Forever blowing bubbles

Roy Mohon
Roy Mohon Pastor Mohon is the minister of the Presbyterian Reformed Church, Stockton-on-Tees. As well as qualifications in banking and taxation, he holds an MA in Theology from the University of Durham.
01 November, 2008 5 min read

Forever blowing bubbles

They say ‘History repeats itself’ and international financial crises have been a repeated woe in recent centuries. One of the best-known older examples is the South Sea Bubble. The bursting soap-bubble has become a euphemistic metaphor for financial collapse following hopes of large gains.

When our savings, pensions and houses fall in value through no fault of our own, we wish that lessons had been learned from previous events.

To put the South Sea Bubble in its historical context we need to remember that when John Bunyan died on 31 August 1688 the Puritan period was drawing to a close. It was a few months before the Glorious Revolution and the accession of William and Mary.

In Scotland, the persecution of the Scottish Covenanters came to an abrupt end and, as life returned to normal, new economic developments took place. Within seven years of Bunyan’s death, the Bank of Scotland was founded in 1695.

If the Puritan writer John Flavel had been alive today, he would have called it a signal (significant) providence that today, 300 years later, with Scotsmen at the financial helm of UK plc, the Bank of Scotland (now HBOS) should be too weak to continue an independent existence.

Politicians like to blame global turbulence and corrupt hedge-fund managers, but are there explanations closer to home?

The problem of debt

It should come as no surprise that the South Sea Bubble was closely connected with public debt. The Bank of England had been founded in 1694 to lend money to the Government. The South Sea Company was formed in 1711 and granted a monopoly in trade with South America in exchange for its proposals to reduce the National Debt.

Searching for further concessions, the South Sea Company offered to take over the public debt completely. The prospect of large returns led many speculators to invest in the company, but the investment fundamentals were not sound and thousands were ruined when the bubble burst in 1720.

Although the Bible does not condemn lending and borrowing, it does warn us of the corrosive effects of excessive debt (Exodus 22:25; Proverbs 22:7). In the UK, undue reliance on corporate and personal debt as the engine of economic growth has produced boom and bust with relentless regularity.


The South Sea Bubble became a political crisis because of the corruption involved. This corruption even involved members of parliament, and it fell to Robert Walpole to seek to restore confidence.

There are no simplistic solutions to financial corruption and the obvious is not always the answer. Should ‘short-selling’ be banned? Some financial commentators fear that such a ban would only make matters worse.

Short-selling is the arrangement whereby investors pay a fee to borrow shares and then sell them in a falling market – intending to buy them back later at a lower price and return them to the lender having made a profit.

What concerns these commentators is not short-selling itself but the attendant corrupt practice of spreading false rumours about the target company – forcing the share-price down and providing the short-seller with a larger profit. The Bible would certainly condemn the practice of raising false reports (Exodus 23:1).


The South Sea Bubble exposed something ugly in the society of its day. A get-rich-quick mentality took over from a careful examination of investment fundamentals. The Bible warns us against becoming greedy (1 Timothy 3:8). To idolise material gain as the investor’s ultimate objective is to worship Mammon.

At the root of all our economic activity should be the biblical doctrine of stewardship. Man has a God-given task to ‘replenish the earth, and subdue it’ to the glory of God (Genesis 1:28) – something that found its first expression in the Garden of Eden where man was ‘to dress it, and to keep it’ (Genesis 2:15).

This interaction with the natural environment involves both caring conservation and effective production to yield abundance as a result of the goodness of God (Psalm 67:6). Each person has a duty in this connection to use his or her gifts and talents. The more diligently this is done, the greater the prospect of personal and social benefit.

The social scientist’s interpretation of this ‘Protestant work ethic’ goes off the rails. He thinks the Calvinist is diligent so as to prove himself elect, being fearful of failing. The truth is that the saved sinner’s motivation arises from his assurance of salvation and his consequent labours are a thankful acknowledgement of God’s sovereign mercy.

Market problems

Free market economics receives a lot of criticism but usually what is being criticised is not a free market at all. The South Sea Bubble took place in the context of government manipulation of the market, as it created monopolistic rights for its own ends.

In our own day there is an expectation that the manipulation of interest rates by central banks, in line with government targets, will not result in distortions of the market. It is a false expectation that will return as a whirlwind. We are right to have doubts when governments make such misjudgements!

The great Scottish philosopher Adam Smith (1723 – 90), whose Wealth of Nations became a classical economics text, advocated limited government so that the market could do its job.

The Bible has no quarrel with a free market as a place where buyers and sellers meet and exchange goods at agreed prices (1 Corinthians 10:25). It expects the free market to be a fair market which will not hinder the civil government from ensuring fair weights and measures. But it is important that markets be allowed to function.

Marginalising the Christian faith

It has become fashionable in our secular society to view faith in general, and Christian faith in particular, as largely irrelevant. This has been one of the disastrous effects of Enlightenment rationalism.

The Bible expects that the market will function in a moral context but, like other disciplines, market theory has suffered from the rationalistic suppression of the Divine in economic activity.

The eighteenth-century departure from the Divine was evident in Adam Smith’s work. He had already reduced God to an ‘invisible hand’ in market capitalism. Even though he himself was strong on morality, it did not bode well that God was largely out of the picture.

It paved the way for a kind of market theory divorced from morality. Alternatively, for some, the market itself defined what was moral. This has relevance to modern financial crises, where ‘every financial institution does that which is right in its own eyes’!

We cannot imagine the Good Samaritan wanting to get rich quick by accelerating the demise of an ailing company at the expense of other people’s jobs, savings and pensions (Luke 10:33-37). He would want to do what was loving as well as having an eye to market efficiency.

Marginalising the Christian faith will backfire spectacularly as left-wing and right-wing secularists alike blow bubbles that will burst. As they take turns at regulating the market they will find that law alone cannot foster the mindset and disposition of the Good Samaritan.

The spiritual dimension of life remains central to our social needs. Jesus Christ remains our perfect example. He is the all-sufficient Saviour, the transformer of men and nations.

Roy Mohon

Roy Mohon
Pastor Mohon is the minister of the Presbyterian Reformed Church, Stockton-on-Tees. As well as qualifications in banking and taxation, he holds an MA in Theology from the University of Durham.
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