|Who's the fairest of the all? Mammon!|
Would you be surprised to learn that debt was destroyed routinely back in the day? Doing so helped civilization grow and prosper, because healthy credit markets helped civilizations grow and prosper too. Today I'd like to share a little historical snippet regarding debt from the good old days. The thoughts belong to a fellow named David Graeber, an anthropology professor at Goldsmiths, University of London. He is the author of the book Debt: The First 5,000 Years. This is from a post at the Wall Street Journal's "Speakeasy" blog,
Contrary to popular belief, credit has been the predominant form of money in world history. In ancient Mesopotamia, elaborate credit systems predated coinage by thousands of years. Periods in which people assume that money really “is” gold and silver, let alone use cash in most everyday transactions, are more the exception than the rule. Ancient empires, for instance, used coins mainly to pay soldiers, and when those empires dissolved in the early Middle Ages, society didn’t really “revert to barter,” as its often believed, but returned to elaborate credit systems—denominated in Roman (and then Carolingian) currency that no longer actually physically existed.
The remarkable thing was that they were able to maintain these credit systems despite the lack of any reliable state authorities willing or able to enforce contracts. How did they do it? Two ways: but both involved insisting that there were values that were more important than mere money.
The first was the cult of personal honor. In most parts of the world, in the Middle Ages (Europe was only a partial exception), merchants had to develop reputations for scrupulous integrity—not just always paying their debts, but forgiving others’ debts if they were in difficulties, and being generally pillars of their communities. Merchants could be trusted with money because they convinced others that they didn’t think money was the most important thing. As a result, “credit,” “honor,” and “decency” became the same thing—an identification which passed into ordinary life as well. As a result in England, where probably 95% of all transactions in a Medieval village were on credit, and decent people tended to avoid the courts, people still speak of “village worthies,” or “men of no account.”
The apogee of this system though was the world of Medieval Islam, where checks were already in wide use by 1000 AD, and letters of credit could travel from Mali to Malaysia, all without any state enforcement whatsoever. In Melaka, the great Indian Ocean entrepôt, merchants from as far a way as Ethiopia or Korea notoriously avoided written contracts, preferring to seal deals “with a handshake and a glance at heaven.” If there were problems, they were referred to sharia courts with no power to have miscreants arrested or imprisoned, but with the power to destroy a merchant’s reputation, and therefore, credit-worthiness, if he were to refuse to abide by their rulings.
This latter brings us to the second factor: the existence of some sort of overarching institutions, larger than states, usually religious in nature, that ensured that credit systems didn’t fly completely out of hand. For much of human history, the great social evil—the thing that everyone feared would lead to the utter breakdown of society—was the debt crisis. The masses of the poor would become indebted to the rich, they would lose their flocks and fields, begin selling family members into peonage and slavery, leading either to mass flight, uprisings, or a society so polarized that the majority were effectively (sometimes literally) reduced to slaves. In periods where economic transactions were conducted largely through cash, there are many parts of the world where this actually began to happen.
Periods dominated by credit money, where everyone recognized that money was just a promise, a social arrangement, almost invariably involve some kind of mechanism to protect debtors. Mesopotamian kings used to rely on their cosmic ability to recreate society to declare clean slates, erase all debts, and simply start over. In ancient Judea this was institutionalized in the seventh-year Jubilee. In the Middle Ages, Christian and Islamic bans on usury and debt peonage, far from being impediments to trade, were actually what made most trade possible, since they ensured ordinary people were not entirely impoverished, and had the means to purchase the merchants’ wares, and because those religious systems became the foundation for networks of honor and trust.
That was my bold highlight. Religious systems the foundation for networks of honor and trust? Imagine that! You can find the entire post here, and his book where they sell books or in your local library. Therein Graebel writes,
"It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt. It would be salutary not just because it would relieve so much genuine human suffering, but also because it would be our way of reminding ourselves that money is not ineffable, that paying one's debts is not the essence of morality, that all these things are human arrangements and that if democracy is to mean anything, it is the ability to all to agree to arrange things in a different way."
I think the Jubilee year was every 50th year, actually, but mechanisms for debt destruction may be an idea that needs to be brushed off if we intend to hold Mammon at bay. Food for thought.