Usury and its critics: from the Middle Ages to modernity

While it is common in discussions of Islamic finance to translate 'riba' as interest, we wish to argue that it is better understood through the notion of usury since it was understood this way not just in the Christian Middle Ages but even at the time of Adam Smith in his 'The Wealth of Nations' (1776). We also argue that the person responsible for changing attitudes towards usury (and for confusing our understanding of the word) was Jeremy Bentham, whose Defence of Usury (1787) would have a huge impact in shaping a tendency not just to trivialize the notion of usury, but to promote a tendency in the West to divorce financial behaviour from ethical concerns. While their debate about usury has already attracted comment (Hollander 1999; Mews and Ibrahim 2007; Walsh and Lynch 2008), it deserves to be placed within a larger context. Bentham's ideas would eventually lead to the abolition of the usury laws in Britain in 1854, making London the global financial centre that it still is today. One could argue that when Britain's law-makers first acknowledged the legitimacy of Islamic financial contracts in 2002, they were unwittingly recognizing the validity of a system of financial ethics that had in fact underpinned the European economy for more than six hundred years until its abolition. This chapter explores a parallel movement to Islamic finance in the European tradition. It is the fruit of collaboration between a historian of medieval Christian thought, and a philosopher concerned with contemporary financial ethics.