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.