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The basis of the condemnation of loan interest by Aristotle and the Scholastic writers was the principle that in an exchange transaction justice demands an equivalence between the goods exchanged. And since money, a "barren" metal, was considered not a durable but a "fungible" good whose use was inseparable from its "consumption" in exchange, the equivalence consisted in a return by the borrower to the lender of the exact amount of the sum loaned. Later writers, in attacking the minor premise of this argument, came to distinguish between what we might call the mere face value or exchange value of money and its capital value, in virtue of which the possessor secures a "command" over other goods.1
There is a second school of thought which does not seek to make a general application of the extrinsic titles. Instead, some seek "a modification of the original Scholastic analysis with respect to the nature of money and capital... to establish a direct and intrinsic justification for modern interest."2 Such an argument for justifying the taking of interest deals with two issues: first, a change in the nature of money itself, which originally was considered barren, but is now seen as productive or a capital resource; second, a change in the nature of a loan which in modern times becomes more like a rental or partnership.
The Scholastic usury teaching was often based upon the teaching of Aristotle that the proper use of money was as a medium of exchange.3 Exchange is natural, and can even be productive, but money lending itself is not naturally productive. They argue that money is considered infertile and barren. "Thomas Aquinas observes: 'Nummus non parit nummos' (Money does not reproduce itself).... it is against nature for money loaned to give birth to more money."4
Bernard Dempsey examines the teaching of what he calls "The Schoolmen," Jesuit theologians, economists, and usury analysts of the sixteenth and seventeenth century. They continue the scholastic traditions and say that money is not fruitful per se (in itself), but then they readily admit that money is fruitful per accidens (in certain concrete situations). Further, "the circumstances in which money can be considered by and in itself may be very rare."5 There was an increase in the availability of market opportunities at this time, and this began to give an additional value to money in addition to its strict value as money in itself. "The special value of money arising from opportunity available may become so widespread in some places and circumstances that in that market a true, common, just price for the privation of money can be established."6
This marks the beginning of a development in what the exact nature of money is, leading some to argue that money has actually changed in our society.
There is much greater facility nowadays for making profitable investment of savings, and a true value, therefore, is always attached to the possession of money, as also to credit itself. A lender, during the whole time that the loan continues, deprives himself of a valuable thing, for the price of which he is compensated by the interest.7
What does this mean for scholastic arguments? The fact that money was sterile and barren is a central part of their usury theory. "Centered on the object involved in the contract, the scholastic analysis refuses to consider other objects for which the contractual object might be exchanged. A contract about money is considered a contract about money, not a contract about real capital."8 When the Scholastics spoke of money, they had in mind real, tangible objects, e.g. gold and silver coins. If the nature of money has changed, then the Scholastic analysis would seem to no longer apply, for now an entirely different transaction is taking place.
"In view of the general applicability of money to productive enterprise and of the consequent 'quasi-productivity' of money capital, every loan of money is virtually a locatio [rental]."9 This is a modification of the original Scholastic analysis of money and capital that establishes an intrinsic justification for modern interest by shifting the contract from a loan of money (mutuum) to that of a rental or lease. This does not mean money is no longer a fungible, but rather that money now has an addition value beyond its face value, a value that makes it almost naturally profitable to own money. If I loan someone my orchard, I deserve a recompense for the natural fruit that orchard produces. In some ways, this type of a loan can be seen as a type of partnership. Now a person can make money with the money I loan him, not just with his own labor and resourcefulness, and so I deserve a share of that profit.
Thus, many today see interest as part of every loan not just per accidens, but even per se. "Most theologians of the present day maintain that usury is now lawful because money has acquired the characteristics of capital.... Since interest on capital is lawful, interest on loans of money must be also lawful."10 Money no longer has as its sole use the fostering of the exchange of goods. Money is now also an asset which one can profitably invest to make more money. In loaning money, the title to lost profit plainly exists as part of the loan itself.
In addition, in today's society there are numerous investment opportunities, which together have established a "price" for money: the market rate of interest. "Due to the change in the nature of money, every modern economy includes extensive money markets.... it is reasonable to assume that market rates of interest reflect legitimate grounds for seeking and accepting the payment of interest."11 The existence of a common interest rate automatically devalues one's money over time, so in making a loan, one would justly deserves compensation under the title of loss (damnum emergens). Not only is this title assumed to exist, it is an intrinsic part of every loan. "Gradually, instead of being seen as 'sterile,' money was seen as productive. Further, interest charges served to equalize the value of present and future amounts of money."12
The process needed for actually determining a legitimate rate of interest is beyond the scope of this paper. Suffice it to say here that the process would be similar to how the just price is established for other goods, for as Thomas says, "the just price of things is not fixed with mathematical precision, but depends on a kind of estimate."13 The safest "estimate" of the just price is the common estimation (communis aestimatio), which for loans would be the market rate of interest. "Generally, that interest rate is lawful which is considered legitimate by the common judgment of prudent men, with due consideration for local industrial and commercial conditions."14
The appearance of a market rate of interest removed the debtor-creditor relationship from that of isolated exchange and precluded the danger of exploitation of the borrower, which was the first concern of the Scholastic doctrine.15
Does a change in the nature of money contradict the Church's teaching on usury? The Church never defined that money was always unproductive, only that profit on loan could not be morally legitimate without some claim to it. Pope Leo X, in the Fifth Lateran Council, gave the following definition of "the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk."16 This shows the strong consistency in the Church's teaching. If money is really a barren resource, seeking profit on a loan is unjust (unless there are other extrinsic titles present). But "in modern economies, it is clear, money has investment uses and is widely productive."17 With abundant opportunities for the investment of money, as there are today, it would seem the modern loan of productive money no longer meets the conditions for usury as described by the Scholastics and articulated by Leo X. "The whole world has become one trading community.... Money consequently is not a mere medium of private exchange."18 The taking of interest on a loan is now a fair practice of justice, just as once justice prohibited the taking of anything above the principal.
At present, the choice for one's money in our world-economy is never simply between spending or hoarding, for money can always be invested in any number of genuinely profitable ("fruitful") enterprises. There is much greater facility nowadays for making profitable investments of savings, and a true value, therefore, is always attached to the possession of money.19
We have now seen a second way of showing the legitimacy of interest on loans that is in harmony with the Church's teaching. Lateran V taught that usury involves the loan of "a thing which produces nothing." Pope Benedict XIV taught that "usury has its proper place and origin in a loan contract (mutuum)." If money has changed so that it is no longer barren, and the loan has changed so that it is no longer a mutuum, then some can legitimately argue that these teachings are truly obsolete, for in fact they no longer apply in modern circumstances. As the economy changed, the teaching applied less and less, and the Church simply stopped prohibiting usury. "The Church necessarily permitted what was no longer unjust."20 It must be noted that there is still a great difference between the claim that this teaching is obsolete, and any claim that the Church's teaching was wrong or has changed, for the second premise is not a necessary conclusion of the first. As noted, the change involved something the Church never claimed to teach definitely, the fact that money is unproductive. The Church did change, not its teaching, but the fact of the applicability of its teaching to the particular economic conditions, which do change. The only possible criticism of the Church is that it should have recognized sooner that its previous teaching was no longer applicable.21
Does this "change" admit of change in other areas of Church teaching? Since it seems that this teaching became obsolete, could not other moral teachings also be obsolete today? Our modern society has drastically changed in the last two centuries, so it would seem possible for many of the Church teachings to be so "historically conditioned" that they no longer apply. Yet, as addressed in chapter one, fundamental human nature and divine revelation are unchanging and never obsolete in any time or culture. This is an important distinction which must be made, for while the usury teaching involved changing economic conditions, almost every other moral teaching of the Church involves the ends of man's human nature (thus the prohibition of abortion, contraception, divorce and remarriage, homosexuality, etc.) or the contents of divine revelation (e.g. reserving the priesthood to males). One can never claim that teachings such as these could become unapplicable in today's circumstances.
We have now seen two different approaches to the "change" in the Church's usury teaching. First is the assumed existence of extrinsic titles which justify the taking of interest, based primarily on the title of lost profit. Second is the change of the nature of money, where a loan now involves capital, something which is naturally fruitful and for which a charge can be made, just as when one rents other types of capital. Is interest justified today simply from the intrinsic productivity of money, or only by the existence of extrinsic titles?
While it would seem that the nature of money has changed, no one can deny that it is still used as an object of exchange in transactions. This basic function of money is not changed, even if it may be considered productive in view of its power of representing real capital. Thus some argue that the productivity of money does not eliminate the extrinsic titles. Since money capital is "fertile or productive, or quasi-productive.... interest could be justified on intrinsic as well as extrinsic grounds."22 While either the intrinsic or extrinsic position may be legitimately argued, are the two proposals actually that different?
Perhaps one can conclude that both of these possibilities are correct, for in a way, the productivity of money becomes itself a legitimate title to interest. As already indicated, one can see an intrinsic justification for interest, because something intrinsic to money itself (its quasi-productivity) makes the extrinsic title (to compensation for loss) present in every loan. Thus the extrinsic titles can be assumed to exist today, because in capitalism, the unlimited opportunities for investment have made money fruitful, and loaning money automatically involves loss of profit to the lender.
To-day the title to interest is intrinsic to the money itself.... This kind of intrinsic title partakes of the nature of extrinsic and intrinsic titles. It is extrinsic, inasmuch as it is not rooted in the nature of money itself, independent of all circumstances. It is intrinsic, inasmuch as it attaches to money in fixed economic conditions like our own.23Perhaps the answer may be summarized in this way: the loan of money, considered only in itself apart from all circumstance, is still not justification for the taking of interest; however, money can never be considered apart from today's economic conditions, which justify the taking of interest, due to lucrum cessans. "Loss of profit has become today an ordinary effect of loaned money, in view of the fact that, under the present economic system, property as well as money is definitely productive."24
This does not prevent some from still arguing even today that the only legitimate title to interest comes from extrinsic titles. "It has always been the work of man, and it alone, which has been productive and fruitful.... Money is not fecund.25 In fact, some will argue that the Church does not allow for an intrinsic title to interest.
The Philosophers, Theologians, Canonists and the Church [meanwhile] stood by the dictum of Aristotle that "Money does not breed money." So that any return by reason of a money loan alone was unjustified. Interest might be taken... on the ground of extrinsic titles. The Church has declared nothing expressly about the reasonableness of interest rising out of an intrinsic title.26
Does the Church teaching actually support one position or the other? Most official teaching only allows for extrinsic titles, but its silence on an intrinsic justification for interest does necessarily equal disapproval. "The justification of interest on either extrinsic or intrinsic grounds [as surveyed above] is compatible with recent decisions of the Church and c.1543 of the  Code of Canon Law."27 It seems that either position may be taken, and one thing is consistently clear: the Church's teaching has not radically changed.
The Church's attitude may be explained as an acknowledgment that, in the present condition of society, when there are so many opportunities for investment, there will always be a presumption that the lender has a right to compensation.28
Interest on loans is now morally accepted by the Church because of a change in the circumstances surrounding the loan, particularly in the economic milieu of free market trade. While it may be debated as to whether this is due to a change in extrinsic or intrinsic circumstances of this market, two conclusions seems clear. First, the nature of financial transactions has changed over time as commercial, competitive markets developed. Second, this financial change is not a change in the teaching of the Church on usury. There may have been many changes in the emphasis, perspective, and even practice of the Church, but I do not think commercial developments and a shift in perspective constitute a new, "substantially different" moral doctrine, as claimed by Noonan. As I make the argument that "the Church's teaching on usury has not changed," there is another extreme which must also be avoided. Some might interpret this to mean that Church teaching on usury still applies, and the taking of interest on a loan is sinful. After all, was not this infallibly taught by the Church for all faithful Catholics to follow? The next chapter will examine those who argue that even today, the Church's ancient prohibition is still in force (and being constantly violated!)
1 Divine, Interest, xv-xvi.
2 Ibid., 114.
3 In fact, this addition of Aristotle is a contribution of St. Thomas and the West, as others who prohibit usury (e.g. Jews, Islam, and Communism) use very different arguments; cf. Paul E. Gottfried, "The Western Case Against Usury," Thought 60 (March 1985).
4 Le Goff, 29.
5 Dempsey, Interest, 158; emphasis original.
6 Ibid, 160.
7 Vermeersch, 237.
8 Noonan, Usury, 359.
9 Divine, Interest, 114.
10 Cleary, 198-199.
11 Grisez, Living, 834.
12 Unsworth, 16.
13 Aquinas, II-II q. 77, a. 1, r. 1.
14 Msgr. Pietro Palazzini, ed.,"Usury," Dictionary of Moral Theology, trans. Henry J. Yannone, (Westminster, MD: The Newman Press, 1962), 1262.
15 Habiger, 78.
16 Lateran V (1515), Decrees, session 10; emphasis mine.
17 Russell Shaw, ed., "Usury," OSV's Encyclopedia of Catholic Doctrine (Huntington, IN: Our Sunday Visitor, Inc., 1997), 690.
18 Fr. Joseph Rickaby, S.J., Moral Philosophy: Ethic, Deontology and Natural Law, 4th ed. (London: Longmans, Green and Co., 1918), 261.
19 Palm, 23.
20 Hardon, "Usury," 445.
21 "Because the moralists failed to understand the changed status of money, legitimate interest rates were still considered to be usury." Habiger, 78. Was it perhaps the theologians of the day who were at fault, not the inadequate teaching of the Magisterium?
22 Thomas F. Divine, S.J., "Usury," New Catholic Encyclopedia vol. 14, (New York: McGraw-Hill Book Company, 1967), 499; hereafter cited as "Usury."
23 Owen Aloysius Hill, "Interest," Ethics: General & Special (New York: The Macmillan Company, 1920), 146; emphasis original.
24 Palazzini, 1262.
25 Jacque Maritain, Review of Social Economy 43 (April 1985); quoted by The Catholic Worker (June-July 1989), 5; emphasis original.
26 Anthony Hulme, Morals and Money (Staten Island, NY: St Paul Publications, 1957), 137.
27 Divine, "Usury," 499.
28 Cleary, 197.
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