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lent all the money they could part with-when individuals hoarded their money, regardless of interest, from the idea that it would be safe in no hands but their own-when borrowers collectively were accommodated with all the money at 5 per cent, which, under any rate of interest, could have been expected to be lent-when the credit of needy borrowers was destroyed and when the offer of 10, 15, or 20 per cent, would have been no temptation in the eyes of the possessor of money, we ask, where is the evidence that the Usury Laws produced evil? We ask in vain, for the usurers do not deal in evidence. Assuming that the offer of exorbitant interest might have induced the Banks to lend somewhat more than they did, what would have followed? It is notorious that many of them lent beyond their means and became bankrupt, and that the remainder generally only retained what was barely sufficient to preserve them from the same fate; it may therefore be regarded as certain, that if they had been more liberal in lending, the failures among them would have been much more numerous. Of course a few individuals might have been benefited, but the community at large would have suffered far more than it did. If there had been no Usury Laws, a few individuals might have saved themselves from ruin, by borrowing at high interest; but then the whole trading world would have been compelled to pay an exorbitant rate for several months; and in consequence, the loss on one side would have greatly outweighed the gain on the other. To the mass, the difficulty of procuring money would have been much greater, and, on the aggregate, the failures would have been far more numerous. The Usury Laws yield ed to the community during the panic, not evils, but benefits of the highest order.
The evils then prevented by these laws will assuredly, after the abolition, always be experienced on similar occasions.
Then it is asserted by the usurers, that the Usury Laws are a prolific source of embarrassment and litigation. A more groundless assertion was never made use of to delude a blind and infatuated country. As to embarrassment, they are free from ambiguity, and every man, if he think good,
may easily avoid violating them. But if they even were obscure, and were frequently violated unintentionally, this would form a reason for amending them, but not for their abolition. As to litigation, they produce infinitely less of it than any other laws of equally comprehensive and incessant operation. That which is founded upon them, arises chiefly from delibe rate efforts to evade them; and a large part of it may be easily prevented by making in them amendments. All effective laws are the parents of embarrassment and litigation; and if their value is to be estimated by the small portion of these they produce in proportion to the magnitude of their effects, the Usury Laws are more va◄ luable than any other.
We have, we think, said sufficient to convince our readers, that if the Usury Laws be abolished, these consequences must follow-there will be constantly great variation in the rate of interest; the rich will borrow at a comparatively low rate, while the poor will have to pay an excessively high one-in time of peace, a large portion of the borrowers must be always, and the whole trading and manufacturing world must be very frequently, at the mercy of the lenders; there must be always to many, and frequently to all, a great scarcity of money; and the rate of interest must undergo continual and violent fluctuations. In time of war there will be a constant scarcity of money, which will keep all borrowers more or less at the mercy of lenders; the whole body of the mort gage borrowers will have to pay an extremely high rate of interest; all other borrowers, including the State, will have to pay a much higher one than they paid heretofore; and during war, as well as during peace, the rate will fluctuate continually and violently. We will now inquire how this will operate on the individual and collective interests of the community. - When a man begins business, he always greatly overrates his chances of success. He is weary of a masterhe wishes to marry-he is ambitious of rising in the world-he estimates his qualifications to be far greater than they really are-he magnifies profits, and overlooks losses-and if he have not capital to begin with, he thinks he could afford to pay almost any interest for borrowed money. He will
agree to pay almost any rate that may be asked, provided a Bank or an indi vidual will accommodate him. When he gets fairly commenced, he must then borrow from necessity; he must retain the money, have his bills discounted, and have frequent further loans for a short term, to save his credit, or escape utter ruin. A vast portion, we may say the chief portion, of the merchants, manufacturers, and tradesmen, begin business partly with borrowed money, which they obtain from the Banks or individuals. The capital of many of them, when they begin, consists in a great degree of such money. As to their borrowing at a certain rate for a term of years, it is out of the question: no man, when he lends money on personal security, will bind himself to that which would prevent him from attempting to regain it, should the borrower be likely to become bankrupt. Beginners will borrow at an exorbitant rate when they commence; and when they get the money fastened so that they cannot repay it, they will be sponged for higher interest until they are ruined. The smaller merchants, manufac turers, and tradesmen, will generally have to pay a much higher rate of interest than the richer ones. If they have not a farthing of capital borrowed in any other way, they must almost daily, particularly the merchants and manufacturers, have their bills discounted, or, which amounts to the same, taken in account by their bank ers. While they will have to pay this higher rate of interest, they will be compelled to sell their goods at the prices taken by the richer ones. They are so circumstanced, that it is impossible for them to be successful, or to maintain themselves in business, if loans of money cannot be generally within their reach, at a moderate and unvarying rate of interest; therefore they must reap the most bitter evils from the abolition of the Usury Laws. The middling and small traders and manufacturers have hitherto been of the highest value to the state, not only on account of their numbers, industry, and good conduct, but because they have formed the nursery of talent, enterprise, and opulent houses. Those who have a large capital of their own to begin business with, are, in comparison, few in number; they are reared in a manner VOL. XXIV.
which disqualifies them for being good men of business; they seldom possess much ability; and they more fre quently diminish their capital than increase it. The most eminent and wealthy traders and manufacturers. are, and generally have been, men who began the world with very little capital, and in many cases with none, exclusive of borrowed money. He who has little or no fortune, is bound to good instruction and discipline, while he is a clerk or an apprentice; when he commences business, the smallness of his capital binds him for some years to a further course of good instruction and discipline; the double apprenticeship confirms his habits, and brings out his powers to the ut most. How much the commerce and manufactures of this country depend on the ability, skill, and enterprise of the merchants and manufacturers, independently of capital, is a matter on which we need not dilate; and nothing could be more fatal to them than to place them under the monopoly of capitalists by birth. The abolition of the Usury Laws, by fettering, ruining, and annihilating the middling and small men of business, will in various ways injure the State in the most serious manner.
We have shewn that every second or third year may be expected to bring a fit of distress, and a scarcity of money. At the beginning of such scarcity, the lenders will not only push up interest, but they will refuse to lend, in the hope, that by holding their money for a week or two, they will make much more of it. Now, the whole trading and manufacturing world has at all times to borrow almost daily from necessity; the rich, as well as the poor, must have their loans, and their bills discounted or passed to. account. In such a fit, this necessity for borrowing is rendered far more general and imperious. In the first moment many will be refused, to their ruin, merely from the wish of lenders to make the most of their money; while, to the remainder, interest will be made destructively high just at the time when they are all sustaining grievous losses. Whenever the whole trading and manufacturing world shall be plunged into loss and distress, its loss and distress will be fearfully augmented, by the refusal to lend, and the exorbitant interest of
the money lenders. The middling and small traders, &c., must then be ruin ed, either by inability to borrow, or by the high terms of the lenders. To place before the lenders of money, an irresistible temptation to refuse loans, and demand a ruinous rate of interest, at all times when the whole of the merchants, manufacturers, and tradesmen, shall be enduring heavy losses, and be compelled to give any rate of interest that may be asked, would be, in our judgment, one of the most fatal errors that the State could commit.
While it is essential that the Banks, in times of general distress, should lend as far as their own safety will permit, it is much more essential that they should not lend farther. If a Bank ruin itself by lending, it does a grievous injury to the community, even though its loans save two or three trading houses from ruin. Its loans cannot save so many, as its fall will destroy. The abolition of the Usury Laws will, in such times, place before the Banks almost irresistible temptations to lend beyond their means. They will be entreated and bribed; they will be supplicated to fix their own terms on satisfactory securities; while they will be exposed to this, they will know that they possess money which they shall not want, in case they be not assailed with run, and, as a run never gives warning, they will think they are in little danger of one. They will be tempted, and then a run will compel them to stop payment. That they will benefit from the ability to borrow at high interest, is what we cannot subscribe to. A Bank could scarcely offer to do this, either to friends or strangers, without blasting its credit. The abolition of the Usury Laws will tend powerfully to increase the number of failures amidst Banks in times of distress.
This country is at present in the enjoyment of peace; but how long will the peace continue? No man, whose judgment is of any value, will venture to say in reply two years. Thanks to that destructive system by which we have been in late years governed, war is almost unavoidable. It is not for us to know what the present Ministers will do, but we cannot be ignorant, that do what they may, it will be scarcely possible for them to preserve peace without sacrificing
not the honour of the empire, for that has been done already-but the inte rests and security of the empire. In time of war, the whole of the mortgage borrowers will be compelled to pay 8 or 10 per cent, and many of them will have to pay more. What will be the effects? Such of them as now have to pay half their rents for interest, will then have to pay about the whole. How widely this will operate, may be judged of by the fact, that half the whole land of the country is estimated to be under incumbrances. A vast portion of them will be deprived of income. Their incumbrances must be greatly increased in extent, if even the amount remain unaltered; their property must suffer an enormous loss of value; and many of them must be stripped of property. In war,
the mortgage borrowers are the great competitors of the State in borrowing. The rate paid by the lat ter must rise, as their rate rises; and it must always be the highest. If they have to pay 8 or 10 per cent, the State will have to pay more; the public funds must be low, in proportion as the rate on mortgage money is high. The increase of interest paid by the mortgage borrowers universally will, by its inroads on rents, and its creation of arrears of interest, add mightily to the scarcity of money caused by the war. What will be the conse quences here? This will perhaps be the best answer to the question-if such had been the state of things during the last war, the State would, in all probability, have been compelled to borrow one-third more, in respect of the amount of its debt; and to levy one-third more of taxes. Whether it could have done this-and what the fruits would have been to both itself and the community, whether it could have done it, or could not have done it-are matters which we leave to the decision of the reflecting.
If an empire like this, which is fre quently for a long term of years embroiled in such war as compels it to borrow an enormous suin annually, do that which has the effect of almost doubling the rate of interest during war, it does what madness could only be expected to do-even if it do it when it is in the enjoyment of peace, which is likely to be of long duration. But if such an empire do so, when, like this, it is, if not on the eve of
war, at least in danger of war, it is guilty of such ruinous conduct as madness never exhibited. The effects are not confined to times of war; they are felt always, and their pressure is often the greatest during peace.
Do the merchants, manufacturers, and tradesmen expect they will escape that they will be able to borrow at 5 per cent when the mortgage borrowers and the State will have to pay almost twice as much? Let them not deceive themselves-the Banks will not lend them money at 5 per cent, when they can obtain 8 or 10 for it on government securities. They must at any rate pay as much as the State. At the best, they will have to pay this high rate of interest; and the fluctuations of trade will frequently compel them to pay one much higher. Let them beware of believing those who tell them that the repeal of the Usury Laws is a question between them and the Landed Interest, and that it will benefit them however much this Interest may suffer from it. They are as much benefited by these laws, as the landowners; in time of peace they are more so; and consequently they will be the greatest sufferers by the repeal.
The farmers, &c. who borrow on personal security, will in both peace and war, but especially in the latter, be ground to powder by exorbitant interest. The effects of this on their own interests, and on those of the State, we need not describe.
Questions, like this, deeply affect in one way or another the interest of the working classes. Great numbers continually rise from these classes, and begin business in different lines, through the ability to borrow a little money at a low rate of interest. Give them a high rate, and place them at the mercy of lenders, and this will be prevented; or at any rate they will then only borrow to their own ruin. If the merchants and manufactures generally have to pay a much higher rate of interest, they must add the increase to the price of their goods, or subtract it from the labour which enters into such price. The merchants will raise their goods. The manufacturers will have their interest and raw produce raised; they will be unable to raise their prices in foreign markets, and in consequence they will be compelled to reduce wages. Husbandry wages will suffer in a similar manner.
A high rate of interest must tend materially to diminish manufactures and foreign trade, both by diverting capital from them, and by raising prices so, in some branches, as to prevent exporting. It must operate most balefully on the home trade.
A high rate of interest must almost constantly diminish the national ca◄ pital. At its commencement, it must, by lowering the public funds and the price of land, annihilate hundreds of millions of property. It must continually plunder the many for the benefit of the few; and much of its plunder must be destroyed in the course of transfer, by litigation, expenses, and losses. By impoverishing the mass of the community, it must constantly narrow the field of the lenders, and destroy the general profits which to a very great extent supply them with money to lend. It will injure a vast portion of the lenders much more in one way, than it will benefit them in another. Such a rate of interest must therefore generally operate to increase scarcity of money, and raise itself.
How Mr Thompson means to deal with the pawnbrokers, we do not know. It will be an uncouth anomaly to make money a commodity to every one else, and to refuse to make it one to them; it will be monstrous injustice to deny to them a right granted to all the rest of the community. If they be allowed to make the most of their money, a rate of 100 per cent will not satisfy them. They will be. rendered a scourge to the poor in
We do not know whether it be necessary to notice the example of Holland and Hamburgh, on which the usurers place so much reliance. Are they circumstanced like this country? Are they so extensively engaged in trade and manufactures, that fluctuations in these can produce such scarcities of money as they produce here? Are they frequently involved in long wars which compel them to borrow vast sums annually? Their example bears in a very small degree on the question; and, in so far as it does so, it is in favour of the Usury Laws; in them the rate of interest fluctuates violently, and when money is scarce, it is perniciously high. We too may cite an example. In 1793 the National Convention in France declared that " money was merchandise," and abolished
áll restraints on usury. What follow ed? The consequences were so fatal, that twenty-three days afterwards, the enlightened measure was revoked. From this example our Turgots and their followers will draw no instruc tion.
But then Mr Thompson, in compassion to his illiberal and bigoted opponents, does not ask for the total abolition of the Usury Laws, although he is exceedingly anxious for it. He still will not suffer the usurers to ob tain more than 5 per cent by law, not withstanding that he suffers them to obtain any rate they please without it. If the House of Commons adopt his measures, we trust it will scoff no more at the ignorance and barbarism of former ages. To declare that men have a clear right to do a thing, and then to incapacitate them for exerci sing this right by law-to declare con tracts to be just and necessary, and then to prohibit the law from being called on to enforce their fulfilment to encourage men by law to violate their agreements, to borrow money on false pretences, and to vest money on promises made only to be brokento make the law the source of lying and cheating to proclaim that a prin ciple is wholly at variance with knowledge, right, justice, and the public weal, and then to fashion it into a negative law all this forms such a specimen of barbarous, blind, childish ignorance and folly, as never disgraced any former Parliament.
Now, what will be the real effect of this reservation? To a great extent in the discounting of bills, the discount is deducted when the money is advanced; the borrower here pays the interest before he is suffered to touch the principal; in truth, the former never comes into his hands; therefore it makes not the least difference to him, whether the laws be wholly abolished, or be thus far spared. If the Banks grant discounts and loans at a higher rate than 5 per cent to those who keep accounts with them, they will, instead of giving credit for the interest to the end of the half year, or year, exact it at the moment when they advance the money. If they lend to chance cus tomers, they will have the interest in advance, instead of giving credit for it until the time for receiving back the principal. Here Mr Thompson's boon places the borrowers in a worse situation than they would be in, should the
laws be wholly abolished. Those who borrow on mortgage, or personal secu rity, at a higher rate than 5 per cent, will be compelled to pay the interest constantly in advance and they will be deprived of all indulgence in respect of time. The lenders will not be able to give them much indulgence, without losing the power of recovering the rate agreed on by law. Here again the borrowers are placed in a much worse situation, than they would be in should the laws be wholly abolish ed. It is absurd to suppose that lend ers will lend to borrowers on terms, which the latter, after they have had the use of the money, may pay or not, as they think proper; and it is wicked to give to men the power of violating solemn engagements, by which they obtain the money of others. But, however, the lender in many cases could recover usurious interest by law in one way, if he could not in another. He could arrest, or foreclose, for his principal; and this would be sufficient for obtaining any interest he might claim, provided he would let the prin cipal remain. If it be right for bor rowers to covenant to pay, and to pay voluntarily, more than 5 per cent, it must be equally right to place them under legal compulsion to pay more when they agree to do it: In genero sity to them, let the Usury Laws be abolished wholly, rather than to the extent contemplated by Mr Thomp son.
And now when the repeal of the Usury Laws will manifestly produce such gigantic evils, what do the usu rers promise as countervailing benefits? Assuming that all they promise will be realized, do they offer anything work thy of being put into the balance against these evils? Do they prove that the repeal will, in general, make loans more plentiful to all classes, or any class, of borrowers? They cannot; for the common complaint is, that under the laws, lending even to the poorer borrowers is carried to excess. They admit-they even make an ar gument of the admission-that during peace the laws place no restraint what ever upon the mass of borrowers of all classes, except for a few months occasionally. They here stand on the exception to the general rule. They do not plead that even in these few months the repeal will benefit borrowers in general; they only aver that it will benefit a comparatively small