Print Story Creditology
By AmericanVirgo (Mon Oct 17, 2011 at 06:39:52 PM EST) anarchism, economics, history (all tags)
A review of Debt: The First 5,000 Years by David Graeber.

I found out about this book while reading Marginal Revolution. Tyler Cowen's short comment is the best summation:

Do you seek an overly verbose, sometimes fascinating synthesis of economic anthropology, early 20th century credit theories of money, and the history of debt?  The book overinterprets early historical evidence and falls apart as it approaches contemporary times, still it has a vitality which many other tracts lack.
The first few chapters function as Graeber's prolegomenon to the history starting out with some critique of the unquestioned assumption that debt is somehow a sacred obligation. It is followed by a satisfying refutation of the barter myth of the origin of currency. This of course enraged doctrinaire Austrians who believe that Mises' regression theorem, which presupposes a barter economy and insists that money must have originally been a commodity, is necessarily true. They subsequently bashed the book in reviews on Amazon.

He uses several basic concepts throughout the book. Money should be understood first as a unit of account. When given tangible form as a token of debt it can become a currency.

Economies function in three different modes: communism, exchange, and hierarchy. Graeber defines communism as the small give and take of goods for which no reciprocity is expected. When a friend asks for a Coke and you give him one with the expectation he'll repay you somehow, that's communism. This is the most fundamental mode of economic relations without which human society could not function. Exchange is what it sounds like. Direct buying or selling, or indirect exchange in gift economies are all examples this modality. Hierarchy is gifts and demands from a superior, such as king, as well as gifts and requests from an inferior to a superior. These don't function as exchange because the king doesn't need your gift, rather it's a means offering worship.

Graeber generally organizes society into three classes: peasants, merchants, and warriors. The precise shape of the society depends on which two are aligned against the third.

The history begins with ancient Sumer. In the Mesopotamian plain cities began to form and the religious practices of the people centered in temples in these cities. Graeber speculates that at some point the temples began advancing goods to merchants who would travel to some place with goods the temples demands and trade for them, paying the value of the original goods plus interest back.

This practice expanded and eventually local officials and merchants would make loans at interest to peasants. Peasants who were unable to pay their loans would have their property seized and eventually forced into debt-peonage as servants of the lenders.

The history continues in different centers of civilization, Europe, Mesopotamia, India, and China across several ages, what he calls the Axial Age, the Middle Ages, the capitalist empires that began with the Portuguese sailing down the coast of Africa, and then the current age.

Graeber's greatest strength as well as his weakness in this book is his anarchism. He quite correctly notes the violent roots of civilization and of markets themselves, and the exploitation that debt as a structure creates.

Another feature is his work as an anthropologist which gives him a wide selection of human societies from which to draw interesting anecdotes to illustrate his arguments. Although I found his anthropology incomplete. In several places I mentally incorporated a Girardian explanation to really make it seem complete. One example of this is the dialectic of exchange between exchange as violence, and exchange as mutual assistance. (E.g. He touches on but doesn't really get at this aspect of exchange.

What does he get right? The big picture tour of history considered in economic terms is worth the price of the Kindle edition. However it's necessarily incomplete as a consequence. Sir Henry Sumner Maine's Ancient Law provides some good supplementary material. Graeber draws an interesting story out of time that should shape how we see the financial world and how we think about how it ought to function.

The greatest weakness is his suggestions at the end, simply abolishing debt altogether and letting free, as in anarchy, men and women figure out how to make promises to each other is unrealistic. Not surprisingly Graeber is one of the intellectual sources for the Owsers:

While debt certainly can be catastrophic as the collapse of the household-debt fueled bubble of the post-World War II era will show, that doesn't mean it should simply be abolished. Properly chastened by the consequences of the pursuit of false prosperity, we may be able to restore responsible uses of debt.
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Creditology | 3 comments (3 topical, 0 hidden) | Trackback
Interesting by TheophileEscargot (4.00 / 1) #1 Tue Oct 18, 2011 at 02:11:59 AM EST
I've been thinking about reading this, it seems to have generated a lot of attention. His point that debt precedes barter seems to be pretty solid, judging only by the comments and reviews.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
Nice review by Scrymarch (4.00 / 2) #2 Tue Oct 18, 2011 at 10:38:59 AM EST
I liked this interview with the author you may have seen floating around, I think TE linked to it a while back.

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VSTFP n/t by Gedvondur (2.00 / 0) #3 Tue Oct 18, 2011 at 02:01:51 PM EST

"So I will be hitting the snatch hard, I think, tonight." - gzt
Creditology | 3 comments (3 topical, 0 hidden) | Trackback