The Church and Usury: Error, Change or Development?


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Chapter Five

We do not believe in "money lending" at interest. As Catholics we are acquainted with the early teaching of the Church. All the early councils forbade it, declaring it reprehensible to make money by lending it out at interest. Canon law of the middle ages forbade it and in various decrees ordered that profit so obtained was to be restored. In the Christian emphasis on the duty of charity, we are commanded to lend gratuitously, to give freely.1

The Catholic Worker is a newspaper founded by Dorothy Day in 1933 for promoting concern for the rights of the poor and workers. Even today it costs only a penny a copy, and its articles still express the ideas of its founder, being particularly critical of modern economic society, including the subject of the sinfulness of usury. One Catholic Worker article, actually entitled "Usury is a Sin," says that "the charging of interest on loans is immoral."2 Why? Because it is contrary to the laws of God, the teachings of Christ, the Magisterium of our Church, the natural order, and justice for the poor.

As many Catholics believe that the Church is indefectible, immutable, and infallible, some do not see any possibility of the Church's teaching on usury being changed. The obvious conclusion is then that the prohibition of usury must still be in effect, and we are entangled in sinful activity in our modern society, for usury is involved every time we accept interest on a savings account or pay interest on a loan. Noonan notes that some would go so far to say today: "It is a mortal sin to take or to seek profit on a loan."3

Numerous examples of such a position are available. Father Jeremiah O'Callaghan was a great 19th century Catholic missionary who evangelized most of Vermont. During his time there he wrote several works attacking all banking as usury, for he found this to be rampant in America, among the bishops and laity alike.4 In fact, his case of denying the last sacraments to a dying usurer in 1819 went before the Sacred Congregation in Rome. The reply he received "supposes that there were sufficient extrinsic titles to justify the merchant in retaining the money."5 (Contrary to the advice of Rome and the local bishop, the penitent did make restitution as Father O'Callaghan had recommended for the safety of his eternal salvation.) The problem was that "O'Callaghan was completely ignorant of the doctrine of extrinsic titles."6 As seen in chapter 3, these titles are legitimate, and because of cases like this one, the Church decided these titles can be assumed to exist today.

In our own century, Hilaire Belloc, an English Catholic layman, sees Catholic teaching being ignored by the modern banking industry. "The modern world is organized on the principle that money of its nature breeds money."7 He makes the distinction that interest should not be taken on consumption loans (loans for the purchase of objects). Belloc says that interest can be morally charged on loans for production or investment purposes, but not on consumer loans, because he views productive loans as a form of partnership. While basing this on the Church's teaching of legitimate partnership and the scholastic argument that money is barren, Belloc has made a very different distinction based on something the Scholastic and Church teaching was not concerned with: what the borrower does with the loan. "Neither Aristotle nor Aquinas drew a distinction between interest on loans made to the needy and interest derived from commercial investment. All moneylending for the sake of profit was reprehensible."8

In fact, it was Calvin who defined usury as "a financial gain sinful only if it hurt one's neighbor.... On loans to the poor, profit would be wicked."9 Many today have the mistaken idea that the Church always allowed loans to the rich and businessmen, and many authors besides Belloc try to make this distinction between loans of consumption and production. The confusion arises from the fact that Church teaching allowed partnerships, but not the taking of usury on loans. "The notion is erroneous because what is critical is not what the borrower uses the loan for but whether or not the loan involves cost (loss or cessant gain) to the lender."10

Even more recently, Jacques Maritain, an influential Catholic philosopher, wrote "A Society Without Money" which was finished the night before he died in 1973. He sees that usury has become a normal part of the business world, which makes "profit as an absolute end in itself" and subjects us all "to a system contrary to nature, where no account is taken of the laws and demands of human morality."11 As he says, "one is perfectly correct in hating money lending."12

Maritain's argument is primarily an economic one, that the nature of money does not allow it to intrinsically grow. He follows the argument of Aristotle and Aquinas, as we saw in the previous chapter. It seems rather difficult to maintain such a position, and even if this position can be upheld, it still must recognize the existence of legitimate extrinsic titles, which the Church has allowed. Money lending at interest is not sinful in today's circumstances.

It must be recognized that these authors do have a legitimate point. Dorothy Day, Belloc and Maritain are all writing because they have seen extreme abuses in the modern economic society where laissez faire capitalism often exploits the poor and lower class. Pope Leo XIII makes this same complaint, seeing a voracious usury rampant in our industrial society.

A devouring usury, although often condemned by the Church, but practiced nevertheless under another form by avaricious and grasping men, has increased... the whole process of production as well as trade in every kind of goods has been brought almost entirely under the power of a few, so that a very few rich and exceedingly rich men have laid a yoke almost of slavery on the unnumbered masses of non-owning workers.13

Unfortunately, in recognizing this legitimate problem, these writers have decided that it is interest on loans itself that is a problem with society. I do not think the banking system itself is intrinsically sinful or evil, it is just misused by men who are driven solely by materialism and profit. This does not prevent some from claiming "that [credit] economy is evil... for the ease with which it permits a very real and literal enslavement of the human person to material well being."14

[Despotic economic] dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.15

St. Thomas Aquinas recognized that economic activity must always be viewed within a larger scheme. "Temporal goods are subjected to man that he may use them according to his needs, not that he may place his end in them and be over solicitous about them."16 For Thomas, all material goods, private property, and exchange transactions are governed by a view of man's final destiny. "The pursuit of material welfare was not to be regarded as an end in itself, but as a means to achieve the summum bonum [greatest good] of salvation."17

This would seem to be the constant teaching of the Church with regard to money, for this is the point emphasized by the Church's "social" encyclicals of the last century. "How ought man to use his possessions? the Church replies without hesitation: 'As to this point, man ought not regard external goods as his own, but as common so that, in fact, a person should readily share them when he sees others in need'."18 The purpose of money and loans, like all material goods, is the advancement and perfection of all men, not just personal gain and profit.

Let us examine one more argument from an editorial in The Catholic Worker, complaining that the problem of usury is no longer being addressed by the Church.

If the topic does come up, the answer, if you're lucky enough to get one at all, usually is "But the Church does not forbid all interest, only 'undue interest'." That may be so, as the explanation on the ban has shifted, historically, from no interest no way, to administrative costs only, to no excessive charges.19

The problem with this statement is that it assumes the Church's teaching at one time forbade all interest. From the examination presented in chapter three, it should be clear that this is confusing the terminology of what the Church taught. The Church forbid the taking of all usury (not all interest), which means taking anything above the principal on a loan, simply because one made the loan. The Church still allowed the taking of interest when one had a just title to it. Obviously, the Church prohibition forbade more than just excessive charges, but it is not wrong to say the Church forbade undue interest, if by undue one means interest that one has no legitimate claim to take.

This fact will not prevent many from saying that, "Catholic teaching itself, as teaching, is not dead, though it is ignored."20 Some will continue to complain that the Church cooperates with evil, others that she tolerates an evil she cannot prevent.

The personnel of the church do not hesitate to ignore completely what the Church has taught for centuries... these churchmen, by proposing more or less watered-down solutions of a practical order, did their best, at the cost of much embarrassment, many hesitations and an unacknowledged fundamental contradiction, to find some kind of justification for lending at interest. In so doing, they unfortunately weakened that pure witness which the world expected of the Church.21

There are also numerous other authors who write in The Catholic Worker with similar arguments to those already presented here. A description given by Noonan is aptly fitting to their stance on usury.

Indeed, more rigorist than the medieval theorists themselves, they persist in regarding all forms of interest and profit on all kinds of credit extension as usury, and they refuse to admit that interest titles and the other contracts of credit were put forward sincerely and in good faith. They are thus more Catholic than the pope.22

While the validity of most of these arguments is questionable at best, perhaps there are some aspects of the Church's usury teaching which have been forgotten and do have application in our modern society. While not within the scope of this paper, a few examples of this can be mentioned. There is obviously excessive interest being charged to the poor in many third-world countries, especially those under Mafia control. In our own country, one must question the interest rate charged on credit cards, as many easily slip into very large debts from these.

One particularly strong criticism is of the modern practice of banks which make loans for which they do not have deposits. In fact, Dempsey makes several arguments against this "credit creation," and "finds the modern banking system guilty, by scholastic standards, of 'institutional usury'."23 He argues that when creating credit, the bank does not suffer any loss, yet it makes profit from this credit creation, which he considers usury. It seems one could say, "when such newly issued money is then loaned out without cost to the lender at interest, such interest is clearly usurious."24

As an aside: "Islamic religious law prohibits Muslims from paying or receiving interest."25 Instead, all parties in a financial "loan" share in the actual losses or profits. This makes Isalmic bank "depositors" much more like shareholders, for they profit based on the bank's own profits (and losses), not a fixed rate of interest. In fact, this unique system of banking has actually been successful. "The Islamic banking system has outpaced conventional Arab banking in terms of growth."26 Perhaps the modern banking system of money creation is not an absolute necessity.

Interestingly, some additional issues are raised under the title of usury by our current Pope. As part of the preparation for the great millennium, he makes reference to the Old Testament jubilee year, which also includes the usury prohibitions. At an international level he suggests the coming jubilee "as an appropriate time to give thought, among other things, to reducing substantially, if not canceling outright, the international debt which seriously threatens the future of many nations."27

On a more local level, the Pope recently spoke on continuing to fight "the worrisome and, unfortunately, widespread phenomenon of usury," a "serious social evil" which is contrary to building "a more just society, one of solidarity, and more attentive to the demands of the needy."28 While these cases do not refer to the technical definition of usury as dealt with in this paper,29 they do show that the Church is still concerned with economic matters, and rightfully so, for "the Church is concerned with the WHOLE of a man's life," and material things can have an effect on a man's immaterial soul.30

Perhaps there are still a few lessons to be learned from the historical teaching on usury. First and foremost is the Church's great concern for the poor. This teaching is strongly presented in the Scriptures and Fathers of the Church, but so often today receives only a token acknowledgement. As one Papal encyclical put it so clearly: "The gap between most of the richest countries and the poorest ones is not diminishing or being stabilized, but is increasing more and more to the detriment, obviously, of the poor countries."31

Second, as a means of helping the poor, perhaps there is a need today for providing "free" loans to the needy. In fact, this is an often forgotten part of the Church's usury theory which could still be applied today. "Everyone knows that man is obliged in many instances to help his fellows with a simple, plain loan. Christ Himself teaches this: 'Do not refuse to lend to him who asks you.'"32 There is little opportunity for the poor, even though they are often very hard working and resourceful, to get the money needed to improve their condition.

This is particularly applicable in many developing countries where no structures exist for getting loans, purchasing land, or other means which would allow for entrepreneurship. "The fact is that many people, perhaps the majority today, do not have the means which would enable them to take their place in an effective and humanly dignified way within a productive system in which work is truly central."33 I think particularly of Latin America, where often a small minority controls the country's land and other productive resources.

Of historical note, instead of relying solely on charitable handouts, the middle ages developed an institution, called a mons pietatis, which was essentially a public pawnshop "run not for profit but for the service of the poor."34 In this way, it provided an opportunity for the poor to get loans without having to pay usurers; instead, there was a small fee attached, which was justified as necessary for continuing the existence of the montes. Although it initially met with much opposition, it was eventually accepted by the Church, and many theologians saw it as a part of fulfilling the requirements of justice towards the poor.

Perhaps this concern we should have for the poor is best summarized by Pope John Paul II as "solidarity," a view of one's fellow man as a brother, not just a distant stranger. A concrete commitment to solidarity and charity is required in order to overcome today's widespread individualistic mentality.35 Such a realization provides for the fact that a justice of strict equality (as is practiced in economic matters) sometimes needs to be supplemented by mercy and charity. We cannot throw away the principles of justice which allow the taking of interest on loans, as these are needed for order and harmony in society. Yet these principles should be practiced with charity, recognizing those circumstances when strict justice should be dispensed from in dealing generously with our neighbor.

Our great concern for the poor does not provide sufficient reason for a condemnation of all of modern economics. Social critics of our government and economic system may use the Church's past teaching on usury as an attempt to add weight to their arguments, but in reality they have little support from the writings of the Church under the heading of usury. A much better approach would be to examine the contributions made by the Church in its social encyclicals. As reiterated many times, the crucial point of this paper is that a careful reading of the Church's teaching is necessary to recognize that a true development took place, one in which the usury prohibition can no longer be applied the same as it once was in the past.

1 Day, Dorothy, ed. The Catholic Worker. July 1960; reprinted in A Penny a Copy: Readings from The Catholic Worker. ed. by Thomas Cornell, Robert Ellsberg, and Jim Forest. Orbis Books, Maryknoll, NY; quoted by The Witness 79, (March 1996), 6.

2 Cooperativas Christianas de Mexico, "Usury is a Sin," The Catholic Worker 60, (March-April 1993), 8.

3 Noonan, "Authority," 71.

4 Cf. Noonan, "Authority," 71, 79.

5 Ibid., 172.

6 Cleary, 173.

7 Hilaire Belloc, "On Usury," Essays of a Catholic (Rockford, IL: Tan Books and Publishers, Inc., 1992), 15.

8 Gottfried, 96.

9 Mario De Solenni, "Usury: The Rise and Fall of a Moral Idea," Triumph (December 1971), 26.

10 Ederer, 20.

11 Maritain, 1.

12 Ibid., 5.

13 Pope Leo XIII, "On the Condition of the Working Classes," Rerum Novarum (15 May,1891), 6; [ONLINE]. Available from http://www.ewtn.com/library/ENCYC/L13RERUM.TXT [accessed 8 Sept. 1996].

14 De Solenni, 25.

15 Pope Pius XI, "On Reconstruction of the Social Order," Quadragesimo Anno (15 May, 1931), 106; [ONLINE] Available from http://www.ewtn.com/library/ENCYC/P11QUADR.TXT [accessed 6 May 1996].

16 Aquinas, II-II, q. 55, a. 6.

17 Raymond De Roover, "Scholastic Economics: Survival and Lasting Influence from the Sixteenth Century to Adam Smith," Business, Banking, and Economic Thought: in Late Medieval and Early Modern Europe, ed. by Julius Kirshner, (Chicago: The University of Chicago Press, 1974), 308.

18 Leo XIII, 36; quoting Aquinas, II-II, q. 65, a. 2.

19 Katherine Temple, "Usury goes to the Movies," The Catholic Worker 57 (June-July 1990), 4; emphasis original.

20 De Solenni, 27.

21 Maritain, 5.

22 Noonan, Usury, 399.

23 Ibid., 404.

24 Ederer, 19.

25 Marla Dickerson, "Islamic Banking Makes a Return," The Sun (Baltimore, MD: 7 June 1999), 2A.

26 Moin A. Siddiqi, "Banking on Principles: Islamic Banking System," The Middle East (May 1997), 26.

27 Pope John Paul II, "As the Third Millennium Draws Near," Tertio Millennio Adveniente (Boston: Pauline Books & Media, 1994), 51.

28 Pope John Paul II, General Audience of April 14, 1999; Vatican Information Service, "John Paul II's Severe Condemnation of Usury," 1; [ONLINE]. Available from http://www.ewtn.com/ewtn/news/getstory.asp?number=14398 [accessed 16 April 1999].

29 "The practice of arranging private loans at exorbitant interest rates has become common in Italy during recent years." General Audience of September 10, 1997; Catholic World News, "Pope Denounces Usury," 1; [ONLINE]. Available from http://www.catholic.org/media/news/vnbarchive/vnb091097.html [accessed 6 May 1999].

30 Hulme, 1.

31 Pope John Paul II, "On Human Work," Laborem Exercens (Boston: Pauline Books & Media, 1981), 79.

32 Benedict XIV, 3.V.

33 Pope John Paul II, "On the Hundredth Anniversary of Rerum Novarum," Centesimus Annus (Boston: Pauline Books & Media, 1991) 33.

34 Noonan, Usury, 295.

35 John Paul II, Centesimus Annus, 49; paraphrased.


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