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Over time, it was considered that the prohibition of
interest was nothing more than a religious dogma that needed to be done away
with. Religion could no longer be allowed to run economics. This was certainly
the sentiment expressed by famed economist historian Richard Tawney when he
stated, “The whole scheme of medieval thought attempted to treat economic
affairs as a part of hierarchy of values embracing all interest and
activities of which the apex was religion.” At
the same time, though, it seems that the change in attitude that took place was
not based on purely economic reasons. Lawrence Dennis stated,
Aristotle, the Roman Catholic Canonists,
the Jewish Torah. . . all forbade loans at interest, or denounced
interest as usury. Lending at interest took its rise in the medieval
centuries largely as a matter of accommodating princes who needed and
could not raise enough money for war and other public
purposes. Contrary to current ideas, lending was not originally developed
as a way of financing commerce. The Venetians, Dutch, Henseatic,
British and other merchants up to the seventeenth century financed
their operations with partners’ capital contributions.
Dennis further states,
The Catholic Canonists did not disapprove
of profits on commercial ventures, rent for the use of land or the
sale of the fruits of the land or other capital. They disapproved of money
interest on money lent. During the Reformation Period, interest came
to be rationalized mainly by the Protestants in a way to get around
Canonist objections. The Catholic Church never abandoned its attitude
towards usury, but it acquiesced in, or tolerated loans on, the
basis of certain assumptions. This moral acquiescence by the Catholic
Church and positive endorsement by the Calvinist traders came to be
embodied in laws and thoughts and behaviour patterns of modern societies.
The rationalizations Dennis is referring to can be seen
in a number of commentaries on the Bible. Even though the Old Testament texts
are very clear in their condemnation of interest, this did not keep later
scholars from virtually ignoring or seemingly distorting this prohibition.
For example, the Henry’s Concise Commentary to Leviticus 25:37 states:
And thus far this law binds still, but could never be
thought binding where money is borrowed for purchase of lands, trade, or other
improvements; for there it is reasonable that the lender share with the
borrower in the profit. The law here is plainly intended for the relief of the
poor, to whom it is sometimes as great a charity to lend freely as to give.
This explanation is refutable
on its face as interest has never been about the lender sharing with the
borrower in the profit. If that were the case, many of the evils of interest
would be removed. Similarly, in the Jameison-Fausset-Brown commentary it
states:
“Usury was severely condemned (Psalms 15:5, Ezekiel
18:8,17), but the prohibition cannot be considered as applicable to
the modern practice of men in business, borrowing and lending at legal rates of
interest.”
How did the act go from
severely condemned to not possibly being applicable to the “modern practice of
men in business”? No logic or proof is offered for such a leap. Similarly, in
their commentary on Deuteronomy 23:19-20, the
Jameison-Fausset-Brown commentary states:
“Thou shalt not lend upon usury to thy
brother . . . Unto a stranger thou mayest lend upon usury--The Israelites
lived in a simple state of society, and hence they were encouraged to lend to
each other in a friendly way without any hope of gain. But the case was
different with foreigners, who, engaged in trade and commerce, borrowed to enlarge their
capital, and might reasonably be expected to pay interest on their loans.”
Again, no evidence is given for
their proposition. (There, however, seems to be attitude that the sacred texts
are not able to express themselves properly.) In fact, even a famed economist was
willing to provide Biblical commentary: Paul Samuelson wrote in his classic
textbook on economics, “The Biblical utterances against interest and
usury clearly refer to loans made for consumption rather than investment
purposes.”
With the removal of “scholastic” objections, it then
became the role of the budding science of economics to justify the paying of
interest. This, it turns out, is much more difficult than it sounds. Haberler
was certainly correct when he stated,
The theory of interest has for a long time been a
weak spot in the science of economics, and the explanation and the determination of
the interest rate still gives rise to more disagreement amongst
economists than any other branch of
general economic theory.
In reality, among economists, “There is not a single
adequate and generally accepted theory of interest which can give a sound explanation
of the origin and the cause of interest.”
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