What is money? How did it arise? Most people, if they’ve thought about the question at all, will tell you the story they heard in school, the story still found in economics textbooks: Money arose as a means of exchange to solve the problems inherent in the barter systems that originally prevailed in primitive societies. Credit money eventually followed as relations of exchange and trade became more complex. The modern-day financial economy is the ultimate, natural consequence. The only problem is that nothing in the historical record or in anthropological studies supports this story of Original Barter, which is a product of classical economics dating back only to the time of Adam Smith.
[T]here’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.
It really deserves no other introduction: according to this theory all transactions were by barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-heads for that beaver pelt or what-have-you. This created inconveniences, because maybe your neighbor doesn’t need chickens right now, so you have to invent money.
The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when The Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.
Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no [deal]. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.
So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?
By the time the curtain goes up on the historical record in ancient Mesopotamia, around 3200 BC, it’s already happened. There’s an elaborate system of money of account and complex credit systems. (Money as medium of exchange or as a standardized circulating units of gold, silver, bronze or whatever, only comes much later.)
So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything it’s precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.
On first reading passages like the above, I felt as though Graeber was proposing some kind of epochal paradigmatic shift. The facts however are uncontroversial; they were not even foreign to me. I simply hadn’t before made the connection that the real history of money has never figured in the non-empirical, reigning models of economics.
If Graeber is suddenly not just in the blogosphere but on C-SPAN and in the likes of Business Week, and if his Debt: The First 5000 Years has met with an oversize reception for a book by an anarchist anthropologist, it’s not entirely thanks to the clarity and brilliance of how he presents things. It’s the timing. The crisis of economics has reached a point where its fairy tales are becoming impossible to sustain.
As Graeber outlines, the original forms of money, which preceded the concept itself, were local systems of unenumerated credit based on reputation. In other words, money originates as social convention, and as such is negotiable. As more complex societies arose they evolved enumerated credit money with units of account such as wheat or silver, but this was still long before any standard physical means of exchange were used. The commodity moneys (and later coins) that subsequently appeared seem to have been first invented as means for settling disputes, damages or dowries, and ultimately were imposed most often by emerging states and empires as ways to raise armies and levy taxes. States asserted power by circulating currency that belonged to the state. A couple of thousand years later, finally, modern economists invented the myth of primitive barter. In doing so, they transported their ideal of the rational, calculating, wealth-maximizing Homo economicus – a “sociopath,” in Graeber’s words – back into the Garden of Eden, reversing the actual historical order of credit to coin to barter.
Graeber has also become known for his part in planning the first Occupy Wall Street protests last September and in the adoption of the slogan, “We are the 99%.” Last week a group from the OWS Alternative Banking committee packed into an NYU lecture hall with about 200 other people to see him, along with authors Charles Eisenstein and Daniel Pinchbeck, at an event sponsored by the magazine Reality Sandwich. After greetings and introductions, Eisenstein kicked off the round with the observation that money is a form of magic, imagining how we moderns would react if a cave painter told us that by manipulating the symbols on the wall, he could cause changes in the real world, and land himself an elk in tomorrow’s hunt. Today we manipulate symbols on a screen, if we are so empowered, and cause a delivery truck to appear outside the door. Graeber followed by describing what he called a “general tradition among economists” to deemphasize the importance of money – defining it as a means of “facilitated barter” – and reviewed the historical misconceptions, pointing out that “coins pop up in 600 BC to pay soldiers but compound interest was already around 2000 years before that.” The Mesopotamians understood the mathematics of infinite-growth debt, which is why they also appear to have been the first to invent the Debt Jubilee – an incomprehensible concept to most of our present-day mainstream economists. Graeber contends that debt accumulation was the central factor in the rise of prostitution, slavery, and more repressive forms of patriachy.
The discussion turns to politics as a different form of symbolism, an attempt to convince people of things that become true only once enough people believe in them, such as that there is a King of France. Eisenstein points out that one symptom of the current systemic breakdown is in the intense awareness that people have developed of politics as symbolism. For example, reports on a candidate’s speech are likelier to analyze the quality of the messaging or the staging of the photo op than to care about what anyone actually said. Eisenstein holds that politics and economics alike are located on a continuum between poetry and fraud. The spectators ironically pretend to believe, as if to show how much smarter they are than those who really do believe. (All true enough, but I also think a visit to a daytime talk-show audience, a Tea Party rally, or a sales convention would reveal that a lot of people still prefer to take things entirely at face value.)
In the role of the moderator, Pinchbeck asks the evening’s star performers what kind of solutions they imagine beyond a systemic collapse. Eisenstein agrees that a collapse is inevitable in a system centered on the perpetual growth of debt, and expresses optimism that the usual post-apocalyptic visions of general chaos and rapine will prove exaggerated. He expects people will be inventive in figuring out how to facilitate “the flow of gifts.” Much as we plan and prepare and spread the word, he believes the alternatives he advances in his book, Sacred Economics and The Ascent of Humanity, such as debt-free public money (greenbacks) or a citizens’ dividend to all, will require a collapse for any implementation. The transition must involve debt forgiveness, but the cultural barriers – the belief systems that uphold debt as a form of moral obligation, right alongside the sanctity of work for income – are formidable. He puts forth the ideas of re-denominating debt in a negative interest currency and a liquidity tax on reserves as tools for making debt forgiveness more acceptable. Then he asks, “What if the Federal Reserve simply purchases all student loans and unilaterally forgives the debt?”
Graeber responds by saying that the idea of printing enough money to buy all underwater mortgages and selling these back to the homeowners at a fraction on the dollar was actually floated within the Federal Reserve, only to be shot down by the administration as political suicide. (The total cost of this idea wouldn’t have been out of line with the trillions committed in the actual banking bailouts, and the money and greatest benefit would have gone to the banks just the same.) “But all they do is print money and give it to the banks,” he says, without producing the hoped-for flow of credit to the productive economy. The last year has brought him in unexpected contact with a few powerful people, albeit not within the halls of power. He estimates that 10 to 15 percent of the ruling elite really do see the urgency of the situation and agree with the need for debt forgiveness; but the idea remains politically isolated and culturally anathema, again because of the “morality of debt.” This morality applies to everyone but the rich, who have no trouble amongst themselves as necessary in renegotiating and disappearing debts into the billions and more recently trillions. The idea of having a vision has become completely alien to the ruling class. Graeber sees Obama as the greatest embodiment of this; he got into office by playing a guy who has a vision.
How did this happen? In Graeber’s view, the elites have fallen victim to their own obsession with the danger of social movements. Capitalism is no longer delivering, so the only argument left is that nothing else is even possible – other than the “hell on earth” of the exemplary totalitarian regimes – and so they focus on attacking social movements. The precarity of labor and ever-increasing working hours of the neoliberal program are not the best method for organizing capital, according to Graeber, but they are a great way of demobilizing potential resistance. No one can think in long-term perspectives or worry about the fate of the earth when they’re worrying about what will happen next week, and with crisis now constant this is equally true of the more enlightened among the elites. Eisenstein adds that the first step in overcoming this will be that people must lose the illusion that normal is ever coming back. He envisions an enlargened movement of debt strikes and sharing arrangements, citing examples like “couch-surfing” and car sharing as means both to reduce anxiety and to hasten the demise of the money system. He points out the way in which the Internet (contrary to the still-periodic outbursts of IT mania) is actually acting as a “giant suck on the GDP” by replacing formerly paid services with free ones. People need to “unplug and reskill” and “escape the void of total monetization.” “Apolitical sharing will have a political effect,” Eisenstein concludes. (In principle, all true; I couldn’t help thinking about how much this is all still a minority phenomenon.)
The talk turned to the Occupy movement and its attempt to “show why the enemy is superfluous” by exhibiting an alternative form of organization in public spaces, and by making “aggressive displays of mutual love and support” that, however, tend to provoke the elites. This, in Graeber’s view, is why the attack on Occupy was so relentless. Pinchbeck pointed out the limits into which Occupy necessarily ran after its own success in “expanding the horizons of the possible.” Those who are excited later find they’re still trapped within the same “insane society” as before, and many feel a sense of betrayal precisely because of their transformed expectations. Yet the history of revolutions, Graeber points out, is one of quick, unpredictable switches.
During the questions period, Graeber doubted the effectiveness of the “move your money” campaign. Besides that those of us on the lower rungs have only relatively small volumes to move, it’s not really depositors’ money that the banks lend; they just “zap new money into existence.” He backed off the point when he saw it had caused a bit of a downer, but I surely wasn’t alone in wishing the event had not ended so abruptly soon after.
This is one question on which the paradigm-busting professor seems not to have strayed beyond convention. The talk of magic at the beginning should have tipped him off about the real power of “move your money” – assuming, of course, that the example of the three or four million who have already done it can inspire tens of millions more to do the same. “Move your money” is one of our means of painting the cave to change the reality. People who take the effort to close accounts at the Wall Street banks are awakening to new possibilities. They are organizing themselves as a movement. Ideally, they’ve done their research and are opening their new accounts with banks or credit unions that do not inflate the speculative bubbles of FIRE, that invest wisely and locally, and that do not slap their customers with arbitrary and exorbitant fees. Regardless, moving accounts robs the too-big-to-fail wizards of a bit of their magic. As additional millions close their accounts with Citigroup, BoA, JPM Chase and Wells Fargo, the illusion the big bankers have created fades. How will they maintain the credibility to just zap more credit into existence, once everyone knows that no one’s got an account with them any more?
Graeber’s seeming inside knowledge of doings at the Fed reminded me of a story that “the central bankers” of the New York Federal Reserve had supposedly invited him “to talk to them, where he told them about the need for debt relief” and that they were “receptive to his message.” It turns out to be apocryphal, however. When I asked him about it after the talk, Graeber said he merely made the acquaintance of an economist who works at the Fed, and his story of it had been garbled. If the “Vatican of capital” had really called in an OWS anarchist for a consultation, it would have been one of the clearest portents yet that, verily, the End is Near.
 “What is debt? An Interview with economic anthropologist David Graeber,” Naked Capitalism, August 2011.
 Drake Bennett, “David Graeber, the Anti-Leader of Occupy Wall Street,” Business Week, October 26, 2011.
 LBO News, May 31, 2012.
“Debt: The first five thousand years,” essay version, Long Now, April 22nd, 02010.
David Graeber and Jamie Stern-Weiner, “Debt, Slavery and Our Idea of Freedom,” Z Communications, Sept. 12, 2011.
Graeber vs. The Austrians: “On the Invention of Money – Notes on Sex, Adventure, Monomaniacal Sociopathy and the True Function of Economics,” Naked Capitalism, Sept. 2011.
Links accessed August 25, 2012.