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founded on erroneous principles. In considering the origin of these laws and the state of society that give them existence, I have traced them to narrow views of self-interest in the legislators, and in those who countenanced this enactment; and in observing their subsequent existence and progress, I have accounted for both solely in the habitual veneration that men entertain for customs long established, and a prejudice in favor of the superior wisdom and virtue of ages that had long preceded. But neither does the virtue of a popular assembly in Rome,inflamed by some factious tribune, nor the political science of a feudal baron, appear well calculated to regulate the commercial system of Great Britain in the nineteenth century ! Even an English parliament under aHenryor a James, when very little capital had as yet accumulated in this country, or had given weight to the voice of its possessors, could not be considered a very sufficient guide on subjects of political economy, Parliament then consisted almost exclusively of landed proprietors, not well aware of the secret sympathy existing between the several classes in the state, who, deeply imbued by the prejudices of the times, and all would-be borrowers, thought it highly expedient for their own advantage to depreciate the value of money. The immediate object of such lawgivers, was to obtain for themselves the use of capital for less than its actual worth; but in this they failed, for their wise heads could devise no means of compelling the monied men to lend their capital for little or nothing. Their successors even in our days, mistook their object, and in their zeal to maintain the system they inherited, imagined that the usury laws had been framed for far nobler and more generous purposes, and argued so cunningly to prove the sagacity of their ancestors, that were the worthy gentlemen to be aware of all the fine things said of their wisdom, they would " burst their searments" to express their pride, gratitude, and astonishment. As the commentators upon Homer are said to have discovered more beauties in the Iliad than ever the poet fancied, so have these expounders of earlier laws discovered in their provisions more exalted notions of legislative wisdom than had ever influenced the enactors. Such fancies are easily transmitted through successive generations, and being among the notions earliest imbibed, continue among those most reverently fostered. Experience, however, has at length exposed their fallacy, and the united interests of every class in the state alike require the termination of a system, that interrupts the progress of their mutual prosperity.
Were this feeling expressed solely by the capitalists, we might possibly distrust the prudence of acceding to a request which would at first sight appear dictated solely by a regard to their own interests, though the justice of such a demand could not be questioned. The limitation of the value of their property is no more consistent with justice or policy, than if the legislature were to impose a maximum rent upon houses or land. There is, however, a happy secret connexion between the interest of all classes within the state ; and any restraint imposed by the inconsiderate jealousy of one upon another, is always sure, by a species of political retribution, to recoil upon the oppressors. Commerce and agriculture therefore have shared in the evils resulting from the usury laws, as deeply as did the monied interests. In commerce indeed, the consequences of the system have not been as discernible, nor as injurious as in agriculture. Capital in this country has been for the most part acquired in trade, so that the commercial and monied interests are now almost synonymous; but agriculture is suffered to remain without receiving its due support from the surplus capital 4o( the country, nor employed in traffic. Very little of capital acquired in commerce is directed towards agriculture, save where a wealthy capitalist purchases lands for his own use; but it is seldom, if ever, applied to the improvement of the country, in the hands of the original landholders. This arises from the operation of the usury laws, which in comparison with the profits of commerce on the one hand, and the convenience and security of government securities on the other, do not enable the agriculturists to hold out a sufficient inducement for pecuniary accommodation. They may indeed borrow by way of annuities, and the various other devices practised by modern ingenuity to evade the usury laws; but these are all attended with a ruinous expense, which no ordinary success in agriculture could ever remunerate. To instance the mode of raising money by way of annuities, perhaps the least oppressive, let us see how the usury laws affect the borrower. A man charges himself for either his own or another's life, not only with the legal rate of interest and with the annual payment of part of the principal, but also with the expense of insuring either his own or another's life, to secure the payment of the principal on the contingency of the insured person's death. This joint amount at the average amounts to fifteen or sixteen per cent., which is shared by the lender and the insurer. Whereas had the usury laws not existed, the same accommodation, by omitting the insurer's profits, might, and certainly should have been obtained at the rate of six or eight per cent.— a compensation that would have enabled the borrower to turn the money to his own advantage, and that of his country.
Here 1 wish to make a few observations upon the circumstances that create such an immense difference between the rate of interest required from landholders with even good security, and that obtained
VOL. XIII. Pam. «0. XXV. L
from the government, and why capitalists prefer depositing their money in the funds at three and four per cent, to lending it to the agriculturists at five. The interest of money must, in the mind of the lender, be estimated by various considerations, of which security and convenience are the principal. The rates then may be formed in this manner. The lowest will be required when not only the principal is well secured, and the interest regularly and certainly paid, but where the lender may receive, back his principal whenever he please, and almost at a moment's warning. This is the case when the money is deposited in the government securities. A rate proportionably increasing will be demanded as these advantages are wanting, and the highest will of course be required, when not only is the interest not regularly paid, but where some trouble and expense may be apprehended in recovering the principal itself. Now it unfortunately happens that country gentlemen, and other landed proprietors are, generally speaking, not very remarkable for the regularity of their pecuniary transactions, and their estates are frequently so heavily encumbered, and so intricately settled, that danger is always apprehended in lending money on such securities. There is nothing so abhorrent to the feelings and general habits of a commercial man, as to be entangled in the tedious and heavy proceedings of a suit in law or equity, where he is in danger of being crushed beneath the weight of parchments, before he can discover the exact relation he bears to the estate contested, or what chance he has of being eventually paid his money at the close of a contest that appears indefinite. Such, however, are the disagreeable chances he must incur in lending money on real property ; and the fears they engender are too often found sufficient to prevent capital from being employed in a manner most beneficial to the community.
There is no part of the empire that labors more under the impolicy of the usury laws, than Ireland. That country is essentially agricultural, and its energies and capabilities for improvement, may be estimated from the advance it has made within a few years, even without the assistance of capital, from a state of weakness and poverty, to one of comparative strength and prosperity. The soil of Ireland possesses every quality to ensure a grateful return for the employment of wealth, in improving her native resources ; but for that assistance she can look to this country only. The legal rate of interest in Ireland is six per cent. ; but from the memory of events long passed, and the discouraging prejudices they have engendered, this rate does not offer a sufficient inducement to English capitalists, to embark their money in a country unfortunately too little known to them, to enjoy their confidence. An increase of one or two per cent, in the interest, might probably surmount their scruplesj particularly as from the uniform practice in that country, of registering all deeds and devises, respecting landed property, they should be exempt from the danger of being entangled in the confusion and expense of law proceedings. Ireland, however, is at present bereft of the advantages to be derived from the expenditure of capital; the capitalist is debarred from a beneficial means of employing his surplus money, and England is cheated of the additional strength and security she should enjoy, from freely and liberally cultivating the resources of that great portion of our empire.
But not in Ireland alone would the beneficial results of the repeal of the usury laws be felt in promoting the agriculture of the country; throughout the extent of Great Britain, the means are presented of employing with advantage many millions of money, in forming canals, making roads, building bridges, draining land, reclaiming mountains, inclosing commons, and improving by labor, the general character of the soil. In works like these consists the real and permanent prosperity of a country; and when we consider the rapid progress made in both islands during the late war, in consequence of the facility given to the employment of capital, by an increased circulating medium, we may indulge our fancies to the utmost, without the fear of entering the regions of extravagance, in conjecturing what the magnificent results to the empire might have been, had those sums been employed within the kingdom, in promoting useful labor, which have been driven abroad by the impolitic provisions of the usury laws, to seek for employment in other countries, or to be consigned to the faith of other governments.
It may, perhaps, be objected, that thisnew sphere of action for the employment of capital, will exercise an injurious effect upon the government funds, and lower their price. This, to a certain extent, cannot be denied; but the operation will be felt more in foreign funds where British capital is engaged, than in those of our own government. Every individual naturally prefers to have his money employed at home, should other circumstances co-operate with his desires: the repeal of the usury laws, therefore, will draw British capital from abroad, and giveit a more profitable employment among our fellow-citizens. This circumstance will be likely to neutralise the effects of the repeal in the state of the funds at home; besides, that the same reasons of security and convenience which have hitherto induced capitalists to let their money lie in the funds at a low rate, in preference to active employment, with the chance of a much greater, will still operate with a great many. But even should the price of the funds fall to some extent, I should, in the present state of the country, be far from regarding such a circumstance as a disadvantage. The price of the funds must be regarded with very different eyes, according as we may happen to be a borrowing or a
164 Mr. E. Cooke on the Repeal of the Usury Laws. [26
paying country. At present we are, or at least boast to be, the latter; and the lower the rate at which we pay, the more available the produce of the sinking fund becomes in the hands of commissioners, for liquidating the national debt. If the chancellor of the exchequer funds at fifty-eight, and pays at eighty-two, the consequences to the country are sufficiently obvious.
This and the preceding objection are founded on the supposition, that the rate of interest, or the value of money, will be exorbitantly raised on the removal of the maximum by law established. But experience proves that this supposition must be erroneous. The rate of interest in the market does not, in general, amount to the maximum, and since the thirty-seventh of Hen. VIII. the decrease in the market uniformly preceded the law for reducing the legal rate. This proves that usury is restrained, not by law, but by the competition of the capitalists, and the ordinary profits of stock. Where the principal and the regular payment of the interest are secured, money may now be had at four and four and a half per cent. Bankinghouses discount good bills at three and three and a half, and the treasury, issues exchequer bills at three per cent., that also bear a premium of eighteen and twenty shillings. This rate will be altered very little to the same classes of borrowers, and when accommodation may be required by others, the increased demand will be met by a proportionate increase of disposable capital in the market. The nature of the security will, in every bargain, form the chief consideration, and for the prudence of the engagement, the legislature may confidently trust to the discretion and self-love of every individual.