“Main use of money is its consumption or investment”
Saint Thomas Aquinas (1265-1274)
From the above quote and his works, we know that St. Thomas Aquinas considered money as a non-durable good, which by definition should be destroyed when exchanged / consumed, and thus should not be used to generate even more money. For him, if money is used to acquire goods or to obtain services, then it is not fair to ask for more money than is worth the service or good itself. Thus Aquinas makes the distinction between the true price for a good or service, and the illegitimate price for the use of such good or service. The price of the use of money is what Aquinas calls usury because when one charges for the use of a good, one charges for more than the fair price of the good. It follows that, for Aquinas, it is evil to sell goods at prices which are higher than their just price; yet he still allows merchants to make profits from their merchandise – which means that they have increased the original price of the goods they are selling. Thence, what is usury for St. Thomas Aquinas and why does he think that profit is not usury?
St. Thomas, in the same way as Aristotle, sees the just or fair price of a good as the price which corresponds to the true value of said object. With this definition, Aquinas considers that usury and profits are sins; still, he puts certain conditions under which one may charge at a different price than the fair price when selling objects, i.e., make profit. If the object provides the consumer with a lot of utility, he could pay a price higher than the fair price; similarly, if the seller does not want to sell the object, then the buyer could pay more than the fair price in case of emergency. You can also charge more than the fair price because of transport costs or modifications to the object. But the most important and valid reason to set a higher price is when the seller sells and makes profit to support his own family or to help the poor. Continuing on the previous example, the seller is a merchant whose profession is to trade, and only through the profits he makes can he can support his family and, if possible, help the needy. For this reason, Aquinas allows profit, if profit is not an end in itself but a compensation for the work of the merchant.
Aside from purchases and sales, in general Aquinas condemns usury in an absolute way. The author Chasterton (Persky, 2007) interprets Aquinas’ thoughts in the following way: Aquinas considers that people who take loans are people who really need the money, such as poor people who have to take care of themselves and their family. To do so they ask a lender, but this lender does not need the money. Indeed, lenders have typically more resources than necessary to cover their needs and this allows them to loan money. In these circumstances, lending with interest implies two sins for lenders: first, they take advantage of the needy, and second, they want more than they need, i.e., they commit the sins of vanity and greed. Other authors, such as Wilson and Stark (Worland 1977), see a different reason behind Aquinas position on money, profit and usury. Both authors take into account the environment in which Aquinas lived, which was characterised by a “chronic low level stagnation”, i.e. a society of orders, with a predetermined status quo and a strong religious devotion among all members of society. In this context the authors, mainly Stark, believe that the reasons why Aquinas wanted to prohibit usury were not those exposed in his Summa Theology, but rather an exogenous factor: the dynamism of Capitalism was threatening the social order, threatening the status quo, and such dynamism began with the loan of money which requires interest -so that one may be able to make profit when lending money. If we follow these authors’ explanation, one could consider that Aquinas did not think that the poor were those who were going to request loans. Instead, he may have thought that only merchants would sought out such loans in order to improve their businesses and generate wealth. In turn this would boost the world economy and in this scenario, a new social order could be established.
In both interpretations of Aquinas’ thoughts, the practice of usury is wrong and detrimental to society. With the first explanation, it is possible that Aquinas outlawed usury in order to defend the poor from the exploitation of unscrupulous lenders. This defense of the poor may not even be genuine and may be due to the potential benefit that Aquinas sees that the lenders could obtain. Indeed, Bentham (1816) showed in his work how the poor were actually willing to accept any interest rate in exchange for a loan. Consequently, unimaginably high rates – that a poor person would not be able to cope with – could be the norm.
If the true intentions of Aquinas are those given by Wilson and Stark, then he wanted to prevent society from developing, from changing; for this reason, he prohibits usury.
Going forward, for Aquinas, usury is such a great misdeed that in the Summa Theologica he extends the sin of usury to any objects that were bought with the gain of it. Even so, he allows in certain occasions to receive some type of appreciation when money is lent. Aquinas says that it is lawful, and not sinful, “to demand in compensation for the loan, those things that are not measured, such as benevolence, friendship of the one to whom it was lent or other similar … if the gift of services or in words not it is granted by way of real obligation, but by benevolence, which does not fall under the pecuniary assessment, it is lawful to receive, demand and wait for it.” (Aquinas 1265-1274, Summa Theologiae, Second Part of the Second Part, question 78). Here, Aquinas affirms again that nothing material can be received in exchange for a loan, nothing except things that cannot be measured, things which cannot be sold or exchanged.
Therefore, we see that Aquinas distinguishes very clearly between selling goods and lending money. With selling, the fair price of the object can be modified given the preferences of the agents and given the transformations the object went through (not only physical but also due to time and location); you may do the same if you are a merchant by profession and the profit made by increasing the price is used for good. However, making profits through lending cannot be allowed. Indeed, if people were allowed to lend money and charge this service, then it could not be in order to feed their family or help the poor, because if they were really altruistic they would have used their excess money for these purposes initially. This is the main difference Aquinas sees between profit and usury and why it is strongly condemned, censored, and forbidden by him and by the Catholic Church. But Aquinas could also maintain the status quo of society, according to Stark. For it, Aquinas used the best way to hide it this double intention: coming out in defense of the poor. In the end, even with the strong condemnation on usury, Aquinas and the Catholic Church did not manage to stop usury because it was secretly camouflaged as interest (Persky, 2007), becoming the fundamental pillar of today’s capitalist world.
By José Alfonso Muñoz
Aquinas, T. (1265-1274). Summa Theologica. Christian Classics Ethereal Library. Retrieved from https://www.ccel.org/ccel/aquinas/summa.pdf
Bentham, J. (1816). Defence of Usury: Showing the Impolicy of the Present Legal Restraints on the Term of Pecuniary Bargains. Payne & Foss.
Persky, J. (2007). Retrospectives: from usury to interest. Journal of Economic Perspectives, 21(1), 227-236.
Worland, S. T. (1977). Justum pretium: One more round in an “endless series”. History of Political Economy, 9(4), 504-521