The Babylonian Solution

A New Book Argues That Life Is Built on Debt

The Babylonian Solution

Melville House

DAVID GRAEBER Exploding myths about kittens and boots.

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Let's get the background out of the way as fast as possible; this great book, Debt: The First 5,000 Years, can't wait a minute more. The author, David Graeber, is an American anthropologist and anarchist. He currently teaches at the University of London. He once taught at Yale, but was not rehired at the end of his contract (2005) for reasons that were clearly political. He received a PhD from the University of Chicago for anthropological research on a rural community, Betafo, in postcolonial Madagascar—his dissertation later became the book Lost People: Magic and the Legacy of Slavery in Madagascar. Graeber's body of anthropological work is highly regarded, yet his style of writing is not academic but almost chatty. Some scholars use academic language to reach and extract the deepest of ideas; Graeber is able to do this—reach, extract, exchange deep and startling ideas—with plain language.

Now, Debt: The First 5,000 Years. This is called perfect timing: A book about the history of debt is released within a month of the S&P downgrading the United States' credit rating and collapsing the stock market. And the two reasons the S&P gave for the downgrade are the politicization of the debt ceiling by the GOP and the US government's general failure to manage its growing deficits. The United States is not the only country in hot soup: Greece is drowning in debt, and debt is also about to drown Italy, Spain, and Portugal. Ireland is broke, and the riots in London are linked to austerity policies implemented to reduce deficits. Our post-neoliberal world is in a debt crisis.

First and foremost, Graeber's book would be useless to Obama, Bernanke, and other politicians and economists who are searching for ways to end deep indebtedness without freaking out the super-rich. Graeber's solution is simple: Do as the Babylonians did and simply cancel all consumer debts. But how in the world did the rich in Babylon allow debts to be canceled? Because if they didn't, debtors just left the city and became nomads in the desert. This option is not available to us. The idea of fleeing our creditors is nothing more than a dream, and, besides, it's not worth it. In Babylonian times, if you did not repay debts, you risked losing your children or yourself to slavery. These days, we are punished only with a poor credit rating. So we, the debtors, have no desire to flee, and they, the creditors, have no desire to cancel our debts. This is the world we are stuck in.

But the book is not really about a solution to our debt crisis but instead a "challenge to familiar ways of thinking" about debt. For Graeber, debt (no matter what size) is not a problem or a moral issue; debt is in fact one of the foundations of human sociality and the real starting point of economics—the management of the home, city, state. The book opens with a look at how economists generally picture the origin of economics: Two people meet. One has some boots in a bag; the other has kittens in a basket. One wants boots; the other wants kittens. The kittens and boots are exchanged, hands are shaken, the deal is done. Graeber argues that this picture (variations of which can be found in numerous economics textbooks) is nothing but a dream. Those who believe that markets are the center and ultimate meaning of society dream that bartering (a primitive market that's just waiting for the invention of money) is the Eden of economics.

Before bartering or money or markets, there is debt. Graeber doesn't pull this idea out of the air; it's drawn from a school of economic thought called "primordial debt theory." He writes: "Primordial debt theorists insist that... debt is the essence of society itself. It exists long before money and markets, and money and markets themselves are simply ways of chopping it up."

If such is the case, then why or how did money appear? Where does it come from? Why didn't humans just live on systems of credit? Graeber's brilliant answer: Money arose with the emergence of states in China, India, and Europe, and these states (as with states of today) liked to go to war. And what is the connection between war and money? For obvious reasons, soldiers are not the sort of people you lend anything to. Money is the preferable medium of exchange with men who live and die by the sword. "While credit systems tend to dominate in periods of relative social peace or across networks of trust... in periods characterized by widespread war and plunder, they tend to be replaced by precious metal."

That is the book's point of departure: "We did not begin with barter, discover money, and then eventually develop credit systems. It happened the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage." What must be understood is that financial capitalism is not the birthplace of complex credit systems; before the state, before the scientific division of labor, before large-scale war, we find complex credit systems.

After this rethinking of debt (as founding) and money (as the medium of war), Graeber then covers a wide area of time and space to trace the movements of debt and money through a variety of human societies. The book is a dense mix of economics, history, and anthropology. And always, these visits to different times and cultures reveal something surprising about debt and money. We see the role of debt and silver coins in axial age China, in the transatlantic slave trade; we also see its role in pre-European African societies and in the development of capitalism, which does not begin in the 19th century with factory work but in the 16th and 17th centuries with slave labor and indentured servants.

By the time the reader reaches our current crisis, which began in 2008 and marked the end of an economic sequence that began in the 1970s and involved the removal of the gold standard and the replacement of wages with debt—credit cards and mortgage refinancing—you understand fully why we are stuck in this debt crisis. And it's here that Graeber's idea of communism rises like a sun in the sky of human history. This, however, is not a theory of the state or Marxist communism (Graeber is not a Marxist), but an understanding of everyday communism, everyday acts of kindness and sharing that exist outside of the market. I'm now beginning to sound dreamy. Just read the book, and you will get a clear idea of Graeber's communism and thinking about violence, money, and debt. recommended


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Canucky Yank 1
Thanks for this review; I'll be giving this book as Xmas gifts this year! I also recommend Paul Grignon's "Money as Debt" ; there's a youtube video and companion website:

These are much more helpful ways to think about monetary policy than our current befuddling propaganda.
Posted by Canucky Yank on August 17, 2011 at 10:31 PM · Report this
Excellent review, Mr. Mudede, excellent review.

First, the University of London is a true oasis of intelligence and one finds phenomenally brilliant people on their faculty (listening to a lecture or extemporaneous talk by Helen Donoghue is a real intellectual pleasure).

There were several corrections I must address, though, beginning with the phrase "Eden of economics" -- which exists around us today.

Just ponder all the talking snakes lurking in our midst: Robert Rubin, Alan Greenspan, Larry Summers, Timothy Geithner, Hank Paulson, Phil Gramm, et al.

Also, that epochal econ story of the kittens and boots exchange when what actually transpired was that one chap stealing the boots from the other, then stomping his kittens to death; who later spawned the lineage of future bond traders and presidents of the International Swaps and Derivatives Assocition (ISDA).

Nicely done, Mudede, and you would fit in comfortably at the University of London.

Additional appropriate reading and viewing:

Complexity, Problem Solving, and Sustainable Societies, by Joseph A. Tainter

Trade, Development and Foreign Debt, by Michael Hudson

The Great American Stickup, by Robert Scheer

Hot Money and the Politics of Debt, by R.T. Nayor (a bit dated, but still a classic)

And most appropriate and few have still seen, the results of the FCIC investigation (and opinions on S&P) -- a short vid:
Posted by sgt_doom on August 18, 2011 at 10:49 AM · Report this
Money as Debt?!?!? EEEEK!!!

It's pretty revolting to think that the world's biggest crooks---among them, the credit card industries and the financial institutions who blindly approved those without the actual means to afford mega-mansions---have lead our country to such outlandish lengths of economic destruction through horrendously irresponsible "borrow and spend" tactics.

Did they not think the bubble would ever burst? That's like the Delta frat boys in National Lampoon's Animal House taking Flounder's brother's Lincoln Continental out for a drunken joyride before totaling it!

Thank you, Charles Mudede, for an excellent and informative review.

Posted by auntie grizelda on August 23, 2011 at 3:44 PM · Report this

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