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* must be presumed to have adopted, if they had " stipulated any interest."*
This modification of the principle which deprecates a legal rate of interest, appears neither reasonable nor well founded. If the interest be an indemnity due to the lender for his having deprived himself of the commodity which he has lent, this indemnity, when it has not been stipulated by the parties, ought, like all other indemnities, to be complete, and restore to the creditor whatever he loses by being deprived of his commodity. Should the interest be fixed by law below the market-rate of interest; should it be legally fixed at five per cent. when it is worth six per cent., it is evident that the creditor loses one per cent., and does not receive the indemnity to which he is entitled; the debtor is favoured and benefited by his want of good faith or punctuality. · In this case, as well as in the loan of any other object than money, the care of fixing the indemnity due to the lender, on account of his having been deprived of his commodity, must be left to tlie magistrate. It ought not to be regulated by law, because it exceeds the functions, and is without the pale of legislation. The law ought to regulate it only when circumstances require its interference to remedy the deficiency of stipulations by the parties.
Except in those extraordinary cases, the law ought no more to fix the rate of interest, when there is no
* Abrégé Elémentaire de l'Economie Politique, par le Sénateur Germain Garnier. Paris, 1796. Chap. iv, article iv. section 3, 64,
agreement between the parties, than it ought to restrict or limit their agreement: the principle is the | same in both cases, and ought not to be differently applied...
But is the lending of capital at interest profitable or detrimental to national wealth ?
When a loan takes place merely because the lender does not wish to employ his capitals himself, and the borrower applies it to pay a labour productive of a revenue, there is no doubt that this employment of capital is as profitable as if the owner himself applied it to pay a labour productive of a profit.
The difficulty is only when the loan is applied to immediate consumption without any re-production.' In that case, we must distinguish between a loan to. a private individual and a loan to the public.
The former cannot have any very disastrous effects, because the number of prodigals and spendthrifts is never very extensive, and their prodigalities and dissipations can have but little or no influence on the total sum of the produce of labour,
The public loan is the only one that is of importance, because it has an essential influence on the wealth and power of states.
Governments are induced to open public loans whenever the ordinary revenue is insufficient for the extraordinary expences which imperious circumstances demand. Public loans must therefore be considered as an extraordinary resource; and the only question proper to be examined in this case is, whe-. ther this resource is more or less prejudicial than any other that might be employed.
Nations have only three ways and means to provide for extraordinary expences;-to sell the national demesnes, if there be any; to levy contributions proportioned to the wants of government; and to have recourse to voluntary loans.
To sell the public demesnes would at this time yield a very feeble resource in great states, and in others it would be precarious, and afford but a slow, uncertain, remote, and consequently inefficient assistance.
To raise the public contributions, and proportion them to the wants of the state, is not always practicable; they could only be levied at the expence of capital destined to maintain labour productive of a revenue; consequently they would cause its diminution, and perhaps interrupt this labour and occasion incalculable losses to re-production, Extraordinary contributions might besides experience a resistance which would augment the expences of government, obstruct its operations and paralyse its energy. And should they even not encounter any resistance or . meet with any difficulty, they could not provide for immediate wants, because they could only be levied slowly and gradually ; consequently extraordinary contributions would afford but a slow, uncertain, and inefficient assistance.
Public loans are free from any of these inconveniences; the want is supplied as soon as it is felt. When the capitals which they procure to the state, have no useful employment or destination, they are no-wise injurious to labour and re-production; both continue in the same state; and if they suffer any injury from this way of employing capital, it is only
in being less extended and improved. Perhaps it might even be asserted, that labour and re-production do not suffer any injury at all, and that they are extended and improved by other causes not less powerful than the impulse of capital.
The interest of the loan and the fund set apart for its re-payment, require a small increase of taxes ; which necessarily proves a stimulus to more labour and greater economy; so that in this instance it may truly be affirmed, that public loans, far from injuring labour and re-production, contribute to the increase of both.
On the other hand, as public loans afford an opportunity of employing even the smallest capitals, and create as it were an income without labour, they stimulate every one to economy, and contribute indirectly to the progress of wealth.
It will no doubt be objected, and with some appear-' ance of truth, that these private savings and increased productions being consumed fruitlessly and without any re-production, there is not a single shilling added to the wealth of the nation, and only a change of consumers effected. .:But on studying the results of public loans with more attention, the futility of the objection is soon discovered. 1. Were the extraordinary wants which occasion public loans, permanent; and were no fund for the extinguishing of such loans in a given time, provided, along with the interest; public loans would undoubtedly consume all the productions which they cause to be produced or economized, and matters
would ultimately be in the same state as if there had been no loans.
But if the wants which such loans supply, are merely temporary; if the productions which they caused to be produced or economized, are sufficient to provide for the interest and for a surplus to extinguish the debt; it must be acknowledged, that after the re-payment of the capital, the contributors to the public expences are richer by all the productions produced to pay their contributions, the state-creditors, by all the savings which they have converted into shares in the public funds, and national wealth increased by both the productions produced by the contributors to the public expences, and the capitals accumulated by the state-creditors.
These results are incontestable, when public loans absorb only unemployed capitals and when the public contributions provide both for the interest of the debt and for its extinction in a given time.
The case is not exactly the same, when the capitals absorbed by public loans are abstracted from those which would have served to maintain labours productive of a revenue. The application of such capitals to an unproductive consumption must be acknowledged to be prejudicial, perhaps even fatal to the branches of labour which they supported: but this evil, considerable as it is, cannot be compared to that occasioned by excessive contributions to the public expences, which impair capitals employed in labour, restrain or paralyse its faculties, weaken the sources of re-production, and carry desolation and despair into all labouring classes. There is even this difference between the