INTEREST. 



Botli natural and revealed ; and the canon law (Decret. 1. v. 

 tit. 19.) has profcribed tlie taking of any, the leaft, increafe 

 f.n- U:c loan of money as a mortal tni. But it lias been ob- 

 fcrvcd in reply, that the Molaical precept was clearly a po- 

 litical, and not a moral precept. It only prohibited the 

 Jews from taking ufury of their brethren ; but, in ex- 

 prefs words, (Deut. xxiii. 20.) permitted them to take it 

 of a ftranger, which proves tliat the taking of moderate 

 ufury, as a reward for the ufe, for fo the word fignifies, is 

 not malum infis fmce it was allowed where any but an 

 Ifraehte was concerned. As to the reafon, deduced from 

 the natural ban-enncfs of money, and afcribed to Ariftotle, 

 the fame miy with equal force be alleged of houfes, which 

 Hcver breed houfes ; and of twenty other things, which no- 

 body doubts it is lawful to make profit of, by letting them 

 to hire. And though money was originally ufed for the 

 purpofes of exchange, yet the laws of any ftate may be well 

 juftified in permitting it to be turned to the purpofes of 

 profit, if the convenience of fociety (the great end for 

 which money was invented) (hall require it. That the al- 

 lowance of moderate intereft tends greatly to the benefit of 

 the public, efpec.ally in a trading country, will appear from 

 that generally acknowledged principle, that commerce can- 

 not fubfift without mutual and extenfive credit. Unlefs 

 money can be borrowed, trade cannot be cai-ricd on ; and if 



no premiums were allowed for the hire of r 



few 



per- 



fons would care to lend it; or at leall the eafe of borrowing 

 at a fliort warning (which is the life of commerce) would be 

 entirely at an end. Thus, in the dark ages of monkifti fu- 

 perftition and civil tyranny, when intcrelt was laid under a 

 total ititerdicl, commerce was alfo at its loweft ebb, and fell 

 entirely into the hands of the Jews and Lombards : but 

 when men's minds came to be more enlarged, when true re- 

 ligion and real liberty revived, commerce grew again into 

 credit ; and again introduced with itfelf its infcparable com- 

 panion, the doftrine of loans upon intereih And, as to any 

 Icruples of confcience, fince all other conveniences may either 

 be bought or hired, but money only can be hired, there 

 feems to be no greater oppreflion in taking a recompence or 

 price for the hire of this than of any other convenience. To 

 denwnd an exorbitint price is equally contrary to confcience, 

 for the loan of a horfe, or the loan of a fum of money ; 

 but a reafonable equivalent for the temporary inconvenience, 

 which the owner may feel by the want of it, and for the 

 hazard of his lofing it entirely, is not more immoral in one 

 oafe than it is in the other. Indeed, the abfolute prohibi- 

 tion of lending upon any, even moderate intereft, introduces 

 the very inconvenience which it feems meant to remedy. 

 The neceffity of individuals will make borrowing unavoid- 

 able. Witliout fome profit allowed by law, there will be 

 but few lenders : and thofe principally bad men, who will 

 break through the law, and take a profit ; and then will en- 

 deavour to indemnify themfelves from the danger of the pe- 

 nalty, by making that profit exorbitant. Accordingly it is 

 well obferved by Grotius, (De Jur. Bell, et Pac. 1. ii. c. 12. 

 § 22.) " if the compenfation allowed by law does not ex- 

 ceed the proportion of the hazard run, or the want felt, by 

 the loan, its allowance is repugnant neither to the revealed 

 nor the natural law : but if it exceed.'; thofe bounds, it is then 

 oppreffive ufiir^' : and though the municipal laws may give 

 it impunity,. they never can make it jult." The exorbitance 

 or moderation of intereft depends upon two circumftances, 

 the inconvenience of parting with it for the prefent, and the 

 ha/.ard of lofing it entirely. The rate of intereit will be 

 generally in a compound ratio, formed out of the inconve- 

 nience and the hazard. 



Mr. Locke, Mr. Law, and Mr. Montcfquicu, as wdl as 



many other writers, feem to have imagined that the increafe 

 of the quantity of gold and filver, in confequence of the 

 difcovery of the Spanifh Weft Indies, was the real caufe of 

 the lowering the rate of intereft through the greater part of 

 Europe. Thofe metals, they' fay, having become of lefs 

 value tiian filver, the ufe of any particular portion of them 

 became necelfarily of lefs value too, and confequcntly the 

 price which could be paid for it. This notion appears at 

 firft fight very plaufible ; but it has been contefted, not to 

 fay refuted, by Mr. Hume and Dr. Smith. It is in vain, 

 fays the firft of thcfe writers, (EfTays, vol. i. efT. iv.) to 

 look for the caufe of the fall or rife of intereft in the greater 

 or lefs quantity of gold and filver, which is fixed in any na- 

 tion. High intereft arifes from three circumftances: A 

 great demand for borrowing ; Uttle nclies to fupply that 

 demand ; and great profits arifing from commerce : and 

 thefe circumftances are a clear proof of the fmall advance of 

 commerce and induftry, not of the fcarcity of gold and 

 filver. Low intereft, on the other hand, proceeds from the 

 three oppofite circumftances : a fmall demand for borrow- 

 ing ; great riches to fupply that demand ; and fmall profits 

 anfing from commerce : and thefe circumftances are all coi>. 

 nedled together, and proceed from the increafe of induftry 

 and commerce, not of gold and filver. In inveftigating the 

 caufes and effefts of a great or fmall demand for borrowing, 

 Mr. Hume traces the origin and eftablilhment of the Liiitled 

 intereft ; and he obfervcs, after tracing the manner in which 

 fome perfons become proprietors of land, and the influence 

 of a lettled revenue on thofe who are entirely without occu- 

 pation, that the prodigals among the landholders will always 

 be more numerous than the raifers. In a ftate, therefore, 

 where there is nothing but a landed intereft, as there is htlle 

 frugality, the borrowers muft be very numerous, and the 

 rate of intereft muft bear proportion to it;, the difference 

 depends not on the quantity of money, but on the habits and 

 manners which prevail. By this alone the demand for bor- 

 rowing is increafed or diminiflied. Were money fo plentiful 

 as to make an egg be fold for fixpence ; fo long as there are 

 only landed gentry and peafants in the ilate, the borrowers 

 muft be numerous, and intereft high. The rent for the fame 

 farm would be heavier and more bulky; but the fame idle- 

 nefs of the landlord, with the higher price of commodities, 

 would difiipate it in the fame time, and produce the fame 

 neceffity and demand for borrowing; The fecond circum- 

 ftance, above-mentioned, ijiz. the great or little riches to 

 fupply the demand, depends alfo on the habits and way of 

 hving of the people, not on the quantify of gold and liiver. 

 In order to have, in any ftate, a greater luimber of lenders, it 

 is not fufFicient nor reqiiifite that there be great abundance of 

 the precious metals. It is only requifite that the property, 

 or command of that quantity, which is inthe flate, whether 

 great or fmall, (hould be colleded in particular hands, fo as 

 to form confiderable fums, or compofe a great moitied inte- 

 reft ; this begets a number of lenders, and finks the rate ot 

 ufury: and this, Mr. Hume affirms,. depends not on the 

 qu.iutity of fpecie, but on particular manners and cuftoms, 

 which make the fpecie gather into feparate fums or mafies of 

 confiderable value. The reduction of intereft muft proceed 

 from an increafe of induftry and frugality, of arts and com- 

 merce. Belides the peafants and the proprietors of land, 

 there muft be another rank of men, who, receiving from the 

 former the rude materials, work them into their proper 

 form, and retain part for their own ufe and fubfiftence. As 

 induftry increafes, and the views of men enlarge, it is found 

 that the moft remote parts of the ftate can affill eachother 

 as well as the more contiguous, and that this intercourfe of 

 good offices may be carried c-a to the grcatcft extent and in- 



triciC.y.. 



