Thomas Baston’s Thoughts on Trade and the Early Stock Market
Thomas Baston’s Thoughts on Trade, and a Publick Spirit is one of the most interesting works on political economics in Early Modern Britain. Published in 1716 and dedicated, as stated on the title page, “to all Lovers of their Country,” it is nothing less than an invective against stock-jobbers, projectors, fraud, financial degeneracy or corruption, and an acute warning about stock market bubbles, and was published at a time when Britain’s economic success was optimistic though its security was far from clear.
Baston, Thomas (fl. 18th century). Thoughts on Trade, and a Publick Spirit. Consider’d under the Following Heads, viz. I. Companies in Trade. II. Stock-jobbers. III. Projectors. IV. Corruptions in the Law and Public Offices. V. Of a Public Spirit.... London, Printed for the Author, 1716.
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London’s financial markets had been established in the 1690s, the decade which also saw Britain’s first boom and bust. By the early 1700s, the ethical overtones of greed and deceit of the market were increasingly evident. “The new possibilities of finance and investment produced a moral panic, but critics of ‘stock-jobbing’ also registered a more serious complaint: in an age where public debt was bought and sold in international markets, shadowy financiers now held a vast and illegitimate sway over the commonwealth.” A. Lebovitz, “An Economy of Violence,” p. 183).
Baston, in particular, took issue with the “vermin” stockbrokers whom he blamed for ruining “all industry and honest gain…to put a counterfeit value where there is no real one,” and he charged unscrupulous projectors with taking “Advantage to the Ignorant People, in order to gull them of their Money,” employing deceitful rhetoric about “Improvement of the small Sums of Money for the Benefit of the poor.”
One of his main problems was the way stockbrokers seemed to take advantage of an unsettled state. Britain’s economy—plagued with great debt from a series of recent wars—was becoming more reliant on private bankers and speculators whom, Baston keenly observed, may well exploit any unrest: “These wretched Men thrive best when the Nation is in a Ferment, in times of War, Rebellion, and publick Calamity, which they make a Market of.” Not only was this ethically wrong, for Baston it was damaging to the health of the state more broadly, as he developed in an extended metaphor comparing the “Body Politick” to the “Body Natural”: “for as the Body Politick may be compar'd to the Body Natural, so the Coin of a Kingdom may be compar'd to the Vital Blood in the Body of a Man, which if it lodges only in one part, and does not duly circulate throughout the whole, causes Plurisies, Apoplexies, Convulsions; and, in short, endangers, or destroys the Constitution.”
Baston also rightly pointed out that an evident lack of regulation and clear evaluation of intrinsic value would likely have dire consequences. To a society that was still fairly new to any sort of economic theorization as such, Baston cautioned against the exchange of shares without a thorough assessment of the company or product’s actual worth: “No sooner is any company erected…but immediately ‘tis divided into shares and then traded for in Exchange Alley, before ‘tis known whether the project has any intrinsick value.”
The period’s most notorious economic figure, John Law, embodied many of Baston’s concerns. Law’s Money and Trade Considered, published anonymously in Edinburgh in 1705, had established the Scottish ex-gambler’s reputation as an economic theorist and the master of what we know as ‘finance capitalism’. He was also the engineer of one of the dizziest adventures in the history of world finance. Focusing on the nature of money and its close relation to trade, Law theorized that economic prosperity is dependent on money supply; credit can stimulate national growth and develop it via either loans in excess of the cash deposits or the issuing of paper money backed by land holdings. He believed, significantly, that money is not a physical thing but rather a way to measure and store value and function as a unit of exchange. Law put his theory into practice with the founding of the Banque Général in France in 1716, the year Thoughts on Trade was published.
Within the span of three years from his arrival in Paris, Law was chairing Europe's most successful conglomerate and was controlling all of France's finance and money creation. The value of shares in the now-famous ‘Mississippi Company’ rose fast as Law's empire expanded. The weak spot in the scheme was, however, the continued issuing of bank notes to fund purchases of shares in the company, including investments from the State in exchange of government debt instruments. Law wanted to convert the public debt into private equity. Soon inflation began to spark. The first significant sell-off of shares to turn capital gains into gold caused the system to crash at the end of 1720. The bankruptcy became known as the ‘Mississippi Bubble’. Law escaped to France and spent his final years in Venice.
Though less directly affected by Law’s actions, the growing British stockmarket had nevertheless been following the Scotsman’s lead in many ways. Only a few years after Thoughts on Trade was published, the infamous South Sea Bubble would prove the prescience of Baston’s words on his home soil. The South Sea Company was established in 1711 partly in an effort to convert Britain’s national debt into shares. The Company promised to be for British trade with the Spanish colonies of South America what The East India Company had done so successfully with trade with India. A broad spectrum of investors—now able to buy shares in installments and with credit—were lured to buy up shares in The South Sea Company, which subsequently skyrocketed in a number of months before plummeting, resulting in a severe economic crisis.
Baston’s treatise is all the more forceful for its personal element, the author’s own experience being an important source of his knowledge. In 1710, Baston was incarcerated for six years in the Kings Bench prison for debt. Thoughts on Trade contains a large section entitled Case of the poor Debtors, which reflects on his first-hand experience.
In 1716, Thoughts on Trade was issued entirely anonymously, although it was entered into the Stationers’ Register under Baston's name. In 1732, still proving its own intrinsic value, the work was published under the author’s name, with the new title Observations on Trade and a Publick.
Goldsmiths 5282; Kress 2981; Hanson, Contemporary Printed Sources for British and Irish Economic History 2217; Philobiblon, One Thousand Years of Bibliophily, no. 225. A. Lebovitz, “An Economy of Violence: Financial Crisis and Whig Constitutional Thought, 1720-1721,” Yale Journal of Law & Humanities 29, no. 2 (September 2018).
How to cite this information
Julia Stimac and Margherita Palumbo, “Thomas Baston’s Thoughts on Trade and the Early Stock Market,” PRPH Books, 25 November 2020, https://www.prphbooks.com/blog/baston. Accessed [date].This post is licensed under CC BY-SA 4.0.