Debt: The First 5,000 Years

"But,"  she objected, as if this were self-evident,"they'd borrowed the money!  Surely one has to pay one's debts."

This comes on page 2 in the book - Debt:  The First 5000 Years - as author David Graeber is describing an encounter at a London party with a woman who works for a non-profit that helps the poor.  [You can read the book online at the link.]

He then goes on to explain this misconception that people have to pay their debts and how this allows banks and international financial organizations to screw over developing nations to the advantage of big banks.  He goes on:

"Where to start?  I could have begun by explaining how these loans had originally been taken out by unelected dictators who place most of it directly in their Swiss bank accounts, and ask her to contemplate the justice of insisting that the lenders be repaid, not by the dictators or even by his cronies, but by literally taking food from the mouths of hungry children.  Or to think about how many of these poor countries had actually already paid back what they'd borrowed three or four times now, but that through the miracle of compound interest, it still hadn't made a significant dent in the principal!  I could also observe that there was a difference between refinancing loans, and demanding that in order to obtain refinancing, countries have to follow some orthodox free-market economics policy designed in Washington or Zurich that their citizens had never agreed to and never would, and that it was a bit dishonest to insist that countries adopt democratic constitutions and then also insist that, whoever gets elected, they have no control over their countries policies anyway.  Or that the economic policies imposed by the IMF (International Monetary Fund) didn't even work.  But there was a more basic problem:  the very assumptions that debts have to be paid."

 He then goes on to explain that banks charge interest based on the amount of risk of a debt and they expect many to not be repaid because of things like bankruptcy laws and LLC's. (limited liability companies.)

Then he goes on to talk about how the austerity polices forced onto the countries to force them to repay the debts caused the cut of basic services and infrastructure to deteriorate.  He gives the example of Madagascar, where he lived two years.  There was an outbreak of malaria

"It was a particularly virulent outbreak because malaria had been wiped out in highland Madagascar many years before, so that, after a couple of generations, most people lost their immunity.  The problem was it took money to maintain the mosquito eradication program, since there had to be periodic tests to make sure mosquitoes weren't starting to breed again and spraying campaigns if it was discovered that they were.  Not a lot of money.  But owing to IMF-imposed austerity programs, the government had to cut the monitoring program.  Ten thousand people died.  I met young mothers grieving for lost children.  One might think it would be hard to make a case that the loss of ten thousand lives is really justified in order to ensure that Citibank wouldn't have to cut its losses on one irresponsible loan that wasn't particularly important to its balance sheet anyway.  But here was a perfectly decent woman - one who worked for a charitable organization, no less - who took it as self-evident that it was.  After all, they owed the money, and surely one has to pay one's debts.

This is a 391 page book (not counting the notes) that I first saw in a bookstore a year and a half ago and wanted to read.  I've got it now, thanks to my son, and I'm hoping to get well into on this trip - yet again - to LA to see my mom.  The good news is she's out of the hospital and back home.  I also get some between flights time in Seattle with my daughter and granddaughter.  The little one recharges my batteries even better than walking in the woods.

As I recall, the book looks into the history of debt and how the bible even had jubilee years where all debts were forgiven.  Not a bad idea.  But reading these first few pages and how banks forced nations into austerity measures that destroyed lives, made me think about all the austerity measures some Republicans are arguing for now because - we have to pay our debts.  Graeber says in this early part of the book - paying debts is not an economic issue, it's a moral one.

So for those of you who still feel strongly that everyone has to pay their debts - even in the kinds of situations like the ones above (which sounds a lot like a payday lender with killer interest rates that the borrower didn't understand) hold your breath and assumptions and check back.  Or even better, check out the book at your library.