World of Debt

During the days of the farmers’ protest, rights and issues between economic needs and European climate directives were discussed. Once again, the hierarchy of social priorities and timelines that are theoretically – but only theoretically – indisputable for saving the planet have been broken. This is happening in many other areas, as if the climate problem could be solved with upside-down binoculars: a magnification that clearly reflects our immediate needs as a society and individuals, and a smaller side in the relatively distant future.

And it is amazing how questions of an almost metaphysical nature – the extinction of the planet, the survival of man on this earth – are supported by statistics and scientific observations that are not negotiable but not radically resolved. If it is true that the concept of sustainable development has entered national policy and citizens’ consciousness, decisive steps are still timid and held back by casual economic needs.

A similar approach can be noted with regard to cooperation with underdeveloped and debtor countries. While the narrative of the need to stimulate economic growth, slow migration phenomena, and invest in countries that would otherwise, as is already happening now, be at the mercy of antagonistic Western powers led by China and Russia, is repeated seldom or with little seriousness, and nothing is done to make it happen.

Worse yet, the debt accumulated in the past continues to add to the debt of future generations. Roughly the same thing is happening in many developed and rich countries, whose governments are hesitant about debt reduction and stability pacts, only to continue to run up double-digit debts. A phenomenon that gradually intensified after the pandemic. This situation forces nearly half of humanity to spend more on debt service than on health, education, or the environment. Hundreds of millions of people will continue to suffer the consequences of the flawed global financial system for years to come.

Note that more than a third of the world’s debt is U.S. debt. It is followed, in much smaller shares, by China, Japan, Great Britain, France, and Italy. In reality, six countries carry three quarters of the world’s debt. Obviously, this data certainly can’t do much to increase global solidarity, except to change the pace of international programs, reflecting what is at least being attempted to combat climate change. Especially since, upon closer inspection, these two things go hand in hand. Natural disasters, floods, typhoons, and earthquakes also increase debts, drain resources and investments in reconstruction and relief for affected populations, and turn urban areas into deserts.

Over the past three years, several countries, especially in Africa, have defaulted or are close to doing so. For example, Zambia, Ghana, Lebanon. The largest creditor of some of them is China. To understand the order of magnitude, between 2000 and 2017, China financed projects in other countries totaling more than $800 billion, mostly in the form of loans. But in general, these are unsustainable payments that fuel debt service with new debts and are buffered by measures that reinforce colonial-type dependency, consisting of concessions on resources, infrastructure and arms contracts, and elite corruption. Clearly, these financial conditions are slowing down investment and development of services and infrastructure. A vicious and unhealthy circle from which it is impossible to get out neither with meager aid and minimal projects (see the Italian government’s lauded Mattei plan, circumventing the scarce and, in fact, already allocated resources), nor by discussing the debt of the next generations without the political will to address the inherited debt. Instead, the opposite trend has been observed, which involves the responsibility of governments, creditors, and international organizations.

According to 2023 World Bank data, the 75 poorest countries paid a record $88.9 billion in debt service in 2022, which is 4.8% more than in 2021. According to the World Bank’s December 2023 International Debt Report (IDR), the total debt service costs of the 24 poorest countries could increase by about 40 percent in 2023 and 2024. Added to costs and debt should be (to examine the development context) the reduction in public expenditure and hence the lack of investment in services and infrastructure, which in turn entails a loss of human capital.

Again, according to the World Bank, in 2022 global public debt will reach a figure of 92 billion dollars, 30% of which is accounted for by developing countries. The International Monetary Fund predicts that global public debt will reach $97 trillion in 2023, a 40% increase from 2019.

In this context, the debt trend is also influenced by the expanding arms market and the increasing number of regional conflicts that drive defense or war spending at the expense of social and infrastructure spending.

According to a report by Italy’s Center for the Study of International Problems (CESPI), “private creditors – mostly Western – involved in the debt of the Global South have always managed to ensure that the burden of measures to restructure and partially cancel external debt falls almost exclusively on public creditors, while many revenues have been privatized.”