“The story of the origins of capitalism, then, is not the story of the gradual destruction of traditional communities by the impersonal power of the market. It is, rather, the story of how an economy of credit was converted into an economy of interest; of the gradual transformation of moral networks by the intrusion of the impersonal—and often vindictive—power of the state.” (p.332)

Our attitude to debt is a symptom of this erosion of social economies by currency economies. Mutually agreed, honour, credit is replaced by state-backed, economic credit. Loans which inexorably grow due to interest are enforced by brutal laws against debtors. This is the context for the rapacity of European colonialists – they were driven on by the tyranny of interest.

“All this helps explain why the church had been so uncompromising in its attitude toward usury. It was not just a philosophical question; it was a matter of moral rivalry. Money always has the potential to become a moral imperative unto itself. Allow it to expand and it can quickly become a morality so imperative that all others seem frivolous in comparison. For the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise. Even human relations become a matter of cost-benefit calculation. Clearly, this is the way the conquistadors viewed the worlds they set out to conquer” (p. 319)

It is the secret scandal of capitalism that at no point has it been organized primarily around free labor. The conquest of the Americas began with mass enslavement, then gradually settled into various forms of debt peonage, African slavery, and “indentured service” (p.350)

This is a scandal not just because the system occasionally goes haywire, as it did in the Putumayo, but because it plays havoc with our most cherished assumptions about what capitalism really is—particularly that, in its basic nature, capitalism has something to do with freedom. For the capitalists, this means the freedom of the marketplace. For most workers, it means free labor. Marxists have questioned whether wage labor is ultimately free in any sense (since someone with nothing to sell but his or her body cannot in any sense be considered a genuinely free agent), but they still tend to assume that free wage labor is the basis of capitalism.

Our dominant image of the origins of capitalism continues to be the English workingman toiling in the factories of the industrial revolution, and this image can be traced forward to Silicon Valley, with a straight line in between. All those millions of slaves and serfs and coolies and debt peons disappear, or if we must speak of them, we write them off as temporary bumps along the road. Like sweatshops, this is assumed to be a stage that industrializing nations had to pass through, just as it is still assumed that all those millions of debt peons and contract laborers and sweatshop workers who still exist, often in the same places, will surely live to see their children become regular wage laborers with health insurance and pensions, and their children, doctors and lawyers and entrepreneurs.”(p351)

With this framing, Graeber repaints Adam Smith’s economic account – “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” etc – as a purely moral account, a utopia utterly unlike the actual economic conditions Smith lived in.

To understand the history of capitalism, however, we have to begin by realizing that the picture we have in our heads, of workers who dutifully punch the clock at 8:00 a.m. and receive regular remuneration every Friday, on the basis of a temporary contract that either party is free to break off at any time, began as a utopian vision, was only gradually put into effect even in England and North America, and has never, at any point, been the main way of organising the production for the market, ever, anywhere.
This is actually why Smith’s work is so important. He created the vision of an imaginary world almost entirely free of debt and credit, and therefore, free of guilt and sin; a world where men and women were free to simply calculate their interests in full knowledge that everything had been prearranged by God to ensure that it will serve the greater good. (p.354).

For some critical commentary see here: http://onthespiral.com/review-reactions-debt-first-years, the Crooked Timber seminar (ht Alex)

Update 30/12/12. There’s an important point about rights being conceptualised as property, which Gemma summarises well:

Our freedom is defined as a right, which we own, as opposed to Graeber’s view that rights are actually obligations on others (e.g. our right to free speech is actually others obligations to allow my free speech). Rights have been defined in this way to justify debt-peonage or even slavery – if we own our rights, like property, then we are free to give them away or even sell them (p206).