[Vision2020] Fewer Credit Cards and More Union Cards

[nickgier at roadrunner.com]

Hail to the Vision!

I'm leaving for a rafting trip on the Green River tomorrow early, and I actually managed to get next week's column done.  The full version with info on Islamic banking is attached as a PDF file.

Wish me luck in the rapids,

Nick Gier

MORE UNION CARDS AND FEWER CREDIT CARDS

By Nick Gier

Voracious usury ... an evil condemned frequently by the Church, 
but nevertheless still practiced in deceptive ways by avaricious men.

-- Pope Leo XIII, Rerum Novarum (1891)

Today the word "usury" means the charging of excessive interest, but ancient Jews, Christians, and Muslims believed that interest amounts to unearned income and is therefore is immoral.
The Hebrew word for interest neshekh means "a bite," and this describes the negative connotation very well. As the Book of Leviticus states: "Take no usury or interest from him; but fear your God, that your brother may live with you" (25:36).  The complaint that usury exploits the poor still rings true with the 200 percent annual rate that is charged at pay day joints. 

Some commentators believed that this prohibition applied only among Jews, and this reasoning was used as a justification for Jewish money lending to Gentiles in the Middle Ages.  Many Christians condemned this practice and used it as a means to persecute and kill thousands of Jews.

The Council of Nicea (325) made it illegal for priests to lend money for interest, and within a hundred years the prohibition was extended to all Catholics. Arthur Birnie explains the Christian position well: "To live without labor was denounced as unnatural, and so Dante put usurers in the same circle of hell as the inhabitants of Sodom and other practicers of unnatural vice." 

Pope Sixtus V (1521-1590) declared that charging interest was "detestable to God and man, damned by the sacred canons and contrary to Christian charity." The pope may have been provoked by the fact the Henry VIII of England had signed a law entitled "In Restraint of Usury," which allowed the practice as long as the interest rate was not excessive.

Until the late 1970s the U.S. had anti-usury laws that usually capped interest at 9 percent. In 1978 Supreme Court ruled that nationally chartered banks were not bound by state anti-usury laws except the state in which they resided. Many banks relocated to states with no limits on interest and started sending credit cards out to everyone.  

As a graduate student I traveled to Europe on a TWA "Getaway" card even though I had less than $1,000 to my name. As long as banks could charge exorbitant interest and fees, they didn't care if I could pay off my balance. The moral basis for banking has collapsed: banks no longer cared about personal character or debt risk.

In the April issue of Harper's Magazine Thomas Geoghagen argues that usury, even more than deregulation, has been the basic cause of our current financial crisis: "We dismantled the most ancient of human laws, the law against usury, which had existed in some form in every civilization from the time of the Babylonian Empire to the end of Jimmy Carter’s term."

Geoghagen points out that even Adam Smith, the father of free markets, believed in limiting interest rates. Smith believed that government regulation was necessary in this case to make sure that most investments went into the real economy rather than financial markets run by "prodigals and projectors." Today we would call them "speculators."

Smith's warnings have proved to be prescient.  Over the last 30 years, capital, both financial and human, has flowed from manufacturing into financial companies.  Top mathematicians, computer scientists, and physicists, who earlier would have been working in basic research and technology, were now inventing complex financial instruments that even the brokers themselves did not understand.

The result was a dramatic dislocation of the American economy in which the financial sector was reporting 40 percent of all corporate profits.  Even companies such as GM and GE set up their own banks so as to recoup the losses they experienced selling their products.

The decline in manufacturing and aggressive corporate attacks on unions led to a precipitous drop in union membership and a thirty-year stagnation in real wages. From 1950-1980 families could support themselves with one wage earner, but now some parents work three to four jobs to pay the bills.  In addition to running up huge credit card debt, far too many people also took out home equity loans to keep up the Jonses.

I was raised in family in which the basic values were hard work, thrift, pay as you go, and above all, and fulfilling basic needs rather than frivolous desires.  My German Catholic father and Scotch-Irish mother had lived through the Depression and their Old World values served them and tens of millions of Americans very well.

My brother and I were always envious of the rich kids on the east side of Medford, Oregon, who didn't work in the summer (I picked pears and fought forest fires), but am I now grateful for being on the right side of Aesop's fable of the Ant and the Grasshopper.

Nick Gier taught religion and philosophy at the University of Idaho for 31 years. He obtained several references from Wayne Visser and Alastair McIntosh,  "A Short Review of the Historical Critique of Usury,"Accounting, Business & Financial History, 8:2 (July 1998), pp. 175-189.

-------------- next part --------------
A non-text attachment was scrubbed...
Name: Usury1209.pdf
Type: application/pdf
Size: 18791 bytes
Desc: not available
Url : http://mailman.fsr.com/pipermail/vision2020/attachments/20090522/ccbd91e3/attachment-0001.pdf