Debt: The First 5000 Years Part 18

30. Pommeranz 1998, Goldstone 2002 for an introduction to the vast literature on comparative standards of living. India was actually doing rather well also for most of its history.

31. Zurcher 1958:282.

32. Gernet 1956 (1999: 24142); for the following discussion see Gernet 1960, Jan 1965, Kieschnick 1997, Benn 1998, 2007.

33. Tsan-ning (919-1001 ad) quoted in Jan 1965:263. Others appealed to the history of bodhisattvas and pious kings who had made gifts of their own bodies, such as the king who, in time of famine, leapt to his death to be transformed into a mountain of flesh, replete with thousands of heads, eyes, lips, teeth, and tongues, which for ten thousand years only grew larger no matter how much of it humans and animals ingested (Benn 2007:95, 108; cf. Ohnuma 2007).

34. Tu Mu, cited in Gernet 1956 (1995:245).

35. This might come as something of a surprise, since the phrase is used so often in contemporary Western popular usage, "karmic debt" becoming something of a New Age cliche. But it seems to strike a much more intuitive chord with Euro-Americans than it ever did in India. Despite the close a.s.sociation of debt and sin in the Indian tradition, most early Buddhist schools avoided the concept-largely because it implied a continuity of the self, which they saw as ephemeral and ultimately illusory. The exception were the Sammitiya, called "personalists" as they did believe in an enduring self, who developed the notion of avipra, whereby the results of good or bad actions-karma-"endure like a sheet of paper on which a debt is inscribed" as an unconscious element of the self that pa.s.ses from one life to another (Lamotte 1997:2224, 8690; l.u.s.thaus 2002:20910). The idea might have died with that sect had it not been taken up by the famous Mahayana philosopher Ngrjuna, who compared it to an "imperishable promissory note" (Kalupahana 1991:5455, 249; Pasadika 1997). His Mdhyamaka school in turn became the Sanlun or "Three Treatise" school in China; the notion of karmic debt was taken up in particular by the "Three Stages" or "Three Levels" school created the monk Hsin-Hsing (54094 ad) (Hubbard 2001).

36. Commentary on the Dharma of the Inexhaustible Storehouse of the Mahayana Universe, as translated by Hubbard (2001:265), with a few changes based on Gernet (1956 [1995:246]).

37. In Hubbord 2001:266.

38. Dao Shi, in Cole 1998:117. Cole's book provides an excellent summary of this literature (see also Ahern 1973, Teiser 1988, Knapp 2004, Oxfeld 2005). Some Medieval texts focus exclusively on the mother, others on parents generally. Interestingly, the same notion of an infinite and unpayable "milk-debt" to one's mother also appears in Turkey (White 2004:7576).

39. Sutra for the Recompense of Grat.i.tude cited in Baskind 2007:166. My "four billion years" translates "kalpa," which is technically 4.32 billion years. I also changed "them" for parents to "her" for mother since the context refers to a man who cut his own flesh specifically for his mother's sake.

40. Chinese Buddhists did not invent the p.a.w.nshop, but they appear to have been the first to sponsor them on a large scale. On the origins of p.a.w.nbroking in general, see Hardaker 1892, Kuznets 1933. On China specifically: Gernet 1956 [1995:17073], Yang 1971:7173, Whelan 1979. In a remarkable parallel, the first "formal" p.a.w.nshops in Europe also emerged from monasteries for similar purposes: the monti di pieta or "banks that take pity" created by the Franciscans in Italy in the fifteenth century. (Peng 1994:245, also makes note of the parallel.) 41. Gernet 1956 [1995:14286], Ch'en 1964:26265; Collins 1986:6671; Peng 1994:24345. It would seem that Taoist monasteries, which also multiplied in this period, banned making loans (Kohn 2002:76), perhaps in part to mark a distinction.

42. Gernet 1956 [1995:228], where he famously wrote, "the donors to the Inexhaustible Treasuries were shareholders, not in the economic domain but that of religion." As far as I know, the only contemporary scholar who has fully embraced the premise that this was indeed an early form of capitalism is Randall Collins (1986) who sees similar monastic capitalism in later Medieval Europe as well. The accepted Chinese historiography has tended to see the first "shoots of capitalism" developing later, in the Song, which was much less hostile to merchants than other dynasties, followed by a full embrace of the market-but firm rejection of capitalism-in the Ming and Qing. The key question is the organization of labor, and in Tang times this remains somewhat opaque, since even if statistics were available, which they're not, it's difficult to know what terms like "serf," "slave," and "wage-laborer" actually meant in practice.

43. Gernet 1956 [1995:11639], Ch'en 1964:26971, on land reclamation and monastic slaves.

44. "It is claimed that the purpose of this generosity is to relieve the poor and orphans. But in fact there is nothing to it but excess and fraud. This is not a legitimate business" Gernet 1956 (1995:1045, 211).

45. Gernet 1956 [1995:22].

46. See Adamek 2005, Walsh 2007.

47. This is probably why abstractions like Truth, Justice, and Freedom are so often represented as women.

48. Marco Polo observed the practice in the southern province of Yunnan in the thirteenth century: "But when they have any business with one another, they take a round or square piece of stick, and split it in two; and one takes one half and the other takes the other half. But before they split it, they make two or three notches in it, or as many as they wish. So, when one of them comes to pay another, he gives him the money or whatever it is, and gets back the piece of stick the other had" (Benedetto 1931:193). See also Yang 1971:92, Kan 1978, Peng 1994:320, 330, 508, Trombert 1995:1215. Tallies of this sort seem, according to Kan, to have preceded writing; and one legend claims that the same man, a minister to the Yellow Emperor, invented both writing and tally contracts simultaneously (Trombert 1995:13).

49. Graham 1960:179.

50. Actually the similarity was noticed in antiquity as well: Laozi (Daodejing 27) speaks of those who can "count without a tally, secure a door without a lock." Most famously, he also insisted "when wise men hold the left tally pledge, they do not press their debtors for their debts. Men of virtue hold on to the tally; men lacking virtue pursue their claims" (stanza 79).

51. Or one might better say, turning them at one snap from monetary debts to moral ones, since the very fact that we know the story implies he was eventually rewarded (Peng 1994:100). It is probably significant that the word fu, meaning "tally," also could mean "an auspicious omen granted to a prince as a token of his appointment by Heaven" (Mathews 1931:283). Similarly, Peng notes a pa.s.sage from Strategems of the Warring States, about a lord attempting to win popular support: "Feng hurried to Bi, where he had the clerks a.s.semble all those people who owed debts, so that his tallies might be matched against theirs. When the tallies had been matched, Feng brought forth a false order to forgive these debts, and he burned the tallies. The people all cheered" (ibid:100n9). For Tibetan parallels, see Uebach 2008.

52. Similar things happened in England, where early contracts were also broken in half in imitation of tally sticks: the phrase "indentured servant" derives from this practice, since these were contract laborers; the word actually derives from the "indentations" or notches on the tally stick used as a contract (Blackstone 1827 I:218).

53. L. Yang 1971:52; Peng 1994:32931. Peng perceptively notes "this method of matching tallies to withdraw cash was actually an outgrowth of the process used in borrowing money, except that the movement over time of loans was transformed into a movement over s.p.a.ce" (1994:330).

54. They were called "deposit shops"-and L. Yang (1971:7880) calls them "proto-banks." Peng (1994:32327) notes something along these lines was already operating, at least for merchants and travelers, under the Tang, but the government had strict controls preventing bankers from reinvesting the money.

55. The practice began in Sichuan, which had its own peculiar form of cash, in iron, not bronze, and therefore much more unwieldy.

56. Peng 1994:508, also 515, 833. All this is very much like the token money that circulated in much of Europe in the Middle Ages.

57. The most important scholarly exponent of this view is von Glahn (1994, though Peng [1994] holds to something close), and it seems the prevailing one among economists, popular and otherwise.

58. Diagram from MacDonald 2003:65.

59. One of the favorite images employed when remembering the rule of the Legalists, under the much-hated First Dynasty, was that they constructed great bra.s.s cauldrons, in which each law was openly and explicitly spelled out-then used them to boil criminals alive.

60. See Bulliet 1979 (also Lapidus 2003:14146) on the process of conversion. Bulliet also emphasizes (ibid:129) that the main effect of ma.s.s conversion was to make the ostensible justification of government, as protector and expander of the faith, seem increasingly hollow. Ma.s.s popular support for caliphs and political leaders only reemerged in periods, like the Crusades or during the reconquista in Spain, when Islam itself seemed under attack; as of course, for similar reasons, it has in much of the Islamic world today.

61. "Most of the time the lower circles paid their taxes through their heads, and looked after themselves. Similarly the government received the taxes and provided some sort of security, and apart from this, occupied itself with matters of concern to itself: external war, patronage of learning and the arts, a life of luxurious ostentation" (Pearson 1982:54).

62. The proverb appears, attributed to the Prophet himself, in al-Ghazali's Ihya', kitab al-'Ilm, 284, followed by a long list of similar statements: "Sa'id Bin Musaiyab said, 'When you see a religious scholar visiting a prince, avoid him, for he is a thief.' Al-Auza'i said, 'There is nothing more detestable to Allah than a religious scholar who visits an official' ..." etc. This att.i.tude has by no means disappeared. A strong majority of Iranian ayatollahs, for example, oppose the idea of an Islamic state, on the grounds that it would necessarily corrupt religion.

63. Lombard 1947, Grierson 1960. This is often represented as a wise policy of refusal to "debase" the coinage, but it might equally be read as meaning that the caliph's signature added no additional value. An experiment with Chinese-style paper money in Basra in 1294 failed, as no one was willing to accept money backed only by state trust (Ashtor 1976:257).

64. MacDonald 2003:64. Gradually this became unsupportable and Muslim empires adopted the more typically Medieval iqta' system, whereby soldiers were granted the tax revenues from specific territories.

65. Neither have slaves been employed as soldiers since, except in temporary and anomalous circ.u.mstance (e.g., by the Manchus, or in Barbados).

66. It seems significant that (1) the "inquisition" of 832, the failed Abbasid attempt to take control of the ulema; (2) the most important ma.s.s conversion of the Caliphate's subjects to Islam, peaking around 825850; and (3) the definitive ascent of Turkish slave soldiers in Abbasid armies, often dated to 838, all roughly corresponded in time.

67. Elwahed 1931:11135. As he puts it (ibid:127), "the inalienability of liberty is one of the fundamental and uncontested principles of Islam." Fathers do not have the right to sell their children, and individuals do not have the right to sell themselves-or at least, if they do, no courts will recognize any resultant ownership claims. I note that this is the diametrical opposite of the "natural law" approach that later developed in Europe.

68. There is a certain controversy here: some scholars, including some contemporary Muslim scholars opposed to the Islamic economics movement, insist that riba, which is unequivocally condemned in the Koran, did not originally refer to "interest" in general, but to a pre-Islamic Arabian practice of fining late payment by doubling the money owed, and that the blanket condemnation of interest is a misinterpretation (e.g., Rahman 1964, Kuran 1995). I am in no position to weigh in but, if true, this would suggest that the ban on usury really emerged in Iraq itself as part of the process of the creation of gra.s.sroots Islam, which would actually reinforce my general argument.

69. The best records we have are actually from a community of Jewish merchants in Geniza, in twelfth-century Egypt, who observed the ban on interest even in dealings with one another. The one area where we regularly hear of interest being charged is the one area where coercion was also regularly employed: that is, in dealings with kings, viziers, and officials, who often borrowed large sums of money at interest-especially, but not exclusively, from Jewish or Christian bankers-to pay their troops. Obliging a request for such an illegal loan was a dangerous business, but refusing even more so (for Abbasid examples, see Ray 1997:6870, mainly drawing from Fischel 1937).

70. There were also a whole host of legal subterfuges (called hiyal) that one might undertake if one were absolutely determined to charge interest: for instance, buying one's debtor's house for the amount of the loan, charging them rent for it, and then allowing them to buy it back for the same sum; having one's debtor agree to buy a certain product monthly and sell it to one at a discount, and so forth. Some schools of Islamic law banned these outright; others merely disapproved. It used to be a.s.sumed that these methods were widely employed, since most economic historians a.s.sumed interest to be a necessary element of credit, but recent research provides no evidence that they were especially common (for the older view: Khan 1929, for the new: Ray 1997:5859).

71. Mez 1922:448, quoted in Labib 1969:89. Note that Basra, the city where everyone in the market paid by check, was also the city where, a century later, Mongol attempts to introduce government-issue paper money were so doggedly resisted. The word sakk is incidentally the origin of the English "check." The ultimate origins of sakk are contested: Ashtor (1972:555) suggests they were Byzantine; Chosky (1988), Persian.

72. Goitein (1966, 1967, 1973) provides a detailed summary of financial practices among Jewish merchants in twelfth-century Egypt. Almost every transaction involved credit to some degree. Checks, remarkably similar even in appearance to the kind used today, were in common usage-though sealed bags of metal coins were even more common in everyday transactions.

73. Though apparently governments sometimes paid wages by check (Tag El-Din 2007:69.) I am no doubt underplaying the government role in all this: there were, for instance, attempts to set up central government banks, and certainly usually a commitment in principle that the government should enforce commercial standards and regulations. It seems, however, that this rarely came to much in practice.

74. Udovitch 1970:7174.

75. Sarakhsi in Udovitch 1975:11, who has a good discussion of the issues involved. Likewise Ray 1997:5960.

76. This should surely also be of interest to students of Pierre Bourdieu, who made a famous argument, based on his study of Kabyle society in Algeria, that a man's honor in such a society is a form of "symbolic capital," a.n.a.logous to but more important than economic capital, since it is possible to turn honor into money but not the other way around (Bourdieu 1977, 1990). True, the text above does not quite say this, but one does wonder how much this is Bourdieu's own insight, and how much simply reflects the common sense of his informants.

77. Following K.N. Chaudhuri (1985:197). The expansion of Islam was spearheaded by both Sufi brotherhoods and legal scholars; many merchants doubled as either or both. The scholarly literature here is unusually rich. See, for instance: Chaudhuri 1985, 1990; Risso 1995; Subrahmanyam 1996; Barendtse 2002; Beaujard 2005.

78. In Goody 1996:91.

79. M. Lombard 2003:17779.

80. Burton's translation; 1934 IV:2013.

81. And what's more, officials employed their own person bankers, and themselves made extensive use of credit instruments such as suftaja both for transfer of tax payments, and the secreting away of ill-gotten gains (Hodgson 1974 I:301, Udovitch 1975:8, Ray 1994:6971.) 82. "For Mohammed this natural regulation of the market corresponds to a cosmic regulation. Prices rise and fall as night follows day, as low tides follow high, and price imposition is not only an injustice to the merchant, but a disordering of the natural order of things" (Essid 1995:153).

83. Only very limited exceptions were made, for instance in times of disaster, and then most scholars insisted it was always better to provide direct relief to the needy than to interfere with market forces. See Ghazanfar & Islahi 2003, Islahi 2004:3132; for a fuller discussion of Mohammed's views on price formation, see Tuma 1965, Essid 1988, 1995.

84. Hosseini 1998:672, 2003:37: "Both indicate that animals, such as dogs, do not exchange one bone for another."

85. Hosseini 1998, 2003. Smith says he visited such a factory himself, which may well be true, but the example of the eighteen steps originally appears in the entry "epingle" in Volume 5 of the French Encyclopedie, published in 1755, twenty years earlier. Hosseini also notes that "Smith's personal library contained the Latin translations of some of the works of Persian (and Arab) scholars of the medieval period" (Hosseini 1998:679), suggesting that he might have lifted them from the originals directly. Other important sources for Islamic precedents for later economic theory include: Rodison 1978, Islahi 1985, Essid 1988, Hosseini 1995, Ghazanfar 1991, 2000, 2003, Ghazanfar & Islahi 1997, 2003. It is becoming more and more clear that a great deal of Enlightenment thought traces back to Islamic philosophy: Decartes' cogito, for example, seems to derive from Ibn Sina (a.k.a. Avicenna), Hume's famous point that the observance of constant conjunctions does not itself prove causality appears in Ghazali, and I have myself noticed Immanuel Kant's definition of enlightenment in the mouth of a magic bird in the fourteenth-century Persian poet Rumi.

86. Tusi's Nasirean Ethics, in Sun 2008:409.

87. Ghazanfar & Islahi 2003:58; Ghazanfar 2003:3233.

88. So for example among Ghazali's ethical principles, we find "the buyer should be lenient when bargaining with a poor seller and strict when transacting with a rich seller," and "a person should be willing to sell to the poor who do not have the means and should extend credit to them without the expectation of repayment" (Ghazali Ihya Ulum al Din II:7982, cited in Ghazanfar & Islahi 1997:22)-the latter of course recalling Luke 6:35.

89. Ghazali in Ghazanfar & Islahi 1997:27.

90. Ibid:32.

91. Ibid:32.

92. Ibid:35. On postmen in Medieval Islam: Goitein 1964. Ghazali's position here recalls and is no doubt influenced by Aristotle's Nicomachean Ethics (1121b): that since money is a social convention meant to facilitate exchange, diverting it into usury defies its purpose; but its ultimate thrust is quite different, closer to Thomas Aquinas' argument that money is basically a measure and that usury distorts it, and Henry of Ghent's argument that "money is a medium in exchange and not a terminus"-unsurprisingly, since Aquinas was likely directly influenced by him (Ghazanfar 2000).

93. It's hard to overstate this. Even the famous "Laffer Curve," by which the Reagan Administration in the 1980s tried to argue that cutting taxes would increase government revenue by stimulating economic activity, is often called the Khaldun-Laffer curve because it was first proposed, as a general principle, in Ibn Khaldun's 1377 Muqaddimah.

94. Goitein 1957 for the rise of the "Middle Eastern bourgeoisie."

95. "Crying down" acted as a de facto tax increase, since one would now need to pay more ecus to make up a tax rate fixed in shillings. Since wages were fixed in pounds, shillings, and pence, this also had the effect of raising their value, and hence it was usually popular. "Crying up" by contrast had the effect of lowering the effective value of the units of account. This could be useful to reduce a king's-or his allies'-personal debt measured in such units, but it also undercut the income of wage-earners and those on any sort of fixed income and so was often protested.

96. Langholm 1979, Wood 2002:7376.

97. On the patristic literature on usury: Maloney 1983; Gordon 1989; Moser 2000; Holman 2002:11226; Jones 2004:2530.

98. Matthew 5:42 99. St Basil of Caesarea, Homilia II in Psalmum XIV (PG 29, 26869).

100. op cit.

101. op cit.

102. Ambrose De Officiis 2.25.89.

103. Ambrose De Tobia 15:51. See Nelson 1949:35, Gordon 1989:114118.

104. Though not entirely. It's worthy to note that the main supply of slaves to the empire at this time came from Germanic barbarians outside the empire, who were acquired either through war or debt.

105. "If each one," he wrote, "after having taken from his personal wealth whatever would satisfy his personal needs, would leave what was superfluous to those who lack every necessity, there would be no rich or poor" (In Illiud Lucae 49D)-Basil himself had been born an aristocrat, but he had sold off his landed estates and distributed the proceeds to the poor.

106. Homilia II in Psalmum XIV (PG 29, 277C). The reference is to Proverbs 19.17.

107. Summa 8.3.1.3: "since grace is freely given, it excludes the idea of debt ... In [no] sense does debt imply that G.o.d owes anything to another creature."

108. Clavero (1986) sees this as a basic conflict over the nature of the contract, and hence the legal basis of human relations in European history: usury, and by extension profit, was denounced, but rent, the basis of feudal relations, was never challenged.

109. Gordon 1989:115. "What is commerce," wrote Ca.s.siodorus (485585), "except to want to sell dear that which can be bought cheap? Therefore those merchants are detestable who, with no consideration of G.o.d's justice, burden their wares more with perjury than value. Them the Lord evicted them from the Temple saying, 'Do not make my Father's house into a den of thieves" (in Langholm 1996:454).

110. On the Jewish legal tradition concerning usury, see Stein 1953, 1955; Kirschenbaum 1985.

111. Poliakov 1977:21.

112. Nelson (1949) a.s.sumed that the "Exception" was often held to apply to relations between Christians and Jews, but Noonan (1957:1012) insists that it was mainly held to apply only to "heretics and infidels, particularly the Saracens," and by some, not even to them.

113. Up to 52 percent with security, up to 120 percent without (Homer 1987:91).

114. Debtor's prisons, in the sense of prisons exclusively for debtors, existed in England only after 1263, but the imprisonment of debtors has a much longer history. Above all, Jewish lenders seem to have been employed as the means of transforming virtual, credit money into coinage, collecting the family silver from insolvent debtors, and turning it over to royal mints. They also won t.i.tle to a great deal of land from defaulting debtors, most of which ended up in the hands of barons or monasteries (Singer 1964; Bowers 1983; Schofield & Mayhew 2002).

115. Roger of Wendower, Flowers of History 25253. Roger doesn't name the victim; in some later versions his name is Abraham, in others, Isaac.

116. Matthew Prior, in Bolles 1837:13.

117. Or even, for that matter, Nietzsche's fantasies of the origins of justice in mutilation. Where one was a projection onto Jews of atrocities actually committed against Jews, Nietzsche was writing in an age where actual "savages" were often punished by similar tortures and mutilations for failure to pay their debts to the colonial tax authorities, as later became a most notorious scandal in Leopold's Belgian Congo.

118. Mundill (2002), Brand (2003).

119. Cohn 1972:80.

120. Peter Cantor, in Nelson 1949:1011.

121. It was a firm from Cahors, for instance, who received the property of the English Jews when the latter were finally expelled in 1290. Though for a long time, Lombards and Cahorsins were themselves dependent on royal favor and hardly in much better position than the Jews. In France, the kings seemed to expropriate and expel Jews and Lombards alternately (Poliakov 1977:42).

122. Noonan 1957:1819; Le Goff 1990:2327.

123. There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men profit from one another. The most hated sort, and with the greatest reason, is usury, which makes a profit out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term "interest" (tokos), which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. "Wherefore of all modes of getting wealth this is the most unnatural" (Aristotle, Politics 1258b). The Nicomachean Ethics (1121b) is equally d.a.m.ning. For the best general a.n.a.lysis of the Aristotelean tradition on usury: Langholm 1984.

124. Noonan 1957:10512; Langholm 1984:50.

125. The technical term for the lost income is lucrum cessans: see O'Brien 1920: 10710, Noonan 1957:11428, Langholm 1992:6061; 1998:75; Spufford 1989:260.

126. As German merchants also did in the Baltic cities of the Hanseatic alliance. On the Medici bank as a case in point, see de Roover 1946, 1963, Parks 2005.

127. The situation in Venice, a pioneer in these matters, is telling: there was no merchant guild, but only craft guilds, since guilds were essentially created as protection against the government, and in Venice, the merchants were the government (MacKenney 1987; Mauro 1993:25960).

128. They were accused of both heresy and sodomy: see Barber 1978.

129. One cannot "prove" the Islamic inspiration of European bills of exchange, but considering the amount of trade between the two sides of the Mediterranean, denying it seems bizarre. Braudel (1995:81617) proposes that the idea must have reached Europe through Jewish merchants, who we know to have long been using them in Egypt.

130. On bills of exchange: Usher 1914; de Roover 1967; Boyer-Xambeu, Deleplace, and Gillard 1994; Munro 2003b:54246; Denzel 2006. There were innumerable currencies, any of which might at any time be "cried up," "cried down," or otherwise fluctuate in value. Bills of exchange also allowed merchants to effectively engage in currency speculation, and even get around usury laws, once it became possible to pay for one bill of exchange by writing a different bill of exchange, due in several months' time, for a slightly higher sum. This was called "dry exchange" (de Roover 1944), and over time the Church became increasingly skeptical, causing yet another round of financial creativity to get around the laws. It's worthy of note that the rates of interest on such commercial loans were generally quite low: twelve percent at the highest, in dramatic contrast to consumer loans. This is a sign of the increasingly lower risk of such transactions (see Homer 1987 for a history of interest rates).

131. Lane 1934.

132. "In very many respects, such as the organization of slave labor, management of colonies, imperial administration, commercial inst.i.tutions, maritime technology and navigation, and naval gunnery, the Italian city-states were the direct forerunners of the Portuguese and Spanish empires, to the shaping of which the Italians contributed so heavily, and in the profits of which they so largely shared" (Brady 1997:150).