#2. A Summary (and Critique) of ‘Debt: The First 5000 Years’ by David Graeber

‘Debt: The First 5000 Years’ by David Graeber (Melville House, 12/07/2011)

Table of Contents:

i. Introduction/Synopsis


1. The Beginnings of Money from the Point of View of Classical Economics

2. The State of Nature: Hunter-Gatherer Tribes and the Origins of Exchange

3. The Question of Human Nature (and the Optimal Society)

4. The Origin of Money (as Debt)

5. The Origins of Exploitation, Markets, and Institutional Debt

6. The Revolt of the Debt Slaves

7. The Origins of Debt Relief

8. The Military-Coinage-Slavery Complex (and the Origin of Metal Coins)

  • 8a. The Military-Coinage-Slavery Complex
  • 8b. The Break Down of the Military-Coinage-Slavery Complex

9. The Intellectual Backlash against Debt Slavery (the Point of View of Philosophy and Religion)

10. The Middle Ages

  • 10a. The Early Middle Ages: The Rise of Religious Wealth and the Overcoming of Restrictions on Usury
  • 10b. The Later Middle Ages: The Re-establishment of Trade Networks


11. The Origins of Modern Banking

12. The Problems with Modern Banking: Bank Runs and Inflation

  • 12a. Bank Runs
  • 12b. Inflation

13. Fixing the Problems with Modern Banking: Minimum Bank Reserves

14. The Origins of Central Banks (and National Currencies)

15. The Origins of the United States Central Bank: The Federal Reserve


16. On The Legitimacy of Central Banks

17. On the Legitimacy of Capitalism

  • 17a. Capitalism as an Unsustainable Economic System
  • 17b. Capitalism as an Illegitimate and Corrupt Economic System

18. Conclusion

i. Introduction

Debt is certainly a topic of deep interest and import these days, what with future prosperity seemingly threatened on all sides by a combination of personal, commercial, and national debt. A fact that has been brought home with particular poignancy in recent times by the role that debt played in the latest global financial crash of 2008, and the continuing threat of growing consumer debt and national debts in places such as Greece, Ireland, Portugal, and now Italy, and, of course, the US. According to Anthropologist David Graeber, author of the new book ‘Debt: The First 5000 Years’, debt takes on an even larger significance when we trace its history, since this exercise allows us to gain a new and more complete understanding of economics as a whole, and our modern capitalist system in particular (not to mention several other aspects of the human condition to boot). The story of debt takes us from the origins of money itself; through to the age of slavery and conquest; on to the origins of the major world religions (with their near universal prohibitions on usury); through to the middle ages, and the beginnings of capitalism and the modern banking system; and finally on to the modern age itself with its national currencies, central banks, and commitment to market capitalism.

While this story is interesting in its own right, Graeber’s main argument here is that tracing the history of debt unearths some uneasy truths and deep flaws in the nature of modern capitalism, and it is high time, he proposes, that we rekindle the conversation about how and with what we might replace it.

According to Graeber, capitalism is faced with two fundamental flaws. To begin with, its assumptions about human nature are both false and immoral. Second, it is ultimately unsustainable.

With regards to the first flaw, Graeber complains that capitalism is a completely impersonal system that treats people not as they truly are—that is, moral agents, and nodes in a nexus of interpersonal relationships—but as isolated, impersonal, self-interested entities; transaction machines, as it were, and ultimately reducible to mere matter and mathematical calculations (the traditional narrowly self-interested and materialist homo economicus of classical economics lore). According to Graeber, seeing people in this way flies in the face of our intuitive way of regarding ourselves and one another, and leads us into immoral behaviour that we would not otherwise stoop to or conceive of as conscionable (for example, holding others to their monetary debts [including developing countries], come hell or high water).

With regards to capitalism’s second flaw, Graeber argues that capitalism is ultimately unsustainable since it depends on perpetual growth (quantifiable at a rate of 5% per annum), which simply cannot be maintained on a finite planet.

Graeber’s arguments that capitalism is essentially a corrupt and unsustainable economic system remain ultimately unconvincing. Nevertheless, it is clear that tracing the history of debt does add to our understanding of history, economics, modern capitalism, and indeed many other aspects of the human condition, and, as such, is a worthwhile project on this count alone.

In what follows, I will retrace the major steps in the history of debt as presented in Debt: The First 5000 Years. I will also outline David Graeber’s main arguments with regards to the faults of modern capitalism. Where I am unable to resist, I will provide a response to Graeber’s line of thinking.


1. The Beginnings of Money from the Point of View of Classical Economics

Graeber begins by attacking the story, so ubiquitous in traditional economic theory, of how money originated. The story runs that people started off with a barter economy, where they traded goods back and forth. For instance, John may have apples, and Mary oranges. John and Mary exchange apples for oranges and both benefit in the process. There is a problem here, though: what if Mary wants apples, but John doesn’t want oranges: they cannot make a trade. If only there was something that everyone wanted that could be used to trade for anything and everything. Aha! Gold!! Hence people began trading their goods for coin, and money was born.

The problem with this story is two-fold, according to Graeber. To begin with, it simply isn’t true; and second, it carries with it assumptions about human nature that are equally false. By retracing the real story, we not only come to see that this one is false, but that the assumptions of human nature upon which it is based are also false.

In order to understand the real story, Graeber claims, we must go back to the very first instances of trade in human history (or, in this case, pre-history).

2. The State of Nature: Hunter-Gatherer Tribes and the Origins of Exchange

This story begins with the nomadic hunting and gathering tribes that populated the earth exclusively up until the first agricultural (or Neolithic) revolution some 11 or 12 000 years ago.

Most of these tribes consisted of no more than 50 to 100 people. Within each tribe a kind of communism existed, since the men would often hunt together, and divvy up the spoils. As such, trade did not really figure amongst the members of each given group.

Where trade did exist was between groups. However, this trade, at least initially, did not take place in order to secure material advantage. Rather, the practice of trading was used to create ties of friendship between groups that were naturally very hostile towards one another, and would otherwise have been constantly warring. For these early people, the problem of barter does not arise, since the purpose of each tribe was not to secure a particular item, but simply anything of value upon which to base a trade, and hence a relationship.

Societies that organize their economies not for material advantage but as an expression of the social relationships therein, Graeber calls ‘human economies’. The fact that human economies existed as the original economic system demonstrates that people initially thought of themselves not as isolated, self-interested individuals, but as people who exist within a web of interpersonal relationships. In contrast to this, by taking a barter economy as your starting point you are saying just the opposite, for the assumption here is that each individual bares no personal relationship to the other, and the purpose and goal of each individual is nothing other than to increase their material advantage: each person is a transaction machine designed to reap the greatest advantage, and treats all others in the same impersonal way. When we are reminded of how human communities actually started out, we come to see that this view of human nature is not necessarily accurate.

3. The Question of Human Nature (and the Optimal Society)

As a rejoinder to Graeber, we might argue here that the fact that people begin as nodes in interpersonal relationships does not preclude their also being self-interested agents. Indeed, the very the fact that inter-group animosity and conflict is a pervasive feature of our past, existing alongside an original in-group communism, does seem to point up our dual nature. Additionally, even within groups, while a material communism may have existed, differences in immaterial currency nonetheless arose, such as a greater amount of honor and reputation being heaped upon the best hunter or warrior, or the most skilled healer, or the wisest advisor. It’s as if the inability to reward more productive people with more material goods (due to practical difficulties) is understood as needing to be corrected by rewarding them with another form of currency; And indeed this immaterial currency (in the form of honor and reputation) often translated into concrete material advantages (at least in the biological sense), such as access to more (and/or more highly coveted) sexual partners. Again, I am not arguing that our moral sense and other-interest are not important features of our human nature (as indeed I am convinced they are), but it must be granted that there is also an important element of self-interest and love of gain in our nature as well.

Now, Graeber does seem to acknowledge that self-interest is an aspect of our humanity. However, for him, this does not mean that we need to base our society on this aspect of ourselves, as, he claims, we currently do: “of course we have a propensity to calculate. We have all sorts of propensities. In any real-life situation, we have propensities that drive us in several different contradictory directions simultaneously. No one is more real than any other. The question is which we take as the foundation of our humanity, and therefore, make the basis of our civilization” (p. 130).

However, it does not seem to me that we have the luxury to simply pick and choose which aspect of our humanity we want to make the basis of our civilization, since if we try to set up a system that does not adequately accommodate all of the aspects of our humanity, we are bound to create a system that simply doesn’t work. Indeed, this has long been the main criticism against trying to set up communism at the level of the state: it simply fails to accommodate our self-interested side, and therefore, is bound to fail (as 20th century experiments attest to).

4. The Origin of Money (as Debt)

At any rate, Graeber continues by way of telling the story of how money actually originated. The true story once again reveals how important human relations are at this early stage. For this story we must go back in time to just after the beginning of the Neolithic Revolution 11 to 12000 years ago.


*For prospective buyers: To get a good indication of how this (and other) articles look before purchasing, I’ve made several of my past articles available for free. Each of my articles follows the same form and is similar in length (15-20 pages). The free articles are available here: Free Articles

8 thoughts on “#2. A Summary (and Critique) of ‘Debt: The First 5000 Years’ by David Graeber

    • Thanks for taking the time to comment Tom. I read the first of the two articles that you cite. Your claim is that we will not be able to produce enough energy in the future to support sustained growth (or, at least the growth trend that we are currently on). You mention two points in particular that may undercut your claim. The first is that we cannot tell today what our future technological ability will be, and the second is that population growth is moving towards stabilization. You argue that these factors will ultimately not be enough to avert energy demands outstripping energy supply. I am somewhat more optimistic about these factors than you. See my article on ‘Abundance: The Future Is Better than You Think’ here: http://newbooksinbrief.com/2012/03/03/a-synopsis-of-abundance-the-future-is-better-than-you-think-by-peter-diamandis-steven-kotler/

      The Book Reporter

      • Actually I haven’t written the text I linked to :)
        Well, I’m not that pessimistic.. it’s just that I think it’s not going to work if we retain economic growth and by implication (see second linked to post) growth in energy consumption..

    • Hi Paul. Thanks for the comment. I read the article that you cite. Now, I found plenty to criticize in Graeber’s book, but I actually thought his anthropological history of money was one of its strong points. I have noticed that many critics of Graeber like to challenge his historical account, but I think this is missing the point. The classical view of money (also ascribed to by the Austrian camp) does not depend on the barter story actually being true, it just depends on the view of human nature behind it being true (a view of human nature that recognizes people as being self-interested creatures). Graeber (and many of his critics) seem to think that disproving the historical account disproves the view of human nature behind it (and thus the entire theory), so they focus on the historical account. I maintain that we can well except Graeber’s historical account (and he certainly supports it well), without throwing out the view of human nature that is behind the barter story. Actually, to be precise, I think that Graeber is right to point out that we do have a moral/interpersonal/communal aspect to our nature. The thing is that our nature also includes a self-interested aspect, and Graeber’s historical account does not disprove this (though he seems to think so, and others seem to be prepared to accept this at face value). The problem is that the self-interested aspect of our nature is not only present, it is the lowest common denominator, so any viable politico-economic system must take this into account, and factor it in. I’m not the first person to think this, this is Adam Smith’s own view. Indeed Smith explicitly said that we human beings have a moral nature, but also recognized that we have a self-interested side that we ignore at our peril, and that we could (and should) exploit for the sake of the common good.

      In any event, as opinionated as I am, I am going to live my own opinions out of my summaries of Schiff’s and Krugman’s books, and just do my level best to render their arguments as accurately as I can, so that the reader can decide for themselves which is most persuasive. After I am finished summarizing the books I am going to record a podcast wherein I discuss both books and offer my own opinion on which argument is best, but in the blog posts I will let the author’s arguments speak for themselves.


    • By the way, Paul, having read both Schiff’s and Krugman’s books, you probably noticed that the the two authors represent fairly extreme views on opposite ends of the economic continuum. For a more middle course (to better appreciate all points of view), I highly recommend Greenspan’s book ‘The Age of Turbulence’. It not only lays out the middle course with regards to economics, but features an (extreme) insider’s look with regards to the last half century in American economic history.


      • Hi Aaron – Thx for the nod to the Greenspan book. I am perplexed by Greenspan, it´s like an alien force took over his mind. The contrast between his philosophy during his “Ayn Rand years” and his actions as Fed Chairman is baffling to me. Or did he forget that ethics and morals must not be overlooked in the pursuit of self interest?

        Thanks very much for the extra comments on the Graeber book, it is a very interesting subject. I agree with you that Graeber has added to the works of Mises et al with his anthropological evidence.



  1. Readers might want to check out Joseph P. Farrell’s “Babylon’s Banksters: The Alchemy of Deep Physics, High Finance and Ancient Religion.”

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