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Nature's Evil [calibre 5.27.0]
- Автор: Эткинд Александр Маркович
- Год: 2022
- Язык: английский
- Год: Wiley
- Переводчик: Sara Jolly
- Жанр: История
Электронная книга - «Nature's Evil [calibre 5.27.0]». Краткое содержание книги:
John Law
In the first year of his regency, the duke of Orléans was persuaded by the Scottish economist John Law to launch a very unusual project. Law, the son of a jeweller, was known in London for his luck in games of chance. But he had killed someone in a duel and somehow escaped from prison. After an unsuccessful attempt to start a national bank in Scotland, he moved to Paris. There he got to know the regent, also a gambler and libertine. The Scottish economist explained to the French regent that a country needs money like a body needs blood; that there would be no income from taxes until the circulation of money was re-established; and that gold wasn’t essential to achieve it – there were other means. The last point was of particular interest to the regent. As Pushkin wrote, ‘It was at this time that Law appeared. Greed for money was united to a thirst for enjoyment and dissipation. Estates vanished; morals went by the board; Frenchmen laughed and calculated, and the state fell to pieces to the skittish music of the satirical vaudevilles.’ 7
Paper money was John Law’s pet subject. In England it had been introduced to finance the war effort; Sweden and even far-off Massachusetts had also experimented with bank notes. At first these pieces of paper functioned as credit notes, and they guaranteed precise sums of gold or silver. The probability that all the bank’s clients would simultaneously want to cash in their bank notes didn’t seem very likely, and the banks issued more notes than they could redeem. The supply of money grew while the metal was locked in the bank’s safes. Now the banks could give credit to merchants, princes and generals without running out of money. Law wrote that, if England were to convert her circulating paper notes back into silver, the volume of its trade would be halved. 8
Then it turned out that probability theory, which was also developing then, was not entirely applicable to banking. Economic agents are mutually dependent and inclined to run into difficulties simultaneously. Granted, different clients took credit for different reasons and would lose their fortunes at different moments. But they all went to the bank to change their bank notes for gold every time they felt that a crisis was looming; moreover, this feeling arose in different people simultaneously. The first newspapers in Europe appeared at about the same time as paper money. Every day they published the value of shares and currencies, as well as reports from battlefields, geographical discoveries and high society rumours. Various investors all read the same newspapers.
John Law knew that, in England and the Netherlands, paper money was backed by gold. France had no such reserves. Her national wealth consisted of land, and Law proposed to create a land bank which would release money guaranteed by land. Every unit equalled a specific portion of land; on demand, the bank would have to distribute land from its reserves in exchange for the assignat. The amount of the bank’s land would grow as a result of colonial conquests, and the quantity of money would also increase accordingly. If there was enough money in circulation, wrote John Law, French land would be just as well cultivated as Dutch.
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.