by MICHAEL HUDSON
Debt mounts up faster than the means to pay. Yet there is widespread lack of awareness regarding what this debt dynamic implies. From Mesopotamia in the third millennium BC to the modern world, the way in which society has dealt with the buildup of debt has been the main force transforming political relations.
Financial textbook writers tell happy-face fables that depict loans only as being productive and helping debtors, not as threatening social stability. Government intervention to promote economic growth and solvency by writing down debts and protecting debtors at creditors’ expense is accused of causing an economic crisis (defined as bankers and bondholders not making as much money as they thought they would). Creditor lobbyists are not eager to save indebted consumers, businesses and governments from bankruptcy and foreclosure. The result is a biased body of analysis, which some extremists project back throughout history.
The most recent such travesty is William Goetzmann’s Money Changes Everything: How Finance Made Civilization Possible, widely praised in the financial press for its celebration of finance through the ages. A Professor of Finance and Management at the Yale School of Management, he credits “monetization of the Athenian economy” – the takeoff of debt – as playing “a central role in the transition to … democracy” (p. 17), and assures his readers that finance is inherently democratic, not oligarchic: “The golden age of Athens owes as much to financial litigation as it does to Socrates” (p. 1). That litigation consisted mainly of creditors foreclosing on the property of debtors.
Goetzmann makes no mention of how Solon freed Athenians from debt bondage with his seisachtheia (“shaking off of burdens”) in 594. Also airbrushed out of history is the subsequent buildup of financial oligarchies throughout the Mediterranean. Cities of the Achaean League called on Rome for military intervention to prevent Sparta’s kings Agis, Cleomenes and Nabis from cancelling debts late in the third century BC.
Violence has often turned public policy in favor of debtors, despite what philosophers and indeed most people believed to be fair, just and stable. Rome’s own Social War opened with the murder of supporters of the pro-debtor Gracchi brothers in 133 BC. By the time Augustus was crowned emperor in 29 BC, the die was cast. Creditor elites ended up stifling prosperity, reducing at least 15 percent (formerly estimated as a quarter) of the Empire’s population to bondage. The Roman legal principle placing creditor rights above the property rights of debtors has been bequeathed to the modern world.
The Bronze Age was not yet ripe for oligarchies to break anywhere near as free of palace control as occurred in classical Greece and Rome. But to Goetzmann the creditor takeover is the essence of progress, despite the economic polarization and Dark Age it brought on for the 99 Percent.
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