Debts are different from obligations because they can be quantified. This requires money. It’s not only money that makes debt possible: money and debt appeared simultaneously.
Our earliest written documents come from Mesopotamian tablets that recorded credits and debits, rations issued by temples, money owed for renting temple lands, and the exact value of each in grains and silver. In turn, some of the earliest works of moral philosophy look at morality as debt—that is, as a money-based concept.
It’s no secret that a history of debt is a history of money and it’s easy to understand how debt has affected society by just following the forms money has taken over time, how it’s been used—and the arguments that inevitably followed. But this is a totally different history of money than we’re used to.
As far as economists are concerned, debt is always something of an afterthought. Barter comes first, then money, then credit. When one reads about the history of money in France, India, or China, all you get is a history of coinage and not much about credit arrangements.
For over a century, anthropologists have been pointing out that this picture is very flawed. When we examine how economic life is actually conducted, in real communities and marketplaces, almost anywhere—where one is much more likely to see everyone in debt to everyone else in a dozen different ways, and that most transactions are conducted without the use of currency—the standard economic-history version has little to do with what we observe.
According to historian Louis Hyman, people turned to friends, loan sharks, or local merchants if they needed credit in the nineteenth century. These loans were a money-losing proposition for corner grocers and country stores with no interest charged.
With the rise of the automobile, this changed. It was in the 1920s that finance companies started popping up. They borrowed from banks and lent to car dealerships, who could then extend credit to individual buyers.
First time ever, consumer banks invested in consumer debt, though indirectly,” Hyman writes. During the great boom of the 1920s, automobiles spread to vacuum cleaners, furniture, radios, and nearly every durable good you could imagine.”
