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CREDIT AND THE PROBLEM OF TRUST IN THE THOUGHT OF JOHN LOCKE, c. 1668–1704

Published online by Cambridge University Press:  16 June 2020

JON COOPER Open the ORCID record for JON COOPER [Opens in a new window]
JON COOPER*
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Stanford University
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Abstract

This article presents a reinterpretation of John Locke's contribution to debates about the interest rate in the seventeenth century. It suggests that his argument that England should maintain the ‘natural’ rate, rather than impose a lower rate, was motivated by his theological, moral, and social conceptions of credit and its dependence on trust. In order to solve the endemic shortage of metal coin limiting the growth of monetary exchange in England, Locke stressed that the higher, ‘natural’ rate of interest would facilitate interpersonal borrowing and lending among neighbours, allowing currency to flow more freely around the country. By contrast, while he acknowledged that institutional creditors such as goldsmith-bankers could quicken the circulation of money by issuing debt instruments like bills of exchange, he saw institutional credit as a threat to the moral community. Not only did he question how people could rationally trust financiers without any epistemic apprehension of their personal probity, but he moreover doubted whether individuals accumulating so much money were likely to act trustworthily. Finally, using an otherwise unstudied dialogue about the Bank of England, this article argues Locke extended his criticisms about the threats posted by private banks to the country's nascent system of public credit.

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Article
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The Historical Journal , Volume 64 , Issue 2 , March 2021 , pp. 211 - 232
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Copyright © The Author(s), 2020. Published by Cambridge University Press.

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Footnotes

This article originated as an undergraduate dissertation at Cambridge. I would like to thank Craig Muldrew for supervising it, John Dunn for providing invaluable feedback, and my director of studies Paul Cavill for his support along the way. Thanks also to the Bodleian Library for kindly allowing me access to its collections, and for the anonymous referees’ helpful comments.

References

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44 Locke, Some of the consequences, p. 182; John Locke, Some considerations of the consequences of lowering of interest and raising the value of money, in Kelly, ed., Locke on money, ii, pp. 209–342, at p. 251, which reads ‘Borrowing Money upon Use is…the necessity of Affairs, and the Constitution of Humane Society.’

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93 Ibid., p. 272. Note the similarity with Locke's statement about the monetary age in Two treatises, ii, 8, §111, which ‘corrupted Mens minds into a Mistake of true Power and Honour’.

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101 On 5 Oct. 1694: ‘Assignd my stock in the Bank to Mr for £255-’ (MS Locke f. 10, fos. 244–5).

102 Correspondence, v, 1811.

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104 Correspondence, v, 1849. For more complaints, see ibid., 1844, 1845, and 1847.

105 Ibid., vii, 3135.

106 MS Locke b. 3, fos. 31–2.

107 Ibid., fo. 31.

108 Ibid., fo. 32. Distrust for the incumbent chancellor of the exchequer, Charles Montagu, who was also involved in devising the bill for the Bank at the treasury, is expressed clearly by the College in Correspondence, v, 2154.

109 MS Locke b. 3, fos. 35–7.

110 Ibid., fo. 35v.

111 Ibid., fo. 36r.

112 Ibid., fos. 36r–v; this seems to accord with Liddell's reflection in Correspondence, v, 1811, that ‘one may perceive…powerfull Court applycations, and the glut of present immergencies’.

113 MS Locke b. 3, fo. 37r.

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