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solutely bent on self ruin, or a projector the most desperate in his designs, might, if possessed of good security, enter the market with'out encountering, in consequence of his character, any opposition to the gratification of his wishes.
The protection of simplicity or ignorance from the fraudulent designs of deeper cunning, seems, however, a legitimate and even a feasible object of the legislature, in comparison with that it proffers to the spendthrifts to save them from the consequences of their own extravagance and folly. The ruin of an individual even by his own acts, is undoubtedly a circumstance to be lamented ; but vain would be the presumption of a ruler who could hope by any general laws to prevent such an occurrence. In a free country the subject could not be placed in a state of pupillage, nor could any prudent government thinkof imposing limits to individual expenditure. Montesquieu speaks of the necessity of having sumptuary laws in democracies, but could he devise the means of enforcing them? Every individual must of necessity be the best judge of the most proper means of regulating his private concerns, as he will ever be found the best guardian of his own property. I feel happy in being again enabled to refer the support of this opinion to the same high authority as before; for Ifind no writer more decidedly hostile to every interference on the part of the government in the management of private affairs, than Dr. Smith. " It is the highest impertinence and presumption," says that enlightened politician, "in kings and ministers to pretend to watch over the economy of private people. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs: if their own extravagance does not ruin the state, that of their subjects never will." (Page 106. Vol. II.) And again he says, (page 243.)" the statesman who would attempt to direct private people in what manner they would employ their capital, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted not only to no single person, but to no council or senate whatever; and which would no where be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."
But why should projectors be thus invidiously distinguished, or be classed with prodigals, as the wasteful children of extravagance? A projector, abstractedly considered, is neither a pernicious nor an useful member of society ; his character can be estimated only by the nature of his undertakings. Like Fortune, it is the adjunct that renders him a blessing or a curse. But had an interdict in early ages been framed against the enterprises of adventurous men, whit would be the present condition of society? The annals of every country, the records of every science, proclaim the services of this proscribed race. Let us cast an eye over the vast career of human advancement, and mark how it has been borne onwards from the nakedness of savage life to the charms of social intercourse.—Let us observe the various and almost minute particulars now comprised in the sum of our actual enjoyments : let us note the union of nations dispensing their mutual advantages, and the discovery and creation of even new worlds, enlarging and promoting the means of universal happiness, and with this catalogue of wonders and of blessings before us, let us ungratefully denounce projectors and speculators as likely to ruin their country with themselves, by dissipating its capital. The secrets of nature are laid open to our view, and rendered familiar to our senses by daily use; the bowels of the earth have been explored; the ocean has become tributary to our luxury; and man, by ingenuity and enterprise, has, from being a weak, helpless and solitary being, asserted his birthright, and is become lord of the creation. Let us confine the prospect to our own country, which might be emphatically called the land of projectors, and we shall find that to their daring enterprise alone, Great Britain owes her proud elevation. Our canals, the greatest sources of internal wealth, our manufactories, and in particular, our wonderful machinery, giving to labor and capital a power almost supernatural, and securing to British industry the markets of the world, are all the offspring of projects. In these various exertions of human ingenuity, some must doubtless have proved unfortunate for their projectors; butthe country has obtained even in their misfortunes a lasting service, which should ever be acknowledged with gratitude. There are few schemes of a public nature undertaken, which, however wild, do not in some measure tend to the general good. Their feasibility may however be safely left to the consideration of the projector himself, whose most sanguine hopes must be to a great degree counterbalanced by the dread of loss, on whom alone the responsibility and danger rest, and on whom also, the difficultieshe mustexperience in raising the funds necessary for his purpose, must act as a sufficient restraint and discouragement. With these considerations operating against the enterprising spirit of his speculation, and a fair allowance for his possessing ordinary discretion, we may justly conclude, that the chances of ultimate success are by many degrees in his favor. There would therefore be as much impolicy as injustice in debarring (if it were possible) an enterprising individual, conscious of his power of serving himself and his country, from as free an access to the money market as is enjoyed by other people. Such a restraint,by its indiscriminate operation, prejudices every speculation, stifles the germs of future prosperity, and dooms the world to languish in stillness and apathy, debarred from the possibility of further improvement.
Those who imagine that the repeal of the usury laws must occasion frequent and sudden changes in the rate of interest, seem to argue rather from their own fears than from the results of experience. The value of money is in fact less liable to sudden fluctuations than almost any other commodity, if the officious intermeddling of governments did not interrupt its equilibrium. All writers on political economy agree that the value of money must be regulated by the profits of stock. These have regularly and gradually diminished since the revival of commerce in Europe. Of this fact the progress of the usury laws, by uniformly diminishing the rate of interest, afford sufficient evidence, because it has been the constant object of the legislature to keep the legal rate somewhat above that of the market. In proportion as capital accumulates, the rate of profit diminishes ; but this is a gradual and slow operation. Now, although by the opening of new markets, by the influence of political events, the profits of trade might be affected, the effect would be only political and temporary. It would be experienced in only one branch of trade, or by a few merchants. If it be favorable, the employment of new capital in the same channel, or if it be unfavorable, the direction of the capital to some more profitable use, will speedily and safely correct the anomaly.
It is however obvious, that if the value of money be liable, by whatever circumstances, to sudden or great alterations, the present system cannot be free from them, or obviate their inconvenience. They must exist under the present laws, or no argument can be founded on them of the slightest importance; and if so, the very existence of the usury laws enhances the evil. Should the market rate of interest rise to six, seven, or eight per cent, while the legal rate remains at five, the difference is sufficient to give birth to usury, with all its train of real and imaginary evils. The severe provisions of the law prevent loans from being negociated at even the market rate; for to that, the borrower must add a premium to ensure the lender from all the consequences of the proceeding.
But the very establishment of a legal rate of interest must of necessity suppose an equability in the value of money—such at least as will not exceed the maximum established. Should the legal rate of interest exceed this, or even amount to it, the danger of private usury, equal to that caused by a total prohibition, is avowed by the advocates for the usury laws. The opinion of Dr. Smith is clearly expressed upon this point, fIn countries," he says," where interest is permitted, the law, in order to prevent the extortion of usury, generally fixes the highest rate which can be taken, without incurring a penalty. This rate ought always to be somewhat above the lowest market price ; or the price which is commonly paid for the use of money by those who can give the most undoubted security. If this legal rate should be fixed below the lowest market rate, the effects of this fixation must be nearly the same as those of a total prohibition of interest. The creditor will not lend his money for les3 than the use of it is worth, and the debtor must pay him for the risk which he runs by accepting the full value of that use. If it is fixed precisely at the lowest market price, it ruins, with honest people who respect the laws of their country, the credit of all those who cannot give the very best security, and obliges them to have recourse to exorbitant usuries. In a country such as Great Britain, where money is lent to government at three per cent., and to private people on good security at four and four and a half; the present legal rate live per cent, is perhaps as proper as any." This rate of five per cent. Dr. Smith approves of, solely from a belief that it is and will continue to be somwehat above the ordinary rate of the market : he must therefore have acknowledged it to be too low should it ever fall below that rate. We may thence conclude what his opinion would have been, had he possessed the experience of a few later years, which proved that the rise of the market rate of interest over that established by law, became something more than a matter of speculation.
How far the convenience of government might be affected upon important emergencies by a repeal of the usury laws, might be estimated by the reflection, that on the pecuniary transactions of the chancellor of the exchequer the usury laws do not exercise the remotest influence. Loans are negociated, funds are created, exchequer bills issued, contracts formed, without the least reference to the legal rate of interest; nor are there any occurrences in the market so arbitrary as such proceedings. They are regulated altogether by a consideration of the actual wants of the treasury, by the amount of the money disposable in the market, by the competition between the capitalists, and by the general market rate of interest, which, as I have already said, bears no reference to the maximum by law established. Upon such considerations the repeal of these laws could produce no effect, unless the measure could at the same moment materially enlarge the means of employing the disposable capital of the country.
I am willing to allow that apprehensions might very naturally be entertained, lest the sudden disseverance of the usury laws from our system, should produce some inconveniences; but I trust, on a maturer consideration, that they will be found of less magnitude than they appear at present. The security of pre-existent bargains will, it is feared, be affected by the measure of a repeal, and individuals now reposing in confidence on the faith of agreements, deriving however their principal guaranty from the known legal rate of interest, may be suddenly called on for the repayment of money or the foreclosure of mortgages. This fear originates in the idea that the removal of the usury laws must of necessity raise the market rate of interest universally, whereas this rate must ever depend upon other circumstances before enumerated, wholly dissevered from any connexion with the usury laws; but admitting that such demands should be urged, the facility of recurring to the money market, afforded by the repeal to the creditors, will tend in a great measure to obviate this inconvenience to individuals. It is however very doubtful, whether, if the usury laws were this instant repealed, the debtors would derive any advantage from recalling their money; for most of them have advanced it, through the medium of the indirect modes practised by secret usury, at the very highest rate, and have every reason to be satisfied with their present application of it. If it be granted on annuities, one of the most usual modes of pecuniary accommodation, it either cannot be demanded, or if it could, the debtor would probably have the most cause to be pleased with a proceeding that would enable him to enjoy an equal advantage at a lesser rate. For he might, in case of the repeal, procure money at its fair and proper value, without undergoing the expense incurred by the secret practices, of insuring the lender against the consequences of his illegal actions. If, however, the danger of present inconvenience to individuals, who have borrowed money on mortgages or other securities, be still apprehended, and should the increased facility of access to the money market be not considered a sufficient antidote to counterbalance the evil, the Court of Chancery might, by a clause in the bill of repeal, be empowered to interfere in cases of hardship or severity, for a period to be limited—say seven years ; at the expiration of which it might be presumed, that every arrangement would be completed to rescue debtors from any subsequent inconvenience. With respect to another hardship with which individuals are said to be threatened by the repeal of these laws; namely, the expense of frequent conveyances of the same property—this, from the reasons I have just noticed, is not a necessary consequence of the repeal, even in the first instance, and will subsequently be obviated with ease by the course of practice.