The Gift_ Creativity and the Artist in the Modern World - Lewis Hyde [77]
The dissociation of civil and moral law brought with it the popularity of the distinction between “interest” and “usury” which we still have today. The two terms became widespread in the sixteenth century, though in fact they had been in use for some time. In Latin the verb interesse means “to make a difference, to concern, to matter, to be of importance.” We still use it in this sense, as when we say a thing “interests” us or when we have an “interest” in a business. In medieval Latin the verbal noun interesse came to mean a compensatory payment for a loss: if someone loses something of mine, something I have an “interest” in, then he pays me my interesse to make good the loss (and he pays me nothing if I have no interest). The word then came to refer to what could be lost when capital was loaned, and a debtor who defaulted on a loan was obliged to pay the interesse, a fixed amount described in his contract. This payment supposedly differed from usura, a direct charge for the use of money, but the difference was not that great: creditors came to say that if they lost profits because they couldn’t reinvest their money, this was also interesse, and rather than describe it as a fixed amount in the contract they came to charge a percentage reckoned periodically.
Even in the Middle Ages, then, interesse was, in practice, one of the shades of usury. By way of illustration we may take a dispute in the Church shortly before the Reformation that was resolved by distinguishing between usury and interesse. At issue had been Christian pawnshops, known in Italy then as now as monti di pietà, mounts of mercy. Here a Christian burdened with debt could come and borrow a little cash to begin another season. Benjamin Nelson describes their founding:
The Brotherhood of Man was the banner under which antisemitic friars … cloaked their demagogic appeals to expel the Jewish pawnbrokers, who had swarmed from Rome and Germany into the Italian towns in response to municipal invitations to set up shops, with licenses to take from 20 to 50 per cent on petty loans … [They] regurgitated the oft-discredited charges of ritual murder, incited mobs to attacks on Jewish life and property, and harangued the people and their magistrates to destroy the Jews, and establish Christian pawnshops, the monti di pietà. By 1509, eighty-seven such banks had been set up in Italy with papal approval …
The priests who defended the monti insisted that the money taken above the principal on a loan was not usury at all: it was a contribution to defray the cost of operating the pawnshops, including the salaries of the officials.
This, of course, is precisely why usury had been prohibited in the first place: the spirit of the gift demands that no one make a living off another man’s need. A group of people comes to be called a brotherhood not only when the circulation of gifts assures that no one has lost touch with the sources of wealth, but also when no individuals in the group can make a private living by standing in the stream where surplus wealth flows toward need. If there are always enough needy people around to feed a group of pawnbrokers, then something is seriously wrong with the brotherhood.
Nonetheless, the monti were set up and Pope Leo X officially approved them in 1515. In a decree at the Fifth Lateran Council he ruled that they could charge interest. The money taken was not to be called usura, but compensation for damna et interesse (damages and losses). It was a fee to cover the risk involved in making a loan, the loss of what the money might have earned if it had not been loaned, and the salaries of the pawnbrokers. Even before the Reformation, “interest” was the term accepted to express the right of stranger-money to earn a moderate return.
Luther and other reformers, particularly Philipp Melanchthon, borrowed this page from