Further to my continuing strident opposition to the practice of Usury, I hope that readers will be encouraged to visit the excellent Applied Philosophy blog after reading author Anonemiss’ superb exposition Bacon on Usury, which is cross-posted below with kind permission –
In Sovereign Credit is State Usury I mentioned a post about usury, the following is what I planned as the first section of that post.
Although usury was invented in ancient Sumer all three Abrahamic religions prohibit the taking of interest on debt. In ancient times money was extended by the temples to the farmers, secured by their land, after four years they either paid or the amount was doubled. When debts on the farmers grew too large there would be a general amnesty and all debt owed by farmers would be annulled. To this day orthodox Jews, marginal Christian sects and devout Muslims will have nothing to do with usury, neither a lender nor a borrower.
The current worldwide domination of usury is the result of the worldwide domination of Europe and Western culture in general for the last couple of centuries, thus to understand how this happened we have to review the history of usury in Europe.
In the early medieval period some Jews lent money against interest-arguing that the prohibition did not apply to non-Jews-they were tolerated by those in power when financing was needed and prosecuted when it was time to pay, the history of national debt default is long and sordid. This association is why the moneylender in The Merchant of Venice is Jewish, the play is about usury and has nothing to do with anti-Semitism (at Shakespeare’s time there was not a single Jewish person in the whole of England).
The good Christians soon took over this lucrative trade when the central authority declined in the second half of the thirteenth century (see The Catholic Empire) at the same time there was ethnic cleansing of Jews all over Europe. The Knights Templar, who had left crusading and turned into banking, also came under attack; their legendry fortunes did not come from the East but rather from usury. Little was found in their vaults, they had nothing to give up even to save their lives, just like modern banks that after years of record profits turned out to be bankrupt.
The practice of usury flourished in North Italy, where there was no central power to hold it back and big money oligarchy took over the government, first in republican form and when the money was concentrated in a single family, the Medici in Florence for example, power became absolute. The religious prohibition still held even in the hearts of bankers: the Italian countryside is dotted with chapels built by guilt-ridden bankers.
“Usury was still banned by the powerful Church in this period, with an interpretation concisely expressed as Quidquid sorti accedit, usura est (“Whatever exceeds the principle is usury”). So the Medici Bank could not openly adopt the modern formula of promising to pay interest on demand deposits and loaning out a fraction of the deposits at greater interest to pay for the interest on the deposit, since a depositer would gain revenue on the principal without any risk to the principal, which would have made both parties usurers and sinners; nor could they charge fees or other such devices.”
–Medici bank, Wikipedia
To get around the prohibition they would use commercial transactions to mask the usury. This kind of usury by other names is currently being practiced by Islamic Banking and in Islamic states that formally prohibits usury (e.g. Iran).
When regional central power was re-established usury was again assailed. The kings of France and England prevented their domestic merchants from becoming bankers, while at the same time ruining the Italian bankers by defaulting on huge debts-the interest paid by these Christian kings was implicit and not explicit-like king Edward III who ruined the societies of the Peruzzi and the Bardi of Florence in 1345 when he defaulted on a debt equal to 4.8 tonnes of gold (1,365,000 florins times 3.5 gram). Their ruin cleared the way for the Medici to establish their bank in 1397.
The last Tudor male sovereign, king Edward VI (1547-53), outlawed usury by parliamentary decree:
“(Act relating to Usury.) Another bill was brought in against usury, which passed both houses, and was made a statute. By it, an act passed in the 37th of the late king (Henry VIII), that none might take above 20 per cent. on money lent, was repealed; which they said was not intended for the allowing of Usury, but for preventing farther inconveniences. And since Usury was by the word of God forbidden, and set out in divers places of Scripture as a most odious and detestable vice, which yet many continue to practise, for the filthy gain they make by it; therefore, from the 1st of May, all usury or gain from money lent was to cease; and whosoever continued to practise to the contrary, was to forfeit both principal and interest, to suffer imprisonment, and to be fined at the king’s pleasure.”
-Cobbett, Parliamentary History of England, vol. I, p.596. [my emphasis]
Notice how the act prescribes the punishment while the prohibition follows from Scripture, thus equating usury with murder and theft. The anti-usury law was repealed in 1571, when the oligarchy-friendly regime of Elizabeth was in power.
There was a need not only to legalise usury, but also to legitimise it. Usury had to become a ‘normal’ part of life, not something that might be one day questioned or even condemned; in short the whole question of usury had to disappear even the word had to change its meaning.
When the Reformation exploded in 1517-The pope at the time was Leo X, the first of three Medici popes-it found its first adherents in the oppressed classes of Europe: the peasants, the artisans, the knights and the merchants. These four existed under the double alliance of nobility and church that ruled since the end of the Catholic Empire. The peasants and the artisans were being crushed by the weight on them, the knights were being constantly grinded down, while the merchants were restrained and blocked by the medieval structures of societies.
The militant knights were crushed early on in 1522, the rebellious peasants in the Peasants War of 1526. Henceforth those two only played the role of the follower never the leader. The peasants became the ardent supporters of absolute power, a central power that would protect them from local abuse.
“Martin Luther warned about the mathematics of compound interest as the monster Cacus, devouring all. Yet Luther’s denunciations of usury are excluded from his collected works in English, and are available in this language only in Vol. III of Marx’s Capital and Book III of his Theories of Surplus Value.”
-Michael Hudson, The Big Bank Job
In 1566, two years prior to the start of the Eighty Years War, the knights summoned themselves and presented a petition against the Inquisition to the Duchess of Parma, the regent of the Netherlands at the time, while emphasising their loyalty to the king and the church. They adopted the name of the Beggars, after being described so by a royal councillor. Their time had since past and they had no role left to play except asking for mercy-like any group in the middle of two warring factions they tried to play the peacemaker, such was the end of the knights who conquered the Holy Land five centuries prior.
The artisans took their time, first developing an ideology, then organising and acting. The anti-usury Anabaptists were resolutely crushed in the Münster Rebellion (1535) leaving only an echo of itself, like European communist parties that once thundered and now squeak from parliamentary obscurity. Their ideology lived on with the pacifist wing of the movement, who quit Europe and immigrated to North America.
The sects that remained adapted to the power structure of the time, feudal Germany adopted Lutheranism and cut its ties with Rome. The merchants in the Netherlands adopted and promoted Calvinism, which in turn spread to Scotland. England ended up with a mix of Catholic, Lutheran and Calvinist church; few notice that the Anglican Church is officially an offshoot of the Catholic Church and not a protestant faction.
The choice of Calvinism by the merchants is not by chance, its doctrines more then rhymed with their economic and social interests:
“Calvin expressed himself on usury in a letter to a friend, Oecolampadius, in which he criticized the use of certain passages of scripture invoked by people opposed to the charging of interest. He reinterpreted some of these passages, and suggested that others of them had been rendered irrelevant by changed conditions. He also dismissed the argument (based upon the writings of Aristotle) that it is wrong to charge interest for money because money itself is barren. He said that the walls and the roof of a house are barren, too, but it is permissible to charge someone for allowing him to use them. In the same way, money can be made fruitful.”
–Calvinism, Wikipedia [my emphasis]
Either the Scripture is the absolute truth valid for all times or it is not. Edward VI changed the conditions when they did not comply with Scripture; the argument of “changed conditions” is an argument to change Scripture to comply with the times.
Religion is the absolute truth valid for all times and places. Philosophy is the absolute truth valid for some times and some places. Religion is by definition principles external to the world, while philosophy is the summation of all the worldly knowledge at a certain time. Hegel explains how philosophy could be absolute and yet change over time:
“Each principle has reigned for a certain time, and when the whole system of the world has been explained from this special form, it is called a philosophical system.”
-Hegel’s Lectures on the History of Philosophy, Introduction A. [my emphasis]
Religion is a blueprint for society; philosophy is a summation of society. Conditions are changed according to religion, while philosophy changes according to conditions. Sometimes philosophy turns into religion as happened with the Bolsheviks who took a social philosophy and turned it into a blueprint for social construction.
What would be Calvin’s reaction if he should come back today and witness Christian denominations that accepts female and homosexual priests because of “changed conditions”, would he accept their argument or condemn them? And in turn how would they react if, in few centuries, incest or child murder were accepted in the name of “changed conditions”? Either it is religion or philosophy; one cannot pick and choose between the two because then he will end up with the ills of both.
By adapting the principles of the Scripture to the current conditions the Protestants-unlike the Anabaptists who wanted the opposite-ensured that their creed would be forever changing, their churches forever reforming. Each new generation adapts the inherited principles to suit their conditions. This is compounded by a fast developing world in which every generation has “changed conditions”.
The Amish-who trace their ideas to the Anabaptists-tried to solve this conundrum by fixing their life at the point of time when their religion was fixed. They abhor all innovation that followed their religion, even though none of the gospels tell of Jesus taking the scenery in a horse-and-buggy. Their unnatural existence is already unravelling and will soon come under external pressure as the entire social structure of the US is transformed.
The second argument is predicated on a false premise: the walls and the roof of a house are extremely fruitful and anyone who does not agree should go outside and sit in the rain, either he will change his mind or die of pneumonia. The fruits of a dwelling could easily be monetised by renting the dwelling-In the past people never let a room stay empty, but quickly found a lodger to supplement their income-This is a fair exchange of actual value for actual money, neither side loses and the circulation of money in the economy increases.
Money, on the other hand, is indeed barren, because its value is potential and not actual, only realised after an exchange (see Defining Inflation). Interest is earned regardless of production and the creation of wealth, this exchange is actual only for the lender: if the potential profit is realised all is well and good but otherwise the borrower suffers while the creditor’s profits are guaranteed.
This exchange is unfair and will only be conducted if capital has an advantage and the lender has means to force the borrower to comply, either by his own force (e.g. loan shark) or through a legal framework that admits usury. In times when capital has no advantage it flows to rent (buying land, walls and roofs), equity (partnership in profit & loss) or charity & monuments. A finance-based economy always flourishes at the end of an era never at the beginning (end of the Roman Empire, end of he Catholic Empire, end of the British Empire, et cetera), because it is unable to produce only to consume.
And if the money be rented
Who shd pay rent on that money?
Some fellow who has it on rent day,
or some bloke who has not?
-Ezra Pound, Canto XLVIII
Legalisation and tacit religious acceptance were not enough and there was a need to rationalise usury and make it acceptable within the new secular-humanistic paradigm.
Francis Bacon (1561-1626) was one of the “workmen in the State” (see Weekly Lesson (14)) in the golden age of big money oligarchy. In 1618 he was appointed to the position of Lord Chancellor by James Stuart, the monarch imported from Scotland to ‘sit’ on the thrown. That position was similar to today’s position of prime minister.
“His public career ended in disgrace in 1621. After having fallen into debt, a Parliamentary Committee on the administration of the law charged him with twenty-three counts of corruption.”
–Francis Bacon, Wikipedia
The fact that he was prosecuted by the parliament is very important. The parliament represented the commercial and country interests, while the sovereign represented the interests of big money. This situation was reversed in the Netherlands where the parliament represented big money and the sovereign represented commercial and country interests. In the Netherlands Oldenbarneveldt, who was in a position equivalent to prime minister, was also prosecuted but by the sovereign. Bacon’s fall in 1621 followed Oldenbarneveldt’s fall from grace and execution two years earlier, though he was lucky to keep his head on his shoulders. The king remitted the high fine and his imprisonment lasted only few days.
In the Netherlands the sovereign was the rival of the oligarchy, while in England the Stuarts were chosen by the oligarchy-dominated court of Elizabeth. James saved Bacon’s head, but his son Charles failed to do the same for his own. The end of the Stuarts came when the sovereign of the Netherlands was crowned joint king of England.
Bacon tried to rationalise usury in his Essays, first he starts by listing all the objections against it:
“The discommodities of usury are, First, that it makes fewer merchants. For were it not for this lazy trade of usury, money would not he still, but would in great part be employed upon merchandizing; which is the vena porta of wealth in a state. The second, that it makes poor merchants. For, as a farmer cannot husband his ground so well, if he sit at a great rent; so the merchant cannot drive his trade so well, if he sit at great usury. The third is incident to the other two; and that is the decay of customs of kings or states, which ebb or flow, with merchandizing. The fourth, that it bringeth the treasure of a realm, or state, into a few hands. For the usurer being at certainties, and others at uncertainties, at the end of the game, most of the money will be in the box; and ever a state flourisheth, when wealth is more equally spread. The fifth, that it beats down the price of land; for the employment of money, is chiefly either merchandizing or purchasing; and usury waylays both. The sixth, that it doth dull and damp all industries, improvements, and new inventions, wherein money would be stirring, if it were not for this slug. The last, that it is the canker and ruin of many men’s estates; which, in process of time, breeds a public poverty.”
-Essays of Francis Bacon, Of Usury
In summary Bacon gives the following seven “discommodities” for usury:
- 1. It makes fewer merchants.
- 2. It makes poor merchants.
- 3. The decay of customs of kings or states.
- 4. It bringeth the treasure of a realm, or state, into few hands.
- 5. It beats down the price of land.
- 6. It doth dull and damp all industries, improvements, and new inventions.
- 7. It is the canker and ruin of many men’s estates; which, in process of time, breeds a public poverty.
First, no merchant can make a profit every year without interruption, but usury is like a hungry beast following the merchants whomever stumbles is devoured. When the cycle picks up instead of new merchants entering the market the existing merchants expand using debt, this is the reason constant growth is sought in the market. As this process is repeated it results in one giant dominating every sector in the economy with competition only coming from foreign owned companies.
This is now the case in the world, especially in the US. Let me give an example from one of the most lucrative sectors: The defence sector.
The Air Force has only supplier for fighters: Lockheed Martin with Boeing providing bids without the production capability to manufacture them, only to give cover. The result is that the Air Force has two new very expansive high-altitude fighters, F-22 & F-35, while it needs low-altitude close support aircrafts.
The supplier for cargo and tanker planes is Boeing, without even a US counterpart providing cover bids. The Air Force was so exasperated with Boeing’s illegal efforts (two people going to prison) to sell it a sub-standard tanker it chose the European bid, the outcry from Congress and the media was so loud, after all that bid was only for cover, the Air Force restarted the much delayed process of selecting a new tanker.
The Navy has one ship supplier, General Dynamics, who asked Congress to order some ships just so they could keep their shipyards working. The saga of producing the new destroyer class has oscillated between Greek tragedy and vaudeville farce until it was cancelled; a similar fate is awaiting the Littoral Combat Ship.
Some will cite sector-specific reasons for this phenomenon, but the fact that it is found in every sector means the reason must be economic and not sector-specific. The reason is simply usury: first companies that take credit in the good years get devoured in the bad years, second banks collects a huge amounts of money paying only a fixed interest then invest it in one monopoly that makes huge profits and ruins the competition (e.g. investment banks creating U.S. Steel with Carnegie as the front man, or Wall Street powering Microsoft with Gates as the front man).
Now everything is a ‘chain’: hotels, restaurants, cinemas, et cetera. In the past all such concerns were wholly owned and usually managed by their owners. They would yield enough profits to sustain a respectable living without the need for expansion or constant growth. The owners did not need credit to facilitate their business and debt was considered a stigma, those were the real middle class and not corporate slaves one paycheck from insolvency. The small business of today is a fake masquerading as the real thing, like “homeowners” with negative equities.
Second, family owned companies have become an endangered species. Small manufacturers fold, relocate or are bought by those with access to financing. Commercial companies either fold, inflate themselves by debt, franchising, et cetera and then go public or get bought out by private investors, like the odious Warren Buffett who levered his insurance companies and bought out the best run family companies; apart from this basic strategy he has no other profitable venture, losing money in silver and derivatives, his latest call to “Buy American” will be his swan song.
When people sell out and take the cash they are faced with a problem: what to do with it? Since 1971 there has been an enormous growth in the financial sector, until it became the biggest sector in the equity market at the start of 2007, and of course the most profitable. One of the reasons is the constant inflow of cash to paper securities of all kinds, not just liquidated capital but also the savings and pensions of wage earners.
“The Dutch civic élite of the mid-eighteenth century, including that of The Hague (…), thus held as astonishingly high proportion of their assets in paper securities. This meant that, at least in Holland and Zeeland, the country’s wealthy were to a high degree dependent on the state, and the VOC [colonies], for sustaining their wealth. As De Pinto stressed, bonds, obligations, dividends, shares, and foreign funds were the linchpin of civic wealth and status, the principal pillar of the social system, a situation quite unlike that existing in other European countries. De Pinto was already predicting, in the 1760s, the disaster that would ensue for Dutch society, and its élite, should the state and the VOC encounter major difficulties. For the collapse of Dutch Generality and provincial bonds would effectively mean the destruction of regent, and much other élite, civic wealth.”
-Israel, The Dutch Republic, p.1007. [my emphasis]
The equity market has since collapsed; in terms of gold it stands at a fourteen years low. People who invested their money in so-called ‘emerging markets’ made big losses on equity decline and currency exchange. People who put their lifesavings in Icelandic banks or “guaranteed” Lehman Brothers bonds lost substantially. Every pension fund, private and public, is in crisis as their combined assets falls short of their combined liabilities due to huge losses this year alone.
“But, in order to keep up their credit, the Board of XVII [of the VOC] continued to pay large dividends out of capital, with the inevitable result that the Company got into debt and had to apply for help to the State. The English war completed its ruin. In June, 1783, the Estates of Holland appointed a Commission to examine into the affairs of the Company. Too many people in Holland had invested their money in it, and the Indian trade was too important, for an actual collapse of the Company to be permitted [i.e. too big to fail]. Accordingly an advance of 8,000,000 florins was made to the directors, with a guarantee for 38,000,000 of debt [i.e. a government bailout]. But things went from bad to worse. In 1790 the indebtedness of the Company amounted to 85,000,000 florins.”
–History of Holland By George Edmundson, Chapter XXVI. [my additions]
Third, usury corrupts the law, the ethics and the morals of the people. A society needs at least two of those three to survive, usury destroy them all. As I explained above usury is basically an unfair practice. Those who lend against interest must make sure that the government will not annual their contracts if there is a poplar outcry against usury, as used to happen regularly in ancient times.
Usury will also create great wealth with very little intrinsic capital or need for labour, this means that the big lenders are not obliged to anyone or held back by mutual connections. For example the big landowners of the feudal time had mutual obligation with their tenants, there was a social structure supporting them and they existed according to the rules of that structure.
The Earl of Warwick, called the kingmaker, was not influential in the war between the house of York and the house of Lancaster during the fifteenth century because he had vast amounts of gold; most probably he never had any great amounts of cash. Warwick had agricultural land with people who lived on it and worked it; they also fought with Warwick as part of their obligations. By the time of Henry VIII that social structure was gone, the nobles had no power and the king was an absolute ruler.
Usury on the other hand produces vast amounts of income without any social obligation or structures to underpin it. This wealth is used according to the wishes of the individual who has it without any social constraint; the gold coin will then buy anything, even honour and virtue-two words that have lost meaning in this age.
Fourth, there is a need for discrepancy in wealth and income in society to enable social circulation for the benefit of the whole. Like water and air streams that circulate from the tropics to the poles driving the climate cycle and enabling life to flourish. This discrepancy must satisfy two conditions: it must be within limits and it must circulate its human composition.
Many have written on the futility of making everyone alike and how such social systems breakdown, but that is only one side of the limits, i.e. an extremely low discrepancy. The other side is an extremely high discrepancy when most of the wealth is concentrated in the top. The concentration of wealth has now entered into the most dangerous levels. Wealth is today concentrated at the top at higher levels that just prior to the depression of the thirties that swept the world and ushered global war.
In a healthy society there is a constant convection, with people rising upward while others descending downward. Although sometimes the wealthy will end up in the poorhouse and the poor will reach the top, most movement will be gradual and intergenerational. Usury cuts this circulation at the top; the rich get richer and everyone else get poorer. The only paths open to riches are the most base and frivolous, e.g. entertainment and sport.
Sometimes the state tries to hold the different social stratums from sinking, this would be like the roof trying to hold the walls upright. The state soon starts dropping those at the bottom of the welfare ladder. We see nowadays how the middle class who voted right-wing governments in the eighties to dismantle the welfare state, that supported the poorest, complain about the destruction of the middle class and demand that the state do “something” about it.
In reality the middle class has been surviving on welfare for the last thirty years, not only indirect state welfare, state higher education for example, but also corporate welfare. The latter is an invisible form of welfare, but it is just as much welfare as the games organised by rich Roman Senators at the end of the Roman Republic. Let me give one example: a large number of middle class people work for magazines that are completely financed by corporations, as opposed to readers; they can thus partake in a lifestyle beyond their means. Fashion, cars, computers, et cetera are all covered by a multitude of magazines and television programs. Considerable money is spent on a press junkets, influential bloggers are flown in private jets to preview upcoming movies, et cetera, et cetera.
All the brightest and smartest middle class people are either tied to the state sector or the corporate welfare sector, effectively binding them to the status quo. As the current crisis deepens they also will be dropped, no danger will come from them now. All social activities that depend on corporate sponsoring will greatly contract in the coming years, while the state sector will further decline in quality and quantity.
Fifth, the land in question is agricultural land. Every economy is built on agriculture, whether it is dominated by commerce or industry people have to have breakfast after waking up and supper before going to sleep. Those who try to argue away the Biblical injunction against usury as a relic from an agrarian past should make a choice: either breakfast or usury. Usury’s destruction of small farmers is beyond dispute, as the local farming sector declines food is imported from less developed areas and the populace are kept quite with bread handouts.
This has happened many times in history: Ancient Greece was dependent on grain shipments from the Black Sea area, ancient Rome on Egyptian grain, North Italy on grain from the south, et cetera. Modern Western agriculture might appear sufficient, even dumping produce in third-world markets, but in reality it is highly dependent on shipments of oil from outside the West. The Green Revolution has succeeded in transforming agriculture into a profitable business at the cost of ruining farmers. Without oil agriculture in the West would not survive a week, there is no longer a vibrant countryside or a rural society in the West there is only agribusiness.
Modern agribusiness is also highly dependent on the financial sector, like all business, making the food supply vulnerable to financial disruption, this must be added to disruption due to the weather, that despite all the technology is still unconquered. One result of this is the decline in food stores, in an effort to maximise profits, from months to weeks; worldwide grain stores would only last weeks in case of a major disruption.
The modern agriculture potential for catastrophic decline has already been demonstrated in Cuba. When the Soviet Union stopped its oil shipments to Cuba the latter’s agriculture collapsed. The West should have learned the lesson of that event and proclaimed a worldwide agricultural emergency, instead they used it to deride the regime in Cuba purely for ideological reasons.
Cheap food in the West is the modern equivalent of Roman grain dole. Instead of handing out the grain directly an environment is created in which food is cheaply produced. This is done with subsidies, tariffs, et cetera. Romans who lived on bread suffered poor health, so does their modern equivalent living on starch, fat and refined sugar.
People living in the West think they are immune from hunger. Such a thing, they believe, could only happen in backward countries in Africa. They are deeply mistaken; agricultural production in the West is falling into an abyss, once it hits the bottom people will wake up and discover the truth; then there will be no breakfast, only usury.
Despite modern technology, government subsidies and protective tariffs farmers in England are committing suicide just like the poor farmers of India. Disappearing farmers are like disappearing bees: omens of famine.
Sixth, Walter Bagehot & I completely agree, you can read Bagehot’s explanation of this process and my comments in Bagehot on Money (see bottom for Ezra Pound’s summation).
This phenomenon is now aggravated by the fact that every facet of society has been commercialised and turned into a product peddled to the consumer: art, religion, history, science, et cetera. When every aspect of society loses its quality and become just another “dull” product to be consumed, then this degradation of the environment must reflect on society itself. Now we can see how usury corrupts society, we have a whole generation brought up in a world where everything is for sale.
Seventh, a man’s estate is land rented to tenant farmers yielding him a fixed income. Why does usury ruin people on fixed incomes? To understand this let us look at Spain at exactly the time of Bacon when Cervantes was writing about a man living on a fixed income driven completely mad to the point he imagined himself a knight errant, I am talking of course about Don Quixote. In Spain what ruined the gentry was the rivers of gold pouring from the Americas, that money concentrated in the hands of the few created extravagance and inflation that ruined the Spanish national economy.
The men of estates would mortgage some land and go to the capital to obtain a court position and get ahead in life. In the capital they would have to mortgage more lands to keep up their social standing. Unlike compounding interest agricultural prices fluctuate, one bad season and the men of estates find themselves in too much debt. To get out of debt these “gentlemen” will do anything, regardless of honour. Shakespeare ridiculed such men in many of his plays. The character Falstaff is the most famous example of a ruined gentleman gambling and robbing without shame.
We see a similar process, today, with young people from middle class background; they finance their college education through debt to get ahead in the world. After graduating they either fail to find a job with high salary or even fail to find a job that demands their qualification. They try to keep up by getting into more debt, mortgage and credit cards, after which no reality show is too humiliating and no job is too demeaning from personal assistant to prostitute.
The art of Bacon’s time, from Cervantes to the melancholy songs of John Dowland, reflected the plight of those on fixed income. Next time you view a production of The Taming of the Shrew notice that Petruccio is an impoverished countryside gentleman and Katherina is the daughter of a rich city merchant, that is the central point of the whole play. Sadly the modern novel has utterly failed to rise above solipsistic drivel and pointless historical accuracy.
Religion also reflected what was happening in society, the simplicity of the Puritans was a reaction against the extravagance of the big money dominated society. The demise of the consumer driven economy will produce a new generation of frugal puritans.
Usury concentrates money in the hands of the few producing extravagance and inflation to the ruin of men living on fixed income. Today we see exactly the same process: those living on fixed income are slowly ruined, money concentrated in the hands of the few, extravagance beyond limit, et cetera.
Let me put this point in more grim and current terms: usury is the ruin of widows, orphans and old-age pensioners all of whom live on fixed income. The damage done is psychological as well as financial. Children living under such stress run the risk of two extremes: either growing up to be spendthrifts who throw their money on luxury without regard of the future or misers who horde enough money to pay the debts of a small country.
The negatives of usury cause long-term and terminal damage to the heart of society. The third point alone is enough to severely punish any who would suggest legalising usury; law is like a maiden’s virtue, once lost never regained. These deadly seven are enough, for any disinterested thinker, to reject usury. Bacon on the other hand only lists them to pre-empt any attack, the speaker’s trick of listing the ills of his subject before brushing them aside. After listing the negatives he goes on to list the positives:
“On the other side, the commodities of usury are, first, that howsoever usury in some respect hindereth merchandizing, yet in some other it advanceth it; for it is certain that the greatest part of trade is driven by young merchants, upon borrowing at interest; so as if the usurer either call in, or keep back, his money, there will ensue, presently, a great stand of trade. The second is, that were it not for this easy borrowing upon interest, men’s necessities would draw upon them a most sudden undoing; in that they would be forced to sell their means (be it lands or goods) far under foot; and so, whereas usury doth but gnaw upon them, bad markets would swallow them quite up. As for mortgaging or pawning, it will little mend the matter: for either men will not take pawns without use; or if they do, they will look precisely for the forfeiture. I remember a cruel moneyed man in the country, that would say, The devil take this usury, it keeps us from forfeitures, of mortgages and bonds. The third and last is, that it is a vanity to conceive, that there would be ordinary borrowing without profit; and it is impossible to conceive, the number of inconveniences that will ensue, if borrowing be cramped. Therefore to speak of the abolishing of usury is idle. All states have ever had it, in one kind or rate, or other. So as that opinion must be sent to Utopia.”
-Essays of Francis Bacon, Of Usury
He can think of only four “commodities” for usury, lets see if they compensate in quality what they lack in quantity:
- 1. It advanceth merchandizing.
- 2. It provides easy borrowing.
- 3. Without it borrowing would be cramped.
- 4. There has always been usury, so there should always be usury.
First, is this the same merchandising that left fewer and poorer merchants? Credit fuels a boom and a bust always follows it. Whatever advantage is gained in the short term is not worth the long-term damage. In the US any advancement for industry from usury is currently beside the point, because the industrial base has been ruined and gutted. Such ‘advancement’ is akin to a man hooked on speed working fourteen hours a day, six days a week only to die from a massive heart attack at the age of forty.
Second, this reminds me of the joke: How is your wife? Compared to what! The whole discussion is about the advantages and disadvantages of this borrowing method, one cannot cite the fact that it is a ‘borrowing method’ as an advantage!
Wealth liquidation and pawning are not the only methods to obtain cash: there is mutual credit, non-interest credit, et cetera. One pawning his valuables might not be able to repay at time and thus lose the difference, but then the loss would stop there and not be compounded continuously until payment becomes impossible.
Bacon seems blind to the historically documented cruelty of moneylenders-documented in history, art and religious texts-and sees cruelty in the competitors of big money usury. Profiting from mortgages and bonds by countryside “moneyed” men is cruel, while London-based oligarchy profiting from usury becomes a public service. No wonder the career of this servant of oligarchy ended in disgrace, prosecuted by a countryside-based parliament.
Third, this seems to me the second advantage in the negative, nonetheless I will let it pass as a third advantage of usury. As the current financial crisis enfolds many commentators have remarked that debt is like a drug, the more one takes it the more one becomes dependent on it. A person might be dependent on his morning coffee or late night sherry, but that is an acquired dependency. Dependence on usury is also an acquired need, which increases with usage.
Let us imagine a world without usury, will be there a great need for it? The answer is that there would be hardly a need for usury in such a world. Let us imagine how such a world would function: The auto industry in the US in the good times should have at least fourteen companies each producing a little more than a million car of one model (a million car is the minimum economical run). There would be less engine manufacturers, because they must produce more engines to be profitable, but they would be separate companies and not consolidated vertically with car builders.
When the economy slums then those with the olds plants, the oldest models, the least efficient production methods will go bankrupt, three auto and at least one engine manufacturer will close doors; the rest will lower utilisation rates. When the economy picks up those still operating will ramp up production but they will not be able to finance further expansion. Without credit the market will provide an opportunity for those with capital to invest, new companies will be set up with new models and more efficient production methods. Capital will flow into the production sector instead of financing industrial expansion via the financial sector. Profits will flow to the investors directly without the banks taking their cut.
In reality usury has consolidated and concentrated the auto sector to just two companies: GM & Ford. Both have lost billions and now teeter on the brink of bankruptcy (they are already bankrupt).
Fourth, there has always been murder, should society, the state and the law admit it and let people kill each other. Sure merchants will always borrow money and pay interest, but only between themselves and payment will only be extracted by an honour system not by the force of organised society, i.e. the bailiff.
Prohibiting usury is not the same as abolishing it completely from the face of the earth. Those who want to legalise prostitution make a similar mistake. Society must strive to create conditions where negative practices are suppressed by social custom and individual prohibition. Society might fail and find itself in conditions where negative practices are widespread. At such points the people must not give up and accept the status quo as inevitable, because if they do they will only invite more corruption.
In the second half of the eighteenth century it seemed that society in Britain was thoroughly corrupted, but within fifty years the Victorian age began with a complete moral rehabilitation. When society, on the other hand, accepted the post-war corruption of the twenties it started a slide that has ended in the gutter of humanity. What is truly Utopian is to think that by admitting one vice, all vices will disappear; history has proven many times that admitting one vice only invites ten other to take its place.
Bacon wants to send those who oppose usury to Utopia, such is the argument of this great ‘thinker’ against those who oppose the rule of big money: to send them to exile in nowhere! This is the last argument of the tyrant, physical elimination of all who oppose him, coached in terms of the ‘thinker’.
I would like to add few words on Utopia: Thomas More (1478-1535) was the first layman not a member of the higher nobility to be appointed Lord Chancellor. He was prosecuted and beheaded, unlike Bacon & Oldenbarneveldt it was not base corruption but because he refused to let the king, Henry VIII, rule his conscience like he ruled his body. Thomas More wrote Utopia in Latin, it tells the story of a traveller who visits an island called Utopia, he then returns to Europe and tells about its ideally constituted society, the traveller’s opinion of the governments of his day is:
“I can have no other notion of all the other governments that I see or know, than that they are a conspiracy of the rich, who on pretence of managing the public only pursue their private ends, and devise all the ways and arts they can find out.”
Sadly just a hundred years after Thomas More held the position of Lord Chancellor Bacon took his place. Bacon epitomized the government criticized in Utopia. Twenty years after Bacon revolution erupted and the king was beheaded.
After listing these anaemic advantages he does not make a fair balance because that would have meant rejecting usury and the whole point of this essay is to legitimise usury. In the scales of usury Bacon throws a primitive scheme for a central bank to balance the seven deadly disadvantages, disingenuously forgetting that death is incurable and usury is the death of a robust economy. I will not quote and argue his scheme because the passage of time has done our work for us, let us see what has happened since the time of Bacon:
In 1694 the Governor and Company of the Bank of England was incorporated. In 1844 the Bank of England by an act of parliament (Peel’s Act of 1844) was recognized as a de facto central bank. In 1873 Walter Bagehot wrote Lombard Street: A Description of the Money Market in which he gives rules and recommendations for the setting up of a formal central bank. In 1913 the Federal Reserve System was set up in the US as a central bank, mostly following the blueprint of Bagehot.
Almost a hundred years later the end result is clear: since the setting up of the Federal Reserve the dollar has lost 97.7% of its value (gold from $20.67/oz. to $900/oz.), the national debt has exploded, the industrial base have been gutted, the countryside depopulated, the professional class grinded down. Today we are told the whole economy is depended on the financial sector functioning, that without credit (i.e. debt) nothing can be done; the banks it seems have imitated the creature in the film Alien which attached itself to the victim in such a way that its removal would result in the death of its victim. The record of central banking speaks for itself.
The passage of time has had another effect; it has brought back the golden age of big money oligarchy on a worldwide scale. Billionaires now dominate the world. They are even openly taking over the government, as happened in: Italy, Bolivia, Thailand, and Lebanon. In Britain they sit in the House of Lords and in Russia they are appointed province governors. Small and medium size capitalist have completely vanished, replaced by bank-owned zombies who are nothing but glorified managers.
The train of the West has long since left the station of industrial capitalism and arrived at the final destination of finance capitalism, but instead of gently stopping it thundered through and hit the concrete barriers head-on at full speed. People fail to recognise the difference between big land & big industry oligarchy on the one hand and big money oligarchy on the other, but there is a difference and it is akin to the difference between a benign and a malignant tumour.
With usury has no man a good house
made of stone, no paradise on his church wall
With usury the stone cutter is kept from his stone
the weaver is kept from his loom by usura
Wool does not come into market
the peasant does not eat his own grain
the girl’s needle goes blunt in her hand
The looms are hushed one after another
ten thousand after ten thousand
Duccio was not by usura
Nor was ‘La Calunnia’ painted.
Neither Ambrogio Praedis nor Angelico
had their skill by usura
Nor St Trophime its cloisters;
Nor St Hilaire its proportion.
Usury rusts the man and his chisel
It destroys the craftsman, destroying craft;
Azure breaks short the young man’s courting
Usury brings age into youth; it lies between the bride
and the bridegroom
Usury is against Nature’s increase.
-Ezra Pound, Canto LI