Debt: The First 5,000 Years

by David Graeber

Socrates responds by pointing out that Thrasymachos is confusing the art of tending sheep with the art of profiting from them. The art of medicine aims to improve health, whether or not doctors get paid for practicing it. The art of shepherding aims to ensure the well-being of sheep, whether or not the shepherd (or his employer) is also a businessman who knows how to extract a profit from them. Just so with the art of governance. If such an art exists, it must have its own intrinsic aim apart from any profit one might also get from it, and what can this be other than the establishment of social justice? It’s only the existence of money, Socrates suggests, that allows us to imagine that words like “power” and “interest” refer to universal realities that can be pursued in their own right, let alone that all pursuits are really ultimately the pursuit of power, advantage, or self-interest.87 The question, he said, is how to ensure that those who hold political office will do so not for gain, but rather for honor.

Plato presents us first with the simple, literal businessman’s view. When this proves inadequate, he allows it to be reframed in heroic terms. Perhaps all debts are really debts of honor after all.88 But heroic honor no longer works in a world where (as Apollodorus sadly discovered) commerce, class, and profit have so confused everything that people’s true motives are never clear. How do we even know who our enemies are? Finally, Plato presents us with cynical realpolitik. Maybe nobody really owes anything to anybody. Maybe those who pursue profit for its own sake have it right after all. But even that does not hold up. We are left with a certainty that existing standards are incoherent and self-contradictory, and that some sort of radical break would be required in order to create a world that makes any logical sense. But most of those who seriously consider a radical break along the lines that Plato suggested have come to the conclusion that there might be far worse things than moral incoherence. And there we have stood, ever since, in the midst of an insoluble dilemma.

Jhering claimed this was possible because the Romans were the first to turn jurisprudence into a genuine science.

Roman law does insist that the basic form of property is private property, and that private property is the owner’s absolute power to do anything he wants with his possessions. Twelfth-century Medieval jurists came to refine this into three principles, usus (use of the thing), fructus (fruits, i.e., enjoyment of the products of the thing), and abusus (abuse or destruction of the thing),

As for dominium, the word is derived from dominus, meaning “master” or “slave-owner,” but ultimately from domus, meaning “house” or “household.” It’s of course related to the English term “domestic,” which even now can be used either to mean “pertaining to private life,” or to refer to a servant who cleans the house. Domus overlaps somewhat in meaning with familia, “family”—but, as proponents of “family values” might be interested to know, familia itself ultimately derives from the word famulus, meaning “slave.” A family was originally all those people under the domestic authority of a paterfamilias, and that authority was, in early Roman law at least, conceived as absolute.

In dramatic contrast with, say, plantation slavery in the Americas, there was no sense that certain people were naturally inferior and therefore destined to be slaves. Instead, slavery was seen as a misfortune that could happen to anyone.

Originally, human beings lived in a state of nature where all things were held in common; it was war that first divided up the world, and the resultant “law of nations,” the common usages of mankind that regulate such matters as conquest, slavery, treaties, and borders, that was first responsible for inequalities of property as well.

This in turn meant that there was no intrinsic difference between private property and political power—at least, insofar as that power was based in violence.

In fact, not only does it make property a right, it treats rights themselves as a form of property. In a way, this is the greatest paradox of all. We are so used to the idea of “having” rights—that rights are something one can possess—that we rarely think about what this might actually mean. In fact (as Medieval jurists were well aware), one man’s right is simply another’s obligation. My right to free speech is others’ obligation not to punish me for speaking; my right to a trial by a jury of my peers is the responsibility of others to maintain a system of jury duty.

Finally, similar ideas have become the basis of that most basic, dominant institution of our present economic life: wage labor, which is, effectively, the renting of our freedom in the same way that slavery can be conceived as its sale.

In other words, king and slave are mirror images, in that unlike normal human beings who are defined by their commitments to others, they are defined only by relations of power. They are as close to perfectly isolated, alienated beings as one can possibly become.

If our political and legal ideas really are founded on the logic of slavery, then how did we ever abolish it? Of course, a cynic might argue that we haven’t really abolished slavery; we’ve just relabeled it. The cynic would have a point: an ancient Greek would certainly have seen the distinction between a slave and an indebted wage laborer as, at best, a legalistic nicety.

The truly remarkable thing, if one consults the historical record, is that slavery has been eliminated—or effectively eliminated—many times in human history. In Europe, for instance, the institution largely vanished in the centuries following the collapse of the Roman empire

the Church itself was never explicitly opposed to the institution and in many cases defended it. Instead, the abolition appears to have happened despite the attitudes of both the intellectuals and the political authorities of the time. Yet it did happen, and it had lasting effects. On the popular level, slavery remained so universally detested that even a thousand years later, when European merchants started trying to revive the trade, they discovered that their compatriots would not countenance slaveholding in their own countries—one reason why planters were eventually obliged to acquire their slaves in Africa and set up plantations in the New World.3 It is one of the great ironies of history that modern racism—probably the single greatest evil of our last two centuries—had to be invented largely because Europeans continued to refuse to listen to the arguments of the intellectuals and jurists and did not accept that anyone they believed to be a full and equal human being could ever be justifiably enslaved.

Coinage appears to have arisen independently in three different places, almost simultaneously: on the Great Plain of northern China, in the Ganges river valley of northeast India, and in the lands surrounding the Aegean Sea, in each case, between roughly 600 and 500 BC.

If we look at Eurasian history over the course of the last five thousand years, what we see is a broad alternation between periods dominated by credit money and periods in which gold and silver come to dominate—that is, those during which at least a large share of transactions were conducted with pieces of valuable metal being passed from hand to hand. Why? The single most important factor would appear to be war. Bullion predominates, above all, in periods of generalized violence. There’s a very simple reason for that. Gold and silver coins are distinguished from credit arrangements by one spectacular feature: they can be stolen.

A debt is, by definition, a record, as well as a relation of trust. Someone accepting gold or silver in exchange for merchandise, on the other hand, need trust nothing more than the accuracy of the scales, the quality of the metal, and the likelihood that someone else will be willing to accept it.

As a result, while credit systems tend to dominate in periods of relative social peace, or across networks of trust (whether created by states or, in most periods, transnational institutions like merchant guilds or communities of faith), in periods characterized by widespread war and plunder, they tend to be replaced by precious metal. What’s more, while predatory lending goes on in every period of human history, the resulting debt crises appear to have the most damaging effects at times when money is most easily convertible into cash.

merchants and tradespeople developed credit arrangements of their own. Most of these took the physical form of clay tablets, inscribed with some obligation of future payment, that were then sealed inside clay envelopes and marked with the borrower’s seal. The creditor would keep the envelope as a surety, and it would be broken open on repayment. In some times or places, at least, these bullae appear to have become what we would now call negotiable instruments, since the tablet inside did not simply record a promise to pay the original lender, but was designated “to the bearer”—in other words, a tablet recording a debt of five shekels of silver (at prevailing rates of interest) could circulate as the equivalent of a five-shekel promissory note—that is, as money.

The origins of interest will forever remain obscure, since they preceded the invention of writing. The terminology for interest in most ancient languages is derived from some word for “offspring,” causing some to speculate that it originates in loans of livestock, but this seems a bit literal-minded. More

In 2402 BC, for instance, a royal inscription by King Enmetena of Lagash—one of the earliest we have—complains that his enemy, the King of Umma,

Usury—in the sense of interest-bearing consumer loans—was also well established by Enmetena’s time.

Enmetena’s text is a bit vague on the details, but a half-century later, when his successor Uruinimgina declared a general amnesty during the New Year’s ceremonies of 2350 BC, the terms are all spelled out, and they conform to what was to become typical of such amnesties: canceling not only all outstanding loans, but all forms of debt servitude, even those based on failure to pay fees or criminal penalties—the only thing excepted being commercial loans. Similar declarations are to be found again and again, in Sumerian and later Babylonian and Assyrian records, and always with the same theme: the restoration of “justice and equity,” the protection of widows and orphans, to ensure—as Hammurabi was to put it when he abolished debts in Babylon in 1761 BC—“that the strong might not oppress the weak.”

In Mesopotamia, rulers appear to have headed off the possibility of unrest by instituting such reforms themselves, as a grand gesture of cosmic renewal, a recreation of the social universe—in Babylonia, during the same ceremony in which the king reenacts his god Marduk’s creation of the physical universe. The history of debt and sin was wiped out, and it was time to begin again. But it’s also clear what they saw as the alternative: the world plunged into chaos, with farmers defecting to swell the ranks of nomadic pastoralists, and ultimately, if the breakdown continued, returning to overrun the cities and destroy everything.

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

It’s well known that the Rosetta Stone, written both in Greek and Egyptian, proved to be the key that made it possible to translate Egyptian hieroglyphics. Few are aware of what it actually says. The stela was originally raised to announce an amnesty, both for debtors and for prisoners, declared by Ptolemy V in 196 BC.

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

from skepticism to idealism—in fact, that philosophers in each managed to simultaneously develop all the major positions on the nature of cosmos, mind, action, and the ends of human existence

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.

These first Lydian coins were basically just round lumps of electrum—a gold-silver alloy that occurred naturally in the nearby Pactolus River

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.

The period when the Greeks 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.

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.

and fifty thousand captives put on the auction block, after which the city itself was razed and its fields sowed with salt.

In each city, history begins with a series of debt crises. In Athens, the first crisis, the one that culminated in Solon’s reforms of 594 BC, was so early that coinage could hardly have been a factor. In Rome, too, the earliest crises seem to have proceeded the advent of currency. Rather, in each case, coinage became a solution.

The first was that the aristocrats could win, and the poor remain “slaves of the rich”—which in practice meant that most people would end up clients of some wealthy patron. Such states were generally militarily ineffective.16 The second was that popular factions could prevail, institute the usual popular program of redistribution of lands and safeguards against debt peonage, and thus create the basis for a class of free farmers whose children would, in turn, be free to spend much of their time training for war.17 Coinage played a critical role in maintaining this kind of free peasantry—secure in their landholding, not tied to any great lord by bonds of debt.

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 $285 billion.

“the secession of the plebs,” when the commoners of the city abandoned their fields and workshops, camped outside the city, and threatened mass defection

Greek sources report that Magadha could put to the field a force of 200,000 infantry, 20,000 horses, and about 4,000 elephants—and that Alexander’s men mutinied rather than have to face them. Whether on campaign or in garrison, they were inevitably accompanied by a range of different sorts of camp followers—petty traders, prostitutes, and hired servants—which, with the soldiers, seems to have been the very medium through which a cash economy had originally taken form.35 By Kautilya’s time, a few hundred years later, the state was inserting itself into every aspect of the process: Kautilya suggests paying soldiers apparently generous wages, then secretly replacing hawkers with government agents who could charge them twice the normal rates for supplies. He also recommends organizing prostitutes under a ministry in which they could be trained as spies, so as to make detailed reports on their clients’ loyalties.

As we shall see, while Aśoka’s own empire was not long to endure, soon to be replaced by a succession of ever weaker and mostly smaller states, Buddhism took root. The decline of the great armies eventually led to the near-disappearance of coinage, but also to a veritable efflorescence of increasingly sophisticated forms of credit.

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.

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.

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.

intellectuals should have been so offended by this sort of cynicism that they began to make common cause with the popular movements that inevitably began to form against those princes. But as is so often the case, oppositional intellectuals were faced with two choices: either adopt the reigning terms of debate, or try to come up with a diametrical inversion. 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.

Axial Age spirituality, then, is built on a bedrock of materialism.

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.

Mauryan empire, for instance, much of India was governed by foreigners.10 Apparently, this increasing distance allowed local Brahmins to begin reshaping the new—increasingly rural—society along strictly hierarchical principles. They did it above all by seizing control of the administration of law. 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.

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,

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 human economies, it does not appear to have occurred to anyone that any act could be either purely selfish or purely altruistic. As I noted in Chapter Five, an act of absolute selfless giving can only also be absolutely antisocial—hence, in a way, inhuman.