Are we taking Christian teaching seriously? An uncompromising approach to debt and relationships

by Dr Paul Mills

Posted: 03 May 2019

Having just 'celebrated' the tenth anniversary of its last great debt crisis in 2008, the global economy appears to be slowing rapidly and may be about to witness its next one. Now is an apt time to do the groundwork for a Christian response and Theos and the St. Paul's Institute are to be commended for doing so.

There are many elements of the report to applaud. It talks a good game about emphasising the relational dimension of the interaction between borrower and lender. It highlights the theme of debt release that runs throughout the Bible. The summary of the Church's historic and near-unanimous condemnation of lending at interest until the 16th Century is succinct and accurate (although Calvin was much more balanced than presented here).

On policy and Church action, the report rightly stresses the lender's moral obligations to know the circumstances of the borrower, to avoid the exploitation of the poor and adapt loan terms if the borrower's circumstances change significantly for the worse. The report correctly argues against the tax subsidy given to company borrowing and highlights the role public and student debt can play in perpetrating intergenerational injustice.

Unfortunately, the report leaves its analysis and recommendations at that. It blunts the sharp edge of the biblical and historic Christian critique of debt and interest seemingly because of a prior belief that there can be 'good' debt (pps. 26, 47). To arrive at this position the report ignores the truly relational critique of debt in Scripture, grossly mishandles the Parables of the Talents and Ten Minas (p.61) and fails to engage with alternative financial contracts. One gets the impression that the biblical material is interpreted so as not to disturb the status quo too much. Remarkably, the report barely mentions banks - the subsidised debt factories of our economy - and makes no suggestions for their reform.

The key relational omission is to fail to highlight the equivalence the Bible draws between debt and servitude (Proverbs 22:7). This comes about because the promise to repay a debt is a deeply serious one (Psalm 37:21). Borrowers give their promise ('bond') to repay - hence, they have lost their financial freedom and are in 'bondage'. To charge interest on a loan is to profit from the 'bondage' of another, an inherently unloving act whether or not they are 'poor'. Unsurprisingly, Jesus condemns such behaviour as that of a "harsh man", who "takes what they did not deposit and reaps what they did not sow" (Luke 19:22) when his parables are read with care. The Bible does recognise a distinction between 'good' and 'bad' debt but draws the line between interest-free and interest-bearing lending. It is the righteous who lend interest-free and shall receive God's blessing (Psalm 15:5; 112:5). Those who charge interest are exploitative of the poor and incur judgement (Nehemiah 5:1-13; Proverbs 28:8; Ezekiel 18:8,13,17; 22:12).

The report makes two responses to this position. First, that Deuteronomy allowed interest to be charged to foreigners (23:20); and second, that charging interest on loans for 'productive' purposes is somehow legitimate.

In response, first - Deuteronomy's foreigner exception to the interest ban is paralleled by that to cancelling debts every seven years (15:3). This is all part of the framework of carefully differentiated rights and responsibilities that migrant members of the Israelite community enjoyed as they moved from 'foreign residents' to 'sojourners' to full proselyte members. In this light, charging interest is a sign of relational distance from the foreigner that does not apply to the more committed sojourner or 'brother' Israelite. Given Jesus' teaching that, for his followers, they are to treat all as 'neighbours' (not foreigners) (Luke 10:29-37), it is unsurprising that he had already told them to lend freely to all, without expectation of return or advantage, let alone interest (Luke 6:34,35).

Second, Deuteronomy makes no exception to the interest ban for commercial or productive loans (23:19) when these would have been familiar at the time - indeed, agrarian loans are often for seed for next season's harvest and intended to be productive. Exodus is also perfectly aware of the distinction between a loan and rental contract (22:14,15). Indeed, there is no moral basis for lenders to enjoy interest on commercial loans. They have not taken any contractual risk and so not participated in the business risk of the enterprise. They take the senior position in the business' capital structure and expect reward without responsibility. They contract as if profit were certain when we know not what tomorrow brings (Proverbs 27:1) - "all such boasting is evil" (James 4:16). They reap where they haven't sown.

Hence, for the Christian, the Bible and the long-standing teaching of the Church is clear - taking interest is an inherently unloving act. Debt is financial servitude and so we should seek to ensure that we move out of debt to enjoy liberty before God. Churches need to teach the wisdom of precautionary savings and establish interest-free loan funds to that end.

For wider society, Christians should be highlighting the problems and injustices that flow from its dependence on, and subsidies to, debt finance. These range from debt-fuelled asset booms and busts (especially in housing), more prevalent corporate bankruptcies, endemic inflation, a vulnerable banking system posing an ever-present threat to the financial system and need of bail-out, and intergenerational injustice. It is no coincidence that the recent rise in wealth inequality began with the deregulation of banking in the early 1980s and the consequent rise in overall debt levels. In this light, debt is financial pollution that imposes costs on the wider society and should be actively discouraged. The relationally positive way to finance business investment is through risk-sharing equity, and to finance house purchase is through lease-to-buy (rent-sharing) contracts.

God's desire is to redeem humanity from its bondage and bring us into liberty, both through the gospel and in freedom from servitude and debt. Forgive Us Our Debts grasps some of that vision but fails to understand and apply its truly radical implications.


This article has been written for our series on Debt in partnership with Theos think tank.

The views expressed in this article do not necessarily reflect the views of Theos and St Paul's Institute. For our views, read our report on debt.

About this author

Dr Paul Mills is a Senior Economist at the International Monetary Fund.

Disclaimer

The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.