The idea of annulling debts nowadays seems so unthinkable that most economists and many theologians doubt whether the Jubilee Year could have been applied in practice, and indeed on a regular basis. A widespread impression is that the Mosaic debt jubilee was a utopian ideal. However, Assyriologists have traced it to a long tradition of Near Eastern proclamations. That tradition is documented as soon as written inscriptions have been found – in Sumer, starting in the mid-third millennium BC.
Instead of causing economic crises, these debt jubilees preserved stability in nearly all Near Eastern societies. Economic polarization, bondage and collapse occurred when such clean slates stopped being proclaimed.
(2) What were Debt Jubilees?
Debt jubilees occurred on a regular basis in the ancient Near East from 2500 BC in Sumer to 1600 BC in Babylonia and its neighbors, and then in Assyria in the first millennium BC. It was normal for new rulers to proclaim these edicts upon taking the throne, in the aftermath of war, or upon the building or renovating a temple. Judaism took the practice out of the hands of kings and placed it at the center of Mosaic Law.
By Babylonian times these debt amnesties contained the three elements that Judaism later adopted in its Jubilee Year of Leviticus 25. The first element was to cancel agrarian debts owed by the citizenry at large. (Mercantile debts among businessmen were left in place.)
A second element of these debt amnesties was to liberate bondservants – the debtor’s wife, daughters or sons who had been pledged to creditors. They were allowed to return freely to the debtor’s home. (Slave girls that had been pledged for debt also were returned to the debtors’ households.) Royal debt jubilees thus freed society from debt bondage, but did not liberate slaves.
A third element of these debt jubilees (subsequently adopted into Mosaic law) was to return the land or crop rights that debtors had pledged to creditors. This enabled families to resume their self-support on the land and pay taxes, serve in the military, and provide corvée labor on public works.
Commercial “silver” debts among traders and other entrepreneurs were not subject to these debt jubilees. Rulers recognized that productive business loans provide resources for the borrower to pay back with interest, in contrast to consumer debt. This was the contrast that medieval Schoolmen later would draw between interest and usury.
Most non-business debts were owed to the palace or its temples for taxes, rents and fees, along with beer to the public ale houses and other payments to these institutions. Rulers initially were cancelling debts owed mainly to themselves and their officials. This was not a utopian act, but was quite practical from the vantage point of restoring economic and military stability. Recognizing that a backlog of debts had accrued that could not be paid out of current production, rulers gave priority to preserving an economy in which citizens could provide for their basic needs on their own land while paying taxes, performing their corvée labor duties and serving in the army.
Most personal debts were not the result of actual loans, but were accruals of unpaid agrarian fees, taxes and kindred obligations to royal collectors or temple officials. Rulers were aware that these debts tended to build up beyond the system’s ability to pay. That is why they cancelled “barley” debts in times of crop failure, and typically in the aftermath of war. Even in the normal course of economic life, social balance required writing off debt arrears to the palace, temples or other creditors so as to maintain a free population of families able to provide for their own basic needs.
As interest-bearing credit became privatized throughout the Near Eastern economies, personal debts owed to local headmen, merchants and creditors also were cancelled. Failure to write down agrarian debts would have enabled officials and, in due course, private creditors, merchants or local headmen to keep debtors in bondage and their land’s crop surplus for themselves. Crops paid to creditors were not available to be paid to the palace or other civic authorities as taxes, while labor obliged to work off debts to creditors was not available to provide corvée service or serve in the army. Creditor claims thus set the wealthiest and most ambitious families on a collision course with the palace, along the lines that later occurred in classical Greece and Rome. In addition to preserving economic solvency for the population, rulers thus found debt cancellation to be a way to prevent a financial oligarchy from emerging to rival the policy aims of kings.
Cancelling debts owed to wealthy local headmen limited their ability to amass power for themselves. Private creditors therefore sought to evade these debt jubilees. But surviving legal records show that royal proclamations were, indeed, enforced. Through Hammurabi’s dynasty these “andurarum acts” became increasingly detailed so as to close loopholes and prevent ploys that creditors tried to use to gain control of labor, land and its crop surplus.
Fast-forward to today’s world. The most recent financial clean slate was the 1948 Allied Currency Reform of Germany. Basic business debts were left in place, along with employer debts to employees. The population was allowed to keep minimum working balances. But the residue of debts was cancelled, on the logic that most were owed to former Nazis. Applauded as a “free market,” Germany’s economy was freed from the postwar debt legacy that had shackled it after World War I. The aftermath in 1948 left Germany’s economy effectively debt-free, paving the way for the Economic Miracle that followed.
(3) Social purpose of Debt Jubilees
The common policy denominator spanning Bronze Age Mesopotamia and the Byzantine Empire in the 9th and 10th centuries was the conflict between rulers acting to restore land to smallholders so as to maintain royal tax revenue and a land-tenured military force, and powerful families seeking to deny its usufruct to the palace. Rulers sought to check the economic power of wealthy creditors, military leaders or local administrators from concentrating land in their own hands and taking the crop surplus for themselves at the expense of the tax collector.
By clearing the slate of personal agrarian debts that had built up during the crop year, these royal proclamations preserved a land-tenured citizenry free from bondage. The effect was to restore balance and sustain economic growth by preventing widespread insolvency.
Babylonian scribes were taught the basic mathematical principle of compound interest, thereby increasing the volume of debt exponentially, much faster than the rural economy’s ability to pay, an argument recently revived by Thomas Piketty, in Capital in the Twenty-First Century, (2014). That is the basic dynamic of debt: to accrue and intrude increasingly into the economy, absorbing the surplus and transferring land and even the personal liberty of debtors to creditors.
Debt jubilees were designed to make such losses of liberty only temporary. The Mosaic injunction (Leviticus 25), “Proclaim liberty throughout the land,” is inscribed on America’s Liberty Bell. That is a translation of Hebrew deror, the debt Jubilee, cognate to Akkadian andurarum. The liberty in question originally was from debt peonage.
To insist that all debts must be paid, regardless of whether this may bankrupt debtors and strip away their land and means of livelihood, stands at odds with the many centuries of Near Eastern clean slates. Their success stands at odds with the assumption that creditor interests should always take priority over those of the indebted economy at large.