- Beggar Thy Neighbor: A History of Usury and Debt by Charles R. Geisst
Charles Geisst provides an intriguing survey of usury from Cicero, Marcus Brutus, and Roman law through to the financial crisis of 2008. This is an admirable attempt to view debt across a long chronological perspective and ask if moral concerns about usury and interest are now obsolete. As the title of the book suggests, the underlying theme is predicated upon distinguishing between usury as the predatory charging of excessive interest, [End Page 418] which might unjustly pauperize borrowers, and a more pragmatic acceptance that interest was beneficial to business and economic growth. Ultimately, Geisst appears to regard changes over time as a victory of practicality over moral censure: ‘‘Capitalism emerged from the shadows of church dogma’’ (97).
The first three chapters of the book provide a whistle-stop tour through the classical, medieval, and early modern periods, with a litany of pre-modern thinkers presented. To a certain extent, Geisst offers a series of potted biographies about prominent theorists or bankers, each of interest but resulting in less discussion about how moral concerns were perceived or circumvented in everyday practice. Credit had increasingly permeated the lives of medieval and early modern people and was built upon a complex system of trust and obligation, as Craig Muldrew has shown. Nonetheless, Geisst covers an admirable range of sources and periods, particularly highlighting natural law perspectives on usury and early attempts to calculate compound interest. The development of financial markets and banking in England and the Low Countries dominates chapter three, where Geisst argues that usury prohibitions remained but were employed more flexibly. The forces behind this change are attributed both to a Weberian Protestant ethic and broader commercial developments such as mercantilism and the use of joint stock companies. Geisst regards the efforts to liberalize credit from moral strictures as a foundation for productive loans, economic growth, and modern capitalism.
The main emphasis is on lenders and theorists, so this is not primarily a story about borrowers, despite the ‘‘neighbours’’ in the book title. Borrowers are discussed to a certain extent in relation to nation states, bankruptcies and debtors’ prisons, the rise of consumerism, and the growth of personal debt. Geisst argues that early sumptuary laws were intended to stem excessive temptations to buy, but such restrictions were replaced by a concept of consumption as aspiration, exemplified by the ‘‘American Dream’’ in the twentieth century. Consumer protection was made more difficult when borrowers acquiesced to the consumer boom. Geisst identifies a long-lived problem of ‘‘consumption loans made to individuals for small amounts of money at extortionate rates’’ (173), with market rates available only to companies or governments for business or capital investment. Loan sharks and payday loans are thus an age-old problem, with loans collateralized for more than their value. It was only with the expansion of lending options that the paucity of small loans at reasonable rates was partly addressed, as with the innovation of credit cards just after WWII.
The book is strongest when considering the institutions that either proffered credit or regulated the practices of moneylending. This includes the early creation of long-term annuities, tontines, government bonds, and more recently, debt derivatives and swap contracts. Frequently the author [End Page 419] notes the importance of theoretical work in underpinning debt arrangements, such as the probability calculations of Edmond Halley or Modigliani–Miller theory that convinced companies that debt was not to be feared if profits exceeded the cost of capital. Geisst highlights the benefits that borrowing and interest brought to modern life, but balances this against the economic crises that have stemmed from excessive leverage, decoupling of risk from lenders’ decision-making, and a lack of regulation.
The second half of the book narrates how indebtedness was allowed to grow massively — both corporate borrowing for investment and personal borrowing for consumption. In both cases, a crisis was born in miscalculation about how this growth in debt could be managed. The development of securitization...