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knowledge has been gleaned principally from our walks amongst orchards and gardens, where all the phenomena were observed with our own eyes, and the experiments made with our own hands.
“Science,” says an anonymous writer, "in its broad and comprehensive term, has flourished, and might continue to flourish, amongst the learned, whilst the rest of the world is in comparative ignorance. But a thorough knowledge of that branch of it which comprehends vegetable physiology must be the result of education widely spread, and of peculiar refinement of tastes, habits, and occupations."
ART. VII.—Defence of Usury; showing the impolicy of the
present legal restraints on the terms of pecuniary bargains; in letters to a friend. To which is added, a Letter to Adam Smith, Esq. LL. D., on the discouragements opposed by the above restraints to the progress of inventive industry. By JEREMY BENTHAM, Esq,, of Lincoln's Inn. New York: 1837.
The expediency of repealing the usury laws of Pennsylvania, so that there shall exist no legal restraint upon the rates of interest for money, has been discussed in the public prints and elsewhere, of late, with great zeal; and the subject still continues to excite much interest in the trading community. Petitions and remonstrances have been forwarded to. Harrisburg, and before the present session shall close it is probable they will be subjected to legislative action.
We propose in this paper to urge a few arguments in favour of this measure.
In doing so we shall endeavour to be as brief as the nature of the subject will admit.
According to a learned jurist, usury is a contract upon a loan of money, or giving days for forbearing of money, debt, or duty, by way of loan, chevisance, shifts, sales of wares, or other doings whatsoever. « Usura dicitur ab usu et ære, quia datur pro usu æris.” It will be seen, therefore, that the taking of interest for the use of money, whether it be merely to the amount legalized by statute, or in an excess over that amount, is in a literal sense, and according to the ancient acceptation, usury. The Mosaical precept, which prohibited the Jews from taking usury from their brethren, has excited many VOL. XXI.-NO. 41.
doubts in the minds of conscientious men as to its propriety in foro conscientiæ. These doubts continue to exist to a great extent even at the present day, upon the ground that the receiving a compensation for the hire of money is contrary to the revealed law of God. A reference, however, to the twentythird chapter of Deuteronomy, in which this prohibition is contained, will conclusively show, that so far from its being intended as a moral precept, the restraint was explicitly imposed upon the Jews only as regarded their dealings with each other, and did not extend to their commercial operations with the people of other nations. Thus in the twentieth verse“Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thy hard to, in the land whither thou goest to possess
it.” It can hardly be supposed, under these circumstances, that this precept was designed to have any other than a political operation-for if the taking a reward for loans of money were malum in se--if a moral turpitude attached to such transactions, the restriction certainly would not have been limited to the Jews alone. ·
Be this as it may, however, the practice of usury during the early ages was viewed with unmingled detestation, and was the object of legal prohibition. So far back, in England, as the time of Alfred, the commission of this crime was visited by the vengeance of church and state: the estates of the delinquents were confiscated, and themselves punished by the severest penalties. They were considered as violators of the divine law, and subverters of the law of nature, in attempting to propagate from that which was naturally sterile and unfruitful.
So far down as the reign of James I., the intolerance with which this “vice” was regarded, was still very great; but, before that period, by the enactment of the statute 37 Hen. VIII. c. 9, the taking of interest was sanctioned and allowed. By that act, ten per cent. for the forbearance of a year was the authorized rate, and excessive usurious transactions were punishable by forfeiture and imprisonment. This law continued in effect until the succeeding reign, when by the statute 5 and 6 Edward VI., c. 20, it was repealed. The statute 13 Elizabeth, c. 8, after declaring that the former act had not been effectual, but that “the vice of usury had much more exceedingly abounded,” repeals the statute of Edward and restores that of Henry VIII. again, fixing ten per cent. as the legal interest. Since that period, owing to fluctuations in the amount and value of money, several statutes have been enacted, by which the rates of interest were altered. The 21 James I., C. 17, reduced it to eight per cent. Subsequently, the 12 Charles
II., c. 13, reduced it to six per cent.; and, finally, the 12 Anne, c. 16, which is the English “statute of usury" at the present day, reduced it to five per cent.
A reason (which we alluded to above) for the prejudice against usury, was founded upon the assertion of Aristotle," that all money is, in its nature, barren and unproductive," and, therefore, to make money beget rnoney. is contrary to the law of nature. And so, in 3 Inst. 153, Sir Edward Coke refers to the statutes of Henry VII., in which all usury “is danıned” and denominated a dry exchange—“ Usura contra naturam est, quia usura sua natura est sterilis, nec fructum habet.”
The absurdity of this dictum can in no way be better manifested than by applying the same principle to the hiring of coaches; the leasing of houses; or the chartering of ships; which coaches, houses and ships, certainly do not generate things of their own species ; and yet, no one ever disputed the moral right of letting them for reward.
That money was originally designed for the purposes of exchange, and not for profit, may be very true, and we shall not go out of our way to dispute it; but it must be considered that money originated at an early age of the world, when its applicability to commercial purposes was not taken into view. The present is essentially a commercial day, and if interest should be abolished, the characteristic of the age will be des. troyed, and commerce must die. It cannot exist without borrowing and lending—if interest were interdicted no man would lend his money, for there would be no corresponding benefit resulting from the loan, to indemnify him for the hazard he might run, or the inconvenience he might suffer. It is well known that in those tyrannical ages when interest upon loans was entirely prohibited, the little trade that was carried on was monopolized by the Jews, and so continued to be until the advance of civilization and knowledge, and the consequent revival of commerce, restored the doctrine of interest.
We would not defend an excessive demand for the hire of money, any more than we would defend an exorbitant demand for the use of other necessaries or conveniences of life. The moral wrong inflicted upon the community would be as great in the one case as in the other. But the question is whether the regulation of the prices of money comes more within the scope of legislative authority than the regulation of the prices of other merchantable commodities. We contend that it does not. The value of money in a trading community depends upon several circumstances: first, the amount of the supply in the hands of lenders, and the extent of the necessity for the use of it felt by borrowers; second, the inconvenience of parting with it for the present, and the risk of losing it altogether.
Now, unless a government should impose restraints upon its citizens which would limit them in the amount of their commercial operations—unless they should say to the merchant, such shall be the quantity of your purchases and sales, and such the price you shall receive for your merchandise, it is not possible for laws to fix a just and undeviating value to the currency of a country. The supply of an article in the market, and 'the demand for that article, do not entirely depend upon each other. At one time there may exist a heavy demand with a limited supply; at another there may be an abundant supply with very little demand. In no article of traffic is this more constantly the case than with money. How, then, can there be any uniformity in legal regulations of interest. The rates of interest have varied from age to age, and from country to country. Among the Romans, at the time of Justinian, it was at twelve per cent. In England, at the time of Henry VIII., as we have seen, it was fixed at ten per cent. Subsequent statutes successively reduced it to eight, six, and five. In some parts of Asia it is at ten and twelve, and in Constantinople it has sometimes been at thirty. In a moral point of view there can be no difference between the highest and the lowest rates. What is it, then, that indicates the expediency of any particular rate, but the convenience of the borrower and lender? and what is it which manifests that convenience but the consent of the parties? A is in want of $1000 for the furtherance of a commercial operation ; B would lend it to him at two per cent. a month for four months, if the law forbade him not; but this, in Pennsylvania, is an illegal, usurious transaction, because the act of 28th March, 1723, prohibits the taking of more than six per cent., under penalty of forfeiture. Now B will not lend his money at six per cent., because, by employing it in his own business he can realize more than thrice that amount. In his own hands, therefore, it is clearly worth to him twenty per cent., because he can make that sum out of it. A, however, holds out an inducement to him to make the loan, by offering him at the rate of twenty-four per cent. ; but this contract cannot be made without a violation of law, (which is always attended with risk,) and it may be of conscience also.
Now what right has the legislature to step in and thus hamper us in our business transactions ? What man, or what set of men are so competent to judge of the ability and mutual convenience of parties to a contract, as the parties themselves ? A is willing to pay $80 for the use of $1000 for four months; he wishes to employ it in an enterprise which will produce him a clear profit of fifty per cent. upon the sum employed. After the repayment to B of the loan, with its interest, amounting to $1080, A would have in his own coffers a surplus profit of
$420. But no, say our paternal lawgivers, you must not make such a contract. Why not? Because, in the first place, it is contrary to the divine law, and therefore a moral sin ; and, in the next place, we wish to restrain projectors and speculators.
Contrary to the divine law! Then we ask you, gentlemen, why do you not carry out the principle to its fullest extent, and prohibit usurious interest in all business transactions? Why have you placed a legal sanction upon whatever rate of interest may be agreed on between the parties, in bottomry, and respondentia, and policies of insurance, and annuities upon lives? Where is the difference, in point of moral sin, between taking high interest upon a promissory note, and upon a respondentia bond? Something, you say, must be allowed for the hazard. But does that make any difference in regard to the morality of the transaction ? if it does, we assert the difference to be in favour of the note, for the other savours strongly of gambling.
To pass a law prohibiting the taking of usury, upon the ground that it is a contravention of the Mosaical precept, and yet to make the distinction in the cases to which we have just referred, upon the principle of allowing indemnity for hazard, appears to us to be the ultima Thule of legislative absurdity and inconsistency.
Well, but independently of the moral consideration, it is said, that a check must be placed upon the visionary schemes of projectors. Who are these projectors ? upon what men, or class of men, is intended to fall the stigma of this odious appellation ? We answer, upon those who devote their attention to the cultivation of the useful arts; upon those who require money to aid them in their plans of invention; upon those who would project new, or make improvements upon old, devices of human contrivance, In short, this legislative restriction effectually. ope-: rates upon all that human ingenuity projects for the benefit of mankind.
The application of the steam engine to the propulsion of boats, was the work of a projector, and money was found necessary to carry the work into effect. When Robert Fulton accomplished that splendid object, he gave an impulse to his name, which will transmit the remembrance of it down to the last generation of the world. The discovery of the western hemisphere was the work of a projector, and the author of that discovery has written his great name upon the records of immortality. The genius of men like these is frowned down by the narrow policy of ephemeral legislators. Now how is it that this class of men would be affected by an operative law, limiting the rate of interest ? Suppose the act of March, 1723, were really effectual in preventing usury (which, not to speak irreverently of the laws, it happily is not,) look at the result.