As we saw in the previous posting on this subject, the type of money determines its proper use. Money that is created by reducing consumption in the past should be used for consumption in the present or the future, not to increase production.
On the other hand, money that is created by promising to deliver something in the future should be used to increase production to be able to deliver on the promise, not for consumption. Combining monetary theory and the labor theory of value brings in usury, a concept that has been grossly distorted by the past savings assumption, misunderstanding of the different types of money, and the meaning of “profit.”
Many people of all faiths and philosophies believe usury to be wrong. Moses, Plato, Aristotle, Cato, Confucius, and other moral teachers condemned usury, as did the Hindu Laws of Manu. Judaism, Christianity, and Islam also condemn the practice. The problem is that few people today have any realistic idea what usury means.
Most simply put, usury consists of taking a profit when no profit is due. That is all. That is the sense, for instance, of the title of Vix Pervenit, Pope Benedict XIV’s encyclical “On Usury and Other Dishonest Profit,” the bulk of which addresses the various ways that people have devised to justify taking a profit when no profit is due.
In the Aristotelian-Thomist understanding of natural law, profit is good. This creates a problem, however, when you cannot decide whether a profit is due in justice, or if a profit is due at all.
There are other complications once we move away from Aristotelian-Thomist natural law and its fundamental rights of life, liberty, and private property. In many forms of socialism, which abolishes private property, all profit is considered evil.
Karl Marx, for example, considered pricing something above what it cost to produce it in terms of human labor to be theft. Profit consists of surplus value stolen from workers and consumers. All profit is usury because no profit is ever due.
In other forms of socialism, profit above a pre-determined level is considered unjust, while in yet others profit from some things is good — up to a point — while from others is unjust. To the agrarian socialist Henry George, for example, no individual has the right to own or make a profit from land or other natural resources. All profit from land use belongs to the people, not individuals, and should be confiscated by the State to fund social purposes.
Laissez faire capitalism takes the opposite position: all profit is good and therefore just. Milton Friedman made himself the Prophet of Profit by declaring greed is good because it is so profitable. As he put it in the title of an article in the early 1970s, “The Social Responsibility of Business Is to Increase Its Profits.” (Milton Friedman, “A Friedman Doctrine — The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, September 13, 1970, 17.)
Ironically, in his article Friedman raised the specter of totalitarian State control of all life unless all government restraints were removed from business. With the Great Reset we face a system of private sector totalitarian control of all life due to the über-wealthy having achieved Friedman’s ideal.
Profit is therefore good, but in common with almost everything else can be very bad if exaggerated or carried to extremes. Carrying profit to an extreme is what we call usury.
Usury is therefore not evil per se, that is, wrong in and of itself, but wrong according to circumstances. It is an application of what in moral philosophy is called the principle of double effect.
For example, governments by their nature do not produce marketable goods and services. Nevertheless, they may legitimately pay interest on money they borrow (and lenders may take it) when tax revenues are insufficient to meet the legitimate costs of government. This is because avoiding the objective evil of a non-functioning government far outweighs the unintended evil of paying and receiving usury.
Ethically, then, neither the government nor the lender sins in that circumstance. The case is different for someone who lends for non-productive purposes to make a profit by such lending. The lender does wrong, but the borrower may or may not, depending on the circumstances. Credit unions and similar cooperative loan arrangements for consumption purposes when low interest is charged on small loans for non-productive purposes are probably not doing wrong because the modern financial system is usurious, and the loans would not be available in any other way.
Thus, if all profit is usury as some would have it, then describing usury as “dishonest profit” is redundant. The exception proves the rule: if dishonest profit is forbidden, it necessarily implies the legitimacy of honest profit. Put another way, the existence of dishonest profit necessarily means that there can be honest profit, just as the universal prohibition against theft (e.g., “Thou shalt not steal”) necessarily implies the legitimacy of private property under natural law.