Debts that can’t be paid won’t be paid
by Simon Radford / February 01 2019
“In his essay “Economic Possibilities for our Grandchildren”, published in 1930, John Maynard Keynes wrote of his hope that, in the future, people would need pay no attention to the “dismal science” of his field. The study of economics would reach such maturity that ordinary people would live in luxury, able to contemplate the more important things in life, “free… to return to some of the most sure and certain principles of religion and traditional virtue — that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money is detestable”.
It is easy to think that the great recession of 2008 served as a harsh refutation of this Utopian prediction. The wave of economic destruction which broke more than a decade ago threw up a political backlash that was felt the world over. Rather than there being a widespread moral awakening to matters of economics and money, however, it has been left to the Archbishop of Canterbury to give warnings about “epidemic levels” of personal debt, and court controversy by entering into debates about predatory lending and economic justice (News, 23 March 2018).
Meanwhile, faith communities have tried to mop up amid the economic devastation by tending foodbanks and providing debt counselling to those trapped in penury. While debate rages about how involved Christians should be in matters of economic justice, a new book by the maverick economist Professor Michael Hudson argues that to fail to do so would be to ignore the central concern of Jesus’s ministry: to overturn an economic system that empowered creditors and ground down those without the means to dig themselves out of economic subjugation. “The Bible is preoccupied with debt, not sin,” advance publicity declared.
Chosen as one of the Financial Times’s best books of 2018, . . . And Forgive Them Their Debts has garnered attention not just for the author’s evocation of Christ as an advocate of political and economic reform, but because of Professor Hudson’s past prescience. Many economists and financial commentators claimed to have predicted the Great Recession before it happened. The Dutch economist Dr Dirk Bezemer, however, identified only 11 who had predicted events with the right cause and with an appropriate timescale. Professor Hudson was among them, focusing his analysis — outlined in a now infamous 2006 article in Harpers — on debt and the interaction between financial assets and the real economy. A veteran of Wall Street who now serves as Distinguished Research Professor of Economics at the University of Missouri, Kansas City, Professor Hudson has an intriguing CV that entails working with bodies ranging from the White House to the Vatican.
…And Forgive Them Their Debts has had a long gestation: he has been writing a history of debt since 1980. More recently, he has been inspired by his concern that, in the wake of 2008, “any lessons were forgotten pretty quickly… It was obvious to me that, if you are going to avoid a massive foreclosure movement, and if you are going to avoid imposing austerity on debtor countries, you have to write down the debts, and most people — especially on the Left — said ‘Well, this is impossible’,” Professor Hudson tells me from his office in New York. “I began to look through history . . . at how different societies have handled their debt problem, and how they have written down the debts.’”
Studying the Bronze Age, he discovered that “for thousands of years in Sumer and Babylonia, and all the rest of the Near East, every new ruler taking the throne would write down the debts, and, instead of creating a crisis, it prevented a crisis from happening and preserved stability.” This history has been neglected, he says. Today, our leaders believe that “stability is making everybody pay the debts that they promised to pay, regardless of their ability to do so.” The cover picture on Professor Hudson’s book shows Jesus throwing the money-lenders from the temple. It is his view that Christ was crucified because of his economic views. He points to Luke 4 and Christ’s very first sermon, “unrolling the scroll of Isaiah, saying that he had come to proclaim the Year of the Lord, meaning the debt cancellation. . . . He said that the Pharisees and the rabbinical school of Hillel had hijacked Judaism and made it into a creditor-orientated religion.”
Professor Hudson echoes academic work by theologians such as Dr Lyndon Drakeb, who argues that Jesus’s use of the word “debt” in “forgive us our debts” would have been jarring to his contemporaries if he had meant only “sins” (as it is often translated), and that Jesus directly argued against the so-called prosbul clause which was used to avoid the Torah’s call for periodic debt-forgiveness. “Jesus wanted to restore the original law, and Luke says that, after he gave his sermon and announced that he had come to promote this debt cancellation, people got very angry at him, and the Pharisees decided they had to kill him, just as creditors were killing debtor advocates all over the ancient world at his time.” Many people today “don’t understand the linguistics of debt and sin”, he says. “Again and again, Jesus denounces the creditors: they were the sinners, not the debtors. That’s the most important message that he had.”
Jesus’s debt advocacy was presaged in the Old Testament, Professor Hudson argues. “The prophets, especially Isaiah, warned that if you let the creditors foreclose on the land of debtors, you are going to have large land-ownings created, and . . . if you can’t pay debt and have to serve as a bond servant, there are going to be runaways and capital flight and depopulation.” He sees the prophets as scolding the kings of the Old Testament who chose the path of taxation, conscription, and debt enforcement over debt forgiveness, self-sustaining economies, and volunteer soldiers.
Similar political battles — between debtors and the powerful — were played out throughout the ancient world: “tyrants” (the economic populists of their day) took on oligarchies with concentrated wealth in a few families, Professor Hudson explains. Politicians who advocated land reform or debt forgiveness, such as the Gracchi brothers, in Rome, often led successful popular uprisings, but were murdered by the incumbent powers. “The creditors called any reformer a tyrant, saying any reformer trying to get popular power is going to interfere with liberty — meaning our liberty to insist that debts be repaid; and so the whole concept of liberty was changed,” he says. “The Americans’ Liberty Bell has a quotation from Leviticus: ‘Proclaim freedom in all the lands.’ But the freedom was deror [the word for the Jubilee Year]: the freedom was from debt, not the freedom for creditors to foreclose.”
The widespread nature of this conflict, and its repeated occurrence, was not just due to the fissiparous political mood of the time, but the result of the logic of compound interest and mathematical laws, Professor Hudson says. He believes that the models used in ancient history are superior to many taught today: “The Babylonians . . . knew that the debts couldn’t be paid. . . This is almost an eternal phenomenon.” In the light of his research, Professor Hudson urges us to reform our financial system radically, and prise our political system away from enforcing the economic status quo.
We do not have to look back to the ancient world to find an example of debt cancellation in practice, he says. “The great clean slate in modern times was the German clean slate of 1947 and ’48… The problem today is that the debts are not owed to the Nazis: they are owed to the banks, and the richest layer of the population. And the question today in the case of consumer debts and mortgage debts is: is it worth having the economy so debt-ridden that more and more of its income has to be paid in debt service? So that you have to pay labour such a high wage in order to pay its mortgage debt? . . . [which means] that it can’t afford to compete with other countries?”
History, mathematics, and economic logic point in the same direction, he argues: it is only a clean slate that can restore economic vitality and stave off a new series of political battles between creditors and the tyrants who all claim to represent the people. Accusations of mismanagement should be laid at the door of creditors, not debtors, he argues. “That certainly is what led up to 2008 and the crash: the creditors’ making loans without any regard for the debtors’ ability to pay.”
His personal prescription is nationalisation: debt and credit as a public utility. “If you leave it in private hands, you will end up in the same way that Rome ended up,” he argues. “You will end up with a concentrated property ownership and the kind of society that is utterly transformed from what people consider to be a free market.” Until we reach that world of abundance, economics will not be a value-free discipline, separate from the worlds of politics, morality, or theology. Archbishop Welby can no more leave economics to the economists than economists can leave questions of value and values to the theologians. Questions of wealth, power, and religion are inevitably and ineluctably bound up with each other.
While a book on the detailed nature and practices of ancient societies’ debt-forgiveness might seem dry to many, it contains one central, explosive truth. As Professor Hudson puts it: “Debts that can’t be paid won’t be paid.” It is Professor Hudson’s argument, uncomfortable to many, that, as a consequence of that painful economic law, Jesus instead paid the ultimate price — even if we are yet to heed his lesson.”
Everything You Knew About Western Civilization Is Wrong
by John Siman / November 16, 2018
“To say that Michael Hudson’s new book And Forgive Them Their Debts: Lending, Foreclosure, and Redemption from Bronze Age Finance to the Jubilee Year (ISLET 2018) is profound is an understatement on the order of saying that the Mariana Trench is deep. To grasp his central argument is so alien to our modern way of thinking about civilization and barbarism that Hudson quite matter-of-factly agreed with me that the book is, to the extent that it will be understood, “earth-shattering” in both intent and effect.
Over the past three decades, Hudson gleaned (under the auspices of Harvard’s Peabody Museum) and then synthesized the scholarship of American and British and French and German and Soviet assyriologists (spelled with a lower-case a to denote collectively all who study the various civilizations of ancient Mesopotamia, which include Sumer, the Akkadian Empire, Ebla, Babylonia, et al., as well as Assyria with a capital A). Hudson demonstrates that we, twenty-first century globalists, have been morally blinded by a dark legacy of some twenty-eight centuries of decontextualized history. This has left us, for all practical purposes, utterly ignorant of the corrective civilizational model that is needed to save ourselves from tottering into bleak neo-feudal barbarism.
This corrective model actually existed and flourished in the economic functioning of Mesopotamian societies during the third and second millennia B.C. It can be termed Clean Slate amnesty, a term Hudson uses to embrace the essential function of what was called amargi andníg-si-sáin Sumerian, andurārumand mīšarumin Akkadian (the language of Babylonia), šudūtu andkirenzi in Hurrian, para tarnumarin Hittite, and deror(דְּרוֹר) in Hebrew:
It is the necessary and periodic erasure of the debts of small farmers — necessary because such farmers are, in any society in which interest on loans is calculated, inevitably subject to being impoverished, then stripped of their property, and finally reduced to servitude (including the sexual servitude of daughters and wives) by their creditors, creditors. The latter inevitably seek to effect the terminal polarization of society into an oligarchy of predatory creditors cannibalizing a sinking underclass mired in irreversible debt peonage.
Hudson writes: “That is what creditors really wanted: Not merely the interest as such, but the collateral — whatever economic assets debtors possessed, from their labor to their property, ending up with their lives” (p. 50). And such polarization is, by Hudson’s definition, barbarism. For what is the most basic condition of civilization, Hudson asks, other than societal organization that effects lasting “balance” by keeping “everybody above the break-even level”?
“Mesopotamian societies were not interested in equality,” he told me, “but they were civilized. And they possessed the financial sophistication to understand that, since interest on loans increases exponentially, while economic growth at best follows an S-curve. This means that debtors will, if not protected by a central authority, end up becoming permanent bondservants to their creditors. So Mesopotamian kings regularly rescued debtors who were getting crushed by their debts. They knew that they needed to do this. Again and again, century after century, they proclaimed Clean Slate Amnesties.”
Hudson also writes: “By liberating distressed individuals who had fallen into debt bondage, and returning to cultivators the lands they had forfeited for debt or sold under economic duress, these royal acts maintained a free peasantry willing to fight for its land and work on public building projects and canals…. By clearing away the buildup of personal debts, rulers saved society from the social chaos that would have resulted from personal insolvency, debt bondage, and military defection” (p. 3).
Marx and Engels never made such an argument (nor did Adam Smith for that matter). Hudson points out that they knew nothing of these ancient Mesopotamian societies. No one did back then. Almost all of the various kinds of assyriologists completed their archaeological excavations and philological analyses during the twentieth century. In other words, this book could not have been written until someone digested the relevant parts of the vast body of this recent scholarship. And this someone is Michael Hudson.
So let us reconsider Hudson’s fundamental insight in more vivid terms. In ancient Mesopotamian societies it was understood that freedom was preserved by protecting debtors. In what we call Western Civilization, that is, in the plethora of societies that have followed the flowering of the Greek poleis beginning in the eighth century B.C., just the opposite, with only one major exception (Hudson describes the tenth-century A.D. Byzantine Empire of Romanos Lecapenus), has been the case: For us freedom has been understood to sanction the ability of creditors to demand payment from debtors without restraint or oversight. This is the freedom to cannibalize society. This is the freedom to enslave.
This is, in the end, the freedom proclaimed by the Chicago School and the mainstream of American economists. And so Hudson emphasizes that our Western notion of freedom has been, for some twenty-eight centuries now, Orwellianin the most literal sense of the word: War is Peace • Freedom is Slavery • Ignorance is Strength. He writes: “A constant dynamic of history has been the drive by financial elites to centralize control in their own hands and manage the economy in predatory, extractive ways. Their ostensible freedom is at the expense of the governing authority and the economy at large. As such, it is the opposite of liberty as conceived in Sumerian times” (p. 266). And our Orwellian, our neoliberal notion of unrestricted freedom for the creditor dooms us at the very outset of any quest we undertake for a just economic order. Any and every revolution that we wage, no matter how righteous in its conception, is destined to fail.
And we are so doomed, Hudson says, because we have been morally blinded by twenty-eight centuries of deracinated, or as he says, decontextualized history. The true roots of Western Civilization lie not in the Greek poleis that lacked royal oversight to cancel debts, but in the Bronze Age Mesopotamian societies that understood how life, liberty and land would be cyclically restored to debtors again and again. But, in the eighth century B.C., along with the alphabet coming from the Near East to the Greeks, so came the concept of calculating interest on loans. This concept of exponentially-increasing interest was adopted by the Greeks — and subsequently by the Romans — without the balancing concept of Clean Slate amnesty.
So it was inevitable that, over the centuries of Greek and Roman history, increasing numbers of small farmers became irredeemably indebted and lost their land. It likewise was inevitable that their creditors amassed huge land holdings and established themselves in parasitic oligarchies. This innate tendency to social polarization arising from debt unforgiveness is the original and incurable curse on our post-eighth-century-B.C. Western Civilization, the lurid birthmark that cannot be washed away or excised. In this context Hudson quotes the classicist Moses Finley to great effect: “…. debt was a deliberate device on the part of the creditor to obtain more dependent labor rather than a device for enrichment through interest.” Likewise he quotes Tim Cornell: “The purpose of the ‘loan,’ which was secured on the person of the debtor, was precisely to create a state of bondage”(p. 52 — Hudson earlier made this point in two colloquium volumes he edited as part of his Harvard project: Debt and Economic Renewal in the Ancient Near East, and Labor in the Ancient World).
Hudson is able to explain that the long decline and fall of Rome begins not, as Gibbon had it, with the death of Marcus Aurelius, the last of the five good emperors, in A.D. 180, but four centuries earlier, following Hannibal’s devastation of the Italian countryside during the Second Punic War (218-201 B.C.). After that war the small farmers of Italy never recovered their land, which was systematically swallowed up by the prædia (note the etymological connection with predatory), the latifundia, the great oligarchic estates: latifundia Italiam (“the great estates destroyed Italy”), as Pliny the Elder observed. But among modern scholars, as Hudson points out, “Arnold Toynbee is almost alone in emphasizing the role of debt in concentrating Roman wealth and property ownership” (p. xviii) — and thus in explaining the decline of the Roman Empire.
“Arnold Toynbee,” Hudson writes, “described Rome’s patrician idea of ‘freedom’ or ‘liberty’ as limited to oligarchic freedom from kings or civic bodies powerful enough to check creditor power to indebt and impoverish the citizenry at large. ‘The patrician aristocracy’s monopoly of office after the eclipse of the monarchy [Hudson quotes from Toynbee’s book Hannibal’s Legacy] had been used by the patricians as a weapon for maintaining their hold on the lion’s share of the country’s economic assets; and the plebeian majority of the Roman citizen-body had striven to gain access to public office as a means to securing more equitable distribution of property and a restraint on the oppression of debtors by creditors.’ The latter attempt failed,” Hudson observes, “and European and Western civilization is still living with the aftermath” (p. 262).
Because Hudson brings into focus the big picture, the pulsing sweep of Western history over millennia, he is able to describe the economic chasm between ancient Mesopotamian civilization and the later Western societies that begins with Greece and Rome: “Early in this century [i.e. the scholarly consensus until the 1970s] Mesopotamia’s debt cancellations were understood to be like Solon’s seisachtheia of 594 B.C. freeing the Athenian citizens from debt bondage. But Near Eastern royal proclamations were grounded in a different social-philosophical context from Greek reforms aiming to replace landed creditor aristocracies with democracy. The demands of the Greek and Roman populace for debt cancellation can rightly be called revolutionary [italics mine], but Sumerian and Babylonian demands were based on a conservative tradition grounded in rituals of renewing the calendrical cosmos and its periodicities in good order.
The Mesopotamian idea of reform had ‘no notion [Hudson is quoting Dominique Charpin’s book Hammurabi of Babylon here] of what we would call social progress. Instead, the measures the king instituted under his mīšarum were measures to bring back the original order [italics mine]. The rules of the game had not been changed, but everyone had been dealt a new hand of cards’” (p. 133). Contrast the Greeks and Romans: “Classical Antiquity,” Hudson writes, “replaced the cyclical idea of time and social renewal with that of linear time. Economic polarization became irreversible, not merely temporary” (p. xxv). In other words: “The idea of linear progress, in the form of irreversible debt and property transfers, has replaced the Bronze Age tradition of cyclical renewal” (p. 7).
After all these centuries, we remain ignorant of the fact that deep in the roots of our civilization is contained the corrective model of cyclical return – what Dominique Charpin calls the “restoration of order” (p. xix). We continue to inundate ourselves with a billion variations of the sales pitch to borrow and borrow, the exhortation to put more and more on credit, because, you know, the future’s so bright I gotta wear shades.
Nowhere, Hudson shows, is it more evident that we are blinded by a deracinated, by a decontextualized understanding of our history than in our ignorance of the career of Jesus. Hence the title of the book: And Forgive Them Their Debts and the cover illustration of Jesus flogging the moneylenders — the creditors who do not forgive debts — in the Temple. For centuries English-speakers have recited the Lord’s Prayer with the assumption that they were merely asking for the forgiveness of their trespasses, their theological sins: “… and forgive us our trespasses, as we forgive those who trespass against us….” is the translation presented in the Revised Standard Version of the Bible. What is lost in translation is the fact that Jesus came “to preach the gospel to the poor … to preach the acceptable Year of the Lord”: He came, that is, to proclaim a Jubilee Year, a restoration of deror for debtors: He came to institute a Clean Slate Amnesty (which is what Hebrew דְּרוֹר connotes in this context).
So consider the passage from the Lord’s Prayer literally: … καὶ ἄφες ἡμῖν τὰ ὀφειλήματα ἡμῶν: “… and send away (ἄφες) for us our debts (ὀφειλήματα).” The Latin translation is not only grammatically identical to the Greek, but also shows the Greek word ὀφειλήματα revealingly translated as debita: … et dimitte nobis debita nostra: “… and discharge (dimitte) for us our debts (debita).” There was consequently, on the part of the creditor class, a most pressing and practical reason to have Jesus put to death: He was demanding that they restore the property they had rapaciously taken from their debtors. And after His death there was likewise a most pressing and practical reason to have His Jubilee proclamation of a Clean Slate Amnesty made toothless, that is to say, made merely theological: So the rich could continue to oppress the poor, forever and ever. Amen.
Just as this is a profound book, it is so densely written that it is profoundly difficult to read. I took six days, which included six or so hours of delightful and enlightening conversation with the author himself, to get through it. I often availed myself of David Graeber’s book Debt: The First 5,000 Years when I struggled to follow some of Hudson’s arguments. (Graeber and Hudson have been friends, Hudson told me, for ten years, and Graeber, when writing Debt; The First 5,000 Years, relied on Hudson’s scholarship for his account of ancient Mesopotamian economics, cf. p. xxiii). I have written this review as synopsis of the book in order to provide some help to other readers: I cannot emphasize too much that this book is indeed earth-shattering, but much intellectual labor is required to digest it.
When I sent a draft of my review to a friend last night, he emailed me back with this question: “Wouldn’t debt cancellations just take away any incentive for people to pay back loans and, thus, take away the incentive to give loans? People who haven’t heard the argument before and then read your review will probably be skeptical at first.” Here is Michael Hudson’s response: “Creditors argue that if you forgive debts for a class of debtors – say, student loans – that there will be some “free riders,” and that people will expect to have bad loans written off. This is called a “moral hazard,” as if debt writedowns are a hazard to the economy, and hence, immoral.”
This is a typical example of Orwellian doublespeak engineered by public relations factotums for bondholders and banks. The real hazard to every economy is the tendency for debts to grow beyond the ability of debtors to pay. The first defaulters are victims of junk mortgages and student debtors, but by far the largest victims are countries borrowing from the IMF in currency “stabilization” (that is economic destabilization) programs.
It is moral for creditors to have to bear the risk (“hazard”) of making bad loans, defined as those that the debtor cannot pay without losing property, status or becoming insolvent. A bad international loan to a government is one that the government cannot pay except by imposing austerity on the economy to a degree that output falls, labor is obliged to emigrate to find employment, capital investment declines, and governments are forced to pay creditors by privatizing and selling off the public domain to monopolists. The analogy in Bronze Age Babylonia was a flight of debtors from the land. Today from Greece to Ukraine, it is a flight of skilled labor and young labor to find work abroad.
No debtor – whether a class of debtors such as students or victims of predatory junk mortgages, or an entire government and national economy – should be obliged to go on the road to and economic suicide and self-destruction in order to pay creditors. The definition of statehood – and hence, international law – should be to put one’s national solvency and self-determination above foreign financial attacks. Ceding financial control should be viewed as a form of warfare, which countries have a legal right to resist as “odious debt” under moral international law. The basic moral financial principal should be that creditors should bear the hazard for making bad loans that the debtor couldn’t pay — like the IMF loans to Argentina and Greece. The moral hazard is their putting creditor demands over the economy’s survival.”
DEBT FREE CURRENCIES
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