in the present and in the past in respect of its morality. It is payment given to a lender for the use of capital which he has transferred to a borrower in return for the service rendered the borrower pays a certain sum of money calculated according to the duration of the loan. It was long regarded as repugnant to moral feeling. The Jewish law forbade the taking of interest by one Jew from another. It was allowed to be levied on foreigners only. It was looked on as an act which offended against brotherly love. Aristotle condemned it warmly as unnatural and dishonourable. It was not often that the judgment of Aristotle was perverted in practical matters. He felt the same objection to interest as did the Jewish legislator. It was a gain made by one man at the expense of another. It was unnatural, because money was invented solely for the purpose of passing from one hand to another in exchanging. In itself it produced nothing; how, then, was it fitting that what itself created no produce should bring back reward, as a kind of offspring, to its original owner? The Roman Catholic Church denounced it as mortal sin. Before the Reformation it was prohibited in England. Limitations of its amount have been made in most countries. The legislation of great States at this very hour forbids a demand of interest beyond a certain rate. To levy interest then seems an oppressing of a poor man by a rich one.

These feelings utterly misunderstood the real nature

of interest. none other.

The idea of money was ever present, and

By the very act of lending a man seemed to show that he had no use to put his coin to, not even to spending it on himself; how then could he justi

fiably exact a charge for allowing a brother man to employ that which was remaining idle in his own hands?

Bastiat puts the objection excellently: "Money, it will be said, does not reproduce like your sack of corn; it does not assist labour like your plane; it does not afford an immediate satisfaction like your horse." It is incapable by nature of producing interest, of multiplying itself, and the remuneration it demands is a positive extortion. It was not seen that money was only a ticket which could procure goods out of shops, and that what was really lent was materials, tools, provisions, and other things wherewith to carry on labour. Then Aristotle and others forgot that the money had been purchased with commodities-that the men who possessed coin had lost goods, property.

Socialistic ideas helped to propagate the delusion. The right of enjoying property is made subject by them to the obligation of labour. What the rich consume is the product of the toil of the labourers. Such a relation is a violation of natural justice. Still more unseemly is the command over the labour of others transferred by inheritance to men who have never themselves performed any service in accumulating property. They have done nothing to benefit society or to increase the welfare of others; yet they sweep away what others have made. To men animated with such feelings interest paid on borrowed money appears to be a yet grosser form of the same injustice. The rich man pays wages to those who perform his work; the capitalist lender only receives. He obtains interest year by year and yet he receives back in time all that he lent. Usury is thus pronounced to be indefensible, not only when it takes

K

advantage of the straits of the needy to extort rapacious terms, but even in its most moderate form: it has no right to exist.

A fatal misconception, as I have said, pervades these ideas on interest. If, indeed, property is declared to be an immoral and unjustifiable institution, then, of course, interest must be involved in the same condemnation. But this is communism; whilst the special objection to interest pre-supposes the existence of property. The mistake consists in not perceiving that the principle of reciprocal service, as the basis of reward or payment, is fulfilled in a loan granted on interest. The capitalist has an interest in the loan, but so also has the borrower, and almost universally in a higher degree than the lender. The fact that he is willing to pay interest for the loan by itself alone proves that he conceives he is gaining an advantage by it; and if service given to the lender brings him benefit, he is bound to give a benefit in return. Not to render service for service would extinguish all labour for others, and soon destroy civilisation.

The objection that money generates nothing is futile. In all loans the things lent are what the money buys. The capitalist who lends and takes interest puts useful wealth in the hands of the borrower. The banker who makes an advance to the merchant on discount lends him the cotton which is traversing the ocean. The small capitalist who lends some hundred pounds to a small man stocks his shop and sets him up in business. The capital borrowed produces results which more than repay the interest: it creates a profit. That profit the capitalist foregoes

and gives up to another; he suffers no wrong, therefore, in being charged with interest. Quite the reverse ;

without that interest he could not have obtained the use of the capital bought with the money, and the profit never would have existed for him. The fact that men borrow upon interest proves that there is a gain in borrowing great enough to make it worth while to pay the interest and this is decisive. To forbid interest is to extinguish one of the greatest motives for saving. It would prevent countless wealth from coming into the hands of those who use it as capital, to their own benefit and that of the whole community. But at any rate, many affirm, the rate of interest ought to be limited by law. Such a demand betrays a lurking feeling that lenders are by nature oppressors, and borrowers victims of exaction. No one, except socialists, dreams of prescribing prices to producers of goods, yet monopolists can extort quite as easily as lenders. Such limitation took the place at the Reformation of abolition of interest, and continued in England almost down to the present day. But it forgets the true relation between the parties. As a rule, the borrower is far more eager than the lender. There are innumerable men and firms who cry at times, "never mind what you charge, only let me have the accommodation." That implies weakness, it is replied; the law is bound to step in to give protection, there may be excess. But how will the borrower feel? Will the great mercantile house, which, though solvent, is threatened with stoppage in the agony of a crisis, thank the kindness which drives the banker, ready to lend, to say: we are not allowed to charge more than 5 per

cent., and at that rate we decline to lend? To suppose that the endangered borrowers who clamour in a crisis for loans at 10 per cent., or even twice that sum, feel themselves to be the victims of the bank, is simply ridiculous. Their only anxiety is that they should not be able to borrow enough. Limitation drives men into conspiracies to evade the law. Interest is paid in advance under the form of discount on a bill given: and judges are brought in to enforce payments which they know to be in direct violation of the law. Similar evasions are practised with like success in France, as Mr Danson well describes.

And now, what is the consequence? The breach of the law creates risk; the stratagem relied on may fail, and the debt may not be recoverable. Insurance must be paid against such a danger, and an increase of interest, often a heavy one, is imposed upon the borrower, for whose protection the limitation. was invented. A useful and necessary service is thus loaded with arbitrary restrictions. Borrowing will go on and ought to go on. Almost the whole trading community of the nation has borrowing from banks and other sources as an integral part of its machinery. Yet the law is asked to step in and to inflict penalties on lending. For what reason? to prevent extortion. But what is extortion? Loanable capital is an article offered in a market; can the law know its value better than those who seek to acquire it? In times of commercial peril to borrow, even if on excessive terms, is often to save a business; what right has the law to strive to render such an act impossible or to brand it as immoral? Experience furnishes a decisive answer.