Why Not Usury?

On Jun 8, 2015, at 11:29 AM, mg wrote:

Was reading this...

 

https://mises.org/library/technology-needs-capital-produce-economic-growth

 

The Rothbard quote...

 

"What is lacking in (underdeveloped counties) is not knowledge of Western technological methods (“know how”); that is learned easily enough. The service of imparting knowledge, in person or in book form, can be paid for readily. What is lacking is the supply of saved capital needed to put the advanced methods into effect."

***Nothing controversial there...  but keep in mind Rothbard is an anarcho-capitalist, so he finds charging interest ok...***

 

Why must the capital be saved?   Why not borrow the capital?  Why can't usury be used to put the technology into effect?

*** Expansion through division of labor comes through the ability of some to forestall gratification today for more and better goods and services tomorrow.  The baker's extra loaves allows workers to build a mill, which then expands bread production, fostering delivery services, or whatever.  so far so good.

Anyone who forestalls payment, who does not demand liquidation of debt immediately is a saver.  Workers who delay being paid at the end of the month are the primary savers in our society, a massive source of bene-credit.  Much of that is stolen by banker's mal-credit, as an aside.

Industry that extends credit to its customers is bene-credit and "borrowing" on the other side of the agreement. So in any instance where there is credit extended, capital is being borrowed.

Usury is harmful in all instances, unnecessary to achieve goals, so why bring it up?***

 

"Take, for instance, a baker John who produced ten loaves of bread. He consumes two loaves of bread whilst the other two loaves — his real savings — he employs to purchase a new part to improve his oven. With a better oven he can now raise the output of bread to twenty loaves. If he still consumes only two loaves, then with a larger savings (now stands at eighteen loaves) he can enhance further his oven by introducing new parts, which will enable the introduction of new technology. Note that all this is made possible on account of real savings."

 

Why not borrow first for the technology then pay it back with 2 loafs +1 loaf for interest? 

***Because you can build vast networks of goods and services provisioned without interest.  And you are assuming that your offer harms no one, and will pencil out.***

  Meanwhile,  the Spiers bakery down the street insists on saving and can't meet demand and loses customers to my bakery

***  Why wouldn't my vendors front me what is necessary with bene-credit.  It is how it was done for most of history, up to circa 1978.  What makes you think my advantage is by paying interest and not in customer satisfaction, unless you think price is all.  And as to your scenario, how has Wonder Bread done?

John

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