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thereafter be annually earned therefrom. Every Savings Bank possessing a surplus, will thus present to new depositors an inducement which will be salutary to the thrifty poor who may avail themselves of the common benefit; and as the existing large surplusses are owned mostly in cities, the inducement will be presented to the class of poor persons who are locally (by reason of surrounding temptations) most in need of inducements to self-denying accumulations. The law will be beneficial to depositors also, who reside where new Savings Banks are located, by reason that the depositors will receive more than 5 per cent. interest, as soon as the bank shall possess deposits enough to neutralize the contingent expenses ; and thus every depositor will become a quasi bank stockholder, to the amount of his deposits, and feel a common interest in increasing the number of depositors, so as to diminish ratably the per-centage of contingent expenses. i
Finally, in our legislation towards Savings Banks, we must remember that the conception of them may have originated in abstract benevolence, but they achieve good as an incident of machinery which is usually instituted for only the personal gain of salaried officers, or for some kindred private benefit. To the Legislature we must look for laws that shall coercively carry into practice the public benevolence which the institutions are capable of effecting, or they will continue to accomplish only as much public benefit as shall be necessary to secure private gains.
THE POLITICAL AND ECONOMICAL INFLUENCE OF USURY LAWS.*
THE RATE OF INTEREST AFFECTS THE PRICE
The right of a man to obtain as high a rate of interest as he can for his own money, will always be subordinated by the public to their right to promote their own welfare. Nor is this unreasonable, money being productive only by the industry of the public, as the Onondaga Salines are valuable only by the desires of salt consumers.
A man owning the Salines might insist on an abstract right to charge what he pleases for the salt; but as he must depend on the community for purchasers, and for supplying legal enac'ments by which his possessions will be secure from forceful seizure, the community would properly require that the price should be regulated by a reciprocity of interests, on the principle of live and let live. Nor are borrowers and lenders, combined, the only persons affected by the legal rate of interest, any more than the importer of foreign goods, and the Government are the only persons affected by a tariff; all imposts being ultimately paid by the consumer of imported goods, and all interest entering into the price of productions. The purchaser of a loaf of bread, or a joint of beef, must compensate the baker, or the butcher, according to the legal rate of interest for the capital employed in his business ; nay, the grazier who raises and fattens the beef, the miller who grinds the flour, and the farmer whu produces the wheat, must all receive, for their productions, a price sufficient to cover, among other expenses, the interest of the money employed in their busi
* Published in 1850.
The legal rate of interest controls still more directly the price of real estate. If my farm will rent for seven dollars an acre, it will be worth a hundred dollars the acre if the interest of money is seven per cent. the year, but it will not be worth more than fifty dollars the acre were the interest of money fourteen per cent.; and it would be worth two hundred dollars the acre, were the interest of money limited by law to three and a half per cent. The same principle applies to the price of rentable property of every kind.
THE RATE OF INTEREST DICTATES NOT MERELY THE PRICE
OF COMMODITIES, BUT THEIR PRODUCTION. If a woolen or cotton factory is to be established in your vicinity, a railroad constructed, or gas and water introduced, will you become a corporator in these enterpri. ses? If the business will pay seven per cent. annual dividends, the stock inay be taken where the interest of money is limited by law to seven per cent.; but where more than seven per cent. can be legally obtained, the stock will not be taken, and the designed business cannot be prosecuted. In California, where the rate of interest is two per cent. or more the month, no manufactural establishment will be undertaken whose dividends will not exceed seven per cent. the year. The legal rate of interest in Massachusetts, is only one per cent. the year less than it is in New York, still that difference makes cotton and woollen manufacto. ries more desirable investments in Massachusetts than in New-York. This influence of the rate of interest on industrial pursuits, and the price of rentable property, was recognized in England more than a hundred years ago, by the statute which reduced the rate of interest to five per cent., and whose preamble says, that "reducing interest to
ten per cent., and from thence to eight, and thence to six, has, by experience, been found very beneficial to trade and improvement of land,” &c.
Some manufactories exist, even in California, where in. terest is two per cent. the month, and by reflecting on what kinds they are, we may see better the principle by which the rate of interest operates on such pursuits. The manufactures of California are such only as can not be competed with by importation, as, for instance, architectural structures, gas works, railroads, turnpikes, ferries, &c.; but the price charged in California for gas, freight, passage, &c., will exceed the price we charge, in a proportion graduated by the excess of their interest over ours. The like may be said of the rents that will be paid in California for architectural erections, and the principle will manifest itself in all pursuits that require capital. The price of even imported articles becomes enhanced by a high rate of interest, so as to compensate the merchant for the time that must transpire between the purchase of his goods and their conversion into money; hence, after knowing the high rate of interest that exists in California, we need not be surprised at the apparently enormous price of house rent, &c., so long, at least, as the supply of houses, &c., shall not exceed the demand for them.
TAE ANTAGONISM BETWEEN LABOR AND CAPITAL.
But the influence of the legal rate of interest extends beyond all the foregoing illustrations. A New-York wool. en manufacturer cannot continue his productions unless their sale shall repay him for the cost of the raw material and the labor bestowed thereon, together with the legal rate of interest on the employed capital. Of these three essential ingredients, labor is the most unprotected. The
raw material of nearly all fabrics possesses a price that is independent of the home manufacture, for it can be transported at generally a small expense to every home market, and often to every foreign market; hence its price is kept up by reference to the value of the article in the best market to which it can be sent; so that every manufacturer procures his raw material in an active competition against the world, inveterated by rivalry and speculation. Disadvantages still greater apply to the borrower of money. He must compete, not with manufacturers only, but with all his countrymen; and could the rate of interest be enhanced illimitably by competition, as the raw material is enhanced in price, we can see that whether a manufactu. rer could compete with foreign fabrics and sustain his business, would depend on the price he pays for labor ; and labor is so dependent on local demand that the employer can coerce it to accept the lowest compensation that will sustain man's animal necessities. The operation of the principle is manifested in England. The raw material there, as everywhere else, is protected by the competition of purchasers, while money, unrestrained by usury laws, is protected, as everywhere, by universal competition for it; and nothing is unprotected but labor. It accordingly must be obtained low, or many fabrics which are made for foreign markets could not be manufactured at a salable price; consequently the laborers are taught that marriage and its most natural animal incidents are too expensive a luxury for their condition, and that emigration and poor-houses are a part of their proper resources. A laborer possesses the theoretical power of locomotion, and may, like money and raw material, seek the best market; but, practically, nothing is more difficult to move than labor. Besides feelings of attachment towards the place wherein we are ac