On the Theory of Interest

Alan C. Thompson

[Reprinted from Land and Freedom, January-February 1938]

I notice a discussion in your December number on interest, and among others, friend Beckwith has a long letter. He claims to be a scientist, in fact the only real economic scientist who is 100 per cent Henry George. All others are "spurious imitations."

In a little notice of my book you qualify your praise by the statement that you "do not hold his views on interest." There are two different things called interest. I and some others discuss one, Beckwith and those who agree with him another.

My contention is that interest is the payment for the use of borrowed wealth and nothing else. George says that this is not all interest, thereby admitting it is interest. Then he tries to make out that some part of the increase due to the use of capital is also interest, but nowhere does he define it or give any clear law for its division, and finally says, "In truth, the primary divisions of wealth is dual not triparte. Capital is but a form of labor." (Book III, chapter 5, last paragraph.) All your correspondents, Beckwith included, discuss interest in the commercial sense (the payment for the use of borrowed wealth) and although the latter denies that there is interest, he proceeds to discuss it without explaining what, in his view, it is; so his discussion is neither scientific nor understandable, as he is trying to apply his idea of interest to something, which he says is not interest. The only interest that is meant by economists other than Beckwith (if you can call him one) is that which I have defined, and which will disappear when economic rents are collected in lieu of all taxation and not until then. For as long as wealth can purchase and that will yield a revenue without the labor of the owner, just so long will man refuse to loan wealth without demanding a similar return.

I notice Mr. Beckwith says that defining terms first is a mistake. Certainly no one would accuse him of doing this in regard to interest.