Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance (14 page)

The Crown of Poland, venal twice an age,
To just three millions stinted modest Gage.

But in certain Parisian salons the flourishing fortunes of countless overseas investors met with a chilly reception. Why, many asked, should foreigners profit when many French were unable to buy as many shares as they would have liked? What right had Law to help English investors at their expense? “Some of the French have endeavoured to represent to Mr. Law’s prejudice the great gains they pretend his countrymen have made,” the diplomat Daniel Pulteney observed. Law ignored the faultfinders. In reality, nostalgia for the land of his birth had nothing to do with it: he encouraged outside investors because he recognized that to play the markets they brought with them silver and gold currency, without which the system of paper money could not survive.

While the holiday mood continued, the foundation of the fabulous gains remained unquestioned. Shrouded in the mists of inexperience, speculators of the rue Quincampoix had no yardstick against which to measure their experience. Almost a century earlier, in the 1630s, speculation fever had descended on Holland when the price of tulips and futures contracts for bulbs had bubbled and burst—the now notorious Tulipmania. But though shares had long been available, investors had been largely confined to small, select groups. The wider general public had never before taken part, nor had such rapid rises on such a scale ever been witnessed. Like gluttons at a Mississippi banquet, most investors ingenuously accepted the opportunity to gorge themselves and never considered the consequence. The fact that the huge increase in share prices was founded on little more than hype and the hugely expanded money supply was unthinkingly brushed aside.

The quantities of notes that had been circulated were vast indeed. Estimates differ—there are no precise figures, because all records were burned in the aftermath of the Mississippi—but one assessment generally accepted by scholars puts the figure at over 1.2 billion livres’ worth by the end of 1719. Added to this, the 624,000 shares that had been issued at 221 million livres were, on current market valuations at the end of November 1719, worth 4.8 billion livres. Of these the Crown and the company probably owned a third. France, thanks to Law’s magic system, was now richer to the tune of 5.2 billion livres. The regent himself had earned a fortune, which he circulated liberally to his paramours and favorites, and Law believed himself “the richest subject in Europe.” But the question of what underpinned these paper fortunes had been dangerously ignored.

The share price had been boosted on its upward path by the ease with which money could be borrowed from the bank. Loans at 2 percent interest were readily available and shares could be used as collateral. The eighteenth-century economist Du Tot summed it up: “Law,” he said, “had built a seven-storey building on foundations that would support only three.” Now we would call it a bubble. As the autumn of 1719 yielded to winter, share prices scaled ever more precarious heights: shares that in August had traded for 3,000 livres tripled in value by December and by the new year reached a peak of 10,000, a twentyfold increase on the original par price of 500 livres, for which Law had been so hard pressed to find subscribers seven months earlier.

As the year drew to a close there were signs, however, that he was beginning to succumb to the pressures of his own success. In November the journalist Buvat noted that the Duc d’Antin, the Marquis de Lassay, Law, and several unnamed ladies had traveled by carriage to the rue Quincampoix—where carriages were banned to everyone else—to visit a banker by the name of Bergerie. Law was at the carriage window and, to amuse the ladies, threw several fistfuls of coins into the street. They watched as “the rabble and courtiers tumbled over one another in the mud to pick them up [and] someone threw from a neighbouring window several buckets of water on the opportunists, one can imagine as a result the state they were in.” The incident’s unsavory undertone raised questions as well as eyebrows. Had Law’s concern for public well-being been blunted by his success? Was ego blinding his moral sensibility to the extent that he now saw avarice as a form of entertainment?

One key long-standing supporter feared the worst: the Earl of Stair, Law’s old friend, became increasingly antagonistic. An inveterate and often unlucky gambler, Stair was distrustful of Mississippi speculation and scoffed at every price rise. In August, as share prices zoomed upward, he had commented venomously that the frenzied market was “more extravagant and more ridiculous than anything that ever happened in any other country.” Law had then offered him a large number of shares and was offended when he refused them with the pompous rejoinder that he did not think it became the king’s ambassador to give countenance to such a thing.

This version of the argument conflicts, however, with the Princess Palatine’s account of their dealings. Stair, she said, “cannot conceal his hatred of Law, nevertheless he has made three good millions through him.” Stair’s animosity, detectable by his ever more alarmist dispatches, was sparked by his worries about Law’s emerging anti-British sentiments. Law, he said, was interfering in diplomatic matters that were no concern of his, and threatening the British economy: “He . . . pretends he will set France much higher than ever she was before and put her in a condition to give the law to all Europe; that he can ruin the trade and credit of England and Holland whenever he pleases; that he can break our bank whenever he has a mind, and our East India Company.” Law, who had three times been refused a pardon, was now exacting painful revenge. Ironically, the pardon had been granted by George I two years earlier, but Law responded with typical impetuosity by handing over the document to the regent as proof of his unstinting loyalty.

Stair, however, ignored this detail. According to him, by the year’s end the regent was losing faith in Law. Having heard a variety of rumors relating to his erratic behavior, the regent assured Stair he had reprimanded Law for his impudence. A few days later, Stair averred, Orléans was again denouncing Law for “his vanity, presumption and insolence. He said he knew him to be a man whose head had been turned by his vanity and unbounded ambition; that nothing would satisfy him but to be absolute master; that he had such an opinion of his own talents and contempt for the talents of others as to be quite impracticable with any other person.”

Stair’s assessment did not tally with other diplomatic intelligence, which suggested that Law’s authority was substantial. The Paris-based diplomat Martin Bladen appraised the situation in a revealing letter to Lord Stanhope. “The Regent has already reaped many solid advantages from the establishment of this company, he is resolved to throw all the revenues of France under their management, which cannot fail of raising the actions to a much higher price.” Of Law’s part in all this Bladen was in no doubt: “Mr. Law is become the idol of the people, the Regent has gained many new friends, the public debts of the government are all discharged, and the revenues of France very considerably increased.” He drew the inevitable conclusion: “Your Lordship knows better than I how precarious our friendship is with this kingdom, and consequently how necessary it will be that some speedy methods should be thought on for payment of the public debts without which His Majesty cannot long continue the arbiter of Europe.”

The growing anxiety was not only that France’s economic renaissance would increase her political aspirations, but also that the flurry of tourists investing in Mississippi stock would drain England of her coinage. Concerns were amplified by Law’s overt jingoism. Openly contemptuous of the English economy, “he spared no occasion of declaring without reserve, even without decency that we are bankrupt and shall be forced to shelter our country under the protection of France,” wrote Daniel Pulteney to the secretary of state James Craggs. Stair told a similar story: “He [Law] said publicly the other day at his own table, when Lord Londonderry was present, that there was but one great kingdom in Europe. . . . He told Pitt that he would bring down our East India stock, and entered into articles [made an agreement] with him to sell him at 12 months hence, a hundred thousand pounds of stock at eleven per cent under the current price.”

Law was convinced that the price of East India stock would fall and he was therefore, in modern parlance, taking a bear futures position. The stance was probably more of a propaganda exercise, meant to bolster confidence in French investments by running down English ones, than a considered opinion—and later it turned horribly wrong. But faced with this nose thumbing, England could do nothing but squirm. Despite what Stair said, Law was far too powerful to risk offending and, ever the archmanipulator, he played mercilessly on the anxiety, even complaining to Pulteney about comments in the English press calling his company “a chimera,” at which he professed to take umbrage. Meanwhile, the career of Stair, the weakling who had picked an argument with a prizefighter, was doomed. When Lord Stanhope visited Paris in early 1720, his predictable conclusion that Law should not be provoked heralded the end of a brilliant diplomatic career for Ambassador Stair. The following spring he was recalled.

For all the carefully calculated bravado and insults bandied over the dinner table, success had not turned Law into an egomaniac. Nor had it silenced his driving demon: his need for acceptance and his desire for political advancement. He might relish behaving high-handedly toward the English establishment and his role of bad-boy-made-good, but part of him craved acknowledgment of his achievement and wanted to be recognized for his honorable intentions, as well as respected for the money he could bestow. Success offered the chance to anchor himself to the country he had served so well by seeking a position within its government. The regent welcomed the idea, but there was a constitutional dilemma: Law still followed the Protestant faith of his forebears, and in Catholic France a Protestant could have no legal role in government. For Law to hold public office he would have to convert.

Oddly for the descendant of a family whose livelihood had once depended on and been doomed by its faith, religion seems to have been of little significance to John Law. His choice of English friends bears this out: among them were several leading Jacobites, although he was also close to the Duke of Argyll and Earl of Ilay, who were staunch anti-Jacobites. If he felt any qualms about his conversion there are no records of it. There are, however, signs that Katherine did not share his feelings: she refused to follow suit, and was said to be “very much upset about it,” according to the regent’s mother, especially when Law insisted that both children should adopt the Catholic faith. But Law, at the zenith of his career, blinkered by ambition, ignored Katherine’s opposition. The ceremony of his acceptance into the Roman Catholic Church took place in Melun in December 1719, presided over by the Abbé de Tencin, the brother of the infamous nun turned courtesan Claudine de Tencin, whose numerous lovers were said to include Law. The association must have been a double blow for Katherine. Like his sister, Tencin was renowned for his venality and corruption and agreed to Law’s conversion largely because he knew he would profit from it. Later he received shares worth 200,000 livres. A few days later, on Christmas Day, Law participated in his first Mass at his local church of St. Roche and marked the occasion with a sumptuous ball and dinner.

Uplifted by his conversion and anxious to secure public affection, Law donated vast sums to good causes. “He gives away lots of alms that are never talked about . . . and helps many poor people,” wrote the Princess Palatine. “It is impossible to express the bounty and munificence of Mr. Law; and what a world of money he gives away on charitable and generous occasions.” Daniel Defoe agreed: “The other day he gave 100,000 livres to the rebuilding of the church of St. Roche in Paris, being the parish church in which he lives and where he received his first communion. After the renunciation of his religion, he gave the same day a hundred thousand crowns to the relief of his country men at St. Germain . . . He had given very considerable sums to the Hospital la Charité.”

Law’s critics were unmoved by his generosity. They were forced to pay him lip service, but many secretly regarded him as a parvenu, whose reforms had seriously damaged their financial muscle. However much they had profited as a result of the escalating price of Mississippi shares, they still felt they would be better off with the old order, in which their preeminence was unrivaled. Moreover, they must have known his reward was imminent.

It came on January 5, 1720, with the announcement that Law had received the ultimate accolade: he had been appointed controller general of finance. The position surprised few. Law had been the nation’s “first minister” in all but name for many months, but the title underlined his ascendancy. The world could no longer ignore the fact that he held the purse strings and therefore held sway over the most powerful and populous nation in Europe.

To commemorate his new office, a portrait was made of France’s new controller general, probably painted by the fashionable artist Hyacinthe Rigaud (the painting was feared lost but appeared recently at a Sotheby’s house sale). Something of the dandy lingers: in it Law wears a gold-buttoned velvet coat and showy turquoise waistcoat embroidered with gold leaves and bunches of brilliantly colored fruit, and sports a powdered gray periwig. The once angular face is now softened with the jowls and ruddy complexion of good living. But it is a grandiose portrait, which forces you to acknowledge a man of exceptional stature and achievement. Gone is the dreaminess: the eyes, brooding beneath luxuriant black brows, focus directly on the viewer, while behind, the emblem of his empire—a Mississippi ship at full sail—powers toward the horizon.

M
ISSISSIPPI
M
ADNESS

After the death of Louis XIV, Law, a Scotchman, a very extraordinary person, many of whose schemes had proved useless, and others hurtful to the nation, made the government and the people believe that Louisiana produced as much gold as Peru, and that it would soon be able to supply as great a quantity of silk as China. . . . The settlers almost all perished from want; and the city was confined to a few paltry houses. Perhaps one day, when France shall have a million or two of inhabitants more than she may know what to do with, it may be of some advantage to her to people Louisiana.

Voltaire,

Short Studies: The French Islands

E
VER SINCE
L
AW HAD TAKEN CONTROL OF THE
L
OUISIANA
colony, tantalizing reports of it had appeared in France’s official newspaper, the
Nouveau Mercure:
correspondents described a land of milk and honey in which the climate was temperate, the soil fertile, the woods replete with trees suited to building and export, and the countryside populated with wild yet benign “horses, buffaloes, and cows, which however do no harm but run away at the sight of men.” In this wonderland, said an article published in September 1717, the soil bulged with seams of gold and silver ore; other valuable minerals—copper, lead, and mercury—also awaited exploitation, and the natives had spoken of an enormous rock near the Arkansas River made of a type of rock that was “dark green, very hard and very beautiful, resembling emeralds.” In short, said the endlessly imaginative Mississippi journalists, “nothing almost is wanting . . . but industrious people, and numbers of hands to work.” The optimistic dispatches continued to circulate Paris for three more years. “The most solid foundation for the hopes of the Mississippians,” wrote the captain of the
Valette,
a vessel that had recently returned from the region, “are the silver mines discovered in the country of the Illinois [the local Indian tribe].” Elsewhere, in the fairs, markets, and taverns of provincial towns and villages, catchy songs advertised the colony’s charms:

Aujourd’hui il n’est plus question
De parler de Constitution,
Ni de la guerre avec l’Espagne;
Un nouveau pays de cocagne,
Que l’on nomme Mississippi,
Roule a présent sur le tapis.

Today there is no longer any question
Of talking of the constitution
Nor of the war with Spain;
A new wonder land
That they call Mississippi
Has appeared on the scene.

By 1719, the showpiece settlement of New Orleans, founded a year earlier and strategically placed at the mouth of the Mississippi to control the trade on the Mississippi and Missouri rivers, was said to be a prosperous town of “nearly 800 very comfortable and well appointed houses, each one of which has attached 120 acres of land for the upkeep of the families.” Furthermore, mineral finds exceeded all expectation, said the
Mercure
of April 1720: samples sent for testing had proved astonishingly pure—“One scarcely finds the same quantity in the richest mines of Potosi.”

It was all an illusion. The reality, concealed beneath the veils of beguiling disinformation, was that the colony was struggling to stay alive. Between 1717 and 1720, of the thousands that made the arduous journey to Louisiana, over half perished en route or returned exhausted and disenchanted with what they found. Hundreds more perished from disease or starvation. No sizable deposits of silver or gold, let alone emeralds, had been found, and according to the report of de Bienville, the colony’s governor, to the company in 1719, New Orleans consisted only of four modest houses, where the immigrants survived entirely by trading with the natives.

The glossy reports and alluring songs had been master-minded by Law more as a marketing ploy than a deliberate deception. He was adamant that given enough time and money, the colony would become the valuable territory everyone believed it to be. But he was hampered by innate French reluctance to emigrate: there were too few willing pioneers. Yet having realized that, along with the predictable profits of the other rights acquired, much of the pyramid of speculation depended on public belief in the colony’s prosperity and their expectation that this was sure to increase, he had no alternative but to conceal the facts until more potential settlers came forward.

To tempt them he offered attractive incentives. Colonists’ expenses would be met by the company from the time they took up residence until they were established, and they would be provided with land, livestock, and thirty pounds of flour a head until their first harvest. But however successfully in the past he had manipulated the public’s opinion, he could not persuade them willingly to leave France for an unknown, undeveloped wilderness, even though much of the nation’s money was staked on it.

Undaunted, and in the expectation that where he led others would follow, Law acquired a concession of his own in 1719. In partnership with the Irish émigré Richard Cantillon, one of Paris’s most successful private bankers, and the English speculator Joseph Gage, he acquired the rights to a plot of 16 square leagues bordering the Ouachita River to the west of the Mississippi, in what is now the state of Arkansas. While Law and his partners observed operations from the comfortable security of their Paris mansions, around a hundred settlers—including carpenters, mine workers, and gardeners—were enlisted to prospect for minerals and to grow tobacco. The party, supervised by Cantillon’s brother Bernard, left La Rochelle on the slave ship
St. Louis
in March 1719. Three months later it dropped anchor in the brave new world of Louisiana. By one account, Law’s expedition was unusually well equipped, with “such a large quantity of merchandise and other effects that they filled three boats to get to their concession.”

As he had hoped, his example inspired similar partnerships. A handful of aristocrats, several successful speculators in Mississippi stock, including the widow Chaumont, and several of his English, Irish, and Scottish émigré friends, including the glamorous Fanny Oglethorpe, joined in ventures aimed at farming tobacco, rice, and silk or prospecting for minerals.

Within months of hearing of his expedition’s safe arrival Law was trumpeting its success. Rumors eddied through salon society of the silver deposits discovered on his land, and of a mine already yielding five ounces of silver for every hundred-weight of ore. Few suspected that the whispers emanated from Law’s imagination rather than the correspondence of his settlers, for the mission, despite its ample resources, was far from triumphant.

Bernard Cantillon and his team had found themselves in a dismal, hostile territory in which the struggle for survival overshadowed any attempt to farm or prospect. The immigrants were racked with scurvy, dysentery, malaria, and yellow fever. There was the ever-present danger of hostile Indians, who needed constant bribes to remain friendly. According to Buvat, in one attack that took place in March 1719 and was never publicized, 1,500 French colonists were ambushed in their homes and slaughtered. There was also danger from the Spanish settlements to the west—with whom war was waged from 1719 to 1720—and English settlements to the east, between which the French colony was sandwiched. Cantillon and his party, like others before them, realized the extent of the exaggeration only when they arrived, but by then it was too late to go back. Within four years, desertion, disease, and other hazards had culled the expedition’s numbers until only a quarter remained. Law and his partners found little in the way of quick profit. In a letter to one partner two years later, when his own fortunes were in decline, he was forced to relinquish his investment: “With regard to my Louisiana colony, I thank you for your offers. As I am not in a state to continue to take on the necessary expenditure to support it, don’t hesitate to take the party that suits your interests best. Wishing you success in what you undertake.” Another two centuries would pass before the true wealth beneath the soil was found, not in silver, gold, or emeralds but in oil.

In Paris, conscious that the rising share market depended on public confidence that large-scale revenue would come sooner rather than later, Law moved to speed things up. The stumbling block as he saw it was still the dearth of settlers and an inadequate support system. He responded first with orders for new shipping, making so massive an investment that even the pragmatic Daniel Pulteney was astounded: “Besides the ships the company had already bespoke in England, which I think were 8 or 9 orders, are lately sent for building there 8 more . . . 4 ships are now fitting out at port Louis,” he wrote, in early 1720, by which time the company fleet had already swelled to some thirty ships, more than the rival English East India Company.

Meanwhile, the problem of where to find settlers had been dramatically addressed: new legislation was passed whereby every criminal, vagabond, and prostitute and any servant unemployed for more than four days was listed and liable for transportation. An army of mercenary soldiers, known as “archers,” was employed by the company to trace, apprehend, and escort them to the nearest port for transportation. In Paris, with the blessing of the authorities, Law rounded up orphans and young people from the so-called hospitals, many of which served also as detention centers and poorhouses. Thus, in Paris alone it was estimated that some 4,000 people—among them society’s most defenseless, disreputable, and dangerous citizens—taken from Bicêtre, l’Hôpital Général, and Salpêtrière, would swell the numbers of settlers and provide the necessary unskilled labor. According to the reports, the first cargo of female deportees arrived to the warmest of welcomes from the male settlers and quickly found marriage partners. Problems arose, however, when two men claimed the last woman, and the matter had to be decided by hand-to-hand combat.

In Paris, at a comfortable distance from wrestling matches on the dockside, few at first opposed the transportations. Echoing the general mood, Saint-Simon commented, “If this had been done with wisdom, discernment and necessary caution, the object they proposed would have been accomplished, and Paris and the provinces relieved of a heavy, useless and sometimes dangerous burthen.” But public approval was short-lived. The journalist Buvat sternly noted the problems caused in Louisiana by certain categories of female immigrants: “The debauched girls that had been transported to the Mississippi and other French colonies had been the cause of much disorder bytheir libertine actions and by the venereal disease that they had spread.”

Increasing displeasure was voiced over the brutality of the archers. Poorly supervised, ill disciplined, and corrupt, they were soon universally detested and feared. If too few people from the designated categories were captured, the archers were known to arrest anyone unfortunate enough to stumble into their path. According to Pulteney, their fiendishness was exacerbated by financial temptation. They were paid commissions for every captive, and the system was widely abused. With a word in the ear of an archer and few sous slipped in his hand, it was all too easy for an unwanted relative, awkward son, inconvenient competitor, or demanding spouse to be dispatched to the swamps of Louisiana. There was even a popular song to warn husbands of the danger:

O vous tous, messieurs les maris,
Si vos femmes ont des favoris,
Ne vous mettez martel en tête;
Vous auriez fort méchante fête.
Si vous vous en fachez, tant pis:
Vous irez a Mississippi.

O all you husbands
If your wives have favorites
Don’t get worried;
You will have a terrible celebration.
If you get angry, too bad:
You will go to Mississippi.

Despite growing public concern, archer chicanery showed no sign of diminishing. Even infants were reported to have fallen prey: “I have heard that they have taken children out of houses; some they release again for money, those who cannot or will not pay a ransom are carried to a prison whence they are to be sent to the Mississippi,” Pulteney lamented. Those who could not escape were abysmally mistreated: “Not the slightest pains were taken to provide for the subsistence of these unfortunates on their journey, or at the places where they disembarked; they were shut up at night in barns without food, or in cellars from which they could not issue. Their cries excited both pity and indignation,” recorded an outraged Saint-Simon. The injustice of impressment would find most famous literary expression in the novel
Manon Lescaut,
published in 1731 by Abbé Prévost. The story charts the life of a young girl, Manon, during the Regency era, who is diverted from life as a nun by the appeal of money. Manon betrays her first suitor, who loves her and wants to marry her, takes numerous lovers, and is eventually arrested and deported to Louisiana, where she dies from the hardship she encounters.

The groundswell of disapproval did not diminish Law’s quest for settlers, but conscious of the problems created by deportations, he concentrated his efforts on enticing volunteers—especially young married couples—to the colony. On visits to Paris hospitals he offered generous dowries to couples who would marry and emigrate. “They took 500 boys and girls from the hospitals of Bicêtre and de Salpêtrière . . . the girls were in wagons and the boys on foot escorted by 32 guards,” noted Buvat. But the most bizarre event Law engineered took place in September 1719, when the pealing bells of the St. Martin
quartier
of Paris proclaimed the mass nuptials of eighty young girls of doubtful repute and eighty specially pardoned criminals. While the marriage took place the couples stood shackled together in heavy iron chains. Afterward, under the watchful eye of a company of archers, they were paraded, still in chains, through the streets of Paris before being sent to La Rochelle for transportation to Louisiana. The chains caused consternation among the public, and a similar mass wedding, in which couples were linked with flowers—presumably to symbolize the fecundity that awaited them—took place soon after in a blaze of publicity.