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A TRAVESTY OF FINANCIAL HISTORY
- WHICH BANK LOBBYISTS WILL APPLAUD

Michael Hudson

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New Economic Perspectives. org, 15 July, 2016,

 
 

Reviewer Comment:
This article is an excellent refutation of the early history of money presented in William Goetzmann's book Money Changes Everything - How Finance made Civilization Possible, Princeton Univ. Press, 2016.
But more, it is also a refutation of the standard theory of many otherwise different 'schools' of economic theory that persist in believing that 'barter' was actually the method of market exchange prior to the invention of coined currency.
Professor Hudson has done extensive personal research into ancient economies, especially Mesopotamia and written extensively on the subject. He has specially focused on money, credit, debt, finance and trade in Near Eastern societies. Professor Goetzmann's book received rave reviews from main stream news publications and from many establishment economists. The theme of the book is that the developing financial industry was a major engine in expanding civilization. But Professor Hudson cites authoritative experts on Mesopotamia to show that Professor Goetzmann ignores and or misinterprets the contemporary documents which reveal the true roles of money, credit, debt, and political authorities in Mesopotamian trade. Then Dr. Goetzmann also ignores the fundamental changes from Mesopotamian civilization to that of Greece and Rome.

 
 

Dr. Hudson categorizes himself as a Marxist, but his theories are far different from those who claim to be bonafied Marxists. However, he certainly is a critic of contemporary actual financial practice as well as of establishment economic theories. He especially is a strong critic of debt and of the role debt plays in politics as well as supporting financial affairs. His battle against debt as a component of various otherwise different contemporary economic theories is what led him to do the real, fact finding, research in ancient civilizations, especially the first Western origins an Mesopotamia. As a result, he has become a leading current economist who is also a well published and recognized historian of ancient economy and the role of debt. He shares that distinction with David Graeber, who published an extensive history of money, credit, and debt with that title DEBT. Dr. Graeber escaped the mind set of the economist fraternity by being a professional anthropologist. His studies of 'primitive' societies, not only ancient ones but contemporary ones today corresponds with Dr. Hudson's results by proving that such societies did not and DO not conduct exchange of goods and services by 'barter'.

 

Summary:
Dr. Hudson begins his review strongly by indicating his dislike of debt. "Debt mounts up faster than the means to pay, Yet there is widespread lack of awareness regarding what this debt dynamic implies. From Mesopotamia in the third millennium BC to the modern world, the way in which society has dealt with the buildup of debt has been the main force transforming political relations."
What he is writing about is not simple 'debt' of the kind an individual incurs when he borrows something from a neighbor and intends to return it or its equivalent. The feature that makes financial debt so destructive is compound interest. With the inerest being charged for financial debt increasing at a compound rate the total debt owed soon exceeds the quantity of the initial sum. And, as Dr. Hudson and other scholars of ancient Mesopotamia and other societies have shown, the initial debt, itself, frequently was not created by any borrowing. Rather it was due to failure from inability of the 'debtor' to pay a tax or other assessment demanded by a creditor (such as the ruler).

 
 

Dr. Hudson indicates his abhorrence of debt. "Financial textbook writers tell happy-face fables that depict loans only as being productive and helping debtors, not as threatening social stability." He waxes indignant at the way creditors obtain government coercive power to support their position in the endless historical conflict between debtors and creditors.

 
 

With this as his introduction the reader is prepared for Dr. Hudson's approach to the book in question. "The most recent such travesty is William Goetzmann's Money Changes Everything, widely praised in the financial press for its celebration of finance through the ages." He gets immediately to specifics citing Goetzmann's adulation of Athenian 'monetization of the Athenian economy' as a central component of 'democracy', but while ignoring Solon's role that 'freed Athenians from debt bondage with his seisachtheia in 594 (BC)'. From there his examples from real history move to Sparta and Rome's Social War. He cites a condition also noted by others "The Roman legal principle placing creditor rights above property rights of debtors has been bequeathed to the modern world". Indeed, so.

 
 

With this he jumps back to the Bronze Age by noting that the palace authorities were not letting financial oligarchies gain control as they did in Greece and Rome. He indites Goetzmann "But to Goetzmann the creditor take over is the essence of progress, despite the economic polarizatin and Dark Age it brought on for the 99 Percent."

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"Misepresenting why individuals ran into debt in ancient Economies"

Dr. Hudson writes that the standard concept about the origin of debt itself is wrong. He is correct that in those palace or temple organized societies the common people owed debts to the palace or temple authorities - that is the rulers. And he is correct that it was the rulers, out of their own self-interest, who periodically declared such debt cancled (Clean Slate) edicts. He is correct that Goetzmann and others do not recognize this.

But he also does not recognize something, namely that in modern society it is not the common people who owe the debt TO the rulers but, in reverse, it is the rulers' (governments) who owe the massive debts to the people. And in those ancient palace societies the palace or temple owned the land and means of production and simply took the grain and artifacts into their store rooms and rationed it out to the common people. But in our society today we claim that it is the people who have 'private property rights' to what they produce and it is government that confiscates it from them, while claiming that it is owed by 'taxation'. The rulers get away with this by confiscating (taxing) more from the minority 'wealthy' while redistributing much of it to the minority of their own supporters.

 
 

"The idea that Clean Slate edicts were a 'crash'.

In this section Dr. Hudson expounds on the actual history of Mesopotamian concepts of ownership and the results. "Mesopotamian rulers are documented as protecting citizenry from foreclosing creditors by cancelling debts since at least as early as Enmentena of Lagash (c. 2400 BC)." He continues with more specific examples. He does note specifically "that ONLY agrarian debts for consumption or public fees were subjet to such Clean Slate edits." Commercial loans accounted for by silver were considered investments in trade and not canceled. They were canceled, however, if there was a loss due to mishap.

 
 

"The false assumption that all loans are 'productive' and readily payable"

 
 

"Goetzmann's obsolete theory of money as a commodity, not a fiscal institution"

 
 

"Goetzmann's failure to understand that 'finance' has something to do with debt"

 
 

 
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L. Randall Wray - Modern Money Theory

 
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Michael Hudson, Finance as Warfare

 
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Michael Hudson, .... and forgive them their debts

 
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Amanda Podany - Ancient Mesopotamia

 
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Mesopotamian Economics and Money

 
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J.G. Manning - The Ancient Economy: Evidence and Models

 
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David S. Landes - The Invention of Enterprise

 
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History of Mesopotamia

 
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Murray Rothbard -What has Government Done to our Money?

 
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Murray Rothbard - The Mystery of Banking

 
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Ludwig von Mises - The Theory of Money and Credit

 
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David Graeber - Debt

 
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Lawrence White -The Clash of Economic Ideas

 
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John Kay - Other People's Money: Masters of the Universe or Servants of the people?

 
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Henry Kaufman - Techtconic Shifts in Financial markets

 
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