Almost all the countries of the world are facing economic crisis due to various reasons like inflation, price rise, unemployment, productivity slowdown. Although some technical reasons can be mentioned like the covid pandemic that gripped the world for almost three years and the Russia-Ukraine war, it can be understood that the conditions that have led to today’s crisis have arisen over several decades. It points to the failure of various economic systems based on public debt and exploitation.
According to the International Monetary Fund (IMF), 60 percent of the world’s countries are in debt. It makes no difference whether it is a developing country or a developed country. Economically backward countries take loans from other countries or international financial institutions for industrial development and infrastructure development. Rich countries borrow to luxuriate and get richer.
But only poor countries get into debt trap. Asian countries like Sri Lanka, Pakistan, Bangladesh, Myanmar, Thailand, Central African countries, Latin American countries like Brazil, Argentina, Peru, Chile, Nicaragua, Italy, Greece and other Eastern European countries are all in debt today. Rich countries like America, China, Japan, Britain and France are also borrowing heavily but are not under the pressure of debt. This is due to the fact that most of the rich countries have domestic debts raised by the people of the country, financial institutions or various social security funds.
On the other hand, most of the developing countries receive loans from foreign countries or from the International Monetary Fund, Asian Development Bank, World Bank and other international financial institutions. Borrowing countries have an obligation to pay the exact principal and interest on such loans every year. Therefore, foreign debt affects the economic growth of the country and increases the financial stress.
When you fail to pay the loan and interest, you have to take a new loan. A large portion of the foreign debt purchased by these countries is leaked during the process and ends up in the hands of various individuals. This unaccounted money is mostly deposited as private investments in the lending countries at low interest rates. It should be paid back with the taxes of the people of the country. Today, developed countries and their financial institutions are ready to give loans to developing countries.
Only the terms and interest rates will increase. If the last century’s practice was to colonize those countries by becoming traders and then taking over the land and natural resources of those countries, the current practice is to take the land and natural resources of those countries as much as possible. This is a turn towards advanced economic colonialism.
Today, such financial institutions lend to developing countries and developed countries make promises. Huge amount of loans are given for projects like world-class ports, airports, high-speed railways and expressways. They come with the offer of such huge projects in countries that do not have basic infrastructure such as education facilities, roads, hospitals, etc. which are needed by the common people.
What’s more, millions of people in these countries will starve. Many developed countries provide loans for large projects and export technology, machinery, consultancy etc. to these countries. A large portion of the loan granted thus returns to the lending country itself. In addition, developing countries are forced to receive arms, technical assistance, training, etc. through large contracts.
If the countries of the world want to escape from the debt trap, it is enough to take urgent rescue measures. Fiscal discipline must be enforced by all countries, whether developed or developing. The loan should be taken after careful study and ensure that it is suitable for domestic production growth and development. Reliance should be placed on domestic borrowing rather than external debt. Extravagance and extravagance should be avoided. Financial discipline can be maintained to some extent through such measures.
If international financial institutions and developed countries do not intervene in time and make loan arrangements, many developing countries may face the fate of Sri Lanka. The increasing public debt may become a huge threat and liability for future generations. In all economic systems that exist in the world today, the flow of wealth is from the poor to the rich.
In such a world order peace, tranquility, happiness and contentment will be alien to a large section of the population. The world needs a non-exploitative economic system based on social justice and the rule of law, where interest does not prevail. In that the flow of wealth should be from the rich to the poor. Only then will it be possible to ensure development and dignified life for all countries and all peoples of the world.