1.) Usury – like moral philosophy in general – is not my field, but its just near enough my orbit that I find myself tempted to say things about it. Needless to say, this is a situation tailor-made to maximize error.
2.) Usury is controversial both in itself and in a special way for Catholics. Usury is usually exhibit A for someone arguing that the Church has changed its teaching. They have some cause to say this: it’s impossible to miss the fact that usury was hotly debated for many centuries while the most recent Catechism has no entry for usury. It does not even use the word (it uses the word “usurious” once, though it doesn’t seem to mean much more than “exploitative”.)
3.) The definition of usury given by the Lateran council is the most definitive. It has three parts, sc. usury is:
a.) Seeking profit
b.) from the use of a thing not fruitful in itself
c.) without labor, expense, or risk to the lender.
Let the meaning of (a) count as obvious. (b.) One element in being “fruitful” seems to be what we now call “returnable”, i.e. if I let you have my chainsaw or my car it’s “returnable”, and so you can use it and bring it back. The opposite of this is, of course, the non-returnable – if my wife borrows a cup of sugar from the neighbor it’s understood that it would be irrational to ask for her to bring it back. The crucial first move in the morality of usury happens when we recognize that it’s irrational to talk about loaning the non-returnable. You can’t loan you neighbor sugar, nor can he properly borrow it from you. We use the word “borrow” only to sound less forward, i.e. because it sounds demanding to using the verb “give” or “take”. Neertheless, this is a purely metaphorical sense of loaning or borrowing. There is something irrational in loaning the non-returnable in the proper sense of the term. And so the usury of money is irrational since money is a non-returnable good. You can no more return the twenty dollars I might “loan” you than you can return the sugar I “loan” you. To use the word loan as anything other than a pleasant sounding metaphor for give is to do something irrational. But it certainly seems that much of what we call “loaning money” goes beyond a pleasant sounding metaphor. This a prima facie case for the irrationality of usury, but it’s clear that it can’t take us all the way, if for no other reason than we haven’t yet gotten to (c) in the above definition.
Take a simpler case of “loaning” non-returnable goods, like the sugar example. It’s conceivable that this might become at least quasi-formalized, and your neighbor might ask you to give her back sugar at some point in the future. You can’t give the same sugar back, but you might give something back equivalent to it. But it would make no sense for her to say “because I’m giving you this now, by right I can demand even more later”. The claim is just batty – there’s no law of sugar or its exchange that makes it intrinsically capable of demanding a greater return than output. But this doesn’t mean that there couldn’t be various extrinsic factors that make it reasonable to ask for more in return than one gave out. Still, these are extrinsic factors – (c.) list circumstances that change something intrinsically irrational (asking for a greater return on something given) into something permissible.
4.) So let’s take a close look at the circumstances. Assume that, by loaning you sugar, it made it necessary for me to make another trip to a very distant store. It might be understandable for us to agree that you’d not only give me some sugar back but also chip in for gas. In this case my loan would involve labor costs on my part, and you would chip in to cover these labor costs. This is the equivalent of what Medieval theologians called damnum emergens, which was the one circumstance that all theologians agreed gave one a claim to a greater return than what one gave. The Franciscans, for example, loaned money to people chiefly to save them from usurers but they still did it in a quasi-formal fashion that led them to incur various costs. The “interest” on the loan was simply a way to cover these costs.
But (c.) clearly indicates circumstances other than labor. We can punt on expense since it can be folded into labor. The more interesting circumstance is risk. Interpreted most conservatively, risk might be rolled into labor or expense. It’s unreasonable to expect if you have loans out to many people, that not all will be able to repay. Thus in order simply to break even you might agree to have each person return slightly more than they were given, to cover the expense of defaults. And so the minimal interpretation of the circumstances in (c) is that they are various ways of accounting for reasonable expenses that might be connected to the act of loaning. But it’s possible to have a broader interpretation of these circumstances, and Brandon gives the perfect account of them here.