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Jubilee has its provenance in ancient Hebrew socio-economics. The contemporary term jubilee itself is borrowed from the ancient Hebrew word yobel (equivalent English sounding), which means a blast of a ram’s horn to mark the beginning of a Hebrew socio-economic cycle. Well before the birth of Economics as a formal discipline of study and way before the Russian economist Nikolai Dmitriyevich Kondratiev suggested economies go through long-term cycles of boom and bust (average 50 years), ancient Hebrew economics revolved around a 49-year cycle.
Leviticus 25:8 records the origin of the Jubilee: “And you shall count seven sabbaths of years (49 years) for yourself, seven times seven years; and the time of the seven sabbaths of years shall be to you forty-nine years.’’ In the 50th year following the completion of the 49 years, the beginning of a festival was proclaimed by the blowing of a ram’s horn on the 10th day of the seventh month (called Tishri) of the Hebrew calendar. This festival was called the Jubilee. It is from this ancient festival that we get the word jubilation. Jubilee is the antithesis of an economic crisis.
The Jubilee of the ancient Hebrews ensured ‘socio-economic jubilation’ by resting on three key pillars. This article explores the systemic links in this ancient economic fabric that prevented economic and financial crises.
Real estate equilibrium
Ancient Hebrew economic policy explicitly conferred and protected the rights of individuals to own a piece of land, secured by formal title deeds. This erstwhile economic system made a provision for a market in real estate. The most important takeaway from this economic architecture is that it had an in-built mechanism to avoid property bubbles in the real estate market, thus staving off economic crises. By shepherding real estate price movements within a preset business cycle, real estate bubbles were avoided.
Three interrelated mechanisms minimised the risk of violent economic gyrations.
First, individuals were allowed to lease land for a maximum period of 49 years, the year of Jubilee being the reference point for establishing the lease period and asset value. Thus, for instance, if one leased their land 10 years after the Jubilee, then the lease would be valid for the following 39 years. Leviticus 25:10 spells out succinctly the role of the Jubilee in restoring real estate equilibrium in the economic system of the ancient Hebrews: “And you shall consecrate the fiftieth year, and proclaim liberty throughout all the land to all its inhabitants. It shall be a Jubilee for you; and each of you shall return to his possession, and each of you shall return to his family.’’ The genius in this economic architecture was that the direction of real estate prices was predictable. That brought economic policy certainty and stability which encouraged flow of investment. That in turn gifted the nation with economic stability.
Second, the Jubilee cycle gave no space for speculative tendencies due to the existence of preset pricing mechanisms. The pricing mechanism for determining the value of land was predicated on the position of the economy on the economic cycle. In simpler terms, the selling price was proportional to the expected years of production and the value of expected output. In modern financial parlance, we would say the value of real estate assets was based on expected future earnings. Leviticus 25: 16 makes this principle lucid: “According to the multitude of years you shall increase its (land) price, and according to the fewer number of years you shall diminish its price; for he sells to you according to the number of years of the crops.’’ Clearly, holding real estate assets in a bid to game the market was not attractive. Land could only be profited from through sweating it by way of putting it to productive use.
Third, the Jubilee was designed to engender socio-economic stability through narrowing inequalities in accessing means of production. To maintain socio-economic stability, the original owner of the real estate asset could redeem it at any point in the economic cycle. This, the lessee knew upfront. Thus enshrined in the real estate law of the ancient Hebrews was the right to redeem land. This was based on the constitutional dictate that, “The land shall not be sold permanently for the land is Mine; …’’ (Leviticus 25:23). The law of redemption was adroitly crafted to ensure pursuit of social stability did not trigger economic instability. The lessee would be compensated for loss of future production based on earnings they would have enjoyed in the remaining period until the Jubilee. Thus redeeming land for non-economic reasons would place the redeemer in a serious economic loss position.
Debt-stabilisation was a key piece of the Jubilee cycle. Leviticus 25:47-50 states: “Now if a sojourner or stranger close to you becomes rich, and one of your brethren who dwells by him becomes poor, and sells himself to the stranger or sojourner close to you, or to a member of the stranger’s family, after he is sold he may be redeemed again. One of his brothers may redeem him; or his uncle or his uncle’s son may redeem him; or anyone who is near of kin to him in his family may redeem him; or if he is able he may redeem himself. Thus he shall reckon with him who bought him: The price of his release shall be according to the number of years, from the year he was sold to him until the Year of Jubilee; it shall be according to the time of the servant hired to him.’’
In the ancient near East it was common practice for a loan defaulter to be ‘bound’ by the lender. To discharge his debt he would offer free labour. Specifically, ancient Hebrew law prohibited lending to the poor for a profit. Leviticus 25: 37 makes this injunction very clear: “You shall not lend him your money for usury (interest), nor lend him your food at a profit.’’ However, the law recognised that external debt obligations had to be settled.
To forestall national debt and credit crises, two carefully crafted provisions were made. First, the price of debt or bond yield was controlled by the point in the economic cycle and a preset financial benchmark. A predictable and transparent debt-pricing mechanism imbued the markets with certainty, resulting in economic and social stability. In the economic system of the ancient Hebrews, external debts were not cancelled. Instead, debt had to be repaid within the 49-year Jubilee cycle. This fall-back provision had the effect of rescheduling and restructuring the debt, effectively lowering the effective interest rate. As citizens were expected to sweat their key productive asset—land—widespread debt default was not expected.
The Jubilee cycle was underpinned by shorter 7-year economic cycles. Every seven years, farmers in ancient Hebrew were obliged by law to recapitalise by letting land lie fallow for a whole year. Note that the Jubilee coincided with the 7-year agricultural production cycle. What cannot escape our attention is how the architecture of the ancient Hebrew economic system was founded on sustainable development principles threading environmental sustainability and economic sustainability together.
Hebrew ancients deliberately managed their economic and business cycles to forestall triggers of economic instability such as bubbles in real estate and credit markets. Ancient economic policy gave the economy a fillip in the Year of Jubilee — creditors were fully paid, citizens were debt-free and their land restored. The brilliance of ancient Hebrews in managing a sustainable economy is undeniable.
Eurozone and our inclusive government could profit by the intellections embodying the original Jubilee.