Upon the recommendation of several people, I recently acquired David Graeber's new book Debt: The First 5,000 Years. With a title like that, I assumed that it'd be a conventional and somewhat tedious work of economic history. However, since debt is ultimately at the root of the whole credit union project, I figured that getting a long historical view of the phenomenon would be worth the slog. As such, I brewed up a cup of tea, hefted the substantial tome, and began to read.
Within the first twenty pages, my expectations of a dry economic history narrative were completely blown out of the water. Graeber, it turns out, is an anthropologist, not an economist, and that perspective is powerfully evident throughout the text. Instead of accepting the commonly held assumptions of economists and lay people on the origins of money and debt, he uses his encyclopedic knowledge of human cultures to refute many of those premises with hard, specific evidence, and offers an interesting new lens through which to view the development and role of debt in both the historical development and the lived reality of human societies. Indeed, Graeber's insightful argument covers so much terrain that it would be virtually impossible to do it full justice in a short book review. As such, I'll limit my observations to a few key points and their implications for credit unionism.
The first part of the book is primarily concerned with butchering some of the economics profession's sacred cows. After pointing out that most Econ 1 students are currently taught that money evolved out of barter relationships, Graeber shows that this perspective has been rooted in thought experiments since the time of Adam Smith. However, when the actual historical and anthropological record is consulted, it is glaringly obvious that it actually happened the other way around: credit relationships came first and were later supplemented and sometimes replaced by coinage only as a result of the utility that the State derived from the markets thus created (i.e., they were convenient ways to provision troops, bureaucrats, etc.).
From this starting point, Graeber takes the reader on a whirlwind tour through a variety of topics which, on the surface, seem to have little to do with debt proper, such as slavery, honor, and the main moral principles which he argues underpin all economic relations in various combinations: communism (in a micro-social rather than political sense), exchange, and hierarchy. Masterfully synthesizing these disparate ideas, Graeber advances a very interesting argument about the origins of our contemporary conceptions of debt.
Initially, he notes, most human societies recognize that their constituent individuals cannot be truly bought or sold, and, as such, things such as dowries and bride wealth were paid in a special kind of currency (which he refers to as "social currency") which was generally not negotiable for commodities such as food, simple crafts, etc. Instead, such social currency had the function of rearranging the social relationships of people in the community, but, no matter the form of that rearrangement, each party had responsibilities towards the other.
This begins to shift in societies with the introduction of chattel slavery. In a traditional hierarchical society, even being at the bottom of the totem pole still meant that you existed in a web of mutual obligations with others in the community. However, an individual who has been entirely torn from their social context and purchased by an individual in a community in which they have no connections is an entirely different story. That slave can be treated in almost any manner without social repercussions, and can thus be used (and thought of) in an entirely instrumental way. This, according to Graeber, leads to a whole cascade of consequences that fundamentally changes the way people view the world in general: if humans are negotiable and alienable, so is everything else. The brutal effects of this transformation are illustrated with vivid historical examples from societies as disparate as West Africa and Thailand, and provides the foundation for a fascinating perspective that sees the social, religious, philosophical, and economic characteristics of a variety of historical periods as being heavily influenced by each era's conceptions about the nature of money and debt.
While the intricacies of Graeber's world-historical argument are fascinating and add enormous value to the book, its most interesting element, from a credit unionist perspective, is his discussion of the fundamental nature of debt. As he makes very clear, debt is such an essential element of our culture that we rarely stop to really consider its particulars. As such, he sets out to do just that, stating that, at its core, "Debt is a very specific thing ... It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are currently not in a state of equality--but for whom there is some way to set matters straight." (120)
A debt between two individuals thus creates a temporary hierarchical relationship between them, and in societies in which the alienation of relationships pioneered by slavery has been internalized, such debts can then be transfered to, or even originated by, a creditor with no interest at all in the wellbeing of the debtor as long as the debt continues to be serviced. As a result, debts in such societies can make the status of debtor virtually a form of slavery as they are pushed to do things that would have been unthinkable had the need to pay off their debts not been hanging over their heads.
A fascinating example of debt-obligations leading to incredible brutality can be historically located in the example of the conquest of Mexico. The leader of the small Spanish expeditionary force, Cortes, was deeply in debt, and saw the expedition as his chance to finally extricate himself from that situation. The incredible brutality of that campaign and of the genocidal working conditions later implemented by his lieutenants in the mines they administered has been traditionally been chalked up to the barbaric greed of thuggish conquistadors. However, Graeber argues that, as debtors, those men actually did not feel that they had much choice in the matter of how they behaved. In order to fend off their creditors, they had to extract as much wealth as quickly as they could in order to avoid being shipped off to Spain in chains, and their creditors, being distant and disconnected, cared little about what they were doing as long as the interest payments kept rolling in.
In light of this understanding of debt, the credit union project takes on new meaning. In contrast to the alienated quasi-slavery that resulted from being deeply indebted to a usurious loan shark, the credit union offered a different way of being. Instead of debt creating an hierarchical power relationship between the debtor and the lender, receiving a loan from an institution in which the debtor had an ownership stake allowed, in many cases, for being in debt to not have the effect of breaking the debtor's equal standing with the other members of his or her community. In addition, the "esprit de corps" that Roy Bergengren saw as a characteristic of many small credit unions functioned to limit the disconnect between the debt and the personal situation of the debtor. Old minutes of credit committee meetings are replete with instances of a loan being adjusted, or even written off, due to circumstances of legitimate hardship. As such, an appreciation of Graeber's perspective on the intersection of debt and power serves to provide a deeper understanding of the nature of the liberation that credit unions offered many people of modest means in the 20th century. The credit union was not simply a way to get better returns on one's savings or cheaper credit; it also offered a way for people who had been deeply socially degraded by debt to recover their dignity.
Though not specifically about credit unions, Graeber's work is nonetheless an incredibly valuable resource for both those interested in credit union history and those who work in the movement's contemporary institutions. He covers a truly enormous amount of ground, from anthropology to economics to philosophy to religion, and upon completing the book, one's understanding of debt, money, and history will be profoundly enriched. Do yourself a favor and get your hands on Debt: The First 5,000 Years!