Before capitalism, debt appeared at the very end of the economic cycle; a mere reflection of the power to accumulate already produced surpluses. Under feudalism, production came first with the peasants working the land to plant and harvest crops. Distribution followed the harvest, as the sheriff collected the lord’s share. Part of this share was later monetised when the lord’s men sold it at some market. Debt only emerged at the very last stage of the cycle when the lord would lend his money to debtors, the King often amongst them.
Capitalism reversed the order. Once labour and land had been commodified, debt was necessary before production even began. Landless capitalists had to borrow to lease workers, land and machines. Only then could production begin, yielding revenues whose residual claimant were the capitalists. Thus, debt powered capitalism’s oeuvre.
After 2008, capitalism changed drastically. In their attempt to re-float the crashed financial system, central banks channelled rivers of cheap debt-money to the financial sector while fiscal austerity limited the public’s demand for goods and services. Unable to profit from austerity-hit consumers, corporations and financiers were hooked up to the central banks’ constant drip-feed of fictitious debt.
Covid-19 found capitalism in this zombified state. With consumption and production hit at once, governments must now replace all incomes to a gargantuan extent. Thus, a mindless virus has forced us into a simple dilemma: Either the post-2008 zombification of banks and corporations will engulf the rest of the economy. Or we shall pursue a massive restructuring of public and private debts. This is the pivotal political decision for our times. Unfortunately, our pseudo-democracies are ducking it.
[A version of the above was published in Spanish in EL PAIS, in May 2020]