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John Law Biography |
John Law (1671 April 21 - 1729 March 21) was a Scottish economist who believed that money was only a means of exchange and did not constitute wealth in itself, national wealth depended on trade.
On April 9, 1694 John Law fought a duel with Edward Wilson. Wilson had challenged Law over the affections of Elizabeth Villiers (later Countess of Orkney). Wilson was killed and Law was tried and found guilty of murder and sentenced to death. His sentenced was commuted to a fine, upon the ground that the offence only amounted to manslaughter. Wilson's brother appealed and had Law imprisoned but he managed to escape to the continent.
Law urged the establishment of a national bank to create and increase instruments of credit, and the issue of paper money backed by land, gold, or silver. He had the almost socialist idea of abolishing minor monopolies and private farming of taxes and creating a bank for national finance and a state company for commerce and ultimately exclude all private venue. This would create a huge monopoly of finance and trade run by the state, and its profits would pay off the national debt. The Conseil des Finances, merchants, and financiers objected to this plan.
In 1716 a General Bank was set up by Law. It was a private bank, but ¾ of the capital consisted of government bills and government accepted notes. The next year Law floated a joint-stock trading company called the Compagnie d'Occident which was granted a trade monopoly of the West Indies and North America. The bank became the Royal bank in 1718, meaning the notes were guaranteed by the king. The Company absorbed the Compagnie des Indes Orientales, Compagnie de Chine, and other rival trading companies and became the Compagnie Perpetuelle des Indes in 1719. In 1720 the bank and company were united and Law was appointed Controller General of Finances to attract capital.
Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company. Time, however, proved his forecast for the territorial wealth to be true. Shares rose from 500 to 15,000 livres, but by summer of 1720, there was a sudden decline in confidence, leading to panic and a fall of 50% in share prices. By the end of 1720 Philippe II of Orléans dismissed Law, who then fled from France. Law died a poor man in Venice in 1729. |
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