Fifty Shades of Graeber
Anthropologist David Graeber’s beliefs about money and credit made him a leading thinker in the Occupy movement. But are his radical ideas — like forgetting one’s debts— simply too good to be true?
Cool, cooler, coolest: David Graeber is a New Yorker, professor of anthropology and self-proclaimed anarchist. He publicly declared his solidarity with the protests against the WTO and the G8 and is regarded as a leading thinker in the Occupy Wall Street movement. He writes books and articles with titles such as “Against kamikaze capitalism,” “Inside Occupy” and “On the Phenomenon of Bullshit Jobs.” The fact that his teaching contract at Yale University was not extended has further strengthened his reputation as a rebel. And it has not damaged his career: He now teaches at the equally prestigious London School of Economics.
When David Graeber gave a sold-out talk on debt and democracy at the Gottlieb Duttweiler Institute (GDI) near Zurich, the lines were long, and people were as likely to be wearing suits as they were to be sporting dreadlocks. In the same week, he spoke on the Swiss radio program Echo der Zeit, the business program Eco and the philosophy program Sternstunde Philosophie and gave a series of newspaper interviews. When has someone who wants to abolish capitalism in its current form received such attention lately?
Maybe it’s because David Graeber is a professor, which, in the consumption-led Western world, leads people to think that he is harmless. The best way to make unconventional thinkers appear harmless is to treat them with sympathy and let them speak once in a while. Speaking is something that Graeber does none too succinctly: It is almost impossible to follow his lecture and take notes at the same time, for he races through eras and places far too quickly. He has a high entertainment value and is enjoyable to listen to; for instance, when he complains that there are hardly any good bands in London anymore because British austerity measures have forced them all to take any old menial job. His books are equally easy to read, in that the examples he uses are true to life, and his tone is casual, and when he expresses criticism he does so with mild cynicism.
His views on money and credit, which he wrote about in his 500-page bestseller “Debt: The First 5000 Years,” are no less original: “Money is a military technology” is one; “We don’t all have to pay our debts. Only some of us do,” is another. His reasoning: “States constantly clear their debts by taking out new loans, big banks and insurance companies are bailed out using money from the treasury, but thousands of university graduates spend years paying off their student loans in installments.”
Graeber himself was one of them. But wouldn’t it be unfair to those who have settled their debts if others did not have to?
“This argument makes about as much sense as saying it would be unfair to a mugging victim not to mug their neighbors too,” counters Graeber.
Graeber believes that debt is an instrument of power and that money was initially created in the context of armies. The very first loans were war loans, he says, which enabled rulers to finance their campaigns and enlist financiers in return for war loot or revenue from the conquered territory. He claims that markets developed for a similar reason: A standing army of several thousand soldiers to feed and look after was too expensive for a single royal family. So they paid their soldiers with money and collected taxes from the civilian population, who in turn sold food to the soldiers and thus gained possession of money, which they then paid back to the monarchy in taxes.
Graeber himself admits that this is a simplification. It is more important to him to dispel the myth that markets and money developed semi-naturally from the barter economy. States and feudal rulers have always played a part in coins being minted and declared valid or allowing debts to be settled using money and credit to be sold on.
He criticizes the way in which banks are allowed to create money by borrowing money that they do not actually possess. Only five to ten percent of the loan amount issued by a bank has a real value. The bank lends itself the rest and passes it on as credit, in the expectation that the recipient will settle their debts. If a large number of the bank’s debtors are unable to pay, then neither can the bank. Graeber cites the automobile industrialist Henry Ford, who once said: “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
Loans are evil, of that Graeber is certain. And, in this light, every negative consequence of the credit system looks like part of an evil plan. But whatever one may think about how banks go about their business, there is no escaping the fact that without bank loans, our economy would grind to a halt. When the financial crisis was at its peak and the banks lent out very little money, it was precisely the small and medium-sized businesses that needed loans in order to procure the material they process or the products they sell that suffered. Graeber may have mastered the art of looking at a common phenomenon from a different point of view and drawing new conclusions in the process, but not everything that sounds plausible can also be proved. What Graeber writes sounds good, sometimes too good to be true.
Established economists see no crime in the prevailing credit system. During the discussion following David Graeber’s lecture at the GDI, the economic columnist Beat Kappeler from the Swiss newspaper Neue Züricher Zeitung said: “One person has money, the other person has projects. The two find each other and enter into a creditor-debtor relationship. This is normal. Crises and bankruptcies have always been the exception.” He continued, “In a functioning monetary economy with a sufficient supply of money and a capital market that uses interest as a regulator, the instruments of power are not distributed improperly. Problems only arise if the debtors use their regular income to pay the interest but not the amortization — meaning they get into too much debt — or if they borrow the interest again.” Kappeler described the problem of over-indebtedness in which various states currently find themselves.
Using interest as a regulator then forces states, whose ability to pay is dubious, to pay higher interest rates in order to take out new loans, which further increases their debt. Graeber did not elaborate on Kappeler’s objection. His response: “That is a naive view of how power and credit work.”
Although Graeber explains his ideas thoroughly in his books, he can be evasive if posed questions that contradict his ideas. When asked on Swiss television how anarchy could impose the prohibition of torture, he replied: “It makes little sense to get those who would most likely use torture to impose the prohibition of torture.” This demonstrates his distrust of government, but it does not answer the question. He continued: “There will always be mean guys who like to use force. But under an anarchical system, they certainly would not be head of the army.”
What makes David Graeber’s views refreshing is the confidence he exudes. He does not see himself as a lone fighter tilting at windmills; he believes that people’s way of thinking has already started to change. The protest movements against the WTO, the G8 and Wall Street capitalism have been successful, he claims, it’s just that it will be 20 or 30 years until it shows, as is the case with most revolutions: The demands of the 1968 generation only began to be satisfied in the 1980s, and what started as radical demands during the French Revolution spread throughout most of Europe half a century later. “If something that was still considered crazy a generation ago has at least become lip service in the meantime, then the revolution was successful,” Graeber clarifies.
Those old enough will remember the ’80s, when green thinking in Switzerland was sneered at and deemed odd. Now, all government parties profess to want to protect the environment. From this perspective, the half-hearted efforts to tighten banking regulations in order to prevent crises like the one in 2008 are the preliminary stages of a far-reaching reform of the banking and credit system. And if it does not turn out that way, at least it sounds good right now.