Wednesday, June 4, 2014

“Allowed Expedients”, Part II: The Problem of State Usury

To be clear on how a State can justify redistribution in an emergency, we need to understand how that same State can justify paying interest (usury) on non-productive government debt.  First, we need to look at whether either redistribution or State usury can in any way be considered “distributive justice.”

Does government payment of interest on its debt come under distributive justice?  Weeeeeell, sort of.  It’s a distribution by the State, so, stretching a point pretty much past the breaking, yes, you could say it comes under distributive justice.  Putting it that way, however, is extremely misleading.  For one thing, it confuses justification (a rationale), with justice (a virtue).

That is why Aquinas justified payment of interest on government debt as an allowed expedient in an emergency.  It is clearly not justice, and does not, strictly speaking, belong under distributive justice — or any other kind of justice or virtue.  Aquinas’s argument from the Summa Theologica is as follows:

“Reply to Objection 3. Human laws leave certain things unpunished, on account of the condition of those who are imperfect, and who would be deprived of many advantages, if all sins were strictly forbidden and punishments appointed for them. Wherefore human law has permitted usury, not that it looks upon usury as harmonizing with justice, but lest the advantage of many should be hindered. Hence it is that in civil law [Inst. II, iv, de Usufructu] it is stated that ‘those things according to natural reason and civil law which are consumed by being used, do not admit of usufruct,’ and that ‘the senate did not (nor could it) appoint a usufruct to such things, but established a quasi-usufruct,’ namely by permitting usury.” (IIa IIae, q. 71, a. 1)

Given that paying usury even on public debt cannot be considered just (and therefore is not distributive justice), how is it possible to justify it?  Let’s look over the conditions for the principle of double effect and see how (or if) they apply:

One, the act must not be evil in and of itself.

This is easy to answer.  Taking a profit from something that generates a profit is, assuming that the profitable activity is otherwise morally good or indifferent, a clear and positive good.  It is safe to conclude, then, that paying or making a profit is not unjust.

Pope Benedict XIV made this clear in his 1746 encyclical, Vix Pervenit: “On Usury and Other Dishonest Profit.”  [Emphasis added.]  The existence of a dishonest profit necessarily implies that there can be honest profit.  Profit, therefore, is not in and of itself evil.

Heinrich Rommen made a similar point in his book on the natural law with respect to the legitimacy of private property.  As he explained, the universal prohibition against theft, e.g., “Thou shalt not steal,” necessarily implies that private property pertains to the natural law and is therefore permanently and unconditionally valid.  Private property is not evil.  It is the misuse of private property that is evil.

Thus, paying usury on government debt (or taking it) is not objectively evil.  It is the fact that government debt is unproductive that makes paying interest on it wrong.

Two, the unintended evil must not be the means by which the good effect is attained.

Again, a no-brainer.  The good effect relating to paying usury on government debt is not attained by paying the usury.  The good effect — permitting the State to carry out its proper function — is attained by borrowing the money, not by paying the usury.  Were it possible for the State to borrow money (without coercion) without paying usury, e.g., public spirited citizens freely lending to the State without charging interest, then the issue would not come up.

(BTW, the proposal that the government could abolish taxes and avoid usury simply by printing the money it needs appears to be objectively evil, as it attains its goal only by abolishing private property and transferring value without the free consent of owners of monetary assets — stealing — by manipulating the currency.)

Three, the good effect must be what is intended.

Again, an easy pitch.  The State is not borrowing money to pay usury.  It is paying usury to be able to borrow money.

Four, the intended good must outweigh the unintended evil.

Maybe you have a different opinion, but as far as we can tell, the rather limited and non-objective evil of a government paying interest on the money it borrows is far outweighed by the fact that the government can thereby continue to do its job.  Without government, there would be anarchy, and that is hardly an acceptable state of affairs.


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