Karthik Tadepalli

Economics PhD student at UC Berkeley

Life and Debt

Published September 10, 2020


In case it wasn’t obvious, I’m pretty far down the economics rabbit hole: I want to become an economist, and I would consider myself quite sympathetic to the “economic perspective” in nearly all instances. Before I knew this, though, I was fortunate enough to take an economic anthropology class, and one of the best things I took from it was an introduction to David Graeber—the anthropologist, activist and anarchist who my professor described as “a really intense guy”. On September 2nd, I was shocked to learn that Graeber had died.

Graeber’s work is methodologically, temperamentally and substantively in clash with the economics profession. Indeed, he was a caustic critic of the whole field: sometimes his attacks were wrongheaded, sometimes they were exactly on point, but they were always significant. So I wanted to remember him with a discussion of his book that influenced my thinking the most—Debt: The First 5,000 Years.

2011 was a year of tumult in the generally esoteric financial system, with headlines about the outrageous practices of investment bankers and their equally outrageous salaries after receiving bailouts. Occupy Wall Street became the movement of its time, rallying on behalf of indebted families who had lost their houses to bankers. David Graeber would know, because he was one of its founders and leaders, credited with the enduring slogan “we are the 99 percent”. In this atmosphere, everything was changing - so he wrote Debt: The First 5,000 Years, a book of big ideas to trace the patterns of the past into the future.

Debt is overflowing with ideas, tangents, ethnographies and arguments. Many of these arguments are unpersuasive—but to me, it only takes one interesting story to make a book worth reading. Debt offers three.


Debt’s underlying argument is that debt relations are a powerful tool to reinforce the existing social system. In other words, debt relations in a hierarchical society (e.g. modern societies, feudal kingdoms) are likely to reinforce hierarchy, but debt relations in an egalitarian society (e.g. most of the indigenous people that Graeber studies) are likely to reinforce people’s equality. This enables us to distinguish between hierarchical debt and egalitarian debt, terms that Graeber doesn’t use but that I think are appropriate. Egalitarian debt is a prominent feature of small, tightly organized societies, while hierarchical debt is an important force in large-scale societies of strangers, nation-states and kingdoms.

This difference can be seen in the first interesting story of Debt: Graeber’s historical account of money. He draws on two common anthropological theories of money:

  1. Credit theory. According to credit theory, money grew as an accounting tool for preexisting debt relations. People exchanged IOUs, those IOUs got exchanged some more, so everyone began to use them, and thus money was made.
  2. State theory. According to state theory, money was introduced by kings to cement conquest and keep armies together. Soldiers were paid in state money, they traded this money wherever they went, so everyone else began to use it too. This also had the effect of integrating conquered territories into the empire through a common currency.

The correspondence between these two theories and the two types of debt is clear. Credit theory reflects a view of money emerging from people’s free and natural debt relations, a much more egalitarian view. State theory reflects a view of money being imposed by states from the top-down. Thinking of the two faces of debt makes it clear that these theories aren’t mutually exclusive—rather, they are just reflections of different societies creating money based on different sizes of society. Indeed, Graeber argues that widespread fiat money likely through states formalizing existing credit arrangements as societies scaled up. In other words, early forms of money arose from people keeping approximate score of debt obligations, but this money was fragmented: people in different villages wouldn’t use the same money, and this money was money only within your village or trusted trading networks. However, states took advantage of the fact that people were used to making monetary trades based on credit, and made money both standardized and fiat-based. By paying soldiers and conquered people in their fiat money, they replaced informal credit arrangement with formal, state-mediated credit arrangements. This corresponds in Graeber’s story to a transition in history: before that, debt was primarily egalitarian, just as people’s credit relations were. But after large-scale, hierarchical societies coopted that debt, it became a tool for maintaining that hierarchy.

Why does this story of money matter, and why does it matter to emphasize that credit was originally the lifeblood of social transactions? Because the key distinction that Graeber sees between credit and barter—the popular view of money’s origin—is that credit relies on trust. Barter exchange can exist completely separately from social institutions, but debt can only exist between people who trust each other, or at least have institutions to guarantee that trust. As Graeber puts it:

All human interactions are not forms of exchange. Only some are. Exchange encourages a particular way of conceiving human relations. This is because exchange implies equality, but it also implies separation. It’s precisely when the money changes hands, when the debt is canceled, that equality is restored and both parties can walk away and have nothing further to do with each other. Debt is what happens in between: when the two parties cannot yet walk away from each other, because they are not yet equal. But it is carried out in the shadow of eventual equality. Because achieving that equality, however, destroys the very reason for having a relationship, just about everything interesting happens in between. In fact, just about everything human happens in between—even if this means that all such human relations bear with them at least a tiny element of criminality, guilt, or shame.

Even more than that, credit had a virtuous cycle of reinforcing social trust. Credit theory emphasizes that small societies created social bonds with constant, amicable debt relations. Compare this stylized barter example:

Henry has potatoes and wants shoes, Joshua has an extra pair of shoes and wants potatoes. Bartering can make them both happier. But if Henry has firewood and Joshua does not need any of that, then bartering for Joshua’s shoes requires one or both of them to go searching for more people in the hope of making a multilateral exchange. Money provides a way to make multilateral exchange much simpler. Henry sells his firewood to someone else for money and uses the money to buy Joshua’s shoes.

with this example from Graeber:

Henry walks up to Joshua and says, “Nice shoes!” Joshua says, “Oh, they’re not much, but since you seem to like them, by all means take them.” Henry takes the shoes. Henry’s potatoes are not at issue since both parties are perfectly well aware that if Joshua were ever short of potatoes, Henry would give him some.

It’s easy to see how the second example both reflects underlying social capital and also generates more social capital. Because of Henry’s debt to Joshua, Joshua knows he can rely on Henry in the future. Thus, forging debt relations between Henry and Joshua makes their shared trust increase. This is the story of egalitarian debt, that Graeber describes extensively through numerous ethnographies.

Of course, this claim is true because Henry and Joshua are presumed to be community members of equal footing—this is egalitarian debt, not hierarchical debt. If Joshua was a landlord and Henry was his serf, maybe the better example would be:

Henry walks up to Joshua and says “I need new shoes, mine are falling apart and I can’t work the potato fields.” Joshua says “Sure, I’m a generous man!” Henry takes the shoes. Joshua later demands 10% more potatoes in Henry’s rent, with interest if Henry doesn’t pay promptly.

The difference can be seen in two (of the many) case studies that Graeber offers: potlatches vs jubilees. Potlatches are a staple of economic anthropologists. For important events like births, deaths and transitions of power, the indigenous people in the Pacific Northwest would invite other tribes to a potlatch, in which the host chief gave away fabulous amounts of wealth and food to other tribes. Potlatches served to enhance a chief’s status, but they had a vital function as well: preventing resource wars. The primary foodstuff of the Pacific Northwest was salmon, which could easily provoke terrible resource conflicts if one tribe had a rich harvest while their downstream neighbor lost all their salmon and starved. By effectively redistributing from the tribes with rich harvests to all the other tribes, potlatches prevented that from occurring. This relied crucially on the mutual debt creation: potlatches granted status because they repaid past debts from past potlatches, but they were so extravagant that they created new debts for other tribes, that could only be repaid with future potlatches, creating a virtuous status cycle that kept the tribes living together in relative peace.

If potlatches displayed the power of debt to bring people together in harmony, jubilees displayed its power to pinch people so hard that it brought them together in revolt. Ancient Mesopotamian societies likely allowed lending with interest, especially to farmers and herders: these debts were recorded on tablets, some of which survive to this day. But when those farmers and herders were unable to pay their loans back, and the burden of debt became insurmountable, people would rise in such anger that the only way for the king to placate them was to wipe the slate clean, destroying all the debt tablets so that no one owed money anymore. These were the jubilees that were celebrated so passionately that “jubilee” to this day refers to celebrations. These jubilees happened periodically, becoming almost a uniform part of the system, a crash-only society that could only be fixed by starting from scratch—but debt kept on coming back and causing people so much misery that they would rise up again.

The distinction between egalitarian debt and hierarchical debt is clear by now, and it’s clear that egalitarian debt is not a feature of the modern world. Graeber holds it as proof that societies don’t have to be organized around venal profit motivation—but the genie is out of the bottle. We live in societies with hundreds of millions of people, in which the kind of intimate equality that Graeber describes with the Tiv people of Nigeria and other indigenous people is just not possible. I wanted Debt to have a vision of what egalitarian debt in the 21st century could look like, but unfortunately it didn’t.


Hindu mythology has an old story about the tributes given to the divine Krishna. Kings lined up in his court to give him their land and lavish gifts, all of which he accepted disinterestedly. But one of the tributes was different: a destitute old woman whose only gift was a rotting, half-eaten pomegranate. The kings around her gave her the evil eye for being poor while they were rich, as kings in stories do. But to everyone’s shock, Krishna stood to receive her gift, and bowed before her in gratitude. The moral of the story is simple: he didn’t care for kings who gave him only a small portion of what they could give, but he respected the old woman who gave him the only thing she owned.

This fable reflects the intuition of proportionality: you are judged proportional to your capacity to act, not by your actions in an absolute sense. It’s a deeply appealing idea: we feel like the old woman did a more praiseworthy thing than the kings, because she sacrificed more than they did. This proportional framework also resonates deeply with leftism: Jeff Bezos donating a million dollars doesn’t have as much moral weight as a struggling worker donating $20 that they can’t afford to lose.

But proportionality isn’t the only moral intuition that we have. Another moral force looming on the horizon is reciprocity—the idea that . Reciprocity is one of the most powerful moral intuitions we can have. Marketers use it to make us buy things, infants can identify it, and religions preach “do unto others as you would have them do unto you”. Reciprocity is widespread for a reason: it simply seems unfair when people take and don’t give back.

Graeber’s insight is that debt relations pit reciprocity against proportionality.1 Reciprocity says, “you have to repay what you borrowed.” Proportionality says “you only have to repay whatever you can afford to repay.” Reciprocity is creditor morality; proportionality is debtor morality. This is why debt creates such a moral confusion in our society—because we all experience the intuitions of reciprocity and proportionality, and we all experience the cognitive dissonance of trying to resolve two important but clashing moral intuitions. I think this is a fantastic explanation, a really clear articulation of how economic transactions can actually have meaningful moral disagreements. It’s easy to fall into the allure of believing that economics is all about value-neutrally tracing the Pareto frontier, but I think about debt obligations often as a gut-check for why that simply isn’t true.

This insight forms the crux of Graeber’s second interesting argument in Debt: that we need to reclaim morality from reciprocity, and accept that proportionality matters just as much if not more than reciprocity when thinking about debt relations. Creditor morality is deeply embedded in social institutions, like religion: the basic premise of religious morality is that we are indebted to the universe and <insert deity> for our existence, and following religion matters because it repays that divine debt. In this way, creditor morality traps us and prevents us from seeing debt in any other way.

This argument might seem like a digression from a historical study of debt—it’s just a moral argument. But I think this arc of moral influence is actually the most convincing evidence Graeber offers for how debt relations can be caused by something other than just the cynical interests of powerful people. If debt harnesses powerful moral intuitions, and those moral intuitions shape how people act, then it’s likely that a widespread social belief in reciprocity creates a society that favors creditors.

My major criticism of this argument, though, is that it creates a zero-sum game out of debt. Maybe debt repayment is zero-sum in each individual instance—but why can’t our criterion be what kind of debt system is better for both creditors and debtors in the aggregate? A really fascinating new paper argues that when Indian courts resolve trials quicker and banks are better able to recover loans through court orders, it stimulates increased bank lending, so local businesses have better access to credit and thus prosper more. Everyone wins from debt enforcement in this scenario—but when you view debt as a way to trap people, you can’t see that mutual gain. Graeber’s determination to ignore positive-sum games does his argument no credit.2


If you’re a skeptic, the main argument of Debt—that debt reinforces the existing social system—might seem trite. Oppressive societies are oppressive, egalitarian societies are egalitarian. Why does debt have any role in this? “Reinforcing” is a vague notion, only a short step away from “it happened at the same time, I guess”. As Noah Smith puts it:

…if someone wrote a book called “Metal: The First 5,000 Years,” and then filled that book with stories of war and bloodshed, never failing to remind us after each anecdote that metal was involved in some way, we might be left scratching our heads as to why the author was so fixated on metal instead of on war itself.

In other words, the confusion is—did debt actually cause any of the social and political dynamics that Graeber emphasizes, or was debt simply one way among many to shape society, all of which would lead to the same outcome? Yes, maybe Genoan bankers used debt to ensnare the conquistadors and force them into brutal violence to repay their debts: but if debt didn’t exist, would anything have really changed about Spanish colonization?

I think this challenge misses the point. Potlatches and jubilees are opposite outcomes, but they both point a common conclusion, which is Graeber’s third and most interesting story: that debt is an observable symptom of broader social health. When debt relations are healthy and equitable, and everyone shares at the potlatch, we can say that society is under control. But when people are so crushed by debt that kings have to cancel all debts in order to keep their heads on their shoulders, we can diagnose serious problems with social injustice that need to be addressed.

The fact that debt is an observable symptom matters because social unrest can be invisible for a long time, but debt relations are front-and-center of society for everyone to see. In this way, debt trouble is the canary in the coalmine, the face of invisible social problems that eventually becomes undeniable. We have to watch the canary, even though it’s obviously not causing the coal miners to die. In this sense, Noah Smith’s analogy to metal is unwittingly accurate. To the extent that the studying metal’s history can shed light on how society’s capacity for technological advancement and war evolved, I would definitely read Metal: The First 5,000 Years. In fact, you can read something like it.

A parting thought: if a society’s debt relations are the canary in the coalmine, what does that say about modern society?


That’s Debt: The First 5,000 Years—a book that seeks to push forward an era of questioning the premises of neoliberalism. Young people today are doing just that—and there’s no denying that Graeber has been one of the most influential thinkers in this space. That’s a legacy to remember.

  1. Instead of “proportionality”, he calls it… “communism”. I would rather not. ↩︎

  2. Pun intended. Isn’t it amazing how debt permeates our language? We talk about having interests, of giving credit, and words like “jubilee” have survived to this day. ↩︎