Debt
In Islamic society, the merchant became not just a respected figure, but a kind of paragon: like the warrior, a man of honor able to pursue far-flung adventures; unlike him, able to do so in a fashion damaging to no one. The French historian Maurice Lombard draws a striking, if perhaps rather idealized, picture of him “in his stately town-house, surrounded by slaves and hangers-on, in the midst of his collections of books, travel souvenirs, and rare ornaments,” along with his ledgers, correspondence, and letters of credit, skilled in the arts of double-entry book-keeping along with secret codes and ciphers, giving alms to the poor, supporting places of worship, perhaps, dedicating himself to the writing of poetry, while still able to translate his general creditworthiness into great capital reserves by appealing to family and partners.79 Lombard’s picture is to some degree inspired by the famous Thousand and One Nights description of Sindbad, who, having spent his youth in perilous mercantile ventures to faraway lands, finally retired, rich beyond dreams, to spend the rest of his life amidst gardens and dancing girls, telling tall tales of his adventures. Here’s a glimpse, from the eyes of a humble porter (also named Sindbad) when first summoned to see him by the master’s page:
He found it to be a goodly mansion, radiant and full of majesty, till he brought him to a grand sitting room wherein he saw a company of nobles and great lords seated at tables garnished with all manner of flowers and sweet-scented herbs, besides great plenty of dainty viands and fruits dried and fresh and confections and wines of the choicest vintages. There also were instruments of music and mirth and lovely slave girls playing and singing. All the company was ranged according to rank, and in the highest place sat a man of worshipful and noble aspect whose bearded sides hoariness had stricken, and he was stately of stature and fair of favor, agreeable of aspect and full of gravity and dignity and majesty. So Sindbad the Porter was confounded at that which he beheld and said in himself, “By Allah, this must be either some king’s palace, or a piece of Paradise!”80
It’s worth quoting not only because it represents a certain ideal, a picture of the perfect life, but because there’s no real Christian parallel. It would be impossible conceive of such an image appearing in, say, a Medieval French romance.
The veneration of the merchant was matched by what can only be called the world’s first popular free-market ideology. True, one should be careful not to confuse ideals with reality. Markets were ever entirely independent from the government. Islamic regimes did employ all the usual strategies of manipulating tax policy to encourage the growth of markets, and they periodically tried to intervene in commercial law.81 Still, there was a very strong popular feeling that they shouldn’t. Once freed from its ancient scourges of debt and slavery, the local bazaar had become, for most, not a place of moral danger, but the very opposite: the highest expression of the human freedom and communal solidarity, and thus to be protected assiduously from state intrusion.
There was a particular hostility to anything that smacked of price-fixing. One much-repeated story held that the Prophet himself had refused to force merchants to lower prices during a shortage in the city of Medina, on the grounds that doing so would be sacrilegious, since, in a free-market situation, “prices depend on the will of God.”82 Most legal scholars interpreted Mohammed’s decision to mean that any government interference in market mechanisms should be considered similarly sacrilegious, since markets were designed by God to regulate themselves.83
If all this bears a striking resemblance to Adam Smith’s “invisible hand” (which was also the hand of Divine Providence), it might not be a complete coincidence. In fact, many of the specific arguments and examples that Smith uses appear to trace back directly to economic tracts written in Medieval Persia. For instance, not only does his argument that exchange is a natural outgrowth of human rationality and speech already appear both in both Ghazali (1058–1111 ad), and Tusi (1201–1274 ad); both use exactly the same illustration: that no one has ever observed two dogs exchanging bones.84 Even more dramatically, Smith’s most famous example of division of labor, the pin factory, where it takes eighteen separate operations to produce one pin, already appears in Ghazali’s Ihya, in which he describes a needle factory, where it takes twenty-five different operations to produce a needle.85
The differences, however, are just as significant as the similarities. One telling example: like Smith, Tusi begins his treatise on economics with a discussion of the division of labor; but where for Smith, the division of labor is actually an outgrowth of our “natural propensity to truck and barter” in pursuit of individual advantage, for Tusi, it was an extension of mutual aid:
Let us suppose that each individual were required to busy himself with providing his own sustenance, clothing, dwelling-place and weapons, first acquiring the tools of carpentry and the smith’s trade, then readying thereby tools and implements for sowing and reaping, grinding and kneading, spinning and weaving … Clearly, he would not be capable of doing justice to any one of them. But when men render aid to each other, each one performing one of these important tasks that are beyond the measure of his own capacity, and observing the law of justice in transactions by giving greatly and receiving in exchange of the labor of others, then the means of livelihood are realized, and the succession of the individual and the survival of the species are assured.86
As a result, he argues, divine providence has arranged us to have different abilities, desires, and inclinations. The market is simply one manifestation of this more general principle of mutual aid, of the matching of, abilities (supply) and needs (demand)—or to translate it into my own earlier terms, it is not only founded on, but is itself an extension of the kind of baseline communism on which any society must ultimately rest.
All this is not to say that Tusi was in any sense a radical egalitarian. Quite the contrary. “If men were equal,” he insists, “they would all perish.” We need differences between rich and poor, he insisted, just as much as we need differences between farmers and carpenters. Still, once you start from the initial premise that markets are primarily about cooperation rather than competition—and while Muslim economic thinkers did recognize and accept the need for market competition, they never saw competition as its essence87—the moral implications are very different. Nasruddin’s story about the quail eggs might have been a joke, but Muslim ethicists did often enjoin merchants to drive a hard bargain with the rich so they could charge less, or pay more, when dealing with the less fortunate.88
Ghazali’s take on the division of labor is similar, and his account of the origins of money is if anything even more revealing. It begins with what looks much like the myth of barter, except that, like all Middle Eastern writers, he starts not with imaginary primitive tribesmen, but with strangers meeting in an imaginary marketplace.
Sometimes a person needs what he does not own and he owns what he does not need. For example, a person has saffron but needs a camel for transportation and one who owns a camel does not presently need that camel but he wants saffron. Thus, there is the need for an exchange. However, for there to be an exchange, there must be a way to measure the two objects, for the camel-owner cannot give the whole camel for a quantity of saffron. There is no similarity between saffron and camel so that equal amount of that weight and form can be given. Likewise is the case of one who desires a house but owns some cloth or desires a slave but owns socks, or desires flour but possesses a donkey. These goods have no direct proportionality so one cannot know how much saffron will equal a camel’s worth. Such barter transactions would be very difficult.89
Ghazali also notes that there might also be a problem of one person not even needing what the other has to offer, but this is almost an afterthought; for him, the real problem is conceptual. How do you compare two things with no common qualities? His conclusion: it can only be done by comparing both to a third thing with no qualities at all. For this reason, he explains, God created dinars and dirhams, coins made out of gold and silver, two metals that are otherwise no goo
d for anything:
Dirhams and dinars are not created for any particular purpose; they are useless by themselves; they are just like stones. They are created to circulate from hand to hand, to govern and to facilitate transactions. They are symbols to know the value and grades of goods.90
They can be symbols, units of measure, because of this very lack of usefulness, indeed lack of any particular feature other than value:
A thing can only be exactly linked to other things if it has no particular special form or feature of its own—for example, a mirror that has no color can reflect all colors. The same is the case with money—it has no purpose of its own, but it serves as medium for the purpose of exchanging goods.91
From this it also follows that lending money at interest must be illegitimate, since it means using money as an end in itself: “Money is not created to earn money.” In fact, he says, “in relation to other goods, dirhams and dinars are like prepositions in a sentence,” words that, as the grammarians inform us, are used to give meaning to other words, but can only do because they have no meaning in themselves. Money is a thus a unit of measure that provides a means of assessing the value of goods, but also one that operates as such only if it stays in constant motion. To enter in monetary transactions in order to obtain even more money, even if it’s a matter of M-C-M’, let alone M-M’, would be, according to Ghazali, the equivalent of kidnapping a postman.92
Whereas Ghazali speaks only of gold and silver, what he describes—money as symbol, as abstract measure, having no qualities of its own, whose value is only maintained by constant motion—is something that would never have occurred to anyone were it not in an age when it was perfectly normal for money to be employed in purely virtual form.
Much of our free-market doctrine, then, appears to have been originally borrowed piecemeal from a very different social and moral universe.93 The mercantile classes of the Medieval Near West had pulled off an extraordinary feat. By abandoning the usurious practices that had made them so obnoxious to their neighbors for untold centuries before, they were able to become—alongside religious teachers—the effective leaders of their communities: communities that are still seen as organized, to a large extent, around the twin poles of mosque and bazaar.94 The spread of Islam allowed the market to become a global phenomenon, operating largely independent of governments, according to its own internal laws. But the very fact that this was, in a certain way, a genuine free market, not one created by the government and backed by its police and prisons—a world of handshake deals and paper promises backed only by the integrity of the signer—meant that it could never really become the world imagined by those who later adopted many of the same ideas and arguments: one of purely self-interested individuals vying for material advantage by any means at hand.
The Far West:
Christendom (Commerce, Lending, and War)
Where there is justice in war, there is also justice in usury.
—Saint Ambrose
Europe, as I mentioned, came rather late to the Middle Ages and for most of it was something of a hinterland. Still, the period began much as it did elsewhere, with the disappearance of coinage. Money retreated into virtuality. Everyone continued to calculate costs in Roman currency, then, later, in Carolingian “imaginary money”—the purely conceptual system of pounds, shillings, and pence used across Western Europe to keep accounts well into the seventeenth century.
Local mints did gradually come back into operation, producing coins in an endless variety of weight, purity, and denominations. How these related to the pan-European system, though, was a matter of manipulation. Kings regularly issued decrees revaluing their own coins in relation to the money of account, “crying up” the currency by, say, declaring that henceforth, one of their ecus or escudos would no longer be worth 1/12 but now 1/8 of a shilling (thus effectively raising taxes) or “crying down” the value of their coins by doing the reverse (thus effectively reducing their debts).95 The real gold or silver content of coins was endlessly readjusted, and currencies were frequently called in for re-minting. Meanwhile, most everyday transactions dispensed with cash entirely, operating through tallies, tokens, ledgers, or transactions in kind. As a result, when the Scholastics came to address such matters in the thirteenth century, they quickly adopted Aristotle’s position that money was a mere social convention: that it was, basically, whatever human beings decided that it was.96
All this fit the broader Medieval pattern: actual gold and silver, such of it as was still around, was increasingly laid up in sacred places; as centralized states disappeared, the regulation of markets was increasingly in the hands of the Church.
At first, the Catholic attitudes toward usury were just as harsh as Muslim ones, and attitudes toward merchants, considerably harsher. In the first case, they had little choice, as many Biblical texts were quite explicit. Consider Exodus 22:25:
If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest.
Both the Psalms (15:5, 54:12) and Prophets (Jeremiah 9.6, Nehemiah 5:11) were explicit in assigning usurers to death and hellfire. What’s more, the early Christian Fathers, who laid the foundation of Church teachings on social issues in the waning years of the Roman empire, were writing amidst the ancient world’s last great debt crisis, one that was effectively in the process of destroying the empire’s remaining free peasantry.97 While few were willing to condemn slavery, all condemned usury.
Usury was seen above all as an assault on Christian charity, on Jesus’s injunction to treat the poor as they would treat the Christ himself, giving without expectation of return and allowing the borrower to decide on recompense (Luke 6:34–35). In 365 ad, for instance, St. Basil delivered a sermon on usury in Cappadocia that set the standard for such issues:
The Lord gave His own injunction quite plainly in the words, “from him that would borrow of thee turn not thou away.”98
But what of the money lover? He sees before him a man under stress of necessity bent to the ground in supplication. He sees him hesitating at no act, no words, of humiliation. He sees him suffering undeserved misfortune, but he is merciless. He does not reckon that he is a fellow-creature. He does not give in to his entreaties. He stands stiff and sour. He is moved by no prayers; his resolution is broken by no tears. He persists in refusal …99
That is, until the suppliant mentions “interest.”
Basil was particularly offended by the crass dishonesty by which moneylenders operated; their abuse of Christian fellowship. The man in need comes seeking a friend, the rich man pretends to be one. In fact he’s a secret enemy, and everything he says is a lie. Witness, St. Basil said, how the rich man will always at first swear mighty oaths that he has no money to his name:
Then the suppliant mentions interest, and utters the word security. All is changed. The frown is relaxed; with a genial smile he recalls old family connection. Now it is “my friend.”
“I will see,” says he, “if I have any money by me. Yes, there is that sum which a man I know has left in my hands on deposit for profit. He stipulated a very heavy rate of interest. However, I shall certainly take something off, and give it to you on better terms.” With pretences of this kind and talk like this he fawns on the wretched victim, and induces him to swallow the bait. Then he binds him with a written security, adds loss of liberty to the trouble of his pressing poverty, and is off. The man who has made himself responsible for interest that he cannot pay has accepted voluntary slavery for life.100
The borrower, coming home with his newfound money, at first rejoices. But quickly, “the money slips away,” interest accumulates, and his possessions are sold off. Basil grows poetic in describing the debtor’s plight. It’s as if time itself has become his enemy. Every day and night conspires against him, as they are the parents of interest. His life becomes a “sleepless daze of anxious uncertainty,” as he is humiliated in public; while at home, he is constantly hiding under the couch at
every unexpected knock on the door, and can barely sleep, startled awake by nightmare visions of his creditor standing over his pillow.101
Probably the most famous ancient homily on usury, though, was Saint Ambrose’s De Tobia, pronounced over several days in Milan in 380 bc. He reproduces the same vivid details as Basil: fathers forced to sell their children, debtors who hanged themselves out of shame. Usury, he observes, must be considered a form of violent robbery, even murder.102 Ambrose, though, added one small proviso that was later to have enormous influence. His sermon was the first to carefully examine every Biblical reference to moneylending, which meant that he had to address the one problem later authors always had to struggle with—the fact that, in the Old Testament, usury is not quite forbidden to everyone. The key sticking point is always Deuteronomy 23:19–20: