[Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 451.]

It was generally admitted by the theologians that the taking of usury might be permitted by the civil authorities, although it was insisted that acting in accordance with this permission did not absolve the conscience of the usurer. Albertus Magnus conceded that 'although usury is contrary to the perfection of Christian laws, it is at least not contrary to civil interests';[1] and Aquinas also justified the toleration of usury by the State: 'Human laws leave certain things unpunished, on account of the condition of those who are imperfect, and who would be deprived of many advantages if all sins were strictly forbidden and punishments appointed for them. Wherefore human law has permitted usury, not that it looks upon usury as harmonising with justice, but lest the advantage of many should be hindered.'[2]

Although this opinion was controverted by aegidius Roma.n.u.s,[3] it was generally accepted by later writers. Thus Gerson says that 'the civil law, when it tolerates usury in some cases, must not be said to be always contrary to the law of G.o.d or the Church. The civil legislator, acting in the manner of a wise doctor, tolerates lesser evils that greater ones may be avoided. It is obviously less of an evil that slight usury should be permitted for the relief of want, than that men should be driven by their want to rob or steal, or to sell their goods at an unfairly low price.'[4] Buridan explains that the att.i.tude of the State towards usury must never be more than one of toleration; it must not actively approve of usury, but it may tacitly refuse to punish it.[5]

[Footnote 1: Rambaud, _op. cit._, p. 65; Espinas, _op. cit._, p. 103.]

[Footnote 2: II. ii. 78, 1, ad. 3.]

[Footnote 3: _De Reg. Prin._, ii. 3, 11.]

[Footnote 4: _De Cont._, ii. 17.]

[Footnote 5: _Quaest. super. Lib. Eth._, iv. 6.]

-- 7. _The Justice of Unearned Income_.

Many modern socialists--'Christian' and otherwise--have a.s.serted that the teaching of the Church on usury was a p.r.o.nouncement in favour of the unproductivity of capital.[1] Thus Rudolf Meyer, one of the most distinguished of 'Christian socialists,' has argued that if one recognises the productivity of land or stock, one must also recognise the productivity of money, and that therefore the Church, in denying the productivity of the latter, would be logically driven to deny the productivity of the former.[2] Anton Menger expresses the same opinion: 'There is not the least reason for attacking from the moral and religious standpoints loans at interest and usury more than any other form of unearned income. If one questions the legitimacy of loans at interest, one must equally condemn as inadmissible the other forms of profit from capital and lands, and particularly the feudal inst.i.tutions of the Middle Ages.... It would have been but a logical consequence for the Church to have condemned all forms of unearned revenue.'[3]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 427.]

[Footnote 2: _Der Kapitalismus fin de siecle_, p. 29.]

[Footnote 3: _Das Recht auf den Arbeiterstrag_. See the Abbe Hohoff in _Democratie Chretienne_, Sept. 1898, p. 284.]

No such conclusion, however, can be properly drawn from the mediaeval teaching. The whole discussion on usury turned on the distinction which was drawn between things of which the use could be transferred without the ownership, and things of which the use could not be so transferred. In the former category were placed all things which could be used, either by way of enjoyment or employment for productive purposes, without being destroyed in the process; and in the latter all things of which the use or employment involved the destruction.

With regard to income derived from the former, no difficulty was ever felt; a farm or a house might be let at a rent without any question, the return received being universally regarded as one of the legitimate fruits of the ownership of the thing. With regard to the latter, however, a difficulty did arise, because it was felt that a so-called loan of such goods was, when a.n.a.lysed, in reality a sale, and that therefore any increase which the goods produced was in reality the property, not of the lender, but of the borrower. That money was in all cases sterile was never suggested; on the contrary, it was admitted that it might produce a profit if wisely and prudently employed in industry or commerce; but it was felt that such an increase, when it took place, was the rightful property of the owner of the money. But when money was lent, the owner of this money was the borrower, and therefore, when money which was lent was employed in such a way as to produce a profit, that profit belonged to the borrower, not the lender. In this way the schoolmen were strictly logical; they fully admitted that wealth could produce wealth; but they insisted that that additional wealth should accrue to the owner of the wealth that produced it.

The fact is, as Bohm-Bawerk has pointed out, that the question of the productivity of capital was never discussed by the mediaeval schoolmen, for the simple reason that it was so obvious. The justice of receiving an income from an infungible thing which was temporarily lent by its owner, was discussed and supported; but the justice of the owner of such a thing receiving an income from the thing so long as it remained in his own possession was never discussed, because it was universally admitted.[1] It is perfectly correct to say that the problems which have perplexed modern writers as to the justice of receiving an unearned income from one's property never occurred to the scholastics; such problems can only arise when the inst.i.tution of private property comes to be questioned; and private property was the keystone of the whole scholastic economic conception. In other words, the justice of a reward for capital was admitted because it was unquestioned.

[Footnote 1: _Capital and Interest_, p. 39.]

The question that caused difficulty was whether money could be considered a form of capital. At the present day, when the opportunities of industrial investment are wider than they ever were before, the princ.i.p.al use to which money is put is the financing of industrial enterprises; but in the Middle Ages this was not the case, precisely because the opportunities of profitable investment were so few. This is the reason why the mediaeval writers did not find it necessary to discuss in detail the rights of the owner of money who used it for productive purposes. But of the justice of a profit being reaped when money was actually so employed there was no doubt at all.

As we have seen, the borrower of a sum of money might reap a profit from its wise employment; there was no question about the justice of taking such a profit; and the only matter in dispute was whether that profit should belong to the borrower or the lender of the money. This dispute was decided in favour of the borrower on the ground that, according to the true nature of the contract of _mutuum_, the money was his property. It was, therefore, never doubted that even money might produce a profit for its owner. The only difference between infungible goods and money was that, in the case of the former, the use might be transferred apart from the property, whereas, in the case of the latter, it could not be so transferred.

The recognition of the t.i.tle _lucrum cessans_ as a ground for remuneration clearly implies the recognition of the legitimacy of the owner of money deriving a profit from its use; and the slowness of the scholastics to admit this t.i.tle was precisely because of the rarity of opportunities for so employing money in the earlier Middle Ages. The nature of capital was clearly understood; but the possibility of money const.i.tuting capital arose only with the extension of commerce and the growth of profitable investments. Those scholastics who strove to abolish or to limit the recognition of _lucrum cessans_ as a ground for remuneration did not deny the productivity of capital, but simply thought the money had not at that time acquired the characteristics of capital.[1]

[Footnote 1: See Ashley, _op. cit._, vol. i. pt. ii. pp. 434-9.]

If there were any doubt about the fact that the scholastics recognised the legitimacy of unearned income, it would be dispelled by an understanding of their teaching on rents and partnership, in the former of which they distinctly acknowledged the right to draw an unearned income from one's land, and in the latter of which they acknowledged the same right in regard to one's money.[1]

[Footnote 1: On this discussion see Ashley, _Economic History_, vol.

i. pt. ii. pp. 427 _et seq._; Rambaud, _Histoire_, pp. 57 _et seq._; Funk, _Zins und Wucher_; Arnold, _Zur Geschichte des Eigenthums_, pp.

92 _et seq._; Bohm-Bawerk, _Capital and Interest_ (Eng. trans.), pp.

1-39.]

-- 8. _Rent Charges_.

There was never any difficulty about admitting the justice of receiving a rent from a tenant in occupation of one's lands, because land was understood to be essentially a thing of which the use could be sold apart from the ownership; and it was also recognised that the recipient of such a rent might sell his right to a third party, who could then demand the rent from the tenant. When this was admitted it was but a small step to admit the right of the owner of land to create a rent in favour of another person in consideration for some payment. The distinctions between a _census reservativus_, or a rent established when the possession of land was actually transferred to a tenant, and a _census const.i.tutivus_, or a rent created upon property remaining in the possession of the payer, did not become the subject of discussion or difficulty until the sixteenth century.[1] The legitimacy of rent charges does not seem to have been questioned by the theologians; the best proof of this being the absence of controversy about them in a period when they were undoubtedly very common, especially in Germany.[2] Langenstein, whose opinion on the subject was followed by many later writers,[3] thought that the receipt of income from rent charges was perfectly justifiable, when the object was to secure a provision for old age, or to provide an income for persons engaged in the services of Church or State, but that it was unjustifiable if it was intended to enable n.o.bles to live in luxurious idleness, or plebeians to desert honest toil. It is obvious that Langenstein did not regard rent charges as wrongful in themselves, but simply as being the possible occasions of wrong.[4]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 409.]

[Footnote 2: Endemann, _Studien_, vol. ii. p. 104.]

[Footnote 3: Endemann, _Studien_, vol. ii. p. 109.]

[Footnote 4: Roscher, _Geschichte_, p. 20.]

In the fifteenth century definite p.r.o.nouncements on rent charges were made by the Popes. A large part of the revenue of ecclesiastical bodies consisted of rent charges, and in 1425 several persons in the diocese of Breslau refused to pay the rents they owed to their clergy on the ground that they were usurious. The question was referred to Pope Martin V., whose bull deciding the matter was generally followed by all subsequent authorities. The bull decides in favour of the lawfulness of rent charges, provided certain conditions were observed.

They must be charged on fixed property ('super bonis suis, dominiis, oppidis, terris, agris, praediis, domibus et hereditatibus') and determined beforehand; they must be moderate, not exceeding seven or ten per cent.; and they must be capable of being repurchased at any moment in whole or in part, by the repayment of the same sum for which they were originally created. On the other hand, the payer of the rent must never be forced to repay the purchase money, even if the goods on which the rent was charged had perished--in other words, the contract creating the rent charge was one of sale, and not of loan. The bull recites that such conditions had been observed in contracts of this nature from time immemorial.[1] A precisely similar decree was issued by Calixtus III. in 1455.[2]

[Footnote 1: _Extrav. Commun._, iii. 5, i.]

[Footnote 2: _Ibid._, c. 2.]

These decisions were universally followed in the fifteenth century.[1]

It was always insisted that a rent could only be charged upon something of which the use could be separated from the ownership, as otherwise it would savour of usury.[2] In the sixteenth century interesting discussions arose about the possibility of creating a personal rent charge, not secured on any specific property, but such discussions did not trouble the writers of the period which we are treating. The only instance of such a contract being considered is found in a bull of Nicholas V. in 1452, permitting such personal rent charges in the kingdoms of Aragon and Sicily, but this permission was purely local, and, as the bull itself shows, was designed to meet the exigencies of a special situation.[3]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 410.]

[Footnote 2: Biel, _op. cit._, Sent. IV. xv. 12.]

[Footnote 3: Cleary, _op. cit._, p. 124.]

-- 9. _Partnership_.

The teaching on partnership contains such a complete disproof of the contention that the mediaeval teaching on usury was based on the unproductivity of capital, that certain writers have endeavoured to prove that the permission of partnership was but a subterfuge, consciously designed to justify evasions of the usury law. Further historical knowledge, however, has dispelled this misconception; and it is now certain that the contract of partnership was widely practised and tolerated long before the Church attempted to insist on the observance of its usury laws in everyday commercial life.[1]

However interesting an investigation into the commercial and industrial partnerships of the Middle Ages might be, we must not attempt to pursue it here, as we have rigidly limited ourselves to a consideration of teaching. We must refer, however, to the _commenda_, which was the contract from which the later mediaeval partnership (_societas_) is generally admitted to have developed, because the _commenda_ was extensively practised as early as the tenth century, and, as far as we know, never provoked any expression of disapproval from the Church. This silence amounts to a justification; and we may therefore say that, even before Aquinas devoted his attention to the subject, the Church fully approved of an inst.i.tution which provided the owner of money with the means of procuring an unearned income.

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 411; Weber, _Handelsgesellschaften_, pp. 111-14.]

The _commenda_ was originally a contract by which merchants who wished to engage in foreign trade, but who did not wish to travel themselves, entrusted their wares to agents or representatives. The merchant was known as the _commendator_ or _socius stans_, and the agent as the _commendatarius_ or _tractator_. The most usual arrangement for the division of the profits of the adventure was that the _commendatarius_ should receive one-fourth and the _commendator_ three-fourths. At a slightly later date contracts came to be common in which the _commendatarius_ contributed a share of capital, in which case he would receive one-fourth of the whole profit as _commendatarius_, and a proportionate share of the remainder as capitalist. This contract came to be generally known as _collegantia_ or _societas_. Contracts of this kind, though originally chiefly employed in overseas enterprise, afterwards came to be utilised in internal trade and manufacturing industry.[1]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 412-14.]

The legitimacy of the profits of the _commendator_ never seems to have caused the slightest difficulty to the canonists. In 1206 Innocent III. advised the Archbishop of Genoa that a widow's dowry should be entrusted to some merchant so that an income might be obtained by means of honest gain.[1] Aquinas expressly distinguishes between profit made from entrusting one's money to a merchant to be employed by him in trade, and profit arising from a loan, on the ground that in the former case the ownership of the money does not pa.s.s, and that therefore the person who derives the profit also risks the loan. 'He who lends money transfers the ownership of the money to the borrower.

Hence the borrower holds the money at his own risk, and is bound to pay it all back: wherefore the lender must not exact more. On the other hand, he that entrusts his money to a merchant or craftsman so as to form a kind of society does not transfer the ownership of the money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand, as something belonging to him, part of the profits derived from his money.'[2] This dictum of Aquinas was the foundation of all the later teaching on partnership, and the importance of the element of risk was insisted on in strong terms by the later writers. According to Baldus, 'when there is no sharing of risk there is no partnership';[3] and Paul de Castro says, 'A partnership when the gain is shared, but not the loss, is not to be permitted.'[4] 'The legitimacy,' says Brants, 'of the contract of _commenda_ always rested upon the same principle; capital could not be productive except for him who worked it himself, or who caused it to be worked on his own responsibility. This latter condition was realised in _commenda_.'[5]

[Footnote 1: _Greg. Decr._, iv. 19, 7.]

[Footnote 2: II. ii. 78, 2, ad. 5.]

[Footnote 3: Brants, _op. cit._, p. 167.]

[Footnote 4: _Consilia_, ii. 55; also Ambrosius de Vignate, _De Usuris_, i. 62; Biel, _Op. cit._, IV. xv. 11.]