Debt
The first 5000 years
By David graeber
Debt explores how monetary arrangements can shape human relations and ultimately history as we know it at its core. By this sense it is quite a historical materialist book. However I think it’s much more than that. The take off point of the book is quite simple. Barter is a myth. Natural systems of economy never used head to head barter as the primordial form of value exchange. This, though sounds simple, is a revolutionary idea. Because the classic liberal economic history text consistently starts with the same assumption: In the beginning there was barter. If you needed a pair of shoes and had an extra chicken, you would go to your neighbour with an extra pair of shoes and a need for a chicken. And followed immediately with another recurrent argument: Since this system of barter was inefficient in determining the exact value of objects, ancient people invented money, or, more precisely, coinage.
Graeber, being an anthropologist, says this claim is totally bogus from a historical point of view. He says that early human societies have organised around interpersonal and incalculable credit. Meaning that the primary mode of exchange was favours and alike. If any member of your community needed a pair of shoes and you had an extra pair, you provided it. But in return you would expect any one of your neighbours to do the same if you were to need a chicken anytime in the future. As a reader for me so far, this argument, despite being prone to be extremely romanticised by the left-leaning theorist, makes much more sense then the myth of barter. Especially considering the extreme inefficiencies that can arise from any system of direct barter hence preventing it to be a system to ever exist in the first place let alone being improved upon. However, Graeber also provides anthropological evidence from tribes studied in modern times in Brazil, Australia, different regions of Africa etc. But noting this, he adds one other curious observation, head on barter is a mode of exchange one would do with strangers. For instance members of the neighbouring tribe, a geography one is simply walking past when travelling from one place to another etc.
Even with this two main arguments books is an extremely good read, regardless of one’s political dispositions. But luckily for the reader, Graeber doesn’t stop there.
He then goes on to argue that coinage and money aren’t the same thing. In other words coinage is not some primitive form of money. He argues that money can also take, and for considerable parts of history has taken, the form of credit. Such as various personal or impersonal IOUs. Or even forms we consider intangible by today’s standards such as one’s perceived honour since it effectively determines one’s credit. But coinage, and thereby bullion, was invented for the cases when exchange needed to be immediate. And its primary driver was military conquest. The need to pay the wages of soldiers coming from four corners of the empire. And collect it back as taxes to raise for more military conquest.
He then goes on to explore historical eras through this lens of when the primary mode of money was coinage and when it was credit. Which in my opinion makes this book a masterpiece. Even if you don’t agree with this underlying theory ultimately, which I must say I find very convincing, it is extremely rewarding to look at history from this lens.
age of first agrarian empires (3500-800 BC)
This is the first significant historical era Graeber looks into. He observes three distinct geographies where it is possible to talk about a centralised state, a bureaucracy and some kind of market structure hence a civilisation in general. These are Mesopotamia, Egypt and China. His main argument is that, despite separated geographies, early money, which spun into existence as interpersonal credit between smaller communities, started to become widespread as this credit and debt started to become impersonal. Such impersonalisation of debt lead to vast inequalities and quasi slave-master relationships to become widespread and ultimately deep unrest in all three of these civilisations. For instance, in Mesopotamia, we see rulers in different eras and empires such as Babylonia and Assyria come to power to forgive all debts and break clay tablets where debt was recorded. The infamous Hammurabi being an example.
the axial age (800 bc - 600 ad)
The defining feature of the axial age is being the age where the first military-slavage-coinage complex was established. He again looks into three distinct geographies: Mediterranean, China and India. But he argues that in all three of these, almost simultaneously, the model of economic expansion shifted to one based on conquest. This constant cycle of waging wars, establishing colonies, collecting taxes to wage more wars, establish more colonies and collect more taxes created first proto-modern markets. In these markets coin was king. He explains why this transformation took place on two levels: distribution and recollection.
First, on the distribution level, logistically speaking, it was much easier to pay wages in some kind of impersonal tender that was universally excepted as valuable. This was because, unlike farmers, armies moved very often, making some kind of ledger system impossible. But also, collecting and distributing raw materials would be equally challenging. So a universally valuable tender given as wages allowed armies to trade and send money back home wherever they moved.
Secondly, on the recollection level, taxation became much more efficient with coinage. Taxes could be standardised to coin units. Both for soldiers and markets, making it much easier to calculate, store and collect. Moreover, states realised if they controlled the markets where armies traded, they could double, triple, quadruple the recollection process without increasing taxes. Thus generating more revenue for conquest.
Graeber argues that this is the first historical era where we see the first widespread materialist ideologies in all three of these geographies. One effect of this for instance is human life being subjected to market conditions and slavery becoming commonplace.
The Middle Ages (600 AD - 1450 AD)
The middle ages saw a return to virtual money again he argues. Where the real gold and silver mostly ended up in churches, monasteries and temples. I’m not going to go into a lot of detail of this age as Graeber does an exceptional job tracing this phenomena around China, Christendom, Islam, India etc. where in all geographies one can observe some kind of virtual money taking shape. I cannot sum it up in a few paragraphs all the different quirks of virtual/credit money that took shape in these geographies as I did for other ages. However one must understand this virtual money didn’t mean usury in all cases. In fact direct usury was banned in most of the cases.
However, I will note this for myself: Read the section where he discusses Islamic civilisation again when you’re reading Hodgson’s A Venture of Islam. He makes some very interesting points on how capital was lended on a profit sharing basis, how markets were allowed to be competitive but understood through a lens of cooperation between different actors. He even goes on to claim that the idea of division of labour, as it appears in Smith, was formalised in Ghazali’s texts, in fact with the same exact example, a pin factory. But different than Smith, Ghazali makes the conclusion that division of labour is ultimately an extension of cooperation and mutual aid. This point was very interesting. It could be an extremely rewarding thing to explore how Islamic scholars viewed the markets and commerce.
Age of Great Capitalist Empires (1450 - 1971)
When the middle ages ended, the age of geographic discoveries brought upon another age where bullion was the main form of money thanks to gold and silver of the new world that flooded the European markets. He also goes on to argue that this return to bullion kick started what we know as capitalism today which seeks accumulation of capital for more accumulation of capital. Which, on a fundamental level, feels similar to axial age empires that waged conquest for the sake of more conquest.
Today (1971 - Present)
Finally, Graeber claims that the age of capitalist empires that relied on bullion was ended by a presidential decree by Nixon in 1971 that unpegged the dollar from gold. He says that this is the beginning of a new era of virtual money that we are yet to fully see and understand. He argues however we are already seeing certain results of this shift relating to inequality and thereby unrest. Global Financial Crisis and Occupy Wall Street being some examples. Which were also his prime mover, motivation when writing this book. However I’d also argue Arab Spring and rise of the new right, so far lead by Donald Trump, in the US are other two results that we see. History will show the social resilience of our credit systems.