Shortman 's List: David Graeber

• Throughout history, debt has served as a way for states to control their subjects and extract resources from them (usually to finance wars). And when enough people got in enough debt, there was usually some kind of revolt.

• At the end of his book, Graeber does make one policy recommendation: a Biblical-style “jubilee,” a forgiveness of all international and consumer debt. Jubilees are rare in the modern world, but in ancient Babylon, Assyria, and Egypt under the Ptolemies they were a regular occurrence. The alternative, rulers learned, was rioting and chaos in years when poor crop yields left lots of peasants in debt. The very first use in a political document of the word freedom was in a Sumerian king’s debt-cancellation edict. “It would be salutary,” Graeber writes, “not just because it would relieve so much genuine human suffering, but also because it would be our way of reminding ourselves that money is not ineffable, that paying one’s debts is not the essence of morality, that all these things are human arrangements and that if democracy is to mean anything it is the ability to all agree to arrange things in a different way.”

• he explores the ambivalent attitudes people have always had about debt: as obligation and sin, engine of economic growth and tool of oppression. Along the way, he tries to answer questions such as why so many people over the course of history have simultaneously believed that it is a matter of morality to repay debts and that those who lend money for a living are evil.

• Graeber’s problem with debt is not just that having too much of it is bad. More fundamental, he writes in his book, is debt’s perversion of the natural instinct for humans to help each other. Economics textbooks tell a story in which money and markets arise out of the human tendency to “truck and barter,” as Adam Smith put it. Before there was money, Smith argued, people would trade seven chickens for a goat, or a bag of grain for a pair of sandals. Then some enterprising merchant realized it would be easier to just price all of them in a common medium of exchange, like silver or wampum. The problem with this story, anthropologists have been arguing for decades, is that it doesn’t seem ever to have happened. “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money,” writes anthropologist Caroline Humphrey, in a passage Graeber quotes.
• People in societies without money don’t barter, not unless they’re dealing with a total stranger or an enemy. Instead they give things to each other, sometimes as a form of tribute, sometimes to get something later in return, and sometimes as an outright gift. Money, therefore, wasn’t created by traders trying to make it easier to barter, it was created by states like ancient Egypt or massive temple bureaucracies in Sumer so that people had a more efficient way of paying taxes, or simply to measure property holdings. In the process, they introduced the concept of price and of an impersonal market, and that ate away at all those organic webs of mutual support that had existed before.

• That’s ancient history, literally. So why does it matter? Because money, Graeber argues, turns obligations and responsibilities, which are social things, into debt, which is purely financial. The sense we have that it’s important to repay debts corrupts the impulse to take care of each other: Debts are not sacred, human relationships are.

   

  If we understand the social origins of debt, Graeber says, we become much more willing to renegotiate debts when conditions change, whether those are mortgages, credit-card debts, student loans, or the debts of entire nations. And if the desperate response to the ongoing financial crisis has shown anything, he argues, it’s that we’re willing to forgive debts if the institution that has them is important.

   

  “Sovereignty does ultimately belong to the people, at least in theory. You gave the bank the right to make up money that is then lent to you,” he argues. “We collectively create this stuff, and so we could do it differently.”

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• At the heart of the book is the revisionist argument that money did not spontaneously emerge to address a social need – the inefficiency of barter in facilitating humanity’s natural tendency to trade and commerce, as economists have been saying since Adam Smith – but was, rather, part of a calculated effort by state-societies to build markets for their own benefit, primarily to fund the war-machines they built around them.
• It isn’t a history of human civilization or even a manifesto about economics, but rather a deconstruction of the terms through which we have learned to think about what human civilization, history, and society are and are supposed to be (which is to say, the language we use to make claims upon it). But his central “claim” is a disclaim, the argument that the force of obligation history has always seemed to have imposed upon us — to behave a particular way, for example, because it is “natural” to do so – is in fact a fiction backed up by nothing more than force and repetition, that what we take to be “normal” is exactly the problem. It is, in this sense, a negation without demands. Much like, one might observe, Occupy Wall Street itself?

• After pointing out that most Econ 1 students are currently taught that money evolved out of barter relationships, Graeber shows that this perspective has been rooted in thought experiments since the time of Adam Smith. However, when the actual historical and anthropological record is consulted, it is glaringly obvious that it actually happened the other way around: credit relationships came first and were later supplemented and sometimes replaced by coinage only as a result of the utility that the State derived from the markets thus created (i.e., they were convenient ways to provision troops, bureaucrats, etc.).
• A debt between two individuals thus creates a temporary hierarchical relationship between them, and in societies in which the alienation of relationships pioneered by slavery has been internalized, such debts can then be transfered to, or even originated by, a creditor with no interest at all in the wellbeing of the debtor as long as the debt continues to be serviced. As a result, debts in such societies can make the status of debtor virtually a form of slavery as they are pushed to do things that would have been unthinkable had the need to pay off their debts not been hanging over their heads.

• The Islamic trade routes in North Africa and across the Indian ocean used informal credit notes as money. These promises to deliver were issued by trading merchants and backed by their ‘honour’, rather than state authority. Courts existed to adjudicate disputes but they had no power to enforce decisions, only to impact on merchants’ reputations. Graeber says that checks issued in this way ‘could be countersigned and transferred’ enabling them to travel ‘across the Indian ocean or the Sahara’ as forms of payment. One source he gives is Goitein (1966, 1967, 1973) who wrote about Jewish merchants using this type of money in 12th century Egypt.

   

  There are many other examples, including in Europe. Interestingly, I was at an exhibition on the history of money at the British museum and there was hardly any mention of the existence of these types of peer-to-peer credit notes. As Graeber suggests this might be due to the fact that no paper money from that period has survived, while some bullion has.”

• In other words, anthropological research like Graeber’s can offer a kind of evidence-based idealism, a utopianism that’s hard headed and founded firmly in observations of diverse communities, not contrived in a sheltered cloister or from untested principles. When apologists for our own current situation offer excuses or tell us that we shouldn’t seek greater justice, equity or governance, because ‘It can’t be any other way but the way it is,’ anthropological research can show that this is not the case. Perhaps few other areas of contemporary life beg for this reality-based imagination more than economic activity.
• According to Graeber, the crisis of 2008—the crash of financial markets and the bailout by the US and UK governments of major banks—revealed two key principles about the current economic system were myths: 1) that markets can take care of themselves, and 2) that debts are inviolable and have to be paid. Not only did deregulated markets get themselves in serious trouble, but, when push came to shove, the state stepped in to save key institutions by absolving them of their debts. In reality, the bailouts simply transferred the debts from private institutions to the state itself, in essence, nationalizing debt, a kind of reverse, negative form of socialism, where the populace owns, not the assets of the banks, but only their debts.
• Specifically, Graeber shows that the typical developmental sequence posited by economists—barter leads to money leads to credit—is not only more variable, but is sometimes precisely reversed. The first ‘money’ of which we have definitive proof is credit-based money in Mesopotamia; currency shows up much later, and many of the most successful trading states throughout history were deeply suspicious of bullion as a means of exchange. Credit precedes money historically.
• The problem isn’t just a flawed origin myth, however, or an empirical difficulty, but the ways in which this flawed origin myth bolstered economists’ insistence that alternative economic arrangements were simply not possible, based upon their understanding of ‘human nature.’ The economists’ origin myths assume that a very specific form of human actor—an actor deeply conditioned by life in market capitalism with debt-based money—exists in all societies and situations. For example, in what he calls the ‘myth of barter,’ economists assume that economic calculation and market-like transactions could have preceded both the existence of markets and money.

• As Graeber writes on the website Naked Capitalism:

   

  Economists always ask us to ‘imagine’ how things must have worked before the advent of money. What such examples bring home more than anything else is just how limited their imaginations really are. When one is dealing with a world unfamiliar with money and markets, even on those rare occasions when strangers did meet explicitly in order to exchange goods, they are rarely thinking exclusively about the value of the goods. This not only demonstrates that the Homo Oeconomicus which lies at the basis of all the theorems and equations that purports to render economics a science, is not only an almost impossibly boring person—basically, a monomaniacal sociopath who can wander through an orgy thinking only about marginal rates of return—but that what economists are basically doing in telling the myth of barter, is taking a kind of behavior that is only really possible after the invention of money and markets and then projecting it backwards as the purported reason for the invention of money and markets themselves. Logically, this makes about as much sense as saying that the game of chess was invented to allow people to fulfill a pre-existing desire to checkmate their opponent’s king. (from On the invention of money)
• Perhaps the most important area currently where culture and economics are fused in the Western imagination is the concept of ‘debt.’ As Graeber makes clear, ‘debt’ is a social promise perverted into an institution by power, mathematics and violence. Repeatedly in interviews, Graeber has highlighted how our current understanding of debt treats it as an unbreakable promise —the only unbreakable promise—such that individuals and states must sacrifice every other social contract, goal and obligation, to their people and to posterity, in order to honour their promises to bankers.

• As David told Alex Bradshaw in an interview:

   

  I was involved in “drop the debt” campaigns of various sorts since at least 2000. What got me interested in some of the philosophical issues I ended up exploring in the book was the peculiar moral power of the notion of debts. So many otherwise sympathetic people, even when told of the terrible, almost unimaginably inhuman suffering inflicted on people in the global South because of the depredations of the IMF, would still respond, “well, that’s terrible that so many children died slow and painful deaths, but still—surely one has to pay one’s debts! They borrowed the money! You couldn’t possibly be suggesting they not pay it…” How is it that the morality of debt can trump any other recognizable form of morality, and make things that no one would ever, possibly agree with in any other context seem suddenly acceptable?
• But there is an irony in thinking of a promise made by a state to pay a debt as something absolutely sacred. After all, a debt is just a promise, and politicians make all sorts of different promises. They break most of them. So why are these promises the only ones that they can’t break? It is considered completely normal for someone like Nick Clegg [in the UK] to say, ‘well of course we promised not to raise school fees. But that’s unrealistic.’ ‘Unrealistic’ here means ‘obviously there’s no possibility of breaking my promises to bankers, even those linked to banks we bailed out and in some cases effectively own’. It’s striking that no-one ever points that out. Why is a promise made by a politician to the people who elected him considered made to be broken – it isn’t “sacred” in any way – whereas a promise the same politician makes to a financier is considered the “honour of our nation”? Why isn’t the “honour of our nation” in any way entailed in keeping our promises to people to provide healthcare and education? And why does everyone just seem to accept that, that this is just “reality”?
• What we’ve learned now is that the economic crisis of the 1970s never really went away. It was fobbed off by cheap credit at home and massive plunder abroad – the latter, in the name of the “third world debt crisis”. But the global south fought back. The “alter-globalisation movement”, was in the end, successful: the IMF has been driven out of East Asia and Latin America, just as it is now being driven from the Middle East. As a result, the debt crisis has come home to Europe and North America, replete with the exact same approach: declare a financial crisis, appoint supposedly neutral technocrats to manage it, and then engage in an orgy of plunder in the name of “austerity”.

• The shift to credit tends to prompt two questions: 1) what’s to stop people just going crazy with it and creating new forms of money with reckless abandon? 2) What is to stop people from thereby falling into debt traps and becoming enslaved? The usual solution is to create some kind of control, which is why you had periodic debt cancellations in Mesopotamia; jubilees, bans on usury, and various other mechanisms that appeared in the Middle Ages; and so on. This makes sense, because if money is just a social construct, and is recognised as such, then people will be more open to changing the rules that govern it. And in fact in the Middle Ages this was completely recognised. Aristotle’s position that money is an agreement we make with each other, which was very much a minority view in antiquity, got widely adopted in Europe. If it’s an agreement, we can renegotiate it at any time, and people did. They would cry out and cry down the value of money, and shift it around all the time.

   

  So the question becomes: why didn’t that happen this time? Why have they not, since 1971, set up these overarching institutions to protect debtors, which is what they’ve always done in the past? Why did they not create controls so that money couldn’t just be created with reckless abandon by those in power as a way of enslaving everybody else? In fact, what’s happened is exactly the opposite of that. They’ve created overarching institutions, like the IMF, to protect creditors. That essentially is what the IMF is: it is part of a huge financial global bureaucracy developed gradually over the past 30-50 years, dedicated to the principle that no-one is ever allowed to default on a loan. Which is crazy – even according to standard economic theory the profits from a loan are supposed to be a reward for taking a risk. This leads to insane speculative bubbles, a situation in which 90-95 percent of all money is actually speculative with no connection to production or trade, and people becoming effectively enserfed.

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• Richard Nixon had cut the US Dollar's link to gold
• Without a limit on the quantity of cash, you've obviously got no limit on the quantity of debt
• the end of "the fixed exchange rate systems, reduced capital controls in rich countries, and the beginning of 20 years of regulatory easing," as academic economists remind us. But Nixon's decision, while making official what had already happened, confirmed that money now had no peg, no controls. It slipped anchor, and began floating freely in both value and quantity
• Because it at least puts the money back into history, front and center. Along with debt. You can't separate the two, says Graeber.
• "The key to averting or curtailing a second Great Depression is to reduce the levels of private debt, through a unilateral write-off, or jubilee. The irresponsible loans the banks made should not be honoured.
• n fact, we need "ways to forgive the excesses of mortgage, installment and revolving credit,"
• Ending the deleveraging has got to end the pain of deleveraging, right? "It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international and consumer debt,"

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