Laudato Si quote

‘In different ways, developing countries, where the most important reserves of the biosphere are found, continue to fuel the development of richer countries at the cost of their own present and future. The land of the southern poor is rich and mostly unpolluted, yet access to ownership of goods and resources for meeting vital needs is inhibited by a system of commercial relations and ownership which is structurally perverse. The developed countries ought to help pay this debt by significantly limiting their consumption of non-renewable energy and by assisting poorer countries to support policies and programmes of sustainable development.’
-Laudato Si n. 52

Household debt lowers wages

This is something I recently realised, that I haven’t seen before, and, based on a quick google search, doesn’t seem to be common knowledge on the web.

Debts must be repayed: Failing to repay debts has bad consequences, such as repossessions and higher debt; Debt repayments are a cost to individuals, and, as there is nothing in return, lower standards of living; Because there is a higher cost of living including the repayments, work is needed more, increasing the supply of labour, which increases competition over jobs and over-time, and therefore lowers wages.

I don’t know why this isn’t more well established economic knowledge. There is very little difference between the notion that lowering unemployment benefit will increase work and decrease wages and, what is the same, increasing a cost such as paying off debts will do the same.
I suspect it may be that the wealthy, who set policy, don’t wish to reveal their advantage. It wouldn’t be popular to tell people they will have higher debt and lower income. And the economists are generally in love with the rich, and wish to present them as kind and helpful in all they do. Ultimately, they will see this as an increase in productivity.

Student debt (in many countries) is different, as it doesn’t last forever and is only paid by those on relatively high earnings. This is paid in proportion to earnings over a threshold, and so works as a tax. It should, therefore, disincentivise work over the threshold, and so increase wages (before tax & debt repayments).

Mortgages can be particularly bad, as the cost of missing repayments is extremely high, even if just a short period is missed.

Interest is the key problem here, as receiving a loan would initially improve cash-flow and help absorb falls in income. But as more will have to be paid back due to interest, the dependence on wage-slavery is increased, overall, rather than decreased.

Basically, the important thing about capitalism is that the more needy a person is, the less they are given and the more is demanded of them. And the capitalists still dare to refer to themselves as kind benefactors (however, occasionally one genuinely is).

God bless you.