How Western Civilization Skidded

Image: João Nitsche
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By MICHAEL HUDSON*

The pro-creditor neoliberal ethic is the root of today's New Cold War

It may seem odd to invite an economist to deliver the keynote address at a social science seminar. For good reason, economists have been characterized as autistic and antisocial in the popular press. They are trained to reason abstractly and from a priori deductions, based on how they understand that societies should develop. The representatives of mainstream Today's economy sees neoliberal privatization and free market ideals as factors that drive a society's income and wealth to establish an optimal equilibrium, without the need for any government regulation – especially when it comes to credit and debt.

The only recognizable role for a government to occupy would be that of enforcing the "sanctity of contracts" and the "security of property". This makes it no more than a guarantor of the execution of debt contracts, even when its execution expropriates a large number of debtors in residential or other properties. This is the story of Rome. We are seeing the same debt dynamics in action today. However, this basic approach led supporters of the mainstream economics to insist that civilization, from its earliest beginnings, not only could but should have followed such a pro-creditor policy.

The reality, however, is that civilization could never have gotten off the ground if some free-market economist had jumped into a time machine and traveled five thousand years to the Neolithic and Bronze Age.

Suppose he was able to convince former chiefs or rulers about how to organize trade, money, and land tenure on the principle that "greed is good" and any public regulation is bad. If some Milton Friedman or Margaret Thatcher had persuaded Sumerians, Babylonians or other ancient rulers to follow today's neoliberal philosophy, civilization would not have developed. Economies would have polarized – as Rome did, and as Western economies are doing today. Citizens would have fled or turned to a local reformer or revolutionary to overthrow the ruler who heeded such economic advice. Or else they would have allied with enemy attackers who promised to cancel their debts, free the serfs and redistribute the land.

Nevertheless, many generations of linguists, historians, and even anthropologists have taken the individualistic, antisocial worldview of the economic discipline and assumed that the world has always been like this. Many of the non-economists have unconsciously adopted the prejudices of these economists, and have approached ancient history, as well as modern history, in a biased way. Our daily discourse is so bombarded with recent American political rhetoric – that the world is divided between “democracy” with “free markets” on the one hand and “autocracy” with public regulation on the other – that fantasies rage even about the first civilizations.

David Graeber and I seek to broaden recognition of how different the world was before Western civilization took the Roman path of creditor oligarchies, rather than sumptuous economies that protected the interests of a large debt-ridden population. At the time (2011) when he published his Debt: the first five thousand years [Debt: The First 5.000 Years, Three Stars, 2016], the group of Assyriologists, Egyptologists, and Harvard archaeologists that I was a part of was still striving to write the economic history of the ancient Near East in a way that was radically different from how most of the public imagined it to have occurred. .

By then, the emphasis, both David's and mine, that the record of royal proclamations canceling debts, freeing serfs, and redistributing land made all these the normal and expected function of Mesopotamian rulers and Egyptian pharaohs was still unrecognized. It seemed impossible that those brushed stones on which such records were engraved could be the instrument that preserved the freedom of the citizens.

David Graeber's book summarized my research on actual debt cancellation in the ancient Middle East, showing that interest-bearing debt was originally adopted under checks and balances that prevented society from becoming polarized between creditors and debtors. Indeed, he pointed out that the tensions created by the emergence of monetary wealth in private hands led to an economic and social crisis that paved the way for the rise of great religious and social reformers.

As he then summarized, “the central period of axial age, defined by Karl Jaspers, (…) corresponds almost exactly to the period when coinage was invented. Furthermore, the three places in the world where coins were first created were the same as where the sages of the period lived. Indeed, such places became the epicenters of religious and philosophical creativity in the Axial Age.” Buddha, Lao Tzu and Confucius sought to create a social context in which economics was embedded. There was no notion of “letting markets work” to allocate wealth and income, devoid of an idea of ​​how wealth and income would be spent.

All ancient societies distrusted wealth, especially monetary and financial wealth in the hands of creditors, because it generally tended to be accumulated at the expense of society at large. Anthropologists have found this to be a general feature of low-income societies.

Arnold J. Toynbee has characterized history as an extensive dynamic unfolding of challenges and responses to central concerns that shape civilizations. One of the big challenges is economic: who benefits from the surpluses achieved as trade and production increase in scale and become increasingly specialized and monetized? Especially: how does society organize the credit and debt necessary for the specialization of economic activity to take place, as well as, before them, the “public” and “private” functions?

Almost all of the first societies had a central authority in charge of distributing surplus investment in order to promote general economic well-being.[I] The great challenge was to prevent credit from leading to the payment of debts in a way that impoverished citizens, for example, due to personal debt and usury – and even more so if there was a temporary loss of freedom (through servitude or exile) or rights of ownership of the land.

The big problem that the Middle East of the Bronze Age solved – but classical antiquity and Western civilization did not solve – was how to deal with debts to be paid, especially with interest, without polarizing economies between creditors and debtors and, ultimately, analysis, impoverish the economy by reducing most of the population to debt dependency. Merchants engaged in trade, both for themselves and as agents of rulers. Who would get the profits? And how would credit be provided, keeping it within payment capabilities?

 

Public versus private theories – on how land tenure originated

Ancient societies rested on an agricultural base. The first and most basic problem for society to solve was how to assign ownership of land. Even families who lived in cities that were beginning to be built, whether around temples or around civic administrative and ceremonial centers, received land for self-support – just like the Russians of Soviet times, who had dachas, where a good part of their food was grown.

When analyzing the origins of land tenure, like every economic phenomenon, we find two approaches. On the one hand, we have a scenario in which land is allocated by the community, in exchange for work and military service. On the other hand, we have an individualistic scenario, in which land ownership originates from the spontaneous action of individuals who work it, making it their property, and then producing handicrafts or other goods (even metal to be used as money) for exchange with each other.

This last perspective on land tenure, the individualist one, has been popularized ever since John Locke conceived the idea of ​​individuals setting out to clear and occupy land - originally overgrown and apparently unoccupied - making use of their own labor (and presumably that of their wifes). That effort would have established his ownership of her and her yield from the harvest. Some families would just happen to have more land than others, either because they were stronger to clear it or because they had more members to help them. And there would be enough land for everyone to clear to plant.

From this perspective, there is no need to consider any community, not even to protect oneself from enemy attacks—not even mutual aid in times of floods or other troubles. And there is no need to consider credit, even though in antiquity this was the main lever, which distorted the distribution of land by transferring its ownership to wealthy creditors.

At some point in history, surely, this theory sees governments come into play. Perhaps they took the form of invading armies, which is how the Norman ancestors of John Locke landowners acquired English lands. Similarly, in England, rulers would have forced landowners to spend part of their harvests on taxes and military service. In any case, the government's role was recognized only as that of 'interfering' with the farmer's right to use the crop as he saw fit – presumably in exchange for things he needed, made by families in their own workshops.

My Harvard-sponsored group of Assyriologists, Egyptologists, and archaeologists discovered an entirely different genesis of land tenure. Land rights seem to have been allocated in standardized fractions, according to the yield of their crops. To provide food for these members, Late Neolithic and Early Bronze Age communities from Mesopotamia to Egypt allocated land to families in proportion as they needed to live on and as much as they could hand over to the palace authorities.

This portion of production handed over to the palace collectors was the original economic rent. Land tenure came as part of a quid pro quo which included the tax obligation to perform work at certain times of the year and to serve in the armies. Thus, it was tribute that created land tenure rights, not the other way around. The land had a social character, not an individual one. And the role of government was that of coordinator, organizer and advanced planner, not that of mere predation or extractivism.

 

Public versus private sources of money

How would early societies have organized the exchange of crops for other products and, more importantly, to pay taxes and debts? Was it simply a spontaneous world of individuals “carrying and exchanging”, as Adam Smith supposed? Prices would undoubtedly have varied enormously, as individuals had no basic reference to production costs or degrees of need. What happened when some individuals became traders, taking what they produced (or other people's products, on consignment), for profit? Now, if they traveled great distances, caravans or ships would be necessary, as well as the protection of large contingents. Would they have been protected by their communities? Did supply and demand actually play a role? And, more importantly, how did money come to be, as a common denominator to define the prices of what was traded, or paid in taxes, or paid off debts?

A century after Adam Smith, the Austrian economist Anton Menger spun a fantasy about how and why "individuals" in antiquity might have preferred to keep their savings in the form of metals, especially silver, but also copper, bronze or gold. It was said that the advantage of metal was that it did not spoil (in contrast to grain carried in a pocket, for example). It would also have been considered of uniform quality. Thus, lumps of metal money gradually would have become the means by which other products came to be measured, as they were exchanged, and in markets in which governments played no role.

The fact that this Austrian theory has been taught for nearly a century and a half is an indication of how gullible economists are willing to accept a fantasy at odds with all the historical records from everywhere in world history where they are available. To begin with, silver and other metals are not of uniform quality. Counterfeiting is old, but individualist theories ignore the role of fraud – and therefore the need for public power to prevent it. This blind spot was why the president of the Federal Reserve of the United States, Alan Greenspan, was so unprepared when he had to deal with the huge bad mortgage crisis, which came to a head in 2008. Wherever there is money, fraud is omnipresent.

This is what happens in unregulated markets, as we can see in today's bank fraud, tax evasion and high-paying crimes. Without a strong government to protect society against fraud, violation of the law, coercion and exploitation, societies will polarize and become poorer. For obvious reasons, the beneficiaries of these predatory appropriations seek to weaken regulatory power and the ability to prevent them.

To prevent currency fraud, silver and later gold coins from Bronze Age Mesopotamia through classical Greece and Rome were minted in temples to sanctify their patterned quality. That's why our word for money comes from the temple of Juno Moneta in Rome, where Roman coinage was made. Thousands of years before gold was coined, it was supplied in metal strips, bracelets, and other elaborate forms in temples, in standardized alloy proportions.

The purity of metals is not the only issue with using ingots. The immediate problem that had to be faced by anyone exchanging goods for silver was how to weigh and measure what was being bought and sold—and also how to pay taxes and debts. From Babylon to the Bible we find denunciations against merchants who used false weights and measures. Taxation involves functions of government, and in all archaic societies it was the temples that oversaw weights and measures as well as the purity of metal castings. The denomination of weights and measures indicates their origin in the public sector: 60 avos in Mesopotamia; 12, in Rome.

The commodity trade had standard customary prices and payments for palaces or temples. Taxes and debts constituted the most important uses for money. This reflects the fact that 'money', in the form of specific commodities, was mainly needed to pay taxes or buy goods from palaces or temples and, at the end of the harvest, to pay off debts to settle such purchases.

O mainstream Today's neoliberal economy has promoted a fairy tale about the existence of a civilization without any regulatory oversight or productive role for government, and without any need to levy taxes for providing basic social services, such as public construction or even military service. There is no need to prevent fraud, or violent seizure of property, as well as the loss of title to land in favor of creditors, as a result of debts. But, as Balzac observed, most great family fortunes were the result of some great theft, lost in the mists of time and legitimized over the centuries, as if everything were natural.

These blind spots are necessary to defend the idea of ​​“free markets”, controlled by the rich, especially creditors. And this is invoked as the ultimate and how society should be conducted. It is for this reason that the current New Cold War is being waged by neoliberals against socialism – violently fought and excluded from the study of history in the academic economics curriculum, and thus from the consciousness of the general public. As Rosa Luxemburgo said, the struggle is between socialism and barbarism.

 

Public versus private origins of interest-bearing debt

Interest rates have been regulated and stable for centuries. The key was the ease of calculation: tenth, twelfth or sixty.

Babylonian scribes were trained to calculate any interest rate as a doubling time. Debts grew exponentially. But the scribes were also taught that herds of cattle and other material economic products decreased on an S-curve. This is why compound interest was prohibited. This was also why it became necessary to cancel debts periodically.

If the rulers had not canceled the debts, the ancient world's take-off would have prematurely suffered the kind of decline and fall that impoverished Rome's citizens, and led to the decline and fall of its Republic - bequeathing subsequent Western civilization a pro-government legal system. creditor to mold it.

 

What makes Western civilization distinctively Western? Was it all a diversion?

Civilization would not have developed if a modern Milton Friedman or a Nobel Prize winner in economics had gone back in time and convinced Hammurabi or an Egyptian Pharaoh to simply let individuals act for themselves, allowing wealthy creditors to reduce debtors to servitude. – and then use his workforce in the form of an Army to overthrow the kings and take over the government for himself, creating a Roman-style oligarchy. This is what Byzantine families tried to do in the XNUMXth and XNUMXth centuries.

If the "free enterprise" boys were right, there would have been no coinage in the temple or supervision of weights and measures; the lands [Amazonian or not] would belong to whoever could snatch them, confiscate them or conquer them; the interest would have reflected anything a wealthy merchant could force a needy farmer to pay. But for economists, everything that happens is a mere matter of “choice”, as if there were no pressing needs – to eat or pay, for example.

A Nobel Prize in economics was awarded to Douglass North for arguing that economic progress today, and indeed throughout history, has been based on "security of contract" and property rights. By this he meant the priority of the creditor's claim to confiscate the debtors' property. These are the property rights that create large estates and reduce populations to debt bondage.

No archaic civilization could have survived for long following this path. And Rome did not survive by instituting what has become the hallmark of Western civilization: handing over control of government and its legislation to a class of wealthy creditors to monopolize land and property.

If an ancient society had followed this path, all economic life would have been impoverished. Most of the population would have fled. Or else the Thatcherite and Chicago School elite would have been overthrown. Wealthy families who had sponsored this systematic predation would have been exiled, as occurred in many Greek cities in the seventh and sixth centuries BC. redistribute the land, as occurred with the secessions of the plebs in Rome in the XNUMXth and XNUMXth centuries BC

So we are led back to David Graeber's argument that the great Eurasian reformers emerged at the same time as economies were becoming monetized and increasingly privatized, a time when wealthy families were increasing their influence over the running of businesses. city-states. Not only the great religious reformers, but also the main Greek philosophers, poets and playwrights sought to explain how wealth is addictive and conducive to pride, how their pursuit of ways that harm others produces.

Examining the course of ancient history, we can see that the main objective of rulers, from Babylonia to southern and eastern Asia, was to prevent a merchant and creditor oligarchy from arising and concentrating land ownership in their hands. The implicit business plan of such an oligarchy was to reduce the general population to clientele, debt slavery and serfdom.

This is what happened in the West, in Rome. And we still live its unfolding. Across the West today, our legal system remains pro-creditor, not pro-indebted general population. This is why personal debt, corporate debt, public debt and international debt of countries in the Global South have reached a crisis point that threatens to shackle economies into prolonged debt deflation and depression.

It was to protest this that David helped organize the Occupy Wall Street. It is obvious that we are dealing not only with an increasingly aggressive financial sector, but also that it has created a fraudulent history, a false consciousness designed to deter any revolt by proclaiming that “there is no alternative”.

 

Where Western Civilization Went Wrong

We then have two diametrically opposed scenarios that illustrate how the most elementary economic relationships emerged. On the one hand, we see societies in the Middle East and Asia organized to maintain social balance, ensuring that debt ratios and market wealth are subordinated to public welfare. Such a goal characterized archaic society, as well as non-Western societies.

But the western periphery, in the Aegean and Mediterranean, lacked both the Middle Eastern tradition of “divine kingship” and the Asian religious traditions. This vacuum allowed a wealthy creditor oligarchy to seize power and concentrate land and property for itself. For public relations purposes, it claimed to be a “democracy” – and denounced any protective government regulation as being, by definition, “autocratic”.

Indeed, the Western tradition lacks a conception of politics that subordinates wealth to general economic growth. The West lacks strong government controls to prevent a wealth-addicted oligarchy from emerging as a hereditary aristocracy. Turning debtors and customers into a hereditary class, dependent on wealthy creditors, is what economists today call the “free market”. It is nothing more than this absence of public checks and balances against inequality, fraud and the privatization of public space.

It may come as surprising, to a future historian, that the political and intellectual leaders of the world today would encourage this individualist neoliberal fantasy that archaic societies "would have" developed in exactly this way, without recognizing that this is how the Republic came to be. Rome's oligarchic system really developed, and what led to its inevitable decline and fall.

 

Debt cancellation in the Bronze Age and modern cognitive dissonance

Finally, we are brought back to why I have been invited to speak here today. David Graeber wrote in his book Debt that he sought to popularize the documentation compiled by my group at Harvard regarding the fact that debt write-offs did exist, and that they were not simply a utopian literary exercise. His book helped make debt a public issue, as did his efforts in the movement. Occupy Wall Street.

The government of Barack Obama supported the police who dismantled the Occupy Wall Street, and has done everything possible to destroy recognition of the debt problems plaguing the United States and the economies of other countries. And not just the mainstream media, but also academic orthodoxy rallied against even the thought that debt can be written down and that it really needs to be written down to keep economies from going into a depression.

The pro-creditor neoliberal ethic is at the root of today's New Cold War. When President Bill Biden refers to this great global conflict, destined to isolate China, Russia, India, Iran and his other Eurasian trading partners, he describes it as an existential struggle between “democracy” and “autocracy”.

By "democracy" he means oligarchy. And by “autocracy” he means any government strong enough to prevent a financial oligarchy from taking over government and society by imposing neoliberal rules… by force. The ideal is to make the rest of the world look like Boris Yeltsin's Russia, where US neoliberals had their hands free to suppress any public ownership of land, mineral rights and essential public services.

*Michael Hudson is a professor at the University of Missouri, Kansas City. Author, among other books by Super Imperialism: The Economic Strategy of the American Empire (Island).

Text of the main conference of the colloquium "Building Bridges Around David Graeber's Legacy", organized by the Triangle Laboratory of the University of Lyon, between 7 and 9 July 2022.

Translation: Ricardo Cavalcanti-Schiel.

Originally published on website from the author [https://michael-hudson.com/2022/07/from-junk-economics-to-a-false-view-of-history-where-western-civilization-took-a-wrong-turn/].

 

Translator's note


[I] In the Americas, up to 500 years ago, the so-called “great civilizations” of Meso-America and the Andes were literal examples of this, including their sacrificial dimension. The Andean case was particularly systematized by the Romanian-American anthropologist John Victor Murra. Evidently, unlike Michael Hudson, anthropologists would start by putting the term “economic” in quotation marks. As the author suggests, in societies other than modern Western ones, the economic is not recognized as either determinant or “infrastructural”. It is "embodied", and usually not even seen as a particular, "naturally" specified field of relationships.

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