David Graeber on Usury and the Psychology of the Conquistadors

The ostensible reason for the Spanish conquests in the New World was the bringing of Christ to the natives. But the extraordinary rapacity and cruelty shown by many of the Spanish soldiers often made a mockery of this purpose. Bartolomé de las Casas describes in gruesome and almost incredible detail how countless Indians, including women and children, were murdered. There was something diabolic about the measureless frenzy of their cruelty as de las Casas says, they behaved, “more inhumanely then rapacious Tygres Wolves and Lyons.” Continue reading

Deliverance From the Hands of Usurers

Daniel Nichols has posted a piece on the American Bishops’ failure to agree on a statement on the economy. One wishes that they had come out with a stern reminder of the Church’s perennial teaching against usury, and suggestions for overcoming it. Some Americans are attacking usury though; the eccentrics of the Occupy Wall Street  movement. They have had a brilliant idea for saving some people from usurers:

OWS is going to start buying distressed debt (medical bills, student loans, etc.) in order to forgive it. As a test run, we spent $500, which bought $14,000 of distressed debt. We then ERASED THAT DEBT. (If you’re a debt broker, once you own someone’s debt you can do whatever you want with it — traditionally, you hound debtors to their grave trying to collect. We’re playing a different game. A MORE AWESOME GAME.)

The name “Rolling Jubilee” is explicitly taken from the Old Testament jubilee. As one commentator puts it “it … feels great to have the opportunity to be an anti-bank for once. There’s something very good about forgiveness.”

Meanwhile, Front Porch Republic reports on a method from a completely different part of the American political “spectrum” to help poor immigrants avoid getting into the hands of usurers in the first place:

Eleven years ago, Bruno Rivas left Mexico City to make a better living for his family in San Francisco. He landed a job at a restaurant and began making some money, but couldn’t figure out how to break out of a cash system into a marketplace driven by credit. […] he was able to purchase items for daily provision, but without a means of building credit, he struggled to find a way to fund larger purchases or take bigger steps toward financial health. But then four years ago, Bruno learned about the Bay Area-based Mission Asset Fund (MAF)—an organization that has garnered nationwide recognition for its nontraditional approach to lending—and decided to join a peer lending circle, or “cesta populare” (“community basket” in Spanish). Joining a cesta meant that Rivas and the eight other members of his circle would contribute $100 every month to a communal pot. After drawing names to determine order, members would take turns collecting a loan that they could then put toward whatever they chose. When Rivas’ turn came around, he took the loan from the lending circle, combined it with savings from an Individual Development Account (IDA) that MAF had set up for him, and purchased equipment to start a screen printing business.

“Peer Lending Groups” are doing the same sort of thing as the montes pietatis.

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.