On usury and other dishonest profit

ON USURY AND OTHER DISHONEST PROFIT is the title of Vix Pervenit, an Encyclical of Pope Benedict XIV promulgated on November 1, 1745. It was in fact the first Papal Encyclical.

What would banking and finance look like if the principles set out in that document were held to? The question lies behind an article in the FT today, with the headline, The City must get rid of banks’ top brass.

The author of the article blames it on culture and values. That is a superficial analysis. It will not do to blame the top brass. These are the sort of people, whom, as class mates, one would not trust with one's pocket money to buy a bar of chocolate at the school tuck shop. If they are reaching the most exalted positions in the banking profession, there is something seriously amiss.

The problem is systemic and structural. It has nothing to do with culture and values, at least not within the banking profession alone. The structures that society creates, of course, are a product of culture and values. It is not possible to clear up little corners alone. The fact that it is possible to refer to a banking "industry" without an eyebrow being raised is an indication of how far things have fallen.

The entire contemporary economic system needs to be re-examined, not from a Marxist perspective but from that of orthodox morality. It must begin with a definition of terms. What is "Capital"? What is "Capitalism"? Both terms are used so loosely as to be almost meaningless.

Is money capital? Is credit capital? Is land capital? Or people? Or slaves? What do you call that which was capital in the original meaning of the term ie wealth used for the production of further wealth eg tools, machines, ships, etc? Conflation of all these terms under the heading "capital" is a recipe for confusion from the outset.

And that is only the start of the difficulty. What is yours? What is mine? How do property rights arise? What is the function of banking? What are the proper and improper uses of credit? What claims does the state have on private property? What IS private property?

These questions tend to be avoided. Problems like corruption of the banking system are bound to arise if they are never addressed.