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Capitalism and Calvin - Essay Example

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This essay describes the John Calvin's contribution to economics, especially in the rise of capitalism, that is widely recognized today by many economists and historians with some of them suggesting that the man's work embodies the spirit of capitalism in the modern world.
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Capitalism and Calvin
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Capitalism and Calvin

Download file to see previous pages... John Calvin's letter on usury of 1545 made it clear that when Christ said "lend hoping for nothing in return," He meant that we should help the poor freely. Following the rule of equity, we should judge people by their circumstances, not by legal definitions. Humanist that he was, Calvin knew there were two Hebrew words translated as "usury." One, neshek, meant "to bite"; the other, tarbit, meant "to take legitimate increase." Based on these distinctions, Calvin argued that only "biting" loans were forbidden. Thus, one could lend at interest to business people who would make a profit using the money. To the working poor one could lend without interest, but expect the loan to be repaid. To the impoverished one should give without expecting repayment.
The arguments in Calvin's letter on usury are amplified in Charles du Moulin's Tractatus commerciorum et usurarum, redituumque pecunia constitutorum et monetarum, written in 1542 and published in Paris in 1546. Du Moulin ("Molinaeus") developed a utility theory of value for money, rejecting Aquinas' belief that money could not be rented because it was consumed.
This attack on the Thomist understanding of money was taken up by Spanish commentators. Domingo de Soto, concerned about social justice, suggested that Luke 6:35 was not a precept, since it has no relation to the justice of lending at interest. Luis de Molina, writing in the late sixteenth century, agreed. He suggested that there was no biblical text which actually prohibited lending money at interest. ( in Noonan, 1957)
By the second half of the sixteenth century Catholics and Protestant alike were increasingly tolerant of the idea that the legality of loans at interest was determined by the intentions of the parties involved. Theologians...
The researcher of this essay states that before we go on discussing how Calvin contributed to capitalism, we firstly need to discuss the word capitalism. If we are to look in the modern world, we can see that trade is characterized by an exchange of goods which brings in profits to the seller. The researcher explaines that this is the idea behind Capitalism – to make profits from an investment. Products are manufactured from raw materials then sold at a price higher than the cost of production. The idea of applying interest on loans, which is the spirit of capitalism, was widely condemned in ages past. Calvin was part of a society that had forbidden the lending of money at interest for 750 years. By 1544 Calvin had "formulated a doctrine about lending money at interest". John Calvin’s letter on usury of 1545 made it clear that when Christ said “lend hoping for nothing in return,” He meant that we should help the poor freely. In essence, the Calvinist Puritan leaders of the Reformation or those who were influenced by Calvin, believed that profitable undertakings, that gave the world a perfect recipe for capital accumulation by regarding frivolous spending as equivalent to sin. It is also maintained that without this attitude, Europe would never have acquired enough capital to launch the capitalist system. The Calvinists or the Reformed divinity were less bound to precedent and adjusted itself rapidly to the new economy. With this idea of practicing thrift, they became a successful merchant class and thus capitalism grew. ...Download file to see next pagesRead More
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