Ancient times may be a guide to today's problems

By Lee A. Presser (with thanks to the work of John R. Saul) Principal Partner
The Presser Group

In light of the recent motions in Congress to tighten the regulations on filing for bankruptcy, I ask this question: Would it be better for citizens, and the country, to be pulled down into another depression due to corporations and governments forcing people to repay debts? Or, is it better for the country if our government helps protect those in financial trouble by allowing them to file for bankruptcy?

I ask this question because of my recent readings about Athens, Greece, during the sixth century B.C. Athens was a country dominated by a wealthy class. They were called Eupatridae and were born into wealth and owned much of the land and business. The wealthy class used economic muscle to drive farmers and small business people into debt during bad times. When the farmers and other owners were unable to repay their debts on time, they were reduced to employees and made to work the land and stores that they once owned.

These employees, called serfs, were no longer given a voice in government. As time passed the debt situation spun further out of control, dragging more people down to serfhood and stripping them of their possessions.

Faced with a huge gap between the rich and the poor, and a fear of imminent uprising, those who still had a voice in government called a man named Solon into government. These politicians then gave him the powers to deal with the situation. The situation of increasing debt, a highly concentrated percentage of wealth and the possibility of an uprising.

Twenty years before, he was their leader and was trusted to act in the best interest of the politicians who had appointed him.

Solon was Athens' leading writer. His writing set examples and created solutions to old political problems. His constant message was moderation and reform. He was as opposed to both the extreme of revolution as he was to the extreme of tyranny. Before being called back to service, he had written "Public evil enters the house of each man, the gates cannot keep it out, it leaps over the high wall; let him flee to a corner of his bed chamber. It will certainly find him out."

Salon's first act, once appointed, was to return all land and property to those who had lost it through debt. He freed the employees and made them citizens again. He did this by what the Athenians called, "shaking off the burdens." Solar was, in effect, the equivalent of the modern day bankruptcy. He ripped up all the debt papers and allowed people who were serfs to become citizens again. In his own words, he had "Uprooted the mortgage stones that everywhere were planted and freed the fields that were enslaved before."

Solon had released the people and nation from their paper chains. By doing this, he was able to reestablish social balance.

Solon's second step was to replace the draconian laws, which had forced so many into debt, with a code of fair laws that laid the foundation for a democratic constitution.

The benefits were immediate.

"Athens immediately began its rise to glory, spewing out ideas, theater, sculpture and architecture, democratic concepts and concrete riches.

All this eventually became the foundation of Roman and indeed of western civilization.

Today we cannot move a step without some conscious or unconscious tribute to the genius of and of Athens - a genius unleashed by defaulting on debts."-John R. Saul

Closer to home, America's 19th century is a history of repeated financial default. American capital investment programs have regularly defaulted. So, too, have American railroad companies and other large corporations and businesses.

In fact, the entire economy defaulted during the panics of 1837, 1857, 1873, 1892-93, 1907 and the Great Depression of 1929.

In each case, debts were canceled due to massive bankruptcies and lost livelihoods, not through an organized government action or policy. This unorganized style of ripping up paper debt led to widespread depression which devastated many families before the economies strengthened and bloomed.

Comparing Solon's thoughtful solution of ridding Athens of its paper debt crises to the American solution of bankruptcy, I ask again, if the American economy were to arrive at the point of another collapse, would it be better for the citizens to be pulled into another depression, or for debts to be forgiven?