When Bonds are Issued to Yield a Profit Out of Destruction, or Exact Interest From Non-Productive Investment, the Evil Will Eat Society Up. Denounced by Ancient Pagans and Christian Moralists Alike, Usury Has Become a Term Almost Forgotten Although Its Practice Is of Daily Experience.
I NOW go on to talk of the plague of monopoly, which is one of the very worst results of modern capitalism, and is ruining society quite as much as the burning sense of injustice suffered by the worker under capitalism. I shall speak of the monopoly of production gradually killing men’s choice in what goods they shall enjoy; the monopoly of distribution, gradually killing men’s choice of where they shall buy and of whom; the virtual monopoly of credit, through the concentration of banking and the stranglehold of the bankers on the modern capitalistic world.
But before we can understand the growing monopoly of credit we must understand “Usury”.
First, let us understand what we are talking about. The word “Usury” is used today in two very different senses. It is used to mean excessive interest on money: that is the popular meaning of the word. It is also used to mean “interest on money as distinguished from profit: any interest,” large or small, demanded for the “use of money” as distinguished from payments for goods or services and from profit on trade. This is the strict original meaning of the word “Usury” and in that sense I use it here: interest on money or credit alone.
It is a strange thing that though Usury has been denounced as an accursed sin, a destruction of society, ever since human society has existed, it has in modern times been left alone, and, until quite lately, was not seriously discussed. It was taken for granted that Usury was quite natural and would do no harm. The ancient pagan philosophers denounced it; the Christian Church denounced it vigorously from the appearance of this Church until the Reformation. All our moral theologians have denounced it. And yet, for a time, after the seventeenth century, until quite recently, Usury was more and more accepted until it became a matter of course. Only when the enormous harm that it has done was beginning to be felt was the question raised again.
Now, Usury being the taking of interest on money merely “as money”, why is that wrong or harmful? Money is a social instrument devised for the exchange of goods. Its proper function is to work as currency. It does not breed. There is no natural profit attaching to it merely as money. If you keep it back from general circulation and take advantage of having it thus in your power and say to the man who needs to buy or sell “You shall not have this necessary currency unless you pay me still more money for the use of it” you are doing wrong.
The principle of taking Usury once admitted, Usury would end by eating up society. A few dollars lent out at compound interest for a few generations would demand a tribute more than all the wealth of the world could meet. A sum of money lent at 5 per cent doubles, at compound interest, in just over 14 years. The debt increases “a thousandfold” in 144 years; in 288 years “a millionfold!” In 432 years it increases “a billionfold”—one thousand million times! One cent put out at such interest when Columbus landed would now claim over $20,000,000.
But clearly you are doing no wrong if you put your wealth into some profitable enterprise and claim a portion of the profit thereon. That is where the confusion lies.
Supposing a man own a piece of land through which, deep down, runs a rich vein of copper ore. The amount of ore that could be extracted in a year’s labor would be worth, by the time he got it to the surface, $100,000. But to get it to the surface needs instruments and reserves of food and clothing and housing and the rest of it to maintain human energy while the ore is being extracted.
The owner of the vein had nothing. He gets a partner with $500,000 and his partner buys the required machinery and reserves of food, etc., so that the work can be undertaken. He bargains to halve, at the end of the year, the value of the ore extracted: that is, $50,000: one-tenth of the amount that he has put up as capital. The other $50,000 of ore is to be kept by the owner of the land. Year after year one goes on taking his share as capitalist. He is getting to one percent on his capital. But the other man has the advantage of “his” share, which he could never have had without the help of his partner. The contract is perfectly just.
Now suppose after 20 years the mine peters out. There is no more profit to be shared and therefore the original contract comes to an end from a lack of matter.But supposing the contract were worded so that the capitalist did not get his 10 percent as part of the profit, but got it as interest on money lent: not as instruments and reserves of food, etc., lent. Then he has a perpetual claim to $50, 000 a year, payable out of wealth that is not there. This is called “interest on the unproductive loan” and such interest is Usury. To pay that tribute the borrower has to get further and further into debt or to sell other wealth of his, until he is ruined; and that is how Usury eats up society.
Now when money claims interest “merely because it is money and without reference to the way that money is used,” a large proportion of the interest must always be interest on what has become an unproductive loan. Part of the vast sums paid to the money lenders annually represents real profit, real wealth, real goods. But part will always represent, if money lending instead of partnership is at work, interest on a loan which has become, or was from the beginning unproductive.
For instance, nearly all the great war loans demand interest on an unproductive loan. The money was spent in buying goods which were consumed, not in producing more wealth, but in producing no wealth—or even in destroying wealth. It went to support soldiers and sailors who produced no wealth and often actually destroyed wealth. It went to buy guns and ammunition which produce no wealth, but were actively employed in destroying wealth. You spend $100,000 in buying guns and ammunition for knocking down in war and industrial building which, in peace, produced $5,000 worth of wealth a year; and you go on asking $5,000 interest on the money represented by worn out guns, exploded ammunition and a factory that has been destroyed.
There are other ways in which the recognition of money’s right to interest, merely because it is money, eats up society, but this one major case of the unproductive loan is sufficient to show the evil that Usury does.
When money lending (“the providing of credits,” as it is called) carries interest as a matter of course, it is an activity which devours mankind.
~Hilaire Belloc: in Social Justice, April 18, 1938.
• Is Usury Still A Sin?, by Thomas Storck
• The Sin of Usury, by St. Thomas Aquinas
• Usury, from the Catholic Encyclopedia