Perhaps because he was considered the greatest French jurist of the mid-sixteenth century, the merit of the contributions of Charles Du Moulin (latinized name, Carolus Molinaeus) (1500–66), has been highly inflated, in his and in later times. A Catholic who later converted to Calvinism and was then forced to leave for Germany, Du Moulin had nothing but contempt for scholasticism, which he attacked vehemently in his highly publicized work, The Treatise on Contracts and Usury (Paris, 1546). Whereas Molinaeus officially denounced the prohibition of usury, in actuality his views were little different from those of the contemporary scholastics or indeed of Calvin. While clearly denouncing the view that money is sterile and demonstrating that it is as productive as the goods bought with it, he hedges his defence of usury sufficiently so that his views are little different from many others. He does maintain that the charge of interest on a loan per se is unjust, but ingeniously points out that a lender charges for the utility of the money rather than for the money itself. But Molinaeus attacks the ‘cruel usuries’ permitted by lucrum cessans, and maintains with Calvin that interest may not be charged for loans to the poor. (One wonders that if such a rule were enforced, who in the world would ever lend to the poor, and would the poor then be better off by being deprived of all credit?)
Indeed, it seems that Molinaeus’ main contribution was to blacken unjustly the name of poor Conrad Summenhart, a cruel injustice that would last for four centuries. In an act obviously motivated by malice toward scholasticism, Molinaeus took the great Summenhart's arguments against the usury ban and twisted them to make the German theologian a particularly doltish advocate of the prohibition. He took Summenhart's initial arguments for the prohibition, which he had stated in order to knock down, claimed that they were Summenhart's own, and then plagiarized Summenhart's critique of these arguments without acknowledgment. As a result of this shabby mendacity, as Professor Noonan points out, since ‘Du Moulin's writings have alone become famous, Conrad [Summenhart] has appeared to posterity only as Du Moulin caricatures him’, i.e., ‘as a particularly obstinate and strangely stupid defender of the usury prohibition’.
The honour of putting the final boot to the usury prohibition belongs to the seventeenth century classicist and Dutch Calvinist, Claude Saumaise (latinized name, Claudius Salmasius) (1588–1653). In several works published in Leyden, beginning with De usuris liber in 1630 and continuing to 1645, Salmasius finished off this embarrassing remnant of the mountainous errors of the past. His forte was not so much in coining new theoretical arguments as in finally willing to be consistent. In short, Salmasius trenchantly pointed out that money-lending was a business like any other, and like other businesses was entitled to charge a market price. He did make the important theoretical point, however, that, as in any other part of the market, if the number of usurers multiplies, the price of money or interest will be driven down by the competition. So that if one doesn't like high interest rates, the more usurers the better!
Salmasius also had the courage to point out that there were no valid arguments against usury, either by divine or natural law. The Jews only prohibited usury against other Jews, and this was a political and tribal act rather than an expression of a moral theory about an economic transaction. As for Jesus, he taught nothing at all about civil polity or economic transactions. This leaves the only ecclesiastical law against usury that of the pope, and why should a Calvinist obey the pope? Salmasius also took some deserved whacks at the evasions permeating the various scholastic justifications, or ‘extrinsic titles’, justifying interest. Let's face it, Salmasius in effect asserted: what the canonists and scholastics ‘took away with one hand, they restored with the other’. The census is really usury, foreign exchange is really usury, lucrum cessans is really usury. Usury all, and let them all be licit. Furthermore, usury is always charged as compensation for something, in essence the lack of use of money and the risk of loss in a loan.
Salmasius also had the courage to take the hardest case: professional money-lending to the poor, and to justify that. Selling the use of money is a business like any other. If it is licit to make money with things bought with money, why not from money itself? As Noonan paraphrases Salmasius, ‘The seller of bread is not required to ask if he sells it to a poor man or a rich man. Why should the moneylender have to make a distinction?’ And: ‘there is no fraud or theft in charging the highest market price for other goods; why is it wrong for the usurer to charge the heaviest usuries he can collect?’
Empirically, Salmasius also analysed the case of public usurers in Amsterdam (the great commercial and financial centre of the seventeenth century, replacing Antwerp of the previous century), showing that the usual 16 per cent charge on small loans to the poor is accounted for by: the costs of the usurers borrowing their own money, of holding some money idle, of renting a large house, of absorbing some losses on loans, of paying licence fees, hiring employees, and paying an auctioneer. Deducting all these expenses, the average net interest rate of the money-lenders is only 8 per cent, barely enough to keep them in business.
In concluding that usury is a business like any other, Salmasius, in his typical witty and sparkling style, declared, ‘I would rather be called a usurer, than be a tailor’. Our examples of his style already demonstrate the aptness of the great Austrian economist Bohm-Bawerk's conclusion about Salmasius: that his works
are extremely effective pieces of writing, veritable gems of sparkling polemic. The materials for them, it must be confessed, had in great part been provided by his predecessors... But the happy manner in which Salmasius employs these materials, and the many pithy sallies with which he enriches them, places his polemic far above anything that had gone before.
As a result, Salmasius’ essays had wide influence throughout the Netherlands and the rest of Europe. As Böhm-Bawerk declared, Salmasius’ views on usury were the high-water mark of interest theory, to remain so for over 100 years.