The cause of the debt crisis is to be found in the essence of capitalism itself: competition, which – surprise! – produces losers as well as winners.
The primary mechanism through which this contest is engaged is the corporation, which the US Supreme Court recently declared to be the legal equivalent of a person. Here is how it works: corporations hire workers to produce widgets for which they are paid $8.75 each. Later, when the workers become consumers and buy the widgets they produced they are charged $10. The difference: a profit of $1.25 each. That’s a 12.5% skim off the top, a house advantage that would thrill any casino operator.
Here’s how those numbers work out nationally. The monetary value of US gross domestic product (the total of all the various kinds of widgets produced) during the first quarter of this year amounted to an annual rate of $15 trillion. Corporate profits for the same period came in at an annual rate of $1.8 trillion. There it is, the culprit: 12.5% skimmed right off the top. It shouldn’t take a degree in higher math to see that this is a game with a short life expectancy. Before long, the workers will find it more and more difficult, and finally impossible, to keep buying the widgets they make.
Now this is where debt makes its appearance. The only way to keep this game going is for corporations to lend some of their profits back to their underpaid workers and overcharged consumers so they can keep buying those corporate products, but on the promise that those loans will be repaid – with interest. In the long run, of course, this only accelerates the process until finally, as now, it is no longer sustainable.
Meanwhile, the government is also called upon to borrow to make up for its gap between revenue and expenditures in order to fulfill its primary purpose of doing for the people what they are unable to do for themselves as well as the responsibility for assisting the growing number of unfortunate ones who are the sad victims of this Ponzi scheme.
Finally, we end up with our present situation. The world has been unevenly divided into lenders and borrowers, with a handful of lenders, and all the rest borrowers. One mysterious aspect of this entire discussion is how the focus and the blame are placed entirely on the borrowers and not at all on the lenders except to complain that they’ve stopped lending.
As a result, whenever some common good is proposed to fill an urgent need or to rectify the damage done by capitalism’s free-for-all, the answer is always “there’s no money.” When the fact is that there’s plenty of money, but as a natural consequence of capitalism’s competitive animus, it has become concentrated into fewer and fewer hands.
Every dollar of debt is a dollar claim on the borrower’s future income, which only adds to the lender’s already disproportionate wealth, and to the inevitability of capitalism’s final collapse.
Here’s Michael Franti and Spearhead with “Hey World“.