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In 1720, a devastating financial panic swept across Europe, making rich men into paupers and ruining many political careers. The panic was rooted in a speculative mania surrounding anticipated high profits flowing from trade with the Americas. A group of British merchants set up the South Sea Trading Company to compete with French trading firms and obtained privileged trading rights with all of Spanish America. Most coveted of all was the exclusive right to sell African slaves to Spanish colonies. Enthusiasm for these and other less substantial companies soared, and investors rushed in, sending share prices skyrocketing. But rumors of fantastic spoils gave way to word that the original investors were dumping their shares and that many of the companies were worthless. The speculative bubble burst. Share prices plummeted, with nearly all the companies created at the time going bankrupt, and even many solid firms in Europe going under. The South Sea Bubble, as it came to be called, reflected the euphoria of overseas trading ventures and the greater interconnections across the world. But it also stood as a vivid example of the perils that could accompany global trade and investment. From 1600 to 1750, the circuits of world trade expanded as commerce continued to flow across the world’s oceans. Ships laden with sugar from Brazil, spices from Southeast Asia, cotton textiles from India, silks from China, and increasingly, silver from Mesoamerica and the Andes made their way from port to port. In these global trading networks, New World silver played a decisive role. It gave Europeans a commodity to exchange with Asian partners and began to tilt the balance of wealth and power in a westerly direction across Eurasia.
Chapter Objectives
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