|The Doctrine of Usury in the Middle Ages
By Simon Smith Kuznets, transcribed by Stephanie Lo
An appendix to Simon Kuznets: Cautious Empiricist of the Eastern European Jewish Diaspora
Note: because the document was hand-written, some words are difficult to ambiguous, and are not easily deciphered through cursory research. These are marked with a superscript of “a” (for ambiguous).
The aim of this essay is to present a clear picture of the medieval thought on the subject of usury. The topic requires an extensive preliminary elucidation. If there is no knowledge of the medieval thought, the preliminary explanation has to prevent us from carrying over the general background of our modern ideas into the different world of Middle Ages. If there is some knowledge of the medieval thought, it is possibly a clear-cut but arbitrary opinion, which should be eliminated. To insure against blundering and misunderstanding, we have therefore, to make clear the subject, to fix its limits and also to survey briefly the general characteristic of the medieval thought, the basic ideas of which the doctrine of usury was a more concrete application.1
The first possible misunderstanding is in the word “usury.” Usury now is understood as a practice of credit-bargains with exorbitant charges for the loan-accommodation. The word is associated with a picture of a cruel pawnbroker squeezing ruinous charges out of a honest poor man for the wretched pittance of money loaned. But usury in the Middle Ages was a broader form. Any credit bargain, where any charges were made for the use of money, was called a “usurious deed.” The word itself was derivated from the Latin “usus” – “utor” – which means “use”, and meant charging reward for the use of money. Thus all the modern credit of nations where any interest is charged for the use of money, would be classified in the Middle Ages as “usurious.” Accordingly, the medieval doctrine, translated into our modern language, is the doctrine of interest on loans.
From the explanation of our subject given by the medieval meaning of the word “usury” we are led to the clearing up of what we mean by medieval and Middle Ages. Usually, Middle Ages is defined as the period of the European history, which lies the 5th and the 15th centuries A.D. We cannot, however, take this mechanical definition as a satisfactory indication of limits on our subject. If we take the medieval thought on usury, as a topic for investigation, there must be more reason which would justify it. This reason is given by the fact that all medieval views on the subject have a certain common mark, a common backbone which is characteristic of the medieval doctrine and distinguishes it from the ancient doctrine or the modern one. Different as they are, the views of St. Augustine in the 3rd century and St. Thomas or Gerson in the 13th and 15th centuries, these view all have a common approach, a common treatment and partly a common solution of the social problems before them. The simpl(er) methodological raison d’etre of our topic as a subject for independent organization is the organic unity of all medieval views of usury. This continuous unity of views was a result of a common view of life shared by all students in the Middle Ages. It is therefore our chief point in the preliminary explanation to give a brief summary of the basic ideas of medieval thought. In my title I have intentionally used the word doctrine instead of the more usual term “theory.” Theory means always a scientific system treating a certain subject for the purpose of discovering causal connections between generalized facts. Doctrine, in the literal sense of the word, means any systematic set of views. But usually “doctrine” denotes the systems of views, which are not theories, being built on a principle different from that of discovery of causal, actual relations. Thus, we say that the Nationalist Part of Germany has its doctrine, this being a set of views where all the things are arranged as to their relation to the greatness and power of Germany, this last being the principle upon which the system of views was built. In this sense, the medieval system of views on usury was a doctrine, and not a scientific theory. What the medieval thinkers looked for, investigating the phenomenon of usury, was not the discovery of the actual existing relations of the facts and their causes, but they tried to trace the relation of facts to another principle, which was held by them as preeminent.
What was that supreme principle which was the basis of the medieval system of views? It can be argued, when we conceive the fact that quite all medieval thinkers on social matters, were more or less churchmen. It is a generally accepted fact and we can take it as granted, the more that in our investigation further we shall have the occasion to prove it. Our task now is to see how this fact of all medieval thinkers being teachers of Christian religion or morality, determined their general conception of things.
The first basic idea of the medieval learned was certainly the gist of the moral teaching of the Christian religion. In his social life a man had to act with brotherly love towards his brethren and with full obedience to the church regulations. Every action and event was considered not a value per se, but a subject to investigation and appreciation as to how this fact showed a conformity to the moral Christian principle, or was a condition to a moral action. The purpose of a man in life was to be worthy the external bliss in Heaven. As the present life was something of a vestibule leading to the temple of the eternal life on the other side of reality.
This principle thought out to its logical consequences brought about a renunciation of activity and encouraged hermitism and asceticism. If it were the only principle taken as it is, any worldly, secular activity, and economic activity specially, would be renounced as obstacles to the spending of the present life in contemplative preparation for the future one. But most of the churchmen conceived that the church organization has to work taking in account the actual situation of the real life. This brought about a certain discretion in the appreciation of the first important principle to the actual life. This discretion was a further development of the idea of “natural law” in the social life, idea which was widespread in the Greek and Roman world.
This “natural” idea ran, approximately, as follows: Nature as it is, was created by God and was the gift to the mankind. AS far as the nature is concerned, there is no possibility of sin or cure in it. It is the man who through the sin of his progenitor, Adam, became liable to sin, evil, etc. But even man, as far as the man’s normal nature is concerned, is not evil and not liable to evil. An activity which is concerned with nature and which is undertaken by man not in excess of his natural, normal needs is not evil in itself. It is only when a man succumbs to an overexcessive grossness of his material substance, above the normal, natural experiment of it, that he be liable soon to be the victim of the devil. Nature as it is, in man and in the universe, is God’s creation and it is no evil as far as it is kept in the bounds of normal nature. This principle became the basis of all medieval views on the social life, and we shall see later how persistently and unflinchingly these views were formulated and applied to the facts of the economic life.
The opinion on usury of the Church-fathers in the Roman Empire.
The Christian church was faced with the problem of usury in the time of Roman Empire, when the Christian religion was in its teens, an idealistic and quite evolutionary creed of an oppressed minority. After all the investigations of the historians it is pretty clear that the economic life of Roman Empire presented a high development of trade, chiefly foreign, of banking and of the system of credit. At any rate, the testimony of the Roman law is clear enough. We shall see further how this same Roman law revived in the 11th century confronted the canonics and scholastics no less even more than it did the Church Fathers of the 3rd century.
It was the third century A.D. when the church-fathers first took up the question of usury. This was the time when the Christian religion formulated its views on the social problems. At the same time appeared St. Augustius book “de Civitas Dei”, in which the relations between church and state were defined. And at the same time the first judgments on usury can be found in sermons and writings.2
As it followed clearly from the teaching of Gospel and all the spirit of Christian religion, usury was flatly condemned. Tertullian (160-?) and Cyprian (3rd century) forbid it referring to the Old Testament prohibitions to the Jews to take any interest from their brethren Jews. Lartanz Tiusa adds to this textual authority the assertion that usury is against the “righteous conscience” (lechts beuristseina), a conception popular among the Roman jurors as the conscience-creator of natural law. Together with the authorities, the clear cut argument is brought out that the loans are made in the satisfaction of a man’s urgent need, and then the moral obligation of a Christian is to lend money gratis. Charging any reward in that case would mean exploitation of the fellow-man’s need.
There is no doubt that these opinions were in decided contradiction to the practice of usury in the real life of that time, and also that they were in discordance with the prevalent views on usury not only among the pagans but among the Christians themselves. As a century later Chrysostom complained, not only the Christian laymen but even the Christian clergy practiced the business of usury and did not consider it bad at all. It is significant that Pope Kallistus (217-22) himself was in his earlier life a banker and it was not counted as an obstacle to his becoming a Pope. It is probable, that the Christians did not consider themselves bound by the authority of the Old Testament. As to the arguments of the Church-fathers, they were no doubt disputed. The traces of these anticondemnation arguments we find in the writings of Chrysostom (345-70 – 407 AD) and St. Jerom (340-2 – 420) when these fathers took up the question of usury.
Their discussions on the subject took the form of supporting the fathers of the 3rd century and of refuting the arguments against condemnation of usury. An argument was stated that usury is in compliance with the civil law, is accepted voluntarily by the debtor and the charges are paid by the latter with thanks. Chrysostom aus wers that the compliance with the civil law is compatible with committing sin against God; that the readiness of the debtor to pay interest is a result of his urgent need, and not because he wants to; that the thanks are paid to cruelty, what is most unnatural. And this argument against condemnation claimed that the loan is for the debtor a mean of earning money and as many lenders became rich, it is no sin to require charge for a loan. This reason was refuted by the assertion that the productivity of the loan is not that of the money but of God’s benefit, and that if few borrowers became rich, most of them were compelled to take up the rope as a Cast rescue (that means, to hang themselves). On another case, St. Jerome is confronted by the question whether charges are permissible in the case when 1 bushel of wheat is loaned and it, sown, gave a harvest of 10 bushels. St. Jerome plainly dodges the question, answering by a dilemma*. The loan is given either to a poor man or to a rich one. The rich man will not take the loan because he is rich and does not need it. The poor man will take because he is in need of it, and in this case it is the duty of the Christian to accommodate the need of his neighbor without profiting from it.
These refutations, especially of the last case, indicated that the condemnation of usury by the church fathers was decided and admitted no exceptions. We should conceive that the Christian religion in that time was only growing, was an ideal which did not come yet to the stage of its realization, when its adherents would have been confronted with the necessity of taking in account the life as it is and not as it should be. Hence this purity and absoluteness of the condemnation.
It is interesting to note that when these views had to be enacted, the real measures taken to exact the prohibition of usury, were far more mild than it could be expected. To be sure, the first council in Elvira (year 306) forbade practicing of usury to any person, threatening even the laymen with excommunication. But already the next two councils, of Arles (314) and Nicaea (325) do not say anything about the laymen, respecting the prohibition of usury-practice only to clergy. All the later councils (except this of Carthage in 419) repeat the prohibition nearly in the same form. On till the end of the 7th century the regulation created by the councils, exclude the laymen from a compulsory prohibition of usury practice, imploring this restriction only on clergy. And in many cases, the regulation seems to overlook the lower clergy pressing the penalty only on the higher church officials.
There are many grounds to suppose that the practice of usury in the real life was yet more unrestricted than on the paper of the councils regulation. As Gregory of Nissa (329-389) relates, in choosing a parson the authorities did not take in account his previous experience in the usury business.3 One incident illustrates vividly the actual situation. A certain Moor bought merchandise from a Christian to the amount of 400 solidi and as he bought it on credit he gave to the Christian notes for 500 silidi. But the prices fell and the Moor sold the merchandise with a great loss. He returned to the Christian 410 solidi, but as the creditor required the whole 500, he appealed to the Pope, Gregory the Great (540-604. Pope 590-604). The Pope did not find necessary or permissible to order the Christian to withdraw his requirement of the 500 solidi. But he asked the creditor as a Christian not to press whom the Moor as the latter could not return the whole sum. This shows how, while the church-fathers renounced usury from the idealistic height of their teaching, it was freely practiced in the actual life.
The doctrine of usury during the dark period.
The opinions of the Church-fathers on usury belong properly to the epoch usually indicated as the time of Ancient World, and not of the Middle Ages. But these opinions were the first expression of church-authorities on the subject, and they remained the sole authoritative opinion free the 12th-13th century. Indeed in the period which was the first in the historical period of the M. Ages (I mean the period of 6th – 11th century), there was very little said about usury. The Dark period was also dark in respect of treachery, study, investigation, or argumentation.
It seems impossible for that period to find clearly expressed, written opinions on the matter of usury. If something can be known on that subject, it can be found only in the decrets and regulations issued by the church-councils, Popes and other church-authorities. These documents were collected in the 12th century by the Bolognese monk Gratians, into a body named “Corpus Juris Canonici.” It is from scattered hints and references in these documents that it became possible to clear up the proper “canonic” doctrine of general economics and of the subject of usury.
“Corpus Juris Canonici” begins like the Roman Code of Justinian by the distinction of civil law and natural law, with that difference that the Canonic code calls the civil law “human” and the natural “divine.” In this dualism the Canonic code fully develops the two principles, indicated above as general in the Middle Ages, the principle of subordination to Heaven by moral together with the acception of undisguised nature as the Gods work and gift to the mankind.4 What concerns us here is, that the Canonic code includes among the several “divine” (or natural) laws the law of community property. The divine law is this which existed in the Paradise till the first sin, when the mankind was in state of uncorrupted nature (“in states incorruptus natural”). It was after the first sin, that the divine law could not be embodied on the earth, and the civil law began to regulate the life of men. The civil law admits private property, but it should be conceived as a sadful digress from the principle of common property of the divine law, as an unavoidable evil which afflicted men as a punishment for the first sin of Adam.
The further application of the dualistic principle was acceptance of land and labor, as the only two possible factors of production. The world of the civil law and secular life was admissible only as far as it was in the strict limit of the natural necessity. Land was a gift of God: therefore agriculture was considered the least evil of the occupation. The artisan worked over the products of nature and applied his labor thus it was also permissible. But trade was dangerous, because it was far from nature, it was in a constant touch with money, and money was the most dangerous of all the objects to deal with.
Money was admitted by the scholastics as a necessary evil. They confessed that money is useful as a medium of exchange, as a measure of value of things. And they accepted it only so far. But if money becomes a source of income, if money will be used not for exchange purposes, but to produce a surplus of money, then it is a decided evil. The production factors are land and labor both given by God. If money becomes a productive factor for itself then it tries to compete with God’s productive factors, and is therefore, undoubtedly, the work of the Devil.
It is clear now, that this condemnation of money as a productive factor is directed against usury in any of its forms. It implied the idea of the “barren” quality of money, idea which was first formula by Aristotel5 and later became the basic point of the scholastic doctrine of usury. It can not be said that this idea was clear in the minds of the creators of the canonic law. We should constantly have in view that the above cited reasoning was written in no book, was nowhere developed by the churchmen of that period, but is only a patch-up of scattered references, reasons brought out in the decrees prohibiting usury. It does however express adequately what was the popular notion of usury in the minds of the people who tried to appreciate it from the then exclusively prevailing point of view of Christian morals.
We saw that while the Roman Empire yet existed the regulation of usury by the Church councils was far more mild than it was required by the teaching of the fathers. But during the discussed Dark period, the situation changed. The Church became a more powerful body; the Christian religion spread and the Christians formed the majority of population. Accordingly the regulations of the Church assumed new importance and bearing.
During that period arose a difference in relation to usury between the Greek Christian church with its centre in Constantinople and the Latin Christian church with its centre in Rome. The Greek church shared the same condemnation-opinion on usury as it was expressed by the fathers and upheld by the Latin church.6 But the church authorities in Constantinople found it unnecessary to change the regulation of the old councils, which prohibited usury-practice only to clergy, recommending the ceasing of usury-practice in laymen but imposing punishments in case of the practice was really entertained by a Christian layman. It was evidently in realizing the impossibility of enacting a usury-prohibition, that the church-authorities in the East abstained from declaring a general prohibition. We have a record of the result of an attempt really made. In the 9th-century King Basilius of Macedonia, under the Influence of the Christian religious teaching issued a law prohibiting usury under heavy penalties. The law was a failure. Basilius’s son and successor, King Leo the Wise saw himself compelled to repeal the law. In explaining the reasons of the repeal, Leo the Wise stated that though usury was certainly forbidden by God and thus should not be permitted by civil law, the grossness and avarice of men turns the prohibition null, and brings about disobedience and false swearing. Thus the practice of usury in the ___sena Empire was all the time regulated by the law of Justinian, which limited the charges to 4% in case the creditor was a nobleman, 8% in case the creditor was a merchant, and 6% in case he was from the common people. If the loan was made for foreign trade the rate was limited to 12%.
The situation in Western Europe was different. In 784 the council of Aachen was proposed to by Carl the Great to prohibit the usury for laymen as well as for clergy.7 This prohibition was confirmed and this had the clerical power as well as the power of the state. This prohibition, which forbade usury in the extensive realm of the Franken Empire, met evidently disapproval and protest. As a result the next councils of Mainz (813), Reinisa (813), Aachen (816) find it necessary to repeat the prohibition in the most sweeping terms. This enforcement of prohibition with increasing threats for violation is going on till the second half of the 9th century, when evidently the Christian usury was driven out. After 864 there is a gap in the church council’s records on the matter of usury, until the second half of the 11th century when the changed economic condition brought again the problem of usury to the scrutiny of the church authorities.
The reasons for the difference in usury-regulation between East and West can be presented here only in a form of a daring suggestion. It may be explained chiefly by the difference in economic and political conditions. While the wave of the migrating Teutonic tribes swamped Western Europle, the Greek territory remained untouched. While the new inhabitants of Western Europle brought with them their economic system of community life and “natural economy”, the economic conditions in the East though were lower than these of Roman Empire in the 2-3rd centuries8, presented a developed foreign trade, obsolete principle of private property with class distinctions, developed exchange etc. While in the credit operations in Western Europle take the form only of consumptive credit, which does not justify any interest charges, the credit operations in the East were well developed, were of assistance, at least, to trade and had the benefit of an old, rooted institution. We have, however, to remember that everywhere, both in the East and in the West, the opinions of the churchmen (and they were the only students of the matter, if there were any), present an absolute, condemnation of usury as a contradiction to the “divine law”, as a plague resulting from the corruption and grossness of the sinning man.
The scholastic doctrine of usury. T. Aquinas
The 11th century marked the beginning of an extensive revival process in the economic life of Western Europe. The growth of towns, the development of the handicraft industries, the increase in the bulk of trade, the establishment of markets, fairs etc. brought about profound changes in economic life. The money-system was growing, the credit operations were becoming more and more a socially necessary function, and the relations of buyers and sellers, creditors and debtor grew again as a modern problem before the students – churchmen and the church-authorities.
Together with the revival of economic conditions and, no doubt, a result of it, a revival of the Roman Law took place. It started in Northern Italy to the close of the 11th-century, the centre of this “glossator” movement being the Bolognese school of glossatiors. Shortly after it became so popular that it pushed the theology out of its privileged position as the most popular and usual course of study. It represented an entirely new line of thinking for the medieval student and was in decided contradiction both to Canonic theory and practice. If we conceive that now in the 20th century, the codes of the Continental European countries are based on this Roman Law, and Justinian’s Code is the basic authority for deciding new questions, we can realize how important and contradictory to the general trend of medieval thought was the spread of Roman Law studies.
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