By defenders and detractors alike, John Calvin and his followers have often been identified as laying the foundations for modern capitalism. Weber’s version of this thesis, focusing on the so-called “Protestant work ethic” is the most well-known, but a great deal of attention has also focused on Calvin’s reinterpretation of the usury prohibition to allow for commercial lending. As Reformed pro-capitalists (like Hall and Burton of Calvin and Commerce) tell it, Calvin’s thought facilitated massive social progress by liberating Christians from the oppressive constraints of backward medieval economic thinking, that simply didn’t understand the productive capacity of money. He removed the stigma on money-lending, thus helping Western Europe embrace all the wonderful advances in productivity that come with a credit-based economy. In previous posts, I have pondered the question of to what extent Calvin’s new ethic worked as an interpretation and application of Scripture, but here I want to ask a more fundamental question–what did Calvin actually say about usury?

When you read his Letter of Advice on Usury, the striking thing is not its permissiveness, but its restraint; not a sanguine embrace of the possibilities of credit-based economics, but deep suspicion and hesitance of the practice, mindful of the greed of the human heart. While, in one short and crucial passage, he does question and dismiss (though without much argument) the medieval dictum “that money does not engender money,” a move with potentially radical consequences, the tone of the letter as a whole is remarkably conservative. Indeed, anyone wishing to follow the principles Calvin lays down would have to condemn almost the entirety of the modern system of credit, and if he were a banker, investor, or mortgage lender, would have to subject his business practices to serious scrutiny. Let’s look at some of the letter.

In Luke 6:35, he says, Christ

“corrects the world’s vicious custom of lending money [only to those who can repay] and urges us, instead, to lend to those from whom no hope of repayment is possible. Now we are accustomed to lending money where it will be safe. But we ought to help the poor, where our money will be at risk. For Christ’s words far more emphasize our remembering the poor than our remembering the rich. Nonetheless, we need not conclude that all usury is forbidden.”

In other words, “Yes, of course, the majority of our lending should be to the poor with no hope of return; I’m just saying that loans at interest to the rich are not completely forbidden; they are the exception to the rule, to be sure, but a permissible exception.” Ha! Imagine an economist or ethicist today saying that.

A little further on he says, “What am I to say, except that usury almost always travels with two inseparable companions: tyrannical cruelty and the art of deception. This is why the Holy Spirit elsewhere advises all holy men, who praise and fear God, to abstain from usury, so much so that it is rare to find a good man who also practices usury.”

Wow, that’s pretty stern stuff. Calvin does not feel that he can legitimately pronounce a ban on all usury, but he hardly wants to present himself as a fan of the practice, and wants anyone contemplating the practice to examine themselves and the circumstance very carefully before they do so–in stark contrast to we moderns, who waltz nonchalantly into the world of paying and charging interest about as soon as we’re old enough to drive. Moreover, his permission of usury is not a permission of usurers…because of the dangers of the practice, he doesn’t think anyone should make it his regular line of work: “I must reiterate that when I approve of some usury, I am not extending my approval to all its forms. Furthermore, I disapprove of anyone engaging in usury as his form of occupation.”

Loans at interest, Calvin goes on to say, are only legitimate if they are made for the benefit of both parties, not merely the creditor. Just because someone wants a loan and is willing to agree to a certain interest rate does not mean a creditor should give them the loan–only if they are confident that the debtor is in such a position of stability that he is almost certain to derive great benefit from the loan, even after repaying the interest. Calvin develops this principle to list seven rules to distinguish lawful from unlawful usury:

“The first is that no one should take interest (usury) from the poor, and no one, destitute by virtue or indigence or some affliction or calamity, should be forced into it. The second exception is that whoever lends should not be so preoccupied with gain as to neglect his necessary duties, nor, wishing to protect his money, disdain his poor brothers. The third exception is that no principle be followed that is not in accord with natural equity, for everything should be examined in the light of Christ’s precept: Do unto others as you would have them do unto you. This precept is applicable every time. The fourth exception is that whoever borrows should make at least as much, if not more, than the amount borrowed. In the fifth place, we ought not to determine what is lawful by basing it on the common practice or in accordance with the iniquity of the world, but should base it on a principle derived from the word of God. [Which means that one can never appeal merely to the “market rate of interest” as justification for charging a certain rate, but must determine what is just and appropriate for the needs of the debtor.] In the sixth place, we ought not to consider only the private advantage of those with whom we deal, but should keep in mind what is best for the common good. For it is quite obvious that the interest a merchant pays is a public fee. Thus we sould see that the contract will benefit all rather than hurt. [Thus, for instance, a creditor should not lend to an investor who proposes to build a development or expand a business that, while quite profitable, will harm the surrounding community.] In the seventh place, one ought not to exceed the rate that a country’s public laws allow. [Which means, of course, that Calvin is presupposing that it is legitimate for governments to put restraints on the interest rates that can be charged, instead of taking a laissez-faire approach.]”

Needless to say, if these principles were consistently followed, it would rule out a substantial majority of the lending and borrowing that goes on today–not just the dubious dealings of “Wall Street” investment bankers, but even much of the ordinary flow of credit that comes from “Main Street” banks and mortgage lenders. It seems that once you actually look with any attentiveness at his work, it becomes impossible to enlist Calvin as an early proponent, or even an ancestor, of laissez-faire capitalism.