POVERTY AND USURY
And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase. I am the LORD your God, which brought you forth out of the land of Egypt, to give you the land of Canaan, and to be your God (Lev. 25:35-38).
The theocentric basis of this law was God's role as the liberator. Men are to fear God. This fear of God should overcome men's fear of nature and history. Fear of God is liberating; fear of the creation is paralyzing.
This law is an extension of Exodus 22:25: "If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury." The Hebrew word translated here as usury means bite. "And the LORD sent fiery serpents among the people, and they bit the people; and much people of Israel died" (Num. 21:6). In both Exodus and Leviticus, the borrower is described as being a poor brother in the faith, i.e., under God's covenant. The heart of the matter in Leviticus 25:35-38 and Exodus 22:25 is the establishment of judicial conditions for charitable, interest-free loans: poverty, covenantal brotherhood, and geographical proximity. As we shall see, these conditions had to be legally identifiable in order for the prohibition against usury to be enforced by a civil court. It was this aspect of conditionality that medieval theologians failed to recognize when they issued prohibitions against taking interest in all loans. The biblical texts are clear; it is the theologians who have been muddled.(1)
What is usury? Both texts are quite clear about the definition: usury is any positive rate of return taken from a loan. There is no universal prohibition in the Bible against interest. This is clear from the text in Deuteronomy that authorizes covenant-keepers to make interest-bearing charitable loans to covenantal strangers. "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: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it" (Deut. 23:19-20). In fact, God encourages His people to lend to those outside the faith; it is a means of subduing them. "For the LORD thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee" (Deut. 15:6). Lending at interest is an aspect of the dominion covenant. Biblically, there is no universal prohibition against this.
Medieval Christian expositors concluded, following Aristotle rather than Moses, that interest is always prohibited.(2) It is not. What was prohibited under Mosaic law was interest taken from a poor brother in the faith or a poor resident alien who had subordinated himself to the civil covenant, presumably by submitting to circumcision. The lender, then as now, was not to take advantage of certain poor people: those who had submitted themselves to the terms of the covenant. He was required by God to make a charitable loan. He would thereby forfeit the interest he might have earned from a business loan. Forfeited interest was the charitable component of his act. If interest were universally prohibited, then all legal loans would be charitable. There would then be no economic distinction between charity loans and business loans, or between dominion by restoring the covenant-keeping poor and dominion by subordinating the covenant-breaking poor. The Bible teaches otherwise.
Charity: Conditional vs. Unconditional
Charitable loans are part of God's program to provide help to honest, covenant-keeping people who have fallen on hard times. These loans are not supposed to subsidize sloth or evil. God does not want us to subsidize evil with the money or assets that He has provided for us.(3) In this sense, biblical charity is necessarily morally conditional.(4) Biblical charity is never a judicially automatic "entitlement," to use the terminology of the modern welfare State: a compulsory redistribution of wealth from the successful to the unsuccessful (minus approximately 50% for "handling" by government bureaucrats(5)). It is this element of covenantal conditionality which distinguishes biblical charity from humanist compulsion.(6)
The modern welfare State does not distinguish judicially between faith and unbelief, or between righteousness and moral rebellion, as primary factors underlying both wealth and poverty. The Bible's ethics-based correlation is an implicit denial of the very foundation of humanism's welfare State. The welfare State rests on two rival theories of the origin of wealth and poverty, held together dialectically in most humanist explanations of economic inequality: 1) the chance distribution of economic assets and personal skills; 2) the exploitation of the poor by the economically and politically successful. The State is seen as the most powerful agency that possesses a moral and legal obligation to offset the effects of either chance or exploitation. The welfare State therefore in theory looks only at the numbers, not at the moral condition of the recipients of State money: their reported income in relation to statute law. Being bureaucratic, the West's welfare State must by law ignore moral criteria and respond strictly in terms of formal criteria: so much income; so many children in the household under age 18, irrespective of the mother's marital status; and so forth. The welfare State is to biblical charity what fornication is to biblical marriage. It literally subsidizes fornication by subsidizing the bastards who are produced by fornication, thereby swelling the ranks of the government-dependent children of the morally corrupt.(7)
This creates lifetime employment for the next generation of welfare State bureaucrats -- the unstated but inevitable goal of the welfare State. Yet so powerful is humanism today in the thinking of academically trained Christians that they have become open defenders of the legitimacy of the modern welfare State's system of compulsory wealth redistribution, despite the fact that it rests on a theory of unconditional legal entitlement.(8)
Reducing Our Fear of the Unknown
Biblical charity is essential for building God's kingdom on earth, for it reduces our fear of the unknown. We are not to live in fear of the unknown. We are to live in the fear of God, which is the beginning of wisdom (Prov. 1:7; 9:10). Intense fear of any aspect of the creation tends to paralyze men, to keep them in bondage to the creation. Fear and paralysis are what the biblical covenant was designed to overcome.
Bad things can and do happen to good people from time to time, while good things happen to the unrighteous (Ps. 73). The world sometimes appears to be governed by a system of perverse historical sanctions. Schlossberg is correct: "The Bible can be interpreted as a string of God's triumphs disguised as disasters."(9) Covenant-keepers are not immune from the corporate curse that God has placed on the creation. We are also not immune to the corporate curses He places on the covenant-breaking society in which we live. So, as a way to reduce our fear of the unknown, God commands us to be generous to others in the faith during their time of need.
Biblical charity is a form of social insurance -- not State insurance, but social insurance: provided through voluntarism without any threat of civil sanctions. Biblical charity begins with those who labor in the work of building God's kingdom on earth who voluntarily support other covenantally faithful people who share in this work. Biblical charity is therefore part of God's system of corporate covenant sanctions -- in this case, positive sanctions, beginning with covenant-keepers and extending to covenant-breakers only after those inside the household of faith have been assisted.
The State as Insurer
Charity creates dependence. This dependence is to be temporary except in cases of permanent physical or mental helplessness. The biblical goal is dominion by covenant, not by permanent dependence. This is why State charity is so dangerous to biblical dominion and therefore to liberty. It creates a permanent political base of dependents and also a permanent corps of State-funded welfare agents whose income depends on the maintenance of poverty to relieve. For this corps of welfare agents, poverty is where the money is.(10) The positive sanction of charity is not to be provided by the State, which must impose compulsory negative sanctions (taxes) on some people in order to extend positive sanctions (welfare) to others. The State is to promote the general welfare only by punishing criminals and defending the nation from invasion. A biblical positive sanction -- the general welfare -- is the social result of the State's exclusively negative sanctions.
The State is required by God to defend the legal boundaries that establish private property, not invade these boundaries in an illegitimate messianic quest to bring positive sanctions to the poor. The civil magistrate is figuratively to stand inside the boundaries beside of the property owner to defend him against any threat of invasion by a non-owner. He is not to stand outside the boundaries by the side of the non-owner, threatening to invade. Defenders of the welfare State reject this view of the civil magistrate. Because so many of these defenders are orthodox theologians and church leaders, Christian social theory today is either non-existent (baptized humanism) or undermined by humanism.
The Stranger and the Sojourner
This text says that we are to relieve the stranger and the sojourner. The text in Deuteronomy 23:20 says that we may lawfully charge strangers interest. How can this apparent contradiction be resolved? Answer: by going to the Hebrew text. At this point, I reprint a portion of a chapter, "The Prohibition Against Usury," which appears in my commentary on the case laws of Exodus, Tools of Dominion (pp. 709-16).
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The text in Leviticus 25, the chapter on the jubilee year, is clear: "And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger [geyr], or a sojourner [to-shawb]; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase" (Lev. 25:35-37). It begins with the determining clause: "If thy brother be waxen poor."
The interpretation of the Leviticus 25 passage initially seems difficult because of the King James translation of Deuteronomy 23:20: "Unto a stranger [nokree] thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the LORD thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it." We must begin with the presupposition that God's revealed law is not inconsistent. But here we have what appear to be two rules regarding the stranger: you may not lawfully charge the stranger interest, yet you may lawfully charge him interest. How can we reconcile these two statements?
The answer is that the Hebrew word used in Leviticus 25:35, transliterated geyr [gare], is not the same as the Hebrew word in Deuteronomy 23:20. Similarly, "sojourner" [to-shawb] is related to yaw-shab,(11) meaning "sit," and implying "remain," "settle," "dwell," or even "marry."(12) To-shawb therefore means resident alien. The stranger [nokree] referred to in Deuteronomy 23:20 was simply a foreigner.(13) Two different kinds of "stranger" are referred to in the two verses. Thus, if the resident alien was poor, and if he was willing to live in Israel under the terms of the civil covenant, then he was entitled to a special degree of civil legal protection. What was this legal protection? If he fell into poverty, he was not to be asked to pay interest on any loan that a richer man extended to him. With respect to usury, he was to be treated as a poverty-stricken Hebrew. Not so the foreigner.
What must be understood is that the economic setting is clearly the relief of the righteous poor. The recipient was any poor person who had fallen into poverty through no ethical fault of his own, and who was willing to remain under God's civil hierarchy.
There is a parallel passage in Deuteronomy 15. Deuteronomy 15 lists the economic laws governing Israel's national sabbatical year. In this national year of release, the text literally says, all debts to neighbors are to be forgiven: "At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the LORD'S release" (Deut. 15:1-2). The text is clear: the neighborly loan is the focus of the law.
At least one kind of loan was explicitly exempted by the text: loans to non-resident foreigners. "Of a foreigner [nokree] thou mayest exact it again: but that which is thine with thy brother thine hand shall release" (Deut. 15:3). This could have been a traveller or foreigner who owned a business locally. It could have been a business contact in another country. It was not a poverty-stricken resident alien, who was treated by biblical civil law as a neighbor.
Who Is My Neighbor?
Because all debts to a neighbor are to be forgiven, the legal question legitimately arises: "Who is my neighbor?" This was the question that the lawyer asked Jesus (Luke 10:29). Jesus answered this question with His parable of the good Samaritan. The Samaritan finds a beaten man on the highway. The man had been robbed. He looked as though he was dead. He was in deep trouble through no fault of his own. He was on the same road that the Samaritan was traveling. The Samaritan takes him to an inn, pays to have him helped, and goes on his journey. He agrees to cover expenses. He shows mercy to the injured man who was incapable of helping himself. He is the therefore true neighbor. The lawyer admitted this (Luke 10:37).
So, the context of the parable is not simply geographical proximity in a neighborhood. It is proximity of life. Samaritans did not normally live in Israel. They had very little contact with the Israelites. But this Samaritan was walking along the same road as the beaten man, and he was in a position to help. He saw that the man was a true victim. The latter was in trouble through no visible fault of his own. He therefore deserved help -- morally, though not by statute law -- but the priest and the Levite had refused to offer him any help. The Samaritan was being faithful to the law.
This parable was a reproach to the Jews. They knew what Jesus was saying: they were too concerned with the details of the ceremonial law to honor the most important law of all, which the lawyer had cited. "Thou shalt love the Lord thy God with all thy heart, and with all thy soul, and with all thy strength, and with all thy mind; and thy neighbour as thyself" (Luke 10:27). What they also fully understood was that Jesus was predicting that the gentiles (Samaritans) who did obey this law of the neighbor would eventually rule over the Jews, for this is what Deuteronomy 15 explicitly says. He who shows mercy to his neighbor will participate in his nation's rule over other nations. "Only if thou carefully hearken unto the voice of the LORD thy God, to observe to do all these commandments which I command thee this day. For the LORD thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee" (Deut. 15:5-6). Notice also that the means of exercising this rule is through extending them credit.
This is a very significant covenantal cause-and-effect relationship. If a nation is characterized by the willingness of its citizens to loan money, interest-free, to their poverty-stricken neighbors who are stricken by, not immoral pursuers of, poverty, including resident aliens, the nation will eventually extend its control over others by placing them under the obligation of debt. "The rich ruleth over the poor, and the borrower is servant to the lender" (Prov. 22:7). This is why it was legal to take interest from the foreigner who was living outside the land. It was a means of subduing him, his family, and his God-defying civilization. It was (and is) a means of dominion.
[Added in 1994: This does not mean, as Timothy Keller insists that it means, that my neighbor is anyone in need anywhere on earth. He writes: "Anyone in need is my neighbor -- that is the teaching of the Good Samaritan parable."(14) No, that is the teaching of the modern welfare State and its international embodiment, the United Nations Organization, a would-be reincarnation of the Roman Empire, but on a much wider scale: the incarnation of humanism's New World Order.(15)]
Because these charitable loans were supposed to be cancelled in the seventh year, the national sabbatical year, there was an obvious temptation to refuse to make such loans as the sabbatical year approached. God recognized this temptation, and He warned against it.
If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother: But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth. Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him nought; and he cry unto the LORD against thee, and it be sin unto thee. Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the LORD thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto (Deut. 15:7-10).
This indicates that God placed a moral obligation on the heart of the more successful man. He was supposed to lend to his neighbor. But this was not statute law enforceable in a civil court. God would be the avenger, not the State.
The context of the obligatory loan of Deuteronomy 15, like the zero-interest loan of Exodus 22:25-27, is poverty. There will be poor people in the promised land, Moses warned. Because of this, these special loans are morally mandatory. There must be a year of release, "Save when there shall be no poor among you; for the LORD shall greatly bless thee in the land which the LORD thy God giveth thee for an inheritance to possess it" (Deut. 15:4). Does this mean that these loan provisions would eventually be annulled? No. "For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land" (Deut. 15:11). Everything in Deuteronomy 15 speaks of poverty and biblical law's means of overcoming it. Deuteronomy 15 is not dealing with business loans; it is dealing with charity loans.
But let the reader be forewarned: biblical law is a broader category than biblical civil law. There was no statute law that imposed sanctions on anyone who refused to make an interest-free loan.
Defining Poverty by Statute
Why was this not a statute law? Because biblical civil law presents only negative injunctions. It prohibits publicly evil acts. Biblical civil law does not authorize the State to make men good. It does not authorize the State to force men to do good things. It does not authorize the creation of a messianic, salvationist State. The State cannot search the hearts of men. God does this, as the Creator and Judge, so the State must not claim such an ability. The State is only authorized by God to impose negative sanctions against publicly evil acts. It is not authorized to seek to force men to do good acts. In short, the Bible is opposed to the modern welfare State.
There is no way for biblical statute law to define what poverty is apart from the opinions of those affected by the law, either as taxpayers, charitable lenders, or recipients of public welfare or private charity. "Poverty" is too subjective a category to be defined by statute law. The State needs to be able to assign legal definitions to crimes, in order that its arbitrary power not be expanded. Yet economic definitions of wealth and poverty that are not arbitrary are not available to the civil magistrates for the creation of positive legal injunctions. Thus, God's civil law does not compel a man to make a loan to a poor person.
Nevertheless, the civil law does prohibit taking interest from certain categories of poor people. How can the law do this without creating the conditions of judicial tyranny through arbitrariness? If the magistrates cannot define exactly what poverty is for the purpose of writing positive civil injunctions, how can they define what a charitable loan is? How can the State legitimately prohibit interest from a charity loan if the legislators and judges cannot define poverty with a sufficient degree of accuracy to identify cases where a charity loan is legally obligatory for the potential lender?(16)
The lender decides who is deserving of his loan and who is not. This is his moral choice. God will judge him, pro or con, not the State. However, once the lender grants this unique, morally enjoined charity loan, he may not extract an interest payment. This is a negative injunction -- not doing something which is forbidden by law -- and therefore it is legitimately enforceable by civil law, as surely as the civil magistrates in ancient Israel were supposed to enforce the release of debt slaves(17) in the seventh (sabbatical) year (Deut. 15:12-15). The requirement to lend to a needy brother under the terms specified in biblical law is a positive injunction. It therefore comes under the self-government provisions of the conscience and the negative sanctions of God. This positive injunction is not under the jurisdiction of the civil courts. On the other hand, the prohibition against charging interest on these unique loans, being a negative injunction, does come under the enforcement of both civil courts and church courts.
The key to understanding the Bible's civil definition of poverty is the loan's contract. There must be a mutually agreed-upon contract, explicit or implicit, in order to establish a legally enforceable loan. If the borrower came to the lender and called upon him to honor Deuteronomy 15:7-8, then the borrower admitted that his was a special case, a charity loan, and it was governed by the civil law's terms of the sabbatical year and the prohibition against interest. The borrower made his request a matter of conscience.
In so doing, he necessarily and inescapably placed himself under the terms of biblical civil law. If he could not repay his debt on time, he could legally be sold into bondservice. This was not a collateralized commercial loan. The borrower was so poor that he had almost no collateral except his land. He chose not to use his land as collateral -- or was forced to because he had already leased his land. Yet he was still in dire need. All he could offer as collateral was his promise, his cloak, and his bodily service until the next sabbatical year, should he default. Thus, the borrower admitted that he in principle had already become a bondservant. He admitted through the loan's contractual arrangement that the borrower is servant to the lender. If he could not repay, he would go into bondservice until the next sabbatical year, or until his debt was repaid, whichever came first.
How would the civil magistrate in Israel know which kind of loan was in force, commercial or charitable, and therefore whether interest was valid or illegal? By examining the nature of the loan's collateral. If a loan went to an individual who, if he should default on the loan, would be placed in debt slavery, then this was a charitable loan governed by the provisions of Deuteronomy 15. This is why the year of release applied to both kinds of servitude: debt servitude and bodily servitude that arose because of a man's default on a charity loan.
Furthermore, if it was a loan with the individual's cloak as security, then it was also a zero-interest loan. The collateral described in Exodus 22:25-27 insured little more than that the individual was a local resident -- he had to come to the lender to get it back each evening -- and that the loan was temporary. (It also made multiple indebtedness more difficult.)(18) It would have been a very small loan. This was clearly not a business loan. A business loan would have a different kind of collateral: property that was not crucial to personal survival on a cold night. If the borrower defaulted on a commercial loan, he would forfeit the property specified in the loan contract. He would not forfeit his freedom or his children's freedom. In short, the Old Testament's texts governing lending specify that certain kinds of loans would have certain kinds of collateral, and wherever these unique forms of collateral appeared, the lender could not legally demand an interest payment.
Biblical civil law is exclusively negative law -- prohibiting evil public deeds -- not positive law, which enjoins the performance of righteous public deeds. An example of this distinction is the enforcement of the tithe: church courts can legitimately require voting members to tithe as a condition of maintaining their voting church membership; the State cannot legitimately require residents to tithe to a church or other organization on threat of civil punishment.
Once the contract was made, the lender was placed under the limits of the civil law. He could not extract interest from the borrower, even a resident alien. But the borrower also was placed under limits: if he defaulted, he could be sold into bondservice. Each party was under limits. Each had decided that this was a true poor loan situation. Each agreed to a unique set of contractual obligations by entering into this arrangement.
Thus, once the contract was made, either implicitly or explicitly, the State had a legal definition of poverty. If the borrower was legally subject to the possibility of being sold into bondservice for defaulting on the loan, then the lender could not lawfully extract interest from him. On the other hand, if the borrower was unwilling to place his own freedom in jeopardy, then he was unwilling to define himself as a poor man for the sake of the civil law's definition. Thus, he had to pay interest on the loan, and his obligation to repay the loan extended beyond the sabbatical year. If he was not under the threat of bondservice, he was not under the protection of the sabbatical year or the zero-interest provisions against usury.
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Today, the State does not recognize the legitimacy of temporary servitude in order to repay loans. The modern State has annulled the defining legal condition under which God established the Mosaic law's compulsory charitable loans. What about the New Covenant? Jesus set forth this rule: "And if ye lend to them of whom ye hope to receive, what thank have ye? for sinners also lend to sinners, to receive as much again. But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful and to the evil" (Luke 6:34-35). The law has been extended to God's covenantal enemies even when the threat of servitude for default has been eliminated. The law is broader and more rigorous in the New Covenant. But it is still conditional: no subsidy of evil. It is part of God's judgment: "Therefore if thine enemy hunger, feed him; if he thirst, give him drink: for in so doing thou shalt heap coals of fire on his head" (Rom. 12:20).
Interest and Inflation
In Tools of Dominion, I went into considerable detail about the economics of time-preference: the originary interest rate. I also discussed the thousand-year history of the church's false interpretations of the usury prohibition as a universal prohibition against all forms of interest. I do not need to reprint the entire chapter here. Those readers who want a detailed treatment may consult that chapter. Warning: it is a long chapter.(19)
It is necessary, however, to remind the reader at this point that the interest rate is a universal category of human action. It is not a purely monetary phenomenon. It results from the inescapable discount that acting men place on the future. For example, a brand new Rolls-Royce automobile is worth more to me today than the same Rolls-Royce delivered a year from now is worth to me today.(20) A bird in hand today is worth more than the same bird in hand in a year.(21) This rate of discount of future goods as against physically identical goods that are in our possession today is the rate of interest.(22) It does not apply to money alone, just as the text in Leviticus indicates; it applies to food and, by extension, all goods and services. Interest on charitable loans is prohibited in the case of money, services, or goods -- a recognition in God's law of the universality of the interest rate phenomenon.
In a period of rising prices (i.e., falling value of money), an astute charitable lender prefers to lend food ("victuals," or "vittles," as the word is pronounced) rather than money.(23) He cannot lawfully charge interest on such loans. A loan "in kind" -- a consumer good rather than money -- means that the lender will receive back the physical equivalent of whatever he gave up temporarily to the borrower. He will not suffer an additional loss from the debtor's repayment of the loan in money of reduced purchasing power. Since he cannot lawfully charge interest, he does not tack on what is called an inflation premium to the loan: an extra payment to compensate him for the fall in the value of money. There is little doubt that price inflation in Israel would have increased the number of loans in kind compared to money loans. A charitable loan made in money would have produced a loss of more than the forfeited interest; it meant the loss of capital.
On the other hand, in a time of falling prices (rising money value), either as a result of an economic depression or because of added economic output, an astute lender would prefer to lend money rather than goods. He would then receive an implicit interest return on the loan: added capital (purchasing power) despite the numerical equality of the monetary units repaid. The Bible allows this. In times of falling prices, an astute borrower will prefer a loan in goods rather than money, but he is not in a position to demand such a loan. "Beggars can't be choosers," as the saying goes. However, in most periods in history, this added return on money loans is very low, since prices rarely fall rapidly except following a period of high monetary inflation. Economic output grows slowly most of the time; prices therefore fall slowly.(24)
There is no question that the lender's decision to loan in money or in goods is heavily dependent on the civil government's monetary policies. Because monetary policy cannot be economically neutral,(25) to some extent there will always be profits and losses in debt arrangements. Either the lender loses or the debtor loses, depending on the terms of the contract and monetary policy. The key judicial issue, however, is that in a covenanted Trinitarian nation, the contract for a charitable loan must not impose an explicit interest payment.
Usury from the poor brother is prohibited by the Bible. In the Mosaic Covenant, this poor person had to be willing to risk going into bondservice for up to six years if he defaulted on such a zero-interest loan. The civil courts were required to enforce this provision of a charitable loan. This bondservice provision was assumed in every zero-interest loan, which the court could safely assume was a charity loan. It was this willingness on the poor person's part to risk bondservice that identified him as a needy person. Accepting such a loan was a last resort. It was this degree of poverty, and only this degree of poverty, that created a moral obligation on the lender to lend.
This usury prohibition has nothing to do with interest on business loans or consumer loans, whether or not they are collateralized, although large loans normally will be. Commercial loans possess no element of moral obligation. Such interest-bearing loans in Mosaic Israel were not under the cancellation provisions of the sabbatical year, but the collateral for the loan could not be perpetual bondservice, for only heathens could be enslaved permanently in Israel. The Israelite bondservant had to be paid a wage, enabling him to buy his way out.(26)
The Pentateuchal texts are clear: covenant-keepers do not owe interest-free charitable loans to those who are not under the jurisdiction of either God's ecclesiastical covenant or God's civil covenant. This means that Christians who live under a civil government in which citizenship is not based on taking or implicitly accepting a formal Trinitarian oath owe no loans to resident aliens, i.e., non-believers. Why not? Because, covenantally speaking, Christians have become the resident aliens. We are the strangers in a strange land. We live as Abraham lived in Canaan, not as Joshua's heirs lived in Israel.(27) The difference is, Abraham looked forward to deliverance and victory during Joshua's generation (Gen. 15:16). Today, the vast majority of Christians praise their permanent resident-alien status as God's plan for the New Covenant era: political pluralism.(28) What Jews in Jesus' day correctly regarded as civil tyranny -- subservience to Rome's pantheon of gods, incarnated in the State -- today's Christians regard as political freedom. Even Calvinists, Protestantism's historic defenders of theocracy, from Calvin's Geneva through Cromwell's England to Puritan New England, have fallen into this humanist mind-set.(29) The Greek rationalism of the medieval university's curriculum has triumphed over whatever biblical elements had been sporadically tacked on by wishful Scholastic thinkers.
The New Testament has broadened the net of those who have a legitimate moral claim on our charitable loans: from poor brothers to poor covenant-breakers. But the law is still conditional. We are not to subsidize evil. We lend to very poor people who are not poor because of their own moral flaws. We are not even to lend in the hope of regaining our principal, let alone interest (Luke 6:34-35). The charitable loan law is more rigorous in the New Covenant, but it is not unconditional.
Usury (interest) is prohibited in charity loans to poor brothers in the covenant and to faithful resident aliens.
Biblical charity is morally conditional: no subsidy of evil.
The modern welfare State does not distinguish between faith and unbelief, righteousness and rebellion, in its identification of poverty and the State's proposed solutions.
Welfare State theorists blame poverty on chance (birth) and exploitation (by the rich).
Biblical charity reduces our fear of the unknown.
It is a form of social insurance, but not State insurance.
The text requires that covenant-keepers relieve impoverished strangers and sojourners through interest-free loans.
Resident aliens were not to be charged interest in charitable loans.
Foreigners were not so protected.
The determining legal status was "neighbor."
The determining issue was proximity: geographically and ethically (righteousness).
Showing mercy was an aspect of Israel's national dominion.
So was making interest-bearing loans to foreigners.
This does not mean that every poor person was the neighbor of every Israelite, and therefore deserving of charity, contrary to what welfare State advocates assume.
There was a moral obligation on Israelites to make charitable loans.
There was no enforceable legal obligation to do so.
This was not civil statute law, for biblical civil law does not enjoin positive sanctions, i.e., wealth-distribution.
Also, poverty is too subjective a category to be defined by biblical civil law.
Arbitrariness by civil rulers is a threat to freedom.
Civil statutes must reduce arbitrariness.
The prohibition on taking interest from charity loans is a civil statute: negative in scope.
The mark of a charity loan contract is the debtor's consent to be placed in bondservice to repay the loan if he defaults.
The modern State does not allow bondservice as a means of paying off defaulted charitable loans.
Interest is a phenomenon of human action, not a strictly monetary phenomenon.
In times of price inflation, lenders of zero-interest charity loans will tend to make loans of goods, not money.
In times of price deflation, lenders of zero-interest charity loans will tend to make money loans.
Christians do not owe charitable loans to "resident aliens" in a State that is not under a formal Trinitarian covenant.
Christians have become strangers in the land.
1. The non-theologians have been even more muddled. See, for example, S. C. Mooney, Usury: Destroyer of Nations (Warsaw, Ohio: Theopolis, 1988). For my response, see Gary North, Tools of Dominion: The Case Laws of Exodus (Tyler, Texas: Institute for Christian Economics, 1990), Appendix G: "Lots of Free Time: The Existentialist Utopia of S. C. Mooney."
2. The prohibition against interest (usury) began with the Council of Nicea (325): clerics were prohibited from making interest-bearing loans. J. Gilchrist, The Church and Economic Activity in the Middle Ages (New York: St. Martin's, 1969), p. 155. This prohibition was gradually extended by the theologians after 800. Ibid., p. 63. The Second Lateran Council (1139) was especially hostile, going so far as to prohibit usurers from being granted Christian burial. Ibid., p. 165. The Council at Vienna (1311-12) mandated the excommunication of civil rulers who permitted usury within their jurisdictions. Ibid., p. 206. Gilchrist's excellent book did not receive the audience that it should have. It includes translations of the texts of the general councils. This makes it invaluable.
3. R. J. Rushdoony, "Subsidizing Evil," in Rushdoony, Bread Upon the Waters (Nutley, New Jersey: Craig Press, 1969), ch. 3.
4. Ray R. Sutton, "Whose Conditions for Charity?" in Theonomy: An Informed Response, edited by Gary North (Tyler, Texas: Institute for Christian Economics, 1991), ch. 9. Sutton is responding to Timothy J. Keller, "Theonomy and the Poor: Some Reflections," in Theonomy: A Reformed Critique, edited by William S. Barker and W. Robert Godfrey (Grand Rapids, Michigan: Zondervan Academie, 1990), ch. 12.
5. James L. Payne, The Culture of Spending: Why Congress Lives Beyond Our Means (San Francisco: ICS Press, 1991), p. 51.
6. Marvin Olasky, The Tragedy of American Compassion (Westchester, Illinois: Crossway, 1992).
7. Charles Murray, "The Coming White Underclass," Wall Street Journal (Oct. 29, 1993), editorial page.
8. Ronald J. Sider, Rich Christians in an Age of Hunger: A Biblical View (Downers Grove, Illinois: Inter-Varsity Press, 1977). For a line-by-line refutation of Sider, including his revised second edition (1984), see David Chilton, Productive Christians in an Age of Guilt-Manipulators (3rd ed.; Tyler, Texas: Institute for Christian Economics,  1990). Sider did not reply to Chilton in either his second or third edition (Waco, Texas: Word, 1990). He did not even mention Chilton's book in his extensive bibliography. Sider has treated Chilton's book in the way that Winston Smith was instructed to deal with inconvenient facts in 1984: he drops them down the memory hole. Yet Trinity College's Kenneth Kantzer writes in the third edition's Foreword that every North American Christian ought to read the book. "It is an honest exposition and condemnation of our rampant materialism" (p. xi). Condemnation, yes; honest, hardly. Thankfully, the printing quality of the third edition is so bad that very few readers will get through it. Nevertheless, the book's print job is far better than the book's thesis.
9. Herbert Schlossberg, Idols for Destruction: Christian Faith and Its Confrontation with American Society (Westchester, Illinois: Crossway,  1993), p. 304.
10. Shirley Scheibla, Poverty Is Where the Money Is (New Rochelle, New York: Arlington House, 1968).
11. Strong's Concordance, Hebrew and Chaldee Dictionary, p. 123.
12. Ibid., p. 52.
13. This is the translation given in the Revised Standard Version, the New American Standard Bible, and the New International Version. The alien and the sojourner were equivalents judicially in the Mosaic law. The NIV translates Leviticus 25:35 as "an alien or a temporary resident."
14. Keller, "Theonomy and the Poor," p. 275. For my critique of this position, see Gary North, Westminster's Confession: The Abandonment of Van Til's Legacy (Tyler, Texas: Institute for Christian Economics, 1991), pp. 271-80.
15. R. J. Rushdoony, "The United Nations," in Rushdoony, The Nature of the American System (Fairfax, Virginia: Thoburn Press,  1978); Rushdoony, "Has the U.N. Replaced Christ as a World Religion?" in Your Church -- Their Target, compiled by Kenneth W. Ingwaldson (Arlington, Virginia: Better Books, 1966), ch. 10; Rushdoony, "The United Nations: A Religious Dream," in Rushdoony, Politics of Guilty and Pity (Fairfax, Virginia: Thoburn Press,  1978), pp. 184-199. See also Chesley Manly, The UN Record: The Fateful Years for America (Chicago: Regnery, 1955); V. Orval Watts, The United Nations: Planned Tyranny (New York: Devin-Adair, 1955); G. Edward Griffin, The Fearful Master: A Second Look at the United Nations (Boston: Western Islands, 1964); Robert W. Lee, The United Nations Conspiracy (Boston: Western Islands, 1981).
16. This is the question that S. C. Mooney raises in his attempt to remove any distinction between charity loans and business loans. Mooney, Usury, pp. 123-27.
17. A debt slave was a person who had asked his neighbor for a morally mandatory, zero-interest charity loan, and who had then defaulted. He was then placed in bondage until the sabbatical year, or until his debt was paid.
18. See Tools of Dominion, pp. 738-40.
19. North, Tools of Dominion, ch. 23.
20. I use the Rolls-Royce example because its style does not change very often, and older models retain their market value.
21. This assumes that the bird's species is not known to be facing extinction or some tremendous fall in numbers next year.
22. Ludwig von Mises, Human Action: A Treatise on Economics (New Haven, Connecticut: Yale University Press, 1949), ch. 19.
23. The word is seldom used outside of backward rural areas.
24. This is not true of computer chips, whose speed doubles every 18 to 24 months: Moore's Law.
25. Murray N. Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Auburn, Alabama: Mises Institute,  1993), p. 715.
26. See Chapter 30.
27. Martin E. Marty, Pilgrims in Their Own Land: 500 Years of Religion in America (Boston: Little, Brown, 1984).
28. Gary North, Political Polytheism: The Myth of Pluralism (Tyler, Texas: Institute for Christian Economics, 1989).
29. Gary Scott Smith, The Seeds of Secularization: Calvinism, Culture, and Pluralism in America, 1870-1915 (Grand Rapids, Michigan: Christian University Press, 1985).
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