by Michael Friday
Last week I attended a wonderful conference in the university town
of Tübingen, Germany, on "Debt - The First 3500 Years," to bring
ancient historians together to discuss David Graeber's book 'Debt
- The First 5000 Years.'
I was enlightened by two papers in particular:
Moritz Hinsch from Berlin collected what Socrates (470-399
BC) and other Athenians wrote about debt
organizer, Prof. John Weisweiler, presented the new view of
late imperial Rome as being still a long way from outright
The 99 Percent were
squeezed, but "the economy" grew - in a way that concentrated growth
in the hands
of the One Percent.
In due course this bred
popular resentment that spread in the form of debtor revolts, not
only in the Roman Empire but that of Iran as well, leading to
religious reforms to limit the charging of interest and
self-indulgent greed in general.
I had not been in Tübingen since 1959, and it was my first chance to
meet with David Graeber since he moved to England to teach at the
London School of Economics after being hounded out of his apartment
in New York City in the wake of the police and FBI crackdown against
Occupy Wall Street.
Our mutual German
publisher, Klett-Cotta, sent its senior editor from nearby Stuttgart
to discuss their German translation of my Killing the Host,
to appear in November, as
Der Sektor: Warum die Globale Finanzwirtschaft
views on whether bad debts should be paid
In Book I of Plato's
(380 BC), Socrates discusses the morality of repaying
businessman living in the commercial Piraeus district, states the
typical ethic that it is fair and just to pay back what one has
borrowed or received. 
Socrates replies that it
would not be just to return weapons to a man who has turned into a
lunatic. Because of the consequences, paying back the debt would be
the wrong thing to do.
At issue is not the micro-economic morality of paying a debt, but
how this act affects society. If a madman is intent on murder,
returning his weapon to him will enable him to commit unjust acts.
The morality of paying
back all debts is not necessarily justice. We need to take the
overall consequences into account.
A similar logic may apply to today's debate over whether Greece
should pay back
the IMF and European
Central Bank (ECB) for the
money that they have provided since 2010 to save bondholders from
losses on loans (largely by French and German banks).
The terms oblige the
Greek government to pay in full instead of writing down debts to
reflect the actual ability to pay.
The IMF staff calculated repeatedly that Greece had no way of paying
off these debts, so the IMF violated its own articles of agreement
(and its "No More Argentinas" rule) that it should not lend to
countries which, in the judgment of its research staff, have no
foreseeable means to pay. 
IMF board members also
protested to the bondholder bailout - all to no avail.
The morality of paying off the IMF and ECB is analogous to paying
off the madman discussed by Socrates.
At issue is what should
wealthy creditors from loss (and the morality that all
debts should be paid), or the overall economy from unemployment and
misery leading to emigration, worse health and shorter lifespans.
They have used their debt
leverage to demand that Greece impose austerity, increase
unemployment (now running at an enormous 25 percent for IV-2015 -
I-2016), scale back pensions to retirees, and privatize public
infrastructure to pay creditors - while running a budget surplus to
suck even more money out of the economy.
When the Greek people voted in 2015 to reject these demands, the ECB
and European Union insisted that referendums didn't matter. Shifting
economic policy from voters to bankers already had led Frank
Schirrmacher to write an article in the Frankfurter
Allgemeine Zeitung, "Democracy is Junk -
Demokratie ist Ramsch."
What really is at issue is the selfish and abusive behavior of
Later in The Republic
(Book VIII, 555d-556b), Socrates talks with Glaucon, pointing
encouragement of licentiousness in oligarchies."
Their greed, Socrates
explains, inserts the parasitic,
"sting of their money
into any of the remainder who do not resist."
The effect is to burden
many Athenians with debt, to suffer foreclosure on their land and
"the drone and pauper
element in the state."
This leaves the people
(the demos) to,
"conspire against the
acquirers of their estates and the rest of the citizens, and be
eager for revolution."
The way to quench this
disaster in the making, Socrates suggests, is to enact,
"a law prohibiting a
man from doing as he likes with his own, or in this way, by a
second law that does away with such abuses."
"What law?" asks Glaucon.
"The law that is next best… commanding that most voluntary
contracts should be at the contractor's risk. The pursuit of
wealth would be less shameless in the state and fewer of the
evils of which we spoke just now would grow up there."
This obligation of
creditors to share in the risk of non-payment is precisely what the
IMF staff and other critics of the European Central Bank's
pro-creditor line are now belatedly insisting.
It is the principle that
American bank reformers urged after
the 2008 crash:
Banks that made junk
mortgage loans beyond the ability of debtors to pay should have
their reckless and often fraudulent "liars' loans" downsized to
reflect reasonable rental values and real estate prices instead
of being allowed to foreclose and push the U.S. economy into
of wealth by Rome's 'One Percent' leads debtors to revolt
Roman emperors sponsored a market economy that aimed at producing a
fiscal surplus, which was used largely to pay mercenaries.
Wealth and political
power were concentrated in the imperial bureaucracy, army leaders,
and their suppliers and provisioners.
The tax reform of
Diocletian (ruled 284-305), enacted in 297, taxed the
hitherto exempt wealthy landowners as well as the rest of
Constantine (ruled 306-337), enacted a monetary reform in
the 310's, basing the military-fiscal state on the gold
The effect was monetary
"Like the gold
standard of the nineteenth and twentieth centuries," Prof.
Weisweiler explained in his paper on the Late Roman economy,
"the introduction of the solidus was a golden age for
capital-owners but a dark period for lower strata of the
Yet Medium-sized farms
survived without being reduced to serfdom, and wage labor was
available for hire at harvest time. The proportion of Italy's
population enslaved is now deemed to have been around 15 percent.
There were no slave revolts, but debtors rebelled or defected to
invaders, as they had done earlier in antiquity.
Prof. John Weisweiler
described how, when a Gothic army defeated that of Rome at
Edirne, in northwestern Turkey) in
378, local guides brought the victors,
"to the villas of
great landowners, who were then plundered by a coalition of
Gothic soldiers and local residents.
When in 408 the
Romano-Gothic military leader Alaric for the first time besieged
the city of Rome, his forces were swollen by many debtors who
left the imperial capital to join his army."
Richard Payne of
the University of Chicago gave a paper explaining how peasant
revolts against Persia's Sasanian rulers a century later sought to
"restore" an egalitarian Zoroastrian order as a protest against the
extreme polarization that widened the gap between luxury and
The new morality of
economic balance rejected silk garments, silver wine vessels and
other status symbols of the elites.
Interest was condemned,
as it had been under Christianity and would be under Islam. All
religious urged mutual aid and warned about abusive wealth-seeking
by the elites.
What occurred culturally
was a revulsion against luxury and hubris - a Greek word that
connoted not only arrogance, but arrogance that took the form of
Creditors were the typical class singled out as oppressive and
destructive of society.
wealth addiction was seen as stripping society to serve their own
compulsive drives. It was to praise moderation and even to prefer a
poverty of equality to indulgence in luxury that Christianity, Islam
and other religious movements of the early first millennium AD took
By the 14th century the great Tunisian Islamic
philosopher of history, Ibn Khaldun, described societies
gaining prosperity through "group feeling," only to lose it within
about 120 years as the ruling dynasty succumbed to self-indulgence
and greed - paving the way for their land to be conquered from
without or taken over from within.
My own paper for the conference described,
how Ibn Khaldun's
"rise and fall" view of history in
was echoed in
The New Science (1725)
later by the
French and Scottish Enlightenment by writers such as Adam
Ferguson who endorsed
Montesquieu's statement in
Spirit of the Laws
"Man is born
in society, and there he remains."
To survive, people need
to cooperate in a system of mutual aid.
"Man is, by nature,
the member of a community; and when considered in this capacity,
the individual appears to be no longer made for himself.
He must forego his
happiness and his freedom, where these interfere with the good
of society." 
All this teaches the
opposite of today's two guiding economic premises:
"Greed is good," and
"There is no such thing as society."
Economics used to be
called moral philosophy, but it has succumbed to
has replaced zoon politikon. Debts are supposed to be paid
without concern for how this impoverishes the economy.
It was to resist personal gain-seeking at the expense of the body
politic and group solidarity that the world's major philosophies and
religions for the past two thousand years urged,
generosity, care for the weak and poor, and rules to limit the
luxurious self-indulgence and anti-social egotism,
...it bred in ruling
intellectual legacy from the curriculum has paved the way for
inverting today's moral attitude upholding creditor claims against
the rest of society.
It should not be surprising that modern financial elites are
fighting back against democratic moves to limit their wealth, adopt
progressive taxation, write down debts by bankruptcy reform, and
shift control of government away from landed aristocracies and
These vested interests
are behaving exactly as Ibn Khaldun described the terminal decadent
generation of dynasties as acting with anti-social selfishness.
Ferguson described how prosperity lay the groundwork for undermining
the commercial stage:
"man is sometimes
found a detached and a solitary being: he has found an object
which sets him in competition with his fellow creatures, and he
deals with them as he does with his cattle and his soil, for the
sake of the profits they bring.
The mighty engine
which we suppose to have formed society, only tends to set its
members at variance, or to continue their intercourse after the
bonds of affection are broken." 
The financial takeover of
government is not new.
Ibn Khaldun described how
today is called the "deep state"
(often run by foreigners or other interlopers) gains control of
Lacking traditional royal
authority, they must work outside or behind the scene of politics,
as finance does today:
In gaining control,
he does not plan to appropriate royal authority for himself
openly, but only to appropriate its fruits, that is, the
exercise of administrative, executive, and all other power.
He gives the people
of the dynasty the impression that he merely acts for the ruler
and executes the latter's decisions from behind the curtain.
He carefully refrains
from using the attributes, emblems, or titles of royal
authority. He avoids throwing any suspicion upon himself in this
respect, even though he exercises full control…
He disguises his
exercise of control under the form of acting as the ruler's
...serve the world's
cosmopolitan financial ideology that money and credit,
debt and taxes are
purely technocratic, and hence
beyond the sphere of voters or the politicians they elect to
We are back with the
Thatcherite financial Taliban
(the Arab word for "students"):
There Is No
That is the protective
myth that elites have wrapped around themselves and their privileges
from time immemorial.
To succeed, it must erase
knowledge of history and live in a highly censored "present" in
which the financial class takes the land, public infrastructure and
government into its own hands.
It has all happened before - and so have revolts by debtors and
other exploited victims of such "economism."
The Republic, 331c-d.
The term for justice is dikaiosyne, meaning "right
behavior," from dike, cognate to dexterous. I am indebted to
Moritz Hinsch of Berlin for drawing my attention to this passage
in his paper on "Private Debts in Classical Greece," delivered
to the international conference on "Debt: The First 3500 Years"
in Tübingen, Germany, June 11, 2016.
 I review the IMF staff protests and Board complaints about
the Greek loan in Killing the Host (2015), pp. 303-306, 310,
319f. and 335f.
 Adam Ferguson, Essay on the History of Civil Society ,
8th ed. (1819), Section IX: Of National Felicity, p. 105. He
adds (pp. 4f.): "both the earliest and the latest accounts
collected from every quarter of the earth, represent mankind as
assembled in troops and companies; and the individual always
joined by affection to one party, while he is possibly opposed
 Ferguson, History of Civil Society, p. 34.
 Ibn Khaldun, Muqaddimah: An Introduction to History 
translated by Franz Rosenthal (Princeton, 1967 [first ed.
1958]), pp. 377-79.