In case you hadn't noticed, our economy is in a bit of a pickle. And our economy is also built around charging interest on loans of money.

The Old Testament included a ban on lending at interest. Instead, a person's capital could be used by others as part of a profit-sharing agreement, or through a rental or hire agreement.

Way back in 1993, economist Paul Mills published a paper on this biblical prohibition of interest. The paper focuses on the bad consequences of an economy based on lending money at interest, as follows:

  1. It is unjust and destabilising. Unjust, because the lender gets no reward for lending to a successful business and (generally) suffers no harm from lending to an unsuccessful business. And destabilising, because lending at interest encourages further borrowing and investment during a growth period and places high burdens (causing bankruptcies) when profits are low.
  2. It encourages the allocation of finance to the safest borrowers (e.g., large firms and wealthy individuals) rather than to the most productive borrowers. This is a consequence of the first point.
  3. It encourages financial speculation in assets and property. "When the price of an asset in relatively fixed supply begins to rise, buyers borrow to purchase more of it," and I think we know what happens next.
  4. It leads to an inherently unstable banking system. Banks can guarantee the savings they hold only through the possibility of government bailouts.
  5. It encourages a "short-termist" investment strategy. "[T]he pervasive influence of interest tends to bias business investment towards quick-return, short-term projects even though longer-term, more risky ones may offer greater benefits in the long run."
  6. It concentrates wealth into fewer and fewer hands. "Interest automatically acts to transfer wealth from net borrowers to net lenders. Not surprisingly, the former tend to be the less well-off and the latter tend to be the richer members of society."
  7. It leads to a rapid flow of financial capital across regions and countries.

The question now is: how can ordinary members of society support a shift away from an interest-based (and debt-based) economy? Probably there are some answers out there...