Debt: The First 5,000 Years

In the second half of Debt, Graeber reexamines over 5,000 years of Eurasian history from 3500 BCE to 1971 CE to illustrate how there “is a broad alteration between periods dominated by credit money and periods in which gold and silver come to dominate—that is, during which at least a share of transactions were conducted with pieces of valuable metal being passed from hand to hand” (213). To Graeber, what was accepted as currency tells a lot about the political forces in each time and place. In periods of high trust, which are associated with peace and stability, virtual credit money dominates. The opposite occurs in periods of war or low trust. In these situations, coinage prevails.

Agrarian empires (3500-800 BCE) in Mesopotamia, Egypt, and China had thriving commercial economies based on virtual credit money. Temples and palaces amassed gold and silver. While metals were sometimes used as measures of accounting (Mesopotamia), ordinary citizens did not have access to them. For this reason, credit was the medium of exchange. The archaeological evidence also documents the occurrence of interest-bearing loans. With these loans, there is also evidence of kings forgiving public debt, likely to prevent the masses from revolting.

During the Axial Age (800 BCE-600 CE), coins become the medium of exchange. Coins appear to have arisen independently in three different parts of Eurasia: in the lands surrounding the Aegean Sea, the Great Plain of northern China, and in the Ganges River Valley of northeast India between approximately 600 and 500 BCE. Graeber argues that war explains the reason for this simultaneous invention. While war predates the Axial Age, we see a new kind of army comprised of trained professionals and mercenaries. The rules of these places needed to reliably reward these soldiers. Livestock would not work since they are hard to transport. Promissory notes might also not be valid in the military professional’s country of origin. Governments came to monopolize the production of coinage (which private citizens already invented). They required their citizens to pay taxes with coins, which allowed governments to generate enough coins to pay their armies. Slavery also massively increased during this time, again tied to war. Governments forces war captives to work in the mines to keep up with their production of coins. Graeber calls this system the military-coinage-slavery complex. This system caused radical social and religious upheavals. The great thinkers of the time grappled with the morality of war, slavery, and money.

The Middle Ages (600 CE-1450 CE) reverted to virtual credit money and coinage found its way back to religious establishments, where it was often “shaped into images of gods” (254). Graeber takes issues with the idea that the word “medieval remains synonymous for superstition, intolerance, and oppression” (251). Instead, he argues that “for most of earth’s inhabitants, it could only be seen as an extraordinary improvement over the terrors of the Axial Age” (251). The combination of bureaucracy and Confucianism in China resulted in its populace having one of the highest standards of living in the world (through the early 1800s). Medieval Islam, which outlawed lending money at interest, was also arguably the first place where we see free markets. While violence appears to have decreased, it did not go away completely, which Graeber acknowledges. Debt peonage (or a form of it) still exists alongside community violence (e.g., Jewish pogroms) and large-scale wars (e.g., the Crusades).

Coinage returns during the Age of Capitalist Empires (1450-1971 CE). Graeber asserts that China switching back to metal currency in the fifteenth century kicked off this new financial period. He notes that by 1540 “the American mines would, at this point, simply have stopped functioning, and the entire project of American colonization foundered, had it not been for the demand from China” (312). What follows is the institutionalization of the slave trade at a truly global level. Graeber is highly critical of capitalism dispelling several of its current tenets including the idea that it is organized around free labor and that markets and states are separate.

President Nixon moving the US dollar off the gold standard in 1971 marks the end of the capitalist empires and “the beginning of something yet to be determined” (361). Following history, we should have seen a reduction in violence and an increase in global stability with the switch back to virtual credit money. Yet, Graeber argues that we so far do not see this. Violence is still rampant. As one example, the US military essentially backs the global currency and bullies other countries into ensuring the US dollar remains dominant. Many people around the world are not able to participate in the capitalist system, because, by its nature, capitalism is “a system of power and exclusion” (381). Graeber believes that we are at a crossroads. If we continue our current capitalist journey, then our financial and social institutions will likely implode (he argues that this is already beginning to happen with the Great Recession as one example). He urges readers to see themselves “as historical actors, as people who can make a difference in the course of world events” (383) to come up with an alternative, more inclusive financial system.