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Published online by Cambridge University Press:  16 June 2020

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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.

Copyright © The Author(s), 2020. Published by Cambridge University Press.

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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.


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42 Ibid., p. 191.

43 Joyce Appleby argued that there had been ‘little in the Western philosophical tradition to lend support to the adoption of a market ethic which would dethrone authority and unravel the fabric of social responsibilities’, and Locke was among the first to adopt the idea of natural law as a rationale for the impersonal economic forces of the market. See her ‘Locke, liberalism and the natural law of money’, at p. 44. The argument presented here and below by contrast suggests that Locke's idea of a natural rate of interest was intended to preserve the fabric of social responsibility by encouraging neighbours to lend to one another.

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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74 Locke, Some considerations, p. 229.

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84 Correspondence, iv, 1701; for Codrington as a shopkeeper, see ibid., ii, 776.

85 Ibid., v, 1705. The sums were paid soon afterwards through an assignable debt instrument, as Clarke paid Locke the full sum, receiving from Codrington a bill of £40, with Codrington delaying payment of the remaining £6 8sd (Correspondence, v, 1706; Locke's journal, 8 Feb. 1694, MS Locke f. 10, fo. 218).

86 Correspondence, iv, 1701, v, 1705.

87 For Stratton, see Locke's journal in MS Locke f. 10, fos. 270–1, 3 May 1695, where Locke notes a payment ‘by oversight omitted in his account’, and his accounts in MS Locke c. 1, where p. 119 correspondingly notes a ‘memorand’ that three payments, including the £46 8sd, were ‘not taken notice of here because they belong not to this account which was closed & signed before these sums were paid which are therefore brought account & writ agn p303’; for Shaftesbury, see Correspondence, iv, 1686 and 1689, v, 1719, 1722, 1723, 1724, 1922; and MS Locke f. 10, fos. 231, 241, 280–1; for Pawling, see Correspondence, v, 1715; for another account settling see ibid., v, 1771, 1804, 1871; for the debacle with the bereaved family of Thomas, see ibid., v, 1731, 1733, 1745, 1815, 1937, 1942, 1943, 2081, 2097, 2137; and MS Locke f. 10, fo. 287.

88 Locke especially emphasized the importance of harnessing human motivation in the pursuit of justice during the 1690s. See Marshall, Resistance, religion and responsibility, pp. 319, 329–451, 453. John Locke, ‘Venditio (1695)’, in Goldie, ed., Political essays, pp. 340–3. For this aspect of Cicero's influence on Locke, see Mitsis, Philip, ‘Locke's offices’, in Miller, Jon and Inwood, Brad, eds., Hellenistic and early modern philosophy (Cambridge, 2003), pp. 4561, at p. 27CrossRefGoogle Scholar; Marshall, Resistance, religion and responsibility, pp. 303–26.

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91 Locke, Some thoughts, §56.

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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’.

94 Locke, ‘Reputation (1678)’, p. 272.

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100 Correspondence, v, 1755.

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.

103 MS Locke c. 1, pp. 262–3, 368–9; Woolhouse, ‘Locke and Somerset’, p. 8. On one occasion, Locke told King ‘you need not excuse your not purchaseing of Stock, for I am not fond of it, But perfectly leave it to you to doe with it as if it were your own money…Buy or forbear as you would doe for yourself’ (Correspondence, vii, 2938).

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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116 Cranston, Locke, p. 313. Locke petitioned William III to pay this debt in 1690, though to no avail.

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118 Correspondence, v, 1874.

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123 Ibid., p. 4.

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