Private Debt - An Impending Capitalist Crisis

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Given that we're about to embark on yet another round of quantitative easing combined with austerity, which has not for the past four times it's been tried, I thought it might be pertinent to talk about something which is rarely mentioned. First, though, I want to clear something up and I'm afraid that this is a rather boring economics post.


The Pandemic is touted by many as being an instigator of a capitalist crisis. I don't believe this is the case and I can't honestly see how a socialist economy would have economically fared much better bar being better prepared and more liberal with spending on healthcare and safety. The UK governments have for once been pretty good economically but heinously shit with regards to everything else. However, this is beside the point.

The point I'm making is that it wasn't an internal contradiction of capitalism that triggered the crisis. An internal contradiction is the only way by which a crisis of capitalism is triggered. There is a particular contradiction that has been bubbling away under the surface since 2009.

The general public is often told the same spiel, that the government cannot borrow money to invest in the economy because it's not available, and that's why we have austerity blah blah... We all know that's a total lie.

But what we're not told about, however, is the huge, almost insurmountable mountain of private debt that is continuously accumulating with no end in sight. 

As of 2017, the combined amount of household debt stood at £1.545 TRILLION. 

As many economists and politicians have pointed out before, ours is an economy predicated on hyper-consumerism; consuming as many commodities as possible. What fuels this is an unyielding level of private borrowing is quantitative easing, which makes lending cheap for banks and helps keep interest rates at rock bottom. Obviously, cheap credit is attractive to the consumer as well and it helps drive economic growth without the government having to do much about anything.

This sort of macroeconomic growth though is obviously unsustainable, and the bubble will eventually burst. The stack of debt has increased dramatically from post-2009 levels and is still rising at unfathomable rates. In 2017, outstanding car loans, credit card balance transfers, and personal loans increased by 10%, while household incomes rose by only 1.5%. 

If everyone in Britain were to pay off their debt today, the entire system would collapse. If debt keeps growing unchecked, many people would become insolvent, and again, the entire system would collapse. Hence, household debt must be above household income but not too high to trigger insolvency for this system to be sustained. Insolvency has been slowly rising and is in fact already at ~25.4% per 10,000 people.

It's no wonder then that Boris has taken to the front pages of the tabloids to rally the patriots to buy for Britain; capitalism is literally depending on it.

And debt itself is but another shackle that keeps workers chained to capitalism. 


Further reading (including some lovely graphs):


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