In ancient Babylon, a newly enthroned king would declare a jubilee, wiping out the population’s debts. In modern America, a faint echo of that idea — call it jubilee-lite — is catching on.
Support for write-offs has been driven by Democratic presidential candidates. Elizabeth Warren says she’d cancel most of the $1.6 trillion in U.S. student loans. Bernie Sanders would go further -– erasing the whole lot, as well as $81 billion in medical debt.
But it’s coming from other directions too. In October, one of the Trump administration’s senior student-loan officials resigned, calling for wholesale write-offs and describing the American way of paying for higher education as “nuts.’’
Real-estate firm Zillow cites medical and college liabilities as major hurdles for would-be renters and home buyers. Moody’s Investors Service listed the headwinds from student debt -– less consumption and investment, more inequality — and said forgiveness would boost the economy like a tax cut.
While the current debate centers on college costs, long-run numbers show how debt has spread through the economy. The U.S. relies on consumer spending for growth -– but it hasn’t been delivering significantly higher wages. Household borrowing has filled the gap, with low interest rates making it affordable.
And that’s not unique to America. Steadily growing debts of one kind or another are weighing on economies all over the world.
The idea that debt can grow faster than the ability to repay, until it unbalances a society, was well understood thousands of years ago, according to Michael Hudson, an economist and historian.
Last year Hudson published “And Forgive Them Their Debts,’’ a study of the ancient Near East where the tradition known as a “jubilee” — wiping the debt-slate clean — has its roots. He describes how the practice spread through civilizations including Sumer and Babylon, and came to play an important role in the Bible and Jewish law.
Rulers weren’t motivated by charity, Hudson says. They were being pragmatic — trying to make sure that citizens could meet their own needs and contribute to public projects, instead of just laboring to pay creditors. And it worked, he says. “Societies that canceled the debts enjoyed stable growth for thousands of years.’’
Forgiveness was good for the economy, would be a modern way of putting it.
I’m reading Chuck Marohn’s “Strong Towns” right now, and he makes the case for both incremental reforms in our communities. But he also points out the impossibility of the present financial commitments of our cities and towns, citing the example of Ferguson, wherein approx. $800,000/year has been spent on paying creditors, and approx. $25,000 was spent repairing sidewalks.
We’re going to need some form of jubilee, and how we come to accept that is going to be less about partisanship than it will be about sober, political reality. At present, neither those of us in suburban HOAs nor those of us in hollowed out city neighborhoods can properly pay for the services we require. We can either embrace reforms now or have them thrust upon us.