Debt: The First 5,000 Years

by David Graeber

the moment that the fear of imminent social revolution no longer seemed plausible, by the end of World War II, we were immediately presented with the specter of nuclear holocaust.116 Then, when that no longer seemed plausible, we discovered global warming. This is not to say that these threats were not, and are not, real. Yet it does seem strange that capitalism feels the constant need to imagine, or to actually manufacture, the means of its own imminent extinction. It’s in dramatic contrast to the behavior of the leaders of socialist regimes, from Cuba to Albania, who, when they came to power, immediately began acting as if their system would be around forever—ironically enough, considering they in fact turned out to be something of an historical blip.

There’s a reason why the wizard has such a strange capacity to create money out of nothing. Behind him, there’s a man with a gun.

Because of United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon’s floating of the dollar was that foreign central banks have little they can do with these dollars except to use them to buy U.S. treasury bonds.14 This is what is meant by the dollar becoming the world’s “reserve currency.” These bonds are, like all bonds, supposed to be loans that will eventually mature and be repaid, but as economist Michael Hudson, who first began observing the phenomenon in the early ’70s, noted, they never really do: To the extent that these Treasury IOUs are being built into the world’s monetary base they will not have to be repaid, but are to be rolled over indefinitely. This feature is the essence of America’s free financial ride, a tax imposed at the entire globe’s expense.

What’s more, Hudson notes, over time, the combined effect of low interest payments and the inflation is that these bonds actually depreciate in value—adding to the tax effect, or, as I preferred to put it in the first chapter, “tribute.” Economists prefer to call it “seigniorage.” The effect, though, is that American imperial power is based on a debt that will never—can never—be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

Certainly, when both Ronald Reagan in the United States and Margaret Thatcher in the UK launched a systematic attack on the power of labor unions, as well as on the legacy of Keynes, it was a way of explicitly declaring that all previous deals were off. Everyone could now have political rights—even, by the 1990s, most everyone in Latin America and Africa—but political rights were to become economically meaningless. The link between productivity and wages was chopped to bits: productivity rates have continued to rise, but wages have stagnated or even atrophied28

How did we get here? My own suspicion is that we are looking at the final effects of the militarization of American capitalism itself. In fact, it could well be said that the last thirty years have seen the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a giant machine designed, first and foremost, to destroy any sense of possible alternative futures. At its root is a veritable obsession on the part of the rulers of the world—in response to the upheavals of the 1960s and 1970s—with ensuring that social movements cannot be seen to grow, flourish, or propose alternatives; that those who challenge existing power arrangements can never, under any circumstances, be perceived to win.39 To do so requires creating a vast apparatus of armies, prisons, police, various forms of private security firms and military intelligence apparatus, and propaganda engines of every conceivable variety, most of which do not attack alternatives directly so much as create a pervasive climate of fear, jingoistic conformity, and simple despair that renders any thought of changing the world seem an idle fantasy. Maintaining this apparatus seems even more important to exponents of the “free market,” even than maintaining any sort of viable market economy.

The real history of markets is nothing like what we’re taught to think it is. The earlier markets that we are able to observe appear to be spillovers, more or less; side effects of the elaborate administrative systems of ancient Mesopotamia. They operated primarily on credit. Cash markets arose through war: again, largely through tax and tribute policies that were originally designed to provision soldiers, but that later became useful in all sorts of other ways besides. It was only the Middle Ages, with their return to credit systems, that saw the first manifestations of what might be called market populism: the idea that markets could exist beyond, against, and outside of states, as in those of the Muslim Indian Ocean—an idea that was later to reappear in China with the great silver revolts of the fifteenth century. It usually seems to arise in situations where merchants, for one reason or another, find themselves making common cause with common people against the administrative machinery of some great state. But market populism is always riddled with paradoxes, because it still does depend to some degree on the existence of that state, and above all, because it requires market relations to be founded, ultimately, in something other than sheer calculation: in the codes of honor, trust, and ultimately community and mutual aid, more typical of human economies.

anywhere, no questions asked. And it continues to be true. Any system that reduces the world to numbers can only be held in place by weapons, whether these are swords and clubs, or, nowadays, “smart bombs” from unmanned drones. It can also only operate by continually converting love into debt. I know my use of the word “love” here is even more provocative, in its own way, than “communism.” Still, it’s important to hammer the point home. Just as markets, when allowed to drift entirely free from their violent origins, invariably begin to grow into something different, into networks of honor, trust, and mutual connectedness, so does the maintenance of systems of coercion constantly do the opposite: turn the products of human cooperation, creativity, devotion, love, and trust back into numbers once again. In doing so, they make it possible to imagine a world that is nothing more than a series of cold-blooded calculations. Even more, by turning human sociality itself into debts, they transform the very foundations of our being—since what else are we, ultimately, except the sum of the relations we have with others—into matters of fault, sin, and crime, and make the world into a place of iniquity that can only be overcome by completing some great cosmic transaction that will annihilate everything.

For me, this is exactly what’s so pernicious about the morality of debt: the way that financial imperatives constantly try to reduce us all, despite ourselves, to the equivalent of pillagers, eyeing the world simply for what can be turned into money—and then tell us that it’s only those who are willing to see the world as pillagers who deserve access to the resources required to pursue anything in life other than money. It introduces moral perversions on almost every level. (“Cancel all student loan debt? But that would be unfair to all those people who struggled for years to pay back their student loans!” Let me assure the reader that, as someone who struggled for years to pay back his student loans and finally did so, this argument makes about as much sense as saying it would be “unfair” to a mugging victim not to mug their neighbors too.)

I would like, then, to end by putting in a good word for the non-industrious poor.45 At least they aren’t hurting anyone. Insofar as the time they are taking off from work is being spent with friends and family, enjoying and caring for those they love, they’re probably improving the world more than we acknowledge. Maybe we should think of them as pioneers of a new economic order that would not share our current one’s penchant for self-annihilation.

What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point, we can’t even say. It’s more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe.