Private Enterprise Originated in Public Institutions

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A public entrepreneurial initiative is difficult for many modern observers to acknowledge because we have virtually inverted the relations of Bronze Age enterprise and finance.

Ancient ziggurat at Ali Air Base Iraq 2005.jpg
Michael Hudson has devoted his career to the study of debt.

Introduction[edit | edit source]

Sumer’s great contribution to civilization was a complex set of innovations that broke through the traditional “anthropological” or “soft” interpersonal reciprocity of gift exchange to create the first known economic regime. Sumerian innovations included bulk trade, standardized (hence, impersonal) money prices and lot sizes, sharecropping rents, wage-ration allotments, interest and contractual forms, and indeed the general system of weights and measures. All these innovations found their initial focus in the city-temples, which were organized on the basis of a number of economic innovations that have shaped the entire world’s subsequent evolution.

The Economic Importance of Sumerian Temples[edit | edit source]

It would not be too much to call these temples history’s first formal business corporations. Organizing an export trade to obtain foreign metals, stone, hardwood and other raw materials not found in the southern alluvium, Sumer’s temples legitimized capital accumulation, that is, the reinvestment of surpluses without reciprocity to earn yet further gains. The objective of the new system was to expand the means of production and to build up monetary savings. Yet among all the Sumerian “firsts” that have been enumerated by Samuel Kramer and other popular historians, the above innovations scarcely have been mentioned.

Public Institutions vs. Private Gain[edit | edit source]

Why did commercial gain-seeking originate in public institutions? The logical answer is that they must have been the line of least resistance to the social forces opposing major private gain-seeking. For although capital accumulation seems natural to modern eyes, it rarely develops spontaneously in low-surplus economies. Communal traditions discourage the pursuit of commerce beyond the level of gift exchange among chiefs and occasional barter by itinerant traders. It therefore is necessary to explain just how the commercial ethic first developed and spread, for it is not a universal and automatic phenomenon.

In Sumer, temples were organized to yield a rentier income in the form of prebends, that is, stipulated flows of rent earmarked to support administrative personnel. The various lands, workshops and herds were organized into what today would be called profit centers. Annual accounts were compiled of costs and expenses, attested by administrators’ seals for each level of the bureaucratic hierarchy. The practice of sealing limited access to storerooms and certified transactions as being officially sanctioned. The ensuing record-keeping required the design of a system of standardized weights and measures, which paved the way for the development of forward planning.

Sumer’s city-temples accumulated unprecedented amounts of capital. Indeed, it was probably only such public institutions that could have placated the adherents of the archaic consumption-based ethic and generated surpluses in socially acceptable ways. Personal self-seekers could not easily have made the breakthrough on their own, for they would have been condemned as greedy. Thus, while the non-public sector (we cannot yet truly call it a private sector) long remained subsistence-based, the temples were able, as public institutions, to legitimize the accumulation of a surplus. It is in this capacity that they acted as a catalyst for a new entrepreneurial regime.

The Standardized Nature of the Public Sector[edit | edit source]

Organized to generate or squeeze out an economic surplus, public enterprise became more formalized and standardized in its production technology and specialization of labor than was the non-public “household” sector. Public rations, for instance, are carefully measured and proportioned, in contrast to the private family’s ad hoc eating arrangements. Indeed, the public sector’s guiding spirit traditionally has been one of standardization and schematic regulation, while the private sector is characterized by free-flowing spontaneity. Against the household sector’s informal plasticity, the public sector manifests a symmetrical formality in its ceremonial art and architecture. With its carefully measured proportions and layouts, public architecture juxtaposes itself to the private sector’s less formalized housing designs.

As early as the fourth millennium, careful measuring was essential for planning the production of an economic surplus. A usufruct in the form of land-rent and interest was calculated—indeed, stipulated—in advance. This scheduling required standardized ration levels within the administrative hierarchy, and a corresponding standardization of time to create symmetrical calendrical months. Members of every social rank were thereby rendered equal in the sense that they shared the same units of measurement. This nominal equality was expressed ceremonially and artistically, as well as legally and economically.

Prices were standardized, as were interest rates, which remained set for centuries on end. Most interest-bearing debts, for instance, reflected intersectoral balances owed by community members to the temples and palace. Settlement of these debts required a standardized means of payment, and two common denominators emerged to play this role: barley for agricultural obligations, silver for commercial ones. The main monetary unit of account was the silver shekel, whose value was set as equal to that of a “bushel” (qa) of barley. Both commodities were subdivided into 60ths, providing small enough increments to represent interest fractions on a monthly or annual basis (1/60th per month = 20 percent per year).

Family households were much smaller than public institutions and enjoyed a higher degree of natural trust, and thus rarely needed the accounting oversight and the related financial checks found in public bureaucracies. Yet the distinction between public and private did not turn mainly on kinship relations. The palace was kinship-based, while many landholding bodies were not (namely. Mesopotamian and subsequent professional guilds and, in more modern times, the Russian mir). The Sumerian distinction between public and private sectors turned on the decision to set apart the community’s industrial enterprise—along with land, herds and money—to support its workers in a corporately distinct sector that belonged at least nominally to the city-community as a whole.

If this public entrepreneurial initiative is difficult for many observers to acknowledge today, it is because the modern world has virtually inverted the relations of Bronze Age enterprise and finance. Profit-making investment is now left almost exclusively to the private sector. But this privatization took thousands of years to achieve. Today’s public sectors no longer are creditors as in Bronze Age times; they are in debt, obliged to levy taxes to cover the cost of their operations rather than relying on their own enterprise.

As wealth has broken free of taxation, it has created a privatization of finance, via budget deficits that are funded by borrowing money at interest. This double concession to wealth—not taxing it fully, and paying interest to individual lenders to cover the government’s shortfall—took even longer to develop, and was much more alien to the ancient mind than was the privatization of enterprise (as the stratagems cited in Book II of the pseudo-Aristotelean Œconomica illustrate).

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