In the Interest of the People

As the British government promises to drop the debt owed to it by the world’s poorest countries, I consider the carefully avoided, unasked question

Every week, Africa pays $200 million in its servicing of national debts. It is no wonder that the global movement, Jubilee 2000, is calling for the cancellation of the unpayable debts of the world’s poorest countries by the end of this year. ‘The debts are unjust, unpayable and are killing too many people,’ states their web site, ‘The cards are stacked against the poor. We’ve got to change the system, to put an end to this injustice.’ In over 120 countries, trade unions, charities, religious groups and community organisations have come together with a unified answer; a call that the debt be dropped. A noble cause, but are we not failing to address the biggest injustice of them all?

In her book, A Fate Worse than Debt, Susan George calls interest rates the ‘bane of Third World debtors’ existence.’ Interest is the injustice which caused the crisis to reach the level it has. The first loans to Africa, Asia and South America came from the World Bank and foreign governments, provided at specifically low rates of interest in order that they be used in development projects and for the expansion of capital goods imports. Later, in the 1970s, commercial banks holding excess capital from OPEC’s oil price partnership joined in. Because they were inexperienced in dealing with poor countries, however, they provided variable-rate loans based on the market rates, while the recipient countries continued to service their previously incurred debts.

Interest rates followed market fluctuations and, largely as a result of the U.S. Federal Reserve tightening monetary policy against inflation in the 1980s, they quickly rose from negative to positive levels. When debt repayments suffered as a result of raised interest rates, the commercial banks withdrew from further lending to protect their own interests. The result of continued high interest rates, combined with a decline in commercial bank lending, was the paradox that the recipient countries were paying out more finance servicing payments than they received as borrowing.

The members of Jubilee 2000 wish to change the system, to put an end to the injustice of what has been termed the Third World Debt Crisis. Admirable, indeed, but is it not time we addressed the issue at the heart of this crisis? The movement, given momentum by Christian groups, gets its name form the Hebrew Bible, for the jubilee was a time when debts would be forgiven. In The Times in 1998, the late Cardinal Hume wrote, ‘the prospect of reducing the burden of debt has profound theological resonance.’ And yet we do not address the issue which was considered so important through the ages by Church theologians.

Judaism, Christianity and Islam have many things in common, one of which is a prohibition on the consumption or charge of interest. In all three faiths, to make a transaction in interest is (or was originally) viewed as committing a major sin. The law in the Pentateuch states that an Israelite may not exact interest from his poor brother on a loan given to him (Exodus 22:25; Leviticus 25:36). In the Psalms, one ‘who does not put his money out to usury … will remain unshaken’ (15:5). In Ezekiel, a righteous man is one who ‘never lends either at discount or at interest, but shuns injustice and deals fairly between one person and another’ (18:8); a loan in interest, meanwhile, is considered amongst a list of abominations (18:13).

Christians through the ages have made reference to the gospel of Luke, in which the teaching is to lend without expecting a return (6:35). The Encyclical of Pope Benedict XIV, of 1745, states, ‘The nature of the sin called usury has its proper place and origin in a loan contract.’ He goes on, ‘One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle, but is spent usefully…’

The Qur’an states that, ‘Those who devour usury will not stand except as stand one whom the devil by his touch has driven to madness. That is because they say: Trade is like usury, but God has permitted trade and forbidden usury …’ (2:275). Muhammad said, ‘A dirham which a man knowingly receives in usury is more serious a sin than thirty-six acts of adultery.’

Would we not then agree that a disassociation from interest would have the greatest theological resonance? Perhaps not. Although a distinction between usury and interest was rejected by Luther and Melancthon, Calvin’s separation of the two gradually gained acceptance amongst both Protestants and Catholics until, eventually, we arrived at the situation of today when we do not even give it a second thought. This is surely the time that Muhammad spoke of when he said, ‘A time is certainly coming to mankind when only the receiver of usury will remain and if he does not receive it, some of its smoke will reach him.’ For those who know of the prohibition, it is convenient to consider usury as different from interest, even though such a distinction was never made in the past. Benedict XIV, after all, was writing after the emergence of modern banking.

It is about time that we stopped skirting around the issue. It is not just the debts which are unjust, unpayable and which are killing too many people, as Jubilee 2000 argues. The root of the debt crisis is, without doubt, interest. How can it be otherwise when the poorest countries of the world were paying out more finance servicing payments than they received as borrowing because they were granted variable-rate loans? In the short term, Jubilee 2000 may wish to pursue this admirable short term solution, but if they really want to change the system it may be time to stick Calvin’s separation back together again and concede that, just maybe, the ancients had it right after all.

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