S
Stfassisi
Guest
Very busy right now, but Hiaire Belloc explains furtherSo, what’s an “unproductive loan”?
If I get a bank loan to buy cattle in order to raise cattle that I couldn’t possibly afford to buy with case, and if my intend (and outcome) is that I make money selling cattle, is that an “unproductive loan”? I don’t think Belloc would say so.
I certainly wouldn’t. If not for having borrowed money, I would not now have 99% of what I now own.
Is borrowing money to buy a car to go to work an “unproductive loan”? Hard to think so if I can’t take a job if I don’t have a car.
Is borrowing money to buy a big screen TV an “unproductive loan”? Well, that probably is, because it’s hard to characterize the big screen TV as anything I really need or can turn to productive purposes.
But if the lender for the TV is guilty of a moral failing, then I’m every bit as guilty. If I don’t have the cash to buy the TV, then I have no business “selling” my future earning potential for it.
From Belloc…
Supposing a man comes to you and says: “There is a field next to mine which is a very good building site; if I put up a good little house on it I shall be able to let that house at a net profit-----all rates, taxes and repairs paid-of
£100 a year. But I have no capital with which to build this house. The field will cost £50 and the house £950. Will you lend me £1,000, so that I can buy the field, put up the house, and enjoy this nice little income?” You would presumably answer, “Where do I come in? You get your £100 a year all right; but you only get it by my aid, and therefore I ought to share in the profits. Let us go fifty-fifty. You take £50 every year as your share for your knowledge of the opportunity and for your trouble, and hand me over the other £50. That will be five percent on my money, and I shall be content.”
This answer, granted that property is a moral right, is a perfectly moral proposition. The borrower accepting that proposition certainly has no grievance. For a long time [theoretically, forever] you could go on drawing five percent on the money you lent, with a conscience at ease.
Now let us suppose that man comes to you and says: “I know the case of a man in middle age who has been suddenly stricken with a terrible ailment. Medical aid costing £1,000 will save his life, but he will never be able to do any more work. He has an annuity of £100 a year to keep him alive after the operation and subsequent treatment. Will you lend the £I,000? It will be paid back to you on his death, for his life has been insured in a lump payment for the amount of £I,000.” You answer: “I will lend £1,000 to save his life, but I shall require of him half his annuity, that is £50 a year, for every year he may live henceforward; and he must scrape along as best he can on the remaining £50 of his annuity.” That answer would make you feel a cad if you have any susceptibilities left, and if you have not-----having already become a cad through the action of what the poet has called “the soul’s long dues of hardening and decay”-----it would be a caddish action all the same, though you might not be disturbed by it.
It seems therefore that there are conditions under which you may legitimately and morally lend £1,000 at five percent in perfect security of conscience, and others in which you cannot.
Now look at the matter from another angle.
When the American city of Boston was founded, three hundred years ago, a man in London proposing to emigrate thither left gold to the value of £1,000 with a London goldsmith, under a bond that the goldsmith might use the money until he or his heirs should demand it, but with the proviso that five percent on the capital should accrue at compound interest until it was withdrawn. The emigrant did not reappear. The goldsmith’s business developed, as so many of them did, into a sort of bank as the seventeenth century wore on. By the beginning of the eighteenth it was a bank in due form, and its successor today is part of one of the great banking concerns of our time. The original deposit has gone on “fructifying,” as the phrase goes, with the liability piling up, but no one claiming it.
At last, in this year 1931, an heir turns up and proves his title. The capital sum into which this modest investment of a thousand pounds at five percent has grown is to be paid over to him under an order of the court. Do you know how much it will come to?-----More than twice the annual revenue of the United States today.
To be continued