At the 146th page of the edition of his ‘Manual’ previously quoted, you will find it stated that the interest of money consists of three distinct parts:

I will reverse this order in examining the statements; for the only real question is as to the first, and we had better at once clear the other two away from it.

3. Wages for the labour of superintendence.

By giving the capitalist wages at all, we put him at once into the class of labourers, which in my November letter I showed you is partly right; but, by Mr. Fawcett’s definition, and in the broad results of business, he is not a labourer. So far as he is one, of course, like any other, he is to be paid for his work. There is no question but that the partner who superintends any business should be paid for superintendence; but the question before us is only respecting payment for doing nothing. I have, for instance, at this moment 15,000l. of Bank Stock, and receive 1,200l. odd, a year, from the Bank, but I have never received the slightest intimation from the directors that they wished for my assistance in the superintendence of that establishment;—(more shame for them.) But even in cases where the partners are active, it does not follow that the one who has most money in the business is either fittest to superintend it, or likely to do so; it is indeed probable that a man who has made money already will know how to make more; and it is necessary to attach some importance to property as the sign of sense: but your business is to choose and pay your superintendent for his sense, and not for his money. Which is exactly what Mr. Carlyle has been telling you for some time; and both he and all his disciples entirely approve of interest, if you are indeed prepared to define that term as payment for the exercise of common sense spent in the service of the person who pays for it. I reserve yet awhile, however, what is to be said, as hinted in my first letter, about the sale of ideas.

2. Compensation for risk.

Does Mr. Fawcett mean by compensation for risk, protection from it, or reward for running it? Every business involves a certain quantity of risk, which is properly covered by every prudent merchant, but he does not expect to make a profit out of his risks, nor calculate on a percentage on his insurance. If he prefer not to insure, does Professor Fawcett mean that his customers ought to compensate him for his anxiety; and that while the definition of the first part of interest is extra payment for prudence, the definition of the second part of interest is extra payment for imprudence? Or, does Professor Fawcett mean, what is indeed often the fact, that interest for money represents such reward for risk as people may get across the green cloth at Homburg or Monaco? Because so far as what used to be business is, in modern political economy, gambling, Professor Fawcett will please to observe that what one gamester gains another loses. You cannot get anything out of Nature, or from God, by gambling;—only out of your neighbour: and to the quantity of interest of money thus gained, you are mathematically to oppose a precisely equal disinterest of somebody else’s money.

These second and third reasons for interest then, assigned by Professor Fawcett, have evidently nothing whatever to do with the question. What I want to know is, why the Bank of England is paying me 1,200l. a year. It certainly does not pay me for superintendence. And so far from receiving my dividend as compensation for risk, I put my money into the bank because I thought it exactly the safest place to put it in. But nobody can be more anxious than I to find it proper that I should have 1,200l. a year. Finding two of Mr. Fawcett’s reasons fail me utterly, I cling with tenacity to the third, and hope the best from it.

The third, or first,—and now too sorrowfully the last—of the Professor’s reasons, is this, that my 1,200l. are given me as “the reward of abstinence.” It strikes me, upon this, that if I had not my 15,000l. of Bank Stock I should be a good deal more abstinent than I am, and that nobody would then talk of rewarding me for it. It might be possible to find even cases of very prolonged and painful abstinence, for which no reward has yet been adjudged by less abstinent England. Abstinence may, indeed, have its reward, nevertheless; but not by increase of what we abstain from, unless there be a law of growth for it, unconnected with our abstinence. “You cannot have your cake and eat it.” Of course not; and if you don’t eat it, you have your cake; but not a cake and a half! Imagine the complex trial of schoolboy minds, if the law of nature about cakes were, that if you ate none of your cake to-day, you would have ever so much bigger a cake to-morrow!—which is Mr. Fawcett’s notion of the law of nature about money; and, alas, many a man’s beside,—it being no law of nature whatever, but absolutely contrary to all her laws, and not to be enacted by the whole force of united mankind.

Not a cake and a quarter to-morrow, dunce, however abstinent you are—only the cake you have,—if the mice don’t get at it in the night.