"Ye friends to truth, ye statesmen who surveyThe rich man's joys increase, the poor's decay;'Tis yours to judge, how wide the limits stand,Between a splendid and a happy land."
"Ye friends to truth, ye statesmen who surveyThe rich man's joys increase, the poor's decay;'Tis yours to judge, how wide the limits stand,Between a splendid and a happy land."
No enterprise, however brilliant, can be in the model state, that blesses the few by the losses of the many.
Great and benign enterprises are possible without usury. There is no greater enterprise than the postal system in this land and extending to all the nations in the postal union. You owe it nothing; like poor Richard, "you pay as you go." It owes nothing, pays no interest and renders a great service for the small amount you pay. It is a standing illustration of the success of a strictly cash business.
The great benevolent missionary enterprises, that send their messengers to all lands, over the whole earth, receive and disburse the gifts of the benevolent. Their work is not interrupted, but continues from age to age.
The commerce of the world can be carried on just as effectively without usury. A mortgage does notmake a farm more productive nor does a bonded debt make a railroad or a navigation company more efficient. The railroads and express and telegraph and telephone and other enterprises are greatly hindered in the service of the public by the tribute they are returning to the usurers. Had this farmer not this mortgage he could improve his farm and bring from his land better results. Were it not for the unceasing drain upon the income of great enterprises to meet the interest on bonds, the properties could be improved and the public better served at greatly reduced rates. Indeed the most successful enterprises are now operated by the owners.
4. "It will be hard to borrow, if you will not pay interest."
It would be a happy condition if no one should want to borrow except in urgent need from an accidental strait; if that old independent, self-reliant spirit that refused to be indebted to any man could be universal, that preferred frank and honest poverty in a cabin, to a sham affluence in a mortgaged palace.
It should be hard to borrow, but easy to pay. Usury makes it easy to borrow, but hard to repay. Usurers even make it attractive and entice the victim into the trap of debt and then it is all but impossible to find a way out. An honest, industrious man of good habits must be ever on the alert or he will be entangled, sooner or later, with debts.
It will not be harder for an honest man, who is inneed, to borrow. He will not be able to borrow more than his need requires. The debt will not increase during the period of disability, and it will be easier to repay without increase. The usurer requires more than honesty for the security of his loan. The loan to him is precious seed, that must be planted where it will grow. To merely have the loan returned without increase does not meet his claim. To remit the increase, to make it easier for the poor debtor to pay, he would regard as a positive loss to himself and a gift to his victim. The usurer prefers rich debtors, who have abundant property to secure the loan and its increase.
There is a despised class of pawn usurers who prey upon the poor. They are regarded as robbers of the poor in their distresses, but their business would be impossible, were it not that all avenues of relief are closed by usury; "interest must be paid anywhere; why not borrow of them though the rates are high?" The moral quality of the act is the same; the difference is wholly in the degree of turpitude.
"If no interest should be charged on money, then no rents should be collected."
The early Christian apologists for usury, who felt it imperative to explain why it was permitted and practiced among Christians, found few arguments. They all agreed that the letter and spirit of the Scriptures forbade lending to the poor, upon interest. They also found it impossible to show from reason the right of money to an increase, but as money can readily be changed into other forms of property, as lands, they reversed the arguments; beginning with the assumed premise that it is right to charge rental for lands, and as money may represent lands, it is therefore right, they say, to charge interest on money.
"It seems as lawful for a man to receive interest for money, which another takes pains with, improves, but runs the hazard in trade, as it is to receive rent for our land, which another takes pains with, improves, but runs the hazard of in husbandry."
True logic would have led them to reason forward from the truth they had determined; that there is no valid reason justifying interest on money. Resting on this truth, and then discovering that money mayrepresent lands, the necessary conclusion must be, that land rentals are without justice. Reversing the order of their argument, they assumed a false premise, and from it attempted to prove true the very proposition they had found to be false.
There is the usury of lands as well as of "money or victuals."
Forty years ago the Omaha Indians went across the river and cut some fine grass growing on open land, and carried it to their reservation. The owner of the land, living in a distant state, learning of this, claimed pay of the Indians and brought suit against them before the agent to recover it. The Indians admitted that they had cut and taken the grass; they also admitted its value. Their defense was that this man had no right superior to theirs. This was a natural growth that had cost him no labor, and they had not injured the land. Their speaker said, "If the man had dug the land and planted it in corn and hoed and tended the corn, the corn would have been his; but the Great Spirit made the grass grow and this man gave it no labor nor care; the buffalo or the cattle could eat it. Have we not the rights of the cattle? This man has no right to it."
The agent decided against them and compelled them to pay the man. They were much dissatisfied and felt they were unjustly treated and oppressed, because they had to pay that which the man had never earned. The red men were not versed in legal statutesnor educated in the tutelage of usury, but it can not be denied that they interpreted very accurately the law written in the reason and conscience: that no man has any especial claim to that which he has not earned.
The convictions of white men, and their method of compelling absentee owners to pay for the increase in value of their lands, came under the writer's observation in a new settlement near the Indians' reservation. He found three poor families in a district. They had little land and extremely plain homes, but there was a good school-house and a good school and an expensive bridge had been built across a stream to enable one of the families to reach it. Enquiring how they could afford to erect such improvements and support such a school, they replied that the lands all around them were owned by absentees, speculators in the east, who were holding the lands for the advance in value, which they, in their struggling poverty, should make by the improvement of the country, when they would gather in an "unearned increment." They said they had the power to levy taxes for bridges and for schools and they had determined to make the absentees in this way compensate them, in part, for the increment they were earning for them.
The conviction of right and justice in the white settler did not differ from the innate and untutored argument of the Indian. The Indians felt oppressed because they were compelled to pay the man for what that man had never earned. The white settlersdetermined to thwart the purpose of the absentee owners to gain an increment from their sacrifice and labor.
The landlord has a right to all that he has produced. When he has cleared away the forest or broken up the land; when he has planted the vineyard and builded the winepress, he has a right to let this out to husbandmen to gather the fruits of his preparation and planting and to share with them in the proportion each has contributed to the production, but to hold all that he himself has produced and yet claim a part of the product of another, is usury. A farmer retires from his farm because no longer able or willing to continue its cultivation. He has an undisputed right to a full reward for all his own labor, and for all he has purchased from others that he leaves in the farm. There must be a compensation for the transformation of the wilderness into a farm at the first, for the fertility that may have been added to the soil, for the orchards, vineyards, houses, barns and every improvement he may have made and left on the farm. He has an undisputed right to all the labor remaining in the farm. If he sells he expects compensation for all this.
But if he sells, he must begin at once to consume its price, unless he becomes a usurer and is supported by the interest. If he does not sell, but retains his farm, he must also begin at once to consume the farm.
For him to demand of his tenant that the farm shall remain as valuable as when he left it, the soil notpermitted to become less fertile, the buildings to be kept from decay and restored when destroyed, the orchards to be kept vigorous and young by the planting of new trees and vines; in short, the farm to be preserved in full value and yet pay a rental, is usury in land.
The preservation of a farm or land and its restoration to the owner unimpaired after a term of years involves far more than persons not informed suppose. It seems to them unreasonable to farm a field and only return the unimpaired field to the owner.
While land is stable and possibly the most easily preserved of all forms of property, at least a thief cannot carry it away, yet the preservation of land involves great care and risk.
The taking of any crop from any land reduces its fertility. On the virgin, western fertile lands the farmers laughed at the thought that they should ever need to return fertilizers, but it was only a few years until they yearned for the fertility they had extravagantly wasted. Buildings inevitably decay and they may be destroyed by fire or storm. Orchards may be overturned by a cyclone or be destroyed by blight or by the thousand enemies of the various varieties of fruit trees. The land may be injured by washing that may require years to repair. A single storm has destroyed fields in this way that never can be restored. Noxious weeds take possession of land that can only be eradicated by infinite pains. In this state certainweeds are declared outlaws and must be destroyed by the farmer for the protection of his neighbors. The farmer in this locality must have an alert eye for Canada thistles and oxeye daisy. It often causes more labor to eradicate them than the land is worth on which they are growing.
If the annual renter was required to give bond for the return of the farm unimpaired, returning that which the crops and time must consume and destroy, taking all risks of every character upon himself, a thoughtful man, though poor and needing the opportunity, would hesitate. It might involve him in an obligation he could not discharge in his whole life through conditions and providences over which he has no control.
Practically in this country the owner renting a farm from year to year does consume it. It begins at once to decline in fertility, the improvements begin to fall into decay, weeds take possession, washes occur and are not repaired, and in a few years the half of the value is gone. The owner is fortunate if he has received in rentals sufficient to restore its former value.
Under a system of perpetual tenantry the case is different. If the fertility declines it is the tenant's loss. The improvements are his and may be sold as one could sell ordinary farm tools, but not to be removed. If they are impaired or destroyed it does not affect the annual rental.
The landed proprietor in city or country, who has permanent tenants, who are required to make every improvement and keep up perfectly the fertility, and who pay an annual rental, is in the same class as those who are receiving annual interest. The landlord practically holds a perpetual mortgage, and the rental is the interest or increase exacted generation after generation.
The debtor working under a mortgage is cheered by the hope that he may be able, some day, to lift it, but the perpetual tenant on entailed lands knows that he is doomed to hopeless tenantry. He can never own the land and he is in the power of the landlord, who is often oppressive.
Calvin, in his letter of apology for usury of money, speaks of the injustice of the landlords in requiring a rental for "some barren farm" and of the "harsher" conditions imposed upon the tenants. Indeed his whole argument, when summed up, is, that the usury of lands is more cruel and oppressive than the usury of money.
While it is not yet true in America, yet considering the landlordships of Ireland and Great Britain and the older countries, with their unremitted exactions, grinding the life out of their tenants for a mere subsistence, it is likely that the race is today suffering more from the injustice and oppression of usury of land than from the usury of money.
The land question is too large for one short chapter or for one small book. It requires more and deeper study than the subject has ever yet received. The ownership of lands cannot be absolute; it must be limited by the rights of those who live upon them, but the limitations have never yet been clearly defined. If a man has a right to live he must have a right to a place to live. If a child has a right to be born it must have a right to a place to be born. It cannot be that the mass of our race only touch the earth by the sufferance of those who claim to own it.
The unprecedented rapidity of the development of this country is owing more to its wise and beneficent land laws than to anything else. They are not perfect but the most favorable to the landless that the world has ever known. No landlordism, no binding up lands by entail to make it forever impossible to gain a title to a portion of the soil, but our land laws, wisely devised, gave hope of a home to the homeless everywhere. The result was that our people from the eastern part of our own country, and the landless from across the seas, swarmed over the mountains and filled the Ohio valley and pushed on to the great Mississippi and Missouri valleys, and in three generations have transformed this waste into happy homes. The possession of land, of a home, ennobles the character, produces a patriotic love ofthis country and stimulates devotion to her institutions. The landless foreigner who makes here a home of his own is unwavering in his loyalty to the country of his adoption. Those foreigners, who do not fall in love with our institutions and do not become assimilated with our people, are tenants here as they were before they came here. They are not attached to our soil; they do not secure homes of their own and are therefore restless and a menace.
A dangerous tendency has been developing throughout our whole land in these later years. The usury of lands is on the increase. Tenantry is becoming more common on the farms in the country, while the mass of our city populations are living in rented houses or flats or crowded tenements.
The yearning for a home of one's own is deeply imbedded in human nature. To be denied the privilege of living in one's own house is one of the greatest trials of a life. This tendency to tenantry is not because our people have come to care less for a home of their own, but the conditions are not such as to make a purchase of a home profitable; the interest on the purchase price is greater than the usury of the land or rental. The natural and desirable state is for every family to own and occupy their home, and those conditions should be encouraged which make itunprofitable for any one to own real property he does not himself occupy, and which make it easy and profitable for every family to own their own home.
When all lands are owned by those who occupy them, the prophet Micah's picture of the millennial dawn will be realized. Every man shall sit under his own vine and under his own fig tree and no one shall molest him or make him afraid, by demanding a rental or by serving a writ of ejectment.
The students of political economy are not always reformers. It is not their purpose nor the object of their studies to transform society. They only endeavor to explain why things are as they are. They find the taking of usury all but universal, and they endeavor to give the reasons for the prevailing custom. The subject is usually but slightly touched upon and dismissed with a few sentences.
Few economists claim that interest or rental is a part of the cost of production. They mostly affirm that it is no part of production; that it is merely the price paid for the opportunity to produce. The lender of money makes a loan to the borrower and thus gives him a better opportunity to produce than he had before. The landlord for the rental withdraws his hand from over his land and gives the renter the opportunity to produce a harvest.
In justification, or at least in explanation of this exaction for an opportunity, three reasons are usually given. These may be briefly stated as risk, time and abstinence.
1. There is some risk in every investment. There is a possibility that the most honest, industrious andcareful debtor may by some misfortune not be able to return the loan and it would therefore be lost. To guard against this the usurer requires the rate of interest to be graded by the measure of risk.
This is claimed to be of the nature of insurance, the borrower paying the premium. The profits of insurance are secured by collecting a larger premium than necessary to pay all losses. On this theory, the gain of usury is in the excess that can be secured of increase over the amounts lost.
This is the reverse of insurance. Insurance is the payment by an owner of property to a company who guarantees its preservation. Usury is the payment by the company to the owner for the privilege of guaranteeing that he shall not suffer loss.
Business involves a risk usually covered by insurance, but no honest man expects to make a profit out of his insurance.
2. A loan is made for a more or less extended time. Time is therefore claimed to be a ground for usury charges.
This claim rests on the assumption that time will increase wealth. But time is the great destroyer; time does not make gardens and farms, but covers them with weeds and sends them back to a wilderness; time does not erect a house, but pulls it down; time does not build a city, but causes it to crumble and a few ages buries it under the dust; time does not "incubateeggs, but turns them putrid; it does not transform into fowls. If eggs are developed into chickens the difference between eggs and chickens is the reward of the incubator."
Aside from the spirit of benevolence and sympathy with the needy there are three selfish reasons why a time loan may be made. First, the owner has no present need of it and wishes to be rid of its care. Second, the owner shall need it at a distant date and he wishes it preserved intact against that time. But these afford no ground for a charge of increase. He who stands and resists the ravages of time until the day it is needed does a positive service and deserves a reward. Third, the lender wishes to appropriate the earnings of another during the period of time given. This is the usurer's reason, and were it not for this time would lose its importance as an element; it is certain that long time loans would not be so attractive.
3. "The reward of abstinence" is a reward for refraining from consuming one's own wealth.
"You can not have your cake and eat it. If you do not eat it, you have your cake, but not a cake and a half. Not a cake and a quarter tomorrow, dunce, however abstinent you may be, only the cake you have, if the mice do not eat it in the night."—Ruskin.
The usual illustration is that of Jacob. He practiced abstinence in refraining from eating the bowl ofpottage and giving it to his hungry brother. The reward of his abstinence was his brother's birthright.
If I do not take my soup now it is a great favor to have it preserved for me and served later, not cold and stale, but fresh and hot. If I deny myself now, for any cause, I can ask no more than that my meal shall be served, perfectly, later. This was all that Jacob could in justice demand of Esau.
It should be remembered, that because Jacob took Esau's birthright, as a reward of his abstinence, he was accounted a robber, was compelled to flee from his home, and not for twenty years see his father's face; that the consciousness of this sin and of the merited vengeance of the brother, whom he thereby defrauded and whom he thought was on his track, caused that night of struggle when he could not let the angel go, until he had his promise of deliverance.
Abstinence, to be benevolent, must be an act of personal loving self-sacrifice for another. Benevolent abstinence is its own reward and asks no more. Abstinence in hope of gain, denying himself while another is using his wealth, cannot be regarded as an act of benevolence, but of a selfish grovelling greed; more gratified to see his wealth increase than to himself enjoy its use. That is the spirit of the miser and receives the contempt of all right thinking people.
That the political economists are right in theiranalysis of the common thought of usury; that risk, time and abstinence are the elements of its basis in the popular mind, may not be denied, but if these are in fact the elements, then usury has no standing in equity and must be condemned by every enlightened conscience.
It would require volumes to fully present the history of usury. A very brief summary must suffice in this place. Yet this synopsis may serve as a guide to those who may wish to pursue the investigation further and who have access to any considerable library of general and ecclesiastical history.
The exacting of usury has always been more or less practiced, and there has always been a contention against it as impolitic and wrong. In heathendom the philosophers and economists and common people were usually arrayed against it, and the voice of christendom has been practically unanimous in its denunciation until the 17th century. (For History of Usury in the Church, see Chapter X.)
Greece: Greece had no laws forbidding usury. The trade in money was left, like the trade in every thing else, without legal restraint. The law declared that the usurer should not demand a higher rate than that fixed by the original contract; it also advised "Let the usury on money be moderate." One per cent. per month was the usual rate.
There were among the Greeks at various times thoughtful men, who violently opposed the taking ofincrease. Solon, of aristocratic blood, but with strong sympathies for the oppressed classes, led a Nehemiah-like reformation. Solon was wise and patriotic. His name is a synonym for unselfish devotion to the public good. He was given authority in Greece in times of great financial distress. Debts were increasing. Mortgage stones were erected at the borders of each tract of land, giving the name of the creditor and the amount of his claim. The interest could not be paid. Interest taking had concentrated the wealth and power of the state in a few hands. The farmer lost all hope and was only a laborer on the farm he once owned. The debtor who had no farm to work for his creditor was yet in a worse condition; he was the mere slave of his creditor and could be sold by him. The free farmers were fast disappearing. The most of them were struggling with miserable poverty. Solon at once came to the relief of this suffering class. He released those who were enslaved and brought back those who had been sold abroad. The great work of Solon for this oppressed class has caused his name to be revered by all who have studied the history of his times.
Plato opposed usury, but he does not give extended reasons. Also the philosopher, Aristotle. His name is yet illustrious in the departments of natural and moral science and economics. With regard to usury he said: "Of all modes of accumulation, the worst and most unnatural is interest. This is the utmostcorruption of artificial degeneracy; standing in the same relation to commerce that commerce does to economy. By commerce money is perverted from the purpose of exchange to that of gain; still this gain is occasioned by the mutual transfer of different objects; but interest, by transferring merely the same object from one hand to another generates money from money, and the product thus generated is called offspring (toxos) as being precisely the same nature as that from which it proceeds."
Rome: In the early ages of Rome there were no laws regulating the loans of money. The practice was common and was one of the most frequent subjects of popular complaint. In the celebrated secession of the lower classes of the people to Mons Sacer, when civil strife and fraternal bloodshed was threatened, the loudest outcry was against the oppression of exhorbitant interest exacted by wealthy citizens of those who were obliged to borrow. The common rate was twelve per cent. per annum. This is inferred from the fact that six per cent. was called half interest and three per cent. one-fourth interest.
The early records of Rome prove conclusively the odium attached to the business of money-lending for profit. In the codification of laws in the fifth century B.C. the rate of usury was fixed at one per cent. per month. This limitation of usury was enacted after a long and bitter contest between the rich lenders and the poorer classes.
A compromise seems to have been made in the assigned punishments. The laws for the collection of debts and the punishment of exacting more than the law permitted were alike extremely cruel.
The creditors of an insolvent debtor were given the power of cutting his body in pieces and the power of selling his children into slavery. The penalty of taking more than this legal interest was punished with more severity than theft. The thief must restore double, but the usurer must restore fourfold. This we learn from Cato's treatise on "Agriculture." Cato's own opinion of usury is shown in the answer which he made when he was asked what he thought of usury, his reply was, "What do you think of murder?"
Nearly a hundred years later the Licinian law forbade all increase. A little later we find the one-half of one per cent. permitted by law. Then under Sylla the legal rate is made three per cent. In the time of Antony and Cleopatra it is four per cent. For a time there was utter confusion and intolerably oppressive rates prevailed. Horace, in his Satires, speaks of one lending at sixty per cent. In the reign of Tiberius Cæsar, Rome was again shaken with another usury sedition, an uprising of the people against the usurers. The law was finally adjusted in the Justinian Code, by a compromise permitting six per cent. and severely restraining the exorbitant rates.
Three hundred and twenty-three years B.C., Livyspeaks of a creditor who kept his debtor in irons, claiming, besides the debt, the interest which he exacted with greatest severity. It was soon after decreed that this cruelty should end and that no citizen should be placed in irons or sold into slavery for debt.
At the close of the republic the rate was twenty-four per cent.
England: In the earliest periods of which we have any records we find that the doctrine, that letting money to hire was sinful, prevailed universally over the island of Great Britain. It was the prevailing opinion that interest, or usury, as it was then called, was unjust gain, forbidden by divine law, and which a good Christian could neither receive nor pay. In common law the practice of taking increase was classed among the lowest crimes against public morals. So odious was it among Christians that the practice was confined almost wholly to the Jews, who did not exact usury of Jews but of the Christians.
The laws of King Alfred, about 900 A.D., directed that the effects of money-lenders upon usury should be forfeited to the king, their lands to the lords under whom they were held, and they should not be buried in consecrated ground.
By the laws of Edward the Confessor, about 1050 A.D., the usurer forfeited all his property and was declared an outlaw and banished from England. In the reign of Henry II, about the close of the twelfthcentury, the estates of usurers were forfeited at their death and their children were disinherited.
His successor, Richard I, was yet more severe, forbidding the usurers attending his coronation, nor would he protect them from mob violence.
During the thirteenth century the severities against the usurers were not relaxed. King John confiscated their gathered wealth without scruple. It is recorded that he exacted an enormous fine of a Jew in Bristol for his usuries, and when the Jew refused to pay he ordered one of his teeth to be drawn daily until he should pay. The Jew is said to have endured the pulling of seven, but then weakened and paid the fine.
Henry III was equally harsh and severe in his measures. He exacted all he could and then turned them over to the Earl of Cornwall. "The one flayed and the other emboweled." It is written in the chronicles of England, 1251 A.D., "By such usurers and licentious liurs as belong to him, the realme had alreadie become sore corrupted."
In the fourteenth century, under the three Edwards, the taking of interest was an indictable offence and Edward III made it a capital crime.
In the fifteenth century, under Henry VII, the penalty was fixed at one hundred pounds and the penalty of the church added, which was excommunication.
Attorney General Noy, in the reign of James I, thought the taking of money by usury was no betterthan taking a man's life. He said: "Usurers are well ranked with murderers."
In the sixteenth century, under Henry VIII, it was enacted that all interest above ten per cent. was unlawful. Less was not collectable by law, but was not a punishable offence.
Edward VI revived the old laws condemning all interest.
Mary I, next following, executed these laws with extreme severity.
Elizabeth restored the laws of Henry VIII, in which usury less than ten per cent. was not a punishable offence. This edict of Elizabeth adds: "In the interpretation of the law it shall be largely and strongly construed for the repression of usury."
This law of Henry VIII and Elizabeth, with the rate of interest reduced, was the statute law of England until 1854, when all the usury laws were repealed.
In 1694 William and Mary II entered into a contract to secure a permanent loan and pledged the kingdom to pay interest on it forever.
The loan marked the turning point in the popular mind with regard to usury. As it was approved in their necessity by the king and queen at the head of the Protestant world, ecclesiastics began to shift their ground and to apologize for, and excuse, that which had been formerly unequivocably condemned. As the crown was the head of both the church and thestate, the condemnation of usury seemed tinged both with disloyalty and heresy. The courts too began to modify their decisions to bring them into harmony with the action of the crown.
The change in the usury laws were not made by enactments of Parliament, but by the decisions of courts. The precedents were gradually accumulated and the statutes were merely made to conform to them.
From the short dissertation on usury found in the works of Bacon we learn that the taking of usury was a recognized evil and odious in his time.
It will be noticed that he eliminates risk from usury and sees that "In the game of certainties against uncertainties" usury is sure to win. It will be noticed also that he mentions only economic arguments against usury. He does not give ethical and moral reasons. He does not mention the want of sympathy for the poor and their oppression.
In his statement of the arguments in defence he implies that the usurer is less grasping than the man he knew who said "The devil take this usury."
This is the very opposite of the picture of the usurer given by his contemporary, Shakespeare, in his character, Shylock.
His specious argument for the regulation of the evil "For some small matter for the license" is familiar to modern reformers in connection with other sins. He speaks of the reduction of the usury rates as a general good and believes "It will no whit discourage the lender." Wrong-doers in all the ages have been ready to part with a portion of the profits of an unlawful business for the cover of the authority of the state.
The following is his discussion in full
OF USURY.
"Many have made witty invectives against usury. They say that it is a pity the devil should have God's part, which is the tithe. That the usurer is the greatest Sabbath breaker, because his plough goeth every Sunday. That the usurer is the drone that Virgil speaketh of:
"Ignavum fucos pecus a praesepibus arcent.
"That the usurer breaketh the first law that was made for mankind after the fall, which was,in sudore vultus tui comedes panem tuum; non in sudore vultus alieni; (in the sweat of thy face shalt thou eat bread—not in the sweat of another's face.) That usurers should have orange-tawney bonnets, because they do Judaize. That it is against nature for money to beget money; and the like. I say only this, that usury is aconcessum propter duritiem cordis; (a thing allowed by reason of the hardness of men's hearts): for since there must be borrowing and lending, and men are so hard of heart as they will not lend freely, usury must be permitted. Some others have made suspicious and cunning propositions of banks, discovery of men's estates and other inventions. But few have spoken of usury usefully. It is good to set before us the incommodities and the commodities of usury, that the good may be either weighed out or culled out; and warily to provide, that while we make forth tothat which is better, we meet not with that which is worse.
"The discommodities of usury are, first, it makes fewer merchants. For were it not for this lazy trade of usury, money would not lie still, but would in great part be employed upon merchandising; which is thevena portaof wealth in a state. The second, that it makes poor merchants. For as a farmer can not husband his ground so well if he sit at a great rent, so the merchant can not drive his trade so well, if he sit at great usury. The third is incident to the other two; and that is the decay of customs of kings or states, which ebb or flow with merchandising. The fourth that it bringeth the wealth or treasure of a realm or state into a few hands.
"For the usurer being at certainties, and others at uncertainties, at the end of the game most of the money will be in the box; and ever a state flourisheth when wealth is more equally spread. The fifth that it beats down the price of land; for the employment of money is chiefly either purchasing or merchandising; and usury waylays both. The sixth, that it doth dull and damp all industries, improvements and new inventions, wherein money would be stirring, if it were not for this slug. The last, that it is the canker and ruin of many men's estates; which in process of time breeds a public poverty.
"On the other side, the commodities of usury are,first, that howsoever usury in some respect hindereth merchandising, yet in some other it advanceth it; for it is certain that the greatest part of trade is driven by young merchants upon borrowing at interest; so as if the usurer either call in or keep back his money, there will ensue presently a great stand of trade. The second is, that were it not for this easy borrowing upon interest, man's necessities would draw upon them a most sudden undoing; in that they would be forced to sell their means (be it lands or goods) far under foot; and so, whereas usury doth but gnaw upon them, bad markets would swallow them quite up. As for mortgaging or pawning, it will little mend the matter; for either men will not take pawns without use; or if they do, they will look precisely for the forfeiture. I remember a cruel monied man in the country that would say: 'The devil take this usury, it keeps us from forfeitures of mortagages and bonds.' The third and last is, that it is a vanity to conceive that there would be ordinary borrowing without profit; and it is impossible to conceive the number of inconveniences that would ensue if borrowing be cramped. Therefore, to speak of the abolishing of usury is idle. All states have ever had it, in one kind or rate, or other. So as that opinion must be sent to Utopia.
"To speak now of the reformation and reiglement of usury; how the discommodities of it may be best avoided, and the commodities of it retained. Itappears by the balance of commodities and discommodities of usury, two things are to be reconciled. The one, that the tooth of usury be grinded that it bite not too much; the other, that there be left open a means to invite monied men to lend to the merchants for the continuing and quickening of trade. This can not be done except you introduce two several sorts of usury, a less and a greater. For if you reduce usury to one low rate it will ease the common borrower, but the merchant will be to seek for money. And it is to be noted, that the trade of merchandise, being the most lucrative, may bear usury at a good rate: other contracts not so.
"To serve both intentions, the way would be briefly thus: That there be two rates of interest; the one free and general for all, the other under license only, to certain persons and in certain places of merchandising. First, therefore, let usury in general be reduced to five in the hundred; and let that rate be proclaimed free and current; and, let the state shut itself out to take any penalty for the same. This will preserve borrowing from any general stop or dryness. This will ease infinite borrowers in the country. This will, in great part, raise the price of land, because land purchased at sixteen years' purchase will yield six in the hundred and somewhat more; whereas this rate of interest yields but five. This, by like reason, will encourage and edge industrious and profitable improvements; because many will rather venture inthat kind than take five in the hundred, especially having been used to greater profit. Secondly, let there be certain persons licensed to lend to known merchants upon usury at a higher rate; and let it be with the cautions following: Let the rate be, even with the merchant himself, somewhat more easy than that he used formerly to pay; for by that means all borrowers shall have some ease by this reformation, be he merchant or whosoever. Let it be bank or common stock, but every man be master of his own money. Not that I altogether mislike banks, but they will hardly be brooked in regard of certain suspicions. Let the state be answered some small matter for the license, and the rest left to the lender; for if the abatement be but small, it will no whit discourage the lender. For he, for example, that took before ten or nine in the hundred, will sooner descend to eight in the hundred than give over his trade in usury, and go from certain gains to gains of hazard. Let these licensed lenders be in number indefinite, but restrained to certain principal cities and towns of merchandising; for then they will be hardly able to color other men's monies in the country. So as the license of nine will not suck away the current rate of five; for no man will lend his monies far off, nor put them into unknown hands.
"If it be objected that this doth in a sort authorize usury, which before was in some places but permissive; the answer is, that it is better to mitigate usury by declaration, than to suffer it to rage by connivance."
(Works of Francis Bacon, Vol. 12, Page 218.)