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Business Booms, Busts, & Bubbles: A Resource Guide on Economic Manias & Crashes

Mississippi Company & the South Sea Bubble

While the events surrounding the Mississippi Company and the South Sea Bubble are two distinct events, they have been put together in this section because their time periods do overlap and often, these two subjects are examined together in books and articles. Below is only a brief explanation of the companies and complex events to put things in context.

The Mississippi Company & John Law

John Law was born into a Scottish family of bankers and goldsmiths. He established himself in France and eventually his proposal to establish the Banque Générale, later nationalized and renamed Banque Royale, was accepted. In 1717, he bought the Mississippi Company (originally found in the 1670s) to help ensure the success of the colony of Louisiana. He also started the Compagnie d'Occident and obtained a monopoly of trading to the Americas specifically the Mississippi River Valley.

In 1719 the company was renamed the Compagnie des Indes and it held an even monopoly on French commerce. That same year Law's original bank was renamed the Bank Royale and it absorbed Compagnie des Indes. Law hoped to retire the public debt by issuing shares in exchange for state-issued public securities. The enthusiasm for the shares of Compagnie des Indes became more intense and it began issuing more than it could cover. The value of the paper money and public securities began to loose value and because of the intricate linking of the company’s stock with the state’s finances, when value of the shares plummeted it caused a general crash. By the end of 1720 the bubble burst and Law was dismissed and left the country.

J. Carter, engraver. The South-Sea Bubble. Library of Congress Prints and Photographs Division.

The South Sea Company

The South Sea Company was founded in 1711 by Robert Harley, 1st Earl of Oxford as the Governor and Company of the merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of the Fishery. It was to be a public-private partnership to consolidate and reduce England’s national debt, while also making money for investors by underwriting the national debt on a promise of interest from the government. The South Sea Bill was passed in 1720 and it gave the South Sea Company a monopoly in trade with South America in return for a loan for the government. People rushed to invest, but in September 1720, the bubble burst when the stock value crashed. The directors of the board were arrested, the Chancellor of the Exchequer was ousted, and other government officials were found guilty of corruption and imprisoned.

Print Resources

This is just a selection of resources for those interested in studying the Mississippi Company and the South Sea Company. There are resources in the General Resources section of this guide that also cover the two companies whose rise and fall played a large part in the trade of North America and the Atlantic.

The following materials link to fuller bibliographic information in the Library of Congress Online Catalog. Links to digital content are provided when available.

Internet Resources