In the Beginning there was Debt

The conventional narrative of economic history posits that in the beginning, there was barter. In its simplest form, it was a fish for an axe, a loaf of bread for a chunk of cheese. However, this system of direct trade posed a problem—what if the individual who had an axe did not need a fish but something else? And even more complex: how do you determine the relative value of diverse goods?

Thus, it is believed that humans conceived the first forms of money, like shells or cacao, as universally accepted stores of value. This innovation allowed people to trade fish for shells, and later use these shells to buy other things. This form of trade evolved, and ultimately, the Lydians invented the first coins, paving the way for modern monetary systems. Or so the story goes.

Challenging Traditional Economic Narratives

This traditional narrative of economic history, however, is being challenged by anthropologists and historians. These scholars argue that before the dawn of money, there was debt.

Anthropologists and thinkers like David Graeber, argue that our conventional understanding of economic progression—from barter to money to credit—is a mere ideology, ignoring what anthropologists and ethnologists have long known. He asserts that no society based solely on barter has ever been found. Instead, millennia before the invention of real money or officially certified coins, a virtual credit economy was thriving. As proof, he points to 5000-year-old shards from Mesopotamia, neatly listing debts and interest in cuneiform script.

Thus, Graeber concludes that the original concept was not money but credit—indebtedness. This perspective offers a new understanding of the 2008 financial crisis, which almost brought the world to a standstill. Graeber's richly detailed journey through the history of debt reveals the moral implications that have arisen from credit and debt over the millennia.

The Dawn of Debt

As an abstract construct, debt emerged in small-scale societies long before coinage's invention. Before any standardized system of exchange, these societies had intricate systems of credits and debits, documented in memory and settled over time. In all probability, the concept of debt predates barter by several millennia.

These societies operated on the basis of a "gift economy", built on the principle of reciprocity. Helping your neighbor repair his roof could earn you assistance in hunting or a share of the surplus from his harvest. In this context, debt wasn't a formal obligation but a social bond. The debt owed wasn't quantifiable in goods or services but took the form of honor, respect, or reciprocal aid.

The inception of money didn't obliterate these social debts; it merely offered a new method of quantification. Ancient societies developed various forms of proto-money, such as cattle, grain, or shells, as standards of value against which debts could be evaluated.

For instance, in Mesopotamian and Egyptian civilizations, the Sumerian 'shekel,' a weight measure of barley, became a unit of account. This unit allowed the state and temples to allocate resources efficiently and collect them systematically. In such systems, money served as a measure of debt—a unit of account—rather than a medium of exchange.

Interestingly, the linguistic roots of these early monetary systems reflect their origin in social debt. Many languages use words that mean 'sin' or 'guilt' to denote 'debt.' This linguistic connection underscores the deep-seated origins of debt in societal relationships and obligations.

As civilizations evolved, the nature of debt also saw a transformation. Debts became less about societal obligations and more about economic liabilities, transforming human relations. With this, the implications of debt took on a broader spectrum. From being a means of social exchange, debt morphed into a tool of control and, at times, exploitation. As some historical epochs suggest, indebtedness has been used as a mechanism of servitude, where the debtor was often subject to the creditor's will.

The intertwining of debt and sin in religious and moral texts reflects the intricate societal, moral, and psychological dimensions of debt. Debt and sin became synonymous in many cultural and religious contexts, extending the realm of debt from the economic to the ethical.

The Legacy of Debt

In our contemporary era, debt continues to be a driving force in economies around the world. It has become an integral part of economic growth, public spending, and international trade. Debts, whether they are personal loans or sovereign debts, have profound implications for economic policies and social welfare.

In conclusion, our understanding of debt must be rooted in its historical context. The concept of debt has come a long way from the mutual exchanges of primitive societies. Yet, it remains, at its core, a reflection of the social contracts that underpin our societies. As we grapple with the challenges of modern economies, whether it's the balancing of public accounts or dealing with international debt crises, this historical perspective continues to be vital.

The evolution of debt has been intertwined with the development of human societies. Debt began as social obligations, transcended into a system of mutual reciprocity, and finally evolved into a sophisticated economic tool with the advent of money. However, at its core, debt still reflects the intricate web of social relationships and obligations that bind us together as a society.

About the author

Martin Granig is Co-founder of the Austrian based company Monkee. Monkee has a very visionary approach to personal finance management, aiming to assist millions of people in achieving their financial goals without resorting to debt. Monkee's mission is anchored in the belief that the journey towards one's financial objectives doesn't have to involve the burden of indebtedness. Instead, it seeks to empower individuals with tools and resources to manage their finances efficiently and save wisely. In an era where debt has become a common part of economic discourse, Monkee's vision prioritizes financial health and wellbeing, promoting sustainable practices to transform the way we understand and engage with personal finance.

Moreover, Monkee extends its educational reach beyond financial platforms through its book, "Monkee. Dem Geld auf der Spur." This unique wimmelbook is aimed at both children and parents, inviting them to engage in meaningful and subtle conversations about the wider theme of money. Recognizing the vital importance of financial literacy from an early age, this book helps shape healthy attitudes towards money in children before they turn six—when key attitudes are often formed. This initiative underscores Monkee's commitment to empowering all generations with financial knowledge and promoting financial wellbeing from the earliest stages of life.