This month we review two books, one about Scotland’s past, the other about its possible future...
The Price of Scotland: Darien, union and the wealth of nations, Douglas Watt, hardback, 312 pages, ISBN 978-1-9-0522263-6, Luath Press Limited, 2007, £19.
A map of Isthmus of Darien made in 1697. The disastrous colonial speculation by Scottish investors ended with a Westminster bailout on advantageous terms.
Douglas Watt has written a splendid account of the Darien disaster and its influence. In 2008, this book won the Hume Brown Senior prize in Scottish History, Scotland’s most prestigious history award. From 2003 to 2006 the author was a post-doctoral research fellow in the Scottish History department of Edinburgh University, funded by the Stewart Ivory Foundation to research the financial aspects of the history of the Company of Scotland (Darien Company).
It was at Darien in modern-day Panama that Scottish speculators – landlords and nobles for the most part – planned a colony, to be called “Caledonia”. Its rapid ruin played a large part in persuading Scotland to accept the Act of Union, and nationalist mythology still presents it as some kind of English trick.
In 1695 the Scottish Parliament passed an “Act for a Company Tradeing to Affrica and the Indies”, the Company of Scotland, a joint-stock company which promised to develop colonies and boost Scotland’s economy. A large number of investors – nobles, landowners, merchants, ministers of the Kirk, lawyers and institutions - invested in the Company.
With the financial revolution of the 1690s and the explosion of capital markets, the first stock market boom became a true mania: they raised £400,000, four times the Scottish government’s annual revenue. Then followed the financial storm of 1696-97, and harvest failures in 1695, 1696 and 1698, causing dearth and famine. The Company ran out of money in 1701.
The Company was badly managed: “in order to persuade investors that the shares were a worthwhile investment, an expensive fleet was constructed, but in order to pay for the impressive fleet, foreign investors were required. This was a very high risk circular strategy ...” No assets were insured and the location was not surveyed.
Watt comments, “The second ‘management’ phase was truly disastrous... Significant mismanagement of the cargo and provisions on the first expedition followed and the climate and location proved calamitous... The failure of the colony and the loss of all the capital was principally the result of decisions taken by the directors...The directors lost touch with reality, influenced by the manic overconfidence of the nation.”
Darien was “a disease-ridden jungle with a poor harbour abandoned by the Spanish nearly two centuries before”. The venture proved to be a fiasco. It cost 2,000 lives, eleven ships out of 14, and more than £150,000.
The directors, unsurprisingly, tried to blame it all on the English: “A vigorous propaganda campaign was launched by the directors to deflect blame from themselves onto the English government.”
The Westminster government gave the shareholders of the Company back all that they had invested in 1696, plus 43 per cent in interest payments, by the 15th article of the Treaty of Union.
“This was an extraordinarily handsome return for the shareholders – a bailout of 142 pence in the pound – and was a truly incredible result for the directors, who had squandered the capital of the Company and now, as major shareholders, were to be generously rewarded for their mismanagement.”
As Watt observes, “the directors who were responsible for squandering the capital received the largest payouts.” ■
Scotland’s Choices: the referendum and what happens afterwards, by Iain McLean, Jim Gallagher and Guy Lodge, paperback, 223 pages, ISBN 978-0-7486-6987-5, Edinburgh University Press, 2013, £14.99.
This excellent book is a study of the implications of the referendum for Scotland’s, indeed Britain’s, future. Iain McLean is a Professor of Politics at Oxford University. Jim Gallagher and Guy Lodge are both Gwilym Gibbon Fellows at Nuffield College, Oxford.
They point out that EU treaties oblige member countries to have a central bank. The SNP says the Bank of England would be Scotland’s central bank.
The SNP says that its 3 per cent corporation tax cut would lift output by 1.4 per cent, jobs by 1.1 per cent (27,000) and investment by 1.9 per cent – by 2034! But to take advantage of lower corporation tax, all a company has to do is set up a shell company to move its taxable profit, not any jobs or actual production, to the cheaper country.
The Scottish government has made no effort to devolve labour market law. It clearly supports the present anti-trade union laws.
Scotland also has higher levels of public spending than the rest of Britain. Its domestic tax revenues per head are the same as the British average. It would rely on current oil revenues to support its public spending. As the authors conclude, “with oil revenues at their 2009-10 level, an independent Scotland would have either to raise taxes or cut services, or both.” ■