John Law
rather than the savings bank probably owes something to the activities of John Law, the Scot who became Comptroller- General of France. Law, who had studied finance in England and Holland, appeared in Paris in the last years of Louis XIV; he believed he could re-order the chaos of French finance, but was given no chance till the old king died. In 1716 the Regent, the Duc d'Orleans, gave him permission to start a bank, which after two years became the State bank of France. In Law's view, France's troubles were mainly due to a shortage of sound currency; this could be remedied by issuing notes backed by all the resources of the State. Even while the bank was only Law and Company, its notes were accepted everywhere, and for a year or two France had a stable currency. At the same time Law floated new companies to exploit French possessions overseas, and took over existing ones like the French India Company. But while shares were gaily issued on the strength of the fertile valleys of the Mississippi, the gold and silver of the Ohio mountains, no steps were taken to develop these admittedly great natural resources beyond the forcible dispatch of some thousands of settlers, drawn mainly from the criminals and vagabonds of Paris. A thousand and sixty million livres of notes were issued against the security of the colonies—and this in spite of the reports sent by the Governor of Louisiana, who warned the home government that only an energetic long-term policy of colonisation could unlock the natural wealth of the country. The bubble burst; those who had fought, bribed and plotted for shares brought them to be sold literally by the waggon-load. Law became about the best-hated man in Paris ; he was deprived of his Comptroller- ship, and soon after left the country.
Mr. Michael Harrison has chosen to tell Law's story in the form of fiction; and in spite of a Wardour Street opening (" On a certain day in the month of March, in the year of Our Lord, 1709 . . ") he has produced a very lively and interesting biography, and made it easy for the reader to dis- entangle the fictitious events from the historical. The method, however, has great disadvantages : Law's early history, for instance, and the exposition of his system, have to be labori- ously woven into conversations that sound like a broadcast debate between the expert and the plain man. Mr. Harrison brings in a number of historical incidents—such as the attempted murder of the Old Pretender in 1715—which have little relevance to Law's story; and he says nothing about Law's life after leaving France. He was followed to the frontier by an agent of the Tsar, who wished Law to re- organise Russia's finances; Hill Burton tells us that "He carried about in his wanderings a sort of shifting levee of ministers and petty princes "; and he returned to England on an Admiral's ship, and was courteously received by the Government.
These tributes were well justified; as Mr. Harrison clearly shows, the collapse of Law's system was largely due to factors beyond his own control. The Regent's Government first b2cked his undertakings extravagantly—nothing was done to click the speculation in shares, which Law knew was dis- astrous, and the issue of notes, which Law had kept within sound limits while the bank was private, was wildly increased when the Regent's Government took it over. Then, when the slump started, the Government panicked, and by decree- ing that paper currency was to be reduced to half its face value, started the landslide. But Law's main principles were not discredited, and his demonstration that a currency backed by Government resources need not be wholly covered by bullion, had beneficial effects on trade and business far
Previous page
