The writings of William Paterson ... founder of the Bank of England, and of the Darien colony

Front matter

CORNELL

UNIVERSITY

LIBRARY

Dedication to Paul Daranda ' i

Fac-sinules

Biographical Introduction, 1658 — 1719 .... ix — cxH

Paterson born in Scotland in 1658 — He was a Merchant in the West Indies and in London — He was neither a buccaneer nor a missionary — His early success ; and his financial authority — His account of the Bank of England — His proposals for better managing the City of London Orphan- Fund — ^The Darien Settlement, and freedom in Government, in religion, and in trade, with the redemption of the Debt, his leading objects in life — The first cause of his misfortunes — His integrity and great abilities — The ruin of the Darien Settlement occasioned by neglect of his advicei and by his not being employed in its government — His case a remarkable illustration of the urgent need of administrative reform— William the Third's respect for him ; and intention to revive expeditions to Central America — Paterson's long residence in Westminster after returning from Darien — His influence on the Union of England in Scotland — He is consulted in financial matters hy great ministers in the reigns of William III., Queen Anne, and George I. but not employed^ — His public Library of Trade in Westminster — He would have prevented the South Sea bubble — His writings — The indemnity of his losses in Darien granted by George I. and Parliament in 1715 — He pays his debts'— He dies in 1718-19.

II

The writings of such a man upon important public affairs familiar to him, will be received with satisfaction, and they are accompanied with only a brief notice of his life, from an unwillingness to present imperfect materials to the reader, when the appearance of this volume may perhaps lead to the disclosure of many valuable stores of information respecting portions of his career now imperfectly known. The representatives of many who were concerned with him in public transactions, both in England and Scotland, possess such stores ; and great liberality already experienced in the communication of correct intelligence respecting Paterson, justifies a reliance upon further aid of the same character. Our daily discovery of neglected historical sources for the deeply important period from 1670 to 1 720, which embraced the most active part of his life, encourages this sanguine expectation. Even personal traditions may be consulted with advantage for that period, as can be shown by some instances of singular interest where family recollections and individual character, which have been thrown aside as belonging almost

XViii BIOGRAPHICAL INTRODUCTION.

exclusively to romance, have furnished material contributions to grave history, and even to science. (App. E.) A special motive for deferring the biography of Paterson until his select writings shall be appreciated, arises out of the favourable result of inquiries already made about him in official records. Those records are but recently opened to free inspection for literary objects ; and the catalogues of their contents, so indispensable for all purposes, are only begun to be formed. Weighty points, therefore, to be soon probably cleared up, are still obscure. Recently there have been found at the Rolls, and in the State Paper Office, materials to correct an universal error as to the ultimate treatment of Paterson by the Government, with documents to explain the secret policy by which it was guided. The value of the new rule, in this respect, to the diligent inquirer, cannot be exaggerated. Even in the existing condition of our records, scattered in various public and private repositories, and with wide gaps in their series, they have been saved from destruction with a fidelity most honourable to their learned keepers of former days, when ministers were careless, and the public was unmindful of these titles of national fame. Above all, the student will gratefully acknowledge the facilities courteously afforded by the able antiquaries now entrusted with their custody. Under these circumstances, it is thought that the revival of attention to Paterson's writings is a fitting step towards the full disclosure of his whole career indispensable to a popular biography of him. Meanwhile early tracts, official papers, the journals of Parliament, the statutes, and a few traditions,

BIOGRAPHICAL INTRODUCTION. xix

have furnished materials for the formation of a skeleton of his story, which few will deem altogether unsatisfactory,

III

The little that is known of Paterson's early years comes from tradition : but his will supplies the leading fact, that he was born in April, 1658, it being executed in July, 1718, when, as it states, he was sixty years and three months old. He died in the following January. His father's family, the Patersons, were eminent of old, and in his time they had representatives among the high modern Episcopalians and adherents of the House of Stuart. They had descended from a Scandinavian stock, originally planted in Northumberland, and had not been without distinction on both sides the border. Although no registration of his baptism has been found, the secondary evidence of his birth in Scotland, of Scottish parents, is decisive. The directors of the Darien Company, who were exclusively Scots when the enterprise had become confined to Scottish resources by the hostility of the English Court, deUberately recorded their acknowledgment of the services of William Paterson to his " native country," by leaving good prospects in London, in order to promote her welfare, and secure the establishment of their Company. This entry is to be seen in the original minutes of their proceedings, preserved in the Advocates' Library in Edinburgh, and it is given entire in the Darien Papers, as extracted in the Appendix E. It could not possibly have referred to any but a Scots-

XX BIOGRAPHICAL INTRODUCTION.

man ; and the individual to whom it did refer is identified by frequent cotemporary notices with William Paterson, the founder of the Bank of England, whose authorship of the contents of the present volume will not be questioned by attentive readers. (App. R) Nor was a doubt ever raised till recently as to his birth in Scotland. Tradition is uniform on this head ; and the honour of being his birth-place has long been claimed for Lochmaben, in Tinwald, in Dumfrieshire, with which county many associations belonging to him are connected. Topographical works of repute support the claim, and the house in which he was believed to be born was pulled down only a few years ago. It used to be pointed out to the curious traveller as the home of the great financier. In Sir John Sinclair's Statistical Accounts of Scotland, compiled mainly from the correspondence of parochial ministers, it is stated positively in the report of the Rev. James Laurie, of Lochmaben, that he was born there. His own subsequent relations with Dumfrieshire were so intimate, that he was chosen a member of the first United Parliament for its boroughs ; and several families belonging to that county assert their descent from his brothers and sisters, or from intermarriages with their descendants. Tradition says that his mother early formed his religious and even political principles, which separated him in after-life from the Episcopalians and Jacobites, of whom his paternal relative, the last Archbishop of Glasgow, was a most energetic leader ; as another of the name. Sir Hugh Paterson of Banuockburn, was attainted of treason for taking the side of the Pretender

BIOGRAPHICAL INTRODUCTION. xxi

in 1715. But, decidedly as William Paterson opposed their party, no trace of bitterness against them is discoverable in any of his writings upon Scottish politics. On the other hand, he is mentioned with respect and kindness by their most determined advocate. (App. G.) All his writings exhibit him as an industrious student, and in his youth a superior education was well provided for in the remotest parts of the south of Scotland. Burnet, indeed, who disliked the Kirk and its professors, asserts with some acrimony that he "had no education," which can only be true in the qualified sense that, quitting home at an early age to escape from religious persecution, his progress was stopped before he went to the university or even to any high school. This, probably was about 1675) when he was seventeen years old, and could certainly have acquired a considerable stock of school knowledge. Traces of his residence in England soon after that date have been met with, when he seems to have stayed a short time with an aged female relative of his mother at Bristol. It is asserted that at the decease of this friend he received from her a legacy, which may have enabled him to set out upon the adventurous career by which he at last gained distinction. He probably went into Holland before his first voyage to America, where he was settled for several years previous to 1 687. His first conception of a colony in Darien was in 1684 — a fact positively stated in his petition to King William, introducing the second work of the present collection. He had connections with New England, as appears from one of his letters written from Darien in 1699, and published in Boston at the time.

Xxii BIOGRAPHICAL INTRODUCTION.

How early he formed these connections does not appear, but his first wife was the widow of a minister of that colony named Bridge ; and a large portion of the population of the West Indies, as well as of the northern colonies, was composed of the refugee Puritans of England and Scottish Covenanters, whose religious habits he probably followed without being a missionary. There is a tradition in Dumfrieshire that he was admitted to take part in the prohibited services of the Covenanters, but that his preaching was not successful ; and the abusive verses of the writers employed by the English minister to run down the Darien cause, taunt him as "predicant Paterson." He may have known Roger "Williams, the patriarch of Providence, in Rhode Island, who died in 1682. WilUams was the first promulgator of perfect religious toleration in the colonies, and Paterson adopted the noble principle in his own constitution for Darien. It has been concluded from various circumstances that his colonial home was New Providence in the Bahamas, where a governor in his time was a Presbyterian minister of the name of Bridge. (App. H.) He must have entered actively into the trade with the North American colonies, at that time, as still, the source from which the West Indians received many supplies. And he was well acquainted with nautical affairs, and seems to have shared in the successful undertaking of Sir William Phipps to raise treasure to the amount of 300,000/. from a sunken Spanish galleon near New Providence.

That he possessed very great influence throughout the West Indies is expressly established by an interest-

BIOGRAPHICAL INTRODUCTION. xxui

ing document lately found among the original Darien manuscripts in Edinburgh, stating his reputation in the West Indies to be such, that wherever he should be settled, thither the people would throng from all the plantations to join him.

It has been asserted that he was one of the buccaneers, and so gained the knowledge he possessed of Darien and of the places of their resort on the Spanish main. This is assuredly a great error. No evidence has been produced of his having been so engaged at any time, and the undeviating character of his life is opposed to the supposition. It is further certain, from a journal of one the parties in his Darien expedition, laid before the Royal Society at the time, and published some years later by Derham, that he had not before visited the spot in which the Scottish settlement was fixed in 1698. (App. I.) His knowledge of Central America was gained, doubtless, by diligent inquiry. It is mentioned in the Darien papers that he possessed valuable maps and geographical materials, which are significant rather of the wealthy and curious collector than of the reckless seafaring adventurer. Burnet only says " he got information "/rom buccaneers when consorting with them. The State Paper Office is full of details of the proceedings of Captain Sharp, and others of their chiefs, who then visited the Bahamas and all the plantations with the countenance of the Government. Sir Henry Morgan, their leader at Panama,had become Lieutenant- Governor of Jamaica, and many of his despatches are recorded in that office ; whence his real story ought to be written to replace the romances of which he is a xxiv BIOGRAPHICAL INTRODUCTION.

favourite subject. Paterson, doubtless, knew him as well as the others; but it would be as reasonable to revive the party calumny, that Lord Somers was the accompUce of the pirate Kid, as to charge Paterson with taking any share in the guilty adventures of the buccaneers. Their relations, indeed, with the merchants and colonists of the West Indies and North America, and also with all the maritime governments of Europe opposed to Spain, are topics for an impartial work worthy of a British or American historian. The strange manners, the heroic bravery, and the crimes of those wild warriors of the sea are fuU of interest. They had been well studied by Eliot Warburton, who perished so miserably in the Amazon, when setting out to visit the scenes of their exploits. Of all men he was perhaps the best qualified to describe those exploits and to appreciate the influence of these daring men upon the waning fortunes of Spain in America. In that accomplished writer of romantic and philosophic travel the Editor of this volume had a friendly associate in his task whose loss he has daily cause to deplore. The ingenious account of Paterson's supposed early days, constructed by Mr. Warburton in the "Merchant Prince," shews what he would have produced when he should have substituted correct information for a pleasant tale which he supplied mainly from a fertile fancy. One wide anachronism runs through the whole of his romance. In it John Law is represented to have been of about Paterson's age. *They are made to be youths together ; whereas Paterson, the true financier,- was certainly thirteen years older than his cousin, the

BIOGRAPHICAL INTRODUCTION. XXV

brilliant, gambling adventurer. To this fundamental error of fact is superadded the more serious mistake of attributing a community of opinions to those two celebrated men ; when it is Paterson's highest honour to have uniformly opposed the financial delusions of Law. Paterson never contemplated a settlement in Central America, but as a means of building up a great, free emporium of trade. Law took the Missisippi region for a simple basis of his state stock-jobbing and boundless operations in paper money. Mr. Warburton had, however, seized correctly the fine traits of Paterson's character, and, after publishing the " Merchant Prince," he at once began to take an exact view of his story upon reading the second of the works included in the present volume ; namely, the memoir on Spanish America.-

IV

Whatever were the occupations of William Paterson abroad before 1685, he had then formed his idea of a great settlement in Central America, to be independent of Spain, which became the one ruling object of his life ; and that object not only merited the praise given to it in the last century, of being calculated to have improved the policy of all civilized states in the western hemisphere, but the important events of the present day in the same regions bring out the genius of Paterson as a statesman in the most brilliant light, in reference to the capabilities of Darien. The rise, indeed, of independent states upon the ruin of the transatlantic dominions of Spain calls for very different combinations

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now, since those states are subject to new influences beyond the reach of British power and which the jarring counsels of all Europe cannot guide. He submitted his views to James II., who was disposed to favour them until absorbed by designs which cost him his crown. Paterson then offered his settlement to the Elector of Brandenburg — the founder of the Prussian monarchy, himself no mean mercantile projector, and who was only prevented adopting the enterprise by the jealousy entertained at his court to the disadvantage of the stranger. (App. K.)

This fondly-cherished design did not stand in the way of the practical, judicious Paterson's persevering application to his business as a merchant. He prospered in that business, and became a member of the Merchant-Taylors' Company. He took part zealously with those who were planning the Revolution of 1688, which wiU account for his being at this period much in the coffee-houses of Amsterdam. (App. K 2.) He also indulged his taste for various honourable enterprises at home, amongst which was one for the better supply of North London with water from reservoirs south of the Hampstead and Highgate hills. This he undertook with the support of so distinguished a man as Sir John Trenchard, as shown by the records of the still existing water-company. At this time he resided in the parish of St. Giles-in-the-Fields, where the old office of that company long stood. (App. L.)

He soon became known as an able financier at a period remarkable for progress, if not of proficiency, in commercial and statistical science. Sir Josiah Child,

BIOGRAPHICAL INTRODUCTION. XXvH

Sir William Petty, and Locke are the three great names commonly cited on this head; but numerous tracts testify that many of their contemporaries were not far inferior to them, and Paterson's writings and his official papers place him at least on a level in financial science with these illustrious men. He warmly supported the correct principles upon which the plan of Lowndes for debasing the coinage was refuted ; and so he seems to have incurred the dislike of one who for nearly thirty years was his formidable opponent at the Treasury.

He has himself fixed upon 1686 as the year from which he began to give serious attention to " matters of general trade and public revenue," having before doubtless been devoted to his own commercial business.

So early as in 1690 a valuable work by Sir Dolby Thomas upon the West Indies, reprinted in the Harleian Miscellany, must have been partly written by Paterson. Besides containing the germs of his plan of banking and currency, it proposes the same enlightened views of colonial government which he planned for Darien, and which may be traced to an old admirable system of home administration for our colonies, now demanding consideration in order to the indispensable reform of the Colonial Office. (App. M.) This tract is dedicated to Sir Robert Davers, M. P. for Suffolk, once a Barbadoes planter, and a persevering advocate of Paterson's claims upon the Government, until they were at length settled, if not satisfied, in 1715 by his aid. It insists upon the plan of popular colonial government sketched by Cromwell, and continued in the first years of Charles

XXviii BIOGRAPHICAL INTRODUCTION.

IL's reign ; and it has paraUelisms to portions of his known writings. (App. N.)

In 1691— a time when banking by companies, and paper currency duly guarded, were being matured— he was a leading witness before a Committee of Parliament appointed to investigate measures to meet the urgent public needs, when he advocated measures for their relief, which clearly prepared the way for his Bank of England.

The following report of the Committee is taken from the Journals, vol. x. p. 621, 18 January, 1692: —

" Mr. Foley reports from the Committee appointed to receive proposals for raising a sum of money towards carrying on the war against France, on a fund of perpetual interest, that there were several persons interested in the banker's debts, ready to take for their debts and a new loan of an equal amount, a perpetual yearly interest of six per cent, by act of Parliament. They were six or seven gentlemen whose principal may be 29,378Z. Others offered 5,400^. And those concerned with bankers said, they did believe in a short time they could get most of the people concerned to subscribe in like manner. In six days they brought a list of several persons subscribing 2 9, 775 Z. Another Member of the House declared himself willing to accept the same proposal as to h,OQOl., his debt.

" When this Committee first met, a paper was brought proposing that on settling a yearly rent of 65,000?., one miUion should be advanced. Sixty thousand pounds would be for interest, and 5,000?. to trustees for management, so as the subscribers may be trustees, and

BIOGRAPHICAL INTRODUCTION. Xxix

their bills of property should he current. In this case they offer to advance 200,000/., to be ready as a bank, to exchange such current bills as should be brought to be exchanged, the better to give credit thereunto, and make the said bills the better to circulate ; so as they be allowed five per cent, for the said 200,000/. for the first year only, and a tally to the said trustees to pay themselves for the same.

" The Committee were of opinion, not to receive any proposal which required making the bills of property current, so as to force them as payment on any without their consent. But they acquainted Mr. Paterson,who made this proposal, that they would receive any proposal to advance one million on a perpetual fund of interest, to be in the nature of a purchase, where they might assign their interest as they pleased, to any one who consented thereto. Then Mr. Paterson said — he believed the gentlemen would come up to that, and not insist on having the bills made current. The next day he said — In discourse with the gentlemen concerned they would not further proceed ; but he believed that himself and some others might come up to advance 500,000/. In this manner 200,000/. would be ready in a few days, and he believed some others would come in and make it up 500,000/.

" On Saturday appeared again, and

then said, about eighteen or twenty gentlemen had appointed a meeting on Tuesday next to consider the matter, and on Wednesday they would send him an answer. But nothing was proposed to the Committee on which they could rely."

XXX BIOGRAPHICAL INTRODUCTION.

The above blank is not filled up in the printed Journals.

He was now engaged in a vigorous controversy against Dr. Hugh Chamberlayn (a precursor of John Law, then a very young man, and certainly not occupied with such matters) against a scheme of paper money inconvertible into gold or silver. (App. O.) His opponent had weight enough in the House of Commons to get a Committee to report in favour of such a paper currency, but it was not adopted (Journals H. C. vol. x. pp. 22-80, 1693) ; and the next year the Bank of England was completed. Internal proof only connects the witness, Paterson, with the author of the tracts in this volume; but solid ground exists for the capital point of the identity of the William Paterson, whose name stands in the charter of the Bank as one of its first Directors, with him of that name who founded the Scottish African, or Darien Company, and who is included under the designation of a merchant in an impeachment preferred by the House of Commons in 1695, as concerned in that Company.

1 . In Boyer's Political State for the month of May 1711, Paterson is positively called " the chief projector of the Bank of England," and at the same time a creditor of the Government who has difficulty in obtaining payment of his Darien claim, and the person employed upon the public accounts at the Union. His agency in regard to all three, the Bank, the African Company, and the Union, is an important point among the subjects of the present volume.

2, The signature Will'"- Paterson to the letters ad-

BIOGRAPHICAL INTRODUCTION. XXXI

dressed to the directors of the African Company, 1699, and preserved in the Advocates' Library in Edinburgh, is the same with that of a letter of 1718, kept in the State Paper OflSce, and addressed to Secretary Stanhope, respecting a lost equivalent debenture for 501., a security for the Darien debt of the Government to Paterson ; and the same signature WiW"- Paterson to original Bank documents of 1694 is also extant. His handwriting was peculiar, as may be seen by the fac-similes in this volume.

3. The same signature is to be seen to Paterson's will in Doctors' Commons,

V

The great merit of founding the Bank of England is universally attributed to him ; and it will be an acceptable tribute to the correctness of public opinion on this important portion of his history to produce unquestionable evidence of the fact having been so. This evidence will be found in the text of the last of his own works, here republished, and in a few notes to that text.

Paterson realised, in establishing the Bank of England, in 1694, what had been for more than forty years the object of EngUsh statesmen and merchants. That object was very seriously discussed during the civil wars, and under the Commonwealth The countenance shown by Cromwell to the Jews favoured it; and at the early sittings of the first council of trade at Mercers' Hall upon the Restoration a distinct proposition was received, and referred to a powerful committee.

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for " the establishment of banks and lombards among us, as in Holland." Numerous writers treated of the matter, and the success of the plan was probably promoted by the shutting up the Exchequer under Charles II. With such antecedents Paterson followed out his own original views from 1690 until his Bank was founded in 1694 with the greatest success. (App. 2.)

He was one of the first directors of the Bank of England upon a qualification of 2,000Z. stock, which he sold out before the end of a year, in 1695, and thus voluntarily withdrew from the board. It has been asserted that more wealthy men than himself took advantage of his abilities to establish the institution, and then " defrauded " him of the reward due to him for founding it. It has been even said that he was expelled from the direction. (App. P.) No evidence is discoverable on either head. There was a strong difference of opinion between him and some of his colleagues respecting the Bank's legitimate operations, and they outvoted him. On that occasion he seems to have been without support, his old friend Mr. Godfrey having been killed in the trenches at the siege of Namur. When he failed to convince the directors of the prudence of his views he proposed what was really another stock company in London, upon the following proposals, which significantly mark his own mercantile standing; although their result is involved in much obscurity.

JilUBKAPHICAL INTRODUCTION. XXXIU

"Feb. 12j 1694. — Proposals made by William Pa- TERsoN, of London, Esq., on behalf of himself and others, for Consolidating the Perpetual Fund of Interest payable to the Orphans and other Creditors of the City of London, by virtue of the Act of Parliament intituled, ' An Act for Relief of the Orphans and other Creditors of the City of London, and for Improving the same so Consolidated above the Interest payable by the said Act.'

" I. That a Book of Subscription shall be prepared, which shall be opened at Merchant-Taylors' Hall, London, every day (Sundays only excepted), from nine o'clock in the morning to twelve at noon, and from three until six in the afternoon, and shall lie open upon and from Thursday the 14th day of this instant February, until Thursday the 1 4th day of March next inclusive, or until four hundred thousand pounds stock in the said fund shall be subscribed, which shall first happen, and no longer, for taking subscriptions of the said fund, pursuant to these proposals.

"II. That Paul Daranda, John Asgill, William Broughton, Paul Docminique, George Finch, Francis Gosfright, Nathaniel Heme, Edward Herrys, Nathaniel Hornby, Robert Lancashire, Samuel Ongly, and William Sheppard, together with the said William Paterson, shall be of the number of the first trustees, and they or the major part of them shall have the full and absolute direction of this subscription, and of all designs and undertaking srelating thereunto, until other trustees, not exceeding thirteen in number, to be chosen in

d

XXXiv BIOGRAPHICAL INTRODUCTION.

manner hereinafter mentioned, shall be added unto them.

"III. And whereas the design for improving this fund can no ways be reduced to practice, unless a suitable number of fit and useful persons be qualified for this trust, by becoming participants and proprietors therein : and the purchasing of such reasonable part or interest in the said fund being extremely difficult, unless the purchasers should be content to be most exorbitantly imposed upon : for remedy thereof it is hereby agreed, that ten per cent, of this subscription shall be equally divided amongst such as shall be the first trustees, they and every of them paying at the rate of fifty-five pounds for every hundred pounds of the said fund, which shall be equally paid to every subscriber in proportion to his or her sum subscribed and part contributed.

" IV. That upon the fifteenth day of March next, or as soon as the said four hundred thousand pounds shall be subscribed, which shall first happen, the subscription! book shall be closed ; and after the closing thereof, the said trustees herein named shall give three days' public notice, at the least, of a general meeting of all the subscribers, to choose, by majority of votes, such other persons as are to be added to the number of the trustees, every five hundred pounds subscribed having one vote, and no one person whatsoever to have more than ten votes.

The subsequent articles provided for assignments of subscribed sums to the trustees; for their trust deed; for their books ; for Paterson's per-centage of one per