Chapter 5 Outline
The chapter begins by explaining that despite usury being considered as an execrable sin against human, it continued to be famous in the United States and British. It is apparent that in a population of 30,000 people, more than 8000 individuals embraced usury or took part in the practice (Geisst 192). The reason is that the necessity of doing business using borrowed money became frequent due to trade. Besides, the chapter offers a detailed explanation on the sophisticated debt revolution that emerged in the 19th century. This made people support industrialization so as to help people to avoid debts. Those that were unable to pay their debts were held in the debtor’s prisons that had been established during the Renaissance period. Besides, funds supplying banks such as Bank of England and Sea Bubble were established so as to act as intermediaries between the citizens and the government.
The faith-based prohibitions of the practice collapsed due to industrialization and exploration though they maintained their moral and emotional appeals. It is also evident that though the money lenders argues that there was equality in the practice of usury, the poor people were forced to pay higher taxes than the rich people since they were unable to fight for their rights(237). Besides, these people needed the money for survival thus could agree to any interest the moneylenders charged. During the twentieth century, people started introducing new derivations and twists to the issue of credit and debt. As a result, the funds supplying banks that had been previously established were forced to make credit more accessible to the citizens. Nevertheless, these institutions continued to grow so as to serve the community though they did not reach a large population thus these people relied on the private lenders that seriously exploited them.
During this period, the usury was termed as compound interest though there was no set guideline for determining the amount of interest that a person should pay. A few individuals came up with contact laws that debated whether, how and when the compound interest was to be administered (193). However, since these laws were not adopted by the government, they did not stop most money lenders from exploiting their subjects. This also led to the flourish of specialized finance facilitates that offered credit to the people at an excessive interest (193).
The money accrued from money lending process by government institutions was used to make the participating countries particularly U.S and Britain more industrialized by building infrastructure as well as other major capital projects (194). Despite these developments, the faith-based institutions revived and continued to fight for the abolition of the usury practice. At this juncture, most people used the civil war to justify this action since they argued that people needed to recover from the losses they had experienced (196). Statistics showed that more than 35,000 individuals had invested in bonds before the war started and this made them encounter great losses (201). They, therefore, argued that it would be unfair to abandon the practice and even went further by establishing a modern credit system in an attempt to cater for the high demand for property and loans.
The chapter also gives a detailed history of how Loan Sharks emerged in these states. According to the author, the World War 1 plagued the American society with two major social problems that are usury and alcoholism. The government was able to address the issue of alcoholism by ordering the closure of all institutions that manufactured spirits and also by imposing sumptuary laws (201). However, the government was unable to stop loan sharking since it provided easy and fast money for those people who practiced it. However, in the late 21st century, the intellectuals established a way of ensuring that people were not overcharged interest by the money lenders (225). It was termed as the intellect seed of revolution.
Chapter 5 Questions
What happened to those people who suffered bad debts?
I have listed this question since I have realized that people developed a unique attitude towards debts meaning that they insisted that people pay their debts.
Why did the faith-based prohibitions fail in abolishing usury?
I have realized that despite the enthusiasm of the faith-based institutions, they failed in abolishing usury, and it is very hard for religious institutions to fail since most people trust their faith.
Were the damages experienced during the World War 1 a good justification for the practice of usury?
I have listed this question since I realized that the practice of usury or the loan sharking emerged after the war. Besides, the chapter explains that most people used the war as a justification for the practice arguing that people needed to money to recover from their losses.
What is the difference between usury and compound interest?
Though this question has been answered in the chapter, I have listed it because I did not understand how the government of the participating countries put a distinction between the two. The reason is that some financial institutions charge very high compound interest rate that to me appears as an extension of usury practice.
Works Cited
Geisst, Charles R. Beggar. Thy Neighbor: A History of Usury and Debt. Philadelphia: University of Pennsylvania Press, 2013. Print.
