| If it is accepted that a change in the attitude to debt was part of the programme promoted by the neoliberals since their accession around 1980, it is obvious that that change can do nothing by itself. Before they came to power credit was rationed in the UK. There were direct limits on bank lending and on consumer credit. There were restrictions on foreign participation in the financial sector and there were restriction on foreign exchanges. From about 1980 that changed. Foreign exchange restrictions were lifted: requirements for banks to make special deposits with the bank of england were also removed and the freed capital led them to enter the mortgage markets in greater strength. Restrictions on what building societies could do were also relaxed and they became more like banks over time: to the extent that some actually converted into banks at a later date. Foreign companies were allowed to enter the credit market too. The effect was to make credit extremely easy to come by, where it had previously been difficult. This was promoted as a freeing of the market which would lead to prosperity and at the same time the people were told that it was not for the "nanny state" to tell people how to manage their affairs: they should make their own decisions about how to manage their money and their debt. From 1980 - 1989 household debt/income ratios doubled and inflation adjusted house prices also doubled in the same period. It is a matter of dispute which came first: but there is no denying that the sale of social housing was a part of the debt increase: and in its turn it forced young people to enter a rising private housing market if they wanted somewhere to live. Previously all those in social housing had no housing debt: now they did. Previously young couples on low incomes formed part of that group:now they didn't. This pattern in the uk was also seen in some of the Scandinavian countries though I do not know if the sale of social housing was part of it, there: the cost of houses rose sharply in Denmark, Norway, Sweden and Finland: and, as in the UK, household savings fell at the same time.
That fall in savings has a knock-on effect: if you do not save because you are paying an enormous mortgage, then you cannot pay for other goods as you did previously: you cannot save for them for you have not enough income. You might cut back on some things (spam valley effect, we call that here: where you have an ok home, but only because you eat spam all week) but you cannot live without a bed or a table or a chair. So your new house needs to be furnished, and that leads to yet more debt. The house value is going up, so you can get the credit for that, though. By the end of that decade lenders were advancing more than 100% of what people were paying for the house.
Some folk were happy with this: some were not. But people must live somewhere and sit on something. Although we are told that consumerism has triumphed I think that this was not a change which was made through free choice: a lot of it was forced. Later the attitude to debt became much more relaxed as a second generation grew up knowing nothing else. Yet throughout the period there were occasional panics over "negative equity" when economic crises hit. Young people could no longer afford a house even if both were in work in many instances: and so we have the problem of young people staying with their parents for a longer and longer time, as referenced in the other thread. The profit goes to the surveyors and the lawyers and the banks: people pay much more for housing than is reasonable in comparison to their incomes even when they can afford it; young people are infantilised. And some end homeless or in sink ghettos which is all that is left of social housing. If by their lights, contractual relationships of this sort are no business of government I have to wonder why they interfered in this way. Oh btw: a lot of them are bankers, or lawyers and estate agents or own a lot of property. Just saying....
If the neoliberal approach denies the existence of society, then what applies to individual debt also applies to institutional debt. That is much harder to sustain, because it is extremely difficult to ignore the fact that institution are not really like individuals, nor yet families. But the fact that firms are now characterised as "corporate persons" seems to suggest that this makes sense to an economist, if not to me. I do not understand how we have been led to accept that: especially not since it is only partial: corporations have some of the privileges of personhood: but not some of the obligations. Or so it appears. (The question of corporate personhood predates the current neoliberal hegemony and I do not mean to suggest that it is a consequence of that, btw) The issues surrounding the concept are beyond the scope of this thread, but it a very interesting subject in itself.
If we accept the proposition that debt is a private matter without consequence for the non- existent society, it follows that corporate debts are no business of anyone else either, so long as they are paid. Any interference by the state to limit indebtedness centrally is unjustifiable.
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