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Saturday, April 13, 2013

Luther's economics

As a man fundamentally opposed to later scholastic refinements or even to the kind of integral, systematic thought of scholasticism, as a man hankering after what he believed to be Augustinian purity, Martin Luther cannot be expected to have looked very kindly upon commerce or upon the later scholastic justifications for usury. And indeed he did not. A confused, contradictory, and unsystematic thinker at best, Luther was unsurprisingly least consistent in an area of secular affairs – economics – in which he had little interest.
Thus, on a crucial question which had vexed scholastics for centuries: whether private property is natural or conventional, i.e. merely the product of positive law, Luther was characteristically anti-intellectual. He was not interested in such questions; therefore they were trivial: ‘it is vain to mention these things; they cannot be acquired by thought,...’. As Dr Gary North has commented, ‘So much for 1500 years of debate’.2 All in all, Richard Tawney's assessment of Luther on these matters is perhaps not an overstatement;

Confronted with the complexities of foreign trade and financial organization, or with the subtleties of economic analysis, he [Luther] is like a savage introduced to a dynamo or a steam engine. He is too frightened and angry even to feel curiosity. Attempts to explain the mechanism merely enrage him; he can only repeat that there is a devil in it, and that good Christians will not meddle with the mystery of iniquity.3

The rest is confusion. Upholding the commandment prohibiting theft meant that Luther had to be, at least in some sense, an advocate of the rights of private property. But to Luther, ‘stealing’ meant not only what everyone defines to be theft, but also ‘taking advantage of others at market, warehouses, wine and beer cellars, workshops...’. In different writings, sometimes even within the same one, Luther was capable of denouncing a person who ‘makes use of the market in his own wilful way, proud and defiant, as though he had a good right to sell at as high a price as he chose, and none could interfere’, while also writing: ‘Anyone may sell what he has for the highest price he can get, so long as he cheats no one’, and then defining such cheating as simply using false weights and measures.
On the just price, Luther tends to revert to the minority medieval view that a just price is not the market price but a cost of production plus expenses and profit for labour and risk of the merchant. On usury in particular, Luther tended to revert to the drastic prohibition that the Catholic Church had long left behind. The census contract he would ban, as he would lucrum cessans; money was sterile; there should be no increase in price for time as against cash payments for goods, etc. All the old nonsense, which the scholastics had spent centuries burying or transforming, was back intact. It is certainly fitting that, as we have seen, one of Luther's great theological opponents in Germany was his former friend, Johann Eck, a Catholic theologian and friend of the great Fugger banking family, who was even ahead of his time in arguing in thoroughgoing fashion in favour of usury.
Yet, despite his opposition to usury, Luther advised the young ruler of Saxony not to abolish interest or to relieve debtors of the burden of paying it. Interest is, after all, a ‘common plague that all have taken upon themselves. We must put up with it, therefore, and hold debtors to it’.
Some of these contradictions can be reconciled in the light of Luther's deeply pessimistic view of man and therefore of human institutions. In the wicked secular world, he believed, we cannot expect people or institutions to act in accordance with the Christian gospel. Therefore, in contrast to the Catholic attempt through the art of casuistry to apply moral principles to social and political life, Luther tended to privatize Christian morality and to leave the secular world and its rulers to operate in a pragmatic and, in practice, an unchecked manner.
Austrian Perspective on the History of Economic Thought (2 volume set)


  1. This comment has been removed by the author.

  2. Good article.

    When I was in Catholic grade school before going off to a Quaker middle/upper school, I learned about the Cardinal Sins, whose name, "cardinal", derived from a Latin word for "hinges".

    Those were not the worst sins, however, though popular imagination and Hollywood tend to see and portray them as such.

    Their significance lay in the literal meaning of their name, the "hinge sins" that allowed the opening to a much worse category of evil.

    The "worst sins" was a whole other list.

    In fact, I knew that there had to be "another list" because, obviously, murder beat out gluttony by a mile. (Smile.)

    This other list included murder, calumny, slander, adultery, simony, heresy, and, last but not least, usury.

    I am pretty sure that the nun who taught me told us that ordinary bank interest was not usury. And, while not explaining further, there were enough shows on TV about "loan-sharking" that any ten-year-old could grasp the concept.

    Usury, that is, the charging of excessive interest such that the person will never succeed in paying the lender back the money, is a form of legalized slavery.

    It is perfectly acceptable to object to this morally and legally even given that objecting to usury means capping interest at an arbitrary level and can be seen as an impediment on commerce and the right of a free person to conduct his affairs as he sees fit.

    Why? Because the community has the right to object to its law-enforcement and justice arm being used to support this form of economic slavery.

    And, so, in Solomon-like wisdom, we "split the baby" without damaging it by recognizing a limit to the exercise of a right when it unduly conflicts with other rights and needs of the community itself.

    My point of view in regard to Martin Luther is that theological and religious thinkers have a great deal of difficulty when it comes to "splitting the baby" on any number of issues.

    Drug use comes to mind. Christian sects have a wide range of taboos from dancing, drinking alcohol, to watching films rated above a certain level for sex and other (for them) uncomfortable topics.

    The basic problem is that religious types, as well as others (any Platonic thinker), have a set of ideals that they "worship" without giving the just due to the opposing ideal, making it impossible to bring the set into complementarity.

    A great topic. I would continue on but got to "carpe" my "diem".