Perspectives

Let debt remission ring!

An ancient idea for today’s economy

By Eva von Dassow
11-18-2015

How might we be faring as a nation, if in response to the 2008 financial crisis our government had bailed out the people instead of the banks? That’s what happened in ancient Mesopotamia, the land that is now Iraq. States periodically ordered all non-commercial debts annulled. As a result, people enslaved for debt were sprung from bondage, and foreclosed homes were restored to their former owners.

This practice, first recorded in Sumer almost 4,500 years ago, is best known from Babylonia during the age of Hammurabi, circa 1750 BCE. From Mesopotamia it spread to other lands, including Israel and Judah. Debt remission restored families to their homes and indentured servants to freedom, so they could resume life as tax-paying citizens.

A king would decree a debt amnesty upon his accession to the throne, marking a new beginning for the realm. He might also do it on other occasions when it seemed politically advantageous. For instance, a king might decree debt remission upon conquering another king’s territory, endeavoring to win over his new subjects by posing as a beneficent liberator. Such decrees covered only certain categories of debt, so they would not affect commerce or inhibit the investment of capital.

Kings claimed they decreed debt amnesties in order to establish justice and equity. Upon Hammurabi’s death, his son Samsu-iluna issued an edict cancelling his subjects’ debts, in order to “strengthen the taxpayer” and “establish justice” — so his edict says.

Suppose President Obama had issued a similar edict. Surely it wouldn’t have cost more than the bank bailout, estimated by some at almost $30 trillion. Following the Mesopotamian model, such a debt amnesty would apply not to commercial loans but exclusively to loans taken out to pay for basic needs — housing, sustenance, medical care, maybe also a college education. As a result, mortgages on primary residences are annulled, foreclosures reversed, defaulting debtors’ wages are no longer garnished, payday lenders forfeit their claims … and the fortunes of households struggling under their debt load are restored.

Well, now I have a problem if I need a mortgage. Who’s going to offer me financing? Maybe I don’t have to make my previous mortgage payments but I’m still short of funds — kids in college, harvest eaten by locusts, investment in a new field won’t pay off for years. So my banker and I devise a mechanism to insulate my new mortgage from a future debt amnesty. Several such mechanisms were used in ancient Mesopotamia. The simplest was to add a stipulation to the contract saying it was not subject to amnesty. The most elaborate was a legal instrument whereby the debtor “adopted” the financier and “bequeathed” him the mortgaged property as an “inheritance share.” The point of debt remission was to restore families and their property. So, if your banker was legally a member of your family, his claim to your property was protected — rather than threatened — by debt amnesty.

Most of us would balk at the idea of incorporating our creditors into our families. We would also likely balk at the idea of our government cancelling debts by decree. Not only is that not a proper role for the state, we would say, such a policy would hobble lending while producing moral hazard. Yet it’s exactly what our Liberty Bell tells us to do. “Proclaim liberty throughout the land” is quoted from Leviticus 25:10, translating as “liberty” the Hebrew word deror. This word is derived from Akkadian anduraru, the term for debt remission used in Babylonia; the Sumerian term was ama-ar-gi, literally “return to mother,” signifying restoration to one’s original condition. What the author of Leviticus commands is a debt amnesty, restoring all who are in bondage to freedom, and their property, too.

In 587 BCE, with the armies of Nebuchadnezzar threatening Jerusalem, Zedekiah, king of Judah, proclaimed just such an amnesty to free Judeans enslaved for debt. The slaveholders obeyed but then forced those they released back into slavery. The prophet Jeremiah declared that because of this transgression God would “release” Judah to the sword. The Babylonians proceeded to sack Jerusalem, raze its temple and deport its people. This, said Jeremiah, was Judah’s punishment for flouting the law that debts shall be remitted and indentured servants released in the seventh year, as it is written in Deuteronomy 15. Leviticus 25 prescribes the institution of both the sabbatical year and the jubilee, when all persons and property return to their original condition, unencumbered by debt. The Hebrew Bible thus incorporates the millennia-old practice of periodically remitting debts, and proclaims it as the law God commanded, that the people and their land may flourish.

Did they? Ample evidence from the age of Hammurabi indicates that Syro-Mesopotamian states did flourish during the period when debt amnesties were proclaimed fairly often.  By contrast, Syro-Canaanite kingdoms of later centuries never proclaimed debt amnesties. Around 1200 BCE, these kingdoms suffered political and socioeconomic collapse, and most of them disappeared.

Imagine that in 2009 the U.S. government had instituted a measure like the ancient Mesopotamian debt amnesty. Debt would have reduced no family to poverty, and driven no one onto welfare rolls. Citizens could dispose of their income to sustain their own needs, ambitions and well-being. Tax revenues would correspondingly rise. And perhaps income inequality would not be a predominant theme of our national discourse.

Bio

Eva von Dassow teaches the history and languages of the ancient Near East at the University of Minnesota. Her publications include State and Society in the Late Bronze Age: Alalah under the Mittani Empire (2008). Her current research focuses on freedom and governance in ancient Near Eastern societies.  

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