David Graeber, Debt: the First 5,000 Years

Debt: the First 5,000 Years is an endlessly fascinating book, and I thoroughly enjoyed it. Not because I agreed with every word; many passages are maddening, and I think that in some ways it is very much wrong-headed. But it is full of fabulous facts and keen insights, and the topic is of central importance, so I absolutely recommend it to anyone interested in what the world is like and how it got this way. Given the amount of time and space it covers — 3000 BCE to the present, across much of the globe — it is no doubt full of errors, some of them beyond my competence to recognize. Still, for the times and places I do know I found it as good as any textbook, and where I disagreed about factual matters I never thought the errors really undermined the argument.

David Graeber is an anthropologist who did fieldwork in Madagascar before getting involved in the protest movement against the IMF and its austerity policies. He found that when he tried to argue that the debts owed by many poor countries to foreign banks were unjust, people would respond with a simple moral parable: but surely one has to pay one's debts! This set Graeber wondering. What is it about debt that we find so morally compelling? When a corrupt dictator borrows money and squanders it, and is then overthrown in a democratic revolution, why is the new democracy saddled with repayment of the dictator's bills? Why are these debts passed on to the grandchildren of the people who borrowed the money? Why is paying our debits a sacred duty? Graeber tried to answer this question by exploring the origins of debt, money, and markets. How did they arise, and how did they evolve into the institutions we know today? This takes him on a journey that touches Sumerian temple administration, the Biblical jubilee of debt forgiveness, African marriage practices, the slave trade, Chinese philosophy, Indian empires, Greek populist revolts, Roman taxation, and more. I loved the historical parts of the book, which as I said make up most of it.

Graeber begins by discussing a bit of nonsense from the economics textbooks. These tomes often explain the origin of money by fables like this:

One can imagine an old-style farmer bartering with the blacksmith, the tailor, the grocer, and the doctor in his small town. For simple barter to work, however, there must be a double coincidence of wants . . . . Henry has potatoes and wants shoes, Joshua has a extra pair of shoes and wants potatoes. Bartering can make them both happier. But if Henry has firewood Joshua does not need any of that, then bartering for Joshua's shoes requires one or both of them to go searching for more people in the hope of making a multilateral exchange. Money provides a way to make multilateral exchange much simpler. Henry sells his firewood to someone else for money and uses the money to buy Joshua's shoes.

These imaginary republics of barter fill the economics texts, starting with Adam Smith's, but actually they have never existed anywhere. What really happens in old-fashioned rural communities is that if Henry needs shoes from Joshua and has, at the moment, nothing Joshua wants, Joshua hands over the shoes and makes a note that Henry owes him. Eventually either Henry will have something Joshua wants, or a "multilateral exchange" will take place in which all the neighbors pass favors around until everyone is vaguely satisfied. How precisely these debts are calculated depends on the society. In 17th-century New England exchanged items were valued by the parties in imaginary pounds and pence (since real coins were vanishingly rare), and both parties would write the debt down in their account books (many of which survive), to be settled later. In other places the debt was kept intentionally vague, and it might even be described as a gift. In some societies the exchange would go like this:

Henry walks up to Joshua and says, "Nice shoes!"
Joshua says, "Oh, they're not much, but  since you seem to like them, by all means take them."
Henry takes the shoes.
Henry's potatoes are not at issue since both parties are perfectly well aware that if Joshua were ever short of potatoes, Henry would give him some.

Graeber puts a lot of emphasis on how wrong economists are about the origins of money because he wants to discredit their whole discipline. To him, economists misunderstand most of what happens in the world because they work from false models. Viz., those rational agents who go around calculating their self-interest. In the sorts of small communities in which people lived for most of our history, exchange took place within the context of long-term relationships. Everyone was in debt to everyone else, and nobody took this as a sign of profligacy or laziness. Graeber — like James Scott, another anthropologist and one of Graeber's personal friends — longs for that world of small communities where economic relations were subordinated to ties of kinship and neighborliness. Graeber wants to make it clear that although we often think of markets and money as natural parts of our world, they are not natural at all. They are human creations, traceable to particular historical epochs, recent compared to the ancient tradition of neighborly sharing and exchange.

Most of Debt is taken up with the question of how we got from that world to our own. Graeber's version of world history is full of violence, theft, rape, slavery, and other unpleasantries. It is a woeful tale, but then history really has been full of those things. Like most historians who have investigated the question, Graeber believes that markets in our sense were created by governments:

States created markets. Markets require states. Neither could continue without the other, at least in anything like the forms we would recognize today.

Rather than being opposites, as Republicans like to say, states and markets are related innovations, both equally opposed to the world of traditional rural communities. And like most historians, Graeber thinks that the rise of states was very much connected to warfare. Both states and markets, in his view, arose from violence. The first widespread taxation was actually the tribute conquered peoples paid to their conquerors. Some of the first open marketplaces we know about were places where pirates and raiders sold their wares. The most widely accepted theory about the origin of coins is that they were minted to pay mercenaries.

Looming over Graeber's whole narrative is the problem of debt. Early Sumerian texts already recognized the problem of poor people losing their freedom through debts to the rich. In Old Testament Israel the prophets decreed that there must be a jubilee every seven years, in which all debts were forgiven and and debt slaves freed. In the classical world these same issues boiled over again and again. Historian Moses Finley liked to say that all revolutions in the ancient world had the same program: cancel the debts and redistribute the land. In medieval India, those reduced to slavery by debt were the majority of the population. Even among the rich, debt was often a terrible problem. When aristocrats acted with shocking greed — for example, Cortez in Mexico — we often find that they were deeply in debt and facing ruinous default.

Here is where I had my most serious problem with Graeber's approach. It is certainly true that across civilization's first 4,000 years most of the people were oppressed peasants, and that debt was one of their problems. But I am not at all certain that it was the oppression that made their lives so hard. Graeber's world is missing the iron scissors of Malthus. Peasants were poor because there were too many of them for the land and their technology. No doubt taxes and rents hurt, but I don't think they were decisive. When I scan human history I see a relentless struggle for resources, with the losers constantly being pushed out of the gene pool. Politics matters a great deal in history, but so does biology.

As my readers know, I think the basic problem with contemporary politics is that while nobody much likes our regime of financial capitalism and wage labor, nobody knows what else to do. Graeber has tried to find some answers to our problems by undertaking a fundamental look at the origins of money and debt. I think he has succeeded on the intellectual level, by inviting us to think outside the bounds of our normal political discourse. It is salutary to be reminded that people have thought very differently about things like debt and money than we do, and that debt has long been one of the main tools the powerful use to oppress the weak. But on the level of practical politics I think he has failed. In fact Graeber is one of those annoying anarchists who refuse to say what sort of institutions we should have after the revolution. Even he understands that the neighborly economy of a rural village is no solution for our age, and he never says how modern people might act on the principles it embodied. I think the clearest political implication of Graeber's work is that we should return to more liberal bankruptcy laws, but then I supported that before.

So we end up where we usually end up: the world is full of cruelty, injustice, and oppression, a state that continues because some people benefit from it and the rest don't know how to change it. On the other hand the best thing about our world is how easy it is to learn millions of fascinating things, and Graeber has certainly made a great contribution to making the world more interesting.