This is a response to some brief comments David Graeber made on my review of his book, Debt: the First 5000 Years, published on this blog on 27 August. I cover two points: the issue of an idealist conception of history and the debt the US owes to China and Asia.
Firstly, my criticism that the book is based on an ‘idealist’ conception of history. History, as Marx and Engels noted, has been a ‘history of class struggles’, but in their examination of history they showed, as Marx put it, that ‘the existence of classes is only bound up with the particular, historical phases in the development of production’. Your analysis does look at class struggles through the ages, but pays little attention to their economic foundation, and it is on this basis that you can elevate concepts such as debt to an ahistorical level. Hence, in the conclusion of your chapter on ‘The age of the great capitalist empires’ you argue that the notion that capitalism would be around forever was the reason behind the credit bubble: ‘Presented with the prospect of its own eternity, capitalism – or anyway, financial capitalism – simply explodes’ (p360). Your analysis puts the evolution of the crisis down to psychology and fails to examine the underlying causes of the credit bubble, which resulted from problems of capital accumulation and profitability.
I am not criticising the book for failing to explain the universe and everything in it, and, of course, I accept that the book aims to cover the issue of debt. However, it is a legitimate criticism to point out mistakes in the analysis. Another example on this topic is where you cover the setting up of the Bank of England in 1694, when a consortium of English bankers loaned £1.2m to the King and in return received a monopoly of banknote issuance and other privileges. You make the absurd claim that if the loan were ever paid back, ‘the entire monetary system of Great Britain would cease to exist’ (p49). This is just ridiculous, not least because the Bank of England is a nationalised entity. It is not a private corporation that could be wound up if the privileges establishing its position were annulled with the repayment of the loan. In any event, a country’s monetary system is not dependent on a particular institution staying in place.
Secondly, on debts the US owes to China and Asia. I did not claim that ‘most money owed in the world today is owed to China or other Asian creditors’. My point was that you argued in your book for a debt ‘Jubilee’ that ‘would affect both international debt and consumer debt’. You raised the issue of cancelling international debt, and I do claim that a large chunk of the US international debt is owed to China and other Asian countries. The total of US debt, including that owed to other US citizens/companies, is far bigger than the international, so that any other country’s proportion of that total is bound to be relatively small. But, if we focus on the international debt, the numbers are far from negligible.
The following figures, which I calculate from the US Treasury website, leave out Japan, an imperialist power, in order to focus on the debt to poor Asian countries. Total US Treasury and government agency (including Fannie Mae and Freddie Mac) debt owned by all foreign countries in June 2011 was $5,781bn, of which China (including Hong Kong) owned $1,785bn and the rest of poor Asia another $529bn. The total Asia figure of $2,315bn is 40% of the Treasury and agency debt owned by other countries.
China may not own any student loan debt, but the book did not specify only cancelling this type of debt. China and other poor Asian countries would certainly get hit pretty badly on any broad debt cancellation. The US owns less than $100bn of debt securities in Asian countries outside Japan.
There are many ways to measure debt, and the comments above refer only to official debt securities. They do not include corporate debt, nor equity holdings, nor the assets and liabilities represented by direct investment. If ‘everything’ is included, at least as measured in published statistics, then the data for 2011 show that the US economy has a net debt position with the rest of the world amounting to $4,157bn. In other words, foreign investors own this amount more of all kinds of assets in the US than the US owns in other countries. Nevertheless, because of its privileged imperial position, with the role of the US dollar in particular, it was still able to earn a net revenue on this debt position of $235bn in 2011!
Tony Norfield, 3 September 2012
Here is a copy of David Graeber’s comments:
Just a couple notes:
I do not actually say that changes in the nature of money are the driving force of history; you just seem to conclude this because I do not provide a theory of the "motor of history" at all, but mainly describe what happened, and since the book is about money and debt, money and debt are what I focus on. However when I do suggest specific you will find, if look carefully, that it's always based in class struggle of some sort or another. Coinage comes about through the rise of professional armies and slave systems. The ban on usury in Islam comes from a shift in class alliances. Etc. Sometimes I note ironic results, such as the disaster that certain forms of debt resistance in the ancient Middle East had on the status of women, or the way that successful popular resistance in Ming China set the stage for the elite counter-offensive in 16-17C Europe. But it's always class struggle ultimately. Skim the book again with that in mind and you'll see it.
The idea that most money owed in the world today is owed to China or other Asian creditors is simply untrue. They just hold a lot of US treasury bonds, which are losing propositions economically anyway. About 74% of the US public for instance, are in debt, and 1 in 7 are currently being pursued by collection agencies, and the amount of student loan debt at all is over a trillion dollars. Close to none of that is owed to China.
 Marx, Letter to Weydemeyer, 5 March 1852.
 These topics have been analysed on this blog in various articles, see for example ‘Anti-Bank Populism in the Imperial Heartland’, 5 July 2011.
 See US Bureau of Economic Affairs, ‘The International Investment Position of the United States at Yearend 2011’, July 2012.
 For further details of how this works, see ‘Dimensions of Dollar Imperialism’ 5 October 2011, on this blog.