John Law of Lauriston / Financier and Statesman, Founder of the Bank of France, Originator of the Mississippi Scheme, Etc.

by A. W. Wiston-Glynn

The efforts of Law and of the Regent having as yet proved insufficient to rectify the balance between the notes in issue and the amount of specie in the country, the adoption of some final drastic measure was rendered imperative. A step was taken which has given rise to much controversy as to its authorship. On 21st May an edict of Council was issued, the provisions of which were designed to adjust the finances of the realm by one sweeping process, irrespective of the interests of individuals, and of a character so radical and effective as to exclude the possibility of the whim of the speculator from defeating its object. It not only covered the relations which were to obtain between the value of notes and specie, but also fixed the price of shares so that they should not disturb by their fluctuations the arrangements of the Bank. It enacted that on the date of publication of the decree bank-notes of all denominations should suffer depreciation to the extent of 20 per cent. of their value, and that on the first of each month, from 1st July to 1st December, further depreciation should take place to the extent of 500 livres on notes of the nominal value of 10,000 livres, and proportionately on the smaller notes. Shares were to undergo a similar diminution in value, starting from 8000 livres as at 21st May. On 1st December therefore, all notes would have reached a discount of 50 per cent., and shares would possess a fixed value of 5000 livres each. These regulations were to apply to all financial and industrial negotiations; but one exception was granted in the case of payment of Royal revenues, and purchase of state securities such as annuities, where until 1st December all notes would be received at their full face value. As a possible steadying influence in so disturbing and so confusing a change, the repeal of the edict prohibiting the currency of specie was to be withdrawn, and the standard value of the specie was again to be increased to a more normal ratio, the silver marc to stand at the value of 30 livres.

In the confusion of authorities it is extremely difficult to apportion the blame for the publication of the edict. On the one hand, it is stated that the enemies of Law were the instigators of it, and among them in particular Dubois and D’Argenson. These two ministers, desiring nothing more than the downfall of their rival, had suggested two courses by either of which the great disproportion between the notes and specie might be immediately accomplished. They pointed out to the Council that as the notes in issue were double in value the amount of specie, equality could be obtained by halving the value of the former or by doubling the value of the latter. Their suggestion possessed the element of simplicity and appealed very strongly to the other members, who, after serious discussion, and in spite of the remonstrances of Law as to its fatal consequences, determined upon dealing with the notes and leaving the specie at its present standard.

On the other hand, it has been argued that the edict was really the work of Law and bears evident marks of his financial handiwork. Before the date of the decree, shares were at 10,000 livres in price, and the marc was valued at 85 livres. Consequently a share at that price represented almost 120 marcs. At the date of the last reduction, shares of 5000 livres would, with the increased ratio of value, return approximately 165 marcs to the holder, or a net gain of 45 marcs. The decree, therefore, which seemed to threaten the financial stability of the nation, would in reality have resulted not only in removing the difficulties due to the inflated issue of notes, but in benefiting materially all the shareholders of the company.

It is difficult to believe that Law on such a ground as this was the author of the decree. There is no contemporaneous evidence of its having been at any time advanced by himself or his friends in order to make the decree acceptable to the public, and it had the additional disadvantage of being unlikely to inspire any confidence. The immediate result of the decree, and not its probable result in the future, would be the determining factor in the attitude of the public towards it, and no one would understand this better than Law himself. It is more likely that Dubois and D’Argenson were accountable altogether for the decree, hoping thereby to secure his removal from office and to destroy the influence he had acquired in the government of the country. Law had made himself obnoxious to both. He had sought to undermine the authority of Dubois, and had deposed D’Argenson from the office of Comptroller General. Their personal jealousy of the great foreigner was therefore sufficiently deep to take advantage of such an opportunity as they now had to avenge themselves.

The publication of the edict created universal consternation. The community were paralysed. The last shred of confidence in Law was utterly destroyed, and national bankruptcy was feared to be imminent. The attitude of the people was one of intense hostility, and threatened to break out at any moment into active riot. Multitudes flocked to the Bank, and the protection of the troops was required to maintain order. Nor was the fury of the mob appeased by the knowledge that the Duke of Bourbon, the Prince of Conti, and Marshall Villeroi, were strenuously opposed to the edict and demanded its withdrawal. Posters were exhibited all over the city calling upon the citizens to resist, even to the extent of using force. Hand-bills were distributed in thousands, foreboding a step of revolution. “This is to give you notice,” they ran, “that a St. Bartholomew’s day will be enacted again on Saturday or Sunday, if affairs do not alter. You are desired not to stir, you nor your servants. God preserve you from the flames. Give notice to your neighbours.”

In the midst of this disorder the First President called Parliament together to consider the situation, and with prompt decision announced to the Regent their refusal to register the edict. The Regent, delighted to have this opportunity of reconciling himself with his Parliament, especially when the occasion allowed him to follow his own desires, received the parliamentary deputation with the greatest deference, and gave them assurance of his sympathy. He, accordingly, sent La Vrillière, one of the Secretaries of State, later on the same day to announce to the President his intention to withdraw the edict, and as far as possible restore the status quo which had been so ruthlessly disturbed. An edict was then published on 27th May, revoking that of 22nd May, by which shares and notes were allowed to remain at their previous value. Unfortunately, however, it was now impossible to restore public confidence. That was irretrievably lost. A blow had been struck at the system from which it never recovered. Its collapse may be dated from the ill-conceived edict of 22nd May, and its subsequent history is merely a record of measures of despair resorted to for the purpose of saving if possible some portion of the national credit.

Holders of bank-notes now thought to avail themselves of the possibility of securing some portion at least of their paper changed into silver, but Law had foreseen the danger of allowing unlimited demands being made on the Bank, and suspended payment in order as he declared to enable him to investigate the circumstances of numerous frauds of which the Bank’s officials had been guilty. This proceeding, while demanded by the exigencies of the moment, merely added fuel to the fire, and the frenzied multitude only awaited the word of command from a leader to break out into open revolt. The notes in circulation were practically valueless for purpose of currency, and the greatest distress accordingly prevailed. The situation could not continue for many days in its present condition, and Law, in order to relieve the distress which was now universal, caused several thousand livres in specie to be sent to each of the commissaries in the city for exchange, but only to be given to those who satisfied the distributing authority that they required the specie for immediate wants. Thus again for a few days at least the inevitable liquidation was postponed.

The Regent was naturally much alarmed at the situation which had been created. He felt that his own position was largely bound up with that of Law, and that the hostile attitude of the community might also be directed against himself. He was urged by Dubois and other influential advisers to sacrifice Law, and thus secure the good favour of the community. The Regent, however, was unwilling to sever in a summary manner his intimacy with Law, but Law himself communicated his readiness to be discharged from office if the Regent thought it prudent in the interests of himself and of the nation. On 29th May, accordingly, the Regent through Le Blanc announced to Law that he no longer held the position of Comptroller General of Finances, but that his services would still be retained as director of the Company and as a member of the Council. At the same time he informed Law that he intended to provide for his personal safety by giving him the protection of a detachment of Swiss Guards under the command of Benzualde. This precautionary measure was by no means superfluous. Law had been threatened by the mob and would have been stoned on one occasion while driving in his carriage had he not at the moment been near his own house and thus escaped. His family had also been subjected to similar treatment. The provision of a guard was therefore an act of kindly consideration for the deposed minister. On the day following his discharge, Law was taken to the Palais Royal by the Duke de la Force, but the Regent, in order to maintain the appearance of having disgraced him, refused to see him. The same evening, however, Law was sent for, and admitted by a secret door, and thus had the desired interview. Two days after these somewhat peculiar proceedings, Law and the Regent appeared together in public at the opera, the necessity for continuing the pretence of disgrace having evidently been regarded as needless.

Law, who acted at this critical period with great good sense, determined upon advising the Regent to reinstate D’Aguessau in the office of Chancellor from which he had been instrumental in removing him. With the assistance of Dubois, to whom Law had communicated his proposal and who strongly approved of its wisdom, as a prudent concession to public opinion, the appeal to the Regent was successful. Since his deposition, the ex-chancellor had lived in retirement on his estate at Frênes. Thence Law himself, and the Chevalier de Conflans, an officer of the Regent’s household, were despatched in order to convey the command of the King to resume his office. D’Aguessau at first refused to accept the honour, but after considerable pressure and on representations that the interests of the government lay with his acceptance, he agreed to receive the seals. D’Argenson was at the same time deprived of office, but retained all the honours and the position it had conferred upon him. Law’s own successor was Pelletier des Forts, and associated with him as colleagues were D’Ormesson and Gaumont. These three formed a commission of finance, and to them was entrusted the responsibility of adjusting the finances of the kingdom.