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Wednesday, October 13, 2010

The Uniqueness of Usury

thumbnail of Geryon by Dore

Usury -- the practice of lending money at interest -- occupies an unusual place as a historical phenomenon: it is a practice that is condemned in the Jewish, Christian, and Islamic traditions (to greater and lesser degrees), but forms the foundational bedrock of modern capitalist societies.  Is there any other practice about which this can be said?

C.S. Lewis (in Mere Christianity) claims that the practice was also condemned in antiquity: "There is one  bit of  advice given to  us  by  the ancient heathen Greeks,  and  by the Jews in  the Old Testament, and  by the great Christian  teachers of  the  Middle  Ages, which  the  modern economic system has  completely disobeyed.  All these people told us not to lend money at  interest: and lending money at  interest-what we call  investment-is the basis of  our  whole system." 

Can you think of another social practice with this history and which holds this status?

Just to be specific: I am not asking about practices condemned by (all of) these traditions but now tolerated, or even celebrated, by some or many today.  To stand in the same position as usury, the practice would have to have been universally condemned, and also constitute an indisputable, core feature of our contemporary social makeup -- something foundational and taken for granted by people with very different moral outlooks.

Admittedly, the practice of usury doesn't find absolute or unequivocal condemnation in ancient sources.  In Deuteronomy 23:20 (Douay-Rheims) (what else?), one sees this statement: “Thou shalt not lend to thy brother money to usury, nor corn, nor any other thing: but to the stranger.  To thy brother thou shalt lend that which he wanteth, without usury.”  And there are other prohibitions in Exodus and Leviticus.  But this passage makes plain that usury is permitted to "strangers" -- that is, to non-Jews.  And, of course, there is a famous example of such lending practices to "strangers" in The Merchant of Venice -- it is perfect that Shakespeare chose Venice which is, I think, one of the first societies in which modern banking was born.

In the New Testament, there is some ambiguity about what exactly the parable of the 10 talents means with respect to usury (the guy who put his share away for safe-keeping gets chewed out when the master comes back).  But Jesus does say, “Give to every one that asketh thee, and of him that taketh away thy goods, ask them not again . . . . But love ye your enemies: do good, and lend, hoping for nothing thereby: and your reward shall be great, and you shall be the sons of the Highest; for he is kind to the unthankful, and to the evil.”  Luke 6:30, 35.  That seems to be an even stronger and more universal condemnation than one sees in the OT.   

And in the Roman Catholic Catechism, one can find this: “Those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them."  Section 2269.  That seems like a considerably moderated position, though.  The position here might be interpreted to mean that usury at a reasonable rate of interest is acceptable, but usury that leads to "hunger and death" is tantamount to homicide.  I have it on good authority (but haven't checked myself) that Islam also prohibits the practice of usury, and that the prohibition is quite strong.

Then, of course, there is Dante.  Dante consigns the usurers to the lowest bolgia in the Circle of the violent against nature (Canto XVII -- Gustave Doré, up above, quite understandably chose to draw the monster Geryon, rather than the usurers, for this Circle, and so there is an association of fraud with usury as well).  The usurers are perpetually warding off hot firebrands on some kind of a wasteland/beach-type area (like dogs in the hot summer, biting and scratching at fleas and horseflies).  From each of their necks hangs a purse, and they look on that purse with unsatable hunger. 

I was reminded of these folks on the drive home yesterday, as NPR aired a story about "payday" loans.  Perhaps it's worth resuscitating the term "usurer" for such people.

Posted by Marc DeGirolami on October 13, 2010 at 03:19 PM | Permalink

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The relevant term in Islam is ribā (Qur’ān 3:130 and 30:39). For a nice introduction, see the entry on "ribā" by the late and great Joseph Schacht in the nonpareil Encyclopaedia of Islam, Vol. 8 (2nd ed., 1954-2005).

For recent (legal and economic) conceptual analyses and historical discussions that take us into the contemporary period, please see Mahmoud A. El-Gamal's Islamic Finance: Law, Economics, and Practice (Cambridge, UK: Cambridge University Press, 2006), Charles Tripp's Islam and the Moral Economy: The Challenges of Capitalism (Cambridge, UK: Cambridge University Press, 2006), and Ibrahim Warde's Islamic Finance in the Global Economy (Edinburgh: Edinburgh University Press, 2000).

Posted by: Patrick S. O'Donnell | Oct 13, 2010 11:11:54 PM

Incidentally, Marx had some rather interesting things to say about usury. Consider, for instance, the following summary of the relevant material from Marx's Capital: A Critique of Political Economy, Vol. 3, by Michael Hardt:

'The function of usury in feudal Europe, and Marx argues its function in any pre-capitalist society, is to impoverish the mode of production and destroy the productive forces. In medieval Europe, the usurer lent money to both the large-scale landed proprietor and the small producers who possessed their own conditions of labor, such as peasants and artisans. What usury does is simply deprive those producers of a portion of their profits and thus erode the viability of that mode of production. "It does not change the mode of production, but clings on to it like a parasite and impoverishes it. It sucks it dry, emasculates it and forces reproduction to proceed under ever more pitiable conditions" (731). Usury thus impoverished the independent feudal peasant and the landed proprietor. The usurer does not really want to destroy the mode of production. It wants that mode of production to continue living so it can continue to suck its profits.

Usury's effects, however, are really contrary to its interests. Its interests are conservative but its effects are revolutionary. Usury contributes to primitive accumulation and prepares for the construction of the capitalist mode of production. Specifically, by impoverishing the small, independent producers, usury has the effect of separating the producers from the means of production and thus on one hand creating a class of free potential proletarians and on the other forming a concentration of wealth in the hands of the few. "Usury has a revolutionary effect on pre-capitalist modes of production only in so far as it destroys and dissolves the forms of ownership which provide a firm basis for the articulation of political life and whose constant reproduction in the same form is a necessity for that life" (732). Usury thus had a revolutionary effect in medieval Europe to the extent that it destroyed the feudal forms of ownership, and Marx claims that it plays or can play a similar role in other non-capitalist societies.

Even when we are talking about usury's revolutionary effects, we should be clear that the effects of usury are purely negative. It only destroys the old mode of production and has no power to contribute to the construction of the new. It's relation to capitalist production, then, is a purely negative one. "Usurer's capital has capital's mode of exploitation without its mode of production" (732). Usury can destroy precapitalist forms and it can exploit from an external position but it has nothing to say about capitalist production itself.

The question then is how is this usury that functions are part of the process of primitive accumulation different from the interest-bearing capital in capitalist production? "What distinguishes interest-bearing capital in so far as it forms an essential element of the capitalist mode of production, from usurer's capital is in no way the nature or character of this capital itself. [Money is lent and paid back with interest.] It is simply the changed conditions under which it functions, and hence also the totally transformed figure of the borrower who confronts the money-lender" (735 mid). The changed conditions and the transformed borrower can be explained in large part, it seems to me, by the fact that within the capitalist mode of production interest-bearing capital is subordinated to or dependent upon industrial capital. "This violent struggle against usury, the demand for the subjection of interest-bearing capital to industrial capital, is simply the prelude to the organic creations that these conditions of capitalist production produce in the form of the modern banking system" (738). In effect, the subordination of all forms of capital to industrial capital, which is characteristic of the capitalist mode of production, is what determines the passage from usury to interest-bearing capital and the entire modern banking and credit system.'

Posted by: Patrick S. O'Donnell | Oct 13, 2010 11:46:36 PM

One quibble: I think that when we are referring to what the Israelites may have thought or practiced, or what religious Jews believe and practice, we should speak of the Hebrew Bible or TANAKH or Masoretic Text (or even Torah) but NOT the "Old Testament," its adjectival characterization as "old" owing exclusively to the Christian perspective.

Posted by: Patrick S. O'Donnell | Oct 13, 2010 11:56:55 PM

Premarital sex?

Posted by: AF | Oct 14, 2010 7:26:35 AM

Pride, Lust, and Envy, i.e., at least three of the Seven Deadly Sins were once "universally condemned [but now, arguably] constitute an indisputable, core feature of our contemporary social makeup."

Posted by: Patrick S. O'Donnell | Oct 14, 2010 8:10:54 AM

Thanks Patrick and AF for the comments.

I don't think the question of the deadly sins is quite the same thing. After all, one could say that gluttony/greed/avarice are also now a core feature of our cultural structure (usury being, from the perspective of the ancients, an example of avarice). But that raises the different issue that we have relocated our disagreements about evils like "envy" or "avarice," not that we have entirely abandoned the notion that there is something deeply objectionable about them. Perhaps pride is more complicated -- I tend to think pride is closer to universally admired than the others. Still, I'm really after practices, rather than values or evils about which one can argue.

The example of premarital sex is a good one, and it had prompted me to include the requirement that the practice be not only celebrated by many, but a core and uncontroversial feature of our social makeup. These are probably matters of perspective and degree, but my own view is that usury occupies a more uncontroversial place in today's world than (any and all types of) premarital sex.

Lastly, Patrick, I accept the correction as to the Torah, but most emphatically not because there is anything intrinsically wrong or pejorative about the adjective "old." In fact, I've always felt (against all that Holmes said) that something's being old is itself a reason for admiring it.

In that vein, this, on usury, from Cicero's 'De Officiis':

"To this class of comparisons belongs that famous saying of old Cato's: when he was asked what was the most profitable feature of an estate, he replied: 'Raising cattle successfully.' What next to that? 'Raising cattle with fair success.' And next? 'Raising cattle with but slight success.' And fourth? 'Raising crops.' And when his questioner said, 'How about money - lending?' Cato replied: 'How about murder?'"

(Thanks to my friend Matt Lister for the pointer).

Posted by: Marc DeGirolami | Oct 14, 2010 9:13:21 AM

I agree that there's "nothing intrinsically wrong or pejorative about the adjective 'old,'" (my point simply being that, for Jews, the Hebrew Bible has not been superseded by a 'New Covenant'). I happen to believe strongly that presumptive (hence rebuttable) deference should be accorded legal precedent, although I don't share a Burkean-like veneration of tradition(s).

Posted by: Patrick S. O'Donnell | Oct 14, 2010 9:53:53 AM

Marc, very interesting and erudite post. With respect to Christiainty, I believe the distinction is between usury, which involves an unreasonably high interest rate, and normal commercial loans, which are permissible. At least that's the way it's been in the West since the late Middle Ages. And usury is still considered a bad thing for Christians, though maybe they don't think about it much any more. Certainly Christians used to take it much more seriously. The famous Scrovegni Chapel in Padua was built to atone for the donor's sin of usury.

Posted by: Mark Movsesian | Oct 14, 2010 12:47:07 PM

Thanks, Mark -- and wonderful comment. That makes a lot of sense, given what is now in, e.g., the Catechism. It would have been nice to hash out with C.S. Lewis exactly when the change from absolute prohibition to prohibition for excessive interest occurred, though even what is in the New Testament is arguably ambiguous.

I didn't know that about the Scrovegni Chapel! I think that Dante met up with Scrovegni among the usurers. He was extremely rude and disgusting. From the Wadsworth translation, Canto XVII:

Proceeding then the current of my sight,
Another of them saw I, red as blood,
Display a goose more white than butter is.

And one, who with an azure sow and gravid
Emblazoned had his little pouch of white,
Said unto me: "What dost thou in this moat?

Now get thee gone; and since thou'rt still alive,
Know that a neighbour of mine, Vitaliano,
Will have his seat here on my left-hand side.

A Paduan am I with these Florentines;
Full many a time they thunder in mine ears,
Exclaiming, 'Come the sovereign cavalier,

He who shall bring the satchel with three goats;'"
Then twisted he his mouth, and forth he thrust
His tongue, like to an ox that licks its nose.

Posted by: Marc DeGirolami | Oct 14, 2010 2:00:05 PM

That's "Wadsworth Longfellow"!

Posted by: Marc DeGirolami | Oct 14, 2010 2:05:12 PM

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