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legislation, the British Government not unfrequently collects from its agents abroad information as to the solution of the same problems in other countries. An important influence always tending in this direction, and greatly strengthened by the changes to which we have alluded, is that of commerce, and particularly of British commerce. England's business relations are coextensive with the world; it is a necessity of her business that she should know what view is taken of contracts and the relations arising out of them by the laws of different states. And it is becoming a necessity of the commercial class in all countries that, on fundamental points at least, the principles of law should be everywhere the same. Strenuous efforts, for instance, are now being made for the establishment of a uniform law of negotiable instruments in all countries, and with some prospect of success. (E. K.)
LAW, John (1671-1729), best known as the originator of what is usually called the Mississippi scheme, was born at Edinburgh in April 1671. His father, a goldsmith and what we should now describe as banker, bought shortly before his death, which took place in his son's youth, the lands of Lauriston near Edinburgh. John lived at home till he was twenty, and then went to London. He had already studied mathematics, and the theory of commerce and political economy, with much interest; but he was known rather as a fop than as a scholar. In London he gambled, drank, and flirted till in April 1694 a love intrigue resulted in a duel. He killed his antagonist, and was arrested, tried, found guilty, and condemned to death. His life was spared, but he was detained in prison. He found means to escape, and fled to Holland, then the greatest commercial country in Europe. Here he observed with close attention the practical working of banking and financial business, and conceived the first ideas of his celebrated "system." After a few years spent in foreign. travel, he returned to Scotland, then exhausted and enraged by the failure of the Darien expedition (1695-1701). He propounded plans for the relief of his country in a work[1] entitled Money and Trade Considered, with a Proposal for Supplying the Nation with Money (1705). This attracted some notice, but had no practical effect, and Law again betook himself to wandering over the Continent. He visited Brussels, Paris, Vienna, Genoa, Rome, making large sums by gambling and speculation, and spending them in a lavish and reckless manner. He was in Paris in 1708, and made some proposals to the Government as to their financial difficulties, but Louis XIV. declined to treat with a "Huguenot," and D'Argenson, chief of the police, had him expelled the city as a suspicious character. He had, however, become intimately acquainted with the duke of Orleans, and, when in 1715 the king died, and that prince became regent, Law at once returned to the French capital. The extravagant expenditure of the late monarch had plunged the kingdom into apparently inextricable financial confusion. The debt was 3 milliard livres, the estimated annual expenditure, exclusive of interest payments, 148 million livres, and the income about the same.
The advisability of declaring a national bankruptcy was seriously discussed, and though this plan was rejected measures hardly less violent were resorted to. By a visa, or examination of the state liabilities by a committee with full powers of quashing claims, the debt was reduced nearly a half, the coin in circulation was ordered to be called in and reissued at the rate of 120 for 100, – a measure by which foreign coiners profited greatly; and a chamber of justice was established to punish speculators, to whom the difficulties of the state were ascribed. These measures had so little success that the billets d'état which were issued as part security for the new debt at once sank 75 per cent. below their nominal value. At this crisis Law came forward and unfolded a vast scheme to the perplexed regent. A royal bank was to be founded. It was to manage the trade and currency of the kingdom, to collect the taxes, and free the country from debt. The council of finance then under the duke of Noailles, opposed the plan, but the regent allowed Law to go on with part of it in a tentative way. By an edict of 2d May 1716, a private institution called La Banque Générale, and managed by Law, was founded. The capital was 6 million livres, divided into 1200 shares of 5000 livres, payable in four instalments, one-fourth in cash, three-fourths in billets d'état. It was to perform the ordinary functions of a bank, and had power to issue notes payable at sight in the weight and value of the money mentioned at day of issue. The bank was a great and immediate success. By providing for the absorption of part of the state paper it raised to some extent the credit of the Government. The notes were a most desirable medium of exchange, for they had the element of fixity of value, which was, owing to the arbitrary mint decrees of the Government, wanting in the coin of the realm. They were also found the most convenient instruments of remittance between the capital and the provinces, and they thus developed and increased the industries of the latter. The rate of interest, previously enormous and uncertain, fell first to 6 and then to 4 per cent.; and when another decree (10th April 1717) ordered collectors of taxes to receive notes as payment, and to change them for coin at request, the bank so rose in favour that it had soon a note issue of 60 million livres. Law now gained the full confidence of the regent, and was allowed to proceed with the development of the "system."
The trade of the large and fertile region in North America about the Mississippi had been granted to a speculator named Crozart. He found the undertaking too large, and was glad to give it up. By a decree of August 1717 Law was allowed to establish the Compagnie des Indes-Occidentals, and to endow it with privileges practically amounting to sovereignty over the most fertile region of North America, The capital was 100 millions, divided into 200,000 shares of 500 livres. The payments were to be one-fourth in coin and three-fourths in billets d'état. On these last the Government was to pay 3 millions livres interest yearly to the company. As the state paper was depreciated the shares fell much below par. The rapid rise of Law had made him many enemies, and they took advantage of this to attack the system. D'Argenson, the former chief of the police, and now, in succession to De Noailles, head of the council of finance, with the brothers Paris of Grenoble, famous tax farmers of the day, formed what was called the "anti-system." The farming of the
- ↑ A work entitled Proposals and Reasons for constituting a Council of Trade in Scotland was published anonymously at Edinburgh in 1701. It was republished at Glasgow in 1751 with Law's name attached; but several references in the state papers of the time mention William Paterson (1658-1719), founder of the Bank of England, as the author of the plan therein propounded. Even if Law had nothing to do with the composition of the work, he must have read it and been influenced by it. This may explain how it contains the germs of many of the developments of the "system." Certainly the suggestion contained in the pamphlet of a central board, to manage great commercial undertakings, to furnish occupation for the poor, to encourage mining, fishing, and manufactures, and to bring about a reduction in the rate of interest, is a plan which was to no inconsiderable extent actually realized in the Mississippi scheme. See Bannister's Life of William Paterson (ed. 1858), and Writings of William Paterson (2d ed., 3 vols., 1859).
