Is asylum seeker dumping usury?

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NauruThe Australian dumping of asylum seekers on Nauru has always seemed abusive. But a recent interview given by the new Vatican Secretary of State provides grounds for believing that it might also amount to usury.

Cardinal Bertone described loans by the International Monetary Fund and the World Bank to impoverished nations as usury. His reasons were that these funds insisted on such conditions as closing Catholic schools or forced sterilisation. He went on to say that loans should encourage economic creativity and must contribute to the good of all the people.

The lines of connection between usury and, for example, forcibly closing Catholic schools are by no means clear. Usury has traditionally been defined as charging interest—any interest or excessive interest—on loans. At first glance, it is hard to see how the conditions imposed by the World Bank and the IMF amount to interest. And even if they did so, why they should constitute usury in a world that considers other interest-bearing loans as unexceptionable?

What Cardinal Bertone meant when he made these connections remains obscure, but reflection on the history of usury suggests the shape of a possible argument.

In the Old Testament and early Christian world, charging interest on loans was attacked. But the context was salient. In the early books of the Old Testament, the practice was condemned only when Jews lent money to Jews. Loans 'in the family' must not be interest bearing. The New Testament is silent about lending money with interest; early Christian writers denounce money lenders who extort money from the poor. Loans to people who need money to survive must be gratuitous. Clergy were regularly forbidden to charge interest on loans.

Later, opposition to lending at interest hardened. The Koran stipulated that interest may not be charged on loans, and this prohibition remains in force in Islamic countries. In medieval Christendom, it was also forbidden to lend money at interest. Thomas Aquinas supported the ban on interest by arguing that it was unjust to make people pay both for the money loaned and for the use of the money. This was double dipping. His objection assumed that that the loan was without cost to the lender. If the loan carried administrative costs, they could be passed on. Venture lending, in which the lender shared the risks carried by the borrower, could also carry interest.



UsuryAs economies became more complex, churches gradually came to accept the charging of interest on loans. Usury became redefined as the charging of exorbitant interest. Theologians evolved complex arguments to reconcile this tolerance with earlier condemnations. Economists defended the charging of interest on the grounds that it was part of a contract freely entered by individuals, and that it was necessary to ensure that investment was directed to profitable enterprises.

In the restricted condemnation of usury, two aspects are seen to make it unacceptable. The interest charged on the loan is out of proportion to its personal and financial cost to the lender, and the borrowers' circumstances leave them with no other option than to borrow money. The loan is taken out, not for productive investment, nor for discretionary buying, but for necessary consumption.

Usury is morally unacceptable because it denies human solidarity, in which all human transactions and possessions must take into account the good of all. Property rights are not absolute but have a social link; transactions must respect the dignity of the parties involved. So where someone is in extreme poverty, we may not exact interest on a loan, because in our use of money we are responsible to that person. Cardinal Bertone leans on this notion of solidarity when he argues that international loans should encourage economic creativity and be for the good of all. Economic creativity implies more than economic prosperity. It looks to the ways in which economic activity enhances human dignity, not simply to the way in which it creates wealth.

World BankThis connection between money lending and human dignity may explain the logic underlying the Cardinal's criticism of the IMF and World Bank. His remarks are consistent with, but go further than, the common criticism that these institutional loans diminish the living conditions of the poor while expanding the wealth of the rich. Their conditions diminish human dignity and weaken solidarity. Cardinal Bertone may take a broader view of human dignity: its conditions include not only economic relations, but respect for religious belief and respect for human life. He can then argue that it is usury to impose as a condition of a loan to poor peoples conditions that contravene human dignity in any way.

If this is indeed his logic, it is interesting because it situates economic activity firmly within its broader human and cultural context, and is prepared to develop a moral language that criticises economic arrangements that fail to respect human dignity.

The examples he gives of usurious conditions are ones that most people would easily identify as 'Catholic' issues, in that they have to do with life and Catholic education. But if it is usurious to impose on penurious nations conditions that abuse human dignity, the patent connection between Australian economic assistance for Nauru and that nation's participation in Australian abuse of asylum seekers is also a prima facie case of usury.

 

 

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Existing comments

two comments: I don't know whether it is usurious or not, but Australia's relationship with Nauru in regard to asylum seekers is certainly wrong - for a number of reasons (Australia's international responsibilities with regards asylumseekers, inhuman treatment of asylum seekers, disregard of Nauru's needs, to start with)
The fact that poor nations are much worse off having received IMF 'assistance'indicates that conditions of the loan are unreasonable and ,in the long run, unsustainable.
Margot Kerby | 25 August 2006


A further minor example of usury? At my local supermarket, I paid for a purchase with a lot of small change. The cashier was delighted:"The banks charge us a lot of money for small change". Is $10 more valuable in metal than in polyester? What is "legal tender?"
Richard Johnson | 25 August 2006


It is usury. I have always believed that. If rich nations impose solutions on penurious nations, it is bad business.
Theo Dopheide | 02 September 2006


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