SECTION CXCI.. Interest-Policy.--the Canon Law, Etc.

INTEREST-POLICY.--THE CANON LAW, etc.

The canon law, from the first, endeavored to prevent contracts for interest. We may even say that the prohibition of interest-usury is the key-stone of the whole system of the political economy of the Corpus Juris Canonici. The development of that law coincides, as to time, with the senility of the Roman Empire and the childhood of modern nations.[191-1] In the golden age of papal power, every interest-creditor was refused the communion, the testamenti factio and the right of ecclesiastical burial. Proceedings at law could not be instituted for the recovery of the principal debt until the creditor had restored all the interest obtained. In the council of Vienna, in 1311, it was declared heresy to defend the taking of interest. The universal antipathy of the church towards the growing importance of the bourgeoisie,[191-2] and the desire to give the spiritual courts an extensive jurisdiction in litigated cases, may have contributed largely to the adoption of these measures. In later medieval times, the secular power offered its services to execute these laws;[191-3] and, to judge of what public opinion in this matter was, we need only call to mind the decided disapproval of interest by Dante, Luther and Shakespeare.[191-4]

The Weddeschat, a species of pledge or loan on security, constituted the transition from this state of things to the modern economic system of interest. The Weddeschat was a sale with a reserved right of redemption, by which the debtor gave his creditor the use and enjoyment of a piece of land a sort of interest in kind, but which he could at any time recover back, by payment of the principal. This was not very oppressive on the debtor, as he was the only party who could recall the contract.[191-5] In a higher stage of civilization, indeed the continuance of this species of land-pledge would be exceedingly disadvantageous, since the momentary possessor of a piece of land which might be bought back by another person at any time at a price fixed in advance, would scarcely think of improving it.[191-6]

And so, the introduction of rent-purchase (Rentekauf) was an important step in advance: the incumbrancing of a piece of land which remained in the possession of the debtor with an interest in kind paid to the creditor. The latter could never claim anything further, while the debtor and his heirs might redeem the land from this interest-incumbrance by paying back the purchase money.[191-7] As the Pope, on the 19th of January, 1569, renewed, in express terms, the prohibition of all interest not based on rent-purchase, so did the police ordinances of the Empire, of the sixteenth century, declare it to be the only lawful form of loaning at interest; provided, always, that only the debtor could demand the cancellation of the contract.[191-8] We find, however, that, on the whole, at least Protestant countries had, before 1654, adopted the modern Roman law relating to interest.[191-9] [191-10]

However, the long persistence of the prohibition of the canon law in relation to interest, even with the refuge afforded by the introduction of the rent-purchase system, and of dormant partnerships (Commanditen) etc., so common in the sixteenth century,[191-11] would be unintelligible, if, contemporaneously, the Jews did not carry on an important and somewhat free trade in capital,[191-12] precisely as the Armenians, Hindoos and Jews do in the Mohammedan world of to-day.

The German Empire, in 1600, allowed the debtor to contract that, in case of delay, the contract might be declared annulled. In France, on the other hand, even during the 18th century, nearly all loans were made in the form of rent-purchase (Law, Trade and Money, 127), and the creditor could declare the contract void only in case the debtor did not pay him the rent. (Warnkönig, Franz. R. G., II, 585 ff.) For strictly Catholic countries, the prohibition relating to the taking of interest still really remains. However, Leo X.'s bull, Inter multiplices, exempts the so-called monti di pietà, and by this means put obstacles in the way of saving, and promoted real usury. Of this last, Niebuhr, Briefe, II, 399, adduces very striking instances from the Pope's own temporal dominion. In the case of pledge, even 12 per cent. per annum is required. (Rom im Jahr, 1833, 163.) Yet, in 1830, the Poenitentiaria Romana instructed the clergy, without, however, deciding the chief question, not to disquiet people any longer in the confessional who had taken interest. (Guillaumin, Dictionnaire de l'Economie politique, art. usure.) On the Russian Sect, Staroverzen, which still condemns the taking of interest, see Storch, Handbuch, II, 19. By the Russian government it was permitted very early. Ewers, Ältestes Recht der R., 323 seq.]