Andrew Lilico is an economist and political writer
The single most influential event in the history of finance occurred shortly after the great Athenian lawmaker Solon was elected archon, or chief magistrate, in 594 BC. Solon instituted a debt reform law called the “Seisachtheia” or “shaking off of burdens”. This cancelled all debts, freed those that had sold themselves into bondage to work on their own former land when they became bankrupt, and reallocated the land back to the families that had held it since the foundation of Athens.
Syriza’s policy in Greece today can be seen as a Seisachtheia for the modern age. There has been much discussion of how Syriza intends to cancel Greece’s debts to foreign governments. What is less widely appreciated is that Syriza has also discussed cancelling the debts of individual Greeks to each other. Indeed, there appears to be some evidence of Greeks already deliberately falling behind on their mortgages and other debts, anticipating Syriza cancelling them.
The first Seisachtheia was so influential because Aristotle regarded it and the events leading up to it as providing the key evidence that lending money at interest was practically flawed. His analysis of why — which then for more than a millennium and a half became the canonical argument against usury (against lending at interest), being adopted by the Christians until the middle Ages and still influential amongst Muslims today — answers the question: “We know in practice what is wrong with lending at interest — but what is wrong with it in theory?”
Aristotle understood that the sequence of events was approximately this. Before metallic exchange (before copper and silver and gold coins came in), lending might take something like the following form. If I gave you some seeds for you to plant your field with, I would expect to get the seeds back plus some share of the harvest. I get more back than I lend precisely because the result of my lending is growth, the production of something extra (e.g. extra seeds).
When money arrived, there was a problem. At the time seeds were bought by borrowers, seeds were rare and the price was high. But when harvest came, seeds were plentiful and the price was low.
So even modest rates of money interest could equate to large multiples in terms of agricultural output. With only occasional bad luck with harvests, many borrowers would be driven into default, resulting in their property being seized and being taken into slavery in lieu of the debt.
Aristotle understood that this process had led to the destitution of the poor and the ever-increasing concentration of assets in the hands of the already-wealthy. His theory of the errors and evils of usury was a response that led in due course to many policy restrictions upon lending at interest. A more direct contemporary response was the Seisachtheia.
But Seisachtheia is not the approach favoured by Greece’s Eurozone partners. We can perhaps see their approach as more in line with the thinking of the 13th century Seljuk Sufi mystic and satirist Nasreddin, in the tale of the Sultan’s singing horse.
The story goes that one day, Nasreddin had made a scurrilous remark about the Sultan. Arrested, he was brought before the Sultan and told he would immediately be beheaded. “Great King — may you live forever — you must know that that would be a terrible waste, since I, Nasreddin, am the greatest teacher in all your lands. Indeed, should I have year to do it, I could even teach your favourite horse to sing!”
The Sultan, amused by this response, said: “Very well. I grant you your year. But if my horse cannot sing, a year from today, you will wish I had beheaded you now.” Nasreddin was taken to prison and prepared for his task. That evening his friends came to visit him and were perplexed to find him very cheerful. “Surely you cannot really believe you can teach the horse to sing? You have made matters worse for yourself!” The mystic replied: “You are quite wrong. For I now have a year. Many things could happen in that time. I might die. The king might die. There might be a revolution. The horse might die. — Indeed, who knows? The horse might even sing!”
The Greeks will not pay their debts to their Eurozone partners. That is indeed inevitable. And it’s easy to mock the delaying of the inevitable — “kicking the can down the road”, etc.. But all kinds of things are inevitable. Delaying our inevitable fate — mortality — even has a name. We call it: “life”.
Don’t expect Greece’s Eurozone partners to stop hoping the horse might sing just yet. But, equally, Syriza has one of the most famous precedents of all to guide its instincts that the burdens must be cast off. Let’s just hope the negative implications of that won’t last as long as Aristotle’s theory of usury.