One of the many fascinating pieces of information that David Graeber tosses off like shrapnel in Debt is that the first recorded appearance of the word “freedom” in a political document is in a Sumerian proclamation of a debt amnesty or jubilee.
What interested me, however, from the point of view of a professional banker, is that the document in question provided only for the discharge of personal debts of the Sumerians; commercial debts of merchants were not discharged. Clearly (and I suppose there is an interesting anthropological history to be written of the extent to which the appropriate level of cynicism about these things as changed from pre-Christian Mesopotamia to modern London), anyone who could have convinced the Babylonian legal system that his liabilities were all personal debts covered by the jubilee, while his assets were all mercantile trade credits, would have made out like a bandit. The point I am trying to make here is that as well as being the first mention of the word “freedom”, this proclamation marks the first recorded instance of a regulator-sanctioned selective default. Then a lot of things happened including the Fall of Rome and the Beatles, and then we had the FDIC’s decision in 2009 to transfer the assets and deposits of Washington Mutual to JP Morgan Chase over a weekend, leaving holding company creditors exposed to an extravagantly bankrupt shell. So from the start to the beginning of the story of debt, it has always mattered whether or not you were on the right side of what the relevant regulator wanted to accomplish.
Debt is a great book – I don’t think I agree with it at all, but it’s that rare thing – a book that you can have an argument with and more so, the kind of book that you can see is intelligently arguing back. The argument I found myself having again and again related to this particular point – on more than one occasion during the history of debt, it was noted almost parenthetically that a particular debt reform was carried out on the basis “except commercial debts”, and I found myself saying “No! Hang on! Tell me more about these exceptions!”.
And I think this because commercial debts between merchants are a really important part of the story here. Not only are they, in simple numeric terms, a much bigger part of the picture than debts between individuals in social groups, or even tax obligations between subjects and rulers, the fact that trade credits between merchants have generally, even in conditions when other kinds of debt relation were being repudiated, tended to be preserved and honoured, gives us a few clues toward an alternative story of debt over the last 5000 years.
The Babylonian merchants weren’t included in the debt amnesty, of course, because to have upset their trading accounts would have done serious damage to the commercial basis of Babylonian society – to put it frankly, they were too big to fail. In general in the commercial world, the ability to put yourself in debt is a privilege, not an obligation – one of the most important aspects of corporate legal personhood, as an introductory legal textbook will tell you, is not the right to sue other people, but the right to be sued. If you can be sued, then you can enter into agreements with other people that they have confidence that the courts will enforce. And really, in a lot of important technical senses, a debt between merchants is simply a legal codification and recognition of the very basis human ability to promise to do things and then do them. (Parenthetically, I’d note that I do consider it a weakness of the book, perhaps an inevitable one given space constraints, that the word “oath” appears very rarely and “promise” only a little less so. A debt is a promise to pay, and the history of promises seems to me to be potentially very different from Graeber’s history of the debt relation – the Celtic and Nordic sagas are chock full of people carrying out totally extreme actions in order to underline the importance attached to keeping one’s word. Meum dictum pactum (my word is my bond) is the motto of the London Stock Exchange).
So it is noticeable that the concept of “too big to fail” has grown up hand in hand with the concept of the debt relation for the entire traceable history of debt. Although the parallel track of debt as obligation, religion and morality has certainly been there, and is described expertly in the book, from day one it has been recognised among merchants and men of commerce that the point of the debt relation is to serve the organisation and arrangement of commercial need.
To my mind, this fact rather colours one of the central theses of Debt – the idea that debt has from its origins been entwined with slavery, military tribute and imperialism. I’d advance the suggestion that of course the first people to start codifying the debt relation were the first emperors and rulers; they were the first people who ever came across the problem of organising a productive economy larger than a small village or subsistence farming community. The fact that debt has its origins in the creation of tax-collecting, military societies seems to me to be equivalent to the fact that NASA invented Teflon – they had to do it, in order to solve the problems put in front of them.
It’s also notable that actually over the years, debt (by which I mean, the commercial and mercantile kind of debt) has worked noticeably better than most of the alternatives. The dzamalag ceremonies described in the book:
This sets in motion the dzamalag exchange. Men from the visiting group sit quietly while women of the opposite moiety come over and give them cloth, hit them and invite them to copulate; they take any liberty they choose with the men, amid amusement and applause, while the singing and dancing continue. Women try to undo the men’s loin coverings or touch their penises, and to drag them from the ‘ring place’ for coitus. The men go with their dzamalag partners, with a show of reluctance, to copulate in the bushes away from the fires which light up the dancers. They may give the women tobacco or beads. When the women return, they give part of this tobacco to their own husbands, who have encouraged them to go dzamalag. The husbands, in turn, use the tobacco to pay their own female dzamalag partners …
New singers and musicians appear, are again assaulted and dragged off to the bushes; men encourage their wives ‘not to be shy’, so as to maintain the Gunwinggu reputation for hospitality; eventually those men also take the initiative with the visitor’s wives, offering cloth, hitting them and leading them off into the bushes. Beads and tobacco circulate. Finally, once participants have all paired off at least once, and the guests are satisfied with the cloth they have acquired, the women stop dancing and stand in two rows and the visitors line up to repay them.
Then visiting men of one moiety dance towards the women of the opposite moiety, in order to ’ give them dzamalag‘. They hold shovel-nosed spreads poised, pretending to spear the women, but instead hit them with the flat of the blade. ‘We will not spear you, for we have already speared you with our penises’. They present the spears to the women. Then, visiting men of the other moiety go through the same actions with the women of their opposite moiety, giving them spears with serrated points. This terminates the ceremony, which is followed by a large distribution of food”.
… certainly have some attractive qualities, but although Graeber wins the battle against the “Myth of Barter” here I think he loses the war – really, although the discussion of socially embedded exchange is incredibly interesting and illuminating, I think anyone who reads the passage above is going to end up sympathising with the people in the economics department who say that you really can’t organise a modern industrial society on the basis of organising a wife-swapping party every time you want to buy a blanket. Perhaps the fact from the book that will end up resisting the longest against the onslaughts of late nights and Scotch whisky on my ability to recall, is that more or less every urban society in the world has ended up inventing an equivalent phrase to “Please”, and “Thank you”, terms which have the social function of asserting between parties to a commercial transaction that the transaction itself does not embed them in any deeper social relation.
(Another parenthetical note: the only real attempt I can think of to organise industrial production on any other basis from the debt relation is Soviet Communism, and while Soviet production quotas weren’t debts, they seem to me to have had all the aspects of debts which Graeber finds to be pernicious and quite a few more besides. But I don’t really know enough about Soviet Communism to be able to say any more about the analogy, if there is one).
So what might one draw in the way of policy conclusions from an alternative history of debt that traced it down the line of debts between merchants and commercial entities, rather than individuals and sovereigns? Well, I think it would be hard to get very near to the last chapter of Debt. When Graeber points out that the US banking system has loaded itself up with “bad assets”, he doesn’t seem to be recognising that these assets (ie, mortgage loans) are “bad” precisely because there is a governing law which doesn’t enforce the debt contract as a matter of religion or morality, but rather gives US mortgage borrowers the right to hand back the collateral and walk away from the debt. The development of modern bankruptcy codes (and, one has to say, the fairly scandalous changes made to the US bankruptcy code in 2006) has gone hand in hand with the growth of debt in the modern world, and the “modern jubilee” which Graeber suggests is basically the same thing as the “bad debt crisis” which has actually happened.
I’ve repeated myself to a boring extent in the past on the subject of the science of economics being basically a branch of control engineering (“economic cybernetics”, as the Russians called it) which went rogue in the 19th century and got caught up in a whole load of moral and political philosophy that didn’t belong there. Debt as per Graeber’s book is an example of this – the debt contract is basically a tool of industrial organisation that escaped from the laboratory and ran wild. But I think he understimates the extent to which there have always been domesticating influences on the concept, and the extent to which the debt relation has always been, correctly, the subject of revision and reappraisal, with the basic underlying question being that of economics rather than anthropology – “How do we best organise the decision making process with regard to production, consumption, and exchange?”
Having said that, there are some situations where Graeber’s analysis seems completely accurate. Countries don’t have bankruptcy codes governing them, and so in the sphere of international debt negotiations, one can see all the pernicious aspects of the “folk-economics” version of the debt contract that Graeber describes. Looking at the relationship between the European Union and Greece, or even Ireland, one can see that the debt relation is being specifically shaped into a tool for exercising power in a way which would not have been possible through democratic means. IMF programs seem to be typically designed to fail, to put the client country into the position of a defaulting debtor and entirely reliant on the mercy of its creditors. So even though I’d have liked to see the book twice as long and ten times as ambitious, the analysis that it presents is very useful in looking at debt-relations outside the commercial codes that govern most of the world’s actually existing debts, and it’s a very salutary reminder of what happens when people forget that debt is really only (or really only ought to be) the legal system’s best guess at what kind of arrangements would best serve the general purposes of commerce. It is, as Graeber intimates, when the debt relation takes on an independent life of its own that the problems all start.