The world’s debt load has
ballooned to a record $164 trillion, a trend that could make it
harder for countries to cope with the next capitalist recession and
pay off debts if financing conditions tighten, the International
Monetary Fund said in April. Global public and private debt swelled
to 225 per cent of global gross domestic product in 2016, the latest
year for IMF figures, according to its semi-annual Fiscal Monitor
report. The previous debt peak was in 2009.
The IMF is an
international body based in Washington,
D.C. of 189 countries. It claims to be “working to
foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the
world.” But its behaviour tells a different story.
Formed in 1945 at the Bretton
Woods Conference in line with the ideas of Harry
Dexter White and John
Maynard Keynes, it started with 29 member countries and the goal
of reconstructing the international
payment system. It now plays a central role in the management
of balance
of payments difficulties and international financial crises.
Countries contribute funds to a pool through a quota system from
which countries experiencing balance
of payments problems can borrow money to buy essentials and
meet payroll. As of 2016, the fund had about $668 billion.
But in order to borrow from that
fund, “conditionalities” must be met. The latter often
require severe cuts to social expenditures and public sector
employment, plus major concessions to private capital, especially to
foreign investors operating in poor and less developed economies.
The IMF forecast expansion of 3.9
per cent in 2018 and 2019, while saying that in subsequent years the
global economy could be impacted by tighter monetary policy and the
shrinking effects of U.S. spending.
Surging private-sector debt,
particularly in China, is driving the buildup. China is
responsible for almost three-quarters of the increase in private debt
since the financial crisis, according to the IMF. Its report reveals
the debt hangover from which the capitalist world is still
recovering—a decade after the global banking system went to the
brink, triggering a deep recession. Governments increased spending to
boost growth, while central banks resorted to unconventional methods
to ease financial conditions, such as buying bonds, in effect,
printing huge sums of money.
Now the focus is on “recalibrating”
fiscal policy to reduce debt-to-GDP levels. Welcome to the
austerity agenda—social cutbacks, precarious work, no benefits,
de-regulation of the natural environment and privatization of
public assets. Why? Make the working class and the
impoverished pay for the irrational, violent, and wasteful
capitalist order.
Those at the top of the income
pyramid will do better, while the “hollowing out” of the
so-called middle class continues apace. Liberals pledge to help
the squeezed “middle.” Right-wing populists talk about
opposing the elites, but they follow their policies aggressively. The
challenge to the left is to fight austerity and, at the same time, to
target the system that fosters it.
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