But if the borrower is very willing and urgent for the loan, this does not change the nature of the act. The game may be shot upon the wing as it is endeavoring to escape, or it may be snared in a trap by a tempting bait. The wild broncho may be captured in chase, or beguiled into the corral.
The voluntary sacrifice of others to the usurer does not make his gains just. The foolish ones are now willing to invest in lottery tickets, yet that does not make the lottery lawful. Slot machines are being put out of the cities, because so many are ready to part with their nickels. If there were none ensnared by them, they could stand harmless.
The borrower may be greatly elated with the hope of gain, but the injustice is the same, whether the services be secured by compelling force, or by guile, or by the folly of the victim.
If we admit the supremacy of man over the material creation, all subordinate to him, and no right to be, except to serve him, and also admit the equal rights of all men, there is no escape from the conclusion that the usurer can have no rightful claims to any portion of the labor of the borrower, without surrendering to him some portion of his property as compensation for the services received. He must have less property when the service is rendered and the borrower must have more property if the rights of both are regarded.
A false impression prevails, that the lender in some way gives the loan to the borrower; that the borrower becomes somewhat the owner of the property. The borrower is encouraged in this illusion and it becomes a plausible basis for the claim upon his services.
When a loan is made to a bank it is called a "deposit" and rightly, for it is only placed in the banker"s hands and does not in any part become his. This is true of any amount, great or small, whether the deposit draws interest or not. The lender never loses his sense of ownership of the whole amount, nor does the banker encourage the fiction that he has become part owner.
Every loan is but a "deposit." The ownership of no part pa.s.ses to the borrower. It is seldom that the loan or "deposit" is not safer in the keeping of the borrower than in the hands of the owner himself, when secured by mortgages or personal sureties. The usurer gains the earnings of the borrower but parts with no property. He receives the service but gives nothing.
Two usurers, A and B, are neighbors. A has a garden he wishes dug. He has an ax but no hoe. B has wood that he wishes cut. He has a hoe but no ax. The laborer appears and wishes to do their work. Usurer A agrees to lend him his ax to cut B"s wood on the condition that he shall return it unimpaired and work his garden for its use.
He cuts the wood, but has no hoe to dig A"s garden for the use of the ax. Usurer B now lends the laborer his hoe to dig the garden, but takes the cutting of the wood for the use of the hoe. The confused borrower knows he is defrauded of his work, though each seems to have a plausible claim upon him.
A does not give the hoe to the laborer. He retains the full ownership but deposits it in the workman"s hands to be returned unimpaired. B does not give away his ax, he only places it in the laborer"s hands also to be returned unimpaired. The full hoe and full ax is returned and they have taken the services without compensation.
The result is just the same as if A and B had traded tools and A had given the laborer a hoe to dig the garden, "the tool and the material with which to work," and B had given him an ax to cut his wood, "the tool and the material with which to work," without a pretence of a payment for his labor.
Taking only a part of the borrower"s or laborer"s services does not relieve it of injustice. The nature of the oppression is the same, only less heinous and flagrant. He who took a penny belonging to another is a thief as truly as the man who took a pound. Pet.i.t larceny and grand larceny differ only in the amount stolen. The man who takes three per cent. of the labor of another wrongfully defrauds as the man who takes fifty per cent. The nature of the wrong is the same; they only differ in degree.
It is a well known fact, however, often repeated, that ninety-five out of every hundred who go into business with borrowed capital, that is, who pay interest on "their material and tools," do give the vigor of their lives to the service of usurers and at the end have nothing.
The element of time is only a figment that clouds the question of right and deceives the borrower. In order that the labor of another may be appropriated it is necessary to give him time to work. The laborer may dig in A"s garden a day or all summer and he may chop wood for B a day or all winter. The result is the same. It is necessary that the borrower be given time to earn something before it is or can be appropriated. The question is, how rapidly can he earn, and how soon can his earnings be collected? Long time loans with the frequent payments of the earnings of the victim are the ideal conditions of the usurer.
CHAPTER XVIII.
A FALSE BASAL PRINCIPLE.
That usury or interest must be held under the restraints of law is recognized in nearly all countries. It is treated as a necessary evil that cannot be abolished, and therefore must be controlled. Bacon said, "It is permitted on account of the hardness of men"s hearts."
The laws differ in the various states. The rate of interest authorized by a particular state is not invariably fixed, but is changed as the condition of the people seems to demand.
That which determines the rate, of any particular people, at any particular time, is the productive ability of the borrower. The rate now in England is about three per cent. The conditions being such that the productive power of the borrower is very limited. In the United States, where the natural resources are not all occupied, and the avenues for successful effort more numerous, the average is seven per cent. In the western states of the United States the rates are higher than in the eastern, for the material resources lie so open and undeveloped that the productive power of the borrower is far greater than in the older eastern states.
The basal for the rate of interest is the benefit or the advantage of the loan to the borrower. What can the borrower do or make with this capital? How great a benefit can he gain by it? The rate is based on the earnings of the borrower.
The transfer from R. R. station to R. R. station across this city is twenty-five cents. That I may make my train and meet my appointment, that prompt and rapid transfer is of greater value to me, but that does not give the hackman the right to an increased charge.
The fare to the distant city is ten dollars, but to me, with important business waiting and suffering, it is worth an hundred. The conductor does not ask me what my profits are to be from this trip. He collects the same fare of all for the same service, whatever their interests may be in the pa.s.sage.
The letter which is freighted with a proposition that affects my future life is two cents. Because of great value to me the postal service is no more than a letter of idle gossip.
Railroad freight rates are at times arbitrarily fixed on the basis of the benefit to the patron. The rates of freight from a coal mine are sometimes made by a railroad on the basis of the profits of operating the mine. The rates to a quartz mine in the mountains are often so regulated. A contractor, dependent on a transportation company, must often share his profits. Such rates are regarded as unjust and oppressive and efforts are made to correct the evil by law.
A is crossing the city and can without inconvenience carry a note to a party for B. That accommodation without sacrifice or inconvenience on the part of A is no basis for a charge upon B, though the delivery of the message was of value to B, but if A discovers that in delivering that note he can make it a matter of business gain to himself, that would not justify B in claiming a part of the profits A secured for himself. While A served his own business he also favored B. It would be unreasonable and unjust for B to forget the favor and make a charge against A, because in the delivery of the note A managed to gain a profit.
Two farmers are without barns. It will require the labor of a number of years to secure the requisite amount of lumber and other material to enable them to erect their barns. One of the farmers undertakes to shelter and protect from decay the lumber of both, until the requisite amount can be secured. This is a real favor to the other and is accepted readily. He even offers to pay him for the care and liability. But he discovers afterward that his neighbor, by wise, careful and skillful piling, has made from this lumber a shelter for his stock and grain. That he has so managed as to gain for himself a benefit. Then, with the false principle of usury he makes a charge for the keeping of the very thing for which he was willing to pay a price.
A gentleman not wanting his coach for a time, but wishing it to be kept in perfect repair, and his team fed and exercised, to be kept sleek and strong, leaves it in his coachman"s care. The coachman agrees to keep from decay, and to replace should one die, and at the end of the term, return the coach in perfect condition, no mar or wear, and the team sleek and strong from good care, feed and daily exercise. But the coachman discovers that in the daily exercise of the team he can carry a party of business men to and from their offices, and secure for himself a gain. He, at the end of the term, returns the carriage and equipage complete as he received it. The owner has had his property perfectly cared for during the term he could not use it.
But the owner learning of the benefit to the keeper, which would not have been possible without his equipage, demands a portion of the benefit which cost him nothing, nor in the least diminished his property.
A gentleman has a warm, rich and beautiful robe, but is about to travel a number of years among the countries of Cuba, Porto Rico, and the Philippines, where he will not need it, and afterward visit Siberia, where he will need and use it. Another undertakes to relieve him of all care of it during these years and deliver it to the Siberian home ready for his use. He protects it from the moths in summer, and guards it against all touch or taint, and delivers it in the perfect condition in which it was received. In justice he deserves a reward from the owner, and if he received no benefit, would receive it, but it is found that he needed it for his comfort by the way, and that without it he should have perished. Then the owner demands a reward for the benefit the carrier received. The owner did no service. He received a positive benefit, but the porter, who carried the burden all the way, must pay interest or rental because he was kept from perishing by it.
The surprise or discovery feature is introduced into the above ill.u.s.trations to emphasize the false basis upon which the rates of interest rest. In the actual practice of usury the lender may have full information as to the use of the loan and its advantages to the borrower. If we eliminate this feature the basis still remains untenable. By no tortion of ethics can I demand that he, who does me a favor, shall pay me for the privilege.
A man has one thousand dollars of money he is not using. He gives it to another to keep or place in a drawer in his vault. To care for this and be responsible for it, a commission is allowed, for it is no benefit to the keeper. Even an amount is asked for the drawer in the vault, without responsibility. To care for this a term of years is deserving of a reward. But now keeping the property equally safe, and returning every dollar when the owner calls for it, is not satisfactory to the usurer. If this money has in any way proved a benefit to the keeper, through his wisdom and energy and skill, he demands an increase. What is this loan worth to you? is the question of the usurer to the borrower.
The basis of legal interest rates is the amount of benefit the borrower gains by the loan. If his opportunities in a state are favorable, and he may by diligence make a large gain, the rates are high. If in another state his opportunities are so limited that, strive as he may, he can make little gain, the legal rates will be low.
The basis is so absurd that many have urged the repeal of all laws regulating the rates of interest. "Why should the laws presume to level the rates for a whole state? The possibilities and opportunities of gain are infinitely varied. Every borrower knows his own conditions and the amount of advantage the loan is to him and he should be permitted to pay for money whatever he is willing to pay."
One writer thus expresses it, "No man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargains in the way of obtaining money, as he thinks fit; nor anybody hindered from supplying him upon any terms he thinks proper to accede to."
Jeremy Bentham is often quoted to prove the absurdity of all laws regulating the rates of interest, and yet all his elaborate arguments are based on this false principle.
If usury is wrong only when the borrower can make no profit, and is right whenever the borrower can make a gain by it, and the rate of interest is to be measured by that gain, then all laws are illogical that limit the rate, and may be cla.s.sed among those restraining trade.
CHAPTER XIX.
THE TRUE ETHICAL PRINCIPLE.
The true ethical principle that should govern the relation between the owner of property and the person holding that property as a loan, does not differ from the principle that is recognized as prevailing in all the other relations of life. The party to whom the service is rendered is under obligation. The party served is the one who must pay for the service. The party served must pay in proportion to the amount of service rendered him. If that service is great, then the payment must be large. If the service is slight, then the payment is small, and when there is no service then no payment can be claimed.
This principle is recognized in all worthy and upright transactions.
It is the service rendered that is rewarded in a court of justice. An employe recovers his wages from his employer for his services rendered. The condition of the employer"s business does not enter into the count. It may have been unprofitable or a great success but that cannot affect the claim either way.
A physician charges for the services given a patient. The recovery or death of the patient can neither increase nor diminish them.
In service we always surrender something of ourselves or of our own, and each knows the sacrifice or effort he has made; he cannot know the value of this to the other, and he need not know. Full compensation is due from the party served but no compensation is due when no service is given nor property surrendered.
The usurer"s whole claim is for the service of his property. But he does not surrender a particle of his wealth. He does not become poorer in making his loan. He holds all his wealth as fully as before, whether it be a loan of money or grains or tools. There has been no outgo of property for which, in any other relation, he could claim a reward or compensation from his fellow. He simply deposits his property with his fellow and takes security for its safe keeping. It must be preserved perfectly and restored fully.
When we consider the true principle, that compensation is due always for services rendered, the obligation is upon the lender for the care and preservation of his property. The borrower in any and every case gives a real and valuable service in preservation and restoration at the end of the term, while the lender renders no personal service nor does he part with a particle of his wealth.
There is always a service rendered in caring for and preserving the property of another. It may be very great or it may be very small. It may be so great that no one would undertake it though the property should be freely given him.
In 1800 the "Faithful Steward" was wrecked in Delaware bay near the sh.o.r.e. It had on board a large number of pa.s.sengers, emigrants, who nearly all perished. Few lives were saved and all the property was lost. One young man, of the kin of the writer, swam ash.o.r.e through the breakers. Before he left the vessel an old man offered him a stocking full of gold if he cared to try and save it. Though young and vigorous he would not undertake to try to save it for it. This was an extreme case of risk and danger.