1517

Economic principles of Protestantism

The start of the Protestant Reformation is usually dated to 1517, the year Martin Luther issued his condemnation of the papal practice of indulgences. Luther argued that it was not possible to replace the penance for sins that would normally be given on absolution with a monetary donation to the Church.

Academics such as the sociologist Max Weber (1864−1920), have suggested a link between the ethics of certain branches of Protestantism, notably Calvinism, and the rise of capitalism in some countries. Protestantism emphasises the value of work as a way of making the most of, and therefore glorifying, God’s creation; professional success was seen as a sign of divine election. As Puritanism also recommends a frugal lifestyle and the rejection of luxury, this work ethic was seen as the ideal foundation for the development of means of production and economic growth. It subsequently spread beyond Protestant groups.

Luther supported the traditional ban on loans at interest. However, John Calvin held that they were legitimate, depending on the rate of interest offered (the rate should not be too high), and on the purpose of the loan (loans for production were encouraged, but not consumer loans).