Thursday, 16 June 2016

Capital III, Chapter 36 - Part 12

Interest In The Middle Ages

Marx quotes a number of authorities. Gilbart, in his “History and Principles of Banking”, argues that, under feudalism, the usurers had an actual monopoly over lending and so it was legitimate to put a legal limit on interest, especially as resort to borrowing would only arise as a result of distress.

The rate of interest was set at 10% under Henry VIII, 8% under James I, 6% Charles II, and 5% Queen Anne. He says,

“In our times, it is the rate of profit which regulates the rate of interest. In those times, it was the rate of interest which regulated the rate of profit. If the money-lender charged a high rate of interest to the merchant, the merchant must have charged a higher rate of profit on his goods. Hence, a large sum of money would be taken from the pockets of the purchasers to be put into the pockets of the money-lenders.” (p 610)

According to Martin Luther, interest ran at between 30-40%. Luther laments,

“If one has 100,000 florins, as the big merchants must possess, he takes 40,000 annually, which means devouring one affluent prince each year. If one has 1,000,000 florins, he takes 400,000 annually, which means devouring one mighty king every year. And he does not risk either his person or his wares, does not work, sits near his fire-place and roasts apples; so might a lowly robber sit at home and devour a whole world in ten years." (Quoted from Bücher vom Kaufhandel und Wucher vom Jahre 1524, Luther's Werke, Wittenberg, 1589, Teil 6, S. 312.)” (p 611) 

Daniel Hardcastle relates how the first bankers were, “... a very bad set, they were gripping usurers, iron-hearted extortioners.” (p 611)

Marie Augier, describes how banks were established in Venice and coastal towns as a result of the long voyages of ships, which encouraged the raising of credit.

Sir Dudley North, one of the first big merchants and economists described how the provision of loans to the decadent rich still prevailed in the last part of the 17th century.

“"The moneys employed at interest in this nation, are not near the tenth part, disposed to trading people, wherewith to manage their trades; but are for the most part lent for the supplying of luxury, and to support the expense of persons, who though great owners of lands, yet spend faster than their lands bring in; and being loath to sell, choose rather to mortgage their estates." (Discourses upon Trade, London, 1691, pp.6-7.)” (p 612)

Something similar is related by J. G. Busch in relation to Poland in the 18th century, where bankers obtained credit from abroad, in order to lend to “spendthrift gentry at 8% and more.” (p 612)

Advantages Derived By The Church From The Prohibition of Interest 

Although interest was banned selling property to cover distress was not, nor was transferring property to the lender for the duration of a loan. The lender, therefore, obtained the rent or other revenue from the property during this time. Particularly during the Crusades, the church obtained considerable profit and ownership of property by such loans.

Back To Part 11

Forward To Chapter 37

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