Beggar Thy Neighbor: A History of Usury and Debt

Chapter 2: Embracing Shylock

Chapter 2 Embracing Shylock The necessity of carrying on business with borrowed money became more and more frequent as trade developed during the latter part of the Middle Ages. Thus the Canonists saw themselves forced . . . to invent distinctions between those forms and the “usura,” the payment for the mere use of money. —Gustav Cassel, 1903 Official attitudes toward usury changed remarkably little in the late Middle Ages and the early years of the Renaissance. It still was considered an execrable sin against humanity although in reality it was being practiced by all and sundry in the commercial revolution in Italy and the rest of Europe. The papacy had become the first financial regulator since usury was under its power, but it exercised that power very selectively, begrudgingly acknowledging interest as necessary for business. Yet with the rising commercialism came discussions about money and usury that were not evident in previous centuries. The revival of learning during the quattrocento opened new dimensions concerning the nature and uses of money and the interpretations were no longer exclusively negative. The sterile concept of money was changing. As more ideas circulated on interest and usury, it became clear that attitudes were in a state of flux. The use of money carried with it more than one potential sin. In addition to usury, debasement of coin, monopoly, and simony now were included. Devaluation of money by princes and the selling of church offices became the hot topics of the day. Simony would become one of the pivotal issues of the Reformation and while usury remained in the limelight as always, it was not quite the burning issue it had been in the time of Aquinas. Some of the new ideas about money also helped cast light on the earlier usury debate, helping later generations understand the nature of the problem. Shylock 59 An eloquent defense of money came from the Italian writer Bernardo Davanzati in 1588. In an oration delivered at the Academy of Florence, he praised money as “an excellent invention, and an Instrument of doing infinite good; if any makes ill use of it, ‘tis not the Thing but the Person that is to be blamed and punished.” If money was used for evil purposes, more needed to be known about its intrinsic qualities. One of those qualities was the quantity in circulation. Bankers and politicians realized that being able to count that amount carefully would provide a safeguard against many sovereigns’ favorite method of funding the national treasury. Inflation, or what Renaissance writers called debasement, was the prime economic topic of the period. The supply of money in a principality was understood to be static until the Renaissance. Since each Italian principality had its own money, this was not a primitive notion but one existing in a very real but limited universe. When gold and silver from the Americas found their way into Europe, prices began to rise as Spain imported more from its trading partners, who in turn raised prices as a result. Davanzati asked, “If that same quantity of Silver be at present in 109 pieces, which used before to be in a hundred only, must not 109 be now paid for that which formerly cost but a hundred?” In the early years of the Roman Empire, when divine law had a profound impact on civil life, usury was considered a violation of the law because only God had the ability to tinker with time, not man. When one man charged another usury, he was usurping a power reserved only for the almighty. But the Renaissance notion that the supply of money was linked to the amount of goods produced in society demonstrated that an increase in the amount of goods required more money. Without the equivalent increase, what later became known as inflation would be created. Before the importation of gold and silver from the Americas, prices were assumed to be more stable unless a sovereign undertook currency debasement, a somewhat frequent occurrence . While attitudes toward excessive interest remained remarkably constant through the late Middle Ages, they nevertheless were being paid lip service while business continued to expand. Fibonacci’s discussion of compound interest in his Book of the Abacus serves as something of a crucible in the history of finance because it was a reminder that interest was discussed and calculated in relatively sophisticated terms. Although usury was railed against by ancients and medievals alike, it was practiced widely and became one of the great cultural paradoxes of...