Global debt is unpayable: How Wall Street traps poor countries, profiting rich ones
Oct 10, 2023
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Journalist and analyst Ben Norton discusses the deeply unequal international financial system, the oppressive policies trapping poor countries in unpayable debt, the exploitative practices of vulture funds, the burden of global debt on developing countries, the use of financial institutions as political weapons, and the urgent need for international financial system reforms.
Poor countries are forced to pay high interest rates to rich bondholders on Wall Street, perpetuating global debt inequality.
Global debt is unsustainable and growing faster than any other public expenditure, posing a serious threat to the global economy.
Developing countries relying on riskier forms of borrowing from private creditors face higher interest rates and reduced government revenue, hindering poverty reduction efforts.
Deep dives
The Global Debt Crisis and Inequality
The world is burdened with enormous debt, which is three and a half times the size of the global economy. This debt is distributed unequally, with impoverished countries in the global South trapped under unpayable debt. Meanwhile, wealthy countries in the North and West use this debt to impose political demands on indebted countries. The debt burden is particularly severe for developing countries in Africa, Asia, and Latin America. Many countries are borrowing from private creditors on international capital markets, leading to higher interest rates and shorter maturities. This mounting debt crisis poses a serious threat to the global economy and highlights the inequality embedded in the international financial architecture.
The Unpayable Nature of Global Debt
Global public debt has reached $92 trillion, a fivefold increase since 2000, while global GDP has grown at a slower rate. The debt burden is unsustainable, with interest payments growing faster than any other public expenditure. Developing countries in the global South shoulder a significant portion of this debt. However, blaming corruption and poor governance obscures the systemic nature of the problem. Debt forgiveness and comprehensive international financial system reforms are urgently needed to alleviate the debt distress faced by many countries.
The Consequences of Borrowing from Private Creditors
Many developing countries increasingly rely on riskier forms of borrowing from private creditors on international capital markets. This shift away from multilateral institutions like the IMF and World Bank has led to higher interest rates and reduced government revenue. Tax cuts on corporations and tax avoidance by transnational corporations have further exacerbated the loss of public revenue. The focus on commercial borrowing fails to stimulate foreign direct investment and hampers poverty reduction efforts in low and middle-income countries.
The Persistence of the Neo-Colonial Financial System
The current financial system perpetuates the neo-colonial relationship between wealthy countries in the North and West and developing countries in the South. The debt burden falls disproportionately on the latter, hindering social spending and developmental initiatives, while private creditors, often based on Wall Street and in the City of London, profit from these debts. The narrative of China's debt trap diplomacy is debunked, as many crises result from excessive borrowing in Western-dominated capital markets rather than loans from China.
Urgent Need for International Financial Reforms
Reforming the international financial system is crucial to address the mounting debt crisis. Proposals include multilateral frameworks for debt restructuring, fairer international tax rules, and greater representation for developing countries in decision-making processes. Attention should also be given to reducing tax evasion by transnational corporations and increasing official development aid commitments. These reforms, coupled with a shift towards developmental policies, can help alleviate debt distress and promote sustainable development.
All the debt in the world is three-and-a-half times the size of the global economy: 349% of GDP, or $37,500 per person on Earth. It is unpayable. But poor countries are forced to pay high interest rates to rich bondholders on Wall Street, while Western vulture funds profit. Journalist Ben Norton analyzes the deeply unequal international financial system.
VIDEO: https://youtube.com/watch?v=WRkhWQ0sRn4
Watch the first part here - "A huge debt crisis is coming": https://youtube.com/watch?v=Ib3QOBbQR2g
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