Re: interest v. "usury"

royls_at_telus.net
Date: 09/03/04 

Date: Fri, 03 Sep 2004 20:43:43 GMT

I missed this first time around.

On Fri, 3 Sep 2004 12:54:54 -0500, "Jim Blair" <jeb@wisc.edu> wrote:

>"Mark Monson" <m_monson@ztech.com> wrote in message
>news:D0xZc.78422$0o5.2933@bignews1.bellsouth.net...
>>
>> From Economics for Helen, by Hilaire Belloc:
>>
>> Usury is the taking of any interest whatever upon an UNPRODUCTIVE loan.
>>
>> A man comes to you and says: "Lend me this piece of capital which you
>possess" (for
>> instance, a ship, and stores of food with which to feed the sailors during
>the
>> voyage of the ship). "Using this piece of capital to transport the surplus
>goods
>> from this country over the sea and to bring back foreign goods which we
>need here I
>> shall make a profit so large that I can exchange it for at least one
>hundred tons of
>> wheat. The voyage there and back will take a year."
>>
>> You naturally answer: "It is all very well for you to make a profit of one
>hundred
>> tons of wheat in one year by the use of my ship and of my stores of food
>for sailors
>> who work the ship, but what about me ? I grant you ought to have part of
>this profit
>> for yourself, as you are taking all the trouble. But I ought to have some,
>because
>> the ship and stores of food are mine; and unless I lent them to you (since
>you have
>> none of your own) you would not be able to make that profit by trading of
>which you
>> speak. Let us go half shares. You shall have fifty tons of wheat and I
>will take
>> fifty, out of the total profit of one hundred tons.
>>
>> The man who proposed to borrow our ship agrees. The bargain is struck, and
>when the
>> year is over you make a fifty tons profit of wheat on your capital.
>>
>> That is the earning of interest on a productive loan.

No, that is the earning of profit in a partnership.

>> There is nothing morally wrong about that transaction at all. It does no
>one any
>> harm. It does not weaken the State or society, or even hurt any
>individual. There is
>> a sheer gain due to wise exchange (which is equivalent to production);
>everybody is
>> benefited - you that own the capital, the man who uses it, and all
>society, which
>> benefits by the foreign exchange. Supposing your ship and stores of food
>were worth
>> a hundred tons of wheat, then your profit of fifty tons of wheat is a
>profit of
>> fifty per cent, which is very high indeed. But you have a perfect right to
>it: your
>> capital has produced a real increase of wealth to that extent. If your
>capital be
>> worth ten times as much, then your profit is only five per cent instead of
>fifty.
>> But your moral right to the fifty per cent is just as great as your moral
>right to
>> the five per cent. No one can blame you, and you are doing no harm.
>>
>> Now supposing that, instead of coming to ask you for the loan of your
>ship, the man
>> came and asked you for the loan of a sum of money which you happened to
>have by you
>> and which would be sufficient to buy and stock the ship. It is clear that
>the
>> transaction remains exactly the same. The loan is productive. He makes a
>true
>> profit, that is, there is a real increase of wealth for the community, and
>you and
>> he have a right to take your shares out of it you because you are the
>owner of the
>> capital, and he because he took the trouble of organising and overlooking
>the
>> expedition.
>>
>> These are examples of profit on a productive loan.

Right. Profit, not interest.

>> Now suppose a man to come to you if you were a baker and say: "Lend me
>half a dozen
>> loaves. My family have no bread and I cannot see my way to earning
>anything for a
>> day or two. But when I begin to earn I will get another half dozen loaves
>and see
>> that you are not out of pocket. " Then if you were to reply: 'I will not
>let you
>> have half a dozen loaves on those terms. I will let you owe me the bread
>for a month
>> if you like, but at the end of the month you must give me back seven
>loaves": that
>> would be usury.

?? Those who can pay cash have all the bread they want. Others who
can't pay cash also want the bread. How to allocate it, if no
interest may be charged?

>> The man is not using the loan productively: he is consuming the loaves
>immediately.
>> No more wealth is created by the act. The world is not the richer, nor are
>you the
>> richer, nor is society in general the richer. No more wealth at all has
>appeared
>> through the transaction.

Yes, it has: the wealth he would not have been able to produce had he
starved.

>Therefore the extra loaf that you are claiming is
>claimed
>> out of nothing. It has to come out of the wealth of the community - in
>this
>> particular case out of the wealth of the man who borrowed the loaves -
>instead of
>> coming out of an increment or excess or new wealth. That is why usury is
>called
>> "usury" - which means: "wearing down", "gradually dilapidating.

Lots of voluntary interactions likewise result in losses to one or
both parties: boxing, marrying for money, gambling, buying drugs or
junk food, etc. Does that mean they should be forbidden by law?

>> It is clear that if the whole world practised usury and nothing but usury,
>if wealth
>> were never lent to be used productively, but only to be consumed
>unproductively, and
>> yet were to demand interest on the unproductive transaction, then the
>wealth that
>> was lent would soon eat up all the other wealth in the community until you
>came to a
>> situation in which there was no more to take. Everyone would be ruined
>except those
>> who lent; then these, having no more blood to suck, would die themselves,
>and
>> society would end.

Silliness. Society would likewise end if everyone were to devote
themselves to nothing but making shoes. Does that mean shoemaking
must be forbidden?

>> As in the case of the ship, it matters not in the least whether the actual
>thing,
>> the loaves of bread, are lent, or money is lent with which to buy them.
>The test is
>> whether the loan is productive or not.

And that is up to the parties themselves to decide.

>The intention of Usury is present
>when the
>> money is lent at interest on what the lender KNOWS will be an unproductive
>purpose,
>> and the actual practice of usury is present when the loan, having as a
>fact been
>> used unproductively, interest is none the less demanded.

Interest was agreed. Why shouldn't it be paid?

>> As in every other case of right and wrong whatsoever, there is, of course,
>a broad
>> margin in which it is very difficult to draw the line. A man guilty of
>usury and
>> trying to excuse himself might say, even in the case of food lent to a
>starving man:
>> "The loan may not look directly productive, but indirectly it was
>productive, for it
>> saved the man's life and thus later on he was able to work and produce
>wealth."

Bingo.

>> The other way about (though there is not much danger of that nowadays), a
>man trying
>> to get out of interest on a productive loan might say in many cases: "The
>loan was
>> not really productive. It is true I made a profit on it, but that profit
>was not
>> additional wealth for the Community. It only represented what I got out of
>somebody
>> else on a bargain.

Or what if the venture the loan was used for actually resulted in a
loss?

>> In this margin of uncertainty we have only common sense to guide us, as
>in every
>> other similar case. We know pretty well in each particular example we come
>across
>> whether a loan is productive of not; whether we are borrowing or lending
>for a
>> productive purpose, or for a charitable or luxurious one, or for one in
>every way
>> unproductive.

And yet, loans that many would consider unproductive have paid off for
society.

>> The proof that this feeling about usury is right is to be found in the
>private
>> conduct of individuals in their social relations. If a poor man in
>distress goes to
>> a rich friend and borrows ten pounds, he pays it back when he can; and the
>rich man
>> would think it dishonourable to charge interest. But if a man borrowed ten
>pounds of
>> one for the purpose of doing something which was likely to increase its
>value, and
>> we knew that this was his purpose, we should have a perfect right to share
>the
>> results with him, and no one would think the claim dishonorable.

Nonsense. That just proves friendship is different from business.

>> Usury, then, is essentially a claim to increment, or extra wealth, which
>is not
>> there to be claimed. It is a practice which diminishes the capital wealth
>of the
>> needy and eats it up to the profit of the lender - so that, if Usury go
>unchecked,
>> it must end in the absorption of all private property into the hands of a
>few money
>> brokers.

No, only the property of profligate borrowers.

-- Roy L

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