Debt: The First 5,000 Years

by David Graeber

“thirty years of money flowing from the poorest countries to the richest was quite enough.”

Imf

in their Swiss bank accounts, and ask her to contemplate the justice of insisting that the lenders be repaid, not by the dictator, or even by his cronies, but by literally taking food from the mouths of hungry children.

policy designed in Washington or Zurich that their citizens had never agreed to and never would, and that it was a bit dishonest to insist that countries adopt democratic constitutions and then also insist that, whoever gets elected, they have no control over their country’s policies anyway. Or that the economic policies imposed by the IMF didn’t even work.

the statement “one has to pay one’s debts” is that even according to standard economic theory, it isn’t true. A lender is supposed to accept a certain degree of risk.

to impose heavy taxes on the Malagasy population, in part so they could reimburse the costs of having been invaded,

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.

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),

In a way you can see current world economic arrangements as a much larger version of the same thing: the U.S. in this case being the Cadillac debtor, Madagascar the pauper starving in the next cell—while the Cadillac debtor’s servants lecture him on how his problems are due to his own irresponsibility.

Looking over world literature, it is almost impossible to find a single sympathetic representation of a moneylender—or anyway, a professional moneylender, which means by definition one who charges interest.

Historically, there have been only two effective ways for a lender to try to wriggle out of the opprobrium: either shunt off responsibility onto some third party, or insist that the borrower is even worse. In medieval Europe, for instance, lords often took the first approach, employing Jews as surrogates.

this usually meant that they would first deny Jews in their territories any means of making a living except by usury (guaranteeing that they would be widely detested), then periodically turn on them, claiming they were detestable creatures, and take the money for themselves.

Other religious traditions have different perspectives. In medieval Hindu law codes, not only were interest-bearing loans permissible (the main stipulation was that interest should never exceed principal), but it was often emphasized that a debtor who did not pay would be reborn as a slave in the household of his creditor—or in later codes, reborn as his horse or ox.

Here we come to the central question of this book: What, precisely, does it mean to say that our sense of morality and justice is reduced to the language of a business deal? What does it mean when we reduce moral obligations to debts? What changes when the one turns into the other? And how do we speak about them when our language has been so shaped by the market?

money’s capacity to turn morality into a matter of impersonal arithmetic—and by doing so, to justify things that would otherwise seem outrageous or obscene.

The way violence, or the threat of violence, turns human relations into mathematics will crop up again and again over the course of this book.

The message was transparent: leave these things to the professionals. You couldn’t possibly get your minds around this.

Americans have been the population least sympathetic to debtors. In a way this is odd, since America was settled largely by absconding debtors, but it’s a country where the idea that morality is a matter of paying one’s debts runs deeper than almost any other.

In colonial days, an insolvent debtor’s ear was often nailed to a post. The United States was one of the last countries in the world to adopt a law of bankruptcy:

The difference between a debt and an obligation is that a debt can be precisely quantified. This requires money.

When economists speak of the origins of money, for example, debt is always something of an afterthought.

How does a barter system work? Suppose you want croissants, eggs and orange juice for breakfast. Instead of going to the grocer’s and buying these things with money, you would have to find someone who has these items and is willing to trade them.

A barter system requires a double coincidence of wants for trade to take place. That is, to effect a trade, I need not only have to find someone who has what I want, but that person must also want what I have.

Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village in Scotland where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker’s shop or the ale-house.12 Eventually, of course, at least for long-distance trade, it all boils down to precious metals, since these are ideally suited to serve as currency, being durable, portable, and able to be endlessly subdivided into identical portions.

The use of metals in this rude state was attended with two very considerable inconveniencies; first with the trouble of weighing; and, secondly, with that of assaying them. In the precious metals, where a small difference in the quantity makes a great difference in the value, even the business of weighing, with proper exactness, requires at least very accurate weights and scales. The weighing of gold in particular is an operation of some nicety

wouldn’t standardizing the units—say, stamping pieces of metal with uniform designations guaranteeing weight and fineness, in different denominations—make things easier still? Clearly it would, and so was coinage born. True, issuing coinage meant governments had to get involved, since they generally ran the mints;

unscrupulous kings have often cheated by debasing the coinage and causing inflation and other sorts of political havoc in what was originally a matter of simple economic common sense.

most people on earth couldn’t imagine any other way that money possibly could have come about.

Indians swapping venison for elk and beaver hides, and made no use of actual descriptions of Indian life that made it clear that Smith had simply made this up. Around that same time, missionaries, adventurers, and colonial administrators were fanning out across the world, many bringing copies of Smith’s book with them, expecting to find the land of barter.

Now, all this hardly means that barter does not exist—or even that it’s never practiced by the sort of people that Smith would refer to as “savages.”

What all such cases of trade through barter have in common is that they are meetings with strangers who will, likely as not, never meet again, and with whom one certainly will not enter into any ongoing relations. This is why a direct one-on-one exchange is appropriate: each side makes their trade and walks away.

True, barter does sometimes occur between people who do not consider each other strangers, but they’re usually people who might as well be strangers—that is, who feel no sense of mutual responsibility or trust, or the desire to develop ongoing relations. The Pukhtun of Northern Pakistan, for instance, are famous for their open-handed hospitality.

adal-badal (give and take). Men are always on the alert for the possibility of bartering one of their possessions for something better.

SCENARIO 1 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.

SCENARIO 2 Henry walks up to Joshua and says, “Nice shoes!” Or, perhaps—let’s make this a bit more realistic—Henry’s wife is chatting with Joshua’s and strategically lets slip that the state of Henry’s shoes is getting so bad he’s complaining about corns. The message is conveyed, and Joshua comes by the next day to offer his extra pair to Henry as a present, insisting that this is just a neighborly gesture. He would certainly never want anything in return. It doesn’t matter whether Joshua is sincere in saying this. By doing so, Joshua thereby registers a credit. Henry owes him one. How might Henry pay Joshua back? There are endless possibilities. Perhaps Joshua really does want potatoes. Henry waits a discrete interval and drops them off, insisting that this too is just a gift. Or Joshua doesn’t need potatoes now, but Henry waits until he does. Or maybe a year later, Joshua is planning a banquet, so he comes strolling by Henry’s barnyard and says, “Nice pig …”

In fact, there is good reason to believe that barter is not a particularly ancient phenomenon at all, but has only really become widespread in modern times. Certainly in most of the cases we know about, it takes place between people who are familiar with the use of money but, for one reason or another, don’t have a lot of it around. 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, when rubles in the first case, and dollars in the second, effectively disappeared.26 Occasionally one can even find some kind of currency

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. The Mesopotamian system is the best documented, more so than that of Pharaonic Egypt (which appears similar), Shang China (about which we know little), or the Indus Valley civilization (about which we know nothing at all). As it happens, we know a great deal about Mesopotamia, since the vast majority of cuneiform documents were financial in nature.

the Sumerians that we owe such things as the dozen, 60-minute hour, or the 24-hour day.

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.

In fact, our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage or paper money: historically, it has mainly been what people who are used to cash transactions do when for one reason or another they have no access to currency. The curious thing is that it never happened. This new history was never written. It’s not that any economist has ever refuted Mitchell-Innes. They just ignored him.

Even some economists have been forced to admit that Smith’s Land of Barter doesn’t really exist.1 The question is why the myth has been perpetuated anyway. Mainstream economists have been happy to jettison other elements of The Wealth of Nations—for instance, Smith’s labor theory of value and disapproval of joint-stock corporations.

Credit Theorists insisted that money is not a commodity but an accounting tool.

The obvious next question is: If money is a just a yardstick, what then does it measure? The answer was simple: debt. A coin is, effectively, an IOU. Whereas conventional wisdom holds that a banknote is, or should be, a promise to pay a certain amount of “real money” (gold, silver, whatever that might be taken to mean),

How could credit money come about? Let us return to the economics professors’ imaginary town. Say, for example, that Joshua were to give his shoes to Henry, and, rather than Henry owing him a favor, Henry promises him something of equivalent value.10 Henry gives Joshua an IOU.

In principle, there’s no reason that the IOU could not continue circulating around town for years—provided people continue to have faith in Henry. In fact, if it goes on long enough, people might forget about the issuer entirely.

Local merchants would often simply endorse them over to each other and pass them around as currency: once, he saw one of his own checks, written six months

In this sense, 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.

in 1901 was to impose a head tax. Not only was this tax quite high, it was also only payable in newly issued Malagasy francs. In other words, Gallieni did indeed print money and then demand that everyone in the country give some of that money back to him.

Whatever its earliest origins, for the last four thousand years money has been effectively a creature of the state. Individuals, he observed, make contracts with one another. They take out debts, and they promise payment.

The core argument is that any attempt to separate monetary policy from social policy is ultimately wrong. Primordial-debt theorists insist that these have always been the same thing. Governments use taxes to create money, and they are able to do so because they have become the guardians of the debt that all citizens have to one another. This debt is the essence of society itself. It exists long before money and markets, and money and markets themselves are simply ways of chopping pieces of it up.

use of cattle as money in eastern or southern Africa, of shell money in the Americas (wampum being the most famous example) or Papua New Guinea, bead money, feather money, the use of iron rings, cowries, spondylus shells, brass rods, or woodpecker scalps.