Debt: The First 5,000 Years, by David Graeber (New York: Melville House, 2011). Review by Brent Ranalli

Most histories of money are histories of coins, tokens. But coins come and go with empires. Money has much deeper roots in the forms of obligation that bind together even the simplest societies. It takes an anthropologist to write a truly universal economic history, and that is what David Graeber has accomplished with Debt: The First 5,000 Years. With its wide scope, Debt offers valuable perspective on contemporary issues. The problem of economic insecurity that makes Basic Income so urgent today is not a unique feature of modernity or capitalism (though modern technological advances make possible for the first time a universal Basic Income as a solution), but has been with us since the development of money per se—that is, financial credit, or debt—at the dawn of civilization.

The book is divided into two parts. The first is analytical, and the second is synthetic. Graeber begins by demolishing conventional myths of economic history, starting with the notion that before money and markets were invented, barter was the normal mode of exchange. In fact, as anthropologists have tried to explain to economists for over a century, barter is almost unheard of in traditional societies. Within communities, food, clothing, tools, and other everyday items might simply be distributed freely from one person to another in accordance with a strong sharing ethos, or distributed from a communally managed stock, or exchanged in a tit-for-tat fashion (so-called “gift economies”), or exchanged as debits and credits in a “virtual” currency that never actually changes hands. Many so-called “primitive currencies,” high-status items like cattle or hand-woven cloth, change hands primarily for purposes of rearranging human relationships (e.g., sealing a marriage contract or compensating the family of a murdered individual). Barter, when it does occur in traditional societies, tends to crop up on the margins of economic life, when people trade with strangers and potential or actual enemies. The modern triumph of money and markets can be seen to represent, in a way, the remaking of society as a collection of strangers or potential enemies a la Hobbes.

Similarly, Graeber turns on its head the conventional notion that the state and the market stand in opposition. In the grand scheme of history, markets (where strangers meet to buy and sell) have been handmaidens of the state, especially the war-making state that needs to provision armies. Only in rare circumstances (e.g, medieval Islam) have markets been sustainable without being substantially propped up by the state for enforcement of contracts, etc.

Meetings of strangers (at the interstices of traditional societies, and in the ancient and modern marketplace) always hold the potential for violence, and one of the themes of the book is the actual violence and constant threat of violence that went into making the seemingly polite modern bourgeois economic order: from the degradation and dispossession of women, whose exchange holds together traditional patriarchal societies, to debt-peonage and debt-slavery, to the war-making that created a demand for markets that could satisfy the appetites of soldiers carrying state-minted coins and war booty, to the extraordinarily harsh laws of early modern England (for example) that criminalized traditional credit-based modes of exchange.

Credit systems preceded the use of coined money in the ancient civilizations of Eurasia. But regardless of whether money is tangible or virtual, the normal, predictable course of events in every society that employs money is for money to be lent (often at interest–an ancient Mesopotamian innovation), and for some or most debtors to become trapped in debt. And the normal endgame of debt in the ancient world was for the debtor’s family members, and in extremis the debtor himself, to be reduced to slavery. In both the ancient and modern worlds, Graeber chillingly demonstrates, enslavement (and other forms of compulsion–peonage, indentured servitude, wage slavery) and trade in slaves has been intimately bound up with debt. Time and again, debt has been the siphon that sucks victims into the system of exploitation, and also the motor that drives the exploiters–both the grand masters (monarchs, conquistadors) and the petty functionaries–to take the desperate step of destroying others’ lives.

The story of civilization is in large part the story of how different societies have coped with the perennial debt trap that afflicts all societies that employ money. Mesopotamian kings offered periodic amnesties, erasing personal debts and freeing slaves to return to their families. The ancient Israelites adopted the practice and formalized it in the custom of Jubilees. Some groups prohibited the charging of interest, or set conventional bounds (that interest should not exceed five percent, or that the total interest charged should not exceed the value of the principal). The ancient Greeks and Romans met their debt and slavery crises by programs of imperial expansion that generated viable new economic opportunities for younger sons and filled the public coffers with booty and tribute–money that could be directed to the poorer classes of citizens to prevent them from falling into the debt trap, via direct payment (like the stipends Greek democracies paid their citizens for jury service, a sort of BI for the demos) or subsidies (like the Roman breads and circuses). Through custom or law, some societies took the more radical steps of abandoning or outlawing slavery and/or establishing bankruptcy protections for debtors.

Graeber detects a general pattern in the (Eurasian) history of monetary practices and debt-coping strategies, and the second half of the book is devoted to explicating that pattern–essentially, retelling the traditional story of civilization through the lens of money, debt, and slavery. The earliest Mesopotamian civilizations were pioneers of the use of money (credit money), and early victims of the debt trap, which their leaders periodically reset with general amnesties. Desperate debtors not infrequently took matters into their own hands as well, and fled with family and flocks to the outlying hills to join the fearsome “habiru” (a word that meant outlaw, fugitive, mercenary). Periodic waves of these groups descended to prey on and take control of civilized urban Mesopotamia, as their presumed counterparts the Hebrews to their West descended in strength upon Egyptian Canaan.

The “axial age” is a recognized watershed in Eurasian history. There was simultaneously in China, India, and the Mediterranean world a flowering of empire and cultural creativity. Graeber convincingly links these political and cultural developments to the (still mysteriously simultaneous and independent) invention of coined money. With the invention of coin and the establishment of markets, ancient states could raise, feed, and field massive armies, and engage in wars of conquest on scales previously unknown. The use of coin facilitated anonymous economic transactions, and deepened and widened the debt trap (except for the lucky subsidized few in the successful imperial powers like Athens and Rome, at least while those empires continued to expand). Expansive war also meant taking large numbers of captives, and these too became slaves. Slavery became an enormous and intrusive social institution, part of the fabric of everyday life.

As coined money entered public consciousness, intimating that everything could be weighed and measured, materialist philosophies arose in all the great ancient civilizations. And idealistic and humanistic philosophies and religious movements arose in defiant protest, these latter being the great philosophies and religions for which we remember the axial age–Greek philosophy against the sophists, Indian Buddhism against Vedic ritualism, Chinese Confucianism against legalism.

Graeber traces the contours of a gradual and staggered transition from the axial age to the “middle ages.” The general story is that the axial empires run out of steam and collapse, coin is replaced by credit (often still denominated in old imperial currencies), pre-market forms of traditional exchange (trust-based, community-based) re-emerge into prominence, social and/or state safeguards are developed to minimize or eliminate the debt trap, and the institution of slavery is abandoned. The story varies from region to region though, providing some interesting contrasts and highlighting the ingenious variety of different societies’ solutions to common problems. In China, for example, the axial imperial system never collapsed–it merely adapted, and used state power in various ways to marginalize the merchant class and protect the poor–or be overthrown by a new regime pledged to do a better job. In India, the state more or less shriveled away, and rural society governed itself via custom and caste–again, the money-managing merchant class being put in its place among the lower orders. In Islam, a thorough and unprecedented separation was achieved between church and state. Merchants took a leading role in religion, and collectively abandoned the practice of usury on religious grounds. As the merchant class was effectively governed by a religious code of honor, no intervention by the state was necessary to enforce contracts. Rather than meddling in economics or religion, then, the state in the Islamic world devoted itself to continued imperial conquest–and continued to capture and employ slaves, paradoxically arming them and employing them as soldiers for further conquest (a practice that religious leaders condoned, since captured enemies–unlike debtors–could legitimately be regarded as having forfeited life and liberty, and using foreign slaves as soldiers eliminated the messy business of Muslims bearing arms against Muslims). In Europe, markets, money and state shriveled nearly away and traditional modes of exchange blossomed. The Church (at least at first) took a hard line against usury; popular sentiment militated against the institution of slavery.

Around 1450, the pendulum swung the other way again. There was a new era of imperial conquest, of war-oriented cash economies, of mining and minting, and of slavery, centered in Europe. As sophisticated credit instruments imported from Islam were married to a metals-based cash economy, yawning new debt traps opened up, ensnaring people of all station, from kings and magnates to common soldiers and traders, while tearing apart other societies on multiple continents. There was at the same time a new cultural Renaissance in Europe, with a surge of materialism and an attendant backlash of more humane philosophies and religious movements.

Graeber perceives, or anticipates, a shift in our own day back in the other direction, away from imperial war, cash, and markets, back in the direction of stability, community, safeguards against the debt trap, and new and traditional forms of trust-based credit. He is light on predictions, and contents himself with arguing that our contemporary global financial system is in a likely terminal crisis (which, for the sake of convenience at least, he dates from Nixon’s 1971 decision to make the dollar a free-floating currency).

The book is an extraordinary feat of synthesis, and most of it is convincing and well-argued. I take issue with only a small handful of points. The weakest point, it seems to me, is Graeber’s conviction that capitalism is necessarily doomed. He makes a strong case that capitalism is by no means the end of history, that it is morally flawed, and that the financial sector in particular is careening out of control in a manner that could destabilize the whole. But his confident and repeated assertion that capitalism with free wage labor is impossible, that under capitalism the world’s population could never, even in principle, achieve middle class living standards, appears to be special pleading. In world history, the institution of the market had its origins in war and violence, but today (as Graeber himself acknowledges) it has left those roots behind and become tame and bourgeois. Capitalism too is historically rooted in brutal exploitation. But could not capitalism too eventually become as tame, hasn’t it already made extraordinary progress in that direction since the days of Dickens and Marx? If every last Chinese peasant finds a job with a dental and retirement plan, it would seem to signify not the demise of capitalism, only that consumers will pay incrementally more for Chinese products. Graeber’s pronouncements about the imminent demise of capitalism are particularly ironic, coming as they do practically in the same breath as his observations that for centuries economists and industrialists have been expecting the system to collapse and it has not done so.

Graeber has essentially acknowledged in post-publication interviews that the collapse of the ~1945-1975 “deal” that gave U.S. and European workers a modest share of the economic pie was not a matter of structural limits: rather, it was a matter of what concessions those at the top of the pyramid were willing to make. Those at the top might have made other choices, and one might argue that they were foolish not to continue investing in expanding the pool of middle-class consumers. They still might make better choices, or their hand might be forced, without anything that resembles an end to the current economic order. Establishment of a Basic Income Guarantee is one scenario that would facilitate transition to the less exploitive economy Graeber envisions while leaving the current system of finance and production intact.

Graeber’s analysis of debt and slavery helps us to make sense of the economic crisis we find ourselves in. Politically and morally we moderns find slavery abhorrent, and as a global society we have succeeded in legally abolishing it. But the logic of debt continues to push many participants in today’s economy close to the edge of slavery and sometimes over the edge; the legal and moral and political consensus starts to buckle. Globally we see a flourishing traffic in poverty-induced sex slavery and illicit organ harvesting. In the U.S., we see the political class weakening bankruptcy protections while consumer debt and student debt soar to crisis levels. And the poorest and most vulnerable in the U.S. are liable to be sucked into a burgeoning prison industrial complex whose work programs constitute de facto slavery. We do appear, as Graeber suggests, to be living in a period of transition; it remains to be seen whether the moral and legal sanctions against slavery will hold up under stress, and whether the debt burden that contributes to the stress can be moderated or eliminated in a timely fashion by policies like Basic Income.

Credit photo: CC Steve Rhodes