Part 4 and Part 5 Final Paper
Actual changes that are eminent in the expounded Chapter three of ‘A History of Usury and Debts’ entails an in-depth insight of the connection between war, capitalism, Protestants as well as their significance in the development of banking and debts around the world, an ordeal which reflects the current status of financial markets. The author well explains Protestants' connection to usury and debt, and how the selection from the Roman Catholic influenced other themes in the chapter, such as war and capitalism (Geisst 107).
Actual changes include the way the three themes related in the previous part is construed to the ability of usury and debt to integrate economic development, population growth and sustainability of the growth that follows economic development. Moreover, a significant expansion in the paper includes a detailed discussion of how debt and usury developed amidst religious, economic and warfare or political constraints. Furthermore, the paper discusses the implication of various forms of debt, and their significance in constituting the current economic practices, related to debt and usury. Lastly, other actual changes include a paraphrase of the subsections of the paper into more captivating sections.
The interrelationship between War, Capitalism and Protestants to Usury and Debt
Protestants were initially part of the Roman Catholic denomination, before breaking up and forming a more independent denomination, which was not construed by ambiguous rules and criticisms, which were not suitable for economic development (Geisst 108). Therefore, the act of some members of the church alienating themselves form the church for economic, and freedom quests were not up taken well by the leaders in the Roman Catholic, an act that prompted constant critics for the significance of usury and debt in the Christian way of life.
However, the critiques did not stop individuals from venturing into usury and debt, which was proving more adaptable to mitigating incidences of plague, and economic recession, by encouraging investments. The Protestants had various drawbacks as far as the Roman Catholic was involved. For instance, the Roman Catholics were inclined to believe that debt and usury, and other forms of banking were morally wrong, and did not portray good biblical beliefs, or even uphold the beliefs of the Roman Catholics (Geisst 107).
Therefore, Roman Catholics did not engage in any form of debt or usury; individuals found to practice debt and usury were highly condemned by the church leaders. Because of the restrictions imposed on idealists, only Protestants indulged in debt and usury, but the practice was done on a much lower scale than it was anticipated (Geisst 107).
However, restrictions began to collapse with the increase in population and hence increase in forms of commerce to sustain the swelling population. Despite the many roles that Protestants played to promote a large scale of debt and usury, other themes interconnected to religion, and implications of religion on debt also helped to enhance the prevalence of debt and usury in the medieval ages (Geisst 109). For instance, Protestants’ quest for increased usury and debt for sustainable development was also backed by capitalists, whose main aim was to maximize the productivity of commercial markets to achieve a sustainable development that could cater for the swelling population in Europe and other parts of the world (Geisst 109).
Apparently, many forms of debt and usury began to take route after economic actors started seeking capital to expand their production. Moreover, lenders to entrepreneurs were integrated into the commercial setting, after a realization that they played a bigger role than any other economic actor (Geisst 109). Mainly, lenders in the financial markets, which were usually capitalists, provided forms of usury to Protestants who were more inclined to their ideology of economic development than their Roman Catholic counterparts, who later realized the sluggish economic growth that was curbed by the introduction of usury and debt. The Roman Catholic leaders believed that banking did not call for a sound and legitimate interests to the resources owed to debtors (Geisst 110).
Practically, the primary basis for shunning usury and debt was attributed to the pains that debtors or creditors had endured during the practice, and possibly be a leading cause of conflicts within the congregation, which would the alienate people from their faith. As the need for more investment and capital grew, also the populations grew uncontrollably, and fear of eminent plagues drove economic actors to become more aggressive (Geisst 107). Aggressiveness initially caused faith-based prohibitions that the Roman Catholics put in their followers to slowly diminish, and thus, the unforeseen change opened individuals to the dire need to invest largely, in a bid to avail a domestic produce, that would be used to finance wars and other forms of trade.
For example, war, a major themed driver to the development of usury and debt was deemed the main element that investors and governments had in mind to improve the aggressiveness of usury and debt. For example, the British government placed their likelihood to win major wars and revolutions, such as the Britain war with France in 1692 (112), Britain witnessed its national reserves drain rapidly, with no contingent source of funds, and thus increased the prevalence of usury and debt. A major concern is attributed to the British predicament, of whether during the glorious revolution, John Grant believed that older annuitants stood a greater chance to enjoy benefits from their annuities that young annuitants. What made the sudden turnaround for the young annuitants begin enjoying more benefits after the war?
For example, various economic minds sought to justify the relationship between war, Protestants and capitalism, and its potential to transform the economic realm. Therefore, many countries opted to try out different forms of usury. Thomas Malthus argued that the current achievements that the current society thought to have achieved had not even reached the threshold that some ancient civilizations were considered to have achieved (Geisst 108).
Moreover, Malthus sought governments to consider how organized forms of usury and debts would transform the way investments were instituted, by providing adequate capital to finance great ideas that were eminent in the pre-industrialization era (Geisst 108). A question that arises from the ideology of Thomas Malthus is that Thomas Malthus argues that populations had not yet matched the nature of populations and use of debt and usury as a counter to plagues in the ancient civilizations (Geisst 108). How does the use of debt and usury vary in usage in the face of economic revolution? Practically, the scale of economic growth is not determined by past practices, which can lead to adverse effects on the nature of economic operations, and lead to a worse off condition that is challenging to mitigate.
Both economically and demographically, the current society was just a fraction of what the ancient civilizations used to be. Hence, Wallace sought the need to invest, to provide for the rising urge to satisfy food security needs. Apparently, methods used to adapt to adverse population growths were no longer applicable to the current predicament, which saw the current civilizations advance economically, technologically and socially (Geisst 113). Thus, the only adaptable means to achieve sustainable growth was to test the potential of usury and debts to harmonize capitalist’s ideas to the ideas of communists and socialists, who posed the major drawbacks to adopting debt and usury.
However, wars created the dire need for usury and debt and thus the various economic groups found a way to work towards a common goal, for the benefit of future generations. In this accord, the various thematic implications of war, capitalism and Protestants religion caused the shift from critiques of debt and usury, to a common ground, in which governments participated actively, to avoid situations where they did not have adequate resources to deal with their predicaments.
Banking and Lending Institutions
Banking and lending was not initially practiced, as usury and debt were done on a much smaller scale, and thus did not raise any need to develop organized institutions to link creditors to debtors, and also facilitate the transfer of capital, for one person to the other. The linking institutions formed were known as banks, as they provided a wide array of services, and also acted as an intermediary for dealing with the governments financially (Geisst 116). Moreover, capitalists who had gained access to funds had developed big production units, whose stability could only be sustained by banking institutions. Therefore, in order to fund bigger production units, annuities emerged to provider more major landings with a longer repayment period (Geisst 116). Annuities were closely linked to the war theme, as they provided a quick way for the governments to access funds during wars, in case the need for more gold and silver arose. Therefore, the applicability of debt services that banks provided had preceded benefits, both to the private and public sector.
The growth of annuities was quite challenging, given the consistent religious critiques that undermined the development of organized usury and debt. Annuities were later used as bonds as the development of debt finance thrived. Earliest forms of lending institutions included an annuity that was named after Lorenzo Tonti. Lorenzo Tonti developed an annuity that provided easier means of acquiring large borrowings and finance from members’ equity (Geisst 111). The tontine system was adopted by many wealthy individuals and involved a scenario where wealth could be passed down ages as it accumulates in value.
However, the last holder of the tontine would remit the accumulated value to the state on his demise (Geisst 112). Apparently, the tontine system was highly adopted by the ruling class to settle conflicts, as well as financing wars with their neighbors. Additionally, methods of calculating risk attached to lending and borrowing the Tonti and other forms of annuities were invented by Jason Banouli, and the invention strengthened the popularity of debt and usury. Thus, with the calculation of debt and usury invented, it was now easier to establish a borrowing platform, which would integrate all the aspects of debt, and establish a smooth transition to development.
The adoption of the banking system and annuities saw the development of social, political and economic systems. For instance, states or countries which adopted the tontine system including France and Dutch accumulated a lot of wealth realized from interest payments, and also the industries grew rapidly in conciseness to population growth (Geisst 112). In this accord, the development of mercantilist ideas to the development of countries arose, and the ordeal was majorly rooted in the fact that states that were able to integrate the use of usury and debts successfully acquired better economic integration, and thus more wealth was realized. Practically, individuals inclined to adopt usury and debts were Protestants who had been assimilated into the mercantile system of trade.
Furthermore, the tontine system is what later led to the development of the stock market in New York, which traded in securities and annuities (Geisst 136). The risks of lending and borrowing could be passed from one individual to another in the form of stock-jobbing. In this regard; stock brokers preferred to trade securities and debts with old stock brokers, who could enjoy benefits for a short while, and then debts pertaining the state would be scrapped off.
Significance of Usury and Debt in 18th Century England
Apparently, the growth of usage of annuities and other forms of debts was adopted by wealthy companies and even the state. For instance, the Britain war in 1692 fostered annuities, as the government turned to the public to source funds to support the war (Geisst 114). Moreover, the availability of funds for investment in the economy led to a significant rise in the purchasing powers of individuals employed to work in the industries.
The ordeal later led to inflation that left the government of England short of funds and means to mitigate the inflation. Furthermore, a panic in the banking and financial markets drove companies to dispose discriminately of shares to end inflation, and also to avoid suffering liabilities. For instance, the south sea bank and investment manipulated its shareholders to get ready for the inflation, but the company had anterior motives that placed it in a better competitive position than the bank of England. Some individuals were so inclined to the usage of debts and usury, in a way that the British opted to adopt colonies abroad to quench the thirst of economic development that had spread out throughout the world.
The development of mercantilist ventures and enterprises made entrepreneurs more conversant to the types of debt and their benefits (Geisst 125). However, the more the knowledge advanced, the more the entrepreneurs were exposed to the reparations of inflation of investments. The use of debts and usury grew uncontrollably to a point where the state built prisons for debtors who could not pay debts. In consequence of the establishment of debtor prisons, eventualities led to the development of the bankruptcy law, which prohibited many cases of incarceration (Geisst 115).
Principally, the increase of borrowers created the need to provide an organized system for borrowing and lending (Geisst 140). Therefore, merchants started organized lending and borrowing to a large scale of people. The first merchant was Campbell, who specialized in small backings (Geisst 140). However, critiques of the banking system attribute major incidences of inflation to inadequate regulation of the banking sector. The fear of inflation was so severe that the government created a prison that would punish debtors who were not inclined to pay back debts.
Economic development at the time was not consistent, because wars that countries engaged in drained most of their reserve funds, and the government had to turn back to the very beginning, to ensure that their wealth was on optimum levels. However, the ordeal of maintaining wealth drove economists such as Adam Smith to criticize the mercantile system and argued that wealth should not be used to advocate for the well-being of a nation, but rather the distribution of that wealth that can provide sustainability even in times of inflation
The relationship between the three themes employed by the author in Chapter three provides an insight into the struggles and achievements of the banking sector, which fosters the use of usury and debt. However, the relationship cannot be overlooked, without establishing the motives behind the creation of banks to harmonize the themes of war, capitalism, and Protestants. Peterson created the first bank to create a link between the government and citizens, to cut down and facilitate the large-scale practice of debt and usury (Geisst 120).
Banks promoted the developments of trade between nations, and also the practice of debt and usury. However, in order to facilitate smooth trade, international banking systems were set up with adaptable configurations, such as the sinking fund system (Geisst 140). Bank such as the House of Rothschild was initiated. Because of the nature of debts, costs of securities fluctuated, and sometimes cause cases of inflation in the economy (Geisst 146). Furthermore, banks made the end goals of capitalists, socialists, and communists to be realized, without causing unnecessary conflicts that would cripple the economic systems, and later jeopardize demographic sustainability. In this regard, the development of usury and debt was mainly inclined to avert plagues and sustain populations.
Charles R. Geisst. Beggar thy neighbor: a history of usury and debt. Penn. University of Pennsylvania Press.2013: