As our government returns to work and prepares for the next debt debate it seems the world has spent the years since 2008 stumbling from one debt crisis to another. If we include the Third World debt crisis, which affected most human beings on the planet, the world has been in continual debt crisis since the 1970’s. This might seem like a new period of human history brought on by virtual credit but a broader view shows credit and debt have been the predominate form of money in the world. In Mesotopamia, elaborate credit systems predate coinage by thousands of years. The remarkable thing is that they were able to maintain these system without a large state but instead relied on two aspects: honor and overarching insitutions typically religious in nature.
Honor held most agreements together as merchants needed to develop reputations of integrity. Not just of paying their debts and being a pillar of the community but also forgiving other people of theirs if they were in difficult times. Thus driving the idea that money was not the most important thing. This allowed merchants in Ethiopia and other Indian Ocean trading posts to avoid written contracts preferring to seal contracts with a handshake and ” a glance at heaven.” If there were problems they referred to Sharia Courts who had no power to arrest anyone but could destroy someone’s reputation or “credit worthiness.”
The religious institutions, which were larger than states, ensured that debt didn’t fly out of hand. Periods of history dominated by credit money where everyone realized that money is just a promise or “social agreement” need some mechanism to protect those in debt. Often Mesotoapia kings would declare slates clean and simply start over when debates became to great. In Judea traditions this became known as the seventh year Jubilee. In the Middle Ages Islam and Christianity both put restrictions on debt bondage making trade possible as ordinary people knew they would not be entirely impoverished and had the ability to make purchases. These religious institutions then became the foundations for honor and trust while protecting the citizens who had fallen into debt.
This explains our current global debt crisis. We have established a global system of debt through the International Monetary Fund and S&P (who manages U.S. credit rating) which protects the creditors and not the debtors. There is no debt forgiveness, and the people cannot restart. As developing nations pay off interest worth 10 times their GDP and many Americans fall into debt bondage we should look to our past for inspiration.