Thoughts on Debt: The First 5,000 Years — David Graeber

Mike Beggs’ review of Debt expresses my reservations about the book better than I can. In Debt there are many solid-seeming micro-insights but the overall narrative doesn’t cohere (I say “solid-seeming” because of Graber’s many errors—see the last paragraph of this post). Beggs describes the problems with Debt better than I can.

One point: Graeber notes religious prohibitions on debt—”The Catholic Church had always forbidden the practice of lending money at interest, but the rules often fell into desuetude[. . .]” (10)—and religiously-inspired depictions—”Looking over world literature, it is almost impossible to find a single sympathetic representation of a moneylender—or anyway, a professional moneylender, which means by definition one who charges interest” (10)—but my understanding is that those prohibitions arose prior to the Industrial Revolution and Enlightenment—in other words, times when growth could be negative for decades, and when growth, even when it did occur, was usually under 1% a year.

In that atmosphere, taking on debts would be ruinous for the vast majority of people. Today, by contrast, many people can use debt safely and successfully for things like education or business. I don’t know how much of that is a just-so story and how much is empirically supported, however.

It is also easy to find many nasty representations of women in world literature, and especially of prostitutes, but, if I may stereotype for a moment, that doesn’t mean that a bunch religious lunatics from the Middle Ages should control modern conceptions of femininity or sexuality. Depictions of groups, professions, or practices from the past may be revealing or important, but they don’t and shouldn’t bind what we think in the future.

Another point: Graeber writes that, in recent times, “the bankers were doing it [that is, making “utterly irresponsible loans”] on an inconceivable scale: the total amount of debt they had run up was larger than the combined Gross Domestic Products of every country in the world [. . . ]” (16). I agree that having “too-big-to-fail” banks is a problem and that the U. S. federal government should get out of the business of subsidizing and guaranteeing mortgages, which are practices that contributed to the size of the financial sector but were probably not decisive to it, but that doesn’t stop me from also noting that every lender needs a borrower. So far as I know, few borrowers had guns held to their head with orders to borrow. Borrowers took loans freely. The story of the last five years should not be a homily about the evils of bankers; they played a role but did not act alone. Everyone who could have taken out a large mortgage in the 2000s but chose to rent instead knows this.

Graeber appears to successfully bury the idea, often mentioned in economic textbooks, that money systems arose from barter. But I don’t think that conception is essential to many, if any, modern ideas in economics. He seems to want to deliberately misstate what economics does:

for there to even be a discipline called ‘economics,’ a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes, or cloth for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death. (32–33)

This misunderstands economics to a degree that seems like willful ignorance: economics is a discipline that studies how people respond to incentives and trade-offs.

The book is frustrating because it has many fascinating descriptions of how native peoples barter and trade, but those observations are marred by moments like this one. Graeber describes positively how native peoples develop ongoing business relationships, and that indeed sounds good, but having ongoing relationships with every single person with whom one wants to trade for goods and services would be incredibly time-consuming in a modern economy. The social arrangements that work well for native people will not necessarily work well for modern people dealing with clerks at Walgreens.

Some points are viable and important: for example, Graeber brings up the example of third-world debt incurred by autocratic leaders and enforced after those leaders are deposed. In instances like that he’s right: the people of third-world countries shouldn’t be forced to repay debts created by dictators. But that doesn’t mean all debt everywhere is automatically bad. Nor am I convinced that the sexual-economic practices of indigenous people, though interesting, necessarily tell us how we should arrange sexual-economic practices today.

Many indigenous people seem to have more fun than most Americans, and in that respect maybe we should emulate, but I can’t judge whether Graeber is cherry-picking examples. The U.S. could improve its sexual culture in many ways, and take some cues from indigenous people, but those cues can be lifted without taking along economic practices.

Debt ends this way:

A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point, we can’t even say. It’s more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our value, no one has the right to tell us what we truly owe. (391)

But a debt isn’t really “the perversion of a promise;” it’s a particular kind of promise. If you don’t like “math and violence,” then don’t take debt. It’s not all obvious, even after almost 400 pages, how Graeber gets from the first two sentences in the paragraph to the last sentence—is anyone “tell[ing] us our value?” Who is this person? And when we start life, “no one has the right to tell us what we truly owe,” but if we want to buy a car for $0 down and $499 a month, then someone does have the right to tell us what we owe, because we gave it to them. There are many edge cases, which you can read about in Contracts law textbooks, but the overall principle is reasonable.

It is hard for me to imagine wanting to re-read Debt.

(I title this post “Thoughts on” because I don’t have sufficient knowledge for a comprehensive review, and because the book is sufficiently broad in scope that a real review would probably need to be thousands of words even if many of them are citations.)

EDIT: See also Brad DeLong on Graeber’s many errors of fact.

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