Debt and the nature of money

When I wrote that David Graeber’s book opens your eyes, that was not just a figure of speech. First, consider this:

In recent weeks, Theodoros Mavridis has bought fresh eggs, tsipourou (the local brandy: beware), fruit, olives, olive oil, jam, and soap. He has also had some legal advice, and enjoyed the services of an accountant to help fill in his tax return. None of it has cost him a euro, because he had previously done a spot of electrical work – repairing a TV, sorting out a dodgy light – for some of the 800-odd members of a fast-growing exchange network in the port town of Volos, midway between Athens and Thessaloniki.
In return for his expert labour, Mavridis received a number of Local Alternative Units (known as tems in Greek) in his online network account. In return for the eggs, olive oil, tax advice and the rest, he transferred tems into other people’s accounts.

Fascinating, but also completely understandable according to a token theory of money. Whether you call it euro, drahma, or tems doesn’t really matter. It is just a unit of exchange. For the community within which it functions, it doesn’t need the backing of the state (or a central bank) or a gold standard. Of course, the limitation is that the system can only function within a relatively small community:

“It’s also a way of showing practical solidarity – of building relationships.”

This quote directly links to Graeber’s argument about the intimate association between debt and community: the tems are nothing less than a system of keeping track of (small) debts within a circle of trust.

What is also characteristic is the Guardian’s subtitle of the mateiral: A determination to ‘move beyond anger to creativity’ is driving a strong barter economy in some places [emphasis mine]. Having read Graeber, one immediately recognizes that the ingenious Greek system of tems is the exact opposite of barter – people are not exchanging goods directly (barter) but through the medium of small debts, and the tems which keep track on the debts. The myth of the barter origin of money shows its ugly head even when one observes in vivo the origin of money as a system to count and manage debts.

And now, the second case. Normally, at the local cafeteria at my university in the Netherlands you can pay either in cash or using the cashless Chipknip system (it’s like paying with a debit card but no pin required). The latter option is much more popular since in this country one can pay almost everywhere with the Chipknip or PIN (both on the same card). A few weeks ago, the Chipknip terminal at the cafeteria broke down and one was required to search his pockets for small change to get his daily caffeine fix. During these weeks, on more than one occasion I actually didn’t have enough coins to get a coffee. Apparently, I wasn’t the only one. Once the Chipknip machine was repaired, there was a note from the cafeteria requesting all people to clear the debts they had accumulated over the period the machine was out of order. So the cashless economy didn’t revert to cash transactions (coins) but miraculously, and instantaneously, transformed itself into a system of debt! 

Geometric Currency Sculptures by Kristi Malakoff

[artwork via Colossal]

David Graeber’s ‘Debt’ will shake your world

David Graeber’s ‘Debt: The First 5,000 Year‘ is easily the most thought-provoking, insightful, erudite and provocative book I have read over the last few years. While you can disagree with particular arguments or resist certain conclusions, it will shake your most fundamental assumptions about social life. After reading the book, you will never see money, credit, war, debt, slavery, states, religion, capitalism, finance, economics, anthropology, presents, hierarchy, and history in the same way again.

Don’t be fooled by the title (and the horrendous cover) – this book is nothing less than a reconstruction of world history in the grand traditions of Toynbee, Spengler, Jaspers, and Braudel. Debt plays center stage but one learns just as much about the genesis of the state, the origin of money, the history of slavery and the meaning of gifts. The approach of the book not only spans history, anthropology, social science and philosophy but switches effortlessly between the empirical and the normative, the theoretical and the metaphysical. Which is actually, my major problem with the book. The prose is so convincing and the erudition of the author so deep that one has to be constantly on the alert to separate the evidence from the opinion, the analysis from the speculation, the social critique from the dispassionate search for scientific truth (I suspect Graeber wouldn’t really agree that these can be separated anyways).

Personally, I found the demolition with the help of anthropological evidence of the ‘foundational myth of the discipline of economics’ – the origin of money from barter – the most convincing part of the book. You can get a taste of the argument here. The chapter is important also because it illuminates so well the differences between economics and anthropology as modes of scientific inquiry.

On the other hand, I found the last parts of the book the least convincing. It’s not that the arguments about the links between the origin of modern states, the rise of capitalism, slavery, and credit are totally misplaced, but they all just seem to have been pushed too far.

The book has already been discussed and reviewed in numerous blogs, magazines, etc. (see for example the forum here). It was actually out of print just before Christmas both in the US and Europe, but now you have no excuse – get it and get ready to have your world shattered.