John Law

John Law was born into a family of bankers and goldsmiths from Fife; his father had purchased a landed estate at Cramond on the Firth of Forth and was known as Law of Lauriston.

Law had joined the family business at age fourteen and studied the banking business until his father died in 1688.

Law subsequently neglected the firm in favor of more extravagant pursuits and traveled to London, where he had lost large sums of money in gambling.

Law had on April 9, 1694, fought a duel with Edward Wilson in Bloomsbury Square in London.

Wilson had challenged Law over the affections of Elizabeth Villiers.

Law, having killed Wilson with a single pass and thrust of his sword, had been arrested, charged with murder and tried at the Old Bailey before the infamously sadistic 'hanging-judge', Salathiel Lovell.

Found guilty of murder, and sentenced to death, he had been initially incarcerated in Newgate Prison to await execution.

His sentence was later commuted to a fine, upon the ground that the offense only amounted to manslaughter.

Wilson's brother appealed and had Law imprisoned, but he had managed to escape to Amsterdam.

Law has urged the establishment of a national bank to create and increase instruments of credit and the issue of banknotes backed by land, gold, or silver.

He had published a text entitled Money and Trade Consider'd with a Proposal for Supplying the Nation with Money (1705).

The first manifestation of Law's system had come when he had returned to Scotland and contributed to the debates leading to the Treaty of Union 1707.

Law's propositions of creating a national bank in Scotland were ultimately rejected, and he left to pursue his ambitions abroad.

He has spent the past ten years moving between France and the Netherlands, dealing in financial speculations.

Problems with the French economy present the opportunity to put his system into practice.

He has the idea of abolishing minor monopolies and private farming of taxes.

He would create a bank for national finance and a state company for commerce, ultimately to exclude all private revenue.

This would create a huge monopoly of finance and trade run by the state, and its profits would pay off the national debt.

The council called to consider Law's proposal, including financiers such as Samuel Bernard, had rejected the proposition on October 24, 1715.

The wars waged by Louis XIV have left France completely wasted, both economically and financially.

The resultant shortage of precious metals has led to a shortage of coins in circulation, which in turn limits the production of new coins.

It is in this context that the regent, Philippe d'Orléans, appoints John Law as Controller General of Finances.

As Controller General, Law institutes many beneficial reforms (some of which have lasting effect, others of which are soon abolished).

He tries to break up large landholdings to benefit the peasants; he abolishes internal road and canal tolls; he encourages the building of new roads, the starting of new industries (even importing artisans but mostly by offering low-interest loans), and the revival of overseas commerce—and indeed industry increases 60% in two years, and the number of French ships engaged in export go from sixteen to three hundred.

Since, following the devastating War of the Spanish Succession, France's economy is stagnant and her national debt is crippling, Law proposes to stimulate industry by replacing gold with paper credit and then increasing the supply of credit, and to reduce the national debt by replacing it with shares in economic ventures.

Law sets up the Banque Générale Privée ("General Private Bank") in May 1716.

It is a private bank, but three quarters of the capital consists of government bills and government accepted notes.

The private bank set up by John Law in 1716 has developed the use of paper money.

Law in August 1717 conceives a joint stock trading company, the Compagnie d'Occident (Company of the West,) a grandiose project meant to generate private prosperity and state income in France through colonial and commercial exploitation of French Louisiana.

Law is named the Chief Director of this new company, which is granted a trade monopoly of the West Indies and North America by the French government.

Shares in what will become known as the Mississippi Scheme initially sell for five hundred livres.

Bienville is restored to the governorship in 1717 under the Mississippi Scheme.

Pierre Dugué de Boisbriand leads an expedition to the area south of present-day St. Louis in 1719.

Eighteen miles north of the Jesuit mission at Kaskaskia, he establishes an outpost that he names Fort de Chartres.

The fort will become the center of military and civilian activity in the area known as Upper Louisiana and the Illinois Country.

The French government had granted a trade monopoly to John Law and his Company of the West  on January 1, 1718.

Hoping to make a fortune mining precious metals, the company has built Fort de Chartres to protect its interests.

Dugué, a cousin and fellow officer of brothers (Jean-Baptiste Le Moyne de Bienville and Pierre Le Moyne d'Iberville), with whom he served on expeditions during French colonization in North America, is the son of Michel-Sidrac Dugué de Boisbriand and Marie Moyen Des Granges.

As a French military officer, Dugué holds a succession of posts from 1699 to 1726 at France's settlements on the Gulf Coast and on the Mississippi River in present-day Illinois.

He serves at various times as commander of outposts at Mobile, Natchez, Louisiana, and the area known as the Illinois Country during his military career.

Events in France now come to influence the future of the South Sea company.

A Scottish economist and financier, John Law, exiled after killing a man in a duel, had traveled around Europe before settling in France.

Here he has founded a bank, which in December 1718 had become the Banque Royale, national bank of France, while Law himself has been granted sweeping powers to control the nation’s economy, which operates largely by Royal decree.

Law's remarkable success, known throughout Europe in financial circles, now comes to inspire Blunt and his associates to make greater efforts to grow their own concerns.

Craggs explains to the House of Commons in February 1719 a new scheme for improving the national debt by converting the annuities issued after the 1710 lottery into South Sea stock.

By Act of Parliament, the company is granted the right to issue eleven hundred and fifty pounds of new stock for every one hundred pounds of annuity that is surrendered.

The government will pay five percent on the stock created, which will halve their annual bill.

The conversion is voluntary, amounting to two and a half million pounds in new stock if all convert.

The company is to make an additional new loan to the government pro-rata up to seven hundred and fifty thousand pounds, again at five percent.

The South Sea company chooses to present the offer to the public in July 1719.

The Sword Blade Company arranges to spread a rumor that the Pretender himself has been captured, and the general euphoria encourages the South Sea share price to rise from one hundred pounds where it had been in the spring to one hundred and fourteen pounds.

Annuitants are still paid out at the same money value of shares, the company keeping the profit from the rise in value before issuing.

Approximately two thirds of the available annuities are exchanged.

The 1719 scheme is a distinct success from the government's perspective and they seek to repeat it.

Negotiations take place between Aislabie and Craggs for the government and Blunt, Cashier Knight and his assistant and Caswell.

Janssen, the Sub Governor and Deputy Governor are also consulted but negotiations remain secret from most of the company.

News from France is of fortunes being made investing in Law's bank, whose shares have risen sharply.

Money is moving around Europe, and other flotations threaten to soak up available capital (two insurance schemes in December 1719 each seek to raise three million pounds).

Plans are made for a new scheme to take over most of the unconsolidated national debt of Britain (£30,981,712) in exchange for company shares.

Annuities are valued as a lump sum necessary to produce the annual income over the original term at an assumed interest of five percent, which favors those with shorter terms still to run.

The government agrees to pay the same amount to the company for all the fixed term repayable debt as it had been paying before, but after seven years, the five percent interest rate will fall to four percent on both the new annuity debt and also that taken over previously.

After the first year, the company is to give the government three million pounds in four quarterly installments.

New stock will be created at a face value equal to the debt, but the share price is still rising and sales of the spare stock over and above that with a sale value equal to the debt will be used to raise the government fee plus a profit for the company.

The more the price rises in advance of conversion, the more the company will make.

Before the scheme, payments are costing the government one and a half million pounds per year.

In summary, the total government debt in 1719 is £50 million: £18.3m is held by three large corporations: £3.4m by the Bank of England, £3.2m by the British East India Company, £11.7m by the South Sea Company.

Privately held redeemable debt amounts to £16.5m; £15m consists of irredeemable annuities, long fixed-term annuities of seventy-two to eighty-seven years and short annuities of twenty-two years remaining maturity.

The purpose of this conversion is similar to the old one: Debt holders and annuitants might receive less return in total but a difficult to sell investment is transformed into shares which can be readily traded.

Shares backed by national debt are considered a safe investment and a convenient method to hold and move money, far easier and safer than metal coins.

The only alternative safe security, land, is much harder to sell and legally much more complex to transfer ownership.

The government receives a cash payment and lower overall interest on the debt.

Importantly, it also gains security over when the debt has to be repaid, which is not before seven years but then at its discretion.

This avoids the risk that debt might become repayable at some future point just when the government needs to borrow more, and can be forced into paying higher interest rates.

The payment to the government is to be used to buy in any debt not subscribed to the scheme, which although it helps the government also helped the company by removing possibly competing securities from the market, including large holdings by the Bank of England.

Company stock is now trading at one hundred and twenty three pounds, so the issue amounts to injecting five million pounds of new money into a booming economy just as interest rates are falling.

Gross Domestic Product (GDP) for Britain at this point is estimated as sixty-four point four million pounds.

Atlantic West Europe (1720–1731): Financial Crisis, Economic Resilience, and Enlightenment Expansion

From 1720 to 1731, Atlantic West Europe—including northern France, the Low Countries (modern Belgium, Netherlands, Luxembourg), and the Atlantic and Channel coasts—faced significant economic turbulence exemplified by financial crises, yet continued its broader trajectory toward intellectual, cultural, and social development shaped by Enlightenment thought and stabilized political structures. The period underscored the resilience of regional economies and fostered deepening intellectual exchanges across Europe.

---

Political and Military Developments

Stability under Bourbon and Habsburg Rule

• Under the regency (1715–1723) and then reign of Louis XV (r. 1715–1774), France enjoyed relative internal peace, allowing a focus on domestic economic and administrative reforms despite ongoing fiscal challenges.

• The Austrian Netherlands (Belgium and Luxembourg), governed under Habsburg rule, enjoyed stable yet conservative administration, maintaining internal order while gradually integrating into wider European economic networks.

Diplomatic Stability and Limited Warfare

• European diplomatic conditions were generally peaceful, guided by balance-of-power diplomacy, especially after the significant territorial realignments resulting from the Treaty of Utrecht (1713). Atlantic West Europe benefited from a respite from widespread conflict, despite occasional diplomatic friction.

---

Economic Developments: Crisis and Recovery

The Financial Bubble Crisis (1720)

• The early 1720s were dominated by financial instability exemplified by the infamous Mississippi Bubble in France and the contemporaneous South Sea Bubble in Britain.

• In France, John Law’s Mississippi Company, heavily tied to colonial speculation in North America, collapsed spectacularly in 1720, devastating public finances, eroding trust in government-backed financial schemes, and causing widespread economic disruption across France, particularly affecting Paris and the northern trading cities.

• Amsterdam and other Dutch cities faced ripple effects from these speculative crashes, temporarily disrupting financial markets, though the robust Dutch banking system proved resilient, recovering more swiftly than France.

Regional Economic Resilience and Recovery

• Despite initial disruption, northern French cities (Bordeaux, Nantes, and Rouen) and the Low Countries (Amsterdam, Antwerp, Brussels) demonstrated resilience, recovering through diverse trade networks, maritime commerce, and robust agricultural productivity.

• Dutch commerce, particularly trade in luxury goods, textiles, and colonial commodities, rapidly resumed strength, maintaining Amsterdam’s position as a pivotal commercial hub and financial capital.

Industrial and Agricultural Expansion

• The Low Countries saw continued growth in industries such as textiles (Flanders) and ceramics (Delft and Brussels), while French Atlantic ports expanded commerce with the Americas, notably in wine, sugar, tobacco, and manufactured goods.

• Agricultural improvements continued steadily across northern France, increasing productivity and facilitating demographic growth.

---

Intellectual and Religious Developments

Continued Enlightenment Expansion

• Enlightenment ideas increasingly permeated intellectual and cultural life across Atlantic West Europe, prominently through French philosophes like Montesquieu, whose seminal work Persian Letters (1721) offered critical yet engaging commentary on French society, politics, and culture, profoundly influencing political thought.

• Universities and academies in the Low Countries, especially Leiden University and the University of Louvain, continued intellectual dynamism, attracting scholars and disseminating Enlightenment ideals broadly.

Religious Moderation and Debates

• Religious toleration advanced modestly, notably in the Dutch Republic, where Calvinist orthodoxy gradually softened, facilitating greater intellectual openness and more liberal religious discourse, exemplified by theologians like Jean Leclerc in Amsterdam.

---

Cultural and Artistic Flourishing

Continued Rococo Expansion

• Rococo style flourished, particularly in France and the Austrian Netherlands. The aesthetic reached new heights in decorative arts, architecture, and painting, emphasizing ornate elegance, pastel colors, and playful themes. Paris, Brussels, and Antwerp became vibrant centers of artistic innovation.

• The French court under Louis XV patronized artists such as François Boucher, who began his influential career during this period, becoming emblematic of Rococo aesthetics.

Literary and Philosophical Innovations

• Literary life thrived, reflected in the growing popularity of satirical works, social critiques, and emerging novelistic forms. Writers and satirists addressed societal issues such as corruption, wealth disparities, and moral decadence, echoing Enlightenment ideals.

• Salons and literary circles, especially in Paris, flourished as platforms for intellectual exchange, significantly shaping public discourse and cultural production.

---

Social and Urban Developments

Urban Growth and Commercial Expansion

• Atlantic port cities—Bordeaux, Nantes, La Rochelle, Amsterdam, Rotterdam—experienced notable population and commercial growth, fueled by transatlantic trade and expanding colonial markets.

• Brussels and Antwerp stabilized economically, benefiting from peaceful governance, strengthened trade networks, and improved urban infrastructure.

Societal Shifts and Social Mobility

• Increased commercial prosperity in port cities boosted the social status and influence of merchant and bourgeois classes, reshaping social structures and fostering greater urban civic engagement and cultural patronage.

• Economic turbulence temporarily heightened social tensions, particularly after the financial bubble crises, fueling criticism of aristocratic privileges and governmental corruption—foreshadowing later Enlightenment and revolutionary critiques.

---

Legacy and Significance

The period 1720–1731 represented both vulnerability and resilience in Atlantic West Europe’s trajectory:

• The financial crises of 1720 exposed the fragility of speculative economic schemes, reshaping European financial practices and spurring more prudent economic governance.

• The subsequent economic recovery underscored regional resilience, emphasizing the importance of diverse trade networks, agricultural productivity, and manufacturing capabilities as foundations for lasting prosperity.

• Enlightenment intellectuals deepened their critiques of political and social structures, laying crucial ideological groundwork for future revolutionary movements.

• Cultural and artistic achievements during this period solidified Rococo aesthetics and literary innovations as enduring components of European cultural heritage.

Overall, this era reinforced Atlantic West Europe's enduring capacity for economic recovery and intellectual vitality, positioning it firmly on the path toward modernity and global influence.

Settlement in the Louisiana colony is not exclusively French; in the 1720s, German immigrants settle along the Mississippi River in a region referred to as the German Coast; specifically, from east to west, in St. Charles, St. John the Baptist, and St. James parishes of present-day Acadiana.

The four settlements along the coast are Karlstein, Hoffen, Meriental, and Augsburg.

Originally, the Germans had settled at the Arkansas Post, but the conditions were intolerable.

The area's name is derived from the large population of German pioneers who are settled there in 1721 by John Law and the Company of the Indies.

When the company folds in 1731, the Germans become independent landowners.

Scottish businessman John Law, who believes that money is only a means of exchange that does not constitute wealth in itself, and that national wealth depends on trade, had in August 1717 acquired a controlling interest in the then derelict Mississippi Company and renamed it the Compagnie d'Occident (or Compagnie du Mississippi).

Its initial goal had been to trade and do business with the French colonies in North America, which includes much of the Mississippi River drainage basin, and the French colony of Louisiana.

As he bought control of the company he had been granted a twenty-five-year monopoly by the French government on trade with the West Indies and North America.

The company had in 1719 acquired the Compagnie des Indes Orientales, the Compagnie de Chine, and other French trading companies and became the Compagnie des Indes (or Compagnie Perpétuelle des Indes).

Law had exaggerated the wealth of Louisiana with an effective marketing scheme, which had led to wild speculation on the shares of the company in 1719.

The scheme was to have the success of the Mississippi Company combine investor fervor and the wealth of its Louisiana prospects into a sustainable joint-trading company.

The popularity of company shares were such that they sparked a need for more paper bank notes, and when shares generated profits the investors were paid out in paper bank notes.

In 1720, it acquires the Banque Royale, which Law had founded as Banque Générale in 1716.

In an attempt to replenish the French treasury, the regency has tried a number of original financial experiments, notable among which is Law’s famous financial system, and now appoints Law Controller General of Finances to attract capital.

As the creditors buy shares in the company with their Bonds and debt papers, the whole government debt becomes property of the company (debt-for-equity transaction) and the company becomes property of the former creditors, but effectively controlled by the government.

Initially, the government pays an annual three percent interest to the company, which amounts to forty-eight million livres.

Through these transactions the French government has successfully unloaded their whole gigantic debt of one thousand percent of the annual budget (perhaps two hundred percent to four hundred percent of GDP) and is now basically debt free. (Compare this with the debt acquisition by The South Sea Company of England that acquires eighty percent of the fifty million pound government debt during 1720. The South Sea Company reaches a highest share price of 1one thousand pounds in August 1720, a few months later than the Compagnie des Indes.)

Louisiana receives a large influx of French settlers, France’s colonial and national economies are stimulated, and many speculators become millionaires.

Shares have risen from five hundred to fifteen thousand livres, but by summer of 1720, there is a sudden decline in confidence.

A capital flight by French investors, similar to what is happening in London with the South Sea Company’s stock, bursts the Mississippi Bubble in October.

When by the end of 1720 opponents of the financier attempt en masse to convert their notes into specie, forcing the bank to stop payment on its paper notes, the Regent Philippe II of Orléans dismisses Law, who flees to Venice.