ANARCHY & INTEREST RATES
"Les esprits se rassuroient à peine" — Raynal

AM | @HDI1780

In the wake of William the Conqueror's successful English campaign, notes Raynal, everything was thrown in a state of confusion, including property rights: "Malheureusement l'introduction du gouvernement féodal occasiona une révolution si brusque & si entière dans les propriétés, que tout tomba dans la confusion" (HDI 1780, iii.1, p. 263).

Without much explanation, he then states: "L’intérêt de l’argent étoit de cinquante pour cent". Although the point is never quite explicitely made, we are led to believe that the supply of credit tends to contract whenever property rights become unstable.

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There is little doubt in my mind that Raynal debated these issues with Diderot. As a matter of fact, he inserts a long passage by Diderot on usury and the credit market, right after his statement on interest rates in eleventh-century England. In titre 95 of Observations sur le Nakaz, Diderot makes the same point: "...dans une contrée très éloignée, où il n'y a nul exercise des lois ... il y a risque de perdre ses avances." Yet it was Adam Smith who best explained the link between anarchy and usury:

Among the barbarous nations who overran the western provinces of the Roman empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of justice of their kings seldom intermeddled in it. The high rate of interest which took place in those ancient times may perhaps be partly accounted for from this cause (Wealth of Nations, i.9).

When it comes to interest rates and the credit market, both Raynal and Diderot had a clear sense of (most of) the causal relations involved. Yet, they failed to present their arguments in a rigorous manner, like Adam Smith in 1776. Why? Because they lacked the Scotsman's esprit systématique.
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