I’m going to confess at the beginning that this is not an area of expertise for me. I did fairly well in Econ 100, but that was over a decade ago, and it was a bit of a joke class. Since then, the closest thing I’ve done to studying economics was to watch Niall Ferguson’s documentary on money.
But, despite my lack of training in economics, I do have a couple ideas about usury that I’d like to present to the readership here at Vox Nova. Furthermore, I do have some expertise in the nature and function of Church teaching and I’d like to explore that theme with reference to usury. I hope that my understanding of usury is not so off-base as to make my deeper point about the possibility of changes in Church teaching invalid. One good thing about blogging is that you can’t get away with much, so I’m sure I’ll get called out if I miss my mark. And I thank you in advance.
First of all, it is useful to look at usury because virtually every discussion about the possibility of change in Church teaching, at least on ethical issues, tends to come back to it. Even the most marginally educated Catholic is aware that Church teaching on usury has changed. The problem is that sometimes that’s all they know about it. This very often leads to the conclusion that any Church teaching on ethics can change because the teaching on usury changed and, furthermore, it can change in almost any direction I want it to.
This is an oversimplification. Now, I think those who claim that “Church teaching didn’t change, the nature of money changed,” are being a touch disingenuous, though only a touch. I think there was a genuine change, but it is important to note what kind of change it was. The Church did not decide one day (under pressure from usurious merchants, or because some “liberal” Pope got elected etc. etc.) to recognize the error of its ways and recant the previous teaching. Rather, in a new financial context (the grain of truth in the disingenuous claim noted above) the Church modified the application of a principle that it still maintained and maintains to this day, if not very loudly.
And here I come to my own thoughts on usury (and I am quite conscious that I may be showcasing my ignorance here): It seems to me that the moral and economic principle that is violated by usury is that one must not invent money that is not backed by anything of real value. If there is $100 worth of goods and services in the world and I lend you $10, demanding $11 in return, I have invented $1. Now the sum total of the value of goods and services is $100, but the amount of money on paper (or in cyberspace, or wherever) is $101. At this stage, there is only a very small problem, but this problem is compounded when several people make such loans. Things get tricky when the money on paper has less and less connection with the actual value of goods and services. Once we all owe one another $150 (or $200 or $300), but the value of goods and services is only $100, we have a problem.
It seems to me that this problem has three possible solutions, which I will present in extremely oversimplified forms.
First, the system can collapse. People stop trading with money because money, which is essentially trust that you can count, stops being trustworthy. Inflation runs wild and people are forced into a barter economy.
Second, we can forgive debts. Indeed, whether or not it was actually practiced, this is the solution in the Old Testament. Part of the Jubilee year was the forgiveness of debts. This resets the system so that the money on paper is now more commensurable with the actual value of goods and services.
Third, and perhaps ideally, people use the money lent to create something of value so that the value of goods and services increases alongside the value of money owed. The discovery of this third option was, essentially, the new information the Church needed to alter its teaching or, more accurately, the application of its principle. Inventing money that has nothing of value to back it can be legitimate when that money makes its own backing.
Those interested may want to check out David Palm’s “The Red Herring of Usury” and Thomas Storck’s “Is Usury Still A Sin?” to see more detailed technical descriptions of how this all played out historically.
Now, neither of the two authors I’ve linked to state the principle at stake the way I do. Their arguments are more complicated and I certainly do not pretend to have bettered them. Nevertheless, after reading both articles, I still believe that the basic principle I have articulated gets at the heart of the matter. And, though I am quite willing to be corrected if the principle I have articulated misses something, it also strikes me as a much simpler way to present the teaching to those with no background in economics. Indeed, I found that, though I can follow the arguments in Palm and Storck while reading the articles, I would have great difficulty explaining them in much detail to an interested party in a Q & A session or over beers.
My own articulation, however, strikes me as very amenable to such situations. Furthermore, most people today can see the trouble that comes from inventing value in cyberspace that does not reflect any actual value on the ground. It’s called a housing bubble. And when it burst, we solved it by a combination of systemic collapse (option 1) and forgiving the debts of the uber-wealthy (option 2, though quite the reverse of what the Old Testament was aiming at).
That the bubble inflated in the first place, it seems to me, was due to a failure of option 3. In other words, the money invented on paper did not actually make its own backing. This, it seems to me, is what was at play when the Church changed its articulation to a condemnation of exorbitant interest. Exorbitant interest is not a given percentage that is immoral, but rather interest that outstrips the money’s capacity to produce value. Exorbitant interest wrecks the system by creating more debt than value.
Now, it is entirely possible that I am missing something here. My lack of expertise in things economic may mean that I have articulated a principle that does not have the broad application that I think it has. It may, in fact, be the case that we must resort to arcane discussions of “mutua” and “fungibility” to explain the apparent change in Church teaching on usury.
But, whether I am correct or not about the exact principle at play for the question of usury, it is the case that any discussion about a possible change in Church teaching on ethical questions must start by identifying the principle underlying the Church’s current formulations.
It seems to me that, should Church teaching change on a given question, it will always be a matter of applying that underlying principle in new ways due to new information and/or new circumstances. It will not be a matter of the election of a progressive (or reactionary!) Pope, and it certainly won’t be a capitulation to the Zeitgeist of the age.
It is a fact of history that the Church has changed it’s teaching on ethical questions, but we must not extrapolate from that fact that everything is up for grabs. From this side of history it is virtually impossible to predict what will change in the future. Who, indeed, could have foreseen the economic developments that led to the shift on usury? What we do know is that the basic principles underlying the Church’s specific injunctions cannot change, even though the injunctions themselves can.
Anyone interested in the possibility of change in Church teaching must start at the ground floor: what is the basic principle underlying Church teaching in this area?
It is naïve to expect that the Church will simply flip-flop according to the spirit of the age. And thank God for that. A Church that accommodates itself to the age is a Church that does not outlast the age.
Brett Salkeld is a doctoral student in theology at Regis College in Toronto. He is a father of two (so far) and husband of one.
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