What’s Your Interest

The National War Tax Resistance Coordinating Committee (NWTRCC) has in its office a slim booklet called “Interest for Radicals: A Collection of Polemics,” put together in 1991 by Ed Agro and Aaron Falbel, two war tax resisters from New England.

Interest is, well, an interesting subject. Why should it be important to war tax resisters?

By pooling together the money we refuse to pay to the war machine, war tax resisters have the opportunity to build a different economy. In fact, the actual building of alternative economies and alternative economic institutions is the “other half” of war tax refusal.

Many alternative funds use the instrument of interest towards a greater good. Some alternative funds refuse to take interest. Why? Read below to find out more. Whichever way we come down on the topic of interest, the editors of the booklet urge war tax resisters to engage in the dialogue and to create more people-centered economies.

There are seven short articles in the booklet. We are reprinting three of them. The first, as it appears first in the booklet, is by Juanita Nelson. The second is by Bob Irwin, and the third is a rejoinder by Juanita.

On Interest

By Juanita Nelson

I consider war tax refusal an essential step in the direction of a saner society, when a society is squandering its substance on war waging and preparation. But if I stop at that point I haven’t got the point. Another imperative for me is to look at economics, beyond the use and abuse of federal tax funds, and to take whatever faltering steps I can in the light of insights as I gain them.

An insight I gained many years ago concerns interest, or the ability of money to multiply, to grow, to reproduce itself. I examined the concept inside out, upside down, top to bottom, and concluded that money has no reproductive powers. A hundred pennies sealed in a jar for however many years remains a hundred pennies. It makes no difference if the jar rests on your desk or in the vault of a bank or is invested in the Sleight-of-Hand Corporation. (Experiment with the jar of pennies on your desk.)

Interest is a construct invented so that, as John Ruskin observes in Unto This Last, some can take advantage of other’s distress. If I lend you a hundred dollars that I have no need of at the moment, or that I obviously can manage without, why would I demand a hundred and ten from you within a year instead of merely the original hundred? I would have done nothing to deserve the ten dollars. It would result from work you had performed and therefore, according to my calculations, I would be extracting ten dollars worth of your labor.

For a paragraph, I’d prefer to remove the discussion from the distraction of dollars or money, only a representation of the real thing. What I’m really dealing with is the product of labor applied to natural resources, the only combination I am aware of which yields wealth. (No matter how many dollar bills, of whatever denomination, are thrown to the ground, they cannot dig a hole, as one person can.) So I, having a surplus, let you use ten bushels of corn to supplement your poor crop, a supplement without which you must go hungry much of the winter. But I stipulate that the next year you must return to me not the ten bushels you had from me, but eleven. If we assume that it takes equal amounts of time to grow a bushel of corn, I would be usurping a bushel of corn’s worth of your time, your labor. With what justification?

So, the first thing to ask about interest is, what is it? And the answer appears to be: appropriation of another’s labor — though the ultimate victims of that appropriation may be many times removed from our immediate view — maybe just a polite way of saying robbery. If this sounds harsh, listen to Cicero in De Officius, 44 B.C.: When Cato was asked what was most profitable in the way of property, he replied, “good pasture.” And when the man who asked the question said, “And what about lending at interest?” Cato answered, “What about manslaughter?” I was pleased also to be backed up by economist Maynard Keynes: “At the base of today’s acquisitive society is legalized usury, or lending money at interest.”

Pioneer Valley War Tax Resisters reluctantly keeps a small bank account to enable check processing. Some years ago we agreed that taking interest on the piddling sum was contrary to all we believed in. We approached the bank to ask that we not be credited with interest. We went from a surprised receptionist to a nonplussed teller to an adamant president, who told us their charter required them to give us the interest. It was only after I recounted an experience in Philadelphia where I had been allowed to forego the unwanted sum that the president decided he could honor our request. Not only that, he consented to what we’d mentioned only offhandedly because we thought it would be too much — we could return the interest we had previously collected! Which we did. We had won permission not to take money we didn’t want.

It might be instructive to enumerate all the reasons given as rationale for interest, why some consider it even a right and reasonable thing. But that can wait for another issue, perhaps another author.

Interest and Economic Transformation

by Bob Irwin

I am convinced that we need a better economic system in order to move from the war era to global peace; but I disagree with the idea that interest is an evil to be eliminated.

Amid the impassioned attitudes and invoking of authorities, a simple reality has been obscured. The article that initiated this discussion advocates that we refuse interest money earned by any bank deposits we may have, and insist instead that the banks keep it! Money that could be given to aid the poor at home and abroad, or to fund efforts to end oppression and war, or even just to make our own lives easier — this, we are told, should instead be donated to bankers!

It would take a Mark Twain to comment adequately on the irony of such a position being advocated by any dedicated radical. Do any of us really believe the average banker is our best ally in the struggle for peace and freedom? It would be better, I think, to take our interest dollars and burn them on the sidewalk in front of the bank than to leave them to the bankers — and better still if some poor person snatched the money from our hands before it turned to ashes.

Whether Aristotle (who considered women inferior and favored slavery) or Gandhi or any other famous name approved interest or not is no excuse for not thinking the matter through for ourselves. (Anybody remember the slogan “Question Authority”?)

Let me briefly offer another view of the nature of interest, and then sketch the role interest plays in three important efforts to transform economic life.

How “barren metal” can “breed” is no more mysterious than how an empty room can earn money. Interest is not robbery; it is rental income on money. It is no more (nor less) ethically dubious than subletting a room in one’s house or apartment. (Any “voluntary” exchange between people with unequal bargaining power can be unfair, but this point applies to all transactions, not just to money-lending.)

Like other rent, interest is related to time. So is value. A dollar can be worth more to me now (when I need to finance attending school) than $1.20 will be to me later (when I can pay the dollar back — plus interest — out of my education-enhanced higher earning capacity.) Most money borrowed at interest is sought because doing so is similarly advantageous to the borrower; not (as Juanita maintains) primarily out of “have-not” desperation. Paying interest is not giving something for nothing; it’s paying for the advantage — the value — of having money sooner rather than later.

I believe we should earn as much interest as we can — within the ethical bounds of socially responsible investment — and use the money for good purposes. Rather than comment further on all the arguments, parables, and moral pronouncements that have been offered, I want to show the positive role interest is playing in efforts to create a more just socio-economic order.

In the Mondragon region of Spain in 1955, a radical priest devised a financial structure for cooperatives that overcomes certain defects of coops throughout the preceding 150 years. …The Mondragon coops have a complex system of internal accounts and interest payments that provides ways workers can gradually buy in and later get their expanding share out. The Mondragon system, starting with one five person coop in 1955, now employs 21,000 persons in secure and well paid jobs in 170 plus coops, each with superior working conditions and a lower ratio of highest to lowest salaries than in capitalist firms.

Crucial to the Mondragon complex is a people’s bank which pays interest on workers’ savings, loans money (at interest) to start up new coops, and uses its surplus for aiding troubled firms, providing social welfare, and expanding worker controlled employment. At last word the Mondragon complex had begun to take over capitalist firms and convert them to worker management. (I hope they start operating in the U.S. soon!) But if blocked by a moral stance against interest, this new economic system could never have developed.

The Mondragon model is relevant to industrial life everywhere. Equally important for the poorest of people in any country is the Grameen Bank of Bangladesh, at the heart of which is money lending and repayment with interest. Recognizing the resourcefulness and hard work it took for poor Bangladeshis to survive, a visionary speculated that if they could get a small loan (for a beehive, a goat, or some chickens) they could run a little business and begin to upgrade their conditions (fix the roof, get safer drinking water.) Based on five person support groups which help borrowers (mostly women) solve problems, keep their husbands from grabbing the income, and stay on track with their loan repayments, the Grameen Bank has since 1976 helped over one million persons lift themselves above the most abject poverty. In the process it has also shifted power from men toward women and reduced the power of traditional exploitative high interest local money-lenders.

The spectacular success of this system of “micro loans” and support groups — a synergic combination of individual initiative and group solidarity combining the best ideals of capitalism and socialism — has caused it to spread to at least eight countries. In the U.S. it has recently begun aiding poor people in Arkansas, Chicago, South Dakota, and Maine.

I regard Mondragon and the Grameen Bank as the world’s most important economic alternatives — the dynamic beginnings of a post capitalist economic system. I see no way they could function without interest, and I hope the lessons and significance of these transformation projects will be weighed against judgments about interest handed down from the past.

A much smaller and (so far) less important undertaking, but one which highlights the issue of interest with startling directness, is the “Financial Independence” program of the New Road Map Foundation. These people offer a plan for “Transforming Your Relationships with Money,” through which you learn to increase your savings rate and lower your living expenses until you can live entirely off interest income!

They ask, wouldn’t you like to have the economic freedom to work full-time (if you so choose) for peace and justice causes? This may sound like an altruistic cover for a goal really designed for lazy greed-heads, but its proponents report that those seeking financial independence for altruistic reasons have a higher success rate in achieving financial independence than those doing it for themselves.

This small movement of people are striving to overcome the common addiction to a consumerist lifestyle and the sense that we are condemned to do compulsory work for money rather than do freely chosen work expressing our values. I don’t totally agree with their position. But their arguments seem to me at least as sound as those of interest’s opponents, and I challenge anyone seriously interested in the interest debate to examine their materials.

Juanita’s Rejoinder (excerpted)

It seems to me that Bob did not deal with my main query, which was “Where does interest come from?” I conclude that it comes from the labor of those who pay the interest. The assumption that it does some good is another matter. There are arguably some good results from war, but I’d rather do without war!…

As for the quixotic notion of refusing bank interest, which seems to set teeth on edge, my decision is based on the desire to break a cycle. If interest is not a good thing (as I believe), then why should I take it? Is it any more pristine in my hands than in the bank’s? As for the poor person I’m shortchanging, I’ll seek another way of helping her or him, rather than perpetuate one of the very instruments that created the poverty in the first place. Maybe we’ll go together and picket to protest the bank’s taking and giving interest, while we share whatever food I have. (I’m not against burning money, by the way, I just don’t see the point of it, except as a demonstration.)…

All of God’s dangers ain’t interest. I have no economic blueprint, but I sure do have ideas about a lot of aspects. I think of interest as a lead-in to the whole vexing problem of economics. What I’d like to do sometime is to be able to talk face to face, so that we might get beyond polemics and into fruitful searching.