CHAPTER XVIII.[ToC]
A FALSE BASAL PRINCIPLE.
That usury or interest must be held under the restraints of law is recognized in nearly all countries. It is treated as a necessary evil that cannot be abolished, and therefore must be controlled. Bacon said, "It is permitted on account of the hardness of men's hearts."
The laws differ in the various states. The rate of interest authorized by a particular state is not invariably fixed, but is changed as the condition of the people seems to demand.
That which determines the rate, of any particular people, at any particular time, is the productive ability of the borrower. The rate now in England is about three per cent. The conditions being such that the productive power of the borrower is very limited. In the United States, where the natural resources are not all occupied, and the avenues for successful effort more numerous, the average is seven per cent. In the western states of the United States the rates are higher than in the eastern, for the material resources lie so open and undeveloped that the productive power of the borrower is far greater than in the older eastern states.
The basal for the rate of interest is the benefit or the advantage of the loan to the borrower. What can the borrower do or make with this capital? How great a benefit can he gain by it? The rate is based on the earnings of the borrower.
The transfer from R. R. station to R. R. station across this city is twenty-five cents. That I may make my train and meet my appointment, that prompt and rapid transfer is of greater value to me, but that does not give the hackman the right to an increased charge.
The fare to the distant city is ten dollars, but to me, with important business waiting and suffering, it is worth an hundred. The conductor does not ask me what my profits are to be from this trip. He collects the same fare of all for the same service, whatever their interests may be in the passage.
The letter which is freighted with a proposition that affects my future life is two cents. Because of great value to me the postal service is no more than a letter of idle gossip.
Railroad freight rates are at times arbitrarily fixed on the basis of the benefit to the patron. The rates of freight from a coal mine are sometimes made by a railroad on the basis of the profits of operating the mine. The rates to a quartz mine in the mountains are often so regulated. A contractor, dependent on a transportation company, must often share his profits. Such rates are regarded as unjust and oppressive and efforts are made to correct the evil by law.