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  #1  
Old 01-20-2010, 11:18 AM
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John Calvin capitalism and moneylending in 16th century Europe

Just read Calvin's letter on usury. He permits Christian to borrow money but forbids them to be usurers. His argument in favor of lending is generally utilitarian. He has one odd proviso. Christians should only borrow if the profit they can make on the borrowed money is equal to or greater than the amount borrowed.
Anyone have any idea why he would require such a large profit. I have no idea what interest rates were in his day or how lending actually worked but the rule struck me as very odd and I'm trying to make sense of it in the context of early capitalism.

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Old 01-20-2010, 11:48 AM
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Originally Posted by kerry View Post
Just read Calvin's letter on usury. He permits Christian to borrow money but forbids them to be usurers. His argument in favor of lending is generally utilitarian. He has one odd proviso. Christians should only borrow if the profit they can make on the borrowed money is equal to or greater than the amount borrowed.
Anyone have any idea why he would require such a large profit. I have no idea what interest rates were in his day or how lending actually worked but the rule struck me as very odd and I'm trying to make sense of it in the context of early capitalism.
When I was in Singapore, there used to be signs in 4 major languages outside the liquor store. Read it carefully: Persons under the age of 18 are not permitted to consume intoxicating beverages on the premises. What does this mean? You can send your 12 yo to the liquor store and have him pick up a pack of smokes and a case for Daddy. At any age, you could go buy booze as long as you don't drink it there. Of course there is such a heavy tax on booze that kids can't afford it. They were not prohibited specifically but it was priced out of their range.

Another thing. There was no curfew. Kids can do whatever they want. Oh, the bus system shut down at midnight and taxis were at double time then. Curfew but no curfew unlike the Americans who seem to champion freedom but have curfews.

Same principle. You can borrow but you have to be able to make a highly improbable sum of money from that borrowing. So I am not saying you cannot borrow. You just have to be able to justify it.
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Old 01-20-2010, 12:21 PM
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Interesting. A lot of ink has been spent on explaining the relationship of Calvinism to the rise of capitalism If what you say is correct, and people took the rule seriously, it would mean that only the shrewdest of business ventures could be pursued. Did this have any effect on the rapid growth of capitalism in Europe, pushing modest business ventures to the margins and encouraging only the most profitable business plans? In other words, concentrating capital in the most profitable businesses?
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Old 01-20-2010, 12:38 PM
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Interesting. A lot of ink has been spent on explaining the relationship of Calvinism to the rise of capitalism If what you say is correct, and people took the rule seriously, it would mean that only the shrewdest of business ventures could be pursued.

Did this have any effect on the rapid growth of capitalism in Europe, pushing modest business ventures to the margins and encouraging only the most profitable business plans? In other words, concentrating capital in the most profitable businesses?
I don't think so. People will say much to your face. Believe in few of them and do even fewer. That is why I eschew those grateful complements people give. I am not intersted in what you have to say about how wonderful I am. As I have said, nothing says "I love you" better than a BJ. Don't tell me how much you love me. I can't hear it. Speak into the mic.

Some will take the rule seriously and the smarter ones will pay it lip service. One of my fav stories was that Nam was poor and grew just about enough to feed the people. One bad harvest, they had to import broken rice (cheap stuff. Kinda like rejects) to feed the people. The govt couldn't afford it so they told the farmers they could keep what they made. THE NEXT YEAR, the exported a few tons of rice. Since then, they have been exporting rice. Govt did the same with aquaculture and they are #4 or #3 exporters of shrimp in the Asia region.

After all, if you must make $1000 because you borrowed $1000, few, if any businesses could guarantee such an ROI except with illegal drugs. The best I can say is that it discouraged the less capable and confident but not much else. After all, if people can be that soft in the head as to listen to some bozo on a pedestal about profit when that guy hasn't made a dime himself, what good are they in the business world?
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Old 01-20-2010, 12:47 PM
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The best I can say is that it discouraged the less capable and confident but not much else. After all, if people can be that soft in the head as to listen to some bozo on a pedestal about profit when that guy hasn't made a dime himself, what good are they in the business world?
There was no 'business world' in the modern sense at the time. If the modern corporation had been invented when he wrote it, it only had been around for a few decades at best. Calvin and his idea were very influential in Europe, particularly Scotland, and also in the USA as modern corporations were evolving. So, if it only served to keep less capable businessmen out of the field, that magnified over a few generations, could have a substantial effect on the growth of the economy.
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Old 01-20-2010, 12:55 PM
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There was no 'business world' in the modern sense at the time. If the modern corporation had been invented when he wrote it, it only had been around for a few decades at best. Calvin and his idea were very influential in Europe, particularly Scotland, and also in the USA as modern corporations were evolving. So, if it only served to keep less capable businessmen out of the field, that magnified over a few generations, could have a substantial effect on the growth of the economy.
Only if their numbers were substantial. OTOH, if it kept 1 out of 100 out of business, is the effect significant? Would the few who were mediocre really make that much of a difference?
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Old 01-20-2010, 01:11 PM
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The US small business failure rate in the first 3 years is around 70% the last time I read about it. Not sure exactly what percentage of change in those numbers would have a substantial effect in a couple of generations, but forbidding investment in marginal enterprises would seem to be good for the economy. I would imagine this is one reason why an authoritarian country like China has been so good in competing in the world market. Capital is not wasted on millions of small stupid unsuccessful business ventures and is concentrated in closely analyzed large ventures.
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Old 01-20-2010, 01:14 PM
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The US small business failure rate in the first 3 years is around 70% the last time I read about it. Not sure exactly what percentage of change in those numbers would have a substantial effect in a couple of generations, but forbidding investment in marginal enterprises would seem to be good for the economy. I would imagine this is one reason why an authoritarian country like China has been so good in competing in the world market. Capital is not wasted on millions of small stupid unsuccessful business ventures and is concentrated in closely analyzed large ventures.
Well, also the fact that they are hungry while we are not. A lot of our people have an entitlement mentality that is grown by the entitlements we give them. That pulls down the whole group. Even an animal that is normally a weak cowardly thing will fight if cornered. They feel the corner, we don't.
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Old 01-20-2010, 01:17 PM
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There's a longstanding argument that Calvinism taught people to think that they weren't really entitled to anything, causing the rise of capitalism. If you combine that argument with this apparently odd requirement of high return on borrowed money and the cultural principles for the expansion of capitalism begin to come together.
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Old 01-20-2010, 01:26 PM
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There's a longstanding argument that Calvinism taught people to think that they weren't really entitled to anything, causing the rise of capitalism. If you combine that argument with this apparently odd requirement of high return on borrowed money and the cultural principles for the expansion of capitalism begin to come together.
In theory, yes. It would have you make damn sure that it would succeed. However, in practice, how many people do you think it influenced? IOW, how many do you think decided "Oh, I can't make that kind of money. Best not borrow and stay home" and how many decided "I can do it. I'll go borrow the money." vs the others who paid lip service to it?

In theory, it would weed out the non hackers but in practice, would it be different?
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Old 01-20-2010, 01:37 PM
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Well, something in Northern European culture caused capitalism to take off between 1500 and 1850. Obviously access to natural resources in the new world had something to do with it but there also must have been cultural reasons. Calvinist countries like Scotland and Holland were really successful so it seems reasonable to look for some cultural causes in Calvinism. I'm pretty sure that at the time Calvin wrote down his ideas about usury and rate of return on borrowed money the Catholic church was still opposed to usury. I'll have to check into that. That would account for why Protestant cultures had a leg up in capitalist expansion over Catholic cultures.
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Old 01-20-2010, 01:45 PM
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Well, something in Northern European culture caused capitalism to take off between 1500 and 1850. Obviously access to natural resources in the new world had something to do with it but there also must have been cultural reasons. Calvinist countries like Scotland and Holland were really successful so it seems reasonable to look for some cultural causes in Calvinism. I'm pretty sure that at the time Calvin wrote down his ideas about usury and rate of return on borrowed money the Catholic church was still opposed to usury. I'll have to check into that. That would account for why Protestant cultures had a leg up in capitalist expansion over Catholic cultures.
Could it be that they simply saw their neighbor getting rich and wanting some of the spoils themselves? If they had more access to natural resources and exploration, etc, etc, it would make it easier for someone to get the idea that there is more out there and I want mine.
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Old 01-20-2010, 02:18 PM
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There's a longstanding argument that Calvinism taught people to think that they weren't really entitled to anything, causing the rise of capitalism. If you combine that argument with this apparently odd requirement of high return on borrowed money and the cultural principles for the expansion of capitalism begin to come together.

Consider also that the only people in many countries who made really big money were the ones in the trading companies who fought pirates, stole land and gold from natives, worked them to death, and/or sold them as slaves.

What's a measly 100% ROI when you can throw out the rules and do what you want in the guise of "enlightening the savages and bringing them civilization and Christianity?"

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