Debt Slavery

Human Wrongs Watch

By John Scales Avery*

At the moment, the issue of debt slavery is very topical because of the case of Greece; but it is an issue that has a far more general significance.

**Image: Campaign poster showing William McKinley holding U.S. flag and standing on gold coin

**Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. | The United States Library of Congress’s Prints and Photographs division | Author: Northwestern Litho. Co, Milwaukee | Public Domain | Wikimedia Commons

Usury, the charging of interest on loans, has a history of being forbidden by several major religions, including not only the three Abrahamic religions, Judaism, Christianity and Islam, but also the ancient Vedic Scriptures of India. (

Perhaps the reason for these religious traditions can be found in the remarkable properties of exponential growth.

If any quantity, for example indebtedness, is growing at the rate of 3% per year, it will double in 23.1 years; if it is growing at the rate of 4% per year, the doubling time is 17.3 years.

For a 5% growth rate, the doubling time is 13.9 years, if the growth rate is 7%, the doubling time is only 9.9 years.

It follows that if a debt remains unpaid for a few years, most of the repayments will go for interest, rather than for reducing the amount of the debt.

In the case of the debts of third world countries to private banks in the industrialized parts of the world and to the IMF, many of the debts were incurred in the 1970’s for purposes which were of no benefit to local populations, for example purchase of military hardware.

Today the debts remain, although the amount paid over the years by the developing countries is very many times the amount originally borrowed.

Third world debt can be regarded as a means by which the industrialized nations extract raw materials from developing countries without any repayment whatever. In fact, besides extracting raw materials, they extract money.

The injustice of this arrangement was emphasized recently by Pope Francis in his wonderful encyclical “Laudato Si’ ”.

Wealth, virtual wealth, and debt

Frederik Soddy, who won the Nobel Prize in Chemistry in 1926, later turned his attention to economics. Soon after receiving his Nobel Prize, he published a book entitled “Wealth, virtual wealth and debt; the solution to the economic paradox”.

In this book, Soddy was extremely critical of the system of fractional reserve banking, whereby private banks keep only a small fraction of the money entrusted to them by their depositors and lend out the remaining amount. He pointed out that, in this system, the money supply is controlled by the private banks rather than by the government.

Thus profits from any expansion of the money supply go to private corporations instead of being used to provide social services. Soddy’s criticisms of fractional reserve banking cast light on the sub-prime mortgage crisis of 2008 and the debt crisis of 2011.

As Soddy pointed out, real wealth is subject to the second law of thermodynamics. As entropy (i.e. disorder and degradation) increases, real wealth decays.

Soddy contrasted this with the behavior of debt at compound interest, which increases exponentially without any limit, and he remarked: “You cannot permanently pit an absurd human convention, such as the spontaneous increment of debt [compound interest] against the natural law of the spontaneous decrement of wealth [entropy]”.

Thus, in Soddy’s view, it is a fiction to maintain that being owed a large amount of money is a form of real wealth.

We can learn from the thoughts of Frederik Soddy in the 1920’s and from the wisdom of Pope Francis today. Most third world debts can be regarded as “odious”, i.e. incurred by governments whose actions were not in the best interests of their peoples, and therefore not legally collectible. In most cases, forgiveness and a fresh start would be of benefit to all of us.

Some suggestions for further reading

john_avery*John Scales Avery, Ph.D., who was part of a group that shared the 1995 Nobel Peace Prize for their work in organizing the Pugwash Conferences on Science and World Affairs, is a member of the TRANSCEND Network and Associate Professor Emeritus at the H.C. Ørsted Institute, University of Copenhagen, Denmark.

He is chairman of both the Danish National Pugwash Group and the Danish Peace Academy and received his training in theoretical physics and theoretical chemistry at M.I.T., the University of Chicago and the University of London. He is the author of numerous books and articles both on scientific topics and on broader social questions. His most recent book is Civilization’s Crisis in the 21st Century

This article can be re-published, sourcing and linking to: Human Wrongs Watch

Copyright ©2015 Human Wrongs Watch

Other articles by John Scales Avery published by Human Wrongs Watch:

Will the Real Issues Be Discussed in 2016?

Militarism’s Hostages

New Hope for Avoiding Catastrophic Climate Change

Exponential Growth

Albert Einstein, Scientist and Pacifist

“The Path to Zero: Dialogues on Nuclear Dangers”, by Richard Falk and David Krieger

Millay’s “Epitaph for the Race of Man” 

The Future of International Law (Part I)

The Future of International Law (Part II)

The Future of International Law (Part III)

Europe Must Not Be Forced Into a Nuclear War with Russia

Tactical Nuclear Weapons in Europe – The Dangers Are Very Great Today

Why Is the Total Elimination of Nuclear Weapons So Urgent?

Why Is the Military-Industrial Complex Sometimes Called “The Devil’s Dynamo”?

Of Reciprocity and Karma

Adam Smith’s Invisible Hand Is at Our Throats

Perpetual War

Kill or Be Killed… Or Both!

Does It Make Sense to Saw Off the Branch on Which You Are Sitting?

Blood for Oil – The Close Relationship Between Petroleum and War

**Image: Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”, held up by group of men, in front of ships “commerce” and factories “civilization”. | The United States Library of Congress‘s Prints and Photographs division | Author: Northwestern Litho. Co, Milwaukee | Public Domain | Wikimedia Commons

2015 Human Wrongs Watch

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