Synopsis
Graeber lays out the historical development of the idea of debt, starting from the first recorded debt systems in the Sumer civilization around 3500 BCE. In this early form of borrowing and lending, farmers would often become so mired in debt that their children would be forced into debt peonage. Because of the social tension that came with this enslavement of large parts of the population, kings periodically canceled all debts. In ancient Israel, the resulting amnesty came to be known as the Law of Jubilee.
Graeber argues that debt and credit historically appeared before money, which itself appeared before barter. This is the opposite of the narrative given in standard economics texts dating back to Adam Smith. To support this, he cites numerous historical, ethnographic and archaeological studies. He also claims that the standard economics texts cite no evidence for suggesting that barter came before money, credit and debt, and he has seen no credible reports suggesting such.
The primary theme of the book is that excessive popular indebtedness has sometimes led to unrest, insurrection, and revolt. He argues that credit systems originally developed as means of account long before the advent of coinage, which appeared around 600 BCE. Credit can still be seen operating in non-monetary economies. Barter, on the other hand, seems primarily to have been used for limited exchanges between different societies that had infrequent contact and often were in a context of ritualized warfare.
Graeber suggests that economic life originally related to social currencies. These were closely related to routine non-market interactions within a community. This created an "everyday communism" based on mutual expectations and responsibilities among individuals. This type of economy is contrasted with exchange based on formal equality and reciprocity (but not necessarily leading to market relations) and hierarchy. The hierarchies in turn tended to institutionalize inequalities in customs and castes.
The great Axial Age civilizations (800 BCE – 600 CE) began to use coins to quantify the economic values of portions of what Graeber calls "human economies". Graeber says these civilizations held a radically different conception of debt and social relations. These were based on the radical incalculability of human life and the constant creation and recreation of social bonds through gifts, marriages, and general sociability. The author postulates the growth of a "military–coinage–slave complex" around this time. These were enforced by mercenary armies that looted cities and cut human beings from their social context to work as slaves in Greece, Rome, and elsewhere. The extreme violence of this period, marked by the rise of great empires in the Mediterranean, China, and India, was, in this way, connected with the advent of large-scale slavery and the use of coins to pay soldiers. This was combined with obligations to pay taxes in currency; the obligation to pay taxes with money required people to engage in monetary transactions, often with very disadvantageous terms of trade. This typically increased debt and slavery. At this time, great religions also spread, and the general questions of philosophical inquiry emerged in world history. These included discussions of debt and its relation to ethics (e.g., Plato's Republic).
When the great empires in Rome and India collapsed, the resulting checkerboard of small kingdoms and republics saw a gradual decline in standing armies and cities. This included the creation of hierarchical caste systems, the retreat of gold and silver to the temples and the abolition of slavery. Although hard currency was no longer used in everyday life, its use as a unit of account and credit continued in medieval Europe. Graeber insists that people in the Middle Ages in Europe continued to use the concept of money, even though they no longer had the physical symbols. This contradicts the popular claims of economists that the Middle Ages saw the economy "revert to barter". During the Middle Ages more sophisticated financial instruments appeared. These included promissory notes and paper money (in China, where the empire managed to survive the collapse observed elsewhere), letters of credit, and cheques (in the Islamic world).
The emergence of the Atlantic slave trade and the massive amounts of gold and silver extracted from the Americas—most of which ended up in East Asia, especially China—stimulated the reemergence of the bullion economy and large-scale military violence. All of these developments, according to Graeber, directly intertwined with the earlier expansion of the Italian mercantile city-states as centers of finance that defied the Catholic Church's ban on usury and led to the current age of great capitalist empires. As the new continent opened new possibilities for gain, it also created a new area for adventurous militarism backed by debts that required the economic exploitation of the Amerindian and, later, West African populations. As it did, cities again flourished in the European continent and capitalism advanced to encompass larger areas of the globe when European trade companies and military outposts disrupted local markets and pushed for colonial monopolies.
The bullion economy ended with the abandonment of the gold standard by the U.S. government in 1971. This return to credit money increased uncertainties. For the moment, the dollar still stands as the primary world currency. This status of the dollar (as with all money) is based on its capacity to extend its quantity through debts and deficits and, more importantly, by the unrestrained authority of the Federal Reserve to create money, which has enabled the U.S. to create a $39 trillion national debt by 2026. This may continue as long as (a) the United States maintains its status as the world's pre-eminent military power and (b) client states are eager to pay seignorage for U.S. government bonds. By comparing the evolution of debt in our times to other historical eras and different societies, the author suggests that modern debt crises are not the inevitable product of history and must be resolved in the near future in a way similar to the solutions, at least in principle, as applied during the last 5000 years.
