David Graeber’s is an amazing, must read book, important because it deals with the core issue of our civilisational crisis, i.e. how we deal with debt, very well written, surprising, and full of historical and anthropological insights.
* Book: Debt: The First 5,000 Years. David Graeber. Melville House Publishing, 2011
Today, David Graeber debunks the myth of barter, part of the ideology served in every economics textbook “101”:
David Graeber:
“In fact, our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems. Barter, in turn, appears to be largely a kind of accidental byproduct of the use of coinage or paper money: historically, it has mainly been what people who are used to cash transactions do when for one reason or another they have no access to currency.
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“The story … is everywhere. It is the founding myth of our system of economic relations. It is so deeply established in common sense, even in places like Madagascar, that most people on earth couldn’t imagine any other way that money possibly could have come about.
The problem is there’s no evidence that it ever happened, and an enormous amount of evidence suggesting that it did not.
For centuries now, explorers have been trying to find this fabled land of barter—none with success. Adam Smith set his story in aboriginal North America (others preferred Africa or the Pacific). In Smith’s time, at least it could be said that reliable information on Native American economic systems was unavailable in Scottish libraries. But by mid-century, Lewis Henry Morgan’s descriptions of the Six Nations of the Iroquois, among others, were widely published—and they made clear that the main economic institution among the Iroquois nations were longhouses where most goods were stockpiled and then allocated by women’s councils, and no one ever traded arrowheads for slabs of meat. Economists simply ignored this information.15 Stanley Jevons, for example, who in 1871 wrote what has come to be considered the classic book on the origins of money, took his examples straight from Smith, with Indians swapping venison for elk and beaver hides, and made no use of actual descriptions of Indian life that made it clear that Smith had simply made this up. Around that same time, missionaries, adventurers, and colonial administrators were fanning out across the world, many bringing copies of Smith’s book with them, expecting to find the land of barter. None ever did. They discovered an almost endless variety of economic systems. But to this day, no one has been able to locate a part of the world where the ordinary mode of economic transaction between neighbors takes the form of “I’ll give you twenty chickens for that cow.”
The definitive anthropological work on barter, by Caroline Humphrey, of Cambridge, could not be more definitive in its conclusions: “No example of a barter economy, pure and simple, has ever been described, let alone the emergence from it of money; all available ethnography suggests that there never has been such a thing.”
Now, all this hardly means that barter does not exist—or even that it’s never practiced by the sort of people that Smith would refer to as “savages.” It just means that it’s almost never employed, as Smith imagined, between fellow villagers. Ordinarily, it takes place between strangers, even enemies. Let us begin with the Nambikwara of Brazil. They would seem to fit all the criteria: they are a simple society without much in the way of division of labor, organized into small bands that traditionally numbered at best a hundred people each. Occasionally if one band spots the cooking fires of another in their vicinity, they will send emissaries to negotiate a meeting for purposes of trade. If the offer is accepted, they will first hide their women and children in the forest, then invite the men of other band to visit camp. Each band has a chief; once everyone has been assembled, each chief gives a formal speech praising the other party and belittling his own; everyone puts aside their weapons to sing and dance together—though the dance is one that mimics military confrontation. Then, individuals from each side approach each other to trade:
If an individual wants an object he extols it by saying how fine it is. If a man values an object and wants much in exchange for it, instead of saying that it is very valuable he says that it is no good, thus showing his desire to keep it. “This axe is no good, it is very old, it is very dull,” he will say, referring to his axe which the other wants. This argument is carried on in an angry tone of voice until a settlement is reached. When agreement has been reached each snatches the object out of the other’s hand. If a man has bartered a necklace, instead of taking it off and handing it over, the other person must take it off with a show of force. Disputes, often leading to fights, occur when one party is a little premature and snatches the object before the other has finished arguing.
The whole business concludes with a great feast at which the women reappear, but this too can lead to problems, since amidst the music and good cheer, there is ample opportunity for seductions. This sometimes led to jealous quarrels. Occasionally, people would get killed.
Barter, then, for all the festive elements, was carried out between people who might otherwise be enemies and hovered about an inch away from outright warfare—and, if the ethnographer is to be believed—if one side later decided they had been taken advantage of, it could very easily lead to actual wars.
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What all such cases of trade through barter have in common is that they are meetings with strangers who will, likely as not, never meet again, and with whom one certainly will not enter into any ongoing relations. This is why a direct one-on-one exchange is appropriate: each side makes their trade and walks away. It’s all made possible by laying down an initial mantle of sociability, in the form of shared pleasures, music and dance—the usual base of conviviality on which trade must always be built. Then comes the actual trading, where both sides make a great display of the latent hostility that necessarily exists in any exchange of material goods between strangers—where neither party has no particular reason not to take advantage of the other—by playful mock aggression, though in the Nambikwara case, where the mantle of sociability is extremely thin, mock aggression is in constant danger of slipping over into the real thing. The Gunwinggu, with their more relaxed attitude toward sexuality, have quite ingeniously managed to make the shared pleasures and aggression into exactly the same thing.
Recall here the language of the economics textbooks: “Imagine a society without money.” “Imagine a barter economy.” One thing these examples make abundantly clear is just how limited the imaginative powers of most economists turn out to be.
Why? The simplest answer would be: for there to even be a discipline called “economics,” a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes, or cloth for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death. Economics assumes a division between different spheres of human behavior that, among people like the Gunwinngu and the Nambikwara, simply does not exist. These divisions in turn are made possible by very specific institutional arrangements: the existence of lawyers, prisons, and police, to ensure that even people who don’t like each other very much, who have no interest in developing any kind of ongoing relationship, but are simply interested in getting their hands on as much of the others’ possessions as possible, will nonetheless refrain from the most obvious expedient (theft). This in turn allows us to assume that life is neatly divided between the marketplace, where we do our shopping, and the “sphere of consumption,” where we concern ourselves with music, feasts, and seduction. In other words, the vision of the world that forms the basis of the economics textbooks, which Adam Smith played so large a part in promulgating, has by now become so much a part of our common sense that we find it hard to imagine any other possible arrangement.
From these examples, it begins to be clear why there are no societies based on barter. Such a society could only be one in which everybody was an inch away from everybody else’s throat; but nonetheless hovering there, poised to strike but never actually striking, forever. True, barter does sometimes occur between people who do not consider each other strangers, but they’re usually people who might as well be strangers—that is, who feel no sense of mutual responsibility or trust, or the desire to develop ongoing relations. The Pukhtun of Northern Pakistan, for instance, are famous for their open-handed hospitality. Barter is what you do with those to whom you are not bound by ties of hospitality (or kinship, or much of anything else).
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In fact, there is good reason to believe that barter is not a particularly ancient phenomenon at all, but has only really become widespread in modern times. Certainly in most of the cases we know about, it takes place between people who are familiar with the use of money, but for one reason or another, don’t have a lot of it around. Elaborate barter systems often crop up in the wake of the collapse of national economies: most recently in Russia in the ’90s, and in Argentina around 2002, when rubles in the first case, and dollars in the second, effectively disappeared.26 Occasionally one can even find some kind of currency beginning to develop: for instance, in POW camps and many prisons, inmates have indeed been known to use cigarettes as a kind of currency, much to the delight and excitement of professional economists. But here too we are talking about people who grew up using money and now have to make do without it—exactly the situation “imagined” by the economics textbooks with which I began.
The more frequent solution is to adopt some sort of credit system. When much of Europe “reverted to barter” after the collapse of the Roman Empire, and then again after the Carolingian Empire likewise fell apart, this seems to be what happened. People continued keeping accounts in the old imperial currency, even if they were no longer using coins.28 Similarly, the Pukhtun men who like to swap bicycles for donkeys are hardly unfamiliar with the use of money. Money has existed in that part of the world for thousands of years. They just prefer direct exchange between equals—in this case, because they consider it more manly.
The most remarkable thing is that even in Adam Smith’s examples of fish and nails and tobacco being used as money, the same sort of thing was happening.
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Anthropologists have been complaining about the Myth of Barter for almost a century. Occasionally, economists point out with slight exasperation that there’s a fairly simple reason why they’re still telling the same story despite all the evidence against it: anthropologists have never come up with a better one.20 This is an understandable objection, but there’s a simple answer to it. The reasons why anthropologists haven’t been able to come up with a simple, compelling story for the origins of money is because there’s no reason to believe there could be one. Money was no more ever “invented” than music or mathematics or jewelry. What we call “money” isn’t a “thing” at all, it’s a way of comparing things mathematically, as proportions: of saying one of X is equivalent to six of Y. As such it is probably as old as human thought. The moment we try to get any more specific, we discover that there are any number of different habits and practices that have converged in the stuff we now call “money,” and this is precisely the reason why economists, historians, and the rest have found it so difficult to come up with a single definition.”
States creates markets and money, not the other way around
“Say a king wishes to support a standing army of fifty thousand men. Under ancient or medieval conditions, feeding such a force was an enormous problem—unless they were on the march, one would need to employ almost as many men and animals just to locate, acquire, and transport the necessary provisions.17 On the other hand, if one simply hands out coins to the soldiers and then demands that every family in the kingdom was obliged to pay one of those coins back to you, one would, in one blow, turn one’s entire national economy into a vast machine for the provisioning of soldiers, since now every family, in order to get their hands on the coins, must find some way to contribute to the general effort to provide soldiers with things they want. Markets are brought into existence as a side effect.
This is a bit of a cartoon version, but it is very clear that markets did spring up around ancient armies; one need only take a glance at Kautilya’s Arthasasatra, the Sassanian “circle of sovereignty,” or the Chinese “Discourses on Salt and Iron” to discover that most ancient rulers spent a great deal of their time thinking about the relation between mines, soldiers, taxes, and food. Most concluded that the creation of markets of this sort was not just convenient for feeding soldiers, but useful in all sorts of ways, since it meant officials no longer had to requisition everything they needed directly from the populace, or figure out a way to produce it on royal estates or royal workshops. In other words, despite the dogged liberal assumption—again, coming from Smith’s legacy—that the existence of states and markets are somehow opposed, the historical record implies that exactly the opposite is the case. Stateless societies tend also to be without markets.
As one might imagine, state theories of money have always been anathema to mainstream economists working in the tradition of Adam Smith. In fact, Chartalism has tended to be seen as a populist underside of economic theory, favored mainly by cranks. The curious thing is that the mainstream economists often ended up actually working for governments and advising such governments to pursue policies much like those the Chartalists described—that is, tax policies designed to create markets where they had not existed before—despite the fact that they were in theory committed to Smith’s argument that markets develop spontaneously of their own accord.”