Tuesday, Nov 29, 2022

It’s debt,Stupid

An anarchist overturns conventional economic wisdom money was not created to simplify barter

An anarchist overturns conventional economic wisdom money was not created to simplify barter

The first transactions ever were barter trades,claim all the economics textbooks. But humans tired of hauling wheat,wine and oil over vast distances to trade for apes and peacocks,and it was always so damned hard to figure out the change due,whether in oil or in apes,so money was invented. And money created the economy,stupid. The trouble,says the persistently troublesome anthropologist David Graeber in Debt — The First 5,000 Years (2011,Melville House,New York),is that the archaeological record offers no empirical evidence for this fundamental economic belief.

Intellectual terrorism,along with his support of radical actions like the WTO protests in Seattle and the Occupy Wall Street movement,explain why Graeber was kicked out of Yale,though he could be the world’s leading anthropological theorist. But discounting his anarchism,it is nevertheless true that barter and markets figure nowhere in the early economic record. Rather,the earliest Egyptian and Sumerian inscriptions catalogue debt — who owed what to the treasury and the temple. Harappan inscriptions may be similar,as the epigraphist Iravatham Mahadevan has suggested.

Graeber proposes that the notion that money was invented to simplify barter is an academic fiction. The record suggests that it was invented to quantify debt,which is therefore the foundational economic concept. Debt,created by the first agrarian empires,predated markets,he argues. And the rise of markets was powered by indebtedness,whose most extreme forms are indentured or bonded labour and slavery,a contract in which the slave owes everything,including life and limb. The role of slavery in the rise of empires,from Athens and Rome to the US before abolition,is well-documented. And the indebtedness that mercantile Europe visited upon Africa has lasted for over a century. Shamed by that legacy,Europeans like Bono and Bob Geldof are still trying to have Africa’s loans written off.

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Let us leave it to academics to evaluate the technical soundness of Graeber’s model. As lay readers,we can amuse ourselves by seeing if traditional economic wisdom explains human affairs better when it is stood on its head. Take caste,an enduring status system which markets cannot explain. Exposed to markets,hierarchies are continually altered or erased in favour of new hierarchies,but caste has been immune to erosion for centuries. Why should productive lower castes — farmers,artisans and traders — deliver value unquestioningly,perpetually to upper caste priests,scholars and warmongers? It is inexplicable unless we think of caste as a system of indebtedness rather than status. The lower castes deliver meekly because they have a debt of karma to pay off,and the upper castes hold them in place by denying them education and opportunity.

Or think of equity as a form of debt. If you hold shares in a company,it owes you something. Corporate indebtedness explains a peculiar feature of the capitalist system — investor interest always comes first. It may even trump the national interest. Outsourcing does that,destroying domestic employment to make companies more profitable and shareholders richer. Debt to shareholders may urge companies to unethical practices. For instance,the India-China opium trade had made the East India Company the biggest drug dealer in history,and no one batted an eyelid.

Is it possible,as Graeber suggests,that debt underlies all of human relations? It is certainly the premise on which all economic activities are initiated. The dignified term “finance” is a euphemism for debt. Before we buy a car,a house,a computer,almost everything except everyday necessities,we take out a loan. Industrialists borrow big-time to finance plant,equipment and expansion. Governments borrow from the void and call it deficit spending. Credit fuels every human activity,even scams — Harshad Mehta financed his operations with unsecured loans. Credit powers crashes. Wall Street was brought to its knees by housing loans which could never be paid back. It was “cured” by hiking the credit limit of the US Fed by $2 trillion. Credit is everything.


As an anthropologist,Graeber takes the argument further,to human relations. It is a scandal,he says,that economics cannot distinguish between a loan you make to your mother and one made to a company or government. He argues that the valorisation of indebtedness has damaged human relations,which were originally based on obligations,an idea which is much wider,more complex and yet more lucid than debt. Like him or distrust him,the anarchic Graeber is,as usual,at the barricades and hard to ignore.

First published on: 22-07-2012 at 03:46:38 am
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