Debt: The First Five Hundred Pages

by Henry on August 29, 2012

Given past history, I’m probably not the best person to write disinterestedly about David Graeber’s Debt. Still, I think that both critics and fans of his work ought to read this comprehensive critique by Mike Beggs in the new issue of Jacobin. Begg admires the energy and ambition of the book, but is also blunt.

Debt, then, does not need any more kind words from me. It’s enough to say that there is a lot of fantastic material in there. The breadth of Graeber’s reading is impressive, and he draws from it a wealth of insightful fragments of history. The prospect of a grand social history of debt from a thinker of the radical left is exciting. The appeal is no mystery. I wanted to love it.
Unfortunately, I found the main arguments wholly unconvincing.
The very unconvincingness poses the question: What do we need from our grand social theory? The success of the book shows there is an appetite for work that promises to set our present moment against the sweep of history so as to explain our predicament and help us find footholds for changing it. What is wrong with Graeber’s approach, and how could we do better?

{ 256 comments }

1

Bruce Wilder 08.29.12 at 1:18 am

An attack on economics evidently goes down well with Graeber’s target audience. It is not a hard sell to anger the average leftist about the power and arrogance of the discipline, or to flatter them that they can see through it all. But it is an unfortunate attitude. “For – though no one will believe it,” as Keynes once wrote, “economics is a technical and difficult subject.”

Modern society has a complex, impersonal structure by which goods and services are produced and distributed. Explaining this structure is economics’ primary problem. The neoclassical strategy for solving it through methodological individualism led to the unrealistic assumptions Graeber derides. He is perfectly right to reject that solution. But it still leaves the problem, which will not be solved just by thinking in terms of a wider range of human motivations. There is an economics-sized gap in Graeber’s history, which he cannot fill. The answer to bad economics is good economics, not no economics. We need a genuine political economy.

An anodyne sentiment, no doubt, and there are no shortage of critics or critiques, but, still, we seem perpetually stuck with the neoclassical economics of the marginal revolution. Paul Krugman defines it, here:
http://krugman.blogs.nytimes.com/2012/08/28/neo-fights-slightly-wonkish-and-vague/
and seems to have little inclination to abandon it. Curious.

2

Watson Ladd 08.29.12 at 1:25 am

Well, we have Marxism. Or at least we used to have Marxism, before we gave it up.

3

The Raven 08.29.12 at 1:31 am

Bruce, surely economic models run with the prevailing ruling class: we have neoliberalism because our rich people love it. I wonder what ruling class could love Keynesianism?

Me, I say money is like language: a social construct but still, somehow, real.

4

The Raven 08.29.12 at 1:40 am

Um…and I suspect theories about the origin of money are likely to be as fruitful as theories about the origin of language.

5

Substance McGravitas 08.29.12 at 1:53 am

Thanks for the critique at the link, a good read.

Um…and I suspect theories about the origin of money are likely to be as fruitful as theories about the origin of language.

What do you mean?

6

The Raven 08.29.12 at 2:17 am

Well, we don’t really know where language comes from. It’s a really knotty question and the debates about it often give more heat than light. But for many purposes, it doesn’t matter; language is here, and there’s plenty things to do with it and about it. In like manner, we can erect systems of finance and economic theories without appeals to eschatology.

7

Salient 08.29.12 at 2:18 am

From the review: If there is one argument that provides a thread through the whole narrative, it is Graeber’s view that money has its origins in debt and not exchange, and that economics has always got this the wrong way around.

…I was anticipating a very different end to that sentence and parted ways with it at the first comma. Am I alone in looking at this sort of squinty-eyed? Is this a summary of the core argument, or of the book’s broadest strokes, that others accept as satisfactory? as serviceable?

I’d say Henry’s summary of the same material was much more fair and representative (from “First though, more about the stuff I like” to “systematically fails to engage with these ideas” more or less, maybe summasummarizable as a very nice recapitulation of the substantivist tradition in economics). But I thought Henry’s whole post was pretty spot on so I’m probably not the best person to write disinterestedly about it either.

(Adding this post to the book event of five months ago was kind of oddly posthumous or something.)

8

chrismealy 08.29.12 at 2:23 am

I wasn’t expecting to find a half-hearted defense of mainstream econ in Jacobin.

But yeah, it’s true, Graeber failed to completely revolutionize economics his book.

9

john c. halasz 08.29.12 at 2:41 am

The “critique” basically accuses Graeber of having fallen victim to the “genetic fallacy”, i.e. that past origins explains current function. But it’s doubtful that Graeber is as intellectually naive or unsophisticated as all that. More likely, the latter’s project is “genealogical” rather than strictly “explanatory”, i.e. re-situating current predicaments in a much larger field of past possibilities, in order to stimulate reflection on our current alternative possibilities, (rather than insisting on the fatal inevitabilities of the current “system”). And the sort of “monetary” economics that Beggs cites in counter-position to Graeber precisely doesn’t inspire confidence in the former’s “critique”.

10

vivek 08.29.12 at 3:23 am

My take is that we are living at a time when there is a systemic confusion or confounding of two quite different things- Faith & Expectations.
True, Money is Credit- in the sense that to credit someone or something is to believe someone or something but to what extent is this based on Expectations?- i.e. some sort of rational calculation of what will happen- and to what extent is it based on Faith?- not a rational calculation but something involving one’s ethos, who one is to oneself.

Some Institutions still require a profession of Faith from us. We are required to pledge alleigance to the State even if our Expectation is that the State might collapse. Some professions, the Law, Medicine, Accountancy, actually Banking and Broking and so on too, require a profession of Faith such that an indefeasible duty is created even if that conflicts with rationally arrived at Expectations. Yet, the astonishing progress of Science and the utter marginalization of Theology, militates for every Institution demanding Faith or requiring Faith to function properly, to try to convert Faith into Expectations by some maneuver more or less illicit.
The Rational Expectations doctrine together with the Efficient Markets Hypothesis had the effect, for the financial sector, of taking Faith- as in good Faith and bad Faith, ‘integrity’ as against being a greedy s.o.b- out of the equation on the grounds that it wasn’t needed- it was the feather Dumbo held with his trunk, he thought he needed it to fly, but he didn’t, his big ears were doing all the heavy lifting.
This would have been fine so long as preference diversity didn’t change too much. Economists know that bad things happen when preference diversity is too great or too small. What they don’t know how to do is separate revealed preferences from true preferences- if such a thing exists. The problem this gives rise to is that, even if everybody subscribes to the correct Economic theory and all relevant information is instantly reflected in prices, still an element of impredicativity has entered the system and so there is no Muth Rational solution- i.e. Rational Expectations faces an aporia. It seems getting rid of Faith and Faith based Identity wasn’t such a good idea- Dumbo without his magic feather is just a clumsy pachyderm tripped up by his own big ears.
This isn’t a real big problem. Evolution is about Conserving Information even at the price of occasional revolutionary saltations. Human Societies are very good at producing the next best thing to Faith- viz. the Expectation that your Life is gonna suck big time- and so Economics will triumph over Chrematistics, Expectations will be pruned back to Faith like proportions- the wagon will trundle on.
And it is this, the fact that the wagon trundles on, which is what is wrong with any grand narrative that promises to’ set our present moment against the sweep of history so as to explain our predicament and help us find footholds for changing it.’- we all know in advance that such grand narratives are a magic feather while Dumbo’s Momma is caged up in that wagon ever rolling on.

11

NickT 08.29.12 at 3:26 am

I am not sure that you can get a history of any economic institution or feature from say 3000 BC to 1200 AD that is much better than a series of anecdotes, which leaves me wondering whether this review is really a devastating critique of Graeber or an indictment of our tendency to fabricate “history” out of minimal evidence and various assumptions. We can’t write a good history of say Diocletian’s various economic measures and their impacts, because the evidence simply isn’t available. Likewise, there’s considerable debate about exactly how the Byzantine state was configured in terms of money, markets etc in the 8th century AD. If we turn to China, good luck writing the economic history of the Qin and Han empires, not to mention the Sui and Tang. Even in the case of so well-studied an institution as the Roman empire, we can very seldom make a half-way decent guess at something as basic as its annual budget or spending priorities. How would the Roman emperors have reacted to the idea that, say, deficits don’t matter? I don’t see how you can do much more than put together an anecdotal history in the case of the earlier periods, given the lack of evidence and the lack of connections between the pieces of information that we think we possess. I am quite happy to accept that Graeber’s work is imperfect and methodologically questionable, but in this particular instance I don’t think the critique is particularly useful or informative.

12

Cornelius Christian 08.29.12 at 4:49 am

What puzzles me is why Graeber eschews, in his discussion, evolutionary game theory and behavioural economics, both of which have improved microeconomics. Macroeconomics is in disarray, that is undoubtable, but standard microeconomics has improved far beyond the 19th Century models Graeber wrong believes represent the profession. When Graeber attacks mainstream economics, he is in fact attacking a straw man version of the discipline.

13

Colin Danby 08.29.12 at 4:52 am

I see widespread despair in the comments so far that our choices re global history of money and debt are limited to (1) standard neoclassical economics and (2) David Graeber.

I have happy news.

There is a rich literature in Post Keynesian theory, not only on the debt origins of money, but what this means in the present day. Paul Davidson, Hyman Minsky, and L. Randall Wray are names to start with. Beggs refers to some of the originary work in Keynes, though he doesn’t bring the story up to date.

There is excellent work in contemporary Marxian theory.

There is Braudel’s work, mentioned in Beggs’ piece, and various books by Wallerstein and Frank. There is Glyn Davies’ _History of Money from Ancient Times to the Present Day_, and Kindleberger’s large-scale historical writings.

Plenty more!

None of these is above criticism. All of offer the kind of rigor and thoughtful attention to evidence that makes criticism productive.

14

Mike Beggs 08.29.12 at 5:21 am

John (#9): I don’t think Graeber explicitly makes the genetic fallacy, but I do think that at many places in the book we are invited to draw conclusions about money as we know it from money as it was.

A genealogical account of money would be much more interesting, and is exactly what is needed – history which takes seriously the need to explain the evolution of a system, of which money is a part. As I said in the review, by pretty much skipping the nineteenth and early 20th century, Graeber misses the most important segment of history for explaining what money is and how it works today. (And there is plenty of good literature in this vein, some of which I touched on – Braudel, Pierre Vilar’s ‘History of Gold and Money’.)

Actually, in the Treatise on Money, Keynes leaves an even bigger gap in his history, jumping more or less from Hannibal’s crossing of the Alps to Napoleon’s. But at least in Keynes we get a history of the evolution of the banking system and of central banking practice over the critical 19th century.

15

Mike Beggs 08.29.12 at 5:23 am

Of course with Braudel and Vilar I meant evolutionary accounts in general, not specifically about the 19th and 20th century (though Vilar goes up to 1920).

16

Mike Beggs 08.29.12 at 5:36 am

Chris (#8): I am not defending ‘mainstream econ’ as such, though I do think it’s a more robust and diverse paradigm than some critics seem to think. I am more concerned to defend a role for economic analysis – i.e. a specialist part of social science – against the idea that it’s all ideological bunkum that can be replaced by discussion of ‘moral universes’ etc.

My own favourite flavour of economic analysis happens to be the modern Marxian/post-Keynesian tradition. But I think there is a lot to be learned from looking at the evolution of mainstream analysis also – how the framing of monetary issues has changed.

17

Mike Beggs 08.29.12 at 5:41 am

Colin (#12): Absolutely! I think Minsky is a fine example of someone who does money right – his analysis is fully conscious of finance as an evolving system. (Though most people unfortunately know him only for the hedge-speculative-Ponzi stuff.) I would add to your list Victoria Chick, another post-Keynesian structuralist, and Perry Mehrling, who writes very interesting stuff marrying Minsky and modern mainstream financial theory.

18

magistra 08.29.12 at 5:48 am

I haven’t read Graeber (and won’t have time to do so in the near future), but on the general question of grand social theory, I’ve always loved this opening paragraph in a review by John Howe (“Revisiting the Holy Man”, Catholic Historical Review, 86 (4), October 2000, p. 640):

To launch a thousand ships in academia you need a creative synthetic insight that is only about half-right. Whereas a perfect new perspective would be a dead end, those hypotheses that can be verified, falsified, and supplemented are what give rise to epic scholarly battles. Among the examples that might be invoked are Lynn White, Jr., on medieval technology, Marshall McLuhan on media, Philippe Ariès on childhood, and perhaps Peter Brown on the holy man.

I think in the same way, what we need isn’t necessarily books that give us the right answers, but ones that creatively make us ask different questions or give us alternative perspectives. It sounds like Graeber’s book is extremely effective at doing that. Once you have that new perspective, you can refine it, even contradict it, but you’re doing so on new terms, you’re changing the framework of the debate. And that in itself is a valuable service.

19

Bob 08.29.12 at 6:16 am

Again – and this has already been pointed out – Graeber fails to notice that evolutionary game theory and behavioural economics are very much part of the mainstream. If he had a less antagonistic view towards mainstream economics, and a more open mind, then I suspect that Debt would be a much better book. Much of what Graeber talks about can be modeled using the techniques in Bowles’ “Microeconomics: Behavior, Institutions, and Evolution.”

20

Chris Bertram 08.29.12 at 6:49 am

Mike Beggs writes:

_these other approaches to grand socio-history differ from Graeber’s 
in treating these levels as structures, and not simply as the practices that create them_

I don’t know how much work the “simply” is doing there, but the contrast invoked here between structures and the practices that reproduce them, seems both crucial to Beggs’s critique and overstated. It doesn’t have to be the case that the people engaged in such practices are aware of what they are doing or of what they are reproducing, and hence such a focus is perfectly consistent with the idea that the important things take place behind the backs of the conscious agents: they do, but they know not what they do. Beggs’s claim that Graeber just gives us a moralized version of history (with greedy conquistadors and virtuous Aztecs) strikes me as a somewhat tendentious reading of the book.

( I liked _Debt_ when I first read it, and I don’t think I should revise that judgement in the light of the unfortunate experience of exposure to its author, even though my subsequent exposure to his writings has been tainted by a more vivid sense of the authorial voice.)

21

Z 08.29.12 at 9:17 am

I don’t think Graeber’s endeavor was to replace neoclassical economics with moral tenets but rather to demonstrate (admittedly by an array of anecdotes, but still) that the intellectual and moral foundations of the current debt economy are quite unusual when compared to the anthropological, moral and philosophical viewpoint prevalent in the last (or first) 5,000 years. I think he succeeded in a large extent in this endeavor, mostly in the way Magistra at 18 alludes to.

FWIW, I also think therein lies the crux of the intellectual (not personal) strife with Henry. Graeber is not interested in building a convincing theory of the current geopolitical system, he is in showing that the current geopolitical system has exceptional anthropological characteristics. Or, to put it in a different way (with drones and spurious punctuations), his thesis (be it right or wrong) is not “Buy our bonds! Or we’ll drone you!”, it is “A state declaring they can drone anyone? Unusual! A world of virtual money in which debtors are stigmatized and paying one’s debts is a cardinal virtue? Unusual!”

22

Marco 08.29.12 at 10:47 am

Chris (#20): Fully agree. The crucial thing is that understanding Graeber`s book as a moralized version of history is more than a tendentious reading: it shows how Beggs misunderstands the argument in a very important way.

Taking an account of how people`s actions are shaped by their worldviews and values as a moralistic account of history says a lot about the incapacity of economists to understand value outside of measure systems. And since Graeber critique of economic theory bases itself on values that are too complex to be measured and debts that are too big to be paid, I must say Beggs simply didn`t understand what he read.

23

ajay 08.29.12 at 10:53 am

Or, to put it in a different way (with drones and spurious punctuations), his thesis (be it right or wrong) is not “Buy our bonds! Or we’ll drone you!”

It’s not drones that give the US the ability to bomb anywhere. Drones are slow, clumsy, vulnerable remote-controlled aircraft that are only any good a) when you already control the airspace, as over Afghanistan and Pakistan, or b) when all you want is something to get shot down in a revealing way, as over Lebanon. If you actually want to bomb someone in a functioning state, you don’t use drones; you use cruise missiles or manned aircraft.

24

Marco 08.29.12 at 11:32 am

I think two quotes from Beggs show the problem with his critique:

“Without actually-circulating money, there would be no value to measure, because the price system only emerges out of innumerable strategic price-setting decisions”.
– That simply doesn`t follow: the value of what money measures wouldn’t disappear if we didn’t measure it “properly”. There are many economic activities in our societies today that are not $measured (e.g. housework).

“But however far credit may stretch money, it still depends on a monetary base: people ultimately expect to get paid in some form or other”.
– The whole book discusses how this “some form or other” of “payment” doesn’t need a monetary base, and may be held between people who despise the idea of calculating the proper payment. To complicate matters, it may also involve many different monetary bases that are not exchangeable.

As Beggs take those statements as evidently true (and not the result of a particular morality), he proceeds to call any description of different economic relationships on its own terms as “moralistic”, “a form of charity” etc. Not only that, he thinks that whenever Graeber describes these economies moral foundations he is prescribing them. That is to say, economists just don`t know how to read anthropology. Why doesn’t he just admit he doesn’t know what the author actually meant and criticize him for not being clear enough? That would be a more honest and useful critique.

25

Barry Freed 08.29.12 at 11:38 am

@Maginstra I think in the same way, what we need isn’t necessarily books that give us the right answers, but ones that creatively make us ask different questions or give us alternative perspectives. It sounds like Graeber’s book is extremely effective at doing that. Once you have that new perspective, you can refine it, even contradict it, but you’re doing so on new terms, you’re changing the framework of the debate. And that in itself is a valuable service.

Great point and this is also exactly what Graeber did with the “we are the 99%” slogan.

26

Z 08.29.12 at 11:44 am

ajay, drones add an awesome quality to anything they touch, as do exclamation marks, which is why I summoned them unnecessarily. Let us not let the thread devolved in an analysis of US Air power. Still, point taken.

27

Henry 08.29.12 at 1:43 pm

A couple of things here. First, as per Salient, I am more sympathetic than Beggs is to the substantivist tradition, and think that there is a lot to be garnered from it. I do think, though, that it is linked to a moral argument (certainly in Polanyi), which sees the modern economy as a disaster, precisely because it has become disembedded from the moral, human frameworks, in which people used to conduct their everyday lives, and that what we really need to do is to re-embed it again (Graeber’s account of how we should do this, from what I’ve read of him, is more politically vague and more radical than Polanyi’s). There’s a lot of potential crossover between e.g. Polanyi and Christian socialists like Tawney.

But this stands in contrast to a Marxist tradition, which is really pretty impatient with the idea of old moral codes that we ought to return to etc. As I mentioned in my original post, there’s an overly strong account of Marx, via David Miller, in which we _need_ the kind of autonomy that markets provide us in order to properly realize socialism. But even if Miller overeggs it, there is still a very clear and consistent sense within Marx that capitalism did us a favor by wrenching us out of all of the diffuse ties and obligations of previous modes of production, rural idiocy etc. When I read Beggs’ criticism here, I think it’s stemming from something like that impatience. Which is not to adjudicate between the positions in any absolute sense, but to say that I disagree with Chris’s suggestion that Beggs is being unfair – this seems to me as a legitimate disagreement, and I think that Beggs is right to detect a strong strain of moralism in Graeber, whether you like it, or whether you don’t.

On Z – I think this is wrong – Graeber has programmatic ambitions which are … rather sweeping …. To quote one of his own tweets on the topic. “I fear I’ve created an impossible standard for myself. Other day, someone said ‘sure Debt is your Grundrisse. When will u write ur Kapital?” Magistra is right though – the book is starting interesting arguments (as well as inspiring at least one very interesting sounding sf novel in the making …).

28

Alex 08.29.12 at 2:29 pm

I wonder what ruling class could love Keynesianism?

The British civil service in the 1950s.

29

straightwood 08.29.12 at 3:04 pm

Intellectuals are drawn to structure because it engages their analytical faculties. But in the case of Economics, the structures under consideration are often ideological constructs that mask the kinds of struggle that Marx correctly described.

The central cause of instability and inequity in society is the broad distribution of value of the selfishness/altruism ratio in the human population. At one end of the distribution are the selfless saints and at the other are the killer cannibals. Politics and economics reflect struggles among large clumps of people sharing different selfishness/altruism ratios. This was as true of the conflict between the ancient Roman Optimates and Populares as it is of American “Liberals” and “Conservatives.”

Instead of addressing the relatively intractable distribution of selfishness/altruism traits, many political commentators prefer to tinker with structures, in the foolish hope that tweaking laws, regulations, and parliamentary procedures will bring the sentiments of saints and killers into harmony. The futility of structural reform is evident in the current wave of spectacular financial corruption in the highly regulated society of the USA.

History reflects the incessant tug of war between selfish and altruistic factions, and our most realistic hope is that the magnitude of these swings may eventually be moderated by a slow civilizing tendency. Placing great hopes in structural refinements, or, worse, ideological transformations, is folly.

30

Phil 08.29.12 at 3:17 pm

What leapt out at me in Mike Beggs’s review was this:

It is a story told almost entirely in the realm of political and moral philosophy, and told essentially from a populist liberal or even libertarian perspective: it was the state and big business stepping all over the little guys and their purer exchange relationships.

…”or even libertarian” especially. My sense of the book (which I haven’t read) is that it makes a lot more sense if you start from the assumption that both commodity production and state control are bad things, or necessary evils at best. (As I personally do, btw.) My worry about the book is that perhaps it doesn’t make sense (or at least, doesn’t say anything very compelling) if you don’t start from that assumption. Mike Beggs’s comment about genealogical approaches is to the point here. I’m picturing somebody explaining the thesis to their room-mate…

so then, right, the state intervened and placed monetary values on those obligations, effectively introducing them into a circuit of commodity-based exchange…
– Yeah, that could work. It would be quite efficient. Interesting story!
No, you’re not listening! The point is, the state intervened, right, and overlaid those relationships with commodity-based exchange! The state! The commodity!

31

Substance McGravitas 08.29.12 at 3:19 pm

Everyone should read the book, disagreement or no.

32

Chris Bertram 08.29.12 at 3:40 pm

With you on the Marx thing Henry, but there seem to be two different contrasts in operation, namely

moralism v social science
(reproductive) process v structure

33

William Timberman 08.29.12 at 4:54 pm

No doubt we do have a problem going forward, as the business types like to say. Graeber has a piece of the solution, so does Marx, and so do the ever-irritable Libertarians, much as I hate to admit it.

The heart of the problem, it seems to me, is embedded in the anecdote Graeber tells in Debt, about the father who presents his son an itemized bill for his upbringing, which, when paid, effectively frees the son from any further filial obligation. If we think of ourselves as creatures of the society (or family, or tribe, or class, or whatever) which created us, but who nevertheless, as moderns, rather fiercely retain our notions of free will, illusory or not, then the real issue is the extent to which we are to have any say over the form our debt to that society will be structured. Whatever we legitimately owe for our existence, it doesn’t seem to me that we’re obliged to pay by enslaving ourselves in either a literal or figurative sense.

34

Mario 08.29.12 at 5:20 pm

The quote Phil mentions above at #30 (“It is a story told . . . . essentially from a populist liberal or even libertarian perspective: it was the state and big business stepping all over the little guys and their purer exchange relationships.”) stuck out to me as well.

Fundamentally, I’m pretty sure this is a misreading of how Graeber conceives of the subject and subject positions. I strongly doubt that Graeber buys into the liberal ontology of the subject (as atomized, individualistic, self-sufficient, etc) that a critique of “the state and big business stepping on the little guys” requires for coherency. Like Polanyi) Graeber’s work is interested in denaturalizing capitalism and its attendant calculus, which takes as fundamental the liberal subject. Some commenters (and the article) have asked Graeber to do more analysis which is essentially quantitative, such as deeper engagement with game theory, but that’s actually methodologically poor for his project: quantitative analysis does not lend itself to research on the production of meaning. Meaning isn’t reducible into the simplifications required to perform calculations, and so inquiry into what meaning has come about needs a different type of method. (This as opposed to whether and when it was produced, which could be quantified by looking at e.g. occurrences of words or the growth of debt exchanges or what-have-you.)

I’m also not sure that Beggs and Graeber understand the state in the same way. I’d expect from his other works that Graeber understands some slippage between state-as-institution (as generally found in both liberal and Marxist accounts) and state-as-performance (as you might find in, e.g., Landauer, Emma Goldman, or Foucault).* Not that it’s one or the other, but deeply both. I’ve flipped back through Debt cursorily without finding Graeber making a definitive statement on what the state “is.” As I run quickly through Debt, Graeber’s phrasings within seem very amenable to (e.g.) Foucault’s claim/argument that “the state is nothing else but the mobile effect of a regime of multiple govemmentalities.” So taking a post-Enlightment reading of the state-for-Graeber may also be not quite right.

(I met Graeber some years ago at an activist conference, and he was abrasive there as well, though incredibly smart. The rumor mill had it that he’s got a mild form of autism where he has trouble reading people’s tones.)

*I’m making broad readings here, but I think they generally hold.

35

Bruce Wilder 08.29.12 at 5:41 pm

The political economy is, by its nature, a virtual reality. Debt was, arguably, the ur-element in the social construction of that virtual reality, having left its traces in the first uses of written language. Economics, as an academic discipline and a conventional set of theories, supplies both a vocabulary and prescriptive grammar for talking about, and navigating, that virtual reality, and also a technocratic secular priesthood to preside over the reproduction of that social order — the maintenance of the code, that produces the virtual reality, if you will. The moralism is an inherent part of the virtual reality, telling you how to score and who to root for, and what the referees are doing and should be doing.

Social science can have some fun, pointing out the gaps between software and hardware, between social enactments as rituals and actually getting real things done, people fed, etc. The studied unreality of neoclassical economics serves some function. I suspect it is simply usefulness to the plutocrats, but regardless of my cynicism, it does help to maintain the illusion. And, a “genuine” social science of political economy would also have to apologize for whatever structure of virtual reality it put into place. Simply taking the red pill and hoping for the best is not a good idea.

36

dsquared 08.29.12 at 6:31 pm

The trouble is that it always ends up in “and therefore the entire system needs to be restructured on the basis of cough mumble* and then we will have a system with all the warmth and personal relationships of primitive peoples** but also even better technology because independent engineers will form anarchist collectives and design better iPhones*** and this would all have happened anyway apart from un-named shadowy villains at the top of the US government**** who exploit us all!”. The whole thing seems to be going in a direction of a critique, but it doesn’t end up with an actual critique; it’s a collection of shaggy dog stories, with a terrible case of Last Chapter Disease (in which he goes on about the “bad assets” of the subprime lenders without even noticing that they’re only “bad” precisely because the institution of debt has developed in order to allow the borrowers to stop paying and return the keys. I liked the book as an interesting read, but I did change my mind in response to the author’s behaviour, because it’s clear that he wants it to be read as a programmatic document along the lines of the Grundrisse or Capital, and on those lines it’s weak as hell.

* but certainly not any sort of “bureaucracy” or “central planning”

** But our lives will be nothing like those of ritual-dominated, institutionally sexist and clannish developing world cultures! How could anyone possibly interpret me as saying that!

*** Just like they did at Apple! Or perhaps not Apple but it definitely happened. Or maybe it didn’t but in any case why can’t you just get off my case! The point is perfectly clear. It happens all the time. Or it could, anyway, maybe.

**** I absolutely didn’t say that the US government was threatening everyone else with war and that’s why we don’t have anarchosyndicalist iPhones! That is clearly a wilfull misreading that only an actual fascist could have made! Bastardbastardbastard! WHY IS EVERYONE MISINTERPRETING ME???

37

dsquared 08.29.12 at 6:32 pm

I wonder what ruling class could love Keynesianism?

The British civil service in the 1950s.

or of course and rather embarrassingly, the Nazi Party.

38

Mao Cheng Ji 08.29.12 at 6:43 pm

The book was an interesting read, except close to the end, where it became boring. And Beggs’ piece is very good, thanks for the link.

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Watson Ladd 08.29.12 at 7:52 pm

Living a life defined by ritual hasn’t stopped B&H from being the biggest electronics retailer on in New York City. It’s probably much more productive to look at capitalism as leading to an end to sacredness, or more prosaically creating a society where ultimate ends do not divide people.

From that standpoint Graeber vs. Marx is a real tension. One wants to extend the mission of emancipation, the other to go back before it was a problem. Having been awakened to possibilities of freedom, Graeber wants to sleep.

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nick 08.29.12 at 8:11 pm

if you think the specific disciplinary apparatus of anthropology can be reduced to “annecdotes”, you’re probably not the best person to evaluate an anthropological critique of economics….

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Anarcissie 08.29.12 at 8:23 pm

I had the idea that Graeber’s book was mostly an account of what we might call the economics-myths from an anthropological point of view. One could do this with other sciences, but with economics it is particularly interesting because much of economics doesn’t ‘work’ in the sense that physics ‘works’, and because economics-myths have important political consequences. I did not see or expect to find a reformation or refutation of all economics in Graeber’s book, but rather a reexamination of the more popular axioms or myth-elements. An assemblage of anecdotes seems adequate for that purpose; they lay out a sort of terrain of possible investigation, if anyone were interested.

I was somewhat surprised by the following: ‘… Graeber believes that the US public debt is “a promise … that everyone knows will not be kept,” but the truth is exactly the opposite: Treasury bonds are considered the safest, surest, most liquid store of value in the world. …’. The ‘but’ does not introduce a logical contradiction. US money maybe be the safest, etc., but it is a widely-held belief among us yellow-dog swamp-dwelling pop economist-pretenders that more money (including of course all the odd instruments recently ginned up out of nothing) has been created than the working class can ever make good on. In fact, no one seems to know how much of it there actually is. In any case, it appears there is simply not enough labor in the world to account for it, unless it is grossly devalued (in terms of labor and the things that labor produces, that is, almost everything of real value), in ways which will probably have serious political consequences. I am not the only one to have come to the conclusion that the present money system is a gaseous fable, although of course we are all cranks. It might be comforting to be dissuaded.

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chrismealy 08.29.12 at 10:13 pm

@Mike Beggs #16, I like the Marxian and PK schools too. I don’t remember Graeber saying economists were completely useless. If I remember correctly he was saying nice things about chartalism, and that was enough to make me happy.

“Debt” is a woolly and kind of a mess, but I think that’s probably where it succeeds.What economists can never remember is that people are nothing like agents in economic models. Most normal people hate the market. They hate haggling, they hate being in debt, they hate asking their boss for a raise, they hate being unemployed (it’s not leisure), and they hate firing people (I said normal people). They don’t optimize. They don’t think Christmas presents are deadweight loss. Market values aren’t human values, not even close. Think about what goes on in an Econ 101 class. All that business about “thinking like an economist” is to get people to repress their human values. What all those anecdotes do in “Debt” is put actual human values and behavior back in focus. I think that’s why people like the book.

@Bob #19, I read Bowles’s micro, and it’s great, but it’s definitely not mainstream. Aside from the ultimatum game stuff it’s still pretty much cyborg econ. Bowles talks about norms towards the end but he’s just scratching the surface.

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JW Mason 08.29.12 at 10:19 pm

I did not like this review. Some thoughts, not yet organized.

Chartalism, or state money, is not IMO the fundamental issue here. The fundamental issue is that Beggs, like most economists, thinks of the economy as beginning *logically* as a barter economy, with some form of money used to facilitate exchange being logically secondary. (The historical argument is just a proxy for this, on both sides.) Obviously this is the conventional view. The problem is Beggs doesn’t actually defend it. He just keeps saying “States print the money, but not the price lists” without seeming to notice that this is exactly the claim under dispute. It needs to be established, and not just asserted, that we can think of relative prices as prior to money contracts.

Again, he simply asserts that debt contracts always must eventually settle in cash. This is another one of the main claims under dispute.

The idea that banks can extend credit only insofar as they can “convert deposits into central banknotes or gold” was already clearly wrong 100 years ago when Wicksell was writing. And it’s been debated for a lot longer — at least since the “hats” and the “caps” in 17th century Sweden. The idea that of credit money has a long history, even if Beggs is not familiar with it.

That Beggs is in doubt about whether there’s a difference between “means of payment” and “means of exchange” is symptomatic. The distinction between them is precisely that means of payment refers to money’s role in settling debt contracts, as opposed to simply facilitating the exchange of goods. Of course if Beggs doesn’t get the importance of that distinction, Debt is not going to make sense to him.

Begs: “It is odd that Graeber claims that “you can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter” – because there actually are things called dollars you can touch, carry around in your wallet, and spend.” This is just silly. Like much of this review, it’s not an argument, just a refusal to engage. A central fact about modern economies is that the vast majority of money does not take the form of tokens you can touch, and it’s perfectly possible to have money that *never* takes that form.

As Perry Mehrling — among others — points out, money should really be considered an adjective in modern economies, not a noun. It’s a quality that many different assets have to different degrees. If Beggs has’t read Mehrling, well, again, that’s his problem, not Graeber’s.

“However far credit may stretch money, it still depends on a monetary base” — again, Wicksell was already writing about a pure credit money system 100 years ago.

And finally, this:

An anchor to one commodity was, in fits and starts, replaced by a moving, flexible anchor to a whole basket of commodities averaged together. It is no accident that the period since the formal gold tie was finally cut has seen inflation become the overriding priority of economic policy. States print the money, but not the price lists. We live in an era not of fiat money, but of what Keynes called “managed money.” Unemployment disciplines money-wages and central banks have become the queens of policy, technocratic institutions isolated from democracy, their jobs too important and technical for that.

Yes, monetary policy is just a technical exercise in maintaining price stability, nothing political about it. Nothing to see here, move along please! Maybe Beggs is just paraphrasing conventional wisdom here, but in the context of the piece, it sounds more like he’s endorsing it. If that’s the Jacobin line, might as well just subscribe to The Economist.

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dsquared 08.29.12 at 10:23 pm

They don’t optimize.

the thing about optimisation though is that even if you don’t like it, it’s still optimal. When people refuse to “think like an economist” or “get involved in the market” with respect to debt contracts, they end up staying in underwater mortgages because their “human values” tell them to, or failing to declare bankruptcy, or borrowing from Wonga.com because it’s niceynicey and doesn’t involve nasty bank debts. This is my big problem with Graeber – debt is a solution to a problem (specifically, the problem of economising on the amount of information you need to collect about people in order to have a commercial relationship with them). As a solution to a problem, it’s had a lot of time and work done on it; it has both evolved and been intelligently designed. Nearly any ad hoc “because it feels right” alternative solution is going to end up being worse. And this is what Graeber wants – loads more of such departures. In your terms, it’s like telling everyone that Python is a bureaucratic compromise and everyone ought to write their own language to suit themselves.

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JW Mason 08.29.12 at 10:30 pm

I see Beggs recommends Mehrling upthread. Which makes me even more baffled by his criticisms of Debt.

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William Timberman 08.29.12 at 10:49 pm

This is my big problem with Graeber – debt is a solution to a problem (specifically, the problem of economising on the amount of information you need to collect about people in order to have a commercial relationship with them).

True enough, but in some sense — a very important sense, I think — irrelevant to what Graeber is hacking his way toward. Ask the Greeks how good a solution debt is to the problem of not knowing what you’re getting into, or who you’re getting into it with. Were the Greeks stupid? Were they simply not thinking like an economist? Reducing social contracts to money may free you from listening to blowhard Uncle Harry lecture you about Obama’s lack of a birth certificate at the Christmas potlatch because you don’t want to embarrass dear old Mom, but it won’t save you from the clutches of the payday lender.

Which is worse? Well, historically speaking, both have had their bad aspects — very bad aspects. A money economy does give you a shot at determining your own destiny, or at least it appears to, but it sure isn’t the place where, when you have to go there, they have to take you in.

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chrismealy 08.29.12 at 10:50 pm

@dsquared Maybe I read it wrong, but I thought Graeber just raised a bunch of issues and dropped the mic. I don’t remember any actual solutions. Was he really advocating the abolition of debt?

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JW Mason 08.29.12 at 11:04 pm

debt is a solution to a problem (specifically, the problem of economising on the amount of information you need to collect about people in order to have a commercial relationship with them)

This is a very odd thing to say. Graber spends most of the book contrasting two forms of exchange, debt-based and money-based. Debt is clearly the more informationally intensive of the two. There are credit rating agencies, after all, not cash rating agencies.

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dsquared 08.29.12 at 11:23 pm

Was he really advocating the abolition of debt?

He was certainly advocating a “modern jubilee” for all current bank debt. He did not seem to realise that this would mean a confiscation of everybody’s savings (or a taxpayer bailout of similar size).

This is a very odd thing to say.

No it isn’t; as is so very very often the case, JW Mason, the problem here is that you have misunderstood what you were reading.

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Salient 08.30.12 at 12:15 am

@D^2^
No it isn’t; as is so very very often the case, JW Mason, the problem here is that you have misunderstood what you were reading.

Am I misremembering all the times you made fun of people for appealing to ‘reading comprehension’ problems? Wouldn’t it make more sense to say that debt is a solution to a problem like, how to extend a commercial transaction across a long time-horizon?

@chrismealy
Was he really advocating the abolition of debt?

Sorta, yeah. I’d say he was advocating we think more about how we might achieve a workable abolition of debt. There are so many hedge phrases in Graeber’s afterword, where he talks about this, that I can’t help but read the thing as more of an emotional appeal to start brainstorming alternative arrangements and how to transition to them. It struck me as a standard (and basically fluff) appeal for Continuing The Conversation, which isn’t thaat different from dropping the mic.

Anyway, here’s some stuff from Graeber’s afterword:

In this book I have largely avoided making concrete proposals, but let me end with one. It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt.

[ D^2^’s reading of what Graeber meant by “international debt and consumer debt” doesn’t appeal to me, and presumably my reading is excessively charitable and doesn’t appeal to D^2^ ]

As it turns out, we don’t “all” have to pay our debts. Only some of us do. Nothing would be more important than to wipe the slate clean for everyone, mark a break with our accustomed morality, and start again.

[ I’d say this indicates Graeber would like to call a jubilee for oppressive debts, and D^2^ would probably have something to say about what that exegetical adjective is sweeping up ]

What is a debt, anyway? 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 true value, no one has the right to tell us what we truly owe.

Quite a lot of books have gushing-appeal afterwords that would be wince-inducing if you were inclined to interpret them as policy proposals; I’d file the above under that category.

Anyhow, there’s a less direct way to infer that Graeber’s not interested in dismantling the entirety of the debt apparatus nownownow; from his seminar response:

In other words, where many assume that anything like money or markets must be wiped out because even the simplest cash transaction contains some sort of evil DNA that, owing to some profound flaw in human nature, will grow and grow until capitalism is reestablished, I argue the opposite: that while markets are founded and usually maintained by systematic state violence, in the absence of such violence, they will quickly turn into something far less obnoxious—and can even come to be seen as the very basis of freedom and autonomy.

Whether this is a fairer summary than Henry’s of Debt’s last chapter is probably not worth rehashing at the moment, but given a lot of stuff Graeber has said about the book, I think maybe he perceives his book’s last chapter more as a compelling argument for disarmament. (I dunno, it’s way too convoluted and sketchy for that.)

A surprisingly large number of readers concluded from the book that I am against all impersonal relations, or all impersonal exchange relations, or even all exchange relations. It feels a little odd to have to say this, but let me hereby state that I am not “opposed” to such institutions, nor am I suggesting they should be, or could be, eliminated. Any complex society will have all these things in some form or another. The question is which.

Neither that quote nor the one before specifically identifies whether he wants to see the abolition of debt, but they do suggest that “

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Mike Beggs 08.30.12 at 12:24 am

JW Mason (#43): A few things to respond to – I’ll take them one at a time. If you think I’m ignorant of the long history of credit money, then I really haven’t explained myself very well, so I’ll have another go.

I say in the piece, just after the bit you quote about touching dollars or Deutschmarks (emphasis added):

“What circulates in this way need not be a physical thing, but it is a thing in the sense that it cannot be in two places at once: when a payment is made, a quantity is deleted from one account and added to another. That the thing that is accepted in payment may be a third party’s liability does not change this fundamental point.”

The vast bulk of what now circulates as money fits these descriptions – it’s not physical, and it’s usually a third party’s liability (a bank’s). In certain circumstances units can make payments with their own liabilities. And this situation goes a long way back. I don’t think we disagree here.

I see I made a poor choice of words when I said “however far credit may stretch money, it still depends on a monetary base” – because ‘monetary base’ carries the sense of a static pile of gold or currency in bank vaults. It could be taken that I was making a macro-level claim about quantity and velocity (when in fact I was talking about the individual unit’s relationship to credit and money – the other half of the sentence is “people ultimately expect to get paid in some form or other”). And I think we agree that it’s not useful to talk about money in terms of the velocity of some exogenously determined quantity of money.

The point I was trying to make is that the need to make ultimate payments does constrain the extension of credit and credit-money (i.e. liabilities that circulate as means-of-payment). The monetary system is layered, in the sense that non-banks make ultimate payments with bank liabilities, while banks make ultimate payments (clearing what does not cancel out) with reserves, balances (or overdrafts) with the central bank. So the constraints are complex, soft (capable of much stretching), and especially so when the central bank is passively or actively manipulating the cost of reserves.

You bring up money as an adjective – and of course, I agree that there are many kinds of instruments that fulfil monetary functions to greater or lesser degree – whereas I am thinking in terms of a verb: units are constrained by their expected cashflows, and their perception of the risk of those cashflows. Not that long ago that largely meant holding precautionary stocks of money and liquid assets (thus the perception of money as noun), whereas now there are a great diversity of position-making practices, many involving plans to borrow in the event of a shortfall.

Minsky traced the evolution of position-making on the liability side and its consequences for policy, and Mehrling has carried this history forward, showing how it focuses pressure on the money market and drove the (re)emergence of central bank as market-maker or last resort. They both help think through the nature of the flexible constraints on credit at the macro level.

I didn’t elaborate on all this in my review because it would have been out of place – Graeber’s framework just has no place for this kind of analysis, but it seems exactly what is needed to understand the subtleties of the relationship between money and credit.

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JW Mason 08.30.12 at 12:37 am

Hey Mike,

I’m sure if we sat down and talked about this stuff — as I hope we will at some point — we’d be mostly in agreement. Or at least the conversation would be a lot less adversarial than comments threads tend to be. I do think you’ve read Graeber a bit uncharitably, but I’m probably just as guilty of that with respect to your review, so…

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Mike Beggs 08.30.12 at 12:48 am

JW Mason (#43): Now, Wicksell. First, don’t you think Wicksell’s position counts against Graeber’s claim about how economists think about money – especially since neo-Wicksellianism is a dominant strain in contemporary monetary policy theory?

On Wicksell’s ‘pure credit economy’ – it’s important that this was for Wicksell an ideal type and not a description of the actual monetary system he saw around him, which he thought was somewhere between his ideal types (pure cash and pure credit).

Also, we need to take care with what Wicksell meant by money, because at the time he was writing it was the norm to treat bank deposits and notes as devices for increasing the velocity of money-proper rather than as money themselves. So, e.g., he writes that “there is no real need for any money at all if a payment between two customers can be accomplished by simply transferring the appropriate sum of money in the books of the bank”. (p. 68 of ‘Interest and Prices’) Whereas today of course we consider bank deposits as money.

In creating his ideal type ‘pure credit economy’ Wicksell makes the crucial assumption that “the whole monetary system is in the hands of a single credit institution” (p. 71). Of course this gets rid of the major liquidity constraint on individual banks in the real world – that they need to be able to settle net outflows to other banks. Even so, even in Wicksell’s pure credit economy the one big bank still has to maintain a gold reserve to meet drains abroad. This was a serious real-world constraint on national banking systems under a fixed exchange rate, at least for smaller countries.

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Peter T 08.30.12 at 12:55 am

If Graeber had “committed the genealogical fallacy” would it actually be a fallacy in this area? Anything as big, messy, contested and dynamic as the area of social life claimed as subject by economics is surely the product much more of history than of some simple underlying structure. It cannot be understood, nor its trajectories plotted, without a good understanding of where the different bits came from, any more than the idioms, irregularities and overlapping vocabularies of a language can be explained without reference to the language’s history. The efforts to explain from some set of first principles have so far been singularly unimpressive in their encounters with real life, however intellectually fascinating.

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Mike Beggs 08.30.12 at 1:11 am

JW Mason (#43): Couple more things – and I think you’re right that we would be mostly in agreement if we could talk it through, but I hope you don’t mind if I use your helpful criticisms to flesh out my thoughts some more!

I don’t think relative prices are “prior to money contracts”. The actual circulation of money is absolutely necessary to establish relative prices. I still think Marx dealt with this pretty well – an apparent barter system with a complex, stable system of relative exchange rates is surely not really a barter system at all, but depends on some kind of de facto money.

My point is more that the system of relative prices under capitalism is opaque to government policy. The line about the state printing the money but not the price lists is pretty much straight from chapter 1 of Keynes’ ‘Treatise’, which is sympathetic to chartalism – and I think the rest of the Treatise is about thinking through the implications of that.

It’s why I think chartalism is true and trivial or interesting and false – often chartalists jump too quickly from establishing money as a creature of the state to concluding that the state therefore has a lot of latent monetary power. Instead, I think, the state is very much constrained in its policy conduct by the systemic needs for monetary stability.

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Mike Beggs 08.30.12 at 1:28 am

JW Mason (#43) Last one:

This is why I’m gutted I appeared to be endorsing the conventional wisdom about central banks! In fact I think their role in reproducing unemployment – effectively sacrificing people for price stability – is outrageous.

It’s just that I don’t see it just as ‘bad policy’, but as a fairly rational policy given the needs of the economic system the central bank is tasked with reproducing. It’s not something that could be fixed with different monetary policy alone. Of course the Jacobin line (I can’t speak for us all but I doubt anyone would disagree) is that the system needs changing. We’re socialists after all.

I don’t think monetary policy is totally determined by the system – I’m sure there is some room to move and it’s worth pressing for a policy that aims at full employment, even if it is unlikely to be successful. But the playing field for monetary policy ideas is far from level. My PhD thesis is actually a genealogy of the relationship between inflation and macroeconomic policy in Australia, 1945-85, and I am working on a book on the same issue in the wider world – so I’m always interested to talk more about it.

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Mike Beggs 08.30.12 at 1:36 am

By the way, while we’re talking about Perry Mehrling and this stuff, he has a great short critique of chartalism in the Journal of Post Keynesian Economics, 22:3, 2000: “Modern money: fiat or credit?”

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Doctor Memory 08.30.12 at 3:24 am

Chrismealy: “Most normal people […] hate haggling”

I’m predisposed to agree with the larger point you’re making about the uselessness of “rational actor” models, but come on: normal people hate haggling? Citation please, and preferably one begs the question of normality a little less than your statement.

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Tom Bach 08.30.12 at 3:38 am

Oddly enough it seems that during the Clinton Administration the thought that US debt was going to be payed off, something no expected, was seen as a potential disaster.{1} The reason, it seems, was the US debt was a stable commodity that payed reasonable dividends on which those with “money” relied. This would seem to be a case of a debt no one expected to be paid off because it was an integral part of the global economy.

{1} http://www.npr.org/blogs/money/2011/10/21/141510617/what-if-we-paid-off-the-debt-the-secret-government-report
http://media.npr.org/assets/img/2011/10/20/LifeAfterDebt.pdf

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JW Mason 08.30.12 at 3:43 am

while we’re talking about Perry Mehrling and this stuff, he has a great short critique of chartalism in the Journal of Post Keynesian Economics, 22:3, 2000: “Modern money: fiat or credit?”

Agree, that’s a brilliant piece. Best take on chartalism I know.

Response to the rest of your comments shortly, I hope.

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JW Mason 08.30.12 at 4:17 am

I do intend to respond to Mike Beggs in detail, either here or on my own blog. But let me first spell out the big picture of what I think is at stake here.

Let’s say there’s a conflict between two sequences. One (the “economics” one) goes from exchange of goods, to exchange of tokens representing goods, to exchange of commitments to give tokens representing goods. The other (the “anthropology” one) goes from a variety of incommensurable obligations of people to each other, to a single standard to measure different obligations, to tokens representing units of that standard, to the use of those tokens to allocate goods.

So wait, what do we mean by sequences? See, that’s part of the confusion, because they can be either logical or historical. Seems to me the real debate is about the logical order, with the historical order as a stand-in on both sides.

(That said, I think history does shed light on the logical relationships, in ways that are worth coming back to maybe at some point.)

So why does it matter? Because the idea of credit-money, i.e. money as a generalization of the commitments anyone can in principle can make to anyone else, has importantly different implications even in a narrow economic sense than commodity money, money as shorthand for a fixed stock of real physical goods. In the case of money-as-generalized-commodity, it’s easy to imagine a barter economy, where all resources are put to their best purposes, and then ask if the use of money distorts that in some way. In the other case, money as generalized commitment, there is no non-monetary baseline to start from. We can imagine economies with various levels of aggregate monetary commitments and none of them is necessarily natural. A simplified but I think fair simplification of this is the question of whether there is a “natural” (not scare quotes, it is a term of art) long-term interest rate, or if — as both Marx and Keynes believed — the long-term interest rate must be regarded as a historical datum that is simply indeterminate with respect to the non-monetary features of the economy.

To me, this is the real, debate, and I think Graeber made an important contribution to it.

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JW Mason 08.30.12 at 4:33 am

Just to spell out another point — in the case of money-as-generalized-commodity, we *already* have a fixed set of stuff that is being traded. In the case of money-as-generalized-commitment, the need to meet money commitments can compel a person or other economic unit to do whatever is necessary to acquire money claims, including stuff that wasn’t previously considered part of the universe of trade. I think showing how this plays out in practice is the point of a lot of the “anecdotes” in Graeber’s book.

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Colin Danby 08.30.12 at 5:37 am

Tom #59, the relevant distinction is between an individual bond, and the total stock of debt owed by a gov’t. There is no inconsistency between an indefinitely growing stock of gov’t debt and repayment of individual instruments. Braudel discussed this usefully in _Civilization and Capitalism_ re British gov’t debt.

JWM, it would be nice if you could acknowledge the fact that there is an *economics* literature, to which Mike B has referred, that is not only consistent with what you overgeneralize as the “anthropology” sequence, but which has made important contributions to understanding the debt origins of money. I don’t see *anyone* on this thread arguing the up-from-barter view. This bit about what you think is the “real” debate is an evasion.

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JW Mason 08.30.12 at 5:45 am

Colin,

Sure, I agree that what I am identifying as the Graeber position is internal to economics. (I’m in the final stages of an econ PhD at UMass, where you studied yourself if I’m not mistaken.) I don’t see why that matters, really?

I think that, despite some articulate dissents, the up-from-barter position is the standard (not necessarily acknowledged) economics position, implicitly in back of what most of us teach. You may disagree. That would be a productive debate to have, I think.

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terence 08.30.12 at 6:22 am

Mike Beggs,

If you’re still reading I just wanted to offer you a small, blog-comment box sized thank you. The review was great and I learnt a lot from it.

Terence

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Alex 08.30.12 at 9:10 am

A thing that bothers me about this: in practice, is there very much difference between keeping a tally of people who’ve been nice to me and therefore deserve a good turn (i.e. a moral economy of obligation), swapping stuff (i.e. barter, in any vaguely practical implementation), and using store credit (money-denominated, but not cash on the nail)?

How would you (or Dave Graeber) go about distinguishing the three systems in the field? Obviously you could ask the participants which one they thought was happening, but you might well find out that they don’t all say the same thing. In many ways, the three options are re-descriptions of the same exchange of goods (or services).

Further, quite a lot of commercial transactions which look like cash sales are actually bookkeeping ones – most people who buy cars don’t schlep £20,000 in notes to the dealer, D^2 will no doubt tell us all about contango trades. No participant would say this is anything other than commerce, but perhaps it’s telling that they don’t.

How we describe them has practical consequences, which is the kind of thing anthropology is supposed to explain. Everyone has had the experience of learning that something they thought was an obligation of friendship was actually a business transaction or the other way around, and it’s a fairly common way to make an enemy.

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dsquared 08.30.12 at 9:52 am

Wouldn’t it make more sense to say that debt is a solution to a problem like, how to extend a commercial transaction across a long time-horizon?

Well maybe, but I think “long” is misplaced there; debt contracts or something like them are needed for any transaction more sophisticated than the sort of spot market near-as-you-can-get-to-barter exchange that we all agree isn’t typical of any economy anywhere.

One of the many reasons that I think the genealogical fallacy is a fallacy is that we have seen at least one attempt to completely redesign the basis of such commercial relationships for an entire economy so that it didn’t use debt in the same way – Soviet Communism (production quotas weren’t debts and although there was a complicated relationship between administered prices and market prices as novelised in Red Plenty, they weren’t the same thing either).

Now Soviet Communism failed, but it wasn’t obviously crazy or doomed, and so I don’t see why we should assume that there haven’t been other, less radical and more successful redesigns of the debt and credit economy; in particular, the creation of the joint-stock company and the various reforms of bankruptcy law in the nineteenth century seem to me to be a clear and conscious effort to redevelop the debt relationship for a modern society.

I am not giving an inch on the Jubilee thing btw – it is clear that Graeber wants something that would basically destroy the currently existing banking system, and he doesn’t have a plan for dealing with the consequences of that for deposits.

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Ciaran 08.30.12 at 10:09 am

Just on the whole jubilee thing, I’ve seen Steve keen talk about “QE for the people” where the government mails out cheques in the post, the only condition attached being that the money is firsted used to pay down debt. I don’t know how good or feasible an idea this is but on the face of it , it seems like it would work .

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dsquared 08.30.12 at 10:18 am

would quite likely end up as an inflation tax on savings, but not as obviously institutionally broken as the Graeber plan.

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Phil 08.30.12 at 10:56 am

If Graeber had “committed the genealogical fallacy” would it actually be a fallacy in this area?

The suggestion was that he’d committed the genetic fallacy, i.e. read off the essential nature of the contemporary phenomenon from its origins. A genealogical account of money/debt is what Graeber says he’s offering; Beggs agrees that this would be a very good thing, but says he doesn’t deliver.

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Colin Danby 08.30.12 at 11:29 am

In the Foucauldian sense, though, has anyone done a successful genealogical account of anything on this kind of temporal and geographic scale?

There are many monies, partial monies, kind of credit with different institutional entailments.

-

JWM, we too easily end up on CT bewailing an orthodox neoclassical position which as far as I can tell is unrepresented on this blog – even sightings in the comments are rare these days. Such bewailing is safe, easy, routine. Why not instead take the opportunity Beggs presents to engage with a much more thoughtful position?

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ajay 08.30.12 at 11:54 am

or of course and rather embarrassingly, the Nazi Party.

The Nazis were not really Keynesians. They didn’t really have much of a consistent economic policy at all – as far as I can remember from Adam Tooze, they liked massive government spending, but because it meant building the Wehrmacht, not because it had good multiplier effects. There were some attempts in 1933-34 to boost employment in construction by having state governments build lots of housing, but they didn’t last very long. They were also well into controlling the manufacturing sector by rationing raw materials, supporting exports and currency simultaneously by a bizarre and contradictory set of foreign-exchange controls and bilateral agreements, and expropriating Jews.

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dsquared 08.30.12 at 12:23 pm

they weren’t really Keynesians, but JMK saw enough of his own ideas in (particularly) Schacht’s policies of the 1930s to write an excruciatingly embarrassing foreword to the German translation of the General Theory (Keynes was also President of the Eugenics Society)

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Steve LaBonne 08.30.12 at 12:31 pm

I’m predisposed to agree with the larger point you’re making about the uselessness of “rational actor” models, but come on: normal people hate haggling? Citation please, and preferably one begs the question of normality a little less than your statement.

Just look at the success of GM’s Saturn brand in its heyday. Many people were willing to overpay for mediocre cars to avoid haggling, on the condition of knowing that nobody else could haggle either and thereby get a better deal.

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Kieran Healy 08.30.12 at 12:41 pm

the genetic fallacy

He does have a sweet tooth for the argument from etymology—or the insinuation from etymology—that goes “the word ‘x’ originally meant ‘y’ so the institution or practice of x is still essentially y”.

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dsquared 08.30.12 at 12:49 pm

cf the really embarrassingly bad bit early on where we all pretend not to understand the difference between the “debt” owed by a child to its parents, and high yield zero coupon bonds.

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William Timberman 08.30.12 at 2:37 pm

The reason for the pretense, or more charitably, the analogy, is not that we don’t know the difference, or that economics isn’t complex, or that the economy, as a system with uncountably many inputs, has unpredictable and unmanageable consequences, it’s that economists, the often hapless analysts of that system, seem to be consistently blind to their own pretense that the system simply needs better analysts, and better managers to be finally made to work properly. The implicit assertion that, as a work in progress, the discipline of economics, and the economists who describe and defend it should be immune to naive criticism, and that its acolytes should be given a pass when the system hiccups, and leaves great swaths of devastation in its wake, is precisely what Graeber rejects.

It’s not that the word ‘x’ originally meant ‘y’ so the institution or practice of x is still essentially y, but that economists are running away from the obvious relationship of x to y in their assertion that it’s okay for the Greeks to starve as long as the banks can still get their trash swept up by the ECB, or that it’s okay to abrogate the contracts governing the pay or health care benefits of GM workers, but not those governing bonuses at Goldman Sachs. Anyone who asserts that a system which routinely produces such effects is self-contained, without any external links to the social concerns which govern much of the rest of life, deserves a bashing from people who don’t think like economists now and then, if for no other reason than to remind him that for a many of those people there is a lot more at stake than their intellectual reputations.

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dsquared 08.30.12 at 2:48 pm

economists are running away from the obvious relationship of x to y in their assertion that it’s okay for the Greeks to starve as long as the banks can still get their trash swept up by the ECB, or that it’s okay to abrogate the contracts governing the pay or health care benefits of GM workers, but not those governing bonuses at Goldman Sachs.

William, if you’re claiming that those “assertions” are made by “economists”, then your critique of economics really isn’t going to get anywhere and it’s not really their fault.

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William Timberman 08.30.12 at 3:00 pm

No, it’s not really their fault, but their complacency, if not to say their arrogance, in the face of it is — or ought to be — legendary. With a few notable exceptions, of course, none of whom seem to have any more influence over events, at least in the short run, than do we naive moralists. And if Keynes was being more than a deadpan humorist when he let slip that the ideas of dead economists are what’s pulling the strings behind the scenes, then I’d say somebody’s got some ‘splainin to do, and if we’re not up to it in your estimation, then maybe prayer is what’s called for after all.

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ciaran 08.30.12 at 3:02 pm

“economists are running away from the obvious relationship of x to y in their assertion that it’s okay for the Greeks to starve as long as the banks can still get their trash swept up by the ECB…”

You know there was an editorial in the FT a while back saying pretty much that. Certainly as Yanis Varoufakis is always at pains to point out, all most all of the bail out money is never seen by the Greek people so this is pretty much official policy.

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Wonks Anonymous 08.30.12 at 3:21 pm

William, did you mean to refer to A.I.G rather than Goldman Sachs?

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dsquared 08.30.12 at 3:41 pm

and if we’re not up to it in your estimation

Since all that would have been necessary to avoid that disaster area of a paragraph would be a little bit of fact checking and a little bit of common sense when it comes to attributing strawman positions to your opponents, I am sure that you are up to it. That’s what makes it so infuriating.

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William Timberman 08.30.12 at 3:44 pm

No, I meant Goldman Sachs, but I probably should have referred to A.I.G., since the public controversy surrounding A.I.G. bonuses arose largely because of the assertion tht the bonuses in question were contractual. It’s not clear — at least to me — that the Goldman bonuses, although equally controversial, were also part of Goldman’s employment contract. In any event, your correction is welcome.

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radish 08.30.12 at 3:56 pm

It is a thing in the sense that it cannot be in two places at once: when a payment is made, a quantity is deleted from one account and added to another

Except when it isn’t, of course. Consistent bookkeeping is a social convention, not a law of nature. If it were anything other than a negotiable (and error-prone) social convention there would be no need for counterfeit detection or double entry accounting.

With all due respect, this is the sort of thing that makes makes it hard to take orthodox economics seriously, even as a “soft” science. “Money” cannot arbitrarily be declared to be sometimes a map and sometimes a territory, just because. It cannot simultaneously be treated as a durable entity subject to the laws of matter and as an abstract datum subject to the laws of information. The fact that orthodox economic theories constantly require you to engage in this conflation of signal with substrate renders the whole enterprise suspect, in my view.

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William Timberman 08.30.12 at 4:15 pm

Dsquared, I’m willing to stipulate that you don’t think that economics, properly understood, demands that the Greeks starve under any circumstances, even those resulting from the collapse of the mountain of clever paper no one now seems to have been responsible for, least of all economists. Still, there are economists who do give that impression — the 172 economist who wrote this letter, for example. Perhaps my impression is a mistaken one, but if so, the mistake is an honest one, one shared by enough people, I would say, that it should be engaged rather than dismissed as irrelevant.

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dsquared 08.30.12 at 4:31 pm

the 172 economist who wrote this letter, for example.

The economists who wrote a letter specifically saying that Greece should default on its debt?

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William Timberman 08.30.12 at 5:09 pm

Yes, the very ones — who presumably know full well that Greece isn’t Argentina, and what that implies for the length of a Greek recovery once its creditors have been burned. It might well be that eine kollektive Haftung für die Schulden der Banken, if offered at the price Angela Merkel has been offering it, would be worse, but what’s gone missing is any sense of responsibility for anything but the stability of the banking system.

But to the larger point: No matter what Graeber’s shortcomings as an economist may be, he — like Marx before him — is insisting primarily that the cultural subtexts which insist that some people escape the consequences of their actions, and others resign themselves to being perpetual victims, can’t be rationalized away by equating the disasters of a modern economic with those of nature, i.e., essentially random, or value free.

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JW Mason 08.30.12 at 5:26 pm

we too easily end up on CT bewailing an orthodox neoclassical position which as far as I can tell is unrepresented on this blog – even sightings in the comments are rare these days. Such bewailing is safe, easy, routine. Why not instead take the opportunity Beggs presents to engage with a much more thoughtful position?

I don’t even understand what we’re arguing about here.

I took Mike Beggs to be saying that Graeber makes some false claims — that there is an important distinction between credit money and commodity money, and that exchange of gods is not logically prior to money contracts, i.e. we can’t think of the economy as dichotomous, with relative prices established first by one set of factors and then the price level by another. I understood, maybe wrongly, Mike to be saying that both those positions are wrong — that the existence of credit money doesn’t change anything fundamental, and that relative prices can be analyzed without considering monetary factors. (““States print the money, but not the price lists.”) My counterargument to this si that the positions that Begs says Graeber is wrong to hold, are also held by lots of people within the economics profession.

I could be completely wrong about all of this — I probably am wrong on a lot of it — it certainly wouldn’t be the first time. But I don’t see how I’m failing to engage with more thoughtful positions within economics. On the contrary, I’m saying Debt should be seen as contributing to them.

(My contrasting an “economics” and “anthropology” view of money was dumb, and probably confused what I was trying to say. Actually I don’t know anything about anthropology, it was just intended as a shorthand for two ways of thinking that are both found in economics.)

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The Iron-Tongued Devil 08.30.12 at 5:37 pm

I am just jumping in here and not trying to comment on the issues at all, but this (from JWM, 88) is one of the all-time great typos:

“exchange of gods is not logically prior to money contracts”

(Unless it’s not a typo, and theology really is playing a role in the conversation.)

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radish 08.30.12 at 6:14 pm

I am not giving an inch on the Jubilee thing btw – it is clear that Graeber wants something that would basically destroy the currently existing banking system, and he doesn’t have a plan for dealing with the consequences of that for deposits.

I’ve been chewing on this and it doesn’t make sense. I think what you’re saying is that a jubilee would not just wipe out particular banks, but prevent any further retail or investment banking. I don’t see how that follows, unless you think he wants to outlaw usury altogether.

I think we can agree that some variations of jubilee would be obviously crazy and doomed. I would argue that the soviet experiment was obviously crazy and doomed as well, but we agree that various other experiments have been quite successful, notably including bankruptcy reform. I think we can agree that even a sane and plausible jubilee would put some existing banks out of business, and probably result in the reorganization of “systemically important” banks. But those banks are, de facto, already insolvent. They would not be going concerns without subsidization of some kind.

What I don’t understand is why you (apparently) seem to be arguing that a state-sponsored jubilee would spell an end to the currently existing banking system, when state-sponsored QE quite clearly has not. They are simply variations on the “helicopter drop.” Or maybe I don’t understand what you mean by currently existing. Or maybe you’re suggesting that “helicopter drop” type strategies are crazy and doomed in general, regardless of who they target, regardless of whether they take the form of debt subsidization, balance-sheet subsidization, or literal helicopter drops?

Any case, I’m puzzled. I mean I’d be happy to argue against a jubilee on the grounds that any modern state which attempted one is so sure to fuck it up that it probably shouldn’t even be attempted. But not on any other grounds that I can think of…

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Eric Titus 08.30.12 at 6:16 pm

@DSquared This is my big problem with Graeber – debt is a solution to a problem (specifically, the problem of economising on the amount of information you need to collect about people in order to have a commercial relationship with them). As a solution to a problem, it’s had a lot of time and work done on it; it has both evolved and been intelligently designed. Nearly any ad hoc “because it feels right” alternative solution is going to end up being worse.

Maybe you’re not talking about debt here so much as credit ratings? The “function” of debt itself is simply to pay later for things you need now. For some (speculators in Minsky’s taxonomy) this means never paying as long as you are profitable. But if you’re saying the evolution of credit (the basis for debt and even some commercial interactions) has “evolved” to the current system and is therefore not easily replaced, I wonder what you think of the recurring financial crises or cases of fraud that are, arguably, partly attributable to our flawed credit system?

I think an “evolutionary” perspective on debt would show how, to some extent, our current system really hasn’t developed much at all in how we evaluate creditors. For individuals, we look at ability to pay, as well as various social indicators of future earnings and decisions. The use of statistics in modern credit systems has helped “refine” this process, but may not be more accurate on an individual level than older approaches were. As for companies, certainly the shift to commercial paper in the 1970s was a change, but in many countries companies still borrow from banks, and they don’t seem to be suffering for it. Certainly the expansion of the modern state and more effective enforcement of contracts have helped increase the “trust” people have in transactions, but that’s a separate subject.

I’ve been slow to pick up Graeber’s book, mostly because what I’ve read makes me skeptical about what he has much to add to more empirically-driven accounts (to those mentioned above, I’d add the debt-related sections in Cronon’s Nature’s Metropolis, Mann’s Republic of Debtors, and Halliday and Carruthers’ Bankruptcy). However, since he argues that it’s as central to the modern economy as money, I doubt he wants to eliminate debt entirely. His jubilee concept may mostly be aimed at those economists who tend to see debt as an irrevocable “promise” guaranteed by the government, which would bring the financial system tumbling down if not kept. The irony is twofold: first that the idea of default is naturally built into debt anyways; second that the government often intervenes to help creditors, often without forcing them to take haircuts on their debt (this is not new to the current crisis). It doesn’t seem particularly extreme to point out that the relationship between debtors and creditors is constantly being negotiated by the government, and that debtors often get the short end of the stick. Even if a jubilee may be a bridge too far, there is a lot of room for government action.

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dsquared 08.30.12 at 6:17 pm

My point is just that you say:

I think we can agree that even a sane and plausible jubilee would put some existing banks out of business, and probably result in the reorganization of “systemically important” banks

without accepting that this has consequences for the people who have deposits in those banks (or for the taxpayer if we are going to bail the depositors out, but the size of the problem doesn’t change)

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radish 08.30.12 at 6:24 pm

Ah. “Painful, difficult, and expensive” is a very different argument than “basically destroy the currently existing banking system.”

And I am accepting that it has consequences for depositors. I’m not convinced those consequences are any worse than the consequences of the status quo is all. Plus the taxpayer is “bailing somebody out” regardless. There has been quite a lot of taxpayer bailing already, to not very much effect.

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Bruce Wilder 08.30.12 at 6:29 pm

Colin Danby: “. . . we too easily end up on CT bewailing an orthodox neoclassical position which as far as I can tell is unrepresented on this blog – even sightings in the comments are rare these days. Such bewailing is safe, easy, routine.”

As someone, who makes a lot of comments bewailing the “orthodox neoclassical position” — indeed, I did so in the very first comment in this thread, where I quoted from Beggs and linked to Krugman, who is generally regarded as one of the good guys around here — I will demur. It is safe and easy, and I do, indeed, do it routinely, and I do it with a full consciousness that I do so, not from a marxist or heterodox position, but from a solidly mainstream “textbook” one, flavored by the sentiments of an “American liberal”, as such is known in these parts.

First, that it is “easy” to make a thoroughly devastating criticism of “neoclassical economics” (see the linked Krugman blog post for a succinct definition), in a blog comment no less, is due in no small part to the fact that there is a huge accumulated volume of book-length critiques, many of which are not fatuous and superficial (though many, of course, are). (I’ve never made a comment, which expressed an original thought, that I know of; so, no ego commitment to personally “seeing through it”.) Blog comments pretty much have to be easy, but the mere fact of “easy” adds tremendously to the force of the comment, in this case, because “neoclassical economics” remains unapologetically astride conventional authority — “the emperor has no clothes” is necessarily an implicit recurrent theme. Krugman, hero of what passes for centre-left opinion in the USA, remains, as the linked blogpost attests, an eyes-wide-shut proponent of “neoclassical economics”. Henry and Chris Bertram have made posts recently, which turned, in large part, on acceptance of the legitimacy of “neoclassical economics” and its claims to conventional authority; so while the fact, that neither poster is an advocate for that authority hardly means that that authority is some kind of dead parrot in our discussion, and it also doesn’t indicate, to me at least, that we done engaging with the nonsense, which is neoclassical economics, in the all-important sense of being free of engagement with it, on its terms and its agenda. (And, . . . dsquared can be sighted in comments — look optimization!.)

Beggs appears to make an “easy” call for an unspecified “genuine political economy”, a sentiment I wholeheartedly endorse, but which doesn’t mean much, if you aren’t willing to “just do it”, and he’s clearly not willing to do it. My own view is caught in a rock, scissors, paper circle. I share Beggs’ disappointment in Graeber’s empty nihilist economics and inability to engage analytically with most of the last 300 years, and I share JWM’s disappointment in Begg’s thin-soup economic history. (I’m not a socialist, so I’m not sure a political discussion with either would end in good feelings, though I’ve enjoyed their back-and-forth, here, and would love to read more, please.)

As is well-known (so this part of the comment is another “easy” throw of the ol’ javelin), neoclassical economics is structured around a fundamental hostility to history. If the neoclassical framework arranges your thinking, you’re never going to be able to think productively about history, and history is your intellectual enemy. You can have erudite discussions about the neutrality of money, or the need for dynamic analysis, the importance of path dependence, call for teaching economic history, or history of economic thought, or worry over the tension between the logical and the historical origins of money and debt, but as long as your feet are stuck in the neoclassical muck, you’re in trouble. The Big Picture, here, is that any sort of serious attempt at economic history is deeply subversive of neoclassical economics. So, two cheers at least for Graeber.

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Bruce Wilder 08.30.12 at 6:50 pm

dsquared @ 92

“the size of the problem doesn’t change”

The “size” of the problem also doesn’t change the nature of the problem, which are lies in the service of parasites. When every attempt to solve what is purportedly a “liquidity” problem, (but has always been a solvency problem created by previous frauds), in order to avoid an imminent apocalypse, ends in massive transfers of financial claims to people, who should be in jail, and huge dead-weight losses to masses of “innocent” people, who might otherwise be working and producing actual goods and services, . . . well, there’s a lot to be said in economics, economic policy and finance, for simply telling the truth. It doesn’t have to an anarchist’s jubilee; it could be a domesday default, in which an equitable process re-writes claims en masse to conform to something close to reality, as we now know it, and without reference to contractual claims now proven unsustainable (and without pointless inquiry into whether they were false, by reason of fraud, beyond what determinations of equity require).

I daresay a domesday default would be more expeditious than funnelling money thru the broken shell of the Greek or Spanish governments to financial claim holders, who have no discernible economic function, and the precedent would inspire future bondholders to be, how shall we say, a bit more pro-active in their due diligence. We don’t have to zero out small bank depositers. That’s just economic sadism. Central banks can gift the masses just as effectively as they have gifted the banksters, if a domesday clean-slate would be improved as a starting point for renewed “normal” economic activity.

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Adrian Kelleher 08.30.12 at 6:54 pm

Getting away for a little while from economics may help illustrate to experts in the discipline why it is that others often find it so frustrating. In particular, it may show that there are reasons other than political or philosophical differences for objecting to the power of closed cabals of specialists.

So in this episode the hero, Franklyn Holzman, is an economist. Unfortunately, his efforts are largely frustrated by a spuriously exact methodology exhibiting the outer forms of science while in no way constrained by its rules or methods.

In 1981, Ronald Reagan announced that since 1970 the USSR had spend $300Bn more at contemporary prices on its armed forces than the USA. Holzman, a respected Soviet analyst of decades standing, took the administration to task on its assessments. He succeeded in significantly altering the picture the administration presented of overwhelming Soviet superiority in central Europe.

But there were elements of the analysis originating within the Department of Defense that were beyond his competence to contest. In fact they were beyond the competence of anyone outside the Pentagon to contest because they relied on numerical methodologies the US military had itself invented. This was a system called WEI/WUV which accorded numerical values to weapons.

WEI/WUV simply added together the numerical values of the constituent weapons to arrive at a numerical assessment of the value of units: platoons, companies and so on all the way up to corps and armies. The final assessment was made by the Congressional Budget Office, which I’m sure you’ll agree is a respected and non-partisan body.

What Holzman, the CBO and Congress itself found is that WEI/WUV wasn’t especially controversial — the there wasn’t any real debate among experts as to what the valuations for different weapons should be. Non-military critics and civilian overseers just had to trust the military’s judgement. As a result, as late as the spring of 1990 the CBO calculated that the USSR had a strategic superiority over NATO of 1.9-1 in central Europe. This figure was greater than the superiority of the USSR over Nazi Germany at the time of its devastating victories in the summer of 1943.

But as it turned out, not only were the WEI/WUV assessments of weapon values badly skewed, the entire system was open to obvious points of complaint. For instance, suppose you had a men armed with knives fighting men armed with rifles. You might decide a rifle was worth 10 knives or 20. It really didn’t matter, because it’s fairly obvious that the context would determine the relative usefulness of a knife or a rifle: a fight in a phone booth will be different from a fight on the Utah salt flats.

Likewise, when NATO and Warsaw pact equipment were placed in opposition to each other during the Gulf War of 1991, it was proven that an M-1 Abrams wasn’t an incremental improvement over a Soviet T-72; it was massively superior because when the first shot confers a very high probability of success then the ability to see and shoot first becomes critical. By controlling the terms of engagement (specifically, by engaging at night time), a single M-1 might easily defeat a dozen or more enemy vehicles.

No civilians were able to make these complaints in the 1980s, however, because only the Pentagon possessed people expert in the WEI/WUV system. So WEI/WUV’s ultimate effect, and arguably its ultimate purpose, was to frustrate the consistently stated democratic objective of the US government to achieve parity in conventional military power with the USSR in central Europe. Instead, US military spending was massively greater than that required to meet congressional objectives.

Now I think the economists may empathise with Holzman in his situation. Certainly, any non-economist may do so. I could detail any number of analogous instances in economics from recent years.

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dsquared 08.30.12 at 7:05 pm

It really doesn’t make sense to be simultaneously calling for expansionary monetary policy and for a “domesday default”. And the good thing about having an economist’s approach to economic problems, rather than one which uses “parasites” as an analytical category, is that it tells you whether the claims you’re making make any sense. It also gives you a much better shot at knowing whether, for example, the USA is currently in recession or in recovery.

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JW Mason 08.30.12 at 7:24 pm

I don’t understand what Dsquared is arguing.

It is true that any reduction in debts involves an equal reduction in the value of financial assets (“savings”). This is not in itself an argument against policies to encourage or require debt writedowns, any more than the fact that some people would face higher taxes is an argument against policies to make the tax structure more progressive.

It is true that if *all* financial claims were wiped out (for instance by a sustained period of high inflation), that would be very destructive. I think we can agree that the costs of a such a “strong Jubilee” would outweigh the benefits, and that no one is calling for that.

But what about partial writedowns? Note that some debt is always being written down, through defaults of various sorts. US commercial banks, according to the Fed,are currently writing off about 1 percent of their stock of debt annually, well above the historic rates, but down from a rate of 3 percent in 2009. Suppose we understood a “weak Jubilee” as policies that would significantly raise those rates, for instance by relaxing bankruptcy rules.

Dsquared — correct me if I’m wrong! — is saying that no such policy could be welfare-improving, either for debtors or of society in general. Interest rates would rise by at least as much as the chargeoff, so that net debt service payments would remain the same or increase. There could be no net redistribution from creditors to debtors because … well, I’m not sure why, but there could not or should not be any. Or perhaps he would say that you could achieve some redistribution tis way, but it would be safer and more efficient to achieve the same end via the tax system.

It’s still not clear to me, though, how we know that the current debt-enforcement mechanisms are not too favorable to creditors. Is this because stronger rights for creditors are always a good thing, or is there reason to think that we have got the current balance exactly right?

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JW Mason 08.30.12 at 7:30 pm

Or going back to Greece — and I loved that choose-your-own-adventure things as much as everyone else! — private creditors have substantially written down their loans to Greece, which is a kind of Jubilee. Has Greece benefited form this at all, or it would the country be better off if it had been compelled to continue servicing its debts in full?

I think if we agree that the writedowns were beneficial to Greece, and to Europe in general, then we’ve established the case for Jubilee in principle. We’re all Graeberians now, the disagreements are just about the details.

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Watson Ladd 08.30.12 at 7:31 pm

If a debtor has debts they cannot pay, they can declare bankruptcy. Greece can always default. But Greece hasn’t defaulted yet. I wonder what that says about the desirability of default.

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bob mcmanus 08.30.12 at 7:51 pm

I think we can agree that the costs of a such a “strong Jubilee” would outweigh the benefits, and that no one is calling for that.

Speak for yourself, capitalist running dog.

A strong Jubilee would certainly destroy a great deal of the “privatized” welfare assets, and thus the government(s) would then have to replace, for instance the defined contribution plans (IRAs, 401-ks, etc), with defined benefit government programs. In fact, I think a Jubilee is likely the only way we will ever get back to a commons that unconditionally guarantees the well-being of people, rather than leaving their retirements at the mercy of speculating banksters.

Same goes for health care, insurance, finance, utilities, transportation etc.

Neo-liberalism is about making the privatization of the commons too big to fail, and thus making democratic soc/ialism impossible, both as democracy and commons.

So/cialism will only come about coincident with a total Jubilee.

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Steve LaBonne 08.30.12 at 7:54 pm

I wonder what that says about the desirability of default.

Or alternatively, about whom their politicians are really working for.

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dsquared 08.30.12 at 8:09 pm

Suppose we understood a “weak Jubilee” as policies that would significantly raise those rates, for instance by relaxing bankruptcy rules.

Whoa, we started with a “biblical Jubilee” and now we’re talking about bankruptcy reform as if it were the same thing? Graeber wants to “wipe the slate clean” and make enough of a reduction in the total debt stock in the USA (or worldwide) to facilitate a wholesale change in social relations. He doesn’t have an explanation for how this wouldn’t be equivalent to a massive monetary contraction, he doesn’t explain who is going to make further credit available to replace the banks that have just gone under (presumably he doesn’t want any more credit extended) and when you ask him about how we are going to get long term projects financed after this Jubilee he tends to waffle. God knows, if you ask him what sort of transitional arrangements might be necessary and how we all avoid total economic collapse while the new order is being brought in you’re not going to get an answer.

I think you’ve got this the wrong way round JW. It’s not doing any favours to Graeber to pretend that the conclusion of D5K was meant to be a mild adjustment of bankruptcy rates. He wants to get rid of debt as it’s currently understood. He thinks that favourable economic consequences (where this might have a deeper, more anthropological, special, human meaning, rather than simply “more outputs for the same amount of inputs”) would ensure from this. He isn’t very good on the details.

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SamChevre 08.30.12 at 8:42 pm

Re: Greece

It seems that “bondholders/parasites” is a bad name for a class that could also be described as “retired workers”. The basic argument is how the proceeds of the current Greek economy shoudl be divided among Greek workers, Greek retirees, and German retirees; the fact that the German retirees’ claims are technically bonds rather than direct government payments seems to me a distinction without a difference.

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JW Mason 08.30.12 at 9:09 pm

Whoa, we started with a “biblical Jubilee” and now we’re talking about bankruptcy reform as if it were the same thing?

Well, they are two points on a continuum.

I guess my concern is less with Graeber’s specific political proposals — which as I recall them are fairly vague — and more with whether his general perspective contributes any thing to a viable politics. I also believe that moderate programs tend to benefit from having maximal versions in circulation. So it seems to me that if you see any value in thinking about political conflicts between debtors and creditors then you can take lots of useful stuff from Debt without having to accept the whole package.

The question really comes down to, are debtors and creditors useful political categories. Or is SmaChevre right that

“bondholders/parasites” is a bad name for a class that could also be described as “retired workers”

I am inclined to think the answer is Yes, it can be useful to talk about a systematic conflict between debtors and creditors. There are smart people I respect (like Doug Henwood, and you, I guess, for that matter) who think it’s No. Maybe you all are right and I’m wrong, maybe the politics of debt is just a distraction from the fundamental conflict between workers and owners. But I don’t think this can be settled a priori, and I don’t think it’s a mistake to explore the question.

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JW Mason 08.30.12 at 9:10 pm

(I mean I think SamChevre is wrong — owners of financial assets are not reducible to retired workers.)

107

Watson Ladd 08.30.12 at 9:24 pm

Don’t forget German banks: A Greek default could leave many Eurozone banks short of capital to meet Basel II requirements.

As for debtor v. creditor, workers v. capitalists is better. An owner of corporate bonds is (cue MM theorem, Fisher separation) a capitalist and a creditor, as is a worker with net savings. A worker with net borrowing is a debtor, and a capitalist with stocks a debtor, as he gains from inflation by virtue of having assets, not nominal cash flows. Yet, somehow I doubt that this debtor/creditor alignment prevents the workers from having common cause against both sets of bosses.

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SamChevre 08.30.12 at 9:47 pm

Clarifying: I think that analyzing things in terms of creditors and debtors can be very helpful. What I do not think is helpful is analyzing debtors vs bondholder creditors, without including the very large class of non-bondholder creditors.

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Alex 08.30.12 at 10:08 pm

And I am accepting that it has consequences for depositors. I’m not convinced those consequences are any worse than the consequences of the status quo is all.

Well, one consequence would be that your wages aren’t there any more (presuming you don’t get paid and conduct business purely cash in hand). This suddenly happening to several hundred million workers would, I think, be quite the event. I know it would be quite problematic for me, especially if I wasn’t allowed to borrow…

But what about partial writedowns? Note that some debt is always being written down, through defaults of various sorts.

[snip]

Dsquared—correct me if I’m wrong!—is saying that no such policy could be welfare-improving, either for debtors or of society in general. Interest rates would rise by at least as much as the chargeoff, so that net debt service payments would remain the same or increase.

I am not aware he has ever said this. He has certainly gone on the record supporting both bankruptcy and inflation as means of adjusting impossible nominal claims in general, and cramdown in the specific case of the US housing market. In fact, within this thread, he has argued that non-recourse mortgages are an example of an institution that writes off unpayable debts and therefore a good thing. In general, he is strongly in favour of renegotiating economic contracts that have become unrealistic – and he said this on his blog before he stupidly decided to hide it.

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Phil 08.30.12 at 10:26 pm

I also believe that moderate programs tend to benefit from having maximal versions in circulation.

There’s minimalist/maximalist, and then there’s utopian/practical – and the latter is a lot harder to bring off. Min/max is having hairy people in the street saying “Expropriate The Expropriators!” and smooth people in the boardroom saying “our members would like another 2% please, and they respectfully beg leave to suggest that the shareholders can lump it”. That I can understand. What’s going on wrt the ‘jubilee’ argument seems more like smooth people saying “let’s consider the possibility of (talking in terms of (it being a real possibility to (expand the horizon of politics to include (the making of demands such as (End All Debt Now!)))))”, and hairy people being left with the job of unpacking all those brackets and getting some demands out of them.

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Mike Beggs 08.30.12 at 10:32 pm

First, Crooked Timber, your comments threads are the envy of the internet.

JW Mason (#61) : I really do think we are on the same page in general, if not about what Graeber’s book brings to the table.

I agree about the distinction between logical and historical order, which I think I made in my review. Where I would differ from what you put here is that I think ‘logical order’ is about the order of presentation of a model of a system, whereas you seem to be saying that it has implications for the system itself. That is, you can’t describe a complicated system all at once, you have to start somewhere and build out to the rest. I think it’s quite possible to start from different starting points and reach more or less the same picture. No doubt the starting point makes a difference in how the whole is framed, so one or another might be preferable on ideological grounds.

To use a dubious mechanical example – if we were describing a car and how it works, you might start from the engine and internal combustion, or you might start from the wheels. Eventually you’d have to get to both. But it doesn’t seem that if you start from the engine you’re committed to an engine theory of cars, and necessarily at war with the wheel theorists.

You and Graeber may be arguing that starting from debt in a vision of money is ideologically preferable to starting from exchange, that it puts the important political issues more in the centre of the frame. I would disagree, but I don’t think on that grounds it makes starting from debt wrong – ultimately we could get to the same place from either side. I don’t think starting from exchange necessarily means a conservative theory of money – it’s where the neoclassicals start, sure, but it’s also where Marx starts.

Having said all this, I do think starting a presentation about money (and what it does in capitalism) from exchange makes more intuitive sense than starting from debt. (And this is not necessarily to start from a barter model.) Graeber himself says the difference between an obligation and a debt is that the latter is quantified in terms of money. (p. 21) What meaning does this quantity have unless money is also already being used to value other things? Debts are denominated in the same money used in exchange. Both creditors and debtors make their decisions about the size of debt contracts they will enter into based on expected future monetary flows from the sale of goods or services, including labour. So it seems to me easier to start the explanation from a hypothetical world of exchange without debt, and then introduce debt, than to do it the other way around.

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Mike Beggs 08.30.12 at 10:33 pm

Terence (#65): Thanks a lot!

113

Phil 08.30.12 at 10:36 pm

It seems to me that we can only talk in terms of a conflict between debtors and creditors to the extent that those two groups have distinct and conflicting interests – something that’s only trivially true. (It’s in my bank’s interest for me to take out a loan and repay it with interest; it’s not in their interest for me to go broke.) It also seems to me that a large part of what went wrong in the run-up to 2007/8 was precisely the creation of a situation in which nobody knew who owed what to whom, or quite how bad it would be if anyone defaulted.

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Mike Beggs 08.30.12 at 10:50 pm

JW Mason (#88): I’m surprised to be read as wanting to uphold ‘money as a veil’ or monetary neutrality. But you’re not the only person to have read me that way, so I must have explained badly.

This was the whole point of my insistence on money as something that circulates (even if not physically), as against Graeber’s metaphor of a ruler. A ruler isn’t responsible for the length of what it measures, whereas it takes the actual circulation of money to create the system of prices it measures.

My position is that money is absolutely necessary for a complex system of relative prices. Barter can’t do it without some de facto monetary standard, in which case it’s already a monetary economy. And with money, an exchange system is going to be critically different from barter: the possibility of hoarding/dishoarding and the creation of new money and credit makes possible unemployment and inflation. Money is the original sin of commodity exchange – can’t live with it, can’t live without it, etc.

When I keep saying “states print money but not the price lists” I am not at all saying, as you put it, “that relative prices can be analyzed without considering monetary factors”. Rather, I’m saying that the state doesn’t control the monetary factors just because it prints the money. This is something that I think you agree with, from what I have read from your blog – e.g. when you talk about Hasan Comert’s dissertation on ‘financial innovation and the declining effectiveness of US monetary policy”.

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rootless_e 08.30.12 at 10:51 pm

Mike Beggs writes:

My own favourite flavour of economic analysis happens to be the modern Marxian/post-Keynesian tradition.

But in his review, he claims to refute chartalism as follows:

The mint can print any numbers on its bills and coins, but cannot decide what those numbers refer to. That is determined by countless price-setting decisions by mainly private firms, reacting strategically to the structure of costs and demand they face, in competition with other firms.

That’s a flat out religious assertion of neoclassical doctrine (and wrong, of course).

For people like me who think Marx was infected by Ricardo and imported Ricardo’s wordview into his work, that’s not too surprising, but I’d be interested to know how Beggs justifies this faith in the capitalist market value setting as “Marxian”. Certainly Keynes would not have accepted that theory as self-evident.

http://krebscycle.tumblr.com/post/30459002952/oil-economists-and-chartalism

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Watson Ladd 08.30.12 at 11:07 pm

But is Graeber a chartist? Whatever Nietzschean story of debt he tells, ultimately Graeber is not interested in government spending policy to preserve a fundamentally capitalist system, but something more radical. It also doesn’t seem to me that chartists disagree that relative prices are not changed by monetary policy, even if subsidies and taxes distort prices.

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dsquared 08.30.12 at 11:20 pm

Don’t forget German banks: A Greek default could leave many Eurozone banks short of capital to meet Basel II requirements.

Not true. (Presuming you mean Basel 3). Bank creditors wrote down their GGBs by 75% already. A Greek default is worth avoiding for all manner of reasons, but not that one.

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rootless_e 08.30.12 at 11:20 pm

The obvious example is oil – not the least important commodity. Let the US government announce it is not committed to military defense of Saudi Arabia and see what happens to those countless price setting decisions of competitive firms. What Beggs does in his review is to agree that the state has a big role and then, having graciously told the kook that there is some merit to his idea idea, dismiss it as irrelevant.

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dsquared 08.30.12 at 11:26 pm

Dsquared—correct me if I’m wrong!—is saying that no such policy could be welfare-improving, either for debtors or of society in general. Interest rates would rise by at least as much as the chargeoff, so that net debt service payments would remain the same or increase.

There are loads of such policies that could be right, although nearly all of the workable ones would involve an adjustment of real values via the price level rather than messing around with fixed nominal-terms contracts (Keynes’ big insight was the importance of fixed nominal-terms contracts). To get to a workable policy though, you would have to do a lot of hard yards with institutional arrangements. And worse, the institutional arrangements would be well-documented and currently available, so broad generalisations wouldn’t be able to do the work of specific chapter and verse, and you might find a lot of people contradicting you. And even worse, there are still enough sensible institutionalist economists left, so in your quest for the right debt policy you’d still have to be dealing with a lot of people who don’t agree with you about the importance of ancient Sumeria.

I also don’t agree that closing my blog was a bad idea, but that may be for another post …

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dsquared 08.30.12 at 11:33 pm

That’s a flat out religious assertion of neoclassical doctrine (and wrong, of course).

btw, it absolutely isn’t. Even Paul Davidson wouldn’t disagree with the quoted passage in #115 (he believes that prices & incomes policy is possible, but not that it can be simply carried out as a part of monetary policy. I don’t know of anyone who thinks that a monetary authority can set the real value of its currency by fiat, and this would be a wildly counterfactual assumption so I don’t think anyone does).

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rootless_e 08.30.12 at 11:38 pm

Oh please, nobody argued that a monetary authority could set the real value of its currency by fiat. But Beggs argued that the value is set by the price setting activities of competitive firms. And that is clearly false. You cannot make the roles of states disappear by going “oh yes, they have and effect” and then dismissing their effect as inconsequential.

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dsquared 08.30.12 at 11:42 pm

But Beggs argued that the value is set by the price setting activities of competitive firms

Not quite. To repeat your quoted passage:

That is determined by countless price-setting decisions by mainly private firms, reacting strategically to the structure of costs and demand they face, in competition with other firms.

Which seems to me about right for any economy in which the majority of final consumption goods are produced by private sector firms in broadly monopolitistic-competitive markets. I can’t think of any major economy that doesn’t fit this description.

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rootless_e 08.30.12 at 11:49 pm

If the US government were to announce it had no strategic interest in supporting the continued rule of the House of Saud, what do you think would happen to the price of oil and to all the goods “produced by private sector firms … ” either from oil or depending on oil? And what about the value of the dollar?

Or consider the value of the yuan? Are you claiming that it is determined or even mostly determined by the price setting of private companies?

By asserting, as an axiom, that the value of a currency is “determined by countless price-setting decisions by mainly private firms” (on the basis of no evidence), one can rhetorically dismiss the role of states from economic analysis, but that only makes the analysis worthless.

Clearly there is some combination of state operation and non-state firm price setting, but once you admit that all sorts of political consequences follow.

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rootless_e 08.30.12 at 11:57 pm

What is infuriating about Graeber is that he upsets that great debate that ranges all the way from Hayek to Mitterand by opening a door and walking outside of the stuffy little room.

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Edwin Adam 08.31.12 at 12:20 am

I have been following the various responses to Graeber’s book since it was first released. Most of these responses, including those on this website, have arguably not been especially insightful, causing me to wonder whether the character of the entire discussion reflects less the quality of Graeber’s work and more the difficulty of coming to terms with the fact that most of the social scientific scholarship produced in the last half century has failed to account for reality as it really is. Most of the criticism of Graeber’s answers to big questions amounts simply to an admission of our own embarrassment over having consistently asked the wrong big questions.

Most of these reviews, moreover, reflect reviewers’ lack of familiarity with the relevant source material or even with historical material more generally. In this regard, I am uncertain what precisely Beggs wants out of a macro-history of debt. Does he really think that comprehensive quantitative analysis of Ancient Sumer is presently possible? A quick glance at the literature will reveal otherwise. At the present state, historians cannot agree upon, e.g., international trade volumes during the nineteenth century (A.D.).

And even if we could conduct the sort of Braudelian cliometric analysis that Beggs advocates, we still would need to consider the psychological and anthropological matters on which Graeber tends to focus. The psychology of the debtor has real historical consequences that cannot be reduced to movements of, e.g., prices and profit rates, even if these movements become, as time progresses, increasingly coordinated and globalized.

Now, there is obviously a lot that can be debated in Graeber’s work, but, alas, we are actually going to need to perform or at least to engage with empirical research in order to form pertinent arguments. Suppose you’re unconvinced by the commodity money/ credit money macro-cycles argument, or you don’t believe there’s any correlation between commodity money and systems of violence — fine, go to the literature (or to the archaeological site, etc.) and construct a positive argument, and we’ll read it.

Beggs writes that, ‘[t]he imaginary barter economy without money but somehow still with a highly developed division of labor is a counterfactual, a tool of abstraction, which in fact the textbooks are often careful not to describe as actual history.’ Again, if you consult the relevant literature, you’ll actually find economists attempting to conduct economic history and attempting to establish the historical existence of ‘mere counterfactuals’ like the barter economy as well as the profit maximization vis-a-vis interest rates. See Michael Hudson’s work on Ancient Mesopotamia, which Graeber cites (online: http://michael-hudson.com/2000/03/how-interest-rates-were-set-2500-bc-1000-ad/).

While we are at it, we should all go back and reread Michael Hudson’s tremendously clear, insightful, and indeed entertaining work Trade, Development, and Foreign Debt. Hudson does a great job of relating economic thought to its historical circumstance and ‘material base,’ if you want, and Graeber is, in many ways, attempting to build upon these insights and to incorporate a wealth of anthropological data. And, yes, thought sometimes is reflected in anecdotes, like, for instance, accounts of what people were thinking in various circumstances.

We have to deal with the reality of political economics as well as with the reality of political economic mythology, culture, and ideology. Graeber’s analysis tends toward the latter; that’s fine, since neither issue is reducible to the other. If you want the former, then go ahead — write it already!

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Dan Kervick 08.31.12 at 1:12 am

I also find Graeber’s book quite unconvincing, although it is full of interesting bits and pieces. Graeber’s anarchist philosophical and dispositional biases drag the whole project down.

Perhaps because he is an anarchist, Graeber seems to regard the whole field of law as either suspect or dirty or not worthy of his interest. But it seems to me that law is the domain in which the phenomenon of debt and its conceptual underpinnings primarily live. Debt is a social relation determined by social rules. These rules are articulated and modified and clarified and adjudicated as the society evolves. Almost half of the law deals with debt and obligation.

Graeber’s whole notion that debt is some kind of bastard child you get when you combine quantification with a concept of obligation just seems way off to me. Debts can be and usually are quantified, but that is not what is fundamental to the concept.

It also just seems wrong to me to say that the existence of debt relations depends on the existence of money – which is an idea with which Graeber begins. Whether or not barter exchange ever exited in any significant degree in any historically actual societies, we can make perfect sense of the concept of debt in a barter framework. Any exchange contract in which one party to the exchange delivers on their half of the contract before the other party delivers their half will result in a debt relation. If you and I conclude an agreement according to which I trade you a bunch of seeds now for some corn to be delivered to me at harvest time, then once I have delivered the seeds, you have a debt. Your debt is not discharged until you have delivered the corn.

You can also make sense of the concept of interest in a barter framework. If you and I make a contract in which I am to give you 100 apples now and you are to give me 120 apples in return two months for now, then you have a debt to me, and the debt involves the payment of interest.

Debts can also exist in social orders in which people can come to be bound by obligations that do not result from contracts – even social orders in which people are bound by obligations to the whole society.

It seems to me Graeber would have done well to devote some sustained attention to the history of the jurisprudence of contract law, in both a common law and positive law framework. That would have introduced some much needed conceptual clarity to a study that chases after numerous hares in many directions, but seems to miss the core of the phenomenon allegedly under study.

Economists study the ramifications of debts and their impacts on production and distribution of goods and services. But they don’t have a lot to say about the nature of debt. It’s not really the economics that is the big problem with the book.

And finally, it seems to me that debt is a broad social phenomenon independent of capitalism; so while a social critique of capitalism is certainly relevant in a broad study of the institution of debt, I don’t think it gets to the bottom of the problem.

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Watson Ladd 08.31.12 at 1:22 am

Why should we give a damn about the calculation of interest in Assyria? We know full well that todays interest rates are actuarial and economic in nature, and in fact a great deal about how those calculations come about. That such setting is unnatural is uninteresting: agriculture and having teeth at 50 is unnatural. Lest we forget, nature is
always the language of reaction, be it Catholic or anarchistic.

Human behaviour has changed with the advent of capitalism. And that took violence, great amounts. Of course, some of that violence was the Civil War, with Abraham Lincoln and Salmon P. Chase destroying the oldest institution in human history. (although it still exists in Mauritania. They need a Lincoln, not a Graeber) This isn’t the history of the preceding eras of humanity. By seeing in the dollar nothing more then a symbol of violence, Graeber ignores the way capitalism really is the deformed offspring of a moment of freedom.

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rootless_e 08.31.12 at 1:29 am

” We know full well that todays interest rates are actuarial and economic in nature, and in fact a great deal about how those calculations come about.”

And here I’d thought that the political decisions of the Federal Reserve board had produced low interest rates!

129

Watson Ladd 08.31.12 at 1:33 am

Low rates for risk-free borrowers, but most borrowers are not Uncle Sam. However, those low Fed Funds rates have reduced mortgage rates.

130

salacious 08.31.12 at 2:17 am

“Clearly there is some combination of state operation and non-state firm price setting, but once you admit that all sorts of political consequences follow.”

And conversely, once you admit it all sorts of *non-political* consequences also flow. Which, I take it, is Mike Beggs point…

131

Andrew Bossie 08.31.12 at 2:22 am

So I read this thread before I read the Beggs peice which was interesting becuase it seems like the basic point being made by the article kind of got lost here. I think the debate between JWM and Beggs is a sideshow and I also think it’s sort of pointless in a way since whether you are arguing logically or historically or whatever with the development of money in any, say, Money and Banking class you wind up by the end of the semester with a very clear role of government in a monetary system.

I mean, the point that money didn’t spring from some kind of Hobbeseian social contract among individuals is useful and refreshing in an age where “markets” and “governments” are considered diametrically opposed. Anyway, I’m probably just restating what you guys seemed to come to agreement on.

But I still think the basic point Beggs is making about the applicability of Debt is important. I will say, and I think it parallels the basic critique that a lot of economist types had of the book. Graeber’s analysis is not useful to us after, say, 1971 (and I think his refusal to treat the century or two before 1971 as a transitional period in one of his thousand year cycles is telling). In the large swings that Graeber describes hard money is a tool of the state and as states and empires dissolve credit money takes it’s place because the hard money apparatus is no longer there.

I don’t see how this squares with the fact that nation states have had to be unusually strong to support the kind of “official” soft money credit system we have now. Within Graeber’s argument this situation is historically unique. Which is why I guess that’s why suddenly in the last chapter we stop talking about a “peoples history of debt” carried through to 2008 but rather start talking about a tenuous connection between finance and military bases.

Also, in the libertarian tip, the parable or whatever Graeber tells about the English shop keeper and credit struck me as an argument for free banking.

One last thing: There is a lot of talk about jubilee but I feel like no one really pays attention to the subtleties to it and honestly I think that if there was any kind of useful contemporary useful stuff in Debt it was the nuance of the jubilee discussion. First, for jubilee to be feasible you have to have a sovereign with a senior claim on your body above that of your payday lender. The call for jubilee is incredibly passive and authoritarian.

There is buried in Debt about two or three paragraphs when Graeber points out that in a democracy or a republic there was no such thing as jubilee. Instead when the debt burden got out of hand there were plebeian uprisings and a new leaders were installed and that was the mechanism for righting the problem of too much debt. Anyway, I don’t know why that wasn’t the take away from the book.

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rootless_e 08.31.12 at 2:30 am

I must be misinterpreting this:
[value] is determined by countless price-setting decisions by mainly private firms, reacting strategically to the structure of costs and demand they face, in competition with other firms.

But I don’t see how. Begg seems to be insisting, as orthodoxy holds, that the state is not a player in this process.

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salacious 08.31.12 at 2:38 am

“reacting strategically to the structure of costs and demand they face,”

That structure is powerfully influenced by government monetary, fiscal, regulatory, etc. policy. So, i.e., fiscal stimulus will increase demand, which will cause firms to produce more, which will cause them to employ more labor, which will yadda yadda yadda.

But influence does not equal total control. The government cannot set the price of oil at $5 dollars a barrel, not without explicit or implicit subsidies.

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Watson Ladd 08.31.12 at 2:49 am

Sure: if the state adjusts the tax code so oil producers aren’t credited depreciation of what is in the ground, oil prices will, ceteris paribus, rise. But what’s at stake is how that regulatory role relates to the monetary one. By saying all torts and taxes will be denoted in dollars, the state is doing something to favor one form of money over another. Yet, that doesn’t give the state the ability to define prices in any fine sense, except through the regulatory power.

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Seth Ackerman 08.31.12 at 2:56 am

@rootless (#123): So I take it Beggs is wrong when he says prices are the outcome of private price-setting decisions, because those decisions are always influenced in various ways by state policy. In that case, presumably it would also be wrong to say that state policy decisions are determined by the state and its personnel, since those decisions are always “influenced” by the outcomes of decentralized private economic behavior. Nothing is responsible for anything.

The fact is that if you want to understand the value of money and how it changes, you have to understand the workings of a decentralized system of private price-setting — *even though* that system (as nobody ever denied) is always affected by state policy and lots of other things. There is a massive range of outcomes that the state would like the achieve but cannot, because it doesn’t control that decentralized system. At most it only influences it.

If Barack Obama and the Joint Chiefs decided tomorrow that they wanted the price of oil to rise (or fall) by 10%, they just would not be able to do it. Unless fortuitously a lot of people outside the US govt happened to already agree with them. And oil, however important, makes up less than 5% of production costs in the US economy.

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Doctor Memory 08.31.12 at 3:18 am

(at the risk of continuing along my own little lacuna of a discussion…)

Steve LaBonne: citing the brief success (followed, importantly, by crashing failure) of a car marque sold only in the North American markets, at above-market prices to a generally affluent clientele is really exactly the opposite of compelling evidence that people in general “hate haggling.”

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rootless_e 08.31.12 at 3:25 am

Actually the US and EU governments did reverse gasoline price increases via essentially threats to open the strategic reserves.

If you want to understand oil prices and dollar values, then stating that “mainly” the decentralized decisions of firms “determine” such things is either incorrect or astoundingly imprecise language. The existence of the Saudi state depends on US military support and is one of the major shapers of the market. That support itself is not free in either blood or money and has a huge effect on the development of the US economy ( increasing power of oil and arms industries and their financial partners, creating market impediments for solar and wind, making imports cheaper by holding down diesel prices etc. etc. ). What I keep seeing here is an effort to wave all that away by announcing that it doesn’t explain everything.

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salacious 08.31.12 at 3:39 am

1. If anything, that example just bolsters Beggs’ point.
2. Is this empirically true? For it to be true that U.S. military support plays a large role in oil prices, then the counterfactual would have to be that in the absence of that military support, Saudi oil would not be on the (commoditized, remember) market. Not at all clear that this would be the case.

The Saudi example worked well during the cold war, but now that the international oil market is pretty well globalized, not so much. (Better modern oil example might be Russia vis a vis eastern europe, where geography means that those net-importer countries have less easy access to oil at the global commoditized spot price and are thus more vulnerable to non-economic(i.e., purely political) Russian decision making.)

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Peter T 08.31.12 at 4:30 am

First – Phil@70 – yes I meant genetic. And still not sure it’s a fallacy in this area.

I take Mike’s point at 111 about different approaches, but I don’t think it captures the merits of the two approaches to money. It was remarked upthread that definitions of money slide about between treating it as map and as territory. Money as means of exchange carries with it the implication that the money is the territory – we have the image of two people, each with real goods, swapping them via money, so money and goods are equivalent. Money as debt draws attention to the potential for mismatch between the money and the goods – money as map. My debts may have as collateral goods which do not exist, or which are worth less than the debt. As we currently know to our cost. And, of course, if the map and the territory do not coincide, yet the map has various legal and social standings, bringing the two into adjustment is a political process, not a question of general prices or value at all.

140

magistra 08.31.12 at 5:40 am

Doctor Memory@135: some empirical evidence for people in the Westernised world hating haggling is the lack of a “make me an offer” button on Amazon (or the vast majority of other retail sites). Amazon don’t have a system in which they tell you that an item is worth fifty pounds, but where if you negotiate with them successfully enough you get it for twenty pounds. They have a system in which they tell you that an item is worth fifty pounds, but they will sell it to everyone for twenty pounds. Universal discounting is almost the opposite of haggling. Nor is haggling common in UK/US shops that I’m aware of. And where are the haggling technique comparison websites to go with the price comparison websites?

Haggling is a time-expensive process for both seller and buyer: it’s therefore only worth it for high-value items unless you really, really like arguing for the sake of it. People generally tend to show inertia about changes that would make minor financial benefits: they don’t move out of savings accounts with poor rates of interests, they’re not always swapping energy suppliers, insurance providers etc. So the argument that there is a huge latent demand for haggling in the west that is not being satisfied by anything other than e-Bay and car boot sales/yard sales strikes me as needing some evidence in itself.

141

weareastrangemonkey 08.31.12 at 5:41 am

Interesting that Begg should say this. This is very similar to a 2002 paper in the AER called “Evil is the Root of All Money” by Kiyotaki and Moore. Which is a debt based theory of money. But not the first cut at a debt based theory of money. I believe Paul Samuelson’s 1958 JPE article “An exact consumption-loan model of interest with or without the social contrivance of money” could also be described as a debt based theory of money.

This of course doesn’t imply that economists do not think that exchange is an important function of money. I am sure that most economists would reach for the exchange story if asked for one. If pressed as to whether this was the or only story I do not think they would be willing to stake a lot on it. I also believe many would now reach for Samuelson’s story or even the Kiyotaki-Moore story.

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weareastrangemonkey 08.31.12 at 5:46 am

I meant to have the following quote at the top of post 140.

“And that is Graeber’s explanation for the rise of capitalism. Evil: the root of all money.”

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engels 08.31.12 at 6:07 am

So the argument that there is a huge latent demand for haggling in the west that is not being satisfied by anything other than e-Bay and car boot sales/yard sales strikes me as needing some evidence in itself.

Western tourists in Thailand? Arguing for 10 minutes over whether to pay 75p or £1 for a Dulce & Gabinna T-shirt is not unheard of. I’ve a feeling the locals don’t do this.

144

ajay 08.31.12 at 8:45 am

143: the only people who ever haggle in Thailand are Western tourists? I hope that’s not what you mean.

145

Chris Bertram 08.31.12 at 9:07 am

dsquared’s “debt as the solution to a problem” line is leaving me feeling a little bit unsatisfied, notwithstanding that he’s right about the naivety of Graeber’s plans for apocalyptic Jubilee. The source of my niggle is that this doesn’t do justice to the other side of the issue, namely, debt-as-a-problem, and specifically debt as a problem in creating, sustaining and legimating (through its moral force) social relations of unfreedom, domination and dependency. Graeber is actually rather good on this (at least descriptively). Bankruptcy law is one attempt to address the issue, but doesn’t really solve it (and haven’t US lawmakers made it impossible for student debt?). Jubilee might explode the system in a catastrophic way, but if we are interested in more equal society and one in which people don’t get themselves into relations of subjection to others, we’ve got to find a way of releasing many people (and countries) from the burden of obligation they’re currently under, for freedom-related (and not just for welfare) reasons. (Cf also the Bertram/Robin/Gourevitch stuff on workplace domination: the fact that people got into the hole they’re in by agreement, doesn’t silence all the worries about freedom, subjection etc.)

146

Phil 08.31.12 at 9:20 am

I think what dsquared is pointing to is that jubilee is a utopian demand, not a maximalist one – not “push it till it breaks” (which immediately suggests a range of tactical options involving pushing it less hard) but “break it and see what happens”.

(Some debts certainly should be repudiated, but that’s a statement about some debts, not about Debt.)

147

ajay 08.31.12 at 10:17 am

145: and while still allowing people to get themselves into debt if they want to. Being able to borrow money, or owe people money for services already delivered, is really useful and emphatically does not mean that you are in a relationship of subjection with your creditor. Obligation doesn’t equal subjection (you have an obligation to look after your kids).

148

engels 08.31.12 at 10:29 am

I hope that’s not what you mean.

It’s not what I mean.

149

ajay 08.31.12 at 10:40 am

What do you mean? Because the locals in Thailand haggle like anything.

150

engels 08.31.12 at 11:10 am

Read the comment I was jokingly responding to (‘huge latent demand for haggling in the West’) and read my comment and try to figure it out, Ajay. It’s not really not that hard. If you still can’t do it, come back and I might have Roger Red Hat books you can borrow.

151

Chris Bertram 08.31.12 at 11:23 am

ajay: the claim about debt and subjection is not a semantic one, but a claim that relations of indebtedness very often turn into relations of subjection. As a sociological and historical generalization that doesn’t seem to be something that anyone could object to (and, as I said, we’ve even developed institutions, such as bankruptcy, that recognize and respond to the problem).

152

Neville Morley 08.31.12 at 11:49 am

The classical Greek view was that any sort of debt was a form of subjection, equivalent to other kinds of dependence on the slippery slope towards slavery (whether actual or metaphorical); unavoidable in many circumstances, but never desirable, and the ideal was to have lots of people owing things to you so that in extremis (e.g. your harvest has just failed) you can make it through the crisis without leaving yourself dependent on the local Big Man or even on your brother-in-law. Obviously this is ideology rather than invariable practice; clearly lots of people did run up debts, and the law in Athens forbidding debt bondage worked against potential debtors as much as potential creditors.

Ancient economic historians have traditionally regarded this as evidence of primitive, non-economic mentality, i.e. resistance to modern ideas of productive credit. One of the interesting questions (for me) raised by Graeber’s book is how far it’s actually a non-primitive reflection of an already market-dominated society, in which normal social give-and-take has become monetised and hence becomes a threat (and an opportunity, for the better off).

153

rootless_e 08.31.12 at 12:17 pm

It’s peculiar that this is what passes for left of center economics – a vigorous defense of corporate friendly bankruptcy laws and efforts to relegate any notion of the influence of state power on economics to footnotes.

154

ajay 08.31.12 at 12:54 pm

Read the comment I was jokingly responding to (‘huge latent demand for haggling in the West’) and read my comment and try to figure it out, Ajay. It’s not really not that hard. If you still can’t do it, come back and I might have Roger Red Hat books you can borrow.

Funny fucker, aren’t you.

155

Watson Ladd 08.31.12 at 1:07 pm

Chris, the US has the friendliest bankruptcy laws in the West. If people want to get out of an underwater mortgage with lots of credit card debt they will never pay off, they can do so very easily. They will lose some assets in doing so, but it isn’t catastrophic. Subjection, in the sense that one is permanently controlled by ones creditors, doesn’t really happen, except with non-dischargeable debts.

What’s more debt is a symptom of spending greater then income. The fact that the US has responded to declining median wages by increased borrowing explains why so many people have debts: they seek to increase consumption.

rootless, of course the state is involved! The state has judges and bailiffs who enforce breach of contract. But that doesn’t mean the market is a creature of the state in the way a prison is.

156

rootless_e 08.31.12 at 1:14 pm

I should point out that Mitt Romney’s entire business career was based on an ability to walk away from debt. The legal system in which student loans are non-dischargable but dividend-recap debt and union contract obligations are optional, is apparently a fundamental property of commerce and cannot be questioned by rational people.

157

SamChevre 08.31.12 at 1:35 pm

Chris Bertram @ 151
debt as a problem in creating, sustaining and legimating (through its moral force) social relations of unfreedom, domination and dependency.

I think this captures my discomfort with Graeber’s analysis. As far as I can see, debts-denominated-in-money have this characteristic LESS than obligations not denominated in money. Paying taxes has LESS of a dominance/dependence component than working so many days a year for the local government.

158

Steve LaBonne 08.31.12 at 1:41 pm

Doctor Memory, Saturn’s success was not “brief” and it was eventually ended by lack of decent new product, not by failure of its sales model. There is plenty of research to show that people hate haggling for cars and do it only because they hate even more the idea of somebody else getting a much better deal than them if they don’t. I suspect this is true of haggling in general. It’s a deadweight loss that is entrenched in some cultures mainly because it presents just this kind of game-theoretic conundrum.

159

rootless_e 08.31.12 at 1:42 pm

Watson Ladd
http://www.startribune.com/investigators/95692619.html?refer=y

Compare this to the scheme by which a private equity firm can walk off from a captive corporation after paying itself a recap-dividend.

160

Watson Ladd 08.31.12 at 2:17 pm

rootless_e: No one who loans money to a company owned by a private equity firm is unaware of this. Investment banks don’t loan money to make a profit: they loan to build a relationship and sell deals, which makes a lot more money.

161

Rakesh 08.31.12 at 2:29 pm

It seems that Graeber’s ideas about the psychological and ideological effects of debt follow Maurice Godelier who gave this example:
Godelier in mind: “… the Marxist view was
that-and it was not proper to Marx-that a big part of ideology is a
presentation of exploitation as reciprocity. There was a very
fantastic idea discovered in the 19th century, that the pharaoh
deserved to be given your life and your work because he is a God; so
if you breathe, if you have water for your garden, it’s because of
him and of the rituals he was performing. So the language of
exchange, and debt, not exchange only, is the seed, the milieu of
caste and class formation. It’s not in the logic of direct violence
that you understand the violence of caste or class formations, but
it’s in the milieu of debt, personal and collective indebtedness. You
cannot understand the milieu of power and the process of its
crystallization without a view of unequal exchange and imaginary
reciprocity.”

http://www.umich.edu/~iinet/journal/vol1no2/deconstruct.html

Consider how Marx develops this idea.
The real trick is not the capitalist pays the just amount for labor power
rather than labor itself. If that’s all Marx had to say about “the trick”, then why
does he return to exploitation in chapters 23 and 24 of Capital.

The real trick is that the capitalist seems to advance wages or
variable capital and appears as the fount of life. The worker thus
appears to be indebted to the capitalist, so indebted that there is
no real injustice in having sold his labor power at discount. After
all the wage has been advanced, the worker is allowed to live before
the commodities are produced, much less sold. The capitalist appears
a benefactor to whom reciprocity (if not life) is owed. The Western
capitalist has in the eyes of everday man the mystical powers of the
Asiatic despot; so much for cheap criticisms of Marx’s Orientalism. The capitalist is
lauded for his ritualized asceticism and equanimity in the face of
risk.

But if the wage is not in fact advanced but only part of the value
that has already been appropriated and then allotted only on the
condition that labor gratis again be performed–and we can only see
this if we consider the impact on classes in the course of economic
reproduction–then the worker is in no debt to his putative
benefactor. Workers may be dependent on the capitalists,
but–and this is the crucial ideological point– the capitalists not their
benefactors.

But again for the individual worker the relation is not this, for the
wage he is paid may not be part of the appropriated value he himself
produced. The individual worker is not treated unjustly; his wage is
in fact advanced by the capitalist. The working class has a claim to
unjust treatment but the concept of justice cannot be stretched to
accommodate the unjust treatment of a class. There is indeed formal
but not substantive justice just as there is formal but not
substantive reciprocal exchange.

Having deflated somewhat the capitalist claim to justice, Marx does
not then go on to base his critique of capitalism on its injustice.

He does not patiently disentangle the substance of justice from its
juridical, case by case, slow frame film form to show that capitalism
can unequivocally shown to be unjust. He seeks other motivations for
working class demands now that he has disburdened the working class
of its apparent debt to the capitalist benefactors. Free of debt, the
working class is free of guilt, free therefore to pursue its life
affirming aims, even if they may be formally unjust.

Marx thought that there were two contradictory but self
consistent ways of looking at the wage transaction which the
transaction would not allow us to resolve, objectively. That is, the
classes’ perception are contradictory. And when
right meets right or one self consistent perspective meets another on
the same objective terrain, only force can decide.

162

rootless_e 08.31.12 at 2:48 pm

Watson Ladd

Even if that were true, it makes no difference. Why should the state violently enforce undischargeable student debt and demands of debt collectors who have nothing resembling a signed contract while facilitating the conveyance of funds from a corporation to a private equity investor? The gross injustice of this debt treatment is not a function of commerce and the famous pricing decisions of private firms, it’s a result of state power imbalances.

FWIW, not only are a large number of dividend recap investments made by unwilling suckers who are required by law to turn over their 401Ks to “professional investment managers” but ones that are not do result in lawsuits like the one that bondholders in Stage Stores and other Bain investments attempted. Oddly, when a bond investor in a company owned by a PE firm alleges a debt, deputies do not drag PE managers into jail. The market works SO mysteriously in a way that mimics what would happen if rich and powerful people were able to manipulate the state to defend their interests.

163

Watson Ladd 08.31.12 at 3:04 pm

rootless, if you cannot grasp the difference between an agent and a principal, or limited liability, are you even bothering to comment here? Of course we can complain about the injustice of nondischargeable debts, and impose restrictions on how debts can be sold. But this isn’t a politics against debt. Nor does it follow that the state creates the debt collector.

Alex Springer is just as protected by the law as the publisher of Jungle World. Yet neither one of them is in any way a product of the German state.

164

Rakesh 08.31.12 at 3:27 pm

I have a question. Why should cash currency be classified as a liability of the central bank?

165

rootless_e 08.31.12 at 3:35 pm

You want to pretend that a hugely complex system of corporate law is some kind of natural law. The question of when management of a corporation is operating correctly within the limits of limited liability and when it is engaged in unlawful conveyance is one that courts and legislators debate. The current US system, in which small business owners would go to jail for behaviors that are common practice for PE firms, is one that developed over 30 years of sustained lobbying from financial concerns through such instruments as the Law and Economics groups. You can see from the epidemic of mostly unsuccessful bondholder lawsuits that this process has arrived at a situation that is a surprise to many lenders. In addition, credit card debtors, lacking the Olin Foundation’s willingness to fly judges to seminars in St. Bart have not fared as well. That’s because of a political and moral process, not because of some fundamental property of economics. The law now puts a thumb on the scale to improve the profitability of debt collectors by taking away even the last dregs of a chain of custody of a debt so that wholesale debt aggregation is cheap, and then puts the armed might of the state in service of the aggregator.

166

William Timberman 08.31.12 at 4:27 pm

If you’ll pardon the sarcasm, it seems to me that a future generation of PhD economists — at least those who’ll have to go 50K dollars or more in debt to get that PhD — may come to have a much better understanding of money debt as bondage, and more sympathy for its victims, than the current generation does. This is especially likely for those who began their education in the U.S. after the recent reform of our bankruptcy laws.

167

Walt 08.31.12 at 4:42 pm

Rakesh, at this point it’s basically an accounting identity. If you hold cash, then it counts as an asset, but since it’s a financial asset, there has to be a corresponding liability somewhere in the world. So it’s treated as a liability of the central bank. This was more meaningful back when currency was backed by gold and you could redeem the money for gold, but now its just a matter of definition.

168

Mao Cheng Ji 08.31.12 at 4:50 pm

It seems to me, debt certainly can be a bondage, but not only that and not necessarily. Suppose they get rid of the debts, and instead implant a chip inside everyone’s skull, that makes you work, consume, and be happy. What are you going to do then, blame the computer chips?

169

bob mcmanus 08.31.12 at 4:59 pm

Speaking of Michael Hudson, mentioned above, whom I read instead of Graeber but is probably not as easy a target, he has a new book out at Amazon. The above is a Naked Capitalism link.

“The pace of Wall Street’s war against the 99% is quickening in preparation for the kill”

“The ground is being prepared for a neoliberal “cure”: cutting back pensions and health care, defaulting on pension promises to labor, and selling off the public sector, letting the new proprietors to put up tollbooths on everything from roads to schools. The new term of the moment is “rent extraction.”

The need for liberal political economists to stay at the extreme level of abstraction is quite literally killing and enslaving us.

170

Walt 08.31.12 at 5:04 pm

I guess the practical significance is that the only way for a central bank to remove currency from circulation is by selling assets, so normally a central bank holds assets equal to the currency in circulation. It doesn’t have to work that way — a government can remove currency from circulation through the taxing power — but that’s the way it currently works.

171

rootless_e 08.31.12 at 6:43 pm

Michael Hudson is an interesting scholar, but a worthless journalist. One cannot trust anything he writes about current events because he already knows how the story should be. For example
http://michael-hudson.com/2012/08/fireside-on-the-great-theft/

” The government could simply have closed down AIG, taking it over and said: We are saving all of your normal insurance policies, we are saving all of your normal business, but the gamblers we are just not paying. “

And, no. The government had no legal authority to do that until the passage of Dodd-Frank. Of course, the Government is able to act beyond legal authority, but the Bush administration had no interest in doing that for AIG. And the following sentence is
” But in that case, Goldman Sachs would not have been paid $18 billion dollars.”

which is also misleading because (a) GS already had seized much of that in collateral (b) they had hedges that would have paid, and (c) the biggest holders of AIG derivatives and the most intransigent were the French Banks, especially SG who threatened to put AIG into bankruptcy which would have had disastrous consequences. But Hudson has a simple story to tell.

or consider a couple of lines up
“The head of the Federal Deposit Insurance Corporation, Sheila Bair, said that she argued with the Obama administration saying that she could close down Citibank and save all of the insured depositors. She could have saved all of the basic banking functions. “

Well, here is Ms. Bair’s testimony

The absence of FDIC resolution powers for bank holding companies and their nonbank affiliates during the crisis posed insurmountable hurdles to our ability to respond to the financial difficulties of these large banking organizations through our traditional receivership process. While each of these bank holding companies had FDIC-insured depository institutions as subsidiaries, the FDIC’s receivership powers extended only to the insured institutions themselves. Had the FDIC been appointed receiver for these bank subsidiaries, the result surely would have been to trigger the failure of the holding company as well – which would have fallen under the jurisdiction of a Lehman-like commercial bankruptcy, and not an FDIC-managed receivership. Since the non-bank affiliates were not insured depository institutions, the FDIC had very little advance information about their structure, activities, and counterparty exposures, making it difficult to know what effect the failure of the holding company might have on other financial institutions and the financial markets. Under those limitations, if any of those institutions had been allowed to fail, the result could well have been a significant widening of the financial crisis. This was not a risk we were willing to take at the time.

http://www.fdic.gov/news/news/speeches/chairman/spjun2211.html

172

Agog 08.31.12 at 8:53 pm

Rootless_e:

Do you know that there are two Michael Hudsons writing prominently about finance? One of them is a journalist; the one cited by Graeber and by people in this thread is not.

173

Andarte 08.31.12 at 9:39 pm

Granted that any sort of a Jubilee is going to wipe out (some) savings, anyone have an idea of what the differences in savings rates and size of deposits are between capitalists, workers, and the burgeoning underclass?

174

rootless_e 08.31.12 at 9:45 pm

I did not know there were two Michael Hudson’s but the one I cite is the one cited here I believe.
http://michael-hudson.com/

175

Watson Ladd 08.31.12 at 9:45 pm

some savings? Every saving is a debt, except for capital. The most risk-free portions of everyone’s portfolio suddenly vanishing is going to be a very bad thing. Remember the debt ceiling debacle? Imagine that times ten.

176

Andarte 08.31.12 at 9:57 pm

Right, and depending on the type and scale of Jubilee, some savings (conceivably up to all savings) will be lost. What I’m asking is if anyone knows what the relative stake in the game would be different social classes, which I would think would be important to know before designing some kind of Jubilee program.

177

rootless_e 08.31.12 at 10:04 pm

The responses to Graeber seem to involve a lot of false dichotomies. Graeber nowhere insists that a Jubilee will zero out every child’s promised allowance. Why not assume he’s not necessarily insane and consider, for example, a jubilee that zeros student, credit card, and payday loans. Or all personal debt that has either been paid back plus 10% or more, or accrued more than 10% fines/fees.

178

bob mcmanus 08.31.12 at 10:08 pm

175: Uncomfortable for a while. Revolutionary, you might say. And yes, I think Graeber and Keen greatly underestimate the dislocations and restructuring necessary. A modern Jubilee would by necessity be a social revolution, because of course our social relations are now commodity and debt relations.

But it has happened to some degree multiple times, usually after losing wars, and people and nations survived and then prospered. France was not a hellhole in 1830, Germany and Japan came out improved a decade after WW II.

The most depressing thing to me is the way the opinion makers have totally bought into There Is No Alternative.

I don’t understand a theory of politics that demands nobody gets hurt. That is no politics at all.

179

bob mcmanus 08.31.12 at 10:19 pm

177: Because national, state, county, and municipal debt are killing us, forcing communities to tear up the social contract.

Because the above, credit card debt and student loans have been securitized and are now part of everybody’s retirement savings. Student loans are now, IIRC, 2 trillion dollars of assets in somebody’s portfolio which would for a variety of reasons crash the economy if abrogated. This is by design.

Part of the design is that partial write0ffs have localized negative effects, so that “divide and conquer” can be used for austerity in Greece with Germany resisting aid.

TINA to revolution, catastrophic change: Debt Peonage for the 99% or socialism.

180

Phil 08.31.12 at 10:21 pm

Why not assume he’s not necessarily insane and consider, for example, a jubilee that zeros student, credit card, and payday loans. Or all personal debt that has either been paid back plus 10% or more, or accrued more than 10% fines/fees.

Depending how you define ‘personal debt’ (and how you define ‘10%’), I think you may just have just abolished mortgages. More generally, apologies for being so monomaniac about the maximalist/utopian distinction, but this is *exactly* what I was referring to above:

Minimalist/maximalist is having hairy people in the street saying “Expropriate The Expropriators!” and smooth people in the boardroom saying “our members would like another 2% please, and they respectfully beg leave to suggest that the shareholders can lump it”. … What’s going on wrt the ‘jubilee’ argument seems more like smooth people saying “let’s consider the possibility of (talking in terms of (it being a real possibility to (expand the horizon of politics to include (the making of demands such as (End All Debt Now!)))))”, and hairy people being left with the job of unpacking all those brackets and getting some demands out of them.

The point is that certain things – including some reasonably coherent approaches to political activity – drop naturally out of the maximalism you get by taking Marxism seriously: we may not know how we get to Global Workers’ Power from here, but certain things are quite obviously more workers’-power-ish than others (and capitalists tend to agree with us on which things those are, which is nice). When it comes to identifying which things are more world-without-debt-ish than others we’re all floundering, because World Without Debt is a utopian alternative to contemporary social reality, not a maximal projection of tendencies immanent within it.

181

rootless_e 08.31.12 at 10:33 pm

But, again, nobody is seriously demanding “world without debt” as a concrete policy. What is being proposed is that debt is not sacred and societies can and should choose to jubilee some level of debt away. We currently have a maximalist position in which aggregators of personal debt not only are assumed to have the right to have debtors imprisoned, but to arbitrarily levy additional fees – and where interest rates are freed from any restraints. To get a glimpse of the radical nature of this situation, note that Adam Smith argued that it was wrong for the State to permit interest rates rise above 3% and Thomas Jefferson argued that debts die with the lender:

To render this conclusion palpable by example, suppose that Louis the XIV. and XV. had contracted debts in the name of the French nation, to the amount of ten thousand milliards, and that the whole had been contracted in Genoa. The interest of this sum would be five hundred milliards, which is the whole rent-roll or net proceeds of the territory of France. Must the present generation of men have retired from the territory in which nature produces them, and ceded it to the Genoese creditors ? No; they have the same rights over the soil on which they were produced, as the preceding generations had. They derive these rights not from their predecessors, but from nature. They, then, and their soil are, by nature, clear of the debts of their predecessors.

182

Lee A. Arnold 09.01.12 at 1:39 am

Look at what is going to happen next. The savings glut in the banks, reconstituted in the banks by the bailout after the financial crash, is going to be kept in Treasuries until the interest rates rise, at which time the taxpayers will be paying MORE money to pay off the Treasuries. So debt holders are going to collect more money on that debt, on a rather massive scale, after they were bailed out with around US$10 trillion (just guessing). Debt is not always sacred, when it is immoral.

183

Lee A. Arnold 09.01.12 at 1:45 am

In other words they should have LOST those savings, because they used it to bet on dross and detritus. We could hardly do otherwise, in the pinch, than to save the savings, to recapitalize the financial system–because otherwise people would have had no bank accounts, would all still be in bankruptcy court 4-1/2 years later to recover those funds. But notice that there has been no quid pro quo on this, there has been no repayment by the banksters of our largesse.

184

Lee A. Arnold 09.01.12 at 1:46 am

It is highly immoral. Debt cannot be immoral.

185

Dan Kervick 09.01.12 at 3:32 am

So much of the tendency of thought coming from Graeber’s book seems to me afflicted by a massive baby.bathwater problem. Debts are just obligations. Obligations are generated by social practices, and reinforced by sanctions, which are social practices that promote or inhibit other social practices.

We can criticize various kinds of social systems that allow for the creation of certain kinds of obligation. We can criticize social systems for not having established effective means for discharging or unraveling debts when they become socially destructive or horribly oppressive. But I find it hard even to imagine a social system that isn’t based on complex networks of obligations. I don’t think there is any viable alternative to replace the institutions of contracted obligation and debt with purely voluntary acts of grace or giftings. Nor do I think any kind of sophisticated society can avoid the necessity of enacting obligations that it makes binding on everyone born into the society, even though the newborn members did not contract those obligations themselves. Anarchists and libertarians seem to find this phenomenon horrifying – but it strikes me as just a universal aspect of the existence of political animals.

Several of Graeber’s anecdotes in the book struck me as fanciful attempts to reinterpret situations in which exchange relations and debt relations were present as situations in which they weren’t present – classic noble savage romanticism.

I certainly don’t think its much of a criticism of the very institution of debt relations that debt relations in aristocratic societies were grounded in hierarchy and in the social power of the superior to unilaterally create obligations binding the inferior. The type of social system makes all the difference to its moral appraisal. The democratic ideal of obligations contracted between equals, and supported by a democratically enacted rule of law is very appealing to me, even though it allows for the existence of debts and obligations. When I make an honest ordinary deal with another business person, I don’t think either of us has become objectionably subordinated. To sniff that I should not be bound by debt because I am some kind of princely being who is too good for debt strikes me as narcissistic.

I’m really dismayed by the anarchist and libertarian turn of a lot of contemporary social critique. I would prefer to see more of an emphasis on democratic and egalitarian ideals based on the recognition of human beings as social and political animals bound to each other by mutual commitments and obligations, and forming societies that inevitably involve some degree of coercive enforcement of their rules. The more equal and humane societies become, the less frequently the rules need to be enforced through coercion, as people increasingly internalize and trust the rules in appreciating the social order they generate. But the idea that there is some viable human social order of coercion-free voluntariness strikes me as fantastically deluded, and a tragic dead end for social reform.

186

heteromeles 09.01.12 at 4:09 am

@Dan: I think we had different takes on Graeber’s book and Graeber’s point. Currently we live in a time where the phrase “Corporations are people” is part of the common discourse, it’s normal for people to take on enormous debt to become functioning members of society (whether it’s college debts or paying a coyote to take you into the US), and much of the power and money is concentrated in the hands of a few who primarily use that money and power to get more money and power.

The question, then, is how to get away from the worst aspects of this. I think, as an anthropologist, someone who values people over their economic transactions, Graeber’s working to find real examples of ways out of this particular set of problems.

Just for fun, let’s look at his one suggestion: jubilee. Get rid of the debts. Certainly they will reaccumulate, because no one is equal. But still, it temporarily solves many problems. For example, it means that most countries can invest in their people, instead of in what the IMF insists they pay, and so on.

Still, the deeper problem is money itself. I’m an ecologist, not an economist, and from my biased perspective, money has many of the characteristics of a fossil fuel or a toxic waste. If we took all the money in all the savings accounts in the world and tried to buy stuff with it, we’d have a massive case of global hyperinflation, and probably most people would starve. There’s so much money in the world that most of it has to be locked away (like the carbon deposited underground during the Carboniferous, or toxic waste now stashed now), just so most people in the world can still afford to eat. The problem is that despite the titanic amount of money already present on the planet, we keep insisting on generating more of the stuff, and worse, on pegging political and social power to who hold title to all these deposits of money.

This is pretty amazing, considering that all of the surplus money isn’t “real,” unlike coal or toxic waste. Mostly it’s just numbers in computer memories. Graeber, in his jubilee proposal, is indirectly saying that the world and most people might be better off if some of those computers were wiped. It’s an idea worth considering, I think.

187

john c. halasz 09.01.12 at 11:09 am

188

Yarrow 09.01.12 at 12:15 pm

Phil @ 180: The point is that certain things … drop naturally out of the maximalism you get by taking Marxism seriously … World Without Debt is … not a maximal projection of tendencies immanent within [society].

I think people have been arguing against the first (implied) claim — that minimalist claims don’t drop naturally out of the maximalism you get by taking World Without Debt seriously — and that the more interesting claim is your second, that World Without Debt isn’t a projection of tendencies that are already present in society.

And I think the second claim marks you as a smooth person on the debt issue, and not a hairy person (in terms of your 110). The smooth people in the boardroom should certainly be saying “Some debts certainly should be repudiated, but that’s a statement about some debts, not about Debt.” (As you do in 146.)

This has not been an argument that you’re wrong! I’m still thinking about that. You might be right now, and wrong in a hundred years — as might a criticism, during feudalism, of someone who said “the employing class and the working class have nothing in common.”

189

dsquared 09.01.12 at 2:40 pm

the claim about debt and subjection is not a semantic one, but a claim that relations of indebtedness very often turn into relations of subjection. As a sociological and historical generalization that doesn’t seem to be something that anyone could object to

hrrrmmmm … as SamChevre seems to be hinting, it does seem pretty interesting to me that with 5000 years of history and the entirety of any civilisation anywhere on the planet to work with, Graeber wasn’t actually able to come up with any model of mutual obligation and transactions which was less likely to result in relations of submission than the current developed-world bankruptcy code. It’s true that US student debt isn’t dischargeable in bankruptcy (I must say I find this inexplicable), but the clan networks of borrowing in Botswana or whatever aren’t dischargeable at all.

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PJW 09.01.12 at 3:39 pm

The arc of the moral universe does not bend toward justice when it comes to debt, at least when it comes to student loans. Why were the banks allowed to fleece the nation’s young people for so long with the student loan scam? I don’t know enough about what the consequences would be for a partial jubilee of some type for student loans to say it would be a good thing to do, though my sense of right and wrong suggests there should be some remedy to make things more right for the debtors.

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William Timberman 09.01.12 at 4:36 pm

As for invidious comparisons between clan obligations in Botswana and modern credit markets, I don’t know. I agree that the latter are easier to quantify, which gives them certain advantages, but the power they generate, and the conditions of servitude which can result from them seem to me to be a) much more catastrophic in their scope, and b) in some ways even more implacable and opaque. A pensioner who winds up in the street in Athens, or this poor guy have almost no way to comprehend or escape from the rubble suddenly heaped on them. In Botswana you might have an uncle who can intercede for you. In the U.S., Uncle Sam is profoundly not interested.

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rootless_e 09.01.12 at 5:26 pm

” I don’t think there is any viable alternative to replace the institutions of contracted obligation and debt with purely voluntary acts of grace or giftings. “

And the only two alternatives for social organization are our current odd system of securitized debt backed up by imperial state or purely voluntary acts of grace or giftings? Graeber is making exactly the contrary argument.

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Mao Cheng Ji 09.01.12 at 5:38 pm

It doesn’t seem to make sense to agitate against the student loans, just like that, out of context. If you make student loans easily dischargeable, then interest on student loans will go up, and fewer people will be able to become students. What you do, probably, want to agitate for is free college education, which would make the student loans unnecessary, end of story.

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Dan Kervick 09.01.12 at 6:18 pm

Describe the alternate system you have in mind rootless. I’m perfectly happy to consider all kinds of alternatives. For example, we could have A purely state-run banking system, where loans come with no interest and only nominal services fees. Such systems could even provide negative interest loans to particular kinds of borrowers to pursue certain kinds of public purposes, including redistributive purposes.

But these alternatives still involve debt obligations; there is still law; there is still a democratic state making and enforcing the laws. The problem with the anarchists is that they repudiate the whole larger social framework of legal obligation, government, law and law enforcement – anything that can be called a “state”. It’s a dead end. Anarchism is one of the big failed jokes of modern Western history and political thought, and it depresses me to see young people being lead down that stupid road again.

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rootless_e 09.01.12 at 8:42 pm

But I do not see in Graeber’s book much utopianism- far from it – he documents a lot of variety in social organization, many of which are just ugly in different ways. Certainly, one can read the book and appreciate it for an insight into how societies function and have very different ideas of what should be done and what can be done. One could, for example, think that securitization of consumer debt should be illegal – that a contract between a consumer borrower and a lender should not be assignable without demanding some utopian fantasy world. Or even more moderately, that any such assignment should require a tax be paid and the assignment be registered somewhere in order for it to be legally enforceable. Understanding how debt evolves or even how debt can be a corrosive danger to social arrangements does not require a commitment to believe that human society can dispense with government next week.

BTW: I really like the book, but think that the occupy wall street movement suffers from a deeply mistaken privileged romantic, I guess “vanguardism” is the least bad word for it.

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Watson Ladd 09.01.12 at 11:55 pm

rootless_e: What’s so bad about securitization? The debtor is in the same position vis a vi a creditor whom originally loaned him the money and a creditor who purchased the debt. The debt crisis has a lot to do with incomes.

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rootless_e 09.02.12 at 2:15 am

The debtor is faced with a legal demand from some unknown party who claims to own a debt contracted, nobody knows when, and to be able to arbitrarily add fees and interest to the debt. Since there are countless such attempts arriving in the mail, the debtor has no simple means of detecting the difference between pure scams and actual holders of debt. The creditor appears to have no obligation to provide a chain of custody for the debt – indeed any such obligation would destroy the business model of debt aggregation. There are no sanctions on creditors who fail to make good faith efforts to work with the debtor or who who violate the terms of the original contract – terms which nobody has available. What is the compelling state interest that makes it important for the taxpayers to bear the cost of collecting such debts? Here you have some local government that doesn’t have enough money to hire math teachers for public schools or fix roads, but is spending tax money on subsidizing the business model of scumballs and also diverting police from protecting the public against crime so they can act as bill collectors for generally out of state entities that contribute nothing to the local economy – in fact that damage the operations of the local economy.

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Chris Bertram 09.02.12 at 8:36 am

_Graeber wasn’t actually able to come up with any model of mutual obligation and transactions which was less likely to result in relations of submission than the current developed-world bankruptcy code._

That’s one way of looking at it. On the other hand, explicit enslavement of people (or similar modes of unfree labour) have been a bit of a no-no for a while. Where those things still go on, they tend to be given the appearance of the discharge of a mutual obligation (as when the prostitute is required to reimburse her traffickers for their expenses). Even when, as in that case, this is just a veneer for what is really going on, it says something about what does and doesn’t count as an acceptable way to get someone else to do stuff for you.

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foppe 09.02.12 at 12:49 pm

The democratic ideal of obligations contracted between equals, and supported by a democratically enacted rule of law is very appealing to me, even though it allows for the existence of debts and obligations. When I make an honest ordinary deal with another business person, I don’t think either of us has become objectionably subordinated. To sniff that I should not be bound by debt because I am some kind of princely being who is too good for debt strikes me as narcissistic.

Strawman much, Dan? What on earth do these comments have to do with anything found in Debt? What Graeber points out there (read ch.5 again, or the “with gifts one makes slaves” anecdote) is that while is that while this “democratic ideal” is something he is entirely in favor of, a. historically these kinds of egalitarian societies are quite hard to realize, and b., even if you are narrowly free from constraints in engaging in your business deal, you are only “free” insofar as you are not obliged by your living situation to engage in said deal. Which, I would humbly suggest, is not quite so “exotic” a secondary consideration as you apparently want us to think, because people quite often engage in deals they otherwise might not have, had they been less worried about getting bread on the table, paying for their kids’ educations, etc.
Of course, you paper over this by talking about being “unobjectionably” bound, but the fact that you yourself experience this as unobjectionable does not speak to whether this is a relevant dimension of the interaction under consideration.

I’m really dismayed by the anarchist and libertarian turn of a lot of contemporary social critique. I would prefer to see more of an emphasis on democratic and egalitarian ideals based on the recognition of human beings as social and political animals bound to each other by mutual commitments and obligations, and forming societies that inevitably involve some degree of coercive enforcement of their rules.

Again, what are you contrasting to what here? Broadly speaking, libertarians (who I would define as ‘those who refuse to talk about organizational issues at all when these concern “private” arrangements’) are quite different from anarchists, unless you still adhere to the facile “anarchists are people who eschew organization/institutionalization” critique.

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Watson Ladd 09.02.12 at 1:26 pm

By the libertarian turn I think he means an individualistic turn: social questions become seen exclusively individually. This is a seemingly odd charge to level at Debt, but I think it is true. Ultimately something like free labor is an ideology that imagines a new kind of society radically opposed to the old society, and that cannot exist alongside it peacefully. By contrast Graeber never really imagines society as a subject of his politics, but rather a kind of individually felt unfreedom.

rootless_e, it might help to avoid making claims that are patently untrue about things that can be looked up. In particular consumers can demand validation of the claimed debt, that the creditor sue them, etc.

Chris, the end of slavery is an important moment of freedom. At a certain level the critique of Graeber as primitivist is absolutely right: Graeber doesn’t imagine that we can go perfect the liberal model of individuals freely reasoning and associating, but rather have to recreate more “human” (read primitive) models of obligation.

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rootless_e 09.02.12 at 1:56 pm

It’s true that indigent people who can afford an attorney can challenge debt debt collection agents under FDCP, if they live in a state where Federal Courts have held that debt aggregator is a collector and not a creditor and where the collection does not come under attorney exceptions, if they challenge within the 30 day period of the notice (that they must have understood not to be junk mail) and then, if they prove one of the narrow exceptions, they may be able to get $1000 penalties imposed on the collector – assuming that the judge is sympathetic ( and anyone who wants to pontificate on these issues needs to spend a couple of hours watching state courts to see how deeply most judges care about the rights of poor people and the niceties of law). Or, alternatively, they could simply move to their luxury second homes in Bern and keep their assets in off shore trusts while pigs fly victoriously overhead.

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Watson Ladd 09.02.12 at 2:33 pm

rootless_e, what exactly is the problem you are so worried about? End of the day people who owe money are either going to pay it back, or wind up in court. That’s true no matter who is doing the collecting.

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rootless_e 09.02.12 at 2:51 pm

The question of whether purchasers of consumer debt should be able to get the state to jail putative creditors without paying any court costs, being required to adhere to any fair billing practices, facing limits on usurious rates, or even meeting some evidence standard for being owners of the debt is easily answered in your mind. Great.

BTW: Assuming the President is re-elected the CFPB should make some improvements to the current unjust situation.

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foppe 09.02.12 at 4:19 pm

@200: I’m not at all sure your last point is fair, and I don’t have a clue either what a society founded on a “liberal model of individuals freely reasoning and associating” would look like, and how it would differ in practice from “primitive” societies in which people use proximity and blood relations to determine who they interact with.
As to your suggestion that the thing he argues for is “primitive” and apparently illiberal: Again recall the ‘inuit’ examples, where other hunters refuse thanks precisely because they do not think it desirable to have a society in which people feel obliged to other people for basic needs. The point Graeber emphasizes there is not that a ‘free’ society is impossible, but that it’s incredibly hard work, which requires a lot of willingness from others to keep society egalitarian. To put it in the words of Bruno Latour (cited in this somewhat apt article), talking about what is generally called ‘negative liberty’ in the US/UK, “As to emancipation, it does not mean ‘freed from bonds’ but well-attached.”

Aside: Are you really proposing to abolish family structures, childhood friendships, and friendships following from chance encounters, because not examples of ‘free association’? Or do you accept geographical and technological limitations upon this free association, but not “social limitations”? If so, why? The former as just as a-rational as the latter…

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Cranky Observer 09.02.12 at 4:30 pm

= = = nd how it would differ in practice from “primitive” societies in which people use proximity and blood relations to determine who they interact with. = = =

By “primitive”, do you mean the type of society where a Mitt Romney can set his son up in investment banking with $300 million in initial capital provided by close business associates, and a George Romney can use his friends, family members, and contacts to get his son Mitt set up and running at the highest levels of finance? Where the entire investment banking world is one large Delta Tau Chi fraternity That sort of “primitive”?

Cranky

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BillCinSD 09.02.12 at 4:37 pm

the thing about optimisation though is that even if you don’t like it, it’s still optimal. When people refuse to “think like an economist” or “get involved in the market” with respect to debt contracts, they end up staying in underwater mortgages because their “human values” tell them to, or failing to declare bankruptcy, or borrowing from Wonga.com because it’s niceynicey and doesn’t involve nasty bank debts.

Perhaps the problem is that thinking like an economist optimizes the wrong function. In which case it isn’t really optimal in the actionable sense. Further, isn’t getting rid of human values a bigger change and detriment to society than a hard debt jubilee?

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Mao Cheng Ji 09.02.12 at 5:20 pm

“As to emancipation, it does not mean ‘freed from bonds’ but well-attached.”

It’s hard to be well-attached these days: too much specialization of labor. There is a reason why things got developed the way they have, and to go back to the way they used to be, the well attached way, you’d probably have to switch to a radically less complicated mode of production.

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Andarte 09.02.12 at 6:03 pm

So near as I can figure (and I’m just an ignorant Polack from a resource town that isn’t even in the US, so I could be wrong), the lowest income quintile in the US has a median of $1700 in savings, with the median cash savings being $800 and the savings rate around 0.3% (first two figures from the New America Foundation, the last from a Brookings Institute power point). Income quintiles 2 and 3 have $1600 and $2700 in median cash savings; the highest tenth have over $400,000 in all savings (New America again). US corporate cash hoards sit at over $2 trillion.

On the debt side, the lowest quintile in the US has a median debt of $9,000. An average of 19% of household income in the lowest quintile goes to servicing debt, with 27% of lowest-income households paying over 40% of their income towards debt. As of 2007, the household debt of the three lowest quintile was 23.7% of overall household debt in the US (New America again, with some of their analysis borrowed from McKinley Global).

Now, even I’m not naive enough to suggest that the outline of a Jubilee is visible here – these are incredibly crude measures, they don’t contain the whole story, and what I’ve left out probably exposes a breathtaking ignorance. And I’m certainly not well-versed enough in economics to suggest what possible immediate and medium-term consequences are for structring massive debt write-offs on things like interest rates and ease of obtaining future credit. Analysis of the current situation and planning a debt relief program are certainly over my head. But it does seem to me that there is clearly a pretty massive benefit to any kind of debt relief for lower-income Americans, and it may even be possible in a way that won’t have to wipe out their savings or require a tax payer bailout of same.

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Watson Ladd 09.02.12 at 7:14 pm

FDIC ensures banks, which are most exposed to the loans. Jubilee would either wipe out FDIC, or small bank accounts. The people with $400,000 saved have less then that in cash.

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Bruce Wilder 09.02.12 at 7:35 pm

Many of the last dozen or more comments touch upon issues of how social affiliation structures and animates a political economy, and several commenters express their inability to comprehend or imagine whatever other commenters have tried to denote in some sketchy reference (“liberal model of individuals freely reasoning and associating” or “As for invidious comparisons between clan obligations in Botswana and modern credit markets, I don’t know.”)

The capacity of people to conceive of public purposes and pursue them by influencing the state as actor or arbiter depends, I think, on the capacity of individuals to form social affiliations and identities and act in concert outside of the pursuit of purely private and individual ends. Ambition and loyalty must be focused on some common purpose, to overcome atomistic greed, and to establish some sense of enlightened self-interest and trust in the maintenance of private conflicts within a public framework.

That political controversy would arise in tandem over both public debt and private debt is symptomatic of a common decline in the capacity of the body politic to organize itself for defining and pursuing general and public purposes.

The existence of a well-managed public debt is the foundation for very large scale organization of economic activities through money and a financial system, and does not have a particularly long history. Ditto for bankruptcy as a public arbitration, on priniciples of equity, neutral between the privileges of the parties to the debt contract, is also a relatively recent innovation.

Romney and Ryan, as unapologetic representatives of an impulse inimical to the very idea of public purpose, shock me, but I cannot say that I much impressed by the capacity of neoliberal technocrats surrounding Obama to synthesize a substitute idea of “public” purpose.

“Debt” exemplifies certain ways in which conflict is entailed by cooperation, and the maintence and continuous arbitration of conflict becomes a public purpose, to facilitate productive cooperation. The failure of public purpose allows the collapse of conflict into oppression, and the consequent failure of cooperation to benefit any, but a few.

It seems to me that the extreme of slavery, which, in Roman law was a failed debt contract, illustrates well the links between a collapse of cooperation between conflicting equals into absolute subordination, as the slave loses the political capacity to affiliate with others or to resist the will of the one other with whom he remains affiliated, with inability to distinguish public purposes from private ones.

A society can remain egalitarian only to the extent to which individuals remain free to organize themselves for political purposes in ways that 1.) maintain conflict in cooperation, and 2.) nurture a sense of public purposes, especially among the political elite, tied to some idea privileged or rightful membership among the political followers. An individualism that insists on social atomism and an exclusive idea of private goods in its ideology and values will soon find itself an advocate of expediency in support of arbitrary despotism, and disabled in its ability to deliberate productively on ends or means.

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ajay 09.03.12 at 9:09 am

nobody is seriously demanding “world without debt” as a concrete policy. What is being proposed is that debt is not sacred and societies can and should choose to jubilee some level of debt away.

This is, in fact, what we already have. Debt in the modern world – personal, commercial, sovereign – is not regarded as sacred. Debts are written down all the time, and in extreme cases – at least for personal and commercial debt – they are written off through the bankruptcy courts, which is a far more sophisticated, more sensitive and less damaging technique than jubilee. But this discussion seems to be ignoring this crucial point. I’d be very interested, for example, in how many people on this thread believe that “the economic problems in Greece are largely happening because Greek sovereign bondholders are insisting on being repaid in full”.

Bankruptcy’s really the key bit of this process. In Mesopotamia, if you couldn’t pay your debts, and if Sargon or whoever didn’t declare a convenient jubilee, you became your creditor’s slave for seven years. No haircuts or workouts or Chapter 7 restructuring for Urtu the Bronze Age peasant.
“Bankruptcy: the first thousand years” would be a rather more interesting book…

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ajay 09.03.12 at 9:19 am

But it does seem to me that there is clearly a pretty massive benefit to any kind of debt relief for lower-income Americans

There would be a massive benefit for the hypothetical median lower-income American, but he doesn’t exist. There would be a massive benefit for a lot of lower-income Americans, but a lot of others would be harmed, because they don’t have any debts and their savings would be wiped out – and even a small financial harm is of course much more serious. So this needs to be done really carefully.

and it may even be possible in a way that won’t have to wipe out their savings or require a tax payer bailout of same.

If you wipe out the debts of a lot of Americans, you are going to be wiping out the assets of a lot of other Americans (and American financial institutions). That’s inescapable. It’s an accounting identity. So either you’re going to have to just accept that a lot of banks and credit unions and pension funds and so on are going to be severely weakened and even collapse; or you’re going to have to bail them out.

It might even be worse than that. If you have a local lender that takes deposits and lends money entirely in the local area, and you announce that there’s a jubilee coming, everyone with savings will think “Shit, if the government says that no one under $40,000 a year has to make mortgage payments any more, the Bailey Savings & Loan is screwed. I’m getting my money out right now before it collapses.” So you get bank runs happening in every poor community in the country.

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Peter T 09.03.12 at 9:48 am

I thought the whole point of money was that it is fungible. Now Watson, ajay and others are arguing that if some people’s debt is written off at some institutions, then those institutions must write off assets belonging to those very same people. And both miss the point that bankruptcy courts – like any courts – generally work much better for those with lawyers, money and knowledge than for those without. As if we can manage write-offs for large banks and countries, but managing write-offs for just people is somehow beyond refinement.

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Alex 09.03.12 at 9:57 am

Now Watson, ajay and others are arguing that if some people’s debt is written off at some institutions, then those institutions must write off assets belonging to those very same people.

No. If the institution writes off all the debts, the institution has no assets and no income, and therefore cannot pay its debts. Those debts are, for the avoidance of doubt, owed to depositors, i.e. you.

I don’t think anyone has made the point yet that this solution is the one proposed by the great philosopher Tyler Durden at the end of Fight Club

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ajay 09.03.12 at 10:24 am

ajay and others are arguing that if some people’s debt is written off at some institutions, then those institutions must write off assets belonging to those very same people

No, I’m not: “If you wipe out the debts of a lot of Americans, you are going to be wiping out the assets of a lot of other Americans”. Note the use of the word “other”.

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Niall McAuley 09.03.12 at 11:42 am

It rather depends on how you wipe out the debts, doesn’t it?

If the Fed printed cash to the value of the average debt of the low paid and posted it to their creditors to wipe out debt, nobody’s assets would be wiped out.

Oh no, it’s the hyperinflation monster! Run!

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Chris Bertram 09.03.12 at 12:03 pm

_If you wipe out the debts of a lot of Americans, you are going to be wiping out the assets of a lot of other Americans (and American financial institutions). That’s inescapable. It’s an accounting identity._

Hmm that depends. If you cancel the debts owed to foreign creditors this isn’t the effect. Cf Iceland, and German anxieties re Greece and Ireland. Not that I’m recommending this, just pointing out the possibility (which also comes with consequences, just different ones).

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ajay 09.03.12 at 12:08 pm

True – I was thinking in terms of writing the debts off rather than just repaying them, but that would work as well. And if you’re going by the New America figures, wiping out the debts of just the lowest quintile would cost about $400 billion. (Though those figures are several years out of date.) Total money supply is about $10 trillion. What this would mean for inflation is a question I leave for bigger brains.

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ajay 09.03.12 at 12:10 pm

217: OK, that was an oversimplification. But just cancelling debts owed to foreign creditors wouldn’t do much for the average American; most of his debts are owed to US institutions. (It might do some short-term good for the average US bank, but that’s not the object of the exercise…)

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rootless_e 09.03.12 at 12:27 pm

“This is, in fact, what we already have. Debt in the modern world – personal, commercial, sovereign – is not regarded as sacred. Debts are written down all the time, and in extreme cases – at least for personal and commercial debt – they are written off through the bankruptcy courts, which is a far more sophisticated, more sensitive and less damaging technique than jubilee.”

Some creditors are more sacred than others. For example, student debt in the US and sovereign debt are both considered sacred. The debt owed by Americans who are too poor to hire lawyers is far less delicate than the debt owed by those who have sufficient assets. Notice how Donald Trump passes through multiple bankruptcy proceedings without being jailed or having his car repossessed. Much of the EU banking crisis is due to a theory that senior bank bondholders must be made whole. Debt owed to firms controlled by PE investors is apparently only a guideline, not a rule. Debts to pension funds seem to be optional as are debts owed under union contracts.

Debt is a moral/political issue. Those who believe that the purchasers of discounted Zambian bonds should be able to seize assets of the poorest people in the world or that people who owe bonds issued by the South African apartheid government have a right to be repaid by the successor government or that a debt aggregator has the right to have cash strapped counties imprison and extract fees from poor people, but a small business should not be able to apply the same process to the CEO of a Fortune 50 corporation that is stretching out contract payments, are proposing a moral scheme.

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Alex 09.03.12 at 12:40 pm

How many low-paid Americans have foreign-denominated debts? Iceland, Hungary, and a few other places did the “finance a new car in yen (or Swiss francs, or whatever) at low, low rates! nothing can possibly go wrong!” thing but I don’t think it happened in the States.

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ajay 09.03.12 at 1:02 pm

student debt in the US and sovereign debt are both considered sacred.

Right, because there wasn’t a huge crisis only a year ago when one political party in the US pushed the country to the brink of sovereign default. That’d never happen, because in the US sovereign debt is considered sacred.

Notice how Donald Trump passes through multiple bankruptcy proceedings without being jailed or having his car repossessed.

I hadn’t noticed that, actually. I have noticed that several businesses he ran have gone bankrupt – the Taj Mahal Casino in 1991, the Trump Plaza Hotel in 1992, Trump Hotels in 2004 – but I hadn’t noticed Trump himself going bankrupt. And if a company that you are CEO of – or even one that you own – goes bankrupt, the creditors can’t come after your personal possessions or have you thrown in jail. That hasn’t been true since about 1870 or so.

Much of the EU banking crisis is due to a theory that senior bank bondholders must be made whole.

…Not the most obvious cause.

Those who believe that the purchasers of discounted Zambian bonds should be able to seize assets of the poorest people in the world

You can’t actually seize the assets of a country because it has defaulted on its debt.

Your general point is more or less correct, though: yes, some creditors (and some debtors) do better in bankruptcy proceedings than others. But I’m not sure that strawmanning for an entire paragraph is the way to go…

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Foppe 09.03.12 at 2:39 pm

@205: That was more or less my point, yes: I don’t see how such a “liberal” society would work itself out on the ground, other than as largely similar to current societies. But apparently Graeber is arguing for something “primitive” — namely, an egalitarian society? A society in which prop rights are not absolute? — whereas this “liberal” society would have people organizing on the basis of “totally free”, and presumably also “rational” choices — or something.

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Watson Ladd 09.03.12 at 3:25 pm

Foppe: I think its safe to say that Graeber argues for a new kind of social relations that is rooted in the community. But that then raises the question of freedom, which I don’t think Graeber adequately addresses. Is the problem with debt its inhumanity, or the unfreedom of the debtor?

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Bruce Wilder 09.03.12 at 5:12 pm

Several commenters are putting way too reliance on accounting identities. Yes, one person’s debt is another person’s asset. But, that’s a fundamentally trivial point, not some great insight.

The deeper point is that a society qua political economy can have too much money and too much money extended as marketable financial assets/debts, so much that it is economically unhealthy, in the sense that it promotes exchange relationships, which move away from the static mutually beneficial positive-sum ideal and/or the dynamic ideal of taking up all available positive-net-present-value investments on the frontier of a progressive path.

We all understand the simple intuition that too much currency chasing too few goods erodes the function of currency as a store of value — the inflation monster — because it is a (too) simple story, and there are propaganda resources devoted to re-telling it constantly.

Less often noticed is the problem of too much money chasing returns from pure financial assets/debts, that is, assets/debts untethered to ownership of real and productive capital or resources. This is the story, I think, Minsky was always trying to tell, about how the accumulation of money in the financial system over the course of the business cycle created a pressure on the financial system to move from prudent, productive investment toward ponzi schemes, fraud and usury.

The basic problem of the financial system is that there are rarely enough productive investment projects to absorb all of the cash being generated by economic rents on the existing stock of capital, and cash must seek out “investments” that promise a return, while trying desperately to avoid toxic, negative net present value assets/debts. When the available stock of rent-returning land and (real) capital is exhausted — i.e. priced to return nothing — there’s nothing left for money to do, but seek returns as an “insurance” product. And, on the frontiers of “insurance”, there’s fraud and usury, the former being disguised theft and the latter an exchange relationship, which is parasitical and exploitive and reduces social welfare.

Usury is the opposite of an investment, which enables a higher future income to pay back the loan; usury is the desperate acceptance of a reduced future income to solve an immediate problem.

Fraud and usury are an economic pathology, and when they become endemic, they do not leave genuinely productive investment uncorrupted. The incomes, which might have funded consumer demand for products and services of genuine value are being cannibalized to fund scams and usury, while genuine investment opportunities, whose returns are typically made minimal by market competition are disadvantaged in the continuing competition for funds, by fraudulent and/or usurious schemes, whose returns may be perversely amplified in market competition. Many products of genuine value no longer compete on price and value, but on financing schemes. Any American can look around and see many examples: credit card interest rates or payday lenders are the pure financial examples, and, slightly more subtly, the rates charged for dental procedures or vet services are rising rapidly, driven by exploitive financing schemes.

To keep up with the “competitive” returns offered by usurious schemes, owners of “real” capital assembled as businesses find themselves disinvesting, in order to generate the necessary cashflow. The pathology spreads like gangrene.

Writing off debt, bankruptcy on equitable principles, prosecution for fraud, prohibition of usury — these are all necessary tonics and remedies, which are, at base, eliminating excess money-extended-as-debt. As rootless_e points out, they are “moral” schemes. And, as economic policies, they only work to restore productive prosperity to the extent to which they correct the maldistribution of income, not just aesthetically, but functionally.

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Kosimba1 09.03.12 at 6:14 pm

Dear Mike Beggs,
you probably stopped reading years ago but I second. Great review – I learned lots, and my own objections crystalised.
Graeber is good at expressing the state of Anthro/substantivist arguments in clear language. I don’t think he has ever had much success in going beyond them. Substantivism had some good points to make so this is not entirely a waste of time but, the book wants to do more than that and when it tries I feel that it falls on its arse. And this is I think a more general problem for most Economic Anthropology, it is always jumping up and down about economics, as if it had some incredible knock down arguments, and it always ends up just repeating some – necessary but insufficent – truths about pre/non capitalist economies (which are already contained in Malinowski and Weber) and juxtaposing these with a cartoon picture of some sort of Benthamite that does not engage with any really existing form of economics.

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rootless_e 09.03.12 at 6:27 pm

Apparently I needed a comma

student debt in the US, and sovereign debt are both considered sacred.
—————————^

And the debt limit crisis in the US was an attempted blackmail, not an assertion that sovereign debt is optional.

As for Trump – that’s the point – we have a complex legal system which allows people like Mr. Trump to profit personally while walking away from debt. Oddly enough, this system works differently for small business than for people like Mr.Trump or Mr.Romney. There is a legal doctrine called “unlawful conveyance” that is supposed to prevent people from using corporate structures to abandon debt, but courts have pretty much walked away from that doctrine for larger companies ( but not, e.g if Bob’s Plumbing LLC tries to fold while owing Chase ).

http://www.forbes.com/sites/clareoconnor/2011/04/29/fourth-times-a-charm-how-donald-trump-made-bankruptcy-work-for-him/

As for Zambia: http://www.guardian.co.uk/global-development/2011/nov/15/vulture-funds-key-players

There’s also a fascinating question of who gets to assert a collectible debt. If I fail to pay my mortgage on time, Well Fargo may decide to assess a late fee which the courts will be happy to collect at gunpoint.Yet if I find my checkstub and can prove that Wells Fargo negligently failed to credit me, can I send them a bill for $10,000 for my time and effort and have their CEO jailed if they do not respond or pay? Why not?

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rootless_e 09.03.12 at 6:57 pm

Bruce Wilder – this point was obvious to Adam Smith, but it’s become wild eyed anarchism or something in retrospect.
http://krebscycle.tumblr.com/post/23824069127/adam-smith-was-not-as-stupid-as-modern-neoclassicals

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Foppe 09.03.12 at 8:10 pm

@224: I’m afraid I do not follow. What do you mean by debt relations being inherently ‘inhuman’? I’d say there’s lots of relationships that are exploitative, and lots of relationships in which the debtor is made unfree in various ways, but I don’t see how this relates to debt relations being categorically ‘free’ or ‘unfree’. Furthermore, I would again emphasize that to be free is not to be “free from restraints”, but to be free from having to worry about how to pay for your food and shelter, to have friends and acquaintances who allow you to behave in the ways you want, to live in a state which does not hamper you overmuch: in other words, to be negatively free is to possess a specific set of positive freedoms that allow you to think that you are an independent and “autonomous” agent. So all freedom is “rooted in community”.
Now, I imagine that when you talk about being “rooted in community” your worry about “community” is more specific, because you are presumably worried about these communities being “small” and “backwards” and whatnot. But could you please, with the above points in mind, specify why you think being rooted in communities (procedurally? substantively?) problematic? Because I do not really understand what you think Graeber is advocating, and what specific worries regarding “the amount of room for freedom” you have wrt his account.

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john c. halasz 09.03.12 at 11:42 pm

This thread is another disappointing one. It started with a really interesting topic, but it soon degenerated into irrelevancy, as commenters increasingly asserted their alternative priors.

The question I have is this: just what is it about Graeber and his book that provokes some many people into confabulating about him or it, rather than addressing the issues it raises with some precision and care. His book is partly an empirico-historical survey the debt and its surrounding practices, part a conceptual reflection of “freedom” and “obligation” and their relations to debt the the implications that follow from debt-related practices, and partly itself a kind of mytho-poetic confabulation on the theme. It’s apparently the suspicion that Graeber is just a confabulater that provokes some many readers to denounce his account (with a weird certainty as to just what he says and intends), while substituting their own confabulations on the topic. But might not that be precisely what Graeber intended, the peculiar angle-of-approach that characterizes his book: to bring out all the various forms of confabulation that surround the contemporary issues of debt

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rootless_e 09.04.12 at 12:47 am

What seems to me to drive reviews like those of Beggs is hostility to the proposition that human economics cannot be separated from politics and anthropology – or at least that those factors cannot be just politely acknowledged and dismissed as unimportant for serious work.

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Watson Ladd 09.04.12 at 12:54 am

Inhumane, not inhuman! The problem is that Graeber seeks to start with debt as 5,000 years back, as though capitalism hadn’t fundamentally remade all relations, including debt. And so there’s a real suspicion I have about that kind of analysis, in that the sorts of freedoms we have today vanish from an analysis that equates communities with goodness. By contrast, an analysis that starts from freedom might recommend many of the same things (lenient bankruptcy, world revolution) but would have a very different politics.

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Josh G. 09.04.12 at 6:56 am

ajay @ 212: “If you wipe out the debts of a lot of Americans, you are going to be wiping out the assets of a lot of other Americans (and American financial institutions). That’s inescapable. It’s an accounting identity.

That would be true if we were on the gold standard. But we’re not. Money is just numbers in a computer database. If we want to change these databases to wipe out the debt and still make creditors whole (or selectively do so in some cases but not others), we can. That’s the whole point of fiat money: we can do whatever we want with it. Accounting laws are not laws of nature; and anyway if you gave them license to be creative, the accountants could make the books say whatever you wanted them to say.

Now, wiping out people’s debts and then adding corresponding amounts to the balances of creditors out of nowhere would be an increase in the money supply and it would cause inflation. But at this time, some inflation would be a good thing.

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Random Lurker 09.04.12 at 7:42 am

@Josh G. 232
Actually I think “we” should just print actual paper money because, if we add money on the bank account of someone, that money becames debt from the point of view of the bank, that usually has to pay (puny) interest on it.

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Foppe 09.04.12 at 7:51 am

Watson: But how on earth do you “start from freedom” unless this freedom has already been institutionally and socially guaranteed? Yes, closely knit communities generally function on the basis of social exclusion, but it is hardly as though this is only a problem in “primitive” or “religious” towns: in rich towns you find rich people (who supposedly respect “privacy” and freedom of speech or w/e you want to call it) doing exactly the same thing.
As such, I would suggest that you’re focusing far too much on the substance of the examples Graeber provides, and too little on the procedural insights that inform them. Certainly you can read the book as Graeber trying to suggest that repression did not take place in precapitalist societies, (though it’s a bit hard to square with his repeated discussion of slavery etc.) but why on earth would you? Read it as an analysis of how debt relations of various sorts inform people’s decisions and social interaction, and you can get much more out of it.

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Phil 09.04.12 at 9:00 am

just what is it about Graeber and his book that provokes some many people into confabulating about him or it

See above re: utopian vs maximalist. One more (last?) time: when Graeber writes

It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt. … Nothing would be more important than to wipe the slate clean for everyone, mark a break with our accustomed morality, and start again.

that’s utopian, not maximalist. (There is no ‘can’t pay? won’t pay!’ movement to repudiate student debt, for instance; people aren’t organising around debt in the way that would be needed to make sense of this stuff.) People are filling in the blanks – not always appropriately or constructively – because they have to: there are lots of blanks to fill in. (I’m also reminded of a lot of the reaction to Zizek, and to a lesser extent Chomsky.)

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Alex 09.04.12 at 9:20 am

Now, wiping out people’s debts and then adding corresponding amounts to the balances of creditors out of nowhere would be an increase in the money supply and it would cause inflation. But at this time, some inflation would be a good thing.

Well, why not just, as the great philosopher Bob McManus says, print until they make us stop?

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Ingo Stuetzle 09.04.12 at 11:37 am

I had already written an review in German which was translated some weeks ago. Graeber’s heated reaction, also from and toward other individuals, was and is irritating for me and can hardly be attributed to differences concerning matters of substance. Now my addendum is online is online in English, too: http://j.mp/OU9fNU

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bob mcmanus 09.04.12 at 12:24 pm

237: That’s partly an argument against those who say QE doesn’t work, like this

Robert Waldmann on Woodford in Wyoming

And I say, “10 billion a month in QE only raised interest rates 0.2 basis points (inflation expectations)? Let’s try 10 trillion a month.” It’s sort of an NGDP thing, without Sumner’s magic dust.

And I would have the Fed for instance, which legally can, buy Greek, Spanish, Italian etc bonds until the US overnight hit at least 5%. I personally would go 10% PCE for a decade.

My global point is that we seemed to have forgotten what real re-evaluations or devaluations or restructurings look like, and how well we survive them. It’s only money.

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Watson Ladd 09.04.12 at 1:51 pm

Foppe: It’s worth backing up a bit. Medieval society has a lot of relations in which people have rights. In fact, all relations in medieval society were reciprocal assignments of duties. So what’s different about capitalism? To some authors not much (Latour, “We have never been modern”). To others (Focault, my understanding of Graeber) modernity replaces the old ties of medieval society with something much more pernicious. And to a third group of thinkers modernity suddenly exposes the possibility of human creativity and ability to remake the society they face.

Debt today is unlike debt yesterday in that it, like almost everything else, can be bought and sold. “It’s only money” is a sentiment thoroughly out of date, because money today is everything, and that wasn’t true in the past. But the flip side of that is today we worry about freedom, in a way no serf ever did. And that’s what I think Graeber misses: a history of 5,000 years of debt ignores where all politics starts from, the recognition that we can remake our society because of freedom.

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Mao Cheng Ji 09.04.12 at 2:56 pm

What is this ‘freedom’ you speak of? The serf had to work for someone, and you have to work for someone. And I don’t see you worrying about that; you perceive it as ‘freedom’. Same as the serf.

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Salient 09.04.12 at 2:57 pm

@ajay
Couple things. Bankruptcy law in the US was gutted ‘reformed’ in much the same way that welfare was eliminated ‘reformed’ in the 90s. (Possibly you’re more familiar with BAPCPA than I am, in which case sorry for me stating the obvious.) That might explain some of the frustration/disconnect between your perspective and that of more US-centric folks (unfortunately including me). I think the widespread impression in the US nowadays is that there’s no such thing as bankruptcy for the 99%.

But also, there might be some disagreement in the definition of sacred. In the US I’d suggest people feel that there should not be any such thing as bankruptcy for the 99% or 100% or whoever. When I hear someone say something like “US consumer debt is sacred” I think that just means “If a US consumer filed for bankruptcy, most of their peers would shun and shame them as irresponsible to the point of immorality.” That’s definitely true, I’d say. I guess anecdotes are all I have to support it. My own parents forgave a friend who stole perscription drugs for them, but spoke about a friend who filed for bankruptcy with nothing but disgust and contempt. They were so angry she was allowed to keep her (nice, new) car. It was so wrong that she wasn’t impoverished for her running up a big credit card bill. I don’t think they or their social circle ever mentioned her again without drily noting she was still driving the Pathfinder. (By contrast, they declined to press charges on their addict friend and were kind of appalled when I asked about whether they did–I got the lecture about how people can make mistakes and find themselves in desperate circumstances. No such lecture for buying a bunch of stuff on credit and then getting fired, then it was more stuff like, “Why didn’t she keep any savings? Gail didn’t have to live paycheck to paycheck. People should be prepared for falling on hard times.”)

I’m pretty sure this generalizes to a widespread phenomenon in the US, a person who stole perscription drugs from friends to feed their habit would be regarded with far more sympathy than a person who made a financially irresponsible decision and then declared bankruptcy. Drugs, you can go to rehab. Fail to repay your debts and file for bankruptcy, well, there’s no scrubbing off that stink.

So, a person’s debt, even to a faceless institution like Visa, is sacred, in the sense that failing to meet one’s obligations as a creditor is sinful/shameful/whatever. But that’s not true of general-consensus US moral intuitions about an institution or a 1%er who owes debt, as it’s assumed they’re gonna get away with whatever and there’s nothing you can do, so why bother caring? (Note, this is a statement about ‘general sense of things’ perception, and most people don’t think of stuff like savings accounts as debt, at least not when making moral judgments. So sure, people would agree that a bank failing to meet its savings accounts debt would be shameful, but that example won’t occur to them offhand.)

@more generally
The whole fucking point of Debt, I thought, was to consider how societies have balanced the moral intuition that a creditor has a moral duty to endure severe hardship in order to meet debt responsibilities, with the moral intuition that lending for profit is exploitative and that when a lender isn’t repaid he just got what’s coming to him.

Our^[1]^ moral intuition on this is derived from a vision of lender and creditor as two individuals entering into an agreement. (That’s also underpinning a lot of moral intuition about contracts.) I think Graeber has a lot to say about the problems that occur when we carry over that intuition to modern relationships between creditor individuals and lending institutions, or debt relations between institutions. We respect corporations more than usurers, if only in the weak sense that advertising and branding cause us to feel more positively about Mastercard than we would about Shylock, so we tend to unthinkingly drop the “exploitative or irresponsibly risky lender” type intuitions and keep the “one should pay one’s debts” intuitions, and that is fucked up and bullshit, and what the fuck do we do about the various social problems this carried-over intuition engenders and exacerbates?

[1] Feel free to interpret ‘our’ in whatever suitably restrictive way will mean less arguing for the time being, up to and including ‘our’ = ‘Salient and a handful of idiots allegedly known to Salient’ or whatever.

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bob mcmanus 09.04.12 at 3:13 pm

240: “It’s only money” is a sentiment thoroughly out of date, because money today is everything

Right, sure. I agree. Well, under conditions of post-capitalist 110% commodification, including the Facebook commodification of social and personal identity, whereat do I find this “freedom” thing you speak of?

Is freedom a characteristic of money so we can all become Jamie Dimon and then free? Is it transcendant, outside of social relations? Is it emergent, say from the velocity or the quantity of money?

I like to do mashups, (Marx works:Capital is continual revolution of social relations or something like that but not evolution) so I find freedom in Real Keynes/Minsky/Paul Davidson non-ergodicity and radical irreducible uncertainty. Revolution.

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Phil 09.04.12 at 3:28 pm

the moral intuition that lending for profit is exploitative and that when a lender isn’t repaid he just got what’s coming to him

That’s one hell of a ‘moral intuition’.

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bob mcmanus 09.04.12 at 3:29 pm

What was the basis of the Great Compression, 1948-1978?

Well, after the century from 1848-1948, and the thirty years of nuclear terror that followed, radical uncertainty was embedded in the social and psychic fabric.

Debt objectifies, and I for one do not want people and society to become so calculable that real rates can rest steady at 2%. It’s immoral.

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Watson Ladd 09.04.12 at 4:10 pm

bob: Your question about freedom is good and deserves an answer that would be indulgent to give here. Let’s just say that while man is everywhere in chains, in modern society there exists a feeling of unfreedom that raises the possibility of politics to achieve freedom, and this politics is Marxism.

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Alex 09.04.12 at 4:18 pm

I think the widespread impression in the US nowadays is that there’s no such thing as bankruptcy for the 99%.

1.35 million people declared personal bankruptcy last year and they can’t all be in the 1%.

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Wonks Anonymous 09.04.12 at 7:20 pm

heteromeles, are you arguing for freezing the monetary base? Or deflation?

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Barry 09.04.12 at 7:23 pm

“Well, after the century from 1848-1948, and the thirty years of nuclear terror that followed, radical uncertainty was embedded in the social and psychic fabric.”

As opposed to 1748-1847?

And as for the nuclear terror, it had effects, but please note that the reaction was pretty much to get on with life. There’s not much evidence of the ‘radical uncertainty’ which prevents our delicate business flowers from blooming.

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bob mcmanus 09.04.12 at 7:47 pm

249: There’s not much evidence of the ‘radical uncertainty’ which prevents our delicate business flowers from blooming.

You pay way too much attention to the right and center-right, like most people here, defending so much you buy into their frames.

My contention in the above is that “radical uncertainty” in a Keynesian sense is exactly what gets real hard-capital investment and output going over a medium and long term, and the Great Moderation was not only immoral, but inhibited demand and technological advance compared to those eras of strong cyclic variability. Greenspan loved it, how could it not be conservative and plutocratic?

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Agog 09.04.12 at 9:19 pm

(Note to self: go back and assess how much criticism of ‘Debt’ merely amounts to a defense of bourgeois complacency.)

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Rumagin 09.04.12 at 9:56 pm

@ Agog

Absolutely! Beggs has bought into the cultural myth promoted by his own discipline. Of course that is little surprise he has been trained as a good PhD in the precise art of economics.

Economics is a social science until economists understand what that means for their entire discipline many will be lost and misleading us all till the day they die.

If it wasnt so sad i would laugh

Interesting debate nonetheless

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Watson Ladd 09.04.12 at 9:57 pm

bob, if you think you are going to die tomorrow, you aren’t going to invest.

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ragweed 09.05.12 at 6:34 pm

This is, in fact, what we already have. Debt in the modern world – personal, commercial, sovereign – is not regarded as sacred. Debts are written down all the time, and in extreme cases – at least for personal and commercial debt – they are written off through the bankruptcy courts, which is a far more sophisticated, more sensitive and less damaging technique than jubilee.

I think that point is debated, however, and Graeber is entering some points in that debate. In much of the popular discourse around debt, it is seen as something sacred, as a breaking of a promise. I have even heard examples where someone bragged that they “did the right thing” and personally paid off a $5oK loan for a failed business, rather than being “irresponsible” and declaring bankrupcty.

This view badly infects any discussion of extending additional debt relief to underwater homeowners, or students, even if it would be better for all concerned (of course the argument is also about “why should they get something I don’t”, but the sacredness of debt argument, or at least immorality of getting out of debt, is a big part of it).

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Substance McGravitas 09.05.12 at 6:42 pm

In much of the popular discourse around debt, it is seen as something sacred

Right. A system of resource allocation has somehow become morally equal to the social obligations around marriage, childbirth and death.

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Salient 09.05.12 at 8:03 pm

1.35 million people declared personal bankruptcy last year and they can’t all be in the 1%.

I suppose defending my statement by saying “I never said the widespread impression was actually true” is pretty lame of me, so instead I’ll abandon the earlier statement and defer to the more general thing that ragweed said in #254. (And I really should go hunt down some pre-BAPCPA bankruptcy rates.)

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