Debt: The First 5,000 Years

December 05, 2022 [books] #economics #anthropology

Book: Debt: The First 5,000 Years
Author: David Graeber

In this ambitious book, Graeber - anthropologist, anarchist and polemicist - makes a case for debt as the primary mover of civilizations. Along the way he takes to the cleaners everyone from Adam Smith to Niall Ferguson. He spends a considerable amount of time showing the difficulty in even explaining the word 'debt' given the layers of meaning it has accrued. The notion of debt, we learn, is possibly as old as humanity. It is present in the earliest writing systems that man has produced. In the Vedas, humans are shown to be in debt to the universe. Debts, as it happens, is also a fundamental part of the market economy. In contrast to market economies, there is such a thing as human economies. Human economies function on favors. There's no human relation that is free from exchange. These exchanges are not just that of tangible goods, but that of intangible ones like respect, honor and such. Given all that, Graeber's definition of debt is that amount that can be precisely calculated.

One of the author's major theses is the rejection of the market as the highest form of human freedom. Markets arise from wars and slaves. This he shows with example after example from the pages of history in exhaustive detail. The market and the state are presented as in conflict with each other in popular discourse. This popularity is only about two centuries old, ever since Adam Smith defined political economy and expounded on a theory about how it could it have come about. This is a false dichotomy. States and markets need each other and there has never been a market that's not backed by the resources a state can provide. The earliest markets were the side effects of elaborate administrative systems of ancient Mesopotamia, operating primarily on credit. That idea that markets could exist outside states came only with the Middle Ages. He makes the case for this by interrogating the Indo-Islamic world and the entrepĂ´ts flourishing therein. Human economies eventually give way to markets, but it is not inevitable. One of the possible origins of money is as a proxy to show how impossible it is really to consider it as a means of any measure at all, whether it's trading human beings or other goods. It's only when humans are taken from their complex web of relationships that they can be traded. Like I said, he asserts that all our political and legal systems derive from slavery. We haven't really abolished slavery either, only relabeled it:

"Formal slavery has been eliminated, but (as anyone who works from nine to five can testify) the idea that you can alienate your liberty, at least temporarily, endures. In fact, it determines what most of us have to do for most of our waking hours, except, usually, on weekends. The violence has been largely pushed out of sight."

Graeber's grouse with Adam Smith is that in his model of barter as origin of human economic systems, Smith ignored debt altogether. Another opposite view of debt is of debt as a central substance of human relations, using the recording in the Vedas as evidence. The universally accepted sequence to explain our system of economic systems now is that there was a prehistoric stage of barter, followed by an ancient stage of coinage and after a brief revision to barter in the Middle Ages, a modern stage of credit economy. Graeber instead prefers to see the world as dominated by cycles, with periods dominated by credit money and periods dominated by coinage, primarily gold and silver. The original form of money was virtual money. Credit systems, tabs, expense accounts existed long before cash. Bullion predominates in periods of generalized violence. This seems to be an accurate description of Warring States China, Iron Age Greece, and pre-Mauryan India. After all, soldiers tend to have access to a great deal of loot and will always seek to trade it. Credit systems dominate in periods of social peace, where there are networks of trust. The current credit system began in 1971, when Richard Nixon made the dollar a fiat currency by unpinning it from the value of gold. The United States' military machine ensures that the dollar remains the fiat currency of choice and is willing to go to war to keep it that way. It is still the early stages of the current cycle, but the consequences of credit are not hard to imagine - it has always ended in violence. Not everyone pays their debt, only a few do.

I am persuaded by Graeber's thesis only because I don't know better. I haven't read up on any monetary theory and this is my first exposure to it. I do find myself sympathetic to his cause. Why is working for money virtuous? Why does increasing the output of goods and services by a certain amount each year the purpose of this species? Why is working 9 to 5 the only way of being in this world? There are other economic systems possible. Utopian communities did pop up all the time in America once. There are a few in India too, for example, Auroville. However, I doubt that their vision of the world will ever come to pass for the vast majority of mankind. After all, states are bigger and more centralized than ever. And as Graeber repeatedly emphasizes, states, wars and markets go hand in hand.

If you can forgive the polemics and the roundabout way of getting to any point, this is a very educative and even entertaining read.

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