[Marxism] Forgive us our debts (LONG)

Louis Proyect lnp3 at panix.com
Thu May 3 07:17:32 MDT 2012

(This is behind a paywall at the LRB.)

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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