The discipline of economic history* is concerned with understanding how and why economies develop.
The common understanding within economics* and economic history has always been that debt and money arose to make buying and selling easier than in a barter* system, where trades are made directly and each party has to have something the other wants.
David Graeber is an anthropologist*—a scholar of human culture and society—who seeks to disprove this understanding of money and debt, and to argue that non-market* societies (societies in which trade for private profit is not a defining feature) are not only possible, but perhaps better.
While David Graeber, author of Debt: The First 5,000 Years, is an anthropologist, his book falls mainly within the field of economic history. The book is an attempt to rethink the way that economic history has approached the subject of debt, and in doing so it draws conclusions about economic systems that depend on repayment of debts.
Whereas economics can be defined as the study of how people behave when faced with scarce means and unlimited desires, economic history is the study of this behavior, its systems, and related institutions over time. Economic history explains how and why economies have developed, and so its core concern is what economic systems and institutions have shown to be both possible and sustainable.
Debt covers a wide range of subjects, but frames all of them within the history of debt.1 We measure debt in monetary terms, so “A history of debt,” Graeber writes, “is thus necessarily a history of money.”2 Studying the history of money helps us understand its true function, and gives us a way to consider its legitimacy as a basis for economic relations. This is an important element of Debt.
“When economists speak of the origins of money, for example, debt is always something of an afterthought … For almost a century, anthropologists like me have been pointing out that there is something very wrong with this picture. The standard economic-history version has little to do with anything we observe when we examine how economic life is actually conducted.”
David Graeber, Debt: The First 5,000 Years
Economic history is a young discipline, recognized as such only in the twentieth century.3 But the history of money has been studied as far back as ancient Greece; the philosopher Aristotle* concluded around 350 b.c.e. that money arose as means to improve the barter system:4 a “placeholder” for goods making barter more convenient for parties without mutually desired goods. The eighteenth-century Scottish thinker Adam Smith* supported this theory in his book The Wealth of Nations (1776), the first work of modern economics.5 In the early twentieth century it was taken up by economists of the Austrian School* (a school of economic thought that focuses on the rationality and actions of individuals as the primary forces in an economy), notably the Austrian economist Carl Menger.*6 This theory of money remains dominant to this day, and supports the idea that money is simply an extension of humanity’s natural tendency, as Adam Smith called it, to “truck and barter.”
Another theory of the history of money was first put forward in the early twentieth century by the German economist Georg Friedrich Knapp,* and came to be known as chartalism.*7 Knapp proposed that money is a “creature of law,”8 a form of credit* that originated with states’ attempts to direct market activity. Chartalism is closely related to the credit theory of money,* pioneered by the British economist Alfred Mitchell-Innes,*9 which considers money a form of credit and debt. Chartalism and the credit theory of money were highly influential10 in developing today’s dominant understanding of an economic system, known as Keynesianism,* based on the idea that total spending is the most powerful force in the economy. But the common understanding of the origin of money continues to be that it emerged as an improvement on the barter system.
Regardless of the origin of money, most mainstream economists believe money reflects a natural human tendency for people to trade with each other.
By disputing what he called the “Myth of Barter,”* David Graeber draws on the work of anthropologists before him. Marcel Mauss,* a nineteenth-century French sociologist considered to be a pioneer in anthropology, proposed in his book The Gift that barter was not a natural or necessary method of exchange in human society.11 In “Barter and Economic Disintegration,” the renowned British anthropologist Caroline Humphrey* wrote: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available [studies of the world’s peoples] suggests that there never has been such a thing.”12
The British anthropologist Keith Hart* has also contributed much to the field’s scholarship on money. In his 1986 essay “Heads or Tails? Two Sides of the Coin,” Hart argues that money has always been both a commodity* (something that can be traded), and a token of debt. Graeber has stated that Hart’s essay was one of the inspirations for Debt.13
Debt also draws on unorthodox theorists like the influential German political philosopher Karl Marx,* who in his classic book Capital (1867–94)14 warned that capitalism uses debt to oppress people, and the Hungarian American economic historian Karl Polanyi,* who in his book The Great Transformation (1944) suggested that markets are artificial concepts that were entirely created by the power of the state.15 As a result, Debt draws on a wide variety of academic traditions.
1. David Graeber, Debt: The First 5,000 Years (Brooklyn, NY: Melville House, 2011), 18.
2. Graeber, Debt, 21.
3. T. C. Barker, “The Beginnings of the Economic History Society,” The Economic History Review 30, no. 1 (February, 1977): 4.
4. Shahzavar Karimzadi, Money and Its Origins (Abingdon: Routledge, 2013), 213.
5. A. Mitchell Innes, “What Is Money?,” The Banking Journal 30 (1913): 377– 408.
6. Graeber, Debt, 28
7. Graeber, Debt, 48.
8. Georg Friedrich Knapp, The State Theory of Money (London: Macmillan & Company, 1924), 1.
9. A. Mitchell Innes, “The Credit Theory of Money,” The Banking Journal 31 (1914): 151–68.
10. John Maynard Keynes, A Treatise on Money (New York: Harcourt, Brace, & Co, 1930), 4.
11. Marcel Mauss, The Gift (London: Cohen & West, 1954).
12. Caroline Humphrey, “Barter and Economic Disintegration,” Man 20, no. 1 (March, 1985): 48.
13. Keith Hart, “Heads or Tails? Two Sides of the Coin,” Man 21, no. 4 (December, 1986): 637–56.
14. Karl Marx, Das Kapital (Chicago: Charles H. Kerr & Co, 1906).
15. Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1944).