The Morality of Moneylending: A Short History (Part 1)

It seems that every generation has its Shylock — a despised financier blamed for the economic problems of his day. A couple of decades ago it was Michael Milken and his “junk” bonds. Today it is the mortgage bankers who, over the past few years, lent billions of dollars to home buyers — hundreds of thousands of whom are now delinquent or in default on their loans.¹ This “subprime mortgage crisis” is negatively affecting the broader financial markets and the economy as a whole. The villains, we are told, are not the borrowers — who took out loans they could not afford to pay back — but the moneylenders — who either deceived the borrowers or should have known better than to make the loans in the first place. And, we are told, the way to prevent such problems in the future is to clamp down on moneylenders and their industries; thus, investigations, criminal prosecutions, and heavier regulations on bankers are in order.

Of course, government policy for decades has been to encourage lenders to provide mortgage loans to lower-income families, and when mortgage brokers have refused to make such loans, they have been accused of “discrimination.” But now that many borrowers are in a bind, politicians are seeking to lash and leash the lenders.

This treatment of moneylenders is unjust but not new. For millennia they have been the primary scapegoats for practically every economic problem. They have been derided by philosophers and condemned to hell by religious authorities; their property has been confiscated to compensate their “victims”; they have been humiliated, framed, jailed, and butchered. From Jewish pogroms where the main purpose was to destroy the records of debt, to the vilification of the House of Rothschild, to the jailing of American financiers — moneylenders have been targets of philosophers, theologians, journalists, economists, playwrights, legislators, and the masses.

Major thinkers throughout history — Plato, Aristotle, Thomas Aquinas, Adam Smith, Karl Marx, and John Maynard Keynes, to name just a few — considered moneylending, at least under certain conditions, to be a major vice. Dante, Shakespeare, Dickens, Dostoyevsky, and modern and popular novelists depict moneylenders as villains.

Today, anti-globalization demonstrators carry signs that read “abolish usury” or “abolish interest.” Although these protestors are typically leftists — opponents of capitalism and anything associated with it — their contempt for moneylending is shared by others, including radical Christians and Muslims who regard charging interest on loans as a violation of God’s law and thus as immoral.

Moneylending has been and is condemned by practically everyone. But what exactly is being condemned here? What is moneylending or usury? And what are its consequences?

Although the term “usury” is widely taken to mean “excessive interest” (which is never defined) or illegal interest, the actual definition of the term is, as the Oxford English Dictionary specifies: “The fact or practice of lending money at interest.” This is the definition I ascribe to the term throughout this essay.

Usury is a financial transaction in which person A lends person B a sum of money for a fixed period of time with the agreement that it will be returned with interest. The practice enables people without money and people with money to mutually benefit from the wealth of the latter. The borrower is able to use money that he would otherwise not be able to use, in exchange for paying the lender an agreed-upon premium in addition to the principal amount of the loan. Not only do both interested parties benefit from such an exchange; countless people who are not involved in the trade often benefit too — by means of access to the goods and services made possible by the exchange.

Usury enables levels of life-serving commerce and industry that otherwise would be impossible. Consider a few historical examples. Moneylenders funded grain shipments in ancient Athens and the first trade between the Christians in Europe and the Saracens of the East. They backed the new merchants of Italy and, later, of Holland and England. They supported Spain’s exploration of the New World, and funded gold and silver mining operations. They made possible the successful colonization of America. They fueled the Industrial Revolution, supplying the necessary capital to the new entrepreneurs in England, the United States, and Europe. And, in the late twentieth century, moneylenders provided billions of dollars to finance the computer, telecommunications, and biotechnology industries.

By taking risks and investing their capital in what they thought would make them the most money, moneylenders and other financiers made possible whole industries — such as those of steel, railroads, automobiles, air travel, air conditioning, and medical devices. Without capital, often provided through usury, such life-enhancing industries would not exist — and homeownership would be impossible to all but the wealthiest people.

Moneylending is the lifeblood of industrial-technological society. When the practice and its practitioners are condemned, they are condemned for furthering and enhancing man’s life on earth.

Given moneylenders’ enormous contribution to human well-being, why have they been so loathed throughout history, and why do they continue to be distrusted and mistreated today? What explains the universal hostility toward one of humanity’s greatest benefactors? And what is required to replace this hostility with the gratitude that is the moneylenders’ moral due?

As we will see, hostility toward usury stems from two interrelated sources: certain economic views and certain ethical views. Economically, from the beginning of Western thought, usury was regarded as unproductive — as the taking of something for nothing. Ethically, the practice was condemned as immoral — as unjust, exploitative, against biblical law, selfish. The history of usury is a history of confusions, discoveries, and evasions concerning the economic and moral status of the practice. Until usury is recognized as both economically productive and ethically praiseworthy — as both practical and moral — moneylenders will continue to be condemned as villains rather than heralded as the heroes they in fact are.

Our brief history begins with Aristotle’s view on the subject.

Aristotle

The practice of lending money at interest was met with hostility as far back as ancient Greece, and even Aristotle (384–322 b.c.) believed the practice to be unnatural and unjust. In the first book of Politics he writes:

The most hated sort [of moneymaking], and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural use of it. For money was intended to be used in exchange, but not to increase at interest. And this term Usury which means the birth of money from money, is applied to the breeding of money, because the offspring resembles the parent. Wherefore of all modes of making money this is the most unnatural.²

Aristotle believed that charging interest was immoral because money is not productive. If you allow someone to use your orchard, he argued, the orchard bears fruit every year — it is productive — and from this product the person can pay you rent. But money, Aristotle thought, is merely a medium of exchange. When you loan someone money, he receives no value over and above the money itself. The money does not create more money — it is barren. On this view, an exchange of $100 today for $100 plus $10 in interest a year from now is unjust, because the lender thereby receives more than he gave, and what he gave could not have brought about the 10 percent increase. Making money from money, according to Aristotle, is “unnatural” because money, unlike an orchard, cannot produce additional value.

Aristotle studied under Plato and accepted some of his teacher’s false ideas. One such idea that Aristotle appears to have accepted is the notion that every good has some intrinsic value — a value independent of and apart from human purposes. On this view, $100 will be worth $100 a year from now and can be worth only $100 to anyone, at any time, for any purpose. Aristotle either rejected or failed to consider the idea that loaned money loses value to the lender over time as his use of it is postponed, or the idea that money can be invested in economic activity and thereby create wealth. In short, Aristotle had no conception of the productive role of money or of the moneylender. (Given the relative simplicity of the Greek economy, he may have had insufficient evidence from which to conclude otherwise.) Consequently, he regarded usury as unproductive, unnatural, and therefore unjust.

Note that Aristotle’s conclusion regarding the unjust nature of usury is derived from his view that the practice is unproductive: Since usury creates nothing but takes something — since the lender apparently is parasitic on the borrower — the practice is unnatural and immoral. It is important to realize that, on this theory, there is no dichotomy between the economically practical and the morally permissible; usury is regarded as immoral because it is regarded as impractical.

Aristotle’s economic and moral view of usury was reflected in ancient culture for a few hundred years, but moral condemnation of the practice became increasingly pronounced. The Greek writer Plutarch (46–127 a.d.), for example, in his essay “Against Running In Debt, Or Taking Up Money Upon Usury,” described usurers as “wretched,” “vulture-like,” and “barbarous.”³ In Roman culture, Seneca (ca. 4 b.c.–65 a.d.) condemned usury for the same reasons as Aristotle; Cato the Elder (234–149 b.c.) famously compared usury to murder;⁴ and Cicero (106–43 b.c.) wrote that “these profits are despicable which incur the hatred of men, such as those of . . . lenders of money on usury.”⁵

As hostile as the Greeks and Romans generally were toward usury, their hostility was based primarily on their economic view of the practice, which gave rise to and was integrated with their moral view of usury. The Christians, however, were another matter, and their position on usury would become the reigning position in Western thought up to the present day.

The Dark and Middle Ages

The historian William Manchester described the Dark and Middle Ages as

stark in every dimension. Famines and plague, culminating in the Black Death [which killed one in four people at its peak] and its recurring pandemics, repeatedly thinned the population. . . . Among the lost arts were bricklaying; in all of Germany, England, Holland and Scandinavia, virtually no stone buildings, except cathedrals, were raised for ten centuries. . . . Peasants labored harder, sweated more, and collapsed from exhaustion more often than their animals.⁶

During the Dark Ages, the concept of an economy had little meaning. Human society had reverted to a pre-civilized state, and the primary means of trade was barter. Money all but disappeared from European commerce for centuries. There was, of course, some trade and some lending, but most loans were made with goods, and the interest was charged in goods. These barter-based loans, primitive though they were, enabled people to survive the tough times that were inevitable in an agrarian society.⁷

Yet the church violently opposed even such subsistence-level lending.

During this period, the Bible was considered the basic source of knowledge and thus the final word on all matters of importance. For every substantive question and problem, scholars consulted scripture for answers — and the Bible clearly opposed usury. In the Old Testament, God says to the Jews: “[He that] Hath given forth upon usury, and hath taken increase: shall he then live? he shall not live . . . he shall surely die; his blood shall be upon him.”⁸ And:

Thou shalt not lend upon usury to thy brother; usury of money; usury of victuals; usury of anything that is lent upon usury.

Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury, that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.⁹

In one breath, God forbade usury outright; in another, He forbade the Jews to engage in usury with other Jews but permitted them to make loans at interest to non-Jews.

Although the New Testament does not condemn usury explicitly, it makes clear that one’s moral duty is to help those in need, and thus to give to others one’s own money or goods without the expectation of anything in return — neither interest nor principal. As Luke plainly states, “lend, hoping for nothing again.”¹⁰ Jesus’ expulsion of the moneychangers from the temple is precisely a parable conveying the Christian notion that profit is evil, particularly profit generated by moneylending. Christian morality, the morality of divinely mandated altruism, expounds the virtue of self-sacrifice on behalf of the poor and the weak; it condemns self-interested actions, such as profiting — especially profiting from a seemingly exploitative and unproductive activity such as usury.

Thus, on scriptural and moral grounds, Christianity opposed usury from the beginning. And it constantly reinforced its opposition with legal restrictions. In 325 a.d., the Council of Nicaea banned the practice among clerics. Under Charlemagne (768–814 a.d.), the Church extended the prohibition to laymen, defining usury simply as a transaction where more is asked than is given.¹¹ In 1139, the second Lateran Council in Rome denounced usury as a form of theft, and required restitution from those who practiced it. In the twelfth and thirteenth centuries, strategies that concealed usury were also condemned. The Council of Vienne in 1311 declared that any person who dared claim that there was no sin in the practice of usury be punished as a heretic.

There was, however, a loophole among all these pronouncements: the Bible’s double standard on usury. As we saw earlier, read one way, the Bible permits Jews to lend to non-Jews. This reading had positive consequences. For lengthy periods during the Dark and Middle Ages, both Church and civil authorities allowed Jews to practice usury. Many princes, who required substantial loans in order to pay bills and wage wars, allowed Jewish usurers in their states. Thus, European Jews, who had been barred from most professions and from ownership of land, found moneylending to be a profitable, albeit hazardous, profession.

Although Jews were legally permitted to lend to Christians — and although Christians saw some practical need to borrow from them and chose to do so — Christians resented this relationship. Jews appeared to be making money on the backs of Christians while engaging in an activity biblically prohibited to Christians on punishment of eternal damnation. Christians, accordingly, held these Jewish usurers in contempt. (Important roots of anti-Semitism lie in this biblically structured relationship.)

Opposition to Jewish usurers was often violent. In 1190, the Jews of York were massacred in an attack planned by members of the nobility who owed money to the Jews and sought to absolve the debt through violence.¹² During this and many other attacks on Jewish communities, accounting records were destroyed and Jews were murdered. As European historian Joseph Patrick Byrne reports:

“Money was the reason the Jews were killed, for had they been poor, and had not the lords of the land been indebted to them, they would not have been killed.”¹³ But the “lords” were not the only debtors: the working class and underclass apparently owed a great deal, and these violent pogroms gave them the opportunity to destroy records of debt as well as the creditors themselves.¹⁴

In 1290, largely as a result of antagonism generated from their moneylending, King Edward I expelled the Jews from England, and they would not return en masse until the seventeenth century.

From the Christian perspective, there were clearly problems with the biblical pronouncements on usury. How could it be that Jews were prohibited from lending to other Jews but were allowed to lend to Christians and other non-Jews? And how could it be that God permitted Jews to benefit from this practice but prohibited Christians from doing so? These questions perplexed the thinkers of the day. St. Jerome’s (ca. 347–420) “solution” to the conundrum was that it was wrong to charge interest to one’s brothers — and, to Christians, all other Christians were brothers — but it was fine to charge interest to one’s enemy. Usury was perceived as a weapon that weakened the borrower and strengthened the lender; so, if one loaned money at interest to one’s enemy, that enemy would suffer. This belief led Christians to the absurd practice of lending money to the Saracens — their enemies — during the Crusades.¹⁵ Embed from Getty Images

Like the Greeks and Romans, Christian thinkers viewed certain economic transactions as zero-sum phenomena, in which a winner always entailed a loser. In the practice of usury, the lender seemed to grow richer without effort — so it had to be at the expense of the borrower, who became poorer. But the Christians’ economic hostility toward usury was grounded in and fueled by biblical pronouncements against the practice — and this made a substantial difference. The combination of economic and biblical strikes against usury — with an emphasis on the latter — led the Church to utterly vilify the usurer, who became a universal symbol for evil. Stories describing the moneylenders’ horrible deaths and horrific existence in Hell were common. One bishop put it concisely:

God created three types of men: peasants and other laborers to assure the subsistence of the others, knights to defend them, and clerics to govern them. But the devil created a fourth group, the usurers. They do not participate in men’s labors, and they will not be punished with men, but with the demons. For the amount of money they receive from usury corresponds to the amount of wood sent to Hell to burn them.¹⁶

Such was the attitude toward usury during the Dark and early Middle Ages. The practice was condemned primarily on biblical/moral grounds. In addition to the fact that the Bible explicitly forbade it, moneylending was recognized as self-serving. Not only did it involve profit; the profit was (allegedly) unearned and exploitative. Since the moneylender’s gain was assumed to be the borrower’s loss — and since the borrower was often poor — the moneylender was seen as profiting by exploiting the meek and was therefore regarded as evil.

Beginning in the eleventh century, however, a conflicting economic reality became increasingly clear — and beginning in the thirteenth century, the resurgence of respect for observation and logic made that reality increasingly difficult to ignore.

Through trade with the Far East and exposure to the flourishing cultures and economies of North Africa and the Middle East, economic activity was increasing throughout Europe. As this activity created a greater demand for capital and for credit, moneylenders arose throughout Europe to fill the need — and as moneylenders filled the need, the economy grew even faster.

And Europeans were importing more than goods; they were also importing knowledge. They were discovering the Arabic numerical system, double-entry accounting, mathematics, science, and, most importantly, the works of Aristotle.

Aristotle’s ideas soon became the focus of attention in all of Europe’s learning centers, and his writings had a profound effect on the scholars of the time. No longer were young intellectuals satisfied by biblical references alone; they had discovered reason, and they sought to ground their ideas in it as well. They were, of course, still stifled by Christianity, because, although reason had been rediscovered, it was to remain the handmaiden of faith. Consequently, these intellectuals spent most of their time trying to use reason to justify Christian doctrine. But their burgeoning acceptance of reason, and their efforts to justify their ideas accordingly, would ultimately change the way intellectuals thought about everything — including usury.

Although Aristotle himself regarded usury as unjust, recall that he drew this conclusion from what he legitimately thought was evidence in support of it; in his limited economic experience, usury appeared to be unproductive. In contrast, the thinkers of this era were confronted with extensive use of moneylending all around them — which was accompanied by an ever-expanding economy — a fact that they could not honestly ignore. Thus, scholars set out to reconcile the matter rationally. On Aristotelian premises, if usury is indeed unjust and properly illegal, then there must be a logical argument in support of this position. And the ideas that usury is unproductive and that it necessarily consists in a rich lender exploiting a poor borrower were losing credibility.

Public opinion, which had always been against usury, now started to change as the benefits of credit and its relationship to economic growth became more evident. As support for usury increased, however, the Church punished transgressions more severely and grew desperate for theoretical justification for its position. If usury was to be banned, as the Bible commands, then this new world that had just discovered reason would require new, non-dogmatic explanations for why the apparently useful practice was wrong.

Over the next four hundred years, theologians and lawyers struggled to reconcile a rational approach to usury with Church dogma on the subject. They dusted off Aristotle’s argument on the barrenness of money and reasserted that the profit gained through the practice is unnatural and unjust. To this they added that usury entails an artificial separation between the ownership of goods and the use of those same goods, claiming that lending money is like asking two prices for wine — one price for receiving the wine and an additional price for drinking it — one price for its possession and another for its use. Just as this would be wrong with wine, they argued, so it is wrong with money: In the case of usury, the borrower in effect pays $100 for $100, plus another fee, $10, for the use of the money that he already paid for and thus already owns.¹⁷

In similar fashion, it was argued that usury generates for the lender profit from goods that no longer belong to him — that is, from goods now owned by the borrower.¹⁸ As one Scholastic put it: “[He] who gets fruit from that money, whether it be pieces of money or anything else, gets it from a thing which does not belong to him, and it is accordingly all the same as if he were to steal it.”¹⁹

Another argument against usury from the late Middle Ages went to a crucial aspect of the practice that heretofore had not been addressed: the issue of time. Thinkers of this period believed that time was a common good, that it belonged to no one in particular, that it was a gift from God. Thus, they saw usurers as attempting to defraud God.²⁰ As the twelfth-century English theologian Thomas of Chobham (1160–1233) wrote: “The usurer sells nothing to the borrower that belongs to him. He sells only time, which belongs to God. He can therefore not make a profit from selling someone else’s property.”²¹ Or as expressed in a thirteenth-century manuscript, “Every man stops working on holidays, but the oxen of usury work unceasingly and thus offend God and all the Saints; and, since usury is an endless sin, it should in like manner be endlessly punished.”²²

Although the identification of the value of time and its relationship to interest was used here in an argument against usury, this point is actually a crucial aspect of the argument in defense of the practice. Indeed, interest is compensation for a delay in using one’s funds. It is compensation for the usurer’s time away from his money. And although recognition of an individual’s ownership of his own time was still centuries away, this early acknowledgment of the relationship of time and interest was a major milestone.

The Scholastics came to similar conclusions about usury as those reached by earlier Christian thinkers, but they sought to defend their views not only by reference to scripture, but also by reference to their observational understanding of the economics of the practice. The economic worth of usury — its productivity or unproductivity — became their central concern. The question became: Is money barren? Does usury have a productive function? What are the facts?

This is the long arm of Aristotle at work. Having discovered Aristotle’s method of observation-based logic, the Scholastics began to focus on reality, and, to the extent that they did, they turned away from faith and away from the Bible. It would take hundreds of years for this perspective to develop fully, but the type of arguments made during the late Middle Ages were early contributions to this crucial development.

As virtuous as this new method was, however, the Scholastics were still coming to the conclusion that usury is unproductive and immoral, and it would not be until the sixteenth century and the Reformation that usury would be partially accepted by the Church and civil law. For the time being, usury remained forbidden — at least in theory. Church officials, particularly from the twelfth century on, frequently manipulated and selectively enforced the usury laws to bolster the financial power of the Church. When it wanted to keep its own borrowing cost low, the Church enforced the usury prohibition. At other times, the Church itself readily loaned money for interest. Monks were among the earliest moneylenders, offering carefully disguised interest-bearing loans throughout the Middle Ages.

The most common way to disguise loans — and the way in which banking began in Italy and grew to be a major business — was through money exchange. The wide variety of currencies made monetary exchange necessary but difficult, which led to certain merchants specializing in the field. With the rapid growth of international trade, these operations grew dramatically in scale, and merchants opened offices in cities all across Europe and the eastern Mediterranean. These merchants used the complexities associated with exchange of different currencies to hide loans and charge interest. For example, a loan might be made in one currency and returned in another months later in a different location — although the amount returned would be higher (i.e., would include an interest payment), this would be disguised by a new exchange rate. This is one of many mechanisms usurers and merchants invented to circumvent the restrictions. As one commentator notes, “the interest element in such dealings [was] normally . . . hidden by the nature of the transactions either in foreign exchange or as bills of exchange or, frequently, as both.”²³ By such means, these merchants took deposits, loaned money, and made payments across borders, thus creating the beginnings of the modern banking system.

Although the merchant credit extended by these early banks was technically interest, and thus usury, both the papal and civic authorities permitted the practice, because the exchange service proved enormously valuable to both. In addition to financing all kinds of trade across vast distances for countless merchants, such lending also financed the Crusades for the Church and various wars for various kings.²⁴ Everyone wanted what usury had to offer, yet no one understood exactly what that was. So while the Church continued to forbid usury and punish transgressors, it also actively engaged in the practice. What was seen as moral by the Church apparently was not seen as wholly practical by the Church, and opportunity became the mother of evasion.

The Church also engaged in opportunistic behavior when it came to restitution. Where so-called “victims” of usury were known, the Church provided them with restitution from the usurer. But in cases where the “victims” were not known, the Church still collected restitution, which it supposedly directed to “the poor” or other “pious purposes.” Clerics were sold licenses empowering them to procure such restitution, and, as a result, the number of usurers prosecuted where there was no identifiable “victim” was far greater than it otherwise would have been. The death of a wealthy merchant often provided the Church with windfall revenue. In the thirteenth century, the Pope laid claim to the assets of deceased usurers in England. He directed his agents to “inquire concerning living (and dead) usurers and the thing wrongfully acquired by this wicked usury . . . and . . . compel opponents by ecclesiastical censure.”²⁵

Also of note, Church officials regularly ignored the usury of their important friends — such as the Florentine bankers of the Medici family — while demonizing Jewish moneylenders and others. The result was that the image of the merchant usurer was dichotomized into “two disparate figures who stood at opposite poles: the degraded manifest usurer-pawnbroker, as often as not a Jew; and the city father, arbiter of elegance, patron of the arts, devout philanthropist, the merchant prince [yet no less a usurer!].”²⁶ Embed from Getty Images

In theory, the Church was staunchly opposed to usury; in practice, however, it was violating its own moral law in myriad ways. The gap between the idea of usury as immoral and the idea of usury as impractical continued to widen as the evidence for its practicality continued to grow. The Church would not budge on the moral status, but it selectively practiced the vice nonetheless.

This selective approach often correlated with the economic times. When the economy was doing well, the Church, and the civil authorities, often looked the other way and let the usurers play. In bad times, however, moneylenders, particularly those who were Jewish, became the scapegoats. (This pattern continues today with anti-interest sentiment exploding whenever there is an economic downturn.)

To facilitate the Church’s selective opposition to usury, and to avoid the stigma associated with the practice, religious and civil authorities created many loopholes in the prohibition. Sometime around 1220, a new term was coined to replace certain forms of usury: the concept of interest.²⁷ Under circumstances where usury was legal, it would now be called the collecting of interest. In cases where the practice was illegal, it would continue to be called usury.²⁸

The modern word “interest” derives from the Latin verb intereo, which means “to be lost.” Interest was considered compensation for a loss that a creditor had incurred through lending. Compensation for a loan was illegal if it was a gain or a profit, but if it was reimbursement for a loss or an expense it was permissible. Interest was, in a sense, “damages,” not profit. Therefore, interest was sometimes allowed, but usury never.

So, increasingly, moneylenders were allowed to charge interest as a penalty for delayed repayment of a loan, provided that the lender preferred repayment to the delay plus interest (i.e., provided that it was seen as a sacrifice). Loans were often structured in advance so that such delays were anticipated and priced, and so the prohibition on usury was avoided. Many known moneylenders and bankers, such as the Belgian Lombards, derived their profits from such penalties — often 100 percent of the loan value.²⁹

Over time, the view of costs or damages for the lender was expanded, and the lender’s time and effort in making the loan were permitted as a reason for charging interest. It even became permissible on occasion for a lender to charge interest if he could show an obvious, profitable alternative use for the money. If, by lending money, the lender suffered from the inability to make a profit elsewhere, the interest was allowed as compensation for the potential loss. Indeed, according to some sources, even risk — economic risk — was viewed as worthy of compensation. Therefore, if there was risk that the debtor would not pay, interest charged in advance was permissible.³⁰

These were major breakthroughs. Recognition of the economic need for advanced calculation of a venture’s risk and for compensation in advance for that risk were giant steps in the understanding of and justification for moneylending.

But despite all these breakthroughs and the fact that economic activity continued to grow during the later Middle Ages, the prohibition on usury was still selectively enforced. Usurers were often forced to pay restitution; many were driven to poverty or excommunicated; and some, especially Jewish moneylenders, were violently attacked and murdered. It was still a very high-risk profession.

Not only were usurers in danger on Earth; they were also threatened with the “Divine justice” that awaited them after death.³¹ They were considered the devil’s henchmen and were sure to go to Hell. It was common to hear stories of usurers going mad in old age out of fear of what awaited them in the afterlife.

The Italian poet Dante (1265–1321) placed usurers in the seventh circle of Hell, incorporating the traditional medieval punishment for usury, which was eternity with a heavy bag of money around one’s neck: “From each neck there hung an enormous purse, each marked with its own beast and its own colors like a coat of arms. On these their streaming eyes appeared to feast.”³² Usurers in Dante’s Hell are forever weighed down by their greed. Profits, Dante believed, should be the fruits of labor — and usury entailed no actual work. He believed that the deliberate, intellectual choice to engage in such an unnatural action as usury was the worst kind of sin.³³ Embed from Getty Images

It is a wonder that anyone — let alone so many — defied the law and their faith to practice moneylending. In this sense, the usurers were truly heroic. By defying religion and taking risks — both financial and existential — they made their material lives better. They made money. And by doing so, they made possible economic growth the likes of which had never been seen before. It was thanks to a series of loans from local moneylenders that Gutenberg, for example, was able to commercialize his printing press.³⁴ The early bankers enabled advances in commerce and industry throughout Europe, financing the Age of Exploration as well as the early seeds of technology that would ultimately lead to the Industrial Revolution.

By the end of the Middle Ages, although everyone still condemned usury, few could deny its practical value. Everyone “knew” that moneylending was ethically wrong, but everyone could also see that it was economically beneficial. Its moral status was divinely decreed and appeared to be supported by reason, yet merchants and businessmen experienced its practical benefits daily. The thinkers of the day could not explain this apparent dichotomy. And, in the centuries that followed, although man’s understanding of the economic value of usury would advance, his moral attitude toward the practice would remain one of contempt.

End of Part 1. Read Part 2.

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1. This essay was originally published in 2007, when the subprime mortgage crisis was in its early stages.
2. Aristotle, The Politics of Aristotle, trans. Benjamin Jowett (Oxford: Clarendon Press, 1885), book 1, chap. 10, p. 19.
3. Plutarch, Plutarch’s Morals, trans. William Watson Goodwin (Boston: Little, Brown & Company, 1874), pp. 412–24.
4. Lewis H. Haney, History of Economic Thought (New York: The Macmillan Company, 1920), p. 71.
5. Anthony Trollope, Life of Cicero (Kessinger Publishing, 2004), p. 70.
6. William Manchester, A World Lit Only by Fire (Boston: Back Bay Books, 1993), pp. 5–6.
7. Glyn Davies, A History of Money: From Ancient Times to the Present Day (Cardiff: University of Wales Press, 1994), p. 117.
8. Ezekiel 18:13.
9. Deuteronomy 23:19–20.
10. Luke 6:35.
11. Jacques Le Goff, Your Money or Your Life (New York: Zone Books, 1988), p. 26.
12. Edward Henry Palmer, A History of the Jewish Nation (London: Society for Promoting Christian Knowledge, 1874), pp. 253–54. And www.routledge-ny.com/ref/middleages/Jewish/England.pdf.
13. Byrne is here quoting Jacob Twinger of Königshofen, a fourteenth-century priest.
14. Joseph Patrick Byrne, The Black Death (Westport: Greenwood Press, 2004), p. 84.
15. Sidney Homer, A History of Interest Rates (New Brunswick: Rutgers University Press, 1963), p. 71.
16. Sermon by Jacques de Vitry, “Ad status” 59, 14, quoted in Le Goff, Your Money or Your Life, pp. 56–57.
17. See Thomas Aquinas, Summa Theologica, part II, section II, question 78, article 1.
18. Aquinas, Summa Theologica, part II, section II, question 78, article 1.
19. Frank Wilson Blackmar, Economics (New York: The Macmillan Company, 1907), p. 178.
20. Le Goff, Your Money or Your Life, pp. 33–45.
21. Jeremy Rifkin, The European Dream (Cambridge: Polity, 2004), p. 105.
22. Le Goff, Your Money or Your Life, p. 30.
23. Davies, A History of Money, p. 154.
24. Davies, A History of Money, p. 146–74.
25. Robert Burton, Sacred Trust (Oxford: Oxford University Press, 1996), p. 118.
26. Burton, Sacred Trust, p. 118–20.
27. Homer, A History of Interest Rates, p. 73.
28. As Blackstone’s Commentaries on the Laws of England puts it: “When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not.” p. 1336.
29. Homer, A History of Interest Rates, pp. 72–74.
30. Le Goff, Your Money or Your Life, p. 74.
31. Le Goff, Your Money or Your Life, p. 47–64.
32. Dante Alighieri, The Inferno, Canto XVII, lines 51–54.
33. Dorothy M. DiOrio, “Dante’s Condemnation of Usury,” in Re: Artes Liberales, V, no. 1, 1978, pp. 17–25.
34. Davies, A History of Money, pp. 177–78.