by NICK DEARDEN
‘[P]eople, even the world’s poorest and most destitute, are required to pay their government’s debts as long as creditors pursue claims… In the worst cases, it’s the modern equivalent of debtor’s prison.’
These aren’t the words of a debt campaigner, but the head of the World Bank David Malpass, speaking last week. They come days after the head of the International Monetary Fund (IMF) called for reforming ‘the international debt architecture.’ Both statements suggest something big is happening. What’s behind it?
The coronavirus pandemic has propelled historically unprecedented levels of global debt into an all-out economic crisis for many countries. The health impacts have been serious enough, but this phase of the pandemic will be followed by the worst economic downturn in living memory.
None of this came out of a clear blue sky, but rather from the failure of world leaders to learn the lessons of the 2008 financial crash. Instead of reforming the economic model which landed us in that mess, the financial system was bailed out, the price paid by ordinary people in the US and Europe through austerity, while the banks and hedge funds went on a high-risk lending binge to the Global South.
New Internationalist for more