by Lewis Hyde
Clearly, then, usury was not unknown in the Middle Ages. But it must nonetheless be emphasized that despite divergent conclusions the common and unquestioned assumption of all Christians during this period was that usury and brotherhood were wholly antithetical. By the twelfth or thirteenth century the word “brother” is always used as a universal, and when the question is raised, the double standard of Moses (or of Saint Ambrose) is always resolved on the side of brotherhood. Here, for example, is Raymond of Pennaforte in the thirteenth century: “From him demand usury, O you, whoever you may be, whom you rightly desire to harm: but you ought rightly to harm no one; therefore, you ought to demand usury from no one.” This is a typical medieval resolution. Here is another from Thomas Aquinas in the same century: “The Jews were forbidden to take usury from their brethren, i.e., from other Jews. By this we are given to understand that to take usury from any man is simply evil, because we ought to treat every man as our neighbor and brother, especially in the state of the Gospel, whereto all are called…” Even in justifying the Crusades, medieval Christians never let go of the basic assumption that usury and brotherhood could not mix. That assumption is the pattern to which the different clothes were cut. Much may have happened in the shadow of universal brotherhood, but the universality itself was never questioned. It is always the ideal: one does not take usury from a brother and all men should be brothers.
The Reformation changed this.
The central figure was Martin Luther. It is difficult to sum up Luther’s views on usury, for he was constantly torn by the question. It is not difficult, however, to summarize the effect of his views. Luther and other leaders of the Reformation organized a division of moral and economic life. Faced with managing the break from Rome, the reformers turned to the alternative power with the most stability: the new merchant princes. There were some priests during the Reformation who called for a new Jerusalem and the abolition of private property, but they did not survive. Those who did survive supported the princes and even advised them on matters of monetary policy. To do this, they ceded power to the state by distinguishing between God’s law and civil law. They said in effect that while it might be hoped that a prince would rule in the spirit of the Gospels, the world was such an evil place that a strong temporal order based on the sword, not on compassion, was necessary. Therefore Protestant churchmen did not in the end oppose civil usury nor any of the other changes in property rights that marked the sixteenth century (such as the charging of rents for what were formerly common lands). The leaders of the Reformation still spoke of brotherhood, but they had become convinced that brotherhood could not be the basis of civil society.
Luther’s views on usury changed greatly during his lifetime. In the young Luther, one finds a traditional medieval condemnation of usury embellished with some attacks on Rome as the usurer. But in 1525 Luther came to a turning point. The Peasants’ War broke out in Germany that year, an uprising whose story has been retold many times, for in it are all the elements of the struggle between spirit and property that marks the Reformation. Germany had seen over a hundred years of unrest among peasant farmers as feudalism faded and princes began to consolidate their power by territory. Roland Bainton, a historian of the Church, writes:
The law was being unified by displacing the diverse local codes in favor of Roman law, whereby the peasant… suffered, since the Roman law knew only private property and therefore imperiled the commons—the woods, streams, and meadows shared by the community in old Germanic tradition. The Roman law knew also only free men, freedmen, and slaves; and did not have a category which quite fitted the medieval serf. Another change … was the substitution of exchange in coin for exchange in kind.
The Peasants’ War was the same war that the American Indians had to fight with the Europeans, a war against the marketing of formerly inalienable properties. Whereas before a man could fish in any stream and hunt in any forest, now he found there were individuals who claimed to be the owners of these commons. The basis of land tenure had shifted. The medieval serf had been almost the opposite of a property owner: the land had owned him. He could not move freely from place to place, and yet he had inalienable rights to the piece of land to which he was attached. Now men claimed to own the land and offered to rent it out at a fee. While a serf could not be removed from his land, a tenant could be evicted not only through failure to pay the rent but merely at the whim of the landlord.
Some of the radical priests identified with the Reformation supported the peasants’ opposition to these changes, and Luther was therefore pressed to clarify his position. In 1523–24, Luther preached on Deuteronomy (the sermons later being published as Deuteronomy with Annotations). In this book he refers to the Mosaic law that releases debtors from their debts every seventh year, calling it “a most beautiful and fair law.”
But [he says] what will you say to Christ who … forbids to demand repayment of a loan and commands to lend without the hope of receiving equal value in return? I answer: Christ is speaking to Christians, who are above every law and do more than the laws ordain; but Moses provides laws for people in civil society, who are subject to the government and the sword, so that evildoers are curbed and the public peace is preserved. Here, therefore, the law is to be so administered that he who has received a loan pays it back, although a Christian would bear it with equanimity if such a law did not come to his aid and a loan were not repaid … The Christian endures it if he is harmed … although he does not forbid the strictness of the avenging sword.
Law and faith are already separated here. A second example from the same years will flesh out the tone of this division. In 1523 James Strauss, one of the more radical priests, suggested not only that no one should charge interest, but that debtors should resist their creditors or themselves share in the sin of usury. The peasants were delighted, but the local clergy and landowners complained to the electoral government, which in turn asked Luther for his opinion. Luther opened his reply by saying that it would be “a noble, Christian accomplishment” if all usury was abolished. Then he gets practical. Strauss, he says, does not “sufficiently deal with the risk” that a businessman takes when he loans capital. Further, “by using high-sounding words, he makes bold the common man … Perhaps he thinks the whole world is full of Christians …” The reply is typical of Luther’s approach: he opposes usury on moral grounds but distinguishes between civil authority and Christian ethics, and in the end cedes to the princes the right to decide economic questions.*
In these fights, Luther stands personally torn in the conflict that tore the Middle Ages apart, the fight between sacerdotium and imperium, between church and state. He resolves the opposition by authorizing it. For whatever reasons, by the sixteenth century power had come into the hands of the holders of private property. Those religious leaders who survived were the ecclesiastical statesmen willing to recognize the civil authority of princes, and even to serve them. Some in fact became the economists who helped the princes develop the details of a cash economy. The German theologian Philipp Melanchthon, for example, stepped into a dispute in Denmark in 1553 and helped King Christian III organize the structure of interest rates.
Those reformers and movements (such as the Anabaptists) that did not recognize the new sense of property did not survive. Thomas Müntzer, another radical priest, actively supported the peasants in Saxony and stood in clear opposition to Luther and his advice to statesmen:
Luther says that the poor people have enough in their faith. Doesn’t he see that usury and taxes impede the reception of the faith? He claims that the Word of God is sufficient.Doesn’t he realize that men whose every moment is consumed in the making of a living have no time to learn to read the Word of God? The princes bleed the people with usury and count as their own the fish in the stream, the bird in the air, the grass of the field, and Dr. Liar says, “Amen!” What courage has he, Dr. Pussyfoot, the new pope of Wittenberg, Dr. Easychair, the basking sycophant?
What a clear voice! The
authorities caught up with this man, tortured him, and cut off his head.
By the end of the Reformation the power to judge the morality of property rights rested in the hands of secular rulers. There is a story about a group of ministers in Regensburg who, in 1587, questioned the validity of the 5 percent contract. They were dismissed from their posts and exiled from the town by the Protestant magistrates. Luther generally opposes usury on moral grounds, but at crucial moments he supports civil power, and as civil power in turn supported usury, the effect of his separation of church and state was to narrow the circle of gift.
The dissociation of civil and moral law brought with it the popularity of the distinction between “interest” and “usury” which we still have today. The two terms became widespread in the sixteenth century, though in fact they had been in use for some time. In Latin the verb interesse means “to make a difference, to concern, to matter, to be of importance.” We still use it in this sense, as when we say a thing “interests” us or when we have an “interest” in a business. In medieval Latin the verbal noun interesse came to mean a compensatory payment for a loss: if someone loses something of mine, something I have an “interest” in, then he pays me my interesse to make good the loss (and he pays me nothing if I have no interest). The word then came to refer to what could be lost when capital was loaned, and a debtor who defaulted on a loan was obliged to pay the interesse, a fixed amount described in his contract. This payment supposedly differed from usura, a direct charge for the use of money, but the difference was not that great: creditors came to say that if they lost profits because they couldn’t reinvest their money, this was also interesse, and rather than describe it as a fixed amount in the contract they came to charge a percentage reckoned periodically.
Even in the Middle Ages, then, interesse was, in practice, one of the shades of usury. By way of illustration we may take a dispute in the Church shortly before the Reformation that was resolved by distinguishing between usury and interesse. At issue had been Christian pawnshops, known in Italy then as now as monti di pietà, mounts of mercy. Here a Christian burdened with debt could come and borrow a little cash to begin another season. Benjamin Nelson describes their founding:
The Brotherhood of Man was the banner under which antisemitic friars … cloaked their demagogic appeals to expel the Jewish pawnbrokers, who had swarmed from Rome and Germany into the Italian towns in response to municipal invitations to set up shops, with licenses to take from 20 to 50 per cent on petty loans … [They] regurgitated the oft-discredited charges of ritual murder, incited mobs to attacks on Jewish life and property, and harangued the people and their magistrates to destroy the Jews, and establish Christian pawnshops, the monti di pietà. By 1509, eighty-seven such banks had been set up in Italy with papal approval …
The priests who defended the monti insisted that the money taken above the principal on a loan was not usury at all: it was a contribution to defray the cost of operating the pawnshops, including the salaries of the officials.
This, of course, is precisely why usury had been prohibited in the first place: the spirit of the gift demands that no one make a living off another man’s need. A group of people comes to be called a brotherhood not only when the circulation of gifts assures that no one has lost touch with the sources of wealth, but also when no individuals in the group can make a private living by standing in the stream where surplus wealth flows toward need. If there are always enough needy people around to feed a group of pawnbrokers, then something is seriously wrong with the brotherhood.
Nonetheless, the monti were set up and Pope Leo X officially approved them in 1515. In a decree at the Fifth Lateran Council he ruled that they could charge interest. The money taken was not to be called usura, but compensation for damna et interesse (damages and losses). It was a fee to cover the risk involved in making a loan, the loss of what the money might have earned if it had not been loaned, and the salaries of the pawnbrokers. Even before the Reformation, “interest” was the term accepted to express the right of stranger-money to earn a moderate return.
Luther and other reformers, particularly Philipp Melanchthon, borrowed this page from their enemies. Around 1555 Melanchthon distinguished between two kinds of loan, one officiosa and the other damnosa. When a man loans his neighbor an amount he can easily spare for a short time, the loan is officiosa and should be free. A damnosa loan, on the other hand, is any forced loan, any loan with no fixed time for repayment, or “sums freely invested with merchants in the form of a partnership.” As the creditor risks a loss in all such contracts, Melanchton wrote, “the rule of equality demands that he receive a compensation, which is called interesse, amounting to no more than five percent.” Luther himself made similar discriminations, condemning usuries of 60 percent, for example, but allowing an 8 percent return on annuities. By the end of the Reformation a new double language had been firmly established for the new double standard. In the eyes of the Lord, usury is still a sin and rightly condemned. But in the everyday world, interest is both necessary and just. Interest is civil usury; now we have capitalism.
There is a way in which these distinctions—between interest and usury, between moral and civil law—revive the dichotomy the Middle Ages had tried to lay aside. Moses, Saint Ambrose, and Luther all recognize two laws. However, though it is related to its predecessors, the distinction that Luther makes is radically different.
In the first place, it is a different thing that is divided in two. In the Old Testament, mankind as a whole is seen as either Brother or Other, and an Israelite conducts himself differently depending on whom he is with. Now each man is divided. The church and the state may be separate but each man partakes of both. When each man has a civil and a moral part, the brother and the stranger live side by side in his heart. Now when I meet someone on the street he is either alien or kin, depending on his business. As each man may participate in a universal brotherhood, so he may partake in an unlimited foreignness. He may be an alien anytime he chooses and without leaving home. He may justify the calculations of his heart as a necessary check to the calculations of others, just as Luther justifies the sword.
Luther’s dichotomy differs from that of Moses in yet another way. When the stranger and the brother live side by side, it is not only each man’s heart that is divided, but the local population as well. Rather than a new tribalism we find the seeds of social class in Luther’s formula. Here is a passage from Deuteronomy with Annotations in which the stranger of old ends up as the poor man of today:
Why is it that [Moses] permits repayment of a loan to be demanded from a stranger … but not from a brother …?
The answer is that this … is according to a just principle of public order, that by some privilege citizens are honored beyond outsiders and strangers, lest everything be uniform and equal … The world has need of these forms, even if they appear to have a show of inequality, like the status of servants and maids or workmen and laborers. For not all can be kings, princes, senators, rich men, and freemen in the same manner … While before God there is no respect of persons, but all are equal, yet in the world respect of persons and inequality are necessary.
Luther is not just speaking of the ancient world here. When social policy is called into question, he does not feel it should be decided by “the common herd, which is insolent anyhow,” but prefers to place his trust in the princes. To my knowledge, he does not develop the idea directly, but his tone certainly leads one to feel that Christians, though rare, are probably more numerous among the landowners and that the new aliens may well be the lower classes.
One could almost argue that the new formulations of the Reformation are an attempt to reclaim space for the spirit of the gift. Luther tried to free the Church of its empire. Even in his ceding of power to civil rulers there can be seen a desire to reclaim the proper sphere of the spirit in a neo-Mosaic fashion. But when we listen closely to Luther’s tone, we do not hear the call for a new brotherhood. Other reformers exhort this,
but not Luther. He goes out of his way to insist that the Christian spirit cannot be set loose in the world:
I have already said that Christians are rare in the world; therefore the world needs a strict, hard temporal government that will compel and constrain the wicked not to steal and rob and to return what they borrow, even though a Christian ought not to demand it [the principal], or even hope to get it back. This is necessary in order that the world may not become a desert, peace may not perish, and trade and society may not be utterly destroyed: all which would happen if we were to rule the world according to the Gospel and not drive and compel the wicked, by laws and the use of force, to do and suffer what is right. We must, therefore, keep the roads open, preserve peace in towns, and enforce law in the land, and let the sword hew briskly and boldly against the transgressors … Let no one think that the world can be ruled without blood; the sword of the ruler must be red and bloody; for the world will and must be evil, and the sword is God’s rod and vengeance upon it.
