Forgive us our debts (LONG)
Source Louis Proyect
Date 12/05/03/15:00
Forgive us our debts
Benjamin Kunkel

Paper Promises: Money, Debt and the New World Order by Philip
Allen Lane, 294 pp, £20.00, December 2011, ISBN 978 1 84614 510 0

Debt: The First 5000 Years by David Graeber
Melville House, 534 pp, £21.99, July 2011, ISBN 978 1 933633 86 2

MOST ANALYSTS DIVIDE postwar capitalism into two periods. The
first extends from the late 1940s into the 1970s. The end of the
second appears to have been announced by the crisis – at first a
‘financial’ crisis, now often a ‘debt’ crisis – that broke out in
2008. The precise boundary between the postwar eras gets drawn
differently depending on which feature of the terrain is
emphasised. In terms of overall growth rates, it was with the
recession of 1973-74 that the surge after the Second World War
gave way to deceleration across the wealthy world. Intellectually,
Milton Friedman’s Nobel Prize of 1976 signalled the shift from
Keynesianism to monetarism; thereafter orthodox economics was more
concerned with low inflation than full employment. Politically,
the neoliberal turn began later, perhaps with Thatcher’s election
in 1979. At any rate, a new kind of socioeconomic arrangement –
the Marxian economists Gérard Duménil and Dominique Lévy propose
the name ‘neoliberalism under US hegemony’ – emerged from the
turmoil of the 1970s, and is now faltering.

Writers who stress the role of debt in the story tend to see 1971
as the cusp. So it is in Paper Promises, a brisk digest of changes
in Western monetary policy over the last few centuries by the
Economist writer Philip Coggan, and in Debt: The First 5000 Years
by the anthropologist and activist David Graeber, which situates
the same stretch of modern history within the vast tidal shifts,
across five millennia of Eurasian history, between monetary
regimes founded on precious metals and those based on ‘virtual
credit money’. In August 1971, Nixon suspended the convertibility
of the US dollar into gold. Until then, foreign central banks had
been entitled – under the terms of the Bretton Woods system
established after the Second World War – to redeem dollar holdings
at a rate of $35 an ounce. Whether or not this modified gold
standard sponsored or merely accompanied the unprecedented
expansion after 1945, it discouraged extravagance among
international debtors. To sink too far into debt – in terms either
of the national budget or the balance of accounts with trading
partners – was to risk being sapped of gold. For this reason among
others, the first postwar decades saw steeply declining ratios of
national debt to GDP across advanced economies. These years were
also more or less free of the great trade imbalances of the
current era, which allow Americans, Spaniards or Britons to buy so
much more from foreigners than they sell to them.

The debt-restraining trends of the Bretton Woods settlement were
not reversed until, in the late 1960s, the US began to live – and
kill – considerably beyond its means, borrowing enormous sums to
cover Johnson’s Great Society and the Vietnam War. It was to avert
a run on American reserves that Nixon first disconnected the
circuit between paper and bullion. When dollar-gold convertibility
was abandoned once and for all in 1973, borrowers and lenders
began to ply a more insubstantial trade. In the decades since, all
monetary debts have been mere ‘paper promises’. Paper money debts,
Coggan argues, being no more than titles to future slips of paper,
multiply more easily than debts reckoned in fixed sums of specie,
and, starting in the early 1970s, overall indebtedness has indeed
grown faster than most national economies: ‘In the last forty
years, the world has been more successful at creating claims on
wealth than it has at creating wealth itself.’ Four decades ago,
the US had a total debt burden – adding up the liabilities of
government, businesses and individuals – hardly larger than its
annual output. By 2010, many countries laboured under debt burdens
several times the size of GDP. The American figure was
approximately three to one; the British, four and a half to one.
In Ireland and Iceland, total debt to output ratios had swollen to
eight or ten to one on the eve of the 2008 collapse.

The new prominence of debt in rich countries – no novelty in
poorer ones – has lately been matched by its political salience.
In Greece, Portugal and Spain, sovereign debt burdens have driven
protesters onto the streets in the tens of thousands. They are
indignant at being made to repair their governments’ books through
higher taxes and reduced salaries and benefits. In Chile,
excessive interest rates on student loans figured among the main
grievances in demonstrations throughout the winter. And the Occupy
movement in the US – whose slogan, ‘We are the 99 per cent,’ was
reportedly first floated by Graeber himself – has condemned not
only the maldistribution of wealth but the related vice of massive
consumer debt, in the form of mortgages, student loans and
usurious interest rates on credit cards. Generally speaking, the 1
per cent lends and the rest borrow.

Western politicians meanwhile excuse their policies by alluding to
the national debt. Austerity is required, they say, to placate the
bond market – that is, the buyers of sovereign debt. The argument
enjoys a popularity with elites independent of its local
plausibility. Countries like the US and the UK, able to borrow in
their own currencies, have throughout the crisis auctioned new
bonds at very low rates of interest – sometimes less than 2 per
cent – while the borrowing costs for weaker members of the
eurozone have spiked to ruinous levels. Faced with a generation of
collective debt servitude, many Greeks have glanced enviously at
Argentina, which ten years ago undertook the largest sovereign
default in history. In the 1990s, Argentina had pegged the peso to
the dollar. When recession struck, the country was left with huge
debts denominated in a foreign currency, and no capacity to regain
the competitiveness of its exports through devaluation: a familiar
predicament in Europe just now. Default, to the tune of $100
billion, was the result. All but shut out of international credit
markets over the past decade, Argentina has nevertheless posted
growth rates of about 8 per cent a year. Post-crash Argentina,
however, enjoyed advantages unknown in the eurozone: a titanic
exporter of foodstuffs, it stood on the brink of a commodities
boom, and also had the friendship of Hugo Chavez in Venezuela, who
financed his fellow left populists in Buenos Aires on generous terms.

Whether or not class struggle is the motor of history, it rarely
goes by that name. Coggan attempts to stay above the fray:
‘Economic history has been a war between creditors and debtors,
with the nature of money as the battleground.’ Graeber, for his
part, enlists on the side of the debtors. His extraordinary book,
at once learned and freewheeling, concludes with a call for a
‘biblical-style jubilee’ – in the Old Testament one was declared
every fifty years – to cancel outstanding consumer and government
loans: ‘Nothing would be more important than to wipe the slate
clean for everyone, mark a break with our accustomed morality, and
start again.’ In a way, Graeber’s utopian proposal resembles
Coggan’s anxious anticipation of the years ahead. ‘Borrowers,’
Coggan writes in his brooding introduction, ‘will fail to pay back
their debts, either through outright default or by encouraging
their governments to inflate the debt away.’

Default or forgiveness, bankruptcy or jubilee: the different terms
for the erasure of debts reflect a divergence of mood founded on
different social positions. Individuals owe debts to private
lenders and – through taxes – to governments. But, conversely,
governments and corporations owe debts to individuals by way of
pensions and healthcare plans, not to mention bonds. And many of
the banks to which so many of us owe so much money are themselves
technically insolvent: to over-lend during the bubble, they had to
over-borrow. So too are there net-creditors (China or Germany) and
net-debtors (the US or Spain) among nations. Many of the economic
promises made over the last decades will not be kept; what follows
will depend on which, and whose, promises these are.

Graeber, an American who teaches anthropology at Goldsmith’s in
London, is a veteran of the alter-globalisation movement, which
sought debt forgiveness for the global South. Closely involved in
planning the occupation of Zuccotti Park in Lower Manhattan that
began last September, Graeber, who describes himself as an
anarchist, joined those successfully advocating a non-hierarchical
or ‘horizontal’ organisation of the encampment: deliberation by
consensus, no formal leadership. In the months since, the American
press, content to ignore Debt when it first appeared (published as
it was by a small press and animated by a radical politics), has
hailed Graeber as the most intellectually imposing voice of
Occupy. In person Graeber is brilliant, if somewhat hectic,
plain-spoken, erudite, quick to indignation as to well as to
laughter, and – minus the laugh – he offers much the same heady
experience on the page. Debt is probably best considered as a
long, written-out lecture, informal in style, not as a
conventional work of history, economics or anthropology.

As the mock-heroic subtitle suggests, the scope of Debt is far too
wide to allow a comprehensive treatment of its theme. Nor does the
book offer a central analytic argument identifying the causal
mechanics of social change. Partial in both senses, Debt aims to
tear away the veil of money draped over the world and expose the
credit system as so many naked human relationships, mostly violent
and unjust. The colossal historical inertia behind organised
domination needn’t triumph – so Debt implies – over small groups
of people converted to a dissident conception of what the members
of a society ‘truly owe’ each other.

Graeber’s first proposition is that debt can’t be considered apart
from the history of money, when it is money that distinguishes a
debt from a mere obligation or promise. Obligations are immemorial
and incalculable, but until the advent of money such relations of
mutual obligation evade mathematical specification. Only through
money do nebulous obligations condense into numerically precise
debts, which can and – according to ‘our accustomed morality’ –
must one day be paid off.

The first role of money (at least as an agent of commerce: Graeber
will later discuss its truly aboriginal function) was not to
grease exchange but to tabulate debts. Mesopotamian tablets dating
from 3500 BC record rent, usually in the form of grain, owed by
tenants of temple lands, and rations of barley due to temple
workers. These credits and debits may have been calculated in
silver shekels, but coins hardly circulated at the time. In other
words, of the three functions ascribed to money by economics
textbooks – a medium of exchange, a unit of account and a store of
value – it was the second that came first. Coinage did not become
widespread until several thousand years later.

Graeber insists on the historical priority of debt to exchange in
order to dispel the anthropological premise of modern economics:
‘the myth of barter’. Adam Smith supposed – as primers on
economics complacently repeat – that economic life emerged from a
propensity of the species to truck and barter. The Wealth of
Nations imagines ‘a tribe of hunters or shepherds’ among whom
producers of arrowheads, tanned hides or teepees simply swap one
thing directly for another. Eventually, however, economies become
too complex to function like this, and so they introduce some
universal commodity – salt, cowries or one or another precious
metal – by means of which all other commodities can be exchanged.
Graeber rejects this creation myth of homo economicus on two
grounds. Not only does it mistake the origin of commercial money,
which lies in credit and debt rather than exchange, it also
mischaracterises the economic behaviour of earlier societies. The
anthropological literature offers no evidence of barter as a
central economic practice prior to money, but does furnish endless
documentation of societies that distribute what we now call goods
and services without drawing up accounts or expecting that such
accounts, were they kept, could balance exactly or be closed.

The theoretical core of Debt is a loose schema of three types of
human economic relationship. Communism (Graeber admits his use of
the word ‘is a bit provocative’), exchange and hierarchy don’t
describe distinct types of society but different ‘modalities’ of
behaviour that operate to a greater or lesser degree in all
societies, monetised or not. Graeber’s communism, which bears a
resemblance to Kropotkin’s ‘mutual aid’, covers relationships
answering to Marx’s dictum: to each according to his needs, from
each according to his abilities. People act as communists not only
towards friends and family but often towards guests, neighbours
and strangers: ‘What is equal on both sides is the knowledge that
the other person would do the same for you, not that they
necessarily will.’ Relationships of exchange, by contrast, entail
that each party gets from the other a more or less exact
equivalent to whatever it’s given. Because exchange ‘gives us a
way to call it even: hence, to end the relationship’, it takes
place mostly among strangers. Hierarchy is, like communism, a mode
of ongoing relationship, but between unequals. Enforced by custom,
hierarchy requires that social inferiors make repeated material
tribute to their betters in caste or status.

With this tripartite scheme in place, and illustrated with
examples from Sudan to Greenland to medieval Europe, Graeber is
ready to define the peculiarity of monetary debts. Like other
market transactions, a loan is agreed to by formal equals, neither
of them legally required to lend or borrow. But so long as a debt
is outstanding – and any debt, being ‘an exchange that has not
been brought to completion’, extends across time – ‘the logic of
hierarchy takes hold.’ Equality is restored only when repayment is
made in full. The servicing of debt can meanwhile become a way
practically to dominate the formally free, to exact a stream of
tribute in societies that recognise no official hierarchies. The
implication is that orthodox economics, by presuming exchange to
be the source and circumference of economic life, misses something
about both the socio-historical environment and the political
essence of debt, for relationships of hierarchy and communism
historically precede and socially encompass all apparently
uncoerced and spontaneous transactions, while monetary debts often
smuggle gradations of power into what look like horizontal
exchanges. (An intriguing question, neglected by Graeber, is
whether a large-scale credit system couldn’t one day promote
communism rather than hierarchy, a possibility glimpsed, or anyway
named, in the literary theorist Richard Dienst’s recent The Bonds
of Debt, which at one point rather vaguely imagines a future
‘radical politics of indebtedness’ fulfilling the slogans of
classical Marxism.[*])

But regular monetised exchanges – completed or incomplete – are a
relative latecomer, as Graeber points out in a brace of
fascinating chapters. Money, in the sense of units of abstract or
general value, wasn’t unknown to intimate ‘human economies’ of
village and tribe, but it didn’t channel the daily flow of goods
and services. So-called primitive money was instead a ritual and
occasional device. So the ‘bridewealth’ yielded to a woman’s
family by her suitor might, among the Tiv of Central Nigeria, take
the form of a quantity of brass rods; or a murderer, among the
Iroquois, might make reparations to his victim’s family with a
gift of white wampum. The inaugural use of money, then, wasn’t
even to record commercial debts but – in currencies of cloth or
metal, whale teeth or oxen, and sometimes human beings themselves
– to betoken ‘debts that cannot possibly be paid’.

In Graeber’s book, a certain literalism about money, an unblushing
faith in its capacity to determine or discover genuinely
equivalent values, is the mark – or blemish – of commercial
economies. The most extreme example is slavery. The buying and
selling of people is an ancient practice, yet in the Atlantic
slave trade Graeber sees the collision of several of his human
economies with a late-model commercial one. Long before trade in
human chattel, the Tiv and the Lele possessed the concepts,
respectively, of ‘flesh-debts’ and ‘debt pawns’. Thus a bridegroom
might owe his in-laws a sister, or a man who had escaped death owe
his rescuer a future son. Still, Graeber claims that the violence
implied by titles in human life was, before the impact of
commercial economies, more potential than actual. A Tiv without a
sister for his bride’s family might offer brass rods instead,
while among the Lele – as in some gigantic metaphor for community
– almost every man was at once the possessor of debt pawns and
someone else’s pawn. Neither women nor men could be bought or
sold; in effect, a life had a price on it and was at the same time

The paradox was too subtle or inconvenient for commercial
economies to abide. In the 17th century the Aro Confederacy
conspired with local rulers and European traders to impose on a
portion of Africa a new commodification of human life. Debts
incurred as civil penalties for the violation of (often freshly
and cynically promulgated) ritual laws might be denominated in
copper, but for a villager unable to scare up enough copper the
next expedient might be the sale into slavery of a dependent, a
pawn, or even the debtor himself. How are human economies – where
‘money is not a way of buying or trading human beings, but a way
of expressing just how much one cannot do so’ – transformed into
slave markets? In Debt, it is organised violence that works the
change. Only at the point of a sword, spear or gun will a
household or community accept the literal and commercial, as
opposed to metaphoric and social, transitivity of human life and

Two main features of this discussion loom over the rest of the
book. The first is an emphasis on the merely conventional nature
of money, as a reflection of a social understanding that in
principle could just as easily be dissolved as compacted.
Commercial economies, in other words, routinely grant credit
arrangements a factitious independence from social interchange, so
that primary relationships seem to obtain not between human beings
but between two sums of money, one loaned and the other due, while
people themselves become mere bystanders to the accumulation of
compound interest. The second is Graeber’s argument that such a
reification of monetary debts can only be maintained by force. A
debt is ‘a promise corrupted by both math and violence’. The
mathematics abstracts obligation from the fluid process of
community, while the violence wielded by mafias or the state
enforces the abstraction.

Already here Graeber is courting some familiar objections to the
anarchist bias against distant or impersonal relationships and
state monopolies on violence. Can’t legal administration – as
opposed to informal association – be the vehicle of justice as
well as injustice? And isn’t the reverse also true, so that an
exclusive reliance on anarchist collectivity might offer less in
the way of happiness, freedom or whatever we are finally after,
than a society permitting the supervention of an armed and
bureaucratised state? But these questions can be postponed until
we pass through Graeber’s history of debt from its ancient Near
Eastern foundations to the tremors lately shaking Wall Street.

Graeber divides the history of commercial economies into five
periods demarcated according to whether metallic bullion or
‘virtual credit money’ prevailed. The periodisation is approximate
and the whole scheme patently heuristic, but the rough-hewn
construction shelters important insights. In modern times, a gold
standard, liable to low inflation or even deflation, has tended to
reward creditors and punish debtors, while the reverse has been
true for inflation-prone paper currency. As Keynes explained in a
polemic against the ‘barbarous relic’ of gold, deflation, by
increasing the value of money, ‘involves a transference of wealth
from the rest of the community to the rentier class and to all
holders of titles to money’. By the same token, the cheapening of
money through inflation erodes the real value of debts and eases
their repayment. Graeber doesn’t dispute the general application
of this rule of thumb, but at no point is he straightforwardly
against bullion and in favour of credit. Metallic and virtual
money can each in their own way enact the corruption of social
promises into economic debts.

In the fourth century BC, at the dawn of ‘the great agrarian
civilisations’, interest-bearing loans were widely established in
Mesopotamia without the use of coins, with wares forwarded to
merchants or peasants against returns from commercial expeditions
or future harvests. Peasants might have to offer family members as
sureties, to be collected in the event of default. By around 2400
BC, indebtedness in the Sumerian kingdom of Lagash had become
insupportable, and the monarch was moved to decree history’s first
recorded debt cancellation, precursor to the biblical jubilee.
Graeber argues this set the pattern for the virtual-money
commercial economies of the time, in the Nile valley as well as
the Fertile Crescent: the expansion and, through interest rates,
intensification of credit relationships at length loads the
peasantry with so much debt that rulers have little choice but to
void outstanding obligations or risk overthrow.

Graeber’s Axial Age runs from 800 BC to 600 AD, taking over Karl
Jaspers’s name for the epoch of the first great world religions.
This age is defined by three conjoined developments: the turn to
metallic money away from credit money; the emergence of the great
philosophical tendencies and religions, from Zoroastrianism,
Buddhism and Confucianism to Hinduism and the major monotheisms;
and – arising together with these in China, India, the Near East
and the Mediterranean – the deployment of professional armies by
the state.

What explains the consorting of coinage, wisdom and war? The
removal of precious metals from temples and estates and their
diffusion into daily commerce in the form of coins seem to have
been driven by war. Thus the first coins, appearing around 600 BC,
were probably used as payment to Greek mercenaries, prized as
soldiers from Egypt to the Crimea, who, far from home, would have
had less use for cumbersome commodities or promissory notes that
would go begging in their own country. The Axial Age launches a
self-reinforcing pact of coin and sword. Payment of soldiers in
precious metal encourages further plunder of neighbouring lands
for their bullion; conquest of these lands disrupts local
economies functioning on credit and trust, as occupying powers
demand that taxes and fines be paid in their own imperial coin;
and the maintenance of such monetised economies requires the
continued presence of the same professional armies that launched
the cycle in the first place. The increased commercialisation of
life also breeds indebtedness and the sale of people into slavery;
other slaves are war booty, put to work in mines. In Asia Minor
(where Alexander’s army ‘required half a ton of silver a day just
for wages’), in Bronze Age India and contemporaneously in China,
Graeber finds much the same clanking concatenation of coinage,
slavery, markets and the state.

As for the third element of the Axial Age triad, the religious and
philosophical schools, Graeber’s reading won’t surprise historical
materialists: the new thinking was essentially a reaction to
‘impersonal markets, born of war, in which it was possible to
treat even neighbours as if they were strangers’. The daily use of
metal coins opens up two chasms. First, money – as a substance
that both is and is not itself, simultaneously a lump of matter
and an instance of abstract value – suggests the separability of
flesh and spirit. Second, it rends a more unified social sphere
into an economy ruled by self-interest and an uncommodified
community realm where other values may prevail. Axial Age ideas
exhibit a contradictory variety: materialist philosophies might
attempt to overcome dualism, while spiritual doctrines ratify it.
But all are marked by ‘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 … Pure greed and pure generosity
are complementary concepts; neither could really be imagined
without the other.’ As today, worldviews might confirm or contest
the status quo, and Graeber’s description of China’s ‘hundred
schools’ of philosophy suggests a premonition of his own politics:
‘Some of these movements didn’t even have leaders, like the School
of the Tillers, an anarchist movement of peasant intellectuals who
set out to create egalitarian communities in the cracks and
fissures between states.’

Compared to his depiction of a bellicose and slaving Axial Age,
Graeber’s portrait of the long Middle Ages is far more admiring.
They begin in India between 400 and 600 AD, when the Mauryan
dynasty lapsed into a series of diminishingly powerful, mostly
Buddhist kingdoms, and coincide with the spread of Islam in
Western Eurasia, not reaching Europe until the close of the first
millennium. The end of the epoch, when coins dropped out of
circulation and money ‘retreated into virtuality’, is announced by
the Iberian conquest of a New World seamed with gold and silver.
The effort to rehabilitate a period with a bad name is
characteristic of Graeber’s general iconoclasm. The Middle Ages
undo ‘the military-coinage-slavery complex’ of the Axial Age, and
mend the rift between economy and morality. Thus economic life
falls ‘increasingly under the regulation of religious authorities.
One result was a widespread movement to control, or even forbid,
predatory lending. Another was a return, across Eurasia, to
various forms of virtual credit money.’

Credit arrangements organised by religious authorities, like the
differential schedules of interest for separate castes in India,
could still lead to steep inequality. Elsewhere, however,
Confucian strictures against extraordinary profits or the Islamic
prohibition of usury allowed markets to run on credit without
indenturing one portion of the population to another. Graeber’s
account of medieval Muslim commerce has warmer words for the
institution of the market than are usually heard on the left:

By abandoning the usurious practices that had made them so
obnoxious to their neighbours for untold centuries before,
[merchants] were able to become – alongside religious teachers –
the effective leaders of their communities … The spread of Islam
allowed the market to become a global phenomenon … But the very
fact that this was, in a certain way, a genuinely free market, not
one created by the government and backed by its police and prisons
– a world of handshake deals and paper promises backed only by the
integrity of the signer – meant that it could never really become
the world imagined by those who later adopted many of the same
ideas and arguments: one of purely self-interested individuals
vying for material advantage by any means at hand.

Notwithstanding some equivocations on the role of the state
(‘Markets were never entirely independent from the government.
Islamic regimes did employ all the usual strategies of
manipulating tax policy to encourage the growth of markets’), here
is a glimpse of the anti-rentier but pro-market conception of
economic life that must surely count as an intermediate necessity
for radical politics today.

In Debt, the Age of the Great Capitalist Empires brings the
apotheosis of the moneylender, after his medieval eclipse. Graeber
joins a tradition of writers, going back at least to Schumpeter,
who locate the origins of capitalism in the international credit
system. (A separate school of thought stresses that the conversion
of the English peasantry into free tenants – but hardly owners –
of agricultural land led to the rise of wage labour.) Graeber
follows Fernand Braudel in virtually identifying capitalism with
consolidated finance, contrasting the ‘anti-market’ of the
monopolistic great capitals with the humbler local markets left
over from the Middle Ages. What distinguishes Graeber’s account,
apart from its anecdotal richness (it seems, for instance, that
gambling debts in Spain harried Cortéz into his assault on
Tenochtitlan), is his emphasis on state violence. So the first
stock markets, in Amsterdam and London, deal mostly in shares of
the simultaneously military and mercantile East and West India
Companies, with their monopoly concessions granted by the state.
Closer to home, the legalisation of interest charges on consumer
debt, reversing medieval bans on usury, promotes at once the
spread and the criminalisation of indebtedness, sometimes
including – in 16th-century England, for example – capital
penalties for default.

Capitalism not only yokes commerce and violence together after the
fashion of the Axial Age; it also marks a reversion to slavery,
and restores bullion to a central place. But the function of metal
is no longer as simple as before. Mercantile capitalism hardly
used coins within domestic economies; most American silver instead
flowed to China, to be exchanged for silks and porcelain as the
Chinese switched from paper money to coins. For Genoese bankers,
gold and silver were the metallic pretext for a profusion of
virtual money, as ‘the value of the bullion was loaned to the
[Spanish] emperor to fund military operations, in exchange for
papers entitling the bearer to interest-bearing annuities from the
government.’ The continual inflationary discounting (in the face
of uncertain repayment) of such sovereign debt – the Spanish or,
later, Dutch and British precursors to capitalist paper money in
general – unleashed the ‘price revolution’ of early capitalism.
Put simply, the paper money of the lenders multiplied much faster
than the wages of the labourers, who often had to pay their taxes
in scarce silver. (This combination of asset-price inflation for
the wealthy and wage stagnation for workers is reminiscent of
recent decades.) One effect was to reduce a debt-wracked peasantry
to the status of a landless proletariat.

Graeber’s attention to blood and treasure as the dirty fuels of
accumulation is a welcome corrective to recent tales of the
pristine birth of capitalism. Such stories, in keeping with the
ostensible incorporeality of a financial age, tend to spiritualise
our mode of production, imagining it as a spontaneous emanation of
the marketplace or the belated expression – as of Athena,
full-grown, from Zeus’ skull – of a timeless Western rationality
and individualism. Classical political economists, even at their
most apologetic, knew better, and could speak in passing, as Mill
did, of a system still shaped by ‘a distribution of property which
was the result, not just of partition, or acquisition by industry,
but of conquest and violence’. Graeber’s emphasis on metal and
arms serves him less well when it comes to the persistence and
evolution of the system into the latest era of world history,
whose beginning he places in 1971.

For Graeber, our own time has so far been distinguished by a
return to virtual money and the preservation of its value by force
of American arms: ‘The new global currency is rooted in military
power even more firmly than the old was.’ But, as Graeber himself
shows, capitalist money has not consistently adhered to a metallic
norm. Even Britain, stalwart of the gold standard, didn’t adopt
the measure until 1717, and an international gold standard dates
only from the last third of the 19th century. Capitalism before
our time also saw the riotous printing of paper money. And even
when society-wide binges on credit money inspired chastened
retreats to bullion, gold or silver served chiefly to measure and
stabilise prices rather than – through coins – to facilitate
exchange. In this sense capitalist currency has not been much less
virtual than Mesopotamian credit, also indexed to metal. Not only
did capitalist powers typically suspend the convertibility of
their paper during wartime, but even at the Belle Epoque zenith of
the gold standard, international money remained a kind of
conjuring trick. Before 1914, as Coggan notes, ‘Britain’s gold
reserves rarely exceeded £40 million, a figure that was only 3 per
cent of the country’s total money supply … Had foreign creditors
demanded the conversion of their claims into gold, Britain could
not have met the bill.’ After the war, and the fitful return to
gold, Keynes argued that it no longer made sense to distinguish
between ‘commodity money’ and ‘representative money’, or the
metallic and the virtual. Gold, having ‘ceased to be a coin’, had
become ‘a much more abstract thing’, with at most a vestigial part
in the regulation by central banks of ‘managed representative
money’. Graeber wouldn’t dispute this – he continually emphasises
that money is always a political, never a truly mineral phenomenon
– but it does put in doubt the usefulness of differentiating
capitalism from prior social formations or sorting out eras within
its history according to the role of bullion.

Graeber’s emphasis on American imperial might in preserving
contemporary monetary arrangements also creates an appearance of
continuity just where he proposes a border. If state violence
inaugurated and maintained capitalism before 1971, can the same
factor set apart the decades since then? The anarchist
identification of the state with violence risks becoming more
axiomatic than analytic. Graeber describes the assembly over
recent decades of a ‘giant machine designed, first and foremost,
to destroy any sense of possible alternative futures’. The
inculcation of hopelessness rests on ‘a vast apparatus of armies,
prisons, police, various forms of private security firms and
police and military intelligence apparatus and propaganda engines
of every conceivable variety, most of which do not attack
alternatives directly so much as create a pervasive climate of
fear, jingoistic conformity and simple despair’. The blurring here
of instruments of coercion and techniques of consent, of armies
and advertisements, itself reveals the need for a more complex
account of the way contemporary capitalism secures – if with
diminishing success – the acquiescence of the governed and the
punctual remittances of the indebted.

The most striking aspect of the current era is that it emerges as
the rare period of virtual money that has so far failed to set up
strong protections for debtors, whether in the form of bans on
predatory lending or periodic jubilees: ‘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 IMF is Graeber’s main example, to which
the European Central Bank and the Federal Reserve could be added.
The response of Western officials to the economic crisis, with its
proximate cause in unsustainable consumer debt, has been to ensure
that banks suffer as few losses as possible, while relying on the
same indebted consumers – in their role as taxpayers – to keep the
bankers whole. The Fed and now the ECB have loaned banks money at
virtually no cost, encouraging those same banks to purchase
government bonds paying much higher rates of interest: a direct
subsidy of finance by the public, while millions sink into
unemployment and bankruptcy. A far simpler and more effective
monetary policy would have been for the government to print a new
batch of money, distribute an equal amount to everyone, then sit
back and watch as stagnant economies were stirred to life by the
spending and debts were paid down and eroded by temporarily higher
inflation. The inconceivability of such a policy is a mark not of
any impracticability, but of the capture of governments by a
financial oligarchy.

Although Paper Promises is essentially an extended piece of
financial journalism, useful and efficient but captive to
conventional wisdom, its treatment of the past 150 years
nevertheless achieves a level of detail that Graeber must bypass.
It’s from Coggan that one gets a picture of the workings of the
pre-1914 gold standard, of interwar monetary chaos, and of the
fragility of Bretton Woods. Yet in discussing the nature of money
as the central reality of economics, both authors at times produce
something like the illusion they are trying to dispel: as if
currency, whether paper or metallic, were a thing apart from the
social production and contestation of value. Both writers see 1971
as a watershed. It’s doubtful, however, that the abandonment of a
residual gold standard was, even in monetary terms, the main event
of the 1970s, or that it was decisive in bringing about the
subsequent economic sea-change.

The problem is more obvious in Coggan’s case. His general
proposition that a metallic standard of value favours the
‘creditor/ rich class’ while a regime of virtual money benefits
‘the debtor/poor class’ is never integrated with his history of
the postwar era. The first decades after the Second World War saw
an inflationary erosion of the value of money; over the past
generation, by contrast, the major currencies of the capitalist
core, lacking any metallic basis, have nevertheless stubbornly
resisted rapid inflation. In other words, the years of gold’s long
goodbye were less, not more, propitious for creditors than the
virtual money era that followed. As Carmen Reinhart established in
a paper cited by Coggan, the real rate of interest (taking
inflation into account) was, from 1945 to 1980, as often negative
as positive across developed economies; in any given year, a
lender was as likely to be losing as gaining real wealth. If this
didn’t quite bring about Keynes’s ‘euthanasia of the rentier’, it
did amount to the pacification of the rentier, even as profit
rates reached historic heights: the main way for capitalists to
beat inflation was by investing money, not by lending it. In
recent decades, the situation has more or less reversed. In the
1960s the US financial sector harvested about 15 per cent of
domestic profits, while manufacturers took half of the total; by
2005, finance enjoyed nearly 40 per cent of profits, and
manufacturing less than 15 per cent.

What happened around 1980 to rejuvenate the rentier and unleash
the so-called financialisation of the world economy? Why did
inflation dramatically subside, and real interest rates surge,
across several decades? It was not the quietus to gold. That had
happened almost ten years before, and – if paper money were really
a boon for debtors – might have been expected to produce an
opposite combination of high inflation with low or negative
interest rates, as for a few years it did. The decisive monetary
event took place in October 1979, when Paul Volcker, chairman of
the Federal Reserve, hiked interest rates to unprecedented levels,
inducing a severe recession in North America and Europe as well as
what came to be known as the Third World debt crisis, as the
countries of the global South found that servicing their
dollar-denominated debts had become vastly more expensive. The
same high American interest rates drew capital to the US for the
better part of two decades. This kept the dollar expensive,
holding down the price of goods, while inflating the value of such
assets as stocks, bonds and real estate. Few arrangements more
convenient for the wealthy could be devised. That this one took
hold during a time of virtual or ‘fiat’ money suggests that it is
mainly the balance of social forces, and not any relationship to
metal, that determines whether the nature of money better suits
one class or another.

Money itself is a form of debt, a general claim on the social
product, and undoubtedly the removal of the dollar from the gold
standard permitted a tremendous expansion of debt claims: the
granting of titles to the world’s wealth far exceeded the actual
production of wealth. Yet for most of the 1970s, labour wielded
enough power to demand a growing share of those titles in the form
of wages and welfare provision: hence generalised inflation. Since
the late 1970s, finance capital, in firmer control of most
governments, has been better placed to multiply its claims: this
too caused inflation, but of the restricted kind known as
asset-price inflation.

In The Crisis of Neoliberalism – a work of lofty analysis and
desiccated prose in the intellectual but not the literary
tradition of Marx – Gérard Duménil and Dominique Lévy persuasively
argue, much as David Harvey has, that neoliberalism has been less
an ideological programme on behalf on free markets than a ‘quest
for high income on the part of the upper classes’.[†] Much of this
high income, withdrawn against asset bubbles, has been, as Duménil
and Lévy go on to show, ‘fictitious’ in that it represented a
claim on future wealth that neither had been nor was to be
produced: as if one could buy apples at the store on the strength
of titles to the more numerous future fruits of imaginary
orchards. To put the argument a bit too simply, for Duménil and
Lévy the crisis that began in 2007-8 derived most immediately from
the attempt to extend to ordinary consumers, through rising home
prices, a fictitious income long enjoyed by the financial classes.
The scheme could hardly last. Imaginary orchards can appear more
prolific than real ones only until the apples are picked.

It’s tempting to believe that debt-fuelled financialisation has
been the succubus preying on advanced economies and draining them
of vitality over the past thirty years, and surely that has been
partly true. Why should the owners and managers of financial
capital have bothered with increased investment in actual
production? Their own incomes soared, never mind that the system’s
trajectory began to sink. Yet to dwell on Volcker’s ‘financial
coup’ of 1979 as the central development of the decade, or to
consider financialisation apart from production, would also be to
concede to money an autonomy it doesn’t possess, in either virtual
or metallic form. There is good reason to doubt whether
financialisation and runaway indebtedness caused the system-wide
deceleration since the 1970s, or merely concealed and at length
compounded it. Orthodox economics over the last generation has
neglected issues of capitalist dynamics, so it has fallen mainly
to Marxian thinkers to search for the causes of ebbing growth.
Robert Brenner has adduced overcapacity in international
manufacturing as the trigger of a systemic slowdown starting in
1973. Others have pointed to ‘the rising organic composition of
capital’ or – a related phenomenon – the dwindling economic
importance of productivity gains in manufacturing, amid a growing
preponderance of services. Graeber and Coggan don’t discuss these
arguments, but add to them an awareness – another product of the
1970s – of ecological checks on growth. For Coggan, the great
looming threat is a permanent increase in energy costs, making
future ‘gains in overall productivity’ difficult or impossible.
For Graeber, environmental limits more generally supply the main
reason to believe that capitalism, as ‘an engine of perpetual
growth … on a finite planet’, will no longer exist ‘in a
generation or so’.

A stationary state of growthlessness, or even a situation in which
per capita GDP stagnated across the globe, would only sharpen the
conflict between creditors and debtors that has come into relief
since 2008. The loaning of money at interest, stigmatised as usury
during the Middle Ages, has seemed a more tolerable practice
during much of the history of capitalism, but its acceptance has
been purchased through growth: increased income for rentiers
didn’t necessarily imply a corresponding decrease for everyone
else, only a share in the common expansion. The more nearly the
global economy approaches a zero-sum game, the less we will be
able to distinguish between what Adam Smith called productive and
consumptive loans, the former contributing to the borrower’s
prosperity and the latter merely draining it. Positive real
interest rates per se will come to seem consumptive or parasitic,
a straightforward transfer of wealth from debtor to creditor. It’s
not inconceivable that financial rents could grow even as the
economy stalls, with the subjects of capitalism submitting to a
century of declining standards of living, as occurred in much of
Europe during the 18th century. But other outcomes are possible,
and more easily imagined than even a year ago, thanks to the
energies of protesters round the world. Graeber’s question for
activists might also be taken by ruling elites as a warning: ‘Will
a return to virtual money lead to … the creation of larger
structures limiting the depredations of creditors?’

Most immediately, the question concerns the ‘sado-monetarism’, as
it’s been called, of the ECB. Peripheral Europe needs higher
inflation, and soon, in order to shed debt and to regain a degree
of competitiveness that probably can’t be achieved, even at
enormous human cost, through the simple reduction of wages. The
Spanish cartoonist El Roto has summarised the logic of European
politicians: ‘If the currency can’t be devalued, it will have to
be the people.’ The programme has been a debacle even on its own
terms, as the increasing debt burden and interest rates of Spain
and other countries testify. Unless the euro – a virtual currency
as inflexible, to date, as any golden fetters – is devalued, it
will be hard for the EU, which has a larger economy than the US,
to escape the consequences foreseen by the economist Nouriel
Roubini: ‘Without a much easier monetary policy … more eurozone
countries will be forced to restructure their debts’ – in other
words, partly default – ‘and eventually some will decide to exit
the monetary union.’ It was with the Continental crisis in mind
that Paul Krugman recently voiced a thought usually confined to
the radical press: ‘I’m really starting to think that we’re
heading for a crack-up of the whole system.’

The prospect of systemic crack-up makes it urgent for new
movements of the left to imagine what ‘larger structures’ might
govern the credit system of a society retaining its complexity and
scale even as it demotes bankers to the level of ordinary
citizens. Some readers of Debt have surmised that Graeber opposes
all forms of impersonal economic relationship, on the basis of his
warm accounts of neighbourly credit relations or the Islamic
bazaar with its ‘handshake deals’, as well as his denunciation of
a credit system, articulated through laws and defended by
violence, that exempts debt obligations and the value of money
from the sort of continuous revision typical of humane dealings
among equals. In response, Graeber has said that he is not
‘against impersonal relations, or all impersonal exchange
relations’, which must in some degree characterise ‘any complex
society’. There is no reason to doubt him. Yet the spirit of the
Occupy movement has so far been defined by what Graeber, in Direct
Action: An Ethnography, described as the – mainly anarchist –
theory and practice of ‘direct action’, or what is now often
called ‘prefigurative politics’. In this ethos, ‘means and ends
become, effectively, indistinguishable; a way of actively engaging
with the world to bring about change, in which the form of the
action … is itself a model for the change one wishes to bring about.’

The political suggestiveness of spontaneous self-organisation – of
protests, assemblies and encampments – can’t be denied. These
practices have reminded thousands of activists that society
itself, all appearances to the contrary, is the active creation of
its constituents. But the stress on direct action and face-to-face
assembly has also threatened to circumscribe, rather than inspire,
a developed programme for the left, as if the impersonal
institutions of money, banking and government had been too badly
tainted by long collusion with oppression to be salvaged. Yet,
assuming that we aren’t about to see a swift unravelling of the
contemporary world into a far lower degree of complexity, the left
will need to imagine and propose credit systems and monetary
authorities that can prise apart debt and hierarchy, exchange and
inequality. Money, and therefore debt, is always an abstraction.
But justice too can be abstract, and there is no reason in
principle why money and debt must serve injustice rather than
justice. So long as we still resort to markets and banks, the
words of (the socialist) George Bernard Shaw are worth keeping in

The universal regard for money is the one hopeful fact in our
civilisation … It is only when it is cheapened to worthlessness
for some, and made impossibly dear to others, that it becomes a
curse … Money is the counter that enables life to be distributed
socially … The first duty of every citizen is to insist on having
money on reasonable terms.

[*] Verso, 192 pp., £12.99, April 2011, 978 1 84467 691 0.

[†] Harvard, 400 pp., £36.95, December 2010, 978 0 674 04988 8.

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