The Case for a Debt Jubilee. Richard Vague

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1 High Levels of Private Debt Stifle the Economy

      In many of the most prominent ancient civilizations, including ancient Sumer, Babylon, Assyria, Akkadia, Egypt, Sparta, Corinth, and China, excessive household debt was a huge and recurring problem. This may come as a surprise to a reader today, because ancient societies are often misleadingly described as barter-based. In fact, debt was a necessary and pervasive part of these earliest economies, and our ancient ancestors quickly developed a sophisticated understanding of debt and lending, with laws and institutions to govern that lending. Debt did then many of the same things that it does now: it facilitated payment for labor, allowed for the acquisition of supplies, and bridged the time between planting and harvest – the reaping and then the sowing of profit.

Some families in these agricultural societies would find themselves with little option but to amass debts in order to live, but in time the burden of this debt could cause them to lose their land, their means of sustenance, and even their liberty, in the tragic form of debt bond servitude. This debt accumulated as unpaid bills, starting with fees and taxes owed to the king; debts to ale houses; and debts to the government for farming supplies. Interest rates were high and lenders quickly learned the power of compounding. Bouts of disease, drought, war, or other disasters often exacerbated citizens’ debt burdens. These ancient economies would sometimes reach the brink of collapse under the staggering weight of private indebtedness.

For this reason among others, kings devised the practice of debt forgiveness or amnesty as a solution. A king might proclaim a debt amnesty for a number of reasons, as we will see, including to ensure that citizens were available to serve in his army and help build the great public works of that society. At first, historians were surprised to learn of this phenomenon, but archeologically documented instances of debt amnesty are numerous and growing, and refer to actual, and fundamental, debt practices in these cultures. In fact, some historians view this practice as conservative, counterintuitive as that may sound, since it was a mechanism that both preserved the practice of lending and kept those loans from overwhelming these economies.

      A key Old Testament passage, Deuteronomy 15:2–3, describes clearly the time when these debt amnesties were proclaimed: “Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the LORD’s time for cancelling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you.”

      Just as lending is almost as old as civilization, so, too, is predatory lending. The modern Rabbinical scholar Jacob Milgrom writes in Leviticus 17–22 that King Urukagina of Lagash (c. 2400 BCE), one of the first enactors of debt amnesty, saw that “officials stole property and land from citizens, forced them to sell their houses, demanded exorbitant rates for essential services, [and] imposed unjust taxes. Impoverished farmers and artisans became indentured servants.”

Debt amnesty was easiest in the earliest civilizations, when lenders were primarily the palace and the temple, since the government was simply forgiving debt it had extended to its citizens. Many of these ancient debts were not loans so much as arrears: an accrual of tax or other obligations that citizens could not pay. But over time, large merchants and landowners became significant lenders, too, and acts of debt amnesty also required that these lenders forgive debts. If by his own debt amnesty proclamation the king forgave a loan his office had extended, it was a loss borne by that king. If by proclamation the king forced other lenders to forgive debts, it was a loss borne by those lenders.

      Debt amnesty typically would cancel agrarian debts owed by the citizenry at large, return land that had been lost due to unpaid debt, and liberate bondservants, who were often family members pledged as collateral for loans. Amnesty was limited and enacted only occasionally. It applied to the debt of owner-occupants alone and wasn’t for the rich or for businessmen’s mercantile debts, so in a sense ancient debt amnesties were “means tested.” Economist and historian Michael Hudson, one of the very few to predict the 2008 financial crisis, has studied ancient debt extensively, and I draw on his work here. He explains, “Only subsistence landholdings were returned to the customary holders, not townhouses and other wealth over and above the basic subsistence needs of citizens. So the aim was not equality as such, but the assurance of self-support land and production for the citizenry.”

These civilizations used terms such as “return” and “straightening out” to describe debt amnesty, and the objective, as Hudson writes, was to ensure that each family had the land and resources they needed for sustenance, unburdened by debt. The act meshed with these societies’ prevailing idea of cyclical time rather than linear time. With debt amnesty, everyone could return to land that their family had once owned but lost to a lender. Family members lost to debt bondage returned home, and the family was given a new, debt-free beginning. This cyclical paradigm, of course, mirrored the cycles of planting and harvest that formed the sole context of their lives. Things always ended. Things always had to begin again. (Superficially, the idea of time and debt as cyclical and renewing instead of linear lingers today with modern sports teams, which start each season with a clean slate of no wins or losses.)

Proclamations of debt amnesty were ad hoc, but often announced at the beginning of a king’s reign. Most members of Hammurabi’s Babylonian dynasty, for example, inaugurated their rule with a new proclamation of debt amnesty. One Babylonian king issued four acts of debt amnesty during his forty-year reign. An invading king could promise debt amnesty to a city’s inhabitants to entice them to side with him and turn on their ruler. By the same token, an incumbent king could use debt СКАЧАТЬ