The oldest form of security offered by property was pawning.
By Kelly Lambert
As long as people have been trading with each other, they have created debt. And as long as people have created debt, some have been unable to pay what they owe. This was as true in ancient Athens as it is today.
Before about the 6th century BCE in Attica, among a population consisting primarily of peasants and small farmers, borrowing occurred among members of local communities in the form of lending farming implements, small sums, and household goods. But when borrowing goes beyond neighborly trading, debts for such farmers and artisans become larger and more difficult to repay. In addition, inheritance by all sons, not just the eldest, led to division of land into smaller and smaller portions that could not sustain a family.
Interestingly, Athenians of this era believed, at least nominally, that any trade should take place simultaneously, with no allowance of a “buy now, pay later” arrangement. Hypothetically, then, there was no such thing as a seller agreeing to delayed payment or providing credit secured by the goods (a “purchase money security interest” in modern Uniform Commercial Code parlance).
However, as might be expected, this simultaneous exchange rule led to difficulties in day-to-day trade, so the Athenians devised many ways around it. “In actual practice at Athens, surviving sources confirm that credit was widely available for consumer (and other) purchases from both vendors and banks.” From a vendor, a buyer could obtain an interest in property or goods by making a deposit, called an arrabṓn [ἀρραβών] or an advance payment called a pródosis [πρόδοσις]. Moreover, enterprises could receive funding from banks, much as businesses obtain “operating loans” today.
The functions of banking, keeping wealth safely and making loans, started in temples. Later, non-temple banking operations appeared, called trápezai [τράπεζαι]. Literally, these trápezai were the tables at which money changing and other services took place.
Such lending, predictably, gave rise to concepts such as interest, a price charged by a lender for the use of his money or property, and security, property offered by a debtor as a guarantee in case of non-payment. “As well as being entitled to sell property he owns, the owner is also entitled to offer it as security. Ever since ancient times, Greece recognized both personal security (the person pledging himself) and real security (the object offered as security)”
The oldest form of security offered by property was pawning. A third person guarantor could also promise to pay if the debtor defaulted. “[F]rom the earliest times it was customary to make [a secured sale] with the right of recovery by the debtor.” Thus, ownership of property worth more than the debt passed to the creditor, but the debtor retained possession of it, and could continue to get revenue from it in order to pay the debt. The debtor was entitled to the return of ownership after the debt was satisfied, but if the debtor failed to pay, the creditor retained ownership and got to take possession, regardless of the size of the debt compared to the value of the property.
Debtors who lost control of their land in this way were called hektḗmoroi [ἑκτήμοροι], from the Greek ἕξ [héx] or “six,” because they became serfs who worked on the surrendered land and gave one-sixth of the produce or revenue to the creditor. If the debt was not paid off by the one-sixth payments, and if the debt came to exceed the value of the debtor’s land or other assets (what today we would call being “underwater”), the debtor and his family became slaves. A debtor could also use his freedom (or perhaps that of his family) as security for a debt, again leading to slavery upon default.
As time went on, more debtors fell into unmanageable obligations to rich elites or other less-than-sympathetic lenders, and disparity between borrowers and lenders grew. “[T]he main problem at Athens was the discrepancy between a small group of elites owning most of the arable land and a large group of dependent, smallholder tenants who had access to land only through them.” This loss of farmland and freedom to wealthy elites in turn led to a crisis of economic and social instability.
Eventually, in 594 BCE, the Athenians elected Solon to address the crisis and set out new laws. Solon’s laws were written in poetic form, and survive today as fragments and in commentary by Plutarch and others. Solon’s reforms regarding debt were known as the seisákhtheia [σεισάχθεια], from the Greek words seíein [σείειν], to shake, and ákhthos [ἄχθος], burden, so shaking off a burden. The seisákhtheia had the effect of cancelling all outstanding debts and freeing all enslaved debtors, both slaves who had remained in Attica and those who had been sold outside, who were to be returned. The laws also returned the forfeited property to the hektḗmoroi. Thereafter, personal freedom could not be used as collateral, and a maximum limit was set on the amount of land that could be owned, to prevent excessive accumulation of land by the wealthy.
Further, Solon’s laws removed hóroi from farmers’ lands. The Greek word hóros [ὅρος, pl. ὅροι] literally means boundary marker, or a or mountain that marks the boundary of vision. In Attica, sales of property on credit, or debts against property, were commemorated by such hóroi, inscribed stone markers set up on mortgaged houses or land, as a way of notifying the public.
Solon’s reforms also organized social classes on the basis of property and units called médimnoi [μέδιμνοι] of agricultural production. The 500, or pentakosiomédimnoi [πεντακοσιομέδιμνοι] were the highest class, whose property produced at least 500 médimnoi per year, eligible to become high officials, civilian and military. The 300, or triakosiomédimnoi [τριακοσιομέδιμνοι], also known as hippeîs (ἱππεῖς), possessed property producing at least 300 médimnoi per year, and who therefore could afford to keep a war horse. Those whose property produced 200 médimnoi or more were known as diakosiomédimnoi [διακοσιομεδιμνοι] or zeugîtai [ζευγῖται], while the lowest class, producing under 200 médimnoi, were called thē̂tes [θῆτες]. This changed the defining characteristic of status to wealth rather than aristocratic birth, but did not eliminate social strife. Plutarch notes that after he enacted his laws, Solon left Athens, which again descended into divisions of the poor and the rich.
It should also be noted that the private debts of individuals were not the only type of obligations. Ancient Greek city-states sometimes took on public debt. For example, about a hundred years after Solon’s reforms, during the Peloponnesian War (431–404 BCE), the city of Athens borrowed from the sacred treasury of Athena approximately 7,000 silver talents and eventually defaulted. Following the war, the interim government of Athens borrowed 100 silver talents from Sparta. This transaction was one of the earliest recorded instances of sovereign (that is, government) debt, and was paid in full with interest by the successor government of Athens.
Sadly, Solon’s reforms did not last long. Herodotus and Plutarch inform us that civil strife arose and continued from around 595 BCE to 546 BCE, when the tyrant Pisistratus took over. However, the abolition of debt slavery, the offering of one’s freedom as security for a loan, had a more permanent effect. “[W]e hear no more about debt slaves after Solon.” This may represent progress in the age-old effort to find a balance, in ancient times as well as today, between creditors feeling secure enough to want to extend credit so that commerce can function, and debtors feeling they can survive indebtedness without losing their livelihoods or freedom.
- Hornblower, S. and A. Spawforth, eds. 1998. The Oxford Companion to Classical Civilization. 211. Oxford, U.K.
- Blok, Josine and Krul, Julia 2017. “Debt and Its Aftermath: The Near Eastern Background of Solon’s Seisachtheia.” in Hesperia, The Journal of the American School of Classical Studies at Athens, Vol. 86, No. 4, p. 619. JSTOR, www.jstor.org/stable/10.2972/hesperia.86.4.0607.
- Cohen, E. 2005. “Commercial Law.” in The Cambridge Companion to Ancient Greek Law. 294. Cambridge, U.K.; See United States Uniform Commercial Code, §9-103(b), “Purchase Money Security Interest in Goods.”
- Cohen 2005. 294.
- Cohen 2005. 294.
- Hornblower and Spawforth. 1998. 111.
- Cohen 2005. 295.
- Hornblower and Spawforth. 1998. 111. Oxford, U.K. (“[B]anks in antiquity supplied a selection of the services familiar from their modern counterparts. Nonetheless, their essential banking function, the receipt of deposits which might then be lent at interest to a different set of customers, appears only fleetingly in ancient texts.”)
- Maffi, A. 2005. “Family and Property Law.” in The Cambridge Companion to Ancient Greek Law. ed. M. Gagarin and D. Cohen, 262. Cambridge, U.K.
- Maffi, 2005. 261.
- Maffi, 2005. 261.
- Maffi, 2005. 261.
- Maffi, 2005. 261–262.
- Titze, T. 2013. “We’re All [Ancient] Greeks Now When It Comes To Debt.” available at historynewsnetwork.org, sponsored by Columbian College of Arts and Sciences, The George Washington University.
- Kilborn, J. 2012. “The 5000-Year Circle of Debt Clemency: From Sumer and Babylon to America and Europe.” Nederlands Tijdschrift voor Burgerlijk Recht 2013. 1.
- Blok and Krul. 2017. 613.
- Blok and Krul. 2017. 613.
- Hornblower and Spawforth. 1998. 669. See also Blackwell, C. 2003. “The Development of Athenian Democracy” 3. Available online at stoa.org
- See Aristotle, Athenian State 6, available at perseus.tufts.edu; and Plutarch, Life of Solon 15.3–5, available at perseus.tufts.edu
- Titze, T. 2013.
- One such marker defined the extent of the Athenian agora, stating “horos eimi tes agoras”—I am the boundary marker of the Agora.” Cf. ὁρίζων, a genitive participle and noun with the general meaning of divide or separate, with English “horizon.”
- Maffi, 2005. 261-262. See also Robinson, D. 1944. “Greek Horoi and a New Attic Mortgage Inscription.” 13 Hesperia: The Journal of the American School of Classical Studies at Athens No. 1, 16. available at http://www.jstor.org/stable/146892
- Martin, T. An Overview of Classical Greek History from Mycenae to Alexander. 1996. Section 6.25, “The Reforms of Solon” available at perseus.tufts.edu
- Plutarch. Life of Solon 29.1. available at perseus.tufts.edu
- Titze, T. 2013.
- Blackwell. 2003. 3.
- Blok and Krul. 2017. 639
Originally published by the Kosmos Society, The Center for Hellenic Studies, 03.18.2021, under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported license.