The capitalists themselves live lives of great luxury. They spend enormous amounts on fancy houses, cars, yachts, servants and so forth. But the level of surplus value soon becomes so great that even the most extravagant capitalists have no need for further luxuries. (How many multi-million dollar yachts does anybody want or ―”need”?) So what to do with all this loot that comes from the workers? Build more factories! The capitalists don’t really know what to do with all the wealth they already have when it comes to personal consumption, but they always do want more and more. (Here’s your insatiable greed at work.) Why? Well, for one thing massive piles of wealth also bring political power and the respect (and fear!) of other capitalists. Think of all the politicians they need to buy, for example! So, the capitalists keep expanding production, building more and more factories, which in turn piles up ever bigger amounts of surplus value. But now the embarrassing question: Who is going to buy all the commodities produced by all these factories? It can’t be the workers, because the workers are only paid a fraction of the value that they produce. They can therefore only buy a fraction of what they produce. But it won’t be the capitalists either, since they are already drowning in luxuries, and their chief goal in life has become greed—piling up ever more wealth. In short, as Engels put it, under capitalism the growth of production far outstrips the growth of market demand. In this situation there are really only two basic things that can be done, and both of them involve the creation of ever more debt. The first is to loan money to the workers themselves, so they can buy what their wages do not allow them to buy. This is why consumer debt, and ever increasing levels of consumer debt, are absolutely necessary to capitalism. The other thing that can be done, especially if consumer debt is reaching its limits, is to have the government buy more and more commodities. (Of course production then shifts to the sorts of things the government wants to buy, especially weapons and war supplies.) But if the government gets the money from taxes from the workers (which is where most tax money comes from) then the workers just have that much less money to spend. So there is no net boost to the economy. Only if the government gets its money through deficit financing (i.e. either by building up government debt or by simply printing up more money) will there be any net boost to the market. The trouble, of course, is that inflating the currency ultimately leads to disaster, as does ever increasing government debt. Anyway, this in short, is why capitalism requires the constant increase in debt in order even to exist. The debt is in two main forms—consumer debt and government debt. Not only must this debt constantly increase, but taken as a whole, it must constantly increase at an ever-greater speed! (i.e., it is an exponential sort of situation.) Can this continue forever? Think of the growth of bacteria in a Petri dish: exponential growth always leads to disaster in the end.
Scott Harrison, “What is it about Capitalism that Requires the Creation of Huge Debt Bubbles?”