Iwan Doherty investigates why our economy hates saving and loves credit and the consequences of the private debt bubble that enslaves us.

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Talk of debt dominated political discussion in the early part of last decade and while our politicians have moved on from talking about reducing our public debt in favour of more populist rhetoric, this country has a growing debt problem. Private household debt has increased every year since the financial crash and too many of us end the month with nothing or less to save.

16 million people — 40% of the working population — have less than £100 in savings and remain an accident away from dropping into a world of food scarcity or homelessness. This situation is worse still in some regions. In Northern Ireland and the West Midlands, the percentage nearly reaches 60% yet alongside the rising household debt. These issues go completely under the radar.

Political debate focuses around income and growth While public debt is made out to be a disaster just waiting to be released upon us, the government refuses to address the issue of rising unsecured private debt which has now reached a record high. The average household now has £15,400 of unsecured debt.

Britain — One Of The Worst Debtors In Europe

The driving factors of this rise has been austerity and the stagnating wages it brought with it. Britain has become one of the worst debtors in Western Europe and we now find our privates finances in deficit for the first time in 40 years. In 2017, households took out nearly £80 billion in loans but they deposited just £37 billion with UK banks. UK households find themselves in deficit, spending more money than they bring in.

The reason is this debt is necessary to sustain the spending required for our economy. Reduced spending could lead to economic decline and the consequences we faced in the last recession alongside reduced corporate profits.

This spiralling private debt bubble has a number of risks to both those in debt and the wider economy yet no large financial institution or government wishes to address this problem, despite it being only 12yrs since the Global Financial Crash.

In many ways the entire economy is sustained by debt needed to stimulate the supply required for our consumerist economy and therefore no government or national financial institution will ever really push citizens to save or give up borrowing.

The Cost Of Debt

All this means our financial institutions promote debt and spending for economic reasons without consideration of the wider human and environmental costs.

The cost of being indebted can be detrimental to mental health, especially when money and debt become as significant moral arbitrators as they have in modern society. One in three people regularly worry about money to the extent that it has a negative impact on their mental health. Debt often triggers anxiety or depression. 9.5 million Brits have mental health issues as a direct result of financial anxiety. Our obsession with money and spending is destroying our personal lives and mental health, as well as the environment around us.

The environmental costs of pursuing never ending growth have resulted in a serious climate catastrophe due to the enhanced greenhouse effect. It could be argued the desire for growth — fuelled by debt — is the reason we remain locked out, unable to make the changes required to avert this disaster.

In a recent report the European Environment Agency stated that pursuing growth over conservation was no longer an option for the European community who had missed most of their targets for environmental conservation.  While earlier research revealed that of nine worldwide processes that underpin life on Earth, four have exceeded “safe” levels.

The World Runs On Debt

The amount of debt in the world far outstrips the global value produced every year. In 2018, global GDP amounted to about 84.93 trillion U.S. dollars but total debt globally has now reached $244 trillion, nearly three times the global GDP. The power of credit is truly immense and plays a major role in sustaining our current economic model.

Capitalism cannot survive without debt. Economists like Maurizio Lazzarato view debt as the power behind all economic decisions, that we have become trapped in an ever-expanding debt bubble as profit is motivated by paying interest on loans. “Finance sees to it that the only choices and the only decisions are those of the tautology of money-making money, of production for the sake of production.”

In fact, due to money’s nature as purely credit all these loans do is create money. Banks have the power to create money ex nihilo for loans. All persons, businesses and governments are enslaved to an increasing spiral of debt. This ever-growing spiral is needed to stimulate supply and the interest provides the motivation for businesses to pursue profits to service their loans.


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If debt sustains capitalism then any attempts by major governments to reduce it weaken the fundamentals of our economic system. Other economists like Kathryn Tanner suggest these economic forces have enslaved governments due their reliance on finance and has shaped government policy to be modelled around finance, not the welfare of its citizens. This may explain why governments are wary of policies that can promote growth with a side effect of inflation, such as additional government spending or raising minimum wages.

The influence of the state relying on debt can be traced to a government’s need for re-election. One primary way we have decided to measure government success is GDP growth. If the economy is growing the economy is working — therefore any efforts to reduce spending would on a large scale be highlighted by the media and politicians as reduced economic success. Loans and lack of saving fuel this spending, citizens saving money would only reduce spending in our economy and loans made my banks only create more money to be spend in the economy.

Our obsession with debt underpins our economic life but its real consequences are dramatic and disastrous. We need a fundamental change in economics to lessen the power of credit on society. Credit has become like a new god, controlling things via an invisible hand powering all economic decisions and seeping into our personal lives.


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