Money For Nothing: The South Sea Bubble and the Invention of Modern Capitalism

The South Sea Company was formed to trade with Asian and Latin American countries but instead engaged in financial fraud on a massive scale, taking over the government's debt and promising to pay the state out of the money received from the shares it sold. This led to the birth of modern financial capitalism, the idea that governments can borrow money to fund projects and that individuals can invest in future prosperity. Thomas Levenson's book "Money for Nothing" provides a gripping account of the scandal and its impact on British society.

Format: Paperback / softback
Length: 480 pages
Publication date: 01 April 2021
Publisher: Head of Zeus

The Financial Times Economics Book of the Year

A captivating narrative of the most infamous scandal of early capitalism, a speculative frenzy that nearly brought down the British state during the scorching summer of 1720. Surprisingly, this scandal paved the way for the birth of modern finance.

The South Sea Company was established with the intention of conducting trade with Asian and Latin American countries. However, it possessed a mere handful of ships and engaged in minimal trade. Instead, it resorted to widespread financial fraud, assuming the government's debt and making promises to reimburse the state through the proceeds generated from the shares it sold.

The summer of 1720 witnessed a remarkable surge in share prices, resulting in substantial profits for many. However, the bubble eventually burst, leaving thousands of individuals with significant financial losses. Prominent figures such as Isaac Newton, Alexander Pope, and Thomas Levenson suffered substantial losses.

Thomas Levenson's exceptional account of the South Sea Bubble goes beyond recounting a colossal scam. It also serves as a testament to the emergence of modern financial capitalism. This ideology posits that individuals can invest in future prosperity, and governments can borrow money to facilitate positive change, such as supporting the growth of British naval and mercantile power. While these dreamers and fraudsters may have brought about the bankruptcy of Britain, they inadvertently enriched the world.

Praise for Money for Nothing:

"A scholar who makes complicated and subtle matters not just accessible but fun." - SIMON SEBAG MONTEFIORE

"Thoroughly researched and vibrantly written, Money for Nothing captures those heady, heartbreaking times, which still hold lessons for today." - DAVID KAISER

"A gripping story of scientists and swindlers, all too pertinent to our modern world." - JAMES GLEICK

It is tempting to view the South Sea bubblers, reminiscent of the tulip-mad Dutch of the 1630s, as financially naïve. However, upon closer examination, it becomes evident that they possessed a level of sophistication and foresight that was lacking in their contemporaries. The South Sea Company, for instance, employed a sophisticated marketing strategy that involved issuing prospectuses and promoting its shares through influential newspapers and magazines. This marketing effort, coupled with the allure of potential wealth, attracted a wide range of investors, including prominent figures such as Isaac Newton and Alexander Pope.

The South Sea Bubble also sheds light on the power of public opinion and the influence of media on financial markets. The widespread belief in the potential for enormous profits fueled the speculative frenzy, leading to a surge in share prices. The media, in turn, played a crucial role in amplifying this sentiment, with newspapers and magazines extensively covering the South Sea Company's activities and promoting its shares as a surefire investment.

Despite the devastating consequences of the South Sea Bubble, it is important to recognize that it had a profound impact on the development of financial markets. The crisis exposed the weaknesses of the existing financial system and led to the implementation of regulations and institutions to prevent future financial crises. It also sparked a renewed interest in economics and finance, leading to the emergence of new theories and approaches to managing financial risks.

In conclusion, the South Sea Bubble serves as a cautionary tale of the dangers of speculation and the importance of regulatory oversight. While it may have brought about the bankruptcy of Britain, it also paved the way for the birth of modern finance and contributed to the development of financial markets. The story of the South Sea Bubble reminds us of the need for responsible investing, economic prudence, and the importance of maintaining a robust financial system to ensure the stability and prosperity of societies.

Weight: 422g
Dimension: 128 x 197 x 41 (mm)
ISBN-13: 9781784973957