John Calvin and Modern Banking

[See original post --- the below has been edited by Uncle Screwtape:]

There is a link between Calvinism and our modern use of Usury. We now live in an age where High Usury against is commonplace, yet the Bible and Historic Christian commentary for 15 hundred years were all against it. Except for one person. And that person was John Calvin.

In the book "Christianity's Dangerous Idea" Alister Mcgrath goes through the common consensus of Biblical interpretation in regards to the issue of Usury. He notes how everyone was against it. Then he turns to Calvin and shows how his view eventually became the common interpretation of the text among Prots and then about 3 hundred years later among Catholics, and eventhough he doesn't mention this, but it has alo become the view of some Orthodox in recent decades.

Yet while Christians were Prohibited from lending money at interest, Jews were explicitly exempted from this ban. This exemption led to the emergence of the stereotype of the Jew as an avaricious moneylender, famously exemplified in Shakespeare's Shylock in The Merchant of Venine. These views were not challenged in the first phase of Protestantism. Martin Luther regarded the biblical prohibition of usury as permanently binding. In his 1524 sermon on trade and usury, Luther lashed out at any attempt to change interest. In his view, Christians "should willingly and gladly lend money without any charge." The Elizabethan Protestant bishop John Jewel reflected the views of his age when he raged from his pulpit against the iniquities of usury. "It is theft, it is the murdering of our brethern, it is the curse of God and the curse of the people."
This uncompromising opposition to usury was emodied in a statute passed by the English Parliament in 1571, which had the uniforeseen and unintended effect of legitimating usury at a fixed rate of 10 percent.

Yet the lending of monay at interest was essential to the emergence of modern capitalism. A steady increasing hunger for capital led many in both church and state to turn a blind eye to moneylending and to reconsider the entire theological basis of the prhibition of usury. Calvin could not have been unaware of these problems. The survival of the city of Geneva depended on being able to sustain and develop its urban economy and remain independant of potentially dangerous neighbors.

In 1545 Calvin wrote to his friend Claude de Sachin, setting out his views on usury. The letter was not published until after Calvin's death (1564), when Theodore Beza decided to make its contents generally known in 1575. At one level, this letter can be read as a total inversion of the teaching of the Old Testament; a more attentive reading confirms this suspicion but discloses the
sophisticated lines of argument that led Calvin to his surprising conclusion. So how could Calvin reinterpret the Old Testament's explicit statement that usury is prohibited to mean that it is actually permitted?

Calvin's letter of 1545 reinforces the impotance of biblibal interpretation to Protestantism. In one respect, Calvin reaffirmed the general Protestant idea that not all the rules set out for Jews in the Old Testament were binding upon Christians; in these instances, the Old Testament offered moral guidance only, not positive prescription for conduct. Yet this way of interpreting the Old Testament had been applied to cultic issues-such as the Old Testament's demand for animal sacrifices. Calvin's extension of the principle to usury broke new ground.

A fundamental theme recurring throuhout the letter was that things had moved on. the situation in sixteenth-century Europe was not the same as that in ancient Israel. As Bieler points out in his magisterial study of Calvin's economic thought, the new economic realities of the sixteenth century made it possible to view interests as simply rent paid on capital. Calvin therefore argued for the need to probe deeper and ascertain the general princliples that seemed to underlie the Old Testament ban on usury in its original context. It was the purpose of the prohibition, not the prohibition itself, that had to govern Protestant thinking on this matter. "We ought not to judge usury according to a few passages of scripture, but in accordance with the principle of equity." For Calvin, the real concern was the exploitation of the poor through." through high interests rates. This, he argued, could be dealt with in other ways-such as fixing of interest rates at communally acceptable levels. Calvin's willinglness to allow a variable rate of interest showed an awareness of the pressures upon capital in the more or less free market of the age.

Calvin's views which were seen by many as running counter to the clear meaning of the Bible, took some time to become accepted. By the middle of the seventeenth century-more than one hundred years after Calvin's groundbreaking analysis-usury was fully regarded as acceptable. Protestant jurists such as Hugo Grotius and Samuel Pufendorf supplemented Calvin's theological analysis with clarifications of economic concepts, especially in relation to price and value, that finally removed any remaining scruples about lending money at unterest. The Catholic church did not legitmate usury, however, until 1830, apparently in response to the widespread acceptance of the practice within predominantly Protestant western Europe.

Yet Protestantism did more than bring about the theological adjustment that opened the way to a modern capitalist economy, its early development in the cities of Europe, especially in Switzerland, created the economic conditions that made such a change inevitable and essential. During the period 1535 to 1540, an economic recession descended on the area around Geneva. Despite this downturn, Geneva was able to survive and to go on to benefit from the subsequent recovery throughout the region, which lasted from 1540 to 1555. It is now thought that one of the prime reasons for Geneva's resilience during this period was the emergence of the Swiss banking system, which allowed Basel and other major Swiss Protestant cities sympathic to Calvin's religious agenda to bail him out through large loans. The Swiss banking system emerged as a direct response to a shared sense of identity throughout the Protestant cantons of Switzerland and neighboring cities-including Geneva. The raising of capital for economic expansion thus became imperative for Geneva around this time. Calvin's removal of the remaining theological impediments to the practice of usury was not merely religiously progressive; it was essential if his version of Protestantism was to survive. So intimate was the connection between the religious system of Calvinism and the city of Geneva that the collapse of the latter would have had disastrous implications for the former." [1]

Calvinism's novel interpretation of Usury is one of the causes of masses poverty in the World today. Yes, the world has always had it's poor, but Calvinism has made it even worse.

[1] pages 332-335 from the book "Christianity's Dangerous Idea: The Protestant Revolution-A History from the Sixteenth Century to the Twenty-First by Alister E. McGrath. Published by HarperOne, Copyright 2007