In 1707 Scotland signed the Act of Union with England, officially ceding its independence in hopes that the wealth of the English monarchy could be brought to bear on Scotland's staggering economic woes. Just a decade before Scotland gave up its sovereignty, however, this proud nation had launched a daring plot to establish a revolutionary trade presence in the New World in a historic attempt to reverse the financial misfortune caused by a succession of poor harvests.
The project was known as the Darien Scheme, and its aim was to establish an overland crossing on the Isthmus of Panama (then called the Isthmus of Darien), thereby linking the Atlantic and Pacific oceans and avoiding the risks and delays of the dangerous oceanic route around Cape Horn. The enterprise was the inspiration of the maverick financier William Paterson---a Scot who had never seen Panama, but who had heard wonderful things about it from a returning sailor.
Paterson had earned his reputation as one of the founders of the Bank of England, but in the late 17th century he returned to his native country armed with the bold ambition of remaking Scotland into an international shipping power capable of competing with the established empires of Britain, Holland, and Spain. Paterson convinced the Scottish Parliament in 1695 to found the Company of Scotland Trading to Africa and the Indies, also known as the Darien Company, as a corporate entity capable of facilitating his dream of creating a lucrative link between East and West.
Modeled after England's East India Company, the Darien Company initially attracted a host of international investors. Soon, however, it met with fierce political opposition from nations threatened by the prospect of Paterson's ambition and his disregard for Spanish claims to Panama. These concerns discouraged many of the Darien Company's international backers, which prompted Paterson to solicit investment from Scotland's own impoverished citizenry. In a very real sense, the economy of Scotland was dependent on the success of the Darien Scheme.
Paterson's fund-raising (estimated, according to the Bank of Scotland, to amount to approximately one-quarter of the total liquid assets of Scotland) was sufficient to outfit five vessels, which set sail for Panama in 1698. Sadly, the 1,200 Scottish settlers aboard these ships were ill-prepared for the challenges and hardships that awaited them. Paterson---himself one of the colonists---had painted an unrealistic picture of friendly native peoples and fertile lands ripe for colonization.
In truth Panama was a wild, harsh jungle under the control of Spanish forces and filled with local tribes that held little regard for European intruders and had small interest in the European goods the Scottish brought for trade. Paterson had envisioned a Scottish colony functioning as a depot for trade goods passing between Europe and Asia and charging a handsome fee for arranging overland transport across the isthmus. Weakened by lack of food and by malaria and yellow fever, however, the colonists were unable to build adequate shelter, grow food, or fend off attacks by the Spanish Navy, let alone establish the dreamed-of trade routes across the isthmus.
The original colonists remained in Panama less than a year before pulling up stakes and returning to Scotland. Of the five ships and 1,200 settlers who had left Scotland in 1698, only one vessel and fewer than 300 survivors returned in 1699. In the meantime additional Scottish settlers set out for the Darien colony only to encounter similar misfortune.
The colossal, devastating failure of the Darien Scheme demoralized the Scottish people, ruined Scotland's economy, and did irreparable harm to the cause of Scottish independence. English payment of a sum (in the opinion of many Scots, a bribe) known as the "Equivalent," largely intended for settlement of the losses of the Darien Company, was one of the determining factors in the Scottish Parliament's ultimate consent to the Act of Union.
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