History of Money, Banking, and Trade
A historical look at the development and evolution of money, banking, and trade. From the ancient civilizations to the present.
History of Money, Banking, and Trade
Episode 3. The Legacy of Babylon: Ancient Economic Systems and their Contemporary Influence
Ready to journey back in time and uncover the secrets of ancient Babylon? What if I told you that there's a thread connecting the financial systems of this ancient city to today's economic norms? This episode takes you on a captivating exploration of Babylon, from its humble beginnings as a village to its peak as an economic and regional powerhouse. We delve into the dynamics of Babylonian society, the transformation under Hammurabi’s reign, and the critical role of Nippur, an influential religious hub of ancient Mesopotamia.
Ever wondered how the Babylonians conducted their financial transactions or how they planned their budgeting for public works and military campaigns? We've got you covered. We'll reveal the intricacies of their unique strategies, including a tab system with merchants and the meticulous tracking of transactions. We'll also shed light on the emergence of early property and bond markets, and the rise of their military-industrial complex.
Finally, we'll reflect on the lasting impact of Babylon's economic and social policies. Witness the turmoil caused by the Clean Slate Programs of 1788 BCE, a well-intentioned effort to wipe out loans that led to severe consequences for lenders. We also discuss how Babylonian leaders cleverly used populist attacks to their advantage, a tactic that reverberates in today's political landscape. Join us for this fascinating episode that reveals the enduring influence of Babylon on our modern world. So, let's step into our time machine and journey back to the ancient city of Babylon.
To support the podcast through Patreon https://www.patreon.com/HistoryOfMoneyBankingTrade
Visit us at https://moneybankingtrade.com/
Welcome podcast listener. I am Mike D and this is the history of money, banking and trade podcast. My goal is to expand your knowledge of the history and evolution of trade, along with money, banking and credit, from the ancient civilizations all the way to the present. In my previous episodes we discussed the early days of ancient Mesopotamia and with that the show focused on Sumer and Akkad. In the next couple episodes I wanted to move up the tigers in the Euphrates and discuss the next stage of the Mesopotamian development, which would see a small village of Babylon develop into one of the world's largest cities. That would end up being a regional superpower and also become an economic powerhouse, and because of that, its culture would begin to spread throughout Mesopotamia and beyond. What you'll notice is Babylon took a lot of Sumer and Akkad's cultural and economic norms and really moved them forward with expanded trade and really set the stages for an early proto monetary system that eventually starts to embrace silver as an exchange medium. Furthermore, this region and time period is possibly most remembered for a famous king that developed one of the most expansive law codes of the ancient world, and because of that, a lot of societies that will follow will use the old Babylonian empire as a model.
Mac Speakers:Babylon was a city located about 83 kilometers or 53 miles south of present day Baghdad. The town of Babylon first appeared on clay tablets a few generations after Sargon the Great had unified Mesopotamia. Specifically, babylon was mentioned during the reign of Shah Khali Shari, from 2217 to 2193 BCE, of the Akkadian empire. You might recall it was during his reign that we discussed a letter from an Akkadian lord threatening his workers, if they don't work or protect the farm from the Goudian attacks, that he was going to withhold pay or something even worse. Potentially, as it were, babylon was merely a small town that was ruled over by the Akkadians. So, as a reminder, sometime around 2197 BCE, the Goudian people from the Zagros Mountains, which is located in Iran and Northern Iraq and Southeast Turkey, came down from Sumer and Akkad to overthrow the old Akkadian empire. The Goudians didn't hold power for long, as they only ruled for around 100 years, so for a while, the central power structure was essentially broken, and it resulted in Mesopotamia reverting back to a small city states that were ruled by a local king and even a local king might be a bit of a stretch, as they were probably more likely to be nothing more than warlords, and eventually the king of Ur was able to drive the Goudians out and retake quite a bit of the old Akkadian empire, but it wouldn't reach the size that Sargon had conquered. The area was restabilized and was referred to as the third dynasty of Ur or the Neo-Semarian Empire.
Mac Speakers:Much of the cultural norms that had been established by the Old Sumerians and the Akkadians were being adopted, and even enhanced in the new city state of Babylon. Just like Sumer, babylon was a male dominated society. Women were guaranteed some rights. For example, if a woman was divorced without a good reason, she could receive her dollar back, but the fact that she had to pay her own dollar in the first place was still a holdover from Sumer. Husbands, on the other hand, were permitted sexual activity outside of marriage, but women were strictly prohibited from doing that. If she was found out, she could actually be pitched into the river if her adultery was discovered. It was rare for a man to have more than one life, but it was permitted if his first wife was unable to have children. But honestly, my first reaction to that when I first read it was I wouldn't know how many men back in those days were in fact shooting blanks and couldn't have kids, but ultimately the women would have been blamed for that and as a result, the man could have taken on a second wife based on the fact that she was blamed for something that was actually his fault. And also, too, it kind of makes me think of the kings that wanted the male heir but would get a female heir, and the woman would be blamed for that. But I digress. In a lot of ways women did actually have more rights than people of, say, the later Greek city-states, as the women in Mesopotamia could represent themselves in court and even own property.
Mac Speakers:The native woman of Cyprus, a city north of the city of Babylon, part of the Babylonian empire, would develop into a priestess class associated with the god Shamash. They were not allowed to marry, but they could make money by lease and land and operating partnerships. And also, around this time we start to see the Babylonian society getting fragmented into different distinct classes. The top was dominated by the king and his royal family, followed by the priestess and the priests. The landowner class began to emerge, and merchants, along with the soldiers, belonged in the next group. Like the elite group, the priests in the hierarchy were the artisans, the shopkeepers, teachers, farmers and laborers. Now, the members of this group were diverse and free citizens. The lowest ranking group would have been the slaves. The slaves were often captured in wars or they could have been purchased and they could have also been born into slavery, but slavery wasn't necessarily a permanent state. Back in those days, babylon had essentially set up extensive laws that ruled over and governed slavery, along with other certain safeguards to prevent their abuse.
Mac Speakers:Ultimately, I find this slavery issue in ancient Mesopotamia to be kind of a bizarre structure in that their former slavery wasn't this kind of slavery that we think of. As in the American slavery. They could actually carry on their own businesses, they could own other slaves, they could marry non-slaves and buy their own freedom. So it's almost completely different than American slavery, where you're born into it and you could potentially be a slave for many generations. Technically, you could have been a slave in the Americas from 1619 to 1865. So we're talking many generations of slavery and you had no rights at all. But their slavery was a lot different. It's really hard for me to describe and, honestly, it's just really hard for me to understand. To be truthful, and it even gets more confusing when you start reading about Roman slavery their slavery was really bizarre. I mean, people could purchase Roman slaves to run businesses and that slavery could result in making a lot of money. If your slave is a great business person, you could sell your slave to another person and you could make a lot of money out of that sale and also to the slave could partake in the profits. So I'm really obviously getting way ahead of myself because I'm talking about Rome. But just to give you an idea, slavery in the ancient society was vastly different than what you think of slavery in today's mind, because I think most people, especially in the United States, when they think of slavery they think of the American South. This was completely different from that situation.
Mac Speakers:The city of Babylon was relatively small in population, but the city itself was very cramped, with small alleyways with houses made of mud brick. Many of the houses would have had an open-air courtyard surrounded by rooms and living spaces. Outside windows were uncommon, but the central courtyard would have actually provided plenty of light and air. But the air would have been very important because it was so hot that you wouldn't need it. Some kind of cooling mechanism and the air would have helped. In fact it was not uncommon for people back in those days to sleep on the roof at night. If it was too hot. They couldn't sleep in the house, they just couldn't bear the heat. So they would actually sleep on the top of the house, on the roof itself.
Mac Speakers:Family was of the highest importance to the Babylonians and their extended families often lived next to one another. Babylonians rarely sold their family home as they were often passed down over the generations and even family burial plots were often underneath the courtyard. So ultimately, I hope I give you a good understanding of the early Babylonian society. I like to picture it as me walking down the street or alleyway in Babylon and seeing the close homes, mud, brick homes jammed close together. You see your cousins a couple doors down from you and you know everybody in the town because it's still a small little town. So in honesty, the city of Babylon would have been a small town that had little to no importance in the grand scheme of Babylon. It was on the river and it may have had some certain trading aspects or a place people might pass through if they're going from Sumer up north into the northern Akkadian regions. Other than that, babylon around 2000 BCE was nothing more than just a small little town that probably half the people they didn't even know existed, just as everything had stabilized from the previous Akkadian period.
Mac Speakers:Around 2112, another nomadic people, the Amorites, streamed down from the Levant, which is modern day Syria. That's where they would have come from. Remember, the Gudeans came from the east, the Amorites came from the west. The Amorites were viewed as yet another set of nomadic barbarians, probably no different than the Gudeans. They were described as people who were nomadic shepherds, who didn't live in houses, as they lived in tents, they didn't bury their dead on the day they died and supposedly they didn't even cook their own meat either.
Mac Speakers:I would imagine that the people in Mesopotamia thought oh no, here we go again. We got this group of scary people coming in that don't even speak our language. But they did speak a Semitic language that is long gone, extinct. So it is unlike the Gudeans, who spoke a language isolate. So it's quite possible that, since they spoke a Semitic language, that communication may have been a little easier at first, but in the end they were completely different than the Gudeans and, shockingly, by 1900, the Amorites had basically completely assimilated into the Mesopotamian way of life.
Mac Speakers:So, in a weird kind of way, the Amorites remind me of the Vikings that would appear 3,000 years later, in that the Vikings were the scary group of people that appeared out of nowhere and basically ravaged the people, but eventually settled in and assimilated to the local cultural norms. And also the Vikings would often become great rulers of the lands that they had taken over, unlike what we will see with the Amorites. So, getting back on track with the Amorites, so they had moved from a nomadic way of life to become farmers and businessmen. They rose to the ranks of governors and generals and sort of how the barbarians of Rome also rose to the high ranking positions in the military and government. Eventually the Amorites had wrestled power away from the local Acadians, but in reality they just adopted the local Acadian culture, including the language. So they ended up speaking Acadian. And one of the biggest things that the Amorites really did was row the city of Babylon from a tiny little trading town to a much more important city within the Mesopotamian region.
Mac Speakers:And after about a hundred years of Amorite rule, hammurabi, another Amorite, came to the throne in 1792 BCE and he will ultimately become possibly the most influential and greatest ruler of the old Babylon Empire. But the thing about Hammurabi was at first he wasn't really interested in being a warm agar that you would typically see with a lot of Mesopotamian kings. He was more interested in governing, as his reign was much more peaceful and uneventful at first and it appears that he was more focused on infrastructure and even other government projects that he could implement. So he would fix the temples and the canals. He did launch some minor military campaigns to the south in the old Sumerian territories, where he was able to expand the empire into these southern cities, with Uruk being the biggest one. However, hammurabi couldn't hold those cities for very long and eventually lost the cities and even a little bit more territory from the southern neighbor. Things settled in and he started to develop good relations with his neighbors and in fact were military allies. He used this time to invest back into public works projects and he was able to fortify and heighten the city walls and even expand the network of temples and, more importantly, he was able to increase trade.
Mac Speakers:But the interesting thing about financial markets and trade is it allows people to interact and develop good relations with people that you may not normally be able to necessarily deal with due to different cultural differences and even language differences. In other words, finance and trade can look beyond differences and benefit both of the parties involved. So in essence, trade was able to link societies from different parts of the known world. So I kind of had this weird thought when I was just speaking. And if you've ever seen the movie American History X, you might remember that the main character played by Edward Norton, was upset with his fellow Aryan brothers because they were doing business with non-white inmates, which the business itself would have actually ultimately helped both sides of the transaction. And I kind of really think about that when I think of how some of these cultures they may kind of really hate each other, but they also realize that by doing business with each other that we could actually both benefit. We may not speak the same language and we may worship different gods, but in the end trade will actually make us both better. Now I fully admit that is kind of a bizarre thought and bringing that up in this Babylonian podcast is a bit odd and I totally get that. But I think that movie really gives the human insight into how trade benefits people that are almost completely opposite of one another. But really honestly, more importantly, it just goes to show you that cultural differences can be pushed aside and new norms can basically result in pushing these cultural differences aside. So in a way, I think that really explains how trade really worked in the ancient societies. You do see groups of people that you may not think that they could ever have some kind of trade relationship because they view things completely different, but in the grand scheme of things, money talks and money opens up opportunities, and these opportunities really helped Babylon thrive and the financiers would ultimately push aside any cultural differences or cultural norms when conducting law and justice trade with other city states that do worship different gods and speak different languages. And these cultural differences were really present.
Mac Speakers:When it comes to the region of Elam, which was a kingdom east of Babylon, elam and Babylon had this weird relationship with one another. Elam was a very important trading partner, but the Babylonians had a love hate relationship with them and, like I mentioned in the previous talks about Sumer and Akkad, this region around Babylon and Asur had poor natural resources, while Elam was rich in natural resources, especially in metals and minerals. But even the fact that Elam had these natural resources, one thing Elam did do is they controlled many of the valuable trading routes that connected Babylon to the peoples who lived far to the east. In a way, I kind of view the Babylon-Elam relationship sort of how I view the United States and China's current relationship. Both absolutely rely upon one another but neither trust each other and they are very fearful of each other. So in 1767 BCE, elam requested help from Babylon in a local war. Hammurabi obliged and helped Elam defeat their enemy, and by doing so Babylon was able to expand its own territory. But Elam also expanded its territory to the south, into southern Mesopotamia, and now there was a conflict over a city on the border. As such, the once friends became enemies, the new frenemies, I guess you could say so. Around 1760 BCE, hammurabi drove out the Elamites from southern Mesopotamia and overthrew Rimsin of Larsa. By doing so, hammurabi was able to move south into Sumer and capture that territory. He was also able to go to the north and annex territories in cities such as Asur and Nineveh, who those cities obviously become much more important years later.
Mac Speakers:The thing scholars noted was that while Hammurabi built this great army and expanded its territories, he was much more than just a general. He devoted a lot of his time and resources to building new temples and constructing defensive forts and maintaining and building new canals and worked out extensive trade agreements with neighboring kingdoms. In addition, he kept extremely detailed accounting letters. In fact, it sounds like he was an obsessive micromanager, as he managed even the most minor details of governing and in fact I tend to believe that it was this micromanaging and really paying attention to the detail that allowed him to eventually develop his famous code of law as known as the Code of Hammurabi.
Mac Speakers:But before I get into the code of Hammurabi, I think it's worth mentioning and talking about the city of Nippur, which was located between modern day Baghdad and Basra in southern Iraq, which would have placed it just north of Sumer and to the south of Akkad, and therefore, you can see, it would have had a lot of mixing of the southern Sumerian cultures and the northern Akkadian cultures. And it was already an ancient city by the time of Hammurabi, so it had been settled around 5000 BCE. So by the time Hammurabi comes around, we're talking it's 3000 years old and it had developed into a very important religious city, not a capital city, but a religious city, in which people and rulers would often take pilgrimages to seek the recognition at Ikur or the temple of Inlil, the chief god of the Mesopotamian Pantheon. Kings would lavish the temple and people gifts of land, precious metals and other commodities such as wheat and barley. If a king had a successful war, he would often travel to Nippur and pay tribute to Inlil from a portion of the plunder in which the king had received from his conquest. This would occur even after Marduk had become the most important god of Babylon and even southern Mesopotamia. People would still revere Inlil and, due to its religious importance, the city of Nippur was often protected from warring city-states and because of that and the fact that it was highly literate society, nippur had lots of texts from Sumer and Akkad that would have been taken there and stored. Something like 80% of all Sumerian texts have been found in Nippur and of those texts that were found, they included the oldest versions of Gilgamesh and the earliest versions of the Great Flood story and creation story. In addition, numerous legal, medical and general business records were stored there, along with other educational materials. In fact, more than 30,000 Cuneiform tablets have been recovered by 1900, and that doesn't even include the subsequent tablets that have been found, since Nippur was also the center of an agricultural district and if you remember from the Sumer talks, it would become obvious that the temple had controlled most of the agricultural production.
Mac Speakers:And I want to take a step back because of something I don't think I'd really mentioned previous. The temple could be viewed almost like a city hall, along with its religious importance. So it's kind of a dual field to it within the city itself. And that's why the temple would have been more or less controlled by the king, because the king would have been appointing governors and the governors would have been appointing the people in the temple. And if the temple is kind of viewed as a city hall type along with its religious importance, you can see how that would be. And it's worth noting that in Nippur, just like the Sumer, the temple would have controlled the production of various garments and other kind of artisan materials that would have been used in the export business and they would have used those materials, or whatever was they're making, to bring back certain goods or commodities, such as tin and copper to make bronze. So you can see how the precedent that was set by the Sumerians centuries ago was really taken hold into the rest of Mesopotamia by this time.
Mac Speakers:But what separates Nippur from the other city states is when the king would appoint a governor. The governor would obviously control the temple. But in Nippur, because of its religious significance, there was no governor that would control the temple. The temple would actually have the rock contact with the king, so there wasn't really a middle man in the middle. So that just shows you kind of how important the temple was in Nippur.
Mac Speakers:And also, too, the interesting thing about Nippur is it lasted a lot longer than the other cities in the Mesopotamian region. For example, when the Persians had conquested the area, the city of Nippur was actually an important city for the Persians. And also Nippur was actually chosen as a seat for one of the early Christian bishops. By the time the assassins controlled the region From the 4th to 7th century CE. So we're talking thousands of years later. Certain aspects of Mesopotamia culture were still present in Nippur. What's fascinating is the city of Nippur thrived well into the time period of the Muzan conquest and up through 800 CE. So while the cities of Uruk and Uruk and Babylon were the early powerhouses of the Mesopotamian region, the city of Nippur thrived and survived, while the other cities declined and faded away. So even though Nippur survived and Babylon withered away, it still doesn't diminish the fact that Babylon had such an importance in the region and antiquity.
Mac Speakers:In general, it was during the time of Hammurabi that growth of private enterprise and the merchant class had continued to develop, despite the palaces and the temples continuing to own large portions of land and wealth, just as had done during the Sumerian and Akkadian empire. As part of this land ownership by the temples, babylon had essentially set up a tenant farming system, whereas indentured servants promised military or civic duties in exchange for land use, and, as part of these agreements, the tenant farmers promised to protect the current ruler or the temple that owned the land. It was. You know, the quid pro quo type scenario will provide you the land, you protect us.
Mac Speakers:In Babylonia, the palace had leased land and workshops at a green-upon prices and also advanced textiles and other items to merchants that engage in long-distance trade. So, in reality, a very similar enterprise system that we discussed in the previous episode when we discussed Sumer and Akkad. But the difference really is is now, in Babylonia, we're starting to see a little bit more evolution of the private marketplace. Don't get me wrong. The temple and the palace still had significant control, but what we are starting to see is the evolution of the long-distance trade owned by the actual individual entrepreneur itself. But in the process of developing this business system, the palace, or even the temple officials, along with the entrepreneurs, had essentially created a system that could create and develop large-scale production of goods and even marketplaces, which ultimately would have more or less changed the supply and demand curve. You would have had a larger supply through the large-scale production and then also you're going to develop more demand with the development of these actual marketplaces to buy and trade the goods that are produced, and this was further enhanced by the fact that you are seeing direct reinvestment back in to the production itself and when you put this all together, you have the enhanced supply, the enhanced demand to the production process. In itself, what you are going to start to see is with the reinvestment that we actually start to see economies of scale start to grow and this will ultimately help get the goods to the marketplace cheaper and more efficiently than in the past. Ultimately, what happens is the Babylonian economy grows.
Mac Speakers:The local temples in Babylonia basically followed what the Cadians and the Samaritans did prior by issuing loans from their current horde of wealth. Like the earlier Cadians and the Samaritans, these loans were typically backed by some sort of grain, such as wheat or barley, which was to be repaid at harvest, typically speaking. In fact, these loans were actually documented in early ledgers on clay tablets that actually can be viewed to this day If you go to the British Museum, you'll see these and this also progressed to the point, whereas the temples, or even the royal palaces, would also begin to service the debts, as in, they would keep track of who owes who and they would also make sure journal entries were properly maintained or, if needed to be, they would make the actual payment in whatever commodity was loaned out. In other words, the temples expanded their business operations of making or accepting payments on behalf of their clients out of the deposits that were entrusted to them. And as a reminder, as I mentioned previously in the Sumer and Akkad episode, ancient Mesopotamians used the base 60 in their math calculations. We, as modern people, use the base 10. When people deposited gold or silver into a temple, it could be deposited in as little as 1 60th, since 60 was the numerical base and, just like the days of Sumer, the palaces and the temple were known to have provided lending and issuing receipts from the wealth they held.
Mac Speakers:As I just mentioned, since food insecurity would have been a potential concern, the loans typically involved issuing seed grain with repayment due from the harvest. Archeologists have been able to unearth numerous clay tablets that have these contracts written up by the temples and the palaces. And what is interesting is clay tablets have indicated that it was often entrepreneurs who came to the temples for certain loans, and it was not uncommon for priests to take out loans directly from the temples themselves. As cereologists have unearthed numerous clay tablets that have the details of loans that were written in Q&A form, and these loan contracts included the amount of the loan, along with the interest and payment details attached to the contract itself. In addition, it wasn't uncommon for some of the contracts to include arrangements that were made for the creditor to make food donations to the temple. So ultimately what would happen is, instead of making interest payments, the creditor would actually make payments of food to the temple. It could have been a case where it was a mixture of both There'd be some kind of interest payment and then also they would supplement that by some kind of donation that would ultimately help the temple. But these temples became so wealthy that they ultimately were responsible for helping widows and orphans along with the other poor.
Mac Speakers:It was the temples that directed the social safety nets and as the temples became more wealthy, silver also continued on its upward projectory as a more increasingly popular favored store of wealth. With regards to silver loans, the rate of interest on silver was set by royal decree. This really set the bar for interest for really almost a thousand years or so, from Hammurabi through the Neo-Babylonian Empire over a thousand years. But in reality there was some fluctuation in the interest on silver loans despite the royal decree, but the fluctuations weren't really that big, so they remained relatively static. The interest rates could also be negotiated. However, it appears that once the precedent was set, the king strongly promoted that rate. In other words, market forces really weren't determining interest rates at the time. It was really the king said to do this, and this is what we're going to do.
Mac Speakers:Most commercial loans throughout ancient Mesopotamia and even throughout the Roman Empire took the form of some sort of shipping loan. They paid a high rate of return 20% plus a share of the trading profits, and this is probably because the risk that a ship might not reach support safely had to incentivize the person that was actually going to fund the voyage itself. As a side note, the share of trading profits is how modern Islamic banking got around the problem of usury. So from Babylon down through Rome, it was understood through regulation that a merchant's debt would be canceled if the ship was lost at sea or raided by pirates, or a caravan was robbed, for example I'll go through this shortly when we discuss the code of Hammurabi. But in reality it was more or less set up this way because they wanted to give assurance to the shipper that the person wouldn't lose everything, because often a shipper might use a large percentage of whatever capital they have personally. If a ship was lost or robbed or whatever happened, a shipper would basically be out of business and wiped out completely. So therefore a shipper really wouldn't have the ability to diversify their investment versus if you're going to invest in an actual voyage versus an investor who could diversify by investing a little bit in multiple voyages. So ultimately what we have is we have two sides of the coin. You have the investor who is loaning out the money, and then the shipper itself. As of now, and what we're going to see for literally thousands of years, the lender was ultimately on the hook, not the shipper.
Mac Speakers:But with regards to the shipper and the merchants, what we've seen is scholarship evolving quite a bit over the past 50 years or so. Originally, we believe that by distributing goods at specific prices, the early Sumerian temples created the conditions to encourage the emergence of independent merchants and market exchanges. One of the early Assyriologists, polanyi, presumed that markets first emerge among military camp followers and foreign merchants and lenders. However, there has been a shift in scholarship recently where the more recent Assyriologists, hudson for example, believes merchants were independent of military campaigns as they basically arose on the fringes of the temple and the palace complexes in Sumer and Babylon. So it appears that a lot of independent merchants essentially helped establish a secondary market which was not dependent upon military conquest and the temple or the palace directing the actual movement of supplies and goods. And you know, I really think it's a good time to take a step back for me to kind of explain how the economy worked in the old Babylonian Empire. Since the concept of currency wasn't fully developed by then, commodities were still being exchanged in trade, with the commodity prices being quote in terms of the silver value of it, while silver was slowly gaining favor.
Mac Speakers:According to Assyriologists Leo Oppenheim, payment for slaves, along with goods and services, during the old Babylonian period was rarely made in silver, even though prices were generally quoted according to silver standard. In addition, assyriologists Mitchell Rothman noted that temples recovered indicated that the recorded transactions almost never mentioned silver changing hands, unless silver itself was the actual object of the exchange. Essentially, silver did not function as real money not quite yet. However, it's not like people would just walk around with brains or precious metals in their pocket to pay local merchants or even the proprietor of an alehouse, so instead a tab would often be kept by the merchants, whereas the payee would settle up at harvest or some other designated time period. The merchant or the proprietor that ran these pubs, for example, would use these tabs as consignment advances from the temple or palaces during the crop year. And, like I said in the last episode, the people of this region were illiterate and wrote down so much that most, if not all, of these transactions were written down on clay tablets and were held at the proprietor or the temple itself.
Mac Speakers:In the end, most of these transactions that occurred in Babylonia were similar to the transactions that we use in modern societies, whereas we transact and receive a good or service without actually having to dig into our wallet and actually make a physical payment. We just swipe a car. So in reality it's really not that much different between how we transact and how they transacted, because a person would say go to an alehouse, they would not actually be paying in silver or whatever kind of commodity that was going to be exchanged for the beer. Instead, you got your good and you basically paid later. It's the same thing with the nowadays right you go to the store, you buy a good or service, you swipe the card and you're really not paying right now. You're basically getting a ledger hit that you got to pay later on, whether it's at the end of the month or whenever you make your payments. But back in those days, the payment was typically going to take place after harvest.
Mac Speakers:It's quite amazing when you think about it, because this is back in the days of Babylonia. We're talking 2000 BCE 4,000 years ago. To put this into perspective, julius Caesar would have considered these people as ancients, so in reality, they were the ancients of our ancients. Yet they had a very modern idea of how to transact in an economy, as they essentially had accountants who meticulously wrote down and kept track of various transactions involving private citizens and even the state. These records were so detailed that they were able to use them as tools for future planning and resource allocation for the overall economy and the people. Therefore, the temple's records on tablets were so precise and up to date that they were used by the palaces and temples to plan and budget for future public works projects and the general needs of the people, along with any potential military campaigns or defense spending. From there they were able to figure out how much money to collect and land rent and taxes, and what we've seen through Sumer, akkad and up through Babylon was the development of trade, money and credit, including interest and pricing.
Mac Speakers:All this did not really emerge spontaneously among individuals. Rather, they used this investment for the purposes of creating profits and the charging of interest, and even the very beginnings of an early form of a property market Ultimately created an even earlier proto bond market that first began to emerge in the temples and the palaces of Sumer and Babylonia. And a lot of this can be traced back to the contracts for public works projects and services that were being issued by the Sumerians as far back as 4th century BCE, and these were often awarded to provide supplies for religious rituals or public building or in other infrastructure projects. Also, contracts were awarded for the collection of public taxes. In addition, we also start to see the rise of the military industrial complex, as provisioning for the army soon became the largest category of contracts, and this was really brought about by the fact that Sumer, akkad and now Babylonia really didn't have a permanent public or royal bureaucracy of the government, so it needed private suppliers for services that can perform the services that the government was not actually providing. So Babylonia was thriving and becoming a regional superpower In the south, in Sumer, ur was having a bit of a resurgence.
Mac Speakers:In fact, ur may have had the world's first known financial district. Texts that were have been recovered in Ur indicate that a local businessman named Damuzzi Gamal I hope I'm pronouncing that right had kept very detailed records of his business transactions and therefore he often kept his own accounts rather than hiring a scribe. What's interesting is, these letters that have been recovered, or these financial transactions that have been recovered, indicate that what he would do is something really modern, in that he would take deposits from individuals at low interest rates and he would turn around and use those deposits for various investment schemes, and apparently his main business the capital was the capital. His main business was that of a bread distributor, in which he would have supplied the temples, and it's also quite possible that he was a supplier to the king in the capital city, larsa. So not only did he provide bread, but he also provided other baking products. In addition to his distributor investment, he also lent silver to local fishermen and farmers. The rate of return that he would get from these loans would be as high as 20% per month not per year, per month 20% per month.
Mac Speakers:Most of these loans were most likely consumption loans, really designed to help out smooth consumption. In other words, a person comes to you and they're desperate because they're a fisherman or they're in some other kind of trade that they might not be getting any kind of income right now. So they need quick income to help smooth out the fact that they're not going to get, say, income or revenue, or maybe their harvest hasn't come in yet. What they do is they go to somebody like him and they use him to kind of get him through the tough times. That might be pretty temporary in nature, but either way, to be honest with you, he almost feels like he was an ancient form of a loan shark to me.
Mac Speakers:In 1796 BCE, damuzzi, gamel and another man had developed a modern sounding banking operations as they borrowed around 500 grams of silver from another businessman and promised to return 297 grams of silver in five years, which would have equated to about a 3.8% annual rate of return. This, however, was rather low, considering that back then a typical interest rate would have been around 33% and five years would have been considered a long-term loan. What makes this sound more modern was the fact that the person that gave the loan ended up selling the loan to some local merchants, who collected the debt at his due date in five years. This gives people the idea that a liquid market for debt had actually been developed in ore, and it's quite possible that this liquid market for debt was available in other cities outside of ore, so it wouldn't be surprising if one could buy and sell debt in Babylon, for example.
Mac Speakers:And also, like I had mentioned previously, since a lot of times people were basically running a tab and then settling up at a later date, such as at harvest time, and in reality, what this was creating was people would lend out whatever it is to another individual. They would receive a deposit or a tab or something or other saying they owed them money in the form of barley or silver or whatever it is, and, in the grand scheme of things, what ends up happening is, as people were accumulating these tabs or tablets, saying that so and so owes me this, what ends up happening is these people end up building up paper wealth. So on paper, they had access to a large amount of commodities or other kind of assets. So this is really the first time in history where one could become a wealthy person without necessarily having to own a lot of land, and therefore one might not even know that this individual is a very wealthy person just by looking at them, because they don't know the underlying paper assets that they have. It's a lot different than looking at a large landowner, where everybody could clearly see that this person has a lot of assets because the land is right there in front of you and this wealth could have been transferred from one individual to another.
Mac Speakers:But the interesting thing is, when people fall into debt, they actually work harder, believe it or not. There was a study that was done in India that actually showed that indebted farmers would actually produce higher yields over farmers who had minimal debt. I find it interesting that this whole idea of wealth transfer and building up assets through issuing debt could ultimately result in higher production, which is kind of interesting because it's not something that most people would have actually thought of, or even I can't even always say most people something I wouldn't have thought of. It's quite possible that, because we are starting to see a growth in the debt market, that this debt market might have had unintended consequences, as it may have fueled an increase in production and farming.
Mac Speakers:And another great case study from a later date, approximately 50 years after, dumuzi Gamal, a serial, just discovered a complaint that was filed by a customer of a merchant in Ur. It's quite possible that this is the oldest living written complaint ever discovered, as it was from approximately 1750 BCE, apparently a person known as Ia Nasir, who was a businessman who organized and financed maritime expeditions from Ur all the way down into the Persian Gulf to a place known as Dilman. Unlike southern Mesopotamia, dilman was in fact resource rich and was a major port for the copper trade. Dilman was located in the eastern province of modern Saudi Arabia on the Persian Gulf. Due to its location, this was an important city for trade that would be coming into Mesopotamia from the south, so if any goods would have been imported through the Persian Gulf, they most likely would have ended up in Dilman before moving on to other points such as Egypt or Mesopotamia.
Mac Speakers:Since Dilman was such an important trading hub, people like Ia Nasir would have financed large expeditions in which investors would have contributed to a proto-equity investment firm in the form of silver or other goods, such as Ur baskets, where the expedition would have traveled to Dilman to buy copper or other goods or other commodities like spices, to resell in Mesopotamia. If the expedition was successful, the investors could have made a very large profit, of which they shared in proportion to their investment level. On the flip side, their loss was only limited to the amount of the original contribution. Thus, this would have been viewed as an early limited liability investment, as it was often stated in the contract of the investment itself. Therefore, it appears that limited partnerships were in effect, around 2000 BCE, which would have been a huge step forward in establishing an economy that encourages direct investments. And, to be honest, this was kind of a shocking revelation, as if you would have asked me in the past where was the first limited partnership, I would have actually assumed it was one of the East Indian companies, but this would have predated them by almost 3500 years. What's even more incredible is when you learn that the Temple of Iana had been involved in a similar financing for about 500 years before this time. In fact, no investment would have been too small, so a common person could have donated a piece of jewelry, for example, to the investment. So it appears to me that even in 2500 BCE there was really an encouragement even by the common person to get actively involved into investing whatever kind of asset you have into a much larger investment vehicle.
Mac Speakers:But getting back to the Ia Nasir case, on this particular occasion he had agreed to sell copper to a person known as Nani. Nani sent his servant with the money or the money is not really known, but it could have been silver, it could have been anything. He had sent his servant with money to complete the transaction. The copper was considered by Nani to be substandard and just not acceptable. In response, nani created the Qnayform letter for delivery to Ia Nasir. Inscribed on the letter was a complaint to Ia Nasir about the copper delivery, as it apparently had the incorrect rate, and he also had issues with another delivery prior to this. Nani had complained that his servant, who ultimately handled the transaction, had been treated rudely. He stated that at the time of writing he had not accepted the copper but he had paid the money for it. And when I say money, money can represent anything. It could be silver baskets, grain Anything could really take the form of money at this time period. And it sounds like this was not the only complaint that he had received, because they had found other letters of a man who had complained that he had not received this copper yet and another saying that he was tired of receiving bad copper.
Mac Speakers:So it's quite possible that Ia Nasir was nothing more than a shady businessman or some other kind of miscommunication between the two parties. I don't know who knows, but it wouldn't be surprising. If we have an early banking system, why wouldn't we have early shady business people? So it kind of goes hand in hand. I guess Once people start making money, people will find ways to cut corners, and it wouldn't surprise me if Ia Nasir was doing nothing more than cutting quarters and just being a shady person in general.
Mac Speakers:But either way, I find reading about these little early complaints. It's fascinating to me that it's such a thoroughly modern feel to it. And this is 4,000 years ago. But as the banking and finance sector grew, so complaining about merchants and bankers was really not uncommon, and some of the earliest attacks on financiers were leveled by Babylonian political leaders who were looking to score points and increase their popularity through populist attacks, and I would surmise that this was a precedent that was set by them that would go forward for literally thousands of years, as political leaders would look at bankers as the root cause of problems, and, of course, some of it was legitimate complaints that they would have about bankers. But the fact of the matter is, anytime a banker is blamed for any kind of economic problem that the local economy or state faces, just know that this is something that's been going on for over 4,000 years. This is not a new phenomenon and it's always going to continue.
Mac Speakers:But you might remember, when I was discussing Sumer, there were edicts created by the palace, known as the Clean Slate Programs. Now, these were designed to help stabilize the population, because in the past, individuals had gotten into debt so far that they had to sell themselves or their kids into slavery, and this would essentially destabilize the whole entire region. So these clean slate programs eliminated the debt and stabilized the local population. However, from a banking and lending standpoint, this would absolutely kill the lending market. In 1788 BCE, a clean slate edict was issued by Rimsson, and this cost all loans to be void. While this is great for the borrower, it's not great for the lender, obviously, and as such, people like Dumouzi Gamal would have been wiped out completely. However, they would have been lawsuits that would have ensued after these edicts, as lenders would have tried to claim property or assets that were pledged as security for the loans, and it appears that these were often unsuccessful in their claims.
Mac Speakers:So you got to wonder how can you have a lending operation if the loans were at risk of being wiped out completely and you cannot obtain the underlying collateral for the loans? This loan would seem to discourage borrowers and savers from getting together, especially if the loans were more than a few months old. You would have duration risk, serious duration risk. The longer the loan, the more risk that a new leader can emerge and wipe out the loan and wipe you out completely on top of that. So the result, honestly, would be this would really stifle economic growth. In fact, evidence seems to suggest that trade with Dilman completely stopped for over a thousand years, and it's after this that we start to see the city of Ur begin its slow decline. Now I don't want to blame the edicts on that, because Ur would also face severe climate change, where the rivers had actually shifted and the Persian Gulf had actually receded to the south. So Ur would eventually just become a desert city and without access to water any city in the desert will die eventually, and Ur was one of those cities that died. But anyway, I got off on a little tangent. It wasn't the first time that lenders were under attack.
Mac Speakers:In ancient Mesopotamia, a populist reformer ruler in 1900 BCE wanted to restore power back to the ordinary citizens in Lagash who had suffered under heavy taxation and interest debt. This reformer abolished the tax collector and rid the city of users and criminals. He kind of lumped them together, users and criminals. And not only did he abolish the debt, but he also lumped the lenders together with the criminals. This certainly won't be the last time this ever happens the user and the criminal. This will be once again another recurring theme that we'll see over and over and over again. The legal system of Babylon really depended upon kind of a modern feel, in that they required notarized and witnessed documents and contracts that would have established individual rights and certain obligations, many of which were very similar to modern financial instruments and contracts. The first mortgages, deeds, loans, futures contracts, partnership agreements and even letters of credit appear in cuneiform documents dating from around the rise of Babylonia, 2000 BCE and even earlier than that, so even in the days of Akkad and Sumer, and the legal code of Babylon was really linked back to its most famous king, king Hammurabi, who was a complicated figure, to say the least.
Mac Speakers:I want to thank you for taking your time to listen to the first episode of the Old Babylonian Empire. I truly hope you found this to be enjoyable, informative and entertaining. Up next we will discuss the second half of the Old Babylonian Empire. If you like what you hear, you can visit us at patreoncom slash history of money banking trade, and also you can help this show out a ton by leaving a 5 star review. Thank you very much. Talk to you soon.
