I’ve previously noted that top economists say will have a never-ending depression unless we repudiate the mountains of bad debt choking the world, that repudiating bad debt is moral, legal, empowering and popular.
I’ve pointed out that debt always grows exponentially, while the real economy can only grow in an “s-curve”, and so periodic debt jubilees are needed. And that we have forgotten what the ancient Sumerians and Babylonians, the early Jews and Christians, the Founding Fathers and even Napoleon Bonaparte knew about money and debt.
And I’ve reported that the money of individuals, businesses, cities, states and entire nations is disappearing into the abyss of debt, and that – by choosing the pretend creditors over the little guy – the government is dooming both to failure.
Here are must-read excerpts from the interview:
Interviewer (Journalist Philip Pilkington): Most economists claim that money was invented to replace the barter system. But you’ve found something quite different, am I correct?
David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.
Rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.
This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any human language is the Sumerian amargi, a word for debt-freedom, and by extension freedom more generally, which literally means ‘return to mother,’ since when they declared a clean slate, all the debt peons would get to go home.
Taxes are also key to creating the first markets that operate on cash, since coinage seems to be invented or at least widely popularized to pay soldiers – more or less simultaneously in China, India, and the Mediterranean, where governments find the easiest way to provision the troops is to issue them standard-issue bits of gold or silver and then demand everyone else in the kingdom give them one of those coins back again. Thus we find that the language of debt and the language of morality start to merge.
In Sanskrit, Hebrew, Aramaic, ‘debt,’ ‘guilt,’ and ‘sin’ are actually the same word. Much of the language of the great religious movements – reckoning, redemption, karmic accounting and the like – are drawn from the language of ancient finance. But that language is always found wanting and inadequate and twisted around into something completely different. It’s as if the great prophets and religious teachers had no choice but to start with that kind of language because it’s the language that existed at the time, but they only adopted it so as to turn it into its opposite: as a way of saying debts are not sacred, but forgiveness of debt, or the ability to wipe out debt, or to realize that debts aren’t real – these are the acts that are truly sacred.
How did this happen? Well, remember I said that the big question in the origins of money is how a sense of obligation – an ‘I owe you one’ – turns into something that can be precisely quantified? Well, the answer seems to be: when there is a potential for violence. If you give someone a pig and they give you a few chickens back you might think they’re a cheapskate, and mock them, but you’re unlikely to come up with a mathematical formula for exactly how cheap you think they are. If someone pokes out your eye in a fight, or kills your brother, that’s when you start saying, “traditional compensation is exactly twenty-seven heifers of the finest quality and if they’re not of the finest quality, this means war!”
Money, in the sense of exact equivalents, seems to emerge from situations like that, but also, war and plunder, the disposal of loot, slavery. In early Medieval Ireland, for example, slave-girls were the highest denomination of currency. And you could specify the exact value of everything in a typical house even though very few of those items were available for sale anywhere because they were used to pay fines or damages if someone broke them.
But once you understand that taxes and money largely begin with war it becomes easier to see what really happened. After all, every Mafiosi understands this. If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt. “You owe me, but I’ll cut you a break for now…” Most human beings in history have probably been told this by their debtors. And the crucial thing is: what possible reply can you make but, “wait a minute, who owes what to who here?” And of course for thousands of years, that’s what the victims have said, but the moment you do, you are using the rulers’ language, you’re admitting that debt and morality really are the same thing. That’s the situation the religious thinkers were stuck with, so they started with the language of debt, and then they tried to turn it around and make it into something else.
PP: You’d be forgiven for thinking this was all very Nietzschean. In his ‘On the Genealogy of Morals’ the German philosopher Friedrich Nietzsche famously argued that all morality was founded upon the extraction of debt under the threat of violence. The sense of obligation instilled in the debtor was, for Nietzsche, the origin of civilisation itself.
DG: If however you ditch the whole myth of barter, and start with a community where people do have prior moral relations, and then ask, how do those moral relations come to be framed as ‘debts’ – that is, as something precisely quantified, impersonal, and therefore, transferrable – well, that’s an entirely different question. In that case, yes, you do have to start with the role of violence.
What do people who don’t use money actually do when things change hands? Anthropologists had documented an endless variety of such economic systems, but hadn’t really worked out common principles. What Mauss noticed was that in almost all of them, everyone pretended as if they were just giving one another gifts and then they fervently denied they expected anything back. But in actual fact everyone understood there were implicit rules and recipients would feel compelled to make some sort of return.
What fascinated Mauss was that this seemed to be universally true, even today. If I take a free-market economist out to dinner he’ll feel like he should return the favor and take me out to dinner later. He might even think that he is something of chump if he doesn’t and this even if his theory tells him he just got something for nothing and should be happy about it. Why is that? What is this force that compels me to want to return a gift?
This is an important argument, and it shows there is always a certain morality underlying what we call economic life.
Money has, for most of its history, been a strange hybrid entity that takes on aspects of both commodity (object) and credit (social relation.) What I think I’ve managed to add to that is the historical realization that while money has always been both, it swings back and forth – there are periods where credit is primary, and everyone adopts more or less Chartalist theories of money and others where cash tends to predominate and commodity theories of money instead come to the fore. We tend to forget that in, say, the Middle Ages, from France to China, Chartalism was just common sense: money was just a social convention; in practice, it was whatever the king was willing to accept in taxes.
The last time we saw a broad shift from commodity money to credit money it wasn’t a very pretty sight. To name a few we had the fall of the Roman Empire, the Kali Age in India and the breakdown of the Han dynasty… There was a lot of death, catastrophe and mayhem. The final outcome was in many ways profoundly libratory for the bulk of those who lived through it – chattel slavery, for example, was largely eliminated from the great civilizations. This was a remarkable historical achievement. The decline of cities actually meant most people worked far less. But still, one does rather hope the dislocation won’t be quite so epic in its scale this time around. Especially since the actual means of destruction are so much greater this time around.
In the past, periods dominated by virtual credit money have also been periods where there have been social protections for debtors. Once you recognize that money is just a social construct, a credit, an IOU, then first of all what is to stop people from generating it endlessly? And how do you prevent the poor from falling into debt traps and becoming effectively enslaved to the rich? That’s why you had Mesopotamian clean slates, Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on and so forth.
Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.
Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.
And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.
PP: You mention that the IMF and S&P are institutions that are mainly geared toward extracting debts for creditors. This seems to have become the case in the European monetary union too. What do you make of the situation in Europe at the moment?
DG: Well, I think this is a prime example of why existing arrangements are clearly untenable. Obviously the ‘whole debt’ cannot be paid. But even when some French banks offered voluntary write-downs for Greece, the others insisted they would treat it as if it were a default anyway. The UK takes the even weirder position that this is true even of debts the government owes to banks that have been nationalized – that is, technically, that they owe to themselves! If that means that disabled pensioners are no longer able to use public transit or youth centers have to be closed down, well that’s simply the ‘reality of the situation,’ as they put it.
These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008. That’s one of the reasons I think you see the beginnings of a reaction in a remarkably similar form to what we saw during the heyday of the ‘Third World debt crisis’ – what got called, rather weirdly, the ‘anti-globalization movement’. This movement called for genuine democracy and actually tried to practice forms of direct, horizontal democracy. In the face of this there was the insidious alliance between financial elites and global bureaucrats (whether the IMF, World Bank, WTO, now EU, or what-have-you).
When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.
Eventually, there will have to be recognition that in a phase of virtual money, safeguards have to be put in place – and not just ones to protect creditors. How many disasters it will take to get there? I can’t say.