LA DEUDA, LOS PRIMEROS 5.

000 AÑOS
David Graeber

Lo que sigue es un fragmento de un proyecto mucho más grande para el estudio de la deuda
y el dinero de la deuda en la historia de la humanidad. La primera e irresistible conclusión
de este proyecto es que al estudiar la historia económica, tendemos sistemáticamente a
ignorar el rol de la violencia, y el papel absolutamente importante que juega la guerra y la
esclavitud en la creación y formación de las instituciones fundamentales de lo que ahora
llamamos “la economía”. De hecho los orígenes importan. La violencia puede que sea
invisible, pero permanece inscrita en la lógica misma de nuestro sentido común económico,
en la propia naturaleza aparentemente evidente de instituciones que simplemente no podrían
existir fuera del monopolio de la violencia – pero también, la amenaza sistemática de
violencia – mantenida por el estado contemporáneo.

Permítanme comenzar con la institución de la esclavitud, que para mí juega un papel clave.
A lo largo de la historia, la esclavitud ha sido vista como una consecuencia de la guerra. En
ciertas ocasiones los esclavos son en realidad prisioneros de guerra, en otras no es así, pero
invariablemente la guerra, casi sin excepción, es vista como el fundamento y la justificación
de la esclavitud. Al rendirse, lo que uno hace es entregar su vida; el vencedor tiene el
derecho a matarnos, y en muchos casos lo hará. Si decide no hacerlo, uno literalmente le
debe la vida; una deuda concebida como absoluta, infinita, irredimible. En teoría el
vencedor puede lograr de uno lo que quiera, y todas las deudas – obligaciones – que uno
tiene con otros (sus amigos, familia, antiguas alianzas políticas), o que otros tienen con uno,
se consideran como absolutamente ignoradas. La deuda con el nuevo amo, con tu
propietario, es lo único que ahora existe.

De este tipo de lógica se derivan dos conclusiones muy interesantes, pero que al mismo
tiempo se pueden considerar como diametralmente opuestas. Primero, como todos saben, la
compra y venta de esclavos es otra típica – quizás fundamental – característica de la
esclavitud. En este caso, la deuda absoluta se transforma (en otro contexto, el del mercado)
en algo ya no absoluto. De hecho, se puede cuantificar. Es más, hay buenas razones para
creer que fue exactamente esta operación la que hizo posible el surgimiento de la forma
contemporánea del dinero.

Lo que los antropólogos solían llamar “dinero primitivo”, el tipo que uno encuentra en
sociedades sin estado (por ejemplo, las plumas de pájaro en las islas Salomón, el wampum de
los iroqueses), antes que para comprar y vender mercadería, se usaba más para concertar
bodas, arreglar disputas entre familias, y jugar con otros tipos de relaciones entre personas.
Por ejemplo, si la esclavitud es deuda, entonces la deuda puede llevar a la esclavitud. Un
campesino babilónico puede haber pagado una cantidad conveniente en plata a sus suegros
para oficializar el matrimonio, pero ella de ninguna manera le pertenecía a él. Él no podía
comprar o vender a la madre de sus niños. Pero la situación cambiaba completamente si el
sacaba un préstamo. Si el entraba en mora, sus acreedores podían, primero, llevarse a sus
ovejas y muebles, después, su casa, tierras y huertos, y finalmente, a su esposa, niños e
incluso a el mismo, convirtiéndolos en esclavos por deuda hasta que el asunto sea arreglado
(lo que naturalmente, pues sus recursos disminuían, se hacía cada vez más difícil). Es la
deuda lo que nos hace posible imaginar al dinero en su sentido contemporáneo, y por lo
tanto, también crear lo que ahora nos gusta llamar el mercado: una plaza donde todo se
puede comprar y vender, por que todos los objetos son (como los esclavos) separados de sus
antiguas relaciones sociales y existen solo en relación al dinero.
Pero al mismo tiempo la lógica de la deuda como conquista puede, como dije, llevarnos por
otro camino. Los reyes, a lo largo de la historia, eran muy ambivalentes en cuanto la lógica
de la deuda amenazaba con salirse fuera de control. Esto no implica que fueran hostiles al
mercado. Al contrario: normalmente lo apoyaban, por la simple razón de que para los
gobiernos resulta inconveniente exigir todo lo que necesitan (sedas, ruedas para carros de
guerra, alimentos exóticos, lapislázuli) de sus súbditos. Es mucho más fácil fomentar los
mercados y luego comprar allí. Los mercados antiguos solían seguir en muchos casos a los
ejércitos o séquitos reales, o se formaban cerca de palacios, o en los márgenes de los
puestos militares. Esto ayuda en cierto modo a explicar el comportamiento algo extraño de
las cortes reales: después de todo, dado que los reyes controlaban las minas de oro y plata,
¿cual era exactamente el propósito de estampar fragmentos de esos metales con la cara de
uno, entregarlos a la población civil, y después demandar su devolución a través de
impuestos?

Solo tiene sentido si la recaudación de impuestos era en realidad una manera de forzar a
todos a adquirir monedas, facilitando así el surgimiento de los mercados, ya que su
existencia era conveniente. Sin embargo, para nuestros propósitos actuales, la pregunta más
importante es: ¿cómo se justificaban estos impuestos? ¿Por que los adeudaban los súbditos?
¿Que deuda estaban saldando al pagarlos? Aquí regresamos otra vez al derecho de
conquista. (En realidad, en el mundo antiguo, los ciudadanos libres – sea en Mesopotamia,
Grecia o Roma – a menudo no tenían

que pagar impuestos directos solo por esta razón, pero obviamente aquí estoy simplificando
el asunto). Si los reyes afirmaban tener el poder sobre la vida y muerte de sus súbditos, por
derecho de conquista, entonces las deudas de sus súbditos eran, además, fundamentalmente
infinitas, y también, por lo menos en ese contexto, las relaciones entre cada uno de ellos, lo
que se debían entre ellos, no tenía importancia.

Lo único que existía era su relación con el rey. Esto a su vez explica por que los reyes y
emperadores siempre intentaban regular el poder que los amos tenían sobre los esclavos, y
los acreedores sobre los deudores. Lo mínimo que hacían era insistir siempre, si tenían el
poder, en que aquellos prisioneros cuyas vidas ya habían sido perdonadas no pudieran ser
muertos por sus amos. De hecho solo los gobernantes podían tener el poder arbitrario sobre
la vida y la muerte. La más importante y suprema de las deudas que se podía tener era con
el estado: era en verdad la única ilimitada, exigible de manera absoluta, cósmica.

Esto lo enfatizo por que esta lógica todavía esta con nosotros. Cuando hablamos de una
“sociedad” (la francesa, la jamaicana) en realidad estamos hablando de gente organizada
bajo un solo estado nación. Ese es, por lo menos, el modelo tácito. Las “Sociedades” son en
verdad estados, la lógica de los estados es la conquista, la lógica de la conquista es
fundamentalmente idéntica a aquella de la esclavitud. Es verdad que desde el punto de vista
de los defensores del estado esto es transformado en la más benévola noción de “deuda
social”. Pero aquí nos encontramos con un pequeño cuento, una especie de mito. Todos
nosotros hemos nacido con una deuda infinita con la sociedad que nos crió, alimentó y
vistió, con aquellos desaparecidos hace ya muchos años que inventaron nuestros lenguajes y
tradiciones, que hicieron posible nuestra existencia. En la antigüedad creíamos que ésta se
la debíamos a los dioses (se la pagaba con el sacrificio, o el sacrificio era en verdad solo el
pago de intereses – la cancelación final se hacía con la muerte). Más tarde la deuda fue
adoptada por el estado, en si una institución divina, con los sacrificios sustituidos por los
impuestos, y la deuda de la vida por el servicio militar. El dinero es simplemente la forma
concreta de esta deuda social, la manera en que es manejada. A los seguidores de Keynes
les gusta esta lógica. Y también a algunas variedades de socialistas, de socialdemócratas,
incluso a cripto-fascistas como Auguste Comte (quien fue, que yo sepa, el primero que
acuñó la frase “deuda social”). Pero esta lógica también se puede detectar en gran parte de
nuestro sentido común: considere por ejemplo la frase “pagar nuestra deuda con la
sociedad”, o “Yo sentía que le debía algo a mi país”, o “Yo quería devolverle algo”. En
tales casos, los derechos y obligaciones comunes, los compromisos mutuos – las relaciones
que la gente realmente libre puede establecer entre cada uno – tienden a ser incluidos dentro
de una concepción particular de la “sociedad”, una sociedad donde todos somos iguales
solamente como deudores absolutos ante la (ahora invisible) presencia del rey, quien
representa a la madre de uno, y por extensión, a la humanidad.

Lo que estoy sugiriendo, entonces, es que aunque las demandas del impersonal mercado, y
de la “sociedad”, a menudo aparecen juntas – y definitivamente han tendido a conquistar
más terreno de numerosas formas – ambas a la larga son construidas sobre una lógica de la
violencia muy parecida. Pero esta tampoco es una mera cuestión de orígenes históricos, que
pueda ser dejada a un lado por ser insignificante, ya que sin la amenaza constante de la
fuerza, el estado – y el mercado – no podrían existir.

Entonces, ¿Cuál es la alternativa?

Hacia una historia del dinero virtual

Aquí regreso a mi hipótesis original: que el dinero cuando apareció, no era la cosa fría,
metálica, impersonal de la actualidad. Era una medida, una abstracción, pero también una
especie de relación (de deuda y obligación) entre seres humanos. Es importante recordar
que a lo largo de la historia es el dinero-mercancía el que siempre ha sido asociado
directamente con la violencia. Como dijo cierto historiador, “el metal precioso es un
accesorio de la guerra, no del comercio pacífico.”

La razón es simple. El dinero-mercancía, especialmente en forma de oro y plata, se puede

distinguir del dinero- crédito sobre todo por que se puede robar, una característica muy
particular. Como un lingote de oro o plata es un objeto sin pedigrí, a lo largo de gran parte
de la historia los metales preciosos han desempeñado el mismo papel que el maletín repleto
de billetes del vendedor de drogas contemporáneo. Eso es, un objeto sin pasado alguno que
puede ser cambiado por otros objetos de valor en casi cualquier lugar, sin que se hagan
preguntas. Así, uno puede ver los últimos 5,000 años de historia humana como la historia de
una especie de alternancia. Los sistemas de crédito parecen surgir, y hacerse dominantes, en
periodos de relativa paz social, a lo largo de redes de confianza. Surgen como creaciones
del estado, o como instituciones transnacionales – que es el caso en la mayoría de los
periodos – mientras que, en los periodos caracterizados por saqueos generalizados, son
remplazados por metales

preciosos. Sin duda alguna, los sistemas de préstamos con intereses abusivos han existido
en toda la historia, pero
han tenido efectos más dañinos en aquellos tiempos en que el dinero era más fácil de
convertir en efectivo.

Por eso, como punto de partida para cualquier intento de discernir los grandes ritmos que
definen el actual momento histórico, propongo el siguiente esquema para la historia de
Eurasia, de acuerdo a la alternancia entre periodos de dinero virtual y metal:

I. Los Primeros Imperios Agrícolas (3500-800 AC). Forma dominante de dinero: Dinero crédito
virtual
La mejor evidencia que tenemos sobre los orígenes del dinero se remonta a la antigua
Mesopotamia, pero no existe alguna razón particular para creer que las cosas eran
radicalmente diferentes en el Egipto de los Faraones, la China de la Edad de Bronce, o el
Valle del Indo. La economía de Mesopotamia estaba dominada por grandes instituciones
públicas (los Templos y Palacios) cuyos administradores burocráticos efectivamente
creaban moneda de cuenta al establecer una equivalencia fija entre la plata y la cebada, que
era el cultivo principal. Las deudas eran calculadas en plata, pero esta rara vez era utilizada
en las transacciones. Para esto se utilizaba la cebada, o cualquier otra cosa que en el
momento estaba a mano y era aceptable. Las deudas grandes eran registradas en tablas
cuneiformes que se guardaban como garantías por ambas partes de la transacción.

No hay duda de que existían mercados. Los precios de ciertas mercancías que no eran
producidas dentro de las propiedades de los Templos o Palacios, y que por lo tanto no
estaban sujetas a las lista de precios oficiales, tendían a fluctuar de acuerdo a los
caprichosos cambios de la oferta y la demanda. Pero la mayoría de las transacciones que se
realizaban a diario, en particular aquellas que no se llevaban a cabo entre completos
extraños, parecen haberse hecho a crédito. Las “mozas de cerveza”, o las propietarias de
posadas, servían cerveza y alquilaban cuartos; fiándoles a sus clientes, que pagaban el saldo
total tras la cosecha. Los comerciantes probablemente mantenían listas de clientes de
confianza a los cuales podían fiar, como sucede en la actualidad en los pequeños mercados
de África o Asia Central. El hábito de cobrar con interés también nació en Sumeria –
mientras en Egipto, por ejemplo, permaneció desconocido. Las tasas de interés, fijadas en el
20 por ciento, se mantuvieron estables por 2000 años. (Esto no es evidencia de regulación o
control estatal del mercado: en esta etapa eran instituciones como estas las que hacían
posible la existencia de los mercados). Sin embargo, esto produjo serios problemas sociales.
Especialmente en los años de mala cosecha, los campesinos se endeudaban
desesperadamente con los ricos, y debían entregar sus haciendas y, por último, a sus
familiares, que pasaban a ser esclavos por endeudamiento. Poco a poco esta situación
parece haber conducido a una crisis social, en la que el pueblo, antes que llevar a cabo un
levantamiento popular, abandonaba completamente las ciudades y tierras habitadas, para
convertirse en “bandidos” seminómadas. Pronto se volvió una tradición para cada nuevo
soberano hacer borrón y cuenta nueva, cancelando todas las deudas, y declarando una
amnistía general o “libertad”, para que todos los peones cautivos pudieran regresar con sus
familias. (Es importante recordar que la primera palabra en cualquier idioma que apareció
equivalente a “libertad” fue el término sumerioamarga, que literalmente significa “regreso a
la madre”). Los profetas bíblicos instituyeron una costumbre similar, la del Jubileo, en la
cual después de siete años todas las deudas eran canceladas. Este es el ancestro directo de la
noción de “redención” del Nuevo Testamento. Como el economista Michael Hudson ha
indicado, una de las grandes desgracias de la historia ha sido el que la costumbre de prestar
dinero con intereses se diseminase por todas partes desde Mesopotamia, pero generalmente
sin incluir los dispositivos que controlasen sus excesos.

II. Era Axial (800 AC – 600 AC). Forma dominante de dinero: Monedas y metales preciosos

Esta fue la era en que nació la acuñación, al igual que las mayores religiones del mundo en
China, la India y el Medio Oriente. Desde la época de los Reinos Combatientes en China, de
la fragmentación de la India y de la carnicería y esclavización masiva que llevó consigo la
expansión (y más tarde, la disolución) del Imperio Romano, este fue un período de
creatividad impresionante en todo el mundo, pero también de una violencia igualmente
impactante. La acuñación, que permitió el uso corriente de oro y plata como medios de
intercambio, también hizo posible la creación de mercados, en el sentido más impersonal
del término, que ahora es el más conocido. Los metales preciosos eran también mucho más
apropiados para una era en que las guerras eran muy comunes, porque – algo obvio- eran
más fáciles de robar. La acuñación definitivamente no fue inventada para facilitar el
comercio (los fenicios, que eran magníficos comerciantes, fueron uno de los últimos
pueblos en adoptarla). Parece haber sido inventada en un principio para pagarles a los
soldados, siendo probablemente los gobernantes de Lidia, en Asia Menor, los primeros en
hacerlo, al pagarles así a sus mercenarios griegos. Cartago, otra gran nación comerciante,
comenzó a acuñar monedas tardíamente, y única y explícitamente, para pagar a sus soldados
extranjeros.

http://blog.longnow.org/2010/04/22/debt-the-first-five-thousand-years/

Anthropologist David Graeber recently sent in his essay on the 5000 year history of
debt (orignally published in Mute and Eurozine). Aside from being an interesting read
in general, this effort (which he is just now finishing as a book) is an interesting
resource for the Eternal Coin and the Long Finance project.

Debt: The first five thousand years by David Graeber

Throughout its 5000 year history, debt has always involved institutions – whether
Mesopotamian sacred kingship, Mosaic jubilees, Sharia or Canon Law – that place
controls on debt’s potentially catastrophic social consequences. It is only in the current
era, writes anthropologist David Graeber, that we have begun to see the creation of the
first effective planetary administrative system largely in order to protect the interests of
creditors.

What follows is a fragment of a much larger project of research on debt and debt money
in human history. The first and overwhelming conclusion of this project is that in
studying economic history, we tend to systematically ignore the role of violence, the
absolutely central role of war and slavery in creating and shaping the basic institutions
of what we now call “the economy”. What’s more, origins matter. The violence may be
invisible, but it remains inscribed in the very logic of our economic common sense, in
the apparently self-evident nature of institutions that simply would never and could
never exist outside of the monopoly of violence – but also, the systematic threat of
violence – maintained by the contemporary state.

Let me start with the institution of slavery, whose role, I think, is key. In most times and
places, slavery is seen as a consequence of war. Sometimes most slaves actually are war
captives, sometimes they are not, but almost invariably, war is seen as the foundation
and justification of the institution. If you surrender in war, what you surrender is your
life; your conqueror has the right to kill you, and often will. If he chooses not to, you
literally owe your life to him; a debt conceived as absolute, infinite, irredeemable. He
can in principle extract anything he wants, and all debts – obligations – you may owe to
others (your friends, family, former political allegiances), or that others owe you, are
seen as being absolutely negated. Your debt to your owner is all that now exists.
This sort of logic has at least two very interesting consequences, though they might be
said to pull in rather contrary directions. First of all, as we all know, it is another typical
– perhaps defining – feature of slavery that slaves can be bought or sold. In this case,
absolute debt becomes (in another context, that of the market) no longer absolute. In
fact, it can be precisely quantified. There is good reason to believe that it was just this
operation that made it possible to create something like our contemporary form of
money to begin with, since what anthropologists used to refer to as “primitive money”,
the kind that one finds in stateless societies (Solomon Island feather money, Iroquois
wampum), was mostly used to arrange marriages, resolve blood feuds, and fiddle with
other sorts of relations between people, rather than to buy and sell commodities. For
instance, if slavery is debt, then debt can lead to slavery. A Babylonian peasant might
have paid a handy sum in silver to his wife’s parents to officialise the marriage, but he
in no sense owned her. He certainly couldn’t buy or sell the mother of his children. But
all that would change if he took out a loan. Were he to default, his creditors could first
remove his sheep and furniture, then his house, fields and orchards, and finally take his
wife, children, and even himself as debt peons until the matter was settled (which, as his
resources vanished, of course became increasingly difficult to do). Debt was the hinge
that made it possible to imagine money in anything like the modern sense, and
therefore, also, to produce what we like to call the market: an arena where anything can
be bought and sold, because all objects are (like slaves) disembedded from their former
social relations and exist only in relation to money.

But at the same time the logic of debt as conquest can, as I mentioned, pull another way.
Kings, throughout history, tend to be profoundly ambivalent towards allowing the logic
of debt to get completely out of hand. This is not because they are hostile to markets.
On the contrary, they normally encourage them, for the simple reason that governments
find it inconvenient to levy everything they need (silks, chariot wheels, flamingo
tongues, lapis lazuli) directly from their subject population; it’s much easier to
encourage markets and then buy them. Early markets often followed armies or royal
entourages, or formed near palaces or at the fringes of military posts. This actually helps
explain the rather puzzling behaviour on the part of royal courts: after all, since kings
usually controlled the gold and silver mines, what exactly was the point of stamping bits
of the stuff with your face on it, dumping it on the civilian population, and then
demanding they give it back to you again as taxes? It only makes sense if levying taxes
was really a way to force everyone to acquire coins, so as to facilitate the rise of
markets, since markets were convenient to have around. However, for our present
purposes, the critical question is: how were these taxes justified? Why did subjects owe
them, what debt were they discharging when they were paid? Here we return again to
right of conquest. (Actually, in the ancient world, free citizens – whether in
Mesopotamia, Greece, or Rome – often did not have to pay direct taxes for this very
reason, but obviously I’m simplifying here.) If kings claimed to hold the power of life
and death over their subjects by right of conquest, then their subjects’ debts were, also,
ultimately infinite; and also, at least in that context, their relations to one another, what
they owed to one another, was unimportant. All that really existed was their relation to
the king. This in turn explains why kings and emperors invariably tried to regulate the
powers that masters had over slaves, and creditors over debtors. At the very least they
would always insist, if they had the power, that those prisoners who had already had
their lives spared could no longer be killed by their masters. In fact, only rulers could
have arbitrary power over life and death. One’s ultimate debt was to the state; it was the
only one that was truly unlimited, that could make absolute, cosmic, claims.
The reason I stress this is because this logic is still with us. When we speak of a
“society” (French society, Jamaican society) we are really speaking of people organised
by a single nation state. That is the tacit model, anyway. “Societies” are really states, the
logic of states is that of conquest, the logic of conquest is ultimately identical to that of
slavery. True, in the hands of state apologists, this becomes transformed into a notion of
a more benevolent “social debt”. Here there is a little story told, a kind of myth. We are
all born with an infinite debt to the society that raised, nurtured, fed and clothed us, to
those long dead who invented our language and traditions, to all those who made it
possible for us to exist. In ancient times we thought we owed this to the gods (it was
repaid in sacrifice, or, sacrifice was really just the payment of interest – ultimately, it
was repaid by death). Later the debt was adopted by the state, itself a divine institution,
with taxes substituted for sacrifice, and military service for one’s debt of life. Money is
simply the concrete form of this social debt, the way that it is managed. Keynesians like
this sort of logic. So do various strains of socialist, social democrats, even crypto-
fascists like Auguste Comte (the first, as far as I am aware, to actually coin the phrase
“social debt”). But the logic also runs through much of our common sense: consider for
instance, the phrase, “to pay one’s debt to society”, or, “I felt I owed something to my
country”, or, “I wanted to give something back.” Always, in such cases, mutual rights
and obligations, mutual commitments – the kind of relations that genuinely free people
could make with one another – tend to be subsumed into a conception of “society”
where we are all equal only as absolute debtors before the (now invisible) figure of the
king, who stands in for your mother, and by extension, humanity.

What I am suggesting, then, is that while the claims of the impersonal market and the
claims of “society” are often juxtaposed – and certainly have had a tendency to jockey
back and forth in all sorts of practical ways – they are both ultimately founded on a very
similar logic of violence. Neither is this a mere matter of historical origins that can be
brushed away as inconsequential: neither states nor markets can exist without the
constant threat of force.

One might ask, then, what is the alternative?

Towards a history of virtual money

Here I can return to my original point: that money did not originally appear in this cold,
metal, impersonal form. It originally appears in the form of a measure, an abstraction,
but also as a relation (of debt and obligation) between human beings. It is important to
note that historically it is commodity money that has always been most directly linked
to violence. As one historian put it, “bullion is the accessory of war, and not of peaceful
trade.”[1]

The reason is simple. Commodity money, particularly in the form of gold and silver, is
distinguished from credit money most of all by one spectacular feature: it can be stolen.
Since an ingot of gold or silver is an object without a pedigree, throughout much of
history bullion has served the same role as the contemporary drug dealer’s suitcase full
of dollar bills, as an object without a history that will be accepted in exchange for other
valuables just about anywhere, with no questions asked. As a result, one can see the last
5 000 years of human history as the history of a kind of alternation. Credit systems seem
to arise, and to become dominant, in periods of relative social peace, across networks of
trust, whether created by states or, in most periods, transnational institutions, whilst
precious metals replace them in periods characterised by widespread plunder. Predatory
lending systems certainly exist at every period, but they seem to have had the most
damaging effects in periods when money was most easily convertible into cash.

So as a starting point to any attempt to discern the great rhythms that define the current
historical moment, let me propose the following breakdown of Eurasian history
according to the alternation between periods of virtual and metal money:

I. Age of the First Agrarian Empires (3500-800 BCE).

Dominant money form: Virtual credit money
Our best information on the origins of money goes back to ancient Mesopotamia, but
there seems no particular reason to believe matters were radically different in Pharaonic
Egypt, Bronze Age China, or the Indus Valley. The Mesopotamian economy was
dominated by large public institutions (Temples and Palaces) whose bureaucratic
administrators effectively created money of account by establishing a fixed equivalent
between silver and the staple crop, barley. Debts were calculated in silver, but silver
was rarely used in transactions. Instead, payments were made in barley or in anything
else that happened to be handy and acceptable. Major debts were recorded on cuneiform
tablets kept as sureties by both parties to the transaction.

Certainly, markets did exist. Prices of certain commodities that were not produced
within Temple or Palace holdings, and thus not subject to administered price schedules,
would tend to fluctuate according to the vagaries of supply and demand. But most actual
acts of everyday buying and selling, particularly those that were not carried out between
absolute strangers, appear to have been made on credit. “Ale women”, or local
innkeepers, served beer, for example, and often rented rooms; customers ran up a tab;
normally, the full sum was dispatched at harvest time. Market vendors presumably
acted as they do in small-scale markets in Africa, or Central Asia, today, building up
lists of trustworthy clients to whom they could extend credit. The habit of money at
interest also originates in Sumer – it remained unknown, for example, in Egypt. Interest
rates, fixed at 20 percent, remained stable for 2,000 years. (This was not a sign of
government control of the market: at this stage, institutions like this were what made
markets possible.) This, however, led to some serious social problems. In years with bad
harvests especially, peasants would start becoming hopelessly indebted to the rich, and
would have to surrender their farms and, ultimately, family members, in debt bondage.
Gradually, this condition seems to have come to a social crisis – not so much leading to
popular uprisings, but to common people abandoning the cities and settled territory
entirely and becoming semi-nomadic “bandits” and raiders. It soon became traditional
for each new ruler to wipe the slate clean, cancel all debts, and declare a general
amnesty or “freedom”, so that all bonded labourers could return to their families. (It is
significant here that the first word for “freedom” known in any human language, the
Sumerian amarga, literally means “return to mother”.) Biblical prophets instituted a
similar custom, the Jubilee, whereby after seven years all debts were similarly
cancelled. This is the direct ancestor of the New Testament notion of “redemption”. As
economist Michael Hudson has pointed out, it seems one of the misfortunes of world
history that the institution of lending money at interest disseminated out of
Mesopotamia without, for the most part, being accompanied by its original checks and
balances.
II. Axial Age (800 BCE – 600 CE). Dominant money
form: Coinage and metal bullion
This was the age that saw the emergence of coinage, as well as the birth, in China, India
and the Middle East, of all major world religions.[2] From the Warring States period in
China, to fragmentation in India, and to the carnage and mass enslavement that
accompanied the expansion (and later, dissolution) of the Roman Empire, it was a
period of spectacular creativity throughout most of the world, but of almost equally
spectacular violence. Coinage, which allowed for the actual use of gold and silver as a
medium of exchange, also made possible the creation of markets in the now more
familiar, impersonal sense of the term. Precious metals were also far more appropriate
for an age of generalised warfare, for the obvious reason that they could be stolen.
Coinage, certainly, was not invented to facilitate trade (the Phoenicians, consummate
traders of the ancient world, were among the last to adopt it). It appears to have been
first invented to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to
pay their Greek mercenaries. Carthage, another great trading nation, only started
minting coins very late, and then explicitly to pay its foreign soldiers.

Throughout antiquity one can continue to speak of what Geoffrey Ingham has dubbed
the “military-coinage complex”. He may have been better to call it a “military-coinage-
slavery complex”, since the diffusion of new military technologies (Greek hoplites,
Roman legions) was always closely tied to the capture and marketing of slaves. The
other major source of slaves was debt: now that states no longer periodically wiped the
slates clean, those not lucky enough to be citizens of the major military city-states –
who were generally protected from predatory lenders – were fair game. The credit
systems of the Near East did not crumble under commercial competition; they were
destroyed by Alexander’s armies – armies that required half a ton of silver bullion per
day in wages. The mines where the bullion was produced were generally worked by
slaves. Military campaigns in turn ensured an endless flow of new slaves. Imperial tax
systems, as noted, were largely designed to force their subjects to create markets, so that
soldiers (and also, of course, government officials) would be able to use that bullion to
buy anything they wanted. The kind of impersonal markets that once tended to spring
up between societies, or at the fringes of military operations, now began to permeate
society as a whole.

However tawdry their origins, the creation of new media of exchange – coinage
appeared almost simultaneously in Greece, India, and China – appears to have had
profound intellectual effects. Some have even gone so far as to argue that Greek
philosophy was itself made possible by conceptual innovations introduced by coinage.
The most remarkable pattern, though, is the emergence, in almost the exact times and
places where one also sees the early spread of coinage, of what were to become modern
world religions: prophetic Judaism, Christianity, Buddhism, Jainism, Confucianism,
Taoism, and eventually, Islam. While the precise links are yet to be fully explored, in
certain ways, these religions appear to have arisen in direct reaction to the logic of the
market. To put the matter somewhat crudely: if one relegates a certain social space
simply to the selfish acquisition of material things, it is almost inevitable that soon
someone else will come to set aside another domain in which to preach that, from the
perspective of ultimate values, material things are unimportant, and selfishness – or
even the self – illusory.
III. The Middle Ages (600 CE – 1500 CE). The return
to virtual credit money
If the Axial Age saw the emergence of complementary ideals of commodity markets
and universal world religions, the Middle Ages[3] were the period in which those two
institutions began to merge. Religions began to take over the market systems.
Everything from international trade to the organisation of local fairs increasingly came
to be carried out through social networks defined and regulated by religious authorities.
This enabled, in turn, the return throughout Eurasia of various forms of virtual credit
money.

In Europe, where all this took place under the aegis of Christendom, coinage was only
sporadically, and unevenly, available. Prices after 800 AD were calculated largely in
terms of an old Carolingian currency that no longer existed (it was actually referred to at
the time as “imaginary money”), but ordinary day-to-day buying and selling was carried
out mainly through other means. One common expedient, for example, was the use of
tally-sticks, notched pieces of wood that were broken in two as records of debt, with
half being kept by the creditor, half by the debtor. Such tally-sticks were still in
common use in much of England well into the 16th century. Larger transactions were
handled through bills of exchange, with the great commercial fairs serving as their
clearing houses. The Church, meanwhile, provided a legal framework, enforcing strict
controls on the lending of money at interest and prohibitions on debt bondage.

The real nerve centre of the Medieval world economy, though, was the Indian Ocean,
which along with the Central Asia caravan routes connected the great civilisations of
India, China, and the Middle East. Here, trade was conducted through the framework of
Islam, which not only provided a legal structure highly conducive to mercantile
activities (while absolutely forbidding the lending of money at interest), but allowed for
peaceful relations between merchants over a remarkably large part of the globe,
allowing the creation of a variety of sophisticated credit instruments. Actually, Western
Europe was, as in so many things, a relative late-comer in this regard: most of the
financial innovations that reached Italy and France in the 11th and 12th centuries had
been in common use in Egypt or Iraq since the 8th or 9th centuries. The word “cheque”,
for example, derives from the Arab sakk, and appeared in English only around 1220
AD.

The case of China is even more complicated: the Middle Ages there began with the
rapid spread of Buddhism, which, while it was in no position to enact laws or regulate
commerce, did quickly move against local usurers by its invention of the pawn shop –
the first pawn shops being based in Buddhist temples as a way of offering poor farmers
an alternative to the local usurer. Before long, though, the state reasserted itself, as the
state always tends to do in China. But as it did so, it not only regulated interest rates and
attempted to abolish debt peonage, it moved away from bullion entirely by inventing
paper money. All this was accompanied by the development, again, of a variety of
complex financial instruments.

All this is not to say that this period did not see its share of carnage and plunder
(particularly during the great nomadic invasions) or that coinage was not, in many times
and places, an important medium of exchange. Still, what really characterises the period
appears to be a movement in the other direction. Most of the Medieval period saw
money largely delinked from coercive institutions. Money changers, one might say,
were invited back into the temples, where they could be monitored. The result was a
flowering of institutions premised on a much higher degree of social trust.”

IV. Age of European Empires (1500-1971). The return

of precious metals
With the advent of the great European empires – Iberian, then North Atlantic – the
world saw both a reversion to mass enslavement, plunder, and wars of destruction, and
the consequent rapid return of gold and silver bullion as the main form of currency.
Historical investigation will probably end up demonstrating that the origins of these
transformations were more complicated than we ordinarily assume. Some of this was
beginning to happen even before the conquest of the New World. One of the main
factors of the movement back to bullion, for example, was the emergence of popular
movements during the early Ming dynasty, in the 15th and 16th centuries, that
ultimately forced the government to abandon not only paper money but any attempt to
impose its own currency. This led to the reversion of the vast Chinese market to an
uncoined silver standard. Since taxes were also gradually commuted into silver, it soon
became the more or less official Chinese policy to try to bring as much silver into the
country as possible, so as to keep taxes low and prevent new outbreaks of social unrest.
The sudden enormous demand for silver had effects across the globe. Most of the
precious metals looted by the conquistadors and later extracted by the Spanish from the
mines of Mexico and Potosi (at almost unimaginable cost in human lives) ended up in
China. These global scale connections that eventually developed across the Atlantic,
Pacific, and Indian Oceans have of course been documented in great detail. The crucial
point is that the delinking of money from religious institutions, and its relinking with
coercive ones (especially the state), was here accompanied by an ideological reversion
to “metallism”.[4]

Credit, in this context, was on the whole an affair of states that were themselves run
largely by deficit financing, a form of credit which was, in turn, invented to finance
increasingly expensive wars. Internationally the British Empire was steadfast in
maintaining the gold standard through the 19th and early 20th centuries, and great
political battles were fought in the United States over whether the gold or silver
standard should prevail.

This was also, obviously, the period of the rise of capitalism, the industrial revolution,
representative democracy, and so on. What I am trying to do here is not to deny their
importance, but to provide a framework for seeing such familiar events in a less familiar
context. It makes it easier, for instance, to detect the ties between war, capitalism, and
slavery. The institution of wage labour, for instance, has historically emerged from
within that of slavery (the earliest wage contracts we know of, from Greece to the
Malay city states, were actually slave rentals), and it has also tended, historically, to be
intimately tied to various forms of debt peonage – as indeed it remains today. The fact
that we have cast such institutions in a language of freedom does not mean that what we
now think of as economic freedom does not ultimately rest on a logic that has for most
of human history been considered the very essence of slavery.
Current Era (1971 onwards). The empire of debt
The current era might be said to have been initiated on 15 August 1971, when US
President Richard Nixon officially suspended the convertibility of the dollar into gold
and effectively created the current floating currency regimes. We have returned, at any
rate, to an age of virtual money, in which consumer purchases in wealthy countries
rarely involve even paper money, and national economies are driven largely by
consumer debt. It’s in this context that we can talk about the “financialisation” of
capital, whereby speculation in currencies and financial instruments becomes a domain
unto itself, detached from any immediate relation with production or even commerce.
This is of course the sector that has entered into crisis today.

What can we say for certain about this new era? So far, very, very little. Thirty or forty
years is nothing in terms of the scale we have been dealing with. Clearly, this period has
only just begun. Still, the foregoing analysis, however crude, does allow us to begin to
make some informed suggestions.

Historically, as we have seen, ages of virtual, credit money have also involved creating
some sort of overarching institutions – Mesopotamian sacred kingship, Mosaic jubilees,
Sharia or Canon Law – that place some sort of controls on the potentially catastrophic
social consequences of debt. Almost invariably, they involve institutions (usually not
strictly coincident to the state, usually larger) to protect debtors. So far the movement
this time has been the other way around: starting with the ’80s we have begun to see the
creation of the first effective planetary administrative system, operating through the
IMF, World Bank, corporations and other financial institutions, largely in order to
protect the interests of creditors. However, this apparatus was very quickly thrown into
crisis, first by the very rapid development of global social movements (the alter-
globalisation movement), which effectively destroyed the moral authority of institutions
like the IMF and left many of them very close to bankrupt, and now by the current
banking crisis and global economic collapse. While the new age of virtual money has
only just begun and the long-term consequences are as yet entirely unclear, we can
already say one or two things. The first is that a movement towards virtual money is not
in itself, necessarily, an insidious effect of capitalism. In fact, it might well mean
exactly the opposite. For much of human history, systems of virtual money were
designed and regulated to ensure that nothing like capitalism could ever emerge to begin
with – at least not as it appears in its present form, with most of the world’s population
placed in a condition that would in many other periods of history be considered
tantamount to slavery. The second point is to underline the absolutely crucial role of
violence in defining the very terms by which we imagine both “society” and “markets”
– in fact, many of our most elementary ideas of freedom. A world less entirely pervaded
by violence would rapidly begin to develop other institutions. Finally, thinking about
debt outside the twin intellectual straitjackets of state and market opens up exciting
possibilities. For instance, we can ask: in a society in which that foundation of violence
had finally been yanked away, what exactly would free men and women owe each
other? What sort of promises and commitments should they make to each other?

Let us hope that everyone will someday be in a position to start asking such questions.
At times like this, you never know.
 [1]
Geoffrey W. Gardiner, “The Primacy of Trade Debts in the Development of
Money”, in Randall Wray (ed.), Credit and State Theories of Money: The
Contributions of A. Mitchell Innes, Cheltenham: Elgar, 2004, p.134.
 [2]
The phrase the “Axial Age” was originally coined by Karl Jaspers to describe
the relatively brief period between 800 BCE – 200 BCE in which, he believed,
just about all the main philosophical traditions we are familiar with today arose
simultaneously in China, India, and the Eastern Mediterranean. Here, I am using
it in Lewis Mumford’s more expansive use of the term as the period that saw the
birth of all existing world religions, stretching roughly from the time of
Zoroaster to that of Mohammed.
 [3]
I am here relegating most of what is generally referred to as the “Dark Ages”
in Europe into the earlier period, characterised by predatory militarism and the
consequent importance of bullion: the Viking raids, and the famous extraction of
danegeld from England in the 800s, might be seen as one the last manifestations
of an age where predatory militarism went hand and hand with hoards of gold
and silver bullion.
[4]
 The myth of barter and commodity theories of money was of course
developed in this period.
http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-
economic-anthropologist-david-graeber.html

What is Debt? – An Interview with Economic Anthropologist David Graeber

David Graeber currently holds the position of Reader in Social Anthropology at

Goldsmiths University London. Prior to this he was an associate professor of
anthropology at Yale University. He is the author of ‘Debt: The First 5,000 Years’
which is available from Amazon.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin,

Ireland.

Philip Pilkington: Let’s begin. Most economists claim that money was invented to
replace the barter system. But you’ve found something quite different, am I correct?

David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ —
it’s a fairy tale.

It really deserves no other introduction: according to this theory all transactions were by
barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-
heads for that beaver pelt or what-have-you. This created inconveniences, because
maybe your neighbor doesn’t need chickens right now, so you have to invent money.

The story goes back at least to Adam Smith and in its own way it’s the founding myth
of economics. Now, I’m an anthropologist and we anthropologists have long known this
is a myth simply because if there were places where everyday transactions took the form
of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now.
After all people have been looking since 1776, when the Wealth of Nations first came
out. But if you think about it for just a second, it’s hardly surprising that we haven’t
found anything.

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a
village somewhere, or Native Americans or whatever, will be engaging in transactions
only through the spot trade. So, if your neighbor doesn’t have what you want right now,
no big deal. Obviously what would really happen, and this is what anthropologists
observe when neighbors do engage in something like exchange with each other, if you
want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take
it!” – and now you owe him one. Quite often people don’t even engage in exchange at
all – if they were real Iroquois or other Native Americans, for example, all such things
would probably be allocated by women’s councils.

So the real question is not how does barter generate some sort of medium of exchange,
that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn
into a precise system of measurement – that is: money as a unit of account?

By the time the curtain goes up on the historical record in ancient Mesopotamia, around
3200 BC, it’s already happened. There’s an elaborate system of money of account and
complex credit systems. (Money as medium of exchange or as a standardized
circulating units of gold, silver, bronze or whatever, only comes much later.)

So really, rather than the standard story – first there’s barter, then money, then finally
credit comes out of that – if anything its precisely the other way around. Credit and debt
comes first, then coinage emerges thousands of years later and then, when you do find
“I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when
there used to be cash markets, but for some reason – as in Russia, for example, in 1998
– the currency collapses or disappears.

PP: You say that by the time historical records start to be written in the Mesopotamia
around 3200 BC a complex financial architecture is already in place. At the same time is
society divided into classes of debtors and creditors? If not then when does this occur?
And do you see this as the most fundamental class division in human history?

DG: Well historically, there seem to have been two possibilities.

One is what you found in Egypt: a strong centralized state and administration extracting
taxes from everyone else. For most of Egyptian history they never developed the habit
of lending money at interest. Presumably, they didn’t have to.

Mesopotamia was different because the state emerged unevenly and incompletely. At
first there were giant bureaucratic temples, then also palace complexes, but they weren’t
exactly governments and they didn’t extract direct taxes – these were considered
appropriate only for conquered populations. Rather they were huge industrial complexes
with their own land, flocks and factories. This is where money begins as a unit of
account; it’s used for allocating resources within these complexes.

Interest-bearing loans, in turn, probably originated in deals between the administrators

and merchants who carried, say, the woollen goods produced in temple factories (which
in the very earliest period were at least partly charitable enterprises, homes for orphans,
refugees or disabled people for instance) and traded them to faraway lands for metal,
timber, or lapis lazuli. The first markets form on the fringes of these complexes and
appear to operate largely on credit, using the temples’ units of account. But this gave the
merchants and temple administrators and other well-off types the opportunity to make
consumer loans to farmers, and then, if say the harvest was bad, everybody would start
falling into debt-traps.
This was the great social evil of antiquity – families would have to start pawning off
their flocks, fields and before long, their wives and children would be taken off into
debt peonage. Often people would start abandoning the cities entirely, joining semi-
nomadic bands, threatening to come back in force and overturn the existing order
entirely. Rulers would regularly conclude the only way to prevent complete social
breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all
consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any
human language is the Sumerian amargi, a word for debt-freedom, and by extension
freedom more generally, which literally means ‘return to mother,’ since when they
declared a clean slate, all the debt peons would get to go home.

PP: You have noted in the book that debt is a moral concept long before it becomes an
economic concept. You’ve also noted that it is a very ambivalent moral concept insofar
as it can be both positive and negative. Could you please talk about this a little? Which
aspect is more prominent?

DG: Well it tends to pivot radically back and forth.

One could tell the history like this: eventually the Egyptian approach (taxes) and
Mesopotamian approach (usury) fuse together, people have to borrow to pay their taxes
and debt becomes institutionalized.

Taxes are also key to creating the first markets that operate on cash, since coinage
seems to be invented or at least widely popularized to pay soldiers – more or less
simultaneously in China, India, and the Mediterranean, where governments find the
easiest way to provision the troops is to issue them standard-issue bits of gold or silver
and then demand everyone else in the kingdom give them one of those coins back again.
Thus we find that the language of debt and the language of morality start to merge.

In Sanskrit, Hebrew, Aramaic, ‘debt,’ ‘guilt,’ and ‘sin’ are actually the same word.
Much of the language of the great religious movements – reckoning, redemption,
karmic accounting and the like – are drawn from the language of ancient finance. But
that language is always found wanting and inadequate and twisted around into
something completely different. It’s as if the great prophets and religious teachers had
no choice but to start with that kind of language because it’s the language that existed at
the time, but they only adopted it so as to turn it into its opposite: as a way of saying
debts are not sacred, but forgiveness of debt, or the ability to wipe out debt, or to realize
that debts aren’t real – these are the acts that are truly sacred.

How did this happen? Well, remember I said that the big question in the origins of
money is how a sense of obligation – an ‘I owe you one’ – turns into something that can
be precisely quantified? Well, the answer seems to be: when there is a potential for
violence. If you give someone a pig and they give you a few chickens back you might
think they’re a cheapskate, and mock them, but you’re unlikely to come up with a
mathematical formula for exactly how cheap you think they are. If someone pokes out
your eye in a fight, or kills your brother, that’s when you start saying, “traditional
compensation is exactly twenty-seven heifers of the finest quality and if they’re not of
the finest quality, this means war!”
Money, in the sense of exact equivalents, seems to emerge from situations like that, but
also, war and plunder, the disposal of loot, slavery. In early Medieval Ireland, for
example, slave-girls were the highest denomination of currency. And you could specify
the exact value of everything in a typical house even though very few of those items
were available for sale anywhere because they were used to pay fines or damages if
someone broke them.

But once you understand that taxes and money largely begin with war it becomes easier
to see what really happened. After all, every Mafiosi understands this. If you want to
take a relation of violent extortion, sheer power, and turn it into something moral, and
most of all, make it seem like the victims are to blame, you turn it into a relation of
debt. “You owe me, but I’ll cut you a break for now…” Most human beings in history
have probably been told this by their debtors. And the crucial thing is: what possible
reply can you make but, “wait a minute, who owes what to who here?” And of course
for thousands of years, that’s what the victims have said, but the moment you do, you
are using the rulers’ language, you’re admitting that debt and morality really are the
same thing. That’s the situation the religious thinkers were stuck with, so they started
with the language of debt, and then they tried to turn it around and make it into
something else.

PP: You’d be forgiven for thinking this was all very Nietzschean. In his ‘On the
Genealogy of Morals’ the German philosopher Friedrich Nietzsche famously argued
that all morality was founded upon the extraction of debt under the threat of violence.
The sense of obligation instilled in the debtor was, for Nietzsche, the origin of
civilisation itself. You’ve been studying how morality and debt intertwine in great
detail. How does Nietzsche’s argument look after over 100 years? And which do you
see as primal: morality or debt?

DG: Well, to be honest, I’ve never been sure if Nietzsche was really serious in that
passage or whether the whole argument is a way of annoying his bourgeois audience; a
way of pointing out that if you start from existing bourgeois premises about human
nature you logically end up in just the place that would make most of that audience
most uncomfortable.
In fact, Nietzsche begins his argument from exactly the same place as Adam Smith:
human beings are rational. But rational here means calculation, exchange and hence,
trucking and bartering; buying and selling is then the first expression of human thought
and is prior to any sort of social relations.

But then he reveals exactly why Adam Smith had to pretend that Neolithic villagers
would be making transactions through the spot trade. Because if we have no prior moral
relations with each other, and morality just emerges from exchange, then ongoing social
relations between two people will only exist if the exchange is incomplete – if someone
hasn’t paid up.

But in that case, one of the parties is a criminal, a deadbeat and justice would have to
begin with the vindictive punishment of such deadbeats. Thus he says all those law
codes where it says ‘twenty heifers for a gouged-out eye’ – really, originally, it was the
other way around. If you owe someone twenty heifers and don’t pay they gouge out
your eye. Morality begins with Shylock’s pound of flesh.
Needless to say there’s zero evidence for any of this – Nietzsche just completely made it
up. The question is whether even he believed it. Maybe I’m an optimist, but I prefer to
think he didn’t.

Anyway it only makes sense if you assume those premises; that all human interaction is
exchange, and therefore, all ongoing relations are debts. This flies in the face of
everything we actually know or experience of human life. But once you start thinking
that the market is the model for all human behavior, that’s where you end up with.

If however you ditch the whole myth of barter, and start with a community where
people do have prior moral relations, and then ask, how do those moral relations come
to be framed as ‘debts’ – that is, as something precisely quantified, impersonal, and
therefore, transferrable – well, that’s an entirely different question. In that case, yes, you
do have to start with the role of violence.

PP: Interesting. Perhaps this is a good place to ask you about how you conceive your
work on debt in relation to the great French anthropologist Marcel Mauss’ classic work
on gift exchange.

DG: Oh, in my own way I think of myself as working very much in the Maussian
tradition. Mauss was one of the first anthropologists to ask: well, all right, if not barter,
then what? What do people who don’t use money actually do when things change
hands? Anthropologists had documented an endless variety of such economic systems,
but hadn’t really worked out common principles. What Mauss noticed was that in
almost all of them, everyone pretended as if they were just giving one another gifts and
then they fervently denied they expected anything back. But in actual fact everyone
understood there were implicit rules and recipients would feel compelled to make some
sort of return.

What fascinated Mauss was that this seemed to be universally true, even today. If I take
a free-market economist out to dinner he’ll feel like he should return the favor and take
me out to dinner later. He might even think that he is something of chump if he doesn’t
and this even if his theory tells him he just got something for nothing and should be
happy about it. Why is that? What is this force that compels me to want to return a gift?

This is an important argument, and it shows there is always a certain morality

underlying what we call economic life. But it strikes me that if you focus too much on
just that one aspect of Mauss’ argument you end up reducing everything to exchange
again, with the proviso that some people are pretending they aren’t doing that.

Mauss didn’t really think of everything in terms of exchange; this becomes clear if you
read his other writings besides ‘The Gift’. Mauss insisted there were lots of different
principles at play besides reciprocity in any society – including our own.

For example, take hierarchy. Gifts given to inferiors or superiors don’t have to be repaid
at all. If another professor takes our economist out to dinner, sure, he’ll feel that he
should reciprocate; but if an eager grad student does, he’ll probably figure just accepting
the invitation is favor enough; and if George Soros buys him dinner, then great, he did
get something for nothing after all. In explicitly unequal relations, if you give somebody
something, far from doing you a favor back, they’re more likely to expect you to do it
again.
Or take communistic relations – and I define this, following Mauss actually, as any ones
where people interact on the basis of ‘from each according to their abilities to each
according to their needs’. In these relations people do not rely on reciprocity, for
example, when trying to solve a problem, even inside a capitalist firm. (As I always say,
if somebody working for Exxon says, “hand me the screwdriver,” the other guy doesn’t
say, “yeah and what do I get for it?”) Communism is in a way the basis of all social
relations – in that if the need is great enough (I’m drowning) or the cost small enough
(can I have a light?) everyone will be expected to act that way.

Anyway that’s one thing I got from Mauss. There are always going to be lots of
different sorts of principles at play simultaneously in any social or economic system –
which is why we can never really boil these things down to a science. Economics tries
to, but it does it by ignoring everything except exchange.

PP: Let’s move onto economic theory then. Economics has some pretty specific
theories about what money is. There’s the mainstream approach that we discussed
briefly above; this is the commodity theory of money in which specific commodities
come to serve as a medium of exchange to replace crude barter economies. But there’s
also alternative theories that are becoming increasingly popular at the moment. One is
the Circuitist theory of money in which all money is seen as a debt incurred by some
economic agent. The other – which actually integrates the Circuitist approach – is the
Chartalist theory of money in which all money is seen as a medium of exchange issued
by the Sovereign and backed by the enforcement of tax claims. Maybe you could say
something about these theories?

DG: One of my inspirations for ‘Debt: The First 5,000 Years’ was Keith Hart’s essay
‘Two Sides of the Coin’. In that essay Hart points out that not only do different schools
of economics have different theories on the nature of money, but there is also reason to
believe that both are right. Money has, for most of its history, been a strange hybrid
entity that takes on aspects of both commodity (object) and credit (social relation.) What
I think I’ve managed to add to that is the historical realization that while money has
always been both, it swings back and forth – there are periods where credit is primary,
and everyone adopts more or less Chartalist theories of money and others where cash
tends to predominate and commodity theories of money instead come to the fore. We
tend to forget that in, say, the Middle Ages, from France to China, Chartalism was just
common sense: money was just a social convention; in practice, it was whatever the
king was willing to accept in taxes.

PP: You say that history swings between periods of commodity money and periods of
virtual money. Do you not think that we’ve reached a point in history where due to
technological and cultural evolution we may have seen the end of commodity money
forever?

DG: Well, the cycles are getting a bit tighter as time goes by. But I think we’ll still have
to wait at least 400 years to really find out. It is possible that this era is coming to an end
but what I’m more concerned with now is the period of transition.

The last time we saw a broad shift from commodity money to credit money it wasn’t a
very pretty sight. To name a few we had the fall of the Roman Empire, the Kali Age in
India and the breakdown of the Han dynasty… There was a lot of death, catastrophe and
mayhem. The final outcome was in many ways profoundly libratory for the bulk of
those who lived through it – chattel slavery, for example, was largely eliminated from
the great civilizations. This was a remarkable historical achievement. The decline of
cities actually meant most people worked far less. But still, one does rather hope the
dislocation won’t be quite so epic in its scale this time around. Especially since the
actual means of destruction are so much greater this time around.

PP: Which do you see as playing a more important role in human history: money or
debt?

DG: Well, it depends on your definitions. If you define money in the broadest sense, as
any unit of account whereby you can say 10 of these are worth 7 of those, then you
can’t have debt without money. Debt is just a promise that can be quantified by means
of money (and therefore, becomes impersonal, and therefore, transferable.) But if you
are asking which has been the more important form of money, credit or coin, then
probably I would have to say credit.

PP: Let’s move on to some of the real world problems facing the world today. We know
that in many Western countries over the past few years households have been running
up enormous debts, from credit card debts to mortgages (the latter of which were one of
the root causes of the recent financial crisis). Some economists are saying that economic
growth since the Clinton era was essentially run on an unsustainable inflating of
household debt. From an historical perspective what do you make of this phenomenon?

DG: From an historical perspective, it’s pretty ominous. One could go further than the
Clinton era, actually – a case could be made that we are seeing now is the same crisis
we were facing in the 70s; it’s just that we managed to fend it off for 30 or 35 years
through all these elaborate credit arrangements (and of course, the super-exploitation of
the global South, through the ‘Third World Debt Crisis’.)

As I said Eurasian history, taken in its broadest contours, shifts back and forth between
periods dominated by virtual credit money and those dominated by actual coin and
bullion. The credit systems of the ancient Near East give way to the great slave-holding
empires of the Classical world in Europe, India, and China, which used coinage to pay
their troops. In the Middle Ages the empires go and so does the coinage – the gold and
silver is mostly locked up in temples and monasteries – and the world reverts to credit.
Then after 1492 or so you have the return world empires again; and gold and silver
currency together with slavery, for that matter.

What’s been happening since Nixon went off the gold standard in 1971 has just been
another turn of the wheel – though of course it never happens the same way twice.
However, in one sense, I think we’ve been going about things backwards. In the past,
periods dominated by virtual credit money have also been periods where there have
been social protections for debtors. Once you recognize that money is just a social
construct, a credit, an IOU, then first of all what is to stop people from generating it
endlessly? And how do you prevent the poor from falling into debt traps and becoming
effectively enslaved to the rich? That’s why you had Mesopotamian clean slates,
Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on
and so forth.
Since antiquity the worst-case scenario that everyone felt would lead to total social
breakdown was a major debt crisis; ordinary people would become so indebted to the
top one or two percent of the population that they would start selling family members
into slavery, or eventually, even themselves.

Well, what happened this time around? Instead of creating some sort of overarching
institution to protect debtors, they create these grandiose, world-scale institutions like
the IMF or S&P to protect creditors. They essentially declare (in defiance of all
traditional economic logic) that no debtor should ever be allowed to default. Needless to
say the result is catastrophic. We are experiencing something that to me, at least, looks
exactly like what the ancients were most afraid of: a population of debtors skating at the
edge of disaster.

And, I might add, if Aristotle were around today, I very much doubt he would think that
the distinction between renting yourself or members of your family out to work and
selling yourself or members of your family to work was more than a legal nicety. He’d
probably conclude that most Americans were, for all intents and purposes, slaves.

PP: You mention that the IMF and S&P are institutions that are mainly geared toward
extracting debts for creditors. This seems to have become the case in the European
monetary union too. What do you make of the situation in Europe at the moment?

DG: Well, I think this is a prime example of why existing arrangements are clearly
untenable. Obviously the ‘whole debt’ cannot be paid. But even when some French
banks offered voluntary write-downs for Greece, the others insisted they would treat it
as if it were a default anyway. The UK takes the even weirder position that this is true
even of debts the government owes to banks that have been nationalized – that is,
technically, that they owe to themselves! If that means that disabled pensioners are no
longer able to use public transit or youth centers have to be closed down, well that’s
simply the ‘reality of the situation,’ as they put it.

These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any
pretence that markets maintain themselves, that debts always have to be honored, went
by the boards in 2008. That’s one of the reasons I think you see the beginnings of a
reaction in a remarkably similar form to what we saw during the heyday of the ‘Third
World debt crisis’ – what got called, rather weirdly, the ‘anti-globalization movement’.
This movement called for genuine democracy and actually tried to practice forms of
direct, horizontal democracy. In the face of this there was the insidious alliance between
financial elites and global bureaucrats (whether the IMF, World Bank, WTO, now EU,
or what-have-you).

When thousands of people begin assembling in squares in Greece and Spain calling for
real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of
the bag. If money really is just a social construct now, a promise, a set of IOUs and even
trillions of debts can be made to vanish if sufficiently powerful players demand it then,
if democracy is to mean anything, it means that everyone gets to weigh in on the
process of how these promises are made and renegotiated.” I find this extraordinarily
hopeful.
PP: Broadly speaking how do you see the present debt/financial crisis unravelling?
Without asking you to peer into the proverbial crystal-ball – because that’s a silly thing
to ask of anyone – how do you see the future unfolding; in the sense of how do you take
your bearings right now?

DG: For the long-term future, I’m pretty optimistic. We might have been doing things
backwards for the last 40 years, but in terms of 500-year cycles, well, 40 years is
nothing. Eventually there will have to be recognition that in a phase of virtual money,
safeguards have to be put in place – and not just ones to protect creditors. How many
disasters it will take to get there? I can’t say.

But in the meantime there is another question to be asked: once we do these reforms,
will the results be something that could even be called ‘capitalism’?

http://www.theglobeandmail.com/news/arts/books/debt-the-first-5000-years-by-david-
graeber/article2203702/

A key to unlock the door of debtor’s prison

raj patel

One morning, when I was a boy, I woke to the sound of shouting, then giggles and
clinking bangles. I went downstairs to find my mother and aunt gently fighting with
their wrists. The ritualized clash – a pat-a-cake for adults – had been demanded by my
aunt for giving us a too-generous gift. Its receipt was being acknowledged with gentle
blows. It may sound exotic, but this is a commonplace. They may not always involve
bangles, but elaborate “no, you shouldn’t haves” are a part of everyone’s life. Why,
though, do we have these rituals?

Debt: The First 5,000 Years, by David Graeber, Melville House, 534 pages, $37

I was reminded of my mother’s sparring by David Graeber’s terrific new book, Debt. In
the best anthropological tradition, he helps us reset our everyday ideas by exploring
history and other civilizations, then boomeranging back to render our own world
strange, and more open to change.

He tells, for instance, of the Tiv, residents of rural Nigeria with elaborate rituals of
exchange spiked with a dark secret. Among the Tiv, it is known that the society of
witches recruits by tricking someone into eating human flesh. After that, two things
might happen. Ordinary people simply run screaming from the table. But those with the
seed of a witch in their hearts are burdened with a flesh debt, doomed to give their
family to be served on other witches’ tables.

Only the most powerful and charismatic men are susceptible to the flesh debt. Although
everyone wants to become powerful and attractive, it’s a way of curbing a love of too
much power. In the egalitarian world of the Tiv, the story prevents anyone from
becoming too big for their boots, lest they be forced to cook their children.

Power and charisma used to be suspect in our own culture. Those who accumulated
power, who manufactured and traded in credit, have generally not been loved. As
Graeber notes, it’s impossible to find happy stories about usurers in most cultures. Late
capitalism is a strange exception. Bankers may be derided, but they continue to
accumulate power and money, their social necessity defended by, say, Niall Ferguson,
who suggests that poverty isn’t about rapacious financiers exploiting the poor, but the
absence of bankers for the poor.

Given bailouts for the wealthy and austerity for the poor, this is a tough case to make.
What Graeber does is open the door to thinking more deeply about why bankers exist in
the first place. Is the solution to poverty really about making microloans available (often
at high rates of interest) so that “untapped” capital can be made to work? Or might we
imagine our responsibilities to one another in different ways?

Graeber suggests that we can. For him, debt is “a relationship between two people who
do not consider each other fundamentally different sorts of being, who are at least
potential equals, and who are not currently in a state of equality – but for whom there is
some way to set matters straight.” It’s a lovely definition because it reminds us of the
possibility of equality. Of course, it also throws into stark relief the debt we’re familiar
with today, invariably based on the opposite of equality.

Getting back to equality means breaking with a conception of human relations as a

series of purely selfish transactions. In spotting the roots of the idea that we’re all
basically selfish individuals in European thinking barely 500 years old, Graeber makes
his case powerfully. Along the way, he helps explain why our modern talk is shot
through with the language of debt, offering a theory of the rise of religion along the
way. Why, after all, is Christ the Redeemer? What gets cashed in?

This is a big book of big ideas: Within its 500 pages, you’ll find a theory of capitalism,
religion, the state, world history and money, with evidence reaching back more than
5,000 years, from the Inuit to the Aztecs, the Mughals to the Mongols. Graeber might,
though, have offered more about how debt happens within the home, and how people
have sought to reconfigure relations of debt.

We’re left with only one concrete idea about what to do next, but it’s one that has
precedent in many societies: a jubilee, a wiping-clean of the slate, in which we are
reminded that the balance at the bank is not all we are, and that we might refashion our
relations with one another differently, and better. If that ever comes about, we’ll owe
David Graeber one..
http://inthearena.blogs.cnn.com/2011/07/05/david-graeber-studied-5000-years-of-debt-real-
dirty-secret-is-that-if-the-deficit-ever-completely-went-away-it-would-cause-a-major-
catastrophe/

David Graeber studied 5,000 years of debt: real dirty secret is that
if the deficit ever completely went away, it would cause a major
catastrophe
Posted by:

Jay Kernis - Senior Producer

His new book is entitled “Debt: The First 5,000 Years,” and in it, Graeber indeed
examines the historical significance of debt, the struggle between rich and poor, and the
moral implications inherent in our ideas about credit and debt.

The U.S. Treasury Department last Friday reiterated its Aug. 2 deadline for
raising the debt ceiling, and urged Congress "to avoid the catastrophic economic
and market consequences of a default crisis by raising the statutory debt limit in a
timely manner.” The White House wants a deal by July 22. If the debt ceiling isn't
raised, the Treasury would not be able to pay nearly half of the 80 million
payments it needs to make every month, according to an estimate by budget
experts at the Bipartisan Policy Center.

How did the United States get into this situation?

Because the Republicans are engaged in one of the most extraordinary campaigns of
political recklessness in recent memory.

One has to presume that Republicans are perfectly well aware that the US debt is not
really a crisis, and that they're not really going to force into default just to be able to
hack further away at social programs. That's what they seem to be telling Wall Street,
anyway. But it's almost unimaginably irresponsible. If you play chicken, there is
always the chance that you'll go off a cliff.

So if Congress doesn’t raise the $14.3 trillion debt ceiling in a few weeks, and
the U.S. defaults on its debt for the first time in history, what level of confusion,
calamity and crisis might this country face?

It's really hard to say. Probably in the short run, not that much – there are always
expedients the federal government can use to stop the gap temporarily, and the business
community will put enormous pressure on the Republicans to cut it out.

The danger would be the effects overseas – would it accelerate movements to abandon
the use of US treasury bonds as international reserve currency. Since 1971, when Nixon
went off the gold standard, the dollar has essentially played the role gold used to play as
the bedrock of the world banking system.
Russia has been arguing the world should move away from the system for years, China
occasionally at least pretends to toy with it, and Dominique Strauss-Kahn was
apparently working on an alternative system as well before.... well, you know.

If that changes, the effects might well be epochal, because the structure of the current
world economy, where the US military basically plays the role of police, and is
effectively rewarded by being allowed to maintain a global monetary system which
gives us huge economic advantages (notably, the ability to import much more than we
export), will be seriously jeopardized.

At a recent news conference, the president once again compared government

spending to what American households face. "Our first starter home was a
$180,000 condo," Obama said. "That was still a good investment, and we were able
to make the payments." Are the bills that average Americans face a good analogy
to explain the complexities of government spending?

To be honest it's hard to imagine a more ridiculous analogy. It's hard to even count the
ways. Sure, households have to bring in revenues, and they have to pay some of it out,
or borrow the difference. But there the resemblance ends.

First of all, the US government is like a household where the breadwinner gets to charge
his employer anything he likes. Second of all, if you or I borrow money, we borrow it
from somebody else – a bank, usually, which can call in the repo man, and eventually, if
you don't cooperate, the police.

The US owes most of that money to itself. Four dollars in five are owed internally, and
about half of that is actually owed by the government to other branches of the
government—especially, to the Federal reserve.

And of course insofar as cops are involved, the government is the cops – nobody can
force it to do anything it doesn't want to. Certainly the Fed can't – if the government
really wanted to, it could take over the Federal Reserve entirely, or abolish it, or rewrite
its rules pretty much any way it wanted to.

Then finally there's the overseas debt. Even that isn't much different. If you look at what
actually happens with all those Treasury bonds floating around in foreign banks –
well, the vast majority never get called in. The banks holding them just roll them over
every five or ten years, as soon as they mature.

Why? Because, as I say, T-bonds have come to replace gold as the world's reserve
currency. So there's the final reason the analogy is so silly. When you or a member of
your household writes a check, the recipient tends to cash it. When the US
government writes a check, and gives a foreign bank or government an IOU, the
recipient almost never does.

But that's just a very superficial explanation. On a deeper level, the analogy is even
more absurd, because, the US needs to maintain a deficit, or catastrophe would ensue.
The real secret of the system is that these IOUs basically are money. Modern money
mainly consists of government debt.
The current financial system – based on central banks – really goes back to 1694 when a
group of London merchants made a loan to the King of England to fight some war in
France, and he gave them the right to call themselves "the Bank of England" and loan
the money he owed to them to other people in the form of bank notes. That's what
British money actually is - an IOU from the king, an uncashed check.

US dollars are exactly the same. They’re government debt circulating through the
Federal Reserve, which just makes up money, loans it to the government, and then
circulates the debt. They try to make the system as complicated as possible so ordinary
people won't understand what's going on, but it means that the real dirty secret of the
system is that if the deficit ever completely went away, it would cause a complete
catastrophe.

Just as the King can never repay his debt to the Bank of England, or else the British
currency system would collapse, the US has to maintain a national debt – as indeed, it
always has, we've always been in arrears since independence – or there'd be no money.
(Or if you want to be technical, private banks would have to make up all the money by
making loans, but of course, at the moment, our big problem is that they aren't doing
that.)

The system might seem crazy – and in a way it is – since it seems like the government is
writing checks that never get cashed – why would anyone go along with that?

But that's where taxes come in. The government effectively says "well, these dollars are
circulating US debt, and we're not going to give you anything for them, exactly, but we
will let you use it to cancel out the debt that we've decided you owe to us” – your
income tax, etc. US taxes can only be paid in dollars. So to keep the system running, the
government has to demand taxes, but they also have to make sure they spend more than
they get, to keep the IOUs all circulating around.

So you see why I say it's a ridiculous analogy?

China is the largest foreign creditor to the U.S., holding more than $1 trillion in
Treasury debt as of this past March. Reuters reported last week that an adviser to
the People's Bank of China said a default could undermine the U.S. dollar. "I think
there is a risk that the U.S. debt default may happen." I mean, we all grow up
believing that paying your debts is the right thing to do. Is it always?

Well, a lot of what "growing up" seems to really mean is figuring out that in the real
world, those moral rules they teach you as a child don't always apply. Business owners
certainly don't feel that debts are sacred – I can't remember the last time I did freelance
work and my employer didn't at least try pretending he just forgot to pay me!

If the study of history shows us anything, it's that it all comes down to power. The
people on the top know that everything is negotiable. If there's a real problem, you can
always work something out – which is what we saw in 2008, when the financial
establishment effectively convinced the both political parties to step in and take care of
several trillion dollars of their gambling debts.
The rich have always been capable of extraordinary acts of generosity and forgiveness
when dealing with each other. The absolute morality of debt is meant for us lesser
mortals – since it's the best means ever discovered to take a situation of massive
inequality and make it seem like the victims are to blame.

The same thing goes for international relations. If Mozambique owes the US 10 billion
dollars, Mozambique has a big problem. If the US owes Japan10 billion dollars, then
Japan has a problem, because there's no way it can force the US to do anything it doesn't
want to.

Or even France: in 1971 when Charles de Gaulle tried to call in his US debt in gold,
which he was legally entitled to do, Nixon just shrugged his shoulders said "fine, then
I'll go off the gold standard." What was France going to do? Nuke us?

Actually, most of those countries that own all those T-bonds know they are losing
money by sitting on them (the yields are less than inflation), and they'll never get all
their money back. But most of them – Japan, South Korea, the Gulf States – are regimes
under US military protection, in fact, with huge US military bases sitting right on top of
them, so really we're talking about protection money—in whatever sense of the term.

Obviously, China is a different story. Their behavior is a little harder to explain, since
they are effectively shipping enormous amounts of consumer goods to us on credit and
must know they're never going to get paid back. But here I think you have to remember
two things. First, China has two thousand years of experience flooding potential rival
powers with riches, so as to make them spoiled and dependent. If it worked on the
steppe nomads, why not the US- which they probably see as just as scary, violent
barbarians?

Second, the Chinese leadership might be running a quasi-capitalist state but these guys
were all trained as Marxists. They probably still see all this high finance as so much
mumbo jumbo – "ideological superstructure" as the Marxists like to put it – it isn't really
real.

What's real is highways, factories, and technology. And they are getting more and more
of that, and we're getting less. So they're perfectly happy with arrangements as they
stand.

I suspect there's a kind of tacit deal, here, whether explicitly stated or not: the Chinese
government periodically pretends to get all worked up over the US debt, even though
they don't care, and in exchange, the US only pretends to get worked up over their
constant pirating of intellectual property rights and technology transfers, but in fact, lets
them get away with it. The result: we get Walmart, and they get nanotechnology,
superfast trains, and a space program. So what do they care if we never “pay the debt?”

You examined 5000 years of economic and cultural behavior. Would you ever
suggest that capitalism as we know it needs to change?

The most remarkable thing I discovered in my historical researches is that virtual money
is nothing new. Actually, it's the original form of money.
Back in ancient Mesopotamia, people didn't go to the bar or market with tiny bits of
silver; they put things on the tab. Merchants used expense accounts. Commerce meant
trust. What we now think of as cash, in contrast – gold and silver coinage, and with
them, impersonal, cash markets – was basically invented much later, mostly to pay
soldiers, and as a side-effect of military operations.

If you look at the last five thousand years of history, what you find is an alternation of
periods where money basically means credit, periods of mostly virtual money, and
periods where it's assumed to be a physical thing. It starts as credit.

Then around the 7th century BC, you see, simultaneously in Greece, India, and China,
the invention of coinage – and for maybe a thousand years after that, vast empires, with
huge standing armies paid in cash, cash markets, where they're among other things
selling all the slaves conquered in the wars, most of whom end up working in the mines
producing more gold and silver to pay the troops with.

In the Middle Ages it all shifts back again – the great religions, which really started as
anti-war movements, take over, the armies are disbanded, cash disappears, people go
back to virtual money (both checks and paper money for instance were Medieval
inventions.)

Then, after 1492 it swings the other way, again – we're back to gold and silver money,
vast empires, slavery comes back (and some might argue its still here – if Plato or
Aristotle were alive today I doubt they'd see much distinction between selling yourself
and renting yourself, so they'd probably see most Americans as, effectively slaves).
That's the period of history that's just ending now.

This is epochal. Changes on this scale only happen once every 500 or even 1000 years.

What will it mean? Well obviously it's impossible to say for sure. And to a large degree
it's really up to us how it all turns out.

But one thing I have noticed is that in periods dominated by virtual money, it becomes
impossible to deny that money is just a promise, that it's just a set of understandings we
have with one another—and therefore, that you need some kind of watchdog institution
in place to make sure things don't get completely out of hand.

In the ancient Near East, they used to simply declare periodic debt cancellations. The
Medieval religious authorities tended to ban interest payments outright. Always there
was some kind of overarching institution, usually bigger than any government, to
protect debtors, to prevent the bulk of the population from simply being reduced to
slaves (which, of course, is how most indebted Americans feel most of the time.)

Of course this time around, the first thing we did was create the IMF, a vast overarching
institution designed basically to protect creditors. But (most people don't know this) that
didn’t work out too well. The IMF has been effectively kicked out of Asia and Latin
America for some time now, and now, most recently, from Egypt. So that model has
definitely failed.
I think it's significant that growing opposition to the "debt crises" being inflicted on
people in Europe, in places like Greece and Spain, is a call for "real democracy."

What they're effectively saying is, "In 2008, the financial elites let the cat out of the bag
when they refused to let their banks fail like the textbooks say they were supposed to.
As a result, we learned that the story about capitalism we'd been hearing for all these
years wasn't really true. Markets don't really run themselves, and debts can be finagled
out of existence if you really want them to be.

"But if that's true, if debt is just a promise and promises can be renegotiated, then if
democracy is going to mean anything, it has to mean that it’s us, the public, that gets the
ultimate say over how that happens – not some hedge fund manager.”

If they win, then we're going to be talking about a very different economic system.
Whether you even want to call it "capitalism" is probably just a matter of taste. But it
gives you a sense of just how much is at stake.

http://www.canopycanopycanopy.com/10/to_have_is_to_owe

To Have Is to Owe
by David Graeber

Mesopotamian usury, Vedic accounting, American Jubilee: excavating the history

of fiscal debt. Illustrations by Joanna Neborsky.

“To Have Is to Owe” contains excerpts from David Graeber’s forthcoming book Debt:
The First 5,000 Years, to be published by Melville House in January 2011. It was
produced by Triple Canopy as part of its Research Work project area, supported in part
by the New York Council for the Humanities and the Brown Foundation, Inc. of
Houston.

Payment Due
For thousands of years, the struggle between rich and poor has largely taken the form of
conflicts between creditors and debtors—of arguments about the rights and wrongs of
interest payments, debt peonage, amnesty, repossession, restitution, the sequestering of
sheep, the seizing of vineyards, and the selling of debtors’ children into slavery. By the
same token, for the past five thousand years, with remarkable regularity, popular
insurrections have begun the same way: with the ritual destruction of debt records—
tablets, papyri, ledgers; whatever form they might have taken in any particular time and
place. In the throes of the recent economic crisis, with the very defining institutions of
capitalism crumbling, surveys showed that an overwhelming majority of Americans felt
that the country’s banks should not be rescued—whatever the economic
consequences—but that ordinary citizens stuck with bad mortgages should be bailed
out. This is quite extraordinary, as Americans have, since colonial days, been the
population least sympathetic to debtors. (Back then, the ears of an insolvent debtor
would often be nailed to a post.) The notion of morality as a matter of paying one’s
debts runs deeper in the United States than in almost any other country, which is odd,
since America was settled
largely by absconding debtors. Despite the fact that the Constitution specifically
charged the new government with creating a bankruptcy law in 1787, all attempts to do
so were rejected on “moral grounds” until 1898, by which time almost all other Western
states had adopted one. The change was epochal.1

Those charged with moderating political debate in our media and legislatures have
decided that this is not the time for another such change. The US government
effectively put a three-trillion-dollar band-aid over the problem, changing nothing.
Financiers were “bailed out with taxpayer money”—in other words, their imaginary
money was treated as if it were real—while mortgage holders were mostly left to the
tender mercy of the courts, subjected to a bankruptcy law that, the previous year,
Congress had made far more exacting against debtors. We have even seen a backlash
against small-scale debtors, one driven by financial corporations that have now turned
to the same government that bailed them out to apply the full force of the law against
ordinary citizens in financial trouble. “It’s not a crime to owe money,” reports the
Minneapolis Star-Tribune. “But people are routinely being thrown in jail for failing to
pay

1 The nature of money has always been particularly contentious in the US, as evidenced
by the endless battles between goldbugs, greenbackers, free bankers, bimetallists, and
silverites in the nineteenth century. American voters were so suspicious of the very idea
of central banks that the Federal Reserve system was created only on the eve of World
War I, three centuries after the Bank of England was founded. Even the monetization of
the national debt was seen by Thomas Jefferson as a pernicious alliance between
warriors and financiers, though it opened the way to government assuming the role of
moral debtor, and of freedom being perceived as something literally owed to the nation.
Aristocratic debtors were wined and dined by
liveried servants and allowed to receive
prostitutes. Impoverished inmates were shackled
together in tiny cells, where they “suffered to die,
without pity, of hunger and jail fever.”
debts.” In Minnesota, “the use of arrest warrants against debtors has jumped 60 percent
over the past four years, with 845 cases in 2009. In Illinois and southwest Indiana, some
judges jail debtors for missing court-ordered debt payments. In extreme cases, people
stay in jail until they raise a minimum payment. In January [2010], a judge sentenced a
Kenney, Ill., man ‘to indefinite incarceration’ until he came up with $300 toward a
lumber yard debt.”2

Despite all this, we hardly know what debt is. The very flexibility of the concept is the
basis of its

2 Throughout history, certain sorts of debts, and certain sorts of debtors, have been
treated differently from others. The British public was scandalized in the 1720s when
the popular press exposed the fact that debtors’ prisons were regularly divided into two
sections. Aristocratic inmates, who often thought of a brief stay in Fleet or Marshelsea
as something of a fashion statement, were wined and dined by liveried servants and
allowed to receive regular visits from prostitutes. On the “common side,” impoverished
debtors were shackled together in tiny cells, “covered with filth and vermin,” as one
report put it, “and suffered to die, without pity, of hunger and jail fever.”

power, and of the moral confusion associated with it. Looking at the history of debt
worldwide, one finds that most people have held that paying back money one has
borrowed is a simple matter of morality and, contradictorily, that anyone in the habit of
lending money is evil. Recently, the former position seems to have trumped the latter,
owing to a persistent refusal to question our slavish devotion to creditors. But if the
welfare state must be destroyed in order, ostensibly, to settle our debts, we should ask
ourselves: To whom, exactly, are those debts owed? And where did our creditors get the
money that was loaned to us? (The answer, of course: We owe the very financial
institutions we

recently bailed out for making fraudulent and idiotic loans; they didn’t get the money
anywhere, they just made it up.) Whenever such questions have been openly asked in
Europe, riots have tended to ensue.

Such eruptions make it clear that debt must be removed from that rarefied sphere of
morality arbitrated by transnational institutions (whose representatives are also its main
beneficiaries), where it has become ensconced, and returned to the sphere of open
political debate. In the ancient world, it was not debt that was considered sacred, but
rather the power to make it disappear. We are, it seems, long overdue for a
contemporary Jubilee, one that would affect consumer debt as well as international debt,
and that would not only relieve a great amount of human suffering but also remind

us that money is not ineffable, that paying one’s debt is not the essence of morality, that
borrowing and lending are human arrangements, and that if democracy is to mean
anything, it is the ability to all agree to arrange things differently.

It is significant that, since Hammurabi, great imperial states have invariably resisted this
kind of politics. Athens and Rome established the paradigm: Even when confronted
with continual debt crises, they insisted on legislating around the edges, softening the
impact; they eliminated obvious abuses like debt slavery and used the spoils of empire
to throw all sorts of extra benefits at their poorer citizens (who, after all, provided the
rank and file of their armies) so as to keep them afloat. They did all this in such a way
as to fend off any challenge to the principle of debt itself. The US has taken a
remarkably similar approach: eliminating the worst abuses (e.g., debtors’ prisons), using
the fruits of empire to provide subsidies, visible and otherwise, and, recently,
manipulating currency rates to flood the country with cheap goods from China. Never
has the governing class allowed anyone to question the sacred principle that we all must
pay our debts. That principle has recently been exposed to be a flagrant lie. As it turns
out, we all don’t have to pay our debts. Only some of us do.

Mesopotamia, 2400 BCE

Usury was common practice by 2400 BCE. Officials or merchants advanced loans to
peasants and, if

they were unable to pay, began to appropriate their possessions, starting with grain,
goats, and furniture, then moving on to fields and houses, then family members. First
went the servants, followed by children, wives, and even the borrower himself, all of
whom were reduced to debt peons until the money was repaid. This threatened to rip
society apart: If for any reason there was a bad harvest, large proportions of the
peasantry fell into debt peonage. Indebted farmers in fear of repossession abandoned
their fields.

Faced with the potential for complete social breakdown, Sumerian and Babylonian
kings periodically announced general amnesties. All outstanding consumer debt was
declared null and void (commercial debts were not affected), all land was returned to its
original owners, and debt peons were returned to their families. Before long, kings
made a habit of declaring such amnesties upon assuming power. (The sovereign saw
himself as literally re-creating human society, so he was in a fine position to relieve all
previous moral obligations.) In Sumerian, these were called declarations of freedom.
The Sumerian word amargi is the first recorded use of “freedom” in any language; it
literally means “return to mother,” since

this is what freed debt peons were allowed to do.

The Fabled Land of Barter

When economists speak of the origins of money, debt is always something of an
afterthought. First comes barter, then money; credit develops only later. Even if one
consults books on the history of money in, say, France, India, or China, what one
generally gets is a history of coinage, with barely any discussion of credit arrangements
at all. For almost a century, anthropologists like myself have been pointing out that
there is something very wrong with this picture. Credit system, tabs, and even expense
accounts existed long before cash. These things are as old as civilization itself. History
tends to move back and forth between periods dominated by bullion, when it’s assumed
that gold and silver are money, and periods in which money is assumed to be an
abstraction, a virtual unit of account. The standard version of this history has little to do
with how economic life is actually conducted in real communities and marketplaces,
where everyone is likely in debt to everyone else in a dozen different ways, and most
transactions take place without the use of currency.

Some of it is just the nature of the evidence: Coins are preserved in the archaeological
record, credit arrangements usually are not. Still, the problem
Missionaries, adventurers, and colonial
administrators fanned out across the world,
carrying copies of The Wealth of Nations,
expecting to find the land of barter. None ever
did.
runs deeper. The existence of credit and debt has always been something of a scandal
for economists, since it’s almost impossible to pretend that those lending and borrowing
money are acting on purely “economic” motivations (for instance, that a loan to a
stranger is the same as a loan to one’s cousin). Therefore, they begin the story of money
in an imaginary world from which credit and debt have been entirely erased: “Once
upon a time, there was barter. It was difficult. So people invented money. Then came
the development of banking and credit.” The logical,

inexorable progression of humanity from Stone Age barterers of mastodon tusks to

wielders of complex financial instruments has become common sense.

We now know from ancient Egyptian and Mesopotamian records—discovered after

Adam Smith, for whom economic history began with Homer—that credit systems (what
is today called virtual money) preceded the invention of coinage by thousands of years.
Money was actually created by bureaucrats to track state resources and spread unevenly,
never completely replacing credit systems. Barter, in turn, is largely an accidental
byproduct of the use of coinage or paper money, a refuge for people operating in cash
economies where currency has for some reason become inaccessible. Nevertheless,
nearly every introductory economics textbook in use today takes the same approach:
“To see that society benefits

from a medium of exchange, imagine a barter economy,” write Begg, Fischer, and
Dornbuch in Economics (2005). “Imagine the difficulty you would have today if you
had to exchange your labor directly for the fruits of someone else’s labor,” write
Maunder, Myers, Wall, and Miller in Economics Explained (1991). “Imagine you have
roosters, but you want roses,” write Parkin and King in Economics (1995). “One can
imagine an old-style farmer bartering with the blacksmith, the tailor, the grocer, and the
doctor in his small town,” write Stiglitz and Driffill in Economics (2000).

There is a simple reason why everyone who writes an economics textbook feels the
need to tell us the same story. For economists, it is in a very real sense the most
important story ever told. It was by telling it in 1776 that Adam Smith, professor of
moral philosophy at the University of Edinburgh,

effectively brought the discipline of economics into being. He objected to the notion
that money was a creation of government, and insisted that property, currency, and
markets not only existed before political institutions but also were the very foundation
of human society. It followed that insofar as government should play any role in
monetary affairs, it should limit itself to guaranteeing the soundness of currency. It was
only by making such an argument that he could insist that economics was itself a field
of human inquiry with its own principles and laws—as distinct from, say, ethics or
politics. The economy, in his formulation, operates

by rules of its own that are separate from moral and political life; it is where we indulge
in our natural propensity to truck and barter. We are still trucking and bartering, and
always will be. Money is simply the most efficient means.

For centuries, economists have searched for the fabled land of barter. Smith set his story
in aboriginal North America, and its lack of realism reflects the dearth of reliable
information on Native American economic systems in Scottish libraries. But by the
middle of the nineteenth century, Lewis Henry Morgan’s descriptions of the Six Nations
of the Iroquois had been published and read widely; they made clear that the Iroquois’s
goods were stockpiled in longhouses, then allocated by women’s councils, without
anyone ever trading arrowheads for slabs of meat. Economists ignored this information.
Stanley Jevons, for example, wrote The Principles of Political Economy, his classic
study of the origins of money, in 1871. He took his examples straight from Smith,
describing Indians swapping venison for elk and beaver hides. Around the same time,
missionaries, adventurers, and colonial administrators were fanning out across the
world, many carrying copies of Smith’s The Wealth of Nations, expecting to find the
land of

barter. None ever did. They discovered an almost endless variety of economic systems.
But to this day, no one has been able to locate a place where the ordinary mode of
economic transaction between neighbors takes the form of “I’ll give you twenty
chickens for that cow.”3

Madagascar, 1990
In the town of Arivonimamo, Madagascar, I had the privilege of interviewing a
Kalanoro, a tiny, ghostly creature that a local spirit medium claimed to keep hidden
away in a chest in his home. The spirit belonged to the brother of a notorious loan shark,
a horrible woman named Nordine. I was a bit reluctant to have anything to do with the
family, but some of my friends insisted; this was, after all, a creature from ancient
times. The creature spoke from behind a screen, in an eerie, otherworldly quaver. But all
it was really interested in talking about was money. Finally, slightly exasperated by the
whole charade, I asked, “What did you use for money back in ancient times, when you
were still alive?”

The mysterious voice immediately replied, “We didn’t use money. In ancient times we
used to

3 This hardly means that barter does not exist—or even that it’s never practiced by the
sort of people that Smith referred to as savages. It just means that it’s almost never
employed between fellow villagers, as Smith imagined it to be.

barter commodities directly, one for the other.”

We all owe an infinite debt to humanity, nature, or
the cosmos (however one prefers to frame it), but
no one else can possibly tell us how to pay it.
IOU All
What gave early nation-states the right to levy taxes? Nowadays, we all think we know
the answer to this question. We pay our taxes so that the government can provide us
with services, starting with military protection. The arrangement is said to go back to an
original social contract, though no one really knows when it was made or by whom, or
why we should be bound by the decisions of distant ancestors on this one matter when
we aren’t by their decisions otherwise.

An alternative explanation is primordial-debt theory, a school of thought developed

largely in France by economists, anthropologists, historians, and classicists; its
foundational text is Michel Aglietta and André Orléan’s La Violence de la Monnaie
(1992). Adherents insist that monetary policy cannot be separated from social policy,
that the two have always been intertwined. Governments use taxes to create money,
which they are able to do

because they have become the guardians of the debt that all citizens have to one another.
This debt is the essence of society itself.

At first, the argument goes, this sense of debt was expressed not through the state, but
through religion. The hymns, prayers, and poetry collected in the Vedas and the
Brahmanas, the foundations of Hindu thought, constitute the earliest-known reflections
on the nature of debt, which they treat as synonymous with guilt and sin. According to
the commentators of the Brahmanas, human existence is itself a form of debt: A man,
being born, is a debt; he is born to death, and only by way of sacrifice does he redeem
himself from death. Two famous passages in the Brahmanas insist that we are born as a
debt not just to the gods (to be repaid in sacrifice) but also to the sages who created the
Vedic learning (to be repaid through study), to our ancestors (to be repaid by having
children), and, finally, to the whole of humanity (to be repaid with

hospitality to strangers).

The first explicit theory of the debt owed by each living person to the society that makes
his or her existence possible was formulated by Auguste Comte in his last work, The
Catechism of Positive Religion (1852), in the form of a lecture on what came to be
known as primordial, existential, or social debt, delivered by the priest of an imaginary
Religion of Society. Asked for his view on human rights, the priest scoffs at the very
notion. It is nonsense, he says, an error born of individualism. Positivism understands
only duties. After all,

We are born under a load of obligations of every kind, to our predecessors, to our
successors, to our contemporaries. After our birth these obligations increase or
accumulate before the point where we are capable of rendering anyone any service. On
what human foundation, then, could one seat the idea of “rights”?

Comte doesn’t use the word debt, but it is clear what he means: We have already
accumulated endless debts before we get to the age at which we can even think of
paying them. And by that time there’s no way even to calculate to whom we owe them.
The only way to redeem ourselves is to be dedicated to the service of humanity.

Comte’s notion of an unlimited obligation to society crystallized in the notion of social

debt, which was taken up among social reformers and, eventually, socialist politicians in
many parts of Europe and abroad. In France the notion of a social debt soon became
something of a catchphrase, a slogan—and, eventually, a cliché: “We are all born

as debtors to society.” The state, according to this view, was merely the administrator of
the existential debt that everyone owes to everyone.

Theories of existential debt always end up justifying—or laying claim to—structures of

authority. What we really have in the idea of

primordial debt is the ultimate nationalist myth. Once we owed our lives to the gods
who created us, paid them interest in the form of animal sacrifice, and, ultimately, paid
back the principal with our lives. Now we owe our lives to the nation that formed us,
pay interest in the form of taxes, and, when it comes time to defend the nation against
its enemies, pay back the principal with our lives. This is a great trap of the twentieth
century: On the one side is the logic of the market, which insists that we don’t owe one
another anything. On the other is the logic of the state, which insists that we are born
with a debt we can never truly pay. In fact, the dichotomy is false. States created
markets, markets require states, and neither could continue without the other.

The true ethos of our individualistic society may be found in this equation: We all owe
an infinite debt to humanity, nature, or the cosmos (however one prefers to frame it),
but no one else can possibly tell us how to pay it. All systems of established authority—
religion, morality, politics, economics, the criminal-justice system—are revealed to be
fraudulent ways of calculating what cannot be calculated. Freedom, then, is the ability
to decide for ourselves how to pay our debts.

England, twelfth century CE

One of the most important forms of currency during the reign of King Henry I was the
notched “tally stick” used to record debts. Each party to a transaction would take a twig,
notch it to indicate the amount owed, then split it in half. The creditor would keep one
half, called the “stock” (hence the origin of the term “stock holder”) and the debtor
would keep the other, called the “stub” (hence “ticket stub”). Tax assessors used such
twigs to calculate amounts owed by local sheriffs. Often, though, rather than wait for
the taxes to come due, Henry’s exchequer would sell the tallies at a discount, and they
would circulate as tokens of debt owed to the government. The king also issued tallies
in lieu of payment to soldiers, farmers, and others owed money by the state; these, too,
were sold at a discount and circulated among stock holders.
There is one puzzling aspect of this equation: The IOU can operate as money only as
long as Henry never pays his debt. This is precisely the logic on which the Bank of
England—the first modern central bank—was founded. In 1694, with public finances
weak and the state's monetary and credit systems precarious, a consortium of English

bankers made a loan of £1.2 million to King William III. In return they received a royal
monopoly on the issuance of banknotes. Practically, this meant the bankers had the right
to advance IOUs representing a portion of the king’s debt to any inhabitant of the
kingdom willing to borrow from them, or willing to deposit his own money in the bank.
The effect was to monetize the royal debt. This was a great deal for the bankers, who
charged the king 8 percent annual interest on the original loan and, simultaneously,
charged clients who borrowed money interest on that same debt. But the arrangement
could only work for as long as the original loan remained outstanding. Which is why, to
this day, the loan has never been paid back. It cannot be. If it ever were, the entire
monetary system of the United Kingdom would cease to exist.

God’s Money
In today’s world, paying one’s debts can seem the very definition of morality, if only
because so many fail to do it. When faced with a debt, large corporations and even some
small businesses will almost automatically wait and see what happens if they do not
pay, complying only if goaded or presented with a legal writ. The principle of honor
having been almost completely removed from the marketplace, debt acquires the halo of
religion. (One might speak of a double theology, one for creditors and another for
debtors.) It is no coincidence that the current phase of American debt imperialism has
also been accompanied by the rise of the evangelical right, which has bucked the past
two millennia of Christian thinking on the subject and enthusiastically embraced
supply-side economics, taking the position that creating money and giving it to the rich
is the most biblically appropriate way to bring about national prosperity. Perhaps the
most ambitious theologian of the new creed was George Gilder, whose book Wealth
and Poverty became a best seller in 1981, at the dawn of the Reagan revolution. Those
who felt that money could not simply be created were mired in an old-fashioned,
godless materialism, Gilder

argued; they didn’t realize that just as God could create something out of nothing, his
greatest gift to humanity was the ability to do so in the same fashion. And to do so was
not hubristic, but in keeping with God’s intentions: The creation of money was a gift, a
blessing, a channeling of grace; a promise, yes, but not one that can be fulfilled, even if
the bonds are continually rolled over, because through faith (“in God we trust”) their
value becomes real. “The United States,” Gilder writes, “must overcome the materialist
fallacy: the illusion that resources and capital are essentially things, which can run out,
rather than products of human will and imagination which in freedom are
inexhaustible.” Such effusions inspired evangelists like Pat Robertson to declare supply-
side economics “the first truly divine theory of money-creation.”

This new breed of capitalist evangelicals failed to acknowledge that the vast majority of
the money being “created” was in fact a product of deficit spending to fund the
mushrooming US military, a practice that was avidly pursued by Reagan and that
reached its pinnacle under George W. Bush. Furthermore, until China became our chief
creditor, money was “borrowed” almost exclusively from
West Germany, Japan, South Korea, and Saudi Arabia—all nations that were under US
military protection. The “products of human will and imagination” were backed by
material forces after all: not so much fields, factories, or even oil wells, but aircraft
carriers and laser-guided missiles. All

the more curious is Christian fundamentalists’ obsession with waging war on Iraq—
which they often referred to, among themselves, as “Babylon”—the birthplace of the
debt-forgiveness decree and the interest-free commercial economy.

Islamic world, Middle Ages

From the beginning, Islam had a positive view of commerce. (Muhammad himself had
been begun his life as a merchant.) The prohibitions against usury did not mitigate the
growth of commerce, or even the development of complex credit instruments. To the
contrary, the early centuries of the caliphate saw an efflorescence of both. Credit
instruments were so essential that traders tended to keep their wealth on deposit and
make everyday transactions using checks (sakk) instead of coins. Checks were
countersigned and transferred, and letters of credit (suftaja) traveled across the Indian
Ocean and the Sahara. These promissory notes operated independently of the state (and
the deals made with them were beyond the purview of government enforcement): They
never became paper money, could not be used to pay taxes, and their value remained
based almost entirely on trust and reputation. If a trader was wronged, he could appeal
to the Islamic courts, but commissioning a

poet to compose verses deriding the debtor would have a much greater effect.

Networks of trust were largely responsible for the spread of Islam over the caravan
routes of central Asia and the Sahara and across the Indian Ocean, which became the
main conduit of world trade. Islam gained a toehold in trade emporia from Aden to the
Spice Islands, largely because Islamic courts were perfectly suited to provide those
ports with legal infrastructure: the means of establishing contracts, recovering debts,
and creating a banking sector capable of redeeming or transferring letters of credit. The
resultant level of trust between merchants in the great Malay entrepôt Malacca was
legendary. The city had Swahili, Arab, Egyptian, Ethiopian, and Armenian quarters, as
well as quarters for merchants from regions of India, China, and Southeast Asia. Yet it
was said that its merchants shunned enforceable contracts, preferring to seal transactions
with, as the saying went, “a handshake and a glance at heaven.”

Money Bags
How many times have we been told that the advent of virtual money, the
dematerialization of cash into plastic and dollars into blips of electronic information,
has brought us into an unprecedented financial world, completely uncharted territory?
That very assumption made it easy for Goldman Sachs, AIG, and their cohorts to
convince people that any effort to understand, much less regulate, their dazzling new
financial instruments was futile. But the moment one casts matters on a broad historical
scale, it becomes clear that there’s nothing fundamentally new about the reign of virtual
money, which would be recognizable to ancient Mesopotamian bureaucrats and Islamic
traders alike.
The new global currency—the free-floating dollar—is rooted in military power even
more firmly than before. Debt peonage continues to be the main principle of recruiting
labor globally—either in the literal sense, in much of East Asia and Latin America, or in
the subjective sense, whereby most of those working for wages or even salaries feel that
they are doing so primarily to pay off interest-bearing loans. New transportation and
communications technologies have made things

easier for creditors: They can charge domestic laborers and factory workers thousands
of dollars to be transported to distant countries where they are forced to work off their
debt, lacking legal protections. The overarching institutions that have been created to
regulate these activities—those whose cosmic scale echoes the divinely inspired
authority of kings of the ancient Middle East and the church of the Middle Ages—do
not protect debtors, but rather enforce the rights of creditors. They all operate on the
principle that one has to pay one’s

debts (unless one is the United States Treasury), since the prospect of default by any
country is assumed to imperil the entire world monetary system. Joseph Addison
described that fear of collapse, which acts to buttress the system, in his 1711 essay
“Public Credit,” recounting a nightmare in which Britain’s national wealth has
disappeared. “There was as great a change in the hill of money-bags, and the heaps of
money, the former shrinking, and falling into so many empty bags, that I now found not
above a tenth part of them had been filled with money,” he writes.

The rest that took up the same space, and made the same figure as the bags that were
really filled with money, had been blown up with air, and called into my memory the
bags full of wind, which Homer tells us his Hero received as a present from Æolus. The
great heaps of gold on either side of the throne now appeared to be only heaps of paper,
or little piles of notched sticks, bound up together in bundles, like Bath faggots.

We need to understand what philosophers in the Middle Ages, from Italy to India to
China, already understood perfectly well: Money is not a thing, and is certainly not a
scarce resource. Money is a promise. And it is a promise we keep to those we value and
break to those we do not. In Greece, Ireland, Portugal, and Spain, sovereign-debt default

seems ever more likely. If it occurs, then what will happen? Certain promises will be
kept, and others will be broken. As we learn from politicians every day, it is rarely
possible to keep all promises exactly as one has made them. Today, in the United
Kingdom, many politicians are saying, “I know I was elected on a solemn pledge not to
raise tuition fees, but now that I’m in power I realize that was unrealistic. We will have
to triple them.” What they in fact mean is, “I have decided that promises made by this
government to repay bankers, at an agreed-upon interest rate, for money they fabricated,
are more important than promises made to my own constituents.” And if promises made
to legal abstractions are always to be given priority over promises made to what we still
occasionally, whether fondly or cynically, call the people, we might well ask ourselves
why our system of government is still deemed democracy.