Book V of Aristotle’s
Politics describes the eternal
transition of oligarchies making themselves into hereditary
aristocracies – which end up being overthrown by tyrants or develop
internal rivalries as some families decide to “take the multitude into
their camp” and usher in democracy, within which an oligarchy emerges
once again, followed by aristocracy, democracy, and so on throughout
history.
Debt has been the main dynamic driving these shifts – always with new
twists and turns. It polarizes wealth to create a creditor class, whose
oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win
popular support by cancelling the debts and redistributing property or
taking its usufruct for the state.
Since the Renaissance, however, bankers have shifted their political
support to democracies. This did not reflect egalitarian or liberal
political convictions as such, but rather a desire for better security
for their loans. As James Steuart explained in 1767, royal borrowings
remained private affairs rather than truly public debts. For a
sovereign’s debts to become binding upon the entire nation, elected
representatives had to enact the taxes to pay their interest charges.
By giving taxpayers this voice in government, the Dutch and British
democracies provided creditors with much safer claims for payment than
did kings and princes whose debts died with them. But the recent debt
protests from Iceland to Greece and Spain suggest that creditors are
shifting their support away from democracies. They are demanding fiscal
austerity and even privatization sell-offs.
This is turning international finance into a new mode of warfare. Its
objective is the same as military conquest in times past: to
appropriate land and mineral resources, also communal infrastructure and
extract tribute. In response, democracies are demanding referendums
over whether to pay creditors by selling off the public domain and
raising taxes to impose unemployment, falling wages and economic
depression. The alternative is to write down debts or even annul them,
and to re-assert regulatory control over the financial sector.
Near Eastern rulers proclaimed clean slates for debtors to preserve economic balance
Charging interest on advances of goods or money was
not originally intended to polarize economies. First administered early
in the third millennium BC as a contractual arrangement by Sumer’s
temples and palaces with merchants and entrepreneurs who typically
worked in the royal bureaucracy, interest at 20 per cent (doubling the
principal in five years) was supposed to approximate a fair share of the
returns from long-distance trade or leasing land and other public
assets such as workshops, boats and ale houses.
As the practice was privatized by royal collectors of user fees and
rents, “divine kingship” protected agrarian debtors. Hammurabi’s laws
(c. 1750 BC) cancelled their debts in times of flood or drought. All the
rulers of his Babylonian dynasty began their first full year on the
throne by cancelling agrarian debts so as to clear out payment arrears
by proclaiming a clean slate. Bondservants, land or crop rights and
other pledges were returned to the debtors to “restore order” in an
idealized “original” condition of balance. This practice survived in the
Jubilee Year of Mosaic Law in Leviticus 25.
The logic was clear enough. Ancient societies needed to field armies
to defend their land, and this required liberating indebted citizens
from bondage. Hammurabi’s laws protected charioteers and other fighters
from being reduced to debt bondage, and blocked creditors from taking
the crops of tenants on royal and other public lands and on communal
land that owed manpower and military service to the palace.
In Egypt, the pharaoh Bakenranef (c. 720-715 BC, “Bocchoris” in
Greek) proclaimed a debt amnesty and abolished debt-servitude when faced
with a military threat from Ethiopia. According to Diodorus of Sicily
(I, 79, writing in 40-30 BC), he ruled that if a debtor contested the
claim, the debt was nullified if the creditor could not back up his
claim by producing a written contract. (It seems that creditors always
have been prone to exaggerate the balances due.) The pharaoh reasoned
that “the bodies of citizens should belong to the state, to the end that
it might avail itself of the services which its citizens owed it, in
times of both war and peace. For he felt that it would be absurd for a
soldier … to be haled to prison by his creditor for an unpaid loan, and
that the greed of private citizens should in this way endanger the
safety of all.”
The fact that the main Near Eastern creditors were the palace,
temples and their collectors made it politically easy to cancel the
debts. It always is easy to annul debts owed to oneself. Even Roman
emperors burned the tax records to prevent a crisis. But it was much
harder to cancel debts owed to private creditors as the practice of
charging interest spread westward to Mediterranean chiefdoms after about
750 BC. Instead of enabling families to bridge gaps between income and
outgo, debt became the major lever of land expropriation, polarizing
communities between creditor oligarchies and indebted clients. In Judah,
the prophet Isaiah (5:8-9) decried foreclosing creditors who “add house
to house and join field to field till no space is left and you live
alone in the land.”
Creditor power and stable growth rarely have gone together. Most
personal debts in this classical period were the product of small
amounts of money lent to individuals living on the edge of subsistence
and who could not make ends meet. Forfeiture of land and assets – and
personal liberty – forced debtors into bondage that became
irreversible.
By the 7
th century BC, “tyrants” (popular leaders) emerged
to overthrow the aristocracies in Corinth and other wealthy Greek
cities, gaining support by cancelling the debts. In a less tyrannical
manner, Solon founded the Athenian democracy in 594 BC by banning debt
bondage.
But oligarchies re-emerged and called in Rome when Sparta’s kings
Agis, Cleomenes and their successor Nabis sought to cancel debts late in
the third century BC. They were killed and their supporters driven out.
It has been a political constant of history since antiquity that
creditor interests opposed both popular democracy and royal power able
to limit the financial conquest of society – a conquest aimed at
attaching interest-bearing debt claims for payment on as much of the
economic surplus as possible.
When the Gracchi brothers and their followers tried to reform the
credit laws in 133 BC, the dominant Senatorial class acted with
violence, killing them and inaugurating a century of Social War,
resolved by the ascension of Augustus as emperor in 29 BC.
Rome’s creditor oligarchy wins the Social War, enslaves the population and brings on a Dark Age
(CONTINUE READING AT COUNTERPUNCH.ORG)
October 25, 2012
