In its inception the economic theory of the loaning of money did not contemplate the possi bility that anyone might desire to raise a loan for the purpose of investment or to secure capi tal with which to carry one's business interests to a more successful outcome. In those early ages the commercial sense had not been widely developed and such business interests as those represented by the modern banker and broker were unknown, a condition that was not un favorable to the extension of the practice of usury whenever and wherever there were laws permitting it. The ancient laws relating to loans read strangely to the modern student and can scarcely be comprehended if they are not considered in connection with the conditions of the times. If the Mosaic laws are taken as an example, the reader must place himself in a position to appreciate the Biblical point of view before he can hope to approximate fairly their justice to both borrower and lender. It must be remembered that the land (that is, the world), belonging originally to its Creator, had been given by God to the descendants of Abraham, and liberality to the poor had been one of the conditions under which this gift had been made. Naturally, therefore, the needy Israelite felt that obtaining loans was a right which belonged to him, while the more wealthy people of Israel, feeling that all their property was a loan direct from the hand of God, did not, in the beginning at least, object to giving a small portion of their plenty for the relief of the destitute. Under such conditions the exe cution of this law of lending was clearly sup ported by all the force that the recommendation of the constitution itself could bring to bear upon it, and it was not until the selfishness of man commenced to exert a baneful influence that definite laws were promulgated, laws that made the duty of lending the express command of God. While the justice of such legislative enactments may be questioned, especially when viewed from the position of present-day society, their benignity is no longer a matter of doubt when the principle of the divine origin of property is accepted as the basis of ownership, and as this was the polity upon which the entire Mosaic commonwealth was constructed, the laws adopted for the government of the borrower and the lender assume a more just and reasonable position in the estimation of modern thought. In substance these laws pro vided that the destitute Israelite might borrow what he required for his necessities without interest, either in money or produce; at the end of each seven years there was a remission of debts when every creditor was supposed to remit such money or produce as he had lent, and a prospective borrower was not to be re fused such necessities as he might require even when the year of the remission was at hand. While the Mosaic law strictly forbade the charging of interest, it did not prevent the acceptance of pledges, which were legally pro tected in such manner as to prevent any hard ship falling upon the borrower. For instance, the lender was forbidden to accept a mill or the upper millstone in pledge, it being held that they were too much a necessity of life; if raiment should be taken it was required that it must be returned before sunset, lest it be needed during the night, while in the case of a widow's raiment, its acceptance was forbidden under all circumstances. Under the Mosaic law a creditor was forbidden to enter a house for the purpose of reclaiming a pledge, al though he might stand without until the bor rower should come to him and return it, and while the statutes did not prohibit temporary bondage in the case of insolvent debtors, they provided that the Hebrew bondsman should not be held longer than the year of jubilee, or the seventh year at the most.
If these were the laws that governed the financial relations of Israelites among them selves, however, the same leniency did not apply to the Israelite's treatment of the stranger. For example: interest might be taken from a for eirer, and, at the end of the seventh year, the principal as weH as the interest might be ex acted. Less restrictions were placed upon pledges taken from foreigners, and the foreign debtor held in bondage was not entitled to exact his release at the coming of the jubil e, and yet even these laws were humane in com parison with those of Rome, which not only provided for the enslavement of the debtor, but even permitted the creditor to put him to death, an extremity, however, to which, ac cording to the best authorities, the Romans were never known to have resorted.
The provisions of the Hebrew law which permitted the lender to collect both principal and interest from a stranger and which placed the stranger at the mercy of the creditor until such loans were repaid was the beginning of the' practice of usury among this people, but many centuries elasped, as it shown by ref erence to Proverbs, or to the Psalms, before the exaction of usury from another, Hebrew was regarded otherwise than as a discreditable act. By the time of the birth of Christ, how
ever, the original spirit of the law seems to have been forgotten, for the borrowing and lending of money then prevailed without re gard to any race limitations.
The practice of mortgaging land and of pay ing exorbitant interest for money obtained upon such surety was a Jewish custom which grew up during the days of the Captivity. Although condemned by Nehemiah as being in direct vio lation of the law, and denounced by Jesus Christ, whose new law of love required the righteous man to give to all who asked of him, and to lend to his enemies, "asking for nothing again," the mortgaging of property has con tinued throughout the East. In the beginning and for a long period 12 per cent was gen erally the interest charged, but later, under Turkish rule, and despite the warnings of the Koran, which also forbids usury, from 40 to 50 per cent was exacted.
In ancient Greece the practice of usury pre vailed to such an extent that in Athens, about 595 B.C., the bulk of the population were bound in practical slavery. Originally free and small proprietors, they had continued to borrow from the rich until the majority of them had placed themselves completely at the mercy of the aristocracy, and even those who nominally owned their land were not only unable to pay the money they owed but were compelled to erect on their land huge •stone pillars, monu ments to advertise their debts, which bore the name of the plutocrat to whom they were so seriously indebted. At last Solon appeared and with him the reform legislation that made Athens once more a free city, for the radical remedy which he applied to the financial abuses formally put an end to the law of bankruptcy resting upon slavery, and practically overcame the evil effects of the entire system of usury. Realizing that such a serious condition re quired a firm band, Solon first proclaimed a general seisachtheia, which provided that all debts made upon the person of the debtor or upon the surety of his land should become void. At the same time his legislation stipu lated that bodily security should never again be accepted and that surety in land should rest only within a portion of the property. These reforms, which were certainly distinctly modern in their character, were so effective that the evils which had once threatened the security of Athens were no longer experienced, and although the rate of interest charged upon loans was still sometimes exorbitant — a condition which must exist whenever the rate is left to be determined by free contract — the restriction of the right of attachment was the means of pre venting many abuses.
The conditions exising in Rome during the early days of the nation were similar to those which prevailed in Greece, although in Rome there was no Solon to legislate reform measures that could really reform. As a result more than five centuries passed before the Ro man debtor was accorded the relief that had saved Athens, and, by that time, it was too late for any legislation to preserve the identity of the middle class. In the beginning Rome re sembled Athens in that the mass of its people were farmers living on their own small estates, and, as in Athens, these yeomen soon became overwhelmed by the debts that war and taxes had forced upon them. A protest was made and, in 500 n.c. the Twelve Tables were adopted as a remedy, the theory being that the stipula tion of a maximum rate of interest would be all that was necessary to overcome the prevail ing evil. So far from accomplishing this pur pose the attempt to regulate the rate of interest failed utterly and as no alterations had been made in the law which actually governed debt, it was less than three centuries before prac tically all the free farmers had become en slaved. It was not until the dictatorship of Julius Casar, in fact, more than five centuries after Solon, that the Athenian remedy was adopted and the law of debt really abolished. It has been stated that, at this time, while the rate of interest upon first-class properties in the city of Rome was only about 4 per cent, in the provinces the rate was increased to 25 and often 50 per cent. After pronouncing the accumula tion of arrears illegal, Justinian established a rate of 6 per cent for all loans except those of a mercantile character, in which case per cent was allowed, and public sentiment, at last aroused to the influence of usury upon the social and economic fabric of the nation, stamped it as such a pernicious crime.