Debt: The 500 Word Review

I just finished David Graeber’s Debt: The First 5000 Years. It’s the best critique of capitalism I’ve yet read – jabbing at both the left and the right. For the right, he makes a powerful argument against any notion that capitalism is intrinsic to human nature. He’s making an argument that much of what we call capitalism has its foundations in war and slavery, and that capitalism requires a state enforcing debt settlement in lenders favor using the government’s power. For the left, 80% of what he says about central banks and monetary policy could be Ron Paul quotes.

Graeber is essentially making a neo-mercantilist argument – that it is the account balance, not the amount of trade, that matters most. People in debt behave differently, trying to capture others into debt to pay off their own debts. Central to his thesis is that changes in how we conceive of debt has driven the changes in human relations, not capitalism as an ideology per se.

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.”

He uses Cortez as an example: he arrived in the New World in debt. He appealed to a monarch that was also highly in debt to launch an expedition to pay off both of their debts. Lenders lent huge sums further still to finance the expedition. Immediately after conquering an the Aztec empire, he couldn’t afford to pay off those debts so tried to rip off his conquistadors – who Cortez put into debt to for their horses, weapons, and even medical care with promises of huge returns. He in turn put them in charge as governors who could extract as much gold and silver as they could in the shortest amount of time – to pay back their debts to Cortez, who needed to pay back lenders, who themselves needed to pay back the Genovese.

All at grotesque human costs. It wasn’t some capitalist or mercantilist ideological transformation, or some new logic of “self-interest.” It was that a new and impersonal system of debt had taken hold, replacing earlier systems based on trust and social obligation. There was a new legal (and increasingly moral) obligation to settle all debts, with the power of the state capturing debtors earnings for the lenders, “no matter what”. Cortez’s debtors were carving up his plantation as he was plundering the Aztec. He wasn’t “profit mad” – he was in a race for his own survival. One in which he ultimately lost, selling his wife’s jewelry in his final years to finance an excursion into California.

Graeber is arguing that same logic of impersonal debt obligations, stripped of any human dimensions that would forgive it and not let people go into ruin, is the logic of global capitalism today:

It is a structure designed to eliminate all moral imperatives but profit. The executives who make decisions can argue—and regularly do—that, if it were their own money, of course they would not fire lifelong employees a week before retirement, or dump carcinogenic waste next to schools. Yet they are morally bound to ignore such considerations, because they are mere employees whose only responsibility is to provide the maximum return on investment for the company’s stockholders. (The stockholders, of course, are not given any say.)”


  1. Haven’t read the book yet – but wonder if he has any view on what the alternative is?

    Problem with systems based on trust and moral obligation is that they don’t scale.

    Lots of things that people and society like a great deal require more resources than a single person can aggregate based on his own personal relationships with people in positions to trust him or feel a moral obligation to lend/invest.

    May 25, 2013
  2. Steve said:

    don’t you owe me money?

    May 26, 2013

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