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Debt: The First 5,000 Years

David Graeber's "Debt: The First 5,000 Years" hit the bookshops recently and it's been making waves. It's a riveting read, drenched with novel insight. Graeber used to teach at Yale till he got the boot in 2005 for his political views (he's an anarchist); he since moved to London University. Here is Gillian Tett's review of the book in this weekend's FT. Here is an intervew with Graeber in nakedcapitalism.com. And here is an hour-long interview by Doug Henwood that was broadcast last weekend on C-Span's BookTV.

From the nakedcapitalism.com interview:

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.

Oh, I almost forgot: a 2002 essay by Graeber in New Left Review and an interview by Charlie Rose five years back.


newbie quanster
I read the Tett review and I don't understand the last bit about debt forgiveness:

But in the western world today, governments are intent on protecting creditors, not debtors. What makes the west an outlier, in other words, is not just the presence of credit cards or the existence of virtual credit, but the reluctance of leaders to countenance programmes of widespread debt-forgiveness of the type that used to be found in Mesopotamia.

#1, isn't the big problem what "west" (US ) owes "east" (China)? I don't think debt forgiveness is an option for policy makers in the west.
#2, he says western governments are "intent on protecting creditors". But what about bankruptcy? It's a relatively easy option for deadbeats, in spite of the 2005 BAPCPA. And bankruptcy was not an option in Ancient Greece, so it's odd to say the trend in the west is toward protecting the creditor.
I understand that debt is a drag on society, but can we really blame creditors with an honest heart? For every sad story of someone getting sick and getting into debt, you have stories of irresponsible spending. Does the citizen deserve to be "protected" from a self inflicted injury?

That is what bankruptcy is for. Bankruptcy was pretty revolutionary when it came about. It allows people to make mistakes and in get out of them.

Honestly, I can never understand people sometimes. If you have too much debt, simply go bankrupt. You won't be able to get a loan and it will mark your credit, but maybe you need a 7 year cooling off period to get your life in order.

Dave Haan

aka nnyhav
what I had to say about it:
It would be uncharitable to characterize as a leftist version of Pound's Cantos without the poetry or cherrypicking [or anti-Semitism], but it is in part a broadside at homo economicus and neoliberalism (tho with its own moral confusions, and refuting originary myths [barter] isn't as damning to the superstructure as he'd like to make out). For all that, the survey of how money / credit / debt operated over the long term is invaluable (yep I just had to use that word), even if the framing skews; his tripartite societal abstraction into communism / hierarchy / exchange could have been more effectively deployed (he gives short shrift to the middle term in familial relations to favor the first, which he takes as "from each according to their abilities, to each according to their needs", trying to resuscitate the term, admitting it a tad provocative), and doesn't address how the last scales up more easily, nor how the rise of technology corresponds, nor for that matter much on how economics treats banking as external (and inadequate on modern state creditor bias [to whom they owe so much], rather imposing a "military-coinage-slavery" complex across the whole of western civ not just its formative years).

what others had to say:
Michael Hudson on his new book, The Bubble and Beyond:


This summary of my economic theory traces how industrial capitalism has turned into finance capitalism. The finance, insurance and real estate (FIRE) sector has emerged to create “balance sheet wealth” not by new tangible investment and employment, but financially in the form of debt leveraging and rent-extraction. This rentier overhead is overpowering the economy’s ability to produce a large enough surplus to carry its debts. As in a radioactive decay process, we are passing through a short-lived and unstable phase of “casino capitalism,” which now threatens to settle into leaden austerity and debt deflation.

This situation confronts society with a choice either to write down debts to a level that can be paid (or indeed, to write them off altogether with a Clean Slate), or to permit creditors to foreclose, concentrating property in their own hands (including whatever assets are in the public domain to be privatized) and imposing a combination of financial and fiscal austerity on the population. This scenario will produce a shrinking debt-ridden and tax-ridden economy.

The latter is the path on which the Western nations are pursuing today. It is the opposite path that classical economists advocated and which Progressive Era writers expected to occur, given the inherent optimism of focusing on technological potential rather than on the political stratagems of the vested rentier interests fighting back against the classical idea of free markets and economic reforms to free industrial capitalism from the surviving carry-overs of medieval and even ancient privileges and essentially corrosive, anti-social behavior.

Today’s post-industrial strategy of “wealth creation” is to use debt leveraging to bid up asset prices. From corporate raiders to arbitrageurs and computerized trading programs, this “casino capitalist” strategy works as long as asset prices rise at a faster rate than the interest that has to be paid. But it contains the seeds of its own destruction, because it builds up financial claims on the assets pledged as collateral – without creating new means of production. Instead of steering credit into tangible capital formation, banks find it easier to make money by lending to real estate and monopolies (and to other financial institutions). Their plan is to capitalize land rent, natural resource rent and monopoly privileges into loans, stocks and bonds.