LAW

LAW, JOHN, commonly known by the name of the Projector, was the eldest son of William Law, and was born at Edinburgh in the month of April 1671. His father followed the profession of goldsmith or banker, with so much success, that he was enabled to purchase the lands of Lauriston and Randleston, which afterwards descended to his son. The latter was educated at Edinburgh, where he is said to have made some progress in literature; but the bent of his genius having led him to study arithmetic and geometry, he attained such proficiency in these branches, as to be able to solve with facility the most intricate problems; and he likewise made himself master of algebra. The prin-

ciples of public and private credit, the state of trade and Law, John. of manufactures, the theory and practice of taxation, and other matters connected with political economy, also engaged his attention; and the accession of knowledge resulting from these inquiries laid the foundation of his future eminence. But he soon became noted as a man of pleasure as well as of study. Having lost his father before he had completed his fourteenth year, he was thus left at an early age without paternal control; and as the graces of a naturally handsome person were improved by the acquisition of external accomplishments, Jessamy John, or Beau Law, as he was indifferently called by his companions, addicted himself to the practice of all games of chance, skill, and dexterity, and appears to have engaged in other pursuits of a still more questionable character. In 1694, he visited London, where his wit and accomplishments procured him admission into the first circles, whilst his extravagance speedily involved him in difficulties. At this time he was noted for his propensity to deep play, and for his gallantries amongst women. By the former, he injured his fortune; in consequence of the latter, he narrowly escaped an ignominious end. An intrigue which he had with a Mrs Lawrence proved the occasion of a quarrel between him and one Mr Edward Wilson; a hostile meeting ensued, and Mr Law killed his antagonist on the spot. He was immediately apprehended, and brought to trial at the Old Bailey, on a charge of murder; and being found guilty, received sentence of death. Upon a representation of the case to the crown, however, Law obtained a pardon; but an appeal being lodged by a brother of the deceased, he was detained in the King's Bench prison. This appeal was brought before the court of King's Bench in Trinity-term 1694; and as the exceptions taken on the part of Law were overruled by the court, the latter, judging it prudent not to await the result, found means to escape from prison,¹ and retired to the Continent.

During his stay abroad, he acted for some time as secretary to the British resident in Holland, and occupied himself in improving his knowledge of financial operations, and particularly in making himself acquainted with the constitution and practical operation of the bank of Amsterdam. He returned to his native country in 1700, and in that year appears to have written his Proposals and Reasons for Establishing a Council of Trade, which was published at Edinburgh early in 1701. His project met with no encouragement; but the publication had the effect of making him known to some of the principal personages of the country, including the Duke of Argyll, his sons the Marquis of Lorn and Lord Archibald Campbell, the Marquis of Tweeddale, and other persons of distinction. Relying upon the support of these noblemen, he offered to the Scottish parliament, in 1705, a plan for removing the difficulties under which the kingdom then laboured from the scarcity of specie, and the stoppage of payments by the bank; and, with a view to further his object, he published another work, entitled Money and Trade considered, with a Proposal for Supplying the Nation with Money, which appeared at Edinburgh the same year. His "proposal" was, that commissioners, to be appointed by an act, under the control of parliament, should be empowered to issue notes, either in the way of loan, at ordinary interest, upon landed security, the debt, however, not to exceed half, or at the most two thirds, of the value of the land; or upon land-pledges, redeemable within a certain period, to the full

Law, John. value of the land; or, lastly, upon sale irredeemably to the amount of the price agreed upon. Paper-money, thus issued and secured, would, he conceived, be equal in value to gold and silver money of the same denomination, and might even be preferred to these metals, as not being, like them, liable to fall in value. But this scheme, though supported by the united weight of the court party, and of that called the squadron, headed by the Duke of Argyll and the Marquis of Tweeddale, was rejected by the parliament, which resolved, "that to establish any kind of paper-credit, so as to oblige it to pass, was an improper expedient for the nation." The rejection of the plan was occasioned by an apprehension, that if it were adopted, all the estates of the kingdom would thereby be brought to a complete dependence upon the government.

Mr Law now resolved to abandon his native country, and to try his fortune abroad. He resided some time at Brussels, where he became noted for extraordinary success at play; and in two excursions which he made to Paris, his good fortune at the gaming-table became still more conspicuous. Having visited the principal cities of Italy, he continued the same career, playing at all sorts of games, and betting and speculating in the public funds and banks, with uninterrupted success; insomuch that, in the year 1714, he was worth upwards of L.110,000 sterling. During these rambles, Law, having the advantage of a graceful figure and an insinuating address, was everywhere well received by persons of the highest quality. At Florence he became acquainted with the Duke de Vendôme, whom he had the honour to oblige with the loan of a considerable sum of money. At Neufchâtel he obtained access to the Prince of Conti, to whom he imparted some of his financial projects. During a short residence at Turin, he communicated to Victor Amadeus, king of Sardinia, a scheme for aggrandising his territories, of the same nature as that which he afterwards proposed to the Duke of Orleans; but the prudent monarch declined embarking in so perilous an adventure, observing to the projector, that his dominions were too small for the execution of so great a design, and that France was the proper theatre for such speculations. "If I know the disposition of the people of that country," added Victor Amadeus, "I am sure they will relish your schemes; and therefore I would advise you to go thither without delay."

Law took the advice which was thus given him, and returned to Paris, where he arrived in 1714, not long before the death of Louis XIV. He was more favourably received than on the occasions of his former visits, when he appears to have been regarded as a mere adventurer; and soon gained the confidence of the Duke of Orleans to such a degree, that he was not only admitted to the convivial parties of the regent, but even nominated one of his counsellors of state. At this time the French finances were in the greatest disorder, indeed in a situation accounted desperate; the nation was burthened with an immense load of debt, contracted during the expensive wars of Louis XIV.; and the people groaned under the intolerable pressure of the taxes which had been imposed for payment of the interest. All industry was thus checked, and trade in a manner annihilated; manufactures, commerce, and navigation, had almost ceased; the merchant and the trader were reduced to beggary, and the artificer was compelled, for want of employment, to leave the kingdom. In a word, the state of affairs was such, that it had been debated in council, and actually proposed to apply a sponge to the debt, and to seek relief by means of a national bankruptcy. The proposal, however, was rejected by the regent, and a commission appointed to inquire into the claims of the state creditors, and endeavour to introduce some degree of order into the public finances. At this calamitous crisis, when the surplus of the public revenue, after payment of the interest of the debt, was found

insufficient to defray the necessary expenses of the civil government, Law came forward with his favourite nostrum or panacea, and proposed to liquidate the debt, by establishing a bank for issuing notes secured upon landed property, and on the unalienable impleadgement of all the royal revenues. The project seems to have been approved of, but as the conjuncture was thought unfavourable for risking so bold an experiment, his application proved ineffectual. Nothing discouraged, Law requested and obtained permission to establish a private bank, to consist entirely of funds advanced by himself, and others who chose to embark in the undertaking. The letters-patent, which are dated the 2d and 20th of May 1716, specify the principles upon which the bank had been established, as well as the regulations according to which it was to be conducted. The scheme promised success, and, in fact, the General Bank of Law and Company had acquired great credit, when, in December 1718, it was dissolved by an arrêt of the regent, who, observing the advantages resulting from the establishment, resolved to take it into the hands of government; a resolution which could not be very agreeable to the founder and his associates in the enterprise. Law, however, was named director-general of the Royal Bank, in which his own had merged; and branches were established at Lyons, Rochelle, Tours, Orleans, and Amiens.

Law now began to develop the stupendous project he had long meditated, and which afterwards became so well known to all Europe, under the name of the Mississippi System. This scheme was nothing less than the vesting of the whole privileges, effects, and possessions of all the foreign trading companies, the great farms, the mint, the general receipt of the king's revenues, and the management and property of the bank, in one great company, who, having thus in their hands all the trade, taxes, and royal revenues, might be enabled to multiply the notes of the bank to any extent they pleased, doubling or even tripling as will the circulating medium of the kingdom, and, by the immensity of their funds, possessed of a power to carry the foreign trade and the improvement of the colonies to a height altogether unattainable by other means. This monstrous and impracticable monopoly was approved of by the regent, and by letters-patent a commercial company was established, under the name of the Company of the West; to which was at the same time granted the whole province of Louisiana, a country watered throughout its whole extent by the Mississippi, from which the project accordingly took its name. The scheme was well calculated to entrap the unwary and to seduce the speculative. Of this company 200,000 actions or shares were issued, at 500 livres each, and the subscriptions were made payable in a depreciated paper-currency, called billets d'état, which, however, in the subscriptions, was taken at its full value. This could not fail to operate as a tempting bait to the holders of these billets or notes to lay them out in the purchase of shares, especially since the depreciation amounted to between sixty and seventy per cent. The company thus became creditors of the king to the extent of a hundred millions of livres, the interest of which sum was fixed at the rate of four per cent.

Law, who had now advanced high in the regent's favour, was of course named director-general of the Company of the West, and thus intrusted with the development of his own stupendous project. Louisiana having been represented as a region abounding in gold and silver, and possessing a fertile soil capable of the highest cultivation, the actions or shares were bought up with the greatest avidity; and such was the rage for speculation, that the unimproved parts of the colony were actually sold for 30,000 livres the square league. In pursuance of the scheme, the farm of tobacco was made over to the company at an advance of rent exceeding two millions of livres. Soon afterwards

they acquired the charter and effects of the Senegal Company; and this was succeeded by a still more important acquisition, namely, the exclusive privilege of trading to the East Indies, China, and the South Seas, together with all the possessions and effects of the China and India companies, now dissolved, upon the condition of liquidating all just claims against them. Upon this occasion, the Company of the West assumed the title of Company of the Indies; and 50,000 new shares were ordered to be constituted, at 550 livres each, payable in coin. The price of actions quickly rose to 1000 livres each. On the 25th of July 1719, the mint was made over to this company for a consideration of fifty millions of livres, to be paid to the king within fifteen months; on the 27th of August following, the regent took out of the hands of the farmers-general, and made over to them, the great farms, for which they agreed to pay an advance of rent of three millions and a half of livres; and, on the 31st of the same month, they also obtained the general receipt or collection of the other branches of the king's revenue. Having acquired all these grants, and thus concentrated in themselves not only the whole foreign trade and possessions of France, but also the collection and management of the royal revenues, they promised an annual dividend of 200 livres on every share; the price of actions instantly rose in the market to 5000 livres; and the public ran with such eagerness upon the last creation of stock, that nearly double the requisite sum was subscribed, whilst the greatest interest was exerted, and every stratagem put in practice, to secure places in that subscription. The frenzy now became general. A rage for the acquisition of shares in the India Company seized and infatuated all ranks in the kingdom. Clergy and laity, peers and plebeians, princes and peasants, statesmen and magistrates, nay, even ladies, all, in short, who either had or could procure money for the purpose, turned stockjobbers, outbidding each other with such avidity, that in November 1719, the price of shares rose to above 10,000 livres, or (when the depreciation of the billets d'état is taken into account) more than sixty times the sum they originally sold for. Nothing was talked of but actions; every place echoed with Mississippi and Quinquempoix.¹ All classes appeared to have but one object, one pursuit. Mechanics laid aside their work, tradesmen forsook their shops, and persons of all grades neglected their professions or employments, to embark in this new occupation; whilst even the few who observed some degree of moderation, showed by their conduct how little concern they took in affairs foreign to the Mississippi scheme.² The delirium had reached its culminating point.

Mr Law now blazed a meteor of unequalled splendour. He possessed the ear of the Duke of Orleans; he was almost adored by the people, ever ready to worship at the shrine of the idol of the hour; and he was surrounded by princes, dukes, peers, marshals, and prelates, who all courted his friendship, and even seemed ambitious of his patronage. Nobles were content to wait in his antechambers, like the meanest subjects; and ladies of the

highest quality employed every artifice, sometimes at the Law, John. risk of their necks, to attract his passing notice.³ The property which he acquired was immense. He purchased no less than fourteen estates with titles annexed to them, and amongst these the marquisate of Rosny, which had belonged to the illustrious Sully, the friend and minister of Henry IV. About this period, too, a free pardon for the murder of Mr Wilson was conveyed to him from England; and Edinburgh, proud of having produced so great a personage, transmitted to him the freedom of the city in a gold box. By his abjuration of the Protestant religion, the only obstacle which stood in the way of his advancement to the highest offices in the state was soon afterwards removed; and, on the 5th of January 1720, he was appointed comptroller-general of the finances. A few days previous to this, the Academy of Sciences had elected him one of its honorary members; and the flattering incense of poetry was offered up at the same shrine with the homage of an infatuated people. Thus the astonished world beheld an obscure foreigner, of doubtful reputation and questionable character, rise in a few months from a private condition to the high station of prime minister of France, and govern for a time, with almost absolute power, one of the greatest and most enlightened nations of Europe. It might well be said of him, Tollitur in altum ut casu graviore cadat.

But after having raised himself to such an unexampled eminence, Law at length fell a sacrifice to the intrigues of the other ministers, who, partly from envy, and partly from apprehension, combined with ignorance, undermined the insecure fabric he had reared, and thus precipitated its fall. The credit of the bank and of the India Company had attained its height in November 1719, when shares of the latter sold for more than 10,000 livres each, and money was so abundant in the former that the directors agreed to lend any sum upon proper security at two per cent. But amidst the general delirium, there were symptoms which evidently betokened an approaching revulsion. The most alarming of these was a constant drain of specie from the bank, either for the purpose of being hoarded or sent abroad. Astonished at their exorbitant gains, the original proprietors of the company thought only of converting their shares into gold, and realizing the fortunes which they had so suddenly acquired; and it was computed that not less than 500 millions of livres, the property of persons of this description, had been sent out of France. To avert the danger which thus threatened the system, several edicts were issued early in 1720, by which payments in specie were restricted to small sums, and the standard of the coin was kept in continual fluctuation, whilst bank-notes were declared to remain invariable, and rents, taxes, and customs, were made payable in notes. But what crowned all, was the edict of the 27th February 1720, prohibiting individuals, as well as secular or religious communities, from having in their possession more than 500 livres in specie, under the penalty of a

Law, John. fine, and confiscation of all sums found exceeding that amount; a measure which could scarcely fail to sow distrust in the bosom of families, and to excite alarm in the public mind. Still the delusion prevailed. On the 23d of February, a few days before the publication of this edict, the Royal Bank had been incorporated with the company, and the king not only remained guarantee of the bank-notes, but gave up to the company all the profits made by the bank since December 1718, when the government had taken it into its own hands. Meanwhile, the manufacture of notes proceeded with so much activity, that, by the 1st of May 1720, paper-money had been fabricated to the amount of more than 2600 millions of livres, or nearly L.110,000,000 sterling; whilst the specie in the kingdom was estimated at only 1300 millions of livres, or about L.52,000,000 sterling. In this state of matters, Cardinal Dubois and M. d'Argenson represented to the regent that it had become necessary to equalize the proportion between the notes and the coin, either by reducing the value of the one to the extent of a half, or by doubling that of the other.

This extraordinary point was debated in council, where it was opposed by some of the members, amongst whom was the comptroller-general, who strenuously contended for letting matters remain as they were; but the majority being in favour of the proposition for lowering the value of the paper, it was decided accordingly; and, on the 21st of May 1720, an edict was issued, which, contrary to all sound policy, and even to the most solemn stipulations, reduced the value of the company's bank-notes one half, and fixed their actions or shares at 5000 livres. By this unjustifiable and fatal step, the whole paper fabric was destroyed in an instant, the notes lost all credit, and next day a man might have starved with 100 millions of paper money in his pocket. The consternation with which all ranks were seized was soon converted into rage, and it became necessary to station troops in different parts of the capital, to prevent the consequences to be apprehended from the fury and despair of the populace. Disorder and confusion reigned everywhere; seditious and inflammatory libels were posted up and distributed; and the life of the regent himself was threatened.¹ Some conception may be formed of the distress of the people, when it is considered that at the time when the bank thus stopped payment, and the value of paper money instantly sunk to zero, not less than 2,235,085,590 livres, or upwards of L.90,000,000 sterling in notes, were in circulation. Law was of course peculiarly obnoxious to popular odium, which he endeavoured in vain to allay by resigning into the hands of the regent his office of comptroller-general, on the 29th of May; but, though several times exposed to imminent danger, from the vengeance both of the parliament and the people, he remained in France until towards the close of the year 1720, when he withdrew to Brussels; and soon afterwards his whole property was confiscated, and his brother William sent to the Bastille.

Law arrived at Brussels on the 22d of December 1720,

and, after waiting there for some time, in the vain expectation of being recalled to France, set out for Venice, which he reached early in January 1721; he then visited other places on the Continent, and, in October, arrived in England, for the ostensible purpose of pleading the king's pardon. He was at first well received, and visited by persons of distinction; but when it was discovered that the fallen financier was in a state almost bordering upon destitution, his friends began to fall off, and, of those who had known or perhaps courted him in his day of power, he could find none good-natured enough to lend him a thousand pounds. In a letter addressed to Mrs Howard, afterwards Countess of Suffolk, he calls that lady his "only friend;" an avowal which affords a striking instance of the instability of fortune, power, and friendship. After residing some years in England, this extraordinary man returned once more to the Continent, and closed his chequered career at Venice, where, on the 21st of March 1729, he died in a state but little removed from indigence, in the fifty-eighth year of his age. Soon after his death appeared the following epitaph, the point of which reminds us of the bitter jests which appeared upon the occasion of his fall:—

Ci gît cet Ecossois célèbre,
Ce calculateur sans égal,
Qui, par les règles de l'algèbre,
A mis la France à l'hôpital.

We do not think that any great difference of opinion can now be entertained respecting the real character of Law's project; and indeed it seems to be generally agreed that, even if it had not been violently interrupted by the edict of the regent, it was too insecure in its principles to have proved permanent. The favourite maxim inculcated by Law, and upon which his whole fabric of the Mississippi system was reared; namely, that the power and prosperity of a nation increase in proportion to the quantity of money circulating therein, and that, as the richest nations have not specie sufficient to afford full employment to their inhabitants, this defect may be supplied by paper credit; involves a dangerous fallacy, even in the most restricted view that can be taken of its application, inasmuch as it implies that paper money may be issued with advantage to an almost unlimited extent, upon general security; and that its credit, or, in other words, its value, may thus be maintained without its being rendered convertible at pleasure into cash. But all experience has proved that this is absolutely impossible. When paper is in excess, in comparison with the total amount of gold and silver currency, it necessarily becomes depreciated; the prices of commodities experience a corresponding rise; the nominal value of the precious metals is increased in proportion to the amount of the depreciation, of which this increase is the only measure, and they disappear from circulation. All existing contracts and obligations are disturbed; debtors benefited at the expense of creditors; a spirit of reckless speculation and adventure is thus engendered; and, after a time, the crisis of revulsion and ruin arrives. Whenever the quantity of money in circulation is too great in propor-

Lundi j'achetai des actions;
Mardi je gagnai des millions;
Mercredi j'arrangeai mon ménage;
Jeudi je pris un équipage;
Vendredi je m'en fus au bal;
Et Samedi à l'hôpital.

Foin de ton zèle séraphique,
Malheureux Abbé de Tencin!
Depuis que Laws est Catholique,
Tout le royaume est Capucin.

tion to the total amount of commodities to be circulated by it; depreciation is the necessary consequence, or, in other words, a proportional rise in the price of commodities. Money has no creative power, as Law seems all along to have imagined, and can never be in excess without endangering "the power and prosperity" of the nation where this is the case. His whole system, therefore, was built upon a sandy foundation, and, even if it had received no rude or sudden shock, would have fallen to pieces from its own insecurity and instability. At the same time, there is much truth in an observation of Mr Burke, in his Reflections on the French Revolution. "It is not true," says he, "that Law built solely on a speculation concerning the Mississippi; he added the East India trade, he added the African trade, he added the farms of all the farmed revenue of France; all these unquestionably could not support the structure which the public enthusiasm, not he, chose to build on these bases." He laid the best foundation that he could, perhaps the best which, in the circumstances, it was possible to lay; but the nation went suddenly mad, an event which he could scarcely have foreseen; the company was hurried onwards by the general frenzy; and when the delirium had reached its height, the regent was advised to issue the fatal edict, which levelled the whole fabric with the dust.

(See Œuvres de Law, passim; Histoire du Système des Finances, tom. i.; Pollnitz, Mémoires; Massillon, Mémoires de la Minorité de Louis XV.; Mémoires de la Regence de M. le Duc d'Orléans, tom. i.; Richelieu, Mémoires, tom. iii.; Voltaire, Siècle de Louis XV.; Chalmers's Biog. Dict. art. LAW; Wood, Life of John Law of Lauriston, Edinburgh, 1824.)