le monnoies, (Paris, 1746) Galiani, F., Della moneta, (1751) Galileo, G., Dialogo sopra i due massimi sistemi del mondo, (Florence, 1632) Gottlieb Heineccius, J., Elementa juris naturae et gentium, (Wroclaw, 1742) Grotius, H., De jure belli ac pacis, (Paris, 1625) Harris, J., An essay upon money and coins, (London, 1757) Hodges J., Considerations and proposals for supplying the present scarcity of Money, and advancing Trade, (Edinburgh, 1705) Hutcheson, F., Philosophiae moralis institution compendi, (Glasgow, 1745) ———, A system of moral philosophy, in three books, vol. 1, (London, 1755) Jocelyn, J., An essay on money and bullion, (London, 1718) Kames, H., Sketches of the history of man, Vol. 1, (Edinburgh, 1774) Lauderdale to Newton (1709) MINT 19/3/55, National Archives, Kew, Richmond, Surrey ‘Lauderdale’s memorial for funds for the Mint’, 1721, T 1/235.179r, National Records of Scotland Lauderdale mint papers, 69/25/13, National Records of Scotland Law, J., Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705) Letter from John Drummond to William Drummond, 11 May 1720, National Records of Scotland, GD243/437 Letter from Lord Maitland to Lord Grange [the 6th Earl of Lauderdale] at Hatton, (1710), NRS GD124/15/993/1 Letter [to the wife of Lord Grange] from the newly widowed Countess of Lauderdale, NRS GD124/15/993/2 Letter to Lord Grange from Lord Maitland [the 6th Earl of Lauderdale] at Hatton, (1710) NRS, GD124/15/993/1 Locke, J., Some considerations of the consequences of the lowering of interest and raising the value of money (London, 1692) Lockhart, G., Memoirs concerning the affairs of Scotland: from Queen Anne’s accession to the throne, to the commencement of the union of the two Kingdoms of Scotland and England, in May, 1707. With an account of the origine and progress of the design’d invasion from France, in March, 1708. And some reflections on the ancient state of Scotland. To which is prefix’d an introduction, shewing the reason for publishing these memoirs at this juncture, (Edinburgh, 1714) ‘Memorial concerning the mint of Scotland’, MINT 19/3/23–8, National Archives, Kew, Richmond, Surrey Monzie, P., Patrick Campbell of Monzie on land money, (1708), 1.814(13) National Library of Scotland More, T., Utopia (London, 1518) Newton, Isaac ‘A report made Sept. 23. 1706 upon the proposals of Mr Holt & Mr Williams dated May 31th & Iuly 17th 1706’, MINT 19/3/545, National Archives, Kew, Richmond, Surrey ———, ‘Miscellaneous correspondence’, Keynes Ms. 99, King’s College, Cambridge ———, ‘Adverse report on the tender of [John] Drummond to handle tin in Amsterdam’, MINT 19/3/566, National Archives, Kew, Richmond, Surrey ———, ‘Royal warrant appointing David Gregory to supervise the reorganisation of the Edinburgh Mint’, MINT 19/3/180, National Archives, Kew, Richmond, Surrey

128  For the want of ‘scots projects’ ——— ‘Response from Newton’, MINT 19/3/56, National Archives, Kew, Richmond, Surrey ——— Three partial holograph drafts … suggesting a compromise Newton has proposed to the Treasury, raising the Edinburgh Mint’s allowance to £1, 450 p.a, MINT 19/3/57, National Archives, Kew, Richmond, Surrey Pufendorf, S., De officio hominis et civis juxta legem naturalem (London, 1673) Pulteney, W., Some thoughts on the interest of money in general (London, 1738) Seton, W., Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) Smith, A., An enquiry into the nature and causes of the wealth of nations, Vol. 1, (London, 1776) Transfer Book for the London Society (for the subscribed Equivalent debt), 1718–1724, REQ/9, Royal Bank of Scotland Archives Secondary sources Bank of England, The Bank of England Note: A Short History, BoE, (QB 1969 Q2, available at https://www.bankofengland.co.uk/quarterly-bulletin/1969/q2/ the-bank-of-england-note---a-short-history) Bolitho, H., and Peel, D., The Drummonds of Charing Cross, (London, 1967) Cochrane-Patrick, R. W., Records of the Coinage of Scotland: From the Earliest Period to the Union, Vol. 1, (Edinburgh, 1876) Cowan, B., The Social Life of Coffee: The Emergence of the British Coffeehouse (New Haven, 2008) Coward, B., The Stuart Age: England, 1604–1714, Fourth Edition, (London, 2014) Graham, A., Corruption, Party, and Government in Britain, 1702–1713, (Oxford, 2015) Heal, A., The London Goldsmith, 1200–1800: A Record of the Names and Addresses of the Craftsmen, their Shop Signs and Trade Cards, (Exeter, 1972) Hilton-Price, F. G., Handbook of London Bankers, (London, 1876) Hoppit, J., Britain’s Political Economies: Parliament and Economic Life, 1660–1800, (Cambridge, 2017) Hughes, D., Versions of Blackness: Key Texts on Slavery from the Seventeenth Century, (Cambridge, 2007) McGilvary, G., East India Patronage and the British State: The Scottish Elite and Politics in the Eighteenth Century, (London, 2008) Munro, N., The History of the Royal Bank of Scotland, 1727–1927, (Edinburgh, 1928) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) Neal, L., ‘I Am Not Master of Events’: The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles, (New Haven, 2012) Saville, R., Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996) Stewart, J. B., Opinion and Reform in Hume’s Political Philosophy, (New Jersey, 2014) Temin, P., and Voth, H.-J., Prometheus Shackled: Goldsmith Banks and England’s Financial Revolution After 1700, (Oxford, 2013) Walsh, P., The South Sea Bubble and Ireland: Money, Banking and Investment, 1690–1721, (Woodbridge, 2014) Whatley, C. A., with Patrick, D. J., The Scots and the Union, (Edinburgh, 2006)

For the want of ‘scots projects’  129 Edited collections and journals Burton, J. H., (ed), The Darien Papers: Being a Selection of Original Letters and Official Documents Relating to the Establishment of a Colony at Darien by the Company of Scotland Trading to Africa and the Indies. 1695–1700, (Edinburgh, 1849) Cartwright, J. J., (ed), The Manuscripts of His Grace the Duke of Portland, Vol. IV, (London, 1897). ———, The Manuscripts of His Grace the Duke of Portland, Vol. V, (London, 1899). ———, The Manuscripts of His Grace the Duke of Portland, Vol. VIII, (London, 1907). Devine, T. M., ‘The Modern Economy: Scotland and the Act of Union’, in Devine, T. M., Lee, C. H., and Peden, G. C., (eds), The Transformation of Scotland: The Economy since 1700, pp.13–33 Frey, L., and Frey, M., (eds), The Treatise of the War of the Spanish Succession: An Historical and Critical Dictionary, (London, 1995) Hatton, R., ‘John Drummond in the War of the Spanish Succession: Merchant turned Diplomatic Agent’, in Hatton, R., and Anderson, M. S., (eds), Studies in Diplomatic History, Essays in Memory of David Bayne Horn, (Hamden, CT, 1970), pp.69–96 Hengstmengel, J., ‘The Paradox of Value in the Teaching of the Church Fathers’, in The European Journal of the History of Economic Thought, Vol. 28, No. 5, pp.695–707 Howell, T. B., (ed), Cobbett’s Complete Collection of State Trials and Proceedings for High Treason and Other Crimes and Misdemeanours from the Earliest Period to the Present Time, with Notes and Other Illustrations, Vol. XI., (London, 1811). Joslin, D. M., ‘London Private Bankers, 1720–1785, in The Economic History Review, New Series, Vol. 7, No. 2, (1954), pp.167–186 Keith Horsefield, J., ‘The Origins of Blackwell’s Model of a Bank’, in The William and Mary Quarterly, Vol. 23, No. 1 (Jan., 1966), pp.121–135 Marwick, J. D., (ed), Extracts from the Records of the Convention of the Royal Burghs of Scotland, 1677–1711, Vol. 4, (Edinburgh, 1880), pp.1677–1711 McDiarmid, A., ‘The Equivalent Societies of Edinburgh and London, the Formation of the Royal Bank of Scotland, and the Nature of the Scottish Financial Revolution’, in Journal of British Studies, Vol. 60 (January 2021), pp.88–114 McGilvary, G. K., ‘John Drummond of Quarrel: East India Patronage and Jacobite Assimilation, 1720–80, in Macinnes A. I. and Hamilton, D. J., (eds), Jacobitism, Enlightenment and Empire, (London, 2014), pp.141–158 Melton, F. T., ‘Deposit Banking in London, 1700–90’, in Davenport-Hines, R. P. T., and Liebenau, J., (eds), Business in the Age of Reason, (London, 1987), pp.40–50 Murray, A. L., ‘The Scottish Mint after the Recoinage, 1709–1836’, in Proceedings of the Society of Antiquaries of Scotland, Vol. 129, (Edinburgh, 1999), pp.861–886 ———, ‘The Scottish Recoinage of 1707–9 and its Aftermath’, in The British Numismatic Journal, Vol. 72 (London, 2003), pp.115–134 Parke, G., (ed), Letter and Correspondence Public and Private of the Right Honourable Henry St John Lord Viscount Bolingbroke during the Time He Was Secretary of State to Queen Anne, Vol. I, (London, 1789) Sedgwick, R., (ed), The History of Parliament: The House of Commons 1715–1754, (Martlesham, 1970) Wedgwood, C. V., ‘Anglo-Scottish Relations, 1603–40’, in Royal Historical Society Transactions, 4th series, (1950), p.xxxii

130  For the want of ‘scots projects’ Online sources Dickinson, H., (2004–09–23). St John, Henry, styled first Viscount Bolingbroke (1678– 1751), politician, diplomatist, and author, Oxford Dictionary of National Biography, (Oxford, 2004) Hopkins, P., ‘Nairne, William, styled second Lord Nairne and Jacobite first earl of Nairne (1664–1726)’, Oxford Dictionary of National Biography, (Oxford, 2004) Johnson, J., ‘Brydges, James, first duke of Chandos (1674–1744)’, Oxford Dictionary of National Biography, (Oxford, 2004) Lynch, M., ‘Royal Burghs, Convention of’, in The Oxford Companion to Scottish History, (Oxford 2001), available at https://www.oxfordreference.com/view/10.1093/ acref/9780199234820.001.0001/acref-9780199234820-e-256 Scott, R., ‘Erskine, James, Lord Grange (bap.1679, d. 1754)’, Oxford Dictionary of National Biography, (Oxford, 2004) Speck, W., (2004–09–23). Harley, Robert, first earl of Oxford and Mortimer (1661–1724), politician, Oxford Dictionary of National Biography, (Oxford, 2004) Sunter, R., (2004–09–23). Graham, James, first duke of Montrose (1682–1742), landowner and politician. Oxford Dictionary of National Biography, (Oxford, 2004) The Records of the Parliaments of Scotland to 1707, K. M. Brown et al., eds, (St Andrews, 2007–2021), 1706/10/2-1705/6/135 Winterbottom, P., Drummond, Andrew (1688–1769), goldsmith and banker. Oxford Dictionary of National Biography, (Oxford, 2004)

7

The long road to the Royal Bank of Scotland and the growth of Scottish banking, 1707–1772

In the years prior to the formation of the Royal Bank of Scotland (RBS), new concepts of what constituted money had been developing in Europe and in the colonies. Emerging financial markets allowed for the creation of liquid financial instruments that were capable of being turned into cash without loss or delay, which in turn created new monetary instruments.1 Included within these instruments were company stock, government debt instruments in the form of bonds, and emerging forms of new commodity and fiat monies. Alongside this evolution in currency, the process of refinancing old debt had become popular with English and French governments. This was done in the form of debt-for-equity swaps, in which public creditors who had previously lent to the government through the purchase of instruments such as bonds, annuities, and lottery tickets were offered equity in a joint-stock company in exchange for the debt they were owed by the government. Through these types of deals, governments could refinance their debt at a better rate, those holding the debt could exchange it for company stock offering a better return, and the joint-stock company might be awarded monopoly rights or other perks by the government in return. The establishment of the South Sea Company was driven by this type of deal. In 1710, company proprietors proposed to the British government that ‘£9.47 million of outstanding short-term war debts not secured by a specific tax’ should be converted into equity of the new joint-stock company.2 The scheme got the go-ahead, and the company was established the following year. In 1713, it won a contract to deliver slaves in British ships for the Spanish Crown to the colonies of Spanish America.3 This also allowed the company to import certain goods into Spanish American ports and appears to have been a successful endeavour.4 When the South Sea Company is mentioned today, however, it is not its trading activities that come to mind. Rather, it is the financial crash of 1720 that has become synonymous with the company. This was an event that had its origins in a debt-for-equity swap, after the company had won a new contract to refinance a large portion of government debt in 1719. At this time, directors of the South Sea Company had hoped to make a profit by exploiting the difference in exchange between the price of the government debt and their inflated share prices. In the wake of the deal, as the share price increased, it looked like this may work. Prices rose to unsustainable heights, before they then crashed towards the end of 1720.5 DOI: 10.4324/9781003284819-7

132  The long road to the Royal Bank of Scotland As this was unfolding in Britain, a similar situation had occurred in France slightly ahead of the South Sea collapse. John Law, with the success of his bank, had brokered a debt-for-equity swap with the government. The swap in this case involved his Mississippi Company, which, like the South Sea Company, was caught up in a speculative frenzy as the share price skyrocketed. By the middle of 1720, however, the price of shares was in decline, and the vast sums of paper money that Law had pumped into the French economy, leading to rapid inflation, had by the second half of the year lost their value. Like the South Sea Bubble, the Mississippi Bubble had burst. The above examples are perhaps the two most famous examples of companies engaging in debt-for-equity swaps during the opening decades of the eighteenth century. It is important to note that they did not fail because they engaged in this practice, but rather because of the unsustainable speculation that grew up around the companies. A debt-for-equity swap could be an incredibly effective way of capitalising debt, and it was this concept that was employed when founding RBS in 1727. The new bank was established on a capital of £111,000, with this sum being drawn from government debt which had in large part been outstanding since the union of 1707. The way in which the bank was formed was, however, different from the debt-for-equity deals already cited. In England and France, the agreements had been undertaken directly with the government. In Scotland, the new bank was established through the agency of the debtholders themselves. The British administration had to provide the bank with a charter, but the transfer of debt into equity did not involve the government; rather, it was carried out by the debtholders, who themselves converted the debt directly into bank equity. The source of the funds originated with the Equivalent payment stipulated in the Treaty of Union. A sum of £398,085 10s was agreed in the negotiations as compensation for Scotland taking on part of the English national debt and for the incurrence of other costs associated with the union process. Numerous men, including Bank of England (BoE) and Company of Scotland projector William Paterson, and Aberdonian mathematician David Gregory, who would later supervise progress at the Scottish Mint during the recoinage of 1707–09, were involved in calculating the figure. Calculations varied significantly, ranging from £10,000 to £1 million. Paterson’s estimates were among the highest, which was to be expected. He was after all deeply involved with the Company of Scotland, and the company’s shareholders were expected to receive a majority of the agreed total as recompose for the failure of Darien.6 In the end, the figure agreed upon was likely calculated by Gregory, who provided a scientific perspective to Paterson’s commercial and financial experience.7 Despite agreement on this very precise figure, however, Douglas Watt has argued that the amount was a ‘political decision’, for which there was no ‘correct’ financial sum. Rather, it was more important that the figure settled on was large enough for Scots to accept, without being too large for the English to object to.8 That the Equivalent would be instrumental in providing the capital for RBS 20 years later was unintended and unexpected. The story of how this occurred began in

The long road to the Royal Bank of Scotland  133 June 1707, when a parliamentary commission tasked with administering ­payment of the Equivalent was established. The 25-strong commission included John Clerk and William Seton, both of whom had been active in the Scottish financial debate of 1705, and was tasked with ‘disposing of the … sum of three hundred ninety eight thousand eighty five pounds and ten shillings, and all other monies which shall arise to Scotland upon the agreements in the treaty of union’.9 Parts of the sum were ring-fenced to cover the cost of a recoinage, to provide a development fund for Scottish industries, and to defray the costs of the commission itself.10 The initial sum was not, however, expected to be enough to cover all the costs associated with union and to compensate Scotland for taking on part of the English national debt. In order to cover the full costs, in addition to the Equivalent payment, Scotland was also to receive the ‘arising equivalent’. This was a proportion of expected increased yields between 1707 and 1714, resulting from the new uniform British fiscal system and the increased trade brought by the union.11 Unfortunately, for those owed from the Equivalent payment, these expected yields would take longer than seven years to materialise; this would become a crucial issue. Paying the Equivalent was a complex process. The BoE was responsible for making the payment to the Scottish commission. The institution sought to turn the payment in its own favour by issuing just £100,085 of the total amount in gold, with the remainder coming in Exchequer bills only payable in cash at the English bank.12 These bills were short-term credit instruments that had first been issued in 1696 in £5 and £10 denominations as an attempt to ease the shortage of cash in the English economy by extending the credit available to the government.13 Initially, the bills had passed in payment ‘to any person or persons that shall be willing to accept and take the same’ and, by the reign of Anne, had developed to cover all ‘aids, taxes, loans and payments to Her Majesty’.14 Their inclusion in the Equivalent payment followed the passing of an English Act in March 1707 which agreed that the BoE would lend the English government £1.5 million in Exchequer bills. These were lent at the rate of four and a half per cent, with the interest being paid in the bills rather than in specie for the first three years after.15 The bank, therefore, had an incentive to push the circulation of the bills. The BoE’s decision to include the Exchequer bills in the payment bound for Edinburgh was not met with enthusiasm in Scotland. There the bills were viewed as a clear challenge to Bank of Scotland (BoS) notes. In August 1707, as news spread of their inclusion, riots broke out on the streets of the Scottish capital. At the insistence of the Scottish commissioners, more money was sent, with an additional £50,000 arriving swiftly. By Christmas, there remained little, if indeed any, Exchequer bills in circulation in the Scottish economy.16 Despite such a troubled start, and with reports of ‘ill agreement’ between the appointed commissioners, it appears that the commission worked effectively. By 1709, £381,509 15s 10.5d had been paid out, leaving little over £16,575 still to be paid.17 Of the sum already administered, excess of £49,888 had gone to covering the cost of the recoinage; £229,611. 4s 8d went towards paying ‘the stock, interest and debts’ of the Company of Scotland; just over £5,513 was used to pay the members of the commission for their services, with an additional £2,224 being used

134  The long road to the Royal Bank of Scotland ‘for defending law suits where the titles of parties were not clear’. The remaining amount was put towards the cost of civil and military lists.18 While the majority of the original Equivalent sum was therefore swiftly paid out, it also quickly became clear that many Scots were still owed money. As outlined above, shareholders and creditors of the Company of Scotland had been a priority. Covering the full cost of military and civil lists had not been viewed with the same importance, and when it came to pay these, there was not enough left in the fund.19 The shortfall should have been covered by the ‘arising equivalent’, yet in the years following 1707 this failed to raise the sums that had been anticipated.20 Those with a claim to the Equivalent became impatient, and many realised that there had been no real-world relationship between the amount of the Equivalent and the amount of public debt.21 In order to cover the outstanding debt, the British Parliament sanctioned the use of debentures. These were legal documents that set forth the debt due to the holder with the addition of five per cent annual interest from June 1708 until the debt was paid.22 These were issued to those still due money from the Equivalent, and by 1713, a total of £138,201 7s in debentures had been issued. These ‘IOUs’, which implicitly recognised the British government as the debtor, were by no means an ideal solution for those holding government debt. They could not be converted into other government bonds, nor were they redeemable. Additionally, the government failed to establish a sufficient fund to cover the interest payments due to debenture holders.23 By 1714, the process of financial remuneration to Scotland which had begun with the union in 1707 should have been completed. This year had also been expected to mark the end of the payments made from the ‘arising equivalent’.24 Yet, at this time, the British Parliament extended the period in which claims to the Equivalent could be made, stating that there remained ‘other publick debts of Scotland yet unsatisfied’.25 This decision was influenced in part by Equivalent creditors becoming organised. This was after a ‘considerable number’ of them had met in Edinburgh in January of 1714 to form a committee. The group was made up of those who had originally received the debentures, as well as speculators who had bought up debentures when they came to market. Together they planned a campaign designed to secure their rights, and by the time of their second meeting, their number had swollen to ‘several hundreds’.26 Since the Scottish commission had worked to disburse the majority of the sum set aside for the Equivalent between 1707 and 1709, the financial commitment covered by debentures had been steadily climbing. By 1714, the figure sat at £230,308, which included almost £45,000 in unpaid interest due to holders.27 New legislation passed at this time cancelled all existing debentures and replaced them with fresh ones, still with five per cent interest.28 The Act failed, however, to provide a fund from which the interest would be drawn. It was not until 1719 that legislation was passed to provide for these payments. This stipulated that £10,000 was to be paid out of the customs and excise of Scotland to service the interest on outstanding Equivalent debentures. By this time, the total sum owed as debentures had increased to £248,550.29

The long road to the Royal Bank of Scotland  135 The Edinburgh and London equivalent societies Prior to the passing of the 1719 Act, a number of debenture holders attempted to sell the paper at the best price they could. Many debentures remained in Scotland, but a large quantity, somewhere in the region of £170,000, moved into the hands of London investors, many of whom were Scots.30 This exchange of debentures was occurring during a period of increased financial speculation, as investors were caught up in the hysteria of the South Sea and Mississippi booms. The opportunity to buy these financial instruments at a reduced rate, collecting interest in the meantime, in the hope of selling them later for increased profits, was an example of the wider interest in the burgeoning market of financial options. In order to protect their investment, debenture holders north and south of the border organised themselves into societies, superseding the Edinburgh committee that had been so important to the additional issue of debentures in 1714. Originally made up of 50 members, the Edinburgh Society was composed of noblemen, lawyers, and merchants. Included was Archibald Campbell, Earl of Ilay. A mover and shaker in British politics, he had held numerous positions under Anne, becoming head of the country’s highest criminal court in 1711, a committed Hanoverian after 1715, and the first governor of RBS in 1727; if you have ever looked at a Scottish bank note, then you have probably seen a bewigged Ilay looking back at you.31 Also included was Andrew Fletcher of Saltoun, later Lord Milton, the nephew of his patriotic namesake and one of the first directors of RBS.32 The deed of settlement, which established the group, stated that the society was to: carry on several undertakings for the benefit of the City of Edinburgh, but may likewise be of use to promote the interest of the nation, by encouraging trade, manufacture, & fishing, and introducing several new branch[es] thereof.33 That the society might be advantageous to Scotland, appearing almost as an afterthought to the benefits that could be brought to the capital, understated the intentions of the group. While it was to remain an entirely domestic entity and was to avoid partaking in ‘such branches of trade or merchandize, as consist in ­buying or selling goods or wares, or adventuring them by sea’, a prominent feature of the society’s intended business was tied to the capitalisation of the Scottish economy.34 Those steering the new Edinburgh Society were invested with the power to: lend or employ all or any part of the money to be paid to them by the subscribers hereof, as also their bills or notes of credit and all such sums of money, or effects which they shall become possest of by virtue of this deed, upon heritable bonds, wad setts, absolute purchase of lands, or in exchange for the bills or notes of credit, or upon other things, as they shall think fit.35

136  The long road to the Royal Bank of Scotland These powers unequivocally signalled the group’s intention to enter the business of banking and clearly encroached upon the interests of the BoS. It was not long until the bank was made aware of the society’s intent. At the same time as the new Edinburgh group was forming, the Society for the Subscribed Equivalent Debt emerged from London. While London-based, the society was not an exclusively English enterprise, and instead, it had an undoubtedly Scottish hue. Included in its membership were representatives from Scotland’s merchant and political classes. Merchant and onetime banker, John Drummond, was involved from the outset and became central in deciding society policy. Lord Archibald Hamilton, brother to James, 4th Duke of Hamilton, the controversial leader of the pro-independence Country Party in the Scottish Parliament at the time of union negotiations, was also an original member,36 as were John Campbell, Duke of Argyll and Ilay’s brother, and George Middleton, a Scottish banker who conducted business for Argyll and Ilay, as well as acting as London agent for John Law.37 In addition to its Scottish membership, the London Society was the brainchild of Scotsman William Paterson. He had recognised that there were many Britons with a stake in the Equivalent, but as Edinburgh was the only place where interest payments could be collected, many stakeholders found managing their investment difficult.38 A society in London which could collectively advocate on behalf of its members was Paterson’s solution. The emergence of this group was one of only a few successes for Paterson, who had undoubtedly found the odds stacked against him following the failure of Darien. Since the Anglo-Scots Union, he had been attempting to gain a share of the Equivalent, hoping that while he had not invested any of his own money in the attempt on Darien, his role in the raising of capital in London for the venture might be properly recognised.39 This was a not unfounded claim. He had been offered generous terms by the Company of Scotland in 1695, entitling him to four per cent of the total capital raised for the scheme, the figure being set at £600,000 this time, potentially netting Paterson £24,000.40 In the aftermath of the project’s failure, however, the money was not forthcoming, and Paterson spent the eight years that followed 1707 petitioning the British administration for recompense. Initially, this was fruitless, but with the ascension of George I in 1714, at which time a number of Paterson’s friends were appointed to government, his luck changed.41 By the middle of 1715, an Act had been passed by the British Parliament which entitled Paterson to £18,241 in Equivalent debentures.42 Papers from the London Society show that by 1718, Paterson possessed Equivalent stock of £5,000, so when he proposed that London-based holders of Equivalent debt organise themselves into one joint fund, it was an ongoing concern for the Scotsman. Additionally, Paterson stood to make a healthy profit if the society were successful, with a clause in the society’s contract stating that for ‘the term of twenty one years’ he was entitled to – ‘one tenth part of the nett profits above the interest on the subscrib’d capital  stock,  and incident expences in the management thereof’.43 While the group would go on to be a ­success, Paterson did not benefit from any profits, dying in early 1719.

The long road to the Royal Bank of Scotland  137 The societies attempt to enter the business of banking To put the Equivalent stock into context, at £248,550 this totalled almost two and a half times the entire capital of the BoS, which had stood at £100,000 since 1695. With the backing of such a sum, the proprietors of Equivalent debt set their sights on the adolescent Scottish bank as the quickest way to employ their fund. This was an obvious choice for such a move, the bank after all represented the most successful Scottish endeavour to emerge from the Scottish Financial Revolution up to that point. In addition, its 21-year monopoly on public banking in Scotland had lapsed in 1716, leaving the institution vulnerable to competition. The BoS had been founded in 1695 and had remained where it was through restrained governorship. It had faced challenges since its formation and had been the subject of significant attacks from those who felt it was failing to support the Scottish economy. Some criticised its lending practices, they complained that loans were being given ‘to all that would give them good security… [the bank] never concerning themselves whether it was to stay in the kingdom [of Scotland] or not’, and feared that this had led to ‘the export of so much coin as hath in a manner left us beggars’.44 Other critics of the bank held the conflicting view that credit was not being advanced in a sufficient quantity and called for the re-establishment of the institution upon a better foundation than formerly or for the erection of a new national bank to be managed by those appointed by the Scottish Parliament.45 In 1704, the bank faced a significant crisis when directors were forced to suspend operations. The stoppage was brought on by a myriad of factors, such as late repayments of loans, political uncertainty, and rumours of a forthcoming recoinage that was to increase the value of the Scots pound (a rumour that led many to retain their money instead of depositing it with the bank), which combined to leave the bank with a funding deficit.46 The stop was short lived, lasting only four months, during which time those with a claim on the bank were offered five per cent annual interest on their debt until payments recommenced. Following the Anglo-Scots Union, business improved. The bank’s board at this time funnelled its energy into increasing loans and advances, and between August and December of 1707, £157,000 in bank notes was exchanged for coin and Exchequer bills, and against bills and bonds of exchange, representing a substantial increase from the £2,850 monthly average issued during the same months in 1705. The bank also began to benefit from funds deposited by revenue collectors and British government officers following the union. Richard Saville has identified this surge in the bank’s business as being ‘indicative of an agricultural economy which benefited from the active links with English markets’. By 1713, the bank held advances of £91,000, with almost £40,000 of its notes in circulation, a sharp increase from accounts prior to 1707.47 Following this extraordinary boom in business, the bank again fell upon difficult times. Political uncertainty at the time of the Hanoverian Succession pervaded all areas of society, and the bank was no different. An intensified Jacobite threat led to demands on the bank’s funds, and on 19 September 1715, less than two weeks after the Stuart standard had been raised at Braemar, the bank again stopped payments.48

138  The long road to the Royal Bank of Scotland It responded in the same manner as it had nine years earlier and declared that all banknotes would carry a five per cent interest payment until they could be settled. The bank requested that all holders of due bills repay these by 1 November, but many failed to do this, and for the next year, the bank issued no advances. Until early 1717, the bank conducted little business, before things began to improve slightly from the middle of that year.49 This was the situation at the BoS when the Equivalent societies made their approach in December 1719 with the offer of up to £250,000 investment.50 For the bank, this was a significant amount, dwarfing the £100,000 capital of the institution.51 The author of the proposal was anonymous, but identified themselves as ‘a proprietor in the Equivalent stock, and also an adventurer in the bank’. They made the case the bank would benefit on two fronts: firstly with a substantial cash injection and secondly through the monetary provisions outlined in the 1719 Act, these being £10,000 per annum to cover interest payments on debentures and £600 for administrative costs. Additionally, there was an allowance of £2,000 per annum for ‘all Pretensions of growing Equivalents due to Scotland’, (the rising Equivalent) as well as £14,000 for the encouragement of the woollen industry.52 All of this, if the merger went ahead, was to be funnelled through the bank. One may assume that many bank proprietors read the proposal with interest. When it came to how future profits were to be divided, many presumably became less enthusiastic. These were to be split unequally between the two interests, 5:7 in favour of the Equivalent proprietors, this being a figure calculated from the investment of £250,000 (five-sevenths) of the £350,000 total of the bank’s stock, should the proposal be accepted. This would leave existing bank proprietors the remaining two-sevenths. This seems like a rational deal based on the ratio of investment. However, another caveat included in the proposition was that those holding Equivalent debentures were to be advanced nine-tenths of their total investment, equating to £225,000, in BoS notes.53 Effectively, this meant that the investment made by the Equivalent proprietors was just one-tenth of their stock for a return of five-sevenths of the bank’s profits! The plan was shrewd. The bank was well established and would allow those holding Equivalent debentures the opportunity to capitalise their funds quickly. The proposal also indicated that Equivalent proprietors viewed themselves as negotiating from a position of strength, with their overall stock surpassing that available to the bank. Proprietors of the bank were not so enamoured with the plan. They saw a union under the terms then being offered as ‘most disadvantageous’, and if it was to go ahead, it would expose the bank to ‘great Hazards, if not certain Ruin’. At the core of their rejection was the fine print found in the 1695 Act that had established the bank. This limited the stock of the company ‘to £100,000, whereof at least 2/3 must be long to Scotsmen residing in Scotland’.54 Even if this were not the case, the bank was concerned with the unequal distribution of profits, particularly considering that nine-tenths of the Equivalent investment (in the form of debentures) was to be reimbursed in the bank’s notes. Agreement to this condition would in principle commence the circulation of a large-scale convertible paper money backed by unredeemable Equivalent debentures.55 The bank could not support this situation, and the proposal went no further.

The long road to the Royal Bank of Scotland  139 The Equivalent proprietors were undeterred by the rejection. Those in Edinburgh attempted to publicly undermine the bank, spreading rumours that its cash stock was in short supply. They also called for the withdrawal of the £8,400 they held with the bank in one amount, in the hope of prompting a run. When these underhand tactics failed, the Edinburgh Society again attempted to insert itself into the bank’s business, approaching the institution in April 1720 with a proposal to buy an extensive number of the bank’s shares. An offer was made that the society would purchase 600 shares at a cost of £200 scots per share, equating to £10,000 sterling for all 600 shares.56 Possibly having learned something from the previous rejection, the Edinburgh Society stated that the sale of shares was to be done ‘in such manner as is consistent with the constitution of the bank’. The proposer was also mindful that by selling some of the shares, many of those holding office with the bank may lose the right to do so. As such, those in office were permitted to retain their shares until the next election, at which point they were to transfer them to the Edinburgh Society.57 This second proposal was every bit as bold as the first. Writing in 1728, an early historian of the bank described the proposition as ‘ridiculous’, but when a response came from the bank it remained measured.58 As in the first instance, the 1695 charter was presented as an obstacle to the plan, while the suggestion that existing bank shareholders should be forced to part with their stock, in turn barring many from being directors ‘who are very fit for the office’, was deemed improper. It was also stated quite simply that there was no appetite among the bank’s proprietors to sell their shares, even at a higher price. There was also a concern that should some of the bank’s stock be transferred to the society, Equivalent proprietors would then attempt to purchase additional shares in order to ‘make themselves absolute Masters’ of the bank.59 The bank refused the offer, but as we shall return to, this rejection did not mark the end of the Edinburgh Society’s challenge to the BoS. As this back and forth between the BoS and the Edinburgh Society was happening in Scotland, the London Society was also attempting to enter the business of banking. To do this, they hoped to exploit a clause included within the Act of 1719 that had secured the interest payments for holders of Equivalent debt. The clause stated that the king, if so inclined, could grant debenture holders greater legal security by allowing them to incorporate. When the London-based equivalent society therefore sought a Royal Charter, they did so under the same terms of the indenture agreed to by the proprietors at the establishment of the group. These terms stated that the society might ‘lend or imploy their bills or notes of credit, and all or any part of the moneys paid in unto them…as they shall think fit upon, mortgages, pledges or absolute purchases of any lands, leases, goods, or chattels, or in exchange for any other bills or notes of credit or other things’.60 Clearly, banking was a key aim of the group. The London Society expected some resistance from the BoE. In an attempt to mitigate the bank’s objections, the group proposed to restrict their note issue to paper payable at six months from the time of borrowing and also ruled out notes payable on demand while the bank existed. This did little to allay the bank’s concerns, with the charter as it stood providing the London Society with power and privileges identical to the bank, while also granting it trading rights from which the

140  The long road to the Royal Bank of Scotland bank itself was restricted.61 Concerned, the BoE urgently sought a meeting with the Attorney General, Nicholas Lechmere. This took place on 6 August 1719, and on 27 August, the bank was informed that a clause designed to limit the powers of the Equivalent proprietors by preventing the new corporation ‘from acting as a bank in England’ had been added to the draft legislation.62 The clause had been suggested by the Equivalent proprietors and was almost identical to a clause included in the 1711 South Sea Act, which had intended to prohibit the South Sea Company from acting as a bank. Despite that clause, the South Sea Company had overstepped the bounds of its charter, at times operating as a bank of sorts when it provided subscribers with loans. The BoE remained concerned. Lechmere found himself in a difficult position. The BoE continued to apply pressure as it attempted to protect its own interests, and in September, the bank’s directors again met with Lechmere to discuss the charter.63 Yet by November, the Attorney General had taken the stance that the clause offered sufficient security to the bank.64 The BoE remained vehemently against the charter. Its position was weakened by the stance of the BoS, which declared the limiting clause in the charter to be acceptable to it.65 At this time, the Edinburgh Society was still attempting its rough wooing of the Scottish bank, so one must consider how much this acceptance of the proposed charter was influenced by these discussions. Perhaps the BoS viewed a charter for banking in England as a way to distract Edinburgh proprietors, freeing the bank from the continually grasping hands of the Edinburgh Society. In the end, bad timing, more than objections from the BoE, prevented the Equivalent proprietors from being granted a charter. As the London Society had been negotiating the terms of the charter, the big economic story of the time had been the speculative frenzies that had developed around the French Mississippi Company and the English South Sea Company. Barring one or two stumbles, share prices in both companies had generally been on an upward trend during 1719 and into 1720. But by the end of 1720, the Mississippi and South Sea bubbles had well and truly burst. From then until the autumn of 1722, the offices of the Attorney General and the Solicitor General had little time to focus on anything other than the financial fallout of the collapses. During this time, they refused to comment on the charter application, ‘while they unravelled the traumas of the stock market crash’.66 The proposed incorporation of the equivalent societies Running concurrently with the London Society’s attempts to attain a charter for banking, discussions on a potential merger between the two Equivalent societies had also commenced. Although those in London were focused on the charter negotiations in England, they were not so preoccupied as to miss the Edinburgh Society’s advances towards the BoS, and recognised that a new unified Equivalent society could, in the event of a successful takeover of the Scottish bank, ‘legally divide [the bank] with the corporation’.67 In this situation, debenture holders in London stood to gain considerably.

The long road to the Royal Bank of Scotland  141 The proposed uniting of the Edinburgh and London Equivalent societies appeared in several anonymous drafts. An inspection of the handwriting confirms that the author was Patrick Campbell of Monzie, a man deeply involved with the financial speculations of the time and one of the first directors of RBS.68 Arranging the drafts in any definitive order is difficult, but it is possible to see an evolution in the terms and complexity of each.69 The most advanced proposal would have seen the two societies each holding a stock of £150,000, made up of £15,000 cash, £62,500 in Equivalent debt, and £72,500 in subscriptions. The £62,500 in Equivalent debt was to be kept by each society ‘constantly in their respective rights,’ but all ‘stock or debentures over and above’ this figure, ‘whither already in their possession or hereafter to be purchased by either society shall belong to the tuo societies in common and what ever profit or improvement shall be made thereof to be divided equally.’70 As profit would be made for both groups, the cost of defraying the operations undertaken by the corporation was to be split. By February 1720, Monzie had been dispatched from Edinburgh to London to discuss the merger. He was instructed ‘in conjunction with Mr Drummond [to] use [his] best endeavours to come to a settlement with the [London] proprietors… upon such terms as either have been allready suggested to Mr Drummond, or such others as may be for the interest of the society’.71 ‘Mr Drummond’ referred to merchant John Drummond, an impressively well-connected financial operator.72 In 1720, he was one of the largest holders of Equivalent stock in London, holding around £4516.73 At this time, only six members of the society held more stock than Drummond. By bringing the two societies together, both sets of Equivalent proprietors stood to gain significantly. The hope in London was that the Edinburgh Society would successfully infiltrate the BoS, so that they might share in the spoils, while the granting of a charter for banking in England would provide investment opportunities for those proprietors north of the border. Yet, unification at this time was not to be. The financial shocks brought on by the collapse of the Mississippi and South Sea bubbles, those which had derailed talks for the English banking charter in 1720, also disrupted union talks. Equivalent proprietors, in response to the economic turmoil in the wake of the collapses, shifted their focus from the merger of the two societies as they instead attempted to rescue other financial interests. Attaining a charter and the formation of the Royal Bank of Scotland As time passed following the crashes of 1720, the attention of the Equivalent proprietors returned to the matter of unifying the two societies, and in late 1724, a Royal Charter incorporating the Edinburgh and London groups was granted. With a capital stock of £248,550, the charter brought the two societies together into one Equivalent Company. The 13 directors of the new company included Campbell of Monzie and Drummond. Also included were numerous financial associates of William Paterson, such as merchant James Campbell, once a director of the Company of Scotland, and Paul D’Aranda, an English merchant who following Paterson’s death was named as sole executor over his estate.74 Other directors of

142  The long road to the Royal Bank of Scotland the company included prominent judge and politician, Sir Hew Dalrymple; Patrick Crawford, later one of the first directors of RBS; and Edward Harrison, once governor of Madras and later a chairman of the East India Company (EIC), where he and Drummond were part of a small group that almost completely controlled EIC affairs.75 The new Equivalent Company was based in London, with 210 of the 238 shares being held in the English capital, while a branch office was established in Edinburgh to carry out Scottish business. The charter granted in 1724 was, however, extremely limited, only allowing the company to collect and administer the sum of £10,600 previously settled by statute for defraying the costs of interest on debentures and administration. No banking rights were granted. So while the proprietors had made advances, they were still not where they wanted to be. The network operating around the Equivalent Company was an influential one. Argyll and Ilay lobbied for the Equivalent Company to be given the right to organise banking, while Robert Walpole, to whom Drummond had granted favours via his EIC directorship and who by then was prime minister of Great Britain in all but name, also backed a new charter. Walpole was held in high esteem by George I, and with his support, a revised charter was secured in 1727. On 31 May of that year, £111,000 of the Equivalent Company’s stock was transferred into shares of a new business—the RBS.76 The new bank was an innovative financial institution. It quickly introduced a significant amount of paper money into the Scottish economy, with £138,530 of the bank’s notes in circulation within two years, and provided the first known overdraft facilities in 1728.77 Importantly, it was a bank that had been formed using innovative means. It was an enterprise built on debt incurred by the British government as a direct consequence of the Anglo-Scots Union. The £111,000 capital had never existed as money, only as debt, but in 1727 it was used to capitalise the endeavours of the bank. The money drawn from the Equivalent debentures to fund the bank, along with the remaining sum that had not been converted into bank stock, totalling £248,550, plus all outstanding monies relating to the annual interest payments, was not paid by the British government until 1850, by which point RBS had grown its capital to £2 million.78 That a powerful bank had been formed using this fund 123 years earlier is a clear example of the alchemy that surrounded the project. The wider context of the new bank, 1700–27 The political situation in Scotland from 1700, under both Scottish and British administrations, hampered the development of financial projects and institutions. By 1727, the group operating around the Equivalent had succeeded in overcoming the political inertia, and through a long program of organisation, it formed the first new financial institution in Scotland since 1695. In addition to the organisation of the Equivalent societies, there were several other factors, some of them were a consequence of the Anglo-Scots Union, which materialised between 1700 and 1727, that were crucial in creating the circumstances for the bank’s foundation. These are now considered, with a particular focus on the Scottish economy and on how pre-Union institutions had fared following 1707, beginning with the shifting fortunes of the BoS.

The long road to the Royal Bank of Scotland  143 When the BoS’s monopoly lapsed in 1716, this did not provoke a wave of new bank foundations in the country. Even the bank itself did not attempt to renew its monopoly, believing there was little competition, and that one bank was all the country could accommodate.79 The end of its monopoly coincided with a slump in the bank’s business, as those opportunities brought by Union began to fade. It also overlapped with a decline in the bank’s reputation, as the institution’s alleged Jacobite links stoked the rumour mill.80 Even if the BoS had not been linked to Jacobitism, the wider impact of the unrest in 1715 still significantly affected bank business. Increased demand to withdraw funds forced the BoS to put a stop on payments in September 1715, markedly affecting the institution’s commercial performance until the middle of 1717.81 The bank fought back from the slump, however, and through its good management, it weathered the storm caused by the bursting of the Mississippi and South Sea bubbles in 1720. As detailed above, it fought off multiple attempts at takeover from the Equivalent societies. It also rejected an attempt by the struggling London-based Royal Exchange Assurance Company to invest significant sums into the bank.82 The strength shown by the BoS was in large part down to its leadership. The governor since 1697 had been David Melville, 3rd Earl of Leven, holding the office until his death in 1728. Leven’s tenure has been described by Saville as epitomising ‘the Presbyterian ideal of the cautious approach to lending and discounting.’83 Through his leadership, the bank saw off the challenges outlined above, as well as reignited threats from the monetary ideas of John Law, after Money and Trade Considered was republished in 1720. Changes were coming for the bank, however. It did not hold the political influence that it once had, and its reputation had been damaged by its alleged Jacobite sympathies. When the Argylls and their associates flexed their considerable political muscle in favour of the Equivalent Company’s bid for a banking charter in the mid-1720s, the BoS protested. Leven went as far as petitioning the king. In an appeal to the newly crowned George II in 1727, he stated that the charter for the RBS had been signed by the late George I shortly before his death earlier that year and that this had not yet been passed by the Seal of Scotland. Leven requested a hearing on the matter in order to request the charter be annulled.84 The meeting was never granted. While the economic provisions of the Treaty of Union were central in creating the capital which underpinned RBS in 1727, the effects of Union in its first two decades were also important for creating the conditions for the emergence of the bank in other ways. One particularly challenging aspect of the Union of 1707 had been the recoinage, with policy decisions taken at this time causing significant problems for the Scottish economy. The most troublesome of which had been the decision to adhere to the English custom of minting no coin smaller than sixpence. In respect to the much larger English economy, this policy was valid, but in Scotland, a small, predominantly agrarian economy, transacting low-value ­business, this was a problem. Representations were made to the Convention of Royal Burghs of Scotland, a group made up of members of parliament representing the burghs (mainly merchants) which sought to protect the interests of the Scottish burghs, in late 1708 regarding the policy. Subsequently, a new warrant for smaller denomination Scottish coin was granted and new dies were prepared, but no new

144  The long road to the Royal Bank of Scotland coin was ever struck. The result was that the Scottish economy was flooded with counterfeit and clipped coin in order to meet the monetary needs of the population. These issues around currency indicate that the Scottish economy faced significant challenges directly linked to post-Union policy, a fact compounded by the failure of the increased yields anticipated in 1707 to materialise during the subsequent seven years. We should be mindful, however, of pushing this point too far. Instead, we must view the decades that directly followed Union as being, in an economic sense, largely like those which had preceded them, which would be to say they were difficult; a condition not necessarily linked to Union.85 Tom Devine has made the case that the harm brought by Union to the Scottish economy should not be exaggerated. He states that ‘the nation’s economy after Union was not in ruins; indeed there had been some modest recovery from the miseries of the 1690s and, though some activities were hit badly, others prospered.’86 Devine admits that some sectors were affected by English competition after 1707, but that many had also been struggling prior to Union, while others flourished within an integrated British economy.87 In the medium- to long term, Scottish trade grew considerably post-Union, but this was mainly after the mid-1730s.88 In the decade prior to the commencement of this growth, and notwithstanding Devine’s downplaying of the situation after 1707, large sections of a disaffected Scottish public were moved to unrest as a direct result of economic issues linked to Union. Urban crowds in Scotland had caused fewer problems in the opening decades of the eighteenth century than they had during the preceding century.89 In the years immediately following 1707, the new British administration pushed for a firm rule, and when this was achieved, it became generally indifferent to events in Scotland.90 By the early months of 1720, however, this was beginning to change as food riots spread up and down the east coast of Scotland. From Linlithgow, along the Forth Estuary, up through Dysart, around the East Neuk of Fife, through Dundee and on to Montrose, the violence was widespread, and lives were lost. The research undertaken by Chris Whatley into these events has revealed a situation directly driven by grain shortages but aggravated by a series of secondary issues linked to Union.91 Whatley argues that to view the impact of the Union as ‘broadly neutral in the short run or that patterns of life were ‘little affected’ by it, is to ignore its impact on the urban labouring classes as well as on proto-industrial workers in the surrounding countryside.’ He highlights the increased duties imposed on linen at Westminster in 1711 and 1715, as well as the new taxes on imported salt that were put in place in 1707, and the later decline of Fife fishing later in the 1710s as affecting significantly on these classes.92 He does admit that while there were signs of an improvement in Scottish external and coastal trade ‘from or even prior to the Union’, this in the main benefited merchants, with the domestic manufacturing economy remaining stagnant until the late 1720s.93 Thus for Whatley, if the unrest that emerged in the east during 1720 had a political dimension, ‘this derived from deep dissatisfaction with the Union of 1707’.94 The east coast food riots marked the beginning of five years in which pockets of unrest sporadically erupted throughout Scotland. Anti-enclosure riots emerged in Dumfries and Galloway during much of 1724. While in the June of the following

The long road to the Royal Bank of Scotland  145 year, unrest broke out across the country, from Elgin in the northeast to Ayr in the southwest, and Dundee in the east to Glasgow in the west, all driven by the Malt Tax. Many in the urban population had become incensed by the imposition, which had again raised its head after the debates of 1712–13.95 People took to the streets and brewers throughout the west of Scotland went on strike.96 Perhaps the most significant rioting was in Shawfield, Glasgow, during which the house of Daniel Campbell, a member of parliament for the city, was ransacked after rumours abounded that Campbell had supported the tax; eight civilians were killed by soldiers in the process.97 During this turbulent period, the spectre of Jacobitism continued to raise its head. While there is little to link the food and Malt Tax riots to the Jacobite cause— indeed, we should note Whatley’s word of caution that not every occasion of unrest in the early eighteenth century was the result of Jacobitism—there was a fear that Jacobites might take the opportunity to undermine the British government.98 The administration’s solution was to return Scotland to order through the influence of Ilay. Walpole invested Ilay with all the power he needed to curtail a rowdy Scotland, and within a month of Ilay’s arrival in Edinburgh in mid-August 1725, he had persuaded striking brewers to restart production and to pay their taxes. 99 With his aims accomplished, Ilay sought to use his influence with Walpole to call in the money that had been promised as support to Scottish industries in the Treaty of Union almost 20 years earlier.100 There was a recognition that a connection between idleness and popular unrest existed, and it was hoped that by reviving Scotland’s ailing economy, civil unrest might be prevented in the future. With this in mind, Ilay’s request was soon granted. As fears over the BoS’s Jacobite links continued, the institution was snubbed when it came to the administration of the funds. Instead, a new body designed to issue grants to encourage Scottish manufacturing and fishing industries, the Board of Trustees for Fisheries, Manufactures and Improvements in Scotland was erected in July 1727. Ilay and his associates were at the very centre of the new trading authority, which, driven by a spirit of improvement, became central to Scotland’s future economic policies. Against this background of political advance, economic uncertainty, and social unrest, there had also been significant developments in economic thought between 1700 and 1727. Particularly important was the monetary theory of John Law. Law’s ideas had caused a stir throughout Europe and fed directly into the ideas that underpinned RBS. After his unsuccessful attempt to establish a land bank in his native Scotland in 1705, Law had remained active. He had unsuccessfully attempted to launch a bank in France during 1706–07 and then in Turin between 1710 and 1712.101 Despite these rejections, Law carried on, and was eventually successful in his endeavour, opening a French bank in 1716. This represented the first part of a system that would eventually come crashing down in 1720, wreaking economic havoc in France.102 Despite this, his ideas remained influential and garnered him a number of prominent acolytes. One of these was Ilay, whose personal library included multiple copies of each of Law’s works.103 The two men were close and had been for some years. Even as far back as 1694, when Law had been sentenced to death in London, there is a suggestion that Ilay and his brother were

146  The long road to the Royal Bank of Scotland involved in Law’s escape from the gallows. Then following the collapse of Law’s system in France in 1720, the Argylls provided him with protection.104 Ilay was a subscriber to Law’s monetary theory and is said to have written the preface to a republished version of Law’s Money and Trade Considered in 1720.105 Like Law, Ilay believed that an expansion of the money supply was desirable and used RBS to do just this, with the bank offering overdraft facilities and issuing over £138,000 in notes within two years of its foundation. The manner in which RBS was founded also pointed to the ideas that Law promoted throughout his career. He had reimagined what constituted money, viewing company stock as representing a ‘new type of money.’106 Law viewed these financial instruments as capable of acting as a medium of exchange and becoming new monetary instruments.107 This was exactly the type of thought which was applied by the Equivalent Company when it used Equivalent debentures to capitalise the bank. An overview of these occurrences of public unrest, currency issues, economic uncertainty, and the development of economic ideas provides the wider societal, political, and economic backdrops to the Equivalent societies manoeuvring in the decade prior to 1727. They indicate that the British government’s inability to successfully incorporate Scotland into the British state project in the years following Union had by 1720 led to significant social unrest and pushed for the beginnings of political and economic reform in the country.108 The RBS and the Board of Trustees for Fisheries, Manufactures and Improvements were consequences of this reform. The growth of Scottish banking, 1727–72 The decades which followed the founding of RBS saw significant developments in Scotland’s financial structures. The BoS and RBS had initially engaged in hostilities, with each attempting to disrupt the business of the other before an uneasy truce was agreed in the mid-1740s. These two large banks were then joined by a third, with the emergence of the Edinburgh-based British Linen Company, later the British Linen Bank, in 1746. This was an enterprise driven by a group who had been deeply involved with RBS, headed by Lord Milton, an original RBS director, and Ilay, now the 3rd Duke of Argyll, who had been the governor of RBS until 1737.109 The three institutions – the BoS, the RBS, and the British Linen Bank – operated as Scotland’s main banks, with each taking deposits, issuing notes, and operating a branch banking system.110 Beneath these, there emerged a number of small private Edinburgh-based banks that accepted deposits and borrowed heavily from the three larger banks in order to lend to their own customers. At this time, the focus of Scottish trade was shifting from Scotland’s east coast to its west, where easy access to Atlantic markets was possible. Glasgow merchants made vast profits trading in tobacco and sugar grown on plantations worked by enslaved peoples. Accordingly, the number of private banks in Glasgow began to increase during the 1750s, with RBS and the BoS both funding private banks in the city.111 Following the Jacobite rising of 1745, there emerged alongside these banks a number of provincial banking companies, and by the 1770s, these were to be found in Glasgow, Aberdeen,

The long road to the Royal Bank of Scotland  147 Dundee, Perth, Ayr, and beyond. 112 Between 1740 and 1750, the number of banks in Scotland (issuing and non-issuing) rose from 5 to 14, and by 1769, the figure had reached 32.113 It was not, however, plain sailing for the young banks, and they faced significant issues during the middle decades of the eighteenth century. These included a ‘small notes mania’ during the 1750s and 1760s, in which small denomination paper notes, issued by poorly resourced individuals and groups, flooded the country. This occurred at the same time as an inflation crisis and was followed by a significant credit crisis during 1772–73. Despite these challenges, the numbers of new banks entering the Scottish market continued to increase and only slowed after the collapse of the Ayr Bank in 1772 and the associated credit crisis of that year and the next.114 The Ayr Bank, or Douglas, Heron and Co. to use the bank’s correct title, is a particularly interesting example in the context of the Scottish Financial Revolution. This is because this bank was in many ways an extension of the ideas that John Law had promoted in Scotland in 1705 and represented a way by which the landowning backers of the venture might monetise their holdings. An entirely private venture, the bank was formed on a capital of £150,000 in November of 1769, drawing subscriptions from Scottish nobles and major landowners.115 The bank was a powerful entity, with a capital which eclipsed that held by the BoS and the RBS at this time. The Ayr Bank expanded quickly, establishing branches in Dumfries and Edinburgh and issuing large sums in its notes.116 By June 1772, it had liabilities of £1,120,000, including £200,000 in circulating notes, and was partly responsible for driving the expansion of the Scottish economy, propelling a ‘speculative frenzy’ in which borrowers used loans from the bank to develop their estates at home and abroad. The sums issued by the bank far exceeded its capital, however, and were secured largely on the Ayr Bank’s name alone. The model was fragile, and on 8 June 1772, when a London-based banking house, Neale, James, Fordyce and Downe collapsed, the Ayr Bank was caught up in the fallout. The two banks were closely connected, and to steady the ship, the Ayr Bank attempted to secure loans from both RBS and BoS but could not agree terms.117 The Ayr Bank was forced to close its doors on June 25, offering note holders five per cent annual interest until it could reopen. This was not to be. The Ayr Bank had overextended itself and in 1773 was dissolved. The failure of the Ayr Bank is not to say the concept upon which it was founded was at fault, however. It had significant backing, with the bank’s proprietors holding estates worth in the region of 6 to 7 million pounds sterling (around a billion pounds today).118 But the bank had been governed recklessly and had attempted to expand too quickly.119 The emergence of these banks considerably boosted the Scottish economy and illustrates the significant developments since the country’s first bank had been founded in 1695. There is, however, a certain irony that the progress of Scotland banking sector was disrupted by the collapse of the Ayr Bank, a bank that owed a debt to John Law’s land banking ideas, a man who had been so crucial in ­developing ideas central to the wider financial revolutions and to the formation of RBS.120

148  The long road to the Royal Bank of Scotland Conclusion By the time British government repaid the outstanding Equivalent sum of £248,550, plus all outstanding monies relating to the annual interest payments in 1850, RBS had been in operation for 123 years. Until that point, the funds that had been used to capitalise the bank had not existed as money, but as IOUs. The economic ideas that had been used in the formation of RBS – novel concepts of what constituted money, and the value of debt – had been employed in the establishment of English and French institutions in the 30 years or so prior to 1727, but it was only at this time that they were put into practice in Scotland. As has been detailed here, however, the formation of RBS was significantly different from the debt-for-equity swaps seen elsewhere. In the Scottish case, it was not a government coming to an agreement with a company to exchange debt for company equity, rather it was private individuals who held government debt that drove the project, in particular, the network with Drummond, Monzie, Ilay and their acquaintances at its core, as well as the financial associates of William Paterson. This chapter has also reassessed the impact of John Law and William Paterson in Scotland. The pair have been termed ‘two of the greatest names of the first great age of European banking debate’ by Sydney Checkland, who also added that Law had been ‘spurned in Scotland’, and Paterson had ‘lost authority’ during the early stages of the Darien project.121 There has, therefore, been a belief that Law and Paterson were important figures in the financial developments of other countries but not in their native Scotland, but this is not the case. Paterson’s foresight to propose the Society for the Subscribed Equivalent Debt in London created a group with clear intentions to move into the world of banking. The merger of the two Equivalent societies into the Equivalent Company was then an important step in laying the groundwork for the formation of RBS. Law’s economic ideas meanwhile were central to the process of transferring Equivalent debt into RBS capital and to the later expansion of banking in Scotland, particularly the Ayr Bank. Through this lens, the formation of RBS represented the coming together of two of Scotland’s greatest economic thinkers. Notes 1 Murphy, John Law, p.61 2 L. Neal, The Rise of Financial Capitalism: International Capital Markets in the Age of Reason, (Cambridge, 1993), p.91 3 K. Morgan, Slavery and the British Empire: From Africa to America, (Oxford, 2007), p.59 4 See H. Paul, ‘The South Sea Company’s Slaving Activities’, (working paper, n.d.), Discussion Papers in Economics and Econometrics, School of Social Sciences Economics Division, University of Southampton 5 For more detail on the South Sea Bubble see: H. J. Paul, The South Sea Bubble: An Economic History of Its Origins and Consequences, (London, 2011); and J. Hoppit, ‘The Myths of the South Sea Bubble’, in Transactions of the Royal Historical Society, Vol. 12, (2002), pp.141–165 6 D. Watt, The Price of Scotland: Darien, Union, and the Wealth of Nation, (Edinburgh, 2007), p.229 and p.xvii

The long road to the Royal Bank of Scotland  149 7 W. Deringer, Calculated Values: Finance, Politics, and the Quantitative Age, (Cambridge, MA, 2018), p.92–93 8 Watt, The Price of Scotland, p.229/230 9 See W. Seton, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705), and J. Clerk, The circumstances of Scotland consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705), Clerk, Unto His Grace John Duke of Argyll, Her Majesties High Commissioner and the Honourable Estates of Parliament, The Report of the Commission of Parliament, Appointed for Stating and Examining the Publick Accompts, (1705), and ‘an act to discharge and acquit the commissioners of the equivalent for the sum of three hundred eighty one thousand five hundred and nine pounds fifteen shillings ten pence half-penny by them duly issued out of the sum of three hundred ninety eight thousand eighty five pounds ten shillings, which they received’ (1714) in The Statutes at Large, from the Twelfth Year of Queen Anne, to the Fifth Year of King George I, Vol. XIII, (London, 1746), p.109 10 S. G. Checkland, Scottish Banking: A History, 1695–1973, (Glasgow, 1975), p.44 11 G. A., Davies, A History of Money: From Ancient Times to the Present Day, 3rd ed. (Cardiff, 2002), p.275 12 Bank of England, Court of Directors, Minutes, 9 January 1706 to 29 March 1709, G4/6, 22 May 1707, p.155, Bank of England Archive online, https://www.bankofengland. co.uk/-/media/boe/files/minutes/1700–1800/1706/court-january-1706-march-1709.pdf 13 R. Saville, Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996), pp.75–76. 14 Ibid 15 R. A. Kleer, ‘A New Species of Mony’: British Exchequer Bills, 1701–1711,’ in Financial History Review, Vol. 22, No. 2, (2015), pp.179–203, pp.183–185. 16 Saville, Bank of Scotland, p.76 17 Letter from Mar to Seafield, 5 Aug. 1707, MSS., 222. Cited in P. W. J. Riley, The English Ministers and Scotland, 1707 – 1727, (London, 1964), p.211 18 ‘an act to discharge and acquit the commissioners of the equivalent …’ (1714) 19 Watt, The Price of Scotland, p.240–241 20 See Davies, A History of Money, p.275: This is an early example of what economists today would term the ‘J Curve’ - this being the occurrence that a country’s balance of trade deteriorates in the direct aftermath of a devaluation or deprecation of its currency (such as a recoinage), but eventually recovers to a higher level than where it was initially. For a modern overview of the phenomenon see, Ian Bremmer, The J Curve: A New Way to Understand Why Nations Rise and Fall, (New York, 2006). 21 Riley, The English Ministers and Scotland, p.215 22 N. Munro, The History of the Royal Bank of Scotland, 1727–1927, (Edinburgh, 1928), p.28, and Riley, The English Ministers and Scotland, p.213 23 R. Saville, Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996), p.84 24 Saville, Bank of Scotland, p.85 25 an act to discharge and acquit the commissioners of the equivalent …’ (1714) 26 Riley, The English Ministers and Scotland, p.223 27 Saville, Bank of Scotland, p.85 28 “An act to discharge and acquit the commissioners of the equivalent,” p.109 29 The Public General Statutes Affecting Scotland: From the Beginning of the First Parliament of Great Britain, 6 Anne, A.D. 1707, to the End of the Fourteenth Parliament of the United Kingdom, 10 & 11 Victoria, A.D. 1847, with a Chronological Table of the Titles Or Subject-matter of All the Public General Acts During that Time, and Index, vols. 3, (Edinburgh, 1876), 1, pp.47–53. 30 Watt, The Price of Scotland, p.49 31 A. Murdoch, ‘Campbell, Archibald, third duke of Argyll (1682–1761), Oxford ­Dictionary of National Biography, (Oxford, 2004)

150  The long road to the Royal Bank of Scotland 32 Murphy, John Law, p.68, and Anon, An Historical Account of the Establishment, Progress and State of the Bank of Scotland, and of the Several Attempts that Have Been Made Against It, and the Several Interruptions and Inconveniences which the Company Has Encountered, (Edinburgh, 1728), p.21 33 Original deed of settlement of the Edinburgh Society, Royal Bank of Scotland Archives (RBS), REQ/11/1, p.1 34 Ibid 35 Ibid, p.3 36 James Hamilton has become a divisive figure. He argued against the Union, but when it came time to the final vote, he was struck down with a suspicious case of toothache and could not attend parliament. Post-Union, he was chosen as one of 16 Scottish peers at Westminster and, in 1711, created Duke of Brandon. 37 Warrants for the dividends paid to members of the London Society (for the subscribed Equivalent debt) 7 July 1719, RBS, REQ/13/1); Warrants for the dividends paid to members of the London Society (for the subscribed Equivalent debt) 14 July 1721, RBS, REQ/13/3; E. Healey, ‘Middleton, George (1692–1747)’, Oxford Dictionary of National Biography, (Oxford , 2004); A. E. Murphy, Richard Cantillion: Entrepreneur and Economist, (Oxford, 1986), p.175; and L. Neal, I am Not Master of Events: The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles, (New Haven, 2012). For more information on John Law see A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) 38 Transfer book of the London Society (for the subscribed Equivalent debt), 1718–1724, RBS, REQ/9, p.2 39 Watt, The Price of Scotland, p.242 40 Ibid, p.35 41 S. Bannister, William Paterson, the Merchant Statesman, and Founder of the Bank of England: His Life and Trials, (Edinburgh, 1858), p.408–409 42 This is around £2.25 million today; ‘An Act for Relieving William Paterson Esquire, Out of the Equivalent-Money, for What is Due to Him’, (1715) in Journal of the House of Lords, Vol. 20, (1714–1717) (London, 1767–1830), British History Online http:// www.british-history.ac.uk/lords-jrnl/vol20 [accessed 13 March 2018], p.122; and Watt, The Price of Scotland, p.246 43 Transfer Book for the London Society, p.11 44 Anon. An Essay For promoting of Trade and increasing the coin of the nation (in a letter from a gentleman in the country to his friend at Edinburgh, a member of parliament), (Edinburgh, 1705) 45 Clerk, The Circumstances of Scotland Consider’d, p.25 46 Saville, Bank of Scotland, p.49/50 47 In March 1706 the bank’s accounts showed total lending of £24,118 and just £6,052 in notes out, Saville, Bank of Scotland, p.77–81 48 S. G. Checkland, Scottish Banking: A History, 1695–1973, (Glasgow, 1975), p.47; and C. Ehrenstein, ‘Erskine, John, styled twenty-second or sixth earl of Mar and Jacobite duke of Mar (bap. 1675, d. 1732), Jacobite army officer, politician, and architect’, Oxford Dictionary of National Biography, (Oxford, 2004) 49 Saville, Bank of Scotland, p.83/84 50 The sum suggests involvement from both the Edinburgh and London societies 51 An Historical Account of the Establishment, Progress and State of the Bank of Scotland: And of the Several Attempts that Have Been Made Against It, and the Several Interruptions and Inconveniences which the Company Has Encountered, (Edinburgh, 1728), p.12 52 Ibid, p.11 53 Ibid 54 An Historical Account, p.13

The long road to the Royal Bank of Scotland  151 55 A. Cameron, The Bank of Scotland, 1695–1995: A Very Singular Institution, ­(Edinburgh, 1995), p.40 56 Anon. Proposal for uniting the Bank of Scotland and the Edinburgh Society, in order to prevent mutual injuries, and lay a solid foundation for their being subservient and assisting to one another, cited in An Historical Account, p.19 57 Ibid 58 Ibid 59 Anon. Proposal for Uniting the Bank of Scotland, p.20 60 Transfer book of the London Society (for the subscribed Equivalent debt), 1718–1724, RBS Archives, REQ/9, p.9 61 Saville, Bank of Scotland, p.86 62 Bank of England, Court of Directors, Minutes, 10 July 1718 to 10 March 1719 [10 March 1720], G4/11, 27 August 1719, p.82, Bank of England Archive (BOE), https:// www.bankofengland.co.uk/-/media/boe/files/minutes/1700–1800/1718/court-july1718-march-1719.pdf 63 Bank of England, Court of Directors, Minutes, 10 July 1718 to 10 March 1719 [10 March 1720], G4/11, 10 September 1719, p.84 64 Saville, Bank of Scotland, p.86 65 Ibid 66 Saville, Bank of Scotland, p.87 67 Letter to a proprietor of the Equivalent debt 14 March 1720, RBS, REQ/11/11 68 The proposals were compared to Monzie’s 1708 land bank proposal; P. Monzie, Patrick Campbell of Monzie on Land Money, (1708), National Library of Scotland, 1.814(13); see chapter six for an overview of Monzie 69 “Proposition,” undated, RBS, REQ/11/8; “Proposal for uniting the Equivalent and Edinburgh Societies,” undated, RBS, REQ/11/9 70 “Heads of ane agreement between the proprietors of the subscribd equivalent debt and the Edinburgh society,” undated, RBS, REQ/11/10, p.1 71 Instructions of the Edinburgh Society to Mr Patrick Campbell of Monzie Advoct, 2 February 1720, RBS, REQ/11/16 72 The reader will remember from the preceding chapter that Drummond was a man with impressive connections, including the Duke of Chandos, the Earl of Oxford, Viscount Bolingbroke, the Duke of Marlborough, and John Law, among others. 73 Transfer Book for the London Society, transfer receipt no. 195 74 Watt, The Price of Scotland, p.44 and 70; J. S. Barbour, A History of William Paterson and the Darien Company, (Edinburgh 1907) p.224–225, and W. Paterson, The Writings of William Paterson, Founder of the Bank of England; with Biographical Notices of the Author, his Contemporaries, and His Race, S. Bannister (ed), Vol. 1 (London, 1858), p.cxli – the writings are also dedicated to a ‘Paul Daranda’, this appears to be the father of Paterson’s executor 75 G. K. McGilvary, East India Patronage and the British State: The Scottish Elite and Politics in the Eighteenth Century, (London, 2008), p.5 76 The rest remained as stock with the Equivalent Co. 77 Transaction for 31 May 1728, Ledgers of the transactions of the Royal Bank of Scotland, 1 January 1728 to 25 March 1731, RBS, RB/714/1 78 Scroll General Balance, 1851, RBS, RB/257/1 79 L. H. White, Free Banking in Britain: Theory, Experience and Debate, 1800–1845, second edition, (Cambridge, 1984), p.22 80 The treasurer at the bank, David Drummond, had instituted a fund to support Jacobite prisoners of war in the wake of 1715, and reports circulated that the bank had refused in 1715 to lend funds to the government, with whom they were disillusioned. Saville, Bank of Scotland, p.91 81 Checkland, Scottish Banking, p.47

152  The long road to the Royal Bank of Scotland 82 J. Armour, Proposals for Making the Bank of Scotland More Useful and Profitable: And for Raising the Value of the Land-Interest of North-Britain (Edinburgh, 1722) 83 Saville, Bank of Scotland, p.41 84 Copy of a Signature for a New Bank [the Royal Bank of Scotland] (n.p., 1727), pp.29–35. 85 Chris Whatley’s assertion that “there is virtual unanimity amongst historians that by and large the first two to three post-Union decades were, like those which preceded them, economically stagnant” may be true, but it ignores much of the economic development that took place during the 1690s. C. A. Whatley, ‘Economic Causes and Consequences of the Union of 1707: A Survey’, Scottish Historical Review, Vol. 68, No. 2, (1989), pp.150–181, at 168 86 T. M., Devine, ‘The Modern Economy: Scotland and the Act of Union’, in T. M. Devine, C. H. Lee, and G. C. Peden (eds), The Transformation of Scotland: The Economy Since 1700, (Edinburgh, 2005), p.27 87 Finer Scottish woollens are highlighted as having been affected by English competition, with the caveat that this sector had been in trouble prior to the Union. In addition, Devine argues that some industries, such as brewing and paper making, which were also struggling, were doing so quite possibly as result of the “ill years” of the 1690s rather than the Union. Devine also argues that an integrated British economy allowed for the development of southern markets for Highland goods, particularly cattle, but also timber, fish, and slate. Devine, “Modern Economy,” pp.17–24. 88 P. R. Rössner, Scottish Trade in the Wake of Union (1700–1760): The Rise of a Warehouse Economy (Stuttgart, 2008), p.209 89 C. A. Whatley, Scottish Society, 1707–1830: Beyond Jacobitism, towards Industrialisation (Manchester, 2000), p.186 90 There was, of course, the Jacobite unrest of 1715. This was not, however, an exclusively Scottish endeavor, and, as Daniel Szechi has shown, the Jacobite rebellion of 1715 was a ‘supremely local phenomenon, wholly dependent on the degree of commitment in the local population (especially the élite)’. D. Szechi, 1715: The Great Jacobite Rebellion, (New Haven, CT, 2006), p.251. 91 C. A. Whatley, ‘The Union of 1707, Integration and the Scottish Burghs: The Case of the 1720 Food Riots’, in Scottish Historical Review, Vol. 78, No. 2, (1999), pp.192–218 92 Whatley, “The Union of 1707,” p.207 93 Ibid, pp.206–208 94 Ibid, p.208 95 A. Gibson and T. C. Smout, ‘Scottish Food and Scottish History, 1500–1800’, in R. A. Houston and I. D. Whyte (eds), Scottish Society, 1500–1800 (Cambridge, 2005), p.77 96 A. I. MacInnes, ‘Scottish Jacobitism: In Search of a Movement’, in T. M. Devine and J. R. Young (ed), Eighteenth Century Scotland: New Perspectives, (East Linton, 1999), p.77 97 V. Wallace, ‘Presbyterian Moral Economy: The Covenanting Tradition and Popular Protest in Lowland Scotland, 1707–c. 1746’, in Scottish Historical Review, Vol. 89, No. 1, (2010), p.62 98 Whatley, “Union of 1707,” p.203 99 R. L. Emerson, Academic Patronage in the Scottish Enlightenment: Glasgow, Edinburgh and St Andrews Universities, (Edinburgh, 2008), p.293 100 A. I. Macinnes, A History of Scotland, (London, 2015), p.112 101 See John Law, Mémoire touchant les monoies et le commerce (n.p., 1706); John Law, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent (n.p., 1707); John Law, Mémoire touchant les monoies et le commerce (n.p., 1706); John Law, The Bank of Turin Manuscript (n.p., 1710–1712) 102 For an in-depth view of this, see Murphy, John Law, pp.105–293. 103 R. L. Emerson, An Enlightened Duke: The Life of Archibald Campbell (1692–1761), Earl of Ilay, 3rd Duke of Argyll, (Glasgow, 2013), p.230

The long road to the Royal Bank of Scotland  153 104 Law had been convicted of killing a rival during a duel in Bloomsbury Square in 1694; see Murphy, John Law, pp.20–34; Roger L. Emerson, ‘The Scottish Context for David Hume’s Political-Economic Thinking,’ in Margaret Schabas and Carl Wennerlind (ed), David Hume’s Political Economy, (London, 2008), p.18 105 Emerson, “The Scottish Context for David Hume’s Political-Economic Thinking,”, p.18 106 Law was speaking about the stock of the East India Company in 1707; John Law, ­Mémoire pour prouver qu’une nouvelle espece de monnaie peut etre meilleure que l’or et l’argent (1707), in John Law, transcribed by P. Harsin, Oeuvres complètes, vols. 3, (Paris, 1934), 1, p.205 107 Murphy, John Law, 61. 108 Julian Hoppit makes the case that Scotland’s integration into the British state only made significant progress from the 1740s. J. Hoppit, Britain’s Political Economies: Parliament and Economic Life, 1660–1800, (Cambridge, 2017), p.118 109 C. P. Kindleberger, A Financial History of Western Europe, (London, 1984), p.83 110 C. W. Munn, ‘Industry, Business and Finance in Scotland Since 1700’, in A. J. G. Cummings and T. M. Devine (eds), Industry, Business and Society in Scotland Since 1700, (Edinburgh, 1994), p.128 111 White, Free Banking in Britain, p.25 112 Munn, ‘Industry, Business and Finance in Scotland Since 1700’, p.129 113 Checkland, Scottish Banking, p.111 114 White, Free Banking in Britain, p.27 115 Checkland, Scottish Banking, p.124 116 Ibid, p.125: in 1769 BoS capital stood at £82,000, and RBS at £77,204 117 Ibid, pp.124–135 118 Ibid, p.132 119 For an overview of the Ayr Bank and the credit crisis of 1772–73, see P. Kosmetatos, The 1772–73 British Credit Crisis, (London, 2018) 120 The Ayr Bank realised Law’s 1705 proposal of monetizing the land of Scotland. Like Law’s French bank, however, the Ayr Bank overextended itself and collapsed just 3 years after it opened its doors. See, A. E. Murphy, The Genesis of Macroeconomics: New Ideas from Sir William Petty to Henry Thornton, (Oxford, 2008), p.177 121 Checkland, Scottish Banking, pp.43–44, and p.35

Bibliography Primary sources Anon, An Essay For promoting of Trade and increasing the coin of the nation (in a letter from a gentleman in the country to his friend at Edinburgh, a member of parliament), (Edinburgh, 1705) Anon, An historical account of the establishment, progress and state of the Bank of Scotland, and of the several attempts that have been made against it, and the several interruptions and inconveniences which the company has encountered, (Edinburgh, 1728) Armour, J., Proposals for making the Bank of Scotland more useful and profitable: and for raising the value of the land-interest of North-Britain, (Edinburgh, 1722) Bank of England, Court of Directors, Minutes, 9 January 1706 to 29 March 1709, G4/6, Bank of England Archive online, https://www.bankofengland.co.uk/-/media/boe/files/ minutes/1700–1800/1706/court-january-1706-march-1709.pdf Bank of England, Court of Directors, Minutes, 10 July 1718 to 10 March 1719 [10 March 1720], G4/11, Bank of England Archives, https://www.bankofengland.co.uk/-/media/boe/ files/minutes/1700–1800/1718/court-july-1718-march-1719.pdf

154  The long road to the Royal Bank of Scotland Clerk, J., The circumstances of Scotland consider’d, with respect to the present scarcity of money: together with some proposals for supplying the defect thereof, and rectifying the ballance of trade, (Edinburgh, 1705a) ———, Unto his Grace John Duke of Argyll, her majesties high commissioner and the Honourable Estates of Parliament, the report of the Commission of Parliament, appointed for stating and examining the publick cccompts, (1705b) Copy of a signature for a New Bank [the Royal Bank of Scotland] (n.p., 1727) ‘Heads of ane agreement between the proprietors of the subscribd equivalent debt and the Edinburgh Society’, undated, Royal Bank of Scotland archives, REQ/11/10 ‘Instructions of the Edinburgh Society to Mr Patrick Campbell of Monzie Advoct, 2 ­February 1720’, Royal Bank of Scotland archives, REQ/11/16 Law, J., Money and trade considered, with a proposal for supplying the nation with money, (Edinburgh, 1705) ———, Mémoire touchant les monoies et le commerce, (1706) ———, Mémoire pour prouver qu’une nouvelle espèce de monnaie peut être meilleure que l’or et l’argent, (1707) ———, The bank of turin manuscript, (1710–1712). ‘Ledgers of the transactions of the Royal Bank of Scotland, 1 January 1728 to 25 March 1731’, Royal Bank of Scotland archives, RB/714/1 ‘Letter to a proprietor of the equivalent debt 14 March 1720, Royal Bank of Scotland ­archives, REQ/11/11 Monzie, P., Patrick Campbell of Monzie on land money, (1708), National Library of Scotland, 1.814(13) ‘Original deed of settlement of the Edinburgh Society’, Royal Bank of Scotland archives, REQ/11/1 Proposal for uniting the Equivalent and Edinburgh Societies, undated, Royal Bank of ­Scotland archives, REQ/11/9 ‘Proposition’, undated, Royal Bank of Scotland archives, REQ/11/8 ‘Scroll General Balance’, 1851, Royal Bank of Scotland archives, RB/257/1 Seton, W., Memorial to the members of Parliament of the court party, (Edinburgh, 1700) ———, Some thoughts, on ways and means for making this nation a gainer in foreign commerce; and for supplying its present scarcity of money, (Edinburgh, 1705) ‘Transfer book of the London Society (for the subscribed Equivalent debt), 1718–1724’, Royal Bank of Scotland archives, REQ/9 ‘Warrants for the dividends paid to members of the London Society (for the subscribed Equivalent debt) 7 July 1719’ Royal Bank of Scotland archives, REQ/13/1 ‘Warrants for the dividends paid to members of the London Society (for the subscribed Equivalent debt) 14 July 1721’ Royal Bank of Scotland archives, REQ/13/3 Secondary sources Bannister, S., William Paterson, the Merchant Statesman, and Founder of the Bank of ­England: His Life and Trials, (Edinburgh, 1858) Barbour, J. S., A History of William Paterson and the Darien Company, (Edinburgh 1907) Bremmer, I., The J Curve: A New Way to Understand Why Nations Rise and Fall, (New York, 2006) Cameron, A., The Bank of Scotland, 1695–1995: A Very Singular Institution, (Edinburgh, 1995) Checkland, S. G., Scottish Banking: A History, 1695–1973, (Glasgow, 1975)

The long road to the Royal Bank of Scotland  155 Davies, G., A History of Money: From Ancient times to Present Day, (Cardiff, 2002) Deringer, W., Calculated Values: Finance, Politics, and the Quantitative Age, (Cambridge, MA, 2018) Emerson, R. L., Academic Patronage in the Scottish Enlightenment: Glasgow, Edinburgh and St Andrews Universities, (Edinburgh, 2008) ———, An Enlightened Duke: The Life of Archibald Campbell (1692–1761), Earl of Ilay, 3rd Duke of Argyll, (Glasgow, 2013) Hoppit, J., Britain’s Political Economies: Parliament and Economic Life, 1660–1800, (Cambridge, 2017) Kindleberger, C. P., A Financial History of Western Europe, (London, 1984) Kosmetatos, P., The 1772–73 British Credit Crisis, (London, 2018) Macinnes, A. I., A History of Scotland, (London, 2015) McGilvary, G. K., East India Patronage and the British State: The Scottish Elite and P ­ olitics in the Eighteenth Century, (London, 2008) Michie, R.C., The London Stock Exchange: A History, (Oxford, 1999) Munro, N., The History of the Royal Bank of Scotland, 1727–1927, (Edinburgh, 1928) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997). ———, The Genesis of Macroeconomics: New Ideas from Sir William Petty to Henry Thornton, (Oxford, 2009) Neal, L., I am Not Master of Events: The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles, (New Haven, CT, 2012) Paul, H. J., The South Sea Bubble: An Economic History of Its Origins and Consequences, (London, 2011) Riley, P. W. J., The English Ministers and Scotland, 1707–1727, (London, 1964) Rössner, P. R., Scottish Trade in the Wake of Union (1700–1760): The Rise of a Warehouse Economy, (Stuttgart, 2008) Saville, R., Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996) Smout, T. C., Scottish Trade on the Eve of Union 1660–1707, (Edinburgh, 1963) ———‘The Road to Union’, in Holmes, G., (ed), Britain after the Glorious Revolution, 1689–1714, (London, 1969), pp.176–196 Szechi, D., 1715: The Great Jacobite Rebellion, (New Haven, CT, 2006). Watt, D., The Price of Scotland: Darien, Union, and the Wealth of Nation, (Edinburgh, 2007) Whatley, C. A., Scottish Society, 1707–1830: Beyond Jacobitism, towards Industrialisation, (Manchester, 2000) White, L. H., Free Banking in Britain: Theory, Experience and Debate, 1800–1845, second edition, (Cambridge, 1984) Edited collections and journals Bannister, S., (ed) The Writings of William Paterson, Founder of the Bank of England; with Biographical Notices of the Author, His Contemporaries, and His Race, Vol. 1, (London, 1858) Devine, T. M., ‘The Modern Economy: Scotland and the Act of Union’, in Devine, T. M., Lee, C. H., and Peden, G. C., (eds), The Transformation of Scotland: The Economy since 1700, (Edinburgh, 2005), pp.13–33 Emerson, R. L., ‘The Scottish Context for David Hume’s Political-Economic Thinking’ in Schabas, M., Wennerlind, C., (eds), David Hume’s Political Economy, (London, 2008), pp.10–30

156  The long road to the Royal Bank of Scotland Gibson, A., and Smout, T. C., ‘Scottish Food and Scottish History, 1500–1800’, in Houston, R. A., and Whyte, I. D., (eds), Scottish Society, 1500–1800, (Cambridge, 2005), pp.59–84 Harsin, P, (ed), Oeuvres complètes, Vols. 3, (Paris, 1934) Hoppit, J., ‘The Myths of the South Sea Bubble’, in Transactions of the Royal Historical Society, Vol. 12 (2002), pp.141–165 Journal of the House of Lords: Volume 20, 1714–1717, (London, 1767–1830), accessed via British History Online http://www.british-history.ac.uk/lords-jrnl/vol20 Kleer, R. A., ‘A New Species of Mony: British Exchequer Bills, 1701–1711’, in Financial History Review, Vol. 22, No. 2 (2015), pp.179–203 MacInnes, A. I., ‘Scottish Jacobitism: in Search of a Movement’, in Devine, T. M., and Young, J. R., (eds), Eighteenth Century Scotland: New Perspectives, (East Linton, 1999), p.70–89 Munn, C. W., ‘Industry, Business and Finance in Scotland Since 1700’, in Cummings, A. J. G., and Devine, T. M., (eds), Industry, Business and Society in Scotland Since 1700, (Edinburgh, 1994), pp.125–142 Paul, H., ‘The South Sea Company’s Slaving Activities’, (working paper, Discussion Papers in Economics and Econometrics), School of Social Sciences Economics Division, University of Southampton, available at https://www.southampton.ac.uk/assets/imported/ transforms/content-block/UsefulDownloads_Download/326F907A8F434B05B2199578 407AA4B6/0924.pdf Pickering, D., The Statutes at Large, from the Twelfth Year of Queen Anne, to the Fifth Year of King George I, Vol. XIII, (London, 1746) The Public General Statutes Affecting Scotland: From the Beginning of the First Parliament of Great Britain, 6 Anne, A.D. 1707, to the End of the Fourteenth Parliament of the United Kingdom, 10 & 11 Victoria, A.D. 1847, with a Chronological Table of the Titles Or Subject-matter of All the Public General Acts During that Time, and Index, Vol. 3, (Edinburgh, 1876) Wallace, V., ‘Presbyterian Moral Economy: The Covenanting Tradition and Popular Protest in Lowland Scotland, 1707–c. 1746,’ in Scottish Historical Review, Vol. 89, No. 1 (2010), pp. 54–72 Whatley, C. A., ‘Economic Causes and Consequences of the Union of 1707: A Survey’, in Scottish Historical Review, Vol. 68, No. 2 (1989), pp.150–181 ———, ‘the Union of 1707, Integration and the Scottish Burghs: The Case of the 1720 Food Riots’, in Scottish Historical Review, Vol. 78, No. 2 (1999), pp.192–218 Online sources Ehrenstein, C., ‘Erskine, John, styled twenty-second or sixth earl of Mar and Jacobite duke of Mar (bap. 1675, d. 1732), Jacobite army officer, politician, and architect’, Oxford Dictionary of National Biography, (Oxford, 2004) Healey, E., ‘Middleton, George (1692–1747)’, Oxford Dictionary of National Biography, (Oxford, 2004) Murdoch, A., ‘Campbell, Archibald, third duke of Argyll (1682–1761), Politician’, Oxford Dictionary of National Biography, (Oxford, 2004)

8 Conclusion

Between 1690 and 1727, Scotland was in a state of transition. It was a period of advancement but also of loss, punctuated by grand schemes, financial calamities, and Union. So complex was the Scottish situation that identifying a Scottish Financial Revolution has historically been difficult. The same economic factors that drove the revolution in England – primarily that of covering the cost of war– did not exist in Scotland pre-Union, and in the decades which immediately ­followed 1707, the country was in general met with apathy from the new British administration when it came to its economic development. In turn, Scotland experienced a dearth of financial projects. This book has therefore provided a framework in which the Scottish experience of tremendous political and constitutional change was central in determining the character of country’s financial revolution. It has hypothesised that the Scottish Financial Revolution was a series of financial and economic developments occurring over three intersecting, but distinct, phases. The first period began in 1690 as Scotland emerged from the upheaval of the Glorious Revolution. Financial developments in Scotland were not, however, linked to the revolution in the same way they were in England. The revolution settlement, with the move towards a constitutional monarchy under William and Mary, the introduction of checks on royal prerogative and more secure property rights, has been central in theories around England’s Financial Revolution.1 These theorise that the settlement boosted confidence in the English state’s commitment to honour its debts, which in turn allowed for the creation of novel ways to provide loans to the government. Projects undertaken in Scotland, meanwhile, were not established to lend to the government – the Bank of Scotland (BoS) was in fact explicitly forbidden from doing so – and instead, there was a focus on private enterprise and the expansion of credit. The country did, however, advance in a similar manner to England, with a growth in joint-stock companies, including the formation of a major joint-stock bank, between 1690 and 1695. In the second half of the decade, both countries experienced crises. In England, this manifested in financial problems in 1696–97, with the Bank of England (BoE) suspending payments, a difficult recoinage, and issues with the stock market; while in Scotland, a second successive bad harvest in 1697, accompanied by an increase in food prices, led to widespread starvation and prompted an outflow of coin from the country to cover the cost of much-needed imports.2 The loss of trade and taxation associated with DOI: 10.4324/9781003284819-8

158 Conclusion the Nine Years’ War (1688–97) and the loss of the Scottish colony at Darien then compounded the Scotland’s poor economic situation, and the first phase of the Scottish Financial Revolution ended in 1700. The second phase then began in 1700 and ended in 1727, and it is best described as a movement that focused on innovative financial ideas and foreign projects. Already labouring under poor economic conditions, Scotland was dealt an additional blow in December 1704, when a funding deficit forced the Bank of Scotland to suspend operations. The stop was short-lived, lasting for four months, but when combined with the ongoing legislative battle around the future relationship of Scotland and England, and as recriminations around the failure of Darien intensified, it became an important factor behind the financial literature of 1705. The writers of these works attempted to address Scottish economic problems by providing methods by which to capitalise the Scottish economy and enlarge the Scottish state. Each of the ideas promoted in 1705 were, however, rejected by the Scottish Parliament, with many members of the House having already turned their attention towards union with England as the solution to Scottish problems. Following the Anglo-Scots Union in 1707, Scotland lost its autonomy and many of its institutions, and a political vacuum emerged as parliamentarians and nobility headed south to London. In the absence of Scottish agitation in the immediate post-Union years, the new British government became largely apathetic to events north of the border, and it was not until the mid-1720s that Scottish financial development became a concern for the Parliament in London.3 In the meantime, financially innovative ideas had been shared and promoted by Scotsmen throughout Europe and North America. These included pushing through a Loan Office to issue paper bills against land security in New Jersey, promoting a national bank in France in 1701, overhauling French public finance between 1716 and 1720, and the various economic endeavours of London-based Scots. The third phase of the Scottish Financial Revolution then occurred from 1727 onwards as the event was reignited in Scotland. This had been driven by the Edinburgh and London Equivalent Societies. These groups, through a process of sustained organisation, successfully distilled the innovative financial ideas that had been circulating in Europe and England into the new Royal Bank of Scotland (RBS). The bank was built on ideas that had developed beyond Scottish borders during the first quarter of the eighteenth century – primarily on novel concepts of what constituted money and the capitalisation of new ventures through the refinancing of old debt. These were ideas with significant Scottish influence, with the concepts popularised by Scottish economist John Law being particularly important in the foundation of RBS. In 1746, the BoS and RBS were then joined by a third bank, the British Linen Bank – a project driven by men previously involved with RBS. Following this, a boom in Scottish banking occurred, with 32 Scottish banks (issuing and non-issuing) in existence by 1769.4 It is remarkable that a 32-year gap existed between the formation of the BoS and the RBS, yet in the 42 years between 1727 and 1769, 30 Scottish banks were established. The examples used in this book point to the conclusion that Scottish ­individuals often played a central role in the financial development of countries other than

Conclusion  159 Scotland, when at the same time financial development in Scotland was stunted. John Law and William Paterson are key examples of this. Paterson was a central figure in the foundation of the BoE, while Law overhauled French public finance. Both men were the source of ideas that were hugely important for the development of contemporary European financial models. In Scotland, however, the political landscape made establishing financial projects difficult, both in the years directly before Union, and in the decades after it. Paterson and Law made bold attempts to establish their own financial systems in Scotland, Paterson with the calamitous Darien Scheme and Law with his land bank ideas of 1705. Traditionally, the history of both men in their native land has therefore been defined by failure; Darien was a failure and Law failed to establish a Scottish bank. As this book has demonstrated, however, Law’s ideas and Paterson’s foresight were central to the formation of the Royal Bank of Scotland in 1727. The first governor of the bank, Archibald Campbell, Earl of Ilay, was a long-time advocate of Law’s monetary theory and possessed multiple copies of each of his works in his library.5 Like Law, Ilay believed that an expansion of the money supply was desirable and used RBS to do this. Law had also reimagined what constituted money and saw company shares as financial instruments that were capable of acting as a medium of exchange and becoming new monetary instruments.6 This type of economic thought was central to the process of transferring Equivalent stock into RBS capital in 1727. We must also remember that the London-based Equivalent Society was the brainchild Paterson. He was aware that those with an interest in the Equivalent payment were not confined to Scotland, but as interest payments could only be collected in Edinburgh, many stakeholders found managing their investment difficult.7 He, therefore, proposed the London Society for the Subscribed Equivalent Debt and included a clause entitling him to a healthy profit from the group for the next 21 years.8 Paterson died in 1719, however, five years before the London and Edinburgh Societies merged and were awarded a Royal Charter and eight years before their debt was alchemically transferred into capital for the new bank. While he, therefore, failed to profit fully from the venture, his foresight in establishing the society was a crucial step in preparing the conditions for the establishment of RBS, Scotland’s first new financial institution in over 30 years. When it comes to comparing the Scottish and English financial revolutions, this is difficult. England had a much larger economy, and the fiscal pressures of war drove financial innovation. Scotland meanwhile was not lacking in innovative financial ideas, but this did not translate into the formation of new institutions, with an absence of any new financial bodies between 1695 and 1727. As this book has demonstrated, there were undoubted parallels between the revolutions in both countries during the early 1690s, after which a divergence took place. The English Financial Revolution has been covered in several landmark books that viewed events through the lens of state-building.9 These provide a narrative in which novel economic projects emerged, and when effective, they brought together the ingenuity of individuals with the state, establishing financial institutions, extending credit, and bankrolling national spending. Before embarking on this project, I had viewed the Scottish Financial Revolution as lacking this state-building character.

160 Conclusion This view was framed by Scotland’s political circumstances in the first quarter of the eighteenth century: firstly, as a small country, struggling economically, and on the verge of a parliamentary union with its larger neighbour; and secondly, as a minor partner which struggled to find its feet after Union and which became in effect a stateless nation in the decades that followed 1707. However, a study of the financial literature which emerged over the summer of 1705 has demonstrated that while the writers involved often disagreed on the best method by which to improve the Scottish economy, the literature shared two overarching themes. Firstly, there was a concerted effort to establish a method of capitalising the Scottish economy, whether this was through an expansion of credit, the introduction of a new currency, or the reform of the country’s banking sector. Secondly, state-building was a central aspect of this literature, in that the majority of proposals rested on the erection of new government institutions and an enlargement of the Scottish state in order to oversee the projects. The Scottish and English revolutions, therefore, developed in similar ways in theory if not in practice. For the reasons outlined in this book, locating and defining the Scottish Financial Revolution have historically been difficult. It is my hope that the model developed here for understanding the revolution will prompt scholars working in the field to identify and explore further examples of Scottish contributions to financial developments in Scotland and elsewhere. As writers on the English Revolution have disagreed on the start and end date of the event, or on the extent to which the event was evolution rather than revolution, I can only hope that similar matters will be debated regarding the Scottish Financial Revolution. Notes 1 D. North, and B. Weingast, ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, in The Journal of Economic History, Vol. 49, No. 4, (December, 1989) 2 For details, see W. R. Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720, Vol. 1, (Cambridge, 1910), pp.347–351; R. Saville, Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996), pp.39–46 3 T. M. Devine, ‘The Modern Economy: Scotland and the Act of Union’, in T. M. Devine, C. H. Lee, and G. C. Peden (eds), The Transformation of Scotland: The Economy Since 1700, (Edinburgh, 2005), p.27 4 L. H., White, Free Banking in Britain: Theory, Experience and Debate, 1800–1845, second edition, (Cambridge, 1984), p.27; for an overview of the crisis of 1772–73 see, P. ­Kosmetatos, The 1772–73 British Credit Crisis, (London, 2018) 5 R. L. Emerson, An Enlightened Duke: The Life of Archibald Campbell (1692–1761), Earl of Ilay, 3rd Duke of Argyll, (Glasgow, 2013), p.230 6 A. E. Murphy, John Law: Economic Theorist and Policy-Maker, (Oxford, 1997), p.61 7 Transfer book of the London Society (for the subscribed Equivalent debt), 1718–1724, Royal Bank of Scotland, REQ/9 8 Transfer Book for the London Society, p.11 9 See P. G. M. Dickson, The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756, (London, 1967); H. Roseveare, The Financial Revolution, 1660–1760, (London, 1991); and J. Brewer, The Sinews of Power: War, Money, and the English State, 1688–1783, (New York, 1989)

Conclusion  161 Bibliography Primary sources Transfer book of the London Society (for the subscribed Equivalent debt), 1718–1724, Royal Bank of Scotland Archives, REQ/9 Secondary sources Brewer, J., The Sinews of Power: War, Money, and the English State, 1688–1783, (New York, 1989) Dickson, P. G. M., The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756, (London, 1967) Emerson, R. L. An Enlightened Duke: The life of Archibald Campbell (1692–1761), Earl of Ilay, 3rd Duke of Argyll, (Glasgow, 2013) Kosmetatos, P., The 1772–73 British Credit Crisis, (London, 2018) Murphy, A. E., John Law: Economic Theorist and Policy-Maker, (Oxford, 1997) Roseveare, H., The Financial Revolution, 1660–1760, (London, 1991) Saville, R., Bank of Scotland: A History, 1695–1995, (Edinburgh, 1996) Scott, W. R., The Constitution and Finance of English, Scottish and Irish Joint-Stock ­Companies to 1720, Vols. 3, (Cambridge, 1910–1912), Vol. 1 White, L. H., Free Banking in Britain: Theory, Experience and Debate, 1800–1845, second edition, (Cambridge, 1984) Edited collections and journals Devine, T. M., ‘The Modern Economy: Scotland and the Act of Union’, in Devine, T. M., Lee, C .H., and Peden, G. C., (eds), The Transformation of Scotland: The Economy since 1700, (Edinburgh, 2005), pp.13–33 Emerson, R. L., ‘The Scottish Context for David Hume’s Political-Economic Thinking’ in Schabas, M., and Wennerlind, C., (eds), David Hume’s Political Economy, (London, 2008), pp.10–30 Harsin, P., John Law: Oeuvres complètes, Vol. 1, (Paris, 1934) North, D., and Weingast, B., ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, in The Journal of Economic History, Vol. 49, No. 4 (Dec., 1989), pp.134–165

Index

Note: Page numbers followed by “n” denote endnotes. Act of Security 1704 15 Act of Settlement 15 Alexander, James 72–73 Alien Act 1705 15, 38 American Philosophical Society 72 Andrew Fletcher of Saltoun 118, 135 Andros, Edmund Sir. 36 An essay on the new project for a land-mint (Brown) 40 Anglo-Scots Union 12, 14, 19, 22, 23, 104, 107, 111, 118, 136, 137, 142, 158 anti-enclosure riots 144 arising equivalent 133, 134 Armitage, David 24n15 Armour, James 18, 39, 44 Asgill, John 38 Ayr Bank 147; speculative frenzy 147 Banco del Giro 91, 93 Banco del Rialto 91 Bank of Amsterdam 17, 42, 90, 91, 94, 95 Bank of England (BoE) 2, 5, 10, 11, 37, 61, 71, 86, 90, 95, 96, 107, 132, 133, 157; English Treasury 13; suspending payments 10 Bank of France 88 Bank of Scotland 3, 9, 10, 15, 18, 38, 46, 61, 103, 118, 157; Act of the pre-Union Scottish Parliament 13; fractional reserve model 18; ‘landcredit’ scheme 51n59; Pamphlet War 15; paper bills 41; Parliamentary Act, June 1695 11; Scottish commercial interests 13; 1695 Act 138 Banque Générale 5, 19 Barbon, Nicholas 38

Barclay, Robert 62–63 Battle of Blenheim 89 Belcher, Jonathan 75 Berkeley, John 62 Bibliothèque Mazarine 92 Bishopric of Salisbury 65 Blackwell, John 35, 36, 37, 39, 45, 46, 48n26; North American land bank 36; supplementary Lombard scheme 36 Bland, J. 49n36 Board of Trade 74 Board of Trustees for Fisheries, Manufactures and Improvements in Scotland 4, 145 Bowie, Karen 16 Briscoe, John 38 British Board of Trade 68 British fiscal-military state 108, 133 British government 108, 111, 112, 131, 132, 144 British Linen Bank 146, 158 British prisoners of war 109 Brown, Andrew 40, 44; gold and silver money 40; land mint 42; money, necessary for 41 Brydges, James 108, 109, 111 bullion 39, 43 Burnet, Gilbert 65 Burnet, William 60, 61, 64–66, 68, 75–76; New Jersey 79n53; paper money 69–73; A Plea for Paper Currency and A Defence of Paper Money 70 Campbell, Archibald 78n27, 114, 159 Campbell, Daniel 145 Campbell, John 20, 109, 136 Campbell, Lord Neil 63

164 Index Cantillon, Richard 71 Carey, Daniel 2 Carteret, George Sir. 62 Casa di San Giorgio 91 cash balance constraint 95–96 Chamberlen, Hugh Dr. 18, 23, 37, 38, 39, 40, 44, 91, 118 Chamillart, Michel 90, 92 Charles II 14, 37 Charles Maitland, 6th Earl of Lauderdale 104, 111–116 Churchill, John 108 Clerk, John 21–23, 28n104, 133 coach building and mining 13 coin 33, 39, 43; coin stocks 60; exchange of 42; paper money, issuance of 61–62; shortage of 61–62, 114; stretching back 16; value of 17 coinage reform 16 collateralised credit scheme 34 Compagnie d’Occident (Mississippi Company) 5, 19, 71, 87, 97, 132 Company of Scotland 9, 14, 18, 46, 103, 118, 132; monopoly of trade 12; shareholders and creditors 134; trading to Africa and the Indies 11 Connecticut: ‘banco of lands’ 35; paper money 61 constitutional monarchy 37 Contrôlleur Général des Finances (French) 87 Council of Trade 20, 21, 22, 23, 28n95 Court Party, Scotland 21 Craige, John 65 Crawford, Patrick 142 ‘credible commitment’ theory 9–10 Cromwell, Oliver 35 currency shortage, Scotland 38 Dalrymple, Hew Sir. 142 D’Aranda, Paul 141 Darien Scheme 3, 4, 5, 17, 46, 103, 158, 159; failure 38; London-based proprietors 12; London merchants 12; subscriptions 12–13 debt-for-equity swaps 131, 132 Decker, Matthew Sir. 109 Defoe, Daniel 118 Deringer, William 21 Desan, Christine 43 digital wallets 1 Dominion of New England 36 ‘dot com’ bubble 1 Douglass, William 74

Drummond, Andrew 104–107; financial opportunities 107; political and commercial life 105 Drummond, John 104, 106, 107–111, 136; British administration 108; British prisoners of war 109; financial contacts 109; financial services to Tory merchant 108; government business overseas 109; ‘scots projects’ lack 107; wealth and importance 111 Drummonds Bank 104, 105–107; military money 108 du Mont, Olivier 88–97 Dutch East India Company 86 Earl of Roxburgh 44 East India Company (EIC) 12, 86, 96, 109, 110, 142; as English companies model 11; Dutch EIC 96 East Jersey 61–64 economic: activity 15, 23, 38; crisis 3, 9, 20, 38; development 10; growth 10; opportunity 43; programme 34; transactions 34 Edinburgh Equivalent Society 135–136, 139, 140, 158–159; equivalent societies 140–141 England: Board of Trade 17; financial innovation 37; financial problems 1696–97 10; Financial Revolution 2, 3, 9, 10, 157, 159; joint-stock companies 10; land security 36; ‘Office of land-credit’ in 37; postrevolutionary uncertainty 37; Scotland border and coastal trade 15; substantial financial debate 37; tit-for-tat legislative war 15; see also English English: administration 12–13; Board of Trade 21; credit 37; economy 143; Financial Revolution 46; land bank 35, 42, 117–118; National Land Bank 45; trade 37; see also England English Mint/Royal Mint 108, 112, 114, 115, 116, 118, 119 English post-Union policy 144; plagiarism 91 Equivalent Company 120, 141–143, 146, 148; Royal Charter 159; Scottish Treasury 39 Equivalent payment 132, 133, 159 Erskine, James 112 Erskine, John 112

Index  165 Essay on a Land Bank (Law) 86, 88, 91, 96, 97 Faure, Edgar 88 Fauske, Chris 2 Ferguson, William 20 financial crises 1 financial literature, Scottish 15–23, 103 financial markets 131 Finlay, Christopher 2 Fletcher, Andrew 40, 44 Franklin, Benjamin 60 France: Banque Royale (1718) 19, 87; Ferme générale 19, 87 French: economy 132; global trade 18; military expenditure 89; proposals 89–90, 93–94, 97–98 French Royal Mint 87 French Settlers 37 Galilei, Galileo 118 George I 106, 110, 113, 136 George III 106 George IV 106 Gibbon, Edward 108 Glorious Revolution 1688–89 9–10, 15, 37, 64, 71, 105; revolutionary settlement 37; Robert III (1390– 1406) 16 gold and silver money 40, 41 Gordon, John 107 government policy 106 Graham, James 106 Great Britain 104 Gregory, David 115, 132 Grotius, Hugo 118 Grubb, Farley 76n3 Gwyn, Francis 50n39 Hamilton, Earl 88 Hamilton, Lord Archibald 136 Hanoverian Succession 104 harbour establishment 14 Harley, Robert 108 Harrison, Edward 142 Harsin, Paul 88 Hartlib, Samuel 34, 35 Heinsius, Anthonie 110 Henry VIII 118 Hodges, James 17–18; ‘publick revenue’ fund 17, 18 Horsefield, J. K. 118 Hunter, Robert 65 Hutcheson, France 118

Jacobite/Williamite splits 37 Jacobitism 20, 37, 104–106, 110, 112, 137, 143, 145, 146 James I of England 14 James VI & I 14, 15 James VII & II 9, 36, 37, 39, 103, 105, 106, 110 John, Henry St. 108 joint-stock bank 45–46, 157 joint-stock company 9, 13, 18, 19, 37, 131 Ker, John 44 The Key of Wealth, Or, A New Way for Improving of Trade (Potter) 34–35 Kleer, Richard 38 land bank model 18, 20, 21, 34, 35, 36, 40, 44, 118; conceptualisation of 45; development of 44–46; domestic economy 45; establishment of 42; landowners, credit arrangements for 46; landowning class 68; land security 36; operating costs 39; paper currency 42; Scottish debate 38–44; secure commodity 35; silver bullion 42–43; state-operated bank 39; subscriptions for 37 ‘landcredit’ scheme 38, 51n59 land mint 40, 41 Law, John 5, 16, 18–19, 21, 42, 132, 143, 158–159; Banque Royale (1718) 19, 87; as an economic thinker 89; banking and financial ideas 91; bank in Turin 97; benefits of the bank 94; Contrôlleur Général des Finances 87; country’s money supply 43; decrees 87; English land bank, proposal for 87–88; Essay on a Land Bank (Law) 86, 88, 91, 96, 97; establishment of private French bank 86–87; excess liquidity, French economy 87; Ferme générale 87; financial instruments 146; gambling tables, Europe 86; imaginary value 43; involvement, compelling case 93–97; involvement evidence 91–93; land bank proposal 42; large-scale institutions 46; military money 108; ‘millionaire’ 5; Mississippi scheme 109, 116; monetary theory 42, 86; Money and Trade Considered 20, 42, 44, 45, 117, 146; money supply 42; ‘paradox of value’

166 Index 118; plagiarism 91; private jointstock bank, France 87; proposed National Bank of France, 1701–02 86–100; undisputed advocate, paper money 95 Lechmere, Nicholas 140 Lenman, Bruce 24n15 Locke, John 118 Lockhart, George Sir. 112 Logan, James 67 London: stock market 10 London Society for the Subscribed Equivalent Debt 108, 139; equivalent societies 140–141 Louis XIV 18–19, 86, 98 Macinnes, Allan 21, 22, 28n95 Maintenon, Madame de 90 Malt Tax 4, 104, 145 Massachusetts General Court 35–36, 39, 61, 67, 74 McGilvary, George 110 McGrath, Ivar 2 merchants: banking structure 34; committee 36; community 36; credit arrangements for 46; private credit 34 Military: military efficiency 106; military expenditure 35 Mississippi scheme 109 monetary theory 40, 42, 86 monetary transactions 1–2 money 18, 22, 35, 39, 40; bipolar exchange 43; ‘imaginary’ value 43; interconnectedness of 39, 43; physical object of 41; subject of 41; vs. trade 42; value of 40; velocity of 34 Money and Trade Considered (Law) 20, 42, 44, 45, 86, 91, 93, 94, 96, 117, 143 Montagne, Georges de 90 More, Thomas 118 Morris, Lewis 74–75 Muldrew, Craig 71–72 Murphy, Antoin 20, 88 Murray, Atholl 116 Murray, William 106 National Land Bank 18, 37, 38, 117; banking schemes 38 Navigation Acts 49n30 Newell, Margaret 73 New Jersey 60, 64–66; assembly 77n13; Board of Proprietors 64; legislature 61; Loan Office 60, 75; Loan

Office, emergence of 66–69; merchants 73–74 New Jersey Loan Office 61; emergence of 66–69; impact of 73–74; Scottish support 69–73 Newton, Isaac 65, 108, 112, 115 New York Library Society 67, 72 Nine Years’ War (1688–97) 3, 9, 10, 37, 46, 89, 158 Oxford-Bolingbroke administration 110 Palace of Westminster in London 103 pamphlet war, Edinburgh 1705 15–23 Panama Canal 10 paper money 16, 18, 36, 39, 41, 132, 138; Burnet’s ‘defence’ 69–73; implementation of 41; New Jersey assembly 77n13; paper currency 34, 39, 40, 41, 42; for payment of taxes 18; to taxation 17; tax-backed 60; winding down, colony 74–75 ‘paradox of value’ 118 Paris Mint 89 Paterson, William 5, 11–12, 20, 21, 24n15, 132, 136, 141, 159 Patrick Campbell of Monzie 104, 116–120 Patterson, William 51n59 Payment Protection Insurance 1 Peace of Ryswick 20 Pennsylvania 67, 73 Penn, William 36, 62 Philadelphia 67 Philippe II, Duke of Orléans 19, 86 Pitt, Thomas Jr. 109 Pitt, Thomas Sr. 122n47 Potter, William 34, 37, 45; private credit 34 Public Accounts Committee, Scottish 20, 22, 23 Purvis, Thomas 68–69 Quaker 62–63 Queen Anne’s death 15, 104 rampant economic nationalism, European 14 Robertson, John 20 Roseveare, Henry 6n7 Rouillé du Coudray, Hilaire-Armand 92 Rowlands, Guy 88 Royal African Company 110 Royal Bank of Scotland (RBS) 5, 6, 16, 131, 132; charter and formation of 141–142; context of the new bank,

Index  167 1700–27 142–146; Scottish banking growth, 1727–72 146–147 Royal Exchange Assurance Company 110 Royal Fisheries group in London 35–36 Royal Society of London 65 salt production 11 Saville, Richard 137 Scotland: balance of payments 22; bank note 135; book trade 16; border and coastal trade 15; British State 104; coin stock of 114; commission 133, 134; The Crown 64–65; debate 38–44; domestic economy of 113; du Mont letters 89–91; economic crises mid- to late-1690s 10; economic problems 21; economy 39, 44, 62–63, 113, 144; Edinburgh and London Equivalent Societies 158–159; export coin 16; exports 43; financial backing 11; financial confidence 11; financial debate 16; financial developments 3, 158; Financial Revolution 2–3, 10, 15, 23, 104, 137, 157, 159; integration into British framework 4; investors 17; joint-stock companies 10, 13; land bank 18, 40, 42; land-based paper currency 34, 42; Loan Office 69–73; mass migration 9; merchants 12; metal currency 41; monetary system 41; money supply 42; National Fund of Money 21; ownership of land on paper 41; political society 103; poor economic condition 9; post-Union policy 144; private banks 17; proposed bank 89–91; rural incomes 9; Scotland post-Union 104; Scottish Treasury 39; Scots coin 20; Scots pound 137; Scottish proprietors 63; Scottish Treasury 39; substantial economic development 9; tit-for-tat legislative war 15; trade and shipping 9, 17; views on economy 159–160 Scotland’s Financial Revolution: ‘credible commitment’ theory 9; financially confident 9; joint-stock ventures 9; pamphlet war 1705 15–23; substantial economic development 9 ‘scots projects’ lack 107 Scottish Book Trade 16 Scottish Mint 4, 16, 103, 104, 111–116, 132

Scottish Money Supply 39, 43 Scottish Privy Council 22, 103, 104 Scott, W. R. 23n3 Seton, William 133; Judicature of Trade 17, 20 1711 South Sea Act 140 1705 Act for a Land Mint 44 short-term credit instruments 133 silver coins 33, 42, 43, 113, 114, 118, 125n117 Smith, Adam 118, 119 Sophia of Hanover 15 South Sea Bubble 2 South Sea Company 71, 109, 116, 131, 140 standardised metal coins 33 Stewart, Daniel 114–115 taxes: imposition of 9; incentive 17; paper money 60 Thor Møhlen, Jørgen 90–91, 98 trade: balance of 39, 43; fluidity of 42; interconnectedness of 39, 43 Treasury and Exchequer fees 115 Treaty of Union 112, 114, 132; Article 13 of 22 Treaty of Utrecht 110 Union of the Crowns 106 U.S. investors 1 Utrecht: peace negotiations 110 Victor Amadeus II, Duke of Savoy 86 von Pufendorf, Samuel 118 Walpole, Robert 110 Walsh, Patrick 2–3 War of the Spanish Succession (1701–13) 18, 46, 71, 90, 106, 109 Watt, Douglas 12 Wealth of Nations (Smith) 118 Wennerlind, Carl 6n7 West Jersey 64 Whatley, Chris 21, 144 William II & III 14, 19, 40, 108 William of Orange 65 William Seton of Pitmedden 17 Winthrop, John Jr. 35 Woodbridge, John 35, 36, 39, 45, 48n15; Bank of money 35; note-issuing bank 35; subscriber credit fund 35 world economy 1 Zoffany, Johan 105