Debt: The First 5,000 Years

by David Graeber

For Jaspers, the period begins with the Persian prophet Zoroaster, around 800 BC, and ends around 200 BC, to be followed by a Spiritual Age that centers on figures like Jesus and Mohammed. For my own purposes, I find it more useful to combine the two. Let us define the Axial Age, then, as running from 800 BC to 600 AD.3 This makes the Axial Age the period that saw the birth not only of all the world’s major philosophical tendencies, but also all of today’s major world religions: Zoroastrianism, Prophetic Judaism, Buddhism, Jainism, Hinduism, Confucianism, Taoism, Christianity, and Islam.4 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; in fact, they became the epicenters of Axial Age religious and philosophical creativity: the kingdoms and city-states around the Yellow River in China, the Ganges valley in northern India, and the shores of the Aegean Sea.

The world’s first coins appear to have been created within the kingdom of Lydia, in western Anatolia (now Turkey), sometime around 600 BC.5 These first Lydian coins were basically just round lumps of electrum—a gold-silver alloy that occurred naturally in the nearby Pactolus River—that had been heated, then hammered with some kind of insignia. The very first, stamped only with a few letters, appear to have been manufactured by ordinary jewelers, but these disappeared almost instantly, replaced by coins manufactured in a newly established royal mint. Greek cities on the Anatolian coast soon began to strike their own coins, and they came to be adopted in Greece itself; the same thing occurred in the Persian Empire after it absorbed Lydia in 547 BC.

The first Indian money, which seems to have appeared at some point in the sixth century, consisted of bars of silver trimmed down to uniform weights, then punch-marked with some kind of official symbol.6 Most of the examples discovered by archaeologists contain numerous additional counter-punches, presumably added much in the way that a check or other credit instrument is endorsed before being transferred. This strongly suggests that they were being handled by people used to dealing with more abstract credit instruments.7 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.

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.

For example, around 700 BC, northern India was still divided into Janapadas or “tribal territories,” some of them monarchies and some republics, and in the sixth century there were still at least sixteen major kingdoms. In China, this was the period where the old Zhou Empire first devolved into vying principalities (the “Spring and Autumn” period, 722–481 BC), then splintered into the chaos of the “Warring States” (475–221 BC). Like the Greek city-states, all of the resulting kingdoms, no matter how diminutive, aspired to issue their own official currency.

city-states, all of the resulting kingdoms, no matter how diminutive, aspired to issue their own official currency.

A typical Sumerian farmer may well have never had occasion to hold a substantial piece of silver in his hand, except perhaps at his wedding. 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. Somehow, during the Axial Age, all this began to change. 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. How? Israeli Classicist David Schaps provides the most plausible suggestion: most of it was stolen. This was a period of generalized warfare, and it is in the nature of war that precious things are plundered. Soldiers who plunder may indeed go first for the women, the alcoholic drinks, or the food, but they will also be looking around for things of value that are easily portable. A long-term standing army will tend to accumulate many things that are valuable and portable—and the most valuable and portable items are precious metals and precious stones. It may well have been the protracted wars among the states of these areas that first produced a large population of people with precious metal in their possession and a need for everyday necessities … Where there are people who want to buy there will be people ...

began to use coinage, for instance, was also the period when they developed their famous phalanx tactics, which required constant drill and training of the hoplite soldiers. 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. One could perhaps provide them all with livestock, but livestock are hard to transport; or with promissory notes, but these would be worthless in the mercenaries’ own country. Allowing each a tiny share of the plunder does seem an obvious solution.

Actually, one theory is that the very first Lydian coins were invented explicitly to pay mercenaries.11 This might help explain why the Greeks, who supplied most of the mercenaries, so quickly became accustomed to the use of coins, and why the use of coinage spread so quickly across the Hellenic world, so that by 480 BC there were at least one hundred mints operating in different Greek cities, even though at that time, none of the great trading nations of the Mediterranean had as yet showed the slightest interest in them. The Phoenicians, for example, were considered the consummate merchants and bankers of antiquity.12 They were also great inventors, having been the first to develop both the alphabet and the abacus. Yet for centuries after the invention of coinage, they preferred to continue conducting business as they always had, with unwrought ingots and promissory notes.13 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.’ ”14 On the other hand, 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, th...

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.21 However, an expeditionary force needed to be paid, and paid well: Alexander’s army, which numbered some 120,000 men, required half a ton of silver a day just for wages. For this reason, conquest meant that the existing Persian system of mines and mints had to be reorganized around providing for the invading army; and ancient mines, of course, were worked by slaves. In turn, most slaves in mines were war captives. Presumably most of the unfortunate survivors of the siege of Tyre ended up working in such mines. One can see how this process might feed upon itself.22 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. The result was to “release the accumulated specie of century onto the market in a matter of months,” something like 180,000 talents, or in contemporary terms, an estimated $2...

Rome is, again, similar to that of Athens. 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. Here, too, 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.25 The plebs practically had to force the senatorial class to take the imperial option. Still, they did, and over time the senate gradually legislated into being a welfare system that recycled at least a share of the spoils to soldiers, veterans, and their families. 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 ...

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. When expansion stopped, everything returned to as it had been before. Actually, it’s not clear that all forms of debt bondage were ever entirely eliminated even in cities like Athens and Rome. 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. Large populations, even in the Greek world, did, in fact, sink to the rank of serfs and clients.

The works of the early Christian fathers likewise resound with endless descriptions of the misery and desperation of those caught in rich lenders’ webs. In the end, through this means, that small window of freedom that had been created by the plebs was undone, and the free peasantry largely eliminated. 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.31 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.

The Bronze Age civilization of the Indus Valley collapsed sometime around 1600 BC; it would be about a thousand years before India saw the emergence of another urban civilization. When it did, that civilization was centered on the fertile plains that surrounded the Ganges farther east. Here too we observe, at first, a checkerboard of different sorts of government, from the famous “Ksatriya republics” with a populace in arms and urban democratic assemblies, to elective monarchies, to centralized empires like Kosala and Magadha.32 Both Gautama (the future Buddha) and Mahavira (the founder of Jainism) were born in one of these republics, though both ultimately found themselves teaching within the great empires, whose rulers often became patrons of wandering ascetics and philosophers. Both kingdoms and republics produced their own silver and copper coinage, but in some ways the republics were more traditional, since the self-governing “populace in arms” consisted of the traditional Ksatriya or warrior caste, who typically held their lands in common and had them worked by serfs or slaves.33 The kingdoms, on the other hand, were founded on a fundamentally new institution: a trained, professional army, open to young men of a wide variety of backgrounds, their equipment supplied by central authorities (soldiers were obliged to check their arms and armor when they entered cities), and provided with generous salaries. Whatever their origins, here too, coins and markets sprung up abo...

With their armies, spies, and administrators controlling everything, the new Indian kings evinced little interest in the old priestly caste and its Vedic ritual, though many kept up a lively interest in the new philosophical and religious ideas that seem to have been cropping up everywhere at the time. As time went on, however, the war machine began to sputter. It’s not clear exactly why this happened. By the time of emperor Aśoka (273–232 BC), the Mauryan dynasty controlled almost all of present-day India and Pakistan, but the Indian version of the military-coinage-slavery complex was showing definite signs of strain. Perhaps the clearest sign was the debasement of the coinage, which over the course of two centuries or so had gone from almost pure silver to about fifty percent copper.39 Aśoka, famously, began his reign in conquest: in 265 BC, destroying the Kalingas, one of the last remaining Indian republics, in a war in which hundreds of thousands of human beings were, according to his own account, killed or carried off into slavery. The king later claimed to have been so disturbed and haunted by the carnage that he renounced war altogether, embraced Buddhism, and declared that from that time on, his kingdom would be governed by principles of ahimsa, or nonviolence. “Here in my kingdom,” he declared in an edict inscribed on one of the great granite pillars in his capital of Patna, which so dazzled the Greek ambassador Megasthenes, “no living being must be killed or sacr...

Until about 475 BC, northern China was still nominally an empire, but the emperors had devolved into figureheads and a series of de facto kingdoms had emerged. The period from 475 to 221 BC is referred to as the “Warring States period”; at that point, even the pretense of unity was cast aside. Ultimately, the country was reunited by the state of Qin, who established a dynasty that was then immediately overthrown by a series of massive popular insurrections, ushering in the Han dynasty (206 BC-220 AD), founded by a previously obscure rural constable and peasant leader named Liu Bao, who was the first Chinese leader to adopt the Confucian ideology, exam system, and pattern of civil administration that were to continue for almost two thousand years.

China never minted gold or silver coins. Merchants used precious metals in the form of bullion, but the coins in actual circulation were basically small change: cast bronze disks, usually with a hole in the middle so that they could be strung together. Such strings of “cash” were produced in extraordinary numbers, and very large amounts had to be assembled for large-scale transactions: when wealthy men wished to make donations to temples, for instance, they had to use oxcarts to carry the money. The most plausible explanation is that, especially after unification, Chinese armies were enormous—some Warring States armies numbered up to a million—but not nearly as professional or well paid as those of kingdoms farther west, and from Qin and Han times on, rulers were careful to ensure that this remained the case, to make sure their armies never became an independent power base.

In China, while many of the founders of the “hundred schools” of philosophy that blossomed under the Warring States were wandering sages who spent their days moving from city to city trying to catch the ears of princes, others were leaders of social movements from the very start. Some of these movements didn’t even have leaders, like the School of the Tillers, an anarchist movement of peasant intellectuals who set out to create egalitarian communities in the cracks and fissures between states.50 The Mohists, egalitarian rationalists whose social base seems to have been urban artisans, not only were philosophically opposed to war and militarism, but organized battalions of military engineers who would actively discourage conflicts by volunteering to fight in any war against the side of the aggressor. Even the Confucians, for all the importance they attached to courtly ritual, were in their early days mainly known for their efforts in popular education.

The Axial Age was the first time in human history when familiarity with the written word was no longer limited to priests, administrators, and merchants, but had become necessary to full participation in civic life. In Athens, it was taken for granted that only a country bumpkin would be entirely illiterate. Without mass literacy, neither the emergence of mass intellectual movements nor the spread of Axial Age ideas would have been possible. By the end of the period, these ideas had produced a world where even the leaders of barbarian armies descending on the Roman empire felt obliged to take a position on the question of the Mystery of the Trinity, and where Chinese monks could spend time debating the relative merits of the eighteen schools of Classical Indian Buddhism.

The result, during the Axial Age, was a new way of thinking about human motivation, a radical simplification of motives that made it possible to begin speaking of concepts like “profit” and “advantage”—and imagining that this is what people are really pursuing, in every aspect of existence, as if the violence of war or the impersonality of the marketplace has simply allowed them to drop the pretense that they ever cared about anything else. It was this, in turn, that allowed human life to seem like it could be reduced to a matter of means-to-end calculation, and hence something that could be examined using the same means that one used to study the attraction and repulsion of celestial bodies.54 If the underlying assumption very much resembles those of contemporary economists, it’s no coincidence—but with the difference that, in an age when money, markets, states, and military affairs were all intrinsically connected, money was needed to pay armies to capture slaves to mine gold to produce money; when “cutthroat competition” often did involve the literal cutting of throats, it never occurred to anyone to imagine that selfish ends could be pursued by peaceful means. Certainly, this picture of humanity does begin to appear, with startling consistency, across Eurasia, wherever we also see coinage and philosophy appear.

The following story, which purports to tell the reaction of a merchant’s son named Lü Buwei on learning that an exiled prince was living nearby, illustrates the progression nicely: On returning home, he said to his father, “What is the profit on investment that one can expect from plowing fields?” “Ten times the investment,” replied his father. “And the return on investment in pearls and jades is how much?” “A hundredfold.” “And the return on investment from establishing a ruler and securing the state would be how much?” “It would be incalculable.”56 Lü adopted the prince’s cause and eventually contrived to make him King of Qin. He went on to became first minister for the king’s son, Qin Shi Huang, helping him defeat the other Warring States to became the first Emperor of China. We still have a compendium of political wisdom that Lü commissioned for the new emperor, which contains such military advice as the following: As a general principle, when an enemy’s army comes, it seeks some profit. Now if they come and find the prospect of death instead, they will consider running away the most profitable thing to do. When all one’s enemies consider running to be the most profitable thing to do, no blades will cross. This is the most essential point in military matters.

Mo Di, the founder of Mohism, took the first approach. He turned the concept of li, profit, into something more like “social utility,” and then he attempted to demonstrate that war itself is, by definition, an unprofitable activity. For example, he wrote, campaigns can only be fought in spring and autumn, and each had equally deleterious effects: If in the spring then the people miss their sowing and planting, if in the autumn, they miss their reaping and harvesting. Even if they miss only one season, then the number of people who will die of cold and hunger is incalculable. Now let us calculate the army’s equipment, the arrows, standards, tents, armor, shields, and sword hilts; the number of these which will break and perish and not come back … So also with oxen and horses …63 His conclusion: if one could add up the total costs of aggression in human lives, animal lives, and material damage, one would be forced to the conclusion that they never outweighed the benefits—even for the victor. In fact, Mo Di took this sort of logic so far that he ended up arguing that the only way to optimize the overall profit of humanity was to abandon the pursuit of private profit entirely and adopt a principle of what he called “universal love”—essentially arguing that if one takes the principle of market exchange to its logical conclusion, it can only lead to a kind of communism.

After the first coins were minted around 600 BC in the kingdom of Lydia, the practice quickly spread to Ionia, the Greek cities of the adjacent coast. The greatest of these was the great walled metropolis of Miletus, which also appears to have been the first Greek city to strike its own coins. It was Ionia, too, that provided the bulk of the Greek mercenaries active in the Mediterranean at the time, with Miletus their effective headquarters. Miletus was also the commercial center of the region and, perhaps, the first city in the world where everyday market transactions came to be carried out primarily in coins instead of credit.71 Greek philosophy, in turn, begins with three men: Thales, of Miletus (c. 624 BC–c. 546 BC), Anaximander, of Miletus (c. 610 BC–c. 546 BC), and Anaximenes, of Miletus (c. 585 BC–c. 525 BC)—in other words, men who were living in that city at exactly the time that coinage was first introduced.72 All three are remembered chiefly for their speculations on the nature of the physical substance from which the world ultimately sprang. Thales proposed water, Anaximenes, air. Anaximander made up a new term, apeiron, “the unlimited,” a kind of pure abstract substance that could not itself be perceived but was the material basis of everything that could be. In each case, the assumption was that this primal substance, by being heated, cooled, combined, divided, compressed, extended, or set in motion, gave rise to the endless particular stuffs and substances th...

It would be foolish to argue that all Axial Age philosophy was simply a meditation on the nature of coinage, but I think Seaford is right to argue that this is a critical starting place: one of the reasons that the pre-Socratic philosophers began to frame their questions in the peculiar way they did, asking (for instance): What are Ideas? Are they merely collective conventions? Do they exist, as Plato insisted, in some divine domain beyond material existence? Or do they exist in our minds? Or do our minds themselves ultimately partake of that divine immaterial domain? And if they do, what does this say about our relation to our bodies?

Let me summarize it as briefly as I can: 1) Markets appear to have first emerged, in the Near East at least, as a side effect of government administrative systems. Over time, however, the logic of the market became entangled in military affairs, where it became almost indistinguishable from the mercenary logic of Axial Age warfare, and then, finally, that logic came to conquer government itself, to define its very purpose. 2) As a result, everywhere we see the military-coinage-slavery complex emerge, we also see the birth of materialist philosophies. They are materialist, in fact, in both senses of the term: in that they envision a world made up of material forces, rather than divine powers, and in that they imagine the ultimate end of human existence to be the accumulation of material wealth, with ideals like morality and justice being reframed as tools designed to satisfy the masses.

We have already seen that reimagining moral responsibility in terms of debt—an impulse that cropped up in both Greece and India—while almost inevitable given the new economic circumstances, seems to prove uniformly unsatisfying.80 The stronger impulse is to imagine another world where debt—and with it, all other worldly connections—can be entirely annihilated, where social attachments are seen as forms of bondage, just as the body is a prison.

At first, most appear to have affected an attitude of bemused tolerance toward the new philosophical and religious movements while privately embracing some version of cynical realpolitik. But as warring cities and principalities were replaced by great empires and especially, as those empires began to reach the limits of their expansion, sending the military-coinage-slavery complex into crisis, all this changed. In India, Aśoka tried to re-found his kingdom on Buddhism; in Rome, Constantine turned to the Christians; in China, the Han emperor Wu-Ti (157–87 BC), faced with a similar military and financial crisis, adopted Confucianism as the philosophy of state. Of the three, only Wu Ti was ultimately successful: the Chinese empire endured, in one form or another, for two thousand years, almost always with Confucianism as its official ideology. In Constantine’s case the Western empire fell apart, but the Roman church endured. Aśoka’s project could be said to be the least successful. Not only did his empire fall apart, replaced by an endless series of weaker, usually fragmentary kingdoms, but Buddhism itself was largely driven out of his one-time territories, though it did establish itself much more firmly in China, Nepal, Tibet, Sri Lanka, Korea, Japan, and much of Southeast Asia.

Popular uprisings in the ancient world usually ended in the massacre of the rebels. 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. Where physical escape is not possible, what, exactly, is an oppressed peasant supposed to do? Sit and contemplate her misery? At the very least, otherworldly religions provided glimpses of radical alternatives. Often they allowed people to create other worlds within this one, liberated spaces of one sort or another. It is surely significant that the only people who succeeded in abolishing slavery in the ancient world were religious sects, such as the Essenes—who did so, effectively, by defecting from the larger social order and forming their own utopian communities.81 Or, in a smaller but more enduring example: the democratic city-states of northern India were all eventually stamped out by the great empires (Kautilya provides extensive advice on how to subvert and destroy democratic constitutions), but the Buddha admired the democratic organization of their public assemblies and adopted it as the model for his followers.82 Buddhist monasteries are still called sangha, the ancient name for such republics, and continue to operate by the same consensus-finding process to this day, preserving a certain egalitarian democratic ideal that would otherwise have been entirely forgotten.

True, the destruction of the Roman war machine also meant that Roman coins went out of circulation, and the few coins produced within the Gothic or Frankish kingdoms that established themselves over the ruins of the old empire were largely fiduciary in nature.1 Still, a glance at the “barbarian law codes” reveals that even at the height of the Dark Ages, people were still carefully keeping accounts in Roman money as they calculated interest rates, contracts, and mortgages. Again, cities shriveled, and many were abandoned, but even this was something of a mixed blessing. Certainly, it had a terrible effect on literacy; but one must also bear in mind that ancient cities could only be maintained by extracting resources from the countryside. Roman Gaul, for instance, had been a network of cities, connected by the famous Roman roads to an endless succession of slave plantations, which were owned by the urban grandees.2 After around 400 AD, the population of the towns declined radically, but the plantations also disappeared. In the following centuries, many came to be replaced by manors, churches, and even later, castles—where new local lords extracted their own dues from the surrounding farmers. But one need only do the math: since medieval agriculture was no less efficient than ancient agriculture (in fact, it rapidly became a great deal more so), the amount of work required to feed a handful of mounted warriors and clergymen could not possibly have been anything like that req...

The Mauryans represented a high watermark of empire. The next five hundred years saw a succession of kingdoms, most of them strongly supportive of Buddhism. Stupas and monasteries sprang up everywhere, but the states that sponsored them grew weaker and weaker; centralized armies dissolved; soldiers, like officials, increasingly came to be paid by land grants rather than salaries. As a result, the number of coins in circulation steadily declined.3 Here too, the early Middle Ages witnessed a dramatic decline of cities: where the Greek ambassador Megasthenes described Aśoka’s capital of Patna as the largest city in the world of his day, medieval Arab and Chinese travelers described India as a land of endless tiny villages.

When coins go out of circulation, after all, the metal doesn’t simply disappear. In the Middle Ages—and this seems to have been true across Eurasia—the vast majority of it ended up in religious establishments, churches, monasteries, and temples, either stockpiled in hoards and treasuries or gilded onto or cast into altars, sanctums, and sacred instruments. Above all, it was shaped into images of gods. As a result, those rulers who did try to put an Axial Age–style coinage system back into circulation—invariably, to fund some project of military expansion—often had to pursue self-consciously anti-religious policies in order to do so. Probably the most notorious was one Harsa, who ruled Kashmir from 1089 to 1101 AD, who is said to have appointed an officer called the “Superintendent for the Destruction of the Gods.” According to later histories, Harsa employed leprous monks to systematically desecrate divine images with urine and excrement, thus neutralizing their power, before dragging them off to be melted down.9 He is said to have destroyed more than four thousand Buddhist establishments before being betrayed and killed, the last of his dynasty—and his miserable fate was long held out as an example of where the revival of the old ways was likely to lead one in the end.

The Dharmaśāstra, law-codes produced by Brahmin scholars between roughly 200 BC and 400 AD, give us a good idea of the new vision of society. In it, old ideas like the Vedic conception of a debt to gods, sages, and ancestors were resuscitated—but now, they applied only and specifically to Brahmins, whose duty and privilege it was to stand in for all humanity before the forces that controlled the universe.11 Far from being required to attain learning, members of the inferior classes were forbidden to do so: the Laws of Manu, for instance, set down that any Sudra (the lowest caste, assigned to farming and material production) who so much as listened in on the teaching of the law or sacred texts should have molten lead poured into their ears; on the occasion of a repeat offense, they should have their tongues cut out.12 At the same, time Brahmins, however ferociously they guarded their privileges, also adopted aspects of once-radical Buddhist and Jain ideas like karma, reincarnation, and ahimsa. Brahmins were expected to refrain from any sort of physical violence, and even to become vegetarians. In alliance with representatives of the old warrior caste, they also managed to win title to most of the land in the ancient villages. Artisans and craftsmen fleeing the decline or destruction of cities often ended up as suppliant refugees and, gradually, low-caste clients. The result was increasingly complex local patronage systems in the countryside—jajmani systems, as they came to ...

The Laws of Manu carefully classify slaves into seven types depending on how they were reduced to slavery (war, debt, self-sale …) and explain the conditions under which each might be emancipated—but then go on to say that Sudras can never really be emancipated, since, after all, they were created to serve the other castes.14 Similarly, where earlier codes had established a 15-percent annual rate of interest, with exceptions for commercial loans,15 the new codes organized interest by caste: stating that one could charge a maximum of 2 percent a month for a Brahmin, 3 percent for a Ksatriya (warrior), 4 percent for a Vaisya (merchant), and 5 percent for a Sudra—which is the difference between 24 percent annually on the one extreme and a hefty 60 percent on the other.16 The laws also identify five different ways interest can be paid, of which the most significant for our concerns is “bodily interest”: physical labor in the creditor’s house or fields, to be rendered until such time as the principal is cleared. Even here, though, caste considerations were paramount. No one could be forced into the service of anyone of lower caste; moreover, since debts were enforceable on a debtor’s children and even grandchildren, “until the principal is cleared” could mean quite some time—as the Indian historian R.S. Sharma notes, such stipulations “remind us of the present practice according to which several generations of the same family have been reduced to the position of hereditary plou...

On the other hand, 1000 AD was about the same time that Islam appeared in India—a religion dedicated to eradicating usury altogether. So at the very least we can say that these things never stopped being contested. And even Hindu law of that time was far more humane than almost anything found in the ancient world. Debtors were not, generally speaking, reduced to slavery, and there is no widespread evidence of the selling of women or children. In fact, overt slavery had largely vanished from the countryside by this time. And debt peons were not even pawns, exactly; by law, they were simply paying interest on a freely contracted agreement. Paying the principle might take generations, but the law stipulated that even if it was never paid, in the third generation, they would be freed.

Politically, it is never a particularly good idea to first tell people they are your equals, and then humiliate and degrade them. This is presumably why peasant insurrections, from Chiapas to Japan, have so regularly aimed to wipe out debts, rather than focus on more structural issues like caste systems, or even slavery.20 The British Raj discovered this to their occasional chagrin when they used debt peonage—superimposed on the caste system—as the basis of their labor system in colonial India. Perhaps the paradigmatic popular insurrection was the Deccan riots of 1875, when indebted farmers rose up to seize and systematically destroy the account books of local money-lenders.

The two great threats to the authorities were always the same: the nomadic peoples to the north (who they systematically bribed, but who nonetheless periodically swept over and conquered sections of China) and popular unrest and rebellion. The latter was almost constant, and on a scale unknown anywhere else in human history. There were decades in Chinese history when the rate of recorded peasant uprisings was roughly 1.8 per hour.21 What’s more, such uprisings were frequently successful. Most of the most famous Chinese dynasties that were not the product of barbarian invasion (the Yuan or Qing) were originally peasant insurrections (the Han, Tang, Song, and Ming). In no other part of the world do we see anything like this. As a result, Chinese statecraft ultimately came down to funneling enough resources to the cities to feed the urban population and keep the nomads at bay, without causing a notoriously contumacious rural population to rise up in arms. The official Confucian ideology of patriarchal authority, equal opportunity, promotion of agriculture, light taxes, and careful government control of merchants seemed expressly designed to appeal to the interests and sensibilities of a (potentially rebellious) rural patriarch.

Over and over we hear the same familiar story: peasants down on their luck, whether due to natural disaster or the need to pay for a parent’s funeral—would fall into the hands of predatory lenders, who would seize their fields and houses, forcing them to work or pay rent in what had once been their own lands; the threat of rebellion would then drive the government to institute a dramatic program of reforms. One of the first we know about came in the form of a coup d’état in 9 AD, when a Confucian official named Wang Mang seized the throne to deal (so he claimed) with a nationwide debt crisis. According to proclamations made at the time, the practice of usury had caused the effective tax rate (that is, the amount of the average peasant’s harvest that ended up being carried off by someone else) to rise from just over 3 percent, to 50 percent.23 In reaction, Wang Mang instituted a program reforming the currency, nationalizing large estates, promoting state-run industries—including public granaries—and banning private holding of slaves. 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.24 “With this scheme,” one historian remarks, “Wang was confident that all business transactions would be under his scrutiny and the abuse of usury would ...

The Confucian state may have been the world’s greatest and most enduring bureaucracy, but it actively promoted markets, and as a result, commercial life in China soon became far more sophisticated, and markets more developed, than anywhere else in the world. This despite the fact that Confucian orthodoxy was overtly hostile to merchants and even the profit motive itself. Commercial profit was seen as legitimate only as compensation for the labor that merchants expended in transporting goods from one place to another, but never as fruits of speculation. What this meant in practice was that they were pro-market but anti-capitalist. Again, this seems bizarre, since we’re used to assuming that capitalism and markets are the same thing, but, as the great French historian Fernand Braudel pointed out, in many ways they could equally well be conceived as opposites. While markets are ways of exchanging goods through the medium of money—historically, ways for those with a surplus of grain to acquire candles and vice versa (in economic shorthand, C-M-C’, for commodity-money-other commodity)—capitalism for Braudel is first and foremost the art of using money to get more money (M-C-M’). Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easie...

this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so.27 From this perspective, China was for most of its history the ultimate anti-capitalist market state.

Buddhism had arrived in China through the Central Asia caravan routes and in its early days was largely a religion promoted by merchants, but in the chaos following the collapse of the Han dynasty in 220 AD, it began to take popular roots. The Liang (502–557) and Tang (618–907) dynasties saw outbreaks of passionate religious fervor, in which thousands of rural young people across China would renounce their farms, shops, and families to seek ordination as Buddhist monks and nuns; where merchants or landed magnates pledged their entire fortunes to the propagation of the Dharma; building projects hollowed out whole mountains to create bodhisattvas and giant statues of the Buddha; and pageants where monks and devotees ritually burned their heads and hands or, in some instances, set themselves on fire. By the mid–fifth century, there were dozens of such spectacular suicides; they became, as one historian put it, “a macabre kind of fashion.”

Before long there were major campaigns of government repression, at first often limited to certain regions, but over time, more often empire-wide. During the most severe, carried out in 845 AD, a total of 4,600 monasteries were razed along with their shops and mills, 260,000 monks and nuns forcibly defrocked and returned to their families—but at the same time, according to government reports, 150,000 temple serfs released from bondage. Whatever the real reasons behind the waves of repression (and these were no doubt many), the official reason was always the same: a need to restore the money supply. The monasteries were becoming so large, and so rich, administrators insisted, that China was simply running out of metal: The great repressions of Buddhism under the Chou emperor Wu between 574 and 577, under Wu-tsung in 842–845, and finally in 955, presented themselves primarily as measures of economic recovery: each of them provided an opportunity for the imperial government to procure the necessary copper for the minting of new coins.45 One reason is that monks appear to have been systematically melting down strings of coins, often hundreds of thousands at a time, to build colossal copper or even gilded copper statues of the Buddha—along with other objects such as bells and copper chimes, or even such extravagances as mirrored halls or gilded copper roof tiles. The result, according to official commissions of inquiry, was economically disastrous: the price of metals would soa...

By 806 AD, for instance, right around the apogee of Chinese Buddhism, merchants moving tea over long distances from the far south of the country and officials transporting tax payments to the capital, all of them concerned with the dangers of carrying bullion over long distances, began to deposit their money with bankers in the capital and devised a system of promissory notes. They were called “Flying Cash,” also divided in half, like tallies, and redeemable for cash in their branches in the provinces. They quickly started passing from hand to hand and operated something like currency. The government first tried to forbid their use, then a year or two later—and this became a familiar pattern in China—when it realized that it could not suppress them, switched gears and established a bureau empowered to issue such notes themselves.53 By the early Song dynasty (960–1279 AD), local banking operations all over China were running similar operations, accepting cash and bullion for safekeeping and allowing depositors to use their receipts as promissory notes, as well as trading in government coupons for salt and tea. Many of these notes came to circulate as de facto money.54 The government, as usual, first tried to ban the practice, then control it (granting a monopoly to sixteen leading merchants), then, finally, set up a government monopoly—the Bureau of Exchange Medium, established in 1023—and before long, aided by the newly invented printing press, was operating factories in s...

From a world-historical perspective, it seems much more sensible to see Judaism, Christianity, and Islam as three different manifestations of the same great Western intellectual tradition, which for most of human history has centered on Mesopotamia and the Levant, extending into Europe as far as Greece and into Africa as far as Egypt, and sometimes farther west across the Mediterranean or down the Nile. Economically, most of Europe was until perhaps the High Middle Ages in exactly the same situation as most of Africa: plugged into the larger world economy, if at all, largely as an exporter of slaves, raw materials, and the occasional exotica (amber, elephant tusks …), and importer of manufactured goods (Chinese silks and porcelain, Indian calicoes, Arab steel).

The Arab military leaders who, after Mohammed’s death in 632 AD, conquered the Sassanian empire and established the Abbasid Caliphate, always continued to see themselves as people of the desert, and never felt entirely part of the urban civilizations they had come to rule. This discomfort took a long time to overcome—on either side. It took the bulk of the population several centuries to convert to the conqueror’s religion, and even when they did, they never seem to have really identified with their rulers. Government was seen as military power—necessary, perhaps, to defend the faith, but fundamentally exterior to society. In part, too, it was because of the peculiar alliance between merchants and common folk that came to be aligned against them. After Caliph al-Ma’mum’s abortive attempt to set up a theocracy in 832 AD, the government took a hands-off position on questions of religion. The various schools of Islamic law were free to create their own educational institutions and maintain their own separate system of religious justice. Crucially, it was the ulema, the legal scholars, who were the principal agents in the conversion of the bulk of the empire’s population to Islam in Mesopotamia, Syria, Egypt, and North Africa in those same years.

Wars of expansion, and trade with Europe and Africa, did produce a fairly constant flow of slaves, but in dramatic contrast to the ancient world, very few of them ended up laboring in farms or workshops. Most ended up as decoration in the houses of the rich or, increasingly over time, as soldiers. Over the course of the Abbasid dynasty (750–1258 AD), in fact, the empire came to rely, for its military forces, almost exclusively on Mamluks, highly trained military slaves captured or purchased from the Turkish steppes. The policy of employing slaves as soldiers was maintained by all of the Islamic successor states, including the Mughals, and culminated in the famous Mamluk sultanate in Egypt in the thirteenth century, but historically, it was unprecedented.65 In most times and places, slaves are, for obvious reasons, the very last people to be allowed anywhere near weapons. Here it was systematic. But, in a strange way, it also made perfect sense: if slaves are, by definition, people who have been severed from society, this was the logical consequence of the wall created between society and the medieval Islamic state.

Islamic law took aim at just about all the most notorious abuses of earlier, Axial Age societies. Slavery through kidnapping, judicial punishment, debt, and the exposure or sale of children, even through the voluntary sale of one’s own person—all were forbidden, or rendered unenforceable.67 Likewise with all the other forms of debt peonage that had loomed over the heads of poor Middle Eastern farmers and their families since the dawn of recorded history. Finally, Islam strictly forbade usury, which it interpreted to mean any arrangement in which money or a commodity was lent at interest, for any purpose whatsoever.

Over the course of the Middle Ages, the Indian Ocean effectively became a Muslim lake. Muslim traders appear to have played a key role in establishing the principle that kings and their armies should keep their quarrels on dry land; the seas were to be a zone of peaceful commerce. At the same time, Islam gained a toehold in trade emporia from Aden to the Moluccas because Islamic courts were so perfectly suited to provide those functions that made such ports attractive: means of establishing contracts, recovering debts, creating a banking sector capable of redeeming or transferring letters of credit.77 The level of trust thereby created between merchants in the great Malay entrepôt Malacca, gateway to the spice islands of Indonesia, was legendary. The city had Swahili, Arab, Egyptian, Ethiopian, and Armenian quarters, as well as quarters for merchants from different regions of India, China, and Southeast Asia. Yet it was said that its merchants shunned enforceable contracts, preferring to seal transactions “with a handshake and a glance at heaven.”

One much-repeated story held that the Prophet himself had refused to force merchants to lower prices during a shortage in the city of Medina, on the grounds that doing so would be sacrilegious, since, in a free-market situation, “prices depend on the will of God.”82 Most legal scholars interpreted Mohammed’s decision to mean that any government interference in market mechanisms should be considered similarly sacrilegious, since markets were designed by God to regulate themselves.83 If all this bears a striking resemblance to Adam Smith’s “invisible hand” (which was also the hand of Divine Providence), it might not be a complete coincidence. In fact, many of the specific arguments and examples that Smith uses appear to trace back directly to economic tracts written in medieval Persia. For instance, not only does his argument that exchange is a natural outgrowth of human rationality and speech already appear both in both Ghazali (1058–1111 AD) and Tusi (1201–1274 AD); both use exactly the same illustration: that no one has ever observed two dogs exchanging bones.84 Even more dramatically, Smith’s most famous example of division of labor, the pin factory, where it takes eighteen separate operations to produce one pin, already appears in Ghazali’s Ihya, in which he describes a needle factory, where it takes twenty-five different operations to produce a needle.

All this is not to say that Tusi was in any sense a radical egalitarian. Quite the contrary. “If men were equal,” he insists, “they would all perish.” We need differences between rich and poor, he insisted, just as much as we need differences between farmers and carpenters. Still, once you start from the initial premise that markets are primarily about cooperation rather than competition—and while Muslim economic thinkers did recognize and accept the need for market competition, they never saw competition as its essence87—the moral implications are very different. Nasruddin’s story about the quail eggs might have been a joke, but Muslim ethicists did often enjoin merchants to drive a hard bargain with the rich so they could charge less, or pay more, when dealing with the less fortunate.

Much of our free-market doctrine, then, appears to have been originally borrowed piecemeal from a very different social and moral universe.93 The mercantile classes of the medieval Near West had pulled off an extraordinary feat. By abandoning the usurious practices that had made them so obnoxious to their neighbors for untold centuries before, they were able to become—alongside religious teachers—the effective leaders of their communities: communities that are still seen as organized, to a large extent, around the twin poles of mosque and bazaar.94 The spread of Islam allowed the market to become a global phenomenon, operating largely independent of governments, according to its own internal laws. But the very fact that this was, in a certain way, a genuine free market, not one created by the government and backed by its police and prisons—a world of handshake deals and paper promises backed only by the integrity of the signer—meant that it could never really become the world imagined by those who later adopted many of the same ideas and arguments: one of purely self-interested individuals vying for material advantage by any means at hand.

Europe, as I mentioned, came rather late to the Middle Ages and for most of it was something of a hinterland. Still, the period began much as it did elsewhere, with the disappearance of coinage. Money retreated into virtuality. Everyone continued to calculate costs in Roman currency, then, later, in Carolingian “imaginary money”—the purely conceptual system of pounds, shillings, and pence used across Western Europe to keep accounts well into the seventeenth century. Local mints did gradually come back into operation, producing coins in an endless variety of weight, purity, and denominations. How these related to the pan-European system, though, was a matter of manipulation. Kings regularly issued decrees revaluing their own coins in relation to the money of account, “crying up” the currency by, say, declaring that, henceforth, one of their ecus or escudos would no longer be worth 1/12 but now 1/8 of a shilling (thus effectively raising taxes) or “crying down” the value of their coins by doing the reverse (thus effectively reducing their debts).95 The real gold or silver content of coins was endlessly readjusted, and currencies were frequently called in for re-minting. Meanwhile, most everyday transactions dispensed with cash entirely, operating through tallies, tokens, ledgers, or transactions in kind. As a result, when the Scholastics came to address economic questions in the thirteenth century, they quickly adopted Aristotle’s position that money was a mere social conven...

Probably the most famous ancient homily on usury, though, was Saint Ambrose’s De Tobia, pronounced over several days in Milan in 380 BC. He reproduces the same vivid details as Basil: fathers forced to sell their children, debtors who hanged themselves out of shame. Usury, he observes, must be considered a form of violent robbery, even murder.102 Ambrose, though, added one small proviso that was later to have enormous influence. His sermon was the first to carefully examine every Biblical reference to moneylending, which meant that he had to address the one problem later authors always had to struggle with—the fact that, in the Old Testament, usury is not quite forbidden to everyone. The key sticking point is always Deuteronomy 23:19–20: Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury. Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury. So who then is this “stranger” or, a better translation of the Hebrew nokri, “foreigner”? Presumably, Ambrose concluded, one against whom robbery and murder would have been justified as well. After all, the ancient Jews lived amidst tribes like the Amalekites, on whom God had specifically instructed them to make war. If by extracting interest one is, as he puts it, fighting without a sword, then it is only legitimate to do so from those “whom it would not be a crime to kill.”103 For Ambrose, living in Milan, all this wa...

The Church opposed usury, but it had little to say about relations of feudal dependency, where the rich man provides charity and the poor suppliant shows his gratitude in other ways. Neither, when these kinds of arrangements began to emerge across the Christian West, did the Church offer any significant objections.108 Former debt peons were gradually transformed into serfs or vassals. In some ways, the relationship was not much different, since vassalage was, in theory, a voluntary, contractual relationship. Just as a Christian has to be able to freely choose to submit himself to “the Lord,” so did a vassal have to agree to make himself someone else’s man. All this proved perfectly consonant with Christianity.

In the years since Nehemiah, Jewish attitudes toward lending had themselves changed. In the time of Augustus, Rabbi Hillel had effectively rendered the sabbatical year a dead letter by allowing two parties to place a rider on any particular loan contract agreeing that it would not apply. While both the Torah and the Talmud stand opposed to loans on interest, exceptions were made in dealing with Gentiles—particularly as, over the course of the eleventh and twelfth centuries, European Jews were excluded from almost any other line of work.110 This in turn made it harder to contain the practice, as witnessed in the common joke, current in twelfth-century ghettos to justify usury between Jews. It consisted, it is said, of reciting Deuteronomy 23:20 in interrogative tones to make it mean the opposite of its obvious sense: “Unto a foreigner thou mayest lend upon usury, but unto thy brother thou shalt not lend upon usury?”111 On the Christian side, in 1140 AD the “Exception of Saint Ambrose” found its way into Gratian’s Decretum, which came to be considered the definitive collection of canon law. At the time, economic life fell very much under the jurisdiction of the Church. While that might appear to leave Jews safely outside the system, in reality, matters were more complicated. For one thing, while both Jews and Gentiles would occasionally attempt to make recourse to the Exception, the prevailing opinion was that it only really applied to Saracens or others with whom Christendo...