Chap. III: Of the Interest of Money

I shall leave it to divines and causists to determine how far the exacting of interest for money is lawful, according to the principles of our religion.

It was forbidden to the Jews, by the laws of Moses, to lend at interest to their brethren, but it was permitted to lend to strangers. Deut. Chap. xxiii, ver. 19, 20. This is one of the wisest political institutions to be met with in so remote antiquity, as we shall hereafter explain.

In the primitive ages of christianity, the lending of money at interest was certainly reputed to be unlawful on most occasions. That spirit of charity to all who were in want, was so worked in with the doctrine of our religion, that a borrower was constantly considered to be in that situation. Trade was little known; trading men were generally ill looked upon; and those who debated so far from the spirit of the times, as to think of accumulating wealth by the use of their money, commonly degenerated into usurers.

In the middle centuries, when a mistaken zeal animated christianity with a most ungodly thirst for the blood of infidels, the Jews were, in every nation in Europe, almost the only money-lenders. This circumstance still more engaged the church to dart her thunder against this practice; and the loan upon interest never took root among christians, until a spirit of trade and industry sprung up in Italy in the time of the Lombards, and from thence spread itself, through the channel of the Hans-towns, over several nations.

Then the church began to open her eyes and saw the expediency of introducing many modifications, in order to limit the general anathema which she had denounced against the whole class of money-lenders. At one time it was declared lawful to lend at interest, when the capital shared any risque in the hands of the borrower; at another, it was found allowable, when the capital was not demandable from the debtor, while he paid the interest; again, it was permitted, when the debtor was declared by sentence of a judge, to be in mora in acquitting his obligation: at last, it was permitted on bills of exchange. In short, in most Roman catholic countries, interest is now permitted in every interest for case almost, except in obligations including a stipulation of sums demandable at any time after the term of payment; and it is as yet no where considered to be so essential to loan, as to be due on all debts whatsoever; not even upon obligations payable on demand.

Expediency and the good of society (politically speaking) are the only rule for judging, when the loan upon interest should be permitted, when forbidden. While people borrowed in order only to procure a circulating equivalent for providing their necessaries, until they could have time to dispose of their effects; and while there was seldom any certain profit to be made by the use of the money borrowed, as now, by turning it into trade, it was very natural to consider the lender in an unfavourable light; because it was supposed that his money, had it not been lent, must have remained locked up in his coffers. But at present, when we see so many people employed in providing stores of necessaries for others, which, without money, cannot be done; were the loan upon interest forbidden, it would have the effect of locking up the very instrument (money) which is necessary for supplying the wants of the society. The loan, therefore, upon interest, as society now stands composed, is established, not in favour of the lenders, but of the whole community; and taking the matter in this light, no one, I suppose, will pretend that what is beneficial to a whole society should be forbidden, because of its being proportionably advantageous to some particular members of it.

If it be then allowed, that the loan upon interest is a good political institution, relatively to the present situation of European societies, the next question is, to determine a proper standard for it, so as to avoid the oppression of usurers, on one hand, and on the other, to allow such a reasonable profit to the lender, as may engage him to throw his money into circulation for the common advantage.

This question leads us directly to the examination of the principles which regulate the rate of interest; and if we can discover a certain rule, arising from the nature of things, and from the principles of commerce, which may direct a statesman how to establish a proper regulation in this matter, we may conclude with certainty concerning the exact limits, between unlawful and pinching usury, exacted by a vicious set of men, who profit of the distress of individuals; and that reasonable equivalent which men have a right to expect for the use of their money, lent for carrying on the circulation of trade, and the employment of the lower classes of a people who must subsist by their industry or labour.