Irving, Texas. G. K. Chesterton begins his Utopia of Usurers with a description of a world in which all art has become commercial art. He does not find it out of place that the wealthy support the arts, but in the older patronage, “The prince paid for the statuette; but he did not expect the statuette to pay him.”

We might think it strange to begin a discussion of usury with a discussion of art, but Dante as well views usury as a violation of art and nature. While journeying through the Sixth Circle of Hell, where usurers are punished, he asks how usury offends, and Virgil answers:

From these two, art and nature, it is fitting,

If you recall how Genesis begins,

for men to make their way to gain their living;

and since the usurer prefers another

pathway, he scorns both nature in herself

and art, her follower; his hope is elsewhere. (Inferno XI, 105-9)

We have long since journeyed into the paradise of the plutocrats where art, like everything else, must pay its way, which means it must pay the merchant-prince, who has come to own all ways. We no longer think it unusual that art is subverted to commercial and political propaganda, while much “serious” art defends itself by becoming unintelligible. And usury has long since ceased to be a topic of economic analysis; in the world of plastic, we think nothing of financing our burgers and fries at 25% per annum.

And yet, with all the turmoil in the financial industry, you would think that there would be a national conversation on money and lending. You would think that this would be a good time to re-examine the way we create money and the way we lend it. You would think, especially, that it would be a good time to review the subject of usury, considering the credit card market is about to collapse in the same way the mortgage market did. But no, that conversation has not taken place.

Indeed, the last great economist to address the subject of usury was J. M. Keynes, back in the 1930’s. Keynes, who was no friend of the Church, surprised himself by finding that the Church’s restrictions on usury made perfect economic sense, a sense ignored by classical economists:

Provisions against usury are amongst the most ancient economic practices of which we have record. The destruction of the inducement to invest by an excessive liquidity preference was the outstanding evil, the prime impediment to the growth of wealth, in the ancient and medieval worlds…. I was brought up to believe that the attitude of the Medieval Church to the rate of interest was inherently absurd, and that the subtle discussions aimed at distinguishing the return on money-loans from the return to active investment were merely Jesuitical attempts to find a practical escape from a foolish theory. But I now read these discussions as an honest intellectual effort to keep separate what the classical theory has inextricably confused together, namely, the rate of interest and the marginal efficiency of capital. (The General Theory, 351-2)

What Keynes is saying in this somewhat technical language is that when returns to pure loans are higher than returns to actual investments, you will have a problem; if you can make more money lending to consumers at 25% than to auto makers at 10%, then the money for making things will dry up, and loans will shift to consumption and speculation. After Keynes, the conversation mostly stops, is mostly confined to Distributists and other “unorthodox” types.

Hence the article Thomas Geoghegen in the pages of Harper’s Magazine, “Infinite Debt: How Unlimited Interest Rates Destroyed the Economyis a welcome revival of the topic. Unfortunately, the article is not yet available on-line, but it is worth picking up a copy of the magazine to read it.

There is an interesting parallel between the lifting of the usury laws and the abolishing of the abortion laws: both were accomplished not by democratic process, but by judicial fiat. In Marquette National Bank v. First of Omaha Service Corp. (1978), the Supreme Court found that an 1864 law prohibited the states from enforcing usury laws in their own state if it was legal in another state. For all practical purposes, this ended usury laws.

According to Geoghagen, the lifting of the usury laws had dire unintended consequences, one of which was the decline of manufacturing:

It may be hard to grasp how the dismantling of usury laws might lead to the loss of our industrial base. But it’s true: it led to the loss of our best middle-class jobs. Here’s a little primer on how it happened. First, thanks to the uncapping of interest rates, we shifted capital into the financial sector, with its relatively high returns. Second, as we shifted capital out of globally competitive manufacturing, we ran bigger trade deficits. Third, as we ran bigger trade deficits, we required bigger inflows of foreign capital. We had “cheap money” flooding in from China, Saudi Arabia, and even the Fourth World. May God forgive us—we even had capital coming in from Honduras. Fourth, the banks got even more money, and they didn’t even consider putting it back into manufacturing. They stuffed it into derivatives and other forms of gambling, because that’s the kind of thing that got the “normal” big return; i.e., not 5 percent but 35 percent or even more.

But in addition to the economic effect, it had a profound effect on the moral character of the nation:

The change in credit-card caps also had a bad effect on the moral character of the nation. Because interest rates were so high, the banks no longer wanted borrowers with good moral character. Look at the way lending has changed just since the time I was in law school in the early 1970s. Even then, the mantra of my teachers in contracts and commercial paper was: “The loan must be repaid!” I have a friend, a professor, who still quotes that refrain. But it’s out of date. At interest rates of 25 percent, or 50 percent, or 500 percent, lenders don’t really want the loan to be repaid—they want us to be irresponsible, or at least to have a certain amount of bad character.

One question, however, is why we were willing to oblige the bankers by displaying such poor moral character. No doubt the convenience of the credit card was a factor, but there is more to it than that. One reason is that we had to. The shift in the economy from manufacturing to finance meant that workers were no longer able to bargain for wages through unions and other means. Since 1972, the median hourly wage has stagnated. We experienced a very odd phenomenon: productivity exploded, but wages remained the same. Obviously, there was not enough purchasing power to clear the markets. Workers responded in two ways. One was to work more hours and put more family members to work, with a devastating effect on family life. The other was to borrow more. Our sense of well-being in the Sixth Circle was largely built on plastic.

Further, the best and brightest of our students no longer went into engineering or manufacturing, but into finance. We started to lose even the knowledge of how to make things. As Thomas Geoghegen points out, not only did financial companies account for 40% of corporate profits in 2003 (up from 18% in 1988), but this may understate the problem. Many “manufacturing” firms, like GM and GE, actually made their profits from their finance divisions. GM became a company that manufactured cars in order to make loans on them.

Our current bail-out plans are mainly directed at the banks, the hedge funds, the insurance companies, and other financial institutions. But this will not work. Wealth comes from the farm, the field, the fishery, the factory, the forest, and the mine. Everything else depends on these. Without restoring manufacturing, farming, mining, and other basic industries, we cannot rescue the economy. But we have the order exactly reversed. The bankers get an instant bailout, no questions asked, while manufacturers, like the auto makers, have to crawl over broken glass to get what amounts to “chump change” in the context of the overall “rescue” numbers. Moreover, “contracts” with the derivative traders of AIG are regarded as sacred and unbreakable, while union contracts are broken at will.

It is the habit of the modernists to despise the past, and so it is no surprise that a restriction which existed in most cultures from the time of the Babylonians to the time of Jimmy Carter would be overturned. Yet, even modernism posits some empiricism, actually looking at the effects of an action. It has now been long enough to look at the effects of the Supreme Court’s 1978 decision. And without revisiting this decision, we cannot fix the economy.

Dante puts the usurers in the deepest ring of the Sixth Circle of Hell, the place where fraud is punished:

Of every malice that earns hate in Heaven,

injustice is the end; and each such end

by force or fraud brings harm to other men. (Inferno Canto XI, 22-3)

The difference between hell and earth is that on earth the innocent are punished along with—or in place of—the guilty. But we have refined the art by taxing the innocent to pay huge sums to the guilty. Welcome to life in Circle Six.

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  1. Since 1972, the median hourly wage has stagnated. We experienced a very odd phenomenon: productivity exploded, but wages remained the same. Obviously, there was not enough purchasing power to clear the markets. Workers responded in two ways. One was to work more hours and put more family members to work, with a devastating effect on family life.

    In this particular case, I think your story has it backwards. It was the ideologically driven influx of women into the workforce that caused (and still causes) wages to stagnate. Obviously, women were always a part of the wage workforce to a certain extent, especially during/after WWII; in and after the 1970’s, however, the proportion of wage-earning women grew significantly due to the equal rights movement and its corollaries. We see the results today. The increasing labor supply leads directly to lower labor price. Supply, demand.

    I am aware that this is not exactly a politically correct observation, but note that I do not, at this point, say whether this economic fact is favorable or unfavorable. One could certainly accept the reality and say it’s worth lower wages for more women to be working in the workforce in spite of the consequent effect of making wages low enough that both parents must work outside the home.

  2. Just a few of many observations:

    1. Ponder how Dante’s hell is populated with those who’ve engaged in other types of consensual behavior that are lawful under today’s civil polity. A very selective reading of Dante is required if one is to cite him in reference to a modern political issue. A selective nostalgia will not do as the basis for public policy.

    2. “Wealth comes from the farm, the field, the fishery, the factory, the forest, and the mine.”

    No, not really. That’s like saying that no book is worth the paper on which it’s printed.

    I’ll go with Ayn Rand’s explanation in Atlas Shrugged in the mouth of character Francisco d’Anconia:

    Dagny, we who’ve been called ‘materialists’ by the killers of the human spirit, we’re the only ones who know how little value or meaning there is in material objects as such, because we’re the ones who create their value and meaning. We can afford to give them up, for a short while, in order to redeem something much more precious. We are the soul, of which railroads, copper mines, steel mills and oil wells are the body–and they are living entities that beat day and night, like our hearts, in the sacred function of supporting human life, but only so long as they remain our body, only so long as they remain the expression, the reward and the property of achievement. Without us, they are corpses and their sole product is poison, not wealth or food, the poison of disintegration that turns men into hordes of scavengers.

    3. A quick survey of the history of usury before our times reveals consequences significantly more severe to the defaulting debtor than those faced by today’s bankrupt.

    4. Art has, for the most part throughout history, been subjected to (or the product) of some agenda imposed by those in power. (Do you suppose that the ceiling of the Sistine Chapel is not “propaganda”?) That it would be the agenda of merchants in an culture ruled by merchants should come as no surprise. I tend to prefer the art produced during the reigns of emperors and popes, though I prefer to live in this mercantile age.

    5. If you want to go biblical on this issue, give attention to the demanding master in the parable of the talents in Matthew 25. While Jesus does not necessarily hold out the master, who expects his servants to achieve aggressive returns, as an exemplar, he also doesn’t see him as wicked.

  3. “1. Ponder how Dante’s hell is populated with those who’ve engaged in other types of consensual behavior that are lawful under today’s civil polity. A very selective reading of Dante is required if one is to cite him in reference to a modern political issue. A selective nostalgia will not do as the basis for public policy.”

    Why must Dante be read very selectively to draw a useful lesson from him about usury? Because he (and the Church) also condemns other things that are legal today? I don’t see what that has to do with the value of his lessons on usury.

    I fail to see where John Medaille dips into nostalgia by reading Dante on usury in any case.

    FWIW, as a Catholic I definitely believe it is worth pondering those other types of consensual behavior, lawful in the US, that landed the poor sinners in Hell, and our society would be better off if those activities were illegal or otherwise beyond the pale of society, but that’s really a subject for a different post and in any case haven’t much to do with this.

  4. “And yet, with all the turmoil in the financial industry, you would think that there would be a national conversation on money and lending.”

    The Austrian economists have been explaining money and lending/banking for almost a century: Ludwig von Mises. F.A. Hayek, and Murray Rothbard, three of the notables. Congressman Ron Paul has been explaining the nature of honest money,to his colleagues; and how and why the US government and the Federal Reserve/the central bank has strayed so very far away from a policy of honest money. He was pleasantly surprised to discover during his presidential campaign that young people were avidly interested in monetary policy.

    Recently,Thomas Woods wrote a book for the layman that explains the present economic turmoil from the Austrian perspective. It’s called MELTDOWN and has been on the NYT bestseller list for several weeks.

    More people are learning about the Austrian view and are being influenced by it because it makes sense and comports with the real world of real people. I think the major media and the federal government ignore it because it holds the Feds primarily responsible for the mess we are in. And it gives no role to the government except (1)to get out of the way and let the market correct itself,and (2)to return to a policy of honest money as spelled out in the Constitution.

    Mises.org is the premier site for Austrian economic theory, for practical and scholarly discussions of money and banking, and for critiques of Keynes.

  5. Nice one Medaille……..”we think nothing of financing our burgers and fries at 25% per annum. “. Thats a lovely way of putting it. I wouldn’t call any reference to Dante’s Circles of Hell “nostalgic”, I’d call them prudent. This Financialization of the American Economy theme is also explored in at least two books by Kevin Phillips that are very applicable to the current debacle. Just yesterday, the N.Y. Times Magazine had a cover article on the “Obama Economy after the Great Recession” (or something to that effect) and the subject, our latest Count Mesmer was interviewed at length and it appeared that Medical Reform was to constitute a major portion of our future economy and while the President made a sideline glance at asserting he understood that some people “enjoy making things”…this observation seemed to be one of saying this object of “making things” was a minority need, far subservient to another Great Object of Federal Endeavor. We were given hands , brains and eyes to do something useful with and any economy that works to subvert or deny this basic fact will surely end up hellish and not quite nostalgic.

  6. The usury and abortion comparison is apt for reasons other than their source in judicial fiat – both represent a lifting of traditional limits in the name of “liberating” us from moral restraint and allowing us maximal individual satisfaction. Indeed, both behaviors are sanctioned for the convenience of the less responsible among us. Both were efforts to dispel communal norms in the name of autonomy and fulfillment of wants. Perhaps most interestingly, both overturned age-old Catholic prohibitions as unjustified restraint upon our ability to get what we wanted NOW. Abortion and usury both discount the relevance of the future upon the present: we prefer to live in THE NOW.

    It’s remarkable to note that the two decisions occurred merely 5 years apart: following successful efforts in the 1960s to portray all authority as illegitimate and authority’s replacement with calls for autonomy and liberation, within a decade all the old moral strictures were being overturned by our “progressive” branch in the name of individual autonomy. We are reaping the “rewards” of these decisions several decades later, both in terms of financial and moral collapse (as if the two were disconnected). Thanks, John, for intimating at the connection between these otherwise “disconnected” spheres; I hope others here on the Front Porch will continue to explore these connections.

  7. Patrick Deneen:

    The connection between usury and abortion (and contraception) is made in Pound’s Canto XLV:

    “Usura slayeth the child in the womb
    It stayeth the young man’s courting
    It hath brought palsey to bed, lyeth
    between the young bride and her bridegroom

  8. This is a much better piece than its detractors give it credit for. But I would also like to quibble with this sentence–or maybe ask for clarification: “Wealth comes from the farm, the field, the fishery, the factory, the forest, and the mine.”

    Factory and mine differ from farm, field, fishery and forest in that they cannot replenish themselves. To use only the example of the farm, soil can be improved by good soil husbandy, which is to say that farming can lead to improved fertility, whereas mining cannot lead to better mining. It can lead only to exhaustion. Likewise, the factory must proceed from extraction to exhaustion.

    My sense is that the factory and the mine increase symbolic or artificial wealth only at the expense of the real wealth of the world (“real wealth” meaning, I assume, something like what you’re after in the sentence I quote), whereas proper care on the farm or in the field, fishery, or forest will ensure an essentially endless sufficiency of goods regardless of what money and usury say about their value.

  9. I thought the Usurers were in the innermost ring of circle VII, the circle of the violent, not Circle VI, the heretics. As I recall, they in the smae ring as the blasphemers (those who are violent against God) and the sodomites (those who are violent against nature). As I remember it,the usurers sit on the edge of the hot sands clutching their purses, and look out over the cliff that marks the boundy between the violen that the fradulent who are punished below them.

    Dante’s taxonomy of sin is very illuminating because he groups the usurers, those who would try to harvest fruit from what is naturaly sterile, with the sodomites (contraceptors), those who render sterile that which is by nature fruitful.

    The abortionists, who have been discussed in the comments here, while still in the circle of the violent, are higher up than the contraceptors, they boil in the Plegethon at the outer ring of circle VII.

  10. This is my first post on FPR, and I must say that the level of commentary is certainly higher than on most blogs.

    Ben, you are correct; Dante discusses usury in the context of level 6, but actually places them in level 7, which gives usury a very complex place in the taxonomy of sin. Since I was quoting a conversation in six rather than seven, I decided to leave it there. That explanation is certainly preferable (for a scholar) than admitting a mistake in scholarship. Such an admission would be contrary to the rules of our guild.

    Jason, I agree with what you say about the mine, although not necessarily with the factory. The factory, of course, depends on what is produced in the farm, field, etc., but it can replenish itself, depending on how the product is used. Not in the way of nature, but in the way of super-nature, that is, the way of man. As for the mine, it depends on what is being extracted. Somewhere I have read, possibly in Buckminster Fuller, that 98% of all metals ever extracted by man are still recoverable. But it is different with energy, such as coal and oil. These are destroyed. Hence the natural wealth is actually depleted, or rather appropriated by a few generations for their own use. Even this would not be so bad if we invested part of the energy in finding replacements. But it is good to keep in mind that much of the wealth of the last 200 years results simply from adding energy to the economy, energy that took eons to create.

    Patrick, usury, abortion, and one can add homosexuality are alike in many ways, CONTRA NATURAM, as Pound notes, but in the ways that they were imposed. It is that strange “democracy” where the religion of the people will have no public place in the life of the people, a democracy that insures that what the people must want they cannot have.

    Art, as for the Austrians, it was the non-regulated portion of the economy that failed. The myth is going around that it is the fault of the poor (naturally) for borrowing too much, and of the gov’t for forcing the banks to lend to them. This is, of course, absolute nonsense. The sub-prime market is too small ($1.4T) to have caused this. To blame the sub-prime market is to blame the explosion on the fuse rather than the dynamite.

    Armchair says, “Art has, for the most part throughout history, been subjected to (or the product) of some agenda imposed by those in power. (Do you suppose that the ceiling of the Sistine Chapel is not “propaganda”?) Of course, you can’t draw a line without having some reason, and so I suppose one can say that the artist has an “agenda.” But there is something quite different about expressing the shared vision of a society, its deepest appreciation of meaning, and trying to coin that meaning into political or commercial advantage. This later subverts art itself, and so is a kind of usury. This subversion is exactly what Dante and Chesterton were talking about. The subject deserves a long post of its own, and perhaps one of the contributors will contribute one.

    Dirk, what scares me about the whole “recovery” package is that it seems to be aimed at “recovering” the conditions which caused the collapse in the first place.

    Albert, I think the causes are reiterative, and you can start anyplace in the cycle you want. Failing wages cause more women to enter the workplace, which causes wages to fall, which causes more women to enter the workplace, etc. It is hard to tell whether the economics create the ideology or vice-versa.

    Great comments, everybody. Thanks a lot.

  11. I think there is an important distinction to make in regards to how the ruling class views both the financial and automotive industries.

    Blame for the financial crisis is universally identified as political. Either a product of government abdicating its responsibility through deregulation or the government causing the bubble in the first place through a policy of easy credit. The financial system is too closely tied to the state to reasonably think otherwise.

    No one in the ruling class views the crisis in the automotive industry as political. It is viewed fundamentally as a business failure.

    The ruling class is correct on both points the question should be is it healthy to have the sort of financial-industrial-complex we have?

    I agree with the author on this point with an emphatic no. The question is now what is the best way to go about untangling this mess.

  12. I fear that to dismiss the recent folly of the regulated portion of our economy as merely the fuse to the current crisis in nonsensical, John. (And you can add an “of course” to that last sentence if it helps.)

    This is not to deny the mess that can be made in a bubble of this sort by the private sector w/o the help of governmental meddling. The moral implications of such private activity would seem to hinge entirely upon whose money was being gambled and whether it was gambled with the permission of the owner.

    The money gambled, explicitly and implicitly, by, or under orders of, our government was gambled without regard to who owned it and whether they wished to have it gambled in such a manner. Worse yet, the government’s posturing as the ultimate backstop for all manner of risky financial behavior most definitely set the tone for the current crisis.

  13. I am going to come at this from a different angle than most of you here but bear with me because I am interested in making common cause. I am a “Green” oriented lefty who has been talking about usury to people for quite a while from the perspective of unsustainable growth. I am going to guess there are more than a few Wendell Berry reading agrarian decentralist lefties on here so I have to say I was disappointed by what I considered to be the off topic comments on abortion. My opinion is so called “culture wars” issues produce much division at the grass roots level that keep the usauers and other decadent purveyors of empire and growth oriented industrialism laughing all the way to the quite literal bank. IMO it’s going to be crucial to our future survival as a democratic republic to begin a dialog between “Green” leaning anti authoritarian lefties like myself and paleo leaning small town loving people like the people here at FPR. IMO that dialog will proceed best if we emphasize areas of agreement like a restoration of an agrarian Jefferson republic with New England style town meetings, more locally grown food and small craft industry, etc. If on the other hand FPR choses to jump in with both feet supporting divisive culture wars themes like abortion then we will in my opinion be unnecessarily divided from one other and the usuarers, professional militarist imperialists, fried food peddlers, tee vee huckster politicians from both parties and other decadent destructive people will defeat us. Remember if we don’t hang together we will surely hang separately as a wise founding father said,

    Just a thought from an open minded lefty reading FPR with interest and respect.

  14. Matthew, this is a long-forgotten thread, but let me respond that many here at FPR would agree with you. Indeed, the abortion and gay marriage issues are the devil’s greatest triumph: he keeps the conservatives from being conservative and still gets to execute millions of babies, all to the benefit of people most of us would rather not associate. Common cause is needed, and needed quickly. Things have greatly deteriorated since I wrote this. Indeed, last Thursday, the Supreme Court staged a coup in behalf of the corporations. See my next post in a few days on this topic.

  15. I look forward to reading your post on the terrible “Citizens United” decision John. I think one waythe left and right can make common cause critiquing the dubious idea of corporate personhood is to see it as the extension of Constitutional rights that were intended for individual human beings only to a lifeless contract that creates a collective group in the corporation that is not the proper place for *human* rights to inhere in. Creating a dubious new class of rights holders in the corporation is extremely unwise. I was reading today BTW that in the original Santa Clara County county v.s. Pacific Railroad case that the justices of the Supreme Court did *not* in fact intend to rule on Constitutionally and that it was fraudulently added to the header of the ruling they did by a court reporter so there is in fact no precedent for this terrible ruling.


    Know that although I consider myself on the left and may disagree with you on some culture issues that I consider you and sincere conservative paleo-cons and Libertarians to be far better friends to the American people than the sold out Democratic party. I suspect many others in the “back to the land” and anti imperialist activist left feel the same way and I hope that we all find a way to dialog in the future.

    Best wishes John, and thanks for letting me post FPR.


    Matt Rogers

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