Sunday, 12 July 2020

Book review: A Very English Deceit, Malcolm Balen (2002)

This book about the South Sea stock market bubble of the early 18th century is odd and while it is a work of popular nonfiction the author is evidently a well-read man who takes his job seriously. He’s a journalist. The curiosity inheres in the fact that while he has tied the book’s central theme to current events (the Dotcom bubble of the early noughts), there’s a contradiction at its heart.

For though it’s censorious regarding the events it chronicles – many people lost a lot of money, so the bursting of the bubble resulted in economic hardship – we’re invited to engage with the book – which is subtitled ‘The Secret History of the South Sea Bubble and the First Great Financial Scandal’ – on the basis that such a spectacle is entertaining. Which is somewhat like Netflix offering people the opportunity to view the Jeffrey Epstein docuseries: you’re simultaneously invited to take a prurient interest in the drama while being encouraged to take a dim view of the material it retails in.

I find this attitude toward afflicted people (in both cases) to be somewhat alarming, as though someone put up a sign next to the highway inviting people to rubberneck. It’s alarming for the same reason that causes people to want to suppress the dissemination of recorded footage of terrorist attacks. But then again people’s tendency to be entertained on account of another’s misfortune probably lies behind the continued popularity of the nightly news.

While the book manages to rise above the low tone it sets for itself, the difficult financial concepts it retails in defeated my understanding. For example:
The Sword Blade’s idea was to call in as many debentures as it could from the people who had lent the government money, by offering them what looked like a profitable exchange deal. The debentures stood at 85 on the stock market, and their holders were offered, in return, Sword Blade shares worth 100. How then could the company make a profit? The answer was that it had, effectively, rigged the market through what today would be called ‘insider trading’. It simply bought up as many debentures as cheaply as it could before announcing its plans, knowing that the scale of its share-swap scheme would cause their price to rise. By this method, the company made an estimated profit of around [25,000 pounds sterling]. The government, too, was satisfied. As well as buying land from it, the company lent it some [25,000 pounds] at a low level of interest as a ‘sweetener’ to facilitate the business between them. Through its financial adventures is became the Sword Blade Bank. It was a key moment in its history, the turning point in what became a growing, and corrupt, entanglement with affairs of state.
If you can understand this paragraph you are a wizard. I completely lost track of the thread with the words “announcing its plans”. I am in the dark as to why the company’s share price went up. On the one hand there’s some sort of corruption hinted at – though no names are mentioned, and the mechanism through which it is supposed to have worked remains opaque – on the other hand the company’s supposed to have conned investors, who were gullible enough to try to take advantage of a scheme where the hope of profit was based on nothing but rumour. If the size of people’s investments led them to guess its shares would be worth more than they actually were, then the consumer is at fault.

I’d sincerely like to know more. This book offers a promise of easy consumption – but fails the reading test.

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