{"id":126301,"date":"2019-01-21T12:00:34","date_gmt":"2019-01-21T12:00:34","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=126301"},"modified":"2019-01-21T06:42:35","modified_gmt":"2019-01-21T06:42:35","slug":"from-barter-to-debt-a-brief-history","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2019\/01\/from-barter-to-debt-a-brief-history\/","title":{"rendered":"From Barter to Debt: A Brief History"},"content":{"rendered":"

In which the brilliant deductive techniques of Sherlock Holmes are applied to the origins of debt, currency and the debt-linked economy.<\/em><\/p><\/blockquote>\n

\"\"<\/a><\/p>\n

    \n
  1. Background<\/strong><\/li>\n<\/ol>\n

    Imagine the simple human economic life of about five thousand years ago, based on the production and exchange of the necessities of life. If one family has a surplus goat, say, and another family has surplus wheat, then both would benefit by making an exchange\u200a\u2014\u200aso much wheat for a goat. Economically, the exchange would make excellent sense, because it would leave everyone better off<\/em>.<\/p>\n

    Individuals, communities and families which relied on the barter economy had to be practical economists; their lives depended on shrewd economic judgement.<\/p>\n

    Not to say that life would not have other aspects, both pleasant and unpleasant. There would be music<\/em>, sport<\/em>, romance<\/em>, oral traditions<\/em>, art<\/em>, craft<\/em>\u00a0\u2026 and also disputes<\/em>, envy<\/em>, betrayal<\/em>. There is absolutely no reason to believe that people of those days were not intelligent, creative, shrewd and happy.<\/p>\n

    But sometimes the family with a surplus goat may not be in need of wheat, whereas the family with surplus wheat may badly need a goat\u200a\u2014\u200afor a family reunion, say. It would not be long before the smart people of the day would come up with the idea of an IOU. After accepting the much-needed goat, the second family would give to the first an IOU for an agreed-upon amount of wheat.<\/p>\n

    About five thousand years ago, the IOU might have taken the form of a clay tablet with some suitable markings on it; precise details of the physical form of the IOU do not really matter.<\/p>\n

    With human ingenuity constantly at work, it would not be long before the expert goat-herd families of the day collected a huge amount of IOUs from other families. They would understand that the wheat IOUs gave them the right to \u2018buy\u2019 not only wheat, but also other commodities\u200a\u2014\u200aprovided only that the suppliers of the other commodities accepted wheat IOUs as \u2018payment\u2019. Depending on need, other forms of IOUs would also make their appearance\u200a\u2014\u200asay, wool IOUs, fish IOUs, and so on.<\/p>\n

    These IOUs were a form of early money\u200a\u2014\u200aserving both as medium of exchange<\/em> and store of value<\/em>. People accepted IOUs \u2018in payment\u2019 for supply of goods, because they knew<\/em> the families concerned and therefore knew<\/em> that \u2018the wheat IOUs were as good as wheat\u2019\u00a0\u2026 and similarly for other IOUs.<\/p>\n

    So the \u2018money supply\u2019 of the day consisted of IOUs backed up by useful, real commodities<\/em>, and faith<\/em> amongst the people that the issuers of the IOUs \u2018stood behind the IOUs\u2019. The issuers could be trusted<\/em> to deliver the promised quantity of wheat, goat or another commodity.<\/p>\n

    The crucial concepts here are (a) useful, real commodities<\/em> and (b) trust<\/em>. Any sensible person of that day would expect these qualities from the prevailing economic system.<\/p>\n

    Another feature of community life would be that some individuals\u200a\u2014\u200abased on their vigour or intelligence\u200a\u2014\u200awould serve as organizers, dispute resolvers or arbitrators\u00a0\u2026 \u2018community leaders\u2019, say.<\/p>\n

      \n
    1. Progress<\/strong><\/li>\n<\/ol>\n

      Around that time, a few major innovations occurred which have had huge impact on human life. It seems that these innovations occurred over a fairly short historic period.<\/p>\n

      Organized instruments of coercion<\/em><\/strong><\/p>\n

      The first of these innovations involved the use of organized instruments of coercion<\/em>\u200a\u2014\u200ato impose a conveniently defined \u2018order\u2019 on society. What this meant was that the \u2018headman\u2019 or \u2018headwoman\u2019 of a community employed \u2018guards\u2019 to do his or her bidding, ostensibly towards \u2018greater social good\u2019.<\/p>\n

      There is no question that, from time to time, dispute resolution is required in social life\u200a\u2014\u200abecause disputes do occur when two or more persons contend over anything. But organized\u200a\u2014\u200aspecialized!\u200a\u2014\u200ainstruments of coercion are not needed for dispute resolution. It is possible for disputants to put sort things out in good faith, perhaps with the help of a trusted arbitrator.<\/p>\n

      On the other hand, \u2018organized instruments of coercion\u2019 develop selfish interests of their own. They may sense than festering disputes work out to their advantage; and they may cunningly persuade the \u2018head\u00adperson\u2019 that they are truly indispensable to achieving \u2018social stability\u2019\u00a0\u2026 and so on and on.<\/p>\n

      In addition to brutish \u2018musclemen\u2019, soon the \u2018organized instruments of coercion\u2019 began to include seemingly \u2018learned people\u2019 who could provide convenient justifications for almost anything that needed to be done in the interests of \u2018social order and stability\u2019. The required justifications were supplied in the name of \u2018law\u2019, \u2018god\u2019, \u2018stability\u2019, \u2018security\u2019, \u2018progress\u2019\u00a0\u2026 as may be expedient at a given time.<\/p>\n

      Tax<\/em><\/strong><\/p>\n

      Debt<\/em> and tax<\/em> should be understood as being both (a) closely interrelated to each other, and (b) useful ancillaries to the organized instruments of coercion described above.<\/p>\n

      Once a \u2018headperson\u2019 is persuaded that he or she has \u2018an indispensable and central role in maintaining social order\u2019, the seductive idea of \u2018tax\u2019 takes complete hold of his or her mind. \u2018Ordinary community members\u2019 are coerced into contributing towards the cost of \u2018maintaining social order\u2019\u200a\u2014\u200aincluding, naturally, the cost of maintaining the expensive instruments of coercion.<\/p>\n

      A brilliant new \u2018business model\u2019 was thus born about five thousand years ago!<\/p>\n

      It is not an over-statement to say that this has been the most durable and successful business model in human history. With the imposition of \u2018tax\u2019, community members become beholden to the \u2018head\u00adperson\u2019. From childhood, every citizen is educated to uphold this \u2018moral obligation\u2019, while the beneficiaries of the system find ways to evade their own moral obligation.<\/p>\n

      The \u2018headperson\u2019 soon became \u2018king\u2019 or \u2018queen\u2019, and took on a certain \u2018majesty\u2019 for added effect. Cost of the \u2018majesty\u2019 is always borne by ordinary people; that is, they must pay for the privilege and the glamour of being governed by the \u2018majestic ones\u2019, with \u2018divine sanction\u2019 also thrown in.<\/p>\n

      Debt and common currency<\/em><\/strong><\/p>\n

      Once the idea of \u2018tax\u2019 took hold in society, a deadly accounting trick became available to \u2018rulers\u2019. This trick had the potential to transform any formerly free citizen into a debt-slave.<\/p>\n

      Recall that IOUs were circulating in healthy societies even before the above-mentioned innovations were imposed on free citizens. Now suppose that a goatherd had been \u2018persuaded\u2019 to supply one goat a week to the \u2018king\u2019 or \u2018queen\u2019 as \u2018tax\u2019, which \u2018every good citizen must pay\u2019. Since the goat was given as tax, the goatherd received nothing in return from \u2018royalty\u2019\u200a\u2014\u200aneither a useful produce nor an IOU.<\/p>\n

      But the goatherd had to get along with daily life, and procure the necessities of life for the family. Without any IOUs as \u2018payment\u2019 for the goat, he or she would be in a \u2018liquidity crunch\u2019.<\/p>\n

      Economic na\u00efvet\u00e9 or distress can always be exploited. The goatherd\u2019s \u2018liquidity crunch\u2019\u200a\u2014\u200ainduced by \u2018tax\u2019\u200a\u2014\u200amade him or her vulnerable to exploitation. The \u2018king\u2019 or \u2018queen\u2019 stepped in graciously and extended \u2018debt\u2019 to the distressed goatherd. Naturally, this was done through cunning agents, since \u2018royal hands\u2019 must not be seen to be sullied by such crass commercial deals.<\/p>\n

      The goatherd received \u2018common currency IOUs\u2019 from \u2018royal\u2019 agents as debt, with an obligation to repay. To ensure repayment, \u2018organized instruments of coercion\u2019 served as tax and debt collectors.<\/p>\n

      What the goatherd thus received was yet another innovation\u200a\u2014\u200aa \u2018common currency\u2019, which by \u2018royal fiat\u2019 could be exchanged for any commodity.<\/p>\n

      Naturally, all earlier forms of trusted IOUs were forced out of the economy. The \u2018royals\u2019 now had total control over currency\u200a\u2014\u200awhich was now a fiat currency<\/em><\/strong>. Thus, in return for being clever and cunning, the \u2018royals\u2019, now operating a \u2018central bank\u2019, now had the citizenry working as debt-slaves.<\/p>\n

      An extra bonus accruing to the \u2018royals\u2019 was that the power to create fiat currency bestowed on them huge political power\u200a\u2014\u200ato be used at the supreme and arbitrary decision of his or her \u2018majesty\u2019. More often, cunning people lurking behind the throne operated all the levers of power.<\/p>\n

        \n
      1. History<\/strong><\/li>\n<\/ol>\n

        Thus \u2018money\u2019 became much, much more than a medium of exchange<\/em> and store of value<\/em>. It became a sophisticated instrument of political and economic power. Ordinary goatherds, farmers\u00a0\u2026 and other such simple people\u00a0\u2026 would never understand what hit them; but they would be dazzled by \u2018royalty\u2019 nonetheless. All along, \u2018religion\u2019 provided the \u2018soft power\u2019 which went hand-in-glove with other instruments of coercion\u200a\u2014\u200aa velvet glove on an iron hand, you might say.<\/p>\n

        The rest is merely a matter of detail. Kings and queens have come and gone\u200a\u2014\u200aas on a stage. One was Joe and one was Jane; one was fat and one was slim; one was stabbed to death and one died of syphilis; one worshiped this god and one worshiped that one\u00a0\u2026 and so on and on. Where a \u2018monarch\u2019 is not readily available, \u2018majestic institutions\u2019 have been developed towards the same ends.<\/p>\n

        Meanwhile, instruments of coercion have evolved into instruments of mass surveillance, deception, incarceration and even destruction; but the basic calculus of economic life has not changed. Human ingenuity is at work in exploiting everything in sight\u200a\u2014\u200awithout the slightest trace of compassion.<\/p>\n

        ***<\/p>\n

        So what is to come next, dear Sherlock? Do tell.<\/em><\/p>\n

        I am afraid I cannot, dear Watson. I am only a detective, not an oracle.<\/em><\/p><\/blockquote>\n

        _________________________________________________<\/em><\/p>\n

        \"\"<\/a><\/em>Dr. Naresh Jotwani is a semi-retired academic living in India and a member of the TRANSCEND Network for Peace Development Environment<\/a>. Apart from part-time engagements in engineering education and consulting, he engages in an in-depth, personal exploration of how Gautam Buddha\u2019s profound discoveries and teachings can be applied to the acute problems of modern life.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

        In which the brilliant deductive techniques of Sherlock Holmes are applied to the origins of debt, currency and the debt-linked economy.<\/p>\n","protected":false},"author":4,"featured_media":106734,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[],"class_list":["post-126301","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-transcend-members"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/126301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=126301"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/126301\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/106734"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=126301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=126301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=126301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}