Arts

This week’s book review takes a break from fiction, and looks at economic history. Photo: CC, Melville House.

Chances are if you’ve taken an economics class, you’ve heard this story.

Once upon a time, people had desires, and in order to get the things we wanted, we had to barter. In other words, we ran into the “double coincidence of wants” phenomenon, where we just happened to have something to bring to market that somebody else wanted, and vice versa—without which, we couldn’t trade.

So over time we created this clever thing called a “medium of exchange” to make barter more efficient and avoid the double coincidence of wants—thus, money was born.

The first thing David Graeber does in his phenomenal 2011 book, Debt: The First 5,000 Years, is show how there’s absolutely no evidence for this whatsoever.

There has been barter of course, but as Graeber explains, most of the time this was in the context of people who were already familiar with the concept of money, or had low systems of trust. So what preceded money? Another old concept—debt.

Graeber examines the anthropological evidence and finds that, by going far back in history, we can see that people were familiar with debt and credit—contrary to the usual economic narrative.

This means that monetary systems did not emerge from the inefficiencies of barter—they were rather a symbolic unit of account for settling debts, and—almost always—issued by some authority.

As Graeber shows, blood feuds were settled by the weregild: if you killed someone, you were penalized, and assigned a debt which was assessed by issuing the authority’s unit of account. Similarly, if you married, your family owed a bride-price or dowry—which is, again, denominated in the issuing an authority’s unit of account. If you were conquered, you owed tribute (in lieu of slaves or other resources) to the conquering power.  

He explains this is how countries were forced to change. For instance, the European colonies in Africa were turned from subsistence agricultural communities to monetized economies—and, the same went for the British colonies in India, and countless others dating back thousands of years. The issuing authorities would force their unit of account down the throats of the colonized at gunpoint—or sword-point.

He traces the history of money from the Axial (pre-Medieval) Age to the modern era. When the great empires collapsed, so too did monetary systems.

It is only now in the modern stage we are just beginning to realize money is not a commodity like gold, silver, or Bitcoin. It is nothing more, as the economist Joseph Schumpeter said, “than a promise to pay.” Of key significance in today’s world is that some people’s promises, or entity’s promises, are more valuable than others.

But if you’re looking for a book packed with anthropological and historical evidence, some interesting stories—like how Frank L. Baum’s The Wonderful Wizard of Oz could have just been an allegorical tale about the monetary system—and something that also challenges our common misconceptions of what money really is—then, Debt is for you.