A review of early Occupy Wall Street organizer David Graeber’s latest book, Debt: The First 5,000 Years.
It is growing daily more apparent that the current economic recession is not a run-of-the-mill downturn or cyclical lag in consumer demand. This recession is different from the booms and busts of the 80s and 90s, above all else, because worldwide, we are experiencing a massive overhang of public and private debt. As Harvard economist and former chief economist of the IMF Kenneth Rogoff recently observed, “the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors.” When you start connecting the dots, it becomes apparent that many of the largest, seemingly unrelated policy fights we have seen since the 2008 crisis have been about debt. The European debates over sovereign debt and austerity measures are a classic debtor-creditor dispute, which boils down to whether creditor institutions, insolvent borrowers, or unwitting taxpayers ultimately bear the burden of unpayable debt. The push for mortgage write-downs and foreclosure prevention in the United States reveals a similar rift, where taxpayers were put on the line for risks taken by banks and large institutional creditors, while average borrowers, students, and homeowners have been crying out for relief. Worldwide, high levels of public debt have undermined the ability of governments to pursue Keynesian spending programs, a fact that threatens to make the current recession more intractable than any since the Great Depression. One of the major challenges of our time will be figuring out how to unwind after a glut of borrowing without either fomenting unrest or grinding the global economy to a standstill. And as this picture becomes clearer, divisions between debtors and creditors are likely to grow more polarized. We need more and better ways of thinking about debt.