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The practice of usury -lending money and accumulating
interest on the loan- can be traced back 4,000 years. But it
has always been despised, condemned, restricted or banned by
moral, ethical, legal or religious entities.
The
oldest references to usury are found in religious manuscripts
of India, dating back
to 2000-1400 BC where the 'usurer' is associated with any interest lender. In
the Hindu Sutra (700-100
BC) as
well as in the Buddhist Jatakas (600-400 BC) there are many references
to the payment of interest, along with expressions of disdain
for the practice.
Vasishtha, a prominent lawmaker of the era, drafted a law that
banned the high caste Brahmans and Kshatryas from being usurers
or money-lenders. In
the second century AD, the term usury becomes relative, meaning
that interest above the legal rate could not be charged; that
would be a usurious loan. But usury in some form or other has
continued to the present day, and although in principle it is
condemned, the term 'usury' refers only to exorbitant interest,
ie well above socially accepted rates. The practice operates
in most parts of the world.
Usury in Western
philosophy
Many
of the early Western philosophers including Plato, Aristotle, Cato, Cicero,
Seneca and Plutarch were critics of usury. In the legal reforms
(Lex Genucia)
of
the Roman Republic (340
BC),
usury and interest were banned. However, in the final period
of the Republic, the practice was common. Under Julius
Caesar,
a limit of 12 per cent was imposed due to the great number of
debtors, and under
Justinian it was set at a mean between 4 per cent and 8 per cent.
Islam's
view
During
the prophet Muhammad's lifetime, criticism of usury became established.
This stance was reinforced by his teachings in the Qur'an, around 600
AD. The original term for usury was riba, which literally
means 'excess or addition' and referred just to interest on loans.
For this reason, Muslim economists Choudhury and Malik maintain
that, in the times of the Caliph Omar, the ban on interest was
a principle established and integrated into the economic
system
of Islam. But that interpretation of usury was not universally
applied nor universally accepted in the Muslim world. For instance,
a school of Muslim thought that arose in the 18th century, led
by Sir Sayyed, still maintains a distinction between usury -loans
for consumption- and interest, which refers to loans for commercial
investment. In modern times there has been a gradual
development of financial institutions that do not charge interest,
for example in Iran, Pakistan and Saudi Arabia, the Dar-al-Mal-al-Islami
in Geneva and Muslim banks in the United States.
'The dust of interest'
Judaism's criticisms
of usury are rooted in several passages of the Old Testament
in which charging interest is scorned, discouraged and prohibited.
The Hebrew word for interest is neshekh,
which means 'bite' (though in Leviticus tarbit and
marbit are also used), and it is believed to refer to the
charging of often exorbitant interest (from the debtor's perspective).
In the Hebrew books of Exodus and Leviticus the ban is
thought to be applied exclusively to loans to the poor
and the sick,
while in Deuteronomy, it extends to all loans, excluding
trade with foreigners. The word 'foreigner' is interpreted in
general as 'enemy' and, armed with this text, Jews employed usury
as a weapon, as other people's needs could be transformed into
submission.
Beyond these biblical roots, there are several Talmudic extensions
of the bans on interest, known as avak ribbit -literally
'the dust of interest', which is applied for example to certain
types of sales, rent or work contracts. It is distinguished from
the rubbit kezuzah, interest adjusted over a quantity
or a rate agreed between the lender and borrower. The legal difference
is that the latter, if the debtor pays the lender, is recoverable
from the lender, while the former, once paid, is not recoverable,
though it is recognized that a contract sullied by the dust of
interest may not be fulfilled.
In spite of the ban, this rule does not appear to have been observed
in biblical times. In addition to the various references in the
Old Testament to lenders who are rigidly exacting high
interest rates, it can be seen in the Elephantine Papyrus
(dating to
the reign of Tuthmosis III) that among the Jews of Egypt in the
5th century BC it was the norm for interest to be charged for
loans. This suggests that the violation of the ban was not seen
as a criminal offense with a penal sanction, but as a moral transgression.
This can also be partially explained by the change in economic
conditions,
beginning in the Amoraim period in Babylonia (200-500 AD), when the prohibition against
interest was agreed when usury became incompatible with the community's
economic needs.
At the same time, a standard way of legalizing interest was established,
known as hetter iska. This referred to the permission to create
partnerships, which has become so common that today all transactions
with interest are made openly according to Jewish law, simply
adding to the corresponding note or contract the words al-pi
hetter iskah.
Usury
on the Cross
The
prohibition of usury was adopted as a major campaign by the earliest
Christian Church, following on from Jesus' expulsion of the money-lenders
from the temple.
The decrees of the Hebrew Bible were revived and a new reference
to usury in the New Testament was added. Based on the
authority of those texts, the Catholic Church of the 4th century
AD banned the clergy from charging interest, a rule that was
later extended in the 5th century to the laity.
In the 8th century, under Charlemagne, usury was declared a criminal
offense. The anti-usury movement gathered force in the late Middle
Ages and reached its peak in 1311 when Pope Clement V totally
banned the practice and declared null and void all secular law
defending it.
In spite of subsequent papal and legislative bans, loopholes
in the law and contradictions in the Church's arguments began
to appear. Soon, on the rising tide of commerce, the pro-usury
movement began to grow. The rise of Protestantism and its pro-capitalist
slant strongly influenced change. However while both Luther and
Calvin expressed reservations about the practice of usury, neither
condemned it outright.
Calvin, for example, cited seven situations in which interest
was 'sinful'. These were largely ignored however and his position
interpreted as a general sanctioning of charging interest. As
a result of these influences, around 1620, according to the theologian
Ruston, 'usury passed from being an offense against public
morality, which a Christian government was expected to suppress,
to being a matter of private conscience, and a new generation
of Christian moralists redefined usury as excessive interest'.
Nevertheless, the ancient criticisms continue to pervade the
Church's modern thinking, as suggested by the viewpoint of the
Church of Scotland (1988) when it released
a report on the ethics of investment and banking.
'We accept that the practice of charging interest for business
and personal loans is not in itself incompatible with Christian
ethics. What is more difficult to determine is whether the interest
imposed is just or excessive' said the report.
In the same vein, it is interesting to contrast the clear moral
mandate expressed through Pope Leo XIII's Rerum Novarum
(634-644
AD)
about 'ravenous usury' as 'a demon condemned
by the Church but practized in a deceitful way by avaricious
men,'
with Pope John Paul II's encyclical Solicitude Rei Socialis
(1987) which omits
any explicit mention of usury, except for a vague reference to
recognizing the Third World debt crisis.
This 'demon' governs current global relations, condemning most of the world
population to living under the sign of debt: i.e., each
person born in Latin America owes already
$1,600 in foreign debt; each individual being conceived
in Sub-Saharan Africa carries the burden of a $336 debt, for
something that its ancestors have long ago paid-off. In 1980
the Southern countries' debt amounted to $567 billion; since
then, they have paid $3,450 billion in interests and write-offs,
six times the original amount. In spite of this, that debt had
quadrupled by the year 2000, reaching $2,070 billion.
*Published
in The World Guide
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