Emergence of prejudice against bankers

Wols (Alfred Otto Wolfgang Schulze), untitled (time_money), 1988.
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By FERNANDO NOGUEIRA DA COSTA*

The Church in the thirteenth century was not content with promising hell to the usurer, it encouraged default by Christians

Jacques Le Goff, in the book The Middle Ages and Money: Essay on a Historical Anthropology, published in 2014, narrates: until the XNUMXth century, within the limited framework of the needs of the time, monastic institutions were lenders to peasants. Later, when the use of money became urbanized, the Jews were able to play a demanding role as lenders.

The Jews, kept out of agriculture, found in certain urban trades, such as medicine, a source of income to survive. They lent surplus income, upon request, to urban Christians without a fortune and credit seekers.

According to Bible and the Old testment, lending at interest was in principle prohibited between Christians on the one hand and Jews on the other, but allowed if it was from Jews to Christians and vice versa. Soon, the Jews already in the twelfth century and mainly in the thirteenth were replaced by Christians. They were expelled from much of that Europe in the Dark Ages: from England in 1290, from France in 1306, then definitively in 1394, from Spain in 1492, from Portugal in 1496.

The image of the Jew as a “money man” was not born from the reality of the facts, despite the existence of Jewish lenders with short terms and high interest rates. Rather, it was born out of religious discrimination, foreshadowing XNUMXth-century anti-Semitism and XNUMXth-century Nazi-fascism.

The loan was accompanied by the payment of interest by the debtor to cover the opportunity cost of the creditor. The cynicism was that the Church forbade any Christian creditor to charge this interest from a Christian debtor, but not from other religions.

The Church in the thirteenth century was not content with promising hell to the usurer, it encouraged default by Christians, if they did not need more loans or did not want to pay what was due. From then on, the classification of society by the medieval Church into three types of humans was born: those who pray, those who fight and those who work.

The devil would have created a fourth category: usurers. Without participating in the work of men, they would be punished like demons by the Catholic Inquisition. Detail: the Jews did not have land and were not accepted as farmers…

Jack Weatherford, in the book the history of money, published in 1999, chronicles the lending of money, in one form or another, being known since when money has existed, but the bank has become something more than just a lending institution. Bankers did not deal much in gold and silver, but in paper deeds representing gold and silver reserves.

Banking activity faced a major limitation because the Church prohibited usury, that is, charging interest on loans. This barrier was one of the greatest obstacles for Italian families in the pre-Renaissance City-States to overcome and build their networks of banking branches in other countries.

The Christian prohibition of usury was based on two passages from Bible. One was: “Thou shalt not charge her interest or usury; Rather, she fears your God […] Thou shalt not charge her interest for the money and food lent her ”(Levitical, 25:36-37)”. Another was: “a son […] a usurer shall not live. For committing these evil things, he will die and his blood will fall on him ”(Ezekiel, 18:13). Creed! I believe in god-priest...

Biblical prohibition never completely eradicated usury, but it made it more difficult. The Jews had the opportunity to act as moneylenders, because in the eyes of the Catholic Church they were already condemned to eternal fire. Instead, if Christians lent money at interest to fellow believers, the Catholic Church excommunicated them, excluding them from all religious services and Holy Communion.

The law stated very specifically: quidquid sorti accedit, usura est (“Any excess over the amount due is usury”). But Italian bankers found a way to get around this ban and get rich without risking their souls not being accepted into the promised paradise.

Usury only applied to loans, so through a subtle technical difference between a loan and a risk-sharing contract, Italian merchants forged an entire network of loans behind a facade without showing any signs of usury. They scrupulously avoided “debts” and traded bills of exchange instead.

A bill of exchange was a written document providing for the payment of a specified amount of money to a specified person at a specified date and place. The Latin name for this document, according to Jack Weatherford, is cambium per letters. It meant “change through written documents or letters”.

The transaction was the sale of one kind of money for another kind, paid to the individual in another currency, at some “close and already specified date” and certain place. For example, a merchant in need of money was looking for a banker in Italy. The banker handed over the money in cash, in guilders or Venetian ducats, and both parties signed the bill of exchange whereby the merchant agreed to pay a slightly higher sum, in another currency, at the next fair in Lyon or Champagne. in France.

The trader did not need to personally go to the fair to pay the bill. Both parties knew: if the merchant did not show up at the fair, the Florence office would collect the amount owed.

This “fool me that I like it” has changed little in the Muslim world, where the Quran prohibited usury more strictly and definitively compared to the Bible. It prohibited any kind of profit obtained in the exchange of gold and silver between people.

Muhammad is reported to have said: “Do not exchange gold for gold except in equal amounts […], nor silver for silver except in equal amounts.” O Quran specifically banned bills of exchange, condemning the exchange of "nothing present for something still absent."

In Islamic financial practices, when alternatives to charging interest were sought, the classic idea of ​​interest covering the opportunity cost of a money holder transferring its profitable usufruct to an entrepreneur was replaced. They presented the operation as if it were a partnership or association in a venture with risk. From this idea, Islamists organized an interest-free financial system.

In this alternative system, charging interest would be replaced by combinations of companies or consortia called changerabah. They present them as “a consortium contract (partnership) between capital and labor, that is, between two parties, one or more owners of capital or financiers […] and an investor entrepreneur”.

It adds: “The profit will be distributed between the two parties according to a predetermined proportion, agreed upon at the time of formation of the contract”. And he even details the risks: “the financial loss will fall only on the financiers”, while “the entrepreneur's loss is in not receiving any reward for his services”.

Interestingly, Spanish monarchs paid for their sins in persecution or religious intolerance. They exacerbated the financial crisis by expelling Jews and Muslims in 1492, when Isabella and Ferdinand unified the country and Columbus made his first voyage to the Americas.

Most Christian Spaniards worked as farmers, growing wheat and olives and raising cows and goats, otherwise they became soldiers. Whether they were soldiers or peasants, they had little education and could not read or write, nor could they operate with numbers.

Jews and Arabs formed the cultured class of administrators and merchants. Without them, the Spaniards proved highly ineffective in managing their financial and commercial affairs.

Italian merchants, German loan sharks, and Dutch manufacturers opportunistically moved to fill the mercantile vacuum left by the expulsion of Jews and Arabs. Afterwards, everyone took their profits back to their respective countries.

In the absence of a native mercantile class, the Galicians – as well as the Portuguese, whose Inquisition also persecuted the Jews – had no choice but to watch passively as their silver and gold, expropriated from the colonies of the Americas, passed by. straight from their hands into the coffers of other Christian (or Anglican) nations in Europe. What a pity... the punishment for obscure religious intolerance.

The discovery of the great wealth of the Americas had a much more immediate impact on the lives of ordinary people than the banking revolution did. This increased the amount of money in circulation and incorporated merchants across Western Europe into a single commercial and financial system, but the increase in silver coins in circulation incorporated the less favored classes into the system.

According to Jack Weatherford (1999), “traditionally cash-dependent trades – soldier, painter, musician, and tutor – focused even more on paying for service and less on the practice of exchanging it for other services, such as full board or rations of money. bread, alcohol or salt. Even prostitutes and innkeepers became increasingly reluctant to accept products and merchandise as payment. Everyone wanted gold or at least silver coins.”

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP).


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