THE CHARITABLE LOAN At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the LORD'S release. Of a foreigner thou mayest exact it again: but that which is thine with thy brother thine hand shall release; Save when there shall be no poor among you; for the LORD shall greatly bless thee in the land which the LORD thy God giveth thee for an inheritance to possess it. Only if thou carefully hearken unto the voice of the LORD thy God, to observe to do all these commandments which I command thee this day (Deut. 15:1-5).
The theocentric focus of this law is God's sabbath. There had to be a scheduled resting in the Promised Land: of the land, of agricultural workers, of domesticated farm animals, and of at least one form of debt. God had rested on the seventh day; Israel was to rest in the seventh year. The law of the sabbath was announced in the fourth commandment. This placed it under point four of the biblical covenant model: oath/sanctions.(1) The release from work was a positive sanction. So was the release from debt. "Forgive us our debts" (Matt. 6:12) remains a valid prayer.
This release from debt was called the Lord's release. The Hebrew word here translated "release," shawmat, means "rest" or "throw down." The mandatory resting of the land in the seventh year is related grammatically to the release from debt: "But the seventh year thou shalt let it rest and lie still; that the poor of thy people may eat: and what they leave the beasts of the field shall eat. In like manner thou shalt deal with thy vineyard, and with thy oliveyard" (Ex. 23:11).
The blessings of God were once again said to be tied to national obedience. Israel's inheritance of the land was ethically conditional. Law, positive sanctions, and inheritance were a covenantal unit. This means that law, negative sanctions, and disinheritance were equally a covenantal unit. The positive sanction of rest was explicitly tied to the maintenance of the national inheritance. This rest included rest from debt.
This was a land law: "for the LORD shall greatly bless thee in the land which the LORD thy God giveth thee for an inheritance to possess it." It was tied to Israel's system of covenantal release. The sabbatical year is no longer required, for this law applied only to Canaan, when the date of Israel's entry into the land could be accurately determined. The sabbatical was tied to the calendar of the feasts.
Loans to the Poor There was an annulment provision in this law of debt release. It would not apply when there were no longer poor people in the land (v. 4). This should be regarded as hyperbolic language. "For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land" (v. 11). But the fact remains that in some unique way, this law was connected judicially to the presence of poor people in the land. This exclusionary clause should alert us to the possibility that this law was not universal in scope or application. It was tied in some way to the both the poor and the land.
Moses explained the application of this law. It was explicitly related to poor people. "If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother: But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth" (Deut. 15:7-8). There was a strong element of moral obligation here.
What did the word mean, "wanteth"? The same Hebrew word, khawsare, is used to describe God's care for them in the wilderness. They lacked nothing. "Yea, forty years didst thou sustain them in the wilderness, so that they lacked nothing; their clothes waxed not old, and their feet swelled not" (Neh. 9:21; emphasis added). Yet the exodus generation had complained continually that they lacked everything good which they had possessed in Egypt. In response, God kept them wandering in the wilderness. He disinherited that generation. So, the idea of "want" in this context is serious poverty, where one's work or life are in danger. Such a lack of basic necessities is not common to covenant-keepers: "The LORD is my shepherd; I shall not want" (Ps. 23:1).
There were sanctions attached to this law because it was a subset of a larger category of biblical laws: charity. "He that giveth unto the poor shall not lack: but he that hideth his eyes shall have many a curse" (Prov. 28:27). These promised negative sanctions were neither civil nor ecclesiastical. There is no suggestion that any covenantal institution had the right or obligation of threatening formal negative sanctions against individuals who disobeyed this law. These promised sanctions were historical and individual. The Bible is clear about the presence of these sanctions in history. God imposed them directly, apart from any intermediary covenantal authorities.
The mandated discipline here was self-discipline. The man with money to lend was to consider the plight of the poor man. He was to evaluate the causes of the poor man's poverty. Having determined that the person was not poor because of bad habits, the man with money was to lend generously. If he did, he would be rewarded: a positive sanction. "Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him nought; and he cry unto the LORD against thee, and it be sin unto thee. Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the LORD thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto" (vv. 9-10). Again, it was God, not the State, who would reward the generous lender. This is why this law had nothing to do with civil sanctions. Biblical civil sanctions are exclusively negative. The Bible does not authorize compulsory wealth redistribution.(2)
Lending and Dominion In the middle of this passage, there is a requirement that has nothing to do with lending to the poor. This passage is extremely important in establishing the legitimacy of money-lending as a profession: "For the LORD thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee" (v. 6).
Here is a legitimate reason to seek wealth: to become an international money-lender. There is a reason to become a money-lender: to increase the influence of your covenant-keeping society. The lender is the master over the borrower. To seek such mastery over other nations is legitimate. To be in a financial position to lend to covenant-breaking nations is a blessing of God. His kingdom is advanced by such lending. Conversely, it is a curse to be in debt to other nations.
The text here is not talking about what is today called foreign aid, which is in fact State-to-State aid: using tax money extracted from the residents of one nation to fund State-funded projects in another nation.(3) It is talking about the aggregate debt or credit positions of a covenant-keeping society: the net effects of voluntary, individual decisions to lend to or borrow from foreigners. When men are future-oriented, they are willing to lend at low rates of interest. They have what Mises calls low time-preference. When men are present-oriented, they are willing to pay high rates of interest.(4) Edward Banfield calls these two groups upper class (future-oriented) and lower class.(5) There is a profitable voluntary transaction possible between members of both groups: a future-oriented person can profitably lend to present-oriented person. This transaction is profitable on both sides. Both actors get what they want. But there is a superior and inferior here. "The rich ruleth over the poor, and the borrower is servant to the lender" (Prov. 22:7). While a present-oriented person gains access to the money or goods he wants immediately in exchange for a promise to repay the lender in the future, he does not gain this advantage at zero cost. He becomes a servant. But this is his choice. It is not a matter of compulsion.
The Bible makes it very clear that there are legitimate hierarchies in this life. Point two of the biblical covenant model is hierarchy.(6) One of these hierarchies is economic: lender over debtor. Another is social: master over servant. These hierarchies are individual. They are also social. They are also international.
This verse clearly recommends becoming an international lender. It very clearly discourages becoming an international debtor. This is another way of saying that it is an advantage to be future-oriented and a disadvantage to be present-oriented. The covenant-keeper is supposed to be future-oriented. He is supposed to be thrifty. Accumulating capital for the purpose of becoming a lender is a good thing for covenant-keepers.
How does a person accumulate capital? By spending less than he receives. That is, he accumulates capital by becoming a net exporter of goods and services. He takes in more money than he spends. What is true of an individual is equally true of a nation. I do not necessarily mean merely a nation-State; I mean a nation: a covenantally oath-bound society. To become an international money-lending society, a nation must be filled with future-oriented people who are net exporters of goods and services. They can lend abroad only because they sell abroad. They have money to lend abroad because they earned money from abroad which they lend to people in those societies that ran trade deficits with them. The trade surplus in the broadest sense creates a balance (equality) of payments surplus (inequality). But how can there be a surplus if there is balance? Because there is a balance of assets: goods and services (assets) exported = goods and services (assets) imported + money loaned out (future income: asset). This equation applies also to an individual who is accumulating capital.
This verse makes it clear that the nation of Israel was to become a money-lending nation by means of international trade. It was to become a trade surplus nation, i.e., a net exporter of goods, services, and money. The money exported (lent) out had to come from the surplus of exports over imports. Goods flowed out; money and goods flowed in. The lower the percentage of goods that flowed back in, the larger the percentage of money that flowed back in. Then this money was lent back out. This is the model followed in the post-World War II era by the Asian "tigers": first Japan; then Hong Kong, Taiwan, South Korea, and Singapore. Their domestic economies have been export-driven. Their businesses have learned how to compete in international markets. Their citizens in the aggregate have run net trade surpluses by becoming international lenders. This process is a unit: two sides of the same coin. Then the coin is lent at interest.
The Israelite Bondservant After the discussion of morally obligatory lending, the text introduces what appears to be a wholly unrelated topic: the Israelite bondservant. This bondservant was to be released in the seventh year.
And if thy brother, an Hebrew man, or an Hebrew woman, be sold unto thee, and serve thee six years; then in the seventh year thou shalt let him go free from thee. And when thou sendest him out free from thee, thou shalt not let him go away empty: Thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy winepress: of that wherewith the LORD thy God hath blessed thee thou shalt give unto him. And thou shalt remember that thou wast a bondman in the land of Egypt, and the LORD thy God redeemed thee: therefore I command thee this thing to day (vv. 12-15).
There is something missing here: an explanation of the difference between this kind of Israelite bondservant and the Israelite bondservant described in Leviticus 25:
And if thy brother that dwelleth by thee be waxen poor, and be sold unto thee; thou shalt not compel him to serve as a bondservant: But as an hired servant, and as a sojourner, he shall be with thee, and shall serve thee unto the year of jubile: And then shall he depart from thee, both he and his children with him, and shall return unto his own family, and unto the possession of his fathers shall he return. For they are my servants, which I brought forth out of the land of Egypt: they shall not be sold as bondmen. Thou shalt not rule over him with rigour; but shalt fear thy God. (Lev. 25: 31-43).
Here is an Israelite bondservant who was purchased by another Israelite. He remained a bondservant until the jubilee. This could be as long as 49 years. Yet the text in Deuteronomy 15 insists that the Israelite bondservant be released in the seventh year. How can these two laws be reconciled?
A Question of Collateral
The person described in Leviticus 25 was a person with no land to return to. What redeemed him from bondage was the return of his land at the jubilee (Lev. 25:13). Because he had no land in the interim, he could find himself without the means to repay a commercial loan. He defaulted on his loan, and he was then sold into bondage to repay it. The presumption of the passage is that he no longer held title to any land. He was landless until the jubilee. He had no collateral for the loan other than his own labor. So, when he defaulted, he lost his freedom.
The collateral for a loan could be either goods or services. Goods could easily be pledged and transferred at the time of default. Labor services could be transferred, too, but they involved the loss of freedom for a specified period of time. If goods were pledged, their transfer redeemed the loan. But what was the value of a person's labor services? To assess this, there had to be a labor market. There was a market for long-term labor services. We would call it a slave market. An Israelite's enslavement was legally limited; it could not exceed 49 years. This limitation did not apply to foreigners (Lev. 25:44-46). Why not? Because an Israelite's redemption out of bondage was by rural land ownership: part of the original inheritance attained by the conquest generation. When the Israelite bondservant's land was returned to him, he could return to his land. He thereby gained redemption from bondage.
An Interest-Free Loan
There was another distinguishing factor: the circumstances of a loan. The Israelite who had no land to pledge for a loan was considered a poor risk. He had lost control over it for some reason. Perhaps he had lost it by having to repay a previous loan. So, the lender wanted security for his loan. He wanted long-term labor services that would command a market price high enough to guarantee his repayment.
But what of the poor man in Deuteronomy 15:12? He was morally entitled to a loan. More than this: he was entitled to an interest-free loan. "If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury" (Ex. 22:25). "And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger [geyr], or a sojourner [toshawb]; that he may live with thee. Take thou no usury of him, or increase: but fear thy God; that thy brother may live with thee. Thou shalt not give him thy money upon usury, nor lend him thy victuals for increase" (Lev. 25:35-37). A poor man had a superior claim on a righteous man's loanable funds. This was not a commercial loan. Commercial loans were legitimate. The non-resident alien [nokree] had no claim to an interest-free loan. "Unto a stranger [nokree] thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury" (Deut. 23:20a). But an interest-free loan was morally compulsory in Mosaic Israel in a way that a commercial loan was not.
The poor man who sought an interest-free loan could be asked to pledge his cloak, but it had to be returned to him by evening (Ex. 22:26). This kept him from pledging an asset that was already pledged, but it meant that only a nearby neighbor would lend to him -- a person who would know his character and the reasons for his present poverty.
The interest-free loan proved that the borrower was at risk of bondage only until the sabbatical year of release. He was not at risk until the jubilee. The presence of interest proved that he was at risk for a longer period: until the jubilee. The zero-interest loan was morally obligatory on the lender. The interest-bearing loan was not. The person seeking an interest-bearing commercial loan had no moral claim on the prospective lender. He was at greater risk in case he defaulted.
In the year of release, the lender was to provide the borrower with capital: "Thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy winepress: of that wherewith the LORD thy God hath blessed thee thou shalt give unto him" (Deut. 15:14). "It shall not seem hard unto thee, when thou sendest him away free from thee; for he hath been worth a double hired servant to thee, in serving thee six years: and the LORD thy God shall bless thee in all that thou doest" (v. 18). There was no such obligation on the lender when a long-term Israelite bondservant departed in the jubilee year. He would return to his land empty-handed. But the poor man who defaulted on a charitable loan apparently had no land to return to. Perhaps he had pledged his land earlier, and had lost control over it. He was to be given animals, food, and wine at his release.
What if the man released in the sabbatical year did not want to face the trials of life without his landed inheritance? What if the jubilee was years away at the time of the first sabbatical year after his bondage began? In that case, he might choose to remain with the lender. The subsequent passage sets forth the ritual terms of permanent bondservice: the pierced ear (Deut. 15:16-17). This covenantal mark of bondage obligated only him, not his adult heirs. If he came into bondage as a poor man by way of a default on an interest-free charity loan, his adult heirs could not be obligated to stay with him. He took the oath of allegiance in his own name only.
New Testament Applications The New Testament Christian faces an even more rigorous requirement: "But love ye your enemies, and do good, and lend, hoping for nothing again; and your reward shall be great, and ye shall be the children of the Highest: for he is kind unto the unthankful and to the evil" (Luke 6:35). Even a poor non-resident alien is now to become the beneficiary. The man with assets is to lend to this person without hope of repayment. A charity loan is still governed by the Old Covenant rule: no interest.
Does this mean that every potential borrower's request must be granted? No; the charity loan is still limited by the rule that evil is not to be subsidized. The moral character and habits of the borrower must be known to the lender. The lender must make an evaluation: Is this a truly poor man whose economic troubles are not of his own making? There is no obligation on anyone's part to subsidize incompetence born of immoral or present-oriented behavior.
The person with assets to lend may choose to have a representative agency make this evaluation for him. He may decide to loan money to the agent or organization, allowing someone else to decide who deserves an interest-free loan. Such loans are to be made on the same basis as the Mosaic charitable loan: no interest. We are not to loan money at interest to charitable organizations. The idea of interest-paying church bonds is abominable.(7) If churches or non-profit Christian organizations choose to raise money, let the members and supporters borrow the money in the commercial loan market and give it to the church (best), or lend this money at zero interest (second-best). If Christian organizations must borrow money at interest, let them borrow from unbelievers or commercial banks. But this is a third-best decision, for it places the church in a subordinate position to covenant-breakers: the servanthood of the debtor. It is a dark day when God's church is in hock to unbelievers through commercial banks. It may have to be done, but it is a dark day when it is done.
In modern times, there is no provision for collateralized labor, i.e., a period of legally enforceable debt servitude. For charitable loans, this is a good rule; for commercial loans, it is not. Today, there is also no national year of release. This is legitimate; Israel's national sabbatical year was an aspect of the Mosaic land laws: the inheritance. Furthermore, the jubilee was an aspect of the original conquest. It no longer has any judicial or covenantal purpose.
The Limits on Debt
The New Testament rule governing charity loans has broadened the Mosaic limits. Christians are to lend at zero interest to the righteous poor without hope of any repayment. The absence today of an enforceable period of debt servitude does not affect this obligation. If anything, it reinforces it. The very absence of such a period of servitude points to the New Testament rule: lend without hope of repayment.
Would it be illegitimate for a society to legislate such a requirement, though not a period longer than the six-year limit of Deuteronomy 15? We must ask: On what basis? If the sabbatical year was a land law, which it appears to have been, then the annulment of Mosaic Israel's special covenantal position removes that as a justification. What covenantal legal principle might legitimately be substituted? Not the sabbath law. Paul was clear: "One man esteemeth one day above another: another esteemeth every day alike. Let every man be fully persuaded in his own mind" (Rom. 14:5). The enforcement of the sabbath is not to become an aspect of judicial sanctions. The locus of enforcement has shifted to the individual.(8)
There was never any moral obligation to make commercial loans under the Mosaic covenant. This is still the case. There remains a moral obligation to loan at zero interest to the brother in the faith or a righteous resident alien. This law had nothing to do with seed or land. This is why the uncircumcised resident alien was morally entitled to a zero-interest emergency charity loan. It was a law governing personal relations among people who agreed to live under the legal terms of God's civil covenant. It was a land law, but not a Promised Land law. It was a covenantal land law: a cross-boundary law that would apply to any nation formally covenanted under God.
Today, Western nations are only rarely formally covenanted under God, and none acknowledges the Bible to be the supreme law of the land. There is therefore no equal moral obligation to lend to resident aliens. This biblical obligation depends on the society's view of debt and the moral outlook of the poor neighbor. If the poor man is an honest man who is in a crisis through no fault of his own, then he is morally entitled to a zero-interest charity loan from a true believer in the God of the Bible. But, like the poor man in Exodus 22:26, he can legitimately be asked to surrender his cloak as collateral. This is a means of seeing to it that he does not indebt himself to many lenders simultaneously. This is an institutional restraint on debt servitude which should be honored today. To lend, hoping for nothing in return is one thing; to devise a system which encourages poor people to run up large debts on the basis of no collateral or multiple loans on the same piece of collateral is something else. Honest, hard-working, otherwise future-oriented people should not be encouraged to become servants to debt. Extending credit to present-oriented people who are willing to pay high rates of interest on commercial or consumer loans is legitimate (Deut. 15:6). It is not legitimate to encourage future-oriented people who are trapped by circumstances beyond their control to go ever-deeper into charitable debt. They should also be encouraged to repay all debts to avoid a life of servitude. A sign of spiritual maturity is debt-free living. A sign of even greater spiritual maturity is debt-free lending.
There is no longer a six-year debt limit on this moral obligation to repay. The New Testament extends greater mercy, but it imposes greater moral maturity in paying off debts and avoiding them in the first place. "For yourselves know how ye ought to follow us: for we behaved not ourselves disorderly among you; Neither did we eat any man's bread for nought; but wrought with labour and travail night and day, that we might not be chargeable to any of you: Not because we have not power, but to make ourselves an ensample unto you to follow us. For even when we were with you, this we commanded you, that if any would not work, neither should he eat" (II Thess. 3:7-10).
Conclusion The interest-free loan was a charitable loan. It was morally obligatory, though not legally obligatory, for an Israelite with surplus assets to loan to a poor Israelite brother or a poor resident alien on an interest-free basis. Such a loan involved the threat of a six-year maximum period of bondservice in case of a default. Liberation day was the national sabbatical year, which was also the year of release for all charitable loans. This was a very different kind of loan from an interest-bearing commercial loan that was collateralized by an Israelite's land or labor until the next jubilee. In the case of a non-Israelite, a default on a large commercial loan could lead to inter-generational slavery (Lev. 25:44-46).(9)
The early church and the medieval church misinterpreted the Mosaic laws governing charitable debt. A series of church councils and decrees placed extensive prohibitions on interest-bearing loans.(10) This hampered the growth of industry for over a thousand years. It also placed Christians into debt to Jews, who had no restrictions on lending at interest to gentiles. This created great hostility on the part of gentiles and led to repeated violence and defaults on loans, especially by gentile governments.
Footnotes:
1. Gary North, The Sinai Strategy: Economics and the Ten Commandments (Tyler, Texas: Institute for Christian Economics, 1986), pp. xvi-xvii; ch. 4: "Sabbath and Dominion."
2. David Chilton, Productive Christians in an Age of Guilt-Manipulators: A Biblical Response to Ronald J. Sider (3rd ed.; Tyler, Texas: Institute for Christian Economics, [1985] 1996).
3. P. T. Bauer, Dissent on Development: Studies and debates in development economics (Cambridge, Massachusetts: Harvard University Press, 1972), pp. 95-135.
4. Murray N. Rothbard, Man, Economy, and State: A Treatise on Economic Principles (Princeton, New Jersey: Van Nostrand, 1962), pp. 323-33. Reprinted by the Mises Institute, Auburn, Alabama, in 1993.
5. Edward C. Banfield, The Unheavenly City: The Nature and Future of Our Urban Crisis (Boston: Little, Brown, 1970), pp. 48-54.
6. Ray R. Sutton, That You May Prosper: Dominion By Covenant (2nd ed.; Tyler, Texas: Institute for Christian Economics, 1992), ch. 2.
7. Gary North, "Stewardship, Investment, and Usury: Financing the Kingdom of God," in R. J. Rushdoony, The Institutes of Biblical Law (Nutley, New Jersey: Craig Press, 1973), Appendix 3.
8. North, Sinai Strategy, pp. 85, 255.
9. Gary North, Leviticus: An Economic Commentary (Tyler, Texas: Institute for Christian Economics, 1994), ch. 31.
10. J. Gilchrist, The Church and Economic Development Activity in the Middle Ages (New York: St. Martins, 1969), Documents. Gilchrist provides translations of numerous texts, from Nicea (325) on, that dealt with usury. The premier study of the late medieval church's position is John T. Noonan, The Scholastic Analysis of Usury (Cambridge, Massachusetts: Harvard University Press, 1957). For a summary, see Noonan, "The Amendment of Papal Teaching by Theologians," in Charles E. Curran (ed.), Contraception: Authority and Dissent (New York: Herder & Herder, 1965), pp. 41-75.
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