famous imposter 15

famous imposter 15

On 23 February 1720, the _Compagnie des Indes_ and the _Banque Royale_

were united, thus linking the ends of the financial chain. “The System”

was now complete.

 

When Aladdin set the Genius, who had hitherto worked so willingly, the

final task of hanging a roc’s egg in the centre of the newly-created

palace, he brought the whole structure tumbling about his ears. So it

was with John Law and the egregious Mississippi Scheme. His idea was

complete and perfect. But the high sun when it reaches its meridianal

splendour begins from that instant its downward course.

 

The reaction was not long in manifesting itself. Usually in such

matters there is a pause before the great driving-wheels reverse

their motion, and the backward motion, beginning slowly, gathers way

as it progresses. But in this case human intelligence and not soulless

machinery was the propulsive force of reaction. The speculators had

begun to work before the onward movement had come to an end or even

begun to slacken. They were loaded up with a vast amount of stocks

whose value, even if there had been money to redeem them, was severely

limited, whereas they had purchased at prices varying between the

first rise above nominal value and that reached by the last desperate

speculator. It is not wise to hold such inflated stock too long, and in

a crisis sailing-master Wisdom orders Quarter-master Caution to take

a trick at the helm. When the bare idea of unification of financial

interests was mooted, the wise holders of stock commenced to unload.

When this movement began its progress was rapid--so long as there was

anything to be moved. The first class to feel it were the bankers. The

specie ran out like the pent-up water from a burst reservoir, till in

an incredibly short time there was not sufficient remaining to afford

the money-change needed in daily life. The advisers and officials of

the State, seriously alarmed, began at once to take strong measures

supported by royal decrees. Then as ruin began to stare the whole

nation in the face more and more with every hour, desperate expedients

were resorted to. The value of the currency was made by every

stratagem, dishonest trick, and unscrupulous exercise of power, to

fluctuate so that such differences or margins as arose might be grasped

forthwith for national use. Payments in bullion, except for very small

amounts, were forbidden. The possession of anything over five hundred

livres in specie was deemed an offence punishable by confiscation,

partial or wholesale, and by fine. Domiciliary visits were paid to seek

evidence of offence and to enforce the new laws, and informers in this

connection were well paid.

 

Then began a war, between public oppression and individual trickery,

to defend acquired rights and evade unjust demands. The holders of

paper money, unable to realise in specie, tried to protect themselves

by purchasing goods of intrinsic value. Precious metals, jewels, and

such like were bought in such quantities that the supplies diminished

and the prices grew, until to avoid immediate ruin, such purchases

were proclaimed illegal and prohibited. Then ordinary commodities of

lesser values were tried as means of barter, till their prices too

rose to such an extent that trade was paralysed. In order to meet the

growing danger a still more desperate expedient was resorted to. A

decree was issued the effect of which would be to reduce--gradually

it was hoped--the obligation of bank notes to one-half their nominal

value. This completed the panic, for here was a position which could

not be guarded against by any prudence or wisdom. No one could

henceforth by any possibility be financially safe. The speculators who

had already realised were alone safe. _Bona fide_ investors, if not

already overwhelmed by disaster, saw the tide of ruin rising rapidly

around them. Nothing within the power of the state could now be done

to check or even lessen the state of panic; not even the reversal of

the late decree in ten days after its issue. To make matters still

worse the Banque at this very time suspended payment. Probably in

a wild endeavour to do _something_ which would avert odium from

itself by saddling the responsibility on someone else, the Government

procured the dismissal of Law from the Controller-Generalship of

Finance. However--strange to say--he was very soon appointed by the

Regent as Intendant-General of Commerce and Director of the ruined

bank. The much-vaunted, idolised, and believed-in “System” had now

fallen hopelessly and was ruined forever. Law was everywhere attacked

and insulted with such unmitigated rancour that he had to leave the

country. He had invested the bulk of the great fortune which he had by

now acquired, in estates in France; and these together with everything

else that he had were now confiscated.

 

At the end of the same year, 1720, whilst he was at Brussels he was

asked by the command of the Czar (Peter), to administer the finances of

Russia, but declined. After this episode, grateful to a broken man, he

spent a couple of years wandering about Italy and Germany and probably

gaming a fluctuating income through gambling. Next he was to be found

in Copenhagen where he had sought sanctuary from his creditors. Next

year there was an outward change in his status, when he went to

England, on a ship of war, at the invitation of the Government. There

he was presented to George I. Somewhat to his chagrin he was denounced

in the House of Lords as a Catholic--(he had abjured his old belief of

Protestantism before accepting the high office of Controller-General

of Finances in 1720)--and an adherent of the Pretender. He pleaded in

the King’s Bench the Royal pardon for the murder of Beau Austin which

had been sent to him in 1719. He spent the succeeding few years in

England whence he corresponded with the Duke of Orleans. He expected

to be recalled to France but his hope was never realised. He wished to

go to the Continent but was practically a prisoner in England, fearing

to leave it lest he should be arrested by his creditors, amongst whom

was the new French East India Company which had been reconstructed on

the ruins of the old. In 1725 Sir Robert Walpole, then Prime Minister,

asked Lord Townshend, the Secretary of State, to give Law a King’s

commission of some sort, so that such might serve for his protection.

In the same year he went to Italy. He died in Venice in 1729, in what,

compared with his former state, was poverty. To the last he was a

gambler, always ready to take long risks for a prospect, however

remote, of large gain. A story is told that in his last years he

wagered his last thousand pounds to a shilling (20,000 to 1) against

the throwing of double sixes six consecutive times. The law of chances

was with him and naturally he won. He renewed his wager but the

authorities would not allow the further gamble to take place.

 

John Law married, quite early in life, the daughter of the Earl of

Banbury and widow of Mr. Seignior. His widow died in 1747. Some of

the members of his family were not undistinguished; his son died a

Colonel in the Austrian service; and one of his nephews became Comte de

Lauriston and rose to be a General in the French army and Aide-de-Camp

to the first Napoleon. He was made a Marshal of France by Louis XVIII.

 

John Law was a handsome and distinguished-looking man, blonde, with

small dark grey eyes and fresh complexion. He made an agreeable

impression on strangers. Saint-Simon, the social historian, gave him a

good character: “innocent of greed and knavery, a mild good man whom

fortune had not spoilt.” Others of his time regarded him as a pioneer

of modern statesmanship.

 

How is it then that such a man must be set down an impostor? In

historical perspective as an impostor he must be regarded, though not

as such in the narrowest view. The answer is that his very prominence

sits amongst his judges. Lesser men, and greater men of lesser

position, might well stand excused in matters wherein he is accorded

condemnation.

 

“That in the Captain’s but a choleric word

Which in the soldier is flat blasphemy.”

 

If, when a man plays a game wherein life and death and the fortunes

of many thousands are involved, it behoves him to be at least

careful, much greater is his responsibility where the prosperity

and happiness of nations are at stake. Had Law merely started new

theories of finance, and had they gone wrong, he might well claim,

and be accorded, excuse. But his were inventions of what, in modern

slang, is called “get-rich-quick” principles. Not only did Law not

enrich human life--with one exception, that of enlarging the currency

in use--or add to the sum total of human well-being and happiness; he

even neglected to show that forethought and consideration for others

which in all honour ought to be exercised by the deviser and controller

of great risks. He was a gambler, and a gambler only. He merely put

into the pockets of some persons that which he had taken out of the

pockets of others; and in doing so showed no consideration for the

poor, the thrifty, the needy--for any of those whose contentment and

happiness depend on such as are in high places and dowered in some

way with productive powers. The soulless uneducated churl who does an

honest day’s work does more for humanity than the genius who merely

shifts about the already garnered wealth of ages. John Law posed as

a benefactor and accepted all the benefits that accrued to him from

the praises of those who followed in his wake and gleaned the rich

wastage of his empire-moving theories and schemes. Financiers of Law’s

type no more benefit a country or enrich a people than do the hordes

of wasters and “tape”-betting men who prey on labour as locusts do on

the crops. If they wish not to do unnecessary harm--which is putting

their duty at the lowest possible estimate--they should at least try to

avoid repeating the errors which have wrecked others. A brief glance at

the wreckage which lay well within the Scotch gambler’s vision, will

show how he shut his eyes deliberately not only to facts, but to the

many correlations of cause and effect. Before his Mississippi Scheme

was formulated, there had been experience of banking enterprises, of

schemes for mercantile combination and for the exploitation of capital,

of adventurous dealings in the developments of countries new and more

or less savage, East and West and South.

 

The following list will typify. Of all these John Law had knowledge

sufficient to judge of difficulties to be encountered in the early

stages, of dangers not only incidental to the things themselves, but

based deep in human nature.

 

The East India Company founded in 1600

The Bank of England founded in 1694

The Africa Company founded in 1695

The Darien Company founded in 1695

 

A glance at each of these, all of which were within the scope and

knowledge of Law, their aims, formation and development, up to the time

spoken of, can hardly fail to be illuminative. The sixteenth century

had been an age of adventure and discovery; the seventeenth of the

foundation of great commercial enterprise, of conception of ideas, of

the constructive beginnings of things. The time for development had

come with the eighteenth; and now care and forethought, prudence and

resource, were the preparations for success.

 

The East India Company was in reality the pioneer of corporate

trading, and as for nearly a hundred years it was in a measure alone

in its scale of magnitude, its experiences could well serve as

exemplar, guide, and danger signal. It was based on that surest of all

undertakings, natural growth. It came into existence because it was

wanted, and from no other cause. Its very name, its modest capital, its

self-protective purpose make for understanding.

 

In its Charter of Incorporation its purpose was indicated in the name:

“The Governor and Company of Merchants of London trading to the East

Indies.” Its capital was £70,000, which though a large sum for those

days, was, according to our modern lights, an almost ridiculously small

sum for the object then before it, and to which it ultimately attained. The time was ripe for just such an undertaking.