The Red Herring of Usury
When the subject of an infallible magisterium comes up, someone always raises the question of usury. Non-Catholics and certain Catholics claim that the Church has contradicted its own teaching on usury. Secular critics tout this as a deathblow to the Church's claim to infallibility. Protestants and rationalists point to usury as a case where the Church made infallible pronouncements on moral conduct, then had to eat its words—where the Church had, in short, proved wrong. The usury rule was, for these literal of the ancient texts, the classic example of an disproved forever the Church's vaunted claim to be the infallible arbiter of morals.
More recently even some Catholics have cited usury as an area in which the Church's teaching has flip-flopped. Fr. Richard McBrien, in his massive Catholicism, attempts to legitimate dissent from the Church's teaching on contraception by arguing that "the official Church has changed teachings in other matters—e.g., religious liberty and usury (2:1010, 1981 edition). McBrien cites the scholarly work of John Noonan in support of this view of usury. In a now famous article, "Authority, Usury, and Contraception" (Cross Currents, Winter 1966), Noonan compares the teaching on usury and contraception through the centuries draws two conclusions. He seeks to demonstrate that was strongly and consistently prohibited by the magisterium of the Church, whereas the prohibitions against contraception were less frequent, although still present. He also that the Church's teaching on usury has changed with changing circumstances and that we should expect the same possibility for its teaching on contraception.
Noonan is correct that the Church consistently condemned usury in the most official way. For example, Canon 13 of the Second Lateran Council (1139) says: "Furthermore we condemn that practice accounted despicable and blame worthy by divine and human laws, denounced by Scripture in the Old and New Testaments, namely, the ferocious greed of usurers; and we sever them from every comfort of the Church, forbidding any archbishop or bishop, or an abbot of any order whatever or anyone in clerical orders, to dare to receive usurers, unless they do so with extreme caution; but let them be held infamous throughout their whole lives and, unless they repent, be deprived of a Christian burial."
Similarly, Canon 25 of the Third Lateran Council (1179) says, "Nearly everywhere the crime of usury has become so firmly rooted that many, omitting other business, practice usury as if it were permitted and in no way observe how it is forbidden in both the Old and New Testament. We therefore declare that notorious usurers should not be admitted to communion of the altar or receive Christian burial if they die in this sin." And Canon 29 of the Council of Vienne (1311) says, "If indeed someone has fallen into the error of presuming to affirm pertinaciously that the practice of usury is not sinful, we decree that he is to be punished as a heretic."
These injunctions were approved by many popes, including Alexander III, Gregory IX, Urban III, Innocent III, and Clement V The teaching of the Church condemning usury is unambiguous, binding, and irrevocable. (Noonan is right, I think, to insist that if anything has been infallibly defined in the Church by both popes and councils, the condemnation of usury certainly has. There have been so many solemn decrees on the matter that to argue, as some have, that the technicalities of an infallible teaching have not been met, or that the prohibitions against usury are only disciplinary and not doctrinal, is an exercise in special pleading [Noonan, 61-3].)
But just what is usury? This is the crux of the matter. First, let's be clear about what usury is not. It is not, as many people think, exorbitant interest on a loan. All parties in this discussion are agreed that the rate of interest has nothing to do with whether a loan is usurious (Noonan, 56). So what is it? Noonan argues that usury is the taking of any interest on any sort of loan. He claims that the condemnation of usury, so defined, is the teaching of Scripture and that this biblical principle was taken up by the Church Fathers and later codified in the Church's official teaching: "The teaching on usury of the Old Testament was explicitly confirmed by the New Testament. The text of the Vulgate was clear and phrased with legal exactness to condemn all profit on a loan: Mutuum date, nihil inde sperantes, 'Lend hoping nothing thereby.' The words were taken to be an express commandment. They were taken [by the early Church] as the words of the Lord himself. Absolutely, unequivocally, without exception, all return on a loan was condemned" (ibid., 57).
If this is the correct definition of usury, then we do have a contradiction in the Church's teaching and practice. (The 1911 Code of Canon Law, for example, required Catholic institutions to keep operating funds on deposit at interest.) But is Noonan's definition correct? Let's do a bit of investigation.
In the Old Testament the injunctions against interest-taking fall generally into three classes.
First, passages such as Exodus 22:25 and Leviticus 25:35-38 command that the poor among the Israelites are to receive interest-free loans, out of compassion and mercy.
The second group of texts is illustrated by Deuteronomy 23:19-21: "You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. You may charge interest to a foreigner, but to your countryman you shall not charge interest, so that the Lord your God may bless you in all that you undertake in the land which you are about to enter to possess." Here the principle of interest-free loans is extended to embrace all of Israel (and would include those non-Jews who are living under Israel's protection). But notice that the Scripture also says, "You may charge interest to a foreigner," indicating that interest-taking is not presented as inherently evil or sinful.
Finally, the third group of texts (Ezek. 18:13, 17, Jer. 15:10, Prov. 28:8) condemn the greed of the rich, who oppress the poor by, among other things, exacting interest which the unfortunate are unable to pay.
So in the Old Testament we have specific prohibitions against Israelites taking interest on loans to other, poor Israelites, or more generally to any Israelites, but this prohibition does not constitute an absolute prohibition against all interest-taking; in fact, we have explicit testimony that interest is not completely forbidden. The larger ethical issue of the morality of interest-taking is not addressed in the Old Testament. Rather, "interest was viewed only as a problem of social justice. The problem of commutative justice, i.e., of equivalence of value in an exchange of present for future goods, remained quite untouched" (Thomas F. Divine, S.J., Interest, 10).
In the New Testament the situation is much the same. The Lord urges compassion and generosity from his people in lending: "Give to him who asks of you, and do not turn away from him who wants to borrow from you" (Matt 5:42). So too our Lord says, "And if you lend to those from whom you expect to receive, what credit is that to you? Even sinners lend to sinners, in order to receive back the same amount. But love your enemies, and do good, and lend, expecting nothing in return; and your reward will be great, and you will be sons of the Most High; for he himself is kind to ungrateful and evil men" (Luke 6:34).
Situated here, in the Sermon on the Mount, this passage is clearly an appeal for Christian generosity; but it says nothing of the intrinsic morality of interest-taking. In fact, in the Parable of the Talents, our Lord chides the lazy servant who failed to receive any return on his master's money: "You ought to have put my money in the bank, and on my arrival I would have received my money back with interest" (Matt 25:27; cf. Luke 19:23). The Lord Jesus himself is the "master" in this parable, and it is impossible that he would place in his own mouth an injunction for his servant to do something intrinsically immoral. So here, as in the Old Testament, the New Testament urges generosity and freedom in lending, especially to the poor, but fails to support the blanket condemnation of all interest posited by Noonan. Indeed Noonan passes over in silence the parts of Scripture that indicate that interest-taking is not inherently immoral.
The Church Fathers were concerned, as is Scripture, to protect the poor from the rapacity of the rich who oppressed them through interest-taking, but they stopped short of categorically labeling all taking of interest as intrinsically immoral. As the Jesuit Thomas F. Divine says, "In the writings of the early Fathers, we find only reiterations of the scriptural precepts that it is contrary to charity and mercy to exact usury of the poor, without any intimation that these precepts imply a universal prohibition" (Divine, 26).
The Catholic Encyclopedia says that until the fourth century all that can be inferred from the writings of the Fathers and ecclesiastical writers is that it is contrary to mercy and humanity to demand interest from a poor and needy man. The vehement denunciations of the Fathers of the fourth and fifth centuries were called forth by the moral decadence and avarice of the time, and we cannot find in them any expression of a general doctrine on this point; nor do the Fathers of the following centuries say anything remarkable on usury; they simply protest against the exploitation of misfortune and against transactions that, under the pretence of rendering service to the borrower, really threw him into great distress.
The Church Fathers, like the authors of Scripture, are not intent on presenting an analysis of the morality of interest taking. But there is an added development in the patristic writings: "Where the problem of commutative justice is touched, it is practically always with respect to conditions such as these in which money is 'idle' and unfruitful, and usury is defined as anything (whether of money or of any other commodity) in excess of the amount advanced to the borrower" (Divine, 33).
It is a bit hard for us to understand, but, during the greater portion of antiquity, economies were characterized by a lack of competitive markets and thus few opportunities for investment. Money itself was considered primarily a medium of private and not commercial exchange. As Joseph Rickaby says of the Middle Ages (and his comments apply to much of antiquity as well): "In those days land was hard to buy, agriculture backward, roads bad, seas unnavigable, carrying-trade precarious, messages slow, raids and marauders frequent, population sparse, commerce confined to a few centers, mines unworked, manufactures mostly domestic, capital as yet unformed. Men kept their money in their cellars or deposited it for safety in religious houses. . .-They took out coin as they wanted it to spend on housekeeping, or on war, or on feasting. It was very hard, next to impossible, to lay out money so as to make more money by it. Money was in those days really barren" (Moral Philosophy, 261).
During the Scholastic period of the Middle Ages, many issues, including the question of the morality of interest-taking, were subjected to more detailed analysis. On what specific principles is interest-taking moral or immoral? This was at the heart of the question of usury. Eventually the morality of interest-taking came to be understood as intrinsically bound up in the nature of the thing lent and the impact (or lack thereof) on the person lending it. It is immoral to take interest on the loan of a thing that is completely consumed by its use, for which one has no other use, and for which one incurs no loss by lending it.
The New Catholic Encyclopedia elaborates on the technical definition of usury as it came to be used in the Middle Ages and thus in the formal conciliar texts of the Church: "From the Latin usura, usury originally meant a charge for a loan of a fungible, i.e., perishable, nonspecific good, whose use consisted of its consumption. Such a loan was called a mutuum. Money, considered to be 'consumed' in the process of exchange for other goods, was classified as a fungible good. And as a money loan became the most common form of loan of this type, usury came to signify a charge for the use of money. Only after repeal of the laws prohibiting interest (usury in the above sense) and the establishment of legal rates did usury assume its present meaning of a charge for a money loan that is exorbitant or exceeds the legal rate."
As we have seen, money itself was considered "barren," since there were only two licit things one could do with it: spend ("consume") it or hoard it. The Catholic Encyclopedia explains: "Money [in the early Middle Ages] was considered a fungible good since, once it was exchanged for other goods, its use ceased to exist for the borrower." (In civil law, goods are considered "fungible" if one unit of them can replace any other unit, such as in paying a debt. The term may be applied to things other than money, such as bushels of wheat or bales of cotton, provided they may be used interchangeably as a means of exchange and that their value is consumed by their use.)
One can lend money at interest, but in lending such money the lender is guilty of usury: "Apart from risk of nonrepayment, to take interest for money that you had no use for but to hoard was getting 'a breed of barren metal.' It was taking up what you laid not down; it was making profit out of your neighbor's need, or your neighbor's gain, where there was no corresponding need unsatisfied, or gain forfeited, on your part" (Rickaby, 261).
As these ethical and economic principles became fully appreciated, and as civilization progressed, it became clear that money in more modern economies—with competitive markets and almost unlimited opportunities for profitable ("fruitful") investment—did not suffer from the same tendency to be "unfruitful" as it had before. In the face of this change, the Church defined what is meant by usury. Session X of the Fifth Lateran Council (1515) gave its exact meaning: "For that is the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk."
So too, Pope Benedict XIV in his encyclical Vix Pervenit, says: "The nature of the sin called usury has its proper place and origin in a loan contract [mutuum]. This financial contract between consenting parties demands, by its very nature, that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious."
Note again that a mutuum is "a loan of a fungible, i.e., perishable, nonspecific good, whose use consisted of its consumption" (New Catholic Encyclopedia). But at present the choice for one's money in our world-economy is never simply between spending and hoarding, for money can always been invested in any number of genuinely profitable ("fruitful") enterprises. There is much greater facility nowadays for making profitable investments of savings, and a true value, therefore, is always attached to the possession of money, as also to credit itself. A lender, during the whole time that the loan continues, deprives himself of a valuable thing, for the price of which he is compensated by the interest. It is right at the present day to permit interest (which is different from usury) on money lent, as it was not wrong to condemn the practice at a time when it was more difficult to find profitable investments for money.
Money is no longer a barren thing in itself, and thus the loan of money at interest is not usurious. Rickaby sums up the correct view of usury nicely: "[I]t is usury to take any interest at all upon the loan of a piece of property, which (a) is of no use except to be used up, spent, consumed; (b) is not wanted for the lender's own consumption within the period of the load; (c) is lent upon security that obviates risk; (d) is so lent that the lender forgoes no occasion of lawful gain by lending it" (Rickaby, 258).
Due to advances in transportation, communications and generally expanding economies, the nature of money itself has changed in the course of time. A loan that was usurious at one point in history, due to the unfruitfulness of money, is not usurious later, when the development of competitive markets has changed the nature of money itself. But this is not a change of the Church's teaching on usury. Today nearly all commercial transactions, including monetary loans at interest, do not qualify as usury. This constitutes a change only in the nature of the financial transaction itself, not in the teaching of the Church on usury. "Still she maintains dogmatically that there is such a sin as usury, and what it is, as defined in the Fifth Council of Lateran "(ibid., 263).
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