Saturday, 16 February 2008

The Debt Disaster: Rowan Williams questions 'loans at interest'

(See an update on this, 25th April 2008.)

In the Q&A after his famous 'Shari'ah' speech, RW was asked about the practice of usury. His answer was very similar to the things I've been saying about the subject (also search Debt Disaster on this blog for other posts in the same vein).

LP: Thank you. Another, another fairly down to earth. "Our existing world order is based upon usury with control by manipulation of rates of interest. In Islam this is not just illegal but sinful. How can this be reconciled with Christianity? And this Christianity also condemns the existing order as the law of Mammon."

RW: I've often been rather surprised by the ease with which the Christian church changed its mind about usury in the sixteenth century, without any very great public fuss. Martin Luther strongly disapproved of it; he was a good medieval Catholic in ail sorts of ways, and he disapproved of it like his medieval predecessors on the basis of the Bible, tradition and the authority of Aristotle. But within about fifty years of the beginning of the Reformation, virtually everybody had mysteriously and imperceptibly decided that there wasn't a problem.

Now, without going into details of the history of that fascinating issue, I think that in all seriousness what theologians and moralists have said about lending at interest in the modern economy, is simply to raise the question "Is this what is prohibited in Jewish scripture?" And they've answered on the whole, "No". And yet I have to say there remains, or should remain for the Christian moralist, a level of discomfort around this. Taking absolutely for granted the manipulation of rates of interest as the engine of an economy, ought to leave us with some unfinished moral business, let's say, and I believe that rather than, so to speak, address that head on, we need to look - and this has been said by many people - at what are the alternative protocols and ethical frameworks for banking that are around. And that is one reason why ! am personally go very interested in the ethics and practice of micro-credit as a way of addressing serious poverty.

Read the rest of the Q&A here.

Thanks to Peter Kirk for the tip.
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  1. (Oxford)

    Thanks for posting John. Your pamphlet raises many interesting questions. It has always puzzled me why anti-usury Christians have not yet followed the lead of the Muslims in developing a system of interest-free banking. Such a model would not be so difficult since financiers could replicate the contractum trinius system developed in the Middle Ages.

    I wonder if one reason has been that Christians are concerned not to fall into the same trap as Islamic finance, which economists have argued does nothing to alleviate poverty? Sharia banking still compensates for the time value of money, just as the contractum trinius did, and also incorporates the idea of sharing the risk of investments, as did Luther. But under such a system customers often end up paying more than they would have done under a system of direct interest payments.

    Another reason, and I am guessing here, would be to say that if one is to be consistent, the argument against usury ought be applied to the public sphere as well as the private. It seems to me, for example, that something like the devaluation of a nation's currency (money being a loan from people to government) is very similar to extracting negative interest from the people.

    Whatever the problems, I like the idea of challenging our current preoccupation with money - our obsession with economic growth and rejection of the idea that less often is more - which runs counter to the very heart of the Gospel. Now there is pubic lecture that RW would be well advised to be giving!

  2. (Chelmsford)

    Thanks for acknowledging the tip.

    My concern about any system of interest-free banking is that it becomes only nominally interest-free. I am not an expert on financial matters, but from what I remember there are already financial instruments available allowing investments or loans at an initially discounted price, but with no actual interest. Presumably this is the kind of thing which is permitted under anti-usury laws, whether sharia or mediaeval Christian. But how are the yields of such instruments calculated and compared? Usually, I think, in terms of a percentage yield over the life of the product. So we now have something being bought and sold which differs from a bond on which interest is paid in a purely nominal and technical sense (and perhaps in how it is treated for tax purposes).

    Now such nominal differences may satisfy the legalistic requirements of a law-based religion. But, as they entirely ignore the intended spirit of the law, I don't see how they can be appropriate for Christians living by grace.

    I would suggest that the only fully Christian way of running one's finances is to move towards what happened in the early chapters of Acts, Christians holding their property in common, or at least, instead of lending, giving to one another whenever they see a brother or sister in need. Yes, this is also a controversial idea, but I think it is a more fundamentally Christian one than trying to find ways to profit from money without it technically being interest.