surprise us, that the great obtain credit from those in a lower position, at least as frequently as they give them credit in turn.

On the side of the creditor, the possibility of making loans is a powerful incentive to frugality. Were there no credit, those who were not in a condition to employ their capital productively would make savings only within very narrow limits.

SECTION XCI.

DEBTOR LAWS.

Private credit is always conditioned, and in a great many ways, by the situation of the whole nation's business; in other

of a land-loan association as compared with what he could obtain before he had joined it. The popular belief of the ancient Egyptians afforded them a very great instrument of credit in the pledging of the remains of their ancestors. (Herodot., II, 136.)

B. Hildebrand is of opinion that the Political Economy of the future may be characterized as credit-economy, in the same way as the Economy of the present may be called money-economy, and that of the past as bartereconomy of barter. (National Ekonomie der Gegenwart und Zukunft, I, 276 ff.) Hildebrand's view is correct in so far as that, with every advance in civilization, credit comes to have absolutely and relatively an ever increasing importance, although in the middle ages, especially under feudal forms (Lehensformen), there were numberless operations in credit. Otherwise, however, Hildebrand's three kinds of economy are, by no means, coördinated. While barter and purchase through the instrumentality of money, in every instance, entirely exclude each other, it is impossible to imagine a credittransaction of which the promise of a barter-performance or of a money-performance does not constitute the base. During a "money-economical (geldwirthschaftlichen) period" [i. e., one during which money is the medium of exchange, and not notes; and when barter does not obtain. - Translator.] the service rendered by money as a medium of exchange may, for the most part, be supplanted by credit. Money, as a measure of value, still remains the substratum of credit itself. (See Knies in the Tübinger Ztschr., 1860, 154 ff.; and in the Freiburger Programm, 9 Sept., 1862, 19.) Earlier yet, A. Wagner, Beitr. zur Lehre von den Banken, 1857 ff. Among the most practical propositions of Saint Simonism is that of a système général des banques, intended to administer all the goods of the nation, and to loan them to individuals engaged in production. (Bazard, 205 ff.)

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words, by their politico-economical situation. It is especially in the higher stages of civilization, that one bankrupt may easily drag numberless others down with him; and where the laws are bad or powerless, not even the wealthiest man can predicate his own solvency for any length of time in advance. One of the most important conditions of credit is the certainty that, if the debtor's good will to meet his obligations should fail, it shall be supplied by the compulsory process of the courts. Hence, the importance of a judicial procedure, at once impartial, enlightened, prompt and cheap.1 The more vigorous the laws relating to debt are in preventing dishonesty on the part of the debtor, the more advantageous are they to honorable and honest debtors. Adam Smith has rightly said, that in countries in which creditors are not completely protected by the courts, the honorable man who borrows money is in the same condition as the notoriously dishonest man or the spendthrift, in better governed countries. He finds it more difficult to borrow and is obliged to pay a higher rate of interest. Rigorous debtor laws, on the other hand, diminish in

1 It is destructive of credit to allow the debtor to await several decrees or judgments before his liability is established; to allow him, on easy terms, delays, reversals of judgment, the costs of the case etc. The term within which a creditor might bring in his claim before the meeting of creditors in the Amsterdam Boedel-chamber was formerly thirty-three and a third years. (Büsch, Darst. der Handlung, Zusatz, 82.) In the presidency of Bengal there were, in 1819, 81,000 cases in arrears, and in 1829, 140,000. Westmin. ister Review, XIX, 142.

And yet Melon is of opinion that the state should favor the debtor as much as possible. (Essai politique sur le Commerce, ch. 12, 18.) This was the view entertained on this subject by the older practitioners. In Bengal, the dhura, a species of “judgment of God,” in which the party who could hold out longest against hunger was declared the victor, was the only means to compel a debtor to pay his debt. As a consequence, the Bengal peasant could not borrow money at less than 60 per cent. per annum. Edinburgh Review, XXII, 67. On the damages attending the credit-laws and creditcourts of Russia, by which all foreign goods are rendered exceedingly dear, see v. Sternberg, Bemerkungen über R., 100 ff. In a country in which a great many powerful personages are above the laws, an incorporated loaning bank may be an indispensable necessity. (Storch, Handbuch, II, p. 23 ff.)

the whole nation the amount of "bad debts," that is, a not insignificant portion of the cost of production. They, at the same time, promote, as far as it is in the power of laws to do it, national honor and the mutual confidence of man in man. The excellence of their debtor laws, in their most flourishing period, was one of the principal elements which contributed to make Athens and Rome of such importance in the history of the world.s

SECTION XCII.

HISTORY OF CREDIT LAWS.

In the history of laws relating to credit, we may distinguish, in a great many countries, three stages of development.

A. The laws, in the first stage, are very severe. In the Germanic middle age the insolvent was disgraced. He became the slave of his creditor (zu Hand und Halfter), who might imprison him, fetter him (stöcken und blöcken), and probably kill him. A Norwegian law allowed the creditor, when his debtor would not work and his friends would not ransom him, to take him before the court, and "to lop off from his body what part he will, above or below." To judge of

1

In Naples, even as recently as 1804, no debtor could be arrested during the last six months of the queen's pregnancy. At a previous period, one might fail in business there and escape all punishment by exposing the hindermost part of himself in a nude state publicly before a column of the Vicaria. (Rehfues, Gemälde von Neapel, I, p. 203 seq., 222.) In Schwytz, the rate of interest is so high, because the law allows the debtor to pay his creditor, whether the latter will or not, in articles of household furniture, clothes etc., estimated at a very high value. (Hermann, Staatsw. Untersuchungen, 202.) It has now become quite usual in the United States, on account of the many delays granted to the debtor by "democratic" laws introduced there, instead of mere mortgage, to give full warranty deeds when capital is loaned. By this means, the creditor is in danger, when misfortune overtakes him, to see himself compelled to let his property go at one-fourth of its value.

See the Heliast oath in Demosth., adv. Timocr., 746. The Roman system of credits in the time of Polybius was much better than the Carthagenian. Polyb., VI, 56, XXXII, 13.

'Sachsenspiegel, III, 39. J. Grimm, Deutsche Rechtsalterthümer, 612 ff.

these provisions correctly, it is necessary to bear in mind the many ways in which family resources were at this time bound and tied up, and not forget "the power of defiance in these iron natures."2 (Niebuhr.)

B. The canon law introduced milder principles. Gregory the Great had already prohibited the holding on to the body of the debtor. On this account, during the latter portion of the middle ages, it was customary to stipulate by contract that the provisions of the ancient law should govern in this matter, to submit to imprisonment etc. The influence of the Roman law made it gradually more usual, in the case of insolvent debtors, to demand no more from them than the assignment of their property for the benefit of their creditors. This, however, led to numerous frauds; and these became more frequent in proportion as the laws governing the property of parties while the marriage relation existed between them, and as executions against landed property etc. were defective.

C. Hence, in more highly civilized times, there has been a return to the severity of earlier ages. Persons engaged in commerce, especially those whose capital is so volatile, and to whom time is a thing so precious, can scarcely dispense willingly with personal imprisonment for debt. Hence, legislation on bills of exchange, sanctioned especially by imprisonment of the person, plays a very important part in the commercial cities of the seventeenth century, as it did, naturally, much earlier in Italy and the Netherlands. Modern laws in Dahlmann, Dänische Gesch., II, 245, 339. Hermann, Russ. Gesch., III, 357. On slavery for debt among the Malays, see Ausland, 1845, No. 157. 2 Beaujour, Tableau du Commerc en Grèce, II, 176.

C. 2 X. De Pignor. An appropriate provision in a priestly government. Diodor., I, 79.

4 Staying in a place by the debtor until the creditor is satisfied, and other degrading stipulations, which, however, were prohibited by the police regulations of the Empire in 1548, art. 17.

'Marten's Ursprung des Wechselrechts, 1797. Statuta Mediol., 1480, fol. 238 ff. The municipal law of Florence unconditionally imprisoned the father or grandfather for the debt of the son, when the latter engaged in industrial pursuits with their consent. (Stat. Flor., I, 201) In Bologna, the

many cases punish the bankrupt whenever an examination of his books, kept after approved methods, does not demonstrate his innocence. The great facility of fraudulent bankruptcy, where commerce has attained a high degree of development and complication; the absence of honor shown in engaging in speculation for one's own gain with a stranger's capital, and without the real owner's knowledge; the comparatively small number of blameless and irreproachable bankruptcies, certainly justify these provisions.9

brothers of a bankrupt who had constituted one houschold with him were held responsible for his debts. (Statuti dell' Università de Mercantati della Città di B., 1550, fol. 110.) The law of Geneva excluded from all positions of honor the son who had left his father's debts unpaid. Montesquieu, E. des Lois, XX, 16. The consequence was, that among the higher classes not a creditor lost anything for centuries. (K. L. v. Haller, Restauration der Staatswissenschaften, VI, 519.) Compare the "Nurenberger Reformation" of 1479, fol. 61 and 68 of the edition of 1564.

Compare the R. P. O. of 1548, art. 22. And so, by the Code de Commerce, III, 4, I, even the simple bankrupt in contradistinction to the fraudu. lent bankrupt is punished, and every person unable to pay his debts is declared a simple bankrupt, who, among other things, has made excessive household expenses, or lost considerable sums by play etc. Compare Sully, Mémoires, Livre XXVI, who declares it to be his most wholesome law, that fraudulent bankrupts should, like thieves, be punished with death, and that all their fraudulent assignments, gifts, etc., should be deciared void. Further, Ordonn. de Louis XIV., sur les Failletes, art. 11; J. de Wit, Mêmoires, 77 ff; v. den Heuvel, Sur le Commerce de la Hollande, 110 ff. Frederick William I., in 1715, threatened with the galleys all light-headed bankrupts, and, in 1723, all those who, knowing their insolvent condition, should effect further loans. Mylius, Corp. Const. March. II, 2, 31, 40. For China, see Davis, The Chinese, 1, 247 ff. Gr. Soden, Nat. Oek., III, 231, demands that, in case of doubt, the guilt of the bankrupt should always be presumed.

In England only one-tenth of the number of bankrupts are considered innocent. Elliott, Credit the Life of Commerce, 1845, 50 ff.

8 The contrainte par corps of debtors was abolished in France in 1792, but restored in 1797. Even Turgot remarked that since slavery had ceased there was no further fear (?) that the poor would be oppressed by imprisonment for debt. (Sur le Prêt d' argent, § 31.) According to Droz, the question is not one of weighing "freedom" against "miserable money," but the deprivation of a few of that freedom and the non-fulfillment of obligations entered into, that is against the destruction of public confidence.

A similar development among the Greeks: