From quite early times, then, Temple administrators developed the habit of advancing goods to local merchants—some of them private, others themselves Temple functionaries—who would then go off and sell it overseas. Interest was just a way for the Temples to take their share of the resulting profits.
However, once established, the principle seems to have quickly spread. Before long, we find not only commercial loans, but also consumer loans—usury in the classical sense of the term.
By c. 2400 BC it already appears to have been common practice on the part of local officials, or wealthy merchants, to advance loans to peasants who were in financial trouble on collateral and begin to appropriate their possessions if they were unable to pay.
It usually started with grain, sheep, goats, and furniture, then moved on to fields and houses, or, alternately or ultimately, family members. Servants, if any, went quickly, followed by children, wives, and in some extreme occasions, even the borrower himself.
These would be reduced to debt-peons: not quite slaves, but very close to that, forced into perpetual service in the lender’s household—or, sometimes, in the Temples or Palaces themselves.
In theory, of course, any of them could be redeemed whenever the borrower repaid the money, but for obvious reasons, the more a peasant’s resources were stripped away from him, the harder that became.
The effects were such that they often threatened to rip society apart. If for any reason there was a bad harvest, large proportions of the peasantry would fall into debt peonage; families would be broken up.
Before long, lands lay abandoned as indebted farmers fled their homes for fear of repossession and joined semi-nomadic bands on the desert fringes of urban civilization.
Faced with the potential for complete social breakdown, Sumerian and later Babylonian kings periodically announced general amnesties: “clean slates,” as economic historian Michael Hudson refers to them.
Such decrees would typically declare all outstanding consumer debt null and void (commercial debts were not affected), return all land to its original owners, and allow all debt-peons to return to their families.
Before long, it became more or less a regular habit for kings to make such a declaration on first assuming power, and many were forced to repeat it periodically over the course of their reigns.
In Sumer, these were called “declarations of freedom”—and it is significant that the Sumerian word amargi, the first recorded word for “freedom” in any known human language, literally means “return to mother”—since this is what freed debt-peons were finally allowed to do.