[Session 3]"A lecturer said to his students, 'Dilbert's 'Salary Theorem' states that 'Engineers and scientists can never earn as much as administrators and sales people.' Therefore, as knowledge approaches zero, money approaches infinity, regardless of the amount of work done. How to proof it? Let's say: Postulate 1: Knowledge is Power. Postulate 2: Time is Money.As every engineer knows: Power = Work / Time. And since Knowledge = Power and Time = Money, it is therefore, it might be true that Knowledge = Work / Money.Solving for Money, we get: Money = Work / Knowledge. Thus, as Knowledge approaches zero, Money approaches infinity, regardless of the amount of Work done.Conclusion: the less you know, the more you make," the lecturer explained."That's why many incompetent employees are appointed as managers," said one of the students."And I don't subscribe and like such idea," the lecturer replied.'"The Moon continued, "Now, the question is, what is the background issue of Debt and Usury in the Merchant of Venice? Like his contemporaries, Shakespeare borrowed freely from previously known works for his plots, characters, and themes, says Halio. Shakespeare's main source for The Merchant of Venice was a sixteenth-century Italian novel, Il Pecorone (The Dunce) by Giovanni Fiorentino.A consideration of the financial workings of various characters' professions offers another context from which to evaluate the play's action. While the world of a Venetian merchant might be imagined as one of wealth, status, and exotic travel, Salerio and Solanio counterbalance this fantasy of prosperity and power by another, opposing fantasy of the merchant's life as one filled with anxiety and preoccupation.As for usury, lending money at interest, raged throughout early modern Europe and became especially acute during the Renaissance. Usury was regarded as unchristian, and insofar as the Church exerted its influence and considerable power, it was prohibited for centuries, until the rise of capitalistic enterprise during the Continental Renaissance felt the need for interestbearing loans to foster trade and other business enterprises. Italian bankers, such as the Medicis in Italy, were in the forefront of those who insisted on the practice of usury as necessary for business expansion. They worked hard, therefore, to gain control of the papacy whenever possible and to circumvent the laws against usury. Others naturally followed until the practice of usury became widespread in Europe, not only among Jews who were forbidden to own land (which was the basis of wealth in the Middle Ages), but also among Christians. The period 1300-1700 is well known for the growth of the banking industry and the expansion of trade as new markets were found, especially in India and the rest of Asia, during this age of exploration.In the Renaissance much of the controversy over usury centered upon interpretations of Scripture, the prohibitions against certain kinds of usury stipulated in several books of the Bible, but discussions of the issue actually go as far back as Plato and Aristotle. St. Thomas Aquinas (1224 or 1225-1274) argued vigorously against any kind of usury: to pay interest on loans, he said, was forbidden, and he gave his reasons. Changing economic circumstances in the Renaissance, however, which saw the rise of banking in Italy and throughout the rest of Europe, required a different definition of usury, one that would sanction at least some kinds of moneylending at interest. The key issue became intent: what the money was borrowed for and under what circumstances it was borrowed. While some scholars and theologians maintained that any sort of interest amounted to usury, others found ways around biblical prohibitions. For example, partnerships that involved investments for potential profit could be permitted. The issue then became risk. If risk was involved, the investor could reasonably expect to be compensated. This was different from contractual loans where the amount of interest was fixed for a period of time, which amounted to usury.Protestant reformers were not all of one mind, just as Catholics were not. Whereas Luther accepted the orthodox view that usury was a sin, a number of his followers did not. Jakob Strauss, for instance, one of the more radical reformers, maintained, in defiance of Luther, that Old Testament law was not binding upon Christians. Melancthon, too, another of Luther's followers, was not as conservative as his mentor. But both Luther and Melancthon held that secular authorities could regulate interest for the good of the community. Calvin moved still further away, as did the French theologian Charles du Moulin, whose arguments were anticipated as early as 1530 by Heinrich Bullinger. Under certain circumstances, they argued, lending at interest was permissible, for example, when it involved long-term loans at reasonable rates (no more than 5 percent). Both defended lending to the poor at no interest, though lending to the rich was permissible when it did not involve extortion or injury of any kind. The important thing was to observe the Golden Rule, 'Do unto others as you would be done by.'In England, in the sixteenth century, these divergent views were vigorously debated, becoming a major issue in mid-century when Parliament considered a bill limiting loans at 10 percent interest. Martin Bucer, a principal figure in the debate, upheld the view that not all usury was sinful. The motivation of the loan was crucial in determining between licit and illicit interest-bearing loans. What was also important was not the interest per se but the amount of interest and the use to which the loan was put. Without lending at interest, many legitimate enterprises could not go forward, such as trade and agriculture. Thus Bucer reconciled theology and commerce, noting an important difference, as Calvin had said, between the Hebrew terms used in Scripture: nesheck, 'biting usury,' which injured one's neighbor, and tarhith, the taking of legitimate interest, which injured nobody.The total prohibition against usury, passed during the reign of Edward VI in 1552, did more harm than good, in practical terms, as it drove up the price of money and seriously handicapped English merchants involved in trade with other countries. Moreover, to encourage industriousness, one had to adhere to the profit motive. What the argument came down to was that the state should regulate the rate of interest, leaving it to God, Who alone knows the secret of men's hearts, to determine the motivation and morality of the lender. Lord Burghley, Lord Treasurer of England under Elizabeth I, studied all aspects of the problem, both religious and pragmatic, and finally determined that the harmful effects of usury were such that moneylending required regulation; thus, he supported the 1571 act, which tolerated lending at interest without sanctioning usury per se.According to Jones, the opposing sides could agree that usury was wrong and had a deleterious effect upon society, but they could not agree on precisely what usury was or what they should do about it. Perhaps the most injurious effect, many believed, was the social mobility that usury promoted (i.e., the ability of people to rise above their class by making money through usury). This mobility upset the social hierarchy and could lead to anarchy, as gentlemen (born to wealth and entitled to bear arms) were reduced to poverty by grasping usurers, who rose in their place. Nevertheless, throughout Europe, princes used civil law to regulate usury, not abolish it. After vigorous debate in both houses of Parliament, a bill was approved that revived in essence the act of 1545 under Henry VIII, which allowed interest at no more than 10 percent, but which was now carefully circumscribed by various restrictions and enhanced enforcement. Offenders faced penalties of triple their principal, for example, half going to the crown and half to the informer. The act, labeled 'Against Usury,' was a compromise between the conservative and the more liberal members of Parliament.In any event, the controversy over usury, while not as virulent as it had been some decades earlier, was still an issue at the end of the sixteenth century in England, although many Elizabethans, including Shakespeare himself, engaged in lending money or other commodities at interest. Capitalism was progressing apace, superseding the older feudal economy. If it took a little longer to arrive and take hold in England, by the eighteenth and nineteenth centuries that nation was the leader among nations in capitalist enterprises.The epoch that began with what we're used to calling the 'Age of Exploration' was marked by so many things that were genuinely new—the rise of modern science, capitalism, humanism, the nation-state—that it may seem odd to frame it as just another turn of an historical cycle, says David Graeber.The era begins around 1450 with a turn away from virtual currencies and credit economies and back to gold and silver. The subsequent flow of bullion from the Americas sped the process immensely, sparking a “price revolution” in Western Europe that turned traditional society upside-down. What’s more, the return to bullion was accompanied by the return of a whole host of other conditions that, during the Middle Ages, had been largely suppressed or kept at bay: vast empires and professional armies, massive predatory warfare, untrammeled usury and debt peonage, but also materialist philosophies, a new burst of scientific and philosophical creativity—even the return of chattel slavery. It was in no way a simple repeat performance. All the Axial Age pieces reappeared, but they came together in an entirely different way.The 1400s are a peculiar period in European history. It was a century of endless catastrophe: large cities were regularly decimated by the Black Death; the commercial economy sagged and in some regions collapsed entirely; whole cities went bankrupt, defaulting on their bonds; the knightly classes squabbled over the remnants, leaving much of the countryside devastated by endemic warfare. Even in geopolitical terms Christendom was staggering, with the Ottoman Empire not only scooping up what remained of Byzantium but pushing steadily into central Europe, its forces expanding on land and sea.At the same time, from the perspective of many ordinary farmers and urban laborers, times couldn’t have been much better. One of the perverse effects of the bubonic plague, which killed off about one-third of the European workforce, was that wages increased dramatically. It didn’t happen immediately, but this was largely because the first reaction of the authorities was to enact legislation freezing wages, or even attempting to tie free peasants back to the land again. Such efforts were met with powerful resistance, culminating in a series of popular uprisings across Europe. These were squelched, but the authorities were also forced to compromise. Before long, so much wealth was flowing into the hands of ordinary people that governments had to start introducing new laws forbidding the lowborn to wear silks and ermine, and to limit the number of feast days, which, in many towns and parishes, began eating up one-third or even half of the year. The fifteenth century is, in fact, considered the heyday of Medieval festive life, with its floats and dragons, maypoles and church ales, its Abbots of Unreason and Lords of Misrule.Over the next centuries, all this was to be destroyed. In England, the festive life was systematically attacked by Puritan reformers; then eventually by reformers everywhere, Catholic and Protestant alike. At the same time its economic basis in popular prosperity dissolved.Why this happened, has been a matter of intense historical debate for centuries. This much we know: it began with a massive inflation. Between 1500 and 1650, for instance, prices in England increased 500 percent, but wages rose much more slowly, so that in five generations, real wages fell to perhaps 40 percent of what they had Why? The favorite explanation, ever since a French lawyer named Jean Bodin first proposed it in 1568, was the vast influx of gold and silver that came pouring into Europe after the conquest of the New World. As the value of precious metals collapsed, the argument went, the price of everything else skyrocketed, and wages simply couldn’t keep up.The problem with the conventional story is that very little of that gold and silver lingered very long in Europe. Most of the gold ended up in temples in India, and the overwhelming majority of the silver bullion was ultimately shipped off to China. The latter is crucial because it is related to how China abandoned the use of paper money.After the Mongols conquered China in 1271, they kept the system of paper money in place, and even made occasional (if usually disastrous) attempts to introduce it in the other parts of their empire. In 1368, however, they were overthrown by another of China’s great popular insurrections, and a former peasant leader was once again installed in power.During their century of rule, the Mongols had worked closely with foreign merchants, who became widely detested. Partly as a result, the former rebels, now the Ming dynasty, were suspicious of commerce in any form, and they promoted a romantic vision of self-sufficient agrarian communities. This had some unfortunate consequences. For one thing, it meant the maintenance of the old Mongol tax system, paid in labor and in kind; especially since that, in turn, was based on a quasi-caste system in which subjects were registered as farmers, craftsmen, or soldiers and forbidden to change their jobs. This proved extraordinarily unpopular. While government investment in agriculture, roads, and canals did set off a commercial boom, much of this commerce was technically illegal, and taxes on crops were so high that many indebted farmers began to flee their ancestral lands.Typically, such floating populations can be expected to seek just about anything but regular industrial employment; here as in Europe, most preferred a combination of odd jobs, peddling, entertainment, piracy, or banditry. In China, many also turned prospector. There was a minor silver rush, with illegal mines cropping up everywhere. Uncoined silver ingots, instead of official paper money and strings of bronze coins, soon became the real money of the off-the-books informal economy. When the government attempted to shut down illegal mines in the 1430s and 1440s, their efforts sparked local insurrections, in which miners would make common cause with displaced peasants, seize nearby cities, and sometimes threaten entire provinces.In the end, the government gave up even trying to suppress the informal economy. Instead, they swung the other way entirely: stopped issuing paper money, legalized the mines, allowed silver bullion to become the recognized currency for large transactions, and even gave private mints the authority to produce strings of cash. This, in turn, allowed the government to gradually abandon the system of labor exactions and substitute a uniform tax system payable in silver.Effectively, the Chinese government had gone back to its old policy of encouraging markets and merely intervening to prevent any undue concentrations of capital. It quickly proved spectacularly successful, and Chinese markets boomed.Now, since Roman times, Europe had been exporting gold and silver to the East: the problem was that Europe had never produced much of anything that Asians wanted to buy, so it was forced to pay in specie for silks, spices, steel, and other imports. The early years of European expansion were largely attempts to gain access either to Eastern luxuries or to new sources of gold and silver with which to pay for them. In those early days, Atlantic Europe really had only one substantial advantage over its Muslim rivals: an active and advanced tradition of naval warfare, honed by centuries of conflict in the Mediterranean. The moment when Vasco da Gama entered the Indian Ocean in 1498, the principle that the seas should be a zone of peaceful trade came to an immediate end. Portuguese flotillas began bombarding and sacking every port city they came across, then seizing control of strategic points and extorting protection money from unarmed Indian Ocean merchants for the right to carry on their business unmolested.At almost exactly the same time, Christopher Columbus—a Genoese mapmaker seeking a short-cut to China—touched land in the New World, and the Spanish and Portuguese empires stumbled into the greatest economic windfall in human history: entire continents full of unfathomable wealth, whose inhabitants, armed only with Stone Age weapons, began conveniently dying almost as soon as they arrived. The conquest of Mexico and Peru led to the discovery of enormous new sources of precious metal, and these were exploited ruthlessly and systematically, even to the point of largely exterminating the surrounding populations to extract as much precious metal as quickly as possible.By 1540, a silver glut caused a collapse in prices across Europe; the American mines would, at this point, simply have stopped functioning, and the entire project of American colonization foundered, had it not been for the demand from China. Treasure galleons moving toward Europe soon refrained from unloading their cargoes, instead rounding the horn of Africa and proceeding across the Indian Ocean toward Canton. After 1571, with the foundation of the Spanish city of Manila, they began to move directly across the Pacific. By the late sixteenth century, China was importing almost fifty tons of silver a year, about 90 percent of its silver, and by the early seventeenth century, 116 tons, or over 97 percent. Huge amounts of silk, porcelain, and other Chinese products had to be exported to pay for it. Many of these Chinese products, in turn, ended up in the new cities of Central and South America. This Asian trade became the single most significant factor in the emerging global economy, and those who ultimately controlled the financial levers—particularly Italian, Dutch, and German merchant bankers—became fantastically rich.By 1540, a silver glut caused a collapse in prices across Europe; the American mines would, at this point, simply have stopped functioning, and the entire project of American colonization foundered, had it not been for the demand from China. Treasure galleons moving toward Europe soon refrained from unloading their cargoes, instead rounding the horn of Africa and proceeding across the Indian Ocean toward Canton. After 1571, with the foundation of the Spanish city of Manila, they began to move directly across the Pacific. By the late sixteenth century, China was importing almost fifty tons of silver a year, about 90 percent of its silver, and by the early seventeenth century, 116 tons, or over 97 percent. Huge amounts of silk, porcelain, and other Chinese products had to be exported to pay for it. Many of these Chinese products, in turn, ended up in the new cities of Central and South America. This Asian trade became the single most significant factor in the emerging global economy, and those who ultimately controlled the financial levers—particularly Italian, Dutch, and German merchant bankers—became fantastically rich.But how exactly did the new global economy cause the collapse of living standards in Europe? It clearly was not by making large amounts of precious metal available for everyday transactions. If anything, the effect was the opposite. While European mints were stamping out enormous numbers of rials, thalers, ducats, and doubloons, which became the new medium of trade from Nicaragua to Bengal, almost none found their way into the pockets of ordinary Europeans.Despite the massive influx of metal from the Americas, most families were so low on cash that they were regularly reduced to melting down the family silver to pay their taxes.This was because taxes had to be paid in metal. Everyday business in contrast continued to be transacted much as it had in the Middle Ages, by means of various forms of virtual credit money: tallies, promissory notes, or, within smaller communities, simply by keeping track of who owed what to whom. What really caused the inflation is that those who ended up in control of the bullion—governments, bankers, large-scale merchants—were able to use that control to begin changing the rules, first by insisting that gold and silver were money, and second by introducing new forms of credit-money for their own use while slowly undermining and destroying the local systems of trust that had allowed small-scale communities across Europe to operate largely without the use of metal currency.This was a political battle, even if it was also a conceptual argument about the nature of money. The new regime of bullion money could only be imposed through almost unparalleled violence—not only overseas, but at home as well. In much of Europe, the first reaction to the 'price revolution' and accompanying enclosures of common lands was not very different from what had happened in China: thousands of one-time peasants fleeing or being forced out of their villages to become vagabonds or 'masterless men,' a process that culminated in popular insurrections. The reaction of European governments, however, was entirely different. The rebellions were crushed, and this time, no subsequent concessions were forthcoming. Vagabonds were rounded up, exported to the colonies as indentured laborers, and drafted into colonial armies and navies—or, eventually, set to work in factories at home.Almost all of this was carried out through a manipulation of debt. As a result, the very nature of debt, too, became one of the principal bones of contention. That's why the Church had been so uncompromising in its attitude toward usury. It was not just a philosophical question; it was a matter of moral rivalry. Money always has the potential to become a moral imperative unto itself. Allow it to expand, and it can quickly become a morality so imperative that all others seem frivolous in comparison. For the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise. Even human relations become a matter of cost-benefit calculation. Clearly this is the way the conquistadors viewed the worlds that they set out to conquer.As time go by, throughout the nineteenth century, domination through external debt was a significant part of the imperialist policies of the major capitalist powers; it continues to plague the twenty-first century in new forms. As a fledgling nation during the period 1820–1830, Greece capitulated to the dictates of creditor powers (especially Britain and France). Though Haiti was liberated from France during the French Revolution and proclaimed its independence in 1804, debt again enslaved it to France in 1825. France invaded the indebted Tunisia in 1881 and turned it into a protectorate. Great Britain led Egypt to the same fate in 1882. From 1881, the Ottoman Empire’s direct submission to its creditors (Great Britain, France, Germany, Italy, and others)2 stepped up its disintegration. In the nineteenth century, creditors forced China to grant territorial concessions and to fully open up its market. The heavily indebted tsarist Russia might also have become the prey of creditor powers had the October Revolution not led to the unilateral debt repudiation of 1918.What is a debt, anyway? A debt is just the perversion of a promise, says Graeber. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point we can’t even say. It’s more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe.On the the next session, we will talk about the the debt trade-offs are harder to see. Bi 'idhnillah."
[Session 1]
