Debt, Updated and Expanded: The First 5,000 Years

Graeber, David
2014

So much tea packed into one book.

The TL;DR on the "third-world debt crisis" you hear from time to time (but whose origins never get explained): the OPEC had a glut of money lying around from the oil crisis in the 70's, and deposited it in Western banks. Western banks now had a glut of money they wanted to get interest on, so they teamed up with the IMF / World Bank and started offering "development loans" to "developing" countries, agreed upon by the ruling elites of those countries. That borrowed money didn't exactly trickle down to the ordinary people in those countries, but it was still ultimately the ordinary people who had to repay the principal + interest on those loans via taxes (surprise, surprise). The net effect being that the outflow of money from the poorer countries to the rich was actually larger than the inflow, i.e. the poorer countries of the world were technically, all told, sending financial aid to the richer countries(’ financial elites).

The origin myth of money (i.e. that tale they told you about primitives wanting to barter but not having things of equal value to exchange on hand) was pretty much a fabrication by Adam Smith et al. They were trying to justify instituting economics as its own field of study, supposedly prior to and hence independent from politics or ethics.

In fact, Smith's famous "invisible hand", as well as the anecdote about the pin factory, both appear to have been lifted uh, inspired by earlier sources in Islamic philosophy that reached European audiences during the Enlightenment. (In addition to other such derivative works by Descartes, Hume, and Kant.)

Credit as a concept existed before money ever did, often as a way of arranging social relations within a community.

There used to be regular "debt-forgiveness decrees" e.g. in Egypt, where during a debt crisis, everyone's debts, then recorded on tablets, would get erased, and the tablets broken. Everyone would get to start over, literally on a clean slate. The Rosetta Stone—so famous for its key role in the translation of texts—is actually a record of such a decree by Ptolemy V.

Money (specifically, coinage) only became important in conjunction with warfare, whereas credit was more widely used amongst civilians in peacetime. Which makes sense—if I know where you live, you know where I live, neither of us is going anywhere any time soon, and we're not at war with each other, why bother being so pedantic (not to mention un-neighbourly) about up-front payments? Coinage, on the other hand, is important if there's some marauding army passing through, you don't trust the other party one bit, and would rather sooner have nothing more to do with the other. Graeber dubs this the military-slavery-coinage complex.

This complex started in what he dubs the Axial Age—the same age in which Pythagoras, the Buddha, and Confucius were contemporaries (circa 500 BC), and the major world philosophies/religions arose, in response to this great rending of social relations due to incessant warfare.

Interest—usury—was banned / considered immoral under most / all of these philosophies.

The Muslim traders were actually the first ones famous for setting up trading outposts all out across the Indian Ocean, and had somehow all managed to agree to keep their wars to dry land, reserving the seas for peaceful commerce.1. Which explains my own long-standing question about the origins of Islamic cultures in South-east Asian communities. They don't teach you much about this in Singapore, despite having what they like to call a world-class education system.

The colonization of the Americas, specifically the enslavement of Native Americans in the American gold and silver mines, wouldn't have been so profitable were it not for the then insatiable appetite of the dynamic Chinese market for bullion, and the demand for "eastern luxuries" in (the rich parts of) Europe. (In fact, prices for silver collapsed in Europe around that time from over-supply.) Eventually, though, they got tired of having to export so much bullion that they started the Opium War to try and settle that balance of payments.

Your 401K (or equivalent retirement account invested in US government bonds)? That's basically you financing US government debt, above and on top of what you already pay in taxes. And so where does the money come from to finance the interest on those government loans? ;)