A bankrupt argument

January 10, 2015 § 17 Comments

Question 34 of the Usury FAQ addresses the issue of personal bankruptcy.  Doubters of the contemporary relevance of the moral prohibition of usury frequently suggest that in the context of modern personal bankruptcy protections, usury is no longer immoral because the borrower has a legal escape hatch in cases of real duress.  The argument typically suggests that personal bankruptcy protections in the positive law modify the contract such that the lender doesn’t truly have full recourse to the person of the borrower for recovery of (in kind) principal and profitable interest.

I’ve updated the answer in the FAQ to make the speciousness of this objection a bit more clear:

34) Doesn’t the safe harbor of personal bankruptcy imply that modern loans are really non recourse?

No.  Even with the safeguard of personal bankruptcy, a usurious contract is – by its full recourse nature – a purchase of the potentialities of a person. The potentialities of a person are not something which actually exist at the time of purchase.  Recall that, in order to “own an economic share” in (or have economic access to) the potentialities of a thing, you must own a share in (or have some sort of property claim against) the actual thing; and it is not morally licit to buy and sell economic shares in persons as if they were property.

Continuing the comparison to slavery (since usury and slavery are in the same moral genus), that a slave might have certain legal remedies in the case of an abusive master, or might under certain conditions have an opportunity to escape his condition, doesn’t make him any less a slave.  He might be in better shape than other slaves who lack those remedies and opportunities; but he is still a slave.

Furthermore, that personal bankruptcy protection is available in cases of extreme financial duress does not change the fact that mutuum contracts require return of what is lent in kind as opposed to in particular (see Question 35): that what is loaned is, in Aquinas’ terms, consumed in its use by the borrower.  The mutuum loan for interest still charges rent for literally no thing, nothing.  Personal bankruptcy protection therefore does not change the basic nature of a usurious contract.

§ 17 Responses to A bankrupt argument

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  • William Luse says:

    Seems to me the bankruptcy just perpetuates the slavery under a different name.

  • jf12 says:

    re: “that a slave might have certain legal remedies in the case of an abusive master, or might under certain conditions have an opportunity to escape his condition, doesn’t make him any less a slave.”

    Rather than backdoor method to a better condition, bankruptcy is more like a reversion to the “can’t get worse” condition. It’s more like the slave keeling over in the field, unconscious and near death, requiring a time of recuperation.

  • Alte says:

    The FAQ is freaking awesome, but long and unwieldy. Have you considered eventually reformatting it as an ebook?

    It seems like material that should be reorganized into a treaty on usury. It seems a very timely subject…

  • Zippy says:

    Thanks. I really haven’t thought that far ahead. The recent usury theme was more or less accidental; Jim Kalb’s fault really, though I had a vague notion that I would eventually put together what I’ve learned into some sort of organized series or what have you. And the last two posts are the result of being laid up with a cold.

    But at some point I may put the FAQ content into other formats, and an ebook seems like a natural.

  • That would be great, it would be an excellent resource to make free or cheap (and just give the money to the Little Sisters). I hope you do find the time.

  • Alte says:

    I sped through Médaille in a single sitting, as his is such an easy read, and it was the first time I’d ever read anything like it. But he only devotes a single chapter to usury and doesn’t go into much depth, which left me unconvinced.

    What about this, what about that, what if?

    We need something more thorough and you have that here. Shame to let it languish in FAQ form. An ebook opens you up to an additional market and gives you the opportunity to “Begin at the beginning and go on till you come to the end; then stop.”

    Also, I just want it for myself. LOL

  • Lydia says:

    Zippy, I apologize if someone else has asked this question as I have not been reading the comments, but I know from one discussion you and I had at the Orthosphere that you do not think all slavery is intrinsically immoral. So I’ve been rather surprised at the direction your recent writings about usury have taken in comparing it to slavery and (as best as I can understand) making that part of the argument against it.

    Would not the analogy here be to indentured servitude rather than chattel slavery? And isn’t indentured servitude supposed to be one of the “not always wrong” types of slavery? Not that I recall your getting specific in our earlier discussion as to what precisely constitutes a “not always wrong” type of slavery or even relating it to indentured servitude. But my recollection _is_ pretty clear that in that exchange you even went so far as to say that you do not think it is intrinsically wrong for one person in some sense to own another, and you related this, IIRC, to medieval serfdom.

    Is it in fact your position that it is not intrinsically immoral in some social contexts to consider that one owns a man outright but _is_ intrinsically immoral to make him a mutuum loan of any size?

  • Zippy says:


    A more accurate statement of my current view is that all forms of chattel slavery are intrinsically immoral, but I am dubious as to whether all things which modern people would reflexively call slavery (e.g. serfdom) are immoral. (Part of the issue is that “slavery” can be as tricky a word as “loan”).

    As far as “hills I am willing to die on” intellectually go, I am far more convinced that my understanding of usury is correct though than of any particular theory about the demarcation problem between slavery and subjection to authority more generally. Heck, I don’t even have such a theory. However that problem might resolve, it is never licit to treat persons as things, and property (what we call “property” in the property relation) consists of things. And it may well be that waffliness on slavery is part of what kept previous generations from properly understanding and going “all in” in the intrinsic immorality of usury.

  • John K. says:

    Lydia, I can’t speak for Zippy, but from what I’ve understood from him, I should think the issue here is that “owning” a person, as one purportedly does a chattel slave or someone who owes one a usurious debt, is different from how a medieval lord might be said to “own” his serfs.

    The former is the way one would own a table, or a share in a corporation. But it is impossible to “own” a person or a “share” in a person in this way, and thus immoral to claim to do so. And this is the sort of ownership that can be exchanged for money.

    The latter, on the other hand, is vastly different; the feudal contract that the local lord swears to his immediate superior in the feudal hierarchy is essentially the contract of serfdom writ large. The serf is granted land, allowed to work said land, and offered protection by the lord, in exchange for a tax of produce, gold, or service. Upon the serf’s death, the land would pass to his children, who would also be serfs, so in effect, the family holds the land as a trustee. The lord was not allowed to sell his serfs or dispossess them without just cause, nor could the serf sell the land entrusted to him. So saying that the lord “owns” the serf is actually quite misleading, given how vastly different this is from the regular sort of ownership.

    The first type of ownership, as mentioned above, includes usurious contracts, and is thus impossible, with any claim to own anything in this way being a lie and therefore intrinsically immoral. The second is only very, very loosely a sort of ownership, and is no less moral than a contract of vassalage is (which it essentially is, on a smaller scale).

  • Zippy says:

    Right John K — a basic heuristic test for whether a person is being treated as property vs a subject is if the relation asserts that the master may (say) permanently separate the subject from his family for economic gain. In my understanding of serfdom – at least to forms of it postulated as morally licit – the master is responsible for the well-being of his subjects across all the human dimensions of the subject’s life qua person. Properly understood a lord or master (as in a father’s relation to child) has greater responsibilities than the servant, toward the servant himself and his personal well being, to go with the master’s greater authority.

  • Zippy says:

    Also I do cover this in Q33.

  • Lydia says:

    So if I’m understanding correctly the idea might be that a mutuum is akin to chattel slavery not to indentured servitude, or would perhaps the idea be that indentured servitude itself is more akin to chattel slavery than previously thought? And that indentured servitude itself is wrong?

    Come to think of it, some people _did_ indenture themselves _precisely_ in order to pay off a loan. E.g. Some immigrants would agree to work for someone in the New World for x period of time in return for his paying the cost of their boat fare up front.

    I have generally heard it said (though not by you) that indentured servitude isn’t intrinsically wrong and is _not_ akin to chattel slavery, but it may be that you would be inclined to make the connection tighter on _that_ end.

  • Lydia says:

    It would be interesting to ask whether it’s a form of usury for a law firm to assume the payments on someone’s law school debt in return for a contract to work for the law firm for a certain period of years. I gather that is a pretty common way for lawyers nowadays to pay off their law school loans.

  • Zippy says:


    In the law firm case it seems to be a situation where in effect an already usurious contract is bought by the law firm — analogous to the purchase of a chattel slave. So yes, that is pretty clearly usury.

    I am not especially sympathetic to indentured servanthood, but – setting aside that subject for a moment — whether usury is or is not present doesn’t depend on a mutuum or other “debt” simpliciter: it depends on whether or not profitable interest is charged. If I accidentally kill my neighbor’s horse I may owe him a replacement horse as a debt of justice. But this is categorically different from investment for profit, which is always, when licit, bound to and bounded by actual property in which the investor purchases a claim.

    So back to indentured servanthood, could someone work off a debt of justice like the dead horse? Perhaps, although as a worker, not a slave who can himself be bought and sold. And that sort of debt arises as a tort or accident, not as part of a for-profit business transaction. If the “creditor” attempts to get back more than he genuinely lost against his will that too would be a real injustice.

  • Lydia says:

    I see your point–namely, that indentured servitude does not by definition involve an attempt to make a profit from the required labor of person indentured, though in practice it may often have involved working off both principal and profitable interest on a loan, which would then fall under the categories you are describing.

    For what it’s worth, and however this fits into your categories, my historical perception has been that serf-owning landlords _definitely_ could make a profit from the coerced labor of their serfs–for example, requiring them to make things which the landlord could then sell for his own profit. But I cannot cite original sources right now to prove that.

  • Zippy says:


    For what it’s worth, and however this fits into your categories, …

    I suppose I should be read as reluctant to condemn everything that anyone might ever label “indentured servanthood” or “serfdom”; much as I am reluctant to condemn everything that anyone might ever label “interest” on a “loan”.

    But I don’t think it would be morally problematic for a father to earn profit-for-his-family from the activities of his children, and there are probably at least in theory “serfdom” relations which are more akin to patriarchy than to chattel slavery.

    The underlying and very generic principle is whether a human being is treated in some way that only an object (not-a-human-being) should be treated. That can give rise to categories and/or heuristics, and I don’t claim to be in possession of a comprehensive set of categories for all moral cases. But I did provide at least one heuristic w.r.t. “indentured servanthood” in a previous comment, and more could probably be developed.

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