Starvation produced amongst poorer classes by issue of new
edict.--Law’s expulsion from France demanded.--Law resigns
all his offices and leaves for Venice.--Privileges of Company
withdrawn.--Commission appointed to value unliquidated
securities.--Law in vain applies for recovery of a portion
of his wealth.--His death at Venice.--Attitude of French
people towards Law.--Circumstances to be considered in passing
judgment.
[Illustration]
The creation of 25 millions of perpetual annuities at 2½ per cent.
and 4 millions of life annuities at 4 per cent. in June as a means of
absorbing notes to that extent was not attended with the success which
had been anticipated. While the interest was small, it yet offered
greater security than the notes themselves afforded, and on that
ground alone ought to have appealed to holders of large amounts who
were debarred by edicts from employing their paper in other directions
for investment. Only a few possessed sufficient confidence to take
advantage of the annuities, and the issue was accordingly of very
insignificant amount. Law, however, was determined to secure the issue
of the whole amount, and if necessary to do so by artificial means.
His determination was made the stronger by the refusal of Parliament
to agree to his last proposal. Accordingly, on 15th August, an edict
was published which declared that all notes of 1000 livres in value and
upwards should have no currency and would be regarded as cancelled,
except those which were utilised either for purchase of annuities, or
for opening credit accounts at the Bank, or for the payment of the
uncalled liability on the new shares issued by the Company. This was
followed by a second edict on 10th October, containing provisions of a
similar nature with reference to all other notes, and requiring their
utilisation before 1st November.
These drastic regulations had the effect of withdrawing from
circulation a large quantity of paper, but still there were many
holders who refused to part with their notes although rapidly becoming
valueless. Some refused in the belief that their wealth might probably
in the future become more liquid at its nominal value; others because
their paper was required for ordinary daily purposes and could not
therefore be spared for permanent investment. As a result, the country
found itself at 1st November in possession of notes of enormous
aggregate value which had automatically become absolutely worthless.
Since the issue of the edicts, the trading community refused to
accept payment in notes of goods supplied except at ruinous rates of
discount, amounting in instances to 80 and 90 per cent. Provisions
and all classes of necessaries reached extravagant prices, and being
unattainable by the poorer people, starvation reigned in the homes of
thousands not only in Paris itself but also in the provinces. Decrees
were issued fixing the maximum prices of food, but these were openly
disregarded by every merchant, who could not have sold at the prices
named without incurring loss to themselves. The difficulty in securing
food and other necessaries had also been increased by the operations
of wealthy speculators, who during the previous months of the year had
purchased all available supplies with the paper in their possession and
stored them in secret places or transported them from the country for
realisation and for investment of the proceeds in foreign securities.
Complaints, accordingly, continually reached the Government from
those who were unable to satisfy the demands of the traders, and the
Government was compelled to visit the culprits with the penalties they
had power to impose, which included not only physical punishment but
confiscation of all their goods, and frequently the payment of a heavy
fine. The bakers of Paris suffered most from the tyrannical edicts,
and on one occasion no fewer than eighteen were fined, placed in the
stocks, and had their goods confiscated.
The final edict, published during the period of Law’s management of
the Bank and of the Company, appeared on 24th October, which directed
that all the original shareholders of the Company who still retained
their shares should deposit these with the Company, and that those
who had sold the whole or part of their shares should now purchase
the necessary number from the Company to make up the total of their
original holdings at the price of 13,500 livres per share. To provide
for the new purchases which this edict required an additional 50,000
shares were created, so that on the assumption that this number
represented the minimum necessary to make up the deficiencies of
holdings the Company would have absorbed over 600,000,000 livres
of depreciated paper. But the edict contained the elements of its
own destruction. It was impossible of accomplishment. The victims
refused to purchase from the Company shares for 13,500 livres which
were obtainable in the market for a mere tithe of that sum, and many
of them immediately prepared to leave the country with all their
belongings. So general were these preparations that no person was
allowed to cross the frontier without the permission of the Regent on
pain of death. The closest watch was kept upon all the main highways,
and numerous arrests were made of suspected emigrants. Many millions
of livres and considerable quantities of plate and jewellery, which
their possessors attempted to smuggle across the frontiers, were
seized and appropriated, the culprits being sent back to Paris to
undergo punishment. In no case however was the extreme penalty imposed,
confiscation and ruin being mercifully judged sufficient punishment.
Law’s position was now becoming highly critical. On the one hand the
people were clamouring for his expulsion from the country, and even for
his life. On the other hand, the Parliament, still at Pontoise, had not
forgotten the author of their exile. His ingenuity had been used to
the utmost to escape from the daily accumulating complications which
surrounded him. All his efforts had failed in their purpose, and now he
was resourceless. He stood alone a foreigner in a hostile country. His
erstwhile friends had now deserted him, the tie of friendship broken
by his inability to further increase their fortunes. One man, and one
alone, the Regent himself, remained faithful to the last, and yet not
openly. The safety of the crown forbade the Regent from employing his
influence and power in order to retain the financier in his service,
and prohibited him from ignoring indefinitely the demands of the people.
Law, accordingly, perceiving the extreme folly and danger of further
continuing to direct the affairs of the Bank and of the Company,
resolved after consultation with the Regent to resign the offices he
still retained. He was anxious to leave the country at the same time,
but the Regent considered such a step impolitic and refused to grant
permission. He was allowed, however, to leave Paris, and retire to his
estate at Guermande, which he did on 13th December. At the interview he
had with the Regent before his departure, he advised the appointment
of Pelletier de la Houssaye as Controller General of Finances, and
in referring to the failure of his schemes is said to have remarked,
“I confess I have committed many faults. I committed them because I
am a man, and all men are liable to error; but I declare to you most
solemnly that none of them proceeded from wicked or dishonest motives,
and that nothing of that kind will be found in the whole course of my
conduct.” Two days after his departure, Law received from the Regent a
letter according permission to depart from the kingdom, and informing
him that the Duke of Bourbon had been ordered to send him the necessary
passports and such money as he might require for his journey. Two
messengers arrived at Guermande on the following day, bringing the
passports and a large sum of money, but Law respectfully refused to
accept the latter. The postchaise of Madame de Prié, with an escort of
six horse guards was also sent for his conveyance, and in it he set
out with his son for Brussels on 16th December. On his way Law was
unfortunately recognised by the Governor of Valenciennes and arrested
as an ordinary fugitive from the kingdom. This was due to Law having
offered passports drawn in another name, his identity being known to
the Governor. He thereupon produced a second passport in his own name,
but this only served to increase the perplexity of the Governor, who
replied that the authorities frequently granted to men such as he,
passports of convenience, because they had not the courage to refuse
and that therefore he was still bound to prevent his departure. Law
then produced a letter from the Regent to the Duke of Bourbon, in
which the passports had been forwarded, and having thus satisfied the
Governor of their genuineness he was allowed to proceed. On arrival at
Brussels, on 22nd December, he was welcomed by the Marquis de Prié,
Governor of the Imperial Low Countries, and enjoyed his hospitality
while he rested before resuming his journey to Venice. Of all his vast
wealth he took with him into exile the small sum of 36,000 livres,
and two diamond rings of great value, one of which he sent to Madame
de Prié on returning her carriage to her from Brussels. Law’s wife
and daughter remained in Paris for a short time after his departure,
but joined him later in Venice after having realised sufficient to
discharge all household debts due by them.
The rumour of Law’s flight soon spread throughout Paris, and the Duke
of Bourbon was saddled by the community with the responsibility of
allowing his escape. The Regent, who had instructed permission to
be given, had by acting through the Duke relieved himself, so far
as the public were concerned, of any blame in the matter. He had
displayed considerable astuteness in thus shifting the responsibility,
but he had not been altogether disinterested in the safety of the
fugitive, and had not acted from motives of friendship alone. The
meeting of the Regency Council held, on 26th January, to consider the
financial situation, disclosed a set of circumstances of a highly
incriminating character against the Regent, and revealed the extreme
advisability on his part of securing the departure of Law before the
return of Parliament to Paris, lest that assembly should cause him to
be arrested. The new Controller General had since his appointment on
12th December been occupied in the attempt to unravel the complicated
finances of the kingdom, and had prepared a report for submission to
the Council. This was in fact the first occasion upon which the members
had been fully acquainted with the actual position, their complete
subservience to the Regent having hitherto caused them to acquiesce in
all the proposals presented to them for approval.
La Houssaye reported that since the 22nd of May 600,000,000 livres
of bank notes had been issued by Law for which there had been no
authorisation by the Council, or by the proprietors of the Bank. The
question was discussed as to whether the State or the Bank were in
the circumstances debtors to the holders, since the liability should
be determined according as they agreed that Law had issued them as
Controller General or as manager of the Bank. The Duke of Bourbon took
the side of the Bank and was supported in his contention by the Prince
of Conti. La Houssaye, however, was firm in his opinion that the excess
of notes should be met by the Bank, although it appeared that decrees
had been issued by the Regent of which the Council were ignorant. The
Regent, pressed by the Duke to give an explanation of his proceedings,
stated that Law had created the notes on his own authority alone and
that in order to save him from the possible consequences of his action,
he had validated the notes by antedated decrees. “Then,” replied the
Duke, “Law in reality created these notes by your orders; otherwise
you would not have allowed him to leave the kingdom and escape the
consequences of a capital crime.” The Regent retorted, “It was you who
handed him the passports.” “It is true,” said the Duke, “but it was you
who sent them to me. I never asked for them; you wished that he should
leave the kingdom; and I can very easily explain the circumstances to
the King and to the Council. I never advised that Law should depart,
but I was opposed to his being handed over to the Parliament, because
I believed that it was not to your interest to sanction this after
having made use of him as you had; but I never asked you to let him
leave the realm, and I beg you in presence of the King and before all
these gentlemen to say if I ever did.” “At least,” said the Regent, “I
did not order you to lend him your carriage, nor a guard to escort him;
you interested yourself more in him than it was my intention. I allowed
him to leave because his presence might have injured public credit and
prejudice our recovery from the misfortunes into which we have fallen.”
It was clear to all those who were present that both the Duke and
the Regent were equally afraid to have left Law to the mercy of the
Parliament, as he might have proved them authors and accomplices of all
that he had done. In their own interests, they had both played their
parts badly at the Council table, but all recognised that the Duke only
played a very minor part in the affair, and that the Regent throughout
had been the real culprit, having compelled Law to issue the notes in
order that he might satisfy his own extravagant pleasures.
Notwithstanding the efforts of the Duke of Bourbon and of the Prince
of Conti to make the government responsible for the excess of notes,
and thus relieve the shareholders by increasing the free assets upon
which they could claim in liquidation, La Houssaye gained his point,
and reported that the public debt including the shares of the Company
amounted to over thirty-one hundred million livres and bore interest
to the extent of almost a hundred million livres per annum. So great
a charge upon the revenues of the State could not be faced by the
Government, but he recognised it was necessary to minimise as far as
possible the loss which would require to be borne by the shareholders
and possessors of bank notes, who, it was estimated numbered no less
than 100,000 families. He accordingly proposed to withdraw all the
privileges of the Company as far as these related to the management of
the national revenues, and reduce it to the position of a mere trading
concern. He would submit to the closest scrutiny the history of every
individual holding either shares or notes and those which were tainted
with speculation would be subject to cancellation. A commission would
be appointed under whose supervision the work of investigation would
be carried on, and all those who failed to submit their securities for
adjudication before 1st August would be deprived entirely of any right
to have a value placed upon their securities.
A decree to this effect was issued on 4th February, and immediately
thereafter the Commission set to work. The task of investigation which
covered transactions over half a million in number, and of a value
of over 3000,000,000 livres, was entrusted to the brothers Paris,
who employed for the purpose a staff of 800 clerks. To simplify the
gigantic task, securities were cast into five categories according
as they were (1) Reimbursements made by the King, (2) Reimbursements
between private individuals, (3) Sales of real property, (4) Sales of
personal property, (5) Purely speculative transactions. All securities
embraced in the fifth class were cancelled without consideration. The
first were untouched because of their origin. The other three classes
were subjected to reduction, ranging from five to ninety-five per
cent. By the end of 1721, the Commission were in a position to deliver
their decision upon the first batch of securities, and by the end of
the following year to finally bring their work to a conclusion. As a
result of the investigation, 1000 million livres of securities were
altogether cancelled, leaving a public debt of 2000 million livres
bearing annual interest amounting to 48 million livres. The capital of
the Company which had before the commission amounted to 200,000 shares
was reduced to 56,000 shares of the value of 500 livres each, bearing a
fixed dividend of 100 livres for the first year, and 150 livres during
subsequent years, guaranteed by the Government and subject to increase,
should the profits of the Company warrant it.
In the fifth category of securities the brothers Paris caused the
whole of the properties belonging to Law and to his brother William
to be classed, an act of revenge for the failure of the Anti-Scheme
with which they had identified themselves three years before. Law made
several efforts to recover at least a portion of his wealth, but they
were of no avail, and the subsequent years of his life were years
of misery and often times direst poverty. After wandering about the
Continent for several months, he returned to England in October, 1721,
and resided in London until 1725, in which year he returned to Venice,
whither he had proceeded on his departure from France. Here he remained
until his death on 21st March, 1729, leading the precarious life of a
gambler and general speculator and leaving at his death the valuable
ring which alone had escaped the arbitrary and cruel proceedings of his
enemies in France.
For several generations after the downfall of the System, Law was
held in deep and bitter hatred by the people of France. The name of
the author of the System was associated, not unnaturally, with the
financial ruin which it brought to so many individuals, and it was
convenient that those who were really responsible for its disastrous
end should foster that attitude of hostility to the man who was now
unable to appeal to the better reason of the people. It is perfectly
clear that at no time did Law seek to advance alone his own material
interests by the schemes he put into operation. No circumstance reveals
this more clearly than the fact that at the date of his flight all his
possessions were in France and that no attempt was made by him during
the latter half of 1720 to transfer any part of his wealth to foreign
countries for safety, although events were at that period rapidly
leading to a financial collapse and determining many to pursue such a
course as a measure of prudent provision for the future. Law himself
puts this very forcibly in a letter written on 15th October, 1724,
to the Duke of Bourbon, in which he seeks that nobleman’s interest
on his behalf in his efforts to secure the restitution of at least a
portion of the wealth he left behind him. The Company owes its birth
to me. “For them I have sacrificed everything, even my property and my
credit, being now bankrupt, not only in France, but also in all other
countries. For them I have sacrificed the interest of my children,
whom I tenderly love, and who are deserving of all my affection; these
children, courted by the most considerable families in France, are
now destitute of fortune and of establishments. I had it in my power
to have settled my daughter in marriage in the first houses of Italy,
Germany, and England; but I refused all offers of that nature, thinking
it inconsistent with my duty to, and my affection for, the state in
whose service I had the honour to be engaged. I do not assume to myself
any merit from this conduct, and I never so much as spoke upon the
subject to the Regent. But I cannot help observing that this mode of
behaviour is diametrically opposite to the idea my enemies wish to
impute to me; and surely all Europe ought to have a good opinion of my
disinterestedness, and of the condition to which I am reduced, since I
no longer receive any proposals of marriage for my children.
“My Lord, I conducted myself with a still greater degree of delicacy,
for I took care not to have my son or my daughter married even in
France, although I had the most splendid and advantageous offers of
that kind. I did not choose that any part of my protection should be
owing to alliances, but that it should depend solely upon the intrinsic
merits of my project.”
In passing judgment upon Law, it is necessary to remember that the
principles upon which he proceeded while he had himself absolute
control of the management of his System were economically sound.
Elements of unsoundness only appeared from the time when the management
passed under the supervision of the Regent. He it was who insisted
upon the adoption of measures which to Law appeared fraught with
the gravest consequences and which he was unable to resist. Had Law
been able to work out his own designs, unhampered by the dictation
of the Regent, it is conceivable that he might in time have realised
his ambition of placing the finances of his adopted country upon a
just and stable foundation. Even as it was he succeeded to an extent
surprising in the circumstances. Financial corruption was no longer
possible to the great extent to which it proceeded in the days of Louis
XIV. Numerous offices in the patronage of the Government to which
large emoluments and no duties were attached, and many privileges and
monopolies which had hitherto checked the progress of industry, were
abolished never to be revived. Agriculture improved, new industries
arose, valuable public works were undertaken, and in general, a
healthier industrial atmosphere was created throughout the country.
That France did not take full advantage of the great principles of
sound industrial progress which were formulated for them and advocated
by Law was neither the fault of him nor of his System. It was the fault
of the people themselves, who were yet to find that resort to violence
was to prove the only means of removing the great obstacles which stood
in the way of their advancement as a nation.
THE END
W. JOLLY & SONS, PRINTERS, ABERDEEN
Transcriber’s Notes
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Punctuation, hyphenation, and spelling were made consistent when a
predominant preference was found in the original book; otherwise they
were not changed.
Simple typographical errors were corrected; unbalanced quotation
marks were remedied when the change was obvious, and otherwise left
unbalanced.
Illustrations in this eBook have been positioned between paragraphs
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hyperlinks, the page references in the List of Illustrations lead to
the corresponding illustrations.
The illustrations at the beginnings of the chapters are decorative.
They are not illustrated letters, but simple line drawings within
“L”-shaped borders.
The text uses “Orléans” and “Orleans” with about equal frequency, so
both have been retained here. Other frequent omissions of accent marks
have been corrected only when there was a predominant pattern to their
usage.
End of Project Gutenberg's John Law of Lauriston, by A. W. Wiston-Glynn