David Graeber

This book has a lot of insight to offer about the background on which we should lead current discussions about debt and money. I found a lot of things to think about in here and very much enjoyed reading it.

However, it is maybe too rich. It is so full of anthropological evidence as well as Graebers own interpretation of circumstances that it is not easy to keep all of them in mind, much less to make out the big picture that Graeber wants to paint. In fact, I only got a feeling of the big picture of Graebers line of thought by compiling this post. I decided therefore to write neither a review nor a complete summary.

Instead, I provide here the shortest summary I can come up with in three minutes and then leave the reader with a chronological collection of notes I made while reading. Sometimes I summarized the gist of an idea, sometimes I simply cited important or well-written paragraphs that capture the gist well by themselves. I do not make any claim to completeness or having picked all the cherries.

The (too) short summary:

The book first looks for the foundations of money and debt, both in human morality and culture (Chapters 2 through 7). Graeber finds a deep tie in the anthropological evidence between debt and violence and dishonor and reminds us that being in debt is a social construction (much more than a mathematical fact) and thus can mean different things. Then, it provides a compelling history of four known and very long world-stretching ages of markets and money (Chapters 8 through 12). This history of ages seems to be cyclic and in fact, we entered a new age in the last decades. The effects of this transition may become more understandable in this big picture.

Chronological note-collection:

Chapter 1: On the Experience of Moral Confusion

Graeber relates a story how he got confused by a statement in a discussion about the IMF and the World Bank. "Surely, one has to pay one's debt". Is that really true? And in the light of the 2008 financial crisis, this question has been asked many times - even if the conversation everyone was expecting has never really taken place:

“The reason that people were ready for such a conversation was that the story everyone had been told for the last decade or so had just been revealed to be a colossal lie. There's really no nicer way to say this.”

Chapter 2: The Myth of Barter

Graeber takes some time to take a stab at the myth from page one in every text book of economics: that money had to be invented, because otherwise (before the "invention" of money), people were left to barter (simply exchanging items like shoes or bread directly between one another).
According to Graeber (who also cites other anthropologists, by the way), this image is based on no evidence at all: no society using only barter has ever been recorded or found. in fact, humans have always used some kind of money, be it precious metals or clay tablets or tally sticks (sticks broken in half, one half goes to the debtor, one to the creditor). In later chapters, Graeber notes that “some of the earliest works of moral philosophy (…) are reflections on what it means to imagine morality as debt - that is, in terms of money.”

In fact, Graeber thinks that this purely imaginary exercise of economists (how money came to be) serves simply to make the argument that our current monetary systems are without alternative. In particular, it can serve as an argument against the notion that money is created by and belongs to the government. This argument, e.g. by Smith, has mostly been made in times when coinage (money directly valued in precious metals) was on the rise or already prevalent and the author wanted to make a case for money (coins) being an emergent feature of civilisation. In fact, Graeber makes clear later in the book that governments are actually always crucial in markets that use coinage.

Chapter 3: Primordial Debts

Societies have had to deal with overbearing of debt for thousands of years - and the evidence tells us that most of the time, they cancelled most of the debt at some point, be it through revolution or to avert a revolution. Often, it was a newly installed king (e.g. one of the early Jewish ones) who preferred to start with a blank slate and could afford to clean the table.

Chapter 5: A brief treatise on the Moral Grounds of Economic relations

Graeber identifies three main moral principles of economic relations among humans. In our lives, we often switch back and forth between them.

Communism: Graeber says a kind of "base communism" is basis of a lot of our daily lives, mostly in small, but numerous interactions. The summarizing motto could be framed as “From each according to their abilities, to each according to their needs”. Graeber: “A lot of us act like communists a good deal of the time.”

Exchange: Here, economic relations are all about equivalence between the actors. It can either be exchange with the goal of profit maximization, within impersonal interactions (which in reality, is almost never 100% true) or exchange of gifts. Gift exchange economies often insist on inexact retribution of gifts, in order to keep the system out of equilibrium (and in motion). With gifts, honor enters the picture and with it, the third moral principle:

Hierarchy: here, one party is the superior (e.g. king & peasant, the king gets a large share of the harvest, the peasant gets "protection"). This relation is often built on precedent rather than actual value of the goods/services. Precedents often happen not with the actual intent to create this durable relation - examples are violent acts (e.g. conquering) or giving one-time gifts for appeasement, which actually sets a precedent for a hierarchy relation.

Graeber concludes that often, there is no definition of which type an economic relation actually is, which creates conceptual confusion in economics. Mathematical models of markets certainly do not cover all of these aspects.
What, then, is debt? A debt creates relationships. Not being able to pay off a debt creates hierarchy (subordination). Wealthy debtors on the other hand, get leverage over their creditors (if you owe the bank 100000 dollars, the bank owns you. If you owe 100 million dollars, you own the bank).

Chapter 6: Games with Sex and Death

Graeber makes a distinction between "Human Economies" and commercial economies. In human economies, “humans can never be equivalent to anything.” Money is only used to create and maintain relationships between humans. Graeber shows examples from African societies, where a human can not even be exchanged with another human, even if the cultural laws do something very similar (e.g. if a member of one clan is murdered the clan of the murderer has to send a replacement human to live in the new clan, also the “profound truth” of the famous blood-feud shows that this equivalence is attained, but never fully implemented or reached).
commercial economies can treat humans exchangeable and measure their worth exactly, which can only happen if humans are ripped from their social relations by use of violence. in the most extreme and rapid case, it has meant to be captured and become a slave, a person with no social context at all. Less extreme cases are for instance societies that establish that certain forms of violence, e.g. against women, are accepted.

Chapter 7: Honor and Degradation, or, On the Foundation of Contemporary Civilisation

Graeber paints an image from ancient times that seems familiar today: The prospering cities with free expression and choice of life, surrounded by evangelising nomads, the latter growing stronger as debt-ridden citizens, victims of the city's ruthless accounting, having often lost their families, join their ranks - founding and deepening the nomad's hatred of the city and its way of life. This image comes up again and again in the history of civilization.

“Historically, war, states and markets all tend to feed off one another. Conquest leads to taxes. Taxes tend to be ways to create markets, which are convenient for soldiers and administrators.”

The cultural icon of the undead, the Zombie, can be found in Africa and Haiti, in regions where only recently slavery was rampant. It is fitting to think of a living human who is completely owned by other humans as undead - and by those who own him as having unnatural powers. But this theory is one of the wilder ones in the book.

Chapter 8: Credit versus Bullion, and the Cycles of History

Graeber notes how 5000 years of human economic history seems to be cyclic, to some extent. Two types of economic age interchange. the first type are ages with money defined strictly to the value of precious metals, with much cruelty and slavery in huge power regimes (e.g. Rome, or The East India Company). The second type are ages of paper (virtual credit) money, with smaller empires, less production and slower innovation, where religious preachers try to tame economic effects on humans (e.g. slavery became often outlawed in these ages).

He only shortly visits the First Agrarian Empires (Mesopotamia, Egypt, China - which had virtual credit money) of which we don't know much and then explains the next four great ages in detail (see next chapters), where the last one (again one of virtual credit money) is only 40 years old.

Chapter 9: The Axial Age (800 BC - 600 AD)

About roman law and how it may have shaped our image of property today:
“At this point we can finally see what's really at stake in our peculiar habit of defining ourselves simultaneously as master and slave, reduplicating the most brutal aspects of the ancient household in our very concept of ourselves, as masters of our freedom, or as owners of our very selves. It is the only way that we can imagine ourselves as completely isolated beings. There is a direct line from the new Roman conception of liberty - (…) as the kind of absolute power of 'use' and 'abuse' (…) - to the strange fantasies of liberal philosophers like Hobbes, Locke and Smith, about the origin of human society in some collection of (…) males who seem to have sprung from the earth fully-formed, then have to decide whether to kill each other or to begin to swap beaver pelts.”

Two seemingly connected, but unsolved puzzles of history:

  1. Pythagoras, Confucius and Buddha lived at the same time, unaware of each other (at the beginning of the "Axial Age").
  2. During their lifetimes, coinage was invented three times, independently, at the very places where these first major philosophers lived.

As a sidenote, the emergence of the main philosophical ideas is why Karl Jaspers called it the "Axial Age".

”Axial Age spirituality, then, is built on a bedrock of materialism. This is its secret; one might almost say, the thing that has become invisible to us. (…) In India and China, the debate took different forms, but materialism was always the starting point.”

“The ultimate effect was a kind of ideal division of spheres of human activity that endures to this day: on the one hand the market, on the other, religion. (…) Pure greed and pure generosity are complementary concepts.”

Then, Graeber also notes that he would not write off religion as purely escapist movements - they brought overall positive effects, e.g. less brutality, less slavery.

Chapter 10: The Middle Ages (600AD - 1450AD)

“If the axial age saw the emergence of complementary ideals of commodity markets and universal world religions, the Middle Ages were the period in which those two institutions began to merge. (…) Cities shriveled, and many were abandoned, but even this was something of a mixed blessing. Certainly, it had terrible effects on literacy; but one must also bear in mind that ancient cities could only be maintained by extracting resources from the countryside.”

In China: “Buddhistic Treasuries themselves became (…) the world's first genuine forms of concentrated finance capital. They were, after all, enormous concentrations of wealth managed by what were in effect monastic corporations, which were constantly seeking new opportunities for profitable investment.” Monks had to live off interest for religious reasons. Also, they had the vision of continuous growth, since “genuine liberation would not be possible until the whole world embraced the Dharma”. Regularly, when they were in dangerous shortage of precious metals, Confucian regimes had to break down monasteries, in order to melt the giant Buddha statues that had once been coins.

Commerce in the Islamic world was very flourishing and some islamic thinkers formulated foundational ideas about money centuries before Adam Smith did. Islamic commerce forbade usury (no interest on loans), and as a result there was much more emphasis on trust
p. 303: Two factors are
- actual free market without control of governments, “honor and credit became largely indistinguishable”.
- actual notion of profits being a reward for risk. “Financial mechanisms designed to avoid risk were considered impious. (…) This made most of the forms of finance and insurance that were later to develop in Europe impossible.”

“Our image of the Middle Ages as an "age of faith" - and hence, the blind obedience to authority - is a legacy of the French Enlightenment. (…) It's hard to find many medevial Chinese, Indian or Islamic parallels, for example, to the burning of "witches" or the massacre of heretics. (…) If there is an essence to Medevial thought, it lies (…) in a dogged insistence that the values that govern our daily affairs (…) are confused, mistaken, illusory or perverse. True value lay elsewhere.”

Chapter 11: The Age of the great capitalistic empires (1450 - 1971)

Without exploding population and market activity in China, as well as a government which had recently switched from paper money to silver and gold as currencies, the extraction of precious metals from the New World by Europeans could not have gone on profitably for as long as it did (three centuries) - and who knows how different the outcomes would have been for Native Americans? The Ming dynasty, after regaining power from Mongol rule, had returned to the silver standard around 1450 and abandoned paper money. Also in that time, the Chinese population strived and thus the Chinese were in dire need of silver to keep their domestic commerce flowing. The European merchants accumulated world trade in these times. They imported a lot of Chinese goods and thus all currency made from gold and silver actually never really reached the European people.

p. 314:
“Any number of civilizations have probably been in a position to wreak havoc on the scale that the European powers did in the sixteenth and seventeenth centuries (Ming China itself was an obvious candidate), but almost none actually did so.”

“Scholars have long been fascinated by Spanish debates about the humanity of the Indians. (…) The real point is that at the key moments of decision, none of this mattered. Those making the decision did not feel they were in control anyway; those who were did not particularly care to know the details. (…) Charles V himself was deeply in debt to banking firms in Florence, Genoa, and Naples. (…) Despite a lot of initial noise and morel outrage (…) such decrees were either ignored or, at best, enforced for a year or two before being allowed to slip into abeyance.”
In a footnote, Graeber notes how this reminds him of today's politics, with the UN being the moral high ground (i.e. demanding free education in poor countries), while the IMF (legally a part of the UN) will enforce brutal free market leasers (i.e. imposing school fees for "economic reforms").

p. 332:
“The story of the origins of capitalism, then, is not the story of the gradual destruction of traditional communities by the impersonal power of the market. It is, rather, the story of how an economy of [personal] credit [among people] was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of the impersonal -and often vindictive- power of the state.”

p. 347f:
Graeber shares stories from the first bubbles in early modern western capitalism. (early 1700). Of course, we all know the Dutch tulip bubble. In Britain, there was also the "South Sea Bubble" of 1710, where the South Sea company very quickly became too big too fail (as big as national debt). If that doesn't already relate well enough to our modern times (keyword: silicon valley investment frenzies), there is also documentation about start-up bubbles in the dawn of high promises, fueled by inspiring stories of technological innovation:

“'Innumerable joint-stock companies started up everywhere. (…) Some of them lasted a week of a fortnight. (…) Every evening produced new schemes, and every morning new projects. The highest of the aristocracy were as eager in this hot pursuit of gain as the most plodding jobber in Cornhill.' (…) The author lists eighty-six schemes, raining from the manufacture of soap or sailcloth, the provision of insurance for horses, to a method to 'make deal-boards out of sawdust'”.

Graeber wonders why capitalistic regimes are constantly overshadowed by a fear of impending doom (social revolution, nuclear holocaust, global warming). “Perhaps the reason is because (…) presented with its own eternity, capitalism -or anyway, financial capitalism- simply explodes. Because if there's no end to it, there's absolutely no reason not to generate credit -that is, future money- infinitely.” He then adds that right after capitalism seemed to have "won" over socialism in the 1990s, several reckless bubbles happened soon thereafter.

Chapter 12: The beginning of something yet to be determined (1971 - ?)

In 1971, U.S. President Nixon abolished the international gold standard - an age of credit money began. We don't know much about the effect on the coming time yet - the early decades showed the opposite of what one might expect in terms of moral institutions and even stronger U.S. hegemony. But the latter seems to be on the decline, maybe the former observation is bound to change, as well.

“American imperial power is based on a debt that will never -can never- be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.”
“Since Nixon's time, the most significant overseas buyers of U.S. treasury bonds have tended to be banks in countries that were effectively under U.S. military occupation.”

“If history holds true, an age of virtual money should mean a movement away from war, empire-building, slavery and debt peonage (waged or otherwise), and toward the creation of some sort of overarching institutions, global in scale, to protect debtors. What we have seen so far is the opposite [but elsewhere he says that four decades are a very short time in history]. (…) Insofar as overarching grand cosmic institutions have been created that might be considered in any way parallel to the divine kings of the ancient Middle East or the religious authorities of the Middle Ages, they have not been created to protect debtors, but to enforce the rights of creditors. The International Monetary Fund (IMF) is only the most dramatic case in point here.”

About neo-liberalism: “As an ideology, it meant that not just the market, but capitalism (I must continually remind the reader that these are not the same thing) became the organizing principle of almost everything. We were all to think of ourselves as tiny corporations, organized around the same relationship of investor and executive: between the cold, calculating math of the banker, and the warrior, who, indebted, has abandoned any sense of personal honor (…).”

“My own suspicion is that we are looking at the final effects of the militarization of American capitalism itself. In fact, it could well be said that the last thirty years have been the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a giant machine designed, first and foremost, to destroy any sense os possible alternative futures.”
“To begin to free ourselves, the first thing we need to do is to see ourselves again as historical actors, as people who can make a difference in the course of world events. This is exactly what the militarization of history is trying to take away.”

Graeber notes that the banking system is often justified as democratic in two ways. 1) It funnels resource from the "idle rich" to the "industrious poor". 2) Recently, the situation was reversed: the middle class have become creditors (e.g. through pensions) and the rich, via their leveraged shareholder companies, the debtors. (He cites Ludwig von Mises and Niall Ferguson) Both seemingly contradictory arguments are used, whenever the situation requires it. Graeber thinks this approach asks the wrong questions. What about the "non-industrious poor"? They are completely left out here, as if they do not deserve not to live in poverty. And do the industrious people really help us as society, given that we now see that the assumption of endless economic growth is destroying our resources?

“In the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe.”

# lastedited 26 Jul 2012
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