The word ‘credit’, like ‘credible’, comes from the Latin credo, to believe. It refers to the trust that must exist between a borrower and a lender. In his monumental work, Debt: the first 5000 years, anthropologist and philosopher-activist David Graeber proposes that credit, in one way or another, is the very basis of sociability and of society. He reverses the traditional dictum in economics that barter came first, then coinage, and finally credit. Quite the contrary: barter was ever only practical in exceptional circumstances; the actual basis of trade for most of human existence was some form of credit. Borrowing worked well in communities where everyone was known and reputation was crucial. Say you need something made, a favour, or service performed. You are then indebted to whoever helps you and at some point you will reciprocate. That sort of cooperation and mutual support is the essence of community.
This is not a review of Graeber’s wide-ranging book or thought, but a reflection on the deep and unorthodox perspective he brings to such questions as: what happens to community when money displaces the honor system of credit? Or: how did the introduction of money change the nature of debt and credit, and therefore society?
Let us note at the outset that many of the evils we associate with money and capitalism already existed in ancient societies that relied on credit, namely: usury. The extortion of “interest” on loans is already a different matter than simply repaying a debt (the “principle”). In a small community, or within families, such extortion would be unfriendly and unconscionable. In larger societies, relations are less personal. The psychological need to honour debt, based on trust, holds over, but without the intimate connection between persons. The debtor—who before was a friend, relative or neighbor—becomes a “stranger,” even when known. The person becomes a thing to exploit; the subject becomes an object.
Lending for gain was no longer a favour to someone in your community, which you knew would eventually be reciprocated fairly. It became something to do for calculated and often excessive profit. It thus became increasingly difficult to repay debts. Securities put up for the loan (even family members or one’s own person!) could be confiscated pending repayment. Usury—and debt in general—became such a problem even in ancient times that kings and rulers were obliged to declare debt amnesties periodically to avoid rebellion. And one of the first things rebellions would do is destroy records of debt. The sacred texts of many religions proscribe usury, but usually only regarding their own people. “Strangers” remained fair game as potential enemies.
The concept of interest has a precedent in the growth of natural systems. Large trees grow from tiny seeds; animal bodies grow from small eggs. Populations expand. Such growth is distinct from static self-maintenance or a population’s self-replenishment. People noticed this surplus when they began to grow crops and manage domesticated animals. The increase of the herd or crop served as metaphor for the interest expected on any sort of “investment.” However, the greedy expectations of loan sharks in all ages usually far exceed the rate of natural growth. Even the “normal” modest return on investment (consistently about 5%) exceeds the rate of growth of natural systems, such as forests. Moreover, there are always limits to natural growth. The organism reaches maturity and stops growing. (The refusal of cells to stop multiplying when they are supposed to is cancer.) A spreading forest reaches a shoreline or a treeline imposed by elevation and cold. The numbers of a species are held in check by other species and by limited resources. Nature as a whole operates within these bounds of checks and balances, which humans tend to ignore.
Money, credit, and debt are ethical issues because they directly involve how people treat one another. Credit in the old sense—doing a favour that will eventually be returned—involves one way of treating others, which is quite different from usury, which often resulted in debt peonage (often literally slavery). For good reason, usury was frowned upon as a practice within the group—i.e., amongst “ourselves.” The group needed to have an ethics in place that ensures its own coherence. But as societies expanded and intermingled, membership in the group became muddied. Trade and other relations with other groups created larger groupings. New identities required a new ethics.
Amalgamation led to states. War between states exacerbated the ethical crisis. War was about conquest, which reduced the defeated to chattel (war was another source of slaves). People, like domesticated animals, could become property bought and sold. Slaves were people ripped from their own community, the context that had given them identity and rights. Similarly, domestic animals had been removed from their natural life and context and forced into servitude to people. We may speak even of handmade things as being wrested from their context as unique objects, personally made and uniquely valued, when they enter the marketplace. Manufactured things are designed to be identical and impersonal, not only to economize through mass production, but also to standardize their value. Mass production of standard things matched mass production of money.
Enter coinage. Rather than supply armies through expensive supply lines, soldiers could be paid in coin to spend locally rather than pillage the countryside. These coins could then be returned to the central government in the form of taxes. Coinage standardized value by quantifying it precisely. But it did something more as well. It rendered trade completely impersonal. Before, you had a reciprocal relationship of dependency and trust with your trade partner or creditor—an ongoing relationship. In contrast to credit, the transfer of coins completed the transaction, cancelling the relationship; both parties could walk away and not assume any future dealings. Personal trust was not required because the value exchanged was fixed and clear, transferable, and redeemable anywhere. Indeed, money met a need because people were already involved in trade with people they might never see again and whom they did not necessarily trust. But this was a very different sort of transaction than the personal sort of exchange that bound parties together.
Yet, trust was still required, if on a different level. Using money depends on other people accepting it as payment. While money seemed to be a measure of the value of things, it implicitly depended on trust among people—no longer the direct personal trust between individuals but ongoing faith in the system. Coins had a symbolic value, regulated by the state, independent of the general valuation of the metals they were made of. (The symbolic value was usually greater than the value of the gold, silver or copper, since otherwise the coins would be hoarded.) The shift toward symbolic value was made clear with the introduction of paper money. But in fact, promissory notes had long been used before official paper money or coinage. The transition to purely symbolic (virtual) money was complete when the U.S. dollar was taken off the gold standard in 1971.
Unfortunately, some of the laws restricting usury were abandoned soon after. “Credit,” in its commercialized form, returned with a vengeance. Credit cards and loan sharks aggressively offered indiscriminate lending for the sake of the profit to be gained, never mind the consequences for the borrower. Hence, the international crisis of 2008—and the personal crises of people who lost their homes, of students who spend half their lives repaying student loans, of consumers always on the verge of bankruptcy, and of publics forced to bail out insolvent corporations.
The idea of credit evolved from a respectable mutual relationship of trust to a shady extortion business. The idea of indebtedness has accordingly long been tinged with sin, as a personal and moral failing. A version of the Lord’s Prayer reads, “forgive us our debts as we forgive our debtors.” (Alternatively: “forgive us our trespasses”, referring to the “sacredness” of private property rights.) As Graeber points out, we generally do not forgive debt, but have made it the basis of modern economics. There is no mention of forgiving the sins of creditors. The “ethics” of the marketplace is a policy to exploit one’s “neighbor,” who can now be anyone in the world—the further out of sight the better.
Usury now deals with abstractions that hide the nature of the activity: portfolios, mutual funds, financial “instruments,” stocks and bonds, “derivatives,” etc. The goal is personal gain, not social benefit, mutual relationship, or helping one another. Cash is going out of fashion in favour of plastic, which is no more than ones and zeros stored in a computer. The whole system is vulnerable to cyberattack. Worse, the confidence that underwrites the system runs on little more than inertia. It will eventually break down, if not renewed by a basis for trust more genuine, tangible and personal.
Apart from climate change, the other crisis looming is the unsustainability of our civilization. The global system of usury (let’s call a spade a spade: we’re talking about capitalism) unreasonably exploits not only human beings but the whole of nature. Like population growth, economic growth cannot continue indefinitely. The sort of growth implied by “progress” is a demented fantasy, with collapse lurking around the corner. Moreover, the fruits of present growth are siphoned by a small elite and hardly shared, while the false promise of a better life for all is the only thing keeping the system going. We cannot be any more ethical in regard to nature than we are in regard to fellow human beings. While people may or may not revolt against the greed of other people, we can be sure that nature will.