Cape of Mad Hope
- BuyThe Price of Scotland: Darien, Union and the Wealth of Nations by Douglas Watt
Luath, 312 pp, £8.99, January 2007, ISBN 978 1 906307 09 7
Most of the institutions around us seem to have infancies – or at least paths of evolution along which they staggered in order to become what they are today. Representative democracy, a civil service, even contemporary war descend to us through strange-looking ancestors: the executioners of kings, the treasurer keeping the royal gold under his bed, the marquis riding with his tenantry into the cannon. But capitalism is different. Like Athena born in armour, it bursts on the scene already mature. The sort of joint-stock venture capitalism that swept over north-western Europe in the 17th century lacked the refinements of a 21st-century public limited company. But its cast of characters, and the manic-depressive psychology of speculative investment, were there from the first day.
We know that cast all too well. It didn’t take the Northern Rock affair to show that sober gents with much to lose can take leave of their senses. That was already plain by the 1690s. Douglas Watt’s irresistible, clever book about the Darien Scheme, which ruined Scotland and led indirectly to the 1707 Union, introduces figures we instantly recognise. Here is the mesmerising visionary bounding from cloud to cloud with other people’s savings, and the yuppie so thrilled with early success that he persuades himself that the company’s cash is his own. Here are the grave, respected men of substance who dare not admit to one another that in financial reality they are total ninnies, unable to read profit or loss off a stallholder’s pocket calculator. All these types dance through the short, catastrophic history of the Company of Scotland, which took a nation’s money to found a colony on the Panama isthmus in 1698 and ended flat bust in 1701.
To read about Darien is to feel that, in a deep sense, venture capitalism is incapable of learning from experience. Of course, its technologies in industrial production, financial ingenuity and tax avoidance have changed beyond recognition. But its sustaining element, its oxygen, remains mad hope: the wager that this time, just this time, the law of gravity will not apply. Nothing else explains why the Company of Scotland went back to Darien with a second expedition after the first settlement had collapsed in unmitigated disaster. Nothing else explains why Northern Rock, tarted up as a bank after generations as a sober mutual, suddenly began to borrow insanely short and lend insanely long.
Many books have been written about the Darien Scheme. John Prebble’s The Darien Disaster of 1968 is still the best known. But The Price of Scotland surpasses them all on two grounds: first, Watt’s method and approach; second, his solidly convincing version of the story’s most contested aspect – the significance of Darien for the politicians who decided a few years later to abandon Scotland’s independence and join an incorporating union with England. Watt’s method, roughly, is to follow the money. Not to exclusion: Darien was also about politics, patriotism, shipping, marketing, religion, geography and disease. But the cash flow of the Company of Scotland is a vein of hard evidence, and it turns out that the account books for the whole life of the company have survived intact in the Darien Papers of the National Library of Scotland. Watt describes them as ‘an untapped source for examining the management of capital by the Company’. It would be almost beyond belief if no scholar had at least glanced through the cash-books before now, but Watt is the first writer to use them systematically. He can now give the reader a really detailed picture of the company’s directors – a gullible, erratic pack of nobles, advocates and lairds – and of how they set about raising money and then managing it. Their failure was that they squandered the money uncontrollably, above all in the first years of the scheme. Their achievement – an incredible one – was to gather the capital in the first place, one of the most phenomenally successful fund-raisings in world history, performed in one of the smallest and poorest countries in Europe.
The second strength of this book is its assessment of Darien’s relationship to the Treaty of Union. There have been at least two schools of thought about this. One asserts that the Darien colony and the Company of Scotland were deliberately wrecked by English policy-makers in order to force a ruined, helpless Scotland to surrender its independence. Another, more deterministic version insists that Scotland had already become a terminal basket-case in the last decades of the 17th century, its underdeveloped economy devastated by famines and crop-failures, its trade strangled by Dutch and English competition, its institutions backward and decayed. The Darien disaster – in this view – merely pushed Scotland over a cliff edge that the nation was anyway approaching.
Watt disagrees with both these lines. English obstruction was real and devastating, but it was not the decisive factor in Darien’s failure. As for the ‘basket-case’ notion, Watt argues that Darien showed the opposite. Scotland in the 1690s suffered the ‘seven ill years’ of hunger after failed harvests. But the Darien Scheme in the same decade showed also that Scotland at the end of the century had acquired the sophistication, the capital resources and the outward-looking energy in its elites to attempt an astounding leap forward to catch up with far bigger and wealthier colonial powers. The leap failed – indeed, it could never have succeeded. Nonetheless, the connection between that failure and the Union some six years later was anything but direct. Darien did not crush the Scots; on the contrary, it inflamed them into a passion of anti-English patriotism. Public opinion concluded after Darien – quite rightly – that the 1603 Union of Crowns was now being operated exclusively to England’s benefit and had become intolerable for Scotland.