economics – Ben Taylor

Pope Benedict XIV’s 1745 encyclical Vix Pervenit “On Usury and Other Dishonest Profits” states:

The nature of the sin called usury has its proper place and origin in a loan contract. This financial contract between consenting parties demands, by its very nature, that one return to another only as much as he has received. The sin rests on the fact that sometimes the creditor desires more than he has given. Therefore he contends some gain is owed him beyond that which he loaned, but any gain which exceeds the amount he gave is illicit and usurious.

Thus he says that, even if a contract is agreed upon by two consenting parties, the creditor is guilty of usury if the contract says that he is owed back more than he gave.

This applies even to loans which are to be used for productive or business ends, not just the more obviously nefarious consumer loans, for he says that the sin of usury cannot be condoned “even by arguing that the money borrowed is not left idle, but is spent usefully, either to increase one’s fortune, to purchase new estates, or to engage in business transactions.”

The modern mind will quickly say, “What then? Can no use be made of idle money by exchange and business? Is there to be no collaboration of resources, which produces wealth?” The pope clarifies:

[It is not] denied that it is very often possible for someone, by means of contracts differing entirely from loans, to spend and invest money legitimately either to provide oneself with an annual income or to engage in legitimate trade and business. From these types of contracts honest gain may be made.

And later in the letter he says that it is an “extreme” which is “evil” to judge the matter with such severity as to say that “any profit derived from money” is illegal and usurious.

So there is certainly some category of contracts that legitimately spend and invest of money with the goal of profit. Yet this sort of legitimate contract cannot, under any guise, involve the collection of interest, for he later writes:

Some will falsely and rashly persuade themselves…that together with loan contracts there are other legitimate titles or, excepting loan contracts, they might convince themselves that other just contracts exist, for which it is permissible to receive a moderate amount of interest.

But no such legitimate, interest-charging contract exists. Therefore, what must the man do who wishes to put his money to work?

Whoever therefore wishes to follow his conscience must first diligently inquire if, along with the loan, another category exists by means of which the gain he seeks may be lawfully attained.

What kinds of contract? He doesn’t say. As in many Catholic social teachings, the pope here leaves the nitty-gritty up for us to determine, but lays out the moral principle in ironclad terms. Perhaps a profit-sharing arrangement, where the partner who sails the merchant vessel and the partner who stays home share in both the risk and the reward? Perhaps something else.

But whatever contract you make, don’t charge interest.

The pope dispels the notion, nearly ubiquitous today, that the prosperity of the modern era has depended on such conventions as these for stimulating the economy.

Christian minds should not think that gainful commerce can flourish by usuries or other similar injustices. On the contrary We learn from divine Revelation that justice raises up nations; sin, however, makes nations miserable.

If that is true, then, judging by how much our current global economy is built on the charging of interest, we are headed for great misery indeed.

My wife and I recently visited Brooklyn and spoke with our city-dwelling relatives about how to do community and how to organize human life well. There’s been a lot of back and forth in my thinking between City Mouse and Country Mouse—the vision of the walkable, beautiful, vibrant urban setting vs. the vision of the pastoral existence where one can cultivate a little eden in view of mountains, near a small town that affords community and vibrancy. Which is better? Each has trade-offs. But in between the two is something that tried to have both and ended up with the best parts of neither: the suburb. On that we and our urban relatives agree: it was a failed experiment, having grown into a monstrosity of uniform strip malls and cookie-cutter neighborhoods where it’s remarkably tough to connect. But why?

On the train back I pondered it a lot, and tried to draw some synthesis out of the apparent conflict between city and country. For one thing, I think Andrew Peterson was right, that the City of God is a place where “culture and nature are in harmony.”

I think another key is seeing the good city (of any size) as a complex cluster of neighborhoods, rather than one large thing. You can only have community in a human-size neighborhood, where things don’t take forever to get to, and where you have meeting places and green spaces. Then there’s the economic component, which is tough to crack, but working together and doing church together are maybe the two major ways to build community that catalyze with the neighbor proximity, and so you’ve got to have some sort of economic co-dependence with your neighbors, and some commonality of belief.

These attributes apply even to the small town of yore, where fewer people is offset by a more full life integration. No one is commuting away from that community for any life function so 2,000 people is fine.

One idea to add to the mix is the role of policy in clamping down on corporate greed’s tendency to sprawl: of collectively aspiring to bring harmony between culture and nature through intentional restrictions upon ourselves through our laws (in distributist fashion). I’m thinking in particular of the Greenbelts of the UK. These have kept urban areas more granular, and at the same time in closer proximity to green spaces. I also think incentives to encourage people to operate in smaller community units are appropriate—like credit unions instead of chain banks, for instance, and farmer’s markets that source locally versus Walmart’s produce section.

But ultimately, the methods must be in line with the goals, and you cannot achieve this mainly through big top-down policy. We should be focusing first on creating viable examples of this in miniature—good homesteads and communities—which can grow contagiously. It is foolhardy to attempt to change the whole architecture of our land by theory first. Let’s find a way to live this balance and prove it to a world that has forgotten it.

Tag: economics

Fixing the suburbs