The creation of 25 millions of perpetual annuities at 2½ per cent. and 4 millions of life annuities at 4 per cent. in June as a means of absorbing notes to that extent was not attended with the success which had been anticipated. While the interest was small, it yet offered greater security than the notes themselves afforded, and on that ground alone ought to have appealed to holders of large amounts who were debarred by edicts from employing their paper in other directions for investment. Only a few possessed sufficient confidence to take advantage of the annuities, and the issue was accordingly of very insignificant amount. Law, however, was determined to secure the issue of the whole amount, and if necessary to do so by artificial means. His determination was made the stronger by the refusal of Parliament to agree to his last proposal. Accordingly, on 15th August, an edict was published which declared that all notes of 1000 livres in value and upwards should have no currency and would be regarded as cancelled, except those which were utilised either for purchase of annuities, or for opening credit accounts at the Bank, or for the payment of the uncalled liability on the new shares issued by the Company. This was followed by a second edict on 10th October, containing provisions of a similar nature with reference to all other notes, and requiring their utilisation before 1st November.

These drastic regulations had the effect of withdrawing from circulation a large quantity of paper, but still there were many holders who refused to part with their notes although rapidly becoming valueless. Some refused in the belief that their wealth might probably in the future become more liquid at its nominal value; others because their paper was required for ordinary daily purposes and could not therefore be spared for permanent investment. As a result, the country found itself at 1st November in possession of notes of enormous aggregate value which had automatically become absolutely worthless. Since the issue of the edicts, the trading community refused to accept payment in notes of goods supplied except at ruinous rates of discount, amounting in instances to 80 and 90 per cent. Provisions and all classes of necessaries reached extravagant prices, and being unattainable by the poorer people, starvation reigned in the homes of thousands not only in Paris itself but also in the provinces. Decrees were issued fixing the maximum prices of food, but these were openly disregarded by every merchant, who could not have sold at the prices named without incurring loss to themselves. The difficulty in securing food and other necessaries had also been increased by the operations of wealthy speculators, who during the previous months of the year had purchased all available supplies with the paper in their possession and stored them in secret places or transported them from the country for realisation and for investment of the proceeds in foreign securities. Complaints, accordingly, continually reached the Government from those who were unable to satisfy the demands of the traders, and the Government was compelled to visit the culprits with the penalties they had power to impose, which included not only physical punishment but confiscation of all their goods, and frequently the payment of a heavy fine. The bakers of Paris suffered most from the tyrannical edicts, and on one occasion no fewer than eighteen were fined, placed in the stocks, and had their goods confiscated.

The final edict, published during the period of Law’s management of the Bank and of the Company, appeared on 24th October, which directed that all the original shareholders of the Company who still retained their shares should deposit these with the Company, and that those who had sold the whole or part of their shares should now purchase the necessary number from the Company to make up the total of their original holdings at the price of 13,500 livres per share. To provide for the new purchases which this edict required an additional 50,000 shares were created, so that on the assumption that this number represented the minimum necessary to make up the deficiencies of holdings the Company would have absorbed over 600,000,000 livres of depreciated paper. But the edict contained the elements of its own destruction. It was impossible of accomplishment. The victims refused to purchase from the Company shares for 13,500 livres which were obtainable in the market for a mere tithe of that sum, and many of them immediately prepared to leave the country with all their belongings. So general were these preparations that no person was allowed to cross the frontier without the permission of the Regent on pain of death. The closest watch was kept upon all the main highways, and numerous arrests were made of suspected emigrants. Many millions of livres and considerable quantities of plate and jewellery, which their possessors attempted to smuggle across the frontiers, were seized and appropriated, the culprits being sent back to Paris to undergo punishment. In no case however was the extreme penalty imposed, confiscation and ruin being mercifully judged sufficient punishment.

Law’s position was now becoming highly critical. On the one hand the people were clamouring for his expulsion from the country, and even for his life. On the other hand, the Parliament, still at Pontoise, had not forgotten the author of their exile. His ingenuity had been used to the utmost to escape from the daily accumulating complications which surrounded him. All his efforts had failed in their purpose, and now he was resourceless. He stood alone a foreigner in a hostile country. His erstwhile friends had now deserted him, the tie of friendship broken by his inability to further increase their fortunes. One man, and one alone, the Regent himself, remained faithful to the last, and yet not openly. The safety of the crown forbade the Regent from employing his influence and power in order to retain the financier in his service, and prohibited him from ignoring indefinitely the demands of the people.

Law, accordingly, perceiving the extreme folly and danger of further continuing to direct the affairs of the Bank and of the Company, resolved after consultation with the Regent to resign the offices he still retained. He was anxious to leave the country at the same time, but the Regent considered such a step impolitic and refused to grant permission. He was allowed, however, to leave Paris, and retire to his estate at Guermande, which he did on 13th December. At the interview he had with the Regent before his departure, he advised the appointment of Pelletier de la Houssaye as Controller General of Finances, and in referring to the failure of his schemes is said to have remarked, “I confess I have committed many faults. I committed them because I am a man, and all men are liable to error; but I declare to you most solemnly that none of them proceeded from wicked or dishonest motives, and that nothing of that kind will be found in the whole course of my conduct.” Two days after his departure, Law received from the Regent a letter according permission to depart from the kingdom, and informing him that the Duke of Bourbon had been ordered to send him the necessary passports and such money as he might require for his journey. Two messengers arrived at Guermande on the following day, bringing the passports and a large sum of money, but Law respectfully refused to accept the latter. The postchaise of Madame de PriÉ, with an escort of six horse guards was also sent for his conveyance, and in it he set out with his son for Brussels on 16th December. On his way Law was unfortunately recognised by the Governor of Valenciennes and arrested as an ordinary fugitive from the kingdom. This was due to Law having offered passports drawn in another name, his identity being known to the Governor. He thereupon produced a second passport in his own name, but this only served to increase the perplexity of the Governor, who replied that the authorities frequently granted to men such as he, passports of convenience, because they had not the courage to refuse and that therefore he was still bound to prevent his departure. Law then produced a letter from the Regent to the Duke of Bourbon, in which the passports had been forwarded, and having thus satisfied the Governor of their genuineness he was allowed to proceed. On arrival at Brussels, on 22nd December, he was welcomed by the Marquis de PriÉ, Governor of the Imperial Low Countries, and enjoyed his hospitality while he rested before resuming his journey to Venice. Of all his vast wealth he took with him into exile the small sum of 36,000 livres, and two diamond rings of great value, one of which he sent to Madame de PriÉ on returning her carriage to her from Brussels. Law’s wife and daughter remained in Paris for a short time after his departure, but joined him later in Venice after having realised sufficient to discharge all household debts due by them.

The rumour of Law’s flight soon spread throughout Paris, and the Duke of Bourbon was saddled by the community with the responsibility of allowing his escape. The Regent, who had instructed permission to be given, had by acting through the Duke relieved himself, so far as the public were concerned, of any blame in the matter. He had displayed considerable astuteness in thus shifting the responsibility, but he had not been altogether disinterested in the safety of the fugitive, and had not acted from motives of friendship alone. The meeting of the Regency Council held, on 26th January, to consider the financial situation, disclosed a set of circumstances of a highly incriminating character against the Regent, and revealed the extreme advisability on his part of securing the departure of Law before the return of Parliament to Paris, lest that assembly should cause him to be arrested. The new Controller General had since his appointment on 12th December been occupied in the attempt to unravel the complicated finances of the kingdom, and had prepared a report for submission to the Council. This was in fact the first occasion upon which the members had been fully acquainted with the actual position, their complete subservience to the Regent having hitherto caused them to acquiesce in all the proposals presented to them for approval.

La Houssaye reported that since the 22nd of May 600,000,000 livres of bank notes had been issued by Law for which there had been no authorisation by the Council, or by the proprietors of the Bank. The question was discussed as to whether the State or the Bank were in the circumstances debtors to the holders, since the liability should be determined according as they agreed that Law had issued them as Controller General or as manager of the Bank. The Duke of Bourbon took the side of the Bank and was supported in his contention by the Prince of Conti. La Houssaye, however, was firm in his opinion that the excess of notes should be met by the Bank, although it appeared that decrees had been issued by the Regent of which the Council were ignorant. The Regent, pressed by the Duke to give an explanation of his proceedings, stated that Law had created the notes on his own authority alone and that in order to save him from the possible consequences of his action, he had validated the notes by antedated decrees. “Then,” replied the Duke, “Law in reality created these notes by your orders; otherwise you would not have allowed him to leave the kingdom and escape the consequences of a capital crime.” The Regent retorted, “It was you who handed him the passports.” “It is true,” said the Duke, “but it was you who sent them to me. I never asked for them; you wished that he should leave the kingdom; and I can very easily explain the circumstances to the King and to the Council. I never advised that Law should depart, but I was opposed to his being handed over to the Parliament, because I believed that it was not to your interest to sanction this after having made use of him as you had; but I never asked you to let him leave the realm, and I beg you in presence of the King and before all these gentlemen to say if I ever did.” “At least,” said the Regent, “I did not order you to lend him your carriage, nor a guard to escort him; you interested yourself more in him than it was my intention. I allowed him to leave because his presence might have injured public credit and prejudice our recovery from the misfortunes into which we have fallen.”

It was clear to all those who were present that both the Duke and the Regent were equally afraid to have left Law to the mercy of the Parliament, as he might have proved them authors and accomplices of all that he had done. In their own interests, they had both played their parts badly at the Council table, but all recognised that the Duke only played a very minor part in the affair, and that the Regent throughout had been the real culprit, having compelled Law to issue the notes in order that he might satisfy his own extravagant pleasures.

Notwithstanding the efforts of the Duke of Bourbon and of the Prince of Conti to make the government responsible for the excess of notes, and thus relieve the shareholders by increasing the free assets upon which they could claim in liquidation, La Houssaye gained his point, and reported that the public debt including the shares of the Company amounted to over thirty-one hundred million livres and bore interest to the extent of almost a hundred million livres per annum. So great a charge upon the revenues of the State could not be faced by the Government, but he recognised it was necessary to minimise as far as possible the loss which would require to be borne by the shareholders and possessors of bank notes, who, it was estimated numbered no less than 100,000 families. He accordingly proposed to withdraw all the privileges of the Company as far as these related to the management of the national revenues, and reduce it to the position of a mere trading concern. He would submit to the closest scrutiny the history of every individual holding either shares or notes and those which were tainted with speculation would be subject to cancellation. A commission would be appointed under whose supervision the work of investigation would be carried on, and all those who failed to submit their securities for adjudication before 1st August would be deprived entirely of any right to have a value placed upon their securities.

A decree to this effect was issued on 4th February, and immediately thereafter the Commission set to work. The task of investigation which covered transactions over half a million in number, and of a value of over 3000,000,000 livres, was entrusted to the brothers Paris, who employed for the purpose a staff of 800 clerks. To simplify the gigantic task, securities were cast into five categories according as they were (1) Reimbursements made by the King, (2) Reimbursements between private individuals, (3) Sales of real property, (4) Sales of personal property, (5) Purely speculative transactions. All securities embraced in the fifth class were cancelled without consideration. The first were untouched because of their origin. The other three classes were subjected to reduction, ranging from five to ninety-five per cent. By the end of 1721, the Commission were in a position to deliver their decision upon the first batch of securities, and by the end of the following year to finally bring their work to a conclusion. As a result of the investigation, 1000 million livres of securities were altogether cancelled, leaving a public debt of 2000 million livres bearing annual interest amounting to 48 million livres. The capital of the Company which had before the commission amounted to 200,000 shares was reduced to 56,000 shares of the value of 500 livres each, bearing a fixed dividend of 100 livres for the first year, and 150 livres during subsequent years, guaranteed by the Government and subject to increase, should the profits of the Company warrant it.

In the fifth category of securities the brothers Paris caused the whole of the properties belonging to Law and to his brother William to be classed, an act of revenge for the failure of the Anti-Scheme with which they had identified themselves three years before. Law made several efforts to recover at least a portion of his wealth, but they were of no avail, and the subsequent years of his life were years of misery and often times direst poverty. After wandering about the Continent for several months, he returned to England in October, 1721, and resided in London until 1725, in which year he returned to Venice, whither he had proceeded on his departure from France. Here he remained until his death on 21st March, 1729, leading the precarious life of a gambler and general speculator and leaving at his death the valuable ring which alone had escaped the arbitrary and cruel proceedings of his enemies in France.

For several generations after the downfall of the System, Law was held in deep and bitter hatred by the people of France. The name of the author of the System was associated, not unnaturally, with the financial ruin which it brought to so many individuals, and it was convenient that those who were really responsible for its disastrous end should foster that attitude of hostility to the man who was now unable to appeal to the better reason of the people. It is perfectly clear that at no time did Law seek to advance alone his own material interests by the schemes he put into operation. No circumstance reveals this more clearly than the fact that at the date of his flight all his possessions were in France and that no attempt was made by him during the latter half of 1720 to transfer any part of his wealth to foreign countries for safety, although events were at that period rapidly leading to a financial collapse and determining many to pursue such a course as a measure of prudent provision for the future. Law himself puts this very forcibly in a letter written on 15th October, 1724, to the Duke of Bourbon, in which he seeks that nobleman’s interest on his behalf in his efforts to secure the restitution of at least a portion of the wealth he left behind him. The Company owes its birth to me. “For them I have sacrificed everything, even my property and my credit, being now bankrupt, not only in France, but also in all other countries. For them I have sacrificed the interest of my children, whom I tenderly love, and who are deserving of all my affection; these children, courted by the most considerable families in France, are now destitute of fortune and of establishments. I had it in my power to have settled my daughter in marriage in the first houses of Italy, Germany, and England; but I refused all offers of that nature, thinking it inconsistent with my duty to, and my affection for, the state in whose service I had the honour to be engaged. I do not assume to myself any merit from this conduct, and I never so much as spoke upon the subject to the Regent. But I cannot help observing that this mode of behaviour is diametrically opposite to the idea my enemies wish to impute to me; and surely all Europe ought to have a good opinion of my disinterestedness, and of the condition to which I am reduced, since I no longer receive any proposals of marriage for my children.

“My Lord, I conducted myself with a still greater degree of delicacy, for I took care not to have my son or my daughter married even in France, although I had the most splendid and advantageous offers of that kind. I did not choose that any part of my protection should be owing to alliances, but that it should depend solely upon the intrinsic merits of my project.”

In passing judgment upon Law, it is necessary to remember that the principles upon which he proceeded while he had himself absolute control of the management of his System were economically sound. Elements of unsoundness only appeared from the time when the management passed under the supervision of the Regent. He it was who insisted upon the adoption of measures which to Law appeared fraught with the gravest consequences and which he was unable to resist. Had Law been able to work out his own designs, unhampered by the dictation of the Regent, it is conceivable that he might in time have realised his ambition of placing the finances of his adopted country upon a just and stable foundation. Even as it was he succeeded to an extent surprising in the circumstances. Financial corruption was no longer possible to the great extent to which it proceeded in the days of Louis XIV. Numerous offices in the patronage of the Government to which large emoluments and no duties were attached, and many privileges and monopolies which had hitherto checked the progress of industry, were abolished never to be revived. Agriculture improved, new industries arose, valuable public works were undertaken, and in general, a healthier industrial atmosphere was created throughout the country. That France did not take full advantage of the great principles of sound industrial progress which were formulated for them and advocated by Law was neither the fault of him nor of his System. It was the fault of the people themselves, who were yet to find that resort to violence was to prove the only means of removing the great obstacles which stood in the way of their advancement as a nation.

The End

W. JOLLY & SONS, PRINTERS, ABERDEEN