Debt: The First 5000 Years

I was really disappointed in this book. It came recommended from a friend and I was hoping for some new ideas or insights around money and economics. It really is just a nonsensical ramble of which I was not able to eke out much. This review is the least I can do to warn others to not repeat my money and time waste.

The author spends a lot of time at the beginning critiquing the "myth" of barter (that two paragraph parable at the beginning of 8th grade economics manuals - of how people would try to barter and thus discover it would be easier to use money). He builds this two paragraph parable into a huge straw-man, calling it the "founding myth of economics" which he proceeds to attack. That's his attempt to take down the discipline of economics (pls. note I am not calling it a science). That's like taking down anatomy because the anatomy drawings in the 6th grade manual are not accurate.

The barter parable is meant to illustrate that any transactions (barter, credit, taxes etc) are nearly impossible without a universal unit of measure for value exchanged. Which is money. The parable uses the example of barter for a transaction because it is much easier for 8th graders to imagine that rather than more complicated transactions such as credit and taxes.

He argues that anthropologists found no societies without money in which significant volumes of barter exists. Of course they did not. Without money it is impossible to keep track of the price of everything against everything. Which is the point the barter parable is trying to make in a simplistic way.

Next the author argues that money is tied to credit transactions (including taxes) and that credit and money are really like the chicken and the egg. Of course they are. Credit transactions are exchanges of value with a time lag. Without a way to quantify the value exchanged they are nearly impossible to make (just like barter). And of course money is not coins. Coins are just symbols for money just like bank notes.

The radical idea found by the author is that exchanges of value (trading goods, trading value in time as in credit, paying taxes) are impossible without a way to measure that value. Which btw. is exactly what the economists' parable of barter is trying to say too.

All of this is peppered with random anthropological accounts, quotes from Nietzsche, quotes from some french economists about our primordial debt to gods, cries that our lives have become a "series of commercial transactions", and nonsensical expressions such as "bourgeois assumptions" (really? bourgeois?).

The intent is to argue that money was involved in almost everything bad people did to each other through history and therefore there's something mysterious and bad about money (debt = money = slavery = capitalism = bad, or something like that). But wooden sticks, metals, clothes, and pretty much everything else including language were also involved in pretty much everything bad some people did to some other. So why single out money? Because it is an abstract concept, and abstract and invisible things draw weak minds like candles draw moths.

Ever wonder why loonies come up with perpetual motion machines involving electricity and magnetism a lot more often than involving mechanics or thermodynamics? For the same reason - electricity and magnetism, just like money, are invisible and mysterious. Easier to make up fantasies about.

Graeber's book is a long, slow read, yet it is a fascinating page-turner for which I enjoyed EVERY SINGLE PAGE. I would highly recommend this five-star book to anyone who enjoys investigating the mysteries of economics in our modern world and to anyone who enjoys history, sociology, anthropology, or looking for major historical trends which tie together and explain world events.

I saw a few critical reviews while reading this book, and now that I have finished, my opinion is that anyone who negatively reviews this book only read a portion of it. Most of the critical reviews are dismissive of his "point-of-view" as being "wrong." However, anyone who has actually read the whole book realizes that he has stepped back and looked at these issues from multiple perspectives and through the lens of multiple disciplines. People who are upset by this book (or by the introductory chapters) are upset because today's economics teaching focuses only on a small piece of the "economics thought pie" (my term) which is out there. Graeber steps out into discussing pieces which are less covered (or not covered at all) in typical economics classes in the West of today. So, rather than reading through his arguments, and seeing where they wind up by reading the whole book, I am certain these people gave up only part-way into the book, and then wrote a negative review because the ideas are different (much wider and more complicated) than they have been taught, and they find it "out of their paradigm" and just can't accept reading further. Yet, anyone should be able to read alternative ideas that challenge traditional ideas in order to see if their beliefs really stand up under scrutiny.

So much information is packed into Debt: The First 5,000 Years, that it could easily have been written as five separate stand-alone books. As an anthropologist at the London School of Economics, Graeber wrote a massive, sprawling history of debt, credit, and the development of markets and money; he ties it to war, slavery, taxes, tribute, government bureaucracy, religious thought, and both local and international trade, by looking at societies from ancient Mesopotamia, to India, to China, to ancient Greece and Rome, to Latin America, to the Middle Ages, and to the Modern Ages.

Why did he do it this way? Several reasons. First, as an anthropologist, he felt he was in a unique position to help us completely rethink our sense of the rhythms of economic history. Economists and historians, he points out, normally come at history in opposite directions. "Economists tend to come at history with their mathematical models--and the assumptions about human nature that come along with them--already in place: it's largely a matter of arranging the data around equations. Historians .....often refuse to extrapolate at all; in the absence of direct evidence.....they will not ask whether it is reasonable to make (certain) assumptions....this is why we have so many "histories of money" that are actually histories of coinage....Anthropologists, in contrast, are empirical--they don't just apply preset models--but they also have such a wealth of comparative material at their disposal they CAN actually speculate about what village assemblies in Bronze Age Europe or credit systems in ancient China were likely to be like. And they can reexamine the evidence to see if it confirms or contradicts their assessment." Second, as a admirer of French anthropologist Marcel Mauss, by writing this book, Graeber feels he has put to rest the real "pet peeve" of anthropologists everywhere--the myth of barter. I found this a shocking idea when introduced to it at the beginning of the book, but he has really convinced me as a reader through his extensive and comprehensive looks at every possible facet of this question.

I will try to summarize in one paragraph the large sweeping ideas covered in this book. What is money, really? What determines what gets used as money, and why? Certain historical ages operated on mutual credit systems, with practically no coinage at all in circulations (for hundreds or even thousands of years at a time); other ages operated with coin made out of various precious metals. What were the differences between the types of ages when these different types of systems occurred in societies around-the-world, and what were the causes of these differences? Historically, when did these various ages occur, and why? What is happening now, and is the current situation in the world changing? We seem to have recently entered a new age of credit, but in many ways, completely unlike past ages of credit, with historical trends now completely reversed between creditors and debtors compared to past credit ages. How does war and slavery factor into all of this? What is capitalism and how did it come about? Does it really work as it claims to? What are the problems and myths associated with capitalism? What does faith and credit in government and society mean, and what has it meant throughout all historical ages around-the-world? These are just a few of the book's largest questions.

Now I will touch on what this book meant to me personally. As an American living overseas in North Africa, I really enjoyed his discussion of how credit was handled during the Middle Ages in Europe, with most people living on credit in regards to each other. It reminded me of the system we even continue to use in North Africa, even in cities, with the merchants at the corner stores (which are our societal equivalents of 7-11 stores). Each family has a notebook which they bring with them to the store each time they want to purchase something. The merchant notes it in the book, and accounts are settled up at the end of the month. Without cash or coin available to most of the populace in the European Middle Ages, everyone operated on such bases with their neighbors, everyone kept accounts, and accounts were settled up in the whole village once or twice a year, usually at specific times or festivals. I found this really interesting. Many such examples from the book meant something to me in my own life, but they would be too numerous to list here.

The price of this paperback was one for which I got more than my money's worth, many times over, for the many pleasurable hours of reading, and all I learned, in a highly-enjoyable and extremely well-written text. I wish I could sit in on David Graeber's class. Be prepared--you will want to discuss this book with friends, so try to get a friend or a book club group to read it with you.

That’s the best short summary of this book. It has a great many good ideas, but they’re buried in such rank BS that I cannot recommend it to anybody who doesn’t already know a great deal about the subject. If you are willing to accept everything in this book as truthful, then you will be badly misled. If you can see past the many mistakes, then there’s some useful content.

The first few chapters demolish the decrepit notion that money was invented to grease the wheels of commerce by making it easier to break transactions down into manageable pieces. If you wanted to barter for a horse, you’d need to find something very expensive that the seller wanted in order to make the deal. If the seller didn’t happen to want a hundred bushels of barley, you couldn’t close a deal. But by making transactions in a standard medium — money — the deal could work because the seller would always be certain that the money he got from you would be usable for some other transaction involving property that the seller *did* want.

That was the standard textbook explanation of the development of money for many years. My impression is that historians never took it very seriously; there were just too many real-world complexities to confute that explanation. But Mr. Graeber assaults the explanation furiously. He offers a different explanation: debt as a social construct. Here he is dead right: small-scale societies do indeed rely on debt as a means for regulating transactions between people. Transactions do not have to be immediately symmetric: Fred can give Mary something today, and she can acknowledge a debt that she pays off at some later date. The system is powerful, simple to implement, and flexible.

While Mr. Graeber delves deeply into the concepts of debt in small-scale societies, he is apparently unaware of three crucial facts that control the operation of debt in such societies.

The first of these is Dunbar’s Number: the number of people with whom you can maintain a stable relationship. This was elucidated by Robin Dunbar in the 1990s; when comparing the sizes of social groups of various primates with their brain sizes, he found a rough correlation which, when applied to Homo Sapiens, suggests that our ideal social group should consist of about 150 people. We seem to have a natural proclivity to cluster in groups of about 150 people. Above that number, we have difficulty keeping track of all the various social relationships.

Keeping track of debt relationships in such a group is easy enough, and Mr. Graeber adduces lots of evidence of such groups utilizing debt systems to manage economic relationships among people. What he doesn’t realize — and this is a huge blunder on his part — is that such debt systems start to break down when the economic group exceeds 150 people. Indeed, once an economic grouping exceeds a thousand people, the personal debt systems that Mr. Graeber extols are completely useless.

The second fact the Mr. Graeber misses is the power of “cheater detection” in human social relationships. There has been plenty of research on this topic, and the phenomenon is well-established. It demonstrates that people are especially sensitive to debt violations, which makes enforcement of debt systems more reliable — but only in the context of small groups where pre-existing social relationships are in place.

The third fact that Mr. Graeber misses is the intermediate role played by “money of account”. This is a standard term from economics that I cannot recall Mr. Graeber using, but he dances all around the concept. Money of account is an imaginary form of money that is used only to keep track of debts. For example, the shekel was an ancient unit of weight (about 11 grams) that predated coinage. Long before any coins were in use, the shekel of silver or gold was used as a money of account. For example, consider some of Hammurabi’s Laws:

201. If he knock out the teeth of a freed man, he shall pay one-third of a gold mina.
203. If a free-born man strike the body of another free-born man or equal rank, he shall pay one gold mina.
204. If a freed man strike the body of another freed man, he shall pay ten shekels in money.
208. If he was a freed man, he shall pay one-third of a mina.
209. If a man strike a free-born woman so that she lose her unborn child, he shall pay ten shekels for her loss.

These were written around 1750 BC, a thousand years before coins were invented, yet they reference weights of precious metals as payments. Shekels of precious metals constituted “money of account” — which was invented before coins were invented. Yet Mr. Graeber never directly addresses the use of money of account, preferring to impose his hypothesis that all economic transactions were conducted via debt systems.

There’s a much better explanation of how money developed. Small-scale societies did indeed rely on debt mechanisms, as Mr. Graeber correctly points out. However, once civilization developed and economic systems embraced more than a few hundred people, debt was confined to sub-societies within the larger societies. Inside a village, debt systems continued to play the dominant role in economic relationships, and it continues to play that role even today in small-scale social clusters.

But in larger economic units, debt relationships could not be enforced, and such groups developed an alternate system based on the one commodity that was universally valued: metals. Metal of any kind was useful for such a wide range of applications; it didn’t rot or wear, and it was small enough to be easily transportable. Thus, metals became the money of account for civilizations the world over.

Mr. Graeber refuses to recognize this simple explanation. Instead, he offers an absurd explanation for the development of money: nasty militaristic tyrants invented money to pay their soldiers, permitting them to build huge armies with which to wage imperialistic wars. They then required taxes to be paid in coinage so that they could keep the money flowing and the armies fighting.

Anybody with any knowledge of history should ask, “How did the Hittites, Egyptians, Babylonians, Assyrians, Medes, etc pay their armies before 700 BC, when coinage was invented?” The existence of large armies fighting imperialistic wars before the invention of coinage blows Mr. Graeber’s explanation right out of the water.

Then there are the many, many historical bloopers; my copy of the book bristles with little note-tags marking the pages containing factual errors. For example, on page 214 of the paperback edition, Mr. Graeber claims that the Mesopotamian system using hollow balls called bullae were a form of IOU to record debt obligations. He claims that clay tablets were sealed inside the bullae. How he could make such a blunder escapes me. The contents of the bullae were not clay tablets, they were clay shapes representing various commodities: bushels of barley, sheep, oxen, etc). They were not records of debt, they were bills of lading. The Mesopotamians had to solve the classic problem of preventing goods from disappearing during shipment from farm to temple. If a farmer’s annual taxes were, say, thirty bushels of barley, then the tax agent went to the farm, collected the grain, and, in the presence of the farmer, sealed three pyramidal clay tokens (representing the thirty bushels of barley) inside a hollow bulla and placed his own identifying mark on the exterior. When the cart carrying the grain reached the temple, the accountant there could check the contents of the bulla against the contents of the cart.

On pages 225 - 227 Mr. Graeber mangles history. According to him, all the metals were squirreled away in temples and ornaments, and then, starting around 800 BC, war erupted all over Eurasia and armies pillaged all that gold and silver, distributing it to the common people. I find it hard to believe that any educated person could swallow this ridiculous nonsense. War is a constant of human history; there were plenty of wars long before 800 BC, and plenty of temples were looted.

He then goes on to declare that these wars provided the impetus for the development of markets. I am at a loss for a suitable imprecation to express my reaction to this absurd claim. Markets existed long before 800 BC. It’s true that international trade grew during that period, but it had grown long before then, and continued to grow long afterwards. The only special development in trade during that time period is the Greek innovation, which I describe here.

Here’s another howler on page 226:

“The period when the Greeks began to use coinage, for instance, was also the period when they developed their famous phalanx tactics, which required constant drill and training of the hoplite soldiers.”

First, there is no direct connection between the development of coinage and the development of the phalanx; it is a mere coincidence, as anybody with a knowledge of military history can tell you. Moreover, the ‘constant drill and training’ is just plain wrong: hoplites were citizen-soldiers. Hasn’t Mr. Graeber even read the Phaedo, in which Socrates refers to his participation in the Battle of Delium, where he saved the life and armor of Alcibiades? And no, Socrates was never a professional soldier.

On page 227, Mr. Graeber refers to Athens as an aggressive military power rather than a great trading nation. { snorts of disbelief } Athens was the pre-eminent trading nation of the Greek world; its military power was an effect of its trading power. Why do you think that the Athenians extended their Long Walls from Athens all the way to the Piraeus, the port of Athens six miles away from the city?

On page 293 Mr. Graeber manages to demonstrate ignorance of two different topics in a single discussion. His explanation of the development of the Arthurian romances is, to say the least, garbled. At the same time, he dismisses knights as mere gangs of armed robbers, when in fact the mounted man-at-arms was the centerpiece of all warfare in Middle Age Christendom. The Crusades were led by knights; all the major battles of the period were fought with knights as the core force. He also manages to screw up the history of the Fourth Crusade. Reading his version, I did not at first recognize the Fourth Crusade; only after he mentioned Byzantium (which he misnames Constantinople) did I recognize what he was talking about.

On page 296 he comes up with the screwiest explanation of the Grail story that I have ever read. Many scholars think that the Grail derives from ancient Celtic mythology of a kind of cornucopia; others think that it is derived from the Christian sacrement of holy communion. If only Mr. Graeber had taken the time to look it up on Wikipedia! Sheesh!

Here’s yet another glorious blooper, on page 308: In describing the effects of the Black Death, Mr. Graeber writes “…whole cities went bankrupt, defaulting on their bonds…” Very few cities in the 14th century were corporations. Many were ruled by a tyrant, and the tyrant may have gone bankrupt. Others were run by oligarchies. Yes, they all had their own treasuries, but these were never substantial components of the economy. More important, there were no municipal bonds back then; the first municipal bond was issued by the city of Amsterdam in 1517.

As he comes closer to modern times, Mr. Graeber drifts off into Cloud-Cuckoo Land, describing a world in which evil bankers, merchants, and governments conspire to cheat the population. Here’s a representative example of his fevered imagination at work:

“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.”

Golly gee, if all those evil people were responsible for defining gold and silver as money, howcum people long beforehand were using gold and silver as money? And how does continuing a tradition several thousand years old constitute “changing the rules”?

As I mentioned earlier, Mr. Graeber refuses to recognize the fact that economies were extending their range through trade. As the world became more tightly integrated economically, the small-scale economic systems that he prefers were made obsolete. He bemoans that development. Does he realize that a small-scale village of a few hundred people cannot manufacture steel, glass, or any of the products of the modern world? Economic integration permits the specialization that makes it possible to provide smartphones so cheaply.

After page 330, Mr. Graeber goes so far off into the ozone that I lost interest in reading his rants. He is a romantic who longs for the good old days when everybody lived in tiny self-sufficient villages, everybody knew and trusted each other, there was no money to corrupt their souls, and everybody enjoyed the simple life. I hope he finds that life for himself. I will point out, however, that without money and loans and interest and banks and publishers and all the other paraphernalia of modern economic systems, he would not be able to carry on his research, teaching, and writing. He’d be too busy hoeing the weeds on his farmland.

Terrific book. Graeber's a brilliant mind. After reading Debt: the First 5000 Years you could walk into just about any economics class and totally tie the teacher in knots....unless they've already read this book. The concepts are foundational, where money comes from, how debt is used for good and ill, how humans really interact positive and negative. What I also learned from this and a handful of other books is how to put money in its proper perspective making it less scary and more of just another tool. People who just assemble large piles of money are like having more camping gear than you could ever possibly use but then never going camping. This is a book you read, and then read again. It's worth it.

This book had a lot of potential. It is a really interesting look at the history of debt. Near the beginning, the author seems to set out to establish a new theory of the origins of money. He does a fantastic job at undermining the longstanding idea that money evolved out of systems of barter. His first few chapters on the prevailing theories of money and its origins are great. He establishes that money is based upon the concept of debt and that debt itself has this really long history that predates the invention of money. What I would have enjoyed seeing is how well this theory explains monetary dynamics in history moving forward and especially now in modern times. Instead, I think the author spent a lot of time focusing on a history of debt which he could use to justify the recommendations he makes in the last chapter of the book. The book has these three sections that are just brutal to get through (Axial Age, Middle Ages, Ages of Capitalist Empires). In them, I struggled to keep focused on whatever was the overarching point of the book. I don't think the point was clear. That being said, by the end of the book the author did seem to suggest a return to the concept of "jubilee" where all debts are forgiven. I think he suggests this because a) we have a credit-based system of money once again and b) in other credit-based systems historically, this was something done to help hit the reset button and not keep anyone enslaved under a debt-burden they would not be able to overcome in their lifetime. I see his point, but I only wish the book accomplished more in the way of a theory that explains the concept of money today.

I appreciate that Prof. Graeber was honest about where he was coming from at the beginning of the book. He doesn’t believe a borrower has an obligation to repay the loan, nor does he believe in capitalism or free markets. While I disagree with his point of view, I was interested in reading about how he would support it and what alternative he suggests. What followed was a rambling history of money and debt that seemed to be selective, and focused on cases of social, economic and other forms of oppression, the implication being that one only has debts because of an unjust system, and so one is under no obligation to repay what one borrows. This logic could also be applied to outright theft – one has needs only because of an unjust system and is not obligated to refrain from taking other people’s property, though the author stops short of making this point.

I enjoyed the history, even though it seemed cherry-picked. There were several problems of logic, however. The most glaring was the assertion that while Marx was a realist, Adam Smith was an idealist because he stated that the butcher did his job for his own self-interest rather than purely for the good of the community. Graeber “disproves” this by asserting that sometimes the butcher would sell on credit. This is illogical – it assumes that the butcher always sells on credit, and that he never attempts or even expects to collect. Later, the Soviet Union was given as an example for the failure of capitalism.
Perhaps the worst part of the book was that there were no alternatives examined. The worst debt abuses throughout history were highlighted, with the conclusion that debt should be revoked, without an examination of what debt forgiveness has looked like in the past, or what would be the result now. Capitalism was attacked for its problems, but wasn’t compared with other economic systems.

For a good history of money less driven by an agenda, I suggest Niall Ferguson’s, “The Ascent of Money.”

All the above.

I really didn't want to write this review. I can only imagine the time and energy it takes to write a book. So, I would like to commend that. But, I write this almost as a moral obligation. It's that bad.

First, if this was insanely hard to read. I've never seen a book written with so many run on sentences. There are routinely long sentences that should be 4 or more small sentences. It's harder reading than old English or similar at times. He loves to make examples. But, instead of making one or two, he goes on and on and on. Example after example. Plus, most have so many variables that they are irrelevant or mildly relevant at best.

As for the economics, there is a whole other set of issues. I'm not going to give my opinion on that. To each his own.

Just do yourself a favor and pass on this one. Just not worth the time and energy it takes to read it.

Graeber's 'Debt' makes some good insights on how slavery was a form of debt fgr conquered peoples, the rise of international religions coincided with coinage, and how societies 'evolve' from moral to market economies. Sadly, this book is hard to recommend as the author stamps too many of his own socialist ideologies onto the past. In fact, in a bit of irony considering that his other book criticizes capitalism as 'utopian', Graeber paints pre-capitalistic economies as utopian. Clearly, Graeber is yet another Marxist in academia who claims to understand "working people" while having a disdainful attitude toward every day people.

Steve Keen recommended this book and I have now cited it multiple times. It's quite readable, and its points are well made. The key fairy-tale this book gets rid of is the one about hard-currency money. Graeber establishes that credit preceded coin, and also existed along side it. Highly recommend this book.

Based on various articles and book reviews that compelled the purchase of this book, I had high hopes on many levels. Sadly, the author disappoints on virtually every level. The compelling ideas contained in "Debt" seem to have primarily come from other writers, and this work simply accumulates them under one cover. The first 90% of the book is written as though there is a substantive agenda or some concrete direction or payoff for slogging through the poorly written work. The payoff never comes, with the possible exception of a literary version of the Beatles' "All you Need is Love."
Debt is poorly written, and comes off as a college sophomore's position paper that was started at 11:00 pm the night before it was due in an 8:00 am class. The author is far too quick to over-generalize, relies too heavily on questionable assumptions, and fails miserably in joining the jumbled ends of "logic". A work that is so highly rated as this one should have some type of well-formulated conclusion that not only questions current policy, but at the very least lays out the framework for some new approach. That Debt failed to do that is bad enough; that reading the book is such an onerous chore along the path to nowhere is just an absolute beating.