It seems to me that this agreement between equals to no longer be equal (at least for a time) is critically important. It is the very essence of what we call "debt."…
Debt is a very specific thing, and it arises from very specific situations. It first requires a relationship between two people who do not consider each other fundamentally different sorts of being, who are at least potential equals, who are equals in those ways that are really important, and who are not currently in a state of equality — but for whom there is some way to set matters straight….
During the time that the debt remains unpaid, the logic of hierarchy takes hold. There is no reciprocity. As anyone who has ever been in jail knows, the first thing the jailors communicate is that nothing that happens in jail has anything to do with justice. Similarly, debtor and creditor confront each other like a peasant before a feudal lord. The law of precedent takes hold. If you bring your creditor tomatoes from the garden, it never occurs to you that he would give something back. He might expect you to do it again, though. But always there is the assumption that the situation is somewhat unnatural, because the debt really ought to be paid….
This is what makes situations of effectively unpayable debt so difficult and so painful. Since creditor and debtor are ultimately equals, if the debtor cannot do what it takes to restore herself to equality, there is obviously something wrong with her; it must be her fault.…
A debt, then, is just an exchange that has not been brought to completion. David Graeber Debt: The First 5000 years, pp. 120-1. [This is the third post on Graeber's Debt; recall here and here.]
According to David Graeber, debt is inter alia a cause of hierarchy. In particular, debt generates (further) hierarchy among those that are (at least tacitly) recognized as equals in some formal sense. For, according to Graeber those that are not even potentially equal cannot be indebted to each other; this is why slaves, animals, and children cannot (legally) be supplied with credit.
Of course, this equality is merely formal. For, in conditions of general equality the very institution of debt -- not unlike the institution of property -- would not arise. Some material difference is required to generate debt in the first place: the would-be-creditor is in some financial sense superior to the would-be-debtor. So, the institution of debt presupposes considerable formal equality alongside some non-trivial material inequality.
According to Graeber debt makes those formerly recognized as equal de facto unequal (at least for the duration of the debt). For the debtor owes the creditor. Here we leave aside the nature of this obligation (is it properly moral, merely legal, or something else altogether?) The de facto superiority of the creditor is also revealed in the fact that she can decide to forgive the debt, or not.
As an aside, in his logic (not in his history, however) Graeber tends to ignore cases where unpaid debts ruin the creditor. There is an old capitalist joke (attributed to J. M. Keynes, but worth reviving in the age of Donald Trump) Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed. [Obviously, the joke needs to be adjusted to inflation.] But that's because on the whole Graeber assumes+ that debts are backed up by the threat of violence that can force repayment.
It is central to Graeber's argument that the very idea of a debt presupposes that it can, in principle, be repaid in some form or another (sometimes in kind, or by a life, a symbol, etc.)--and so equality can be restored. We may say, then, that in Graeber's analysis it is the foreseeable consequence of the institution of debt that it generates further, temporary hierarchy among those that are recognized as equals in some formal sense while aiming at returning to considerable equality.
In fact, given the necessary logic of compound interest, it is a foreseeable consequence of much debt that while debt formally aims at a return to equality, it can be expected that the hierarchy -- which is intended to be merely temporary -- only gets further entrenched and, thereby, eventually undermine even formal equality because the indebted are reduced to real slavery, imprisoned, or deemed the unworthy. This much is all in Graeber.
From a modal (economics) perspective, we can say, then, that [A] debt takes us from worlds in which equality is presupposed and at least thought possible in the future, to worlds in which equality becomes thought impossible. In this new world, relations are not governed by formal reciprocity, but by precedent that is inscribed in some kind of institutional memory (the law, custom, etc.).* So, Graeber's analysis of debt is a kind of foreseeable, unintended consequence explanation. It is unintended in the sense that the the very intelligibility of the institution of debt presupposes aiming at some form of equality (that's the would-be-repayment part).** The outcome is foreseeable because Graeber models his agents -- and this is the main virtue of his theorizing -- as not deceived about this; they understand their own world-all-too-well.
It would be sufficient to stop here (in order to re-think Liberalism). But it is worth noting that for Graeber [A] is inherently unstable in its modern, capitalist form. It is not unstable because hierarchy is intrinsically unstable. (Graeber analyzes hierarchical societies and finds them remarkably stable over very long periods.) Rather, it is unstable because the moment one thinks and acts that [A] is an eternal, stable equilibrium, that is one thinks it "really will be around forever, everything goes haywire." (p. 358) That is, as long as the agents that inhabit [A] consider it fragile, [A]=[A]. But the moment that the agents that inhabit [A] endorse [A] as occurred during, say, 'the great moderation,' it becomes self-undermining (that is, [A]-->[-A]). That is to say, for [A] to work, it may not be perceived to be true, or, a ruling ideology.