foreign nations into one or two of its ports only,
cannot transact the same quantity of business
which it might do with different laws
and institutions. In a country, too, where,
though the rich, or the owners of large capitals,
enjoy a good deal of security, the poor,
or the owners of small capitals, enjoy scarce
any, but are liable, under the pretence of justice,
to be pillaged and plundered at any time
by the inferior mandarins, the quantity of
stock employed in all the different branches of
business transacted within it, can never be
equal to what the nature and extent of that
business might admit. In every different
branch, the oppression of the poor must establish
the monopoly of the rich, who, by engrossing
the whole trade to themselves, will
be able to make very large profits. Twelve
per cent. accordingly, is said to be the common
interest of money in China, and the ordinary
profits of stock must be sufficient to
afford this large interest.
A defect in the law may sometimes raise
the rate of interest considerably above what
the condition of the country, as to wealth or
poverty, would require. When the law does
not enforce the performance of contracts, it
puts all borrowers nearly upon the same footing
with bankrupts, or people of doubtful
credit, in better regulated countries. The uncertainty
of recovering his money makes the
lender exact the same usurious interest which
is usually required from bankrupts. Among
the barbarous nations who overran the western
provinces of the Roman empire, the performance
of contracts was left for many ages to
the faith of the contracting parties. The
courts of justice of their kings seldom intermeddled
in it. The high rate of interest
which took place in those ancient times, may
perhaps, be partly accounted for from this
cause.
When the law prohibits interest altogether,
it does not prevent it. Many people must
borrow, and nobody will lend without such a
consideration for the use of their money as is
suitable, not only to what can be made by the
use of it, but to the difficulty and danger of
evading the law. The high rate of interest
among all Mahometan nations is accounted for
by M. Montesquieu, not from their poverty,
but partly from this, and partly from the difficulty
of recovering the money.
The lowest ordinary rate of profit must always
be something more than what is sufficient
to compensate the occasional losses to
which every employment of stock is exposed.
It is this surplus only which is neat or clear
profit. What is called gross profit, comprehends
frequently not only this surplus, but
what is retained for compensating such extraordinary
losses. The interest which the borrower
can afford to pay is in proportion to the
clear profit only.
The lowest ordinary rate of interest must,
in the same manner, be something more than
sufficient to compensate the occasional losses
to which lending, even with tolerable prudence,
is exposed. Were it not, mere charity
or friendship could be the only motives for
lending.
In a country which had acquired its full
complement of riches, where, in every particular
branch of business, there was the greatest
quantity of stock that could be employed
in it, as the ordinary rate of clear profit would
be very small, so the usual market rate of interest
which could be afforded out of it would
be so low as to render it impossible for any
but the very wealthiest people to live upon
the interest of their money. All people of
small or middling fortunes would be obliged
to superintend themselves the employment of
their own stocks. It would be necessary that
almost every man should be a man of business,
or engage in some sort of trade. The province
of Holland seems to be approaching
near to this state. It is there unfashionable
not to be a man of business. Necessity
makes it usual for almost every man to be so,
and custom everywhere regulates fashion. As
it is ridiculous not to dress, so is it, in some
measure, not to be employed like other people.
As a man of a civil profession seems awkward
in camp or a garrison, and is even in some
danger of being despised there, so does an
idle man among men of business.
The highest ordinary rate of profit may be
such as, in the price of the greater part of
commodities, eats up the whole of what should
go to the rent of the land, and leaves only
what is sufficient to pay the labour of preparing
and bringing them to market, according
to the lowest rate at which labour can anywhere
be paid, the bare subsistence of the labourer.
The workman must always have
been fed in some way or other while he was
about the work, but the landlord may not always
have been paid. The profits of the
trade which the servants of the East India
Company carry on in Bengal may not, perhaps,
be very far from this rate.
The proportion which the usual market
rate of interest ought to bear to the ordinary
rate of clear profit, necessarily varies as profit
rises or falls. Double interest is in Great
Britain reckoned what the merchants call a
good, moderate, reasonable profit; terms
which, I apprehend, mean no more than a
common and usual profit. In a country where
the ordinary rate of clear profit is eight or
ten per cent. it may be reasonable that one
half of it should go to interest, wherever business
is carried on with borrowed money. The
stock is at the risk of the borrower, who, as it
were, insures it to the lender; and four or five
per cent. may, in the greater part of trades,
be both a sufficient profit upon the risk of
this insurance, and a sufficient recompence for
the trouble of employing the stock. But the
proportion between interest and clear profit