David Graeber on Debt and the Myth of Barter

Rethinking Economic History

The archaeologist excavating an ancient Roman metropolis will be more likely to find coinage than records of credit. Consequently, many economists and historians believe that money came before credit. The standard narrative of economic history depicts the evolution from a barter-based to a currency-based exchange system. The myth of barter contends that before currency, if a baker wanted to trade bread for pork but the butcher was not interested in bread, the baker had to engage in a series of complex exchanges until he got meat. In such a situation, economist Adam Smith argued that "no exchange can, in this case, be made between them" (2021).

However, the invention of money, according to the myth of barter, made the ancient process of barter obsolete, superseded by a convenient currency system. The undesirable situation of barter presumably prompted the invention of money to facilitate transactions. Nonetheless, this historical chronology is a myth. Anthropologists who have lived among tribes have seen no signs of a barter economy. In fact, ethnographic studies have yet to find any backing for the pure barter-based economy. Bartering predominantly takes place between people previously familiarised with money. Native Americans stockpiled goods in longhouses and allocated resources among the tribe, while other indigenous tribes operated within a gift economy. Tribes did not haggle in exchanges with community members; they exchanged goods based on social relations of credit. This means that credit, in actuality, emerged before capital as tribes distributed resources according to mutual 'I-owe-you' systems. A hunter shared his catch, knowing that he would be repaid for his contribution later. Hence, a social credit system existed prior to capital. By contributing to the tribe, other members owed a favour. These human economies thereby operated on transactions of 'I-owe-yous' with no currency involved. Accordingly, anthropologist David Graeber maintains that "our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around" (2011, p. 40).

The historical fairy tale of early civilization claims that everything improved as prosperous commercial societies arose. However, in light of market economies, humans could be degraded and commodified. Money would beget the substitution of life. Blood wealth could now pay off murder, settling feuds via transactions, while wife wealth secured the groom a hand in marriage. When currency could be exchanged for life, humanity, in many cases, descended toward regressive gender roles and slave trade. "Once the game exists, once the principle of substitution comes in, there was always the possibility of extending it" (Graeber, 2011, p. 145). Prior to the market economy, human economies operated within the framework of reciprocal credit systems. In human economies, women had far more freedom, while in the market economy, women could be reduced to slaves, prostitutes, or property. A Mesopotamian husband could not normally sell his wife, but "everything changed the moment he took out a loan. Since if he did, it was perfectly legal - as we've seen - to use his wife and children as surety" (Graeber, 2011, p. 180). The man, therefore, became the domestic authority, and his wife and children became debt pawns. Since the human economy was replaced by the market economy, ancient households internalised systematic oppression, replicating the brutal characteristics of commercial society. Early market civilizations reduced neighbours, families, enemies, and others into slaves or commodities. Capital facilitated arranged marriages and resolved blood feuds, while money served as the mediator in the economic equation between life and currency. When Europeans encountered non-commercial economies, they reduced people to commodifiable labour to serve colonial powers. This systemic violence disrupted the social fabric and reduced humans to the status of slaves. The clash between market economies and human economies has often led to the emergence of the slave trade, even among citizens of the same origin.

For centuries, states have created markets because neither the state nor the market can survive alone. The ruling class, therefore, has issued money to tax their citizens and fund armies, relying on their self-legitimised currencies. In market economies, a nationalist debt emerges, implying that we owe society for raising us and believing that we owe our lives to unjustified authority figures. This instils a sense of primordial debt, leading to nationalistic impulses based on religion, ethnicity, citizenship, and borders, which obligate us to serve the nation. From this sense of primordial debt, numerous wars and economic debts arise. An example of such debt relations can be seen in the aftermath of World War I when the allied powers demanded reparations from Germany. The Treaty of Versailles required Germany to disarm, make territorial concessions, and repay debts for the damages caused. While this may appear fair, the allied powers themselves caused immense damage to their colonial territories without compensating them. In a similar vein, after self-liberated Haitian slaves achieved independence, Haiti found itself indebted to France due to the loss of future profits. Despite the fact that France had ravaged Haiti, the country remained indebted to its former oppressor. Third-world debtor nations, which were subjected to decades of European brutality under colonial rule, received no compensation for the damages inflicted upon them. Strikingly, it seems that the debtor-creditor relationship has been reversed, with formerly subjugated nations owing money to their former colonial rulers. For instance, despite France brutalising the Malagasy people during its colonisation of Madagascar from 1897 to 1958, Madagascar was indebted to France upon gaining independence.

In August 1971, the US eliminated the convertibility of the US dollar to gold, ushering in the Bretton Woods system and establishing the dollar as a fiat currency. Fiat currency is not backed by any commodity and derives its value solely from institutional regulation and the acceptance of the market. It has no use value and is characterised by volatile exchange rates. Since Richard Nixon severed the link between the US dollar and gold, fiat currencies have become globally adopted, marking the first time in history that no national currency is backed by commodities. In this era, a small fraction of the population wields the financial levers capable of generating trillions of euros, dollars, or yen. Those who control these levers are backed by governmental power, as evidenced by the saying, "there's a reason why the wizard has such a strange capacity to create money out of nothing. Behind him, there's a man with a gun." The traditional understanding of debt entails borrowing money and owing a debt, often with interest. However, the 2008 market crash and bank bailouts revealed that powerful financial institutions do not always have to repay their debts. Fiat currency is deeply rooted in institutional and military power, as its value relies on the potential for violent enforcement. The US dollar, in particular, maintains its value through governmental backing and its military predominance in the world. No other nation currently possesses the military capabilities of the US, and it is this power that sustains the prevailing monetary system centred around the US dollar.

Fiat currency finds its roots in violent force. According to Graeber, "debt peonage continues to be the main principle of recruiting labour globally [...] whereby most of those working for wages or even salaries feel that they are doing so primarily to pay off interest-bearing loans" (2011, p. 368). Debt is neither an objective measure of capital enterprise nor a fair mathematical calculation of what is owed. The market system reduces the world to a series of numbers, turning the global population into subjects, disregarding the social and ecological boundaries of this practice. Debt represents a distorted promise fueled by mathematics and violence, a grand scheme that assigns us a "numerical objective" value, even though it lacks the legitimacy to define our world.

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