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Title: John Law of Lauriston
Author: Wiston-Glynn, A. W.
Language: English
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JOHN LAW OF LAURISTON
[Illustration:
_Copyright._] [_Emery Walker._
JOHN LAW OF LAURISTON.
From a portrait in the National Portrait Gallery, London.]
John Law of Lauriston
_Financier and Statesman_
FOUNDER OF THE BANK OF FRANCE, ORIGINATOR OF THE
MISSISSIPPI SCHEME, ETC.
[Illustration]
By A. W. WISTON-GLYNN, M.A.
EDINBURGH
E. SAUNDERS & Co., 52 NORTH BRIDGE STREET
ALSO AT LONDON AND DUBLIN
Inscribed
to
My Wife.
PREFACE
The career of John Law is one of the most striking and romantic in a
period teeming with great and historic personages, and provides in the
annals of the early part of the 18th century a chapter dealing with a
series of exciting events which, in their character, their intensity,
and their influence upon the French people, were almost revolutionary.
As a financial genius he was incomparably the greatest man of his age.
His schemes, original in their conception, and vast in their operation,
captivated by their brilliance a nation already on the brink of ruin,
and eager to embrace any possible means by which it might rehabilitate
its shattered fortunes. His gigantic joint-stock undertakings, his
sweeping financial proposals culminating in the discharge of the whole
National Debt of France, his gradual increase of power and influence,
and latterly his virtual control of the government of France, made him
a man of international importance--a man to be respected, flattered,
and feared.
It is, accordingly, a somewhat striking circumstance that, with
the exception of the short account of Law’s career by John Philip
Wood issued so long ago as 1824, no adequate biography of the great
financier has yet appeared in this country. While essays, and
critical articles have, no doubt, appeared in abundance in numerous
publications, and while his phenomenal career has even been pressed
into the service of fictional literature, it has only been possible to
obtain a comprehensive impression of the man and his work by reference
to the numerous treatises dealing with his system published in France
during the 18th century, to the voluminous memoirs of the time, and
last but not least to the state and official documents in which his
various schemes are considered. In preparing the following pages,
therefore, it has been necessary to deal with a considerable mass
of unsifted material, no small portion of which seems to have been
neglected by previous writers, although valuable and requisite for
forming a just and impartial estimate.
Amongst the authorities to which I have been most indebted for guidance
are the following,--“Histoire du Système des Finances pendant les
années, 1719 and 1720,” by Duhautchamps; “Vue génèrale du Système de M.
Law,” by Fourbonnais; “Correspondence of the 2nd Earl of Stair, in the
Hardwicke State papers;” “Memoirs de Saint-Simon;” “Law et son système
des Finances,” by Thiers; “Recherches historiques sur le systême de
Law,” by Levasseur; and “Law, son systême et son époque,” by Cochut.
Law’s own writings have, of course, also furnished valuable material,
and particularly his “Proposals and Reasons for constituting a Council
of Trade in Scotland,” and his “Money and Trade Considered.” His later
writings form part of Daire’s “Collection des Principaux Economistes.”
A. W. W.-G.
EDINBURGH,
_26th November, 1907_.
ILLUSTRATIONS.
JOHN LAW OF LAURISTON Frontispiece.
facing page
LAURISTON CASTLE 4
LA SALLE 52
DUC D’ORLEANS 104
EARL OF STAIR 148
CARDINAL DUBOIS 186
CONTENTS
PAGE
CHAPTER I. 1
Standard of criticism hitherto applied to John Law.--
Birth and ancestry.--Education.--Death of father.--
Early devotion to study of finance.--Manner and
appearance.--Visits London.--Duel with Beau Wilson.--
Tried for murder.--Escapes to France.--Meets Lady
Catherine Knollys.--Career of gambling on the
Continent.--Studies banking.--Formulates new principles
of finance.--Returns to Scotland.
CHAPTER II. 15
Unsettled condition of Scottish politics in 1700.--
Financial and commercial insecurity of country.--Law’s
solution of difficulties.--Land Bank.--Supported by
Court party.--Rejected by Parliament.--Again resorts
to gambling.--Returns to Continent.--Expelled from
Holland.--Visits Paris.--Discusses finance with Duc
d’Orleans.--Expelled by Lieutenant General of Police.--
Submits proposals to Louis XIV. without success.--Again
attempts to secure adoption of proposals by France.--
Financial condition of France.--Earl of Stair’s
friendship with Law.
CHAPTER III. 33
Accession of Louis XV.--National debt of France.--
Debasement of coinage.--Arraignment of tax collectors.--
Council of Finances consider Law’s proposals
unfavourably.--Petition for permission to establish
private bank granted.--Constitution of the Bank.--Its
Success.--The “Pitt” diamond and its purchase.
CHAPTER IV. 50
Law’s notes become official tender.--The Mississippi
Scheme projected.--Early explorers of Mississippi
territory.--Establishment of the West India Company.--
Its absorption of depreciated _billets d’état_.--
D’Argenson appointed Chancellor of France, and attempts
extinction of National Debt.--Law innocently involved
in D’Argenson’s fatal scheme.--Saved from arrest by
Regent.--The brothers Paris and an anti-system.
CHAPTER V. 66
Exaggerated accounts of resources of Louisiana.--
Law’s judgment at fault.--His ultimate aim.--He
creates an artificial rise in the value of Company
shares.--His unsuccessful efforts to gain influence
over Saint-Simon.--Acquisition of Tobacco monopoly.--
Absorption of other companies.--Reconstitution of West
India Company.--Parliamentary opposition overcome.--
“Mothers” and “Daughters”.--Excited speculation in
shares.--Issue of notes to colonists.--A pioneer’s
account of Louisiana.
CHAPTER VI. 82
Company acquires right of coinage.--Issue of fresh stock
and rise in price.--Attempts made to discredit Law.--
Stair’s account of the situation.--Law defeats the
anti-scheme.--The concluding proposal of his schemes.--
The Company’s capital and sources of revenue.--Report of
directors for 1719.--Law’s bank converted into a Royal
bank against Law’s wish.--The Regent divests notes of
the bank of their most valuable features.--Provincial
branches established.--Restriction of gold and silver
tender.--Extravagance of successful speculators.
CHAPTER VII. 98
Hotel Mazarin acquired as office of Company and of
Bank.--Excitement of crowds in the Rue Vivienne and
the Rue Quincampoix.--Curious sources of fortune.--
Instances of enormous fortunes acquired by members of the
nobility.--Enormous influx of foreign speculators into
Paris.
CHAPTER VIII. 111
Law’s importance causes him to be courted by all
classes.--Socially ostracised by nobility.--Law’s
conversion to Roman Catholicism.--The part of the
Abbé Dubois and the Abbé Tencin in the conversion.--
Difficulties in its accomplishment.--Law becomes
naturalised.--Law appointed Controller-General
of Finance.--Regent celebrates appointment by a
distribution of pensions.--Law honoured with the freedom
of the City of Edinburgh.--Elected member of Academy
of Sciences.--William Law brought to France and made
Postmaster-General.--Law’s private investments.--His
fiscal reforms.--His introduction of free university
education.
CHAPTER IX. 128
Law’s designs against England’s political and industrial
position.--Earl of Stair’s correspondence with Mr.
Secretary Craggs.--Stair accused by Law of threatening
the safety of the Bank.--Stair’s recall intimated.--
Lord Stanhope sent to conciliate Law.--Threatened
rupture between England and France over question of
evacuation of Gibraltar.--Stair endeavours to justify
his hostile attitude towards Law.--His apprehensions
as to Law’s purpose in acquiring South Sea stock.--The
humiliating nature of Stair’s dismissal.
CHAPTER X. 154
The beginning of Law’s difficulties.--The Bank’s reserve
of specie begins to be depleted.--Law attempts a remedy
by altering the standard of the coinage, and restricting
the currency of specie.--Temporary success of remedy.--
Domiciliary visits resorted to for detection of hoarded
specie.--Bank and Company United.--Discharge of
National Debt.--Use of the Rue Quincampoix prohibited as
a stock market.--The assassination of a stock-jobber by
the Comte des Horn, and the latter’s execution.
CHAPTER XI. 171
New measures prove ineffectual.--New edict issued
fixing price of shares and depreciating value of
notes.--Authorship of edict.--People hostile to
edict.--Parliament refuses to register it, and a
revocation is issued.--Law deposed from office of
Controller-General.--D’Aguessau reinstated in his former
office.--New schemes for absorption of bank-notes.--
Widespread distress produced amongst community.--Law’s
person in danger.--Stock-jobbers establish themselves in
the gardens of the Hotel de Soissons.--Parliament exiled
to Pontoise, and Bank closed for an indefinite period.
CHAPTER XII. 189
Starvation produced amongst poorer classes by issue of
new edict.--Law’s expulsion from France demanded.--
Law resigns all his offices and leaves for Venice.--
Privileges of Company withdrawn.--Commission appointed
to value unliquidated securities.--Law in vain applies
for recovery of a portion of his wealth.--His death
at Venice.--Attitude of French people towards Law.--
Circumstances to be considered in passing judgment.
John Law of Lauriston
CHAPTER I
Standard of criticism hitherto applied to John Law.--Birth and
ancestry.--Education.--Death of father.--Early devotion
to study of finance.--Manner and appearance.--Visits
London.--Duel with Beau Wilson.--Tried for murder.--Escapes to
France.--Meets Lady Catherine Knollys.--Career of gambling on
the Continent.--Studies banking.--Formulates new principles of
finance.--Returns to Scotland.
[Illustration]
It has been the fate of most men who have left their name upon the
pages of political history to have their conduct scrutinised with a
degree of ethical fineness which happily is denied those whose records
have not risen above the commonplace. Such a standard of criticism
has been invariably applied in instances where origin of birth would
hardly justify anticipations of pre-eminent greatness--and especially
where the circumstances that have fostered its rise lie outside the
beaten track, and possess the inviting charm of novelty. Reputation
acquired in the steady, patient pursuit of a purpose is not more likely
to reach the level of permanent fame, than one of which spasmodic
progress forms the outstanding element. Where brilliance of meteoric
splendour appears in any sphere of life, but chiefly in the region
of national politics, a curiosity which otherwise would be escaped
is aroused by reason of its suddenness, and attempts are made to
discover unworthy motives behind each act. While these attempts can
only have a problematic value in absence of any true disclosure of
motive, judgment is not infrequently passed with an air of authority
that seems to exclude refutation. Nor is it an uncommon occurrence for
contemporary opinion, prejudiced and perhaps unjust, to distort the
estimates of subsequent writers. Exemplification of this is in some
degree to be found in the case of John Law of Lauriston, the founder of
the Mississippi Scheme, whose chequered and questionable career before
his elevation to a position of national importance in the government of
France, furnished excellent material for a sinister interpretation of
his intentions by his detractors.
By birth, Law belonged to a family which held a position of
considerable social rank and influence in the Scottish capital. He was
born at Edinburgh, on the 21st of April, 1671, and his father, William
Law, described in the records of his time as a goldsmith carrying on
business in the capital, followed a profession more nearly allied
to that of banking as now understood. Some conflict appears to have
existed as to his lineage, but on the authority of Walter Scott,
Writer to the Signet, father of Sir Walter Scott, who acted for some
time as agent for the family, it may be taken that Law was the grandson
of James Law of Brunton, in Fife, by Margaret, daughter of Sir John
Preston, Bart. of Prestonhall, and great-great-grandson of James Law,
Archbishop of Glasgow from 1615 to 1632. The claim of his mother, Jane
Campbell, to relationship with the ducal house of Argyll may have been
somewhat remote, but is not at all improbable.
With a view no doubt to educating his son to a career which the
fortunes of the family were sufficient to enable him to follow, and
perhaps because he early perceived evidences of uncommon capacity,
William Law embraced every opportunity which the educational facilities
of the time afforded. In order to put him beyond the possible
prejudicial influences of the city, he sent young Law at an early age
to Eaglesham, where he was placed under the care of the Rev. James
Hamilton, whose son subsequently married his eldest sister. There
he received his early education in a school established by the Rev.
Michael Rob, the first Presbyterian minister ordained after the liberty.
Unfortunately for the future of his promising son, William Law died
in 1684, and to his mother’s care, but probably less restraining
influence, young Law was now entirely entrusted. In the year preceding
his death, however, William Law had acquired territorial dignity by the
purchase of the estates of Lauriston and Randleston, situated along
the Firth of Forth a few miles west of Edinburgh, the right to which
was taken in life-rent for himself and his wife, and in fee to John
Law, their eldest son.
[Illustration:
_From a Photograph._
LAURISTON CASTLE.]
Law’s mother, although no more than an ordinary degree of womanly
grace and force of character can be attributed to her, possessed what
was of equal, if not of greater, value at such a juncture as this,
when the loss of the head of a family may mean so much--a capacity to
direct with prudence, tact, and business capacity the affairs of her
estate. The family was large; of eleven children nine survived, and
the burden imposed upon her resources by the education and maintenance
of so many, without entailing at least outward change of appearance,
is eloquent testimony to her cautious and careful management. Upon Law
himself she bestowed the greatest concern, continuing his education
upon the lines directed by his father, and in particular giving him
every encouragement towards the study of mathematics, in which his
youthful mind took the deepest delight. At an age when the majority of
children have merely mastered the preliminary stages of a branch of
knowledge presenting so many difficulties--and seldom indeed caring
or willing to go beyond its threshold--Law was able to find the most
genial occupation in solving the most complicated problems in geometry,
and in comprehending the subtleties of algebraic formulæ. At a time
also when political economy as a science was undeveloped, and
when the dominating principle of finance consisted of meeting daily
exigencies by daily expedients, Law devoted a considerable portion of
his time to inquiring into the basis of national and private credit,
the laws governing the currency of money, the problems of taxation,
and generally all the intricacies of economic phenomena that presented
themselves to his observation. The theories which he formulated as
scientific explanations of these phenomena indicate a philosophic grasp
of mind, although they may now appear crude and untenable, and bear
the marks of his proneness to hasty conclusion. They soon, however,
procured for him distinction as an economist of novel ideas, and formed
the foundation for the development of the various schemes by which he
afterwards acquired a European reputation.
Added to his undoubted intellectual abilities, Law possessed an
engaging manner, a generous disposition, and a handsome personal
appearance. By his fastidiousness in dress, he gained a degree of
notoriety amongst his fellows, and was known amongst the ladies of his
acquaintance by the appellation of Beau Law, whilst the gentlemen of
the city conferred upon him the nickname of Jessamy John.
When twenty-one years of age, Law, with the feeling of independence
due to the competency with which he had been provided by his father,
desired to find a wider field for the proper display of his various
accomplishments, and accordingly found his way to London, whence he
made frequent visits to Tunbridge Wells, Bath, and other popular places
of pleasure of the day. There he mixed with the highest social and
political circles, to which his talents obtained him ready access, but
in a society where gambling, hard drinking, and general dissipation
were marks of distinction, Law’s popularity made serious inroads in
a very short time upon his pecuniary position. An accumulation of
debts necessitated a re-arrangement of the fee of Lauriston in order
to provide for their payment. This he conveyed to his mother in
consideration of her advancing the requisite sum, and whatever other
money he required for immediate and legitimate purposes. The burden
thus imposed upon the estate, however, was not to be allowed to remain.
By severe economy his mother was able within a comparatively short
period to remove it, and to secure the estate free of encumbrance in
entailed succession to her family.
An event, however, shortly occurred, which almost resulted in an
ignominious termination to Law’s career, but, as it happened, he
succeeded in escaping its consequences although it necessitated his
departure from the country. As an exponent of masculine fashions, he
had a rival in one Edward Wilson, a younger son of a Leicestershire
landlord. Their rivalry, as may be judged, did not conduce to friendly
relations, and ill-concealed feelings of hatred existed between the
two. This Wilson had been an ensign in Flanders, but having resigned
his commission--from what cause it is not known, whether it was that
his daintiness rebelled against the roughness of soldiery or that his
courage was not equal to its dangers--he found his way to London,
and there was a source of the greatest mystery to his friends and
associates. Possessed of little or no patrimony, he yet maintained a
magnificent establishment with an army of servants, and drove a coach
and six. His lavish entertainments, and his social splendour, were the
envy of the wealthiest. With unlimited credit, he nevertheless incurred
no debts but were speedily paid, and on his death left no estate or
evidence of the source of his abundant means.
With Wilson, Law had a serious difference, in which a Mrs. Lawrence,
according to one account, and according to another Miss Elizabeth
Villiers, afterwards Countess of Orkney, was concerned, and
satisfaction could only be obtained by resorting to a duel. They met
at midday on 9th April, in 1699, in Bloomsbury Square, and Wilson
receiving a fatal wound, Law was arrested on a charge of having “of
his malice aforethought and assault premeditated, made an assault
upon Edward Wilson with a certain sword made of iron and steel of the
value of five shillings, with which he inflicted one mortal wound of
the breath of two inches, and of the depth of five inches, of which
mortal wound the said Edward Wilson then and there instantly died.”
Law was tried on the 18th, and two following days of the same month
at the Old Bailey, before the King’s and Queen’s Commissioners, but
notwithstanding the most skilful defence, was found guilty of murder,
and condemned to be hanged.
His popularity with persons of rank now stood him in good stead at this
critical juncture. The acquaintanceships he had assiduously cultivated
during his brief stay in London were not without their value, and
enabled him to draw upon their influence to serviceable purpose. The
King’s mercy was invoked, and pardon was extended to the condemned man.
His release, however, was not to bring him absolute freedom. An appeal
was immediately made by Wilson’s brother to the Court of King’s Bench
to have this apparently wrongful exercise of royal clemency cancelled.
So general was the impression that justice had been flagrantly
abused, that Law was again arrested and thrown into prison during the
dependence of the appeal. Numerous technical objections were taken to
the grounds of the charge, but all without success, and fortune seemed
at last to have handed him over to the doom already pronounced against
him. But expedients for escape had not been all exhausted. With the
assistance of his friends he contrived, two days before his execution,
to regain his liberty, and place his recapture beyond possibility.
After overcoming his guard by the use of an opiate, and removing the
irons with which he had been fettered by means of files surreptitiously
conveyed to him, he climbed the high wall encircling the prison
buildings, and, in the company of sympathetic associates, succeeded in
reaching the Sussex coast, where a boat had been held in readiness to
convey him over to France. The authorities made no serious effort to
prevent his flight. Rather does it appear that, under the influence
which formerly secured his pardon, they connived at his escape.
Strength is given to this hypothesis by the misleading description
of Law in the announcement offering a reward for the capture of the
fugitive, which appeared in the LONDON GAZETTE of 7th January, 1695,
to the effect that “Captain John Lawe, a Scotchman, lately a prisoner
in the King’s Bench for murther, aged 26, a very tall, black, lean,
man, well shaped, above six foot high, large pock-holes in his face,
big high nosed, speaks broad and loud, made his escape from the said
prison. Whoever secures him, so as he may be delivered at the said
prison, shall have fifty pounds paid immediately by the Marshall of the
King’s Bench.”
Having arrived in safety upon French territory, Law made his way to
that haven of refuge for all needy Scotsmen of birth and influence,
the Court of St. Germains. Here he hoped to recover his lost position
and fortunes by placing the services of his naturally great abilities
at the disposal of a Court to whom they could not but be of some
advantage if properly directed. His efforts to secure a place were
unsuccessful, but it was probably at this time that he met the lady
who was afterwards to be his wife, although for a time she lived with
him as such while yet she was the wife of another. Lady Catherine
Knollys, sister of the fourth Earl of Banbury, was the wife of a
gentleman called Senor or Seignieur. Law’s attractions were probably
too captivating to be resisted, with the result that she “liked him so
well as to pack up her alls, leave her husband, and run away with him
to Italy.”
The moral obliquity of the incident lends colour to the unsparing
attacks of his enemies, and certainly cannot be extenuated even
according to the loose standards of his day. The gravity of the offence
he could not be ignorant of, notwithstanding his youth. His finer
susceptibilities, however, had been impaired by the contagion of vice,
which led him to embark upon risks, especially of gallantry, from mere
impulsiveness, and regardless of consequence. What little credit can be
extended to Law in connection with this affair, he derives from having
remained faithful to her to the last, while the death of her husband,
shortly after, relieved him of possible embarrassment during his
subsequent visits and residence in Paris.
Unsuccessful in his appeal to the Court at St. Germains to secure
official employment, he resumed his old career of gambling, and made
the principal cities of the Continent the field of his operations for
the next three or four years. His movements at this time are somewhat
difficult to trace. No authentic record of his peregrinations have
come down to us. It is tolerably clear, however, that he resided for
short periods at Genoa, Rome, Venice and Amsterdam, and may also
have visited Florence and Naples. Gambling in his case was no mere
means of satisfying an uncontrollable passion. He did not conduct it
promiscuously. He based his speculations upon a system which he had
developed for his own guidance after the most careful study of the
laws of chance. Although success did not invariably attend his play,
the balance of probability was so frequently in his favour that he was
not only able to maintain his position as a gentleman of worth, but to
amass a considerable fortune in an incredibly short period of time. No
doubt the cool, calculating Scotsman, apart from any merit his system
of play may have possessed, was more likely to rise from the tables
with success than those with whom he would choose to gamble. Not only
would his confidence and boldness irritate and excite his opponents,
but the reputation his skill had acquired for him would be in itself
a disturbing element to their minds, and render them unequal to his
superior play.
Notwithstanding his propensities in this direction, Law also devoted
his abilities and his keen powers of observation to another and more
creditable study. The subject of banking, the mysteries of credit, and
all the intricacies of financial problems appealed to his strongly
mathematical mind, and of the advantages afforded him, whilst on the
Continent, for an intimate acquaintance with the various systems of
his time he was not slow to avail himself. At this period there were
several banking companies in Europe, and of these the banks of Venice,
Genoa, and Amsterdam were the chief. The first two owe their origin to
the financial difficulties of the Venetian and Genoese Republics, and
had been in existence since 1157 and 1407 respectively. The Bank of
Amsterdam, on the other hand, was of more modern growth, having been
established in 1609 in order to minimise the confusion continually
arising from the unsteady value of the currency by placing the coinage
upon a fixed and more permanent basis. Law, accordingly, utilised his
stay in these three cities to gaining an insight into their methods
of business. At Venice, we are told, he constantly went to the Rialto
at Change time, and no merchant upon commission was more punctual.
He observed the course of exchange all the world over; the manner of
discounting bills at the bank; the vast usefulness of paper credit; how
gladly people parted with their money for paper, and how the profits
accrued from this paper to the proprietors. At Amsterdam, where he was
employed as secretary to the British Resident in Holland, “he made
himself acquainted on the spot with the famous bank of that city; with
its capital, its produce, its resources; with the demands individuals
had upon it; with its variations, its interests; with the mode of
lowering or raising its stock, in order to withdraw the capital,
that it might be distributed and circulated; with the order that
bank observed in its accounts and in its offices; and even with its
expenditures and its form of administration.”
The varied information which Law in this way acquired during his
residence on the Continent, and especially in the great banking
centres, he did not store as a mere mass of bare interesting facts.
Whether the investigations he assiduously pursued were the outcome of a
design to develop a new system of banking, or proceeded merely from the
attraction of the subject, is matter of doubt. But it is clear that he
abstracted certain principles of finance from the data he had gathered,
and that these principles were heterodox according to the opinions of
his contemporaries. Our judgment upon Law must be largely determined by
our impression as to whether these principles were logically deduced
explanations of the financial phenomena he observed, or whether they
were the fanciful ideas of his own imagination for the justification
of which he sifted his phenomena. It is extremely difficult to arrive
at any definite conclusion. His own published writings give no guiding
clue, and the records of his time confuse, rather than enlighten, by
their contradictory and varied explanations of his schemes. It is
probable that the principles upon which they were founded possessed
an element of both possibilities. His observations on the one hand
would seem to indicate to his mind some underlying law; and on the
other hand his mind, impressed with the beauty and simplicity of some
vast ambitious scheme of finance, would readily discover support in
its favour from the deductions he had made. At no time did Law attempt
to build up a system of financial philosophy, but he must be given
due praise for laying down propositions bearing upon the subject of
credit and of the use of paper money which have stood the test of
time and received recognition from political economists of our own
day. He must also be raised to a higher level than a mere financial
schemer. His proposals were more than plausible. They had an element
of practicability, in which he demonstrated his own belief by his
readiness to put them to test under private direction before they were
launched with sovereign authority and under public control. Convinced
so thoroughly as he was with the soundness of his theories, and with
the possibilities they opened up, if adopted, of infusing new life and
new energy into the commercial world of his day, he regarded himself as
a man with an important mission.
His own country seemed to offer a suitable field for his financial
ability, and we find him back in Edinburgh in the closing year of the
seventeenth century, the legislative independence of Scotland affording
him all necessary safety against arrest for the murder of which he had
been guilty five years previously.
CHAPTER II
Unsettled condition of Scottish politics in 1700.--Financial
and commercial insecurity of country.--Law’s solution of
difficulties.--Land Bank.--Supported by Court party.--Rejected
by Parliament.--Again resorts to gambling.--Returns to
Continent.--Expelled from Holland.--Visits Paris.--Discusses
finance with Duc d’Orleans.--Expelled by Lieutenant General
of Police.--Submits proposals to Louis XIV. without
success.--Again attempts to secure adoption of proposals by
France.--Financial condition of France.--Earl of Stair’s
friendship with Law.
[Illustration]
Scotland at the time of Law’s return was in a very unsettled condition,
politically and commercially. The projected union of the two Kingdoms
was beginning to emerge from the sphere of discussion into that
of practical politics. The change was recognised as likely to be
attended with results of the greatest consequence, but was not by any
means enthusiastically supported by public opinion. What, however,
was obviously impossible by means of conviction, was ultimately
accomplished by methods of bribery, and the Act of Union stands as
a striking instance of the great success of a policy universally
condemned, but carried by dishonourable means in spite of the
opposition of those who were chiefly concerned.
The minds of the people, however, in 1700 were more disturbed by the
feeling of financial insecurity that was gradually asserting itself.
The air had been for some years laden with all kinds of fanciful
schemes advanced by men who had the public ear, and who had succeeded
in calling up visions of easily won wealth in the imaginations of a
nation at that time, as now, characterised by caution and business
prudence to the degree of frugality. Banks, colonisation schemes,
and all sorts of extravagant and even ridiculous proposals followed
close upon one another in one continuous stream, but almost invariably
bringing ruin in their train. The most notable, as it was the most
disastrous of these, was the Darien Scheme launched by William
Paterson, founder of the Bank of England. Patronised by all the
nobility and people of money as well as by numerous public bodies,
and possessing all the superficial elements of success, it produced a
fever of financial excitement and a mad race for the acquisition of
holdings in its capital. Its collapse caused widespread disaster, and
was in reality a national calamity, entirely destroying that confidence
essential to industrial and commercial stability.
Law found in the condition of his native country a congenial subject
for treatment according to the economic theories he had developed
during his stay on the Continent. In the beginning of 1701 he published
his “Proposals and Reasons for Constituting a Council of Trade in
Scotland.” In it he advocated changes of a very drastic and radical
character, and while they were without question too advanced and
impracticable for his day, at least for adoption in their entirety,
they show that he was by no means a Utopian theorist, but possessed the
insight and foresight of a statesman. He advocated the establishment,
under statutory authority, of a Council of Trade entrusted with the
sole administration of the national revenue, bringing under that
denomination the king’s revenues, the ecclesiastical lands, charitable
endowments, and certain other new impositions, such as a tax of
one-fortieth on all grain grown in the country, one-twentieth of all
sums sued for by litigants, and a legacy duty of one-fortieth. The
Council of Trade would control the national treasury and would direct
the national expenditure. The uses to which he suggested the moneys
thus collected should be directed were all devised in the interests of
promotion of trade. After allowing a sufficient sum for the Civil List,
the Council were to discover proper means of employing the poor and
preventing idleness; establish national granaries; improve the mines
and develop the mineral wealth of the country; restore the fisheries
to their flourishing condition of the reign of James I.; reduce the
interest of money; abolish monopolies; and encourage foreign trade,
which was at a very low ebb. Notwithstanding the vigour with which Law
advocated his proposals, and notwithstanding the brilliant hopes he
held out by their adoption, they received little or no countenance from
public opinion, and were regarded as wholly impracticable by Parliament.
During the five years that followed his first unsuccessful incursion
into the domain of practical politics, Law was engrossed in the
development of a new and more brilliant project. He gave it to the
world in 1705 in a volume which bore the title, “Money and Trade
considered, with a Proposal for Supplying the Nation with Money.” It
displayed a remarkable grasp of the theory of credit, and evidenced
the inborn financial genius of its author. Although its proposals and
the propositions upon which they were based can hardly bear judgment
according to the standards of present-day political economy, it must
be remembered that up to that time no attempt had been made in the
formulation of the principles of that science. The difficulties he had
to encounter were great, but the manner in which he surmounted them
was not only a tribute to his clearness of mind, but showed a judicial
capacity to a remarkable extent in marshalling masses of disjointed
facts.
He proposed the establishment of a Land Bank, with power to issue
to landlords notes secured upon their estates, and having a forced
currency at their face value. The extent of each issue was to be
determined in one of three ways: 1. As an ordinary heritable loan, not
exceeding the maximum of two-thirds of the value of the property;
2. As a loan up to the full value of the property, but with a fixed
period of redemption; or 3. As an irredeemable purchase for value. The
adoption of his proposal would have had the effect, he submitted, of
relieving the commercial tension due to the insufficiency of specie
by supplying a medium of currency of a non-fluctuating value. Though
forced, the notes would not in any way have been mere accommodation
paper, but would always be for value or security received. Confidence
would thus have been maintained, and the risk of panic amongst holders
avoided.
Law had succeeded in interesting the Court party and a considerable
number of influential politicians in favour of his suggested scheme. It
appealed to them less upon its merits than upon its probable effect of
reducing the estates of the kingdom to dependence upon the Government.
The Duke of Argyll, supported by his sons the Marquis of Lorne and
Lord Archibald Campbell, and by the Marquis of Tweeddale, submitted
the proposal to the Scottish Parliament. An opposition, however, led
by the Lord Chancellor, proved strong enough to reject it by a large
majority, and passed a resolution “that the establishing of any kind
of paper credit, so as to oblige it to pass, was an improper expedient
for the nation.” It is evident that the ground of the opposition, which
was ostensibly the chimerical nature of the scheme, but really the
fear that the Government of the country would be placed in the hands
of the Court by its adoption, was not the concealed intention of Law
in its formulation. The possibility of this consequence only emerged
in the course of discussion, and in the knowledge of the composition
of Parliament the opponents of the scheme were strongly justified in
regarding the possible result as a certain probability. From Law’s
point of view, however, the scheme only attempted what is successfully
followed by banking institutions of the present day, with the
difference that the latter have a reserve of gold against their notes,
whereas the former would have had the landed property of the country.
Law’s hopes of being able to realise his ambitions in his native land
were now at an end. He saw no prospect of attaining that position in
the control of public affairs to which he aspired, and for which he
considered himself eminently fitted. He was, accordingly, compelled
to fall back upon his old gambling career, which had been practically
suspended since his return to Scotland. To such advantage did he
indulge his skill in this direction, that in the course of a few months
he found himself an extremely wealthy man, amongst his gains being the
estate of Sir Andrew Ramsay of a yearly value of £1200 Scots, and an
annuity of £1455 Scots secured upon the estate of Pitreavie in Fife,
purchased in 1711 by Sir Robert Blackwood from the Earl of Rosebery.
The negotiations for the Union of the two kingdoms were now fast
approaching a successful conclusion. Law felt his safety in a somewhat
precarious condition, the death of Wilson still rendering him liable
to arrest should he cross the Border, and the Union in all probability
likely to remove the element of safety from his residence in Scotland.
He petitioned the Crown for a pardon, but Wilson’s brother, an
influential banker of Lombard Street, protested against its being
granted, thus leaving no excuse upon which a pardon might be extended,
had the royal prerogative been inclined in his favour.
The Continent furnished the only safe asylum, and thither Law removed
himself in 1707, or at the latest, early in 1708. He seems first to
have taken up residence at the Hague, and then at Brussels, living in
luxurious fashion, and impressing every one by his extravagance and
apparently inexhaustible resources. With a keen eye for the weaknesses
of a people, Law introduced the Dutch to the exciting possibilities
of the lottery system. So far was he received into their good favour
that not only was a State lottery established, but every town of any
consequence had a smaller lottery of its own. The lottery was to be the
great panacea for all financial embarrassments, national and municipal.
Law, however, was not a disinterested participant in all these dazzling
schemes. His suggestions, if worth adoption, were worth remuneration,
but unfortunately he did not himself disclose the source of it, with
results which necessitated his removal from the country. “Mr. Hornbeck,
Great Pensionary of Holland, being also a nice calculator, finding
out that Mr. Law had calculated these lotteries entirely to his own
benefit, and to the prejudice of the people, having got about 200,000
guilders by them, Mr. Law was privately advised by the States to leave
their dominions.”
On his expulsion from Holland, Law abandoned himself to the life
of a rover amongst the various Continental cities, and to all the
attractions they offered. For six years he exercised with profitable
results his skill as a gambler, and quickly gained a notoriety
throughout Europe as a player of remarkable and unvarying success in
every game of chance. He seems first to have gone to Paris, which
afforded a rich and extensive field for gambling operations, and his
good fortune brought around him a cringing crowd of followers, hoping
to attract to themselves some of the glamour that surrounded the
person of their idol. In his train were to be found the flower of the
French nobility. He spent his time in the houses of the aristocracy
of the day, of whom he was at all times a favoured guest, not less by
his skilful play than by his pleasant, affable manner, and brilliant
conversation and wit. Faro was the game in which he most delighted, and
at the houses of Poisson, Duclos, and at the Hotel de Gesvres, he held
a sort of faro bank, and the _entree_ to these houses was considered
a matter of the greatest favour. In the fashionable crowd of excited
gamesters Law was the only one who remained absolutely cool whatever
the fortunes of the game. His operations were conducted upon a most
extensive scale, and necessitated the employment of considerable sums
of money. It was no uncommon circumstance for Law to carry with him
100,000 livres or more in gold. So cumbrous did this become, that he
conceived and carried out the idea of utilising counters, which were
valued at eighteen louis each, and proved more convenient than the coin
they represented.
During this first visit of Law to Paris, which apparently lasted not
more than a year, Law succeeded in gaining the good favour of the Duc
de Chartres, afterwards, as Duc d’Orleans, Regent of France during the
minority of Louis XV., and of Chamillard, the Comptroller-General.
With these he had frequent conversations concerning the embarrassed
condition of the French Treasury, and discussed proposals for
its improvement. He captivated them by the apparent soundness of
his knowledge of finance, and by his brilliant theories for the
establishment of the National Exchequer on a stable foundation. Every
opportunity was embraced by Law for holding these discussions, and
although they had no immediate effect beyond securing the adherence
of two of the most powerful men in the Government, they laid the
foundation of his future greatness. Unfortunately, however, for Law,
the continuity of his acquaintance with the man with whom he desired
most to cultivate friendship was rudely and unexpectedly suspended.
D’Argenson, Lieutenant-General of Police, was suspicious of Law and his
methods. His reports to the Government were unfavourable and framed
with a view to Law’s expulsion from Paris. This he ultimately succeeded
in getting authority to do, and Law was immediately served with a
notice to leave the capital within twenty-four hours on the ground
“that he knew how to play too well at the games he had introduced.”
For a considerable time Law remained away from Paris, visiting the
principal cities of Italy, Hungary, and Germany, and in all leaving
behind him the reputation of being one of the most remarkable men
of his age. He became a frequent and well-known visitor at all the
gambling resorts on the Continent. His progress from city to city
resembled the progress of a royal court, and rumour preceded him to
herald his coming. He was no common gambler. He was an accomplished man
of the world, exquisitely courteous, and with interests that rose above
the sordid pursuits from which he derived his pecuniary prosperity.
His political instincts were always allowed free play, and by close
observation he acquired the amplest knowledge of the industrial and
economic conditions of the various countries he visited.
Law was now becoming anxious to secure an opportunity of putting into
practice the schemes he had mentally constructed for the improvement of
trade and commerce. The more he observed the prevailing unhealthiness
of industry, and the more he satisfied himself as to the apparent
causes of industrial depression, the more did he feel that his scheme
was the only royal remedy. He accordingly returned to Paris shortly
before the close of the reign of Louis XIV., purposing to gain the
support of that monarch for the adoption of his system in France.
Chamillard did not now occupy the office of Comptroller-General,
but Law through the influence of the Abbé Thesul was received by
Desmarets his successor, who not only discussed in thorough detail the
scheme laid before him by Law for the rehabilitation of the financial
condition of the country, but became so enamoured of it that he decided
upon submitting it to the King himself. Louis XIV., however, was not a
man of large mental horizon. His decisions were often the outcome of
the impulse of the moment. Frequently they were determined by religious
bias, even where religious scruples were wholly foreign to the matter
under consideration. Law’s proposal seems to have been placed under the
latter category by Louis XIV. Report has it that the bigoted monarch
was more anxious to learn the faith to which the Scotsman belonged than
to know the merits of his scheme, and that on being informed Law was
not a Catholic, he brushed aside the matter and refused to accept his
services.
Disappointed, but not discouraged, Law was more determined than ever
to have his system put to practical test. If France did not accept
salvation at his hands, he doubted not some other country would.
He accordingly approached the King of Sardinia, one of the needy
sovereigns of the day. Law’s proposal to him was the establishment of a
land-bank, which he held out in glowing terms as the certain foundation
of great national prosperity, but the wily monarch was not to be drawn,
and with a touch of sarcasm recommended Law again to urge his scheme
upon France. “If I know,” he said, “the disposition of the people of
that kingdom, I am sure they will relish your schemes; and, therefore,
I would advise you to go thither.”
The close of 1714 saw Law for the third time in Paris. Whether his
return to France was due to the suggestion of the King of Sardinia,
or to his having perceived a possibility of his system being yet
adopted by France, whose crippled financial condition was becoming
more serious as time went on, and demanded some drastic remedy to
relieve the intolerable burden upon the Treasury, we cannot judge.
He probably considered that, with bankruptcy hanging over the French
nation like a grim spectre, necessity, if not conviction, would induce
the acceptance of his theories. The nation’s indebtedness had now
outgrown its resources. Every conceivable device had been resorted to
for the purpose of meeting the most pressing obligations. Provision
for the future was regardlessly sacrificed to the needs of the
moment, and ingenuity was devoted only to keeping the evil day afar
off. Every one feared the worst. No one was able to grapple with the
difficulty in a broad, statesmanlike fashion, and to carry out a bold
policy of national economy. The Treasury had to face the payment of
exorbitant rates of interest upon loans, the full value of which had
not been received. The coinage was debased to an extent altogether
out of proportion to its face value. Lotteries were organised on an
extensive scale as a means of appealing to the gambling instincts of
the community, and as a method of applying indirect taxation without
the hateful element of compulsion. _Billets d’état_ were foisted
upon unwilling creditors in almost unlimited amounts, and formed a
paper currency that had difficulty in changing hands at even 10 per
cent. upon its value of issue. To crown all, titles were sold as mere
articles of commerce, sinecures created with high-sounding designations
that roused the ridicule of the multitude, but helped to provide the
King with money, and monopolies granted to the highest bidder. Yet all
these devices failed their purpose, and the insatiable hunger of the
Treasury was still far from being appeased. Financial paralysis was
creeping over the nation, and threatened the gravest consequences.
Here was such a field as Law alone could fully appreciate. Fortune at
last seemed about to smile upon him. His star was about to assume a
meteoric brilliance, and to mount towards its zenith with marvellous
rapidity. Circumstances moulded themselves to his successful progress;
and with rare capacity Law took full advantage of every opportunity.
In order to remove as far as possible, social obstacles to his easy
access to Court, he took up residence in a fine mansion, and lived as
a man with unlimited means at his disposal. He entertained, in the
extravagant way that marked his previous visits to Paris, all those
whom he thought he could utilise for his own advancement; and the death
of Mr. Segnior enabled him to marry the latter’s widow, with whom he
had hitherto been living, thus removing the taint of illicitness from
his cohabitation with her, and legitimatising his family.
Law’s objective was the good favour of the Duc d’Orleans. He recognised
the importance of obtaining the support of the man who promised to
occupy the Regency within a very short time, and who would thus possess
sufficient power to impose upon the Government any scheme towards
which he was favourably inclined. With great prudence Law did not
seem to be over-anxious in the prosecution of his aim, lest he might
induce suspicion as to his disinterestedness. He, accordingly, devoted
himself at first to the entertainment of the Prince by bringing into
play all his varied gifts, and by gratifying his tastes for gambling
and pleasure as far as he was able. “His good address and skill at
play, made him particularly taken notice of by the Regent, who used
to play with him at baggammon, a game the Regent likes mightily, and
Mr. Law plays very well at.” By this process, Law succeeded in placing
his intimacy with the Duc upon a solid foundation, and in securing his
influence when the opportune moment arrived for its exercise.
Law’s fame as a potential financier of national grasp was at this time
exercising the minds of the British Government of the day. The Earl
of Stair had been newly appointed Ambassador to the Court of France,
and was so impressed with Law’s ability that he recommended him to
Lord Halifax and to Secretary Stanhope as a man who might be useful in
suggesting some means of liquidating the debts of the British Treasury,
which at that time were somewhat complicated and assuming enormous
proportions. On Feb. 12, 1715, Stair wrote to Stanhope:--
“... There is a countryman of mine named Law of whom you have no doubt
often heard. He is a man of very good sense, and who has a head fit
for calculations of all kinds to an extent beyond anybody.... Could
not such a man be useful in devising some plan for paying off the
national debts? If you think so, it will be easy to make him come. He
desires the power of being useful to his country. I wrote about him to
Lord Halifax.... The King of Sicily presses him extremely to go into
Piedmont, to put their affairs upon the foot they have already spoken
of. I have seen the King’s letters to Law, which are very obliging and
pressing. I would not venture to speak thus to you of this man had I
not known him for a long time as a person of as good sense as I ever
knew in my life, of very solid good sense, and very useful; and in the
matters he takes himself up with, certainly the cleverest man that is.”
Shortly before this date Stair had written to Halifax in similar terms,
and received the following reply of date February 14, 1715:
“I had the honour to know Mr. Law a little at the Hague, and have by
me some papers of his sent to Lord Godolphin out of Scotland, by which
I have a great esteem for his abilities, and am extreme fond of having
his assistance in the Revenue. I have spoke to the King and some of his
Ministers about him, but there appears some difficulty in his case, and
in the way of having him brought over. If your Lordship can suggest
anything to me that can ease this matter, I should be very glad to
receive it.”
The latter portion of this letter obviously refers to Law’s conviction
of murder by the English courts, which Law had failed to obtain pardon
for. On April 30, 1715, Stanhope replied to Stair in the following
terms:--
“Though I have not hitherto, in my returns to your Lordship’s letters,
taken notice of what you have writ to me once or twice about Mr. Law,
yet I did not fail to lay it before the King. I am now to tell your
Lordship that I find a disposition to comply with what your Lordship
proposes, though at the same time it has met, and does meet, with
opposition, and I believe it will be no hard matter for him to guess
from whence it proceeds.”
Lord Stair’s admiration of Law was very considerable, and so intimate
was their friendship that we find the first entry in Stair’s
Journal upon his arrival as British Ambassador in Paris in 1715 to
be:--“Wednesday, January the 23rd, at night, arrived at Paris; saw
nobody that night but Mr. Law.” Lord Stair’s strong recommendations of
Law to the British Government were based upon his fixed belief that his
services would be of incalculable value. Law, himself, however, was not
by any means anxious that they should be accepted. He saw greater scope
in France for his financial schemes, and therefore, while permitting
these friendly negotiations to proceed, he was somewhat indifferent as
to their result.
He did not abate, on the other hand, his assiduous cultivation of
the Duc d’Orleans; nor did he fail to please Desmarets, who, as
Comptroller-General was in such a position as likely to become a
powerful support in carrying out his plans. His relations with the
Comptroller-General were also strengthened by the representations made
to him by the Regent to encourage Law as a man whose advice at that
critical period might prove of the utmost value. By his diplomatic
conduct Law succeeded in having his proposal for the establishment
of a land-bank brought under discussion by the Council of Ministers.
The result, however, was again unfavourable, the ground of rejection
of the scheme, according to Stair’s Journal, being that there was no
foundation for such a bank in a country where everything depended on
the King’s pleasure.
CHAPTER III
Accession of Louis XV.--National debt of France.--Debasement of
coinage.--Arraignment of tax collectors.--Council of Finances
consider Law’s proposals unfavourably.--Petition for permission
to establish private bank granted.--Constitution of the
Bank.--Its Success.--The “Pitt” diamond and its purchase.
[Illustration]
Louis XIV. died on 1st September, 1715, and was succeeded by his
great-grandson Louis XV., then a mere boy of five years old. The Duc
d’Orleans was called to the Regency, and wielded the power of an
absolute monarch. He brought to his office the singular gifts of a
statesman, and man of affairs, modified by the vices and indifference
of a debauchée. The Duc de Saint-Simon speaks of the “range of his
mind, of the greatness of his genius, and of his views, of his
singular penetration, of the sagacity and address of his policy, of
the fertility of his expedients and of his resources, of the dexterity
of his conduct under all changes of circumstances and events, of
his clearness in considering objects and combining things; of his
superiority over his ministers, and over those that various powers sent
to him; of the exquisite discernment he displayed in investigating
affairs; of his learned ability in immediately replying to everything
when he wished.” No doubt this high estimate is the eulogium of a
courtier, and requires to be discounted to some extent, but, on
the whole, with little modification it may be considered a fair
representation of the abilities of the man who was about to place Law
in practical command of the government of France.
One of the first, as it also was one of the most important and
pressing, matters to which the Regent’s attention was demanded, was the
financial condition of the country. The adoption of drastic measures
was imperative. The national debt amounted to 3500 millions of livres,
and while the revenue produced 145 millions, the expenditure of the
Government absorbed 142 millions, leaving 3 millions with which to
liquidate interest upon the national debt, or 1-10th per cent. A
deficit of 150 to 200 millions was thus accumulating each year, and
every resource which ingenuity could conceive having long ago been
exhausted, the situation was daily becoming more difficult. The Regent,
shortly after his accession, called a meeting of the Council for the
purpose of devising a means of relieving the intolerable strain.
National bankruptcy was suggested by a few of its members, notably the
Duc de Saint-Simon. The Regent would give no ear to such a course, and
waved the suggestion aside as alike dishonourable and disastrous to all
possibility of good government. No one, however, seemed capable of
offering any plan of permanent value. The schemes proposed were merely
expedients promising temporary relief, and no other policy but one of
despair being apparent at the moment, the Regent was eager for their
immediate execution.
A commission or visa was appointed to investigate the nature of the
national debt, and, by classifying the claims, to bring order out of
chaos. By methods, in many instances more rigorous than just, the
national debt was reduced by 1500 millions, and interest was made
uniform at the rate of four per cent. Of the 2000 millions at which
the debt now stood, 1750 millions were funded, and the balance of
250 millions was converted into a general floating debt represented
by _billets d’état_. A substantial reduction was thus made in the
amount of interest payable by the Treasury; but, without an increase
of permanent revenue, which, if it were to be accomplished by the
imposition of fresh taxation, neither the Regent nor his Councillors
would face, or without a reduction in expenditure to an extent which
would have rendered the public service inefficient, the solution of the
financial difficulty was as distant as ever. Recourse was accordingly
had to two measures, which served the purpose of the moment. The first
was the old expedient of debasing the coinage. With the ostensible
object of having a new currency with the new king’s effigy, the old
coinage was recalled. The fresh issue, however, was depreciated in
the process to the extent of about 30 per cent., and the Government
profited by the transaction sufficient to liquidate one year’s interest
of the National Debt. The second device for replenishing the Exchequer
was the establishment of a Chamber of Justice, a kind of inquisition
for the investigation of the conduct of the tax-collectors. These men
by their unscrupulous dealings, had come to be regarded as the evil
genii of the French peasantry. Like vampires, they had for years been
sucking the very life-blood of the nation. No redress was open to their
victims, and resistance only had the effect of increasing the burdens
laid upon their shoulders. The institution of the Chamber of Justice
was accordingly received with unbounded joy. Every tax-farmer was
arraigned before this tribunal. The most searching investigation was
made, not only into his own dealings, but also into the dealings of the
hordes of satellites whom he employed to bleed his unfortunate victims.
Where information was withheld, or even where it was suspected that the
information given was tainted with inaccuracy, encouragement was given
to informers by holding out promises of 20 per cent. of any fines that
might be levied. Such a system, of course, was bound to bring evils
in its train as great as those it was intended to remove. A reign of
terror set in amongst the farmers-general. No sympathy was extended to
them by their judges. All confidence in their honesty had long ago been
destroyed. They were already prejudged. No effort on their part could
by any possibility ward off the weight of accusation against them.
Prison accommodation was soon taxed beyond its capacity. Those who were
fortunate enough to escape this Jeddart justice by bribery, by payment
of enormous fines, or by quietly submitting to wholesale confiscation,
left the country as a measure of personal safety. The records of the
period teem with the decisions of the Chamber of Justice and their
consequences. Most of the cases reflect a degree of moral obliquity on
the part of the judges not less than on the part of the accused. We are
told of one instance where a contractor had been taxed, in proportion
to his wealth and guilt, at the sum of twelve millions livres. A
courtier, possessing considerable influence with the Government,
offered to procure a remission of the fine for a bribe of one hundred
thousand crowns. “You are too late, my friend,” replied the contractor,
“I have already made a bargain with your wife for fifty thousand.”
In the course of a few weeks almost the whole of the fraternity had
run the gauntlet of the Chamber of Justice. They had been stript of
their power, their influence and their possessions. The country had
been effectively cleared of their presence, but to comparatively small
advantage. The total fines and confiscations amounted to one hundred
and eighty million livres, of which the Government received only one
half, and its parasites the other. As a consequence, its career was
brought to a close, and with it the ingenious financial devices of the
Council of Ministers.
Law was an amused spectator of the puerile efforts of the Regent and
his advisers to restore financial stability to their country. He
regarded them no less with scorn, and probably rejoiced in the futility
of their efforts, in the hope that each successive step they took would
bring the realisation of his own ambition within measurable distance.
The position he occupied, however, was one of difficulty, and demanded
a display of considerable tact and judgment. He had educated the Regent
up to the point of implicit confidence in his scheme, but there still
remained a dead weight of opposition in the Council, and without the
support of both the ground was very uncertain.
No time was lost by Law in an attempt to bring his proposals to a
head. He repeatedly interviewed the Regent within the first few weeks
after the death of Louis XIV., and submitted definite schemes for
relieving the situation. He urged that by the adoption of a system of
paper credit, not necessarily for supplanting, but for supplementing,
the coinage in currency, not only would the trade of the country
increase in volume, but the national debt would be effectively dealt
with. He based his argument upon the principle that the quantity of
money in circulation in a country determines its industrial activity.
Recognising that money, whether it be specie or paper, is not itself
the wealth of a country, but only the measure of its wealth, and
that in whatever form it exists it must represent either the whole
or part of that actual wealth, he conceived the idea of issuing the
notes against the landed property of France, and the ordinary State
revenues. He pointed out, as examples in support of his proposals,
the immense benefits which had flowed from the adoption of a similar
system by England, Holland, Venice, and Genoa. The Regent, convinced
before by Law’s arguments, was now determined to put them into
operation. He convened the Council of Finances, and invited to its
deliberations the principal bankers and merchants of Paris and of the
provinces. The sederunt took place on 24th October, 1715, only eight
weeks after the King’s death, but the Regent had personally interviewed
beforehand several of the members to secure their support for Law. To
this assembly Law unfolded the general outline of his proposals. “He
was listened to as long as he liked to talk. Some, who saw that the
Regent was almost decided, acquiesced; but the majority opposed.” The
precise ground of opposition is nowhere recorded, but probably the
fear, expressed at the former Council in July, had not been dissipated,
that the system would lend itself to abuse at the hands of an absolute
monarch, and might bring in its train greater evils than those it was
intended to remedy. The letters patent of 2nd May, 1716, granting
private banking privileges to Law, refers to the decision of this
assembly, but being couched in the language of official ambiguity,
gives no clue to the reasons which actuated the rejection of the
scheme. “Mr. Law having some time since proposed a scheme for erecting
a bank, which should consist of our own money, and be administered in
our own name, and under our authority, the project was examined in
our Council of Finances, when several bankers, merchants and deputies
from our trading cities being convened and required to give their
advice, they were unanimous in the opinion that nothing could be
more advantageous to our kingdom, which, through its situation and
fertility, added to the industry of its inhabitants, stood in need
of nothing more than a solid credit for acquiring the most extensive
and flourishing commerce. They thought, however, that this present
conjunction was not favourable for the undertaking; and this reason,
added to some particular clauses of the project, determined us to
refuse it.”
Law was thus foiled again, but weakness of purpose was far from being
a feature of his character. Irrefragable determination steeled him
against all rebuffs. He saw more than ever that France was his last
and only opportunity. He saw that the plastic minds of most of the
ministers were susceptible to the pressure of the Regent’s influence if
applied with sufficient strength. This was not difficult of operation.
The Regent’s influence was at Law’s command, and he made unsparing use
of it. With prudent calculation, however, of the future, should his
plans fail in their object by some mishap, he modified his scheme to
the extent of petitioning for permission to establish a private instead
of a national bank. In order, too, that the members of the Council
and those who would be called to the deliberations in connection with
his proposal should have some more definite and complete knowledge
of his theories than could be conveyed in conversation, or in course
of an address at the Council table, Law translated his book on Money
and Trade, published in Edinburgh in 1705, supplementing what he had
written there by separate papers giving his maturer ideas.
Early in 1716 every preparation had been made, and all contingencies
provided against. The Regent called again the Assembly of the previous
October. The scheme was solemnly discussed. Opposition dwindled to
a mere shadow. The scheme was passed, and remitted to the Regency
Council for final ratification. This last stage in the process is well
described by the Duc de Saint-Simon, whose opposition not even the
Regent could overcome.
M. le Duc d’Orléans took the trouble to speak in private to each
member of the council, and gently to make them understand that he
wished the bank to meet with no opposition. He spoke his mind to
me thoroughly; therefore a reply was necessary. I said to him that
I did not hide my ignorance or my disgust for all finance matters;
that nevertheless, what he had just explained to me appeared
good in itself, that without any new tax, without expense, and
without wronging or embarrassing anybody, money should double
itself at once by means of the notes of this bank, and become
transferable with the greatest facility. But along with this
advantage I found two inconveniences, the first, how to govern
the bank with sufficient foresight and wisdom, so as not to issue
more notes than could be paid whenever presented: the second,
that what is excellent in a republic, or in a monarchy where the
finance is entirely popular, as in England, is of pernicious use
in an absolute monarchy such as France, where the necessities of
a war badly undertaken and ill sustained, the avidity of a first
minister, favourite or mistress, the luxury, the wild expenses,
the prodigality of a King, might soon exhaust a bank, and ruin all
the holders of notes, that is to say overthrow the realm. M. le
Duc d’Orléans agreed to this; but at the same time maintained that
a King would have so much interest in never meddling or allowing
minister, mistress, or favourite to meddle with the bank, that
this capital inconvenience was never to be feared. Upon that we
for a long time disputed without convincing each other, so that
when, some few days afterwards, he proposed the bank to the regency
council, I gave my opinion as I have just explained it, but with
more force and at length: and my conclusion was to reject the bank,
as a bait the most fatal, in an absolute country, while in a free
country it would be a very good and very wise establishment.
Few dared to be of this opinion: the bank passed. M. le Duc
d’Orléans cast upon me some little reproaches but gentle, for
having spoken at such length. I based my excuses upon my belief
that by duty, honour, and conscience, I ought to speak according
to my persuasion, after having well thought over the matter, and
explained myself sufficiently to make my opinion well understood,
and the reason I had for forming it. Immediately after, the edict
was registered without difficulty at the Parliament. This assembly
sometimes knew how to please the Regent with good grace in order to
turn the cold shoulder to him afterwards with more efficacy.
Letters patent were issued on 2nd and 28th May, 1716, incorporating
the Bank, and three days after the latter date, these letters were
registered in the Parliamentary journals. The Bank was formed under
the name of the General Bank of Law & Company, the principal partners
being Law himself and his brother William. The capital was fixed at
six million livres, a sum approximately equal to £300,000, divided
into 1200 shares of 5000 livres each. The price of the shares allotted
to subscribers was payable in four equal instalments of which only
one required to be in cash, the balance being in _billets d’état_.
The management of the Bank and its general policy was placed in the
hands of the shareholders themselves, the extent of their voting
interest being determined by the number of their individual shares,
each five shares conferring one vote. A bi-yearly audit was to be
made of the Bank’s financial position, and shareholders were to be
convened at least twice a year. The business of the Bank was similar
in its nature to ordinary banking business of the present day, and
wise provision was made against engaging in commercial undertakings.
In short, the regulations were modelled upon the soundest principles
of finance. The one great feature of the Bank, however, and a feature
that displayed Law’s remarkable foresight, because its establishment
was only the first step in the development of his vast designs whose
ultimate accomplishment depended upon present success, consisted in
the character of the note issue. All notes were drawn at sight to
bearer, and were promises to pay in coin of the weight and standard of
the day of issue. Here rested the foundation of the Bank’s phenomenal
success. The coinage had in previous years been subject to sudden and
arbitrary changes of relative value, and consequently its purchasing
power was always of a speculative character. But, further, as the
Government alone secured the profit upon depreciation of the coinage,
each alteration brought with it dislocation of commercial transactions
and indirectly affected the volume of trade of the country. Law’s notes
in a very short time established themselves in the confidence of all
classes. Their value was permanent and unaffected by any fluctuations
in the coinage. Credit business was rendered possible where before
it had been folly. Industry in general experienced the stimulus of
financial stability, and underwent remarkable expansion. The notes,
and not the current coinage, became the medium of exchange, and soon
acquired a value in excess of the specie they nominally represented. To
these advantages Law was careful to add ease of immediate conversion.
Although the capital payable in cash only amounted to £75,000, yet
the large deposits, and the extensive floating business of the Bank,
together with the high estimate in which the notes were held, combined
to make the risk of inability to convert the notes a very remote
contingency.
In view of all these substantial advantages, the success of Law’s
scheme came in a measure as a matter of course. Business of the most
profitable nature flowed into the Bank. By enabling commercial men to
trade upon their securities at a low rate of interest, not only did
he usurp the functions of the usurer, functions which the bad policy
of the Government had placed in his hands, but the ramifications
of the Bank spread throughout the whole country, and made its
beneficent influences felt in a striking degree. Law himself very
shortly became the supreme protector of industrial prosperity. His
statesmanlike instincts led him to revive many branches of trade which
had degenerated, and to induce the establishment of others for which
he saw the resources of France were eminently suited. In order to
facilitate the business of the Bank he opened in the principal centres
branch establishments which acted both as feeders and as outlets for
the central institution. No one was more surprised than the Regent
himself at the extraordinary measure of success which had attended
Law’s scheme. Law accordingly occupied more than ever a high position
in the Regent’s estimation. He was regarded as the financial saviour of
France, a heaven-sent legislator before whom the hereditary advisers
of the Crown were small and paltry. Law was sufficiently astute to
press the advantage he had gained, and judging from the conduct of
the Duc D’Orleans at this time, he evidently had the latter under his
control. Saint-Simon tells us of the forced interviews he was compelled
by the Regent to grant to Law in order that he might be tutored into
approval, if not appreciation, of the new state of affairs. The wily
courtier was impervious, however, to the blandishments of his tutor. He
only deferred to the wish of the Regent, and merely gave a courteous
acquiescence to the arguments and statements that were showered upon
him. The object of these interviews obviously was to capture the
confidence of Saint-Simon who had been sufficiently courageous on
previous occasions to thwart Law’s designs in face of the Regent’s
wishes, and who might prove an awkward element in accomplishing
the development of his plans for the future. There was, however, a
subsidiary purpose, and Saint-Simon was not slow to recognise it. “I
soon knew,” says Saint-Simon, “that if Law had desired these regular
visits at my house, it was not because he expected to make me a skilful
financier, but because, like a man of sense--and he had a good deal--he
wished to draw near a servitor of the Regent who had the best post in
his confidence, and who long since had been in a position to speak to
him of everything and of everybody with the greatest freedom and the
most complete liberty, to try by this frequent intercourse to gain my
friendship, inform himself by me of the intrinsic qualities of those
of whom he only saw the outside, and by degrees to come to the Council;
through me, to represent the annoyances he experienced, the people with
whom he had to do, and, lastly to profit by my dislike to the Duc de
Noailles, who, whilst embracing him every day, was dying of jealousy
and vexation, and raised in his path, underhand, all the obstacles and
embarrassments possible, and would have liked to stifle him. The Bank
being in action and flourishing, I believed it my duty to sustain it.
I lent myself, therefore, to the instructions Law proposed, and soon
we spoke to each other with a confidence I never have had reason to
repent.”
Notwithstanding the pressure of work upon Law’s shoulders at this period
when the enormous amount of details consequent upon the establishment
of the Bank required his unremitting attention, he yet found ample time
for indulging in those trifling matters which bulk so largely in the
estimation of a courtier, and, especially if they entail extravagant
expenditure, often cloud his limited horizon to the exclusion of
affairs of greater importance.
The Duc de Saint-Simon, with a fine eye and a keen judgment for the
dainty trifles of this world, had set his mind upon the purchase
for the King of a priceless diamond which had come into the market
early in 1717. This gem, variously known as the “Pitt” or “Regent”
diamond, possessed a rather questionable history. It had been
discovered in 1701 in the Parteal mines of the Great Mogul by a slave,
who immediately decamped with his precious find to the coast. Here
he negotiated a sale with an English captain, who sold it to the
Governor of Fort St. George, an office held at that time by Thomas
Pitt, grandfather of the first Earl of Chatham. A model of it was made
and shown to Law, who had been approached with a view to using his
influence with the Regent for its purchase. The price, however, was a
stumbling-block, and Law at once requested the assistance of the Duc de
Saint-Simon. The Duc, who was always superior to any trifling financial
difficulty, thought “that it was not consistent with the greatness of
a King of France to be repelled from the purchase of an inestimable
jewel, unique of its kind in the world, by the mere consideration of
price, and the greater the number of potentates who had not dared to
think of it, the greater ought to be his care not to let it escape
him.” Saint-Simon’s record of his interview with the Regent is an
excellent example of the arguments the extravagant spendthrift makes
use of to salve his conscience when any whim is to be satisfied. The
Regent “feared blame for making so considerable a purchase, while the
most pressing necessities could only be provided for with much trouble,
and so many people were of necessity kept in distress. I praised
this sentiment, but I said that he ought not to regard the greatest
King of Europe as he would a private gentleman, who would be very
reprehensible if he threw away 100,000 livres upon a fine diamond,
while he owed many debts which he could not pay; that he must consider
the honour of the crown, and not lose the occasion of obtaining a
priceless diamond which would efface the lustre of all others in
Europe! that it was a glory for his Regency which would last for ever;
that, whatever might be the state of the finances, the saving obtained
by a refusal of this jewel would not much relieve them, for it would be
scarcely perceptible; in fact, I did not quit M. le Duc d’Orléans until
he had promised that the diamond should be bought. M. le Duc d’Orléans
was agreeably deceived by the applause that the public gave to an
acquisition so beautiful and so unique.... I much applauded myself
for having induced the Regent to make so illustrious a purchase.”
Through Law the price was fixed at two millions, or, approximately,
£150,000. So reduced, however, was the exchequer that payment was
impossible at the time, and thus an additional debt was added to an
already over-burdened Treasury. The purchase of the gewgaw was a simple
matter, and Saint-Simon was eminently capable for this portion of the
negotiations. The payment was more difficult, and was postponed to be
dealt with by Law himself.
CHAPTER IV
Law’s notes become official tender.--The Mississippi
Scheme projected.--Early explorers of Mississippi
territory.--Establishment of the West India Company.--Its
absorption of depreciated _billets d’état_.--D’Argenson
appointed Chancellor of France, and attempts extinction of
National Debt.--Law innocently involved in D’Argenson’s fatal
scheme.--Saved from arrest by Regent.--The brothers Paris and
an anti-system.
[Illustration]
Less than one year’s operations were sufficient to disclose the
superior value of Law’s Bank as an institution of national importance.
Its remarkable success was not attributable to factitious or ephemeral
circumstances, but to the confidence inspired by the soundness of the
methods upon which its business was conducted. Law’s powerful grasp of
financial principles, and his striking capacity for their practical
application, were evidenced in the masterly manner that characterised
his management at this period. If anything was wanting to its complete
success, it was recognition by the Government of the Bank as the
official channel for the national revenues to reach the Treasury. This
came before the first year expired. On 10th April, 1717, the Council
decreed that the tax collectors should treat Law’s notes as legal
tender at their full face value. The effect of this, of course, was to
extend the demand for so stable a medium of currency to districts as
yet outside the sphere of the Bank’s operations. Law’s position was now
one of the first magnitude. So far-reaching was his influence that the
industrial welfare of France was bound up to a large extent with his
fortunes, and would have been seriously menaced by its withdrawal. The
stimulus of his activity was felt throughout the whole country, and
secured for him the greatest authority and respect.
Law now considered himself in a position to develop another stage
at least of his great scheme for the commercial regeneration of
France. Not only was the moment opportune, but the principles he
had been advocating in theory had operated so well in practice that
he entertained no doubt that certain success would follow his new
enterprise. Credit, and especially that phase of credit represented in
paper currency, was capable, in his opinion, of unlimited expansion so
long, at least, as there was an apparent foundation of security. With
an available cash capital of only £75,000 he had been able to float
and to give stability of value to 60,000,000 livres, or approximately
£4,500,000. Why, therefore, not centralise the whole wealth of France
and establish upon it a huge currency of notes, by means of which
industrial growth and prosperity would be fostered?
Dominated by this one purpose, he projected his famous Mississippi
scheme during the summer of 1717, a scheme which was at once to raise
him to the highest pinnacle of fame and to prove his undoing.
[Illustration: LA SALLE,
The French Explorer of the Mississippi territory from 1676 to 1682.]
France at this time possessed the vast American territories which are
watered by the Mississippi. In 1674, Jolliat, who had been sent by the
Count de Fontenac to discover if possible a passage through the Bay of
California into the South Sea, came upon the great river, but did not
attempt to explore it. This was accomplished by La Salle, one of the
greatest French explorers of the American continent. He went out two
years after Jolliat, and after many adventures and hardships, succeeded
in navigating the Mississippi to its mouth, where he set up the French
flag on 9th April, 1682, claiming the whole of the vast territory he
had traversed for his native country. On making known his success to
Louis XIV., he was furnished by that monarch with three ships and a
man-of-war for the purpose of establishing a French colony in the
region he had annexed, in order to establish the right of France to
the newly-acquired territory. Unfortunately, La Salle was unable to
again locate the mouth of the Mississippi, and, after several months of
vain wanderings in quest of his destination, he was murdered by some
of his followers, who had been exasperated by his ineffectual efforts,
and goaded into revolt by his harsh and domineering disposition.
D’Iberville, a French Canadian, who took up the task of exploration
in succession to La Salle, enjoyed, however, greater success, and
erected a French fort at the mouth of the river in 1712.
As yet no actual development of resources had been seriously attempted,
but the glowing account of the vast riches of Louisiana given by
D’Iberville had the effect of inducing a wealthy merchant, by name
Antoine Crozat, to acquire the monopoly of its trade and of exploiting
its natural wealth. Louis XIV. granted him this privilege for a period
of sixteen years from 1712. Whether by bad management, by bad fortune,
by reason of the vastness of the undertaking, or by a combination of
all three circumstances, Crozat, soon found he had entered upon a task,
the magnitude of which was altogether beyond his capacity. In 1717,
accordingly, he endeavoured to get rid of the burden he had so easily
assumed, but could not so easily throw off. He naturally turned to
Law, the man who loomed so large in the world of speculation, the one
man who seemed able to evolve success from failure. Law regarded with
favour the advances made by him, and created no little astonishment
by announcing his decision to take over the monopoly and privileges
which hung like a mill-stone round Crozat’s neck. He intimated his
decision to the Regent, and explained the course he intended to pursue
in the development of his new proposal. The Regent, who was of course
controlled in all financial matters by Law, was readily willing to
comply with his wishes and countenanced the vigorous prosecution of
the scheme.
In August, 1717, by letters patent, a trading corporation under the
name of the West India Company was established. To it was given a grant
of the whole of Louisiana, and for a period of twenty-four years from
1st January, 1718, it was to possess the sole rights of trading with
the colony, and the company was generally to regard the undertaking
as a huge commercial enterprise, in the management of which they
would not be trammelled by State interference. For these privileges
no payment was made to the State, but no act was to be allowed which
might prejudice the sovereignty of France in Louisiana, and the company
was under an obligation to furnish at its own expense all necessary
military and naval protection. The capital of the company was fixed at
100 million livres, divided into 200,000 shares of 500 livres each.
Although no price was payable to the State for the apparently valuable
rights acquired by the company, the ingenuity of Law had devised an
indirect consideration of great importance. We have already seen how
the Bank had absorbed depreciated _billets d’état_ at their face value
to the extent of 4½ millions. But a bolder stroke was now conceived
by Law. It was no less than to make the whole of the share capital of
his new company payable in the State notes, which were then standing
at a discount of 65 per cent. These _billets d’état_ formed part of
the converted stock of the previous year, and bore interest at the
rate of 4 per cent. The company scrip which was given in exchange for
the _billets d’état_ was charged with a fixed permanent interest at
the same rate, and in addition a contingent interest dependent upon
the profits of each year. The effect of this financial juggle, was on
the one hand, to transfer a twentieth part of the national debt from
the State to a private company, and, on the other hand, to reduce the
number of the nation’s creditors by several thousands. The advantage
was primarily in favour of the State, and as will be seen later, was
the first step towards the total extinction of the nation’s paper then
in currency, by a method which in reality was repudiation of liability,
though at this stage it could not have been foreseen as such either by
Law or by the Regent.
The influential position to which Law had now attained was naturally
productive of great heart-burning, not only amongst those whose power
he had virtually usurped, but also amongst the army of tax-farmers
whose opportunities he had seriously curtailed. D’Aguessau, the
Chancellor of France, was particularly envious of Law, and had used all
his influence with the Regent against the new regime. Law, however, was
paramount in the Regent’s favour, and secured the summary dismissal of
the undesirable Chancellor. In January, 1718, D’Argenson, Lieutenant of
Police, a weak and pliable creature, was installed in his place, and a
pretext was also discovered for requiring the resignation of the Duke
of Noailles, chief of the Council of Finance, in order to combine the
two offices in the person of D’Argenson. These appointments practically
left the Government in the hands of the Regent, Law, and the Abbé du
Bois, the Minister for Foreign Affairs. The elevation of D’Argenson was
a move on the part of Law to secure the adoption of all his suggestions
without encountering the opposition he would have met at the hands
of a strong and independent Minister. His duties were to be merely
clerical, and his services were to be at all times at the command of
Law. D’Argenson, however, was of a suspicious disposition. Accustomed
to being his own master in his former office, and active, though
somewhat officious, in the administration of its functions, he fretted
under the domination of his imperious master. He had been accustomed to
the flattery of the great, and had become imbued with a sense of his
own importance. To assume a position of inactivity, and to be deprived
of all authority, were conditions much too humiliating to the self
important Chancellor, and he endeavoured to surround his new office
with an air of fictitious responsibility. While Lieutenant of Police
he had been accustomed to give audiences at all times of the night
and day, and this furnished him with an idea as to the possibility
of impressing the people with the false notion that he was more than
ever immersed in public business. He made appointments at the most
inconvenient hours, mostly after midnight or in the early morning, and
those who were favoured with admittance carried away an exaggerated
idea of the tremendous load of responsibility upon the shoulders of the
new Chancellor, from a pre-arranged theatrical display of work in which
he might be seen dictating to innumerable secretaries in the midst of
a veritable ocean of papers and documents requiring attention. So far,
indeed, did he carry this ludicrous performance, that he is said to
have driven through the streets in the evenings with a lighted carriage
in order to maintain the appearance of requiring to employ every moment
of the day for overtaking the stupendous volume of work.
Behind all this mummery, however, there was a determination in the mind
of D’Argenson to counteract the influence of Law, if not to supersede
him altogether. With this object in view he conceived a bold plan
for outbidding Law in his financial proposals. This was no less than
the extinction of the floating national debt, and the means for its
accomplishment was depreciation of the coinage. Law had provided for
the absorption of 100 million livres in his Western Company, so that
D’Argenson had set himself the task of taking up the balance of the
State notes, amounting to 150 millions. His proposal was not only of
the crudest, but it displayed an utter disregard for the industrial
interests of France, and even he could not fail to have been impressed
with the highly injurious effects upon trade of arbitrarily tampering
with the currency. He secured, however, the adoption of his proposal,
and on 10th May, 1718, a decree was issued debasing the coinage to
the extent of 50 per cent. upon the depreciation which took place in
December, 1715. The silver marc was now raised from 40 to 60 livres,
and the crown piece of 3 livres 10 sous, which weighed one ounce
in 1715, now weighed less than half an ounce. In anticipation of
his scheme, D’Argenson had purchased very cheaply a large quantity
of silver for coinage purposes, and the Mint now issued 60 livres,
weighing 8 ounces, in exchange for 48 livres of the old coinage and
12 livres in _billets d’état_. In order, therefore, to absorb all the
floating paper, D’Argenson required to issue 750,000,000 livres, upon
which the State realised a profit of 250,000,000, so that after the
cancellation of the notes there would therefore have remained a balance
of 100,000,000. This high-handed proceeding created a deep feeling of
resentment throughout the community, and Parliament, deferring to the
wishes of the traders and of those who were affected by the change,
issued on 15th June a decree practically annulling the whole of the
new coinage. The Regent, whose authority was thus threatened, was in
despair. He endeavoured to stem the tide of opposition by ordering
the destruction of all copies of the decree, and forbidding its
publication. Not to be outdone, however, the Parliament employed the
services of men who were willing to expose themselves to the risk of
being shot down by the soldiery whilst engaged in placarding the decree
all the city of Paris. From Paris the opposition spread throughout the
whole of France, and became almost revolutionary in its intensity.
Law’s position had now unexpectedly become precarious. The outcry was
directed towards him no less than the Regent, and D’Argenson, the real
initiator of the fatal policy, was unconnected in the public mind with
the agitation. Parliament, in the exuberance of its temporary success,
resolved upon further measures. It instructed the collectors to refuse
payment of taxes in bank notes; it prohibited all foreigners from any
share in the management of the national finances; and it withdrew the
privileges of the bank in so far as these related to the administration
of the Treasury. The climax was reached when Law was charged with the
instigation of all the disastrous effects of D’Argenson’s policy, and
was under immediate danger of being arrested and forthwith hanged at
the gates of the Palais de Justice.
It was now imperative that something should be done by the Regent.
He felt that not only was he bound to save his favourite, but that,
if Parliament were allowed without check to pursue its will, he also
would lose his authority and mastery over the realm. Accordingly,
a consultation was held on 19th August at the house of the Duc de
Saint-Simon. “In this conference at my house the firmness of Law,
hitherto so great, was shaken, so that tears escaped him. Arguments
did not satisfy us at first, because the question could only be
settled by force, and we could not rely upon that of the Regent. The
safe-conduct with which Law was supplied would not have stopped the
Parliament an instant. On every side we were embarrassed. Law, more
dead than alive, knew not what to say; much less what to do. His
safety appeared to us the most pressing matter to ensure. If he had
been taken, it would have been all over with him before the ordinary
machinery of negotiation (delayed, as it was likely to be, by the
weakness of the Regent) could have been set in motion; certainly,
before there would have been leisure to think of better, or to send
a regiment of Guards to force open the Palais de Justice; a critical
remedy at all times, and grievous to the last degree, even when it
succeeds; frightful, if instead of Law, only his suspended corpse had
been found!”
Law, knowing the intensity of feeling with which Parliament was
moved, and the certainty of their threat being carried out should
they succeed in arresting him, was greatly concerned for his personal
safety. A secure and ready asylum was at hand. The Regent placed
at his disposal a chamber in the Palais Royal, an astute move on
the part of those who suggested it, not only because it removed the
possibility of Law’s arrest, but because it would have the affect of
strengthening the Regent’s determination to undermine the authority
of that insubordinate assembly. The suggestion emanated from the Dukes
de Saint-Simon, and De la Force, and Fagon, one of the counsellors of
state, all three virulent opponents of Parliamentary institutions.
The presence of Law in the royal palace and the inadvisability of
surrendering him to the tender mercies of the irate House were both
strong incentives to the Regent to act at once with decision so as to
secure the freedom of the powerful financier. A Bed of Justice was
agreed upon by the Regent and his advisers as the only possible means
of annulling the decrees of 15th June. The difficulties, however, in
the way of its being held were great and required the utmost tact and
secrecy. The Duc de Maine, suspected as the prime instigator of the
parliamentary resolutions, and the Marechal de Villeroy, a servile
supporter of all the former’s proposals, were regarded as possible
successful opponents of a session of a Bed of Justice. Both were
guardians of the young king, and as his presence was necessary to
setting the seal of authority to the results of the deliberations
of this body, the Regent feared they would place obstacles in the
way. But the Duc de Saint-Simon was equal to the emergency, and, in
his own voluble and consequential way, has recorded with much detail
the measures he adopted for carrying out the proposal. He assumed
responsibility for all the arrangements, and with gossipy fulness tells
how he prepared for holding the Bed of Justice at the Tuileries,
keeping it a profound secret until the very morning it was to be
convened, and how the summons to attend was only to be issued a few
hours before. The precautions although somewhat elaborate were all
required. The step was highly critical for the Regent. It involved not
only the recognition of his authority as Regent, but, in the event
of its being unsuccessful, his deprivation of the Regency itself. In
short, it could only be justified by a successful conclusion, a result
which was ultimately attained, although by means of a high-handed and
arbitrary nature. Throughout the whole of the proceedings, the Regent
displayed a firmness and resolution which can only be attributed to
the desperation of his position. They were sufficient, however, to
the end he had in view, although by no means features characteristic
of his general conduct. The Parliament was over-awed; the decree was
abrogated; and Law once more regained his freedom. Thus was Law the
innocent instrument of the degradation of the French Parliament, and
the establishment of a despotism oriental in its thoroughness and
far-reaching in its effects.
Law’s escape from the violent intentions of the angry Parliament was
however but a prelude to other difficulties and opposition. D’Argenson,
smarting under the feelings of jealously engendered by the subordinate
position he was compelled to play to a foreigner, and actuated by an
exaggerated conceit of his abilities, conceived the notion of meeting
Law on his own ground and damaging the importance of the latter by the
adoption of a scheme which might supersede Law’s by its brilliance and
attract to himself the admiration of the financial world. Depreciated
securities issued by the various government departments were afloat
to incredible amounts. Their value was purely speculative, and any
tendency to fluctuation was usually downward, so that unfortunate
holders were always uncertain of the extent to which they might be
calculated as realisable assets. Here was the groundwork of a scheme
for the display of financial genius which might eclipse the schemes
of Law by converting them at face value into securities of a more
substantial and liquid character. The idea of conversion was of course
merely an adaptation of Law’s methods, but D’Argenson was bent on
something less speculative, and so far as prospects were concerned,
less remote, if not less illusory, than the Mississippi Scheme. He
found ready instruments for his purpose in the four brothers Paris,
great government contractors, men of considerable wealth, but most
unscrupulous in the manner of their dealings. Not only were they
envious of Law, but they feared a restriction of their own field of
operations should his influence be left unchecked. With them therefore
D’Argenson conspired in the initiation of a bold Anti-Système.
Their scheme was the formation of a company to take over a large
proportion of the national revenues, and in payment of the shares, of
which there were 100,000, of 1000 francs each, to take the depreciated
securities of the public service at their full value. This company
was to guarantee a revenue of 48 millions per annum, derivable from
the sources of taxation allotted to them, and the treasury were to
hold in security of their carrying out their obligation the 100
millions of depreciated securities which the company would absorb. The
company would of course proceed in the manner usual to all farmers of
the public revenue, and exact from the public taxation exorbitantly
in excess of what was payable to the treasury. D’Argenson and the
brothers knowing that the holders of the depreciated securities were
thoroughly acquainted with the profitable nature of the business in
which the company was to engage would only be too ready to convert
their securities into the company’s shares. The brothers Paris had a
reputation for want of any quality of mercy in the levy of taxation,
and the shareholders would require no assurances as to the probable
returns upon their investments or as to the probable permanence of
these returns. Alluring advertisements in praise of the company’s
sources of income were quite unnecessary as in the case of the
Mississippi scheme projected by Law. These unfortunately were patent to
every one, but fortunately for those who would have been the victims
of such a scheme, and fortunately also for the country at large,
already suffering sufficiently from the insatiable rapacity of the
tax-gatherers, the formation of the company did not commend itself to
the Regent and his advisers, so once more Law was delivered from the
jealousies of his rivals.
CHAPTER V
Exaggerated accounts of resources of Louisiana.--Law’s judgment
at fault--His ultimate aim.--He creates an artificial rise
in the value of Company shares.--His unsuccessful efforts
to gain influence over Saint-Simon.--Acquisition of Tobacco
monopoly.--Absorption of other companies.--Reconstitution
of West India Company.--Parliamentary opposition
overcome.--“Mothers” and “Daughters”.--Excited speculation in
shares.--Issue of notes to colonists.--A pioneer’s account of
Louisiana.
[Illustration]
Law was now free to direct his thoughts to the business of the bank and
the development of his original ideas with reference to the West India
Company. Although the latter had been established in August, 1717,
nothing had yet been accomplished in the direction of actual business.
The capital had been issued to an over-eager public, but unless a
revenue were forthcoming the consequences would be grave for its
originators. It was not sufficient that the flourish of trumpets with
which he heralded the boundless possibilities of wealth of the vast and
unknown territories of the Mississippi should die away with its last
faint echoes. He must at once give evidence that the promises would
bear fruit. The situation was difficult, but his ingenuity was equal
to the task imposed upon him.
Since the establishment of the company, France had been deluged
with books, pamphlets, engravings, and all kinds of advertisements
and prospectuses descriptive of the extent and wealth of Louisiana.
Exaggerated accounts were published of its riches, of its mineral
resources, and of its people. One picture would exhibit mountains
declared to be “full of gold, silver, copper, lead, and quicksilver.
As these metals are very common, and the savages know nothing of
their value, they exchange lumps of gold and silver for European
manufactures, such as knives, cooking utensils, spindles, a small
looking-glass, or even a little brandy.” Another, designed to invest
the natives with a highly religious disposition, would show them
performing humble obeisance to the priests, and have accompanying
letterpress to the effect that “the idolatrous Indians earnestly pray
that they may receive baptism. Great care is taken of the education of
their children.”
Glittering accounts such as these appealed to the speculative instincts
of everyone. All sorts and conditions of people sold their lands and
purchased shares; ships were bought to carry intending emigrants; and
transportation was substituted for all other penalties for criminals in
order that a supply of manual labour might be furnished in opening up
the newly acquired territories. Louisiana however was to prove a bitter
disappointment to those who expected to find a country where hardships
and difficulties were absent, where without trouble or labour fortunes
were to be amassed in the shortest time, and where without stint the
pleasures and luxuries of home could be enjoyed to the fullest.
The brilliant pictures that were drawn of the capacities of Louisiana
were undoubtedly largely exaggerated so far as its condition was at
the time. With the knowledge of subsequent years they were however
substantially accurate, but the development of these capacities
required the expenditure of vast sums of capital and the lapse of many
years of hard and continuous labour of an imported population. The
concessions made to the company on its incorporation were of enormous
ultimate value, and under different conditions, conditions which
would have imported fewer elements of speculation and introduced more
administrative patience and moderation, might have proved a national
asset of great importance instead of a disastrous enterprise the
magnitude of which had the effect of paralysing for several generations
the commercial and industrial stability of France. The concessions
were co-extensive with virtual sovereignty over the vast territories
included in the grant, and unlimited freedom of administration was
conferred.
While it is evident that Law anticipated that Louisiana would in
reality be a possession which would yield to his company a large
annual revenue and prove an exceedingly profitable investment to its
shareholders, it is equally evident that he recognised that this
result could not be accomplished at once. He was probably mistaken
as to the length of time that would be required, and, if so, he was
only guilty of a fault of judgment attributable to the inadequacy of
contemporary knowledge of these far distant lands as well as to the
fact that experience of developing companies, such as the Western
Company, was then in its extreme infancy. Until operations could
proceed on a sufficiently extensive scale, the only immediate income
derivable by the company consisted of the annuities payable by the
Treasury, the amount of which was equivalent to interest at the rate
of four per cent. upon the 100 million livres of State notes absorbed
at the time of incorporation. From the fact that the first year’s
annuities of four million livres were to be devoted to the general
purposes of the company, and that the succeeding years’ annuities were
to be placed to the dividend fund, it would seem that Law was under the
impression that he could sufficiently develop the company’s territories
within a year to admit of further drafts upon the treasury payments
being unnecessary.
On the other hand, the Western Company was but one element in the
ultimate scheme which Law was ambitious to attain. His aim was to
embrace in one vast undertaking not only the whole foreign trade of
France, but also the large revenue departments of the government,
such as the mint, and the collection of the national taxation. To
these would be added the Bank, the success of which, in its present
form, was now assured and had inspired the confidence of French people
and foreigners alike. With these under one control, and all working
together with one definite purpose, national prosperity might be
placed upon a sound practical basis, trade in general be fostered and
guided along lines of greatest development, and the circulation of
money be more ample by the issue of notes to the extent of the real or
approximate value of the incorporated assets.
During the early months of 1718, accordingly, he was engaged in laying
plans for the acquisition of several monopolies and companies then in
existence, but, by reason of indifferent management, not productive to
their fullest capacity. In the meantime, however, the public required
consideration at his hands. The shares of the Western Company were
at a discount of 50 per cent., and he foresaw the necessity before
proceeding further of adopting measures to create a rise in their
value to par at least, and if possible to a premium. His proposals
would demand further appeals to investors, and their decision would
inevitably be determined by the value in the open market of the stock
he had already launched. The method he pursued to bring about this
object was as ingenious as it was original. He offered to buy at six
months’ date in practically unlimited quantities shares of the Western
Company at the minimum price of par and in many cases at a price in
excess of par to the extent of 20, 30, and even 40 per cent. This
proceeding naturally roused intense excitement, coming as it did from
the prime mover in all the great financial operations which had so
recently been agitating the community and been promising so great
results. The consequence was as Law had hoped. The value of the shares
was revived, the public were eager to join in the speculative fever
that was produced, and Law not only employed their eagerness to his
own advantage but succeeded in spreading and strengthening his already
marvellous influence.
While Law was publicly carrying through transactions in such a manner
as to rouse enthusiasm and inspire confidence in his projects, he was
also at the same time engaged in securing by every possible means the
good offices of those in high places without whose favourable support
his plans would not likely reach maturity. The Duc de Saint-Simon
reveals the nature of the efforts by which Law endeavoured to engage
the good opinion of himself and others. “Law,” he says, “often pressed
me to receive some shares for nothing, offering to manage them without
any trouble to me, so that I must gain to the amount of several
millions. So many people had already gained enormously by their own
exertions that it was not doubtful Law could gain for me even more
rapidly. But I never would lend myself to it. Law addressed himself to
Madame de Saint-Simon, whom he found as inflexible. He would have much
preferred to enrich me than many others, so as to attach me to him
by interest, intimate as he saw me with the Regent. He spoke to M. le
Duc d’Orléans, even so as to vanquish me by his authority. The Regent
attacked me more than once, but I always eluded him. At last, one day
when we were together by appointment at Saint Cloud, seated upon the
balustrade of the orangery, which covers the descent into the wood of
the goulottes, the Regent spoke again to me of the Mississippi, and
pressed me to receive some shares from Law.
“The more I resisted the more he pressed me and argued. At last he
grew angry, and said that I was too conceited, thus to refuse what the
king wished to give me (for everything was done in the king’s name),
while so many of my equals in rank and dignity were running after
these shares. I replied that such conduct would be that of a fool,
the conduct of impertinence, rather than of conceit; that it was not
mine, and that since he pressed me so much I would tell him my reasons.
They were, that since the fable of Midas, I had nowhere read, still
less seen, that anybody had the faculty of converting into gold all
he touched; that I did not believe this virtue was given to Law, but
thought that all his knowledge was a learned trick. A new and skilful
juggle, which put the wealth of Peter into the pockets of Paul, and
which enriched one at the expense of the other; that sooner or later
the game would be played out, that an infinity of people would be
ruined finally, that I abhorred to gain at the expense of others, and
would in no way mix myself up with the Mississippi Scheme.
“M. le Duc d’Orléans knew only too well how to reply to me, always
returning to his idea that I was refusing the bounties of the king.
I said that I was so removed from such madness that I would make a
proposition to him, of which assuredly I should never have spoken but
for his accusation.
“I related to him the expense to which my father had been put in
defending Blaye against the party of M. le Prince in years gone by; how
he had paid the garrison, furnished provisions, cast cannon, stocked
the place, during a blockade of eighteen months, and kept up, at his
own expense, within the town, five hundred gentlemen whom he had
collected together; how he had been almost ruined by the undertaking,
and had never received a sou, except in warrants to the amount of five
hundred thousand livres, of which not one had ever been paid, and
that he had been compelled to pay yearly the interest of the debts he
had contracted, debts that still hung like a millstone upon me. My
proposition was--that M. le Duc d’Orléans should indemnify me for this
loss, I giving up the warrants, to be burnt before him.
“This he at once agreed to. He spoke of it the very next day to Law; my
warrants were burnt by degrees in the cabinet of M. le Duc d’Orléans,
and it was by this means I was paid for what I had done at La Ferté.
M. le Duc d’Orléans also distributed a large number of the Company’s
shares to the general officers and others employed in the war against
Spain.”
Law was by these means assured of the certainty of his coming proposals
meeting with public approval, and the only step now remaining was to
mature as speedily as circumstances would permit the arrangements he
had been busily negotiating with the Regent and his advisers on the one
hand and with the companies and the lessees of the various monopolies
on the other.
The Tobacco monopoly was the first of the privileges to be acquired
by the company. Although by no means an extensive trade, it was
an important and lucrative one. The transfer was effected on 4th
September, 1718, under burden of an annual charge of 4,000,000 livres
payable to the king. Shortly after, arrangements were completed for the
absorption of the Guinea Company, whose business was largely composed
of slave-dealing on the West Coast of Africa. This was finally carried
through on 15th December of the same year. Then came the fusion of the
French East India Company, established in 1664 by Colbert, and also
a dormant monopoly issued in 1713 conferring the sole privilege of
carrying on trade with China.
The company was now assuming bulky proportions, and a re-arrangement of
its capital was necessitated by the requirements of its wide and varied
interests, and by the prospect of still further acquisitions under
negotiation. Accordingly in May, 1719, a decree was published which
conferred upon the Company the new and more pretentious title of the
Company of the Indies; permission was given to increase the capital;
and to the rights already possessed was added the monopoly of trade
“from Guinea to the Japanese Archipelago, of colonising especially the
Cape of Good Hope, the East Coast of Africa, that which is washed by
the Red Sea, all the known islands on the Pacific, Persia, the Mougal
Empire, the Kingdom of Siam, China, Japan, and South America.” The
increase of capital was fixed at 27,500,000 livres divided into 50,000
shares of 550 livres each, payable in monthly instalments of 27½ livres
per share.
The magnitude of these transactions was now so great and unprecedented
as to blind the public entirely to all other considerations, and
enthusiasm for the foreigner was more than ever highly pitched. A mad
scramble soon ensued for possession of shares which would produce so
handsome returns as those promised by the great financier. Dividends of
200 per cent. were indicated as certain to accrue from the company’s
operations, and it is said that no fewer than 300,000 applications for
shares were received from eager crowds of speculators. An unfortunate
hitch, however, postponed the allotment to successful applicants.
Parliament was still unwilling to follow Law into all his schemes.
They were always ready to place obstacles in his path. Accordingly
the decree authorising the issue of additional capital was refused
endorsement, and six weeks elapsed before the difficulty could be
removed. This untoward incident, however, by no means dampened the
ardour of Law or of the general public. The previously issued shares of
the company which Law had been himself under necessity of converting
from a discount to a premium were now in so great demand that they
rose without his interference in the market. Artificial gave way to
natural inflation of value through keen competition from without, and
Law with that capacity for using every advantage with quick and ready
skill turned the public feeling to immediate account. On 20th June
he placed an absolute condition upon the acquisition of the newly
authorised shares. With the ostensible object of laying down a standard
for distribution of the new shares amongst applicants, but really
of maintaining and if possible of increasing the price of the old
shares, he expressed his intention of allotting the new shares in the
proportion of one to four of the old shares held by the applicant. The
purchase of the requisite amount of the original issue was a necessary
preliminary to a favourable consideration of a further subscription.
A great demand for original shares at once followed the issue of this
decree, and accordingly the prices rose to double their face value
within a comparatively few days. These shares were popularly known as
the _Mothers_ and the shares of the new issue as the _Daughters_. The
excitement and competition was intense. The whole business of Paris
seemed to be concentrated on the purchase and sale of Indian stock.
From the highest down through every grade of the community to the
lowest, every one talked and thought of nothing else. Visions of untold
wealth were conjured up by rash participants in the race of reckless
speculation, and the good fortune of many adventurers only served to
stimulate those who as yet lagged far behind.
Forbonnais describes the effect of the decree. “When no more
_daughters_ were to be found, the western shares were sought for at any
price. They were bought for ready money, or on credit with a premium on
the price agreed on. Some sold so as to make sure of a large profit,
and then seeing that the shares still went up, bought again. In such a
state of fermentation, the quickness of the transactions did not admit
of the employment of coin; the note was preferred to it; and so that
the public might not want _that_, they did not put too high a price on
it.”
On the other hand, the absolute confidence which the Regent placed
in the Mississippi Company, and his strong intention to render every
assistance to the new colonists in the development of its resources,
are seen in his consistent attitude of approval of all Law’s proposals
at this period. One of the difficulties with which the colonists had
to contend was the absence, or at least scarcity, of a medium of
exchange. Barter was much too cumbrous and inconvenient a method of
exchange, and operated as a serious check upon freedom of commerce.
Law’s solution was the issue of bank notes. The Royal Charter granted
at this time made provision for this, and the grounds upon which the
Regent, in name of the King, authorised the issue, although probably
inspired by Law himself, show also the steps the company were taking
for the exploitation of its territories. “The King having by his
Letters Patents of the month of August, 1717, established a Trading
company, under the name of the West India Company; and by his edict of
May last, remitted to the said Company the trade to the East Indies
and China; His Majesty sees with great satisfaction that that Company
takes the best measures for securing the success of its establishment;
that they send a great number of inhabitants to the country Louisiana,
which was granted them; that many private persons make settlements
in that colony, and send thither husbandmen, tillers, and other
handicraftsmen, to manure and improve the land, sow corn, plant
tobacco, breed silk-worms, and do whatever is necessary to improve the
country. Furthermore His Majesty being informed that the said Indian
Company is at great charge for transporting the said inhabitants, and
furnishing the colony with meal and other necessaries, until the land
affords a sufficient quantity of provisions for their subsistence;
that the company sends thither all sorts of goods and merchandise, to
render the life of the inhabitants more comfortable; and that for
preventing of abuses, too frequent in colonies, they have taken care
to settle the price thereof at a moderate rate, by a general tariff,
which dispositions have appeared so wise and necessary that His Majesty
is resolved to favour the execution thereof; and knowing that the
exchanging of goods not being sufficient to carry on commerce in its
full extent, it is necessary in the beginning of establishments of
this nature, to give them all possible protection and countenance,
His Majesty is resolved to supply the said company with a sum of
bank bills, to enable the inhabitants of Louisiana to trade amongst
themselves, and bring into France the fruits of their labour, industry
and economy, without any risk or charge.”
The effect of the deep interest taken by the Regent in the fortunes
of the Company was twofold. It inspired confidence in the mind of
the public at home. Of that and of its results special mention will
require to be made. It also directed the eyes of suitable colonists to
the new El Dorado, and set in motion a stream of emigration from the
shores of France. Expeditions were fitted out by Law, and for these
numerous vessels were both purchased and built. Everything was done
on a scale in keeping with the dignity and magnitude of the Company.
One of the pioneers, writing in 1721, has left on record an account of
his experiences. The faintheartedness, however, which determined his
speedy return, can hardly be attributed to his having been misled as
to the character of the country, as he would wish us to believe, but
rather to disappointment that the riches in quest of which he had gone
could only be acquired by strenuous labour and after suffering many
privations. “Our first embarkation for the Mississippi was at St. Malo;
we were twelve ships, and carried with us agents, clerks, labourers,
some troops, and provisions. After a tedious voyage, we arrived at
Hispaniola, in the bay, and took Pensicola from the Spaniards on the
Continent, being necessary for securing our navigation into the river,
it lying almost at the mouth of it; the bay, which makes the mouth
of the river Mississippi, is wider than from Orfordness to the North
Foreland, and fuller of banks and shoals; so that it is very difficult
for ships of any burthen to get into it, without very skilful pilots,
of which there are none as yet; it hath three large openings, and one
can hardly judge which is the mouth, though they all three come out of
it, except by Mons. D’Ibberville’s Fort, which one hardly sees, till
you are just upon it. After you have got into the river, it is still
very shoal, though broad, till you get up to Monsieur D’Ibberville’s
second Fort, at both of which we are to begin our factories and carry
them higher, as our people increases. Our Fort lies in about 28 degrees
of latitude; the country is prodigiously sandy; and, I must say, they
might as well have sent us to the deserts of Libia, or Barco, to have
settled a colony, as thither; we met with no inhabitants near the
sea-side, nor indeed for a great many leagues up the river; if you
believe some people from Canada, that came to us, their navigation
down this river was from 42 degrees to 28, directly south and north;
the mountains, water-falls, on the way from Canada, and lakes are
incredible; one lake, called Illinois, is so large, that they sailed 40
leagues over it. The different nations up the country, running along
the back of the English plantations, I leave to others to describe,
that is no part of my business; but the Iroquois, who we were told in
France were the inhabitants, are not within a thousand miles of it,
nor any other inhabitants. I saw for many hundred miles but here and
there some straggling Indians, natives of Florida, and poor, innocent,
harmless people. I went up the river in a canoe for some hundred of
miles, without seeing the country mend, and after three months stay
embarked again for France.”
CHAPTER VI
Company acquires right of coinage.--Issue of fresh stock and rise
in price.--Attempts made to discredit Law.--Stair’s account of
the situation.--Law defeats the anti-scheme.--The concluding
proposal of his schemes.--The Company’s capital and sources of
revenue.--Report of directors for 1719.--Law’s bank converted
into a Royal bank against Law’s wish.--The Regent divests
notes of the bank of their most valuable features.--Provincial
branches established.--Restriction of gold and silver
tender.--Extravagance of successful speculators.
[Illustration]
The Indian Company had only yet touched the fringe of the monopolies
Law intended it to embrace. It had embarked upon a sea of dazzling
speculation, but its journey was only at its commencement. Its
destination, however, was by no means uncertain in the mind of the
great financier, and this he was to reach in the space of four months.
The first great acquisition of value and importance was the transfer to
the Company of the right of coinage. This was effected on 25th July,
1719. The right was to extend over a period of nine years, and the
price was fixed at 50,000,000 livres, payable within fifteen months
of the date of the grant. To place the Company in a position to carry
out the bargain a fresh issue of shares was made, and Law on this
occasion took greater advantage of public enthusiasm than he did on
the occasion of the previous issue. In the latter case the shares were
offered at a premium of ten per cent., the public, although paying 550
livres, receiving stock only of the value of 500 livres. In the present
instance the 500 livres share was to be allotted on payment of 1000
livres, thus necessitating the issue of only 50,000 shares. In addition
to enacting a premium, Law employed a device he had before resorted to.
He made it a condition that subscribers should be already possessors
of previously issued shares to the extent of five times more than the
number of new shares they desired to have allotted to them. The effect
of this was magical. The demand for old shares was so intense that they
rose immediately to 2000 livres, and the rapidity of the rise only
served to widen the circle of speculators. Law was thus bringing within
his grasp practically the whole of the nation as participants in his
schemes.
The universal enthusiasm, however, was not unmixed. The unaccustomed
magnitude of Law’s transactions was productive in certain quarters of
considerable misgivings, and not a few were able amidst the general
excitement to regard his schemes with more than usual calmness. Amongst
those, of course, were found the financier’s bitterest enemies.
To discredit Law, and to baulk him in his efforts, they lost no
opportunity; and to instil doubt in the public mind as to the sanity
of their speculations was by no means a difficult task. It was only
necessary to secure the support of a few in order to depress the value
of the Mississippi stock. Extensive sales, ostensibly for the purpose
of saving a further loss, but really for the purpose of undermining the
market, produced in the following month a sharp reaction. The Earl of
Stair writing to Secretary Craggs on 20th August, 1719, remarks in the
course of his letter upon this sudden and disturbing attitude of the
public. He says:--
“Mississippi begins to stagger; the actions fall and there are no more
buyers; which has happened by Law’s imprudence, and boundless desire
for gain. He had raised the actions to such a price that it required
above forty millions to pay the interest at four per cent. When the
French, by degrees, began to make this calculation, and found that it
was impossible that even the King could find his account to furnish
such a sum annually to support Mississippi, they found themselves
cheated; and they are now crowding to sell out. Law will do what he can
to support the actions, but the thing is impossible. The mystery of
the matter is this: in the original fund of one hundred millions, the
King and the Regent had about forty millions; and the same proportion
of additional subscription of fifty millions. The company bought the
coinage of the King at fifty millions, to be paid in fifteen months.
Besides these fifty millions, the King or the Regent, by selling out
when the actions were at four hundred, might have got two hundred
millions; at which rate they might have been supported. But by buoying
them up to six hundred, to make the Regent win three hundred millions,
Law risks to have the whole fabric tumble to the ground. For the
French, who run on boldly and impetuously in the beginning of all
enterprises, run back with the same impetuosity when once they are
rebuffed. I do not know if I have explained this matter to you, so as
that you will be able to understand. It is, certainly, something more
extravagant and more ridiculous than anything that ever happened in any
other country. I wish for your diversion I could but talk one hour to
you upon that subject.”
Law, however, was equal to the opposition of his enemies, and treated
their efforts to undermine his position with the utmost indifference
and contempt. He proceeded apace with the completion of his schemes,
and was now approaching the zenith of his power. All that now remained
for him to accomplish of his original plans was the purchase of the
great farms and several other smaller sources of the national revenues.
The anti-scheme attempted by the brothers Paris, under the auspices
of D’Argenson, had been carried out to the extent of a lease of the
great revenue farms having been granted to Aymard Lambert, D’Argenson’s
valet-de-chambre, but had not been put into operation. Law now came
forward and secured the lease on behalf of the Western Company,
accomplishing the three-fold object of acquiring a valuable asset for
the company, relieving the taxpayers from the intolerable exactions
of the farmers, and, lastly, humiliating D’Argenson for the part he
took in the anti-scheme. The grant of the great farms was formally
made on 27th, and of the other departments of taxation on 31st August.
The treasury had derived from these sources the annual revenue of
48,000,000 livres, but Law offered a further sum of 3,500,000 livres
for the privilege which was to extend over a period of nine years. The
Company now declared its ability to pay a dividend of 200 livres upon
its shares, or 40 per cent. upon its capital. Such a declaration at
once counteracted the devices of Law’s opponents to lower the price
of the shares, and within a few days they rose to a premium of 1000
per cent., at which extravagant price it was even extremely difficult
to make substantial purchases. The demand was also created by the
condition that allotment of the recently issued shares would only be
in favour of those already possessed of stock. “The public,” says Lord
Stair, “has run upon this new subscription with that fury that near
the double of that sum is subscribed for; and there have been the
greatest brigues and quarrels to have place in the subscription, to
that degree, that the new submissions are not yet delivered out, nor is
the first payment received. Mr. Law’s door is shut, and all the people
of quality in France are on foot, in hundreds, before his door in the
Place Vendôme.”
Law now made the concluding proposal of his schemes. The absorption
of _billets d’état_ by the Company, although extensive, had not yet
exhausted them. There still remained almost 1500 million livres
in circulation, and Law was anxious to have them liquidated. He
accordingly proposed to lend the King a sum of money sufficient for the
purpose at 3 per cent. per annum, and at the same time to reduce the
interest upon the 100 millions previously advanced at 4 per cent. to a
similar rate; and in return for an offer so advantageous, he secured an
extension of the various grants to the Company for the uniform period
of fifty years. To carry through this, the largest and most important
transaction upon which the Company had entered as yet, an issue of
300,000 new shares was made at a price of 5000 livres, thus yielding a
premium of 4500 livres. These shares, however, were not to be allotted
to the public. The Regent was fully alive to the possibility of
enriching himself by securing the whole of the issue and profiting by
the rise which would certainly take place in their value. He already
was holder of 100,000 of previously issued shares, and of the whole
capital of the company only 200,000 were in the hands of the public.
The supply was accordingly unequal to the demand, and in the course of
two months the shares reached the incredible price of 10,000 livres. A
kind of madness had seized the nation. A royal road to fortune had been
opened up by the ingenious foreigner; and had lured along its easy path
an excited throng of princes and people, peers and commoners, clergy
and laity, rich and poor--in short all who by any means could hope to
secure the coveted scrip. The memoirs of the period teem with instances
of the excessive folly and rashness which characterised these halcyon
days of the scheme, and display a want of balance on the part of the
French nation entirely beyond belief.
That the public should thus have allowed their excitement of feelings
to destroy their judgment so far as to ignore the primary elements of
caution and of foresight can hardly be attributed to Law. No evidence
can be brought of any intention on his part to utilize his financial
genius for the purpose of blinding the nation to its own interests,
and turning it merely to his own exclusive advantage. The effect of
his schemes was entirely beyond his control. So far as the reception
they would receive from the French nation was concerned, his own
anticipations were only too clearly exceeded. He undoubtedly perceived
the dangerous courses upon which the public had entered, but it would
have been imprudent on his part to have endeavoured by any arbitrary
act to check it. He firmly believed in the adequacy of his system to
accomplish the objects which he stated he had in view. He may have
been, and was, somewhat over-sanguine, but that was merely a fault of
temperament, not a consequence of sinister motive. He may have been
extravagant in praise of the possibilities of his schemes, but that was
due to intensity of confidence in their efficacy, not to any deliberate
intention to deceive.
The total capital of the company was now 300,000,000 livres, and to pay
the promised dividend of 200 livres per share would require profits of
at least 120,000,000 livres. Those profits were drawn principally from
the interest payable by the State upon the advances made by the Company
for the purposes of liquidating the national debt, from the coinage,
from the tobacco monopoly, from the great farms, from the collection of
general taxes, and from their general commerce. Amongst these the only
leakage which could occur would be in the latter, and Law’s estimate of
the profits derivable from it were placed at one-third of the whole.
Such an estimate, however, may have been so wide of the mark that the
expenditure incurred in the administration of the Company’s commercial
transactions might possibly have been so great as to absorb the whole
of the surpluses accruing from the other departments. Time, however,
could alone supply the test of this, but the downfall of the system
anticipated the opportunity. Other contingencies arose, foreign to the
business of the Company, which struck at its stability and brought its
career to an unexpected end.
The closing months of 1719, and the opening months of 1720, saw the
system at the height of its prosperity. Everything proceeded smoothly.
Nothing ruffled the high hopes entertained by all as to its future. At
the General Assembly of the proprietors of the Company held, on 30th
December, 1719, for the purpose of communicating its position since
the previous assembly, and of submitting the accounts for this year,
it was reported that, although an accurate balance could not be struck
owing to the overwhelming duties of the directors in carrying through
the extensive negotiations of the previous months, “the proprietors
may be assured that everything passes for the good and advantage of
the Company; that the colonies of Louisiana are going on prosperously;
that the trade to India, and that to Africa, and to the north, are
assuming new vigour; that the produce of the Farms General is visible
increasing; that there will be very considerable profits arising from
the administration and striking of the coin and from the refining of
the materials; that the Company wish to economize the expenses of
taxations, and of the emoluments given to the Receivers General of
Finance, so that the dividend of the old shares of the Western Company
might be fixed at present at the proportion of 40 per cent. and a like
dividend for the hundred and fifty millions of the new shares in the
India Company.”
The board of directors consisted of thirty members, each of whom was
obliged to deposit 200 shares as security for his good administration.
Their salaries were originally fixed at 6000 livres, but at the same
meeting were increased to 30,000 livres, by no means an exorbitant sum
in view of the magnitude of their labours and the greatness of their
responsibility.
Interesting as had been the progress of the Company during the past
year, the Bank which Law had founded had also undergone a great and
momentous change. Since its institution in May, 1716, its operations
had met with great success, and had secured the utmost confidence
of the public, not only because of the soundness of the principles
which dominated its administration, but also because of its careful
and cautious management. The currency became more stable than it
hitherto had been, and foreign trade developed where before it had
been impossible by reason of the great uncertainty of the rates of
exchange. The Regent, influenced by its success and labouring under the
idea that this success could be permanently maintained even though its
principal features were radically changed, determined to take control
of Law’s bank, and convert it from a private into a royal institution.
Accordingly, on 4th December, 1718, the General Bank of Law and Company
was proclaimed a Royal Bank, to be administered in future by the King
and his advisers. This change was opposed by Law, who, knowing the
character of the Regent, foresaw the possibility of disastrous results,
but the Duc d’Orleans had decided upon the step, and opposition was of
no avail. The new ordinance was to come into force on 1st January,
1719. The King reimbursed in specie the holders of the shares, and
guaranteed the due payment of the notes in circulation which at that
date amounted to 59,000,000 livres. The proprietors, who had, as
already seen, only paid one fourth of their holding in specie and the
remaining three fourths in depreciated _billets d’état_, thus realised
their investment in cash to the face value of their securities. Law was
appointed Director-General of the Bank, acting under the instructions
of the King through the Regent. Thus the King by this change became
the sole proprietor of the Bank, and the dignity he conferred upon it
secured it even more, if that were possible, in the good favour of his
people.
It has already been stated that the notes of the General Bank were
always convertible at sight into coin of the weight and standard of
the day of issue, and that here lay its strength and security. The
Regent, however, in all probability unwilling to restrict himself from
taking advantage of depreciating the coinage at any time a favourable
opportunity should present itself, divested the notes of the Bank of
this excellent feature, and in the future they bore that. “The Bank
promises to pay the bearer, at sight, ---- livres in silver coin,
value received.” This change, also opposed by Law, struck at the
very root principle of good credit. It endeavoured to make paper the
standard of currency, while no guarantee was given that the coinage
would remain of a fixed and unvarying value. No legislative decree,
no royal proclamation, can place an artificial value upon the medium
of currency, unless there is also present the indispensable element of
public confidence. A paper currency can only circulate at its nominal
value if there is behind it the security of a fixed coinage and a fund
of specie in reserve for conversion. The Regent in issuing his new
notes offered neither of these, but on account of the favour into which
the Bank had been brought by Law, the confidence of the public remained
as yet at least unshaken. We will see, however, at a later stage the
consequences which this disastrous change involved.
A further important step in the development of the Bank was the
establishment of branches in the five important centres--Lyons, La
Rochelle, Tours, Orleans, and Amiens. Those towns, which enjoyed the
privilege of local parliaments, such as Toulouse, Bordeaux, Rouen,
Grenoble, Dijon and Metz, were carefully avoided by the Regent, who
anticipated that the extension of the Bank to them might provoke
unpleasant opposition. Other towns, again, where no provincial
parliaments existed to consult, had otherwise displayed hostility to
the Bank, and these also were not honoured by the presence of its
branches. “Lisle, Marseilles, Nantz, Saint Malo, and Bayonne, were
distinguished by this prudent exclusion.” At the same time it was
decreed that where branches of the Bank existed specie should only be
legal tender up to 600 livres, notes being necessary for amounts beyond
that sum, and that gold and silver were on no account, unless by
special permission of the Bank authorities, to be transmitted to such
towns. By these restrictions it was hoped that specie as a medium of
currency would fall into desuetude and notes alone become recognised
for purposes of exchange. This hope was expressed in the decree of
22nd April, 1719, which authorised the issue of 100,000,000 additional
notes. “These cannot be subject to any diminution, as the specie is,
inasmuch as the circulation of the Bank bills is more useful to the
subjects of his Majesty, than that of the specie of gold and silver,
and that they deserve a particular protection, in preference to the
coin made of materials brought from foreign countries.”
Before the close of the year, fresh issues were made to the extent of
900,000,000 livres; and on 21st December, silver and gold suffered
further restriction as tender, the former being limited to ten livres
and the latter to three hundred. The purpose of this was to force a
paper currency, and as far as possible discourage the use of specie.
By reducing to so low a limit the tender of gold and silver, a demand
was created for the notes of the Bank, and very shortly the Bank
had attracted to itself a large proportion of the coinage then in
currency. People “ran there in crowds, conjuring and imploring the
clerks to receive their specie, and thinking themselves happy when they
succeeded. Upon which, a merry fellow wittily called out to those who
were the most forward; ‘Don’t be afraid, gentlemen, that your money
should remain on your hands; it shall all be taken from you.’”
The effect was to a large extent as the Regent had wished. Paper
circulated with the greatest freedom, and the highly speculative
mood in which the people indulged was productive of an appearance
of peculiarly false prosperity. Money as represented in notes
became exceedingly abundant because of the manner in which it was
distributed. Everyone spent with a lavish hand, regardless of the
possibility of Law’s schemes receiving a sudden and unexpected check,
thus bringing about a dislocation of the supply of money. Luxuries
became necessaries, and domestic life displayed the grossest degrees
of unbridled extravagance. To supply the great demand for rich cloths,
costly furniture, and all the various luxuries which only find a ready
market when prosperity spreads over a whole community, new industries
arose throughout the country, and labour not only became scarce but
was able to command in some cases four times its previous value. A
taste arose too for works of art, and the best of the continent was
sent into France where fabulous prices were obtained with a readiness
proportionate to the ease with which the fortunes of the investors
were made. Duhautchamp, in his History of the Scheme, gives several
instances of this extravagance on the part of the _nouveaux riches_.
Of one he says that, “He carried his magnificence so far, that most
of the deeds related of him appear fabulous. His hotel in Paris, his
gardens, his furniture, his equipage, the number of his servants of
all degrees and professions, equalled those of the greatest princes.
A certain jeweller declares that he supplied him with more than three
millions worth of precious stones, without reckoning the beautiful
diamond of the Count de Nocé, for which he paid 500,000 livres, and a
girdle buckle which a Jew sold him for the same sum. With regard to his
furniture, being a connoisseur of good taste, he had selected the whole
so well, that, to form an idea of the magnificence of his apartments,
we must have recourse to descriptions which are used of fairy palaces.
Not content with 4000 marcs of silver and silver gilt service which
he had first ordered, he found means to carry off from the jeweller’s
that which had been made for the King of Portugal, under pretext that
the agents of that prince had been wanting in punctuality of payment.
Besides this magnificent table service, he furnished himself with
stands, mirrors, braziers, orange-tree cases, flower pots, &c. Lastly
all his cooking utensils were of silver. As for his upholstery, he
took everything which could be imagined of that kind that was most
precious. He had no less than eighty horses in his stables--his
equipages equalled in number those of the grand Sultan. The number of
his servants was nearly ninety, amongst whom were comprised intendant,
secretaries, steward, surgeon, valets de chambre, upholsterers, four
young ladies as chamber maids, and for his grooms four footmen of birth
very superior to that of their master. Even when he went to dine away
from home, he had his own table served as sumptuously as if he were
present. It was served with everything most exquisite, principally
during the year 1720. He was supplied with young peas which had cost
100 pistoles the pint. Nothing was wanting that the most voluptuous
gourmet could think of. The desserts that were served were fitted to
surprise the most expert mechanicians. Large fruits, which would have
deceived the eyes of the most clear sighted, were so artistically
contrived that when anyone, surprised at seeing a beautiful melon in
winter, attempted to touch it, he caused a number of little fountains
to spring up of different sorts of spirituous liquors which delighted
the sense of smell, whilst the master of the house, pressing his foot
on a concealed spring, made an artificial figure walk round the table
and pour out nectar to the ladies, before whom he was made to stop.
In a word I doubt whether the famous feasts of Antony and Augusta,
so vaunted in history, had anything more rare than those which our
fortunate millionaire took a pleasure in giving.”
CHAPTER VII
Hotel Mazarin acquired as office of Company and of
Bank.--Excitement of crowds in the Rue Vivienne and the
Rue Quincampoix.--Curious sources of fortune.--Instances
of enormous fortunes acquired by members of the
nobility.--Enormous influx of foreign speculators into Paris.
[Illustration]
In order that the Company and the Bank might be housed in a style of
magnificence befitting the brilliance of their careers, the Hotel
Mazarin had been purchased at a cost of one million livres. Both
were now under one roof, and Law was thus enabled to devote himself,
with greater ease and less inconvenience, to their management. This
was all the more necessary since the Bank and the Company, although
nominally distinct and separate undertakings carrying on different
classes of business, were yet in reality part and parcel of the same
system, engaged in accomplishing the same ultimate objects and working
in co-operation in all their transactions. Of both, Law was the
controlling spirit. The Bank, now the property of the Crown, was placed
entirely under the management of its founder upon whom no restrictions
were laid, and the Company although under the directorate of thirty
proprietors was equally in his hands. Their will was invariably his
wish, and in everything they yielded with ready compliance to the
suggestions of the great financial genius.
While the Hotel Mazarin was the centre from which the fuel for the
prevailing excitement was distributed, its intensity was only really
felt and displayed in another quarter. When the day of issue of shares
arrived, the Rue Vivienne in which the Company’s offices were situated,
and all the adjoining streets and squares, were crowded by speculators
of all degrees. Unseemly rushes took place amongst the throng. Each one
regarded his neighbour as a rival for the possession of the coveted
scrip, and crushed and jostled himself though the crowd towards the
enchanted building so that he might be amongst the first to enter when
its doors were opened to hand over the shares to successful applicants.
Lemontey compared them to a phalanx which “advanced for several days
and nights towards the Exchange office, like a compact column, which
neither sleep, hunger, nor thirst could destroy. But at the fatal cry
which announced the delivery of the last share, the whole vanished at
once.” So great was the number of applicants that on several occasions
considerable difficulty and delay were experienced in compiling the
lists of allottees. Public patience at these times was thoroughly
exhausted, and gave way to frantic disorder and not infrequently to
scenes of violence. The aristocracy, in order that they might not
be compelled to mix with the crowds on the street in their patient
wait to know the result of their efforts to secure allotment, rented
rooms and houses in the Rue Vivienne, and so great was the demand for
accommodation that fortunate proprietors were in a position to charge
the most exorbitant rates.
The excitement and frenzy however reached its highest point in the Rue
Quincampoix. Here was the Stock Exchange of the day. A short narrow
street of fifty yards in length and two or three in breadth, it ran
from the Rue aux Ours to the Rue Aubry-le-Boucher, and contained the
offices and houses of the bankers of the period. So confined was it
that the crowds of speculators entirely blocked it as a thoroughfare,
and drivers were prohibited from making use of it. Gates were erected
at each end, and guards with drums were stationed to inform people
when the street was opened or closed for business. Other restrictions
were imposed upon the use of the street. The entrance by the Rue
Aubry-le-Boucher was reserved for members of the aristocracy, and that
by the Rue aux Ours for all others, but inside the gates no distinction
of rank was respected. On Sundays and fête days the street was closed
altogether, and in order that business might not proceed to hours which
would disturb the rest of those who resided in the neighbourhood the
guards were ordered to clear the speculators from the street at a
reasonable hour in the evening.
As in the case of the tenants and proprietors of houses in the Rue
Vivienne, opportunity to even greater extent was afforded those who
resided in the Rue Quincampoix to let their houses as dwellings or
offices to the infatuated crowd of speculators. A house for which
a rent of eight hundred livres per annum was paid secured without
difficulty for its occupier a return of 5000 to 12,000 livres per
month, single rooms in many cases returning as much as 1500 livres per
month. Fortunes were made by many people who anticipated the demand
for accommodation and secured a number of houses at little above
their normal rent for the purpose of letting at these extravagant
figures. Curious, too, were the methods adopted by some for the making
of money. We read of a hunchback who converted his deformity to the
original and profitable use of a writing-desk. In a very few days he
had accumulated the sum of 150,000 livres from the fees he received
from the speculators who took advantage of the novel purpose to which
he put his hunch. The same eccentric occupation enabled a soldier,
possessed of very broad shoulders, to obtain his discharge from the
army and purchase an estate in the provinces to which he prudently
retired before the fever of speculation had enthralled him. We read
too of a cobbler who plied his trade in a very primitive manner under
four planks secured to a wall. The crowds of ladies who were drawn to
the Rue Quincampoix as interested spectators in its exciting scenes
suggested to the cobbler the means of gaining in a short time more
than the labour of a lifetime could secure for him. He furnished
his diminutive stall with chairs, and these he let out to ladies at
exorbitant charges gladly paid. He then added to his stock a supply of
pens and paper which were taken advantage of by brokers and others who
resorted to his stall to carry out their transactions. By these means
he drew an income of 50,000 livres per month.
But these and other similar methods of acquiring fortunes were only
incidental to the main business of the Rue Quincampoix. Great and
unexpected fortunes were made by speculators in the Company’s shares,
and these by no means were confined to the wealthy capitalists or
even persons possessed of moderate sums available for operation.
The methods provided for exchange were of the crudest description,
and provided means of amassing wealth for those who were absolutely
without capital but were unscrupulous enough to take advantage of the
opportunities that were opened up to them. Innumerable instances are
recorded where servants, the most menial, enriched themselves in this
way. One shareholder desirous of disposing his holding was too unwell
to carry out the sale himself and sent his servant to carry through the
transaction. He was instructed to sell two hundred and fifty shares at
8000 livres per share. On arrival at the Rue Quincampoix, he found the
shares had meanwhile risen to 10,000 livres. The difference of 500,000
livres he retained, and with it speculated further until he succeeded
in multiplying it four times, when he retired from the scene of his
good fortune to enjoy the fruits of his ill-earned money. Another,
who had been entrusted with the realisation of two hundred shares,
took advantage of the rapidly rising market to postpone the disposal
of them until the price enabled him to obtain 1,000,000 livres beyond
their value on the day upon which they were handed to him, and this he
regarded as his own, only paying to his principal the price they would
have brought had they been immediately realised.
Amusing too, are many of the stories of those who found themselves so
suddenly raised from extreme indigence to excess of wealth. Carriages
thronged the streets whose occupants were formerly coachmen and
footmen, cooks and scullery-maids, butlers and valets. A footman who
had established himself in a palatial residence betrayed his former
station by mounting behind his own carriage instead of entering it,
and when reminded of his mistake excused himself by the remark that he
wished to engage more footmen, and desired to know if there were room
for them. Another footman, according to the Regent’s mother, was in
the habit of doing the same thing, but in his case intentionally, in
order that he might the more experience the pleasure of the change his
newly gained wealth had brought to him. Amongst menials none were more
fortunate than those who were in attendance on Law himself. It is said
that his coachman, having made for himself a competency, desired to
leave the financier’s service, and on expressing his desire to Law was
allowed to do so on condition that he provided a substitute. This was
naturally easily complied with, and in a short time he returned with
two suitable men, of whom he offered one to Law, mentioning that he
intended retaining the other for himself.
[Illustration: DUC D’ORLEANS,
Regent of France during the minority of Louis XV.]
It was, however, amongst the higher ranks of society that the greatest
scramble for wealth took place, and amongst the entourage of the
court that the deepest gambling in shares was indulged in. Peers,
court favourites, ladies of fashion, judges, bishops, and practically
everyone of standing in society or in the public service, were to be
found day after day in the Rue Quincampoix, engaged in the purchase
and sale of the Mississippi stock. The Regent himself was one of the
most successful participants in the national gamble, and with princely
and lavish generosity, marked his sudden and easy access of enormous
wealth. Amongst charitable institutions he distributed several million
livres, giving in particular one million each to the Hotel-Dieu, the
Hospital General, and the Foundlings. The debts of prisoners to the
extent of one and a half millions were discharged, and to many of his
friends he gave gifts of varying, but extravagant, amounts. The Marquis
de Nocé, the Count de la Motte, and the Count de Roie, were each
recipients of 100,000 livres, and the Count de la Marche, a child of
thirteen years, son of the Prince de Conti, had conferred upon him a
pension of 60,000 livres. He also increased by 130,000 livres, the
pension enjoyed by his mother, the Princess Palatine, who wrote in her
letters that “we hear nothing but millions spoken of now; my son has
given me two millions in shares, which I have distributed among my
household. The King has also taken some millions for his household. All
the royal household have received some, all the children of France, the
grandchildren of France, and the Princes of the blood.”
The Duke of Bourbon, son of Louis XIV. and Madame de Montespan,
repaired his broken fortunes, liquidated his enormous debts, and in the
course of several successful strokes of speculation, acquired a fortune
of twenty million livres. He purchased large estates in Picardy, and
acquired all the most valuable land between the Oise and the Somme. The
castle at Chantilly was rebuilt on a scale of regal magnificence, and
an extensive zoological collection was brought together as a feature of
attraction to his territorial possessions. Anxious to improve the breed
of horses in France, he also imported 150 race-horses from England, and
thus established one of the finest stables on the continent of Europe.
And then, “to pay his court to the Regent, who was passionately fond
of his daughter, the Duchess of Berry, he gave that Princess, who was
eager after pleasure, a superb festival, which lasted four or five
days, and cost an immense sum of money.”
Among other nobles whose dilapidated fortunes were restored at this
time, were the Dukes D’Antin, de Guiche, de la Force, the Marshal
D’Estrées, Madame de Vérue and the Princes de Rohan and de Poix. But
many foreigners were no less successful, and of one, Joseph Gage,
brother of Viscount Gage, who had acquired an exceedingly large
fortune, we are told that, having aspirations to kingly rank, he
offered the King of Poland three millions if the latter would resign
his crown in his favour, and meeting with an unfavourable reply,
endeavoured to negotiate a similar transaction with reference to
Sardinia, but with no greater success.
Fortune, however, did not shine on all the members of the nobility
of France. Many were unable or unwilling to take advantage of the
opportunities offered them for enrichment. Of the latter the most
conspicuous were Chancellor D’Aguessau, the Duc de Saint-Simon, the
Duc de la Rochefoucauld, Marshal de Villeroy and Marshall de Villars.
For the former other means were discovered for acquiring wealth than
direct speculation, means less creditable, if not more discreditable.
The institution of marriage was utilized by the poor nobility to
replenish their finances. Many of the _nouveaux riches_ were only too
pleased to endow a prospective noble son-in-law with wealth sufficient
to enable him to live according to his station, so that they too
might be able to number themselves among the aristocracy. Until the
advent of Law, marriages of this kind were not only unusual, but so
strict was the line of division which separated the nobility from
all inferior ranks, that when they were celebrated, they invariably
brought social ostracism. The charms of wealth, however, removed all
scruples of caste, and we find, for instance, that the marriage of
Mlle. de Sainte-Hermine, a near relation of the Duc de la Vrilliere,
Secretary of State, whose consent was willingly given, to a _parvenu_
of the name of Panier, was celebrated without any reflection on the
ground of misalliance. But marriages of a very different class from
these were brought into favour amongst this class of suitor during
these days of financial excitement. These were known as marriages à
réméré,--marriages with right of redemption,--the distinctive feature
of which consisted in the right of the noble husband to cancel the
marriage at a future date. Marais instances the case of “the Marquis
D’Oise, of the house of Villars-Brancas, who entered into a proposal
of marriage with a little girl of two years old, daughter of André
the Mississippian. The betrothal was made with the consent of the two
families. The Marquis was to have an annuity of 20,000 livres until the
marriage took place, and even in case it never took place. If it took
place, the dowry was to be four millions. Little girls would no longer
have dolls, but asked for “Marquises of Oise to play with.”
This marriage, however, did not take place, the pretext for its
cancellation being found in the subsequent fall of André on the
collapse of the scheme. The marriage of the Count D’Evreux was of the
same class. His wife was a young girl of twelve, daughter of the famous
Crozat. The Count received a sum of 2,000,000 livres on the marriage,
but, subsequently gaining enormous profits on successful share
transactions, repaid the dowry and obtained release from the nuptial
tie.
During these months of excitement, Paris was a centre of a attraction
equally for the foreigner as for the Frenchman. The brilliance of the
capital was dazzling, and the facilities for spending money were even
greater than those for making it. The influx was from all nations and
drawn from every grade. The sovereigns even of foreign countries did
not disdain to engage in the general business of share speculation, and
sent to Paris specially appointed agents for the purpose, or made use
of their ministers already at the French court. Britain too supplied
its quota of speculators. The Earl of Ilay, a friend of Law’s, and
anxious to benefit his friends at home by turning his friendship to
account, in writing to Mrs. Howard in Sept., 1719, said, “I have laid
out the money you bid me. It is very difficult in a letter to give you
an idea of the funds of this country; but in fact everybody has made
estates that have been concerned in them for four or five months. As a
little instance of this, cousin Jack has got, I believe, near £10,000,
and has lost the half of that sum by a timorous silly bargain he made;
for my part, I came after all was in a manner over, and as I never
meddle with these matters, I do nothing but buy books and gimcracks.
It is true it is now very late, and yet, by what I am informed by him
who knows all, and does all, I am of opinion that whatever sum you
remit here may be turned to great profit. The stocks are now at 950,
and if no accidents happen of mortality, it is probable they will be
1500 in a short time. The money I laid out for you was 5000 livres,
as a subscriber to the fifty millions of stock lately added, of which
the tenth part only is paid down, so that 5000 is the first payment
of 50,000 livres. The subscription was full, but Mr. Law was so kind
as to allow it me; some of the subscribers have already sold their
subscriptions for 230, that is their own money back again and 130 per
cent. profit. Whatever you think fit to do, you may bid Middleton
remit to me as many livres. I shall acknowledge the receipt of them
and do the best I can. You will think that the levity of this country
has turned my head when I tell you your master might, within these few
months, have made himself richer than his father.”
It was estimated that at the end of 1719, no fewer than 305,000
foreigners were in Paris, drawn there in the hope of securing immediate
wealth. So large an accession to the population had the effect of
stimulating business. Housing accommodation became exceedingly scarce,
and every available out-house was utilised as a temporary place of
abode. Not only did the necessaries of life rise greatly in price, but
all articles of luxury shared in the general increase of value. The
effect was to create an appearance of great prosperity which permeated
every class of the community, and elicited expressions of deep respect
and admiration for the man who had inaugurated this new era of apparent
greatness for France.
CHAPTER VIII
Law’s importance causes him to be courted by all classes.--Socially
ostracised by nobility.--Law’s conversion to Roman
Catholicism.--The part of the Abbé Dubois and the Abbé Tencin
in the conversion.--Difficulties in its accomplishment.--Law
becomes naturalised.--Law appointed Controller-General of
Finance.--Regent celebrates appointment by a distribution
of pensions.--Law honoured with the freedom of the City of
Edinburgh.--Elected member of Academy of Sciences.--William Law
brought to France and made Postmaster-General.--Law’s private
investments.--His fiscal reforms.--His introduction of free
university education.
[Illustration]
In the midst of all this excitement, gaiety and brilliance, Law himself
stood out as the one great and prominent figure in the kingdom. Court
was paid to him by all the most influential personages in France; and
by the multitude he was regarded with feelings of awe and admiration.
His chambers were crowded day after day by those who at other times
would have been in attendance upon their sovereign. Every excuse and
artifice was employed in order to obtain an interview with the great
man. “I have seen an hundred coaches at his levee in a morning, and
dukes and peers waiting for hours together to speak with him, and could
not get within two rooms of him for the crowd.” Yet through the whole
of this period of flattery and adulation he maintained the same cool
unaffected demeanour which had always characterised him, and although
given at times to treat his importunate visitors with haughtiness and
curtness, yet he was noted for his general suavity and affability
when receiving those who were strangers to him, and who had sought
introductions without credentials merely for the purpose of obtaining
pecuniary assistance. When he passed along the streets, he was followed
by crowds by whom he was greeted with cries of “Long live Mr. Law.”
Ladies of the highest rank kissed their hands to him, and even princes
rendered him obeisance in public. In fact so important had Law become
in the eyes of everyone, that he allowed himself to indulge in conduct
of a somewhat shameless character, although it was attributed simply
to boldness by those who encouraged him in it. The latter--and they
were more often than not of the gentler sex--thought they excused their
conduct in endeavouring to give it the character of a joke, and the
nobility of the period, ready at all times to sacrifice their lives to
their honour, scrupled not to sacrifice their honour to their fortune.
The determination of many ladies to have the honour, as they considered
it, of speaking with Law, led to many amusing if not ridiculous
incidents. One lady, who had waited without success at his house for
an interview, instructed her coachman to overturn her carriage if on
any occasion when driving her he chanced to meet the great financier.
For several days she drove through the streets of Paris he was most
in the habit of frequenting, and at last her patience was rewarded.
On the approach of Law her coachman upset the carriage, and the
lady who was carried into a neighbouring house by the object of her
attentions confessed the purpose of her stratagem, and extracted a
promise from him that her application for shares would be granted. Not
so successful, however, was the ruse of another lady who had failed to
secure an invitation to the house of Madame de Simiane where Law was to
dine. Driving to the house when all were seated at dinner, she bade her
coachman and footman to shout “Fire,” at which the guests all rushed
into the street. On seeing the lady leave her carriage to meet him, Law
at once perceived the object of the false alarm and fled before she had
an opportunity of speaking to him.
At Law’s house was always to be found the most exclusive society in
Paris, and it is related that the Regent, expressing the desire on
one occasion to find a Duchess to whom he could depute the duty of
accompanying his daughter to Modena, mentioned to the Abbé Dubois
that he did not exactly know where to find one, to which the latter
remarked, “I can tell you where to find every duchess in France: you
have only to go to Mr. Law’s; you will see them every one in his
ante-chamber.”
One incident, however, serves to show that there was no desire on
the part of the nobility to admit Law to their ranks, and that their
conduct in apparently placing him on their own social level was merely
dictated by the possibility of utilising their friendship for financial
gain. The Maréchal de Villeroi had arranged a ballet in which the young
king was to appear. Such ballets had been common during the reign
of Louis XIV., and were considered part of a nobleman’s education,
which then chiefly consisted in “grace, address, exercise, respect
for bearing, graduated and delicate politeness, polished and decent
gallantry,” but had fallen entirely into disuse during the Regency.
Great difficulty was accordingly experienced by the Maréchal in
obtaining a sufficient number of dancers amongst the nobility who alone
were formerly privileged to take part in the royal entertainment. Many
were admitted who would not otherwise have been allowed to join in the
ballet, and Law requested the Regent to obtain the honour for his son
of being allowed to join the company. The Maréchal was unable to refuse
the Regent’s request, but the idea of a commoner’s son occupying a
place in a royal ballet so scandalised the feelings of social propriety
of the privileged circle that “nothing else was spoken of for some
days; tongues wagged freely, too; and a good deal of dirty water was
thrown upon other dancers in the ballet.” The success of the ballet was
thus threatened, and the whole project promised to be a total failure
when it was announced that Law’s son had fallen ill from small-pox. The
cause of all the difficulties having thus been removed, the high-born
courtiers displayed their undisguised satisfaction and proceeded with
calmer feelings to carry out the first and only Court ballet which
graced the reign of Louis XV.
While Law’s influence at this time was all-powerful in the government
of France, he was without any of the outward symbols of authority. He
held no office, and his influence accordingly could only be exercised
indirectly. He enjoyed the splendour of the position to which he had
attained, but did not possess any official mark of greatness. Two
obstacles existed to official advancement. His religion was not that
recognised by the State; and his nationality was foreign. Both of these
he was now prepared to renounce. The abjuration of his religion was a
step which required to be accomplished with the utmost caution. All the
elements of sincerity were lacking, and Law’s conversion was likely
to be regarded as a merely political move. There was danger moreover
of the public regarding the conversion of Law under royal auspices
in the light of a highly scandalous proceeding, and considering that
it might derogate from the high office to which he was destined and
for which the abjuration of his religion was a necessary preliminary.
There was a circumstance also in Law’s career which under ordinary
conditions would have militated against his admission to the Roman
Catholic communion, and therefore required delicate treatment. Law
had not been legally married to the lady whom he passed off as his
wife, and the law of the Church strictly required cessation of all
relations with her. This, naturally, was a course to which Law would
not assent since by her he had a son and a daughter, and since
her husband Senor was now dead for many years. It was accordingly
necessary to have a very indulgent converter, one who would not only
attest sincere conversion but would at the same time refrain from
interfering with Law’s connubial relations. An accommodating instrument
had therefore to be found, and Dubois was ready to supply him in the
person of a certain Abbé Tencin. “I shall give you,” said Dubois,
“neither a curé nor a habitué de paroisse: they are too much bound by
formularies, maxims, and rigid rules; you will have the Abbé Tencin,
a man of considerable talent whom I know intimately; he can convert
and receive into the Church Mr. Law and all his family.” The Abbé was
undoubtedly a man of talent, ambitious and witty, but unfortunately had
acquired a reputation for unscrupulousness, and a degree of dishonesty
inconsistent with his high professions. Regarded with suspicion,
and denied the friendship of those with whom his calling would have
brought him into contact, he devoted himself to intriguing on behalf
of politicians and others to whom a man of the ability and cunningness
of the Abbé was indispensable. To Dubois he was invaluable, but he
also had that minister under his control through his having compromised
himself with Madame de Tencin. The Abbé found in this a powerful lever,
and unfailingly turned it to his own advantage at every opportunity.
Law’s conversion was such an opportunity, and one which opened out a
prospect of enrichment he had not as yet enjoyed.
With the approval of the Regent, the Abbé was accordingly deputed to
perform the delicate task of making Law a Catholic. A short time was
allowed to elapse before the actual ceremony took place, and in the
interval it was supposed that Law, under the spiritual guidance of the
Abbé, was preparing himself for the solemn and important step he was
about to take. But by no ingenious form of deception, however mild, was
the Abbé able to give even a colour of sincerity to Law’s conversion,
and he was therefore placed under the necessity of choosing some other
place than Paris for the performance of the ceremony lest the people,
outraged in their notions of religious propriety, should resort to
forcible measures to prevent the ceremony from taking place. The Church
of the Récollets in Melun was accordingly chosen as a sufficiently safe
and retired scene for the abjuration, and on 17th September, 1719,
the necessary formalities were performed, the Abbé retiring from “his
pious task with many shares and bank-notes.” The event was made the
occasion of sarcastic verse of which a few fragments still survive.
The following fragment preserved in the “Memoris du Maréchal Duc de
Richelieu” celebrates the bestowal of the title of Primate of the
Mississippi upon the Abbé by the Colonel of the Regiment of Skull-Caps,
a burlesque association which jested on all events:--
Nous Colonel de la Calotte,
Pour empêcher par tous moyens,
Que l’erreur des Luthériens
Et que la Doctrine Huguenotte
N’infecte notre Régiment
D’un pernicieux sentiment;
Et pour mettre dans la voye,
Quiconque seroit fourvoyé,
Et seroit devenu la proye
De l’Hérétique Devoyé.
A ces causes, vu la science,
Bonnes mœurs, doctrine, éloquence
Et zele que l’Abbé Tencin
A fait paroître sur-tout autre;
Pour le salut de son prochain,
Nous lui donnons Lettre d’Apôtre,
Et de convertisseur en chef;
D’autant qu’en homme apostolique,
Il a rendu Law Catholique:
En outre par le même bref,
Voulant illustrer la soutane,
Et donner du poids aux Sermons
Dudit Abbé; nous le nommons
_Primat de la Louisiane._
De plus, quoique l’Abbé susdit,
Plein d’un évangélique esprit,
Meprise les biens de ce monde,
Et que même contre eux il fronde.
De notre libéralité
Pour soutenir sa dignité,
En conséquence du systême
Lui déléguons dîme on dixieme
Sur les brouillards dudit pays,
Qui du systême sont le prix;
Espérant qui la Cour de Rome
Donnera les Bulles gratis.
An unexpected difficulty, however, now arose. Law’s parish church
was the church of Saint-Roch, and the Curé, refusing to credit the
sincerity of the conversion, would not recognize Law as a duly
converted Catholic. This was a serious difficulty since Law had
renounced his old faith and, while having complied with all the outward
formalities necessary for reception into the new, was denied admission.
The realisation of his ambition was thus threatened, and the situation
demanded the employment of measures, extreme if necessary, but
sufficient at least to overcome the scruples of the recalcitrant Curé.
Tencin, as intermediary in the negotiations which followed, had full
and ample powers to treat with the Curé. The wily Abbé, knowing that
corruption was closed to him as an avenue of successful approach to the
Curé, adopted the useful method, but one none the less corrupt because
it does not personally benefit the recipient, of offering on behalf
of his principal to subscribe lavishly to the funds of the church,
and to give substantial assistance towards its construction. The Curé
yielded readily to the temptation, and it was thereupon arranged that
Law should communicate and make the bread offering at High Mass on
Christmas-day with all due solemnity. His donations were attributed to
a sense of religious duty, and as a thank-offering for the privilege of
being received into the Catholic communion. The ceremony was performed
before a crowded and fashionable congregation, who had flocked from
Paris to witness the interesting event, and Law was now able to take
out letters of naturalisation.
Law, however, was not permitted to escape so easily from public
reflection upon the apparent motives of his action. A heated
controversy arose between Jansenites, who, influenced only by rigid
principle, were indignant at the manner in which a sacred rite had been
in their opinion grossly abused, and the Jesuits, who, inclined to
place more weight upon outward ceremony, were convinced, or at least
declared they were convinced, of the sincerity of the conversion. Nor
were matters improved when during the controversy all the compromising
features of Law’s past life were diligently gathered and as diligently
published to a curious and interested community.
But Law chose to treat the matter in a spirit of indifference, and by
refraining from making any attempt to refute or explain the statements
of his opponents the storm subsided from mere exhaustion.
A few days after the ceremony at Saint-Roch, on 5th January, 1720, Law
was named Controller General of Finance in place of D’Argenson, whose
tenure of office was wholly at Law’s mercy. Law had merely to create
difficulties for his nominee, in order to obtain his resignation, and
D’Argenson wise enough to perceive the futility of opposing the designs
of Law readily yielded up the most important office in the national
administration. As Voltaire remarks, Law had in the space of four
years developed from a Scotsman into a Frenchman; from a Protestant
into a Catholic; from an adventurer into a lord of the fairest lands
of the kingdom; and from a banker into a minister of state. His
phenomenal rise from obscurity to the highest office, and that in a
foreign country, was an apparent witness to the truth of his theories,
and the circumstance that he did not allow himself to be overcome by
overestimation of his own importance, but maintained an unassuming and
unpretentious manner throughout the whole of this period secured for
him the personal attachment and admiration of the whole nation, and
for his opinions a greater degree of implicit faith than probably they
would otherwise have received.
The Regent was himself delighted with the preferment he was thus easily
enabled to confer upon his favourite, and marked the occasion by a
lavish distribution of grants and pensions to numerous courtiers and
relations. Of these the Duke of Saint-Simon mentions grants of 600,000
livres to La Fare, captain of the guard; 100,000 livres to Castries,
chevalier d’honneur to Madame la Duchesse d’Orléans; 200,000 to the
Prince de Courtenay; and 60,000 livres to the Comte de la Marche, the
infant son of the Prince de Conti. Saint-Simon then adds that “seeing
so much depredation, and no recovery to hope for, I asked M. la Duc
d’Orléans to attach 12,000 livres, by way of increase, to my government
of Senlis, which was worth only 1000 livres, and of which my second son
had the reversion. I obtained it at once.”
Two other honours of a different character were also conferred upon
Law during these few months of greatness. One came from his native
city, which was now anxious to do homage to the man of whom it
formerly had reason to be somewhat ashamed. This consisted of the
freedom of Edinburgh, presented to him in a gold casket of magnificent
workmanship, which had cost the municipal treasury the sum of £300. The
other consisted in his election as an honorary member of the Academy
of Sciences, an honour of the highest order and conferred only upon
Frenchmen of outstanding ability. In this latter condition was found
the excuse for purging his name from the roll on his downfall, his
election which took place on 2nd December, 1719, having preceded his
naturalisation.
The magnitude and diversity of interests to which Law’s time and
attention was now devoted were such as to cause him to enlist the
services of his brother, William Law, a man of parts but much inferior
in ability to his more brilliant brother.
William Law was first appointed representative of the Bank on the
London Exchange, and so great was the standing of the Bank in the
opinion of English commercial circles that the bulk of remittances
for France passed through his hands. His business capacity, however,
was such as to warrant Law in bringing his brother over to Paris, and
accordingly a London office was established in the Strand under the
management of one George Middleton. Before setting out for Paris,
William Law had made arrangements for the importation into France
of considerable numbers of skilled workmen, chiefly gold and silver
smiths. It had always been one of Law’s objects to develop France
into a great industrial nation, and one of the methods he adopted to
accomplish this end was to rob England of its best workmen by offering
substantial inducements. A factory was established at Versailles in
which it was intended to carry on, on a large scale, a business which
would gradually absorb certain classes of trade that had hitherto been
practically the monopoly of British manufacturers. Success however
did not come as Law had anticipated. No doubt his efforts were a
stimulating influence, but he was to discover that trade, which was not
of natural growth, seldom prospered by purely artificial means.
William Law on his arrival in Paris was received with that welcome
which his relationship with the Comptroller-General naturally secured
for him. He was introduced immediately to the Regent, and was not
only made one of the directors of the Bank, but was also appointed
to the office of Postmaster-General--a circumstance which alone
indicates the commanding influence Law exercised over the Regent and
the government of France. These two brothers lived in princely fashion
in Paris, honoured and courted by everyone from the Regent downwards.
Each accumulated enormous wealth, but directed its investment into
different channels. William purchased land and estates in his native
country, not that he foresaw the possibility of the collapse of his
brother’s schemes, but because he had no desire to permanently settle
in France. John, on the other hand, with the intention of becoming
a Frenchman so far as that was possible in spite of his origin,
acquired great estates throughout the land of his adoption, and thus
incidentally evinced his confidence in the sterling value of his
financial schemes. His nephew compiled a list of his more important
investments, aggregating almost 8,000,000 livres:--
La Marquisat d’Effiat 800,000 livres.
La Terre de la Rivière 900,000 „
La Marquisat de Toncy 160,000 „
La Terre de la Marche 120,000 „
La Terre de Roissy 650,000 „
La Terre d’Orcher 400,000 „
Terre et Bois de Brean 160,000 „
Marquisats de Charleville et Bacqueville 330,000 „
La Terre de Berville 200,000 „
La Terre de Fontaine Rome 130,000 „
La Terre de Serville 110,000 „
La Terre d’Yville 200,000 „
La Terre de Serponville 220,000 „
La Terre de Tancarville 320,000 „
La Terre de Guermande 160,000 „
Hotel Mazarin, et Emplacemens Rue Vivienne 1,200,000 „
Emplacemens Rue de Varenne 110,000 „
Emplacemens de la Place Louis le Grand 250,000 „
Partie du fief de la Grange Batelière 150,000 „
Marais on Chartiers du Fauxbourg St. Honore 160,000 „
Maisons, surtout dans Paris 700,000 „
Les Domains de Bourget 90,000 „
Quelques petites terres, comme Valançay,
St. Suplice, etc. 350,000 „
Not by any means a strikingly large list for the man who had in so few
years enabled the Regent and innumerable members of the aristocracy to
accumulate vast wealth and rehabilitate the fortunes which successive
generations had squandered in reckless extravagance.
That Law did not merely use the great power and influence he had
acquired in the government of France for the purpose of promoting his
own financial schemes and his own personal advantage is evident from
the radical reforms he accomplished in the fiscal arrangements of that
country. The principles upon which he based his fiscal policy were
of the most advanced and enlightened character. They were liberal,
and consequently had strict equality for their object. The system of
taxation which prevailed not only showed many anomalies but lent itself
to the grossest abuse. Monopolies of every description abounded.
Officials swarmed throughout the country, and by their extortionate
levies upon every branch of trade checked industrial progress in every
direction. It is said that in Paris itself the number of officials
equalled the number of people engaged in the various trades they were
supposed to supervise in the interests of the nation. Free trading
intercourse was also limited by the existence of a system of provincial
protection which sought to prevent the goods of one province from
entering, except under payment of prohibitive dues, the markets of
another province.
Law was alive to the prejudicial effects of all these factors upon
the industrial prosperity of the country, and also upon the general
well-being of the people, and endeavoured as far as possible to remove
or at least to modify them. His ideal was the adoption of a single tax
to be levied in proportion to the wealth of the individual. Too many
vested interests existed however for the accomplishment of so sweeping
a reform, and he had to satisfy himself with measures more moderate
in their sweep. It is a tribute to his fearlessness that during the
winter of 1719–20 he introduced innumerable changes in the method and
incidence of taxation, and that in spite of the overwhelming opposition
of those who were thus deprived of continuing the old extortionate
system to their own pecuniary gain. By wholesale modification of
duties and charges, he succeeded in effecting substantial reductions
in the price of such necessaries as grain, corn, coal, wood, butter,
cheese, and eggs. Inland protective duties were abolished on all
articles classed as necessaries or as raw material, and on one item of
import--English coal--the tariff was removed for the benefit of French
manufacturers, whom Law was most anxious to encourage.
But Law’s horizon was not bounded by the commercial and industrial
interests of the country. He recognised the great part which education
plays in the progress of a nation, and determined to give such
facilities as would place the highest education within the reach of
every one. He accordingly appropriated a twenty-eighth part of the
postal revenue for the endowment of free education in the University of
Paris. He thus conferred upon France a benefit of the most invaluable
character, and by this measure alone merited the reputation of an
enlightened and broad-minded statesman.
CHAPTER IX
Law’s designs against England’s political and industrial
position.--Earl of Stair’s correspondence with Mr. Secretary
Craggs.--Stair accused by Law of threatening the safety of
the Bank.--Stair’s recall intimated.--Lord Stanhope sent to
conciliate Law.--Threatened rupture between England and France
over question of evacuation of Gibraltar.--Stair endeavours to
justify his hostile attitude towards Law.--His apprehensions as
to Law’s purpose in acquiring South Sea stock.--The humiliating
nature of Stair’s dismissal.
[Illustration]
The year 1720 was a momentous one in the history of the Mississippi
Scheme. Its commencement was full of promise from many points of view.
It witnessed the realisation of Law’s ambition to gather into his
hands the reins of government in practically every department of the
administration. It witnessed also the zenith of prosperity for all
those gigantic schemes and undertakings which were to make France the
great centre of trade and finance for the world. But the promise for
the future which these circumstances seemed to contain was only of few
months’ duration. Yet these few months saw Law the most striking and
commanding figure of his time throughout Europe. We have already seen
the position to which he had attained in the internal affairs of France
itself; how the government of that country was practically under his
control; and how by sheer energy and force of character he had extended
his influence over every class of society. His fame however reached
far beyond the confines of France. He was regarded as an international
force by other nations. Not only was his system copied by other
countries, but he was bent on following a line of foreign policy for
France which threatened the political and industrial prospects of these
countries, and caused them great alarm, temporary no doubt, probably
foolish, but real while it lasted.
Law’s designs were chiefly directed against the power of England. The
English government recognised this, and considered Law a person to be
conciliated. Their attitude towards him was peculiarly weak, and led to
the recall of the minister at the French court, the Earl of Stair. That
minister on his arrival in Paris in 1715 had called upon Law, not only
as a friend, but because he adjudged him even then as a man of great
importance. Their friendship however was of short duration. It rapidly
degenerated into merely formal intercourse, and then into active
hostility. The latter stage was reached in 1719, when we find Lord
Stair intriguing against Law in his attempt to displace Dubois, foreign
minister of France, by Torcy, who would have been a more pliable
instrument for the carrying out of his designs. Lord Stair’s letters
to Mr. Secretary Craggs at this time are full of interest, and show the
nature of the hostility between himself and Law, and the progress of
their quarrel. On August 30th, 1719, he writes--“In a long conversation
I had with the Abbé (Dubois) to-night, he seems apprehensive that Torcy
gains ground, and that there may be a close connection betwixt Law and
Torcy, with views to turn the Abbé out. I am afraid this apprehension
of the Abbé is not without ground; but, however that may be, I am
persuaded we shall quickly see this court take airs which will not be
easy to bear; and I am not a little apprehensive that we shall very
quickly see them come into measures that we shall have no reason to
like. If this should be true, we must not, in my poor opinion, seem to
take any notice of it; but at the same time, it will behove us to exert
ourselves to find out ways, without loss of time, to get rid of the
pressure of the public debts.”
A few days later Lord Stair had apparently concluded that he was
powerless to stem the advance of Law’s influence, and writes
accordingly--“Supposing I had talents, and that I were fitter to serve
you at this court than another; you will be obliged to change your
minister. You may depend on it, this court, with their fortune, will
change their measures (_i.e._, their foreign policy); and they will
desire to have a man here that they may be either able to gain or
impose upon. You must henceforth look upon Law as the first minister,
whose daily discourse is, that he will raise France to a greater
height than ever she was, upon the ruin of England and Holland. You
may easily imagine I shall not be a minister for his purpose. He is
very much displeased with me already, because I did not flatter his
vanity by putting in Mississippi. I did not think it became the King’s
Ambassador to give countenance to such a thing, or an example to others
to withdraw their effects from England, to put them into the stocks
here; which would have been readily followed by many. I have been in
the wrong to myself, to the value of thirty or forty thousand pounds,
which I might very easily have gained if I had put myself, as others
did, into Mr. Law’s hands; but I thought it was my duty, considering my
position, not to do so.
“The Abbé told me, that if some people prevailed, measures would be
changed; that Torcy of late took the ascendant very much; and that
the Regent discovered a great partiality towards him; and that, if it
continued a little longer, he, the Abbé, would lay down. I am sure Law
is in this thing, for he will be for removing everything that does not
absolutely depend on him, and that can, in any manner, stand in his
way to hinder him to be first minister. Law’s heart has been set upon
that from the beginning; and we stand too directly in the way of his
ambitious views, for France to imagine that a good understanding can
subsist long between the nations, if he comes to govern absolutely.”
On 9th September, Lord Stair returns to the question of the
displacement of Dubois, and seeks to impress the government with what
he conceives to be the gravity of the situation. “I told you, in my
former letter, what the Abbé Dubois said to me upon the subject of
Torcy’s taking the ascendant over him in the Regent’s favour, and
of the close connection he, the Abbé, apprehended was between Torcy
and Law. He has since confirmed the same thing to me in several
conversations; and seemed to be in very great concern, and to have
thoughts of laying down, which I advised him not to do. The Abbé
likewise told me that there were many things which were hid from him;
and that he apprehended there was some change of measures.
“I come now to take notice of another thing to you, which in my opinion
is very much to be minded; and that is the spirit, behaviour and
discourse of the man whom, from henceforth, you must look upon as the
first minister, and that is Mr. Law. He, in all his discourse, pretends
that he will set France higher than ever she was before, and put her in
a condition to give the law to all Europe; that he can ruin the trade
and credit of England and Holland whenever he pleases; that he can
break our Bank whenever he has a mind, and our East India Company. He
said publicly the other day at his own table, when Lord Londonderry was
present, that there was but one great kingdom in Europe, and one great
town; and that was France and Paris. He told Pitt that he would bring
down our East India stock, and entered into articles with him to sell
him at twelve months hence a hundred thousand pounds of stock at eleven
per cent. under the present current price.
“You may imagine what we have to apprehend from a man of this temper,
who makes no scruple to declare such views, and who will have all the
power and all the credit at his court.”
Later in the same month he says, “I hope our good friends in the
North will make our affairs in Parliament easy. We must in that case
exert ourselves to do something decisive towards the payment of the
public debts, if we do not intend to submit ourselves to the condition
in which Mr. Law pretends to put all Europe. He says, _il rendra la
France si grande que toutes les nations de l’Europe, enverront des
Ambassadeurs à Paris, et le roy n’enverra que des couriers_.”
From opposition on the ground of policy alone to personal differences
was an easy stage. Law, conscious of his own power, had been hitherto
somewhat indifferent to the efforts of Lord Stair to weaken his
direction of the foreign policy of France. A rumour, however, which
gained circulation towards the end of the year determined him to rid
the French court of a man who he thought was moved not less by personal
enmity than by the interests of the country he represented. Two
circumstances had happened of an alarming nature which threatened the
safety of the Bank and the value of Mississippi stock. A run had been
made upon the Bank, and an attack upon the market had been organised
with a view to depreciating the price of shares. These disturbing
events had been attributed to Lord Stair, and Law at once informed the
Regent to whom the matter was of great concern. Lord Stair was innocent
of the charge, and naturally sought an interview with the Regent in
order to disabuse his mind. The result was satisfactory so far as the
assurances of the Regent went, but displayed the latter’s duplicity
since he was throughout unquestionably on the side of Law. Stair’s
letter descriptive of the interview was dated 11th December. “Several
days ago I was informed on very good authority, that Mr. Law told the
Duke of Orleans that it was I who had latterly been the cause of the
attack on the Bank. I thereupon resolved to clear myself with him,
and I turned the conversation in such a way that he mentioned he had
been told that I had been the cause of the attack. I said to him, ‘My
Lord, I understand that Mr. Law has had a talk with you, and I am very
pleased to have the opportunity of proving to you that he is absolutely
false in all his statements. It is true that the subjects of the King,
my master, have considerable wealth in this country, which it would
have been very easy for me to have used to the prejudice of the Bank.
But if it is true that neither I nor any other subject of the King had
taken billets in order to have them changed at the Bank; if we have not
placed shares on the market in order to depreciate them; if it is true
that I have had no communication with those who have run on the Bank,
you ought to be convinced that Mr. Law’s talk is not only false but is
the most atrocious calumny and the most unworthy; a calumny which does
not tend only to deceive you on my account, a trustworthy servant at
all times, through gratitude and through affection; but which tends to
embroil you with my master, the King, who is your best friend and ally;
for I know that Mr. Law stated at the same time that what I did in this
respect I did by order of my court.
“Now, if Mr. Law cannot prove to you that one of these three points is
true, since I boldly submit to you that all three are false, he ought
to be considered by you as a calumniator who desires to deceive in
things of great importance. But it is not merely of recent date that I
know the good intentions of Mr. Law for his country, and the designs
he has to set the King at variance with you. It is only eight days
since Mr. Law publicly threatened, in presence of several subjects of
the King, my master, to write a book for the purpose of convincing the
world that Great Britain could not possibly pay her debts. Such are the
ordinary and public discourses of Mr. Law. You can judge what effect
that can produce when a man who pretends to be your first minister
delivers such discourses. I have known it for a long time, but I have
refrained from saying anything to you because I was persuaded that
Great Britain would not think the same; and because I regarded these
discourses as the effects of the foolish vanity and inebriation of
Mr. Law whose head I have noticed for some time, has been turned.’ I
then told the Duke of Orleans many discourses of a similar nature. The
Duke listened with surprise. At last he said to me, ‘My Lord, they are
truly the discourses of a fool.’ I replied, ‘I say nothing to you that
I would not say in Mr. Law’s presence, and that I could not prove; you
can now judge if it would have been astonishing if I had really acted
in the way Mr. Law led you to believe I had done, but I am guided by
the respect I have always had for your interests.’
“The Duke of Orleans told me finally that he was quite satisfied
with what I had just told him; that he had always looked on me as
his friend, and that he had difficulty in believing that I wished
to prejudice his operations. That is substantially all that passed
between the Duke and myself on the subject of Mr. Law. You can make the
necessary reflections. There is no need of comment.”
Stair’s following letter communicates an apparent determination of the
Regent to exclude Law from any influence on the relations of France
with England, but also indicates his hesitation to place too much
reliance upon the Regent’s assurances. “The Regent,” he writes, “so
strongly perceived the dangers into which Law would precipitate him,
that some days ago he repeatedly spoke very strongly to me of the
vanity, presumption, and insolence of this man. He said he knew Law to
be a man whose head had been turned by excessive vanity and ambition;
that nothing could satisfy him except to be absolute master; that he
had so great conceit of his own abilities and so great contempt for the
talents of other men that he was impracticable with every one; that he
had tried to make him work with the cleverest men in France, and that
he could not agree with them for two consecutive days, always being
impatient at the slightest obstacle or contradiction. He told me that
he had rated Law soundly for his insolent discourses which alarmed
everyone in such a way that he had reason to believe that Law would
contain himself; but that he saw clearly no bridle could hold him.
‘But,’ said the Regent, ‘believe me, I shall arrange matters so that
there will be no risk of Law embroiling me with the King nor separating
me from my allies. He is necessary to me in my financial affairs, but
he will not be listened to in political matters, and I shall be on my
guard against his mischievous designs.’ I should like to believe that
the Regent said what he thinks, and that he really thought it at the
moment he spoke to me; but, with all that, a great treasurer, such
as Law, is first minister wherever he chances to be in office; and
if Law’s system is established we are equally lost sooner or later.
Further, believe me, we ought to be aware of this nation; we can never,
with safety, count on their friendship, inasmuch as you could be a
dangerous enemy to them, and can bring home to them the great injury
we could cause them if they disagreed with us. On this account their
friendship will be assured; but we shall miscalculate every time we
depend on them in time of need. You will have received a messenger from
the Abbé Dubois, who would inform you that I told him last Thursday
that I would ask to be recalled. It is not from pique; but I see by the
course things are taking that I shall no longer be able to render any
service to the King at this court.”
In the middle of January, 1720, Lord Stanhope intimated the recall
of Lord Stair to the French minister, and a few days afterwards it
was known throughout Paris. The manner of his recall was by no means
courteous, but Lord Stair received the news with apparently unruffled
temper, and expressed no regret in dimitting office since he recognised
the difficulty and the delicacy of the position in which he had placed
himself. Notwithstanding, however, the manner of his discharge--a
discharge which was virtually a disgrace--he declared that it would
not alter his unchangeable devotion to the service of his King and
country. So serious a view did the English government take of the
probable consequences of Stair’s efforts to circumvent Law that they
deemed it necessary to send Lord Stanhope himself to Paris in order to
conciliate Law and to disclaim any animosity on the part of England
towards him. Such a step showed at once a callous indifference to the
feelings of Lord Stair, and greatly gratified Law, who seemingly
occupied the proud position of being able to bring England to the
humiliating necessity of asking his pardon for the hostility to him
of her minister. Stanhope also promised to give Law’s son a regiment,
and to secure that a writ of summons should be issued calling Lord
Banbury, his brother-in-law, to the House of Lords, a question as to
his title having arisen which had hitherto denied him this privilege.
Lord Stair refers to this step by his government in a letter dated 14th
February, 1720. “As to Lord Stanhope, I have ever had a very great
value and esteem for him; and I have upon all occasions endeavoured to
give him the sincerest proofs of my friendship and faithful attachment
to him; and I dare say it, with great truth, that I have not given him
the least reason to complain of me personally. I am sorry if I have
not been able to deserve his esteem, but I am sure I have deserved his
friendship, at least his good-will. What has happened lately, I own to
you, has piqued me very much, especially the manner of doing it; but
I reckon that has proceeded from his views as a minister, in which I
think he has been very much mistaken. I shall readily agree with you
that if his lordship has gained Mr. Law, and made him lay aside his
ill-will and ill-designs against his country, he did very right to make
all sorts of advances to him, to give his son a regiment, to engage to
bring Lord Banbury into the House of Lords, to sacrifice the King’s
ambassador to him. If I had thought Mr. Law to be gained, I should
very readily have advised to do all these very things and a great deal
more. But if his lordship has not gained Mr. Law I am afraid we shall
not find our account in Lord Stanhope’s supporting, when he is ready
to fall, in making him first minister, and in destroying the personal
credit I had with the Regent, and recalling me from this court, when
my long stay should have enabled me to be better able to judge of
their designs and of their ways of working than a stranger of greater
capacity could probably be. A little time will show who has judged
right. I do most heartily wish, for the good of my country, that I may
be found to have framed a wrong judgment; but I own to you I have seen
nothing yet to make me change my opinion, but on the contrary, new
things every day do confirm me that Mr. Law’s designs and the views
of this court are just what I represented them to be. You do me great
wrong if you say that I advised to break with the Regent if he did not
agree to part with Mr. Law. You will find no such thing in any of my
letters. You will find then, that I thought it was useful to endeavour
to shake Mr. Law’s credit with his master, to make his master jealous
of Mr. Law’s ambition, and apprehensive of the dangers his presumption
might lead him into; and that I thought it was fit to stand in his way,
as much as it was possible, to hinder him to gain an absolute power
over the Regent’s mind, and to obstruct his becoming first minister. I
thought it was fit to make Mr. Law lose his temper and to make him act
in passion and rage. I had not succeeded in all these views when Lord
Stanhope arrived and thought fit to demolish me and all my works at
once. As to Mr. Law, I have no ill-will to him, but as I take him to be
a dangerous enemy to my country, I am afraid time will but too plainly
show that I have judged right in this matter. As to my revocation, if
it was possible I should have a mind to stay in this country, you have
made it impracticable. You have taken all effectual ways that could be
thought of to destroy the personal credit I had with the Regent. You
have made it plain to him that I have no credit with the King, that is
to say with his ministers. Lord Stanhope has declared to Mr. Law that I
shall be recalled, so that is no longer a question. You are under the
necessity of sending another minister to this court.”
A new element of concern for Lord Stair now introduced itself, and
bulked largely in his subsequent correspondence up to the time of his
departure from Paris. The occupation of Gibraltar by Britain was a sore
point with France and Spain, and many efforts were made at various
times to obtain her dislodgment. Lord Stanhope’s visit to Paris at
this time was taken advantage of by the Regent and Dubois for the
purpose of negotiating its evacuation if possible, and, according
to Stair, he had given some hope of this being brought about. On the
faith of this, the Regent had apparently assured the King of Spain
that Gibraltar would be given up, and felt that his honour was now
involved in this hope being realised. It was soon evident however that
the English government had no intention at any time of entertaining
proposals for its evacuation, and alarm was felt that a rupture might
take place. Law, we are informed by Stair, was anxious to declare war,
and was confident that the resources of France, owing to the operation
of his system, were sufficient to result in a successful issue. He
became very bitter in his conversation about England, and spoke with
a degree of insolence, revolting even to the French. One evening he
invited to dinner Lord Bolingbroke, and so fierce was his denunciation
of the English that the latter vowed he would never again set foot in
Law’s house. On the same occasion one of Stair’s friends had said to
Law, “Sir, what is this rumour which runs through Paris about us going
to have war? I am persuaded that you have nothing to do with it. A
man who thinks of making a flourishing state by commerce, and by the
establishments which require peace, does not think of war.” Law replied
coldly to him, “Sir, I do not wish war, but I do not fear it.”
Lord Stair’s conclusions were undoubtedly biassed by the deep
feelings of resentment he naturally fostered towards the man who had
accomplished his downfall, and he was too ready to make use of any
rumour which in any degree gave colour to the character of the designs
he attributed to Law. There is no substantial evidence that Law really
went so far as Stair would have us believe, and was using every means
in his power to induce the Regent to make the question of Gibraltar
an occasion for hostilities. It is impossible to say more than that
Law was merely an interested spectator, but not an active participant
during the progress of the affair. As first minister, he would be
under the necessity of guarding his opinions when expressed upon the
subject, but there is no reason to believe that he meant more than he
said when he stated he did not wish war, but did not fear it. Yet Stair
sees underlying this remark the insolence of Law with which he has been
endeavouring to impress the government at home, and points out that if
this be his attitude when his system is likely to fall to pieces, what
would it be if his system yet proved a success.
Notwithstanding Stair’s efforts, however, the English government were
not inclined to adopt his views as to Law’s designs, and indicated
that he had simply allowed himself to be carried away by pique and bad
temper. Stair could not of course allow an accusation such as this to
pass unchallenged and replied, “God knows, that I was only actuated by
feelings of zeal and of attachment towards my King and to my country.
I have spoken truly, as a clear-headed man, whilst you have treated
me as a dreamer; although I can say, without conceit, that you have
reason to trust me and to distrust those to whom you have given trust.
I do not speak of Lord Stanhope. I know him to be an honest man, and
a faithful servant of the King. I respect him and honour him; and
although I have had cause to complain of him, I have no resentment
against him. He believed he was serving the State in humiliating me. He
was deceived. Any man can be deceived. I’ll be bound for it, if you had
left it to me, Law would have been lost at the present moment, and the
understanding between the King and the Duke of Orleans would have been
closer than ever. At the present time it is necessary to think as soon
as possible about sending another minister to this court. For God’s
sake, send an honest man here before everything; and a clever man if
you can find him.”
Stair seems to have created an impression in the mind of his government
that he wished the King to demand from the Regent a promise that he
would depose Law from office at the risk of going to war; and early in
March, Mr. Secretary Craggs wrote that the King would not entertain
such a proposal. Stair had not, however, reduced the matter to such an
issue, and on 12th March stated clearly the position he had taken up.
“I must beg pardon,” he wrote, “to say two things, first that I never
did put things upon that issue, and in the next place, that there was
no need of putting things upon that issue. You will find in my letters
that I represented to the Duke of Orleans that Law, by his vanity and
presumption, was leading him into great dangers and inconveniences,
both at home and abroad; that Law, by going too fast, and by taking
arbitrary measures, was in a way to ruin his Royal Highness’s credit
with the nation, and to overturn the whole system of the finances; and
that, at the same time, Law was, by his discourse and conduct, doing
everything that lay in his power to destroy the good understanding
between the King and the Regent, and between the Regent and the rest
of his allies, and I bade the Regent beware how he trusted the reins
of his chariot to that Phæton Law, because he would overturn it. The
answer the Regent made me to these representations was, that he knew
that vanity and ambition had turned his head; but that he, the Regent,
would take care to keep a hand over him, and to contain him within
bounds in the management of the finances; that he should have nothing
to say in public affairs; that, if he pretended to meddle, the Regent
would not listen to him; and that I might be well assured that it
should not be in his power to create an ill understanding between him
and the King.
“I believe nobody can fairly say that there is anything in my
representations which imported that the King would quarrel with the
Regent if he did not lay Law aside. Nor can they say that there is
anything in the Regent’s answer which imports that he took what I said
in that sense. On this foot things stood. I spoke very freely to the
Regent what I had to say on the subject of Mr. Law, and His Royal
Highness received what I said in a very friendly manner.
“When Lord Stanhope arrived, he thought fit to acknowledge Mr. Law as
first minister, and to _consider him as a much greater man than ever
Cardinal Richelieu or Cardinal Mazarin had been_; to tell the Regent
that the King was very well satisfied with Mr. Law, and did not in any
manner complain of him; that what I had said was entirely out of my
own head, and without, and even contrary to orders; and that for so
doing I should be recalled. Since that time Mr. Law has acted as First
Minister, and I have had no intercourse with the Regent but in formal
audiences, to deliver such messages as I received from Court, and to
receive short and formal answers.
“In what manner Mr. Law has acted as First Minister, I may save you the
trouble of telling you. You have seen it and felt it.
“For me; there was nothing left for me to do, but to desire to be
recalled, unless I could have prevailed with myself to have acted the
part of a fool, or of a knave, or of both. What I have said above, I
believe, is sufficient to prove that things were not brought to that
extremity that there was a necessity to declare war against France, or
to make humble submission to Mr. Law.
“What has happened of late may convince you, I am sure it will the
world, that I knew Mr. Law and this court better than other people do.
Neither vanity or resentment prompts me to say this.
“As to the charge you bring against me, that I have exclaimed against
the minister personally, and against these measures, it does not lie
against me. I have behaved myself with great modesty and moderation on
this side. I have never spoken of Lord Stanhope but with respect and
esteem. I have writ upon that subject to yourself with great freedom,
and to no other man living, my uncle Sir David excepted, to whom I
endeavoured to clear myself of the heavy charge you brought against me.
I shall not compare my behaviour with that of other people’s. I know
how I have been represented to my master and my country. I propose no
other revenge to myself than to show by my conduct that they have been
unjust to me, and that I deserved fairer usage.
“If the charge you mention is laid against our ministry, viz., ‘That
Law is for setting up the Pretender, and they are setting up Mr. Law;
that the Regent will play us false; and that I have been ill-treated
for penetrating these designs; that we are in the hands of France and
dare not own it; that he understands himself with Spain, and that we
shall be the dupes of this alliance, and of this war.’ If this charge
is laid against the Ministers, it shall not be laid against them by my
words. I shall content myself to shew my conduct, that no part of that
charge lies against me.
“Believe me, my dear Craggs, I have no design to enter into any cabals,
nor to make any broils in the state. If I endeavour to show you are
wrong, it is with a design that you may get into the right way again
as soon as possible, that you may not continue to deceive yourselves.
Ask and take the assistance of people who love the King and his
government. You shall always be sure of my little help to support this
ministry. I am not for changes; nor can I be influenced by private
resentment, which, I declare to you upon my honour, I am ready to
forget, as if I never had any reason to complain. My dear Craggs, take
my word for it, Mr. Law’s plan is formed to destroy the King and his
government and our nation; and he will certainly bring his Master into
it; nor is there any other way to divert him from that design but my
showing his Master that it is dangerous for him to attack us. There is
nothing but an appearance of strength and firmness on our side, or the
miscarriage of Law’s system on this side, can save us from a war with
France. No personal credit that anybody may flatter themselves they
have with the Duke of Orleans, will signify anything to divert it. Your
letter about Gibraltar was very well writ, and it was very right to
write it; but I will give you my word for it, it will have no manner
of weight here if Law’s system takes place. If they can bully the
Ministry, or buy a party in England, we must part with Gibraltar; and
when we have parted with it we shall be every way as little secure of
peace as we are at present; and upon many accounts less able to support
a war.”
[Illustration: JOHN, 2ND EARL OF STAIR.
From a Portrait in The National Portrait Gallery, Edinburgh.]
Fresh apprehension seems to have been aroused in Stair’s mind as to
Law’s apparently deep designs for the accomplishment of some great
injury to English interests by the fact that Law about this time had
purchased large quantities of South Sea stock. He communicated his
apprehension to Craggs, who was not disposed to lay great stress upon
the circumstance. This seems to have somewhat allayed his fears, and he
accordingly wrote on 30th April:
“I am glad you do not apprehend that Mr. Law is in a condition to
do us any great hurt by what he gets by the rise of our South Sea
Stock. Though I know that Law will brag, yet I own to you I did
apprehend that he had gained considerably and that he might be able
to do us a good deal of mischief by withdrawing a very great sum
himself, and by tempting other foreigners to follow his example.
I suppose you know the great sums Mr. Law pretends to have in our
stocks were bought in Holland.
It seems to me to be a very dangerous thing in such a country as
ours, where things are so very uncertain and fluctuating, to have
foreigners masters of such vast sums of money, as they must needs
have at present, by the rise of our stocks. This is a terrible
handle to hurt us by, in the hands of such a man as Law. I wish our
monied men may be attentive enough to the security of the nation in
this point; and that they may not let themselves be blinded by the
flattering appearances of present gains.
I am very glad to see you think so sanguinely as to the payment of
our national debts. It will be very important to give the world
such impressions of our situation. By several letters I have seen
from very understanding men in Holland, I should be afraid that
such impressions might prevail there and at Geneva, which would be
very hurtful to us, for both the Dutch and the Geneve have very
great sums in our stocks.
I am afraid we have not money enough, either in coin or in paper,
to move so vast a mass as our South Sea Company now comes to be.
The national bank would have been a very great help. I must own
I apprehend that if that matter is not settled at this time, you
will meet with great opposition at any other time by the South Sea
Company, which, from this time forward, we are to look upon as a
very powerful body.
I am afraid our people in England think too neglectfully of Mr.
Law’s schemes. I own to you, that, as this kingdom is disposed,
there is a great odds to be laid that it will miscarry; but it is
not impossible, far from it, that it may hold long enough to do us
a good deal of mischief. Another thing I dare be bold to say--it
cannot succeed without undoing us; and if Mr. Law can compass our
ruin, I think he is in a fair way to carry through his project
in France. I know Mr. Law himself thinks so too, and that being
the case we may be very sure he will do us all the mischief in
his power. You cannot think that power is small, considering the
absolute authority he has acquired over the Regent. That being so
I am sure you will agree with me that we cannot be too attentive
to discover, prevent, and defeat the designs he may form against
us. His designs are no trifling ones; they strike at the root.
As to the behaviour of this court towards ours, it will depend
entirely upon what happens in Sicily, and upon the King of Spain’s
disposition towards the Regent, which is naturally bad, and which,
I have reason to think will not be made better by the advice he
receives from France. As to our friend the new Archbishop of
Cambray, (the Abbé Dubois) he will do Law all the hurt he can,
because he is firmly persuaded that Law is determined to turn him
out. The truth of the matter is that Law does hate and despise
him exceedingly, and it is no less true, that the Abbé has but
very little credit at present with his master, though his master
affects to say the contrary. The Abbé, with all the desire he has
to flatter himself, sees through the disguise.”
The closing letter of this correspondence shows how humiliating was the
dismissal of Lord Stair,--humiliating even to the extent of his being
denied the usual privilege of seeing his sovereign on his return--and
how complete was the triumph of Law over his former friend.
“I see plainly I shall not be able to see the King of England.
It is a great while ago since Mr. Law told his friends here,
that I should not be allowed to have the honour of seeing the
King. It is pretty hard to digest I own, if, after serving the
King very faithfully, very zealously, and with some success, I
should have the mortification not so much as to have my master’s
good countenance. However that happens to be, I am very glad His
Majesty’s affairs go so very well, and that there is so good an
understanding amongst them that serve him.
I shall be able to tell a good many curious particulars concerning
the state of affairs here, which are not so very proper to be put
into a letter. Mr. Law still brags that he will make our stocks
humble, by withdrawing the French effects. He seems more bent than
ever to do us mischief, believing it the only way he has left to
save himself and his system. How far he may be able to draw his
master into his notions, God knows. His master professes the best
intentions imaginable. In the meantime they go on with the new
levies with all the application imaginable; and I am assured they
are giving out commissions for levying some more German regiments
in Alsace. All over France they talk of a war with Britain, and
the Jacobites are in greater numbers at Paris, and more insolent.
They talk of great changes at this court; and that the Archbishop
of Cambray is to be sent to his diocese. Law’s friends give out
that he has more credit than ever at the Palace Royal. That may
be; but I dare swear he has lost a great part of his master’s good
opinion, though, at the same time, he is very unwilling to renounce
the fine views Law had given him. I think we have nothing to fear
from France at present but by surprise; but, in my opinion, it will
behove us to be very attentive against something of that kind.
It is plain the Jacobites have their heads filled with some such
notion.
As soon as Sir Robert arrives, I shall certainly set out and leave
some friends to take the best care they can to my effects.”
Thus was brought to a close an embassy which offered at its outset
so bright promises, but which ended in virtual disgrace. It is very
questionable if any other result could have been possible. Lord Stair
possessed all the necessary qualifications for a successful ambassador,
and his failure can hardly be said to have been due to want either of
ability or of tact. Rather was it due to the integrity of his motives
and to the high estimate he had of his office. Had he yielded to the
temptation which Law set before him to enrich himself by speculation
in Mississippi stock, his difference with him might never have
originated, and his mission might have had a happy ending. But it is
futile to speculate on probable consequences had events been other than
they really were. On the other hand it is a tribute to Lord Stair’s
foresight that he always predicted the downfall of Law’s schemes, and
this he did even when they were at the height of their prosperity and
gave every indication of probable success.
CHAPTER X
The beginning of Law’s difficulties.--The Bank’s reserve of specie
begins to be depleted.--Law attempts a remedy by altering
the standard of the coinage, and restricting the currency of
specie.--Temporary success of remedy.--Domiciliary visits
resorted to for detection of hoarded specie.--Bank and
Company United.--Discharge of National Debt.--Use of the Rue
Quincampoix prohibited as a stock market.--The assassination of
a stock-jobber by the Comte de Horn, and the latter’s execution.
[Illustration]
Events now very rapidly developed in the history of the Bank and of
the West India Company. Law’s accession to power marked the beginning
of his difficulties--difficulties which taxed his judgment to the
utmost and forced him into the employment of expedients which he
himself foresaw could not permanently ward off injury to his schemes.
He thought, however, they might serve their purpose until his schemes
assumed a less fluid condition, and that their establishment in good
working order would render them proof against attack from such outside
forces as might array themselves against him.
The first indications of danger were becoming apparent in December, and
by the following month had assumed an alarming aspect. Shares had been
selling at the very high price of 10,000 livres each, but by concerted
action amongst several large holders and speculators that price was
gradually forced up until it reached the unprecedented figure of 20,000
livres. This was now their opportunity. Artificial inflation could not
be carried to greater lengths, and accordingly a process of extensive
unloading commenced. These speculators, however, suspicious of the
stability of the new system, were not satisfied with holding notes,
the value of which might depreciate at any moment, and immediately
presented them at the Bank for their equivalent in specie. Law
perceived that such a process if allowed to run unchecked would soon
deplete the Bank of all its available resources. Refusal to exchange
would be suicidal, and if public confidence could not be maintained
without recourse to artificial means, the currency of the notes would
require to be forced directly or indirectly.
One of the chief offenders was the Prince de Conti, a near relative of
the Regent. This nobleman had amassed great wealth through engaging
in speculation under Law’s guidance, but had alienated the latter by
his insatiable appetite for still greater fortune. Unable again to
enlist the services of Law in his interests, he evinced towards him
that bitterest form of ingratitude, the ingratitude of the man who
is favoured to him who does the favour. He attacked Law in his most
sensitive part by realising great quantities of stock, and converting
the notes he received in payment into money at the Bank, an operation
which required the aid of three waggons. Many speculators who had
preferred specie to paper transmitted their money abroad for safe
investment, and in the course of a few weeks several hundred millions
of livres were sent out of the country. A few also hoarded their wealth
in secret places until the time would come when they could without fear
employ it openly.
The first step taken by Law with a view to placing a check upon this
continuous drain on the reserves of the Bank was the issue of a decree
on 28th January, depreciating the coinage by raising the price of
the silver marc to 54 livres. At the same time the interest of money
was reduced from 4 to 2 per cent. Many people refused to bring their
specie to the Bank for recoinage, and then commenced that system of
domiciliary visits which under subsequent decrees worked with so much
tyranny and for a time absolutely destroyed not only public but also
domestic confidence.
The result of the decree was not so satisfactory as had been
anticipated, and in quick succession other decrees were issued
introducing alterations in the standard of the coinage. The purpose
of this was to discredit specie as far as possible as a medium of
exchange, and by giving the note the appearance of fixity in value
to raise its credit for currency purposes. Payments in specie were
only allowed to the extent of 300 livres in gold, and of 10 livres
of silver, sums respectively equivalent to £12 10s. and 8s. 4d.
in our money. Public offices could only receive payments in bank
notes, except where the amounts of these or the balances were less
than the lowest denomination of the note. And then the employment
of gold and silver for other than coinage purposes was strictly
prohibited without the royal license. These measures, however, were
still unequal to restoring public confidence in the paper of the
Bank, although in addition to those already specified, decrees were
published fixing the value of paper at five per cent. and then at ten
per cent. above the corresponding nominal value of specie. Trade was
now beginning to experience the bad effects of a restricted currency,
and representations were strongly made to Law and to the Regent to
restore the currency to its previous position. This of course Law was
unable to do without facing the consequences of seeing the bulk of the
specie withdrawn altogether not only from circulation but from the
country. A financial and industrial crisis would have at once been
precipitated. To meet the situation, Law resolved upon bold and extreme
measures. On the pretext that there were 1,200,000,000 livres in specie
lying idle in the hands of financiers and successful speculators, an
edict of Council was published on 27th February, which ordered “that
no person, of whatever estate or condition, not even any religious
or ecclesiastical community, should keep more than 500 livres in
coined money or ingots, under pain of confiscation of the excess, and
of a fine of 10,000 livres.” All payments exceeding 100 livres in
amount were to be made without exception in paper, and the purchase
of jewellery, plate and precious stones was declared illegal if made
for purposes of investment. To provide against concealment of specie
informers were promised a reward of half the sums disclosed, and all
government officials were ordered to make search wherever ordered by
the directors of the Bank. This decree was followed on 5th March by one
which further debased the currency by raising the price of the silver
marc to 85 livres, and on 11th March by a third, by which gold specie
was to be withdrawn from the currency from and after 1st May following,
and silver specie, except the smaller pieces which were necessary for
odd change, from and after 1st August following.
These various decrees wrought a revolution in the fiscal arrangements
of the country. No one appreciated more fully their danger than Law
himself, but extraordinary circumstances such as those with which
he was forced demanded the employment of extraordinary methods to
counteract them. He was presented with the alternative of certain
collapse of his schemes if he did not resort to arbitrary measures,
or of a possible chance of saving the situation if he could force
the currency of paper by withdrawing all the specie from circulation
and holding it in the hands of the Bank. Had he succeeded in doing
this, confidence in the notes of the Bank would undoubtedly have
largely been restored since that depends entirely upon the knowledge
of the public that behind them there are liquid reserves available for
conversion whenever required. It is questionable if any other methods
could have been devised than those followed by Law, and in judging
their character it is necessary to bear in mind the ultimate object he
had in view.
It was natural that these tyrannical steps should have had the
immediate effect of rousing a storm of opposition amongst the public
towards Law, and if we are to believe Lord Stair, they also prejudiced
him in the eyes of the Regent, to whom the hostile attitude of the
people was a matter of grave concern. On the day following the issue of
the decree of 11th March, he wrote to Craggs, “The rage of the people
is so violent, that, in the course of one month, he will be pulled to
pieces; or his master will deliver him up to the rage of the people.
You may depend upon it that he is mightily shaken in his master’s
good opinion, who, within these few days last past, has used him most
cruelly to his face, and called him all the names that can be thought
of, ‘Knave and madman,’ &c. He told him he did not know what hindered
him to send him to the Bastille; and that there never was anyone sent
thither deserved it half so well. To make matters better, Law’s head is
so heated that he does not sleep at nights, and he has formal fits of
phrenzy. He gets out of bed almost every night and runs, stark staring
mad, about the room making a terrible noise; sometimes singing and
dancing, at other times swearing, staring and stamping, quite out of
himself. Some nights ago his wife, who had come into the room upon the
noise he made, was forced to ring the bell for people to come to her
assistance. The officer of Law’s guard was the first that came, who
found Law in his shirt, who had set two chairs in the middle of the
room and was dancing round them, quite out of his wits. This scene
the officer of the guard told Le Blanc, from whom it came to me by a
very sure conveyance. Le Blanc is in despair about the state of Law’s
health and discredit in which he stands with the Regent. At the same
time, there is a most formidable party formed against him, and almost
everyone who held their tongues out of fear, now take courage to speak
to the Regent upon his character; so that they believe the Regent is
only withheld by shame from sacrificing him to the resentment of the
nation. Law, on the other hand, says, that if they will give him but a
little time, he will set everything to rights; that he will raise the
credit of the stocks; turn the course of the exchange; sink the stocks
in England, and put everything in that country into such disorder that
it shall plainly appear that he can do everything in that country he
pleases. In order to that, he has prevailed with Croisset, André,
and several other people, who had very great sums in our stocks, to
withdraw their money and to remit the greater part of it back into
France; with the rest, he proposes to turn the course of the exchange
and to carry on his other designs. He proposes further, in order to
alter the course of the exchange, to lower the value of the specie in
France, till the crown is brought down by degrees to three livres; and
this _arret_ is to come out in a few days.”
Law’s object was to a large extent gained so far as it aimed at
replenishing the reserves of coin at the Bank. During the month
of March no less than 300,000,000 livres were deposited, a sum
undoubtedly large but still short of being an adequate security
against the enormous mass of paper afloat, which has been estimated at
2,600,000,000 livres. These deposits were at the same time maintained
in full strength by the operation of the decree of 27th February,
which relieved the Bank of the necessity of repaying at any time more
than 500 livres in specie. Success however limited as it was, was only
secured at considerable cost to Law’s reputation. The domiciliary
visits which were made use of for detecting hoarded coin created
widespread and bitter resentment. A feeling of deep distrust, of
insecurity, and of fear crept through the community. The reward for
information was so great that sons betrayed their parents, brothers
their sisters, servants their masters. Friend betrayed friend, and
enemies had an effective instrument of revenge. “Never before had
sovereign power been so violently exercised, never had it attacked in
such a manner the temporal interests of the community. Therefore was
it by a prodigy, rather than by any effort or act of the government,
that these terribly new ordinances failed to produce the saddest and
most complete revolutions; but there was not even talk of them; and
although there were so many millions of people, either absolutely
ruined or dying of hunger, and of the direst want, without means to
procure their daily subsistence, nothing more than complaints and
groans was heard.”
Among those who were ruined in their fortunes at this time was one of
the directors of the Bank itself. A domiciliary visit, prompted by
one of his enemies, resulted in the discovery of 10,000 crowns, which
were confiscated. For failure to declare his hoard and deposit it in
the Bank he was fined 10,000 livres and lost his appointment. The
brothers Pâris were also among the sufferers. They were detected in
the act of conveying 7,000,000 livres into Lorraine, and a visit to
their residences brought into the coffers of the Bank an additional sum
of like amount. These confiscations and many others of more or less
substantial sums were published abroad in order to induce others to
conform to the edict from fear, and in many cases the prospect of loss
of fortune was regarded a less evil than possibility of discovery with
all its attendant penalties. There is in fact every reason to believe
that neither Law nor the Regent anticipated recourse to harsh measures
in carrying out their decree. They relied upon the fear which would be
created by its publication serving their purpose, and in order the
better to accomplish it arranged with several well-known prominent men
to allow themselves to become apparent victims. Thus were many of the
courtiers and public officials intimidated into divesting themselves of
their accumulated wealth, and into exchanging it for paper which was so
soon to lose its value. The largest capture which was made was that of
ex-Chancellor Pontchartrain whose cellars disgorged the enormous sum of
57,000 louis d’or or considerably over £10,000,000. The deep dislike
the Regent had for his own decree is also evinced by his conduct
towards the President Lambert de Vernon, who had sought an interview
for the purpose of informing against some one who was possessed of
500,000 livres in gold. On hearing his message, the Regent in horror
enquired, “What d--d sort of a trade have you taken to?” The President
replied, “Sir, I do nothing more than obey the law, and it is that
which you indirectly treat with such an appellation. As for the rest,
your Royal Highness need not be alarmed, and may do me more justice.
It is myself I come to inform against, in the hope of being allowed to
keep at least a part of this sum, which I prefer to all the bills of
the Bank.” As a result of his appeal, the President was allowed the
reward of an informer and permitted to retain half his fortune.
Law himself was the victim of a somewhat amusing result of his own
methods about this time. Some months before he negotiated with the
President of Novion the purchase of his estates for £400,000 francs.
The President required payment to be made in silver, and Law, who was
anxious to impress everyone with the advantages to be gained by the use
of paper alone, could not of course refuse, declaring that he preferred
to be rid of a metal which was to him a burden on account of its bulk,
and of the embarrassment it caused him. Unfortunately Law was compelled
afterwards to re-transfer the estates to the President’s son to whom
the right of pre-emption had been reserved, and received back the price
in notes which he was bound to accept according to his own decree. Nor
could Law complain of the advantage that had been taken of him without
depreciating the value of his own paper.
A measure of vastly greater importance and destined to lead to much
graver consequences than even those already mentioned was the union
of the Royal Bank and the Indian Company. A meeting was held on
22nd February at the Bank to which had been called the principal
shareholders of the Company, the proposal being formally made and
agreed to. Since the General Bank had been converted, in December,
1718, into a Royal institution, it had carried on its business for
the benefit of the Royal revenues alone. The notes in circulation
carried the guarantee of the King, a guarantee which was still to
remain notwithstanding the amalgamation. For the ostensible purpose
of preventing unlimited issue of additional notes it was provided
that authority must in all cases be first obtained from the Council.
Since the Council was in all its deliberations under the influence
of the Regent, it will be seen later how worthless such a provision
proved as an effective check to arbitrary fabrication of paper. During
the period of the Bank’s existence as a Royal establishment, it had
carried on business with great success, its balance sheet showing on
paper a profit 120,000,000 livres of profit. This profit it was also
arranged should be transferred intact to the company for the benefit
of its shareholders. The object which Law had in view in bringing
about the union could only have been one of expediency. It contained
no feature which promised permanent success to the undertaking, and
showed a singular lack of foresight and real business capacity.
Undoubtedly it gave encouragement to speculators, who were carried
away by the apparent increase of stability given to the Company by the
amalgamation. But even this was of short duration. It was impossible
to conceal for long the elusory nature of the transaction, and it soon
became clear that a false step had been taken inasmuch as the fortunes
of the Bank were now altogether bound up with those of the Company.
Previously to the date of the incorporation of the Bank and the
Company, the note issue in circulation amounted to about 600,000,000
livres. Within three months after that date, an additional
2,000,000,000 livres were fabricated and set afloat. The bulk of the
fresh issues was utilised for the purpose of discharging the national
debt, one of the great objects which Law had in view at the initiation
of his financial schemes. The national creditors were now become
creditors of the Company in respect of the notes they held; and the
state had now nominally discharged her debts in full.
One of the difficulties created by the publication of the various
decrees limiting the currency of coin was that of scarcity of notes of
small denomination. On 19th April, accordingly, a decree was registered
by which no less than 438,000,000 livres in notes of 10 to 1000 livres
each were issued in order to facilitate the changing of notes of
greater value and the carrying out of transactions of small amounts.
Although all these expedients failed in their object, the extent to
which speculation was carried was very little affected. The time for
suddenly made fortunes had now gone, but sufficient excitement remained
to render the purchase and sale of shares an occupation attractive to
thousands of speculators. The tendency of the market was distinctly
downwards, but there were intervening fluctuations, which maintained
the mania in almost all its former strength. The Rue Quincampoix was
still crowded from morning till evening. So great were the crowds on
many occasions that scenes of confusion were frequent and sometimes
developed into scenes of violence. It formed a happy hunting ground
for the lowest classes in the community. Robberies and even murders
took place so often that special precautions had necessarily to be
taken by those who carried money on their person. So dangerous had
the street and its environs become that on 22nd March, the council
published an edict prohibiting its use as a stock market, and requiring
all houses and offices wherein share transactions had been hitherto
usually negotiated to be closed in future for such business. No other
locality was assigned to the speculators, and for two months they had
no recognised place of meeting. The wisdom of this decree was dictated
by an unhappy occurrence that took place on the morning of the day of
its issue, in which was involved a young foreigner of noble family,
Comte de Horn, son of Prince Philippe Emmanuel who had served in France
at the sieges of Brizac and of Landau, and at the battles of Spire
and of Ramillies. According to the account given of the incident by
Duclos, it appears that the Count, who had been living a riotous life
in Paris for some time and had contracted extensive debts, along with
two companions, Laurent de Mille, and a sham knight named Lestang,
plotted the assassination of a rich stock-jobber and the theft of his
pocket-book in which he was known to carry large sums of money in
paper. They resorted to the Rue Quincampoix, and under the pretext of
negotiating the purchase of 100,000 crowns worth of shares, took the
stock-jobber to a tavern in the Rue de Venise and stabbed him there.
The unfortunate stock-jobber, in defending himself, made sufficient
noise to attract the attention of a waiter, who, passing at the moment
the door of the room, opened it. Seeing a man lying in a pool of blood,
he immediately closed and locked the door and shouted murder.
The assassins, finding retreat closed against them, escaped through
the window. Lestang, who had been keeping watch on the staircase,
rushed off on hearing the shouts of the waiter to the lodging house
in the Rue de Tournon, where the three of them boarded, took the most
portable luggage and fled. Mille dashed through the crowds in the Rue
Quincampoix, but followed by the people, was at last arrested at the
markets. The Comte de Horn was seized on jumping from the window.
Believing his two accomplices to have succeeded in saving themselves,
he had enough presence of mind to say that he feared he himself would
also have been murdered in trying to defend the stock-jobber. His ruse,
however, proved valueless by the arrest of Mille, who, having been
brought back to the tavern, confessed all. The Comte declared to no
purpose he did not know Mille; and the Commissary of Police took him
to prison. The crime being fully established, the trial did not last
long, and on 26th March both were broken alive on the wheel in the
Place du Grève. The Comte was apparently the author of the plot; for,
while he was still breathing on the wheel, he demanded pardon for his
accomplice, who was executed last.
Before the execution had been carried out, the strongest efforts had
been made to influence the Regent to grant a pardon, or at least a
commutation of the punishment. The crime was so atrocious that they
did not insist on the first, but redoubled their solicitations for
the latter. They represented that the execution by the wheel was so
ignominious, that no daughter of the house of Horn could, until the
third generation, enter any convent. The Regent rejected all prayers
for pardon. They appealed to him on the ground that the culprit was
allied to him, but he replied,--“I shall partake of the shame. That
ought to console the other relatives.” He repeated the words of
Corneille: “The shame is in the crime, not in the scaffold.” The Regent
was inclined however to commute the punishment, but Law and the Abbé
Dubois impressed him with the necessity of preserving the public safety
at a time when everyone carried his wealth about with him. They pointed
out to him that the people would not be satisfied, and would consider
themselves humiliated by a distinction of punishment for a crime so
atrocious.
When his parents lost all hope of pardon from the Regent, the Prince de
Robec Montmorency, and the Marechal d’Isenghen, found means of securing
admission to the prison. They brought poison with them and exhorted
him to take it in order to avoid the shame of the execution, but he
refused. “You wretch,” they declared, leaving him with indignation,
“you are only worthy to die by the hands of the executioner.”
CHAPTER XI
New measures prove ineffectual.--New edict issued fixing price
of shares and depreciating value of notes.--Authorship
of edict.--People hostile to edict.--Parliament refuses
to register it, and a revocation is issued.--Law deposed
from office of Controller-General.--D’Aguessau reinstated
in his former office.--New schemes for absorption of
bank-notes.--Widespread distress produced amongst
community.--Law’s person in danger.--Stock-jobbers establish
themselves in the gardens of the Hotel de Soissons.--Parliament
exiled to Pontoise, and Bank closed for an indefinite period.
[Illustration]
The efforts of Law and of the Regent having as yet proved insufficient
to rectify the balance between the notes in issue and the amount of
specie in the country, the adoption of some final drastic measure was
rendered imperative. A step was taken which has given rise to much
controversy as to its authorship. On 21st May an edict of Council was
issued, the provisions of which were designed to adjust the finances
of the realm by one sweeping process, irrespective of the interests
of individuals, and of a character so radical and effective as to
exclude the possibility of the whim of the speculator from defeating
its object. It not only covered the relations which were to obtain
between the value of notes and specie, but also fixed the price of
shares so that they should not disturb by their fluctuations the
arrangements of the Bank. It enacted that on the date of publication of
the decree bank-notes of all denominations should suffer depreciation
to the extent of 20 per cent. of their value, and that on the first
of each month, from 1st July to 1st December, further depreciation
should take place to the extent of 500 livres on notes of the nominal
value of 10,000 livres, and proportionately on the smaller notes.
Shares were to undergo a similar diminution in value, starting from
8000 livres as at 21st May. On 1st December therefore, all notes would
have reached a discount of 50 per cent., and shares would possess
a fixed value of 5000 livres each. These regulations were to apply
to all financial and industrial negotiations; but one exception was
granted in the case of payment of Royal revenues, and purchase of
state securities such as annuities, where until 1st December all notes
would be received at their full face value. As a possible steadying
influence in so disturbing and so confusing a change, the repeal of the
edict prohibiting the currency of specie was to be withdrawn, and the
standard value of the specie was again to be increased to a more normal
ratio, the silver marc to stand at the value of 30 livres.
In the confusion of authorities it is extremely difficult to apportion
the blame for the publication of the edict. On the one hand, it is
stated that the enemies of Law were the instigators of it, and among
them in particular Dubois and D’Argenson. These two ministers, desiring
nothing more than the downfall of their rival, had suggested two
courses by either of which the great disproportion between the notes
and specie might be immediately accomplished. They pointed out to the
Council that as the notes in issue were double in value the amount of
specie, equality could be obtained by halving the value of the former
or by doubling the value of the latter. Their suggestion possessed the
element of simplicity and appealed very strongly to the other members,
who, after serious discussion, and in spite of the remonstrances of Law
as to its fatal consequences, determined upon dealing with the notes
and leaving the specie at its present standard.
On the other hand, it has been argued that the edict was really the
work of Law and bears evident marks of his financial handiwork. Before
the date of the decree, shares were at 10,000 livres in price, and
the marc was valued at 85 livres. Consequently a share at that price
represented almost 120 marcs. At the date of the last reduction,
shares of 5000 livres would, with the increased ratio of value, return
approximately 165 marcs to the holder, or a net gain of 45 marcs. The
decree, therefore, which seemed to threaten the financial stability of
the nation, would in reality have resulted not only in removing the
difficulties due to the inflated issue of notes, but in benefiting
materially all the shareholders of the company.
It is difficult to believe that Law on such a ground as this was the
author of the decree. There is no contemporaneous evidence of its
having been at any time advanced by himself or his friends in order to
make the decree acceptable to the public, and it had the additional
disadvantage of being unlikely to inspire any confidence. The immediate
result of the decree, and not its probable result in the future, would
be the determining factor in the attitude of the public towards it,
and no one would understand this better than Law himself. It is more
likely that Dubois and D’Argenson were accountable altogether for the
decree, hoping thereby to secure his removal from office and to destroy
the influence he had acquired in the government of the country. Law
had made himself obnoxious to both. He had sought to undermine the
authority of Dubois, and had deposed D’Argenson from the office of
Comptroller General. Their personal jealousy of the great foreigner was
therefore sufficiently deep to take advantage of such an opportunity as
they now had to avenge themselves.
The publication of the edict created universal consternation. The
community were paralysed. The last shred of confidence in Law was
utterly destroyed, and national bankruptcy was feared to be imminent.
The attitude of the people was one of intense hostility, and threatened
to break out at any moment into active riot. Multitudes flocked to the
Bank, and the protection of the troops was required to maintain order.
Nor was the fury of the mob appeased by the knowledge that the Duke of
Bourbon, the Prince of Conti, and Marshall Villeroi, were strenuously
opposed to the edict and demanded its withdrawal. Posters were
exhibited all over the city calling upon the citizens to resist, even
to the extent of using force. Hand-bills were distributed in thousands,
foreboding a step of revolution. “This is to give you notice,” they
ran, “that a St. Bartholomew’s day will be enacted again on Saturday or
Sunday, if affairs do not alter. You are desired not to stir, you nor
your servants. God preserve you from the flames. Give notice to your
neighbours.”
In the midst of this disorder the First President called Parliament
together to consider the situation, and with prompt decision announced
to the Regent their refusal to register the edict. The Regent,
delighted to have this opportunity of reconciling himself with his
Parliament, especially when the occasion allowed him to follow his
own desires, received the parliamentary deputation with the greatest
deference, and gave them assurance of his sympathy. He, accordingly,
sent La Vrillière, one of the Secretaries of State, later on the same
day to announce to the President his intention to withdraw the edict,
and as far as possible restore the _status quo_ which had been so
ruthlessly disturbed. An edict was then published on 27th May, revoking
that of 22nd May, by which shares and notes were allowed to remain at
their previous value. Unfortunately, however, it was now impossible
to restore public confidence. That was irretrievably lost. A blow
had been struck at the system from which it never recovered. Its
collapse may be dated from the ill-conceived edict of 22nd May, and its
subsequent history is merely a record of measures of despair resorted
to for the purpose of saving if possible some portion of the national
credit.
Holders of bank-notes now thought to avail themselves of the
possibility of securing some portion at least of their paper changed
into silver, but Law had foreseen the danger of allowing unlimited
demands being made on the Bank, and suspended payment in order as he
declared to enable him to investigate the circumstances of numerous
frauds of which the Bank’s officials had been guilty. This proceeding,
while demanded by the exigencies of the moment, merely added fuel to
the fire, and the frenzied multitude only awaited the word of command
from a leader to break out into open revolt. The notes in circulation
were practically valueless for purpose of currency, and the greatest
distress accordingly prevailed. The situation could not continue for
many days in its present condition, and Law, in order to relieve the
distress which was now universal, caused several thousand livres in
specie to be sent to each of the commissaries in the city for exchange,
but only to be given to those who satisfied the distributing authority
that they required the specie for immediate wants. Thus again for a few
days at least the inevitable liquidation was postponed.
The Regent was naturally much alarmed at the situation which had been
created. He felt that his own position was largely bound up with
that of Law, and that the hostile attitude of the community might
also be directed against himself. He was urged by Dubois and other
influential advisers to sacrifice Law, and thus secure the good favour
of the community. The Regent, however, was unwilling to sever in a
summary manner his intimacy with Law, but Law himself communicated
his readiness to be discharged from office if the Regent thought it
prudent in the interests of himself and of the nation. On 29th May,
accordingly, the Regent through Le Blanc announced to Law that he
no longer held the position of Comptroller General of Finances, but
that his services would still be retained as director of the Company
and as a member of the Council. At the same time he informed Law
that he intended to provide for his personal safety by giving him
the protection of a detachment of Swiss Guards under the command of
Benzualde. This precautionary measure was by no means superfluous.
Law had been threatened by the mob and would have been stoned on one
occasion while driving in his carriage had he not at the moment been
near his own house and thus escaped. His family had also been subjected
to similar treatment. The provision of a guard was therefore an act of
kindly consideration for the deposed minister. On the day following his
discharge, Law was taken to the Palais Royal by the Duke de la Force,
but the Regent, in order to maintain the appearance of having disgraced
him, refused to see him. The same evening, however, Law was sent for,
and admitted by a secret door, and thus had the desired interview. Two
days after these somewhat peculiar proceedings, Law and the Regent
appeared together in public at the opera, the necessity for continuing
the pretence of disgrace having evidently been regarded as needless.
Law, who acted at this critical period with great good sense,
determined upon advising the Regent to reinstate D’Aguessau in the
office of Chancellor from which he had been instrumental in removing
him. With the assistance of Dubois, to whom Law had communicated
his proposal and who strongly approved of its wisdom, as a prudent
concession to public opinion, the appeal to the Regent was successful.
Since his deposition, the ex-chancellor had lived in retirement on his
estate at Frênes. Thence Law himself, and the Chevalier de Conflans,
an officer of the Regent’s household, were despatched in order to
convey the command of the King to resume his office. D’Aguessau at
first refused to accept the honour, but after considerable pressure and
on representations that the interests of the government lay with his
acceptance, he agreed to receive the seals. D’Argenson was at the same
time deprived of office, but retained all the honours and the position
it had conferred upon him. Law’s own successor was Pelletier des Forts,
and associated with him as colleagues were D’Ormesson and Gaumont.
These three formed a commission of finance, and to them was entrusted
the responsibility of adjusting the finances of the kingdom.
As with Law, the supreme object of the new commission of finance was
the reduction of the volume of bank-notes in circulation and the
establishment of the shares upon a more stable foundation in order to
prevent the extravagant fluctuations to which they had hitherto been
subjected. In their deliberations they were joined by five deputies
of Parliament,--a suggestion of the Regent who wished to impress the
public with the idea that all the measures which might be taken to
deal with the crisis had the approval of that body. The result of
their deliberations was the creation of twenty-five million livres
of annuities secured upon the revenues of Paris. These annuities,
which bore interest at the rate of 2½ per cent., were purchasable in
notes, which were received at their nominal value, and the notes thus
utilised were to be burnt publicly at the Town Hall. At the same time
it was determined to effect a wholesale reduction of the capital of the
Company. The King was proprietor to the extent of 100,000 shares, and
the Company itself held 300,000 shares which had been bought in during
February and March at the rate of 9000 livres per share. These were
now to be cancelled, and 200,000 new shares were to be issued in place
of the 200,000 shares to which the capital was now reduced. The new
shares were to be given to holders of the latter, share for share, with
a liability of 3000 livres payable in notes or at the rate of two new
shares for three old shares, and were to carry a fixed dividend of 360
livres per share. To induce the commercial community to make use of the
facilities which the Bank were willing to afford, it was also arranged
to open credit accounts for their benefit upon which they could operate
to the extent of any deposits they might make in notes. It was hoped
that these accounts would absorb at least 600,000,000 livres in notes,
but so little advantage was taken of them that only about 250,000,000
livres were deposited.
These schemes, however, were only directed to absorption of paper.
They were valueless as means of relieving the distress of those who
were in immediate need of money to satisfy the pressing wants of the
moment. The price of food not only rapidly rose, but shop-keepers
would only accept notes in payment at very high rates of discount,
and in many cases refused to sell unless payment was made in specie.
The distribution of silver by the commissaries had been of a very
limited character, and merely served for the day upon which it was
made. The probability of disturbances arising was strongly impressed
upon the commission of finances unless provision was immediately made
for extensive conversion of notes. It was accordingly arranged that
the Bank should again be opened on 10th June for exchanging notes of
10 livres, and that on 11th June notes of 100 livres should also be
exchanged for those of 10 livres. No more than one note of 10 livres
was convertible into specie for each person, nor of 100 livres into
small notes. These arrangements, designed with the best intentions,
led unfortunately to a very alarming situation. The Bank was besieged
by thousands of people during the few hours its doors were open, and
a guard was stationed within the building to regulate the flow of the
eager and excited multitude. Many were injured and crushed to death
in the vast and unwieldy crowds, and the exasperating slowness of the
process of exchange, by which only an insignificant portion of the
crowd was satisfied each day, culminated not infrequently in attacks
upon the soldiery who were thus under the necessity of charging them in
order to prevent the possibility of the Bank being wrecked.
To relieve the Bank, recourse was had again to the employment of the
district commissaries, whose offices were open on Wednesdays and
Saturdays, but the same scenes were enacted there as at the bank
itself. “The doors,” says Buvat, “were only half open, so that the
money seekers should only enter one by one, and none got in but the
strongest. Most of them brought away nothing but sweat and fatigue
instead of money, because the preferences that the commissaries gave to
their friends had exhausted the funds, and they reserved a portion for
themselves.” This system of decentralising the distribution of specie
was, however, of short duration, the Regent and his advisers fearing
that the creation of numerous centres of disturbance might at any
moment lead to widespread revolt.
Although the distribution of coin continued for several weeks, the
needs of the community were still far from satisfied, and the crowds,
instead of diminishing, grew larger each day. On the morning of 17th
July, the crowd, who had commenced to gather at three o’clock, found
their approach to the Bank protected by barricades so as to render the
task of the guard less difficult in arranging the people in file. This
measure of safety, however, only incited the people to violence, and
determined them to destroy it. In the rush, by which it was hoped to
carry away the barricades, a large number were seriously injured, and
twelve were killed. Three of the bodies were forthwith carried to the
Palais Royal, followed by a concourse of three or four thousand people
thirsting for vengeance, and demanding the lives of Law and the Regent,
both of whom were conceived to be the cause of the prevailing distress.
The scene was impressive, and Paris seemed ready to rise in arms, but
Le Blanc was equal to the situation and acted with promptness and tact.
He ordered the guard at the Tuilleries to proceed at once to the Palais
Royal. He himself reached the palace after the utmost difficulty, and
with the greatest coolness informed the people who he was and that he
had come to plead their case before the Regent. Addressing himself to
those who had carried the bodies, he said, “My children, take these
bodies, carry them to a church, and return to me immediately for
payment.” Surprised by the calmness of the Minister, they obeyed in
spite of themselves, and a considerable portion of the crowd followed
them, partly from curiosity and partly in hope of also participating in
the reward. During their absence the guard arrived and dispersed the
crowd without difficulty, the force of their demonstration having been
destroyed by the removal of the bodies.
At ten o’clock on the same day Law drove to the Palais Royal to speak
with the Regent. On the way he was recognised by the widow of one
of those who had lost their lives earlier in the morning. At once
the people surrounded his carriage and threatened to kill him. By
preserving his usual coolness, however, he succeeded in reaching his
destination without injury. The Regent, after the interview, would not
allow Law to return home, and his carriage on making its appearance
on the streets was again attacked and broken to pieces, the coachman
barely escaping with his life. The news immediately spread through the
city, and the First President who had left the chamber where Parliament
was deliberating, hearing it rushed back to inform the members of what
had happened. They rose to their feet and in excitement asked if Law
too had been torn to pieces, but on the President replying that he was
ignorant of all that had occurred, they adjourned the sitting in order
that they might carry the news to their friends.
Since the Rue Quincampoix had been closed to the stock-jobbers no place
had been allotted to them for carrying on their business. Transactions,
however, were not less numerous now than they were before, and the
events of the past few months did not destroy speculation in the shares
of the company. The extreme inconvenience of having no recognised place
for meeting induced the Regent to consider the appeals made to him,
and accordingly on 2nd June they were allowed to establish themselves
in the Place Vendôme. In the beautiful open square, of which the
Place Vendôme consisted, assembled daily the fashionable Parisians of
the day. Tents were erected for the accommodation of stock-jobbers,
and the host of gamesters, saloon-keepers and others who catered for
the pleasures of the crowd. The noise however of the great multitude
of people proved a source of much annoyance to the Chancellor whose
court was held in the vicinity, and on his complaint being made to the
Regent it was necessary to arrange for the removal again of the place
of exchange. Thereupon the Prince de Carignan sold to Law his Hotel de
Soissons at the price of 1,400,000 livres, reserving the gardens which
extended to several acres. In these the Prince erected a large number
of tents for the jobbers which he let at 500 livres per month, the
revenue from all producing about 500,000 livres per annum. In order
to secure that the tents should be utilised, the Prince succeeded in
obtaining an edict prohibiting the conclusion of any transaction except
in one of them, and this was done under pretext of providing against
the loss and theft of pocket-books containing money. For three months
the stock-exchange of Paris was held in the gardens of the Hotel de
Soissons, and on 29th October, stock-jobbing was entirely prohibited,
a penalty of 3000 livres being imposed upon any one found dealing in
shares or notes.
A few days before the outbreak at the Palais Royal, the Regent on the
advice of Law had drawn up an edict, conferring in perpetuity upon the
Company the whole commercial rights and privileges of the kingdom on
condition that it liquidated within a year 600,000,000 livres of bank
notes by monthly instalments of 50,000,000 livres each. The operation
of this edict would have had the effect of re-establishing the Company
as a sound commercial undertaking and of removing from circulation the
unsecured paper issue afloat, but this would only have been possible
at the cost of ruining the whole community of private traders or at
least of placing them at the mercy of the Company which might exercise
their proposed privileges in an arbitrary and despotic manner. On the
16th of July the draft-edict was submitted for approval to the Council
of the Regency, and this body agreed to send it for registration to
the Parliament. The following day accordingly it was deliberated upon
by that assembly, who refused to give it effect, 148 members going so
far as to support a proposal that it should be returned to the Regent
without acknowledgment or reply.
[Illustration: CARDINAL DUBOIS.]
This unexpected check to the plans of the Regent and of Law produced
the greatest consternation at court. They feared that the people would
by the refusal infer the sympathy of Parliament with their position
and might be encouraged to break out into revolt, although the refusal
had not proceeded from motives so high and disinterested, but from
feelings of opposition to Law and to every proposal he might suggest
that would tend to rehabilitate confidence in the Company. The Regent,
with Law, Dubois, and Le Blanc, then resolved in secret council upon
the banishment of Parliament to Blois. The musketeers with four
thousand soldiers were immediately put in readiness to accompany the
refractory assembly on its journey on the following day. The musketeers
were to surround the resident of the First President, and the soldiers
were to take possession of the Grand Chamber early in the morning,
and orders were to be conveyed to all the members that they were to
betake themselves to their place of exile within 48 hours. At the last
minute, however, D’Aguessau prevailed upon the Regent to send the
members to Pontoise, a place within easy reach of Paris, instead of to
Blois where it was hoped they would have sooner submitted to his wishes
by reason of the many discomforts and inconveniences they would
undergo owing to its greater distance from the capital. The members,
accordingly, proceeded on 21st July to Pontoise in a body without
demur, determined to maintain their authority and equally determined
to enjoy the term of their exile. The change of place of exile and all
the circumstances connected with it converted what was intended as a
punishment into proceedings of a highly ridiculous character. In order
to assist those who might require money for their journey, the Regent
sent to the Attorney General 100,000 livres in silver and a similar
amount in notes. The First President was allowed a considerable sum in
addition for his own expenses and drew from the Regent no less than
500,000 livres in all. “He kept open table for the Parliament; all
were every day at liberty to use it if they liked, so that there were
always several tables all equally, delicately, and splendidly served.
He sent, too, to those who asked for them, liquors, &c., as they could
desire. Cooling drinks and fruits of all kinds were abundantly served
every afternoon, and there were a number of little one and two horse
vehicles always ready for the ladies and old men who liked a drive,
besides play-tables in the apartments until supper time. A large number
of the members of the Parliament did not go to Pontoise at all, but
took advantage of the occasion to recreate themselves in the country.
Only a few of the younger members mounted guard in the assembly, where
nothing but the most trivial and make-believe business was conducted.
Everything important was deliberately neglected. The Parliament, in
a word, did nothing but divert itself, leave all business untouched,
and laugh at the Regent and the government.” The Parliament adhered to
their resolution to refuse to register the edict, and remained in exile
till 17th December.
Thus the final grand expedient of Law to restore the Company’s fortunes
was destroyed.
On the 17th of July an edict was published which prohibited the people
from assembling in crowds, under pain of heavy penalties, and it was
also declared to be necessary in the interests of public peace and
safety to close the Bank for an indefinite period, and that no further
notes could be received there for conversion into coin.
CHAPTER XII
Starvation produced amongst poorer classes by issue of new
edict.--Law’s expulsion from France demanded.--Law resigns
all his offices and leaves for Venice.--Privileges of Company
withdrawn.--Commission appointed to value unliquidated
securities.--Law in vain applies for recovery of a portion
of his wealth.--His death at Venice.--Attitude of French
people towards Law.--Circumstances to be considered in passing
judgment.
[Illustration]
The creation of 25 millions of perpetual annuities at 2½ per cent.
and 4 millions of life annuities at 4 per cent. in June as a means of
absorbing notes to that extent was not attended with the success which
had been anticipated. While the interest was small, it yet offered
greater security than the notes themselves afforded, and on that
ground alone ought to have appealed to holders of large amounts who
were debarred by edicts from employing their paper in other directions
for investment. Only a few possessed sufficient confidence to take
advantage of the annuities, and the issue was accordingly of very
insignificant amount. Law, however, was determined to secure the issue
of the whole amount, and if necessary to do so by artificial means.
His determination was made the stronger by the refusal of Parliament
to agree to his last proposal. Accordingly, on 15th August, an edict
was published which declared that all notes of 1000 livres in value and
upwards should have no currency and would be regarded as cancelled,
except those which were utilised either for purchase of annuities, or
for opening credit accounts at the Bank, or for the payment of the
uncalled liability on the new shares issued by the Company. This was
followed by a second edict on 10th October, containing provisions of a
similar nature with reference to all other notes, and requiring their
utilisation before 1st November.
These drastic regulations had the effect of withdrawing from
circulation a large quantity of paper, but still there were many
holders who refused to part with their notes although rapidly becoming
valueless. Some refused in the belief that their wealth might probably
in the future become more liquid at its nominal value; others because
their paper was required for ordinary daily purposes and could not
therefore be spared for permanent investment. As a result, the country
found itself at 1st November in possession of notes of enormous
aggregate value which had automatically become absolutely worthless.
Since the issue of the edicts, the trading community refused to
accept payment in notes of goods supplied except at ruinous rates of
discount, amounting in instances to 80 and 90 per cent. Provisions
and all classes of necessaries reached extravagant prices, and being
unattainable by the poorer people, starvation reigned in the homes of
thousands not only in Paris itself but also in the provinces. Decrees
were issued fixing the maximum prices of food, but these were openly
disregarded by every merchant, who could not have sold at the prices
named without incurring loss to themselves. The difficulty in securing
food and other necessaries had also been increased by the operations
of wealthy speculators, who during the previous months of the year had
purchased all available supplies with the paper in their possession and
stored them in secret places or transported them from the country for
realisation and for investment of the proceeds in foreign securities.
Complaints, accordingly, continually reached the Government from
those who were unable to satisfy the demands of the traders, and the
Government was compelled to visit the culprits with the penalties they
had power to impose, which included not only physical punishment but
confiscation of all their goods, and frequently the payment of a heavy
fine. The bakers of Paris suffered most from the tyrannical edicts,
and on one occasion no fewer than eighteen were fined, placed in the
stocks, and had their goods confiscated.
The final edict, published during the period of Law’s management of
the Bank and of the Company, appeared on 24th October, which directed
that all the original shareholders of the Company who still retained
their shares should deposit these with the Company, and that those
who had sold the whole or part of their shares should now purchase
the necessary number from the Company to make up the total of their
original holdings at the price of 13,500 livres per share. To provide
for the new purchases which this edict required an additional 50,000
shares were created, so that on the assumption that this number
represented the minimum necessary to make up the deficiencies of
holdings the Company would have absorbed over 600,000,000 livres
of depreciated paper. But the edict contained the elements of its
own destruction. It was impossible of accomplishment. The victims
refused to purchase from the Company shares for 13,500 livres which
were obtainable in the market for a mere tithe of that sum, and many
of them immediately prepared to leave the country with all their
belongings. So general were these preparations that no person was
allowed to cross the frontier without the permission of the Regent on
pain of death. The closest watch was kept upon all the main highways,
and numerous arrests were made of suspected emigrants. Many millions
of livres and considerable quantities of plate and jewellery, which
their possessors attempted to smuggle across the frontiers, were
seized and appropriated, the culprits being sent back to Paris to
undergo punishment. In no case however was the extreme penalty imposed,
confiscation and ruin being mercifully judged sufficient punishment.
Law’s position was now becoming highly critical. On the one hand the
people were clamouring for his expulsion from the country, and even for
his life. On the other hand, the Parliament, still at Pontoise, had not
forgotten the author of their exile. His ingenuity had been used to
the utmost to escape from the daily accumulating complications which
surrounded him. All his efforts had failed in their purpose, and now he
was resourceless. He stood alone a foreigner in a hostile country. His
erstwhile friends had now deserted him, the tie of friendship broken
by his inability to further increase their fortunes. One man, and one
alone, the Regent himself, remained faithful to the last, and yet not
openly. The safety of the crown forbade the Regent from employing his
influence and power in order to retain the financier in his service,
and prohibited him from ignoring indefinitely the demands of the people.
Law, accordingly, perceiving the extreme folly and danger of further
continuing to direct the affairs of the Bank and of the Company,
resolved after consultation with the Regent to resign the offices he
still retained. He was anxious to leave the country at the same time,
but the Regent considered such a step impolitic and refused to grant
permission. He was allowed, however, to leave Paris, and retire to his
estate at Guermande, which he did on 13th December. At the interview he
had with the Regent before his departure, he advised the appointment
of Pelletier de la Houssaye as Controller General of Finances, and
in referring to the failure of his schemes is said to have remarked,
“I confess I have committed many faults. I committed them because I
am a man, and all men are liable to error; but I declare to you most
solemnly that none of them proceeded from wicked or dishonest motives,
and that nothing of that kind will be found in the whole course of my
conduct.” Two days after his departure, Law received from the Regent a
letter according permission to depart from the kingdom, and informing
him that the Duke of Bourbon had been ordered to send him the necessary
passports and such money as he might require for his journey. Two
messengers arrived at Guermande on the following day, bringing the
passports and a large sum of money, but Law respectfully refused to
accept the latter. The postchaise of Madame de Prié, with an escort of
six horse guards was also sent for his conveyance, and in it he set
out with his son for Brussels on 16th December. On his way Law was
unfortunately recognised by the Governor of Valenciennes and arrested
as an ordinary fugitive from the kingdom. This was due to Law having
offered passports drawn in another name, his identity being known to
the Governor. He thereupon produced a second passport in his own name,
but this only served to increase the perplexity of the Governor, who
replied that the authorities frequently granted to men such as he,
passports of convenience, because they had not the courage to refuse
and that therefore he was still bound to prevent his departure. Law
then produced a letter from the Regent to the Duke of Bourbon, in
which the passports had been forwarded, and having thus satisfied the
Governor of their genuineness he was allowed to proceed. On arrival at
Brussels, on 22nd December, he was welcomed by the Marquis de Prié,
Governor of the Imperial Low Countries, and enjoyed his hospitality
while he rested before resuming his journey to Venice. Of all his vast
wealth he took with him into exile the small sum of 36,000 livres,
and two diamond rings of great value, one of which he sent to Madame
de Prié on returning her carriage to her from Brussels. Law’s wife
and daughter remained in Paris for a short time after his departure,
but joined him later in Venice after having realised sufficient to
discharge all household debts due by them.
The rumour of Law’s flight soon spread throughout Paris, and the Duke
of Bourbon was saddled by the community with the responsibility of
allowing his escape. The Regent, who had instructed permission to
be given, had by acting through the Duke relieved himself, so far
as the public were concerned, of any blame in the matter. He had
displayed considerable astuteness in thus shifting the responsibility,
but he had not been altogether disinterested in the safety of the
fugitive, and had not acted from motives of friendship alone. The
meeting of the Regency Council held, on 26th January, to consider the
financial situation, disclosed a set of circumstances of a highly
incriminating character against the Regent, and revealed the extreme
advisability on his part of securing the departure of Law before the
return of Parliament to Paris, lest that assembly should cause him to
be arrested. The new Controller General had since his appointment on
12th December been occupied in the attempt to unravel the complicated
finances of the kingdom, and had prepared a report for submission to
the Council. This was in fact the first occasion upon which the members
had been fully acquainted with the actual position, their complete
subservience to the Regent having hitherto caused them to acquiesce in
all the proposals presented to them for approval.
La Houssaye reported that since the 22nd of May 600,000,000 livres
of bank notes had been issued by Law for which there had been no
authorisation by the Council, or by the proprietors of the Bank. The
question was discussed as to whether the State or the Bank were in
the circumstances debtors to the holders, since the liability should
be determined according as they agreed that Law had issued them as
Controller General or as manager of the Bank. The Duke of Bourbon took
the side of the Bank and was supported in his contention by the Prince
of Conti. La Houssaye, however, was firm in his opinion that the excess
of notes should be met by the Bank, although it appeared that decrees
had been issued by the Regent of which the Council were ignorant. The
Regent, pressed by the Duke to give an explanation of his proceedings,
stated that Law had created the notes on his own authority alone and
that in order to save him from the possible consequences of his action,
he had validated the notes by antedated decrees. “Then,” replied the
Duke, “Law in reality created these notes by your orders; otherwise
you would not have allowed him to leave the kingdom and escape the
consequences of a capital crime.” The Regent retorted, “It was you who
handed him the passports.” “It is true,” said the Duke, “but it was you
who sent them to me. I never asked for them; you wished that he should
leave the kingdom; and I can very easily explain the circumstances to
the King and to the Council. I never advised that Law should depart,
but I was opposed to his being handed over to the Parliament, because
I believed that it was not to your interest to sanction this after
having made use of him as you had; but I never asked you to let him
leave the realm, and I beg you in presence of the King and before all
these gentlemen to say if I ever did.” “At least,” said the Regent, “I
did not order you to lend him your carriage, nor a guard to escort him;
you interested yourself more in him than it was my intention. I allowed
him to leave because his presence might have injured public credit and
prejudice our recovery from the misfortunes into which we have fallen.”
It was clear to all those who were present that both the Duke and
the Regent were equally afraid to have left Law to the mercy of the
Parliament, as he might have proved them authors and accomplices of all
that he had done. In their own interests, they had both played their
parts badly at the Council table, but all recognised that the Duke only
played a very minor part in the affair, and that the Regent throughout
had been the real culprit, having compelled Law to issue the notes in
order that he might satisfy his own extravagant pleasures.
Notwithstanding the efforts of the Duke of Bourbon and of the Prince
of Conti to make the government responsible for the excess of notes,
and thus relieve the shareholders by increasing the free assets upon
which they could claim in liquidation, La Houssaye gained his point,
and reported that the public debt including the shares of the Company
amounted to over thirty-one hundred million livres and bore interest
to the extent of almost a hundred million livres per annum. So great
a charge upon the revenues of the State could not be faced by the
Government, but he recognised it was necessary to minimise as far as
possible the loss which would require to be borne by the shareholders
and possessors of bank notes, who, it was estimated numbered no less
than 100,000 families. He accordingly proposed to withdraw all the
privileges of the Company as far as these related to the management of
the national revenues, and reduce it to the position of a mere trading
concern. He would submit to the closest scrutiny the history of every
individual holding either shares or notes and those which were tainted
with speculation would be subject to cancellation. A commission would
be appointed under whose supervision the work of investigation would
be carried on, and all those who failed to submit their securities for
adjudication before 1st August would be deprived entirely of any right
to have a value placed upon their securities.
A decree to this effect was issued on 4th February, and immediately
thereafter the Commission set to work. The task of investigation which
covered transactions over half a million in number, and of a value
of over 3000,000,000 livres, was entrusted to the brothers Paris,
who employed for the purpose a staff of 800 clerks. To simplify the
gigantic task, securities were cast into five categories according
as they were (1) Reimbursements made by the King, (2) Reimbursements
between private individuals, (3) Sales of real property, (4) Sales of
personal property, (5) Purely speculative transactions. All securities
embraced in the fifth class were cancelled without consideration. The
first were untouched because of their origin. The other three classes
were subjected to reduction, ranging from five to ninety-five per
cent. By the end of 1721, the Commission were in a position to deliver
their decision upon the first batch of securities, and by the end of
the following year to finally bring their work to a conclusion. As a
result of the investigation, 1000 million livres of securities were
altogether cancelled, leaving a public debt of 2000 million livres
bearing annual interest amounting to 48 million livres. The capital of
the Company which had before the commission amounted to 200,000 shares
was reduced to 56,000 shares of the value of 500 livres each, bearing a
fixed dividend of 100 livres for the first year, and 150 livres during
subsequent years, guaranteed by the Government and subject to increase,
should the profits of the Company warrant it.
In the fifth category of securities the brothers Paris caused the
whole of the properties belonging to Law and to his brother William
to be classed, an act of revenge for the failure of the Anti-Scheme
with which they had identified themselves three years before. Law made
several efforts to recover at least a portion of his wealth, but they
were of no avail, and the subsequent years of his life were years
of misery and often times direst poverty. After wandering about the
Continent for several months, he returned to England in October, 1721,
and resided in London until 1725, in which year he returned to Venice,
whither he had proceeded on his departure from France. Here he remained
until his death on 21st March, 1729, leading the precarious life of a
gambler and general speculator and leaving at his death the valuable
ring which alone had escaped the arbitrary and cruel proceedings of his
enemies in France.
For several generations after the downfall of the System, Law was
held in deep and bitter hatred by the people of France. The name of
the author of the System was associated, not unnaturally, with the
financial ruin which it brought to so many individuals, and it was
convenient that those who were really responsible for its disastrous
end should foster that attitude of hostility to the man who was now
unable to appeal to the better reason of the people. It is perfectly
clear that at no time did Law seek to advance alone his own material
interests by the schemes he put into operation. No circumstance reveals
this more clearly than the fact that at the date of his flight all his
possessions were in France and that no attempt was made by him during
the latter half of 1720 to transfer any part of his wealth to foreign
countries for safety, although events were at that period rapidly
leading to a financial collapse and determining many to pursue such a
course as a measure of prudent provision for the future. Law himself
puts this very forcibly in a letter written on 15th October, 1724,
to the Duke of Bourbon, in which he seeks that nobleman’s interest
on his behalf in his efforts to secure the restitution of at least a
portion of the wealth he left behind him. The Company owes its birth
to me. “For them I have sacrificed everything, even my property and my
credit, being now bankrupt, not only in France, but also in all other
countries. For them I have sacrificed the interest of my children,
whom I tenderly love, and who are deserving of all my affection; these
children, courted by the most considerable families in France, are
now destitute of fortune and of establishments. I had it in my power
to have settled my daughter in marriage in the first houses of Italy,
Germany, and England; but I refused all offers of that nature, thinking
it inconsistent with my duty to, and my affection for, the state in
whose service I had the honour to be engaged. I do not assume to myself
any merit from this conduct, and I never so much as spoke upon the
subject to the Regent. But I cannot help observing that this mode of
behaviour is diametrically opposite to the idea my enemies wish to
impute to me; and surely all Europe ought to have a good opinion of my
disinterestedness, and of the condition to which I am reduced, since I
no longer receive any proposals of marriage for my children.
“My Lord, I conducted myself with a still greater degree of delicacy,
for I took care not to have my son or my daughter married even in
France, although I had the most splendid and advantageous offers of
that kind. I did not choose that any part of my protection should be
owing to alliances, but that it should depend solely upon the intrinsic
merits of my project.”
In passing judgment upon Law, it is necessary to remember that the
principles upon which he proceeded while he had himself absolute
control of the management of his System were economically sound.
Elements of unsoundness only appeared from the time when the management
passed under the supervision of the Regent. He it was who insisted
upon the adoption of measures which to Law appeared fraught with
the gravest consequences and which he was unable to resist. Had Law
been able to work out his own designs, unhampered by the dictation
of the Regent, it is conceivable that he might in time have realised
his ambition of placing the finances of his adopted country upon a
just and stable foundation. Even as it was he succeeded to an extent
surprising in the circumstances. Financial corruption was no longer
possible to the great extent to which it proceeded in the days of Louis
XIV. Numerous offices in the patronage of the Government to which
large emoluments and no duties were attached, and many privileges and
monopolies which had hitherto checked the progress of industry, were
abolished never to be revived. Agriculture improved, new industries
arose, valuable public works were undertaken, and in general, a
healthier industrial atmosphere was created throughout the country.
That France did not take full advantage of the great principles of
sound industrial progress which were formulated for them and advocated
by Law was neither the fault of him nor of his System. It was the fault
of the people themselves, who were yet to find that resort to violence
was to prove the only means of removing the great obstacles which stood
in the way of their advancement as a nation.
THE END
W. JOLLY & SONS, PRINTERS, ABERDEEN
Transcriber’s Notes
Larger versions of most illustrations may be seen by right-clicking
them and selecting an option to view them separately, or by
double-tapping and/or stretching them.
Punctuation, hyphenation, and spelling were made consistent when a
predominant preference was found in the original book; otherwise they
were not changed.
Simple typographical errors were corrected; unbalanced quotation
marks were remedied when the change was obvious, and otherwise left
unbalanced.
Illustrations in this eBook have been positioned between paragraphs
and outside quotations. In versions of this eBook that support
hyperlinks, the page references in the List of Illustrations lead to
the corresponding illustrations.
The illustrations at the beginnings of the chapters are decorative.
They are not illustrated letters, but simple line drawings within
“L”-shaped borders.
The text uses “Orléans” and “Orleans” with about equal frequency, so
both have been retained here. Other frequent omissions of accent marks
have been corrected only when there was a predominant pattern to their
usage.
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