I’m not quite done reading Debt: The first 5000 years, by David Graeber, but I want to give an early report. It is full of surprises!

Debt is an examination of the role of money, currency and debt in society. It is a long-view look at economics. I hesitate to call it empirical, but it is evidence-based on the anthropological record. It traces the evolution of economic behavior by observing evidence regarding the stuff of economics — goods, land, labor, resources, value, ownership, exchange, wealth, markets, commerce — throughout history in a wide variety of cultures on all the inhabited continents.

The first surprise is, well, you know that well-known theory that money was invented because Peasant A had 2 chickens and Peasant B had 6 cabbages, and B wanted chickens but A didn’t need cabbages, so they invented an intermediate token called money to represent the abstract value of cabbages and chickens? FALSE, according to Graeber. He reviews the literature to note that the key early economists (notably Adam Smith, but also others) treated this theory as so obvious that no evidence was needed.

Then Graeber went looking across time and geography for any evidence of barter societies that evolved intermediary tokens of value, i.e., proto-money. This led to the second surprise: he didn’t find evidence that a single primitive society even WAS a barter society that fit any of the presumptive models. (Barter sometimes occurred between tribes that were distinct (and often at war), but not within a tribe. Within a tribe the modal finding was that value was shared in small-c communistic ways . . . stuff belonged to the tribe as a whole rather than to individuals.)

So then Graeber went looking for where money first arose. Surprise number 3: Money arose (a) to pay soldiers and (b) so subjugated people could pay their conquerors for the privilege of being subjugated. Which they could not do, of course, hence debt — and its consequences.

I am eliding a lot of detail and missing additional key points. I am also unqualified to say whether Graeber is treating the evidence he recounts in a complete and even- handed way, and this is my biggest botheration as I read Debt.

However, I can report that Graeber’s key point is that money and debt were invented to be tools of militarism, power, kleptocracy, violence, subjugation and serfdom. Eyes wide open: these are the relationships of economics — the happy villagers eating, drinking and dancing in the market square on Saturday, not so much.

“Debt peonage” is alive and well today — it is no accident that David Graeber is also one of the intellects of the Occupy Wall Street movement.

As soon as I get done reading it, I’m going on a hunt for critical reviews. But meanwhile, I’m finding it quite mind-expanding to follow Graeber’s “everything you know about economics is wrong,” chain of evidence.

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  1. Russ Nelson says:

    He thinks that the reason people have to pay interest is because of the risk of loss of some or all of the principal. That the whole system would break down if people were expected to *always* pay back a loan AND had to pay interest. This is not true, unfortunately.

    There are three sources of a desire for interest. First is the one already named: risk of loss of some or all of the principal. Second is the changing value of money. Third is rent (payment for the forsaken use of their money). The level of interest is going to be a balance between these three sources. If the recipient of a loan is known to be a reliable person of good character known to pay back their loans, and the currency of the loan is relatively unchanging over the lifetime of the loan, the only component of interest is the lender’s preference for liquidity.

    Oh, and I heard a new definition of WTF: Well That’s Fantastic!

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