There was much lending and borrowing in the ancient world but no competitive market for money. Interest rates were socially determined, not a response to productivity and profit levels. Lenders were not competing with each other by setting different rates; interest rates were set centrally (temple, palace) and remained constant for long periods of time.
Michael Hudson argues in "How Interest Rates Were Set, 2500 BC – 1000 AD," Journal of the Economic and Social History of the Orient 43 (Spring 2000):132-161, that interest rates in Mesopotamia, Greece and Rome were set by the dictates of mathematical simplicity of calculation:
A comparison of Sumerian, Greek and Roman interest rates and their terminology reveals a pattern not readily apparent when these economies are viewed in isolation. In each region the customary rate reflected the local system of numerical fractions, and specifically the “unit fraction”: 1/60 per month in Mesopotamia’s sexagesimal system, 1/10 in Greece’s decimal system, and 1/12 in Rome’s duodecimal system.On an annualized basis, the rate was 20 per cent for Mesopotamia, 10 per cent for Greece and 8 1/3 per cent for Rome.
Ancient usury thus did not reflect the debtor’s ability to pay, for a rising proportion of debts were not paid. Needy individuals borrowed out of abject necessity, not to earn a profit. This admission relating to the plight of the rural poor indicates how futile it is to try to explain interest rate levels in reference to productivity or profit rates. The proceeds of agrarian loans were not invested productively to generate an income out of which to pay interest to the creditor, but were consumed or paid out for taxes. And as for industry, it was self‑financed throughout antiquity.The decrees to cancel all such debts that regularly accompanied the accession of a new ruler were quite necessary to keep the power of creditors in check.
PS: Of particular interest to my earlier discussion is the observation that "interest rates in the commercial and agricultural spheres remained segregated throughout most of antiquity" because I suggest that the Torah implies such a distinction. To lend on interest within the polity of Israel was prohibited (Deut. 23:19; cf. Exod. 22:25); but to lend to a non-resident (!) foreigner was permissible (Deut. 23:20). I argued that the latter implies a commercial sphere.
For more on Mesopotamian entrepreneurs, see William N. Goetzman, Financing Civilization.
