Debt (40 page)

For much of human history, then, an ingot of gold of silver, stamped or not, has served the same role as the contemporary drug dealer’s suitcase full of unmarked bills: an object without a history, valuable because one knows it will be accepted in exchange for other goods just about anywhere, no questions asked. As a result, while credit systems tend to dominate in periods of relative social peace, or across networks of trust (whether created by states or, in most periods, transnational institutions like merchant guilds or communities of faith), in periods characterized by widespread war and plunder, they tend to be replaced by precious metal. What’s more, while predatory lending
goes on in every period of human history, the resulting debt crises appear to have the most damaging effects at times when money is most easily convertible into cash.

As a starting point to any attempt to discern the great rhythms that define the current historical moment, let me propose the following breakdown of Eurasian history according to the alternation between periods of virtual and metal money. The cycle begins with the Age of the First Agrarian Empires (3500–800 bc), dominated by virtual credit money. This is followed by the Axial Age (800 bc-600 ad), which will be covered in the next chapter, and which saw the rise of coinage and a general shift to metal bullion. The Middle Ages (600–1450 ad), which saw a return to virtual credit money, will be covered in
chapter 10
;
chapter 11
will cover the next turn of the cycle, the Age of Capitalist Empires, which began around 1450 with a massive planetary switch back to gold and silver bullion, and which could only really be said to have ended in 1971, when Richard Nixon announced that the U.S. dollar would no longer be redeemable in gold. This marked the beginning of yet another phase of virtual money, one which has only just begun, and whose ultimate contours are, necessarily, invisible.
Chapter 12
, the final chapter, will be devoted to applying the insights of history to understanding what it might mean and the opportunities it might throw open.

We have already had occasion to note the predominance of credit money in Mesopotamia, the earliest urban civilization that we know about. In the great temple and palace complexes, not only did money serve largely as an accounting measure rather than physically changing hands, merchants and tradespeople developed credit arrangements of their own. Most of these took the physical form of clay tablets, inscribed with some obligation of future payment, that were then sealed inside clay envelopes and marked with the borrower’s seal. The creditor would keep the envelope as a surety, and it would be broken open on repayment. In some times or places at least, these
bullae
appear to have become what we would now call negotiable instruments, since the tablet inside did not simply record a promise to pay the original lender, but was designated “to the bearer”—in other words, a tablet recording a debt of five shekels of silver (at prevailing rates of interest)
could circulate as the equivalent of a five-shekel promissory note—that is, as money.
⁵

We don’t know how often this happened; how many hands such tablets would typically pass through, how many transactions were based on credit, how often merchants actually did weigh out silver in rough chunks to buy and sell their merchandise, or when they were most likely to do so. No doubt all this varied over time. Promissory notes usually circulated within merchant guilds, or between inhabitants of the relatively well-off urban neighborhoods where people knew one another well enough to trust them to be accountable, but not so well that they could rely on one another for more traditional forms of mutual aid.
⁶
We know even less about the marketplaces frequented by ordinary Mesopotamians, except that tavern-keepers operated on credit, and hawkers and operators of market stalls probably did as well.
⁷

The origins of interest will forever remain obscure, since they preceded the invention of writing. The terminology for interest in most ancient languages is derived from some word for “offspring,” causing some to speculate that it originates in loans of livestock, but this seems a bit literal-minded. More likely, the first widespread interest-bearing loans were commercial: temples and palaces would forward wares to merchants and commercial agents, who would then trade them in nearby mountain kingdoms or on trading expeditions overseas.
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The practice is significant because it implies a fundamental lack of trust. After all, why not simply demand a share in the profits? This seems more fair (a merchant who came back bankrupt would probably have little means of paying anyway), and profit-sharing partnerships of this sort became common practice in the later Middle East.
⁹
The answer seems to be that profit-sharing partnerships were typically contracted between merchants, or anyway people of similar background and experience who had ways of keeping track of one another. Palace or temple bureaucrats and world-roaming merchant adventurers had little in common, and the bureaucrats seem to have concluded that one could not normally expect a merchant returned from a far-off land to be entirely honest about his adventures. A fixed interest rate would render irrelevant whatever elaborate tales of robbery, shipwreck, or attacks by winged snakes or elephants a creative merchant might have concocted. The return was fixed in advance.

This connection between borrowing and lying, incidentally, is an important one to history. Herodotus remarked about the Persians: “To tell a lie is considered by them the greatest disgrace, and next to that to be in debt … especially because they think that one in debt must of necessity tell lies.”
¹⁰
(Later, Herodotus reported a story told to him by
a Persian about the origins of the gold that the Persians had acquired in India: they stole it from the nests of giant ants.)
¹¹
Jesus’s parable of the unforgiving servant makes a joke out of the matter (“Ten thousand talents? No problem. Just give me a little more time”), but even here, one can see how such endless falsehoods contributed to a broader sense that a world in which moral relations are conceived as debts is also, while in certain ways entertaining, necessarily a world of corruption, guilt, and sin.

By the time of the earliest Sumerian documents, this world may not yet have arrived. Still, the principle of lending at interest, even compound interest, was already familiar to everyone. In 2402 bc, for instance, a royal inscription by King Enmetena of Lagash—one of the earliest we have—complains that his enemy, the King of Umma, had been occupying a huge stretch of farmland that had rightfully belonged to Lagash for decades. He announces: if one were to calculate the rental fees for all that land, then the interest that would have been due on that rent, compounded annually, it would reveal that Umma now owes Lagash four and a half trillion liters of barley. The sum was, as in the parable, intentionally preposterous.
¹²
It was just an excuse to start a war. Still, he wanted everyone to know that he knew exactly how to do the math.

Usury—in the sense of interest-bearing consumer loans—was also well established by Enmetena’s time. The king ultimately had his war and won it, and two years later, fresh off his victory, he was forced to publish another edict: this one, a general debt cancellation within his kingdom. As he later boasted, “he instituted freedom
(amargi)
in Lagash. He restored the child to its mother, and the mother to her child; he cancelled all interest due.”
¹³
This was, in fact, the very first such declaration we have on record—and the first time in history that the word “freedom” appears in a political document.

Enmetena’s text is a bit vague on the details, but a half-century later, when his successor Uruinimgina declared a general amnesty during the New Year’s ceremonies of 2350 bc, the terms are all spelled out, and they conform to what was to become typical of such amnesties: cancelling not only all outstanding loans, but all forms of debt servitude, even those based on failure to pay fees or criminal penalties—the only thing excepted being commercial loans.

Similar declarations are to be found again and again, in Sumerian and later Babylonian and Assyrian records, and always with the same theme: the restoration of “justice and equity,” the protection of widows and orphans, to ensure—as Hammurabi was to put it when he
abolished debts in Babylon in 1761 bc—“that the strong might not oppress the weak.”
¹⁴
In the words of Michael Hudson,

Over the next several thousand years, this same list—cancelling the debts, destroying the records, reallocating the land—was to become the standard list of demands of peasant revolutionaries everywhere. In Mesopotamia, rulers appear to have headed off the possibility of unrest by instituting such reforms themselves, as a grand gesture of cosmic renewal, a recreation of the social universe—in Babylonia, during the same ceremony in which the king reenacts his god Marduk’s creation of the physical universe. The history of debt and sin was wiped out, and it was time to begin again. But it’s also clear what they saw as the alternative: the world plunged into chaos, with farmers defecting to swell the ranks of nomadic pastoralists, and ultimately, if the breakdown continued, returning to overrun the cities and destroy the existing economic order entirely.

Egypt represents an interesting contrast, since for most of its history, it managed to avoid the development of interest-bearing debt entirely.

Egypt was, like Mesopotamia, extraordinarily rich by ancient standards, but it was also a self-contained society, a river running through a desert, and far more centralized than Mesopotamia. The pharaoh was a god, and the state and temple bureaucracies had their hands in everything: there were a dazzling array of taxes and a continual
distribution of allotments, wages, and payments from the state. Here, too, money clearly arose as a means of account. The basic unit was the
deben
, or “measure”—originally referring to measures of grain, and later of copper or silver. A few records make clear the catch-as-catch-can nature of most transactions:

Most merchants were itinerant, either foreigners or commercial agents for the owners of large estates. There’s not much evidence for commercial credit, however; loans in Egypt were still more likely to take the form of mutual aid between neighbors.
¹⁷

Substantial, legally enforceable loans, the kind that can lead to the loss of lands or family members, are documented, but they appear to have been rare—and much less pernicious, as the loans did not bear interest. Similarly, we do occasionally hear of debt-bondservants, and even debt slaves, but these seem to have been unusual phenomena and there’s no suggestion that matters ever reached crisis proportions, as they so regularly did in Mesopotamia and the Levant.
¹⁸

In fact, for the first several thousand years, we seem to be in a somewhat different world, where debt really was a matter of “guilt” and treated largely as a criminal matter:

The “and/or” is significant. There was no formal distinction between a fine and a beating. In fact, the entire purpose of the oath (rather like the Cretan custom of having a borrower pretend to snatch the money) seems to have been to create the justification for punitive action: so the debtor could be punished as
either
a perjurer or a thief.
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