Usury and its Critics: From the Middle Ages to Modernity

This paper argues that there is a close parallel to Islamic teaching prohibiting riba to the classical Christian prohibition on usury, prior to a radical shift in attitude to usury introduced by Jeremy Bentham in his 'Defence of Usury', published in 1787. Even Adam Smith maintained the need for laws against usury in his 'Wealth of Nations', first published in 1776. The first part of this paper explores the notion of the classical understanding of usury, as it existed in the medieval and early modern period, arguing against the notion of interest developed simply as legitimate compensation for a loan. Even in the early modem period, it was recognized that interest was a form of legitimate compensation to the lender, but that it should not exceed a fixed level. This way of thinking was still defended by Adam Smith, even though it would be challenged by Jeremy Bentham, whose ideas would influence the way finance would increasingly become detached from ethical concerns in the modem period in the West. The second part of the paper reviews modern thinking about the ethics of finance, a theme that has tended to be neglected in the wake of Bentham's utilitarian approach to ethics.