An offhand comment from a lawyer at a cocktail party got David Graeber thinking about debt. “One has to pay one’s debts,” the lawyer said when she found out Graeber was in favor of debt amnesty for third-world countries. Debt: The First 5,000 Years was the long answer to that question.
As a preliminary answer, Graeber (p. 3) suggests that credit works only on the assumption that debts may not be paid, that the lender takes a risk in giving loans: “Financial institutions are supposed to be ways of directing resources toward profitable investments. If a bank were guaranteed to get its money back, plus interest, no matter what it did, the whole system wouldn’t work. Say I were to talk into the nearest branch of the Royal Bank of Scotland and say ‘You know, I just got a really great tip on the horses. Think you could lend me a couple million quid?’ Obviously they’d just laugh at me. But that’s just because they know if my horse didn’t come in, there’d be no way for them to get the money back. But, imagine there was some law that said they were guaranteed to get their money back no matter what happens, even if that mean, I don’t know, selling my daughter into slavery or harvesting my organs or something. Well, in that case, why not? Why bother waiting for someone to walk in who has a viable plan to set up a laundromat or some such?”
Graeber argues that the IMF functions like the bank giving loans for the horses: By guaranteeing loans, IMF created a global situation where “banks [were] willing to fork over billions of dollars to a bunch of obvious crooks.”