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He cautions that “what we might stigmatise as ‘usury’ does not consist in the obtaining of a gain out of the loan, or out of the buying of labour, but in the immoderate extent of that gain…. Some gain or profit on capital there would be if there were no compulsion on the poor, and no monopolising of property…. It is only the height of this gain where, in particular cases, it reaches an excess, that is open to criticism, and, of course, the very unequal conditions of wealth in our modern communities bring us unpleasantly near the danger of exploitation and of usurious rates of interest.”
The Essence of Interest
Böhm-Bawerk takes pains to emphasize that he is not condemning interest per se: “But what is the conclusion from all this? Surely that, owing to accessory circumstances, interest may be associated with a usurious exploitation and with bad social conditions; not that, in its innermost essence, it is rotten.”
Yet he asks, “[W]hat if these abuses are so inseparably connected with interest that they cannot be eradicated, or cannot be quite eradicated?” His response:
Even then it is by no means certain that the institution should be abolished…. Arrangements absolutely free from drawback are never allotted to us in human affairs….
Instead of the absolute good, which is beyond reach, we must choose what, on the whole, is the relative best, where the balance, between attainable advantage and the drawbacks that must be taken into the bargain, is the most favourable possible for us.
In the end he doesn’t believe abuse is inseparably connected to interest: “There is no inherent blot in the essential nature of interest. Those, then, who demand its abolition may base their demand on certain considerations of expediency, but not, as the Socialists do at present, on the assertion that this kind of income is essentially unjustifiable.”
There are unanswered questions about Böhm-Bawerk’s position, but we do know that the thinker who refuted Marx’s exploitation theory had one of his own.
This article originally appeared at The Freeman.