Slow Read Book Club: Chapter 2, The Myth of Barter, in Debt The First 5,000 Years by David Graeber
Debunking barter leads us to think about the critical role of debt and virtual money in human societies
"Once upon a time, there was barter. It was difficult. So people invented money. Then came the development of banking and credit."
In this chapter, Graeber debunks one of the most ubiquitous common sense ideas about the history of money. That is, money was simply a matter of convenience in human development.
After all, it seems hard to carry an oxen or sheep in exchange for salt. Or if the salt maker would even like oxen at the time of the trade. Such was the thought exercise of Adam Smith, philosopher and economist, who outlined the political economy of England at the dawn of the Industrial Revolution in the Wealth of Nations. In Chapter 4 where Smith discusses the origin of money, he proposes an evolutionary framework to understand why money (coinage) and eventually the free market system we now have is an inevitable outcome of human exchange.
What are the implications of Smith’s argument?
In the simple evolutionary framework from barter to money, Smith lays the foundation for what we have come to accept as our present capitalist condition:
property, money, and markets are the foundation of human society and predate any formal government (or government control of money or markets); thereby, emphasising that markets should be free of government control
the division of labour is an inevitable outcome and the basis of human development - some people are better as blacksmiths, brewers, or bakers (or plug-in any occupation here); our purpose in life is to become specialised producers for the purpose of exchange
Though Graeber did not explicitly state this, he was criticising the basis of our capitalist framework. More overtly, he says that this is the myth of economics as a discipline and the economic life we have today.
When you read the two implications, you get a sense of the profound questions confronting us today. I’m taking it a step further and ask:
Are we on a hamster wheel of endless production as human beings? It appears the purpose of production has replaced what was once just being (ourselves) as the worth of a human life
Should the government play a role in markets, money, and property? If so, what? If money and debt predated the government, what does this society look like?
Why is it important to debunk the myth of barter?
If we disagree with Smith’s proposition that our purpose is to be merely economic producers for the sake of exchange, then we need to first debunk the myth of barter.
In a two-step process, Graeber proposes that we let go of the myth of barter because
there is no ethnographic evidence for a pure barter economy (swapping objects to trade) in which currency emerged1
the historical evidence and colonial contact accounts suggest multiple forms of economic systems with some form of currency equivalence already in existence; money is already in the minds of people 2
ironically, barter accelerates and appears when currency systems fail in the contemporary period (rather than a precursor of money)
According to Graeber, the evolutionary myth from barter to the currency system clouds our understanding of what money, debt, and economics are.
He argues that economics misses the social context (the violence, sex, and competition that happens along the way)3.
people were always in some form of debt or exchange relations without necessarily using any currency
the act of lending and borrowing are not done by rational actors because they are embedded in social relations (lending to family members vs. strangers is different)
Hence, Graeber argues that we must focus on the history of debt which has been largely erased in the history of money. He wants to bring back a new understanding of the human economic system(s) by looking at different ways people were indebted and paid off their debts from the past into the present.
Let’s begin with debt and virtual money
The difference between a debt and an obligation is that a debt can be precisely quantified. This requires money.
Graeber points out that credit systems predate coinage because they were scarce. The earliest Mesopotamian shekel was in silver and was a record of debts associated with temple duties and wages.
People need not be paid or pay their debts using these silver coins because the coins had fixed equivalence in other goods such as barley, goats, or lapiz lazuli. In essence, these were money as we understand it. The most interesting thing is that temple administrators and bureaucrats administered these credit and debit systems outside of any state system as we understand it. 4
The archaeological evidence supports Graeber’s argument that the idea of money came first (virtual money) before actual money. Hence, rather than coinage, the history of money lies in understanding the credit and debt system in human history.
Barter can only be understood because people already understand money or currency equivalences.
Round-Up
Debunking the myth of barter of Adam Smith disabuses us of:
the separation of human exchange from its social context (we are not rational beings but rather prone to embellish trade with elements of warfare, festivity, and hospitality)
foundational elements of capitalist principles such as the division of labour and the concept of humans as producers for exchange have become so entrenched that we need to step back to reflect on our current system
Graeber begins here the history of debt largely erased in the history of money. He makes several bold arguments in his new understanding of the economic order:
virtual money has to exist in the mind before actual money
barter exists simultaneously with money (and not a precursor to it) and it becomes even more ubiquitous when currency fails
More commonly, barter seems to be more common with strangers or across unrelated groups as examples in Nambikwara of Brazil and the Gunwinggu of Western Arnhem Land of Australia. In the ethnographic accounts, these exchanges are various combinations of war-readiness, hospitality, dancing, sexual encounters, trading, and negotiation, etc. which points to the human complexity erased in merely one-to-one quantified exchange.
Currency equivalence is commonly phrased as spheres of exchange in gift economies in anthropology. Objects and goods have a designated hierarchy of value such as pigs as the highest and common foods as the lowest. There are designated types of objects that could be traded or exchanged only for certain goods like jewelry or shells for similar items.
See footnote 1
I discuss the Mesopotamian temple city development and the lack of ‘state’ structure in Post 1 and Post 2 from Chapter 8 of my 2023 Slow Read: The Dawn of Everything from David Graeber and David Wengrow. Credit and debt systems were administered by temple administrators, the earliest known bureaucrats, before any centralised state.