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.”