Nevertheless, the Church has given no positive approval to any of the foregoing theories. In the last formal pronouncement by a Pope on the subject, Benedict XIV[136] condemned anew all interest that had no other support than the intrinsic conditions of the loan itself. At the same time, he declared that he had no intention of denying the lawfulness of interest which was received in virtue of the title of "lucrum cessans," nor the lawfulness of interest or profits arising out of investments in productive property. In other words, the authorisation that he gave to both kinds of interest was merely negative. He refrained from condemning them.
In the Responses given by the Roman Congregations from 1822 onward to questions relating to the lawfulness of loan-interest, we may profitably consider four principal features. First, they declare more or less specifically that interest may be taken in the absence of the title of "lucrum cessans"; second, some of them definitely admit the title of "praemium legale," or civil authorisation, as sufficient to give the practice moral sanction; third, they express a genuine permission, not a mere toleration, of interest taking; fourth, none of them explicitly declares that any of the titles or reasons for receiving loan-interest will necessarily or always give the lender a strict right thereto. None of them contains a positive and reasoned approval of the practice. Most of them merely decide that persons who engage in it are not to be disturbed in conscience, so long as they stand ready to submit to a formal decision on the subject by the Holy See. The insertion of the latter condition clearly intimates that some day interest taking might be formally and officially condemned.
Should such a condemnation ever appear, it would not contradict any moral principle contained in the "Roman Responses," nor in the present attitude of the Church and of Catholic moralists. Undoubtedly it could come only as the result of a change in the organisation of industry, just as the existing ecclesiastical attitude has followed the changed economic conditions since the Middle Ages.
All the theological discussion on the subject, and all the authoritative ecclesiastical declarations indicate, therefore, that interest on loans is to-day regarded as lawful because a loan is the economic equivalent of an investment. Evidently this is good logic and common sense. If it is right for the stockholder of a railway to receive dividends, it is equally right for the bondholder to receive interest. If it is right for a merchant to take from the gross returns of his business a sum sufficient to cover interest on his capital, it is equally right for the man from whom he has borrowed money for the enterprise to exact interest. The money in a loan is economically equivalent to, convertible into, concrete capital. It deserves, therefore, the same treatment and the same rewards. The fact that the investor undergoes a greater risk than the lender, and the fact that the former often performs labour in connection with the operation of his capital, have no bearing on the moral problem; for the investor is repaid for his extra risk and labour by the profits which he receives, and which the lender does not receive. As a mere recipient of interest, the investor undergoes no more risk nor exertion than does the lender. His claim to interest is no better than that of the latter.
Interest on Productive Capital
On what ground does the Church or Catholic theological opinion justify interest on invested capital? on the shares of the stockholders in corporations? on the capital of the merchant and the manufacturer?
In the early Middle Ages the only recognised titles to gain from the ownership of property were labour and risk.[137] Down to the beginning of the fifteenth century substantially all the incomes of all classes could be explained and justified by one or other of these two titles; for the amount of capital in existence was inconsiderable, and the number of large personal incomes insignificant.
When, however, the traffic in rent charges and the operation of partnerships, especially the "contractus trinus," or triple contract, had become fairly common, it was obvious that the profits from these practices could not be correctly attributed to either labour or risk. The person who bought, not the land itself, but the right to receive a portion of the rent thereof, and the person who became the silent member of a partnership, evidently performed no labour beyond that involved in making the contract. And their profits clearly exceeded a fair compensation for their risks, inasmuch as the profits produced a steady income. How then were they to be justified?
A few authorities maintained that such incomes had no justification. In the thirteenth century Henry of Ghent condemned the traffic in rent charges; in the sixteenth Dominicus Soto maintained that the returns to the silent partner in an enterprise ought not to exceed a fair equivalent for his risks; about the same time Pope Sixtus V denounced the triple contract as a form of usury. Nevertheless, the great majority of writers admitted that all these transactions were morally lawful, and the gains therefrom just. For a time these writers employed merely negative and a pari arguments. Gains from rent charges, they pointed out, were essentially as licit as the net rent received by the owner of the land; and the interest received by a silent partner, even in a triple contract, had quite as sound a moral basis as rent charges. By the beginning of the seventeenth century the leading authorities were basing their defence of industrial interest on positive grounds. Lugo, Lessius, and Molina adduced the productivity of capital goods as a reason for allowing gains to the investor. Whether they regarded productivity as in itself a sufficient justification of interest, or merely as a necessary prerequisite to justification, cannot be determined with certainty.
At present the majority of Catholic writers seem to think that a formal defence of interest on capital is unnecessary. Apparently they assume that interest is justified by the mere productivity of capital. However, this view has never been explicitly approved by the Church. While she permits and authorises interest, she does not define its precise moral basis.