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to the idle capitalist. The state of the public funds confirmed this calculation.
The real capital of the trading and agricultural part of the country was increased also by the operation of the laws against excessive interest. He who required a larger share of the returns of capital than the laws allowed, was induced to embark personally with his mental, as well as his pecuniary, resources; and, instead of advancing his capital on property pledged to restore it, he brought his own property into the market.
Whilst the policy of the Usury Laws was thus to promote industry, and to increase the real capital of the trading and agricultural community, those laws had also the effect of discouraging idleness; and, by consequence, profligacy and immorality, for the three are generally united. They tended to add to the number of active and useful members of society, and to lesson those of a contrary character.
It was no inconsiderable argument in favour of the regulations in question, that they gave permanency and stability to the property of the country. If the value of every thing were to depend on the constant fuctuations of pecuniary speculators, or the success of manufacturing and commercial projects, the permanent interests and happiness of the community at large would be frequently sacrificed.
The energies of the inhabitants of these kingdoms have carried forward, by rapid strides, the prosperity of the country's but some wholesome restraint is essential to render that progperity continuous, and it was aptly supplied by the provisions in question.
It had been supposed that they who possessed money should be permitted to use it in any way they pleased, like ihe possessors of all other kinds of property. But there is a natural and essential difference between the one and the other. In money there is no intrinsic value, it is of an imperishable nature, security is given for its return, which is not the case on the bire of other articles. The quality and utility, of all other things vary indefinitely. Money is comparatively immutable. It is the mere medium by which valuables are transferred. It is the representative of wealth, and not wealth itself. It constitutes a sort of metallic Bank, by which busi. ness is carried on better than it could otherwise be conducted, yet it ought not to be confounded with the real commodities of commerce. It resembles the entries in a banker's book, which record the amount of property, but cannot be identified with it.
The rule which governs the use of money cannot then be applied to any other commodity, for the latter varies inde
finitely in, durability and quality. All kinds of merchandize are perishable; the most substantial edifices are crumbled by the hand of time, but gold remains unimpaired for ages. It is impossible to fix a rate for the use or hire of horses, or houses, by any general law, because the value of each depends upon its size, strength, beauty, and many other properties; whilst, on the contrary, a guinea is always the samel; and, although one person may want it more than another, yet the aggregate demand for the circulating medium varies but little, when compared with every other article.
It was to be observed also, that the permission to take an unlimited interest affords a temptation to lend money upon insufficient securities, and was, therefore, injurious to the lender. It was detrimental also to the borrower, by diminishing the incitements to prudential conduct. The extension of the system of credit and false capital, beyond its present state was, to say the least, of very doubtful advantage. The consequences of a repeal of the laws would be chiefly felt by the middle classes of society, composed principally of tradesmen and farmers. The eminent merchants might have no difficulty in raising loans to effect any speculative object; their influence and credit could not be affected by a change; but men of inferior responsibility would be obliged to submit to whatever terms should be imposed upon them.
It was important to remark, also, in favour of these regulations, that they have proceeded upon no speculative data. They had gradually followed the progress of wealth. The rate of interest had been reduced in proportion to the reduction of commercial and farming profits. Thus, in the reign of Henry the Eighth, the legal interest was 10 per cent. In that of James the First, it was reduced to 8; in that of Charles the Second, it was limited to 6; and in the time of Anne, it was finally diminished to 5 per cent.
During these several stages of the Usury enactments, the amount of capital constantly increased, and profit proportionally diminished; and it was remarkable, that the legal rate had nearly always been higher than the market rate,--that is, when the securities were of the highest kind, and the party borrowing possessed unimpeached credit. The laws, therefore, did not affect the superior class of traders, and they consequently could not complain of their operation. It was the humbler and the most numerous order of dealers that the laws were calculated to protect and benefit, and they were precisely the persons who most needed protection.
It should not be forgotten that no civilized community had ever existed in which regulations did not prevail regarding the interest of money, and although this was no conclusive
argument in their favour, it was a sufficient ground to call upon the public to examine with unusual strictness the reasonings brought against them; and, before they consented to an alteration, to be morally certain, that it would also be an improvement.
And although the opinions of learned men could not be decisive on this, or on any subject, yet respect should always be paid to their authority, and their reasoning examined with attention. That Grotius and Puffendorf, Bacon and Blackstone, Paley and Smith, bad all concurred in the justice of restraining the interest of money within moderate limits; and, until some stronger grounds than had yet been urged should be brought forward, the laws for that purpose ought not to be abolished.
ON THE OTHER HAND, the advocates for the unrestricted use of money, maintained that all the argument was on their side; that there was no good reason why a man should not employ his cash in the same manner as any other species of property; and that no one could derive benefit from the Usury Laws, unless it was the dealers in annuities. Some of the opponents of restriction contended, that the laws were inoperative and ineffectual; and others, that they were mischievous; and that the mischief affected the borrower more than the lender: that, if money could not be obtained at 5
cent. the borrower was obliged to pay an extravagant rate to cover the risk of insurance, and the hazard of illegality.
What difference, it was demanded, can there be between the hire of money and the hire of any other kind of goods ? If profit, to any extent, may be made upon a hundred pounds' worth of silver manufactured into particular articles, why may not the proprietor sell those articles and lend the proceeds at an equal rate? There may be the same extent of risk in each case,-the principle of credit was the same; and the rule of law ought to be the same.
The legislature could not so well know the interest of the parties as they themselves knew it, and to them it ought to be left. It was evident, that the notion about the lender imposing any terms of severity upon the borrower was wholly unfounded; for, at the present period, money could be obtained greatly below the legal rate. Surely people might be left to take care of their own interests. They can see much better with their own eyes than with those of other persons; and, generally speaking, the just rate of the interest of money will be ascertained by a market-price like any other commodity.
They could not agree in the metaphysical views which had been stated of the nature of money: it was as valuable as land, because it might be converted into it; and the rent, or
VOL. I. PART I.
the payment for the use of land, had no legal limitation,-and why, therefore, should it for money ?—that gold, if employed, was as productive as the cultivation of land; and that, although parks and pleasure-grounds might not strictly be considered productive, yet, in refined societies, they were valuable; large rents were paid for them,-and why should not interest be paid for the use of the current coin of the realm, an article which was the medium of all the conveniencies of life, and all the elegancies of society?-that, if it were true that gold was returned uninjured in the same state in which it was lent, so was the land, and so were houses; and, therefore, there could be no reason in this respect for the enactment of a different principle of remuneration.
With respect to the supposed advantage of the laws, in restraining profligacy,-it was obvious that there was no difficulty in raising money by those who were disposed to extravagance; and the alteration of the law would diminish, rather than increase, the evil. It was, in fact, a sort of oppression on those, who desired pecuniary relief, and who could not obtain it at the ordinary rate, to prevent them from receiving it at a higher rate. The borrower was obliged to pay for the obloquy which attached to the usurer, and for all the hazard he encountered in his traffic. It was, indeed, rather hard upon those who were in want of money, to say to them, “ You shall not be relieved, unless you can persuade some one to grant the loan on our terms; you shall not borrow, unless you can get it at 5 per cent."
The restriction had the effect of preventing those undertakings which would probably produce a high rate of interest, and thus enable the borrower to pay for the loan, and advance himself to a state of prosperity. It was, therefore, cramping exertion, and confining the speculations of adventurous industry.
It was pressed upon the attention also, that a general freedom of trade could not be maintained without a general freedom of capital, on which it depended. The free principles of the one, therefore, ought to ensure the liberty of the other. The laws of restraint, indeed, were, on all subjects, relating to the transactions between man and man, far too numerous, and required much revision and repeal.
It had been said, that it was not incumbent on the supporters of the regulations in question to defend them, and that the impugners must adduce the grounds for their abolition; but it was submitted that, if the laws could not be defended, they ought to be abolished; that restraint was an evil, and could only be justified when it prevented an evil of greater magnitude than itself; and that the benefit must be certain and not problematic.
Independent of the question of policy, there was no right vested in the legislature, in nature or reason, to interfere in the contracts between one individual and another; and it was rather singular that the law kindly prevented those who wanted the money of their neighbours from paying them more than 5 per cent. but it never enjoined them to keep up to that rate: they might pay as much less as they pleased, but never one farthing more! Neither the antiquity of these laws, nor their general prevalence in all countries, were material arguments in their favour; for error in principle, and fallacy in reasoning, had at all times, and in all places, been most abundant. Unless, therefore, the enactments could be supported on better grounds than age and vulgarity, the sooner they were expunged the more creditable to the age and country in which we lived.
IN REPLY to these positions, it was contended, that the defenders of usury turned their attention to part only of the subject, and did not examine it comprehensively. It was true, that the laws were in some instances inoperative; and in some ineffectual: they might also be partially detrimental. But the question was of a general nature,-- were not the laws far more beneficial than injurious?
The laws were inoperative only as they related to transactions of the first class, where either the security was of the best kind, or the credit of the party was of the first order. Under such circumstances the restriction was not needed, for there was nothing to restrain. But so it was with regard to all other laws,-the penalties denounced against public offenders were “inoperative” upon honest men; and, if all men were honest, enactments could not be necessary, for their own principles of rectitude would be the best guides; but, in the absence of those principles, legislation must supply the best standard that it could, although it was imperfect.
That the restriction was not always effectual was nothing surprising, for no human foresight could reach every case, and it was vain to expect it. To fail in many instances was the common lot of all practical jurisprudence; yet it was surely not desirable that all efforts should cease, and every thing be left to chance. It seemed to be lost sight of, that an extensive effect was produced by the operation of wholesome provisions, in a way as beneficial as it was silent and unnoticed. This arose from the influence of an habitual respect to the laws of our country. There were multitudes who tacitly yielded to whatever was long established; who, from principle, disliked innovation; and who inflicted a stigma on those who violated the ancient usages of the land. The larger part of the community was composed of individuals of this character, and it was a gross mistake in the facts of the case to suppose that a