Debt: The First 5000 Years
David Graeber
Penguin Books India (Allen Lane), Rs 799, Pp 534
In the Mahabharata, in a rapid quiz with Dharmaraj, Yudhishtir says his definition of a happy man is someone who has his own home and does not owe a debt. Through the subsequent millennial and even now, banks in India offer detailed statistics on how people in India never want to prolong their housing loans.
An aversion to debt is classical. As human beings settled down, as agricultural communities and property rights were formalised, debt would have also arrived. Transactions on a mass scale would have been impossible otherwise.
This is possibly the cause for debt to have got in the hair of religious teachers. A deeply irreligious thought is that the cohort of believers for every savant got expanded whenever debt overhang in the society multiplied. Those would typically also be the phases when famine or pestilence would have expanded too, possibly the reason why debt expanded in the first place.
Given the formidable array of punishments states deployed against debtors, the asylum of the religious teacher was often the only way for escape. This operated across societies. The teachers were, therefore, going with the grain when they threatened usurers and their assemblage with fairly venomous stamps of retribution.
Still as Yudhisthir?s, and subsequent shlokas make out, payment of debt was elevated to a semi-religious status. It obviously made it easy for the state to avoid taking the corporal route frequently and also made the king, who wrote off debt in times of general crisis, appear even more larger than life.
Some of the reasons why pre-capitalist societies used a harsh framework to enforce payment of debt was also because there were few monetary tools available to transform debt. Enforcement of contract was a function of a functioning state, often made difficult when state boundaries changed, as it happened too frequently in India. In periods of currency crisis, it was difficult to square off debt. Muhammad Bin Tughlak?s paper currency experiment without the backing of an established gold standard showed up to the creditors the risk of losing their capital, even otherwise.
Respect for the sanctity of debt and its obverse charging of interest did create the inevitable problem of bonded labour, especially in rural areas. The phenomena of indentured labour transported from India to Mauritius and further afield to the Caribbean appear graphically in Amitav Ghosh?s Sea of Poppies.
Maybe the collective memory of debt as an avoidable peril is the reason why even in more recent periods Indians are prompt in trying to erase their debt, including even those meant for long-term benefits like housing loans. While the ticket size for a standard housing loan is 15 years, eight years is the norm by when families try to square off their loans, even if they lose their income tax benefit in the process.
But is debt then on a par with the original sin, as David Graeber would want us to believe? The history of debt over the last 5,000 years is an erudite work. The journey as an alternate economic history of the world is engaging and detailed. The anthropologist from the University of London has, of course, got an excellent reason to read debt. He saw the fulmination against it in action as one of the members of the Occupy Wall Street movement in the US. It is from there his book Debt: The first 5000 Years has emerged.
To the list of the fantastic volumes which rolled out ever since the global financial meltdown of 2008 upended the comfortable view of the world, Debt could be an excellent addition, except for its conclusion. Graeber ends with an argument to make the world a better place, which does little justice to the scholarship the book displays. His prescription is to erase all debt from every accounts book and send people to spend time with friends and families ?as pioneers of a new economic order?.
Yet without the linkage of debt in place, it is difficult to figure out how a payment mechanism can work in any economy. In a one-man island economy, Robinson Crusoe can eat only when he goes out to fish. If he instead goes hungry for a day to prepare a fishing rod or net to get more catch than he requires in a day, it is the process of building capital. The hunger that he suffers is the cost of building the net, or the interest cost. The choice for Crusoe is to choose a life of drudgery or adding to the quality of life.
Graeber, like others before him, is right to question if the interest cost was calculated correctly and was borne by the right persons. But as countries in Asia are finding out, the transmission mechanism of debt, when harboured well, is an excellent means to improve happiness in their part of the world. How does one decry the effort a labourer puts in to improve his living standard by making himself eligible to get a loan and, therefore, becoming a debtor? He incurs a debt but is able to provide a better quality of life to his family that the author thinks is possible by eliminating all debt from the books that generations of debt forbearance never did. The impact of the debt waivers set off against the success of the micro-credit movement in this part of the world makes the argument obvious.
Instead, the charm of a world view that eschews work is a vision that has now brought many of the European economies to their knees?a na?ve belief about a ?society where people can live more by working less?.
Living life where the non-industrious people can enjoy themselves well is an economic descriptor that just does not then fit in with the human revolution in the making, in the non-European world.