The resistible rise of universal debt

In 1867 Marx published the first volume of a long series that was not to be. In it, and in the notes that would make up the posthumous volumes published by Engels and Kautsky, he developed the concept of surplus value, that part of the value added by labour for which it receives no wages. However, he was unable to explain how surplus value was monetised and accumulated as capital. And Rosa Luxemburg would highlight this deficiency in “The accumulation of capital” (1913). Having analysed the numerous theories of her time, she concluded that unpaid added value could be accumulated as capital by colonial expansion, exploitation and expropriation. Surplus value for consumption, say guns and ammunition, could be sent overseas and its value brought back as land rights, raw materials and bullion. This trade of consumer goods for raw materials, of consumption for investments, survived the end of the colonial system and persists to this day, but it was not and is not sufficient to absorb all unpaid added value.

War is a great consumer and governments are able to borrow vast amounts. During the first half of the 20^th century total global war resolved the problem of surplus value for consumption by demolition, death, monetary devaluation and debt defaults on a grand scale. But the technology of destruction finally reached a stage where it could no longer be expended. The awesome horror of Nagasaki and Hiroshima put an end to total war and reduced bellicose consumption to the Cold War dimensions of counterinsurgency. This meant that surplus value needed new outlets. The solution was household consumption and consumer credit. This turn around was tempered by a costly competition for unusable weapons and by quite heavy fighting in Korea, Vietnam, Burma, Kenya, Algeria and with a lesser intensity elsewhere. Nevertheless, by the late 1970s civilian consumption and household debts were booming. The euphoria would last three decades.

Presently, the debts accumulated by treasuries, by urban or regional administrations and by households are all approaching or passing national revenue. Most incomes are spent before they are earned, and debts have reached a stage where their growth only covers interest charges and cannot increase consumer spending. If this is a high tide, it will ebb. And the last few months strongly suggest that moment of slack when the current moves neither one way nor the other. Will the pause last till autumn, or is a downturn already under way? The summer of 2015 could be the hottest on record.