|
Hi, Dan —
In the early Church, charging interest on loans was
forbidden to clerics. By implication, it was not absolutely forbidden to others.
Now, in the patristic era, I think the following argument
can be made. Charging interest on loans was condemned
on the following grounds:
- Charging interest on loans harms borrowers
in need;
- It is wrong to harm borrowers in
need.
Now, the harm talked about in #1 and #2 was simple material harm. The doctrine thus consisted
of two parts: #1 and #2.
Now, #2 concerned morals. The
Church was inerrant with respect to #2. However, #1 is
not a moral or dogmatic proposition: it concerns an empirical
question of economics. Unless Scripture affirms #1 in
full generality, which I think it does not, #1 does not
pertain to faith or morals. (Note: The inerrancy of Scripture
might go beyond matters of faith or morals; the infallibility
of Tradition does not.)
However, in the scholastic period, the teaching developed.
The charging of interest on loans was no longer seen
as contrary to charity, as above, but as contrary to justice. Thus, the teaching was no longer based on #1. An injustice is wrong even if it does not materially
harm anybody.
Throughout the Middle Ages, the doctrine was in
a state of flux and was not an absolute prohibition
on interest. At various times, various exceptions were
accepted.
For instance, it was seen (at least in some
periods) as acceptable for the lender to ask for compensation
for material losses that he suffered because of the lack
of the money. By this principle, I suppose, if I lent
you money and meanwhile, because of the lack of that
money I couldn't do routine repairs on my house and the
house eventually collapsed because of this, then I would
be entitled to compensation for the destruction of the
house. Or, if I sent the loan to you by courier, I had
a right to ask from you a fee that would cover the costs
of the courier. Moreover, limited financial penalties
for late payment of debt were permitted during some
periods — (the teaching was, remember, all the time in
a state of flux), provided that the penalties weren't
so high that the lender would prefer the repayment
to be late.
Eventually, some interesting practices developed in
the late Middle Ages to the beginning of renaissance.
For instance, it was, albeit grudgingly, accepted that
one could do the following thing: One could buy from
a farmer his fields, and let him continue to live on
his fields while paying you a portion of the proceeds
of the fields. This is not too different from an investment
loan, except that title to the fields passed to the lender.
Also, institutions were set up, designed to lend to the
poor. These institutions charged the costs of the running
of the institution, including the costs of staff time,
to the borrower.
The heart of the medieval teaching was the doctrine
of fair price. It is morally wrong to sell
something to someone for a price higher than its fair price. It was taken by the medievals to be irrelevant
whether the buyer had a special need for the thing or
not. The value of an item was taken to be something objective
and, to sell for more, was a sin. If the buyer had a special
need, then to take advantage of this special need was
taken to be a coercion. The fair price was supposed to
coincide with the price that an uncoerced buyer would
be willing to pay. However, uncoerced means
not uncoerced by the seller but also uncoerced by circumstances.
St. Thomas thought, following Aristotle, that the fair price of $10 was, well, $10.
Thus, it would be morally wrong to sell someone $10 and
demand more than $10 back. Money, St. Thomas and Aristotle
thought, did not multiply.
There was an economic error here, caused by the fact
that the medievals thought of money, not as an abstract
medium of exchange existing through social construction,
but as coin. Coins, unlike cows, don't multiply. Thus,
while it would be reasonable that if I lend you a cow
and a bull for a year, that I should ask for a cow, bull
and calf back, it would be unreasonable and unjust that
I should ask for $10.50 back, if I've lent you $10.00
for a year. But this is a misunderstanding of the nature
of money. Money is defined by social construction. It
is not the same as coin.
While coins do not multiply,
money does.
Now, Thomas Aquinas was not entirely blind to this.
He considered the question of whether a lender who could
have invested the money (e.g. by buying himself a cow
and a bull!) can ask the borrower to pay back the amount
which the lender could have expected to earn had he invested
the money instead of lending it. St. Thomas's answer is
in the negative, on the grounds that potential future
gain is not real, but uncertain and contingent. I think
that here a calculus of probability computing the expected gain would have been acceptable.
If we put together all of the ideas above, I think we
can get an idea of money lending which lets the lender
charge for costs of lending. This was always accepted,
but what could count as a
cost of lending varied
over the Middle Ages, including the cost of the lender's
time (fair salaries of bank staff, etc.) and including
the gain that the lender could have expected to make,
had he invested the money in some non-lending way (e.g.
by buying shares in someone's field or company, or by
buying a bull and cow); inflation being factored in. Since money, being socially constructed, is not the
same as coin; if I lend you a $10 bill and get back the
same $10 bill in an inflationary economy, I have received
less money than I gave. Likewise, loans that are equivalent
to investments are acceptable. Now, this does not justify
all lending at interest.
The sin of usury is still on
the books. Charging 20% interest like some credit card
companies do is usury, and is wrong. However, lending money
to someone so he might buy a house seems quite acceptable
because, in effect, the lender is buying the house and
renting it back to the borrower. The medievals would
not have accepted this, but it seems quite legitimate.
So my answer is a little complicated. The patristic
teaching had two parts, one of which was moral and the
other empirical. Only the moral part was the Church inerrant
about. The medieval teaching was in flux throughout the
Middle Ages. It didn't go back to the Fathers fully, but
there was a shift, from a focus on charity, to a focus
on justice. The center of the teaching was that it was
unjust to charge an unfair price. This is still Church
teaching however, the difficult, partly economic, question
of what constitutes a fair price was in flux throughout
the Middle Ages. Different kinds of things that we could
call interest were permitted at different
times. This flux suggests that we weren't dealing an
immutable teaching, but with one that was developing.
It is true that throughout the Middle Ages people would
have been willing to say:
It is always wrong to
charge interest.
However, what exactly would count
as interest changed with time. Costs to the lender were
always permitted to be charged.
I think that the teaching on usury has not received
enough emphasis in the past century or two. The teaching
is still there. Charging unfair interest is wrong. What
counts as unfair is a difficult question,
but it seems clear that there are many cases of it around.
Developing countries, staggering under an enormous debt
load, despite having paid back well over the principal,
might well be victims of usury.
Alexander R. Pruss
|
