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JEREMY BENTHAM
AND THE
USURY LA
The object of the remarks which I mean to make »ipon this subject is, not to discuss the
subject of the Currency, nor to say one-half that may be said upon the subject of the
Usury Laws ; but merely to make an attempt to remove the prejudices which prevail
(to a limited extent) among some men in trade, on account of the gross misrepresenta-
tions which have been made by Mr. Bentlmm, and others of his school. I am satisfied
that most men have not given themselves the trouble of investigating the true policy and
design of those laws, nor the principles upon which they are founded.
In 1787, Mr. Jeremy Bentham presented the world with a book which
he termed "A Defence of Usury, showing the impolicy of the present legal
restraints of the terms of pecuniary bargains." I presume that Mr. Ben-
tham considered himself entitled to the sole credit of the views then taken
of the subject, for he begins by declaring that he "does not recollect ever
seeing any thing yet offered in behalf of the liberty of making one's own
terms in money bargains."
He then proceeds to state the general proposition which he means to
establish, which, he says, rather jeeringly, was the result of an odd notion
of his. It is in these terms :
" That no man of ripe years and of sound mind, acting freely, and with
his eyes open, ought to be hindered, with a view to his advantage, from
making such a bargain in the way of obtaining money, as he thinks fit ;
nor (what is a necessary consequence) any body hindered from supplying
him, upon any terms he thinks proper to accede to.
" That contracts in general ought to be observed," he says, " is a rule the
propriety of which no man was ever yet found wrong-headed enough to
deny. If this case is one of the exceptions (for some doubtless there are)
which the welfare and safety of society require should be taken out of the
general rule, in this case, as in all those others, it lies upon him who alleges
the necessity of the exception, to produce a reason for it."
This would have been a fair statement of the question, had the exception
contended for been a new one. But after admitting, as he explicitly does,
that the exception is as old as the general rule, that it had gone into the
legislation of almost all nations, ancient and modern, that it had " taken
hold of the imagination and passions of men," and "that custom was the
sole basis which, either the moralist in his rules and principles, or the legis-
lator in his injunctions, can have to build upon," one would have supposed
that he who sought to overthrow an exception practised upon through all
time, by both moralists and legislators, would have had the diffidence to
believe that the chance that all the world was right, was tolerably good,
until he established the contrary. But Mr. Bentham was a theorist in
the largest sense of the term, and ought not to be severely censured for
believing all the world wrong in this particular instance, inasmuch as he
believed they were wrong in almost all others.
1
JEREMY BENTHAM AND THE
.e.^a
Mr. Bentham thus divides the subject. " In favor of the restraint opposed
to the species of liberty I contend for, I can imagine but five arguments:
"1. Prevention of usury-
"2. Prevention of prodigality.
" 3. Protection of indigence against extortion.
•'4. Repression of the temerity of projectors.
"5. Protection of simplicity against imposition."
He then devotes several chapters of his book to the refutations of these
five reasons, which are all that he can "imagine" in favor of the restraints
proposed upon the loan of money.
The substance of the second chapter consists in a successful attempt to
show that there can be no such thing as usury in the absence of all previous
legal restraint; — that usury is the excess over the rates established by law.
This proposition might have been taken for granted.
In the third letter Mr. B. proceeds to demolish the second reason which
he "imagines" to be one of the reasons in favor of usury laws, the preven-
tion of prodigality. He says, what in general is true, "that no man, prodi-
gal or not prodigal, will ever think of borrowing money to spend, so long
as he has ready money of his own, or effects which he can turn into ready
money without loss." That if he is a prodigal " the usury law will not
prevent him from spending what he has." And that after he has spent his
all, "and has no security to offer, it will be as difficult to obtain money at
an extraordinary rate as at an ordinary rate," and thus, therefore, the usury
laws can be no protection to him.
In his fourth letter he undertakes to show that the Indigent derives no
beneficial protection from these laws, because, supposing him of sound un-
derstanding, he is a better judge than the legislature what he can afford to
pay.
The protection of simplicity forms the subject of the fifth letter, and is the
only remaining reason upon whicti Mr. B. imagines the usury law to rest.
He says, " Here, in the first place, 1 think I am by this time entitled to
observe, that no simplicity short of absolute idiotism, can cause the individ-
ual to make a more groundless judgment than the legislature, who, in the
circumstances above stated, should pretend to confine him to any given rate
of interest, would have m^ade for him."
That even admitting the judgment of the legislature to be better than
that of the individual, still the usury laws can be no protection to him, be-
cause there are many other ways by which a simple man may ruin him-
self, which the legislature has not protected him from, such as buying
goods at exorbitant prices, buying more than he wants, and other similar
cases.
This ends the work of demolishing the five reasons which Mr. Bentham
has imagined were the only reasons upon which the usury laws were
based.
Mr. Benthamt hen proceeds to an enumeration of the positive mischiefs
of the usury laws.
" The first I shall mention, is that of precluding so many people alto-
gether from getting the money they stand in need of, to answer their re-
spective exigencies. Think what a distress it would produce, were the
liberty of borrowing denied to every body." I confess myself unable clearly
to understand what the author means by this mischief. I believe it was
never before pretended that usury laws lessened the quantity of money or
prevented any one from borrowing.
The second mischief is, that if any man is not permitted to borrow, he
must sell his property at a greater loss than the extra interest would occa-
sion. Here, again, he imagine)? that the usury laws prevent men from
borrowing.
T7SURTI.AW. 3
But the third and last mischief is somewhat extraordinary, and proves
not only how bold a man must be who opposes the deliberate verdict of man-
kind by novel and unfounded theories, but how deeply he will plunge into
error, who draws entirely upon his imagination for information which can
be nowhere found, but in the practical business of life. He says —
" The last article I have to mention in the history of mischief, is the cor-
ruptive influence exercised by these laws on the morals of the people, by
the pains they take, and cannot but take, to give birth to treachery and in-
gratitude.
" To purchase a possibility of being enforced, the law neither has found,
nor what is very material, must it ever hope to find in this case, any other
expedient, than that of hiring a man to break his engagement, and to crush
the hand that has been reached out to help him.^^
This is too bad even for a writer who draws entirely upon his imagina-
tion. Had JVIr. Bentham taken the pains to understand and state the
reasons upon which these laws really are founded, and to overthrow
those reasons as successfully as he has the cob-houses of his own imagina-
tion, he might have been entitled to the indulgence of a little sentiment of
this sort. But to steer clear from the beginning to the end of his book of
the sole questions upon which the policy or expediency of such restraints
depend, and then to end with a poetical triumph of this sort, is a liberty
which perhaps no other man but Jeremy Bentham would have indulged in.
— I say to end, because I have given the substance of his book. If it had
been my object to attempt to overthrow the reasons given to support the
propositions advanced, a more detailed statement would have been required
in order to give a fair view of his side of the question.
. But with this reasoning, (though I by no means assent to some of it,) it
is unnecessary to consume time, because I shall endeavor to show that the
propositions, to support which that reasoning is employed, have but a re-
mote connection with the usury laws. If the men of Mr. Bentham's days,
either by their writings or conversations, induced him to believe that the
laws against usury were enacted only for the protection of the prodigal, the
indigent, the projector, or the simple, they must have abounded in igno-
rance, and he in credulity.
The policy and expediency of usury laws must depend mainly, if not
entirely, upon two questions.
1st. Supposing the parties to stand on equal terms, and the bargains
which they make to be, in general, perfectly feir as between themselves, is
it, or is it not for the interest of the public to allow money to be converted
into merchandise, and bought and sold at any price the parties may choose
to slipulate?
2d. Do the parties, in general, meet on equal terms, and are the bar-
gains, in the absence of usury laws, as fair as bargains usually are, in re-
lation to merchandise?
These two questions involve substantially all the other questions that
relate to the usury laws, for if perfect freedom as to the price of money,
neither injures the public nor individual borrowers, any more than the
same freedom in relation to merchandise, then Mr. Bentham is right.
If, on the contrary, this freedom would be injurious to the public, or so
generally to borrowers, as to call for protection from the law, then it is
equally clear that he is wrong. I say it is equally clear that he is wrong,
if the latter supposition is true, because no one admits the evils, and com-
plains of the remedy. The complaint is not that usury laws, as they now
exist in England, do not constitute the best remedy for the supposed evils,
but that the supposed evils have no existence. All that I shall attempt to
show, therefore, is, that these evils always have existed and probably always
will, unless checked by some legislation of some kind or other. If any
4 JEREMV BENTHAM AND THE
discovery of a belter remedy than that resorted to by nearly all the civi- '
lized nations of the world, should be pointed out in this inventive age, let
the new remedy be applied. Until such discovery, the old remedy must
be deemed the best, if the evils complained of really exist.
The little book of Mr. Bentham on this subject was one of the first, if
not the very first that contains a systematical attack upon the whole policy
of the usury laws.
No reformer before his day was bold enough to recommend so wide a
departure from the legislation which ancient and modern nations have been
obliged sooner or later to resort to. Adam Smith dealt pretty freely with
many of the usages and much of the legislation of his own and other
countries. But, intelligent and fearless as he was, he expressly admits the
necessity of the laws in question. When Mr. B. therefore undertook the
arduous task of showing that all mankind were wrong in the conclusion to
Avhich they had arrived, one would have supposed that at least he would,
from a regard to his own reputation, have informed himself upon what
questions the policy of those laws depended. At the present day at least,
it will be admitted that they mainly depend upon the two which I have
stated. Yet, from the beginning to the end, Mr. B. nowhere states, either
formally or substantially, either of these questions. I have given the sub-
stance of his book so far as it relates to the laws against usury. In letter
10, he undertakes to ascertain the grounds of the prejudices against usury.
This attempt I shall remark upon by and by. The other letters may have
a bearing upon the subject, but so remote that, at my time of life, I am una-
ble to discern it.
Still I hear the advocates of free trade in money matters exultingly refer
to Mr. Bentham's book, as settling all the difficulties which surrounded this
intricate and perplexing question. All I ask of the public is to read this
book, after first deciding in their own minds what the questions are upon
which the policy of those laws depend, and if they find those questions any
where stated or discussed, I have been unfortunate enough to overlook the
page which contains it.
1 shall take but a brief view of the subject, because nothing but brief
views on any subject, in this busy age, stand a chance of being read, and
also because I hope to provoke a discussion of the important questions
which it involves, by those better informed than I pretend to be.
1st. I think I cannot be mistaken in saying that the first question upon
which the policy of these laws depends, is, whether it would or would not
be injurious to the public to allow money to become the subject of unre-
strained traffic, like any other article. If such a traffic would not injure
the public, then one of the reasons which have been supposed toexist,jis re-
moved. If it would, then all will agree that they ought to be reinvested
with their original security.
How is it to be decided that such a freedom would injure the public?
The answer is a very plain one. If such a freedom from restraint would
inevitably increase the average rates of interest, it would be a serious evil
to the community. If its tendency should be to reduce the rates below what
they formerly were when the usury laws remained in force, it would be a
blessing. If on the other hand they neither increased nor diminished the
rates, then so far as the public is concerned, the restraints ought to be entire
]y withdrawn, because all penal laws are odious, and when they have no
efTect of any kind, are also useless.
The advocates of the free trade principle, at least those with whom I
have conversed, agree that, so far as the public is concerned, the whole
policy of the laws depends upon the questions I have stated. They con-
sequently contend very earnestly that interest would be lower if the re-
stoints were all thrown off, than they now are, under the partial restraints
USIIRVLAW. 5
that remain. Those who contend for this effect fiom a total repeal, are
principally money lenders, men who are interested in keeping- up the rates
as high as possible. I have had some difficulty in discovering what should
induce men to wish for the repeal of a law, which, as they say, is sure to
lessen the income or interest of their money; still, as 1 know many of
them to be conscientious and upright men, I have never questioned their
sincerity, although it is a sincerity very liable to be turned wrong end fore-
most.
I cannot find that Mr. B. anywhere discusses this question, but he re-
peatedly states opinions from which others of his school infer, that he
thought that the usury laws have a tendency to increase the rates of inter-
est. 1 draw precisely a contrary inference from all that has a bearing on
the subject. For instance, in his second letter, page 1.3, he states, " And in
Hindostan, where there is no rate limited by law, the lowest customary rate
is 10 or 13." " In Constantinople, in certain cases, as I have been inform-
ed, 30 per cent, is a common rate. Now of all these widely different rates,
what is there that is intrinsically more proper than another ? "
He had previously stated that in Ireland it was six, and in the West
Indies eight per cent. If Mr. B. contends that 30 per cent, is intrinsically
as proper as 6, he does not agree with most other advocates of the free trade
system, that high rates are injurious to the public — for if they are injurious
to the public they are not proper.
But can it be seriously questioned by any practical men that high rates
are injurious to the public?
Mr. Bentham, in p. 14, says, " For him who takes as much as he can get
for any other sort of thing, a house for instance, there is no particular ap-
pellation, nor any mark of disrepute; nobody is ashamed of doing so, nor ia
it usual so much as to profess to do otherwise. Why a man who takes as
much as he can get, be it 6 or 7, or 8 or 10 per cent, for the use of his money,
should be called usurer, should be loaded with an opprobrious name, any
more than if he had bought a house with it, and made a proportionable profit
by the house, is more than I can see."
Why a man always has been, and always will be, loaded with an oppro-
brious name, who takes as much as he can get for his money, I will consider
when I come to remark on the fairness of the bargain between the lender
and the borrower. At present I cite this passage as the foundation of the
notion that money is to be treated like an article of merchandise, and that,
in both cases, it is right to take all that the lender or seller can get. My
view of the subject, both as it regards its effects upon the public and upon the
borrower, is, that money is unlike any other article, and so unlike it that the
possessor has neither the legal nor the moral right to take for it all that he
can get. Mr. B. seems never to have given a moment's attention to the dif-
ference between money and merchandise. I will endeavor to point out
what he says he cannot see.
In the first place, all merchandise is, in some form or other, the product
of individual labor or skill. The farmer who produces a hundred bushels
of wheat, the manufacturer who fabricates his bale of cloths, and the mechanic
who constructs a ship, become the absolute owners of the products. Their
right is unqualified, for they are not produced for any specific purpose, but
originating solely in individual labor, they are to be used solely to gratify
individual caprice or individual love of gain. When the original producer
sells them, he conveys all his right to dominion over them, and all this right
and dominion over them passes with the article into whose hands soever it
may come. The original or any subsequent owner may destroy them if he
pleases, and neither the public nor any other individual has a right to com-
plain. So absolute is his right that even the government cannot take it
from him for public use, without making an adequate compensation.
b JEREMY BENTHAM AND THE
On the other hand, money is not orig-inally the product of individual
labor or skill, but is brought into existence by the government. The me-
tallic currency must pass through the mint, or receive in some other way
the sanction of the government before the character of ijnoney is impressed
upon it. Our paper currency is the creature of State governments, who au-
thorize certain agents of theirs, called Banks, "to issue certain amounts.
Thus the origin of the metallic and paper currency is with the government
of the country.
2d. The object of these products of the Government is as different from
the products of individual labor, as is their origin. The object is a speci-
fic one, to benefit the common country at large, by afl^ording them a medium
for facilitating the exchange of all the commodities in which men usually
deal. It is sent out as an instrument to represent the value of all other
articles.
Its main object then was for the public good, as a currency to which all
men might have access. It was never intended as an article of trade — as
an article possessing an inherent value of itself, any further than as a repre-
sentative or test of the value of all other articles. It undoubtedly admits of
private ownership, but of an ownership that is not absolute, like the product
of individual industry, but qualified and limited by the special use for which
it was designed. The first purchaser from the Mint or the Bank of a por-
tion of this currency, purchased with a knowledge that it was the currency
of the country, and that it was designed for that particular purpose. All
the title which he acquired by the purchase, was to use it for his own bene-
fit, provided he did not interfere with the main object of its creation, to wit,
a currency. It is analogous to the use which individuals may make of any
other property created for public purposes. A public or navigable river is
undoubtedly the property of the public, destined for specific purposes and
uses. An individual, one of the public for whose use this public river or
other high-way was intended, may acquire a particular kind of property in
it. He may use it in any way that does not interfere with the grand object
of all high-ways, but if he exceed that object, and undertake to prevent others
from using it in the same manner, he exceeds his right. The owners of the
land adjoining a high-way are the owners to the centre. If a mine should
be discovered under it, they alone could claim it. But this private right
must be so used as not to interfere with the travel of the public. Many
other modes of illustrating the limited nature of individual title to the cur-
rency of the country, will occur to every one.
Can an individual owner of a portion of the currency use it as he pleases,
without regard to the object of its creation? The individual producer of
the 100 bushels of wheat may throw it into the sea if he pleases, and nei-
ther the government nor any individual has a right to complain. But sup-
pose forty or fifty capitalists should buy up all, or nearly all the metallic
currency of the country, (which it is in their power to do,) so that all the
paper currency must of necessity be withdrawn from circulation, and conse-
quently all the business of the country come to a stand ; suppose they should
insist upon their right to use it as merchandise, and keep it locked up in
their warehouses, would any lawyer among us say that they had either the
legal or the moral right so to do ?
In a general sense the Government has the right to prevent an indii'idual
from using any property over which, according to common parlance, he
has an absolute right, from using it to the injury of the public. But this is
a general power, to be exercised by general laws, and in no other manner.
It is wholly unlike the case supposed, for until those general laws are en-
acted, the individual may legally use his property in any way he pleases.
But the right which the Government has to the currency is not a general
right to pass all laws required by the public good, but a specific interest in
USURY LAW,
the thing itself which constitutes the currency. The public is a partner
with the individual. It has a joint interest in the thing itself, and an un-
doubted right to restrain the individual from using it, except for partnership
purposes. The elder right is in the public, and the individual purchased
merely the power of using it, subject to the elder right.
Again — the inherent and inseparable qualities of money are different from
those of any other article. It possesses a power which no other commodit\r
does or can possess. It is beyond the ability of individuals or of the Gov-
ernment, to confer that power upon land or merchandise. The Govern-
ment possesses the power of converting lead, or rags, or silks, into a cur-
rency, but the moment that is done the lead, or rags, or silks become money,
and this superadded character, conferred upon it by the government, clothes
it with a power, different in kind, and greater in "degree, than can exist in
any other article without that character.
This power is separate and distinct from its value. One hundred dollars
in land possesses as much value as one hundred dollars in gold, but much
less power. The land, though of the full value of one hundred dollars,
will not, like money, at all times, and in all places, command one hundred
dollars value, in any of the thousand different commodities which its owner
may want. This power to command every thing else, does not exist in the
gold, or the silver, or the paper constituting the materials of money, but it
arises out of the Act of the Government which impresses the character of
money upon it. Should the Government ordain, that certain peculiar
shells should constitute the currency, and be a lawful tender in payment of
debts, that currency would possess the same power, though probably not
the same value as gold and silver. The power of money, then, over every
other article, arises out of the artificial character given to it by the state, and
not out of the qualities of the material of which it is composed. This power
consists mainly in its convertibility, in the facility with which it may be ex-
changed for any other commodity. If an individual should invent a ma-
chine capable of performing what no other machine could perform, not only
would the materials of which it might be composed be his property, but its
powers and capacities would also be his. The law would protect him in
the enjoyment of this latter species of property, and prevent any other indi-
vidual from constructing or using a similar one, without his consent. This
power and capacity being the fruit of individual skill, becomes the subject
of individual right and property. In theory, therefore, it would seem that
the power of money being the fruit of the industry and skill of the govern-
ment, would necessarily become the property of the government. But in
point of fact, this power was conferred upon it for the benefit of the public,
and becomes the property and right of those for whose benefit it was
invented.
In the next place, it must be admitted that power thus conferred upon the
currency by Government, is not only different in kind from the power
which the ownership of other commodities confers, but that it is almost un-
limited in extent and degree. This extent of power arises out of the fact
that money is indispensable to the business of every man, because every
man is in the community. It being the representation of the value of all
other articles, it is indispensable to the business of all men, because every
man must deal in some one or other of those articles. When I say indis-
pensable I do not mean useful, convenient, or desirable, but indispensable
in its strictest sense, for a man who is deprived of access to money entirely,
must stop his business. Should he resort to a barter trade he would find
so much of his time consumed in making his exchanges, and so many
other obstacles to encounter, that a rival in the same business, who could
command a sufficiency of money, would undersell him.
Money, then, is the subject of want to evtry man in the community, and
of a want so pressing as to be indispensable.
8 JEREMY BENTHAM AND THE
Money is as indispensable to every man, as a license would be in a given
case. Suppose, in a case of war or some other exigency, that the govern-
ment, for purposes of revenue, found it necessary to enact a law that no busi-
ness of any kind should be transacted without a license first obtained, and
that the price of this license should be governed by the amount of business
to be transacted ; suppose also that this law should be rigidly enforced ; it
is easy to see in the case supposed, that without a license no man could
continue his business; in other terms, that the license would be indispensable.
The currency is this license, provided by the government, (not for the
purpose of revenue) but to enable all men to transact their business.
No other article can be named which is indispensable to the business of
every man, consequently in this particular, money is totally unlike any thing
else. It is also unlike all other commodities in this, that there is no one
article that is made the subject of trade, which everi/ man has any occasion
for. On the contrary, select any one we please and we shall find, that
comparatively but few persons are in want of it. The variety of studies
and occupations is almost as great as the variety of commodities. Each man
wants only that in which he deals. Even provisions and clothing consist
of a great variety of kinds, and scarcely one can be selected which all men
want, and no one that is indispensable. In case of a scarcity of one, others
will be substituted. This difference between all other commodities and
money is very material, for money being not only the subject of want, but
indispensable to all men, a scarcity is felt by all men : like diseases of the
blood, it not only affects the heart and the other vital organs, but the remo-
test extremities. No portion of the system can escape its contagious in-
fluence.
A scarcity then in any one of the subjects of trade, affects but a kw, and
that few in but a slight degree, because other articles can be substituted.
If prices should rise considerably above the market value, in 90 days im-
portations from Europe would supply our wants at least, if not reduce the
price. There is always a physician at hand for the diseases of trade. But
a scarcity of money cannot be cured by substituting something else. Money
and nothing but money will supply the wants of individuals. Nor will a
supply from abroad cure a disease of the currency arising from scarcity, as
in the case of merchandise, for the owners of the latter article send it
wherever prices are highest. But the owner of money is governed by a
different rule. In general he keeps it under his own eye. He prefers
loaning it to men and upon security, well known to him. He may be wil-
ling to invest it in the stocks or lands of a foreign country, but very rarely
does a capitalist send his money to a foreign country to loan to individuals.
He has to encounter the double risk of the solvency of his agent, as well
as that of the borrower. For many years money has commanded from
twenty to thirty per cent, in manyof the western states, upon landed security,
while it has been abundant in England and Holland at three and four.
There is another point of view in which money is unlike other articles.
It is this, that a scarcity in the latter rarely ever occurs, a general scarcity
never ; I say never, because for the last forty years I never knew a general
scarcity of all articles, and but a few instances in any one article. But the
scarcity of money has been the theme of general complaint. It has existed
(either real or artificial) as long as the oldest of us can remember, and the
reason is found in the facts before stated, that it is indispensable to the busi-
ness of every man.
Another essential difference between the two subjects under considera-
tion, consists in the facility of creating an artificial scarcity of the one, and
the difficulty, if not impossibility, of creating such a scarcity in relation
to the other.
Money is concentration in its very nature. Its home is the pockets of the
USURYLAW. 9
few. Under the free trade system, this concentrative quality would natural-
ly increase. Merchandise, on the other hand, is diffusive. The object of
its creation is distribution and consumption. Without this consumption,
trade could not exist, and its natural effect is, that merchandise of all kinds
is found in great abundance all over the country. When a sale of goods,
of any kind, takes place, they part from their owner never to return again.
They abide but a short period with no one but the ultimate consumer.
Money, on the other hand, is loaned, not sold, and it returns to its owner
invigorated with additional power by an increase in its amount. This ten-
dency, in merchandise, of diffusion among the many, and in money, of con-
centration among the few, prevents an artificial scarcity in the one case, and
facilitates it in the other.
There are other facts which increase the difficulty on the one hand, and
entirely remove it on the other. The specie currency of the country, if I
mistake not, is estimated at about $40,000,000. The paper at about eight
times that amount, or $320,000,000, while the subjects of trade are supposed
to be at least ten times the latter amount, or thirty-two thousand millions
of dollars. To attempt to create an artificial scarcity in all the various
subjects of trade therefore would be little short of madness.
All that the most visionary would deem practicable, would be to effect an
artificial scarcity in some one article. Suppose flour should be selected,
and a few wealthy capitalists should buy up two or three millions in value
of that article. Two hundred thousand dollars in flour cannot well be con-
cealed in a pocket-book or in a vault. The attempt would of course be-
come generally known, and probably never repeated. Nine-tenths of the
people, rather than such a combination should succeed in raising the price,
would substitute some other article. If there should be a partial advance,
the evil would be very limited in duration. But the fact that such combi-
nations do not exist to any extent, and never have, is sufficient proof that
they will not exist in future. I suspect that the truth of the case is, that
there is more danger of loss, than chance of gain, by such experiments.
Flour is a perishable article. Almost all kinds of merchandise are subject
to great fluctuations in price. Importations, to supply the quantity hoarded
up by speculators, would soon follow and prevent the occurrence of the
threatened evil.
The facilities, however, in the case of money, to produce an artificial
scarcity, are much greater. I do not mean to affirm that even in respect
to money such a scarcity has ever been produced. All I mean to say is,
that it may be produced with much more ease than in relation to any other
article. Thus, if a few large capitalists should control $10,000,000 of the
specie currency, the Banks would be obliged to withdraw from circulation
say $80,000,000 of the public currency. This of itself would, under the
free trade system, at once raise the rates of interest up to !^0 or 30 per
cent. In fact there seems to be no need of any action on the part of the
capitalists. All that is necessary is to pretend that a scarcity exists, and
what means have the public of ascertaining the truth ? But in the case of
merchandise, the fact of a real scarcity or a pretended one, can be much
more easily ascertained.
But in relation to the subject of scarcity, money differs essentially from
merchandise not only as it regards the facility of creating it, but in its con-
sequence Vi'hen created.
Suppose a stranger upon entering a foreign country, should find a small
portion of the people afflicted with a slight disease, of short duration, and
which visited them every ten or twenty years. That this disease occasioned
but little pain and no deaths ; would he consider it among the leading ca-
lamities of life, or even as a ver}' serious evil.
Suppose, however, that in the next country which he' visited, that he found
2
10 JEREMY BENTHAM AND THE
nearly every man, woman and child in deep distress; all writhing under
severe pain, some in the agonies of death, and many gone to the lombs of
their fathers. Suppose that he should be told that the disease which caused
all this suffering, was produced by a want of food ; that it visited them
nearly every year, and that the want of food was occasioned by the govern-
ment allowmg individuals to buy up all the provisions which had been de-
posited in the granaries for public use, and to impose such exorbitant
prices, that few if any were able to supply themselves with the necessaries
of life, would he not be apt to rank this among the real calamities of life?
The difference between the extent and degree of suffering in the two
imaginary cases is no greater than between that occasioned by a scarcity
(real or pretended) of any one of the articles of merchandise, and a scar-
city of money. In tl)e case of a scarcity of merchandise, very few are af-
fected at all ; that few in a very slight degree, for a short period, and the
disease happens once in ten or twenty j^ears. But in the case of money,
it goes home to the business of every man, rich and poor. It pinches all —
it ruins many ; and what is its worst feature, it is of frequent occurrence.
What would be the opinion of any man of common intelligence, of the wis-
dom of that government which, after providing a supply of food for the
wants of the whole, and at the expense of the whole, should, instead of fixing
a reasonable price which should enable all to command a portion, convert
it into an article of trade and speculation, and thereby defeat the whole ob-
ject of such an institution ? The currency was created by government, at
the expense of the whole, and for the good of the whole. It is as neces-
sary to the wants of business as food to our physical wants. Once allow it
to become an article of merchandise, and you effectually starve the business
of the country.
It will be perceived that my object thus far has been not so much to sus-
tain the policy of the usury laws, as to show how totally unfounded is the
basis of the opposite reasoning, that money is like any other article of
merchandise, and therefore any lender has a right to take all that he
can get.
I have attempted to show that it is unlike merchandise in the following
essential features.
1st. That money is the creation of government, merchandise of individual
industry. Its origin is therefore different.
2. That the object of government in creating money was as a currency
for the convenience of all, whereas the object of the product of individual
industry is the advantage of the individual alone.
3d. That the title of an individual to merchandise is absolute, the public
having no interest in it. But that his title to a portion of the currency is
qualified, he having no legal, at least no moral right to prevent the object
of its creation
4th. That money differs from all merchandise in the power which is
inseparable from it. That this power was conferred upon it by govern-
ment, and that it is the right and duty of the government to see that a power
imparted for the general good shall not be perverted to the injury of the
public.
5th. That this power is the necessary consequence of the character im-
posed upon it by government, money being the only instrument of exchange,
and therefore indispensable to the business of all.
6th. That money being generally in the hands of the few, the facilities
for creating an artificial scarcity, are much greater than for creating an
artificial scarcity of merchandise.
There is another argument, used by law, quite as unusual as the one I
have already noticed. It is this, that usury laws have a tendency to keep
up the rates of interest, because tlie lender who violates those laws, will
USURYLAW. 11
make the borrower pay for the additional risk he incurs. I should not
have noticed what I consider is not even a plausible argument, were it not
for the fact that I find it in the mouth of every free trade man with whom I
converse. This, and the one already considered, are about all the weapons
which their armory contains. The easiest way to dispose of it is, to admit
the fact, that when a lender does violate the law, he indemnifies himself for
the risk of that A'iolation. Does this prove that usury laws have a tendency
to increase the rates of interest? What would, not only that individual,
hut all other individuals, have taken in the absence of usury laws? in the
absence of that salutary moral restraint, which comes powerfully to the aid
of those laws? This argument makes it a matter of reasoning, whether
these laws had that eflfect or not. The free trade reasoners seem to have a
slim opinion of facts and experience. All that the case put by Say proves,
is, that in that one case the lender indemnifies himself for the additional risk,
but he forgot to state that where there was in England one case of violation
of the law, there was ninety-nine of conformity to it. Suppose for a mo-
ment that the fact is, not as I know, but as from my own e.xperience under
both systems I believe it to be, that in England and in this country, under
those laws, take all the contracts for the loan of money together, there was
not one case in a hundred of an excess of the legal rate. In Rhode Island
banks are very numerous in town and country. Nearly all our loans were
from the banks at the legal rates. No bank, to my knowledge, ever dared to
exceed that rate, because a forfeiture of the debt might be the result, and
that forfeiture the directors who should have violated the law, would have
had no right to have charged to the bank, but would have been obliged to
have shouldered themselves. They therefore run a great risk of detection,
and in case of escape, they would have made nothing but their portion of
the excess as stockholders. The law, therefore, was a perfect protection
for all borrowers from the bank. While those laws were in force, there-
fore, and the banks were obliged to loan at the legal rate, few men borrowed
at all from out door lenders, and none in good credit would give more than
six per cent., so long as he could hire of the banks at that rate. The con-
sequence was, as I believe it always has been in England, that out of all
the contracts made, not one in a hundred exceeded the legal rate. Suppose
then that I am correct in this proportion, it follows that if there were one
hundred loans, of one hundred dollars each, ninety-nine of them at six, and
one at twelve per cent. ; the average rates in Rhode Island under those
laws, was six and one-sixteenth per cent. The question is wholly mis-stated
by Say, for instead of inquiring the eftect of usury laws upon lenders gene-
rally, he inquires what their eflect is upon the one man in a hundred, wil-
ling to incur the risk of their violation. A fair test of their effect is, to
ascertain the rates in general ; that is, the average rates upon the whole
capital loaned, in countries with and in countries without these laws. Per-
haps a still better test is the average rates in the same country, under the
different systems. By that test, I am willing that the question shall be
decided.
In Rhode Island, a virtual repeal of those laws took place in 1817. From
that period to the present time, a gradual increase has taken place. Direc-
tors of banks, finding themselves free from the personal responsibility of a
forfeiture, began the free trade music by shaving drafts. They were not
bold enough to take excessive interest upon notes for a considerable period,
but excessive interest by way of charging the difference of exchange upon
drafts was so pleasing an employment, that they had but little left for
notes. Money became scarcer and scarcer upon notes, but generally abun-
dant upon drafts, till at length the exactions of some few of them, (there
were several honorable exceptions,) became the subject of universal com-
plaint, and the legislature interfered by a law, which I hope the good sense
12 JEREMY BENTHAMANDTHE
of the people will second them in enforcing' with the utmost strictness.
This is the result of the free trade system in Rhode Island. If I have fellen
into any error in this statement, there are those around me better informed
than I am, able and willing to correct it. What the result has been in
Massachusetts 1 am unable to state, except from information too vague to
rely upon.
In New- York, a loop-hole just large enough to escape through, had ad-
mitted all the evils of the free trade system. No one pretends that since
the relaxation of these laws, the rates are lower than formerly.
In these three instances of relaxation. New- York, Massachusetts, and
Rhode Island, I believe, all business men will agree, that for some reasons
or other, interest has increased. No doubt the lenders will attribute it to
other causes.
Say informs us, that in ancient times, the more severe the penalties the
higher were the rates; but he furnishes no facts to justify his opinion. On
the contrary, the only fact he does state, refutes the whole proposition. He
says, that letters patent are still extant, authorizing the Jews to loan at
eighty-six per cent, per annum. Here then is the customary rates in that
reign under the free trade system. There was no indemnity for the risk
of violating the law, because those rates were authorized by law. Previous
to the reign of Henry the VIII., the customary rates were forty per cent.
The taking any interest was then denominated usury. In the thirty-seventh
of Henry the VIII., the rates were established at ten per cent. They were
reduced from time to time, until the reign of Anne, when they were estab-
lished at five per cent., and so continued until the present day. An excess
of that rate, subjects the lender to the forfeiture of the debt, and an additional
forfeiture of three times the amount. These penalties are of great severity,
and according to Say, ought to have increased the rates of interest. But
how is the fact 1 Why, that the people have conformed to those rates as
they were successively reduced, and instead of a general increase — in what
country in the world (except perhaps Holland) are the rates so low as in
England?
Hindostan, Mr. Bentham states, is a free trade country; and he explicitly
admits that the lowest rates there are from ten to forty per cent. The
•usual rate, I believe, is about twenty.
China is practically, and I believe legally, under a similar system. A
very intelligent merchant, for many years a resident in that country, informs
me, " That in China the inhabitants may be classed into the very rich, the
middling, and the very lowest. The rich are very few compared to the
middling. They usually possess an ensign of office, but are not allowed
to exercise any of its duties, so long as they pursue other avocations. This
distinction protects them from the impositions of the petty officers of the
government. In China there are no laws limiting the interest of money,
or none that have any effect. The rate of interest is very high, varying
from twelve to thirty per cent. Those who are reputed rich, and can have
great influence with government, can borrow at a comparatively low rate;
whilst the middling class, comprehending the tradesmen, the mechanics,
and the manufacturers, pay a very high rate. A silk manufacturer, wish-
ing to execute an order for one thousand pieces of satin, must borrow in
order to pay for colouring, weaving, &c. This will consume about three
months, and it is very common to pay two per cent, a month, for such ope-
rations. Mechanics and middling class merchants, in general, pay two per
cent, a month. For small sums, three per cent, a month is very common.
Monty shops, as they are called, are numerous. It is common for those
■who do not own shops, to send their money to them to be loaned. There
are many lenders who come to Canton from other provinces, and lend
USURYLAW. 13
money in large sums. They live in a penurious manner, and are called
'blood-suckers.'
" From this description of their system, it may be perceived, that the
middling class are always kept in a state of dependence, the profit of trade,
manufacturing, and labor, being absorbed by the few who control the pro-
perty." Here, then, is another tendency of the free trade system, to lower
the rates of interest.
Mr. Bentham has written a chapter upon the grounds of the prejudices
against usury. These prejudices, according to him, originated in two facts,
one the saying of Aristotle, "that money is naturally barren ;" and the other
the religious prejudices against the Jews. The supposed saying of Aris-
totle, he chooses to understand in a literal sense, "that notwithstanding the
great number of pieces of money that had passed through his (Aristotle's)
hands, and notwithstanding the uncommon pains he had bestowed on the
subject of generation, he had never been able to discover in any one piece
of money, any organs for generating any other such piece." Did Mr. Ben-
tham intend to impose upon his readers a belief that such was Aristotle's
meaning? He surely could not have believed it himself. Yet strange as
it may seem, this construction has gone into the books of the free trade
writers, and some others, and the money lenders profess to believe it. The
obvious meaning of this brief sentence is merely to express the common
opinion then, and the common opinion now, that the lender of money ought
not to be encouraged, because he produces nothing, which is literally and
substantially true, notwithstanding the labor of the modern theorists to
prove the contrary. The hirer, by his own industry, aided by this instru-
ment called money, may produce a ship, or a thousand bushels of wheat,
and thereby add to the previous stock. But the lender produces nothino-.
His money was the instrument which assisted the hirer to produce the ship
or the wheat. So would the loan of a plough, a saw, or any other instru-
ment, have been of service to the borrower, but that does not constitute the
plough the producer of the wheat, or the saw the producer of the ship. Nor
is the loaner of money any better entitled to the merit of being a producer,
than would be the loaner of a plough or a saw. The plough is an instru-
ment that aids in but one purpose. The saw an instrument aids in many
purposes, and money an instrument that aids in all. Hence its command-
ing power.
This was the meaning of the phrase of Aristotle, "that money is natu-
rally barren."
Mr. Bentham is quite as unfortunate in his next attempt, in which he
attributes the early usury laws to the prevailing prejudices against the
Jews.
Chesterfield informs us, that there is but an inconsiderable few, even
among the intelligent, who think for themselves. This is undoubtedly true
in relation to what they are not immediately interested in. That but very
few men ever thought of this false and absurd st-atement of Bentham's, is
undoubtedly true. It has been taken entirely upon trust. I hope the com-
munity, before they take more of this Bentham paper, will require as many
endorsers, as money lenders usually do.
Mr. Bentham is obliged to admit that nearly all the civilized nations of
the world, ancient and modern, have passed laws against usury. The ex-
istence then, of such laws is admitted, and the only question is ?v?ii/ they
were enacted. Mr. Bentham says on account of the prejudice against the
Jews. Now in point of fact, in all or nearly all the nations that ever re-
sorted to such laws, the free trade system prevailed centuries before usury
laws were thought of. What nation ever enacted a penal law, until the evil
existed? Penal laws are among the last species of legislation resorted to.
The law of Athens, until a pretty late period, was, that " A broker shall de-
14 JEREMY BENTHAM AND THE
mand no more interest money than what he agreed for at first." Lysias
Orat. 1 in Themnestum.
" Let usurer's interest money be moderate." Ulpiemus.
Say says, that marine interest in Athens, was sixty per cent., when in
ordinary cases it was commonly not more than twelve. It is not my pur-
pose to do more on this point, than to show how utterly groundless is the
assertion of Bentham that usury laws grew out of prejudices against the
Jews. This is accomplished by merely stating what every man must at
once perceive the truth of, that the Grecian and Roman laws could not have
originated in a prejudice of that kind. They first tried the free trade sys-
tem, as almost every other nation, ancient and modern did ; they found that
the money lenders were exorbitant in their demands; that the power of
money at thirty and sixty per cent., concentrated all the wealth in the hands
of a few, to the ruin of the industrious of every trade and profession. This
was the experience of Rome and of Athens, and so severe was that trial
and experience, that in the former, the state was convulsed by the revolu-
tions produced by the exactions of the usurers.
Try the same free trade system in this country, and if we do not in
twenty years create a war against property generally, then I shall conclude
that no reliance is to be placed upon history and experience.
It was not on account of prejudices against the Jews then, that the Greeks
and Romans resorted to these restraining laws, for if I am not very much
mistaken, they had few or no Jews among them.
In modern Europe, the Jews were to be found in almost every city, and
it is probably true, that a considerable portion of the money was monopo-
lized by them. But what but excessive interest enabled them to monopolize
it? What created the prejudices against them, but the very practices now
attempted to be legalized in this country.
But upon what authority does the assertion of Mr. Bentham rest, that
these prejudices occasioned these laws? Upon this point the opinions of
ancient judges vary, some of them contending that by the early laws, the
Jews were permitted to take usury, (all interest was then considered usury,)
and that the prohibition extended only to the Christians. Some of the an-
cient statutes refer to the Christian brokers. Ord says, " In the time of
Edward I., Edward II., and Edward III., many commissions were granted
to inquire of Christian usurers, and many were indicted," &c.
But be the object of the early statutes what they may, both the Jews and
Christians did take from 40 to 100 per cent., and the natural question is
what enabled them to exact such unconscionable rates ? Was it the power
of the Jews personally ? They were a proscribed sect. — Even to this sect,
the Christian did pay these unchristian rates. The reply is too obvious, it
was the power of the money — and the fact admitted by Bentham proves in-
contestibly, that through all time, money has possessed the power of dictat-
ing its own terms. JVIoney was probably as plenty then, in proportion to
the amount of business, as at the present time. It was not the scarcity, it
■was not the influence of the Jews, but it was the inherent and absorbing
power of the money itself that governed and controlled the whole business
of those early nations. All Mr. Beniham's facts are directly opposed to
■his theory.
The statute of Anne, enacted about 130 years ago, and now in force is,
if I may use the expression, a perfect statute. Its preamble bears upon
this question : " Whereas the reducing of interest to ten, and from thence
to eight, and thence to six in the hundred, has by experience been found very
beneficial to trade, and improvement of lands ; and whereas the heavy bur-
den of the late long and expensive war, hath been chiefly borne by the
owners of the land of this kingdom, by reason whereof they have been
necessitated to contract very large debts, and thereby and by the abatement
USURYLAW. 15
in the value of their lands, are become greatly impoverished ; and where-
as by reason of the great interest and profit of money made at home, the
foreign trade has been neglected," &c.
The practical men of that day found, what we now find, that at 6 per
cent, the lenders of money on the whole become rich faster than any other
class.
Mr. B. frequently intimates, that it was a prejudice against the ricA, which
in part occasioned these laws. — Then they did get rich. But it is some-
what unlucky as an argument. Have the kings and nobles of England,
of France, of Russia, and of nearly all the despotic governments of Europe,
ever been accused of passing laws against the rich by any other man than
Jeremy Bentham ? The real truth is that this feeling, which he calls pre-
judice, is the result of the moral instinct of mankind. It existed in full
force among rich and poor, learned and ignorant, republics and monarchies,
wherever a human bosom was found endued with the knowledge of right
and wrong. It exists now to this day in this country and in every country
on the globe. I appeal to the feelings of every man in the community,
whether any man who lives by habitually exacting excessive rates of inter-
est, is not considered an extortioner? Does he stand as well with the com-
munity as men in general? Why? The reason is obvious. The bor-
rower is the slave of the lender. Advantage is taken of his necessities. He
has no will of his own. The terms are dictated by the lender. It is the
poverty or the necessities of the borrower that consents, and not his judg-
ment. So say all the statesmen of ancient and modern days. So say the
great mass of lawyers, doctors and clergymen that ever lived. So said the
ploughman in the field, the mechanic in his shop, and the merchant at his
desk, all over Europe, Asia and Africa, and (with the exception of the ad-
vocates of the new light) so say the same classes all over the world to the
present day. Let us pause at least before we reverse the verdict of univer-
sal mankind. Let us have diffidence enough of our own judgment to ex-
amine the grounds of this feeling, before wq peril our interests or board
this free trade craft, which upon every trial has lined the shore with its
wrecks.
I will therefore proceed to examine the reason tohy mankind have thus
felt, in relation to this interesting subject. If I mistake not it will be found
that the old notion is the true one, that the lender takes advantage of the
necessities of the borrower. This brings me to a consideration of the se-
cond question — whether the bargain, in the absence of any restraint, is
usually fair between the parties.
In the consideration of this question I hope it will not be understood that
I mean to cast the slightest imputation upon the motives or the general
moral character of the lender. On the contrary I have no doubt that many
of them really believe that it is right to take all that they can get. They
ought to be exempted from blame, because if they are in an error, they have
been led into it by writers of acknowledged talent and ability. I speak
not of the motives of the men, but the tendency and effect of the practice if
once sanctioned by the Legislature.
In every case, and among all civilized nations, the law requires, as an
indispensable prerequisite to every valid contract, that the parties should
stand on equal grounds. If they do not, but one party (no matter to what
cause owing) has an undue advantage over the other, both common law
and common sense inform us that the bargain is void. A married Avoman
can make no contract with her husband, on account of the influence he has
over her. An infant is not bound, because he has not sufficient discretion.
A debtor, illegally imprisoned, cannot bind himself by a contract with his
creditor, on account of the influence of his desire to escape from prison.
Even if the imprisonment is legal, a Court of Equity will see that the term
JO JEREMY BENT II AM AND THE
of the bargain were fair. For the same reason a Court of Equity will look
with great jealousy upon a contract made by a ward, just after arriving of
age, with his guardian, on account of the influence of the latter over the
former. A female seduced, although she agrees to the dishonor, is not
left without protection, and heavy damages are generally given.
In all these cases the parties agree to the contract which the law pro-
nounces void, because they do not meet on equal terms. No matter whether
the subject of the contract is land, or merchandise, or money. All are
treated alike, and all set aside, because one party possesses an undue advan-
tage over the other. That advantage may arise out of the subject of the
contract, or out of the existing relations of the parties ; but arise from
whence it may, if it actually exists, the law supposes that it will be excused,
because men generally use all the advantages which they possess. I say,
generally, because there are some instances in which perfectly fair contracts
are made with wards, with minors, married women, and prisoners in jail.
There are also some instances of contracts perfectly just, above the legal
interest, between creditor and debtor. All legislation must look at the state
of thing.9 generally, and experience has proved, beyond all doubt, that in
all these cases, if the party possessing the advantage was allowed to use it,
without restraint, that in nine cases out of ten he would have been governed
by no other rules than the wants of a greedy avarice. It is quite a new doc-
trine to me that mankind have approached so near a state of perfectibility
that all restraints upon their lusts, their ambition, and their avarice, may
safely be removed. If it is so, I am very grateful for the information ;
but until I have a little experience that men in power, unless curbed by
constitutions and written laws, will overlook the interest of the public for
their own selfisli purposes; that lust, unless checked by salutary, moral,
and legal restraints, will spread misery and havock around it ; and that
avarice, in the absence of similar restraints, will fill its insatiable maw while
millions around are suffering for food, I must be permitted to raise my
feeble voice in favor of treating all these selfish and extreme passions alike.
Are they not all equally strong ? Does avarice claim for itself a milder
character than belongs to the other two? May we not reason as plausi-
bly in flxvor of abolishing all constitutions and laws restraining the abuse
of official power? Is it not for the public good that power should not be
abused? And does not the interest of the man in power, in a large sense,
consist in advancing the public good ? And yet, does not experience prove
ihat when men acquire power, that the passion called ambition prevents their
taking and pursuing this large view of the subject? It is equally easy to
show, in a broad sense, that the free trade doctrines are the best for the
public, if the possessors of money would use it only with a view to the
public good. But in comes this blind passion of avarice, and urges its
possessor to use all its magic power, for its own aggrandizement.
This I understand to be the principle upon which all usury laws are
founded, and not the visionary principles "imagined" by Jeremy Bentham.
They proceed upon the principle that money possesses a power which
no other article ever did or ever can possess. Is not that true in point
of fact? That the avarice of the lender will urge him on to exact all
that he can get, — Is not that true in point of fact? That the wants of the
knder are in general so great that, in nine times out often he must have the
the money at all events, — Is not that true in point of fact ? That the avarice of
the lender will, in nine times out of ten, induce him to take advantage of
those events, — Is that denied? That the parties do not stand upon equal
grounds any more than a prisoner contracting with his creditor, — Is not
that true? That in dealing for all other articles men do stand on equal
grounds, — That no man can deny.
USURYLAW. 17
If these facts are denied, I. can prove them by volumes of testimony. I
-would take the depositions of the lenders themselves, all of whom know that
they are true.
Am I not correct, then, in saying that the usury laws do deal with money
precisely as the general law deals with all other similar cases? That no
law will permit one man to make a valid contract with another, in relation
to any article, unless the judgment and will of both are equally free ?
The advocates of the free trade system must be driven to take their ground.
They must admit that the borrower is in general a slave to the lender, and
under a weccssif?/ of complying with the terms dictated, and still contend that
the law ought to permit such a bargain to stand, or they m\ist deny the
fact.' I give them their choice. They must lake one or the other. Sup-
pose they deny the fact; I will then bring the general voice of the legisla-
tors, writers, and the mass of society, in all civilized nations, ancient and
modern, against them. Bentham himself admits that this is the unanimous
verdict of the civilized nations of the world, and probably that was the very
reason that he contended that it was wrong.
Does not our daily observation demonstrate its literal truth ?
Why is the borrower of money the slave of the purchaser, and why is
the purchaser of every other article as free to judge for himself as the seller ?
Why can the purchaser of goods always purchase upon his individual credit,
when the borrower of money is always obliged to give bond and mortgage,
or a string of endorsers ? Why has money always commanded this prefer-
ence over every other article 1 Because every man wants money and must
have it. His wants make it indispensable. Because it is generally con-
fined to the pockets of a ^q\n, and always wanted by the many. Because
the constitution and laws render it (and it alone) a tender in payment of
debts. No other article can be substituted.
If we open our eyes we cannot avoid seeing the narrow quarters into
which the borrower of money is driven, and the freedom with which the
purchaser of every other article exercises his judgment. Go into any of
our crowded cities, and we see granaries, storehouses, shops, and other
spacious buildings crowded with merchandise and goods of every possible
variety. In every street, lane or alley, for miles in extent, one uniform
abundance is presented to our view. This is always the case.
But the money of the city is confined to a single street or a narrow alley.
All other articles are abundant and in the hands of the many. Money is
frequently scarce and in the hands of the k\\. In all the trading streets we
see the seller bowing to the buyer, and courting his custom by the most
enticing manners. In the money alleys we see the borrovver bowing to the
lender, with the servility of a French dancing master. The purchaser en-
ters a store with the air of a free and independent man. The borrower
enters a bank with the subdued and sorrow-stricken countenance of a beg-
gar. This is the case now, always has been, and always must be, because
the one is urged on by an irresistible necessity from which there is no es-
cape; the other is a free and independent man, consulting his fancy rather
than gratifying his wants.
If the purchaser is really in want of an article, he goes from store to
store, perhaps from city to city. Wherever he goes he finds the seller
crowding off his goods upon him from a desire to obtain his custom. If,
however, the purchaser is not suited in the article or the price, he can sub-
stitute something else ; wait a month or two, or forego his wants entirely.
In all this dealing the advantage is rather on the side of the purchaser. On
the other hand, the borrower of money has a note due at the bank en a
given day and at a given time, of a thousand or ten thousand dollars. The
tender laws compel him to pay in money alone. He must pay at the time,
or he must be ruined. He can substitute no other article; he cannot post'
3
l8 jtJREMYBENTHAMANDTHE
pone the payment for a month, until it suits his convenience. It is not a
matter of choice or convenience, but of stern necessity. He cannot go to
another city where he is not known, nor perhaps to any other bank there,
the one at which he usually transacts his business.
This bank, or one of its kind friends, will accommodate him at 3 per
cent a month. His life and deatli, his bane and antidote are both before him.
On the one hand is 30 per cent, per year, on the other, bankruptcy, dis-
grace, and ruin. I now ask any considerate man who is not a money lender,
upon whom does the distress operate with the most appalling power, the
prisoner of the jail, or the prisoner of the bank? Would it not be incon-
sistent in the law to set aside a contract with the former, which is only of
occasional occurrence, and allow the latter evil to exist, an evil which hap-
pens more than a thousand times every day ?
I affirm it as a fact, then, which cannot be denied, that the lender does
take advantage of the necessities of the borrower, that the lender generally
knows it at the time, and that many of them do not pretend to deny it ; on
the contrary they justify it, and say that it was the folly of the borrower
to contract debts which he could not pay. It is the folly of a man to get
drunk, but what is the scale of that man's moral feeling who takes advan-
tage of his situation, and obtains from him a deed of the house which shel-
ters his wife and children?
It makes the matter worse that many of these lenders have been deluded
into a belief, that these practices are legal and just. What is done con-
scientiously and sincerely, is generally done with a corresponding zeal and
eagerness. The fanaticism of avarice defends itself with the same argu-
ments as the fanaticism of religion. It inflicts its punishment of fire and
fagot with the same coolness and composure. While the puritans of old
believed that they were doing God service in hanging and burning the
witches, they would naturally look upon the tortures of their victims with
philosophy, if not with exiiltation ; and while the puritans of the currency
believe that they are benefiting the state by establishing their favorite sys-
tem, their tears will not fall very freely at the sight of the misery and dis-
tress which the exaction of thirty or forty per cent, is bringing upon some
of the most worthy and industrious among us.
In most other countries, there exists a check — a moral restraint upon
these excesses, which, under a free tradesystem, would beinefficacious here.
Individuals have some regard to public feeling, and dread the stigma which
such exactions sooner or later fasten upon their characters. To be con-
sidered by all mankind an extortioner, is what the moral sensibilities of
most men cannot endure. This silent and unseen influence upon individ-
uals, is very extensive and efi^cacious.
But in this country, nearly all the money is loaned by the banks, and
we know that their moral sentiments are generally at low water mark. A
corporation has no soul. No one is responsible for its conduct in a moral
view. A strong legal restraint is the only one that will reach it, for it is
merely a legal being. Thi.s power of the creditor, therefore, will be exer-
cised by the banks up to the hilt upon their defenceless victims, in the ab-
sence of usury laws. My propositions then are these, that nothing but the
severest usury laws can keep down the rates of interest ; that whether those
laws tend to increase those rates is a matter of fac^ and thatthe experiment
has been thoroughly tried by other nations, and the free trade system re-
jected ; that this tendency to increase the general rates arises out of the
power of money itself, goaded on by the avarice of its possessors, generally
the few, taking advantage of the necessities of the borrowers, generally the
many; thatthe necessities of the borrower are generally so great that he
has no choice, is not a freeman, and takes no part in fixing the terms of the
Contract. Consequently to permit such contracts to be legal, is to allow
USURYLAW. 19
the lender to make the contract himself; that as this is allowed in ho other
cases, relating to lands, merchandise, or any other article, it ought not to be
allowed in the case of money.
These are the facts which I affirm to exist. The free trade advocates
must either deny, or ihey must admit ihem, Tf they admit them, they must
justify the right of one man to impose his terms upon anotfnr. Because
these facts have been found to exist in other nations — -because they found, by
experience, that one of the parties being a slave, had no will of his own to
•contract, the governments of those nations have found it necessary to fix the
rates for him.
If these facts are still denied, let a committee be appointed by the legis-
lature of New- York, to ascertain them. In the course of the ensuing year,
let the coramitiee ascertain the rates of interest in all the free trade countries,
ancient and modern, and compare those rates with those countries that
have lived Ui[\Aer usury laws; let them compare the rates at the different
periods of lV\e same country, when that country had and had not the benefit
of these laws. This will test the free trade doctrine. Let them also take
evidence and ascertain whether one party to the contract has any will of his
own. For one, I am willing that these much misrepresented laws shall
stand ihe test of these facts. They may be easily ascertained. I have a
full conviction, that they are as I have slated them. But I may be wrong.
Other men of great intelligence view the subject in a different light, and
therefore I am anxious for a test by an enlightened committee, to inquire
into facts. Their report will satisfy the nation Laws on this subject ought
to be uniform through the states, and what state so proper to take the lead
as the empire state of New- York?
If the advocates of the free trade doctrine, in case these facts should be
found against them, should still contend that money ought to regulate itself,
I should think their trade must have made great inroads upon their moral
perceptions. Is ihat free trade, where one party is a slave and has no will
of his own? I thought a contract, the result of free vvill and judgment,
meant the free will of both parties.
But some of them say, notwithstanding all this, that the "laws of trade"
will reffulate money without restraint, just as they regulate every thing
else. The reason why the prices of every thing else regulate themselves
is, that in relation to every thing else, both parries are free. We have the
means of knowing where there is a scarcity of any other article. We judge
for ourselves. We take or we leave it. It is this equal power of the buyer,
to buy or not to buy, that regulates all other articles. When we say, there-
fore, that trade (or prices) will regulate itself, we always mean that both
parties have an equal voice in the contract. But if, in fact, the lender dic-
tates his own terms, he regulates the price. If the borrower is in general
under a necessity of complying with the terms proposed, what agency has
he in regulating the rates of interest?
But, say the apostles of this new light, when money is scarce it will be
high, and so the reverse. But who is to judge when it is scarce? Is it
not the lender, who alone possesses it? Then the power which is asked
for the lender is, to allow the rates to be high when there is a scarcity, and
to make hiin the sole judge whether there is a scarcity or not? That is,
in substance, the sole judge of^e price. In other commodities we have the
means of judging for ourselves. If the seller says there is a scarcity, and
the purchaser opens his eyes and sees that there is not, he will not buy at
high prices, and the seller is obliged to come down, or the articles will rot
on his hands. This equal liberty, and equal means of judging on both sides,
is nil that is meant by prices regulating themselves. But what means has-
the borrower of jiidi^ing of the scarcity of money ? Do we not know that
tht-re is money enough now? That it requires no more money to perform
20 JEREMYBENTHAM.ETC.
the business of society at one price than at another 1 If there is enough
at thirty-six per cent., is there not enough at six ? Is not the scarcity wholly
artificial? And is not the consequence of this artificial scarcity simply
this, that the whole profits of many industrious men for the whole of the
past year, have been transferred to the Ynoney lender, by the operation of
an artificial scarcity. Is this to be endured ? Will it be endured without
inquiring into facts? If the free trade writers are correct, that an absence
of all usury laws does tend to lower the rates of interest, for one I shall be
o-lad to be convinced • but the fact that the lenders themselves are so anxious
for a free trade system, in a jealous or suspicious mind, would not go far to
show that they thought so, for why should they wish the rates reduced?
Let them, however, convince us by facts and experience. I object to the
whole mass of their theories. Scarcely any two of them agree in those
theories. The writers demonstrate these artificial rules, the science of po-
litical (that is national) economy. Why not furnish us with a science of
individual economy? The one is quite as necessary and quite as useful as
the other. The science of prudence, I suppose, would come next, a subject
quite as reducible to rules as economy. The truth is, that literary men of
all ao-es have had some predominate hobby. At one time the science of
astrology ruled mankind. Next comes metaphysics, which employed the
pens of the ablest men of its age. That science is now generally agreed
to deal pretty much in moonshine, and has gone with its fellow science of
astrology to" the tombs of the Capulets.
Nexrcame political economy, which had its day, though a brief one.
We now find it low down in the western horizon, phrenology over our
heads, and animal magnetism about an hour high in the east. What will
come next, no one can ever guess. Come what will, for one, I shall not
abandon the experience and wisdom of mankind very hastily, especially in
relation to a question so nearly touching the safety of property in general,
as the one before us. Property holders seem to forget that they are living
under a republican government, that the general feeling is already suffi-
ciently radical, without provoking it by exactions which even its best friends
cannot justify. The tenure of property is more frail than most men here
imagine. It is inexpedient to exercise all its extreme rights, even if we
admitted that this is one of them. The moral feeling of the great mass of
men is against the right now claimed. That feeling, sooner or later, will pre-
vail and go into our legislation. Is it not better to let it act now, rather
than to wait until the high rates shall sere and exasperate the mass of the
community. Legislation, under such a feeling, might touch upon some of
the necessary and essential rights of property. For one, I had rather come
down voluntarily and gracefully, from a position which cannot be main-
tained, than to be obliged to abandon it in a more awkward gait. Let the
rates be fixed now wlsjle the public n^md is cool. Stop up all the little cat-
holes in your stiitute, *just large eAougJ*^ for«the money lenders to escape
through. Take the English statutes of Anne, which covers every thing,
and we shall have no trouble about two per cent, a month.
If, however, the free trade system is resorted to, give it a fair trial. Re-
move all the present restraints and try over again the experiments which
have so many times been tried and failed. I am very sure it would never be
tried but once, but I much fear, that in that oi^ trial, the system of extortion,
which would be the consequence, would hurry us fast and far down towards
that power, which feels no attachment to property, and no sympathy for the
sufferings of its possessors. _^^ ,vtt^t-,t-.
^ A RHODE-ISLANDER.
December, 1836.
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