Thomas Manley and the Rate-of-Interest Debate, 1668–1673

Abstract

Historians have seen the mid-1660s as a period of significant distress in many sectors of the English economy. With population pressure diminishing, agricultural prices moved away from the benefit of producers, and rent and land values stabilized. Indeed, landowners were futher burdened by the imposition of higher levels of taxation in the wake of debts generated by the Civil War and the Commonwealth. Moreover, English merchants complained that Dutch competition limited the expansion of their overseas commerce, while the Second Dutch War (1664–67) severely dislocated trade and incurred heavy public expenditure and even higher levels of taxation. The outbreak of plague in London, followed by the Great Fire, further interrupted trade at the commercial and transport nexus of the economy. Hence, war finance and the rebuilding of London put pressure on the stock of loanable funds in a period characterized by a generally low level of prices. Interest rates had fallen gradually with the increase in the availability of capital in the first half of the seventeenth century, yet this trend, according to Christopher Clay, “was unquestionably retarded by the extensive government borrowing associated with the succession of civil and foreign wars between 1642 and 1674.” Of course, in seventeenth-century England, a maximum rate of interest was set by statute. The medieval prohibition on usury was first broken in 1545, setting a ceiling of 10 percent per year.