Law, John (1671-1729) (DNB00)
LAW, JOHN (1671–1729), of Lauriston, controller-general of French finance, was born at Edinburgh in April 1671. His father, William Law, great-grand-nephew of James Law [q.v.], archbishop of Glasgow, was a prosperous Edinburgh 'goldsmith,' a business which then included money-lending and banking. He acquired the estate of Lauriston, a few miles from Edinburgh, in the parish of Cramond, and died in 1684. John was educated at Edinburgh, and was early remarkable for his proficiency in arithmetic and algebra. He grew up a handsome, accomplished, and foppish young man of dissipated habits, and a great gambler. Migrating to London, he was soon deeply involved in debt, and at twenty-one sold the fee of Lauriston to his mother, who kept the estate in the family. In April 1694 he killed Edward Wilson, known as 'Beau' Wilson [q.v.], in a duel in London, and being convicted of murder, was sentenced to death. The capital sentence was commuted to one of imprisonment on the ground that the offence was one of manslaughter only; but against this decision an 'appeal of murder' was brought by a relative of his victim. While the appeal was pending Law escaped from prison and took refuge on the continent.
For a time Law is said to have acted as secretary to the British resident in Holland, and to have devoted much attention to finance, especially to the working of the bank of Amsterdam.
At the close of 1700 he was in Scotland, then in a state of collapse, due to the failure of the Darien scheme. Early in 1701 he issued anonymously at Edinburgh his 'Proposals and Reasons for Constituting a Council of Trade in Scotland,' which was to abolish the farming of the revenue and to simplify taxation. The revenue raised and administered by it was to furnish a fund from which advances should be made for the encouragement of national industries, or the council might undertake certain needful branches of production neglected by private enterprise, abolish trade monopolies, free raw materials from import duties, and set the unemployed to work. In 1709 was published, also anonymously, at Edinburgh, Law's second pamphlet, 'Money and Trade considered, with a Proposal for Supplying the Nation with Money.' Law starts here with the assertion that the trade of a country depends on its possession of a supply of money equal in quantity to the demand for it in all departments of industry. Law maintained that paper-money, as yet unknown in Scotland, was not only in itself a much more convenient currency than specie, with which the country was scantily supplied, but could be easily and safely issued in quantities adequate to the demand if it represented not gold and silver, but non-metallic objects possessing real value, especially land. By such an issue the rate of interest would fall, and production of all kinds would flourish. In the year of the publication of this pamphlet he appears to have submitted to the Scottish parliament a scheme for the establishment of a state bank, which was to issue paper-money on the security of land. There is no mention of Law's name in the parliamentary records, though they contain several references to Hugh Chamberlen the elder [q. v.], who was then renewing his proposals for the establishment of a Scottish land bank, and who charged Law with plagiarism (Money and Trade considered, p. 65). Probably it was Law's scheme which the Scottish parliament had been considering when it resolved, 27 July 1705 (Acts of Parliament of Scotland, xi. 218), that 'the forcing of any paper-credit by an act of parliament is unfit for this nation.' According to Lockhart of Carnwath (Memoirs, i. 117), Law was at the time very intimate with the Duke of Argyll and other great Scottish nobles, and his scheme was rejected by the parliament, not on economic grounds, but because it was 'so contrived that in process of time it' would have 'brought all the estates of the kingdom to depend on the government.' At the same time Law communicated some of his projects to Godolphin, then prime minister in England, and thus acquired in London a reputation for financial ability (Murray Graham, i. 264).
From 1708 to 1715 Law appears to have been roaming over the continent, dividing his time between the gaming-table and unsuccessful attempts at persuading European potentates to try some of his financial projects. He was both a skilful and a lucky gambler, and is represented as having been on this account expelled by the authorities from more than one continental city. Through his gains at the gaming-table and otherwise he is said to have been in 1715 worth 114,000l. During visits to Paris before the death of Louis XIV he communicated to the government projects for the restoration of the shattered French finances. They were not accepted, but Law made a very favourable impression on the Duke of Orleans, afterwards regent. In February 1715 Lord Stair, in a letter from Paris (ib. i. 265), told Stanhope that 'the King of Sicily,' Victor Amadeus, afterwards king of Sardinia, was urging Law to undertake the management of his finances. Stair suggested that Law might be useful in devising some scheme for paying off the national debt of England, and described him as 'a man of very good sense and who has a head for calculations of all kinds to an extent beyond anybody.'
After the death of Louis XIV (September 1715), Law plied the Duke of Orleans, on becoming regent, with proposals for the establishment of a state bank. The regent was favourable to them, but the opposition of his advisers and of experts procured their rejection. He, however, allowed Law and some associates to found a bank of their own, the first of any kind, apparently, founded in France. Letters patent for the establishment of a Banque Générale, one of issue and deposit, were granted them 20 May 1716. It was speedily successful. Law was able to try his pet scheme of a paper-currency under circumstances peculiarly favourable. The metallic currency of France was then subject, at the caprice of the government, to frequent alterations of value. Law made his notes payable on demand in coin of the same standard and weight as at the date of issue. Having thus a fixed value they were preferred to the fluctuating French coinage, and rose to a premium. Their reputation and that of the bank was increased when, 10 April 1717, a decree ordered them to be accepted in payment of taxes. His paper-money being thus preferred to specie, Law freely advanced money on loan at a low rate of interest, and the immediate result was an expansion of French industry of all kinds. 'If,' says Thiers, 'Law had confined himself to this establishment, he would be considered one of the benefactors of the country and the creator of a superb system of credit' (see Nicholson, Money and Monetary Problems, pp. 146 sq.). But Law now had in view a scheme of colonisation by means of a company, which he hoped would rival or surpass the East India Company of England, and he persuaded the regent to make over to him and his associates Louisiana, which at that time included the vast territory drained by the Mississippi, the Ohio, and the Missouri. From the first-named river Law's enterprise became known as 'The Mississippi Scheme,' but it was also called 'The System.' The decree incorporating the Compagnie d'Occident, with sovereign rights over Louisiana, was issued in August 1717. The parliament of Paris was indignant at the concessions of banking privileges and territory to a foreigner and a protestant. Its opposition reached a crisis when in August 1718 it was rumoured in Paris that the parliament intended to arrest Law, try him in three hours, and have him hanged forthwith (Saint-Simon, Mémoires, ed. Chéruel, xv. 354–5). The regent met the parliamentary resistance in December 1718 by converting the Banque Générale into the Banque Royale, the notes of which were guaranteed by the king. Law was nominated its director-general, but he was unable to prevent the regent from freely increasing the issue of paper-money in order to satisfy his extravagant personal expenditure.
Law meanwhile was enlarging the responsibilities of his Western Company. In August 1718 it acquired the monopoly of tobacco, and in December the trading rights, ships, and merchandise of the Company of Senegal. In March 1719 it absorbed the East India and China companies, and thenceforward assumed the designation of the Compagnie des Indes. In the following June the African Company came under its authority, and thus the whole of the non-European trade of France was in its hands. In July of the same year the mint was handed over to Law's company, and he could manipulate the coinage as he pleased. In August the company undertook to pay off the bulk of the national debt of the kingdom, and became practically the sole creditor of the state. The functions of the receivers-general were already assigned to it, and the farm of the revenue was abolished in its favour. The collection and disposal of the whole of the revenue of the state which was derived from taxation was thus placed under Law's control. As a fiscal administrator Law appears in a very favourable light. He repealed or reduced taxes which pressed directly, and he abolished offices the emoluments attached to which pressed indirectly, on commodities in general use, and the price of the necessaries of life was reduced by forty per cent. Rural taxation was so adjusted that the peasant could improve the cultivation of the soil without fear of losing the honestly earned increment. Free trade in cereals and other articles of food between the provinces of France was established. The abuses and grievances which Law removed revived after his fall, but Turgot's chief fiscal reforms were either executed or planned by Law.
Law promised high dividends to the shareholders of his great company, and the public expected that its enormous enterprises would ultimately yield fabulous profits. Its issues of new shares were accompanied by fresh issues of paper-money from the bank, for which the stock of the company offered a means of investment. 'The System' reached its acme in the winter of 1719–20. Multitudes of provincials and foreigners flocked to Paris eager to become 'Mississippians.' The scene of operations was a narrow street called Quincampoix, where houses that previously yielded 40l. a year now brought in over 800l. per month. Enormous fortunes were made in a few hours by speculators belonging to all classes through successful operations for the rise. The highest in the land courted Law in the hope of a promise to be allowed to participate in each new issue of shares. The market price of shares originally issued at five hundred livres reached ten thousand livres, and when on 1 Jan. 1720 a dividend of 40 per cent. was declared, the price rose to eighteen thousand livres. On 5 Jan. 1720, having as a needful preliminary abjured protestantism and been admitted into the Roman catholic church, Law was appointed controller-general of the finances. According to Lord Stair, then British ambassador in Paris, Law boasted that he would raise France to a greater height than ever before on the ruins of England and Holland, that he could destroy English trade and credit, and break the Bank of England and the English East India Company whenever he pleased. Stair resented his language, and from a friend became an enemy of Law. To appease Law, early in 1720 Stair was recalled by his government.
On 23 Feb. 1720 the Company of the Indies was united to the Royal Bank, and 'The System' was completed. But a reaction had already set in. The successful speculators in the shares of the company had begun to realise their gains, and to drain the bank of coin in exchange for their paper-money. The specie thus obtained was partly hoarded, partly exported. To check this movement Law had recourse, during the earlier months of 1720, to violent measures, enforced by royal decrees. The value of the metallic currency was made to fluctuate. Payments in specie for any but limited amounts were forbidden. The possession of more than five hundred livres in specie was punished by confiscation and a heavy fine, and domiciliary visits were paid to insure the enforced transmission of specie to the mint. Informers of infractions of this order were handsomely rewarded. Holders of paper-money began to realise by purchasing plate and jewellery, but this traffic was prohibited. Investments in the purchase of commodities was the last expedient tried, and it increased the already enormous prices due to a superabundant paper currency, which were paralysing trade and industry and exciting popular discontent. It has been much disputed whether the final decree which precipitated the downfall of 'The System' was planned by Law or by Law's enemies in the councils of the regent (cf. Wood, Life, p. 117; Levasseur, pp. 116, 120; Louis Blanc, i. 320–4). Dubois, then secretary of state for foreign affairs, exerted much influence there: he was devoted to the alliance with England, and the English government had now adopted Stair's policy of opposition to Law (Lord Stanhope, History of England, ed. 1853, Appendix, p. xiv). On 21 May 1720 a decree was issued directing the gradual reduction of the value of the bank-note until it reached one-half. This flagrant repudiation of the state's obligations caused a panic, which was not checked by the withdrawal of the decree on the 27th, since at the same time the bank suspended cash payments. On the 27th Law was relieved of the controller-generalship, yet was soon appointed by the regent intendant-general of commerce and director of the ruined bank. But 'The System' had fallen with a crash. In the popular commotion which followed, Law's house in Paris was attacked and himself insulted. His enemies in the regent's councils gained the upper hand, and he had to leave the country. He had invested the bulk of his fortune in the purchase of estates in France. They and whatever other property he left behind him were confiscated.
On arriving at Brussels in December 1720, Law was overtaken by an envoy of the Czar Peter, who had been sent to Paris to invite him to St. Petersburg in order to administer the finances of Russia, but he declined the offer (Lemontey, i. 342). After months of wandering in Italy and Germany, he took refuge in Copenhagen from his creditors. There he received an invitation from the English government to come to England, and he went thither in October 1721, on board the English admiral's ship. He was presented to George I on 22 Oct., but was denounced in the House of Lords for having become a Roman catholic, as well as for having countenanced the adherents of the Pretender. He was not further molested, and formally pleaded in the court of king's bench the pardon which had been sent him in 1719 for the murder of Wilson. He took lodgings near Hanover Square, and on 26 Oct. 1721 he witnessed at Drury Lane a representation of Ben Jonson's 'Alchemist,' for which an epilogue introducing Law's name had been specially written (see Gent. Mag. 1825, i. 101). He spent several years in England, and corresponded with the Duke of Orleans, by whom he expected to be recalled to France, but his hopes were not realised. He desired to leave England, but feared persecution by his creditors on the continent, especially by the new French East India Company, which had risen on the ruins of his own company. In the autumn of 1725 Walpole asked Lord Townshend to obtain for Law some sort of commission from the king to any prince or state, 'not for use but for protection.' He appears to have proceeded in that year to Italy. It is said that while in some Italian town he staked his last thousand pounds against a shilling in a wager that double sixes would not be thrown six times successively. He won, and repeated the experiment before the local authorities interfered (Wood, p. 187 n.). He died in comparative poverty, 21 March 1729, at Venice, where he had spent his last years, and he was buried there. The following epitaph appeared in the 'Mercure' in April 1729:—
- Çi-gît Écossais célèbre,
- Ce calculateur sans égal,
- Qui par les régles de l'algèbre
- A mis la France à l'hôpital.
Before leaving Scotland in 1708 Law had married Katherine Knollys, third daughter of Charles Knollys, titular third earl of Banbury, and widow of a Mr. Seignior. His widow died in London in 1747. His only daughter, Mary Katherine, was married in 1734 to her first cousin, called Viscount Wallingford. His only son, 'William Law of Lauriston,' accompanied his father in his flight from France, settled with his mother at Utrecht and Brussels, and died, a colonel of an Austrian regiment, at Maestricht in February 1734.
Law's brother, William (1675–1752), who had assisted him actively during his financial career in Paris, had two sons, who rose very high in the service of the French East India Company. A son of the elder of these, James A. B. Law (1768–1828), created Comte de Lauriston, was a distinguished general in the French army, a favourite aide-de-camp of the first Napoleon, and was made by Louis XVIII a marshal of France.
Law was a handsome man of polished and agreeable manners, and of much conversational talent. Saint-Simon, who knew him intimately, pronounced him 'innocent of greed and knavery,' and described him as 'a mild, good, respectful man whom fortune had not spoilt.' Some of the chief French historians of his times speak of him approvingly as a precursor of modern state-socialism, and most of them agree that 'The System,' however ruinous to individuals, gave a great impetus to the industry and enterprise of France, exhausted as it had been by Louis XIV's wars. According to Voltaire (Siècle de Louis Quinze), who was an eye-witness of its collapse, 'a system altogether chimerical produced a commerce that was genuine and revivified the East India Company, founded by the great Colbert, and ruined by war. In short, if many private fortunes were destroyed, the nation became more opulent and more commercial.'
A volume entitled 'Œuvres de J. Law' was published at Paris in 1790. It comprises a French translation of his 'Money and Trade considered,' memorials and letters on banks and banking addressed by Law to the regent Orleans, and a vindication of himself, written in London in 1724, addressed to the Duc de Bourbon, prime minister of France after the regent's death. All of these are in French, and were reprinted, with some additions, in Daire's 'Économistes-Financiers du XVIIIe Siècle,' 1843.
There were several portraits taken of Law, most of which were engraved. That in the National Portrait Gallery, by the well-known French portrait-painter Alexis S. Belle, represents Law with a closely shaven face, small dark-grey eyes, pale yellow eyebrows, and a fair complexion (Scharf, Catalogue of the Pictures, &c., in the National Portrait Gallery, 1888; cf. London Gazette, 3 and 7 Jan. 1694–5).[The chief authority for Law's general biography is the Life (1824) by John Philip Wood, the editor of Douglas's Peerage of Scotland. Many traits and anecdotes of him are given by the French memoir-writers of his time, especially Saint-Simon. There are full accounts of 'The System' by older writers—Fourbonnais in his Vue générale du système de M. Law at the end of his Recherches et Considérations sur les Finances en France (1758), and Duhautchamps in his Histoire du Système des Finances pendant les années 1719 et 1720 (1739). A lucid, lively, and critical history of 'The System' is contained in the article 'Law' contributed by Thiers to the Revue Progressive (1826), and reprinted in the Dictionnaire de la Conversation. Both ample and accurate is the Historical Study of Law's System, by Andrew McFarland Davis (Boston, U.S., 1887), reprinted from an American periodical, the Quarterly Journal of Economics. All information, however, that either the student or the general reader can require on Law and his career is to be found in Levasseur's Recherches sur Law (1854), a work elaborate, succinct, and impartial. The anecdotal element is supplied in Cochut's volume, Law, son Système et son Epoque (1853), and there is an entertaining chapter on Law in vol. i. of Dr. Charles Mackay's Extraordinary Popular Delusions. A valuable essay on 'John Law of Lauriston' is included in Mr. J. Shield Nicholson's Treatise on Money and Essays on Present Monetary Problems (1888). Among French histories Lemontey's Histoire de la Régence contains remarks on Law, in writing which the author had before him materials since lost. Henri Martin is solid and trustworthy on Law, and Michelet vivid and a little rhapsodical. Louis Blanc, in his very interesting account of Law, in vol. i. of his Histoire de la Révolution Française, lays great stress on Law's popular sympathies, and represents him admiringly as aiming at the establishment of a new social system for which the France of his time was not ripe. Some only of the letters of Lord Stair from Paris to ministers in London, which contain references to Law, are printed in John Murray Graham's Annals and Correspondence of the Viscount and the first and second Earls of Stair (1675); the rest are in the Hardwicke State Papers. By Voltaire, St.-Simon, the Duc de Noailles, and other French contemporaries Law was commonly called Lass—the French equivalent of Laws, a common colloquial form of the name; see Athenæum, December 1889; cf. Addit. MS. 5145, f. 95; Hist. MSS. Comm. 5th Rep. i. App. p. 384; 'La prononciation du nom de Jean Law le Financier,' Paris, 1891, forms the subject of an interesting essay by M. Alexandre Beljame.]