Sacred Headwaters #28: Money, Debt, and Society
We tend to think of money as a tool that facilitates exchange, and of debt as a simple representation of money. But some authors argue that money and credit systems actually shape society.
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Issue #28: Money, Debt, and Society
This issue is the third in a series of four newsletters focused on debt. In this series, I’m trying to build a narrative that makes it clear how important debt is as a cultural, political, and economic construct in the broader challenges of achieving a sustainable and equitable civilization.
Issue #27: Modern Monetary Theory (MMT) (Dec 7, 2020)
Issue #28: Money, Debt, and Society (Dec 21, 2020)
If you read Stephanie Kelton’s The Deficit Myth (referenced in the last issue on modern monetary theory) or Kate Raworth’s Doughnut Economics (discussed in issue #2), you’ll have been briefly introduced to an important point of disagreement in economics: the origins of money. Kelton and Raworth both argue emphatically that classical and neoclassical economists have the origins of money wrong. According to them, classical economists believe that humans were exchanging goods, and money sort of naturally emerged as a way to facilitate that exchange. This implies a worldview where money is a technical tool and where monetary systems may be tweaked to optimize exchange, but where the underlying social structures predate and supercede money. Kelton argues instead that money was created by government to allow it to impose taxes, in essence as a tool for self-legitimation, a component of her MMT worldview that derives from a macroeconomic theory called chartalism. But Kelton’s chartalist interpretation is just one of many non-traditional views, and at least one important insight comes from simply questioning the classical origin story: if money is not simply a way of making exchange more efficient…then money, and correspondingly, the structure of the monetary system, might play a more determinative role in the structure of society. In other words: do the financial structures of money, debt, and exchange actually contribute to the structure of the social relations that define our world, rather than simply being emergent properties of them? Are power dynamics, labor dynamics, and so on influenced by the monetary system and debt?
This may not sound revolutionary and it has a rich history in heterodox economic theory, but it’s a marked departure from so-called “mainstream" economics (though hopefully the last issue shed some light on the difficulties involved in classifying certain kinds of economics as “mainstream”). Rather than seeing money (and credit) as tools that make the barter system more efficient, they’re seen as structures that contribute to defining the entire structure of society, including the exchange of goods. In this issue, we’ll get introduced to one of the more famous scholars and activists who has explored these questions from a holistic perspective, David Graeber, and begin asking questions like: how does our monetary system impact society? How did our monetary system today develop and why is that important? How can we leverage a better understanding of the development of today’s monetary system in order to drive change towards a more equitable and sustainable civilization?
As always, though I’m feeling it particularly strongly with these last few issues, one newsletter and one hour of reading is barely scratching the surface: I’m trying to convince you that this kind of analysis is important in understanding our world, understanding the landscape of possibility available to us, and understanding how we can navigate that landscape, and providing a starting point for further exploration.
To Have Is To Owe (25 minutes)
This essay by Graeber (who tragically passed away earlier this year) is in some ways a short version of his book, Debt: the First 5,000 Years. He throws out the allegedly traditional economic idea of money as a tool for exchange, pointing out that very few non-Western non-money cultures have ever used systems of barter in the way the Adam Smith tradition of economics believed they might have. He goes on to look at the metaphysical origins of debt and the historical ones, albeit much more briefly in this article than in the book, and ties this into the post-2008 global economic picture. According to Graeber, the modern world is one defined by debt peonage in much the same way as many historic civilizations have been, and the institutions of the world — governmental and social institutions — serve almost entirely to enforce the rules of that debt. Perhaps most notably for me, he draws a holistic picture that connects the more cultural understandings of debt as a moral construct with the very rationale for the existence of states and international institutions.
It’s also interesting to think about what Graeber writes here in the context of the ongoing resistance to student debt forgiveness as a plethora of pseudo-moral arguments about why it’s a bad idea make the rounds.
This is a bit of a sprawling essay and may seem like it glosses over a lot of things; I’d encourage you to read both the next article, which contextualizes Graeber’s thinking more explicitly within heterodox economic theory, and the book Debt itself.
In Defense of David Graeber’s Debt (30 minutes)
This essay is technically a review of his book Debt: the First 5,000 Years, but it provides a great bridge from the macroeconomic monetary analysis of the last newsletter and Kelton’s Modern Monetary Theory to the bigger questions surrounding how monetary systems impact our social systems. The review focuses on the economic theory and analysis underlying Graeber’s work and does a good job clearing up some concepts with confusing terminology, something I’m not really helping with so far in this newsletter. “Money,” for Graeber, is effectively “cash,” including both fiat money (our current system) and commodity money (the previous gold standard); “debt” is what economists call “credit money” and is a measure of obligations that is not necessarily directly correlated to exact commodity money amounts.
This is an important distinction. At first glance, you might think that we exist in a commodity money system: as a layperson, “debt” seems like it is directly tied to what Mason calls “state tokens” (our fiat cash — dollars). But as we learned about in the last issue, that’s not really how it works: the amount of credit that is created and circulated in our economy is not deterministically tied to the volume of state tokens. Putting it bluntly, Mason states, “Today we are well into the unfamiliar terrain of a pure credit money system.” I don’t know that Graeber would agree with that statement, because Debt tries to analyze how historical societies existed on the monetary spectrum between commodity money and credit money, though Mason notes that Graeber’s analysis is not meant to be predictive: he’s not trying to claim that “because this historic civilization looked like this with a credit money system, the current civilization will evolve the same way.”
We don’t really know what this means. Economists (including some cited by Mason) have considered this scenario for some time, and it’s certainly part of why MMT is becoming more and more of a mainstream discussion. But Graeber’s analysis provides broader insight: in Debt, he looks at how civilizations throughout written human history have interacted with their monetary systems and how the differences between “debt” and “money” systems have correlated with differences in the social relationships manifest in those civilizations. Mason situates Debt within a tradition of macroeconomic and monetary theory, making the bridge between anthropology and economics that Graeber tried to build a bit more explicit.
One core lesson that Mason draws from Graeber’s work resonates very closely with Kelton’s work: the neoliberal global ideology has convinced us all that monetary policy is a “purely technical exercise,” an apolitical stabilization process following what we believe to be “natural laws” of economic systems. Graeber — and for different reasons, Keynes, Kelton, Marx, Minksy, and many others — argues the opposite: monetary policy is in essence a purely political enterprise that cannot be separated from the social relationships that make up our civilization, and to claim otherwise is in fact a political claim.
Podcast: Team Human with Astra Taylor and Thomas Gokey (40 minutes)
If you haven’t listened to Team Human before, don’t get scared off by Doug Rushkoff’s opening monologue! I like it, but it’s ok if you don’t, and he doesn’t get into debt until his guests come on. Astra and Thomas (and Doug) were at the Occupy Wall Street protests in 2011 — with David Graeber — and have spent the decade since organizing against, to use Graeber’s historical term, debt peonage in the US today. They’ve been involved in a variety of initiatives including Strike Debt, Rolling Jubilee, and the Debt Collective, trying to build collective power to overcome both the financial constraints and the social and moral ones that come with debt in today’s society. This conversation does a great job connecting the more theoretical questions of debt, money, and how they behave in and control today’s society with on the ground activism and collective action. The Debt Collective is a debtor’s union — as one author puts it in “Are Debtors the New Workers of the World?” the movement is an attempt to define “debtor” as a political identity that draws alliances across other, pre-existing identities to build collective power and overcome the global system of debt.
Books
I haven’t read any of these books yet, but I intend to read all of them. They’ve been highly recommended to me and seem to be equal contributors to an understanding of debt’s role in today’s civilization and its importance as a lever for social change.
Debt: the First 5,000 Years — We’ve already read a review of this one so I won’t belabor it. I will note that I think this kind of historical and anthropological analysis is incredibly important not because it tells us how things ought to be, but because it proves to us that the status quo is not the only way things can be. This is one of many reasons that I think it’s important to learn about and try to understand non-Western worldviews and epistemologies, something I’ve written about here before and will undoubtedly write about again.
The Making of the Indebted Man: An Essay on the Neoliberal Condition — Where Graeber looks at the history of debt over the last 5,000 years, Lazzarato looks at the history of debt in the last 200, arguing that it is a key component of modern neoliberal capitalism. He draws on many of the economists and philosophers that Graeber draws from less explicitly to build a political economic picture of the present-day debt economy as a system of social control.
Can’t Pay, Won’t Pay: the Case for Economic Disobedience and Debt Abolition — This book was released this year by Astra Taylor’s Debt Collective. It is a call to action for debtors around the world: through banding together, debtors can build collective power and demand an end to debt peonage, working to build a society of abundance instead of one of manufactured scarcity.
Image from “David Graeber and the rewriting of monetary history.”
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