Debt is a moral issue – at least, that is what we’re encouraged to believe by journalists, politicians and other commentators. On 8 May 2012, the Deputy Prime Minister Nick Clegg announced that:

We have a moral duty to the next generation to wipe the slate clean for them of debt. We have set out a plan – it lasts about six or seven years – to wipe the slate clean, to rid people of the deadweight of debt that has been built up over time.

As it happens, Clegg wasn’t correct anyway: the “plan” concerns the national deficit, the rate at which debt is accrued.

Debt by david graeber in occupy sfsu Malcolm x...
Debt by David Graeber in Occupy SFSU Malcolm x library DSC_0037 (Photo credit: Steve Rhodes)

The national debt itself will not be paid off. But if we think of his statement as an expression of a kind of moral philosophy, then it becomes interesting – particularly because this philosophy appears to have a key role in how the Coalition typically justifies its austerity measures. Do we have a moral duty to pay down the national debt, or even to clear our own debts? In his recent book, Debt: The First 5000 Years, anthropologist David Graeber suggests that the ethical and political significance of debt is far more complex. He provides a historical and anthropological perspective on the subject which invites us to reconsider the meaning of a concept we assume to be a natural part of the world around us. Specifically, he invites us to consider how our ideas about debt are the result of a long chain of contingent events and decisions, and that the role they play in our lives could have been (and could still be) very different.

Chris Groves introduced some of the key themes of Graeber’s book at last night’s Cardiff Philosophy Cafe, in the first of  series of Cafes over the next twelve months which will look at how the humanities and social sciences can shed light on different aspects of the 2007-08 financial crisis and its aftermath.

With respect to Clegg’s statement, the following quotation from the book is relevant, relating to abstract models of the economic system:

Economists are aware that reality is always more complicated; but they are also aware that to come up with a mathematical model, one always has to make the world into a bit of a cartoon. There’s nothing wrong with this. The problem comes when it enables some (very often these same economists) to declare that everyone who ignores the dictates of the market shall surely be punished  – or that since we live in a market  system everything (except government interference) is based on principles of justice: that our market system is one vast network of reciprocal relations in which, in the end, the accounts balance and all debts are paid. (p. 115)

How have we come to accept such ideas about the economy as a self-balancing system in which fair prices are supposed to produce a fair allocation of resources, and ensure that everyone gets what they need? Graeber suggests that economic theories about free markets, as introduced by Adam Smith and others in the 18th century, were not designed to be descriptive theories, but utopian programmes – based on dubious anthropological assumptions. He sets out how Smith and the majority of other economists (as well as political philosophers like John Locke) see the evolution of money as a solution to the inefficiencies of barter systems, which supposedly dominated the early history of humanity.

The difficulties of determining how many chickens are worth the same as a pig, or whatever, are alleged to have been solved by the use of a neutral medium of exchange (some form of money) to help set prices – abstract measures of equivalence. Once a chicken is worth £1 and a pig £10, it’s easy to see how many chickens you need before you’ll hand over your prize sow.  But, Graeber argues, there is no anthropological evidence that barter has ever been used as the primary means of trading goods in human societies anywhere. Smith and those who agree with him are wrong. Indeed, Graeber notes that barter has historically only been carried out in unusual circumstances, as between colonists and natives:

Barter, then […] was carried out between people who might otherwise be enemies and hovered about one inch away from actual warfare […] (p. 30)

The barter relationship assumes no intrinsic connection between the individuals involved in it. If Smith saw a correctly managed system of prices as a more just replacement for barter, then what he had already assumed was that societies were just collections of unconnected individuals. This kind of picture of society had already been given a philosophical foundation a century before by thinkers such as Thomas Hobbes and John Locke. Given such a situation, maybe a price system would be more efficient. However, such a depiction of human societies, Graeber argues, is a distortion.

Throughout the book, he develops a distinction between two different “economies”, two ways of imagining human relationships. Market economies rely on rules of exchange that define the value of things in terms of prices, and which therefore view things (and people, or at least slaves or wage-labourers) as, at least potentially, equivalents. Historically, they have come to be seen as governed by abstract and even mechanical principles which are independent of other forms of social relationship (such as kinship, friendship, political affiliation and so on).  Human economies, on the other hand, operate on the basis that human beings are unique and irreplaceable, because they are “each a unique nexus of relations with others” (p. 208). Within human economies, people can relate to each other on the basis of what Graeber provocatively (as he himself states) calls “communism”, or hierarchically.

Market and human economies as kinds of social relationship

Communistic relationships are ones determined by need, on the basis of (as Marx said) “from each according to his ability, to each according to his need”. They tend, across societies, to operate between friends, neighbours and members of the same community, and may work on the basis of promise-based credit, but do not use money. Indeed, Graeber argues, in traditional societies, currency often has specific uses, but is not used as payment for everyday trades. Hierarchical relationships, on the other hand, are established between different segments of the same community (e.g. castes, classes) by custom, and require formal exchanges of tribute to be made. In neither case are trade or obligations independent of wider social contexts. With the imposition of market exchanges, governed only by money, obligations take on an independent life as debts, measured out in cold cash.

The bulk of Graeber’s book is concerned with the history of how, in different times and in different places, market exchanges and debts measured in terms of money, have come to be superimposed on human economies. This, he argues, always requires political intervention – to enforce laws regarding interest, to produce and distribute coinage, and so on – and so the creation of markets in which things (and people, where slavery exists) can be exchanged as equivalents relies on violence and coercion.  The historical and anthropological evidence, he suggests, indicates that it is possible to manage obligations differently – “communistically” and/or hierarchically – and that, even now, we often do manage our obligations according to these principles. Nonetheless, the predominance of market relationships in our lives often submerges these other forms of relationship, introducing confusion and conflict.

Our current situation – a debt crisis – links the contemporary world to pivotal moments in the histories of other civilizations where supposedly stable creditor-debtor relationships imploded. Graeber asks us to consider whether ideas of an intrinsic connection between paying off debts and moral ideals of justice are appropriate after all, and whether the promises of free-market based stability made by economists ever since Smith are a veil over relations of political domination.  In other places, at other times, revolutions have been accompanied by the destruction of official records of debt – a question raised by Graeber’s book is, therefore, do we need a repudiation of debt in order to achieve justice, rather than expecting the economy to adjust itself and ensure those who have incurred debts “immorally” will be punished?

The burning of the debt records, Union Square, New York, April 25, 2012

The audience at the Café raised a wide variety of issues in response to Chris’ overview of the book. What, for example, is the role of bankruptcy in modern societies, and how does it relate to the story Graeber tells? How do we manage trust in relationships which are no longer ones between neighbours, without some kind of neutral accounting mechanism – and in such circumstances, does monetized debt therefore reinforce wider social relationships rather than supplanting them? It was suggested that perhaps the debt crisis is a sign of a return of some of the inefficiencies which Smith and his colleagues have seen in barter relationships. Graeber points out that the terms “truck and barter”, used by Smith to describe humans’ alleged universal propensity to trade with each other, had a specific meaning:

in the century or two before Smith’s time, the English words ‘truck and barter’, like their equivalents in French, Spanish, German, Dutch and Portuguese, literally meant ‘to trick, bamboozle or rip off’. (p. 34)

Barter often implies what economists call “information asymmetry”, that is, that each participant has a different level of information about the quality of the goods they want to exchange. Each side can use what they know about what they’re trading to seek an advantage, by for example trying to convince the other that what they’re being offered is better than it is. An audience member suggested that the current debt crisis was, in part, caused by such asymmetries. The very mathematical complexity of the trades carried out in the financial industry meant that traders were, despite everything being stated in terms of dollars, euros or whatever , back in the position of the barterer who gained an upper hand thanks to inside knowledge. It was also suggested that rethinking our relationship with debt needed to consider how inappropriate debt was as a way of thinking about our obligations to the natural world, as a life support system for both the market and human economies. Monetising debt, and then using this system to think about our relationship with nature (as some economists, and many governments, want to do) is, it was suggested, at least as problematic as the impact it can have on human economies.

To help continue the debate, try this poll – add any other comments you might have in the Comments section below this post.


6 thoughts on “Last Night’s Cafe: Should we pay our debts?”

  1. The reason I voted NO was that I felt fundamental behavioral changes are required to resolve the crisis, and somebody did work very hard to keep away from the loans.

  2. Interesting letter in the Guardian today on Greece:

    It has become clear that the cost of Greece leaving the euro will vastly outweigh the cost of forgiving them their debts ($1,000,000,000,000, 17 May). With the second Greek election looming, the objective of Angela Merkel and the other austerity-loving bullies is to frighten Greek voters into a retreat on their refusal to swallow neoliberal snake oil. Expecting ordinary people to pay such a heavy price for a financial disaster caused by an incompetent political elite, greedy financiers and the tax-dodging rich is a disgrace. The Greek people will see through this bluff and so should we.
    Peter Robbins
    London

  3. ‘The cost of Greece leaving the Euro will vastly outweigh the cost of forgiving them their debts.’

    I think the issue of debt and bankruptcy has to work both ways. While part of the responsibility for the situation is on debters for borrowing too much, the blame has to be shared with the creditors who lent too much. We talk about debt ‘forgiveness’ but ultimately no-one can force a sovereign nation to pay its debts anyway (Argentina didn’t need forgiveness). Ultimately the creditors need to write off some of the debt in the the hope they may get at least some of their cash back. That’s a practical solution though some may like to sell it as a moral one.

    Another point is that it’s generally hard-wired into us to believe that the poor owe money to the rich. That isn’t always the case however. Should the poor Chinese forgive the rich Americans or British their debt? Some economists have suggested they may have to. But isn’t it absurd?

    As for Clegg, he’s right that debts are a burden on the next generation, but his comments bear no relation to reality.

Leave a Reply

Your email address will not be published. Required fields are marked *