The Invention of News: How the World Came to Know About Itself

by Andrew Pettegree

  CHAPTER 14

  In Business

  IN June 1637 Hans Baert found himself in a difficult spot. Baert was a wealthy Haarlem merchant, and in recent times he had involved himself heavily in the trade in tulips.1 For a time he had prospered. The price of the bulbs had increased steadily, and more recently at a phenomenal rate. But in February of this year the bottom had dropped out of the market; and none of those who had bought from Baert at the higher prices would pay their debt.

  The tulip trade was, it must be admitted, a very unusual form of commodity trading. These most exotic of plants flowered, often only for a week or two, in spring. The bulbs were then lifted, dried and in September replanted; thus for most of the trading year they could not be seen, or physically delivered to their new owners. This was little problem to the adventurous Dutch, who through their lengthy experience of long-distance voyages were used to managing a futures market, but it was bad news for Hans Baert. The price for tulips had reached its unlikely zenith in February 1637, when his bulbs were deep underground; now, in June, they had to be lifted, which could only be done in the presence of their new owners to prevent fraudulent substitution of less valuable varieties. Since his clients would not come, Baert stood to lose his money.

  The tulipmania has gone down in history as one of the first great financial bubbles: an extravagant boom, followed by a ruinous bust. In fact, much of what was assumed to be known about this episode turns out to be myth. Most of those involved in the trade were prosperous citizens who could absorb the losses. There were few bankruptcies and the wider Dutch economy was barely affected. The tulipmania did not lead simple artisans, tempted into the market by hopes of a quick fortune, into penury. The most extravagant stories of destitute carpenters and weavers emanate from the moralising pamphlets that followed the collapse of the market.2 During the sharp, and ultimately spectacular rise in the prices of bulbs there was little adverse comment; in fact, the States of Holland were most concerned to profit from the boom by taxing the trade. What is in fact most extraordinary about this colourful episode is how little interest it evoked in the contemporary news media. That a pound of bulbs could change hands for 1,000 guilders (three years’ wages for a master carpenter) caused no adverse comment. Perhaps events moved too quickly. In five weeks Switzers, one of the most sought-after bulbs, went from 125 guilders a pound to a high of 1,500: 1,200 per cent appreciation in just over a month.3

  In this same year Amsterdam had two functioning newspapers, yet neither paid this sudden appreciation in the price of tulips much attention. Even in this sophisticated news market, the boom in tulip futures was a word-of-mouth phenomenon. Deals were struck and prices talked up in meetings between bloemisten, as those who got into the trade became known, in closed circles: at private dinners, in taverns, or in meetings in the gardens where the tulips were planted. The print media discovered the tulipmania only when the trade had collapsed, when pamphleteers had many things to say about greed, the credulity of traders, and the transitory nature of earthly wealth. Those who had had their fingers burned faced a deal of mockery. In 1637 the bad blood between thwarted sellers and rebellious buyers threatened to become a problem of public order. This too was unwelcome in a state where the good conduct of business and national reputation were closely aligned. In March the Burgomasters of Holland forbade ‘the little song and verses which are daily sold by the booksellers about the tulip trade’. The council sent round bailiffs to confiscate the printed copies.4 It was time to draw a veil over the business, and move on.

  The Business Press

  The tulipmania casts an interesting light on the psychology of business in this period, but offers few hints regarding the development of a business press. This seems all the more surprising when we remember the important role that merchants had played in the creation of the international news market: from the business correspondence of the late Middle Ages, through the creation of the first courier services and the first commercial manuscript newsletters.5 But at the point news became a commercial product it took a decisive turn away from the reporting of business news. Avvisi, and their successors the printed newspapers, offered almost exclusively political, diplomatic and military news. This could be of great importance to merchants with goods on the road, but it did not mesh with their day-to-day concerns with regard to the prices they would pay, or could charge, for commodities. Merchants also needed to keep a close eye on the rates of exchange between Europe's various currencies. Although bills of exchange had functioned efficiently for the discharge of debt and the transfer of money over long distances for some centuries, fortunes could still be won and lost through trading in the currency markets.

  14.1 A satire on the tulipmania. Bloemisten conclude their bargains in a fool's cap while peasants cart off the worthless bulbs.

  These more prosaic mercantile concerns spawned a different and highly specialised printed business literature: the publication of lists of commodity prices and exchange rates. Some of the most ephemeral of all forms of printed literature, they are far more likely to have been lost than to survive. The early history of the financial press can only be reconstructed from fragmentary evidence of flimsy scraps of print, often tucked away in bundles of commercial correspondence.6

  So although there is evidence that printed lists of commodity prices were published in Venice and Antwerp as early as the 1540s, the earliest surviving copies date from forty years later. These printed price lists were the very simplest form of print: a single strip of paper, characteristically about 14 by 48 centimetres. This suggests a large folio sheet had been set with two or three settings of the same text across the page, which was then cut up. The format was closely modelled on the handwritten price lists compiled by brokers and agents in Europe's major trading centres in the medieval period. Examination of these early manuscript lists reveals a remarkable level of uniformity. Lists compiled in widely spread cities such as London and Damascus, and at very different dates, record much the same commodities (and often in the same order).7 The commodities were named in Italian and this practice was largely continued into the print era, whether the price lists were issued in Venice, Frankfurt or Antwerp.8 Amsterdam, where the commodities were listed in Dutch, was an exception; Hamburg also used Dutch in its earliest lists. All of these cities had published regular weekly lists by the end of the sixteenth century. London, Danzig and Lisbon soon followed. In the earliest surviving examples only the actual form was printed, leaving the date and the current prices to be added by hand.

  In Amsterdam the fixing of prices was delegated to a committee of five brokers.9 The data could then be passed to a scribal office for the prices to be added to a pre-printed form. By the middle of the seventeenth century Amsterdam had moved to a fully printed form, still produced under official supervision. The regulations established by the city burgomasters also stipulated the terms of sale: subscribers were to pay 4 guilders a year (one and a half stuivers per copy). So that merchants who traded in Amsterdam on an irregular basis could have access to them, individual issues could be purchased at the Exchange for 2 stuivers each. The commodities listed were grouped into convenient categories, and covered a wide range of raw materials and finished products, including spices, foodstuffs and a range of clothes and textiles. Of course those actually striking bargains would always want to check up on the latest prices, which could move quite significantly during the course of a week. This suggests that the printed sheets served primarily as a reference tool, particularly for traders who wanted to assemble a run of weekly lists and check how prices had moved over an extended period. That the Amsterdam lists were used in this way, and circulated widely both in the Netherlands and abroad, is indicated by the provision for subscribers to take two or more copies at a reduced rate: presumably to send the duplicates to out-of-town correspondents.

  Lists of currency exchange rates were published in much the same way, on a weekly basis under official supervision. Here the published form consisted of a list of European
cities, alongside which the prevailing rates of exchange could be added. In Venice the currencies and their rates were both printed on the sheet, though this was rather the exception.10 Elsewhere the rates were added by hand. As with commodity prices, each city published a single official list, consigning the task to a trusted official or, in the case of Venice, a publishing firm. In the second half of the seventeenth century the principle of this official monopoly was increasingly under strain. Twice, in 1670 and 1683, the Amsterdam authorities had to intervene to defend the privileges of the appointed exchange brokers from interlopers. The crucial change seems to have come with the introduction of a third major piece of financial data: share prices. In the second half of the seventeenth century the previously rather small number of joint stock companies expanded rapidly. Trading in their stock encouraged the development of specialist financial publications, which listed shares alongside commodity prices, exchange rates and shipping news. Nowhere was this development more pronounced than in the emerging powerhouse of northern commerce, London.

  14.2 The Antwerp Bourse. Such places were hotbeds of rumour and disinformation, as well as commercial hubs.

  Bubble

  In the publication of business data England chose a separate path, almost from the beginning. Uniquely, in England the publishing of commodity data does not seem to have been an official monopoly. Merchants and traders could instead avail themselves of a wide range of publications. The Prices of Merchandise in London, published from 1667 and the successor to the earliest London price lists, was joined from 1680 by Whiston's Weekly Remembrancer and from 1694 by Proctor's Price Courant.11 A few years later John Castaing began publication of his Course of the Exchange. London had never had its own listing of exchange rates, and this provided Castaing's opportunity. But he improved on it by adding a list of share prices. Castaing, a member of the Protestant Huguenot community settled in London since their expulsion from France by Louis XIV, was an active stock-jobber, and saw here the chance to combine this business with financial journalism. In March 1697 he placed an advertisement for his paper: ‘J. Castaing at Jonathan's Coffee House delivers the Course of Exchange, the price of Blank-Notes, Bank Stock, East India Stock and other things every Post-Day, for 10s per annum.’12

  This advertisement appeared in Houghton's A collection for the improvement of husbandry and trade, another innovative financial publication. In contrast to the price lists, Houghton's Collection included in each weekly issue an article on a topic of economic or financial interest. This was followed by a select commodity price list and a list of shares. The number of shares quoted was at first large, with as many as 64 listed in mid-1694. This could not be sustained; the list of companies shrank quite rapidly, and in 1703 Houghton's paper ceased publication.13 Houghton's collection had also included details of the arrivals and departures of ships, trading information that also generated its own specialist publication with the foundation in 1694 of Edward Lloyd's Ships arrived at and departing from the several ports of England and foreign ports. This, renamed Lloyd's list, continues to this day.

  These technical specialist papers remained, however, rather separate from the general press. Although England experienced a rapid proliferation in the number of newspapers after the lapse of the Licensing Act in 1695, these papers offered only very limited comment on the economic life of the capital. The Gazette followed the progress of the subscription to the Bank of England in 1694, but once this was accomplished Bank matters were not often alluded to. In 1699 The Post Boy mentioned a meeting to discuss a union of the East India and English Companies; but there was no comment on the likely effect of such a union, or, in subsequent issues, on the outcome.14 From 1697 The Post Boy included a brief passage with the major share prices, but business news intruded most obviously through the placing of paid advertisements. Companies took space to advertise meetings of their General Court. The launch of companies, and particularly projects, took up many inches of news print. This was a great era of projecting. Schemes of land reclamation, patent diving bells, new inventions and trading schemes made their optimistic pleas for investors’ money. Between 1695 and 1699 lottery schemes often occupied nearly all the available advertising space.15 This proliferation of lotteries, such as the Million Adventure, the Unparalleled Adventure and the Honorable Undertaking, was a sign of the emergence of a new class of potential investors with little experience in the marketplace and searching for alternative opportunities for investment. It was a potentially combustible mix.

  In the two decades after the Glorious Revolution of 1688 the London economy embarked on a period of sustained growth. The more settled political climate allowed for a degree of fundamental institutional innovation: the foundation of the Bank of England, the consolidation of the national debt, the re-coinage of 1696.16 All of these remarkable developments, and the extra-ordinary boom in venturing and new companies, inspired a sustained effort to understand the changes under way. Most of these disquisitions on trade appeared in traditional pamphlet form, though the periodical press also did what it could to help readers understand the new markets. Between June and July 1694 John Houghton wrote a series of seven articles in his A collection for the improvement of husbandry, attempting to explain the new financial markets to his subscribers. His articles gave a brief history of joint stock companies and explained how trades were made, including such relatively sophisticated instruments as options and time bargains.17 Defoe's Review also discoursed frequently on economic matters, and Defoe was more inclined than most to muse on the general state of the economy. Defoe of course had personal experience of the hazards of projecting, having been a bankrupt in an unsuccessful business career. He never entirely kicked the habit; although the Review was drawn off into political topics, his last valedictory issue would comment rather wistfully that ‘writing upon trade was the whore I really doted upon’.18 The choice of language is significant; the tone of contemporary pamphlet comment was deeply suspicious of projecting, reflecting the perceived moral ambiguity of making money through financial dealings. The questions posed in the correspondence columns of the Athenian Mercury focused on the moral hazard of lotteries. Could, asked one correspondent in 1694, a godly man in good conscience partake in a lottery when the lots were disposed by Divine Providence?19

  Despite the considerable amount of ink spilled on economic discussions, and the amount of financial data being published in the business press, it remains very questionable whether this was sufficient, or offered the right sort of information, to be of much use to those entering the markets; particularly at times of rapid price movements. London was a very unusual financial market. To a quite unique extent the capital city concentrated the political power and financial muscle of the whole nation. It was also of course a port with constant connections to all major European markets. Yet within this sprawling metropolis the financial trading district was concentrated into a very small space. The principal centres of financial power, the Royal Exchange, the East India Company and Exchange Alley (whence stock-jobbers had removed from the Exchange in 1698) were all within a few hundred paces of each other. Visitors venturing into this bear-pit in trading hours found it a cacophony of noise, where those experienced in affairs exchanged information and made trades, all at a speed and in a jargon that outsiders found utterly bewildering. Defoe, whose Essay on Projects and The Villainy of Stock-Jobbers detected reflect the general scepticism of the age, used his Review for a wonderfully inventive denunciation of the lack of scruples in the financial market. The following imagined dialogue caught the irrationality of trading in a market where rumour and the herd mentality could easily trump rational analysis:

  One cries, is there a Post? Answer, no; but they have it in Exchange Alley

  Has the Government any Express? No, but it is in everybody's mouth in Exchange Alley.

  Is there any account of it at the Secretary's Offices? No, but ‘tis all the news in Exchange Alley.

  Why, but how does it come? Nay, nobody knows; but ‘
tis very hot in Exchange Alley.20

  Those that flourished in this world did so because they had developed their own networks of information and intelligence.21 It took experience to filter from the cacophony of rumour, reports and advice the news that would move markets, particularly as it was widely believed that some would deliberately circulate false reports to make a profit. Those at the very pinnacle of this edifice of power and money could also be very secretive with commercially sensitive information, the directors of the East India Company and the Bank notoriously so.

  The result was that when the markets moved rapidly, as was the case with the notorious South Sea adventure, the printed word offered no real help. The weekly price lists were too infrequent to keep up with the market, and the web of speculation and rumour made little impact on the non-financial papers. This mattered less than one might think, for most citizens were simply the astonished audience for this first great bull market. Rather like tulipmania, the vast majority of dealings occurred within the closed circles of the privileged. The South Sea Bubble was that most satisfying thing: a fraud perpetrated by the elite on itself.