Lesson video

Hi there, I'm Mr. Roberts, and thanks for joining me for today's history lesson where my job will be to guide you through our history resources.

I'll be making sure that by the end of today's lesson, you'll be able to securely meet our lesson objective.

By the end of today's lesson, you'll be able to explain how the role of Prime Minister and Cabinet government emerged in response to the South Sea Bubble under the ministerial leadership of Robert Walpole.

There are five key terms which we need to make sure we're comfortable with before embarking on our learning journey today.

Shares are issued upon investment in a company, ensuring a share of future profits.

A financial bubble in this context refers to the effect of overconfidence in a company, resulting in over-investment and a false high share price.

Bankruptcy is when a bank is running out of money due to lending more than they should, and people withdrawing what is left.

The Chancellor of the Exchequer is the politician and Member of Parliament in Britain, who is in charge of the economy and spending tax money.

And the Cabinet is the term given to the team of politicians in Britain who work together to run the country in the form of a government.

Our lesson on Robert Walpole and Cabinet government will be separated into two different learning phases.

And the first one is dedicated to the story of the rise of the South Sea Company, and the incident of its collapse in 1720.

During the 18th century, Britain, like many European powers at the time, was eager to take advantage of the lucrative opportunities presented by global trade routes and overseas ventures.

The South Sea Company was granted a monopoly by the British government on trade in the South Seas, an area encompassing parts of modern day South America.

The promise of vast riches from trade with South America, particularly in commodities like gold, silver, and exotic goods, captured the imaginations of British investors.

The South Sea Company took advantage of this enthusiasm by selling shares in order to fundraise for its ambitious ventures.

These shares were eagerly snapped up by investors keen to share in the anticipated profits.

Let's make sure we've secured some key information now.

The South Sea Company became a well-known joint stock company in which century? A, the early 16th century, B, the early 17th century, or C, the early 18th century.

Pause the video while you decide on the answer, and then press when you're ready to resume.

Welcome back, and well done if you said C.

The South Sea Company became a well-known joint stock company in the early 18th century.

The company's early years saw some success in its trading endeavours, bolstering confidence among investors and further fueling interest in its stocks.

Due to the increase in popularity of investing in the South Sea Company, partly fueled by the company's early success and partly caused by word of mouth, the company's share price soared to dizzying heights.

This continued to happen even when it became clear that the company's actual profits were failing to match the high prices the company's shares were costing, because of the sheer demand for shares.

Before we move on again, let's just check the following.

True or false, when there is high demand for shares, this drives up the price of shares? Pause the video while you decide on the correct answer, and then press play when you're ready for the answer to be revealed.

Welcome back, and well done if you identified the correct answer as true.

Now, let's justify that answer.

Which of the following is true? A, high demand for shares leads to price increases because people can sell them to the highest bidder.

Or B, high demand for shares leads to price increases because nobody wants to buy the company's shares.

Pause the video while you select an answer, and then press play when you're ready to continue.

Welcome back.

Well done if you said the correct answer is A.

It's true to say that high demand for shares leads to price increases, because people can sell them to the highest bidder.

And that is exactly what was happening to the South Sea Company shares due to all the excitement in the early 18th century.

Now, I'd like you to use what you've learned so far to put the following events into chronological order by numbering them one to four, with one as the earliest.

Pause the video while you order these events, and then press play when you're ready for me to reveal the answers.

Welcome back, and well done if your chronological order looks like this.

Firstly, the South Sea Company was formed.

Secondly, the South Sea Company was granted a monopoly on trade in the South Seas.

Thirdly, this monopoly and opportunity excited British people who rushed to invest in the company by buying shares.

And finally, the rush to invest meant the prices of the company shares rose quickly in a bubble, with some people even borrowing money to buy the shares.

Confidence in the South Sea Company finally collapsed in 1720, when it became clear that there was no way that the company could make anywhere near enough profit to pay back the sheer number of investors.

Both big and small investors had invested huge sums of money into the company.

With everyone hurrying to sell their shares in the company, the shares themselves became worthless, as hardly anyone had any desire to buy them as they knew that the company would never be able to make them any money.

As a result, thousands of Britons who had invested all their savings into the South Sea Company became bankrupt.

To make matters worse, banks had lent money to people so that they could invest in the company.

And as a result, banks faced bankruptcy themselves because their customers were never going to be able to pay them back as their shares were now worthless.

As people heard about this, they rushed to banks to withdraw their money from their bank accounts before the banks ran out of money completely, known as a run on the banks.

Ultimately, the collapse of the South Sea Company bubble caused major financial problems for ordinary Britons, the British financial system, and the British government.

And before we move on again, let's just check the following.

True or false, when many people all sell their shares in a company at once, it causes shares to lose value? Pause the video while you decide on the correct answer, and then press play when you're ready for the answer to be revealed.

Welcome back, and well done if you identified the correct answer as true.

Now, let's justify that answer.

Which of the following is true? A, when lots of people try to sell their shares, it signals they know they are not worth very much, so people are willing to pay less for them.

Or B, when lots of people try to sell their shares, it signals they know they're not worth very much, so people are willing to pay more for them.

Pause the video while you select an answer, and then press play when you're ready to continue.

Welcome back, and well done if you said the answer is A.

It's true to say that when lots of people try to sell their shares, it's signals that they know they're not worth very much.

So people are willing to pay less for them, which is what happened to the shares of the South Sea Company after the financial bubble that had pushed their price up finally burst.

Now, I'd like you to use what you've learned so far to complete the following learning check, which should now be familiar to you.

Put the following events into chronological order by numbering them one to four, with one as the earliest.

Pause the video while you order the events, and then press play when you're ready for me to reveal the answers.

Welcome back, and well done if your chronological order looks like this.

Firstly, the rush to invest meant the prices of the company's shares rose quickly, with some people even borrowing money to buy the shares.

Secondly, when it became clear the South Sea Company could not make enough money to pay back its investors, everyone wanted to sell their shares.

Thirdly, the mass desire to sell shares drove down the prices of shares, and people could not sell their shares for what they bought them for.

And finally, banks were faced with bankruptcy because they had lent people money to buy shares, which they could now not pay back.

Next, I'd like you to study the image on the screen, which is a segment taken from an image we saw earlier.

It's an illustration of Change Alley in London, where people flocked to buy shares in the South Sea Company.

The sign above the two people depicted reads, "Pawnbroker and Jeweller." Note here that if you've never heard of a pawnbroker before, it's someone who will loan you money in exchange for your valuables.

Now, please use what you've learned so far to answer the following question, what does this image suggest about the extent of the excitement surrounding the South Sea Company? Pause the video while you complete this task, and then press play when you're ready for the feedback in the form of a model paragraph.

Hello again, I asked you to study the image and explain what it suggests about the extent of the excitement surrounding the South Sea Company at the beginning of the 18th century.

Well done if you managed to include any of the following.

The image suggests a huge desire amongst British people to buy shares in the South Sea Company.

This is because there is a woman talking to a pawnbroker, presumably looking to exchange her jewellery for a loan.

The fact she is in Change Alley suggests that she will use this loan to buy shares in the South Sea Company.

The fact that she was willing to sell her valuables to invest demonstrates how excited Britons were, and the lengths to which they would go to purchase as many shares as possible.

This demand quickly drove up the price of the South Sea Company shares, and is known as a bubble.

Well done for all your hard work in that first part of the lesson.

Because now it's time for us to move on to the second and final part of our lesson today, where we'll be looking at the parliamentary leadership of Robert Walpole during the South Sea crisis.

And how this leadership led to the emergence of the role of Prime Minister and the method of Cabinet government.

Robert Walpole, as Chancellor of the Exchequer, faced the daunting task of stabilising the economy and restoring public confidence in the government after the collapse of the South Sea Company.

Walpole proceeded to take decisive action to support banks who were on the verge of bankruptcy, in addition to agreeing to pay small amounts of money each year on an ongoing basis to those who still held worthless shares in the South Sea Company.

As well as addressing the British public's economic concerns, Walpole recognised the importance of calming public outrage and restoring their trust in government.

He supported investigations into the causes of the crisis, and helped to pass legal reforms that would prevent similar disasters in the future.

Ultimately, Walpole was successful in stabilising the country and steering it through the period following the collapse of the South Sea Company.

He was able to forward alliances with other key political figures, and maintained the confidence of both Parliament and King George I.

His leadership during this difficult time strengthened his position as the person in government that everyone else was looking to for leadership, laying the groundwork for one of the King's ministers to become the Prime Minister from then on.

Now, I'd very quickly like you to consider the answer to the following question.

What was Robert Walpole's official role in government when he was dealing with the collapse of the South Sea Company? Was it A, president, was it B, King, C, Prime Minister, or D, Chancellor of the Exchequer? Pause the video while you come to a decision, and then press play for the answer to be revealed.

Welcome back, and well done if you said D.

Chancellor of the Exchequer was the official job title of Robert Walpole during the South Sea crisis.

Next, I'd like you to consider the following question.

What three measures did Walpole take to stabilise the country at this time? Did Walpole, A, pay small amounts each year to the South Sea Company shareholders, even though their shares were worthless? Did he, B, investigate the causes of the crisis and pass laws to stop something similar happening again? Did he, C, speak to King George I to get advice about how best to deal with the crisis because he was inexperienced? Or did he, D, support banks who were on the verge of bankruptcy due to lending money to investors who could not repay? Pause the video while you select the three correct answers, and then come back to this video when you're ready for the lesson to continue.

Welcome back, and well done if you identified A, B, and D as the measures that Walpole undertook in order to mitigate the effects of the South Sea crisis on the British economy and stabilise it as much as he could.

It's also worth noting here that he could not have done these things without the help of the team of politicians he put in place to help him.

Interestingly, Walpole's leadership style throughout the crisis was flexible, and focused on building a team of people who could help him deal with the crisis, even if they disagreed on other political matters.

He favoured collaboration, and this style of leadership was well suited to the challenges of the time where a great many dissatisfied people wanted their voice heard in regards to the nation's economic and political challenges.

While Walpole did not single-handedly invent the Cabinet, he very much contributed to formalising the group and cementing it as a key institution in British governance.

The South Sea Company's collapse, therefore, not only acted as a catalyst for the formalising of the role of Prime Minister.

But also helped to formally create the Cabinet, a political body that sat above Parliament but was made up of Members of Parliament who could debate and agree on decisions, and act swiftly and decisively in the running of the country in the years ahead.

Now, I'd like you to use what you've learned so far to answer the following question, which two features of British government emerged thanks to Walpole's leadership after the company's collapse? Pause the video while you come up with the answers, and then resume this video when you're ready for feedback.

Welcome back, and well done if you said that, A, the role of the Prime Minister and C, the governance of Britain by Cabinet were the two features of British government that emerged thanks to Walpole's leadership after the company's collapse.

Now, one final learning check.

I'd like you to use your knowledge to match the key features of this time period with their correct definitions.

Pause the video while you complete this matching task, and then press play for the answers.

Hello again, and well done if you said that Robert Walpole was the Chancellor of the Exchequer during the crisis.

That Cabinet is the team of politicians who run the governing of Britain, and that George I was King of Great Britain at this time.

Finally, now, I'd like you to answer the following questions in as much detail as you can.

Number one, explain how the South Sea Company's collapse led to Robert Walpole effectively becoming Britain's first ever Prime Minister.

And number two, explain how the South Sea Company's collapse led to the system of Cabinet becoming the formal way of running a government in Great Britain.

Pause the video while you do this using your learning today, and then press play when you're ready for some feedback in the form of two model answers.

Welcome back.

Firstly, I asked you to explain how the South Sea Company's collapse led to Robert Walpole effectively becoming Britain's first ever Prime Minister.

Well done if you managed to include the following in your answer.

The collapse of the South Sea Company led to an economic and political crisis, meaning that the British public lost confidence in the government.

Chancellor of the Exchequer, Robert Walpole, who was known for his financial skill and honesty, stabilised the economy and restored confidence in the government.

His effective handling of the crisis gained him support from both the King and the Parliament.

His ability to collaborate with politicians he normally disagreed with in order to succeed meant that everyone now looked to him for leadership, making him effectively Britain's first Prime Minister.

Secondly, I asked you to explain how the South Sea Company's collapse led to the system of Cabinet becoming the formal way of running a government in Great Britain.

Well done if you managed to include the following in your answer.

The collapse of the South Sea Company led to Robert Walpole's effective handling of the crisis.

He did this by putting together a team of able politicians to help him take action to stabilise the economy and the country, which would become known as the Cabinet.

This term would go on to be used to describe the way British government has worked ever since.

Really well done with your efforts on that task.

And with that task now complete, we've arrived at the end of our lesson.

The following is a summary of our key learning points, and it'd be great if you could remember these going forward.

The South Sea Company was an exciting and fast-growing trade and exploration company.

Many people invested in the South Sea Company, given the potential riches on offer in South Atlantic trade and the monopoly the South Sea Company was given by the British government.

This created a bubble.

And when it became clear the South Sea Company would never make the promised profits, it collapsed, provoking a major economic and political crisis.

Robert Walpole managed this crisis, emerging as Britain's first Prime Minister.

He also formalised the system of Cabinet government.

Thank you so much for joining me for our lesson today.

It's been a real pleasure to guide you through our history learning resources.

And I very much look forward to seeing you again in the future for more history lessons.