Name | John Law |
---|---|
Caption | John Law, by Casimir Balthazar |
Birth place | EdinburghScotland |
Death date | March 21, 1729 |
Death place | VeniceItaly |
Occupation | Economist, Banker, Financier, Author. |
Signature | John_Law_signature.jpg |
In 1716 Law established the Banque Générale in France, a private bank, but three-quarters of the capital consisted of government bills and government-accepted notes, effectively making it the first central bank of the nation. He was responsible for the Mississippi Bubble and a chaotic economic collapse in France.
Law was a gambler and a brilliant mental calculator. He was known to win card games by mentally calculating the odds. He originated economic ideas such as "The Scarcity Theory of Value" and the "Real bills doctrine".
On 9 April 1694, John Law fought a duel with Edward Wilson. Wilson had challenged Law over the affections of Elizabeth Villiers. After Law killed Wilson, he was tried and found guilty of murder and sentenced to death. His sentence 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 Amsterdam.
Law urged the establishment of a national bank to create and increase instruments of credit and the issue of banknotes backed by land, gold, or silver. The first manifestation of Law's system came when he had returned to Scotland and contributed to the debates leading to the Treaty of Union 1707. He published a text entitled Money and Trade Consider'd with a Proposal for Supplying the Nation with Money (1705). Law's propositions of creating a national bank in Scotland were ultimately rejected, and he left to pursue his ambitions abroad.
He spent ten years moving between France and the Netherlands, dealing in financial speculations. Problems with the French economy presented the opportunity to put his system into practice.
He had the idea of abolishing minor monopolies and private farming of taxes. He would create a bank for national finance and a state company for commerce, ultimately to exclude all private revenue. This would create a huge monopoly of finance and trade run by the state, and its profits would pay off the national debt. The council called to consider Law's proposal, including financiars such as Samuel Bernard, rejected the proposition on 24 October 1715.
The wars waged by Louis XIV left the country completely wasted, both economically and financially. The resultant shortage of precious metals led to a shortage of coins in circulation, which in turn limited the production of new coins. It was in this context that the regent, Philippe d'Orléans, appointed John Law as Controller General of Finances.
As Controller General, Law instituted many beneficial reforms (some of which had lasting effect, others of which were soon abolished). He tried to break up large land-holdings to benefit the peasants; he abolished internal road and canal tolls; he encouraged the building of new roads, the starting of new industries (even importing artisans but mostly by offering low-interest loans), and the revival of overseas commerce—and indeed industry increased 60% in two years, and the number of French ships engaged in export went from sixteen to three hundred.
Since, following the devastating War of the Spanish Succession, France's economy was stagnant and her national debt was crippling, Law proposed to stimulate industry by replacing gold with paper credit and then increasing the supply of credit, and to reduce the national debt by replacing it with shares in economic ventures. Though they failed, his theories ironically live on 300 years later and "captured many key conceptual points which are very much a part of modern monetary theorizing".
Category:Scottish bankers Category:Scottish economists Category:Physiocrats Category:Economy of France Category:History of banking Category:People from Fife Category:Scottish statisticians Category:Scottish gamblers Category:Duellists Category:1671 births Category:1729 deaths Category:Recipients of British royal pardons Category:18th-century Scottish people Category:17th-century Scottish people Category:People of the Regency of Philippe d'Orléans Category:People of the Ancien Régime
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