A History of Debt: David Graeber’s Four Ages

(1450 words)

Standing back from a big, highly detailed painting usually allows us to understand it better. Trying to understand the current monetary system, it’s been interesting to read and listen to the anthropologist and anarchist David Graeber talk about his insights from studying the history of debt.

I would encourage you to buy Graeber’s book, Debt: the First 5,000 Years, if the subject interests you. However there are PDF copies available for free download from any number of anarchist websites if you don’t have the budget for it.

Some of Graeber’s conclusions are surprising and contradict many of the notions about economics history we come out of school believing. His main arguments are generally compelling and I have not yet found a sound rebuttal.



One example concerns barter. We are lead to believe that before the invention of money (in the form of coins) if you wanted a chicken you would bring a cow to a market and swap the cow with someone who happened to have chickens. Such a system is obviously unworkable and I am surprised that I accepted this notion when I learnt it from my economics teacher. What happens if the trader with the chicken didn’t need a cow? How do you decide how many chickens equal a cow? What if you only want half a cow’s worth of chickens?

In fact, the earliest societies operated on a gift system. If you needed something you would ask for it and it would be given to you. Of course, you can’t just take and never give, Graeber gives an example of a Maori man who took advantage of the system this way. He would never fish but always be asking for fish. The men who had spent all day fishing were compelled under tribal law to give him a share of their catch. Eventually, the tribe decided the best way to solve this problem was to kill him.

In Mesopotamia, and probably elsewhere, instead of killing people for asking for too many fish, a system developed where you could run up a tab and settle the difference between what you got and what you gave when harvest time came.

So the notion of ‘credit’ arrived much earlier in human history than most of us might think. Indeed, tribal people are capable of higher level thinking than we give them credit for. Graeber notes a report by Maurice Leenhardt, a Catholic missionary to New Caledonia, who said the natives already understood the notion of a ‘spirit’ before they met any missionaries. But for reasons we will see, they did not have an understanding of materialism until they learnt about it from the missionaries.


Ages of Debt

Perhaps the main conclusion drawn from Graeber’s overview of debt in history is that society alternates between ages where we use gold and silver to settle our debts and ages where we use virtual money. He identifies four separate ages, and proposes that we are now entering a fifth age which holds uncertain consequences.



The age of the first agrarian empires from 3300BC to 800BC began in Mesopotamia, where the main form of money was credit. Society was dominated by large public institutions, especially temples. Accounts were settled at set times of the year. Even in these early days, the idea of interest rates on unpaid debt is already part of accounting. For thousands of years, the interest rates were unchanged at 20%.

Debt crises often occurred as a result of crop failures, floods, droughts and plagues and people would end up losing possessions, cattle, eventually their children, wives and their own liberty to pay their debts. Rather than submit to slavery, some people would leave their farms and become bandits. When this problem became too big and the empire started to break apart, the king would announce a forgiveness of debt, wipe the slate clean and start over again. Debt forgiveness became institutionalized so that every new king would enact a cleansing of debts as his first action and do it again every seven years. Regrettably, debt forgiveness is not one of the ideas that has been passed down to our times.


The Axial Age

The second age went from 800BC to 600AD, beginning when coinage was invented. It was a time marked by giant empires, vast armies, slavery, the rise of world religions. All the trends of Chinese philosophy arose along with ideas of materialism, scepticism, sophistry, nihilism, followed by a popular reaction against it all.

Coins were, at first, a military invention – the Phoenecians were the last to adopt coinage even though they were the great trading empire of their time. Large professional armies needed to be provisioned, but local merchants didn’t want to extend credit to soldiers (it’s dangerous to collect debts from big men who know how to swing a sword and who might not be alive to pay after the next battle, anyway).

Taxes were introduced by the king in order to create a demand for coinage, as the king would only accept coins for payment of tax.

One of the early adopters of coinage was the city state of Miletus (Greek mercenaries were highly important throughout Asia Minor). The early philosophers of Miletus were among the first to try to understand concepts of substance, materials, what things are made of. Coins were recognized as both a substance and an abstraction. Coins were always worth more than the gold or silver that they were made from (this margin is known as ‘fiduciarity’).

In China, coinage arrived around 550BC. This also lead to ideas taken up by Chinese philosophers. Mozi tried to demonstrate that war is never profitable. Confucius tried to invert it completely by concentrating on ideals of honor, virtue etc. Eventually, imperial expansion reached its limits and the emperors looked to these philosophical social movements and tried to institutionalize them. This was managed successfully in China, somewhat more shakily in Europe by Constantine the Great.


The Middle Ages

From 600AD to 1450, the Middle Ages saw a return to virtual credit money. Nobody had much cash. They kept account of their debts and settled them once or twice per year. The language of credit and personal credibility developed and were entangled such that this is the time when descriptions such as ‘a person of no account’ ‘worthies’, ‘people of great credit’ were first used. Money was basically trust. It was the basis of social relations.

Complex debt instruments were invented which calculated compound interest etc. Tally sticks were used in England, paper money started to be used in China – “cash” is thought to be a Tamil word for Chinese money. The check was invented in modern day Iraq. Many of these ideas did not reach Europe until 500 years after they were invented.


Age of the Great Capitalist Empires

The period from 1450 to 1971 saw the conquest of the New World and a reversion to bullion, giant empires, chattel slaves and a price revolution in Europe. This age actually starts with rebellions against cash in China and reversion to a silver based economy. The need for increasing amounts of silver bullion to allow the economy to grow caused a huge demand for South American silver.

By Hobbes’ time, debt had become criminalized. Extremely harsh penalties were inflicted on debtors. Big debts were taken to the courts to be registered. Bankruptcy laws have softened these penalties, but there remains a social stigma against bankrupts and those who get into debt too readily.


The Beginning of Something Yet to be Determined

The current age began in 1971 when Nixon abandoned the gold standard.

Periods of credit money tend to be dominated by a few institutions which to act to protect debtors – royal debt forgiveness in the first age, medieval controls on usury. So we should expect the current age will mark a return to something like this, but so far the opposite has happened. The IMF protects creditor nations, there is no serious discussion of debt forgiveness among the elite.

It should be noted that, in history and in most human relationships, debt is treated differently when it is between social equals than when it crosses caste boundaries. This is why, during the Global Financial Crisis, Washington forgave the banks debts but mortgage holders lost their houses.



It’s a bit disappointing that we still can’t predict what is going to happen next. I suppose historians are always doomed to seeing everything in hindsight. But measured in such long time periods, the current age of debt has only just begun, so at least we can prepare ourselves for what might come.

For me, it was gratifying to confirm my suspicions about the connections between debt, slavery and working for wages. Perhaps we are seeing a departure from slavery in the current Western trend towards a jobless society.

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