Debt: The First 5,000 Years

Debt: The First 5,000 Years, by David Graeber is an interesting examination into the history and current mechanisms behind debt. Reading it changed my conception of many different parts of the economy, and also made me question: “what exactly is money, anyway?” The whole thing is filled with interesting anecdotes and theories around why debt is both necessary and misunderstood.

As a quick note, I’ve only made it halfway through the book, and intend to pick it up at a later point in time.

The Barter Economy is a Lie

We're often taught that people came up with money as a way of simplifying bartering for things. That it was easier to have some single store of value to reduce the complexity of trading, say, sheep for beads. Yet, there doesn't seem to be much evidence of this! Instead, Graeber makes the case that people first started by issuing debts and credit systems, an early form of IOUs.

In essence, this is one way we might think about money... it's just a note that says "I will pay you back the equivalent of one dollar at some point".

This explains why debt is actually a key part of our modern economy.

Currency was created by the state

Instead of thinking of currency as an emergent property, it starts making sense as something which is explicitly created by the state to track and manage debt. Instead of setting up more gold and silver mines, the state found it was easier to create a centralized currency, and then maintain control over that currency. It could always issue more debt, in a sense, creating wealth.

Currency (and particularly coinage) has two parts. The first is that it is guaranteed by the state to be some sort of legal tender that can be redeemed for the equivalent value. The second is that there is some value inherent to the mark (e.g. 1 oz of gold)

It's sort of funny to think about currency and money in this perspective. In some sense, it's just a 'formalized' IOU which is backed by a guarantee from the state itself.

The Human Economy

There's apparently a fairly strong set of norms in various indigenous tribes to gift various goods in exchange for marriage, adultery, or killing a member of the tribe. Graeber makes the point that in each of these cases... there is actually no good you can trade for a human life! The life itself is sacred. Instead you must go into debt for what you owe by paying various costs. But whatever payment is really just temporary, and sort of like interest. Eventually you must re-pay the debt with a life.

There's a key difference between this and slavery. With these tribes, there is no sense of inequality-in fact, the debtor is tied more closely to the person who they owe. Most people have two-way obligations, where they owe some debt, but also are owed.