What’s in our best interest?

The holy scripture of Islam, the Koran, and the craze to build a skyscraper in Dubai in the Middle East possess a very subtle cause-and-effect relationship. Islamic doctrine, which shuns receiving interest on loans, has turned its focus to real estate investment like this 100-story skyscraper. This is understandable when considering that Wall Street focuses on the “Koranic laundering” of Islamic finances instead of money laundering. With the Middle East having vast amount oil money at its disposal, Wall Street is creating crafty spin-off financial products, such as real estate investment, as well as stocks and bonds, that are nebulous enough to transcend doctrinal hesitation toward interest income.
The Koran is not the only scripture that repudiates income from interest. The New Testament has verses that encourage people to lend but not to receive interest. Interest is criticized as unearned income void of honest hard work. Medieval canon law banned receiving interest. Aristotle said, “Money does not breed money.” The perception remains today ― people still question what right a piece of paper or slab of metal has to create interest payments. The notion of money as a regular product, where supply and demand determines price, became prevalent only after passing through mercantilism and industrialization and the arrival of capitalistic market economics.
This is not to say interest transactions did not occur during ancient times or the Middle Ages. History reveals that usury was widespread in the black market. Rome in the fifth century B.C. had a 12 percent interest rate in place. Shylock in “The Merchant of Venice,” who goes down in history as the most notorious usurer, reveals how rampant the business of private loans was in the urban nations of Europe during the 16th century. During the short-lived Daehan Empire, King Gojong prohibited receiving a 60 percent annual interest rate when lending small amounts of money, which was a law established for pawnbrokers.
Our country is pursuing a measure that would reduce the legal ceiling of 66 percent annual interest to 40 percent.
Nobody is against relieving the hardship of people who cannot set foot into a bank. However, it is troubling to consider that the market may react adversely when lowering the value of money, with the market rate of interest on the black market for private loans rising above 100 percent.
People responsible for making policy should reflect on the difficult struggle against usury practices and take a deep breath.

*The writer is a deputy business editor of the JoongAng Ilbo.

By Hong Seung-il [hongsi@joongang.co.kr]

korea joongAng daily

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What’s in our best interest?

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