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29 August 2018

John Law: the 18th-century Scot who became richer than the king of France

The remarkable story of how John Law transformed the French economy after establishing a national bank.

By Lucy Hughes-Hallett

“I am a human being,” said John Law to his patron, the regent of France. “I have made great errors.” Some of his contemporaries would have disputed both propositions. In 1694 Law was imprisoned in the Marshalsea, London’s debtors’ prison. From there, conjuring money out of nothing-ness, he rose to become the “richest citizen there has ever been” (his words). He transformed “the old France of Cathedrals and Kings”, funded inadequately by forced loans and the sale of offices, into a joint-stock company, and made it prosper. To have achieved all this, some said, Law must be a wizard. As for errors, people were so far from believing he was capable of making any that they fought tooth and nail for the chance to pour their fortunes into Law’s ventures.

Twenty years ago James Buchan published Frozen Desire, a book-length essay, sparkling with historical curiosities and mind-bending arguments, on the elusive nature of money. In John Law he returns to the theme, this time framing what he has to say about finance within the story of a remarkable life.

Law was the son of an Edinburgh goldsmith (Buchan, another Scot, likes to quote contemporary remarks on the “perfidy”, “insularity” and “deep drinking” of the English). Growing up with gold, Law observed how protean precious metal could be; now material for glittering ornaments, now the symbolic measure of wealth. Money-making fascinated him. Once his father was dead, his mother threw him out, enraged by his persistently staying up late to play “the Lotterie and other games”.

The word “adventurer” in Buchan’s sub-title might conjure up the derring-do of an explorer or knight errant, but it is used here in its proper old sense (applicable equally to the gambler and the financier) of one who lays out money in the hope of getting more in return. In Edinburgh John Law was known for his prowess at tennis (an occasion for betting). Moving to London as a young man on the make, he observed, in the coffee houses and in Exchange Alley, how men with insider knowledge and acumen could get rich “adventuring”.

Daniel Defoe estimated that in 1691 wagers amounting to £200,000 were laid on the outcome of the siege of Limerick. The way aristocrats gambled away their fortunes can seem to modern minds the most alien aspect of 18th-century culture, but Buchan elucidates it, tracing the easy transition from games of chance to speculative business.

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At 23, Law killed a man in a duel, and escaped abroad. After a brief period in Paris running a faro game – an ancien régime Nathan Detroit – he fetched up in Genoa. He devised a method, immensely profitable to the insurer (himself) of insuring against a loss on the lottery. He thought big. In 1705 he published a book, Money and Trade Considered: with a Proposal for Supplying the Nation with Money. With Lady Katherine Knowles (whom he loved loyally but never married) he flitted to the Hague and to Turin, becoming ever more celebrated for his success at “play and other business dealings”. He was looking for a patron audacious and powerful enough to allow him to try out his “system”, a new way of organising public finance.

In 1715 he met the Duc d’Orléans, regent to Louis XV, the child-king of France. He was authorised to establish a national bank, and rented a Parisian palace to house it. Within three months of its opening a secretary at the British embassy wrote, “Law’s bank has ruined all the banquiers here.” Soon he had a hand (and money) in everything going – the colony in Louisiana, the iron-foundry business, the refitting of the navy, the purchasing of an enormous diamond for the crown jewels. For three years he ran the French economy, earning enough in the process to buy himself 21 country estates. To many it seemed that he ran France.

The only description of Law’s appearance that Buchan gives us is from the “Wanted” notice when he was a murderer on the run. “He is a very tall, black [ie dark-haired], lean man” with “large pockholes’, “a big high nose” and a “broad and loud” voice. We know that he had engaging manners, but he was as impassive as a gambler must be. Buchan quotes the Comte de Fortia de Piles: “The banquier must always retain his sang-froid… He may not lose his head, while the punters are free to do so.” Law followed that rule.

At the height of the furore in the open-air stock market on the Rue Quincampoix, when Law had released a new share issue, “One could scarcely fit one’s nose between two persons,” writes a doctor from Lyon, adding: “It is a mania, a vertigo beyond description.” In contrast, the person who had “set in train such transports is the coolest man in the world, who… speaks only in equations”.

Inscrutable though Law remains, Buchan’s book teems with vitality. The narrative is crowded with characters, many of whom are not only actors but sources. Pepys, Defoe and Evelyn in England. In France, Saint-Simon, Voltaire, Montesquieu and Elisabeth Charlotte, the Regent’s mother, “cuboid as a die” and delightfully smutty-minded and candid.

There is more detail here of Law’s financial transactions than any lay reader will want – this is biography not of the laundry-list school, but of the bank statement one. Here is a representative sentence: “The Company would lend the King 1.2 billion livres at the rate of 3 per cent per year, deducting the 36 million livres he would pay in annual interest from its 52 million livres rental payment for the General Farmers.” My eyes glaze over. But there is plenty of compensatory interest for the less mathematically inclined.

Buchan is possessed of a remarkably well-furnished mind. His story is a trem-endous one, spanning two continents, but he finds space as well for a host of minor characters, vividly sketched, and for the indulgence of his own particular pen-chants. He knows that the opera season in Venice began on St Martin’s Day (11 November) and that the Venetians, going masked, were seeking to frustrate the informers of their surveillance-obsessed regime. Writing about Law’s duel, he declares that Pushkin’s The Shot is “one of the very best of all short stories”. Discussing Law’s collection of paintings (damaged in a shipwreck and subsequently lost) he muses on the remarkable ups-and-downs of Guido Reni’s reputation. He alludes en passant to Prince Eugene’s relief of Turin in 1706 – “one of the greatest of all military exploits”. He notes that the uncle of a Dutch widow from whom Law borrowed money had written two wedding songs “of which Shakespeare would not have been ashamed”.

Law’s power, his fortune and the fortune he had made for France all rested on confidence. In December 1719 that confidence began to ebb away and, like a torrent breaching a dam, it created its own channels and went ever faster. There was a run on the bank. Every measure Law tried to contain it – offering coin for bank notes, devaluing the currency, publicly burning discredited share certificates – were seen as signs of weakness or loss of nerve. People flooded into Paris, desperate to get rid of their paper money while it still had some value. “It is astonishing,” wrote the incorrigible Elisabeth Charlotte, “that the streets don’t run with piss.”

Law declined from potentate to fugitive, slipping out of France incognito. He drifted around Europe. The king of Denmark and the tsar of Russia each offered him employment, but he turned them down and went to ground in Venice, where he savoured the novelty of going about on foot while, back in Paris, Lady Katherine struggled to sell his ten massive, gilded and velvet-upholstered coaches. Meanwhile, all he had done to modernise and restore the French economy was reversed.

Buchan’s narrative is compendious to a fault. There are times when his fondness for genealogy leads him down sidetracks that serve at best to bewilder and at worst to bore. But he is also capable of pithiness (the Parlement of Paris, he writes, saw themselves as “champions of legality against despotism – liberty did not then exist in France as a political purpose”) and his wit is delightful. He can translate French doggerel into similarly bawdy and metrically perfect English. He leads us surely through the complexities of credit and of trading in futures – what a Dutch author of 1722 described as “selling what one does not possess, and buying what one has no intention to accept”.

The Earl of Stanhope, chancellor of the exchequer, told King George I that England had lost, in refusing to pardon and employ John Law, more than the £50m she had borrowed for her recent wars. In 1718 Law was in a position to lend the king of France enough to pay off the entire national debt. His Company of the Indies was, writes Buchan, the only joint-stock company anywhere “ever to be priced in the market at more than twice the annual product of France”. His rise and fall were both prodigious, and they make a great story.

In this erudite, elegantly-written biography the narrative line sometimes becomes tangled in a mass of extraneous anecdote. But if the book is overcrowded and confusing, it is so only in the way a successful party might be, because it is too full of interesting people, variously disgraceful or brilliant, and of compelling stories overlapped. 

Lucy Hughes-Hallett’s books include “The Pike: Gabriele D’Annunzio, Poet, Seducer and Preacher of War” (HarperCollins)

John Law: A Scottish Adventurer of the Eighteenth Century
James Buchan
MacLehose Press, 498pp, £30

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This article appears in the 29 Aug 2018 issue of the New Statesman, How politics turned toxic