Skip to Content

Debt, Money and Marx

David Graeber’s much talked of Debt: The First 5,000 Years is what the title suggests –a history of debt since ancient times. Debt, that is, in the broadest sense, since Graeber discusses theological conceptions of debt as something humans owe to gods or to God or to society, which is rather remote from the more usual sense of owing money.

The myth of barter

Graeber sets out to refute the idea put forward by Adam Smith and followed by others that money arose out of barter. Smith argued that all humans had a “propensity to truck, barter, and exchange one thing for another”and so that barter would have been the original way in which they exchanged the products of their different trades. As barter has the inconvenience that those wanting to exchange have to have what each wants, at some stage money is invented as something that can be exchanged for anything.

As an anthropologist, Graeber is able to show that there never have been any economies based on barter. It’s a myth, but the founding myth of conventional economics and still adhered to in modern economics textbooks. In a footnote (p. 395) Graeber suggests that “the idea of a historical sequence from barter to money to credit…reappears at least in tacit form in Marx”. This is fair enough to an extent, as in his ‘critique of political economy’ (the subtitle of Capital) Marx did accept some of the historical facts as perceived by Adam Smith and others whose ideological conclusions he was critiquing.

One of these historical assumptions was that barter preceded money. The theory of money that Marx expounds in the opening chapters of Capital, however, is that money is a commodity that can be exchanged for any other commodity, i.e. it is what he called a ‘general equivalent’. This is not a theory of money as an invention or social convention to overcome the inconveniences of barter. It is, rather, a theory of the way in which the social relationship that links separate commodity producers appears externally as a thing.

Marx’s analysis of money was not a historical description of how money evolved but a theory of what money is, irrespective of how it evolved. It is therefore not affected by later researches such as Graeber’s which suggest that money as a general equivalent did not in fact evolve out of barter. This said, Marx is very much with the money-as-commodity school as opposed to the money-as-credit theorists with whom Graeber seems to have more sympathy.

Social currencies

But if money didn’t arise from barter, how did it arise? In fact, what is money? Most would say that money is something that can be exchanged for anything else, i.e. that it is a means of exchange, typically (but not exclusively) coins and, these days, notes. Graeber accepts that this is one aspect of money, but emphasises another: its function as a general unit of account allowing different products to be compared. Once again as an anthropologist, he is able to show that money in this form existed before coins.

The first example he gives is of human groups where dowries and compensation for killing or injuring someone or impugning their honour are quantified. The general unit in which these are measured can be anything and has varied from cowrie shells to cattle. As these items do circulate (pass from one person to another) he calls them “social currencies”and the groups which practice this he calls “human economies”. But these cowrie shells, etc were not used to acquire items of everyday use:

“All of this, it is important to emphasize, can happen in places where markets in ordinary, everyday goods –clothing, tools, foodstuffs –do not even exist. In fact, in most human economies, one’s most important possessions could never be bought and sold for the same reasons that people can’t: they are unique objects, caught up in a web of relationships with human beings”(p. 208).

But if they are not used, and cannot be used to buy things are they really money?

Shekels and the State

Graeber’s second example is of the states that existed in the Middle East from 3500 to 800 BC, especially Sumer (the area between the Tigris and Euphrates rivers, now part of modern Iraq). Here there were both taxes (debts to the state) and commercial and personal loans to acquire things. These were also expressed in a common unit (a shekel which was a weight of silver) but this rarely changed hands as debts and taxes were settled in kind with such useful things as wheat, whose quantity was determined by its silver equivalent. There were no coins, but was there nevertheless money? Can money be said to exist if there is just a general unit of account without the circulation of the material which is its substance? In any event, Graeber proves his point that before there were coins there wasn’t just barter.

Coins, i.e. uniform pieces of metal stamped according to their weight by the rulers of a state, are generally accepted to have first come into existence in the kingdom of Lydia (in what is now Turkey) around 600 BC. Graeber makes a good case for saying that this was to pay the soldiers the state employed. The use of coins, he says, then spread to Miletus, a Greek city and port on the Ionian coast of the Aegean Sea:

“It was Ionia, too, that provided the bulk of the Greek mercenaries active in the Mediterranean at the time, with Miletus their effective headquarters. Miletus was also the commercial center of the region, and, perhaps, the first city in the world where everyday transactions came to be carried out primarily in coins instead of credit”(p. 245).

Thus states (not barter) were at the origin of money. Graeber goes further and argues that markets too, as places where everyday things can be acquired in exchange for coins, were also the creation of states. In other words, markets were dependent on states from the start. This allows him to refute the free-marketeer idea that government-free markets have existed or could exist (which in fact is part of the barter myth).

Commercial credit

Commerce (merchant’s capital) existed long before industrial capital (capital invested in production) and many of the arrangements for paying for goods that were traded over long distances were developed in pre-capitalist societies: arrangements for clearing payments at mediaeval fairs in Europe, for instance, and ‘paper money’ (actually, paper trade bills: credit given to merchants till they sold their goods) in China in the 10th century AD. Cheques, Graeber points out, were in use in the Islamic world in mediaeval times, the Arabic word saqq being the origin of the English word ‘cheque’.

These are all credit arrangements which Graeber uses to back up the thesis advanced in his book that there is a historical cycle of periods during which trade is based on credit and when it is based on bullion. According to him, after the USA finally went off the Gold Standard in 1971, we may have entered another age in which the credit will come to be regulated, as it was in previous credit ages.  During these times debts were periodically cancelled (the original meaning of the word “jubilee”) and the charging of interest on loans for consumption was banned.

What is capitalism?

When discussing relatively modern times (1450 to 1971) Graeber asks “So, what is capitalism anyway?”Socialists in the Marxist tradition define capitalism as an economic system based on the production of surplus value by wage workers. These are employed by capitalists or capitalist corporations that have invested money in producing things for sale on a market with a view to profit. Graeber challenges this definition. Marxists, he says,

“still tend to assume that free wage labor is the basis of capitalism. And the dominant image in the history of capitalism is the English workingman toiling in the factories of the industrial revolution, and this image can be traced forward to Silicon Valley, with a straight line in between. All those millions of slaves and serfs and coolies and debt peons disappear, or if we must speak of them, we write them off as temporary bumps along the road”(p. 351).

Graeber should read the chapter in Capital on “The Genesis of the Industrial Capitalist”. In it Marx deals with how the capital to launch the industrial revolution was originally acquired: “so-called primitive accumulation”(but which is better translated as “original accumulation”). He lists “colonialism, the national debt, the modern mode of taxation, and the protectionist system”as methods employed by the state in Spain, Portugal, Holland, France and England “to hasten, hothouse fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition”. That Marx fully realised what a brutal process this was can be seen from the concluding words of the chapter where he wrote that capital came into the world “dripping from head to foot, from every pore, with blood and dirt.”This is hardly ignoring the sufferings of pre-industrial producers.

Graeber sees capitalism as this rather than as the investment of money capital in production with a view to extract surplus value from wage-labour. He has confused what states did to hasten capitalism’s coming in being with capitalism. He wasn’t the first, as Marx notes in the same chapter:

“The great part that the public debt, and the fiscal system corresponding to it, has played in the capitalisation of wealth and the expropriation of the masses, has led many writers, like Cobbett, Doubleday and others, to seek in this, incorrectly, the fundamental cause of the misery of the modern peoples.”

People are not exploited today because they are the debt-slaves of the financial system but because they are the wage-slaves of capitalist corporations.

Graeber’s view of capitalism as the exploitation of the real economy by some military-financial complex gives credence to those who see the way forward in abolishing the supposed power of banks to create credit out of nothing (a mistaken view Graeber seems to share). Outside his profession as an anthropologist, Graeber is an anarchist and a member of the IWW and so wants to go to a society in which there will be no wage-labour. However, his inadequate theory of capitalism could lead to any growing anti-capitalist movement getting diverted into mere banking and monetary reform.