Debt : The First 5000 Years

M R Rajagopalan

The *Book under review is not only exceptionally interesting but in equal measure is full of information and quotable quotes. Many Tamilians, at least of the older generation, would be familiar with the statement of Kamban on Ravana's state of mind when he was cornered by Rama—"Ravana was shaken like a man in debt". Many saints all over the world have stated that their duty was to serve the people. The word 'duty' and 'debt' are often interchangeable. The word 'debt' has more than one dimension.

David Graeber, the author of the book under review has delved deep into the history and traces the word debt to at least 5000 years based on recorded history of Mesopotamia:

"Some of the very first written documents that have come down to us are Mesopotamian tablets recording credits and debits, rations issued by temples, money owed for rent of temple lands, the value of each precisely specified in grain and silver. Some of the earliest works of moral philosophy, in turn, are reflections on what it means to imagine morality as debt—that is, in terms of money".

Debts exist from the beginning of the world—that is what is meant by Primordial Debt, a term used by the author.

"The core argument is that any attempt to separate monetary policy from social policy is ultimately wrong. Primordial-debt theorists insist that these have always been the same thing. Governments use taxes to create money, and they are able to do so because they have become the guardians of the debt that all citizens have to one another".

In Mespotamia the practice of loaning money at interest was first invented, probably two thousand years before the Vedas were composed and it was the home of world's first states.

Communism is defined as any human relationship that operates on the principles of "from each according to their abilities, to each according to their needs'.

"Communist society"—in the sense of society organized exclusively on that single principle—could never exist. But all social systems, even economic systems like capitalism, have always been built on top of a bed rock of actually existing communism.

The more of one's wealth that is obtained by plunder or extortion, the more spectacular and self-aggrandizing will be the forms in which it is given away. And what is true of warrior aristocracies is all the more true of ancient states, where rulers almost invariably represented themselves as the protectors of the helpless, supporters of widows and orphans, and champions of the poor. The genealogy of the modern redistributive state can be traced back to "primitive communism", but ultimately to violence and war.

Slave Trade, according to the author, has been present in all societies all through history. There is every reason to believe that slavery, with its unique ability to rip human beings from their contexts to turn into abstractions played a key role in the rise of markets everywhere.

For some reason, in Lydia, India, and China, local rulers decided that whatever longstanding credit systems had existed in their kingdoms were no longer adequate, and they began to issue tiny pieces of precious metals-metals that had previously been used largely in international commerce, in ingot form-and to encourage their subjects to use them in day-to-day transactions.

Chapter nine of this book bears the title 'Axial Age'. The term Axial Age was coined by Jaspers, a German Philosopher of the 20th century. According to Jaspers, China, India and the Mediterranean saw the emergence of remarkable philosophical trends from skepticism to idealism—in fact, almost the entire ranges of positions about the nature of cosmos, mind, action and the ends of human existence that has remained the stuff of philosophy to this day.

The core period of Jaspers’ Axial Age—the lifetimes of Pythagoras, Confucius, and the Buddha—corresponds almost exactly to the period in which coinage was invented.

India
Both kingdoms and republics produced their own silver and copper coinage, but in some ways the republics were more traditional, since the self-governing "populace in arms" consisted of the traditional Kshatriya or warrior caste, who typically held their lands in common and had them worked by serfs or slaves. The kingdoms, on the other hand, were founded on a fundamentally new institution: a trained professional army, open to young men of a wide variety of backgrounds, their equipment supplied by central authorities (soldiers were obliged to check their arms and armor when they entered cities), and provided with generous salaries.

About the Mauryan Empire under Chandragupta, Kautilya's Arthasastra,a political treatise gives a good idea of the society. The empire maintained a huge army of 200,000 soldiers, 20,000 horses and some 4000 elephants.

Whether on campaign or in garrison, they were inevitably accompanied by a range of different sorts of camp followers-petty traders, prostitutes, and hired servants-which, with the soldiers, seems to have been the very medium through which a cash economy had originally taken form. By Kautilya's time, a few hundred years later, the state was inserting itself into every aspect of the process: Kautilya suggests paying soldiers apparently generous wages, then secretly replacing hawkers with government agents who could charge them twice the normal rates for supplies, as well as organizing prostitutes under a ministry in which they could be trained as spies, so as to make detailed reports on their clients' loyalties.

Thus was the market economy, born of war, gradually taken over by the government.

The situation in China—with some differences is described by the author.

Early middle ages saw the dramatic decline of the cities. The Greek Ambassador Megasthanes described Asoka's capital Patna as the largest city in the world, of his day whereas medieval Arab and Chinese travelers described India as a land of endless tiny villages.

Brahmins seized control of the administration. Dharma Sastra law code was produced by Brahmins (200BC to 400AD).

Artisans and craftsmen fleeing the decline or destruction of cities ended up as suppliant refugees, and gradually low caste clients.

Almost all of the new forms of paper money that emerged were not originally created by governments at all; they were simply ways of recognizing and expanding the use of credit instruments that emerged from everyday economic transactions. If it was only China that developed paper money in the Middle Ages, this was largely because only in China was there a government large and powerful enough, but also, sufficiently suspicious of its mercantile classes, to feel it had to take charge of such operations itself.

For most of the Middle Ages, Islam was not only the core of Western civilization; it was its expansive edge, working its way to India, expanding in Africa and Europe, sending missionaries and winning converts across the Indian Ocean.

Over the course of the wars of expansion, for example, enormous quantities of gold and silver were indeed looted from papacies, temples and monasteries and stamped into coinage, allowing the Caliphate to produce gold dinars and silver dirhams of remarkable purity-that is, with next to no fiduciary element, the value of each coin corresponding almost precisely to its weight in precious metal. As a result, they were able to pay their troops extraordinarily well. A soldier in the Caliph's army, for example, received almost four times the wages once received by a Roman legionary.

The story of the origins of capitalism, is not the story of the gradual destruction of the traditional communities by the impersonal powers of the market. It is, rather, the story of how, an economy of credit was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of impersonal and often vindictive power of the state.

The concluding chapter of the book is titled ‘The Beginning of Something Yet To Be Determined’.

On August 15, 1971, United States President Richard Nixon announced that foreign-held US dollars whould no longer be convertible into gold-thus stripping away the last vestige of the international gold standard. This was the end of a policy that had been effective since 1931, and confirmed by the Bretton Woods accords at the end of Wrold War II : that while United States citizens might no longer be allowed to cash in their dollars for gold, all US currency held outside the country was to be redeemable at the rate of $35 an ounce. By doing so, Nixon initiated the regime of free-floating currencies that continues to this day.

The immediate effect of Nixon's unpegging the dollar was to cause the price of gold to sky-rocket; it hit a peak of $600 an ounce in 1980 (Rs 110 per gram) This of course had the effect of causing US gold reserves to increase dramatically in value. The result was a massive net transfer of wealth from poor countries, which lacked gold reserves, to rich ones like the United States and Great Britain, that maintained them. In the United States it also set off persistent inflation.

Nixon floated the dollar in order to pay for the cost of a war in which, during the period of 1970-72 along, he ordered more than four million tonnes of explosives and incendiaries dropped in cities and villages across Indo-China causing a senator to dub him "the greatest bomber of all time".

This is a book on 'Debt' running to 391 pages in 12 chapters. All through the book 'Debt' is discussed in different contexts, in different geographical areas and with different implication but always very interesting to read. This is what the author has to say at the end of this book.

"What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point, we can't even say. It's more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe".

*Debt : The First 5000 Years -David Graeber

Frontier
Vol. 46, No. 7, Aug 25-31, 2013

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