Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance Read online

  This did nothing for efficiency, Law deemed, and served only to make necessities more expensive and to encourage the holders of the offices “to live in idleness and deprive the state of the service they might have done it in some useful profession, had they been obliged to work.” In place of the hundreds of old levies he swept away (over forty in one edict alone), Law introduced a new national taxation system called the denier royal, based on income. The move caused an outcry among the holders of offices, many of whom were wealthy financiers and members of the Parlement, but delight among the public. “The people went dancing and jumping about the streets,” wrote Defoe. “They now pay not one farthing tax for wood, coal, hay, oats, oil, wine, beer, bread, cards, soap, cattle, fish.”

  Elsewhere a similar sense of well-being came from share dealing. The regent’s family and favorites were given preferential allocations and prospered spectacularly. His mother reported that the king had millions for his household and that “My son has given me 2 million in shares which I have distributed among my household.” The Marquis de Lassay, the Maréchal d’Estrées, the Duc de la Force, and the royal princes of Conti and Bourbon made millions. Bourbon spent part of his colossal windfall in starting his own porcelain factory and redecorating his château at Chantilly. An avid equine enthusiast, he was convinced that he would come back in the afterlife as a horse, and had luxurious stables, the so-called Grandes Écuries, designed by the architect Jean Aubert. Arcaded, domed, and studded with sculpture, the palatial building could house five hundred horses and survives as an equestrian museum.

  So numerous were the private fortunes gained that a new word was invented to describe them. The word “millionaire” was coined at this time to describe the rich Mississippians, first appearing in print in the lawyer Marais’s journal in 1720:

  Espérons que la dividende

  En sera plus sûre et plus grande

  Sur le rapport qu’il en fera,

  Et que l’on communiquera

  Aux calotins actionnaires,

  Lesquels n’ont point realisé

  Comme certains millionnaires

  Peuple avare et mal avisé.

  Let’s hope that the dividend

  Will be more certain and larger

  On the return that it will bring

  And one will inform

  The smug investors

  Who have realized nothing

  Like certain millionaires

  A greedy and ill-advised breed.

  The term “millionaire” exerted a seductive appeal. Drawn by stories of unbelievable gains that echoed throughout Europe, foreigners flocked to Paris. Estimates vary, but around 200,000 (some put it as high as 500,000) people from Venice, Genoa, Geneva, Germany, England, Holland, and Spain, as well as vast numbers from the provinces, gravitated to the city to play the markets. The streets were choked with carriages; all modes of public transport from the major cities of Lyon, Aix, Bordeaux, Strasbourg, and Brussels were booked up months in advance; people gambled or bid outrageous sums for a place on a coach.The lucky ones arrived in Paris to find every room occupied, and even stables let as accommodation. Journalists reveled in the frenzied get-rich-quick ambience. In one periodical Defoe commented, “Beau Gage has gained three hundred thousand pounds sterling by the stocks. The Lord Londonderry also . . . being the same that sold the great diamond to the King of France is there, and they say has likewise gotten very great sums of money.” Gage was later nicknamed Croesuss, and with his winnings he attempted to buy the island of Sardinia and the crown of Poland. He was trounced in Poland, equally dishonestly, by Augustus the Strong of Saxony, prompting Alexander Pope to write in his “Epistle to Bathurst”:

  The Crown of Poland, venal twice an age,

  To just three millions stinted modest Gage.

  But in certain Parisian salons the flourishing fortunes of countless overseas investors met with a chilly reception. Why, many asked, should foreigners profit when many French were unable to buy as many shares as they would have liked? What right had Law to help English investors at their expense? “Some of the French have endeavoured to represent to Mr. Law’s prejudice the great gains they pretend his countrymen have made,” the diplomat Daniel Pulteney observed. Law ignored the faultfinders. In reality, nostalgia for the land of his birth had nothing to do with it: he encouraged outside investors because he recognized that to play the markets they brought with them silver and gold currency, without which the system of paper money could not survive.

  While the holiday mood continued, the foundation of the fabulous gains remained unquestioned. Shrouded in the mists of inexperience, speculators of the rue Quincampoix had no yardstick against which to measure their experience. Almost a century earlier, in the 1630s, speculation fever had descended on Holland when the price of tulips and futures contracts for bulbs had bubbled and burst—the now notorious Tulipmania. But though shares had long been available, investors had been largely confined to small, select groups. The wider general public had never before taken part, nor had such rapid rises on such a scale ever been witnessed. Like gluttons at a Mississippi banquet, most investors ingenuously accepted the opportunity to gorge themselves and never considered the consequence. The fact that the huge increase in share prices was founded on little more than hype and the hugely expanded money supply was unthinkingly brushed aside.

  The quantities of notes that had been circulated were vast indeed. Estimates differ—there are no precise figures, because all records were burned in the aftermath of the Mississippi—but one assessment generally accepted by scholars puts the figure at over 1.2 billion livres’ worth by the end of 1719. Added to this, the 624,000 shares that had been issued at 221 million livres were, on current market valuations at the end of November 1719, worth 4.8 billion livres. Of these the Crown and the company probably owned a third. France, thanks to Law’s magic system, was now richer to the tune of 5.2 billion livres. The regent himself had earned a fortune, which he circulated liberally to his paramours and favorites, and Law believed himself “the richest subject in Europe.” But the question of what underpinned these paper fortunes had been dangerously ignored.

  The share price had been boosted on its upward path by the ease with which money could be borrowed from the bank. Loans at 2 percent interest were readily available and shares could be used as collateral. The eighteenth-century economist Du Tot summed it up: “Law,” he said, “had built a seven-storey building on foundations that would support only three.” Now we would call it a bubble. As the autumn of 1719 yielded to winter, share prices scaled ever more precarious heights: shares that in August had traded for 3,000 livres tripled in value by December and by the new year reached a peak of 10,000, a twentyfold increase on the original par price of 500 livres, for which Law had been so hard pressed to find subscribers seven months earlier.

  As the year drew to a close there were signs, however, that he was beginning to succumb to the pressures of his own success. In November the journalist Buvat noted that the Duc d’Antin, the Marquis de Lassay, Law, and several unnamed ladies had traveled by carriage to the rue Quincampoix—where carriages were banned to everyone else—to visit a banker by the name of Bergerie. Law was at the carriage window and, to amuse the ladies, threw several fistfuls of coins into the street. They watched as “the rabble and courtiers tumbled over one another in the mud to pick them up [and] someone threw from a neighbouring window several buckets of water on the opportunists, one can imagine as a result the state they were in.” The incident’s unsavory undertone raised questions as well as eyebrows. Had Law’s concern for public well-being been blunted by his success? Was ego blinding his moral sensibility to the extent that he now saw avarice as a form of entertainment?

  One key long-standing supporter feared the worst: the Earl of Stair, Law’s old friend, became increasingly antagonistic. An inveterate and often unlucky gambler, Stair was distrustful of Mississippi speculation and scoffed at every price rise. In August, as share prices zoomed upward, he had
commented venomously that the frenzied market was “more extravagant and more ridiculous than anything that ever happened in any other country.” Law had then offered him a large number of shares and was offended when he refused them with the pompous rejoinder that he did not think it became the king’s ambassador to give countenance to such a thing.

  This version of the argument conflicts, however, with the Princess Palatine’s account of their dealings. Stair, she said, “cannot conceal his hatred of Law, nevertheless he has made three good millions through him.” Stair’s animosity, detectable by his ever more alarmist dispatches, was sparked by his worries about Law’s emerging anti-British sentiments. Law, he said, was interfering in diplomatic matters that were no concern of his, and threatening the British economy: “He . . . pretends he will set France much higher than ever she was before and put her in a condition to give the law to all Europe; that he can ruin the trade and credit of England and Holland whenever he pleases; that he can break our bank whenever he has a mind, and our East India Company.” Law, who had three times been refused a pardon, was now exacting painful revenge. Ironically, the pardon had been granted by George I two years earlier, but Law responded with typical impetuosity by handing over the document to the regent as proof of his unstinting loyalty.

  Stair, however, ignored this detail. According to him, by the year’s end the regent was losing faith in Law. Having heard a variety of rumors relating to his erratic behavior, the regent assured Stair he had reprimanded Law for his impudence. A few days later, Stair averred, Orléans was again denouncing Law for “his vanity, presumption and insolence. He said he knew him to be a man whose head had been turned by his vanity and unbounded ambition; that nothing would satisfy him but to be absolute master; that he had such an opinion of his own talents and contempt for the talents of others as to be quite impracticable with any other person.”

  Stair’s assessment did not tally with other diplomatic intelligence, which suggested that Law’s authority was substantial. The Paris-based diplomat Martin Bladen appraised the situation in a revealing letter to Lord Stanhope. “The Regent has already reaped many solid advantages from the establishment of this company, he is resolved to throw all the revenues of France under their management, which cannot fail of raising the actions to a much higher price.” Of Law’s part in all this Bladen was in no doubt: “Mr. Law is become the idol of the people, the Regent has gained many new friends, the public debts of the government are all discharged, and the revenues of France very considerably increased.” He drew the inevitable conclusion: “Your Lordship knows better than I how precarious our friendship is with this kingdom, and consequently how necessary it will be that some speedy methods should be thought on for payment of the public debts without which His Majesty cannot long continue the arbiter of Europe.”

  The growing anxiety was not only that France’s economic renaissance would increase her political aspirations, but also that the flurry of tourists investing in Mississippi stock would drain England of her coinage. Concerns were amplified by Law’s overt jingoism. Openly contemptuous of the English economy, “he spared no occasion of declaring without reserve, even without decency that we are bankrupt and shall be forced to shelter our country under the protection of France,” wrote Daniel Pulteney to the secretary of state James Craggs. Stair told a similar story: “He [Law] said publicly the other day at his own table, when Lord Londonderry was present, that there was but one great kingdom in Europe. . . . He told Pitt that he would bring down our East India stock, and entered into articles [made an agreement] with him to sell him at 12 months hence, a hundred thousand pounds of stock at eleven per cent under the current price.”

  Law was convinced that the price of East India stock would fall and he was therefore, in modern parlance, taking a bear futures position. The stance was probably more of a propaganda exercise, meant to bolster confidence in French investments by running down English ones, than a considered opinion—and later it turned horribly wrong. But faced with this nose thumbing, England could do nothing but squirm. Despite what Stair said, Law was far too powerful to risk offending and, ever the archmanipulator, he played mercilessly on the anxiety, even complaining to Pulteney about comments in the English press calling his company “a chimera,” at which he professed to take umbrage. Meanwhile, the career of Stair, the weakling who had picked an argument with a prizefighter, was doomed. When Lord Stanhope visited Paris in early 1720, his predictable conclusion that Law should not be provoked heralded the end of a brilliant diplomatic career for Ambassador Stair. The following spring he was recalled.

  For all the carefully calculated bravado and insults bandied over the dinner table, success had not turned Law into an egomaniac. Nor had it silenced his driving demon: his need for acceptance and his desire for political advancement. He might relish behaving high-handedly toward the English establishment and his role of bad-boy-made-good, but part of him craved acknowledgment of his achievement and wanted to be recognized for his honorable intentions, as well as respected for the money he could bestow. Success offered the chance to anchor himself to the country he had served so well by seeking a position within its government. The regent welcomed the idea, but there was a constitutional dilemma: Law still followed the Protestant faith of his forebears, and in Catholic France a Protestant could have no legal role in government. For Law to hold public office he would have to convert.

  Oddly for the descendant of a family whose livelihood had once depended on and been doomed by its faith, religion seems to have been of little significance to John Law. His choice of English friends bears this out: among them were several leading Jacobites, although he was also close to the Duke of Argyll and Earl of Ilay, who were staunch anti-Jacobites. If he felt any qualms about his conversion there are no records of it. There are, however, signs that Katherine did not share his feelings: she refused to follow suit, and was said to be “very much upset about it,” according to the regent’s mother, especially when Law insisted that both children should adopt the Catholic faith. But Law, at the zenith of his career, blinkered by ambition, ignored Katherine’s opposition. The ceremony of his acceptance into the Roman Catholic Church took place in Melun in December 1719, presided over by the Abbé de Tencin, the brother of the infamous nun turned courtesan Claudine de Tencin, whose numerous lovers were said to include Law. The association must have been a double blow for Katherine. Like his sister, Tencin was renowned for his venality and corruption and agreed to Law’s conversion largely because he knew he would profit from it. Later he received shares worth 200,000 livres. A few days later, on Christmas Day, Law participated in his first Mass at his local church of St. Roche and marked the occasion with a sumptuous ball and dinner.

  Uplifted by his conversion and anxious to secure public affection, Law donated vast sums to good causes. “He gives away lots of alms that are never talked about . . . and helps many poor people,” wrote the Princess Palatine. “It is impossible to express the bounty and munificence of Mr. Law; and what a world of money he gives away on charitable and generous occasions.” Daniel Defoe agreed: “The other day he gave 100,000 livres to the rebuilding of the church of St. Roche in Paris, being the parish church in which he lives and where he received his first communion. After the renunciation of his religion, he gave the same day a hundred thousand crowns to the relief of his country men at St. Germain . . . He had given very considerable sums to the Hospital la Charité.”

  Law’s critics were unmoved by his generosity. They were forced to pay him lip service, but many secretly regarded him as a parvenu, whose reforms had seriously damaged their financial muscle. However much they had profited as a result of the escalating price of Mississippi shares, they still felt they would be better off with the old order, in which their preeminence was unrivaled. Moreover, they must have known his reward was imminent.

  It came on January 5, 1720, with the announcement that Law had received the ultimate accolade: he had been appointed controller general of finance. Th
e position surprised few. Law had been the nation’s “first minister” in all but name for many months, but the title underlined his ascendancy. The world could no longer ignore the fact that he held the purse strings and therefore held sway over the most powerful and populous nation in Europe.

  To commemorate his new office, a portrait was made of France’s new controller general, probably painted by the fashionable artist Hyacinthe Rigaud (the painting was feared lost but appeared recently at a Sotheby’s house sale). Something of the dandy lingers: in it Law wears a gold-buttoned velvet coat and showy turquoise waistcoat embroidered with gold leaves and bunches of brilliantly colored fruit, and sports a powdered gray periwig. The once angular face is now softened with the jowls and ruddy complexion of good living. But it is a grandiose portrait, which forces you to acknowledge a man of exceptional stature and achievement. Gone is the dreaminess: the eyes, brooding beneath luxuriant black brows, focus directly on the viewer, while behind, the emblem of his empire—a Mississippi ship at full sail—powers toward the horizon.

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  MISSISSIPPIMADNESS

  After the death of Louis XIV, Law, a Scotchman, a very extraordinary person, many of whose schemes had proved useless, and others hurtful to the nation, made the government and the people believe that Louisiana produced as much gold as Peru, and that it would soon be able to supply as great a quantity of silk as China. . . . The settlers almost all perished from want; and the city was confined to a few paltry houses. Perhaps one day, when France shall have a million or two of inhabitants more than she may know what to do with, it may be of some advantage to her to people Louisiana.