Usury and Growth

I am by no means an admire of leftist politics, but I must admit that the English Labour MP in the above clip is attacking a real evil. The so-called payday loan companies that give short-term loans at a very high rate of interest are a particularly clear and extreme example of the injustice of usury. They exploit the distress of the poor, enticing them into an unjust contract, obligating them to exchange (say) £182 for  £100.

Payday loans are clearly absurd, but they are typical for an economic system in which usury is the default solution to bottle necks both in supply and in demand. Leftist analysis of economic injustice is often as insightful as Leftist solutions are disastrous. Take a look at David Harvey’s application of Marx’s analysis of the internal contradictions of capital accumulation to the current situation:

That’s a remarkably pithy summary of the basic underlying dynamics of the system. The first point at which usury enters into the system is in supply. Supply is supposed to work by a capitalist taking money, buying means of production, hiring labour, and and using an industrial technology to produce enough of a commodity to pay for the means of production + labour + a profit. The first point at which usury enters into the system is simply to accumulate enough capital at the right place and time to get the system going. But this means that enough of the commodity has to be produced to pay for means of production + labour + interest on debt + a profit. Unless of course one delays re-paying the debt, for then one can reinvest part of the profit in an expansion, and pay from the expanded profit. This is the first point at which growth becomes vital: one needs to be able to expand. The imperative to expand is of course also strengthened by competition (not to mention greed).

Now an interesting problem arises: it’s simply what G.K. Chesterton identifies as the basic contradiction of capitalism: namely that it wants the mass of men to be both poor (since their wealth comes from wages) and rich (since they are the capitalist’s customers). Another way of stating the paradox is to say: where does the necessary surplus demand come from to keep the growth going? Marx explains the contradiction by means of a simplified model of the economy: if you had an economy entirely divided between capitalists and workers increase in demand can’t come from the workers, since they can’t possibly spend more money than is paid to them in wages. So the capitalists themselves have to supply the surplus effective demand. But how is that possible? Well, the answer is of course by usury. But now it’s lending money to the consumer. Credit cards are a great example here. This is money lent to increase demand in order to drive growth. So now you have a system in which both supply and demand are financed by usury which always depends on future expansion. Hence debt increases with the growth of the economy. The whole thing is an elaborate Ponzi scheme that only works as long as there is a very high rate of growth.

But of course one can answer to this that in fact it has worked pretty well. Every once in a while there’s a depression in which a lot of people go bust and the system starts over again as it where from scratch, but for the most part the economy keeps growing. And while perhaps we have more usurers making unjust gains than in earlier economies, we also have less people starving. Is constant growth such a bad thing? What about “be fruitful and multiply” and all that. This is the line of argument taken up by Edward Hadas in a book that I have just begun reading. In the introduction Hadas remarks that he began the book intending it to be simply a condemnation of the modern economic world. Synthesizing the thinking of the anti-capitalist Jewish left in which Hadas was raised, and the anti-modernist strand of Catholic Social Teaching to which he had been converted. But soon he came to think that a tout-court condemnation was an inadequate response to what he calls the “pro-life” features of modern industrial capitalist economy. This economy, he contends, allows the world to support many more people, and allowed them to live longer, healthier lives, and expand their knowledge of creation. “A life-lover cannot simply dismiss these accomplishments as meaningless.” (p. xvi) So Hadas goes about trying to formulate a constructive critique of the system. Hadas’s point made me think of a chilling scene in Jonathan Franzen’s novel Freedomwhere the misanthropic Walter attacks economic growth:

Mainstream economic theory, both Marxist and free-market, Walter said, took for granted that economic growth was always a positive thing. A GDP growth rate of one or two percent was considered modest, and a population growth rate of one percent was considered desirable, and yet, he said, if you compounded these rates over a hundred years, the numbers were terrible: a world population of eighteen billion and world energy consumption ten times greater than today’s. And if you went another hundred years, with steady growth, well, the numbers were simply impossible.  […] “I mean, everybody is so obsessed with growth, but when you think about it, for a mature organism, a growth is basically a cancer, right? If you have a growth in your mouth, or a growth in your colon, it’s bad news, right?” (pp. 121-122)

An anti-life vision if ever there was one. In a brilliant undergraduate essay Caleb Cohoe once made a “pro-life” argument for capitalist economy similar to Hadas’s, in which he points out that Aristotle thought that one had to prevent poverty by limiting population including by infanticide and abortion.

But then again, if one looks at the actual effect of the globalization of the capitalist system in our times one sees that it has spread abortion and contraception to the four corners of the globe. So I’m looking forward to seeing how Hadas’s unfolds his project of a pro-life re-thinking of our economic life.


9 thoughts on “Usury and Growth

  1. I’ve never heard a homily at a novus ordo Mass condemning usury. Of course I’ve never heard one condemning contraception either.

    What both have in common is how hidden they are while being incredibly destructive to modern western society.


  2. I’ve never heard a sermon about either at a Traditional (*T*radition! tradition!) Mass (registered trademark). So what?

    (Have definitely heard sermon(s) about contraception at NO masses, and about assorted economic/material injustices, though I don’t recall if usury was mentioned in particular.)


  3. Berenike writes : “So what?”

    Given how widespread and accepted they both are, I find it notable. But then again

    I have heard a couple of dozen homilies against abortion. But I have never heard a homily explaining how surgical abortions are only 10% of all induced abortions, and that 90% of all induced abortions are chemical abortions caused by abortifacients like the pill, IUD etc.

    I don’t recall ever hearing a homily against homosexuality, or fornication, or adultery, or masturbation.

    I don’t recall ever hearing a homily against pornography, or any of the sins of the flesh.

    I have heard one homily against indecent dressing. By a priest who was obviously effected by it because he threatened to not say daily mass if women kept coming to mass in sexually provocative clothing. And by indecent dressing I don’t mean skirts above the knee, I mean skirts virtually just above the vagina line, and you get the picture.

    I don’t recall ever hearing a homily against our unjust wars of aggression, but I have heard lots of praise for those who are “fighting for our freedom” by committing those same unjust acts of war.

    I have never heard a homily against inflation and how destructive it is to the family, especially by forcing mothers into the workforce.

    I have never heard a homily against consumerism and how destructive it is to the family, especially by luring mothers into the workforce.

    I don’t recall ever hearing a homily against capitalism, specifically its treatment of men as no more than means of production.

    I don’t recall ever hearing a homily on responsibility of employers to pay a living wage.

    I have never heard a homily on how modern american society emasculates men and how destructive that is to the family.

    I don’t recall ever hearing a homily on annulments and separation encouraging spouses to stay together versus the modernist solution of “catholic divorce”.

    I have heard homilies on NFP, but never on ecological breastfeeding.

    I have once heard a homily explaining that Christ is truly present in the Eucharist.

    I don’t recall ever hearing a homily on how charity is best practiced close to home, but I have heard lots of homilies asking for donations for strangers.

    I don’t recall ever hearing the words, schismatic, or heretic. But I have heard the term separated brothers.

    I don’t recall ever hearing the word infidel, or ever hearing how Islam is a real and becoming ever more dangerous threat to the Faith and the faithful.

    I don’t recall ever hearing the term fallen nature, but I’m sure I must have somewhere.

    I don’t recall ever hearing the term mortal sin, but I’m sure I must have somewhere.


  4. The root of the evil is the love of money, which finds its happiest home in the practice of usury.

    Usury perverts the nature of money and hence Dante puts usurers and Sodomites side-by-side in Hell.

    Given what Aristotle said about usury, I find the classic neoliberal economist’s objection to the Christian’s objection (based on usury), “That,” (says the neoliberal) “money today is different from money then” to be a complete admission on their part of Aristotle’s primary point (against usury): i.e., it perverts (changes) the nature of money. Therefore (and obviously!), the systemic practice of usury is going to result in money acquiring a different (perverted) nature (being now given a false fecundity) than money would have in, say, the Middle Ages, when the practice of usury was greatly restricted (at least in the West).

    Money has no natural fecundity. The Medievals recognised this fact and with Aristotle forebade usury to be practiced. The argument that money today is different than the money of times past should be self-evidently ridiculous: “Pray tell, what is so fundamentally different about the man who bought some food and ale with his coins in the Middle Ages, and the man who buys some food and ale with his coins today?” The answer should be (because it is) nothing, but as the apologists of usury are always insisting, there is yet this mysertious “something” nonetheless; something fundamentally different: that difference is the unnatural and vicious consequence of usury.


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  6. Well, I agree that usury, actual usury, is unjust. But is not clear to me that it is always usury in the cases you may be pointing to. People usually do need money for investment in their business and some people make a business out of having money to lend to businesses. Or even if they don’t have the money, they charge fees because they bring together those who want to invest money and those who want to be invested in. Now it is just for such people to expect payment for such a service. It may not be the best way, but I think that it is like the way people buy and sell recorded music. Obviously, the artists and the recording companies ought be remunerated for/supported in (if you prefer 🙂 ) the work that they do. Now, the language of intellectual property that people used to justify such transactions may be faulty, but justice is served by the system. Likewise, maybe it is not correct to speak of paying for the money and for the use of the money, but justice is being served when people charge interest because they are providing a service of giving enough money for a certain amount of time at just the right time.


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