Regulatory Capture: Management and Agency During the South Sea Bubble

Abstract

The United Kingdom in the early eighteenth century was an early modern colonial power that experienced a series of political and economic “shocks” that would require it to deeply consider the civil and fiscal policies in which they were governed by. The result of this would be the creation of the quasi-governmental South Sea Company, which would serve not only as one of the major monopolies of the time period, but also as the structural mechanism in which the contempory United Kingdom government would look to centralize and control the significant levels of outstanding public debt. Ultimately, the Company would see massive speculative forces that would exponentially raise stock prices over the course of several months, until the burst “bubble” would just as quickly drive it to collapse. This thesis looks to examine the political forces that surround the decision-making process that eventually sees the Company’s demise. This is done by reviewing three separate points during the lifecycle of the Company: the circumstances in which the Company was created, the height of the Company’s reach, and the collapse and investigation of the Company by the contemporary government. Through the use of several primary sources, this research looks to highlight the fact that the decisions that would ultimately lead to the collapse of the Company came through the close relationship that was held between the Company and the political, regulatory, and aristocratic leaders of the period, each of which was using their own clout to maintain the potential for profit.