08 July 2015

Greece Shaking Off of Burdens



The innovation of Legal Tender in seventh century BC was adopted by the greater part of the Greek world. Towards the end of the seventh century BC, wealth and debt went extreme with complications.

Money and Man by Elgin Groseclose, 1961
The introduction of coined money [Legal Tender] produced what might be called in today’s parlance "boom times" in the Mediterranean. It was an era of expansion, of the development of frontiers, of the exploitation of natural resources. Cities flourished, trade was active, debtors and creditors appeared, banks were organized, and in the end there grew up a host of attendant evils resulting from an unbalanced economy based too largely on money.

Toward the end of the seventh century B.C., the Greek civilization, which had been riding the crest of a sudden prosperity, was being carried, irretrievably, it seemed, toward the dark headlands of disaster. The inexorable culmination to the era grew out of the growth of debt. In Attica, as in modern America, the incubus of debt had thrust its tentacles into the very vitals of society. The greater part of the peasants’ holdings had come under mortgage, the evidences of which were stone pillars erected on the land, inscribed with the name of the lender, the amount, the rate, and the maturity of the loan. A still more insidious form of debt was the chattel mortgage in which the farmer could pledge his own person or that of his wife or his children, for the repayment of a loan. These chattels, under Athenian law, could be sold off into slavery, and such was the extent of the existing credit structure that the greater part of the agricultural population was in danger of being converted into bondage.

A state of affairs developed in Greece toward the end of the seventh century B.C. similar to that in the Middle West in the nineteen twenties. Revolution was being talked, with mutterings about "redistribution of the land," and armed insurrection was imminent.

A History of Interest Rates by Sidney Homer, Rutgers University Press, 1963
In Attica, at the beginning of the sixth century B.C. the tenant farmers were under severe economic pressure and threatened rebellion. They were sometimes able to keep only the sixth part of their produce. Personal slavery of whole families for debt was permitted and became common. Freeman had to compete with slaves. In spite of the relief provided by extensive colonization, discontent grew. Pawn credit was widespread. Debt had become an insupportable burden. At this crucial point (594 B.C.) the poet and wiseman Solon was called upon by Athens to assume supreme legislative power for a limited period and revise her laws.

Money and Man by Elgin Groseclose, 1961
The moneyed classes, the aristocracy, and the merchants, sensed the growing dissatisfaction among the masses, and in the hope of staving off rebellion, put up Solon for archonship in 594 B.C. The oligarchy had tried their best to enforce this law of debtor and creditor, with its disastrous series of contracts, and the only reason why they consented to invoke the aid of Solon was because they had lost the power of enforcing it any longer, in consequence of the newly awakened courage and combination of people.
Inaugurated as archon, Solon moved with amazing speed, and before the country knew what was happening, it was going through a social, economic and political revolution that completely revamped the character of the Athenian state and still amazes historians.

Solon assumed extra-legal powers, and with a facility for "catch" expressions that took hold of popular fancy, issued immediately a revolutionary decree under the appealing name "Shaking Off of Burdens". This decree, going at once to the heart of the money problem, tore down all the mortgage pillars of Athens and abrogated at once all agricultural and personal loans. It liberated all those debtors who were actually in slavery under previous legal adjudication, and it forbade any Athenian to pledge his own person or that of any member of his family as security for a loan.

A History of Interest Rates by Sidney Homer, Rutgers University Press, 1963
Solon’s reforms were radical and for the most part they endured. He canceled many debts secured by land and scaled down others. All those enslaved for debt were freed; those sold abroad for debt were redeemed at state expense. Political power was reapportioned according to property. The drachma was devalued by about one quarter. Weights and measures were increased in size. Citizenship was granted to immigrants who were skilled artisans. Judging from these reforms and their acceptance, the economic crisis of 594 B.C. was severe indeed.

Money and Man by Elgin Groseclose, 1961
Of course it shattered the credit structure of Athenian economy. Deprived of the security behind their assets, and with obligations of their own to meet, the landlords and the money lenders were thrown into practical bankruptcy. In solution to this problem, the crumbling financial edifice, Solon provided a partial moratorium by means of a debasement of the currency. The money question solved temporarily - it was to come up again and again in Greek history - Solon was now able to lay the foundation for the enduring structure of reform which brought into being that cynosure of history - the Athenian democracy.

To prevent complete authoritative meltdown, the Greek State responded to the economic crisis and looming revolution with the carrot of democracy.

Democracy (Random House Dictionary):
Government by the people; a form of government in which the supreme power is vested in the people and exercised directly by them.

However, the system was not a pure democracy, but a democracy more representative of propertied individuals, individuals with the greatest ownership, individuals who derive the greatest interest income.

A People’s History of the United States by Howard Zinn, 1980
When economic interest is seen behind the political clauses of the Constitution, then the document becomes not simply the work of wise men trying to establish a decent and orderly society, but the work of certain groups trying to maintain their privileges, while giving just enough rights and liberties to enough of the people to ensure popular support.

To this day, the image of Solon graces the frieze of the United States Supreme Court building, captioned with "Equal Justice Under Law", impressively supported by pillars of Greek columns, an architectural style that continues to adorn buildings of Law and Money.

Solon (Random House Dictionary)
a wise lawgiver.



Confucious, Moses, and Solon



Debt: The Gift that Keeps Giving

Government to 'retire' some of its WW1 debt
31 Oct 2014
The UK Government has said that it will 'retire' £218m of the UK's £2bn First World War debt by refinancing bonds originally issued by Winston Churchill. The UK has paid a total of £1.26bn in interest on these bonds since then. The continued existence of the war bond debt illustrates the lasting shadow cast by World War One. According to the UK Treasury there are currently 11,200 registered holders of the bonds. In addition to the war bonds, some of the debt being refinanced by the Treasury dates back to the 18th Century.  One of these bonds was issued by William Gladstone in 1853 to consolidate the capital stock of the South Sea Company, which was founded in 1711. The South Sea Company collapsed during the South Sea Bubble financial crisis of 1720, leaving behind it a lot of debt. In 1932 Chancellor Neville Chamberlain converted some war bonds into "perpetuals". This gave the government the right not to pay back the loans, as long as they continued paying 3.5% interest on them. Perpetual bonds, as the name suggests, pay a steady stream of interest forever.

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