Econostrum | Economic News in the Mediterranean



The ancient and monotheistic sources of the prohibition of interest

By Ezzedine Ghlamallah, entrepreneur and researcher

(photo : F.Dubessy)
(photo : F.Dubessy)
Aristotle considered men who are greedy and do not respect equality as unjust. Indeed, the unjust man either takes too much of the wealth that should go to others, notably through interest, or too little of the "evils" that should go to him and which he leaves to others. It is in this sense that, in his eyes, the greedy man never respects equality and that it is the role of justice as a 'whole virtue' to restore this equality and to combat the pleonexia that often leads to men wanting to monopolise profits and transfer their losses to others.

Indeed, Aristotle already raised the issue of usury in his Politics, Book 1, Chapter 3: "We are especially right to abhor usury, because it is a mode of acquisition born of money itself, and does not give it the purpose for which it was created. Money was only meant to be used for exchange; and the interest derived from it multiplies it, as the name given to it in the Greek language indicates (the word which in Greek means "interest", comes from a radical which means "to give birth to"). The fathers here are absolutely similar to the children. Interest is money from money, and of all acquisitions it is the most contrary to nature. ".

Interest was undoubtedly judged by Aristotle to be unnatural, because nothing that exists in nature resists the alteration of time, whereas interest, under the effect of time and as a human creation devoid of all materiality, tends inexorably towards infinity. Man, in conceptualising interest, has given an attribute of eternity to one of his creations, and it is surely for this reason that it is so reprobated in the scriptural sources of the monotheisms. Cicero reported a quote from Cato the Elder in which he was asked: "What about the interest loan? "and he replied: "What about murder? ".

Usury is considered the most serious economic crime

The Torah uses two terms for interest: "bite", whose Hebrew root means "to bite", and "surplus", whose Hebrew root means "to increase". The "bite" expresses the suffering of the borrower and the "surplus" the enrichment of the creditor. The Old Testament contains many passages condemning the practice of usury and interest.
In the Gospel we find the parable of the unforgiving servant or the parable of the debt according to Matthew, whose original text led the clergy to deduce that the Gospel advocated the abolition of debt.

For Aristotle, who condemned chrematistics, money does not have the ability to grow, it is unfruitful and rather resembles a fungible good such as wine for which it is impossible to proceed to a dismemberment contrary to real estate. Aristotelian thought had a major influence on scholasticism in the Middle Ages, as embodied by Thomas Aquinas, who wrote: "(...) if someone wanted to sell wine on the one hand, and on the other hand wanted to give up the use of it, he would be selling the same thing twice, or he would be selling what does not exist: he would therefore obviously be doing an injustice. ". For Thomas Aquinas, time cannot be sold without being the object of an injustice, since it has no monetary value, which for Aristotle was the greatest evil.
The fathers of the Church were unanimous in their vehement condemnation of the practice of usury, mainly for the following two reasons: firstly, it is explicitly forbidden by the Old Testament to charge interest, and secondly, it is not compatible with the Christian commandment to love one another. The Church's position for many centuries has been that interest leads to slavery. Through the inability to pay interest, the indebted borrower unwittingly enters into lifelong servitude.

It is in this context that the very idea of economic coercion was first established in relation to usury, considered the most serious economic crime. St. Ambrose of Milan unequivocally declared usury to be a form of theft: "If anyone carries usury, he commits theft". In accordance with these rules, the Church therefore prohibited interest in Europe by classifying the lending of money as usury. It was through Calvin's reformation that this practice became acceptable. It was Protestantism that justified the legitimacy of interest: "Capital has the character of an immediately productive good" and interest was thus able to acquire a legal character.


The condemnation of interest is a universal attribute

In Islam, the firm and definitive prohibition of usury took nine years, the prohibition was done gradually, as historically this practice was very rooted in pre-Islamic societies. The Prophet Muhammad began by abolishing the interest that was due to his family. Indeed, he asked his uncle Abbas to cancel all interest owed to him. In Islam, cheating a new market entrant is considered usury in the same way that an agent artificially fuels demand to raise the price of an auction. Applied to the market economy and modern finance, this prohibition is understood to include taking advantage of asymmetric information or market price manipulation. Through the mechanism of mark-to-market valuation, these prohibitions increase the fairness and efficiency of markets and can improve economic efficiency by encouraging cooperation and reducing information asymmetry. Furthermore, economic analysis shows another largely perverse effect of interest rates that contribute to financing inefficiency: risky borrowers, including the disadvantaged, are denied access to credit, forcing them to turn to informal markets.

As we have just seen, the condemnation of interest is found in Aristotelian wisdom and in the three monotheisms. Rather, it is a universal attribute shared by different forms of wisdom and spirituality and is distinct from this form of 'modern' finance that is speculative and disconnected from the financing of the real economy. Thus, this prohibition of interest raises the question of the ethical or moral value of a system that remunerates the idleness of capital through bank interest and allows the rich to be ever richer without having to make any effort other than to be rich.

This position seems ethically and morally untenable and unacceptable: both from a traditional point of view, referring to the sources of the different forms of human wisdom, whether it be ancient Greek wisdom, or one of the three monotheisms; but also from a modern point of view, when we contemplate the state of depravity of the present world enslaved by the grip of debt and the system of financial slavery which through the establishment of an excessive exploitation of nature and living beings has led to the destruction of ecosystems.

Ezzedine Ghlamallah, entrepreneur and researcher

Tuesday, April 27th 2021

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