The stigma against moneylending continued well into the 1500s. To understand it, think about your reaction to the idea of a bank making a loan to a business at a 5% interest rate. No problem, right? Now compare that to how you’d feel if your mother lent you money on the same terms. In Biblical times, the typical loan was more like the second case – it wasn’t an arms-length transaction, but a charitable loan from a wealthy man to a neighbor who’d experienced misfortune or had nowhere else to turn. Throughout early Medieval Europe, the local church or a wealthy family was often the only source of capital, especially outside the major commercial centers. Many peasants bought their land by getting mortgages from a monastery. In a world without credit markets and insurance, then, charging interest felt like extorting a friend or family member. In Debt: The First 5,000 Years (2011), the anthropologist David Graeber argues that before the advent of money, economic life within a community was a web of mutual debts. People did not behave as self-interested individuals – at least not from the perspective of a single transaction; rather, they would share food, clothes and luxuries, and trust that their peers would repay the favor in return. When we consider these origins of debt and credit – as a system of mutual aid between people who trust each other – it’s no surprise that so many cultures viewed charging interest as morally wrong. Moreover, as the economists José Scheinkman and Edward Glaeser have noted, usury laws also acted as a kind of social insurance that reduced inequality. Since charging
interest (especially extortionate interest) was condemned, poor people could get emergency loans quite cheaply, and the rich couldn’t easily and passively turn their wealth into more wealth. At least that was the idea – in reality, people often turned to loan sharks, or to wealthy Jews who were quite literally demonized for moneylending. Some historians and economists contend that the usury taboo was more about performance than reality. They argue that the moneyed class mostly ignored the prohibition – not least because it called for unrealistic levels of charity from the gentry. Merchants and bankers had all sorts of tactics for disguising the interest payments; one trick was for the parties to agree to use an overpriced exchange rate for the purchase of goods in the future. Or lenders made loans that didn’t pay interest, exactly, but instead promised a share of the profits from the borrower’s business. (This was a loophole, but it also ensured bankers got paid only if their loans benefitted the borrowers.) Meanwhile, the Catholic Church played its own part in sowing the seeds of a change of attitude. In the 13th century, it developed the concept of Purgatory – a place that had little basis in Scripture but did offer some reassurance to anyone committing the sin of usury each day. “Purgatory was just one of the complicitous winks that Christianity sent the usurer’s way,” wrote the historian Jacques Le Goff in Your Money or Your Life: Economy and Religion in the Middle Ages (1990). “The hope of escaping Hell, thanks to Purgatory, permitted the usurer to propel the economy and society of the 13th century ahead towards capitalism.”
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