Laws on Interest and Debt

We may remark, too, that this more equitable tone of opinion grew up spontaneously, without any legal restriction on the rate of interest–no such restriction having ever been imposed and the rate being expressly declared free by a law ascribed to Solon himself.

Continuing Solon’s Early Greek Legislation,
our selection from History of Greece by George Grote published in 1846. For works benefiting from the latest research see the “More information” section at the bottom of these pages. The selection is presented in eighteen easy 5 minute installments.

Previously in Solon’s Early Greek Legislation.

Time: 594 BC
Place: Athens

If the borrower cannot fulfill his promise to repay the principal, the public will regard him as having committed a wrong which he must make good by his person. But there is not the same unanimity as to his promise to pay interest: on the contrary, the very exaction of interest will be regarded by many in the same light in which the English law considers usurious interest, as tainting the whole transaction. But in the modern mind, principal, and interest within a limited rate, have so grown together, that we hardly understand how it can ever have been pronounced unworthy of an honorable citizen to lend money on interest. Yet such is the declared opinion of Aristotle and other superior men of antiquity; while at Rome, Cato the censor went so far as to denounce the practice as a heinous crime. It was comprehended by them among the worst of the tricks of trade–and they held that all trade, or profit derived from interchange, was unnatural, as being made by one man at the expense of another; such pursuits therefore could not be commended, though they might be tolerated to a certain extent as a matter of necessity, but they belonged essentially to an inferior order of citizens. What is remarkable in Greece is, that the antipathy of a very early state of society against traders and money-lenders lasted longer among the philosophers than among the mass of the people–it harmonized more with the social “idéal” of the former, than with the practical instincts of the latter.

In a rude condition such as that of the ancient Germans described by Tacitus, loans on interest are unknown. Habitually careless of the future, the Germans were gratified both in giving and receiving presents, but without any idea that they thereby either imposed or contracted an obligation. To a people in this state of feeling, a loan on interest presents the repulsive idea of making profit out of the distress of the borrower. Moreover, it is worthy of remark that the first borrowers must have been for the most part men driven to this necessity by the pressure of want, and contracting debt as a desperate resource, without any fair prospect of ability to repay: debt and famine run together in the mind of the poet Hesiod. The borrower is, in this unhappy state, rather a distressed man soliciting aid than a solvent man capable of making and fulfilling a contract. If he cannot find a friend to make him a free gift in the former character, he will not, under the latter character, obtain a loan from a stranger, except by the promise of exorbitant interest, and by the fullest eventual power over his person which he is in a condition to grant. In process of time a new class of borrowers arise who demand money for temporary convenience or profit, but with full prospect of repayment–a relation of lender and borrower quite different from that of the earlier period, when it presented itself in the repulsive form of misery on the one side, set against the prospect of very large profit on the other. If the Germans of the time of Tacitus looked to the condition of the poor debtors in Gaul, reduced to servitude under a rich creditor, and swelling by hundreds the crowd of his attendants, they would not be disposed to regret their own ignorance of the practice of money-lending. How much the interest of money was then regarded as an undue profit extorted from distress is powerfully illustrated by the old Jewish law; the Jew being permitted to take interest from foreigners–whom the lawgiver did not think himself obliged to protect–but not from his own countrymen. The “Koran” follows out this point of view consistently, and prohibits the taking of interest altogether. In most other nations laws have been made to limit the rate of interest, and at Rome especially the legal rate was successively lowered–though it seems, as might have been expected, that the restrictive ordinances were constantly eluded. All such restrictions have been intended for the protection of debtors; an effect which large experience proves them never to produce, unless it be called protection to render the obtaining of money on loan impracticable for the most distressed borrowers. But there was another effect which they “did” tend to produce–they softened down the primitive antipathy against the practice generally, and confined the odious name of usury to loans lent above the fixed legal rate.

In this way alone could they operate beneficially, and their tendency to counterwork the previous feeling was at that time not unimportant, coinciding as it did with other tendencies arising out of the industrial progress of society, which gradually exhibited the relation of lender and borrower in a light more reciprocal, beneficial, and less repugnant to the sympathies of the bystander.

At Athens the more favorable point of view prevailed throughout all the historical times. The march of industry and commerce, under the mitigated law which prevailed subsequently to Solon, had been sufficient to bring it about at a very early period and to suppress all public antipathy against lenders at interest. We may remark, too, that this more equitable tone of opinion grew up spontaneously, without any legal restriction on the rate of interest–no such restriction having ever been imposed and the rate being expressly declared free by a law ascribed to Solon himself. The same may probably be said of the communities of Greece generally–at least there is no information to make us suppose the contrary. But the feeling against lending money at interest remained in the bosoms of the philosophical men long after it had ceased to form a part of the practical morality of the citizens, and long after it had ceased to be justified by the appearances of the case as at first it really had been.

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