by Scott Nelson & Matthew Edwards

Debt is a strange beast. A few generations ago the great evil that macroeconomic policies were designed to vanquish was unemployment. When concern grew that the tools used to correct unemployment were effecting inflation in the long term, then inflation became the bogeyman of the day. As we neared the end of the Cold War, debt increasingly inched its way toward centre stage of our predominant concerns with the economy as the old adherence to Polonius’ advice of “neither a borrower nor a lender be” began to break down. But that was an adherence by many individual citizens around the world, in eras when debt was stigmatized, credit availability limited and the relationship between borrower and lender much more personalized.

Countries, of course, had rarely if ever listened to Polonius: first, their individual rulers were always more than happy to borrow (and even more happy not to pay back) and then, after the emergence of the modern nation state, central banks and mass enfranchisement, countries governments found debt a useful tool for financing expenditure, whether it was for productive uses or not. And debt has continued to grow, in absolute and relative terms. In 1988, for the first time since the First World War, the United States became a net debtor to the rest of the world; as of the end of 2018, its net liabilities were close to breaking 10,000 billion dollars. Prior to the euro, the more profligate economies of Europe had always found it convenient to seek out a short-term solution to their debt problems by way of devaluing their currencies. Hamstrung in their control over monetary policy, their only alternatives have been to restructure or elect populist parties of the left or right.

With all of this talk about debt whirling about, it might be advantageous to take a fresh look at the idea itself. And in the hyper-fast environment of the modern technological age where we race about in the eternal present, nothing could be fresher than consulting an old voice – a very old voice – from the distant past. Because while unemployment and inflation were not necessarily completely understood or discussed with as much theoretical rigor centuries ago, debt certainly was; and, indeed, it was at the forefront of debates both secular and sacred for centuries. This may be because the very notion of debt presupposes the idea of private property, which has been dear to many cultures through the ages. To say that you owe something means that you currently hold something that does not belong to you or that you do not deserve, e.g. someone else’s property, or someone else’s grace, for that matter.

The great Roman orator, Marcus Tullius Cicero – in addition to enjoying the well-deserved reputation of having been a stalwart defender of the Roman Republic and one of the most eloquent men to have ever lived – sounds a distinctly modern tone in his concern with debt and his defence of private property. In fact, unlike some of the Greek philosophers who preceded him, he sounds positively Lockean on this score: “The men who administer public affairs must first of all see that everyone holds on to what is his, and that private men are never deprived of their goods by public acts…What greater plague could there be than [an equalization of goods]? For political communities and citizenships were constituted especially so that men could hold on to what was theirs. It may be true that nature first guided men to gather in groups; but it was in the hope of safeguarding their possessions that they sought protection in cities.”

In this passage, Cicero makes clear that human societies exist in order to maintain the principle of private property. We can guess from this that Cicero will take a fairly harsh stance toward large-scale debt forgiveness, as indeed he does: “What is the point of wiping slates clean, unless it is that you can take my money in order to buy a farm, which you will have, while I no longer have my money? For that reason provision must be made to avoid any debt that may harm the political community. There are many methods of guarding against this; but if it does occur do not let the rich lose that which is theirs while the debtors profit at others’ expense. For there is nothing that holds together a political community more powerfully than good faith; and that cannot exist unless the paying of debts is enforced.”

What is refreshing in this passage, given how ultra-economic our modern day discourse regarding debt has become, is that Cicero anchors his opposition to debt forgiveness on the wellbeing of society. We of course cannot expect Cicero to employ those arguments against debt forgiveness or default that are commonly found today, e.g. that such measures would drive up interest rates and deter investment, or that a more tolerant attitude toward bankruptcy is useful for promoting innovation and entrepreneurship, but the overall point is certainly worth reinforcing. At the end of the day, the money has to be accounted for – even with central banks’ Quantitative Easing measures and balance transfers on individual credit cards – and debt, when not invested productively or when not repaid, leads to an overall diminution of the well-being of society. A point, perhaps, that some politicians and serial credit card applicants might like to consider.

Scott Nelson is a scholar and writer who has been living and working in Vienna since 2008. He has published works on political ethics and a variety of thinkers including Raymond Aron, Max Weber, Erasmus, Karl Marx, and Karl Popper. He is currently working on his next project as a co-author on a book discussing Cicero and modern politics.

Matthew Edwards is an independent consultant and analyst based in Vienna. He gained his bachelor’s from the University of York and master’s degree from King’s College, London.

The views expressed on are not necessarily those of the Austrian Economics Center.