Left Out, a podcast produced by Michael Palmieri, Dante Dallavalle, and Paul Sliker, creates in-depth conversations with the most interesting political thinkers, heterodox economists, and organizers on the Left.
We’re excited to announce our new weekly series called The Hudson Report with the legendary economist Michael Hudson. Every episode we’ll pick Professor Hudson’s brain for 10 or 15 minutes on an economic issue that is either being ignored—or hotly debated—that week in the press.
Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri at Kansas City. He counsels governments around the world on finance and tax policy and has served as an economic adviser to the US, Canadian, Mexican, and Latvian governments. Michael is a financial analyst and a veteran of Wall Street, an economic historian and one of the world’s leading experts on the history of private property, debt, and real estate and the origins of economic civilization in the Ancient Near East. He’s widely credited with being one of the few economists who foresaw the financial crisis of 2007-08. His new book, …and forgive them their debts: Credit and Redemption From Bronze Age Debt Remissions to the Jubilee Year, releases in May of 2018.
LISTEN to this week’s first episode of The Hudson Report on modern-day debtors’ prisons in America and debt in antiquity:
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Paul Sliker: So Michael, in conjunction with Harvard University’s Peabody Museum you headed up an archaeological research team on the origins of private property, debt, and real estate and the origins of economic civilization in the ancient Near East. You actually have a new book coming out in May called ‘…and forgive them their debts: Credit and Redemption From Bronze Age Debt Remissions to the Jubilee Year’. And speaking of debt that’s a perfect segue into the topic of our first discussion here. A new ACLU report just got released called A Pound of Flesh: The Criminalization of Private Debt, that shows that thousands of debtors are arrested in jail each year in the U.S. because they owe money–and millions more are threatened with jail. The debts can be as small as a few dollars and can involve every kind of consumer debt from medical bills to car payments to student loans to credit card debt.
It goes sort of something like this… cities and private collections agencies have teamed up to bring back a system of modern day debtors’ prisons to skirt around federal law that has prohibited debtors’ prisons since 1833. And it’s also in clear violation of the Equal Protection Clause of the 14th Amendment. And these agencies and their hired lawyers will send out a notice to someone who’s missed a payment. That person won’t show up to court. They get a notice of contempt and then it goes on their record and an arrest warrant is issued for their failure to appear in court. And this takes some pretty big cooperation or coordination with the prosecutors and the judge. One of the most alarming things is that there’s sort of a business relationship or a quid pro quo between collection agencies and the prosecutors.
So my question for you Michael is, as an economist and someone who is an expert on the history of debt, can you give us your reaction to this report?
Michael Hudson: Well I think much of the modern variable is the privatization of prisons. If you have a privatization of prisons you run them for profit. And what do you need in order to run the prison for profit? Well, you need inmates. So the first question is how are you going to get inmates. And that’s what brings us back to the issue of debt.
So far for the last 20 or 30 years most of the inmates have been racial minorities on drug deals…marijuana and other drug deals putting them in. But now that’s being phased out because they realize how destructive and racist it is. So they want an equal opportunity source of inmates and debt is a major source of the inmates to be employed to make a profit. Now in a way this goes back to the very origins of debt. I’m a little surprised that the title that the ACLU gave its report A Pound of Flesh. That obviously refers to Shylock’s loan–and that was a zero interest loan. And that misses the whole point. The whole point of debt is interest!
We’ve done a number of books recently through the Harvard group. One is on labor in the ancient world, where we look at the origins of how labor was mobilized in the Neolithic and the early Bronze Age in Egypt. And originally there were no workers for hire. There was no labor for hire… you couldn’t say well I’m a cultivator on the land and I need to make some money so I think I’ll go into town and get a job. The governments could mobilize labor to work on public building projects and that’s how the infrastructure was built up. How would individual merchants or even temples or palaces get labor? The only way of doing it was to make an interest bearing loan to a cultivator where the interest was paid in the form of labor and where the worker himself or his family member –his son, his daughter or a household servant– was pledged as collateral. The collateral was supposed post to work off the interest. The original way of getting labor for hire was to make a loan, and it was paid as interest, not to pay wages. Wages only developed maybe in the second millennium very largely on the basis of what labor had to be paid or supported when it was pledged for debt. So the idea of working off a debt by one’s labor and in the form of being a bondage pledged to one’s creditor is a very old idea.
What’s fairly new in history is that there are public institutions–public jails–that you’d be pledged for if you couldn’t pay a debt. Instead of being pledged to the creditor to work off the debt you would be–especially in England it was known from the medieval times through pretty recent times–they still have the debtors’ prisons open and if you couldn’t pay a debt you’d be consigned to a debtors’ prison. You’d have to pay for your own food and board and you’d be charged for the support. And the only way if you didn’t have any money to pay for your own food–or if you didn’t have friends who would bring by food for you–would be to stick your hands out of the grate for alms. Many people who were Almsgivers would go by the debtors’ prison supporting the debtors so they wouldn’t simply starve to death.
Paul Sliker: And Michael I want to talk a little bit about about the reasons for why debts have been written down over the course of history. So I mean, you know, according to your work from my perception, writing down debts obviously reduces the overall economy’s financial costs… so the perception of this long term macroeconomic dynamic explains why debtors’ prisons have been closed and things like bankruptcy laws have become increasingly humanitarian to enable debtors to make a fresh start and become economic actors and start spending into the economy again.
So what are the reasons why they’re sort of trying to bring back these arrangements particularly here in the U.S. today?