Mesopotamian city-states were dominated by vast Temples: gigantic, complex industrial institutions often staffed by thousands — including everyone from shepherds and barge-pullers to spinners and weavers to dancing girls and clerical administrators, [and these Temples owned many of the assets of the city-state].
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We don’t know precisely when and how interest-bearing loans originated, since they appear to predate writing. Most likely, Temple administrators invented the idea as a way of financing the caravan trade. This trade was crucial because while the river valley of ancient Mesopotamia was extraordinarily fertile and produced huge surpluses of grain and other foodstuffs, and supported enormous numbers of livestock, which in turn supported a vast wool and leather industry, it was almost completely lacking in anything else. Stone, wood, metal, even the silver used as money, all had to be imported. From quite early times, then, Temple administrators developed the habit of advancing goods to local merchants — some of them private, others themselves Temple functionaries — who would then go off and sell it overseas. Interest was just a way for the Temples to take their share of the resulting profits.
However, once established, the principle seems to have quickly spread. Before long, we find not only commercial loans, but also consumer loans — usury in the classical sense of the term. By c2400 BC it already appears to have been common practice on the part of local officials, or wealthy merchants, to advance loans to peasants who were in financial trouble on collateral and begin to appropriate their possessions if they were unable to pay. It usually started with grain, sheep, goats, and furniture, then moved on to fields and houses, or, alternately or ultimately, family members. Servants, if any, went quickly, followed by children, wives, and in some extreme occasions, even the borrower himself. These would be reduced to debt-peons: not quite slaves, but very close to that, forced into perpetual service in the lender’s household — or, sometimes, in the Temples or Palaces themselves. In theory, of course, any of them could be redeemed whenever the borrower repaid the money, but for obvious reasons, the more a peasant’s resources were stripped away from him, the harder that became.
The effects were such that they often threatened to rip society apart. If for any reason there was a bad harvest, large proportions of the peasantry would fall into debt peonage; families would be broken up. Before long, lands lay abandoned as indebted farmers fled their homes for fear of repossession and joined semi-nomadic bands on the desert fringes of urban civilization. Faced with the potential for complete social breakdown, Sumerian and later Babylonian kings periodically announced general amnesties: ‘clean slates,’ as economic historian Michael Hudson refers to them. Such decrees would typically declare all outstanding consumer debt null and void (commercial debts were not affected), return all land to its original owners, and allow all debt-peons to return to their families. Before long, it became more or less a regular habit for kings to make such a declaration on first assuming power, and many were forced to repeat it periodically over the course of their reigns.
In Sumeria, these were called ‘declarations of freedom’ — and it is significant that the Sumerian word, the first recorded word for ‘freedom’ in any known human language, literally means ‘return to mother’ — since this is what freed debt-peons were finally allowed to do.
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Nehemiah was a Jew born in Babylon, a former cup-bearer to the Persian emperor. In 444 BC, he managed to talk the Great King into appointing him governor of his native Judaea. He also received permission to rebuild the Temple in Jerusalem that had been destroyed by Nebuchadnezzar more than two centuries earlier. In the course of rebuilding, sacred texts were recovered and restored; in a sense, this was the moment of the creation of what we now consider Judaism.
The problem was that Nehemiah quickly found himself confronted with a social crisis. All around him, impoverished peasants were unable to pay their taxes; creditors were carrying off the children of the poor. His first response was to issue a classic Babylonian-style ‘clean slate’ edict — having himself been born in Babylon, he was clearly familiar with the general principle. All non-commercial debts were to be forgiven. Maximum interest rates were set. At the same time, though, Nehemiah managed to locate, revise, and reissue much older Jewish laws, now preserved in Exodus, Deuteronomy, and Leviticus, which in certain ways went even further, by institutionalizing the principle. The most famous of these is the Law of Jubilee: a law that stipulated that all debts would be automatically cancelled ‘in the Sabbath year’ (that is, after seven years had passed), and that all who languished in bondage owing to such debts would be released.
‘Freedom,’ in the Bible, as in Mesopotamia, came to refer above all to release from the effects of debt.”
From David Graeber’s Debt: The First 5,000 Years.