Article III. Supplements to the Doctrine

378. With what intention interest is exacted today. Our explanation having been proved, it is licit sincerely to confess what seems consonant with the truth: many of those who today lend at interest wish neither to conduct business nor to purchase some rent, but simply have the will to extend money on credit and to obtain profit from this contract. Cf. Pesch, place cited, pp. 46-48.

This is licit for them because, from common estimation, there inheres today in money the rationale of “capital,” whose even temporary concession has value.¹

¹ Cauwes passed over this in the rationales by which, in nos. 886 and 978, he endeavors to show that the honesty of lending at interest did not always obtain. Possessed money was not always commonly regarded as capital or as a source of profit.

379. A loan for consumption is the proper seat of the sin of usury. From the thesis it follows that by the sin of usury the equality proper to the contract of a loan for consumption is violated, which accordingly will be the proper seat of that sin. A loan for consumption, moreover, is to be understood both formally and virtually, with which another agreement is often mingled, for example, a sale with deferred payment of the price (vente à crédit [sale on credit]).

And that the matter has always been understood in such a way that usury was joined with credit of a fungible thing is easily evident to one reading the Holy Fathers and antiquity. We do not know by what right the distinguished Professor Funk imagines this to be an invention of the Middle Ages.² Jurists and theologians afterward testified with one voice that usury is located in a loan for consumption;³ finally, Benedict XIV solemnly declared it in the encyclical Vix pervenit. Cf. above, no. 360, p. 467.

² Tübingen Quarterly, 1869, pp. 404-405.

³ Cf. already Henry, Cardinal of Ostia, Summa aurea, title On Usury.

380. The determination of interest is not rarely said to be made by comparing with each other the probable profit and probable loss which commonly befall one using money in such a place and at such a time. This consideration is nevertheless inadequate, since it neglects that not inconsiderable utility of possessed money by which it procures credit (donne crédit [gives credit]). Wherefore, we would prefer to say that just interest per se stands somewhat below the common hope of returns from possessed money. We establish interest somewhat below the hope itself because the use of money for conducting business is subject to various dangers, so that the prestation of security which is promised by the borrower must be computed (prime d’assurance [insurance premium]).

Interest determined by common estimation can justly be increased by one for whom it is specially important to reserve the use of the money for himself, or at least not to lend it to a debtor whose affairs are in a precarious state. Specially, I say, that is, beyond that danger or that utility which, because it is ordinarily present today in lending money for consumption, has already been computed in common estimation and cannot properly be called an extrinsic title. Cf. no. 366. Besides, this is a perpetual rule of just exchanges. So long as a certain use of a thing is almost proper to the seller, it furnishes a just cause for increasing the common price. But if afterward that use has become common, it will now be compensated by the common price itself, which from that fact will become greater per se.

381. By the name of modern usury some understand all the unjust arts of profiting with which present-day business abounds.⁴ As far as we are concerned, this is indeed licit; but when they think that these frauds and wicked deeds are denounced through the words of the encyclical Rerum novarum (at the beginning): “Devouring usury has increased the evil, which, more than once condemned by the judgment of the Church, is nevertheless practiced in the same manner under another appearance by greedy and acquisitive men,” we judge that they wander from the truth. For it would be strange for a foreign signification to be assigned by the Supreme Pontiff to a word whose force is defined by so many ecclesiastical documents; moreover, usury which is condemned by the judgment of the Church was said to have its proper seat in a loan for consumption; but a new appearance is easily understood as some new manner of cloaked usury, such as is not rarely practiced when, for the purpose of assisting payment, certain things are sold to purchasers with portions of the price established to be paid in order at individual intervals, which, taken together, excessively exceed the value (payements par acomptes [installment payments]). And many other examples could be brought forward.⁵

⁴ Thus, for example, Rev. Dr. Dehon, L’Usure au temps présent [Usury at the Present Time], p. 4, pp. 29-30, who thinks that this rationale is already contained in Littré’s dictionary, under usurier: “This word also applies to one who profits from the misfortunes or necessities of another in order to enlarge his fortune.” This description, however, accords more with the rationale of usury given by Rev. Dr. Funk: the abuse of another’s necessity from a position of superiority.

⁵ That there are many forms of this kind is testified by the investigations concerning which a public report was made in Parliaments. Cf., for example, Brants, L’usure dans la législation contemporaine [Usury in Contemporary Legislation], p. 10.

382. The sin contrary to usury, that is, the undue denial of interest, is committed not so rarely today by the rich when they defer, beyond what is licit by custom, the payment of what they owe to small merchants, bring countless inconveniences and losses upon them, and do not think of compensating them in any measure, even by moderate interest.⁶ St. Antoninus already censures an inequitable delay, Summa, pt. 2, tit. 1, chap. 17, § 7.

⁶ We attempted to write more precisely about this argument in Bien Public, February 9, 10, 11, 1900, under the title Les dettes criardes [Clamorous Debts].

383. As patrons of our opinion we can enumerate several theologians or economists: Rev. Fathers Lehmkuhl, Pesch, and Antoine, of the Society of Jesus, works cited, whose explanation is very similar to ours.⁷

⁷ Indeed, Charles Gide does not seem foreign to this rationale, on account of what he has in the work Principes d’économie politique [Principles of Political Economy], bk. 4, pt. 2, chap. 4, § 4, pp. 576-577.

We judge, however, contrary to the opinion of Rev. Fr. Lehmkuhl, that one who today lends money still truly makes a loan for consumption. For a loan for consumption is made because what is granted is, indeed, not a sterile thing, but a fungible thing, such as money is and remains. Nevertheless, we do not therefore permit interest by force of the loan for consumption, since we argue from common estimation, which rests upon a rationale not contained in every loan for consumption, but adventitious from present circumstances.—Likewise, since we deny that a strictly so-called obligation is undertaken by the creditor, we approve still less that formal explanation by which Rev. Fr. Pesch says that interest is the price of that obligation and that a loan for consumption is a bilateral agreement, although we grant him that being without money is today capable of valuation at a price.

384. From what time has it been universally licit to lend at interest? As generally happens in similar matters, someone could scarcely calculate the time at which the vicissitudes of things became such that they attributed objective value to the act of lending money. Certainly, in the Middle Ages, when ecclesiastical laws were enacted, the conditions were not yet such; nor did Benedict XIV recognize that they were already such, although perhaps they then existed in certain cities, but not likewise in villages. In our century, however, after all restraints were loosened to unbridled cupidity and, on account of the abundance of means of transport, the greatest similarity of the conditions of life was introduced everywhere, this state, not happy in every respect, was reached very rapidly. Cf. Pesch, p. 71, in the note.

It is useful to recite certain opinions of economists concerning this matter.

“Now, speaking generally, it may be said that during the period from the eleventh to the fourteenth century, there was but a very small field for the investment of capital.”⁸

⁸ Ashley, An Introduction to English Economic History and Theory, vol. 1, pt. 1, bk. 1, chap. 1, § 17, p. 155.

“After the conclusion to which we have just come as to the character of capital, we may perhaps draw out the case in favour of the canonist doctrine in some such form as this. In the later days of the Roman Empire the power of the creditor over the debtor was often so harshly abused that the Fathers, moved by a natural reaction, urged the faithful to abstain from so dangerous a trade, and when they lent at all out of compassion, to lend asking nothing in return save the loan itself. But so long as capital needed to be borrowed for purposes of trade, it would have been unwise to insist that all men should follow their advice. Accordingly, no attempt was made to enforce the rule by ecclesiastical penalties on any save the clergy; it was a counsel of perfection, and it would have remained a counsel of perfection only, had not economic conditions changed. This would seem to be shown by the fact that in the Eastern Empire no permanent restriction was placed on the loan of money beyond the limitation of the rates by Justinian, and the Eastern Church acquiesced in the license given by the secular law.⁹ But in the West the barbarian inroads for a time caused an almost entire suspension of commerce; and though in some Italian and Gaulish centres there was never any absolute break in the life of trade, there was a period of some centuries during which it played a very insignificant part in social activity. Agriculture was the all-important occupation—and agriculture carried on for the supply of the wants of each group of producers themselves, and not for the market where money was borrowed, it was in the vast majority of cases, not for what is called productive expenditure, but for consumptive; not to enlarge the area of tillage, or to invest in trade or industry, but to meet some sudden want due to the frequent famines or to oppressive taxation or to extravagance. The money that was lent, was money for which it would otherwise have been exceedingly difficult to secure an investment.”¹⁰

⁹ We would not wish to judge definitively here concerning several things which are asserted in this passage.

¹⁰ Ashley, An Introduction to English Economic History and Theory, vol. 1, pt. 2, bk. 2, chap. 6, § 71.

“The conditions of business in the fourteenth century were such that banking operations were very circumscribed. Though bills were used for the transmission of wealth, there is a striking difference between those times and ours in the absence of commercial credit as a basis for transactions of other kinds; there were no bank notes or cheques or other instruments of credit. We must remember that transactions were carried on in bullion: men bought with coins and sold for coins: loans were made in coins and repaid in coins; a special coin was struck for payment to foreign countries, and thus the whole currency was metallic. There was no paper circulation of any kind; this continued to be the case for practical purposes till the latter part of the seventeenth century. Dealing for credit was little developed and dealing in credit was unknown; hence there was no room for a large part of the functions of modern banking.”¹¹

¹¹ Professor Cunningham, Growth of English Industry and Commerce, vol. 1, bk. 3, chap. 5, § 11, p. 362.

385. Concerning rents and the triple contract. Once the rationale why interest is not to be admitted in a loan for consumption of itself has been well perceived, it appears readily enough that usury is not committed by one who, by means of money, has procured for himself the right of receiving a part of the fruits from a fruitful thing, or who, by force of a contract, has joined money with business. And for this reason many theologians defended the purchase of rents and the triple contract. Concerning these things very briefly.

1. A rent (census) designates an annual return from a fruitful thing. Now, both natural things and human industry are fruitful. Hence a real rent, which regards a definite fruitful thing of another, for example, a field or meadow; and a personal rent, which regards the works of another indefinitely. He purchases a rent who acquires the right of obtaining annually from the thing or works of another a certain profit or payment; and he is called the rent-holder (censualista), while he who must pay is called the rent-payer (censuarius). That right can be acquired either by the payment of a certain sum or by the transfer of the field, meadow, or fruitful thing itself, with the transferor reserving a right to a part of the fruits. Wherefore, this rent is called reservative, while the former is designative, in which the fruitful thing affected by that quasi-servitude is merely designated.

A rent is redeemable on one side or on both if, when either party wills it, the obligation of annual payment comes to an end through the payment of a single far greater sum. Otherwise, it is irredeemable.

An agreement concerning a real rent was solemnly approved by Martin V and by Calixtus III, chapter Regimini universalis Ecclesiae. Concerning a personal rent, especially a redeemable one, there was greater doubt; indeed, on account of the danger of abuses, this contract was prohibited by the constitution Cum onus of St. Pius V; that prohibition obtained only in Italy.

It is not to be denied that this contract can easily be stained by a usurious intention, or that in fact usuries can be exacted if an excessive rent must be paid; but of itself the contract is immune from that stain, provided that: α) The rent is truly founded upon a fruitful thing. Therefore Sporer says that it is “most certain among all” that an industrious person capable of profiting is required; β) The annual sum is moderate; and, if the purchaser enters into no risk or can dissolve the contract, it is diminished in just proportion on account of these causes.

Sporer excellently proves this liceity, tr. VI, On the Decalogue, chap. 6, nos. 16-24.

2. The triple contract. It was a contract of partnership by which, for a certain business profitable in hope, one party contributed labor and the other money; the latter, however, at the same time avoided by a double insurance the double risk which by force of the prior contract he ought to undertake. For in place of uncertain profit a lesser but certain profit was promised to him; and the danger to his principal, with the profit reduced further, was transferred to the other contracting party. Authors disputed whether it was licit to enter into that threefold or triple contract with one and the same person; and, on account of the great danger of abuse, this form of agreement was condemned by Sixtus V in the constitution Detestabilis avaritiae, 1586. In itself, however, provided that the fixed profit is exacted according to a just norm, it seems to contain nothing contrary to natural law.

By these and similar contracts someone could formerly invest money usefully and justly. Nor should you think that in this manner the matter falls back into vain subtleties. For those contracts could not be made unless a fruitful thing or profitable business was at hand, besides someone who was willing either to cede a right to receive the fruits of his field or industry, or to admit a partner into the business.

Therefore, those err and have not sufficiently perceived the true rationale of the dishonesty of profit sought from a loan for consumption who think that theologians were compelled as though by necessity to excuse contracts which per se would have been repugnant to their own severity.