96

THE NATURE AND CAUSES OF

of business transacted within it can never be equal to whatthe nature and extent of that business might admit. In everydifferent branch, the oppression of the poor must establishthe monopoly of the rich^who, by engrossing the whole tradeto themselves, will be able to make very large profits. Twelveper cent, accordingly is said to be the common interest ofmoney in China , and the ordinary profits of stock must besufficient to afford this large interest.

A defect in the law may sometimes raise the rate of interestconsiderably above what the condition of the country, as towealth or poverty, would require. When the law does notenforce the performance of contracts, it puts all borrowersnearly upon the same footing with bankrupts or people ofdoubtful credit in better regulated countries. The uncer-tainty of recovering his money makes the lender exact thesame usurious interest which is usually required from bank-rupts. Among the barbarous nations who overran thewestern provinces of the Roman empire, the performance ofcontracts was left for many ages to the faith of the contract-ing parties. The courts of justice of their kings seldom inter-meddled in it. The high rate of interest which took placein those ancient times may perhaps be partly accounted forfrom this cause.

When the law prohibits interest altogether, it does not pre-vent it. Many people must borrow, and nobody will lendwithout such a consideration for the use of their money asis suitable, not only to what can be made by the use of ifbut to the difficulty and danger of evading the law. Thehigh rate of interest among all Mahometan nations is ac-counted for by Mr. Montesquieu , not from their poverty, bidpartly from this, and partly from the difficulty of recoveringthe money.

The lowest ordinary rate of profit must always be some'thing more than what is sufficient to compensate the occa'sional losses to which every employment of stock is exposed'It is this surplus only which is neat or clear profit. Wl>^is called gross profit comprehends frequently, not only th> 5surplus, but what is retained for compensating such extrao'jdinary losses. The interest which the borrower can afft> r(to pay is in proportion to the clear profit only.

The lowest ordinary rate of interest must, in the sain emanner, be something more than sufficient to compensate tb foccasional losses to which lending, even with tolerable p rl1 '