The original beginning to this post had nothing to do with usury, and has been moved to A Watery Hiatus. I explained that I had had to read Sartre because I was working on a movie screenplay…
I could talk about Sartre, but I’ve chosen a comparatively cheerful topic: usury. Here’s the “Brittanica Concise” definition:
In law, the crime of charging an unlawfully high rate of interest. In Old English law, the taking of any compensation whatsoever was termed usury. With the expansion of trade in the 13th cent., the demand for credit increased, necessitating a modification in the definition of the term. In 1545 England fixed a legal maximum interest, a practice later followed by other Western nations.
Usury is an ugly word, and something of an
expletive. Judging from how often you hear the actual word,
(usury!) it seems more obscene than any conventional curse. The
pithy definition above is a rather decorous take on a revolution in
economics. I wonder if they note elsewhere that with the expansion of
trade, the demand for slave labor also increased, necessitating a
modification of other terms as well. Don’t you love anonymous destiny
verbs? Necessitate!
Perhaps you’ve heard about the Distributist (and Catholic) idea that the morality of interest on a loan has nothing to do with some arbitrary limit set by the state, but rather with the nature of the loan itself. In his Restoration of Property, Belloc argues while interest may be taken on a productive loan as a legitimate share in the profits, any interest taken on a non-productive loan is usury.
This is quite a statement. It used to be considered common sense, and
even common law, but today this simple idea would bring down huge
sectors of the economy like a mall of cards. Take the mortgage
industry. For almost every house you drive past, someone is paying
two or three times the (already insane) ticket price of the
place. Where is that extra $100,000, $200,000, or $300,000 coming
from over those twenty or thirty years? The house isn’t growing.
It’s not sprouting bathrooms or expanding new cozy dens.
It’s a dead structure. Yet the owner
must pay and pay and pay,
as if the house were magically turning into a palace month by month,
and the mortgage company deserved a cut.
I eagerly await a papal condemnation of the mortgage industry, but though I’m not holding my breath, it is true that multiple twentieth-century Popes have explicitly condemned usurious loans to poor countries. Oddly enough, this scores a homiletic cameo even less often than the supposedly really unpopular items like abortion or contraception. Even social justice types can blather on all day about hunger without considering the concrete ways their country helps cause it.
Since the recriminalization of interest on non-productive loans
(gloriously colorless phrase!) would mean the wholesale destruction of
those pleasant little industries that feed on mortgages, credit cards,
car loans, student loans, and war loans, I had thought myself on the
radical end of this particular spectrum. I thought, restrict loan
interest to a share in the actual profits a loan produces, and the
world will be remade.
Then I read a recent Gutenberg book, Usury: A Scriptural, Ethical, and Economic View. The author, Calvin Elliott, has a simple thesis: any interest on any loan is usury. Theft. A crime. Period.
It’s not every day that someone makes Belloc look like a permissive capitalist.
The book was published by the Anti-Usury League
of Millersburg,
Ohio. I had never heard of them. I wonder how they’re doing. If you’re interested in this topic
at all (too late, you’re reading this), you need to read this book. I
recommend at least a good skim. Elliott seems to be a sturdy
Protestant, and he’s writing in 1902, so the first blast of his
argument is a barrage of Scripture quotes to which the average reader
today might be all too immune. But press on, and you will find his
later arguments thought-provoking indeed.
Money is dead. Get over it.
Usury rests on a fundamental assumption that money grows, that five dollars ought to turn into ten dollars after a few years, like an acorn bursting into a mighty oak. If money can’t grow, if it’s a thing, a tool, like a hammer, then we have a serious problem.
Suppose you leave a five-dollar bill on the table and come back in a month. Perhaps you expect to find that Mama Lincoln has a new brood of cute little baby penny Lincolns. But perhaps not. The bill, if you’re lucky, has just sat there, and it’s far more likely that it’s been lost or stolen or made into a mouse nest. Hmm. It didn’t grow.
Yet what is obviously ridiculous with money in the form of paper
becomes mysteriously plausible when we etherialize money as
investments
or CDs
or even a simple checking account.
You put your money in the bank (or virtuous credit union), and of
course it just grows. That’s what money does.
But how exactly does this work? Your money is now even more fragile. From a physical piece of paper, it’s become an arrangement of magnetized tape that has to be interpreted in a particular way by a particular machine running a particular program (and probably a particular version of that program), all of which have to be maintained and backed up and insured by humans just to keep your money from vanishing into the digital void. So far your money is a net loss; the five dollar bill could have been stashed in a drawer, but now your five dollars requires a hilarious amount of effort merely to remain in existence. On top of all this, you expect the bank to take on the hassle of managing it; if you write a check, the bank has to record the transaction. The bank has to make your five dollars accessible to a global network of ATM machines. The bank has to send you a piece of paper every month to remind you that you still have five dollars. And for all these services, you don’t pay the bank, the bank pays you.
Those poor banks. Pushovers.
Of course, that whopping 1.5% interest rate isn’t even keeping up with inflation, so in a sense you are paying them after all. And even if the rate was higher, if you could actually find a CD with a rate higher than inflation (do they make those?) we know that the bank suffers all these agonies precisely because it is sure it can loan your five dollars to some other chump who will have to repay it at a much higher rate of interest. So the question is: where does your interest come from? Where does the bank get that money to pay you extra? They don’t make any money. The chump does. And where does he get it? If he borrows the five dollars as venture capital for his lemonade stand, is he going to plant that bill in a glass and at last make it grow?
This is where it gets interesting. I’m belaboring this point
because the idea of organic money
seems to be one of the
uglier superstitions of our time. We everyday people really walk
around with this bizarre idea that money grows. Our savings account may
be a slow-but-sure redwood, our credit card finance charges may be
more on the order of poison ivy, but to try to stop either of
them seems like trying to freeze a teenage male mid-growth spurt.
By following around this five dollar bill, we’ve hopefully gotten at
least as far as Belloc; money itself is dead, so only
productive loans actually produce wealth. The bank didn’t
take my five dollars and make more dollars. They just took care of it,
made it available to me, and loaned it to the chump. It’s up to the
chump to produce some wealth.
Belloc would say that if the chump uses the five dollars to buy lemons, honey, and an ad in the Wall Street Journal, and uses these tools to create more wealth (lemonade), then the bank has a right to a share in these profits. The chump couldn’t have done it without the five dollars, so the bank deserves a cut.
But why does the bank deserve a cut? The chump took the five dollars, and he did all the work.
Certainly the bank deserves to get back its five dollars (and, I would add, though no one seems to mention this, an additional fee to adjust exactly for inflation, so that the sum returned is worth precisely as much as the five dollars that was lent). But everything in addition to the five dollars plus inflation, all that profit—how exactly did the bank do any of that? It sure looks like the chump was the one out there squeezing lemons and haggling with customers. True, without the five dollars, the chump couldn’t have made the money. But without the chump, the bank would still be sitting on five dead dollars.
A Copernican Revolution: Wealth Decays
We’ve reached Elliott’s most fascinating argument:
wealth decays. What does this mean? One articulate
definition of wealth is: property that has economic utility
.
Those two elements are essential; wealth is not only property, but
property that humans can use in an economic way. Our first example of
usury was a house. A mortgage presumes that the house is in a
continuous, glorious evolution into greater and greater usefulness,
while in reality it is a dead arrangement of building materials. The
mortgagee pays for value that isn’t there. But when we considered the
tribulations that the valiant bank must undergo to keep your five
dollars in existence, it became clear that wealth not only does not
grow, it is not even static. It takes effort to keep
your five dollars safe and accessible, to keep it worth five dollars,
to maintain that wealth. And lo and behold, houses are not
exactly static either.
What is home ownership, anyway, but an epic tale of collapsing furnaces, exploding pipes, and water heaters electrifying the laundry room faucet? If you abandon a house for five years, it will remain your property, but you will lose wealth. When you return, the house may have just as much wood and drywall and wiring as when you left, but in will be in a much less useful arrangement for humans (and far more useful for the rats and roaches who have subdivided it into developments).
Wealth decays. This is a Copernican Revolution (if I may join the club and rip the phrase off from Kant). We think of wealth as a dynamic of growth, whereas the reality is exactly the opposite; the world wars ceaselessly on our wealth, and wins. Even live wealth eludes us; cows have calves, but they attack their fences; fields left fallow sprout weeds, then shrubs. To keep property useful requires perpetual effort.
(Incidentally, this is the peculiar fascination of
permaculture, which is the science of designing systems in
which nature can function to produce wealth by its own rules and inner
dynamics with a minimum of human intervention. The classic example,
perhaps, is a food forest
, where trees produce food year after
year with hardly a human touch. But permaculture is obviously the
exception rather than the rule in economic activity, and even a
do-nothing
master like Fukuoka will be the first to say that a
great deal depends on that minimum of intervention.)
If wealth decays, it must be renewed even to remain what it was. As Chesterton said in another context, if you want the old white post, you must have a new white post; the old white post was brilliant, but after a few years, it needs a new coat of paint. This renewal takes work, and is thus the creation of more wealth. And who does this work? The lender? Suddenly we see that the entire burden has fallen on the borrower. The chump has to work just to keep that five dollars intact and return it. Even if he works very hard and turns a further profit, what right does the bank have to a cut when it has already profited by receiving back the original sum intact?
Elliott quotes Ruskin:
You can not have your cake and eat it. If you do not eat it, you have your cake, but not a cake and a half. Not a cake and a quarter tomorrow, dunce, however abstinent you may be, only the cake you have, if the mice do not eat it in the night.
We’re taught to assume that the bank needs to be compensated because it could have just sat on the five dollars itself. But if wealth decays, this is false; if the bank had sat on the five dollars, it would now be less than five dollars. In exchange for his use, the chump maintained the sum. In a world soaked in usury, inflation makes this point undeniable; that five dollar bill in your wallet is literally losing value as you read.
I’m not sure that all this is a conclusive proof that interest on a business loan is usury, and the idea of overturning the entire economy certainly raises a few practical questions, but I think we’ve seen enough to call the matter into grave question. And I’d like to close by noting that if all such interest is usury, than the most terrifying revelation to come is not the enormity of our economic corruption, but the cancer that we carry in our souls.
The Virtue of Theft
What’s the point of an investment? I want to take my money
that would otherwise be dead and put it to work for me.
But
what if there’s a slight error there, one word, one little pronoun? What if I
want to put them to work for me?
What if our desire to be smart, sensible, good stewards, to lay up for retirement and our children’s future, is precisely the same impulse as that of the benevolent plantation master? What if my very concept of flourishing as a solvent adult is inextricably bound up with systematic robbery?
That makes me sick.
It makes me sick because I know it’s true. I know that it is not enough for me to work with my hands and get paid for my day’s work, I know there’s an underlying dynamic whereby I feel that I should get more, that to earn in an hour only what I myself made in that hour is to fail. We can muddy the issue immeasurably by claiming that we’ll stick to moral investments, but once we grasp the concept of investment, of something for nothing, of wealth ex nihilo, we have tasted the cocaine. There is no natural limit to the accumulation of wealth; unlike hunger or sex, no satiation is possible. But this isn’t ex nihilo, it’s ex neighboro. Someone is working hard, and I’m taking her money.
Yet, like many a current problem, this may partly be a perversion of the agricultural drive. We were meant to tend a garden, and a garden does grow on its own. If I plant a tree, I have to care for it, but it does most of the work. I have to milk a cow, but she takes care of making more cows. This desire to tend, to guide something that lives and flourishes on its own and bears fruit, is here blameless and beautiful. That’s why everyone should have something that grows; I think that at bottom we don’t so much crave piles of cash as this excitement and risk and variety. We never know exactly how many apples we’re going to get, or how well the cucumbers are going to do, and there is some deep human need that can be well and truly satisfied by these little yearly dramas. Even the disappointments carry the seeds of future victories.
In a sense, if every hour brings only an hour’s pay, I have failed; I could have a tree sprouting apples, chickens laying eggs, flowers slowly spreading across my yard. And on a deeper level, my work itself must be worthwhile; if I build a house, I’ll get paid once, but it will bear fruit for as many years as people use it. The same cannot be said for preparing a tax return. I’m not getting paid at all for this blog, but at this moment you’re reading it; and whatever else I’m doing by now, these words are bearing fruit.
So in the end, the lust for other people’s money is a glimpse into our own repressed desire to be fruitful and multiply. A return on investment is the wrong kind of satisfaction, and so it can’t ever be enough.
I’ve only barely presented one of Elliott’s arguments, so I hope you enjoy the full book, and I’ll leave you with this mental image:
Another mathematical genius says, had one cent been loaned on the first day of January A.D. 1, interest being allowed at the rate of six per cent. compounded yearly, then 1895 years later—that is on January 1, 1895—the amount due would be $8,497,840,000,000,000,000,000,000, 000,000,000,000,000,000,000 (8,497,840,000 decillions). If it were desired to pay this in gold, 23.2 grains to the dollar, then taking spheres of pure gold the size of the earth, it would take 610,070,000,000,000,000 to pay for that cent. Placing these spheres in a straight row, their combined length would be 4,826,870,000,000,000,000 miles, a distance which it would take light (going at the rate of 186,330 miles per second) 820,890,000 years to travel.
The planets and stars of the entire solar and stellar universe, as seen by the great Lick telescope, if they were all in solid gold, would not nearly pay the amount. A single sphere to pay the whole amount, if placed with its centre at the sun, would have its surface extending 563,580,000 miles beyond the orbit of the planet Neptune, the farthest in our system.
It may be added that if the earth had contained a population of ten billions, each one making a million dollars a second, then to pay for that cent it would have required their combined earnings for 26,938,500,000,000,000,000,000 years.
Anyone can figure on this and see if it be correct.
Had Peter only thought to put one cent at interest, there would be no call now for Peter’s pence.
Blast. What was Peter thinking?
