Beggar Thy Neighbor

Beggar Thy Neighbor: A History of Usury and Debt

Charles R. Geisst
Copyright Date: 2013
Pages: 400
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  • Book Info
    Beggar Thy Neighbor
    Book Description:

    The practice of charging interest on loans has been controversial since it was first mentioned in early recorded history. Lending is a powerful economic tool, vital to the development of society but it can also lead to disaster if left unregulated. Prohibitions against excessive interest, or usury, have been found in almost all societies since antiquity. Whether loans were made in kind or in cash, creditors often were accused of beggar-thy-neighbor exploitation when their lending terms put borrowers at risk of ruin. While the concept of usury reflects transcendent notions of fairness, its definition has varied over time and place: Roman law distinguished between simple and compound interest, the medieval church banned interest altogether, and even Adam Smith favored a ceiling on interest. But in spite of these limits, the advantages and temptations of lending prompted financial innovations from margin investing and adjustable-rate mortgages to credit cards and microlending. In Beggar Thy Neighbor, financial historian Charles R. Geisst tracks the changing perceptions of usury and debt from the time of Cicero to the most recent financial crises. This comprehensive economic history looks at humanity's attempts to curb the abuse of debt while reaping the benefits of credit. Beggar Thy Neighbor examines the major debt revolutions of the past, demonstrating that extensive leverage and debt were behind most financial market crashes from the Renaissance to the present day. Geisst argues that usury prohibitions, as part of the natural law tradition in Western and Islamic societies, continue to play a key role in banking regulation despite modern advances in finance. From the Roman Empire to the recent Dodd-Frank financial reforms, usury ceilings still occupy a central place in notions of free markets and economic justice.

    eISBN: 978-0-8122-0750-7
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Introduction
    (pp. 1-12)

    Seven years before the assassination of Julius Caesar, an acrimonious dispute broke out between Marcus Tullius Cicero, at the time the provincial governor of Cilicia, and Marcus Junius Brutus, a young provincial Roman administrator. The elder statesman chided the younger man for using his administrative post in Cyprus to earn ill-gotten gains at the expense of the local people. Cicero received reports that Brutus had been lending money in Cyprus at four times the maximum rate stipulated by Roman law. To make matters even worse, he did it anonymously through an agent who did not mind using strong-arm tactics to...

  4. Chapter 1 Saints and Sinners
    (pp. 13-57)

    Collecting interest traditionally was considered the world’s second oldest profession until the Industrial Revolution. It was lumped together with other socially unacceptable practices as inimical to the common good and a perversion of the idea that man should help his fellow man. Along with prostitution, arson, and murder, it was considered an execrable crime under religious law, although it was more gingerly tolerated in the secular world. In the Middle Ages, usurers were often relegated to the seedier sections of towns, segregated much as prostitutes were in red light districts. Theory and practice concerning interest often diverged widely, but generally...

  5. Chapter 2 Embracing Shylock
    (pp. 58-96)

    Official attitudes toward usury changed remarkably little in the late Middle Ages and the early years of the Renaissance. It still was considered an execrable sin against humanity although in reality it was being practiced by all and sundry in the commercial revolution in Italy and the rest of Europe. The papacy had become the first financial regulator since usury was under its power, but it exercised that power very selectively, begrudgingly acknowledging interest as necessary for business. Yet with the rising commercialism came discussions about money and usury that were not evident in previous centuries. The revival of learning...

  6. Chapter 3 Protestants, War, and Capitalism
    (pp. 97-136)

    Following the Reformation, faith-based prohibitions against usury and interest began to crumble in the wake of increased commerce and exploration, although they maintained their emotional and moral appeal for centuries to come. But practicality slowly began to win the usury debate and capitalism emerged from the shadows of church dogma.

    The contributions of the Dutch to a more liberal interpretation of interest and usury cannot be overstated. On a practical level, Stevin’s interest tables made the secrets of bankers accessible for the first time. On a higher level, Grotius helped divorce usury from its Thomist connotations while still managing to...

  7. Chapter 4 The Great Experiment
    (pp. 137-179)

    As society grew larger and entered the industrial age, the demand for loans and property increased. Usury prohibitions were under pressure in Britain and the United States because they were seen by many as standing in the way of progress. As experience in the eighteenth century proved, credit banking made loans easier to obtain. But the moral stigma surrounding usury and indebtedness lingered. Consumption loans still provided fodder for those who wanted to keep the usury prohibitions. Business loans provided the argument for greater laxity. The last remaining question was if the prohibitions would still hold sway if usury ceilings...

  8. Chapter 5 The New Debt Revolution
    (pp. 180-229)

    The new attitude toward debt emerging from the nineteenth century was best found in a book by Thorstein Veblen that was published in 1899. In his Theory of the Leisure Class, he described the new class of consumers who had grown rich over the previous decades. “Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure,” he wrote about the current consumers who provided demand for luxury goods during the Gilded Age. Their goal was to emulate other wealthy individuals in a quest for status and luxury. In previous centuries, the sumptuary laws tried to...

  9. Chapter 6 Something Old, Something New
    (pp. 230-271)

    In 1970, a new edition of the King James Bible appeared, the first since the original English translation appeared in 1611. The New English Bible was a collaboration by noted biblical scholars and incorporated the most advanced knowledge available. It also modernized the text by using contemporary language. But its treatment of one Old Testament passage concerning usury was more than a reiteration of the original. The new interpretation was significant.

    The new translation of the passage in Leviticus (25:36) concerning usury reflected the advances made in understanding the concept since the early seventeenth century as well as some that...

  10. Chapter 7 Islam, Interest, and Microlending
    (pp. 272-298)

    Developments in finance were centered mostly in New York and London after World War II. New financial theories, products, and practices developed at a torrid pace, beginning in the 1950s, and by the 2000s most of the developed world had adopted them in one form or other. But in the developing world, and in the Islamic world in particular, not much had changed for centuries. Banking was relatively primitive by Western standards and religious prohibitions held great sway over financial practices, much as they had in the West centuries before.

    By the late 1970s, usury prohibitions still were a problem...

  11. Chapter 8 The Consumer Debt Revolution
    (pp. 299-334)

    The erosion of state usury laws in the United States reflected the new attitude that had been developing toward debt since the 1970s. Debt was no longer feared. The term had been replaced in consumer culture by the term credit; how much credit lenders extended to borrowers was a reflection of the borrowers’ status in life, not a potentially damaging tool that could alter the borrowers’ lifestyles and future prospects. Debt was being accumulated at a fast rate, suggesting that consumers either were borrowing with a high degree of certainty about their future earnings prospects or were being sold a...

  12. Appendix Early Interest Rate Tables and Calculations
    (pp. 335-342)
  13. Notes
    (pp. 343-360)
  14. Bibliography
    (pp. 361-376)
  15. Index
    (pp. 377-388)
  16. Acknowledgments
    (pp. 389-389)