Did the Church Change Its Doctrine on Usury?

Orthodox Catholics say that discipline can change and doctrine can develop—in the sense that elements present in the early form of a doctrine can emerge more fully over time—but doctrine in its essence cannot change.

In the 1950s and 1960s, Catholic advocates of contraception cited the Church’s teaching on usury as a counterexample to this dictum. The Magisterium’s doctrinal authority covers faith and morals, which surely includes its teaching on usury. And yet its teaching on usury obviously changed. If doctrine could change with respect to usury, the argument went, why could it not change with respect to contraception?

During the recent Extraordinary Synod on the Family in Rome, we heard the same argument applied to communion for the divorced and remarried, and for homosexuality. Reporting on the Synod in The Daily Beast, Barbie Latza Nadeau wrote: “Doctrine, the traditionalist fathers said, cannot be changed, even though there are exceptions: doctrine on slavery has changed over the years; so, arguably, has doctrine on ‘usury,’ the payment of interest.”

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This argument has achieved a place in the pantheon of conventional wisdom. But is it correct? Did the Church’s change of teaching on usury constitute a doctrinal change?

No. What changed was our understanding of the nature and function of money, neither of which has doctrinal status. Once the understanding of money changed, the sin of usury ceased to be identified in any simple way with charging interest on money. This is development, not substantial change.

Unfortunately, the issue is complex. And its complexity provides fertile ground to plant the seeds of doubt about the stability of doctrine. We need to lay this mistake to rest.

The Traditional View
These days, we think of usury as charging an astronomical interest rate on a loan, but for most of the last 2,000 years, usury referred to any interest charged on a loan—that is, usury was more or less identified with charging interest on a money loan.

Far from being a trivial moral peccadillo, it was seen as a damnable offense. In his Divine Comedy, Dante puts usurers in the inner ring of the seventh circle of hell. Hatred of usury was not unique to Christianity, however. The Greek philosophers Plato and Aristotle—along with such Roman thinkers as Cicero, Seneca, and Cato—also disdained it, with the latter comparing it to murder. And it wasn’t just a Western hang-up. Buddha denounced it, and Islam still follows Muhammad in condemning it.

While Greek and Roman thinkers shaped the Church’s view of usury throughout the Middle Ages, the other influence, of course, was Scripture. The Old Testament seemed to prohibit charging interest on money loans. In Leviticus, for instance, God forbids the Hebrews from charging each other interest on loans after they have entered the Promised Land.

But if the Hebrew Bible condemns usury, how did Jews come to be associated with usury in the Middle Ages? The short answer is that the Old Testament allows Jews to charge interest to non-Jews.

Christians had to grapple with an additional passage from the New Testament book of Luke, where Jesus admonishes his followers to “lend, expecting nothing in return.” Because of admonitions like this, for centuries Christians were officially forbidden from charging interest while Jews were free to make interest-bearing loans to Christians. Since Jews were often prohibited by laws and prejudice from pursuing other lines of work, many ended up working as moneylenders to Christians.

From Sterility to Fertility
Although profound developments in culture and technology took place in the intervening 2,000 years, in terms of their economies, most classical and medieval Europeans were not all that different from the ancient Israelites. Most people lived and worked in the country or in villages and traded mainly within their extended families, clans, or tribes. By modern standards, almost everyone was dirt poor, and banks as we know them didn’t exist. Moneylending, then, involved rich people lending to their poor neighbors, probably their kin or longtime employees, for a basic need such as food or winter clothing. Such borrowers would not have been able to shop around for the best interest rate.

The early Christian world, like the Roman world before it, saw money as sterile, functioning only as a means of exchange but without value in itself. This was Aristotle’s view. The Greek philosopher had argued that money, unlike monkeys and monkey trees, did not produce after its own kind. (The Greek word for usury, tokos, translates as “offspring.”) Quarters do not sprout quarters, and if you plant a dollar in your garden, you won’t get a money tree. What followed from this, Aristotle thought, was that while charging interest on money might enrich the banker, it is ill-gotten gain because it’s based on a fact “contrary to nature.” It’s treating something as fertile that is in fact sterile.

In the Middle Ages Thomas Aquinas, along with many others, adopted Aristotle’s thinking on the subject (though St. Thomas showed that he was aware of contrary arguments even then). Money, they noted, doesn’t wear out like clothing or a house. If somebody wears your clothes for a year, you can’t get your original clothes back. At best, you’ll get used clothes. So you can rightly charge rent for your clothes. When coins get too shabby-looking, however, they are simply removed from circulation and replaced with freshly minted coins of the same worth. Also, a borrowed sum of money can be repaid exactly, even if repaid with different coins or bills. Charging for money seems different from charging rent on, say, a horse and cart or a three-bedroom apartment with a carport.

These arguments led most people to conclude that charging interest on money was more or less charging for nothing. As such, it was wrong. What changed their minds? In the West, Christian scholars slowly began to recognize the changing nature of money. Around the twelfth century, the growth of trade and banking exposed the problems. This created several dilemmas. First, growth in trade led to a shortage of gold and silver coins—the common form of currency. Second, it’s hard to make large exchanges of money over hundreds or thousands of miles when money is made of gold and silver and easily stolen by roadside bandits or lost in a shipwreck. Finally, the different coins used in Bruges, Milan, and Rome were often reminted and debased with less valuable metals, so the ordinary person could easily get ripped off by unscrupulous merchants or conniving kings.

From these exigencies, the bank as we know it emerged. Moneychangers, who could tell real coins from counterfeits, were crucial to the new system. They began keeping deposits for various clients so that when two clients made an exchange, all the moneychanger had to do was credit one account and subtract from the other. Simple arithmetic had replaced a risky and cumbersome movement of coins.

Eventually banks emerged with branches in different cities. This gave merchants a way to transfer payment safely over large distances, since bank notes now stood in for the money stored safely in a bank vault.

This process became so common that not only merchants but also governments and even the Pope used bank notes to pay bills. In fact, some banks had such large deposits that they could lend money to kings. What was fit for a king was soon fit for the commoner. Individuals and firms with extra money began depositing their money in banks, to be withdrawn as needed. This could only happen once people were convinced that their money was safer in a bank than hidden in a mattress or a hole in the ground. Thus banking grew only as ties of trust grew beyond family and ethnic lines to connect larger and larger groups of people.

Interest was still identified with usury, however, so instead of talking about interest on money, bankers spoke of a fee for service. This fix fell short of a robust theological defense, but the result was that the use of business credit and insurance spread. Soon the surplus money of a privileged few was no longer hoarded and unproductive but set free for others to use creatively in launching new enterprises. People began to create more wealth than they consumed, and, with the accumulated wealth, banks could create yet more wealth by functioning as brokers between depositors and investors.

It slowly became clear that money, at least in certain settings, is fertile, and has what economists call a “time value.” If I lend my neighbor $1,000 for a year, I forgo the opportunity to invest the money in some wealth-creating enterprise for a year, while you gain the same opportunity. That’s worth something.

Notice that charging interest for money need no longer be a rich man bilking his destitute brother or cousin. Now banks were making capital loans, that is, loans that could be used to start or fund business ventures. When a bank lends money at interest, it isn’t charging for nothing. Strictly speaking, it isn’t charging for the money itself, as a butcher would charge for a ham that will be smoked and eaten. It’s charging for the “opportunity cost” that the lender bears by not having the money for a while. To lend the money, the lender has to forgo all other uses he might have for the money. And for the borrower, getting the money now rather than a year from now is a benefit. It’s no surprise, then, that people will pay a premium for that benefit, since it self-evidently has value to the borrower. That’s why if you lend someone $1,000 today, he will be paying you for something if, a year from now, he repays you $1,000 plus interest. Whatever this is, it isn’t usury as the ancients envisioned it.

Besides the time value of the money lent, a banker charges for the risk that he won’t get his money back on time, or ever. So what is the right price to offset that risk? That depends on the situation. If only one bank can lend, and lots of people want to borrow money, the bank can charge a relatively high interest rate, though it would still be limited by what potential borrowers are willing to pay. But in a market with lots of banks competing for customers, interest rates will be much lower as the rates reflect the underlying supply and demand for credit—along with the perceived riskiness of a given loan. A wealthy tech executive with a perfect credit rating can get a much lower interest rate than the guy who just graduated from college and has never had a checking account or a credit card.

These days, few Christians—whether Protestant, Catholic, or Orthodox—offer a blanket opposition to charging interest, the Vatican participates in modern banking, and Canon Law assumes its legitimacy. As it was said toward the long conclusion of the scholastic debates, “When the reasons for the law ceases, the law itself ceases.”

What Do the Scriptures Really Say?
But did the Church, as some have charged, simply ignore inconvenient biblical passages against usury and change her teaching? No. What happened was that once scholars had cleared away certain assumptions about money they had brought to such biblical passages, the Church could draw some key distinctions that had been overlooked.

Of the three passages forbidding interest-charging in the Hebrew Torah, two refer to the rich Israelite lending money to a poor “brother” in dire straits; the lender should not take advantage of the situation by charging interest. The third passage, in Deuteronomy, repeats this ban but allows Hebrews to charge interest to people outside the community. So the practice must not have been seen as intrinsically evil. Ancient Israelites were simply forbidden from confusing family relationships with commercial ones.

Look at the passage in the New Testament book of Luke, which I referred to earlier. “If you lend to those from whom you hope to receive,” Jesus said, “what credit is that to you? Even sinners lend to sinners to receive as much again. But love your enemies, do good, and lend, expecting nothing in return.” Historically, many readers have thought that Jesus was prohibiting the charging of interest. But in context, things look quite different.

In the first part of this sermon, Jesus has given his famous “beatitudes,” such as “Blessed are you who are poor” and “Woe to you who are laughing now, for you will mourn and weep.” Then, he says, among other things: “If anyone takes away your coat, do not withhold even your shirt.” Does Jesus mean we should hope for everyone to be poor, so that they can be blessed? Is he commanding us not to laugh? Are Christians not allowed to sell shirts and coats? Is Jesus forbidding society from enforcing laws against theft? Of course not.

Jesus is using a rhetorical device common in first-century Judaism: hyperbole. Even sinners lend money, he observes, and they expect to receive back the same amount. Jesus says nothing about interest. And Aristotle’s argument is nowhere in sight. Instead, Jesus says we should lend expecting nothing in return. Jesus is encouraging his followers to be generous toward friends in need; he is not denouncing banks for charging interest on loans. Similarly, when Jesus drives the moneychangers out of the Temple, he also drives out everyone selling sheep, cattle, and doves. Nobody concludes from this that Jesus issued a blanket ban on livestock auctions. He did not denounce commerce or money-changing in general, but rather the misuse of a house of worship.

Jesus also condemned hoarding and stinginess. “Do not store up for yourselves treasures on earth,” he told his disciples, “where moth and rust consume and where thieves break in and steal; but store up for yourselves treasure in heaven.” Here he’s reminding his disciples that their ultimate loyalty is not in wealth or possessions, but in God’s kingdom. He’s denouncing selfish hoarding, not pensions.

In the parable of the talents, Jesus even draws a distinction between the sterile hoarding of money on the one hand and, on the other hand, the interest-bearing savings of money placed in a bank; and he approves of the latter. In the parable, a man calls three servants and entrusts each with huge sums of money, and goes away. When he returns, he rewards the first two servants for investing the money they were given—for putting it at risk, where it can bear fruit. He condemns the third servant for playing it safe and burying the money. The master expected the servant to invest, to put the money at risk. At the very least, the master tells the servant, he should have put it in a bank where it could bear interest. Jesus isn’t giving an economics lesson—the parable is about the kingdom of God—but he treats prudent risk, investment, and interest in a positive light. So we can say that our more modern understanding of money and of interest is not just doctrinal development, but also resourcement: a recovery of something embedded already in the tradition—indeed, in the canon—but long overlooked.

Not a Doctrinal Change
Still, wouldn’t it have been better if the Church had understood all this from the beginning? Perhaps. But John T. Noonan, in his distinguished Scholastic Analysis of Usury, argues that “the scholastic theory of usury … is the first attempt at a science of economics known to the West.” The centuries-long debate over usury just may have given the West an economic head start. (Noonan, incidentally, stumped for contraception during the 1960s, but that doesn’t sully his point here.)

Moreover, the development of the Church’s teaching on usury has helped clarify both the extent and the limits of magisterial authority. In hindsight, it seems commonsensical that refined details about the nature and function of money in an economy would not be the natural domain of doctrine per se, any more than would the precise geometry of the solar system. Nevertheless, the Magisterium can speak about the moral implications of financial engagements in light of its current understanding of money. But that distinction, that limitation, is vital to keep in mind.

And if we do keep it in mind, it should be clear that doctrine, as Catholics define it, has not changed. Put simply, usury is charging someone for something that has no value, in short, for defrauding someone, especially the poor and dependent, in a financial transaction. The Church is right to condemn it, as Pope Benedict XVI did in his 2009 encyclical Caritas in Veritate. Our thicker understanding of money simply leads us to recognize that most ordinary bank loans exact a cost on the lender and have value to the borrower, and so are not usurious. Perhaps there are other examples of the Church changing doctrine—though I doubt it—but her teaching on usury is not one of them.

Editor’s note: The image above titled “The Moneylender and His Wife” was painted by Quentin Massys in 1514.


  • Jay W. Richards

    Jay W. Richards is an Assistant Research Professor in the School of Business and Economics at The Catholic University of America, a Senior Fellow at the Discovery Institute, and executive editor of The Stream. He is the author of many books, including Money, Greed, and God which received a 2010 Templeton Enterprise Award. Most recently, he wrote, with co-author Jonathan Witt, The Hobbit Party: The Vision of Freedom that J.R.R. Tolkien Got and the West Forgot. He has a Ph.D., with honors, in philosophy and theology from Princeton Theological Seminary.

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