TURMEL: David Graeber's DEBT: The First 5,000 Years Chap02
ISBN: 978-1-61219-129-4
https://www.amazon.com/Debt-Updated-Expanded-First-Years/dp/1612194192/ref=sr_1_2?ie=UTF8
All reports at http://SmartestManOnEarth.Ca/debt5000
DG: P21 THE MYTH OF BARTER
For every subtle and complicated question, there is a perfectly simple and
straightforward answer, which is wrong. - H.L. Mencken
JCT: Generalizations are tough to get right. This one's wrong. An engineer
knows that many subtle and complicated questions to have perfectly simple and
straightforward answers that were unknown which are right.
I've always made fun of economists with this story:
An economist is driving along and hears a noise under the hood. He checks and
sees the radiator overflow tube sitting loose and the carburetor intake valve
sitting open. So he plugs it in.
A ways down the road, now the car is really acting up. He pulls into a garage
and details the litany of woes he has experienced. The mechanic tells him:
"Unplug that feedback tube." The economist answers: Impossible.
there is no perfectly simple and straightforward right answer to such subtle
and complicated questions.
Now consider the many subtle and complicated economic questions faced in our
new high-tech world? And they are all short-circuited as simply as: Unplug the
improper interest feedback. So the topic of this book disproves the point.
Interest-free economies suffer zero feedback problems!
DG: WHAT IS THE DIFFERENCE between a mere obligation, a sense that one ought to
behave in a certain way, or even that one owes something to someone, and a
debt, properly speaking? The answer is simple: money. The difference between a
debt and an obligation is that a debt can be precisely quantified. This
requires money.
Not only is it money that makes debt possible: money and debt appear on the
scene at exactly the same time. 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.
A history of debt, then, is thus necessarily a history of money- and the
easiest way to understand the role that debt has played in human society is
simply to follow the forms that money has taken, and the way money has been
used, across the centuries- and the arguments that inevitably ensued about what
all this means. Still, this is necessarily a very different history of money
than we are used to.
When economists speak of the origins of money, for example, debt is always
something of an afterthought. First comes barter, then money; credit
only develops later. Even if one consults books on the history of money
in, say, France, India, or China, what one generally gets is a history
of coinage, with barely any discussion of credit arrangements at all.
JCT: David Astle said the same in his Preface:
http://SmartestManOnEarth.Ca/babyl01
Page vii
"For money has been the ruin of many and has misled the minds of
Kings." Ecclesiasticus 8, verse 2.
When I originally approached my study as best I might, dealing
with the growth in pre-antiquity and antiquity of what is known as the
International Money Power, and the particular derivative of the money
creative activities of such International Money Power that might be
defined as the Life Alternative Factor, I did so with some diffidence.
Perhaps I was overly conscious of what seemed to be the
inadequateness of my preliminary training in these matters and that in
no way could I describe myself as deeply conversant with the languages
of ancient times, or, in the case of Mesopotamia, their scripts.
However, in my preliminary studies involving checking through the
indices of a number of those standard books of reference dealing with
the ancient civilizations, I soon found that any feelings of
inferiority in so far as the adequacy of my scholarship relative to
my particular subject was concerned were unwarranted, and that qualms
in these respects were by no means justified...
In almost all of such books of reference, except those that
classified themselves as economic or monetary histories, was
practically no clear approach to the subject of money and finance, or
to those exchange systems that must have existed in order that the so-
called civilizations might come to be. In the odd case where the
translations of the texts might reveal some key clue, no more special
emphasis was placed herein than might have been placed on the mention
of a gold cup, a ring, a seal, or some exquisite piece of stone work.
In Jastrows's "Assyria" there was no reference to money at all;
in Breasted's "History of Egypt," a volume of six hundred pages or so,
only brief mention on pages 97-98. In "A History of Egypt" by Sir
William M. Flinders-Petrie, in the records of Sir John Marshall and
E.J.C. McKay in respect to the diggings at Mohenjo-Daro, and in the
writings of Sir Charles L. Wooley and others on their findings from
their studies of the exhumed archives of the city states of ancient
Mesopotamia, little enough information exists on the matters referred
to above. In Christopher Dawson who wrote widely on ancient times,
particularly in the "Age of the Gods" which dealt with most cultures
until the commencement of that period known as antiquity, there is
only one reference to money, casual and not conveying much to the
average reader; this reference to be found on page 131... In Kings'
"History of Babylon" there was practically nothing on these matters.
Thus in almost all of the works of the great archaeologists and
scholars specializing in the ancient civilizations, there is a virtual
silence on that all important matter, the system of distribution of
food surpluses, and surpluses of all those items needed towards the
maintenance of a good and continuing life so far as were required by
climate and customs.
In all these writings of these great and practical scholars, the
workings of that mighty engine which injects the unit of exchange
amongst the peoples, and without which no civilization as we know it
can come to be, is only indicated by a profound silence. Of the
systems of exchanges, of the unit of exchange and its issue by private
individuals, as distinct from its issue as by the authority of
sovereign rule, on this all important matter governing in such
totality the conditions of progression into the future of these
peoples, not a word to speak of...
JCT: So the creation of money has been covered up for millennia.
DG: P22: For almost a century, anthropologists like me have been pointing out
that there is something very wrong with this picture. The standard economic-
history version has little to do with anything we observe when we examine how
economic life is actually conducted, in real communities and marketplaces,
almost anywhere- where one is much more likely to discover everyone is in debt
to everyone else in a dozen different ways, and that most transactions take
place without the use of currency.
Why the discrepancy?
Some of it is just the nature of the evidence: coins are preserved in the
archeological record; credit arrangements usually are not.
economists.. begin the story of money in an imaginary world from which credit
and debt have been entirely erased. Before we can apply the tools of
anthropology to reconstruct the real history of money, we need to understand
what's wrong with the conventional account.
Imagine what life would be like without it. The alternative to a monetary
economy is barter, people exchanging goods and services for other goods and
services directly instead of exchanging via the medium of money...
A barter system requires a double coincidence of wants for trade to take place.
P23: In a complex society with many goods, barter exchanges involve an
intolerable amount of effort. Imagine trying to find people who offer for sale
all the things you buy in a typical trip to the grocer's, and who are willing
to accept goods that you have to offer in exchange for their goods. Some
agreed-upon medium of exchange (or means of payment) neatly eliminates the
double coincidence of wants problem.2
Just about every economics textbook employed today sets out the problem the
same way. Historically, they note, we know that there was a time when there was
no money. What must it have been like? Well, let us imagine an economy
something like today's, except with no money. That would have been decidedly
inconvenient! Surely, people must have invented money for the sake of
efficiency.
The story of money for economists always begins with a fantasy
world of barter. The problem is where to locate this fantasy in time
and space: Are we talking about cave men, Pacific Islanders, the American
frontier? One textbook, by economists Joseph Stiglitz and John
Driffill, takes us to what appears to be an imaginary New England or
Midwestern town:
One can imagine an old-style farmer bartering with the blacksmith, the tailor,
the grocer, and the doctor in his small town. For simple barter to work,
however, there must be a double coincidence of wants... Henry has potatoes and
wants shoes, Joshua has an extra pair of shoes and wants potatoes. Bartering
can make them both happier. But if Henry has firewood and Joshua does not need
any of that, then bartering for Joshua's shoes requires one or both of them to
go searching for more people in the hope of making a multilateral exchange.
Money provides a way to make multilateral exchange much simpler. Henry sells
his firewood to someone else for money and uses the money to buy Joshua's
shoes.4
Again this is just a make-believe land much like the present, except
with money somehow plucked away. As a result it makes no sense:
Who in their right mind would set up a grocery in such a place? And
how would they get supplies? But let's leave that aside. There is a
simple reason why everyone who writes an economics textbook feels
they have to tell us the same story. For economists, it is in a very real
sense the most important story ever told.
JCT: It is funny when the frame-work they "imagine" is false.
P24: In the years after Columbus, as Spanish and Portuguese adventurers
were scouring the world for new sources of gold and silver,
these vague stories disappear. Certainly no one reported discovering a
land of barter. Most sixteenth- and seventeenth- century travelers in the
West Indies or Africa assumed that all societies would necessarily have
their own forms of money, since all societies had governments and all
governments issued money.7
7. See Jean- Michel Servet (1994, 2001) for this literature. He also notes that
in the eighteenth century, these accounts suddenly vanished, to be replaced by
endless sightings of "primitive barter" in accounts of Oceania, Africa, and the
Americas.
JCT: So they had to erase governments using their own chips from the record
before sucking the world recently into letting private banks issue their nation's
money cheaper despite the interest and not running it themselves.
P25 What, Smith begins, is the basis of economic life, properly speaking? It is
"a certain propensity in human nature... the propensity to truck, barter, and
exchange one thing for another." Animals don't do this. "Nobody," Smith
observes, "ever saw a dog make a fair and deliberate exchange of one bone for
another with another dog."8 But humans, if left to their own devices, will
inevitably begin swapping and comparing things. This is just what humans do.
Even logic and conversation are really just forms of trading, and as in all
things, humans will always try to seek their own best advantage, to seek the
greatest profit they can from the exchange.9
9. "If we should enquire into the principle of human mind on which this
disposition of trucking is founded, it is clearly the natural inclination every
one has to persuade. The offering of a shilling, which to us appears to have so
plain and simple meaning, is in reality offering an argument to persuade one to
do so and so as it is for his interest" (Lectures on Jurisprudence, 56) It's
fascinating to note that the assumption that the notion that exchange is the
basis of our mental functions, and manifests itself both in language (as the
exchange of words) and economics (as the exchange of material goods) goes back
to Smith. Most anthropologists attribute it to Claude Levi- Strauss (1963:296).
It is this drive to exchange, in turn, which creates that division of
labor responsible for all human achievement and civilization.
P26 "Salt is said to be the common instrument of commerce and exchanges in
Abyssinia; a species of shells in some parts of the coast of India; dried cod
at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies;
hides or dressed leather in some other countries; and there is this day a
village in Scotland where it is not uncommon, I am told, for a workman to carry
nails instead of money to the baker's shop or the ale-house.12
P28: We teach it to children in schoolbooks and museums. Everybody
knows it. "Once upon a time, there was barter. It was difficult.
So people invented money. Then came the development of banking and
credit." 14
14. The idea of an historical sequence from barter to money to credit... The
problem is there's no evidence that it ever happened, and an
enormous amount of evidence suggesting that it did not.
JCT: Being wrong doesn't prevent Nobel Prizes in Economics.
P29: For centuries now, explorers have been trying to find this fabled land of
barter-none with success. Adam Smith set his story in aboriginal North America
(others preferred Africa or the Pacific). In Smith's time, at least it could be
said that reliable information on Native American economic systems was
unavailable in Scottish libraries. But by mid-century, Lewis Henry Morgan's
descriptions of the Six Nations of the Iroquois, among others, were widely
published- and they made clear that the main economic institution among the
Iroquois nations were longhouses where most goods were stockpiled and then
allocated by women's councils, and no one ever traded arrowheads for slabs of
meat. Economists simply ignored this information.15
15. Though they did make an impression on many others. Morgan's work in
particular (1851, 1877, 1881), which emphasized both collective property rights
and the extraordinary importance of women, with women's councils largely in
control of economic life, so impressed many radical thinkers- included Marx and
Engels- that they became the basis of a kind of counter-myth, of primitive
communism and primitive matriarchy.
They discovered an almost endless variety of economic systems. But to this day,
no one has been able to locate a part of the world where the ordinary mode of
economic transaction between neighbors takes the form of "I'll give you
twenty chickens for that cow."
Caroline Humphrey: "No example of a barter economy, pure and simple, has ever
been described, let alone the emergence from it of money; all available
ethnography suggests that there never has been such a thing."16
Now, all this hardly means that barter does not exist- or even that it's never
practiced by the sort of people that Smith would refer to as "savages." It just
means that it's almost never employed, as Smith imagined, between fellow
villagers. Ordinarily, it takes place between strangers, even enemies.
P32: What all such cases of trade through barter have in common is that they
are meetings with strangers who will, likely as not, never meet again, and with
whom one certainly will not enter into any ongoing relations. This is why a
direct one-on-one exchange is appropriate: each side makes their trade and
walks away.
Recall here the language of the economics textbooks: "Imagine a society without
money." "Imagine a barter economy." One thing these examples make abundantly
clear is just how limited the imaginative powers of most economists turn out to
be.21
21. Though as we will note later, it's not exactly as if international business
deals now never involve music, dancing, food, drugs, high- priced hookers, or
the possibility of violence.
P33: From these examples, it begins to be clear why there are no societies
based on barter. Such a society could only be one in which everybody was an
inch away from everybody else's throat; but nonetheless hovering there, poised
to strike but never actually striking, forever.
JCT: The major point seems to be that everyone is a little in debt to half with
half a little in debt to him. "Still owe you 30 more chickens for the pig."
P36: Henry might not have something Joshua wants right now. But if the two are
neighbors, it's obviously only a matter of time before he will.24
24. The point is so obvious that it's amazing it hasn't been made more often.
The only classical economist I'm aware of who appears to have considered the
possibility that deferred payments might have made barter unnecessary is Ralph
Hawtrey (1928:2, cited in Einzig 1949:375). All others simply assume, for no
reason, that all exchanges even between neighbors must have necessarily been
what economists like to call "spot trades."
This in turn means that the need to stockpile commonly acceptable items in the
way that Smith suggested disappears as well. With it goes the need to develop
currency. As with so many actual small communities, everyone simply keeps track
of who owes what to whom.
In most gift economies, there actually is a rough- and- ready way to solve the
problem. One establishes a series of ranked categories of types of thing. Pigs
and shoes may be considered objects of roughly equivalent status: one can give
one in return for the other. Coral necklaces are quite another matter; one
would have to give back another necklace, or at least another piece of jewelry-
anthropologists are used to referring to these as creating different "spheres
of exchange."25 This does simplify things somewhat.
P37: In fact, there is good reason to believe that barter is not a particularly
ancient phenomenon at all, but has only really become widespread in modern
times. Certainly in most of the cases we know about, it takes place between
people who are familiar with the use of money but, for one reason or another,
don't have a lot of it around. Elaborate barter systems often crop up in the
wake of the collapse of national economies: most recently in Russia in the '90s
and in Argentina around 2002, when rubles in the first case, and dollars in the
second, effectively disappeared.26 Occasionally one can even find some kind of
currency beginning to develop: for instance, in POW camps and many prisons,
inmates have indeed been known to use cigarettes as a kind of currency, much to
the delight and excitement of professional economists.27 But here too we are
talking about people who grew up using money and now have to make do without
it- exactly the situation "imagined" by the economics textbooks with which I
began.
The more frequent solution is to adopt some sort of credit system. When much of
Europe "reverted to barter" after the collapse of the Roman Empire, and then
again after the Carolingian Empire likewise fell apart, this seems to be what
happened. People continued keeping accounts in the old imperial currency, even
if they were no longer using coins.28
Take the example of dried cod, supposedly used as money in Newfoundland. In the
early days of the Newfoundland fishing industry, there was no permanent
European population; the fishers went there for the fishing season only, and
those who were not fishers were traders who bought the dried fish and sold to
the fishers their daily supplies. The latter sold their catch to the traders at
the market price in pounds, shillings and pence, and obtained in return a
credit on their books, with which they paid for their supplies. Balances due by
the traders were paid for by drafts on England or France.31
P38 The primary examples, then, were ones in which people were improvising
credit systems because actual money- gold and silver coinage- was in short
supply. But the most shocking blow to the conventional version of economic
history came with the translation, first of Egyptian hieroglyphics, and then of
Mesopotamian cuneiform, which pushed back scholars' knowledge of written
history almost three millennia, from the time of Homer (circa 800 BC), where it
had hovered in Smith's time, to roughly 3500 BC. What these texts revealed was
that credit systems of exactly this sort actually preceded the invention of
coinage by thousands of years.
JCT: Major point! Credit money came before metal chips.
P39: The Sumerian economy was dominated by vast temple and palace complexes.
These were often staffed by thousands: priests and officials, craftspeople who
worked in their industrial workshops, farmers and shepherds who worked their
considerable estates. Even though ancient Sumer was usually divided into a
large number of independent city-states, by the time the curtain goes up on
Mesopotamian civilization around 3500 BC, temple administrators already appear
to have developed a single, uniform system of accountancy- one that is in some
ways still with us, actually, because it's to the Sumerians that we owe such
things as the dozen or the 24- hour day.32
32. The temples appear to have come first; the palaces, which became
increasingly important over time, took over their system of administration.
The basic monetary unit was the silver shekel. One shekel's weight in silver
was established as the equivalent of one gur, or bushel of barley.
JCT: That's supposed to be 180 Barleycorns, whatever that is.
A shekel was subdivided into 60 minas, corresponding to one portion of barley-
on the principle that there were 30 days in a month, and Temple workers
received two rations of barley every day.
JCT: This is not Late Bronze Age "Armana Letters" where 60 Shekels is a Mina
(pound) and 60 Minas is a Talent. Talent 60 pounds, Mina 1 pound, Shekel
about a quarter-ounce $1 Canadian Looney.
It's easy to see that "money" in this sense is in no way the product of
commercial transactions. It was actually created by bureaucrats in order to
keep track of resources and move things back and forth between departments.
JCT: Accounting credits and debits. Remember, Credits are negative, reducing
the balance in an account while Debits are positive increasing your cash
account. Backwards to further the trick. Most people think "A Credit to my
account" is good when it really means you owe more. A Debit to your account is
good. Don't ask me why they defined them in such a misleading way but I can
guess it's the general effort to stupidize the sheople on money.
Temple bureaucrats used the system to calculate debts (rents, fees, loans,
etc.) in silver. Silver was, effectively, money. And it did indeed circulate in
the form of unworked chunks, "rude bars" as Smith had put it.33
JCT: Just like we regularly calculate them in US gold-backed dollars.
In this he was right. But it was almost the only part of his account
that was right. One reason was that silver did not circulate very
much. Most of it just sat around in Temple and Palace treasuries, some
of which remained, carefully guarded, in the same place for literally
thousands of years. It would have been easy enough to standardize the
ingots, stamp them, create some authoritative system to guarantee their
purity. The technology existed. Yet no one saw any particular need to
do so.
Didn't need to have any eggs to rate everything else in eggs, do we?
Once the butcher says a his pound of pork is priced at a dozen eggs, the baker
can price his pound of cake at a dozen eggs too.
One reason was that while debts were calculated in silver, they
did not have to be paid in silver- in fact, they could be paid in more
or less anything one had around.
JCT: That is big. It's forcing people to use one medium, say cash, that allows
people to miss their payments.
Peasants who owed money to the Temple or Palace, or to some Temple or Palace
official, seem to have settled their debts mostly in barley, which is why
fixing the ratio of silver to barley was so important. But it was perfectly
acceptable to show up with goats, or furniture, or lapis lazuli. Temples and
Palaces were huge industrial operations- they could find a use for almost
anything.34
P40: At this point, just about every aspect of the conventional story of the
origins of money lay in rubble. Rarely has an historical theory been so
absolutely and systematically refuted.
Mitchell-Innes matter- of- factly laid out the false assumptions
on which existing economic history was based and suggested that what
was really needed was a history of debt:
One of the popular fallacies in connection with commerce is that in modern days
a money- saving device has been introduced called credit and that, before this
device was known, all purchases were paid for in cash, in other words in coins.
A careful investigation shows that the precise reverse is true. In olden days
coins played a far smaller part in commerce than they do to- day. Indeed so
small was the quantity of coins, that they did not even suffice for the needs
of the [Medieval English] Royal household and estates which regularly used
tokens of various kinds for the purpose of making small payments. So
unimportant indeed was the coinage that sometimes Kings did not hesitate to
call it all in for re- minting and re-issue and still commerce went on just the
same.36
In fact, our standard account of monetary history is precisely
backwards.
JCT: Wonder if it's backward on purpose?
We did not begin with barter, discover money, and then eventually develop
credit systems. It happened precisely the other way around. What we now call
virtual money came first. Coins came much later, and their use spread only
unevenly, never completely replacing credit systems. Barter, in turn, appears
to be largely a kind of accidental by-product of the use of coinage or paper
money: historically, it has mainly been what people who are used to cash
transactions do when for one reason or another they have no access to currency.
The curious thing is that it never happened. This new history was never
written. It's not that any economist has ever refuted Mitchell-Innes.
They just ignored him. Textbooks did not change their story- even if all the
evidence made clear that the story was simply wrong. People still write
histories of money that are actually histories of coinage, on the assumption
that in the past these were necessarily the same thing; periods when coinage
largely vanished are still described as times when the economy "reverted to
barter," as if the meaning of this phrase is self-evident, even though no one
actually knows what it means. As a result we have next to no idea how, say, the
inhabitant of a Dutch town in 950 AD actually went about acquiring cheese or
spoons or hiring musicians to play at his daughter's wedding- let alone how any
of this was likely to be arranged in Pemba or Samarkand.37
37. Peter Spufford's monumental Money and Its Use in Medieval Europe (1988),
which devotes hundreds of pages to gold and silver mining, mints, and
debasement of coinage, makes only two or three mentions of various sorts of
lead or leather token money or minor credit arrangements by which ordinary
people appear to have conducted the overwhelming majority of their daily
transactions. About these, he says, "we can know next to nothing" (1988:336).
An even more dramatic example is the tally-stick, of which we will hear a good
deal: the use of tallies instead of cash was widespread in the Middle Ages, but
there has been almost no systematic research on the subject, especially outside
England.
JCT: King Henry I The Great, first British King to use interest-free Tallies
for money.
HISTORICAL EXAMPLES
The record most successful case was in the British Isle,
Where "Tallies," sticks of money, left King Henry I with smile.
Accountants in the Treasury would split the stick in two,
One half would be the money and the other half its due.
A tally worth a pound of gold to pay the King's expense,
The other half amounted to taxation that made sense.
The only question left is how the tax should be assessed,
For goods and services? A simple formula to test.
For services, he'd levy tax at end of every year.
For assets, tax to pay depreciation. It was clear.
The tax collectors through the land all had an easy way,
Since people had their tallies and enough the tax to pay.
The tallies funded projects and could pay for everything,
With tallies matching tax, a hero, Henry I, their King.
For over 700 years, the tallies were in use,
But having lost control of money now is Crown's excuse.
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