Scotland bet a fifth of its wealth on a Panama colony — and the colony died in two years

In 1695 the Scottish parliament chartered the Company of Scotland Trading to Africa and the Indies, conceived by the financier William Paterson as a trading gateway on the Isthmus of Panama between the Atlantic and Pacific. After English investors withdrew under pressure from their own East India and Royal African companies, the subscription was taken up entirely in Scotland. It raised £400,000 sterling — estimated at roughly a fifth of all the liquid wealth in the country, drawn from lords, lairds, merchants and town councils.

The first expedition of five ships sailed from Leith in July 1698 and landed some 1,200 settlers on the shore of the Bay of Darien, founding New Edinburgh. The site had been chosen from a prospectus, not from any reconnaissance: it was swamp, it had no safe harbour, it grew no provisions the settlers could eat, and it lay in territory the Spanish Crown considered its own. King William, also ruling a Spain-aligned foreign policy from London, ordered the English colonies in America and the Caribbean not to supply or trade with the settlement.

Within a year fever, dysentery and starvation had killed the majority of the colony, Paterson's own wife among them. A second expedition of roughly 1,300 more settlers arrived in November 1699 to find the first abandoned and the land still malarial, and it died the same way. In March 1700 a Spanish force besieged the bay; the survivors surrendered and sailed home. Of about 2,500 who had gone, only a few hundred returned, and the company's capital was gone with them.

The loss fell not on shareholders who could bear it but on the whole country, because the subscription had been a national one. The ruin of so much private and civic capital is reckoned among the pressures that broke Scottish resistance to the 1707 Treaty of Union, under which London paid £398,085 — the 'Equivalent' — to compensate Scottish holders of the company's stock and absorb Scotland's share of the national debt.