- John Law's Capitalist Violence and the Invention of Modern Prostitution, 1719–1720
The year 2019 marks a milestone in the history of finance and of capitalism: the three hundredth anniversary of John Law's spectacular take-over of France's economy. Between December 1718 and December 1719, Law established the first national bank in French history, the Banque Royale or Royal Bank, as well as Paris' original stock exchange, on the rue Quincampoix. At the same time, Philippe d'Orléans, the Regent governing France during Louis XV's minority, fused several older trading companies in order to create a giant conglomerate known as the Indies Company that enjoyed an absolute monopoly over the country's overseas trade. The Regent gave Law control first over the newly powerful Indies Company, then over the Royal Mint, and in the end over the regulation of all government finance and expenditure. Finally, also in 1719, Law introduced the French to two financial instruments with which they had had no prior experience: paper money and publicly traded stock in the form of shares in the new Indies Company. One man controlled the most important economy in Europe.
Shares in Indies Company stock rose from an initial price of 500 French livres or pounds in May 1719 to over 10,000 livres in December 1719. On January 5, 1720, Law reached the height of his powers when he was named France's superintendent general of finance. The end, however, was already in sight.
Inflation soared to 23 percent in January 1720. In February, the English ambassador, the Earl of Stair, coined a term to characterize the panic-stricken withdrawals of money from the Royal Bank that were then just beginning: he called them "runs."1 On February 22, to put an end to [End Page 10] the public spectacle of the loss of investor confidence, the Royal Bank was shuttered without warning while Law tried to deal with inflation and the excess of paper in circulation. Soon, Indies Company stock began to fall precipitously: between May 28 and May 30 alone, stock declined by 44 percent. On May 29, Law was removed from his position as royal finance minister. By July, six thousand soldiers were positioned around the Royal Bank to try to control the riots that broke out there on a daily basis. By December 31, both banknotes and shares were virtually worthless.
In letters and diaries, numerous contemporary observers recorded what they saw as the transformation of French society brought about by Law's financial experiments. In early 1720, for example, Mathieu Marais, a lawyer for the Parisian Parlement, lamented that "there is no longer any honor, any word of honor, any good faith."2 And Antoine Louis Le Fèvre de Caumartin de Boissy, great aristocrat and president of the Grand Council, warned his sister in the provinces that "Paris is no longer the city you once knew."3
One new phenomenon that both Marais and Caumartin de Boissy had in mind was the spectacular crime wave that took over the streets of the French capital soon after runs on the Royal Bank began in February 1720, an explosion of crime so violent that Edgar Faure termed March and April 1720 "le printemps écarlate," "the scarlet spring."4 In March, Parisians were terrified by a succession of murders that took place on or near the stock exchange on the rue Quincampoix, sometimes even in broad daylight. After a young noble, the Comte de Horn, knifed a speculator to death in a public place in order to abscond with his wallet stuffed with 150,000 livres, the rue Quincampoix was shut down and people were forbidden to congregate there.
But the scarlet spring grew only bloodier. In early April, a Parisian lawyer named Barbier made this entry in his journal: "For the past week, the police have been fishing out of the river a great quantity of arms, legs, and various sawed-off slices of the corpses of those who have been assassinated and cut into pieces."5 When I first described everyday life in [End Page 11] Paris during the implosion of Law's system to Marc Flandreau...