PER CONTRA; POLITICAL ECONOMIST.
The students of political economy are not always reformers. It is not
their purpose nor the object of their studies to transform society.
They only endeavor to explain why things are as they are. They find
the taking of usury all but universal, and they endeavor to give the
reasons for the prevailing custom. The subject is usually but slightly
touched upon and dismissed with a few sentences.
Few economists claim that interest or rental is a part of the cost of
production. They mostly affirm that it is no part of production; that
it is merely the price paid for the opportunity to produce. The lender
of money makes a loan to the borrower and thus gives him a better
opportunity to produce than he had before. The landlord for the rental
withdraws his hand from over his land and gives the renter the
opportunity to produce a harvest.
In justification, or at least in explanation of this exaction for an
opportunity, three reasons are usually given. These may be briefly
stated as risk, time and abstinence.
1. There is some risk in every investment. There is a possibility that
the most honest, industrious and careful debtor may by some
misfortune not be able to return the loan and it would therefore be
lost. To guard against this the usurer requires the rate of interest
to be graded by the measure of risk.
This is claimed to be of the nature of insurance, the borrower paying
the premium. The profits of insurance are secured by collecting a
larger premium than necessary to pay all losses. On this theory, the
gain of usury is in the excess that can be secured of increase over
the amounts lost.
This is the reverse of insurance. Insurance is the payment by an owner
of property to a company who guarantees its preservation. Usury is the
payment by the company to the owner for the privilege of guaranteeing
that he shall not suffer loss.
Business involves a risk usually covered by insurance, but no honest
man expects to make a profit out of his insurance.
2. A loan is made for a more or less extended time. Time is therefore
claimed to be a ground for usury charges.
This claim rests on the assumption that time will increase wealth. But
time is the great destroyer; time does not make gardens and farms, but
covers them with weeds and sends them back to a wilderness; time does
not erect a house, but pulls it down; time does not build a city, but
causes it to crumble and a few ages buries it under the dust; time
does not "incubate eggs, but turns them putrid; it does not transform
into fowls. If eggs are developed into chickens the difference between
eggs and chickens is the reward of the incubator."
Aside from the spirit of benevolence and sympathy with the needy there
are three selfish reasons why a time loan may be made. First, the
owner has no present need of it and wishes to be rid of its care.
Second, the owner shall need it at a distant date and he wishes it
preserved intact against that time. But these afford no ground for a
charge of increase. He who stands and resists the ravages of time
until the day it is needed does a positive service and deserves a
reward. Third, the lender wishes to appropriate the earnings of
another during the period of time given. This is the usurer's reason,
and were it not for this time would lose its importance as an element;
it is certain that long time loans would not be so attractive.
3. "The reward of abstinence" is a reward for refraining from
consuming one's own wealth.
"You can not have your cake and eat it. If you do not eat it, you have
your cake, but not a cake and a half. Not a cake and a quarter
tomorrow, dunce, however abstinent you may be, only the cake you have,
if the mice do not eat it in the night."--Ruskin.
The usual illustration is that of Jacob. He practiced abstinence in
refraining from eating the bowl of pottage and giving it to his
hungry brother. The reward of his abstinence was his brother's
birthright.
If I do not take my soup now it is a great favor to have it preserved
for me and served later, not cold and stale, but fresh and hot. If I
deny myself now, for any cause, I can ask no more than that my meal
shall be served, perfectly, later. This was all that Jacob could in
justice demand of Esau.
It should be remembered, that because Jacob took Esau's birthright, as
a reward of his abstinence, he was accounted a robber, was compelled
to flee from his home, and not for twenty years see his father's face;
that the consciousness of this sin and of the merited vengeance of the
brother, whom he thereby defrauded and whom he thought was on his
track, caused that night of struggle when he could not let the angel
go, until he had his promise of deliverance.
Abstinence, to be benevolent, must be an act of personal loving
self-sacrifice for another. Benevolent abstinence is its own reward
and asks no more. Abstinence in hope of gain, denying himself while
another is using his wealth, cannot be regarded as an act of
benevolence, but of a selfish grovelling greed; more gratified to see
his wealth increase than to himself enjoy its use. That is the spirit
of the miser and receives the contempt of all right thinking people.
That the political economists are right in their analysis of the
common thought of usury; that risk, time and abstinence are the
elements of its basis in the popular mind, may not be denied, but if
these are in fact the elements, then usury has no standing in equity
and must be condemned by every enlightened conscience.