Debt: The First 5,000 Years

by David Graeber

during the ’70s oil crisis, OPEC countries ended up pouring so much of their newfound riches into Western banks that the banks couldn’t figure out where to invest the money; how Citibank and Chase therefore began sending agents around the world trying to convince Third World dictators and politicians to take out loans (at the time, this was called “go-go banking”); how they started out at extremely low rates of interest that almost immediately skyrocketed to 20 percent or so due to tight U.S. money policies in the early ’80s; how, during the ’80s and ’90s, this led to the Third World debt crisis; how the IMF then stepped in to insist that, in order to obtain refinancing, poor countries would be obliged to abandon price supports on basic foodstuffs, or even policies of keeping strategic food reserves, and abandon free health care and free education; how all of this had led to the collapse of all the most basic supports for some of the poorest and most vulnerable people on earth.

these loans had originally been taken out by unelected dictators who placed most of it directly in their Swiss bank accounts,

In 1895, for example, France invaded Madagascar, disbanded the government of then–Queen Ranavalona III, and declared the country a French colony. One of the first things General Gallieni did after “pacification,” as they liked to call it then, was to impose heavy taxes on the Malagasy population, in part so they could reimburse the costs of having been invaded, but also, since French colonies were supposed to be fiscally self-supporting, to defray the costs of building the railroads, highways, bridges, plantations, and so forth that the French regime wished to build. Malagasy taxpayers were never asked whether they wanted these railroads, highways, bridges, and plantations, or allowed much input into where and how they were built.1 To the contrary: over the next half century, the French army and police slaughtered quite a number of Malagasy who objected too strongly to the arrangement (a hundred thousand, by some reports, during one revolt in 1947). It’s not as if Madagascar has ever done any comparable damage to France. Despite this, from the beginning, the Malagasy people were told they owed France money, and to this day, the Malagasy people are still held to owe France money, and the rest of the world accepts the justice of this arrangement.

The most spectacular example of this is the history of the Republic of Haiti—the first poor country to be placed in permanent debt peonage. Haiti was a nation founded by former plantation slaves who had the temerity not only to rise up in rebellion, amidst grand declarations of universal rights and freedoms, but to defeat Napoleon’s armies sent to return them to bondage. France immediately insisted that the new republic owed it 150 million francs in damages for the expropriated plantations, as well as the expenses of outfitting the failed military expeditions, and all other nations, including the United States, agreed to impose an embargo on the country until it was paid. The sum was intentionally impossible (equivalent to about 18 billion dollars), and the resultant embargo ensured that the name “Haiti” has been a synonym for debt, poverty, and human misery ever since.

The definitive anthropological work on barter, by Caroline Humphrey, of Cambridge, could not be more definitive in its conclusions: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money;

the English words “truck and barter,” like their equivalents in French, Spanish, German, Dutch, and Portuguese, literally meant “to trick, bamboozle, or rip off.”23 Swapping one thing directly for another while trying to get the best deal one can out of the transaction is, ordinarily, how one deals with people one doesn’t care about and doesn’t expect to see again.

Elaborate barter systems often crop up in the wake of the collapse of national economies: most recently in Russia in the ’90s and in Argentina around 2002,

But the most shocking blow to the conventional version of economic history came with the translation, first of Egyptian hieroglyphics, and then of Mesopotamian cuneiform, which pushed back scholars’ knowledge of written history almost three millennia, from the time of Homer (circa 800 BC), where it had hovered in Smith’s time, to roughly 3500 BC. What these texts revealed was that credit systems of exactly this sort actually preceded the invention of coinage by thousands of years.

For one thing, silver did not circulate very much. Most of it just sat around in Temple and Palace treasuries, some of which remained, carefully guarded, in the same place for literally thousands of years.

One of the popular fallacies in connection with commerce is that in modern days a money-saving device has been introduced called credit and that, before this device was known, all purchases were paid for in cash, in other words in coins. A careful investigation shows that the precise reverse is true.

the Myth of Barter cannot go away because it is central to the entire discourse of economics.

history shows that without money, such vast barter systems do not occur. Even when economies “revert to barter,” as Europe was said to do in the Middle Ages, they don’t actually abandon the use of money. They just abandon the use of cash. In the Middle Ages, for instance, everyone continued to assess the value of tools and livestock in the old Roman currency, even if the coins themselves had ceased to circulate.

It’s also clear that the mere existence of money, in itself, is not enough to allow us see the world this way. If it were, the discipline of economics would have been created in ancient Sumer, or anyway, far earlier than 1776, when Adam Smith’s The Wealth of Nations appeared.

Credit Theorists insisted that money is not a commodity but an accounting tool. In other words, it is not a “thing” at all.

The obvious next question is: If money is a just a yardstick, what then does it measure? The answer was simple: debt.

the value of a unit of currency is not the measure of the value of an object, but the measure of one’s trust in other human beings.

The surest way to know that one is in the presence of communistic relations is that not only are no accounts taken, but it would be considered offensive, or simply bizarre, to even consider doing so.

It’s understandable that dealings with potentially hostile strangers should encourage an all-or-nothing logic, a tension preserved even in English in the etymology of the words “host,” “hostile,” “hostage,” and indeed “hospitality,” all of which are derived from the same Latin root.

Medieval Sufi mystic Nasruddin Hodja

Giving gifts to kings is often a particularly tricky and complicated business.

The fourteenth-century Arab traveler Ibn Battuta

We are all communists with our closest friends, and feudal lords when dealing with small children.

It seems to me that this agreement between equals to no longer be equal (at least for a time) is critically important. It is the very essence of what we call “debt.”

The habit of always saying “please” and “thank you” first began to take hold during the commercial revolution of the sixteenth and seventeenth centuries—among those very middle classes who were largely responsible for it.

How is this calculability effectuated? How does it become possible to treat people as if they are identical? The Lele example gave us a hint: to make a human being an object of exchange, one woman equivalent to another, for example, requires first of all ripping her from her context; that is, tearing her away from that web of relations that makes her the unique conflux of relations that she is, and thus, into a generic value capable of being added and subtracted and used as a means to measure debt. This requires a certain violence.

I should be clear here. I am not using the word “violence” metaphorically. I am not speaking merely of conceptual violence, but of the literal threat of broken bones and bruised flesh;

men who live by violence, whether soldiers or gangsters, are almost invariably obsessed with honor, and assaults on honor are considered the most obvious justification for acts of violence.

Equiano’s further adventures—and there were many—are narrated in his autobiography, The Interesting Narrative of the Life of Olaudah Equiano: or, Gustavus Vassa, the African, published in 1789.

Throughout history, moral justifications for slavery are rarely taken particularly seriously even by those who espouse them. Instead, most people saw slavery much as we see war: a tawdry business, to be sure, but one would have to be naïve indeed to imagine it could simply be eliminated.

So what is slavery? I’ve already begun to suggest an answer in the last chapter. Slavery is the ultimate form of being ripped from one’s context, and thus from all the social relationships that make one a human being. Another way to put this is that the slave is, in a very real sense, dead.

What’s unusual about the Irish material is that it’s all spelled out so clearly. This is partly because Irish law codes were the work of a class of legal specialists who seem to have turned the whole business almost into a form of entertainment, devoting endless hours to coming up with every possible ramification of existing legal principles, whether or not there was any real possibility such a case might end up in court. Some of the provisos are so whimsical (“if stung by another man’s bee, one must calculate the extent of the injury, but also, if one swatted it in the process, subtract the replacement value of the bee”) that one has to assume they were basically jokes.

For us, the notion that the sanctity of a priest or the majesty of a king could be held equivalent to a million fried eggs or a hundred thousand haircuts is simply bizarre. These are precisely the things that ought to be considered beyond all possibility of quantification. If Medieval Irish jurists felt otherwise, it was because people at that time did not use money to acquire eggs or haircuts.28 It was the fact that it was still a human economy, in which money was used for social purposes, that made it possible to create such an intricate system whereby it was possible not just to measure but to add and subtract specific quantities of human dignity—and in doing so, provide us with a unique window into the true nature of honor itself.

The most famous expression of this identification of prostitute and civilization can be found in the story of Enkidu in the epic of Gilgamesh.

The Assyrian habit of veiling was not widely adopted in the Middle East, but it was adopted in Greece. As much as it flies in the face of our stereotypes about the origins of “Western” freedoms, women in democratic Athens, unlike those of Persia or Syria, were expected to wear veils when they ventured out in public.

It seems hardly coincidental that the quarrel between Agamemnon and Achilles that sets off the action of the Iliad, generally considered to be the first great work of Western literature, is a dispute over honor between two heroic warriors on the occasion of the disposition of a slave girl.

the Roman emperor Valerian (253–260 AD), defeated at the Battle of Edessa, was captured and spent the last years of his life as the footstool that the Sassanian emperor Shapur I used to mount his horse. Such were the perils of war.

A warrior’s honor is his willingness to play a game on which he stakes everything. His grandeur is directly proportional to how far he can fall.

He recognized Plato and ransomed him. Plato felt honor-bound to try to repay him, and his Athenian friends assembled twenty minas in silver with which to do so, but Annikeris refused to accept the money, insisting that it was his honor to be able to benefit a fellow lover of wisdom.89 As indeed it was: Annikeris has been remembered, and celebrated, for his generosity ever since. Plato went on to use the twenty minas to buy land for a school, the famous Academy.

German legal theorist Rudolf von Jhering famously remarked that ancient Rome had conquered the world three times: the first time through its armies, the second through its religion, the third through its laws.91 He might have added: each time more thoroughly. The Empire, after all, only spanned a tiny portion of the globe; the Roman Catholic Church has spread farther; Roman law has come to provide the language and conceptual underpinnings of legal and constitutional orders everywhere.

A fixed interest rate would render irrelevant whatever elaborate tales of robbery, shipwreck, or attacks by winged snakes or elephants a creative trader might have concocted. The return was fixed in advance. This connection between borrowing and lying, incidentally, is an important one to history.

The king ultimately had his war and won it, and two years later, fresh off his victory, he was forced to publish another edict: this one a general debt cancellation within his kingdom. As he later boasted, “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.

figures like Pythagoras (570–495 BC), the Buddha (563–483 BC), and Confucius (551–479 BC) were all contemporaries, and that Greece, India, and China, in that period, all saw a sudden efflorescence of debate between contending intellectual schools, each group apparently unaware of the others’ existence.

Each case witnessed the development of something akin to a drop-out culture, with ascetics and sages fleeing to the wilderness or wandering from town to town seeking wisdom; in each, too, they were eventually reabsorbed into the political order as a new kind of intellectual or spiritual elite, whether as Greek sophists, Jewish prophets, Chinese sages, or Indian holy men.

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. What’s more, the three parts of the world where coins were first invented were also the very parts of the world where those sages lived;

For Seaford, what was genuinely new about coins was their double-sidedness: the fact that they were both valuable pieces of metal and, at the same time, something more. At least within the communities that created them, ancient coins were always worth more than the gold, silver, or copper of which they were composed. Seaford refers to this extra value by the inelegant term “fiduciarity,” which comes from the term for public trust, the confidence a community places in its currency.

This is the key to Seaford’s argument about materialism and Greek philosophy. A coin was a piece of metal, but by giving it a particular shape, stamped with words and images, the civic community agreed to make it something more.

As I’ve already observed, physical escape, such as via exodus or defection, has always been the most effective response to oppressive conditions since the earliest times we know about.

Wang Mang also established a state loan agency that would offer interest-free funeral loans for up to ninety days for those caught unprepared by the death of relatives, as well as long-term loans of 3 percent monthly or 10 percent annual income rates for commercial or agricultural investments.

In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be driven largely by a love of violence. As individuals, they were not good people, but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good.29 Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world—even England only really overtook it in perhaps the 1820s, well past the time of the Industrial Revolution.

from the beginning, Islam had a positive view toward commerce. Mohammed himself had begun his adult life as a merchant, and no Islamic thinker ever treated the honest pursuit of profit as itself intrinsically immoral or inimical to faith.