BY K. C. BHATT
A recently published report has brought to light that the global debt is escalating faster than expected and has exceeded two hundred fifty trillion dollars earlier than it was predicted.
It was also mentioned in the report that the two biggest economies of the world account for sixty percent of the total borrowings recently which raced to a staggering 7.5 trillion dollars in the first six months of the current year.
It was not mentioned in this report by what percent it grew over the last year. It also does not mention which of the two biggest economies is more responsible for pushing the world to the abyss of a total collapse. It is important to note that while China has a growth higher than six percent, the USA too has a cool growth of three percent. It is a remarkable growth because the rest of the world is feeing either recession or, worse even, a stagflation. Communist China or the democratic USA: the economic success story is the same for both.
Recently, the Chinese middle class displayed its muscle by spending thirty billion dollars within twenty four hours in online shopping to celebrate the ‘Single’s day’. It can be assumed that the people behind it are young entrepreneurs or professional in their prime years. So it is unlikely that any time in the near future any one can put pressure on China through economic sanctions to make it more amiable to making changes in its polity. Actually reverse could be the case as it is almost similar to the leading economy of the world in size and is growing twice the rate.
It may be a reason that the leaders of former European powers make a bee-line to win favours from China, as recently, President Trump has not been very friendly to them and has placed trade barriers to reduce trade deficit of the USA with EU nations apart from arm-twisting them to cough up more money to foot the bill of NATO.
Besides many countries defined as emerging economies are already having a debt more than two times their GDP and they are borrowing more to avoid sinking altogether.
Many economies in EU and Argentina and South Africa are incapable of keeping them afloat without a routine bail outs from either IMF or WB; or other agencies; or Germany directly. But for them every fresh economic stimulus has proved worse than the diseases which ail their economies, and they might never get revived for they have a strong culture of distributing social benefits way beyond their capacities.
Any efforts at reforms there have been stiffly resisted by their people. Moreover, these countries have always been advised by their donors like IMF and WB and now in no position to decline more advices from the same. So they no more are sovereign nations in strict terms.
In earlier days these countries were colonial powers, when the plunder of colonies sustained them. After the end of colonialism money-laundering kept them afloat. But now the global public opinion against it has dried it up significantly.
There are more countries which were colonies earlier but are steps away from falling in the similar situation and still have debt less than hundred percent of their GDPs. They do not take many advices from the donors but have a colonial system which was not changed much after independence and preys on the people to create a native ruling class which is far more ruthless than the real colonials in exploiting its own people.
However, this can be reversed only if the two largest economies agree to diversify their trade. They account for almost half of the global trade presently and any disputes between them do not last long for it hurts both the sides. Besides their debt situation indicates that they are not in as good health as they claim.
For this situation is precarious for the leading two economies too, as finally it could reach a point of no return and bring down drastically the economy of the world which is barely growing at two percent.
The writer can be reached at: <kcbhatt@gmail.com>
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