St. Thomas on Usury and Interest: Some Lessons for the Modern World

Abstract

The recent global financial crisis, that crippled the economies of a great portion of the world, refocused attention on the ethics of banking. Should loans at interest be subjected to moral evaluation? Amongst contemporary Western philosophers, the tendency has been to treat all forms of interest as morally permissible. This is odd given the disasters that have befallen us. Indeed if one wishes to find a detailed contemporary attempt to develop an ethics of money lending, one needs to look to the Islamic world. Whilst modern Western philosophers have largely ignored the ethics of banking, within contemporary Islamic philosophy one finds detailed discussions on the difference between permissible and impermissible banking practices. However, Western philosophy has not always been so negligent. In the High Medieval period philosophers and theologians paid considerable attention to banking as well as other economic practices. This is the tradition that R.H. Tawney referred to as 'economic casuistry' in his classic text Religion and the Rise of Capitalism. Perhaps the most important work in this tradition was the treatment of the problem of usury by Thomas Aquinas. His discussion occurs as part of a series of reflections on various kinds of injustice, in particular sins that emerge in the course of voluntary transactions. Here Aquinas carefully distinguishes between legitimate money-lending (interest) and illegitimate forms (usury). In this paper we consider Aquinas' work and highlight those aspects relevant to the contemporary economic context. The significance of Aquinas' work for us is that he develops an ethics of banking within a framework that is not fundamentally opposed to commercial activity. In pursuing this theme we shall also draw parallels between Thomas' writings and an important figure within the Islamic tradition, IbnRushd, who employs the term riba to identify morally illegitimate forms of money lending. (Again we find the tendency amongst some scholars to conflate the moral term with all interest.) In exploring these historical themes we hope to begin a rehabilitation of the tradition of economic casuistry, a tradition which has the ideas of St. Thomas at its very core and in so doing develop a modern ethics of banking.