Beggar Thy Neighbor starts with Marcus Junius Brutus, a predatory lender infamous for his role in the assassination of Julius Caesar, ends with the aftermath of the 2008 financial crisis, and provides a lively social-cum-cultural history of debt for the intervening two millennia. To put this expansive time span in perspective, an investment of 100 denarii at only 0.5 percent interest would be worth over 2 million denarii 2,000 years later, when compounded annually. In other words, Charles Geisst examines debt and credit in the longue durée, albeit with a primary focus on western finance. And the one master theme running through that vast period is the concern for usury: a deep but variable disquiet about the practice of charging interest on a loan. Originally based in religious doctrine and cultural practice (see the many Old Testament references to usury discussed by Geisst), the prohibition against usury was enshrined in law in many different ways, reflecting cultural shifts and social change, but also the accommodations necessary to reconcile religious ideals with the realities of commercial practice. While the details are complicated, the overall sweep of history is simple: “… interest and usury have gone from being anathema to being big business in the contemporary world …” (p. 2).
The book is organized into thematic chapters, in roughly chronological order. Chapter 1 (entitled “Saints and Sinners”), for example, briskly takes the reader from the classical period into the Middle Ages, and stretches from Rome to Thomas Aquinas's incorporation of Aristotle's theory of money into canon law. Chapter 2 (“Shylock”) travels through the Renaissance and into the early modern period, with discussions of accountancy, Jewish lenders, the Medici bank, and the shift of European commercial activity from Italy to the Low Countries and to England. In chapter 3 (“Protestants, War, and Capitalism”), the focus rests on early modern Holland and England, where the development of financial markets and public finance made it impossible to impose strict legal prohibitions against usury broadly defined. Instead, rules were interpreted more liberally, and distinctions were made between interest, excessive interest, and compound interest. However, if one thinks that Catholic countries simply adhered to old-fashioned conceptions, consider how well the Medici family bank served the financial needs of the Papacy (and even provided several Popes) while finessing usury rules. It turns out that financial engineering has been going on for quite a while.
We arrive in the nineteenth century in chapter 4, landing primarily in the United States and United Kingdom where usury restrictions were being relaxed in the face of social and economic development. Chapter 5 (“The New Debt Revolution”) is about the many developments in consumer and corporate finance that occurred in the twentieth century in the United States, including credit cards, installment lending, securitization, modern financial theory, and bankruptcy law reform. Chapter 6 (“Something Old, Something New”) focuses on the late twentieth century and a medley of topics, covering international finance, the collapse of Bretton Woods, OPEC oil shocks, the Mexican debt crisis, the rise of swaps and other financial derivatives markets, and junk bonds. Chapter 7 briefly diverts the narrative away from western finance and into contemporary Islamic banking and South Asian microfinance. Like the Bible, the Koran prohibits usury, but these strictures have been embraced rather than weakened as earnings from oil flowed into the Arab Middle East. However, like the Medici bank in renaissance Florence, Islamic bankers have found creative ways to conform to the letter of the Koran while operating in a financial world that ordinarily expects interest on loans. The final chapter returns to the west and addresses the events of the late twentieth century in the United States: deregulation of banking, growth in consumer debt, securitization and home mortgages, and the financial crisis of 2008.
The book offers a wealth of historical detail and is written in an engaging fashion. Geisst provides biographic sketches of many of the interesting characters that readers meet on this two millennium journey: Thomas Aquinas, Luca Pacioli, Salmasius, Edward Halley (of comet fame), Robert Morris, and Samuel Insull, among others. It is hard to imagine many scholars whose expertise encompasses all the topics covered here, so doubtless everyone will learn something from this book. And certainly it will be educative for general readers. But one big flaw for social scientists is the absence of a causal account of why the status of usury changed, or whether this has any implications for the trajectory of other kinds of stigmatized transactions (what Alvin Roth called “repugnant transactions”). Does modernity unshackle economic forces that force societies to shed the strictures of tradition? Such a formulation may sound simplistic, but it seems consistent with assertions like: “As society grew larger and entered the industrial age, the demand for loans and property increased. Usury prohibitions were under pressure in Britain and the United States because they were seen by many as standing in the way of progress” (p. 137). Alternatively, Geisst hints at a demographic explanation in several places (e.g., pp. 98, 181), suggesting that population growth creates demand for more liberal financial markets, but there is no explicit argument, nor systematic interrogation of the evidence. Overall, Geisst shows us that many interesting financial developments occurred in 2,000 years, but how to explain those changes remains somewhat of a mystery.
