Anthropologist David Graeber could not have timed his new book better. Debt: The First 5,000 Years is a sweeping historical survey of the social meaning of debt – or more precisely, the relationship between debtors and creditors. While many people regard this as a straight-forward moral matter – “everyone needs to pay the debts they owe” – Graeber invokes dozens of instances throughout world history to show how this relationship is highly complicated -- and essentially political.
Debt is not really a freely entered into contract between equals. It is a time-delayed market exchange in which the debtor agrees to be subordinate to the creditor for the duration of the loan. Upon full repayment of the debt, the debtor suddenly becomes an equal to the creditor again.
The subordination of debtors is not only morally fraught, as evidenced by synonyms for the word debt such as “sin” and “guilt.” Debt is also (indeed, primarily) a political subordination. The creditor has the whip hand – and debtors are vulnerable to all sorts of contempt, abuse and punishment. In Roman times, a creditor could seize a debtor's wives and children as collateral, and make them personal slaves, if the debtor failed to repay a loan.
Debt thus becomes a fulcrum upon which the rich and powerful -- creditors -- can hold entire classes of people in servitude. Over time, it can cause major political disenfranchisement, concentrations of power and social dislocations. During biblical times, as debtors' family members were forced to work as household slaves for creditors for years at a time, the calling of a Jubillee – or blanket amnesty for debts – was the only way to rebuild the social fabric and reunite wives and children with their families.
It's a huge advance that human beings can no longer be taken as collateral for loans, of course. But on the other hand, there is still no Jubilee or other systemic way to restore a generalized social equality that has been destroyed by decades of debt-servitude. The problem is that creditors tend to get richer precisely as debtors grow more hopelessly in debt. The resulting concentrations of wealth and power eventually become highly destabilizing. The 99% rise up to confront the 1%.
This is one way to understand the Occupy Wall Street movement: a primal cry of the debtor class protesting their structural, indefinite servitude at the hands of those in control of the money. Ever since the Reagan/Thatcher neoliberal revolution began in the early 1980s, the screws have grown tighter on the middle class and working poor, thanks to a combination of privatization of public wealth, deregulation of corporate behavior, and budget cutbacks for public services. The problem is made worse by credit being managed not as a commons, but as a private asset designed to expand the wealth and privilege of those who control it.
Eight years of George W. Bush as president further rewarded the creditor/investor class, and intensified pressures on debtors, especially through reckless war borrowing (the usual source of government debt) along with heaping measures of good old-fashioned corruption and cronyism. This drove present and future taxpayers deeper into debt.
Such burdens were aggravated by measures like the Bankruptcy Reform Act of 2005, which made it impossible for students to declare bankruptcy on their student loans. This means that hundreds of thousands of unfortunate twenty-somethings are now trapped in a decades-long purgatory of debt amidst a stagnant job market caused by irresponsible lending.
It is taken as a moral truism that everyone has to re-pay their debts. That's "the right thing to do." But as Graeber shows in a range of historical and anthropological vignettes, the morality of debt is equally a function of unequal political power. The moral imperatives of debt are not self-evident or clear-cut.
The debts of the powerful are not the same as the debts of the poor, for example. Economists routinely talk about the “moral hazards” of letting someone off the hook for their legitimately incurred debts. In capitalism, contracts are a sacred oath, they declare. And so on. Yet when Wall Street banks were unable to repay trillions of dollars of unsecured debt because of their reckless pursuit of easy returns, the sanctity of debt repayment somehow evaporated.
Bankers simply called their former colleagues, now serving in government, and demanded that taxpayers bail their banks out. It was a classic “socialize the risk and privatize the profit” scam. So much for the morality of debt! (Wall Street can't even manage to show gratitude for its benefactors, but instead nurses a resentment that the 99% are so angry.)
The recent audit of the Federal Reserve showed that $7.7 trillion was advanced to financial institutions following the 2008 crash to cover bankers' debts and prevent a global market crash. Such revelations help explain why “free market” capitalism is in such a shambles these days: its solemn sermons about contracts, moral hazard and debt proved to be a load of crap. At least it has become more evident that money is not just a neutral medium for transactions. Through the power of debt, it's becoming clearer that money is a rigged medium for managing social relations, class privilege and political power. As Graeber puts it, “Theories of existential debt always end up becoming ways of justifying – or laying claim to – structures of authority.”
Graeber is illuminating and refreshing in situating the meaning of money in the broadest possible human context. Rather than blandly accept the standard economist's narrative that money arose to replace the inefficiencies of barter, Graeber appeals to actual, real-life evidence. He cites French economist-turned anthropologist Philippe Rospabé, who argues that “primitive money” was not a way to pay debts, but rather a way of recognizing the existence of debts that cannot be paid. When a suitor's family paid the family of the bride a sum of the local social currency, for example, western economists often mistake that as “buying” the bride.
But as Graeber points out, “bride-price” is more like a social gesture – a symbolic acknowledgment that "one is asking for something so uniquely valuable that payment of any sort would be impossible....One might call it the recognition of a life-debt.” Similarly, payments by one family to another to settle a blood-feud is not a “payment” or compensation that asserts an equivalency between one person's life and a sum of money. Rather, it is a statement that some things are of greater value than money.
Graeber notes that “rather than being employed to acquire things, [primitive currencies] are mainly used to rearrange relations between people. Above all, to arrange marriages and to settle disputes, particularly those arising from murders or personal injury. There is every reason to believe that our own money started the same way.”
It is Graeber's virtuosity as an anthropologist that he can extend his social and political analysis of debt to the geo-political scale. U.S. economic power has succeeded in making the dollar the world's “reserve currency” – the preferred medium of exchange in international commerce. This means that the U.S. Government can “create” money out of thin air by selling U.S. Treasury bonds to internatioinal investors. This makes the U.S. a debtor nation, but the fact that it controls the currency of debt – and commands overwhelming U.S. military power – means that it will never really have to repay its debt. (Even better, the value of its debt will depreciate over time!) The U.S. debt is simply rolled over indefinitely – for now.
The meaning of U.S. debt has a lot to do with U.S. power. Graeber notes that “it's never clear whether the money siphoned from Asia to support the U.S. war machine [through the purchase of U.S. Bonds] is better seen as 'loans' or as 'tribute.'” But it is clear, he writes, that “American imperial power is based on a debt that will never – can never – be repaid.”
The U.S. will continue to escape any reckonings (at least for now) because its imperial economic and military power enables it to control the world's default currency. When and how the “tribute” that China is now paying (by buying U.S. bonds) turns into “loans” (i.e., something that actually has to be repaid, not rolled over) may be one of the great geo-political shifts of the modern era.
The pleasure of Graeber's Debt lies in its lucid anthropological demystification of the social significance and politics of money and debt. He helps us see more clearly how debt functions as a pervasive medium for regulating our political life and interpersonal relationships. It functions as a subtle medium that presumes an equality among everyone (e.g., the freedom to enter into a contract) while simultaneously binding us into a stigmatizing servitude that can turn viciously politically.
Debt is rigorous, incendiary, revealing and disruptive of the complacent myths of the creditor class. In short, a real treat.