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.