Give Good a Chance

My further, expanded thoughts on the discussions we have been having on usury and debt forgiveness.

Give Good a Chance

Comments are welcome, here or there.

11 Responses to Give Good a Chance

  • Joe,

    Good post. I have a couple of different comments.

    First, it is incorrect to say, as you do in your post, that “[t]he tradition of the Church has, over the course of many years, allowed for moderate usury.” Usury is never allowed according to Catholic doctrine. However, the Church does allow the charging of interest on a loan based on certain considerations (e.g. the opportunity cost to the lender of not having his money during the loan period). Charging interest based on these sorts of legitimate reasons is not considered usury, and thus does not fall under the Catholic ban on usury (for details, see the Catholic Encyclopedia article on the subject).

  • BA,

    The article you link to says a few times that the Church changed her position a few times. In one instance it says,

    “What is the reason for this change in the attitude of the Church towards the exaction of interest? As may be more fully seen in the article USURY, this difference is due to economical circumstances.”

    The article goes on to discuss what is a moderate or acceptable rate of interest.

    I guess I wasn’t aware that usury was only lending with interest at immorally high rates. I thought it was a blanket term that covered all lending with interest. I think that is the way the word is most often used.

    It’s really a minor point.

  • Second, while I agree that there is something valuable in “performing an intrinsically good deed[s] for one’s brother or one’s neighbor without apparent regard for the short-term, pragmatic, economic consequences.” I disagree, however, that this things like mandatory debt forgiveness or restrictions on interest taking. If I forgive someone’s debt because the law says I have to that is not an intrinsically good deed. Indeed, as we discussed before, a law mandating debt forgiveness can actually lead to greater wickedness on the part of lenders, as it forces them to restrict their lending to avoid the effect of the law.

  • Finally, in your post you seem to flirt with the idea that if our intentions are pure then everything will work out for the best. If only it were so. But as Etienne Gilson remarked in another context, piety is no substitute for technique. History is full of examples of well meaning people who caused great harm because they failed to understand what the effects of their actions would be.

  • Joe,

    It may be a minor point (I know I was guilty in the prior thread of using the word in the same way). But it’s probably best to be precise.

    Also, to be clear, it’s not the rate of interest that defines usury; it’s the rate of profit (and particularly how the rate of profit compares to the rate of profit generally in the economy generally). You can have very high interest rates that aren’t usurious, as in the case of microlending (which was endorsed by Popee Benedict in Caritas in Veritate)

  • BA,

    I think I addressed the problem of good intentions in the piece, and differentiated it from trust in God. Two different things.

    But I do agree that it is best to be precise, and I will adjust accordingly.

  • Um…

    As much as I like your intent, which I believe is to call people to look at their business transactions (and those on a macroeconomic scale) through eyes of faith and social justice, I believe a few of your premises are incorrect; that incorrectness, or imprecision, I believe, hurts your argument.

    What the heck am I talking about? Well…

    For example: “…are we not currently in a period of severe, worldwide economic distress? It would appear that we are now in another historical moment, such as that faced by the Jews in the Book of Esdras, in which what God had to say about usury and debt forgiveness is worthy of our attention.”

    My short answer to this premise is, “No.” The current economic conditions do not lend themselves to the kind of remedies you seem to be prescribing. Mortgage crisis? Well…what will it mean if people default on their mortgages? Will it mean they will move out into tent cities set up by Associated Catholic Charities? No; it will mean that the investment that they made in a property that they can no longer afford, and which no longer has the value for which they mortgaged it will return to the bank, to be sold at a price more consistent with its real market value. But the family will, for the most part, not then be homeless; it will be renting. TO the extent that this happens, for example, there is no social justice issue.

    Another example: “Our government gave hundreds of billions of dollars to the Wall Street executives whose greedy practices got us into this mess in the first place.” Faulty premise. Businesses were loaned money; many are repaying those *loans* (NOT gifts) in full with interest right now; they term “Wall Street executives” is a straw man which, while fun to beat the heck out of, does not exist in reality. I am no fan of TARP, by any means; my problem with it, and the situation which created the supposed need for it, is that both were creations of the elected representatives of the people, whose thirst for power (and heartfelt desire for remaining in power) led them to build the regulatory house of cards which collapsed last fall. Had our government not required banks and other lenders to lend to people who obviously could not afford to borrow, we would not have had the situation in which we found ourselves.

    Finally, the Distributism drum you beat I find a little troubling, as well. Your definition of distributism seems to indicate that part of the compensation of every worker ought to be a share in the ownership (and therefore, the profits) of any business. I have not seen you answer this question, though, so I won’t presume on your answer: Do those who share in the profits get the privilege, also, of sharing in the loss? Or would it be the responsibility of the ultimate owner of an enterprise to absorb all the losses, and insulate his workers, because “It would only make a tiny difference to us, but to them, it would mean the world?” Unless we are distributing the risks along with the benefits of a Distributist-run business, we are just coloring Socialism something other than Red, and marketing the same old tired “Power to the People” bunk. If this is not how you see Distributism, then I am willing to be corrected on that.

    So. I am willing to go along with the thought that there is possible a more just way to manage businesses. But any model that mandates, through government intervention, a particular model of sharing profits is almost doomed to failure at its outset. Government rarely does anything well besides defense of the country and maintenance of the infrastructure (and even that task it arguably fails at frequently).

    Thanks!

  • I like Deacon Chip’s comment. I do need help on the technical aspects of your theory, so I provide comments on my point of view.

    We have several forgotten inviduals who would be hurt by government mandated debt forgiveness. First, bailouts require tax money from individuals who could find themselves facing difficulties supporting themselves after government increases tax assessments to pay for these programs. Second, business owners, and their employees, who made good faith contracts would be hurt by the mandates. I do not believe that God intends to hurt these forgotten individuals who make an honest living.

    Seldom do I read articles on the people who financed their spending. People who support debt forgiveness sometimes forget that people spend more than their income-producing ability. My hesitation in addressing this was addressed by Deacon Chip. People can find a house to rent until they can afford to purchase a house within their means.

    I also complement Deacon Chip on how he addreses sharing profits. As an employee, I have not taken the risk of business ownership. Sometimes we become jealous and criticize profits, however we do not address our desire to avoid risk by not becoming self-employed. If we want to share in the profits, we should be willing to share the risk.

  • Deacon Chip,

    Thanks for that lengthy and considered reply. Mine will have to be brief.

    First I want to say that I’m not really proposing any “remedies” beyond the observation that the money given to Wall Street executives – and that isn’t a strawman because that is exactly who got it – could have and should have gone to relieve people with serious economic difficulties, such as those who were the victims of predatory lending.

    I could not disagree more with your assignment of blame to the lending of money to people who could not afford to repay it, because that sort of thing was not undertaken because of a government mandate – the Community Reinvestment Act has been empirically vindicated. It was the repeal of Glass-Stegall, which kept commercial and investment banking separate for good reasons, that induced the orgy of toxic debt.

    As for Distributism, if you want to know more about what I think on that, you can go to my blog and read the page “Redistribution of Wealth: A Catholic Perspective”, as well as the Papal Encyclical by JP II, Laborem Exercens – though support for Distributist policies is found in, among other encyclicals, Rerum Novarum, Quadragesimo Anno, and Mater et Magistra as well.

    I wish I could write more, but time is short for me this week. You seem like an interesting and engaging fellow and I think we might learn from one another. Feel free to add me as a friend on facebook if you’re there. My email address is on my “about” page on my blog as well. Perhaps after Christmas we can have a more detailed exchange.

  • Also, to answer this:

    “Do those who share in the profits get the privilege, also, of sharing in the loss?”

    Yes, of course. There are many different ownership structures that I would call Distributist, from profit-sharing, Employee Stock Ownership Programs, and the like, to democratically run/fully worker owned cooperatives such as the Mondragon in Spain – started by a Catholic priest inspired by Quadragesimo Anno, and the most successful cooperative in the world, Spain’s 7th largest corporation.

    Distributism is not a rigid model, but an ideological precept. The models can vary greatly, but the idea is to implement in degrees the consistent Papal exhortation to spread ownership of the means of production among more people.

  • Joe,

    I look forward to a more detailed discussion; I find your insights challenging, and I enjoy the intellectual exercise.

    To respond to one aspect of your last two posts, I can’t get my arms around the “empirical validation” of the Community Reinvestment Act to which you refer. Has the CRA increased home ownership? Of course it has! BUT…has the CRA led to people being able to buy homes which, in a different regulatory and legal environment, would be out of their reach? Certainly. And has that led to some of them losing those same homes in the recent economic disturbances? Undeniably. And in my mind, the main cause of the exposure in the first place was the requirement to lend to folks who would not have even qualified for loans for homes, had there not been a mandate to lend. The road to hell being paved with good intentions, I think the hell of defaults and foreclosures we have experienced/are experiencing is paved with paper from the CRA.

    as for a Distributist ownership schema for businesses…I guess one real issue would be transitioning to such a process. For big, public companies this should be no problem; in reality, many already allow participation by employees in the form of stock ownership. But what about the small business (that enterprise which provides employment for just over half of all private-sector employees (http://www.sba.gov/advo/stats/sbfaq.pdf)? How do you share the *risks* of small business ownership with employees? and how much of a share is appropriate, given the amount of sweat equity investment on the part of the small business owner required to even open the doors? How much of a share does an employee of such a firm have a claim to, and how would one calculate that share based on the specific contributions of said employee?

    Those questions being asked, I am not in favor of just working people for whatever the boss can get away with paying them; of course the concept of just pay for completed work is a valid one. (I’m sure the Pope is relieved I think so!) But the key is the work, and a just valuation of that work for both employee *and employer*.

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