1st, That the legitimacy of interest rests upon the fact that he who accords delay renders service. Interest, then, is legitimate in virtue of the principle of service for service.
2d, That the perpetuity of interest reposes on this other fact, that he who borrows must pay back all that he has borrowed at a fixed date. When the thing lent, or its value, is restored to its owner, he can lend it anew. When returned to him a second time, he can lend it a third time, and so on to perpetuity. Which of the successive and voluntary borrowers can find fault with this?
But since the legitimacy of interest has been contested so [p203] seriously in our day as to put capital to flight, or force it to conceal itself, I may be permitted to show how utterly foolish and insensate this controversy is.
And, first of all, let me ask, would it not be absurd and unjust either that no remuneration should be given for the use of capital, or that that remuneration should be the same, whether the loan were granted and obtained at one year’s, or two years’, or ten years’ date. If, unhappily, under this doctrine of pretended equality, such a law should find a place in our code, an entire category of human transactions would be suppressed on the instant. We should still have barter, and sales for ready money, but we could no longer have sales on credit, nor loans. The advocates of equality would relieve borrowers from the burden of paying interest; but they would, at the same time, balk them of their loans. At the same rate, we might relieve men from the inconvenient necessity of paying for what they buy. We should only have to prohibit them from purchasing; or, what would come to the same thing, declare prices illegal.
There is levelling enough, in all conscience, in this pretended principle of equality. First of all, it would put a stop to the creation of capital; for who would desire to save when he could reap no advantage from saving? Then it would reduce wages to zero, for where there is no capital (instruments, materials, and provisions), there can be neither future work nor wages. We should very soon arrive at the most perfect of all equalities, the equality of nothingness.
But is there any man so blind as not to see that delay is in itself a circumstance which is onerous, and, consequently, entitled to remuneration? Apart, even, from the consideration of loans, would not every one endeavour to abridge delays? It is the object of our perpetual solicitude. Every employer of workmen lays great stress on the time which must elapse before his returns come in. He sells dearer or cheaper according as his returns are more or less distant. Were he indifferent on that subject, he must forget that capital is power; for if he is alive to that consideration, he must naturally desire that it should perform its work in the shortest possible time, so as to enable him the oftener to engage it in a new operation.
They are but short-sighted Economists who think that we pay interest for capital only when we borrow it. The general rule is, that he who reaps the satisfaction should bear all the charges of production, delay included, whether he renders the service to himself, or has it rendered to him by another. A man in a state of [p204] isolation, who has no bargains or transactions with any one, would consider it an onerous circumstance to be deprived of the use of his weapons for a year. Why, then, should an analogous circumstance not be considered as onerous in society? But if a man submits to it voluntarily for the sake of another who agrees voluntarily to remunerate it, what should render that remuneration illegitimate?
Nothing would be transacted in the world; no enterprise requiring advances would be undertaken; we should neither plant, nor sow, nor labour, were not delay considered as in itself an onerous circumstance, and treated and paid for as such. Universal consent is so unanimous on this point, that no exchange takes place but on this principle. Delays, hindrances, enter into the appreciation of services, and, consequently, into the constitution of value.
Thus, in their crusade against interest, the advocates of equality not only trample under foot the most obvious notions of equity—they ignore not only their own principle of service for service, but also the authority of mankind and universal practice. How can they, in the face of day, exhibit the overweening pride which such a pretension supposes? Is it not, indeed, a very strange and a very sad thing, that these sectaries should adopt not only tacitly, but often in so many words, the motto, that, since the beginning of the world, all men have been mistaken except themselves? Omnes, ego non.
Pardon me for thus insisting on the legitimacy of interest, which is founded on this principle, that, since delay is costly, it must be paid for—to cost and to pay being correlative terms. The fault lies in the spirit of our age. It is quite necessary to defend vital truths, admitted generally by mankind, but attacked and brought into question by a few fanatical innovators. For a writer who aspires to demonstrate the harmony of phenomena in the aggregate, it is a painful thing, you may believe, to be constantly stopped by the necessity of elucidating the most elementary notions. Would Laplace have been able to explain the planetary system in all its simplicity, if, among his readers, there had not existed certain common and received ideas,—if it had been necessary for him, in order to prove that the earth turns upon its axis, to begin by teaching numeration? Such is the hard fate of the Economist of our day. If he neglects the rudiments, he is not understood—if he explains them, the beauty and simplicity of his system is lost sight of in the multiplicity of details.