The long history of debt

“Debt: The First 5000 Years” by David Graeber

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.