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diff --git a/saved-articles/to have is to owe.txt b/saved-articles/to have is to owe.txt new file mode 100755 index 0000000..0444abf --- /dev/null +++ b/saved-articles/to have is to owe.txt @@ -0,0 +1,603 @@ +--- +title: To Have Is to Owe +Triple Canopy +date: 2010-12-09T23:17:44Z +source: http://canopycanopycanopy.com/10/to_have_is_to_owe +tags: finance, money + +--- + +Mesopotamian usury, Vedic accounting, American Jubilee: excavating the +history of fiscal debt. Illustrations by [Joanna +Neborsky](/contributors#neborsky_joanna). + +“To Have Is to Owe” contains excerpts from David Graeber’s forthcoming +book [*Debt: The First 5,000 +Years*](http://www.amazon.com/Debt-First-5-000-Years/dp/1933633867/ref=sr_1_1?ie=UTF8&s=books&qid=1291747069&sr=8-1), +to be published by Melville House in January 2011. It was produced by +Triple Canopy as part of its [Research +Work](/projectareas#project_areas) project area, supported in part by +the New York Council for the Humanities and the Brown Foundation, Inc. +of Houston. + +Payment Due +----------- + +For thousands of years, the struggle between rich and poor has largely +taken the form of conflicts between creditors and debtors—of arguments +about the rights and wrongs of interest payments, debt peonage, amnesty, +repossession, restitution, the sequestering of sheep, the seizing of +vineyards, and the selling of debtors’ children into slavery. By the +same token, for the past five thousand years, with remarkable +regularity, popular insurrections have begun the same way: with the +ritual destruction of debt records—tablets, papyri, ledgers; whatever +form they might have taken in any particular time and place. In the +throes of the recent economic crisis, with the very defining +institutions of capitalism crumbling, surveys showed that an +overwhelming majority of Americans felt that the country’s banks should +not be rescued—*whatever the economic consequences*—but that ordinary +citizens stuck with bad mortgages should be bailed out. This is quite +extraordinary, as Americans have, since colonial days, been the +population least sympathetic to debtors. (Back then, the ears of an +insolvent debtor would often be nailed to a post.) The notion of +morality as a matter of paying one’s debts runs deeper in the United +States than in almost any other country, which is odd, since America was +settled largely by absconding debtors. Despite the + +fact that the Constitution specifically charged the new government with +creating a bankruptcy law in 1787, all attempts to do so were rejected +on “moral grounds” until 1898, by which time almost all other Western +states had adopted one. The change was epochal.[1](#) + +Those charged with moderating political debate in our media and +legislatures have decided that this is not the time for another such +change. The US government effectively put a three-trillion-dollar +band-aid over the problem, changing nothing. Financiers were “bailed out +with taxpayer money”—in other words, their imaginary money was treated +as if it were real—while mortgage holders were mostly left to the tender +mercy of the courts, subjected to a bankruptcy law that, the previous +year, Congress had made far more exacting against debtors. We have even +seen a backlash against small-scale debtors, one driven by financial +corporations that have now turned to the same government that bailed +them out to apply the full force of the law against ordinary citizens in +financial trouble. “It’s not a crime to owe money,” reports the +*Minneapolis Star-Tribune*. “But people are routinely being thrown in +jail for failing to pay debts.” In Minnesota, “the use of arrest +warrants against + +1 The nature of money has always been particularly contentious in the +US, as evidenced by the endless battles between goldbugs, greenbackers, +free bankers, bimetallists, and silverites in the nineteenth century. +American voters were so suspicious of the very idea of central banks +that the Federal Reserve system was created only on the eve of World War +I, three centuries after the Bank of England was founded. Even the +monetization of the national debt was seen by Thomas Jefferson as a +pernicious alliance between warriors and financiers, though it opened +the way to government assuming the role of moral debtor, and of freedom +being perceived as something literally owed to the nation. + +Aristocratic debtors were wined and dined by liveried servants and +allowed to receive prostitutes. Impoverished inmates were shackled +together in tiny cells, where they “suffered to die, without pity, of +hunger and jail fever.” + +debtors has jumped 60 percent over the past four years, with 845 cases +in 2009. In Illinois and southwest Indiana, some judges jail debtors for +missing court-ordered debt payments. In extreme cases, people stay in +jail until they raise a minimum payment. In January [2010], a judge +sentenced a Kenney, Ill., man ‘to indefinite incarceration’ until he +came up with \$300 toward a lumber yard debt.”[2](#) + +Despite all this, we hardly know what debt is. The very flexibility of +the concept is the basis of its power, and of the moral confusion +associated with it. Looking at the history of debt worldwide, one + +2 Throughout history, certain sorts of debts, and certain sorts of +debtors, have been treated differently from others. The British public +was scandalized in the 1720s when the popular press exposed the fact +that debtors’ prisons were regularly divided into two sections. +Aristocratic inmates, who often thought of a brief stay in Fleet or +Marshelsea as something of a fashion statement, were wined and dined by +liveried servants and allowed to receive regular visits from +prostitutes. On the “common side,” impoverished debtors were shackled +together in tiny cells, “covered with filth and vermin,” as one report +put it, “and suffered to die, without pity, of hunger and jail fever.” + +finds that most people have held that paying back money one has borrowed +is a simple matter of morality and, contradictorily, that anyone in the +habit of lending money is evil. Recently, the former position seems to +have trumped the latter, owing to a persistent refusal to question our +slavish devotion to creditors. But if the welfare state must be +destroyed in order, ostensibly, to settle our debts, we should ask +ourselves: To whom, exactly, are those debts owed? And where did our +creditors get the money that was loaned to us? (The answer, of course: +We owe the very financial institutions we recently bailed out for making +fraudulent and idiotic loans; they didn’t *get* the money anywhere, they +just + +made it up.) Whenever such questions have been openly asked in Europe, +riots have tended to ensue. + +Such eruptions make it clear that debt must be removed from that +rarefied sphere of morality arbitrated by transnational institutions +(whose representatives are also its main beneficiaries), where it has +become ensconced, and returned to the sphere of open political debate. +In the ancient world, it was not debt that was considered sacred, but +rather the power to make it disappear. We are, it seems, long overdue +for a contemporary Jubilee, one that would affect consumer debt as well +as international debt, and that would not only relieve a great amount of +human suffering but also remind us that money is not ineffable, that +paying one’s debt is not the essence of morality, that borrowing and +lending are human arrangements, and that if + +democracy is to mean anything, it is the ability to all agree to arrange +things differently. + +It is significant that, since Hammurabi, great imperial states have +invariably resisted this kind of + +politics. Athens and Rome established the paradigm: Even when confronted +with continual debt crises, they insisted on legislating around the +edges, softening the impact; they eliminated obvious abuses like debt +slavery and used the spoils of empire to throw all sorts of extra +benefits at their poorer citizens (who, after all, provided the rank and +file of their armies) so as to keep them afloat. They did all this in +such a way as to fend off any challenge to the principle of debt itself. +The US has taken a remarkably similar approach: eliminating the worst +abuses (e.g., debtors’ prisons), using the fruits of empire to provide +subsidies, visible and otherwise, and, recently, manipulating currency +rates to flood the country with cheap goods from China. Never has the +governing class allowed anyone to question the sacred principle that we +all must pay our debts. That principle has recently been exposed to be a +flagrant lie. As it turns out, we *all* don’t have to pay our debts. +Only some of us do. + +**Mesopotamia, 2400 BCE**\ + Usury was common practice by 2400 BCE. Officials or merchants advanced +loans to peasants and, if they were unable to pay, began to appropriate +their possessions, starting with grain, goats, and + +furniture, then moving on to fields and houses, then family members. +First went the servants, followed by children, wives, and even the +borrower himself, all of whom were reduced to debt peons until the money +was repaid. This threatened to rip society apart: If for any reason +there was a bad harvest, large proportions of the peasantry fell into +debt peonage. Indebted farmers in fear of repossession abandoned their +fields. + +Faced with the potential for complete social breakdown, Sumerian and +Babylonian kings periodically announced general amnesties. All +outstanding consumer debt was declared null and void (commercial debts +were not affected), all land was returned to its original owners, and +debt peons were returned to their families. Before long, kings made a +habit of declaring such amnesties upon assuming power. (The sovereign +saw himself as literally re-creating human society, so he was in a fine +position to relieve all previous moral obligations.) In Sumerian, these +were called declarations of freedom. The Sumerian word *amargi* is the +first recorded use of “freedom” in any language; it literally means +“return to mother,” since this is what freed debt peons were allowed to +do. + +The Fabled Land of Barter +------------------------- + +When economists speak of the origins of money, debt is always something +of an afterthought. First comes barter, then money; credit develops only +later. Even if one consults books on the history of money in, say, +France, India, or China, what one generally gets is a history of +coinage, with barely any discussion of credit arrangements at all. For +almost a century, anthropologists like myself have been pointing out +that there is something very wrong with this picture. Credit system, +tabs, and even expense accounts existed long before cash. These things +are as old as civilization itself. History tends to move back and forth +between periods dominated by bullion, when it’s assumed that gold and +silver *are* money, and periods in which money is assumed to be an +abstraction, a virtual unit of account. The standard version of this +history has little to do with how economic life is actually conducted in +real communities and marketplaces, where everyone is likely in debt to +everyone else in a dozen different ways, and most transactions take +place without the use of currency. + +Some of it is just the nature of the evidence: Coins are preserved in +the archaeological record, credit arrangements usually are not. Still, +the problem runs + +Missionaries, adventurers, and colonial administrators fanned out across +the world, carrying copies of *The Wealth of Nations*, expecting to find +the land of barter. None ever did. + +deeper. The existence of credit and debt has always been something of a +scandal for economists, since it’s almost impossible to pretend that +those lending and borrowing money are acting on purely “economic” +motivations (for instance, that a loan to a stranger is the same as a +loan to one’s cousin). Therefore, they begin the story of money in an +imaginary world from which credit and debt have been entirely erased: +“Once upon a time, there was barter. It was difficult. So people +invented money. Then came the development of banking and credit.” The +logical, inexorable progression of humanity + +from Stone Age barterers of mastodon tusks to wielders of complex +financial instruments has become common sense. + +We now know from ancient Egyptian and Mesopotamian records—discovered +after Adam Smith, for whom economic history began with Homer—that credit +systems (what is today called virtual money) preceded the invention of +coinage by thousands of years. Money was actually created by bureaucrats +to track state resources and spread unevenly, never completely replacing +credit systems. Barter, in turn, is largely an accidental byproduct of +the use of coinage or paper money, a refuge for people operating in cash +economies where currency has for some reason become inaccessible. +Nevertheless, nearly every introductory economics textbook in use today +takes the same approach: “To see that society benefits + +from a medium of exchange, imagine a barter economy,” write Begg, +Fischer, and Dornbuch in *Economics* (2005). “Imagine the difficulty you +would have today if you had to exchange your labor directly for the +fruits of someone else’s labor,” write Maunder, Myers, Wall, and Miller +in *Economics Explained* (1991). “Imagine you have roosters, but you +want roses,” write Parkin and King in *Economics* (1995). “One can +imagine an old-style farmer bartering with the blacksmith, the tailor, +the grocer, and the doctor in his small town,” write Stiglitz and +Driffill in *Economics* (2000). + +There is a simple reason why everyone who writes an economics textbook +feels the need to tell us the same story. For economists, it is in a +very real sense the most important story ever told. It was by telling it +in 1776 that Adam Smith, professor of moral philosophy at the University +of Edinburgh, + +effectively brought the discipline of economics into being. He objected +to the notion that money was a creation of government, and insisted that +property, currency, and markets not only existed before political +institutions but also were the very foundation of human society. It +followed that insofar as government should play any role in monetary +affairs, it should limit itself to guaranteeing the soundness of +currency. It was only by making such an argument that he could insist +that economics was itself a field of human inquiry with its own +principles and laws—as distinct from, say, ethics or politics. The +economy, in his formulation, operates + +by rules of its own that are separate from moral and political life; it +is where we indulge in our natural propensity to truck and barter. We +are still trucking and bartering, and always will be. Money is simply +the most efficient means. + +For centuries, economists have searched for the fabled land of barter. +Smith set his story in aboriginal North America, and its lack of realism +reflects the dearth of reliable information on Native American economic +systems in Scottish libraries. But by the middle of the nineteenth +century, Lewis Henry Morgan’s descriptions of the Six Nations of the +Iroquois had been published and read widely; they made clear that the +Iroquois’s goods were stockpiled in longhouses, then allocated by +women’s councils, without anyone ever trading arrowheads for slabs of +meat. Economists ignored this information. Stanley Jevons, for example, +wrote *The Principles of Political Economy*, his classic study of the +origins of money, in 1871. He took his examples straight from Smith, +describing Indians swapping venison for elk and beaver hides. Around the +same time, missionaries, adventurers, and colonial administrators were +fanning out across the world, many carrying copies of Smith’s *The +Wealth of Nations*, expecting to find the land of barter. + +None ever did. They discovered an almost endless variety of economic +systems. But to this day, no one has been able to locate a place where +the ordinary mode of economic transaction between neighbors takes the +form of “I’ll give you twenty chickens for that cow.”[3](#) + +**Madagascar, 1990** \ + In the town of Arivonimamo, Madagascar, I had the privilege of +interviewing a Kalanoro, a tiny, ghostly creature that a local spirit +medium claimed to keep hidden away in a chest in his home. The spirit +belonged to the brother of a notorious loan shark, a horrible woman +named Nordine. I was a bit reluctant to have anything to do with the +family, but some of my friends insisted; this was, after all, a creature +from ancient times. The creature spoke from behind a screen, in an +eerie, otherworldly quaver. But all it was really interested in talking +about was money. Finally, slightly exasperated by the whole charade, I +asked, “What did you use for money back in ancient times, when you were +still alive?” + +The mysterious voice immediately replied, “We didn’t use money. In +ancient times we used to + +3 This hardly means that barter does not exist—or even that it’s never +practiced by the sort of people that Smith referred to as savages. It +just means that it’s almost never employed between fellow villagers, as +Smith imagined it to be. + +barter commodities directly, one for the other.” + +We all owe an infinite debt to humanity, nature, or the cosmos (however +one prefers to frame it), but no one else can possibly tell us how to +pay it. + +IOU All +------- + +What gave early nation-states the right to levy taxes? Nowadays, we all +think we know the answer to this question. We pay our taxes so that the +government can provide us with services, starting with military +protection. The arrangement is said to go back to an original social +contract, though no one really knows when it was made or by whom, or why +we should be bound by the decisions of distant ancestors on this one +matter when we aren’t by their decisions otherwise. + +An alternative explanation is primordial-debt theory, a school of +thought developed largely in France by economists, anthropologists, +historians, and classicists; its foundational text is Michel Aglietta +and André Orléan’s *La Violence de la Monnaie* (1992). Adherents insist +that monetary policy cannot be separated from social policy, that the +two have always been intertwined. Governments use taxes to create money, +which they are able to do because + +they have become the guardians of the debt that all citizens have to one +another. This debt is the essence of society itself. + +At first, the argument goes, this sense of debt was expressed not +through the state, but through religion. The hymns, prayers, and poetry +collected in the Vedas and the Brahmanas, the foundations of Hindu +thought, constitute the earliest-known reflections on the nature of +debt, which they treat as synonymous with guilt and sin. According to +the commentators of the Brahmanas, human existence is itself a form of +debt: A man, being born, is a debt; he is born to death, and only by way +of sacrifice does he redeem himself from death. Two famous passages in +the Brahmanas insist that we are born as a debt not just to the gods (to +be repaid in sacrifice) but also to the sages who created the Vedic +learning (to be repaid through study), to our ancestors (to be repaid by +having children), and, finally, to the whole of humanity (to be repaid +with + +hospitality to strangers). + +The first explicit theory of the debt owed by each living person to the +society that makes his or her existence possible was formulated by +Auguste Comte in his last work, *The Catechism of Positive Religion* +(1852), in the form of a lecture on what came to be known as primordial, +existential, or social debt, delivered by the priest of an imaginary +Religion of Society. Asked for his view on human rights, the priest +scoffs at the very notion. It is nonsense, he says, an error born of +individualism. Positivism understands only duties. After all, + +> We are born under a load of obligations of every kind, to our +> predecessors, to our successors, to our contemporaries. After our +> birth these obligations increase or accumulate before the point where +> we are capable of rendering anyone any service. On what human +> foundation, then, could one seat the idea of “rights”? + +Comte doesn’t use the word *debt*, but it is clear what he means: We +have already accumulated endless debts before we get to the age at which +we can even think of paying them. And by that time there’s no way even +to calculate to whom we owe them. The only way to redeem ourselves is to +be dedicated to the service of humanity. + +Comte’s notion of an unlimited obligation to society + +crystallized in the notion of social debt, which was taken up among +social reformers and, eventually, socialist politicians in many parts of +Europe and abroad. In France the notion of a social debt soon became +something of a catchphrase, a slogan—and, eventually, a cliché: “We are +all born as debtors to society.” The state, according to this + +view, was merely the administrator of the existential debt that everyone +owes to everyone. + +Theories of existential debt always end up justifying—or laying claim +to—structures of authority. What we really have in the idea of +primordial debt is the ultimate nationalist myth. Once we owed our lives +to + +the gods who created us, paid them interest in the form of animal +sacrifice, and, ultimately, paid back the principal with our lives. Now +we owe our lives to the nation that formed us, pay interest in the form +of taxes, and, when it comes time to defend the nation against its +enemies, pay back the principal with our lives. This is a great trap of +the twentieth century: On the one side is the logic of the market, which +insists that we don’t owe one another anything. On the other is the +logic of the state, which insists that we are born with a debt we can +never truly pay. In fact, the dichotomy is false. States created +markets, markets require states, and neither could continue without the +other. + +The true ethos of our individualistic society may be found in this +equation: We all owe an infinite debt to humanity, nature, or the cosmos +(however one prefers to frame it), but no one else can possibly tell us +how to pay it. All systems of established authority—religion, morality, +politics, economics, the criminal-justice system—are revealed to be +fraudulent ways of calculating what cannot be calculated. Freedom, then, +is the ability to decide for ourselves how to pay our debts. + +\ +\ +**** + +**England, twelfth century CE**\ + One of the most important forms of currency during the reign of King +Henry I was the notched “tally stick” used to record debts. Each party +to a transaction would take a twig, notch it to indicate the amount +owed, then split it in half. The creditor would keep one half, called +the “stock” (hence the origin of the term “stock holder”) and the debtor +would keep the other, called the “stub” (hence “ticket stub”). Tax +assessors used such twigs to calculate amounts owed by local sheriffs. +Often, though, rather than wait for the taxes to come due, Henry’s +exchequer would sell the tallies at a discount, and they would circulate +as tokens of debt owed to the government. The king also issued tallies +in lieu of payment to soldiers, farmers, and others owed money by the +state; these, too, were sold at a discount and circulated among stock +holders. + +There is one puzzling aspect of this equation: The IOU can operate as +money only as long as Henry never pays his debt. This is precisely the +logic on which the Bank of England—the first modern central bank—was +founded. In 1694, with public finances weak and the state's monetary and +credit systems precarious, a consortium of English + +bankers made a loan of £1.2 million to King William III. In return they +received a royal monopoly on the issuance of banknotes. Practically, +this meant the bankers had the right to advance IOUs representing a +portion of the king’s debt to any inhabitant of the kingdom willing to +borrow from them, or willing to deposit his own money in the bank. The +effect was to monetize the royal debt. This was a great deal for the +bankers, who charged the king 8 percent annual interest on the original +loan and, simultaneously, charged clients who borrowed money interest on +that same debt. But the arrangement could only work for as long as the +original loan remained outstanding. Which is why, to this day, the loan +has never been paid back. It cannot be. If it ever were, the entire +monetary system of the United Kingdom would cease to exist. + +God’s Money +----------- + +In today’s world, paying one’s debts can seem the very definition of +morality, if only because so many fail to do it. When faced with a debt, +large corporations and even some small businesses will almost +automatically wait and see what happens if they do not pay, complying +only if goaded or presented with a legal writ. The principle of honor +having been almost completely removed from the marketplace, debt +acquires the halo of religion. (One might speak of a double theology, +one for creditors and another for debtors.) It is no coincidence that +the current phase of American debt imperialism has also been accompanied +by the rise of the evangelical right, which has bucked the past two +millennia of Christian thinking on the subject and enthusiastically +embraced supply-side economics, taking the position that creating money +and giving it to the rich is the most biblically appropriate way to +bring about national prosperity. Perhaps the most ambitious theologian +of the new creed was George Gilder, whose book *Wealth and Poverty* +became a best seller in 1981, at the dawn of the Reagan revolution. +Those who felt that money could not simply be created were mired in an +old-fashioned, godless materialism, Gilder + +argued; they didn’t realize that just as God could create something out +of nothing, his greatest gift to humanity was the ability to do so in +the same fashion. And to do so was not hubristic, but in keeping with +God’s intentions: The creation of money was a gift, a blessing, a +channeling of grace; a promise, yes, but not one that can be fulfilled, +even if the bonds are continually rolled over, because through faith +(“in God we trust”) their value becomes real. “The United States,” +Gilder writes, “must overcome the materialist fallacy: the illusion that +resources and capital are essentially things, which can run out, rather +than products of human will and imagination which in freedom are +inexhaustible.” Such effusions inspired evangelists like Pat Robertson +to declare supply-side economics “the first truly divine theory of +money-creation.” + +This new breed of capitalist evangelicals failed to acknowledge that the +vast majority of the money being “created” was in fact a product of +deficit spending to fund the mushrooming US military, a practice that +was avidly pursued by Reagan and that reached its pinnacle under George +W. Bush. Furthermore, until China became our chief creditor, money was +“borrowed” almost exclusively from + +West Germany, Japan, South Korea, and Saudi Arabia—all nations that were +under US military protection. The “products of human will and +imagination” were backed by material forces after all: not so much +fields, factories, or even oil wells, but aircraft carriers and +laser-guided missiles. All + +the more curious is Christian fundamentalists’ obsession with waging war +on Iraq—which they often referred to, among themselves, as “Babylon”—the +birthplace of the debt-forgiveness decree and the interest-free +commercial economy. + +**Islamic world, Middle Ages**\ + From the beginning, Islam had a positive view of commerce. (Muhammad +himself had been begun his life as a merchant.) The prohibitions against +usury did not mitigate the growth of commerce, or even the development +of complex credit instruments. To the contrary, the early centuries of +the caliphate saw an efflorescence of both. Credit instruments were so +essential that traders tended to keep their wealth on deposit and make +everyday transactions using checks (*sakk*) instead of coins. Checks +were countersigned and transferred, and letters of credit (*suftaja*) +traveled across the Indian Ocean and the Sahara. These promissory notes +operated independently of the state (and the deals made with them were +beyond the purview of government enforcement): They never became paper +money, could not be used to pay taxes, and their value remained based +almost entirely on trust and reputation. If a trader was wronged, he +could appeal to the Islamic courts, but commissioning a + +poet to compose verses deriding the debtor would have a much greater +effect. + +Networks of trust were largely responsible for the spread of Islam over +the caravan routes of central Asia and the Sahara and across the Indian +Ocean, which became the main conduit of world trade. Islam gained a +toehold in trade emporia from Aden to the Spice Islands, largely because +Islamic courts were perfectly suited to provide those ports with legal +infrastructure: the means of establishing contracts, recovering debts, +and creating a banking sector capable of redeeming or transferring +letters of credit. The resultant level of trust between merchants in the +great Malay entrepôt Malacca was legendary. The city had Swahili, Arab, +Egyptian, Ethiopian, and Armenian quarters, as well as quarters for +merchants from regions of India, China, and Southeast Asia. Yet it was +said that its merchants shunned enforceable contracts, preferring to +seal transactions with, as the saying went, “a handshake and a glance at +heaven.” + +Money Bags +---------- + +How many times have we been told that the advent of virtual money, the +dematerialization of cash into plastic and dollars into blips of +electronic information, has brought us into an unprecedented financial +world, completely uncharted territory? That very assumption made it easy +for Goldman Sachs, AIG, and their cohorts to convince people that any +effort to understand, much less regulate, their dazzling new financial +instruments was futile. But the moment one casts matters on a broad +historical scale, it becomes clear that there’s nothing fundamentally +new about the reign of virtual money, which would be recognizable to +ancient Mesopotamian bureaucrats and Islamic traders alike. + +The new global currency—the free-floating dollar—is rooted in military +power even more firmly than before. Debt peonage continues to be the +main principle of recruiting labor globally—either in the literal sense, +in much of East Asia and Latin America, or in the subjective sense, +whereby most of those working for wages or even salaries feel that they +are doing so primarily to pay off interest-bearing loans. New +transportation and communications technologies have made things + +easier for creditors: They can charge domestic laborers and factory +workers thousands of dollars to be transported to distant countries +where they are forced to work off their debt, lacking legal protections. +The overarching institutions that have been created to regulate these +activities—those whose cosmic scale echoes the divinely inspired +authority of kings of the ancient Middle East and the church of the +Middle Ages—do not protect debtors, but rather enforce the rights of +creditors. They all operate on the principle that one has to pay one’s + +debts (unless one is the United States Treasury), since the prospect of +default by any country is assumed to imperil the entire world monetary +system. Joseph Addison described that fear of collapse, which acts to +buttress the system, in his 1711 essay “Public Credit,” recounting a +nightmare in which Britain’s national wealth has disappeared. “There was +as great a change in the hill of money-bags, and the heaps of money, the +former shrinking, and falling into so many empty bags, that I now found +not above a tenth part of them had been filled with money,” he writes. + +> The rest that took up the same space, and made the same figure as the +> bags that were really filled with money, had been blown up with air, +> and called into my memory the bags full of wind, which Homer tells us +> his Hero received as a present from Æolus. The great heaps of gold on +> either side of the throne now appeared to be only heaps of paper, or +> little piles of notched sticks, bound up together in bundles, like +> Bath faggots. + +We need to understand what philosophers in the Middle Ages, from Italy +to India to China, already understood perfectly well: Money is not a +thing, and is certainly not a scarce resource. Money is a promise. And +it is a promise we keep to those we value and break to those we do not. +In Greece, Ireland, Portugal, and Spain, sovereign-debt default + +seems ever more likely. If it occurs, then what will happen? Certain +promises will be kept, and others will be broken. As we learn from +politicians every day, it is rarely possible to keep all promises +exactly as one has made them. Today, in the United Kingdom, many +politicians are saying, “I know I was elected on a solemn pledge not to +raise tuition fees, but now that I’m in power I realize that was +unrealistic. We will have to triple them.” What they in fact mean is, “I +have decided that promises made by this government to repay bankers, at +an agreed-upon interest rate, for money they fabricated, are more +important than promises made to my own constituents.” And if promises +made to legal abstractions are always to be given priority over promises +made to what we still occasionally, whether fondly or cynically, call +the people, we might well ask ourselves why our system of government is +still deemed democracy. + + |