The economy of the Middle Ages was, in many respects, the evolutionary antecedent of our contemporary global economy. But it also had some features, which in retrospect, appear idiosyncratic, even un-economic. One such feature was the Church’s interdiction against usury. Originally, usury meant charging a certain amount of interest for a loan. Only later did it receive the connotation of exorbitant interest and the moral condemnation associated with it. Sundry religious traditions throughout history have anathematized usury. Islamic banking codes outlaw the practice. Both the Quran and the Old Testament admonish us against it. Even the Greek philosopher Aristotle denounces it. Such a consensus, which spans a variety of otherwise incompatible, even belligerent traditions, should give us cause to consider why these traditions proscribed the practice of usury and if it might not tell us something about our own contemporary ecological predicament. This prohibition may have inadvertently resulted in temporarily restraining the unecological growth of the economy beyond the borders of Europe.Thus, in this paper I will endeavor to examine how this feature of the medieval economy – the prohibition against usury and interest – is germane to the discourse of sustainability and anti-growth economics today. In our epoch of globalization and exponentially expanding and contracting markets, as they pass through boom and bust cycles, there may be something valuable to learn from the regional economics of the Middles Ages.
After Aristotle made his way into the European intellectual tradition in the 13th century, his animadversions on usury were appropriated by the Scholastics. Scholastic philosophy was frequently at odds with the nascent ethos of mercantilism, capitalism and free-marketeering. St. Thomas Aquinas was only one of the more famous theologians to decry the practice of usury and interest. There were others: Saint Antonio and Saint Bernardino of Siena among them. According to Max Weber, in The Protestant Work Ethic and the Spirit of Capitalism, Aquinas characterized the desire for gain, and thus profit, as turpitude (34). Further, Aquinas, unlike the secularists, differentiated between money and the use of money. It was this bit of scholastic pettifogging that made all the difference. For Aquinas, usury had nothing to do with exorbitant interest rates, but with any loan whatsoever that generated profit, and it is profitable lending, as we shall see, which is the bane of the natural environment.
In 1515, at the Fifth Council of the Latern, Leo X promulgated a Bull approbating the Montes pietatis, which were lending institutions under the aegis of the Church. These lending institutions provided low-interest loans to the indigent as a more viable alternative to the often execrated Jewish lending system of the time. There is a certain amount of anti-Semitism associated with the prohibition against usury. It was also resolved in this Council that the unrepentant usurer could not be interred in hallowed ground, lest his iniquitous soul corrupt it. The funds for these pious loans usually originated from alms, private donations from the patrician class, or fines. The profit accrued from the interest was then reinvested into the montes pietatis to pay its operating costs and to fund future loans to the indigent. In a way, the montes pietatis was a more beneficent and less parasitic form of payday loans, which are so frequently made to the indigent with exorbitant interest rates. These pious loans were not made to merchants, adventurers, capitalists or entrepreneurs, but those struggling to procure the necessities of life. This refusal to extend credit to entrepreneurs and proto-capitalists had the effect of retarding economic growth and thereby restraining environmental degradation to a degree.
Around the time of the Reformation the attitude towards usury and interest began to shift. Luther condemned usury, but maintained that the charging of interest was permissible. Many of Germany’s entrepreneurs supported this relaxation of the prohibition against interest. Burghers and other men of commerce felt that the Church’s monetary regulations and proscriptions of usury were stultifying and invasive. Luther was among the first to demarcate and separate the civil and religious spheres of influence in what was known as the Doctrine of the Two Kingdoms. As Weber demonstrated in his classic study of the Protestant work ethic, the Reformation was intimately bound up with the secularization of the European economy, which would prove inauspicious for the natural environment.
Vix Pervenit: an encyclical that was promulgated by Pope Benedict XIV in 1745 proscribing the practice of charging interest on loans (Braudel 559). This was promulgated at a time when the Church was desperately trying to retain its hold over financial markets and monetary matters, as the world transitioned (with the help of writers like Voltaire and Rousseau) into a post-theological period known as The Enlightenment. Though this encyclical was passed after the Middle Ages, it codified a sentiment that had been current in Christian and Judean thinking for millennia. The usurer, or creditor, argued that they were charging interest for the time of the loan. The Church counter-argued that time belongs to God alone. The creditors and mercantilists wanted to extended the domain of property rights to include the fourth dimension itself. The Church even went as far as to side with defaulting borrowers, citing that the lenders had committed usury. The usury debate also hinged upon the sectarianism of the Jewish people in the Old Testament and the catholic, universalist precepts of the New Testament. The Jews were permitted by Deuteronomy to lend to gentiles. Under the new covenants of the New Testament, all people were eligible to receive the grace of god, not just the Jews. Thus, under the Church, the proscription of usury was extended not just to Jews, but also to gentiles.
The Church prohibited usury primarily for reasons of morality, not because the complex interrelational dynamics between the economy and ecological systems were understood. Again, it must be stressed that the Church was not prohibiting usury for the sake of sustainability, but more often out of a deep and irrational rancor for temporal affairs, which the Church sought to control. Furthermore, just because usury was criminalized does not mean it was eradicated. Usurious practices often became clandestine. However, the prohibition, unbeknownst to the Church, may have had salutary effects upon the land and the medieval environment in general.
It would be false to aver that there was no untoward exploitation of the natural environment whatsoever in the Middle Ages. There are verses in the Book of Genesis which gave some interpreters the license to overburden the natural environment, whether because of doomsday eschatologies or because it was believed that Genesis conferred upon man the right to dominate and subdue nature for his benefit. But the environmental damage of the Middle Ages was usually localized, and never on a global scale as it is today, to such an extent that it actually threatens the continuity of our species. Others have amply demonstrated why interest is economically unsustainable, but I would like to essay a demonstration of why it is ecologically unsustainable.
The Church’s prohibition against usury seems to have kept economic growth, and thus the over-taxation and exploitation of the resource base in check, at least for a time. Timber was the paramount primary material of the Middle Ages, for timber was used for everything from building materials to energy and heat sources. Houses, bridges and water mills required timber for their construction. The weapons of war demanded vast amounts of timber. The devastation of medieval forests was not trivial, but it pales in comparison to the egregious scale of the deforestation of contemporary forests such as the rainforests in the Amazon basin or the forests of Indonesia. Several Medieval economic historians cite that the forests in some regions of Europe are more extensive today than they were in 1300 (Gimpel 82). But these historians hyperbolize the devastation when they do not acknowledge the rampant deforestation of our tropical forests that is proceeding at this very moment. France’s forests may be bigger today than they were in the Middles Ages, but that is only because France is no longer raping its own resource base. The deforestation has been exported to other continents on a vastly greater scale. In the Middle Ages there was no EPA or United Nations to police environmental criminals. It is myopic and feckless to say that we manage our forests better than the foresters of the Middle Ages. Through colonialism and economic imperialism, we have simply shipped the exploitation to other countries and today’s technology allows deforestation to proceed at a much faster pace and with less cost than was possible in the Middle Ages.
If the Church had lifted its ban against usury and the charging of interest, the devastation wrought against the environment might have been much worse. With the process of secularization and the advent of mercantilism, the religious sanction against usury began to diminish and the rise of finance and investment capital allowed for continual economic growth. Indeed, in 1807 (incidentally, only a few decades before the spike in deforestation) certain concessions were made to the secular and civil branches of society and the economy: interest rates were fixed at 5% for civil loans and 6% for commercial loans, but they were not outlawed wholesale or peremptorily condemned on moral grounds. The Church was slowly admitting that it had lost its vise grip on temporal affairs and economic growth. Economic growth, among deep ecologists and environmentalists, is practically synonymous with environmental devastation.
As soon as interest become a common practice, and facilitated the expansion of capital markets and global trade, the deforestation was done in colonized countries instead of at home in Europe. If we examine the history of deforestation it will be seen that its scale augmented considerably around the middle of the nineteenth century and has been increasing ever since. Satellite footage of Bolivia, Brazil, Indonesia, Malaysia and other heavily deforested regions reveal large tracts of land utterly bereft of their virgin rainforests. Some of these tracts of cleared land, subjected to slash and burn techniques, are as large as European countries. Over 200,000 square miles of rainforest have been cleared in Brazil alone. The land area of France is 212, 934 square miles. France’s forests in the Middle Ages may have been heavily depleted, but the entire country was certainly not voided of every square mile of forest, as in Brazil. Many of these deforestation projects are made possible by first world loans to second and third world countries. These countries then become the debtors of first world lenders like the IMF and the World Bank and, to get out of the vicious cycle of debt, they must perpetuate unecological practices to produce profit.
The second material process to degrade the natural environment of the Middle Ages was mining. Stone quarrying was as important to the economy of the Middle Ages as drilling for oil is today. Between the eleventh and thirteenth centuries more stone was quarried in France than in all of ancient Egypt. The superior quality of French stone was so renowned that even William the Conqueror had it imported to build one of his abbeys. However, mining for stone is less exhaustive and intensive than drilling for oil. Gimpel writes that every vestige of these Medieval mines has been obliterated from the landscape of Europe (69). Like deforestation in the Middle Ages, without the aid of industrial technology, stone quarrying proceeded at a much more lethargic pace than the strip mining, open pit mining, mountaintop removal mining, and other extractive industries of today.
Surficial mining techniques disrupt the local ecosystem’s flora and fauna and toxifies local watersheds. Many of these mining operations are funded by government and commercial loans, the exact sources of which are often difficult to trace. It has long been public knowledge that many of the coal mining operations in China are bankrolled by Bank of America. China Development Bank contributed funds to infrastructure megaprojects like the Three Gorges Dam.
There were few, if any megaprojects, in the Middle Ages. Megaprojects are those public projects that have profound impacts upon the natural environment and local communities, often spanning international borders. Megaprojects are capital intensive endeavors funded almost entirely by lenders and governments. They can displace entire populations of humans or destroy the niches of species. The Hoover Dam; the Suez Canal; the Trans-Alaska Pipeline System; the Channel Tunnel under the English Channel, to name only a few, are all megaprojects with substantial environmental impacts that were made possible by banks lending at interest. The World Bank has invested in oil pipelines in Chad. The International Monetary Fund (IMF) has financed extractive mining operations in both Latin America and Africa. Both have extended loans to brutal dictators of third world countries.
Interest is among the chief impetuses of economic growth, which is quantified by the GDP (Gross Domestic Product). The building of prisons is factored into the GDP. The money expended and the services rendered to clean up an oil spill are also factored into economic growth. The average citizen, who wants to maintain employment, considers economic growth to be sacrosanct, as do many economists who want to keep their jobs. Economic growth, quantified with whatever metric, requires a substratum of natural resources to buttress it and preserve its growth. But the resource base is finite. When the charging of interest became the norm, the economic conditions were ripe for the First Industrial Revolution. Capital returns allowed for reinvestment in primary and secondary materials, heavy machinery and other fixed asset investments that will be utilized for production and profit in the future. In this way, economic growth coupled with technical innovations (the jacquard loom, the steam engine, etc.), enabled Western civilization to vanquish the natural environment in ways that were not accessible to the Middle Ages.
If it is not a reasonable political solution to outlaw the charging of interest, the institution of ethical banking practices and the application of external ethics would be one compromise. Most major banks, like Bank of America, which is one of the largest lenders to China, do not vet potential borrowers based upon their impact on the natural environment. Bank of America extends large loans to the coal industry in the United States and abroad, not because they loathe the environment, but simply because it is lucrative to do so. Bank of America started as a very small operation in San Francisco. After decades of acquisitions, it now has over ten percent of all US deposits and is the largest underwriter of global high yield debt. Banks like Bank of America will continue to lend at interest to environmentally hazardous industries so long as it remains profitable.
Banks that do not have ethical or green lending practices use only bottom line analysis when evaluating potential borrowers. Bottom line analysis evaluates only financial performance. If a potential borrower is deemed safe by a loan officer, then a loan might be extended, regardless of what the money is being used for. This includes borrowers who may engage in dubious environmental practices with the borrowed money. A triple bottom line analysis, however, has been proposed which would evaluate potential borrowers according to their ecological footprint in addition to their financial performance.
The unethical charging of interest establishes the conditions for a positive feedback loop, which once put into motion, cannot be stopped without collapsing the entire edifice. Systemic risk is built into the very nature of investment ventures. There are statistical correlations between interest rates and various environmental wellness indices like carbon emissions. As interest rates fluctuate, so too will carbon emissions. Lower interest rates result in more borrowing. A higher level of borrowing, among certain sectors of the economy (such as heavy industry), results in more industry and thus higher levels of carbon emissions. In turn, interest allows banks to accrue profit, and profit in turn allows banks to grow. As banks grow, they lend more. The more banks lend unethically, the more the environment is diminished. This inexorable process did not exist in Medieval Europe. The proscription and restraint of lending at interest would curtail this cycle.
It is instructive here to recall Aristotle’s prohibition against usury: “Usury is detested above all and for the best of reasons. It makes profit out of money itself, not from money’s natural object…Money was intended as a means of exchange, not increase at interest” (Braudel 560). If money produced profit out of its “natural object,” and not from lending at interest, the economy would be more ecologically sustainable. In a very limited sense, the Church acted as precursor to central banking systems, even if it often took a reactionary rather than a productive role. The Church, for a time, acted as a regulatory body that monitored and supervised monetary transactions. If the Fed acted as the Church once did, and proscribed usury, the global financial system would certainly collapse, but the environment would be saved. That might be a small price to pay for survival and the continuation of our species.
Part of the tactic of capitalism is to ahistoricize what is historically contingent: “what is has always been and ever shall be, for there is no other.” But, as we have seen in the Middle Ages, there was a time when the European economy operated virtually without interest, or at least without interest as we know it today. The call to prohibit usury may sound like charlatanism and imprudent economic policy. But it is only imprudent economic policy from the blinkered perspective of neo-classical economics, which assumes that exponential GDP growth is a desideratum. Max Weber wrote that the “canonical prohibition on interest…has an equivalent in almost every ethical system of the world” (Braudel 561). Weber, who was usually a relativist in most matters, seems to be positing a universal norm. If this is so, our occidental civilization, after the Protestant Reformation, has fallen far astray from its origins. In our own times, the Vermont Commons has even proposed the abolishment of usury in its own publications. There is a small, but vocal minority of environmentalists and eco-economists that is advocating for a return to what the Church proscribed in its encyclical of 1745: an end to usury.
Authorship: Amos Wright
Bibliography
Braudel, Fernand. The Wheels of Commerce: Civilization and Capitalism, 15th-18th century. Volume 2. New York: Harper & Row, 1979.
Gimpel, Jean. The Medieval Machine. London: Futura, 1979.
Weber, Max. The Protestant Work Ethic and the Spirit of Capitalism. New York: Routledge, 1992.