Debt

My preferred way of engaging with books is reconstruction. These notes were created during my reading process to aid my own understanding and not written for the purpose of instruction. With that said, I’ve decided to share these unedited notes on the off chance they are helpful to other readers. 

These book notes on Debt are separated into two parts. The first part is a short summary of the book. The second part is a reconstruction of each individual chapter.

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Part I: Summary

Graeber cherry-picks his data (some of which are factually wrong) to paint a daring yet distorted picture of economic history that is illuminating as it is biased.

His project, in the first four chapters, is to dismantle two popular economic ontologies.

He first (Chapter 2) outlines the liberal/capitalist theory of Adam Smith, suggesting that Smith falsely identifies the logic of “barter” as the constitutive human capacity to justify the market and establish economics as a discipline. What’s wrong with Smith, in Graeber’s view, is that the history he depicts (Barter > Money > Credit) happened exactly in the reverse! Pre-money societies weren’t dominated by barter as so much by neighbors keeping tabs on the goods they give to each other in aid (credit). On the historical stage, credit was the first mode of economic behavior, and it was only until after money came on the stage did people begin bartering when money was not available to them.

Next (Chapter 3), he moves on to the socialist/primordial debt theory of money. If Adam Smith assumed that we don’t owe any debts to anybody to begin with (freely trading agents), then this alternative theory assumes the opposite: humans start off with infinite debt to the cosmos. As proof, these theorists cite how religions are often framed in the language of debt. They further claim that the government inherits the right to this primordial debt – this naturally leads to a socialistic logic where the government has total control over money and the market. The critique that Graeber levels against these theorists is immanent: he shows that religious debt (debt towards the cosmos/God) and moral debt (obligations towards one’s family/society) is fundamentally different from the logic of economic debt.

In Chapter 4, Graeber gives his definition of money. Money is both a commodity (Smith) as well as an IOU (primordial debt). He goes on to reject the liberal ontologies of both liberal and socialist traditions. Drawing upon Nietzsche, Graeber shows that the liberal tradition (we don’t owe anyone anything) and the socialist tradition (we owe everyone everything) stems from the same false assumption: they take reciprocity to be the only logic that governs social relations. That is why both theories are limited in expressing human relations as “owing” something to another.

In Chapter 5, Graeber introduces three distinct types of social logic that he believes governs human relations. First, communism operates on the logic of “to each according to their need, from each according to their ability.” It describes the human impulse to help without expectation of return when the need is big enough or the ask is small enough. Second, exchange operates on the logic of equality. Both sides feel obliged to return to other what they received. This obligation is debt. Lastly, hierarchy operates on the logic of precedent: what is expected from a certain group currently is simply what has been expected from them before. With these threefold logic outlined, Graeber gives his definition of what debt is: an exchange that has not been brought to completion Debt is even more unbearable than hierarchy because it operates with the premises of exchange (equality) but within the reality of hierarchy (domination). He claims that the proliferation of the market and economics, has blinded us to both communism and hierarchy. 

In Chapters 6 and 7, Graeber presents his historical construction of how we transitioned from gift economies (without money, neighbors giving aid to each other operating on both communism and exchange) to market economies. This inevitably takes us to a middle stage: human economies. Human economies are where money first came to be. These currencies (“social” currencies) were never used to buy or self anything, they were used to rearrange relations between people (Think, precious objects used to settle blood feuds or rearrange marriages). Importantly, they were never seen as equivalent to the people they were rearranging. This incommensurability was an expression of the uniqueness and preciousness of human lives. In Chapter 6, Graeber details how human economies become perverted when they are introduced to market economies: these exact same social currencies which used to express the value of human life, became the price to purchase humans for slavery. In Chapter 7, Graeber details how the slow transformation of human economies to market economies corrupts social mores. A key concept for him is going to be honor because of its dual meaning. Honor used to be an expression of the dignity of a person, but with the introduction of money, honor came to measure the power through which one can take away the dignity of another.

Here is one way to reconstruct Graeber’s economic history.

First, you have primitive, communist societies. These are hunter gatherer societies operating almost exclusively on the logic of communism and hierarchy. These people rarely operate on exchange unless it is with an outsider. There is nothing like a currency.

Next, you have gift economies. These are economies where the primary mode of economic behavior is giving gifts to one’s neighbors and expecting a roughly equivalent gift in one’s own time of future need. This tab, either physical or in one’s mind, is the closest thing to a currency. But, there is no one single denomination.

The next progression is human economies. The primary mode of economic behavior might still be the same as gift economies. But key social currencies develop. What defines human economies is that these social currencies (one denomination for many different social events) are expressions of the value of each human life. They are not taken to be equivalent to human life.

Then, you have, what we can call “heroic societies.” Medieval Ireland, with its honor price, may be a good example. Again, the primary mode of economic behavior may still be gift giving within one small community. The big difference is that, now, there is a clearly defined and set price to “buy” a single person. That is to say currency is seen as equivalent to human lives.  

Lastly, you have market economies. This is where almost everything is seen as being tradeable with money. Of course, market economies vary greatly based on whether humans are tradeable (i.e. whether slavery is permitted). In the market economies which they are, human trading is even more perverse than in heroic societies: in heroic societies the currencies for an “honor price” aren’t equated with regular goods. That is to say there is no equivalence between a human and X number of shoes because the social currency is only used to exchange for humans. This is not true for market economies.

As you go down this progression (expanding the realm of things commensurable with money), Graeber wants to say that more violence is required. You need some degree of institutionalized violence to rearrange people in human economies and certainly to buy and sell slaves in heroic societies. He also wants to say that the concept of honor takes on a more perverse form. Whereas it signaled the dignity of a person in earlier societies, in the latter ones, honor is about your power to control others and protect people from being controlled. The idea is this: when humans become more tradeable and more easily uprooted from their social circumstance, it matters greatly whether one is the one doing the trading or being traded. Graeber sees this as the origin of patriarchy: it is only when the prostitution of debt-peons’ daughters and wives became pervasive did the most powerful men uphold chastity as a female virtue, preventing their women from engaging with public life. Another way to put this point is: as more things in the social world are denominated by money,  more things and people become easily commensurable and comparable. As a result, people’s sense of worth is defined more relatively.

Clearly, a big difference within market economies is whether people are tradeable. Another important difference is whether the underlying currency is virtual/credit or real/bullion. In the former case, such as Mesopotamia, even though all the tabs are kept in silver, silver did not circulate outside specific institutions. Virtual market economies will take on many characteristics of gift economies (e.g. one’s reputation being extremely important in doing business). Chapters 8 – 12 are a reconstruction of economic history that interprets history as oscillating between periods of virtual and real currencies. I will not summarize all the insights in this briefing, but merely highlight one last definition that Graeber makes: capital. Graeber takes capital to be currency which has an imperative to grow. One way he shows this is how politics and war served the ends of money in the capitalist empires while money served the ends of politics and war in the Axial age. Another way he shows this is by pointing to the fact that the ban against usury was circumvented in the capitalist empires because interest was seen as compensation to the creditor for the other profitable ventures he could have but did not put his money in. In other words, money was expected to grow.

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Part II: Reconstruction

Chapter 1

Graeber begins by giving a set of examples to show how deeply embedded yet complex (and confused) the concept of “debt” is.

Debt, in the global economy, can take upon many different forms. It can be what the weak owe the strong (e.g. Haiti, IMF). But, in the case of the US, it can also be owed from the strong to the weak. It is not the arrow of debt that determines who has the power but who controls the means of violence that shapes what these relationships look like and who ultimately benefits.

 Debt is also infused into our moral and even religious language. Jesus’ salvation is described as “redemption.” We constantly are lectured on what we “owe” others and society. And our moral language operates under the logic of debt. Yet, in this moral framework there is a moral confusion about debt. We seem to both hold the position that 1. We should all pay back our debts 2. Anyone who lends money is evil. This ambivalence manifests in another way. It seems both morally bankrupt to be in debt but also to repay all of one’s debts:

On the one hand, insofar as all human re­lations involve debt, they are all morally compromised. Both parties are probably already guilty of something just by entering into the relation­ ship; at the very least they run a significant danger of becoming guilty if repayment is delayed. On the other hand, when we say someone acts like they "don't owe anything to anybody," we're hardly describing the person as a paragon of virtue.

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Chapter 2: The Myth of Barter

Smith’s Founding Myth

Adam Smith was arguing against the Statist view of money: that money was created by the government. Presumably, because this would also give the government justification to intervene in matters of money ie. private property and the market.

Smith wanted to 1. Establish private property and the free market as an institution that shouldn’t be touched by the government (ie. Relegate the functioning of the government merely to preserving the functioning of markets) 2. Found the discipline of economics. He wanted to identify laws governing the market as systematic and deterministic as those of Newton's (of course, the only way to have these laws come to be is to assume that humans are rational calculating machines in it for their own interest). To justify the former, he goes to argue that markets and money really exist before the government. In fact, it is a natural evolution of primitive barter. To justify the latter, he needs to assume that in all matters of exchange, humans are merely looking to maximize their utility . In other words, economics (the sphere of exchange) had to be completely orthogonal to war, sex, honor, adventure, and any other human sphere. This was quite a novel thought in Smith's day as the idea that there existed the "economy" as a separate sphere was something new.

So Smith locates “a certain propensity in human nature . . . the propensity to truck, barter, and exchange one thing for another.”  Graeber draws out the implications of Smith’s assumption: “Humans, if left to their own devices, will inevitably begin swapping and comparing things. This is just what humans do. Even logic and conversation are really just forms of trading, and as in all things, humans will always try to seek their own best advantage, to seek the greatest profit they can from the exchange.” Smith legitimizes this desire to barter for self-interest as a constitutive capacity of humanity and then goes on to paint a state of nature which begins with simple barter, evolves at the invention of money as a unit of account, store of value, and medium of exchange, and finally develops credit and other more advanced financial instruments. With this progression of history, Smith can relegate the role of government to merely protecting the system of exchange that existed before it.

Flipping the Story 

The problem with this account of barter > money > credit is that there is no historical evidence for it. Barter only exists in two scenarios 1. When people who are used to the market (so people who exist after money was invented) live in an arrangement where money does not exist (think P.O.W. camp) 2. Before money was invented, you would only barter with strangers that you had no intention or expectation of coming across again. And this makes sense, you only want to maximize your own gain if you didn’t care about the other person:

What reason is there not to try to take advantage of such a person? If, on the other hand, one cares enough about someone-a neighbor, a friend-to wish to deal with her fairly and honestly, one will inevitably also care about her enough to take her individual needs, desires, and situation into account. Even if you do swap one thing for another, you are likely to frame the matter as a gift.

Instead what pre-money societies (what Graeber terms “gift economies”) usually operate on is more so credit than barter. You would go to your neighbor and simply ask for, say, a sandal with the expectation that you will give back something in the future in their time of need. There is also no unit of account here, as goods are separated into tiers. Where there is a social consensus that a chicken and a goose and a pair of sandals are roughly equivalent while an ox and a candle aren’t. Two important things to highlight here 1. These exchanges are usually framed in the language of gifts but there was a social expectation that there had to be an equivalence 2. This resolves the double coincidence of wants problem that money solves for Smith because you are eventually going to need something from your neighbor in the future. Ie. Everyone in a community expects to be with each other forever and so expect the balances to equal out eventually.

Even when money was invented, many times the coinage wasn’t available to the masses. So money became only the unit of account but not the medium of exchange nor store of value. People simply kept credit tabs denominated in currency:

 In the marketplaces that cropped up in Mesopotamian cities, pric­es were also calculated in silver, and the prices of commodities that weren't entirely controlled by the Temples and Palaces would tend to fluctuate according to supply and demand. But even here, such evidence as we have suggests that most transactions were based on credit. Mer­ chants (who sometimes worked for the Temples, sometimes operated independently) were among the few people who did, often, actually use silver in transactions; but even they mostly did much of their dealings on credit, and ordinary people buying beer from "ale women," or lo­cal innkeepers, once again, did so by running up a tab, to be settled at harvest time in barley or anything they might have had at hand.

Graeber draws his surprising conclusion: Smith’s account of money is completely backwards. It did not go from barter > money > credit. Instead, credit was the natural arrangement (our fundamental capacity isn’t to truck and barter but to lend and repay), money was invented after (through warfare), and it is only in a society dominated by money do we start view everything under the logic of barter: reciprocation and exchange.

In fact, systematic exchange as we see today shouldn’t be recognized as a natural extension of what humans naturally do but as a violent turn away from nature. It’s not the absence of the state that allows the market to prosper but the existence of a very specific type of state:

It's money that had made it possible for us to imagine ourselves in the way economists encourage us to do: as a collection of individuals and nations whose main business is swapping things. It's also clear that the mere existence of money, in itself, is not enough to allow us see the world this way. If it were, the discipline of economics would have been created in ancient Sumer, or anyway, far earlier than 1776, when Adam Smith's The Wealth of Nations appeared.

The missing element is in fact exactly the thing Smith was at­ tempting to downplay: the role of government policy. In England, in Smith's day, it became possible to see the market, the world of butchers, ironmongers, and haberdashers, as its own entirely independent sphere of human activity because the British government was actively engaged in fostering it. This required laws and police, but also, specific monetary policies, which liberals like Smith were (successfully) advo­cating. It required pegging the value of the currency to silver, but at the same time greatly increasing the money supply, and particularly the amount of small change in circulation. This not only required huge amounts of tin and copper, but also the careful regulation of the banks that were, at that time, the only source of paper money.

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Chapter 3: Primordial Debts

The century before smith, attempts to create state-supported banks, based off of a completely different view of money failed spectacularly:

The century before The Wealth of Nations had seen at least two attempts to create state-supported central banks, in France and Sweden, that had proven to be spectacular failures. In each case, the would-be cen­tral bank issued notes based largely on speculation that collapsed the moment investors lost faith. Smith supported the use of paper money, but like Locke before him, he also believed that the relative success of the Bank of England and Bank of Scotland had been due to their policy of pegging paper money firmly to precious metals. This became the mainstream economic view, so much so that alternative theories of money as credit-the one that Mitchell-Innes advocated-were quickly relegated to the margins, their proponents written off as cranks, and the very sort of thinking that led to bad banks and speculative bubbles in the first place.

This chapter examines the alternative to Smith’s view: money as credit.

The credit theorists insists that money is not a commodity with an intrinsic value but it is an accounting tool, a unit of measurement:

You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement, and as the credit theorists cor­rectly noted, historically, such abstract systems of accounting emerged long before the use of any particular token of exchange.

What does it measure? Debt: the promise of one person to pay another. You can see this is the case because gold coins usually circulate at face value and not the value of the underlying metal (which was usually less). Credit theorists insist that there is no real difference between credit such as a loan and money such as a gold coin. At the end of the day money is valuable because we always assume some person is going to accept it in exchange for a real good. Imagine if everyone in the world stopped accepting the USD, what we conceive of as “hard cash” will quickly take on the form of a defaulting credit relationship.

As primarily a mode of measurement, this theory has a more convincing story of how money came to be: the state. After all, the state is responsible for unifying the other modes of measurement. Of course unifying the measurement of debt under your currency gives you a degree of power that, say, unifying the measurement of height does not.

If we abide by the commodity theory of money, it becomes a puzzle why the state needs to collect taxes instead of, say, simply controlling the gold mines. Credit theorists explain this much more convincingly: by collecting taxes you are in effect dictating how people measure value, this often comes with enormous advantages for you since you can now create value out of thin air. Here is a hypothetical example:

Say a king wishes to support a stand­ing army of fifty thousand men. Under ancient or medieval conditions, feeding such a force was an enormous problem-unless they were on the march, one would need to employ almost as many men and ani­mals just to locate, acquire, and transport the necessary provisions. On the other hand, if one simply hands out coins to the soldiers and then demands that every family in the kingdom was obliged to pay one of those coins back to you, one would, in one blow, turn one's entire national economy into a vast machine for the provisioning of soldiers, since now every family, in order to get their hands on the coins, must find some way to contribute to the general effort to provide soldiers with things they want. Markets are brought into existence as a side effect.

Here is a historical example. Note that the primary role of tax collection here isn’t to collect value (he handed out the pieces of paper that he would eventually collect) but to create a cultural symbol and for formative reasons. This is even more powerful than the mere extraction of value as you are changing the rules by which the game is played:

This was particularly true in the colonial world. To return to Mad­agascar for a moment: I have already mentioned that one of the first things that the French general Gallieni, conqueror of Madagascar, did when the conquest of the island was complete in 1901 was to impose a head tax. Not only was this tax quite high, it was also only payable in newly issued Malagasy francs. In other words, Gallieni did indeed print money and then demand that everyone in the country give some of that money back to him.

Most striking of all, though, was language he used to describe this tax. It was referred to as the  the "educational" or "moralizing tax." In other words, it was designed-to adopt the language of the day-to teach the natives the value of work. Since the "educational tax" came due shortly after harvest time, the easiest way for farmers to pay it was to sell a portion of their rice crop to the Chinese or Indian merchants who soon installed themselves in small towns across the country.

 Money in today’s economy is, beyond a doubt, chartalist: created and stewarded by the state as a unit of measurement rather than a commodity with intrinsic value.

By the time of the Great Depression of the 1930s, the very notion that the market could regulate itself, so long as the government ensured that money was safe­ly pegged to precious metals, was completely discredited. From roughly 1933 to 1979, every major capitalist government reversed course and adopted some version of Keynesianism. Keynesian orthodoxy started from the assumption that capitalist markets would not really work unless capitalist governments were willing effectively to play nanny: most famously, by engaging in massive deficit "pump-priming" during downturns.

To be sure this does not mean that the state is the ONLY creator of money but that it is the most natural entity to do so.

Primordial Debt Theory

This may answer why the state started to create taxes but it does not justify the act as legitimate. Here, Graeber turns to primordial debt theory that suggests we are born with infinite debt towards society and the state becomes the embodiment of that creditor:

The core argument is that any attempt to separate monetary policy from social policy is ultimately wrong. Primordial-debt theorists insist that these have always been the same thing. Governments use taxes to create money, and they are able to do so because they have become the guardians of the debt that all citizens have to one another. This debt is the essence of society itself. It exists long before money and markets, and money and markets themselves are simply ways of chopping pieces of it up.

The argument goes that this intrinsic sense of infinite indebtedness was first channeled through religion. In the earliest of Hindu texts, debt was synonymous with sin and guilt. In fact, our entire lives are plagued with guilt because we are forever indebted to the gods – a debt that we pay through ritual sacrifice.

The next move of the argument is to say that the state becomes the middleman between the gods and us in terms of repayment. We conceive the creditor of this debt as shifting from the gods to the entirety of society (not just the state but also, say, our fathers):

The first kings were sacred kings who were either gods in their own right or stood as privileged mediators between human beings and the ultimate forces that governed the cosmos. This sets us on a road to the gradual realization that our debt to the gods was always, really, a debt to the society that made us what we are.

In support of this genealogy, we can look at how often early currencies (cattle in Homeric Greece) were also what was offered in sacrifice to the gods. Ie. currency is that which was most fitting to giving to the gods.

But these debt theorists need to answer another important question: how did money become quantifiable? After all, I may wholeheartedly believe that I owe the state or someone I wronged cows, but still unsure how many cows I owe.

The next argumentative move of debt theorists is to say that currencies (that could be quantified) first developed not to acquire things but to rearrange relations, especially when settling disputes.

There is every reason to believe that our own money started the same way-even the English word "to pay" is originally derived from a word for "to pacify, appease"-as in, to give someone something precious, for instance, to express just how badly you feel about having just killed his brother in a drunken brawl, and how much you would really like to avoid this becoming the basis for an ongoing blood-feud.

The key insight here is that equivalence between qualitatively different goods (chicken vs. cows) is impossible to arrive at. The reason that we have arrived at ratios of equivalence must come from the specific instances where the human desire for equivalence is the strongest: when one feels wronged. In other words, the very ability for humans to think about any form of identity between objects and concepts lies in the strong urge to establish equivalence in moral relations between humans:

I've already remarked how difficult it is to imagine how a system of precise equivalences-one young healthy milk cow is equivalent to exactly thirty-six chickens-could arise from most forms of gift exchange. If Henry gives Joshua a pig and feels he has received an inadequate counter-gift, he might mock Joshua as a cheapskate, but he would have little occasion to come up with a mathematical formula for precisely how cheap he feels Joshua has been. On the other hand, if Joshua's pig just destroyed Henry's garden, and especially, if that led to a fight in which Henry lost a toe, and Henry's family is now hauling Joshua up in front of the village assembly-this is precisely the context where people are most likely to become petty and legalistic and express out­ rage if they feel they have received one groat less than was their rightful due. That means exact mathematical specificity: for instance, the capacity to measure the exact value of a two-year-old pregnant sow. What's more, the levying of penalties must have constantly required the calculation of equivalences. Say the fine is in marten pelts but the culprit's clan doesn't have any martens. How many squirrel skins will do? Or pieces of silver jewelry? Such problems must have come up all the time and led to at least a rough-and-ready set of rules of thumb over what sorts of valuable were equivalent to others. This would help explain why, for instance, medieval Welsh law codes can contain detailed breakdowns not only of the value of different ages and conditions of milk cow, but of the monetary value of every object likely to be found in an ordinary homestead, down to the cost of each piece of timber-despite the fact that there seems no reason to believe that most such items could even be purchased on the open market at the time.

The intuitions behind primordial debt theory (there is thing called society, we are indebted to it, governments are secular gods and natural representatives of it) came out of the French revolution: during the birth of the modern state. If the commodity theory of money has led to the liberal capitalist empires of the 20th century, then the credit theory of money has led to the socialist ones. The USSR, for example, often employed Vedic logic to justify preventing emigration:

The argument was always: The USSR created these people, the USSR raised and educated them, made them who they are. What right do they have to take the product of our investment and transfer it to another country, as if they didn't owe us anything? Neither is this rhetoric restricted to socialist regimes. Nationalists appeal to exactly the same kind of arguments--especially in times of war. And all mod­ ern governments are nationalist to some degree.

One might even say that what we really have, in the idea of pri­mordial debt, is the ultimate nationalist myth. Once we owed our lives to the gods that created us, paid interest in the form of animal sacrifice, and ultimately paid back the principal with our lives. Now we owe it to the Nation that formed us, pay interest in the form of taxes, and when it comes time to defend the nation against its enemies, to offer to pay it with our lives.

In summary, the Primordial Debt theorists’ justification for taxation is that it is a constant in human nature to think of us as infinitely indebted to the world. We can see this urge of human nature in our earliest relationship with gods. The state is the natural entity to steward this debt.

The Problem with Primordial-Debt Theory

Graeber’s problem with Primordial-Debt theory is that it starts off on the wrong premise: that we begin with infinite indebtedness to the world. This poses a few challenges. First, who are we exactly indebted to? Is it all of humanity or a specific subgroup. Second, how do we pay a debt so diffuse and unspecified. Third, who possibly has the authority to act as the creditor: to tell us how to repay our debts.

 These paradoxes become apparent when we look at how Vedic interpreters conceive of how we ought to repay such a debt:

• To the universe, cosmic forces, as we would put it now, to Nature. The ground of our existence. To be repaid through ritual: ritual be­ing an act of respect and recognition to all that beside which we are small.

• To those who have created the knowledge and cultural accom­plishments that we value most; that give our existence its form, its meaning, but also its shape. Here we would include not only the philosophers and scientists who created our intellectual tradition but everyone from William Shakespeare to that long-since-forgotten woman, somewhere in the Middle East, who created leavened bread. We repay them by becoming learned ourselves and contributing to human knowledge and human culture.

• To our parents, and their parents-our ancestors. We repay them by becoming ancestors.

• To humanity as a whole. We repay them by generosity to strang­ers, by maintaining that basic communistic ground of sociality that makes human relations, and hence life, possible.

What’s odd is that this logic functions nothing like a commercial debt. The way to repay here is to merge with your creditor. Perhaps the real crime is thinking that we are separate and equal enough to enter into debt relationships with these entities. Ie. Thinking that we are in debt or guilty to these entities, implies our belief in our separation from and equality with them, that is what we are really guilty of:

Or even that the very presumption of positing oneself as separate from humanity or the cosmos, so much so that one can enter into one-to-one dealings with it, is itself the crime that can be answered only by death. Our guilt is not due to the fact that we cannot repay our debt to the universe. Our guilt is our presumption in thinking of ourselves as being in any sense an equivalent to Everything Else that Exists or Has Ever Existed, so as to be able to conceive of such a debt in the first place

Perhaps what the Vedic commentators were trying to show by framing our relationship with the cosmos in the language of debt is that it cannot be fundamentally framed in the language of debt.

In fact, we can find the same tension in Christianity as well. It may be odd to think about the coming of Christ in the language of a financial transaction: "Redeemer." But if we dig closer we will see that to redeem is not referring to paying one's debts but to the removal of all debts: the destruction of the accounting system. In similar manner, financial language is used to show the inadequacy of financial language:

Nehemiah was a Jew born in Babylon, a former cup-bearer to the Persian emperor. In 444 Be, he managed to talk the Great King into appointing him governor of his native Judaea. He also received per­ mission to rebuild the Temple in Jerusalem that had been destroyed by Nebuchadnezzar more than two centuries earlier. In the course of rebuilding, sacred texts were recovered and restored; in a sense, this was the moment of the creation of what we now consider Judaism.

The problem was that Nehemiah quickly found himself confronted with a social crisis. All around him, impoverished peasants were un­ able to pay their taxes; creditors were carrying off the children of the poor. His first response was to issue a classic Babylonian-style "clean slate" edict-having himself been born in Babylon, he was clearly fa­miliar with the general principle. All non-commercial debts were to be forgiven. Maximum interest rates were set. At the same time, though, Nehemiah managed to locate, revise, and reissue much older Jewish laws, now preserved in Exodus, Deuteronomy, and Leviticus, which in certain ways went even further, by institutionalizing the principle. The most famous of these is the Law of Jubilee: a law that stipulated that all debts would be automatically cancelled "in the Sabbath year" (that is, after seven years had passed), and that all who languished in bondage owing to such debts would be released.

"Freedom," in the Bible, as in Mesopotamia, came to refer above all to release from the effects of debt. Over time, the history of the Jew­ish people itself came to be interpreted in this light: the liberation from bondage in Egypt was God's first, paradigmatic act of redemption; the historical tribulations of the Jews (defeat, conquest, exile) were seen as misfortunes that would eventually lead to a final redemption with the coming of the Messiah-though this could only be accomplished, prophets such as Jeremiah warned them, after the Jewish people truly repented of their sins (carrying each other off into bondage, whoring after false gods, the violation of commandments)Y In this light, the adoption of the term by Christians is hardly surprising. Redemption was a release from one's burden of sin and guilt, and the end of history would be that moment when all slates are wiped clean and all debts finally lifted when a great blast from angelic trumpets will announce the final Jubilee.

If so, "redemption" is no longer about buying something back. It's really more a matter of destroying the entire system of account­ing. In many Middle Eastern cities, this was literally true: one of the common acts during debt cancelation was the ceremonial destruction of the tablets on which financial records had been kept, an act to be repeated, much less officially, in just about every major peasant revolt in history.

Furthermore in the Lord's prayer, we say "forgive us of our debts as we forgive those of our debtors." The problem is we don't forgive our debtors at all. The implicit message here could be, again, that the forgiveness by God (first half of the sentence) can't possibly be framed in the language of financial transactions:

What's more, there is the lingering suggestion that we really couldn't live up to those standards, even if we tried. One of the things that makes the Jesus of the New Testament such a tantalizing character is that it's never clear what he's telling us. Everything can be read two ways. When he calls on his followers to forgive all debts, refuse to cast the first stone, turn the other cheek, love their enemies, to hand over their possessions to the poor-is he really expecting them to do this? Or are such demands just a way of throwing in their faces that, since we are clearly not prepared to act this way, we are all sinners whose salvation can only come in another world-a position that can be (and has been) used to justify almost anything? This is a vision of human life as inherently corrupt, but it also frames even spiritual affairs in com­ mercial terms: with calculations of sin, penance, and absolution, the Devil and St. Peter with their rival ledger books, usually accompanied by the creeping feeling that it's all a charade because the very fact that we are reduced to playing such a game of tabulating sins reveals us to be fundamentally unworthy of forgiveness.

Graeber's claim is that all of these religions arose in the Axial age when markets and coinage first started to dominate and enter into the way that we have conceived of things. That is why these traditions framed relationships with god and morality in general as financial transactions. But they all go to show by this very framing how morality cannot be conceived of in these terms.

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Chapter 4: Cruelty and Redemption

What is Money

Graeber affirms both theories’ (primordial debt and barter) understanding of what money is. Money is both a commodity and an IOU. It can’t be just the former because people never needed it to make barter easier. But it also can’t just be the latter because trust is hard to come by. In other words, if your IOU also has intrinsic value (as a commodity) it would make for better money because it would be harder to fabricate. This is why a gold coin with an emperor’s face stamped on it often went for higher than the value of the metal (added trust that the emperor would accept it).

Historically, money would alter between IOU and commodity. In periods of low trust (war) money had to be more of a commodity (gold). In periods of high trust (stability) money was more likely to be IOU (USD). In fact, learning what is accepted as currency often tells you a great deal of the political landscape:

One could often learn a lot about the balance of political forces in a given time and place by what sorts of things were accept­ able as currency. For instance: in much the same way that colonial Virginia planters managed to pass a law obliging shopkeepers to ac­cept their tobacco as currency, medieval Pomeranian peasants appear to have at certain points convinced their rulers to make taxes, fees, and customs duties, which were registered in Roman currency, actually payable in wine, cheese, peppers, chickens, eggs, and even herring­ much to the annoyance of traveling merchants, who therefore had to either carry such things around in order to pay the tolls or buy them locally at prices that would have been more advantageous to their suppliers for that very reason. This was in an area with a free peasantry, rather than serfs. They were in a relatively strong political position. In other times and places, the interests of lords and merchants prevailed instead.

What isn’t Morality

Paradoxically, after accepting both theories’ view of money, he goes on to reject both of their views of morality: that we are either not indebted to anyone at all or fully indebted to the cosmos. He paints this as a false dichotomy that supposedly contains between them the realm of possibility. Where they both start off with (and get wrong on) is to think that commercial relations (debt and exchange) encompasses the whole of moral relations.

Graeber draws upon Nietzsche to show how, if we start off with Smith’s premise of humans as creatures of exchange, capable of creating debts freely, we will naturally conceive of our relationship with the cosmos in debt as well.

Nietzsche's second essay in the genealogy details how the logic of debt transitioned to the logic of guilt. The starting state is when punishment is conceived of as a repayment of debt. Specifically, the creditor rejoices in the pain inflicted upon the debtor. This is considered cheerful because the debts are sought to be squared after this act of punishment and both can go about on their own ways. Guilt certainly existed, but only before the act of punishment. The guilt was clearly identifiable and small enough that you would be rid of your guilt once you submit yourself to the equivalent level of punishment. This was the basis of social structures and relationships:

The feeling of guilt, of personal obligation, has its origin in the oldest and most primitive personal rela­tionship there is, in the relationship between seller and buyer, creditor and debtor. Here for the first time one person moved up against another person, here an individual measured himself against another individual. We have found no civilization still at such a low level that something of this relationship is not already perceptible. To set prices, to measure values, to think up equivalencies, to exchange things-that preoccupied man's very first thinking to such a degree that in a certain sense it's what thinking itself is. Here the oldest form of astuteness was bred; here, too, we can assume are the first beginnings of man's pride, his feeling of pre-eminence in relation to other animals. Perhaps our word "man" (manas) continues to ex­ press directly something of this feeling of the self: the human being describes himself as a being which assesses values, which values and measures, as the "inherently calculating animal." Selling and buying, together with their psychological attributes, are even older than the beginnings of any form of social orga­nizations and groupings; out of the most rudimentary form of personal legal rights the budding feeling of exchange, contract, guilt, law, duty, and compensation was instead first transferred to the crudest and earliest social structures (in their relation­ ships with similar social structures), along with the habit of comparing power with power, of measuring, of calculating.

(Again, we see here the thesis that our intellectual capabilities for calculation and comparison come from our urge for moral comparison)

The transition has five interlinked movements: 1. the ascription of free will to the debtor: the debtor is now being punished because he could've done otherwise 2. the expansion of the creditor: when we enter into society this logic of debt becomes natural way we conceive of our relationship with the community. The creditor expands even more when we conceive of our relationship with the cosmos or God in this way. 3. As the creditor expands so does the debt. It both increases as well as becomes amorphous to the point where there is no possibility of you paying it off. The debt becomes constant. 4. the internalization of the will to power: prior, the will to power was directed externally when experiencing joy when watching the pain of your creditor. Now, the will to power is directed within yourself, your "free will", and feeling bad about your own inclinations. 5. the shift of focus from the creditor to the debtor: the act of punishment is now not to reward the creditor but because the debtor deserves this.

With these five moments we've started from debt and arrived at an ell encompassing guilt, a bad consciousness.

Graeber emphasizes the second of these movements to show how Nietzsche's genealogical story reveals that the myth of barter and the myth of primordial-debt really start from the same premises. Specifically, if you view human relations exclusively in terms of exchange, as the former does, you will naturally conceive of your relationship with society, the cosmos, and God in such a manner, as the latter does:

When humans did begin to form communities, Nietzsche contin­ues, they necessarily began to imagine their relationship to the com­ munity in these terms. The tribe provides them with peace and security. They are therefore in its debt. Obeying its laws is a way of paying it back ("paying your debt to society" again). But this debt, he says, is also paid-here too-in sacrifice:

Within the original tribal cooperatives-we're talking about primeval times-the living generation always acknowledged a legal obligation to the previous generations, and especially to the earliest one which had founded the tribe [ . . . ] Here the reigning conviction is that the tribe only exists at all only be­ cause of the sacrifices and achievements of its ancestors-and that people have to pay them back with sacrifices and achieve­ ments. In this people recognize a debt which keeps steadily growing because these ancestors in their continuing existence as powerful spirits do not stop giving the tribe new advantages and lending them their power. Do they do this for free? But there is no "for free" for those raw and "spiritually destitute" ages. What can people give back to them? Sacrifices (at first as nourishment understood very crudely), festivals, chapels, signs of honor, above all, obedience--for all customs, as work of one's ancestors, are also their statutes and commands. Do peo­ple ever give them enough? This suspicion remains and grows.

In other words, for Nietzsche, starting from Adam Smith's as­sumptions about human nature means we must necessarily end up with something very much along the lines of primordial-debt theory. On the one hand, it is because of our feeling of debt to the ancestors that we obey the ancestral laws: this is why we feel that the community has the right to react "like an angry creditor" and punish us for our transgressions if we break them. In a larger sense, we develop a creeping feeling that we could never really pay back the ancestors, that no sacrifice (not even the sacrifice of our first-born) will ever truly redeem us. We are terrified of the ancestors, and the stronger and more powerful a com­ munity becomes, the more powerful they seem to be, until finally, "the ancestor is necessarily transfigured into a god." As communities grow into kingdoms and kingdoms into universal empires, the gods them­ selves come to seem more universal, they take on grander, more cosmic pretentions, ruling the heavens, casting thunderbolts-culminating in the Christian god, who, as the maximal deity, necessarily "brought about the maximum feeling of indebtedness on earth." Even our ances­tor Adam is no longer figured as a creditor, but as a transgressor, and therefore a debtor, who passes on to us his burden of Original Sin:

Finally, with the impossibility of discharging the debt, people also come up with the notion that it is impossible to remove the penance, the idea that it cannot be paid off ("eternal punishment") . . . until all of a sudden we confront the paradoxi­cal and horrifying expedient with which a martyred humanity found temporary relief, that stroke of genius of Christianity: God sacrificing himself for the guilt of human beings, God paying himself back with himself, God as the only one who can re­ deem man from what for human beings has become impossible to redeem-the creditor sacrificing himself for the debtor, out of love (can people believe that?), out of love for his debtor!

It is this false assumption: that all morality can be framed in the language of commercial transactions that is problematic. In fact, rather than seeing the ability to calculate and keep tabs as that which is quintessentially human, egalitarian societies often saw it as not doing so as what makes us human. Graeber will later argue that to be able to reduce morality to debt, to impersonal numbers requires us to violently strip out all our moral relationships to things and other people:

Freuchen tells how one day, after coming home hungry from an unsuccessful walrus-hunting expedition, he found one of the successful hunters dropping off several hundred pounds of meat. He thanked him profusely. The man objected indignantly: "Up in our country we are human!" said the hunter. "And since we are human we help each other. We don't like to hear anybody say thanks for that. What I get today you may get tomorrow. Up here we say that by gifts one makes slaves and by whips one makes dogs."

The last line is something of an anthropological classic, and simi­lar statements about the refusal to calculate credits and debits can be found through the anthropological literature on egalitarian hunt­ing societies. Rather than seeing himself as human because he could make economic calculations, the hunter insisted that being truly human meant refusing to make such calculations, refusing to measure or remember who had given what to whom, for the precise reason that doing so would inevitably create a world where we began "comparing power with power, measuring, calculating" and reducing each other to slaves or dogs through debt.

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Chapter 5: A Brief Treatise on the Moral Grounds of Economic Relations

If, as the religious traditions show morality cannot be conceived of in the logic of debt, how can morality be conceived? Graeber suggests three types of moral logic: communism, exchange, and hierarchy. Debt is merely the obligation generated within exchange. Communism and hierarchy will have their own obligations.  

Communism

Communism is governed by the principle of “from each according to their abilities, to each according to their needs.” The obligation is to help others when they need it and to contribute according to one’s abilities. Any small team or social unit operates in this way. 

If the “from each” element is small enough (asking for directions) or the “to each” element is big enough relative to the “from each” (someone is drowning) we expect people who are not explicitly enemies to operate under this logic.

But of course, the extent to which someone follows this logic is determined by the society. Often, if this is the dominant logic of a community, there is a presumption of eternity, that you are always going to be interacting with them. And there is some shared identity (e.g. tribesman, or humanity).

“The surest way to know that one is in the presence of commu­nistic relations is that not only are no accounts taken, but it would be considered offensive, or simply bizarre, to even consider doing so.” For example if siblings always kept tallies of who helped who.

We almost operate on this logic to some degree even in commerce: e.g. merchants reducing prices for the needy.

Exchange

The logic of exchange is equivalence. Both sides feel obliged to return to other what they received. This obligation is debt. Framed in this abstract way it is clear that exchange is not always about sharing value (commerce) but can also be an exchange of blows or warfare. Different from communism, actors within exchange keep clear accounts.

Instead of a common shared identity, as in the case with communism, parties in exchange are defined by equality. This is also why I wouldn’t feel the need to reciprocate if Bill Gates treated me out to dinner but would if my friend did:

In exchange, the objects being traded are seen as equivalent. There­fore, by implication, so are the people: at least, at the moment when gift is met with counter-gift, or money changes hands; when there is no further debt or obligation and each of the two parties is equally free to walk away. This in turn implies autonomy.

Certainly, sometimes, what each side is aiming for is not equivalence but to outdo the other. But the logic is similar: to return what one received with interest – it is still equivalence in a looser term. (This is why exchange can transform into hierarchy) So the relationship as a whole tends towards equilibrium even if both parties aim to break equilibrium.

Furthermore, there is no presumption of eternity and there is always a possibility that the relationship could end. Thus, communities based on exchange needs to always be maintained and repayments of exactly the same amount seem offensive because they represent an urge to square accounts and stop all future dealings:

Exchange allows us to cancel out our debts. It gives us a way to call it even: hence, to end the relationship. With vendors, one is usu­ ally only pretending to have a relationship at all. With neighbors, one might for this very reason prefer not to pay one's debts. Laura Bohannan writes about arriving in a Tiv community in rural Nigeria; neighbors immediately began arriving bearing little gifts: "two ears corn, one vegetable marrow, one chicken, five tomatoes, one handful peanuts." Having no idea what was expected of her, she thanked them and wrote down in a notebook their names and what they had brought. Eventually, two women adopted her and explained that all such gifts did have to be returned. It would be entirely inappropriate to simply accept three eggs from a neighbor and never bring anything back. One did not have to bring back eggs, but one should bring some­ thing back of approximately the same value. One could even bring money-there was nothing inappropriate in that-provided one did so at a discreet interval, and above all, that one did not bring the exact cost of the eggs. It had to be either a bit more or a bit less. To bring back nothing at all would be to cast oneself as an exploiter or a parasite. To bring back an exact equivalent would be to suggest that one no longer wishes to have anything to do with the neighbor. Tiv women, she learned, might spend a good part of the day walking for miles to distant homesteads to return a handful of okra or a tiny bit of change, "in an endless circle of gifts to which no one ever handed over the precise value of the object last received"-and in doing so, they were continually creating their society. There was certainly a trace of communism here--neighbors on good terms could also be trusted to help each other out in emergencies-but unlike communistic relations, which are assumed to be permanent, this sort of neighborliness had to be constantly created and maintained, because any link can be broken off at any time.

Finally, relationships of pure exchange are hard to identify because we have an urge to pretend we are more than just calculating machines wanting nothing to do with each other after the transaction. So even parties haggling in a night market might feel pressured to put on a more personable façade.

Hierarchy 

Hierarchy operates on the logic of precedent: what is expected from a certain group currently is simply what has been expected from them before. In fact, it is dangerous to give gifts to people higher up or lower than you for this precise reason: that it will be considered precedent.

And this makes sense: in communism, ability and need specify what was done. In exchange, equivalence demanded what was to be exchanged. There is no inherent logic of hierarchy (it is saying that the parties are inherently different and incommensurable) as there is in the other two, so the logic is simply based on precedent.

In relations of hierarchy, there develops identities or essential natures. Someone does something because it is in their nature to do so. That is why hierarchy may be a misleading name here, it’s not so much an objective ranking of different natures but a recognition of different natures (that may not be able to be ordinally ranked) which separates it from communism and exchange:

Often, such arrangements can turn into a logic of caste: certain clans are responsible for weaving the ceremonial garments, or bringing the fish for royal feasts, or cutting the king's hair. They thus come to be known as weavers or fishermen or barbers. This last point can't be overemphasized because it brings home another truth regularly over­ looked: that the logic of identity is, always and everywhere, entangled in the logic of hierarchy. It is only when certain people are placed above others, or where everyone is being ranked in relation to the king, or the high priest, or Founding Fathers, that one begins to speak of people bound by their essential nature: about fundamentally differ­ent kinds of human being. Ideologies of caste or race are just extreme examples. It happens whenever one group is seen as raising themselves above others, or placing themselves below others, in such a way that ordinary standards of fair dealing no longer apply.

In fact, something like this happens in a small way even in our most intimate social relations. The moment we recognize someone as a different sort of person, either above or below us, then ordinary rules of reciprocity become modified or are set aside. If a friend is unusually generous once, we will likely wish to reciprocate. If she acts this way repeatedly, we conclude she is a generous person, and are hence less likely to reciprocate.

We can describe a simple formula here: a certain action, repeated, becomes customary; as a result, it comes to define the actor's essential nature.

In like manner, not only is there a qualitative difference between people but there is also a qualitative difference between the goods exchanged.

Hierarchy, however, can be merely a channel of redistribution:

In much of Papua New Guinea, social life centers on "big men," charismatic individuals who spend much of their time coaxing, cajoling, and manipulating in order to acquire masses of wealth to give away again at some great feast. One could, in practice, pass from here to, say, an Amazonian or indigenous North American chief. Unlike big men, their role is more formalized; but actually such chiefs have no power to compel anyone to do anything they don't want to (hence North American Indian chiefs' famous skill at oratory and powers of persuasion). As a result, they tended to give away far more than they received. Observers often remarked that in terms of personal posses­sions, a village chief was often the poorest man in the village, such was the pressure on him for constant supply of largesse.

There tends to be a correlation between how much wealth is gathered on the top and how violently it is gathered with how spectacular my act of giving it away must be and how much I have to foster identities within a group. The idea must be this: if I gathered a lot of wealth through wealth and plunder, the only way I could justify this is if I tell a story about how some people (e.g. the rich) are essentially bad in nature. I must also, the idea goes, make a big show of giving it away to alleviate the tensions I created from my plundering. The redistributive state has its origins more in hierarchy then communism:

And what is true of warrior aristocracies is all the more true of ancient states, where rulers almost invariably represented themselves as the protectors of the helpless, supporters of widows and orphans, and champions of the poor. The genealogy of the modern redistributive state-with its notorious tendency to foster identity politics-can be traced back not to any sort of "primitive com­munism" but ultimately to violence and war.

 Stage Transitions

Graeber concedes that 1. Every relationship is probably a mixture of these three 2. These three relations can easily descend into the other. (Although some transitions from communism to exchange, for example, are much more difficult) The reason we think that everything is exchange however is because 1. How much the market has penetrated into our everyday thinking (historically contingent) 2. As humans, we have a natural tendency to envision justice as symmetry and therefore reciprocity. 

We are at a point where we can meaningfully answer what “Debt” is: “an exchange that has not been brought to completion.” Debt has to happen between two separate equals. It can neither be between relations of communism (where no one is keeping tallies) nor hierarchies (where things are expected from certain people). Furthermore, there must still be, at least the logical possibility, of them returning to equality:

This is what makes situations of effectively unpayable debt so dif­ficult and so painful. Since creditor and debtor are ultimately equals, if the debtor cannot do what it takes to restore herself to equality, there is obviously something wrong with her; it must be her fault.

This connection becomes clear if we look at the etymology of common words for "debt" in European languages. Many are synonyms for "fault," "sin," or "guilt;" just as a criminal owes a debt to society, a debtor is always a sort of criminal.

What is so peculiar about debt is that it only exists when the exchange has not completed, when only one party has transacted. Therefore, debt, despite grounded in the morality of equal exchange, also somewhat operates on the logic of hierarchy. The relationship with you and your debtor is an uncomfortable mix between hierarchy and equality:

Debtor and creditor confront each other like a peasant before a feudal lord. The law of precedent takes hold. If you bring your creditor tomatoes from the garden, it never occurs to you that he would give something back. He might expect you to do it again, though.

 This is neither a good nor bad thing in itself. On the positive side, debt puts people who otherwise would have nothing to do with each other (this is what equality implies: seperation) into moral relationships:

Debt is what happens in between: when the two parties cannot yet walk away from each other, because they are not yet equal. But it is carried out in the shadow of eventual equality. Because achieving that equality, however, destroys the very reason for having a relation­ ship, just about everything interesting happens in between. In fact, just about everything human happens in between-even if this means that all such human relations bear with them at least a tiny element of criminality, guilt, or shame.

For the Tiv women whom I mentioned earlier in the chapter, this wasn't much of a problem. By ensuring that everyone was always slightly in debt to one another, they actually created human society, if a very fragile sort of society-a delicate web made up of obligations to return three eggs or a bag of okra, ties renewed and recreated, as any one of them could be cancelled out at any time.

A Culture of “Please” and “Thank You”

Our insistence on saying “please” and “thank you” reveals the commercial nature of our culture. These words imply that you are dealing with equal and separate individuals that could have done otherwise. In hierarchy, a lord will never thank a barber for fulfilling his function: that is what he IS. Similarly, in communism, it would be extremely weird for a child to thank her mother for every act of help because it would imply that the child expected the mother to not be so caring. What this tells us is, first and foremost, that we think we live in a community of separate, equal, and essence-less individuals. “It is also merely one token of a much larger philosophy, a set of assumptions of what humans are and what they owe one another, that have by now become so deeply ingrained that we cannot see them.”

But it is even more interesting when we look at the etymologies for these phrases.

Saying please means, literally and etymologically, that you have no obligation to do something. But, of course, there is an obligation:

In fact, the English "please" is short for "if you please," "if it pleases you to do this"-it is the same in most European languages (French si il vous plait, Spanish por favor). Its literal meaning is "you are under no obligation to do this." "Hand me the salt. Not that I am saying that you have to!" This is not true; there is a social obligation, and it would be almost impossible not to comply. But etiquette largely consists of the exchange of polite fictions (to use less polite language, lies). When you ask someone to pass the salt, you are also giving them an order; by attaching the word "please," you are saying that it is not an order. But, in fact, it is.

In like manner, the literal meaning of “thank you” is that I will record done what you did for me (breaking equal relationship and entering into debt). But the implied meaning of it is that we didn’t have any relationship to begin with and you could of not done that.

In English, "thank you" derives from "think," it originally meant, "I will remember what you did for me''-which is usually not true either-but in other languages (the Portuguese obrigado is a good example) the standard term follows the form of the English "much obliged"-it actually does means "I am in your debt." The French merci is even more graphic: it derives from "mercy," as in begging for mercy; by saying it you are symbolically placing yourself in your bene­ factor's power-since a debtor is, after all, a criminal. Saying "you're welcome," or "it's nothing" (French de rien, Spanish de nada)-the latter has at least the advantage of often being literally true-is a way of reassuring the one to whom one has passed the salt that you are not actually inscribing a debit in your imaginary moral account book. So is saying "my pleasure"-you are saying, "No, actually, it's a credit, not a debit-you did me a favor because in asking me to pass the salt, you gave me the opportunity to do something I found rewarding in itself!"

What this reveals is two things. First, how we are really ignoring relationships that are actually hierarchical and communistic: that is why there is a dual and conflicting meaning of these phrases.

Second, it shows the fragility of equality in our culture. Much like the schizophrenic logic of debt which sits uncomfortably between equality and hierarchy so too does our everyday relationships. The literal meaning of “please” is that we are free individuals with no obligations, yet the social meaning is that you are obliged to help me. The literal meaning of “thank you” is that I am in your debt and have obligations towards you, whereas the implication of even saying it in the first place is that we had no obligations towards each other.

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Chapter 6: Games with Sex and Death

 If we just view economic history in the logic of equal exchange then we will be overlooking much of human activity. Even exchange itself, at the extremes, takes upon logic of communism or hierarchy.

 Graeber begins telling his version of economic history that goes from credit > money > barter. Early communities begin with people operating on gifts. They kept accounting by agreeing upon a rough equivalence between goods, money didn’t necessarily have to form. Money begins forming in “human economies” and takes upon their modern form in “market economies” which tend to oscillate between virtual and real forms of money. And it is only in this last evolution to “market economies” do we establish our propensity to barter: to quantify and equate.

To understand the modern intuitions of money and debt we, therefore, have to understand the transition from human economies to market economies. In this chapter, we examine what happens when human economies are exposed to market economies. In the next, we see how the transition naturally happens.

Money in Human Economies

 Graeber’s definition of human economies:

 Currencies are never used to buy and sell anything at all. Instead, they are used to create, maintain, and otherwise reor­ganize relations between people: to arrange marriages, establish the paternity of children, head off feuds, console mourners at funerals, seek forgiveness in the case of crimes, negotiate treaties, acquire followers­ almost anything but trade in yams, shovels, pigs, or jewelry.

Often, these currencies were extremely important, so much so that social life itself might be said to revolve around getting and disposing of the stuff. Clearly, though, they mark a totally different conception of what money, or indeed an economy, is actually about. I've decided therefore to refer to them as "social currencies," and the economies that employ them as "human economies." By this I mean not that these societies are necessarily in any way more humane (some are quite hu­mane; others extraordinarily brutal), but only that they are economic systems primarily concerned not with the accumulation of wealth, but with the creation, destruction, and rearranging of human beings.

The role of money in human economies is not to buy things, it is not to establish equivalence. It is a recognition that an equivalence can never be made. Take “bride price” for example. It may look like you are buying a wife, but that would be inaccurate because 1. You can’t sell the wife 2. You have moral obligations to her 3. There is no equivalent amount of goods you can give for her, you continuously need to pay, and no one would think that your debt to the family has been repaid. In this example, the prestigious brass rods are a symbol that you know there is a debt that can never be repaid, that money and a person are qualitatively different things incapable of equivalence:

The Tiv at that time used bundles of brass rods as their most prestigious form of currency. Brass rods were only held by men, and never used to buy things in markets (mar­kets were dominated by women); instead, they were exchanged only for things that men considered of higher importance: cattle, horses, ivory, ritual titles, medical treatment, magical charms. It was possible, as one Tiv ethnographer, Akiga Sai, explains, to acquire a wife with brass rods, but it required quite a lot of them. You would need to give two or three bundles of them to her parents to establish yourself as a suitor; then, when you did finally make off with her (such marriages were always first framed as elopements), another few bundles to as­suage her mother when she showed up angrily demanding to know what was going on. This would normally be followed by five more to get her guardian to at least temporarily accept the situation, and more still to her parents when she gave birth, if you were to have any chance of their accepting your claims to be the father of her children. That might get her parents off your back, but you'd have to pay off the guardian forever, because you could never really use money to acquire the rights to a woman. Everyone knew that the only thing you can legitimately give in exchange for a woman is another woman. In this case, everyone has to abide by the pretext that a woman will someday be forthcoming. In the meantime, as one ethnographer succinctly puts it, "the debt can never be fully paid."

The same holds true for blood feuds. You might have to pay the family whom you injured, but there is never a sense that the accounts have been settled. The only thing that is equivalent to a human life is another human life. So you would develop economies where the males all wanted to hoard females that could be exchanged with each other:

Among North African Bedouins, for instance, it sometimes happened that the only way to settle a feud was for the killer's family to turn over a daughter, who would then marry the victim's next of kin-his brother, say.

This is very much like primordial debt theory: money is a recognition that there is an absolute debt that cannot be repaid. This is also why, money in human societies were often extremely social objects:

Lele currencies are, as I say, quintessential social currencies. They are used to mark every visit, every promise, every important moment in a man's or woman's life. It is surely significant, too, what the objects used as currency here actually were. Raffia cloth was used for clothing. In Douglas's day, it was the main thing used to clothe the human body; camwood bars were the source of a red paste that was used as a cosmetic-it was the main substance used as makeup, by both men and women, to beautify themselves each day. These, then, were the materials used to shape people's physical appearance, to make them appear mature, decent, at­tractive, and dignified to their fellows. They were what turned a mere naked body into a proper social being.

This is no coincidence. In fact, it's extraordinarily common in what I've been calling human economies. Money almost always arises first from objects that are used primarily as adornment of the person. Beads, shells, feathers, dog or whale teeth, gold, and silver are all well­ known cases in point. All are useless for any purpose other than mak­ing people look more interesting, and hence, more beautiful. The brass rods used by the Tiv might seem an exception, but actually they're not: they were used mainly as raw material for the manufacture of jewelry, or simply twisted into hoops and worn at dances. There are exceptions (cattle, for instance), but as a general rule, it's only when governments, and then markets, enter the picture that we begin to see currencies like barley, cheese, tobacco, or salt. 

Three Tiers of Violence

Money begins as a recognition that humans are unique qualities incapable of being exchanged for quantities. Graeber goes on to paint a picture of how violence makes humans fundamentally calculable and tradeable:

How is this calculability effectuated? How does it become pos­sible to treat people as if they are identical? The Lele example gave us a hint: to make a human being an object of exchange, one woman equivalent to another for example, requires first of all ripping her from her context; that is, tearing her away from that web of relations that makes her the unique conflux of relations that she is, and thus, into a generic value capable of being added and subtracted and used as a means to measure debt. This requires a certain violence. To make her equivalent to a bar of camwood takes even more violence, and it takes an enormous amount of sustained and systematic violence to rip her so completely from her context that she becomes a slave.

The first level of violence comes from Lele logic itself. The equivalence of human life for human life is, in itself, an equivalence that collapses qualities into quantities. And this equivalence was only possible through the threat of violence:

Human beings, left to follow their own desires, rarely arrange themselves in symmetrical patterns [(patterns that meant equivalence could be established)]. Such symmetry tends to be bought at a terrible human price. In the Tiv case, Akiga is actually willing to describe it:

Under the old system an elder who had a ward could always marry a young girl, however senile he might be, even if he were a leper with no hands or feet; no girl would dare to re­fuse him. If another man were attracted by his ward he would take his own and give her to the old man by force, in order to make an exchange. The girl had to go with the old man, sorrowfully carrying his goat-skin bag. If she ran back to her home her owner caught her and beat her, then bound her and brought her back to the elder. The old man was pleased, and grinned till he showed his blackened molars. "Wherever you go," he told her, "you will be brought back here to me; so stop worrying, and settle down as my wife." The girl fretted, till she wished the earth might swallow her. Some women even stabbed themselves to death when they were given to an old man against their will; but in spite of all, the Tiv did not care.

The second level of violence comes when members internal to the Lele community break it’s own logic with violence. The only time when a human life is seen as fully tradeable to goods is when a man sells his claim on a woman to a tribe which has the means to violently cease her by force:

Sometimes when two clans were disputing a claim to blood compensation, the claimant might see no hope of getting sat­isfaction from his opponents. The political system offered no direct means for one man (or clan) to use physical coercion or to resort to superior authority to enforce claims against an­ other. In such a case, rather than abandon his claim to a pawn­ woman, he would be ready to take the equivalent in wealth, if he could get it. The usual procedure was to sell his case against the defendants to the only group capable of extorting a pawn by force, that is, to a village.

The man who meant to sell his case to a village asked them for 100 raffia cloths or five bars of camwood. The village raised the amount, either from its treasury, or by a loan from one of its members, and thereby adopted as its own his claim to a pawn.

Once he held the money, his claim was over, and the village, which had now bought it, would proceed to organize a raid to seize the woman in dispute.

In other words, it was only when violence was brought into the equation that there was any question of buying and selling people. The ability to deploy force, to cut through the endless maze of preferences, obligations, expectations, and responsibilities that mark real human relationships, also made it possible to overcome what is otherwise the first rule of all Lele economic relationships: that human lives can only be exchanged for other human lives, and never for physical objects.

The third and most total level of violence is when outsiders hijack the Lele logic with violence. In other words, when the market economy is introduced to human economies.

By the height of the trade fifty years later, British ships were bringing in large quantities of cloth (both products of the newly created Manchester mills and calicoes from India), and iron and copper ware, along with incidental goods like beads, and also, for obvious reasons, substantial numbers of firearms.19 The goods were then advanced to African merchants, again on credit, who assigned them to their own agents to move upstream.

The obvious problem was how to secure the debt. The trade was an extraordinarily duplicitous and brutal business, and slave raiders were unlikely to be dependable credit risks-especially when dealing with foreign merchants who they might never see again. As a result, a system quickly developed in which European captains would demand security in the form of pawns.

The sort of "pawns" we are talking about here are clearly quite different from the kind we encountered among the Lele. In many of the kingdoms and trading towns of West Africa, the nature of pawn­ ship appears to have already undergone profound changes by the time Europeans showed up on the scene around 1500-it had become, effectively, a kind of debt peonage. Debtors would pledge family members as surety for loans; the pawns would then become dependents in the creditors' households, working their fields and tending to their house­ hold chores-their persons acting as security while their labor, effectively, substituted for interest. Pawns were not slaves; they were not, like slaves, cut off from their families; but neither were they precisely free. In Calabar and other ports, masters of slaving ships, on advancing goods to their African counterparts, soon developed the custom of demanding pawns as security-for instance, two of the merchants' own dependents for every three slaves to be delivered, preferably including at least one member of the merchants' families. This was in practice not much different than demanding the surrender of hostages, and at times it created major political crises when captains, tired of waiting for delayed shipments, decided to take off with a cargo of pawns instead.

What is noteworthy here is that, as is the case with Cortes and the Aztecs, violence was not only exacted upon the debtor but also the creditor. In other words, the creditor is also motivated by the fear of violence which makes it so terrifying. One insight here is that Graeber must believe that profit-seeking is inherent in market economies to no small extent because people are often cogs in chains of debt, and the cost of not being able to pay one’s debt was so high.

In the final analysis, it is terrifying for human economies, where the goal is to manage social relationships with money, to be introduced to market economies, where the goal is to increase the amount of money. This is because the very mechanism of (human != money) that was supposed to represent the incommensurability of human life with objects becomes hijacked by the profit-seeking goal of the market (through a long chain of debt) and turned into an equivalence (human = money). The brass rods which were a recognition of the uniqueness of the bride becomes the effective price of the bride:

The pervasive climate of violence led to the systematic perversion of all the institutions of existing human economies, which were transformed into a gigantic apparatus of dehumanization and destruction.

At the same time, Aro collaborated with local elders to create a code of ritual laws and penal­ ties so comprehensive and severe that everyone was at constant risk of falling afoul of themY Anyone who violated one would be turned over to the Aro for transport to the coast, with their accuser receiving their price in copper bars. According to some contemporary accounts, a man who simply disliked his wife and was in need of brass rods could always come up with some reason to sell her, and the village elders­ who received a share of the profits-would almost invariably concur.

Of course, this hijacking of the logic of human economies could only happen with the introduction of systematic violence. The idea must be that each person exists within a social context. There is an inherent resistance to being ripped out of this context from both the point of the individual as well as their immediate context (friends, family). But to be tradeable as an impersonal quantity, one must be ripped out in this way, hence the threat of violence.

Critique: This explains how slavery (the quantification of humans) was made possible. But violence doesn’t seem to be necessary to untangle objects from their web of relations. And markets only require objects to be untangled. Certainly some objects may have such an emotional attachment that this is required. But for most consumables I’d wager that they could be bartered and traded without violence.

Critique: Graeber’s definition of violence is a bit thin. It seems to be the alienation from one’s social and moral commitments. Now, certainly if this is an involuntary, total alienation (slavery) that’s terrifying. But this critique fails to extend forcefully in today’s society: our alienation is partial and somewhat by choice. This controlled alienation (Hegel) can often be a good thing. That is to say, even if I grant Graeber the premise that to participate in the market economy requires the collapse of qualities into quantities which in turn requires violence (alienation), it is not necessarily a bad thing.

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Chapter 7: Honor and Degradation

In the last chapter we examined how the immediate introduction of the market economy into human economies wrecked havoc on human economies. This chapter is to examine how the natural transition from human to market economies had been equally disastrous.

The key to understanding this transition is in our concept of honor. To understand honor we have to understand slavery. In most societies that allowed freedom the slave was thought of as legally a dead person. “If a Roman soldier was captured and lost his liberty, his family was expected to read his will and dispose of his possessions. Should he later regain his freedom, he would have to start over, even to the point of remarrying the woman who was now considered his widow.” What being dead means, morally at least, is that the slave could not form any normative relationships: no commitments, no friends, and no debts. The slave was honorless in this sense: he no longer had his basic integrity and dignity as a human. 

But what makes the slave-owning master honorable is honor in a different sense: it is “surplus dignity.” The honor of the master lies precisely in his ability to take away the dignity of others and render them as slaves. 

Honor has come to mean two different things: 1. Is the dignity and integrity of being human: the ability to form moral relationships 2. The very power that could rob the former away from someone and render them into objects. A person who is honorable, in the second sense, has a heightened awareness of the fragility of his power and is therefore very sensitive to provocation:

It seems to me that this is precisely what gives honor its notori­ously fragile quality. Men of honor tend to combine a sense of total ease and self-assurance, which comes with the habit of command, with a notorious jumpiness, a heightened sensitivity to slights and insults, the feeling that a man (and it is almost always a man) is somehow reduced, humiliated, if any "debt of honor" is allowed to go unpaid. This is because honor is not the same as dignity. One might even say: honor is surplus dignity. It is that heightened consciousness of power, and its dangers, that comes from having stripped away the power and dignity of others; or at the very least, from the knowledge that one is capable of doing so. At its simplest, honor is that excess dignity that must be defended with the knife or sword (violent men, as we all know, are almost invariably obsessed with honor). Hence the warrior's ethos, where almost anything that could possibly be seen as a sign of disrespect-in inappropriate word, an inappropriate glance--is considered a challenge, or can be treated as such. Yet even where overt violence has largely been put out of the picture, wherever honor Is at issue, it comes with a sense that dignity can be lost, and therefore must be constantly defended.

And we saw this already in the last chapter with the Leles. Money represented honor in the first sense in human communities: as representing the dignity and incommensurability of the subject. But it eventually morphed into honor in the second sense: as the ability to remove people from their unique social web.

I think Graeber’s thesis must be that honor and money must go through a similar transition in all instances when human economies transform into market economies.

Medieval Ireland 

Graeber only brings up Medieval Ireland primarily to show how money is a measurement of honor which is one’s ability to take other’s dignity away.

Ireland operated mostly on credit arrangements:

The authors of the law codes didn't even know how to put a price on most goods of ordinary use--pitchers, pillows, chisels, slabs of bacon, and the like; no one seems ever to have paid money for them. Food was shared in families or delivered to feudal superiors, who laid it out in sumptuous feasts for friends, rivals, and retainers. Anyone needing a tool or furniture or clothing either went to a kinsman with the relevant craft skills or paid someone to make it. The objects themselves were not for sale. Kings, in turn, assigned tasks to different clans: this one was to provide them with leather, this one poets, this one shields . . . precisely the sort of un­ wieldy arrangement that markets were later developed to get around.

What currencies it did have (slave girls and cattle) were social currencies only for rearranging relationships. Specifically, there was an honor price that you had to pay someone everytime you insulted their honor. This price was determined by social rank and you paid the price of whoever was protecting the person you insulted. This honor price is also how you acquire new dependents:

A suitor paid the value of the wife's honor to her father and thus became its guardian. What about serfs? The same principle applied: when a lord acquired a serf, he bought out that man's honor price, presenting him with its equivalent in cows. From that moment on, if anyone insulted or injured the serf, it was seen an attack on the lord's honor, and it was up to the lord to collect the attendant fees. Meanwhile the lord's honor price was notched upward as a result of gathering another dependent: in other words, he literally absorbs his new vassal's honor into his own.

Graeber’s whole point here is to show how honor is a zero-sum game, and what made slave girls an acceptable currency of honor was precisely their lack of it (it showed the master was powerful enough to take that honor away):

All this, in turn, makes it possible to understand both something of the nature of honor, and why slave girls were kept as units for reckoning debts of honor even at a time when-owing no doubt to church influence-they no longer actually changed hands. At first sight it might seem strange that the honor of a nobleman or king should be measured in slaves, since slaves were human beings whose honor was zero. But if one's honor is ultimately founded on one's ability to extract the honor of others, it makes perfect sense. The value of a slave is that of the honor that has been extracted from them.

Mesopotamia (The Origins of Patriarchy)

Graeber’s main point here is that if you looked at Mesopotamia in the 2500 – 3000 BC it was mostly a credit economy where the currency was reserved for the gods. At the time, there was abundant female participation in public life. But with the introduction of war, coinage, the markets, and most importantly massive debt, it turned “human relations­ and by extension, women's bodies-into potential commodities. At the same time, it created a horrified reaction on the part of the (male) win­ners of the economic game, who over time felt forced to go to greater and greater lengths to make clear that their women could in no sense be bought or sold.” By 1200BC women were then confined into the household. As a result, honor took upon this aura of being able to prevent one’s female relatives from entering into prostitution.

The argument was that in the pre-debt economy. Neither sex nor sex-for-money was vilified. Having one’s, say, sister engage in sex-for-money was acceptable because 1. Sex was associated with these divine temple priestesses 2. The money that was used to pay for sex was used to worshipped the gods and took upon a noble aura. Prostitution was not demonized because the connotations of sex as well as what that sex was being paid with were both, in some sense, holy:

Sumerian temples do often ap­ pear to have hosted a variety of sexual activities. Some priestesses, for instance, were considered to be married to or otherwise dedicated to gods. What this meant in practice seems to have varied considerably. Much as in the case of the later devadasis, or "temple dancers" of Hindu India, some remained celibate; others were permitted to marry but were not to bear children; others were apparently expected to find wealthy patrons, becoming in effect courtesans to the elite. Still oth­ers lived in the temples and had the responsibility to make themselves sexually available to worshippers on certain ritual occasions. One thing the early texts do make clear is that all such women were considered extraordinarily important. In a very real sense, they were the ultimate embodiments of civilization. After all, the entire machinery of the Sumerian economy ostensibly existed to support the temples, which were considered the households of the gods. As such, they represented the ultimate possible refinement in everything from music and dance to art, cuisine, and graciousness of living. Temple priestesses and spouses of the gods were the highest human incarnations of this perfect life.

It's also important to emphasize that Sumerian men do not appear, at least in this earliest period, to have seen anything troubling about the idea of their sisters having sex for money. To the contrary, insofar as prostitution did occur (and remember, it could not have been nearly so impersonal, cold-cash a relation in a credit economy), Sumerian religious texts identify it as among the fundamental features of human civilization, a gift given by the gods at the dawn of time. Procreative sex was considered natural (after all, animals did it). Non-procreative sex, sex for pleasure, was divine.

This all changed with the introduction of markets and debt. 1. The majority of people who performed sexual acts were no longer divine priestesses but female relatives of male debtors who were forced to pawn them away 2. The money that was used to pay these sex workers was no longer a currency that was reserved for holy occasions but something to be exchanged for everyday items. Prostitution became highly frowned down upon by the wealthier classes and women’s liberties were restricted for the honor of their male relatives. 

The argument here isn’t that there wasn’t debt in the previous economy. It is a credit economy after all which produces debts. The argument here is that, with the enforcement of the state and introduction of coinage and the market which made everything impersonal, debt could be collected by commoditizing one’s relatives. 

Ancient Greece

In the time of Homer, 1000 BC, Greece very much operated as a heroic society. Where honor was measured in one’s wealth and ability to subdue others (e.g. Achilles and the slave girl). Where there was clear communism and hierarchy (e.g. suitors at Odysseus’ house). But with the introduction of coinage, used mainly to pay soldiers and then produced as a mark of civic independence, the market had fully penetrated Greek society by the fifth century (the agora/marketplace was the place of debate and assembly).

Graeber’s thesis in this section is that the introduction of coinage, the market, and debt fundamentally altered the mores of Greek society, leading to moral confusion. 

The first order effects of coinage was the debt crisis, military expansion, influx of slaves, and expanded citizenry:

One of the first effects of the arrival of a commercial economy was a series of debt crises, of the sort long familiar from Mesopotamia and Israel. "The poor," as Aristotle succinctly put it in his Constitution of the Athenians, "together with their wives and children, were enslaved to the rich." Revolutionary factions emerged, demanding amnesties, and most Greek cities were at least for a while taken over by populist strongmen swept into power partly by the demand for radical debt relief. The solution most cities ultimately found, however, was quite different than it had been in the Near East. Rather than institutionalize periodic amnesties, Greek cities tended to adopt legislation limiting or abolishing debt peonage altogether, and then, to forestall future crises, they would turn to a policy of expansion, shipping off the children of the poor to found military colonies overseas. Before long, the entire coast from Crimea to Marseille was dotted with Greek cities, which served, in turn, as conduits for a lively trade in slaves. The sudden abundance of chattel slaves, in turn, completely transformed the nature of Greek society. First and most famously, it allowed even citizens of modest means to take part in the political and cultural life of the city and have a genuine sense of citizenship. But this, in turn, drove the old aristocratic classes to develop more and more elaborate means of setting themselves off from what they considered the tawdriness and moral corruption of the new democratic state.

The second order effects were twofold.

First you saw a schizophrenia in both parts of the citizenry: the aristocrats and the ordinary citizens (who were mostly engaged in commerce). The citizens both despised the aristocrats but also wanted to be like them:

We see an almost schizophrenic reaction on the part of the ordinary citizens themselves, who simultaneously tried to limit or even ban aspects of aristocratic culture and to imitate aristocratic sensibilities. Pederasty is an excellent case in point here. On the one hand, man-boy love was seen as the quintessential aristocratic practice-it was the way, in fact, that young aristocrats would ordinarily become initiated into the privileges of high society. As a result, the democratic polis saw it as politically subversive and made sexual relations between male citizens illegal. At the same time, almost everyone began to practice it. 

The aristocrats on the other hand, feeling themselves to be challenged by the new rich with more money than them also became schizophrenic. On one hand, they began defining virtues exactly opposite of the virtues of commerce. Honor changed drastically from the accumulation of wealth to a disdain for the pursuit of wealth. Honor also changed drastically for women:

The famous Greek obsession with male honor that still informs so much of the texture of daily life in rural communities in Greece hear­ kens back not so much to Homeric honor but to this aristocratic rebel­ lion against the values of the marketplace, which everyone, eventually, began to make their own. The effects on women, though, were even more severe than they had been in the Middle East. Already by the age of Socrates, while a man's honor was increasingly tied to disdain for commerce and assertiveness in public life, a woman's honor had come to be defined in almost exclusively sexual terms: as a matter of virginity, modesty, and chastity, to the extent that respectable women were expected to be shut up inside the household and any woman who played a part in public life was considered for that reason a prostitute, or tantamount to one. The Assyrian habit of veiling was not widely adopted in the Middle East, but it was adopted in Greece. As much as it flies in the face of our stereotypes about the origins of "Western" freedoms, women in democratic Athens, unlike those of Persia or Syria, were expected to wear veils when they ventured out in public.

…

Money, then, had passed from a measure of honor to a measure of everything that honor was not. To suggest that a man's honor could be bought with money became a terrible insult.

On the other hand, they felt irresistibly attracted to wealth because they too needed it for their endeavors: 

Rather, the thing that really seemed to bother them about money was simply that they wanted it so much. Since money could be used to buy just about anything, everybody wanted it. That is: it was desirable because it was non-discriminating. One could see how the metaphor of the porne might seem particularly appropriate. A woman "common to the people"-as the poet Archilochos put it-is available to every­one. In principle, we shouldn't be attracted to such an undiscriminating creature. In fact, of course, we are. And nothing was both so undiscriminating, and so desirable, as money.

…

We might say, then, that money introduced a democratization of desire. Insofar as everyone wanted money, everyone, high and low, was pursuing the same promiscuous substance.

The next second-order effect was throwing relations of communism and hierarchy into disarray.

Communistic relations of mutual aid became much harder to sustain in a market economy because if there is a price on everything (as there wasn’t in credit-based human economies) it seems like you are taking advantage of people who are helping you:

The same tensions can be observed between neighbors, who in farming communities tend to give, lend, and borrow things amongst themselves-anything from sieves and sickles, to charcoal and cooking oil, to seed corn or oxen for plowing. On the one hand, such giving and lending were considered essential parts of the basic fabric of human sociability in farm communities, on the other, overly demanding neighbors were a notorious irritant-one that could only have grown worse when all parties are aware of precisely how much it would have cost to buy or rent the same items that were being given away.

Paradoxically, it might’ve been the breakdown of hierarchical relations into relations of exchange (really debt) that was more damaging. After all, relations of hierarchy meant that the greater person had real obligations to the lesser one in a way the creditor does not have for the debtor. 

The critical thing, though, about such relations of patronage is that they involved responsibilities on both sides. A noble warrior and his humble client were assumed to be fundamentally different sorts of people, but both were also expected to take account of each other's (fundamentally different) needs. Transforming patronage into debt relations-treating, say, an advance of seed corn as a loan, let alone an interest-bearing loan-changed all this? What's more, it did so in two completely contradictory respects. On the one hand, a loan implies no ongoing responsibilities on the part of the creditor. On the other, as I have continually emphasized, a loan does assume a certain formal, legal equality between contractor and contractee. It assumes that they are, at least in some ways on some level, fundamentally the same kind of person. This is certainly about the most ruthless and violent form of equality imaginable. But the fact it was conceived as equality before the market made such arrangements even more difficult to endure.

This story contains all the moral confusion that came about from the fundamental altering of the mores of society:

We know a little about it from trial speeches, many of which have survived. Here is one from the fourth century, probably around 365 BC. Apollodorus was a prosperous but low-born Athenian citizen (his father, a banker, had begun life as a slave) who, like many such gentle­ men, had acquired a country estate. There he made a point of making friends with his closest neighbor, Nicostratus, a man of aristocratic origins, though currently of somewhat straitened means. They acted as neighbors normally did, giving and borrowing small sums, lending each other animals or slaves, minding each other's property when one was away. Then one day Nicostratus ran into a piece of terrible luck. While trying to track down some runaway slaves, he was himself captured by pirates and held for ransom at the slave market on the island of Aegin ... His relatives could only assemble part of the price, so he was forced :o borrow the rest from strangers in the market. These appear to have been professionals who specialized in such loans, and their terms were notoriously harsh: if not repaid in thirty days, the sum doubled; if not repaid at all, the debtor became the slave of the man who had put up the money for his redemption. 

Tearfully, Nicostratus appealed to his neighbor. All his possessions were already pledged now to one creditor or another; he knew Apollodorus wouldn't have that much cash lying around, but could his dear friend possibly put up something of his own by way of security? Apollodorus was moved. He would be happy to forgive all debts Nicostratus already owed him, but the rest would be difficult. Still, he would do his best. In the end, he arranged to himself take a loan from an acquaintance of his, Arcesas, on the security of his town-house, at 6 percent annual interest, so as to be able to satisfy Nicostratus's creditors while Nicostratus himself arranged a friendly, no-interest era­ nos loan from his own relatives. But before long, Apollodorus began to realize that he had been set up. The impoverished aristocrat had decided to take advantage of his nouveau-riche neighbor; he was actu­ ally working with Arcesas and some of Apollodorus's enemies to have him falsely declared a "public debtor," that is, someone who had de­ faulted on an obligation to the public treasury. This would have first of all meant that he would lose his right to take anyone to court (i.e., his deceivers, to recover the money), and second, would give them a pretext to raid his house to remove his furniture and other possessions. Presumably, Nicostratus had never felt especially comfortable being in debt to a man he considered his social inferior. Rather like Egil the Viking, who would rather kill his friend Einar than have to compose an elegy thanking him for an overly magnificent gift, Nicostratus appears to have concluded that it was more honorable, or anyway more bearable, to try to extract the money from his lowly friend through force and fraud than to spend the rest of his life feeling beholden. Before long, things had indeed descended to outright physical violence, and the whole matter ended up in court.

The story has everything. We see mutual aid: the communism of the prosperous, the expectation that if the need is great enough, or the cost manageable enough, friends and neighbors will help one another. And most did, in fact, have circles of people who would pool money if a crisis did arise: whether a wedding, a famine, or a ransom. We also see the omnipresent danger of predatory violence that reduces human beings to commodities, and by doing so introduces the most cutthroat kinds of calculation into economic life-not just on the part of the pirates, but even more so, perhaps, on those moneylenders lurking by the market offering stiff credit terms to anyone who came to ransom their relatives but found themselves caught short, and who then could appeal to the state to allow them to hire men with weapons to enforce the contract. We see heroic pride, which sees too great an act of generosity as itself a kind of belittling assault. We see the ambiguity among gifts, loans, and commercial credit arrangements. Neither does the way things played out in this case seem particularly unusual, except perhaps for Nicostratus's extraordinarily ingratitude. Prominent Athenians were always borrowing money to pursue their political projects; less-prominent ones were constantly worrying about their debts, or how to collect from their own debtors. Finally, there is another, subtler element here. While everyday market transactions, at shops or stalls in the agora, were here as elsewhere typically conducted on credit, the mass production of coinage permitted a degree of anonymity for transactions that, in a pure credit regime, simply could not exist. Pirates and kidnappers do business in cash-yet the loan sharks at Aegina's marketplace could not have operated without them. It is on this same combination of illegal cash business, usually involving violence, and extremely harsh credit terms, also enforced through violence, that innumerable criminal underworlds have been constructed ever since. 

Graeber even read’s Plato’s exchange with his interlocutors on justice as an example of the moral confusion that has set in to the Greek psyche: 

What I want to emphasize, though, is the degree to which what we consider our core tradition of moral and political theory today springs from this question: What does it mean to pay our debts? Plato presents us first with the simple, literal businessman's view. When this proves inadequate, he allows it to be reframed in heroic terms. Perhaps all debts are really debts of honor after all. But heroic honor no longer works in a world where (as Apollodorus sadly discovered) commerce, class, and profit have so confused everything that peoples' true motives are never clear. How do we even know who our enemies are? Finally, Plato presents us with cynical realpolitik. Maybe nobody really owes anything to anybody. Maybe those who pursue profit for its own sake have it right after all. But even that does not hold up. We are left with a certainty that existing standards are incoherent and self-contradictory, and that some sort of radical break would be required in order to create a world that makes any logical sense. But most of those who seriously consider a radical break along the lines that Plato suggested have come to the conclusion that there might be far worse things than moral incoherence. And there we have stood, ever since, in the midst of an insoluble dilemma.

Rome 

Graeber here wants to show how slavery has been more of a backdrop for our modern day legal and moral notions than we’d imagine. (This seems disjointed from the commentary on honor or the introduction of markets that we have been tracing)

The first definition that was defined against the backdrop of slavery was private property. It was commonly defined as 1. A relationship between a person and an object (this is peculiar because, intuitively, it should be a relationship between people with respect to an object) 2. The ability of the owner to exercise absolute power (this is peculiar because no law code before has felt this had been worthy to mention). Graeber argues that the most plausible explanation here is that this definition is created primarily with slavery in mind.

The second definition is, paradoxically, freedom. Graeber’s claim is this: freedom transitioned from the ability to form moral relations to the absolute power of the master: 

The meaning of the Roman word libertas itself changed dramatically over time. As everywhere in the ancient world, to be "free" meant, first and foremost, not to be a slave. Since slavery means above all the annihilation of social ties and the ability to form them, freedom meant the capacity to make and maintain moral commitments to others. The English word "free," for instance, is derived from a Ger­ man root meaning "friend," since to be free meant to be able to make friends, to keep promises, to live within a community of equals. This is why freed slaves in Rome became citizens: to be free, by definition, meant to be anchored in a civic community, with all the rights and responsibilities that this entailed. 

By the second century AD, however, this had begun to change. The jurists gradually redefined libertas until it became almost indistinguishable from the power of the master. It was the right to do absolutely anything, with the exception, again, of all those things one could not do.

Conclusion

It’s hard to figure out exactly what Graeber is trying to communicate in this section.

I think to try and make sense of it we need to introduce a new type of society within human societies: the honor society. 

In human economies, when this ability to rip people from their contexts does appear, it is most often seen as an end in itself. One can already see a hint of this among the Lele. Important men would occasionally acquire war captives from far away as slaves, but it was almost always to be sacrificed at their funeral. The squelching of one man's individuality was seen as somehow swelling the reputation, the social existence, of the other. In what I've been calling heroic societies, of course this kind of addition and subtraction of honor and disgrace is lifted from a somewhat marginal practice to become the very essence of politics. As endless epics, sagas, and eddas attest, heroes become heroes by making others small. In Ireland and Wales, we can observe how this very ability to degrade others, to remove unique human beings from their hearths and families and thus render them anonymous units of accounting-the Irish slave-girl currency, the Welsh washerwomen-is itself the highest expression of honor.

In heroic societies, the role of violence is not hidden-it's glorified. Often, it can form the basis of one's most intimate relations. In the Iliad, Achilles sees nothing shameful in his relation with his slave-girl, Briseis, whose husband and brothers he killed; he refers to her as his "prize of honor," but almost in the very same breath, he also insists that, just any decent man must love and care for his household dependents, "so I from my heart loved this one, even though I won her with my spear."

Perhaps we can paint a history going from human societies that mostly operated on credit, whatever currencies there were is merely a recognition of the incommensurability of human life. In a pure human society even humans cannot be traded for humans. Think of the Tiv and Mesopotamia pre-coinage. In these societies, honor refers to the dignity of humanity.  

Then, we have heroic societies. They are a sub-branch of human societies because it is still very much a credit society with hierarchy and communism but the big difference is that some humans can be traded for humans and even other goods. Honor in these societies is about the power one can exert over others. Think of Homeric Greece or Medieval Ireland.

Lastly, we have market societies. Here everything is in the logic of exchange. Coinage, the state, armies, and debt all come to be. Here the circle of tradeable humans expands even more broadly because of debt instruments. And honor as power becomes even more heightened creating cultural institutions like patriarchy. Think of Rome or post-coinage Greece or Mesopotamia.

Graeber’s claim could be that along this development, more violence had to be introduced, more people were seen as tradeable and torn out of their contexts, and the more people felt their worth was tied to their power over others (think of Mesopotamian patriarchy or the injustice that an aristocrat felt being indebted to someone in post-coinage Greece).

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Chapter 8: Credit Versus Bullion 

Graeber begins to paint his cyclical story of history here, a history that moves between periods of virtual money and bullion money. And this move is fundamentally caused by warfare. The argument goes that in periods of warfare you want transactions to be simple and hard to falsify so bullion dominated. During peace time, coinage shrinks to specific institutions and local credit relationships are what take hold:

The cycle begins with the Age of the First Agrarian Empires (35oo-8oo BC), dominated by virtual credit money. This is followed by the Axial Age (8oo BC-6oo AD), which will be covered in the next chapter, and which saw the rise of coinage and a general shift to metal bullion. The Middle Ages (6oo-1450 AD), which saw a return to virtual credit money, will be covered in chapter 10; chapter n will cover the next turn of the cycle, the Age of Capitalist Empires, which began around 1450 with a massive planetary switch back to gold and silver bullion, and which could only really be said to have ended in 1971, when Richard Nixon announced that the U.S. dollar would no longer be redeemable in gold. This marked the begin­ning of yet another phase of virtual money, one which has only just begun, and whose ultimate contours are, necessarily, invisible.

Mesopotamia (3500-800 BC)

 Silver was the currency but it remained mostly in the palaces. People transacted with silver not as a medium of exchange but merely a unit of account. These transactions were more so credit tabs than barter. Furthermore, credit arrangements with fixed-interest loans did develop. These instruments seemed to be traded as well.

Of course, along with debt came debt-peons debt crises and peasant revolutions. Cancelling debts, destroying records, relocating wealth became the common banner for many revolutionaires.

Egypt (2650-716 BC)

Here, too, money clearly arose as a means of account. The basic unit was the deben, or "measure"-originally referring to measures of grain, and later of copper or silver.

Loans for commercial credit was rare, most of it was mutual aid between neighbors. Similarly, legally enforceable loans that could lead to family members taken way are very rare, especially because what loans there were did not bear interest.

Debt crisis were only prevalent in the new Kingdom (1550 – 1070 BC).

China (2200-771 BC)

Sources are unclear. People seem to have operated on credit with neighbors (tying knots on strings for example) and used hard currencies with passers-by. What these transactions were actually denominated in seem to have varied greatly by region: ie. there were many local currencies.

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Chapter 9 the Axial Age

The axial age was a period between 800 BC to 600 AD. It saw the simultaneous development in India, the Mediterranean, and China: massive military complexes, coinage, and an outpouring of ideas (Pythagoras (570-495 BC), the Buddha (563-483 BC), and Confucius (551-479 BC)).

The claim is that the axial age first starts with warring states and military expansions never before seen. Coinage was generally invented by private citizens and then monopolized by the state to finance war. It is extremely challenging to pay your troops, a good way to do so is to give them coins and demand everyone else to pay taxes in the forms of those coins. This led to markets. War also created slaves who were often needed to work in the mines to produce even more coinage. The rise of markets, as seen in Greece, fundamentally altered our cultural mores and institutions which led to widespread debate and an outpouring of ideas.

These ideas were initially purely materialistic and cynical realpolitik from a reflection of the market economy which led to a reaction from religious leaders to create purely spiritual ideologies. This causes the division of spheres we have today (Weber).

The second phase of the Axial age is when these warring states are united under one banner into a large empire. And the leaders of these empire adopt some form of more spiritual, less brute ideology (Christianity, Buddhism, Confucianism).

Critique: war is going to be a key reason for why these periods of real/virtual money sync up between these far-away nations. What Graeber doesn't properly address then is why periods of war/peace synced up between them.

The Mediterranean

Alexander (300BC) is a good example of what Graeber calls the “Military-Coinage-Slavery-Complex” and how they feed upon each other:

When Alexander set out to conquer the Persian Empire, he borrowed much of the money with which to pay and provision his troops, and he minted his first coins, used to pay his creditors and continue to support the money, by melting down gold and silver plundered after his initial victories. However, an expeditionary force needed to be paid, and paid well: Alexander's army, which num­bered some 11o,ooo men, required half a ton of silver a day just for wages. For this reason, conquest meant that the existing Persian system of mines and mints had to be reorganized around providing for the invading army; and ancient mines, of course, were worked by slaves. In turn, most slaves in mines were war captives. Presumably most of the unfortunate survivors of the siege of Tyre ended up working in such mines. One can see how this process might feed upon itself.

This was also true for Rome:

In fact, the entire Roman empire, at its height, could be understood as a vast machine for the extraction of precious metals and their coin­ing and distribution to the military-combined with taxation policies designed to encourage conquered populations to adopt coins in their everyday transactions. Even so, for most of its history, use of coins was heavily concentrated in two regions: in Italy and a few major cities, and on the frontiers, where the legions were actually stationed. In areas where there were neither mines nor military operations, older credit systems presumably continued to operate.

India 

In like manner, the introduction of massive armies in India also imposed the market onto everyday life. In fact, the state even set up organizations to sell to the very soldiers they were paying. The idea must be that, in somewhat permanent settlements, people are happy to use credit. But soldiers and those who service them only accepted bullion:

These armies could be huge. Greek sources report that Magadha could put to the field a force of 2oo,ooo infantry, 2o,ooo horses, and about 4,000 elephants-and that Alexander's men mutinied rather than have to face them. Whether on campaign or in garrison, they were inevitably accompanied by a range of different sorts of camp followers-petty traders, prostitutes, and hired servants-which, with the soldiers, seems to have been the very medium through which a cash economy had originally taken form. By Kautilya's time, a few hundred years later, the state was inserting itself into every aspect of the process: Kautilya suggests paying sol­diers apparently generous wages, then secretly replacing hawkers with government agents who could charge them twice the normal rates for supplies, as well as organizing prostitutes under a ministry in which they could be trained as spies, so as to make detailed reports on their clients' loyalties.

Thus was the market economy, born of war, gradually taken over by the government. Rather than stifle the spread of currency, the pro­cess seems to have doubled and even tripled it: the military logic was extended to the entire economy, the government systematically setting up its granaries, workshops, trading houses, warehouses, and jails, staffed by salaried officials, and all selling products on the market so as to collect the pieces of silver paid off to soldiers and officials and put them back into the royal treasuries again. The result was a moneta­rization of daily life unlike anything India was to see for another two thousand years.

China 

We see the same pattern play out between 400-200 BC, the warring states period.

Mass Literacy

One of the consequences of all of this mass literacy. Graeber suggests that this was carried top-down. The idea might be that an educated citizenry is more conducive in warfare, more productive in trade etc. Not only did the market attack the old confines of hierarchy, but it itself became an educative tool:

The popular education campaigns of the period perhaps provide a clue. The Axial Age was the first time in human history when familiarity with the written word was no lon­ger limited to priests, administrators, and merchants, but had become necessary to full participation in civic life. In Athens, it was taken for granted that only a country bumpkin would be entirely illiterate.

Without mass literacy, neither the emergence of mass intellectual movements, nor the spread of Axial Age ideas would have been pos­sible. By the end of the period, these ideas had produced a world where even the leaders of barbarian armies descending on the Roman empire felt obliged to take a position on the question of the Mystery of the Trinity, and where Chinese monks could spend time debating the rela­ tive merits of the eighteen schools of Classical Indian Buddhism.

No doubt the growth of markets played a role too, not only help­ing to free people from the proverbial shackles of status or community, but encouraging a certain habit of rational calculation, of measuring inputs and outputs, means and ends, all of which must inevitably have found some echoes in the new spirit of rational inquiry that begins to appear in all the same times and places. Even the word "rational" is telling: it derives, of course, from "ratio"-how many of X go into Y-a sort of mathematical calculation previously used mainly by ar­chitects and engineers, but which, with the rise of markets, everyone who didn't want to get cheated at the marketplace had to learn how to do.

Material Self-Interest

The proliferation of army-driven markets led people to take a very different view on human nature. In human economies, whether it was rearranging relations with social currencies or even keeping credit accounts (these were mostly based off of the character of the person) you always assumed that there were many complex motives: 

Within human economies, motives are assumed to be complex. When a lord gives a gift to a retainer, there is no reason to doubt that it is inspired by a genuine desire to benefit that retainer, even if it is also a strategic move designed to ensure loyalty, and an act of magnifi­cence meant to remind everyone else that he is great and the retainer small. There is no sense of contradiction here. Similarly, gifts between equals are usually fraught with many layers of love, envy, pride, spite, communal solidarity, or any of a dozen other things. Speculating on such matters is a major form of daily entertainment. What's missing, though, is any sense that the most selfish ("self-interested") motive is necessarily the real one: those speculating on hidden motives are just as likely to assume that someone is secretly trying to help a friend or harm an enemy as to acquire some advantage for him- or herself. Neither is any of this likely to have changed much in the rise of early credit markets, where the value of an IOU was as much dependent on assessments of its issuer's character as on his disposable income, and motives of love, envy, pride, etc. could never be completely set aside. 

But with cash transactions between strangers (soldier and a civilian), the motives really are very simple: how to get the most for oneself:

Cash transactions between strangers were different, and all the more so when trading is set against a background of war and emerges from disposing of loot and provisioning soldiers; when one often had best not ask where the objects traded came from, and where no one is much interested in forming ongoing personal relationships anyway. Here, transactions really do become simply a figuring-out of how many of X will go for how many of Y, of calculating proportions, estimating quality, and trying to get the best deal for oneself. The result, during the Axial Age, was a new way of thinking about human motivation, a radical simplification of motives that made it possible to begin speak­ing of concepts like "profit" and "advantage" - and imagining that this is what people are really pursuing, in every aspect of existence, as if the violence of war or the impersonality of the marketplace has simply allowed them to drop the pretense that they ever cared about anything else. It was this, in turn, that allowed human life to seem like it could be reduced to a matter of means-to-end calculation, and hence some­ thing that could be examined using the same means that one used to study the attraction and repulsion of celestial bodies.

As a result, people took upon a very reductive picture of human motivation that persists today. There are three key assumptions about human nature that has its roots in the market: 1. We assume that the self-interested motive is the “real” one. 2. This is not a very nuanced idea of self-interest as glory or even respect but material self-interest. 3. That human life could be thought of in the framework of a bargain: means-ends calculation. This is where instrumentalism arises.

In such a world, heroic considerations of honor and glory, vows to gods or desire for vengeance, were at best weaknesses to be manipu­lated. In the numerous manuals on statecraft produced at the time, everything was cast as a matter of recognizing interest and advantage, calculating how to balance that which will profit the ruler against that which will profit the people, determining when the ruler's interests are the same as the people's and when they contradict.

This view was taken upon by many philosophers. What’s interesting is that, in human economies, people would never equate the good from running a society as commensurable with the material gain from sowing the fields:

China provides an unusually transparent case in point. Already in Confucius's time, Chinese thinkers were speaking of the pursuit of profit as the driving force in human life. The actual term used was li, a word first used to refer to the increase of grain one harvests from a field over and above what one originally planted (the pictogram represents a sheaf of wheat next to a knife). From there it came to mean commercial profit, and thence, a general term for "benefit" or "payback." The following story, which purports to tell the reaction of a merchant's son named Lu Buwei on learning that an exiled prince was living nearby, illustrates the progression nicely:

On returning home, he said to his father, "What is the profit on investment that one can expect from plowing fields?"

"Ten times the investment," replied his father.

"And the return on investment in pearls and jades is how much?"

"A hundredfold."

"And the return on investment from establishing a ruler and securing the state would be how much?"

"It would be incalculable.

This was not limited to China:

Wherever the military-coinage-slavery complex began to take hold, we find political theorists propounding similar ideas. Kautilya was no different: the title of his book, the Arthasastra, is usually translated as "manual of statecraft," since it consists of advice to rulers, but its more literal translation is "the science of material gain." Like the Legalists, Kautilya emphasized the need to create a pretext that governance was a matter of morality and justice, but in addressing the rulers themselves, he insisted that "war and peace are considered solely from the point of view of profit"-of amassing wealth to create a more effective army, of using the army to dominate markets and control resources to amass more wealth, and so on. In Greece we've already met Thrasymachos. True, Greece was slightly different. Greek city-states did not have kings, and the collapse of private interests and affairs of state was in principle universally denounced as tyranny. Still, in practice, what this meant was that city-states, and even political factions, ended up acting in precisely the same coldly calculating way as Indian or Chinese sovereigns. Anyone who has ever read Thucydides' Melian dialogue-in which Athenian generals present the population of a previously friendly city with elegantly reasoned arguments for why the Athenians have determined that it is to the advantage of their empire to threaten them with collective massacre if they are not willing to become tribute­ paying subjects, and why it is equally in the interests of the Melians to submit-is aware of the results.

But the deeper point is that even the people who argued against these schools (say, the Legalists) did so on Legalist grounds and were therefore still stuck on the plane of materialism and profit as dominant modes of thinking. Mozi’s refutation of Legalism, advocating for pure materialistic altruism, still appeals to the very profit and calculation at the core of Legalism: 

If one could add up the total costs of aggression in human lives, animal lives, and material damage, one would be forced to the conclusion that they never outweighed the benefits-even for the victor. In fact, Mo Di took this sort of logic so far that he ended up ar­ guing that the only way to optimize the overall profit of humanity was to abandon the pursuit of private profit entirely and adopt a principle of what he called "universal love"-essentially arguing that if one takes the principle of market exchange to its logical conclusion, it can only lead to a kind of communism.

Even the religious traditions that did aim to escape from materialism were simply the opposites of this crude materialism. Pure charity also came about for the first time in history only as a reaction again the purely greedy logic of the market. The result was a Weberian division: 

The ultimate effect was a kind of ideal division of spheres of human activity that endures to this day: on the one hand the market, on the other, religion. To put the matter crudely: if one relegates a certain social space simply to the selfish acquisition of material things, it is almost inevitable that soon someone else will come to set aside another domain in which to preach that, from the perspective of ul­ timate values, material things are unimportant; that selfishness-or even the self-are illusory, and that to give is better than to receive. If nothing else, it is surely significant that all the Axial Age religions emphasized the importance of charity, a concept that had barely existed before. Pure greed and pure generosity are complementary concepts; neither could really be imagined without the other; both could only arise in institutional contexts that insisted on such pure and single-minded behavior; and both seem to have appeared to­gether wherever impersonal, physical, cash money also appeared on the scene.

What’s interesting here is that I often found the modern bifurcation of self and other interest to be deeply unsatisfying. if we examine the sources before the axial age, we might be able to find a philosophical language that can truly capture and guide our complex motives and escape this binary.

Metaphysical Materialism 

What the market also introduced in terms of ideas, Graeber claims, is a dualism between the physical and the spiritual. If you talk to cultures that have never been introduced to the market, you would realize that it is not the spirit that is introduced but material:

The notion that humans had souls appeared to Boesoou to be self­ evident. The notion that there was such a thing as the body, apart from the soul, a mere material collection of nerves and tissues-let alone that the body is the prison of the soul; that the mortification of the body could be a means to the glorification or liberation of the soul-all this, it turns out, struck him as utterly new and exotic.

Axial Age spirituality, then, is built on a bedrock of materialism. This is its secret; one might almost say, the thing that has become invisible to us. But if one looks at the very beginnings of philosophi­cal inquiry in Greece and India-the point when there was as yet no difference between what we'd now call "philosophy" and what we'd now call "science"-this is exactly what one finds. "Theory," if we can call it that, begins with the questions: "What substance is the world made of?" "What is the underlying material behind the physical forms of objects in the world?" "Is everything made up of varying combinations of certain basic elements (earth, air, water, fire, stone, motion, mind, number . . .), or are these basic elements just the forms taken by some even more elementary substance (for instance, as Nyaya and later Democritus proposed, atomic particles . . .)" In just about every case, some notion of God, Mind, Spirit, some active organizing principle that gave form to and was not itself substance, emerged as well. But this was the kind of spirit that, like Leenhardt's God, only emerges in relation to inert matter.

What made this idea plausible is the very form of coinage. The defining characteristic of coinage was its double sidedness. On one hand, it was just material. But on the other it not only had a price that went beyond the material price but it could be traded and transformed into anything. The idea that a mere rearrangement of material (stamping a King’s face) would change its actual value was what made coinage so unique. It is exactly this duality that also exists in any Materialistic philosophy the form and the material that “really” underlies it: 

Consider this word, "materialism." What does it mean to adopt a "materialist" philosophy? What is "material," anyway? Normally, we speak of "materials" when we refer to objects that we wish to make into something else. A tree is a living thing. It only becomes "wood" when we begin to think about all the other things you could carve out of it. And of course you can carve a piece of wood into almost any­ thing. The same is true of clay, or glass, or metal. They're solid and real and tangible, but also abstractions, because they have the potential to turn into almost anything else-or, not precisely that; one can't turn a piece of wood into a lion or an owl, but one can turn it into an image of a lion or an owl-it can take on almost any conceivable form. So already in any materialist philosophy, we are dealing with an opposi­tion between form and content, substance and shape; a clash between the idea, sign, emblem, or model in the creator's mind, and the physical qualities of the materials on which it is to be stamped, built, or im­ posed, from which it will be brought into reality. With coins this rises to an even more abstract level because that emblem can no longer be conceived as the model in one person's head, but is rather the mark of a collective agreement. The images stamped on Greek coins (Miletus' lion, Athens' owl) were typically the emblems of the city's god, but they were also a kind of collective promise, by which citizens assured one another that not only would the coin be acceptable in payment of public debts, but in a larger sense, that everyone would accept them, for any debts, and thus, that they could be use to acquire anything anyone wanted.

…

The war between Spirit and Flesh, then, between the noble Idea and ugly Reality, the rational intellect versus stubborn corporeal drives and desires that resist it, even the idea that peace and community are not things that emerge spontaneously but that need to be stamped onto our baser material natures like a divine insignia stamped into base metal-all those ideas that came to haunt the religious and philosophi­cal traditions of the Axial Age, and that have continued to surprise people like Boesoou ever since--can already be seen as inscribed in the nature of this new form of money.

It would be foolish to argue that all Axial Age philosophy was sim­ ply a meditation on the nature of coinage, but I think Seaford is right to argue that this is a critical starting place: one of the reasons that the pre-Socratic philosophers began to frame their questions in the peculiar way they did, asking (for instance): What are Ideas? Are they merely collective conventions? Do they exist, as Plato insisted, in some divine domain beyond material existence? Or do they exist in our minds? Or do our minds themselves ultimately partake of that divine immate­rial domain? And if they do, what does this say about our relation to our bodies? 

Fun fact: Miletus’ was the first Greek city to issue coinage. Thales, when asking his questions about the fundamental underlying substance was immersed in a culture of commerce.

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Chapter 10: the middle ages

India

The Mauryan Empire (first to have unified India 300-100BC) spawned five hundred years of successive kingdoms. By the time we get to the Middle ages proper India experienced a confluence of changes:

• Officials increasingly became paid by land grants.

• Centralized armies dissolved.

• Cities declined and villages became much more self-sufficient.

• The rise of monasteries and gold flowing into them.

• The reestablishment of hierarchy by the priestly caste. Legitimacy goes to religious authorities instead of the state.

• Transactions on credit within these self-sufficient villages.

• Slavery vanishes but debt peonage very much exists, although there are added protections for the debtors.

Monasteries became key financial institutions:

The key innovation was the creation of what were called the "perpetual endowments" or "inexhaustible treasuries." Say a lay supporter wished to make a contribution to her local monastery. Rather than offering to provide candles for a specific ritual, or servants to attend to the upkeep of the monastic grounds, she would provide a certain sum of money-or something worth a great deal of money-that would then be loaned out in the name of the monastery, at the accepted 15-percent annual rate. The interest on the loan would then be earmarked for that specific purpose.

Without war, priestly scholars effectively reinstated a form of local feudalism. Mass literacy was pulled back and learning became the domain of an elite class once again. What is interesting is that while the formal inequality seems to be much greater: you were now in a specific caste with a specific role, the actual burden on the poorest people were lessened since their work wasn’t extracted to sustain mega-cities anymore: 

They did it above all by seizing control of the administration of law. The Dharmasastra, law-codes produced by Brahmin scholars between roughly 200 BC and 400 AD, give us a good idea of the new vision of society. In it, old ideas like the Vedic conception of a debt to gods, sages, and ancestors were resuscitated-but now, they applied only and specifically to Brahmins, whose duty and privilege it was to stand in for all humanity before the forces that controlled the universe. Far from being required to attain learning, members of the inferior classes were forbidden to do so: the Laws of Manu, for instance, set down that any Sudra (the lowest caste, assigned to farming and material production) who so much as listened in on the teaching of the law or sacred texts should have molten lead poured into their ears; on the occasion of a repeat offense, have their tongues cut out. At the same time Brahmins, however ferociously they guarded their privileges, also adopted aspects of once-radical Buddhist and Jain ideas like karma, reincarnation, and ahimsa. Brahmins were expected to refrain from any sort of physical violence, and even to become vegetarians. In alliance with representatives of the old warrior caste, they also managed to win control of most of the land in the ancient villages. Artisans and craftsmen fleeing the decline or destruction of cities often ended up as suppliant refugees, and, gradually, low-caste clients. The result were increasingly complex local patronage systems in the countryside-jajmani systems, as they came to be known-where the refugees provided services for the land­ owning castes, who took on many of the roles once held by the state, providing protection and justice, extracting labor dues, and so on-but also protected local communities from actual royal representatives.

This latter function is crucial. Foreign visitors were later to be awed by the self-sufficiency of the traditional Indian village, with its elaborate system of landowning castes, farmers, and such "service castes" as barbers, smiths, tanners, drummers, and washermen, all arranged in hierarchical order, each seen as making its own unique and necessary contribution to their little society, all of it typically operating entirely without the use of metal currency. It was only possible for those reduced to the status of Sudras and Untouchables to have a chance of accepting their lowly position because the exaction of local landlords was, again, on nothing like the same scale as that under earlier governments-under which villagers had to support cities of up­ wards of a million people--and because the village community became an effective means of holding the state and its representatives at least partially at bay. 

While slavery vanished, fixed interest loans that one’s family members could be responsible for and, therefore, debt peonage was quite common. Although debt was never the binding logic that held communities together simply because it went against the caste logic of hierarchy:

There is a peculiar tension here: a kind of paradox. Debt and credit arrangements may well have played a crucial role in creating the Indian village system, but they could never really become their basis. It might have made a certain sense to declare that, just as Brahmins had to dispatch their debts to the gods, everyone should be, in a certain sense, in debt to those above them. But in another sense, that would have completely subverted the very idea of caste, which was that the universe was a vast hierarchy in which different sorts of people were assumed to be of fundamentally different natures, that these ranks and grades were fixed forever, and that when goods and services moved up and down the hierarchy, they followed not principles of exchange at all but (as in all hierarchical systems) custom and precedent. The French anthropologist Louis Dumont made the famous argument that one cannot even really talk about "inequality" here, because to use that phrase implies that one believes people should or could be equal, and this idea was completely alien to Hindu conceptions. For them to have imagined their responsibilities as debts would have been profoundly subversive, since debts are by definition arrangements between equals-at least in the sense that they are equal parties to a contract ­that could and should be repaid.

China

China is unique in that the other middle age empires saw religion take over the state in terms of legitimacy, but the Han Dynasty (50BC) molded them together (Confucianism + Bureaucracy).  

Chinese rule was always threatened by two things: nomadic invaders and peasant uprisings. Chinese statecraft, then, was how do we collect enough taxes from the peasantry enough to sustain a strong enough army while not collecting too much taxes to create peasant revolts:

The two great threats to the authorities were always the same: the nomadic peoples to the north (who they systematically bribed, but who nonetheless periodically swept over and conquered sections of China) and popular unrest and rebellion. The latter was almost con­ stant, and on a scale unknown anywhere else in human history. There were decades in Chinese history when the rate of recorded peasant uprisings was roughly 1.8 per hour. What's more, such uprisings were frequently successful. Most of the most famous Chinese dynasties that were not the product of barbarian invasion (the Yuan or Qing) were originally peasant insurrections (the Han, Tang, Sung, and Ming). In no other part of the world do we see anything like this. As a result, Chinese statecraft ultimately came down to funneling enough resources to the cities to feed the urban population and keep the nomads at bay, without causing a notoriously contumacious rural population to rise up in arms. The official Confucian ideology of patriarchal authority, equal opportunity, promotion of agriculture, light taxes, and careful government control of merchants seemed expressly designed to appeal to the interests and sensibilities of a (potentially rebellious) rural patriarch. 

What really helped the peasants’ case was the Confucian suspicion towards the mercantile class. This, combined with the natural tendency for rulers to be cautious of overburdening the workers meant that there were often state-led redistribution efforts to cancel debts etc.

The Confucian state may have been the world's greatest and most enduring bureaucracy, but it actively pro­ moted markets, and as a result, commercial life in China soon became far more sophisticated, and markets more developed, than anywhere else in the world.

This despite the fact that Confucian orthodoxy was overtly hostile to merchants and even the profit motive itself. Commercial profit was seen as legitimate only as compensation for the labor that merchants expended in transporting goods from one place to another, but never as fruits of speculation. What this meant in practice was that they were pro-market but anti-capitalist.

In Confucian terms, merchants were like soldiers. Those drawn to a career in the military were assumed to be driven largely by a love of violence. As individuals, they were not good people; but they were also necessary to defend the frontiers. Similarly, merchants were driven by greed and basically immoral; yet if kept under careful administrative supervision, they could be made to serve the public good. Whatever one might think of the principles, the results are hard to deny. For most of its history, China maintained the highest standard of living in the world.

Paper money started with Tallies that would be split in half and completed upon redemption. The creditor’s half became an IOU and started circulating as currency. In the Song Dynasty, (960-1279 AD), tea merchants started carrying promissory notes from private Chinese banks due to the danger of carrying bullion over long distances. The government initially tried to stop it but ended up issuing their own fiat currency. This system was kept by the Mongols and wasn’t abandoned until the 17th century. The Chinese view on money was always Chartalist because the internal economy was big enough that whatever the state accepted as taxes would become de facto money: 

If it was only China that developed paper money in the Middle Ages, this was largely because only in China was there a government large and powerful enough, but also, sufficiently suspicious of its mercantile classes, to feel it had to take charge of such operations.

Buddhism in China was inexorable linked with trading and business. It came from caravan routes and was, in its early days, largely a religion promoted by merchants. 

The language it came to describe the logic of the universe also took upon the logic of exchange: karmic debt. 

As Gernet remarks, the idea of life as an endless burden of debt would surely have struck a chord with Chinese villagers, for whom this was all too often literally true; but, as he also points out, like their counterparts in ancient Israel, they were also familiar with that sense of sudden liberation that came with official amnesties. There was a way to achieve that too. All that was required was to make regular donations to some monastery’s Inexhaustible Treasury.

Finally, even more so than their Indian counterparts, these monasteries were not only investors of capital, but they were full-scaled industrial operations:

The Chinese Buddhist approach to charity was nothing if not multifaceted. Festivals often led to vast outpourings of contributions, with wealthy adherents vying with one another in generosity, often driving their entire fortunes to the monasteries, in the forms of oxcarts laden with millions of strings of cash-a kind of economic self-immolation that paralleled the spectacular monastic suicides. Their contributions swelled the Inexhaustible Treasuries. Some would be given to the needy, particularly in times of hardship. Some would be loaned. One practice that hovered between charity and business was providing peasants with alternatives to the local moneylender. Most monasteries had attendant pawnshops where the local poor could place some valuable possession-a robe, a couch, a mirror-in hock in exchange for low-interest loans. Finally, there was the business of the monastery itself: that portion of the Inexhaustible Treasury turned over to the management of lay brothers, and either put out at loan or invested. Since monks were not allowed to eat the products of their own fields, the fruit or grain had to be put on the market, further swelling monastic revenues. Most monasteries came to be surrounded not only by commercial farms but veritable industrial complexes of oil presses, flour mills, shops, and hostels, often with thousands of bonded workers. At the same time, the Treasuries themselves became-as Gerner was perhaps the first to point out-the world's first genuine forms of concentrated finance capital. They were, after all, enormous concentrations of wealth managed by what were in effect monastic corporations, which were constantly seeking new opportunities for profitable investment. They even shared the quintessential capitalist imperative of continual growth; the Treasuries had to expand, since according to Mahayana doctrine, genuine liberation would not be possible until the whole world embraced the Dharma.

These monasteries became so wealthy, with so much metal, that the state had to shut them down and confiscate their possessions.

The Near West: Islam (Capital as Credit) 

Islamic attitudes should be interpreted as the exact opposite of Chinese ones: a love for law and merchants and a suspicion towards the government. 

The prevailing Islamic attitude toward law, government, and economic matters was the exact opposite of that prevalent in China. Confucians were suspicious of governance through strict codes of law, preferring to rely on the inherent sense of justice of the cultivated scholar-a scholar who was simply assumed to also be a government official. Medieval Islam, on the other hand, enthusiastically embraced law, which was seen as a religious institution derived from the Prophet, but tended to view government, more often than not, as an unfortunate necessity, an institution that the truly pious would do better to avoid. 

The distrust towards government is, first, because the Arab military leaders who, after Mohammed's death in 632 AD, conquered the Sassanian empire and established the Abbasid Caliphate never felt one with the people they ruled over, even after the population converted to Islam centuries later. As a result the people were always distrustful of the government. Second, religious authorities were free to set up their own judicial and educational institutions independent from the state which further weakened its power:

After Caliph al-Ma'mum's abortive attempt to set up a theocracy in 832 AD, the government took a hands-off position on questions of religion. The various schools of Islamic law were free to create their own educational institutions and maintain their own separate system of religious justice. Crucially, it was the ulema, the legal scholars, who were the principal agents in the conversion of the bulk of the empire's population to Islam in Mesopotamia, Syria, Egypt, and North Africa in those same years. But-like the elders in charge of guilds, civic associations, commercial sodalities, and religious brotherhoods-they did their best to keep the government, with its armies and ostentation, at arm's length.

What this meant is that the Caliphate continued Axial age style of conquests without effecting its people in the same way. Rome, as an example of Axial age conquest, generated a military-coinage-slavery complex that penetrated deeply into everyday life: slaves were working everywhere, everyone in Roman cities used coinage, and law/religion/trade were certainly not outside the reach of government. But in the Caliphate, slaves ended up back in the military, coinage became mostly a means of payment to soldiers (regular commerce worked on credit).

As a result, the internal society of the Caliphate was drastically different from other Axial age empires. In fact, the religious authorities which had the authority to erect law, created many protections for debtors:

The legal system that they created also ensured that it was effectively impossible for Muslims-or for that matter Christian or Jewish subjects of the Caliphate-to be reduced to slavery. Here al-Wahid seems to have been largely correct. Islamic law took aim at just about all the most notorious abuses of earlier, Axial Age societies. Slavery through kidnapping, judicial punishment, debt, and the exposure or sale of children, even through the voluntary sale of one's own person-all were forbidden, or rendered unenforceable. Likewise with all the other forms of debt peonage that had loomed over the heads of poor Middle Eastern farmers and their families since the dawn of recorded history. Finally, Islam strictly forbade usury, which it interpreted to mean any arrangement in which money or a commodity was lent at interest, for any purpose whatsoever.

It was partially because of this ban of usury – and the terrifying consequences it had to debtors – that made commerce so well-liked. In fact, there was a massive shift of class alliances: while the merchants were previously the bane of citizens, by giving up usury and allying with religious/legal authorities, all three groups became allied against the intrusion of the state.

Of course, it also didn’t hurt that the Prophet began his adult life as a merchant and thus no Islamic thinker ever treated the honest pursuit of profit as itself intrinsically immoral or inimical to faith.

Furthermore, the ban of usury did not stall commerce and the development of other financial instruments. One example is to allow for service fees: allowing goods bought on credit to be priced slightly higher:  

Still, these incentives were never enough to allow banking to become a full-time occupation: instead, almost any merchant operating on a sufficiently large scale could be expected to combine banking with a host of other moneymaking activities. As a result, credit instruments soon became so essential to trade that almost anyone of prominence was expected to keep most of his or her wealth on deposit, and to make everyday transactions, not by counting out coins, but by inkpot and paper.

Financing, on the other hand was not done through fixed-interest instruments by profit sharing agreements (equity). There was a high degree of trust and reputation was pivotal in Islamic commerce for few reasons 1. You can only enter into profit sharing agreements if you believe the other person will properly report profits 2. The currency by which you transact (promissory notes) are not backed by the state and cannot be redeemed by them 3. Contracts were not enforceable by the state either (e.g. there were no debtor’s prisons). “Its merchants shunned enforceable contracts, preferring to seal transactions "with a handshake and a glance at heaven.”

As a result, the merchant became a knightly figure:

In Islamic society, the merchant became not just a respected figure, but a kind of paragon: like the warrior, a man of honor able to pursue far-flung adventures; unlike him, able to do so in a fashion damaging to no one. The French historian Maurice Lombard draws a striking, if perhaps rather idealized, picture of him "in his stately town-house, surrounded by slaves and hangers-on, in the midst of his collections of books, travel souvenirs, and rare ornaments," along with his ledgers, correspondence, and letters of credit, skilled in the arts of double-entry book-keeping along with secret codes and ciphers, giving alms to the poor, supporting places of worship, perhaps, dedicating himself to the writing of poetry, while still able to translate his general creditworthiness into great capital reserves by appealing to family and partners.

And the market, unlike post-coinage Mesopotamia, became once-again a respectable place of community:

Once freed from its ancient scourges of debt and slavery, the local bazaar had become, for most, not a place of moral danger, but the very opposite: the highest expression of the human freedom and communal solidarity, and thus to be protected assiduously from state intrusion. 

In many ways, what Medieval Islam had was both an earlier and more genuine form of the free market. The Prophet declared that “prices depend on the will of God” and, of course, to tamper in it should be considered sacrilegious. Many of Smith’s key moves are anticipated by Islamic thinkers:  

If all this bears a striking resemblance to Adam Smith's "invisible hand" (which was also the hand of Divine Providence), it might not be a complete coincidence. In fact, many of the specific arguments and examples that Smith uses appear to trace back directly to economic tracts written in Medieval Persia. For instance, not only does his argument that exchange is a natural outgrowth of human rationality and speech already appear both in both Ghazali (1058-1111 AD), and Tusi (1201-1274 AD); both use exactly the same illustration: that no one has ever observed two dogs exchanging bones. Even more dramatically, Smith's most famous example of division of labor, the pin factory, where it takes eighteen separate operations to produce one pin, already appears in Ghazali's Ihya, in which he describes a needle factory, where it takes twenty-five different operations to produce a needle.

But there are two key differences of massive import between Islamic assumptions and that of modern liberalism.

First, the market is an expression of mutual aid. In other words, the market ought to operate on a logic of communism and not exchange. Smith would say that the market channels private vice into public virtue, yet Tusi’s view is that the very motives we enter into the market is mutual aid. While the end state is the same, the motivations aren’t: 

Divine providence has arranged us to have different abilities, desires, and inclinations. The market is simply one manifestation of this more general principle of mutual aid, of the matching of, abilities (supply) and needs (demand)-or to translate it into my own earlier terms, it is not only founded on, but is itself an extension of the kind of baseline communism on which any society must ultimately rest. 

Second, money, according to Ghazali, acts as a good unit of account not because it had intrinsic worth (Smith) but because it has no qualities whatsoever:

How do you compare two things with no common qualities? His conclusion: it can only be done by comparing both to a third thing with no qualities at all. For this reason, he explains, God created dinars and dirhams, coins made out of gold and silver, two metals that are otherwise no good for anything:

Dirhams and dinars are not created for any particular purpose; they are useless by themselves; they are just like stones. They are created to circulate from hand to hand, to govern and to facilitate transactions. They are symbols to know the value and grades of goods. They can be symbols, units of measure, because of this very lack of usefulness, indeed lack of any particular feature other than value:

A thing can only be exactly linked to other things if it has no particular special form or feature of its own-for example, a mirror that has no color can reflect all colors. The same is the case with money-it has no purpose of its own, but it serves as medium for the purpose of exchanging goods.

From this it also follows that lending money at interest must be illegitimate, since it means using money as an end in itself: "Money is not created to earn money." In fact, he says, "in relation to other goods, dirhams and dinars are like prepositions in a sentence," words that, as the grammarians inform us, are used to give meaning to other words, but can only do because they have no meaning in themselves. Money is a thus a unit of measure that provides a means of assessing the value of goods, but also one that operates as such only if it stays in constant motion. To enter in monetary transactions in order to obtain even more money, even if it's a matter of M-C-M', let alone M-M', would be, according to Ghazali, the equivalent of kidnapping a post­ man. Whereas Ghazali speaks only of gold and silver, what he describes­ money as symbol, as abstract measure, having no qualities of its own, whose value is only maintained by constant motion-is something that would never have occurred to anyone were it not in an age when it was perfectly normal for money to be employed in purely virtual form.

These are two differences of import. Merchants, for example, were expected to lower their prices for the needy, since the market should be an expression of mutual aid. Furthermore, Graeber argues that this is a more meaningful version of a “free” market because it completely pushes the state out of the picture. If, like Smith, you believe that money has intrinsic worth, then it should be the role of the state to maintain the purity of the currency. And, if you believe that the intentions in the market are purely selfish, then you need to have prisons and police to enforce contracts. But, starting with the Islamic assumptions, you can afford to push the state all the way back and create: “a genuine free market, not one created by the government and backed by its police and prisons-[but] a world of handshake deals and paper promises backed only by the integrity of the signer.”

Western Europe

Europe came into the middle ages late (the mercantile capitalism that we see in Islam did not take shape until 1200AD). But we see the same shape of events going on:

• Collapse of large empires of the axial age into more localized governance systems (city-states stewarded by merchant classes).

• Religious authorities regulating financial systems, especially the creation of credit.

• The flow of bullion into religious institutions.

• The virtualization of money: “Everyone continued to calculate costs in Roman currency, then, later, in Carolingian "imaginary money"-the purely conceptual system of pounds, shillings, and pence used across Western Europe to keep accounts well into the seventeenth century.”

• Local mints coming back to operation

The Christian theologians, writing at the end of the Roman empire (which was being torn apart by debt crisis) all condemned usury:

Usury was seen above all as an assault on Christian charity, on Jesus's injunction to treat the poor as they would treat the Christ him­self, giving without expectation of return and allowing the borrower to decide on recompense (Luke 6:34-35).

St. Ambrose went so far as to compare usury with theft and violence. At the same however, and this became a recurring loophole to be exploited, he made a, what was later to be called, “Exception of St. Ambrose.” He reasoned that what Deuteronomy 23:20 was really saying was that, since usury is like violence, you should be able to charge interest on those that you are also justified to kill – “Strangers”.

Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury. Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury.

What is fascinating is that while the Church condemned usury, it was fine with slavery (which was often worse than debt peonage) and feudalism (which debt peonage transformed into). This goes to show how much debt – the relationship of a broken equality – is unbearable.

The “Exception of Saint Ambrose” first became significant as it made the Jews the defacto financial class. This was doubly troubling for the Jews as they were not only the creditors that were in tension with the larger community, but (because of this) Kings often chose them as scapegoats and played the populist card:

In part this was due to the habit of Christian princes of exploiting, for their own purposes, the fact that Jews did sit slightly outside the system. Many encouraged Jews to operate as moneylenders, under their protection, simply because they also knew that protection could be withdrawn at any time. The kings of England were notorious in this regard. They insisted that Jews be excluded from merchant and craft guilds, but granted them the right to charge extravagant rates of interest, backing up the loans by the full force of Iaw. Debtors in Medieval England were regularly thrown in prisons until their families settled with the creditor. Yet the same regularly happened to the Jews themselves. In 1210 AD, for example, King John ordered a tallage, or emergency levy, to pay for his wars in France and Ireland. According to one contemporary chronicler "all the Jews throughout England, of both sexes, were seized, imprisoned, and tortured severely, in order to do the king's will with their money." Most who were put to torture offered all they had and more-but on that occasion, one particularly wealthy merchant, a certain Abraham of Bristol, who the king decided owed him ten thousand marks of silver (a sum equivalent to about a sixth of John's total annual revenue), became famous for holding out. The king therefore ordered that one of his molars be pulled out daily, until he paid. After seven had been extracted, Abraham finally gave in.

The terror inflicted by kings carried in it a peculiar element of identification: the persecutions and appropriations were an extension of the logic whereby kings effectively treated debts owed to Jews as ultimately owed to themselves, even setting up a branch of the Treasury ("the Exchequer of the Jews") to manage them. This was of course much in keeping with the popular English impression of their kings as themselves a group of rapacious Norman foreigners. But it also gave the kings the opportunity to periodically play the populist card, dramatically snubbing or humiliating their Jewish financiers, turning a blind eye or even encouraging pogroms by townsfolk who chose to take the Exception of Saint Ambrose literally, and treat moneylenders as enemies of Christ who could be murdered in cold blood. Particularly gruesome massacres occurred in Norwich in 1144 AD, and in France, in Blois in 1171. Before long, as Norman Cohn put it, "what had once been a flourishing Jewish culture had turned into a terrorized society locked in perpetual warfare with the greater society around it."

Debates about usury during this time often extended to challenge the foundations of private property itself:

All this was echoed by a heady intellectual debate in the newly founded universities, not so much as to whether usury was sinful and illegal, but precisely why. Some argued that it was theft of another's material possessions; others that it constituted a theft of time, charging others for something that belonged only to God. Some held that it embodied the sin of Sloth, since like the Confucians, Catholic thinkers usually held that a merchant's profit could only be justified as payment for his labor (i.e., in transporting goods to wherever they were needed), whereas interest accrued even if the lender did nothing at all. Soon the rediscovery of Aristotle, who returned in Arabic translation (and the influence of Muslim sources like Ghazali and Ibn Sina), added new arguments: that treating money as an end in itself defied its true purpose; that charging interest was unnatural, in that it treated mere metal as if it were a living thing that could breed or bear fruit.

The debates also trended another direction, finding another loophole for lenders to collect interest. The legal term of this loophole is actually where our current word “interest” comes from:

At the same time, the revival of Roman law-which, as we’ve seen, began from the assumption of absolute private property-put new intellectual weapons in the hands of those who wished to argue that, at least in the case of commercial loans, usury laws should be relaxed. The great discovery in this case was the notion of interesse, which is where our word “interest” originally comes from: a compensation for loss suffered because of late payment. The argument soon became that if a merchant made a commercial loan even for some minimal period (say, a month), it was not usurious for him to charge a percentage for each month afterward, since this was a penalty, not rental for the money, and it was justified as compensation for the profit he would have made, had he placed it in some profitable investment, as any merchant would ordinarily be expected to do.

Merchant capitalism only came to be in western Europe around 1200AD with the rise of city states that were de facto controlled by wealthy merchant families. One peculiar difference, however between the capitalism of Europe and the other middle age regions is that there was a close symbiosis between merchants and armies (in fact, most merchants were the armies). In China, the government and armies were suspicious of merchants; In India, the government used merchants to syphon money off of the armies; In the middle east, the merchants, allied with the people, erected a wall against the army.

What jumps out, in comparison with the Muslim world, are these links of finance, trade, and violence. Whereas Persian and Arab thinkers assumed that the market emerged as an extension of mutual aid, Christians never completely overcame the suspicion that commerce was really an extension of usury, a form of fraud only truly legitimate when directed against one's mortal enemies. Debt was, indeed, sin-on the part of both parties to the transaction. Competition was essential to the nature of the market, but competition was (usually) nonviolent warfare. There was a reason why, as I've already observed, the words for "truck and barter" in almost all European languages were derived from terms meaning "swindle," "bamboozle," or "deceive."

…

Most of the capital for these banking enterprises derived from the Mediterranean trade in Indian Ocean spices and Eastern luxuries. Yet unlike the Indian Ocean, the Mediterranean was a constant war zone. Venetian galleys doubled as both merchant vessels and warships, replete with cannon and marines, and the differences between trade, crusade, and piracy often depended on the balance of forces at any given moment.131 The same was true on land: where Asian empires tended to separate the sphere of warriors and merchants, in Europe they often overlapped:

All up and down Central Europe, from Tuscany to Flanders, from Brabant to Livonia, merchants not only supplied warriors-as they did all over Europe--they sat in governments that made war and, sometimes, buckled on armor and went into battle themselves. Such places make a long list: not only Florence, Milan, Venice, and Genoa, but also Augsburg, Nuremberg, Strasbourg, and Zurich; not only Lubeck, Ham­ burg, Bremen, and Danzig, but also Bruges, Ghent, Leiden, and Cologne. Some of them-Florence, Nuremberg, Siena, Bern, and Ulm come to mind-built considerable territorial states.

This close proximity between the mercenary class and armies led to the invention of new forms of war financing:

The Genoese republic was also the inventor of a unique mode of military financing, which might be known as war by subscription, whereby those planning expeditions sold shares to investors in exchange for the rights to an equivalent percentage of the spoils. It was precisely the same galleys, with the same "merchant adventurers" aboard, who would eventually pass through the pillars of Hercules to follow the Atlantic coast to Flanders or the Champagne fairs, carrying cargoes of nutmeg or cayenne, silks and woolen goods-along with the inevitable bills of exchange.

Graeber argues that the popular middle-age image of roaming knights actually came from these wandering merchant-warriors. Knights were at most entertainers if not wandering bandits:

The curious thing is that it bears almost no relation to reality. Nothing remotely like a real "knight-errant" ever existed. "Knights" had originally been a term for freelance warriors, drawn from the younger or, often, bastard sons of the minor nobility. Unable to in­ herit, many were forced to band together to seek their fortunes. Many became little more than roving bands of thugs, in an endless pursuit of plunder-precisely the sort of people who made merchants' lives so dangerous. Culminating in the twelfth century, there was a concerted effort to bring this dangerous population under the control of the civil authorities: not only the code of chivalry, but the tournament, the joust-all these were more than anything else ways of keeping them out of trouble, as it were, in part by setting knights against each other, in part by turning their entire existence into a kind of stylized ritual. The ideal of the lone wandering knight, in search of some gallant ad­ venture, on the other hand, seems to have come out of nowhere.

Conclusion

If the defining characteristic of Axial age thought was materialism, then the defining mode of thinking of Middle age thinking is transcendence: that true value lay somewhere transcendent of the material realm. To put it crudely, if an Axial age thinker saw the world and inevitably collapsed it into some form of material, then a Middle age thinker collapses the foundations of the world in ideas and social conventions. Of course, this was, Graeber claims, influenced by the virtual nature of the currency that fluctuated depending on social convention: 

If the Axial Age was the age of materialism, the Middle Ages were above all else the age of transcendence. The collapse of the ancient empires did not, for the most part, lead to the rise of new ones.141 Instead, once-subversive popular religious movements were catapulted into the status of dominant institutions. Slavery declined or disappeared, as did the overall level of violence. As trade picked up, so did the pace of technological innovation; greater peace brought greater possibilities not only for the movement of silks and spices, but also of people and ideas. The fact that monks in Medieval China could devote themselves to translating ancient treatises in Sanskrit, and that students in madrasas in Medieval Indonesia could debate legal terms in Arabic, is testimony to the profound cosmopolitanism of the age.

…

If there is an essence to Medieval thought, it lies not in blind obedience to authority, but rather in a dogged insistence that the values that govern our ordinary daily affairs-particularly those of the court and marketplace-are confused, mistaken, illusory, or perverse. True value lay elsewhere, in a domain that cannot be directly perceived, but only approached through study or contemplation. But this in turn made the faculties of contemplation, and the entire question of knowledge, an endless problem. Consider for example the great conundrum, pondered by Muslim, Christian, and Jewish philosophers alike: What does it mean to simultaneously say that we can only know God through our faculties of Reason, but that Reason itself partakes of God? Chinese philosophers were struggling with similar conundrums when they asked, "Do we read the classics or do the classics read us?" Almost all the great intellectual debates of the age turned on this question in one way or another. Is the world created by our minds, or our minds by the world?

Critique: this is painting in way too broad a stroke, I think these broad conclusions are meaningless and cherry picking.

Graeber argues that the shift from bullion to virtual money (intrinsic to social value) also meant that debt had a greater role to play in everyday life: after all virtual money is, in a sense, debt. And the different religious, cultural traditions dealt with it in different ways:

On one level, this is just another version of the dilemmas that always arise when we try to reimagine the world through debt-that peculiar agreement between two equals that they shall no longer be equals, until such time as they become equals once again. Still, the problem took on a peculiar piquancy in the Middle Ages, when the economy became, as it were, spiritualized. As gold and silver migrated to holy places, ordinary transactions everywhere came to be carried out primarily through credit. Inevitably, arguments about wealth and markets became arguments about debt and morality, and arguments about debt and morality became arguments about the nature of our place in the universe. As we've seen, the solutions varied considerably. Europe and India saw a return to hierarchy: society became a ranked order of Priests, Warriors, Merchants, and Farmers (or in Christendom, just Priests, Warriors, and Farmers). Debts between the orders were considered threatening because they implied the potential of equality, and they often led to outright violence. In China, in contrast, the principle of debt often became the governing principle of the cosmos: karmic debts, milk-debts, debt contracts between human beings and celestial powers. From the point of view of the authorities, all these led to excess, and potentially to vast concentrations of capital that might throw the entire social order out of balance. It was the responsibility of government to intervene constantly to keep markets running smoothly and equitably, thus avoiding new outbreaks of popular unrest. In the world of Islam, where theologians held that God recreated the en­ tire universe at every instant, market fluctuations were instead seen as merely another manifestation of divine will.

This is also an age where the foundations of modern capitalism was born. In fact, the corporation was initially inspired by angels and first applied to monasteries, schools, etc:

Legally, our notion of the corporation is very much a product of the European High Middle Ages. The legal idea of a corporation as a "fictive person" (persona ficta)-a person who, as Maitland, the great British legal historian, put it, "is immortal, who sues and is sued, who holds lands, has a seal of his own, who makes regulations for those natural persons of whom he is composed"166-was first established in canon law by Pope Innocent IV in 1250 AD, and one of the first kinds of entities it applied to were monasteries-as also to universities, church­ es, municipalities, and guilds.

Graeber defines modern day capitalism as different from the commerce of the middle ages because it had large organizations that partnered with governments to create monopolies that systematized risk away. This was impossible for, say, Islam because of their strong distaste for the government and objections to fixed-rate interest:

Certainly, the Islamic world produced figures who would be hard to describe as anything but capitalists. Large-scale merchants were referred to as sahib al-mal, "owners of capital," and legal theorists spoke freely about the creation and expansion of capital funds. At the height of the Caliphate, some of these merchants were in possession of millions of dinars and seeking profitable investment. Why did nothing like modern capitalism emerge? I would highlight two factors. First, Islamic merchants appear to have taken their free-market ideology seriously. The marketplace did not fall under the direct supervision of the government; contracts were made between individuals-ideally, "with a handshake and a glance at heaven"-and thus honor and credit became largely indistinguishable. This is inevitable: you can't have cutthroat competition where there is no one stopping people from literally cutting one another's throats. Second, Islam also took seriously the principle, later enshrined in clas­ sical economic theory but only unevenly observed in practice, that profits are the reward for risk. Trading enterprises were assumed to be, quite literally, adventures, in which traders exposed themselves to the dangers of storm and shipwreck, savage nomads, forests, steppes, and deserts, exotic and unpredictable foreign customs, and arbitrary governments. Financial mechanisms designed to avoid these risks were considered impious. This was one of the objections to usury: if one demands a fixed rate of interest, the profits are guaranteed. Similarly, commercial investors were expected to share the risk. This made most of the forms of finance and insurance that were to later develop in Europe impossible.

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Chapter 11 Age of the Great Capitalist Empires

The Capitalist age begins not with the introduction of armies which spawns Bullion as does the axial age, but an introduction of Bullion that spawns armies:

The era begins around 1450 with a turn away from virtual currencies and credit economies and back to gold and silver. The subsequent flow of bullion from the Americas sped the process immensely, sparking a "price revolution" in Western Europe that turned traditional society upside-down. What's more, the return to bullion was accompanied by the return of a whole host of other conditions that, during the Middle Ages, had been largely suppressed or kept at bay: vast empires and professional armies, massive predatory warfare, untrammeled usury and debt peonage, but also materialist philosophies, a new burst of scientific and philosophical creativity-even the return of chattel slavery. It was in no way a simple repeat performance. All the Axial Age pieces reappeared, but they came together in an entirely different way.

The black plague had killed off 1/3 of the labor force. This gave the peasants a lot of negotiating power and wealth. Festival days-off sometimes took up a third of the year: the fifteenth century saw massive improvements in quality of life for the peasantry. Yet this all went away in the following centuries. The common explanation is the influx of precious metals that inflated prices. The problem with this story is that most of the metals did not end up anywhere in Europe (especially not in the hands of the peasantry) but in China.

When the Ming dynasty came into power (1300 AD) they had a suspicion of commerce and merchants who worked closely with the previous, Mongol dynasty. They limited commerce and promoted self-sufficient agrarian communities taxed by mandatory labor for the state (old, Mongol vestige). People began leaving their ancestral lands and started working in illegal silver mines. By the mid 1400s, the state tried to crack down these mines, but eventually ended up adopting silver and not labor as the mode of taxation. The Ming economy and population boomed and, thus, had a massive appetite for silver to prevent deflation. It was this large demand of silver that made the conquest of the new world and the search for metals sustainable:

Had China in particular not had such a dynamic economy that changing its metallic base could absorb the staggering quantities of silver mined in the New World over three centuries, those mines might have become unprofitable within a few decades. The massive inflation of silver-denominated prices in Europe from 1500 to 1640 indicates a shrinking value for the metal there even with Asia draining off much of the supply.

By the late sixteenth century, China was importing almost fifty tons of silver a year, about 90 percent of its silver, and by the early seventeenth century, 106 tons, or over 97 percent. Huge amounts of silk, porcelain, and other Chinese products had to be exported to pay for it. Many of these Chinese products, in turn, ended up in the new cities of Central and South America. This Asian trade became the single most significant factor in the emerging global economy, and those who ultimately controlled the financial levers-particularly Italian, Dutch, and German merchant bankers-became fantastically rich.

What caused the inflation wasn’t metals entering circulation, but government bills backed by metals entering circulation:

What really caused the inflation is that those who ended up in control of the bullion-governments, bankers, large-scale merchants-were able to use that control to begin changing the rules, first by insisting that gold and silver were money, and second by introducing new forms of credit-money for their own use while slowly undermining and destroying the local systems of trust that had allowed small-scale communities across Europe to operate largely without the use of metal currency.

What is Capital

Graeber claims that Cortes and his soldiers were not particularly evil or greedy people (relative to the travesties they committed) they were merely motivated by a perverted financial instrument that was particularly harsh in its terms and unforgiving in its penalties:

After eight months of grueling house-to-house warfare and the death of perhaps a hundred thousand Aztecs, Tenochtitlan, one of the greatest cities of the world, lay entirely destroyed. The imperial treasury was secured, and the time had come, then, for it to be divided in shares amongst the surviving soldiers.

Yet according to Diaz, the result among the men was outrage. The officers connived to sequester most of the gold, and when the final tally was announced, the troops learned that they would be receiving only fifty to eighty pesos each. What's more, the better part of their shares was immediately seized again by the officers in their capacity of creditors-since Cortes had insisted that the men be billed for any replacement equipment and medical care they had received during the siege. Most found they had actually lost money on the deal. Diaz writes:

We were all very deeply in debt. A crossbow was not to be purchased for less than forty or fifty pesos, a musket cost one hundred, a sword fifty, and a horse from 8oo to 1000 pesos, and above. Thus extravagantly did we have to pay for every­ thing! A surgeon, who called himself Mastre Juan, who had tended some very bad wounds, charged wildly inflated fees, and so did a quack named Murcia, who was an apothecary and a barber and also treated wounds, and there were thirty other tricks and swindles for which payment was demanded of our shares as soon as we received them.

Serious complaints were made about this, and the only remedy that Cortes provided was to appoint two trustworthy per­ sons who knew the prices of goods and could value anything that we had bought on credit. An order went out that whatever price was placed on our purchases or the surgeon's cures must be accepted, but that if we had no money, our creditors must wait two years for payment.

…

We are not dealing with a psychology of cold, calculating greed, but of a much more complicated mix of shame and righteous indignation, and of the frantic urgency of debts that would only compound and accumulate (these were, almost certainly, interest-bearing loans), and outrage at the idea that, after all they had gone through, they should be held to owe any­ thing to begin with.

And what of Cortes? He had just pulled off perhaps the greatest act of theft in world history. Certainly, his original debts had now been rendered inconsequential. Yet he somehow always seemed to find himself in new ones. Creditors were already starting to repossess his holdings while he was off on an expedition to Honduras in 1526; on his return, he wrote the Emperor Charles V that his expenses were such that "all I have received has been insufficient to relive me from misery and poverty, being at the moment I write in debt for upwards of five hundred ounces of gold, without possessing a single peso towards it." Disingenuous, no doubt (Cortes at the time owned his own personal palace), but only a few years later, he was reduced to pawning his wife's jewelry to help finance a series of expeditions to California, hoping to restore his fortunes. When those failed to turn a profit, he ended up so besieged by creditors that he had to return to Spain to petition the emperor in person.

This interpretation of Cortes paints an optimistic psychology of human nature but a terrifying psychology of the debtor: someone who is infuriated, and is forced to see the world in terms of value to be extracted.

All of this helps explain why the Church had been so uncompromising in its attitude toward usury. It was not just a philosophical question; it was a matter of moral rivalry. Money always has the potential to become a moral imperative unto itself. Allow it to expand, and it can quickly become a morality so imperative that all others seem frivolous in comparison. For the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise. Even human relations become a matter of cost-benefit calculation. Clearly this is the way the conquistadors viewed the worlds that they set out to conquer.

…

Or, more precisely, perhaps, about the debtor who feels he has done nothing to deserve being placed in his position: the frantic urgency of having to convert everything around oneself into money, and rage and indignation at having been reduced to the sort of person who would do so.

Drawing from Cortes, Graeber paints a pessimistic picture of capitalism: financiers who are too far away from the action to care and gamblers who are too powerless to do anything.

If all this seems suspiciously reminiscent of the fourth Crusade, with its indebted knights stripping whole foreign cities of their wealth and still somehow winding up only one step ahead of their creditors, there is a reason. The financial capital that backed these expeditions came from more or less the same place (if in this case Genoa, not Venice). What's more, that relationship, between the daring adventurer on the one hand, the gambler willing to take any sort of risk, and on the other, the careful financier, whose entire operations are organized around producing steady, mathematical, inexorable growth of income, lies at the very heart of what we now call "capitalism."

As a result, our current economic system has always been marked by a peculiar dual character. Scholars have long been fascinated by Spanish debates that ensued, in Spanish universities like Santander, about the humanity of the Indians (Did they have souls? Could they have legal rights? Was it legitimate to forcibly enslave them?), just as they have argued about the real attitudes of the conquistadors (was it contempt, revulsion, or even grudging admiration for their adversaries?) The real point is that at the key moments of decision, none of this mattered. Those making the decisions did not feel they were in control anyway; those who were did not particularly care to know the details.

Graeber’s central claim is that capital in the capitalist age is different from bullion in the Axial age in that capital is money with the expectation and imperative to grow. This means that, in the first time in history (if you don’t count the inexhaustible treasuries), you have organizations that are centered around the profit-seeking motive. Whereas the profit seeking-motive was to serve empire/politics/military expansion in the Axial age, the latter is made to serve the former in the capitalist age. Ie. Capital has become autonomous:

Capital, then, is not simply money. It is not even just wealth that can be turned into money. But neither is it just the use of political pow­ er to help one use one's money to make more money. Cortes was trying to do exactly that: in classical Axial Age fashion, he was attempting to use his conquests to acquire plunder, and slaves to work the mines, with which he could pay his soldiers and suppliers cash to embark on even further conquests. It was a tried-and-true formula. But for all the other conquistadors, it provided a spectacular failure.

This would seem to mark the difference. In the Axial Age, money was a tool of empire. It might have been convenient for rulers to promulgate markets in which everyone would treat money as an end in itself; at times, rulers might have even come to see the whole apparatus of government as a profit-making enterprise; but money always remained a political instrument. This is why when the empires collapsed and armies were demobilized, the whole apparatus could simply melt away. Under the newly emerging capitalist order, the logic of money was granted autonomy; political and military power were then gradually reorganized around it. True, this was a financial logic that could never have existed without states and armies behind it in the first place. As we have seen in the case of Medieval Islam, under genuine free-market conditions-in which the state is not involved in regulating the market in any significant way, even in enforcing commercial contracts-purely competitive markets will not develop, and loans at interest will become effectively impossible to collect. It was only the Islamic prohibition against usury, really, that made it possible for them to create an economic system that stood so far apart from the state.

In fact, this imperative of capital to grow is precisely how medieval protestant thinkers justified usury (they also made the case that usury is still sinful but in our imperfect world it should be permitted):

Protestant thinkers all continued to make the old Medieval argument about interesse: that "interest" is really compensation for the money that the lender would have made had he been able to place his money in some more profitable investment. Originally, this logic was just ap­ plied to commercial loans. Increasingly, it was now applied to all loans. Far from being unnatural, then, the growth of money was now treated as completely expected. All money was assumed to be capital.

The Mores of Pre-Capital Europe

Among the commoners, cash was reserved for transactions with strangers and people with so low reputation that no one would extend credit to them. Credit (without interest) was kept on everyone else and a great public “reckoning” was held every year to square accounts. It was an economy based on credit and trust. It had elements of capitalism (market) but also communism (collective stewardship):

The reason that this upends our assumptions is that we're used to blaming the rise of capitalism on something vaguely called "the market"-the breakup of older systems of mutual aid and solidarity, and the creation of a world of cold calculation, where everything had its price. Really, English villagers appear to have seen no contradiction between the two. On the one hand, they believed strongly in the collective stewardship of fields, streams, and forests, and the need to help neighbors in difficulty. On the other hand, markets were seen as a kind of attenuated version of the same principle, since they were entirely founded on trust.

The only people who use cash systematically were government officials funding vast enterprises and the criminal underworld. This combined with the fact that the only times a commoner would transact in cash would be with people of low reputation meant that Credit was seen as morally just and the use of cash to be seen as suspect.

In these small and local communities operated on trust and credit, much like similar ones in the Islamic world, the market was seen as a form of mutual aid instead of a place that needed to be backed by governmental force to make sure that people don’t cheat each other. And this makes sense right, if the people you are trading with are people you have social ties with, then of course you won’t be trading just out of selfish interest any more than you would be trying to maximize the amount you eat at a family dinner. The basis of society is communal solidarity and not mutual restraint (as imagined by Hobbes):

For most English villagers, the real font and focus of social and moral life was not so much the church as the local ale-house-and community was embodied above all in the conviviality of popular festivals like Christmas or May Day, with everything that such celebrations entailed: the sharing of pleasures, the communion of the senses, all the physical embodiment of what was called "good neighborhood." Society was rooted above in the "love and amity" of friends and kin, and it found expression in all those forms of everyday communism (helping neighbors with chores, providing milk or cheese for old widows) that were seen to flow from it. Markets were not seen as contradicting this ethos of mutual aid. It was, much as it was for Tusi, an extension of mutual aid-and for much the same reason: because it operated entirely through trust and credit.

In 1696, for instance, Charles Davenant wrote that even if there were a general collapse of confidence in the credit system, it could not last long, because eventually, when people reflected on the matter and realized that credit is simply an extension of human society,

They will find, that no trading nation ever did subsist, and carry on its business by real stock [that is, just coin and merchandise]; that trust and confidence in each other, are as necessary to link and hold a people together, as obedience, love, friendship, or the intercourse of speech. And when experience has taught man how weak he is, depending only on himself, he will be willing to help others, and call upon the assistance of his neighbors, which of course, by degrees, must set credit again afloat.

"Amity and friendship," Bodin wrote, "are the foundation of all human and civil society"-they constitute that "true, natural justice" on which the whole legal structure of con­ tracts, courts, and even government must necessarily be built. Similarly, when economic thinkers reflected on the origins of the money, they spoke of "trusting, exchanging, and trading." It was simply assumed that human relations came first.

Transition to Capital I: the Demonization of Credit

The story of the origins of capitalism, then, is not the story of the gradual destruction of traditional communities by the impersonal power of the market. It is, rather, the story of how an economy of credit was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of the impersonal-and often vindictive-power of the state.

The transformation happened first and foremost when interest was legalized. The harsh penalties that the Law often imposed on debtors also encouraged creditors from falsifying accounts to get the debtors in trouble. As a result, the moral logic was flipped: borrowing and credit took upon a bad name and it was the usage of coinage that appeared to be morally justifiable:

Even in the late Middle Ages, in the case of really large loans, it was not unusual for creditors to lodge claims in local courts-but this was really just a way of ensuring that there was a public record (remember that most people at the time were illiterate). Debtors were willing to go along with the proceedings in part, it would seem, because if there was any interest being charged, it meant that if they did default, the lender was just as guilty in the eyes of the law as they were. Less than one-percent of these cases were ever brought to judgment. The legalization of interest began to change the nature of the playing field. In the 168os, when interest-bearing loans began to become common between villagers, creditors also began to insist on the use of signed, legal bonds; this led to such an explosion of appeals to the courts that in many small towns, almost every household seemed to be caught up in debt litigation of some sort or other. Only a tiny proportion of these suits were ever brought to judgment, either: the usual expedient was still to rely on the simple threat of punishment to encourage debtors to settle out of court. Still, as a result, the fear of debtor's prison-or worse--came to hang over everyone, and sociability itself came to take on the color of crime.

The criminalization of debt, then, was the criminalization of the very basis of human society. It cannot be overemphasized that in a small community, everyone normally was both lender and borrower. One can only imagine the tensions and temptations that must have existed in a communities-and communities, much though they are based on love, in fact, because they are based on love, will always also be full of hatred, rivalry and passion-when it became clear that with sufficiently clever scheming, manipulation, and perhaps a bit of strategic bribery, they could arrange to have almost anyone they hated imprisoned or even hanged.

Of course, the animosity that the legalization of interest and criminalization of debt injected into society also made people (like Hobbes) believe that the bedrock of society is not solidarity or mutual aid but conflict. It is here that we see the term self-interest take upon a central role in explaining human motivation. One reason that interest is used is because of the desire to be more like a science and make human action calculable and quantifiable. The other is theological. Much how capital is Axial age money with the assumption and expectation of infinite growth, human desire now takes upon a similar unsatiable nature:

"Self-interest" is first attested to in the writings of the Italian historian Francesco Guicciadini (who was, in fact, a friend of Machiavelli), around 1510, as a euphemism for St. Augustine's concept of "self-love." For Augustine, the "love of God" leads us to benevolence toward our fellows; self-love, in contrast, refers to the fact that, since the Fall of Man, we are cursed by endless, insatiable desires for self-gratification-so much so that, if left to our own devices, we will necessarily fall into universal competition, even war. Substituting "interest" for "love" must have seemed an obvious move, since the assumption that love is the primary emotion was precisely what authors like Guicciadini were trying to get away from. But it kept that same assumption of insatiable desires under the guise of impersonal math, since what is "interest" but the demand that money never cease to grow? The same was true when it became the term for investments­ "I have a twelve-percent interest in that venture"-it is money placed in the continual pursuit of profit.59 The very idea that human beings are motivated primarily by "self-interest," then, was rooted in the profoundly Christian assumption that we are all incorrigible sinners; left to our own devices, we will not simply pursue a certain level of comfort and happiness and then stop to enjoy it; we will never cash in the chips, like Sindbad, let alone question why we need to buy chips to begin with. And as Augustine already anticipated, infinite desires in a finite world means endless competition, which in turn is why, as Hobbes insisted, our only hope of social peace lies in contractual arrangements and strict enforcement by the apparatus of the state.

One should read Smith’s famous lines: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” In the context of this flip of morality that started to demonize debt/credit and prefer coinage:

The bizarre thing here is that, at the time Smith was writing, this simply wasn't true. Most English shopkeepers were still carrying out the main part of their business on credit, which meant that customers appealed to their benevolence all the time. Smith could hardly have been unaware of this. Rather, he is drawing a utopian picture. He wants to imagine a world in, which everyone used cash, in part because he agreed with the emerging middle-class opinion that the world would be a better place if everyone really did conduct themselves this way, and avoid confusing and potentially corrupting ongoing entanglements.

Transition to Capital II: Deflation of Bullion

One thing that eventually paved the way to modern capitalism, and the declining quality of life of the peasantry, was not the influx of bullion into European markets but the vanishing of bullion from markets. This was caused by an almost religious devotion to the intrinsic value of metals:

Some appealed to alchemy to argue that the monetary status of gold and silver had a natural basis: gold (which partook of the sun) and silver (which partook of the moon) were the perfected, eternal forms of metal toward which all baser metals tend to evolve. Most, however, didn’t feel that much explanation was required; the intrinsic value of precious metals was simply self-evident. As a result, when royal advisors or London pamphleteers discussed economic problems, the issues they debated were always the same: How do we keep bullion from leaving the country? What do we do about the crippling shortage of coin? For most, questions like “How do we maintain trust in local credit systems?” simply did not arise.

This belief in the intrinsic value of money actually prevented some of our most familiar institutions of modern capitalism (e.g. fractional reserve banking) from coming into being.

This is the story normally told as "the origins of modern banking." From our perspective, though, what it reveals is just how closely bound together war, bullion, and these new credit instruments were. One need only consider the paths not traveled. For instance: there was no intrinsic reason why a bill of exchange couldn't be endorsed over to a third party, then become generally transferable--thus, in effect turning it into a form of paper money. This is how paper money first emerged in China. In Medieval Europe there were periodic movements in that direction, but for a variety of reasons, they did not go far. Alternately, bankers can produce money by issuing book credits for more than they have on cash reserve. This is considered the very essence of modern banking, and it can lead to the circulation of private bank notes. Some moves were made in this direction as well, especially in Italy, but it was a risky proposition, since there was always the danger of depositors panicking and making a run, and most Medieval governments threatened extremely harsh penalties on bankers unable to make restitution in such cases: as witnessed by the example of Francesch Castello, beheaded in front of his own bank in Barcelona in 1360.

This belief was really disastrous in it prevented the government from being able to adjust the denomination of the prices. In the 17th century, British silver saw a spike in prices such that the face value of the coin was less than its silver content. As a result coins were being shaved off the edges to the point that only 50% of their weight remained. Locke argued that a pound of silver had a specific intrinsic value and that it was the government’s job only to ensure the weight was accurate. He campaigned for the mint to remint at the exact same face value (below metal value) with disastrous results. The reforms that counteracted the downsides of Locke’s proposal made it such that every transaction was now done on fiat.

The Treasury proposed to call in the coinage and reissue it at a 20-to-25-percent lower weight, so as to bring it back below the market price for silver. Many who supported this position took explicitly Chartalist positions, insisting that silver has no intrinsic value anyway, and that money is simply a measure established by the state. The man who won the argument, however, was John Locke, the Liberal philosopher, at that time acting as advisor to Sir Isaac Newton, then Warden of the Mint. Locke insisted that one can no more make a small piece of silver worth more by relabeling it a "shilling" than one can make a short man taller by declaring there are now fifteen inches in a foot. Gold and silver had a value recognized by everyone on earth; the government stamp simply attested to the weight and purity of a coin, and-as he added in words veritably shivering with indignation-for governments to tamper with this for their own advantage was just as criminal as the coin-clippers themselves:

The use and end of the public stamp is only to be a guard and voucher of the quality of silver which men contract for; and the injury done to the public faith, in this point, is that which in clipping and false coining heightens the robbery into treason.

Therefore, he argued, the only recourse was to recall the currency and restrike it at exactly the same value that it had before. This was done, and the results were disastrous. In the years immediately following, there was almost no coinage in circulation; prices and wages collapsed; there was hunger and unrest. Only the wealthy were insulated, since they were able to take advantage of the new credit money, trading back and forth portions of the king's debt in the form of banknotes. The value of these notes, too, fluctuated a bit at first, but eventually stabilized once they were made redeemable in precious metals. For the rest, the situation only really improved once paper money, and, eventually, smaller-denomination currency, became more widely available. The reforms proceeded top-down, and very slowly, but they did proceed, and they gradually came to create the world where even ordinary, everyday transactions with butchers and bakers were carried out in polite, impersonal terms, with small change, and therefore it became possible to imagine everyday life itself as a matter of self-interested calculation.

Despite the poor outcome of Locke’s suggestions his materialism actually became accepted by most economists at the time, simply because the governments who did not peg their paper currency to metals experienced terrible disasters:

It would appear that it's only in a resolutely materialist age that this ability to simply produce things by saying that they are there comes to be seen as a scandalous, even diabolical. And the surest sign that one has entered such a materialist age is precisely the fact that it is seen so.

Transition to Capital III: Inflation of Paper Currency

When bankers controlled the governments (and thus the armies), they could be much more creative in manipulating the finances. The venetian government of the 12th century pioneered the idea of funding through government debt which effectively circulated as a currency:

Where bankers effectively controlled Medieval governments, it proved safer and more profitable to manipulate the government's own finances. The history of modern financial instruments, and the ultimate origins of paper money, really begin with the issuing of municipal bonds-a practice begun by the Venetian government in the twelfth century when, needing a quick infusion of income for military purposes, it levied a compulsory loan on its taxpaying citizens, for which it promised each of them five percent annual interest, and allowed the "bonds" or contracts to become negotiable, thus, creating a market in government debt. They [the Venetian government?] tended to be quite meticulous about interest payments, but since the bonds had no specific date of maturity, their market prices often fluctuated wildly with the city's political and military fortunes, and so did resulting assessments of the likelihood that they would be able to be repaid. Similar practices quickly spread to the other Italian states and to northern European merchant enclaves as well: the United Provinces of Holland financed their long war of independence against the Hapsburgs (1568-1648) largely through a series of forced loans, though they floated numerous voluntary bond issues as well.

It was precisely these manipulations of money creation that caused the inflation and collapse of prices and not the influx of bullion:

While already by the sixteenth century, merchants were using bills of exchange to settle debts, government debt bonds-rentes, juros, annuities-were the real credit money of the new age. It's here that we have to look for the real origins of the "price revolution" that hammered once-independent townsfolk and villagers into the ground and opened the way for most of them to ultimately be reduced to wage laborers, working for those who had access to these higher forms of credit. Even in Seville, where the treasure fleets from the New World first touched port in the Old, bullion was not much used in day-to-day transactions. Most of it was taken directly to the warehouses of Geno­ ese bankers operating from the port and stored for shipment east. But in the process, it became the basis for complex credit schemes whereby the value of the bullion was loaned to the emperor to fund military operations, in exchange for papers entitling the bearer to interest-bearing annuities from the government-papers that could in turn be traded as if they were money. By such means, bankers could almost endlessly multiply the actual value of gold and silver they held. Already in the 1570s, we hear of fairs in places like Medina del Campo, not far from Seville, that had become "veritable factories of certificates," with transactions carried out exclusively through paper. Since whether the Spanish government would actually pay their debts, or how regularly, were always slightly uncertain, the bills would tend to circulate at a discount-especially as juros began circulating throughout the rest of Europe-causing continual inflation.

Critique: The process by which the bankers "endlessly-multiplied" their gold before sending it off to China was through fractional reserve banking. So it's not endless after all.

The first true currency came about with the Bank of England. This was because what was traded as currency was no longer government bonds but promissory notes (that did not carry interest):

The reader will recall that the Bank of England was created when a consortium of forty London and Edinburgh merchants-mostly already creditors to the crown-offered King William III a £1.2 million loan to help finance his war against France. In doing so, they also convinced him to allow them in return to form a corporation with a monopoly on the issuance of banknotes-which were, in effect, promissory notes for the money the king now owed them. This was the first independent national central bank, and it became the clearinghouse for debts owed between smaller banks; the notes soon developed into the first European national paper currency.

And now we see an inversion of Axial age logic. In the Axial age, money was debt owed to the king. The king would distribute taxes to his armies and demand that everyone pay taxes in that denomination. It was what you owed to the King. In the Capitalist age, money was debt owed by the king. When you are transacting paper notes, it is a promissory note that could be redeemed for gold. This is significant because for two reasons 1. The relationship of the people with the government changes. Increasingly, people began to feel like it was they who owned the government and not vice versa. 2. This goes back to Graeber’s central thesis on the capitalistic age: everything is just motivated by a long chain of debt. Even the government now has an imperative and is beholden to grow. Capital ensures its own growth by financializing and creating long chains of debt:

Starting from our baseline date of 1700, then, what we see at the dawn of modern capitalism is a gigantic financial apparatus of credit and debt that operates-in practical effect-to pump more and more labor out of just about everyone with whom it comes into contact, and as a result produces an endlessly expanding volume of material goods. It does so not just by moral compulsion, but above all by using moral compulsion to mobilize sheer physical force. At every point, the familiar but peculiarly European entanglement of war and commerce reappears-often in startling new forms. The first stock markets in Holland and Britain were based mainly in trading shares of the East and West India companies, which were both military and trading ventures. For a century, one such private, profit-seeking corporation governed India. The national debts of England, France, and the others were based in money borrowed not to dig canals and erect bridges, but to acquire the gunpowder needed to bombard cities and to construct the camps required for the holding of prisoners and the training of recruits. Almost all the bubbles of the eighteenth century involved some fantastic scheme to use the proceeds of colonial ventures to pay for European wars. Paper money was debt money, and debt money was war money, and this has always remained the case. Those who financed Europe's endless military conflicts also employed the government's police and prisons to extract ever-increasing productivity from the rest of the population.

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Chapter 12 The Beginning of Something Yet to be Determined

Graeber sees the last 50 years since the USD went off the gold standard in 1971 and became the global reserve currency as the birth of a new era (a return to the virtual economy). It is defined by two movements.

First is of the USD going off the gold standard and becoming the reserve currency. This, of course, also coincides with US being the world’s debtor. If the first movement is the flipping of power between creditor and debtor (the debtor is now the more powerful one) on the international stage, then the second movement is this exact same flipping nationally:

This gave rise to a second line of argument: that no doubt the rich were the major creditors in the ancient world, but now the situation has been reversed. So Ludwig von Mises, writing in the 1930s, around the time when Keynes was calling for the euthanasia of the rentiers:

Public opinion has always been biased against creditors. It identifies creditors with the idle rich and debtors with the industrious poor. It abhors the former as ruthless exploiters and pities the latter as innocent victims of oppression. It considers government action designed to curtail the claims of the creditors as measures extremely beneficial to the immense majority at the expense of a small minority of hardboiled usurers. It did not notice at all that nineteenth-century capitalist innovations have wholly changed the composition of the classes of creditors and debtors. In the days of Solon the Athenian, of ancient Rome's agrarian laws, and of the Middle Ages, the creditors were by and large the rich and the debtors the poor. But in this age of bonds and debentures, mortgage banks, saving banks, life insurance policies, and social security benefits, the masses of people with more moderate income are rather themselves creditors.

Despite – or, in some cases, because – of these movements, Graeber levels a few critiques against our new era.

Critique One: Preserving Imbalance

It doesn’t really matter who is the creditor or debtor but who controls political power. This is true for the national stage:

In the wake of the subprime collapse, the U.S. government was forced to decide who really gets to make money out of nothing: the financiers, or ordinary citizens. The results were predictable. Financiers were "bailed out with taxpayer money"-which basically means that their imaginary money was treated as if it were real. Mortgage holders were, overwhelmingly, left to the tender mercies of the courts, under a bankruptcy law that Congress had a year before (rather suspiciously presciently, one might add) made far more exacting against debtors.

Critique Two: Debt Imperialism

This is, so Graeber claims, also true internationally. Graeber seems to suggest that America running a trade deficit is actually imposing a global tax on everyone. His argument, however, rests on two wrong assumptions: 1. That other governments have nothing to do with USD and are “forced” to buy US treasury bonds. In reality, other governments seem to be able to do many things with their USD reserves (e.g. buy goods). Furthermore, they seem to be buying American bonds because it has the highest yields in developed countries. 2. That the other governments actually lose money because the yield on treasury bonds are lower than inflation (not the case).

Because of United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon's floating of the dollar was that foreign central banks have little they can do with these dollars except to use them to buy U.S. treasury bonds. This is what is meant by the dollar becoming the world's "reserve currency." These bonds are, like all bonds, supposed to be loans that will eventually mature and be repaid, but as economist Michael Hudson, who first began observing the phenomenon in the early '7os, noted, they never really do:

To the extent that these Treasury IOUs are being built into the world's monetary base they will not have to be repaid, but are to be rolled over indefinitely. This feature is the essence of America's free financial ride, a tax imposed at the entire global expense.

What's more, over time, the combined effect of low interest pay­ments and the inflation is that these bonds actually depreciate in value-adding to the tax effect, or as I preferred to put it in the first chapter, "tribute." Economists prefer to call it "seigniorage." The effect, though, is that American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

Critique Three: “Free” Labor

The third critique is that modern capitalism does not operate on free labor at all that globally and nationally in the United States, people are still motivated by paying off interest-bearing loans. This is a bit far-fetched (one of the reasons being the lenient bankruptcy laws) and even Graeber admits it by calling US labor “subjective” debt peonage:

Debt peonage continues to be the main principle of recruiting labor globally: either in the literal sense, in much of East Asia or Latin America, or in the subjective sense, whereby most of those working for wages or even salaries feel that they are doing so primarily to pay off interest-bearing loans. The new transportation and communications technologies have just made it easier, making it possible to charge domestics or factory workers thousands of dollars in transportation fees, and then have them work off the debt in distant countries where they lack legal protections. Insofar as overarching grand cosmic institutions have been created that might be considered in any way parallel to the divine kings of the ancient Middle East or the religious authorities of the Middle Ages, they have not been created to protect debtors, but to enforce the rights of creditors. The International Monetary Fund is only the most dramatic case in point here. It stands at the pinnacle of a great, emerging global bureaucracy-the first genuinely global administrative system in human history, enshrined not only in the United Nations, the World Bank, and the World Trade Organization, but also the endless host of economic unions and trade organizations and non-governmental organizations that work in tandem with them-created largely under U.S. patron­ age. All of them operate on the principle that (unless one is the United States Treasury), "one has to pay one's debts"-since the specter of default by any country is assumed to imperil the entire world monetary system, threatening, in Addison's colorful image, to turn all the world's sacks of (virtual) gold into worthless sticks and paper.

Critique Four: Built on Violence

The final critique that Graeber levies is that the US debt exists in the first place because of its military expenditures and the legitimacy of the USD is backed by the military:

The United States has fought no war in which it did not control the skies, and it has relied on aerial bombardment far more systematically than any other military-in its recent occupation of Iraq, for instance, even going so far as to bomb residential neighborhoods of cities ostensibly under its own control. The essence of U.S. military predominance in the world is, ultimately, the fact that it can, at will, drop bombs, with only a few hours' notice, at absolutely any point on the surface of the planet. No other government has ever had anything remotely like this sort of capability. In fact, a case could well be made that it is this very power that holds the entire world monetary system, organized around the dollar, together.

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Miscellaneous

Debt vs. Hierarchy

Graeber wrestles with a paradox: why is debt often less bearable, and its removal seen as a more justified than more unequal institutions of explicit hierarchy (e.g. Caste system or slavery). Throughout history many peasant revolts were for the removal of debts compared to those that sought to topple hierarchy. His answer is because debt presumes equality between two parties but destroys that equality. In other words, in hierarchy, one both expects and experiences inequality in hierarchy whereas one experiences inequality yet expects equality in relations of debt. Furthermore, because of this, this must mean that the debtor is in some sense responsible for his lowly position. He is to blame for his ills.

It's particularly striking because so many other things do seem to have been accepted as simply in the nature of things. One does not see a similar outcry against caste systems, for example, or for that matter, the institution of slavery. Surely slaves and untouchables often experi­enced at least equal horrors. No doubt many protested their condition. Why was it that the debtors' protests seemed to carry such greater moral weight? Why were debtors so much more effective in winning the ear of priests, prophets, officials, and social reformers? Why was it that officials like Nehemiah were willing to give such sympathetic con­ sideration to their complaints, to inveigh, to summon great assemblies?

Some have suggested practical reasons: debt crises destroyed the free peasantry, and it was free peasants who were drafted into ancient armies to fight in wars. No doubt this was a factor; clearly it wasn't the only one. There is no reason to believe that Nehemiah, for instance, in his anger at the usurers, was primarily concerned with his ability to levy troops for the Persian king. It is something more fundamental.

What makes debt different is that it is premised on an assumption of equality. To be a slave, or lower-caste, is to be intrinsically inferior. We are dealing with relations of unadulterated hierarchy. In the case of debt, we are dealing with two individuals who begin as equal parties to a contract. Legally, at least as far as the contract is concerned, they are the same.

We can add that, in the ancient world, when people who actually were more or less social equals loaned money to one another, the terms appear to have normally been quite generous. Often no interest was charged, or if it was, it was very low. "And don't charge me interest," wrote one wealthy Canaanite to another, in a tablet dated around 1200 BC, "after all, we are both gentlemen."30 Between close kin, many "loans" were probably, then as now, just gifts that no one seriously expected to recover. Loans between rich and poor were something else again.

The problem was that, unlike status distinctions like caste or slav­ery, the line between rich and poor was never precisely drawn. One can imagine the reaction of a farmer who went up to the house of a wealthy cousin, on the assumption that "humans help each other," and ended up, a year or two later, watching his vineyard seized and his sons and daughters led away. Such behavior could be justified, in legal terms, by insisting that the loan was not a form of mutual aid but a commercial relationship-a contract is a contract. (It also required a certain reli­able access to superior force.) But it could only have felt like a terrible betrayal. What's more, framing it as a breach of contract meant stating that this was, in fact, a moral issue: these two parties ought to be equals, but one had failed to honor the bargain. Psychologically, this can only have made the indignity of the debtor's condition all the more painful, since it made it possible to say that it was his own turpitude that sealed his daughter's fate. But that just made the motive all the more compelling to throw back the moral aspersions: "Our flesh is as the flesh of our brethren, our children as their children." We are all the same people. We have a responsibility to take account of one another's needs and interests. How then could my brother do this to me?

Who Pays Whom

It is common anthropological wisdom that bride wealth tends to be typical of situations where population is relatively thin, land not a particularly scarce resource, and therefore, politics are all about con­trolling labor. Where population is dense and land at a premium, one tends to instead find dowry: adding a woman to the household is add­ing another mouth to feed, and rather than being paid off, a bride's father is expected to contribute something (land, wealth, money . . .) to help support his daughter in her new home.

Cycles of Slavery

Slavery was abolished roughly in 600AD and then it made a resurgence:

On the popular level, slavery remained so universally detested that even a thousand years later, when European merchants started try­ing to revive the trade, they discovered that their compatriots would not countenance slaveholding in their own countries-one reason why planters were eventually obliged to acquire their slaves in Africa and set up plantations in the New World. It is one of the great ironies of history that modern racism-probably the single greatest evil of our last two centuries-had to be invented largely because Europeans continued to refuse to listen to the arguments of the intellectuals and jurists and did not accept that anyone they believed to be a full and equal human being could ever be justifiably enslaved.

What's more, the demise of ancient slavery was not limited to Europe. Remarkably, right around the same time-in the years around 6oo AD-we find almost exactly the same thing happening in India and China, where, over the course of centuries, amidst much unrest and confusion, chattel slavery largely ceased to exist. What all this suggests is that moments of historical opportunity-moments when meaningful change is possible-follow a distinct, even a cyclical pattern, one that has long been far more coordinated across geographical space than we would ever have imagined. There is a shape to the past, and it is only by understanding it that we can begin to have a sense of the historical opportunities that exist in the present.

Interest vs. Equity

Interest rather than equity sharing implies a lack of transparency within a community:

The practice is significant because it implies a fundamental lack of trust. After all, why not simply demand a share in the profits? This seems more fair (a merchant who came back bankrupt would probably have little means of paying anyway), and profit-sharing partnerships of this sort became common practice in the later Middle East. The answer seems to be that profit-sharing partnerships were typically con­ tracted between merchants, or anyway people of similar background and experience who had ways of keeping track of one another. Palace or temple bureaucrats and world-roaming merchant adventurers had little in common, and the bureaucrats seem to have concluded that one could not normally expect a merchant returned from a far-off land to be entirely honest about his adventures. A fixed interest rate would render irrelevant whatever elaborate tales of robbery, shipwreck, or attacks by winged snakes or elephants a creative merchant might have concocted. The return was fixed in advance.

This explains why, despite the clear normative advantageous of equity over debt financing (so Graeber claims), why societies don't always use it. 1. In some instances it is because of the negative consequences (the total control of creditor over debtor) that explains why debt financing is used in the first place. 2. Society needs to have a high degree of trust and transparency for equity financing (you need to know how much the venture made).

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