The Interesting Thing About Interest

In addition to his famous quip about “death and taxes” that seems to roam around the interwebs every year come mid-April, Benjamin Franklin’s whimsical monetary musings also extend to something else that strikes fear into all who hear it spoken of: debt.

Debt, arrears, a loan: whatever you might call it, the idea of owing another too much of something or for too long deeply troubled the polymath Founding Father, who warned his readers to “never keep borrow’d Money an Hour beyond the Time you promis’d” and that “The second Vice is Lying; the first is Running in Debt.”

Franklin, whose likeness hangs in terracotta form on the second floor of the Harvard Art Museum, would, in all probability, be fairly disturbed by modern attitudes toward debt — especially amidst what can only be described as an incredibly turbulent time for global financial systems given the recent banking turmoil both in the United States and abroad (looking at you, Credit Suisse). On an individual level, millions of Americans collectively hold almost $1 trillion in high-interest credit card debt, while multiple more trillions exist in the form of debt collateralized by the homes, vehicles, and other goods we deem essential for contemporary living. On a national level, the federal debt, now $31.4 trillion and counting, has long been a fractious target of political jockeying even though its intrinsic differences with household debt make it a relatively tamer concern.

Even so, there is no question that debt constitutes a core pillar of modern society. Some of our most mundane actions, from swiping a credit card to promising to Venmo a friend for lunch, ultimately involve the creation of credit and debit in some form.

But there is a key difference between the former and latter: Whereas refusing to pay off your Visa on time likely entails a not-so-pleasant letter in the mail or knock on the door, your friend will probably be fine if you need a couple more days to scrounge up $20. Moreover, while distant third parties such as credit card issuers charge a sizable interest rate for their lending services, your buddy presumably would not (if they do, consider re-evaluating your friendship).

The very concept of interest is, at its core, largely synonymous with the nature and strength of the relationship between a lender and borrower. While borrowing a lawnmower from your next-door neighbor is usually a no-interest affair, that is only the case because of mutual familiarity, geographical proximity, and the expectation of future reciprocity; you are essentially obligated to be the magnanimous supplier of garden equipment the next time around.

This explains why a rise in social complexity, at least initially, begets the emergence of the interest rate. As the average interpersonal distance increases between the debtor and debtee, expectations of reciprocity become increasingly unrealistic, not only because of spatial or temporal distance but also the growing difficulty to trust the word of a stranger.

It comes as no surprise, then, that written documentation of interest being paid is nearly as old as writing itself; though not currently displayed, this second millennium BCE Assyrian cuneiform tablet from the Harvard Art Museums collection dictates the addition of interest to a loan of silver shekels and is an excellent illustration of interest’s descent from antiquity.

Remarkably, impassioned rhetoric against the charging of interest appears in the historic record more or less at the same time. On a visit to the Renaissance gallery in the Harvard Art Museum during my recent financial musings, I noted a multitude of depictions of Saint Jerome — who, as it so handily turns out, was one of the fiercest detractors of “usura,” the Latin term he chose to express the multiple Biblical prohibitions of abusive lending practices and the etymological parent of “usury” in modern English.

Leviticus 25:35-37 spells out the antipathy toward interest in Scripture most precisely:“Take no interest from [your brother] or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”

The belief encapsulated here that fellow brethren, particularly of the same faith, should not demand a fee for a loan or favor makes perfect sense if you see interest as something born fundamentally out of the exigencies of civilizations growing in both social complexity and distance. In essence, most “anti-usury” efforts, from the historic proclamations of religious teachers to the ongoing campaign in the United States to forgive billions of student loan debt, represents a nostalgic yearning for a time when fraternal trust was much more free-flowing.

And perhaps, it really would be a good idea to reconsider our shared attitudes toward debt and interest. After all, there is no better time than now: The tightening of interest rates by the Federal Reserve over the past year has largely driven the many bank runs and general economic chaos that we’ve come to witness as of late.

Is a society where entire livelihoods are built on debts of various shades, and where hikes in interest rates become points of collective obsession, truly in line with the congenial aspirations of mutual well-being and fortune that we share just as much? You be the judge.

Alexander Junxiang Chen ’24 is a Neuroscience and Chemistry concentrator in Quincy House. His column “Artifactual” appears on Thursdays.