Belief, capitalism and hell
I'm coming round to the idea that some of the most significant and consequential religious beliefs of the last 2000 years have been with regard to the morality of charging interest on loans (or usury, in its older sense).As Yanis Varoufakis (an economist, writing about economics) tells the tale of Faustus/Faust: in Marlowe's version, once his twenty-four years are up, Doctor Faustus begs, cries and pleads to be released from his contract with Mephistopheles, but to no avail, and he is carried off to Hell. But in Goethe's somewhat later version, Faust is able to achieve redemption: realising his mistake before his time is up, Faust performs acts of public service and so, when Mephistopheles comes to claim his interest, Gods's angels intervene. Singing "He who strives on and lives to strive / Can earn redemption still," they take Faust to heaven instead.
Varoufakis' point is that "Debt is to market societies what hell is to Christianity: unpleasant but indispensable". Thinking back to the discussion (or posts) on evangelicalism and capitalism, I wonder if there's more the relationship than metaphor, for example reflecting the changes to the ending of Faust or the appeal of universalism.
All three Abrahamic faiths, for a significant part of their histories, have believed it wrong to either pay or receive interest on loans, and banned it, although they had/have different interpretations on the permissibility of lending with interest (eg to people of other faiths).
In Europe, it wasn't so much the Reformation itself that bought about the end of usury doctrine, as Luther (for one) supported the traditional view. The big exception was Calvin, who rejected the idea that usury was disallowed from either a moral or theological viewpoint, and advocated for permitting interest on commercial loans, while forbidding interest on charitable loans to the needy.
Two of the first countries to put this revised doctrine into practice were the Habsburg Netherlands (in 1540 permitting interest payments up to 12%, but only for commercial loans) and England (in 1545 permitting interest payments up to 10% on all loans).
The effect on economic growth of being able to charge interest on debt is profound. You could argue that it's had other profound effects, that it leads to a world in which people are divided into two kinds - creditors and debtors. And that, unchecked, it leads to increasing inequality between the two and, for many people, no escape from debt during their lifetime.
Returning to Faust and hell, it's no accident that the religious concepts of redemption and forgiveness also apply to financial debt. Jubilee 2000, the cancellation of "third-world" debt by the year 2000, had its origins in the biblical idea of the year of Jubilee. Needless to say, debt forgiveness appeals rather more to debtors, while creditors need to be persuaded there's something in it for them…
Comments
They can. Islamic banks lend money at zero interest but charge fees that are pretty much the same in value.
St. Peter don't you call me, I owe my soul to the (credit card gods).
I will follow it with interest.
I'll get me coat ...
Usury may not be the worst crime in the system
I remember a radio talk more that 60 years ago, when an eminent economist argued that inflation of around 0.5. per cent was necessary (and even desirable) to facilitate adjustment to pay differentials. Anything more was not necessary and even dangerous.
Yeah, I don't think that's true, nor do I believe it would be wise for central banks to have a target that low, because it could easily slip into deflation (which would be genuinely bad).
On the other hand, I'm reminded about sayings and verses about mammon: the love of money being the root of all evil; being able to serve God and money. The conflict goes back a long way. Thinking about where, more precisely, the line is, I'm intrigued that Calvin saw a moral and theological distinction between commercial loans and charitable loans (to the needy).
It depends on the sort of economy you're running. For much of the Middle Ages, inflation was effectively zero (interspersed by a few interesting inflationary periods). Then bullion started "arriving" from the New World (as one online source put it). The price we pay for larcenous (rapacious) colonialism is inflationary. And because we're generous like that, the descendants of the colonised that survived get to experience inflation too, and especially debt.
(Meanwhile, one of the interesting aspects to inflation that sticks in my mind is the idea of inflating away debt.)
This thread is about belief. The roots of property are a matter of belief. More prosaically, our modern western ideas of property look to be another of those things that the Romans did for us, and the Church.
We live in a society in which it is widely believed that interest-bearing unsecured credit should be equitably available to all. Credit cards, credit unions and ROSPA's seem to operate with roughly comparable levels of interest. Yet many people still object to using credit on moral, cultural and religious grounds, or it just being a very slippery slope. And few of us would consider charging interest on the money we lend to friends or family, or expect to pay it on the money we borrow from them.
Hmm. I wasn't planning on a lecture. (Maybe I'm still annoyed with Rutger Bregman.) There's an idea or two in here I'm trying to locate.
This is partly why we need inflation; as soon as an economy starts to require debt for necessities like shelter and (higher) education people are put in the position where they have to make decisions under uncertainty and then have to live with 100% of the actual (rather than average) result.
In systems without any kind of dampening, noise tends to accumulate, and in this context it's inflation that provides the dampening function.
As is the root of the word 'credit' (credo)
"The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right, greed works." - Gordon Gekko played by Micheal Douglas (1987)
Just as I posted the Wall Street quote, the thought came to me about the parable of the unrighteous steward, where the manager of the owner's money was called to account for malfeasance. As he is about to loose his job, he decides to go full bore and call in all the owner's debtors, slashing all the debts owed. Luke 16.
What would happen if all of the sudden someone with similar power slashes all of the interest rates on today's credit cards?
As has many theologians since it was first written down, probably even before that.
Today, I am finding I am getting a lot of offers for debt reduction, even cancelation. But they all seem a little fishy as well. I am of the type to take responsibility for what I have taken on. Still, with my recent health episodes and not being able to work for the time being, they are tempting. I think I am going to wait until after I finish my tax return the end of January to see where I am at then.
Indeed. We also have "Abram believed the Lord, and it was credited to him as righteousness."
In significantly reducing the debts, it is unclear whether the steward is just wiping off the interest - I wonder if he would have had the authority to alter the principal. (I also wonder whether he derived his income from the interest that was charged, in a similar manner to tax collectors.) In any event, it seems likely to me that the unrighteousness of the wealth is a reference to the charging of interest on the debts, which is the most direct way of profiting from lending.
I also suggest that considering the relationship between debt, enslavement, sin and forgiveness can shed some light on the parable.
From Education for Justice: From the Bible: Looking at chrisstiles’ earlier argument from a different perspective, as soon as an economy starts to require debt for necessities like food and shelter and heating, with no hope of remission, it is condemning people to hell on earth. And while Christianity and the Church are ready and willing to offer absolution from sin, they don't seem so strongly committed to a concomitant mission to address debt.
Economics isn't engineering, but a large part of the economic system is 'engineered' as a combination of policies on things like interest and tax rates, market regulations and so on. That a particular aspect isn't invariant doesn't mean that one can't reason about the system as a whole - taking that aspect as part of the general context (and dampening, noise, hysteresis etc. are all terms that are common on the technical side of economics).
Yes, in the general sense beyond a certain level inflation is harmful, but equally zero inflation (or even deflation) is harmful to economic growth, and most of us wouldn't want to live the life of the median Medieval peasant.