Reflections from David Graeber’s “Debt, the first 5000 years”
“The story of money for economists always begins with a fantasy world of barter.” (Graeber, 2011, p23)
From the first chapters of his expansive work ‘Debt, the first 5000 years‘, David Graeber sets out to demolish much of the mythology around money, and its half-sibling debt (or credit, depending on which side of the tracks you hail from). Both Aristotle and Adam Smith are taken to task in chapter 2 for advancing the notion that money arose organically from barter.
No, says Graeber. Anthropologists, of whom Graeber is one, have been pouring icy water on this for 100 years: on page 29 he writes “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. ” (Humphrey 1985).”
Instead, Graeber tells us that within cultural groups, the basic form of exchange of goods and services is via social obligations, which are specifically not accounted for using any kind of numerical currency (p79,87). Although he does not explicitly call it out, I think Graeber is referring to the small scale communities beloved of anthropologists, like the villages where everyone knows everyone else, and many residents are related to each other by blood or marriage. Within the community, each person knows their social obligations towards everyone else, and shares their resources and skills accordingly (p33-4). No accounting is needed, and the sanction against wastrels is community shame or exclusion.
This makes intuitive sense, because if everyone is hunting the same game, gathering the same fruit, and farming the same crop, then what is there which would still need to be bartered for? Even where community members are specialising in whatever they are best at, they are still giving (not selling, not trading) the fruits of their labours to other members of the same community, confident that their own needs will in due course be met. Graeber wants us to see this gift economy or “everyday communism” (p100) as the default mode for economic relations between human beings.
In chapter 6, Graeber describes the two scenarios in which something that looks like barter begins to appear: the bride price and the blood debt. In both cases, he asserts that the relevant exchange goods are not to be considered as equivalent to the value of the life of a human being, but rather that the bride price (or dowry) and the blood debt are symbolic gifts to demonstrate that the giver is acknowledging an unpayable social debt. So still not true barter or trade, and still only executed between people who have an existing relationship of cultural obligation.
In contrast, Graeber says that “Barter is what you do with those to whom you are not bound by ties of hospitality (or kinship, or much of anything else)” (p33) and is “how one deals with people one doesn’t care about and doesn’t expect to see again.” (p34). No one expects it to be fair or honest, and there is no recourse for buyer’s remorse.
Having demolished barter as foundational to economic evolution, Graeber takes us (p39, 64) to the historical emergence of debt/credit in the city-states of Sumer in Mesopotamia, somewhere between 3500BC and 2700BC, where he, following Michael Hudson (2002), describes the city temples running credit accounts with dual currencies of silver-by-weight and barley-by-volume, with a fixed exchange rate between them (Hudson, 2004). The administration of these temple accounts both pre-dates, and may be the proximate cause of, the first invention of both writing and numbers.
While the city temple was the creditor, the debtors were the ordinary Sumerian farmers and artisans, who might have incurred their debts via rent, fees, or loans (p39). We should note that during this period, the ensi, the high priest of the temple, was the ruler of the city; kings in the sense of military overlords, only appear later at around 2700BC. So these debts to the temple are effectively debts to the government.
While the locals were settling their debts with barley at harvest time, silver was also used “as the means of payment for trade and mercantile enterprise” (Hudson 2018, para 6), presumably because foreign traders had no use for an account at the local temple, and wanted to settle their trading with a portable, durable commodity with no counterparty. One can debate whether this trade in silver represents just another commodity trade, or is actually the first money (coins do not appear for another 2000 years). If all trade goods were priced in specific amounts of silver, then silver had become money.
Because it pre-dates writing, we have no record of why the Sumer city-states started keeping credit and debt accounts, and Graeber does not directly address that question. But if we assume that whatever existed beforehand was some kind of social obligation system, then we can speculate that the increasing population of each Sumer community made it impossible for anyone to keep a mental track of who was meeting their social obligations, and who was free-loading: thus the community leaders resorted to keeping records of who owed what, thereby creating the debit/credit accounting system. The emergence of such systems could even be a significant factor in enabling the original growth of the first cities beyond the scale where everyone knows everyone else and there is no division of labour.
So, using the examples set out by Graeber, we can distinguish four systems of value exchange:
- community obligation : without records or currency; but cannot scale beyond a village-scale face-to-face community
- barter : has never existed as an organised endogenous system; it’s a sporadic thing you do with strangers
- debt(credit) obligation : with records and unit of account; has a counterparty; may be with or without interest payments
- commodity money : intrinsically valuable, portable, durable, no counterparty, no interest, no records required
For the avoidance of doubt, your bank account is a credit obligation and not commodity money, because you have a counterparty: legally the bank owns the money in your bank account, and you have loaned it to them: if the bank fails, you become an unsecured creditor of the bank. Bank notes and modern base metal coins are also credit obligations, because their face value is far more than their intrinsic value; their usefulness comes from legal tender laws confirming their validity for settling debts, particularly tax debts.
It can be seen that debt and credit can only operate in the context of legal authority, where there is an enforceable sanction against non-payment (p54). Yet, even in a market context where payments are in commodity money, traders may still prefer that there are laws protecting their ownership rights and enforcing their contracts.
The specific advantage of commodity money, is that once you have it in your possession, the value of that part of your wealth is no longer dependent on your relationship with anyone else: not your employer, not your landlord, and not even your government. In contrast, credit-based money can and does fall to its intrinsic value of zero, when its issuing institution loses its credibility.
Graeber blurs these categories, when he recounts the view of Credit Theorists that “a banknote is simply the promise to pay something of the same value as an ounce of gold. But that’s all that money ever is. There’s no fundamental difference in this respect between a silver dollar, a Susan B. Anthony dollar coin made of a copper-nickel alloy designed to look vaguely like gold, a green piece of paper with a picture of George Washington on it, or a digital blip on some bank’s computer” (p46) and “A gold coin is a promise to pay something else of equivalent value to a gold coin. After all, a gold coin is not actually useful in itself. One only accepts it because one assumes other people will” (p47).
It’s unclear whether Graeber really believes this, given that he clearly knows that the silver dollar and gold coin will continue hold their value long after the credit obligations (base metal coins, notes, and bank accounts) have lost their purchasing power due to inflation or currency failure. This mutability of perspective is a recurring issue: sometimes Graeber describes a perspective in great detail, only to slap it down on subsequent pages: chapter 3 spends ten pages (p55-65) enthusiastically recounting Primordial Debt theory and then the next six pages debunking it.
Having examined the origins of debt and money, Graeber devotes four chapters (8-11) to a world-spanning history of financial practice, identifying repeated shifts between the pre-eminence of commodity money and the dominance of debt and credit forms of stored value. He includes a fascinating wealth of anecdotes, with something for everyone to justify their pre-conceptions or broaden their understanding. However, in trying to tie vastly disparate geographies and cultures together like this, he loses some focus, and perhaps accuracy.
Across centuries and continents, Graeber notes the repeated occasions where the poorest members of society were subjugated by use of debt and foreclosure (p216 Sumer, p231 Rome, p256 India, p259 China) and ultimately this is what animates the thesis of his book. Is the debt trap an inescapable consequence of capitalism, or is it just another tool of elite dominance, to be preferred over physical violence because the state will enforce it on your behalf?
What is society do with people who cannot (or will not) pay their debts? Does it matter how they got into debt in the first place and what they spent the money on? Was it foolishness, over-ambition, or just an unavoidable accident? An amoral society has lost the means and will to differentiate between the choices that led to indebtedness. But to be indebted is to have broken a promise (p391); does an amoral society not even expect people to keep their promises? Graeber pines for the village community where mutual relationships address this, but in our overpopulated world of cities, almost everyone has become detached from their community, detached from any set of people who know them well enough to decide whether or not to bail them out of their debts.
What about the debts of governments? Graeber reminds us (p364) that “modern money is based on government debt, and that governments borrow money in order to finance wars” and any historical chart of UK or US national debt will confirm that. We are on the hook for debts incurred before we were born, and our grandchildren are on the hook for the debts we incur today.
I agree with Graeber that debt (particularly interest-bearing debt) is a grave threat to our shared future, and I am indebted to him for the wealth of his scholarship shared in this book.
Afterword: if you are going to read Graeber’s book, then I recommend (with Alessandro Perilli) to read chapter 1 last, to avoid having your mind pre-programmed with the author’s partisan positioning. The 60 pages of footnotes are also fascinating. Your search engine will guide you to a downloadable PDF if that’s your thing.
References:
Graeber, David (2011) ‘Debt, the first 5,000 years’, Melville House.
Hudson, Michael (2002) “Reconstructuring the Origins of Interest-Bearing Debt and the Logic of Clean
Slates.” in Debt and Economic Renewal in the Ancient Near East (Hudson, Michael and
Marc Van de Mieroop, editors), pp. 7-5 8 . Bethesda: CDL Press.
Hudson, Michael (2004) “The Role of Accounting in Civilization’s Economic Takeoff.” In Creating Economic Order: Record-Keeping, Standardization and the Development of Accounting in the Ancient Near East (Michael Hudson and Cornelia Wunsch, editors, 2004), pp. 3-5. CDL Press. Available at https://www.imtfi.uci.edu/files/docs/2013/hudson.pdf
Hudson, Michael (2018) ‘Palatial Credit: Origins of Money and Interest’ available at https://michael-hudson.com/2018/04/palatial-credit-origins-of-money-and-interest/ Accessed 6 Jan 2026.
Humphrey, Caroline. 1985. “Barter and Economic Disintegration.” Man 20: 48-72. 1994. “Fair Dealing, Just Rewards: the Ethics of Barter in North-East Nepal.” In Barter, Exchange, and Value: An Anthropological Approach (Caroline Humphrey and Stephen Hugh-Jones, editors), pp. 107-141. Cambridge: Cambridge University Press