City of Capital City of Capital POLITICS AND MARKETS IN THE ENGLISH FINANCIAL REVOLUTION Bruce G. Carruthers PRINCETON UNIVERSITY PRESS PRINCETON, NEW JERSEY Copyright 1996 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, NewJersey 08540 In the United Kingdom: Princeton University Press, Chichester, West Sussex All Rights Reserved Library of Congress Cataloging-in-Publication Data Carruthers, Bruce G. City of capital : politics and markets in the English financial revolution / Bruce G. Carruthers p. cm. Includes bibliographical references and index. ISBN 0-691-04455-4 (cl : alk. paper) 1. Capital market—History—17th century. 2. Capital market—History—18th century. 3. Great Britain—Politics and government—1689–1702. 4. Great Britain—Politics and government—18th century. 5. Bank of England—History—18th century. 6. East India Company—History—18th century. 7. South Sea Company—History—18th century. I. Title. HG5432.C37 1996 332′.0414—dc20 95-53190 CIP This book has been composed in Caledonia Princeton University Press books are printed on acid-free paper and meet the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources Printed in the United States of America by Princeton Academic Press 13579108642 For my parents, Janet Wilson Greenhowand Bruce Magoffin Carruthers; to my wife, Wendy Nelson Espeland; and to my children, Esther Jane Carruthers Espeland and Samuel Nelson Espeland Carruthers. Life goes on. CONTENTS List of Figures ix List of Tables xi Acknowledgments xiii CHAPTER ONE Introduction 3 CHAPTER TWO British Politics from 1672 to 1712 27 CHAPTER THREE Finance and State-Formation 53 CHAPTER FOUR Britain in Comparative Perspective 92 CHAPTER FIVE Financial Property Rights and the State 115 CHAPTER SIX Politics and the Joint-Stock Companies 137 CHAPTER SEVEN Trading on the London Stock Market 160 CHAPTER EIGHT Government Bonds and Political Bonds 195 Appendix 209 Notes 213 Bibliography 267 Index 299 FIGURES 3.1 Total and Military Expenses, 1692–1730 72 3.2 Total Income and Expenses, 1692–1730 74 3.3 Funded and Unfunded Debt as a Proportion of Total Debt, 1692–1730 81 3.4 Funded and Total Debt, 1692–1730 84 7.1 Market Prices of Joint-Stock Company Shares, January 3– December 23, 1712 176 TABLES 3.1 Revenue Inflows from Parliamentary Subsidy (22 & 23 Charles II, c.3), Given Royal Assent March 3, 1671 59 3.2 Sums and Annual Payments Owed to Creditors Affected by the Stop of the Exchequer, 1677 63 3.3 Number of Goldsmiths’ Assignments, 1677–1683 65 3.4 Sex, Social Rank, Location, Occupation, and Average Debts of Bankers’ Assignees, 1677–1683 66 6.1 Average, Minimum, and Maximum Votes for Winning Candidates in Annual Bank of England Directors’ Elections, 1707–1713, and East India Company Directors’ Elections, 1709–1712 145 6.2 Political Affiliations of Bank of England and United East India Company Directors, 1712 145 6.3 Political Affiliations and Financial Characteristics of Bank of England and United East India Company Shareholders, 1712 156 6.4 Selected Social and Financial Characteristics of Bank of England Shareholders, 1712 157 6.5 Selected Social and Financial Characteristics of United East India Company Shareholders, 1712 158 7.1 Transactions in East India Company Shares, 1661–1689 167 7.2 Bank of England, United East India Company, and South Sea Company Share Prices, 1712 174 7.3 Correlations of Bank of England, United East India Company, and South Sea Company Share Prices, 1712 174 7.4 Correlations of Changes in Bank of England, United East India Company, and South Sea Company Share Prices, 1712 175 7.5 Shareholdings and Transactions in Bank of England, and United East India Company Stock, 1712 178 7.6 Party Trading in United East India Company Shares, and Log- Linear Analysis 180 7.7 Party Trading in United East India Company Shares Involving Active Traders 182 7.8 Party Trading in United East India Company Shares Involving Inactive Traders 182 xii LIST OF TABLES 7.9 Party Trading in United East India Company Shares That Involved Wealthy Shareholders 183 7.10 Ethnic-Religious Trading in United East India Company Shares, and Log-Linear Analysis 184 7.11 Party Trading in Bank of England Shares, and Log-Linear Analysis 185 7.12 Ethnic-Religious Trading in Bank of England Shares, and Log-Linear Analysis 186 7.13 East India Company Shareholder Same-Party Partisanship by Political Status 190 7.14 East India Company Shareholder Partisanship by Party Support 190 7.15 Patterns of Trading in East India Company and Bank of England Shares among Political Parties, Ethnic-Religious Groups, and Guilds 193 ACKNOWLEDGMENTS SOCIOLOGICAL RESEARCH is a collective enterprise for which an individual author gets the credit or blame. Acknowledgments are an opportunity to spread that credit and blame around to those who truly deserve it. As this research moved forward, people too numerous to thank individually have examined and criticized various parts. Those who read a whole version may have already suffered enough, but nevertheless I must implicate Sarah Babb, Wendy Espeland, Carol Heimer, Christopher Jencks, Richard Lach- mann, Karl Monsma, Charles Ragin, Peter Siegelman, Arthur Stinchcombe, and Richard Swedberg for their careful readings and constructive com- ments. As members of my dissertation committee, John Padgett, Theda Skocpol, and the late James Coleman helped to launch this project. John and Theda have continued to provide valuable advice and support, and I remain inspired by the high standard of scholarly rigor set by their own work. In timely conversations, Mark Granovetter and Michael Burawoy helped me to clarify various of my arguments, but in time-honored fashion I must fall on my sword and accept responsibility for all remaining errors. The past and present members and staff of the Northwestern University Sociology Department have provided a truly supportive and friendly envi- ronment in which to undertake scholarship and have a family. Managing both has been much easier thanks to my colleagues but also, and especially, because of Heather Jones and Carmen Cranston. Thanks are due to two classical scholars, Jonathan Swift and Polly Hoover, for introducing me to Eumenes. Thanks also to Adam Gebler and Kate Wilson for their research assistance and to Ken Dauber for his graphic prowess. Working with Peter Dougherty and Bill Laznovsky at Princeton University Press has been a pleasure I recommend to all. For financial support, I am grateful to the American Bar Foundation (then directed by William L. F.Felstiner) and the Northwestern University Research Grants Committee. During my time in England, I received ample assistance from the staffs of the Bodleian Library, Bank of England Archives, British Library, Centre for Socio-Legal Studies, Corporation of London Record Office, Guildhall Library, India Office Library, Public Record Office, and the Royal Bank of Scotland Archives. P.G.M. Dickson, Evelyn Cruikshanks, and Henry Roseveare provided helpful advice, although I’m sure I didn’t follow enough of it. In addition to many other fine qualities, my friends have helped me re- main sane and enjoy life, two necessary conditions for getting research done. Thanks to Peter and Sean, Edwin, Lis, Alfred, Durkin, Ingrid and Bob, xiv ACKNOWLEDGMENTS Kathy and Nick, Sunita, Tom and Polly, Blair, Terry and Holly, Art and Carol, Mark, Maureen, Dennis and Susan, Bob and Lisa, Tessie, and Charles and Mary. For similar reasons, I thank my family, including Elspeth and Andrew, Mary and Erika, Anne and John, Scotty, Wendy, Mandy, Mark and Annie, Amos, Esther (I), and Obert. I am also deeply indebted to Samuel and Esther (II) for helping me to keep my work in proper perspec- tive. Finally, I owe more than I can ever say to Wendy Espeland, for many, many reasons. Throughout this book, I have used the masculine “he” as a generic pro- noun because the overwhelming majority of persons I am referring to were male. Early modern England was a patriarchal society, so an analysis of political and economic elites necessarily deals mostly with men. Parts of chapter 7 are reprinted from Bruce G. Carruthers, “Homo Economicus and Homo Politicus: Non-Economic Rationality in the Early 18th Century Lon- don Stock Market,” Acta Sociologica (1994), vol. 37, pp. 165–94, by permis- sion of Scandinavian University Press, Oslo, Norway. City of Capital Chapter One INTRODUCTION Eumenes, however, perceiving that, while they despised one another, they feared him and were on the watch for an opportunity to kill him, pretended to be in need of money, and got together many talents by borrowing from those who hated him most, in order that they might put confi- dence in him and refrain from killing him out of regard for the money they had lent him. The consequence was that the wealth of others was his body-guard, and that, whereas men generally preserve their lives by giving, he alone won safety by receiving. —Plutarch It [the Bank of England] acts, not only as an ordinary bank, but as a great engine of state. —Adam Smith EUMENES OF CARDIA was principal secretary to Alexander the Great and a member of his army. As a Greek general in a Macedonian force, Eumenes was regarded with suspicion and contempt. Those who served under him had to respect his martial abilities but this made the Macedonians fear and hate him even more. With the death of Alexander, Eumenes lost his sponsor and his situation suddenly became rather precarious. As Plutarch explained, Eumenes’ response consisted of an unusual hostage strategy. He borrowed as much money as he could, especially from his bitterest rivals. As creditors, Eumenes’ enemies acquired a financial interest in his ability to repay them, something which he could not do if he were dead.