Nature's Evil

In May 1716, the regent approved John Law’s project. The new Banque Générale was privately owned, and everyone could buy shares. Soon the regent ordered his agents in the provinces to collect taxes exclusively in this bank’s notes. Law could barely print them quickly enough to meet the demand. The regent also founded a new joint stock company, to which he handed over the management of all the French colonies. Merged with Law’s bank, this company changed its name several times; the Company of the West, the Company of the Indies and, finally, the Mississippi Company. French bank notes were now guaranteed by the vast territory of Louisiana. The city of New Orleans, named in honour of the regent, was founded in the malarial swamps in 1718. John Law sent 6,000 white and 3,000 ‘coloured’ settlers to Louisiana.

The crown was paying the interest on its huge wartime debt to numerous

rentiers

– wealthy citizens who owned bonds issued by the government. Now the regent transferred the whole French national debt to the Mississippi Company: it would be covered by the income from the Louisiana swamps. The young regent won plaudits in Paris; he had found a way of monetising the ‘civilising mission’, in which the French were losing faith. This was how things should be: the empire’s outgoings would be offset by income from the colonies.

The business grew – John Law added French colonies in Africa to his company. Within three years its share value went from 140 to more than 10,000

livres

. On the black market, shares were even traded at 18,000; people who couldn’t obtain shares bought options and futures, which were another invention of the time. At the beginning of 1720 John Law was made general controller of finances. Renamed as the Banque Royale, his bank became the first central bank in French history. The rentiers became richer than ever before. The most fortunate became millionaires – this was when the term ‘millionaire’ was first used in French. The biggest shareholders of the company obtained the rights of ownership on large plots of land on the banks of the Mississippi. The newspapers published articles about silver deposits found west of the Mississippi – the rock there was apparently richer in silver than the Peruvian mines. Misleading articles, images and maps buoyed up the rise in share prices. This was the dawn of PR.

In fact, the Parisian millionaires could place their hopes only in three sorts of raw matter from Louisiana: tobacco, sugar and felt. Tobacco required a mass influx of African slaves, and they had to be fed. Sugar cane from Saint-Domingue was planted right in the middle of today’s New Orleans; but, even in good years, the sugar was of low quality, and in cold years it didn’t grow at all. After they lost Canada, the French kept on hoping that they would find beaver and establish trading posts in Louisiana. They didn’t know that there were no beavers south of the Hudson. The stock market bubble fed on nostalgia for the lost colonies. Unprofitable Louisiana was passed from hand to hand over the course of many years. Half a century after John Law, as a result of the Seven Years’ War, Louisiana passed to the Spanish Empire. Then Napoleon got it back, only to sell it to the United States. These lands would become commercially successful much later, when slaves drained the swamps, built canals and developed cotton plantations.

The profits reaped by the regent and some shareholders in Paris derived not from overseas colonies but from French subjects. But John Law did fulfil some of his promises. He almost eliminated the national debt. His currency was convertible – shares could be exchanged for bank notes and bank notes for silver. The aristocracy experienced the pleasures of money, but they hardly understood the reason for the ebbs and flows in their accounts. The financial system assembled by Law was very complex; the Parisian public lacked the financial know-how to keep up with his creation. Thanks to the inexperience of the shareholders the crash was a long time coming, but then everything unravelled very fast. In the spring of 1720, the value of shares collapsed and Law stopped their conversion to gold. The price of bread in Paris rose instantly by 50 per cent. Angry Parisians occupied the financial quarter, which was situated near the regent’s palace. John Law fled from Paris.