Economic Crisis and Overseas Colonies
The closing decade of the seventeenth century saw the generally favourable economic conditions that had dominated since the Restoration come to an end. There was a slump in trade with the Baltic and France from 1689–91, caused by French protectionism and changes in the Scottish cattle trade, followed by four years of failed harvests (1695, 1696 and 1698-9), known as the "seven ill years". The result was severe famine and depopulation, particularly in the north. The Parliament of Scotland of 1695 enacted proposals that might help the desperate economic situation, including setting up the Bank of Scotland. The "Company of Scotland Trading to Africa and the Indies" received a charter to raise capital through public subscription.
The "Company of Scotland" invested in the Darien scheme, an ambitious plan devised by William Paterson, the Scottish founder of the Bank of England, to build a colony on the Isthmus of Panama in the hope of establishing trade with the Far East. The Darién scheme won widespread support in Scotland as the landed gentry and the merchant class were in agreement in seeing overseas trade and colonialism as routes to upgrade Scotland's economy. Since the capital resources of the Edinburgh merchants and landholder elite were insufficient, the company appealed to middling social ranks, who responded with patriotic fervour to the call for money; the lower orders volunteered as colonists. However, both the English East India Company and the English government opposed the idea. The East India Company saw the venture as a potential commercial threat and the government were involved in the War of the Grand Alliance from 1689 to 1697 against France and did not want to offend Spain, which claimed the territory as part of New Granada and the English investors withdraw. Returning to Edinburgh, the Company raised £400,000 in a few weeks. Three small fleets with a total of 3,000 men eventually set out for Panama in 1698. The exercise proved a disaster. Poorly equipped; beset by incessant rain; suffering from disease; under attack by the Spanish from nearby Cartagena; and refused aid by the English in the West Indies, the colonists abandoned their project in 1700. Only 1,000 survived and only one ship managed to return to Scotland. The cost of £150,000 put a severe strain on the Scottish commercial system and led to widespread anger against England, while, seeing the impossibility of two economic policies, William was prompted to argue for political union shortly before his death in 1702.
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