Debt (72 page)

At this point, however, the principle has been exposed as a flagrant lie. As it turns out, we don’t “all” have to pay our debts. Only some of us do. Nothing would be more important than to wipe the slate clean for everyone, mark a break with our accustomed morality, and start again.

What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point we can’t even say. It’s more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell us our true value, no one has the right to tell us what we truly owe.

1.
With the predictable results that they weren’t actually built to make it easier for Malagasy people to get around in their own country, but mainly to get products from the plantations to ports to earn foreign exchange to pay for building the roads and railways to begin with.

2.
The United States, for example, only recognized the Republic of Haiti in 1860. France doggedly held on to the demand and the Republic of Haiti was finally forced to pay the equivalent of $21 billion between 1925 and 1946, during most of which time they were under U.S. military occupation.

3.
Hallam 1866 V: 269–70. Since the government did not feel it appropriate to pay for the upkeep of improvidents, prisoners were expected to furnish the full cost of their own imprisonment. If they couldn’t, they simply starved to death.

4.
If we consider tax responsibilities to be debts, it’s the overwhelming majority—and if nothing else the two are closely related, since over the course history, the need to assemble money for tax payments has always been the most frequent reason for falling into debt.

5.
Finley 1960:63; 1963:24; 1974:80; 1981:106; 1983:108. And these are only the ones I managed to track down. What he says for Greece and Rome would appear to be equally true of Japan, India, or China.

6.
Galey 1983.

7.
Jacques de Vitry, in Le Goff 1990:64.

8.
Kyokai,
Record of Miraculous Events in Japan
(c. 822 ad), Tale 26, cited in LaFleur 1986:36. Also Nakamura 1996:257–59.

9.
ibid:36

10.
ibid:37.

11.
Simon Johnson, the IMF’s chief economist at the time, put it concisely in a recent article in
The Atlantic:
“Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as ‘picking up nickels in front of a steamroller,’ this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.” (Johnson 2010) Johnson of course passes over the possibility that AIG knew perfectly well what was eventually going to happen, but simply didn’t care, since they knew the steamroller was going to flatten someone else.

12.
In contrast, England already had a national bankruptcy law in 1571. An attempt to create a U.S. federal bankruptcy
law in 1800 foundered; there was one briefly in place between 1867 and 1878, aimed to relieve indebted Civil War veterans, but it was eventually abolished on moral grounds (see Mann 2002 for a good recent history). Bankruptcy reform in America is more likely to make the terms harsher than the other way around, as with the 2005 reforms, which Congress passed, on industry urgings, just before the great credit crash.

13.
The mortgage relief fund set up after the bailout, for example, has only provided aid to a tiny percentage of claimants, and there has been no movement toward liberalization of bankruptcy laws that had, in fact, been made far harsher, under financial industry pressure, in 2005, just two years before the meltdown.

14.
“In Jail for Being in Debt,” Chris Serres & Glenin Howatt, Minneapolis-St. Paul
Star Tribune
, June 9, 2010,
www.startribune.com/local/95692619.html
.

15.
“IMF warns second bailout would ‘threaten democracy.’ ” Angela Jameson and Elizabeth Judge,
business.timesonline.co.uk/tol/business/economics/
article6928147.ece#cid=OTC-RSS&attr=1185799
, accessed November 25, 2009

1.
Case, Fair, Gärtner, & Heather 1996:564. Emphasis in the original.

2.
op cit.

3.
Begg, Fischer, and Dornbuch (2005:384); Maunder, Myers, Wall, and Miller (1991:310); Parkin & King (1995:65).

4.
Stiglitz and Driffill 2000:521. Emphasis again in the original.

5.
Aristotle
Politics I
.9.1257

6.
Neither is it clear we are really speaking of barter here. Aristotle used the term
métadosis
, which in his day normally meant “sharing” or “sharing out.” Since Smith, this has usually been translated “barter,” but as Karl Polanyi (1957a:93) has long since emphasized, this is probably inaccurate, unless Aristotle was introducing an entirely new meaning for the term. Theorists of the origin of Greek money from Laum (1924) to Seaford (2004) have emphasized that customs of apportioning goods (e.g., war booty, sacrificial meat), probably did play a key role in the development of Greek currency. (For a critique of the Aristotelian tradition, which does assume Aristotle is talking about barter, see Fahazmanesh 2006.)

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.

8.
Wealth of Nations I
.2.1–2. As we’ll see, the line seems to be taken from much older sources.

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).

10.
The reference to shepherds implies he may be referring to another part of the world, but elsewhere his examples, for instance of trading deer for beaver, make it clear he’s thinking of the Northeast woodlands of North America.

11.
Wealth of Nations I.4.2.

12.
Wealth of Nations I.4.3.

13.
Wealth of Nations I.4.7.

14.
The idea of an historical sequence from barter to money to credit actually seems to appear first in the lectures of an
Italian banker named Bernardo Davanzati (1529–1606; so Waswo 1996); it was developed as an explicit theory by German economic historians: Bruno Hildebrand (1864), who posited a prehistoric stage of barter, an ancient stage of coinage, and then, after some reversion to barter in the Middle Ages, a modern stage of credit economy. It took canonical form in the work of his student, Karl Bücher (1907). The sequence has now become universally accepted common sense, and it reappears in at least tacit form in Marx, and explicitly in Simmel—again, despite the fact that almost all subsequent historical research has proved it wrong.

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.

16.
Anne Chapman (1980) goes if anything further, noting that if pure barter is to be defined as concerned only with swapping objects, and not with rearranging relations between people, it’s not clear that it has ever existed. See also Heady 2005.

17.
Levi-Strauss 1943; the translation is from Servet 1982:33.

18.
One must imagine the temptation for a sexual variety must be fairly strong, for young men and women accustomed to spending almost all of their time with maybe a dozen other people the same age.

19.
Berndt 1951:161, cf. Gudeman 2001: 124–25, who provides an analysis quite similar to my own.

20.
Berndt 1951:162.

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. For a random example underlining the last two, see Perkins 2005.

22.
Lindholm 1982:116.

23.
Servet 2001:20-21 compiles an enormous number of such terms.

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.”

25.
Bohannan 1955, Barth 1969. cf. Munn 1986, Akin & Robbins 1998. A good summary of the concept can be found in Gregory 1982:48–49. Gregory gives one example of a highland Papua New Guinea system with six ranks of valuables, with live pigs and cassowary birds on the top rank, “pearl-shell pendants, pork sides, stone axes, cassowary-plume headdresses, and cowrie-shell headbands” on the second, and so on. Ordinarily items of items of consumption are confined to the last two, which consist of luxury foods and staple vegetable foods, respectively.

26.
See Servet 1998, Humphries 1985.

27.
The classic essay here is Radford 1945.

28.
In the 1600s, at least, actually called the old Carolingian denominations “imaginary money”—everyone persisting in using pounds, shillings, and pence (or livres, deniers, and sous) for the intervening 800 years, despite the fact that for most of that period, actual coins were entirely different, or simply didn’t exist (Einaudi 1936).

29.
Other examples of barter coexisting with money: Orlove 1986; Barnes & Barnes 1989.

30.
One of the disadvantages of having your book becomes a classic is that often, people will actually check out such examples. (One of the advantages is that even if they discover you were mistaken,
people will continue to cite you as an authority anyway.)

31.
Innes 1913:378. He goes on to observe: “A moment’s reflection shows that a staple commodity could not be used as money, because
ex hypothesi
, the medium of exchange is equally receivable by all members of the community. Thus if the fishers paid for their supplies in cod, the traders would equally have to pay for their cod in cod, an obvious absurdity.”

32.
The temples appear to have come first; the palaces, which became increasingly important over time, took over their system of administration.

33.
Smith was not dreaming about these: the current technical term for such ingots is “hacksilber” (e.g., Balmuth 2001).

34.
Compare Grierson 1977:17 for Egyptian parallels.

35.
e.g., Hudson 2002:25, 2004:114

36.
Innes 1913:381

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.

1.
Heinsohn & Steiger (1989) even suggest the main reason their fellow economists haven’t abandoned the story is that anthropologists have not yet provided an equally compelling alternative. Still, almost all histories of money continue to begin with fanciful accounts of barter. Another expedient is to fall back on pure circular definitions: if “barter” is an economic transaction that does not employ currency, then any economic transaction that doesn’t involve currency, whatever its form or content, must be barter. Glyn Davies (1996:11–13) thus describes even Kwakiutl potlatches as “barter.”

2.
We often forget that there was a strong religious element in all this. Newton himself was in no sense an atheist—in fact, he tried to use his mathematical abilities to confirm that the world really had been created, as Bishop Ussher had earlier argued, sometime around October 23, 4004 bc.

3.
Smith first uses the phrase “invisible hand” in his
Astronomy
(III.2), but in
Theory of Moral Sentiments
IV.1.10, he is explicit that the invisible hand of the market is that of “Providence.” On Smith’s theology in general see Nicholls 2003:35–43; on its possible connection to Medieval Islam, see chapter 10 below.