INDEBTEDNESS

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Danger of Credit,

Even if the co-operative credit movement were to spread among
industrial workers to a much greater extent than we anticipate it would
not strike at the heart of the workers’ difficulties. Credit, in the sense of
borrowing capacity, is not the worker’s need ; it would be nearer the
truth to describe it as his curse. There are frequent occasions when a
misfortune makes it necessary for him to obtain a small loan, but such
loans are often obtained from relatives. Even where this is not possible,
they could frequently be obtained on reasonable terms, if it were not for
the larger debts already incurred. As matters stand at present, if these
loans could all be secured on terms of easy repayment, the majority of
workers would be little nearer to freedom. It is the large debts which
are incurred not from economic necessity but on account of social
pressure and custom that most enslave the worker. The fatal weakness
 in the present system is the comparative ease with which the
worker can borrow sums which he has little prospect of being able to
repay. His lack of education tends to prevent him from taking long
views ; and the offer of cash to the extent of a hundred or two hundred
rupees in exchange for a thumb-print is almost irresistible. The lack
of forethought in mortgaging the future is illustrated by the fact that the
thumb-print is frequently given ona blank document or the page of a
book. It is by no means uncommon for the money-lender to fill in both
the capital sum and the interest rate subsequently, and in any case the
borrower has no copy of the transaction and has usually to rely entirely on
the money-lender for a periodical reckoning of the position. Quite apart
from the dangers of this practice the workman has often no real perception
 of the effect of compound interest, and his readiness to let the future
take care of itself is fatal to him.

Laws against Usury.

Laws against usury have been a prominent feature of various
religions and national codes, and-the leading religions of India affirm the
principle underlying them. Unfortunately, as we think, the influence of
economic thought in the nineteenth century led to the removal ofall
legal restrictions on usurious practices in India, and it is only within the
last generation that there has been a tendency to re-impose them. This
has led to a few legislative experiments but (with the possible exception of
Some measures relating to land) the attempts so far made have not been
effective. The leading measure of general application is the Usurious
Loans Act of 1918. This measure enables the court hearing a suit for
bhe recovery of debt to re-open the transaction and relieve the debtor of
excessive interest, provided that the transaction was substantially unfair
nm the first instance. Excessive interest is defined as meaning interest
In excess of that which the court deems to be reasonable having regard
to the risk incurred as it appeared, or must be taken to have appeared, to
the creditor at the date of the loan ”. Tt is agreed that the law has not
been generally successful. We doubt if the interest in the type of transaction
 we are considering is © excecaiva ’ within the meanine of the