A Short Review of the Historical Critique of Usury
From HodHood
Contents
Top 20 FREQUENT WORDS
usury 103 islamic 31 banking 29 economic 18 london 16 economy 15 rate 14 debt 13 financial 13 islam 13 church 12 prohibition 12 discounting 11 social 11 wealth 10 based 9 critique 9 future 9 political 9 utility 9
DOCUMENT KEY POINTS
- while the contemporary relevance of these largely historical debates are not analysed in detail the authors contend that their significance is greater than ever before in the context of the modern interest based global economy keywords usury interest debt discounting islamic banking introduction the concept of usury has a long historical life throughout most of which it has been understood to refer to the practice of charging financial interest in excess of the principle amount of a loan although in some instances and more especially in more recent times it has been interpreted as interest above the legal or socially acceptable ratei i
- it was the democratic party in rome who rededicated themselves to the cause of those suffering the burden of debt and under the banner of julius caesar a ceiling on interest rates of was set and later under justinian lowered even further to between and birnie
- history of the critique of usury usury in hinduism and buddhism among the oldest known references to usury are to be found in ancient indian religious manuscripts and jain provides an excellent summary of these in his work on indigenous banking in india
- the difference in law is that the latter if it has been paid by the borrower to the the lender is recoverable from the lender while the former once paid is not recoverable although a contract tainted by the dust of interest will not be enforced
- the great twentieth century economist john maynard keynes held a similar position believing that the disquisitions of the schoolmen on usury were directed towards elucidation of a formula which should allow the schedule of the marginal efficiency to be high whilst using rule and custom and the moral law to keep down the rate of interest so that a wise government is concerned to curb it by statute and custom and even by invoking the sanctions of the moral law
- similarly it is illustrative that in contrast to the clear moral injunction against usury still expressed by the church in pope leo xiii s rerum novarum as voracious usury an evil condemned frequently by the church but nevertheless still practised in deceptive ways by avaricious men pope john paul ii s sollicitude rei socialis lacks any explicit mention of usury except the vaguest implication by way of acknowledging the third world debt crisis
- the lateran council of clearly expressed such a view of the church this is the proper interpretation of usury when gain is sought to be acquired from the use of a thing not in itself fruitful such as a flock or a field without labour expense or risk on the part of the lender
- keynes biographer skidelsky intriguingly comments that keynes s sense that at some level too deep to be captured by mathematics a love of money as an end not a means is at the root of the world s economic problem
- this is clearly the contextual meaning of the judaic biblical passages in exodus and leviticus encyclopedia judaica and ruston suggests that the original target of the medieval usury laws was the medieval equivalent of the a loan shark but that the medieval theory was unsatisfactory because it could not distinguish the helpful loan from the oppressive
- a parallel modern argument relates to the devastating social impact of the so called third world debt crisis a situation which even pope john paul ii acknowledges in his sollicitude rei socialis when he states capital needed by the debtor nations to improve their standard of living now has to be used for interest payments on their debts
- another consequence of the discounting principle argued by kula is that in evaluating long term investment projects particularly those in which the benefits and costs are separated from each other with a long time interval the net present value rules guide the decision maker to maximise the utility of present generations at the expense of future ones
- for instance pearce and turner note that discounting affects the rate at which we use up natural resources the higher the discount rate derived partly from the interest rate the faster the resources are likely to be depleted
- the specific methods for implementing islamic banking have centred around financial equity based approaches most notably mudarabah a joint venture between the bank and a a partner with both contributing to the capital of the project and sharing the profit or loss and musharakah in which all the capital for an investment is provided by the bank in return for a predetermined share of the profit or loss of the business undertaking kahn mirakhor
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DOCUMENT WORD ANALYSIS
Main Category
- AlHuda Material\riba
KeyWords
islam financ bankand asset fund mfi inflated financi mfis profit contract invest risk return increase price credit usuria waqf costly
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DOCUMENT REFERENCES
Number of Pages
10
Published Date
2010-05-29 17:48:51
