What is Debt?

[StrangeSox]

An article entitled "To Have Is To Owe" by economic anthropologist David Graeber grabbed my interest last year. Part of the article touched on the mythology surrounding the formation of money going back to Adam Smith and how the standard story, that money evolved from a simple spot-trade barter system, doesn't really make much sense and isn't supported in the historical records.

 

For centuries, economists have searched for the fabled land of barter. Smith set his story in aboriginal North America, and its lack of realism reflects the dearth of reliable information on Native American economic systems in Scottish libraries. But by the middle of the nineteenth century, Lewis Henry Morgan’s descriptions of the Six Nations of the Iroquois had been published and read widely; they made clear that the Iroquois’s goods were stockpiled in longhouses, then allocated by women’s councils, without anyone ever trading arrowheads for slabs of meat. Economists ignored this information. Stanley Jevons, for example, wrote The Principles of Political Economy, his classic study of the origins of money, in 1871. He took his examples straight from Smith, describing Indians swapping venison for elk and beaver hides. Around the same time, missionaries, adventurers, and colonial administrators were fanning out across the world, many carrying copies of Smith’s The Wealth of Nations, expecting to find the land of barter. None ever did. They discovered an almost endless variety of economic systems. But to this day, no one has been able to locate a place where the ordinary mode of economic transaction between neighbors takes the form of “I’ll give you twenty chickens for that cow."

 

Graeber published a book this summer entitled Debt: The First 5000 Years. In it, he explores the origins of debt and credit in human civilization and the moral underpinnings from which it sprung:

 

Every economics textbook says the same thing: Money was invented to replace onerous and complicated barter systems—to relieve ancient people from having to haul their goods to market. The problem with this version of history? There’s not a shred of evidence to support it.

 

Here anthropologist David Graeber presents a stunning reversal of conventional wisdom. He shows that for more than 5,000 years, since the beginnings of the first agrarian empires, humans have used elaborate credit systems to buy and sell goods—that is, long before the invention of coins or cash. It is in this era, Graeber argues, that we also first encounter a society divided into debtors and creditors.

 

Graeber shows that arguments about debt and debt forgiveness have been at the center of political debates from Italy to China, as well as sparking innumerable insurrections. He also brilliantly demonstrates that the language of the ancient works of law and religion (words like “guilt,” “sin,” and “redemption”) derive in large part from ancient debates about debt, and shape even our most basic ideas of right and wrong. We are still fighting these battles today without knowing it.

 

Debt: The First 5,000 Years is a fascinating chronicle of this little known history—as well as how it has defined human history, and what it means for the credit crisis of the present day and the future of our economy.

 

He's also had a few articles and interviews on Naked Capitalism lately:

 

What is Debt? An Interview...

Lengthy interview covering many of the ideas presented in the book.

 

David Graeber: On the Invention of Money

A rebuttal to some criticism, a thorough layout of his concepts of the formation of money and an attack on the nature of blog "echo chambers"

 

[Texsox]

Are you by any chance on the Delancy mail list? That was the excerpt for today. Very interesting.

[StrangeSox]

Nope, but I'll check it out.

 

I know some of his findings are more controversial (all human interactions are communistic in nature) but the actual history of credit, debt and money and how they arose from moral debt is pretty fascinating.