By ending ban on interest, Protestants launched capitalism

Hamilton County government operates Enterprise South industrial park, where it hopes to draw yet more business after winning Volkswagen and Amazon.

Capitalism or the free market system generally is defined as an economic system in which the means of production (land, labor and capital) are privately owned. The capitalists own the land and capital, and workers sell their labor for wages. The owners use capital, which are savings or delayed consumption, to produce goods that are traded in markets relatively unhindered by government regulation. The rewards to labor are wages, to owners are rents and profits.

Profits also go to traders and their backers, who are an important part of commerce.

Capitalism has existed at various times in history, but modern capitalist systems such as that of which Chattanooga is a part arose with the development of the modern nation-state in the West. Its growth in modern times is traceable to the Reformation, a time of world-changing rediscoveries in theology.

One religio-political change was the change in the work ethic that occurred with the idea of holiness changed.

Luther’s recovery of salvation by grace meant that no longer were beggars important for gaining merits in the penitential discipline system of the medieval Church. Those who gave to beggars did not acquire holiness by that kind act. Instead people saved by grace were expected to demonstrate their gratitude by working for the glory of God. So a person is not holy because he practices charity toward the poor; instead the poor demonstrate their gratitude for salvation by grace by diligent labor and doing all things for the glory of God. This means that all honest work is sanctified. Work is not a manifestation of the curse of sin, as the Medieval Church had taught.

Another contributor to the development of capitalism is the great reformer John Calvin. He ministered in Geneva, a business city run by business people. Unlike so many aristocrats, socialists and communists who came later, Calvin was supportive of the bourgeoisie (the middle class) who were merchants, skilled laborers and business people.

IT IS IMPORTANT to note a change that occurred in Calvin’s day. During the Middle Ages wealth consisted in possession of land. Those who held the land as fiefs or in some other way were owners of the farming produce. So a lord of the manor, whether civil or ecclesiastical, was entitled to an owner’s share of the produce. Charging rent in this situation was acceptable. However, charging interest on a money loan was difficult to justify in an economy where money was scarce and people without a place on the land could starve.

The scholasticism of the medieval Church had long accepted charging rent, but not interest which it left to the Jews. Since the Jews were non-Christian they were already lost therefore they could be allowed to charge interest for their loans to Gentiles. Jews, however, did not charge interest to fellow Jews, in keeping with Old Testament practices.

Calvin abandoned the Aristotelian idea that money is sterile and therefore that charging interest is unacceptable usury. The practice of charging any interest was considered usury by many who found support for this belief in the Bible.

However, Calvin, who wrote commentaries on most of the books of the Bible did not find charging interest per se a forbidden practice. He found it to be an accepted and theologically justified practice because charging interest for loans was little different from charging rent on land which no one challenged. If money is not sterile as Aristotle wrongly taught and charging “rent” (interest) on loans of money is acceptable, the money system of capitalist finance could go forward.

As the Reformation spread, so did Calvinism in Holland, Switzerland and the British Isles.

The Protestant Reformation gave theological support to business growth, to liberty both political and economic. Calvinism definitely encouraged the opposition of American colonialists to British mercantilism prior to the American Revolution. After victory at Yorktown, Americans were free to trade with the world as free business people.

MAX WEBER ARGUED that the Calvinist work ethic Is the spirit of capitalism in his book, The Protestant Ethic and the Spirit of Capitalism. Weber wrote this book in 1905, but his book was not translated until 1930 by Talcott Parsons. Weber’s argument is that the work ethic of Protestantism, especially Calvinism, has contributed to the rise of the modern Western capitalist system.

Rarely discussed is that Weber was a member of the German Historical School. He was third generation member of the many German professors who were supporters of Otto von Bismarck’s state welfare system.

There are a number of ironies in history of which the Protestant German Historical School is a part. It engaged in protracted and at times vicious battles of the books with the Austrian school of economics. The Roman Catholic Austrian School advocated free markets. It was to Germany that thousands of American Protestant ministers went to study theology prior to 1914. They returned home with ideas about social Christianity as the means for dealing with the problems of the Gilded Age.

It is therefore fair to say that Bismarck is the father of the American welfare state. And that it is anti-Calvinism — the kind espoused unwittingly by many American Christians through a low view of the sovereignty of God — that is promoting its growth as a form of neo-mercantilism or neo-socialism opposed to political and economic freedom.


Jack Waskey, an encyclopedist, is a professor who teaches political science, philosophy, world religions and logic at Dalton State College in Dalton, Ga. He is a minister who is perhaps the conservative holdout in the Presbyterian USA denomination. Dr. Waskey is working on a book about the protestant Reformation, particularly as regards John Calvin’s doctrine of the lesser magistrate and resistance to tyrants.