definitive, sent 16.10.2018
A world in debt
In April 2018 global non-financial debt reached $247 trillion, equalling 318% of the global annual product. Rising more than $8 trillion in the first trimester of the year, in less than a hundred days it burdened on average with a thousand US dollars more each and every person on the planet. We now owe around $35.000 each. Debt, thrilling only some radical dinosaurs and a handful of scholars till the financial crisis of 2008, is now catapulted to the centre stage of political strife, public attention, and personal worries.
Debt is the obverse side of finance, today grown so strong that the term financialization, unknown till recently, has come to define our historical period. In our ‘era of finance’, as it has also been called, “finance prospers with such apparent brilliance that it takes over from the industrial entrepreneur the leading role in capitalist development”. The few owners of finance capital enjoy an inordinately powerful position in society.
Do they use it magnanimously in favour of the common interest? Few if any recent examples allow us to think so, while the consequences of their power on democracy and on the planet itself are anybody’s guess. On the other hand, historians remind us that finance’s refusal to temper its interests in the twentieth century ushered in the most destructive war in history plus many others.
Seen in historical perspective, such phases of financial domination are nothing new. In the last four centuries they herald the autumn of cycles of capital accumulation, initiating hegemonic transitions. In this framework a crisis leads, possibly but not necessarily through a major war, to a reorganization of the world system and a displacement of its powerful and affluent centre. In the twentieth century the US replaced on the throne of capitalist hegemon Great Britain, that had previously displaced Holland, that had earlier taken the crown of Genoa. It is uncertain whether the US will still enjoy their hegemonic position at the end of the current crisis.
Certain for us common mortals is debt. Like death and taxes, with which it is intimately connected, debt is unescapable. Even the few who lack any personal debts to worry about are still indebted, often heavily, through the state. Modern capitalist states being always in debt, they regularly channel to creditors part of their resources, often a big part, ultimately a part of the wealth created by us all. We all work to repay the public debt whether we want it or not, whether we know it or not; its burden can be crushing, and during these last decades it steadily escalates, globally and in each country separately. This standard aspect of financialization leads to ever more destructive crises.
Unsurprisingly, more and more people notice this. Ten years ago in Greece almost nobody discussed national debt, and few even suspected its existence. Everybody wails it today. Sentiments like those expressed by the movement Occupy Wall Street spread everywhere by now, especially among the young: “To the financial establishment of the world, we have only one thing to say: We owe you nothing. To our friends, our families, our communities, to humanity and to the natural world that makes our lives possible, we owe you everything”. Incorporating these sentiments in mainstream politics seems only a matter of time. Few have however a concrete notion of what debt really is and how can we get rid of it.
Oligarchy and slavery
Debt is neither a punishing plague sent from God nor a fact of nature. It does not reflect personal or collective failings of debtors either. It is better approached as an ages-old and institutionalized social relation linking people and groups who owe to powerful people and groups who are owed to. A predominant social fact of questionable fairness, hardly symmetrical or equitable, it ultimately reflects an unequal, asymmetrical, and unfair power relationship based explicitly or implicitly on violence. The world economy today suffocates under a mountain of debt buttressed by what is described as the ‘militarization of American capitalism’. Most of this debt was created after the Cold War ushered in a unipolar world dominated by the US, a world now crumbling. But its roots are deep.
Since the dawn of history, commercial lending among businesses aside and also excepting a special case of state debt mentioned in the third article of this series, debt mechanisms transfer wealth from the many to the few, from weak to strong, from poor to rich. Throughout the ages debt feeds oligarchic politics, which today impose social polarization at a colossal scale, without historical precedent. Democracy in recent centuries progressed in other fields, but not as regards the distribution of wealth which becomes more and more unequal. Debt enables this.
Today those who are owed to are roughly the 1%, and for the most part a tiny fraction of it, arguably a financial oligarchy. This ancient Greek term, meaning the rule of the few, attracts again the interest of activists and academics, for obvious reasons. Its scholarly use points to a few oligarchs using the massive concentrations of material resources controlled by them to protect and increase their own wealth and status. Their huge and practically untaxed wealth, intricately linked to debt, negates all notions of democracy, justice, or fairness. Mammoth transnational corporations form a structured ownership network controlled by a small and dense core of financial institutions, an economic ‘super-entity’ impacting market competition and financial stability at a global level.
Those who owe are the great majority, practically us all. We always owe indirectly, as citizens of states that redistribute resources upwards through massive and unending debt repayments. And usually we also do owe directly. Working families borrow to survive. Or to study, pay for hospital, buy a home or a car, and in any other way finance a life that used to be normal for our parents but now, with public provision waning and wealth concentrating in fewer and fewer hands, is considered luxurious.
Debt, traditionally pictured as slavery, was literally a cause for enslavement in previous eras. Indebted men, kneeling under compound interest that at some point became unpayable, gave away as slaves their women and children, or turned themselves into slaves of powerful creditors. Millions suffer the same fate in our world too, mainly in poor countries. Debt peonage has become a worldwide institution.
For example, in many parts of the world families incur debts to send their young to a rich country. Immigrants then work as slaves, in fact if not in law, to repay both capital and interest. If they die or disappear, or simply don’t manage, other members of the family are enslaved until both debt and interest are repaid. Many of these young people are women who are then channeled into prostitution and their lives wither fast. For these victims of debt, and they are legion, few things changed for the better since the times of King Hammurabi.
God forgives debt
Since the dawn of history debt, an institution thousands of years more ancient than money, used to bring shame and was confounded with guilt. It can hardly be a coincidence that in southern Mesopotamia of five thousand years ago, where we find its earliest traces, we also encounter the first forms of state organisation -at about the same time.
For about half of these millenia however, almost until the Classical era, non-commercial debts were controlled by the state and regularly wiped out. This happened, for example, after wars or coronations of new kings. It meant agrarian debts cancelled, property returned, bondservants liberated. All thanks to an institution known to us by its Jewish name, jubilee. Jubilees stabilized and legitimized ancient monarchies. Keeping societies together they bolstered social peace. It is doubtful whether the weak early states, and even the peoples themselves, could survive without them.
The celebrated anthropologist David Graeber discerns in these pre-capitalistic millenia alternations between periods of relative social peace, connected to rising systems of credit, and periods of extensive plunder in which credit shrank or disappeared altogether, eclipsed by transactions in precious metals or other forms of cash. Trust being scarce in these periods, networks based on it waned. Absent the jubilees, economies disintegrated and people turned to war.
The oligarchic city-states of Ancient Greece that refused to institute jubilees saw social pressures pile heavier and heavier upon them. When colonial emigration reached its limits, prolonged struggles ensued, with the indebted masses indignant against the unfairness of interest-bearing debt. Successful political change, more or less violent, instituted democracy, in other words the rule of the have-nots. Cratos in Greek means rule, while the demos were the propertyless masses. In the process popular tyrants imposed seisachtheias, literally debt unburdenings.
What had been normal in previous Mid-Eastern systems, was conquered in Greece through hard struggles. But in the system that came next, of Rome, even these struggles failed.
Rome copied the already steep social stratification of oligarchic Greece, and imposed material unequality as well as normalized cruelty at an immense and previously unimaginable scale. Roman debtors resisted but lost. Their cause was valiantly promoted by prominent leaders, mainly the Gracchi brothers and Julius Caesar, but concerted oligarchic reaction doomed them. The populus and plebs forfeited property and rights. Their defeat stabilized, at huge human cost, the ruling oligarchy, but the system thus born eventually brought the fall of Rome. By then lending had devoured the economy and money had become scarce, while banks had already disappeared around the third century A.D.
The Classical world gave birth not only to oligarchy but also to mass religious movements promoting the cause of debtors. With creditors controlling the worldly powers around the Mediterranean, the poor sought solace in hopes of divine help or retribution. Early Christianity codified the plea for absolution, even in its daily prayer – “and forgive them their debts”. Michael Hudson, the foremost scholar of debt in Antiquity, portrays Christ as a serious rebel against lenders.
In between the Roman times and our modern era Christianity and Islam strongly condemned lending with interest, called usury. Commercial credit however thrived in Renaissance enclaves, such as the oligarchic city-states of Venice, Florence, and Genoa, that built the financial networks from which modern capitalism sprung up. The credit they managed was private; state debt in Antiquity and in the European Middle Ages was normally incurred through obligations to pay tribute or ransom, not because of loans. Back then, only subject populations were hit by regular taxes; it was unthinkable, actually a contradiction in terms, to tax free people. According to the criteria of the Middle Ages and Renaissance, as long as we pay tax we are subject and not free people. In this sense, only capitalists are free today -more or less the same people to whom all the rest of us are indebted.
 Global Debt Monitor – July 2018, at https://www.iif.com/publication/global-debt-monitor/global-debt-monitor-july-2018.
 Jan Toporowski, The End of Finance. The Theory of Capital Market Inflation, Financial Derivatives and Pension Fund Capitalism, Routledge, London, New York 2000, p.1. On financialization see, from the perspective of historical sociology, Greta R. Krippner, Capitalizing on Crisis, The Political Origins of the Rise of Finance, Harvard University Press, Cambridge Massachusetts, London 2011.
 See this story masterly told in Adam Tooze, The Wages of Destruction. The Making and Breaking of the Nazi Economy, Penguin, Harmondsworth 2007.
 Giovanni Arrighi, Beverly J. Silver, “Capitalism and world (dis)order”, Review of International Studies 27 , pp.257–279, p.261.
 On this see Giovanni Arrighi, The Long Twentieth Century. Money, Power, and the Origins of our Times, Verso, London, New York 1994.
 Strike Debt / Occupy Wall Street, The Debt Resistors’ Operations Manual, September 2012, p.2.
 David Graeber, Debt. The First 5.000 Years, Mellville House, Νew York 2011, p.382.
 See the data in Thomas Piketty, Capital in the Twenty-First Century, translation Arthur Goldhammer, The Belknap Press of Harvard University Press, Cambridge MA, London 2014 ; Angus Maddison, Contours of the World Economy, 1-2030 A.D. Essays in Macro-Economic History, Oxford UP, Oxford, New York 2007. A mainstream report: Chuck Collins, Josh Hoxie, Billionaire Bonanza. The Forbes 400 and the Rest of Us, Institute for Policy Studies, Washington 2017; and a site presenting facts in graphic form is at https://inequality.org/facts/global-inequality/.
 Along the twentieth century, and if data pertaining to thirteen important economies are representative, about 10% of state debt was owed to central banks, double this percentage to commercial banks, and the rest to other capitalists. See S. M. Ali Abbas, Laura Blattner, Mark De Broeck, Asmaa El-Ganainy, Malin Hu, “A 100-year perspective on sovereign debt composition in 13 advanced economies”, Vox. CERP Policy Portal 27 October 2014, available at https://voxeu.org/article/advanced-economies-sovereign-debt-100-years-data . Similar is the conclusion of
 A good introduction to modern oligarchic theory see in Jeffrey A. Winters, Oligarchy, Cambridge University Press, New York 2011.
 D. Graeber, Debt. The First 5.000 Years, op.cit., p.368ff.
 On the role of debt in modern slavery see Christien van den Anker (ed.), The Political Economy of New Slavery, Palgrave Macmillan, Houndmills, New York 2004.
 James C. Scott, Against the Grain. A Deep History of the Earliest States, Yale University Press, New Haven, London 2017. Also see on this issue Seth Richardson, “Before Things Worked: A “Low- Power” Model of Early Mesopotamia”, in Clifford Ando, Seth Richardson (eds.), Ancient States and Infrastructural Power. Europe, Asia, and America, University of Pennsylvania Press, Philadelphia 2017, pp.17-62.
 On the ancient origins of debt and money see L. Randall Wray (ed.), Credit and State Theories of Money. The Contributions of A. Mitchell Innes, Edward Elgar, Cheltenham, Northampton MA 2004.
 David Graeber, Debt. The First 5.000 Years, op.cit..
 Originally in Michael Hudson, The Lost Tradition of Biblical Debt Cancellations, Henry George School of Social Science, New York 1993.