Technically one could argue that a world without credit (the other side of debt) would be one that takes us back to the days when we used to barter with each other since fiat currency in itself is debt, but I’m not talking about it on a level that deep. I’m merely talking about that standard credit which is issued by a lending institution like a bank or an alternative lender, perhaps even that friend or family member who’s willing to lend you a few quid to tide you over until your next payday.
What would a world without all of these lenders look like?
Well societies adapt a certain way, mainly shaped by their basic instincts to manipulate their environment as effectively as possible for basic survival, but at times societies are shaped by the vision, desires and even ideologies of an elite few, so a couple of scenarios could perhaps have played out if something like credit didn’t exist.
“Natural” Economic Policy
One such manner in which our society would adapt (or remain in “default” settings) would be economics doing the unthinkable and following the laws of nature, such as the fact that with physical objects there’s no such thing as a negative number. For example, you either have 1 or more cows on your farm or you have none, but you can’t really have a negative number of cows. Conceptually having a negative number of cows means that you owe someone some cows and so any cows which may come into your possession in future will need to be handed over.
There are arguments for and against this way of living, with the pro natural economics argument pointing towards the development of the financial industry slowing right down to mirror real-world development and not developing too quickly. That’s perhaps how the gold standard came into existence for a brief period of time, but an argument against this “natural” economics ideology is that if you in effect don’t have any money or value to spend on development, development is completely halted because you can’t borrow anything to go ahead with it.
Forget not being able to afford a vehicle because there’d be no credit you can get to finance the vehicle — there’d perhaps be no such thing as a motor vehicle in the first place (or there’d only be a handful in the entire world) because the mass production of such goods would inevitably require some form of credit. If you were short on a few quid, you’d have to go without buying food or ask the neighbours to help you out until the next payday because there’d be no such thing as short term loans and the likes.
Elitist-Shaped Economic Policy
The other way in which a world without credit would perhaps develop would be one which is very similar to the one we live in today, except only an elite few would be able to afford the things that everyone else essentially has to take out credit to be able to afford, such as the very house you live in, your motor car, etc.
So the bottom line is credit is an essential tool required to keep the current economic system operational, but it’s how you use debt that makes for the difference between financial success and a constant state of falling short.