Abstract
The stock market which arose in London toward the end of the seventeenth century emerged from a confluence of political, social, economic and cultural processes. The focus of this chapter is on the extent to which England’s participation in continental war between 1689 and 1697 called the nascent market in securities into being and, furthermore, conditioned its early development. The argument will develop as follows. To begin, the case for war as a catalytic effect upon the stock market is presented; consideration is also given to the future role the capital market in securities would play in financing the wars against France over the course of the long eighteenth century. Next, an historical question is posed: how was it that contemporaries came to identify fluctuations in abstract share prices as real changes in the national fortunes of their country? Answers are sought in two places. First, it is noted that the forts and ships of overseas trading companies were especially vulnerable to attack during periods of episodic warfare: profits would slump, dividends were suspended, and the share price would tumble. Second, attention is given to the value of securities issued to fund the conflict; they are seen to rise and fall in response to news of events affecting the survival of the Glorious Revolution because, ultimately, their worth depended upon the promises of future payments made by the regime.
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K. G. Davies, ‘Joint-Stock Investment in the Later Seventeenth Century’, Economic History Review, n.s., 4, no. 3 (1952): 297.
These were as follows: ‘the Mines Royal, the Mineral and Battery Works, the New River, the York-buildings, and the Shadwell Waterworks, the Fire-insurance company, that for making Salt Water fresh, the Convex Lights, the White Paper Makers, the Royal Lustring company, and lastly a provincial water supply undertaking at Newcastle’. William Robert Scott, The Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to1720, 3 vols. (Cambridge, Cambridge University Press, 1910–1912), I: 327.
G. D. B. Parkinson, ‘The London Stock Market in the 1690s’ (unpublished MPhil thesis, University of Cambridge, 2006), ‘Table 3.2: Estimates of Investment Community Size in 1690, 1695, 1700’, 105.
The entry in the Oxford Dictionary of National Biography serves as an excellent introduction to this personality of the proto-Enlightenment, but see also D. T. O’Rourke, ‘John Houghton (1645–1705): Journalist, Apothecary and F. R. S.’, Pharmaceutical Historian 9, no. 1 (1979): 2–3.
Samuel Jeake, An Astrological Diary of the Seventeenth Century, Michael Hunter and Annabel Gregory (eds) (Oxford: Clarendon Press, 1988), 233 (16 April 1694).
D. W. Jones, War and Economy in the Age of William III and Marlborough (Oxford: Basil Blackwell, 1988), 249–50.
See, for example, Parkinson, ‘London Stock Market’, 119, ‘Table 4.3: Occupations of Owners of Hudson Bay Stock, 1692–1698’, 145; Anne L. Murphy, ‘Society, Knowledge and the Behaviour of English Investors, 1688–1702’ (unpublished PhD thesis, University of Leicester, 2005), 144, ‘Table 5.5: Social Status/Occupation of Original Subscribers to the Bank of England’, 147, ‘Table 5.7: Social Status/Occupation of Subscribers to the Bank of England, 1697’, 150. It should be remembered that occupational labels need to be used with caution. For a discussion of the problems, see James Alexander, ‘The Economic and Social Structure of the City of London, c. 1700’ (unpublished PhD thesis, London School of Economics, 1989), 24–8.
Christine MacLeod, Inventing the Industrial Revolution: The English Patent System, 1660–1800 (Cambridge University Press, 1988), 150.
See also Christine MacLeod, ‘The 1690s Patents Boom: Invention or Stock-Jobbing?’ Economic History Review, 2nd series, 39, no. 4 (1986): 549.
For further discussion, see J. Keith Horsefield, ‘The Stop of the Exchequer Revisited’, Economic History Review 35, no. 4 (1982): 511–28.
John Brewer, The Sinews of Power: War and the English State, 1688–1783 (London: Unwin Hyman, 1989).
See also P. G. M. Dickson, The Financial Revolution in England: A Study in the Development of Public Credit, 1688–1756 (London: Macmillan, 1967).
The Examiner, 14 (2 November 1710); repr. Frank H. Ellis (ed.), Swift vs Mainwaring: The Examiner and the Medley (Oxford: Clarendon Press, 1985), 7.
Henry L. Snyder, ‘The Circulation of Newspapers in the Reign of Queen Anne’, The Library 23, 5th series, no. 3 (1968): 213;
Henry L. Snyder, ‘A Further Note on the Circulation of Newspapers in the Reign of Queen Anne’, The Library 31, 5th series, no. 4 (1976): 388–9;
J. M. Price, ‘A Note on the Circulation of the London Press, 1704–1714’, Bulletin of the Institute of Historical Research 21 (1958): 221. It should be noted that many of these newspapers went overseas and consequently were exempted from the tax.
John J. McCusker and Cora Gravesteijn, The Beginnings of Commercial and Financial Journalism: The Commodity Price Currents, Exchange Rate Currents, and Money Currents of Early Modern Europe (Amsterdam: Neha, 1991), 297.
Flying Post, 17 (25 June 1695). This, then, places the newspaper reportage as starting several years before that implied by Murphy. Murphy, ‘Society, Knowledge, Behaviour’, 96. Moreover, contrary to Smith, newspapers did not discontinue the practice of quoting changes in prices after the dislocations of 1696–1697, but rather included them with increased frequency. C. F. Smith, ‘The Early History of the London Stock Exchange’, American Economic Review 19, no. 2 (1929): 212.
Larry Neal, ‘The Rise of a Financial Press: London and Amsterdam, 1681 – 1810’, Business History 30, no. 2 (1980): 163–4.
Narcissus Luttrell, A Brief Historical Relation of State Affairs from September 1678 to April 1714, (6 vols.) (Oxford: Oxford University Press, 1857), III: 520 (5 September 1695).
John Evelyn, in E. S. de Beer (ed.), The Diary of John Evelyn: Now Printed in Full from the Manuscripts Belonging to Mr. John Evelyn, 6 vols. (Oxford: Clarendon Press, 2000), V: 174 (22 April 1694); Whiston’s Merchants Weekly Remembrancer (17 June 1689).
On the armed struggle for mastery in the bay, see William Thomas Morgan, ‘A Crisis in the History of the Hudson’s Bay Company, 1694–1697’, North Dakota Historical Quarterly 5, no. 4 (1931): 197–218.
The rivalry ceased only when the bay was finally designated as Britis by the Treaty of Utrecht in 1713. See E. E. Rich, ‘The Hudson’s Bay Company and the Treaty of Utrecht’, Cambridge Historical Journal 11, no. 2 (1954): 183–203.
Anne L. Murphy, ‘Dealing with Uncertainty: Managing Personal Investment in the Early English National Debt’, History 91, no. 302 (2006): 208.
A. C. Carter, ‘The Huguenot Contribution to the Early Years of the Funded Debt, 1694–1714’, Proceedings of the Huguenot Society 19, no. 3 (1955): 21–41 [reprinted in Getting, Spending and Investing in Early Modern Times: Essays on Dutch, English and Huguenot Economic History, Alice Clare Carter (ed.) (Assen: Van Gorcum, 1975), 76–90];
W. Marston Acres, ‘Huguenot Directors of the Bank of England’, Proceedings of the Huguenot Society 15, no. 2 (1933–1937): 238–48.
See also Bruce G. Carruthers, City of Capital: Politics and Markets in the English Financial Revolution (Princeton, NJ: Princeton University Press, 1996), 193.
As well as orchestrating the Million Adventure, Thomas Neale played a disproportionate role in the rise of the early stock market. For a biography, see J. H. Thomas, ‘Thomas Neal, a Seventeenth-Century Projector’ (unpublished PhD thesis, University of Southampton, 1979). For an account of the Million Adventure and other lottery schemes of the period, see Anne L. Murphy, ‘Lotteries in the 1690s: Investment or Gamble?’, Financial History Review 12, no. 2 (2005): 227–46.
The methodology of linking Jacobite activity with price changes in capital markets was first proposed by John Wells and Douglas Wills in an empirical test of the North and Weingast thesis. John Wells and Douglas Wills, ‘Revolution, Restoration and Debt Repudiation: The Jacobite Threat to England’s Institutions and Economic Growth’, Journal of Economic History 60, no. 2 (2000): 418–41.
North and Weingast have argued that it was removal by Parliament of the sovereign’s arbitrary power to renege on debts which led to the dramatic rise in capital markets after 1688. Douglass C. North and Barry R. Weingast, ‘Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England’, Journal of Economic History 49, no. 4 (1989): 803–32.
E. S. de Beer (ed.), The Correspondence of John Locke, (8 vols.) (Oxford: Clarendon Press, 1976–1989), V: 248. Queen Mary died of smallpox on 28 December 1694.
The coefficient of determination (R2) for the regression is 0.68. For an expla nation of these terms, see Damodar Gujarati, Essentials of Econometrics (New York: McGraw-Hill, 1992), 163.
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© 2013 Giles Parkinson
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Parkinson, G. (2013). War, Peace and the Rise of the London Stock Market. In: Reinert, S.A., Røge, P. (eds) The Political Economy of Empire in the Early Modern World. Cambridge Imperial and Post-Colonial Studies Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137315557_7
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