Bankers as Immoral? Some Parallels between Aquinas’s Views on Usury and Marxian Views of Banking and Credit
Abstract
Since ancient times the practices and ethics of bankers and banking in general have undergone a great deal of criticism. While lending is motivated by profit, and while households are not coerced into borrowing money, the justice of a system which exploits workers and at the same time encourages them to borrow money in order to maintain a certain standard of living can be viewed as unfair and immoral. The value of goods, according to Aquinas and Marx, should mostly reflect the value of labor embodied in them, and for that reason, labor should be compensated fully for its work. For these reasons, Aquinas and Marxian economists offer somewhat similar views on both the labor theory of value as well as on the morality of certain banking practices. If credit and the banking system also bring about crisis and the greater concentration and centralization of capital, then the morality of these outcomes also needs to be examined.
This paper provides a nice explication of the views of some major thinkers who would be critical of contemporary lending practices and institutions. Although it might seem surprising, given their different times and philosophical commitments, that Marx, Aristotle, and Aquinas would have similar views about credit and banking, they are nonetheless all quite critical of lending practices and institutions. In what follows, I raise two primary questions:
Question 1: How well do the criticisms of lending fit together, i.e. how consistent are they? Lambert identifies some parallels between them, focusing especially on two ideas. One consistent idea is that lending drives a wedge between the real value of labor or goods, on the one hand, and the price that is reflected in monetary exchanges. Usury, as Aquinas understood it, does so by using money just to create money (which is an unnatural and parasitic operation, as Aristotle argued), thus breaking apart the relationship between real value and monetary value. Marx argues that much lending relies upon an unjust use of human labor, one in which workers are forced to sell their labor for less than it is really worth, the remainder of which is funneled into banking for the purpose of developing yet new ways of growing wealth.
Another parallel Lambert discusses is a concern with the effects of the concentration of wealth that results from money lending. Though no champion of equality, Aristotle (and Aquinas later) recognized that lenders often tend to target the poor as customers and described lenders as possessing the vice of stinginess or meanness, since they will enforce lending contracts no matter the suffering it causes. This has the predictable result of concentrating wealth in the hands of a smaller number of people. Not surprisingly, given the time in which he is writing, Marx has a much more nuanced view of the methods by which banking contributes to inequality and the concentration of wealth, as well as the impacts this can have on political decision-making.
These parallels are very interesting. But how consistent are the views of Marx, Aristotle, and Aquinas, really? This question is especially relevant to the issue of inequality and the concentration of wealth. Are Aristotle and Aquinas right to think that inequalities are natural, though the inequalities created by lending specifically are problematic? Is Marx right to argue that lending and banking is one mechanism by which capitalism more generally exploits workers? These questions become pressing if we hope to draw out the implications of the views for evaluating banking and credit today, as Lambert does briefly in the conclusion to his paper.
Question 2: Should these critiques really be revived today? Lambert certainly suggests so at various points in the paper, and I am sympathetic with this view. But the history that Lambert presents only briefly mentions the debates and arguments (e.g. Jeremy Bentham, Adam Smith, Calvin, even Martin Luther) that laid the intellectual foundation for the system of banking and credit with which we are now familiar. Lambert tends to present capitalism as a fait accompli, which is perhaps understandable given that it is in fact our economic system today. But if we wish to revive earlier criticisms, then we must also revive the ideas that created and rationalized the system we would thereby critique. Capitalism is not natural or inevitable, as history reveals. It is just our current economic system, and it is one that was created and rationalized with specific arguments, some of them aimed directly at Aquinas and Aristotle’s earlier views. Reviving the earlier views requires simultaneously re-examining arguments for capitalist credit and banking, rather than treating capitalism as natural or inevitable.
Some further sources:
Geisst, C.R. (2013) Beggar Thy Neighbor: A History of Usury and Debt. Philadelphia, PA: University of Pennsylvania Press.
Graeber, D. (2011) Debt: The First 5,000 Years. Brooklyn, NY: Melville House.
Joseph, M. (2014) Debt to Society: Accounting for Life Under Capitalism. Minneapolis, MN: University of Minnesota Press.
Krippner, G.R. (2011) Capitalizing on Crisis: The Political Origins of the Rise of Finance. Cambridge, MA: Harvard University Press.
Martin, R. (2002) The Financialization of Daily Life. Philadelphia, PA: Temple University Press.
McClanahan, A. (2017) Debt, Crisis, and the Twenty-First-Century Culture. Stanford, CA: Stanford University Press.
Padgett Walsh, K. (2018) Transforming Usury into Finance: Financialization and the Ethics of Debt. Finance and Society, 4(1): 41-59.
Dear Dr. Padgett Walsh.
Thanks so much for your kind words and most of all for your good and constructive comments on my paper. Also, thanks for the additional sources. I plan to review these more thoroughly soon and will probably incorporate most/all of them.
Regarding your two sets of questions. I think there is overlap between Aquinas and Marx yet distinct differences. As you note, Aquinas and Aristotle were not preoccupied about inequality. Yet, neither approved of unfair bargaining and exploitation, especially of the poor. Also, all 3 agree that using money to make money is not something inherently valuable. And one thing I plan to add to the paper when and if the journal desires another submission/revision is that in today’s time, as your sources, especially Martin and Kippner, indicate it almost has become a macroeconomic imperative that financialization exists and thrives and expands in order to keep a capitalist system going. And as your paper notes, much of this is done in the name of investment when actually most of modern borrowing is done for consumption purposes because of the inequality and exploitation that exist today. Hence, some type of servitude is created as you and Graeber note. in which debt constrains so many people and where the thing purchased through lending often fails to live up to expectations. As Baran and Sweezy (1966) would claim, a capitalist system has a tendency toward stagnation. Advertising and borrowing to purchase now rather than later are attempts to stimulate consumer demand so as to avoid stagnation. These also help with absorption of the economic surplus and profits gained from workers exploitation. Inequality is reinforced not just through wage labor, which is brought about by workers not having access to capital, but also by having them borrow much of the profits that they helped earn. This is especially true given that many consumers do not understand finance or the risks associated with lending as your paper notes. This is something which schooling does not adequately address either (Lambert 2019).
Regarding your second set of questions, I think that these critiques do indeed need to be reemphasized and reemployed today when it comes to student loan relief and mortgage foreclosure relief. After all, and again, workers are mostly getting exploited twice (first at work and then at the lending institution) through borrowing money that they have partially earned but not been paid. I do not think capitalism is a “done deal”, but I do believe that public pressure is and economic crises are pushing us toward a better understanding of how debt may be doing more harm than good now, especially if one sees debt as a means to investment for fewer and fewer businesses and people. I would also hope that one day labor exploitation is ended through greater worker participation and representation within businesses, especially through the formation of worker cooperatives.
Once again, thank you so much for your comments. I plan to incorporate these and your sources in a future revision. Best regards. Thomas.
BARAN, P. A., & SWEEZY, P. M. 1966. Monopoly capital; an essay on the American economic and social order. New York, NY: Monthly Review Press.
Lambert, Thomas. 2019. Rationality and Capitalist Schooling. Journal of Economics and Social Thought. http://www.kspjournals.org/index.php/JEST/article/view/1975
The central premise of the paper is that there is some affinity in the work of Aquinas and Marx on money. The author writes in the abstract that both men use a version of the labour theory of value, and both have a critique of the exploitative effects of money.
The problem with this line of argument is that is abstract and somewhat superficial. As soon as one tries to become more specific about the thoughts of the two men on money and labour, moreover, the differences immediately become apparent.
Aquinas is writing in the context of a revival of southern European trade in a broadly feudal economy. He is a member of the Church using a synthesis of Aristotle and Christianity to develop a normative account of economy rooted in his wider system of natural law. Those relations of feudalism that allow for the exploitation of the masses are never critiqued in his broadly theological system. Specifically, the extraction of surplus labour from the masses is not part of any unequal exchange although usury, the method of extraction associated with merchant capital, most certainly is. Aquinas here reflects the position of the Catholic Church within feudalism, itself a major landlord and a major beneficiary of feudal relations of production.
Although he may have a very rudimentary understanding of the links between value and labour, he has no use for a labour theory of value in the sense in which Marx will employ it. What he is deploying is a traditional moral critique of usury by a Chruch that doesn’t benefit from it directly.
His morality is specific to his position within the mode of production in which he is operating, and his theological critique of usury has nothing in common with Marx’s empirical and theoretical assessment of the role of money within capitalism
Marx is not developing a moral critique of usury in Aquinas’ sense. Indeed, the author himself accepts that Marx is not developing a moral critique of money on page seven. Marx’s historical materialist method demands that the central relations of production are the starting point of an analysis that uses the labour theory of value to expose the nature of exploitation under capitalism and links the role of money to this system of exploitation. For Marx, the L T of V is a pivotal, indeed the central category of analysis, not a peripheral and rudimentary category as it is in Aquinas. Marx spends a large part of his third volume on capital exploring the links between capitalist relations of production and the role of money is extending these relations, accentuating their influence, and ultimately accentuating the devastation that comes in their wake. From one perspective Marx has an obvious moral critique of this whole system. One might even say that it is a form of Aristotelian critique rooted in the idea that capitalism frustrates the potential of human development and creates a barrier to human liberation, but, and this is the important point, his critique is not of money or usury per se, but of the whole mode of production that shapes the role of money and undermines human development.
In sum. It is far better to look at the nature of the two sets of categories in a historical and materialist sense than to pick two relatively superficial similarities and seek to build an argument on them.
Dear Professor O’Boyle,
For some reason these comments did not show until a few months ago, or I did not notice them. My apologies for not noticing them much sooner.
I truly appreciate your comments. I plan to address them in a revision of the paper. And yes, there are parallels as well as differences between the two, and I plan to develop the differences more in the revision.
I plan to forward a re-write to you and Dr. Walsh Padget when completed.
Again, many thanks for your comments. I truly appreciate them.
Best regards. Thomas Lambert