Notes - Debt: The First 5000 Years
David Graeber takes a look at history, and how the concept of debt - something so intrinsic to social relations - has changed over the years, and turned into something verging on the edge criminal. This book may be the most important book I have read in terms of defining how I see money, and how I think about it socially.
What does it mean to say that our sense of morality and justice is reduced to the language of a business deal? What does it mean when we reduce moral obligations to debts? [pg 13]
Graeber takes a lot of time to describe how our languages have evolved to equate how we interact with people on an everyday basis - “please” and “thank you” - with how we would deal in a purely financial situation. It’s telling of our society and culture.
Since colonial days, Americans have been the population least sympathetic to debtors. In a way this is odd, since America was settled largely by absconding debtors. [pg 16]
No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing. - Caroline Humphrey, “Barter and Economic Disintegration”
To be fair, I have not read many economic treatises, but I have heard the theory of a barter economy before, and have even been taught it in school.
Whatever its earliest origins, for the last 4 thousand years money has been effectively a creation of the state. Individuals, he observed, make contracts with one another. They take out debts, and they promise payment. [pg 54]
This book points out that maybe economists should stop trying to explain the world with economics, and start looking at what other disciplines have learned, or know. The study of Economics, by economists, is seen as the master discipline. Ex: Freakonomics. Economics assumes that the world is made up of self-interested actors calculating how to get the best terms possible out of any situation. Something both standard psychology, and this book, disprove1.
Markets aren’t real. They are mathematical models, created by imagining a self-contained world where everyone has exactly the same motivation, and the same knowledge, and is engaged in the same self-interested, calculating exchange. [pg 114]
A critique of game theory could easily be phrased in the same way. We continuously pretend to understand a complex system, and this has had numerous disastrous consequences, least amongst which was the 2008 market crash. I have yet to read Aid on the Edge of Chaos, but it’s said to tackle and talk about complex systems in terms of foreign development. Psychohistory has been a long time coming2.
What makes debt different is that it is premised on an assumption of equality [pg 86].
Communism is often described as:
From each according to their abilities, to each according to their needs. [pg 94]
One could argue that this is also the fundamental principle of Capitalism, but with the added clause of “with as much extraction of money as is possible.” To continue:
While markets are ways of exchanging goods through the medium of money - historically, ways for those with a surplus of grain to acquire candles and vice versa (in economic shorthand, C-M-C’, for commodity-money-other commodity) - capitalism is first and foremost the art of using money to get more money (M-C-M’). Normally, the easiest way to do this is by establishing some kind of formal or de facto monopoly. For this reason, capitalists, whether merchant princes, financiers, or industrialists, invariably try to ally themselves with political authorities to limit the freedom of the market, so as to make it easier for them to do so. [pg 260]
This has been fundamental for me to understand the difference between markets and capitalism. The two get blurred together quickly by economists, theorists, and thinkers along both sides of the isle, and I think I’ve always had a hard time getting that, especially when it comes to communist or anarchist thinking.
As a result, he argues, divine providence has arranged us to have different abilities, desires, and inclinations. The market is simply one manifestation of this more general principle of mutual aid, of the matching of abilities (supply) and needs (demand) - or, to translate it into my own [Graeber’s] earlier terms, it is not only founded on, but is itself an extension of the kind of baseline communism on which any society must ultimately rest. [pg 279]
Similarly, English villagers celebrated everyday communism:
Markets were not seen as contradicting this ethos of Mutual Aid. It was an extension of mutual aid - and for much the same reason. Because it operated entirely through trust and credit.
Internally, capitalist firms operate communistically.
Not directly this, but I have noticed similar statements in other works I’ve read.3
"Gift here does not mean something given freely, not mutual aid that we can ordinarily expect human beings to provide to one another. To thank someone suggests that he or she might not have acted that way, and that therefore the choice to act this way creates an obligation, a sense of debt, and hence, inferiority." [pg 116]
An explanation given by an eskimo, on why they don’t think of gifts as we do. It’s an incredibly striking, and culture shaking statement. It changes how I view helping people, donating money, and doing favors.
Linked into the fight with vicious and virtuous cycles4
Debt talks about contracts as a temporary agreement between two parties to not be equals. One party says “I will give away my time and my self in exchange for money, to do what you want”. The same goes for governments:
Government was essentially a contract, a kind of business arrangement whereby citizens had voluntarily given up some of their natural liberties. [pg 206]
Is this bad? Not necessarily. Is the putting it onto paper part necessary?
There is every reason to believe that slavery, with its unique ability to rip human beings from their contexts, to turn them into abstractions, played a key role in markets everywhere. [pg 165]
Alongside the way governments introduced money to be able to maintain their armies, which brought in slaves, which produced more money. Through a series of events (best outlined on pg 249), this system eventually separated markets from religion, separating moral thought from the selfish acquisition of material things, insisting that there is no space for considering society within a market, or an economy.
We might say then that money introduced a democratization of desire. Insofar as everyone wanted money, everyone, high and low, was pursuing the same promiscuous substance. But even more: increasingly, they did not just want money. They needed it.
In ancient Greece, when the big epics are set, money was not important. Graeber explains how before this, it’s hard to find references to “necessities” in ancient literature, because it was assumed everyone had them (the definition of “everyone” was of course flexible, and meant everyone who belongs to that exclusive group).
Philosophers have spent centuries trying to understand how it could be possible for us to have a relation of domination over ourselves. The most popular solution - to say that each of us has something called a ‘mind’ and that this is completely separate from something else, which we can call ‘the body’, and that the first thing holds natural dominion over the second - flies in the face of just about everything we now know about cognitive science. It’s obviously untrue, but we continue to hold onto it anyway, for the simple reason that none of our everyday assumptions about property, law, and freedom would make sense without it.
This is largely because we’re no longer able to imagine what a world based on social arrangements that did not require the continual threat of tasers and surveillance cameras would even look like. [pg 260]
There’s a fascinating story about the reality of this within Chicago5.
A fresh look at history, you won’t find this taught in European or American history books:
Now, since Roman times, Europe had been exporting gold and silver to the East: the problem was that Europe had never produced much of anything that Asians wanted to buy, so it was forced to pay in specie for silks, spices, steel, and other imports. The early years of the European expansion were largely attempts to gain access either to Eastern luxuries or to new sources of gold and silver with which to pay for them. In those early days, Atlantic Europe really had only one substantial advantage over its Muslim rivals: an active and advanced tradition of naval warfare, honed by centuries of conflict in the Mediterranean. The moment when Vasco da Gama entered the Indian Ocean in 1498, the principle that the seas should be a zone of peaceful trade came to an immediate end. Portuguese flotillas began bombarding and sacking every port city they came across, then seizing control of strategic points and extorting protection money form unarmed Indian Ocean merchants for the right to carry on their business unmolested. [pg 311]
Think about how that puts into perspective the conquest of the Americas by the Spanish, Portuguese, and English.
The last chapter of the book is an offensive on Capitalism.
In every case, their price was quickly bid through the ceiling - each new buyer betting, effectively, that he or she could unload [the stocks] to some even more gullible sucker before the inevitable collapse. [pg 348]
The South Sea Bubble, but also see the Dot Com Bubble, Tulip Panic, and when people buy Facebook stock, or Twitter stock. Or when they ever buy stock. Conceptually, people no longer buy stock because they think companies have long term value. They think that they can offload the stock to someone else in the future, when they need the money. Stock brokers think other stock brokers are suckers, and that they are the ones that can beat the system. It’s a system that relies on other people making mistakes and wrong gambles. There’s an interesting discussion about EMH and Index Funds over on HN related to this.6.
In the new dispensation, wages would no longer rise, but workers were encouraged to buy a piece of capitalism. Rather than euthanize the rentiers, everyone could now become rentiers - effectively could grab a chunk of the profits created by their own increasingly dramatic rates of exploitation. [pg 376]
See also: 401ks.
Insofar as it [money that put people into their current debts] was borrowed for what economists like to call discretionary spending, it was mainly to be given to children, to share with friends, or otherwise to be able to build and maintain relations with other human beings that are based on something other than sheer material calculation. One must go into debt to achieve a life that goes in any way beyond sheer survival.
Debt has become such a norm, and increasingly, people in debt are not crooks. But debt is painted as crookery. The people in debt are trying to make a normal living, and spend money on things that make their lives better. Yet we vilify them for it.
Capitalism doesn’t work that way. It is ultimately a system of power and exclusion, and when it reaches the breaking point, the symptoms recur. [pg 381]
Not everyone can have it all. For the rich to stay rich, they need to exploit a group of people.
Once you realize that the original meaning is the financial one, the word Interest becomes incredibly fascinating. [pg 332]
Kahneman, 2003 - A Psychological perspective on Economics. ↩
Psychohistory is the basis of Asimov’s pretty good Foundation series. ↩
Why Nations Fail ↩
Discussion - Why I don’t trade stocks and (probably) neither should you. If everyone assumed the market always went up, it would stop going up. But then people would think they could more easily beat it, and it would start fluctuating again, etc. ↩