1

Jon Goldman 11/22/11

Athens and the Age of Perikles James Capreedy

Debt, the economic order, and the monetary system of Ancient Greece &

Athens: The early Bronze age through the time of Alexander: Was this ancient

economic order a manifestation of a disciplinary paradigm?

The modern conservative is engaged in one of man's oldest exercises in moral

philosophy; that is, the search for a superior moral justification for selfishness. John

Kenneth Galbraith

The very concept of the economy in the modern sense is untranslatable in Greek,

because it simply did not exist. M.M. Austin & P. Vidal-Naquet

2

Introduction:

The economic discipline, like all social or academic institutions, has its

foundational legends and mythologies. There is the legendry of truly free-market

economic orders, of social orders built on the back of the patriotic subsistence

farmer, of monetary systems that endogenously arose from the people as an agreed-

upon way of simplifying daily life by creating a fungible, liquid trade commodity that

could do away with barter systems, et al. Such mythologies are legion, manifesting

separately in the particulars but nearly identically in the generalities, in every

academic discipline. Such legends typically harken back to the earliest possible days

of the timeframe relevant to the particular discipline. In economics, these days

generally1 begin in the mists of the early Bronze Age, or about five and a half

thousand years ago. The mainstream theorists of the economic discipline have not

hesitated on many an occasion to use Ancient Greece as a founding example, even a

paradigmatic aspiration, for the circumstances in which monetary systems

endogenously, or autochthonously, arise.2 To a lesser extent this theorizing has also

ascribed to Ancient Greece the worlds first capitalist (or nearly capitalist) economic

orders. Is the economic discipline right on either count? Did the financial and

production systems of Ancient Greece conform to modern models and terminologies

1 There is a rich amount of literature covering the (often theoretical) economics of the stone age and even

earlier, but the lack of monetary systems renders the type of monetary-focused theorizing I will mostly engage in all but inapplicable. 2 (Homer S. , 2005) (P. 36)

3

by which we could understand their economics through a modern lens? Or does

such ad-hoc theorizing fail in its objectives, and by doing so, fail to understand the

inner workings of one of the ancient worlds richest cultures? This is the question

that this essay will seek to answer.

The lack of trustworthy primary-source knowledge.

Primary-source knowledge regarding the Greek economy is rare, and often

corrupted at that. It is certain that Greek civilization was very different from modern

paradigms. Federal authorities had not yet arisen. From the Bronze until Phillip II

and his sons3 victory at the battle of Chaeronea, Greece was fragmented, comprised

of hundreds of small, independent poleis or "city-states." Thus the economic trade

system that had been in place in between these poleis must have surely been quite

complicated. Most of the surviving evidence for the ancient Greek economy comes

from the literary works of Classical Athens, such as legal speeches, philosophical

dialogues and treatises, historical narratives, and dramas and other poetic

writings.4 Numerous speeches, such as those of Demosthenes, Lysias, Isokrates,

survive. It is noteworthy that most of these speeches concern lawsuits. However, the

surviving literature is but a remainder of what had once been a far greater whole.

What survives is without exception what prior generations of historians had

thought worthy of being preserved. Thus there is significant survivor bias that has

3 Alexander, not yet called the Great at age 18 was a commander of the Macedonian forces of this

battle, and was instrumental to the victory which established Macedonian hegemony over the entire Greek peninsula save Sparta, which was by this time in a period of irreversible and systemic decline in nearly all of its social institutions. 4 (Engan, 2010) (P. 2)

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led to an overwhelming amount of high literature, philosophy, and oratry at the

expense of utilitarian writings, like accounting records and business ledgers (which

would be ideal primary source material had such knowledge survived the passage of

time).

It must be mentioned that philosophical works, especially those of Xenophon,

Plato, and Aristotle, provide modern readers with irreplaceable insight into how the

ancient Greek aristocracy perceived and conducted economic matters. Greek social

attitudes towards capitalist enterprise are known. Or are they? A significant

downside to the surviving works of these philosophers is that they were without

exception members of the landed elite or intimately associated with the elite, and

thus their perspectives, their disdain for day-to-day economic activity,5 should

not be taken to represent the views of all or even the majority of ancient Greeks,

especially the Greeks whose livelihoods depending on capitalist enterprise.6 There

are other sources who are probably more trustworthy. Thucydides especially takes

great care to describe the financial resources of Athens during the Peloponnesian

War, knowledge invaluable to modern theorists of warfare and economics.

Furthermore, the surviving economic literature is insufficient to employ all

but the most basic quantitative methods of modern economic analysis and has thus

forced scholars to employ other more qualitative methods of investigation. This

5 (Engan, 2010) (P.2)

6 (Engan, 2010) (P. 2)

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essay will feature such statistical knowledge where possible, but regrettably, this is

not a frequent occurrence.

The great economic debate:

The Ancient Greek economy has been the battlefield upon which economic

theorists have warred for two centuries. This great debate began in the late

nineteenth century, with the two sides attempting to resolve one core question; was

the Greek Ancient economy "primitive" or "modern." These were, naturally, poor

word choices, forcing theorists through language to conceptualize the ancient Greek

economy in terminologies and contexts that are simply inapplicable. There is no

modern analogue to the Greek poleis model, but that does not simultaneously mean

that their financial or economic orders were primitive. Furthermore, the economic

discipline is famously biased,7, 8 which becomes clear when the assumptions

underlying the terminologies are analyzed. "Modern economy, was never carefully

defined, but upon close reading was apparently assumed to be broadly capitalist,

with market-determined pricing mechanisms.9, 10 One wonders how their

interpretation harmoniously co-existed with State ownership of the Laurium silver

mines and regular interference in market processes by the State.11, 12 Primitive

economy apparently referred equally to the lack of sophisticated financial systems

7 (Galbraith, 2008) (The entire book.)

8 (Klein, 2007) (Foreword.)

9 Market-determined referring to price being determined at the margin purely on the basis of supply

and demand. 10

(Engan, 2010) (P. 8) 11

(Goldman, 2011) (P. 2) 12

Solon banned the export of grain products as a part of his economic reform program in 594 BC.

6

and state or public ownership of productive processes. The Modernists, seeing

extensive trade and use of money in Greece from the fifth century B.C. onward, took

these as being emblematic of the existence of a market economy. The Primitivists,

reading into the surviving literature of Greek social and political values that

disdained capitalist market economies, downplayed the significance of extensive

trade and the use of money in the economy. Neither Primitivists nor Modernists

were capable of conceptualizing the ancient Greek economy except when peering at

it through the lens of free market economics, and discerning the Greeks strength in

adhering to this model. Finally, neither side in the debate could understand an

activity as being "economic" except if the activity was conducted with the objective

of profits, a perspective crucially downplaying the economic significance of women,

politics, and reciprocative cultural traditions.13

Historical methods were also a factor in the great debate. Classical historians

who relied on philology and archaeology14 tended to side with Modernist

interpretations, whereas other Classical historians, using the analytical social

methods pioneered by Weber, advocated the Primitivist view. For example, Michael

Rostovtzeff assembled a wealth of archaeological data to argue that the scale [size]

of the ancient Greek economy in the Hellenistic period was so great that it could not

be considered primitive.15 On the other hand, Johannes Hasebroek, drawing upon

the surviving primary-source literature, used sociological methods developed by

13

(Waller, 2005)(P. 6) 14

(Engan, 2010) (P. 7) 15

(Engan, 2010) (P. 5)

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Max Weber to argue that the ancient Greek citizen was a homo politicus ("political

man") and not a homo economicus ("economic man") - he disdained economic

activities and subordinated them to traditional political interests.16

The great debate shifted with the work of Karl Polanyi, a heterodox

Hungarian political economist of the nineteenth century who used socio-

anthropological methods to argue that economies could and should not be

organized purely on the basis of a free-market order.17 He argued that where the

power balance in between labor and capital shifted too far towards the latter, the

former would be systematically deprived of economic opportunity, linearly leading

to their political insurrection against capital.18 He argued that every time Ancient

Greece favored capital at the expense of labor, class warfare then ensured.19 He

concluded by arguing that when Greece was at the zenith of its economic prowess

under Pericles, it had done so because it had struck an appropriate balance in

between the two social classes.20

Polanyi created distinctions between what he called "substantivist" and

"formalist" economic analysis.21 The former, proposed by Polanyi in his work The

Great Transformation, argues that non-capitalist pre-industrial societies cannot be

16

(Engan, 2010) (P. 5) 17

(Levitt, 2006) (P. 156) 18

The use of labor and capital terminology to denote the haves and the have-nots of Ancient Greece is only roughly accurate. The Marxian conceptualization of the terminologies is based upon capitalism, whereas my use of the terms is denoting a fundamentally feudal society. 19

The examples of this form of class conflict in our class readings are legion. 20

(Rotstein, 1970) (P. 120, 121) 21

(Croix, G.E.M. St. de, 1960) (P. 1)

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understood on the basis of free markets. This vision of economics centers on social

relationships, cultural values, moral concerns, politics, religion or the fear instilled

by authoritarian leadership. Production in most peasant and tribal societies is for

the producers, also called 'production for use' or subsistence production, as

opposed to 'production for exchange' which has profit maximization as its chief aim.

According to Polanyi, in modern capitalist economies the concepts of

formalism and substantivism coincide, albeit with conflict, given the complicated

nature of modern society that prominently features institutional and proletariat

friction in tandem with a highly financialized economic order. However, in pre-

capitalist, pre-industrial economies this assumption does not hold. The two do not

mix, substantivism reigns. Unlike modern economies, according to Polanyi, ancient

ones are not based on market exchange but rather are based

on redistribution and reciprocity.22 Reciprocity is defined as the mutual exchange of

goods or services as part of long-term relationships (note the proxenos system, and

the system of king-on-king reciprocated gift-giving). Redistribution implies the

existence of a strong political authority, such as the clan, landed oligarch, and

monarch systems of the early Aegean Sea, such as Mycenae, which taxed the

production of subsistence goods in kind and then redistributed the proceeds.23 In

pre-capitalist societies reciprocity and redistribution generally occur together.

Conversely, market exchange is seen as the dominant mode of integration in

22

(Levitt, 2006) (P. 16) 23

(Sarah B. Pomroy, 2008) (P. 34)

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modern capitalist societies, while reciprocity and redistribution counteract the

volatility of capitalism in the form of welfare and other social-support/minimum

standard of living programs.

Formalist economic analysis, which Polanyi railed against, is closest to the

modern neo-classical mainstream of economics, which is based upon the logic of

rational action and decision-making, in the management of infinite wants against

limited (scarce) means.24 This is typical of economic analysis today. Market

economies operate independently of non-economic institutions and their most

characteristic feature is that prices are set at the margin, by the forces of supply and

demand among a group of interconnected, liquid markets. This understanding of

Greek economics woefully misunderstood the nature of ancient Greek economics

according to Polanyi.25

Polanyi believed that Greek history showed that it was possible to have a

large, complex, economy without capitalism or a Marxist revolution, and therefore

that the "Great Transformation" (the orientation of the world of Polanyis time

around the conflicting free-market and Marxian paradigms) could be reversed to

create a better world. Polanyi continuously reiterated how Athenian financial and

economic prowess co-existed with just society under Pericles reign, noting that the

Athenian economy [operated] on neither a territorial scale, nor with a general

complexity even faintly comparable to that of the nineteenth-century West." And yet

24

(Engan, 2010) (P. 21) 25

(Levitt, 2006) (P. 22)

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this economic system granted opportunities to the masses to live decent livelihoods

surpassed in the West only by the Roman Empire, and by no European regimes until

well into relatively modern times.

Polanyi concluded that ancient Greece did not have a fully developed

economic system until the Hellenistic period.26, 27 Before that time, according to

Polanyi, the market economy of ancient was "embedded" in other social and

political institutions, having not yet reached a level of sophistication

comprehensible to modern free-market theorists. Through his work, Polanyi

redefined the terms by which debate of the ancient Greek was conducted, bringing

the debate to a higher level of intellectual maturity. With that being said, free-

market theorists have never quite abandoned their presence in the great debate.28

These theorists are particularly vocal and have been thoroughly established in the

Austrian school of economics, particularly under the leadership of Murray

Rothbard.29 Though misinformation continues to be disseminated by these

theorists, Polanyis influence now shadows over all involved.

The Greek Economy: Attitude Bias?

The ancient Greek word oikonomia is the root of our modern English word

"economy." But, the two words are not synonymous. Whereas today "economy"

26

(Levitt, 2006) (P. 16) 27

It is regrettable that Polanyi did not much distinguish between real economic processes and financial processes. 28

(Rothbard, 2006) 29

(Rothbard, 2006)

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refers to a distinct sphere of human interactions involving the production,

distribution, and consumption of goods and services, oikonomia meant "household

management," a familial activity that was subsumed or "embedded" in traditional

social and political institutions. That is the meaning that Xenophon had in mind

when he wrote his Economics.30 It is in this respect that the Greek economy,

especially in ancient times (though slightly less so in the ages including and after the

ages of Pericles and Alexander) crucially differs from modern paradigms that orient

around Adam Smith on the one hand and Karl Marx on the other. It is correct that

the ancient Greeks produced and consumed goods, engaged in various forms of

exchanges including long-distance trade, collected and disbursed taxes and credit,

developed monetary systems employing coinage, may have had reasonably modern

insurance institutions, had traders that would arbitrage the differing costs of goods

whose costs varied depending on transport distance, had standardized systems of

measures, but these traits shouldnt be interpreted as being emblematic of a

prevailing capitalist economic or social order.

Ancient Greek social values held in low esteem economic activities that were

not subordinated to the traditional activities of managing the family farm and

obtaining goods for necessary consumption.31 These frowned-upon activities,

prominently including manufacturing, finance, trade, and other business that would

be regarded as capitalist in modern times were then considered to be morally

30

(Xenophon) 31

(Engan, 2010) (P. 14)

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corrupting and furthermore as being incompatible with active political participation

(the mark of a good citizen). Capitalism was thus fundamentally at odds with the

social ideal, that being a farmer tied to the land who was productive enough to have

ample leisure time with which to take part in polis society and politics.32 Production

and exchange were to be undertaken only for personal need, to help out friends, or

to benefit the community as a whole. Surplus production going beyond the

requirements for survival and maintenance of government was all but entirely

oriented to conspicuous consumption; this is made clear from surviving loan

records.33 Such activities were not to be undertaken simply to make a profit and

certainly not to obtain capital for future investment and economic growth. This

cultural disdain for capitalists, however, reflects an inherent bias that may not have

been held by the majority of Greeks. Those who dominated the politics of elite of

ancient Greek society were wealthy landowners, even in democratic poleis like

Athens. Such men naturally had little interest in manufacturing, business, and

trade.34

The perspectives of the Big Three philosophers on economics.

Most of the surviving ancient Greek philosophers, Hesiod and Xenophon

aside, were strongly in the political camp of the landed oligarchy.35 Socrates openly

32

(Sarah B. Pomroy, 2008) (P. 171) 33

34

(Engan, 2010) (P. 9) 35

(Rothbard, 2006)

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despised labor as being unhealthy and vulgar,36 placing himself firmly in line with

aristocrats politically by quoting the king of Persia to the effect that by far the

noblest arts are agriculture and war.37 Although he was the son of a stonemason,

Socrates was an ultra-elitist38 who was executed a year after the restoration of

democracy, largely on suspicion of Spartan and oligarchic sympathies. This inspired

Plato, himself the son of a wealthy landowner, of the flaws of democracy, turning

him to pro-wealthy political views that would now be regarded as ultra-right wing.

A decade after the death of Socrates, Plato would set up his Academy not only

as an institution for the education of the impressionable young in the fine arts and

philosophies, but as a think tank advocating the imposition of social despotism. He

himself tried three times unsuccessfully to set up despotic regimes in the city state

of Syracuse, while no less than nine of Plato's students succeeded in establishing

themselves as tyrants over Greek city-states.39 Murray Rothbard constructs a

devastating critique of Plato on economics that, rather than roughly summarizing, is

best repeated in the original.40

Plato's search for a hierarchical, collectivist utopia found its classic expression

in his most famous and influential work, The Republic. There, and later in The

Laws, Plato sets forth the outline of his ideal city-state: one in which right oligarchic

rule is maintained by philosopherkings and their philosophic colleagues, thus

36

(Rothbard, 2006) 37

(Rothbard, 2006) 38

(Rothbard, 2006) 39

(Rothbard, 2006) 40

(Rothbard, 2006)

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supposedly ensuring rule by the best and wisest in the community. Underneath the

philosophers in the coercive hierarchy are the "guardians" the soldiers, whose role

is to aggress against other cities and lands and to defend their polis from external

aggression. Underneath them are to be the body of the people, the despised producers:

laborers, peasants, and merchants who produce the material goods on which the

lordly philosophers and guardians are to live. These three broad classes are supposed

to reflect a shaky and pernicious leap if there ever was one the proper rule over the

soul in each human being. To Plato, each human being is divided into three parts: "one

that craves, one that fights, and one that thinks," and the proper hierarchy of rule

within each soul is supposed to be reason first, fighting next, and finally, and the

lowest, grubby desire.

The two ruling classes the thinkers and the guardians that really count are, in

Plato's ideal state, to be forced to live under pure communism. There is to be no private

property whatsoever among the elite; all things are to be owned communally,

including women and children. The elite are to be forced to live together and share

common meals. Since money and private possessions, according to the aristocrat Plato,

only corrupt virtue, they are to be denied to the upper classes. Marriage partners

among the elite are to be selected strictly by the state, which is supposed to proceed

according to the scientific breeding already known in animal husbandry. If any of the

philosophers or guardians find themselves unhappy about this arrangement, they will

have to learn that their personal happiness means nothing compared to the happiness

of the polis as a whole a rather murky concept at best. In fact, those who are not

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seduced by Plato's theory of the essential reality of ideas will not believe that

there is such a real living entity as a polis. Instead, the city-state or community consists

only of living, choosing individuals.

To keep the elite and the subject masses in line, Plato instructs the

philosopherrulers to spread the "noble" lie that they themselves are descended from

the gods whereas the other classes are of inferior heritage. Freedom of speech or of

inquiry was, as one might expect, anathema to Plato. The arts are frowned on, and the

life of the citizens was to be policed to suppress any dangerous thoughts or ideas that

might come to the surface.

Remarkably, in the very course of setting forth his classic apologia for totalitarianism,

Plato contributed to genuine economic science by being the first to expound and

analyze the importance of the division of labor in society. Since his social philosophy

was founded on a necessary separation between classes, Plato went on to demonstrate

that such specialization is grounded in basic human nature, in particular its diversity

and inequality. Plato has Socrates say in The Republic that specialization arises

because "we are not all alike; there are many diversities of natures among us which

are adapted to different occupations."

Aristotle was less ultra-right wing than his two primary intellectual

descendants, but given his enormous influence on the socioeconomic philosophies

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of the high and latter Middle Ages,41, 42 he was no doubt every bit as harmful,

justifying centuries of social and political dominance by landowners not so unlike

those of ancient Athens, men with similar attitudes towards democracy and

strenuous employments.43 He, like his forbears, took a dim view to economic growth

and thus favored a static society. These traits complement his opposition to

moneymaking and the accumulation of wealth. His economics were that of poverty,

advocating the virtue of scaling down one's desires to fit whatever means were

available.44 By taking such a stance that could and had in the past provided

comfortable livelihoods for the greater mass of the people, he was being neither left-

wing nor politically neutral. He was a panderer, an apologist, to the landed with

power to the detriment of those with neither wealth nor power. He wrote that no

good citizens "should be permitted to exercise any low mechanical employment or

traffic, as being ignoble and destructive to virtue."45

In summary, the economic statism of the big three betrays significant source

and survivor biases. It cannot be a coincidence that the writings that survive to the

present day are so heavily politically biased to the benefit of the wealthy and the

powerful, when by and large, it was the wealthy and powerful who had through the

centuries monopolization of the means to preserve these writings. Where are the

writings and speeches of the populists who overcame the forces of oligarchy time

41

Philosophers of the time called themselves Aristotelian, suggesting more than mere influence, but outright dominance, of Aristotles philosophies over Christian Europe. 42

(Madden, 2005)(P. 83) 43

(Madden, 2005) (P. 24, 29) 44

(Rothbard, 2006) 45

(Bonn, 1853)(P. 249)

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and again? There can be little doubt that politically disfavorable (to the affluent)

writings were allowed to fade into dust through the passing of the centuries.

To conclude discussion of the big three, their writings were prolifically

populated with the historically typical aristocratic exaltation of aristocrats,

exaltation of the military, arts, and of agriculture. Nearly as prominently displayed

were (also historically typical) contempt for labor, trade, and other base

employments. They cannot be taken as being representative of Attican society as a

whole, though they may well have been representative of the Athenian citizenry,

which was by mandate populated only by relatively wealthy landowners. In fact, it

has been estimated that of the roughly 400,000 citizens of Attica during the time of

Pericles, only about 7%, or 30,000, had citizenship rights.46

The big three, and perhaps the citizen population as a whole, had a

fundamentally pessimistic view of economic innovation and entrepreneurship. The

entrepreneur, the dynamic innovator, is after all the locus of individual ego and

creativity, and is therefore the harbinger of often disturbing social change, as well as

economic growth. But the Greek and Socratic ethical ideal for the individual was not

an unfolding and flowering of inner possibilities, but rather a public/political

creature molded to conform to the demands of the polis. That kind of social ideal

46

(Rothbard, 2006)

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was designed to promote a frozen society of politically determined status, and

certainly not a society of creative and dynamic individuals and innovators.47

Class conflicts over money, and by extension the means of production, are

not new phenomena. This conflict drove much of Greek cultural history, especially

in the Oligarchic period, directly antecedent to Solons reforms in Athens. Class

conflict would continue in varying incarnations up until Cleisthenes tyranny purged

most of the final remainders of the feudal oligarchy in 508 BC.48 Economic

inequality was rooted in ancient social norms, reified in the Athenian constitutions.

Prior to the Solonian reforms,

the constitution was that of the heroic age As far as written history takes

us back, we find the land already divided up and privately owned.the old

gentile constitution, for its part, knew neither money nor advances of money

nor debts in moneyAll the fields of Attica were thick with mortgage

columns bearing inscriptions stating that the land on which they stood was

mortgaged to such and such for so and so much. The fields not so marked had

for the most part already been sold on account of unpaid mortgages or

interest, and had passed into the ownership of the noble usurer; the peasant

could count himself lucky if he was allowed to remain on the land as a tenant

and live on one-sixth of the produce of his labor, while he paid five-sixths to

his new master as rent. And that was not all. If the sale of the land did not

47

(Rothbard, 2006) 48

(Engels, 1884)

19

cover the debt, or if the debt had been contracted without any security, the

debtor, in order to meet his creditor's claims, had to sell his children into

slavery abroad. Children sold by their father such was the first fruit of

father-right and monogamy! And if the blood-sucker was still not satisfied, he

could sell the debtor himself as a slave. Thus the pleasant dawn of civilization

began for the Athenian people.49

The lack of a central legal or rhetorical framework for dealing with economic

issues, a dearth deriving from the absence of discussion of these issues in the

original constitution, in effect meant that the feudal oligarchy had free reign to prey

on the lower classes, devoid as they were of economic rights. While the political

history of Athens up to Solons time is known only imperfectly, it is known that the

office of basileus fell into disuse; the heads of the state were the archons elected

from the nobility. The power of the nobility continuously increased, until about the

year 600 B.C., when it became insupportable. By this time, ever-increasing economic

injustices were resulting in sectarian conflict, otherwise known as class warfare.

Many speculate, and some consider it probable, that civil war would have resulted if

these economic vagaries had remained unaddressed. Solon was appointed primarily

in order to ensure that this never came to pass; this is the reason all social classes

supported his ascension to absolute powers over legislative functions.50

49

(Engels, 1884) 50

(Millett, 1991)

20

The economic reforms dealt with in the Solonian Athenian constitution were,

specifically: 51 (the following bullets are all sourced from Aristotle)

51

(Aristotle, 594 BC)

21

1) Part 5 exhorts the wealthy to never become too grasping, definitively

calling for an end to the absolute oligarchic hegemony.

2) Part 6 liberated the people once and for all, by prohibiting all loans on the

security of the debtor's person: and in addition he made laws by which he

cancelled all debts, public and private. This measure is commonly called the

Seisachtheia [removal of burdens], since thereby the people had their loads

removed from them. This ended the enslavement of members of the lower

classes for debt delinquency, a major source of tension between the social

classes. This measure also restored citizenship to all persons who had

previously been enslaved for financial reasons and mandated that the

Athenian government search for former citizens who had been sold abroad

by their oligarchic owners.

3) Part 10 fixed the standards of weights and measures, and of the currency.

During his administration the measures were made larger than those of

Pheidon, and the mina, which previously had a standard of seventy

drachmas, was raised to the full hundred. The timing of this measure is

hardly coincidental. In the Archaic period, Athens became less of a

stereotypical polis and more of a fledgling commercial empire with extensive

interests abroad. A system of weights and measures normalizing the rules of

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merchantry across the Aegean greatly benefited Athenian commercial

interests.

4) Part 52 set a cap on annual interest rates for personal loans at 12.5%. It also

reiterated that peoples bodies could not serve as loan collateral, i.e. people

could not be enslaved for bad debts. They could, however, be held in debtors

prison up until they repaid, assuming that the prisoner possessed relatively

liquid assets.

5) Part 54 set a maximum cap on the amount of land that any individual could

own, and in order to compromise and temper the mutual hostility between

the nobility and the lower classes, it formalized timocratic elements into

society, but ensured that decisive legislative power remained in the citizenry

through the assembly. Specifically:

Solon divided the citizens into four classes according to their property in land

and the amount of its yield: five hundred, three hundred and one hundred fifty

medimni of grain (one medimnus equals about 1.16 bushels) were the

minimum yields for the first three classes; those who owned less land or none at

all were placed in the fourth class. All offices could be filled only from the three

upper classes, and the highest offices only from the first. The fourth class only

had the right to speak and vote in the assembly of the people; but it was in this

23

assembly that all officers were elected, here they had to render their account,

here all laws were made; and here the fourth class formed the majority. The

privileges of the aristocracy were partially renewed in the form of privileges of

wealth, but the people retained the decisive power. Further, the four classes

formed the basis of a new military organization. The first two classes provided

the cavalry; the third had to serve as heavy infantry; the fourth served either as

light infantry without armor or in the fleet, for which they probably received

wages.52

What exactly Solon mandated while in power remains obscure, as no primary

source material survives. The above points are probably mere fragments of his

legislations. He removed the mortgage pillars (horoi, a pillar of rock placed on a

property by creditors showing that the estate was in a state of negative equity) from

the land and "shook off the burdens" that vexed the people. It is here that the lack of

source material becomes problematic. If land was inalienable, then what were these

pillars doing on it, put in place by non-citizens? There would not seem much use in

putting up a mortgage/for-sale sign if the debtor could not be physically

dispossessed of his land. Finley suggests an answer; that before Solon, while the

landowner could not be dispossessed he could be enslaved, and these pillars

denoted not foreclosure on the land of the debtor but on his person; he became a

52

(Engels, 1884)

24

debt slave and worked his own land for the benefit of his creditor.53 Debt slavery

was the curse of the ancient world; again and again it crops up, always at a period of

economic distress, never to be wholly eradicated.

Sectors of the Ancient Athenian Economy: Agriculture, Mining, Government,

and Empire

Agriculture:

Arable land was the primary source and form of wealth in Ancient Greece,

and more importantly, it was simultaneously the greatest source of social

acceptability.54 Land was the preferred form of wealth by all social classes. It cannot

be emphasized enough, however, that wealth wasnt the first objective achieved

through land ownership. Rather, it was prestige. Wealth was secondary.

The surviving ancient literature is replete with references to the sharp

contrasts between the city and the countryside, starting for example with biases

built into the ancient language itself. Artifacts of these biases survive to the present

day. We still speak of the proverbial gentleman farmer, but never of gentleman

merchants, manufacturers, or entrepreneurs. While today this descriptor is a mere

fossil of a Jeffersonian ideal, because now farming is too a full part of the capitalist

order, for most of agricultural history the distinction was fundamental. Anyone

53

(Finley, 1999) 54

25

who confuses the gentlemanliness of agriculture with a disinterest in profits and

wealth closes the door to an understanding of much of the past.55

An enduring theme in the ancient Greek economy is the persistent

maintenance of the monopoly over landownership by citizens, thereby restricting

social prestige and economic affluence to a more or less fixed stock of citizenry. In

ancient poleis in general, especially including those of the Aegean Sea and Rome

itself, land was basically free from taxation. Any form of direct land tax was so

considered to be the mark of redolent tyranny. These taxes (eisphora), only

implemented in times of national crisis, were never allowed to ossify into

permanence.56, 57

It is fairly certain that land ownership in early and primitive times in Ancient

Greece was inalienable; land belonged not to an individual but to a family, and the

owner was a life tenant who enjoyed only the usufruct during his lifetime.58 Land in

early Greece was not a liquid asset; land belonging to a family must never be lost,

and the family must never die out. If there was no male heir to the household,

adoption was the rule.59

A significant example serving to prove the lack of economic comprehension

by the ancients is their utter ignorance of economies of scale. For example, in one of

55

(Finley, 1999) (P. 58) 56

Contrast this with the United States, and its maintenance of the individual income tax even after the Civil War came to an end. 57

(Finley, 1999) (P. 95) 58

(Xenophon) 59

(Mitchell, 1953)

26

his letters to Calvisius Rufus,60 Pliny the Elder discusses an opportunity that has

come before him, to buy a farm estate that is contiguous to his at bargain prices due

to mismanagement by the owners. In discussing the merits of this proposal, he

primarily mentions an oligarchic motivation the beauty of seeing such an estate

under his ownership. 61 Pliny secondarily mentions other largely psychological

motivations both estates could be managed by one of Plinys agents and visited in

one journey. Pliny then asked Rufus for advice, including no information regarding

the topics that we would expect to see in the modern era. How logistically suitable

were the two estates for a full merger into one greater whole? Was infrastructure in

place that would easily allow for this, and would doing so lead to cost savings? Pliny

mentions nothing of economies of scale, nothing that could be interpreted as a

potential cost saving through estate combination. Nothing is mentioned of more

efficient divisions of labor or other cost efficiencies. Pliny doesnt even consider to

merge the workforces of the two estates even though they are right next to each-

other, and pierce each-others otherwise straight borders in places.

Management and control over labor is a pervasive theme through the

surviving writings concerning estate management. Considering that most ancient

estates were owned by absentee landlords who constituted the bulk of societys

wealth, and that writing itself was more or less limited to those of the landowning

classes or those servile to them, it would indeed make sense that there would be an

60

61

To love beauty.

27

abundance of surviving material concerning the topic. However, the surviving

writings do not concern themselves with methods for improving the efficiency or

output of a managed estate. Nothing is discussed of labor-saving devices or

technological innovations. Economies of scale are never alluded to. The writings do,

however, place great emphasis on management of the labor force, generally

consisting of sharecroppers and slaves. Xenophon, for instance, discusses at length

how one maintains the work ethic and honesty of a labor force that at best only

shares marginally in the fruits of his labor. His writings were told from the

perspective of a policeman, of a feudal tyrant, rather than an entrepreneur.62

According to Ernest Feder, who carried out extensive surveying of modern-day

lutifundia of Latin America, absentee landlordism is a guarantee that customary

methods of farming are strictly observed, though they may be antiquated.63 The

social structures that give rise to an entrepreneurship society were not significantly

present in the ancient world, and especially so in and around the estates of the

absentee landlord oligarchy.

In ancient Greece the manifestations of this agrarian problem are often

obscure and in many cases baffle our clear understanding. But, setting aside many

little points over which the scholars disagree, the over-all picture which does

emerge is unequivocal. In the epics of Homer we see the brilliant Mycenaean-

Minoan epoch in its last stage. There is still a rude abundance in the land; there is

62

(Xenophon) (Section 1, paragraphs 18-20) 63

(Feder, 1987) (P. 83-97, at P. 88)

28

plenty to eat and drink; the feasting in the halls of the kings and nobles is

prodigious. We hear, it is true, of poor men and beggars, but poverty is not a serious

menace and there is no land problem. And then the curtain falls and for three

centuries we know nothing of the history of Greece. It rises with the Works and Days

of Hesiod, and on a very different scene. Times are bad; poverty is everywhere; the

judges are corrupt, and the great landowners are squeezing out the little men. What

has happened? There seems no other explanation than the impoverishment of

Greece. This impoverishment of the small landholder was corrected in various ways

in Greece, partially if not wholly. The preferred way, and the most effective, was the

murder of the creditors. Solon - That his solution of the agrarian problem was not

decisive is plain, for we find that not long after the "tyrant" Peisistratus was able to

impose himself on the people by the popular expedient of murdering the nobles and

dividing their land among the poor.

It was a matter of arrangement between debtor and creditor what form the

agreement took. The debtor might remain in possession of the property, paying

interest on the loan (usually 12%) subject to the right of the mortgagee to foreclose

in case of default. Another method was "sale on condition of release" (prasis epi

lysei) when apparently the revenues from the land went straight to the buyer but

the seller retained an equity of redemption.64 Evidently these transactions were

what modern lawyers term "conditional sales." Chattel mortgages were also

common. We hear of loans on a stock of copper, of silver from a mine near Athens,

64

(Finley, 1999) (P. 41)

29

on a number of slaves, and on a valuable horse. The last involved the parties in a

lawsuit, as the horse died. Bankers in Athens seldom, if ever, lent upon the security

of real estate, because in the majority of cases they were not Athenian citizens; they

were foreign residents in the city (metics) and by Athenian law were debarred from

owning land and so would have no good title to the property on foreclosure. The

cases argued in the courts which had to do with ownership of land and debts more

than any other grant insight into the ancient economy. Significantly, it becomes clear

that problems related to the ownership of land were never solved. Again and again,

in seemingly inevitable form, the encroachment of the capitalist upon the small

farmer and of the dispossession of the small holder by the large is the rule. This

remains true today. The small farmer is inefficient; he has no capital, or not enough

to allow him to improve his methods. The vagaries of nature, some prolonged

disaster, droughts that produce "dust-bowl" conditions, will force him into debt,

ruin him, deprive him of his land if he cannot hold on. The creditor forecloses, he can

do nothing else; and with capital he can do what the small holder cannot, he can

wait and eventually bring the land back. This reminds us of a particularly

scandalous episode in the life of Alcibiades. He had received with his wife the record

dowry of ten talents, an enormous sum, and this he had spent on riotous living and

horse-racing. At last she petitioned for divorce and Alcibiades with a gang of

rowdies broke into the court where the case was being heard and carried the lady

30

off bodily. He had no objection to losing his wife, but to repay her dowry would have

ruined him.65

Why was the agrarian question so acute in the seventh century B,C. in Attica?

Finley asserts that the problem arose due to the shift from subsistence farming

(grains) for which Attica was not well suited, to production for export of such

products as the land was more capable of raising, such olive oil, figs, and wine.66 A

plantation of olive trees matures slowly and demands capital to plant and maintain.

The small farmer lacked the capital for this, and thus hopelessly involved himself in

debt in attempting to maintain his lifestyle (no records have been found involving a

farmer taking on debt to aid in his economic transition from subsistence to export).

The reforms of Solon, followed by the more drastic methods of Peisistratus,

seem to have settled the difficulty. It is remarkable that no mortgage stones (horoi)

have been found antedating the closing years of the fifth century BC.67 Apparently

the problem of indebtedness on land was not a pressing one from the time of

Peisistratus (middle of sixth century B.C.) to the close of the Peloponnesian War in

404, a period of 150 years. Immediately afterwards it undoubtedly became acute.

Why was this? Athens had been enjoying a time of extraordinary prosperity. Greece

had routed the Persian invasion; Athens was head of the Delian League and the

tribute of her allies was pouring into the treasury. The mines of Laurium, "that

running fountain of pure silver," as Aeschylus called them, were enriching the land.

65

(Thucydides, fifth century BC) 66

(Finley, 1999) 67

(Finley, 1999)

31

Unemployment had been brought under control through the creation of an

extensive military/support infrastructure.

Finley makes out a very strong case for attributing the re-emergence of the

agrarian problem in Athens after the war to the damage it sustained during it. The

Spartans invaded Attica and laid its land waste to waste on an annual basis for a

generation. The Athenians never dared to meet the Spartan army in a decisive battle

on land; Pericles himself judged that to do so would have been to invite certain

defeat.68 Thus the Athenians withdrew behind the "long walls" and the Piraeus of

Athens and left their to their foes to their depredation of the Attican countryside. At

first the Spartans only destroyed the standing fields of grain, and that did no

irreparable damage; they could be replanted every season. As the war went on and

bitterness mounted on both sides, however, Thucydides says that the Spartans

resorted to cutting down the fig and olive groves, an act considered unholy.69 It was

around this period that horoi stones begin to re-appear.70 The connection between

economic distress and debt and default is clear.

Mining:

Discovery of the silver-lead deposits of Laurium, which were generally within

75 kilometers southeast of Athens itself, probably dates back some three thousand

68

(Thucydides, fifth century BC) (The Funeral Oration) 69

(Thucydides, fifth century BC) 70

(Finley, 1999)

32

years.71 The early Greeks found that the heavy dark crystals72 contained within the

white marble of the area yielded a bright metal alloy when heated. With further

refinement of this ore extract, a final very bright metal, silver, was obtained. The

leftover consisted of low-purity lead and zinc, which were dumped into massive

tailings pits and the neighboring sea. These mines, although they had limited gold

mineralization, were not significant sources of the yellow metal. The silver

resources of these mines in large part financed the rise to power of classical

Athens.73

After the mysterious yet nearly absolute destruction of the Minoan

civilization in 1600 B.C., the decline of Mycenaean culture around 1200 B.C., and the

Dark Ages, the focus of silver production changed. Up until that point silver

production in the Aegean had been under the purview of these powers.74 With their

passing, the mines of Laurium became the leading Aegean production center for the

white metal and provided a source of economic power to the growing Greek

civilizations, Athens in particular. Until the exploitation of Macedonian resources in

the time of Philip II and his son Alexander, there were no other significant sources of

silver in the Greek world aside from that obtained via foreign trade.75 Thus Athens

held a highly lucrative monopoly for many centuries.

71

Invalid source specified. 72

Galena crystals, heavy dark cubic crystals that are a primary source of lead. These crystals are also high in silver and zinc content. 73

Invalid source specified. (P. 69) 74

(Sarah B. Pomroy, 2008) (P. 32, 43) 75

(Murray, 1978) (P. 25)

33

According to Sidney Homer,76 the economic power of Athens was originally

founded on silver. The poleis struck one of the first coinages in the world (the

Athenian drachma) roughly around 580 BC. The Laurium mines were highly

productive; estimates from historical writings and physical evidence from old mine

dumps indicate silver production to have been about 1 million troy ounces per year

during the height of production (600 B.C. to 300 B.C.). In the twelve years from 338-

326, the mines provided the Athenian government with a yearly income of 200

talents.77 In fact, for about 1,000 years ending around the 1st century A.D., the

Laurium mines were the largest individual source of world silver production in the

world, if the physical evidence is to be trusted.78 The mines were one of the largest

sources of revenues that the Athenian government ever possessed, and were the

largest source prior to the tribute system of the Delian league. The Athenian

currency, the de-facto standard of international trade throughout the Greek

peninsula, granted the Athenian government the ability to monetize its silver and to

wield significant economic power, as an exchange rate system was in place that

provided advantageous seigniorage revenues to the State.79 To ensure the demand

for its silver, The Athenian government took great care to maintain the image and

reputation for quality of its coinage for high quality. Official devaluation of the Owl

was extremely rare, practiced only under Solon and at the tail end of the

Peloponnesian War, after the mines were temporarily lost to Athenian control.

76

(Homer S. , 2005) (P. 52) 77

(Engan, 2010) 78

Invalid source specified. (P. 4) 79

(Mitchell, 1953)

34

Coinage of the Owl was practiced, albeit interruptedly, for many centuries.80, 81

Athens loss in the Peloponnesian War was not a significant factor in the economic

history or the social acceptability of the Owl. The face of the coinage has remained

more or less constant since the seventh century BC up to the present day.

After the battle of Marathon, Themistocles persuaded the Athenians to

devote the anticipated revenue derived from a major silver vein strike in the mines

of Laurion circa 483 BC to expanding the Athenian fleet to 200 triremes, and thus

laid the foundation of the Athenian naval power.82 The mines, which were the

property of the State, were highly environmentally damaging, and were worked by a

population of roughly 20,000 barbarian slaves, primarily Thracians, among whom

the annual death toll was, according to Lawrence, roughly 25%.83 The mines

continued to be worked for centuries, though they were never again so lucrative as

they had been in the Classical period. French conglomerates continue to mine the

Laurion district to the present day. 84

Trade and Empire:

It is little wonder that international trade became an integral part of the

ancient economy. Overland transportation costs of ancient Greece were certainly, by

modern standards, onerous. The transport figures in Diocletians edict of maximum

80

(Sarah B. Pomroy, 2008) (P. 64) 81

Invalid source specified. (P. 6) 82

(Sarah B. Pomroy, 2008) (P. 216) 83

Invalid source specified. (P. 2) 84

Invalid source specified.

35

prices implied that a 1,200 pound wagonload of wheat would double in price every

300 miles, meaning that barring loss risk that the purchase price of the equivalent

cart of wheat, transported from the Black Sea to the Pillars of Gibraltar, would cost

less than a wagonload transported 75 miles by land. And this was in the age of the

famed Roman roads, in geographically mild land. In Ancient Greece, before the

advent of a unified road network in a country far more characterized by rough

terrain, overland transportation costs would have surely been even more onerous.85

For a specific example of how limited the viability of overland transportation

of bulk goods in the ancient world was, note the famine of Antioch in 362-363 AD.

Antioch was only fifty miles away from a core Roman road, and yet the city still

starved despite the direct intervention of Emperor Julian. There can be little doubt

that overland transport in Ancient Greece, which was much more geographically

variable and lacked unified government or transportation systems, would have been

even less viable.86

This data makes it clear that access to the sea was a necessary prerequisite

for a poleis to have any hope of becoming a commercial center. For Athens, it was

the great harbor, the Piraeus, which served to replace the sand-beach of Phalerum

after Themistocles shipbuilding program required a greater port.

Water transport was the core of the ancient international economy, and

became the core of the domestic economy of nearly all of the greater powers of the

85

(Finley, 1999) 86

(Finley, 1999)

36

Classical and Hellenistic ages, Sparta aside. Water transport permitted for the

economic bulk transport of commodity goods such as food, in turn allowing

communities to grow beyond the constraints imposed by local geography. Water

transport opened up international trade markets in culture and luxury goods,

contributing to the intellectual flowering of the ancient world. Water transport also

increased the degree of the division of labor, geographically and socially, no doubt

leading to greater productive efficiency.

At the height of Periclean Athens, tributes derived from the Delian League

accounted for roughly sixty percent of the public (government) income.87 When the

city had reached the height of its power at the helm of the Delian League, it was

highly import dependent. The city imported perhaps two thirds of its wheat, all of

the iron and other base metals that it required, all of the timber, and most of its

slaves (other than those bred domestically). Most luxury goods, and all ivory and

precious gems, required importation. The same for an immense range of other baser

commodities, like papyrus for writing, flax for clothing, and most leathers. Athens

was self-sufficient only in honey, olive oil, ordinary wine, silver, building stone

(including marble), potting clay, pottery, and fuel. Athens was probably nearly self

sufficient in wool, fish, and meat. The city made it a capital offense to export home-

grown grains, despite the citys control over the Aegean sea and therefore control

over the importation of the massive wheat markets of the Black Sea and the Levant.

There is no evidence that this policy was a part of a broader protectionist economic

87

(Thucydides, fifth century BC) (2.13.3)

37

policy; indeed, the ubiquitous presence of Owls in sites throughout the

Mediterranean suggests by accounting tautology that Athens was in a state of

(presumably large) trade deficit for many years, or else other poleis would have

never been able to net acquire large sums of Athenian currency.

Athens exported immense quantities of olive oil as a cash crop, but olive oil

was not Athens largest export commodity.88 That title belongs to silver derived

from the Laurium mines. According to Xenophon, Athens had a highly advantageous

position in international trade because the citys silver, which funded massive

acquisition of imports (trade deficits) and furthermore provided importing

merchants who didnt wish to take on a return cargo with the option of filling their

hold with silver instead.89

Another significant source of Athenian revenues were metics, or foreigners

who chose to live in Athens. Metics came to Athens because of Athens relatively lax

policies on their presence, and because of Athens evolution into an international

trade center and clearing-house by the end of the sixth century. Athens also became

a popular tourist destination not long thereafter. The Piraeus was almost certainly

the most frequented port in the Aegean Sea the constant coming and going of so

many people and goods surely constituted a large, though immeasurable for lack of

statistics, part of the Athenian foreign trade balance.

Regarding manufactured exports,

88

(Finley, 1999) (P. 134) 89

(Croix, G.E.M. St. de, 1960)

38

The rise of international trade contributed significantly to the rise of the division of

labor. Xenophon himself obliquely notes this, explaining that the superiority of the

meals served at Persian court is to be expected given the size of the kitchen staff.90

Just as the various trades are the most highly developed in large cities, in the same

way the food at the palace is prepared in a far superior manner. In small towns the

same man makes couches, doors, ploughs, and tables, and often he even builds houses,

and still he is thankful if only he can find enough work to support himself. And it is

impossible for a man of many trades to do all of them well. In large cities, however,

because many make demands on each trade, one alone is enough to support a man,

and often less than one; for instance, one man makes shoes for men, another for

women, there are places even where one man earns a living just by mending shoes,

another by cutting them out, another just by sewing the uppers together, while there is

another who performs none of these operations but assembles the parts. Of necessity

he who pursues a very specialized task will do it best.

Implicit in Xenophons analysis is his analysis of supply and demand.

Demand is proportional to the population, and without enough persons supplying

demand, capacity will be strained. The ability of supply to meet demand is made

more efficiency by specialization into the different aspects of manufacture. This

analysis of Xenophon is further reinforced through the following excerpt regarding

silver mining.

90

Cyropaedia 8.2.5)

39

Of all the activities I know, silver mining is the only one in which expansion arouses no

envy. ..if there are more coppersmiths, for example, copperwork becomes cheap and

the coppersmiths retire. The same is true in the iron tradebut an increase in the

amount of the silver orebrings more people into this industry.

Considerable primary source material regarding ancient Athenian finance

and banking survives. Given the frequent antipathy to worldly affairs expressed by

the greater philosophers, this is surprising.. The ancient economy and financial

system cannot be understood if one takes a uniformitarian or universalist approach

to socioeconomic analysis. Doing so would necessary lead to trying to contextualize

the ancient economy, trying to fit it among the competing modern economic

paradigms of Marxism and Captialism. The ancient economy was different to its core

it was its own paradigm. To attempt to analyze the ancient economy invites gross

and sometimes grotesque distortion: assumption as to interest rates that ignore

the very different Athenian conceptualization of yield on principal

It has become fashionable to warn readers against the excessively bourgeois

nature of Athenian literary sources, which were written by a privileged elite for a

privileged elite, and thus often dealt with unrepresentative concerns. Modern

classical literature sees Athenian banking as being a marginal activity primarily

engaged in by those on the margins of society, such as metics and slaves. This view

cannot harmoniously co-exist with the survival of substantial primary source

material regarding the ancient financial system. The mere continued existence of

40

these sources suggests a significant impact of the financial system on the Athenian

elite. Most modern understanding of Athenian financing comes from five surviving

courtroom speeches prepared by Demosthenes for his clients.91

This section of this essay deals with the significant role of the financial

system in Athens, primarily focusing on the Classical period while touching on both

the Archaic and the Hellenistic. Thus the very premise of this line of research would

be regarded as false by the primitivist scholars, and yet will at the same time fall

afoul of the research of the modernists, who ascribed to Athens an economic system

that significantly resembled modern capitalist paradigms in everything but scale.

The fourth century of Athens witnessed two significant innovations; the

transition to an economy governed by monetary acquisition rather than

traditional social motivations, and the development of the worlds first private

businesses, trapezai (banks), which accepted from the populace depositor funds

which could then be deployed as the managers saw fit. Thus one of if not the worlds

first corporate innovations was fractional reserve banking. However, credit for

purposes of investment (business expansion) was noteworthy only in its utter

absence. There are no surviving records of even a single clear instance of credit

being granted for purposes of investment (as defined by the expansion of fixed

capital or equipment).92 Many records survive of credit granted for real estate,

91

(Casson, 1984) (P. 23) 92

(Hopper, 1979) (P. 11-12)

41

commercial banking, and merchant financing, but nothing for what is now regarded

as investment in anything but the financial-speculative sense.

In prehistoric times, before the existence of standardized media of exchange,

and even before the existence of physical money, credit existed. In fact the

historical record of debt antecedes the record of the first coinage denominations by

at least two millennia.93 There are many ethnological instances of credit repaid in

kind in communities where no trace has been discovered of any form of media of

exchange or store of value. Credit therefore existed from the very earliest phases of

social activity, even before the evolution of barter systems.94

Consider credit in its simplest forms. Primitive credit would have probably

been a loan of seed to a brother, son, or other close companion, the expectation

being repayment in kind at harvest time. Credit would just as well have consisted of

a loan of an animal, of food, or of useful tools. These basic forms of credit were

generally informally negotiated, and oftentimes probably didnt carry an

expectation of repayment beyond the refurbishment of an equal amount of seed or

the return of the tool or animal in equal condition. Thus these were loans at zero

percent interest, though just like the gifts between chieftains, these loans no doubt

carried a connotation of expected reciprocity, binding inter and extra-community

trade and thus domestic and foreign relations.95

93

(Homer, 2005) 94

(Homer, 2005) 95

(Millett, 1991)

42

The Bronze age civilizations of the Aegean Sea, which rose and fell between

2400 and 1200 BC, reached levels of cultural and economic activity that were

unmatched for centuries after the cataclysm that ended the age of the Myceneans.

Despite their affluence, relatively little information regarding the forms and rates of

credit of these civilizations have survived to the modern day.96 Cattle were the first

standard of value; indeed, the word capital itself comes from the word pecus, or

flock, in latin.97 Early Greeks actually valued their precious metals in terms of cattle,

as noted in The Odyssey when one of Penelopes suitors, begging, promised Ulysses

a contribution of bronze and gold to the value of twenty oxen.98 Where repayment

of credit at interest was expected, typical rates between private parties seemed to

average at 20-50% per annum, which naturally led to the prevalence of loan

sharks, generally members of the oligarchy, who would use credit as a tool of social

domination.99, 100 Homeric trade was often done by barter, with the pecuniary value

of metals (which, again, were priced in terms of cattle) being determined by volume,

as there were no standardized facilities for measuring weight, not to mention poor

assurance of the volumetric similarity of one coin to another.101 This inefficiency,

96

(Sarah B. Pomroy, 2008) 97

(Murray, 1978) 98

(Homer, 527 BC) 99

This practice would in time direly stratify Athenian society, leading to Solons appointment and subsequent economic reforms, which among other legislative economic decrees abolished most private debts and capped the annual rate of interest.

100 (Engels, 1884)

101 Volumetric measurement of coinage would in this context naturally lead to fraud via debasement of

coinage. Hence King Hieron IIs commissioning of Archimedes in 250 B.C., leading to the discovery of specific gravity; an innovation that would have surely been of great utility to Athenian financiers of pre-Hellenistic times had it then been known.

43

especially in regards to converting the coinage of one poleis to that of another, is

why the rates charged for money-clearing averaged at 5% of the total transaction,

rather than the much smaller rates known today (because of the lack of

international quality standards, judging the weight and purity equivalence of

different currencies was a very time-intensive process).102 Money-clearing from one

currency to another was the primary source of revenues for Athenian bankers.

Ancient Greek coinage:

This explains the definitions for the measures of the various units of

Athenian currency, for example a talent being defined as the amount of gold or silver

required to fill an amphorae, roughly 39 liters in modern terms. Homerian money, in

terms of sophistication, pales before the financial prowess of Minoan Crete, where

the qualities of metallic currency had been closely regulated by the state.103

The official coinage of money in the Aegean is assumed by most scholars to

have begun in Lydia in the seventh century BC, although some credit the Ionians or

even earlier peoples. Coins were originally brought into being as a system for the

payment of taxes and other public debts coins wouldnt intrude on private trade to

a meaningful extent until after Solons reforms, as these first coins, composed of

electrum, were generally equivalent in their lowest denomination to the value of ten

oxen, or well beyond the point of convenience for most private parties in everyday

transactions.

102

(Casson, 1984) (P. 30) 103

(Murray, 1978)

44

The Ancient Financial System:

The importance of private banks (called trapezai) in the Athenian economy is

only beginning to be recognized. Many historians have dismissed the trapezai as

little more than pawnbrokers or coin-changers; but a closer examination of the

evidence, thanks mainly to the research efforts of Cohen, reveals that banks were

crucial to the city's ability to function as a center of international trade.104 Hundreds

of ship cargoes were required annually to satisfy Attica's enormous need for food

and other items. Virtually all of these cargoes were dependent on loans. Financiers

also preferred to spread their risk; no records survive of a financier investing more

than 7,000 drachma in a single enterprise (4,000 was typical) whereas a single

ships cargo could easily be worth over 40,000).105 Such a system of financing

provided creditors with an opportunity to absorb over many transactions the risk of

a total loss from the sinking of a single ship.

The bankers also expedited commerce through the use of demand deposits.

By guaranteeing payments of funds at far-off locations using signed documents, the

banks allowed customers to avoid the dangers and inconvenience inherent in

transporting a large amount of coins or bullion.106 Thus when Stratokles needed

funds available at the distant Black Sea, to which he was about to journey, he was

104

(Cohen, 1997) 105

(Casson, 1984) (P. 25) 106

(Cohen, 1997)

45

able to leave his own money on loan in Athens and carry instead a bank guarantee of

payment of principal and interest on 300 Cyzicene staters.107

The trapezai were unincorporated businesses operated by individual

proprietors or partners, almost entirely free of governmental regulation; modern

banks are almost always corporate institutions, invariably governed by official

regulation. ... At Athens, banking "powers" and business arrangements were

determined without state interference -- by economic, not legal, constraints.

Governmental "charters" permitting specified activities, or limiting competition,

were nonexistent. ... In sharp contrast to virtually all modern systems ... loans from

the trapezaiwere explicitly independent of parochial legal governance. Indeed,

concerning contractual provisions, Athenian law seems to have mandated the

primacy of "whatever arrangements either party willingly agreed on with the

other." ... In contractual contexts there is frequent reference to Athenian law

mandating absolute government noninvolvement in the conditions and terms of

nongovernmental dealings .... Financial arrangements were subject to no control

other than that of market conditions. ... Athenian bankers were free to vary the

conduct of their operations .... No activity was governmentally proscribed, no

activity was governmentally mandated. ... [T]he absence of governmental restriction

or economic monopoly ... resulted in wide variance in the terms on which, and the

107

(Cohen, 1997)

46

mechanisms through which, bankers sought funds.

Greek Financial and Economic Reform:

By the seventh century BC, Greek trade had evolved beyond the point of

interest-free reciprocated credit due to the maturation of poleis economics, which

was in turn due to progress in the viability of inter-poleis trade. Low to no-interest

reciprocated credit transactions were generally limited to family units and other

personal networks, which could not be sustained in the realm of commoditized

international trade.108 The maturation of foreign trade was reflected in the

increasing financial sophistication of Greek traders by this point in time, in turn

reflected in the form of extensive borrowing-at-interest and the rise of an insurance

industry. Financial speculation as the term is in modern times recognized was born.

In next to no time the commercial genius of the Greek rises to the notion of

speculationcapital accumulation is only an investment with an eye to

accumulating more.109 The poets of the day bitterly complained about the

domination of new capitalist manners over the traditional Heroic-age ideals. The

power of the old kings, based on soil, cattle, and descent from the gods was eroded,

replaced by a rapidly growing feudal and commercial oligarchy whose skill at capital

accumulation was not yet significantly regulated by the government.110 The stage

108

(Engels, 1884) 109

(Homer S. , 2005) 110

(Engels, 1884)

47

was set for class conflicts between the economic classes, which would continue in

varying incarnations up until Cleisthenes tyranny purged most of the final

remainders of the feudal oligarchy in 508 BC.111

By the beginning of the sixth century BC, the rural homestead farmer had

long since given way to the tenant farmer, a highly indebted social class whose

person and entire family could be enslaved and sold as mortgage collateral. Tenant

farmers were by the time of Solons appointment in 594 BC in such a state of

economic distress that they were threatening open rebellion. Redistribution of

wealth of some form or another had to occur. The favorite method of achieving this

in later times, and the most effective in retrospect as proven by Peisistrasos

administration, was the murder of the creditors.112

However, in Attica at least, these class conflicts were relatively peacefully

settled by the legislations of the lawgiver Solon, who was born in about 638 B.C and

enacted his famous laws in 594 B.C. It has been suggested that before Solon, while

the landowner could not be dispossessed legally, he and his family could still be

enslaved, albeit as sharecroppers on their own land.113 This meant that the

remaining tenant farmers had to compete with slave labor.114 Laws that had been in

place before Solon forbade the foreclosure on the land of the debtor, but permitted

it on his person; he and his could and often did become debt slaves and who worked

111

(Engels, 1884) 112

(Murray, 1978) 113

(Mitchell, 1953) 114

(Homer S. , 2005)

48

their own land for the benefit of oligarchs, who seized from their sharecroppers up

to 5/6 of all produce production.115 Despite the influx of goods from recent

colonizations, private sector debt burdens among the lower classes caused such

states of generalized economic distress that the situation, the prevailing overly

stratified social order, had become insupportable. Judging from the list of Solons

economic reforms, and their by-and-large acceptance, it is likely that Athens was in

a state of dire economic crisis during the period directly antecedent to Solons

reforms.116

By 508 BC, after the reforms of Peisistrasos and Cleisthenes, Athens long

history with economic class struggle had finally for the most part abated, with the

economic purge of much of the feudal nobility and the murder of most of the rest.117

After 508 BC, Athens so rapidly outdistanced the other Greek city states

economically and financially that from thence on the history of Greek trade and

finance is for the most part, but not entirely, a history of Athenian trade and

finance.118 Athens refusal to devalue the owl silver coinage through the

Peloponnesian war, alongside the sheer power of Athens commercial empire, led to

the dominance of the owl coinage as by far the most commonly accepted and

fungible currency in Greece, for over 600 years, or long after Athens defeat in the

Peloponnesian Wars.119 The financial innovations credited to Athens were quickly

115

(Homer S. , 2005) 116

(Murray, 1978) 117

(Engels, 1884) 118

(Homer, 527 BC) 119

(Homer, 527 BC)

49

copied by other city states in the aftermath. The defeat of Athens was not a turning

point in the history of Greek finance.120

Athenian maintenance of full employment:

Particularly in the period following Solons reforms, the surviving primary

literature shows a declining rate of mention of unemployment, in spite of population

growth. I assert that this is largely due to the growth of the Athenian navy and

related industry, not to mention government. The navy especially was highly labor

intensive. The typical trireme of the classical period would have had a crew of

roughly 200,121 including 5 officers (government employment for the educated and

the uneducated).

Trierarchos the commanding officer, responsible for supporting the ship

Kybernetes executive officer, responsible for the cruising safety

Keleustes responsible for the training and morale of the crew

Pentecontarchos administration officer

Prorates bow officer, responsible for keeping a sharp lookout

1 auletes a musician supplying the oar timing with his flute

170 oarsmen in three banks

a. 62 thranites the upper bank

b. 54 zygites the middle bank

c. 54 thalamites lower bank

120

(Homer S. , 2005) 121

50

10 sailors for handling the sails

14 Marines (10 spearsmen, 4 archers)

In Thucydides, it is mentioned that during the fourth year of the Peloponnesian War,

Athens had almost the largest number of first-rate ships in commission that she ever

possessed at any one moment, she had as many or even more when the war began.

At that time one hundred guarded Attica, Euboea, and Salamis; a hundred more were

cruising round Peloponnese, besides those employed at Potidaea and in other places;

making a grand total of two hundred and fifty vessels employed on active service in a

single summer.

At this same time Athens was also hard-pressed for revenues to maintain the

siege of Mytilene. The massive amount of ships deployed during this summer were

an outstanding drain on the public treasury relative to GDP. Exact statistics are

impossible to provide, but given the going rate of one Attic talent (~26 kg silver)

being sufficient to employ a trireme for a month, this implies that the employment

of 250 triremes would have been a net monthly drain in current dollars, assuming

for a price of $20/ounce of silver, of $4,160,000,000 this sum being levied from an

empire of about 1.5 million people. Contrast to the current population and GDP of

Iceland, 317,400 and $12.6 billion respectively. Athens population in the fifth and

fourth centuries has been, conservatively, estimated to be over 150,000.122 This was,

almost certainly an extremely conservative estimate (to the point of being outright

122

(Casson, 1984)

51

false), as the numbers of soldiers that Thucydides specifically references to would

have required a larger supporting economy than such a small population would

imply. Even a far larger population of half a million would still be extremely

conservative if Thucydides military numbers can be trusted. Employed in the

triremes alone during the fourth year of the Peloponnesian war were 50,000 men,

which would have been a huge proportion of the number of employable men of

military age in Athens. Many more were surely employed in the administrative,

logistical, and productive complex that supported this navy; it is a common rule of

war that every frontline solder requires several direct and indirect supporting staff.

These numbers show it to be highly likely that Athens, alone (in the surviving

records) among fifth and fourth century powers in controlling unemployment, did

so through the creation of a massive military-industrial complex.

It is likely that these particular fourth-century employment figures were

unusual by Athenian standards. It is regrettable that the data of Thucydides isnt

sufficient to present time-series data.

Everything below up to, but not including, the conclusion constitutes notes,

which were copy/pasted from interesting sources.

52

Annual Tribute to Athens, 477-454 B.C.

Date

477 B.C.

454 B.C.

431 B.C.

428 B.C.

425 B.C.

421 B.C.

Sum

Attic Talents

460

500

600

800

1,500

1,200

Drachmae

2,760,000

3,000,000

3,600,000

4,800,000

9,000,000

7,200,000

Source

Thuc. I. 96

Meiggs, AE, p. 253

Thuc. I. 99. 3 & II. 13. 6-7*

Meiggs, AE, p. 325**

Meiggs, AE, p. 343

Andoc. III. 9

*Meiggs, AE, pp. 62-63, doubts Thucydides' figures for 477 and 432 B.C. Meiggs'

lower sums are implausible, and his proposed sum of 400 talents in 432 B.C. is

based on fragmentary ATL in which many of the sums are guesswork.

**Plut., Aristides 24. 3, notes tribute was raised to 1,300 talents after the death of

Pericles in 429 B.C.

Reported Reserves of Athens

Date

454 B.C.

Sum

Attic Talents Drachmae

Source

Diod. XII. 28. 2

53

432 B.C.

430 B.C.

8,000

10,000

9,000

6,000

48 mil