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.