Economics for Helen by Hilaire Belloc

Usury, the last subject but one on which I am going to touch in this book, is one which modern people have almost entirely forgotten, and which you will not find mentioned in any book on Economics that I know. Yet its vital importance was recognised throughout all history until quite lately, and it is already forcing itself upon modern people's notice whether they like it or no. So it is as well to understand it betimes, for it is going to be discussed very widely in the near future.

All codes of law and all writers on morals from the beginning of anything we know about human society have denounced as wrong the practice of _Usury_.

They have recognised that this practice does grave harm to the State and to society as a whole, and must, therefore, as far as possible, be forbidden.

Now what is Usury, and why does it thus do harm?

Modern people have so far forgotten this exceedingly important matter that they have come to use the word "usury" loosely for "the taking of high interest upon a loan. " That is very muddled thinking indeed, as you will see in a moment. The character of Usury _has nothing to do with the taking of high or low interest_. It is concerned with something quite different.

_Usury is the taking of any interest whatever upon an_ UNPRODUCTIVE _loan_.

A man comes to you and says: "Lend me this piece of capital which you possess" (for instance, a ship, and stores of food with which to feed the sailors during the voyage of the ship). "Using this piece of capital to transport the surplus goods from this country over the sea and to bring back foreign goods which we need here I shall make a profit so large that I can exchange it for at least one hundred tons of wheat. The voyage there and back will take a year."

You naturally answer: "It is all very well for you to make a profit of one hundred tons of wheat in one year by the use of _my_ ship and of _my_ stores of food for sailors who work the ship, but what about me? I grant you ought to have part of this profit for yourself, as you are taking all the trouble. But I ought to have _some_, because the ship and stores of food are mine; and unless I lent them to you (since you have none of your own) you would not be able to make that profit by trading of which you speak. Let us go half shares. You shall have fifty tons of wheat and I will take fifty, out of the total profit of one hundred tons."

The man who proposed to borrow your ship agrees. The bargain is struck, and when the year is over you make a fifty tons profit of wheat on your capital.

That is _the earning of interest on a productive loan_.

There is nothing morally wrong about that transaction at all. It does no one any harm. It does not weaken the State or society, or even hurt any individual. There is a sheer gain due to wise exchange (which is equivalent to production); everybody is benefited -- you that own the capital, the man who uses it, and all society, which benefits by the foreign exchange. Supposing your ship and stores of food were worth a hundred tons of wheat, then your profit of fifty tons of wheat is a profit of fifty per cent., which is very high indeed. But you have a perfect right to it: your capital has produced a real increase of wealth to that extent. If your capital be worth ten times as much, then your profit is only five per cent. instead of fifty. But your moral right to the fifty per cent. is just as great as your moral right to the five per cent. No one can blame you, and you are doing no harm.

Now supposing that, instead of coming to ask you for the loan of your ship, the man came and asked you for the loan of a sum of money which you happened to have by you and which would be sufficient to buy and stock the ship. It is clear that the transaction remains exactly the same. The loan is _productive_. He makes a true profit, that is, there is a real increase of wealth for the community, and you and he have a right to take your shares out of it -- you because you are the owner of the capital, and he because he took the trouble of organising and overlooking the expedition.

These are examples of profit on a _productive_ loan.

Now suppose a man to come to you if you were a baker and say: "Lend me half a dozen loaves. My family have no bread and I cannot see my way to earning anything for a day or two. But when I begin to earn I will get another half dozen loaves and see that you are not out of pocket. " Then if you were to reply: "I will not let you have half a dozen loaves on those terms. I will let you owe me the bread for a month if you like, but at the end of the month you must give me back _seven_ loaves": that would be usury.

The man is not using the loan productively; he is consuming the loaves immediately. No more wealth is created by the act. The world is not the richer, nor are you the richer, nor is society in general the richer. No more wealth at all has appeared through the transaction. Therefore the extra loaf that you are claiming is claimed out of nothing. It has to come out of the wealth of the community -- in this particular case out of the wealth of the man who borrowed the loaves -- instead of coming out of an increment or excess or new wealth. That is why usury is called "usury" -- which means: "wearing down," "gradually dilapidating."

It is clear that if the whole world practised usury and nothing but usury, if wealth were never lent to be used productively, but only to be consumed unproductively, and yet were to demand interest on the unproductive transaction, then the wealth that was lent would soon eat up all the other wealth in the community until you came to a situation in which there was no more to take. Everyone would be ruined except those who lent; then these, having no more blood to suck, would die themselves, and society would end.