John Law – Forgotten Son of Edinburgh

Economist John Law became the richest man in the world – but died a pauper. Edinburgh usually celebrates its most eminent sons and daughters. Economist Adam Smith, for example, has a statue erected in his honour on Royal Mile and his face on the Scottish 20 pound note. For some reason they seem to have […]

Economist John Law became the richest man in the world – but died a pauper. Edinburgh usually celebrates its most eminent sons and daughters. Economist Adam Smith, for example, has a statue erected in his honour on Royal Mile and his face on the Scottish 20 pound note. For some reason they seem to have skipped on his colleague John Law. “John Who?” Even most natives of the city reply with astonishment if you ask them about this early 18th century figure. Which is quite astonishing, too, since John Law was only the inventor of modern paper money, saved post-Louis XIV France from bankruptcy, controlled commerce for a great part of North America and rose to be the richest man in the world, maybe the richest man of all time, but wound up a pauper and dying alone and despised in a Venice hotel.

But first things first: Born in Edinburgh in 1671 as the eldest son of the goldsmith and banker William Law, young John grew up at Lauriston Castle, a 16th century Edwardian mansion in Silverknowles near the Firth of Forth which today is open to tourists. The boy turned out to be brilliant at mathematics and economics, but also knew how to enjoy life. “Beau Law”, as the tall and handsome lad was called by his friends, had a love for the ladies and for gambling. For a great part of his life he would make ends meet by separating other people from their fortunes at a card game called Pharao. At first, not very successful. Squandering his late father’s inheritance, he had to be bailed out by his mother. At the age of 20, John Law moved to London in order to study mathematics, economics and political economy. But at night, he went on with the hobbies mentioned above. His charm and fine manners soon got him in touch with the higher circles of society, both male and female. Not everybody was quite fond of that. On April 9th 1694, Law fought a duel with a certain Edward Wilson over the affections of a woman. Being an excellent fencer Law killed his opponent on the spot. He was found guilty of murder and sentenced to death just three days after the incident. Later the accusation was reduced to mans-laughter and the sentence commuted to a fine. But his victim’s brother appealed.

Wilson had been the son of an influential family and Law was imprisoned again. However, he was able to flee with the help of some friends and escape to Amsterdam, where he learned banking as a more practical approach. Upon returning to Scotland around 1700, Law engaged in debates surrounding the Union with England and proposed his plans to The Scottish Parliament (see box). They were rejected and in 1707 Law had to flee again. Due to the Union the sentence against him became valid in Scotland, as well. He toured Europe along with his lover Catherine Segnieur and their two children. Catherine was at the time still married to another man. “I’m not married, but my wife is”, John Law would joke. After several other rejections he got his chance in France which had been ruined by the late “Sun King” Louis XIV’s wars and opulent lifestyle. The new regent gave a way for Law’s banking project and appointed him Controller General of Finances. As such he founded the Banque Royale which succeeded in reducing most of the state’s debts and made many reforms benefitting the common man. The thankful regent granted Law the commerce monopoly for France’s overseas territories in Northern America, Lousiana. Had Law died at this point he might have been considered a national hero in France. But his ruin was about to come.  Law founded the West Indian Company whose shares were affordable for peasants and servants, as well.

People were equal in this respect several decades before the French Revolution. And they almost trampled each other to death to buy Law’s shares hoping to profit from the alleged El Dorado across the Atlantic. The shares boosted and made Law the richest man in the world and everybody’s darling in Paris. But the Scot had greatly exaggerated the riches of Louisiana, which turned out to be a mosquito-ridden swamp. The “Mississippi Bubble”, one of the biggest financial bubbles of all time, burst and shares fell rapidly. John Law had made the French rich and then poor again. In May 1720, an angry mob hunted the formerly popular man down the streets of Paris. He managed to save himself, but his carriage was torn apart. John Law was expelled yet another time.

His titles and belongings were seized by the state. On March 21st, 1729 he died in Venice – alone and forgotten.

According to John Law economic progress is fundamentally linked to the amount of money circulating. Because paper money was unknown and metals for coins were rare, the Europe of his day suffered from a scarcity of money. So Law proposed the establishment of a national bank with the rights to issue paper notes backed by land, gold or silver and guaranteed by the state. This multiplication of money, he reckoned, could increase investments.
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