Front Page Titles (by Subject) 13.: INTEREST, CREDIT, AND COMMERCE — (THE RHODIAN CODE) - The History of the Decline and Fall of the Roman Empire, vol. 8
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
Also in the Library:
13.: INTEREST, CREDIT, AND COMMERCE — (THE RHODIAN CODE) - Edward Gibbon, The History of the Decline and Fall of the Roman Empire, vol. 8 
The History of the Decline and Fall of the Roman Empire, ed. J.B. Bury with an Introduction by W.E.H. Lecky (New York: Fred de Fau and Co., 1906), in 12 vols. Vol. 8.
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
INTEREST, CREDIT, AND COMMERCE — (THE RHODIAN CODE)
1. The interest on a loan of money was fixed by the two parties to the transaction, but could not, according to a law of Justinian, exceed (a) in ordinary cases, 6 per cent. per annum, (b) when the lender was a person of illustrious rank, 4 per cent., (c) when the lender was a professional money-changer or merchant, 8 per cent., (d) when the money was to be employed in a transmarine speculation, 12 per cent. (nauticum fænus).
This system of interest was calculated on the basis of a division of the capital into 100 parts, and each part into 12 unciæ. The new coinage, introduced by Constantine, led to a change in the rate of interest, to the disadvantage of the borrower. Seventy-two nomismata were coined to a pound of gold, and 24 keratia went to each nomisma. The practice was introduced of calculating the annual interest by so many keratia to a nomisma, instead of the monthly interest by the fraction of the capital. Thus the old trientes (= ⅓ of of the capital per month) = 4 per cent. per annum was replaced by 1 keration per 1 nomisma per annum = 4⅙ per cent. per annum. Similarly 6 per cent. became 6¼, 8 per cent. 8⅓.
In the 10th century the adjustment of the old unit of 100 to the new unit of 72 went farther, to the disadvantage of the borrower. Six per cent. was converted into 6 nomismata per pound, i.e. per 72 nomismata; or in other words, where 6 per cent. had been paid before, 8.33 was paid now. (So 11.11 replaced 8, and 5.55 replaced 4 per cent.) There was thus a considerable elevation of the legal maxima of interest.
2. The free circulation of capital was seriously impeded by the difficulty in obtaining good securities. The laws respecting mortgage were not calculated to secure the interests of the creditor; and it is significant that in the Ecloga no notice is taken of either mortgage or personal security. Another hindrance to credit was the defectiveness of the mode of proceedings1 open to a creditor for recovering his money from a defaulting debtor.
The defects of the credit-system of the Empire could not fail to react unfavourably on commerce; and the consequence ultimately was that the trade, which ought to have been carried on by the Greeks of Constantinople and the towns of the Aegean, fell into the hands of Italians. The settlements of Venetian and Genoese merchants in the East were due largely to the defects of the Imperial legislation.
On the condition of Greek commerce in the 8th century we have some slight information from the “Rhodian Nautical Code,” published by the Iconoclast Emperors.2 From this we learn that at this period it was not usual for a merchant to hire a ship and load it with his own freight, but a merchant and a shipowner used to form a joint-stock company and divide the profit and loss. All accidental injuries befalling ship or cargo were to be borne in common by skipper, merchant, and passengers. It has been remarked that these regulations point to the depression of maritime commerce, easily explained by the fact that from the 7th century forward the Aegean and Mediterranean were infested by Slavonic and Saracen pirates. In such risky conditions men did not care to embark on sea ventures, except in partnership. Although the nautical legislation of the Iconoclasts was not accepted in the Basilica, it seems that it continued to prevail in practice.
It is interesting to observe that a man with a small capital (c. £300 to £1000) could purchase, if he chose, a life-annuity, with a title into the bargain. Certainly titular dignities (even the high title of protospathar) were for sale, and an extra payment entitled the dignitary to a yearly salary (called ῤόγα), which brought him in 10 per cent. on his outlay.
There were also a number of minor posts at the Imperial court, with salaries attached, and these could be purchased outright, the purchasers being able to sell them again or leave them to their heirs. These investments produced about 2½ per cent. It is presumable, however, that there was some limit to the number of these posts, and that, although practically sinecures, they could be assigned only to residents at Constantinople.
These two institutions present the only analogy to a national debt in the Eastern Empire.
Cp. Zachariä von Lingenthal, op. cit. p. 300.
[1 ]Zachariä, op. cit. p. 392 sqq.
[2 ]Ed. in Pardessus, Coll. des lois maritimes, i. c. 6. It is also printed in Leunclavius, Jus Gr.-Rom. ii. 265 sqq.