“But they’ve repaid the debt several times over”

This gets repeated a lot in Debt (David Graeber), and in the world in general.  It annoys me.

Would you rather have $100 now, or in a month?  I’m guessing now, unless your tax circumstances are about to change drastically.  How much additional money would it take for you to prefer payment in a month?  $10?  $15?  What if there were transactions costs to receive payment were significant?  What if there was risk involved?  The fact that you would rather have money sooner than later is known as the time value of money.

This is the principle behind interest on a loan: you’re compensating the lender for them not having the money until later.

How much of an increase would you need to agree to delay receiving some money by 50 years, instead of $100 now?  I’m guessing it is a lot.  Many times the original $100.  The implication of the phrase “but they’ve repaid the debt several times over” is that this is morally wrong.  But if you’re not referencing the timespan on which that repayment took place, the statement is meaningless.  To compare apples to apples you need to do a present value calculation, which tells you the equivalent of what they paid if it had been delivered as a lump sum at the beginning.

This statement often gets entangled with the idea of usury (unfairly or immorally high interest rates).  I am not a big fan of the usury taboo: you’re not hurting someone by giving them the option to take a loan .  The counterargument is that deal was opaque (which is a fair criticism) or that the borrowers circumstances were so bad they had no choice.  Which is definitely a thing, but… maybe we should fix the problem at that end?  Much like debt forgiveness this appears to be a call to give poor countries/people more money, with a layer of obfuscation added by debt.  I am extremely curious why this seems to be more attractive than my solution “just give them money”.

Debt: The First 5000 Years (David Graeber)

This book seriously changed my thinking when I first read it, and I’ve shared many cool ideas from it, but I’ve found that when the ideas are challenged I don’t know enough to defend them.  So I’m going to reread the book and really dig in, with the following goals:

  1. Understand and be able articulate Graeber’s ideas without ambiguity
  2. Look up the data he cites and opposing arguments
  3. Update my beliefs based on what I learn

And I’m going to publish it here, probably chapter by chapter but if I need to break it down smaller I will.

What I publish will be a mix of “my understanding of his arguments”, “steelmen of his arguments”, “his argument updated by other things I know” and “things this made me think about”.  I will try to make it obvious what’s my opinion and what is his, but the application of the principle of charity is inevitably biased by what I consider charitable.

A few people have expressed interest in doing a small group chat over Whatever, in response to my “talk to me for an hour” offer.  If there’s enough interest, this strikes me as a good topic for that, so let me know if you’re interested.

And now, Debt: The Introduction.

You know what would be helpful?  A definition of debt.  Here is my idealized definition of debt:

Person A has a way to spend money to make more money later, but not the initial starting money (capital).  Person B has money, but no way to spend it to make more money.  Person B gives person B the money and A gives B money on a set schedule, up to a certain amount.  Everyone is better off.  Hurray.  The difference between debt and investment is that debts are owed no matter what, whereas in investment the risk is shared.

Graeber definitely isn’t using that definition.  There are a number of examples he gives that make me want to scream the chronological distribution of payment is not the issue here.  E.g.:

  • France billed Madagascar for their own invasion, and for the building of infrastructure they didn’t want.  Madagascar not having the cash on hand to pay them, this became a debt paid by onerous taxes.  Graeber claims Madagascar is still paying France, but I don’t trust him that this is the same bill.  He provides no source for this claim and I couldn’t find one.  But the wikipedia article on the subject makes it sounds like France had a bit of a dust up and somehow found itself running Madagascar, so I’m not convinced it’s unbiased.
  • France billed Haiti for the property damaged and confiscated during the Haitian slave rebellion, and convinced the rest of the world to embargo Haiti (unclear how long this lasted).  Haiti finished paying this in 1947.  No seriously, they had to pay France for no longer being slaves.
  • A Japanese legend about a woman who committed various commercial misdeeds, including loaning rice with a small cup and reclaiming it with a large cup.  The problem here is theft by deception.
  • Also in Madagascar: in the early 80s Madagascar had a resurgence of malaria, after almost wiping it out, because they couldn’t pay for their anti-malaria programs any more.  Graeber blames the IMF, which imposed austerity in order to refinance loans made by first world banks to Madagascar.  He makes no mention of whether Madagascar would have been able to pay for mosquito programs absent the loans.
  • As late as the 1970s, moneylenders in the Himalayas would take borrowers’ daughters as collateral and rape them as interest payments.  (source: “Galey 1983”, which probably exists because google scholar found other citations to it, but not the piece itself).  No one would have been happier if fathers had the ability to compel their daughters into prostitution proactively.
  • Graeber’s strongest point is that much of the debt owed by third world countries was taken by dictators and used for either personal enrichment or to repress the populace that is now forced to pay it.  Which is an extremely fair point, but still not any worse than repressive taxation in general.

So that’s a whole bunch of times the economic concept of debt was not the problem.  But… maybe the social constructs around debt let humans do things they wouldn’t otherwise do (this seems especially likely in the dictator case).  This seems curiously tied up with the concept of quantification (which is how he distinguishes between a debt and an obligation).  The way this makes sense to me is that this is an anthropology of debt, not an exploration of the economics


This is not a comprehensive summary of the chapter but it’s odds and ends and I don’t want this to turn into liveblogging, so they’ll all wait till their own chapter.