Re: interest v. "usury"

From: Mark Monson (m_monson_at_ztech.com)
Date: 09/12/04 

Date: Sat, 11 Sep 2004 20:56:32 -0400

<royls@telus.net> wrote in message news:41435ca9.11166161@news.telus.net...
> On Thu, 9 Sep 2004 17:13:12 -0400, "Mark Monson" <m_monson@ztech.com>
> wrote:
>
> ><royls@telus.net> wrote in message news:4140912d.5963943@news.telus.net...
> >> On Thu, 9 Sep 2004 10:33:27 -0400, "Mark Monson" <m_monson@ztech.com>
> >> wrote:
> >
> >> >> >> Fine. Suppose an entrepreneur wants to create some capital for a
> >> >> >> productive venture he is planning. He can get workers to create it
> >> >> >> for him by supplying them with food while they work. But he has no
> >> >> >> money, so he borrows some, agreeing to pay back the same amount plus
> >> >> >> 1% at the end of a month, when he believes the creation of the capital
> >> >> >> will be complete.
> >> >> >>
> >> >> >> Is that 1% interest, or usury?
> >>
> >> I do not consider the above question terribly subtle or complex. So
> >> if you wish to continue this discussion, please answer it.
> >>
> >> And I'll even make it simpler for you. Forget the workers. The
> >> entrepreneur borrows the money so that he himself can eat while he
> >> works to create some capital. Interest or usury?
> >
> >More simple yet. A worker borrows food so he can produce something else for
> >exchange. If he pays back more than principle, he pays Usury.
> >
> >In the usual case labor does work, receives wages, and then consumes food. Only
in
> >distress will the worker borrow food.
>
> Wrong. A worker may borrow food (or money to buy food) in order to
> devote time that would otherwise be spent getting food to creating
> capital that will allow him to be more productive in the future.

The wealth he creates each day contains his wages as well as any rent and interest.
The fact that the wealth will be used as capital doesn't change the fact that he
produces his own wages. If the capital is a fish hook a day or a small part of a
ocean steamer a day, there is no essential difference. At the end of the day,
the owner of the fish hook or ocean steamer owns an increase in wealth and by
exchange the worker owns an increase in wages.

Any interest that comes out of his production will be for the use of tools. This is
return to capital. If he uses somebody else's welder to fasten steel plates on the
ocean steamer, interest for that tool use is deducted from his pay check ( though it
won't be itemized as such).

> Consider the simple example of a pioneer borrowing in order to eat
> while he builds himself a house. You are saying that this worker is
> entitled to all the additional production having a house will allow
> him to produce, while the lender who made the construction possible by
> financing it is entitled to nothing whatever beyond the return of what
> he advanced.
 I find such a position absurd.

Your example is absurd. A pioneer's house is built of his wages, just as his
food is supplied from his wages. If a neighbor helps him build his house he should
expect the favor returned. This is neither interest nor usury but simple
cooperation that benefits both parties. The fact that the exchange is not
instantaneous does not make it a loan of capital. Many common exchanges are made
on credit with one side extending goods first and receiving repayment later. The
exchanges are made on credit because both parties benefit from the exchange.

 Calling it "usury" does
> not change the nature or rightfulness of the lender's return, any more
> than calling rent seeking "investing" changes the wrongfulness of its
> return.

It doesn't matter what we call it, but it's important that we differentiate between
a productive and a non productive loan.

MM

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