Debt: The First 5,000 Years

by David Graeber

while credit systems tend to dominate in periods of relative social peace, or across networks of trust (whether created by states or, in most periods, transnational institutions like merchant guilds or communities of faith), in periods characterized by widespread war and plunder, they tend to be replaced by precious metal.

In the great temple and palace complexes, not only did money serve largely as an accounting measure rather than physically changing hands, merchants and tradespeople developed credit arrangements of their own.

In some times or places, at least, these bullae appear to have become what we would now call negotiable instruments, since the tablet inside did not simply record a promise to pay the original lender, but was designated “to the bearer”—in other words, a tablet recording a debt of five shekels of silver (at prevailing rates of interest) could circulate as the equivalent of a five-shekel promissory note—that is, as money.

We don’t know how often this happened, how many hands such tablets would typically pass through, how many transactions were based on credit, how often merchants actually did weigh out silver in rough chunks to buy and sell their merchandise, or when they were most likely to do so.

We know even less about the marketplaces frequented by ordinary Mesopotamians, except that tavern-keepers operated on credit, and hawkers and operators of market stalls probably did as well.

The terminology for interest in most ancient languages is derived from some word for “offspring,” causing some to speculate that it originates in loans of livestock, but this seems a bit literal-minded.

The practice is significant because it implies a fundamental lack of trust. After all, why not simply demand a share in the profits?

Efficiency? Risk?

Palace or temple bureaucrats and world-roaming merchant adventurers had little in common, and the bureaucrats seem to have concluded that one could not normally expect a merchant adventurer returned from a far-off land to be entirely honest about his adventures.

In 2402 BC, for instance, a royal inscription by King Enmetena of Lagash—one of the earliest we have—complains that his enemy, the King of Umma, had been, for decades, occupying a huge stretch of farmland that had rightfully belonged to Lagash. He announces: if one were to calculate the rental fees for all that land, then the interest that would have been due on that rent, compounded annually, it would reveal that Umma now owes Lagash four and a half trillion liters of barley. The sum was, as in the parable, intentionally preposterous.12 It was just an excuse to start a war. Still, he wanted everyone to know that he knew exactly how to do the math.

“He instituted freedom (amargi) in Lagash. He restored the child to its mother, and the mother to her child; he canceled all interest due.”13 This was, in fact, the very first such declaration we have on record—and the first time in history that the word “freedom” appears in a political document.

Similar declarations are to be found again and again, in Sumerian and later Babylonian and Assyrian records, and always with the same theme: the restoration of “justice and equity,” the protection of widows and orphans, to ensure—as Hammurabi was to put it when he abolished debts in Babylon in 1761 BC—“that the strong might not oppress the weak.”

Over the next several thousand years, this same list—canceling the debts, destroying the records, reallocating the land—was to become the standard list of demands of peasant revolutionaries everywhere.

Egypt was, like Mesopotamia, extraordinarily rich by ancient standards, but it was also a self-contained society, a river running through a desert, and far more centralized than Mesopotamia.

Ehhhh

To state the matter simply: in Mesopotamia, interest-bearing loans by palace and temple officials largely substituted for the lack of a comprehensive system of taxation. In Egypt this was not necessary.

Also Egypt had less access to precious metals.

Greek sources, for instance, record that the Pharaoh Bakenranef (reigned 720–715 BC) issued a decree abolishing debt bondage and annulling all outstanding liabilities, since “he felt it would be absurd for a soldier, perhaps at the moment when he was setting forth to fight for his fatherland, to be hauled off to prison by his creditor for an unpaid loan”—which, if true, is also one of the earliest mentions of a debt prison.

In most places, long strings of cowrie shells figure prominently, but even here, though we often hear of “the cowrie money of early China,” and it’s easy enough to find texts in which the value of sumptuous gifts are measured in cowries, it’s never clear whether people were really carrying them around to buy and sell things in the marketplace.

The Guanzi, a collection that in early imperial China became the standard primer on political economy, notes, “There were people who lacked even gruel to eat, and who were forced to sell their children. To rescue these people, Tang coined money.”

in that period, all saw a sudden efflorescence of debate between contending intellectual schools, each group apparently unaware of the others’ existence. Like the simultaneous invention of coinage, why this happened had always been a puzzle.

For most of the great urban civilizations of the time, the early Iron Age was a kind of pause between empires, a time when political landscapes were broken into a checkerboard of often diminutive kingdoms and city-states, most often at constant war externally and locked in constant political debate within.

He observed that all these great regions of the world, China, India, and the Mediterranean, witnessed the emergence of almost exactly the same collection of philosophical tendencies, from skepticism to idealism—in fact, that philosophers in each managed to simultaneously develop all the major positions on the nature of cosmos, mind, action, and the ends of human existence that have remained the stuff of philosophical debate ever since.

The attentive reader may have noticed that the core period of Jasper’s Axial age—the lifetimes of Pythagoras, Confucius, and the Buddha—corresponds almost exactly to the period in which coinage was invented.

In both India and China, we can observe the same pattern: invented by private citizens, coinage was quickly monopolized by the state.

Much early Chinese coinage also shows signs of having evolved directly from social currencies: some were in fact cast bronze in the shape of cowries, though others took the shape of diminutive knives, disks, or spades.

Most precious metals took the form of wealthy women’s anklets and heirloom chalices presented by kings to their retainers, or it was simply stockpiled in temples, in ingot form, as sureties for loans.

Large amounts of silver, gold, and copper were dethesaurized, as the economic historians like to say; it was removed from the temples and houses of the rich and placed in the hands of ordinary people, was broken into tinier pieces, and began to be used in everyday transactions.

This was a period of generalized warfare, and it is in the nature of war that precious things are plundered.

what the Axial Age also saw—again, equally in China, India, and the Aegean—was the rise of a new kind of army, made up not of aristocratic warriors and their retainers, but trained professionals.

The results were so extraordinarily effective that Greek mercenaries were soon being sought after from Egypt to Crimea. But unlike the Homeric retainers, who could simply be ignored, an army of trained mercenaries needs to be rewarded in some meaningful way.

These new armies were, directly or indirectly, under the control of governments, and it took governments to turn these chunks of metal into genuine currency.

to create enough coins that the people could begin to use them in everyday transactions required mass production on a scale far beyond the abilities of local merchants or smiths.

Actually, one theory is that the very first Lydian coins were invented explicitly to pay mercenaries.

Phoenician cities struck no coins until 365 BC, and while Carthage, the great Phoenician colony in North Africa that came to dominate commerce in the Western Mediterranean, did so a bit earlier, it was only when “forced to do so to pay Sicilian mercenaries; and its issues were marked in Punic, ‘for the people of the camp.’ ”

in the extraordinary violence of the Axial Age, being a “great trading nation” (rather than, say, an aggressive military power like Persia, Athens, or Rome) was not, ultimately, a winning proposition. The fate of the Phoenician cities is instructive. Sidon, the wealthiest, was destroyed by the Persian emperor Artaxerxes III after a revolt in 351 BC. Forty thousand of its inhabitants are said to have committed mass suicide rather than surrender. Nineteen years later, Tyre was destroyed after a prolonged siege by Alexander: ten thousand died in battle, and the thirty thousand survivors were sold into slavery.

Coinage played a critical role in maintaining this kind of free peasantry—secure in their landholding, not tied to any great lord by bonds of debt. In fact, the fiscal policies of many Greek cities amounted to little more than elaborate systems for the distribution of loot.

Many of the political crises in ancient Greek cities similarly turned on the distribution of the spoils.

It was slavery, though, that made all this possible. As the figures concerning Sidon, Tyre, and Carthage suggest, enormous numbers of people were being enslaved in many of these conflicts, and, of course, many slaves ended up working in the mines, producing even more gold, silver, and copper. (The mines in Laurium reportedly employed ten to twenty thousand of them.)

"Employed"

When Alexander set out to conquer the Persian Empire, he borrowed much of the money with which to pay and provision his troops, and he minted his first coins, used to pay his creditors and continue to support the money, by melting down gold and silver plundered after his initial victories.

Alexander’s army, which numbered some 120,000 men, required half a ton of silver a day just for wages.

Alexander was also the man responsible for destroying what remained of the ancient credit systems, since not only the Phoenicians but also the old Mesopotamian heartland had resisted the new coin economy. His armies not only destroyed Tyre; they also dethesaurized the gold and silver reserves of Babylonian and Persian temples, the security on which their credit systems were based, and insisted that all taxes to his new government be paid in his own money.

Its early history, as recorded by official chroniclers like Livy, is one of continual struggles between patricians and plebians, and of continual crises over debt. Periodically, these would lead to what were called moments of “the secession of the plebs,” when the commoners of the city abandoned their fields and workshops, camped outside the city, and threatened mass defection—an interesting halfway point between the popular revolts of Greece and the strategy of exodus typically pursued in Egypt and Mesopotamia.

the patricians were ultimately faced with a decision: they could use agricultural loans to gradually turn the plebian population into a class of bonded laborers on their estates, or they could accede to popular demands for debt protection, preserve a free peasantry, and employ the younger sons of free farm families as soldiers.24 As the prolonged history of crises, secessions, and reforms makes clear, the choice was made grudgingly.

It seems significant, in this light, that the traditional date of the first Roman coinage—338 BC—is almost exactly the date when debt bondage was finally outlawed (326 BC).26 Again, coinage, minted from war spoils, didn’t cause the crisis. It was used as a solution.

In fact, the entire Roman empire, at its height, could be understood as a vast machine for the extraction of precious metals and their coining and distribution to the military—combined with taxation policies designed to encourage conquered populations to adopt coins in their everyday transactions.

Ignoring slavery again.

In Greece, as in Rome, attempts to solve the debt crisis through military expansion were always, ultimately, just ways of fending off the problem—and they only worked for a limited period of time.

In cities that were not successful military powers, without any source of income to set up welfare policies, debt crises continued to flare up every century or so—and they often became far more acute than they ever had in the Middle East, because there was no mechanism, short of outright revolution, to declare a Mesopotamian-style clean slate.

much of the debt was owed by members of the senatorial class to each other: in a way, this was just the usual communism of the rich, extending easy credit to one another on terms that they would never think to offer others.

under the late Republic, history records many intrigues and conspiracies hatched by desperate debtors, often aristocrats driven by relentless creditors to make common cause with the poor.

The works of the early Christian fathers likewise resound with endless descriptions of the misery and desperation of those caught in rich lenders’ webs.

By the waning days of the empire, most people in the countryside who weren’t outright slaves had become, effectively, debt peons to some rich landlord, a situation in the end legally formalized by imperial decrees binding peasants to the land.

Not that the peasants gave a shit or paid attention.

Without a free peasantry to form the basis for the army, the state was forced to rely more and more on arming and employing Germanic barbarians from across the imperial frontiers—with results that need hardly be recalled here.

Again, iffy history.