Privatization in the Ancient World – Summary

The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism: ownership of government by an individual, by a group, or any controlling private power.
– Franklin D. Roosevelt

In today’s world, we tend to make a distinction between “public” and “private” property. But to what extent was this distinction made in ancient societies? We know that foraging cultures do not make such distinctions, and it is in such cultures that we have spent most of our existence as a species. So when and how did such concepts emerge? And what were the social relations bound up in this transformation? These are the critical issues taken up in Privatization in the Ancient Near East and Classical World, the first book in the series of five volumes published by Harvard’s Peabody Museum as part of the colloquiums coordinated by the Institute for the Study of Long-Term Economic Trends (ISLET), co-edited by economist Michael Hudson.

While the modern “science” of economics lionizes individual private ownership and alienable private property, seeing such things as “natural” and “primordial,” it appears that these concepts developed relatively recently in history. Ancient cultures had very different ideas about land tenure and usage. The emphasis was on self-sufficiency and social cohesion, rather than maximizing profit or efficiency. Private property was not “absolute” but a social contract between the members of a society.

…French economist Emile de Laveleye[‘s] Primitive Property found ancient attitudes toward property governed by the idea of  ensuring for all families the means of self-support on the land: “Whether in Europe, Asia and Africa, alike among the Indians, Slavs and Germans, and even in modern Russia and Java, the soil was the joint property of the tribe, and was subject to periodical distribution among all the families, so that all might live by their labor, as nature has ordained.”…this practice was grounded in the classical ideal of equality as a precondition for liberty and democracy. Ancient lawmakers “had recourse to all kinds of expedients: inalienability of patrimonies, limitations on the right of succession, maintenance of collective ownership as applied to forests and pasturage, public banquets in which all took part…” This primitive egalitarianism was the true “state of nature” in Laveleye’s view, not John Locke’s fantasy of private land ownership stemming from a primordial social contract. Surveying the fields of history and anthropology, Laveleye found private property in land to be a relatively late development, emerging only in Roman times…p.4

It appears that property in the modern sense, immune from communal and public overrides, made its first incursions on royal lands in southern Mesopotamia, followed by subsistence lands that had been rendered redundant by the shrinkage of the landholding community’s member families. This surplus land seems to have passed into the market process as property “sold at the full price” voluntarily rather than as property relinquished under economic duress.

If this is indeed the case, then privatization of subsistence land, alienable irrevocably at the owner’s personal discretion, is not something primordial as social contract advocates have argued, but developed relatively late in history. It is thus necessary to examine how privatization developed in each particular ancient society. How far did each society progress (or fail to progress) toward a Roman-style codification of owner rights? What common denominators emerge as the levers of privatization. pp.7-8

Business began in the public sector

One of the big revelations of this book is that what we think of “business activities” began not by the efforts of individual entrepreneurs or families, but in what might reasonably be called the “public” sector.

Now, an obvious problem here is defining exactly what we mean by “public” and “private.” This is always tricky, especially when dealing with times and cultures very different than our own. Scholars have described Sumeria’s temples not as a “public” sector, but a “communal” sector that was administratively distinct from household activities. The temples were not under the control of any particular clan or household, which allowed them to undertake certain functions which would not have been socially acceptable for solitary individuals:

A generation ago, economic historians such as Mikhail Rostovtzeff and Fritz Heichelheim depicted “the state” as being antithetical to private property. Yet public investment by large institutions was undertaken long before the emergence of a private sector as our modern epoch knows it. Contemporary research by Assyriologists points to the state as the great catalyst of private enterprise. It was Sumerian public institutions that created usufruct-yielding lands and set them corporately apart from the periodically reallocated communal subsistence lands…

Definitions and concepts are of critical importance in tracing these dynamics. Southern Mesopotamia’s communally held land was not part of the public sector, yet neither was it private in the modern individualistic sense of the term. It belonged in principle to the community, and originally it was not freely alienable, for an obvious reason: As long as taxes and a stipulated quota or corvee labor were paid by the community, the appropriation and withdrawal of land by private individuals would have thrown the fiscal and labor burdens onto the community’s remaining members…(p. 36)…the Sumerian economy …embrac[ed]… the communal sector of self-supporting cultivators, the temples functioning as what might call public utilities, and the palaces. Each of these three sectors had its own source of handicraft labor and its own form of land tenure, none of which originally were individualistic or “private” in character.

It was…the public sector that innovated the basic array of institutions needed for profit making enterprise: corporate organization, writing and account-keeping, contracts and their formalities, weights and measure, and interest-bearing debt. However, Sumerian public investment ultimately catalyzed the growth of a private sector which ended up undermining temple and palace control. This was just the opposite of the Chicago School scenario whereby private self-seeking is primordial but repeatedly stifled by state activism and taxation…pp. 43-44

If this public entrepreneurial initiative is difficult for many observers to acknowledge today, it is because the modern world has virtually inverted the relations of Bronze Age enterprise and finance. Profit-making investment is now left almost exclusively to the private sector. But this privatization took thousands of years to achieve. Today’s public sectors no longer are creditors as in Bronze Age times; they are in debt, obliged to levy taxes co cover the cost of their operations rather than relying on their own enterprise. p.39

So we can see that what we call “business” activities began in the public/communal sector, for the public’s benefit, and not through countless individuals making anonymous transactions in “free and open” markets. Such “collective” activities were necessary for larger and more complex societies to form historically, contrary to the libertarian propaganda put forth by modern economics.

As Karl Polanyi pointed out, in most ancient and traditional societies, economic activity was undertaken primarily for subsistence rather than gain—“habitation,” rather than “improvement.” The supposed “natural” instincts to accumulate, hoard, barter, profit and haggle turn out to be not natural at all, but socially determined. Once again, to review:

The  outstanding  discovery of recent historical  and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. Neither the process of production  nor  that  of  distribution  is  linked  to   specific   economic  interests  attached to the possession of goods; but every single  step in that process is geared to  a number  of social interests which  eventually ensure that the required step be taken. These interests will be very different in a  small hunting  or  fishing community  from those  in  a vast  despotic  society, but in either case the economic system will be run on noneconomic motives.

Indeed, given everything we know about human social relationships in tribal cultures, surplus-producing activities could have *only* began in the public (i.e. communal) sector:

In retrospect, we can see the logic in public enterprise appearing prior to private enterprise. The accumulation of capital requires a sustained generation of economic surpluses. These in turn require forward planning and account-keeping, and hence the design of standard weights and measures for form the basis for pricing and charging interest. In addition, land rent and interest presuppose the creation of contractual formalities and enforcement procedures. This seems to be why private gain-seeking emerged first and foremost at the center of society, in its public entrepreneurial institutions.p. 8

Sumer’s city-temples accumulated unprecedented amounts of capital. Indeed, it was probably only such public institutions that could have placated the adherents of the archaic consumption-based ethic and generated surpluses in socially acceptable ways. Personal self-seekers could not have easily made the breakthrough on their own, for they would have been condemned as greedy…pp. 37-38…Looking back from today’s vantage point, when private enterprise is overwhelmingly dominant, we must ask why private forms of wealth did not take the lead from the outset. The simple explanation is that a private sector in the modern sense of the term did not yet exist in Bronze Age times.

For a deeper answer it is necessary to review the anthropological record and the subsistence basis of most tribal economies. Almost everywhere they have been studied, such communities have displayed little interest in investing wealth to accumulate more wealth. The tendency is to disparage personal wealth accumulation as being impolite, rude or miserly. Furthermore, the tribal communities known to modern anthropologists have little specialized administrative apparatus; their exchange of goods and services is conducted in an informal person-to-person fashion rather than a formally “economic” manner.” …p.45

Sumer’s great contribution to civilization was a complex of innovations that broke through the traditional “anthropological” or “soft” inrerpersonal reciprocity of gift exchange to create the first known economic regime. The Sumerian innovations included bulk trade, standardized (hence, impersonal) money prices and lot sizes, sharecropping rents, wage-ration allotments, interest and contractual forms, and indeed the general system of weights and measures. All these innovations found their initial focus in the city-temples,” which were organized on the basis of a number of economic innovations that have shaped the entire world’s subsequent evolution.

It would not be too much to call these temples history’s first formal business corporations. Organizing an export trade to obtain foreign metals, stone, hardwood and other raw materials not found in the southern alluvium, Sumer’s temples legitimized capital accumulation, that is, the and to build up monetary savings….

The account-keeping for which public bureaucracies have been notorious throughout history often is viewed as a costly overhead, yet it is a precondition for managing costs and budgeting resources to generate a profit. In this respect public accounting helped pave the way for private management to emerge. Without it, private enterprise would have had to start from scratch among the Indo-European speakers who settled the Aegean and Italy… p. 9

This is a direct contradiction to the thesis promoted by libertarians. In their telling, individual “strivers” engaged in entrepreneurial activities from the get-go because our “natural human instinct” is always to maximize our personal gain to the greatest extent possible. Such behavior causes “free” markets to form ex nihilo where value is exchanged. Then, government comes along and taxes away nearly all the surplus from the value-creators to build gargantuan monuments and wage war solely for the benefit of a feckless, parasitical bureaucracy that sponges off the “makers.”

While surpluses were accumulated in the temples and storehouses of the cities, subsistence on the land was much more oriented to providing for the basic daily needs of the household and its members. To this end, the alienability of land was subject to much more restrictions:

It would be anachronistic to call the cultivators who belonged to Sumer’s landed groupings either a “private” or a “public” sector. They were not characterized by private property, for their subsistence land holdings were not theirs to freely sell or pledge for debt, at least not more than temporarily. Inasmuch as citizens held their allotments in exchange for an obligation to serve in the army and provide corvee labor duties, alienability of this land would have meant a loss of their citizenship status and its associated obligations.

To prevent this public loss, communities imposed constraints in the alienation of land…The land was redivided periodically or alienated as some families grew larger, others smaller, and new entrants joined the commune (these groupings often were open in character, (e.g. as the later Irish gelfine). Families held tenure rights to cultivate this land, but were not “free” to transfer it as they chose-or, for that matter, to forfeit it permanently and thereby lose their economic freedom, citizenship rights and consequent obligations to serve in the army and to provide corvee labor.

Land transfers among communal sector families did occur, but traditionally were limited to only temporary duration. The function of the communal land was to support its holders, not to yield a formal economic rent.p. 44…The early documented land sales from commmunal groupings to the palace suggest that such transfers were irrevocable only when the purchasing party was the king. But a widening array of exceptions developed, enabling formal property to emerge…p. 45

It was therefore this dynamic “interplay” between individual households and the communal sector in the cities that led to the explosive growth of the economy of southern Mesopotamia after 4000 BC. These communal “public” institutions are what allowed something resembling a modern economy to be established in the first place.

In today’s world, the government undertaking any business activity at all is considered something that must be avoided at all costs. We’re told that all such activities must be left to the “private sector.” This assumes that the private sector is inherently “efficient,” and the government is always corrupt and wasteful. Under the Market system the government’s sole purpose is to create a “beneficial business climate” for powerful private interests (business owners, CEO’s, stockholders, bankers, etc.) to do as they please, and the Invisible Hand of the Market will sort it all out. The depiction of governments as merely “parasites” on private sector activities is very convenient for those powerful private interests. Keeping governments in constant debt also acts as a constraint on their activities.

It used to be thought that southern Mesopotamia was a “temple state” where everything was owned and centrally planned by temple scribes and priests. Some textbooks still depict it this way. But this is inaccurate. In fact, most economic production took place in the household. Rather than running production directly, the temples used economic planning to collect and redistribute the surpluses throughout the society.

Most writers have emphasized the nature of state control over craft production. There is, however, ample evidence to suggest that craft production also was undertaken in the context of a private market economy…A potter was involved with a staple finance commodity when producing ceramics for the state authority, but he (or she) could and did produce pottery for a market economy, thus involving the production of wealth finance. A single producer could be (and the texts indicate that they indeed were) involved with both public and private domains of production.

…In sum, although the texts suggest large-scale industrial production controlled by the state, the archaeological record suggests that most craft production took place outside the physical context of a centralized state bureaucracy. This is most clearly evident in the case of pottery…One can hardly avoid the conclusion that the distribution of these commodities was not directed by state bureaucrats from centralized warehouses. These everyday essential goods were obtained from private craftsmen who produced them for purchase or barter within a market economy. No doubt, as in the case of potters, they also produced specific quotas for delivery to state institutions…

Mesopotamian texts suggest that craftsmen and farmers, in fact all primary producers, were responsible for providing a specific amount of their products for delivery to a state authority. I believe that the documentary evidence allows for the following interpretation: all primary producers were responsible for delivering to the state a set quota, a specific amount of manufactured product. Thus, the staple and wealth finance in the hands of the state institutions came in the form of specific quotas derived from primary producers. When the primary producer filled his/her/their quota, the remainder of time and labor was their own. This is what the third-millennium texts elaborate upon when discussing the office concerned with the bala, meaning “to turn over.” That which they “turn over” is their quota. The texts clearly indicate that primary producers were responsible for “turning over” their quotas, the balas, to the state.

Redistributive and household methods of production were not, then, distinct “stages” but interwoven with each another from the start. Redistribution was accomplished via a standardized pricing system administered by the temples. Such prices were not set by price-fixing markets; they were instead established by the temples themselves. However, such prices did eventually carry over into the “private” sector over time. It was this establishment of a society-wide pricing mechanism, and standardized units of currency that allowed money and markets to form, and not the spontaneous higgling and haggling of countless anonymous individuals. So we see that once again, it was the activities of centralized institutions that allowed markets to form in the first place.

The city-temples were the central organs through which the Sumerians mediated the economic surplus (P. 42)…Before price-seting markets developed, public institutions were the major vehicle for distributing output at standardized prices. For these large institutions it was natural for prices to be administered, if only as an internal control to check abuses and as a means of keeping accounts in commmon denominators such as silver and barley. Common prices, once established in this way, helped catalyze the development of market exchange, and ultimately price-seeking markets for goods and services that did *not* pass from the the public institutions to the rest of the economy.

…Karl Polanyi’s idea of a “redistributive stage of development” preceding that of market pricing therefore must be superceded by the recognition that public distribution took place largely via the pricing mechanism. Setting such prices was part of the public administration of measures, weights and interest rates (which were among the last prices to be deregulated, precisely because of the visible role of coercion between strong creditors and dependent debtors falling below the break-even level). Such prices were accordingly announded at the outset of many early royal laws, and appear throughout Hammurapi’s laws. p. 296

Alongside these price exchange systems, older means of gift exchange and subsistence production continued to be employed. Thus, the existence of markets (contractus) did not alter the prevailing social relations (status). Market relations were employed by strangers, foreigners, people who had no organic social relations, or between people of vastly different status:

Of course, most output was for self-use, and hence either was unpriced or exchanged at prices which, under normal conditions, followed the lead of the large institutions whose transactions tended to dominate the market (p. 296)…Private household production existed alongside that of the temples, but seems to have been oriented more towards subsistence needs with only marginal production for the market. The products of these households probably were less specialized and luxurious than those produced in the temple and palace workshops… (p. 42)

The impersonal economic formality of public institutions stands in contrast to the customary familial or neighborly informality. Throughout the Bronze Age, gift exchange continued among people of similar rank, while commercial exchange characterized relations among people of different status, or on opposing sides of the public/private divide, or from different communities. Debt obligations of the “anthropological” type among persons of similar status did not bear interest as late as the eranos loan clubs found among Athenian gentlemen, in contrast to loans from the rich to the poor or financial claims by public institutions on the citizenry at large. p. 43

Thus, we can accurately characterize the economy of these ancient Near Eastern societies as a “mixed” economy. One example of the way in which the temple activities interfaced with the broader household economy can be seen in the use of standardized weights and measures, including, as noted above, the price schedules denominated in silver shekels or bushels of barley. Another was the existence of multiple calendar systems: a lunar one for festivals, and a solar one for economic planning:

One example of how public and private modalities can coexist is reflected in Sumer’s elaboration of the calendar from a lunar one governing communal festivals to a solarized public-sector one. Neolithic and even paleolithic communities appear to have based their festivals on lunar rhythms, but lunar months vary in length and hence are unsuitable for allocating standardized rations.

Sumer’s temples and palaces needed to schedule large-scale flows of barley and other commodities on a regular basis, and therefore took the lead in introducing a 360-day public sector calendar composed of twelve equal 30-day months. This public solar calendar was adopted alongside the popular lunar calendar. (A similar dual calendrical system survives today for setting movable feasts such as Christian Easter, the Jewish New Year and Islamic Ramadan.) p. 42…

The 360-day public year left an extra five days to balance out the true solar year, and an eleven-day excess of the solar year over the lunar year. This interregnum–a “time out of time”–became the occasion for the New year festivals that provided the occasions for new rulers to renew the social and economic cosmos by cancelling agrarian debts, freeing debt bondsmen and restoring the status quo ante, above all lands that had been forfeited to creditors. p. 42

Just as public and private calendars coexisted, so did public and private modes of production. Public commerical production stood in contrast to production stood in contrast to production on communal subsistence lands. Likewise, different rates of interest were adopted for the two spheres of economic activity: silver-denominated commercial debts accrued at 1/60th per month, while agrarian barely debts accrued at higher rates, typcially 33-1/3% per year by the end of the third millennium. The result was a dual financial system operating as a bimonetary standard. pp. 42-43

There is a debate to what extent were temples truly “public” institutions, and to what extent were they actually “fronts” for certain powerful families? Were these actually set up as “trusts” for certain powerful families? Where did the public’s interest end and the private interest begin? How much of the temple activities were undertaken under the guise of providing public benefits on the surface, while behind the scenes administrators were really feathering their own nests? We have several examples of leaders abusing their power. We also have accounts of reformers attempting to restore fairness and balance. In some instances, the same leader can be engaged in both activities simultaneously.

Privatization and corruption

Communal activities and the interface between the temples and the households eventually gives rise to a true “private” sector, whose activities expanded over time. Eventually, these communal activities were more-or-less subsumed into private households–the earliest “privatization.” The people who led this trend were those most intimately connected with the redistributive apparatus–the temples and the palaces, and the merchants whose job it was to interface with those institutions (tamkarum). They managed to use their positions to profit from what might be called “business” activities even while maintaining a veneer of public-spiritedness. In contrast to the conventional story, the history of entrepreneurship really begins when these “business” activities are decoupled from their original context and taken over by powerful individuals and households.

Privatization was accompanied by a rollback of the safeguards designed to protect the average person. This did not lead to a release of pent-up entrepreneurial energy from the , but rather oppression as the powerful took advantage of their positions and cut insider deals. Protections against debts were relaxed. Hudson makes an analogy to Russia after the Soviet Union fell, where people in privileged positions took over much of what had formerly been communally owned property and industries and ran them for their own benefit.

It appears to have been military expansion that caused the repurposing of the old redistributive apparatus into centered around tax collection/tribute. The palace ceased to play its former role as a “great provider” and instead became a military/administrative center. As victorious palaces conquered and absorbed surrounding cities and states, they used the bureaucratic apparatus developed in the temples to collect the taxes. Wealth flowed to the top of the social pyramid via conquest, even as the common person lost their lands and independence in such conflicts. In addition, captured lands were often redistributed as personal property to the ruler’s friends and allies in a sort of “spoils system.” This reminds me of a quote I once read about military conquest abroad generally being accompanied by repression at home.

From the early Bronze Age to late classical antiquity, historians can trace society’s economic dynamics (and the economic surplus) becoming more individualistic and free from central oversight. Individualism first emerges, culturally and economically, not from members of the “communal” (non-public) sector, but from palace rulers and their families…Personal property in the modern sense developed originally in the palace sector. It was the ruler’s own property that was the first to be made immune from communal-sector redistribution. Sargon’s dynasty took over the temples to make the flow of surplus a one-sided tribute for vanquished cities to the new capital at Akkad. In this respect military conquest was a major catalyst of privatization. Palace warlords captured what originally had been public institutions, and transformed them into instruments of their personal and economic power. p. 26

The upshot of privatization was economic polarization between creditors and debtors, landlords and tenants, patricians and clients, while the private sector grew richer largely at the expense of the public sector. A major effect of the privatization of subsistence land, for instance, was a change in the economic uses to which the land’s yield was put. Babylonia’s subsistence cultivators had been obliged to provide corvee labor, serve in the army, and pay taxes or other fees to the palace in exchange for holding land. But the new private appropriators kept the land’s usufruct for themselves rather than passing it on as taxes. The debtor’s labor services, crops and, in time, title to his land were taken as interest and, ultimately, forfeited as collateral for debt. This often obliged the remaining commuity members to make up the individual debtor’s fiscal shortfall; otherwise the net yield available to the palace was simply reduced.

A related consequence of privatization was a shift away from growing grains for the self-support of cultivators to more luxury-oriented and capital-intensive cash crops (olive trees and grape vines in the Mediterranean), increasingly on large estates which came to be stocked with slaves by the time of Rome’s great latifundia.p. 35

Hudson identifies four major means of land privatization in the ancient Near East:

1.) One form occurred when Sumerian rulers appropriated communal land and temple estates as their own personal property…this characteristic of individualism is first found in the royal household , from which it diffused downward via the royal bureaucracy to the rest of society.

2.) A second type of privatization occurred when rulers gave property away to their relatives (often as dowries) or companions, or assigned control of these properties (or at least their prebend rents) as tribute to local chieftains…

3.) A related type of privatization occurred as a product of political decentralization, most notably when palace control collapsed. In such crises, royal managers or warlords tended to seize the royal lands and workshops. This occurred as Hammurapi’s Babylonian empire fell apart, and after 1200 BC when Mycenaean Greece fell into a Dark Age.

4.) A fourth type of privatization became the most prevalent: the transfer of communally held lands to creditors or other absentee buyers. Beginning in southern Mesopotamia, subsistence lands were appropriated by individuals from outside the local kinship-based groupings by royal collectors, creditors or merchants through debt foreclosure; outright purchase at distressed prices; or, less frequently, at the “full market price.”

Rather than the heroic view of entrepreneurship promoted by economists, in this view entrepreneurs look more like opportunists, taking over institutions designed to serve the public good for their own purposes.

Privatization comes to the Mediterranean world

As Hudson tells it, the economic planning tools were brought from the temples of the Near East to the palaces of the Aegean world. The palaces of the Minoans and Mycenaeans contained vast storerooms which collected the output of many different households, which was then redistributed. But they did not have interest-bearing debt and loans. Then, after the Bronze Age collapse, the centralized palaces collapse and are seized by private warlords or “big men.” Greek society reconfigured itself along feudal lines. Phoenician merchants brought the concepts of debt and interest payments (along with the alphabet) to the Greeks, but they did not bring along the idea of debt forgiveness and Clean Slates.

This creates two major differences between debt in its original context the its new one 1.) There was less of an communal role played by centralized institutions in the Mediterranean world, and 2.) The rights of creditors were privileged above those of debtors. In the classical world, rather than periodically expunging the debts, such claims were held as sacrosanct! For this reason, the classical world–Greece and Rome–develop into what Hudson calls creditor oligarchies. It is this tradition which we have inherited in the West.

Greek history begins not with Athens and Sparta, but in the western periphery of the Late Bronze Age world, in Mycenae and other Late Bronze Age towns c. 1400-1200 BC. Here, Mesopotamian practices were transmuted into something new as the Mycenaean Greek palaces adopted syllabic record keeping (Linear B), sealing, and large workshop production–but not interest bearing debt…Not only is debt missing, but money too: “Since the palace revenue is presumably derived from feudal dues and from foreign conquest, monetary or other media of exchange do not play any significant part in the records…In lieu of money and the flexibility it affords for an efficient specialization of labor, the Mycenaeans denominated their levies in standardized “bundles” of commodities fixed in proportion. In the Pylos Ma- tablets, for instance, a number of townships are put down for contributions whose mutual proportions of six commodities remain constant at 7:7:2:3:1-1/2:150.

No evidence of debt appears in Greece and Italy until it is introduced by Syrian and Phoenician merchants around the 8th century BC. Without intersectoral debt balances there was little need for rulers to cancel arrears as part of general restorations of order. Thus, the entire character of kingship became less commercially oriented (and less public).pp. 18-19

The fact that centralized public property and traditions of royal oversight were weakest in Greece and Italy probably contributed to the fact that privatization developed most easily in these formerly peripheral regions after palace authority collapsed throughout the Mediterranean and Levant c. 1200 BC in the wake of a general social breakdown and drastic shrinkage of the population and commercial activity. p. 19

Interest-bearing debt became the prime level of classical privatization, enabling wealthy family heads to pry away the land of smallholders. Elected officials in some Greek city-states pledged *not* to cancel the debts or redistribute the land — just the opposite principle of Bronze age rulership. Under these conditions, the protected property was no longer that of the citizenry at large, but the large estates and fortunes of the few. Debt relations became even more polarized in Rome, where wealthy creditors turned what had been communally held subsistence landholdings into latifundia slave plantations. p. 27

With no Clean Slates to cancel the mounting debts, the Law of Cumulative Advantage and Creeping Normalcy are free to do their dirty work unimpeded. The result is a downward spiral of debt repeatedly reducing of much of Classical society to landless debt serfs.

This debt became a major societal problem. Debt serfs could not afford to equip themselves for the army and train. They could not contribute to the commonwealth via taxes. They could not tend to their own land to produce food. They lost voting rights. Debt was hollowing out society. As a result, the relationship of the state to its citizens was transformed. Corvee labor obligations were replaced by hired and slave labor. Civic contributions were replaced with bequests from wealthy individuals. Soldiers were replaced with mercenaries. Democracy was replaced with plutocracy.

As privatization increased, the city-states had to levy taxes in order to hire mercenaries, rather than continuing to provide cultivators with land tenure rights in exchange for military and other labor services. In classical Greece, property taxes paid in coin paid for public work, which was performed mainly by immigrants and other non-citizens, or slaves (a reflection of the demeaning status of public labor throughout antiquity).

The passing of rents, interest and profits into private hands (especially those of the wealthy) led to the taxation of the commons for the benefit of large landowners. This was done in such a way as to aggravate the dispossession process. The state meanwhile reduced its role as public entrepreneur as its functions were taken over by private entrepreneurs…the Roman state increasingly absorbed the costs or “externalities” associated with private wealth-seeking by the richest families (including the cost of defending the land against both domestic civil warfare and foreign enemies). p. 28

With the privatization of land, and the parallel shift of the handicraft export industries into private hands came tax crises. The wealthiest families managed to avoid taxes, while pushing more of their own expenses onto the public budget. Instead of government reforming land tenure or taking over industry and socializing its revenues, economic control passes almost entirely into private hands. For all practical purposes, the wealthiest landowners became “the state” in alliance with barbarian war chieftains who seized land by military force. p.29

The classical world embraced privatization and individual wealth accumulation to a much greater degree than ever before. I find it ironic that Western history is often portrayed as a contrast between the “slavery” and “despotism” of Near Eastern cultures, and the “freedom” and “equality” of the Greek and Roman world. But as we saw, Near Eastern cultures allowed for debt forgiveness and redistribution of land. Classical antiquity, however, drove people into debt bondage, had massive wealth disparities, consolidated productive land into the hands of a few wealthy families, and had massive amounts of slaves working in many critical industries. Is our view of history backwards?

The modern logic of privatization

One major point that Hudson makes is that in the ancient world, unlike today, there was no assumption that powerful people acting in their own narrow self-interests would lead to beneficial social outcomes! There was no “logic” of privatization. Rather, it was generally assumed that oligarchies usurping the public purpose was a bad thing and should be avoided if possible. Powerful private interests usurping the public good was associated with immorality and collapse, rather than with progress and efficiency. There was yet no “science” of economics to tell them otherwise:

…nobody in antiquity advanced the idea that private property and personal self-seeking would bring about a more efficient social system than communal property or private property managed unselfishly. Just the opposite: The stoics disparaged private self-seeking. Antiquity produced no Milton Friedman or Margaret Thatcher, nor did an Adam Smith emerge to suggest that an invisible hand would guide personal self-seeking to increase the nation’s wealth. The policy objective was not efficiency, but “straight order” in Babylonia, social equity for the Biblical prophets, and an appeal to the “constitution of the fathers” (patrios politeia) by the Athenian oligarchs and by Cicero’s upholding of patrician Roman values. Creditors were not euphemized as savers performing a public service; they were condemned throughout antiquity as usurers preying on the poor. Nobody suggested that debt-ridden economies might work their way out of debt by saving and investing more. In these respects there were indeed was no doctrine of privatization in antiquity.

Mesopotamian rulers viewed the privatization of enterprise from a different perspective than that of today’s political philosophers. Modern governments are charged with the duty of defending creditor claims against debtors’ rights to their own economic freedom and means of livelihood. But Bronze Age rulers protected debtors against creditors…Mesopotamia’s public institutions coped with this problem of economic inequity and private patronage by countering the arrogance that tended to be inherently associated with wealth. p.53

One result of the modern world emerging out of Rome’s collapse rather than directly from the Mesopotamian upswing is that our legal traditions sanctify debt obligations rather than providing for their cancellation when they grow too heavy. Modern industry is financed with borrowed money via mortgages, bonds, and bank loans. Even our governments are debtors, not creditors as in the Bronze Age. Indeed, in an attempt to service these public debts, governments throughout the world are privatizing natural resources and public utilities long considered to be part of the national patrimony…p. 56

We all know what happened to the Roman empire after is latifundia dynamic ran its course. It declined and fell. Is something similar in store for today’s topheavy debtor economies? Will market forces again become swamped by a new growth in debt overhead? Will a new polarization enable the wealthiest classes once again to free themselves of taxes and other traditional obligations of ownership? Or will history be different this time around? p. 3

Conclusion

Privatization is at the core of the Neoliberal project that has managed the world since the 1980’s. Hollowed-out states act as little more than agencies collecting and funneling taxpayer money to private corporations. Public services in every area of life, from public transportation to health care, are sold off at fire-sale prices or shut down altogether. Politicians sit on the boards of these corporations and have their political campaigns funded by them. Lucrative jobs and lobbying positions await them when they leave Washington. Everything from K-12 schools to basic infrastructure is now under the control of private enterprises acting to maximize profits, rather than in the public’s best interests. It is, in Matt Taibbi’s phrase, a “Griftopia.” Another term might be “kleptocracy.”

Once again, private industry is not taking entrepreneurial risks, but seizing the commons and acting as costly toll-bridges to essential services–in other words, becoming rentiers. Even national defense and incarceration are profit centers for giant mega-corporations, which explains America’s vast carceral state and perpetual wars around the globe (compare to World War Two which was concluded in four years by our central government). We are told every day that the private sector is honest, efficient, and cost-effective, and that the government is corrupt, bloated, inefficient, and wasteful. But, of course, we are given this message by a media which is the property of those very same corporations. Privatization ensures that corrupt and wasteful government becomes a self-fulfilling prophecy (to be fixed by more privatization!)

It appears that private interests diverting resources from the state into their own hands played a large role in the downfall of the Roman Empire. So did reducing entire populations to debt servitude and taking away their dignity and self-reliance. One wonders how far along this trend must go before people realize that the narratives they are being fed by the corporate media and economists are self-serving lies, and decide to rise up and demand a different way of doing things.

SOURCES:

Privatization in the Ancient Near East and Classical World. Baruch Levine (Editor), Michael Hudson (Editor). Peabody Museum of Archaeology, 1996.

Are We Rome? Cullen Murphy. Houghton Mifflin Company, 2007.

The Origins of Business, Money, and Markets. Keith Roberts. Columbia University Press, 2011.