Elements of Morals Part 8

It is this doctrine which a Father of the Church, Clement of Alexandria, has expressed in these terms in his treatise: _Can any rich man be saved?_

"What division of property could there be among men if no one had anything? If we cannot fulfil the duties of charity without any money, and if at the same time we were commanded to reject riches, would there not be contradiction? Would it not be to say at the same time give and not give, feed and not feed, share and not share?"

It is therefore not a strict duty to loan to all; it is a form of benevolence, and we must put off to another chapter (ch. vi.) the conditions and the degrees of this duty.

But a question which necessarily presents itself here, is to know if, when one loans, it is a duty to deprive one's self of all remuneration; or if it is, on the contrary, permitted to exact a price over and beyond the sum loaned. This is what is called money _interest_; and when this interest is or appears excessive, it is called _usury_. This question, discussed during the whole middle ages, was, before its true principles were established, first resolved by practice and necessity.

It is to-day evident to all sensible minds, that capital, like work, has a right to remuneration. Why? Because without the expectation of this remuneration, the possessor of the capital would forthwith consume it himself or allow it to waste away without use. This will be better understood in considering the two princ.i.p.al forms of remuneration for capital: _interest_ and _rent_. Interest and rent are both the product of a capital loaned, but with this difference, that rent is the product of a _fixed_ capital (house, field, workshop); while interest is the product of a _circulating_ capital (money or paper).

The interest of capital represents two things: 1, the deprivation of him who loans, and who might consume his capital; 2, the risk he incurs, for capital is never loaned except to be invested, and consequently it may be lost. These are the two fundamental reasons which establish the legitimacy of interest, despite the prejudices which have long condemned it as _usury_, and the utopias which would establish the _gratuity_ of _credit_.[24]

The princ.i.p.al reason against the legitimacy of interest is deduced from the _sterility of money_. "Interest," says Aristotle, "is _money bred from money_; and nothing is more contrary to nature." But, as Bentham remarks (_Defense of Usury_, letter 10), "if it be true that a sum of money is of itself incapable to breed, it is not the less true that with this same borrowed sum, a man can buy a ram and a sheep, which, at the end of a year, will have produced two or three lambs." In other terms, as Calvin says, "it is not from the money itself that the benefit comes, it is from the use that is made of it."

It has been said that he who _loans_ does not _deprive_ himself of his money, since he can do without it. (Proudhon, _Letters to Bastiat_, 3d letter.) But he does deprive himself of it, since he might have consumed it himself. The proof that a loan is a privation, is the pain men have in economizing and in investing their money. How many men are there who, in possession of a sum of one hundred francs, would not rather spend it than place it on interest?

As to what is called _gratuitous_ credit, it could be possible only by being reciprocal. In fact, if I loan you my house, and you loan me in return your land, supposing they are of equal value, it is evident that, the one being worth as much as the other, and the two services equivalent, we need not pay each other anything; for it would be only an exchange of money. But nothing can be inferred from this, touching the most usual case: namely, where the capital is loaned by the possessor to him who does not possess; for then there is no reciprocity, consequently no gratuity.

As to the rate of interest it varies like all values according to the law of supply and demand in the money market. (See the _Cours d'Economie Politique_.) The greater the supply of capital the less dear it is. It is, then, the increase of capital that is to diminish interest and bring about a sort of relative gratuity. Every enterprise against capital will produce a contrary result.

As to the rent of capital, it has generally raised fewer objections than interest; for it is easier to understand that if I give myself the trouble to build a house, it is that it will bring me in something; but it is, on the whole, the same thing, with this difference, that circulating capital, running more risks than fixed capital, seems to have a still better right to remuneration.

The lender has then the right to exact a certain amount over and above the sum loaned. Certainly, he cannot exact it, as it often occurs among friends, and for very small sums. But as a principle, one is no more obliged to lend gratuitously, than to give to others gratuitously what they need.

In admitting that the interest of money is a legitimate thing, is one obliged also to admit that the money-lender has a right to fix the rate of interest as high as he wishes? Beyond a certain limit, will not the interest become what we call _usury_?

To which may be replied:

"1. If the one borrowing consents to pay the price, it is that this service done him does not appear to him too dear. One may borrow at 20 and even 30 per cent., if one foresees a gain of 40. 2. Why not look at the thing from the lender's standpoint? If the return of the funds appears more or less doubtful, why should he not have the right to protect himself?" (_Dictionary of Politics_, by Maurice Block.)

These arguments prove, in fact, that it is impossible to determine beforehand and absolutely the rate at which it may be permitted to lend, and there are many cases where a very high interest may be legitimate: for instance, in what is called _bottomry-loan_, which consists in advances made to s.h.i.+pping merchants on their s.h.i.+ps; the law here sanctions very high interest, because of the exceptional risks this kind of enterprise runs.

Does it, however, follow, as some economists seem to think, that there is no occasion to speak of _usury_, properly so called, that the term _usurer_ is an insult, invented by ignorance, which has no real basis?

This we cannot admit. Political economy and morality are two different things.

Even if one should admit that there is no reason for legally fixing the rate of interest, because money is a merchandise like all others which should be left to free circulation, to the free appreciation of the parties, it would not follow that there could be no abuse made of the required interest. Experience proves the contrary. It is not so much the rate of the interest which const.i.tutes the injustice thereof, as the reasons and circ.u.mstances of the loan. If, taking advantage of the pa.s.sions of youth, one loans to a prodigal, knowing him unable to refuse the conditions, because he only listens to pleasure; or if, seducing the ignorant, one dazzles him with magnificent bargains; or, lastly, if profiting by the common desire among peasants to enlarge their grounds, we advance them money, knowing they cannot return it, and secure thereby the property they think they are buying, in all such cases, or similar ones, there is always _usury_, and morality must condemn such hateful practices.

The hatefulness of usury is brought into strong relief in Moliere's celebrated scene in _The Miser_ (Act ii., Sc. i.):

LA FLeCHE: Suppose that the lender sees all the securities, and that the borrower be of age and of a family of large property, substantial, secure, clear and free from any inc.u.mbrances, there will then be drawn up a regular bond before a notary, as honest a man as may be found, who to this effect shall be chosen by the lender, to whom it is of particular importance that the bond be properly drawn up.

CLEANTE: That's all right.

LA FLeCHE: The lender not to burden his conscience with any scruples, means to give his money at the low rate of denier eighteen[25] (5, 9 per cent.) only.

CLEANTE: Denier eighteen? Jolly! That's honest indeed! No fault to find there!

LA FLeCHE: No. But as the said lender has not with him the sum in question, and, to oblige the borrower, he will himself be obliged to borrow from another at the rate of denier five (20 per cent.), it will be but just that the abovesaid first borrower should pay that interest without prejudice to the other, for it is only to oblige him that the said lender resorts to this loan.

CLEANTE: The devil! What a Jew! What an Arab is that! That would be at a greater rate than denier four (25 per cent.).

LA FLeCHE: That's so: it is just what I said.

CLEANTE: Is there anything more?

LA FLeCHE: But just a small item. Of the fifteen thousand francs that are asked, the lender can give in cash only twelve thousand, and for the thousand crowns remaining, it will be necessary that the borrower take the clothes, stock, jewelry, etc., of which here is the list.

CLEANTE: The plague on him!

The next scene shows with remarkable energy the _spendthrift_ and the _usurer_ in conflict with each other.[26]

=39. Duties of the debtor.=--After the duties of the lender and the creditor, let us point out those of the borrower or the debtor. The only duty for him here is to return what he has borrowed: it is the duty of _paying one's debts_.

For a long time, the duty of paying one's debts appeared to be one of those vulgar and commonplace duties intended for the generality of men, but from which the great lords freed themselves easily. The poor creditors have been the laughing stock in comedies.[27] But it is not doubted nowadays that to refuse to pay what one owes, is really taking from the property of others, and appropriating what does not belong to us.

This duty, besides, is so simple and stringent that it is necessary only to mention it without further development. The same principles apply to the various ways in which one may make use of property, and particularly to the three kinds indicated in the Civil Code--the _usufruct_, the _usage_, and the _right of action_. The common obligation in these three cases, mentioned by the Code, is to use the thing belonging to others as a _prudent father_ would, which is to say, to use it as the proprietor himself would use it, without injuring the object, and even improving it as much as possible. It is especially in commerce that the act of paying one's debts, is not only more obligatory morally, but socially more necessary than anywhere else. The reason of it is that commerce is impossible without credit. By exacting of every merchant the payment of cash, the springs of exchange would dry up; besides, most of the time it would be useless; for in commerce merchandise is constantly bought against merchandise. It would be loss of time, loss of writing, limitation of the market. In commerce one cannot say of him who owes that he is a borrower; for the next day, according to the fluctuations of demand and supply, he may be the lender. But it is just because credit is indispensable in commerce, that the obligations of the debtors are in some respect more stringent; for the greater the confidence, the more stringent the duty. So that _commercial honor_ is like _military honor_--it does not admit of breaking promises.

=40. Failures and bankruptcies.=--However strict one should be in commerce in regard to keeping promises, there is nevertheless in the Code cause for distinguis.h.i.+ng two different cases of promise-breaking--failure and bankruptcy; and in this second case, there is _simple_ bankruptcy and _fraudulent_ bankruptcy.

Failure is purely and simply the suspension of payments resulting from circ.u.mstances independent of the will of him who fails. Bankruptcy, on the contrary, is suspension of payments resulting either from imprudence or from mistakes of the bankrupt.

Simple bankruptcy occurs in the following cases: 1. If the personal expenses of the merchant or the expenses of his house are judged excessive; 2. If he has spent large sums of money in operations of pure chance either in fict.i.tious operations or extravagant purchases; 3. If with the intention of putting off his failure, he has made purchases to sell again below par; 4. If after cessation of payment, he has paid a creditor to the prejudice of all others. (Code of Commerce.)

Bankruptcy is called _fraudulent_, when the bankrupt has abstracted his books, misrepresented a portion of his a.s.sets, or declared himself debtor for sums he does not owe.

It is useless to say that this third case is but another case of theft and deserves the severest denunciation. Simple bankruptcy is already very culpable; and failure itself should be regarded by all merchants as a very great misfortune, which they must avoid at any cost.

=41. The commodate or gratuitous loan.=--The gratuitous loan or commodate is a contract by which one of the parties gives to the other a thing to be made use of, on the condition that it be returned after having served its purpose. (Code Civ., Art. 1875.)

As a fundamental principle, the receiver must return to the lender the very thing he has loaned him. But in case of loss or deterioration of the thing loaned, resulting from the use made of it, on whom is to fall the loss?

"It cannot be presumed, says Kant (Doctrine of the Law, French translation, p. 146), that the lender should take upon himself all the chances of loss or deterioration of the thing loaned; for it stands to reason that the proprietor, besides granting to the borrower the use of the thing he loans him, would not agree to _insure_ him also against all risks. If, for instance, during a shower, I enter a house, where I borrow a cloak, and this cloak gets to be forever spoiled from coloring matters thrown upon me by mischance, from a window, or if it be stolen from me in a house where I laid it down, it would be considered generally absurd, to say that I had nothing else to do than to send back the cloak, such as it is, or report the theft that has taken place. The case would be very different if, after having asked permission to use a thing, I should insure myself against the loss in case it should suffer any damage at my hands, by begging not to be held responsible for it. No one would think this precaution superfluous and ridiculous, except perhaps the lender, supposing he was a rich and generous man; for it would then be almost an offense not to expect from his generosity the remission of my debt."

=42. The trust.=--_Trust_, in general, is an act by which one receives the thing of another on condition to keep it and restore it in kind. (Code Civ., Art. 1915.)

He who deposits is called deponent (or bailor in England); he who receives the trust is called depositary (in England bailee).

The obligations of the depositary are morally the same as those found in positive law. We have then nothing better to do here than to reproduce the precepts of the Code on this matter.

1. The depositary, in keeping the thing deposited with him, must exercise the same care as with the things belonging to himself (Art. 1927).

2. This obligation becomes still more stringent in the following cases: (_a_), when the depositary offers himself to receive the thing in trust; (_b_), when he stipulates for a compensation for the keeping of the thing deposited; (_c_), when the trust is to the interest of the depositary; (_d_), when it has been expressly agreed upon that the depositary be answerable for all kinds of mistakes (Art. 1928).

3. The depositary cannot make use of the trust without the express or presumed consent of the deponent (Art 1929).--For example, if a library has been left in my trust, it may be presumed that the deponent would not object to my using it; but if the trust consists in valuable jewelry, it can be only by the express wish of the deponent that I could wear it. The difference is simple and easily understood.

4. The depositary should not seek to know what the things deposited with him are, if they have been left with him in a closed trunk or a sealed envelope (Art. 1931).

5. The depositary must return the identical thing he has received. Thus the trust consisting in specie, must be returned in the same specie.

The obligation to restore the thing deposited in kind, and such as it was when delivered, is evident, and const.i.tutes the very essence of the trust.