TURMEL: David Graeber's DEBT: The First 5,000 Years Chap10b

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P271 Chapter Ten B

JCT: This is longer because there is so much on usury.

DG: THE MIDDLE AGES
The Near West:
Islam (Capital as Credit)

Prices depend on the will of Allah; it is he who raises and
lowers them. - Attributed to the Prophet Mohammed
The profit of each partner must be in proportion to the
share of each in the adventure. -Islamic legal precept

For most of the Middle Ages, Christendom, lodged in the
declining empire of Byzantium and the obscure semi-
barbarous principalities of Europe, was largely
insignificant.

Since people who live in Western Europe have so long been in
the habit of thinking of Islam as the very definition of
"the East," it's easy to forget that, from the perspective
of any other great tradition, the difference between
Christianity and Islam is almost negligible.

From a world - historical perspective, it seems much more
sensible to see Judaism, Christianity, and Islam as three
different manifestations of the same great Western
intellectual tradition,

P273: After Caliph al-Ma'mum's abortive attempt to set up a
theocracy in 832 AD, the government took a hands-off
position on questions of religion. The various schools of
Islamic law were free to create their own educational
institutions and maintain their own separate system of
religious justice.

P274: The legal system that they created also ensured that
it was effectively impossible for Muslims- or for that
matter Christian or Jewish subjects of the Caliphate- to be
reduced to slavery.
Here al- Wahid seems to have been largely correct. Islamic
law took aim at just about all the most notorious abuses of
earlier, Axial Age societies. Slavery through kidnapping,
judicial punishment, debt, and the exposure or sale of
children, even through the voluntary sale of one's own
person- all were forbidden, or rendered unenforceable.67
67. Elwahed 1931:111- 35. As he puts it (ibid:127), "the
inalienability of liberty is one of the fundamental and
uncontested principles of Islam." Fathers do not have the
right to sell their children, and individuals do not have
the right to sell themselves - or at least, if they do, no
courts will recognize any resultant ownership claims. I note
that this is the diametrical opposite of the "natural law"
approach that later developed in Europe.

Likewise with all the other forms of debt peonage that had
loomed over the heads of poor Middle Eastern farmers and
their families since the dawn of recorded history.

P275: Finally, Islam strictly forbade usury, which it
interpreted to mean any arrangement in which money or a
commodity was lent at interest, for any purpose
whatsoever.68
68. There is a certain controversy here: some scholars,
including some contemporary Muslim scholars opposed to the
Islamic economics movement, insist that riba, which is
unequivocally condemned in the Koran, did not originally
refer to "interest" in general, but to a pre-Islamic Arabian
practice of fining late payment by doubling the money owed,
and that the blanket condemnation of interest is a
misinterpretation (e.g., Rahman 1964, Kuran 1995). I am in
no position to weigh in but, if true, this would suggest
that the ban on usury really emerged in Iraq itself as part
of the process of the creation of grassroots Islam, which
would actually reinforce my general argument.

JCT: So you can believe that usury wasn't banned because it
condemned the borrowers to a death-gamble but for another
reason. A little bit of death might not be so bad? Maybe
not.

DG: It was made possible by a profound shift in class
alliances. The great urban civilizations of the Middle East
had always been dominated by a de facto alliance between
administrators and merchants, both of whom kept the rest of
the population either in debt peonage or in constant peril
of falling into it. In converting to Islam, the commercial
classes, so long the arch-villains in the eyes of ordinary
farmers and townsfolk, effectively agreed to change sides,
abandon all their most hated practices, and become instead
the leaders of a society that now defined itself against the
state.

It was possible because, from the beginning, Islam had a
positive view toward commerce. Mohammed himself had begun
his adult life as a merchant, and no Islamic thinker ever
treated the honest pursuit of profit as itself intrinsically
immoral or inimical to faith. Neither did the prohibitions
against usury - which for the most part were scrupulously
enforced, even in the case of commercial loans - in any
sense mitigate against the growth of commerce, or even the
development of complex credit instruments.69
69. The best records we have are actually from a community
of Jewish merchants in Geniza, in twelfth-century Egypt,
who observed the ban on interest even in dealings with one
another. The one area where we regularly hear of interest
being charged is the one area where coercion was also
regularly employed: that is, in dealings with kings,
viziers, and officials, who often borrowed large sums of
money at interest - especially, but not exclusively, from
Jewish or Christian bankers - to pay their troops. Obliging
a request for such an illegal loan was a dangerous business,
but refusing even more so (for Abbasid examples, see Ray
1997:68- 70, mainly drawing from Fischel 1937).

To the contrary, the early centuries of the Caliphate saw an
immediate efflorescence in both. Profits were still possible
because Islamic jurists were careful to allow for certain
service fees and other considerations - notably, allowing
goods bought on credit to be priced slightly higher than
those bought for cash - that ensured that bankers and
traders still had an incentive to provide credit services.70
70. There were also a whole host of legal subterfuges
(called hiyal) that one might undertake if one were
absolutely determined to charge interest: for instance,
buying one's debtor's house for the amount of the loan,
charging them rent for it, and then allowing them to buy it
back for the same sum; having one's debtor agree to buy a
certain product monthly and sell it to one at a discount,
and so forth. Some schools of Islamic law banned these
outright; others merely disapproved. It used to be assumed
that these methods were widely employed, since most economic
historians assumed interest to be a necessary element of
credit, but recent research provides no evidence that they
were especially common (for the older view: Khan 1929, for
the new: Ray 1997:58-59).

Still, these incentives were never enough to allow banking
to become a full-time occupation: instead, almost any
merchant operating on a sufficiently large scale could be
expected to combine banking with a host of other moneymaking
activities. As a result, credit instruments soon became so
essential to trade that almost anyone of prominence was
expected to keep most of his or her wealth on deposit and to
make everyday transactions not by counting out coins, but by
inkpot and paper. Promissory notes were called sakk,
"checks," or ruq'a, "notes." Checks could bounce. One German
historian, picking through a multitude of old Arabic
literary sources, recounts that:

P276: Checks could be countersigned and transferred, and
letters of credit (suftaja) could travel across the Indian
Ocean or the Sahara.72
72. Goitein (1966, 1967, 1973) provides a detailed summary
of financial practices among Jewish merchants in twelfth
century Egypt. Almost every transaction involved credit to
some degree. Checks, remarkably similar even in appearance
to the kind used today, were in common usage - though sealed
bags of metal coins were even more common in everyday
transactions.

If they did not turn into de facto paper money, it was
because, since they operated completely independent of the
state (they could not be used to pay taxes, for instance),
their value was based almost entirely on trust and
reputation.73
73. Though apparently governments sometimes paid wages by
check (Tag El- Din 2007:69.) I am no doubt underplaying the
government role in all this: there were, for instance,
attempts to set up central government banks, and certainly
usually a commitment in principle that the government should
enforce commercial standards and regulations. It seems,
however, that this rarely came to much in practice.

When it came to finance, instead of interest-bearing
investments, the preferred approach was partnerships, where
(often) one party would supply the capital, the other carry
out the enterprise. Instead of fixed return, the investor
would receive a share of the profits. Even labor
arrangements were often organized on a profit-sharing
basis.74

In all such matters, reputation was crucial - in fact, one
lively debate in early commercial law was over the question
of whether reputation could (like land, labor, money, or
other resources) itself be considered a form of capital. It
sometimes happened that merchants would form partnerships
with no capital at all, but only their good names.
This was called "partnership of good reputation." As one
legal scholar explained:
As for the credit partnership, it is also called the
"partnership of the penniless" (sharika al- mafalis). It
comes about when two people form a partnership without any
capital in order to buy on credit and then sell. It is
designated by this name partnership of good reputations
because their capital consists of their status and good
reputations; for credit is extended only to him who has a
good reputation among people.75

P277: In Islamic society, the merchant became not just a
respected figure, but a kind of paragon: like the warrior, a
man of honor able to pursue far-flung adventures; unlike
him, able to do so in a fashion damaging to no one. The
French historian Maurice Lombard draws a striking, if
perhaps rather idealized, picture of him "in his stately
town-house, surrounded by slaves and hangers-on, in the
midst of his collections of books, travel souvenirs, and
rare ornaments," along with his ledgers, correspondence, and
letters of credit, skilled in the arts of double-entry book-
keeping along with secret codes and ciphers, giving alms to
the poor, supporting places of worship, perhaps, dedicating
himself to the writing of poetry, while still able to
translate his general creditworthiness into great capital
reserves by appealing to family and partners.79

P278: Once freed from its ancient scourges of debt and
slavery, the local bazaar had become, for most, not a place
of moral danger, but the very opposite: the highest
expression of the human freedom and communal solidarity, and
thus to be protected assiduously from state intrusion.

P279: There was a particular hostility to anything that
smacked of pricefixing. One much- repeated story held that
the Prophet himself had refused to force merchants to lower
prices during a shortage in the city of Medina, on the
grounds that doing so would be sacrilegious, since, in a
free-market situation, "prices depend on the will of God."82
81. And what's more, officials employed their own person
bankers, and themselves made extensive use of credit
instruments such as suftaja both for transfer of tax
payments, and the secreting away of ill- gotten gains
(Hodgson 1974 I:301, Udovitch 1975:8, Ray 1994:69- 71.)
82. "For Mohammed this natural regulation of the market
corresponds to a cosmic regulation. Prices rise and fall as
night follows day, as low tides follow high, and price
imposition is not only an injustice to the merchant, but a
disordering of the natural order of things"

Most legal scholars interpreted Mohammed's decision to mean
that any government interference in market mechanisms should
be considered similarly sacrilegious, since markets were
designed by God to regulate themselves.83
83. Only very limited exceptions were made, for instance in
times of disaster, and then most scholars insisted it was
always better to provide direct relief to the needy than to
interfere with market forces. See Ghazanfar & Islahi 2003,
Islahi 2004:31- 32; for a fuller discussion of Mohammed's
views on price formation, see Tuma 1965, Essid 1988, 1995.

If all this bears a striking resemblance to Adam Smith's
"invisible hand" (which was also the hand of Divine
Providence), it might not be a complete coincidence.
no one has ever observed two dogs exchanging bones.84

Let us suppose that each individual were required to busy
himself with providing his own sustenance, clothing,
dwellingplace and weapons, first acquiring the tools of
carpentry and the smith's trade, then readying thereby tools
and implements for sowing and reaping, grinding and
kneading, spinning and weaving... Clearly, he would not be
capable of doing justice to any one of them. But when men
render aid to each other, each one performing one of these
important tasks that are beyond the measure of his own
capacity, and observing the law of justice in transactions
by giving greatly and receiving in exchange of the labor of
others, then the means of livelihood are realized, and the
succession of the individual and the survival of the species
are assured.86

P280: Still, once you start from the initial premise that
markets are primarily about cooperation rather than
competition - and while Muslim economic thinkers did
recognize and accept the need for market competition, they
never saw competition as its essence - the moral
implications are very different. Nasruddin's story about the
quail eggs might have been a joke, but Muslim ethicists did
often enjoin merchants to drive a hard bargain with the rich
so they could charge less, or pay more, when dealing with
the less fortunate.88
88. So for example among Ghazali's ethical principles, we
find "the buyer should be lenient when bargaining with a
poor seller and strict when transacting with a rich seller,"
and "a person should be willing to sell to the poor who do
not have the means and should extend credit to them without
the expectation of repayment" (Ghazali Ihya Ulum al Din
II:79-82, cited in Ghazanfar & Islahi 1997:22)- the latter
of course recalling Luke 6:35.

P281: Ghazali also notes that there might also be a problem
of one person not even needing what the other has to offer,
but this is almost an afterthought; for him, the real
problem is conceptual. How do you compare two things with no
common qualities? His conclusion: it can only be done by
comparing both to a third thing with no qualities at all.
For this reason, he explains, God created dinars and
dirhams, coins made out of gold and silver, two metals that
are otherwise no good for anything:
Dirhams and dinars are not created for any particular
purpose; they are useless by themselves; they are just like
stones. They are created to circulate from hand to hand, to
govern and to facilitate transactions. They are symbols to
know the value and grades of goods.90

They can be symbols, units of measure, because of this very
lack of usefulness, indeed lack of any particular feature
other than value: A thing can only be exactly linked to
other things if it has no particular special form or feature
of its own- for example, a mirror that has no color can
reflect all colors. The same is the case with money- it has
no purpose of its own, but it serves as medium for the
purpose of exchanging goods.91

From this it also follows that lending money at interest
must be illegitimate, since it means using money as an end
in itself: "Money is not created to earn money." In fact, he
says, "in relation to other goods, dirhams and dinars are
like prepositions in a sentence," words that, as the
grammarians inform us, are used to give meaning to other
words, but can only do so because they have no meaning in
themselves. Money is thus a unit of measure that provides a
means of assessing the value of goods, but also one that
operates as such only if it stays in constant motion. To
enter into monetary transactions in order to obtain even
more money, even if it's a matter of M- C- M', let alone M-
M', would be, according to Ghazali, the equivalent of
kidnapping a postman.92
92. Ibid:35. On postmen in Medieval Islam: Goitein 1964.
Ghazali's position here recalls and is no doubt influenced
by Aristotle's Nicomachean Ethics (1121b): that since money
is a social convention meant to facilitate exchange,
diverting it into usury defies its purpose; but its ultimate
thrust is quite different, closer to Thomas Aquinas'
argument that money is basically a measure and that usury
distorts it, and Henry of Ghent's argument that "money is a
medium in exchange and not a terminus"- unsurprisingly,
since Aquinas was likely directly influenced by him
(Ghazanfar 2000).

Whereas Ghazali speaks only of gold and silver, what he
describes - money as symbol, as abstract measure, having no
qualities of its own, whose value is only maintained by
constant motion - is something that would never have
occurred to anyone were it not in an age when it was
perfectly normal for money to be employed in purely virtual
form.

P282: Much of our free-market doctrine, then, appears to
have been originally borrowed piecemeal from a very
different social and moral universe.93
93. It's hard to overstate this. Even the famous "Laffer
Curve," by which the Reagan Administration in the 1980s
tried to argue that cutting taxes would increase government
revenue by stimulating economic activity, is often called
the Khaldun-Laffer curve because it was first proposed, as a
general principle, in Ibn Khaldun's 1377 Muqaddimah.

The mercantile classes of the medieval Near West had pulled
off an extraordinary feat. By abandoning the usurious
practices that had made them so obnoxious to their neighbors
for untold centuries before, they were able to become -
alongside religious teachers - the effective leaders of
their communities: communities that are still seen as
organized, to a large extent, around the twin poles of
mosque and bazaar.94
94. Goitein 1957 for the rise of the "Middle Eastern
bourgeoisie."

The spread of Islam allowed the market to become a global
phenomenon, operating largely independent of governments,
according to its own internal laws. But the very fact that
this was, in a certain way, a genuine free market, not one
created by the government and backed by its police and
prisons- a world of handshake deals and paper promises
backed only by the integrity of the signer- meant that it
could never really become the world imagined by those who
later adopted many of the same ideas and arguments: one of
purely self- interested individuals vying for material
advantage by any means at hand.
-------------------------------

The Far West:
Christendom (Commerce, Lending, and War)

Where there is justice in war, there is also justice in
usury. - Saint Ambrose

Europe, as I mentioned, came rather late to the Middle Ages
and for most of it was something of a hinterland. Still, the
period began much as it did elsewhere, with the
disappearance of coinage. Money retreated into virtuality.
Everyone continued to calculate costs in Roman currency,
then, later, in Carolingian "imaginary money" - the purely
conceptual system of pounds, shillings, and pence used
across Western Europe to keep accounts well into the
seventeenth century. Local mints did gradually come back
into operation, producing coins in an endless variety of
weight, purity, and denominations. How these related to the
pan-European system, though, was a matter of manipulation.
Kings regularly issued decrees revaluing their own coins in
relation to the money of account, "crying up" the currency
by, say, declaring that, henceforth, one of their ecus or
escudos would no longer be worth 1/12 but now 1/8 of a
shilling (thus effectively raising taxes) or "crying down"
the value of their coins by doing the reverse (thus
effectively reducing their debts).95
95. "Crying down" acted as a de facto tax increase, since
one would now need to pay more ecus to make up a tax rate
fixed in shillings. Since wages were fixed in pounds,
shillings, and pence, this also had the effect of raising
their value, and hence it was usually popular. "Crying up"
by contrast had the effect of lowering the effective value
of the units of account. This could be useful to reduce a
king's- or his allies'- personal debt measured in such
units, but it also undercut the income of wage- earners and
those on any sort of fixed income and so was often
protested.

P283: The real gold or silver content of coins was endlessly
readjusted, and currencies were frequently called in for re-
minting. Meanwhile, most everyday transactions dispensed
with cash entirely, operating through tallies, tokens,
ledgers, or transactions in kind. As a result, when the
Scholastics came to address such matters in the thirteenth
century, they quickly adopted Aristotle's position that
money was a mere social convention: that it was, basically,
whatever human beings decided that it was.96

At first, the Catholic attitudes toward usury were just as
harsh as Muslim ones, and attitudes toward merchants,
considerably harsher. In the first case, they had little
choice, as many Biblical texts were quite explicit. Consider
Exodus 22:25: If you lend money to My people, to the poor
among you, you are not to act as a creditor to him; you
shall not charge him interest.
Both the Psalms (15:5, 54:12) and Prophets (Jeremiah 9.6,
Nehemiah 5:11) were explicit in assigning usurers to death
and hellfire. What's more, the early Christian Fathers, who
laid the foundation of Church teachings on social issues in
the waning years of the Roman empire, were writing amidst
the ancient world's last great debt crisis, one that was
effectively in the process of destroying the empire's
remaining free peasantry.97

While few were willing to condemn slavery, all condemned
usury. Usury was seen above all as an assault on Christian
charity, on Jesus's injunction to treat the poor as they
would treat the Christ himself, giving without expectation
of return and allowing the borrower to decide on recompense
(Luke 6:34- 35).

JCT: "allowing the borrower to decide on recompense" is new.
I don't read that in Luke.

DG: In 365 AD, for instance, St. Basil delivered a sermon on
usury in Cappadocia that set the standard for such issues:
The Lord gave His own injunction quite plainly in the words,
"from him that would borrow of thee turn not thou away."98
But what of the money lover? He sees before him a man under
stress of necessity bent to the ground in supplication. He
sees him hesitating at no act, no words, of humiliation. He
sees him suffering undeserved misfortune, but he is
merciless. He does not reckon that he is a fellow-creature.
He does not give in to his entreaties. He stands stiff and
sour. He is moved by no prayers; his resolution is broken by
no tears. He persists in refusal..

P284: That is, until the suppliant mentions "interest."
Basil was particularly offended by the crass dishonesty by
which moneylenders operated, their abuse of Christian
fellowship. The man in need comes seeking a friend, the rich
man pretends to be one. In fact, he's a secret enemy, and
everything he says is a lie. Witness, St. Basil said, how
the rich man will always at first swear mighty oaths that he
has no money to his name: Then the suppliant mentions
interest, and utters the word security. All is changed. The
frown is relaxed; with a genial smile he recalls old family
connection. Now it is "my friend." "I will see," says he,
"if I have any money by me. Yes, there is that sum which a
man I know has left in my hands on deposit for profit. He
stipulated a very heavy rate of interest. However, I shall
certainly take something off, and give it to you on better
terms." With pretences of this kind and talk like this he
fawns on the wretched victim, and induces him to swallow the
bait. Then he binds him with a written security, adds loss
of liberty to the trouble of his pressing poverty, and is
off. The man who has made himself responsible for interest
that he cannot pay has accepted voluntary slavery for life.

JCT: voluntary debt slavery for life.

DG: The borrower, coming home with his newfound money, at
first rejoices. But quickly, "the money slips away,"
interest accumulates, and his possessions are sold off.
Basil grows poetic in describing the debtor's plight. It's
as if time itself has become his enemy. Every day and night
conspires against him, as they are the parents of interest.
His life becomes a "sleepless daze of anxious uncertainty,"
as he is humiliated in public; while at home, he is
constantly hiding under the couch at every unexpected knock
on the door and can barely sleep, startled awake by
nightmare visions of his creditor standing over his
pillow.101
Probably the most famous ancient homily on usury, though,
was Saint Ambrose's De Tobia, pronounced over several days
in Milan in 380 BC.

JCT: BC? Don't think there were any saints in BC.

DG: He reproduces the same vivid details as Basil: fathers
forced to sell their children, debtors who hanged themselves
out of shame. Usury, he observes, must be considered a form
of violent robbery, even murder.102 Ambrose, though, added
one small proviso that was later to have enormous influence.
His sermon was the first to carefully examine every Biblical
reference to moneylending, which meant that he had to
address the one problem later authors always had to struggle
with - the fact that, in the Old Testament, usury is not
quite forbidden to everyone.

P285: The key sticking point is always Deuteronomy 23:19-20:
Thou shalt not lend upon usury to thy brother; usury of
money, usury of victuals, usury of any thing that is lent
upon usury. Unto a stranger thou mayest lend upon usury; but
unto thy brother thou shalt not lend upon usury.

So who then is this "stranger" or, a better translation of
the Hebrew nokri, "foreigner"? Presumably, one against whom
robbery and murder would have been justified as well.

After all, the ancient Jews lived amidst tribes like the
Amalekites, on whom God had specifically instructed them to
make war. If by extracting interest one is, as he puts it,
fighting without a sword, then it is only legitimate to do
so from those "whom it would not be a crime to kill."103 For
Ambrose, living in Milan, all this was something of a
technicality. He included all Christians and all those
subject to Roman law as "brothers"; there weren't, then, a
lot of Amalekites around.104
104. Though not entirely. It's worthy to note that the main
supply of slaves to the empire at this time came from
Germanic barbarians outside the empire, who were acquired
either through war or debt.

Later, the "Exception of St. Ambrose," as it came to be
known, was to become extremely important. All of these
sermons - and there were many of them - left certain
critical questions unanswered. What should the rich man do
when receiving a visit from his troubled neighbor? True,
Jesus had said to give without expectation of return, but it
seemed unrealistic to expect most Christians to do that. And
even if they did, what sort of ongoing relationships would
that create?

St. Basil took the radical position. God had given us all
things in common, and he had specifically instructed the
rich to give their possessions to the poor. The communism of
the Apostles - who pooled all their wealth and took freely
what they needed - was thus the only proper model for a
truly Christian society.105

JCT: No one said they pooled all their wealth without
retaining ownership of it. Lending without usury doens't
mean giving it away. It means giving your money to the
treasurer of "The Poor" Commune until you needed it back.
Sure, their deposits were pooled and most didn't need it
back living in the commune with access to all sustenance
they needed.

105. "If each one," he wrote, "after having taken from his
personal wealth whatever would satisfy his personal needs,
would leave what was superfluous to those who lack every
necessity, there would be no rich or poor"

Paul Corr II 8:14 says it best: Your abundance should at the
present time be a supply for their want so that later their
abundance may be a supply for your want. In that way, he who
gathers much doesn't have too much and he who gathers little
doesn't have to little, that there be equality. That's also
a differential equation dB/dt=0

(In Illiud Lucae 49D)- Basil himself had been born an
aristocrat, but he had sold off his landed estates and
distributed the proceeds to the poor.

Few of the other Christian Fathers were willing to take
things this far. Communism was the ideal, but in this fallen
and temporary world, they argued, it was simply unrealistic.

JCT: But keeping tabs on what's yours so you can have it
back should you need it was realistic.

DG: The Church must accept existing property arrangements,
but also come up with spiritual arguments to encourage the
rich to nonetheless act with Christian charity. Many of
these employed distinctly commercial metaphors. Even Basil
was willing to indulge in this sort of thing: Whenever you
provide for the destitute on account of the Lord, it is both
a gift and a loan. It is a gift because you entertain no
hope in recovering it, a loan because of our Lord's
munificence in paying you back on his behalf, when, having
taken a small sum for the poor, he will give you back a vast
sum in return. "For he who takes pity on the poor, lends to
God."106
106. Homilia II in Psalmum XIV (PG 29, 277C). The reference
is to Proverbs 19.17.

P286: Since Christ is in the poor, a gift of charity is a
loan to Jesus, to be repaid with interest inconceivable on
earth. Charity, however, is a way of maintaining hierarchy,
not undermining it. What Basil is talking about here really
has nothing to do with debt, and playing with such metaphors
seems ultimately to serve only to underline the fact that
the rich man doesn't owe the poor suppliant anything, any
more than God is in any way legally bound to save the soul
of anyone who feeds a beggar. "Debt" here dissolves into a
pure hierarchy (hence, "the Lord") where utterly different
beings provide each other utterly different kinds of
benefit. Later theologians were to explicitly confirm this:
human beings live in time, noted St. Thomas Aquinas, so it
makes sense to say that sin is a debt of punishment we owe
to God. But God lives outside of time. By definition, he
cannot owe anything to anyone. His grace can therefore only
be a gift given with no obligation.107
107. Summa 8.3.1.3: "since grace is freely given, it
excludes the idea of debt... In [no] sense does debt imply
that God owes anything to another creature."

This, in turn, provides an answer to the question: What are
they really asking the rich man to do? The Church opposed
usury, but it had little to say about relations of feudal
dependency, where the rich man provides charity and the poor
suppliant shows his gratitude in other ways. Neither, when
these kinds of arrangements began to emerge across the
Christian West, did the Church offer significant
objections.108
108. Clavero (1986) sees this as a basic conflict over the
nature of the contract, and hence the legal basis of human
relations in European history: usury, and by extension
profit, was denounced, but rent, the basis of feudal
relations, was never challenged.

JCT: Lending without interest is best repaid by the borrower
becoming self-sufficient and able to help you back should
you need it.

Commerce, on the other hand, remained a problem. There was
not much of a leap between condemning usury as the taking of
"whatever exceeds the amount loaned" and condemning any form
of profit-taking. Many - Saint Ambrose among them - were
willing to take that leap. Where Mohammed declared that an
honest merchant deserved a place by the seat of God in
heaven, men like Ambrose wondered if an "honest merchant"
could actually exist. Many held that one simply not be both
a merchant and a Christian.109
109. Gordon 1989:115. "What is commerce," wrote Cassiodorus
(485-585), "except to want to sell dear that which can be
bought cheap? Therefore those merchants are detestable who,
with no consideration of God's justice, burden their wares
more with perjury than value. Them the Lord evicted them
from the Temple saying, 'Do not make my Father's house into
a den of thieves" (in Langholm 1996:454).

In the early Middle Ages, this was not a pressing issue-
especially since so much commerce was conducted by
foreigners. The conceptual problems, however, were never
resolved. What did it mean that one could only lend to
"strangers"? Was it just usury, or was even commerce
tantamount to war?

JCT: Just usury, not commerce.

P287: In the time of Augustus, Rabbi Hillel had effectively
rendered the sabbatical year a dead letter by allowing two
parties to place a rider on any particular loan contract
agreeing that it would not apply.

JCT: So can we give Rabbi Hillel credit for ending interest-
free lending among Jews?

DG: While both the Torah and the Talmud stand opposed to
loans on interest, exceptions were made in dealing with
Gentiles - particularly as, over the course of the eleventh
and twelfth centuries, European Jews were excluded from
almost any other line of work.110
This in turn made it harder to contain the practice, as
witnessed in the common joke, current in twelfth - century
ghettos to justify usury between Jews. It consisted, it is
said, of reciting Deuteronomy 23:20 in interrogative tones
to make it mean the opposite of its obvious sense: "Unto a
foreigner thou mayest lend upon usury, but unto thy brother
thou shalt not lend upon usury?"111

If one were to concede that the Exception allowed Jews and
Christians the right to lend to each other at interest, it
would also mean that they had the right to murder one
another.112
112. Nelson (1949) assumed that the "Exception" was often
held to apply to relations between Christians and Jews, but
Noonan (1957:101-2) insists that it was mainly held to apply
only to "heretics and infidels, particularly the Saracens,"
and by some, not even to them.

JCT: If you can trick borrowers into playing a game to the
death or slavery, murdering them would only be more
personal.

DG: No one really wanted to say that. On the other hand,
real relations between Christians and Jews often did seem to
skate perilously close to this unfortunate ideal - though
obviously the actual murder (apart from mere economic
aggression) was all on one side. In part, this was due to
the habit of Christian princes of exploiting, for their own
purposes, the fact that Jews did sit slightly outside the
system. Many encouraged Jews to operate as moneylenders,
under their protection, simply because they also knew that
protection could be withdrawn at any time. The kings of
England were notorious in this regard. They insisted that
Jews be excluded from merchant and craft guilds, but granted
them the right to charge extravagant rates of interest,
backing up the loans by the full force of law.113
113. Up to 52 percent with security, up to 120 percent
without (Homer 1987:91).

Debtors in medieval England were regularly thrown in prisons
until their families settled with the creditor.114
114. Debtor's prisons, in the sense of prisons exclusively
for debtors, existed in England only after 1263, but the
imprisonment of debtors has a much longer history. Above
all, Jewish lenders seem to have been employed as the means
of transforming virtual, credit money into coinage,
collecting the family silver from insolvent debtors, and
turning it over to royal mints. They also won title to a
great deal of land from defaulting debtors, most of which
ended up in the hands of barons or monasteries (Singer 1964;
Bowers 1983; Schofield & Mayhew 2002).

P288: Yet the same thing regularly happened to the Jews
themselves. In 1210 AD, for example, King John ordered a
tallage, or emergency levy, to pay for his wars in France
and Ireland. According to one contemporary chronicler, "All
the Jews throughout England, of both sexes, were seized,
imprisoned, and tortured severely, in order to do the king's
will with their money." Most who where put to torture
offered all they had and more - but on that occasion, one
particularly wealthy merchant, a certain Abraham of Bristol,
who the king decided owed him ten thousand marks of silver
(a sum equivalent to about a sixth of John's total annual
revenue), became famous for holding out. The king therefore
ordered that one of his molars be pulled out daily, until he
paid. After seven had been extracted, Abraham finally gave
in.115
115. Roger of Wendower, Flowers of History 252- 53. Roger
doesn't name the victim; in some later versions his name is
Abraham, in others, Isaac.

P289: One mustn't exaggerate the Jewish role in lending.
Most Jews had nothing to do with the business, and those who
did were typically bit players, making minor loans of grain
or cloth for a return in kind. Others weren't even really
Jews. Already in the 1190s, preachers were complaining about
lords who would work hand in glove with Christian
moneylenders claiming they were "our Jews"- and thus under
their special protection.120

By the 1100s, most Jewish moneylenders had long since been
displaced by Lombards (from Northern Italy) and Cahorsins
(from the French town of Cahors)- who established themselves
across Western Europe and became notorious rural usurers.121
121. It was a firm from Cahors, for instance, who received
the property of the English Jews when the latter were
finally expelled in 1290. Though for a long time, Lombards
and Cahorsins were themselves dependent on royal favor and
hardly in much better position than the Jews. In France, the
kings seemed to expropriate and expel Jews and Lombards
alternately (Poliakov 1977:42).

The rise of rural usury was itself a sign of a growing free
peasantry (there had been no point in making loans to serfs,
since they had nothing to repossess). It accompanied the
rise of commercial farming, urban craft guilds, and the
"commercial revolution" of the High Middle Ages, all of
which finally brought Western Europe to a level of economic
activity comparable to that long since considered normal in
other parts of the world. The Church quickly came under
considerable popular pressure to do something about the
problem, and at first, it did try to tighten the clamps.
Existing loopholes in the usury laws were systematically
closed, particularly the use of mortgages. These latter
began as an expedient: as in medieval Islam, those
determined to dodge the law could simply present the money,
claim to be buying the debtor's house or field, and then
"rent" it back to the debtor until the principal was repaid.
In the case of a mortgage, the house was in theory not even
purchased but pledged as security, but any income from it
accrued to the lender. In the eleventh century, this became
a favorite trick of monasteries. In 1148, it was made
illegal: henceforth, all income was to be subtracted from
the principal. Similarly, in 1187, merchants were forbidden
to charge higher prices when selling on credit - the Church
thereby going much further than any school of Islamic law
ever had.

In 1179, usury was made a mortal sin, and usurers were
excommunicated and denied Christian burial.122 Before long,
new orders of itinerant friars like the Franciscans and
Dominicans organized preaching campaigns, traveling town to
town, village to village, threatening moneylenders with the
loss of their eternal souls if they did not make restitution
to their victims.
All this was echoed by a heady intellectual debate in the
newly founded universities, not so much as to whether usury
was sinful and illegal, but precisely why. Some argued that
it was theft of another's material possessions; others that
it constituted a theft of time, charging others for
something that belonged only to God. Some held that it
embodied the sin of Sloth, since like the Confucians,
Catholic thinkers usually held that a merchant's profit
could only be justified as payment for his labor (i.e., in
transporting goods to wherever they were needed), whereas
interest accrued even if the lender did nothing at all.

P290: Soon the rediscovery of Aristotle, who returned in
Arabic translation, and the influence of Muslim sources like
Ghazali and Ibn Sina, added new arguments: that treating
money as an end in itself defied its true purpose, that
charging interest was unnatural, in that it treated mere
metal as if it were a living thing that could breed or bear
fruit.123
123. There are two sorts of wealthgetting, as I have said;
one is a part of household management, the other is retail
trade: the former necessary and honorable, while that which
consists in exchange is justly censured; for it is
unnatural, and a mode by which men profit from one another.
The most hated sort, and with the greatest reason, is usury,
which makes a profit out of money itself, and not from the
natural object of it. For money was intended to be used in
exchange, but not to increase at interest. And this term
"interest" (tokos), which means the birth of money from
money, is applied to the breeding of money because the
offspring resembles the parent. "Wherefore of all modes of
getting wealth this is the most unnatural" (Aristotle,
Politics 1258b). The Nicomachean Ethics (1121b) is equally
damning. For the best general analysis of the Aristotelean
tradition on usury: Langholm 1984.

But as the Church authorities soon discovered, when one
starts something like this, it's very hard to keep a lid on
it. Soon, new popular religious movements were appearing
everywhere, and many took up the same direction so many had
in late Antiquity, not only challenging commerce but
questioning the very legitimacy of private property. Most
were labeled heresies and violently suppressed, but many of
the same arguments were taken up amongst the mendicant
orders themselves.
By the thirteenth century, the great intellectual debate was
between the Franciscans and the Dominicans over "apostolic
poverty" - basically, over whether Christianity could be
reconciled with property of any sort.

At the same time, the revival of Roman law - which, as we've
seen, began from the assumption of absolute private
property - put new intellectual weapons in the hands of
those who wished to argue that, at least in the case of
commercial loans, usury laws should be relaxed. The great
discovery in this case was the notion of interesse, which is
where our word "interest" originally comes from: a
compensation for loss suffered because of late payment.124
The argument soon became that if a merchant made a
commercial loan even for some minimal period (say, a month),
it was not usurious for him to charge a percentage for each
month afterward, since this was a penalty, not rental for
the money, and it was justified as compensation for the
profit he would have made, had he placed it in some
profitable investment, as any merchant would ordinarily be
expected to do.125
125. The technical term for the lost income is lucrum
cessans: see O'Brien 1920: 107- 10, Noonan 1957:114- 28,
Langholm 1992:60-61; 1998:75; Spufford 1989:260.

P291: Whereas Persian and Arab thinkers assumed that the
market emerged as an extension of mutual aid, Christians
never completely overcame the suspicion that commerce was
really an extension of usury, a form of fraud only truly
legitimate when directed against one's mortal enemies. Debt
was, indeed, sin - on the part of both parties to the
transaction.

JCT: Not interest-free debt. How could Jesus say "Lend
expecting nothing in return" if interest-free debt were a
sin for either party?

DG: Competition was essential to the nature of the market,
but competition was (usually) nonviolent warfare. There was
a reason why, as I've already observed, the words for "truck
and barter" in almost all European languages were derived
from terms meaning "swindle," "bamboozle," or "deceive."
Some disdained commerce for that reason. Others embraced it.
Few would have denied that the connection was there.

One need only examine the way that Islamic credit
instruments - or for that matter, the Islamic ideal of the
merchant adventurer - were eventually adopted to see just
how intimate this connection really was. It is often held
that the first pioneers of modern banking were the Military
Order of the Knights of the Temple of Solomon, commonly
known as the Knights Templar. A fighting order of monks,
they played a key role in financing the Crusades. Through
the Templars, a lord in southern France might take out a
mortgage on one of his tenements and receive a "draft" (a
bill of exchange, modeled on the Muslim suftaja, but written
in a secret code) redeemable for cash from the Temple in
Jerusalem. In other words, Christians appear to have first
adopted Islamic financial techniques to finance attacks
against Islam. The Templars lasted from 1118 to 1307, but
they finally went the way of so many medieval trading
minorities: King Phillip IV, deep in debt to the order,
turned on them, accusing them of unspeakable crimes; their
leaders were tortured and ultimately killed, and their
wealth was expropriated.128
128. They were accused of both heresy and sodomy.

Much of the problem was that they lacked a powerful home
base. Italian banking houses such as the Bardi, Peruzzi, and
Medici did much better. In banking history, the Italians are
most famous for their complex joint- stock organization and
for spearheading the use of Islamic- style bills of
exchange.129
129. One cannot "prove" the Islamic inspiration of European
bills of exchange, but considering the amount of trade
between the two sides of the Mediterranean, denying it seems
bizarre. Braudel (1995:816-17) proposes that the idea must
have reached Europe through Jewish merchants, who we know to
have long been using them in Egypt.

At first these were simple enough: basically just a form of
long-distance money-changing.

P292: A merchant could present a certain amount in florins
to a banker in Italy and receive a notarized bill
registering the equivalent in the international money of
account (Carolingian derniers), due in, say, three months'
time, and then after it came due, either he or his agent
could cash it for an equivalent amount of local currency in
the Champagne fairs, which were both the great yearly
commercial emporia and great financial clearing houses of
the European High Middle Ages. But they quickly morphed into
a plethora of new, creative forms, mainly a way of
navigating- or even profiting from- the endlessly
complicated European currency situation.130
There were innumerable currencies, any of which might at any
time be "cried up," "cried down," or otherwise fluctuate in
value. Bills of exchange also allowed merchants to
effectively engage in currency speculation, and even get
around usury laws, once it became possible to pay for one
bill of exchange by writing a different bill of exchange,
due in several months' time, for a slightly higher sum. This
was called "dry exchange" (de Roover 1944), and over time
the Church became increasingly skeptical, causing yet
another round of financial creativity to get around the
laws. It's worthy of note that the rates of interest on such
commercial loans were generally quite low: twelve percent at
the highest, in dramatic contrast to consumer loans. This is
a sign of the increasingly lower risk of such transactions
(see Homer 1987 for a history of interest rates).

P293: The Genoese republic was also the inventor of a unique
mode of military financing, which might be known as war by
subscription, whereby those planning expeditions sold shares
to investors in exchange for the rights to an equivalent
percentage of the spoils. It was precisely the same galleys,
with the same "merchant adventurers" aboard, who would
eventually pass through the pillars of Hercules to follow
the Atlantic coast to Flanders or the Champagne fairs,
carrying cargoes of nutmeg or cayenne, silks and woolen
goods - along with the inevitable bills of exchange.135

It would be instructive, I think, to pause a moment to think
about this term, "merchant adventurer." Originally, it just
meant a merchant who operated outside of his own country. It
was around this same time, however, at the height of the
fairs of Champagne and the Italian merchant empires, between
1160 and 1172, that the term "adventure" began to take on
its contemporary meaning. The man most responsible for it
was the French poet Chretien de Troyes, author of the famous
Arthurian romances- most famous, perhaps, for being the
first to tell the story of Sir Percival and the Holy Grail.
The romances were a new sort of literature featuring a new
sort of hero, the "knight-errant," a warrior who roamed the
world in search of, precisely, "adventure" - in the
contemporary sense of the word: perilous challenges, love,
treasure, and renown. Stories of knightly adventure quickly
became enormously popular, Chretein was followed by
innumerable imitators, and the central characters in the
stories- Arthur and Guinevere, Lancelot, Gawain, Percival,
and the rest- became known to everyone, as they are still.
This courtly ideal of the gallant knight, the quest, the
joust, romance and adventure, remains central to our image
of the Middle Ages.136
The biographer of Guillaume le Marechal gives an idea of how
this rabble of courtly routiers amused itself on the
jousting fields of western Europe. The hazards, the
concourse, the prizes, keyed men to the pitch of war. The
stakes were magnificent, for the victor held his prize,
horse and man, for ransom. And for these ransoms fiefs went
in gage or the hapless victim fell into the hands of
usurers, giving his men, and in extremity, himself, as
hostages. Fortunes were made and lost on the point of a
lance and many a mother's son failed to ride home.139

JCT: "In gage" means "gambled." French "gage" = "gamble."

P295: So, it was not only that the merchants supplied the
materials that made the fairs possible; Since vanquished
knights technically owed their lives to the victors,
merchants ended up, in their capacity as moneylenders,
making good business out of liquidating their assets.
Alternately, a knight might borrow vast sums to outfit
himself in magnificence, hoping to impress some fair lady
(with handsome dowry) with his victories; others, to take
part in the continual whoring and gambling that always
surrounded such events. Losers would end up having to sell
their armor and horses, and this created the danger that
they would go back to being highwaymen, foment pogroms (if
their creditors were Jews) or, if they had lands, make new
fiscal demands on those unfortunate enough to live on them.

Others turned to war, which itself tended to drive the
creation of new markets.140
140. See Schoenberger 2008 for a recent and compelling take:
comparing the role of war mobilization in creating markets
in Greece and Rome to Western Europe in the High Middle
Ages.

P296: What, Then, Were the Middle Ages?
Each of us is a mere symbolon of a man, the result of
bisection, like the flat fish, two out of one, and each of
us is constantly searching for his corresponding symbolon.
- Plato, The Symposium

We've already seen this with bills of exchange, already in
use in the East by 700 or 800 AD, but only reaching Europe
several centuries later. The independent university - perhaps
the quintessential medieval institution - is another case in
point.

P297: When Aristotle argued that coins are merely social
conventions, the term he used was symbolon - from which our
own word "symbol" is derived. Symbolon was originally the
Greek word for "tally" - an object broken in half to mark a
contract or agreement, or marked and broken to record a
debt. So our word "symbol" traces back originally to objects
broken to record debt contracts of one sort or another. This
is striking enough. What's really remarkable, though, is
that the contemporary Chinese word for "symbol," fu, or fu
hao, has almost exactly the same origin.148
148. As far as I know, the only scholar to have pointed out
the connection is Bernard Faure, a French student of
Japanese Buddhism: Faure 1998:798, 2000:225.

P299: Let's start with the Greek term "symbolon." Two
friends at dinner might create a symbolon if they took some
object- a ring, a knucklebone, a piece of crockery - and
broke it in half. Any time in the future when either of them
had need of the other's help, they could bring their halves
as reminders of the friendship. Archeologists have found
hundreds of little broken friendship tablets of this sort in
Athens, often made of clay. Later they became ways of
sealing a contract, the object standing in the place of
witnesses.149
149. Later still, as cash transactions became more common,
the term was applied to small sums of cash offered as
downpayment, rather in the sense of English "earnest money."

The word was also used for tokens of every
sort: those given to Athenian jurors entitling them to vote,
or tickets for admission to the theater. It could be used to
refer to money too, but only if that money had no intrinsic
value: bronze coins whose value was fixed only by local
convention.150 Used for written documents, a symbolon could
also be passport, contract, commission, or receipt. By
extension, it came to mean: omen, portent, symptom, or
finally, in the now- familiar sense, symbol.
The path to the latter appears to have been twofold.
Aristotle fixed on the fact that a tally could be anything:
what the object was didn't matter; all that mattered was
that there was a way to break it in half. It is exactly so
with language: words are sounds we use to refer to objects,
or to ideas, but the relation is arbitrary: there's no
particular reason, for example, that English - speakers
should choose "dog" to refer to an animal and "god" to refer
to a deity, rather than the other way around.

P301: We've already seen how paper money seems to have
developed from paper versions of such debt contracts, ripped
in half and reunited. For Chinese theorists, of course,
Aristotle's argument that money was simply a social
convention was hardly radical; it was simply assumed.

P302: A tally does away with the need for witnesses; if the
two surfaces agree, then everyone knows that the agreement
between the contracting parties exists as well. This is why
Aristotle saw it as a fit metaphor for words: word A
corresponds to concept B because there is a tacit agreement
that we shall act as if it does. The striking thing about
tallies is that even though they might begin as simple
tokens of friendship and solidarity, in almost all the later
examples, what the two parties actually agree to create is a
relation of inequality: of debt, obligation, subordination
to another's orders. This is in turn what makes it possible
to use the metaphor for the relation between the material
world and that more powerful world that ultimately gives it
meaning. The two sides are the same.

P303: The striking thing is that the Confucian condemnation
of the merchant and the Islamic celebration of the merchant
ultimately led to the same thing: prosperous societies with
flourishing markets, but where the elements never came
together to create the great merchant banks and industrial
firms that were to become the hallmark of modern capitalism.

Trading enterprises were assumed to be, quite literally,
adventures, in which traders exposed themselves to the
dangers of storm and shipwreck, savage nomads, forests,
steppes, and deserts, exotic and unpredictable foreign
customs, and arbitrary governments. Financial mechanisms
designed to avoid these risks were considered impious. This
was one of the objections to usury: if one demands a fixed
rate of interest, the profits are guaranteed. Similarly,
commercial investors were expected to share the risk. This
made most of the forms of finance and insurance that were to
later develop in Europe impossible.165
165. Insofar as I'm weighing in on the "Why didn't the
Islamic world develop modern capitalism?" debate, then, it
seems to me that both Udovitch's argument (1975:19-21) that
the Islamic world never developed impersonal credit
mechanisms, and Ray's objection (1997:39-40) that the ban on
interest and insurance was more important, carry weight.
Ray's suggestion that differences in inheritance laws might
play a role also deserves investigation.

In this sense, the Buddhist monasteries of early medieval
China represent the opposite extreme. The Inexhaustible
Treasuries were inexhaustible because, by continually
lending their money out at interest and never otherwise
touching their capital, they could guarantee effectively
risk-free investments.

P304: That was the entire point. By doing so, Buddhism,
unlike Islam, produced something very much like what we now
call "corporations"- entities that, through a charming legal
fiction, we imagine to be persons, just like human beings,
but immortal, never having to go through all the human
untidiness of marriage, reproduction, infirmity, and death.
To put it in properly medieval terms, they are very much
like angels.
Legally, our notion of the corporation is very much a
product of the European High Middle Ages. The legal idea of
a corporation as a "fictive person" (persona ficta)- a
person who, as Maitland, the great British legal historian,
put it, "is immortal, who sues and is sued, who holds lands,
has a seal of his own, who makes regulations for those
natural persons of whom he is composed"166 - was first
established in canon law by Pope Innocent IV in 1250 AD, and
one of the first kinds of entities it applied to were
monasteries - as also to universities, churches,
municipalities, and guilds.167

JCT: So Pope Innocent IV legalized corporations.

DG: The idea of the corporation as an angelic being is not
mine, incidentally. I borrowed it from the great medievalist
Ernst Kantorowicz, who pointed out that all this was
happening right around the same time that Thomas Aquinas was
developing the notion that angels were really just the
personification of Platonic Ideas.168
168. In the Platonic sense: just as any particular, physical
bird we might happen to see on a nearby fruit tree is merely
a token of the general idea of "bird" (which is immaterial,
abstract, angelic), so do the various physical, mortal
individuals who join together to make up a corporation
become an abstract, angelic Idea. Kantorowicz argues that it
took a number of intellectual innovations to make the notion
of the corporation possible: notably, the idea of the aeon
or aevum, eternal time, that is, time that lasts forever, as
opposed to the Augustinian eternity which is outside of time
entirely and was considered the habitation of the angels, to
the revival of the works of Dionysius the Areopagite
(1957:280- 81).

When such companies began to engage in armed ventures
overseas, though, a new era of human history might be said
to have begun.

JCT: Quite the long chapter but it dealt more with usury and
the others so it merits it.