Sunday, March 26, 2017

Some history of interest


Richard Werner:

... the charging of usury (interest), which until about 300 years ago was illegal in most countries, including throughout Europe.

I didn't know that. How could I not know that?

I did know that at least two major religions that grew up after the fall of Rome did not look kindly on lending at interest. I always thought of this as evidence that debt and interest were at the time held to be responsible for the fall.

Couple tidbits from Wikipedia...

Usury is, as defined today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Originally, usury meant interest of any kind.

I'm thinking usury was always thought "unethical or immoral". In other words, charging "interest of any kind" was unethical and immoral, back when. And I'm thinking it was not the ancients but the moderns who changed the meanings of words so that "interest" was generally okay, and that only the extreme we now call "usury" served to "unfairly enrich the lender."

This tidbit supports that view:

Public speaker Charles Eisenstein has argued that the pivotal change in the English-speaking world seems to have come with lawful rights to charge interest on lent money, particularly the 1545 Act, "An Act Against Usurie" of King Henry VIII of England.

Oddly, the law that made it legal to charge interest on money was called an act against usury. It seems the meaning of the word "interest" had become benign already by the year 1545.

There is a "[clarify]" note attached to that sentence at Wikipedia, but it's pretty clear to me: The change in the meaning of the word made interest acceptable, and that was the first step in the rise of financialization. Legal interest was the birth, no, was the moment of conception of capitalism.

About 300 years before Henry VIII,

In 1275, Edward I of England passed the Statute of the Jewry which made usury illegal and linked it to blasphemy, in order to seize the assets of the violators.

Edward I was "Longshanks" in the movie Braveheart.

I read one time that King so-and-so of England was the first to use money to pay the people who worked for him. That seems a real break with the feudal tradition of exchanging labor for protection, and I still remember a fragment of what I read. Looking it up now, at A Comparative Chronology of Money -- nice site! -- I find this:
1159 Scutage tax introduced by Henry II in lieu of military service
The annual 40 days service owed to him by his tenants-in-chief and their retainers is commuted into cash payments and with the proceeds he is able to establish a permanent army of mercenaries or professional soldiers as they commonly became known after this time from the solidus or king's shilling that they earn.

So Henry II chose to receive payments in money rather than service, and he used the money to pay his troops. Circular flow, a hundred years or so before Edward.

Some 300 years before Henry, Charlemagne set up a new monetary standard, as did King Offa of Mercia. "Charlemagne applied the system to much of the European Continent, and Offa's standard was voluntarily adopted by much of England."

I like the way the pieces fit to a timeline:

Step one: Set up a monetary system people can use. Wait 400 years.
Step two: The government itself adopts this monetary system. Wait 400 years.
Step three: Money changes the culture. Interest is no longer a bad thing. Wait 400 years.
Step four: Debt and interest cause the fall of civilization.

300 years ago, charging interest was illegal almost everywhere. Today the global economy is constipated by debt.

1 comment:

The Arthurian said...

Henry II was able to "receive payments in money" because the monetary economy had been growing for some 300 years, and there was circulation (of money) in which he could participate.

Henry VIII was able to make interest legal because people had by his time rediscovered the benefits of lending and of borrowing. Oh, and he is the one with many marriages and disagreements with the church. He was probably happy to contradict the church's view of interest!

Two kings before Edward I was John, "the principal villain within the traditional Robin Hood narrative." Robin Hood fits perfectly into the time line, stealing from the rich and giving to the poor. Two kings before John was Henry II. All the puzzle pieces fit. I love it.