Michael Hudson: The New Economic Archaeology of Debt (April 23, 2002)

Economists are accustomed to discussing interest rates in terms of what the production process can afford to pay for capital (or loans that provide capital) that is employed profitably. Basing their deductive reasoning on lending for productive investment, economists have constructed heuristic exercises to illustrate how loans of cattle, seeds and tools might have enabled early hunters and cultivators to produce more, and hence to pay a fair rate of interest to the suppliers of such means of production. This approach seems so logical that few economists have found it necessary to seek historical verification. But when historians such as Moses Finley have searched through classical antiquity's records, they have found that the ancient world provides little empirical evidence of productive loans. From Mesopotamia through classical antiquity, lending occurred almost entirely in the spheres of commercial trade and agrarian usury.

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Along these lines already a century ago the German historical economist Wilhelm Roscher (1878) attributed the decline of interest rates from Rome through medieval and modern times to factors to which few historians have found relevant, such as the Ricardian principle of diminishing productivity in agriculture squeezing profits. He also cited the patience of individuals choosing to defer consumption so as to use their resources to make tools to obtain higher yields ("interest").[1] But the Austrian economist Eugen von Böhm-Bawerk (1890) dismissed the conflation of interest with productivity and profit rates (that is, the idea of interest as reflecting payment for the use of "capital") as "naïve productivity" theorizing.

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The ancient Near East did not enter Mauss's analysis, nor has it had much influence on subsequent anthropological research. Precisely because gift exchange is so integral a feature of mutual aid, marriage ceremonies and other alliances, funerals and other rites of passage, the custom does not offer much concrete help in explaining how charging specific rates of interest first evolved in Mesopotamia. Despite the wide-ranging scope of anthropological studies of debt phenomena, no surviving tribal community matches the historically unique ancient Mesopotamia or possesses its outward-reaching commercial dynamics. And it is in Mesopotamia, after all, that the phenomenon of interest-bearing debt is first attested, along with royal amnesties to cope with the strains it caused. Civilization's economic history developed in a particular way, with the temples and palaces of Sumer and Babylonia contributing key innovations.