For every subtle and complicated question, there is a perfectly simple and straightforward answer, which is wrong. -H.L. Mencken
This chapter is an excerpt from the book Debt: The First 5000 Years, by David Graeber, wherein he argues that money was in no way the product of commercial transactions. It was created by bureaucrats to track the resources and move things back and forth between departments. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems.
He does that by refuting the established concept of barter in Economics textbooks. He says, "Recall here the language of the economics textbooks: Imagine a society without money. Imagine a barter economy. One thing these examples make abundantly clear is just how limited the imaginative powers of most economists turn out to be."
He argues that the scenario depicted in the economics textbooks is an imagined one because while in reality there are many societies which have been documented to practice barter, none of them have faced the problems, such as the double coincidence of wants that is taken as the basis for the introduction of currencies in the economics discipline.
What empirical research on societies that practice barter tells is quite a different story. According to Case, Fair, Gartner, and Heather (1996), the alternative to a monetary economy would have to be the barter system, where people would exchange goods for goods, and not goods for money. A barter system requires a double coincidence of wants. So, one needs to find someone who wants to sell what one wants to buy. It requires an intolerable amount of effort. One can only imagine how hard it would be to look for a double coincidence to fulfil all of one’s needs! It is worth noting that it could not have been practised the way Adam Smith described as among small communities where a barber would exchange his services for bread with the baker because this system would be too complicated to have worked even for a short period.
This leads us to two distinct questions: 1) Did barter ever exist? In any form? and 2) how did exchange take place in pre-currency societies, if not through the way described by Adam Smith?
Barter is often evident in unsophisticated economies, where the range of traded goods is small. He starts explaining the system of Barter by examining the word. In almost every language it is described as “to trick”, “bamboozled”, or “rip off” - which then fits in well with the empirical evidence of barter being a system of exchange practised usually among strangers or even enemies. The writer clarifies that this does not mean the barter system does not exist. It means that it was not what Adam Smith imagined.
In this chapter, he has given us two such examples. The Nambikwara of Brazil and the Gunwinggu of Western Arnhem Land in Australia. The Nambikwara of Brazil have a simple society divided into bands with a maximum of a hundred people. Occasionally if one spots the cooking fires of another in their vicinity, they will send emissaries to negotiate a meeting for purposes of trade. If the offer is accepted, they first hide their women and children and then invite men from the other camp. On arrival, everyone puts their weapons down and sing and dance together after which individuals approach each other to trade. People undermine what they want to keep and compliment what they do not. This argument is carried out in an angry tone after which they snatch the item from each other's hand. This situation ends with a great feast where the women reappear. With ample opportunities for seduction, there are sometimes quarrels, and people get killed. The author also describes the erotic dzamalag ceremony. What both examples have in common is that they are meetings with strangers who will, likely as not, never meet again, and with whom one certainly will not enter into any ongoing relations. Here is why a direct one-on-one exchange is appropriate: each side makes their trade and walks away.
All of this was made achievable by laying down the initial mantle of sociability in the form of shared pleasures, music and dance. For trade must always be built on the usual base of conviviality.
He states that the best partner for barter is the one who is distant spatially and has little opportunity to complain. It raises the chances of being fooled out of a deal and makes the process more futile for one to get into trade. But tables do turn when the deal is with someone you care about, in such scenarios you not only care about your good but also theirs. Hence not only the economic relation but the personal connection between the parties affect the trade in a significant way. Practices such as barter, therefore, cannot take place in small communities.
So, how did the exchange take place in pre-currency communities? He cites the example of the descriptions by Lewis Henry Morgan of the six nations of the Iroquois were the longhouses were the economic institutions among the Iroquois nations. Here most goods were stockpiled and then allocated by councils of women according to the need in a communal fashion. He further said that missionaries, adventurers, and colonial administrators ventured out with copies of the book by Adam Smith, but no one found the barter system economy. They found an endless variety of other communal economic systems similar to that of the Iroquois.
Then why do economists continue to tell the same story - of first came barter, then money, and far later came the system of credit when several Anthropologists have argued with considerable evidence that this depiction is wrong? For one, he says because it is theoretically plausible and simpler to imagine. Also, in economics, as a discipline, there are several differences in theory and the way economic activities take place in the real world.
In the anthropological account, the storyline is slightly different. Graeber argues how the history of money IS the history of debt as both of them appear in history at the same time. Debt (or credit) he explains, begins with an obligation. The difference being debt is quantifiable, and an obligation is not. Thus, one involves money, unlike the other. However, while we documented coins in archaeological records, as money, we did not record credit arrangements. Graeber goes on to say that this issue has always been scandalous for economists because one cannot say for sure that their motivation to borrow or lend is purely economic.
More importantly, that currency came in as a way to keep track of debt. Barter is not just an ancient phenomenon. It was prevalent in the wake of the collapse of national economies, like Russia in the 1990s, and Argentina in 2002. Sometimes currency may also develop, for example, the POW at WW2 used cigarettes as an exchange medium. Adoption of a credit system can be a solution. For instance, after the fall of the Roman empire, people still managed accounts in the old imperial currency, even if they were no longer using coins. He gives similar examples from Newfoundland fishing communities, ancient Mesopotamians and Sumerians, where coins were invented to keep track of debt, while rarely being used in the market to exchange goods and services.
The story of debt, therefore, is the story of money and the story of coins. And it is only by studying the forms that money has evolved into over the years, is somehow the easiest way to understand how debt works.
Review by: Namit Mahajan, Divyansh Sankhla, Harshita Chhabda, Shaurya Arora, and Nakul Singh Rathore.
Commentaires