In my last Politics of Debt post, I went through Graeber’s three categories of society, which function to isolate certain distinct social phenomena playing on human relationships: Baseline Communism, Exchange, and Hierarchy. Careful to keep separate the morality that might follow the anthropologist himself from the immense store of facts and recordings on diverse societies that he has researched, my goal is to capture the logic of debt. Amongst the thinkers and scientists in their books and discoveries, could there lie a peculiar social relationship – debtor/creditor – that we could target for achieving a maximum ameliorative effect on society at large? Aside from the quest for an understanding of debt, an emancipatory project could emanate from such a skillful targeting; debt has been used to harm people and communities with a burning intensity as of late, and bringing into question debt and morality (and the interplay of the two) has the potential to reverse our fortunes.
The concern at the moment of the book is the question of money. Money in Graeber’s analysis is not quite a commodity (gold coins flying around marketplaces and as taxation) and not quite a credit or debt. “Thus money is almost always something hovering between a commodity and a debt-token.” (p.75) Both of these explanations for the nature of money correspond to their own mythical origin stories: commodity-money has the myth of barter (where all early societies are inefficiently trading item for item before coinage saves them from their savagery) while credit theories have the myth of primordial debt (where the debts are owed to the ancestors and the state, forming the eventual basis of money). Money thought of as an IOU, a mere promise by one person/party to another person/party, eventually finds its way into the social whole as a thing to be indebted to, with its head being the sovereign collecting taxes. When money is conceived as credit for paying back debts (a purely social arrangement depending on the actors involved), or, conversely, as a “debt-token” (where all money in circulation is a piece of the great debt, with society at large the creditor), then we get primordial debt theories with their infinite indebtedness to a social totality (the myth being a cosmic state, with a sovereign watching over the value of money).
The distinction between commodity-money(myth of barter) and credit/debt-money(myth of primordial debts) is the grey area where money actually lives according to Graeber. In theorizing money, an origin story of a mythical other time has been traditionally posited to give a sense of grounding to commercial value in exchange. The coins or paper or numbers on a computer screen circulating in exchange for commodities, greasing the wheels of commerce, are sometimes thought as commodities themselves and sometimes as either credit or debt. Thinking of money as one or the other instead of both sides of the “coin” leads to an idealized picture of either the great Market or the great State.
Regarding credit/debt money:
“Credit theorists insist that money is not a commodity but an accounting tool. If other words, it is not a “thing” at all. You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement, and as the credit theorists correctly noted, historically, such abstract systems of accounting emerged long before the use of any particular token of exchange.
The obvious next question is: if money is just a yardstick, what then does it measure? The answer was simple: debt. A coin is, effectively, an IOU. Whereas conventional wisdom holds that a banknote is simply the promise to pay a certain amount of “real money” (gold, silver, or whatever that might be taken to mean), credit theorists argued that a banknote is simply the promise to pay back something of the same value as an ounce of gold. But that’s all that money ever is.” (p.46)
This conception of money is espoused by the Chartalists. Money is only the token of debt that is kicked off by a promise from one person to pay back another in equal proportion. During the time it is not payed back, the token can be circulated or passed on to another, third party who treats the debt-token as redeemable currency. It all works out just fine as long as the trust between all parties is held up and the original debtor is good for the payback. But when you get to larger economic systems, the question of trust becomes more tenuous and a guarantor with power must step in to ensure the worth of the debt-token become money. Regardless of who or what acts as the guarantor of the value of the currency is unimportant, as long as the confidence in the value of the currency is consistent throughout the society. Citing the historian G.F. knapp, Graeber writes:
“If money is simply a unit of measure, it makes sense that emperors and kings should concern themselves with such matters. Emperors and kings are almost always concerned to established to uniform systems of weights and measures throughout their kingdoms. It is also true, as Knapp observed, that once established, such systems tend to remain remarkably stable over time.” (p.48)
He goes on to remark that Charlemagne’s monetary system remained intact for over 800 years, despite the fact that the empire he ruled dissolved very soon after he took over. The point is that when money is thought of as a mere outgrowth of the credit/debt system that naturally occurs in normal social relationships, then a currency that expands into the macroeconomy and beyond a small village can only be kept secure by a bigger government entity like a king. Kings then take their power as sovereigns and keepers of the debt-token’s value and pay their armies to fight enemies and/or colonize those neighboring peoples around them. Tax collecting sucks up a portion of the money circulating through their domain and now a portion of that dispersed debt concentrates into the hands of a military protecting the people, or else plundering and expanding to the wishes of the rulers. This is the story under the Chartalist or state credit theories of money.
The argument hinges on the debts incurred from ordinary people going into debt with one another and then circulating those debt-tokens to create a state-wide market with security. These debts are conceived by the state theorists to preexist itself, originating from debts to one’s family, ancestors, neighbors, gods, and society itself.
“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. This debt is the essence of society itself. It exists long before money and markets and money and markets themselves are simply ways of chopping pieces of it up.” (p.56)
Society itself is the originator of debts, and, therefore, the state-currencies with an official emblem minted on gold slabs are merely the standardizing process for what we all owe to “society.” As to what society is and how we pay it back for the generosity in being our great creditor, accounts will vary. Primordial-debt theorists go so far as to invoke early religious texts involving indebtedness as an existential situation. Lifelong debts, sacrifices to the gods – forces of the cosmos to which we are all indebted, the etymology of the words ‘debt’ as being synonymous with ‘sin’ and ‘guilt’: these ideas and practices all justify the authority that the sovereign claims in collecting taxes and making its subjects use the money that it stamped.
Cosmic religious doctrines that make us stand in relation to the All or God take up the condition of indebtedness and universalized it. A second step in the story comes from the primordial-debt economists:
“The ingenious move of course is to fold this back into the state theory of money – since by “sovereign powers” Théret actually means “the state.” The first kings were sacred kings who were either gods in their own right or stood as privileged mediators between human beings and the ultimate forces that govern the cosmos. This set us on a road to the gradual realization that our debt to the gods was always, really, a debt to the society that made us what we are.” (p.58)
This is how the myth of the state accompanies credit/debt theories of money and chartalism, that is, when very large societies and kingdoms develop. It is a story that justifies and solidifies the role of the sovereign as the guarantor of the value of the currency – the trust that this coin will be redeemed somewhere down the line of exchanges and can be taken by another for some tangible goods right now. The sovereign, the state, the king all “capitalize” on an original debt to society, which they have taken up and quantified into taxation.
“If the king has simply taken over guardianship of that primordial debt we all owe to society for having created us, this provides a very neat explanation for why the government feels it has the right to make us pay taxes. Taxes are just a measure of our debt to the society that made us. But this doesn’t really explain how this kind of absolute life-debt can be converted into money, which is by definition a means of measuring and comparing the value of different things. This is just as much a problem for credit theorists as for neoclassical economists, even if the problem for them is somewhat differently framed.” (p.59)
What Graeber is doing is showing how monetary theorists seeking an explanation for the creation of money and taxes have wittingly or unwittingly created a myth that has drawn on ancient myths about primordial indebtedness like in the Vedas. The teachings of the primordial indebtedness to the cosmos “lend” very well to the sovereign who wishes to command respect from its subjects and take enough of the output from its territory (in soldier’s bodies, weapons, etc.) to wage war. In the earliest civilizations, sovereigns were also in the position to wipe out all of the debts and restart the process of exchange with a “clean-slate.” This was done because of pressure exerted on them by a crumbling community situation, where people were fleeing their impossible debt and the selling off of their freedom and their children’s freedom to cover the cost of accumulating debt. But it was the “cosmic pretensions” of the sovereign that allowed them to do this.
How could we come to think of ourselves as being in debt to “society”? Graeber believes that these grand debts to existence, gods, and kings stem from a myth of the state or the nation.
“…in the idea of primordial debt, is the ultimate nationalist myth. Voice we owed out lives to the gods that created us, paid interest in the form of animal sacrifice, and ultimately paid back the principal with out lives. Now we owe it to the Nation that formed us, pay interest in the form of taxes, and when it comes time to defend the nation against its enemies, to offer to pay it with our lives.” (p.71)
He sees the state as the main perpetrator of self-promoting myths but going even farther than that he proposes the very word society as a kind of nationalist entity. Projecting themselves backward, nations envision their own well-organized composition into the past:
“What makes the concept of society so deceptive is that we assume the world is organized into a series of compact, modular units called “societies,” and that all people know which one they’re in. Historically, this is very rarely the case.” (p.66)
“The reason that it seems like such a simple, self-evident concept is because we mostly use it as a synonym for “nation.” After all, when Americans speak of paying their debt to society, they are not thinking of their responsibilities to people who live in Sweden. It’s only the modern state, with its elaborate border controls and social policies, that enables us to imagine “society” in this way, as a single bounded entity. This is why projecting that notion backwards into Vedic or Medieval times will always be deceptive, even though we don’t really have another word.” (p.69)
In questing for the origins of money and debt, we have been led into uncertainty concerning the very social cohesion one usually takes for granted. The state assures its subjects that it will guarantee the value of its currency and that it is the supreme entity towards which one is indebted. Those economists and neoliberals seeking a non-state theory of money tend to appeal to the other great myth: the Market. We seemed to be caught between two myths in thinking about money. It is the quintessential form of abstract value turned into something material; an imaginary “current” flowing throughout the land and sea which is at the same time the most immediate “real” concern for people’s lives.
So society is stuck in mythology as well, but wither the baseline communism? The basic commonality of humans that I described in the last post is functioning as Graeber’s “real” to the fictions of States and Markets. The fictional state assures us that the official money is good for exchange (redeemable for all debts) and manipulates the religious logic of cosmic indebtedness to its own advantage; the Market is the fictional “other” of the state that does indeed exert its forces of demand, labor, technology, supply, geography, etc. on money, but would not exist without that common exchangeable currency. These two poles are theories in economics but make use of myths to explain just what money is, its origin.
Graeber believes that money goes through shifting periods of being a commodity (backed by something material and stable like gold) and credit-based as in a fiat system. Money in all cases is both a commodity and a debt-token, but the money system, printing or coining a currency and regulating its value in trade by a state, goes through big cycles of being tied to a material or tied to the credit/debt arrangement. This financial arrangement of the economy (meaning banks peddling debt and multiplying there money to astronomical proportions based solely on that debt) is crucial at the macro scale.
This thing that streams all value into a standard number keeps that value thanks to the confusion between two myths. The foundations may be shaky, but we continue on in spite of the mystification as to what money is. Taking another step forward, we might ask: “what does it matter whether money has a sure origin? It works just fine.” This is a question of the importance of origins, and will have to be taken up in the next post.