Ancient Philosophers and Medieval Theologians
Before the 18th century, there were no “economists.” But philosophers and theologians often considered economic questions like “What is wealth and how should it be used?” and “What does justice in the marketplace look like?” They often wrote about usury and generally concluded that it was unjust.
Aristotle, for example, argued that usury was unnatural and a distortion of an appropriate use of wealth. In seeking to live well, people need all kinds of material goods. Many of these goods could be produced within an extended household, but not all of them. Aristotle approves trading one’s surplus for a roughly equivalent amount of someone else’s surplus (e.g., a bushel of olives for a bushel of grapes). Money can serve a useful intermediary function in these exchanges, but fundamentally people are trading commodities for other commodities.
Usury, however, does not fit this paradigm. The lender begins with money and ends with more money. He both gets more than he gives and mistakes means for ends. There are “natural” limits to how much commodities one gathers. At some point, people have enough gallons of olive oil or pairs of shoes or sets of dishes. Collecting thousands of these things does not make sense. But collecting a thousand dollars does. Or ten thousand. Or ten million. In fact, there is no “natural” limit to one’s monetary accumulation.
Regarding trading practices, Aristotle writes:
The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. 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. (Politics, Book I)
Beyond the danger of unrestrained acquisitiveness, Aristotle was also concerned about usury’s injustice. Just exchange requires trading equal value. But with usury, the lender receives more money or value than he gives.
Thomas Aquinas similarly condemns usury but offers different reasons. He, too, criticizes usury for not being an exchange of value for value—which justice requires. But he picks up on the rich-poor dynamics of lending, going so far as to say: “He who gives usury does not give it voluntarily simply, but under a certain necessity, in so far as he needs to borrow money which the owner is unwilling to lend without usury” (Aquinas, Summa Theologica, “Treatises on the Virtues,” Question 78). This fits the biblical or agricultural paradigm of borrowing being used only in dire circumstances. The concern seems to be about oppression and the lack of virtue in lending at interest.
Reformers like John Calvin took a broader view of usury. Calvin understood that money, along with clearly defined and protected property, was a tool men can avail themselves of to produce more. And producing more fulfilled the cultural mandate. Besides appreciating the prospect of productive loans, the Reformers also added nuance to what borrowing and lending consisted of—namely, it is actually a kind of purchase. In that case, principles of charity and justice apply rather than blanket prohibitions. Furthermore, when lending for productive use, the lender shares in the fruit or profit of the enterprise when they receive interest.
One must consider the position of borrowers to avoid taking advantage of their situation or impoverishing them. But Calvin also thought it was possible for borrowers to defraud the lender if they had the means of repayment but chose not to repay. This was tantamount to theft. As Christians, he argued, we are primarily under the law of charity, both in terms of how we use our resources and in how we borrow and lend. He would have had no patience for loan sharks, payday lending, or high credit-card interest rates.