In July 2018, The UN chief Antonio Guterres expressed concern at the financial condition of the world body. He urged member states to pay their dues as early as possible as the UN was running out of cash. He noted that UN had a budgeted deficit of $139 million and that it had never faced such cash crunch this early in any year. He summed up the contemporary UN as ‘Running out of cash sooner and staying in the red for longer. ‘ While Guterres reiterated measures to reduce expenses, US ambassador Nikki Haley demanded greater check on inefficiency and overspending. The unprecedented scenario hints at what the nations could be facing.
The IMF estimates global debt today to be worse than that prior to the financial crises. IMF opines that all economies are looking vulnerable with low interest rates for debt to reach 225% of GDP. The debt to GDP ratio for some countries are: China 256%, Japan 240%, US 108%, Canada 89%, and EU 81%. Unfortunately as the portal National Interest notes, the subject of debt is not popular in the corridors of Washington, Tokyo, Rome, or Beijing. The burden of debt is best felt only when growth slows with rising interest rates, when massive debt burdens make unprecedented impact on lives.
When the path to debt accumulation is revisited, it would only be logical to conclude that debt would always be accumulated at an increasing rate. The needs of man are always there and the fundamental psyche of man is to get it satiated at the earliest and at the maximum. This is particularly true when governments are the one responsible for providing it. While the governments are on one hand trying to cut costs through austerity measures, these efforts are dwarfed by the needs for more spending; prominently infrastructure rebuilding and confronting natural calamity. The writing is on the wall. Spending and therefore debt has to rise as it had for so long. Where will the unprecedented piling debt finally lead to?.
The political literature has not evolved much in the recent decades; our minds still entrenched with the ideas of capitalism, communism, or socialism. As we evolve with time and unprecedented changing situations, our innumerable responses either together or separately could defy fitting into any perfect political ideology. While some could be in line with the ideals of capitalism, some of these could even raise the bar of socialism to newer levels. The evolution of political thoughts and governing principles would be reflective of the newer unfolding situations, their impact, and the major public psyche with which these are perceived. The thoughts and responses would no longer reflect a conscious desire to associate with any particular ideological identity, thereby pushing to the fore the fact that our choices are now beginning to be more on compulsions rather than freewill.
As unprecedented financial problems escalate for nations, nations begin to showcase newer responses or at newer levels, like unprecedented tariffs and trade wars. Although governments had tried all different tricks under their sleeves, across a majority of them, something common can be easily observed; the rise of national debts, the rich-poor gap, and wealth accumulation at the top, all had gone hand-in-hand. This raises a kind of superstitious question of whether our economic systems could have some inherent flaws by which debt transforms to wealth through a legitimate labyrinth, a labyrinth that is neither visible nor understood?. Our market system of red and green is more driven by sentiments and a system led by sentiments has a possibility of itself succumbing to sentiments.
The fact that most nations, including major economies have piled up huge debts, the immediate challenge before many of them is not reducing their debts but preventing further debts. How long can nations carryon their routines without being impacted by their debts? What kind of austerity and revenue raising measures they would likely introduce and how effective these would be? How would people perceive these? The portal, the balance.com notes, “In 2012, the IMF released a report that stated the eurozone’s austerity measures may have slowed economic growth and worsened the debt crisis.” These are evolving situations for which governments and people would be seeking unprecedented solutions after much maneuvering and experimenting. When nations are cornered with no possibility of further borrowing, simultaneously confronted with the urgent need of funds, what will they do?
Water will ultimately find its own level. While desperate governments look into all possible ways of managing debt, there is no doubt that a solution to this is definitely out there. Every disease has a cure; but the question is whether that cure has been identified or not. The easy ‘funding to spending’ spree will now force governments to explore the evasive cure that can fix their economies. As the balance.com suggests, austerity measures typically include privatizing government-owned businesses. “These are usually industries considered vital to the state’s interest. They include utilities, transportation, and telecommunications. Selling them will raise revenue to pay off debt.” Whether this is in the right direction or a far cry, only time will reveal.
Debt has been seen to transcend factors like GDP, growth rate, or export performance. So where does this evasive cure lie? If the happiness of a given people could correlate to any particular index, it could well be the rich-poor gap index. Nations have majorly shown an inability to control this. There could now be a possibility of some nation experimenting with curbs on private wealth accumulation. Private wealth curb is one path modern man has considered immoral and not attempted to walk it, keeping up with the ideals of free society. Guided by God and prayers, he will now look upon this path, a path hardly considered before. When river meets the sea, there is no aftermath for the river. An idea that problems will scale down only when this rich-poor gap is reduced, and that the gap cannot reduce by economic policies but only civil law, could seem a prospective pill for in-debt nations, worth swallowing.
