CHAPTER XXI

INTERESTS IN THE PRE-CAPITALISTIC PERIOD

In its beginnings interest is a phenomenon either of international or feudal law. Within a tribal village, or clan community, there is neither interest nor lending, since transfers of value in consideration for a payment are unknown. Where outside resources are used in economic life it is done under the form of neighborly help, such as invitation work in connection with house building or assistance in case of emergency, which rests on the duty of helping the clan brother without compensation. Even the Roman mutuum, a loan without interest, is a survival of these primitive conditions. The obligation to help in case of need receives an extension when it is taken over by religious communities and imposed upon brothers in the faith; the best known example is that of the Israelites. It is not the fact that they took interest which is peculiar to the Jews, for interest has been received everywhere in the world, including the medieval monasteries themselves; rather it was exceptional and repugnant to the western peoples that the Jews took interest from Christians but not from each other.

The prohibition in the Torah against taking interest or usury from the brother rests partly on military and partly on religious grounds. In the first place, the clan brother must not be imprisoned for debt and thus lost to the army. For this reason the ancient Egyptian religious code ascribed to the curse of the poor, a special force with the divine powers and this idea passed over into the book of Deuteronomy. The distinction thus set up between internal and external ethics survived the exile; and after the Israelites became the Jews, interest was still forbidden between compatriots while it might be taken from foreigners (“Gojim”). Thus Maimonides could ask the question whether the Jew was under obligation to take interest from them.¹

The prohibition of interest taking from a brother is also characteristic of early Islam and of Brahminism. Interest everywhere arises in the field of lending to foreigners outside the tribe or that of loans between classes. In this connection the contrast between creditor and debtor was originally always a contrast between a town-dwelling patritiate and rural peasants; it was so in China, India, and Rome, and the same conception also dominates in the Old Testament. The possibility that a prohibition against interest should arise rested on the fact that all credit was originally emergency credit and purely for consumptive purposes, so that the idea of a brotherly obligation could arise in opposition to the demand for interest by the master class; a further consideration is that behind the warning against interest there was a strong military interest since the creditor ran the risk of being reduced to the condition of a landless proletarian who would not be in a position to equip himself for war.

The occasion for breaking through the prohibition against interest was provided by the loan of concrete property. The first case is the cattle loan. Among nomads, the contrast between propertied and non-propertied persons is fearfully sharp. The man who owns no cattle is forthwith outlawed and can only hope to rise again to full citizenship through a loan of stock and stock breeding. Of similar import is the seed loan, which in Babylonia especially, confronts us as a customary usage. In the one case as in the other the object of the loan replaces itself manifold and it did not appear an unjust conception if the creditor reserved for himself a part of the fruits of his cattle or grain. In addition, the prohibition against interest was broken wherever town life developed.

In the Christian occident the need for credit for industrial purposes originally found expression rarely in the form of a loan with a definite interest but rather in that of an association. It was not the prohibition of usury by the church which was behind this arrangement, so much as the risk connected with oversea business ventures. In view of this risk a definite interest rate was not so much at issue in such transactions; instead, the creditor participated in the gain as compensation for the risk to which the capital he provided was subject. Hence the Italian commenda, the dare ad proficuum de mari, with an interest rate depending in accordance with a scale, on the port of destination. These primitive trading credit transactions were not affected by the ecclesiastical prohibitions of usury. On the contrary, a fixed loan against fixed interest became customary in connection with land transportation because the risk here was less than in overseas trade. The formula salvum in terra signified that the capital loan must be without reference to the result of the enterprise.

At the same time, however, the opposition to usury on the part of the church increased in energy. Hence the prohibition of interest is not a product of an age of purely natural economy, but the movement reached its full development only as it was allowed to lapse in the face of a growing money economy. Pope Gregory IX even condemned sea loans as usury. Equally false is the assertion that the church pursued an opportunistic policy in connection with interest and favored the development of capitalism. In fact it pursued the war against interest with increased determination and forced many a man to restore interest on his death bed just as today the confessional enforces restitution of goods stolen from a master. But the more money economy developed, the oftener was the prohibition evaded, and the church had to meet the situation by general indulgences. Finally, in the face of the power of the great Florentine bankers in the 15th century it was confronted by facts which made all opposition fruitless. Theology then attempted to interpret the prohibition as leniently as possible, but the tragedy was that the church itself as a temporal power was forced to have recourse to loans at interest.

At first, before the church itself undertook the establishment of lending institutions (the montes pietatis) a way out was found in the money lending of the Jews. This was characterized by the fact that it afforded the political authorities the possibility of adopting a “sponge policy”; that is, the population was exploited through their payments of interest to the Jews and at irregular intervals the state confiscated the profit and the outstanding loans and simultaneously banished the Jewish creditors. In this way the Jews were hounded from city to city and from country to country; formal pools for robbing them were established between the princes, as for example between the Bishop of Bamberg and the Hohenzollern Burgrave of Nuremberg to the effect that they shared in the booty when the Jews fled from the jurisdiction of one to that of the other. Meanwhile the attitude of the church to the taking of interest became increasingly cautious. It is true that a formal suspension of the prohibition was never decreed, but in the course of the 19th century ecclesiastic depositions repeatedly recognized as legal the taking of interest under specified conditions.

In northern Europe the prohibition against usury was broken up by Protestantism, although not immediately. In the Calvinistic synods we repeatedly meet with the conception that a lender and his wife must not be admitted to the Lord’s Supper, but Calvin himself declared in the Constitutio Christiana that the purpose of the prohibition of interest was only the protection of the poor against destitution and not the protection of the rich who carried on business with borrowed money. Finally, it was the Calvinistic leader in the field of classical philology, Claudius Salmasius, who in his book De Usuris in 1638, and in a number of later tracts, undermined the theoretical foundations of the prohibition against interest.