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USURY

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Originally appearing in Volume V27, Page 813 of the 1911 Encyclopedia Britannica.
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USURY . An See also:

ancient legal conception, it has been said, corresponds not to one but to several See also:modern conceptions; and the proposition is equally true when economic is substituted for legal. Until quite See also:recent times the See also:term " usury " (See also:Lat. usura, use, enjoyment, See also:interest, from usus, use) covered a number of essentially different social phenomena. " See also:Thou shalt not lend upon usury to thy See also:brother; usury of See also:money, usury of victuals, usury of anything that is See also:lent upon usury. Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury, that the See also:Lord thy See also:God may bless thee " (Dent. See also:xxiii. 19, 20). In this See also:sentence we find interest of all kinds blended together, and the natural economic tendencies directly counteracted by the moral and religious See also:law. At the See also:present See also:day, " usury," if used in the old sense of the term, would embrace a multitude of modes of receiving interest upon See also:capital to which not the slightest moral taint is attached. The See also:man who does not in some shape or other lend his capital I was made in the law of "dent, See also:anti the See also:attempt to regulate the upon " usury " is, in the modern See also:world, generally considered as lacking in his See also:duty to himself or his See also:family. The See also:change in the moral attitude towards usury is perhaps best expressed by saying that in ancient times so much of the lending at interest was associated with See also:cruelty and hardship that all lending was branded as immoral (or all interest was usury in the moral sense), whilst at present so little lending takes See also:place, comparatively, except on commercial principles, that all lending is regarded as See also:free from an immoral taint. This change in the attitude of See also:common-sense morality in respect to " anything that is lent upon usury" is one of the most See also:peculiar and instructive features in the economic progress of society. " It is worthy of remark," says See also:Grote (See also:History of See also:Greece, iii.

144), " that the first borrowers must have been for the most See also:

part men driven to this See also:necessity by the pressure of want, and contracting See also:debt as a desperate resource without any See also:fair prospect of ability to pay; debt and See also:famine run together in the mind of the poet See also:Hesiod. The borrower is in this unhappy See also:state rather a distressed man soliciting aid than a solvent man capable of making and fulfilling a See also:contract; and if he cannot find a friend to make a free See also:gift to him in the former See also:character he would not under the latter character obtain a See also:loan from a stranger except by the promise of exorbitant interest and by the fullest eventual See also:power over his See also:person which he is in a position to See also:grant." This remark, though suggested by the state of society in ancient Greece, is largely applicable throughout the world until the See also:close of the See also:early See also:middle ages. Borrowers were not induced to See also:borrow as a See also:rule with the view of employing the capital so obtained at a greater profit, but they were compelled of necessity to borrow as a last resort. The conditions of ancient usury find a graphic See also:illustration in the See also:account of the See also:building of the second See also:temple at See also:Jerusalem (Neh. v. 1-12). The reasons for borrowing are famine and See also:tribute. Some said, " We have mortgaged our lands, vineyards and houses, that we might buy See also:corn, because of the dearth." Others said, " We have borrowed money for the See also:king's tribute, and that upon our lands and vineyards ... and, lo, we bring into bondage our sons and our daughters to be servants,... neither is it in our power to redeem them, for other men have our lands and vineyards." In ancient Greece we find similar examples of the evil effects of usury, and a law of See also:bankruptcy resting on See also:slavery. In See also:Athens about the See also:time of See also:Solon's legislation (594 B. c.) the bulk of the See also:population, who had originally been small proprietors or metayers, became gradually indebted to the See also:rich to such an extent that they were practically slaves. Those who still kept their See also:property nominally were in the position of Irish cottiers: they owed more than they could pay, and See also:stone pillars erected on their See also:land showed the amount of the debts and the names of the lenders. Usury had given all the power of the state to a small See also:plutocracy. The remedy which Solon adopted was of a See also:kind that we are accustomed to consider as purely modern. In the first place, it is true that according to ancient practice he proclaimed a See also:general seisachtheia, or shaking off of burdens: he cancelled all the debts made on the See also:security of the land or the person of the debtor.

This measure alone would, however, have been of little service had he not at the same time enacted that hence-forth no loans could be made on the bodily security of the debtor, and the creditor was confined to a See also:

share of the property. The consequence of this See also:simple but effective reform was that Athens was never again disturbed by the agitation of insolvent debtors. Solon See also:left the See also:rate of interest to be determined by free contract, and sometimes the rate was exceedingly high, but none of the evils so generally prevalent in antiquity were experienced. When we turn to See also:Rome, we find exactly the same difficulties arising, but they were never successfully met. As in Athens in early times, the See also:mass of the See also:people were yeomen, living on their own small estates, and in time they became hopelessly in debt. Accordingly, the legislation of the XII. Tables, about 500 B.C., was intended to strike at the evil by providing a maxi-mum rate of interest. Unfortunately, however, no alterationrate of interest utterly failed. In the course of two or three centuries the small free farmers were utterly destroyed. By the pressure of See also:war and taxes they were all driven into debt, and debt ended practically, if not technically, in slavery. It would be difficult to overestimate the importance of the See also:influence of usury on the social and economic history of the See also:Roman See also:republic. In the provinces the evils of the See also:system reached a much greater height.

In 84 B.C. the war tax imposed by See also:

Sulla on the See also:province of See also:Asia was at first advanced by Roman capitalists, and See also:rose within fourteen years to six times its See also:original amount. It is interesting to observe that the old law of debt was not really abolished until the dictatorship of See also:Julius See also:Caesar, who practically adopted the legislation of Solon more than five centuries before; but it was too See also:late then to See also:save the middle class. About this time the rate of interest on first-class security in the See also:city of Rome was only about 4%, whilst in the provinces from 25 to 50% were rates often exacted. Justinian made the See also:accumulation of arrears (anatocismus) illegal, and fixed the rate at 6%, except for See also:mercantile loans, in which the rate received was 8%. On the whole, it was truly said of usury during the republic and early years of the See also:empire: " Sed vetus urbi faenebre malum et seditionum discordiarumque creberrima causa." Even when it came to be authorized by Roman law under certain restrictions, it was still looked upon as a pernicious See also:crime. " See also:Cicero mentions that See also:Cato, being asked what he thought of usury, made no other See also:answer to the question than by asking the person who spoke to him what he thought of See also:murder." It was only natural, considering the evils produced by usury in ancient Greece and Rome, that philosophers should have tried to give an a priori explanation of these abuses. The See also:opinion of See also:Aristotle on the barrenness of money became proverbial, and tvas quoted with approval throughout the middle ages. This condemnation by the moralists was enforced by the Fathers of the See also:church on the See also:conversion of the empire to See also:Christianity. They held usury up to detestation, and practically made no distinction between interest on equitable moderate terms and what we now term usurious exactions .l The consequence of the condemnation of usury by the church was to throw all the dealing in money in the early middle ages into the hands of the See also:Jews. A full account of the mode in which this See also:traffic was conducted in See also:England is given by Madox in See also:chapter vii. of his History of the See also:Exchequer (See also:London, 1711). The Jews were considered as deriving all their privileges from the See also:hand of the king, and every See also:privilege was dearly bought. There can be no doubt that they were subjected to most arbitrary exactions.

At the same time, however, their dealings were nominally under the supervision of the Jews' exchequer, and a number of regulations were enforced, partly with the view of protecting borrowers and partly that the king might know how much his Jews could afford to pay. It was probably mainly on account of this money-lending that the Jews were so heartily detested and liable to such See also:

gross See also:ill-treatment by the people. A curious illustration of this popular animosity is found in the insertion of a clause in the charters granted by See also:Henry III. to See also:Newcastle and See also:Derby, forbidding any See also:Jew to reside in either place. Ultimately in 1290 the Jews were expelled in a See also:body from the See also:kingdom under circumstances of See also:great barbarity, and were not allowed to return until the time of See also:Cromwell. Before the See also:expulsion of the Jews, however, in spite of canonical opposition, Christians had begun to take interest openly; and one of the most interesting examples of the See also:adaptation of the dogmas of the Church of Rome to the social and economic environment is found in the growth of the recognized exceptions to usury. In this respect the canonical writers derived much assistance from the later Roman law. Without entering into technicalities, it may be said generally that an attempt was made to distinguish between usury, in the modern sense of unjust exaction, and interest on capital. Unfortunately, however, the modifications 1 For a popular account of the reasons given in support of the canonical objections to usury, and of the modifications and exceptions admitted in some quarters, see W. See also:Cunningham's Usury. which were really admitted were not openly and avowedly made by a See also:direct change in the statutes, but for the most part they were effected (as so many early reforms) under the See also:cover of ingenious legal See also:fictions. One of the most curious and instructive results of this treatment has been well brought out by See also:Walter See also:Ross in the introduction to his Lectures on the Law of See also:Scotland (1793). He shows, in a very remarkable manner and at consider-able length, that " to the devices fallen upon to defeat those See also:laws (i.e. against usury) the greatest part of the deeds now in use both in -England and Scotland owe their original forms " (i.

4). One of the consequences of this indirect method of reforming the law was that in some cases the evil was much exaggerated. " The See also:

judges," says Ross, " could not See also:award interest for the money; that would have been contrary to law, a moral evil, and an oppression of the debtor; but, upon the See also:idea of See also:damages and the failure of the debtor in performance, they unmercifully decreed for See also:double the sum borrowed." He may well remark that See also:imagination itself is incapable of conceiving a higher degree of inconsistency in the affairs of men (compare See also:Blackstone, iii. 434, 435). In the limits assigned to this See also:article it is impossible to enter further into the history of the question (see also MONEYLENDING), but an attempt may be made to summarize the See also:principal results so far as they See also:bear upon the old controversy, which has again been revived in some quarters, as to the proper relation of law to usury and interest. (I) The opinion of See also:Bentham that the attempt directly to suppress usury (in the modern sense) will only increase the evil is abundantly verified. See also:Mere See also:prohibition under penalties will practically See also:lead to an additional See also:charge as security against See also:risk. The evils must be partly met by the general principles applicable to all contracts (the fitness of the contracting parties, &c.) and partly by provisions for bankruptcy. Peculiar forms of the evil, such as mortgaging to excessive amounts in countries largely occupied by See also:peasant proprietors, may be met by particular See also:measures, as, for example, by forbidding the accumulation of arrears. (2) The attempt to See also:control interest in the commercial sense is both useless and harmful. It is certain to be met by fictitious devices which at the best will cause needless inconvenience to the contracting parties; restraints will be placed on the natural flow of capital, and See also:industry will suffer. (3) In the progress of society borrowing for commercial purposes has gradually become of overwhelming importance compared with borrowing for purposes of necessity, as in earlier times.

By far the greater part of the interest now paid in the civilized world is, in the See also:

language of the See also:English economists, only a fair See also:reward for risk of loss and for management of capital, and a necessary stimulus to saving. See Capital and Interest (Eng. trans., 1890), by E. See also:Boehm von Bawerk; Nature of Capital and Income, by See also:Irving See also:Fisher (1906). (J. S.

End of Article: USURY

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