In this episode of the @VersusHistory Podcast, we are delighted to interview Thomas Levenson, Professor of Science Writing at the Massachusetts Institute of Technology (MIT). His new book ‘Money for Nothing' is the remarkable tale of the world’s first-ever financial crash, which took place 300 years ago, in the year 1720. It tells the captivating stories of a host of entertaining characters who became caught up in the world’s first financial bubble; with luminaries such as Daniel Defoe, Alexander Pope and even Isaac Newton losing out in a scheme that was ‘too good to be true’. ‘Money for Nothing’ explores how the scientific revolution extended to matters far beyond the flight of a cannonball or the dynamics of the tides, extending into the idea that empiricism and maths could make sense of everyday life; and how the invention of modern ideas about money both made the world rich and expose us to predictable hazards that we have, to date, three centuries on, failed to fully prepare for.

The South Sea Company was formed to monopolize trade with Spain’s American colonies. But it had almost no ships and did precious little trade. So it turned its hand to playing money games, until, in 1720, it launched the first great stock market boom, fraud and bust, in what is now remembered as the South Sea Bubble. The financial engineering pioneered in the Bubble didn’t go away. Instead, it evolved into the same kinds of market manipulation that brought the world’s economy crashing down in 2008. In the moment, though, it all seemed to work brilliantly. Exactly 300 years ago, in June 1720, South Sea shares hit their peak, a ten-fold gain. Britain’s punters—up to and including the King’s mistresses—had grown incredibly, impossibly rich—on paper. And then the carousel stopped and thousands lost their shirts. Isaac Newton, the Duke of Portland (England’s richest man) and others lost heavily.

Tom Levenson's superb account of the South Sea bubble dissects that huge scam—but that tale isn’t just a disaster story. It is also the story of the birth of modern financial capitalism: the idea that you can invest in future prosperity and that governments can borrow money to make things happen, like funding the rise of British naval and mercantile power. These dreamers and fraudsters may have ruined Britons, but they made the world rich.

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