When Debts Become Unpayable, They Should Be Forgiven

Michael Hudson

For centuries, debt and indebtedness have had profoundly destabilizing effects on human societies. In the ancient world, rulers and their subjects had a solution: known as a debt jubilee, it involved a periodic, unconditional wiping out of debt. We need such a jubilee today.

Detail from a Babylonian boundary stone depicting King Mardukpaliddin with one of his officials, 714 BC. (Universal History Archive / UIG via Getty images)

Interview by
Branko Marcetic

Debt is a fact of life — even as it’s proved one of the most persistent problems bedeviling our world. Your home, your consumer goods, your degree, and, if you live in the United States, your medical care — more than likely, all of it was made possible by going into debt. Periodic economic crises have been among the results. Whenever such crises emerge, there have been calls to forgive debt. But the powers that be and an army of commentators warn us any such efforts have to be limited and measured, lest they lead to chaos and disorder.

Michael Hudson has a different view. A former economist for Chase Manhattan Bank and advisor to various governments, including Washington, Hudson wrote the highly influential Super Imperialism, explaining how the emergence of an international monetary system based on the dollar in the postwar era ended up helping the US finance limitless military spending.

Now a professor of economics at the University of Missouri-Kansas City, Hudson has delved into archaeology to try and find the origins of debt and private property. He spoke to Jacobins Branko Marcetic about the results of this research, the 2018 book …and forgive them their debts: Lending, Foreclosure, and Redemption from Bronze Age Finance to the Jubilee Year. The work covers everything from debt forgiveness in ancient societies to how much of what we know about Christianity is wrong. The conversation has been edited for length and clarity.

Branko Marcetic

You make the case that our modern relationship with and understanding of debt is unique when you look at the full scope of human history. What was ancient societies’ relationship to debt and how did they keep it in check?

Michael Hudson

Almost all debt, in really ancient society, was interpersonal, what the Europeans called weregild-type debt. If you injured somebody, if you break an arm, or if you kill them, there are two choices ancient society had: either you had a feud, and your family would fight his family, or he’d make restitution, and you would settle the conflict. Gradually, the payment of the weregild, whether it was in money — or if it was really serious, it would be in slave girls or cattle — came to be the word for debt, and for the offense, or the word for “sin.” So the original meaning of the Lord’s Prayer in Hebrew and Greek was, “Forgive us our debts.”

In Mesopotamia, an agrarian economy, most debts began to be owed to the palace or the temples. Obligations were paid throughout the year. In the third millennium Sumer, or second millennium Babylonia, if you go to a bar during the crop year, you’d run up a tab to the alehouse, and to the palace for advances of animals, water, or agricultural inputs, and everything was done by credit. The debts would all be paid on the threshing floor, in grain, and a unit of grain was equal to a unit of silver.

But sometimes, you would have a crop failure, or war, or drought, and you couldn’t pay. And at that time, like in the laws of Hammurabi, you’d say, “If the storm god, Hadad, comes and ruins the crops, then the debts don’t have to be paid.” This is how society worked, basically, in the third, second, and even into the first millennium. When a new ruler took the throne, or when there were other reasons — a war was over, or there was any reason for a debt cancellation — you’d cancel the debts, you’d liberate the debt servants to go back to their families, you’d give them back the pledges that they’d made. Because what would happen if you hadn’t wiped out the debts? All of a sudden all these people that owed debts would become the servants of the person who they owed them to, a wealthy person.

Branko Marcetic

You also make the case that this matter is at the heart of the Biblical stories we think we’re familiar with.

Michael Hudson

That was what the first sermon of Jesus was all about. When he went to the synagogue and unrolled the scroll of Isaiah the prophet and said, “I’ve come to proclaim the year of the Lord,” which was the debt cancellation — the Jubilee year — that was brought in from Babylonia into Judaism, as it was done all through the Near East. People who translated the Bible didn’t really know what these words meant. What does it mean, “year of the Lord?” What does it mean, “deror?,” which was debt cancellation.

It was only after Assyriologists began to find out how all of Near Eastern society had debt cancellation, just like anthropologists were finding that all the way from the Native American Indians to European realms, you’d have this practice of restoring balance. The idea was, how do we prevent society from destabilizing and polarizing? You cancel the debts.

Branko Marcetic

How did this attitude to debt and debt cancellation change?

Michael Hudson

There was no concept of interest in the West, in all of the Linear B documents of Greece, from about 1600 to 1200 BC. Around the eighth century BC, the idea of interest-bearing debt appeared for the first time, and local chieftains all of a sudden became what a number of historians call mafia families. They found a way of just monopolizing the land, until about the seventh and sixth centuries. There were revolutions all over by reformers, all over Greece, and Italy, and reformers later were called “Tyrants.”

The whole fight of every early society was: How do you prevent the population from falling into bondage? The palaces had a reason for doing this. If you would have the taxpaying small cultivators owing their crop to the creditor and having to go to work on the creditor’s land instead of working as a corvee, building palace walls and digging ditches for irrigation — if you would have these people fall in debt to the creditors, they wouldn’t be able to pay this crop surplus and labor surplus to the palace anymore. The creditors would take over.

Rulers throughout the Near East, all the way into probably the early kings of Rome, said, “The one thing we’ve got to do is prevent the creditor class from becoming an independent oligarchy. Because if it becomes independent of us, and it gets the economic surplus, they’re going to use this labor to hire an army, they’re going to overthrow us, and they’re going to become the state.”

So you always had a struggle between the state protecting society from the creditor class — the oligarchy — and the oligarchy wanting to be independent, wanting not to have a debt cancellation. And this was a fight that went on for four centuries before Jesus’s time. The early Christians were basically advocates of the Jubilee year, trying to cancel debt.

Branko Marcetic

How did debt and the rising power of creditors figure in the tumult of Roman history?

Michael Hudson

In Rome, the wrong kings were overthrown in about 509 BC by an oligarchy, who essentially wanted to reduce the rest of the Roman population to serfdom. The whole Republic was a long set of one revolt after another after another, wanting a debt cancellation and redistribution of land. All of this was called a democracy. A democracy to the oligarchy means all the creditors are equal, and therefore liberty is the liberty to enslave the rest of the population.

Democracy throughout antiquity meant serfdom for most of the population. Aristotle was very clear on this. He said, “Many cities have constitutions that appear to be democracies, but they’re really oligarchies.” And in fact, every democracy, Aristotle wrote, tends to turn into an oligarchy, as wealthy people get rich, and then the oligarchy makes itself into a hereditary aristocracy, and lords it over the rest of society.

You had this whole background that led to the modern world, which had stopped the tradition of debt cancellation that had liberated populations from debt bondage, and what became serfdom. And it was on the idea that the law is inexorable.

The historians now say, “Well, boy, the Roman Empire wasn’t all that bad — look at how rich it got.” But the richness was all concentrated in the 1 percent of the population and the 99 percent ended up being tied down to the land. If you read the late books of the New Testament, all the way through to the book of Revelation, it’s all about, “We’re living in the end times, it’s terrible, Rome is the beast, there’s no hope here. We can’t reform land. We can’t cancel the debts ever because of the greed of the rich. There’s nothing to do but become martyrs and die and hope that in the next world, things are going to be better, and maybe Jesus is going to come back.” The whole idea was anti-Roman.

Every economy is going to be planned by someone. The question is, is it going to be planned by the creditors, as it has happened today? Or are you going to have a government, a ruler, that is going to say, “My job is to keep society stable, and to prevent it from polarizing so that we can survive and be resilient and go forward?” The creditors don’t care about resilience. Their time frame is rather short.

Branko Marcetic

What are the implications of this for the post-pandemic recovery, given we live in such highly indebted societies?

Michael Hudson

The tendency of any economy that has an interest-bearing debt is the debt growing faster than the economy as a whole. You have exponential debt doubling every so many years and economies have never been able to keep up with it. The tendency of debt for any family, any corporation, any economy, is to grow faster than the ability to pay, until there’s a crash. And when you can’t pay, either you lose the property, or you become in one way or another, a servant to your creditor, in terms of having to pay labor, having to pay whatever you produce. You have a concentration of property ownership in the hands of the creditors, if you don’t write off the debts, which ancient society did, and which used to be the core of ancient religion.

Every economy that has interest-bearing debt has to restructure at some point, or else all of the economy will end up being owned by just a teeny group of people at the top, like you had in Rome. That’s how the Roman Republic ended up in the Roman Empire. It becomes centralized. The tendency of any financialized economy is to centralize. Not only wealth, but by centralizing wealth, you centralize political power, and decision-making, and ultimately, military force in the hands of the financial class.