The 5000-Year Circle of Debt Clemency: From Sumer and Babylon to America and Europe

Abstract

The notion of compulsory debt clemency has come full circle during the past five millennia. This brief paper surveys this progression over three relatively distinct periods. In the first period, rulers in ancient Sumer and Babylon imposed periodic debt amnesties to maintain social stability, especially a ready military base. This practice continued as a divine mandate for the ancient Hebrews in several passages of the Torah. In the several centuries surrounding the coming of Christ, however, a second period saw two millennia of waning enthusiasm for compelled debt forgiveness. Roman and later Islamic law mandated only a limited form of debt clemency, though both Christian and Muslim ideals encouraged creditors to offer full remission of distressed debts voluntarily. The circle began to close with the beginning of a third period in post-Enlightenment England and especially the new United States of America. The renewed notion of legally compelled debt clemency faced skepticism if not hostility elsewhere until the late 1900s and early 2000s, when the idea spread like wildfire throughout Europe. Modern legislators took up compulsory debt clemency for largely the same reasons as their Sumerian and Babylonian predecessors thousands of years earlier: to maintain social stability and maximize competitiveness with foreign powers, this time in an economic rather than a military sense.

Keywords: consumer insolvency, personal bankruptcy, debt forgiveness