William Paterson (banker)

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Sir William Paterson.

Sir William Paterson (April, 1655 - January 22, 1719) was a Scottish merchant and banker, the founder of the Bank of England and an initiator of the Bank of Scotland. He remains famous for his idea of the Darien Scheme, the Scottish trading colony on the Isthmus of Panama, which resulted in great disaster and near bankruptcy of the whole Scottish economy.

Biography

Early life

William Paterson was born on his parent's farmhouse of Skipmyre in Tinwald, Scotland. He received the education common to boys of his time, studying grammar, arithmetic, and Latin, and was destined to become a Presbyterian minister. However, in 1672 he was forced to leave Scotland, being accused of keeping contacts with the persecuted ministers in hiding in the wilds of Dumfries-shire

He emigrated first to Bristol and from there to the Bahamas. It was here that he first conceived the Darién scheme, his plan to create a colony on the Isthmus of Panama, facilitating trade with the Far East.

In Bahamas, Paterson became a prosperous merchant, some say even keeping close connections with pirates.

The idea of the Darién scheme

Paterson returned to Holland, and attempted to convince the English government under James II to undertake the Darién Scheme. Paterson was a strong supporter of free trade, and believed that a trading route through Panama would benefit the economy of the country that undertakes that route. It would open up the flow of goods across Atlantic and Pacific Oceans, and would bring free trade to all of Central and South America. He thus advocated the establishment of the permanent trading colony on the Isthmus of Panama.

Decades before Adam Smith’s The Wealth of Nations, Paterson wrote: "Trade will increase trade, and money will beget money, and the trading world shall need no more want work for their hands, but will rather want hands for their work."

The only problem with the idea was that which ever country attempted to establish a colony in Panama would inevitably come in conflict with Spain, who had strong interests in Central America. Paterson’s idea was thus refused by English, after which he tried again to persuade the governments of the Holy Roman Empire and the Dutch Republic to establish a colony in Panama, but failed in both cases.

Bank of England

Paterson returned to London and made his fortune with foreign trade (primarily with the West Indies) in the Merchant Taylors' Company. He published a paper entitled A Brief Account of the Intended Bank of England, in which he revealed his idea of a central national bank that would help in government finances.

In July 1694, Paterson realized his idea, and founded the Bank of England. He proposed a loan of £1.2m to the government; in return the subscribers would be incorporated as The Governor and Company of the Bank of England with banking privileges including the issue of notes. The Royal Charter was granted on July 27, 1694.

Paterson acted as one of the Directors of the Bank until 1695, when he was removed from the post due to a financial scandal.

Return to Scotland and Darien expedition

Paterson relocated to Edinburgh, where he successfully lobbied the Scottish parliament for the passage of the Act for a Company Trading to Africa and the Indies. The Act led to the establishment of the Bank of Scotland, the central bank of the Kingdom of Scotland, in 1896.

Paterson was also able to convince the Privy council of Scotland to take interest in the Darién Scheme. The Government soon started to invest money in the project, causing the conflict with the English, who strongly opposed the idea and banned their citizens from investing money in it. By the end of 1690s, it is estimated that between a quarter and a half of the total wealth of Scotland was invested into the Darién Scheme.

In July 1698, first five ships left Scotland heading for Panama. Among 1200 passengers were Paterson and his second wife Hannah (his first wife Elisabeth died prematurely) and child. The trip however soon turned to a complete disaster. Many of the passengers died on the way, including Paterson’s wife and child. He was among the only few who actually survived[1]. The colonists eventually settled down in Darién, but remained there only for short time and ultimately returned to Scotland abandoning the whole project.

Last years

Paterson returned to Scotland in December 1699, bankrupt and rather ill. He continued with trading business and was instrumental in the movement for the Union of Scotland and England. The treaty led to the Act of Union in 1707, which was rather beneficial for Scottish. Paterson spent last years of his life in Westminster, London, where he died in January 1719.

Legacy

William Paterson was one of the most famous Scotsmen, whose name still evokes strong feelings among Scots. He is famous for founding the Bank of England and influential in starting the Bank of Scotland, two institutions fundamental in the economy of Great Britain. He advocated free trade decades before Adam Smith published his The Wealth of Nations. His idea of the free trade between Pacific and Atlantic Oceans preceded the construction of the Panama Canal for about two hundred years.

Paterson is however mostly remembered for the disastrous Darien Scheme, which resulted in almost bankruptcy of the whole Scottish economy, and the death of more than 2000 people.

Publications

Roughly 22 anonymous works are attributed to Paterson, notably:

  • Paterson, William. 1694. A Brief account of tile Intended Bank of England.
  • Paterson, William. 1700. Proposals and Reasons for Constituting a Council of Trade.
  • Paterson, William. 1701. A Proposal to plant a Colony in Darién to protect the Indians against Spain, and to open the Trade of South America to all Nations.
  • Paterson, William. 1705. Essay Concerning Inland and Foreign, Public and Private Trade.
  • Paterson, William. 1706. The Occasion of Scotland's Decay in Trade; with a proper Expedient for Recovery thereof, and the Increasing our Wealth.
  • Paterson, William. 1717. Wednesday Club Conferences.

References
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External links

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  1. ↑ Dennis R. Hidalgo To Get Rich for Our Homeland: The Company of Scotland and the Colonization of the Darién, Colonial Latin American Historical Review, 10:3 (Summer/Verano 2001): 156
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