The Million Adventure

At the end of the 17th century, England was in trouble.

The English Civil War dominated the middle of the century, and it left the country financially devastated. Bridges and buildings needed to be repaired or rebuilt from scratch, and debts needed to be repaid.

This war had seen England go from a constitutional monarchy to a republic, and then back again as Oliver Cromwell showed once and for all that you don’t have to be a king to become a tyrant. Just try to imagine the devastation that two revolutions might wreak on a country.

Meanwhile, England’s navy had continued to expand, and in order to maintain power, gunboat diplomacy was common. France, England’s main geopolitical rival as the new century approached, understood this quite well, and they were eager to make life harder by escalating their own spending. Centuries later, the US would take a similar tactic as the close of the Cold War drew near.

England could become wealthier over time by projecting power outward, but there was an urgent need for cash right now at home.

How much cash? Oh, about a million pounds (£1 million). Inflation makes that seem like a trivial amount for a wealthy nation, but in 1694, this was more like £200 million in today’s terms, and England’s entire budget for the year was around £5 million. Today, the UK spends more than a trillion pounds a year, so hopefully this puts things into context!

Pounds sterling meant that the currency was backed by actual silver, so you couldn’t just print money like the Federal Reserve can today. Incidentally, “printing money” is an overused simplification, but one feature of fiat money is that it can be created whenever needed without worrying about staying tethered to the scarcity or abundance of an arbitrary metal. The Federal Reserve did this in 2008 and in 2020, most famously, but this strategy was off the table for England in 1694.

Innovation was needed, and after the kingdom’s best financiers put on their thinking caps, they came up with a fundraising scheme that was certainly novel.

They called the idea “The Million Adventure”, invoking a sense of wonder and excitement right out of the gate. Shares would be sold to individuals at the price of £10 each, so if the government could sell 100,000 of these, they’d be all set.

The money collected from the share sales was then invested by the government, so it tended to gain a little principle over time. And, as individual shareholders died, their shares were then distributed among the surviving investors. The longer a person lived, the more their shares were worth, at least in theory.

The Million Adventure didn’t blow up like the Tulip Bubble, and it didn’t devastate the nation’s finances the way the South Sea Bubble did. It does seem like a bit of a Ponzi scheme—people’s share price would go up if more people bought in and subsequently died—but it seems to have fizzled out rather than blowing up, probably because there wasn’t enough enthusiasm to really ignite the idea.

However, during that same desperate year, England created an institution that’s a huge part of the fabric of the UK today. The same spirit of financial innovation that came up with the Million Adventure also conceived of the Bank of England, or BOE for short.

The BOE was kind of like the blueprint for all modern central banks today (like the Fed). Financial stability is incredibly important in order to have full employment, both of which are objectives of the BOE today. Back in 1694, the BOE was able to issue debt on behalf of the government, and to manage and pay down the existing debt in an orderly manner.

You can see that England was sort of throwing these ideas onto the wall to see what would stick, and the Bank of England has certainly stuck around.

These bold experiments were badly needed at the time, and desperate times called for innovative measures. The modern world has all sorts of complex financial instruments today that virtually nobody can understand, and the Million Adventure played its role in inspiring future ideas, although it largely remains in the dustbin of central banking history. The BOE, on the other hand, is widely recognized for its importance in the evolution of central banks like the Fed.

What are some sketchy or innovative ideas in modern finance? Had you heard about the Million Adventure before today? What do you think of the modern BOE or Fed?