This article was originally published in Dollars & Sense. Read the whole essay here.
You might be familiar with Karl Marx's famous notion that capitalism never really resolves its crises, rather it moves them around geographically. Up until the last couple of years, I tended to agree. To be sure, complex phenomena like financial crises have complex causes, and, further, the conditions left in the wake of prior crises often contribute to the development of the next one. But all of that said, it used to be the case that one could, more or less, roughly pinpoint a particular market in a particular country where the trouble seemed to first erupt. For example, the U.S. mortgage market in 2007 in which the Great Recession ignited, or the market for the Thai baht in which the 1997 East Asian Financial Crisis began, or the market for syndicated loans to Latin American governments that underpinned that region’s debt crisis in the 1980s.
However, in the case of today’s debt crisis, the one that has emerged over the past couple of years, things seem different. There is no single place to which one can point right now and say, “Aha!! There it is. That’s where the trouble began.” At the moment, there are very serious financial and economic problems in most of the countries I’ve researched for this article—including Egypt, Pakistan, Lebanon, El Salvador, Argentina, Sri Lanka, Ghana, Zambia, China, the United States, Japan, and the United Kingdom, among others—issues that stem from a great number of overlapping and dynamic causal factors. And there’s debt all over the place, too, one of many visible symptoms of these larger problems. It’s a Whole World Debt Crisis, and geographic release valves to vent the pressure that’s built up are scarce. Since late 2020, debt-related problems have erupted in larger, wealthier economies right alongside smaller, poorer ones. But risk always hits the poor the hardest, and the current debt crisis has been especially difficult for poor and working people and for low- and middle-income economies that rely on imported food and energy to meet domestic needs. Yet, this unfolding global tragedy also contains bright spots of hope for the future, related to the shifting geopolitical and financial terrain on which the debt crisis is playing out. The volatile landscape is complicating international debt relief and restructuring efforts while at the same time creating opportunities for debtor states that were not available in the past…
Read the full article at Dollars & Sense.