Debt

by David Graeber

He began to adorn himself and be more careful of his appearance than before. He wore a plume of feathers, with a medallion and a gold chain, and a velvet cloak trimmed with loops of gold. In fact he looked like a bold and gallant Captain. However, he had no money to defray the expenses I have spoken about, for at the time he was very poor and much in debt, despite the fact that he had a good estate of Indians and was getting gold from the mines. But all this he spent on his person, on finery for his wife, whom he had recently married, and on entertaining guests …

  When some merchant friends of his heard that he had obtained his command as Captain General, they lent him four thousand gold pesos in coin and another four thousand in goods secured on his Indians and estates. He then ordered two standards and banners to be made, worked in gold with the royal arms and a cross on each side with a legend which said, “Comrades, let us follow the sign of the Holy Cross with true faith, and through it we shall conquer.”16

  In other words, he’d been living beyond his means, got himself in trouble, and decided, like a reckless gambler, to double down and go for broke. Unsurprising, then, that when the governor at the last minute decided to cancel the expedition, Cortés ignored him and sailed for the mainland with six hundred men, offering each an equal share in the expedition’s profits. On landing he burned his boats, effectively staking everything on victory.

  Let us skip, then, from the beginning of Díaz’s book to its final chapter. Three years later, through some of the most ingenious, ruthless, brilliant, and utterly dishonorable behavior by a military leader ever recorded, Cortés had his victory. After eight months of grueling house-to-house warfare and the death of perhaps a hundred thousand Aztecs, Tenochtitlán, one of the greatest cities of the world, lay entirely destroyed. The imperial treasury was secured, and the time had come, then, for it to be divided in shares amongst the surviving soldiers.

  Yet according to Díaz, the result among the men was outrage. The officers connived to sequester most of the gold, and when the final tally was announced, the troops learned that they would be receiving only fifty to eighty pesos each. What’s more, the better part of their shares was immediately seized again by the officers in their capacity of creditors—since Cortés had insisted that the men be billed for any replacement equipment and medical care they had received during the siege. Most found they had actually lost money on the deal. Díaz writes:

  We were all very deeply in debt. A crossbow was not to be purchased for less than forty or fifty pesos, a musket cost one hundred, a sword fifty, and a horse from 800 to 1000 pesos, and above. Thus extravagantly did we have to pay for everything! A surgeon, who called himself Mastre Juan, who had tended some very bad wounds, charged wildly inflated fees, and so did a quack named Murcia, who was an apothecary and a barber and also treated wounds, and there were thirty other tricks and swindles for which payment was demanded of our shares as soon as we received them.

  Serious complaints were made about this, and the only remedy that Cortés provided was to appoint two trustworthy persons who knew the prices of goods and could value anything that we had bought on credit. An order went out that whatever price was placed on our purchases or the surgeon’s cures must be accepted, but that if we had no money, our creditors must wait two years for payment.17

  Spanish merchants soon arrived charging wildly inflated prices for basic necessities, causing further outrage, until:

  Our general becoming weary of the continual reproaches which were thrown out against him, saying he had stolen everything for himself, and the endless petitions for loans and advance in pay, determined at once to get rid of the most troublesome fellows, by forming settlements in those provinces which appeared most eligible for this purpose.18

  These were the men who ended up in control of the provinces, and who established local administration, taxes, and labor regimes. Which makes it a little easier to understand the descriptions of Indians with their faces covered by names like so many counter-endorsed checks, or the mines surrounded by miles of rotting corpses. We are not dealing with a psychology of cold, calculating greed, but of a much more complicated mix of shame and righteous indignation, and of the frantic urgency of debts that would only compound and accumulate (these were, almost certainly, interest-bearing loans), and outrage at the idea that, after all they had gone through, they should be held to owe anything to begin with.

  And what of Cortés? He had just pulled off perhaps the greatest act of theft in world history. Certainly, his original debts had now been rendered inconsequential. Yet he somehow always seemed to find himself in new ones. Creditors were already starting to repossess his holdings while he was off on an expedition to Honduras in 1526; on his return, he wrote the Emperor Charles V that his expenses were such that “all I have received has been insufficient to relive me from misery and poverty, being at the moment I write in debt for upwards of five hundred ounces of gold, without possessing a single peso towards it.”19 Disingenuous, no doubt (Cortés at the time owned his own personal palace), but only a few years later, he was reduced to pawning his wife’s jewelry to help finance a series of expeditions to California, hoping to restore his fortunes. When those failed to turn a profit, he ended up so besieged by creditors that he had to return to Spain to petition the emperor in person.20

  If all this seems suspiciously reminiscent of the fourth Crusade, with its indebted knights stripping whole foreign cities of their wealth and still somehow winding up only one step ahead of their creditors, there is a reason. The financial capital that backed these expeditions came from more or less the same place (if in this case Genoa, not Venice). What’s more, that relationship, between the daring adventurer on the one hand, the gambler willing to take any sort of risk, and on the other, the careful financier, whose entire operations are organized around producing steady, mathematical, inexorable growth of income, lies at the very heart of what we now call “capitalism.”

  As a result, our current economic system has always been marked by a peculiar dual character. Scholars have long been fascinated by Spanish debates that ensued, in Spanish universities like Santander, about the humanity of the Indians (Did they have souls? Could they have legal rights? Was it legitimate to forcibly enslave them?), just as they have argued about the real attitudes of the conquistadors (was it contempt, revulsion, or even grudging admiration for their adversaries?)21 The real point is that at the key moments of decision, none of this mattered. Those making the decisions did not feel they were in control anyway; those who were did not particularly care to know the details. To take a telling example: after the earliest years of the gold and silver mines described by Motolinia, where millions of Indians were simply rounded up and marched off to their deaths, colonists settled on a policy of debt peonage: the usual trick of demanding heavy taxes, lending money at interest to those who could not pay, and then demanding that the loans be repaid with work. Royal agents regularly attempted to forbid such practices, arguing that the Indians were now Christian and that this violated their rights as loyal subjects of the Spanish crown. But as with almost all such royal efforts to act as protector of the Indians, the result was the same. Financial exigencies ended up taking precedence. Charles V himself was deeply in debt to banking firms in Florence, Genoa, and Naples, and gold and silver from the Americas made up perhaps one-fifth of his total revenue. In the end, despite a lot of initial noise and the (usually quite sincere) moral outrage on the part of the king’s emissaries, such decrees were either ignored or, at best, enforced for a year or two before being allowed to slip into abeyance.22

  All of this helps explain why the Church had been so uncompromising in its attitude toward usury. It was not just a philosophical question; it was a matter of moral rivalry. Money always has the potential to become a moral imperative unto itself. Allow it to expand, and it can quickly become a morality so imperative that all others seem frivolous in comparison. For the debtor, the world is reduced to a collection of potential dangers, potential tools, and potential merchandise.23
Even human relations become a matter of cost-benefit calculation. Clearly this is the way the conquistadors viewed the worlds that they set out to conquer.

  It is the peculiar feature of modern capitalism to create social arrangements that essentially force us to think this way. The structure of the corporation is a telling case in point—and it is no coincidence that the first major joint-stock corporations in the world were the English and Dutch East India companies, ones that pursued that very same combination of exploration, conquest, and extraction as did the conquistadors. It is a structure designed to eliminate all moral imperatives but profit. The executives who make decisions can argue—and regularly do—that, if it were their own money, of course they would not fire lifelong employees a week before retirement, or dump carcinogenic waste next to schools. Yet they are morally bound to ignore such considerations, because they are mere employees whose only responsibility is to provide the maximum return on investment for the company’s stockholders. (The stockholders, of course, are not given any say.)

  The figure of Cortés is instructive for another reason. We are speaking of a man who, in 1521, had conquered a kingdom and was sitting atop a vast pile of gold. Neither did he have any intention of giving it away—even to his followers. Five years later, he was claiming to be a penniless debtor. How was this possible?

  The obvious answer would be: Cortés was not a king, he was a subject of the King of Spain, living within the legal structure of a kingdom that insisted that, if he were not good at managing his money, he would lose it. Yet as we’ve seen, the king’s laws could be ignored in other cases. What’s more, even kings were not entirely free agents. Charles V was continually in debt, and when his son Philip II—his armies fighting on three different fronts at once—attempted the old Medieval trick of defaulting, all his creditors, from the Genoese Bank of St. George to the German Fuggers and Welsers, closed ranks to insist that he would receive no further loans until he started honoring his commitments.24

  Capital, then, is not simply money. It is not even just wealth that can be turned into money. But neither is it just the use of political power to help one use one’s money to make more money. Cortés was trying to do exactly that: in classical Axial Age fashion, he was attempting to use his conquests to acquire plunder, and slaves to work the mines, with which he could pay his soldiers and suppliers cash to embark on even further conquests. It was a tried-and-true formula. But for all the other conquistadors, it provided a spectacular failure.

  This would seem to mark the difference. In the Axial Age, money was a tool of empire. It might have been convenient for rulers to promulgate markets in which everyone would treat money as an end in itself; at times, rulers might have even come to see the whole apparatus of government as a profit-making enterprise; but money always remained a political instrument. This is why when the empires collapsed and armies were demobilized, the whole apparatus could simply melt away. Under the newly emerging capitalist order, the logic of money was granted autonomy; political and military power were then gradually reorganized around it. True, this was a financial logic that could never have existed without states and armies behind it in the first place. As we have seen in the case of Medieval Islam, under genuine free-market conditions—in which the state is not involved in regulating the market in any significant way, even in enforcing commercial contracts—purely competitive markets will not develop, and loans at interest will become effectively impossible to collect. It was only the Islamic prohibition against usury, really, that made it possible for them to create an economic system that stood so far apart from the state.

  Martin Luther was making this very point in 1524, right around the time that Cortés was first beginning to have trouble with his creditors. It is all very well, Luther said, for us to imagine that all might live as true Christians, in accordance with the dictates of the Gospel. But in fact there are few who are really capable of acting this way:

  Christians are rare in this world; therefore the world needs a strict, hard, temporal government that will compel and constrain the wicked not to rob and to return what they borrow, even though a Christian ought not to demand it, or even hope to get it back. This is necessary in order that the world not become a desert, peace may not perish, and trade and society not be utterly destroyed; all of which would happen if we were to rule the world according to the Gospel and not drive and compel the wicked, by laws and the use of force, to do what is right … Let no one think that the world can be ruled without blood; the sword of the ruler must be red and bloody; for the world will and must be evil, and the sword is God’s rod and vengeance upon it.25

  “Not to rob and to return what they borrow”—a telling juxtaposition, considering that in Scholastic theory, lending money at interest had itself been considered theft.

  And Luther was referring to interest-bearing loans here. The story of how he got to this point is telling. Luther began his career as a reformer in 1520 with fiery campaigns against usury; in fact, one of his objections to the sale of Church indulgences was that it was itself a form of spiritual usury. These positions won him enormous popular support in towns and villages. However, he soon realized that he’d unleashed a genie that threatened to turn the whole world upside-down. More radical reformers appeared, arguing that the poor were not morally obliged to repay the interest on usurious loans, and proposing the revival of Old Testament institutions like the sabbatical year. They were followed by outright revolutionary preachers who began once again questioning the very legitimacy of aristocratic privilege and private property. In 1525, the year after Luther’s sermon, there was a massive uprising of peasants, miners, and poor townsfolk across Germany: the rebels, in most cases, representing themselves as simple Christians aiming to restore the true communism of the Gospels. Over a hundred thousand were slaughtered. Already in 1524, Luther had a sense that matters were spilling out of control and that he would have to choose sides: in that text, he did so. Old Testament laws like the Sabbatical year, he argued, are no longer binding; the Gospel merely describes ideal behavior; humans are sinful creatures, so law is necessary; while usury is a sin, a four to five-percent rate of interest is currently legal under certain circumstances; and while collecting that interest is sinful, under no circumstances is it legitimate to argue that for that reason, borrowers have the right to break the law.26

  The Swiss Protestant reformer Zwingli was even more explicit. God, he argued, gave us the divine law: to love thy neighbor as thyself. If we truly kept this law, humans would give freely to one another, and private property would not exist. However, Jesus excepted, no human being has ever been able to live up to this pure communistic standard. Therefore, God has also given us a second, inferior, human law, to be enforced by the civil authorities. While this inferior law cannot compel us to act as we really ought to act (“the magistrate can force no one to lend out what belongs to him without hope of recompense or profit”)—at least it can make us follow the lead of the apostle Paul, who said: “Pay all men what you owe.”27

  Soon afterward, Calvin was to reject the blanket ban on usury entirely, and by 1650, almost all Protestant denominations had come to agree with his position that a reasonable rate of interest (usually five percent) was not sinful, provided the lenders act in good conscience, do not make lending their exclusive business, and do not exploit the poor.28 (Catholic doctrine was slower to come around, but it did ultimately accede by passive acquiescence.)

  If one looks at how all this was justified, two things jump out. First, Protestant thinkers all continued to make the old Medieval argument about interesse: that “interest” is really compensation for the money that the lender would have made had he been able to place his money in some more profitable investment. Originally, this logic was just applied to commercial loans. Increasingly, it was now applied to all loans. Far from being unnatural, then, the growth of money was now treated as completely expected. All money was assumed to be capital.29 Second, the assumption that usury is something that one
properly practices on one’s enemies, and therefore, by extension, that all commerce partakes something of the nature of war, never entirely disappears. Calvin, for instance, denied that Deuteronomy only referred to the Amalekites; clearly, he said, it meant that usury was acceptable when dealing with Syrians or Egyptians; indeed with all nations with whom the Jews traded.30 The result of opening the gates was, at least tacitly, to suggest that one could now treat anyone, even a neighbor, as a foreigner.31 One need only observe how European merchant adventurers of the day actually were treating foreigners, in Asia, Africa, and the Americas, to understand what this might mean in practice.

  Or, one might look closer to home. Take the story of another well-known debtor of the time, the Margrave Casimir of Brandenburg-Ansbach (1481–1527), of the famous Hohenzollern dynasty:

  Casimir was the son of Margrave Friedrich the Elder of Brandenburg, who has come to be known as one of the “mad princes” of the German Renaissance. Sources differ on just how mad he actually was. One contemporary chronicle describes him as “somewhat deranged in his head from too much racing and jousting;” most agree that he was given to fits of inexplicable rage, as well as to the sponsorship of wild, extravagant festivals, said often to have degenerated into wild bacchanalian orgies.32

  All agree, however, that he was poor at managing his money. At the beginning of 1515, Friedrich was in such financial trouble—he is said to have owed 200,000 guilders—that he alerted his creditors, mostly fellow nobles, that he might soon be forced to temporarily suspend interest payments on his debts. This seems to have caused a crisis of faith, and within a matter of weeks, his son Casimir staged a palace coup—moving, in the early hours of February 26, 1515, to seize control of the castle of Plassenburg while his father was distracted with the celebration of Carnival, then forcing him to sign papers abdicating for reason of mental infirmity. Friedrich spent the rest of his life confined in Plassenburg, denied all visitors and correspondence. When at one point his guards requested that the new Margrave provide a couple guilders so he could pass the time gambling with them, Casimir made a great public show of refusal, stating (ridiculously, of course) that his father had left his affairs in such disastrous shape that he could not possibly afford to.33