What If All the World’s Debt Just Went Away

Picture: Roman Oleinik (CC)

Joe Brewer writes at Common Dreams:

Just for fun, imagine if all debt were wiped away when the Mayan Calendar ends this Friday…

How would the world be different?  What would become possible for you personally in your life?  How would nations and corporations invest our newfound wealth differently if we all started from a clean slate?  Problems like global warming and extreme poverty would instantly become financial drops in the bucket—easily tackled with fair contracts and forward-looking investments.  The structural debts of entrenched subsidies, invested capital, tax havens, and trade agreements that keep them from being addressed would simply no longer exist.

Sounds too good to be true, doesn’t it?  Well just such a fantasy used to be standard practice in the Hebrew Tradition throughout the early days of their civilization.  They held a great Jubilee every seven years to erase all debt and end economic slavery.  Accounts kept on stone tablets were broken.  Those stored on papyrus were burned to ash.  Slaves were returned to their families.  Everyone was given a fresh start.  (This tradition is being revived today through the Occupy-inspired project, Rolling Jubilee, that has already abolished more than $9,000,000 in US debt for everyday citizens.)

The Invention of Debt

What you may not know is that debt arose recently on the human stage.  Throughout more than 99% of our history we have not even had a concept for debt.  (The interested reader can pick up David Graeber’s excellent book Debt: The First 5000 Years for full story.)

Anthropological studies of hunter-gatherer societies reveal that there were no barter systems, no currencies to use for money, and — in the absence of these cultural artifacts — there was no debt.  With all the great variation cross cultures one might expect from ethnographic research, the anthropologists found that some tribal communities engaged in “gift economies” where status arises from how generous a person is who has acquired wealth, while others have remained egalitarian and non-hierarchical for thousands of years by sharing their food and materials based on the principles of “from each as they are able, to each as they need.”

This belies the great misunderstanding about communism that treats it as a state-centric governing system, when in truth it is the foundational sentiment of any community that builds upon the trust and good will of social relations between people who know and depend upon one another — a condition that has held for all hunter-gatherer societies throughout our long 200,000 year history as a species.

Pick up an economics textbook at random and you will find a classic (and false) “just so” story about the need for barter systems to have money.  They all go something like this:  Steve has potatoes and needs some shoes.  Bob has shoes but does not need any potatoes.  They are unable to directly exchange goods due to this mismatch of need, and so must introduce a money system to preserve the value of currency across multiple exchanges that enable Steve to sell his potatoes to Sue and acquire money that he can then use to pay Bob for a pair of shoes.  What this simple narrative conceals is the broad evidence from ancient cultures studied by anthropologists that no such problem arises in this way.

What really happens is that a warring society has arisen somewhere (to get a sense of how this happens, read my article about psychopaths and agrarian city states) and is in a mode of conquest.  When this burgeoning empire conquers new land, the ruler imposes a system of taxation on the local populace to pay for the costs of war.  This imposition of scarcity, by extracting resources from the local population to be hoarded by the warrior chieftain, is what leads to the emergence of barter systems and — in some instances — the introduction of a money system by the ruler.

Read more here.

20 Comments on "What If All the World’s Debt Just Went Away"

  1. OtherWorldly1 | Dec 20, 2012 at 7:53 pm |

    Not to say that I wouldn’t enjoy living free of debt, but in a debt-based fiat currency society if all debt were to suddenly disappear so too would all of the money.

  2. Geoff Henry | Dec 20, 2012 at 8:12 pm |

    It would mean things likey rentors not paying their bills and my losing the homes they live in. Sorry, but take another bong rip and dream about perpetual motion while you’re at it.

    • Actually the way banks are set up now is the closest approximation of perpetual motion the human species has attained. That full spectrum realization is what will precipitate the erasure of all debt across the system. Yaaaaaay!

  3. “What If All the World’s Debt Just Went Away?”
    That would mean that chinese and all poor countries of the world just worked for free and gave their natural resources for free to rich countries. Slavery and robbery.

  4. BuzzCoastin | Dec 20, 2012 at 10:58 pm |

    ancient debt consisted of tangible objects
    for which a form of precious metals were exchanged
    or some form of tangible goods exchanged for other tangible goods
    debt consists of computer digits backed by thought
    mostly backed by hypothecated “financial instruments”
    for which people become indebted for the purchase of ephemeral goods
    like software, movies and digital services
    (it’s even possible to jailed for “stealing” software)
    and nobody seems to have noticed the change
    or adjusted their practices accordingly

    and who thought up the mortgage contract
    where you buy the house 3 times over before the loan is settled?
    I can’t believe that all this rolling Jubilee hasn’t focused on that white elephant

    • I’d say it’s still that way now except that the standard of living for the majority of the population has become irrelevant to the exchange itself. Oil for weapons seems to be the the dominant materials exchange, unfortunately for the population neither weapons nor oil lend themselves to the fulfillment of a quality of life for the collective species of the planet. We need to find better goods to dominate the exchange like cannabis for food. The people rule even if they don’t know it. People have stooped to coercion to sway the popular favor into their favor but the popular favor still rules even if every iota of our environment is bought as advertising space. We shall create harmony and life should we be so coerced to do so.

    • emperorreagan | Dec 21, 2012 at 9:26 am |

      How about the student loan?

      Repay over 25 years or more. At one time, a lawyer would apprentice with a practicing lawyer for ~5 years, for example. Now, you go into a job, still have to learn the ropes from someone who has been practicing for a few years, but will be paying for a diploma for 1/3-1/4 of your life.

      • BuzzCoastin | Dec 21, 2012 at 7:27 pm |

        back in the day, education was a ticket to freedom
        that changed a few decades ago, and now
        it’s the gateway to indentured servitude
        and unlike mortgages
        now student loans can no longer be discharged through bankruptcy
        the Roman Republic had a revolution over such a matter

  5. It would mean a collapse of our financial system as we know it. Maybe not a bad thing in the long run, but in the short term it would mean riots, martial law, mass starvation, and a lot of other crazy dystopian shit. The Occupy movement, which I fully support, is just a bubble representing a small part of the population that actually gives a shit. There’s probably just as many people who recently went out and purchased a Bushmaster AR for fear of new gun control laws as there are people actually participating in Occupy. When the economy grinds to a halt they’re going to need those guns.

    A better, more realistic choice, might be hyper inflation. If the dollar were suddenly worth only $0.50, then everyone’s debt would be cut in half. It would probably take a while for wages to catch up, but they eventually would. You’d have the same problems with credit getting frozen, but the transition would probably be a lot smoother than any sort of debt forgiveness scheme. Inflation hurts people with money, particularly those that loan it, much worse that people without it, at least in a financial context.

    • Hyperinflation has been tried. Google on “Weimar Republic”. Didn’t end well. In fact, I don’t know of ANY historic examples of hyperinflation that ended well. Hyperinflation doesn’t stop at the value of a currency unit getting cut in half, think wheelbarrow full of bills in exchange for a loaf of bread.

      Debt has been pyramiding in Western civilization for hundreds of years. Now, the financialization of this culture is turning it into an invisible tax on every transaction devoted to nonproductive ends.

      I think our options are to get to a “Jubilee” via some controlled means, or via massive long-term economic crash of civilization. When I say long term crash, one example would be the 100+ year long depression in EU starting in 1340. Controlled means would require what any other major reform required for the long-term survival of civilization does, curbing the power of the billionaire class who profit towards the runup to several different kinds of disaster.

      • Yeah, hyper inflation was probably the wrong term to use. Maybe global currency devaluation. You’d have to do it globally to avoid animus between trading partners.

    • Yours Mine Realign | Dec 21, 2012 at 12:35 pm |

      The nice thing about the Global Debt Realignment Initiative is that it is global…it would effect all of the world’s economies, fairly and equally, in one swoop. Just curious, but why do you think that it would lead to things like “riots, martial law, mass starvation”?

      • Because capital would freeze. No one would lend money in a world where mass debt forgiveness was a reality. The result would be an economic collapse. Of course, getting to a point where we would actually pursue something like a global debt forgiveness options would mean we were already on the brink of a global economic collapse or that some massive socialist movement had swept the world. Nationalize the worlds banks and something like this might be possible.

        I guess my main argument with the idea is that it’s a fairy tale. The space between the people who currently run the world and are perfectly happy with how it’s running and the people that would be able to make something like this happen is vast. The notion that you could just hit reset without having to fundamentally transform the way the world operates just seems hopelessly naive.

        Debt is how our oligarch masters control us. I believe this whole notion of debt crisis is all just smoke and mirrors to keep global populations scared. Currency is an incredibly fluid thing in this day and age and I’m certain that those who control wealth know what they’re doing and aren’t about to sacrifice their position. The may have us all fight a few world wars in order to redraw how money gets from point A to point B, but don’t think they’re ever going to let go of the yoke of debt.

  6. I’d give my left nut to see that.

  7. bobbiethejean | Dec 21, 2012 at 10:15 am |

    Would that include my student loans? Because then I could stop being an indentured servant. That would be nice.

    • Matt Staggs | Dec 21, 2012 at 12:56 pm |

      I’m with you. Barring a miracle, I’ll be in debt to the banks for the rest of my life.

      • bobbiethejean | Dec 22, 2012 at 9:30 am |

        100 grand+. Gods help me if I ever default because then I’d end up owing hundreds of thousands. O__O

  8. Yours Mine Realign | Dec 21, 2012 at 12:25 pm |

    This is not a new idea…

    The Global Debt Realignment Initiative has been around since at least the early Nineties, yet never has it been more relevant or necessary: http://www.thedebtrealignmentinitiative.com/Home_Page.html

  9. Let the chips fall!

Comments are closed.