The Monkey's Paw (Part III)

The Blessing and the Curse of Interest

Review

Happy Halloween, dear reader! In a nod to the holiday, we’ve been drawing a multi-week comparison between the taking of interest, or usury, and the spooky old tale of the monkey’s paw. Interest has been an integral tool for propelling the trajectory of civilization to ever-greater heights. But like that mummified paw that grant wishes in horrible ways, the benefits of usury come at a terrible price. In Part I, we covered the origins of interest in human cooperation and the way that it enables the building of cities. In Part II, we outlined the dangers of usury and the dynamics of how it eventually rips societies apart. In today’s conclusion, we’ll trace the thread of Western civilization from the ancient Near East, through Greece and Rome, into the Middle Ages, and finally arrive back at home in our own time.

Mesopotamia 

Interest was first invented in ancient Mesopotamia as a logical reshuffling of resources that allowed those cultures to get around the problem of the long time gap between the planting and harvesting seasons. Usury was a crucial building block for the first cities that sprang up after the Agricultural Revolution. The problem was that once private citizens began lending out their wealth for profit, the practice badly exacerbated wealth inequality and eventually ripped the fabric of society apart. Like the monkey’s paw, it was a cursed tool that blew up in the faces of those who used it. Their solution to this problem was to make a time-honored tradition out of the debt jubilee. The kings always kept this useful trick in their back pockets. They had the absolute power to declare all debts forgiven, return foreclosed land, and free debt slaves. Hammurabi, the Babylonian ruler famous for his Code, soaked the rich in this way no less than four times during his reign. The kings of Mesopotamia were well-motivated to wield this power. It was not so much that they cared about the fate of the poor. They were more interested in preventing private lenders from getting rich enough to challenge the power and influence of the king. Jubilees were so important and so widespread that they made it all the way into the Bible. The Jewish authors of the Hebrew Bible discovered debt jubilees during their time as Babylonian captives. The dangers of usury was understood well enough in those days that they took note of this handy solution by weaving it into scripture. Here is the full quote from Chapter 25 of Leviticus, which is the same quote immortalized on the Liberty Bell in Philadelphia:

10 “And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.”

Greece and Rome

Western Civilization can be thought of as one giant experiment in NOT forgiving debts. While the debt jubilee was well-established for the Mesopotamians and the Hebrews, classical Greece and Rome had no such tradition. Before the Classical Era, societies either periodically redistributed the slices of their economic pies or they collapsed into chaos. The Greeks and Romans stumbled upon a third option: expanding the overall size of the pie through the use of coinage. The scam was a simple one. Instead of paying militaries with generic lumps of precious metals, kings began stamping their faces onto pieces of these metals to prevent counterfeiting. These kings then ordered their royal treasuries to accept only these non-counterfeitable coins as tax payments. This meant that the citizenry needed to get their hands on the coins given out to the soldiery in order to pay their taxes. Since they couldn’t be counterfeited, citizens had no choice but to provide soldiers with equipment, food, lodging, companionship, etc. Coins and taxes were tools used to enfranchise entire populations into supplying and supporting militaries. Whereas Mesopotamian warriors had lived other lives as farmers or tradesmen during peacetime, the advent of coinage permitted specialists like Spartan hoplites or Roman legion to train full-time for war and conquest. Coins led directly to highly effective professional armies. Empire-building kicked into high gear. Traditional citizen soldiers, like those of ancient Mesopotamia, were no longer competitive. They had no chance of defending their homelands against the likes of Alexander or Caesar. The Greeks and Romans could get away without debt jubilees by using their military to constantly expand their economic pie. But the stability they created would only be temporary.  

The Greeks pioneered empire-building with professional armies, but the Romans perfected it. They formally precluded redistributions and jubilees by legally sanctifying private property. Modern legal systems still reflect this with Latin legal terms. In Part II, we noted that usury creates a situation in which wealth flows, like a steady current, from the have-nots to the haves. The charging and paying of interest economically elevates some citizens over others, creating a vertical hierarchy. It lends to society a tiered, pyramidal shape. Up until Greek and Roman times, successful societies redistributed wealth from the top of the pyramid back down to the bottom so that the flow of wealth could continue indefinitely. The Greeks and Romans were adding layers to the bottom of their pyramids instead by absorbing frontier territories and imposing by swordpoint extractive tax regimes. The amount of the wealth that ended up being concentrated in Rome was like nothing the world had ever seen. But the price for reaching those lofty new heights was a proportionate fall. Pyramid schemes collapse when they can’t find new suckers to pay off the established upper echelons. And so it was that the collapse of the Roman Empire came inevitably after there were no more lands to conquer. 

Some notable subjects of Rome sensed that something was horribly wrong as the sun began to set on the empire. Julius Caesar understood that mounting wealth inequality was an existential threat to his society. He proposed basic reforms and redistributions to re-enfranchise the poor and indebted. But (and this should sound familiar) the senate had become corrupt agents of the wealthy. They publically murdered Caesar for his efforts. Meanwhile across the Mediterranean in Palestine, Jesus of Nazareth raged against the excesses of the wealthy. All four gospels tell tales of his violent expulsion of moneylenders from the temple in Jerusalem. His ministry forbad the taking of interest, a rule the church would take seriously right up until the time of The Renaissance. During fiery sermons, Jesus waved the old Jewish holy writings commanding debt forgiveness in the faces of his followers. The salvation and redemption promised by Jesus was literally financial in nature. These things were later placed over the horizon of death where they conveniently could not affect the balance sheets of the rich. Like Caesar, Jesus would be publicly executed for threatening the interests of the wealthy and powerful. Both Jesus and Caesar were equally powerless to prevent the calamity that followed. Wealth concentration inevitably passed the point of no return and the empire collapsed into spectacular ruin. The fallout was catastrophic enough to knock Western civilization out of the empire-building game for a thousand years.

Middle Ages

For Christendom, the ensuing Dark Ages were economic doldrums that played out among the visible ruins of the old Roman Empire. With the taking of interest still banned by the church, money lending became the province of the Jewish community. The occasional debt crises that arose could be resolved by simply seizing the assets of these Jewish moneylenders. It’s all right there in Shakespeare’s The Merchant of Venice, where the Jewish villain Shylock is not permitted to collect the pound of flesh owed to him by Antonio. Shakespeare makes light of this debt default, but the awful tradition of solving debt crises by rounding up Jews and confiscating their wealth will forever characterize some of history’s darkest chapters. Jews excluded from the debt sanctity that had been codified into Roman law. And like Shylock, they were easy to vilify as usury worked it’s usual trick of making moneylenders increasingly wealthy at the expense of greater society.

Colonialism

Empire building began again in earnest after the discovery of the New World. The Roman problem of having no more lands to conquer disappeared overnight. Debt jubilees were never a part of the Roman legal tradition inherited by Christendom, but that scarcely mattered with two whole continents worth of indigenous people to exploit and mountains of gold waiting to be plundered. European powers elbowed one another aside in a race to bring as much of the world as possible under their respective flags as possible. Wealth and natural resources extracted from their colonies flowed into the capitals of Europe. People themselves were treated as extractable resources and a brutal slave trade flourished. This jockeying for position in Europe eventually culminated in two brutal world wars, but the geographically-isolated United States was spared the devastation and survived with its infrastructure intact. The stage was set for the United States to take center stage in a second-empire building era that has flown us closer to the sun than our Greek and Roman progenitors could have dreamed. 

United States

In an interesting twist, the United States has been using the old Roman concepts of debt sanctity as a colonial tool instead of raw military might. Just as our state buildings tend to be dominated by Greek columns, our legal system is still dominated by Roman concepts and Latin phrases. Rather than colonizing poorer countries through outright conquest, we have spent the post-war period loaning these countries money through the World Bank and the IMF. Compound interest has been working its eternal magic and we, the money lenders, have been increasing our wealth at their expense. The Obama Administration, for example, threatened Greece with economic sanctions in 2011. Their citizens had voted to allocate tax money toward rebuilding from the 2008 Financial Crisis instead of toward making bond payments to the European Central Bank. The US showed it’s true colors by enforcing debt sanctity instead of democracy.

Meanwhile, the sheer volume of debt inside the United States itself is completely out of control. Federal debt, mortgage debt, auto loans, student debt, and credit card debt have all swollen to record highs. Especially in the US, but also across the western world, wealth inequality is accelerating toward unsustainable levels just as it did during the last days of the Roman Empire. The paradigm of debt sanctity that we are living in is of Greek and Roman origin. It’s over 2,000 years old, and it’s wholly dependent on constant expansion. Infinite economic growth is just as impossible today as it was for the Romans. We’re following their logic (complete with Latin legal terminology) off the same cliff. It’s the logic of the cancer cell that grows until it kills its host and itself by extension. The solution is obvious; one has only to crack a history book or a holy book to find it. Without the ability to grow our economic pie forever, redistributing the existing slices is critical to wielding the invaluable tool of interest without disaster. We are in danger of lapsing back into a second Dark Age, where most of us are debt serfs renting our lives from a few lords who own everything. Avoiding that fate this time around is going to mean heeding the calls of our Caesars and our Christs, rather than putting them to death, when they call for redistribution and debt forgiveness. It’s our only hope for preventing armageddon.