The online edition of Crisis magazine recently (December 8, 2014) had an article on the perennial problem of usury, “Did the [Catholic] Church Change Its Doctrine on Usury?“ Although it might seem like re-plowing old ground, we thought we’d weigh in again with a few brief thoughts.
|Pope Benedict XIV|
The article struck us as unnecessarily complex. Usury can be stated very simply: taking a profit where no profit is due. Pope Benedict XIV explained this in his encyclical Vix Pervenit in 1746, “On Usury and Other Dishonest Profit.”
The right to a pro rata share of the profits of a joint endeavor is a right of private property, one of the limited and socially determined bundle of rights that define how an owner may exercise that inalienable and absolute right to be an owner that inheres in every single human being by nature. When someone lends existing savings for a productive or capital project, he is entitled to a share of the profits, just as he risks a share of the losses.
|15th Century Usurer|
When new money is created for a productive or capital project, e.g., by discounting or rediscounting bills of exchange (whether merchants, trade, or bankers acceptances), no interest (profit sharing) is due. The acceptor, however, is due a fee for creating money to compensate for services rendered and for assuming risk. This fee comes out of the discount, often misconstrued as an interest rate.
Recent (i.e., the last couple of centuries) confusion over usury in Catholic circles can be traced to two sources: 1) the prevalence of Keynesian economics, which relies on usurious government manipulation of the currency in an often unsuccessful effort to impose desired results. 2) John Thomas Noonan, Jr.s’s analysis that distorted the non-objective evil of government borrowing allowed under the principle of double effect into approval in his book The Scholastic Analysis of Usury (Cambridge, Massachusetts: Harvard University Press, 1957).
Problems with Keynesian economics from a natural law perspective have been addressed many times on this blog. It is unnecessary to go over them yet again — at least for now. Noonan, however, is another story.
Catholics almost always cite Noonan in studies of usury. Noonan’s approach is similar to the methods employed by Msgr. John A. Ryan in the early twentieth century to distort understanding of the natural law, and thus Catholic social teaching as a whole, although there does not appear to be any direct connection. (Vide John A. Ryan, A Living Wage. New York: Grosset and Dunlap, Publishers, 1906; Distributive Justice. New York: Macmillan and Company, 1916.)
|A lasting, global problem.|
The method is a curious mix of idealism, exemplified by Immanuel Kant in his philosophy, and positivism, epitomized by David Hume — a combination that G.K. Chesterton described as a sort of Manichean mutability (G.K. Chesterton, Saint Thomas Aquinas: The “Dumb Ox”. New York: Image Books, 1956, 106). This, in somewhat diluted form, is popularly known as “Cafeteria Catholicism.”
The problem is that, in order to retain one’s faith-based opinion in the face of reason and objective knowledge (logical argument and empirical evidence), one is forced to edit or alter facts to avoid the consequences of being wrong. As Mortimer J. Adler described the results of this confusion between knowledge and opinion,
|Paul VI and Mortimer Adler|
“The positivism or scientism that has its roots in Hume’s philosophical mistakes, and the idealism and critical constraints that have their roots in Kant’s philosophical mistakes, generate many embarrassing consequences that have plagued modern thought since their day. In almost every case, the trouble has consisted in the fact that later thinkers tried to avoid the consequences without correcting errors or mistakes that generated them.” (Mortimer J. Adler, Ten Philosophical Mistakes. New York: Macmillan and Co., 1985, 100)
Thus, Noonan also distorted and misstated the Catholic Church’s teaching on slavery (vide Rev. Joel S. Panzer, The Popes and Slavery. New York: Alba House, 1996) and contraception (John T. Noonan, Jr., Contraception: A History of Its Treatment by the Catholic Theologians and Canonists, Enlarged Edition. Cambridge, Massachusetts: Belknap Press, 1986). He thereby advanced modernism, the religious equivalent of the legal positivism that has infected civil society.
For an in-depth treatment of the positivist theory of the “living constitution” that has wrought havoc in U.S. law, resulting in such decisions as Roe v. Wade and Citizens United v. the FEC, see William Crosskey, Politics and the Constitution in the History of the United States (1953). For an overview of positivism in general, see Mortimer Adler, Ten Philosophical Mistakes (1985), especially the chapter on “Knowledge and Opinion” with the analysis of David Hume’s philosophical errors.
For a non-usurious reform of the tax and monetary system, see the book Capital Homesteading for Every Citizen (2004).