Before There Was Money, There Was Debt
Debt: The First 5,000 Years is a new book by anthropologist, author and general provocateur, David Graeber. It gives a long and global view on the history of debt, and an alternative theory on the origins of money. Professor Graeber recently stopped by our New York City bureau to talk with Economy 4.0 special correspondent, David Brancaccio.
DAVID BRANCACCIO: You think of debt, you think of a 5-year car loan or maybe a 30-year mortgage, I'm about to talk to a professor who looks at debt through the millennia. David Graeber is an anthropologist at Goldsmiths University of London. His book, Debt: The First 5000 Years, goes deep into the question if we really, really have to pay back what we owe. I sat with him in the New York bureau the other day and I'm forever in his debt. Professor Graeber, thanks for doing this.
DAVID GRAEBER: Thank you.
BRANCACCIO: Of course, it's morally wrong not to pay your debts back. I mean, your folks didn't teach you that?
GRAEBER: Well, one of the things I discovered when looking at history is that people always say that, but in practice it's not really the case. Especially people in the top of the food chain; they know that everything's negotiable. The strict morality of debt tends to be for the little people.
BRANCACCIO: Well we have a great example of this, the 2008 financial meltdown. Big financial institutions didn't have to deal with their debt according to the rules during the crisis, but maybe you and I still had to?
GRAEBER: Exactly. I mean that's a perfect case in point. There's been estimates that something like 13 trillion dollars worth of debt was, by one means or another, made to go away.
BRANCACCIO: But it's so deeply engrained. Here, you may have heard the following lines, the actor is Al Pacino, the screenwriter is Uncle Bill from Stratford-Upon-Avon.
AL PACINO IN THE MERCHANT OF VENICE: The pound of flesh, which I demand of him, is dearly bought; 'tis mine. 'Tis mine!
BRANCACCIO: And I will have it! I mean, the person who wants his money back is traditionally seen as a person who needs to get his money back.
GRAEBER: And he's also the villain, isn't he? That's the fascinating thing, throughout human history people have tried to reconcile two completely irreconcilable ideas: morality is paying your debts, money lenders are evil.
BRANCACCIO: So we love credit, we just don't often love the image of the person we owe the money to.
BRANCACCIO: But this notion, that you're a bad person if you don't pay your debts back, you're saying is actually up for discussion?
GRAEBER: Absolutely, I mean a debt is a promise. It's a certain type of promise. It's a promise that can be quantified and it's therefore a promise that can be transferred to other people.
BRANCACCIO: But, a debt is a contract and it's argued quite persuasively, I have to say, that rule of law and enforceable contracts are what allowed us to achieve the standards of living that we have. Yes, contract law is not a law of physics, it is a human construct, but by accepting contract law a lot of good flowed from it.
GRAEBER: Certainly, but there's contract law and there's contract law. Throughout human history debts have been renegotiated. It's only when you have debts between very powerful people and powerless people that people suddenly say, "no, this is absolutely sacred, this cannot be renegotiated at all."
BRANCACCIO: Now as you looked through all these thousands of years of history as an anthropologist did you find societies that didn't look at these debt obligations in the same way, but were still successful?
GRAEBER: Absolutely. In fact most of the most successful civilizations in human history always had some way of readjusting debt so that you don't end up in a situation where the big people end up effectively enslaving the little people. In Mesopotamia, for example, they had debt cancellation. It was almost systematic thing, every new king who would come in would say, "Alright, clean slate, start over again." The Biblical Jubilee was the same thing; every seven years debts would be cancelled.
BRANCACCIO: Are there good uses of debt?
GRAEBER: Oh absolutely. I mean, small-scale communities in Africa, for example, where it's just considered right that everybody should owe each other a little. If somebody gives you something or lends you something you give back a little bit more or a little bit less. So there are some places where debt and sociality are the same thing.
BRANCACCIO: The term you're using is sociality... ?
GRAEBER: Yeah, the idea that everybody should have links to each other. And debt was a way of making that real.
BRANCACCIO: You point out that a lot of very familiar English words actually descend from this idea of debt.
GRAEBER: Yes, reckoning, redemption, even phrases like "a person of no account" or worthy, they all go back to credit. Because when you don't have a state enforcing a debt, well then debts take on a whole different color. One's honor, one's decency and one's credit are basically the same thing so whereas, for us if you spend money helping the poor, that's probably gong to lower your credit rating because you'll be more likely to miss a mortgage payment. For most of human history if you were a decent person and were generous that would actually improve your credit
BRANCACCIO: So there's debt as social capital and there's also if you borrow some money to do something worthy like investing in plants and equipment to make medicines to cure tropical diseases, but there's also this other kind of debt, quite familiar to many Americans and it sounds a lot like this from the 2009 movie, Confessions of a Shopaholic.
REBECCA BLOOMWOOD (played by Isla Fisher): Rebecca Bloomwood. Occupation: Journalist. Jacket: Visa. Dress: AMEX. Belt: MasterCard. It's vintage. And I got one percent cash back.
BRANCACCIO: Gee, without debt she doesn't have any self-image at all!
GRAEBER: Well, in a way credit has come to substitute for what used to be community.
BRANCACCIO: And so it's no longer a kind of social glue, a kind of social capital, it's something else.
GRAEBER: Suddenly sociality itself becomes a problem. The fact that we want to buy a beer for our friends, the fact that we want to throw a party for our children, that we want to take care of each other. Which is what most people spend money on. Most consumption is really about friendship and family. Suddenly brings people in a situation where they're in constant fear, looking over their shoulders, because they're in hock for their lives.
BRANCACCIO: So what's this, you have an idea, maybe another one of these Biblical Jubilees might be in order. A mass debt forgiveness, what do you think?
GRAEBER: I think it wouldn't be a bad idea, and I've gotten a lot of criticism for this, and it's a provocative idea, but I think we should at least think about it, because I think we're using an antiquated idea of what money is. If money is just a credit system, it's a series of promises. Well, promises, by definition can be renegotiated.
BRANCACCIO: But why? To get people out of this cycle of having to serve the debt that they owe, and then to do something perhaps more productive?
GRAEBER: Yes, I think it would free up a lot of energies of people doing things that they don't really want to be doing and, and work that doesn't even really need to be done.
BRANCACCIO: Look if you could engineer a Jubilee and I wouldn't have to pay off the rest of my mortgage and the credit card debt I still owe. I'll be first in line for that! Fabulous at first, but the thing is, right? No one would ever lend again. People lend for a lot of reasons, but they especially lend to make an informed bet on the borrower's future. It's a way of turning my honor, as a kind of guy that would pay back, into ready cash. And that's just going to dry up credit into the future.
GRAEBER: That's what people always say, but in fact, in the past, that's not been the case. Because what are people going to do with their money? The money doesn't really exist unless you lend it. Banks make up money by making loans, if they don't make loans, there's no bank.
BRANCACCIO: The front doors of the United States Federal Reserve are down at 20th and Constitution Avenue in DC. I'll meet you down there, we can see how far we get. We'll have a chat.
Alright, thank you very much. David Graeber is an anthropologist at Goldsmiths University of London. The book: Debt: The First 5000 Years.