(Net. 5, 1 ff.) Was there, in the long duration of such prescriptions, an educational measure having reference to the peculiar fault towards which the Jewish national character had a special tendency? In Josephus"s time even, usury practiced on one"s country people was universally despised (Antiq. Jud., IV, 8, 25.), and the Talmud continues it. Compare _Michaelis_, De Mente ac Ratione Legis M. Usuram prohibentis. In Russia, the orthodox Jews are wont to evade the legal rate of interest by exacting one-half the profit, and estimating it approximately in advance at a probable sum. If, afterwards, the debtor declares under oath that he made no profit, the creditor has no more to say; but then the borrower would lose all credit in the future. (_Bonav.
Mayer_, Die Juden unserer Zeit, 1842, 13 seq.)]
[Footnote 190-5: The Mosaic pa.s.sages, however, only prohibit the taking of interest from poor people of one"s own country.]
[Footnote 190-6: The prohibition in the Koran, ch. 2, 30, is regularly evaded in Persia, by deducting the proper amount at the moment the loan is made. (_Chardin_, IV, 157 ff.) Under the Mongolian rulers, it was done by way of preference, by a fict.i.tious sale for cash, at prices out of all proportion. "Why cannot capitalists either buy land or carry on trade?" asked Sultan Gazan, on an occasion when the prohibition of interest was strongly insisted on.
(_d"Ohsson_, Histoire des Mongols, IV, 397.)]
[Footnote 190-7: For instance, _Luke_, 6, 34 ff., where interest is no more prohibited than in _Luke_, 14, 12 ff., the mutual invitation of friends to a feast. Not less groundless is the supposed allegorical allusion (_Matthew_, 21, 12) to interest-creditors. Rather might an approval of interest be inferred from _Matthew_, 25, 27.]
[Footnote 190-8: _Origen_, for instance, would have the creditor take no interest; but exhorts the debtor to return double the amount unasked. (Homil., III, ad. Ps., -- 37.) Hence there is here no condemnation of interest, but only an effort to transform all legal relations into relations of love. Quite the reverse in _Lactant._, Inst.i.t., VI, 12; _Basil_, ad. Matth., 5 ff.; _Ambrose_, De Off., III, 3; _Chrysost._, ad. Matth. Hom., 56; Tim., VII, 373 ff. (Paris, 1727); _Hieronym._, ad. Ezech., V, 367 c. (Francof, 1684); _Augustin._, Epist., 54. Even _Cyprian_, 183, 318 (Paris, 1726).]
SECTION CXCI.
INTEREST-POLICY.--THE CANON LAW, etc.
The canon law, from the first, endeavored to prevent contracts for interest. We may even say that the prohibition of interest-usury is the key-stone of the whole system of the political economy of the _Corpus Juris Canonici_. The development of that law coincides, as to time, with the senility of the Roman Empire and the childhood of modern nations.[191-1] In the golden age of papal power, every interest-creditor was refused the communion, the _testamenti factio_ and the right of ecclesiastical burial. Proceedings at law could not be inst.i.tuted for the recovery of the princ.i.p.al debt until the creditor had restored all the interest obtained. In the council of Vienna, in 1311, it was declared heresy to defend the taking of interest. The universal antipathy of the church towards the growing importance of the _bourgeoisie_,[191-2] and the desire to give the spiritual courts an extensive jurisdiction in litigated cases, may have contributed largely to the adoption of these measures. In later medieval times, the secular power offered its services to execute these laws;[191-3] and, to judge of what public opinion in this matter was, we need only call to mind the decided disapproval of interest by Dante, Luther and Shakespeare.[191-4]
The _Weddeschat_, a species of pledge or loan on security, const.i.tuted the transition from this state of things to the modern economic system of interest. The _Weddeschat_ was a sale with a reserved right of redemption, by which the debtor gave his creditor the use and enjoyment of a piece of land a sort of interest in kind, but which he could at any time recover back, by payment of the princ.i.p.al. This was not very oppressive on the debtor, as he was the only party who could recall the contract.[191-5] In a higher stage of civilization, indeed the continuance of this species of land-pledge would be exceedingly disadvantageous, since the momentary possessor of a piece of land which might be bought back by another person at any time at a price fixed in advance, would scarcely think of improving it.[191-6]
And so, the introduction of rent-purchase (_Rentekauf_) was an important step in advance: the inc.u.mbrancing of a piece of land which remained in the possession of the debtor with an interest in kind paid to the creditor. The latter could never claim anything further, while the debtor and his heirs might redeem the land from this interest-inc.u.mbrance by paying back the purchase money.[191-7] As the Pope, on the 19th of January, 1569, renewed, in express terms, the prohibition of all interest not based on rent-purchase, so did the police ordinances of the Empire, of the sixteenth century, declare it to be the only lawful form of loaning at interest; provided, always, that only the debtor could demand the cancellation of the contract.[191-8] We find, however, that, on the whole, at least Protestant countries had, before 1654, adopted the modern Roman law relating to interest.[191-9] [191-10]
However, the long persistence of the prohibition of the canon law in relation to interest, even with the refuge afforded by the introduction of the rent-purchase system, and of dormant partnerships (_Commanditen_) etc., so common in the sixteenth century,[191-11] would be unintelligible, if, contemporaneously, the Jews did not carry on an important and somewhat free trade in capital,[191-12] precisely as the Armenians, Hindoos and Jews do in the Mohammedan world of to-day.
[Footnote 191-1: The apostolic canons and several decrees of councils of the fourth century prohibit the taking of interest by the clergy. A Spanish provincial council dared, in 313, to extend the prohibition to the laity. Pope Leo I.
condemned the taking of interest by the laity also, but only in the form of a moral law. (443.) The synod of Constantinople (814) punished the violation of the prohibition with excommunication. See _Thomas Aquin._ (ob.
1274.) De Usuris, in the Quaestiones disputatae et quod libetales. The canon law, however, always permitted delay-interest (_Verzugszinsen_), and Gregory IX, allowed _justa et moderata expensa et congruam satisfactionem d.a.m.norum_ to be taken into account, (c. 17, X.) De Fora Comp. II, 2. A tacit recognition of the productiveness of capital is to be found in c. 7, X. De Donatt. inter. Virum.
cett. IV, 20; and the later schoolmen, _Antonin_ and _Bernhardin_, (ob. 1459 and 144) are pretty clear on the point. But _Albertus Magnus_ had already recognized the _d.a.m.num emergens_ and _Thomas Aquinas_ the _lucrum cessans_ as causes of interest. (Tubinger Zeitschr., 1869, 151, 159, 161.) The essentially modern character of Roman law, which, in the form it has finally a.s.sumed, is in harmony with a high development of national economy, accounts for the fact that the glosse of _Accursius_ relying on _Irnerius_ and _Bulgarus_ entirely ignores the prohibition of interest. For a similar reason, in the 16th century, _Donellus_ and _Cujacius_ stand entirely on Roman ground. In the interval, indeed, men like _Bartolus_ and _Baldus_ were not disquieted by the canon law. (_Endemann_, Studien in der Romisch-Canonischen Wirtchaftsund Rechtslehre, I, 18, 27 seq. 61.) Compare the rich historical material in _Salmasius_, De Usuris, 1638; De Modo Usurarum, 1639, and De Mutuo, 1640.]
[Footnote 191-2: _A. Thierry_, Lettres sur l"Histoire de France, ed. 2., 248 ff.]
[Footnote 191-3: Thus the emperor Basil, in the year 867, as _Justinian_ had before him, forbade the further payment of interest, once the amount already paid equaled the princ.i.p.al. (L. 29 seq.; Cod. IV, 32, Nov., 121, 2.) Compare Sachsenspiegel, I, 54. _Edward the Confessor_ is said to have issued the first prohibition of interest. (_Anderson_, Origin of Commerce, a. 1045.) _Edward III._ forbade all interest as the ruin of commerce. (Idem a., 1341.) About 1391, the lower House had its zeal aroused against the "shameful vice of usury;" and again, in 1488, all interest on money and all rent-purchases stipulated for on unlawful conditions, were threatened with a fine of 20, the pillory, and six months imprisonment. (_Anderson_, a., 1488.) In France, the edict of Philip IV. of 1312. Compare _Beaumanoir_, Coutumes, ch. 67, des Usures, No. 2.]
[Footnote 191-4: _Dante_, Inferno, XI, 106 ff., suggests that interest-creditors had violated the command of _Moses_, I, 3. _Macchiavelli_ seems to judge otherwise: Compare Istoria Fior., VII, a, 1464; VIII, a, 1478. Very interesting discussions on the legitimateness of the taking of interest in 1353 seq., in which the Dominicans, up to the time of _Savonarola_, defended the strictest opinion. (_M. Villan_, III, 106.) _Luther_, Tract on Trade and Money, 1524, and Sermon on Usury, 1519. Later still, _Luther_ became more moderate. Thus, in his letter to the Danzig counsel, 1525, in _Neumann_, Geschichte des Wuchers in Deutschland, 617 ff., in which, for instance, he blames the forcible carrying out of interest-prohibitions, draws a distinction between rich and poor, etc. So, too, in his letter: An die Pfarrherren, wider den Wucher zu predigen, 1540.
_Melanchthon_, Phil. moral., 137 ff., is also more moderate.
_Calvin_ was clearer in this matter, and no longer recognized the canonical prohibition of interest. (Epistolae et Responsa, Hanov., 1597, epist. 383.) Similarly _Zwinglius_, who will not praise interest, but considers it a natural consequence of property (Opp. ed. Tugur., 1530, I, 319 ff.), and even _Erasmus_, ad. Evang. Luc., 6, 44. Adagia v. Usurae nautt. In _Shakespeare_, compare Merchant of Venice. _Bodinus_ also rejects on principle, even Roman interest, which he held to be 1 per cent. a year: De Republ., 1584, V. 2. Even the practical Dutch excluded the so-called "table-keepers," from the communion up to 1657.
Compare the contests hereon in _Laspeyres_, Gesch. d.
volkswirthsch. Ansich. d. Niederl., 258 ff.]
[Footnote 191-5: The mutual right of cancellation (_Kundbarkeit_) in the case of these contracts during periods poor in capital and credit, would easily have ruined the debtor. Compare _J. Moser_, Patr. Ph., II, No. 18. Hence munic.i.p.al rights in the latter part of the middle ages, which in many other respects are so antagonistic to Rome, have seldom anything to object to its measures in this matter.]
[Footnote 191-6: A reason why, as _A. Struver_ remarks, the Church which was more a creditor than a debtor, never approved the Weddeschat above mentioned.]
[Footnote 191-7: The inst.i.tution of rent-purchase (_Rentekauf_) was already developed in the Hanse cities at the beginning of the fourteenth century. (_s...o...b.._, in the Zeitschr. f. deutsches Recht, XIX, 189 ff.) About 1420, the bishops of Silesia inquired of the Pope, whether such contracts which had been the practice in Silesia for a century were lawful. The answer was a favorable one, although he left the rate of interest free in this particular case (Extr. Com. III, 5, 1, 2); after _Alexander IV._, however, as early as 1258, had instructed inquisitors not to take part in litigations concerning usurious contracts. Formerly all such contracts were prohibited in express terms. (Decret. Greg., V. 19, 1, 2), although, in France, the ordinances of Louis IX. and Louis X. (1254 and 1315) had established fixed rates of interest therefor.
Between pledge and rent-purchase, the right of the (virtual) loaner to expel the (virtual) borrower, which after fell into disquietude, occupies, so to speak, a middle place.
(Compare _Eichhorn_, D. St.- und R.-Gesch., II, -- 361, a III, -- 450.) It was decreed, in France, in 1565, that all rent in kind should be converted into money rent.
(_Warnkonig_, Franz., St.- und R.-Gesch., II, 585 ff.)]
[Footnote 191-8: Magnum Bullar. Roman., II, 295.]
[Footnote 191-9: A Prussian law allowing interest even without a contract of rent-purchase as far back as 1385.
(_Voigt_, Geschich. von Preussen, V, 467.) In Ma.r.s.eilles, in 1406, a rate of interest of ten per cent. allowed.
(_Anderson_, Origin of Commerce, s. a.) Likewise in England, 37 Henry VIII., c. 9. In Brandenburg, 1565, 6 per cent.
(_Mylius_, C. C., March, II, 1, 11.) A retrograde step by 5 and 6 Edward VI., c. 20; by which all interest was again prohibited. These laws had, practically, the effect of increasing interest to 14 per cent., and were therefore repealed in 1571. How unnatural the prohibition was is apparent from the fact that by 4 and 5 Philip and Mary, c.
2, the possessor of 1,000 marks was estimated equal to a person with 200 annual income. In Denmark, the taking of interest at 5 per cent. was allowed in 1554, since "although it is contrary to G.o.d"s command, yet [according to an opinion given by _Melanchthon_] this commerce cannot be entirely abolished." (_Kolderup-Rosenvinge"s_ Danische R.
G., in _Homeyer_, -- 142.) Similar views of the elector Augustus, 1583. (Cod. August 1, 139 ff.)
The German Empire, in 1600, allowed the debtor to contract that, in case of delay, the contract might be declared annulled. In France, on the other hand, even during the 18th century, nearly all loans were made in the form of _rent-purchase_ (_Law_, Trade and Money, 127), and the creditor could declare the contract void only in case the debtor did not pay him the rent. (_Warnkonig_, Franz. R. G., II, 585 ff.) For strictly Catholic countries, the prohibition relating to the taking of interest still really remains.
However, _Leo X."s_ bull, Inter multiplices, exempts the so-called _monti di pieta_, and by this means put obstacles in the way of saving, and promoted real usury. Of this last, _Niebuhr_, Briefe, II, 399, adduces very striking instances from the Pope"s own temporal dominion. In the case of pledge, even 12 per cent. per annum is required. (Rom im Jahr, 1833, 163.) Yet, in 1830, the Poenitentiaria Romana instructed the clergy, without, however, deciding the chief question, not to disquiet people any longer in the confessional who had taken interest. (_Guillaumin_, Dictionnaire de l"Economie politique, art. usure.) On the Russian Sect, _Staroverzen_, which still condemns the taking of interest, see _Storch_, Handbuch, II, 19. By the Russian government it was permitted very early. _Ewers_, altestes Recht der R., 323 seq.]
[Footnote 191-10: The first scientific defense of interest is generally considered to be that of _Salmasius_, loc. cit.
Yet _Bacon_, Sermones fideles, C. 39 (after 1539), and at bottom also _H. Grotius_, De Jure Belli et Pacis, 1626, taught that it was lawful to take interest in so far as it was not against the love due to one"s neighbor (_Endemann_, loc. cit., I, 62 ff.), and _Besold_, Quaestiones aliquot de Usuris, 1598, was as near the truth as _Salmasius_. Compare _supra_, note 4. How earnestly _North_ and _Locke_ labored against the lowering of interest by governmental interference, see _Roscher_, Z. Gesch. der engl.
Volkswirths., 90, 102 ff. The best writers, in strictly Catholic countries, did violence to themselves in this matter for a long time after. Thus _Galiani_, Della Moneta, II, I seq.; and one cannot help being greatly surprised at witnessing the subtleties which _Turgot_, Memoire sur le Pret d"Argent, 1769, had to have recourse to, to prove the clearest matters. Thus: at the moment of the loan, a sum of money is exchanged against the mere promise of the other party, which is certainly less valuable. [If it were not, why should he borrow?] This difference must, therefore, be made up in interest, etc. _Mirabeau_ even was a decided opponent of interest. (Philos. rurale, ch. 6.) Compare, however, the theological defense by _Viaixnes_, 1728, in the Traite des Prets de Commerce, Amsterdam, 1759, IV, 19 ff.]
[Footnote 191-11: Of course, evaded in a thousand ways in practical life. Thus, for instance, people gave wheat, other commodities, and even uncoined gold and silver as loans, and had what interest they pleased promised them. In alienating the capital, they might stipulate _a fonds perdu_, as they thought best. (Turgot, I, c. -- 29.) When debtors had promised under oath to make no complaint, the church ordered that they should be helped officially. When the temporal power showed itself lax, Alexander III. decreed that such questions should be brought before the spiritual courts.
(Decret. Greg. V., t.i.t. 19; 13 _Innocent_, Epist., VIII, 16; X, 61.) In England, _Richard of Cornwall_ obtained a monopoly of the whole loaning business. (_Matth. Paris_, ed.
1694, 639: compare, also, 20 Henry III., 5.), from which fact the existence of the custom of taking interest about 1235, is apparent. Cases in which English kings borrowed and promised payment back _c.u.m d.a.m.nis, expensis et interesse:_ Anderson, Origin of Commerce, a. 1274, 1339.]
[Footnote 191-12: Compare _Gioja_, Nuovo Prospetto, III, 190. The canon law desired to put an interdict on their taking interest also: Decret. Greg., V, t.i.t. 19, 12, 18.
Frequently, also, a minimum of interest was provided for them: Ordonnances de la Fr., L. 53 seq. II, 575. Receuil des anciennes, Lois, I, 149, 152. John of France extended this to four _deniers_ per _livre_ per week, that is, annually 86-2/3 per cent.! (_J. B. Say_, Traite II, ch. 8.) In Austria, in 1244, 174 per cent. allowed! (_Rizy_, Ueber Zinstaxen und Wuchergesetze, 1859, 72 ff.)]
SECTION CXCII.
INTEREST-POLICY.--GOVERNMENT INTERFERENCE.--FIXED RATES.
Instead of the medieval prohibition of interest, most modern states have established fixed rates of interest, the exceeding or evasion of which, by contract or otherwise, is declared null and void, and is usually punishable as usury.[192-1] If the fixing of the rate is intended to depress the rate of interest customary in the country,[192-2] [192-3] it uniformly fails of its object. If control were great enough, vigilant and rigid enough, which is scarcely imaginable, to prevent all violations of the law, it is certain that less capital would be loaned than had been, for the reason that every owner of capital would be largely interested in employing his capital in production of his own.
More capital, too, would go into foreign parts, and there would be less saved by those not engaged in any enterprise of their own. All of this would happen to the undoubted prejudice of the nation"s entire economy.[192-4] [192-5]
If, on the other hand, the control by the government be not great enough, the law would, in most cases, be evaded; especially as each party, creditor as well as debtor, would find it to his advantage to evade it. The latter, who otherwise would not be able to borrow at all, is, as a rule, more in need of obtaining the loan, than the creditor is to invest his capital. How easily, therefore, might he be induced to bind himself by oath or by word of honor![192-6] He would, moreover, be compelled to pay the creditor not only the natural interest and the ordinary insurance premium, but also for the special risk he runs when he violates the law threatening him with a severe penalty.[192-7] Hence the last result is either a material enhancement of the difficulty of obtaining loans or an enhancement of the rate of interest.[192-8]
[Footnote 192-1: This is, historically, the second meaning of the word usury, while in the middle ages, for instance in England, under Elizabeth (_D. Hume_), the taking of any interest whatever was called usury. Science should employ this word only in the sense used in -- 113.]
[Footnote 192-2: In Switzerland, at the end of the 17th century, not only were those punished who took more interest than the law prescribed, but those who took less. (Compare Rechtsquellen von Basel, Stadt und Land, 1865, Bd. II.)]
[Footnote 192-3: Fixed rates of interest of this kind are to be accounted for in part by a still continuing aversion of the legislator for interest in general; in part, by the opinion which prevails that precisely the most useful and most productive cla.s.ses might be elevated by an artificial lowness of the rate of interest. (But most especially the government itself, which borrows more than it lends.) When Louis XIV. about 1665, lowered the rate of interest to 5 per cent., he claimed in the preamble to his decree that it would have the effect of promoting the welfare of landowners and business men, and of preventing idleness. Similarly _Sully_, Economies royales, L, XII. And so _J. Child_, Discourse of Trade, 69 ff., says that every lowering of the rate of interest, by law, produced a completely corresponding increase of the national wealth. He says, since the first reduction (?) of interest in 1545, the national wealth increased six fold; since the last, in 1651, the number of coaches increased a hundred fold; chamber-maids wore now better clothes than ladies formerly; on "Change there were more persons with a fortune of 10,000 than before with 1,000. Similarly _Culpeper_: compare _Roscher_, Z. Geschichte der eng. Volkswirthsch., 57 ff.
Later, the French generally thought that a lowering of the rate of interest would prove injurious to the _n.o.blesse de la robe_; hence even in 1634, parliament was opposed to it.
(_Forbonnais_, Recherches et Considerations, I, 48, 226.) _Darjes_ says that information of all loans of capital should be made to the police authorities, and that the authorities might compel payment and the loaning of the princ.i.p.al over again to parties in need of capital. (Erste Grunde, 426 seq.) Something a.n.a.logous practically provided for by the Wurtemberg _Landesordnungen_ of the 16th century.
(Compare also _von Schroder_, F. Schatz- und Rentkammer, XXV, 3.)]
[Footnote 192-4: Precisely a high rate of interest is a powerful incentive to saving, and to the importation of capital.]
[Footnote 192-5: _Usurae palliatae_, interest taken out of the capital, or stem-interest, called also money-usury in contradistinction to patent interest-usury. To this category belong the written acknowledgments of indebtedness to a larger amount than that actually received; acknowledging it in a higher kind of money than that in which the loan was made; the compulsory taking by the debtor of commodities at a disproportionately high price, in the place of money, or at a disproportionately low one, by the creditor. See the enumeration of such things in the police regulations of the empire, 1530, art. 26, and 1548, art. 17. Thus, in Paris, jewels are "sold" to students hard-pressed for money, which immediately find their way to the _monts de piete_, and have to be paid for some time after to the usurious "seller," at a most exorbitant price. The person who loans $100 at 6 per cent., and retains the interest for the next following year from the date of the loan, takes in reality nearly 6.4 per cent. Fraudulent accessory expenses of all kinds, _faux frais_, expenses of registration, for prolongation, and extinguishment, etc. Here belong, also, the provisions introduced into contracts to make redemption more difficult, the fixing of terms of payment in such a manner that the debtor is almost forced to let them slip by--called "usury in the conditions" in Austria. Remarkable instances from the 16th century in _Vasco_, Usura libera, -- 57 ff. Recently, _Braun_ und _Wirth_, Die Zinswuchergesetze, 1856, 190 ff. In view of the manifold business transactions behind which the interest-usurer may take refuge, the complete prevention of the latter would break the legs of commerce (loc. cit., 145 ff.).]
[Footnote 192-6: If the state, by annulling such promises, should incite the people to violate them, it would be a frightful step towards the demoralization of the nation: "thus rewarding men for obtaining the property of others by false promises, and then, not only refusing payment, but invoking legal penalties on those who have helped them in their need." (_J. S. Mill_, Principles, V, ch. 10, 2.) Besides, the Austrian usury law of 1803 punishes the borrower also as a spendthrift, and imprisons him for six months (-- 18), or else it designates where he shall make his domicile (_Ortsverweisung_). Modern loaning on drafts and bills of exchange, the acceptance of which is forged with the knowledge of the creditor, corresponds to what _Plutarch_, Quaest., Gr., 53, relates of the Cretans, who had, especially in later times, the worst possible reputation for avarice and dishonesty. (_Polyb._, VI, 46.
_Paul_ to t.i.tus, I, 12.)]
[Footnote 192-7: He must insure him against the usury laws.
(_Adam Smith._) According to _Krug_, Staatsokonomie, the usury laws should be called so because they promote usury, not because they prevent it. Compare to some extent, _Montesquieu_, Esprit des Lois, XXII, 18 ff.]