Indebtedness, Household Consumption and the New Politics of Distribution.

By Boris Frankel

The socio-economic consequences of rising household debt and the government policies that encourage it.

Since the beginning of the era of financial deregulation in the early 1980s, financial institutions in Australia have borrowed heavily abroad in order to generate higher profits via greater consumer and business debt. The boom of the late 1990s in the US and Australia unleashed anew wave of consumerism, increasing indebtedness and a decline in savings.

Finance capital has a strategy of increasing its profits by increasing gearing by households.

This has required a change in culture as culture industries, educational institutions, business and government promote the virtues of 'entrepreneurial, asset-accumulating culture.

Government debt has declined due to expenditure cuts and privatisation, but household debt to financial institutions has more than doubled from 54% of disposable income in 1990 to 120% in 2002. It now exceeds private business debt.

There is a misconception that personal debt is avoidable as it is driven by a desire for material wealth. However, for many people debt is closely related to inadequate government social security policies, poor wages, illness and unemployment.

Since the 1980s,, governments have been shifting costs to households through cutbacks in capital and recurrent expenditure. the decline in hospitals and public schools are a reflection of this. Inequality increases as a direct result of forcing more costs onto individuals regardless of means.

Governemnt have abdicated responsibility in socio-economic areas, instead opting for punitive approaches to social welfare provision and blaming 'dysfunctional families' and impoverished communities for their own plight.

(ACOSS Impact; October 2002)