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4 of 6 people found the following review helpful
5.0 out of 5 stars Fascinating, but Missed the Debt / Growth Connection, May 20, 2012
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This review is from: Debt: The First 5,000 Years (Hardcover)
The key difference between modern debt and ancient debt is the presence of economic growth. When there is growth, debts can often be paid back with interest. When there is no growth, debt with interest just redistributes wealth, often from working people to the lords and ladies, hence the rebellions over debt slavery from biblical times and the religious prohibitions against usury.

Graeber misses this point, which is why his book is weaker when it gets into the modern era. Nevertheless it is a great book, a fascinating read, a real eye-opener. It is also extremely timely, as the modern era is now reaching its limits to growth, so his recommendation for jubilee year type debt forgiveness is dead on. In fact there is far more debt in today's world than will ever be paid back due to the imminent end of economic growth caused by ecological and resource overshoot, most notably peak oil.

The recent partial bond default by Greece is but a foretaste of much bigger debt crises to come. This debt will be resolved by some combination of inflation, austerity, and debt forgiveness. The latter is to be much preferred for practical economic and social reasons, not just moral reasons. Namely, debt forgiveness gives working people the chance to work more for themselves and their fellow workers than to work to support the unproductive, affluent life styles of the bondholders.

After a short period of turmoil if there is a sudden default, a more prosperous and egalitarian economy follows. The 2001 default by Argentina is a good example. Today in the US principle reduction for underwater mortgages would be highly beneficial to the economy, as would debt forgiveness on student loans as middle class jobs become scarcer. The Occupy movement is a sign of the growing political rebellion over such debt, with Graeber himself playing a key role in educating the youth on debt and governance.

In the future as the era of economic growth transitions to contraction, the entire landscape of money and debt will be transformed. Graeber's book is an invaluable guide to how historical societies sought to prevent debt servitude and the consequent economic and social weakness. It wasn't just jubilee years. The Chinese empires were largely governed by Confucian scholar / bureaucrats on day to day matters, and they learned to keep a tight reign on the debt practices of merchants and aristocrats. In the Islamic world, merchants were actually honored by the imams because usury was prohibited. Also the imams helped keep the merchants at arm's length from the rulers. Lesson: the modern world needs to find a way to build a fire wall between politicians and financiers and to keep the latter on a tight leash.
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