According to Ron Harris in his article “The Bubble Act: Its Passage and Its Effects on Business Organization,” “[H]istorians have treated 1720, the year of the South Sea Bubble and the Bubble Act, as a watershed year in British History[. . .] When the bubble burst, South Sea stock plunged about 87 percent[. . .] The crash constituted the first international stock market burst.” The history leading up to the South Sea Bubble was fascinating, given that Mary Cowper, the wife of William Cowper, a prominent politician in the House of Lords, burned part of her diary from 1716 to April of 1720. This diary was the main primary source that detailed the internal affairs within the government. During these years, she secretly invested in …show more content…
The Special Report of 1720, under Hungerford’s committee, outlined several reasons for pursuing the Bubble Act: “The Establishment of such a Company by your Majesty’s Royal Authority, will be a very great Security and Encouragement to Trade and Navigation, enable the Merchants to make quicker Returns, employ more Hands, encrease the Number of Seamen, greatly augment your Majesty’s Customs, and preserve many of your good Subjects and their Families from the Ruin to which they are now exposed, by being Assurers in a private Capacity.” While the document outlined several reasons to create this joint-stock duopoly in the marine insurance business, Ron Harris pointed out that historians have debated several other potential reasons for the Bubble Act being enacted. Specifically, he outlined three potential reasons for the Bubble Act’s authorization. First, the government believed the Bubble Act would target stock market speculation and particularly the exponential creation of joint-stock companies. Second, the Act gave parliament more control over raising revenue, as well as an avenue of giving an advantage to chartered businesses. Finally, his third reason developed into his thesis as it differed from the more popular historical debate: “[T]he South Sea Company (SSC) initiated that BA because it believed that the wave of small bubbles competed with the company’s conversion scheme and could endanger the blowing of its own bubble. According to this view, the act was an attempt to hinder alternative investment opportunities and to divert more capital to South Sea shares.” There are substantial issues with all three