When he took office, Harley knew he needed a plan to bail out the country and keep himself in power. But to find the money he so desperately needed there were few places to which he could turn. Poor Harley found it was virtually impossible to borrow money from the Bank of England or the East India Company, because of establishment opposition to the newcomer in power. The Whig-dominated City thought a Tory government was bad for business and put obstacles in his way. The election of directors, too, both to the Bank and to the East India Company, was in the grip of the Whigs. The Governor of the Bank of England, his deputy and all twenty-four directors were all Whigs, as were twenty out of the twenty-four directors of the East India Company. The Bank had even tried to persuade the Queen to block Harley’s appointment, by giving her an ultimatum: if she sacked the Whig government it would refuse to hand over a £100,000 loan it had promised. The Queen stood firm and went ahead anyway.
So while the Tories had ousted the Whigs, they were effectively in office but not in power: they simply couldn’t raise the large sums of money they needed to replenish the Exchequer’s coffers. Grudgingly, the Bank granted Harley a £50,000 loan, only half the amount he requested. In these circumstances it was not surprising that Harley’s brother Edward maintained there was a conspiracy among ‘the Bank, stock jobbers and moneyed men of the City who are all engaged to sink the credit of the government’.
In fact, Harley could not even rely on support from within his own party. The more radical Tories, inflamed by the punishment of a radical cleric whose trial had been the catalyst for the Whigs’ downfall, wanted to impeach the previous government. Harley, who was a mainstream Tory rather than a High Tory, refused. Jonathan Swift noted: ‘The ministry is upon a very narrow bottom, and stands like an Isthmus between the Whigs on one side, and violent Tories on the other. They are able seamen, but the tempest is too great, the ship too rotten, and the crew all against them.’ Add together Harley’s struggle against the country’s overwhelming debts and the obstructiveness of the City, and there was every incentive for him to look outside traditional political or financial circles for new ideas. Unable to join the two main City institutions, he resolved to beat them. In these straitened times, it is unsurprising that he welcomed advice from outside the establishment.
Two men were to offer very different solutions: John Blunt and John Law.
John Law was well brought up and should have known better than to get himself into the trouble that had seen him exiled. His father, William, was a goldsmith who had made so much money from banking that he had bought two large estates, Lauriston and Randlestone, on the outskirts of Edinburgh. With Lauriston came a family castle, which William Law bequeathed to John along with most of his estate when he died in 1683. When John left school he took a keen interest in the business his father had left behind. At the same time, perhaps in the absence of paternal control, he began to develop a taste for women and gambling – becoming, as one contemporary put it, ‘nicely expert in all manner of debaucheries’. Luckily for him, women found him fairly irresistible: tall and dark, he was so good-looking they called him ‘Beau Law’ or ‘Jessamy John’, to indicate he was a fop or a dandy.
Law decided, while still a teenager, to try his luck in London, no doubt influenced by the stories he had heard of its racy social life. He moved into rooms in St Giles-in-the-Fields, a mixed area which included Bloomsbury and Covent Garden. In many ways, St Giles matched Law’s changeable personality: it could not quite decide whether it was respectable, including as it did many members of the fashionable set, or rough, with its narrow, dirty alleys which were home to Irish immigrants and French refugees. Here, Law lost no time in conducting himself in a way that reflected both sides of his character: he took a mistress, a certain Mrs Lawrence, but also made sure he made the acquaintance of Thomas Neale, the Master of the Mint and one of the leading ‘projectors’ of the day – the name given to men who promoted the cause of the new ideas and businesses that abounded in the capital. Neale was also Groom Porter to the King, which meant he was responsible for providing cards and dice at court. It was not hard to see why Law was keen to meet him.
Law spent most of his nights in the clubs and gaming houses of London. But he was no idle gambler. He began to investigate the odds of throwing a sequence of numbers with the dice, and studied the patterns of games like ‘hazard’ – a form of craps – which were very popular. His early calculations were not successful. He was forced to sell his castle, and his mother bailed him out by buying the estates from him. At the same time, Law kept up his interest in banking and in particular addressed the issue of whether a national bank should be established to take over from the goldsmiths, like his father, who generally held money for the merchants of the day.
The two sides of Law’s engaging personality were to collide – and in spectacular fashion. All his plans, and hopes for the future, were ended by the duel that he came to fight in Bloomsbury in April 1694.
His rival in love, Edward Wilson, was a man whose taste for high living exceeded even that of Law, and in the wake of his death his lifestyle became the subject of much comment in the newspapers, the London Journal declaring that ‘Mr Wilson was the wonder of the time he lived in; from low circumstances he was on a sudden exalted to a very high pitch for in a gay dress, a splendid equipage and vast expense, he exceeded all the Court. How he was supported, few (very few indeed) truly know; and those who have undertaken to account for it, have only done it from the darkness and uncertainty of conjecture. But in the midst of gaiety, he fell by the hand of the then private Mr Law, and not fairly neither.’
One theory for Wilson’s giddy lifestyle, which was based on no discernible income, is that he was the lover of Elizabeth Villiers, the mistress of the King, and that she was subsidising his standard of living. It may also explain why the King apparently took an interest in Law’s trial. However, the reports of the proceedings make no mention of Miss Villiers: ‘The matter of fact was thus. There was some difference happened to arise between Mr Lawe and the deceased concerning a woman, one Mrs Lawrence, who was acquainted with Mr Lawe; upon which on 9th of April instant, they met at Bloomsbury Square, and there fought a duel in which Mr Wilson was killed.’
Whatever the cause of the fight, the consequence was clear. Wilson lay dead, and Law had to flee for his life.
Law’s departure, though enforced, was not without its consolations. Exile proved profitable: within a few years he had made a fortune by gambling. He was not just making money – he was making his own money: so high were the stakes he placed that he even arranged for special gold counters to be minted. He was frequently to be seen arriving at the gaming tables carrying £6,000 worth of coins. Nonetheless he built up his wealth carefully, playing to a system and using his mathematical skills to calculate the odds. In Italy he won £20,000, and by the time he reached France in 1714, four years after Harley came to power in England, he had £90,000 to his name. He was seriously, independently, wealthy – the equivalent of a multimillionaire today.
But Law was not the dilettante his background suggested. While he was in Amsterdam, rather than simply trying to make money, though he did that too, he began to think seriously about it as a theory. The Dutch, too, had suffered from the financial problems with which Harley was wrestling in London. But they were far ahead of the English in their economic thinking. The Bank of Amsterdam, a government bank owned by the city, had been established specifically to help oil the wheels of commerce. Most countries faced the same problem, which was how best to guarantee the value of their currency. To try to secure a basis for international trade, a handbook was published listing the 500 gold and 340 silver coins which were circulating in the world. But traders complained that coins were frequently ‘clipped’ to reduce their metallic content, so their values fluctuated. England had been forced to call in all its silver coinage in 1696 and remint it, but paper money had been issued at an alarming rate to finance the war effort, out of all proportion to the coins in circulation.
The Bank of Amsterdam tackled the problem simply but effectively. It put the coins on the scales and allowed credit according to their real value, their weight, by replacing them with promissory notes. Such pieces