[[p. 150]] Having read Professor Newman's¹ defence of interest and your remarks thereon, I wish to make a few observations on the general question.

    Your position, and also that of Mr. Ruskin,² appears to be that money should be lent only as an act of benevolence or charity, and that lending it any other way is not only, in most cases economically and socially, injurious, but is also morally wrong. With the first part of this proposition I am very much inclined to agree, but not with the second. Looked at broadly, I believe that the power of obtaining interest on capital, however great, with the corresponding desire of the owner of capital to obtain interest on it, is, next to the private monopoly of land, the great cause of the poverty and famine that prevail in all the most advanced and most wealthy communities. To prove this would occupy too much space; but I may just notice that bankruptcies, with the widespread misery they inflict--the speculations of promoters and financiers often bringing ruin on hundreds or thousands of deluded investors--and the vast loans to foreign despots, which can only be paid by the sweat and blood of their unfortunate subjects, are the direct, and in the present state of society, the necessary results of the interest-system. Professor Newman says that if it were to cease, business would be lessened by one-third. But only rotten and speculative business would be stopped; commercial men would then be what they now only appear to be, and no really necessary business would cease to be carried on. The late William Chambers has stated (in his "Life of Robert Chambers") that their vast book-selling, printing, and publishing business was established and carried on from first to last without one penny of borrowed capital; and that, as a result, panics and financial crises which brought ruin to some of their competitors, only caused them a little temporary inconvenience. I believe, therefore, that it would be for the benefit of the community if loans of money, or advances of goods on credit, were not recognised by the law, but were made wholly at the risk of the lender; but I do not see that it follows that he who lends, even under these circumstances, and takes interest for his loan, is doing what is wrong. For I cannot perceive any essential difference in principle between lending on interest, and selling at a profit. If I buy a shipload of drugs or any other goods at wholesale price, warehouse them, and sell them in the course of a year at the current market rate, making a profit of, say, 15 per cent. on my money, am I doing that which is morally wrong? Of the amount gained by me, we may put perhaps 1 or 2 per cent. for my personal trouble in the matter, 2 or 3 per cent. for risk of loss, 5 per cent. for interest on capital, and the other 5 per cent. for surplus profit. Is this 10 per cent. illegitimate gain? and am I morally bound to sell my goods at so much below the market rate as to leave me only fair payment for my time and risk? If it is wrong to take interest for the money which, when lent to another man enables him to do this, surely it is wrong to take a larger share in the shape of profit; and this really means that all trade is immoral which returns more than payment for personal labour, and insurance of the capital employed. But if so, it should be so stated, and the question should not be confined to interest on money loans only, and, in fact, Mr. Ruskin does not so confine it. The quotation you make from Mr. Ruskin does not, however, seem to me at all to the point. You freely lend your friend an umbrella in his need, and you would even do the same to the merest acquaintance or neighbour, but if your neighbour called every day for your umbrella on his way to the City, and other neighbours followed his example, so that you ceased to have the use of your own umbrellas, you would soon have either to refuse to lend, or to charge a rent for the use of them, and if this were convenient to your neighbours, and they were willing to pay you sufficient to cover the wear and tear of umbrellas, your time and trouble in looking after them, and interest on your capital invested in them, it will require arguments very different from any yet advanced to satisfy me that you would be morally wrong in doing so. In like manner, though you lend your friend or neighbour cab-money, or give him a bed for a night on rare occasions when he urgently requires such aid, you would give none of these things repeatedly to a mere acquaintance. Yet, if circumstances rendered such accommodation very useful to a considerable number of persons, and you or someone else found it profitable to supply such accommodation, you would charge rent for your beds, and interest for your loans, and the transaction would differ nothing in principle from that of every tradesman who sells goods at a profit, of the innkeeper who charges beds in his bill, or of the jobmaster who charges for the use of his horses or his carriages. Nothing deserving the name of proof has yet been given that either of these things are immoral. Whether it is a good and healthy state of society, in which large numbers of persons get their living by such means, is another matter altogether.

    The difference of opinion on this question of usury arises mainly from the different standpoints of the disputants. Seeing that it is bound up with many of the evils of modern society, and believing that it should have no place in a system of true Socialism, you and Mr. Ruskin denounce it as immoral. Professor Newman, on the other hand, looks at it as a question of modern society, and finds nothing in its essential nature contrary to justice, and here he seems to me to have the best of the argument. No doubt, in a more perfect state of society, in which private accumulations of capital were comparatively small, and the land and its products were freely open to the use of all, usury would have little place, because loans of money would rarely be needed; but when they were needed, I cannot see any grounds for maintaining that it would be morally wrong to lend money on interest. On the contrary, such loans would then retain their use without the evils their wide extension now brings. There would be no great capitalists, and if one man lent to another it would be a convenience to the borrower, and certainly some loss to the lender, because, as Professor Newman well puts it, £100 paid a-year in ten years hence is not as valuable as £100 paid to-day. To say that it is so is really to say that it has no value to-day, for if its payment can be delayed one year without loss it can two, or three, or ten, or a hundred, or a thousand! Where are we to stop? If we suppose a perfect social state, we suppose all men to be producers, and as capital is an aid to production, no man can give up the use of his capital to another without loss. The true solution to the problem is, I believe, to be found in the proposition that all loans should be personal, and, therefore, temporary; and that, as a corollary, the repayment of the capital should be provided for in the annual payments agreed to be made by the borrower, either for a fixed period (if he live so long), or for the term of his life. This would abolish the idea of perpetual interest, which is as impossible in fact as it is wrong in principle, while it would avoid the injustice of compelling one man, or set of men, to pay the debts of a preceding generation from which they may have received no real benefit.

    This question of interest thus becomes involved in the wider question of the tyranny of capital over labour and its remedy. At present civilised Governments act on the presumption that great accumulations of capital are beneficial, and even necessary, to the well-being of the community, and all legislation favours such accumulations. When the people are once convinced that the reverse is the case, and legislation is directed to favour small holders of capital, and to check its inordinate accumulation, most of the evils complained of will cease. To this end the first step would be to get rid of all Government [[p. 151]] funds, guaranteed loans, railway stocks, &c., which are the main agents and tools by which capital is accumulated and money is made to breed money. This could be done in every case by making such stocks non-transferable after a certain date, and then declaring the payments to be terminable at the death of the holders and their living heirs, just as I propose to do in the case of landlords. The railways should be taken by the State, existing shareholders receiving annuities of the amount of their average dividends, payable in like manner to themselves and their living heirs. The Limited Liability Act should be repealed, because it has served only to foster the worst and most iniquitous speculations, and has deluded the public into the idea that they could safely share in the profits of commercial enterprises of the nature and management of which they are profoundly ignorant. There would remain no safe investments for money, except in some branch of agriculture, manufactures, or commerce in which either the investor or some relation or friend was personally interested, and thus would be brought about the diminutions and practical abolition of usury as a system, and of whole classes living idle lives on the interest of money derived from the accumulations of previous generations. Of course, it will be said that the plan here proposed is wholesale confiscation and repudiation; but a little consideration will show that it is nothing of the kind, and that it is really the best thing that can happen even to the individual holders of the stocks dealt with. In the case of the National Debt, for example, fundholders are now threatened with a reduction of interest of a quarter per cent., and later on of a half per cent.; and they will be forced to accept it, because the interest on the public debt regulates that of all other good investments, which will inevitably rise in price enormously if any considerable portion of the amount now invested in the funds seeks other investments. The offer to pay off fundholders at par will, therefore, be illusory, and the vast class who live upon their dividends will inevitably have their incomes reduced one-twelfth or one-sixth, while the cost of living goes on continually increasing. Would they not be far better off to have their present incomes secured to themselves and their living heirs? And when they fully realise their position, will they not choose the latter alternative if offered them? If the series of changes here sketched out were effected, the reign of capital as the tyrant and enemy of labour would be at an end. When the tools with which the financier and the speculator work no longer exist, the piling up of great fortunes will be impossible, and much personal care and attention will be required in order to make capital produce a steady return. Industry and commerce will be the sole means of acquiring wealth, and by these means alone--under the new conditions of society--very great wealth can never be accumulated by one man. For the land being nationalised, and the use of some portion of it obtainable by all, the minimum of wages will rise far above the starvation point which now prevails, and every village or other community, however small, will consist of small capitalists, who will be ever ready to unite for the safe employment of their capital. Then will arise a variety of industries on a scale adapted to the size and wealth of the district, and calculated to utilise the surplus labour and spare time of the surrounding population; and these small industries will compete successfully with the establishments of individual capitalists, because they will have an ample and a cheap supply of labour, and because most of their labourers, or their relations, will be shareholders, and will thus be working for themselves. The individual capitalist will then find himself paralysed for want of labour, unless he offers great temptations in the form of high wages and participation in the profits. For when a large proportion of the population are settled upon the land, and are able to devote their savings and their spare time to local industries, they will not, as now, be forced to become parts of a huge manufacturing machine in the success of which they have little personal interest.

    By the methods here sketched out the labourer will receive, as Karl Marx and other social reformers maintain that he should do, the whole produce of his labour, and he will obtain this general result without any aid from Government, except what consists in remedying injustice, and removing the restrictions on freedom which now hamper him. Without any laws against usury, usury will practically cease to exist. Without any direct restrictions on wealth, those vast and injurious accumulations of wealth which now prevail will be impossible. The "stealers" and the "beggars" who now, as Mr. Girdlestone has shown, are so numerous among us, will steadily give place to "workers," and just in proportion as that happens, poverty will diminish, and will ultimately disappear. Now, a large portion of the working population are employed in the production of useless and often tasteless luxuries and trifles, the direct consequence of the large number of persons who have surplus money to spend after all their reasonable wants and comforts are fully satisfied. It is this, much more than the mere number of idle people, that is the dead weight which keeps thousands starving in the midst of so much wealth. When mere extravagant luxuries are less in demand great masses of labourers will be set free to produce the necessaries and comforts of life; these will be more abundant and cheaper (whatever their money price may be), and if all those who are now idle aid in the production of these necessaries and comforts, it is evident that, with free exchange, none can want.

    I would particularly call attention to the fact that the results here indicated would all be brought about by carrying out the true system of laissez-faire now so much abused as if it had failed, when really it has never been tried. Labour, the sole source of all wealth and well-being, has been fettered in all her limbs, and harassed in all her actions, and then because she often stumbles or faints by the way, they cry, "See, she cannot do without help!" But first unloose your bonds, and cease to hamper her with your legal meshes, and then see if she will not achieve a glorious success. Let Government do its duty, and no more. Let it secure peace from external foes, and safety from internal violence; let it give free and speedy justice between man and man; let it secure to all alike free access to the land and all natural powers; let it abolish every monopoly of individuals and classes--either the local or central authority having the management of all institutions or industries which are essential to the public welfare, but which in private hands tend to become monopolies; and let it enact that all debts contracted by individuals shall be payable by those individuals only, and those contracted by the municipality or the State be payable by the generation which contracts them, so that they may never remain a burden on the succeeding generation. When it has done all this, then alone will labour be really free, and, being free, it will work out the well-being of the whole community without any Government interference whatever. This is the true laissez-faire; and this, I believe, will enable us to realise the best social state which, in its present phase of development, humanity is capable of. The distant future will take care of itself; let us try to improve the future that is immediately before us. I have here very briefly and imperfectly sketched out a series of measures which I believe are best calculated to promote this object, and they have the great and inestimable advantage that they all tend to the diminution of governmental interference with labour and industry, instead of that indefinite increase of it which the German Socialists advocate, and which, as the greatest political thinkers maintain, and as all experience shows, must inevitably fail, while in the present condition of civilisation it will probably lead to evils not less grave than those it attempts to cure.

Editor's Notes

¹Francis William Newman (1805-1897), English scholar and writer
²John Ruskin (1819-1900), English writer

Return to Home