Sir William Paterson

Published on Monday 30 January 2006 16:56

THERE remains only one painting in existence of Sir William Paterson, which the founder of the Bank of England posed for in 1708 about a decade before his death, but his legacy lives on in every sinew of Scottish society today.

Famous for founding the Bank of England and influential in starting the Bank of Scotland, Paterson's name evokes strong feelings among Scots, who from history books recall his name as the chief strategist behind the disastrous Darien experiment that came so near to bankrupting his nation, its people and spirit.

Born in Skipmyre, Dumfriesshire, in 1658, Paterson would by the end of his extraordinary life have made and lost a fortune as a banker of tremendous influence, acted as the nation's fiscal negotiator as Scotland's chief settlement advisor in the 1707 Act of Union with England, and have sailed the West Indies as a suspected pirate.

Though claims of piracy remain unproven, Paterson's early travels in the Caribbean as a young merchant instilled in him an entrepreneurial zeal. It also offered Paterson practical commercial experience that allowed him to amass a fortune, which he would invest into Dutch banks.

An early exponent of free trade decades before Adam Smith rewrote modern economics with The Wealth of Nations, Paterson would pen: "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."

Paterson then brought back to London ideas gleaned from Amsterdam's burgeoning banks, and, after his publication of a pamphlet entitled "A Brief Account of the Intended Bank of England," he and wealthy backers sold their scheme for a central bank to William II, whose wars had exhausted England's coffers.

Paterson proposed a loan of 1.2 million to the government, which was accepted; its subscribers were incorporated as the Governor and Company of the Bank of England, and the Royal Charter defining the bank's purpose was sealed in July 1694. Though one of the key backers and first directors of the Bank of England, Paterson was ousted as governor less than a year later amid claims of financial mismanagement.

Before his departure, Paterson successfully lobbied the Scottish parliament for the passage of the Act for a Company Trading to Africa and the Indies. The act led the the erecting of the Bank of Scotland in 1696.

The Darien debacle of 1698 would ensue, with Scotland losing over half its national wealth alongside the lives of over 2,000 colonists who died attempting to set up a trading post in what is now Panama.

As a civilian passenger on board the first of five ships that would sail from Leith, Paterson would lose his health and much of his wealth. His second wife and child died at Darien (his first wife also died prematurely), and he was forced to return to England after falling gravely ill.

The failed experiment - caused in no small measure by England's withdrawal of investment and assurances of safety on the colony, alongside similar promises and withdrawal by the Dutch - would effectively force the Act of Union with England. That is where Paterson would go some way to redeeming himself by securing for Scotland a stipend for assumption of part of England's national debt.

Paterson died in 1719 and was buried in the churchyard of Dumfriesshire's crumbling Sweetheart Abbey. A plaque was unveiled at New Abbey in 1974, and his portrait, thought the only one in existence, currently hangs in the British Museum.

This article includes revisions and amplifications since it was originally published.