Chapter 4 Banking Philosophies, Ethics and Pastoral Care
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Financing, Credit, Moneylending and Charging of Interest. A Christian-ethical and Pastoral Perspective M Bøsterud Orcid.org/0000-0001-5305-0501 Previous qualification (Cand. Jur, PhD, DBA) Thesis submitted in fulfilment of the requirements for the degree Doctor of Philosophy in Pastoral Studies at the North-West University Promoter: Prof Dr JM Vorster Co-Promoter: Prof Dr AL Rheeder Graduation: October 2018 Student number: 25818252 ACKNOWLEDGEMENTS I am deeply grateful to my two accommodating supervisors at North-West University for their erudite, tolerant and inspirational guidance in this, my second dissertation under their capable supervision. • First, I extend my thankful gratitude to Professor J. M. Vorster, who through his knowledgeable and attentive guidance and outstanding authorship inspired me onto the appropriate research path and oversaw that my research aims were duly reached. • Then, I thank Professor R. Rheeder for his germane and insightful comments and patient feedback on my work as it progressed, and his considerate sharing of pertinent knowledge within the realm of my research. • Mrs Tienie Buys has kept a firm hand and steady eye on my research progress, and maintained an invaluable overall role in all things practical and administrative for the realisation and consummation of this research project. Finally, I extend my most appreciative thanks to Greenwich School of Theology’s Mrs Peg Evans for all the kind and timely assistance given along the way; thanking her lastly is most fitting, as she holds the honour of being the first GST/NWU representative with whom I had contact in this enterprise. i ABSTRACT Financing of human activity through borrowing from third parties is widespread in the Western world, and such financing may give rise to several questions of moral and ethical character. The type of financing activity, or banking, which has become commonplace, will include lending for commercial enterprises, for specific or general business purposes, for private consumption or mortgaging, for issuance of derivative and/or speculative financial products, for support of financial equities and currency trading, as well as lending and borrowing among public agencies and governments, to mention but the most typical situations. Moneylending will in its contemporary Western usage be expected to involve charging of interest, and will as well be subjected to increasing governmental regulation. Despite increased regulatory interest from governmental agencies, the ethical underpinnings of such banking activity are somewhat unclear, and not uniform among the involved actors. Christian thinkers have been divided as to what moral norms should apply, and traditionally, the matter has been discussed mostly in connection with the level of interest charged by the lender to the borrower. In this dissertation, the practice of moneylending is illuminated from different angles. These include questions regarding the moral defensibility of lending and borrowing, the taking and posting of collateral, third party guarantees, the level of interest that may be charged, the nature of money as social technology, and the place of banking within societal contexts. Through this elaboration, Christian-ethical and pastoral principles are developed, all under the Reformed paradigm, and examples of how such principles harmonise with banking practice are given. A new banking systematic is proposed, whereby banking is given a constructive and participatory societal place, in concert with sound Christian-ethical and pastoral principles. This new banking paradigm is named Pastoral Banking Practice (PBP), to focus its Christian-ethical and pastoral foundations and constructive base ethos. A recommendation to banking practitioners as to the operation of the PBP in real life setting is given in general terms. Key terms: Financing, banking, charging interest, moneylending, credit, financial speculation, money as social technology, lending, borrowing, collateral, third party guarantees, Pastoral Banking Practice (PBP). ii TABLE OF CONTENTS ACKNOWLEDGEMENTS .......................................................................................................... I ABSTRACT............................................................................................................................... II CHAPTER 1: INTRODUCTION ................................................................................................. 1 1.1 BACKGROUND AND PROBLEM STATEMENT/RATIONALE ..................... 1 1.1.1 Background .................................................................................................... 1 1.1.2 Problem Statement ........................................................................................ 2 1.1.3 Preliminary Literature Study ........................................................................... 4 1.2 AIM AND OBJECTIVES ................................................................................ 5 1.2.1 Aim ................................................................................................................. 5 1.2.2 Objectives ...................................................................................................... 5 1.3 CENTRAL THEORETICAL ARGUMENT ...................................................... 6 1.4 RESEARCH DESIGN/METHODOLOGY ....................................................... 6 1.5 CONCEPT CLARIFICATION ......................................................................... 6 1.6 ETHICAL CONSIDERATIONS ...................................................................... 7 CHAPTER 2 HISTORICAL BACKGROUND ............................................................................. 8 2.1 INTRODUCTION ............................................................................................ 8 2.2 DEVELOPMENT OF MONEY ........................................................................ 9 2.2.1 Background .................................................................................................... 9 2.2.2 Antiquity ......................................................................................................... 9 2.3 THE EVOLUTION OF BANKING AND FINANCING.................................... 23 2.3.1 Background .................................................................................................. 23 2.3.2 Mesopotamia and Babylonia ........................................................................ 23 iii 2.3.3 Greek City-states ......................................................................................... 26 2.3.4 The Romans ................................................................................................ 26 2.3.5 The Medieval Era ......................................................................................... 28 2.3.6 Modern Era .................................................................................................. 31 2.3.7 Twentieth Century and Beyond .................................................................... 34 2.4 SUMMARY .................................................................................................. 36 CHAPTER 3 EPISTEMOLOGY ............................................................................................... 39 3.1 INTRODUCTION .......................................................................................... 39 3.2 ANTIQUITY .................................................................................................. 40 3.2.1 Early Thinkers and Socrates ........................................................................ 40 3.2.2 Plato and Aristotle ........................................................................................ 43 3.2.3 Stoics and Neo-Platonism ............................................................................ 44 3.3 MEDIEVAL PERIOD .................................................................................... 45 3.3.1 Augustine – Transitional Phase .................................................................... 45 3.3.2 Early Medieval.............................................................................................. 46 3.3.3 Aquinas - Late Medieval ............................................................................... 47 3.4 RENAISSANCE – REFORMATION ............................................................. 49 3.4.1 Renaissance ................................................................................................ 49 3.4.2 The Reformation .......................................................................................... 50 3.5 ENLIGHTENMENT – EARLY MODERNIST ................................................ 52 3.5.1 Transition to the Secular .............................................................................. 52 3.5.2 Early Modern ................................................................................................ 54 3.6 MODERNISTS ............................................................................................. 57 3.6.1 Reductionism Developed ............................................................................. 57 iv 3.7 POSTMODERNISTS.................................................................................... 60 3.7.1 The Tacit Revisited ...................................................................................... 60 3.8 CONTEMPORARY REFORMED ................................................................. 62 3.8.1 Reformed Philosophers ...............................................................................