Debt: The first five thousand years

David Graeber
20 August 2009

Throughout its 5000 year history, debt has always involved institutions -- whether
Mesopotamian sacred kingship, Mosaic jubilees, Sharia or Canon Law -- that
place controls on debt's potentially catastrophic social consequences. It is only in
the current era, writes anthropologist David Graeber, that we have begun to see
the creation of the first effective planetary administrative system largely in order
to protect the interests of creditors.

What follows is a fragment of a much larger project of research on debt and debt money
in human history. The first and overwhelming conclusion of this project is that in studying
economic history, we tend to systematically ignore the role of violence, the absolutely
central role of war and slavery in creating and shaping the basic institutions of what we
now call “the economy”. What’s more, origins matter. The violence may be invisible, but
it remains inscribed in the very logic of our economic common sense, in the apparently
self-evident nature of institutions that simply would never and could never exist outside
of the monopoly of violence – but also, the systematic threat of violence – maintained by
the contemporary state.

Let me start with the institution of slavery, whose role, I think, is key. In most times and
places, slavery is seen as a consequence of war. Sometimes most slaves actually are war
captives, sometimes they are not, but almost invariably, war is seen as the foundation and
justification of the institution. If you surrender in war, what you surrender is your life;
your conqueror has the right to kill you, and often will. If he chooses not to, you literally
owe your life to him; a debt conceived as absolute, infinite, irredeemable. He can in
principle extract anything he wants, and all debts – obligations – you may owe to others
(your friends, family, former political allegiances), or that others owe you, are seen as
being absolutely negated. Your debt to your owner is all that now exists.

This sort of logic has at least two very interesting consequences, though they might be
said to pull in rather contrary directions. First of all, as we all know, it is another typical –
perhaps defining – feature of slavery that slaves can be bought or sold. In this case,
absolute debt becomes (in another context, that of the market) no longer absolute. In
fact, it can be precisely quantified. There is good reason to believe that it was just this
operation that made it possible to create something like our contemporary form of money
to begin with, since what anthropologists used to refer to as “primitive money”, the kind

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that one finds in stateless societies (Solomon Island feather money, Iroquois wampum),
was mostly used to arrange marriages, resolve blood feuds, and fiddle with other sorts of
relations between people, rather than to buy and sell commodities. For instance, if
slavery is debt, then debt can lead to slavery. A Babylonian peasant might have paid a
handy sum in silver to his wife’s parents to officialise the marriage, but he in no sense
owned her. He certainly couldn’t buy or sell the mother of his children. But all that would
change if he took out a loan. Were he to default, his creditors could first remove his
sheep and furniture, then his house, fields and orchards, and finally take his wife,
children, and even himself as debt peons until the matter was settled (which, as his
resources vanished, of course became increasingly difficult to do). Debt was the hinge
that made it possible to imagine money in anything like the modern sense, and therefore,
also, to produce what we like to call the market: an arena where anything can be bought
and sold, because all objects are (like slaves) disembedded from their former social
relations and exist only in relation to money.

But at the same time the logic of debt as conquest can, as I mentioned, pull another way.
Kings, throughout history, tend to be profoundly ambivalent towards allowing the logic of
debt to get completely out of hand. This is not because they are hostile to markets. On
the contrary, they normally encourage them, for the simple reason that governments find
it inconvenient to levy everything they need (silks, chariot wheels, flamingo tongues, lapis
lazuli) directly from their subject population; it’s much easier to encourage markets and
then buy them. Early markets often followed armies or royal entourages, or formed near
palaces or at the fringes of military posts. This actually helps explain the rather puzzling
behaviour on the part of royal courts: after all, since kings usually controlled the gold and
silver mines, what exactly was the point of stamping bits of the stuff with your face on it,
dumping it on the civilian population, and then demanding they give it back to you again
as taxes? It only makes sense if levying taxes was really a way to force everyone to
acquire coins, so as to facilitate the rise of markets, since markets were convenient to
have around. However, for our present purposes, the critical question is: how were these
taxes justified? Why did subjects owe them, what debt were they discharging when they
were paid? Here we return again to right of conquest. (Actually, in the ancient world, free
citizens – whether in Mesopotamia, Greece, or Rome – often did not have to pay direct
taxes for this very reason, but obviously I’m simplifying here.) If kings claimed to hold the
power of life and death over their subjects by right of conquest, then their subjects’ debts
were, also, ultimately infinite; and also, at least in that context, their relations to one
another, what they owed to one another, was unimportant. All that really existed was
their relation to the king. This in turn explains why kings and emperors invariably tried to
regulate the powers that masters had over slaves, and creditors over debtors. At the very
least they would always insist, if they had the power, that those prisoners who had
already had their lives spared could no longer be killed by their masters. In fact, only
rulers could have arbitrary power over life and death. One’s ultimate debt was to the
state; it was the only one that was truly unlimited, that could make absolute, cosmic,
claims.

The reason I stress this is because this logic is still with us. When we speak of a “society”
(French society, Jamaican society) we are really speaking of people organised by a single
nation state. That is the tacit model, anyway. “Societies” are really states, the logic of
states is that of conquest, the logic of conquest is ultimately identical to that of slavery.
True, in the hands of state apologists, this becomes transformed into a notion of a more

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benevolent “social debt”. Here there is a little story told, a kind of myth. We are all born
with an infinite debt to the society that raised, nurtured, fed and clothed us, to those long
dead who invented our language and traditions, to all those who made it possible for us
to exist. In ancient times we thought we owed this to the gods (it was repaid in sacrifice,
or, sacrifice was really just the payment of interest – ultimately, it was repaid by death).
Later the debt was adopted by the state, itself a divine institution, with taxes substituted
for sacrifice, and military service for one’s debt of life. Money is simply the concrete form
of this social debt, the way that it is managed. Keynesians like this sort of logic. So do
various strains of socialist, social democrats, even crypto-fascists like Auguste Comte (the
first, as far as I am aware, to actually coin the phrase “social debt”). But the logic also
runs through much of our common sense: consider for instance, the phrase, “to pay one’s
debt to society”, or, “I felt I owed something to my country”, or, “I wanted to give
something back.” Always, in such cases, mutual rights and obligations, mutual
commitments – the kind of relations that genuinely free people could make with one
another – tend to be subsumed into a conception of “society” where we are all equal only
as absolute debtors before the (now invisible) figure of the king, who stands in for your
mother, and by extension, humanity.

What I am suggesting, then, is that while the claims of the impersonal market and the
claims of “society” are often juxtaposed – and certainly have had a tendency to jockey
back and forth in all sorts of practical ways – they are both ultimately founded on a very
similar logic of violence. Neither is this a mere matter of historical origins that can be
brushed away as inconsequential: neither states nor markets can exist without the
constant threat of force.

One might ask, then, what is the alternative?

Towards a history of virtual money

Here I can return to my original point: that money did not originally appear in this cold,
metal, impersonal form. It originally appears in the form of a measure, an abstraction,
but also as a relation (of debt and obligation) between human beings. It is important to
note that historically it is commodity money that has always been most directly linked to
violence. As one historian put it, “bullion is the accessory of war, and not of peaceful
trade.” [1]

The reason is simple. Commodity money, particularly in the form of gold and silver, is
distinguished from credit money most of all by one spectacular feature: it can be stolen.
Since an ingot of gold or silver is an object without a pedigree, throughout much of
history bullion has served the same role as the contemporary drug dealer’s suitcase full
of dollar bills, as an object without a history that will be accepted in exchange for other
valuables just about anywhere, with no questions asked. As a result, one can see the last
5 000 years of human history as the history of a kind of alternation. Credit systems seem
to arise, and to become dominant, in periods of relative social peace, across networks of
trust, whether created by states or, in most periods, transnational institutions, whilst
precious metals replace them in periods characterised by widespread plunder. Predatory
lending systems certainly exist at every period, but they seem to have had the most
damaging effects in periods when money was most easily convertible into cash.

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So as a starting point to any attempt to discern the great rhythms that define the current
historical moment, let me propose the following breakdown of Eurasian history according
to the alternation between periods of virtual and metal money:

I. Age of the First Agrarian Empires (3500-800 BCE).

Dominant money form: Virtual credit money
Our best information on the origins of money goes back to ancient Mesopotamia, but
there seems no particular reason to believe matters were radically different in Pharaonic
Egypt, Bronze Age China, or the Indus Valley. The Mesopotamian economy was
dominated by large public institutions (Temples and Palaces) whose bureaucratic
administrators effectively created money of account by establishing a fixed equivalent
between silver and the staple crop, barley. Debts were calculated in silver, but silver was
rarely used in transactions. Instead, payments were made in barley or in anything else
that happened to be handy and acceptable. Major debts were recorded on cuneiform
tablets kept as sureties by both parties to the transaction.

Certainly, markets did exist. Prices of certain commodities that were not produced within
Temple or Palace holdings, and thus not subject to administered price schedules, would
tend to fluctuate according to the vagaries of supply and demand. But most actual acts of
everyday buying and selling, particularly those that were not carried out between
absolute strangers, appear to have been made on credit. “Ale women”, or local
innkeepers, served beer, for example, and often rented rooms; customers ran up a tab;
normally, the full sum was dispatched at harvest time. Market vendors presumably acted
as they do in small-scale markets in Africa, or Central Asia, today, building up lists of
trustworthy clients to whom they could extend credit. The habit of money at interest also
originates in Sumer – it remained unknown, for example, in Egypt. Interest rates, fixed at
20 percent, remained stable for 2,000 years. (This was not a sign of government control
of the market: at this stage, institutions like this were what made markets possible.) This,
however, led to some serious social problems. In years with bad harvests especially,
peasants would start becoming hopelessly indebted to the rich, and would have to
surrender their farms and, ultimately, family members, in debt bondage. Gradually, this
condition seems to have come to a social crisis – not so much leading to popular
uprisings, but to common people abandoning the cities and settled territory entirely and
becoming semi-nomadic “bandits” and raiders. It soon became traditional for each new
ruler to wipe the slate clean, cancel all debts, and declare a general amnesty or
“freedom”, so that all bonded labourers could return to their families. (It is significant
here that the first word for “freedom” known in any human language, the Sumerian
amarga, literally means “return to mother”.) Biblical prophets instituted a similar custom,
the Jubilee, whereby after seven years all debts were similarly cancelled. This is the
direct ancestor of the New Testament notion of “redemption”. As economist Michael
Hudson has pointed out, it seems one of the misfortunes of world history that the
institution of lending money at interest disseminated out of Mesopotamia without, for the
most part, being accompanied by its original checks and balances.

II. Axial Age (800 BCE – 600 CE). Dominant money form:
Coinage and metal bullion

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This was the age that saw the emergence of coinage, as well as the birth, in China, India
and the Middle East, of all major world religions. [2] From the Warring States period in
China, to fragmentation in India, and to the carnage and mass enslavement that
accompanied the expansion (and later, dissolution) of the Roman Empire, it was a period
of spectacular creativity throughout most of the world, but of almost equally spectacular
violence. Coinage, which allowed for the actual use of gold and silver as a medium of
exchange, also made possible the creation of markets in the now more familiar,
impersonal sense of the term. Precious metals were also far more appropriate for an age
of generalised warfare, for the obvious reason that they could be stolen. Coinage,
certainly, was not invented to facilitate trade (the Phoenicians, consummate traders of
the ancient world, were among the last to adopt it). It appears to have been first invented
to pay soldiers, probably first of all by rulers of Lydia in Asia Minor to pay their Greek
mercenaries. Carthage, another great trading nation, only started minting coins very late,
and then explicitly to pay its foreign soldiers.

Throughout antiquity one can continue to speak of what Geoffrey Ingham has dubbed the
“military-coinage complex”. He may have been better to call it a “military-coinage-slavery
complex”, since the diffusion of new military technologies (Greek hoplites, Roman
legions) was always closely tied to the capture and marketing of slaves. The other major
source of slaves was debt: now that states no longer periodically wiped the slates clean,
those not lucky enough to be citizens of the major military city-states – who were
generally protected from predatory lenders – were fair game. The credit systems of the
Near East did not crumble under commercial competition; they were destroyed by
Alexander’s armies – armies that required half a ton of silver bullion per day in wages.
The mines where the bullion was produced were generally worked by slaves. Military
campaigns in turn ensured an endless flow of new slaves. Imperial tax systems, as noted,
were largely designed to force their subjects to create markets, so that soldiers (and also,
of course, government officials) would be able to use that bullion to buy anything they
wanted. The kind of impersonal markets that once tended to spring up between societies,
or at the fringes of military operations, now began to permeate society as a whole.

However tawdry their origins, the creation of new media of exchange – coinage appeared
almost simultaneously in Greece, India, and China – appears to have had profound
intellectual effects. Some have even gone so far as to argue that Greek philosophy was
itself made possible by conceptual innovations introduced by coinage. The most
remarkable pattern, though, is the emergence, in almost the exact times and places
where one also sees the early spread of coinage, of what were to become modern world
religions: prophetic Judaism, Christianity, Buddhism, Jainism, Confucianism, Taoism, and
eventually, Islam. While the precise links are yet to be fully explored, in certain ways,
these religions appear to have arisen in direct reaction to the logic of the market. To put
the matter somewhat crudely: if one relegates a certain social space simply to the selfish
acquisition of material things, it is almost inevitable that soon someone else will come to
set aside another domain in which to preach that, from the perspective of ultimate values,
material things are unimportant, and selfishness – or even the self – illusory.

III. The Middle Ages (600 CE – 1500 CE). The return to

virtual credit money
If the Axial Age saw the emergence of complementary ideals of commodity markets and

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universal world religions, the Middle Ages [3] were the period in which those two
institutions began to merge. Religions began to take over the market systems. Everything
from international trade to the organisation of local fairs increasingly came to be carried
out through social networks defined and regulated by religious authorities. This enabled,
in turn, the return throughout Eurasia of various forms of virtual credit money.

In Europe, where all this took place under the aegis of Christendom, coinage was only
sporadically, and unevenly, available. Prices after 800 AD were calculated largely in
terms of an old Carolingian currency that no longer existed (it was actually referred to at
the time as “imaginary money”), but ordinary day-to-day buying and selling was carried
out mainly through other means. One common expedient, for example, was the use of
tally-sticks, notched pieces of wood that were broken in two as records of debt, with half
being kept by the creditor, half by the debtor. Such tally-sticks were still in common use
in much of England well into the 16th century. Larger transactions were handled through
bills of exchange, with the great commercial fairs serving as their clearing houses. The
Church, meanwhile, provided a legal framework, enforcing strict controls on the lending
of money at interest and prohibitions on debt bondage.

The real nerve centre of the Medieval world economy, though, was the Indian Ocean,
which along with the Central Asia caravan routes connected the great civilisations of
India, China, and the Middle East. Here, trade was conducted through the framework of
Islam, which not only provided a legal structure highly conducive to mercantile activities
(while absolutely forbidding the lending of money at interest), but allowed for peaceful
relations between merchants over a remarkably large part of the globe, allowing the
creation of a variety of sophisticated credit instruments. Actually, Western Europe was,
as in so many things, a relative late-comer in this regard: most of the financial
innovations that reached Italy and France in the 11th and 12th centuries had been in
common use in Egypt or Iraq since the 8th or 9th centuries. The word “cheque”, for
example, derives from the Arab sakk, and appeared in English only around 1220 AD.

The case of China is even more complicated: the Middle Ages there began with the rapid
spread of Buddhism, which, while it was in no position to enact laws or regulate
commerce, did quickly move against local usurers by its invention of the pawn shop – the
first pawn shops being based in Buddhist temples as a way of offering poor farmers an
alternative to the local usurer. Before long, though, the state reasserted itself, as the
state always tends to do in China. But as it did so, it not only regulated interest rates and
attempted to abolish debt peonage, it moved away from bullion entirely by inventing
paper money. All this was accompanied by the development, again, of a variety of
complex financial instruments.

All this is not to say that this period did not see its share of carnage and plunder
(particularly during the great nomadic invasions) or that coinage was not, in many times
and places, an important medium of exchange. Still, what really characterises the period
appears to be a movement in the other direction. Most of the Medieval period saw money
largely delinked from coercive institutions. Money changers, one might say, were invited
back into the temples, where they could be monitored. The result was a flowering of
institutions premised on a much higher degree of social trust.”

IV. Age of European Empires (1500-1971). The return of

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precious metals
With the advent of the great European empires – Iberian, then North Atlantic – the world
saw both a reversion to mass enslavement, plunder, and wars of destruction, and the
consequent rapid return of gold and silver bullion as the main form of currency.
Historical investigation will probably end up demonstrating that the origins of these
transformations were more complicated than we ordinarily assume. Some of this was
beginning to happen even before the conquest of the New World. One of the main factors
of the movement back to bullion, for example, was the emergence of popular movements
during the early Ming dynasty, in the 15th and 16th centuries, that ultimately forced the
government to abandon not only paper money but any attempt to impose its own
currency. This led to the reversion of the vast Chinese market to an uncoined silver
standard. Since taxes were also gradually commuted into silver, it soon became the more
or less official Chinese policy to try to bring as much silver into the country as possible,
so as to keep taxes low and prevent new outbreaks of social unrest. The sudden
enormous demand for silver had effects across the globe. Most of the precious metals
looted by the conquistadors and later extracted by the Spanish from the mines of Mexico
and Potosi (at almost unimaginable cost in human lives) ended up in China. These global
scale connections that eventually developed across the Atlantic, Pacific, and Indian
Oceans have of course been documented in great detail. The crucial point is that the
delinking of money from religious institutions, and its relinking with coercive ones
(especially the state), was here accompanied by an ideological reversion to “metallism”.
[4]

Credit, in this context, was on the whole an affair of states that were themselves run
largely by deficit financing, a form of credit which was, in turn, invented to finance
increasingly expensive wars. Internationally the British Empire was steadfast in
maintaining the gold standard through the 19th and early 20th centuries, and great
political battles were fought in the United States over whether the gold or silver standard
should prevail.

This was also, obviously, the period of the rise of capitalism, the industrial revolution,
representative democracy, and so on. What I am trying to do here is not to deny their
importance, but to provide a framework for seeing such familiar events in a less familiar
context. It makes it easier, for instance, to detect the ties between war, capitalism, and
slavery. The institution of wage labour, for instance, has historically emerged from within
that of slavery (the earliest wage contracts we know of, from Greece to the Malay city
states, were actually slave rentals), and it has also tended, historically, to be intimately
tied to various forms of debt peonage – as indeed it remains today. The fact that we have
cast such institutions in a language of freedom does not mean that what we now think of
as economic freedom does not ultimately rest on a logic that has for most of human
history been considered the very essence of slavery.

Current Era (1971 onwards). The empire of debt

The current era might be said to have been initiated on 15 August 1971, when US
President Richard Nixon officially suspended the convertibility of the dollar into gold and
effectively created the current floating currency regimes. We have returned, at any rate,
to an age of virtual money, in which consumer purchases in wealthy countries rarely

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involve even paper money, and national economies are driven largely by consumer debt.
It’s in this context that we can talk about the “financialisation” of capital, whereby
speculation in currencies and financial instruments becomes a domain unto itself,
detached from any immediate relation with production or even commerce. This is of
course the sector that has entered into crisis today.

What can we say for certain about this new era? So far, very, very little. Thirty or forty
years is nothing in terms of the scale we have been dealing with. Clearly, this period has
only just begun. Still, the foregoing analysis, however crude, does allow us to begin to
make some informed suggestions.

Historically, as we have seen, ages of virtual, credit money have also involved creating
some sort of overarching institutions – Mesopotamian sacred kingship, Mosaic jubilees,
Sharia or Canon Law – that place some sort of controls on the potentially catastrophic
social consequences of debt. Almost invariably, they involve institutions (usually not
strictly coincident to the state, usually larger) to protect debtors. So far the movement
this time has been the other way around: starting with the ’80s we have begun to see the
creation of the first effective planetary administrative system, operating through the IMF,
World Bank, corporations and other financial institutions, largely in order to protect the
interests of creditors. However, this apparatus was very quickly thrown into crisis, first
by the very rapid development of global social movements (the alter-globalisation
movement), which effectively destroyed the moral authority of institutions like the IMF
and left many of them very close to bankrupt, and now by the current banking crisis and
global economic collapse. While the new age of virtual money has only just begun and the
long-term consequences are as yet entirely unclear, we can already say one or two
things. The first is that a movement towards virtual money is not in itself, necessarily, an
insidious effect of capitalism. In fact, it might well mean exactly the opposite. For much
of human history, systems of virtual money were designed and regulated to ensure that
nothing like capitalism could ever emerge to begin with – at least not as it appears in its
present form, with most of the world’s population placed in a condition that would in
many other periods of history be considered tantamount to slavery. The second point is to
underline the absolutely crucial role of violence in defining the very terms by which we
imagine both “society” and “markets” – in fact, many of our most elementary ideas of
freedom. A world less entirely pervaded by violence would rapidly begin to develop other
institutions. Finally, thinking about debt outside the twin intellectual straitjackets of state
and market opens up exciting possibilities. For instance, we can ask: in a society in which
that foundation of violence had finally been yanked away, what exactly would free men
and women owe each other? What sort of promises and commitments should they make
to each other?

Let us hope that everyone will someday be in a position to start asking such questions. At
times like this, you never know.

Footnotes
1. Geoffrey W. Gardiner, "The Primacy of Trade Debts in the Development of Money", in
Randall Wray (ed.), Credit and State Theories of Money: The Contributions of A. Mitchell
Innes, Cheltenham: Elgar, 2004, p.134.

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 2. The phrase the "Axial Age" was originally coined by Karl Jaspers to describe the
relatively brief period between 800 BCE -- 200 BCE in which, he believed, just about all
the main philosophical traditions we are familiar with today arose simultaneously in
China, India, and the Eastern Mediterranean. Here, I am using it in Lewis Mumford's
more expansive use of the term as the period that saw the birth of all existing world
religions, stretching roughly from the time of Zoroaster to that of Mohammed.

3. I am here relegating most of what is generally referred to as the "Dark Ages" in Europe
into the earlier period, characterised by predatory militarism and the consequent
importance of bullion: the Viking raids, and the famous extraction of danegeld from
England in the 800s, might be seen as one the last manifestations of an age where
predatory militarism went hand and hand with hoards of gold and silver bullion.

4. The myth of barter and commodity theories of money was of course developed in this
period.

Published 20 August 2009

Original in English
First published in Mute 12 (2009)
Downloaded from eurozine.com (https://www.eurozine.com/debt-the-first-five-thousand-
years/)
© David Graeber / Mute / Eurozine

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