David Graeber on debt as a false religion

If debt through compound interest is an obligation with no upper limit, and if it is in law an obligation which transcends all other obligation, then the idea of debt is like a religion—the sacrifice of all other values to Mammon.  Or so it has long seemed to me.

People today world are still sold into slavery to pay their debts.  Nations are required by international organizations to sacrifice the welfare of their people in order to pay debts to international banks, even debts incurred by previous rulers to acquire the means to keep their people down.  Overhanging debt holds back our economy, yet a write-down of debt seems unthinkable.

David Graeber is an American who teaches anthropology at Goldsmiths, University of London; he also is an anarchist who was one of the originators of the Occupy Wall Street protest.   In his book, Debt: the First 5,000 Years, he attempted to explain the origins of the moral, religious and social meaning of debt.

Debt: the First 5,000 Years is profound, interesting, difficult and, at times, sometimes questionable.  Graeber clarified and expanded my own insight about the nature of debt.  He made me see world history in a new light.  I wonder about some of his assertions, but do not have the knowledge to refute.  I would willingly take a semester course with this as a textbook.

You can click on the title above to get Graeber’s outline of his idea for the book.   In what follows I’ll try to explain what I got out of it.

According to Graeber, most human beings, in their most intimate relationships, operate on the basis of small-c communism.  People do what they can for their loved ones and their community, and receive what they need in return.

The first step beyond this is reciprocal obligation.  People do favors for their neighbors and keep track in their minds who owes a favor to whom.

People have a sense of debt to God or the gods for their very existence, he wrote.  There are debts of honor, in which retribution or repayment must be made for the taking of human life.  There is “bride-wealth,” the payment by a husband to a wife’s family.  All these things are paid for in special ways, in wampum or sea shells or specially woven cloth, precisely because they are of infinite worth and cannot be quantified in terms of goods used in everyday life.

David Graeber

None of this is debt in our sense, as something precisely quantifiable.  Such debt, according to Graeber, came into existence with the emergence of the great agrarian empires in Egypt and the Fertile Crescent.  These empires were ruled by kings who were thought to be demi-gods or in communion with the gods, who collected taxes and tribute in the name of the gods themselves.  Graeber wrote that along with this came banking and credit, which existed long before coins or cash.

He said the use of money came into being in the Axial Age (800 BC to 600 AD).  Money was not a substitute for barter, which in ancient times was never used among people who were acquainted with each other.  Money was a convenience for rulers.

An emperor, instead of having to provide for his troops, could simply pay them in gold or silver coins, which they could use to buy food, shoes or whatever else they needed.  The common people would need gold and silver coins, because the emperor demanded payment of taxes in the form of gold and silver.

Graeber said many military conquerors, including Alexander the Great, financed their operations with borrowed money, which was repaid out of loot.  Here again, it was convenient to melt loot down into portable gold or silver ingots.

Because the great world religions arose in the Axial Age, the scriptures of Judaism, Christianity, Hinduism and Buddhism conflate the idea of sin with the idea of debt.  The Lord’s prayer asks God to “forgive us our debts, as we forgive out debtors.”  Hinduism and Buddhism believe in karmic debt, a negative balance of bad actions over good actions, which accumulates through multiple lifetimes and has to be paid.

The scriptures of all four religions regard money-lending and usury as sinful, but at the same time regard debt as an absolute obligation.  There are passages in both the Hebrew Bible and Christian New Testament about men selling wives and children into slavery to pay debts.

In the Ten Commandments, the reason there are separate commandments for “thou shalt not commit adultery” and “thou shalt not covet thy neighbor’s wife” is that the second passage is about acquiring your neighbor’s wife as your property, along with his ox, his ass, his maidservant and his manservant.  The first is about sex, the second about human slaves as property.

Graeber said this theme is not present in Chinese religious philosophy,, although the Chinese rulers seem not to have behaved differently from those of India, the Fertile Crescent or the Mediterranean world.

The Middle Ages (600 to 1450 AD) were, according to Graeber, a period when religious values called into question monetary values, he wrote.  This was true across the civilized world from China to Europe.  Money came to be regarded as a symbol of value instead of something with intrinsic value, he wrote; this was when the Chinese came to use paper money.

This period represented relative freedom rather than regression.  In Europe, it was less laborious for a poor peasant to support a lord in his castle and a priest in his church than, as during the Roman period, to have to help support a huge city.

Both the Muslim world and the Chinese created free market economic systems without capitalism, he said.  They gave their merchants free rein, but no governmental support, even to enforcement of debts.  This meant that, in order to get credit, merchants had to have reputations for honesty.

Islam, as Graeber noted, is the only one of the great world religions to have been founded by a merchant.  Merchants in the Muslim enjoyed much greater respect than in China or Europe, he wrote.  The ideal was to be like the fictional Sinbad the Sailor—to go out into the world, have adventures, acquire wealth and retire in dignity to enjoy the fruit of your endeavors.

The Islamic economy operated without compound interest.  A merchant charged a higher price on goods he sold on credit.  An investor in a business venture shared the risk as well as the profit.  But there was no inexorable increase in debt so that forced the debtor to pay back the original sum many times over, while still leaving the person as deep in debt as ever.

Graeber began his chapter on the Age of the Great Capitalist Empires (1450-1971) with the story of Cortez and his ruthless quest for gold, which was fueled by two things—the fact that Cortez himself was perpetually in debt, which he never got out of, and the fact that Europeans needed gold to buy the merchandise of China and India.

The Western world had a balance of payments problem with China going back to Roman times, based on the fact that China produced silks, porcelains and other goods that the rest of the world wanted, but the rest of the world produced little or nothing the Chinese wanted, except gold and silver.

All the gold the Spanish looted from Mexico and Peru, and all the silver mined by slave labor in the Andes by slaves, eventually wound up, through world trade, in Buddhist and Hindu temples in China and India.  This changed only when the British suppressed India’s textile industry and set the Indians to work refining opium for export to China, which they waged a war to force the Chinese to accept.

Graeber wrote that the African slave trade was based on debt in all its aspects.  The owners of the tobacco and sugar plantations, the owners of the slave ships and even the Africans who traded in slaves were working to pay off debts, and many of the Africans sold into slavery were already in debt slavery to other Africans.

He told how the French used debt as a means to subjugate people in Madagascar, where he did field work as an anthropologist.  The conquered peoples were considered lazy because they preferred to engage in hunting, fishing and subsistence farming rather than work for wages for white people.  So the French, like other European conquerors, required the Malagasy people who pay taxes to cover the cost of conquering and ruling them, and the money to pay these taxes could only be acquired by working for wages for a Frenchman.

 The French had a policy of inducing the Malagasy people to acquire a taste for cheap luxuries, which also put them in debt which had to be paid by cash.  When Graeber was there, he said some still resisted this, but most succumbed.

He wrote about villages in England, and how commercial values gradually superseded human values—that is, impersonal relationships replace personal relationships.  This is not to say that there can’t be cruelty and exploitation in personal relationships, but it is cruelty and exploitation by an individual person, not a system.

What’s missing from Graeber’s book is the story of capitalism and the Industrial Revolution as I learned about it in school—the story of how people in Britain, then in Europe and North America and now around the world learned how to use technology to increase the total amount of wealth in the world, to the ultimate benefit of all, or at least potential benefit of all.

He merely stated gruffly that the increase in the world’s wealth in the past 250 years is all an illusion and not sustainable.  He could well be right, but I would like evidence and argument for this assertion.

The last chapter of the book is a rant against banks and their seeming power to create money out of nowhere—a rant whose spirit I largely agree with, but which isn’t based on any facts that would convince anyone who didn’t already agree.  Graeber doesn’t seem to understand contemporary finance.  Banks do create money, in a sense, but not without limits and not out of nowhere.

The value of the book for me is how Graeber showed how we came to regard payment of monetary as the supreme moral obligation that overrides all the rest.  Once this belief is brought to consciousness, we see how absurd and harmful it is.

Click on Do Banks Create Money From Thin Air? by Dan Kervick for background on banks and money.

Tags: Banking, David Graeber, Debt, Debt Forgiveness, Debt: the First 5000 Years, Islamic banking, Money