Evening Republican, Volume 21, Number 26, Rensselaer, Jasper County, 8 February 1918 — WHEN PARIS “BOOMED” [ARTICLE]

WHEN PARIS “BOOMED”

Thotmanda of New Cltisena Forced to Live to Stoblee end KHcheui MUalaalppl Scheme, Early Buatoeaa Corporation, Canoe

By S. W. STRAUS

(Pnsdaeßtltew TerkaU Ota* Bote)

(Copyright, 1917. Weatern Newipaper.Union.) The wildest “booms” In America never exceeded that which occurred in Paris during the eatly part of the eighteenth century. It was when Law’s “Mississippi Scheme” reached the crest in its meteoric course. In two or three years the manufactures of Paris Increased four-fold. The population was added to by hundred thousands. The vast numbers of people who came to Paris were forced to live in garrets, kitchens and stables. This amazing activity was caused by anticipations that huge profits would be derived from trade with the Louisiana province. At the beginning of the reign of Louis XV France was in serious financial straits owing to the wars of Louis XIV. Law was a Scottish financier who submitted to the French governmenf a tempting plan for reducing the national debt by a systematic cultivation of commercial relations with the French territory in North America.

With the protection of the government he organized, in 1717, the Compagnle d’Occident, capitalized at 100,000,000 livres. His company was invested with the privilege of trading exclusively with the Province of Louisiana for twenty-five years. The influence of the Compagnie d’Occident over Louisiana was made so great that it amounted practically to a new government. In 1718 the name of the company was changed to the Banque Royale, with the king, himself, guaranteeing the notes that were issued. In 1719 the company obtained, a monopoly of trade with the East Indies, China and the South Seas and was named the Compagnie des Indes. By this time so successful was Law In arousing popular interest that when 50,000 new shares were offered 300,000 applications were made for them. Then the boom above described reached its culmination. The entire scheme was doomed to failure. Actual operations had hardly been started when the government greatly increased its paper money circulation on the strength of this prosperity. People began to realize that they were riding on the crest of a bubble. The end came swiftly and although Law endeavored to remedy matters by drastic measures he was forced

to flee from Paris and died practically penniless in a foreign city. At the. same time a similar project was coming to its end in England. The Smith Sea company, formed for the purpose of trading in the South Seas, endfed with a crash when most of the directors sold out when the value of their shares had been stimulated to reach 1,000. These early attempts at large scale business organization ushered in the modern type of corporation. A brief sketch of -how our present complex business organization evolved should be interesting to the readers of this series, for the greater proportion of banking is inseparably linked with business. Many of the investment bonds on the market today are obligations of corporations. The corporation, in its essential principles, has been traced back as far as ancient Babylon. It grew oUt of the activities of families in commercial ventures. A family of fishermen would be as one in the ownership of boats, equipment, and in their operation. Their trust in one another led naturally to the recognition of each member as an agent of the firm, whose acts bound the others^and to the unlimited liability of each for payment of obllgaSons—features of the partnership. The corporation came into existence as an improvement over tile partnership in handling large projects and in limiting the liability of members. It is asserted by Blackstone that the corporation as we see it today descended directly from the practice of Roman business men. The Roman corporations were known as “colleges.” They enabled aristocratic Romans to engage in vulgar trade secretly. In medieval times the corporation, form of organization was used chiefly with municipalities and ecclesiastical bodies. Guilds and municipalities were often chartered by the crown because they could exercise the power which the king himself was unable to wield.

The American “trust” Is not strictly American. The idea of trusts originated in the middle ages through the desire of the church to get around the statutes of “mortmain.” These laws were not favorable to those who had estates willed to them in perpetuity. The scheme adopted was to have property deeded to a third party, who would administer it for the benefit of the church. This is similar to the modern trust organization, where stock of various corporations is held in trust by a holding company. Probably the popular idea that trusts are illegal originated in this first evasion of the law. The trade union has apparently always existed. The Romans had them. In medieval times they were called guilds and crafts. Journeymen often formed associations for protection. The purpose they gave was religious wpsship, but that was only a cover for what we would now call trade unions. They conducted strikes and obtained increases in wages.