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The Mississippi Scheme and Its Antecedents

THE great "Mississippi Scheme" which wrought havoc on the French in 1720 is the central and turning point in the history of John Law, late of Lauriston, Controller- General of Finance in France. His father, William Law (grand nephew of James Law, Archbishop of Glasgow) was a goldsmith in that city. As in the seventeenth century the goldsmiths were also the bankers and moneylenders of the community, a successful goldsmith might be looked on as on the highroad to great fortune. To William Law in 1671 was born his first son John, who had considerable natural talent in the way of mathematics and a nature which was such as to nullify their use. As a youth he showed proficiency in arithmetic and algebra, but as he was also in those early days riotous and dissipated, we may fairly come to the conclusion that he did not use his natural powers to their best advantage. He was already a gambler of a marked kind. Before he was of age he was already in debt and was squandering his patrimony. He sold the estate of Lauriston which his thrifty father had acquired, and gave himself over to a life of so-called pleasure. His mother, who had family ambitions, bought the estate so that it might remain in the family of its new possessors. He removed himself to London where within a couple of years he was sentenced to death for murder-not a vulgar premeditated murder for gain, but the unhappy result of a duel wherein he had killed his opponent, a boon companion, one Austin who had acquired the soubriquet of "Beau" Austin. Through social influence the death penalty was commuted for imprisonment, and the crime only regarded as manslaughter. He had however to deal with the relatives of the dead man who were naturally vindictive. One of them entered an appeal against the commutation of the sentence. Law, with the characteristic prudence of his time and nationality, did not wait for the leisurely settlement of the legal process, but escaped to the continent where he remained for some years sojourning in various places. Being naturally clever and daring he seems to have generally fallen on his feet. Whilst in Holland he became secretary to an important official in the diplomatic world, from which service he drifted into an employment with the Bank of Amsterdam. Here the natural bent of his mind found expression. Banking in some of its forms is gambling, and as he was both banker and gambler-one by inherited tendency and the other by personal disposition-he began to find his vogue, addressing himself seriously to the intricacies and possibilities of the profession of banking. He was back in Scotland in 1701 (a risky venture on his part for his felony had not been "purged") and published a pamphlet, "Proposals and Reasons for constituting a Council of Trade in Scotland." This he followed up after some years, with another pamphlet, "Money and Trade considered, with a proposal for supplying the Nation with Money"; and in the same year (1709) he propounded to the Scotch Parliament a scheme for a State Bank on the security of land-a venture which on being tried speedily collapsed. This, like other schemes of that period, was based on the issue and use of paper money.

In the meantime, and for five or six years afterwards, he was travelling variously throughout Europe, occupying himself with formulating successive schemes of finance, and in gambling-a process in which he, being both skilled and lucky, amassed a sum of over a hundred thousand pounds.

He had varying fortunes, however, and was expelled from several cities. He was not without believers in his powers. Amongst them was the Earl of Stair, then Ambassador to France, who allured by his specious methods of finance, suggested to the Earl of Stanhope that he might be useful in devising a scheme for paying off the British National Debt. After the death of Louis XIV, in 1715, he suggested to the Duke of Orleans, the Regent for the young King (Louis XV), the formation of a State Bank. The Regent favoured the idea, but his advisers were against it; it was, however, agreed that Law might found a bank with power to issue notes and accept deposits.