[P2P-F] Article : Debt Slavery – Why It Destroyed Rome, Why It Will Destroy Us Unless It’s Stopped

Tue Dec 6 21:55:42 CET 2011

On Tue, Dec 6, 2011 at 9:08 PM, Dante-Gabryell Monson <
dante.monson at gmail.com> wrote:

>
> http://www.counterpunch.org/2011/12/02/debt-slavery-%E2%80%93-why-it-destroyed-rome-why-it-will-destroy-us-unless-it%E2%80%99s-stopped/
>
> *This article appears in the Frankfurter Algemeine Zeitung on December 5,
> 2011.*
>
> WEEKEND EDITION DECEMBER 2-4, 2011
> Hammurabi Knew Better
> Debt Slavery – Why It Destroyed Rome, Why It Will Destroy Us Unless It’s
> Stopped
> by MICHAEL HUDSON
>
> 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 7th 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*
>
> **Matters were more bloody abroad. Aristotle did not mention empire
> building as part of his political schema, but foreign conquest always has
> been a major factor in imposing debts, and war debts have been the major
> cause of public debt in modern times. Antiquity’s harshest debt levy was by
> Rome, whose creditors spread out to plague Asia Minor, its most prosperous
> province. The rule of law all but disappeared when publican creditor
> “knights”  arrived. Mithridates of Pontus led three popular revolts, and
> local populations in Ephesus and other cities rose up and killed a reported
> 80,000 Romans in 88 BC. The Roman army retaliated, and Sulla imposed war
> tribute of 20,000 talents in 84 BC. Charges for back interest multiplied
> this sum six-fold by 70 BC.
>
> Among Rome’s leading historians, Livy, Plutarch and Diodorus blamed the
> fall of the Republic on creditor intransigence in waging the century-long
> Social War marked by political murder from 133 to 29 BC. Populist leaders
> sought to gain a following by advocating debt cancellations (*e.g*., the
> Catiline conspiracy in 63-62 BC). They were killed. By the second century
> AD about a quarter of the population was reduced to bondage. By the fifth
> century Rome’s economy collapsed, stripped of money. Subsistence life
> reverted to the countryside.
>
> *Creditors find a legalistic reason to support parliamentary democracy*
>
> **When banking recovered after the Crusades looted Byzantium and infused
> silver and gold to review Western European commerce, Christian opposition
> to charging interest was overcome by the combination of prestigious lenders
> (the Knights Templars and Hospitallers providing credit during the
> Crusades) and their major clients – kings, at first to pay the Church and
> increasingly to wage war. But royal debts went bad when kings died. The
> Bardi and Peruzzi went bankrupt in 1345 when Edward III repudiated his war
> debts. Banking families lost more on loans to the Habsburg and Bourbon
> despots on the thrones of Spain, Austria and France.
>
> Matters changed with the Dutch democracy, seeking to win and secure its
> liberty from Habsburg Spain. The fact that their parliament was to contract
> permanent public debts on behalf of the state enabled the Low Countries to
> raise loans to employ mercenaries in an epoch when money and credit were
> the sinews of war. Access to credit “was accordingly their most powerful
> weapon in the struggle for their freedom,” Richard Ehrenberg wrote in his
> *Capital and Finance in the Age of the Renaissance* (1928): “Anyone who
> gave credit to a prince knew that the repayment of the debt depended only
> on his debtor’s capacity and will to pay. The case was very different for
> the cities, which had power as overlords, but were also corporations,
> associations of individuals held in common bond. According to the generally
> accepted law each individual burgher was liable for the debts of the city
> both with his person and his property.”
>
> The *financial *achievement of parliamentary government was thus to
> establish debts that were not merely the personal obligations of princes,
> but were truly public and binding regardless of who occupied the throne.
> This is why the first two democratic nations, the Netherlands and Britain
> after its 1688 revolution, developed the most active capital markets and
> proceeded to become leading military powers. What is ironic is that it was
> the need for war financing that promoted democracy, forming a symbiotic
> trinity between war making, credit and parliamentary democracy which has
> lasted to this day.
>
> At this time “the legal position of the King *qua *borrower was obscure,
> and it was still doubtful whether his creditors had any remedy against him
> in case of default.” (Charles Wilson, *England’s Apprenticeship: 1603-1763
> *: 1965.) The more despotic Spain, Austria and France became, the greater
> the difficulty they found in financing their military adventures. By the
> end of the eighteenth century Austria was left “without credit, and
> consequently without much debt,” the least credit-worthy and worst armed
> country in Europe, fully dependent on British subsidies and loan guarantees
> by the time of the Napoleonic Wars.
>
> *Finance accommodates itself to democracy, but then pushes for oligarchy*
>
> **While the nineteenth century’s democratic reforms reduced the power of
> landed aristocracies to control parliaments, bankers moved flexibly to
> achieve a symbiotic relationship with nearly every form of government. In
> France, followers of Saint-Simon promoted the idea of banks acting like
> mutual funds, extending credit against equity shares in profit. The German
> state made an alliance with large banking and heavy industry. Marx wrote
> optimistically about how socialism would make finance productive rather
> than parasitic. In the United States, regulation of public utilities went
> hand in hand with guaranteed returns. In China, Sun-Yat-Sen wrote in 1922:
> “I intend to make all the national industries of China into a Great Trust
> owned by the Chinese people, and financed with international capital for
> mutual benefit.”
>
> World War I saw the United States replace Britain as the major creditor
> nation, and by the end of World War II it had cornered some 80 per cent of
> the world’s monetary gold. Its diplomats shaped the IMF and World Bank
> along creditor-oriented lines that financed trade dependency, mainly on the
> United States. Loans to finance trade and payments deficits were subject to
> “conditionalities” that shifted economic planning to client oligarchies and
> military dictatorships. The democratic response to resulting austerity
> plans squeezing out debt service was unable to go much beyond “IMF riots,”
> until Argentina rejected its foreign debt.
>
> A similar creditor-oriented austerity is now being imposed on Europe by
> the European Central Bank (ECB) and EU bureaucracy. Ostensibly social
> democratic governments have been directed to save the banks rather than
> reviving economic growth and employment. Losses on bad bank loans and
> speculations are taken onto the public balance sheet while scaling back
> public spending and even selling off infrastructure. The response of
> taxpayers stuck with the resulting debt has been to mount popular protests
> starting in Iceland and Latvia in January 2009, and more widespread
> demonstrations in Greece and Spain this autumn to protest their
> governments’ refusal to hold referendums on these fateful bailouts of
> foreign bondholders.
>
> *Shifting planning away from elected public representatives to bankers*
>
> **Every economy is planned. This traditionally has been the function of
> government. Relinquishing this role under the slogan of “free markets”
> leaves it in the hands of banks. Yet the planning privilege of credit
> creation and allocation turns out to be even more centralized than that of
> elected public officials. And to make matters worse, the financial time
> frame is short-term hit-and-run, ending up as asset stripping. By seeking
> their own gains, the banks tend to destroy the economy. The surplus ends up
> being consumed by interest and other financial charges, leaving no revenue
> for new capital investment or basic social spending.
>
> This is why relinquishing policy control to a creditor class rarely has
> gone together with economic growth and rising living standards. The
> tendency for debts to grow faster than the population’s ability to pay has
> been a basic constant throughout all recorded history. Debts mount up
> exponentially, absorbing the surplus and reducing much of the population to
> the equivalent of debt peonage. To restore economic balance, antiquity’s
> cry for debt cancellation sought what the Bronze Age Near East achieved by
> royal fiat: to cancel the overgrowth of debts.
>
> In more modern times, democracies have urged a strong state to tax*rentier
> * income and wealth, and when called for, to write down debts. This is
> done most readily when the state itself creates money and credit. It is
> done least easily when banks translate their gains into political power.
> When banks are permitted to be self-regulating and given veto power over
> government regulators, the economy is distorted to permit creditors to
> indulge in the speculative gambles and outright fraud that have marked the
> past decade. The fall of the Roman Empire demonstrates what happens when
> creditor demands are unchecked. Under these conditions the alternative to
> government planning and regulation of the financial sector becomes a road
> to debt peonage.
>
> *Finance vs. government; oligarchy vs. democracy*
>
> **Democracy involves subordinating financial dynamics to serve economic
> balance and growth – and taxing rentier income or keeping basic monopolies
> in the public domain. Untaxing or privatizing property income “frees” it to
> be pledged to the banks, to be capitalized into larger loans. Financed by
> debt leveraging, asset-price inflation increases *rentier* wealth while
> indebting the economy at large. The economy shrinks, falling into negative
> equity.
>
> The financial sector has gained sufficient influence to use such
> emergencies as an opportunity to convince governments that that the economy
> will collapse they it do not “save the banks.” In practice this means
> consolidating their control over policy, which they use in ways that
> further polarize economies. The basic model is what occurred in ancient
> Rome, moving from democracy to oligarchy. In fact, giving priority to
> bankers and leaving economic planning to be dictated by the EU, ECB and IMF
> threatens to strip the nation-state of the power to coin or print money and
> levy taxes.
>
> The resulting conflict is pitting financial interests against national
> self-determination. The idea of an independent central bank being “the
> hallmark of democracy” is a euphemism for relinquishing the most important
> policy decision – the ability to create money and credit – to the financial
> sector. Rather than leaving the policy choice to popular referendums, the
> rescue of banks organized by the EU and ECB now represents the largest
> category of rising national debt. The private bank debts taken onto
> government balance sheets in Ireland and Greece have been turned into
> taxpayer obligations. The same is true for America’s $13 trillion added
> since September 2008 (including $5.3 trillion in Fannie Mae and Freddie Mac
> bad mortgages taken onto the government’s balance sheet, and $2 trillion of
> Federal Reserve “cash-for-trash” swaps).
>
> This is being dictated by financial proxies euphemized as technocrats.
> Designated by creditor lobbyists, their role is to calculate just how much
> unemployment and depression is needed to squeeze out a surplus to pay
> creditors for debts now on the books. What makes this calculation
> self-defeating is the fact that economic shrinkage – debt deflation – makes
> the debt burden even more unpayable.
>
> Neither banks nor public authorities (or mainstream academics, for that
> matter) calculated the economy’s realistic ability to pay – that is, to pay
> without shrinking the economy. Through their media and think tanks, they
> have convinced populations that the way to get rich most rapidly is to
> borrow money to buy real estate, stocks and bonds rising in price – being
> inflated by bank credit – and to reverse the past century’s progressive
> taxation of wealth.
>
> To put matters bluntly, the result has been junk economics. Its aim is to
> disable public checks and balances, shifting planning power into the hands
> of high finance on the claim that this is more efficient than public
> regulation. Government planning and taxation is accused of being “the road
> to serfdom,” as if “free markets” controlled by bankers given leeway to act
> recklessly is not planned by special interests in ways that are oligarchic,
> not democratic. Governments are told to pay bailout debts taken on not to
> defend countries in military warfare as in times past, but to benefit the
> wealthiest layer of the population by shifting its losses onto taxpayers.
>
> The failure to take the wishes of voters into consideration leaves the
> resulting national debts on shaky ground politically and even legally.
> Debts imposed by fiat, by governments or foreign financial agencies in the
> face of strong popular opposition may be as tenuous as those of the
> Habsburgs and other despots in past epochs. Lacking popular validation,
> they may die with the regime that contracted them. New governments may act
> democratically to subordinate the banking and financial sector to serve the
> economy, not the other way around.
>
> At the very least, they may seek to pay by re-introducing progressive
> taxation of wealth and income, shifting the fiscal burden onto *rentier*wealth
> and property. Re-regulation of banking and providing a public option for
> credit and banking services would renew the social democratic program that
> seemed well underway a century ago.
>
> Iceland and Argentina are most recent examples, but one may look back to
> the moratorium on Inter-Ally arms debts and German reparations in 1931.A
> basic mathematical as well as political principle is at work: Debts that
> can’t be paid, won’t be.
>
> *This article appears in the Frankfurter Algemeine Zeitung on December 5,
> 2011.*
>
> *MICHAEL HUDSON is a former Wall Street economist. A Distinguished
> Research Professor at University of Missouri, Kansas City (UMKC), he is the
> author of many books, including Super Imperialism: The Economic Strategy
> of American Empire<http://www.amazon.com/exec/obidos/ASIN/0745319890/counterpunchmaga> (new
> ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A
> History of Theories of Polarization v. Convergence in the World Economy<http://www.amazon.com/exec/obidos/ASIN/3980846695/counterpunchmaga>.
> He can be reached via his website, mh at michael-hudson.com*
>

-- 
P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

Connect: http://p2pfoundation.ning.com; Discuss:
http://lists.ourproject.org/cgi-bin/mailman/listinfo/p2p-foundation

Updates: http://del.icio.us/mbauwens; http://friendfeed.com/mbauwens;
http://twitter.com/mbauwens; http://www.facebook.com/mbauwens
-------------- next part --------------
An HTML attachment was scrubbed...
URL: https://lists.ourproject.org/pipermail/p2p-foundation/attachments/20111207/9e7d9038/attachment.htm 