But when you come to a paragraph like this, you really have to reach for the smelling salts:
Since colonial days, Americans have been the population least sympathetic to debtors. In a way this is odd, since America was settled largely by absconding debtors, but it’s a country where the idea that morality is a matter of paying one’s debts runs deeper than almost any other. In colonial days, an insolvent debtor’s ear was often nailed to a post. The United States was one of the last countries in the world to adopt a law of bankruptcy: despite the fact that in 1787, the Constitution specifically charged the new government with creating one, all attempts were rejected on “moral grounds” until 1898.
--Graeber, David (2011-07-12). Debt: The First 5,000 Years (p. 16).
Melville House. Kindle Edition.
Oh, where to begin. In the first, the Constitution never "specifically charged" anyone to make bankruptcy law; all it did was provide that no one but Congress had the power. Second, it is not true that "all attempts were rejected" until 1898; we had Federal bankruptcy laws from 1801 to 1803; from 1841 to 1843 and again from 1867 to 1878. Meanwhile virtually every state abolished debtors' prisons in the early 19th Century. Many states adopted "stay laws" to fend off collection (in the teeth of the Constitutional prohibition against state bankruptcy). Almost every new state admitted in the mid-19th Century adopted a "homestead law" to protect some or all of the debtor's real estate. Moreover the late 19th Century was also the golden age of the "railroad receivership" which, while it did not bear the B-name, certainly seemed to have functioned as a device to thwart the efforts of many creditors to vindicate their claims. The 19th Century also saw the rise of the limited liability company which from the beginning functioned like a bankruptcy discharge insofar as it capped the liability of the investor . Just in general, as David Moss documents, "Americans had long displayed a penchant for forgiving or otherwise relieving distressed debtors..." Indeed it appears that the very fertility and ingenuity of 18th-Century states in devising debtor-protection policies is the reason why the drafters assigned the bankruptcy power to the Constitution in the first place.
A deeper problem is that Graeber doesn't seem to grasp what bankruptcy law is about. He's really discussing the bankruptcy discharge, whereby a debtor may be excused from liability on his debts. But bankruptcy has a history as a collection device--often punitive--that long precedes its function of an organ of debtor relief (last time I checked, the French still punished banqueroute as a crime, and the Italians used banca rotta as a means to collect debts). In a footnote, Graeber says that "England already had a national bankruptcy law in 1571." I think most bankruptcy scholars would agree that England did not have anything like the modern discharge until 1705. Bankruptcy was typically "involuntary"--adverse to the debtor--and why not? One wouldn't think of volunteering for bankruptcy in those days anymore than one would volunteer for a root canal. If Graeber understand this, he isn't letting on.
Beyond that, it is difficult to evaluate the "argument," because it is difficult to figure out exactly what he is saying. Examples: "Least sympathetic to debtors..." "Morality is a matter of paying one's debts..." How the hell does he know that--in the teeth, for example, of the examples set forth above? Is he aware that through much of the 20th Century we were the virtually the only country in the world to have a self-executing off-the-rack bankruptcy discharge available to virtually any debtor for the price of a failing fee (we've tightened the screws a bit lately--and other countries have loosened theirs--but the situation is not a lot different)? Still more: "Settled largely by absconding debtors..." Is he thinking of the "what-was-your-name-in-the-stats" fandango, whereby settlers were said to move to new states, fleeing obligations in the old? Does he know whether this really happened, or whether it subsists only as a folk song? Anyway, if it did happen, isn't it evidence that the United States was in fact compassionate to debtors, not the other way around? As to nailing ears to the wall, I'd love to know what kind of evidence he has for that. It's a favorite bit of bankruptcy folklore; I suspect it always existed far more in legend than in fact.
Starting from a record like this, you come up with two choices: don't know, or don't care. I vote for "don't care," and for one very specific reason. That is: Graeber after all this free-floating hubba hubba offers up a footnote in which he actually mentions the 1867-78 bankruptcy act ("briefly," he says), and the 1801 act ("foundered"). This would seem flatly to contradict his statement that " all attempts were rejected" until 1898. Apparently these troublesome details would have destroyed the linearity of the presentation. So the book remains, as I say, a highly entertaining book and perhaps even instructive, but for the moment I think I'll file it under "fiction."