My route to Modern Monetary Theory (MMT) came through English economist and global debt activist Ann Pettifor (The Coming First World Debt Crisis (2006)), who strongly advised study of David Graeber's signature work: Debt, the First 5,000 Years, Melville House (Brooklyn, London), 2011
After a recent re-read, I pulled together these notes and comments. Graeber excerpts are in quotation marks, standard white, their order somewhat revised (page numbers noted); the magenta headings and blue comments are my own.
Introduction
"Here we come to the central question of this book: What, precisely, does it mean to say that our sense of morality and justice is reduced to the language of a business deal? What does it mean that we reduce moral obligations to debts? What changes when one turns into the other? And how do we speak of them when our language has been so shaped by the market?" (13)
"The way violence, or the threat of violence, turns human relations into mathematics will crop up again and again over the course of this book." (14)
Part I – Obligation and Debt in Pre-State Societies
"WHAT IS THE DIFFERENCE between a mere obligation, a sense that one ought to behave in a certain way, or even that one owes something to someone, and a debt, properly speaking? The answer is simple: money. The difference between a debt and an obligation is that a debt can be precisely quantified. This requires money." (21)
"Debt pawns as money in the African slave trade." (152)
"Debt bondage arises out of ritual needs." (156)
"Reflections on violence" (158).
SMC: Debt bondage originated from ritual obligations in non-state, “human economies” (Graeber’s term). Ritual obligations for blood-death (a life is owed) are meaningful but never fully redeemable because the dead person was unique and cannot be replaced. Obligations for bride-debt also were ritualized, to symbolize a cost (taking on a father’s daughter for life) that could never be quantified and redeemed. The money (social currency) in human economies is never equal to the actual lives, just symbolic of an obligation or a desire to fulfill. The form of currency could be anything. Ritual currency tends to accumulate among elders (men, mostly) who, then, lend it to younger men who need it to fulfill the cost of certain ritual pay-outs and pledge themselves (their honor) to repay. These loans of currency, however, are not symbolic of obligations that can never be met but, rather, actual, finite obligations that can and must be repaid. If they aren’t, then, by honor, a man must provide surety (usually a family member) until it is paid. No one wants to be “pawned” in this fashion, and the closest capacity for violence is paternal authority. In desperate situations, fathers pledged their children against debts and lost them in the process. Once coercive violence enters the equation, debt servitude emerges. These kinds of values and practice set the stage for wide-spread adoption of debt peonage in the early millennia of agriculture and the first city-states.
Part II – Axial Age (8th century BC to 1st century AD): simultaneous origins of state-sponsored violence, empires, philosophy, monotheism in the Yellow River valley (China), the Ganges valley (India) and the Aegean Sea (Greece/Rome)
"Here, too, the patricians were ultimately faced with a decision: they could use agricultural loans to gradually turn the plebian population into a class of bonded laborers on their estates, or they could accede to popular demands for debt protection, preserve a free peasantry, and employ the younger sons of free farm families as soldiers…It seems significant, in this light, that the traditional date of the first Roman coinage – 338 BC – is almost exactly the date when debt bondage was finally outlawed (326 BC). Again, coinage, minted from war spoils, didn’t cause the crisis. It was used as a solution." (230)
"Large amounts of silver, gold, and copper were dethesaurized [melted down];…it was removed from the temples and houses of the rich and placed in the hands of ordinary people [starting with mercenary soldiers], was broken into tinier pieces, and began to be used in everyday transactions." (225)
"These new armies were, directly or indirectly, under the control of governments, and it took governments to turn these chunks of metal into genuine currency. The main reason for this is simple capacity: to create enough coins that the people could begin to use them in everyday transactions required mass production on a scale far beyond the abilities of local merchants or smiths." (227)
"Coinage played a critical role in maintaining this kind of free peasantry – secure in their landholding, not tied to any great lord by bonds of debt…Gold, and especially silver, were acquired in war, or mined by slaves captured in war. Mines were located in temples (the traditional place for depositing spoils), and city-states developed endless ways to distribute coins, not only to soldiers, sailors, and those producing arms or outfitting ships, but to the populace, generally, as jury fees, fees for attending public assemblies, or sometimes just as outright distributions…At the same time, insisting that the same coins served as legal tender for all payments due to the state government that they would be in sufficient demand that markets would soon develop." (229)
"
Markets appear to have first emerged…as a side effect of government administrative systems. Over time, however, the logic of the market became entangled in military affairs, where it became almost indistinguishable from the mercenary logic of Axial Age warfare, and then, finally, that logic came to conquer government itself, to define its very purpose." (248)
"Everywhere, too, we find philosophers who react to this by exploring the ideas of humanity and the soul, attempting to find a new foundation for ethics and morality…Everywhere, some of these philosophers made common cause with social movements that inevitably formed in the face of these new and extraordinarily violent and cynical times…The ultimate effect was a kind of ideal division of spheres of human activity that endures to this day: on the one hand, the market, on the other, religion." (248-9)
SMC: The military-coinage-slavery complex arose from resolution of the class contradiction between patricians and plebes in ancient societies at a time when warfare advanced from heroic bands of warriors and raiders to phalanx formations of mercenary troops. Money (tokens of various sorts) had first arisen (in the private sector) when some traders, issuing tokens (or other forms of IOU) to signify their debt to others, found that their IOUs were then passed to others to represent debts taken out by second note-holders. When the symbols of debts began to circulate, that signaled the near-arrival of money. But, the notes or tokens created by various people to signify debts (owed or held) needed to be standardized and mass produced before they could become money in a full social and commercial sense. The state had to get involved (Knapp, State Theory of Money (1905)). The state had to ensure sufficient quantity of standardized tokens. Since anything – sea shells, pure silver, debased silver, dried cod, leather tokens – might serve as money, it is the state’s intervention to resolve the quantity/quality issue of would-be money that decides which will be the “money of the realm,” and it does so by announcing which form(s) it will accept for payment of taxes. Knowing they must pay taxes, all entities then choose to denominate their debts in the state’s currency, thus creating a realm-wide market of exchange with the state’s currency serving as tokens of everyone’s debts. Of course, since money is created by states, it always comes into being and exists in the context of the state’s monopoly of law and its capacity to use force to enforce the law. When Roman Legions conquered a region, they never plundered. Instead, they used denarii to pay the local gentry for provisions while letting them know that, henceforth, taxes to Rome had to be paid in denarii. In no time and with little overt violence, a local, denarii-denominated market was created.
Part III – Middle Ages to Industrial Age
SMC: With Rome’s dark age collapse, the Middle Ages saw the return to “virtual money,” that is, to credit and debt in place of coinage, and debt peonage returned to Europe. The Church was the biggest landholder and the main purveyor of credit. The mercantile era (1588-1790) also was managed mainly by credit and debt arrangements with plundered gold ingots serving as surety. Thus, as the industrial age emerged, private credit and debt (rather than cash) was the norm.
"In fact this is precisely the logic on which the Bank of England – the first successful modern central bank – was originally founded. In 1694, a consortium of English bankers made a loan of L1,200,000 (pounds) to the king. In return they received a royal monopoly on the issuance of banknotes. What this meant in practice was they had the right to advance IOUs for a portion of the money the king now owed them to any inhabitant of the kingdom willing to borrow from them – in effect, to circulate or “monetize” the newly created royal debt. This was a great deal for bankers (they got to charge the king 8 percent annual interest for the original loan and simultaneously charge interest on the same money to the clients who borrowed it), but it only worked as long as the original loan remained outstanding. To this day, this loan has never been paid back. It cannot be. If it ever were, the entire monetary system of Great Britain would cease to exist." (49)
"The period from roughly 1825 to 1975 was a brief but determined effort on the part of a large number of very powerful people – with the support of many of the least powerful – to try to turn [Adam Smith’s classic] vision into something like reality. Coins and paper money were, finally, produced in sufficient quantities that even ordinary people could conduct their daily lives without appeal to tickets, tokens, or credit. Wages started to be paid on time. New sorts of shops, arcades, and galleries appeared, where everyone paid in cash, or alternatively, as time went on, by means of impersonal forms of credit like installment plans. As a result, the old puritanical notion that debt was a sin and degradation began to take a profound hold on many of those who came to consider themselves the “respectable” working classes…" (254)
Part IV – Final chapter: The Beginning of Something Yet to be Determined...opens with Aug 15, 1971, the day Nixon ended the gold standard
"Whatever Nixon’s reasons…once the global system of credit money was unpegged from gold, the world entered a new phase of financial history – one that nobody completely understands." (362)
"The United States has always been dominated by a certain market populism, and the ability of banks to “create money out of nothing” – and even more, to prevent anyone else from doing so – has always been the bugaboo of market populists, since it directly contradicts the idea that markets are a simple expression of democratic equality. Still, since Nixon’s floating of the dollar, it has become evident that it’s only the wizard behind the screen who seems to be maintaining the viability of the whole arrangement." (364)
"[M]oney has no essence. It’s not “really” anything; therefore, its nature has always been and presumably always will be a matter of political contemplation." (373)
SMC:Reagan-Thatcher marked the political end of the New Deal’s institutional redistribution regime. The masses would still have political rights, but they would now have to ensure their own economic security by buying a piece of capitalism (IRAs, retirement funds, etc.). Full-blown development in the 90s and 00s: the financialization of everyday life, neoliberalism.
"As an ideology, [neoliberalism] meant that not just the market, but capitalism (I must continually remind the reader that these are not the same thing) became the organizing principle of everything. We were all to think of ourselves as tiny corporations, organized around the same relationship of investor and executive: between the cold, calculating math of the banker, and the warrior who, indebted, has abandoned any sense of personal honor and turned himself into a kind of disgraced machine." (377)
"In this world, “paying one’s debts” can well come to mean the very definition of morality, if only because so many people fail to do so." (377)
"One must go into debt to achieve a life that goes in any way beyond sheer survival." (379)
"Finance capital [is] the buying and selling of chunks of that [capitalist] future, and economic freedom, for most of us, [has been] reduced to the right to buy a small piece of one’s own permanent subordination." (383)
"[This mythic route to personal, financial security imploded with the financial crisis of 2008, but]…we were left in the strange situation of not being able to even imagine any other way that things might be arranged. About the only thing we can imagine is catastrophe." (383)
"The real question now is how to ratchet things down a bit, to move toward a society where people can live more by working less. I would like, then, to put in a good word for the non-industrious poor. At least they aren’t hurting anyone. Insofar as the time they are taking off from work is being spent with friends and family, enjoying and caring for those they love, they’re probably improving the world more than we acknowledge. Maybe we should think of them as pioneers of a new economic order that would not share our current one’s penchant for self-annihilation." (390)
"Conclusion: Perhaps the World Really Does Owe You a Living" (388)
SMC: Graeber’s next book was Bullshit Jobs!
Part V – Reimagining Our Financial Future
"In this book I have largely avoided making concrete proposals, but let me end with one. It seems to me that we are long overdue for some kind of Biblical-style Jubilee: one that would affect both international debt and consumer debt. It would be salutary not just because it would relieve so much genuine human suffering, but also because it would be our way of reminding ourselves that money is not ineffable, that paying one’s debts is not the essence of morality, that all these things are human arrangements and that if democracy is to mean anything, it is the ability to all agree to arrange things in a different way." (390)
"[After the financial bailout, it’s obvious that] we don’t “all” have to pay our debts. Only some of us do. Nothing would be more important than to wipe the slate clean for everyone, mark a break with our accustomed morality, and start again." (391)
"What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence. If freedom (real freedom) is the ability to make friends, then it is also, necessarily, the ability to make real promises. What sorts of promises might genuinely free men and women make to one another? At this point, we can’t even say. It’s more a question of how we can get to a place that will allow us to find out. And the first step in that journey, in turn, is to accept that in the largest scheme of things, just as no one has the right to tell use our true value, no one has the right to tell us how much we truly owe." (391)
Steve Clark
Social Science
Alvin Toffler: The Third Wave
Frederick Engels: Origins of the Family, Private Property and the State
William Strauss & Neil Howe: The Fourth Turning: An American Prophecy
Helen Fisher: Anatomy of Love: A Natural History of Mating, Marriage, and Why We Stray
Marvin Harris: Cannibals and Kings: The Origins of Cultures