The History of Debt: Cement or explosive elixir or poison?

• Author: James, Harold

There is no end of debt in sight. However much politicians and economic analysts complain about the dangerous consequences of the buildup of government, corporate, and personal debt all over the world, we appear to need ever more debt to face the health, climate, and security challenges that are all round us. Even as activists demand a biblical cancellation of debt, that is, a jubilee, they too want more debt, because only debt--a mortgage on the future--can help meet present needs.

Looking at aggregate figures on government and corporate debt, it is easy to believe that the world is drowning in debt. That is why it is good to be reminded by books like that of Barry Eichengreen, and his co-authors Asmaa El-Ganainy, Rui Esteves, and Kris James Mitchener, that debt can play and has played a positive role over long periods of time.

Debt creates the obligations that tie the global economy together and make trade and payments possible. At the same time, the fact of debt imposes payment requirements that become uncomfortable and burdensome, especially when interest rates rise.

The fact of debt is old, as is the dilemma that it constantly produces. Scholars--archaeologists, historians--agree that debt is considerably older even than money or coins. Clay cuneiform tablets in Mesopotamia, for example, record Sumerian debt contracts measured in units of grain or animals (sheep) over five thousand years ago, around 7500-3350 BCE.

The dilemma of how to understand the consequences of debt for relationships between people is also an ancient one. Debt came to be a central feature in the development of civil society, and of the concept of responsibility. It is at the heart of the moral economy.

The evolution of debt was central to a theory of ethics. All Plato's virtues--temperance, prudence, courage, and justice-can be either developed internally, from one's character or one's internal resources, or are based on external or social influences. Courage, later often redescribed as the virtue of fortitude, involved meeting obligations, and not running away from them.

Debts thus help to socialize us and bind us to others. They are one aspect that constitutes the key to human personhood, in that they provide a recognition that we are bound by our past actions, and thus have a continuous identity as a person. On that basis, promises occur between persons: you know who I am and can rely on me, even if circumstances change. Without that trust, there is endless suspicion.

Debts can also very obviously be highly oppressive, creating chains of obligation, and, in many premodern societies, bondage and debt peonage. It thus regularly deprived people of their humanity. That is because circumstances obviously do change: there are accidents, climatic and health catastrophes, and other circumstances that make it impossible to repay. Many religions...