Sir William Paterson lived from April 1658 to 22 January 1719. He was the founder of the Bank of England and influential in starting the Bank of Scotland; he was also the architect of the disastrous Darien Scheme and one of the negotiators behind the Acts of Union in 1707. The wider picture in Scotland at the time is set out in our Historical Timeline.
Paterson was born in the tiny hamlet of Skipmyre, mid way between Dumfries and Lochmaben in Dumfries and Galloway, where his parents were farmers. At the age of 17 he went to Bristol, and from there to the Bahamas. Here he became a prosperous merchant by a variety of means, including, some have suggested, activities that bordered on piracy.
From the Bahamas he moved to Holland, where he invested his fortune in Dutch Banks. A strong promoter of free trade, he would foreshadow some aspects of Adam Smith's work by the better part of a century, writing: "Trade will increase trade, and money will beget money, and the trading world shall no more want work for their hands, but will rather want hands for their work."
He also returned from the Caribbean with a strong belief that the establishment of a trading company in Panama would open up huge potential, allowing trading to take place across the Atlantic and the Pacific (in effect pre-empting the reasons for the construction of the Panama Canal over two centuries later). The complication with such an idea was that it would inevitably be opposed by the Spanish, who already had strong interests in Central America. Paterson tried to sell the idea for his Darien Colony first to the Holy Roman Empire and then to the Dutch Republic, both times without success.
Paterson returned to London from Holland and published a document called "A Brief Account of the Intended Bank of England" under which a central bank would be set up to help with Government finance. William II approved of the idea and in July 1694 the Bank was established by Royal Charter and made its first loan to the Government of £1.2m. Paterson became one of the Directors of the Bank of England, a post he was removed from the following year after a financial scandal.
In 1695 Paterson moved to Edinburgh and was instrumental in persuading the Scots of the need for a Bank of Scotland to support commercial trading abroad. This came into being the following year. He also persuaded the Scots to take an interest in his Darien Scheme, which had started to take off in England before the English Government opposed it and banned investment by English citizens. The 1690s were very hard times for the Scots and it has been estimated that anything between a quarter and a half of the total available wealth of Scotland was invested in the dream of Darien.
When the first five ships left Leith for Darien on 14 July 1698, Paterson, his second wife and their child were among the 1,200 people on board. The Scheme was a disaster, with most of those involved dying, including Paterson's wife and child. He was among the few to return. The cause of the disaster was less down to any fault with the aims of the scheme itself, and more because the English and Dutch Governments under William II actively prohibited any assistance being given to the Darien colonists for fear of upsetting the Spanish.
Sir William Paterson returned to Scotland in December 1699. Like his country, he had been virtually bankrupted by Darien. He resumed trading, and later became a key figure in the financial negotiations which led to the Acts of Union between England and Scotland in 1707, probably being responsible for their emerging in a form that was financially fairly favourable to Scotland. Paterson was living in London when he died in 1719. He was buried in the graveyard at Sweetheart Abbey, and a plaque commemorating him was unveiled there in 1974.