How the poor debtors still sell their daughters, How in the drought men still grow fat

| Gabriel |

I recently read Graeber’s Debt: The First Five Thousand Years and found it to be very impressive and thought-provoking. As an indication of how impressed I was, I’ll just say that: I’ve recommended it to several people, I’m citing it in one of my next papers, I’m very seriously considering assigning it as a text when I prep econ soc sometime in the next couple years, and it inspired me to go back and read The Gift by Mauss and several journal articles. I’d long been vaguely aware of the anthropology of exchange through my exposure to Zelizer and Fiske, but had never read very deeply in it and so I learned a lot. Debt is written as “big history” (not unlike JLM’s Social Structures and Fukuyama’s OoPO) and this gives it a different character than the more cross-sectional approaches taken by Mauss, Zelizer, or Fiske.

Large parts of the book could better be called Commerce: The First 5,000 Years or Exchange: The First 5,000 Years. However there are a few places where Graeber explicitly tackles debt. The most widely known of these (in part because Graeber opened a can of whup-ass on some guy at Mises who tenaciously stuck to the discredited view) is the origins of money. The received view from Adam Smith which still persists in econ textbooks is that primordial exchange takes the form of barter but that barter suffers from the “double coincidence of wants” problem wherein A can only trade with B if A has something B desires and vice versa. In this model, money lubricates exchange by creating a universal medium of exchange. As Graeber shows, this model of pre-monetized exchange assumes arms-length transactions whereas almost all documented exchange in primitive cultures is thoroughly embedded and takes one form or another of communal sharing or gift exchange. That is, delayed reciprocity is typical and this avoids the problem of coincidence of wants. From the economist’s perspective delayed reciprocity introduces further issues of trust, time preference, etc and thus is a more complex form of exchange than barter, but this is because (at least on this issue) economists are acting as arm chair philosophers of the social contract and it is the anthropologists who are (at least on this issue) being good empiricists.

The important exception to the “barter is a myth” point is that Graeber argues that arms-length exchange does occur in primitive cultures, but only between and not within meaningful social units and that such arms-length exchange is somewhat sketchy and dangerous. More broadly, one of the central points of the book is that arms length exchange in general and market economies in particular require the disembedding of people and commodities from their social context. Graeber sees this process as often violent and he makes a powerful argument that this originates with slavery, both in antiquity and in early modern Africa.

Other interesting points he makes on debt are various ways that it becomes a moral obligation such that debtors are seen as sinners and religious salvation is seen as a spiritual analog to redemption. This helps explain something I never completely understood when watching The Sopranos, which is why gangsters first go to the trouble of getting someone to incur an illegal debt before shaking them down? It turns out that the point of loan-sharking instead of mere naked extortion is the victim feels a certain moral obligation to repay the debt and so loan sharks exploiting gambling addicts has the same logic as how many grifts (e.g., 419 advanced-fee fraud, the fiddle game, etc.) first involve the victim as co-conspirator in a crime against a real or imagined third party. Moreover, Graeber makes the bold point towards the end of the book that debt can drive people to do things that they otherwise would be morally averse to, with his example being the conquistadores.

This is all fascinating but it depends a lot on how much you trust Graeber’s empirical claims. For instance, was it really true that everyday economic life in early modern Britain was largely cashless and instead used a combination of token currencies, informal credit, and asynchronous barter? Maybe, I really don’t know. I’d like to trust Graeber on this but I don’t know if I can since he gets some things pretty wrong, or at least dubious. At Unfogged there’s a review (and a very funny comments thread) pointing out that the following sentence contains six factual claims all of which are incorrect:

Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other’s garages.

This is not exactly stuff written in the cuneiform of Mesopotamian diplomacy, the barbarian law codes of mediaeval Ireland, or the field notes of Victorian anthropologists, but something that occurred in suburban California around the time I was born and concerns the extremely well documented origins of one of the world’s biggest firms. If Graeber gets this wrong, how can we trust him about the stuff that’s harder to check, like all that business about barbarian law codes.

The thing that really bothers me though (because it’s more than an isolated sentence) is the last few chapters, which argue that America’s current account deficit constitutes military tribute. He means this literally. For instance, he suggests that the Iraq War was punishment for Iraq switching to the euro — meanwhile back in reality the euro area itself overlaps pretty closely with NATO and several eurozone countries invaded Iraq together with the United States. I guess we’ve just been too busy punishing Iraq for using euros to get around to dropping a few bombs on the European Central Bank which actually issues those euros. (This is pretty strange since the ECB is just a few minutes of flight time from a massive USAF base, so bombing it would be a very convenient way to ensure the continued flow of tribute).

When I first read this military tribute argument in the early 1990s (in Chomsky’s Deterring Democracy) it made a lot of sense to me, but two things were different then:

1. I was a lot younger, less informed about economics, and more paranoid in my political thinking.
2. In the early 1990s the US government’s major foreign debt holders were countries that could plausibly be described as military protectorates (Japan, South Korea, Saudi Arabia, etc.). Now the single largest holder of US government debt is the People’s Republic of China. For those of you following at home, China is most certainly not a US military protectorate but our major geostrategic rival against whom a post-GWOT DOD is orienting its strategic doctrine.

Graeber addresses problem #2 head on and tries to explain this away by some convoluted argument that I can’t even reproduce but I find his argument much less plausible than the more parsimonious explanation that the Chinese are buying t-bills (a) as a store of value (b) as a medium of exchange and (c) as a tacit export subsidy that suits their domestic politics. That is, they buy t-bills for basically the same reasons as everybody else, including those countries where we have Air Force or Navy bases. This deliberate obtuseness about how a reserve currency works and the paranoid understanding that it is provincial tribute is by far the worst part of the book. I’m trying to draw a fact/value distinction between my lack of sympathy for his political positions and his empirical claims as I’d like to think that when reading someone with whom I disagree I can distinguish between their empirical claims that are well-supported, debatable, and downright nuts. That is to say I don’t think these chapters upset me because they are normatively “anti-American” but because as an empirical matter they badly fail to understand how (for better or worse) American power works.

This business about tribute is at the end so I’d like to say that I recommend the book but that you stop on page 365, right before he gets his Chomsky on, but I honestly worry whether I can trust the parts of the book I’m not as informed about. This is the 13th chime of the clock, the brown M&Ms in the Van Halen dressing room; pick your metaphor, but this business about Apple computer and especially about Chinese t-bill holdings ultimately makes me take a “trust but verify” attitude towards a book that I found both extremely enjoyable and intellectually inspirational as I was reading it. My recommendation is that people interested in exchange read the book, but do so with an appropriate degree of skepticism and look to see reactions from historians and anthropologists who are qualified to assess the empirical claims. Also see other reviews at Understanding Society and OrgTheory. [Update 2/23/12, also see the Crooked Timber symposium. Like all of their book clubs it's truly excellent]