A just economy cannot thrive on debt.

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the LORD your God may bless you in all that you undertake in the land that you are entering to take possession of it.” Deuteronomy 23.19, 20

Credit – and with credit, debt – are the backbone of a consumerist economy such as that of the United States. It is difficult to argue with the track record of prosperity which free market, credit/debt practices have accomplished over the past 250 years. But as we are now beginning to discover, when material prosperity is the objective of an economic system, the use of credit and debt can quickly get out of hand, jeopardizing the wellbeing, not only of the economy, but of the polity as a whole.

The economics of justice set forth in the Law of God does not forbid borrowing and lending. There is some question among scholars as to whether the term, “interest”, refers to simple interest – payment for the use of something, or of money, that would compensate for the lost opportunity costs which the creditor would potentially incur – or of usury – extracting interest beyond what is reasonable. My own view is that “interest” here probably refers to usury, which would encourage covetousness and exploiting one’s neighbor, but does not preclude simple interest. The Law recognizes what economists refer to as “opportunity costs” and expects those to be covered by the party responsible for imposing them on another (cf. Ex. 21.18, 19). When you loan money to me, it is to be assumed that the money you loan to me could be working for you, either gaining interest in the bank – which even Jesus did not discourage (Matt. 25.27) – or being used for your own personal needs; therefore, it is not unreasonable for me, in paying back what I owe, to compensate you accordingly.

But it would be unreasonable, and unjust, of you to expect to make money on my loan, that is, beyond what borrower and lender might agree together in advance as a reasonable expectation of return. Terms of loans – of extending credit and incurring debt – are thus best set case by case. Those with money to lend should not be able to conspire or otherwise agree together on a “set” interest rate – or look to government to establish one. Instead, each transaction should be treated as a separate case with respect to amount and length of the loan and terms of repayment.

When the goal of economic activity is justice – the practice of love for God and neighbor – rather than material prosperity, everything about that economy is going to look different, including the use of credit and debt. These would not be forbidden, but the terms on which they are engaged and the reasons for which they are employed would, it seems to me, be dramatically different than the easy credit/burdensome debt practices which are so common in our society today. Public policies that support that latter can be calamitous in the extreme, as we are learning the hard way during this current recession. Moreover, they create a mindset which can be difficult to overcome – as, again, we are seeing in our society. When people are taught that material prosperity is the way to happiness, and easy credit is extended on every hand to make that prosperity a reality, covetousness and lust will rule instead of sound reason, and the blessings of God will elude us, though we possess the wealth of all the nations of the world.

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