The first 5,000 years of debt

David Brancaccio Oct 27, 2011

The first 5,000 years of debt

David Brancaccio Oct 27, 2011

David Brancaccio: When you think of debt, you probably think of a 30-year mortgage or a five-year car loan. But anthropologist David Graeber looks at debt differently. He examines debt through the Millennia. He’s with Goldsmiths — University of London and his new book, “Debt: The First 5,000 Years,” goes into the idea of debt, and if we really, really have to pay back what we owe.

Professor Graeber, thanks for joining us.

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 that I discovered, when looking at history, is that people always say that. But in practice, it’s not really the case — especially people on 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: But it’s so deeply ingrained. Here, you may have heard the following lines. The actor is Al Pacino, the screen writer is William Shakespeare.

Al Pacino: The pound of flesh that I demand of him is dearly bought. T’is mine. T’is 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 too completely unreconcilable 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.

Graeber: Precisely.

Brancaccio: But this notion of 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 therefore it’s a promise that can be transferred to other people.

Brancaccio: But, a debt is a contract and it’s argued quite persuasively 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. In fact, most of the most successful civilizations in human history always had some way of readjusting debt so 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 a systematic thing. Every new king who’d come in would say, “All right, clean slate. Start over a gain.” The biblical Jubilee was the same thing; every seven years, debts would be canceled.

Brancaccio: Are there good uses of debt?

Graeber: Absolutely. I mean, there’s a lot of small-scale communities in Africa for example, where it’s just considered right that everybody should owe each other a little. So, there are some places where debt and sociality are really 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 going to lower your credit rating, because you’re more likely to miss a mortgage payment. For most of human history, if you’re a decent person or generous, that would actually improve your credit.

Brancaccio: So there’s debt as social capital and is also, if you borrow some money to do something worth, like investing in plant 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: Rebecca Bloomwood. Occupation: Journalist. Jacket: Visa. Dress: AMEX. Belt: MasterCard. It’s vintage! And I got 1 percent cashback.

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: So it’s no longer a social glue, a kind of social capital. It’s something else.

Graeber: The fact that we want to buy a beer for our friends, the fact that we want to have a party for our children, that we want to take care of each other suddenly brings people in a situation where they’re in constant fear and looking over their shoulders, because they’re in [HOT] for their lives.

Brancaccio: So what’s this you have an idea, maybe, another one of these biblical jubilees might be in order of mass debt forgiveness? What do you think?

Graeber: I think it wouldn’t be a bad idea, and I’ve got a lot of criticism for this and it’s a provocative idea. But I think we should at least think about it. Because 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: Well, why? To get people out of this cycle of having to serve the debt that they owe and to do something, perhaps, more productive?

Graeber: Yes, I think that would free up a lot of energies of people doing things that they don’t really want to be doing 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 that I still owe, I’ll be first in line for that. Fabulous at first, but the thing is — right? — no one would 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 who would pay back into ready cash. And that’s just going to dry up credit into the future.

Graeber: Well, 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 really doesn’t 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 D.C. I’ll meet you down there. We can see how far we get. We’ll have a chat.

Graeber: Yeah.

Brancaccio: Alright, thank you very much.

Graeber: My pleasure.

Brancaccio: David Graeber is an anthropologist at Goldsmiths – University of London. The book, “Debt: The First 5,000 Years.”

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