August 4, 2011

The History of Debt

Early Societies (3,500-4,000 B.C.E.)

Pre-commercial societies are based on two moral principles. People shifted (as we ourselves do today) from one modality to the other during the course of the day – from being communists when dealing with close friends, to being kings when dealing with small children (pp. 113-114).

1. The communistic Principle: The communistic principle implies “from each according to his ability, to each according to his needs.” [The phrase was not coined by Karl Marx (1818-1883), who used it only in 1875. It was a slogan in the early French workers’ movement, first appearing in print, in 1839, in the work of socialist Louis Blanc (1811-1882)].

The slogan implies a baseline of open-handed sharing, mutuality and generosity. Work, implements and pleasure (music, food) are shared cooperatively, no accounts are taken, and society is presumed to be eternal, so that full reciprocity will eventually be achieved. [This “baseline communism” is unrelated to the ownership of the means of production. Rather than following Marx, this strain of revolutionary theory was developed, perhaps most famously, in Peter Kropotkin’s Mutual Aid (1902)].

Today, this is the way we treat our family members and friends. Mothers, for instance, are the paradigm of selfless love. A communistic attitude toward each other is the way in-groups define themselves. In need, the members of the group know that they can turn to each other, that they can rely on mutual aid (pp. 94-102, 103, 105, 191, 404).

2. The hierarchical Principle: The hierarchical principle implies lines of superiority and inferiority which are clearly drawn and accepted by all parties. Although originally imposed by violence, the relations are no longer seen as regulated by arbitrary force but rather by habit or custom. The two parties are seen as having essential natures which are fundamentally different. A noble warrior and his humble client are assumed to be fundamentally different kinds of human beings, fundamentally different sorts of people. Both, however, are expected to take account of each other’s (fundamentally different) needs. Relations of patronage involve responsibilities on both sides.

Until recently, for instance, almost any philosopher, artist, poet, or musician required a wealthy patron for support. Thus, Leonardo da Vinci (1452-1519), completed the Mona Lisa toward the end of his life, when he was being given housing and a stipend by King Francis I, of France – without compromise to the assumption of the King’s intrinsic superiority.

If the other is a different sort of person, either above or below one, then ordinary rules of reciprocity do not apply. When medieval writers imagined society as a hierarchy in which priests pray for everyone, nobles fight for everyone, and peasants feed everyone, it never occurred to them to establish how many prayers, or how much military protection was equivalent to a ton of wheat.

The relationship operates by precedent rather than reciprocity – a gift is treated as a precedent and added to the web of customs. When gifts or payments are made, they are of fundamentally different quality, their relative value impossible to quantify. There is no way even to conceive of squaring accounts.

Ideologies of caste and race are extreme examples of this principle. Saint Nicholas, patron saint of children and of thieves, is a mythological version – no social relation is possible, and, therefore, no obligation (in his case, above all, because he does not actually exist) (pp. 109-113).

For most of human history, human economies predominate – currencies are social, that is, used to create, maintain, and otherwise re-organize relations between people, such as to seal a marriage, establish the paternity of children, head off feuds, console mourners, seek forgiveness in case of crime, negotiate treaties, or acquire followers. The concern is the creation, destruction, and rearranging of human beings, not the accumulation of wealth, not trade, not the buying or selling of items. These tokens, mis-named “primitive money,” can be anything, from wampum to cloth to feathers, and is always used for non-economic functions (pp. 129-130).

The Rise of commerical Exchange

During the recent millennia, commercial exchange erodes both the above principles – that of communistic relations and that of hierarchy. Concurrent with this erosion, is the rise of patriarchy.

Market exchange is characterized by the following:

1. Equivalence: We exchange words, blows, material goods or gunfire. It is not that there is ever an exact equivalence (even if this could be measured), but that there is a constant process of interaction tending toward equivalence.

2. Competition: Exchange often has an element of competition. Both sides keep accounts.

3. Impermanence: Unlike communism which always partakes of a certain notion of eternity, the entire relationship of exchange can be canceled out at any time. Either party is able to call it to an end. Exchange allows us to cancel our debts. It gives us a way to call it even – and hence end the relationship.

4. Impersonality: Commercial exchange tends to be impersonal. In principle, the identities of the seller and the buyer are irrelevant. Each is simply assessing the value of the object to be sold. In practice, there is rarely complete impersonality. The minimal element of trust needed for a transaction to take place usually requires some outward display of sociality.

In a pure credit regime, there can never be full anonymity. The mass production of coinage, however, permits complete anonymity for transactions.

5. Autonomy: Exchange implies autonomy. Since the objects being traded are seen as equivalent, by implication, so are the people (at least at the time of the exchange). When there is no further debt or obligation, each of the two parties is equally free to walk away. Each is assumed to be autonomous.

6. “Equality” before the Market: A loan assumes a certain formal, legal equality between contractor and contractee. It assumes that they are fundamentally the same kind of person. This is a ruthless and violent form of equality, yet it is conceptualized as “equality before the market.”

7. No responsibility on the Part of the Creditor: A loan (and especially an interest-bearing loan) implies no on-going responsibilities on the part of the creditor.

Commercial markets arise at the beginning of the Axial Age, when governments begin to have professional armies needing to be provisioned by the people. Governments pay the soldiers in coins, and demand that taxes be paid in these same coins. People need the coins to pay taxes. The money circulates among the people and encourages the development of a market – that is, the use of coins for daily transactions.

Over time, human motivation becomes redefined as the simple, single-minded accumulation of wealth, both on the part of governments and the people. Materialist philosophies imagine that material wealth is the ultimate end of human existence, and reframe morality and justice as but tools designed to satisfy the masses. Some philosophers react to this cynicism by rejecting aggressive war as the foundation of politics, and exploring a new foundation for ethics and morality within the heart and soul of humanity (pp. 248, 302).

Eventually, rulers are converted to the new religion, and there arises two separate social spaces, the ideal division of spheres of human activity which endures to this day – one, the market, devoted to the selfish acquisition of material things, and the other, religion, devoted to preaching that, from the perspective of ultimate values, material things are unimportant. It is better to give than to receive. The concept of charity arises. Pure greed and pure generosity arise as complementary concepts, an opposition which could only have arisen in an institutional context which insists on pure, single-minded behavior. Both domains appear at the same time, counter-posed wherever impersonal, physical cash money makes its appearance (p. 249).

Thus, war, the State, the market, and religion form one constellation of human behavior (p. 248).

Today, economists (though not anthropologists) insist that in an exchange, both parties try to seek their own maximum material advantage. Economic theory assumes that any human interaction is ultimately a business deal, and that we are all self-interested individuals trying to get the most for ourselves at the least cost and/or least amount of effort (pp. 102-108, 191, 195).

The First agrarian Empires (3,500 B.C.E.-800 B.C.E.)

3,500-800 B.C.E. is the time of the First agrarian Empires. They are empires dominated by virtual credit money (p. 214).

Ancient Mesopotamia: Mesopotamia largely corresponds to modern-day Iraq.

David Graeber defines “Mesopotamia” as encompassing the period 3,500-800 B.C.E. (p. 214).

The early dynastic Sumerian City States: (c.2,900- c.2,350 B.C.E.).

The Akkadian Empire: The Akkadian Empire (2,334-c.2,154 B.C.E.) begins with the conquests of King Sargon of Akkad (reigned 2,270-2,215 B.C.E.). The Empire would collapse in c.2,154 B.C.E., after only 180 years, probably due to a three-century drought which occurs around 2,200 B.C.E. Mesopotamia would then give rise to two nations, Assyria (2,250-608 B.C.E.) in the north, on the Upper Tigris River, and Babylon (1,867-539 B.C.E.) in the south, between the Tigris and Euphrates Rivers (Wikipedia).

Assyria: The history of Assyria (2,250-608 B.C.E.) is divided into:

1. The Old Assyrian Period (2,250-1,756 B.C.E.), ending, in 1,756 B.C.E. with the conquest of Babylonian King Hammurabi (died c.1,750).

2. The Middle Assyrian Period (1,756-1,076 B.C.E.), ending, in 1,076 B.C.E., with the death of King Tiglah-Pileser I (1,115-1,077 B.C.E.).

3. A Period of Dark Ages (1,077-911 B.C.E.).

4. The Neo-Assyrian Empire (911-608 B.C.E.), ending, in 608 B.C.E. with the sacking of the capital, Harran, by an alliance of Babylonians, Medes, and Scythians.

In 539 B.C.E., Assyria would be conquered by Cyrus the Great, King of Persia (reigned 559-530 B.C.E.) founder of the Achaemenid Empire (c.550-330 B.C.E.) (Wikipedia).

Babylon: The history of Babylon (1,867-539 B.C.E.) begins, in 1,867 B.C.E., with the founding of the City, and ends in 539 B.C.E., with its capture by Cyrus the Great, King of Persia (reigned 559-530 B.C.E.), founder of the Achaemenid Empire (c.550-330 B.C.E.) (Wikipedia).

Ancient Egypt: Ancient Egypt largely corresponds to modern-day Egypt.

Egyptian civilization coalesces around 3,150 B.C.E., with the political unification of Upper and Lower Egypt under the first pharaoh.

David Graeber defines “Ancient Egypt” as encompassing the period 2,650-716 B.C.E. (p. 217).

Egypt is at the pinnacle of its power during the New Kingdom (1,550-1,070 B.C.E.) (Wikipedia).

Bronze Age India: Bronze Age India largely corresponds to modern-day Pakistan and northwest India. Its history includes:

1. The Harappa 1 Civilization (3,000-1,300 B.C.E.).

2. The Indus Valley Civilization (2,600-1,900 B.C.E.), the mature phase of the Harappa 1 Civilization.

David Graeber places the collapse of the Bronze Age civilization of the Indus Valley sometime around 1,600 B.C.E. (p. 232).

3. The Rigvedic Period [(1,500-1,000 B.C.E), the early part of the Vedic Period (1,500-500 B.C.E)].

The writing of Bronze Age India remains indecipherable.

Iron Age India is the period 1,200-272 B.C.E. (Wikipedia).

Early China, (2,200-771 B.C.E.): David Graeber defines “Early China” as encompassing the period 2,200-771 B.C.E. (p. 219).

The written history of China dates from c.1,500 B.C.E., during the Shang Dynasty (c.1,700-1,046 B.C.E.). The Shang Dynasty would be followed by the Zhou Dynasty (1,045-256 B.C.E.) (Wikipedia).

3,500 B.C.E.

Sumer, Ancient Mesopotamia:

Debts: By 3,500 B.C.E., in Sumer (3,500-1,756 B.C.E.), the most ancient Mesopotamian civilization, Temple administrators have already developed a single, uniform system of accountancy. It is to the Sumerians that we owe the “dozen,” the 24-hour day, and the 30 day-month. The basic monetary unit is the silver shekel, equivalent to one bushel of barley. This “primitive money” is not the product of commercial transactions, but rather created by bureaucrats to keep track of resources. Debts are calculated in silver, but do not have to be paid in silver. Most transactions are based on credit (pp. 39, 214, 384).

Credit is recorded on clay tablets inscribed with the obligation of future payment. The tablets are wrapped in a clay envelope (a bulla), which is sealed and imprinted with the borrower’s seal. The creditor keeps the bulla as surety, and it is broken upon repayment (p. 214).

The practice of lending money at interest is first invented in Mesopotamia, and precedes the invention of writing (3,100 B.C.E.). It is probable that the first interest-bearing loans are commercial, with temples and palaces forwarding wares to merchants and commercial agents, who then trade them either in nearby mountain kingdoms, or on trading expeditions overseas. The practice is significant because it implies a fundamental lack of trust. The time element may also be important, as presumably, without interest to be paid, merchants would delay employing the funds for as long as possible. The principle would spread quickly, and be used for consumer loans (usury) as well as for commercial loans (pp. 64, 214-215, 384, 424).

3,100 B.C.E.

Sumer, Ancient Mesopotamia:

Debts: Writing is invented around 3,100 B.C.E. The very earliest records show how debt payment enforced by violence or the threat of violence (such as seizing the debtor’s possessions), turns all human relations (and, by extension, women’s bodies), into potential commodities. The invention of money, around 550 B.C.E., would worsen the problem, turning morality itself into a matter of impersonal arithmetic (pp. 14, 179).

2,500 B.C.E.

Sumer, Ancient Mesopotamia:

Debts: During the early dynastic Sumerian city states (c.2,900- c.2,350 B.C.E.),

it is common practice for local officials and wealthy merchants, to advance loans to peasants in financial trouble, on collateral, and, in the event the debt is unpaid, appropriate their possessions. Grain, sheep, goats, furniture are appropriated first, then fields and houses, then servants, children, wives, and, eventually, the borrower himself. All would be reduced to debt-peons – forced into perpetual service in the lender’s household or the Temple (pp. 64-65).

Such practices threaten to destroy society. Faced with the potential for complete social breakdown, Sumerian, and later Babylonian kings, periodically announce general amnesties, “declarations of freedom,” decreeing all outstanding consumer debt null and void, the return of all land to their original owners, and the return of all debt-peons to their families. (Commercial debts are not affected). The Sumerian word amargi, meaning “freedom” (literally “return to mother”) is the first recorded word for “freedom,” in any known human language (p. 65).

By the time of King Enmetena of Lagash (2,400 B.C.E.), usury, in the sense of interest-bearing consumer loans, is well established. Two years after his victorious war against his neighbor, the King of Umma, Enmetena issues the first general debt cancellation recorded. It includes the first time that the word “freedom” appears in a political document. Enmetena would later boast:

“He instituted freedom (amargi) in Lagash. He restored the child to its mother, and the mother to her child. He cancelled all interest due” (p. 216).

During the New Year’s ceremonies of 2,350 B.C.E., Enmetena’s successor, King Uruinimgina of Lagash declares a general amnesty, spelling out the terms in detail – the cancellation of all outstanding loans, and all forms of debt servitude, even those based on failure to pay fees for criminal penalties. Only commercial loans are excepted (p. 216).

Similar declarations would be issued repeatedly in Sumer, and later, Babylon and Assyria (p. 216).

Women: The very earliest Sumerian texts (3,000 to 2,500 B.C.E.) indicate that women are participating fully in public life, as rulers, doctors, merchants, scribes, and public officials (p. 178).

Ancient Egypt:

Debts: There are no interest-bearing loans in Ancient Egypt (2,650-716 B.C.E.). Loans take the form of mutual aid between neighbors (pp. 63, 217-218, 400).

2,200 B.C.E.

Early China:

Debts: In Early China (2,200-771 B.C.E.), a variety of credit instruments long pre-date 1,500 B.C.E., when writing is invented (p. 220; Wikipedia).

2,000 B.C.E.

Assyria, Ancient Mesopotamia:

Women: In Assyria, during the Old Assyrian Period (2,250-1,756 B.C.E.), the place of women in civic life is eroding, giving way to a patriarchal pattern, with an emphasis on chastity and premarital virginity. Women are disappearing from government and the liberal professions, and lose their independent legal status – with the effect that they become wards of their husbands (p. 178; Wikipedia).

1,800 B.C.E.

Babylon, Ancient Mesopotamia:

Debts: In Babylon, in 1,761 B.C.E., King Hammurabi (reigned 1,792-1,750 B.C.E.) abolishes debts. The ritual of “breaking the tablets” (breaking the debt records) is instituted at the New Year Festival – part of the calendrical renewal of society along with the rest of nature. Debtors are restored cultivation rights to their lands, free of any mortgage liens, and persons held as debt pledges are released to rejoin their families (pp. 216-217).

1,500 B.C.E.

Ancient India:

Debts: During India’s Vedic Period (1,500-500 B.C.E.), the Vedas, a large body of texts originating in Ancient India (beginning c.3,000 B.C.E.), contain the first philosophical expression of how debt, enforced by violence, turns humans into commodities, and their relationships into a war of one against all (p. 14).

The Vedas and the Brahmanas (commentaries on the four Vedas) contain the earliest known reflections on the nature of debt. Even the very earliest Vedic poems, composed between 1,500 and 1,200 B.C.E., evince a constant concern with debt – which is treated as synonymous with guilt and sin (p. 56).

Ancient Egypt:

Markets: During the New Kingdom (1,550-1,070 B.C.E.), Egypt begins to have markets (p. 219).

1,300 B.C.E.

Assyria, Ancient Mesopotamia:

Women:

Reassertion of paternal Controls: In Assyria, during the Middle Assyrian Period (1,756-1,076 B.C.E.), it is legal for a husband to use his wife and children as surety for a loan. If he is unable to pay, they can be taken away as debt pawns, just like his sheep, goats and slaves. This legal status gradually transforms domestic relations of care and protection, into relations of authority – property rights that can be bought and sold. Family members are commodities which can be rented or sold. For a man, honor is measured in terms of credit (p. 180).

The reassertion of paternal control is particularly strong among the indebted farmers who have fled to the deserts and steppes, away from the cities in the river valleys. They reject the great urban civilizations of Uruk, Lagash, and later, Babylon, which they see as places of bureaucrats, traders, and whores. The origin of patriarchy, therefore, is in the protest of displaced, indebted farmers against the commoditization of people in the cities from which they have fled (pp. 182-183).

The Law Code: The law code dating from between 1,400 and 1,100 B.C.E., is the most dramatic known attempt to distinguish between “respectable” and “non-respectable” women. The former are those whose bodies cannot be bought or sold, under any condition. The law code is the first to assign to the State the responsibility for policing social boundaries. It contains the first known reference to veiling in the history of the Middle East. Respectable women (married women or concubines), widows, and daughters of free Assyrian men “must veil themselves” when they go out on the street. Prostitutes (including unmarried Temple servants) and slaves are not allowed to wear veils. The code specifies punishment only for the latter group (p. 184).

The source of the Assyrian practice of veiling may have been the Sumerian Empire (3,500-2,500 B.C.E.), where the veil was used in weddings as a symbol of encompassment in a man’s domestic authority – the father of the bride would cover her with a veil, which the groom removed, thereby making her his wife (pp. 185, 417).

Over the course of the next millennia (that is, until 250 B.C.E.), sexuality would be demoded systematically from a divine gift and embodiment of civilized refinement, to connoting degradation, corruption and guilt (p. 185).

Harems: By the end of the Middle Assyrian Period (1,076 B.C.E.), large numbers of women are sequestered away in harems, and (in some places), subjected to obligatory veiling. By now, not only is Sumer a highly centralized and militaristic State (which itself would have fostered a low status for women), but it is a conquering State. Conquest leads to taxes. An explosion of debt threatens to turn all human relations – and by extension, women’s bodies – into potential commodities. Horrified wealthy males are increasingly feeling forced to make it absolutely clear that their women can in no sense be bought or sold (p. 179).

The Assyrian habit of veiling, however, would not be widely adopted in the Middle East (p. 188).

The Axial Age (800 B.C.E.- 600 C.E.)

800 B.C.E.- 600 C.E. encompasses the Axial Age. The Axial Age sees the birth not only of all the world’s major philosophical tendencies, but also all of today’s major world religions:

1. Zoroastrianism [Persian prophet Zoroaster (around 800 B.C.E.)].

2. Prophetic Judaism [ Samuel (the first of the major prophets in the Land of Israel, 1,050 B.C.E.); Amos (750 B.C.E); Isaiah (740 B.C.E.); Jeremiah (626 B.C.E.); Nehemiah (425 B.C.E.].

3. Buddhism, in northeast India [The Buddha (c.563-483 B.C.E.); Buddhism c.450 B.C.E.).

4. Jainism (Mahavira, 599-527 B.C.E.).

5. Hinduism (as a self-conscious religion, around 500 B.C.E.).

6. Confucianism [Confucius (551-478 B.C.E.)].

7. Taoism [Lao-Tzu (550 B.C.E.)].

8. Christianity (Jesus, 0 C.E.; Christianity in the eastern Mediterranean Sea, 50 C.E.).

9. Islam [Muhammad (570-632 C.E.)] (pp. 224, 426; Wikipedia).

The earliest coins are created in the Kingdom of Lydia, western Anatolia (now Turkey), around 600 B.C.E. The invention is first used by governments for administrative purposes, to keep track of accounts. It leads, however, to a general shift to metal bullion, a shift accompanied by the creation (in China, India, and the Aegean area) of armies composed of trained professionals (instead of, as previously, aristocratic warriors). Indeed, the first Lydian coins are invented explicitly to pay mercenaries (pp. 214, 224, 226-227, 244, 248).

Along with coins, both materialist philosophies (such as, in India, skepticism, materialism, sophistry, and nihilism) and religions make their appearance (pp. 247,431).

During the Axial Age, although it is a tool of empire, money remains a political instrument. When the empires collapse and armies are demobilized, the whole money apparatus also melts away (pp. 320-321).

800 B.C.E.

Greece:

Markets: In Greece, around 800 B.C.E., commercial markets develop – almost 3,000 years later than in Sumer, where they were developed by 3,500 B.C.E. (p. 186).

During the time of Homer (c.750 B.C.E.), Greek society is still based on the two principles of communistic relations (mutual aid) and hierarchy (great men with their retainers). Money exists but it is not used by the general population. Everyone can have their basic needs (food, shelter, clothing) met.

The Homeric epics describe a world dominated by heroic warriors disdainful of trade. Buying and selling take place only with foreigners, and important men live in pursuit of honor, which is measured in both followers and treasure (pp. 38, 186).

In the Iliad (considered the first great work of Western literature), the quarrel between Agamemnon and Achilles, which sets off the action, is a dispute over honor between two heroic warriors concerning the disposition of the slave girl Briseis, whom Achilles has personally reduced to slavery. Briseis is from the Trojan town of Lyrnessus. During the Greek attack on the town, Achilles has killed her husband and three brothers, and has received her as a prize. (Upon learning of his daughter’s fate, Briseis’ father hung himself). Achilles insists he loves Briseis. Homer does record her opinion.

In the Odyssey, on several occasions, Odysseus barely escapes enslavement (pp. 189, 209, 417-418).

700 B.C.E.

Egypt:

Debts: Egypt begins to have Mesopotamian-style debt crises. Pharaoh Bakenranef (reigned 720-715 B.C.E.) issues a decree abolishing debt bondage and annulling all outstanding liabilities. His decree contains one of the earliest mentions of debt prisons (p. 219).

600 B.C.E.

Greece:

Coins: Around 600 B.C.E., the Greek Government first uses coinage to pay soldiers. It also makes its payments to the people in coinage, and requires that the people pay their fines and fees to the Government in the same coinage. Coins are soon used in everyday transactions. By 600 B.C.E., almost every city-state is producing its own coins as a mark of civic independence (p. 186).

Commercial markets undermine the principles of mutual aid and hierarchy. Communistic relations are disappearing, increasingly confined to the interior of the household. Relationships of hierarchy are also disappearing, as great men (surrounded by dependents and retainers drawn from the ranks of the poor) replace giving patronage with giving credit. It can no longer be taken for granted that basic needs can be met. Not only does everyone wants money, everyone needs it survive. Prostitution arises – perhaps a symbol of how a commercial economy makes some submit to the desires of others. A series of debt crises, similar to those of Mesopotamia and Israel, follow (pp. 187, 190-191).

Debts: When Athens has its first debt crisis, statesman, lawmaker and poet Solon (638-558 B.C.E.) describes Athens as under threat from unrestrained greed and arrogance. The symbol of this perversion of the natural and social order is the horos, a pillar on the boundary of a farmer’s land, indicating that the farmer is in debt. In the event of non-payment, he and his family can be sold into slavery. Solon’s reforms (“the shaking off of burdens”), c.594 B.C.E., include the cancelation of all debts, the prohibition of the debtor himself being used as security on a loan, and the release of all enslaved Athenians (pp. 187, 228, 390, 417; Wikipedia).

Rather than, as in the Near East, institutionalize periodic amnesties, Greek cities eventually adopt legislation limiting or even abolishing debt peonage, and sending the poor to found military colonies overseas. Soon the entire coast from Crimea to Marseille is dotted with Greek cities, which serve as conduits for slaves. The sudden abundance of chattel slaves completely transforms the nature of Greek society (p. 187).

550 B.C.E.

Lydia, India and China:

Coins: Coinage makes its appearance independently, between 600 and 500 B.C.E. – that is, almost simultaneously – in three different places:

1. The lands surrounding the Aegean Sea.

2. The Ganges River valley in northeast India.

3. The Great Plain of northern China.

For the next 1,000 years (until around 450 C.E.), States everywhere would issue their own coinage (pp. 212-213).

With coins, the creditor has the means to specify numerically exactly how much the debtors owes. This ability of coins to quantify debts turns morality into a matter of impersonal arithmetic, and, in turn is used to justify behavior which otherwise would be labeled outrageous or obscene. Violence and the quantification of debt are intimately linked. The problem of debt which first appeared in Ancient Mesopotamia (3,500 B.C.E.) would lead to a moral confusion unresolved to the present day (p. 14).

450 B.C.E.

Greece:

Markets: By 450 B.C.E., in Greece, the agora (place of public debate and communal assembly) doubles as a marketplace (p. 187).

Greek aristocrats disdain the values of the market, a disdain which would eventually transfer to the general population. The effect on women is even more severe than it was in the Middle East (p. 188).

The sophist Thrasymachos (c.459-400 B.C.E.) lives in Athens. He would later become a character is Plato’s The Republic (380 B.C.E.) (Wikipedia).

The Roman Republic:

Debts: The early history of the Roman Republic (508-44 B.C.E.) is one of continual political struggle between creditors and debtors (patricians and plebeians) and of continual crises over debt. Unlike their counterparts in Mesopotamia and Egypt who tended to flee to the countryside, and unlike their counterparts in Greece who tended to revolt, and Roman commoners periodically abandon their fields and workshops, camp outside the city, and threaten mass defection (“the secession of the plebs”) (pp. 201, 230).

Debt bondage reduces family relations to relations of property, and provides the context for the concept of the absolute power of the paterfamilias (father) – one having absolute power over his dependents, his unit of authority. The concept of absolute power gains momentum as the influx of slaves into the Republic increases, and even moderately prosperous fathers own slaves (pp. 203, 421).

The word libertas (“liberty”) refers first and foremost, to not being a slave. The definition implies the freedom to form relationships, since slavery means above all the annihilation of social ties as well as of the ability to form ties (pp. 209-210).

450 B.C.E., The Roman Republic (Continued)

Early Roman law is harsh:

1. Debtors: Creditors have the right to enslave and execute insolvent debtors (pp. 201, 421).

2. Slaves: In its earliest law, c.450 B.C.E., the Roman Republic defines slaves as people of diminished worth – injuries to them counting as 50 percent of those to a free person. [By the late Republic, slaves would be redefined as res (things)]. The authority of a father with regards his slaves, is absolute, including the right of execution without the need for an official reason (pp. 200-201, 421).

3. Wife: The power of a man over his wife is not absolute, as she is still to some degree under the protection of her own father (p. 201).

4. Children: The power of a father over his children includes the right to whip, torture and sell them. It includes the right to execution, provided they have committed a capital crime (p. 201).

450 B.C.E. (Continued)

Persian Empire (Judah):

Debts: The Hebrew words padah and goal, both translated as “redemption,” mean recovering some object held by creditors in a way of a pledge. The most important meaning is the redemption of family members held as debt-pawns. By the time of the prophets, the economy of the Hebrew kingdoms is beginning to develop the same kind of debt crises long common in Mesopotamia. The earlier prophets, such as Amos (750 B.C.E.) and Isaiah (740 B.C.E.) contain allusions to such crises, but the Book of Nehemiah, written around 425 B.C.E., when Judah is a province of the Achaemenid (Persian) Empire (539-332 B.C.E.), is the most explicit:

“Some of our daughters are brought unto bondage already: neither is it in our power to redeem them, for other men have our lands and vineyards” (p. 81).

Nehemiah re-issues old Jewish laws (preserved in Exodus, Deuteronomy, and Leviticus) which institutionalize the principle of a “clean slate.” The Law of Jubilee, for instance, stipulates that all debts would be automatically cancelled “in the Sabbath year,” and that all who languish in bondage owing to such debts would be released (pp. 82, 403).

In the Bible, as in Mesopotamia, “freedom” refers above all to release from debt (p. 82).

400 B.C.E.

Greece:

Women: The society in which Socrates (469-399 B.C.E.) lives, is one in which a man’s honor is increasingly tied to both disdain of commerce and assertiveness in public life. A woman’s honor, on the other hand, is almost exclusively defined in sexual terms – virginity, modesty, and chastity. Respectable women are expected to remain inside the household. A woman who plays a part in public life is considered a prostitute, or tantamount to one. The practice of veiling, which began as an aristocratic affectation, has spread, and, by now, all respectable women are “veiled daily and routinely, at least in public or in front of non-related men” (pp. 188, 418; Quote from Llewellyn-Jones 2003, p. 418).

Persia and Syria:

Women: Around 400 B.C.E., women in Persia and Syria are not expected to wear veils in public (p. 188).

380 B.C.E.

Greece:

Debts: In 387 B.C.E., seven years before he would write The Republic (380 B.C.E.), Plato (424-348 B.C.E.) takes a sea cruise, is captured, and is offered for sale on the auction block at Aegina. Libyan philosopher of the Epicurean School, Annikeris, happens to be in the market at the time, recognizes Plato and ransoms him. Annikeris later refuses the money which Plato assembles for him, insisting that it is his honor to be able to benefit a fellow lover of wisdom. In his writings, Plato never mentions Annikeris. We know of his existence only from later biographers (pp. 197, 421).

In Greece, the language of debt begins to be used for thinking about moral problems, thus turning morality into an exact and quantifiable science – a debt as a sin, debt collection as vengeance. Indeed, it is in the interest of creditors, who often have little legal recourse to compel debtors to pay, to insist that to pay one’s debt is moral. However, as Plato notes in The Republic, money also encourages the worst sorts of behaviors (p. 195).

In The Republic, while discussing justice with Socrates, Thrasymachos denounces those who think that justice consists of always paying one’s debts as milky-eyed idealists. In reality, he says, all talk of “justice” is mere political pretext, designed to justify the interests of the powerful. And so it should be, because insofar as justice exists, it is simply that – the interest of the powerful. Rulers are like shepherds. We like to think of them as benevolently tending their flocks, but what do shepherds ultimately do with sheep? They kill them and either eat or sell the meat for money (pp. 195-196, 241. See under “450 B.C.E.,” “Greece”).

380 B.C.E., Greece (Continued)

Thrasymachos summarizes:

“Thus, injustice on a sufficiently large scale is stronger, freer, and more masterful than justice. It is the advantage of the stronger that is justice. Injustice is what profits a man’s self and is to his advantage” (Wikipedia).

350 B.C.E.

Greece:

Debts: In his Constitution of the Athenians, referring to the great crisis which led to Solon’s c.594 B.C.E. reforms, Greek philosopher Aristotle (384-322 B.C.E.) describes:

“The poor together with their wives and children were enslaved to the rich” (pp. 187, 191).

Aristotle views money as a mere social convention invented by human communities to facilitate exchange. Having no intrinsic value in itself, it is whatever human beings decide that it is:

“Usury . . . makes a profit out of money itself, and not from the natural object of it . . . Money was intended to be used in exchange, but not to increase at interest . . . Tokos (interest), which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent . . . Wherefore of all modes of getting wealth, this is the most unnatural” (Aristotle, Politics, quote pp. 290 and 440; 283).

This view of money would be adopted by the European scholastic philosophers in the Middle Ages (13^th century) (p. 298).

The Roman Republic:

Coins: The first Roman coinage is made in 338 B.C.E. Debt bondage is outlawed in 326 B.C.E. Like Greece, Rome would attempt to solve the debt crises through the temporary solution of military expansion (pp. 230-231, 390).

350 B.C.E. (Continued)

China:

Markets: The period 475-221 B.C.E., in China, is referred to as the “Warring States Period.” The chaos is typical of the Axial Age. Emperors are but figureheads ruling over de facto kingdoms, which wage aggressive wars among themselves with trained, professional armies, create coined money to pay the soldiers, and encourage (impersonal) markets, based on “profit” and “advantage.” Chattel slavery is extreme. In the State of Qin, for instance, merchants, craftsmen, and the “poor and idle” can be “confiscated as slaves,” and slaves are allocated to army officers by rank. Also typical of the Axial Period, this is the Golden Age of philosophy in China, as itinerant philosophers and religious visionaries coalesce into “the hundred schools” of philosophy (pp. 235-237, 428).

The predominant school of political thought during the Period is that of the Legalists, who insist that, in matters of statecraft, a ruler’s interest should be the only consideration, although rulers should not admit this. The people can be easily manipulated, since they are also motivated by profit (p. 240).

In his Book of Lord Shang, statesman Shang Yang (390-338 B.C.E) writes:

“(The people’s pursuit of profit is utterly predictable), just like the tendency of water to flow downhill” (p. 240).

Shang believes that widespread prosperity is ultimately harmful to the ruler’s ability to mobilize his people for war. Terror, therefore, is the most efficient instrument of governance, though the terror should be clothed as a regime of law and justice (pp. 240, 429, Wikipedia).

As is also typical of the Axial Age, those political leaders who bring about an end to the Period, attempt to transform the new philosophies into religions of State. In 221 B.C.E., the Qin Dynasty (221-206 B.C.E.) re-unites China (and builds the Great Wall of China). It is soon overthrown (206 B.C.E.) by peasant leader Liu Bang (ruled 206-195 B.C.E.), who is the first Chinese leader to adopt the Confucian ideology. Bang becomes the first of the 400-year long [206 B.C.E.-9 C.E. (“Western”), and 25-220 C.E. (“Eastern”)] Han Dynasty (pp. 235-236, 258, 269; Wikipedia).

300 B.C.E.

India:

Coins: Daily life in Iron Age India (1,200-272 B.C.E.) is becoming completely monetarized (p. 233).

Around 320 B. C.E., India is dominated by the Mauryan Empire (320-185 B.C.E.), which has originated in the Indo-Gangetic plains of northeast India. By 320 B.C.E., the Empire has occupied most of central and northwest India, defeating and conquering the satraps left by Alexander the Great (356-323 B.C.E.) (p. 233; Wikipedia).

Kautilya (c.350-283 B.C.E.), one of the chief ministers of the Mauryan Dynasty (320-185 B.C.E.), writes Arthasastra (“the science of material gain”), a treatise on politics, statecraft, economic policy and military strategy, often compared to The Prince, by Niccolo Machiavelli (1469-1527). Kautilya provides extensive advice on how to subvert and destroy democratic constitutions. Speaking to the population, he insists that governance is a matter of morality and justice. Speaking to the rulers, however, he says:

“War and peace are considered solely from the point of view of profit.”

(that is, to amass wealth to create a more effective army, using the army to dominate markets and control resources, and thereby amass more wealth) (pp. 233, 240-241, 250).

Kautilya notes:

“The treasury is based upon mining, the army upon the treasury. He who has army and treasury may conquer the whole wide earth” (pp. 233, 240; Wikipedia).

The Elements of modern Capitalism: During the Mauryan Period (320-185 B.C.E.), checks (adesha) are in use.

250 B.C.E.

India:

Coins: In India, the rule of Mauryan Emperor Asoka (ruled 273-232 B.C.E.) marks a revolutionary shift in ethos. Asoka embraces Buddhism (though he does not abolish the army, abandon capital punishment, or outlaw slavery). He abandons aggressive war, and diverts substantial resources to the religious orders (Buddhists, Jains, and world-renouncing Hindus). During the next centuries, thousands of stupas and monasteries spring up across the subcontinent. The decline of the great armies would eventually lead to the near-disappearance of coinage, and an efflorescence of sophisticated forms of credit (pp. 234-235, 249, 265).

200 B.C.E.

Egypt:

Debts: Under the Greek Ptolemy Dynasty which rules Egypt (305-30 B.C.E.) after Alexander the Great (356-323 B.C.E.) has conquered the country (332 B.C.E.), periodic clean slates are institutionalized. In 196 B.C.E., in Memphis, King Ptolemy V raises the Rosetta Stone (a granodiorite stele) inscribed with a decree announcing an amnesty, both for debtors and prisoners (p. 219; Wikipedia).

China:

Coins: After the end of Warring States Period (475-221 B.C.E.), coins disappear from circulation as transactions on credit resume. Chattel slavery largely ceases to exist (pp. 212-213).

150 B.C.E.

The Roman Republic:

The Elements of modern Capitalism: By 150 B.C.E., the Roman Republic (508-44 B.C.E.) is contracting out many of its functions (such as the collection of taxes and the building of temples) to publicani (societies of capitalists), some of which are very large, employing tens of thousands of slaves. Ownership of these legal bodies is divided into partes (shares).

100 B.C.E.

The Roman Republic:

Property Laws: The Roman Republic (508-44 B.C.E.) is in its late phase. Hundreds of thousands of captive laborers are pouring into Italy, and Rome is becoming a genuine slave society.

The word dominus (master or slave owner) first appears in 111 B.C.E., and the concept of dominium (absolute private property), a few years later. Roman law re-defines slaves from being “people of diminished worth” to being res (things). Injuries to them have the same legal status as injuries to farm animals (pp. 200-202, 290, 421).

The word libertas (liberty) gradually looses its meaning of “not being a slave,” to becoming tantamount to the “power of the master,” thus effacing the difference between private property and political power based on violence. Freedom is power (the right) to do what one likes with one’s own property. The definition implies that we are all completely isolated beings. This is the way Glasgow University Professor of Moral Philosophy Adam Smith (1723-1790) would use the term (pp. 205).

Roman law defines private property as the basic form of property. Private property is the owner’s absolute power to do anything he wants with his possession. No other tradition makes the possession of a thing the basis of property law, since doing so makes almost all actual law little more than series of exceptions. For instance, the possessor of a chainsaw legally can do only a limited number of things with it inside his own home or land, and almost nothing with it outside his home or land (pp. 199, 385, 421).

In actuality, as medieval jurists were well aware, one man’s right is simply another man’s obligation. My right to free speech is the obligation of others not to punish me for speaking (p. 205).

Property is also a relation between people. The owner’s right to a thing entails an understanding that all other persons on the planet will refrain from interfering with this possession – a right held, as English law puts it, “against all the world” (pp. 199, 421).

100 B.C.E., the Roman Republic (Continued)

For the Romans, however, property is not a relation between people but between a person and a thing. More accurately, Romans understand property as a relation between two people, one of whom is also a thing. The “thing” in their minds, is a slave. The Romans, therefore, take a principle of domestic authority [dominium (absolute power over people)], define some of those people (slaves) as res (things), and then extend that logic to animals and actual things (pp. 199, 200, 421).

The notions of “absolute” property rights, and of the “absolute” sovereignty of an emperor, both of which appear in paradigmatic modern legal documents, can be traced back to Roman law. The notions are derived from slavery (pp. 199, 421).

Interest Law: In Roman law, “interesse” means “penalty for the late payment on a loan” (p. 290).

China:

Religion: In China, faced with a military and financial crisis, the Han emperor Wu-Ti (ruled 141-87 B.C.E), adopts Confucianism as the philosophy of State (p. 249).

50 B.C.E.

The Roman Empire:

The Elements of modern Capitalism: By 50 B.C.E., the Romans are using an early form of checks (praescriptiones).

Property Laws: By the end of the Roman Republic, usually defined as 44 B.C.E., with the appointment of Julius Caesar (100-44 B.C.E.) as perpetual dictator, slaves make up between 30 and 40 percent of the Italian population, perhaps the highest proportion in any known society. All workers (farmers, muleteers, clerks) are property (pp. 200, 421).

0 C.E.

The Near East:

Debts: In the Ancient Middle East, resistance to punishment for debts unpaid had taken the form of exodus, not rebellion – the melting away with one’s flocks and families, before both were taken away. Displaced, indebted farmers had fled to the pastoral fringes of Mesopotamia, the deserts and steppes away from the river valleys. In Mesopotamia and to the West, loose bands of pastoral nomads or refugees (sometimes doubling as soldiers) are now generically referred to as habiru. The word may be the origin of the term “Hebrew” (pp. 182-183, 416-417).

In these outskirts, the poor have kept their hatred of the commoditization of people in cities from which they fled, such as Uruk, Lagash and Babylon. The emphasis on the absolute authority of fathers and the intense misogyny which accompanies it (under the guise of protecting their fickle womenfolk), are extraordinary (pp. 182-183).

The patriarchal hatred of the city is given voice In the New Testament, Book of Revelation. Saint Peter (d. 67 C.E.), speaking in Bethsaida, a city East of the Jordan River, situated in a “desert place” (that is, uncultivated ground used for grazing), refers to Babylon as:

“the great whore, (sitting) upon a scarlet colored beast, full of names of blasphemy . . . Babylon the Great, the mother of harlots and abominations of the earth” (pp. 183, 416-417).

The Roman Empire:

Property Laws: In 16 C.E., Emperor Tiberius (emperor 14-37 C.E.) passes the Lex Petronia, the first Roman law which limits the power of slave owners. The law stipulates that a father has to obtain the permission of a magistrate before he can have a slave torn apart publicly by wild beasts (pp. 202, 422).

China:

Debts: The practice of usury is such that the effective tax rate (the proportion of his harvest which a peasant has to give to someone else) is 50 percent. In 9 C.E., the Han Dynasty Confucian official Wang Mang seizes the throne, and rules until 23 C.E. Among other reforms, Wang Mang bans the private holding of slaves (p. 259).

100 C.E.

The Roman Empire:

Property Laws: In the Roman Empire (44-1,453 B.C.E.), under Emperor Hadrian (emperor 117-138 C.E.) the power of fathers over their slaves is further limited. Fathers are forbidden to maintain private dungeons for their slaves, practice other cruel and excessive punishments, or kill their slaves (pp. 202, 422).

250 C.E.

The Sassanian Empire:

Gamblers: The Sassanian Empire (224-651 C.E.) is the last pre-Islamic Persian Empire. It comprises modern-day Iran, Afghanistan, Iraq, Syria, the Caucasus, parts of Turkey, parts of the Arabian Peninsula, the Persian Gulf area, and areas of Pakistan. In 259 C.E., at the Battle of Edessa, King Shapur I (reigned 241-271) defeats the Roman Emperor Valerian (ruled 253-260), captures him, and uses him as his footstool for the rest of Valerian’s life (months or years) (pp. 189, 272; Wikipedia).

The Elements of modern Capitalism: By 250 C.E., banks in the Sassanian Empire are issuing letters of credit (chak).

300 C.E.

The Roman Empire:

Debts: The works of the early Christian Fathers (50-800 C.E.) resound with endless descriptions of the misery and desperation of those caught in the web of rich lenders. The small window of freedom opened by the threatened “secession of the plebs” is now closed, and the free peasantry has been largely eliminated. By the end of the Empire, most people in the countryside who are not outright slaves, become, effectively, debt peons to a rich landlord – a situation legally formalized by imperial decrees binding peasants to the land. In 332 C.E., the first of these decrees, issued by Emperor Constantine (emperor 306-337 C.E.), greatly restricts the rights of peasants, and ties them to the land. Constantine is the first emperor to convert to Christianity (pp. 232, 249, 427; Wikipedia).

The Middle Ages (600-1540 C.E.)

600-1450 C.E. is the time of the Middle Ages. The Period begins with the collapse of empires. When, eventually, new States are formed, the nexus between war, bullion, and slavery is broken. Conquest and acquisition for their own sake are no longer celebrated as the end of all political life. Economic life, from the organization of local markets to the conduct of international trade, falls increasingly under the regulation of religious authorities (pp. 251, 283, 297).

There is a movement to control, or even forbid, predator lending, and, across Eurasia, a return to various forms of virtual credit money (pp. 214, 251).

For most of the earth’s inhabitants, the period of the Middle Ages is an extraordinary improvement over the terrors of the Axial Age. In Roman Gaul, for instance, where during the Axial Age, Roman slave plantations (owned by urban grandees) and communities in debt peonage dotted the countryside, after 400 C.E., the number of plantations and the population of the towns decline radically. In the subsequent centuries, many of these plantations are replaced by manors, churches, and later, castles, where, of course, new local lords extract their own dues from the surrounding farmers (pp. 251-252).

However, the amount of work required to feed a handful of mounted warriors and clergymen, is not anything like that required to feed entire cities. However oppressed medieval serfs come to be, their plight is not comparable to that of their Axial Age equivalents (p. 252).

In Greece, India and China, bullion predominates during periods of war – coinage making it possible to (1) Keep no record of a transaction, (2) Not rely on relations of trust, and, (3) Provide anonymity to armed itinerant soldiers. When wars abate, transactions on credit resume their popularity (p. 213).

In India and China, the Middle Ages begin between 400 and 600 C.E., sweep across much of the western half of Eurasia with the advent of Islam, and reach Europe between 800 and 1,000 C.E.

In Medieval Islam, the logic of money is not granted autonomy, and States and armies do not enforce the laws. On the contrary, the prohibition against usury makes loans at interest effectively impossible to collect, and prevents the development of purely competitive markets. The conditions would lead to the development of a genuinely free market (one not regulated by the State in any significant way, even with respect to the enforcement of commercial contracts) (p. 320).

300 C.E.

India:

Coins: In India, the Mauryan Empire (320-185 B.C.E.) is followed for the next 500 years (185 B.C.E.-315 C.E.) by a succession of kingdoms, most of them strongly supportive of Buddhism, but each increasingly weak.

Centralized armies are dissolved, and soldiers are paid in land grants rather than salaries. The number of coins in circulation declines, replaced by increasingly sophisticated credit arrangements, such as sureties, collaterals, mortgages, promissory notes, and compound interest, with, toward the end of the period, techniques for combining compound interest with partial re-payments.

Chattel slavery largely ceases to exist.

Medieval monasteries are magnificent establishments, with vast “Inexhaustible Treasuries” funded by “perpetual endowments.” The Treasuries are inexhaustible because, by continually lending their money out at interest and never otherwise touching their capital, they effectively guarantee that their investments will be risk-free. Unlike Islam, Buddhism thus produces entities much resembling present-day “corporations.” The temples where the metal from the coins accumulate, are Buddhist at first, then increasingly Hindu (pp. 212, 253-254, 296, 303-304, 431).

Cities decline in size. India becomes a land of tiny villages, and society is reshaped along strictly hierarchical principles. The Dharmasastra Law Codes, written by Brahmin scholars between 200 B.C.E. and 400 C.E., describe the duty of the Brahmins to stand in for all humanity before the forces which control the universe. The Manusmrti (Laws of Manu), the early part of the Dharmasastra, set down that the Sudra (the lowest caste, assigned to farming and material production) may not be educated. Artisans and craftsmen fleeing the decline or destruction of cities often end up as suppliant refugees, and, gradually, as low-caste clients. The result is an increasingly complex local patronage system (jajmani) where the refugees provide service to the land-owning castes, who themselves take on many of the roles once held by the State, such as the provision of protection and justice, and the extraction of labor dues (p. 255).

400 C.E.

China:

Debts: In China, after the collapse of the Eastern Han Dynasty (220 C.E.), the central State breaks apart, cities decrease in size, and coins disappear. In contrast to other areas of the world, however, in China, the bureaucracy eventually survives, and a centralized State re-emerges, run by Confucian scholars trained in the literary classics. Rebellions due to intolerable tax burdens are frequent, and are invariably followed by official debt relief (either in the form of blanket amnesties or the annulments of all loans in which interest has exceeded the principal); the setting of interest rates at a maximum of 20 percent; the banning of compound interest; cheap grain loans; famine relief; and laws against the selling of children (pp. 258-259, 268, 433).

Local shopkeepers and merchants extend credit, keeping accounts with tally sticks of bamboo (much like the hazel wood sticks which would be used in England, around 1150 C.E.), notching it, both the creditor and debtor then keeping one half (pp. 268-269).

Markets: The Confucian State encourages markets, in the sense of encouraging the exchange of goods through the medium of money [(C-M-C’), where C stands for commodity, M for money, and C’ for another commodity]. However, the State is anti-capitalist, in the sense that it discourages the use of money to obtain more money [(M-C-M’)]. The Chinese Government prevents money from being used for speculation. Commercial profit must be the compensation for labor, not the fruits of speculation (p. 260).

Since the easiest way to profit from money is to establish a monopoly, as a rule, capitalists, such as merchants, financiers, or industrialists, ally themselves with political authorities to limit the freedom of the market, and establish either formal or de facto monopolies. Chinese rulers, however, refuse to form an alliance with (the always existing) would-be Chinese capitalists, seeing them instead as destructive parasites to be kept under careful supervision. Until 1820 C.E., China would maintain the highest standard of living in the world (pp. 260-261, 310).

Religion: Buddhism increasingly takes root among the population. Medieval Chinese Buddhism (originally promoted by merchants returning from India) has a striking tendency to employ the language of the marketplace. The School of the Three Stages (? c.400 C.E.), for instance, amplifies the notion of “karmic debt” – the notion that each sin in one’s accumulated past lives continues as a debt needing to be discharged (pp. 261-262, 387).

400 C.E., China (Continued)

However, the debt can be discharged through a donation to the Inexhaustible Treasury of a monastery. The result is not only an elaborate system of debts and forms of redemption, but also, the rise of “Inexhaustible Treasuries,” which lend the money at interest, as the world’s first genuine forms of concentrated finance capital. They become enormous concentrations of wealth collectively managed by monastic corporations which constantly seek new opportunities for profitable investment. The “Inexhaustible Treasuries” even share the quintessential capitalist imperative of continual growth, since according to Mahayana doctrine, genuine liberation will not be possible until the whole world embraces the Dharma (truth). Huge concentrations of capital interested in nothing more than profit, is precisely what Confucian economic policy was meant to prevent (pp. 19, 263-266, 268, 302-303; Wikipedia).

India:

Education: In 427 C.E., the Nalanda Center of higher learning (university) is founded, in Bihar Province, India.

Europe:

In Europe, Saint Augustine (354-430 C.E.) develops the concept of “self-love” to denote insatiable desires for self-gratification. For Augustine, the “love of God” leads us to benevolence toward our fellows. In contrast, “self-love” refers to the fact that, since the Fall of Man, we are cursed by endless, insatiable desires for self-gratification – so much so that, if left to our own devices, we will necessarily fall into universal competition, even war (p. 332).

500 C.E.

China:

Debts: By 511 C.E., the Chinese (now Confucian) Government is issuing decrees condemning Buddhist monks for altering debt contracts, diverting grain intended for charitable purposes to high-interest loans, and maintaining loans on which the interest has exceeded principal (p. 265).

600 C.E.

China:

Debts: During the three years 613-615, China has about 1,000 rebellions per year. In 618, the Tang Dynasty (618-907), originally itself a peasant insurrection, begins. Usury is a principal cause of popular unrest and rebellion (pp. 258, 433).

650 C.E.

Greece:

Coins: Around 650 C.E., in Greece, there is a movement back to credit instead of coinage. The institution of slavery largely vanishes (pp. 211-212).

The Roman Empire:

Coins: The (Western) Roman Empire is destroyed by the Goths, Frisians and Franks. There is a movement back to credit instead of coinage. The institution of slavery largely vanishes (pp. 60, 211-212).

650 C.E. (Continued)

Persia:

Coins: After the death of Mohammed (632 C.E.), Arab military leaders conquer the Sassanian Empire and establish the Abbasid Caliphate [(750-940, with real power), (940-1258 and 1261-1513, with waning, then symbolic power)]. The rulers are from the desert, and the people, mostly urban, see their government as a military power external to society. They expect only some security in return for taxes (272-274; Wikipedia).

The Caliphate is free to operate much like the old Axial Age empires – creating professional armies, waging wars of conquest, capturing slaves, melting down loot and distributing it in the form of coins to solders and officials, while also demanding that those coins be rendered back as taxes (pp. 273-274).

Debts: In contrast to the Caliphate, Islamic law attacks the most notorious abuses of Axial Age societies. Slavery through kidnapping, judicial punishment, debt, the exposure or sale of children, and the voluntary sale of one’s own person, are forbidden. Debt peonage is abolished. The lending of any money or commodity at interest, for any purpose whatsoever, is strictly forbidden. Islamic courts are the ultimate triumph of the patriarchal rebellion begun in the desert and the steppe. Merchants who convert to Islam, abandon their practice of lending at interest, whether for commercial or personal loans, instead becoming leaders of the society, against the government (pp. 274-275, 436).

Partnerships, with one party supplying the capital, and the other carrying out the enterprise, both receiving a share of the profit, is preferred to fixed interest-bearing investments. Even labor arrangements are organized on a profit-sharing basis. The economy is based on credit, largely without State mechanisms of enforcement (that is, without police to arrest those who commit fraud, or bailiffs to seize a debtor’s property) (p. 276).

650 C.E., Persia (Continued)

Markets: Islamic society becomes the first popular free-market society. Freed from its ancient scourges of debt and slavery, the local bazaar becomes the highest expression of human freedom and communal solidarity – and as such, assiduously protected from government intrusion (pp. 278-279).

The particular hostility to price-fixing dates from the Prophet Mohammed (570-632) himself, who considered that “prices depend on the will of God.” Islamic scholars interpret this to mean that markets are designed by God to regulate themselves, and any government interference with market mechanisms is sacrilegious. God re-creates the entire universe at every instant, and market price fluctuations are but another manifestation of divine will (pp. 279, 303, 437-438).

During the Middle Ages, the Indian Ocean becomes effectively a Muslim lake. Muslim traders establish the principle that kings and their armies keep their quarrels on dry land. The seas are a zone of peaceful commerce (pp. 277, 385).

While large-scale merchants (“owners of capital”), seeking profitable investment, exist in the world of Islam, and legal theorists speak about the creation and expansion of capital funds, modern capitalism, with its hallmarks of great merchant banks and industrial firms, does not emerge. This is in contrast to the Inexhaustible Treasuries of medieval China. There are two principal reasons for this difference:

1. A free Market: The market never falls under the direct supervision of the government. Contracts are made between individuals (“with a handshake and a glance at heaven”), honor being indistinguishable from credit. As a result, the Islamic world would not develop impersonal credit mechanisms (such as installment plans, credit cards, debit cards, all mediated not by interpersonal relations of trust, but by profit-seeking corporations) (pp. 303-304, 354, 367-368).

2. No fixed Interest Rate: Islam enshrines the concept that profits are the reward for risk. Financial mechanisms designed to avoid risks are considered impious. (This is one of the objections to usury, as a fixed rate of interest guarantees profits). Similarly, commercial investors are expected to share the risk. The bans on both fixed interest and financial insurance, prevent the development of most of the forms of finance and insurance which would develop in Europe (pp. 303-304, 443).

700 C.E.

China:

Debts: In 713 C.E., the Chinese Government confiscates two Inexhaustible Treasuries of the Three Stages Sect, for soliciting money under the fraudulent claim that the money is to be used to help orphans and the poor (pp. 265, 434).

800 C.E.

China:

Debts: Chinese Buddhism reaches its apogee around 800 C.E. (p. 269).

In 845 C.E., the Chinese Government releases from bondage 150,000 temple serfs during a raid which destroys 4,600 monasteries (an average of 33 serfs per monastery destroyed) (p. 265).

The Elements of modern Capitalism: By 806 C.E., merchants selling tea from the far south of the country, and officials transporting tax payments to the capital, concerned with the danger of transporting bullion for long distances, deposit their money with bankers in the capital in return for promissory notes – “Flying Cash.” Like tallies, these are divided in half and redeemable for cash in the bank’s provincial branches (p. 269).

850 C.E.

Persia:

The Elements of modern Capitalism: Around 850 C.E., during Islam’s “Golden Age” (750-1258), under the Abbasid Caliphate (with its capital in Baghdad), Muslim traders are using checks (sakk). (The word sakk is the origin of the English word “check”) (pp. 275, 437).

950 C.E.

China:

Debts: In China, the Sung Dynasty (960-1279), originally a peasant insurrection, begins. Usury is a principal cause of popular unrest and rebellion (p. 258).

1000 C.E.

India:

Debts: By 1000 C.E., Hindu law codes have largely eliminated restrictions on usury by the upper castes. However, at this time, Islam makes its appearance in India, and Islam is dedicated to eradicating usury altogether.

Even Hindu law, however, is far more humane that any law in the ancient world. Debtors are not reduced to slavery, and women and children are not sold. Overt slavery has largely vanished. The law stipulates that debtors should be freed in the third generation, even if the principal has not been repaid (pp. 256-257).

China:

The Elements of modern Capitalism: In China, by the early Song Dynasty (960-1279 C.E.), “proto-banks” accept cash and bullion for safekeeping. They allow depositors to use their receipts as promissory notes, these then beginning to circulate as de facto money.

In 1023 C.E., the Chinese Government consolidates the “proto-banks” into a Government monopoly, the Bureau of Exchange Medium (pp. 269-270, 435).

Persia:

Philosophy: Persian Muslim polymath Ibn Sina (“Avicenna”) (980-1037 C.E.) makes the point which would be repeated later by French Enlightenment philosopher Rene Descartes (1596-1650) as “Cognito ergo sum” (I think, therefore, I am) (pp. 279, 438).

Europe:

The Elements of modern Capitalism: Around 1050, the French Government begins regulating and trading agricultural debts on behalf of the banking community, thereby creating the first brokerage system.

Philosophy: The essence of European medieval thought lies not in blind obedience to authority, but in a dogged insistence that the values which govern our ordinary daily affairs (particularly those of the court and marketplace) are confused, mistaken, illusory, or perverse. True value lies elsewhere, in the domain that cannot be perceived directly, only approached through study or contemplation. The entire questions of contemplation and knowledge become an endless problem (p. 297).

Like India, Europe sees a return to hierarchy. Society becomes a ranked order of “Priests,” “Warriors,” “Merchants,” and “Farmers” (p. 302).

1100 C.E.

Persia:

Philosophy: In medieval Persia, Muslim theologian and mystic Abu Hamed al-Ghazali (1058-1111) makes three points that would be taken up by later thinkers:

1. Abu Hamed al-Ghazali writes that exchange is a natural outgrowth of human rationality and speech. As illustration, he uses the fact that animals, such as dogs, do not exchange one bone for another (p. 279).

* Muslim polymath and prolific writer Nasir al-Din al-Tusi (1201-1274) would make the same argument, using the same illustration (p. 279; Wikipedia).

* In 1775, Glasgow University Professor of Moral Philosophy Adam Smith (1723-1790) would make the same argument (the market is directed by an “invisible hand,” “the hand of Divine Providence”), using the same illustration (pp. 279, 438).

2. In his Ihya (The Revival of religious Sciences), Abu Hamed al-Ghazali describes the division of labor, using the example of a needle factory, where it takes 25 different operations to produce a needle (p. 279).

* In 1755, under the entry “Epingle,” the French Encyclopedie would use the same example (18 steps to produce a pin) (p. 438).

* In 1775, Adam Smith would make the same argument, using the same illustration (a pin factory, where it takes 18 separate operations to produce one pin) (p. 279).

3. Abu Hamed al-Ghazali makes the point that the “constant conjunction” of two things does not itself prove causality.

* Scottish Enlightenment philosopher David Hume (1711-1776) would later (famously) make the same point (p. 438).

1100 C.E., Persia (Continued)

Markets: Abu Hamed al-Ghazali’s perspective on the division of labor anticipates that of Muslin polymath Nasir al-Din al-Tusi (1201-1274) – cooperation, not competition, is the essence of the market.

Abu Hamed al-Ghazali conceptualizes money as created to facilitate transactions. It is a symbol, a unit of measure, used to assess the value and grades of goods. Precisely because it lacks usefulness in itself, because it lacks any particular feature other than value, it can serve as the medium for the exchange of goods. Lending money at interest means using money as an end in itself, and is, therefore, illegitimate:

“Money is not created to earn money . . . [To enter in a monetary transaction in order to obtain even more money (M-C-M’, or M-M’)], is the equivalent of kidnapping a postman” (pp. 280-281, 298-299, 301, 438).

The free-market doctrine, which would become global, originates, therefore, in a very different social and moral universe than that described by Adam Smith. The market of medieval Islam operates according to its own internal laws, largely independently of governments. It is a genuinely free market – not one created by the government and backed by government police and prisons. It is a world of handshake deals and paper promises backed only by the integrity of the signer. It is a world which could not be imagined by those who would later adopt many of the same ideas and arguments. For Adam Smith, the market is composed of purely self-interested individuals vying for material advantage by any means at hand (pp. 282, 286, 290-291, 336, 384).

1150 C.E.

Europe:

Debts: In England, during the reign of King Henry II (reigned 1154-1190), one of the most important forms of currency consists of notched “tally sticks” used to record debts. Both parties to a transaction take a hazel wood twig, notch it to indicate the amount owed, and then split it in half. The creditor keeps one half (“the stock”) and the debtor the other (“the stub”).

The Elements of modern Capitalism: During the European Middle Ages, many financial abstractions are invented:

1. Checks:

a. Between 1118 and 1307, the Military Order of the Knights of the Temple of Solomon (the Knights Templar) introduce a check system for pilgrims travelling across Europe to the Holy Land.

b. Around 1250, Venice develops bills of exchange to allow international trade without the need to carry large amounts of gold and silver.

c. Around 1500, in the Dutch Republic, people begin depositing their money with “cashiers,” who hold the money for a fee.

2. Bonds: In 1157, the Bank of Venice issues the earliest known bonds – prestiti (forced loans to the City of Venice Government). The bonds are municipal, compulsory for tax-paying citizens, and carry an annual interest rate of 5 percent. Venice uses the funds for its war against Constantinople. The bonds are negotiable, and a market in Government debt is thereby created.

Similar practices quickly spread to other Italian States and to northern European merchant enclaves. The Seventeen Provinces of the Low Countries, for example, finance their 80-year war of independence (1568-1648, ending with the Treaty of Westphalia) against the Habsburgs Kings of Spain [Philip II (reigned 1556-1598; Philip III (reigned 1598-1621; and Philip IV (reigned 1621-1665)], largely through forced and voluntary bond issues. The Seven United Provinces emerge independent.

The first record of a financial crash occurs in Venice, when the average price of prestiti drops from 92 ½ percent of par (face value), in 1375, to 24 percent of par in 1381.

1150 C.E., Europe (Continued)

3. Annuities: Between 800 and 1450, annuities are sold in medieval German and Dutch cities. Medieval monasteries raise money through the sale of life annuities (pp. 48, 291, 337-338; Wikipedia. See under “1700 C.E.,” “Europe,” “The Elements of modern Capitalism”).

1200 C.E.

Persia:

Markets: In medieval Persia, Muslim polymath and prolific writer Nasir al-Din al-Tusi (1201-1274) begins his treatise on economics with a discussion of the division of labor. For Nasir al-Din al-Tusi, the division of labor is an extension of mutual aid:

“When men render aid to each other, each one performing one of these important tasks (which together) are beyond the measure of his own capacity, and observing the law of justice in transactions by giving greatly and receiving in exchange (the fruits) of the labor of others, then the means of livelihood are realized” (pp. 279-280).

Nasir al-Din al-Tusi concludes that divine providence has arranged for us to have different abilities, desires, and inclinations. The market is simply one manifestation of this more general principle of mutual aid – the matching of abilities (supply) and needs (demand). (In terms of moral principles, it is an extension of the “baseline communism” on which any society ultimately rests) (p. 280).

Philosophy: Poet Jala ad-Din Rumi (1207-1273) has the definition of enlightenment come from the mouth of a magic bird (p. 438).

* German Enlightenment philosopher Immanuel Kant (1724-1804) would later (famously) write the same thought:

“Immaturity is the inability to use one’s understanding without guidance from another. ‘Have courage to use your own understanding.’ That is the motto of enlightenment” (p. 438; Wikipedia).

1200 C.E. (Continued)

Europe:

Debts: In 1204, the Fourth Crusade (1202-1204), from Western Europe, conquers the Christian Eastern Orthodox city of Constantinople, capital of the Eastern Roman (Byzantine) Empire. Most of the knights are in debt, many to financial firms in Genoa. In his book Byzantium and Europe (1967), University of California at Los Angeles historian Speros Vryonis, describes the sack of Constantinople:

“The Latin soldiery subjected the greatest city in Europe to an indescribable sack. For three days, they murdered, raped, looted and destroyed on a scale which even the ancient Vandals and Goths would have found unbelievable” (p. 318; Wikipedia).

This was a first taste (later dramatically demonstrated by the conquistadors), of the rage, indignation, and frantic urgency of the debtor who feels he has done nothing to deserve having to be reduced to a person who converts everything around himself into money (pp. 325, 389-390).

Markets: The Church is uncompromising in its attitude toward usury. Scholastic philosopher Henry of Ghent (1217-1293) writes that

“Money is a medium in exchange, and not a terminus” (p. 438).

Italian priest of the Catholic Church, scholastic philosopher and theologian Thomas Aquinas (1225-1274):

1. Makes the same argument as does Henry of Ghent – money is basically a measure, which usury distorts (pp. 286, 321, 438).

2. Develops the notion that angels are the personification of Platonic “Ideas.” Just like any one bird is a token of the general idea of “bird” (immaterial, abstract, angelic), so do the various physical, mortal individuals who join together to make up a corporation, become an abstract, angelic “Idea” (pp. 304, 443).

The Elements of modern Capitalism: In 1250, perhaps influenced by Thomas Aquinas (1225-1274), Pope Innocent IV establishes, in canon law, the legal idea of a corporation as a “fictive person” (persona ficta). The notion would apply first to monasteries, and then to universities, churches, municipalities and guilds. The European tradition is the only one of the great traditions which would come up with the notion of the corporation as a person – immortal, like an angel (p. 304).

1300 C.E.

Europe:

Climate: By 1300, in Europe, the Medieval Warm Period (950-1250) has come to a close. The transition to the “Little Ice Age” (1550-1850) begins, bringing with it harsher winters and smaller harvests. The “Great Famine” of 1315-1317 kills more than 10 percent of the population of Northwest Europe (Wikipedia).

China:

Markets: The (Mongol) Yuan Dynasty, which rules China for one century (1271-1368) works closely with foreign merchants, whom the people come to widely detest. The Dynasty keeps the Bureau of Exchange Medium. (It would be abandoned only in 1650 C.E.) (pp. 270, 310).

1350 C.E.

Europe:

Markets: The bubonic plague (“Black Death”) is introduced into Europe in 1347, and in four years (1348-1352), kills 45-50 percent of Europe’s population, reducing the 1300 population of 75 million, to a 1400 population of 38 million. The work force is reduced by 1/3. (Total world population is reduced by 20 percent, from a 1300 population of 450 million to a 1400 population of 363 million). A series of popular uprisings force the authorities to allow wages to rise dramatically. Wealth starts to flow into the hands of ordinary people, and governments introduce new laws which limit the number of feast days, and forbid the low-born from wearing silk and ermine (pp. 308-309; Wikipedia).

The Elements of modern Capitalism: Around 1350, major cities, such as Amsterdam (in Holland), and Ghent, Bruges and Ypres (in Flanders), have brokerage firms. In Venice, brokers are trading in Government of Venice securities.

China:

Debts: In China, the Ming Dynasty (1368-1644), originally a peasant insurrection, begins. Usury is a principal cause of popular unrest and rebellion (p. 258).

1400 C.E.

Europe:

The Elements of modern Capitalism: In Italy, around 1400, during the Middle Ages and early Renaissance, the rich cities in the north, such as Florence, Venice and Genoa begin operations similar to modern banking. In 1397, Giovanni Medici (c.1350-1429) establishes the Medici Bank, which would become the most famous Italian bank (p. 291; Wikipedia).

The Age of capitalist Empires (1450-1971 C.E.)

1453

The (Eastern) Roman Empire: With the fall of Constantinople (1453), the last remnants of the Byzantine Empire (the Eastern Roman Empire, the continuation of the Ancient Roman State, 306-1453) collapse (pp. 211, 308).

The Ottoman Empire: The capture of Constantinople (1453) by Sultan Mehmed II (1432-1481) initiates the growth phase (1453-1683) of the Ottoman Empire (1299-1923) (p. 308).

1450-1971

The period 1450-1971 is the Age of Capitalist Empires. The Age begins with a massive planetary switch away from virtual currencies and credit economies, back to gold and silver bullion. It ends when United States President Richard Nixon (president 1969-1974) announces that the U.S. dollar would no longer be redeemable in gold, an announcement which marks the beginning of a return to virtual money (p. 214).

Under the newly emerging capitalist order, the logic of money is granted autonomy, and political and military power are gradually reorganized around it. States and armies enforce the laws (p. 320).

1500 C.E.

China:

Markets: In China, partly because the (Mongol) Yuan Dynasty (1271-1368) worked closely with foreign merchants, whom the people detested, the subsequent Ming Dynasty (1368-1644), the result of a popular insurrection, is, at first, suspicious of commerce (p. 310).

Taxes on crops are so high that many indebted farmers either sell their land to powerful families in exchange for freedom from taxes, or flee their ancestral lands. By 1581, taxes are again to be paid in silver, and the Chinese Government returns to its pre-Mongol invasion policy of encouraging markets, only intervening to prevent undue concentrations of capital. The policy is successful. Chinese markets boom. Population grows and living standards improve (pp. 310-311, 443-444).

Europe:

An Influx of Wealth: In 1492, Genoese mapmaker Christopher Columbus (1451-1506) touches land in the Bahamas, and initiates the European colonization of the “New World.” During the next three centuries (until about 1800), not Europe, but China would absorb the staggering quantities of silver mined in the New World (p. 311).

In 1498, Portuguese explorer Vasco da Gama (c.1460-1524) enters the Indian Ocean, and puts an immediate end to the principles held during the Middles Ages, that markets exist beyond, against, and outside of States, and that seas are zones of peaceful trade – as indeed was the case for the Indian Ocean under Muslim rule (from 650 C.E. through the Middle Ages). Portuguese flotilla begin bombarding and sacking every port city they come across, seizing control of strategic points, and extorting protection money from unarmed Indian Ocean merchants for the right to carry on their business unmolested (pp. 277, 311, 385).

From 1500 to 1650, as the value of silver in Europe diminishes (despite China draining off much of the supply, which would tend to maintain its value high), all of Europe suffers from massive inflation of silver-denominated prices. In England, for example, prices rise by 500 percent, wages rising much more slowly, with the result that, over the course of five generations, real wages fall by 60 percent. Living standards collapse. Despite the massive influx of metal from the Americas, the poor do not have cash, though they are required to pay taxes in either gold or silver (pp. 311-313).

1500 C.E., Europe (Continued)

By 1540, the price of silver in Europe has diminished sufficiently that treasure galleons begin to bypass Europe, round the horn of Africa, and proceed directly across the Indian Ocean toward Canton. After the foundation of the Spanish city of Manila (1571), the galleons proceed directly across the Pacific Ocean. The silk, porcelain, and other Chinese products which China exports to pay for the silver, are sold, not in Europe, but in the new cities of Central and South America. The Asian trade becomes the single most significant factor in the emerging global economy (p. 312).

Intrinsic to the new, modern notion of impersonal debt, is the possibility of bankruptcy. In 1542, Britain passes its first bankruptcy law. Bankruptcy is a personal apocalypse. It means prison, the dissolution of one’s estate, and, for the least fortunate, torture, starvation, and death (pp. 359, 450).

In 1545, Britain legalizes loans at interest, thereby validating the notion that “interest” is the demand that money never cease to grow. An investment is money placed in the continual pursuit of profit (pp. 328, 332).

Very little of the American gold and silver which reaches Europe, actually flows to ordinary farmers, mercers, and haberdashers. Those who control the silver (the royalty, the aristocracy, bankers, and large-scale merchants) use this control to change the rules, thus preventing the wealth from flowing to the people. The powerful:

1. Insist that Gold and Silver are Money: Since gold and silver are money, they must be used to pay taxes.

The view that money is founded on the “intrinsic” value of gold and silver, is opposed to that of Aristotle (384-322 B.C.E.), Ibn Sina (“Avicenna”) (980-1037 C.E.), Abu Hamed al-Ghazali (1058-1111 C.E.), Nasir al-Din al-Tusi (1201-1274 C.E.), Henry of Ghent (1217-1293 C.E.), and Thomas Aquinas (1225-1274 C.E.) who see money as a social convention. The view also ignores the discoveries of European explorers who are finding an endless variety of other currencies in use, such as shell, bead, feather, and salt money.

1500 C.E., Europe (Continued)

One reason why the powerful prefer to latch the value of paper money onto gold and silver, is their knowledge that once credit becomes unlatched from relations of trust between individuals (whether merchants or villagers), and enters the amoral world of a competitive marketplace, scams and confidence games of every sort occur.

The powerful impose a bullion economy, even while small change is almost non-existent (pp. 313, 327-329, 337).

2. Destroy the local Systems of Trust: The powerful show no interest in maintaining the trust in local credit systems (tallies, promissory notes, and, in smaller communities, simply keeping track of who owes what to whom) which makes it possible for small communities across Europe to operate largely without the use of metal currency. In fact, the powerful actively work to undermine and destroy this trust (pp. 313, 327-329, 337).

For English villagers, markets are entirely founded on trust, seen as an extension of the collective stewardship of fields, streams and forests, and the need to help neighbors in difficulty. Trust is everything. Most money is trust, since most credit arrangements are handshake deals (pp. 313, 327-329).

3. Enclose common Lands: The powerful enclose common lands (such as pastures and fields) for the grazing of their own animals. In England, the enclosure movement is particularly strong during the Tudor Dynasty (1485-1603). The lack of common land drives tenants to leave their farms, and migrate in droves to the cities, in search of employment (pp. 308-309, 313; Wikipedia).

4. Introduce new forms of Credit: The powerful introduce new forms of credit-money for their own use – principally government debt bonds – rentes, juros, and annuities (pp. 313, 327-329, 339).

The new regime of bullion money is imposed through almost unparalleled violence. Governments crush the popular insurrections [the “Price Revolution” (1500-1650)], and the debtors are eventually set to work in factories (pp. 308, 312-313).

1500 C.E., Europe (Continued)

The Greed and Violence of Debtors: The destruction of the native population of the New World by the conquistadors is systematic. Not only do smallpox, war and famine cause high death rates, but also labor exaction, taxes, enslavement, and above all, forced service in the gold and silver mines. Around the mines, in Hispaniola and in many parts of Mexico and Peru, death rates are essentially 100 percent. The population never recovers. The greed, the unrelenting drive of the conquistadors for more and more treasure, can be traced to their own indebtedness (pp. 314, 326, 444).

The conquistadors resemble a volunteer militia rather than a regular organized military, in that they have to supply their own materials, weapons and horses. Most of the conquistadors are in debt.

Although he is funded by Holy Roman Emperor Charles V (King of Spain 1516-1556), Hernan Cortes (1485-1547), conqueror of the Aztec Empire, is in debt. Cortes orders mining operations to begin almost immediately after the fall of Tenochtitlan, in 1521. Not only does Cortes not share the spoils of his victory with his soldiers, who themselves are deeply in debt, but he makes them pay for replacement weapons and the medical care they have received. Those who complain most vociferously are placed in charge of local administrations in the provinces (pp. 316-318, 325).

Vasco Nunez de Balboa (c.1475-1519), in 1513, the first to cross the Isthmus of Panama to the Pacific Ocean, has come to the Americas to escape from his creditors. Francisco Pizarro (c.1471-1541), conqueror of the Incan Empire, victorious in Cusco, in 1534, has borrowed heavily, in Panama, to outfit his expedition to Peru, and fears debtors’ prison, should he return. Francisco de Montejo (1502-1565), conqueror of Yucatan, has pawned his Mexican possessions to launch an expedition to Honduras. Pedro de Alvarado (c.1485-1541), conqueror of Guatemala, is deeply in debt when he sets out to conquer the Spice Island and China (p. 444; Wikipedia).

As the Church knew, for the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise. Even human relations become a matter of cost-benefit calculation. This is the way the conquistadors view the worlds they set out to conquer. It is the peculiar feature of modern capitalism to create social arrangements which essentially force us to think this way – a structure designed to eliminate all moral imperatives, and focus only on profit (pp. 320, 349, 386. See under “1200 C.E.,” “Europe,” “Markets”).

1500 C.E., Europe (Continued)

Gamblers: In 1519, after burning his boats, Hernan Cortes assembles an army of local allies and begins a march on the Aztec capital, Tenochtitlan. Aztec Emperor Moctezuma invites the entire Spanish force (a few hundred men) to be his official guests. Palace intrigues lead to him being held hostage in his own palace by Cortes’ men. During the time when Moctezuma is being held captive, he and Cortes pass the time playing the Aztec game totoloque. Cortes and his chief lieutenant Pedro de Alvarado cheat flagrantly, demanding gold for each point Moctezuma looses, yet themselves, when they loose, paying only in worthless pebbles.

In totoloque, as in all Aztec games, one can always achieve instant, total victory by a freak stroke of luck – in this case, for instance, by having one of the dice land on its edge. Moctezuma stakes everything on this happening. He is not simply gambling for gold. Gold is trivial. His stakes are the entire universe. Nothing happens, and Moctezuma’s universe is eventually destroyed. The incident lays bare the relationship between gambling and apocalypse (pp. 355-357).

Capitalism: Capitalism enshrines the gambler as an essential part of its operation. Like warriors and gamblers who are willing to risk their own future on a game, so capitalism, as a system, has no in-built mechanism to prevent it from destroying its own future (p. 357).

A number of civilizations have been in a position to destroy entire civilization on the scale that the European powers did 1500-1700. Around 1425, in China, for example, the Ming Dynasty (1368-1644), had its own “age of exploration.” Almost none actually did so (pp. 314, 444).

The origin of contemporary capitalism, is based on an alliance between daring adventurers, who are essentially gamblers willing to take enormous risks, and careful financiers focused on producing a steady, mathematical, inexorable growth of income. This dual character of capitalism remains today. The conquistadors, who make the decisions in the field, do not feel in control. The financiers, who have control, do not particularly care to know the details. For example, royal agents attempt regularly to forbid debt peonage (the imposition of heavy taxes, the lending of money at interest to those unable to pay, then the demand that the loans be repaid with work). Financial exigencies, however, always end up taking precedence. Holy Roman Emperor Charles V (King of Spain 1516-1556) is himself deeply in debt to banking firms in Florence, Genoa, and Naples. Gold and silver from the Americas account of 20 percent of his total revenue (pp. 318-320; Wikipedia).

1500 C.E., Europe (Continued)

In contrast to the Axial Age (800 B.C.E.- 600 C.E.), when money remained a political instrument, and in contrast to medieval Islam (c.750-c.1258) which prohibited usury and, therefore, the development of purely competitive markets, under the newly emerging capitalist order, the logic of money is granted autonomy. Political and military power are gradually reorganized around it. States and armies enforce the laws (pp. 320-321).

The Elements of modern Capitalism: The first securitization of assets occurs around 1550. As land ownership is too illiquid an asset to make fortunes, bankers and grain merchants in Lombardy, Italy, securitize land – transform it into bank loans. This allows the wealth to be invested in government bonds, overseas commerce, and other new investment opportunities. (Securitization in the modern sense, in which illiquid assets are pooled and repackaged, dates from only 1970).

Religion: The Reformation (1550-1825) takes the side of the controllers of power, not that of the population. In 1524, referring to interest-bearing loans, German initiator of the Protestant Reformation Martin Luther (1483-1546) makes the point that interest-bearing loans need government enforcement:

“The world needs a strict, hard, temporal government that will compel and constrain the wicked not to rob, and to return what they borrow . . .” (pp. 321, 331).

Swiss Protestant reformer Huldrych Zwingli (1484-1531), is even more explicit. Except for Jesus, no human can live up to God ‘s communistic standard. Therefore, God has also given us a second, inferior, human law, to be enforced by civil authorities, a law which can make us follow the lead of the apostle Paul:

“Pay all men what you owe” (Romans 13:7, quote p. 322).

Soon afterward, French theologian John Calvin (1509-1564) rejects the blanket ban on usury, sanctioning the practice, and thereby breaking the Church’s nearly 1,500 year old tradition of prohibiting usurious lending (p. 322; Wikipedia).

By 1580, interest-bearing loans between villagers have become common. The fear of debtors’ prison comes to hang over everyone (p. 333).

1500 C.E., Europe (Continued)

Psychology: In Roman law, “interesse” means “penalty for the late payment on a loan” (p. 290).

Around 400 C.E., St. Augustine (354-430 C.E.) develops the concept of “self-love” to denote insatiable desires for self-gratification (p. 332).

Around 1510 C.E., Italian historian Francesco Guicciadini (a friend of Niccolo Machiavelli), keeps intact St. Augustine’s concept of insatiable desires, but renames St. Augustine’s “self-love,” “self-interest.” “Interest” on a loan now no longer means “penalty for the late payment,” but rather the demand that money never cease to grow” (p. 332).

Indeed, in 1651, Thomas Hobbes (1588-1679) publishes Leviathan, in which he describes the basic nature of society as a “war of all against all” from which only the absolute power of monarchs can save us (pp. 325, 331, 344-345, 387).

By 1750, most in English educated society accept as common sense that “self-interest” explains all human motivation (p. 331).

1600 C.E.

Europe:

The Elements of modern Capitalism: The first major joint-stock corporations are the British and the Dutch East India companies, both of which pursue the same combination of exploration, conquest, and extraction as had the conquistadors. Their dual structure is precisely designed to eliminate all moral imperatives but profit. The executives are employees whose sole responsibility is to provide the highest possible return on the stockholders’ investment. Those in the field do not feel in control (p. 320).

The British East India Company: In 1600, Elizabeth I (Queen of England and Ireland 1558-1603) grants an English Royal Charter to the British East India Company (1600-1874), thereby making it the first joint stock company to have monopoly rights. The Company would rule large parts of India, exercising military power, and assuming administrative functions to the eventual exclusion of its commercial purposes. It would have trade monopolies and issue its own coinage (p. 320; Wikipedia).

Like most other joint-stock corporation, the British East India Company does not survive the Industrial Revolution. While it itself does not revive, however, around 1900, particularly in America and Germany, many other corporations do revive, and become what we know now as the modern bureaucratic capitalist corporations. [The heyday of British capitalism (1815-1950) was characterized by small family firms and high finance] (pp. 345, 449; Wikipedia).

The Dutch East India Company: In 1602, the States-General of the Netherlands grants a 21-year monopoly to the Dutch East India Company (1602-1798) to carry out colonial activities in Asia. The Company becomes the first publicly-traded company in which shareholders can own a portion of the business.

In 1606, the Dutch East India Company is the first company to issue stocks. It possesses quasi-governmental powers, including the power to wage war, imprison and execute convicts, negotiate treaties, issue its own coinage, and establish colonies (p. 320; Wikipedia).

1600 C.E., Europe (Continued)

The first central Bank: The Bank of Amsterdam, established in 1609, is the first central bank. Sweden would establish a central bank in 1664; England, in 1694; France in 1800; and the United States (the U.S. Federal Reserve) in 1913.

The Invention of Short-selling: In 1609, Dutch merchant Isaac le Maire invents short-selling. Short-selling is the practice of borrowing (usually) securities from (usually) a broker, selling them, and re-buying them later at (hopefully) at a lower price.

The first modern speculative Mania: In 1637, during the Dutch Golden Age (1600-1700), the market in the Netherlands undergoes the first well-documented, modern speculative mania.

China:

Debts: During the 15 years, 1628-1644, China has 1.8 insurrections per hour (a total of 234,185 insurrections) (pp. 258, 433).

1650 C.E.

Europe:

Debts: By 1650, almost all Protestant denominations agree with the position of John Calvin (1509-1564) that a reasonable rate of interest (usually 5 percent), is not sinful. Catholic doctrine is slower to come to this position, but does ultimately accede by passive acquiescence (pp. 289, 322).

The justifications for this change include primarily:

1. All Money is Capital: All money is expected to grow. Interest is really compensation for the money that the lender would have made, had he been able to place his money in some more profitable investment. This logic is at first applied only to commercial loans, but is increasingly applied to all loans (pp. 322-323).

2. The market is purely competitive: Usury is permissible because all commerce partakes something of the nature of war. Usury, therefore, can be practiced on anyone, even a neighbor – not only on foreigners or one’s enemies (pp. 322-323).

Philosophy: In 1651, Thomas Hobbes (1588-1679) publishes Leviathan, in which he describes the basic nature of society as a “war of all against all” from which only the absolute power of monarchs can save us (pp. 325, 331, 344-345, 387).

The idea that human beings are motivated primarily by “self-interest” is rooted in the profoundly Christian assumption that we are all incorrigible sinners – that, left to our own devices, we will not simply pursue a certain level of comfort and happiness, and then stop our pursuit of wealth in order to enjoy what we have. We will not stop and tell our tale, like Sindbad the Sailor, the Persian fictional hero from Basrah, during the Abbasid Caliphate (750-1513 C.E.). Not only will we never stop the pursuit of wealth, but we will not even ever question why we need wealth in the first place. This is why, as Saint Augustine (354-430 C.E.) and Thomas Hobbes (1588-1679) anticipated, if left to our own devices, we would fall into a state of war (p. 332. Wikipedia).

1650 C.E., Europe (Continued)

Capitalism: The origin of capitalism is not the gradual destruction of traditional communities by the impersonal power of the market.

Rather, the origin of capitalism lies in the combination of:

1. Interest: The conversion of an economy based on loans in return for credit, to an economy based on loans in return for interest.

2. Impersonality: The gradual destruction of moral networks by the intrusive, impersonal, and often vindictive, power of the State (pp. 332-334).

Debts: The criminalization of debt is the criminalization of the very basis – the sociability – of human society. The effect on communal solidarity is devastating because everyone is both a lender and borrower. Debt, the essence of sociality, the tie that bind a community, is transformed into a war of all against all. Debt is used to split communities against themselves, opening the way for capitalism. Witchcraft accusations, which peak between 1560 and 1660, serve the same purpose. They reverse the popular gains of the late Middle Ages (1300-1500) (pp. 334-335, 345, 447).

1700 C.E.

Europe:

Capitalism: The Bank of England is founded in 1694. A consortium of English bankers (most already creditors to the Crown) lend King William III (reigned over England 1689-1702) a sum of money to help finance his war against King Louis XIV of France (reigned 1643-1715). In return, they receive a royal monopoly on the issuance of banknotes (having, therefore, the right to advance IOU’s for a portion of the money the king now owes them – in effect circulating (“monetizing”) the newly created royal debt. The plan only works as long as the original loan remains outstanding. To this day, the loan has not been paid back. This is the simplest and most efficient way to bring markets into being (pp. 49, 339-340).

The banknotes of the Bank of England are genuine paper money, not British Government bonds, and the paper money becomes the first European national paper currency. In time, smaller denominations would become widely available, and everyday transactions would be carried out in polite, impersonal terms – and it would become possible to imagine life itself as a matter of self-interested calculation (pp. 339-340, 386-387).

In 1717, Britain adopts the gold standard, which the British Empire would maintain to its final days (1914), as it would maintain also the notion that gold and silver are money. Especially after ordinary banks are allowed to create money, reliance on gold and silver seem the only way to prevent the new forms of credit-money from producing insane results – speculative “bubbles,” such as the Dutch tulip mania of 1637, a series of bubbles on the London markets in the 1690’s, the South Sea Bubble of 1720, and the crash of the Banque Royale in 1721. Financial speculation, unmoored from legal or community constraints seems to require some solid foundation. No one, however, returns to the view of Aristotle (384-322 B.C.E.) (pp. 341-342).

Once unlimited profit is declared a viable end in itself, thus validating greed, it becomes obvious that those who make the system run (brokers, stock-jobbers, traders), have no loyalty to anything, not even the system itself. The consequences of this lack of cooperation and solidarity would never be resolved (p. 345).

1700 C.E., Europe (Continued)

Capitalism is a system which demands constant, endless growth – both of enterprises and nations. At the dawn of capitalism (about 1700), an interest rate of 5 percent was widely accepted as the legitimate rate of interest for a commercial loan. This same rate (5 percent) would later be considered the rate at which the Gross Domestic Product (GDP) of a nation should grow (pp. 345-346, 390).

Interest rate, therefore, once considered an impersonal mechanism compelling people to look at everything as a potential source of profit, would become the only objective measure of the health of human communities (p. 346).

The Elements of modern Capitalism: By 1700, almost all the elements of modern capitalism are already in place:

1. Checks: Checks, also known as bills of exchange, consist of an order by one person to another to pay money to a third person. In India, during the Mauryan Period (320-185 B.C.E.), checks (adesha) are in use. By 50 B.C.E., the Romans use an early form of checks (praescriptiones). In 250 C.E., banks in the Sassanian Empire (224-651 C.E.) are issuing letters of credit (chak). Around 800, Chinese merchants and officials deposit their money with bankers in the capital in return for promissory notes, called “Flying Cash.” Around 850, Muslim traders are using checks (sakk). Between 1118 and 1307, the Knights Templar introduce a check system for pilgrims travelling across Europe to the Holy Land. Around 1250, Venice develops bills of exchange to allow international trade without the need to carry large amounts of gold and silver. Around 1500, in the Dutch Republic, people begin depositing their money with “cashiers,” who hold the money for a fee (pp. 345, 437; Wikipedia).

2. Capital Stocks: Capital stocks consist of the original capital invested in the business by its founders. By 150 B.C.E., the Roman Republic (508-44 B.C.E.) is contracting out many of its functions (such as the collection of taxes and the building of temples) to publicani (societies of capitalists), some of which are very large, employing tens of thousands of slaves. Ownership of these legal bodies is divided into partes (shares).

In 1606, the Dutch East India Company is the first company to issue shares of stocks after the Middle Ages (p. 345; Wikipedia).

1700 C.E., Europe (Continued)

3. Annuities: Between 800 and 1450, annuities are sold in medieval German and Dutch cities. Medieval monasteries raise money through the sale of life annuities (p. 345; Wikipedia).

4. Brokerage Houses: Around 1050, the French Government begins to regulate and trade agricultural debts on behalf of the banking community, thereby creating the first brokerage system. Around 1350, major cities, such as Amsterdam (in Holland), and Ghent, Bruges and Ypres (in Flanders), have brokerage firms. In Venice, brokers are trading in the City of Venice Government securities. In 1606, the Dutch East India Company becomes the first publicly-traded company to issue shares of stocks, thus allowing shareholders to own part of the business (p. 345; Wikipedia).

5. Bond markets: In 1157, the Bank of Venice issues the earliest known bond, to fund a war against Constantinople. The first record of a financial crash occurs in Venice, when the average price of prestiti (forced loans from wealthy citizens to the Venetian Treasury to finance Venice’s wars) drops from 92 ½ percent of par (face value), in 1375, to 24 percent of par, in 1381 (345; Wikipedia).

6. Modern banking: Modern banking can be traced to medieval and early Renaissance Italy (1350-1700), particularly the rich cities in the north, such as Florence, Venice and Genoa. The most famous Italian bank is the Medici bank, established by Giovanni Medici, in 1397 (345; Wikipedia).

7. Securitization: By 1550, as land is too illiquid an asset to make fortunes, bankers and grain merchants in Lombardy securitize it – transform land ownership into bank loans. This allows the wealth to be invested in government bonds, overseas commerce, and other new investment opportunities. (Securitization in the modern sense, in which illiquid assets are pooled and repackaged, dates only from 1970) (p. 345; Wikipedia).

1700 C.E., Europe (Continued)

8. Corporations: In 1250, perhaps influenced by Saint Thomas Aquinas (1225-1274), Pope Innocent IV establishes, in canon law, the legal idea of a corporation as a “fictive person” (persona ficta). The notion would apply first to monasteries, and then to universities, churches, municipalities and guilds. The European tradition is the only one of the great traditions which would come up with the notion of the corporation as a person – immortal, like an angel (p. 304).

The British East India Company (1600-1874), created at the beginning of the colonial period, is the first joint-stock corporation. Like most other such corporations, however, it vanishes during the Industrial Revolution (1700-1900). It does not revive, but, around 1900, particularly in America and Germany, many other corporations do revive, and become what we know now as the modern bureaucratic capitalist corporations. [The heyday of British capitalism (1815-1950) was characterized by small family firms and high finance] (pp. 345, 449; Wikipedia).

9. Central Banks: A central bank is a public institution which issues currency, regulates the money supply, and controls interest rates. The Bank of Amsterdam, established in 1609, is the first central bank. Sweden establishes a central bank in 1664; England, in 1694; France in 1800; and the United States (the U.S. Federal Reserve) in 1913 (p. 345; Wikipedia).

10. The Practice of Short-selling: Short-selling is the practice of borrowing (usually) securities from (usually) a broker, selling them, and re-buying them later at (hopefully) at a lower price. The invention is that of Dutch merchant Isaac le Maire, in 1609 (p. 345; Wikipedia).

1700 C.E., Europe (Continued)

11. Speculative Bubbles: The first speculative bubble may have occurred in Roman times. By 150 B.C.E., the Roman Republic (508-44 B.C.E.) is contracting out many of its functions to publicani (societies of capitalists). Ownership of these legal bodies is divided into partes (shares). Share prices fluctuate, and toward the end of the Republic, there may occur what is the first known speculative mania.

The first well-documented modern speculative mania is in 1637, in the Netherlands, during the Dutch Golden Age (1600-1800) (p. 345; Wikipedia. See under “1150 C.E.,” “Europe,” “Debts”).

The one element of modern capitalism which is not in place by 1700, is wage labor in factories. The gigantic financial apparatus of credit and debt would now begin to extract an ever-increasing amount of labor out of everyone, and thereby produce an ever-expanding volume of material goods to be sold at a profit. The extraction of this ever-increasing productivity is facilitated by the government, through its police and prisons (p. 346).

The system uses moral compulsion to mobilize the population for war. The first stock markets in Holland and Britain are based principally on trading shares of the East and West India companies, each of which are both trading and military ventures. The national debts of England, France and the other European countries originate in the need to train recruits, acquire gunpowder, and construct prisoner camps. Almost all the bubbles from 1700 to 1800, involve using the proceeds from colonial ventures to pay for European wars. Paper money is debt money, and debt originates in war. The connections would hold through time (p. 346).

1700 C.E., Europe (Continued)

The Atlantic slave trade (1550-1850) is a giant chain of debt obligations:

At one End: At one end of the chain, the periodic bubbles begin, the most famous one of the time being the South Sea Bubble of 1720. The South Sea Company, founded in 1711, is a British joint stock company granted a monopoly to trade in Spain’s South American colonies, as part of a treaty between Spain and Great Britain, during the War of Spanish Succession (1701-1714). In return, the Company assumes the national debt England has incurred during the War. Speculation in the Company’s stocks lead to a great economic bubble, the South Sea Bubble, in 1720. Thousands grow rich, and thousands more are ruined (p. 347; Wikipedia).

At the other End: At the other end of the chain, are fantasies of eventually paying one’s debts. From around 1550 to 1850, about 12 million slaves, the great majority Africans, are shipped across the Atlantic. The number of people taken from their homes is considerably higher (p. 347; Wikipedia).

Capitalism was not organized around free labor. It was organized around millions of slaves, serfs, coolies, and debt peons. Today’s sweatshops are not just a stage through which industrializing nations must pass (p. 351).

1750 C.E.

Europe:

Capitalism: As nations fight increasingly larger and bloodier wars, and national debts escalate geometrically, the philosophers of the Enlightenment (1700-1800), such as Voltaire (1694-1778), Denis Diderot (1713-1784), Abbe Sieyes (1748-1836), Johann Goethe (1749-1832), and Honore de Mirabeau (1749-1791), fear national bankruptcy. They fear a national default and the economic collapse which would ensue, resulting in regimes across Europe falling like dominos, plunging the continent into endless barbarism, darkness and war – possibly leading even to the destruction of civilization itself (pp. 358-359).

1800 C.E.

Europe:

Debts: At the time Glasgow University Professor of Moral Philosophy Adam Smith (1723-1790) writes, most English shopkeepers are still carrying out the main part of their business on credit, and the Bank of England is still keeping its internal accounts using tally sticks. The Bank would abandon this practice only in 1826 (pp. 49, 335, 397).

Markets: The most famous arguments enunciated by Adam Smith appear to have been cribbed from the works of free-market theorists from medieval Persia [(during the Abbasid Caliphate (750-1513)], such as Ibn Sina (“Avicenna”) (980-1037 C.E.), Abu Hamed al-Ghazali (1058-1111 C.E.), and Nasir al-Din al-Tusi (1201-1274 C.E.) (p. 19).

Adam Smith not only agrees with the emerging middle-class opinion that the world would be a better place if everyone used cash (thus avoiding confusing and potentially corrupting ongoing entanglements), but he makes the larger point, that even if all businesses operated like the great commercial companies, with an eye only to self-interest, it would still, through the logic of the invisible hand, lead to the benefit of all. In The theory of moral sentiments (1759), Smith writes:

“(Even the) natural selfishness and rapacity (of the rich, with all their) vain and insatiable desires (will still, through the logic of the invisible hand, lead to the benefit of all”) (Quote p. 335).

Smith’s description of shopkeepers, in Wealth of Nations (1776), is simply not true:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, (only) of their advantages” (Quote p. 335).

Adam Smith imagines a society as a collection of individuals whose only significant relations are with their own possession, bartering one thing for another for the sake of mutual convenience, debt almost entirely abolished from the picture. It is a world free of credit and debt (pp. 207, 353-354, 385).

1825 C.E.

United States:

Adam Smith and Capitalism: In the United States, the period 1825-1975, is characterized by a brief but determined effort on the part of a large number of very powerful people (with the avid support of many of the least powerful) to try to turn the vision of Adam Smith into reality. One of the results is the resurgence of the old puritanical notion that debt is sin and degradation among the “respectable” working class – who often see freedom from the clutches of the pawnbroker and loan shark as a point of pride, separating them from drunkards, hustlers, and ditch-diggers (p. 354).

1850 C.E.

Europe:

Capitalism: During the Victorian era (Queen Victoria, reigned 1837-1901), the dangers of degeneration and decline seem real. Victorians feel that capitalism will not be around forever. Insurrection seems imminent.

Karl Marx (1818-1883) is among the great theorists of capitalism who think that capitalism is unlikely to be around for more than one or two generations at most (p. 359).

1900 C.E.

Europe:

Capitalism: Capitalism enshrines the gambler as an essential part of its operations (p. 357).

German sociologist Max Weber (1864-1920) is among the great theorists of capitalism who think that capitalism is unlikely to be around for more than one or two generations at most (p. 359).

As of 1934, U.S. citizens are no longer able to cash convert dollars to gold (pp. 361, 450).

1950 C.E.

International Institutions:

Human Rights: The United Nations, Universal Declaration of Human Rights (1948) is an example of the extent to which the Roman tradition has formed our idea of rights as being the property of a person. We speak not only of property as being a right, but also of the right to property as a form of property. We speak not only of “having” (owning) freedom, but also of “having” (owning) the right to freedom (p. 205).

The Declaration speaks of universal rights to food and shelter. However, the definition of “human rights abuses” is limited to those cases in which a government trespasses on a victim’s person or possession (such as by raping, torturing, or killing the victim). The definition excludes those cases in which the harm to the victim is indirect (as when a government eliminates price supports on basic foodstuffs, even if this leads to widespread malnutrition, razes shantytowns, or removes the homeless from shelters) (pp. 207, 423).

Debts: In 1945, the International Monetary Fund (IMF) is created. It is an international economic organization, with, as of 2010, 187 member countries. Its “Conditionalities,” including “Structural Adjustment Programs” (economic performance targets) as pre-conditions for loans, would be severely criticized. The IMF acts essentially as the world’s debt enforcer (p. 2; Wikipedia).

Joseph Stiglitz, former Chief Economist of the World Bank, criticizes the International Monetary Fund for its reflection of the interests and ideology of the Western financial community:

“When the IMF arrives in a country, they are interested in only one thing – how do we make sure the banks and financial institutions are paid? . . . It is the IMF that keeps the (financial) speculators in business. They are not interested in development, or what helps a country get out of poverty” (Wikipedia, “IMF,” as quoted by Johann Hari, 06/03/11).

Europe and the United States:

Capitalism: Austrian-American economists Ludwig von Mises (1881-1973) and Joseph Schumpeter (1883-1950), are among the great theorists of capitalism who think that capitalism is unlikely to be around for more than one or two generations at most (p. 359).

By the end of World War II (1945), the fear of imminent social revolution no longer seems plausible. Immediately, the specter of nuclear holocaust appears, and shortly thereafter, the specter of global warming. Capitalism manufactures the means of its own extinction. Presented with the prospect of being eternal, financial capitalism explodes, because if there is no end, there is no reason not to generate credit (that is, future money) infinitely (p. 360).

1975 C.E.

The United States:

Debt : The dream of turning the version of capitalism presented by Adam Smith into reality turns out to be utopian. Capitalism is a system based on gambling, and gamblers do not have a long-term view of the future. Since 1790, the debt of the United States has been a war debt. The country now spends more on its military than all other nations combined. Were it not for its military expenditures, the U.S. would not run a deficit at all (pp. 358-359, 365-366).

The national debt has three aspects to it:

1. It is Money borrowed from future Generations (p. 358).

2. It is not owed to all the People equally. The national debt is owned mostly to capitalists – those who can afford to lend to the government. It puts more money into the hands of generals and politicians, neither group known for their long-term view of the future. Soldiers and politicians play for high stakes, now. For them, there is no reason not to generate credit – that is, future money, infinitely. In the short-term future, reckless speculative bubbles bring the whole system crashing down – the last crash occurring in 2008 (pp. 358-360, 365-366).

3. Modern Money is effectively Government Debt. Without deficit, there is no money. This is why the U.S. financial elites, led by Alan Greenspan (Chair of the Federal Reserve, 1987-2006) panicked in the late 1990’s, when President Bill Clinton (President 1993-2001) began to run budget surpluses. The tax cuts by President George W. Bush (President 2001-2009) seem to have been designed specifically to maintain the deficit (pp. 358, 450).

1975 C.E., United States (Continued)

Around 1978, the dream of many to turn Adam Smith’s version of capitalism into reality, is abandoned, as the financial elite (fearing the increased power of workers bought about by the upheavals of the 1960’s and early 1970’s), succeeds in regaining control of Government policies. In the United States, President Ronald Reagan (president 1981-1989), and in the United Kingdom, Prime Minister Margaret Thatcher (prime minister 1979-1990) launch a systematic attack on the power of labor unions, and on the legacy of British economist John Maynard Keynes (1883-1946), namely, the tacit guarantee that increases in workers’ productivity would be met by increases in wages (pp. 354, 373, 375, 383).

The period 1978-2008, in the United States, is characterized by:

1. Meaningless political Rights: Political rights encompass an ever-larger segment of the population, but are, however, meaningless because disassociated from any modicum of economic security (p. 375).

2. Low Wages: Wages are stagnant despite a continued dramatic rise in workers’ productivity (p. 375).

3. “Monetarism”: A return by the Government to “monetarism” (the doctrine that even though money is no longer based on gold, it should be treated as if it were a scarce commodity) (p. 375).

4. Financialization: Capital becomes financialized to the point that most of the money invested the market is pure speculation, completely detached from any relation to production (pp. 375-376).

5. Inability to envision Alternatives to Capitalism: The population abandons any sense of possible alternative futures. This abandonment is maintained by the militarization of the economy, and a vast apparatus of prisons, police, private security firms, and intelligence, surveillance, and propaganda engines. The policy is not to attack alternatives directly, but to create a pervasive climate of fear, jingoistic conformity, and despair which render any thought of changing the world seem idle fantasy (p. 382).

1975 C.E., United States (Continued)

Capitalism: In 1971, President Richard Nixon (president 1969-1974) announces that foreign-held U.S. dollars would no longer be convertible into gold. (U.S. citizens have not been able to convert dollars into gold so since 1934). There is now no international gold standard. A regime of free-floating currencies is in effect. As gold rises in value (from a 1971 value of $35 an ounce, to a 1980 value of $600 an ounce), poor countries (without gold reserves) are impoverished, while rich countries (with gold reserves) are enriched (pp. 361-362).

The result of Nixon’s floating of the dollar is the free-market orthodoxy which says that “the market” is a self-regulating system, the rising and falling of prices akin to a force of nature. It is no secret, however, that prices rise and fall principally in anticipation of, or reaction to, decisions regarding interest rates by the current chairman of the Federal Reserve (Alan Greenspan, term 1987-2006, Ben Bernanke, term 2006-2014) (pp. 363-364).

The international and individual effects of the free-floating dollar are profound:

Internationally: Throughout the world, U.S. dollars replace gold as the world’s reserve currency – that is, as the ultimate store of value in the world. This situation yields enormous economic advantages to the United States. Foreign central banks have little else they can do with U.S. dollars but use them to buy U.S. treasury bonds or invest in the U.S. stock market, both of which ultimately have a similar effect. American diplomats make it clear that buying control of U.S. companies, returning to gold, or (even more so), opting out of U.S. dollars, are viewed as unfriendly acts (pp. 6, 365-366, 451).

U.S. dollars are IOU’s which are to be rolled over indefinitely, and will never be repaid. Every other country, however, must pay its debts, even if this means observing tight money policies, because default by any country could make dollars worthless, and thus imperil the entire world monetary system. In his article, “Reconstructuring the Origins of Interest-bearing Debt and the Logic of Clean Slates” (2002), economist Michael Husdon explains:

“To the extent that these Treasury IOU’s are being built into the world’s monetary base, they will not have to be repaid, but are to be rolled over indefinitely. This feature is the essence of America’s free financial ride, a tax imposed at the entire globe’s expense” (Quote pp. 366, 451, 471).

1975 C.E., United States (Continued)

Adding to this “reserve currency” tax, the low interest rates given by the United States, and the country’s constant inflation mean that U.S. treasury bonds actually depreciate in value. Economists call this tax effect “seigniorage” [a tax imposed by sovereigns on the purchase price of a coin (metal content and production cost)]. A more accurate term may be imperial “tribute.” American imperial power is based on a debt that will never – can never – be repaid. The debt of the United States is a promise to its own people and to the nations of the world, which everyone knows will not be kept (pp. 6, 366, 367).

At the same time, U.S. policy is to insist that those countries which rely on U.S. treasury bonds as their reserve currency, behave in exactly the opposite way – observing tight money policies and scrupulously repaying their debt (p. 367).

Since the first king of the Babylonian Empire, Hammurabi (reigned 1792-1750 B.C.E.), no State has allowed a challenge to the principle of debt, namely, that:

“One has to pay one’s debts.” (Quote, pp. 2, 368).

Like those of Greece and Rome before it, the governing class of the United States has eliminated the worst abuses (for instance, debtors’ prisons), and uses the fruits of empire to provide subsidies to the population. Recently, it has also manipulated currency rates so as to flood the country with cheap goods from China. The Government does not allow anyone to question the principle that we must all pay our debt – a principle which it does not apply to itself (pp. 367-368, 390-391).

This unequal world monetary system is maintained by U.S. military predominance. “Debt imperialism” prevails internationally. The U.S. military power is what holds together the entire world monetary system, organized around the dollar (pp. 365-366, 368, 391).

Individually: On the individual level, globally, debt peonage continues to be the principal method of recruiting labor. In the United States, the average household debt is 130 percent of income. Neoliberalism assumes that debt is due to self-indulgence, and that redemption, therefore, is a purely individual matter (pp. 368, 378-379, 391).

On both an international and an individual level, capitalism is ultimately a system of power and exclusion (p. 381).

2000 C.E.

the United States:

Capitalism:

Usury: In 1980, the United States passes the Depository Institutions Deregulation and Monetary Control Act which eliminates all federal usury laws. (The law leaves the interest ceilings of states in place, but some states, such as South Dakota, have no maximum interest rate, and the companies are allowed to observe the laws of the state in which they are registered, no matter where they operate) (pp. 376, 452).

Previous federal usury laws limited interest to 7-10 percent. Real interest rates of 25-50 percent, or even (for pay-day loans) of 120 percent annually are now legal, and, therefore, enforced by lawyers, judges, bailiffs and police. Capitalism now becomes an overarching organizing principle of society (p. 376).

Bankruptcy Laws: In 2005, three years before the 2008 subprime collapse, the United States Congress passes the Bankruptcy Abuse and Consumer Protection Act, a new bankruptcy law which is far more exacting to debtors than the previous law (p. 381).

Speculative Bubbles: The period leading up to 2008, is one in which many begin to believe that capitalism is going to be around forever. At least, no one seems any longer to be able to imagine an alternative. The immediate effect is a series of increasingly reckless bubbles which, in 2008, brings the whole apparatus crashing down (pp. 360, 385).

Creditors vs. Debtors: After the 2008 subprime collapse, the U.S. Government bails out the financiers with taxpayer money – meaning, basically, that the imaginary money of financiers (based on speculation, detached from any relation to production) is treated as if it were real money. The battle is a class war expressed as a political battle between creditors and debtors (pp. 373, 381).

summary

Money

Coinage: Coinage makes its appearance independently and almost simultaneously, between 600 and 500 B.C.E., in three different areas: the Kingdom of Lydia, western Anatolia (now Turkey); the valley of River Ganges in northeast India; and the Great Plain of northern China.

The Lydian coins are created explicitly to pay mercenaries. Indeed, a government can in one move turn its entire national economy into a vast machine for provisioning its soldiers, by paying its soldiers in coins and demanding that taxes be paid in these same coins. From then on, in order to obtain coins, every family must find some way of contributing to the general effort of providing soldiers with the things they want. A market is brought into existence as a side-effect (pp. 49-50).

The two Sides of Money: In 1986, Keith Hart, Professor (Emeritus) of Anthropology at Goldsmith’s College, University of London, makes the point that there are two sides to any coin:

“Heads”: On one side, “heads,” is the symbol of the political authority which minted the coin – reminding us that States underwrite currencies, and that originally, money represents a relationship between individuals in a society. Money is a token, a tool of measurement, an “IOU.”

Those who view money as a mere social convention include Greek philosopher Aristotle (384-322 B.C.E.), Persian Muslim polymath Ibn Sina (“Avicenna”) (980-1037 C.E.), Persian Muslim theologian Abu Hamed al-Ghazali (1058-1111), Persian Muslim polymath Nasir al-Din al-Tusi (1201-1274), European scholastic philosopher Henry of Ghent (1217-1293), and Italian scholastic theologian Thomas Aquinas (1225-1274).

German historian G. F. Knapp, in State theory of money (1905), clarified the chartalist view of money (from the Latin charta, “token”) that money is simply a unit of measure, and can be anything from pure silver, debased silver, leather tokens, or dried cod. However, for money to become currency, the State must be willing to accept it in payment of taxes. Markets do not develop spontaneously. Money is not a medium that emerges from exchange. Money is a means for accounting and settling debts, the most important of which are tax debts. It is the tax policy of a government which determines whether a market will be created where none existed before. Stateless societies tend to be also without markets (pp. 46-48, 50, 52-53, 397).

Summary, Money (Continued)

John Maynard Keynes (1883-1946), in Treatise on money (1930) concurred. Whatever its earliest origins, from 2,000 B.C.E. onward, money effectively has been a creature of the State:

“The right (to enforce payment and even vary the value of money) is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of money has been reached, that Knapp’s chartalism – the doctrine that money is peculiarly a creation of States – is fully realized . . . To-day, all civilized money is, beyond the possibility of dispute, chartalist” (Quote p. 54).

“Tails”: On the other side, “tails,” is the precise specification of the amount the coin is worth as payment in an exchange – reminding us that money is a thing, capable of entering into definite relations with other things. Money is a commodity (p. 73).

In 1179, the Catholic church makes usury a mortal sin. Usurers will be excommunicated and denied Christian burial. The thinking is still, therefore, that money is a unit of measure and should not be used to acquire more money.

Between 1500 and 1650, however, the notion that money is a commodity, is imposed on the people of Europe, with almost unparalleled violence by those who control the enormous flow of gold and silver which the conquistadors bring back from the New World. The royalty, the aristocracy, bankers, and large-scale merchants use the opportunity to prevent this wealth from flowing to the people. Crushing the popular insurrections [the “Price Revolution”(1500-1650)], they insist that gold and silver are money, and hence must be used to pay taxes; they willfully destroy the systems of trust which maintain the local credit systems; they enclose common lands for their own use; and they buy government bonds, thereby obtaining fixed rates of interest. In 1542, Britain passes its first bankruptcy law and, in 1545, it legalizes loans at interest. Debtors eventually have no other choice but to work in factories.

The Reformation (1550-1825) takes the side of those in power, not that of the population. In 1524, Martin Luther (1483-1546) not only sanctions interest-bearing loans, but makes the point that the government needs to enforce them. Huldrych Zwingly (1484-1531) and John Calvin (1509-1564) follow suit.

Summary, Money (Continued)

After nearly 1,500 year of prohibiting usurious lending, the Catholic Church ultimately accedes by passive acquiescence.

In 1651, Thomas Hobbes (1588-1679) publishes Leviathan, in which he describes society as a “war of all against all” from which only the absolute power of monarchs can save us.

Life is now considered to be a matter of self-interested calculation.

Forgotten is the fact that money always hovers between two poles – heads and tails.

Interest

Ancient Rome: In Roman law, interesse means the loss suffered because of late payment.

Europe: In medieval Europe, economic matters fall very much under the jurisdiction of the Church. Catholic thinkers usually hold that a merchant’s profit can only be justified as payment for his labor – that is, transporting goods. This does not include interest because interest accrues even if the lender does nothing at all.

During the High Middle Ages (1050-1350), after the “re-discovery” (c.1100 C.E.) of Aristotle (384-322 C.E.), and under the influence of medieval Persian Muslin writers, such as Ibn Sina (“Avicenna”) (980-1037 C.E.), Abu Hamed al-Ghazali (1058-1111), and Nasir al-Din al-Tusi (1201-1274), the Catholic viewpoint is solidified. Treating money as an end in itself defies its true purpose. Charging interest is unnatural, in that it treats mere metal as if it were a living thing that can breed or bear fruit. In 1179, the Catholic Church makes usury a mortal sin. Usurers will be excommunicated and denied Christian burial.

The counter-argument is that it is not usurious for a merchant to charge a percentage for each month that he makes a commercial loan, since the charge is not a rental fee for the money, but for lucrum cessans (lost income) – compensation for the profit the merchant would have made, had he placed the money in some profitable investment, as any merchant would ordinarily be expected to do (pp. 290, 440).

By 1650, the proposition that all money is capital and is expected to grow, is widely accepted – and reflected by the publication, in 1651, of Thomas Hobbes’ Leviathan. The effect on communal solidarity is devastating. Debt, as well as witchcraft accusations, which peak between 1560 and 1660, are used by the wealthy to split communities against themselves – and open the way for capitalism.

Summary, Interest (Continued)

China: The history of China is replete with rebellions of peasants in debt to predatory lenders, forced to either work on, or pay rent for, what was once their own house and fields. One of the first of numerous programs of reforms, is that in 9 C.E., at a time when usury has increased the government-imposed tax of 3 percent to an effective rate of 50 percent. Confucian official Wang Mang (45 B.C.E.-23 C.E.) seizes the throne, and, among many reforms, establishes a State Loan Agency which offers low interest loans, as an alternative to loans from usurers. Inequality and social unrest nevertheless recur on a regular basis, despite governmental reforms which include setting maximum interest rates at 20 percent, banning compound interest, and forbidding the interest from exceeding the principal (pp. 259, 433).

India: In India, debt plays a significant role in the emergence of the caste system, as the Hindu temples (“Inexhaustible Treasuries”), run by Brahmins, make a enormous number of interest-bearing loans. By 1000 C.E., Hindu law codes have largely eliminated restrictions on usury by members of the upper castes. This is only somewhat counterbalanced by the influence of Islam, a religion dedicated to eradicating usury altogether, then making its appearance in India (p. 256).

Even Hindu law of that time, however, is far more humane than any law in the ancient world. Debtors are not reduced to slavery, there is no widespread selling of either women or children, overt slavery has largely vanished from the countryside, and the law stipulates that even if the principal on a loan has not been paid, the third generation will be freed from peonage (pp. 256-257).

The Near East: During the Abbasid Caliphate (750-1513 C.E.), Islamic law takes aim at the most notorious abuses of Axial Age societies. Slavery, through either kidnapping, judicial punishment, debt, the exposure and sale of children, or even through the voluntary sale of one’s own person, is forbidden, or rendered unenforceable. Debt peonage, which has loomed over the heads of the poor farmers and their families since the dawn of recorded history, is forbidden, or rendered unenforceable. Islam strictly forbids the practice of usury, the latter interpreted as any arrangement in which money (or a commodity) is lent at interest, for any purpose whatsoever. The prohibition is strictly enforced for both commercial and individual loans. Islam has a positive view toward commerce and the honest pursuit of profit. Commerce grows, and is accompanied by the development of complex credit instruments. The State does not enforce debt contracts. As merchants convert to Islam, they define themselves as allied with the population, against the State (pp. 274-275, 277).

Capitalism in the Making

Elements of modern Capitalism: By 1700, in Europe, most of the elements of modern capitalism are in place:

1. Checks: Checks (bills of exchange) are first used in India, during the Mauryan Period (320-185 B.C.E.).

2. Capital Stocks: By 150 B.C.E., the Roman Republic (508-44 B.C.E.) contracts out many of its functions to legal bodies, publicani (societies of capitalists), whose ownership is divided into partes (shares of capital stocks).

3. Annuities: During the Middle Ages (800-1450), annuities are sold in German and Dutch cities. Medieval monasteries raise money through the sale of life annuities.

4. Brokerage Houses: Around 1050, the French Government regulates and trades agricultural debts on behalf of the banking community, thereby creating the first brokerage system.

5. Bond Markets: In 1157, the Bank of Venice issues the earliest known bonds – prestiti (forced loans to the City of Venice Government). The bonds are municipal, compulsory for tax-paying citizens, and carry an annual interest rate of 5 percent. Venice uses the funds for its war against Constantinople. The bonds are negotiable, and a market in Government debt is thereby created (p. 338; Wikipedia).

6. Modern Banking: Modern banking begins in medieval and early Renaissance Italy (1350-1700), particularly in the rich cities of the north, such as Florence, Venice and Genoa.

7. Securitization: Securitization begins around 1550, in Lombardy, as bankers and grain merchants find land to be too illiquid an asset to make fortunes. They securitize their land – transform it into bank loans, and invest the money in government bonds, overseas commerce, and other new investment opportunities. (Securitization in the modern sense, in which illiquid assets are pooled and repackaged dates only from 1970).

8. Corporations: In 1600, the British East India Company becomes the first joint-stock corporation.

Summary, Capitalism in the Making, Elements of modern Capitalism (Continued)

9. Central Banks: The Bank of Amsterdam, established in the Seventeen Provinces of the Low Countries, in 1609, is the first central bank. At the time, the Provinces are waging their 80-year War of Independence (1568-1648, ending with the Treaty of Westphalia) against the Habsburgs Kings of Spain [Philip II (reigned 1556-1598; Philip III (reigned 1598-1621; and Philip IV (reigned 1621-1665).

10. The Practice of Short-selling: In 1609, Dutch merchant Isaac le Maire, invents short-selling.

11. Speculative Bubbles: The first well-documented modern speculative mania occurs in 1637, in the Seventeen Provinces of the Low Countries, during the Dutch Golden Age (1600-1800).

Historical Capitalism: Islam celebrates the merchant. Confucian China condemns him. Both viewpoints would lead to prosperous societies with flourishing markets. Neither society, however, would develop the great merchant banks and industrial firms which are the hallmark of modern capitalism (p. 303).

Islamic Societies:

The Free-market Ideology: Islamic merchants believe in the free-market, and do not let the marketplace fall under the direct supervision of the government. Their contracts are made between individuals, “with a handshake and a glance at heaven, ” and not enforced by the government. Credit is indistinguishable from honor. Competition is restrained by trust. The Islamic world does not develop credit mechanisms which are impersonal (pp. 303, 443).

Profits only the Reward for Risk: Islamic merchants believe that profits are the reward for risk, and should only be the reward for risk. They consider impious any financial mechanism designed to avoid risks. Usury, for instance, has a fixed interest rate which guarantees the profit, and is, therefore, objectionable. Commercial investors also should share whatever risk is undertaken. The Islamic world bans both interest and insurance and never develops the forms of finance and insurance which Europeans would at a later date (pp. 303, 443).

Summary, Capitalism in the Making, Historical Capitalism (Continued)

China:

Confucianism: By the early Middle Ages [during the imperial Sui Dynasty (581-618 C.E.) and the imperial Tang Dynasty (618-907)], China is a centralized State ruled by aristocratic Confucian scholars who are pro-market (C-M-C’), but anti-capitalist, (anti-M-C-M’) (where C stands for commodity, C’ for another commodity, M for money, and M’ for a greater amount of money) (p. 260).

Chinese rulers monitor and regulate all economic matters, including the money supply and price fluctuations. They are overtly hostile to merchants, and even hostile to the profit motive itself. They consistently refuse an alliance with capitalists (merchants, financiers, industrialists) who seek to limit the freedom of the market so as to facilitate the establishment of commercial formal or de facto monopolies. They see commercial profit as legitimate only as compensation for the labor merchants expend, never as the fruit of speculation (pp. 258, 260, 433).

Rulers see merchants as basically immoral individuals, driven by greed, who, nevertheless, under careful administrative supervision, can be made to serve the public good. This is in contrast to usurers whose fundamentally selfish and antisocial motivations, cannot be put to use by society (p. 260).

Commercial life in China would soon become far more sophisticated, and markets more developed than anywhere else in the world. Indeed, for most of its history, China would maintain the highest standard of living in the world, surpassed only by England around 1825 (pp. 250-261).

Summary, Capitalism in the Making, Historical Capitalism (Continued)

Buddhism: The Buddha (c.563-483 B.C.E.) preaches in eastern India. Buddhism arrives in China, through the caravan routes of Central Asia, probably during the Han Dynasty (206 B.C.E.-220 C.E.). It takes root particularly during the chaos of the Liang Dynasty (502-557 C.E.), and the imperial Tang Dynasty (618-907 C.E.).

In its early days, Buddhism is largely a religion promoted by merchants, but, by 450 C.E., outbreaks of passionate religious fervor are accompanied by suicides aimed at redeeming the sins of all beings. China has dozens of Christ-like redeemers. A selfless sacrifice for the benefit of all living things, is the mirror image of theft or even murder. It is the opposite pole of the notion of “profit.” The tension between these two poles would hang over the economic life of medieval Chinese Buddhism (pp. 261-262).

In China, the religion places restraints on exploitative economic practices. The notion of karmic debt is taken up in particular by the Three Stages School of Madhyamaka Buddhism, created by monk Hsin-Hsing (540-594 C.E.) (pp. 261-262).

The classic work, Commentary on the Dharma of the Inexhaustible Storehouse of the Mahayana Universe laments:

“Some use their power and authority as officials to bend the law and seize wealth. Some prosper in the marketplace . . . They engage in an excess of lies, and cheat and extort profits from others. Still others, farmers, burn the mountains and marshes, flood the fields, plough and mill, destroying the nests and burrows of animals . . . There is no avoiding the fact of our past debts, and it is difficult to comprehend the number of separate lives it would require, if you wanted to pay them one by one” (Quote pp. 262, 434) .

Summary, Capitalism in the Making, Historical Capitalism (Continued)

India: In India, the Brahmins convert the old customs of debt peonage and chattel slavery into the system of castes, an over-arching hierarchical system in which everyone knows his/her place.

The Brahmins do this by seizing control of the administration of law.

Preparation: Between 200 B.C.E. and 400 C.E., Brahmin scholars write the Dharmasastra Law Codes which would reorganize the new society along strictly hierarchical principles. Old ideas, like the Vedic conception of debts to gods, sages, and ancestors, are resuscitated, but now are applied only and specifically to Brahmins, who have the duty and privilege to stand in for all humanity before the forces which control the universe. Significantly, the Brahmin’s debt to other humans vanishes entirely (pp. 255, 432).

The Manusmrti (Laws of Manu), the earliest work of the Dharmasastra, are harsh. They set down, for instance, that Sudras (the lowest caste, assigned to farming and material production) can never be emancipated, since they were created to serve the other castes. Sudras are forbidden to obtain learning, and a Sudra who so much as listens in on the teaching of the law or sacred texts, should have molten lead poured into his ears (pp. 255-256, 432).

Where earlier codes established a standard annual interest rate of 15 percent for all loans (except commercial loans), the new code organizes interest by caste – from up to 60 percent annually for a Sudra, down to a maximum of 24 percent annually for a Brahmin. No one can be forced into the service of someone in a lower caste. Physical labor in the creditor’s house or fields is to be rendered until the principal has been paid. Debts are enforceable on debtors’ children and grand-children (p. 256).

Application: During the “Kali Age,” the period from the reign of Alexander the Great (reigned 336-323 B.C.E.) to the early Middle Ages – a period which encompasses the Mauryan Empire (321-185 B.C.E.), the Sunga Empire (185-73 B.C.E., whose rulers were Brahmin), and the wave of foreign invasions which followed until the Gupta Empire (320-550 C.E.) – Brahmins re-shape India’s increasingly rural society along these strictly hierarchical principles (pp. 254, 432).

Summary, Capitalism in the Making, Historical Capitalism, India (Continued)

In alliance with the old warrior caste, the Brahmins win control of most of the land in the ancient villages. Artisans and craftsmen fleeing the cities which are either in decline or destroyed, often end up as suppliant refugees, and, gradually, low-caste clients. An increasingly complex jajmani (patronage) system develops in the countryside, with the land-owning castes taking on many of the functions once held by the State, such as providing protection and justice, and extracting labor dues (p. 255).

Result: The Hindu universe is now a vast hierarchy in which different sorts of people are assumed to be of fundamentally different natures. The ranks and grades are fixed forever, and when goods and services move up and down the hierarchy, they follow, not principles of exchange, but principles of custom and precedent. The idea that people can or should be equal is alien to Hindu conceptions. The concept of debt is subversive, since by definition, debts are arrangements between equals (at least in the sense that they are equal parties to a contract), and debts can and should be repaid. Such equality is foreign to the Hindu tradition (p. 257).

Modern Corporate Capitalism

The Origin of modern Capitalism: Modern corporations arise in the West. A set of circumstances is present in the West which was not present in other societies.

Persona Ficta: In 1250, during the European High Middle Ages, Pope Innocent IV establishes, in canon law, the legal idea of a corporation as a “fictive person” (persona ficta). The notion would apply first to monasteries, and then to universities, churches, municipalities and guilds. The European tradition is the only one of the great traditions which would come up with the notion of the corporation as an immortal person – like an angel (p. 304).

In 1908, British legal historian Frederic Maitland (1850-1906) describes a corporation as:

“a person who is immortal, who sues and is sued, who holds lands, has a seal of his own, (and) who makes regulations for those natural persons of whom he is composed” (pp. 305, 443).

Moral Duality: At the heart of what we now call “capitalism,” is the preemption of morality produced by the duality of the corporation.

The Fourth Crusade: This dual structure is already present during the Fourth Crusade (1202-1204), as indebted knights strip whole foreign cities of their wealth, and still are unable to pay their debts to the financial firms in Venice to which they owe the money for the expedition.

The Conquistadors: During the colonization of the “New World,” the same duality prevails. On the one hand, the daring adventurer, the gambler, willing to take any sort of risk; and on the other, the careful financier, whose entire operations are organized around producing a steady, mathematical, inexorable growth of income.

At key moments of decision, the conquistadors do not feel they are in control anyway. Those who are in control do not particularly care to know the details. Financial exigencies end up taking precedence over moral qualms. The conquistadors are in debt to financial firm in Genoa. Charles V (King of Spain 1556-1598) himself is deeply in debt to firms in Florence, Genoa, and Naples. Gold and silver from the Americas account for one-fifth of his total revenue (pp. 318-319).

Summary, Modern Corporate Capitalism, The Origin of modern Capitalism (Continued)

The “Price Revolution”: In 1157, the Bank of Venice issues the earliest known bonds – prestiti (forced loans to the City of Venice Government). The bonds are municipal, compulsory for tax-paying citizens, and carry an annual interest rate of 5 percent. (In legal term, this is interesse, a penalty for late payment). Venice uses the funds for its war against Constantinople. The bonds are negotiable, and a market in Government debt is thereby created.

The Spanish Government [ruled by Holy Roman Emperor Charles V (King of Spain 1516-1556), and King Phillip II (King of Spain 1556-1598)], also issues negotiable bonds, thereby also creating a market in Government debt. In the case of Spain, however, the commercial classes have available to them the enormous wealth flowing from the New World, and, by taking advantage of the fluctuating price of bonds, they are able to use the monetization of Government debt bonds (rentes, juros, annuities) for their own benefit. As the bullion arrives, they buy it and lend it to the Government, receiving in exchange certificates entitling the bearer to interest-bearing annuities. The market price of these certificates varies widely according to assessments of the likelihood that the Government will pay its debt. Trading them as money, therefore, the rich can multiply almost endlessly the actual value of gold and silver they have originally lent to the Government (p. 339).

Since whether the Spanish Government will actually pay its debts, or how regularly, is always highly uncertain, the certificates circulate at a discount. This is especially true in the case of juros when they begin circulating throughout the rest of Europe. The discounts cause continual inflation. In Europe, the number of juros in circulation rises from 3.6 million ducats, in 1516, to 80.4 million ducats, in 1598. (At 3.4 Grams of 0.986 gold per ducat, valued at $44 (2010) U.S. dollars per ducat, this is an increase in the value of the ducats circulated from $159 million, in 1516, to $3.5 billion, in 1598) [pp. 338-339, 448; Webster Dictionary (1913); Wikipedia].

Massive inflation occurs throughout Europe. In England, for example, between 1500 and 1600, prices rise by 500 percent, while wages fall by 60 percent. The “Price Revolution” (1500-1650) is crushed. Ultimately, once-independent townsfolk and villagers are reduced to wage laborers, working for those who have access to these higher forms of credit (pp. 309, 339).

Summary, Modern Corporate Capitalism, The Origin of modern Capitalism (Continued)

Indeed, modern capitalism was not organized primarily round free labor. Modern capitalism is based on the mass enslavement of Native Americans, African slavery, debt peonage, and “indentured service’ (the use of contract labor – workers who have received a cash advance in exchange for years of work). Chinese contract laborers built the North American railroad system. Indian “coolies” built the South African mines. Colonial regimes in Africa and southeast Asia regularly demanded forced labor from their conquered subjects, or, alternately, created tax systems designed to force the population into debt, and, therefore, into the labor market. Today’s sweatshops are not just a stage through which industrializing nations must pass (pp. 350-351).

Wage Labor in Factories: The relations between master and slave and between employer and employee, are similar, in that they are, in principle, impersonal. Whether someone has been sold, or simply has rented him/herself out, the moment money changes hands, who that person is, ceases to be important. All that matters is whether he/she is capable of understanding orders and doing what he/she has been told to do.

The affinity between wage labor and slavery is historical. The scientific management techniques developed to control slaves on the Caribbean sugar plantations, would be applied during the Industrial Revolution to factories.

In fact, in the early days, it was slaves on these sugar plantations who supplied the quick-energy products powering much of the wage laborers’ work (p. 352).

The Difference between the West and other World Areas: In historical terms, the corporations to which the West gave rise, are strange, unusual organizations. No other great tradition came up with anything like them. Although all traditions have had vast concentrations of wealth, as well as capitalists wanting to make this wealth grow, modern capitalism emerged in the Christian West, not in any other tradition.

Islamic Societies: Islamic societies developed a truly free market, unsupervised by the government. By not developing impersonal credit mechanisms, and banning both interest and insurance, they were able to restrict profits to only the reward for risk, for both commercial and personal loans. Money itself did not grow (no M-C-M’ or M-M’) (See under “Summary,” “Capitalism in the Making,” “Historical Capitalism,” “Islamic Societies”).

China: Chinese rulers were also pro-market (C-M-C’) but anti-capitalist anti-(M-C-M’). They regulated the market, though without allying themselves with merchants, financiers and industrialists. Buddhism placed a restraint on exploitative economic practices (See under “Summary,” “Capitalism in the Making,” “Historical Capitalism,” “China”).

India: In India, the Brahmins converted the old customs of debt peonage and chattel slavery into the system of castes, giving themselves special privileges, and declaring the Sudras not capable of being emancipated. Equality between people is foreign to the Hindu tradition. Since debts are arrangements between equal parties to a contract, the very concept of debt is subversive to the caste system (See under “Summary,” “Capitalism in the Making,” “Historical Capitalism,” “India”).

Summary, Modern Corporate Capitalism, The Difference between the West and other World Areas (Continued)

The West:

In addition, circumstances present the West and not present in other societies included:

1. Money as a Commodity: The West considers money as a commodity which can grow: (M-C-M’) and (M-M’).

2. “Persona ficta”: The declaration, in 1250, by the Catholic Church, of the corporation as a persona ficta, giving it (because it is immortal) more power than humans, is unique to the West.

3. Moral Duality: The dual organization of the corporation so as to preempt moral restraint, is unique to the West. Those in the field gamble to make high profits. The directors do not ask too many questions on how the money was made.

4. Silver and Gold: The large amount of silver and gold coming from the New World, is unique to the West. The commercial classes lend this wealth to the Government, then profit from the variation in price of Government bonds.

Not only do the commercial classes use the wealth from the New World for their own benefit, but they also:

a. Crush the “Price Revolution” (1500-1650) mercilessly.

b. Destroy local systems of trust.

c. Enclose common lands.

d. Demand that taxes be paid in silver, though small change is almost non-existent for the population.

Independent farmers are thereby reduced to wage laborers.

Summary, Capitalism in the Making, The Difference between the West and other World Areas (Continued)

5. Factory Work: Displaced farmers, having nothing to sell but themselves, are easily put to work in factories at the lowest possible pay. The scientific management techniques developed to control slaves on the Caribbean sugar plantations, are applied in factories (See under “1500 C.E.,” “Europe;” and under “Summary,” “Capitalism in the Making,” “Historical Capitalism”).

Adam Smith:

The Myth of Barter: In 1776, when Glasgow University Professor of Moral Philosophy Adam Smith (1723-1790) was writing, most English shopkeepers are still carrying out the main part of their businesses on credit, not cash. Smith could hardly have been unaware of this. Like the emerging middle class, however, Smith wanted everyone to use cash – and thus avoid confusing and potentially corrupting continuous entanglements. It was better to say “please,” and “thank you,” and leave the store. Smith also wanted to make a larger point. Even the “natural selfishness and rapacity” of the rich, with all their “vain and insatiable desires” would still, through the logic of the invisible hand, lead to the benefit of all (p. 335).

To make these points, Smith drew a utopian picture of two middle-class men bartering their possessions, and then using money to facilitate the transactions. Money made it possible for him to imagine humanity as collections of individuals and nations whose principal business is swapping things. His argument is not substantiated by history. If bartering led to money, then it would have occurred in Ancient Sumer (pp. 24-29, 335).

The missing element in Smith’s argument, is exactly what he was attempting to downplay – the role of government policy. In Smith’s day, the British Government was actively fostering the development of a market, not only by means of laws and the police, but also by means of specific monetary policies, such as pegging the value of the currency to silver, increasing the money supply, increasing the amount of small change in circulation, and regulating banks (p. 45).

In fact, barter is a recent phenomenon, becoming widespread only in modern times. Historically, the solution to the need for exchange is the adoption of a credit system. There is no historical example of a pure barter economy, much less the emergence from it of money. Indeed, if pure barter is defined as concerning itself only with swapping objects, and not with re-arranging relations between people, it has probably never existed (pp. 29, 37, 45, 395).

Summary, Modern Corporate Capitalism, Adam Smith (Continued)

Economics as a Science: Adam Smith was attempting to establish the new discipline of economics as a science – specifically, a science operating according to laws similar to those of the physical world which Sir Isaac Newton (1642-1727) had recently identified. Smith’s basic assumption was that when two individuals exchange valuable objects, it is because they have both decided that they would gain a material advantage by swapping them. His world is one in which men and women are free to simply calculate their interests, in full knowledge that everything has been pre-arranged by God to ensure that it will serve the greater good. Ignored are the roles of benevolence and malevolence in economic affairs. Erased from the picture are crime and recompense, war, slavery, honor, debt and redemption, passion, adventure, mystery, sex, and death. The assumption is that our lives are divided into different spheres of behavior, an assumption which does not fit real people (pp. 19, 33, 44, 336, 353-354).

Smith’s vision has come down to us today, as we assume that life is neatly divided between the marketplace, where we do our shopping, and the “sphere of consumption,” where we concern ourselves with music, feasts, and seduction (p. 33).

History shows that an ethos of mutual aid is the necessary foundation for a really free market (one not created and maintained by the State). History also testifies to the violence and sheer vindictiveness which was used by the powerful classes to create the competitive, self-interested markets we know today as modern capitalism (p. 336).

Conclusions

See the following poems in Addendum:

1. Money and Morality, July 29, 2011 ………………………………………............... 92

2. Our Relationships, August 20, 2011 …………………………………………………… 96

3. One has to pay One’s Debts, September 21, 2011 ……………………………... 105

4. The Evolution of Capitalism, September 29, 2011 ………………………………. 110

5. To Adam Smith (1723-1790), October 3, 2011 ………………………………….. 116

References

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Wikipedia.

http://www.en.wikipedia.org/wiki. Accessed 08/04/11-10/12/11.

Addendum

July 29, 2011

Money and Morality

In the history of states and empires (beginning around 3,500 B.C.E.),

the overwhelming majority of human beings have been in debt.

Most frequently, this indebtedness has been due to having to pay taxes.

Fear of punishment has been pervasive, but the greatest has been the fear

of losing everything – honor, dignity, house, family, friends, community –

the fear of becoming a slave, ripped from one’s context, and thus from all the

social relationships that make one a human being. A slave is, in this sense, dead.

He is has become a thing, a commodity which now can be bought and sold.

Adding to the violence needed to convert debtors into debt peons or slaves,

has been the routine admonition that whatever punishment befalls them,

it is just, because it is the debtors who have brought it on themselves. In all

Indo-European languages, the words for “debt” are synonymous with those for

“sin” or “guilt.” Indeed, indebtedness is how we now express our moral code.

In Mesopotamian civilization (3,500-539 B.C.E.), the word “freedom”

referred above all to being released from debt. The same is true of the Bible.

The Lord’s Prayer, popularized at the end of the Middle Ages (1,500 C.E.),

speaks of sins as debts to God: “Forgive us our debts.” Our word “free,” is

derived from the German “friend” – being free meant being able to make friends.

Throughout history, the struggle between rich and poor has largely

taken the form of conflicts between debtors and creditors. To redeem

means to re-buy (from a pawn-broker). “To pay” originally meant “to pacify,

to appease.” The German word schuld means both “debt” and “guilt.”

The German word Geld (money) and our word “guilt” have the same root.

In the early Greek city-states and in early Rome, the political struggle between

debtors and creditors was constant. Our word “domestic,” meaning both

“pertaining to private life” and “a servant who cleans the house,” is derived

from the Latin dominus, meaning both “household,” and “master” or

“slave-owner.” Our word “family” derives from famulus, meaning “slave.”

- - -

If we “have” (own) liberty, and even “have” (own) the right to liberty,

then, presumably, we are free to give these away, or even sell them.

Wage labor is, effectively, the renting of our freedom, in the same

way that slavery can be conceived of as the sale of one’s freedom.

When we say we “have” a body, do we mean that we own it like a slave?

In Roman law, “interesse” meant “penalty for the late payment on a loan.”

Around 400 C.E., St. Augustine developed the concept of “self-love” to

denote insatiable desires for self-gratification. Around 1510 C.E., Italian

historian Francesco Guicciadini (a friend of Niccolo Machiavelli), kept intact

St. Augustine’s concept of insatiable self-gratification, but re-named it

“self-interest.” English philosopher Thomas Hobbes (1588-1679) concurred

with the idea. By 1750, most in English educated society accepted as

common sense that “self-interest” explains all human motivation.

- - -

The Axial Age, from 800 B.C.E. to 632 C.E., saw the birth of not only all the

world’s present major philosophical tendencies, but also all of today’s major

world religions – Zoroastrianism, Prophetic Judaism, Buddhism, Jainism,

Hinduism (as a self-conscious religion), Confucianism, Taoism, Christianity,

and Islam. The core of the Axial Age (as defined, in 1949, by German existentialist

philosopher Karl Jaspers), was that period encompassing the lives of Pythagoras

(570-495 B.C.E.), the Buddha (563-483 B.C.E.) and Confucius (551-479 B.C.E.). This period

corresponds exactly with that when coinage was invented. The world’s first coins were

created in the Kingdom of Lydia, in western Anatolia (now Turkey), around 600 B.C.E.

Lydian coins were invented explicitly to pay mercenaries. Were some philosophies

and all religions, in fact, attempts to provide a mirror image to the market logic?

Our endless maze of paired opposites appeared soon thereafter – egoism vs. altruism,

profit vs. charity, materialism vs. idealism, calculation vs. spontaneity.

Is it possible that only people immersed in the pure, calculating, self-interested

logic of market transactions could ever have imagined such dualities?

Indeed, the spirituality of the Axial Age was built on its bedrock of materialism.

We continue the conflict today: “Flesh” vs. “Spirit,” “Reality” vs. “Idea,” and

“corporeal drives and desires” vs. “the intellect.” From this very conflict has arisen

even the idea that peace and community are not trends which, in a group of

people, emerge spontaneously, but rather have to be stamped onto people’s baser

material nature, much like a divine insignia is stamped onto the base metal of a coin.

- - -

Our notion of the corporation is very much a product of the European High

Middle Ages (1,000-1,300 C.E.). The legal idea of a corporation as a “fictive person”

(persona ficta) was first established in canon law by Pope Innocent IV, in 1250 C.E.

Legal historian Frederic Maitland (1850-1906) described such a corporation as

a person who “is immortal, who sues and is sued, who holds lands, has a seal

of his own, and makes regulations for those natural persons of whom he is composed.”

One of the first kinds of entities to which the fiction applied were monasteries.

We have accepted this quaint legal fiction, and treat our corporations

as persons – just like human beings, except immortal, never having

to go through all the human untidiness of marriage, reproduction, infirmity,

and death. In properly Medieval parlance, our corporations are our angels.

The “tulip mania” of 1637, in the Dutch Republic, was the first of a series

of speculative “bubbles,” when future prices bid by investors skyrocketed

and then collapsed. In the 1690’s, the London markets suffered a series of

such bubbles, culminating in the famous South Sea Bubble of 1720.

Two hundred and eighty-eight years later, in 2008, we had our own bubble.

- - -

Historically, the impersonal, commercial markets we now have, must have

originated in theft. Who else but a thief could have been the first person to

look at a house full of objects, and assess them only in term of what he could

trade them in for on the market? Burglars, marauding soldiers, then perhaps

debt collectors must surely have been the first to see the world this way.

We are the sum of the relations we have with others.

Any system which reduces the world to numbers can only

be held in place by weapons – whether these be swords

and clubs, or “smart bombs” from unmanned drones.

Reference

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Debtors, redemption, guilt, freedom, sin – pp. 8 and 393.

Mesopotamian civilization – p. 39.

Debt, sin, Geld, guilt – p. 59.

Pay, pacify, appease – p. 60

Schuld, guilt – p. 77.

Axial Age – pp. 80, 84, 224, 237-238, 244, 297 and 426.

Freedom, Bible, Mesopotamia – p. 82.

Slave – pp. 168-171.

Dominus, famulus – pp. 200-201.

Friend – p. 203.

Body – pp. 206-207.

Hobbes – pp. 206, 210, 325 and 344.

Lydia – pp. 224 and 227.

Opposites – pp. 242 and 247.

Interesse – pp. 290 and 331.

Maitland – p. 304.

Self-interest – pp. 331-332 and 446.

Bubbles – pp. 341-342, 347 and 358.

Weapons – p. 386.

We are the sum – p. 387.

August 20, 2011

Our Relationships

With ourselves:

Exactly who owns what, when we say, “I have a body”?

Does our mind own the rest of us? Can it really do anything it

wants with us? But is not the mind indeed part of our body?

The phrase comes from Roman law which defined private property

as the relationship between an owner and a slave, the owner having

absolute power over the slave, who was himself defined as a “thing.”

The power extended to that of torture and execution, without the

need for a formal reason. The law defined all other types of property,

such as, for instance the ownership of a chainsaw, where the power

of the owner is severely limited both inside and outside his land, as

exceptions to the cardinal, absolute power of the master over his slave.

Our expression “I have a body,” reflects a master-slave relationship, but

in this case, the owner is also the thing being owned. It would be more

accurate to say, “I am a body – in relationship with the rest of the world.”

With Our Peers:

The Vedic (c.1,500 B.C.E.) and later Hindu god Indra, depicted accurately our

relationship to each other. We are all jewels in his net, each one reflecting

all the other jewels, including all the reflections in these other jewels.

When we feel a large measure of equality, and comfortable loving and trusting

each other, we know the meaning of Indra’s net. We act communistically.

We do not keep tabs on who owes what to whom. In our family, it is “from

each according to his ability, to each according to his need.” Sometimes even

thanking a relative or neighbor too profusely is insulting, as it intimates

that the favor was not expected, or even may not be returned. The debts

and obligations on each side are too numerous to count, and we assume

that “in the end” – that is, sometime during eternity – it will all balance out.

Where the relationship is with people who are approximately our equals, but

are strangers, or perhaps even enemies, we slip into a relationship of exchange.

If we are friendly, we exchange gifts which are comparable and of approximately

the same value. At the store, we pay our money for the goods we buy, say

“thank you!” and leave without any further obligation to the owner. If we do

not like a person, we might “exchange words.” If we are angry, we might

exchange blows. In sports, we exchange a ball. In war, we exchange gunfire.

War seems “fair,” whereas a massacre, where one side is defenseless, is “unfair.”

With incomparable Entities:

Where the parties are obviously unequal and disparate, we slide into a relationship of hierarchy, with its assumption that the two sides have essential essences which are so different, that the only possible way for them to interact, is for each to give what it can

give, no attempt even made to keep accounts. During the Middle Ages, for instance,

priests, warriors and vassals were seen as basically different kinds of human beings –

each, however, with specific responsibilities to the others. Priests prayed for everyone,

nobles fought for everyone, and peasants fed everyone – not a soul ever asking how

many prayers or how much military protection was equivalent to a ton of wheat.

Toward the end of his life, Leonardo da Vinci (1452-1519) put the final touches on the

Mona Lisa while living in a manor house and on a pension provided by King Francis I,

of France – without compromise to the assumption of the King’s intrinsic superiority.

In Medieval China (c.600), the Three Levels School of Buddhism calculated that in

the first three years of life, a child drinks, on average, 360 gallons of its mother’s milk. Beginning with this unpayable milk debt, life became a cycle of debt and redemption.

With Nature:

What kind of relationship then do we have with the world around us? An important

negative aspect of saying, “I have a body,” is that it allows us to imagine ourselves

completely isolated beings, without the need to form mutual relationships with the

life that surrounds us. It encourages us to think of ourselves as self-sufficient, apart

and independent of Nature. Economists, for instance, assume that theirs is a pure

field of inquiry, all humans driven by only one motivation – the rational, calculated

pursuit of “profit” or “advantage.” This assumption then permits them to study “the

market” much like astronomers study the attraction and repulsion of celestial bodies.

In fact, our relationship with Nature is hierarchical, the gifts from each side so

fundamentally different in quality, their relative value so impossible to quantify,

that they simply cannot be compared. There is no way to square accounts.

When we put out a birdfeeder for those singing birds, it is not to feed the birds.

The birds can take care of themselves. The gift demonstrates neither benevolence

nor power, only an acknowledgement that we can never repay our debt to birds.

When Bolivian President Evo Morales asks us to give human rights to Mother Earth, he correctly points to the hierarchical character of our relationship with Nature. But this is precisely the reason why we cannot assume that we can give to Nature what has meaning for us. Nature does not know rights. It can take care of itself – and will destroy us in the process. Nature is neither our mother, nor our defenseless child, nor our slave. And it is presumptuous to think that we can relate in a human way to the whole of creation. The disparity between us and Nature is such that the only recourse is for each to give what it can – sunshine, trees and fish from one side, appreciation, use, and acknowledgement of an infinite debt from the other.

Nature is like Saint Nicholas (270-343), patron saint of children and repentant thieves.

We cannot socialize with either. Like burglars, they enter our lives stealthily, and whether

Nature or Saint Nicholas leaves us bereft or rewarded, depends on our own actions.

We may ponder the implications of introducing an indigenous Amaryan concept into the Christian culture, with its history of populating the world with metaphysical entities (angels) –

invisible, ageless, sempiternal, immortal, endowed with “intellectual or mystical” bodies.

Greek philosopher Plato (424-348 B.C.E.) conceptualized an “Idea” as the generalization of

the particular (“a bird” is the composite of all individual birds). In the High Middle Ages,

Italian theologian Thomas Aquinas (1225-1274) declared angels to be the personification

of Plato’s “Ideas.” In 1250, Pope Innocent IV, noting that corporations were “Ideas” (the abstract of the individuals who compose them), decreed corporations to be angel-like – immortal “fictive persons” with the same rights as human beings. But is not Nature an “Idea,” the abstract of its individual elements? Is the United Nations, now drafting a Declaration on

the Rights of Mother Earth, then preparing us to accept that Nature also is a persona ficta?

Conclusions:

Global warming is now destroying the conditions on earth for life as we know it.

Our present actions will dictate whether Nature leaves us bereft or rewarded.

It is time to see that not only do we have a hierarchical relationship with

Nature, but we are, indeed, part of Nature. Her fate will determine ours.

We can begin the discussion by replacing our “I have a body,” with “I am a body

which could not exist, were it not in constant relationship with the universe.”

References

Principal Reference:

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Other References:

Britannica Online Encyclopedia, “Peck.”

http://www.britannica.com/EBchecked/topic/448327/peck. Accessed 08/23/11.

Annotation:

In the British Imperial System, the peck is used for either liquid or dry measure, and is equal to 2 imperial gallons (9.1 liters). In the United States Customary System, the pick is used only for dry measure, and is equal to 8.8 liters.

Graeber states that a Medieval Chinese Buddhist calculated that the average child absorbs precisely 180 pecks of mother’s milk during its first three years of life. The notion of a quantifiable (karmic) debt was taken up in particular by the “Three Stages” or “Three Levels” Chinese School of Buddhism, created by the monk Hsin-Hsing (540-594 C.E.) (Graeber pp. 262-264, 268, and 433-434).

Common Dreams, 2011. “United Nations Document would give ‘Mother Earth’ same Rights as Humans.” April 13.

http://www/commondreams.org/headline/2011/04/13-2. Accessed 08/23/11.

* See annotation next page.

Environment News Service, 2011. “Bolivia celebrates Law granting Rights to Mother Earth.” April 20.

http://www.ens-newswire.com/ens/apr2011/2011-04-20-01.html. Accessed 08/23//11.

* See annotation next page.

Global Exchange. 2011. The rights of Nature – the case for a universal declaration on the rights of Mother Earth. San Francisco, CA: Global Exchange.

http://therightsofnature.org/related-books. Accessed 08/23/11.

* See annotation next page.

Shaman’s Well, 2011. “Proposed UN Paper to give Mother Earth Rights – Bolivian Amaryan Indian Minister leading the Charge.” April 15.

http://www.shamanswell.org/shaman. Accessed 08/23/11.

* See annotation next page.

* Annotation for the above four References:

Bolivia’s Law of Mother Earth, enacted by President Evo Morales in January 2011, defines Mother Earth as “a unique, indivisible, self-regulating community of inter-related beings that sustains, contains and reproduces all beings.” The law will be implemented by a Mother Earth Ministry.

The eleven rights of Nature which the law establishes, include the following:

1. The right to maintain the integrity of life and natural processes.

2. The right to pure water.

3. The right to clean air.

4. The right to not have cellular structure modified or genetically altered.

5. The right to continue vital cycles and processes free from human alteration.

6. The right to balance, to be at equilibrium.

7. The right to be free of toxic and radioactive pollution.

8. The right to repair livelihoods affected by human activities.

9. The right to not be affected by mega-infrastructure development projects which affect the balance of ecosystems and the local inhabitant communities.

The law declares that every human activity has to “achieve dynamic balance with the cycles and processes inherent in Mother Earth.” The law also promotes “harmony,” “peace” and “the elimination of all nuclear, chemical, and biological” weapons.

On April 20, 2011, the United Nations General Assembly began drafting a “Declaration on the Rights of Mother Earth.” Ecuador, Nicaragua, Venezuela, Saint Vincent and the Grenadines, and Antigua and Barbuda, expressed support for the Bolivian proposal.

To coincide with the beginning of the U.N. debate, Global Exchange, the Council of Canadians, the Pachamama Alliance, and the Fundacion Pachamama released the book, The rights of Nature – the case for a universal declaration on the rights of Mother Earth (2011, San Francisco, CA: Global Exchange).

The book includes essays by and interviews with Maude Barlow (the Council of Canadians), Vandana Shiva (Indian eco-feminist), Desmond Tutu (South African retired Anglican bishop), Cormac Cullinan (South African environmental attorney and author), Edwardo Galeano (Uruguayan novelist), Nimo Bassey (Friends of the Earth), Thomas Goldtooth (Indigenous Environmental Network), and Shannon Biggs (Global Exchange).

Wikipedia. (This reference was used principally for dates).

http://www.en.wikipedia.org/wiki. Accessed 08/20/11-08/24/11.

September 21, 2011

One has to pay One’s Debts

The Creditors’ View

One has to pay one’s debts – a dictum so thoroughly ingrained

in our minds through millennia of repetition and enforcement

by creditors, that it now seems a sacred, immutable obligation,

so fundamental a part of our moral code as never to be questioned.

Credit Systems

Credit systems long pre-date writing. By 3,500 B.C.E., that is,

400 years before the invention of writing, in Sumer, the most

ancient Mesopotamian civilization, most transactions are based

on credit. Records are kept by means of bullae – clay tablets

inscribed with the obligation of future payment, placed in a clay

wrapping, sealed and imprinted with the borrower’s stamp. The

creditor keeps the bulla as surety, and it is broken upon repayment.

Although silver shekels do exist, they are used only as units of

account to keep track of resources, not for commercial transactions.

Interest-bearing Loans

Charging interest on loans also pre-dates writing. In Sumer,

Temple administrators first use interest-bearing loans to

assure themselves of a profit when they advance goods to

merchants going overseas – many of whom are likely to return

with tales of disaster testing believability. The practice is significant

because it implies a fundamental lack of trust. Once established,

the principle of lending at interest, and even compound interest,

spreads quickly, and within a few hundred years, it is applied

not only to all commercial loans, but also to consumer loans.

Usury

By 2,400 B.C.E., the time of Sumerian King Enmetena of Lagash, usury,

in the sense of interest-bearing consumer loans, is well-established.

Local officials and wealthy merchants make loans to peasants in

financial trouble, on collateral, and expropriate their possessions

in case of non-payment. Grain, sheep, goats, and furniture are

taken first, then fields and houses, and eventually servants,

children, wives, and the borrower himself, all of whom are reduced

to debt-peons, forced into perpetual service in the lender’s household –

each step, of course, diminishing the possibility of repayment.

Debts in Systems of Credit

Debt crises are a permanent part of our history. In Sumer, the very

earliest written records (around 3,100 B.C.E.) describe how debt payment

enforced by violence, or the threat of violence (such as seizing the debtor’s

possessions), turns all human relationships into potential commodities.

In Babylon, around 1,765 B.C.E., the reign of King Hammurabi is marked

by a series of debt crises. In India, the Vedas, written around 1,500 B.C.E.,

contain the first philosophical reflections on the nature of debt. Around

700 B.C.E., as Egypt is having its first debt crisis, a decree issued by

Pharaoh Bakenranef contains one of the earliest mentions of debt prisons.

Coinage

The severing of relationships is worsened by the invention of coinage, as

now debts can be quantified exactly. Morality becomes a scale of impersonal

arithmetic. Coinage appears independently in Lydia (now Turkey), India, and

China, between 600 and 500 B.C.E. At first local social currencies, coins are

quickly appropriated by States faced with the problem of provisioning the new,

standing professional armies they are assembling. States mint coins on a

large scale and use them to pay soldiers. By also requiring that taxes be

paid in these same coins, States immediately turn their population into avid

providers of soldiers’ needs. The State no longer has to provision its soldiers.

Debts in Systems of Coinage

Athens has its first debt crisis around 600 B.C.E. Beginning in 508 B.C.E., the

history of the Roman Republic (508-44 B.C.E.) is one of continual political

struggle between creditors and debtors (patricians and plebeians). Creditors

have the right to enslave and execute insolvent debtors. Around 425 B.C.E.,

in Judah, then a province of the Achaemenid (Persian) Empire, the Prophet

Nehemiah writes explicitly about the damage wrought by debt bondage.

In China, during the “Warring States Period” (475-221 B.C.E.), the State of

Qin allows merchants, craftsmen, and the “poor and idle” to be “confiscated

as slaves,” and allocates slaves to its army officers on the basis of rank.

From Peonage to Serfdom

Until 16 C.E., in the Roman Empire (44 B.C.E.-1453 C.E.), a paterfamilas (the father

of a family unit), has the right to have a slave publically torn apart by wild beasts

for no official reason. The works of the early Christian Fathers (50-800 C.E.)

resound with endless descriptions of the misery and desperation of those

caught in the web of rich lenders. By the end of the Empire, the free peasantry

has been largely eliminated, and, in the countryside, most inhabitants are either

slaves or debt peons to a rich landlord, a situation legally formalized by a series

of imperial decrees. The first of these decrees, issued in 332 C.E., by Emperor

Constantine, greatly restricts the rights of peasants, and binds them to the land.

Reacting to Indebtedness – Patriarchy

The reaction to indebtedness molds civilizations. The fear of loosing not

only one’s sheep, goats and slaves, but also one’s wife and children, gradually

transforms domestic relations of care and protection into relations of

authority. Family members become commodities which can be rented

(as debt pawns) or sold (as slaves). The reassertion of paternal control is

particularly strong among indebted farmers who have fled cities, such as

Uruk, Lagash and Babylon, to the deserts and steppes at the edge of civilization.

The origin of patriarchy is in the protest of displaced indebted farmers

against the commoditization of people in the cities from which they have fled.

In Assyria, the Law Code of around 1,250 B.C.E. is the most dramatic known

attempt to distinguish between “respectable” and “non-respectable” women.

The former are those whose bodies cannot be bought or sold, under any condition.

The Code contains the first known reference to veiling in the history of the

Middle East. Respectable women (married women or concubines), widows,

and daughters of free Assyrian men “must veil themselves” when on the street.

Prostitutes (including unmarried Temple servants) and slaves may not wear veils.

During the next millennia, sexuality is demoded from being a divine gift and

embodiment of civilized refinement, to echoing degradation, corruption and guilt.

Reacting to Indebtedness – The Caste System

In India, between 200 B.C.E. and 400 C.E., the Brahmins convert the old customs of

debt peonage and chattel slavery into a system of castes – an over-arching hierarchical

system in which debt completely vanishes. The Dharmasastra Law Codes specify

that the Brahmins stand in for all humanity before the forces which control the universe.

They have no debt to other humans. The Sudras, the lowest caste, were created to

serve the other castes, and may not ever either be emancipated or educated. If they

so much as listen in on learning, they will have molten lead poured into their ears.

For Brahmins, the maximum annual interest on loans is 24 percent, for a Sudra,

it is 60 percent. Debt has been converted to a rigid inequality accepted by all.

Reacting to Indebtedness – Morality pre-empted

In the West, indebtedness leads to a splitting of roles which pre-empts any

considerations of morality. A dual structure, already present during the Fourth Crusade

(1202-1204 C.E.), becomes fully apparent during the colonization of the “New World.”

On the one hand, the daring adventurer, the gambler, willing to take any risk, and on the

other, the careful financier, whose entire operations are organized around obtaining a

steady, mathematical, inexorable growth of income. The conquistadors, most of whom are indebted, feel no responsibility for the morality of their venture. King Charles V (reigned

over Spain 1516-1556), himself deeply in debt to firms in Florence, Genoa and Naples,

does not particularly care to know the details. Financial exigencies trump moral qualms.

Debt Imperialism

After the announcement, in 1971, of United States President Richard Nixon that

foreign-held U.S. dollars would no longer be convertible into gold, the value of gold

rises from its then $35 an ounce to reach $600 an ounce, in 1980. Poor countries

(those without gold reserves) are thereby severely impoverished, while rich countries

(those with gold reserves) are enriched. Since then, U.S. dollars have become the world’s

reserve currency, meaning that U.S. treasury bonds – that is, “IOU’s” on the part of

the U.S. – are held by all nations as their ultimate store of wealth. If the United States

paid off its debt, we would have no money. The bonds, therefore, are to be rolled

over indefinitely, never paid. All other countries, of course, must pay their debts.

In 1980, the United States Congress eliminates all federal usury laws. In 2005, it

passes a new, unprecedentedly exacting bankruptcy law. The period leading up to

2008 sees a series of increasingly reckless speculative bubbles, the last of which,

the subprime bubble, collapses in 2008, bringing down with it the country’s whole

economic apparatus. In 2009, the Government bails out the “too big to fail” corporations

with taxpayers’ money, thus replacing the imaginary money of financiers (money

based on speculation, detached from any relation to production) with money

representing production. Most mortgage holders are left to the mercies of the courts.

The number living in poverty rises from 25 million, in 1978, to 44 million, in 2009.

The two Sides of Debt

Debt is an expression of how we view our relationship to each other.

Putting the other in debt, is an effective weapon in the millennia-old class war.

Debt can also be interpreted as an extension of cooperation and mutual aid.

The choice is ours.

References

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Wikipedia.

http://www.en.wikipedia.org/wiki. Accessed 08/04/11-09/26/11.

September 29, 2011

The Evolution of Capitalism

The Accoutrements of Capitalism

Most of the elements of capitalism are invented by all the

great civilizations, and are essentially in place by 1650 C.E.

Checks (bills of exchange) are first used in India,

during the Mauryan Period (320-185 B.C.E.).

Capital stocks are invented around 150 B.C.E., by the Roman Republic (508-44 B.C.E.),

as it contracts out many of its functions to publicani (societies of capitalists).

Annuities are first sold during the Middle Ages (800-1450 C.E.), in German and

Dutch cities. Medieval monasteries raise money through the sale of life annuities.

The brokerage system is initiated around 1050, by the French Government,

when it begins to regulate and trade agricultural debts on behalf of bankers.

Bonds (prestiti, forced loans to the government) are first issued

in 1157, by the Bank of Venice, to fund its war against Constantinople.

Modern banking begins in medieval and early Renaissance Italy (1350-1700),

particularly the rich cities of the north, such as Florence, Venice and Genoa.

An early form of securitization is invented around 1550, in Lombardy, as the

wealthy transform land, an illiquid asset, into cash which can be invested and grow.

Corporations come into being in 1600, in England, when the British

East India Company becomes the first joint-stock corporation.

Central Banks are initiated in 1609, by the City of Amsterdam,

when it establishes the Bank of Amsterdam, the first central bank.

Short-selling (selling borrowed securities and re-buying them later,

at a lower price) is invented in 1609, by a Dutch merchant.

Speculative mania become a regular feature of capitalism after 1637, when

the first “bubble” collapses in the Seventeen Provinces of the Low Countries.

Money in the great Civilizations

Markets, in the sense of the exchange of goods through the medium of money

[(C-M-C’) where C is a commodity, M is money, and C’ is another commodity], have

not presented a problem for civilizations. But capitalism, in the sense of profits

from money [(M-C-M’, or M-M’) where M’ is greater than M], has been a perennial

moral issue faced by all the great traditions. Modern corporations – profit-driven concentrations of wealth, privileged by governments – arise only in the Christian West.

India:

Early Vedic writers (1,500-1,000 B.C.E.) describe how the

violent enforcement of debt payments, turns humans into

commodities, and their relations into a war of one against all.

A millennium later, Kautilya (c.350-283 B.C.E.) eschews

morality and justice, claiming that, whether in peace or in war,

rulers should govern only according to their own profit.

Despite the espousal of Buddhism by Mauryan Emperor Asoka

(rules 273-232 B.C.E.), and the shift toward more gentleness which

it engenders, medieval monasteries become large concentration

of wealth (“Inexhaustible Treasuries”) by lending at high interest.

Like today’s corporations, they are intent on continual growth,

since, according to the Mahayana doctrine, genuine liberation

is not possible until the whole world embraces the Dharma.

Brahmins co-opt the issue. Between 200 B.C.E. and 400 C.E., they

write the Dharmasastra Law Codes establishing the rigid, hierarchical

caste system, in which debt vanishes and inequality is permanent.

China:

During China’s “Warring States Period” (475-221 B.C.E.), the Legalists,

represented most prominently by statesman Shang Yang (390-338 B.C.E.),

insist that, in statecraft, a ruler’s interest should be the only consideration.

After the Han Emperor Wu-Ti (rules 141-87 B.C.E.) adopts

Confucianism, the State encourages markets (C-M-C’), but prevents

the use of money to obtain more money (M-C-M’) or (M-M’).

Chinese rulers consistently refuse to form an alliance

with the would-be capitalists who seek to speculate.

After 500 C.E., Buddhism, earlier introduced from

India, takes root, and while “Inexhaustible Treasuries”

appear, they are kept under control by the Government.

Peasant rebellions, mostly against usury, are a constant

part of the landscape, and bring to power several

dynasties, such as the Han (206 B.C.E.-220 C.E.), the

Tang (618-907 C.E.), and the Sung (960-1279 C.E. ) Dynasties.

During the 15 years, 1629-1644, China has 1.8

insurrections per hour – a total of 234,185 insurrections.

Islamic Societies:

Hebrew Prophet Nehemiah, writing around 425 B.C.E.,

when Judah is a province of the Achaemenid (Persian) Empire

(539-332 B.C.E.), laments the pain inflicted by debt bondage.

Prophet Mohammed (570-632 C.E.) encourages commerce.

In its early years, the Abbasid Caliphate (750-1513 C.E.)

eliminates the ancient scourges of slavery, debt peonage, and

the lending of money or commodities at interest. It is the first

government in history to do so. Local bazaars become centers

of freedom and solidarity, protected from government intrusion.

Contracts are made between individuals, “with a handshake

and a glance at heaven,” and not enforced by the government.

The Islamic world does not develop any credit mechanisms

(such as credit cards) which are not mediated by relations

of trust; nor does it develop the forms of finance and

insurance later invented in Europe. Price-fixing is sacrilegious.

Profits are moral only if they are the reward for risk.

Money is nothing but a unit of measure. It does not grow.

The market is truly “free,” an extension of mutual aid.

The Christian West:

The Fourth Crusade (1202-1204 C.E.) and the conquest of the

“New World,” reveal a duality in the West’s commercial enterprises

(the gambler who gathers the wealth, and the financier who counts

it) which effectively pre-empts morality for the sake of profit.

The alliance between the government and merchants, dating

back from classical times, persists, and is joined by the Church.

In 1250, Pope Innocent IV declares the corporation to be a

persona ficta (fictive person) – a concept unique to the West.

Between 1500 and 1650, the silver flowing in from the New World,

causes massive inflation in Europe. In England, prices rise by 500

percent, while real wages fall by 60 percent. Living standards collapse,

and the rich take the opportunity to consolidate their control. They

crush the “Price Revolution,” destroy local credit systems based on

trust, enclose common lands, and insist that taxes be paid in silver.

Debtors have no choice but to become wage-laborers in factories.

Money is expected to grow. Markets are impersonal and

purely competitive. All contracts are enforced by the

government. “Self-interest” explains all human motivation.

Conclusion

All the great traditions had their would-be capitalists – the wealthy wanting

money to grow. The worst abuses were restrained, however – in India, by codifying

inequality; in China, by governments aligning themselves with the people; in Islamic

societies, by both the government and religion aligning themselves with the people.

In the West, however, restraints were weak originally, and were completely overwhelmed,

as the massive amount of silver from the New World was used by the rich to enrich

themselves. Capitalism thrived on the backs of slaves, debt peons, serfs, coolies –

and today’s sweatshop workers. The growth of money continues to be the priority.

Communists and Islamic “terrorists” – during the past 100 years, the designated

arch-enemies of the West’s corporate world – perhaps not coincidentally,

are the two groups which most threaten the West’s non-free markets.

Reference

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Note: The conclusion of the poem reflects my own impression, written after immersing myself in Graeber’s data.

October 3, 2011

To Adam Smith (1723-1790)

Your fantasy World

You are the founding father of our field of economics.

You were attempting to establish the, then new, discipline

of economics, as a science – specifically, a science operating

according to laws similar to those of the physical world

recently identified by Sir Isaac Newton (1642-1727).

You decided that profit was what prompted the behavior

of individuals, much like gravity prompts the movement

of the planets. So simplifying life, you could present us

with an imaginary society in which individuals, separate

and unconnected, are moved only by self-interest.

Your world is one in which individuals who exchange

possessions, do so solely because each has decided that

the transaction is to his material advantage. It is a fantasy

world – without either emotions or indebtedness, both

of which have played such a large role in human history.¹

And in addition, you arrogantly certify that the transactions

of these individuals, based only on material possessions

and the selfish calculation of their own interest, without

regard for any others, are bound, by the workings of God

(the invisible hand, Providence) to serve the greater good.²

Islam disappeared

You had in your personal library the Latin translations of

the works of Persian writers, such as Ibn Sina (“Avicenna”)

(980-1037), Abu Hamed al-Ghazali (1058-1111), and

Nasir al-Din al-Tusi (1201-1274), all of whom described

how the market functioned in medieval Islamic societies.³

It was a market operating according to its own internal

laws, largely independently of governments, genuinely

free in the sense that it was not either created by the

government nor backed by its army, police or prisons.

Contracts were backed only by the integrity of the signer.

For Ibn Sina (“Avicenna”), a compartmentalized

(“segmented”) treatment of the economic aspects

of life, was incompatible with the “holistic”

principle of learning, with its emphasis on the organic,

functional relations between parts and wholes.⁴

Like you, Abu Hamed al-Ghazali thought that exchange

is a natural outgrowth of human rationality and speech,

As illustration, he used the fact that animals, such as dogs,

do not exchange one bone for another. You yourself

use that very same illustration, but without attribution.⁵

In his Ihya (The Revival of religious Sciences), arguing

in favor of the division of labor, al-Ghazali used the

example of a needle factory, where it takes 25 different

operations to produce a needle. You make the same

argument, using the same illustration, without attribution.⁶

Al-Ghazali conceptualized money as created to facilitate

transactions. It is a symbol, a unit of measure, used to assess

the value and grades of goods. Precisely its lack of usefulness

in itself, and lack of any particular feature other than value,

are what enables it to serve as the medium of exchange.

“Money is not created to earn money,” said al-Ghazali.

“(Entering a monetary transaction to obtain even more

money), is the equivalent of kidnapping a postman.” You

yourself differed and approved of usury, but do not mention

either al-Ghazali, or reasons for the difference of opinion.^{7, 8}

Al-Tusi saw the division of labor as an extension of mutual

aid – “When men . . . aid each other, each one performing

one of these . . . tasks . . . then the means of livelihood are

realized . . . ” For you, the division of labor is in pursuit of

individual advantage. You make no mention of al-Tusi.⁹

You must have known that zakat, a tax which the wealthy

imposed on themselves, specifically to aid the needy,

had been initiated by the Prophet Mohammed himself,

and had become one of the five key pillars of Islam. You

do not mention this evidence of a social conscience.¹⁰

You must have known that the ban on gharar (the forbidding

of any speculative, overly risky or deceptive sale, and

any “zero” sum transaction) dates back from the Qur’an,

and is part of Shari’ah (Islamic law). You yourself approve of

speculation, without mentioning the principles of Islam.^{11, 12}

Untruth about Shopkeepers

At the time you were writing, most English shopkeepers

were still conducting their business on credit. Why do you

describe them as selfish? – “It is not from the benevolence

of the butcher, the brewer, or the baker, that we expect

our dinner, but from their regard to their own interest.”¹³

An unusal Definition of private Property

Around 100 B.C.E., in the waning days of the Roman Republic,

as slaves totaled 40 percent of the population, the word libertas

(liberty) changed its meaning from “not being a slave,” to “the

power of the master.” Freedom was the power (the right) of

the dominus (slave owner) to do what he liked with his property.

No other tradition makes the possession of slaves the basis

of property law, because doing so makes exceptions of all

non-slave property. For instance, if I own a chainsaw, there

are only a limited number of things I can do with it inside my

home, and almost nothing I can do with it outside my home.

As medieval jurists in the West were well aware, property is

a relation between people. One man’s right is another man’s

obligation. An owner’s right to a thing entails an understanding that

all other persons will refrain from interfering with this possession –

a right held, as English law puts it, “against all the world.”¹⁴

As your definition for property, you used that of Rome –

absolute power over one’s possession. You must have been

aware that the definition implies a society which consists of

isolated, self-contained beings, and that it also conflates the

concepts of “owning property” and “possessing political power.”

Indeed, the society you offer us, is an aggregation of

individuals whose interactions center on “trucking and

bartering” over material possession, each side coldly

calculating his self-interest with “natural selfishness

and rapacity” and “vain and insatiable desires.” ^{2, 5, 15}

A callous Society

You preferred cash to credit, because cash is impersonal and

assumes each side to be equal, independent and autonomous.

Credit implies a long-term, potentially cumbersome relationship.

But for the poor, “equality before the market” is ruthless

and violent, echoing Thomas Hobbes’ war of all against all.¹⁶

Working for the Wealthy

You were a stooge of the middle and upper classes, capitalists,

wanting their money to beget more money. You provided

them with a theory to alleviate their conscience, as they

increased their own wealth at the expense of the poor.

The world is a little more callous because you were in it.

Notes

1. Graeber 2011, pp. 44 and 353-354.

2. Adam Smith. 1759. The theory of moral sentiment.

http://www.books.google.com/books?isbn1599865939. Accessed 10/07/11.

“The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more that the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom them employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species” (p. 232).

3. Graeber 2011, p. 438.

4. Ghazanfar 2003, p. 147.

5. Adam Smith, 1776. An inquiry into the nature and causes of the wealth of nations.

http://geolib.com/smith.adam/won1-02.html. Accessed 10/07/11.

“This division of labour . . . is . . . the consequence of . . . a certain propensity in human nature – . . . the propensity to truck, barter and exchange one thing for another . . . (It seems probable) that it (is) the necessary consequence of the faculties of reason and speech . . . It is common to all men, and to be found in no other race of animals . . . Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog (Book I, Chapter 2).

6. For Adam Smith, it was a pin factory and 18 separate operations to produce one pin (Graeber 2011, p. 279. Institute of Islamic Banking and Insurance undated, p. 1).

7. Quote in Graeber 2011, p. 281.

8. Adam Smith approved of usury but advocated usury laws which would limit interest rates, thereby promoting lending to “sober” borrowers (and, therefore, projects more advantageous to the country), rather than lending to “prodigals and projectors” (who would promote “fraudulent schemes”) (Jadlow 1977, p. 1. Smith 2011, p. 1).

9. Quote in Graeber 2011, pp. 279-280.

10. Zakat: Institute for Islamic Banking and Insurance undated, p. 1. Wikipedia 2011, p. 1

11. Gharar: Answers.com undated, p. 1. Institute for Islamic Banking and Insurance undated, p. 1. Napoleoni 2008, pp. 237-238. Wikipedia 2011, p. 1.

12. Adam Smith. 1776. An inquiry into the nature and causes of the wealth of nations.

http://geolib.com/smith.adam/won1-02.html. Accessed 10/07/11.

Smith rationalizes speculation on the basis that the speculator knows best because if his prediction fails, he loses money; and also because his speculative activities are a warning of which way prices will go, and are, therefore, of benefit to the community as a whole:

“If a merchant ever buys up corn . . . in order to sell it again soon after, . . . it must be because he judges that the market cannot be so liberally supplied through the whole season as upon that particular occasion, and that the price, therefore, must soon rise. If he judges wrong in this, . . . he hurts himself. If he judges right, he renders (the great body of people) a most important service. By making them feel the inconveniencies of a dearth somewhat earlier than they otherwise might do, he prevents their feeling them afterwards so severely as they certainly would do, if the cheapness of price encouraged them to consume faster than suited the real scarcity of the season . . . In other words, the corn trade, so far at least as concerns the supply of the home market, ought to be left perfectly free” (Book IV, Chapter 5, quoted in Roberts 2011, p. 1).

13. Quote in Graeber 2011, p. 335.

14. Graeber 2011, p. 205.

15. Adam Smith, 1776. An inquiry into the nature and causes of the wealth of nations.

http://geolib.com/smith.adam/won1-02.html. Accessed 10/07/11.

“As it is by treaty, by barter, and by purchase that we obtain from one another the greater part of those mutual good offices which we stand in need of, so it is this same trucking disposition which originally gives occasion to the division of labour” (Book I, Chapter 2).

16. Thomas Hobbes. 1651. Leviathan.

http://www.en.wikipedia.org/wiki/Leviathan, 2011. Accessed 10/07/11.

http://www.en.wikipedia.org/wiki/Bellum omnium, 2011. Accessed 10/08/11.

Hobbes (1588-1679) conducts a thought experiment, placing people in a pre-social condition, and theorizes what would happen:

“The natural state of men, before they were joined in society, was a war, and not simply, but bellum omnium contra omnes (a war of all against all).”

References

Principal Reference:

Graeber, David. 2011. Debt – the first 5,000 years. New York, N.Y.: Melvillehouse.

Other References:

Answers.com, undated.

http://www.answers.com/topic/gharar. Accessed 10/06/11.

Gharar – an Islamic finance term describing a risky or hazardous sale where details concerning the sale items are unknown or uncertain. Gharar is forbidden by the Qur’an, which explicitly forbids trades that are considered to have excessive risk due to uncertainty.

Ghazanfar, Shaikh, Editor. 2003. Medieval Islamic economic thought – filling the “great gap” in European economics. Chapter by Shaikh Ghazanfar, “Links to Greek and Latin-European Scholarship.” New York, N.Y.: RoutledgeCurzon.

http://www.google.com/search?q=ghazanfar. Accessed 10/06/11.

“The primary focus was not the domain of economic aspects of life. Indeed, a “segmented” treatment of any discipline would not have been compatible with the prevailing “holistic” principle of learning. The Arab-Islamic thinkers never visualized solutions to economic problems strictly through the functioning of the free market, “invisible hand” approach. Administrative control through public policy and social intervention was always advocated in order to ensure social well-being and common good” (p. 147).

Hobbes, Thomas. 1651. Leviathan.

http://www.en.wikipedia.org/wiki/Leviathan, 2011. Accessed 10/07/11.

http://www.en.wikipedia.org/wiki/Bellum omnium, 2011. Accessed 10/08/11.

Institute of Islamic Banking and Insurance, undated. “Islamic Economics.”

http://www.islamic-banking.com/islamic-economics.aspx. Accessed 10/06/11.

Gharar: Gambling and the taking of undue risk; excessive uncertainty; hazard and deception; or a “zero sum” transaction in which one party must loose for the other to gain (p. 1).

Zakat: A religious or moral tax which those who can afford it impose on themselves (p. 1).

Jadlow, Joseph, 1977. “Adam Smith on Usury Laws.” Journal of Finance, Vol. 32, No. 4, September, pp. 1196-1200.

http://www.jstor.org/pss.2326522. Accessed 10/04/11.

“Despite his general advocacy of laissez-faire, Smith was a strong supporter of state-imposed price controls in one market – the market for loans. He supported usury laws. Smith opposed the prohibition of interest charges, but favored the imposition of an interest rate ceiling.”

Napoleoni, Loretta, 2008. Rogue economics – capitalism’s new reality.

http://www.google.com/search?pg . . . napoleoni. Accessed 10/06/11.

“Islamic activists, intellectuals, writers, and religious leaders have always upheld the prohibition of riba, the interest charged by money-lenders; and denounced gharar, which refers to any type of speculation. Under this belief, money must not become a commodity in itself to create more money” (pp. 237-238).

Roberts, Russ. 2011. “Adam Smith on gouging, Speculation, and political Economy.” January 21.

http://cafehayek.com/2011/01/adam-smith. Accessed 10/06/11.

Smith, Adam.

1759. The theory of moral sentiment.

http://www.books.google.com/books?isbn1599865939. Accessed 10/07/11.

1776. An inquiry into the nature and causes of the wealth of nations.

http://geolib.com/smith.adam/won1-02.html. Accessed 10/07/11.

Smith, Yves, 2011. “Economists debate Ethics in Economics – Adam Smith warned against subprime Lending.” September 11, 2011 (or April 6, 2009).

http://www.nakedcapitalism.com/2009/04. Accessed 10/04/11.

Adam Smith approved of usury but advocated usury laws which would limit interest rates, thereby promoting lending to “sober” borrowers (and, therefore, projects more advantageous to the country), rather than lending to “prodigals and projectors” (who would promote “fraudulent schemes”).

Wikipedia, 2011.

http://www.en.wikipedia.org/wiki, 2011. Accessed 10/03/11-10/09/11.

Zakat: A practice initiated by Mohammed himself.

“Islamic Economics in the World.”

Zakat: “The taxing of certain goods, such as harvest, with an eye to allocating these taxes to expenditures that are also explicitly defined, so as aid to the needy.”

Gharar: “The interdiction of chance . . . that is, of the presence of any element of uncertainty in a contract. The interdiction includes insurance contracts, and the lending of money without participation in the risks.”

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