Scotland at the time of Law’s return was in a very unsettled condition, politically and commercially. The projected union of the two Kingdoms was beginning to emerge from the sphere of discussion into that of practical politics. The change was recognised as likely to be attended with results of the greatest consequence, but was not by any means enthusiastically supported by public opinion. What, however, was obviously impossible by means of conviction, was ultimately accomplished by methods of bribery, and the Act of Union stands as a striking instance of the great success of a policy universally condemned, but carried by dishonourable means in spite of the opposition of those who were chiefly concerned.

The minds of the people, however, in 1700 were more disturbed by the feeling of financial insecurity that was gradually asserting itself. The air had been for some years laden with all kinds of fanciful schemes advanced by men who had the public ear, and who had succeeded in calling up visions of easily won wealth in the imaginations of a nation at that time, as now, characterised by caution and business prudence to the degree of frugality. Banks, colonisation schemes, and all sorts of extravagant and even ridiculous proposals followed close upon one another in one continuous stream, but almost invariably bringing ruin in their train. The most notable, as it was the most disastrous of these, was the Darien Scheme launched by William Paterson, founder of the Bank of England. Patronised by all the nobility and people of money as well as by numerous public bodies, and possessing all the superficial elements of success, it produced a fever of financial excitement and a mad race for the acquisition of holdings in its capital. Its collapse caused widespread disaster, and was in reality a national calamity, entirely destroying that confidence essential to industrial and commercial stability.

Law found in the condition of his native country a congenial subject for treatment according to the economic theories he had developed during his stay on the Continent. In the beginning of 1701 he published his “Proposals and Reasons for Constituting a Council of Trade in Scotland.” In it he advocated changes of a very drastic and radical character, and while they were without question too advanced and impracticable for his day, at least for adoption in their entirety, they show that he was by no means a Utopian theorist, but possessed the insight and foresight of a statesman. He advocated the establishment, under statutory authority, of a Council of Trade entrusted with the sole administration of the national revenue, bringing under that denomination the king’s revenues, the ecclesiastical lands, charitable endowments, and certain other new impositions, such as a tax of one-fortieth on all grain grown in the country, one-twentieth of all sums sued for by litigants, and a legacy duty of one-fortieth. The Council of Trade would control the national treasury and would direct the national expenditure. The uses to which he suggested the moneys thus collected should be directed were all devised in the interests of promotion of trade. After allowing a sufficient sum for the Civil List, the Council were to discover proper means of employing the poor and preventing idleness; establish national granaries; improve the mines and develop the mineral wealth of the country; restore the fisheries to their flourishing condition of the reign of James I.; reduce the interest of money; abolish monopolies; and encourage foreign trade, which was at a very low ebb. Notwithstanding the vigour with which Law advocated his proposals, and notwithstanding the brilliant hopes he held out by their adoption, they received little or no countenance from public opinion, and were regarded as wholly impracticable by Parliament.

During the five years that followed his first unsuccessful incursion into the domain of practical politics, Law was engrossed in the development of a new and more brilliant project. He gave it to the world in 1705 in a volume which bore the title, “Money and Trade considered, with a Proposal for Supplying the Nation with Money.” It displayed a remarkable grasp of the theory of credit, and evidenced the inborn financial genius of its author. Although its proposals and the propositions upon which they were based can hardly bear judgment according to the standards of present-day political economy, it must be remembered that up to that time no attempt had been made in the formulation of the principles of that science. The difficulties he had to encounter were great, but the manner in which he surmounted them was not only a tribute to his clearness of mind, but showed a judicial capacity to a remarkable extent in marshalling masses of disjointed facts.

He proposed the establishment of a Land Bank, with power to issue to landlords notes secured upon their estates, and having a forced currency at their face value. The extent of each issue was to be determined in one of three ways: 1. As an ordinary heritable loan, not exceeding the maximum of two-thirds of the value of the property; 2. As a loan up to the full value of the property, but with a fixed period of redemption; or 3. As an irredeemable purchase for value. The adoption of his proposal would have had the effect, he submitted, of relieving the commercial tension due to the insufficiency of specie by supplying a medium of currency of a non-fluctuating value. Though forced, the notes would not in any way have been mere accommodation paper, but would always be for value or security received. Confidence would thus have been maintained, and the risk of panic amongst holders avoided.

Law had succeeded in interesting the Court party and a considerable number of influential politicians in favour of his suggested scheme. It appealed to them less upon its merits than upon its probable effect of reducing the estates of the kingdom to dependence upon the Government. The Duke of Argyll, supported by his sons the Marquis of Lorne and Lord Archibald Campbell, and by the Marquis of Tweeddale, submitted the proposal to the Scottish Parliament. An opposition, however, led by the Lord Chancellor, proved strong enough to reject it by a large majority, and passed a resolution “that the establishing of any kind of paper credit, so as to oblige it to pass, was an improper expedient for the nation.” It is evident that the ground of the opposition, which was ostensibly the chimerical nature of the scheme, but really the fear that the Government of the country would be placed in the hands of the Court by its adoption, was not the concealed intention of Law in its formulation. The possibility of this consequence only emerged in the course of discussion, and in the knowledge of the composition of Parliament the opponents of the scheme were strongly justified in regarding the possible result as a certain probability. From Law’s point of view, however, the scheme only attempted what is successfully followed by banking institutions of the present day, with the difference that the latter have a reserve of gold against their notes, whereas the former would have had the landed property of the country.

Law’s hopes of being able to realise his ambitions in his native land were now at an end. He saw no prospect of attaining that position in the control of public affairs to which he aspired, and for which he considered himself eminently fitted. He was, accordingly, compelled to fall back upon his old gambling career, which had been practically suspended since his return to Scotland. To such advantage did he indulge his skill in this direction, that in the course of a few months he found himself an extremely wealthy man, amongst his gains being the estate of Sir Andrew Ramsay of a yearly value of £1200 Scots, and an annuity of £1455 Scots secured upon the estate of Pitreavie in Fife, purchased in 1711 by Sir Robert Blackwood from the Earl of Rosebery.

The negotiations for the Union of the two kingdoms were now fast approaching a successful conclusion. Law felt his safety in a somewhat precarious condition, the death of Wilson still rendering him liable to arrest should he cross the Border, and the Union in all probability likely to remove the element of safety from his residence in Scotland. He petitioned the Crown for a pardon, but Wilson’s brother, an influential banker of Lombard Street, protested against its being granted, thus leaving no excuse upon which a pardon might be extended, had the royal prerogative been inclined in his favour.

The Continent furnished the only safe asylum, and thither Law removed himself in 1707, or at the latest, early in 1708. He seems first to have taken up residence at the Hague, and then at Brussels, living in luxurious fashion, and impressing every one by his extravagance and apparently inexhaustible resources. With a keen eye for the weaknesses of a people, Law introduced the Dutch to the exciting possibilities of the lottery system. So far was he received into their good favour that not only was a State lottery established, but every town of any consequence had a smaller lottery of its own. The lottery was to be the great panacea for all financial embarrassments, national and municipal. Law, however, was not a disinterested participant in all these dazzling schemes. His suggestions, if worth adoption, were worth remuneration, but unfortunately he did not himself disclose the source of it, with results which necessitated his removal from the country. “Mr. Hornbeck, Great Pensionary of Holland, being also a nice calculator, finding out that Mr. Law had calculated these lotteries entirely to his own benefit, and to the prejudice of the people, having got about 200,000 guilders by them, Mr. Law was privately advised by the States to leave their dominions.”

On his expulsion from Holland, Law abandoned himself to the life of a rover amongst the various Continental cities, and to all the attractions they offered. For six years he exercised with profitable results his skill as a gambler, and quickly gained a notoriety throughout Europe as a player of remarkable and unvarying success in every game of chance. He seems first to have gone to Paris, which afforded a rich and extensive field for gambling operations, and his good fortune brought around him a cringing crowd of followers, hoping to attract to themselves some of the glamour that surrounded the person of their idol. In his train were to be found the flower of the French nobility. He spent his time in the houses of the aristocracy of the day, of whom he was at all times a favoured guest, not less by his skilful play than by his pleasant, affable manner, and brilliant conversation and wit. Faro was the game in which he most delighted, and at the houses of Poisson, Duclos, and at the Hotel de Gesvres, he held a sort of faro bank, and the entree to these houses was considered a matter of the greatest favour. In the fashionable crowd of excited gamesters Law was the only one who remained absolutely cool whatever the fortunes of the game. His operations were conducted upon a most extensive scale, and necessitated the employment of considerable sums of money. It was no uncommon circumstance for Law to carry with him 100,000 livres or more in gold. So cumbrous did this become, that he conceived and carried out the idea of utilising counters, which were valued at eighteen louis each, and proved more convenient than the coin they represented.

During this first visit of Law to Paris, which apparently lasted not more than a year, Law succeeded in gaining the good favour of the Duc de Chartres, afterwards, as Duc d’Orleans, Regent of France during the minority of Louis XV., and of Chamillard, the Comptroller-General. With these he had frequent conversations concerning the embarrassed condition of the French Treasury, and discussed proposals for its improvement. He captivated them by the apparent soundness of his knowledge of finance, and by his brilliant theories for the establishment of the National Exchequer on a stable foundation. Every opportunity was embraced by Law for holding these discussions, and although they had no immediate effect beyond securing the adherence of two of the most powerful men in the Government, they laid the foundation of his future greatness. Unfortunately, however, for Law, the continuity of his acquaintance with the man with whom he desired most to cultivate friendship was rudely and unexpectedly suspended. D’Argenson, Lieutenant-General of Police, was suspicious of Law and his methods. His reports to the Government were unfavourable and framed with a view to Law’s expulsion from Paris. This he ultimately succeeded in getting authority to do, and Law was immediately served with a notice to leave the capital within twenty-four hours on the ground “that he knew how to play too well at the games he had introduced.”

For a considerable time Law remained away from Paris, visiting the principal cities of Italy, Hungary, and Germany, and in all leaving behind him the reputation of being one of the most remarkable men of his age. He became a frequent and well-known visitor at all the gambling resorts on the Continent. His progress from city to city resembled the progress of a royal court, and rumour preceded him to herald his coming. He was no common gambler. He was an accomplished man of the world, exquisitely courteous, and with interests that rose above the sordid pursuits from which he derived his pecuniary prosperity. His political instincts were always allowed free play, and by close observation he acquired the amplest knowledge of the industrial and economic conditions of the various countries he visited.

Law was now becoming anxious to secure an opportunity of putting into practice the schemes he had mentally constructed for the improvement of trade and commerce. The more he observed the prevailing unhealthiness of industry, and the more he satisfied himself as to the apparent causes of industrial depression, the more did he feel that his scheme was the only royal remedy. He accordingly returned to Paris shortly before the close of the reign of Louis XIV., purposing to gain the support of that monarch for the adoption of his system in France. Chamillard did not now occupy the office of Comptroller-General, but Law through the influence of the AbbÉ Thesul was received by Desmarets his successor, who not only discussed in thorough detail the scheme laid before him by Law for the rehabilitation of the financial condition of the country, but became so enamoured of it that he decided upon submitting it to the King himself. Louis XIV., however, was not a man of large mental horizon. His decisions were often the outcome of the impulse of the moment. Frequently they were determined by religious bias, even where religious scruples were wholly foreign to the matter under consideration. Law’s proposal seems to have been placed under the latter category by Louis XIV. Report has it that the bigoted monarch was more anxious to learn the faith to which the Scotsman belonged than to know the merits of his scheme, and that on being informed Law was not a Catholic, he brushed aside the matter and refused to accept his services.

Disappointed, but not discouraged, Law was more determined than ever to have his system put to practical test. If France did not accept salvation at his hands, he doubted not some other country would. He accordingly approached the King of Sardinia, one of the needy sovereigns of the day. Law’s proposal to him was the establishment of a land-bank, which he held out in glowing terms as the certain foundation of great national prosperity, but the wily monarch was not to be drawn, and with a touch of sarcasm recommended Law again to urge his scheme upon France. “If I know,” he said, “the disposition of the people of that kingdom, I am sure they will relish your schemes; and, therefore, I would advise you to go thither.”

The close of 1714 saw Law for the third time in Paris. Whether his return to France was due to the suggestion of the King of Sardinia, or to his having perceived a possibility of his system being yet adopted by France, whose crippled financial condition was becoming more serious as time went on, and demanded some drastic remedy to relieve the intolerable burden upon the Treasury, we cannot judge. He probably considered that, with bankruptcy hanging over the French nation like a grim spectre, necessity, if not conviction, would induce the acceptance of his theories. The nation’s indebtedness had now outgrown its resources. Every conceivable device had been resorted to for the purpose of meeting the most pressing obligations. Provision for the future was regardlessly sacrificed to the needs of the moment, and ingenuity was devoted only to keeping the evil day afar off. Every one feared the worst. No one was able to grapple with the difficulty in a broad, statesmanlike fashion, and to carry out a bold policy of national economy. The Treasury had to face the payment of exorbitant rates of interest upon loans, the full value of which had not been received. The coinage was debased to an extent altogether out of proportion to its face value. Lotteries were organised on an extensive scale as a means of appealing to the gambling instincts of the community, and as a method of applying indirect taxation without the hateful element of compulsion. Billets d’État were foisted upon unwilling creditors in almost unlimited amounts, and formed a paper currency that had difficulty in changing hands at even 10 per cent. upon its value of issue. To crown all, titles were sold as mere articles of commerce, sinecures created with high-sounding designations that roused the ridicule of the multitude, but helped to provide the King with money, and monopolies granted to the highest bidder. Yet all these devices failed their purpose, and the insatiable hunger of the Treasury was still far from being appeased. Financial paralysis was creeping over the nation, and threatened the gravest consequences.

Here was such a field as Law alone could fully appreciate. Fortune at last seemed about to smile upon him. His star was about to assume a meteoric brilliance, and to mount towards its zenith with marvellous rapidity. Circumstances moulded themselves to his successful progress; and with rare capacity Law took full advantage of every opportunity. In order to remove as far as possible, social obstacles to his easy access to Court, he took up residence in a fine mansion, and lived as a man with unlimited means at his disposal. He entertained, in the extravagant way that marked his previous visits to Paris, all those whom he thought he could utilise for his own advancement; and the death of Mr. Segnior enabled him to marry the latter’s widow, with whom he had hitherto been living, thus removing the taint of illicitness from his cohabitation with her, and legitimatising his family.

Law’s objective was the good favour of the Duc d’Orleans. He recognised the importance of obtaining the support of the man who promised to occupy the Regency within a very short time, and who would thus possess sufficient power to impose upon the Government any scheme towards which he was favourably inclined. With great prudence Law did not seem to be over-anxious in the prosecution of his aim, lest he might induce suspicion as to his disinterestedness. He, accordingly, devoted himself at first to the entertainment of the Prince by bringing into play all his varied gifts, and by gratifying his tastes for gambling and pleasure as far as he was able. “His good address and skill at play, made him particularly taken notice of by the Regent, who used to play with him at baggammon, a game the Regent likes mightily, and Mr. Law plays very well at.” By this process, Law succeeded in placing his intimacy with the Duc upon a solid foundation, and in securing his influence when the opportune moment arrived for its exercise.

Law’s fame as a potential financier of national grasp was at this time exercising the minds of the British Government of the day. The Earl of Stair had been newly appointed Ambassador to the Court of France, and was so impressed with Law’s ability that he recommended him to Lord Halifax and to Secretary Stanhope as a man who might be useful in suggesting some means of liquidating the debts of the British Treasury, which at that time were somewhat complicated and assuming enormous proportions. On Feb. 12, 1715, Stair wrote to Stanhope:—

“... There is a countryman of mine named Law of whom you have no doubt often heard. He is a man of very good sense, and who has a head fit for calculations of all kinds to an extent beyond anybody.... Could not such a man be useful in devising some plan for paying off the national debts? If you think so, it will be easy to make him come. He desires the power of being useful to his country. I wrote about him to Lord Halifax.... The King of Sicily presses him extremely to go into Piedmont, to put their affairs upon the foot they have already spoken of. I have seen the King’s letters to Law, which are very obliging and pressing. I would not venture to speak thus to you of this man had I not known him for a long time as a person of as good sense as I ever knew in my life, of very solid good sense, and very useful; and in the matters he takes himself up with, certainly the cleverest man that is.”

Shortly before this date Stair had written to Halifax in similar terms, and received the following reply of date February 14, 1715:

“I had the honour to know Mr. Law a little at the Hague, and have by me some papers of his sent to Lord Godolphin out of Scotland, by which I have a great esteem for his abilities, and am extreme fond of having his assistance in the Revenue. I have spoke to the King and some of his Ministers about him, but there appears some difficulty in his case, and in the way of having him brought over. If your Lordship can suggest anything to me that can ease this matter, I should be very glad to receive it.”

The latter portion of this letter obviously refers to Law’s conviction of murder by the English courts, which Law had failed to obtain pardon for. On April 30, 1715, Stanhope replied to Stair in the following terms:—

“Though I have not hitherto, in my returns to your Lordship’s letters, taken notice of what you have writ to me once or twice about Mr. Law, yet I did not fail to lay it before the King. I am now to tell your Lordship that I find a disposition to comply with what your Lordship proposes, though at the same time it has met, and does meet, with opposition, and I believe it will be no hard matter for him to guess from whence it proceeds.”

Lord Stair’s admiration of Law was very considerable, and so intimate was their friendship that we find the first entry in Stair’s Journal upon his arrival as British Ambassador in Paris in 1715 to be:—“Wednesday, January the 23rd, at night, arrived at Paris; saw nobody that night but Mr. Law.” Lord Stair’s strong recommendations of Law to the British Government were based upon his fixed belief that his services would be of incalculable value. Law, himself, however, was not by any means anxious that they should be accepted. He saw greater scope in France for his financial schemes, and therefore, while permitting these friendly negotiations to proceed, he was somewhat indifferent as to their result.

He did not abate, on the other hand, his assiduous cultivation of the Duc d’Orleans; nor did he fail to please Desmarets, who, as Comptroller-General was in such a position as likely to become a powerful support in carrying out his plans. His relations with the Comptroller-General were also strengthened by the representations made to him by the Regent to encourage Law as a man whose advice at that critical period might prove of the utmost value. By his diplomatic conduct Law succeeded in having his proposal for the establishment of a land-bank brought under discussion by the Council of Ministers. The result, however, was again unfavourable, the ground of rejection of the scheme, according to Stair’s Journal, being that there was no foundation for such a bank in a country where everything depended on the King’s pleasure.