The economic background of it all was very simple. The medieval consumer—we can sympathize with him today more easily than in 1914—is like a traveller condemned to spend his life at a station hotel. He occupies a tied house and is at the mercy of the local baker and brewer. Monopoly is inevitable. Indeed, a great part of medieval industry is a system of organized monopolies, endowed with a public status, which must be watched with jealous eyes to see that they do not abuse their powers. It is a society of small masters and peasant farmers. Wages are not a burning question, for, except in the great industrial centers of Italy and Flanders, the permanent wage-earning class is small. Usury is, as it is today in similar circumstances. For loans are made largely for consumption, not for production. The farmer whose harvest fails or whose beasts die, or the artisan who loses money, must have credit, seed-corn, cattle, raw materials, and his distress is the money-lender’s opportunity. Naturally, there is a passionate popular sentiment against the engrosser who holds a town to ransom, the monopolist who brings the livings of many into the hands of one, the money-lender who takes advantage of his neighbor’s necessities to get a lien on their land and foreclose. “The usurer would not loan to men these goods, but if he hoped winning, that he loves more than charity. Many other sins be more than this usury, but for this men curse and hate it more than other sin.”[[49]]
No one who examines the cases actually heard by the courts in the later Middle Ages will think that resentment surprising, for they throw a lurid light on the possibilities of commercial immorality.[[50]] Among the peasants and small masters who composed the mass of the population in medieval England, borrowing and lending were common, and it was with reference to their petty transactions, not to the world of high finance, that the traditional attitude towards the money-lender had been crystallized. It was natural that “Juetta [who] is a usuress and sells at a dearer rate for accommodation,” and John the Chaplain, qui est usurarius maximus,[[51]] should be regarded as figures at once too scandalous to be tolerated by their neighbors and too convenient to be altogether suppressed. The Church accepts this popular sentiment, gives it a religious significance, and crystallizes it in a system, in which economic morality is preached from the pulpit, emphasized in the confessional, and enforced, in the last resource, through the courts.
The philosophical basis of it is the conception of natural law. “Every law framed by man bears the character of a law exactly to that extent to which it is derived from the law of nature. But if on any point it is in conflict with the law of nature, it at once ceases to be a law; it is a mere perversion of law.”[[52]] The plausible doctrine of compensations, of the long run, of the self-correcting mechanism, has not yet been invented. The idea of a law of nature—of natural justice which ought to find expression in positive law, but which is not exhausted in it—supplies an ideal standard by which the equity of particular relations can be measured. The most fundamental difference between medieval and modern economic thought consists, indeed, in the fact that, whereas the latter normally refers to economic expediency, however it may be interpreted, for the justification of any particular action, policy, or system of organization, the former starts from the position that there is a moral authority to which considerations of economic expediency must be subordinated. The practical application of this conception is the attempt to try every transaction by a rule of right, which is largely, though not wholly, independent of the fortuitous combinations of economic circumstances. No man must ask more than the price fixed, either by public authorities, or, failing that, by common estimation. True, prices even so will vary with scarcity; for, with all their rigor, theologians are not so impracticable as to rule out the effect of changing supplies. But they will not vary with individual necessity or individual opportunity. The bugbear is the man who uses, or even creates, a temporary shortage, the man who makes money out of the turn of the market, the man who, as Wyclif says, must be wicked, or he could not have been poor yesterday and rich today.[[53]]
The formal theory of the just price went, it is true, through a considerable development. The dominant conception of Aquinas—that prices, though they will vary with the varying conditions of different markets, should correspond with the labor and costs of the producer, as the proper basis of the communis estimatio, conformity with which was the safeguard against extortion—was qualified by subsequent writers. Several Schoolmen of the fourteenth century emphasized the subjective element in the common estimation, insisted that the essence of value was utility, and drew the conclusion that a fair price was most likely to be reached under freedom of contract, since the mere fact that a bargain had been struck showed that both parties were satisfied.[[54]] In the fifteenth century St. Antonino, who wrote with a highly developed commercial civilization beneath his eyes, endeavored to effect a synthesis, in which the principle of the traditional doctrine should be observed, while the necessary play should be left to economic motives. After a subtle analysis of the conditions affecting value, he concluded that the fairness of a price could at best be a matter only of “probability and conjecture,” since it would vary with places, periods and persons. His practical contribution was to introduce a new elasticity into the whole conception by distinguishing three grades of prices—a gradus pius, discretus, and rigidus. A seller who exceeded the price fixed by more than 50 per cent. was bound, he argued, to make restitution, and even a smaller departure from it, if deliberate, required atonement in the shape of alms. But accidental lapses were venial, and there was a debatable ground within which prices might move without involving sin.[[55]]
This conclusion, with its recognition of the impersonal forces of the market, was the natural outcome of the intense economic activity of the later Middle Ages, and evidently contained the seeds of an intellectual revolution. The fact that it should have begun to be expounded as early as the middle of the fourteenth century is a reminder that the economic thought of Schoolmen contained elements much more various and much more modern than is sometimes suggested. But the characteristic doctrine was different. It was that which insisted on the just price as the safeguard against extortion. “To leave the prices of goods at the discretion of the sellers is to give rein to the cupidity which goads almost all of them to seek excessive gain.” Prices must be such, and no more than such, as will enable each man to “have the necessaries of life suitable for his station.” The most desirable course is that they should be fixed by public officials, after making an enquiry into the supplies available and framing an estimate of the requirements of different classes. Failing that, the individual must fix prices for himself, guided by a consideration of “what he must charge in order to maintain his position, and nourish himself suitably in it, and by a reasonable estimate of his expenditure and labor.”[[56]] If the latter recommendation was a counsel of perfection, the former was almost a platitude. It was no more than an energetic mayor would carry out before breakfast.
No man, again, may charge money for a loan. He may, of course, take the profits of partnership, provided that he takes the partner’s risks. He may buy a rent-charge; for the fruits of the earth are produced by nature, not wrung from man. He may demand compensation—interesse—if he is not repaid the principal at the time stipulated. He may ask payment corresponding to any loss he incurs or gain he foregoes. He may purchase an annuity, for the payment is contingent and speculative, not certain. It is no usury when John Deveneys, who has borrowed £19 16s., binds himself to pay a penalty of £40 in the event of failure to restore the principal, for this is compensation for damages incurred; or when Geoffrey de Eston grants William de Burwode three marks of silver in return for an annual rent of six shillings, for this is the purchase of a rent-charge, not a loan; or when James le Reve of London advances £100 to Robert de Bree of Dublin, merchant, with which to trade for two years in Ireland, for this is a partnership; or when the priory of Worcester sells annuities for a capital sum paid down.[[57]] What remained to the end unlawful was that which appears in modern economic text-books as “pure interest”—interest as a fixed payment stipulated in advance for a loan of money or wares without risk to the lender. “Usura est ex mutuo lucrum pacto debitum vel exactum ... quidquid sorti accedit, subaudi per pactum vel exactionem, usura est, quodcunque nomen sibi imponat.”[[58]] The emphasis was on pactum. The essence of usury was that it was certain, and that, whether the borrower gained or lost, the usurer took his pound of flesh. Medieval opinion, which has no objection to rent or profits, provided that they are reasonable—for is not every one in a small way a profit-maker?—has no mercy for the debenture-holder. His crime is that he takes a payment for money which is fixed and certain, and such a payment is usury.
The doctrine was, of course, more complex and more subtle than a bald summary suggests. With the growth of the habit of investment, of a market for capital, and of new forms of economic enterprise such as insurance and exchange business, theory became steadily more elaborate, and schools more sharply divided. The precise meaning and scope of the indulgence extended to the purchase of rent-charges produced one controversy, the foreign exchanges another, the development of Monts de Piété a third. Even before the end of the fourteenth century there had been writers who argued that interest was the remuneration of the services rendered by the lender, and who pointed out (though apparently they did not draw the modern corollary) that present are more valuable than future goods.[[59]] But on the iniquity of payment merely for the act of lending, theological opinion, whether liberal or conservative, was unanimous, and its modern interpreter,[[60]] who sees in its indulgence to interesse the condonation of interest, would have created a scandal in theological circles in any age before that of Calvin. To take usury is contrary to Scripture; it is contrary to Aristotle; it is contrary to nature, for it is to live without labor; it is to sell time, which belongs to God, for the advantage of wicked men; it is to rob those who use the money lent, and to whom, since they make it profitable, the profits should belong; it is unjust in itself, for the benefit of the loan to the borrower cannot exceed the value of the principal sum lent him; it is in defiance of sound juristic principles, for when a loan of money is made, the property in the thing lent passes to the borrower, and why should the creditor demand payment from a man who is merely using what is now his own?
The part played by authority in all this is obvious. There were the texts in Exodus and Leviticus; there was Luke vi. 35—apparently a mistranslation; there was a passage in the Politics, which some now say was mistranslated also.[[61]] But practical considerations contributed more to the doctrine than is sometimes supposed. Its character had been given it in an age in which most loans were not part of a credit system, but an exceptional expedient, and in which it could be said that “he who borrows is always under stress of necessity.” If usury were general, it was argued, “men would not give thought to the cultivation of their land, except when they could do nought else, and so there would be so great a famine that all the poor would die of hunger; for even if they could get land to cultivate, they would not be able to get the beasts and implements for cultivating it, since the poor themselves would not have them, and the rich, for the sake both of profit and of security, would put their money into usury rather than into smaller and more risky investments.”[[62]] The man who used these arguments was not an academic dreamer. He was Innocent IV, a consummate man of business, a believer, even to excess, in Realpolitik, and one of the ablest statesmen of his day.
True, the Church could not dispense with commercial wickedness in high places. It was too convenient. The distinction between pawnbroking, which is disreputable, and high finance, which is eminently honorable, was as familiar in the Age of Faith as in the twentieth century; and no reasonable judgment of the medieval denunciation of usury is possible, unless it is remembered that whole ranges of financial business escaped from it almost altogether. It was rarely applied to the large-scale transactions of kings, feudal magnates, bishops and abbots. Their subjects, squeezed to pay a foreign money-lender, might grumble or rebel, but, if an Edward III or a Count of Champagne was in the hands of financiers, who could bring either debtor or creditor to book? It was even more rarely applied to the Papacy itself; Popes regularly employed the international banking-houses of the day, with a singular indifference, as was frequently complained, to the morality of their business methods, took them under their special protection, and sometimes enforced the payment of debts by the threat of excommunication. As a rule, in spite of some qualms, the international money-market escaped from it; in the fourteenth century Italy was full of banking-houses doing foreign exchange business in every commercial center from Constantinople to London, and in the great fairs, such as those of Champagne, a special period was regularly set aside for the negotiation of loans and the settlement of debts.[[63]]
It was not that transactions of this type were expressly excepted; on the contrary, each of them from time to time evoked the protests of moralists. Nor was it mere hypocrisy which caused the traditional doctrine to be repeated by writers who were perfectly well aware that neither commerce nor government could be carried on without credit. It was that the whole body of intellectual assumptions and practical interests, on which the prohibition of usury was based, had reference to a quite different order of economic activities from that represented by loans from great banking-houses to the merchants and potentates who were their clients. Its object was simple and direct—to prevent the well-to-do money-lender from exploiting the necessities of the peasant or the craftsman; its categories, which were quite appropriate to that type of transaction, were those of personal morality. It was in these commonplace dealings among small men that oppression was easiest and its results most pitiable. It was for them that the Church’s scheme of economic ethics had been worked out, and with reference to them, though set at naught in high places, it was meant to be enforced, for it was part of Christian charity.