THE PRICE OF USURY
Thus far, I have only taken account of the written law of God to prove my thesis. But there is another line of proof that has been largely overlooked by Christians. The fact that some of the most stable ancient cultures condemned usury in concert with biblical culture indicates that the light of nature has something to say on the subject. The practice of usury by its nature bears a social cost. I offer the following observations and arguments from the nature of usury, as confirmation of the explicit teaching of Scripture:
1. Usury is a way to make money while avoiding honest labor. Thus, to tolerate usurers is to encourage the avoidance of man’s proper calling.
The biblical norm for mankind is healthful manual labor – he was made for it. The father of the human family was driven from Paradise, where the labor was sweet and nature cooperated with him in it. He was cursed to labor under adverse conditions that would require the sweat of his brow to acquire enough food for his family’s well-being. It is wrong to shrink from the particular form of labor that one is called to. It argues an unsubmissive heart to try to escape the punishment that God has laid upon all of us, and to find an easy way to make a living. This attitude of slothfulness readily leads to crime.
This is also the rationale Ahmad uses to explain why in Islam God “permits trade yet forbids usury”… “The difference is that profits are the result of initiative, enterprise and efficiency. They result after a definite value-creating process. Not so with interest”; also “interest is fixed, profit fluctuates. In the case of interest you know your return and can be sure of it. In the case of profit you have to work to ensure it” (A Short Review of the Historical Critique of Usury, Wayne A.M. Visser and Alastair McIntosh,1958, p.25.)
Usury is a lawless short-cut to wealth, like theft, fraud, extortion, or any other crime that lives upon the labor of others, rather than one’s own. Under the present system, electronic money is created ex nihilo through the money monopoly of the Federal Reserve banking system. Banks then obtain it at very low cost, then charge interest on the loaning of it! Having suffered little or no opportunity cost or sacrifice, they are able to make huge profits virtually without labor, expense or risk.
2. Usury is an attempt to make money without risk by passing on the risk to the borrower.
There are ways to structure a joint business venture that do not involve the charging of interest on a loan. The capitalizing partner can agree to a percentage of the profits or losses of the business, thus sharing risk with the partner who will be providing the labor involved in running the business. Or two partners can provide equal shares of capital and labor, and thus share the risk equally.
But usury is a way of transferring most of the risk to the weaker partner. It increases the security of the lender, and decreases the security of the borrower. Over time, this difference in risk will make the usurer richer, and the people who made him rich poorer.
3. Usury makes money an end in itself; whereas the proper use of money is as a medium of exchange.
What the Bible calls money is neither paper, nor coins made of base metals circulated as legal tender. Traditionally, money has always been gold, silver. It was not at first coined, but weighed. It was a commodity – one of the rarest and most valuable commodities. Because a small amount was very valuable, it provided a compact and transportable medium of exchange. Its chemical and physical properties made it durable. Because it was intrinsically valuable for the making of beautiful objects and jewelry, its value was assured, and very stable. Because it was rare, there was a natural limit on how much was in circulation. This protected society from the evil of an ever-expanding commercial sector and from price inflation at the same time. Most people had no option but to work the land, so the agrarian society with all its benefits was assured.
What we call money today is indeed a medium of exchange, but a highly defective one. Paper money and base-metal coinage are intrinsically worthless. Their value is based on the confidence that others will accept them in exchange for things of value. When that confidence fails, the economic system will fail. There is no natural check on inflation, and hence, no inherent stability to the value of the currency. There is no limit on how much money can be circulated, so there is no brake on the growth of the commercial sector. As a result, precious human labor is attracted to secondary and peripheral activities – and increasingly to immoral activities – and away from the land, and the production of useful things. This is societal suicide.
Paper money is not wealth, for it is of no benefit to us but by the disposing of it. True wealth (lands, houses, cattle, bond-servants, silver and gold are wealth, as I am using the term.) is productive of good – it is intrinsically good, i.e. useful in some way to the possessor.
It may be objected that the possession of anything considered “money” provides security, and that security is good. But whatever security it may provide is premised on the possibility of disposing of it.
It is objected that money is especially useful to have, for it is the only commodity that can be easily changed into whatever one needs. But that misses the point. Its usefulness is only realized in the disposing of it through purchases, whereas the usefulness of true wealth is in the possession of it.
The charging of interest creates the illusion that paper money is wealth, and so tends to foster the love of money as a good in itself. The land is productive of food for man and beast, houses provide comfort and protection, cattle produce food and offspring, bond-servants provide labor and produce offspring; but usury only makes money productive of more money.
“Usury is what marks the distinction between money being simply a socially contracted abstract mechanism to lubricate between supply and demand, and money as an end in itself. As an end in itself, as a social commodity legitimized through usury to tax other economic activity, the honest process of living by the sweat of one’s brow is short-circuited. The true dignity and full reward of ordinary labour is compromised.
“Money thus becomes self-perpetuating power in itself rather than just a mediating agent of power. And it is the relentlessness of compound interest in the face of adversity that sets the potential cruelty of usury apart from equity-based return on investment… one can see how it is the love of money as an end in itself, not the use of money itself, that is said to be the root of all evil (1 Timothy 6).” (Ibid).
4. Usury discounts future value for the borrower, while discounting present value for the lender.
It therefore proceeds on a principle of discounted value. The lender knows that, to the borrower, present gain is more important than future pain. The borrower has a slave mentality, which the usurer exploits for his own future gain. For the usurer does not discount future value – he is future-oriented himself.
“The last reason cited for condemning usury relates to the concept and practice of discounting future values. Because compound interest results in an appreciation in invested monetary capital, it is presumed rational for people to prefer having a specified amount of currency now than the same amount some time in the future.” (Ibid). The effect of usury is to sacrifice the borrower’s future for the sake of the lender’s. And when usury is institutionalized and fostered, everyone’s future is at stake.
Further, this discounting affects the rate at which we use up natural resources – the higher the discount rate (derived partly from the interest rate), the faster the resources are likely to be depleted.
And another consequence of the discounting principle, argued by Kula, is that “in evaluating long term investment projects, particularly those in which the benefits and costs are separated from each other with a long time interval, the net present value rules guide the decision maker to maximize the utility of present generations at the expense of future ones”. (A Short Review of the Historical Critique of Usury, Wayne A.M. Visser and Alastair McIntosh)
The Old Paths 