SECTION CLXXXIX.. Interest-Policy.--Legitimateness of Interest.

INTEREST-POLICY.--LEGITIMATENESS OF INTEREST.

The legitimateness of interest is based on two unquestionable grounds: on the real productiveness of capital, and on the real abstinence from enjoyment of it by one's self.[189-1] Let us suppose a nation of fishermen with no private ownership in land and no capital, living naked in caverns, on sea-fish which the ebb of the ocean has left in the puddles along the shore, and which are caught only with the hand.[189-2] All workmen here may be equal, and each catch and consume three fish a day. Let us again suppose that some clever savage reduces his consumption to two fish a day, for one hundred days, and uses the stock of one hundred fish collected in this way to enable him to devote all his strength and labor, during fifty days, to the construction of a boat and a net. With the aid of this capital he, from the first, catches thirty per day. What now will his fellow tribesmen, who are not capable of such intelligent and systematic self control to do as he has done, do? What will they offer him for the use of his capital? In discussing this question both parties will very certainly consider not only the fifty days' labor spent in the construction of the boat, etc., but also the one hundred and fifty days during which its maker had to abstain from his full ration of food. If the borrower, of the thirty fish which may be caught daily with the aid of his capital, gives twenty-seven away, his condition is at least no worse than it was at first. On the other hand, the lender, if compensated only for the wear and tear of his capital, would reap no profit whatever from his loan. The interest to be paid will be fixed somewhere between these two extremes by the relation between demand and supply. A loan which pays no interest is a donated use of capital. (Knies.)[189-3] Interest may be called the reward of abstinence (Senior), in the same way as wages is called the reward of industry.[189-4] With the abolition of interest, exchange would be limited to the mere present, without any mediation between the past and the future. A great number of services would bring no equivalent in return, and, therefore, as a rule, never be performed. Most of the charges commonly made in our day against the "tyranny of capital" are, at bottom, only a complaint that capital is not inexhaustible; and even those workmen who are obliged to pay most to capital would be much worse off without it.

How entirely fallacious the above assumption is, is seen most strikingly in the case of such goods as cigars, wine, cheese, etc., which, without the least addition of labor, by merely postponing the consumption of them, obtain a much larger value both in exchange and in use. Or, how would it be possible, for instance, to reduce the value of a hundred-year-old tree, over and above the cost of planting it, to labor alone? Similarly, the fact that on a Chilian hacienda, 25 per cent. of the cattle can be slaughtered and no diminution of the herd take place. (Wappäus, M. und S. Amerika, 784.) Strassburger rightly inquires: if all the profit of capital is based on a cheating of workmen by capitalists, who is cheated in the case in which a manufacturer without workmen earns more with an increased capital than before with a small capital? (Hildebrand's Jahrb., I, 103.)]