A familiarity with the history of usury and the biblical doctrine of usury does not seem automatically to produce in some a conviction that usury is wrong. Incredible as this may appear, it is due to a common tendency in man. It is easy for one to perceive the sinfulness of something except when he is completely immersed in it. If one has not disciplined himself to judge all of life by the standard of God’s word, then common worldly customs in which he indulges, even though they are sinful, will hold in his mind an authority that is equal to or greater than the authority of God’s word. In this case, one’s own preference to continue in usury will make it seem necessary for him to explain away the testimony of history and Scripture concerning the evil of usury. Henry Smith eloquently expounded on this curious psychology of sin in his “Examination of Usury”, in 1591:
Sin is never complete until it be excused: this is the vantage which the devil getteth by every sin, whensoever he can fasten any temptation upon us, we give him a sin for it, and an excuse to boot. First he sinned, and then he excused: so first we sin, and then we excuse: first an Usurer, and then an excuser. Therefore every Usurer will defend Usury with his tongue, though he condemn it with his conscience. If the Image makers of Ephesus had not lived by Images, they would have spoken for Images no more than the rest: for none stood for Images but the Image makers (Acts 19:25): so if the Usurers did not live by Usury, they would speak for Usury no more than the rest: for none stand for Usury but Usurers.
The captivation of the sin of usury is shown to be very powerful, as is evidenced in the variety of excuses that have been amassed for it. Nine of the currently most popular excuses for usury are treated in discussions which follow.
They are:
1) If there were no usury, then no one would bother to loan,
2) Biblical usury laws have reference only in case of loans to the poor,
3) Biblical usury laws have reference only in case of charitable loans,
4) Deuteronomy 23:20 says that usury is allowed in certain cases (loans to “foreigners”), and therefore usury cannot be inherently evil,
5) John Calvin did not regard all usury as unlawful,
6) Usury must be allowed in order for the lender to be compensated for risk,
7) Usury is nothing more than rent on money, and therefore must be as
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Henry Smith, An Examination a/Usury in Two Sermons (1591; Norwood: Walter Johnson, Inc., 1976)
legitimate as other rents,
8) Usury is necessary because of inflation – dollars repaid are worth less than dollars loaned, and
9) usury is an inescapable aspect of economics because of “the discount of future goods as against present goods.”
The spuriousness of these excuses shall be demonstrated in the discussions which follow, and whatever substance the reader may have granted to anyone of them shall evaporate in the light of sound judgement.
I. Who Would Loan?
Since the present economic context is so bound up with usury, it is difficult for some to imagine an economy without usury. One of the first excuses to be voiced goes like this: “If there were no usury, then who would make a loan?” This typically is heard in conversation. The question is based on the somewhat more sophisticated notion that usury is required in order for the economy to function as it does, which goes back to the early modern era when the present economy was in its infancy. At that time, businessmen saw that the pace of their trade could be rapidly accelerated if they could obtain loans for greater operating capital, but no
one would make loans because usury was against the law. Apologists for usury began a campaign to repeal usury laws on the pretext that usury was required in order for business to carryon. They did not live in an age of “situation ethics”, so in order to reverse the centuries of negative attitudes about usury, these apologists had to show that usury was theoretically as well as practically necessary. Theories of the necessity of interest have taken many forms over the last 300 years. The latest expression of this alleged necessity may be found in Mises, “We cannot even think of a world in which originary interest would not exist as an inexorable element in every kind of action.” Or, as Gary North translates, “Thus interest is a basic category of human action. It is inescapable. ” In this day of “situational ethics” it is much easier to sell the idea that the practical requirements of a sinful economy some how excuses sin.
Worry over how the present economy may continue without usury is predicated on the presumption that the present economy ought to continue. It readily is admitted that usury is required for the maintenance of the present economy, which is
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L.v.Mises, Human Action (Chicago: Contemporary Books, Inc., 1963), p.572
Gary North, Honest Money (Ft.Worth: Dominion Press & Nashville: Thomas Nelson, Inc., 1986), p.71
Babylonian in essence, and it further is stated that both the present economy (the debt/credit economy) and usury ought to cease. Christians, along with unbelievers, fear the demise of the present economy because so much of their “wealth” is dependent on the continued flow of electricity to banks’ computers. An interruption of this flow will have devastating consequences. However, any lessening of living conditions under the elimination of usury would only be the result of the collapse of those conditions that are artificially supported by usury (mortgages, consumer loans, rents, and an array of “investments”). If a certain thing or condition can be had only if there is usury, then one ought to say “good riddance” to those things. Actually, there is no reason inherent in economics why men cannot achieve a high standard of living through hard work rather than credit expansion. One’s pleasures may be addressed more quickly by means of credit expansion than productive
effort, e.g. he may take possession of a desired good today, and pay the bill with usury over a long period of time, instead of saving over a long period of time and “paying cash”, but in the long run such immediate gratification costs more once the bill is paid with usury.
While usury may be regarded as a necessary element of a Babylonian economy, it hardly may be said that usury is necessary for the function of a godly economy. If it is granted that usury seems necessary, it is not automatically known how to esteem this fact until it is known how usury came to be regarded as necessary. Presented at length is a discussion of this by early 17th century English theologian Roger Fenton:
Presupposing the custome and corruption of these times wherein men will not lend freely as they ought; is there not a necessitie of usurie? Admit that be granted; who did impose this necessitie? If God; then is this reason good, Usurie is necessarie therefore lawful. But if men or estates have drawne a necessitie of sinning upon themselves by the custome of sin; doth this extenuate or aggravate the fault? Woe be unto them (saith the Prophet Esay [Isaiah)) who draw sinne, as with cart.ropes .
It is an invalid course to assume the lawfulness of usury at the outset, in order to give it some legitimate place in an economy, and then once the economy has deteriorated to the point that it cannot operate without usury, to argue on that basis that usury is necessary! Usury is not necessary to a biblical economy, but is condemned by a biblical economy.
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Roger Fenton, A Treatise ofUsurie (1611; Norwood: Walter Johnson, Inc.,
1975), p.122
Usury may seem necessary to a Babylonian economy. but only because men have “drawn the necessity of sinning upon themselves.” It is a preoccupation with temporal pleasures and a profound contempt for posterity which accounts for the almost perverse commitment to usury that is found in the current generation. Christians find themselves in the position of defending usury because they uncritically have accepted whatever economy the world has decreed. Rather than defend usury, we ought to condemn it along with the economy on which it thrives. As it is, Christians are found side by side with the unbelieving economists setting
aside the law of God on no more provocation than worry over the inconvenience of keeping His law.
Our task in answering the question, “Without usury, who would loan?”, is not a straightforward one. This is because men of differing outlooks on the world would respond differently under an elimination of usury. Citizens of the “earthly city” cannot be expected to respond as joyfully to the requirements of God’s law as the inhabitants of the “City of God”. As an aside. the question of how it could ever come about that usury is eliminated might be considered. It might be expected that this, as well, would go differently depending on which city is in question. However, it is not essential to the present question to decide on a scenario.
Ancient pagan societies alternated between statutorily decreed usury and usury statutorily prohibited. Usury came and went according to the dictates of pragmatism, rather than the dictates of any truly Divine Law. Augustine says of the godless oligarchy that it is “ruled by its lust of rule”. The behavior of men who are subject to such rule also is characterized by pragmatism. They will do what they must to avoid the consequences threatened by the man with the sword. If the man with the sword prohibits usury, then the pragmatic man probably will not engage in usury. It readily is admitted that in such a pagan economy all loans that
are given on the expectation of receiving usury would cease to be given should usury cease. The one who dwells in Babylon worries with good reason whether anyone would bother to loan if there were no usury.
Nevertheless, it is not entirely true that all loans would cease in the absence of usury, even in the “earthly city”, for the simple reason that pragmatism would not require it. That is, only such loans as are motivated by the prospect of usury would cease, but not all loans are so motivated. Even in this modern time, in which moral aversion to usury is almost entirely lacking, it is not uncommon to find that numerous loans are made with no expectation of receiving usury. Although there is
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Augustine, The City of God, Bk 1
much counsel and many proverbs against making loans to friends and family, yet it is not unusual to find such loans made, and made with no usury. Rather than profit, the motivation in such cases is to do a favor. It is typical for one to think of loans in terms of money, but when loans to friends and relatives are considered, direct loans of goods must not be overlooked. It happens all the time that one would loan his lawnmower to his neighbor, and not expect anything back beyond what was loaned (not even “rent”). The man with a greatly diversified portfolio of IRAs, CDs, T-Bills, Mutual Funds, etc. will loan his lawnmower to his neighbor with no usury. If he had the funds to spare, the investment banker will loan his brother some Federal Reserve notes for a few days (“just until pay day”)
so he can buy food, and not exact usury. It is this sort of lending that exhibits the true nature of the loan. All such loans would continue uninterrupted even if usury were outlawed.
Even in the “earthly city” there is a latent consciousness of the brotherhood that ought to obtain among men. Secular society is characterized by an assumed enmity among men, a “universal otherhood”, as Nelson termed it, therefore there is little, if any, aversion to the violence represented by usury. Yet, when it comes to blood relations and close friends which one has acquired, the violence of usury would not even be considered. Thus the citizens of the “earthly city” answer their own question by their own actions. Who would loan with no usury? The answer is: a brother. But this is what the law of God has required all along. Why should one ignore the charity among brethren that already is a reality, even among unbelievers, and then turn right around and wonder who would loan if there were no usury?
In the City of God – the community of God’s people – usury is not alternately sanctioned and prohibited as pragmatism may dictate. Rather,
it is simply and absolutely prohibited as the law of God dictates. This is not imposed by the sword on a people of faith, but is written on their hearts. The man of faith does not evaluate, in terms of convenience or expediency, whether it is practical for him to keep God’s law. He holds expediency to be defined by God’s law, and disciplines himself to esteem convenience in terms of what the law requires. Whether or not he loans is not determined by whether or not he can get usury. He disciplines himself in faith to follow the commandment of God: “If there
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Benjamin Nelson, The Idea of Usury, From Tribal Brotherhood to Universal
Otherhood (Princeton: Princeton University Press, 1949)
is a poor man with you, one of your brothers, in any of your towns in your land which the LORD your God is giving you, you shall not harden you heart nor close
your hand from your poor brother; but you shall freely open your hand to him, and shall generously lend him sufficient for his need in whatever he lacks” (Deuteronomy 15:7-8). For those who are squeamish about the applicability of Old Testament law: “Give to him who asks of you, and do not turn away from him who wants to borrow from you” (Matthew 5:42). If usury is outlawed in the “earthly city”, the usurer no longer is interested in the needy since he no longer can make a profit off of them. He still is a usurer in his heart, but he does what he must in order to escape the penalty of the law. In the “City of God” the repentant usurer quits profiting off of the need of his brother or neighbor because of inner conviction, and turns instead to help sustain him. Under this latter condition, there is much less consequence for standard of living. Men have a sense of belonging together as a people. There is no vested interest in the perpetual need of one’s brother, but rather a concern to see him prosper. The economic incentive, under this case, for rescuing others from suffering and misery, is the maintenance of the “people consciousness”. It is precisely this factor which is missing in the present
debt-based economy. Furthermore, the one in need is enjoined by the same law to become productive.
This communal identity does not sacrifice individuality or private property, but provides the only proper economic context in which individuality and private property may be guaranteed. Worldly economics is bound up in a dialectic of radical individualism (libertarianism) and radical collectivism (communism). It is only under the Christian ideology that this godless tension can be resolved. One
economic application of this is the biblical prohibition of usury, which
requires the sustenance of the brethren while they regain a productive
footing.
The summation of this discussion is that among a people of conviction, the elimination of usury would hardly mean the end of all loans because the very people-consciousness that requires the elimination of usury (not enslaving one’s brother) also requires loans at no usury to the needy (sustaining one’s brother). Loans would be made by those acting in faith – trusting that God, who requires him to loan to his brother, will bless him in his obedience. Also, loans would not cease altogether in a society lacking this conviction simply because not all loans are usury-motivated. Loans that are usury-motivated would indeed cease, but this would not be bad for society any more than quitting drugs would be bad for the addict. The momentary sufferings that the addict experiences as a result of reform is a small price to pay for gaining a responsible life.
The Creator of all is sovereign over all. The one God will use the sword of both the godly and the ungodly for His own purposes; to discipline His people, and to bring wrath upon the evil-doer. Pagan prohibitions of usury both in ancient and modern times have been useful in simulating a righteous economy in which God’s people may prosper. Also, rampant usury, as is found in modern times, is useful as a scourge upon an unfaithful people. Let us set our minds on the things above, not
on the things that are on earth (Colossians 3:2) Let us seek first God’s kingdom and righteousness. If some worry that there shall not be loans if there is no usury, it is because they have bitten, and have been bitten, to the point of numbness; some are not prepared to be brothers to their fellow Christians, nor do they expect that their fellow Christians will be brothers to them. Like nation of Lot, they turn away from Abraham and embrace the sinners of Sodom and Gomorrah. Christians ought to return in faith, and live in reality as brothers in Christ.
II. Poor Vs. Rich Borrowers
It is common for modern treatment of the biblical law on usury to center on the language of Exodus 22:25 and Leviticus 25:35. Reformed writers, including Calvin, Rushdoony and North, make much of the mention of the “poor” that occurs in both passages. Rushdoony makes a point of mentioning that, “the law has reference to the poor.” North mourns; “From the early church until today, from the church fathers to the populists, there have been Christians who have refused to read the plain teaching of every text prohibiting usury. They refuse to acknowledge the qualification ‘thy brother who is poor’ in the law prohibiting interest on loans. ” The significance of this mention of the “poor” in these texts is supposed to be that it represents a “qualification”, as North put it, of the law against usury. That is, usury is not altogether wrong, but is permitted in certain cases. Calvin’s remarks brings this concept into full view: “But those who think differently, may object, that we must abide by God’s judgement, when He generally prohibits all usury to His people. I reply, that the question is only as to the poor, and consequently, if we have to do with the rich, that usury is freely
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Rushdoony,The Institutes of Biblical Law (Nutley: Presbyterian & Reformed,
1973), p,473
North, “Dominion Strategies” (Tyler: ICE, 1985), Vol. I, No.3
permitted …”
If these voices, and others, are to be heeded then usury shall be considered unlawful only in case one is making a loan to a “poor” man, and that if one is making a loan to a “rich” man then usury is “freely permitted”. Is this, indeed, the “plain teaching” of Scripture? If it is so plain, then does the Scripture also plainly tell how one is to know whether a certain man is “poor” or “rich”? Exactly how is a God fearing, law abiding man to keep himself pure? He wishes to avoid scrupulously ever exacting usury from a “poor” man, and at the same time he would like to bite the “rich” man when it is permitted. How does he keep himself pure? How shall he know whether or not he is transgressing the law? What is the
test that will prove whether or not a given man is “poor”? The importance of these questions has for the most part been ignored by the same writers who would have us believe that the lawfulness of usury depends only on whether the debtor is poor. Nowhere is there any definition proposed.
Of course, usury apologists are not to be faulted for failing to provide a standard by which men can abide by their teaching, for the idea of “poor” is essentially subjective and relative, and defies any hard and fast definition. The fault of the usury apologists is that they go beyond what is written in the Scripture. Where the law of God makes special allowances for the poor, there also is given the means by which anyone may be identified as poor, relative to each specific case. This is an
obvious and necessary aspect of law. If one’s obedience to the law depends on his understanding of who is “poor”, then the law had better provide the basis for that understanding, or that one has no hope of obedience. Presently, three examples of special handling of the “poor” by the law of God shall be surveyed. Upon comparing the usury law to these examples, it shall be evident that it is not of this type.
First, attention is directed to the law concerning the purification from leprosy, found in Leviticus 14. Verses 2-9 prescribe a general procedure for one cleansed from leprosy to reenter the camp. On the eighth day after reentering the camp there is a sacrificial procedure for ceremonial cleansing and atonement. The normal procedure is described in v.10-20. It requires “two male lambs without defect, and a yearling ewe lamb without defect, and three-tenths of an ephah of fine flour mixed with oil for a grain offering, and one log of oil” (v.10). A description of
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John Calvin, Commentaries on the Four Last Books of Moses (Grand Rapids:
Eerdmans, 1950), Vol III, p.131
an elaborate series of offerings and anointings follows. What if one is too poor, and cannot provide this array of animals, grain, and oil? It would not have been unusual for one who had been quarantined with leprosy to find that he was unable to supply what was required. A special allowance was made in this case. Beginning in v.21: “But if he is poor, and his means are insufficient, then he is to take one male lamb for a guilt offering to make atonement for him, and one-tenth of an ephah of fine flour mixed with oil for a grain offering, and a log of oil, and two turtledoves or two young pigeons which are within his means … ” The relief to the poor in this case is evident. Two male lambs and one ewe lamb is reduced to one
male lamb and two small birds. Also, three-tenths of an ephah of flour is reduced to one-tenth. It is evident that the structure of this law provides the basis on which one may determine whether or not a given man is poor. Since “poor” is a subjective and relative idea, no general definition of “poor” is given in Scripture; no general definition is possible. But it is possible to define “poor” in the particular sense that relates to the leprosy law. If one cannot afford all the animals and grain which normally are required, then he is “poor”.
Secondly, Leviticus 27:1-13 prescribes the valuation of individuals who have made vows to the Lord. Incidentally, it is interesting to point out that the various valuations are given in terms of shekels, a certain weight of silver. Individuals are valued variously according to their age and sex. But, what is to be done in the event that one is so poor that he does not have the specified amount of silver? The law makes a special allowance in this case. “But if he is poorer than your valuation, then he shall be placed before the priest, and the priest shall value him; according
to the means of the one who vowed, the priest shall value him” (v.8) Here again, there is an obvious relief to the poor. The normal requirement of the law is bypassed in favor of a special case. This law as well provides the basis on which one may determine who is “poor”. If one cannot afford the quantity of silver that is specified in the law, then he is poor.
Lastly, in Deuteronomy 24:10-13 there is an allowance in the law for special treatment of the poor in the matter of holding a pledge. As this case has to do with loans, it directly relates to the present study, and shall be quoted at length.
When you make your neighbor a loan of any son, you shall not enter his house to take his pledge. You shall remain outside, and the man to whom you make the loan shall bring the pledge out to you. And if he is a poor man, you shall not sleep with his pledge. When the sun goes down you shall surely return the pledge to him, that he may sleep in his cloak and bless you; and it will be righteousness for you before the LORD your God.
This general requirement is found also directly following the usury statute in Exodus 22, v.26-27: “If you ever take your neighbor’s cloak as a pledge, you are to return it to him before the sun sets, for that is his only covering; it is his cloak for his body. What else shall he sleep in?” Once again, the same structure is evident. Normally, the lender may keep a pledge for the term of the loan, but here a special case is made for the poor. A specific relief is afforded the poor, and the one who is poor in the sense of this law is identified by the requirement of the law. If a man cannot do without his pledge over night, then he is “poor” for the specific purpose of this law.
Comparing the usury statute with these laws, which specify special handling in the case of the poor, it is evident that usury statute is of a different type. The three laws given above not only prescribe special handling of cases involving the poor, but as well they provide the necessary element of giving the basis on which to tell whether someone is poor. In the matter of purification from leprosy, if a man cannot afford two male lambs, one ewe lamb, and three-tenths of an ephah of flour, then he is “poor”, and his obligation is specified differently. In the matter of vows, if a man cannot afford the normal valuation prescribed in the law, then he is “poor”, and his valuation is determined by the priest in accordance with his means. These two laws have to do with men’s duty to God, and the special cases involving “poor” men alter the nature of the duty somewhat in order to accommodate their slight means. The difference between these examples and the usury law is plain. The laws on leprosy and valuations prescribe a normal requirement, and then give a special requirement in the case of the poor. The usury law obviously
lacks this structure. It does not say anything like: “You may exact usury on loans (normal), but if the borrower is poor you shall not exact it (special).” Instead, there is only one course of action given: “you shall not exact usury”, and it is left only to an inference from this that usury may be permitted in other cases. However, it not possible to identify any other cases, because as the law is given there is no basis on which to determine whether anyone is “poor”. The last example considered involves men in relation to one another, specifically in the matter of a loan, and therefore is more directly similar in general nature to the usury statute.
It is evident in the law regarding the holding of pledges, that one is to be considered “poor” if he cannot do without his pledge over night. A simplistic approach to paralleling the usury law with this might be to suggest something like: “If a man cannot afford to pay usury, then he is poor, and must not be required to pay it.” This is the popular understanding of the law, however, it is an invalid interpretation of it. The special case of the poor in the law of pledges does not impact whether or not a pledge may be taken. If the law of pledges were framed in the same manner as many suppose the law of usury is framed, then it would stipulate that one ought not to require a pledge of a “poor” man. This leaves one with the same problems as he encounters with the popular idea of the usury law:
I) How does one know who is poor?
2) Is it valid to infer from this that pledges may be taken from those who are not “poor”?
As the text is written, we do not have these problems in the case of the law of pledges. We know that pledges may be taken for loans. We know that if one is poor, then we ought not to hold his pledge over night. And we know whether a man is “poor” in this sense if he cannot do without his pledge over night. Turning to the usury statute, it is evident that it does not have this structure. The condition is not attached to the status of the borrower (e.g. “if he is poor”), rather it is attached to the act (“If you lend money …”). Thus, it is not suggested that usury is lawful on one side of the contingency and unlawful on the other. Abstaining from usury is made contingent on whether there is a loan, not whether the borrower is poor. Accordingly, a definition of “poor” is not required for the purposes of the usury statute; one’s obedience to the statute does not require his knowing whether a certain man is “poor”.
To summarize the above discussion, the following may be said.
1) The idea of “poor” is essentially subjective and relative; it defies objective
definition.
2) God’s law makes special allowances for the poor in certain cases. 3)
These cases are characterized by a normal requirement followed by the special allowance.
4) The “poor” are identified, for the purpose of the particular law, in terms of the difference between the normal and special requirement of the law.
5) The usury law does not have this structure. It does not give a normal requirement followed by a special requirement to be observed in the case of the poor, and thus it is not possible to treat it as though it did, since there would be no way of knowing who is “poor” in that particular sense.
Mention of the “poor” in the law does not automatically mean that
there is a special handling of the law in their case. Sometimes, the poor
are mentioned by way of stating specifically that there strictly is to be no
special handling. Exodus 30: 11-16 is the law concerning the “atonement
money”. A census was to be taken, and everyone was to pay a “ransom” to the Lord of one half shekel of silver. The statute declares, “The rich shall not pay more, and the poor shall not pay less than the half shekel, when you give the contribution to the LORD to make atonement for yourselves.” (v.15) Also, there is a general principle stated in Scripture that there is to be no special dealing with the poor when they are being prosecuted for crimes. Repeatedly, God commands His people: “You shall not be partial to a poor man in his dispute (Exodus 23:3), “You shall do no injustice in judgement; you shall not be partial to the poor nor defer to the great … ” (Leviticus 19:15) “You shall not show partiality in judgement; you shall hear the small and the great alike … ” (Deuteronomy 1:17), “You shall not
distort justice; you shall not be partial …” (16:19)
Then there are times when the mention of the “poor” neither establishes a special handling, nor specifically prohibits one. A good example of this occurs in Deuteronomy 24:14-15 :
You shall not oppress a hired servant who is poor and needy, whether he is one of your countrymen or one of your aliens who is in your land in your towns. You shall give him his wages on his day before the sun sets, for he is poor and set his heart on it; so that he may not cry against you to the LORD and it become sin in you.
It is instructive to examine this law carefully, for its structure is precisely that of the usury statute in Exodus 22:25 and Leviticus 25:35-37. It therefore is a good model for understanding the requirement of the usury law. Specifically, the wage law requires that one pay the poor hireling his wages every day, before the sun sets. Is it valid to infer from this that it is permissible for one to withhold the wages of a “rich” hireling? Indeed it is not. It does not follow by any logical necessity, and indeed it is stated elsewhere in the law, without any reference to “rich” or
“poor”, that one shall not withhold the wages of a hireling. “The wages of a hired man are not to remain with you all night until morning.” (Lev.19:13) The Deuteronomy passage restates this with particular emphasis on the poor. The force of the statement is not an implication that one may withhold the wages of those who are not poor. There is nothing in the statement that provides any basis on which to judge who is “poor” and who is not. There is no need to judge, since the principle of not withholding wages applies generally. The force of the statement is an exhortation to be especially mindful of this requirement in the case of those who are poor. A general and subjective idea of “poor” is all that is required in this case. Whether a man is innocent or guilty before the law does not depend on his accurately identifying someone as “poor”, since he is obliged to pay wages before sun set in all cases.
The usury statutes of Exodus and Leviticus may be understood in a similar way. It is invalid to infer from them that usury is allowed in the case of loans to those who are not poor. Why do not those who claim that such an inference is valid try to apply the same sort of inference in other cases? Doing so immediately exposes the folly of such irrationality, as Roger Fenton demonstrated over 350 years ago:
“Immediately before this law of usurie in Exod.22.22. is there a law for widowes and fatherless children: Thou shalt not trouble any widow, or fatherless child. Doth it therefore follow that thou maist trouble a maned woman, or a childe that hath a father?” Of course, it does not. Similarly, an inference that usury may be allowed in cases that are not mentioned does not follow logically, and it contradicts a prohibition of usury that appears elsewhere, and that has no reference to “rich” or “poor”: “You shall not charge interest to your countryman: interest on money, food, or anything that may be loaned at interest.” (Deut.23:19) It is a gross misconception of the nature of these statutes to suggest that they imply the legitimacy of usury in any case. The force of the law is not to rule out a few cases where usury is not allowed, so as to define a great field on which usury is “freely permitted”. Its force is to emphasize that usury, which is generally unlawful, is
especially unlawful and dangerous in the case of the poor. Nothing in the usury statutes of Exodus and Leviticus provides any basis on which to determine who is “poor”. A general and subjective understanding of “poor” is all that is needed in order to catch the solemn message of the command. As Fenton points out, the poor are mentioned in these cases, as are widows and orphans in the other case, in order to call attention to those “most subject to oppression,” The mention of a certain type or class of person does not imply that the law does not hold in the case of those not mentioned.
This tendency to draw invalid inferences from the text arises from a simplistic approach to understanding the terminology of the text. The simple fact that the Exodus and Leviticus texts speak of the “poor” hardly proves that their applicability is limited to loans to the poor. Applying the same simplistic reasoning to the Exodus text demonstrates the foolishness that attends such an approach. The statute states as a condition, “If you lend money …. A literal translation would be, “If you lend silver …” Is it valid to infer from this that loans of other substances are not subject to the prohibition of usury? Would the usury apologists like to take their method as far as to say that usury is prohibited only on loans of silver to poor people? Not only is this irrational, but it also contradicts the Deuteronomy text, which specifically broadens the field of the law to prohibit generally, “interest on money [silver], food, or anything that may be loaned at interest.” (v.19)
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Fenton, A Treatise of Usurie (1611; Norwood: Walter J. Johnson, Inc., 1975),
P. 41
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Those who teach that a “poor/rich” distinction qualifies God’s law on usury commit an inconsistency, which subverts their method of qualifying the law on that basis. Deuteronomy 15:1-11 declares God’s law on the remission of debts every seven years. This law is parallel in form to the law on usury. The usury statute provides that “You may charge interest to a foreigner, but to your countryman your shall not charge interest” (Deuteronomy 23:20a) Likewise, the statute on the remission of debts provides that, “From a foreigner you may exact it, but your hand shall release whatever of yours is with your brother.” (15:3). The language involving the “poor” in the Exodus and Leviticus texts has been noted. The statute on the remission of debts similarly exhorts:
If there is a poor man with you, one of your brothers, in any of your towns in your land which the LORD your God is giving you, you shall not harden your heart, nor close your hand from your poor brother; but you shall freely open your hand to him, and shall generously lend him sufficient for his need in whatever he lacks. Beware, lest there is a base thought in your heart, saying, “The seventh year, the year of remission, is near,” and your eye is hostile toward your poor brother, and you give him nothing; then he may cry to the LORD against you, and it will be sin to you. (15:7-9)
Yet, amazingly, the very ones who claim that the mention of the “poor” in Exodus 22:25 and Leviticus 25:35 qualifies the usury statute, also bluntly state, without any qualification, that all debts are to be cancelled after six years. A few examples will suffice. R.I. Rushdoony espouses the “poor/rich” distinction as a qualification of the usury statute, and yet in the same volume states, “…no man is allowed to tax his own future by means of debt. The length of a debt is limited to six years (Deut.
15:1-4). No man has a right to mortgage his future, since his life belongs to God.” Also, Gary North, another proponent of the “poor/rich” distinction as a qualification of the usury law, has said, “This, too, is basic to a Biblical social order: no loans to the faithful for over seven years (Deuteronomy 15:1-2).” He expresses the same thought more clearly elsewhere, “… a six-year debt limitation is the maximum that is morally legitimate (given the provisions of the sabbatical years regarding the cancellation of all debts …)” How is it that these scholars can find an inference in Exodus 22:25 and Leviticus 25:35 that usury is lawful in many cases, and yet fail to find a similar inference in Deuteronomy 15:1-11? Why do
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Rushdoony, The Institutes of Biblical Law, p.5l0
North, Honest Money (Ft. Worth: Dominion, Nashville: Nelson, 1986), p.128
North, An Introduction to Christian Economics (The Craig Press, 1973), p.10
they not hold that only the debts of “poor” brethren are to be cancelled, and infer from this that it is lawful for one to continue to exact the debts of the “rich”? The present writer agrees with their views concerning the remission of debts, particularly as cited above. The wonder is that they do not similarly expound on the usury statute, which is given in a similar form.
In summary: 1) The usury statutes in Exodus and Leviticus mention the “poor”, but they do not conform to the structure of those laws that make specific allowance for special handling of cases involving the “poor”.
2) Therefore, those two texts do not provide any basis on which to determine whether anyone is “poor”.
3) Therefore, the notion that the law of usury would require something different in the case of those who are not “poor” can only be derived by inference.
4) But such an inference is totally invalid logically and as well is contradictory of the Deuteronomy text, which gives the law in its general form.
5) Therefore, there is one law of usury, viz. usury is unlawful Mention of the “poor” in Exodus and Leviticus is not for the purpose of making a special allowance, but merely is emphasizing the case of “those most subject to oppression.” The drive to legitimize one’s own sinful behavior is very powerful,
especially if such behavior is very lucrative. It took a thousand years for the church’s grasp of the straightforward command of God against usury to be subverted. Finally, with the expansion of commerce and the outset of the industrial revolution, the church was intimidated into believing that with her strict anti-usury position she was standing in the way of progress. Now we are at a point where that which seems simple to understand must be argued with great tedium – and still many declare that they are not convinced. What is being argued here is not a new idea, or a new interpretation of Scripture. It is the historic position. This is not a call to strike out in a new direction; it is a call to return to faithfulness to God. If we do not repent and return, we may expect more of God’s discipline upon us, for He loves us and will discipline us to conform us to the image of Christ.
The distinction of “poor” vs. “rich” borrowers provides no basis on which one may excuse himself from compliance with the usury law. The previous discussion dealt with the exegetical and contextual problems of this spurious excuse. Virtually the same excuse is proposed with a different emphasis, and is given in terms of a distinction between “charitable” and “commercial” loans. It is said that to exact usury on a “charitable” loan is not lawful, while it is lawful to exact usury on a
“commercial” loan. For instance, Gary North has said, “In the Bible, ‘usury’ is forbidden on loans to poverty stricken fellow believers. It has nothing to do with business loans. There is no interest rate ceiling ever mentioned in the Bible.
Either no interest must be charged (charity loans), or no limit is placed on voluntary contracts (profit-seeking ventures).” In dealing with this it is important to emphasize that biblical law on usury at no point speaks in terms of charity or commerce. There is not even a hint of such a distinction. As previously was noted, the language of Exodus 22:25 and Leviticus 25:35 might allow one to imagine
that the usury law applies differently in the case of the “poor”, if he is inclined to believe that it does, even though no such special handling may be supported hermeneutically. What must be realized in the present discussion is that the “charitable/commercial” concept was derived only from the “poor/rich” concept. There is nothing in any biblical text which would suggest that such a distinction of loans has anything at all to do with the law on usury. Thus, the argument for usury on the basis of a “charitable/commercial” distinction of loans becomes a problem not of the usury law’s biblical context, but its historical context.
In the Middle Ages there was a deeply entrenched aversion to usury for the very reason that no one wanted to be a brother-biter. With the development of commerce and industry, which signaled the end of the Middle Ages and the beginning of the modern era, the stigma of usury as a biting was somewhat relieved. Money loans for the purpose of capitalizing industry were sought out. Businessmen were glad to pay usury in return for an opportunity to get a head start on capitalizing their enterprises. (Their gladness endured in the event that their enterprises were successful enough to enable them to repay the loans with usury). If the bite of usury was gone, and the bite was the main objection to usury, then usury was allowed to become a legitimate, acceptable practice. As Cunningham described, “What benefitted trade benefitted the realm; and though the sentiment against usury survived, the ordinary conscience did not feel clear that it was altogether an evil practice, since there was difficulty in saying why it was hurtful.” Yet it was only the perception of the bite that went away. The bite itself is ever-present with usury. The fact that the one who is liable to pay the usury does not regret having to pay, and does not experience the bite, does not prove that the bite itself is relieved. One of the features of the development of commerce and industry is that now it is possible for the borrower to pass on to others – to the nameless, faceless masses – the bite of usury that his borrowing has incurred. It is this feature, perhaps more than any other development, that has allowed usurers to salve their consciences.
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Gary North, “Dominion Strategies” (Tyler: ICE, 1986) YoUI, No.3
W. Cunningham, The Growth of English Industry and Commerce (1910; New York: A. M. Kelly, 1968), Vol I, p.558
This development of trade and commerce has introduced a factor into the discussion that was not present in ancient times when the law was given. Modern usury apologists readily admit that the biblical texts do not speak of “commercial loans”, yet they give a most curious meaning to this silence. Rev. I.E. Howard, writing in “Christian Economics”, said, “…in all passages forbidding interest-taking, only consumer loans are in focus, never loans for productive purposes. . . . Borrowing money for the purpose of producing more money is never on the horizon of the Biblical writers.” His insight is fully true and accurate, however, the importance that he attaches to this fact does not validly follow from it. He claims that therefore the usury law does not specifically prohibit usury on
“commercial” loans. The reasoning is that since no one was borrowing for commercial purposes at the time the law was given, then the law, could not have specific reference to loans of that sort, and therefore it must be stretching the law beyond what was intended to suppose that it applies to all cases of borrowing in general. Thus, a little later Howard continues,
It … comparing the 16th century with Bible times, Calvin said, ‘Our relationship is not at all the same. Therefore I do not consider that usury is wholly forbidden among us, except it be repugnant to justice and charity.” The problem with Calvin’s statement, as cited by Rev. Howard, and as typical of this whole line of argument, is that it is nothing but a begging of the question. The present thesis actually claims little more than Calvin already has said. The present writer concurs: only that usury is forbidden which is repugnant to justice and charity. It further is stated that usury in its very essence and by its very nature always is repugnant to justice and charity. For one to say that he will allow only that usury which is not
repugnant to justice and charity is the same thing as his saying that he will
not allow usury at all. That, of course, is the very question at issue here,
and lest the present discourse likewise accomplish only a begging of that
question, a substantive inquiry is in order.
That usury always is uncharitable is proven by the fact that the loan is by nature a charitable contract on the part of the lender. Let the reader recall the discussion of this point at the outset of the present volume. Since the contract of loan is bondage on the part of the borrower, it is necessary that the lender act only on a motive of compassion and charity. If this is not the lender’s motive, then the bondage of the borrower is particularly vulnerable to exploitation. This is what made money-
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Rev. I.E. Howard, “Interest, Moral or Immoral?”, in “Christian Economics”,
Vol.XIV, No.9, May I, 1962
IBID
lending especially offensive in ancient times. Moneylenders typically were ruthless in their dealings, and devoid of charity toward their debtors. It was this lack of charity that allowed usury to become thinkable, and which left the creditors numb to the misery of those whom usury had ruined. The proper motivation of
charity disallows usury as unthinkable. Compassion for one’s needy brother is demonstrated by “generous lending”, and is subverted by the desire to gain by usury, which only aggravates the debtor’s bondage.
This cannot be handled differently in the event that the would-be borrower is not perceived to be “needy”. Whether or not the borrower is considered “poor” may influence the potential lender’s decision of whether to make the loan (there is no obligation of a potential lender to cater to irresponsible borrowing), but once a loan is made, the lender’s perception of the borrower cannot be allowed to color his dealings with him. Once charity is extended, it must not later be converted into exploitation. In other words, it hardly matters to justice whether the borrower seeks a loan for “productive” purposes or simply to sustain his life. A loan is a loan, in any case. The means by which many attempt to justify usury on loans for certain purposes is to cover up the fact that it is a loan at all. Many cases of the “commercial loan” are called “investing”. When these cases are acknowledged to be in fact loans, they usually are termed “commercial loans”, as though they were of a radically different nature than what are called “charitable loans”. The loan that is “uncharitable” is the loan of an enemy; one who intends to exploit the bondage of his debtor for gain. Of course, this is not what is meant when men speak of the “commercial” loan as opposed to the “charitable” loan. They mean a loan that is supposed to result in a profit for the lender (and possibly the borrower as well). This has the flavor of moral neutrality, and appears to side-step the stigma of
“uncharitableness”. However, this motive of profit belongs rightly to the “exchange” and the “investment”, not to the loan, because only by means
of exchange and investment can men profit without compromising charity.
The idea of “loan” requires charity, while the idea of “gain” is foreign to the
very nature of loans among brothers. “Charitable loan” is a tautology; “commercial loan” is a contradiction. So, the borrower’s purpose in seeking a loan really ought to make no difference to the lender, once the loan is granted. An attitude of charity still is required. This shows that what is termed the “commercial loan” does not lie outside of the ancient biblical usury law, and thus does not escape the jurisdiction of the law. The same point can be made on the basis of the history of economics.
It is common for those with a modern economic perspective to read the Exodus usury statute as though it were limiting the application of the law to only a few cases. The phrase “to the poor among you” is seen by many as marking off a small area where usury would not be allowed on loans. Indeed, that is the reality we face today. Hardly any loans are made on which usury would not be popularly justified. Why is this the case? Once usury is justified by some means, then loans are made only in those cases where usury is allowed, because men are covetous. Once men thus have created a liberal custom of usury, then the biblical usury statutes are
read as though they expressed this same thing. However, in the ancient
economy, the phrase “to the poor among you” did not have a limiting character. In its original intent, the statute is not marking off a small area where usury is not allowed. The Rev. Howard’s insight concerning the absence of “commercial” borrowing in the ancient world does not mean that such loans lie outside of the small area defined by the law, rather it means that the law is not really marking off a small area of application at all. To the modern consciousness, “the poor among you” stand in comparison to those who may borrow for commercial purposes, and so reference to them seems to limit consideration to their case. However, the absence of the “commercial” borrower in the ancient consciousness means that in its original intent the phrase, “to the poor among you” is not referencing special cases in which the prohibition of usury applies; it is referencing what was then the typical case of borrowing. It is not restricting the application of the law; it is only emphasizing, as Fenton said, the case of “those most subject to oppression.”
This proves that the popular conception is in error. The phrase, “to the poor among you” does not have in view only a few cases of loans, but most cases. Still, it may be argued that it does not have in view all cases, for it leaves open for consideration the question of those loans in ancient times that were made to borrowers who were not “poor”. Initially, it must be reiterated that such loans were not for “commercial” purposes, for it already has been established that “commercial loans” were not an aspect of the ancient economy. These loans to the non-poor most likely were on the order of a house-wife borrowing a cup of sugar from her neighbor. Jesus refers to a loan of this type in Luke 11:5-6, “Suppose one of you shall have a friend, and shall go to him at midnight, and say to him, ‘Friend, lend me three loaves; for a friend of mine has come to me from a journey, and I
have nothing to set before him·…” One man is not “poor”, in the general sense, and does not need a loan in order to sustain his life, yet he experiences an urgent need that he cannot immediately fulfill on his own, and therefore seeks a loan. This same kind of lending occurs often, even in our modern times, between friends, family, and neighbors. What is interesting to note is that usury never enters the lender’s mind in these cases. In Exodus and Leviticus there is an explicit admonition to abstain from usury on loans, especially in the case of the poor, and in the case of others usury would not even be considered. Neither form of the statute explicitly provides for usury in any case. It is only on the basis of a modern economic context that some read the statute as limiting its own applicability. However, it is invalid to interpret the Scripture by reading back into it the economic ideas that only lately have emerged. The correct procedure is to judge all of the new things that men devise by the unchanging standard of God’s law.
Even if viewed only from the standpoint of the modern economic situation, the “Charitable vs. Commercial” excuse for usury is unimpressive. It is a highly questionable procedure for one to argue for the legitimacy of usury on the basis of a supposed distinction between “charitable loans” and “commercial loans”, and then turn around and reap mountainous gains from the great bulk of loans which have nothing to do with either “charity” or “commerce”. Consider the fact that in practice “charitable” loans hardly ever are made. The very fact that usury would be
frowned upon in the case of “charitable” loans is the reason that “charitable” loans are not made. Since covetousness has overrun society, those who are in a position to make charitable loans typically will not do so. The “charitable/ commercial” distinction was devised not in order to protect a certain class of borrower from usury, but to establish the legitimacy of usury in certain cases. It is only in those cases, then, that loans are being made. Lending institutions will compete with one another for the opportunity to loan to a wealthy entrepreneur, but the unemployed
laborer cannot get a loan from anyone. Therefore, it is only academically interesting that all would agree on the idea of classifying a loan to an unemployed laborer as “charitable” and not liable to usury, for in practice everyone desires usury and no one would give him the loan! The obvious reason for this is the fact that the unemployed laborer cannot be expected to repay with usury. The current mentality is to loan to others not because they are needy, but because it is anticipated that they are able to repay with usury.
Modern lending institutions engage in publicity campaigns that have the purpose of creating desire in people, and thus need, where previously there was none. They attempt to talk into borrowing, those to whom it never occurred to borrow until they saw an advertisement. They want people to go on vacation to the Bahamas today, and pay them usury, instead of saving for a year and going debt-free. If the arguments that are heard were followed consistently, one should expect that if an unemployed laborer and a wealthy entrepreneur both present themselves to a
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There are certain encouraging exceptions to this. Two organizations, The Nehemiah Project and Habitat for Humanity, extend usury-free loans to the poor for housing
moneylender, and both declare themselves to be in need, then the lender ought to meet the “poor” man’s need and exact no usury, and if there is any leftover he may choose to lend also to the “rich” man with usury. However, in actuality Babylonian lenders seek out the “rich” and turn away from the “poor”.
The lure of usury has absorbed virtually all excess funds. Typically, though this argument of “charitable vs. commercial” loans pretends to express great conviction that “charitable loans” ought not to include usury, yet in reality very little is “invested” in charity. Previously, we noted God’s command to His people, that they surely ought to look with compassion on their brothers, and freely loan to him that which he needs. Instead, men today behave like the dwellers of Babylon. They bite and devour their brothers with no twinge of conscience. That is bad enough, but what is even more amazing is that the cause of many men’s poverty is overlooked in today’s mentality. The popular view would insist that “commercial” loans rightly include usury. But, once usury has ruined the would-be business man, and he becomes “poor”, now loans to such a one must not include usury. Here is a farmer who has lost everything he had: all apparently would agree that he is “poor”, and that loans to him would be “charitable” loans, which must not be usurious. How did he become “poor”? He, and hundreds of other farmers each year, became destitute because they could not keep up the usury payments on their “commercial” loans. This is the sense of compassion that is superimposed on
Babylonian economics: now that usury has ruined them, let us no longer
charge them usury. As the old Puritan, Henry Smith put it, “Usurers make
beggars, even as Lawyers make quarrelers.”
While loans at no usury for charity are very rare, loans at usury for “commercial” purposes commonly are done. However, loans for “commercial” purposes actually are the minority of loans at usury. Let us examine some actual figures. The Board of Governors of the Federal Reserve System, who keep track of such things, reports outstanding “credit market debt” (money loans from government and financial institutions) in two broad categories – financial and non-financial sectors. Outstanding debt of “financial sectors” represents the debt of banks, savings and loans, investment brokers, etc., and represents the shuffling around of “dollars” among the fraternity of usurers. The outstanding debt of “non-financial sectors” represents the debt of federal, state, and local governments, individuals,
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Henry Smith, “The Examination ofUsurie in Two Sennons” (1591; Norwood:
Walter Johnson, inc., 1975)
organizations, and non-financial businesses (those which manufacture a product or offer a service), and is more to the point of the present discussion. Government debt also is known as “public debt”, since the only means .that governments have for paying their debts is by raising revenues through taxation. Thus, government debt is another aspect of individual debt, as taxation of individuals accounts for by far the greater portion of government revenues. Therefore, government debt plus individual debt will be taken to represent loans for consumables. The nonfinancial business debt will represent loans for production. As of first quarter 1986, outstanding loans for consumables stood at 4.61 trillion “dollars”. That is: $4,610,000,000,000.00. The same period loans for production stood at 2.42 trillion, or $2,420,000,000,000.00. Loans for consumables are nearly double the “business loans”. Those who attempt to justify usury on the basis of a so-called Charitable/Commercial distinction of loans yet enjoy great returns of usury from trillions of dollars of “investments” and loans which have nothing to do with business. Their consciences are not too disturbed, however, because it is not generally argued that they have anything to do with charity either. If Gary North were taken seriously by his followers, when he justifies usury only on “profit-seeking ventures”, one would expect that by now there would have been massive repentance of “investing” in consumer credit, mortgages, and government debt. As it is, however, this notion of “commercial loans” has become an elephant’s trunk that was allowed to poke through the door.
Now the entire elephant has barged in. That one pitiful justification of usury has resulted in “open season” on any and every occasion of lending.
Not only that, but all of the talk about “no usury on charitable loans” is exposed as only lip service. It may be argued that even though loans are not made to the poor, nevertheless the poor are not paying usury. But this is not true. It was remarked above that with the emergence of “commercial lending” the bite of usury is distributed over the economy as a whole. Whereas the rich are the few, any burdens upon the economy as a whole are felt most acutely by the poor. So, the protection that is offered the poor, by exempting loans to them from usury, is phony since it is the poor who end up bearing the brunt of “legitimized” usury on commercial loans.
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Board of Governors of the Federal Reserve System, “Flow of Funds Accounts,
First Quarter 1986”. p.viii
Let us assume that usury is legitimized on the basis of this “charitable/ commercial” distinction. Loans are made with usury to wealthy entrepreneurs so they can start or expand their businesses. Their profits are taken out of the gross receipts. The amount of their profits is determined by gross receipts minus operating expenses. If all expenses are met and there is nothing left, then there are no profits. These things are taken into consideration when setting the price for what is to be sold, however, the values of the consumers will dictate that prices cannot rise above a certain limit. Under normal conditions, no one would pay 100 oz. of gold for a cracker. If an entrepreneur cannot manufacture a cracker at a cost that is somewhat less than what men will pay him for it, then he will decide not to
produce crackers. Therefore, the problem for entrepreneurs is to engineer a way to produce goods at a cost that will still leave him some profit once the products are sold and the expenses are paid. Among the expenses that need to be paid are the loans and usury. Although the entrepreneur personally is liable for these debts, the successful entrepreneur obtains the funds for repayment from his customers. It is evident from this that consumers actually pay the usury for “commercial” loans. This emphasizes the problem of “pen money” vs. “sweat money”. “Pen money” is money that is created by a banker’s stroke of his pen when he makes a loan; “sweat money” is an individual’s earnings, which he receives “by the sweat of his brow”. It is bad enough that loans of “pen money” must be repaid with a greater quantity of “sweat money”, but what is worse is that on top of this some portion of sweat must also chip in to repay with usury the loans incurred by governments and businesses as well. More is paid in taxes than otherwise would be necessary, even without a change in the tax laws. Nearly 20% of the Federal budget now goes to pay usury on Federal loans, that is nearly $200,000,000,000.00 each year! Also, prices are higher than they would be without usury. How much higher are prices since businesses are paying usury? It is difficult to get a handle on this, but the effect can be illustrated.
Suppose we buy a gallon of gasoline for $1.00. If the service station facility, where we bought the gasoline, is mortgaged, some fraction of that $1.00 will go toward the usury on that mortgage. If the truck that delivered the gasoline to the service station is financed by a loan with usury, then another fraction of that $1.00 will go to pay the usury on that loan. If the refinery that sold the gasoline to the service station has loans outstanding, then yet another fraction of the $1.00 spent will go toward the usury on those loans. If any of the employees of the refinery and the service station have loans outstanding, then some portion of their wages or salaries, which is some fraction of that $1.00 spent, goes toward the usury on their loans. It is very difficult to track down all of the usury that $1.00 spent is called upon to pay, but it totals up to a substantial portion. Whatever portion of a “dollar” spent ends up paying usury, the point is that the customer pays all of it. While it is true that corporations typically “invest” and receive usury themselves, nevertheless even this corporate income ultimately derives from someone spending a “dollar”. If a corporation “invests” in government securities, then the corporate “interest income” ultimately derives from individual tax payments. (Even corporate taxes ultimately derive from individual expenditures, for they are yet another cost of operations.) What good does it do the “poor” to exempt loans to them from usury, when they are among those who end up paying
all the usury on business and government loans?
It is not implied here that it is wrong for those with consumer or commercial loans to pay them and the usury with profits or wages that ultimately are derived from “poor” consumers. On the contrary, that is the only way that a free economy can operate. Not just the loans and usury, but all of one’s expenses and purchases are met with funds derived in this manner. The key to prosperity is to become more of a producer than a consumer. Those who do enjoy an abundance. Those who do not (for whatever reason) become dependent on the charity of another. This is the product of freedom and the inequalities of men. It is not this reality that is under attack here. The point here simply is that one must not declare that usury is permitted only on “commercial” loans and then blindly suppose that the “poor” will pay no usury.
In summary:
I )”Charitable loan” is a tautology; “Commercial loan” is a contradiction. Even though the borrower has a commercial purpose, this does not absolve the lender of responsibility to remain charitable in the loan. If a lender desires gain, then the proper way of pursuing it, without compromising charity, is by means of the “exchange” and the “investment”.
2) Loans with no usury in cases of charity is, in practice, a complete fiction. Therefore, the “charitable/ commercial” distinction has no pious purpose to protect “charitable loans” from usury, but to create a pretended legitimacy for usury in the case of “commercial loans”; and
3) not only are the “poor” denied loans (usury or not) to meet their own needs, but they must pay the “rich” man’s usury in the form of higher taxes and higher prices. In every consideration the mythical “charitable/commercial” distinction proves useless for the defense of usury.
Therefore, such an imaginary distinction offers no challenge to the conviction that usury is wrong.
IV. Deuteronomic Double Standard
Deuteronomy 23:19-20 says, “You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. You may charge interest to a foreigner, but to your countryman you shall not charge interest, so that the LORD you God may bless you in all that you undertake in the land which are about to enter to possess.”
The terminology “Deuteronomic Double Standard” is borrowed from Benjamin Nelson’s study of this text. The main problem is the following dilemma: If usury is wrong, then why would God permit it in any case at all? And if usury is permitted in even one case, then how can one make a broad and general statement that it is wrong? In ancient times the church fathers condemned usury more because of the ruthlessness of the usurer than the inherent evil of usury. Medieval attempts to address the inherent evil of usury did not advance beyond the thesis handed down from Aristotle, that “money is barren”, and therefore does not breed more money. By the time of the Reformation, the idea of the inherent evil
of usury was in doubt because of the double standard which now is under
consideration. This text has been a stumbling block for centuries. It is used as an excuse by those who defend usury because it explicitly states that usury is lawful in certain cases. Of course, the text also states what are the cases in which usury is lawful, but this is not considered by those who only are seeking an excuse. It is sufficient for them if they can simply derive from the text that usury is not inherently evil, supposedly because it is not universally banned. From there they can go on to make up their own (convenient) conditions in which usury is lawful. This is the origin of the pretended justification of usury on the basis of the
“poor/rich” and “charitable/commercial” distinctions. This was the method of John Calvin, and many who subsequently have followed in his steps. Calvin’s contribution to the usury debate will be examined more fully in another discussion which is to follow. For now the difficulty he had with the Deuteronomy text shall be surveyed, for it is typical of the difficulty that may be found in contemporary arguments.
In his commentary on the Law, Calvin refers to the Deuteronomy text in treating the question of the inherent evil of usury.
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Nelson, The Idea of Usury, From Tribal Brotherhood, to Universal Otherhood
(Princeton: Princeton Univ. Press, 1949)
As touching the political law, no wonder that God should have permitted His people to receive interest from the Gentiles, since otherwise a just reciprocity would not have been preserved, without which one party must needs be injured. God commands His people not to practice usury, and still lays the Jews alone, and not foreign nations, under the obligation of this law. In order, therefore, that equality (ratio analogica) might be preserved, He accords the same liberty to His people which the Gentiles would assume for themselves; for this is the only intercourse that can be endured, when the condition of both parties is similar and equal.
What is evident immediately is that Calvin acknowledges the necessary damaging effects of usury (“one party must needs be injured”), and yet calls for “equality” between the earthly city and the City of God on the low level of sin, rather than calling on all men everywhere to repent. This curious approach results from his conviction that God had not subjected anyone but Israel to His law. The worry, in that event, was that if the “Gentiles” were free to exact usury from the “Jews”, and not vice versa, then surely the “Jew” would be at an economic disadvantage in their dealings with the “Gentiles”.
This is a well known explanation of why God would permit usury on loans to foreigners, and not on loans to countrymen. However, it is not faithful to the essence of the passage. There are two problems with this explanation. First, was the stranger really free from usury laws? Calvin asserts that God’s usury laws were “political”, that is, “civil” laws. As such they were supposed to be binding only within the state of Israel. In other words, they were not binding on other peoples. It certainly is uncharacteristic for Calvin to advance this biblically untenable position. It would sidetrack the present discussion to spend a great deal of time in
pursuit of this question, however, the issue is important, and warrants a
few remarks.
God is the Creator of all men. “He made from one, every nation of mankind to live on all the face of the earth … ” (Acts 17:26) Men are distinguished from one another not by metaphysical characteristics; not in their duty and obligation to their Creator; but only by their faith. God’s people, by faith, keep His laws. Those who are not His people evidence this fact by hating and transgressing His law; perhaps
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John Calvin, Commentaries on the Four Last Books of Moses (Grand Rapids:
Eerdman’s, 1950), p.128
not continuously and exclusively, but at least habitually (“By this the children of God and the children of the devil are obvious: anyone who does not practice
righteousness is not of God, nor the one who does not love his brother.” I
John 3:10) All men are responsible to God, and the wicked and unbelieving are exposed as such in that they do not fulfill this responsibility. It is not that we, His people, are any better in ourselves than the wicked. We keep His law only because He has by His Holy Spirit empowered us to do so (Romans 8:1-4). The law of God binds all men. Some men are not His people, not because they are not bound by His law, but because they are in rebellion against it. Some observations of Greg
Bahnsen will suffice to conclude this point.
Since God is the living Lord over all creation and immutable in His character, and since all men are His creatures and morally accountable to Him, we are led to believe that God’s law (as reflecting the righteousness of God) applies to every man irrespective of his position in life, situation in the world, nationality, or place in history …. The conclusion must be. then, that God’s law was binding upon the Gentile as well as the Jew in the age of the Older Testament. Thus the law itself specified that even the alien was to be judged by the magistrate in accordance with the standard of God’s law (Deut.1:16-17). “There shall be one standard for the stranger as well as the native, for I am the Lord your God” (Lev.24:22. NASV; cf Num.15:16, “one law and one ordinance”) …. What is sinful within the borders of Canaan is not condonable outside, and this is because the Mosaic law does not represent the ethic of a few Palestinian tribes but the universal and divine standard of righteousness.
A second problem with Calvin’s explanation – that Israel must be allowed to exact usury from the foreigner because the foreigner was going to exact usury from Israel – is that it supposes that needy Israelites would sooner borrow from a usurious foreigner than from his benevolent brother. In other words, permission to exact usury from foreigners was hardly necessary as a way of putting Israel on an equal economic footing with foreigners, because usurious foreigners could not compete with loans at no usury that would have been offered by fellow Israelites. In fact, economic superiority was the goal of this provision of the law. Usury enslaves. Israel was not to be enslaved, but was to be the master. (Deuteronomy 28).
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Greg L. Bahnsen, Theonomy in Christian Ethics (Phillipsburg: Presbyterian &
Reformed, 1977), p.339-341
A fuller expression of Calvin’s argument is found in the “Report of the Committee to Study the Biblical Teaching on Loans” of the Orthodox Presbyterian Church General Assembly (1983). The entire paragraph dealing with the matter at hand is presented here.
In turning to consider the matter of taking interest (usury) on loans, it should first be noted that Scripture does not outlaw all taking of interest. Calvin and others have pointed out that Deuteronomy 23:20 … allows the taking of interest from non-believers. The reason for such a distinction is not expressly stated, but the Hebrew term translated “foreigner” here is nokri, rather than the more familiar ger. In his commentary on Deuteronomy 15:3, Driver points out, “the foreigner (nokhri) — to be distinguished from the Ger (10: 19) — is the foreigner who merely visits Canaan temporarily, for trade.” Cragle (likewise at 15:3) comments that the nokri is a “foreign merchant who might live in an Israelite town.” Thus in allowing the taking of interest from the “foreigner” the law is envisioning a business loan rather than the relief-loan extended to the poor brother Israelite. Usury is allowed on the former, forbidden on the latter. Similarly, on Ezekiel 18:5-9, Calvin notes that not all interest is contrary to the law, and consequently, not all interest comes under condemnation.
It is clear in this paragraph that the “brother/foreigner” distinction that is evident in the text is made out to be a “charitable/commercial” distinction. The means by which this is done is similar to the means by which men usually attempt to get the Bible to say something other than what it says: an appeal to some commentator’s exposition of the original language. One surely may find a commentary somewhere that will support whatever view one wishes to support. A survey of the meaning and usage of these words Nokri and Ger will prove very instructive.
Nokri is derived from Noker, which means “misfortune” or “calamity”. It is translated mostly as “foreigner”, but also is rendered “adulteress” and “adulterous woman” (Proverbs 2:16; 6:24; 23:27; 27:13). Ger is derived from Gur, which means “to sojourn”. It is translated mostly as “alien”, but also is rendered “sojourner” and “immigrants” (ExodusI8:3; 20:10; Ezekiel 14:7; 22:29). What is immediately apparent is that Nokri carries a distinct negative connotation. The sojourner is one who is abiding in some other than his homeland. God said of His people, “you were strangers (Ger) in the land of Egypt” (Ex.22:21), but the term Nokri never is applied to Israel. The “foreigner” is Nokri whether he is in another land or in his own homeland. Nokri who were in some other than their homeland probably were transients just because of their negative qualities. They were not wanted in the City of God. Aliens, i.e. not Israelites, who did not indulge in Babylonian culture and economics, and forsook their pagan gods, were allowed to remain in the land as sojourners, and were protected by God’s usury law (Leviticus 25:35). Ruth is a good case in point. She was a Moabitess, and therefore Nokri in lineage. When Naomi returned to Israel from Moab, she urged Ruth and her sister to return to their people and to their gods (Ruth 1:15), which Orpah, Ruth’s sister did do. However, Ruth was steadfast in her intent to convert to the faith of Naomi. She said, “Your people shall be my people, and your God, my God.” (v.16). Even so, Ruth did not presume that Boaz would immediately or automatically relate to her as Ger. In humility, because of her Moabite lineage, she spoke of herself as Nokri (2:10). Boaz looked upon her with favor and kindness. He discerned the sincerity of her repentance of the pagan gods of her fathers. Thus Ruth acquired a better, spiritual lineage, and became the great-grandmother of David (4:18-22). The Ger were favored aliens, who were to enter into the life of Israel. The Nokri were the wicked people whom God had promised to drive out of the land. This usage hardly justifies the idea that Nokri were necessarily traveling merchants, much less the idea that loans to Nokri were “business loans”.
It is important to distinguish between Nokri and Ger, which is not always easy to do in English translations. There is an argument which takes the “Deuteronomic double standard” to mean that usury is not inherently evil, the substance of which rests entirely upon a confusion of the two terms. Ebenezer Erskine and James Fisher, in 1753, published a commentary on the Westminster Shorter Catechism, in which they teach the following:
Q. How do you prove from Scripture, that moderate usury, or common
interest, is not oppression in itself?
A. From the express command laid upon the Israelites not to oppress a stranger, Ex. 23:9; and yet their being allowed to take usury from him, Deut.23:20; which they would not have been permitted to do, if there had been an intrinsic evil in the thing itself. This argument sounds conclusive, except that it ignores the distinction that is evident in the Hebrew between the Ger in Exodus 23:9 and the
Nokri in Deuteronomy 23:20, as was explained above. Exodus 23:9 says, “And you shall not oppress a stranger, since you yourselves know the feelings of a stranger, for you also were strangers in the land of Egypt.” The term “stranger”
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Erskine & Fisher, The Westminster Assembly’s Shorter Catechism Explained by
way of Question and Answer (the Presbyterian Church in Scotland, 1753), Q.36
in every occurrence in this verse is Ger in the Hebrew. The provision of Deuteronomy 23:20 was for the exaction of usury from the Nokri. The righteousness of making such a distinction is based on the fact that God so carefully made this distinction in His law. The Ger were not to be oppressed (Exodus 22:21; 23;9, Leviticus 19:33,34), but were to held accountable to, and thus protected by God’s law (Exodus12:49, Leviticus 24:22, Deuteronomy 1:16), as was noted above. The Nokri, on the other hand, were identified by their lawlessness and wickedness.
Who were these “foreigners”, and why was Israel permitted to exact usury from them if usury was unlawful? It was understood from ancient times that this permission related specifically to the conquest of the promised land. Usury was part of the violence that Israel inflicted upon the wicked people whom God was driving out before them. God had told Israel that the conquest would encompass a length of time. Exodus 23 :29- 30, “I will not drive them out before you in a single year, that the land may not become desolate, and the beasts of the field become too numerous for you. I will drive them out before you little by little, until you become fruitful and take possession of the land.” The oppression of usury was an effective means of keeping the Canaanites under check until they had been totally conquered. In this case, usury was an instrument of God’s judgement upon a wicked people. As Luther expounded:
But the people of the Jews had a fuller and higher law, not only with regard to the repayment of loans but … with regard to the lending to the Gentiles on interest and taking usury, namely, by divine authority, which establishes and permits this very thing. For He is God and Lord of all; He takes away not only money and goods but also kingdoms and empires from whomever He wills and however He wills, and gives them to whomever He wills. If, therefore, for the sake of vengeance on the Gentiles, God wants to punish them through usury and lending, and commands the Jews to do this, the Jews do well obediently to yield themselves to God as instruments and to fulfill His wrath on the Gentiles through interest and usury. This is no different from when He commanded them to cast out the Amorites and the Canaanites …. This answers the question how the Jews were permitted to lend on interest. The answer is: It was not and is not permitted them because of their merit or by common law but through the wrath of God over the Gentiles, which He wants to fulfill through the Jews as instruments of His wrath.
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Luther’s Works, [W, XIV, 655,656]
It was this purpose of conquest that Ambrose had in mind when he uttered, “Who is the stranger but Amelech – but an enemy? Take usury from him whose life you may take without sin. The waging of war implies the right of taking usury.” Usury was allowed in the case of loans to “foreigners” because they were regarded as the enemy. Israel was to shun “foreign” peoples (Deuteronomy 17: 15, Nehemiah 9:2; 13:3), and abstain from “foreign” gods (Genesis 35:2, Exodus 23:24, Joshua 24:23, I Samuel 7:3, etc.). Usury exacted from the foreigner does not imply that usury is not inherently evil, just as the carrying out of the death penalty does not imply that killing is not inherently evil. The command to execute a murderer is not to be taken as an “exception” to, or “qualification” of the commandment “you shall not kill”, In the same way, usury is an inherent evil that is not “qualified” by permission to practice on foreigners.
Fenton has argued that since the conquest of Canaan was completed, there was no longer any Divinely sanctioned utility in the exaction of usury. “Now when the Canaanites were once suppressed, we find all usurie ever after simply forbidden without any such limitation. So the Hebrews understood the 15. Psalm, as if it were unlawfull for a Jew in David’s time to take usurie of any Gentile. ” In Fenton’s time, Jews were infamous for money lending and usury taking. It was thought that they justified their usury on the basis of the provision of Deuteronomy 23:20.Yet one of their apologists, Rabbi Leon of Modena, agrees with Fenton.
Writing in 1616, he said of the Jews, “… they have allowed themselves the liberty to take usury, notwithstanding it is said in Deuteronomy 23:20: ‘unto a stranger thou may’st lend upon usury, but unto thy brother thou shall not lend upon usury.’ In which place, the Jews cannot understand by the word “stranger” any other besides these seven nations, the Hittites, Amorites, Jebusites, etc., which God had commanded to be destroyed with the sword. But because they are not suffered to use the same means of getting a living as others which are brethren by nature, they pretend they may do it [usury] lawfully.’
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cited in: Cleary, The Church and Usury (1914; Hawthorn: The Christian Book Club of America, 1972), p.6
Roger Fenton, A Treatise of Usurie (1611; Norwood: Walter Johnson, Inc., 1975), p.46
cited in Jacob R. Marcus, The Jew in the Medieval World (Atheneum: New York, NY 1969), p.439
Modern day Evangelical usurers also “pretend that they may do it lawfully”, however, appealing not to the law as it is stated, but to a number of alleged “qualifications” of the law. That is, they plunder their brethren not because they think they are “foreigners”, in which case their usury might have some hope of justification, but because they think their brethren are “rich”, or that their loans are “commercial”, and that this some how makes their usury more lawful than in any other case. The stipulation of the law, to do violence on the wicked, is offensive to modern-day Evangelicalism. They are frightened by any “us vs. them” stance vis-a-vis the world. Therefore, for instance, the above cited Committee Report turned the “countryman/foreigner” distinction of the text into the mythological “charitable/commercial” distinction. As much as modern excusers would like to “break down the dividing wall”, and do away with the “countryman/foreigner” distinction, they do so for the completely opposite reason that this wall was removed by ancient and medieval theologians. The 16th century Englishman Fenton maintained that now God’s law prevails on both sides of where once there was a wall, whereas 20th century usury apologists seem to want the pagan Code of Hammurabi to prevail. If there no longer is any “Deuteronomic Double Standard”, then there is but a single standard now in force. Is it proper to universalize the standard of the “brother” side of what once was a wall? In this case, one ought to relate to all men as brothers, and view lending in charitable terms in all cases. There would be no “exceptions” in which case usury is allowed. This is what the Puritans taught. Or is it proper to universalize the standard of the “foreigner” side? In this case all men relate to one another not as brothers, but as “foreigners” – not simply men from another country, but Nokri, i.e. detestable. This would provide the appropriate social context for the rampant usury that now in fact swarms over our land today, but it hardly fulfills the biblical vision of Christians as God’s people, who love one another, and compassionately sustain their poor (in whatever they lack) with loans. Yet this is what the average “Christian” economist teaches.
Until recently, the passing of the “countryman/ foreigner” distinction meant the passing of any mitigation of the law, and therefore meant that usury simply is universally unlawful. Today there is the suggestion that the “countryman/ foreigner” distinction represents a “qualification” of the law, which leaves usury lawful regardless of whether the borrower is a “countryman” or a “foreigner”. In order for this modern suggestion to be upheld, the militaristic nature of the Deuteronomic provision must be denied. Men may attempt to deny it by means of some brand of scholarship, however, what cannot be denied is the essentially violent and oppressive nature of usury. The suggestion that Christians bear an adversarial relation to other men is shocking to most Evangelicals, yet it is
this very concept which explains the Deuteronomic Double Standard. Usury is permitted in the case of loans to “foreigners” not because usury is permitted on “business” loans, but because usury is an act of war (usury is Neshek, a biting) and “foreigners” are the enemy. It is not suggested here that some men ought to be identified as “foreigners”, against whom Christians ought to wage war, and loans to whom lawfully may include usury. Many other questions must be addressed, and many other assumptions must be brought out into the open, before one can pursue this idea of warfare. It is something that Evangelicals would rather avoid discussing. That is why the essence of the Deuteronomic Double Standard is ignored in favor of the spurious and erroneous poor/rich and charitable/commercial distinctions. The point in stressing the violent nature of usury is not to force the issue of warfare between the City of God and the earthly city. The present study does not afford an appropriate context in which to state any thesis or position on this subject. Rather, the objective is to stimulate the brethren, who would not even
consider warfare against unbelievers, also to put off the warfare of usury among themselves.
One need not decide whether there ought to be warfare between “them and us”, nor stipulate of what it would consist, in order to reach the conviction that warfare, in the particular form of usury, ought not to exist among the brethren. As was seen in previous discussions, usury always is a calamity. If one who is paying usury does not experience its calamity, it is only because he has managed to pass on to others its calamitous effects. The array of financial “instruments” which provide a vehicle for usury these days affords a great population of small-time usurers the luxury of knowing neither the names nor the faces of those whom they bite. One must not attempt to justify usury only because he cannot see the pain and oppression that it brings upon an individual brother. A sincere concern for the individual alone hardly will uncover the sin of usury. Needed is the development of a “people-consciousness”. A true consciousness of brotherhood within modern Evangelicalism would almost instantaneously bring with it the conviction that it is warfare which is waged in the pursuit of gain through usury, and that it surely must not be waged among the brethren.
V. John Calvin
It may seem surprising to some that this exercise of addressing popular excuses for usury should include a discussion of John Calvin. Calvin, of course, was a prominent “reformer” during the Reformation of the church in the 16th century in Europe. Most Christians today at least have heard of the theological (and philosophical) system that bears his name: Calvinism. There is a great deal of misunderstanding and misinformation regarding Calvinism today, but it is not within the scope of our present purpose to address this problem. Our purpose here is to discuss Calvin’s contribution to the centuries-old controversy on usury.
Whatever the reader’s conception of Calvinism, he probably has the well-founded tendency to associate Calvinism with political and economic conservatism. Modern Calvinists, such as Gary North, fulfill this expectation in their writings. In this light, it may surprise some to learn that Calvin was instrumental in liberalizing the Church’s stand on usury. This explains why it is that even the most strict and conservative Christian scholars in modern times still hold to what would by medieval standards be a liberal position on usury. The modern ideas concerning “the poor”, “business loans”, and “the Deuteronomic double standard” find their origin in the writings of John Calvin. Whatever feelings this fact may evoke in the reader depends on his previously held convictions concerning both Calvin and usury. Such feelings are of little use. The present discussion of John Calvin ought in no way to influence the manner in which the Arminian or Evangelical reader tends to esteem Reformed theology or world view. The issue of usury not withstanding, the modern Evangelical has a lot to learn from Calvin. On the other hand, it would be the height of foolishness for the Reformed reader to embrace the sin of usury only on the strength of the fact that Calvin liberalized it. The present procedure will be to survey and evaluate Calvin’s teaching on
usury.
As was noted in the previous discussion, the so-called Deuteronomic Double Standard was a stumbling block for Calvin. Having misinterpreted the permission, given in Deuteronomy 23:20, to exact usury from the “foreigner”, Calvin could not bring himself to declare that usury was inherently evil. There was much more involved than simply the interpretation of a verse of scripture. His circumstances may help explain, though not excuse, Calvin’s liberal view.
Calvin’s life traversed the interface of the medieval and modern eras. He saw the height of the Renaissance with the consequent blossoming of the arts and sciences. As well, commerce and industry were gearing up to an extent that the ancient world never knew. This tended to change the problem of usury. Loans at usury to capitalize a commercial or industrial enterprise did not seem to entail the “bite” for which money-lending had become infamous. Surely, it was thought, commerce and industry would grow to unimaginable heights if only usury were not restricted. Great pressure was brought to bear for a loosening of the standard, to allow the
financing that business men sought. Many European states had outlawed usury, having been convinced by the church. But the loyalty of the state to the church typically has been pragmatic in nature. As soon as business interests had succeeded in convincing the state differently – that usury is desirable so that commerce and industry could be capitalized – the various states were not slack in converting their loyalties, and legalizing usury. A host of secular theorists had begun loudly and openly to come to the defense of usury, and were joined, though less enthusiastically, by a number of Reformers. Among them, of course, was Calvin. Perhaps Calvin had come automatically to question whatever position Rome had
taken. In any case, the pro-usury course that he had adopted was not as defensible as were other points of reform, nor were his pro-usury arguments as confident and eloquent as his other discourses.
In his struggle to achieve his usual consistency, the maintenance of the pro-usury position presented a two-fold problem. First, Calvin wished to remain loyal to the Bible, and to the heritage of the ancient fathers, who were unequivocally opposed to usury. But, secondly, he needed to refute the arguments of Aristotle, which had for hundreds of years dominated the church’s theoretical case against usury.
In many passages, Calvin displays his instinct to carry the banner that is unfurled in the Bible and handed down through the Fathers and Scholastics. In his commentary on Ezekiel 18 he says, “In a well regulated state, no usurer is tolerated: even the profane see this : whoever therefore professedly adopts this occupation, he ought to be expelled from intercourse with his fellow men. . .. that of the usurer is an illiberal trade, and unworthy of a pious and honourable man … And surely the usurer will always be a robber; that is, he will make a profit by his trade, and will defraud, and his iniquity will increase just as if there were no laws, no equity, and no mutual regard among mankind.” In his commentary on the Eighth Commandment he comments on the nature of usury that, “it can hardly be but that usurers suck men’s blood like leeches.” Also, in his commentary on the Eighth Commandment, Calvin chides those who play with terminology in order to escape the requirement of God’s law. He accused Israel of calling usury Tarbith (increase) instead of Neshek (biting), in order to escape the condemnation of the Eighth Commandment. He says, “For, where He complains of their unjust modes of spoiling and thieving in Ezekiel, and uses both words as He does
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see Bohm-Bawerk’s historical discussion in Capital and Interest (1890; New York: Kelly & Millman, Inc., 1957), VoLl, p.25ff
Calvin, Commentaries on Ezekiel (Grand Rapids: Eerdmans, 1948), VoI.II, p.227
Calvin, Commentaries on the Four Last Books of Moses (Grand Rapids: Eerdmans, 1950), VoI.ill, p.129
here by Moses, there is no doubt but that He designedly cuts off their empty excuses (Ezek. xviii. 13.) Lest any, therefore, should reply, that although he derived advantage from his money, he was not on that account guilty of usury, God at once removes this pretense, and condemns in general any addition to the principal. Assuredly both passages clearly shew that those who invent new words in excuse of evil, do nothing but vainly trifle. I have, then, admonished men that the fact itself is simply to be considered, that all unjust gains are ever displeasing to God, whatever colour we endeavor to give to it.” In all of this Calvin echoes the sentiments of the church from earliest times. It certainly was not his purpose to break radically with this tradition.
However, he failed to hold radically to the tradition. Calvin’s view of usury is not as monolithically traditional as the above quotations, taken by themselves, might suggest. Due to the pressures described above, his thinking apparently was confused, or at least inconsistent. For example, directly following the fairly strong statement that was just quoted, Calvin adds, “But if we would form an equitable Judgment, reason does not suffer us to admit that all usury is to be condemned without exception.” One wonders how these two views could both reside in the same treatise. First, Calvin appeals to God and His law in order to condemn usury – regardless of what it is called – and then he appeals to “reason” and “equitable judgment” – as though an equitable judgment were not already present in the law – in order to justify usury.
Such vacillation is evident also in his commentary on Ezekiel 18. In nearly one breath Calvin declares, “But we must hold that the tendency of usury is to oppress one’s brother, and hence it is to be wished that the very names of usury and interest were buried and blotted out from the memory of men. But since men cannot otherwise transact their business, we must always observe what is lawful, and how far it must go.” Notice three things in this labored statement. First, there is evidenced an instinct to deal properly with the law on usury (one must not exact usury because one must not “oppress one’s brother”). Secondly, the pragmatic and worldly pressures to accommodate trade, commerce, and industry are evident
(“since men cannot otherwise transact their business”). Thirdly, the law is made liable to qualification (to usury, Calvin no longer says “yes” or “no”, but “how far”). This sort of transition, which Calvin executed in the space of a few lines of text, mirrors the historical degeneration of teaching on usury from the high,
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IBID, p.130-1
IBID
Calvin, Commentaries on Ezekiel, VoI.II, p.228
biblical standard opposing usury that endured throughout the early Middle Ages, to the pragmatic doubts and questions that cropped up in the later Middle Ages, to finally the compromise and qualification of God’s law that is rampant in the modern era. In anticipating this latter phase of the transition, Calvin was ahead of
his time.
Having mishandled the so-called Deuteronomic Double Standard, as
was demonstrated in a previous discussion, Calvin set himself on a course
to discover the “qualifications” to God’s law, which would defme in what·
cases usury is to be permitted. But, though he saw himself as having set
aside any univocal condemnation of usury in the law, he yet was left standing face-to-face with Aristotle. The church fathers knew that usury was wrong because the law of God so stated. But, when it came to stating some theory to explain why it was inherently evil, they were largely at a loss. Mostly, their practical problem with usury referenced the ruthlessness of usurers and the miserable lot of debtors. For any argument that was discreetly theoretical, they were forced to turn to the pagan philosophers. Since the basic thesis of Aristotle formed the essence of the theoretical case against usury in the Middle Ages, Calvin rightly saw the need to refute his arguments. Like Calvin, the present writer as well holds Aristotle’s argument to be flawed, however, unlike Calvin the present interest in refuting it is not in order to establish the lawfulness of usury, but to replace a weak and inadequate argument against usury with a better one.
Aristotle’s argument was not highly developed. The basic principle was that “money is barren”; that is, money does not beget money. On the strength of this observation, Aristotle declared that gain through usury is wholly unnatural. This idea held sway for centuries, and formed the basis for the theoretical arguments of the Scholastics, such as Thomas Aquinas. The view is flawed, as were many views of Aristotle, and Calvin was brave enough to challenge it. To challenge Aristotle required bravery simply because of the colossal stature he commanded throughout the Middle Ages. Calvin need only have contemplated the lot of Galileo in order to gauge the seriousness of his course. But then, being a reformer, it is certain that he was accustomed to being at odds with Rome. He said, “Nor will that subtle argument of Aristotle avail, that usury is unnatural, because money is barren and does not beget money; for … a cheat …might make much profit by trading with another man’s money, and the purchaser of the farm might in the
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J.T. Noonan, Jr., The Scholastic Analysis of Usury (Cambridge: Harvard Univ.
Press, 1957) Noonan points out that scholastic theory of usury got its start
independent of Aristotle, but the later-incorporated Aristotle gained authority.
meantime reap and gather his vintage. ” Calvin imagines numerous cases where one man somehow makes a large profit “by trading with another man’s money”. He concedes it as obvious that money stored away in a box will never beget more
money, and quickly adds that such is not the purpose or function of money. This was not a point that had escaped Aristotle, though he did not admit the same conclusion. In the course of his brief remarks, Aristotlesays, “For money was intended to be used in exchange, but not to increase at interest. ” He centers on the Greek (for him the vernacular) terminology, viz.Tokos, here translated “interest”, as in many versions of the New Testament. He explains, “And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth this is the most unnatural.” However, it seems obvious to Calvin that money put to its right purpose certainly yields gain. Calvin concentrates on the effects of trading with money. Calvin certainly is correct in this regard, yet he seems oblivious to the differing legal status of “lender” and “partner”. A partner certainly is entitled, according to the terms of the partnership, to some share of the venture profits (or losses), but a lender is entitled only to repayment of the loan.
It is interesting that Calvin should multiply examples and illustrations utilizing the farm and vineyards, for it is in these cases that Aristotle’s principle falls apart. Money indeed is barren; but a cow is not barren, nor a seed. If the barrenness of the thing lent is the only reason why usury on the loan is to be prohibited, then not even Aristotle could argue against usury on a loan of seed or livestock. Aristotle’s problem was that he approached the problem through science instead of law. The law says that usury is prohibited not only on money, but also on “food, or anything that may be loaned at interest” (Deuteronomy 23:19b). The reason that usury is prohibited is not because it is unnatural, but “so that the Lord your God may bless you in all that you undertake in the land which you are about to enter to possess.” (23:20b). Calvin sought to refute Aristotle in order to remove all theoretical barriers to usury. The present writer refutes . Aristotle because his arguments against usury are spurious and inadequate.
It is apparent that in his pursuit of the conditions under which usury may be exacted lawfully, Calvin executed a transition in his thinking. In one passage he flatly stated the unlawfulness of usury in case of loans to one’s brother, and the
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Calvin, Commentaries on the Four Last Books of Moses, Vol.Ill, p.l3l
Aristotle, Politics, Bk.I, Ch.10
IBID
lawfulness of it only in case of loans to the stranger. However, the more he wrote about usury, and the more he tried to refute.
Aristotle, the more the conditions for lawful usury changed in his mind from the biblical brother/stranger distinction, to the mythological “poor/rich” or “charitable/ commercial” distinctions. Directly following his comments on Aristotle, cited above, he continues, “But those who think differently, may object, that we must abide by God’s judgement, when He generally prohibits all usury to His people. I reply, that the question is only as to the poor, and consequently, if we have to do with the rich, that usury is freely permitted.” It is this sort of case that Calvin has in mind when in his Ezekiel commentary he offers the following scenario.
But if a man is rich, and has money of his own, as the sayingis, and has a very good estate and a large patrimony, and should borrow money of his neighbor, will that neighbor commit sin by receiving a profit from the loan of his money? Another borrower is the richer of the two, and might do without it and suffer no loss : but he wishes to buy a farm and enjoy its fruits : why should the credit or be deprived of his rights when his money brings a profit to a neighbor richer than himself?
Calvin, of course, was asking these questions rhetorically, but the correct answer is not the one that Calvin implies. What he asks rhetorically begs for an answer. Right away, the words of St. Jerome come to mind, “Did you give to a prosperous person or not? If he were prosperous, then you should not have given it; if he were not, then you should not ask it back as if he were.” There seems to be a common idea that because a man is rich, it somehow becomes lawful to exact usury from him. Calvin carefully constructs his hypothetical cases so that the reader hardly will object to usury being taken from the borrower. Yet the exceeding wealth of this hypothetical borrower suggests a question which Calvin had overlooked, “if he is prosperous, then why did you give it?”
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Calvin,Commentaries on the Four Last Books of Moses, Vol.III,p.131
Calvin,Commentaries on Ezekiel, VoUI, p.228
citedin Cleary,The Church and Usury (1914;Hawthome:TheChristianBook
Club of America, 1972,1984), p.55
Calvin seems almost 20th century when he speaks of “rights” (“why should the creditor be deprived of his rights when his money brings a profit to a neighbor that is richer than himself’). Also in 20th century fashion, he overlooked the obvious point that once the money was lent, it no longer was the creditor’s money. It was not the creditor’s money that made a profit for the borrower. Once the loan was made, the creditor owned the debt, not the money. If the creditor was interested in profits from the borrower’s use of the money, then why did he not use the money
himself in the way the borrower did, or enter into a partnership with the borrower? Then he legitimately may have clamored for his “rights”.
Indeed, so 20th century were Calvin’s insights that in this era, those who argue for usury, and who otherwise despise his teaching, openly acknowledge their debt to him. So says Benjamin Nelson in The Idea of Usury :
Calvin on Deuteronomy became a Gospel of the modern era. Everyone
from the sixteenth to the nineteenth century who advocated a more liberal usury
law turned to Calvin for support. Even those who would not or could not
mention his name were compelled to speak his words. If today we do not
appeal to his teachings, it is because we have learned his lessons too well.
Religious or even ethical vocabulary is no longer needed to justify the moral and
economic postulates which he helped to establish.
If Calvin could read that statement, there is no doubt that he would be horrified. That which today is attributed to him is not in any way what he meant to accomplish. He was not one who labored to find an excuse to live lawlessly, as may characterize those who today appeal to him in order to justify their covetousness and theft. He desired nothing other than for human lives to carry on in submission and obedience to God. There is little doubt that he would be horrified at the thought of his teaching being stripped of its essentially religious character. The modern church owes a great debt to Calvin for his contribution to the bedrock of sound biblical interpretation. His works evidence genius and piety, and have provided a standard of biblical scholarship in the tradition of Augustine, owing ultimately to the Apostles and to the very Word of God. However, in matters of economics Calvin has failed to distinguish himself. It is likely that his economic lessons, such as his commentary on Ezekiel 18, were provoked by a need he felt to say something rather than nothing. However, his speech in this regard was not borne up with great learning and experience as were his theological
____________
Princeton: Princeton University Press, 1969), p.526
insights. This may be surmised on the basis of his own confession, in a letter to the Queen of Navarre.
Calvin had made a loan of money to the King of Navarre, a small kingdom that was friendly to the cause of the Reformation. As it happened, the King died before repayment was made. Now Calvin found himself in the awkward position of having to speak to his widow about the matter. In his letter to the Queen, he recounted the negotiations for the loan. Apparently, the matter prevailed unnecessarily until after the King’s death, due to Calvin’s own ineptness. He rather timidly apologised to the Queen, “But when the time came round for the payment, I did not know in what direction to turn myself, for I have never been a man of
finances”. All Christians ought to take this confession seriously. The works of Calvin have proven to be invaluable to the church, but they are not Scripture. One must not read the works of men uncritically, and one ought to be especially watchful when dealing with those passages which display the author’s self-confessed weakness. This was the method in examining Calvin’s treatment of usury, and sadly, it has been found wanting.
Surely, the apologists for usury have made much more out of the teaching of Calvin than they ought to have made, for they have been willing to grasp whatever support they could find to justify the practice without showing any compulsion to try to integrate this with the totality of Calvin’s world-view. Christians, on the other hand, have not made as much out of Calvin’s world-view as they ought to have made, and therefore are hard-pressed to realize the schizophrenia represented by the inclusion of usury. It is the excusing sinfulness of man that prompts one
to take conveniently liberal quotes from Calvin and represent these as typical of his overall view, while ignoring the preponderance of his more traditional views.
One must allow himself to see the fallenness of Calvin. He was not perfect. As an earnest contender for the faith, Calvin’s exhortation to Christendom was to take “every thought captive to the obedience of Christ” (II Corinthians 10:5). That precisely is the motive of this present course of inquiry. The outcome of the present discussion is not that therefore one must discard Calvin. On the contrary, the present thesis holds that if Calvin himself were more consistent to the radical biblical foundation to which we know he subscribed, and if he were more self consciously biblical in his economics, then he surely would have held more consistently to the prohibition of usury. The Reformational heritage is not
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Dr. Jules Bonnet, Letters of John Calvin, (New York: Burt Franklin )
compromised by a correction of Calvin on the point of usury, rather it is strengthened. This correction is but a call to faithfulness to the one foundation. Calvin himself would not have it any other way.
VI. Risk
Another popular excuse for usury is the reality of risk. It is said that one granting a loan is entitled to usury as a compensation for the risk he undertakes in giving the loan. A modern expression of this idea is found in the writings of Gary North. Commenting on the biblical prohibition of usury he says, “There is no biblical evidence, nor have Christian casuists generally argued, that the prohibition restricted interest received on business loans, so long as the lender shared the risks of failure along with the borrower.” This comment reveals a certain link that exists between this idea of “risk” and the concept of “business loans”. The excuse for usury that is built around “risk” actually is a variation of the excuse involving the spurious “charitable/commercial” distinction of loans, which previously was treated. The particular variation involving an idea of “risk” deserves separate treatment.
At the outset of this discussion it is necessary to define precisely what is meant (and what is not meant) by the term “risk”. Risk universally is understood as exposure to hazard. Typically, hazard is confronted due to an uncertainty of the future. If one invests in a company that is being organized to manufacture a certain product, he is risking the investment because he cannot have absolute certainty that the venture will succeed. Whether the venture succeeds or not is not a matter that is left to randomness or chance. The success of the venture is determined to some extent by the talent of the entrepreneurs to hire expert workers at a reasonable wage, to minimize costs, and to market the product effectively. But these cannot be absolute determinants because man is not sovereign in the world. None of his efforts can guarantee success. Yet men continue to venture into numerous enterprises. Why? If men insisted on a guarantee of success before they venture into business, no business ever would be done. The bottom line of business is the development and production of factors of human survival: food, clothing, and shelter. These things must be done. Men must venture out to do them even though they cannot be
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Gary North, An Introduction to Christian Economics (The Craig Press, 1973), p.362
absolutely certain of success. One’s estimation of this situation depends on
how one explains the fact of uncertainty.
Some have sought to explain man’s uncertainty of the future by ascribing randomness and chance to the universe. This position is based on the conviction that no mind can have higher or more complete knowledge than the human mind. That is, the future is unknown because it is unknowable. This obviously is a position of unbelief. It denies the fact that there is a Creator of the universe Who is omniscient. An example of this view is the well-known free market economist, Ludwig von Mises. He has said, “The uncertainty of the future is already implied in the very notion of action. That man acts and that the future is uncertain are by no means two independent matters. They are only two different modes of establishing one thing. ” What is the “one thing” that these two insights establish? Mises does not say specifically. He does go on to say that whether the ultimate reality is determinism or chance is irrelevant to the theory of human action. To him, ignorance of the future is the important factor. He says, “if a man knew the future, he would not have to choose and would not act. He would be like an automaton, reacting to stimuli without any will of his own.” The “one thing” that Mises means to establish is the ultimacy of human action. It does not matter to him whether obscure physical laws absolutely control everything in a complicated web of cause and effect, or whether all events are entirely random, as long as men are ignorant of the reality and as long as there is no Creator who is sovereign over His own creation. In this case men are left (in their own perceptions) with the ultimacy of their own choices and actions against a fundamentally unknowable future.
In contrast to this unbelieving view, is the view of faith. This biblical view explains the uncertainty of the future based on the finitude of man. The future is unknown to man, but it is not unknowable. But even saying that, it would not be true to say that the future is entirely unknown to man. The unbelieving school would say that since the future is unknowable, therefore it is entirely unknown. The biblical view maintains that since the future is entirely known to God, therefore it is partially known to man to the extent that God has revealed it to him. A simple example of this is the farming enterprise. Whether there will be planting and harvesting seasons next year is not regarded as up to chance. The presumption that farming can be done next year, to one degree of success or another, ultimately
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L.v.Mises, Human Action (Chicago: Contemporary Books, 1963), p.105
IBID
is derived from the revelation of God that “While the earth remains, seedtime and harvest, and cold and heat, and summer and winter and day and night shall not cease.” (Genesis 9:5) God has given to men of faith some certainty regarding the future, and they experience the greatest reality and fulfillment in their lives when they interpret their lives and history in terms of this revelation. Rushdoony has pointed out that the future logically is prior to the present. What this means is that one’s interpretation of past and present realities is to be held in terms of what he knows of the future. The future is not to be a fundamental unknown that may perhaps be predicted on the basis of past trends. To do this is to make an idol out of history. Rather, God’s ultimate goal in history, while lying still future to us, is a fundamental premise on the basis of which we truly understand the past and the present. For example, we know that in the future God will judge all men. We daily live in light of this fact. The uncertainties of the future are not wide open, for what to us is contingency necessarily must conform to what we know God has decreed. We must approach future uncertainty by faith in the Creator and the hope that we
serve His eternal purposes in our lives.
The reality of risk is perpetual in human experience. This is true whether one explains this reality on the basis of man’s finitude or some principle of randomness. One’s attitude in dealing with risk is determined by the explanation of risk to which he subscribes, but the reality of risk itself may not be escaped. All men face risks, regardless of whether they are borrowers or lenders. That the borrower experiences risks as well as the lender, is a point that has been overlooked by those who feel that risk excuses usury. In fact, up until the modern era, the borrower’s risk was
unquestionably greater than the lender’s, for if the borrower incurred losses that disabled him to repay the loan, he and his family faced slavery. It was actually suggested, in the Middle Ages, that since the borrower undertook such risks, interest was due from the lender! Let us take a moment to examine how men have dealt with the reality of risk historically – particularly economic risk.
The idea that men deserve a reward for bearing economic risk was totally missing from ancient thought. The Bible, which aside from being the Word of God also is a major source document for the study of ancient civilization, is absolutely without any mention of economic risk. Some translations include the term “risk” in other contexts, but these translations are from various combinations in the original tongues that have entirely different meanings than what normally is ascribed to the
___________
R.J. Rushdoony, The One and the Many (Fairfax: Thobum Press, 1978)
Henick, History of Commerce and Industry (New York: The MacmilJan Co.•
1920), p.144
concept of risk. For example, Jeremiah 30:21 has God declaring, “Who would dare to risk his life to approach Me?” Here risk is translated from a word meaning “to take on pledge”. The idea of one being entitled to compensation for facing future uncertainties is alien to biblical economics. There is a measure of truth in the statement of Gary North, that biblical prohibitions against usury were not directed against those who shared risks in commercial endeavors. But the reason is not the one that North implies. It was not because usury was allowed in those cases,
but because those cases did not exist.
Other ancient sources similarly are silent on the matter of economic risk. Aristotle did not treat the matter of risk. He certainly did not regard it as pertinent to the controversy of usury. As the reader will recall from an earlier chapter, Aristotle’s entire complaint against usury was the so called “barrenness of money”.
This silence in ancient sources may be due to the fact that economic risk, i.e. risking capital in a commercial enterprise, also was virtually unknown in ancient times. Although individuals bear risks perpetually, of all manner and description, risks bourne in partnership with others were uncommon until the development of partnership ventures in the early centuries AD. The development of the commercial partnership stimulated the need to define the partner’s legal right to dividends of the venture profits. Justinian law decreed in 533 AD that, “If no express agreement be made by the partners concerning their share of profit and loss; the loss and the profit must be equally divided. But if an express agreement be made, it must be observed …” More numerous and more complicated regulations sprang up to address the conditions under which partners in a venture may share the profits and losses unequally.
Important to the issue of usury was the question of whether a man who contributes money to a commercial venture was to be regarded as a lender or a partner. This was important because throughout the middle ages ecclesiastical law (and much civil law) prohibited usury on any loans. A lender would not be entitled to any profits from the venture; he would be entitled only to repayment of the loan. A partner, however, would be entitled to a share of the profits. The basis of this distinction was the legal precedence that a lender actually transferred ownership of what was loaned to the borrower, while he who committed money or goods to a
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NASB Exhaustive Concordance, Hebrew-Aramaic Dictionary (Nashville: Holman Bible Publishers, 1981)
cited in Cave & Coulson, eds., A Source Bookfor Medieval Economic History
(New York: Biblo and Tannen, 1965), p.184
partnership venture retained ownership of them. On the strength of this idea Thomas Aquinas wrote, “He who commits his money to a merchant or manufacturer in partnership does not transfer ownership of the money, so that the merchant or manufacturer works with it at the other’s risk, hence that other may lawfully seek a share in the profit as it arises from his own property.” Cleary points out that in this passage Thomas brings two elements together; ownership and risk. He observes, “Here ownership of the property is the ostensible reason assigned for a right to a share in the profit, yet one cannot help thinking that St. Thomas attached some special importance to the fact that the risk is retained by the
capitalist. ” That there was an importance attached to the bearing of risk seems undeniable, however, it also seems that the importance of risk was other than the importance of ownership, viz. risk was taken as evidence of partnership, and ownership was the basis of claim on profits. Cleary observes this fact: “Liability to risk had been made the test of true partnership by the early cannonists. This was the result of their teaching on the inseparability of risk and ownership … ” It is clear that risk and ownership are inseparable in commercial enterprise, since the loss of property is a hazard that is bourne by the owner. A medieval application of this principle was a London ordinance of 1391, which declared, “if any person shall lend or put into the hands of any person, gold or silver, to receive gain thereby, or a promise for certain without risk, such person shall have the punishment for usurers … ” Risk was a valid test for partnership simply because the lender originally bore no risk. The debt of principal and usury to him was dependent on no contingency. It mattered not whether the borrower prospered or failed.
As was noted in a previous chapter, during the Middle Ages usury was outlawed throughout much of Europe. This did not stop usury, but incited an evil sort of creativity in men to arrange their business deals to accomplish the same thing as usury, while escaping the condemnation of the statute. Some of these special arrangements, called “extrinsic titles” dealt with seemingly legitimate claims for the repayment of more than was loaned, and were readily accepted by the church. One that was not so easily accepted, however, was the title that was named “Periculum Sortis”, which basically was a claim to compensation because of risk; virtually the same claim that presently is under examination. The church leadership
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cited in Cleary, The Church and Usury (1914; Hawthorn: The Christian Book Club of America, 1972), p.87
IBID
IBID, p.126
IBID, p.l05
stood against such a claim. An example is a decree by Pope Gregory IX: “He is to be accounted a usurer, who lends a certain sum to one who is about to make a voyage, or attend a market, on the condition of receiving more than he lent merely because he undertakes the risks.” Risk was recognized as a handy test of ownership, to weed out those business deals that were so constituted as to get around usury laws, but a considerable effort was required by usurers to get “Periculum Sortis” recognized as itself a legitimate claim to compensation over and above the principal.
Finally, at the outset of the Reformation, Periculum Sortis was recognized. This title was formulated in the same form in which it still exists today. There is no difference between Periculum Sortis and the idea that a lender ought to be compensated for taking a risk. The problem with this idea is the mistaken significance that is attached to the reality of risk. The fact that partners in a commercial venture share risk does not prove that everyone who experiences risk therefore is a partner in a venture. In a day when lender’s bore little or no risk in extending a loan, risk was a handy test of partnership. Unless one was at risk in a commercial venture, he could not claim to be a partner in the venture. But the fact of risk does not create partnership. As was pointed out, originally lenders bore little or no risk in extending a loan. Even if the borrower defaulted, the lender confiscated all of his property and made the borrower his slave. Medieval and modern bankruptcy laws have increased the lender’s risks, but it was invalid for theorists to infer from the fact of risk that now lenders enjoy the same claim to profits as do partners. Risk is perpetual due to men’s uncertainty of the future. Walking down the street is a risk. Climbing in and out of the bath tub is a risk. It has only been since the advent of Periculum Sartis that men have
felt that they deserve a monetary reward simply because they have taken a
risk.
The true basis of one’s claim to profits is the one that has been recognized from antiquity through the middle ages, and has its foundation in biblical law, viz. ownership. Risk or no risk, a lender may claim only the return of what was loaned. Those who bear risks as owners and partners actually are not lenders. Risk may be an evidence of partnership, but to make risk itself a criteria of lawful gain is a 500 year old mistake that actually has been used to sanctify what in reality is usury. Ownership is the key. Owners in partnership lawfully gain dividends (in the event
their venture succeeds). A lender is no longer an owner of what was borrowed, and is not a partner with the borrower. Any increase paid to him is usury.
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IBID, p.115
To appeal to risk as a claim to monetary gains is to appeal to one’s own abilities in confronting a chance and random universe. A professional risk-taker requires his debtors to congratulate him with usury because he was so brave in risking his money. An owner works with capital to produce goods. He requires nothing but what is rightfully his, being produced by his capital. He bears risks in his work, as all men bear risks in the conduct of their lives. But the righteous man does not
view his own risks as special. He does not suppose that he is the only one
who bears risks, or that other men owe him anything on account of his risks. This is the difference between the risker and the owner; between the usurer and the producer: The risker sees himself as afloat on a random sea of contingency; the owner sees his life as created, directed, and sustained by God. The risker sees himself as on a crusade to tame a random universe; the owner is in a position to bow in humility before God and His law. James 4:13-17 illustrates this distinction.
Come now, you who say, “Today or tomorrow, we shall go to such and
such a city, and spend a year there and engage in business and make a profit.”
Yet you do not know what your life will be like tomorrow . You are just a
vapor that appears for a little while and then vanishes away. Instead, you ought
to say, “If the Lord wills, we shall live and also do this or that.” But as it is,
you boast in your arrogance; all such boasting is evil. Therefore, to the one
who knows the right thing to do, and does not do it, to him it is evil.
The reality of risk is evident in the vapor-like character of our lives. How do we deal with this uncertainty? Do we appeal to our Creator for our lives and the direction and success of our work, or do we make uncertainty a fundamental principle and then set out to conquer it? In humility and faith we must appeal to our God. Risk itself entitles us to nothing. The legal importance of risk historically has been as a test of partnership, and for this purpose it certainly is useful. Beyond that, an idea of risk is only philosophically interesting. As an excuse for usury,
and a subterfuge from the law of God, it is terribly inadequate.
VII. What is Rent
Another popular excuse for usury is that it is no different than rent. It is said that “interest” merely is rent on “money”, and that if rent is assumed to be legitimate, then usury would have to be considered legitimate as well. Bohm-Bawerk reports the view of John Locke, “to receive profit from the loan of money is as equitable and lawful as receiving rent for land”. He further comments on Locke:
That there is undoubtedly an analogy between interest and the profit from
land rent, was very likely to lead logically to a conclusion involving land
rent in the same condemnation as interest. To this Locke’s theory would
have presented sufficient support, since he expressedly declares rent also
to be the fruit of another man’s industry. But with Locke the legitimacy of rent appears to have been beyond question.
The economic similarity between usury and the rent of property
readily is admitted. However, this close connection does not serve to
legitimize usury, as Locke et al suppose; but to condemn rents. The
presupposition of the legitimacy of rents is faulty since usury theoretically
and historically is the prior concept, and forms the basis of rents, not viceversa.
Before looking into the history of rents, and examining their
usury-like character, it first is necessary to dismiss a common
misconception that rent is sanctioned in the Bible.
John J. Mitchell, then editor of the Presbyterian Guardian, says in the
April 1977 issue:
The ancient Israelite was free to lend his work animals for pay (Exodus 22:15).
He was free to “lend” himself as a laborer for hire (Deuteronomy 24: 15).
He was even free to rent out his land (though not to sell it) for a return
based on the number of harvests during the lease (Leviticus 25:15-16). The
principle is clear: It was right and proper to expect payment for the usage of
such assets as land, animals. or even one’s own person.
But if he could receive payment for the use of his land, by what principle
of equity should he have been forbidden to collect “rent” on the use of his
money?
The answer, of course, is that in fact it is not lawful for one to sell the use of his property (rent). But that is the point in question, so let us examine the three scripture references that are given in the remarks cited above. The most easily dismissed is the idea that wages may be viewed as “rent” of one’s labor. Labor is the most basic manner in which one may provide a service to others. Goods and
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cited in E. v.Bohm-Bawerk, Capital & Interest (New York: Kelly & Millman, Inc., 1957), YoU, p.4S
IBID, p.46
services are the property that men offer in trade with one another. The “hire” of a laborer is what he receives in exchange for providing the service of his labor. It cannot be confused with “rent”, as Mr. Mitchell himself appears to acknowledge
when he uses “lend” in quotes when applying this term to labor. Also, the Hebrew word for “hire”, sakar, is most often translated “wages” in the NASB, and in no way can be given the sense of “rent”.
Secondly, Mr. Mitchell suggests that the Bible sanctions the renting of work animals. In support of this he cites Exodus 22:15. The passage in which this verse is found deals with laws concerning the loss of property under various circumstances. Starting with v.14, it says, “And if a man borrows anything from his neighbor, and it is injured or dies while its owner is not with it, he shall make full restitution. If its owner is with it, he shall not make restitution; if it is hired, it came for its hire.” In the first case, an animal is borrowed. Under typical terms of a loan, the borrower owes the lender that which is loaned. The death or injury of the animal loaned does not alter the fact of this debt. The borrower owes the lender
an animal, even if he cannot give him the very animal which was loaned. In the next case “its owner is with it”, i.e. it is not a loan agreement. Mr. Mitchell contends that this is a case of rent. However, the text says that this is another case of “hire” – sakar. If the payer has rented the animal, then why was the owner with it? If he has not rented it, but hired the animal, then how did he make a wage agreement with an animal? The only way in which to understand the text is that this is a case of one hiring a man with an animal to bring his animal and perform some service with it. That is why no restitution is required in this case, should the animal die or suffer injury. The agreement of the payer is to pay the hire for the services provided by the owner of the animal. It is no economical concern of his should the owner’s animal die or be injured in the performance of this service.
A modern example will illustrate this point. The animal in this case may be thought of as a tool. Though animate, it is a device which a man uses to enhance the effectiveness of his labor. When one hires a plumber to come to his house and repair a leak, the plumber brings his own tools to perform the appropriate task. The fee for the plumber’s services may be estimated even before he begins his work, and may vary according to the cost of the materials he uses and/or the time required for the work. However, if the plumber should break one of his tools while performing the work, it would not be lawful for him to hold his customer to be responsible for this loss. Suppose instead that one should borrow some tools and attempt to do the work himself. If he breaks a tool, then he is responsible for it. He must replace it for the one from whom he borrowed it. If he borrowed a tool, and it “dies”, he shall make full restitution. If the plumber is with it, he shall not make restitution, for “it came for hire.”
This text cannot be made to speak of payment “for the use of another’s property”, and there is no linguistic element in the text which supports the concept of “rent”. The rendering of the key phrase in the New International Version is confusing – “If the animal was hired, the money paid for the hire covers the loss”. This really is a paraphrase, that is, it is not supported by the original text, but is interpretative. That
would not automatically be a problem, except for the fact that the interpretation is faulty. The “hire” does not “cover the loss”. The “hire” covers the services rendered. The animal came to provide services, or “it came for its hire”, as the correct rendering says. Loss incurred by the owner of the animal is the owner’s problem. There is no responsibility laid upon the “customer”. There is no sense in which this can be considered “rent”.
Thirdly, Mr. Mitchell cites the Jubilee observance, and the attendant reversion of lands, as an example of rent. Lev.25:13-16, On this year of jubilee each of you shall return to his own property. If you make a sale, moreover, to your friend, or buy from your friend’s hand, you shall not wrong one another. Corresponding to the number of years after the jubilee, you shall buy from your friend; he is to sell to you according to the number of years of crops. In proportion to the extent of the years you shall increase its price, and in proportion to the fewness of the years, you shall diminish its price; for it is a number of crops he is selling to you.
God had given the various Israelite families an inheritance in the land. That these land allotments were not ultimately negotiable is evident in the first requirement of the Jubilee – that everyone return to lands as God had given them (the Jubilee was a period of fifty years). Individuals were not permitted to buy and sell lands in the same manner in which they freely could buy and sell other property. Mr. Mitchell suggests, therefore, that the buying and selling that is spoken of in v. 14 and 15
actually is rent. He points out that the amount of rent is even proportioned to the length of time that the other has to spend on the land until the next Jubilee (v.16) However, this is to ignore the true reason, given in the text, for the proportioning of the “price” : “for it is a number of crops he is selling to you” (v.16b). There is no way that buy (Heb. qanah) and sell (Heb. makar) in this passage can be construed to mean “rent”. The text is explicit. The buyer was not buying the use of the land; he was buying a number of crops. There may not appear to be much difference in the outward appearance, but there is a world of difference in equity. A seller of property no longer has any equitable claim or interest in said property. A seller of “uses” deals in abstractions – that which exists only in the mind.
No title to any property changes hands. He in effect loans property and requires repayment of the property with a fee. This is indistinguishable from usury. It also is entirely foreign to the passage in question.
Additionally, it will be helpful to deal with biblical passages that, in various translations, include the term “rent”, or a derivative thereof. The NASB translates Amos 5:11 as, “Therefore, because you impose heavy rent on the poor and exact a tribute of grain from them …” It is apparent that this rendering is interpretative. The phrase “impose heavy rent” is given for a single Hebrew word, Bashas, which is used only in this instance. The meaning of this term is “Trample” Indeed, the KJV of 1611 puts, “Forasmuch therefore as your treading is upon the poor, and ye take from him burdens of wheat…” The context of this charge is the prophesy of Amos against Judah and Israel. The nucleus of God’s case against them was that they” … rejected the law of the Lord and have not kept His statutes” (2:4). Throughout the book there are a number of references to oppression of the poor. The particular charge now under consideration is that some had robbed the poor of freedom, having created a serfdom. If the NASB version were taken as correct, the substance of the problem was that the poor were subject to heavy rent. This of course implies that there is a level of rent that is appropriate, and that the solution to the problem would have been for the poor to pay this appropriate rent instead of having to pay the heavy rent. However, no where does the law of God stipulate what is an appropriate rent, above which rent is to be considered “heavy”. The real problem in this passage is that the poor were being trampled. Are we to understand that God was displeased because the poor were being trampled “too heavily”, and that His anger would be appeased if the poor were trampled only lightly? Rather, the law of God requires that brothers do not trample one another at all (Lev.25:39-46) As will be shown below, the basic nature of rent is the exaction of a tribute by a conqueror of his conquered. The second phrase quoted from the NASB (“and exact a tribute of grain from them”) more accurately portrays the nature of the problem than does the first (“you impose heavy rent on the poor”).
Secondly, it will be helpful to examine a parable of Jesus that occurs in three parallel passages, Matthew 21:33-41, Mark 12:1-9, and Luke 20:9-16. The present treatment of this parable will utilize the Matthew text. A landowner set up a vineyard and, as the NASB puts it, “rented it out” to vine-growers. At harvest time he sends servants to the vineyard to collect his share of the produce, but the vine-growers mistreat them, even killing some. The owner then sends to them his son,
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R.L. Thomas, ed. New American Standard Exhaustive Concordance of the
Bible, (Nashville: Holman Bible Publishers. 1981)
but they kill him as well, hoping to acquire his inheritance. Jesus indicated that it would be righteous for the landowner to dispose of the vine-growers, and “rent
out” (NASB) the vineyard to others. Does this not imply the legitimacy of
the rental arrangement? Actually it does not. The phrase “rent out” calls
to mind the modern reader’s own concept of rentals. It is the stated purpose of modern translations to put the biblical ideas in terms that are familiar to the modern reader, not only to the reader of a different native tongue. However, if in so doing, the translation suggests a meaning that is not present in the original, then the advantages of familiarity are nullified. There is no use in having the wrong idea put in the most familiar terms. Evidently, the KJV rendering of the text in question would not communicate adequately to modern readers. The KJV says that the
landowner “let out” the vineyard to vine-growers. Surely “rent out” means more to the modern mind than does “let out”, however, the KJV is closer to the original Greek, which is a composite term meaning literally “give out”. It is evident in the text that this was not a rental contract, as the modern reader would conceive it. Comments in the text provide insight into the nature of the arrangement. It is said (Matt.21 :34) that “when the harvest time approached, he [the landowner] sent his slaves to the vine-growers to receive his produce.” Why does the landowner have
any claim to the produce of the vineyard? If he has “rented” out the vineyard to others, in a manner that is familiar to the modern reader, then he would have no claim to the produce. His gain would in that case be a money payment of rent. However, it might be suggested that instead of a money payment, the rent consists of a share of the produce. This apparently is the arrangement that is indicated in the text. However, one must not think of this in terms of modern rent. Instead, this is a case of share-cropping. It is a partnership venture between a landowner and
vine-growers.
There is a significant difference between a rental agreement and a share-cropping agreement. In terms of a rental contract, the tenant owes the landlord a fixed rent, regardless of the success or failure of the tenant’s venture with the property. The rents consists entirely of a fee that the tenant must pay before the owner will agree to loan the property, and has no basis in or bearing on the produce that may be realized from the use of the property. If the owner excuses his exacting this fee by
suggesting that the profits of the tenant’s use of the property will enable him to pay the fee, this exposes a gross presumption of the owner on the providence and blessing of God on the productive enterprise. Likewise, the tenant enters into such presumption if he expects that his success on the rented property will enable him to meet the rental obligation. The sharecropping partnership, on the other hand,
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IBID
specifies the proportion of whatever produce the Lord may see fit to bestow that shall accrue to the various partners. The reader will recall from a previous discussion on risk that ownership is the key factor that identifies a contract as a
partnership. In the present case, the landowner obviously shares in ownership because he owns the vineyard itself. The vine-growers also enjoy a share of ownership in the produce because of the services they have provided in caring for the vineyard. A lender does not share in ownership; he is entitled only to the return of that which he lent.
It will be helpful to compare this partnership arrangement to another method of getting produce out a vineyard – that of hiring laborers for wages. One chapter earlier in Matthew, there is another parable of Jesus concerning a landowner and a vineyard. It begins, “For the kingdom of heaven is like a landowner who went out early in the morning to hire laborers for his vineyard. And when he had agreed with the laborers for a denarius [a certain weight of silver, in coin] for the day, he sent them into his vineyard.” (20:1,2) In this case, the owner does not enter into a
partnership with the workers. Perhaps these workers are less skilled than would be suitable for a partnership, or perhaps the owner requires assistance only temporarily, Le. not consistently enough to warrant entering into a partnership with others. Whatever the case, the present case is one of exchange; silver for labor. Once both parties have fulfilled their obligations, neither one has any further claim on the other. The owner gets the service of labor, and the laborers get an agreed upon quantity of silver. Should the vineyard produce exceeding abundantly,
the laborers have no claim on any of its produce. Likewise, should it eventually fail to produce at all, the owner has no claim on the silver he paid the laborers. The text of original concern shows the vine-growers being compensated according to the performance of the vineyard, rather than by payment of wages, for they were engaged as partners in the vineyard. This text hardly legitimizes rent, as we know it, while at the same time it actually illustrates what many modern commercial rental and lease agreements could and ought to become, viz. partnerships.
One last text of interest is Acts 28:30. The concluding discussion of the book of Acts is a report of Paul’s condition in Rome. It says in v.30 (NASB) that “he stayed two full years in his own rented quarters …” Once again, the KJV has a rendering that is closer to the literal meaning of the original tongue. It puts “hired house” instead of “rented quarters”. The curious thing is to discern just what arrangement Paul had in that city. One possibility is that it was not much unlike the modern apartment rental. After all, the host nation in this case – Rome – was not known for it strict adherence to the laws of God. This may perhaps constitute a case of actual rent that is found in the Scriptures. However, who is going to suggest that the reporting in Scripture of Paul going to pagan Rome and being subject to rent constitutes a Scriptural endorsement of rent? It nevertheless is unlikely that this possibility is the correct one. Most writers on ancient economies point out that what appears as rent in ancient times is quite different than the modern notion. Another possibility is that Paul’s arrangement was on the order of the operation of inns in the ancient world. Ancient inns also were quite different in function than modern motels. Travelers did not pay a fee for the use of some space. They bought a service. In exchange for a money payment they got meals, the attendance of servants, and care of their animals. The space under roof provided a context in which these services could occur. Such operation is illustrated in Luke 10:35. It is probable that Paul hired, not a house itself, but someone with a house and servants, to feed him and take care of him. In any case, this text cannot be construed to provide a justification of the modern concept of rent.
Nothing in the Bible legitimizes the practice of usury in any form.
The fact that usury in the form of rent is so uncritically and unquestioningly
accepted today accounts for the tendency in many to go to the Bible
in search for some justification of it. A better procedure would be to go
to the Bible for the purpose of receiving instruction in godliness and right
living. God does not speak to us in His Word of rent as we know it. What He has declared to be unlawful – usury – cannot be legitimized by our comparing it to a modern invention – rent. It is a curious procedure to attempt to justify usury by means of positing an identity between usury and rent. The law of God clearly prohibits the one, and on the strength of the identity that already is admitted to obtain between them, one ought easily to arrive at the unlawfulness of the other. Indeed, medieval and early modern theorists maintained a strict opposition to usury while seeking to legitimize the rental of tangible property by attempting to show
that the two are very different things. In modern discussions, it seems that the dissimilarity of rent and usury is stressed whenever it is desired to legitimize rent, and their essential similarity is stressed whenever it is desired to legitimize usury. In order to pare away the uncritical acceptance of rents that stands in the way of many receiving godly instruction in area of economics, it will be helpful to look a rent in the context of its historical development.
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e.g. Cunningham states that the income that feudal tenants provided their lords
was “a very different thing from modern rent.” (The Growth of English
Industry and Commerce, VoLl, p.5)
The origin of rent charges goes back to ancient taxation. Property rights in Babylonian and Medo-Persian civilization were based on might. The man with the biggest, or most effectively wielded sword, could claim the most property. The rest of humanity was left in the position of doing basically whatever the man with the sword said to do. The powerful organized a virtual serfdom around themselves, and extracted a variety of taxes and duties. Greek civilization was more sophisticated, but the idea of absolute ownership of property still was foreign. In later stages, Greece had a class of free landowners, though most men either were
urban laborers or rural sharecroppers. Taxation typically was a tribute that was exacted from conquered peoples. Of Greek dominance over Egypt, Durant says, “Everywhere the government took rentals, taxes, customs, and tolls, sometimes labor and life itself. The peasant paid a fee to the state for the right to keep cattle, for the fodder that he fed them, and for the privilege of grazing them on the common pasture land.” This account shows the similarity in nature of rents and tributes.
Rome had established a rigorous idea of property ownership based on land. Property eventually reverted into the hands of the mighty anyway, through outright conquest or through the distressed sale of war-ravaged land. Also, farmers-turned-warriors often failed to return to their land either because of death or because their military travels had introduced them to the lure of urban life. Thus, a wealthy aristocracy accumulated much of the real property, and rented it out to the peasantry. As Durant explains,
The owners rode in now and then to look at their property; they no longer
put their hands to the work, but lived as absentee landlords in their suburban
villas or in Rome. This process, already under way in the fourth century B.C.,
had by the end of the third produced a debt-ridden tenant class in the
countryside, and in the capital a propertyless, rootless proletariat whose sullen
discontent would destroy the Republic that peasant toil had made.
While the Roman Empire expanded, they also exacted tribute from conquered peoples. The earliest occurrence of this sort of tribute that ties linguistically with the modern idea of rent is the Roman census. The meaning of the Latin term was very much the same as our word; an enumeration of the population, particularly for
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Durant, The Story of Civilization (New York: Simon & Schuster, 1954), Vol.lI,
p.591
Durant, Vol. III p.77
the purpose of a head tax. This term eventually gave rise to the medieval German Zinzen, which meant “rent, tax, duty, and interest”. This is the word that Martin Luther gave in translation of the Hebrew Neshek (biting) and the Greek Takas
(birthing). The word is still in use to this day, however, its meaning is
limited to “usury”.
Our English term “rent” finds its initial use in medieval feudalism. The feudal system was essentially the same arrangement as ancient slavery: the powerful assume control of the land and exact tribute from the peasantry. In this case the “lord” (landlord) allots parcels of land to his “serfs” (tenants), which they work, and pay to the lord some service or quantity of produce (rent). One major difference between medieval feudalism and ancient slavery was the enhanced dignity and status of the serf. He entered into this arrangement voluntarily (although typically it was virtually necessary to do so in order to survive), he was free to conduct business with whatever surplus he had once his obligation to the lord was satisfied, and most of the time he could pass on his allotted land to heirs.
The term “rent” derives from the Latin “rendere”, which has the meaning of “payment”, and was used not only in the sense of an economic exchange, but also in the sense of surrendering a city or an army to captors. This is the derivation of both the modern economic meaning of “rent” and the violent meaning of “rend”, i.e. to destroy (sur rend er). Rent, in its ancient and medieval forms, was in the same class as usury. Both were a means of one man dominating and enslaving another. Both came under the condemnation of the church. In the early centuries of the church, the bishops exhorted Christian lords not to enslave their brethren
as serfs. In short, for the first several millenia of recorded civilization, rent and usury were treated as simply two types of economic oppression. The similarity of one to the other served, as Bohm-Bawerk put it, to lead to a conclusion involving land rent in the same condemnation as interest. From the later Middle Ages to the present, rental of property was held to be of a different class than usury on a loan of money. It was the newly emerging science of economics that provided the theoretical categories in terms of which such a distinction could be made. Beginning with Thomas Aquinas, and continuing through the English Puritans, all the condemnation of usury in the Bible and the ancient church was directed to the increase (usury) received on a loan of money, and diverted from the increase (rent) received on a loan of other property.
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Oxford English Dictionary
The main idea that provided for the theoretical separation of rent and usury was the distinction that was drawn between “durable” and “perishable” goods. It was this sort of distinction that allowed Roman law to specify two different types of loans, the commodatum and the mutuum,an introduction to which the reader will recall from an earlier discussion. The commodatum was a contract which provided that the borrower was granted the use of a particular “durable” good for a specified period of time, during which time it continued to be considered the property of the
lender, and upon the expiration of which time the very good was to be restored to the possession of the lender. The contract of mutuum provided that the borrower was to be granted title and use of certain “perishable” goods, and the lender held an obligation from the borrower that the borrower restore to him, by a specified time, goods which are like the ones loaned in kind, quality, and number. One of the key differences between commodatum and mutuum is that in the latter contract property
in the good transfers to the borrower, while in the former the property always remains with the lender. Roger Fenton, an ardent foe of usury in early 17th century England, defined “usury” only in terms of mutuum., and consequently in condemning usury, he meant only the increase received by the lender of “perishable” goods. His comments in this regard are typical of the views commonly held in his day:
If I lend thee my money, of mine I make it thine for a time. Thine to do withall what thou wilt: Thine in use and propertie both: So thine, as during that time, I will not owne it, nor call thee to account what thou dost with it, because it is thine. But if I lend thee a horse, or a house, I will so passe it over, as it shall be mine still and not thine. I will be the owner stil, even for the time that I have lent it. And if thou use it not well, I will have an action against thee; for this is not, mutuum, but commodatum, lent to use, but not to spend or bestow.
“Perishable” and “durable” goods became economical categories which provided a theoretical basis for distinguishing between rent and usury, however, the difference between perishable and durable goods itself did not arise from any theoretical necessity. Rather it emerged of practical necessity. The lender of goods needed some legal title to the goods loaned, in order to have recourse in case the goods are not repaid. But, the borrower also needed some legal title to the goods loaned in order to escape the perception of theft or the irresponsible use of someone else’s property. In case of a loan of food, it seemed ridiculous for the
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Roger Fenton, A Treatise of Usurie (1611; Norwood: Walter Johnson, Inc.,
1975), p.16
lender to claim property in the food which the borrower was eating, and
which never would have been seen again. But in case of a loan of a horse,
it seemed ridiculous for the borrower to claim property in the horse
which he was required to return to another as soon as he had finished with
it.
This difference in how one would look at a loan contract is stimulated not by theoretical constraints, but by the realistic expectation of the lender concerning what will be repaid. A lender of food has no expectation of receiving in repayment the very same food as was loaned. However, a lender of a horse does expect to· receive again the same horse as was loaned. This expectation, however, is only a subjective element of the lender’s thinking. That is, it does not place the borrower under any legal constraint. If the horse that was loaned should die, this would not make it impossible for the borrower to fulfill his obligation to the lender. The borrower’s obligation was from the beginning to restore to the lender goods of the same kind, quality, and number as was loaned. If this cannot be done with the very goods that were loaned, then other goods of the same kind, quality, and number will do. The borrower of a horse, which died while in his possession, may fulfill his loan obligation by obtaining another horse, of similar quality and characteristics, and presenting it to the lender. If the lender considers a particular good to be one of a kind, i.e. irreplaceable, then either he will decline to risk a loan of such a good, or will make some agreement with the borrower to receive something else to satisfy the obligation of repayment in the event that the loaned good perishes.
Thomas Aquinas pioneered the concept of making a theoretical and legal distinction between rent and usury. However, he failed to consider the subjective nature of the lender’s expectations in his treatment of these things. He, in the tradition of Roman law, assumed that goods could be divided into the two watertight categories of “durable” and “perishable” goods. Of the latter type he said:
He who takes usury for a loan of money acts unjustly for he sells what does not exist, and such an action evidently constitutes an inequality and consequently an injustice. To understand this we should note that there are
certain things whose use consists in their consumption, as in using wine we consume it, or as we consume wheat in using it for food. In such cases then, the use of a thing is inseparable from the thing itself, hence he, to whom the use is granted, has the thing itself granted to him. Hence in loans of articles of this description, ownership itself is handed over. If therefore a man wanted to make two distinct sales, one of wine, the other of the use of the wine, he would be
either selling the same thing twice, or selling what does not exist – wherefore
manifestly he would commit a sin against justice. Similarly, he commits
injustice who lends wine or wheat, seeking a double recompense; the one, the
return of a quantity equal to the loan; the other, which we call usury, a payment
for its use.
This is a plain description of the injustice of usury. Indeed, one may see plainly from this description the injustice of any concept of “rent” on such things as wine, bread, and money. As was noted in the discussion of medieval history, Aquinas focused his argument against usury on cases involving “perishable” goods, as cited above. However, his argument did not seem to hold in the case of “durable” goods. Thomas continues:
But there are some things, which to use is not to consume (that is, which
are not consumed in use) : thus one uses a house by dwelling in it, not by
destroying it, and in such a case, a man may transfer the ownership of the
house to another, keeping for himself the right to dwell in it for some time, or
conversely, one may grant the use of the house to another whilst reserving its
ownership. Such a man might lawfully receive a price for the use of the house,
whilst in addition he may demand back the house which he has lent – the course
of action adopted in letting and hiring of houses.
It is here that Thomas’ great rigor of thought breaks down. It would
seem that his presupposition was that rent of durable goods was a
legitimate economic relationship, and that therefore his task was to show
how such a relationship may be upheld in the face of the condemnation of
usury. However, in fact the use of goods and the possession of goods
cannot practically be distinguished in any class of goods. Also, the distinction of “durable goods” and “perishable goods” is only utilitarian, that is, it is useful on some occasions to make such distinctions. However, in reality no good is absolutely durable; all goods are “consumable” or perishable. The case of goods which are consumed in their first use merely serves to illustrate this fact more dramatically than the other. To speak of “durable goods” as opposed to “consumable goods” is only a way of emphasizing the large difference in degree or
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Thomas Aquinas, Summa The%gica, cited in Cleary, The Church and Usury ,
p.79
IBID
rate of perishability of different goods. To “use” bread is to consume it. This is obvious. But what is not so obvious is that the same principle holds in the case of a
house or a field. One cannot live in a house without consuming the house. Anyone who has lived in the same house for any appreciable length of time is well aware of this fact. It may take much longer to consume a house than to consume a loaf of bread, nevertheless living in a house and never doing any maintenance on it will eventually consume it. Its consumption is not as rapid as the consumption of bread, nor is the entirety of it directly caused by human activity. Therefore, the tendency
is to view the consumption of a house as fundamentally different that the consumption of bread. However, in principle it is the same thing. It must be emphasized that it is only a difference of degree. The distinction of perishable and imperishable goods is unwarranted since all goods perish through use. The two imagined categories cannot explain all cases. Repeated use of a shirt will cause it to perish, yet if one were to loan a shirt he would expect to receive back the same shirt. So, is the shirt a “perishable” good, or a “durable” good? If a fee is charged for the use of the shirt, is this usury? Indeed it is usury.
Perhaps if the economies of the Byzantine era had produced a wider array of goods, then the gap between consumables and durables might not have been so firmly fixed in the medieval mind. Presently, we have a lot of goods which are neither “perishable”, in the extreme of something like food, nor “durable” in the sense of indestructibility. All sorts of machinery, for instance, occupies this class. In this case, one can monitor the various stages of consumption of the good. The partially consumed good may be thought of as “damaged”. In this case the damage that is done to such goods is called “wear and tear”. Usually, such wear is not sufficient to prohibit the return of the identical good that was loaned. In many cases (such as the wear on internal combustion engines) the wear is
imperceptible following an average use. If the wear is quantifiable, a money charge covering such wear is appropriate since the article now is less than it was when it was loaned; returning it in its now worn condition does not fulfill the obligation of repayment. This payment of money, however, is not rent. It is a recompense for damages. Consequently, any “rent” charged on the use of property that goes beyond recompense for damages done to the property by the user, is the selling of use, or usury.
Linguistically, and in its functional characteristics, rent virtually is indistinguishable from usury. Both are a violent means of enslavement. It is a struggle for liberation to become free from both usury and rents. Both of these are quite effective as a tax and tribute that the dependent must pay to the “lord”. The problem in modern times is that rent automatically is assumed to be a legitimate economic relationship. Therefore the undeniable similarity it bears to usury is used to give usury an air of legitimacy. What must be emphasized is that later medieval
theorists argued for the legitimacy of rent by means of trying to show its dissimilarity to usury. Until recently, any similarity that was seen between rent and usury served only to result in the condemnation of rent. H is a peculiar tactic of modern excusers to attempt to justify usury by insisting on its similarity to rent. Historically, and theoretically, any degree of success in trying to legitimize rent has rested upon arguing its dissimilarity to usury. The modern mind is oblivious to the origin of the pretended legitimacy of rent, and now glibly supposes that usury is justified because usury and rent are the same!
This problem would not have arisen if medieval theorists had succeeded in arriving at truly fundamental economical categories. “Perishable” and “durable” are not economical categories. They merely are ways of expressing a high degree of difference in the rate of perishability of all created things. Strictly, all loans must be treated as contracts of mutuum. Property and use may not be separated in the case of any good. Only the thief uses goods that belong to someone else. Property in a loaned good transfers to the borrower. However, the borrower may not enrich himself by means of borrowing a lot of goods, for “the borrower becomes the lender’s slave” (Proverbs 22:7b). The borrower is not free. He is bound by the contract of loan to a specific performance, viz., to restore to the lender goods oflike kind, quality, and number as he borrowed. This is true regardless of whether the goods loaned are money, food, machinery, or houses. It is evident that the ancient impulse to classify rent and usury together was correct, and that the medieval idea of separating them was in error. Rent and usury do not stand apart; they fall together.
The immediate objection to this analysis is that given its truth, much commerce and industry as we know it is condemned. Acre upon acre of farm land is not “owned” by the farmer, but rented. All kinds of capital equipment is not “owned” by the entrepreneur, but by a “leasing company” and rented to its use. Warehouse and apartment rentals abound. Is this monolith in fact too great and awesome to condemn? The ubiquity of usury on “money” has salved men’s consciences so now the rental of almost everything has reached an extent that not even Aquinas would have tolerated. Horrible scenarios abound: “Without rent, no one would build apartment buildings.” That is the nature of the paralyzing fear. However, is it unthinkable that apartment buildings ought not to be built? If one of great means decided to build one and loan its units to poor people who need a place to live, there is no principle of equity to prohibit that. In fact, equitably, he may charge them a money fee as compensation for damages, assuming such damages can suitably be quantified. But there is no principle of equity that would permit the exaction of rent from such tenants. This merely is usury and serfdom in disguise.
The abolition of rent along with usury would have no necessary inhibiting effect on commerce and industry. Most of the commercial rental agreements can be replaced directly with partnership. The principle here is precisely the same as in the case of money loans. The rent on industrial equipment is a gain that is guaranteed to the lender regardless of the performance of the enterprise. As such it represents a
share of the enterprise’s receipts that is claimed by him who has no share in ownership, and no intention to share in its losses. The principle here is the same as that stated in a previous segment on the matter of “risk”. The reader is referred there for a more complete treatment. A passage by Calvin Elliot well sums up the present point,
A farmer retires from his farm because no longer able or willing to continue its cultivation. He has an undisputed right to a full reward for all his own labor, and for all he has purchased from others that he leaves in the farm. There must be a compensation for the transformation of the wilderness into a farm at the first, for the fertility that may have been added to the soil, for the orchards, vineyards, houses, bam s and every improvement he may have made and left on the farm. He has an undisputed right to all the labor remaining in the farm. If he sells he expects compensation for all this.
But if he sells, he must begin at once to consume its ‘Price, unless he becomes a usurer and is supported by the interest. If he does not sell, but retains his farm, he must also begin at once to consume the farm. For him to demand of his tenant that the farm shall remain as valuable as when he left it, the soil not permitted to become less fertile, the buildings to be kept from decay and restored when destroyed, the orchards to be kept vigorous and young by the planting of new trees and vines; in short, the farm to be preserved in full value and yet pay a rental, is usury in land.
In summary: The ancient world knew nothing like what we know of as rent. Modern rent evolved from ancient tribute-taking, and medieval serfdom. Medieval theorists pretended to establish the legitimacy of rent by arguing that it is different than usury. Oblivious to the origin of the pretended legitimacy of rent, modern
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Calvin Elliot, Usury a Scriptural, Ethical and Economic View (Millersburg: The Anti-Usury League, 1902), p.246-7
excusers try to justify usury by arguing that usury and rent are the same. Modern excusers are correct on the point of the sameness of rent and usury, however, if the medieval theorists had acknowledged this sameness they would have condemned
rent along with usury. That is, their sameness does not justify usury; it condemns rent. When modern excusers say “Usury is rent” it is evident that they really do not mean to construct an identity between them. If they did, then the present thesis, “Rent is usury”, would not be nearly so alarming to them. As it is, the alarm that is expressed concerning “Rent is usury” only exposes “Usury is rent” to be merely an excuse.
Historically, rent has the same character as usury and taxation. Rent basically is a tribute that a lesser man pays to a greater. Such tribute-taking is the order of the day in the “earthly city”. In a society of idolaters, there always is an elite of men who wish to impose themselves as the idols of the masses. Jesus said, “You know that the rulers of the Gentiles lord it over them, and their great men exercise authority over them. It is not so among you, but whoever wishes to become great among you shall be your servant.” (Matthew 20:25,26) Service is the basis of a righteous economy. Let not he who sells the use of his property think that he is providing any kind of a service. Service is a gift, or it is one side of an exchange. As a component of an exchange, it consists of the performance of some labor, whether of body or of mind, or the offering of some good. If one does not produce something that may be given as a gift, or given in exchange, then he cannot claim to be doing a service. What the seller of uses actually is doing is playing the lord, and exacting tribute. In the City of God all
tribute is owed directly to our one and only Lord. Far be it from us to enter into competition for even a portion of what rightly is ascribed only to God. We must repent, and return to true brotherhood, and serve one another truly, from the heart, to the glory of God.
VIII. INFLATION
Yet another popular excuse for usury is the factor of inflation. The reader will recall from the previous historical discussion that governments from antiquity have inflated or “debased” their money. In modern times, the proliferation of paper “money” is parallel to the ancient practice of diluting the precious metal content of coins. The end result is the same: that which is serving the purpose of money becomes less valuable. The “value” of money is, like other values, subjective. The
only way to think of it and express it is in terms of something else. In the case of money, changes in value are evident in the rising and falling of prices. In our day, inflation is tracked and reported based on the rate of change of the Consumer Price Index. However, the rising of prices is only symptomatic of the fact that “money” is becoming less valuable. Suppose that in 1974 $20,000 is loaned for a home mortgage. The entire amount will not be repaid for thirty years. Before the loan is even one quarter paid, inflation has ruined the dollar’s “purchasing power” by a
considerable margin, as reflected by the Consumer Price Index. Does this not justify the repayment of a greater face amount than what was loaned, since more of current dollars are needed in order to equal the value of the dollars loaned? There are two ways of approaching this issue, both of which reveal it to be merely an excuse for usury.
First, we must examine this excuse in light of the moral aspect of inflation. As reported to us in the media, inflation is spoken of as though it were a mysterious, autonomous, seemingly supernatural phenomenon. The government’s panel of experts is represented as searching diligently for a solution to this elusive problem. Everything including the greed of big business, the greed of organized labor, and the general public’s lust for material possessions is blamed for causing inflation. Everything including cutting government spending, wage and price controls (let the reader recall Diocletian), and general public “austerity” is proposed as a solution. All that this sort of knit-brow pomposity accomplishes is to distract the general public consciousness from the reality of the matter. The real cause of inflation is the ever widening ratio of “money” to products and services. Since nowadays “money” comes into being by a simple stroke of a banker’s pen, its increase is able by far to out pace the increase of available goods that it is supposed to buy. The real solution to inflation is to take away bankers’ money-creation powers, and to repeal legal tender laws.
In the mean time, the general population is left with the idea that inflation is like a law of nature. It is, to them, simply another one of those unpleasant facts of life; like death and taxes. Therefore, all of the energy and resources that are directed to the problem of inflation have no motive behind them to combat evil, but only to get around a morally neutral investment problem. Of course, such a distorted concept of inflation hardly will challenge anyone’s involvement in usury. That is why the present discussion is necessary.
The fact of the matter is that inflation is a conscious course that is taken by men who know exactly what they are doing. What they are doing is lawlessness (Lev.19:35,36; Deu.25:13-15; Pr.ll:l), and therefore evil. The self-consciousness of this evil in those who would appeal to inflation in order to excuse their usury is evident in their behavior during times of deflation. If inflation really justified the practice of requiring in repayment more than was loaned, then by the same principle deflation would justify the practice of requiring in repayment less than was loaned. In hypocrisy some would excuse their usury because of inflation, and yet during deflation there is no rush to offer rebates to debtors. Gary North
theorizes, “A society could conceivably produce a negative money rate of interest if the value of the purchasing power of money were rising at a faster rate than the market’s registered rate of time-preference plus the risk premium.” However, in light of the rising value of money, North does not envision borrowers repaying less, but an equivalent amount. “If you could buy more with the money received in the future, you might need to ask only for an equal amount of paper money or coins as a retum.” While North acknowledges the immoral nature of inflation, it
does not seem that this fact has much significance for his counsel to inflation-ravaged “investors”.
On the immorality of inflation Rushdoony has said:
But there is a subtle evil in trying to profit by inflation. It gives a person a vested interest in the inflationary or larcenous state. Today, there are numerous wealthy and not-so-wealthy conservatives who eagerly attend one conference after another on money and inflation. These conferences are very carefully advertised. Basic to their advertised appeal is the summons to “protect yourself’ against inflation. The purpose of attending is to profit by inflation, a very different thing. One economist, who tried to teach basic principles of economics to such conferees found them rude and hostile. He had sought to call attention to the total immorality of inflation, when the conferees, immoral conservatives, wanted to know how to profit from it. Their excuse was selfrighteous to the extreme: “I’m trying to protect myself.” But protection from inflation is not a complicated-matter: it involves converting one’s monetary assets into gold, silver, land, a home, the tools of one’s trade, and the like. These people were interested in more: like the Federal Government, they wanted to exploit inflation for their own power and profit goals.
Surely, it is a fair course for one to avoid the effects of other men’s evil deeds. However, neutrality in respect to evil is not permissible (Ephesians 5: 11) nor possible (Matthew 12:30). Christians must be wise in this world. We must be light to the world. Let us not be mesmerized by the media, nor carried along by every
____________
Gary North, An Introduction to Christian Economics (The Craig Press, 1973),
p.366
IBID
R.I. Rushdoony, The Roots of Inflation (Vallecito: Ross House Books, 1982),
p.5
wind of doctrine. Our energies and resources in this area must be devoted to the exposure of the evil of inflation. Those who have sufficient position and influence must work to stop the practice of “money creation”, In the mean time, our efforts to protect ourselves from the effects of inflation must be limited to divesting ourselves of Federal Reserve notes and bank balances, and acquiring tangible assets. A very effective and popular way of doing this is the purchase of gold and silver coins. In any case, we must not hedge ourselves against inflation by plundering our brethren through usury. Inflation surely is a form of theft, but it simply will not do for Christians to protect themselves from this evil by means of committing the equally evil practice of usury upon their brethren. As it is said, “Two wrongs do not make a right.”
The above discussion involves the psychology of inflation, and its moral nature. Secondly, we might consider usury vis-a-vis inflation on a more theoretical plane. Initially it will be instructive to notice the role of inflation according to economists. Some economists (e.g. Keynes) advocate the use of inflation by governments as a controlling device. Other economists (notably von Mises) condemn inflation as an
infringement on personal liberty. But no economist argues that inflation
is a necessary condition for the idea of usury. The attempt to justify usury
because of inflation gives inflation entirely too much significance. One cannot justify usury by an appeal to that which does not even serve as a necessary condition for the idea of usury. When a man attempts to justify his actions, he appeals to that which makes his actions necessary. It has not been demonstrated theoretically that inflation makes usury necessary. In fact, some today even have advanced the theory that usury causes inflation. Usury certainly aggravates inflation. As prices rise, “interest rates” rise. This added cost of usury only aggravates the already rising prices. The actions of modern financial institutions prove that inflation is not a necessary condition for usury. “Interest rates” will fluctuate with inflation as reported in the Consumer Price Index, but regardless of what inflation does, interest never quite seems to make it to zero. According to
the most respected theorists, the necessary condition for usury is not inflation, but the psychological phenomenon known as “the discount of future goods as against present goods”.
If the invalidity of excusing usury by an appeal to inflation is as obvious as the present thesis contends, then one would think that it should not be too difficult to demonstrate the inadequacy of such an appeal. However, a disadvantage faced by
______________
e.g. Thoren & Warner, The Truth in Money Book (Chagrin Falls: Truth in
Money, inc., 1984)
Please see the following discussion
this writer is that error in this discussion is more complicated than truth. The complication in this discussion arises from the confusing nature of the current monetary system. Under the current system, a loan of “money” is thought of, and
said to be, not a loan of some thing or substance, but a loan of an abstract
195
Popular Excuses for Usury
idea known as “purchasing power”. Actually, this “purchasing power” is more than an idea, for it manifestly is a “power”. By means of this mystical power, men may acquire tangible goods and services. In order to strip away some of the mysteriousness and abstractness which attends this discussion, it will be helpful to consider the dynamics of fluctuating values in terms of the ancient barter economy.
In the ancient form of loan, one might loan a bushel of wheat to a brother with a hungry family. By the end of the next growing season, when the borrower is able to repay, the exchange ratio of wheat to some other goods may be much lower than when the loan was made (e.g. wheat is more plentiful due to an unusually good season; certain other articles that the lender wishes to acquire now are more scarce, etc.). The “price” of rope in wheat may be much higher than when the loan was granted, however, it may be that the “price” of pottery in wheat is much lower. If
the lender was counting on using the repayment of the loan of wheat to trade for rope, he probably will feel disappointed. If his inclinations are like modern excusers, he might even feel that the borrower ought to pay him more wheat than was loaned, since now it is worth less in terms of rope. But suppose the lender instead wishes to acquire pottery. He will experience joy, and not disappointment, but will the modern excuser counsel him to issue a rebate to the borrower since the “price” of pottery in wheat has declined? In terms of the contract of loan, the borrower owes the lender exactly what was loaned. The changing subjective
valuations of men during the term of the loan do not alter the borrower’s obligation, nor excuse the lender’s covetousness. In the same way, the fluctuation of prices due to inflation does not alter a borrower’s obligation to repay the exact quantity of dollars as he borrowed.
In summary, the first thing that must be noted concerning inflation is its evil character. It is not a mysterious phenomenon, the effects of which the hapless investor must plan carefully to escape. It is a sin of unjust weights and balances, which evil men consciously enter into in an attempt to control the economy to their own benefit. The response of the Christian to this course of sin must be to expose it and combat it – not to hide from it by plundering his brother. Secondly, in reply to the theoretical concern it is noted that inflation cannot justify usury simply because it has never been shown that inflation requires usury. The idea of usury did not arise in the minds of men because of inflation, but because of their covetousness. It is invalid to appeal to extraneous factors, like inflation, to justify what was conceived in sin apart from any thought of such factors. Inflation cannot require usury just because the changing valuations of men subsequent to the loan contract cannot lawfully alter the obligation of the borrower according to the contract.
IX: FUTURE VS PRESENT GOODS
One of the most sophisticated excuses for usury is what may be termed “The discount of future goods as against present goods” , or “time preference”. The argument for time preference gets a little abstract. If the reader perceives that this concept of interest has little, if anything, to do with the medieval and biblical discussions that heretofore have been entertained, it is because that is precisely the case. The reader who is not acquainted with the notion of time-preference may elect to skip this discussion. It may be interesting to learn about this theory, but it is futile to do so only so one now is in a position to discard it.
With the birth of economics as a distinct theoretical discipline (usually considered as coincident with the publication of Adam Smith’s The Wealth of Nations in 1776) there came also the secularization of economic theory. The medieval theorists opposed usury fundamentally because of the biblical prohibition. Their arguments basically were appeals to law and authority. The modern economists discounted such prohibitions, and insisted on a rigorously secular idea of interest. Throughout the 18th and 19th centuries, one theory after another was advanced to explain the “necessity” of usury. These theories differed from the “Extrinsic Titles” of the 13th and 14th centuries in that the Extrinsic Titles did not mean to justify usury, but to justify some payment over and above the principal that was not strictly to be considered usury (extrinsic to the contract of loan). In fact, the term “interest” came into vogue because it did not carry with it the negative connotation of “usury”.
The “interest theories” of the modern economists mince no words in declaring the necessity of usury (interest) in economic relations. At the turn of the 20th century, modern interest theory crystallized around the idea of “time preference”.
______________
Mises, Human Action (Chicago: Contemporary Books, 1963), p.524
A.A. Chafuen argues that the seeds of “time preference” were present in the
Extrinsic Title of Damnum Emergens [Chafuen, Christians for Freedom: Late-
According to the idea of time-preference, one would value goods that are available today more highly than the promise of the same goods becoming available some time in the future. Thus, it is said, there is a discount of “future goods” as against “present goods”. The reality of this discount seems undeniable. Given the choice of receiving an apple today or an apple next year, hardly any conditions would seem to make next year the better choice. Even if one is not hungry at the present moment, he knows that he shall become hungry long before next year, and so would choose to receive the apple now. The implications of this sort of discounting of future goods for loans are as follows. That which is loaned is considered “present goods”. The promise of repayment harkens to a future time when some future goods are offered to satisfy the debt. Eugen von Bohm-Bawerk rightly indicates that the medieval theorists supposed that goods given in repayment of a loan were equal to the goods loaned if they were like the goods loaned in number and in kind. He replies, “Now this assumption is so false that the wonder is how it has not long ago been exposed as a superstition.” He continues, “Every economist knows that the value of goods does not depend simply on their physical qualities, but, to a very great extent, on the circumstances under which they become available for the satisfaction of human needs.” There cannot be an equivalence of goods of the same number and kind when they are separated by time, he maintains. This discounting of future goods, according to this view, is what makes interest necessary. Since the future goods are worth less, the ratio of this discount (interest) must be added to the principal in order for a true equivalence to be achieved.
For example, A makes a loan to B for $10.00, to be repaid in one year. At the time the loan is made the $10.00 is considered “present goods”. However, the $10.00 that B will pay back to A next year are “future goods”. That being the case, they are seen as less valuable than the $10.00 present. So, rather than an equivalence between the principal loaned and the principal repaid, there is in fact a non-equivalence. When the time comes to pay the loan, B may have to pay A $11.00 in order to achieve equivalence. In other words, “interest” is necessary just in order
for the repayment of the loan to be equal in value to what was loaned. Or,
_____________________
Scholastic Economics (San Fransisco: Ignatius, 1986)]
E. v. Bohm-Bawerk, Capital and Interest (1890; New York: Kelley & Millman,
Inc., 1957), Vol I, p.257-8
as Btihm-Bawerk put it, “The replacement of the capital + the interest constitutes the full equivalent.”
It must be noted that this time-preference has nothing to do with inflation. Currently, inflation causes 1986 “dollars” to have much less purchasing power than had 1967 “dollars”. So it may also be argued in inflationary times that, since “dollars” repaid are worth less than “dollars” previously loaned, then more of them are required in order to constitute the repayment of a value equal to what was loaned. Although similar in appearance, this actually is a different matter. The question of inflation was treated at length in a previous discussion. The “time-preference” idea is not concerned with and does not pretend to prophesy regarding
inflation. “Dollars” may have greater purchasing power in the future than when they are loaned, but still, future goods are valued at a discount just because they are future.
What is interesting in this development of the theory is that it is represented as required that there be interest paid in order for the loan to be considered as repaid in full. But, no one today who appeals to this “time-preference” theory is happy merely to be repaid in full. They actually want a profit. That is why they lend. They also are the ones who cry, “Without interest, no one would lend!” To argue that usury is necessary in order for the repayment to be the equivalent of the loan, and then on that basis to ply usury as a means of gain, is nothing short of hypocrisy. Once usury becomes justified as necessary in order to make a full equivalence in repayment, then that very principle may safely be set aside, and men may carry on profiting through usury on loans without the social stigma that previously, and rightly, they suffered.
Modern Christian financial counselors, notably Gary North, have been parroting this interest theory as a justification of usury. Dr. North argues for “time-preference” as follows:
Every rational person discounts the value of future economic goods. Men are mortal; they are subject to the burden of time. Each man places a premium on the use of his wealth over time; he will not voluntarily forfeit that use without compensation. His personal time-preference sets his discount rate for the enjoyment of future goods and services that his money might buy immediately. That rate of discount sets the rate of interest that he will demand from someone who wants to borrow his money. Because money is more highly valued now than
____________________
IBID p.259
the same amount of future money is valued now (assuming a stable purchasing power for money), some men are willing to pay to get access to money now.
The fact that some men are willing to pay for the use of property (usury) is incidental to the question of whether usury is lawful. The above explanation of Dr. North does not justify usury, it merely describes how men excuse their sin. If one man would rather use his money now than later, then why does he not just go ahead and use it? The would-be borrower in this case must be told that no money is available for loan, because it is in use. If, however, he is not using it, then why would he feel that he must demand compensation if someone wants to borrow it? In the modern “fractional reserve” banking system, there is no such thing as money that is not in use. All money is by definition in use at all times. No bank has extra money that they would be willing to loan. When a bank today extends a loan, the money that is loaned is created for that specific purpose. In terms of the “time preference” idea, the borrower basically is said to be hiring the bank to create some money for him. To call it hiring is much too sterile; in reality usury is a bribe. Now, consider the dynamics of lending in case the lender does not have this mystical power to create money. Suppose one seeks a loan of “money” from a friend. In this case the thing which is sought in loan already exists, and it either is in use by the lender or it is not. Whether or not it is in use, the lender could point out to the would-be borrower the interesting fact that the “money” itself is worth more to him than the other’s promise to pay the same amount some time in the future. The reality of this preference is true, and it is interesting to note, however it hardly follows from this that the lender is justified in requiring more in repayment than what was loaned. Ought the principle of law to revolve around subjective human preferences? If one suggests that it is lawful for a lender to require a bribe from the borrower in order to overcome his “time preference”, he might as well suggest that the common alley thug is justified in requiring a money payment from his victim in order to overcome his preference to knife him. The usurer is allowed to believe that he actually is doing a service to the borrower, yet we somehow fail to regard the thug as doing a service to the victim in allowing him to live. Usury is the “compensation” that inhabitants of “the earthly city” demand before they will agree to loan. The “compensation” that those of the “City of God” receive upon compassionately and obediently loaning to his brother is the blessing of God.
________________
Gary North, An Introduction to Christian Economics (The Craig Press, 1973),
p.364-5
The temptation of usury in modern times is that one might easily reap higher “profits” by “forfeiting” the use of his money, so someone else can use it, and then charging usury on the loan. The more who succumb to this temptation, the less direct use is made of existant money, and the more use is made of “money” that someone had to bribe a banker to create. In time the Gross National Product will not consist of enough to pay the usury on the loans that supposedly made this GNP possible! These hard realities are ignored or said to be the consequences of some other malady, while the Babylonian usury system is excused by an appeal to all sorts of complicated theories. Perhaps the most subtle of these is the argument of “time-preference” .
The “time-preference” theorists did not put any more work into developing this theory than was required to achieve the desired effect, i.e. to secure a theoretical justification for usury. In so doing, they raised more questions than they answered. Time is a very subtle and perplexing philosophical topic. By basing an “interest theory” on time, Bohm-Bawerk and Mises have brought more complication into the discussion than they have brought insight. They apparently regarded certain
assumptions about time as given, for they did not provide a rigorous philosophy of time on which to develop the idea of time preference. A cursory pursuit of questions regarding the nature of the present and the future would have spared the 20th century a lot of distraction in the matter of usury. It is beyond the scope of the present writing to explore a comprehensive philosophy of time, but certain questions shall be entertained to an extent that is necessary to show the error of the
aforestated “time-preference” theory of interest.
Chiefly lacking in Bohm-Bawerk and Mises is an attempt to define “present goods” and “future goods”. This is an uncharacteristic lack of definition in the works of these otherwise thorough writers. The effect of this lack was that they ended up treating “present goods” as those goods which are available for consumption or production in the “present” moment of time. That is, the concept was chiefly temporal. This is almost correct, however, pursuit of these notions will reveal the “time preference” theory actually to be misstated. They spoke of availability
and non-availability of goods in general; determined chronologically, rather than determined by the status of a particular good vis-a-vis a particular person. One would think that Mises would have considered this latter approach. since his major thesis is based on the (pretended) ultimacy of the individual “human actor”.6 Bohm-Bawerk and Mises appeared to deal with time as an abstract category. As such, “future” is future to all men. No man is living next year; all men live in the present. Because of the emphasis on capital and production that attended the development of this idea, Bohm-Bawerk et al usually thought of future goods as the future expected output of a production process. Manufactured goods, which in
fact are not yet manufactured, are “future goods” to all men. But, whether or not a good is to be considered “future” is not determined strictly by whether or not it has being. Something that A might sell to B is a present good for A, but B cannot consider it so. The time-preference theorists failed to show adequately what it is that makes goods either “present” or “future”. In speaking of present goods as “available” and future goods as “unavailable”, they came close to the truth.
In reality, the separation of goods by time is incidental to the question of why goods are not presently available. In considering what it is that makes goods available or unavailable to anyone who desires them, the following may be observed:
1) Goods may be considered as presently unavailable because they do not exist, i.e. they do not have being. One may anticipate that at a future time they will come into being through some natural (offspring of livestock) or production (some manufactured good) process, and thus become available. Even in this case, though, their present non-availability is not due strictly to a problem of time, but of
metaphysics.
2) Goods which presently have being may be presently unavailable because they are spatially removed. Apples that will be available next week may presently (i.e. in time) exist, but still are discounted in value as against presently available (Le. at hand) apples. They will not be available until next week because that is the length of time that is required in order either to travel to the orchard, or to ship the apples to the subject. This basically is a problem of space, which a period of time is required in order to solve.
3) Goods may be metaphysically and spatially present, i.e. they both have being and are spatially at hand, but still be unavailable to a particular subject because they are not his property. One apple in A’s possession is valued higher than two apples which are at hand to A, but which are the property of B. In the event that
A has no apples, and that the only apples at hand to A are the apples which are the property of B, still A has no basis on which to consider such apples as “present goods”. Even though they are “present” spatially and temporally (it may just as well be said that it is A who is “present”), the apples must be regarded as “future goods” to A since he contemplates a future time at which they may become available to him, e.g. by means of a trade or loan agreement with B. (There also are interesting combinations of 1, 2, and 3 above, however, to simplify the discussion as much as possible only the three given shall be considered).
What is evident in all of these conditions of non-availability is that time is required in order to overcome them. Time is required in order bring non-existent goods into being; time is required in order to bring spatially removed goods into the possession of the subject; and time is required in order to negotiate and execute an exchange or loan, which would bring into the possession of the subject goods that presently are not his property. This, however, does not give us a “time-preference” theory, for simply desiring a good now more than later does not address the reason for its non-availability. Time alone will not overcome any problem of non-availability. The consideration of time also does not address the psychology of the preference. Having considered the reasons for non-availability, it now is clear that the preference is based not so much on ideas of “present” and “future”, but on the fact of uncertainty. There is greater certainty (and thus availability) of “present goods”, and greater uncertainty (and thus unavailability) of “future goods”. It must be borne in mind that goods are considered “present” or “future” not merely due to a consideration of time. Goods are separated from a particular subject not temporally, but metaphysically, spatially, and proprietarily.
Rather than a “time-preference” theory, the discount of future goods suggests a “certainty-preference” theory. The value of present goods is discounted not because of time, but because there is an uncertainty that they ever shall be obtained. The discount of such future goods is due to their non-availability. But this non-availability is not directly a result of any function of time. Rather, time comes into play because unavailable goods cannot be made available instantaneously. Furthermore, there can be no guarantee that they will become available at all. “Future goods” are discounted not so much because they are future, but because there is no certainty that they may be acquired. Efforts to produce metaphysically removed goods may not succeed; estimates of what is required in order to possess spatially removed goods may prove to be in error, and possession may not come about; negotiations for acquiring someone else’s goods, by trade or by loan, may break down; and, not the least consideration, one may not live long enough to begin to attempt any of these things. Being neither omniscient nor omnipotent, we cannot dictate what the future may hold. Being the creature and not the Creator, we may not even presume that it is our place to dictate the future. “You do not know what your life will be like tomorrow”, says God to anyone who is in pursuit of “future goods”. Rather we are directed to hold all of our anticipations in terms of “If the Lord wills” (James 4). There is no hint in this text that such is the case because of our sin. Such would be the case whether or not we are sinners. Uncertainty of the future, and dependence on the will of God are metaphysically guaranteed since we are finite creatures.
Already considered are the implications of “time-preference” for the contract of loan. Now that the error of emphasizing time has been demonstrated, it will be helpful to consider the implications of the correct “certainty-preference” for the contract of loan. The present goods of A are the future goods of B, who desires them in a loan from A. When the loan is made, the said goods now are the present goods of B and the future goods of A, as B owes them to A for repayment of the loan. For A to demand that B repay the loan with a greater quantity of goods than A loaned to B, on the basis that “future goods” are less valuable than “present goods”, is unwarranted. It is as unwarranted as it would have been for B to require that A present him with, for instance, $11.00 to serve as a loan of $10.00. B’s future dollars (A’s present dollars) are less valuable to B than B’s present dollars. Therefore, more than 10 of A’s dollars are required in order to constitute an equivalent of 10 present dollars for B. The absurdity of this latter requirement guarantees also the absurdity of the former. If one is a “con”, so is the other.
It may be objected that the borrower imminently is to receive the goods loaned, whereas the lender will not receive repayment for quite some time – perhaps years – and that therefore the lender has a legitimate claim to interest while the borrower does not. However, the length of time separating “future goods” and “present goods” does not figure into the “time-preference” theory. It has been shown actually to be a “certainty-preference” theory, and that the passing of time is only incidental to its workings. There is no reason why the borrower’s “certainty-preference” would not function in exactly the same way as the lender’s. To make the discount of future goods adjustable according to the length of time separating the future from the present is to make it a mechanical function, rather than a psychological function. That interest is calculated based on the term of the loan reveals that the “time-preference” theory is given simply as an excuse to justify usury. Even Mises admits, “The custom of computing interest pro anno is merely commercial usage and a convenient rule of reckoning. ” However, the discount of future goods in truth results from uncertainty of the future. It is the changing of circumstances which turns uncertainty into certainty, not the passing of time. The imminence of the loan does not disqualify the borrower from receiving usury any more than the remoteness of repayment qualifies the lender to receive usury. It is the law of God which disqualifies the borrower and lender alike from receiving usury.
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IBID, p.536
It may further be objected that the lender is deferring use of his property until a future time, so that he can loan it out, whereas the borrower only anticipates the use of property that he does not possess. In the first place, this is not true in the case of loans of “money” from banks today. When they grant a loan, they are not deferring the use of anything, for the “money” is created on the spot for the loan. In other cases, the asset that is loaned already exists, but this does not put the lender on a better footing than the borrower to claim a right to usury. To argue for usury on the basis of the deferred use of property actually distracts consideration from the issue of time. Such reasoning actually helps to refute the “time preference” excuse, for consideration is diverted from the relation of “present” and “future” goods, and directed to the lender’s self-imposed privation of property.
Whatever reason is given to deny the borrower’s right to exact usury of the lender will serve as well to deny the lender’s right to exact usury of the borrower. Even if both parties’ right to exact usury is affirmed, the average borrower’s usury will tend to cancel the average lender’s usury. They are usurers only in their minds. Since usurers usually do not practice usury simply for the psychological pleasure of doing so, but do so for profit, it is to be doubted that usury would continue under the cancelling effect of the borrower’s usury. Of course, it is more likely that the respective discounting of the future by lender and borrower will be unequal. In this case one party or the other may stand to gain by the loan. But one man cannot control the subjective values of another man, and therefore neither party can be assured of gain.
This discourse on the natures of present and future goods does not conclude with the justification of borrower’s usury. To this point it merely has been demonstrated that IF “the discount of future goods as against present goods” justifies usury on repayment of loans, then there is no theoretical reason why it does not also justify usury on the making of a loan. In reality, this discount justifies nothing. This brief treatment of the matter shall conclude with the positive implications of the phenomenon of certainty-preference.
A consistently held idea of future goods necessarily would involve the notion that future goods do not exist. Goods are considered “future” only in the contemplation of a particular economical subject. This obviously is true in the case of goods which are metaphysically removed, i.e. those which have no being. They merely are ideas in the minds of those who contemplate producing them. But, even goods which have being, but are spatially removed, do not exist for the one who contemplates them as “future goods”. The one who only imagines what his life would be like if certain goods were his present goods, holds such goods only as ideas in his imagination. Goods which temporally and spatially are present to one who does not own them may nevertheless be entertained as his property, but again, only in his imagination. It is because they are not his property that he must view them as “future goods”. He does not possess them; he contemplates acquiring them. As such they do not exist. If he considers such goods as existing in the sense that they have being, it can only be as the present goods of their owner. If one looks at some one else’s shovel and thinks, “I would like to have a shovel”, he imagines a shovel. As he approaches the owner of the shovel to propose a loan, the existent shovel always is thought and said to be the property of its owner. Contemplated as a future good, it is only an idea. Considered as a really existing good, it can be nothing but the present good of its owner. Future goods do not exist. There are only present goods in external reality.
Since the contemplation of “future goods” is characterized by idealism, one may not actually compare “present goods” and “future goods” for purposes of economic calculation. The preference that isdictated by the discount of the “future goods” cannot be avoided because one cannot possibly call upon an idea in his mind to serve a purpose that only a concrete object can serve. If A decides that he needs a shovel, his own shovel at hand will suit that need, and his contemplation of a spatially removed shovel, or a shovel that is B’s property, will not. Lacking a
shovel, A still will wait until conditions have sufficed to make some “future shovel” now a “present shovel”, rather than to attempt to address his need for a shovel with a “future shovel”. The point is that “future goods” vs. “present goods” presents no real choice. The two cannot be compared in value as though they were different qualities of the same class of goods. In truth, the choice of goods for meeting one’s needs is a choice of presently available goods. One present good compares only to other present goods.
When men trade property, they trade “present goods”. When one man grants a loan to another, he gives him “present goods”. When the other repays the one for the loan, he repays “present goods”. A borrower
is not justified in requiring $11.00 from the lender to serve as a loan of $10.00 because as soon as the loan is made the $11.00 given in loan is equivalent (as now the borrower’s present goods) to any other $11.00 that are the borrower’s present goods. The discount of the future goods disappears because the uncertainty of obtaining them disappears, as does also the future goods themselves. Requiring a payment of $11.00 in order to constitute the repayment of a loan for $10.00 likewise is unjustified by any idea of “time-preference”. The creditor will discount “future dollars” that are owed to him; preferring instead “present dollars”. When the $10.00 are repaid, they become present goods to the creditor, and are
the equivalent to any other $10.00 he might have. The uncertainty is relieved, and the discount disappears.
The error of time-preference is partly explained by the fact that the time-preference theorists had an erroneous idea of the contract of loan. Bohm-Bawerk, for instance, spoke of the loan as if it were the same thing as an exchange. He says, in his own italics, “The loan is a real exchange of present goods against future goods.” He continues, “… present goods invariably possess a greater value than future goods of the same number and kind, and therefore a definite sum of present goods can, as a rule, only be purchased by a larger sum of future goods.” To treat a loan as the same thing as a “purchase” and an “exchange” is a gross misconception. The contract requires the borrower to give back to the lender that which was loaned. It is only once this contract is corrupted to allow for the giving back of something other than what was loaned, viz. usury, that the loan could be characterized as an exchange. But in the case of the idea of “time-preference”, this corruption was required, and the loan had to be presumed to be an exchange in the first place, in order for this would-be justification of usury to emerge.
To summarize: The psychology of subjective human preferences cannot legitimately mitigate the requirement of God’s law. “The discount of future goods as against present goods” does not justify usury because
1) as this theory has been developed, “future goods” and “present goods”
erroneously are temporally understood. While time certainly is involved
in making unavailable goods available, they are unavai1able not for
temporal reasons, but for metaphysical, spatial, and proprietary reasons.
2) The economical meaning of “present” and “future” must not be understood in terms of general temporal categories, i.e. present goods are not present for all men in general, but only for particular subjects. Likewise with future goods.
3) So, the discount of future goods suggests not a “time preference” so much as a “certainty preference”. That is, “future goods” are discounted in value not because of chronology per se, but because there is no certainty that they ever will become “present goods”. The psychology of “certainty preference” functions the same way
in all economical relations. Therefore, if the said discount really justified lender’s usury, then it also justifies borrower’s usury. 4) But in fact it justifies neither, since goods contemplated as “future goods” can only be ideal, and cannot be compared to real, i.e. “present”, goods. Only “present goods” are bought, sold, loaned, and repaid.
“Time preference” theories have not succeeded in justifying usury, rather they have for many only re-stated the issue so that now usury is seen as requiring no justification. This has been done simply by means of declaring usury to be an inescapable element of economics. The irony and tragedy of modern times is that the more inescapable usury is perceived to be, the more inescapable will be our demise because of it.
INDIVIDUAL RIGHTS & ANTINOMIANISM
Amazingly, many remain unconvinced of the unlawfulness of usury, even after their pet excuses have been refuted. Once these excuses have melted in the mind of the excuser, one would think that the excuser would therefore face a crisis of repentance. However, an attitude that is more fundamental than any of these excuses emerges in the unrepentant and carries him through the crisis period. It is an attitude of lawlessness, which takes different forms in the Christian and the non-Christian.
The non-Christian is characterized as a whole by unrepentance. Once all of his excuses are pared away, the attitude of lawlessness that is revealed in his thinking is the Libertarian principle of “the right of contract”. The contention of this principle is that men have a right to enter into voluntary contract with one another, and that no one else has any right or authority to interfere with them. That is, if one voluntarily contracts to pay usury, then that is his right, and no one can say that the usurer with whom he contracts is wrong or evil. This sounds correct at first, because “individual rights” is one of the great victories of the American Revolution. But, on close inspection, there is evident a fundamental difference between the American principle of individual rights and the Libertarian principle of the right of contract.
The American principle is that men are granted rights by their Creator. As such, these rights are specific and limited. The standard of holiness in God’s law limits man morally. In contrast to this, the Libertarian principle is that men’s rights are unlimited and unspecified. This view teaches that a man has a right to do whatever enters his mind to do, “so long as he does not infringe upon another’s rights”. These “rights” are not derived from any source outside of the individual. In this case the
individual is regarded as ultimate. According to Libertarian Murry N. Rothbard, “The right to self-ownership asserts the absolute right of each man, by virtue of his (or her) being a human being, to ‘own’ his or her own body; that is control that body free of coercive interference”. It is on this basis that the “right of contract” is postulated. It is a dangerous thing for Christians to flirt with this Libertarian
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Declaration of Independence, pp.2
Rothbard, For a New Liberty (New York: Collier Books, 1973), p.28
concept. We need not appeal to godlessness for our principles of rights and freedom. The freedom and rights that are bestowed on man by his Creator are not absolute, but are bound by the requirement of God’s law. No one has the “right” to do wrong. An appeal to “the right of contract” in order to excuse one’s involvement in usury is only a commitment to lawlessness. It is a repudiation of the standard of God’s law, and a pretense to become a law unto oneself.
The one who is a Christian, and who nevertheless is unrepentant of usury, also harbors a fundamental principle of lawlessness that emerges into view once all of his excuses have been refuted. Unlike the non- Christian, the Christian sanctifies his sin with religious jargon. This technique greatly alleviates the experience of conviction, but it does not diminish the need to repent. This “Christian” principle of lawlessness is what is called “antinomianism”. The excuses which involve supposed distinctions between “poor” and “rich” debtors, or between “charitable”
and “commercial” loans, mean to identify some “qualification” of God’s law; that is, some special respect in which men are not bound in obligation to the law. Antinomianism is only a more consistent application of the tendency to qualify one’s duty to God. It is the ultimate qualification of God’s law. It is the notion that now that we have been cleansed from our sins in Christ, we no longer are under any obligation to the law of God. Many suppose that the Old Testament statutes against usury no longer bind the modern believer. This attitude causes many problems for Evangelicalism, not only in the case of usury. The importance of this question as it pertains to usury is enhanced by the fact that there is not a great deal of teaching on the subject in the New Testament. Once the so-called “parable of the talents” is misconstrued as sanctioning usury, and the relevance of the Old Testament usury statutes is dismissed, then one is left believing that nothing in the Bible challenges his involvement in the worldly practice of usury.
It is impossible for the present study to include a complete argument for the abiding validity of the entirety of God’s law. However, this does not present a great difficulty since the task already has been done in a separate work. The reader who dismisses the present study because of his conviction that Old Testament law has no application to him is directed to
Greg Bahnsen’s Theonomy in Christian Ethics . For the present purpose, a brief summary of Bahnsen’s thesis is included here.
1) God’s law is identified with Him. It is His word, and as such displays His character and attributes. Accordingly, in the Bible the law of God is given many of
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Bahnsen, Theonomy in Christian Ethics (Phillipsburg: Presbyterian & Reformed, 1984)
God’s attributes. The law is Spiritual (Rom.7:14), Holy (Rom.7:12), Righteous (Ps.119:172), Justice (Ps.25:8-10),Truth (Ps.119:142), Faithfulness (Ps.93:5), Purity (Ps.119:140)
2) Since the law displays the attributes of God, who spoke it, it also represents the standard of righteousness for men whom He made in His own image. It is in relation to this standard that men are shown to be sinners (Rom.7:7).
3) God redeems men from sin “apart from the Law” (Rom.3:21). The law is the standard for righteousness in life, but is not able to “impart life” (Ga1.3:21). God alone imparts life via His creative activity. He breathed life into men’s nostrils (Gen.2:7), and He imparts life in the one who is dead in sin (Eph.2:5). The standard of God’s law condemns us in sin. The grace of God in Christ redeems us from sin.
4) The holiness and relevance of God’s law is not abrogated because of our sin. Sin is a failure of man, not of the law. Our obligation to the law continues, not as a means of redemption from sin; rather redemption from sin becomes a foundation for our keeping his law (Rom.8:1-4). “This inescapable requirement of holiness or sanctification is not contradictory to salvation by grace through faith (Eph.2:8-9); we are not saved by obedience, but unto obedience. ‘We are His workmanship created in Christ Jesus unto good works’ (v.lO). God’s gracious salvation delivers one from the bondage of sin and enables him to walk in the liberty of God’s holy law (Ga1,5:13-14).”
5) Therefore, Jesus’ statement in Matthew 5:17-19 must be taken in all seriousness: “Do not think that I came to abolish the Law or the Prophets; I did not come to abolish, but to fulfill. For truly I say to you, until heaven and earth pass away, not the smallest letter or stroke shall pass away from the Law, until all is accomplished. Whoever then annuls one of the least of these commandments, and so teaches others, shall be called least in the kingdom of heaven; but whoever keeps and teaches them, he shall be called great in the kingdom of heaven. ”
The saying seems clear enough, but Greg Bahnsen has shown that in the original tongue it is even more forceful. He demonstrates that “fulfill” in v.17 actually is not the best translation. Although the original word may have this meaning, the structure of the sentence requires a stark contrast. An appropriate contrast to “abolish” is not “fulfill”. Another sense of the word is needed in this context.
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IBID, p.162
Bahnsen suggests “confirm”. Jesus makes a point of making it plain to His hearers that He has not come to “abolish” the law. What He is going to do instead is to confirm, or reestablish it. What follows in v.l8 and 19 is consistent with this understanding.
Again, for a complete discussion of this and other fine points of the question about the status of God’s law in modern times, please read Greg Bahnsen’s Theonomy in Christian Ethics. For now, though, it is hoped that the preceding discussion will suffice to discourage any dismissal of the present thesis on usury simply on grounds of this question. Men continue to require of one another conformity to some moral code . The only question is: “which moral code?” Let us not adopt a principle of lawlessness, which despises the law of God and advocates scrupulous
adherence to the arrogant statutes of men. It would be a great pity if one should adopt such a damnable course simply because God’s law prohibits usury and man’s so-called “laws” allow it.
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The appeal to Mr. Bahnsen’s work on the question of God’s law does not imply that Mr. Bahnsen endorses the present thesis on usury.