Monday Smackdown: Yet More Chapter 11 of David Graeber's "Debt" in Chapter 7: (Definitely Not) the Honest Broker for the Week of October 3, 2014

During the past two weeks the drought of high-quality DeLong smackdowns on the internet has resumed. So it is time to turn back to the promise I made myself on April Fools Day 2013, and see whether the rest of the chapters of David Graeber's Debt: The First Five Thousand Mistakes are of as low quality as the utterly bolixed up chapter 12.

As you will recall, David Graeber is infamous for:

Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other's garages...

and for having, concurrently and subsequently, offered three different explanations of how this howler came to be written and published:

1. He has claimed that it it all perfectly true, just not of Apple but of other companies (none of which he has ever named).

2. He has claimed that he had been misled by Richard Wolff, who taught him about Silicon Valley's communal garage laptop circles of the 1980s.

3. He has claimed that what he had written was coherent and accurate, but that (for some unexplained reason) his editor and publisher had bolixed it all up.

This passage is, in the words of the very sharp LizardBreath:[1]

The Thirteenth Chime... that make[s] me wonder whether any fact in the book I don't know for certain to be true can be trusted...

And things have gone downhill from there...

If you have not been following along, skip to here for the backstory:.

I looked, but could not find anybody masochistic enough give a close reading to David Graeber's earlier chapters before the chapter 12 that I had read and, yes concluded was in general about as weak as his knowledge of Silicon Valley. So last June--before the arrival of manna from heaven in the form of high-quality DeLong smackdowns ended the drought--we had begun in on chapter 11. Now we continue:

On to the next kindle screen here! We have:

Graeber has arithmetic problems. One of them:

1. Between 1500 and 1650, Graeber says, as a result of the bullion inflow from the Americas prices increased 500%.

2. But he earlier claimed that this period also saw a diminution in the use of virtual currencies, or credit.

3. With prices going up 500% and with population increasing, the total flow of nominal spending went up by more than 500%.

4. With less use of credit and virtual currencies, the total amount of precious metals in circulation must have gone up by more than 500%--but it didn't.

5. Therefore Graeber has here disproved his earlier claim that the post-1450 era saw a relative fall in credit and relative rise in bullion and precious-metal coinage.

6. Yet Graeber doesn't know enough about arithmetic to realize that the numbers he presents undermine the point he had claimed to be making.

Another problem:

1. Prices increased sixfold. Real wages declined by 60%. That means that nominal wages increased from a base of 100 in 1500 to 240 in 1650.

2. That is not wage stickiness. Usually, when people say "wages simply couldn't keep up" the mean that some institutional or contractual feature made wages sticky. But wages weren't sticky: they could change, and did change, and did change by a lot.

3. Because Graeber doesn't do the arithmetic to recognize that by his reckoning nominal wages in 1650 were nearly 2.5 times their 1500 level, he doesn't understand that to say "wages couldn't keep up" is not a sufficient explanation. Why couldn't wages keep up? Since it wasn't because they were stuck for psychological and institutional reasons, it must have been something about supply and demand? What? Graeber doesn't say, and isn't even aware that he should say.

4. That nominal wages rose very rapidly indeed in the years around 1500 is the reason that nearly all economic historians have concluded that we need to shift from institutional nominal-stickiness explanations of the decline in real wages in the early modern period to demographic real-Malthusian supply-and-demand explanations.

5. Thus the big question--which Graeber makes no attempt to answer--is what the real, not nominal, factors were that caused the large post-Black Death real wage boom to be so quickly reversed. Jean Bodin was state-of-the-art as far as economic analysis was concerned in 1568, but not today.

Maybe the next screen will clarify matters?

No. It does not clarify matters.

That being said, this is the first place I have found in chapter 11 in which Graeber says something that seems to me to be (a) non-obvious and (b) true. It is a serious "problem with the [Jean Bodin] story... that... the gold ended up in temples in India, and the overwhelming majority of the silver was ultimately shipped off to China..." I would say that it is more than a serious problem: it is a decisive flaw.

But immediately after making this true observation, Graeber loses the thread of his own argument. He forgets that he posed the problem of and thus owes us an explanation of why European real wages collapsed from 1500-1650, and leaves us hanging. Instead of presenting an alternative explanation for the fact that bricklayers in the England of James I could buy only two-thirds as much bread as bricklayers in the England of Henry IV, he wanders off 6,000 miles away, to China, and forgets that he had started and framed the first part of this chapter as about a shift in Europe from credit money to gold and silver.

We peek forward to the end of the paragraph at the top of the next page:

This raises natural questions:

1. If "the place to start" if you are looking for "the origins of the modern world economy" is "not in Europe at all", then why did Graeber start the chapter in Europe, which is not the place to start?

2. Where were the editors, the friends, the colleagues, the internal reflective selves who ought to have told him that if you find yourself writing that the place you started is not the place to start, that is a sign that you should throw away the false start as mere throat clearing?

3. How can the Chinese abandonment of paper money for specie be "the place to start" in understanding a modern world economy that makes and has made immense use of paper money and other financial instruments for half a millennium?

It will be interesting to see if Graeber makes any attempt to provide any answer to these questions as we read forward. So let us read on--and I definitely need to pick up the pace...

Now maybe I am misinformed, but I had always thought that the Ming Dynasty saw American silver not as something that made their task of ruling easier but as something that made it more difficult--that the Ming Dynasty had tried, after the inward turn following the voyages of Zheng He, to wall itself off from the rest of the global trading world; failing that to wall off the interior from the trading coast; and had only succumbed to the silverization of the economy in the 1570s--when it was approaching its last legs--with the "Single-Whip Tax System".[2] The regime did not first silverize and then turn to American silver to solve a problem: American silver arrived, and the regime fought silverization for more than half a century. Why Graeber thinks American silver was either seen by the dynasty as or was an aid to Ming rule I do not know.

Backing up, Graeber appears to think that the Chinese economy boomed during the Ming Dynasty because of a mid-Ming shift to pro-market pro-silver policies. And the Ming economy did indeed boom: a population rise from roughly 100 million at the middle of the fourteenth century to roughly 200 million at the beginning of the seventeenth century. The thing is that GDP in the Ming Dynasty Chinese economy--like in all agrarian economies--was 75% the harvest: living standards depended overwhelmingly on agricultural capital, agricultural technology, and whether nature cooperated. And here it was internal piece, the spread of double- and triple-cropping rice strains, extraordinary investments in wet-field and irrigation canal construction, plus the new crops of the Columbian Exchange that were decisive. I don't know why Graeber thinks that mid- and late-Ming silverization and the near-abolition of feudalism with Chinese characteristics were at all decisive here.

Nor do I understand why Graeber thinks that the early-Ming policy turn of the dynasty arose because:

During their century [1234 north/1271 south-1368] of rule, the Mongols had worked closely with foreign merchants, who became widely detested. Partly as a result, the former rebels, now the Ming dynasty, were suspicious of commerce in any form, and they promoted a romantic vision of self-sufficient agrarian communities. This had some unfortunate consequences. For one thing, it meant the maintenance of the old Mongol tax system, paid in labor and in kind; especially since that, in turn, was based on a quasi-caste system in which subjects were registered as farmers, craftsmen, or soldiers and forbidden to change their jobs.

I don't get this: as part of the reaction against the policies of the Yuan dynasty, the early Ming (a) kept the Mongol tax system and (b) continued the Mongol version of feudalism with Chinese characteristics? Graeber's footnote for this is:

Brook 1998. Needless to say, I’m simplifying enormously...

Timothy Brook's The Confusions of Pleasure: Commerce and Culture in Ming China[3] is a very interesting book. But it is important to note that it is, as Timothy Brook writes in the preface:

not an economic history of the Ming Dynasty... but a cultural history of a place that commerce was remaking...

It is a recreation of China as seen from the viewpoint of those who were powerful either because of their membership in or their usefulness as bureaucrats-landlords-literati to the ruling Ming Dynasty, and who feared commerce either because it created alternative power elites or because it gave non-elites options. Their view of what the Chinese economy had been at the start of the Ming and was becoming is not reliable.

And it is important to register where Timothy Brook was coming from when he finished the book back in 1998. He writes:

My interest in the Ming dynasty goes back to my student days at Fudan University in Shanghai, when Professor Li Qingjia first introduced me to the writings of late-Ming philosophers. That was in the heady spring of 1976, when Shanghai was caught in the final year of the Cultural Revolution, suspended between the high-court politics and anticommercialism of the “Gang of Four” (all of them natives or one-time residents of Shanghai) and the world of what then passed for fashion down on Huaihai Road, where muted commercial instincts sought to inch past the political cordon. With the death of Chairman Mao Zedong later that year, China slipped from socialism to the market with a rapidity most Chinese found shocking, provoking anxieties...

No. For most Chinese, slipping from the socialism to the market economy meant the abolition of the communes, with the accompanying great gain in individual freedom that came from no longer being a serf to the local commune boss plus roughly a doubling of rural peasant living standards. Deng Xiaoping and his successors have enormous credit with 老百姓 for this, and the rest of the transformation away from the late-Maoist era of Great Leap Forward-Great Famine-Cultural Revolution. That Brook does not see this--the single dominant fact about China that he lived through--and writes instead about how it was:

found shocking, provoking anxieties about what in the late 1970s was called a “poverty of philosophy,” then moving on to a more general sense of cultural crisis in the 1980s...

speaks volumes.

Brook back in 1998 continues:

Struggling with the conundrum of how to blend desire for profit with desire for moral good, Chinese in the post-Mao age found themselves reliving a contradiction that Chinese of the late-Ming dynasty knew well. From the perspective of the 1990s, when silver has become the undisputed lord of the land and the urban sex and luxury trades assume almost late-Ming-like proportions, even that debate now seems antique, a quick backward glance to a moral vision that disintegrates as China finds its place in the international division of labor. In presenting the Ming dynasty as a coherent arc of change from ordered rural self-sufficiency in the early Ming to the decadence of urban-based commerce in the late, I am conscious of parallels with my own time.... This is not to say that the narrative arises from other than Ming sources, only to acknowledge that every historian writes the past from the present...

Is Brook as of 1998 a more reliable guide to the political-economic processes (as opposed to the cultural processes, at which he is a master) of 1368-1644 than to the political-economic processes of his own day? Graeber appears to think so. I am not sure why.

F--- me. This is now 3843 words. And I am only 7 kindle screens into a chapter 11 that is 81 kindle screens long. And I do not even have the beginning of a sense of what Graeber has to say about his "Age of the Great Capitalist Empires" that is (a) correct and (b) interesting.

Right now my state-of-mind is more-or-less that of Daniel Davies, when he discovered exactly what his "shorter Stephen den Beste" project had gotten him into:[4]

...What people want is a Shorter Stephen den Beste; one that doesn't take about ten thousand words to get from A to halfway through the downstroke of B. So I'll be posting one-sentence summaries of posts on the USS Clueless... until I get bored. Here's today's batch:

• I've never served in uniform.
• My dislike of the French is independent of any facts about the world.

No thanks, please, I do it for the love.

Update: F--- me, this is gonna be more work than I thought...

---

The Backstory:

I turned to reading Graeber's chapter 12, and found myself reading it with a jaundiced eye: dozens upon dozens of simple mistakes:

1. The Federal Reserve is not a council of eighteen private bankers plus a presidential appointee as their chair.
2. Korean-American shopkeepers do not long to treat everybody else in Brooklyn the way Saul and Samuel treated the people of Amalek.
3. That people are happier to hold the debt of the Swiss than the US government shows that it is not fear of being bombed by the US Air Force that makes people eager to hold U.S. Treasuries.
4. The Federal Reserve is perfectly constitutional--as is the FDA, the FCC, the EPA, the FTC, etc.
5. Nixon did not close the gold window because of the mounting costs of the Vietnam War.
6. There is nothing that makes Iraq more likely than any other corner of the world to be the source of the next forward leap in human society.
7. The Federal Reserve does not lend private banks money at the prime rate--you really don't know whether to laugh or cry at passages like: "For those who don't know how the Fed works: technically, there are a series of stages. Generally the Treasury puts out bonds to the public, and the Fed buys them back. The Fed then loans the money thus created to other banks at a special low rate of interest ('the prime rate')..."
8. And dozens upon dozens more in chapter 12 alone.

I looked, but could not find anybody masochistic enough give a similarly jaundiced reading to David Graeber's earlier chapters. So last June--before the arrival of manna from heaven in the form of high-quality DeLong smackdowns ended the drought--we had begun in on chapter 11. We had noted:

• Graeber's lumping together of five eras--the Waning of the Middle Ages, the Commercial Revolution, the Industrial Revolution, the First True Era of Globalization, and the Drive to High Mass Consumption--in his one chapter on "The Age of the Great Capitalist Empires, 1450-1971", mixing not just apples and oranges but apples, yeast, giant redwoods, and tyrannosaurs. Such a macedoine is highly unlikely to produce anything coherent.

• Graeber's starting his chapter in 1450 and ending it in 1971. Richard Nixon's 1971 abandonment of the Bretton Woods system is not the end of or the beginning of any important story. And what does 1450 mark? The Fall of Constantinople to Mehmet II? But that happened in 1453.

• Graeber's long introductory quotation about debt peonage. As Marx knew better than anyone else, capitalism is three things--(i) wage labor, (ii) the separation of private property in land from thick-tie social relationships, and (iii) markets--that together a world in which people are the puppets of market forces transmitted through the equilibrium prices at which they buy and sell. Debt peonage is when there is one and only one person from whom you have to buy--the patron, the latifundista--one and only one person to whom you can sell--again, the patron--and, soon and inevitably, one and only one person to whom you try to pay the interest on your debt. What does debt peonage have to do with the creation of great capitalist empires? Very little. How does debt peonage require a great capitalist empire to support it? It doesn't. How do great capitalist empires depend on debt peonage? They don't.

• Graeber's writing that it is "odd to frame [1450-1971] as just another turn of an [ongoing] historical cycle". He is right. It is odd.

• Graeber's claiming that the amount of bullion and precious-metal coinage in Europe underwent some sort of inflection point in 1450. It did not.

• Graeber's claiming that starting in 1450 we see a "turn away from virtual currencies and credit economies" back to bullion. We do not. The funded, liquid, traded debt of the Dutch Republic in 1600 as it fought off Spanish-Habsburg conquest vastly exceeded the debt that Philippe IV Capet could issue in 1300. And the virtual credit flows later on in the 1450-1971 period absolutely dwarfed those before 1450.

• Graeber's writing of "the 1400s... [as] a century of endless catastrophe: large cities were regularly decimated by the Black Death". The 1400s saw a very substantial rebound in urban life after the disasters of the 1300s: Europe's largest cities in 1500 look to have been half again as numerous as they had been in 1400.

• Graeber's writing of how in the 1400s saw "knightly classes squabbl[ing] over the remnants, leaving much of the countryside devastated by endemic war..." The 1400s saw rather less endemic warfare than the centuries on either side of it had. It was the 1300s that had the bulk of the Hundred Years War. It was the 1500s that had first the French-Spanish struggles over Italy and then the Wars of Religion. Wars, yes. Chevauchee, yes--urning out of the countryside as a way to get the opposing knights to come out of their castles. But only par for the late-medieval course.

• Graeber's claiming that in the 1400s "Christendom was staggering, with the Ottoman Empire... pushing steadily into central Europe..." Here Graeber has simply lost his mind. The 1400s do not see the Ottoman Empire anywhere in central Europe--in the 1400s it conquers Constantinople, acquires a very loose acknowledgement of vassalage from the Khan of the Crimea, establishes naval bases and outposts at the site of the 2014 Winter Olympic Games, wins a somewhat stronger acknowledgement of vassalage from the Princes of Wallachia and Moldavia, and conquers (a) Bosnia, (b) Albania, (c) Attica, and (d) the Peloponnese count either. If conquering Bosnia is a steady push into central Europe that causes Christendom to stagger, that is news to everyone except the Bosniaks. The first of the two unsuccessful Ottoman attempt to conquer Vienna came in 1529. The conquest of Buda and Pest did not, IIRC, occur until 1541. The attack on Malta in 1565 might count as an incursion into southern Europe--if Malta were in southern Europe, that is, and if the attempt to conquer Malta had not been a failure. The Ottomans did conquer Cyprus in 1570-1. The Ottoman high-water marks took place at the Battle of Lepanto in 1571 on sea, and in the first half of the 1600s on land. Perhaps Graeber simply doesn't look either at maps or dates?

• Let's mock Graeber again on his claiming that in the 1400s "Christendom was staggering..." Western Christendom does shrink along its borders with the Ottoman Empire. But everywhere else things are different: The 1400s see the ethnic cleansing of Muslims and Jews from the Spanish peninsula by Castile. The 1400s see the advance of the Portuguese forces of Dom Henrique Aziz and his successors from Cueta south along the coast of Africa and into the Indian Ocean. The 1400s see Cristobal Colon and his Spanish company leap across the Atlantic in the last eight years of the century. The 1400s see Casimir IV Jagiellon of Poland on the offensive deep into the Ukrainian steppe. They see Ivan III Rurik of Muscovy subdue the Khanate of Kazan. My considered and sober judgment is that a California high-school student cribbing from Wikipedia would have done considerably better.

• And let us mock Graeber for forgetting that just a couple of pages after he writes about how in the 1400s "the commercial economy sagged... whole cities went bankrupt, defaulting on their bonds..." with the knightly classes "squabbl[ing] over the remnants" he writes that the 1400s saw "so much wealth was flowing into the hands" of people outside the knightly feudal hierarchy that "government... forbid... the lowborn to wear silks and ermine". You see the problem? The "lowborn" wearing silks and ermine are the burghers and guild masters of the cities that Graeber claimed--only two pages before--had been depopulated by plague and were defaulting on their debt because economies had "sagged" and, in places, "collapsed". This is word salad.

Note that we are only three kindle screens into the text of chapter 11 here. We are going to have to pick up the pace.

And note that up to this point in the chapter, with its many errors and misconceptions, Graeber has managed to drop only one footnote. Does the footnote explain or justify any of his more bizarre claims? No. It simply notes Dyer (1989), Humphrey (2001), and Federici (2008) as sources for the changing level of English real wages and the changing quality of English "festive life".

(I would note that were Graeber to talk in the presence of the Londoners of the days of Charles II Stuart (1660-1685) of how "Medieval festive life, with its floats and dragons, maypoles and church ales, its Abbots of Unreason and Lords of Misrule" was in the "next centuries" after 1450 "destroyed" would have evoked their surprise and laughter. There was a reduction in "festivity" as the so-called Little Ice Age and the down-phase of the Malthusian population cycle took hold: with fewer growing days and smaller farms you did need to put in more working hours. But Graeber's religious-ideology claims are greatly overstated. In general in early-modern Europe Reformers were not Calvinists, Calvinists were not Puritans:

and even Puritans were not culturally hegemonic for much more than a decade anywhere other than Scotland and New England. You can talk about a privatization and a desacralization of celebration and spectacle. But I really do not think you can talk of any sort of destruction of feast and festivity...)