Why was charging interest once a sin?

For centuries, in many religious and philosophical traditions, charging interest was not just frowned on: it was condemned, and in medieval Christianity it could cost you the sacraments. The word usury originally meant any interest at all, and it was denounced by a long list of religious leaders and philosophers, from Plato and Aristotle to Gautama Buddha and Muhammad. Today the word means something narrower: either a moral charge, taking advantage of others' misfortunes, or a legal one, an interest rate above the maximum the law allows.

The Christian rules grew stricter over time. In 325 the First Council of Nicaea forbade clergy from lending above 1 percent a month. Later, the Third Lateran Council decreed that people who took interest could receive neither the sacraments nor a Christian burial. Dante went further in the Divine Comedy and placed usurers in the inner ring of the seventh circle of hell.

The reasoning came from philosophy. Aristotle argued that interest is unnatural, since money is sterile and cannot reproduce itself. Thomas Aquinas added that it amounts to double charging, for the thing and for the use of the thing. It is like selling a bottle of wine and then charging again for drinking it.

Yet commerce did not stop. Banning usury did not prevent investment: an investor could share in the profit as long as he also shared the risk, as a partner in a venture. Medieval financiers also invented workarounds, such as the zinskauf, an exchange of a fixed sum for yearly income that counted as a sale rather than a loan.

Opinions shifted in the Renaissance, as borrowed money began to fund production, not just consumption. Charles Eisenstein argues that a pivotal change came with Henry VIII's 1545 act in England, which made charging interest lawful. In Islamic teachings, usury, riba, remains forbidden, though the exact definition is debated, and interest-free Islamic banking grew in the later twentieth century.