… And forgive them their debts: Loan, foreclosure and redemption of finance from the Bronze Age to the year of the jubilee. Michael Hudson. SMALL ISLAND. 2018.
The Rosetta Stone is famous for providing insight into the ancient Egyptian language. It contains three versions of a decree issued by King Ptolemy V (196 BC), one of which was written in ancient Greek. With this translation, modern Egyptologists were able to decode hieroglyphic scriptures for the first time. This decree became so famous that the term “Rosetta Stone” came to mean a clue to the unknown and a universal symbol for translation. Nevertheless, the content of the decree occupies little place in the collective imagination. It may seem confusing, as if the former successor of Alexander the Great had asked his scribes to produce something destined to go through the ages without anything particularly interesting or important to say. However, as Michael Hudson points out in his latest book, … and forgive them their debts, there is yet another glimpse into the ancient world that the Rosetta Stone has to offer: it is a Debt Cancellation Proclamation. Indeed, “the great majority of cuneiform tables are debt contracts and administrative accounts” (55).
Hudson is best known for being one of the few economists who accurately predicted the 2008 financial crisis. Son of one of the leaders of the Minneapolis general strikes of the 1930s, and himself godson of Leon Trotsky, the the author has one of the backgrounds for an economist one might imagine. He graduated in 1959 from the University of Chicago, in Germanic philology. Throughout his long career, he has served as a conductor, financial analyst on Wall Street, and economic advisor to the CIA and several governments. He is currently a Distinguished Professor at the University of Missouri, Kansas City. Hudson is also a prolific author on issues of finance and economics, with … and forgive them their debts be on the list of the best books of the Financial Time for 2018.
The basic assumption underlying his economic analysis is simple: As a mathematical law, debt that increases at compound interest is irreparably linked to economic growth (usually an S-curve). In this book, Hudson tells how the scribes of the ancient Babylonian temples (2000 BC) were trained to be aware of this phenomenon: debts tend to become unpayable. This is the logic behind the adage with which the author is most closely associated: “Debts That Can’t Be Paid Won’t Be Paid. ‘ The real question is How? ‘Or’ What they will not be paid, in the form of depreciation or foreclosures.
The idea that debts could – let alone should – being successfully forgiven is a controversial issue. The Greek financial crisis of 2012 is an example of how sensitive the issue is even today. Who should be held responsible when things go wrong? If the debts need to be written off, why would anyone lend in the first place? Hudson claims that, contrary to popular economic beliefs, most debt is not the result of loans for productive businesses. Throughout antiquity, most of these were arrears of failed harvests or other unpaid tax obligations. So when sovereign rulers proclaimed blank lists of personal debts – trade finance contracts were usually exempt – they were waiving obligations owed primarily to themselves.
These periodic debt amnesties by the rulers had a dual objective: a) to preserve the economic solvency of the population, and with it their ability to supply corvée work and taxable surpluses; and b) prevent the rise of a creditor oligarchy capable of competing with – or limiting – royal power. Evidence of such practices can be found from ancient Sumer (2500 BC) to Byzantium. According to Hudson’s reading of the story, the state “is an arena in which creditors, landowners and rulers compete for control” (262). The rulers, however, did not act to safeguard the freedom of the peasantry for itself. They were defending their own right to raise armies of small landowners and tax them. Nonetheless, “the privatization of credit eventually became a force that swept aside the checks and balances that existed at the start of Mesopotamia” (62). From the transition to feudalism in the West to the decline of Constantinople in the East, this tension has shaped the course of history, politics and even religion.
Hudson points to the book of Leviticus – the third in Torah and the Old Testament – and claims it is a warning to the people of Israel of the dangers unpayable debts pose to a society, if not for the individual soul of the usurer. “The conquest of Judah by foreign powers is interpreted as a divine warning not to renounce the laws of Leviticus” (215). The New Testament contains similar warnings, from the parable of the ruthless servant to the punitive imagery of the Last Judgment. The author asserts that early Christianity aimed to extend the Jubilee tradition: “a radical program to redeem the poor from debt bondage” (224). It is thus representative of the triumph of the idea that debts are sacred that “Jesus was transformed from the messenger of the Lord bringing the good news of a clean slate, to become the Christ preaching forgiveness on a more abstract spiritualized plane” ( 224). After all, it was his attempt to bring the debt cancellations back to Judea – embodied in his expulsion of the temple moneylenders, an image of which is also the cover of the book – that sparked outrage among the Pharisees, leading at his crucifixion. .
Hudson is not the first in recent years to point out the close links between debt and morality. Academics like David Graeber and Kenneth Dyson find similar models. However, in … and forgive them their debts, Hudson goes further. It is a book that aims, and categorically succeeds, at being controversial. Most (so-called) neoliberal economists will grapple with the idea that enforcement of creditors’ rights is a historical tool of exploitation by the oligarchs. After all, the debtor is generally considered to have an advantage because they have more information about their ability (and willingness) to fulfill their obligations. Many Christians are doomed to feel some unease when they read Hudson’s conclusions that the Bible speaks more of debts than of sins. Even strict Marxists and some contemporary progressives can be challenged by the idea that religion was in fact not the opium of the people, but an avenue for their redemption and a bulwark for their freedom throughout history. Nevertheless, the author’s work is sufficiently scholarly to force most of these positions into real reflection.
Almost anyone with the necessary patience will benefit from reading this book. Sadly, Hudson doesn’t make it easy. The book demands an encyclopedic knowledge of Bronze Age history – albeit more realistically a true encyclopedia – on the part of the reader, lest one get lost in a maze of facts and terms. as informative as they are obscuring. Still, the effort is well worth it. Just as it is difficult to imagine someone indifferent to Hudson’s arguments and findings, it is just as difficult to conceive of someone whose view of history, religion and / or economics will go unchallenged. – or even unchanged – after turning the last page.
- This blog post first appeared on LSE Book Review.
- The article gives the point of view of its author, not the post of LSE Business Review or the London School of Economics.
- Featured Image: Stained glass image of Jesus turning money lenders from the window, St Mary’s, Nottingham (Jules & Jenny CC BY 2.0)
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Alfredo Hernández Sánchez is a doctoral researcher in political economy at the University of Central Europe. His main research interests are international finance and geopolitics. He has lectured at the American University of Central Asia and at the OSCE Academy in Bishkek. Learn more about his work here.