Gaston Haxo and the Theory of Interest
F. T. Hodgkiss
[Reprinted from Land and Freedom,
November-December, 1940]
Your July-August issue contains an interesting article on a "Theory
of Interest" by Mr. Gaston Haxo. He is sound in his statements
that interest is not due to the reproductive forces of nature; also,
that the contract (interest) freely entered into by borrower and
lender, both of whom benefit therefrom, is equitable; and this custom
is not likely to cease. Payment for service rendered, and it is
commonly, so understood, is the justification for interest, and the
average rate is determined by competition between lenders. The return
to lenders is their own concern.
I purchase a machine (capital). I purchase it from my own funds. It
is mine for all time. That is just. But again, I borrow money not for
itself, but for the service it supplies and I buy the machine. It is
not mine. I pay for its hire. That is just. Service for service -
interest.
Surely Mr. Haxo's statement that interest as an institution is "but
the evil fruit of an evil economic system", and is "unearned
increment" is wrong. It largely arises from his treating money as
if it purchased only capital. If I, a land speculator, buy and sell
vacant lots I do not spend money in purchasing capital. I purchase
land- a wide distinction. If I buy a block, erect a building upon it,
and let the whole, I am paid in money; I receive so much in interest
on my building (capital). This is just. And I receive so much
in land rent. This is due to society, and I have no just claim to it.
Mr. Haxo makes no such vital distinction.
There is little doubt the enormous land rent incomes of Astors,
English dukes, German junkers, etc. are invested by them partly in
purchasing additional land - not capital. They also invest land-rent
money in capitalistic enterprises, claiming "interest" and
also in interest-bearing Government loans, stealthily reducing the
masses to slavery. The whole world is the sufferer.
The investment origin is land rent privately appropriated. Only in
this sense is Mr. Haxo's statement correct that "interest as an
institution has its roots in land monopoly and the resultant
exploitation of labor". This investment of the people's values we
must put an end to. We must eliminate all land rent from private
incomes.
Then will money lent be invested in capital alone, which, with
interest thereon, Mr. Haxo endorses as just. Long-term interest on
debts would disappear and back debts be paid off, for a new world of
prosperity would prevail. The effect of breaking up land rent monopoly
would be the same as witnessed in early "Go West" days
before land speculation got the mastery and brought the United States
to its present condition of progress and poverty. George would be
vindicated. So great would be the demand for labor and capital, that
wages and interest (both just, and the same in origin) would rise
together, and with land rent collected and the abolition of
monopolies, parasitism would be ended. Melbourne, Australia.
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