Bankruptcy protects fake people, brutalizes real ones
“Debts that can’t be paid, won’t be paid.” There, in eight simple words, we have Michael Hudson’s key insight into the role debt and debt cancellation plays in the rise and fall of human civilizations.
Debts are inescapable.
In order to provide a society with its necessities — food, shelter, energy — producers need the inputs (seed, fertilizer, materials, tools) before they have the means to buy them.
In order to produce, producers must borrow.
The earliest money we know of is debt: ancient Babylonian ledgers recording the debts owed by farmers, which they promised to repay after the harvest.
But what happens when there is no harvest? Foul weather, blight, pests, and other misfortune can wipe out the crops, and leave farmers unable to pay their debts. Farm long enough, and you will eventually fall prey to one of these disasters — thus, anyone who farms long enough will eventually become a debtor.
Societies inevitably fracture into two classes: creditors and debtors. If debtors have no way to escape their debts, then creditors will be able to command an ever larger segment of the workforce and its productive capacity.
The needs of the many — food, shelter, energy — will be sidelined by the whims of the few: gaudy baubles, ostentatious palaces, feasts and ornamental gardens.
That is why every known successful society has had some way for debtors to escape their creditors. In ancient times, we had jubilee, a festival where all debts were erased. Jubilees were announced by monarchs based on necessity, or were enacted to celebrate the ascension of a new ruler to the throne.
Creditors hated jubilee, just as modern creditors deplore its descendant, bankruptcy. Every state has had to balance the demands of creditors against the plight of debtors. It’s a hard balance to strike, because creditors are, by definition, wealthy and powerful, and they use that power to influence policy.
Sometimes, creditors get the upper hand and tip policy in their favor, insisting that even debts that can’t be paid must be paid. When this…