Debt: The First 5,000 Years,Updated and Expanded by David Graeber (PDF)

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Now in paperback, the updated and expanded edition: David Graeber’s “fresh . . . fascinating . . . thought-provoking . . . and exceedingly timely” (Financial Times) history of debt Here anthropologist David Graeber presents a stunning reversal of conventional wisdom: he shows that before there was money, there was debt. For more than 5,000 years, since the beginnings of the first agrarian empires, humans have used elaborate credit systems to buy and sell goods—that is, long before the invention of coins or cash. It is in this era, Graeber argues, that we also first encounter a society divided into debtors and creditors.Graeber shows that arguments about debt and debt forgiveness have been at the center of political debates from Italy to China, as well as sparking innumerable insurrections. He also brilliantly demonstrates that the language of the ancient works of law and religion (words like “guilt,” “sin,” and “redemption”) derive in large part from ancient debates about debt, and shape even our most basic ideas of right and wrong. We are still fighting these battles today without knowing it.

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐That’s the best short summary of this book. It has a great many good ideas, but they’re buried in such rank BS that I cannot recommend it to anybody who doesn’t already know a great deal about the subject. If you are willing to accept everything in this book as truthful, then you will be badly misled. If you can see past the many mistakes, then there’s some useful content.The first few chapters demolish the decrepit notion that money was invented to grease the wheels of commerce by making it easier to break transactions down into manageable pieces. If you wanted to barter for a horse, you’d need to find something very expensive that the seller wanted in order to make the deal. If the seller didn’t happen to want a hundred bushels of barley, you couldn’t close a deal. But by making transactions in a standard medium — money — the deal could work because the seller would always be certain that the money he got from you would be usable for some other transaction involving property that the seller *did* want.That was the standard textbook explanation of the development of money for many years. My impression is that historians never took it very seriously; there were just too many real-world complexities to confute that explanation. But Mr. Graeber assaults the explanation furiously. He offers a different explanation: debt as a social construct. Here he is dead right: small-scale societies do indeed rely on debt as a means for regulating transactions between people. Transactions do not have to be immediately symmetric: Fred can give Mary something today, and she can acknowledge a debt that she pays off at some later date. The system is powerful, simple to implement, and flexible.While Mr. Graeber delves deeply into the concepts of debt in small-scale societies, he is apparently unaware of three crucial facts that control the operation of debt in such societies.The first of these is Dunbar’s Number: the number of people with whom you can maintain a stable relationship. This was elucidated by Robin Dunbar in the 1990s; when comparing the sizes of social groups of various primates with their brain sizes, he found a rough correlation which, when applied to Homo Sapiens, suggests that our ideal social group should consist of about 150 people. We seem to have a natural proclivity to cluster in groups of about 150 people. Above that number, we have difficulty keeping track of all the various social relationships.Keeping track of debt relationships in such a group is easy enough, and Mr. Graeber adduces lots of evidence of such groups utilizing debt systems to manage economic relationships among people. What he doesn’t realize — and this is a huge blunder on his part — is that such debt systems start to break down when the economic group exceeds 150 people. Indeed, once an economic grouping exceeds a thousand people, the personal debt systems that Mr. Graeber extols are completely useless.The second fact the Mr. Graeber misses is the power of “cheater detection” in human social relationships. There has been plenty of research on this topic, and the phenomenon is well-established. It demonstrates that people are especially sensitive to debt violations, which makes enforcement of debt systems more reliable — but only in the context of small groups where pre-existing social relationships are in place.The third fact that Mr. Graeber misses is the intermediate role played by “money of account”. This is a standard term from economics that I cannot recall Mr. Graeber using, but he dances all around the concept. Money of account is an imaginary form of money that is used only to keep track of debts. For example, the shekel was an ancient unit of weight (about 11 grams) that predated coinage. Long before any coins were in use, the shekel of silver or gold was used as a money of account. For example, consider some of Hammurabi’s Laws:201. If he knock out the teeth of a freed man, he shall pay one-third of a gold mina.203. If a free-born man strike the body of another free-born man or equal rank, he shall pay one gold mina.204. If a freed man strike the body of another freed man, he shall pay ten shekels in money.208. If he was a freed man, he shall pay one-third of a mina.209. If a man strike a free-born woman so that she lose her unborn child, he shall pay ten shekels for her loss.These were written around 1750 BC, a thousand years before coins were invented, yet they reference weights of precious metals as payments. Shekels of precious metals constituted “money of account” — which was invented before coins were invented. Yet Mr. Graeber never directly addresses the use of money of account, preferring to impose his hypothesis that all economic transactions were conducted via debt systems.There’s a much better explanation of how money developed. Small-scale societies did indeed rely on debt mechanisms, as Mr. Graeber correctly points out. However, once civilization developed and economic systems embraced more than a few hundred people, debt was confined to sub-societies within the larger societies. Inside a village, debt systems continued to play the dominant role in economic relationships, and it continues to play that role even today in small-scale social clusters.But in larger economic units, debt relationships could not be enforced, and such groups developed an alternate system based on the one commodity that was universally valued: metals. Metal of any kind was useful for such a wide range of applications; it didn’t rot or wear, and it was small enough to be easily transportable. Thus, metals became the money of account for civilizations the world over.Mr. Graeber refuses to recognize this simple explanation. Instead, he offers an absurd explanation for the development of money: nasty militaristic tyrants invented money to pay their soldiers, permitting them to build huge armies with which to wage imperialistic wars. They then required taxes to be paid in coinage so that they could keep the money flowing and the armies fighting.Anybody with any knowledge of history should ask, “How did the Hittites, Egyptians, Babylonians, Assyrians, Medes, etc pay their armies before 700 BC, when coinage was invented?” The existence of large armies fighting imperialistic wars before the invention of coinage blows Mr. Graeber’s explanation right out of the water.Then there are the many, many historical bloopers; my copy of the book bristles with little note-tags marking the pages containing factual errors. For example, on page 214 of the paperback edition, Mr. Graeber claims that the Mesopotamian system using hollow balls called bullae were a form of IOU to record debt obligations. He claims that clay tablets were sealed inside the bullae. How he could make such a blunder escapes me. The contents of the bullae were not clay tablets, they were clay shapes representing various commodities: bushels of barley, sheep, oxen, etc). They were not records of debt, they were bills of lading. The Mesopotamians had to solve the classic problem of preventing goods from disappearing during shipment from farm to temple. If a farmer’s annual taxes were, say, thirty bushels of barley, then the tax agent went to the farm, collected the grain, and, in the presence of the farmer, sealed three pyramidal clay tokens (representing the thirty bushels of barley) inside a hollow bulla and placed his own identifying mark on the exterior. When the cart carrying the grain reached the temple, the accountant there could check the contents of the bulla against the contents of the cart.On pages 225 – 227 Mr. Graeber mangles history. According to him, all the metals were squirreled away in temples and ornaments, and then, starting around 800 BC, war erupted all over Eurasia and armies pillaged all that gold and silver, distributing it to the common people. I find it hard to believe that any educated person could swallow this ridiculous nonsense. War is a constant of human history; there were plenty of wars long before 800 BC, and plenty of temples were looted.He then goes on to declare that these wars provided the impetus for the development of markets. I am at a loss for a suitable imprecation to express my reaction to this absurd claim. Markets existed long before 800 BC. It’s true that international trade grew during that period, but it had grown long before then, and continued to grow long afterwards. The only special development in trade during that time period is the Greek innovation, which I describe here.Here’s another howler on page 226:“The period when the Greeks began to use coinage, for instance, was also the period when they developed their famous phalanx tactics, which required constant drill and training of the hoplite soldiers.”First, there is no direct connection between the development of coinage and the development of the phalanx; it is a mere coincidence, as anybody with a knowledge of military history can tell you. Moreover, the ‘constant drill and training’ is just plain wrong: hoplites were citizen-soldiers. Hasn’t Mr. Graeber even read the Phaedo, in which Socrates refers to his participation in the Battle of Delium, where he saved the life and armor of Alcibiades? And no, Socrates was never a professional soldier.On page 227, Mr. Graeber refers to Athens as an aggressive military power rather than a great trading nation. { snorts of disbelief } Athens was the pre-eminent trading nation of the Greek world; its military power was an effect of its trading power. Why do you think that the Athenians extended their Long Walls from Athens all the way to the Piraeus, the port of Athens six miles away from the city?On page 293 Mr. Graeber manages to demonstrate ignorance of two different topics in a single discussion. His explanation of the development of the Arthurian romances is, to say the least, garbled. At the same time, he dismisses knights as mere gangs of armed robbers, when in fact the mounted man-at-arms was the centerpiece of all warfare in Middle Age Christendom. The Crusades were led by knights; all the major battles of the period were fought with knights as the core force. He also manages to screw up the history of the Fourth Crusade. Reading his version, I did not at first recognize the Fourth Crusade; only after he mentioned Byzantium (which he misnames Constantinople) did I recognize what he was talking about.On page 296 he comes up with the screwiest explanation of the Grail story that I have ever read. Many scholars think that the Grail derives from ancient Celtic mythology of a kind of cornucopia; others think that it is derived from the Christian sacrement of holy communion. If only Mr. Graeber had taken the time to look it up on Wikipedia! Sheesh!Here’s yet another glorious blooper, on page 308: In describing the effects of the Black Death, Mr. Graeber writes “…whole cities went bankrupt, defaulting on their bonds…” Very few cities in the 14th century were corporations. Many were ruled by a tyrant, and the tyrant may have gone bankrupt. Others were run by oligarchies. Yes, they all had their own treasuries, but these were never substantial components of the economy. More important, there were no municipal bonds back then; the first municipal bond was issued by the city of Amsterdam in 1517.As he comes closer to modern times, Mr. Graeber drifts off into Cloud-Cuckoo Land, describing a world in which evil bankers, merchants, and governments conspire to cheat the population. Here’s a representative example of his fevered imagination at work:“What really caused the inflation is that those who ended up in control of the bullion — governments, bankers, large-scale merchants — were able to use that control to begin changing the rules, first by insisting that gold and silver *were* money, and second by introducing new forms of credit-money for their own use while slowly undermining and destroying the local systems of trust that had allowed small-scale communities across Europe to operate largely without the use of metal currency.”Golly gee, if all those evil people were responsible for defining gold and silver as money, howcum people long beforehand were using gold and silver as money? And how does continuing a tradition several thousand years old constitute “changing the rules”?As I mentioned earlier, Mr. Graeber refuses to recognize the fact that economies were extending their range through trade. As the world became more tightly integrated economically, the small-scale economic systems that he prefers were made obsolete. He bemoans that development. Does he realize that a small-scale village of a few hundred people cannot manufacture steel, glass, or any of the products of the modern world? Economic integration permits the specialization that makes it possible to provide smartphones so cheaply.After page 330, Mr. Graeber goes so far off into the ozone that I lost interest in reading his rants. He is a romantic who longs for the good old days when everybody lived in tiny self-sufficient villages, everybody knew and trusted each other, there was no money to corrupt their souls, and everybody enjoyed the simple life. I hope he finds that life for himself. I will point out, however, that without money and loans and interest and banks and publishers and all the other paraphernalia of modern economic systems, he would not be able to carry on his research, teaching, and writing. He’d be too busy hoeing the weeds on his farmland.

⭐This is a story about how many different cultures behave around money. How religion provide, punish, and collect debts. How credit became the key mover of economies. And how ancient and modern societies organise themselves around these central roles.This is also the history of collaterals, in the form of honour, death, sex, slavery, blood-debt, and of course the likes of houses, credit ratings, and businesses. And ultimately, this is the long, 5000 years, journey of how debt evolved from the Babylon days to become the form it is today in modern globalised society.Using a big range of academic researches and an impressive array of anthropological findings, David Graeber, an anthropology professor at the London School of Economics, presents the evolution of debt into a narration akin to what Joseph Campbell’s “The Hero with a Thousand Faces” did to mythology.It covers the difference between a loan and a bond, the relationship between debt and honour, sin and redemption, the mechanism of tribute system, the value of owing a favour, the distribution of spoils, how coinage became the central part of Axial Age evolution, how traditional markets were born, the enigma of speculative bubbles, how Martin Luther’s 95 Theses were more than just about religion, and geopolitical angles such as what happened with the debt borrowed by an African nation with the money went straight to its dictator’s Swiss Bank account.One argument that stands out from the rest of this book is the reality that barter system is actually a myth and never really happened. Instead, from the dawn of civilisation some form of credit has always existed, including the paper money that we now use. Yes paper currency is a form of credit, an IOU, just look at the Bank of England banknotes (the British Pound) that still has this written on its notes: “I promise to pay the bearer on demand the sum of five pounds.”Graeber also concluded near the end of the book that “[a]ll that I have said so far merely serves to underline a reality that has come up constantly over the course of this book: that money has no essence. It’s not “really” anything; therefore, its nature has always been and presumably always will be a matter of political contention.”And chapter 12, in particular, elaborates this view in great details, with the culminating example of how the US eventually control the modern world using US Dollar. The clarity of this chapter explains more than few books on the subject that I’ve read so far.At the first time reading it more than a decade ago, the book instantly became one of my top 5 favourites, if not the number 1 favourite. I mean, what’s not to like? I am a sucker for history, culture, religion, sociology, politics, finance and economy, and especially the history of money as the central role that connects everything in a society. And now after a 2nd reading, this is still one of my top favourite books of all time out of around nearly 500 books that I’ve read so far. Simply outstanding.

⭐A lot of people have written extensive reviews on Debt: The First 5,000 Years. That is not my goal here.What I have to say is this : reading this book changed how I see the world. It changed how I think about my life, my job, my society, my place in life. It changed how I think about the choices I make. It changed many of the choices I make. Reading this book blew my mind.It’s a big book. I put it next to my bed. Then I dragged it around in my car to every appointment and all my kid’s functions. I took breaks from it and came back. I stopped reading occasionally to contemplate a concept. I reread whole chapters before moving on. I now understand differently than I did the garbage I was taught about money, debt, trade, exchange, relationship, common good, circulation and stagnation, human nature, things. I have set off in a different direction than had been laid for me by others.This book didn’t actually do all that. It’s a book. It explains stuff. But what it did do is offer me a radically different perspective than I had been shown before, and that whetted my appetite to know more, to think more, to pursue my own reason and reasoning.Maybe it will do something similar for you. It’s a risk. Take it.

⭐The book is an exceptional study on the origin of money. However, the book is not about how coinage and cash and banknotes, and the infrastructures around them, evolved. Instead, it’s a study on how the concept of money came to be, why, when, and how ancient societies managed to achieve the things that money achieves before money existed.More importantly, it’s a study conducted by an anthropologist rather than an economist or a historian. That offers a unique perspective that, to me, is significantly more reliable than anything written by the other two kinds of professionals.It’s is a gripping story and a must-read if you are passionate about history or economics. However, the book has an additional, unsupected value for a completely different category of readers.At the time of writing this review, the mainstream audience worldwide starts to learn about cryptocurrencies based on blockchains, NFT-based economies, and many other related concepts that go under the umbrella term of “web3”.Among the many criticisms against cryptocurrencies, there are some about the lack of support from the government, the fact that they represent virtual money not pegged to gold, or that the whole system is a giant Ponzi scheme.Without ever referring to cryptocurrencies or other web3 concepts (they were not even on the author’s radar at the time of writing), this book is full of surprises that pertain to those technologies.For example, human societies went through alternate phases where they either used credit systems and virtual money or cash based on gold and silver bullions and coins. And virtual money came first.In another example, governments almost always legitimated a new currency (virtual or real) *after* it was being used by private citizens for at least one generation.For these reasons, I believe this book is mandatory for anybody that wants to develop a position on cryptocurrencies, either pro or against them.That said, I have a few recommendations for readers that have yet to start the book:1. Skip Chapter 1 entirely and read it at the end of the book, after the last chapter and the Afterword. The reason is that in Chapter 1, the author expresses political positions and unveils parts of his personal life that are polarizing and might strongly bias the reader against or in favour of the rest of the content. Once that happens, it will take a long time to regain objectivity and focus on the quality of the work rather than on the author’s position.2. The author tends to digress, which is evident in more than one chapter. In some cases, the digression is necessary to provide a broad and detailed historical, political, and economic context to justify the unfolding of the events. In other cases, it seems that the love for history drives the digression rather than a practical need. The reader will have to make an effort to keep the focus and be patient as the author closes all the loops and makes the key points clear.3. The last chapter, Chapter 12, feels especially dense compared to the rest of the book, with an exceptional amount of references and names and concepts that the author doesn’t fully articulate as in other chapters. At traits, the writing feels rushed or possibly constrained by a certain length. In other moments, it just seems an unnecessary exercise in eloquence. Whatever the reason, most of this chapter will require a leap of faith. The good news is that Chapter 12 is not critical to understanding how money came to be.4. It’s essential to read the Afterword written in 2014. It will give colour to the reasons behind the book and what happened after. As I said before, only at this point makes sense to go back and read Chapter 1.Overall, a 4 out 5 stars.—How I review books5 stars – an exceptional book that expands my reasoning, not just my knowledge4 stars – a great book that significantly expands my knowledge3 stars – a book with some interesting information and some major flaws that didn’t really make an impact in my life.(Notice that there’s a time in life for certain books. It’s possible that this was not the time for this book, and the review rating would change ten years from now)2 stars – a book that gave me nothing and took my time.1 star – a book so poorly written that I couldn’t even finish reading.

⭐This book is a fascinating, detailed and well researched history of money and debt from the earliest times to the present covering all kinds of cultures, using anthropology, ethnography, history and archaeology. It is well worth reading for that part of it – which is most of the book. The way it shows money going back and forth between paper/credit and coin is just one of the many things I learned from it.The only bit that lets the book down is the conclusion, which asks whether we shouldn’t just stop worrying about being in debt, rather than asking why , for instance, private banks, who can create money out of thin air, have any right to get it all paid back or not. It fails to ask how it’s just for people paid low wages to be in debt as a result, while bank executives who are paid insane wages get paid far more than they could ever possibly have earned in any meaningful sense. By not questioning the causes of debt enough, and whether a lot of it is really owed in any moral sense, it lets itself down. But that shouldn’t take away from the 95% of the book that is a brilliant history and analysis of money and debt throughout history.

⭐The book has some quite interesting anthropology in the beginning but the author never quite manages to string it together in a coherent story. Part of the problem, which becomes very apparent when we get to the current financial system, is that the author has a very limited understanding of finance.Throughout the book the author’s dislike of capitalism shines through and clouds his judgment. There is much to blame capitalism for and its early roots are decidedly unpleasant, but the system has achieved a remarkable eradication of absolute poverty in this century. Clearly there is much further to go, but no other system has come close.A better informed author might have chosen to explain how debt and banking are dangerous tools like fire or atomic power, but once mastered can be an enormous force for good.For a more balanced discussion I’d recommend Philip Coggan “Paper Promises”

⭐An excellent book on the history of debt, which uses anthropological story-teling to explain why the traditional economists’ view of money is inaccurate. Well-written. My only issue was the desire of the author in later chapters to write a diatribe of modern capitalism, which was too much rhetoric.

⭐This book is essential reading for anyone interested in economics and finance, but also all of those who have found themselves burdened with debt. Since ordinary debtors are forced to pay to the last penny, while those who have millions or billions (in debt) keep afloat. The focus is not on financial theory but on actual perception of the meaning of debt over history. And over history the approach has been so different at different times that it is no surprise that we have double or triple standards in this area. And, at the end of the day, brute force determines who is required to pay and who gets off with a slap on the wrist.

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