Graeber Debt Jubilee

Earlier this autumn I was reading Graeber's Debt: The First 5000 Years (Melville House, 2011). Seeing the euro crisis unfold in real time while reading was a awesome experience, giving me a weird feeling of experiencing the end of the world with a voice-over.

As an aside, let me confess that the news coverage of the euro crisis right now is giving me feelings of suffocation. Everywhere panic is stirred up, as if the big catastrophe that needed to be averted at all cost would be a break up of the euro-zone. But isn't the genuine catastrophe what is happening right now: whole populations sentenced to austerity without a trace of democratic process, and a power grap by the few, conveniently legitimated by the "crisis"?

Graeber's book is brilliant. It simply should be read. Like always with his works, it is never boring. He's always generous, letting the reader feel smart and come to startling new understandings on almost every page. He writes well, and explains well.

Here it won't be possible to summarize the book. So let me just gesture towards some of the things I liked: first, there are the wonderful first pages about the Garden Party in London, where Graeber gets the innocuous comment: ”Surely, one has to pay one’s debts” - a statement one might say that the entire book tries to problematize. From there the big arguments unfold: the idea that virtual money is the original kind of money (not cash or bullion), the criticism of the myth of barter, the distinction between communism, exchange and hierarchy as the three basic forms of economic morality, and the suggestion that history alternates between epochs of bullion and epochs of credit. Among the titbits are things like the claim that Europeans never "reverted to barter" after the collapse of the Roman Empire, the speculation that patriarchy originated in the horrified reaction against the Mesopotamian credit economy, the portrayal of the corporation-like Buddhist monasteries in China, or the startling account of the origin of the Bank of England.

Along the way, an anthropology of economic relations is built up which is used to show that barter, taken as the prototype of the "market" by classical economics has historically only been typical of relations between enemies or strangers, people who had no interest in building long-term relations with each other. Barter is a behavior close to war. Members of the same community have practically never used barter to exchange things; they share them or give them away, saying "I owe you one". In other words, they live in a credit economy.

Money existed in so-called "primitive" communities too, but was embedded in human relations, functioning as approximate credit units. Even when existing in material form, it was seldom used in daily transactions, tending to be reserved for special occasions – such as marriages, funerals or alliances – when there was some important rearrangement of relations between people. This kind of money Graeber calls ”social currencies” and the economies in which they are employed ”human economies”. What happens when such economies give way to commercial ones – when obligations turn into debts? The result can be debt peonage, as in Mesopotamia, or slavery, as in ancient Greece or Rome.

An important argument is about the role of the state and especially of military force. Money is credit money, i.e. IOUs or, basically, debt. It functions as money as long as it is redeemable. In principle, an IOU can be issued by anyone (such as the "tally sticks" used in medieval England or the scraps of signed paper that circulated as notes in China), but usually they only become recognized as money when they're backed by the state. Even when issued by the state, money remains debt. When states first issued coins it was to pay for their armies. But how could states ensure that this money would be redeemable, that there would be markets where the money would be accepted? By demanding the money back in taxes, ensuring that markets would grow up around the armies. The ability to raise taxes in turn rested on the ruler's means of coercion. Armies, then, were crucial to the creation of money and markets. Ultimately, it is the state's ability to back its IOUs with military force that underlies its ability to create money.

Graeber broadly divides history into three epochs of credit and two epochs of bullion. The most ancient economies were credit economies. In Sumer and the Mesopotamian empires, a typical pattern emerged whereby conflicts over debt were resolved or mitigated through periodic “Jubilees”. Credit led to debt peonage, which in turn provoked resistance in the form of indebted peasants joining the nomads – like in the Biblical “exodus”. Institutionalizing the “Jubilees” was a way for the empires to avoid losing their populations and to minimize their vulnerability to nomad attacks. This early credit age, however, were succeeded by the gruesome Axial age (the age of the Roman, Maurya and Han empires) when coins dominated. During the Middle Ages credit again became dominant in Europe, India and China. This was followed by the age of modern bullion-based capitalist empires, which lasted until 1971, when the Nixon shock inaugurated a new age dominated by credit. According to Graeber, it matters a great deal what kind of epoch it is. Bullion-dominated epochs have generally been warlike. Coin or cash is tailor-made for hostile relations, when you will never see each other again. Credit, by contrast, is more suited to peace and stability, since it presumes the possibility of reliable long-term relations.

A seemingly paradoxical fact, repeatedly stressed by Graeber, is that usually in the past, the ages of virtual credit money were accompanied by institutions designed to protect debtors (such as the Jubilee), but the most recent such age is different. Today institutions like the IMF instead function to protect the creditors. Graeber doesn’t really present a solution to this riddle, merely suggesting that the new age of credit is still rather new and that things are still up for grabs. With a little effort, we might still make this an epoch in which debtors rather than creditors will be protected. ”It seems to me that we are long overdue for some kind of Biblical-style Jubilee” (p390).

Here’s my one objection to the book. The fact that we live in a credit-based economy today is indisputable, but that is hardly ground for hope. Credit economies only need to be “humane” to debtors so long as the state or system of coercion is weak. Only then must they must presume some basic trust or faith in the debtor. Today, however, states have developed to such an extent that trust in debtors can be dispensed with. Credit cards are accepted and loans are granted, not because of any trust in the debtors, but because the system will guarantee repayment. Debtors can no longer escape to the desert, but will be tracked down electronically. Even if they can’t pay, banks are too big to fail. What matters is not whether one lives in an epoch of cash or credit, but the strength of the system, its general growth prospects and its apparatus of coercion. This suggests that the idea of epochs of credit and of bullion is just a surface phenomenon, hiding more crucial processes going on elsewhere.

Just look at Greece, which is caught in a cage. The recipe of slashing growth prospects to reduce debt is about as reasonable as robbing a worker of his tools and then tell him to work until he has repaid his debt. To me it seems this is neither an age of bullion nor credit, at least not if credit is supposed to mean trusting each other, being humane, and caring for the long-term relation. Credit today means trust in coercion. It means: I trust the jailors above all, and if I trust you, it's because I trust your fear of the jailors and the strength of the fetters in which you will be caught.

So we see: the catastrophe is not the potential default or a break-up of the euro zone. The catastrophe is that a system has already come into being which we think is so important that we are sacrificing whole populations to ensure its functioning.

But there is one weak spot in the system. Unlike mutual trust, trust in coercion is a one-sided trust that is found above all in the creditor. It needs to be complemented by fear and anxiety on the part of the debtor. Fear of the crisis and of failure, panic at the prospect of default and of a rebuke from the rating agencies. This anxiety and fear is part of the catastrophe.

Part of the cure could be that we ask ourselves: do we really need to feel so anxious and fearful? Humane societies don’t need growth. To be humane and civilized means to behave decently and kindly even in hard times. Often these qualities are most real and strongest among so-called losers and failures. True barbary is strongest among those who strive to be on top or who struggle to avoid losing. If you want proof, just look around the world, or even just at Europe.