CofE Acts on Usury

It's a subject I've posted on in the past, so it's nice to see this news.

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Pay-day loans - the scandal of silence

“Lord, who may live on your holy hill?” asks David in Psalm 15. Answer, the one whose walk is blameless, who does what is righteous and, tucked away at the bottom, “He who lends his money without usury” (v 5, NIV).

That little word ‘neshek’ is one that ought to be written large over our Western culture. Indeed it may turn out to be its economic epitaph.

Simply, it means ‘charging interest’, which is of course at the basis of modern capitalism. In Mere Christianity, C S Lewis pointed out that our economies were therefore based on something which, until the end of the medieval period, all Christian traditions had taken to be a sin. Whilst admitting that he was no economist, he said it would nevertheless be remiss of him not to make this observation.

Personally, I think we now know how right he was. An economy driven by interest charges is fatally flawed. Furthermore, it seems to me Jesus also had this ‘traditional’ take on economics.

In the parable of the talents, the master says to the man who accuses him of reaping where he has not sown, “then you should have put my money on deposit with the trapezites” — according to the Greek English Lexicon of the New Testament a broker or banker who ‘exchanges money for a fee, and pays interest on deposits’. In other words, he should have lent to someone as grasping as he makes his master out to be.

Some still want to argue that the Bible is not opposing ‘sensible’ or ‘business’ loans. Personally I doubt that, but whatever one’s view there is surely something utterly scandalous about the increasing proliferation of so-called ‘pay day loans’. Our television screens are full of their adverts, and that alone surely indicates a booming business. With a typical repayment rate of over 4000% (that’s right, four thousand per cent) they surely qualify by anyone’s standards as ‘excessive’.

Furthermore, it is not just the desperately poor or the economically ignorant who are falling victim to what is basically a scam. In today’s Daily Telegraph, a reporter writes of her experiences with just such a loan, pointing out that with the so-called ‘credit crunch’, banks and other lenders are being urged to be cautious in the loans they offer.

Her conclusions are hard to dispute:

“Legal loan sharks have simply stepped in to the breach, devoid of proper regulation that might provide a cap on lending, and now, worst of all, this Government is actually cosying up to them. As was revealed in The Daily Telegraph a fortnight ago, Wonga executives attended the recent Conservative Party conference and paid £1,250 a head for face-to-face meetings with ministers from the Treasury and the Department for Business.

Instead of financial lessons about loans being learnt, it feels as if the normalisation of debt is close to being complete. You never hear anybody talk about “saving up” any more, unless it’s for a house, and even then that process is only in place so that you can take out a whopping great loan. Entire lives and lifestyles are still built on credit, and it is seen as uncontroversial that one of the Prime Minister’s closest employees goes to work for a company that has been investigated by the OFT.”

This makes me angry. I hope it makes you angry too. Every time I see a ‘Wonga’ advert, I want to throw up. And every day there seem to be more such companies. Yet the Church, along with society as a whole, seems to be strangely muted in response.

This is not a case of wanting the Church to leap on a crusading bandwagon. Nor is it the traditional call for the Church to attack the profit motive. It is about the exploitation of the poor and indeed the spread of poverty. If the directors of these payday loan companies are getting rich, we know exactly at whose expense they are doing so — the poor sap who thought they could pay for that car repair or that little treat for the kids by taking out just a little extra.

In my book, payday loan companies and heroin dealers are not that different. They both relying on getting the needy client hooked and then milking them for all they can.

In God’s book it is already clear where they stand — and it is not on his holy hill.

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Interest: a real injustice to the poor

Meanwhile, back in the real world, here is something the churches surely ought to have got their teeth into long before now:

Rising levels of poverty are putting millions at risk from spiralling debts, with the Government facing renewed calls to crack down on lenders who make large profits by exploiting the poor.

Those on benefits and the working poor are at greatest risk, according to new government figures which show that the number of payouts to people forced to appeal for emergency financial help from the Government has almost trebled in only five years.

The Bible is quite clear:

O Lord, who may abide in your tent? Who may dwell on your holy hill? [Those...] who do not lend money at interest, and do not take a bribe against the innocent. (Psalm 15:1,5)

Calvin was wrong on this, Luther was right, and the more that money-lending has become part of our social fabric, the worse things have got, not least for the poor.

If you want to see other stuff I’ve written on this subject, just click on the ‘labels’ below.

JPR

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Is there a Christian economic ethic?

Apart from its (almost mandatory) snide headline, and a couple of "nudge, nudge" witticisms in the accompanying text, The Independent has published an article on Christianity and ethical investment which could be a useful discussion-starter.

The second paragraph reads,

Cash has always been a thorny subject for the devout. How can one be rich and pious? There can't be too many Christian bankers who are unaware that, according to Christ, camels have a better chance of passing through the eye of a needle than bankers do of getting into heaven. Yet the wealthy may be able to sleep more soundly following the creation this week of Europe's first "Christian equity index". The Stoxx Europe Christian Index is the brainchild of a German investment firm that has spotted a gap in the market to provide a list of companies that the faithful can happily invest in without feeling like they are sinning at the same time.

Of course, Christian interest in ethical economics has been around for a long time. In the 1970s and 80s evangelicals in this country were trying to think through some of the issues involved. Sir Fred Catherwood penned a number of works which I seem to remember were regarded as quite controversial for not saying that Capitalism and wealth-creation were bad (remember, this was in the days when Christians either worried about, or rather approved of, Marxism).

And there have long been Christian groups and companies developing means of 'ethical investment'. The Ecclesiastical Insurance Group, for example, has certain standards it maintains for its 'Amity' funds.

But back in the sixteenth century, Martin Luther and others were writing about what we today would call 'economic justice'.

In the last couple of decades, though, it all seems to have gone rather quiet. One of the few solid works I'm aware of on the subject is Andy Hartropp's What is Economic Justice? Biblical and Secular Perspectives Contrasted. This is a very solid work and deserves to be widely read and known. But the commitment in the 'Five Marks of Mission' to "seek to transform unjust structures of society" and to "strive to safeguard the integrity of creation and sustain and renew the life of the earth" don't seem to be translating into very much except (still!) a vague hostility towards and discomfort about Capitalism, which has meanwhile so richly blessed us in the West.

What the article in The Independent might usefully prompt is a discussion on precisely what is a 'Christian' view of economic life. Regulars on this blog, for example, will know that I have a 'thing' about the biblical mandate against usury in any form. (And, contra an opinion in The Independent, I did not take my cue in this from the Muslims, though I do think they usefully show that an ethical principle can actually have an economic application.)

Most of us are also dimly aware of the examples of past Christian entrepreneurs, especially amongst the Quakers.

I cannot help wondering, though, whether from a Christian point of view what matters is not the great scheme of things but the small - the 'insignificant' - details. It is surely as great a challenge to be personally honest in one's business dealings in the office as it is to come up with some 'macro-economic' theory.

Many years ago, I heard someone who was regarded as something of an evangelical leader advocate that Christians in the workplace should go along with the 'dodgy practices' and 'petty' dishonesties so that, when the time came for them to speak up in the Trade Union meetings, they would not have lost the respect and the hearing of their workmates because of their 'stand-offish' attitude. That has got to be mad, hasn't it?

Personally, I think that telling the truth at work because you are a Christian is just as likely to get you 'crucified' as wearing a cross - and I have to admit to being frankly relieved that my own form of employment lets me off most of these ethical challenges.

John Richardson
28 April 2010


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Children died, the days grew cold ...

Afficionados of Larry Norman will know that the line from I wish we’d all been ready continues, “A piece of bread would buy a bag of gold.” The reference is to the days after the supposed ‘Rapture’: “The Son has come, and you’ve been left behind,” is the ‘punch-line’ to the song. The idea is that in the days before the Tribulation (with a capital ‘T’) the condition of the world would become worse and worse, until the Christians were finally removed, leaving the planet to its own, or rather Satan’s, devices.

This is a concept with which I have very little theological sympathy. I think that the notion of the Rapture is based on a misreading of a Scriptural image (specifically, 1 Thess 3:17). In that sense, I am a classic amillennialist. But, perhaps controversially, I am not one of those who believes that Christ could return ‘at any moment’. It seems to me that the argument of 2 Thess 2:1-11 (“that day will not come until the rebellion occurs and the man of lawlessness is revealed”, v3) depends on their being certain discernible events taking place before the Second Coming of our Lord.

Less controversially (maybe), it also seems clear to me in the Scripture that Christians will not be preserved from the world’s sufferings before the End. The bad news, from that point of view, is that we will have to stick around.

Back in the realms of controversy, however, I am entirely unconvinced by the Post-millennial scenario expressed in one of my favourite Christmas songs, “It can upon a midnight clear,” with its reference to the “age of gold” which will come round “with the ever circling years.” It is a wonderful idea with a long pedigree, that the Church will prove triumphant and, through the gospel, bring an age of peace and prosperity, but again I do not believe it fits the Scriptural evidence. Rather, the evidence points (I am persuaded) to increasing difficulties and a final outbreak of rebellious evil.

At the same time, I am aware that previous generations which thought they were living in the end ‘end times’ have all been wrong, whether they were the pessimists of medieval millenarianism or the optimists of the nineteenth century Student Volunteer Movement with its slogan of “the evangelization of the world in this generation.” History teaches us caution. Yet I cannot help feeling a certain resonance between Norman’s angst and what appears to be coming towards us just over the horizon.

The immediate cause of these musings is an article I came across by a gold analyst (here as a pdf), warning of the potential danger of hyperinflation. I am not an economist, and am therefore not in a position to judge his prescience, but I know a Christian who is, and he is making exactly the same prediction for similar reasons, namely that far from being almost out of the recession caused by the credit crunch we are about to have our ‘swine ’flu’ moment as a second wave of problems hits us in the form of runaway inflation.

The heart of it is that the First and Second worlds have accumulated debts which make Third world debt a thing of, if not indifference, certainly insignificance in terms of the global economy. The Christian’s view is that the measures taken by Western governments have done the trick and saved the economy from simply going ‘pop’. However, they have done it because governments have an advantage with regard to debt which is not possessed by the ordinary citizen and it is called ‘the printing press’. That is to say, governments can create money. The posh name for this, as most people know, is quantitative easing. The Analyst and the Christian both agree that the way governments have been buying their own bonds has averted the immediate disaster. But they both also agree that this still has to be ‘paid’ for.

Who, then, will pay? The answer (because there is no-one else) is that we will. In the immediate short-term it may be by the traditional method of taxation, for the other thing governments can do which ordinary citizens cannot is to raise revenue from ordinary citizens. In the long term, however, we will pay by massive (perhaps hyper) inflation. If multiple trillions of dollars (that is $N,000,000,000,000) are ‘owed’ —and they are —then somehow the debt has to be reduced. The good news is that you can do this by printing money. The bad news is that printing money is inflationary. The very bad news is that an awful lot of money is going to have to be printed. The good news —maybe, if I’ve understood this correctly —is that when the £20 note in your pocket is actually a £20,000 note, that debt mountain has just had a useful number of zeros knocked off its effective ‘value’.

All this, however, brings me to two questions —or rather one question with two aspects, and it is this: are we, the Christian church, ready? Readers will not be surprised to hear that I think we are not. On the one hand, we seem to be saying nothing, and to have nothing to say, about the current economic situation, beyond an easy criticism of ‘the greed of the bankers’. Yet we could just as easily criticize ‘the greed of the man in the street’, for all that debt, whether amassed by governments or corporations, is allowing us all to live beyond our means, right down to the level of ‘schools and hospitals’ so beloved by our political leaders.

As the Analyst points out, we have already had one scary foretaste of what the future will hold with the spike in basic food prices, especially rice, that occurred in 2008. The difference next time is that whereas previously the impact of such ‘spikes’ was absorbed by people in the Far East doing without, next time they will have the economic clout to compete, and the pinch will be felt here. The indebtedness of our societies puts us in an increasingly poor position (in every sense) as global economic competitors, and the balance of economic power is undoubtedly shifting to China and India.

The Western church, at least, seems to have nothing to say, just when a ‘prophetic’ voice might actually come in handy. We could, for example, be denouncing First and Second world debt, or warning about the credit-card culture, but we are not. Instead, we are paralysed by the headlights.

But the Church also seems unready for the spiritual challenges this implies and entails, for (as history again shows) economic hard times bring with them spiritual risk. This may not be the time before the End Times, but it certainly provides the opportunity for spiritual forces which have been at work throughout history to manifest themselves in ways which will be simultaneously both deeply attractive to the mass of humanity and deeply inimical to God’s people.

I am constantly reminded of the verses from Revelation 13 which express, I believe, not so much a prediction as a recurring theme of history: “He [that is the second beast who is the ‘false prophet’, 19:20] also forced everyone, small and great, rich and poor, free and slave, to receive a mark on his right hand or on his forehead, so that no one could buy or sell unless he had the mark, which is the name of the beast or the number of his name.”

Who, in 2009, could imagine the free countries of the West succumbing to a system of economic dictatorship? Yet who in 1950s England could imagine a London bus ticket costing over a pound? And who, in early Weimar Germany, would have imagined Christians would be unsure how to respond to a man who offered them economic security and a glorious future at the price of complete obedience?

Revd John P Richardson
6 October 2009

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A Jubilee for the West?

I've just had an idea which has got to be worth a go.

The Jubilee Debt Campaign has long been pushing for the cancellation of debts owed by the Third World, for reasons outlined here.

However, it is now surely the case that countries like Great Britain owe (or will soon owe) sums that dwarf the debts of typical Third World nations. Moreover, they too owe this money to wealthy lenders in wealthy countries. Again, as in the Third World, it is the average citizen, not the super-wealthy minority, who will ultimately have to pay the interest and the capital of these loans and who will suffer the consequences of indebtedness entered into by their governments.

The solution, however, is obvious: extend the Jubilee to the West. Indeed, I am rather warming to the Jubilee Debt Campaign's proposal here:

9. How do we prevent future debt crises? We need economic justice - covering debt, trade, aid, tax, etc - and responsible financing in the future. There must be international action to ensure that we never return to a debt crisis like the one which has now been crushing poor countries for decades. After the 'clean slate' of cancellation of unjust ('illegitimate') and unpayable debts, this will mean firstly that there must be just trade rules, a just tax system, and sufficient, high-quality aid – with a bias towards grants not loans – so that countries are not forced back into indebtedness. It also means that any future loans should be given responsibly, on fair terms, and in a transparent way which is open to scrutiny by parliaments, media and citizens. Any loans given on unjust terms should be considered the responsibility of the creditor and therefore eligible for cancellation in future.

In fact, if we can combine the principles of the Jubilee Debt Campaign with the approach of our present government, everybody wins (almost)! We can borrow the money, return to full prosperity and not be saddled with endless repayments. Magic!

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'Ecclesia Reformanda': plain Reformed or something else?

A couple of days ago I posted, by request, a link to a website for a new journal of "British Reformed Theology" to be called Ecclesia Reformanda. Being both British and Reformed, I was quite happy to do this (though it did cross my mind to wonder why we need a new journal at this point in time, especially since I know, from experience, how difficult it is to keep a journal going).

However, I have since received a communication pointing me to the blog run by David Anderson, which takes issue with the publicity for Ecclesia Reformanda, observing that, rather than simply being about 'Reformed' theology, the movement behidn it represents a particular strand called 'Federal Visionism'.

Now I have two confessions to make. The first is that this had entirely escaped my attention. But given David Anderson's observation that the publicity makes no direct mention of this, I won't feel too bad about that. Anderson comments, however, that in his view,

1. The real purpose of this new magazine is to promote the "Federal Vision" theology of Douglas Wilson / Peter Leithart / Credenda/Agenda / Auburn Avenue etcetera in the UK.
   
   
2. Yet for some reason the magazine's backers have decided to hide this fact.
   
   
3. Not only have they decided it's best strategy to hide their real aim, they've also decided to present the "Federal Vision" as if it were mainstream British Reformed theology, which it is certainly not: not historically and absolutely not in the last 200 years or at the present day.

Perhaps more embarrassingly, I also have to confess that I know next to nothing about Federal Visionism (indeed, I'm not even sure that is the right word!). My first instinct, though is to wonder whether it has any significant parallels with Christian Reconstructionism.

I do know, though, that I might have been a bit more cautious about the link if I'd known there was an 'issue' here. In this case, I must offer the disclaimer that carrying an advertisement does not necessarily entail endorsement of the product.

Revd John Richardson

Updated 5 minutes later!
It seems my "first instinct" (see above) wasn't entirely off. Having posted this comment, I went to the Wikipedia article on Federal Vision (you have to start somewhere), where I read this:

Many of those who are involved in Federal Vision theology began in the Christian Reconstructionist movement until differences in methods and interpretations led to their exodus.

Now Reconstructionism is something I do know something about, having encountered it in the 1980s. Indeed, my views on usury and interest owe a lot to that period (though not much, now, to that theology). Reconstructionism was, I think, fundamentally flawed in its understanding of the impact of the gospel and on its implications for human living. (In fact I was getting rather heated earlier today in a discussion about Galatians in this regard, which I was saying had implications for our political views quite at odds with the contemporary political establishment.)

I suspect, therefore, this will not be my last post on the subject.

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Karl Marx, prophecy and the wonderful power of the urban legend

Today in my meagre e-mail I received not one but two 'urban legend' posts - you know, like the one about the Vanishing Hitchhiker who, just before he disappears, says "Jesus is coming soon."

One I won't bother with, but the other was this great quote "ascribed to Karl Marx":

“Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.” — Karl Marx, 1867, Das Kapital

Bang on - except that it just didn't 'smell' right. So I Googled it, and came up with this comment on Faux Marx (via another website):

It's been fifteen years since I read Das Kapital, and I'm not sure how much I retained even when I was young and hale. But it immediately set off my fake alarms. First, because it doesn't sound remotely like anything I remember Marx saying--his core thesis was that falling wages would immiserate the working class, not that they'd be done in by their overdrafts. Second, because I do remember Marx spending huge chunks of Das Kapital grousing about the inadequacy of the housing supply for the working class, in very tedious detail. (I now appreciate, as I didn't then, how valuable this is as a historic record. But it's quite something to wade through.) And third, because no one in 1870 imagined the working class having access to bank credit.

Read the rest, and you'll see it's highly unlikely Marx said anything like what was "ascribed" to him.

It would be fascinating to know who makes these things up. But at least we know who passes them on. That would be the rest of us!

What Marx apparently did say, quoted chapter and verse in a comment on the other website, is this:

"The credit system, which has its focal point in the allegedly national banks and the big money-lenders and usurers that surround them, is one enormous centralization and gives this class of parasites a fabulous power not only to decimate the industrial capitalists periodically but also to interfere in actual production in the most dangerous manner - and this crew know nothing of production and have nothing at all to do with it." - Marx, Capital, vol. 3, chap. 33

Now that's more like it!

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The Debt Disaster: "Poo, meet fan. Fan, meet poo."

Lord, who may abide in your tent? Who may dwell on your holy hill? ... Those who do not lend money at interest, and do not take a bribe against the innocent. (Ps 15:1,5)

This link goes to my original article 'Losing Interest'.

"Central banks are trying to calm jitters by pouring billions of dollars into money markets to increase liquidity. Last week another $200 billion was dropped into the system. That was quickly swallowed up amidst screams for yet more emergency injections. Debt junkies, like heroin addicts, demand ever bigger fixes."

[...] For too long, those who warned that the borrowing bubble would burst with terrible consequences were dismissed as congenital gloomsters. Greedy lenders, their irresponsible customers and incompetent ministers formed an unholy alliance to perpetuate a myth: that consumers, companies and governments could keep spending more than they earned and suffer no penalty.

We heard new and intriguing justifications for excess. Banks seemed able to acquire rubbish and recycle it as triple-A securities. It was a sophisticated version of the second-hand shop that advertises: "We buy unwanted junk and sell valuable antiques." Instruments of financial leverage became so complicated that even those trading them did not fully understand how the system worked. All they cared about was the potency of magic that enabled welfare claimants to borrow five or six times the income they were not earning and still make the numbers add up.

So clever were the designers of this wizardry that, though it failed the common sense test, they were able to fool supervisors, credit committees, external auditors, shareholders and regulators - even themselves! Disbelief was suspended by all concerned. Read more

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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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The Debt Disaster: Canterbury catches on

Nice to see more attention being given to this. I started blogging on this topic back in May. Do a search on this blog for 'debt' and 'interest' for other posts.

This link goes to my original article 'Losing Interest'.

This link now gives the CofE response.

From The Times

January 7, 2008

Clergy told to counsel on ‘life and debt’ crisis

Ruth Gledhill, Patrick Hosking and Sam Coates

The Church of England is launching an unprecedented campaign of practical and spiritual help today for anyone in the grip of post-Christmas financial difficulties.

The “matter of life and debt” campaign draws on Bible texts and specially written prayers in an effort to give hope to those at the mercy of loan sharks, high-interest credit card repayments and other financial burdens.

The Church has disclosed to The Times that it is to offer guidance to all its clergy on giving debt advice from the pulpit and within community groups. It is also providing a ten-point debt checklist to help people to work out if they need assistance before it is too late. Read more

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The Debt Disaster: Hopeless New Year?

Returning to a theme of earlier this year, I've been suggesting for some time that the Bible's injunctions against interest-bearing loans have a moral dimension which we are unwise to ignore. Over the 'festive season' the sub-prime mortgage disaster has failed to go away. Meanwhile, our own god of spending kicked in on Boxing Day, if the full car-parks at shopping centres were anything to go by.

Not surprisingly, articles in the press continue to warn of what is going to happen - and most people continue to ignore it.

From the Times:

Villains aplenty but few heroes in sad tale of debt tragedy
...there is little in the UK financial system so cynical and downright nasty as the US sub-prime mortgages that precipitated this crisis. Labelled Ninja mortgages – no income, no job, no assets – these were loans sold to poor Americans regardless of whether they could afford the repayments. Lenders did not care if they could meet the repayments. The whole idea was that the price of the properties would rise and that any repossession value would more than compensate for any bad debts.

Back home, while Northern Rock is proof that outwardly sophisticated financial engineering can bring down a company under the noses of the tripartite, it is difficult to envisage the sale of individual products as invidious as Ninja mortgages in the UK. Our home-grown scandalous offerings, such as split-capital investment trusts, were not callously designed using the premise that profits are best reaped from a built-in failure mechanism.

But there is no room in the current climate for complacency and there are areas of real concern; chiefly the sale of individual voluntary arrangements, a form of bankruptcy-lite, used by debtors as an alternative to insolvency. [...]

From the Guardian:

Shop today and pay tomorrow
By rights, this Christmas should not hold much seasonal cheer for consumers. There has been a credit crunch, a run on a bank and the housing market has finally come off the boil. No wonder a number of retailers have sounded fretful about the outlook for the all-important Christmas shopping season: sales yesterday were said to begin with heavy discounts to drag people through doors and on to websites. Shops always promise bargains, of course, but there are plenty of reasons for a debt-addicted and retail-obsessed nation to worry as economic times get tougher. Britain (perhaps unlike the United States) may not be about to enter a recession in 2008. But everyone, from the Bank of England down, fears that growth is going to slow, perhaps painfully.This has implications for the government as well as individuals. In November the current budget deficit was £9.1bn - a record, and well up on the same period in 2006. But families already saddled with big mortgages and stagnating incomes will also be hurt if growth slows and credit becomes harder to obtain. The annual Boxing Day shopping frenzy may leave a bigger headache than Christmas lunch. [...]

Discouraging Third World debt is something the churches have been doing for some time. It is high time we did the same nearer home.

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The wrongs of loans

Is it right, or even reasonable, to argue that our debt-based economy is in any sense un-Christian, or to argue that lending money at interest, particularly for the purchase of something as basic as a house, is somehow wrong?

Before considering these questions, I’d like to quote something said by CS Lewis in the original radio talks that eventually became his classic Mere Christianity:

There is one bit of advice given to us by the ancient heathen Greeks, and by the Jews in the Old Testament, and by the great Christian teachers of the Middle Ages, which the modern economic system has completely disobeyed. All these people told us not to lend money at interest: and lending money at interest — what we call investment — is the basis of our whole system. Now it may not absolutely follow that we’re wrong. Some people say that when Moses and Aristotle and the Christians agreed in forbidding interest (or "usury" as they called it), they could not foresee the joint stock company, and were only thinking of the private money-lender, and that, therefore, we need not bother about what they said. That is a question I can’t decide on. I am not an economist and I simply don’t know whether the investment system is responsible for the state we are in or not. This is where we want the Christian economist. But I should not have been honest if I had not told you that three great civilisations had agreed (or so it seems at first sight) in condemning the very thing on which we have based our whole life.

Lewis avoided giving judgement. Can we, however, go a bit further?

Peter Kirk asks, for example, with respect to investing in a building society, “Is it wrong that I invest that money in a way which allows relatively poor people to buy homes to live in?”

There is, however, a difficulty with phrasing the question this way. Perhaps at one stage the aim and effect of building societies was, indeed, to allow the relatively poor to buy a home. The present situation, however, is very different, where almost no-one can afford even to get on the so-called ‘first rung’ of the housing market in the UK without mortgaging themselves to the hilt.

I would argue it is an example of the principle of ‘unintended effect’, with the initial provision of relatively small loans actually driving up the cost of house-buying, exacerbated further by the prevalence of two-income households. What has happened is a competition not for housing but for loans, with sellers able to ask more for their property because people are willing to borrow more to buy it.

The result is, increasingly, a nation of mortgage slaves under the delusion that they own an ‘investment’. But a house is only an investment if you can dispose of it without having to buy another at a similar or lower price. In other words, it is an investment for downsizing pensioners or for people who own more than one house — who do not therefore fit the category of those who need to buy ‘homes to live in’. In fact, as we know, another pressure driving up the price of housing is the ‘buy to let’ market. Yet this is only made possible by the ‘lend to buy’ mortgage market, which has arguably fuelled the problem, benefiting a few at a cost to the many.

This is why I would say it is a mistake to suggest that ‘playing the stock market’ is motivated by greed, whereas investing in a building society is free from ethical dilemmas. First, there is nothing necessarily ‘greedy’ about stock market investment. Secondly, the housing market has itself become the epitome of greed where some are raking in fortunes whilst others are struggling to hold on to their homes.

What, though, of other loans? Martin Luther would have had no problem with investments where the value of the investment could go down as well as up. That was just the nature of business. But in ethical terms, is the prohibition of interest just a matter of ‘risk good, no risk bad’?

The biblical injunction is based clearly on the principle of not exploiting the poor. It is unnecessary to explain why this is a bad thing! The problem for us is in recognizing that our debt economy is based almost entirely on the same form of exploitation, without us realizing it.

The Bible specifically forbids charging interest on a loan to a brother Israelite who borrows in order to buy what he needs. Such borrowing would fall into the category of a ‘consumptive loan’. However, any consumptive loan must be open to question either on the same grounds of need or on the grounds of greed.

If somebody needs something — really needs it, such as food or clothing or shelter — then charging them interest (in other words, further increasing the cost of what they cannot afford so that we can profit from the deal) is clearly immoral.

If, on the other hand, they want to buy something that they don’t need, then they should wait and work until they can afford it. To borrow money at interest in order to buy what you do not absolutely need only increases the cost of something you can’t afford already. For the buyer it is folly to get into debt, and for the lender it is collusion with their folly to take their money. On this basis, most of the credit industry stands condemned as operating on the principle of a sucker being born every minute!

That only leaves the charging of interest on ‘productive’ loans — loans which are taken out in order to develop a venture which will hopefully make money and provide economic benefit.

Luther’s own invective against charging interest was directed precisely at this kind of system. His arguments were that the lender sought to insulate himself from risk, leaving only the borrower exposed, which in his view was both unloving and contrary to the principle of accepting that life contains risks for all of us.

Of course, there is a certain simplicity in charging a fixed rate of interest on such loans. Moreover, if the venture goes particularly well, the borrower stands to gain more than otherwise might have been the case with a ‘shared profits, shared losses’ arrangement.

Nevertheless, we cannot necessarily say that is the end of the argument. The Islamic world operates on the principle that fixed interest is wrong, and yet there are major Muslim investors in the Western economy committed to abiding by that principle. If it can be done by them, why cannot it be done by us?

There is something clearly not quite right about an economic system which can take from the endeavours of others without a shared risk. Equally, it is clearly not impossible to operate on another basis. Given that we now have perfectly sober commentators appearing on the BBC saying, “We do not have a debt problem in this country, we have a debt crisis,” and given that the Bible is quite clear that this crisis is avoidable, do we not have, as Lewis observed, the responsibility at least to question the system and, where possible, to extricate ourselves and others from it?

Revd John P Richardson
4 August 2007

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The Debt Disaster

It is my opinion that the UK is in the throes of a social disaster brought about by personal debt.

It is also my opinion that the Bible's prohibition of lending money at interest arises not out of obscurantism, nor out of a failure to understand economics, nor indeed out of a mere desire to protect people from 'excessive' (as distinct from 'moderate') interest payments, but out of a need to protect the poor and to prevent increasing poverty.

Just as the Old Testament allowed for divorce and the keeping of slaves, so it also allowed the Jews to lend to Gentile nations. Nevertheless, the prohibition of usury, meaning the charging of any interest on a loan, was established as the way to treat one's brother or neighbour. It is thus the Old Testament equivalent of the command to 'turn the other cheek' - not always easy to do, but representing the most desirable 'economic value'.

Up until the Middle Ages, the church also held that usury was a sin because it was immoral. Even after this view was overturned, personal debt was regarded as a last resort, to be avoided at all costs. Only in the latter part of the twentieth century did it become a widespread practice for people to buy and borrow 'on credit'.

In the 1950s, 'hire purchase' began to become common - buying goods on the 'never never', a system of which it was said, "Buy something on the never-never and you end up paying twice as much." Later came the personal credit card which, as one campaign put it, "Takes the waiting out of wanting."

Today, most British people are in substantial debt. The average adul t in the UK owes £28,024 (source, Credit Action). In 2006, the median (commonest) UK annual income was £23,244 gross (source, National Statistics online). On average, each of us owes more than we earn in a year.

Paying off a year's salary, after tax and outgoings, would be hard enough. But on top of that debt is the interest - the 'never never' element. At the current 5.5%, the interest alone on that debt is £1,278. But many lenders charge a much higher rate, for example on credit and store cards. The result is that a substantial amount of what people pay goes merely to service the debt, not to pay off the loan, with the result that yet more interest accrues to the lender.

If Third World debt is such a serious problem to entire countries, one is left wondering why Old and New World debt is not a similar problem for individuals. And if Third World debt has unfairly channelled money to lending countries, could it not be that individual debt in the Old and New Worlds is equally unfairly channelling money away from those doing the work to those doing the lending, at no great effort on their part?

Jesus said to the third man in the 'Parable of the Talents', "So you knew that I harvest where I have not sown and gather where I have not scattered seed? Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest."

If that is what he thought of those who lend on credit, what should be our own view? Future posts on this blog will highlight news items concerned with the debt disaster. Comments are welcome.

Revd John P Richardson
30 May 2007

Why do mortgages matter?

The same Scripture that forbids sexual acts between people of the same gender also forbids charging interest on a loan: “Do not charge your brother interest,” says Deuteronomy 23:19, “whether on money or food or anything else that may earn interest.”

But as has frequently been observed, Scripture also forbids eating shellfish and wearing clothes woven from two different kinds of cloth. Yet Christians are quite prepared to disregard these instructions, just as they no longer sacrifice bulls or goats for the forgiveness of sins.

So does charging interest come under the category of laws we no longer need to keep ‘to the letter’, or does it belong with the commandments against theft or murder which we regard as expressing binding principles?

Modern Christians assume the former is the case. Charging interest on loans is accepted as a fact of life. Yet until the end of the middle ages, it was treated as a sin.

And in fact the Bible seems to support the latter view. In the words of Ezekiel we read this extraordinary warning:

“If (a man) fathers a son who is violent, a shedder of blood, who does any of these things (though he himself did none of these things), who even eats upon the mountains, defiles his neighbour’s wife, oppresses the poor and needy, commits robbery, does not restore the pledge, lifts up his eyes to the idols, commits abomination, lends at interest, and takes profit; shall he then live? He shall not live. He has done all these abominations; he shall surely die; his blood shall be upon himself.” (Ezekiel 18:10-13)

It seems odd to argue that we must not murder, commit adultery, oppress the poor, rob and be an idol-worshipper, but that we may nevertheless charge interest on a loan. Indeed, the medieval prohibition on charging interest was based entirely on the understanding that it was immoral.

The reason for this is not hard to discern. If a person invests capital in a business venture, they are entitled to a share of the profits. If the business makes a loss, that is the risk they take. No one has ever suggested that such an arrangement is immoral or unjust.

But what if someone lends money to someone else to make a purchase they could not otherwise afford? This is where the moral issue arises, because if the lender takes a profit on the loan it is clearly at the expense of the borrower. And how can that be right?

If the borrower absolutely must make the purchase, for example to buy food, then the lender is taking advantage of their poverty. If the borrower does not need to make the purchase, the lender is taking advantage of — indeed is encouraging — their avarice. Moreover, the process becomes a vicious circle. The lender who profits on the loan is thereby in a position to lend more people money. Meanwhile, the ‘have nots’ are naturally encouraged by seeing what others have bought with their loans to become ‘haves’, and so incur debt themselves.

The result is all around us in society. First, we have those sorry souls, running into tens if not hundreds of thousands, whose credit card debt alone is crippling them. One only has to turn on day time TV and look at adverts offering various ‘solutions’ to debt to realize both the size of the problem and that many of those it affects are not even in full-time work. They have borrowed their way into misery and the results are astonishing.

According to the charity Credit Action, the average UK household debt excluding mortgages is £8,833. The average owed by every UK including mortgages is £28,024. Average consumer borrowing on credit cards, etc, is £4,550 per , and Britain’s personal debt is increasing by £1 million every 4 minutes, with the result that each household pays an average of £3,525 per annum in interest alone.

In the light of this, it is perhaps not surprising to discover that almost 300 people are becoming insolvent each day. Indeed, the average Citizens Advice Bureau client has a debt nearly 17.5 times their monthly income which would take them seventy-seven years to repay.

Personally I find it hard to understand why those in the Church and elsewhere who can recognize the problem of debt regarding Third World countries do not similarly acknowledge and demand action on the no-less debilitating problem of individual debt in our own society.

Then we have those who are slaves to their mortgages. Yet the rising cost of mortgages is simply another part of this bleak picture, no different in principle from the debts owed on a credit or store card. People will complain that they must borrow enormous amounts of money to get on the housing ladder. And naturally there will be people willing to lend it to them.

But in reality, there is no necessity for this system of loans and credit and it is simply not true that economic enterprise would dry up without it. On the contrary (as TV adverts also remind us constantly) there are many opportunities to invest where the value of shares may go down as well as up.

Some people may ask who would invest in such circumstances, to which the biblical answer has to be anyone except those who can’t afford it or the greedy. Others will object that surely the money they put in the bank should be allowed to earn a modest amount of interest, to which one only has to point to Credit Action’s statistics and observe that high street banks are one of the key lenders in the UK market. In other words, one man’s ‘modest interest’ is another man’s mounting debt.

And what about houses? According to Credit Action’s statistics, the average price of a house in the UK in 1969 was under £10,000. Today it is over £200,000 and climbing exponentially. So what is driving up the price of houses? In the final analysis, it has much to do with the availability of money to borrow. People, desperate to get on the ‘housing ladder’, are taking out loans more than three times their annual salary. And in a quarter of cases these are ‘interest only’ mortgages which do nothing to pay off the actual capital sum borrowed.

In the face of this, the Bible’s injunctions begin to seem refreshing rather than obscurantist: “Lord, who may dwell in your sanctuary? Who may live on your holy hill? He ... who lends his money without usury and does not accept a bribe against the .”

(And by the way, in case you’re wondering, I’ve not had an interest-bearing account for something like twenty years, and on principle I try to ensure that the value of all my investments can indeed go down as well as up. So far, I seem to be no worse off.)

Revd John P Richardson
12 May 2007

If you enjoyed this post, you may also like to download a previous article of mine, Losing Interest (pdf)

Losing Interest: why the Church was right and we are wrong about usury

It is a commonplace observation that Anglicans today accept many practices which were the cause of controversy to earlier generations. Artificial contraception, for example, was the subject of heated debates even quite recently, yet is almost entirely accepted by Anglicans now.

Another often-quoted example of a formerly controverted practice is that of usury — the lending of money at interest. The received understanding is that the Church once opposed this, but that increasing economic pressures forced a change of heart, as a result of which European economies were released from medieval restraint and enabled to become the prosperous societies we see today. Thus, we are told, the Church was shown to be as hopeless on the economic front as it was on the scientific. The persecution of Galileo and the handicapping of Western economics belong in the same, unenlightened, boat.

Yet we see around us now a world of individuals and societies crippled with debts incurring the constant repayment of interest. And in the theology of the Middle Ages we find opposition to usury rooted not in a wooden adherence to the letter of Scripture, but in a deep concern for social justice. It is therefore, I would suggest, time for us to think again about the ‘wisdom’ of our denomination’s current stance.

Download "Losing Interest"