At Naked Capitalism, Dublin-based journalist Philip Pilkington asks economic anthropologist David Graeber an intriguing question:
We know that in many Western countries over the past few years households have been running up enormous debts, from credit card debts to mortgages (the latter of which were one of the root causes of the recent financial crisis). Some economists are saying that economic growth since the Clinton era was essentially run on an unsustainable inflating of household debt. From an historical perspective what do you make of this phenomenon?
Here’s part of David Graeber’s intriguing answer:
In the past, periods dominated by virtual credit money have also been periods where there have been social protections for debtors. Once you recognize that money is just a social construct, a credit, an IOU, then first of all what is to stop people from generating it endlessly? And how do you prevent the poor from falling into debt traps and becoming effectively enslaved to the rich? That’s why you had Mesopotamian clean slates, Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on and so forth.
Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.
Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.
And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.
As historical perspective, David Graeber points to ancient Mesopotamia, with its giant bureaucratic temple and palace complexes. Here’s how he says that they worked, and how global debt forgiveness would be used from time to time to keep them working:
[Mesopotamian temple and palace complexes] were huge industrial complexes with their own land, flocks and factories. This is where money begins as a unit of account; it’s used for allocating resources within these complexes.
Interest-bearing loans, in turn, probably originated in deals between the administrators and merchants . . . The first markets form on the fringes of these complexes and appear to operate largely on credit, using the temples’ units of account. But this gave the merchants and temple administrators and other well-off types the opportunity to make consumer loans to farmers, and then, if say the harvest was bad, everybody would start falling into debt-traps.
This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any human language is the Sumerian amargi, a word for debt-freedom, and by extension freedom more generally, which literally means ‘return to mother,’ since when they declared a clean slate, all the debt peons would get to go home.
And, in the contemporary world, David Graeber notes that pressures for some sort of universal debt forgiveness are building:
‘[R]ealities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008 [with the bank bailouts]….
When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.
My tapping of the brakes on David Graeber’s debt-forgiveness advocacy is to note that it’s a radically materialist-based notion of accounting. Here’s an analogy. If you’re going to account for the universe, you might wish to eliminate the mind of God from your accounting in the following manner: the mind of God is a phantom of the human imagination; the product of a power relation (the manipulation of the laity by priests). And so, we simply eliminate the mind of God from the universe. Atheist Jubilee!
But, obviously, an atheist Jubilee would have consequences on a lot of people, many perhaps good, but also many that are unintended (existential, emotional, social, and otherwise). Think of “Eleanor Rigby.”
Likewise with debt. You can’t just wish the mind away and not expect at least some negative consequences to follow. This is because debt is not only a material relation; it’s also a relation of minds (minds willing to entice other minds into debt relations, and still other minds willing to be enticed into such relations).
Thus, if you simply declared a universal elimination of debt (because debt is supposedly just numbers tallied by accountants), then in the future a lot of important minds might well refuse to play the economic and social game on the same terms that they had in the past. Jubilees would be factored into their risk equations.
For example, if you were a lender, would you loan out your next dollar for a higher or lower rate of interest after a globally enforced Jubilee? You very well might lend it at a lower rate (though you might also be bitterly disgruntled at the bath you took during the Jubilee).
But put that same lender 50 years into the future. Knowing that a second Jubilee might not be far down the road, wouldn’t you ask for higher interest rates in anticipation—or drop out of the lending game entirely?
I’m thinking of Ayn Rand’s metaphor of Atlas shrugging. The question is: who should we worry about shrugging more: the poor and middle classes or the rich (who may not take future risks with their capital)?
Which groups are too big to fail here?
In any event, David Graeber has recently written an entire book on debt in the light of anthropology, and I’m curious to read it. You can find it at Amazon here. My advice: put it on your credit card.
Here’s David Graeber in a YouTube clip:
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And here’s “Eleanor Rigby”:
Prometheus Unbound 