Debt: The First 5,000 Years

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“What is a “debt”, anyway? A debt is just a perversion of a promise. It is a promise corrupted by both math and violence.”

David Graeber

The behavioural economist Uri Gneezy once ran a famous experiment on incentives at a chain of daycare centres in Haifa.

To incentivise parents to pick up their kids on time, the centre introduced a small but meaningful “late fee” for those who were more than ten minutes late. But rather than this reducing late pick-ups, average delinquency in those centres doubled. What happened? Gneezy surmises: the fixed penalty put a monetary value on the inconvenience: it converted a moral obligation into a financial one. In doing so something meaningful was lost.

That something is the motivating force behind this highly entertaining, learned, and stimulating book. David Graeber’s history —and there’s plenty of history, right back to the myth — yes, myth — of the foundation of money in barter — poses this central question: what happens when we reduce our sense of morality and justice to the language of a business deal?

“What,” Graeber asks in the first chapter, “does it mean when we reduce moral obligations to debts?”

Now, denizens of the financial services industry should understand that Graeber did not come at this question from what we would call a conventional place. He was an anthropologist, not an economist or a historian, and of the anarchist left: he was instrumental in establishing the Occupy Wall Street movement. But it would be a grave mistake to write off his book as a Marxist screed. There is so much of value here: in challenging conventional, lazy and simplistic ways we have at looking at the world. It is well researched and thoughtfully argued. Graeber perfectly understood conventional wisdom. It is just that he was ... what’s the word? — oh that’s it: a contrarian. It is also beatufully, and

The best thing to do is just pick out some choice points.

Everyday communism

Playfully, Graeber introduces the notion of “everyday communism” — he could, less provocatively, have called it “communalism”, but where’s the fun in that — as an alternative to a life of sterile, impersonal, perfectly quantified transactions. By this, he did not mean Bolshevism, but something more prosaic: our general disposition help each other out without question where the relative personal cost is not great. This stance: to be a good egg — to co-operate and not defect — is deeper and more critical to interpersonal relationships than are the outcomes of economic transactions which, rather, depend on that basic layer of probity.

“If someone fixing a broken water pipe says, ‘hand me the wrench,’ his co-worker will not, generally speaking, say, ‘and what do I get for it?’”

Yet monetarist orthodoxy cannot see it, and therefore treats it as imaginary.

Graeber would have said, with justification, that his was not the radical view here. The idea that we can atomise these vital, ineffable social interrelationships — James C. Scott might have called them “illegible” — to a binary pattern of quantifiable economic transactions is absurd. But that — remember “there’s no such thing as society”? — has been orthodoxy in our lifetimes. For many, it still is.

The distinction between a debt — quantifiable obligation to pay a sum of money on a certain date; which in its fungibility and transferability is an impersonal thing — and a personal obligation in the wider sense (the same distinction between a liability and an obligation) is profound, and we lose something important when we ignore it.

Exchange and cancellation of debts

An ongoing relationship implies a complicated web of reciprocal obligations (in the wider sense): these are not an imposition of a cost to the relationship, but its fuel: in a sense a relationship is a preparedness to grant, and accept, indulgences over time. That one is “obliged” is a good thing: literally, to be in a relationship is to be bound to one another. Thus, to exactly reconcile one’s outstanding obligation to another exactly — to leave nothing on the table — is to indicate that one wants the relationship to end: one wants the freedom to leave.

This, it seems to me, goes deep. It resonates strongly with observations by a diverse range of impressive writers – James C. Scott, Jane Jacobs, Rory Sutherland, W. Edwards Deming, Nassim Nicholas Taleb — that far from being indicators of weakness and a feeble governance, a certain looseness — planned slack and redundancy — in fact speak to confidence in one’s purpose. They are vital to the durability and flexibility of any enterprise.

This is Graeber’s point: we should always leave something on the table. To leave something unsaid builds trust; it strengthens ties; it reinforces the sense of relationship and personal obligation. By way of reductio ad absurdum Graeber takes the debt that a child owes to its parent for its upbringing. Should the child repay that debt in full? Can it? And more tellingly, if it does, what does that say about the future of the relationship between that parent and that child? Is it over? Thus, the absurdity of treating interpersonal relationships as some kind of ledger of account. Yet what is business if it is not a complex web of interpersonal relationships?

Yet this is what our current modernist orthodoxy promises to do: to convert what should be interpersonal relationships — life — into a sterile ledger of account — to comprehensively monetise it. But you literally cannot put a value on “doing the right thing”. The economic equivalent — “discharging one’s obligations” is to do the bare minimum. It is is a “cheapest to deliver” option. When the bare minimum fully discharges your contractual obligation, your relationship is moot. As we have observed many times in these pages, the potential forward value of a business relationship is necessarily greater the present value of any transaction, because if the relationship stays healthy there will be more transactions.

Of course, the smartest firms realise this; only, over their accountants’ objections.

But the point goes even deeper, for we cannot, even if we want to, fully articulate the financial value, or risk, of our commercial situation, imperfect as our information is, and shifting as the dynamics of the landscape necessarily are. The redundancy, slack and overlap is a necessary buffer: it is the fat we burn to adapt to our constantly changing circumstances.

Rest in peace

David Graeber died unexpectedly in Venice in 2020. The JC doesn’t subscribe wholesale to Graeber’s total theory and nor his general political outlook, but he was still a formidable intellect and a fabulous contrarian to boot, and we laud the spot-on insight that propels Bullshit Jobs: A Theory all the same, and the brio with which Mr. Graeber articulated it. We also think everyone in the financial markets should read Debt: The First 5,000 Years. The world is a far less interesting place without David Graeber in it. Well played, sir.

See also