Brief:The Mesopotamian Origin of Debt
The Western world celebrates progress and economic advancement, often viewing it as a result of “creative destruction” spurred by ambitious individuals seeking wealth, as described by Joseph Schumpeter. However, history challenges this narrative. Ancient societies, such as those in the Bronze Age, saw the overgrowth of debt as abnormal and prioritized overall growth over financial gain. They even implemented periodic debt forgiveness known as Clean Slates to maintain economic resilience.
Mesopotamia, in the third millennium BC, pioneered interest-bearing debt within its economic structure due to its need for foreign raw materials. This led to financial innovations and the emergence of new property relationships. Temples became centers of enterprise, employing labor for trade and crafting. They standardized measurements, payment systems, and introduced a monetary system based on silver shekels.
Economic life in Mesopotamia required large institutions, initially temples and later palaces, to manage markets and prevent credit imbalances from destabilizing land-tenure relations. Two types of debt existed: commercial debts in silver and agrarian debts in barley units. Commercial debts facilitated long-distance trade, often with interest rates doubling principal in five years, while agrarian debts, often charged at a third of the principal, arose from land rental agreements and were seen as socially unfair.
Throughout antiquity, rulers understood the need to prevent societal collapse due to indebtedness. Clean Slates were periodically enacted to forgive debts, liberate debtors, and maintain self-support for citizens. Early societies valued overall welfare over personal wealth accumulation and used regulatory oversight to manage economic strains. Land was considered a natural right, and debt bondage was temporary to prevent permanent loss of liberty.
In summary, understanding the historical management of debt can provide insights into navigating economic crises. By recognizing the significance of debt forgiveness and prioritizing societal welfare, societies throughout history have managed to maintain stability amidst economic challenges.
