In contrast to my introductory notes placing this colloquium’s subject matter in the context of economic and anthropological theory, this paper presents my own reconstruction of the dynamics of early interest-bearing debt and clean slates. In view of the fact that the textual and material record omits much of the information that would be needed to confirm one’s ideas of what was going on, some logical inference is necessary to reconstruct the dynamics at work. This requires the economic historian to venture beyond the scant written record to create a plausible working hypothesis of how interest-bearing debt first emerged, and also how rural usury developed alongside of commercial credit. Therefore, despite the fact that the terse documentary record obliges modern observers to rely on inference, I hope to show that the extant source materials provide sufficiently strong hints to fill in some of the most obvious gaps in our picture of how the Sumerians and Babylonians organized debt relations.

If Mesopotamians had been more considerate of modern desires to understand the logic that underlay their practices, they might have left a treatise along such lines for our benefit. But they neglected to do so, perhaps believing that their way of dealing with problems was so obvious as to be self-evident. Although assyriologists are among the least inclined to indulge in guesswork, I think a point has been reached where informed intuition is preferable to silence in the face of the anachronistic categories that characterize some of the most widely accepted theories and speculative excesses by economists and anthropologists.

My first objective is to establish the priority of commercial over agrarian interest-bearing debt. I believe that the practice of charging interest appears to have originated in the advance of handicrafts and silver to merchants by the Sumerian temples and palaces to trade abroad. Agrarian barley debts appear as obligations to deliver land-rent in kind to the large institutions, as well as the accrual of fees for related agricultural inputs. Rental contracts utilized the formalities that had been developed for commercial debts, but applied the (higher) sharecropping rates as interest charges. The resulting crop debts became destabilizing and called forth the response of royal debt cancellations.

The character of these clean slates was simultaneously economic and cosmological. Their fiscal objective was to reclaim the crop usufruct for the palace, away from creditors asserting their priority over royal claims. These edicts preserved economic self-sufficiency on the land for cultivators, soldiers and their families. This function was so important that they must have been announced in a major ceremonial context, replete with the usual cosmology of restoring order out of chaos. Modern observers have found no attestation of the date within the year that such clean slates were provided, or a ceremony with which they were explicitly associated. I believe the most likely occasion was the New Year festival, which may also have provided the occasion for coronation ceremonies. Perhaps I should speak of a New Year-like festival, as there seem to have been more than one such festival each year, reflecting the different crop seasons.

In an epoch when myth, ritual and economic structures were still integrated with each other, it was natural to include economic restructuring along with the social cosmology of the calendrical renewal of time. The underlying idea of clean slates was what Mircea Eliade has called the eternal return, in this case a return to an idealized or “normalized” status quo ante. As acts of economic renewal, the idea of cyclicality was inherent in clean slates, although not necessarily one of mathematically fixed periodicity.

The commercial origins of interest-bearing debt, and the role played by Sumer’s temples

The genesis of interest-bearing debt remains one of the most intractable problems for economists to explain. Loans usually are assumed to have been invested productively as capital in the form of seeds or breeding animals, agricultural tools or other means of production, but loans in antiquity almost never were made to finance direct investment of this sort. Unlike public bodies in today’s world, the temples and palaces that operated the most elaborate landed estates and workshops acted as creditors, not debtors. They advanced land and other inputs for rent, but did not make money loans for this purpose. Family oikos estates of classical Greece and Rome likewise were creditors rather than debtors.

Historians dealing with actual documentary record have focused on the corrosive role of usury, especially in rural settings where it disrupted the traditional ethic of self-support and mutual aid. By about 2000 BC rural debts are found leading to widespread bondage of family members and forfeiture of crop rights. Over a millennium later, the biblical prophets denounced absentee owners using usury to pry land away from smallholders, and by the 7^th century BC debt crises wracked Sparta, Corinth and Athens. By the end of classical antiquity, Greek and Roman writers including Livy, Plutarch and Diodorus described usury as the main culprit in their epoch’s economic immiseration and collapse.

Loans to merchants to finance their trade ventures does not appear to have caused a problem. They provided merchants with commodities or money to trade at a profit sufficient to repay their creditors and still keep a profit for themselves. Lenders typically shared in the mercantile risk, often by taking an equity position. And if ships were lost at sea, caravans robbed or cargoes otherwise lost to the merchant through no fault of his own, the debt was cancelled. Yet economic theorists tend to overlook the likelihood that interest-bearing loans were inaugurated in this mercantile sphere.

From the outset commercial loans were functionally distinct from agrarian lending. They were denominated in silver, agrarian loans in barley or other crops (often valued at a silver-price equivalent, to be sure). The commercial rate of interest was standardized at 12/60ths per year (20 percent), substantially lower than the rate charged for barley loans (a third to half the value of the nominal principal).

Mesopotamian rulers evidently recognized what today would be called the distinction between productive and unproductive loans, for they left mercantile silver loans intact while only canceling agrarian crop debts. The latter represented rental obligations and distress lending to the poor – the type of loan classically denounced as usury.

But what kind of came first? Was rural “consumer” usury and its consequent widespread forfeiture of lands primary, or was it was an unanticipated mutation of lending that initially had been productive in character? Was agrarian usury a mutation that originated in productive loans? Or, might mercantile lending have been a fortuitous application of erstwhile corrosive usury by enterprising merchants trading with personal loans – something akin to doing modern business with one’s high-interest credit card?

To modern eyes, charging interest seems so simple as not to need any explanation, but its calculation requires a number of institutional preconditions that do not develop in a vacuum. Among the prerequisites are standardized weights and measures, a calendar to determine when payments are to be made, and an array of binding contractual formalities. Such standards first appear in association with the account-keeping developed by Sumer’s temples c. 3200 BC. To coordinate the allocation of food rations to their labor force and the flow of raw materials to their workshops at regular intervals (and to prevent theft), these institutions needed to develop reporting, inventory and forward-planning systems. Such account-keeping in turn required uniform quantities of products, to which standard values were assigned. The resulting system brought customary weights, measures and price equivalencies into being, as well as uniform standards of quality.

Like early weights and measures, interest charges were calendrically based, for as Thomas Aquinas would point out in a later epoch, interest represents a payment for time. Standardizing the measurement of time was achieved by replacing the lunar calendar’s months of varying lengths (averaging about 29½ days) with uniform 30-day administrative months. Inasmuch as food rations were to be consumed twice daily, the temples and palaces divided their monthly measures into 60 units. This made the typical small meal measure – one “quart”– 1/60^th of the monthly “bushel” allocation.

This sexagesimal system of fractional divisions spread throughout the Sumerian economy, including the units of weight used to measure silver. The large institutions based their accounting systems on the equivalency of one mina of silver per “bushel” of barley. Dividing the mina weight into 60 shekels of silver made each shekel equal in value to a “quart” of barley. This parity enabled the institutions to keep their accounts in a bimonetary standard, so that the value of resource flows could be calculated readily and equally in terms of silver and barley.

Other prices were plugged into this system by administrative fiat, usually in round numbers. The accounting prices used for planning internal resource flows tended to be adopted for transactions between the large institutions and families based on the land. Such prices became decoupled from official price schedules in times of scarcity, but it took many centuries before market prices and incomes to fluctuate in response to shifting supply and demand. The formalities of mortgage lending, commercial investment to finance the voyages and caravans of merchants, the charging of interest and its contractual documentation, foreclosure practices and procedures for handling disputes were developed in this public redistributive context thousands of years prior to the emergence of individualistic “market” economies.

Interest rates became part of this administrative system some time during the third millennium BC. Indirect evidence for the priority of commercial silver debts over agrarian barley debts is supplied by the uniformity of interest rates on silver debts: 1/60th per month, that is, one shekel per mina, the “unit fraction,” 12/60ths per year (20 percent in modern decimal notation), doubling the principal in five years.

Maddening as it must appear to economists looking for signs of free market rationality everywhere, interest rates in ancient economies seem to have been guided above all by a concern for ease of calculation based on the sexagesimal system of fractional weights and measures. Once having been set, this interest rate remained stable for centuries, more so even than prices such as the barley/silver ratio. Being administered, the rate was not set in a spontaneously interpersonal ad hoc manner by what Adam Smith called the haggling of the market place. Autonomously “private sector” commercial transactions simply emulated the practice of the large institutions. (Outside of Mesopotamia the standard rate of interest likewise was based on the local unit fraction: a decimalized tenth [dekate] in Greece, and a twelfth in Rome with its duodecimal system.) [1] The inference is that the initial charging of interest and the setting of interest rates was not invented spontaneously by private individuals such as cultivators, pastoral herders or merchants acting on their own, but rather by the large institutions. And the interest rate did not reflect productivity or profit potential, or supply and demand, but ease of calculation.

This working hypothesis is bolstered by examining the role played by the city-temples in mediating long-distance trade and producing domestic handicrafts. Perhaps one motive in the payment of interest to the temples was to serve as a payment to the gods for a successful voyage, akin to the military dekate donated by victorious Greek generals to their own city-temples in classical antiquity. In any event, the temples were the major producers of prestige textiles, woven by war orphans and widows in their workshops as a byproduct of their social welfare functions. The temples also were the natural repositories of their communities’ monetary savings, and hence in the best position to lend out these savings.

It is indeed plausible to suspect that interest-bearing debt originally took the form of an advance of assets enabling debtors to make an economic gain. But economists have sought for the explanation in the wrong places. The origins of such mutually beneficial debt are to be found in commercial advances of handicrafts and silver, and in advances of land by Sumer’s temples and palaces, not by prosperous individuals to needy borrowers under terms that quickly worsened their position. The prototypical agrarian debts were contractual rental agreements, but the practice of charging interest came to be applied to crop shortfalls and fee arrears owed to royal collectors, and then to loans of necessities to borrowers in general.

The logical question to ask is what problem is most likely to have been solved by charging interest on advances. We know well enough what problems this caused over an extended period of time, but in the first instance it must have appeared as a solution to some problem. I suspect that the primary role of interest was to enable temple and palace workshops to obtain what would have been deemed to be a fair part of the gains that merchants earned from trading handicrafts produced by these large institutions. Looking at the broad sweep of history, one hardly can believe that there was an initial intent to let interest-bearing debt end up polarizing economies and land tenure patterns. The practice of charging interest must have begun as an attempt to solve a problem at hand – with a solution that in times to come would create new and yet larger problems for society. After all, it has become an axiomatic rule of history that the solution to every major problem tends to create new and usually unforeseen problems.

My proposed scenario suggests that public enterprise was the key to early financial innovation. Such a finding hardly is in tune with today’s political ideology, and economists have not pursued it. My reconstruction suggests that the first creditors were not well-to-do individuals but large institutional complexes such as the temples and palaces. And economically remunerative borrowing first occurred in mercantile trade, not in agriculture or handicraft production.

I base this view by asking who the initial traders were, and where they obtained the goods that they transported over long distances by caravans and boat. Many of the prestige textiles and other handicrafts they traded came from temple and palaces workshops. In time, money was put up by well-to-do individuals, but damgar traders continued to operate and resolve disputes through their city-temples. Later they came under the supervision of the “chief trader,” gal damgar, a palace official.

Temples and palaces provided merchants with textiles and other handicrafts produced by their dependent labor force, to be exchanged for foreign raw materials. Frankfort (1951:67) has shown that many damgar merchants worked for the temples, which supplied them with food rations as well as donkeys for their caravan trips abroad. “The fact that Enlil, the chief god of Nippur, bore the epithet ‘trader of the wide world,’ and that his spouse was called ‘merchant of the world,’ is an indication of the role of the Babylonian temples in the exchange of goods. When Ur-Nammu, the first king of the Third Dynasty of Ur, attempted to reestablish the former lines of communication after the troubles of the Gutian occupation, ‘he ordered the commercial navigation and gave the ships sailing to Magan (the present Oman) again into the hand’ of Nanna, the chief god of Ur.” In a similar recent analysis, Renger (1994:201) traces how subsequently, “In Sippar during the latter part of the Old Babylonian period merchants (tamkaru) acted as entrepreneurs receiving wool from the palace for which they had to give silver at a later date. Such transactions are often described as purchase on credit.”

The problem confronting the Sumerians was how merchants should compensate the temples (and later, the palaces). How should the benefits – the trade proceeds – be split in a way that was in keeping with the values of the time? Today, economists would describe the merchant’s total sales revenue over the course of his voyage represented a combination of the basic price of the export goods and the merchant’s markup or profit. But these concepts had not yet gained currency circa 3000 BC.

Of course, merchants also engaged in other trade. It is in the nature of such trade that merchants like to delay payment for their consignments of merchandise for as long as possible, so as to use the money for further ventures of their own. Perception of this fact probably contributed to interest-bearing trade arrangements supplanting purely equity arrangements, because it concerned the timing of the payment to the large institutions or other backers of trade ventures. Trade itself is time-related, and this calendrical dimension was quantified economically. Charging interest on such advances would have provided the suppliers of merchants with an assured share of the trading profit. By 2000 BC most private lending and investment took the form of mercantile advances. The large institutions produced goods with their dependent labor force (largely composed of war-widows and orphans), and advanced them to “merchants” who usually were temple or royal officials, or at least worked in close association with the large institutions.

I must acknowledge that the attempt to fill out this scenario is confronted by an initial wall of silence in the textual record. Curiously, there are no trade and export records from Sumer. One possible explanation may be that the tablets were destroyed when the trade ventures were completed, so that no obligations remained to be carried over. On the other hand, even when tablets were broken or thrown out to be used as landfill, their pieces tend to survive. They would have had to be ground to powder or dissolved in water to destroy them beyond recognition by modern excavators. In any case, no such tablets have been discovered to date. The evidence thus is only suggestive that the arrangements that traders made with their suppliers – the large institutions in the first instance – included the charging of interest.

On the other hand, a public-sector nexus is strongly suggested in the sphere of agrarian debt.

Origins of barley interest in land-rental agreements

Most crop debts represented obligations owed under sharecropping agreements for the advance of land. The role of temples and palaces in renting out land to sharecroppers, and providing water, plows and draught animals, poses the question of the extent to which agrarian interest charges originated in the character of land rent.

Agrarian interest rates denominated in barley are attested from the end of the third millennium onward (Steinkeller 1981). Temples and palaces rented lands to sharecroppers in return for a stipulated crop to be turned over to them. Their anticipated crop-share was recorded as an obligation owed by the cultivator. Contractual debt practices seems to have provided the basic model for subsequent advances of resources such as water, tools or draught animals. Fees owed for such resources likewise were recorded as debts, on which interest was charged at the same rate as rents were charged upon the advance of land.

The reason for this conservatism in adopting pre-existing legal practice is readily understandable to anyone following modern legal habits and the desire to build on precedent. The basic debt formulae had been developed fully by the end of the third millennium. Debts were formalized by cuneiform tablets stating the sum due, the due date, and the names of witnesses, along with the appropriate seals. Additional stipulations might include guarantees by other individuals who stood surety, the pledges involved and the interest rate to be charged (often to accrue only in the event that the debt was not paid in a timely fashion). Such documents often were given a title citing the reason why the debt was established. This causum is what informs modern interpreters of what really is going on, but usually there is no such explanation.

One striking feature of agrarian debts is that their rates of interest had a broader range than did commercial silver loans. The normal rate of 12/60ths per annum is the most stable price found in the ancient world, lasting from before 2000 BC for some two thousand years. By contrast, barley-interest rates reflected sharecropping rental rates, normally ranging from 33 1/3 to 50 percent. These rates were not as standardized as the commercial silver-loan rate but were more ad hoc, especially when lenders were able to take advantage of the debtor’s distress.

Barley debts had an annual character reflecting the crop cycle, being due upon harvest at threshing time. Some assyriologists (including Van De Mieroop in this volume) find the full annual rate to have been charged without regard to the actual duration of the loan, taken as a flat proportion rather than accruing on a monthly basis like silver loans. This is a far cry from the idea that loans as early as the Neolithic took the form of advances of seeds or animals that were used to produce a usufruct out of which the borrower could repay his debt to well-to-do private lenders.   

I conclude that an economic mutation occurred as the practice of charging interest spread to cultivators living near the margin of subsistence. What came to be denounced as rural usury consisted of food and other necessities lent at interest to distressed borrowers in emergencies, and (even more important in the Old Babylonian period) arrears run up by cultivators unable to meet their stipulated payments to the palace or temples. Barley debts owed by cultivators to royal officials or other wealthy individuals seem to be an application of interest-bearing mercantile debt practice to the agrarian sphere of land rental and the assessment of fees. The idea of rent evidently was primary, but the rental contracts adopted as their model the legal agreements that had been developed for loans. What was “advanced” was, conceptually speaking, the land’s ability to yield a crop.

There was no idea of paying the temples out of a surplus, e.g. in gratitude for the god helping one’s voyage, for the interest-bearing debt typically resulted from a crop shortfall. Many such debts did not reflect prior loans but accrued as arrears for unpaid rents or fees owed to the royal collectors. This is why usury charged on agrarian barley debts tended to be corrosive, whereas interest on commercial silver debts represented a sharing in the mercantile gain. Rural debts stemming from the cultivator’s inability of to meet his basic break-even costs obliged him to pay interest out of revenue he earned elsewhere or by selling off his assets. Either way, payment in times of crop failure or military disruption ate into his meager resources. The Hebrew tarbit and neshek reflect this distinction between the idea of growth and that of a “bite.” It was the food crop bitten off by the creditor.

As most silver debts reflected a prior advance of money or inventories for trade, they normally could be paid without creating social strains. But rural debts became a lever prying away the family members of debtors, and ultimately their land rights. This is why rulers annulled them while leaving commercial silver debts intact. Part of the reason seems to have been recognition that not to cancel agrarian debts would have been to disenfranchise cultivators, the men who stocked the infantry and army. This would have depleted the community’s fighting force, dooming debt-ridden realms to defeat by outsiders.

Inasmuch as most barley debts were owed to the palace, it was easy for rulers to cancel them. By annulling these debts while leaving silver debts intact, rulers drew an implicit distinction between what classical economists called productive and unproductive debts. An implicit distinction was drawn between “interest” and “usury” similar to that which the Christian Church would draw in the twelfth century of the modern epoch, when it banned consumer usury while permitting commercial interest to be paid in the form of an agio involving foreign exchange dealings.All interest was synonymous with usury throughout antiquity. There was no specific reference to a legal rate. It was not denounced in the commercial sphere for silver loans, only to poor cultivators and other needy individuals. Agricultural debts alone were held to create economic disorder. Only modern economics indiscriminately conflates all types of credit and interest.

The important thing to recognize is that interest-bearing barley debts mounted up more rapidly than the population’s general ability to pay. The accrual of such debts thus did not reflect a similar growth in purchasing power, nor did it become the foundation for a modern-type credit pyramid. It drained the population’s ability to afford the basic needs of life, and indeed stripped away the basic asset needed as the means of self-support for rural cultivators: their right to cultivate the land.

Ancient societies dealt with the inability to pay debts in a number of ways. First, they consigned debtors to debt bondage. This may have been designed to deal with pre-commercial wergild-type debts. An alternative came to be supplied to forfeiting one’s family members or other “movable assets” to foreclosing creditors. Debtors were permitted to pledge their “immovables,” that is, their land. But this caused serious problems in disenfranchising the community’s citizens, who also happened to supply their fighting force – the infantry and, as mercenaries came to be hired, their cavalry.

It was largely to restore the community’s own essential needs for a land-tenured self-supporting citizenry and armed force that rulers proclaimed Clean Slates as part of what seems to have been an almost universal archaic practice of restoring general social order in communities. To explain the logic underlying such edicts we enter a controversial area that extends down through the biblical debt cancellations.

The calendrical timing of debt cancellations: When during the year did rulers annul debts?

The idea of periodicity in Sumerian and Babylonian Clean Slates is reflected in their proclamation at the outset of the ruler’s first full year on the throne (technically his “second” year of rule). New rulers decreed what today would be called a honeymoon period by proclaiming a Clean Slate reversing the economic imbalances that had been mounting up prior to their inauguration. This seems to have been thought of as starting a new cycle. It is not a strictly numerical idea of periodicity, but varied with the length of the ruler’s reign.

It appears that rulers also annulled agrarian debts on the occasion when they celebrated “a month of years” of their rule, that is, thirty years, as in the case of Hammurapi’s misharum proclamation of 1762 BC. In this respect these edicts were at least partially inherent in the mathematics, like the rate of interest. Such edicts also were proclaimed occasionally as circumstances warranted, as when military emergencies or crop failures made debt repayment impracticable on a large scale.

An open question concerns the extent to which such economic re-ordering was linked to the cosmological role of rulers in the sense suggested by the modern term “divine kingship.” I suspect there was an association between early Mesopotamian royal edicts “restoring order” and the New Year festival or related coronation festival, inasmuch as clean slates were intended to create a status quo ante akin to that associated with the starting of time – and the social structure – anew. Gudea, for instance, appears to have cancelled debts at such a celebration c. 2100 BC (Jacobsen 1987, and now Edzard 1997).

An associated question concerns the point at which these clean slates became merely literary and symbolic, dropping their worldly practical effect. For many years they were dismissed by scholars as being merely a literary topos rather than actually enforced. It is now known that they were indeed enforced, and indeed were elaborated over the centuries in order to close loopholes as creditors sought to hold on to their claims on the lands and other assets of their debtors despite these proclamations. Ammisaduqa’s edict specifies just how many stratagems were resorted to, which were duly closed in order to maintain the thoroughness with which rulers cleared away the overhang of debt claims and the property transfers that had ensued since the last such proclamation.

Each new reign seems to have been viewed as starting a new cycle. In this respect the underlying concept of time was circular, not linear, although there has been some discussion of just how precisely the Babylonian idea of regularity – and hence, cyclicality – was reflected in the timing of misharum acts and related royal proclamations. [2]

Anthropologists and prehistorians have long discussed the archaic idea of “cyclical time” and juxtaposed it to the modern concept of “linear time.” The essence of linear time is irreversibility. That would be the contribution of classical antiquity. It meant not only secular progress, but also the irreversibility of debt and property relations as they distorted the traditional economic order.

What is most important to recognize is the readiness of the Sumerians, Babylonians and their contemporaries to see economies as naturally developing internal strains that need to be resolved. This is just the opposite idea from the modern guiding assumption that economic disturbances automatically are cured by inherent self-correcting market mechanisms. In this respect the ancients were in advance of modern economic ideologues and the equilibrium mathematics they utilize. [3] They knew that the mathematics of debt tended to increase more rapidly than the economic capacity to pay.

How did the Sumerians and Babylonians use their idea of order (or “worldview”) to resolve the economic imbalance caused by interest-bearing debt? The public inscriptions left by rulers show that they viewed such annulments as a sacred duty to their city-gods. I suggest that royal proclamations annulling agrarian debts were coordinated with the ritual calendar for the royal enthronement ceremony that seems to have occurred at the outset of the ruler’s first full year on the throne, perhaps along with a complementary New Year ceremony. If this was the case, it is plausible that the calendrical aspects of royal Clean Slates are central to the idea of a “return to the origin” of society’s land and debt relations. By integrating royal debt policies with social cosmology, this idea was central to the archaic idea of justice. To this extent, myth and ritual texts are directly relevant to the history of debt, notwithstanding Ignace Gelb’s 1967 complaint that literary studies and “onionology” have become unduly separated into two distinct compartments.

Mesopotamian myth and ritual have long been studied more as an otherworldly topic, largely to discover the antecedents (or at least to draw parallels) with Judaism and, by extension, Christianity. There has been less work tracing the parallels between Mesopotamian Clean Slates and the biblical Jubilee Year of Lev. 25. To be sure, one of the very first articles (Schorr 1915) started this, and E. Speiser (1953, 1963) has helped fill in many of the gaps.

A major problem that has discouraged the formulation of diffusionist scenarios has been the excesses of such theory in the 1920s and the 1930s. It probably will be left to assyriologists to make a fresh start in suggesting plausible scenarios for how economic institutions evolved and permutated, usually being stripped down as they were disembedded and transplanted into new contexts.

The diffusion of debt practices outside of Mesopotamia

The idea that the practice of charging interest diffused rather than being spontaneously invented in each region is so controversial that there certainly is no general consensus that it diffused from Mesopotamia to the Mediterranean. But if the practice did indeed diffuse, this raises the question of how it came to be decontextualized from the system of checks and balances found in the Mesopotamian core. Why did classical antiquity adopt the practice of charging interest but not the originally associated practice of canceling debts when they caused problems on a society-wide scale?

My answer is that the practice of interest-bearing debt was adopted “out of context,” without the checks and balances that had been developed to integrate it smoothly in its earliest Sumerian and Babylonian contexts. [4] Trade and industry were concentrated in the households of chiefdoms rather than in centralized public institutions such as temples.

If the charging of interest was invented in third-millennium Sumer rather than being an inherently natural and universal development, then its diffusion up the Euphrates into Anatolia and to the eastern shore of the Mediterranean – and ultimately, to Greece and Rome – must be explained historically by a “critical path” analysis. No doubt the medium by which interest-bearing debt spread was commercial trade ventures as temple guilds promoted counterpart institutions abroad. The evidence suggests that Syrian and Phoenician merchants brought interest-bearing debts to Greece around 750 BC, and around the same time to Rome and the Etrurian region via Pithekousi. In any event, no hint of such debts are found in Linear B records, which end c. 1200 BC with the general economic devastation of the Aegean and Eastern Mediterranean societies.

It might be argued that this is an argument from silence, but when interest-bearing debts first appear in the historical record, the logic underlying their rates is similar to that of Mesopotamia. In each case the unit fraction was utilized as a matter of convenience: 1/60th per month in Mesopotamia, 1/10th annually (a dekate) in the Greek decimal system apparently derived from Egypt, and 1/12th in Rome, whose duodecimal system of fractions evidently was based on the division of the year into twelve months. [5] While the practice seems natural enough as a path of least resistance, it also suggests a high probability of being borrowed by example. It was coincidental that moving from east to west, from Mesopotamia to Greece and Rome, the differing arithmetic systems happened to produce a sequence of declining interest rates. For over a century economic theorists interpreted this sequence as reflecting a secular decline in productivity or profit rates, [6] but the explanation appears to lie not in an underlying economic rationale, for no such logic existed in antiquity.

The metaphoric terminology of interest – a “birth” of interest at calendrical intervals (probably the month originally, and later annually for agrarian debts, based on the harvesting season when barley obligations were paid), along with the gestation period it took for trade investments to double – was interpreted literally by economic historians seeking a “productivity” explanation for the payment of interest, based on the use of seeds or breeding cattle to produce offspring. But if the first interest-bearing debts were commercial rather than agrarian, the usufruct for productive advances was obtained in trade (mainly foreign trade by travelling merchants). The idea of “birth” of animals (or by semantic extension, the seasonal sprouting of crops) therefore must have been metaphoric rather than literal. It was a new calendrical unit of time that was “born.”

Another reason to suspect that the charging of interest represents a diffusion of Near Eastern practice is what appears to be a correlation between writing and the apparent transplanting of interest-bearing debt practices to preliterate societies. Assyria’s Kultepe trade colony in Cappadocia c. 2000 BC seems to have adopted the custom of royal “economic order” proclamations along with debt practices (Balkan 1974), but this check to over-indebtedness tended to be stripped away in the process of spreading interest-bearing debt further westward.

The inference is that interest-bearing debt developed in a particular part of the world at a particular point in time. The most severe problems associated with usury arose when it was transmitted piecemeal, without the Clean Slates found in southern Mesopotamia. Much the same kind of problem occurs when plants or animal species are transplanted to an environment in which they grow unchecked, leading to disastrous environmental consequences. This is what occurred in classical antiquity with the spread of agrarian debt. (Commercial debts were dealt with in ways that did not seriously disturb society, for they concerned relations mainly among the well-to-do.)

There is a tendency for inter-regional adaptations to decontextualize [7] originally “total” or socially holistic practices. Historians have viewed the removal of Clean Slates from classical antiquity’s interest-bearing debt system as constituting a fresh start growing out of anthropological practices such as gift exchange, as I have traced in the introduction. Yet what long has been viewed as western civilization’s “classical takeoff” may well be, to a large extent, a case of Bronze Age palace economies breaking apart during the Dark Age that occurred throughout the eastern Mediterranean from about 1200 to 700 BC.

A major reason why the practice of debt cancellations did not spread to the Mediterranean lands in classical antiquity was that the character of kingship itself was changing away from the “divine kingship” of Sumer and early Babylonia toward the more oligarchic political systems found in the Greek and Italian city-states. This is reported to have occurred in Judah and Israel early in the first millennium (the vivid passage in 1 Samuel 8 probably was interpolated at a later date than its nominal placement in the chronicles). What became a sacred in some Greek cities was a vow taken by administrators not to cancel the debts. The only known examples in historical times occurred in times of war (e.g. by Zedekiah in Judah, Coriolanus in Rome, and by Mithradates as well as the Roman generals who opposed him in the Asia Minor wars) or in civil crises such as occurred in Athens in the time of Solon (594 BC). This classical experience attests to the underlying military logic in canceling debts that is implicit in the laws of Hammurapi protecting the self-support lands of Babylon’s army fighters.

What remains unexplained is how Babylonian debt annulments came to be included in Lev. 25. No assyriologist has found firmer evidence of neo-Babylonian debt annulments than the suggestive hints cited by Michael Jursa in this volume. However, neo-Assyrian examples are well attested in the 9th century BC. [8] (Postgate 1969 and 1973). How, then, is one to bridge the gap between the misharum edict of Ammisaduqa in 1646, the neo-Assyrian andurarum edicts and the deror laws of Lev. 25?

One is left to fill in the gaps with regard to how the biblical prophets and Nehemiah shifted this practice away from one of royal prerogative to the sacred sphere at the core of Jewish religion. Debt cancellations were made periodic and hence independent of the ruler’s will, while the Levitical deror year stretched out the maximum period between debt cancellations to 50 years. To reconstruct the economic structures at work, what was left unspecified must be explained. This involves more than simply merely dealing with texts in a philologically acceptable manner. The issue to be addressed is what had changed since Mesopotamian debt practices were developed in the context of large temple and palace institutions.

Summary

Interest charges for commercial and agrarian debts appear to have originated in Sumer’s temples and palaces in the third millennium BC. I believe that the least documented form is likely to have been the original one: Interest was charged on advances of workshop handicrafts to traveling merchants associated with these large institutions as officials or holders of damgar status. Other lenders adopted the practices pioneered by their institutions. In addition to placing their own money with merchants (who often were their own relatives), they made distress loans to cultivators who lacked the money to pay the fees owed to the palace or temples, or who needed food and other resources in times of crop failure or military devastation of the land, or as a result of illness, incapacity or other hardship. However, most agrarian debts stemmed from sharecropping arrangements with the large institutions, whose anticipated crop share was recorded as a debt owed by the cultivators.

Advances of barley, seed, water, and money to pay the various types of fees owed to the palace were charged at the same rate of interest as the rate at which land was advanced. This meant that the higher rates for agrarian interest than commercial interest reflected sharecropping rates that were applied across the board to agricultural debts in general. Impoverished cultivators were obliged to pay the same rate for advances of barley or food for their own consumption or other emergency needs as they paid for the advance of productive assets. Once they fell behind in their payments, their debts tended to mount up at arrears at exorbitant rates.

In this phenomenon we find the origin of classical usury. The stipulated interest charges had to be paid by the cultivator out of other revenue (and often there was none) or by relinquishing his assets. Living near the margin of subsistence, he often was obliged to pledge the labor services of his family members (his daughters, wife, sons or house-slaves) as collateral to work off the interest and debt charges.

These family assets typically were pledged to royal collectors acting in their personal capacity, using interest-bearing debt as a means to obtain income and, ultimately even more important, the land’s usufruct from strapped debtors. By the time three years had elapsed, these interest charges typically had grown as large as the original debt. (§88 of Hammurapi’s laws limited the barley-interest rate to the commercial rate of 20 percent, in modern terms. But this ruling seems not to have been followed in practice.) This doubling seems to have underlain §117 of these laws, wiping out the barley obligation once the antichretic interest supplied by the debtor’s family members had “worked off” the debt.

This kind of agrarian usury, along with commercial lending by well-to-do private individuals acting increasingly on their own, represented an adoption of originally public institutional practices. The interest rate was been set not by the profitability of commercial advances to merchant-debtors, but by the need for simplicity of calculation, i.e., more by mathematical than by “economic” considerations.

The line of diffusion ran from Mesopotamia’s initially temple- and palace-centered practices to the population at large. Geographically, these practices diffused from Mesopotamia up along the Euphrates to the northeast, eastward to the Mediterranean and to the Assyrian trade colonies in central Turkey (Cappadocia). But it apparently took until the 8^th century BC for the practice of charging interest to pass to the Aegean, the Greek mainland and to Italy. As late as the 13^th century BC there is little trace of interest charges in Ugarit, the Hittite lands, Crete or Mycenaean Greece.

The problem of how the earliest interest rates were determined is important for a number of reasons. A modern economic analysis would explain why interest rates could afford to be paid. If interest indeed could normally be paid, there would have been little need for debt cancellations. A related consequence is whether the apparent decline in interest rates over the course of antiquity resulted from economic causes such as profit rates, soil and capital productivity, the spread of money exchange, greater security of investment and so forth, or from non-economic considerations.

The key to tracing the historical origin and spread of interest-bearing debt lies in a careful economic definition of just what interest it. What makes the formal charging of interest different from, say, the informal web of “anthropological” obligations is that it is specified as to its amount as precisely the unit-fraction, 1/60th per month. The time of repayment or accrual of interest is specified in advance. Thus, rather than being open-ended as in gift exchange, it is closed-ended as far as the timing of the payment is concerned. (For Assyrian commercial loans, this time period was five years, when 60 months had passed and the original loan had fully reproduced itself, and compound interest could begin. For shorter-term loans, I suspect that the key calendrical date was the new moon, as it was in classical Greece.) Failure to repay does not result simply in losing face and status; it permits the creditor to proceed with formal foreclosure proceedings, leading to debt-bondage and forfeiture of land-rights, and hence of the most essential means of self-support for community members.

Economic institutions mutate in the process of being transplanted from one context to another, from centralized to decentralized economies, from large-scale to small-scale economic institutions. With regard to the idea of diffusion, it should be borne in mind that there are no pristine tribal societies in today’s world. Nearly all appear to reflect culture contact, borrowings and adaptations. By the 19th century, there were scarcely any pristine relations to be discovered, except by consulting the historical and prehistoric records. In any case, the idea of taking a “primitive tribe” as an analogue for Sumer rests on the assumption that there is a single, linear, genetic pattern based on “stages of development.”

There has been some attempt to search throughout the world's tribally based societies to find the kind of relationships that might “logically” have been developed under similar material conditions similar to those of Sumer. The working assumption is that similar economic challenges produce similar solutions. Thus, early in the 20th century, Marcel Mauss interpreted tribal gift-exchange as an analogue for interest-bearing debt, and imagined this to have provided the prototypical origin of what, in time, became a regular periodic payment, stipulated in advance. He then described the rather curious gift exchange practices of the Kwakiutl of the northwest American Pacific coast as an example.

I believe that this conflates two quite different phenomena. What occurred in Sumer was above all an economic revolution going beyond “anthropological” relationships. We therefore should inquire how Sumerian developments shaped Babylonia and the rest of the Near East, and how these regions shaped classical antiquity’s development, which in turn shaped subsequent European practice.

Civilization only happened once, and it occurred in a particular way. Its economic dynamics, above all the dynamics of interest-bearing debt, can be traced from Mesopotamia via classical antiquity, up the coast of Europe, to North America and also to Asia. There may well have been a broad range of ways in which the world economy could have developed. Our civilization was not destined inevitably to have evolved in just the way it did. A wide variety of possible mutations and combinations offered itself.