Fair Pay Is Not Usury.

Apparently some segments of the Catholic blogosphere are worrying about usuria again. The same people who understand that the Bible teaches that the laborer is worthy of his pay, and that the Valiant Woman has textile and real estate businesses on the side, do not understand that it also teaches (on the side) that investment and earning interest is better than burying your money in the ground.

A laborer’s time and work (and risk of injury or other problems) is paid back with money. In undeveloped countries, he is often paid per piece of work: so many widgets or so many bales, for so much money. But this does not adequately compensate the worker for his time or insulate him against risks that would prevent him from doing as many pieces as he would like. This is why wages are usually paid per hour, or why salaries are paid per year.

The owner of a rental object or real estate is paid back with money for the time of the rental. Usually any damages must also be paid by the renter. This is fair, because the owner cannot use the car or the house while the renter is using it. (The owner also risks the destruction of his property. Even getting a replacement isn’t as good as keeping the original and not having the stress.)

An investor’s time and money (and risk of getting nothing) is paid back with money. (If he makes anything.)

A lender’s time and money and risk is also paid back with money. (Hopefully.)

If I lend money to Bob, and Bob does his business and gives back every penny to me in the next ten seconds, obviously I have not lost any opportunities to do other stuff with my money. (Unless I missed a really sweet stock market deal that was only open for ten seconds.)

But if I lend money to Bob for a year, I cannot spend or invest or lend that particular bunch of money to anybody else… for a whole year.

If he just pays me back the exact amount of money I lent him, I have not been compensated for that year. If Bob is my brother or son, then maybe we have enough of a gift economy going that I can give him a year as a gift. But if we are doing business, and I’m not giving out interest-free years as a loss leader to attract buyers… then Bob needs to pay me for renting my money for a year, just like he would pay me for renting a house for a year.

We cannot pay back in kind for time or opportunity, because humans are not God. Therefore, we pay rent and pay interest.

Fair interest rates are fair payment for time and risk.

Unfair interest rates are loan sharking.

In a gift economy, interest is irrelevant because it all evens out. In an undeveloped economy, it is not fair to expect that people will be able to pay much interest. So even low rates of interest could constitute loan sharking, or usuria.

But in a developed economy, interest rates are just fair pay for fair work.

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3 Comments

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3 responses to “Fair Pay Is Not Usury.

  1. Another angle:
    Me charging you $5 on the loan of $100 for the chance to not die horribly when I have it to spare is pretty horrible.

    Me charging you $5 on the loan of $100 because you have cable TV and miscalculated your bills but don’t want to cancel it, not really horrible.

  2. Stargazer

    Foxfier, I think in your first example, if I understand it correctly, you are conflating two concepts: the worker being worth their wages and charity towards others.

    For the concept of the worker being worth their wages applying to interest, the person who borrows $100 has a duty to repay the $100 and interest because they chose to take on the debt, even if the reason they did so was a great need such as not dying horribly.

    On the flip side, those who have resources, are aware of the situation, and are aware of how they may be able to help using those resources, would have a duty of charity towards others to choose to aid the person in need. Note that it is not necessarily the person from whom the loan would come that may have this duty, but potentially any that know of the need and how to help.

    Ultimately charity is about the giver giving of themselves as a penance, which God rewards. This is why government based charity helps nobody in the theological sense as those who push for the government to give charity never sacrifice anything and those from whom the resources are taken, are compelled and never choose to make a sacrifice.

  3. Nah, charity isn’t involved in my example– just poking at the difference in kind between usury and interest.

    They are rather related, though, as you point out.

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