The Privatization of Land

How It All Began

Michael Hudson

[Reprinted from Land & Liberty, 1995]

Dr. Hudson is co-author of A Philosophy for a Fair Society, London: Shepheard-Walwyn, 1994.

The Henry George School of New York sponsored the International Colloquium on Privatization at New York University. The conference was organized by the school's Research Director, Dr. Michael Hudson, author of this essay, and Prof. Baruch Levine of New York University's Skirball Department of Hebrew and Judaic Studies. Participants represented each major period and geographic region of antiquity. The colloquium papers will be published at the end of the year by Harvard University's Peabody Museum.

SCHOLARS from Russia, Germany, Italy, Israel, Canada and the United States gathered in New York last November for a colloquium on the origins of privatization in the Ancient Near East and the Classical World. The US scholars were from Harvard and the University of Illinois.

Leading archaeologists, cuneiformists and philologists traced the dynamics of privatization from 3500 to 500 EC, from Bronze Age Mesopotamia through Biblical, classical Greek and Roman times. In his essay, Dr. Hudson argues that the forces unleashed in Mesopotamia 5000 years ago must be clearly understood if we are to solve contemporary problems like private poverty and public indebtedness.

POTS and statues do not tell much about social institutions that produced them. Bronze Age written records are laconic, consisting mainly of abbreviated notes (largely receipts and internal accounts from the public temples and palaces) mat take for granted the economic context.

The colloquium was important because its participants were willing to compare their various data and venture a plausible context for just what kinds of societies produced the artefacts dug up or the tablets recording resource flows within the temples, palaces and private households.

Their findings challenged many now-orthodox economic assumptions. There was general agreement that from Bronze Age Mesopotamia down through biblical times in me Levant, classical Greece and Rome, each society progressed through broadly similar (but by no means identical) experiences as they commercialized their economic life. The "wild card" proved to be how they handled interest-bearing debt, and the limits they placed on debt bondage and forfeiture of the land to foreclosing creditors.

In antiquity, as today, debt was the major economic lever of privatization. But whereas today's privatizations stem mainly from public debt pressures that encourage governments to sell lands and forests, mineral resources and public utilities, there were no public debts in antiquity.

Temples and the palace typically were creditors, especially in Bronze Age Mesopotamia. However, private debts with the land pledged as collateral led to its forfeiture for arrears. Personal indebtedness was the catalyst for transferring subsistence lands to absentee owners, in epochs when the outright sale or alienation of land was prohibited for more than just a temporary period.

ECONOMISTS have long been notorious for taking private property as an elemental and original institution in human experience. This assumption is a carry-over of the Social Contract theories of John Locke and Adam Smith.

In these theories no role is played by me idea of land originally held by communal groupings and allocated to members who bore a military liability and other public obligations attached to the land. Whatever does not belong to the palaces and temples is deemed "private" ipso facto. Yet the idea of private property as it is understood in modern times developed relatively late.

"In the beginning," Sumer's temples (and in time me palaces) were the major profit-seeking entities (and even more, rent and interest recipients). The non-public communal sector functioned mainly on a subsistence basis. Indeed, all the basic 'elements of modern enterprise, including such basic practices as charging land-rent and interest, developing standardized production runs, lot sizes, weights and measures, and monetary standards of exchange were innovated by the Sumerian temples in the fourth and third millennia BC.

Accordingly, one riddle that we addressed was why entrepreneurial techniques were first developed by public institutions, above all by the Sumerian temples, rattier than within private households. Why was there public enterprise to be privatized in the first place, rather than autonomous private enterprise to be taxed or otherwise made subject to social overrides? If private enterprise is an inherently superior mode of organization, why did civilization take the seeming detour represented by the Sumerian temples and, later, the palaces? The fact that the first commercially organized enterprise is found in Sumer's temples as early as the fourth millennium BC indicates that the state is not inherently antithetical to private property. It seems that public enterprise was needed as a catalyst.

Evidently some social blocks had to be overcome by creating the techniques of commercial enterprise -- rent-yielding land, interest-bearing debt, account-keeping and production planning -- to generate economic surpluses at least nominally for the community at large (in Sumer's case, the city-temple) rather than for purely personal gain. This community-wide social purpose is what seems to have made the pursuit of private gain socially acceptable, whereas in traditionally organized chiefdoms it was considered "bad manners" to take a surplus for oneself.

Sumerian cities needed to generate exports to obtain foreign metals, stone and other raw materials not found in local river-deposited soils. The city-temples solved this problem by putting widows and orphans, the sick and infirm to work in temple weaving workshops and other public welfare/workfare hierarchies.

Every early society ended up by privatizing its land, industry and credit systems. But some societies did this in ways mat protected traditional social values of equity and freedom; others, such as Rome, did it in such a way as to polarize and indeed, pauperize its society.

THREE types of landed property emerged in southern Mesopotamia's cradle of enterprise: communal land (periodically re-allocated according to widespread custom); temple land endowments, sanctified and inalienable; and palace lands, acquired either by royal conquest or direct purchase (and often given to relatives or other supporters).

Of these three categories of land, "private" property (alienable, subject to market sale without being subject to repurchase rights by the sellers, their relatives or neighbours) emerged within the palace sector. From here it gradually proliferated through the public bureaucracy, among royal collectors and the Babylonian damgar "merchants". However, it took many centuries for communal sanctions to be dissolved so as to make land alienable, forfeitable for debt, and marketable, with me new appropriates able to use it as he wished, free of royal or local communal oversight.

Modern advocates of private enterprise argue that gain-seeking individuals manage resources more efficiently than do public agencies. No such economic rationale was developed to support antiquity's property transfers. No one suggested turning over wealth to the rich to manage in society's interest. Just the opposite: for century after century the acquisition of land by public officials or merchants was reversed repeatedly and indeed, almost regularly, by royal Clean Slates. These cancelled personal debts (including back taxes) and returned the land to its traditional holders.

Rulers sought to maintain a free land-tenured body of citizens to serve in the infantry and provide corvee labour services. Loss of land rights would have meant a loss of citizenship and military rank. Hence, rulers had an interest in avoiding social polarization between large landholders and uprooted landless individuals. Clean Slates also deterred the consolidation of a wealthy aristocracy as economic rivals to the palace.

In Roman times the Stoics denounced personal gain-seeking, hoping to return to what they imagined to have been a Golden Age -- the Bronze Age -- of social altruism. But by late antiquity the memory of royal Clean Slates to restore economic order and equity had faded. The rich themselves were Stoics. They tended to preach in favour of a return to a broader distribution of land and economic self-reliance, but they did not actively back this in practice.

Pliny claimed that the vast latifundia estates had ruined Italy, much as Isaiah a half-millennium earlier had decried the great landlords "who add house to house and join field to field, till no- space is left and you live alone in the land." But as Christianity became the "political correctness" of the day, it removed the Judaic Jubilee Year from its original Near Eastern context, postponing it until the Day of Judgment. This effectively turned the Pentateuch's core of debt and land-tenure legislation into a Utopian, even otherworldly ideal.

Did history have a choice?

Why were the warnings of Isaiah and Pliny not heeded? Was there another way to go? Did history have a choice? The answers are to be found more in the forces of social power than in a reasoned economic rationale.

Throughout antiquity, social efficiency was defined more in political and military man in economic terms. Land traditionally was supposed to be used to support a self-sufficient citizenry which originally comprised the armed forces and supplied public labour services. Yet from Bronze Age Babylonia through the Roman empire, privatization led to fiscal, economic and military collapse as local subsistence lands were cut away by outsiders (creditors, royal collectors, war chieftains and merchants).

Babylonian scribal exercises illustrated how rapidly debts mounted out at the customary 20% commercial interest rate, doubling in five years, quadrupling each decade, and multiplying 64 times every 30 years. Rulers such as Hammurapi who lived long enough to celebrate their 30th anniversary on the throne proclaimed new Clean Slates, as they did at the first New Year festival after they took the throne (and when circumstances warranted it at other times).

In antiquity, therefore, the public sector was not the enemy of economic freedom and private enterprise that it is portrayed as being today. Not only did the Sumerian temples innovate most of civilization's entrepreneurial techniques, but rulers preserved widespread economic liberty by periodically annulling the overgrowth of agrarian debt, freeing debt bondmen and restoring to their customary holders lands (and hence, citizenship status) that had been forfeited for debt arrears.

PRIVATIZATION of the land led to absentee ownership and monopolization. Ultimately, they also led to fiscal crises as wealthy landholders managed to avoid taxes by shifting these onto the rest of the population. This economic polarizatiaon was staved off by the tradition of royal Clean Slates, which finds its final expression in the Biblical Jubilee Year of Leviticus (Ch. 25).

What hitherto was a royal act was made the centrepiece of Judaic religion. The Jubilee Year restored the status quo ante by wiping out the overgrowth of agrarian debt, freeing debt bondmen, and restoring subsistence lands to the cultivators who had forfeited them to creditors. Prof. Baruch Levine pointed out that although the Jubilee Year seems to be a post-Exilic phenomenon, it was part of a living tradition extending back thousands of years. Indeed, biblical economic legislation represents the last major repository of Bronze Age Near Eastern practices.

Prof. Maynard Maidman argued that although Nuzi's rulers proclaimed Clean Slates in the 16th and 15th centuries BC, they seem to have been unable to obtain compliance by the large landowners, for private holdings survived intact for time periods spanning such proclamations.

As privatization spread up the Euphrates from Babylonia into less centralized economies, the power of large landholders (often war chieftains) increased. Partly as a result of the ensuing domestic social polarization, societies such as Nuzi collapsed relatively suddenly, their economic and military base hollowed out by privatization of the land leading to fiscal strangulation.

One result was a rural exodus of men uprooted from their land. In 18th century England this rural exodus following the enclosures of the commons provided a key element of the Industrial Revolution, in the form of cheap urban labour. But in archaic times there was little industrial wage labour market. Manual labour in Mesopotamia's temples and palaces was composed of persons who could not make a go of things on the land, mainly because of physical infirmity or the misfortune of having lost their husbands and/or fathers through war, and not been incorporated into the households of relatives. (Skilled craftsmen were formed into company-type unions run by the palace, not by the craftsmen themselves. Hence, labour was not unionized and "privatized" along today's lines.) Much of the displaced labour joined floating vagrant bands of migratory workers, some of whom found work as mercenaries, pressing out of Mesopotamia into the Levant. Thus, the result of rural uprooting was to create a military force more than the industrial labour force found in post-feudal Europe.

The collapse of civilizations

Bearing in mind the manner in which each major ancient society collapsed, the colloquium's participants emphasized how privatization represented more than merely a shift of resources from public to private hands. This shift went hand in hand with economic polarization, fiscal crises, and the inability to field an army of land-tenured soldiers.

Often the process involved civil warfare, such as the overthrowing of landed aristocracies by popular tyrants in 7th century BC Greece, the popular walkout in Judah under Zedekiah c. 590 BC (Jer. 34), contemporary to Solon's cancelling the rural debts and banning debt-slavery in Athens in 594 BC, and the reputed refusal by Romans to fight behind Coriolanus until their debts were annulled or they were promised lands of their own.

"In the beginning," most land was held communally and allocated to citizens as subsistence lands for their self-support. These cultivators in turn owed military and corvee labour services. Gradually, the land was privatized and transformed into property in the modern sense of the term - property immune from social control and periodic redistributions, able to be alienated (either sold or forfeited to creditors for debt arrears) without recourse for the seller, his relatives or neighbours to redeem it.

Privatization in feudal Europe often took the form of seizure of lands by individuals through force or legal stealth (as in England's enclosures), but there is little evidence of this in the Bronze Age. There were three major types of privatization, each with its own set of dynamics.

(1) The first real "privatizer" was the palace ruler. Rulers acted in an ambiguous capacity, treating royal property -- and even mat of the temples, which they took over in time -- as their own, giving it to family members and supporters. In this respect "private" property, disposed of at the discretion of its holder, can be said to have started at the top of the social pyramid, in the palace, and spread down through the royal bureaucracy (including damgar "merchants" in Babylonia) to the population at large.

Bronze Age Mesopotamian rulers are found acquiring property mainly by purchase (with tribute money), but royal appropriation of land within the ruler's own community was strictly circumscribed. When the Israelite king Ahab sought to obtain Naboth's vineyard, for instance, he was constrained to operate within the bounds of popular traditions that dictated that kings could obtain property only by voluntary sale or confiscating it as punishment for a capital crime.

(2) A derivative form of private ownership developed as rulers gave away land to family members (as dowries), or companions, mainly military leaders in exchange for their support. The recipients tended to free themselves from the conditions placed on what they could do with the land and the fiscal obligations associated with such land. As early as the Bronze Age, such properties and their rents are found managed autonomously from the rest of the land (viz. Nippur's Inanna temple privatized by Amorite headmen c. 2000-1600 BC). Likewise the modern system of private landholding was catalyzed after England's kings assigned property to the barons in exchange for military and fiscal levies which me barons strove to shed, as can be traced from the Magna Carta in 1215 through me Uprising of the Barons in 1258-65.

Much as modern privatization of the national patrimonial assets often follows from the collapse of centralized governments (e.g. in the former socialist states and Third World kleptocracies), so in antiquity the dynamic tended to follow when centralized palace rule fell apart. Royal properties were seized by new warlords, or sometimes simply kept by the former royal managers, e.g. the Mycenaean basilae, not unlike how Russia's nomenklatura bureaucrats have privatized Soviet factories and other properties in their own names.

(3) A third kind of privatization occurred in the case of communal lands obtained by public collectors and "merchants" (if this is not an anachronistic term used for the Babylonian tamkaru), above all through the process of interest-bearing debt and subsequent foreclosure. Ultimately, subsistence lands in me commons (or more accurately the communally organized sector, which often anachronistically is called "private" simply because it is not part of the public temple-and-palace sector), passed into the market, to be bought by wealthy creditors or buyers in general.

The fiscal crisis and taxation

AS PRIVATE creditors and merchants appropriated the land in each region, they did not themselves take on the corvee labour, military or tax obligations (which would have been impossible for large land-grabbers such as Tehib-Tilla of Nuzi, who acquired hundreds of subsistence-land parcels), but shifted these onto the population that had been expropriated.

Antiquity's privatizations thus went hand in hand with a fiscal crisis not unlike those of modern-day America and Britain, Latin America and the former Soviet sphere. Landlords managed to cast off the social obligations "originally" attached to their property, thereby starving the public sector for funds. The fiscal problem was aggravated by the fact that the public sector was no longer self supporting as industrial enterprise passed out of the large public institutions (the Sumerian temples, emulated by the palace workshops in northern Mesopotamia and the Levant).

It is at this point that states were obliged to begin taxing the population. The taxes were used to hire mercenaries in place of the peasantry that was losing its lands (most notoriously in Rome), and to purchase from private suppliers the services and goods mat formerly were produced by public institutions and the community's land.

The role of debt in social crises DEBT and privatization problems are central to the economic histories of Rome written by Livy and Dionysius of Hallicarnassus, and have been traced back to the XII Tables. They are the central points of Solon's Athens and Lycurgan Greece as told by Plutarch, Aristotle and other early historians. And they are the central core of biblical law, as well as forming the centerpiece for Hammurapi's laws c. 1750 BC and those of earlier rulers. However, conference participants pointed out that what long have seemed to be ancient records actually were, in their own time, relatively late reconstructions. The story of debt and privatization thus has had to be rewritten on the basis of what can be more securely confirmed by modern historiography.

During the early centuries of privatization there was no market economy as modern economists use the term, i.e. an economy whose resources were allocated by price-clearing, self-equilibrating markets. Interest rates and rent rates remained fixed for centuries rather than responding fluidly to market conditions. When adjustments were made, they were more by royal, religious or political intervention than by commercial forces.

The new archaeological reading confirms mat land tenure, the collection of land-rent and taxation are the most important economic phenomena of every ancient society, juxtaposed to the attaching of interest-bearing debt claims to the land. This central role of rentier income (rent and mortgage interest) hardly is surprising in view of the fact that the land was the basic resource producing the crop surplus which in turn was converted into industrial handicraft labour and output, military power, public infrastructure work and the accumulation of monetary treasure.

A second dynamic at work was a phenomenon that also disturbs today's Third World economies: monopolization of the land in the hands of absentee commercial owners who displace self-supporting food-growers. This was at least as problematic in antiquity as it was in the case of England's enclosures of the commons from the 16th to 18th centuries of our modern era. After about 1600 BC, many became landless hapiru, migrant seasonal labourers who doubled as mercenaries and formed themselves into bands troubling the Levant for two hundred years or so. In Greece and Rome, the displacement of cultivators by absentee owners led to the planting of luxury export crops, mainly olive trees and grape vineyards to make wine on large plantations worked increasingly by slaves. By Roman times the expropriated cultivators and their heirs formed part of the urban masses who turned the ancient cities into net economic drains.

The conference found that land monopolization, debt polarization and fiscal crises (as the new absentee landlords cast off the former public fiscal responsibilities attached to the possession of land) intensified over the course of antiquity, aggravated by three major factors.

• First, archaic safeguards preserving communal land tenure broke down, especially as the privatizers grew more powerful and ended up unseating central palace rulers. (Indeed, public officials in classical antiquity pledged not to cancel the debts and redistribute the land!)
• Second, there was less and less tradition of royal Clean Slates, and these seem not to have been enforced as effectively as they were "in the beginning" in Early and Middle Bronze Age Sumer and Babylonia.
• Finally, armies came to depend more on mercenaries than on free domestic cultivators.

It would be almost a truism to say that in antiquity, as today, economic progress was associated with poverty. What is now clear is that the very idea of progress -- the irreversible arrow of time -- represented an oligarchic refusal to periodically restore economic order and equity. The archaic royal program of annulling consumer debts and reversing land forfeitures and debt bondage gave way to debt strains and the loss of widespread land tenure which destroyed the economic balance of ancient societies.

Ultimately at issue was the idea of cyclical time restoring economic balance and equity rather than irreversible economic polarization. The fact that royal Clean Slates long were proclaimed afresh by each ruler (and for the Babylonian rulers of Hammurapi's dynasty, on numerous occasions during their rule) did not mean that they were ineffective. Rather, it was recognized that market developments, if left alone, did not lead to economic balance but to just the reverse -- a concentration of land and other wealth in the hands of creditors, public officials and war chieftains.

Poverty and the Bible's laws

Rulers had a concrete interest in alleviating poverty. To have permitted cultivators to lose their lands to creditors and merchants would have been to exclude these cultivators both from the obligation to provide public corvee labour and from the army. Such a society would have suffered emigration and other depopulation, or military defeat by rival communities. This is what we see in the Hellenistic and Roman periods at the end of antiquity (viz. Sparta at the end of the third century BC, and Rome at the hands of the northern invaders in the fourth century of our modern era).

It was in response to these impoverishing tendencies that Judaism sanctified the economic legislation that survives today as the core of the Bible. The Pentateuch took the idea of social equity out of the hands of rulers and made them the core of its religious commandments, attributed to Moses himself, whose story - along with that of the conquest and settlement of Israel -- was elaborated into a foundation myth as a literary vehicle for the laws concerning the land and rural usury. In mis way the spirit first found in the Mesopotamian response to privatization of the land passed into Christianity and subsequent European tradition. Indeed, biblical stories such as that of Naboth and his vineyard became rallying points for social reformers down through European feudal times to modern-day liberation theology.

Counterpoised to the spirit of Judaism and its Near Eastern predecessors was the Roman response to debt-strangulation and monopolization of the land into the great la ti fund ia estates that Pliny blamed for ruining Italy. Roman society in the Western (European) half of the empire saw interest-bearing debt disappear along with the money economy (with the Christian Church condemning usury outright, as in the Mosaic laws of Exodus), while Outright slavery was replaced by serfdom.

One can look at modern Western civilization as having been shaped by the particular way in which Rome's imperial economy collapsed. Its oligarchic spirit left a legacy of property-based law that has continued to shape European civilization since it emerged from feudalism. In the end, it was the force of Roman civil legal principles that dominated the Judaic laws in shaping Christianity, in contrast to the earlier Bronze Age Near Eastern overrides to the land's privatization and monopolization.

The upshot is that although the dynamics of land privatization inspired the economic core of biblical laws, mis core is all but ignored today. Few people would think of applying biblical injunctions to modern debt and privatization policies. What is remembered is more the dramatic stories mat now seem, in light of modern archaeological discoveries, to have been composed in large part to form a sacred mythic wrapping for the Mosaic laws.

No doubt it would be hard to fit the details of Leviticus and the Jubilee Year into a Hollywood movie, however. No Cecil B. de Mille has made a film of how Nehemiah and Ezra carried out their reforms and helped sponsor a school which edited and composed the Bible in the form that has come down to us. Despite the importance of the land question for the early history of civilization down through the present, the subject tends to be ignored in school curricula. Most economists identify the land with capital in general. Historians also tend to ignore the role played by land, despite the central role mat land tenure and debt play in the Bible. But the lessons of history must be retrieved.

Ways of doing things mat were invented in Bronze Age Sumer have shaped history ever since, but in ever-new ways as they have passed into private hands. The privatization of land-rent in particular has had major fiscal consequences. The particular way in which the land has been privatized from one society to the next -- and over time in any given society - has shaped the economy's distribution of wealth and income, the pattern of urbanization, freedom or slavery, and ultimately the rise and fall of civilizations and their religious responses to the economic imbalances associated with privatization.

The New York University conference thus outlined the extent to which the history of civilization will have to be rewritten to take account of the cuneiform and related archaeological discoveries made in the past few decades. A foundation was laid for placing the role of privatization of the land and economic enterprise at the centre of a new view of history's broad dynamics, the evolution of economic policy and the economic core of ancient religion.

The New York University symposium has defined a research agenda for the remainder of the decade. It has shown that privatization is more than just a shift in ownership from public to individual holders; it connotes a shift of social costs and other burdens from landlords and creditors onto the shoulders of the population at large.

One question to be addressed is whether today's resource owners and creditors will act differently from those of antiquity. Will they realise that there is a need for them to invest their revenue productively, or will they merely attach this income as interest-bearing debt to property? Will they strip assets in foreclosure proceedings and distress sell-offs rather than investing directly to bring new productive powers into being? Will landlords and creditors ultimately prove more efficient than public agencies in overseeing society's land, natural resources and other means of production? Or will they resist their tax obligations and deepen the fiscal crisis, as they have done so often over the millennia?