Almost all of Pakistan awoke to darkness on the morning of Monday, January 23, as the country experienced its second major power outage in four months. Energy Minister Khurram Dastgir Khan announced that “unusual voltage and frequency fluctuation” had caused a widespread breakdown in the national grid. The outage was caused by a disruption in the power generation units, which the government was shutting down at night when the demand for electricity was relatively lower, as an “economic measure” amid a looming energy shortage. The fallout from the outage was dramatic—affecting not only water supply systems and hospitals, but also economic activities. Shahid Sattar, the secretary general of the All Pakistan Textile Mills Association, told AFP that 90% of factories had shut down on Monday, causing an estimated loss of $70 million.
On Friday, Jan. 13, Treasury Secretary Janet Yellen wrote to Congress that the U.S. government will hit its borrowing limit on Jan. 19, forcing the new Congress into negotiations over the debt limit much sooner than expected. She said she will use accounting maneuvers she called “extraordinary measures” to keep U.S. finances running for a few months, pushing the potential date for default to sometime in the summer. But she urged Congress to get to work on raising the debt ceiling. Lifting it above its current $31.385 trillion limit won’t be easy with a highly divided and gridlocked Congress. As former Republican politician David Stockman crowed in a Jan. 11 article: 15 [House] votes and the slings and arrows of MSM opprobrium were well worth it. That’s because the GOP’s anti-McCarthy insurrection obtained concessions which just might slow America’s headlong rush to fiscal armageddon. And just in the nick of time! We are referring, of course, to the Speaker elect’s promise that there will be no more debt ceiling increases without off-setting spending cuts; and that in the event of a double-cross a single Member of the House may table a motion to vacate the Speaker’s chair.
The external debt of the world’s low and middle-income countries at the end of 2021 totalled 9 trillion US dollars, more than double the amount a decade ago. Such debt is expected to increase by an additional 1.1 trillion US dollars in 2023. Moreover, the debt-service payments, projected to top 62 billion US dollars in 2022, put the biggest squeeze on poor countries since 2000, according to the World Bank. As defined by the Organization for Economic Cooperation and Development (OECD), debt service refers to payments in respect of both principal and interest. Actual debt service is the set of payments actually made to satisfy a debt obligation, including principal, interest, and any late payment fees. Scheduled debt service is the set of payments, including principal and interest, that is required to be made through the life of the debt, OECD goes on.
The deuda (“debt” in Spanish) is one of the most persistent elements in the two centuries of Argentina’s history. It has conditioned the political life and the economy of the country like no other factor, for generations. But this should not be confused with just any debt. The word deuda normally refers to the external debt (both public and private), a debt owed to foreign creditors. Historically, the key aspect of the deuda is that it is based on a foreign currency, the world trade currency controlled by the ruling empire. It was once the British pound. Since 1944 it has largely been the US dollar. The United States can “print” dollars (and the Federal Reserve does so regularly), but Argentina cannot. The same is true of other countries in the Global South with large external debts denominated in foreign currencies.
Even as the floodwaters have receded, the people of Pakistan are still trying to grapple with the death and devastation the floods have left in their wake. The floods that swept across the country between June and September have killed more than 1,700 people, injured more than 12,800, and displaced millions as of November 18. The scale of the destruction in Pakistan was still making itself apparent as the world headed to the United Nations climate conference COP27 in Sharm el-Sheikh, Egypt, in November. Pakistan was one of two countries invited to co-chair the summit. It also served as chair of the Group of 77 (G77) and China for 2022, playing a critical role in ensuring that the establishment of a loss and damage fund was finally on the summit’s agenda, after decades of resistance by the Global North.
Hundreds of smallholder farmers gathered in the city of Morogoro on November 17 and 18 for the 27th Annual General Meeting (AGM) of Mtandao wa Vikundi vya Wakulima Tanzania or the National Network of Small-Scale Farmers Groups in Tanzania (MVIWATA). The organization was founded in 1993 by self-organized farmers in the wake of the country’s first Structural Adjustment Program (SAP) under the IMF and the World Bank between 1986 to 1989. The neoliberal reforms ushered in during this period marked an absolute departure from Tanzania’s centrally-planned economy under socialist president and leading anti-colonial figure Julius K. Nyerere. In 1967, Nyerere issued the Arusha Declaration, committing Tanzania to the principles of socialism and self-reliance and paving the way for nationalization of key industries and the collectivization of agriculture.
The International Monetary Fund (IMF) has said a “wave of debt crises” may be coming in the Global South, and “the global economy is headed for stormy waters,” as the world faces a “geopolitical realignment” that will be “permanent.” The US-dominated financial institution warned “the worst is yet to come,” as the depreciation of most currencies against the dollar and rising interest rates make it hard for both governments and companies to service their dollar-denominated debt. The director of the IMF’s research department, Pierre‑Olivier Gourinchas, made these comments in a press briefing on October 11. Countries comprising a third of the entire global economy are expected to contract in 2022 or 2023, he prognosticated. “In short, the worst is yet to come; and for many people, 2023 will feel like a recession,” he said.
Members of three groups known as Last Generation, Scientist Rebellion and Debt for Climate staged several protests today. Some activists entered Germany’s Ministry of Finance with banners on which they accused Finance Minister Christian Lindner of an “empty promise” in regard to debt cancellation. “Dear Christian Lindner”, Debt for Climate said on Twitter. “We know that you are in the building, you just passed our activists. We are here to talk to you about what you promised to do: debt cancellation for the Global South.” The protesters told him to meet them “outside” for a discussion. The same group posted photos. They showed its members inside the Ministry. Some of them had glued their hands to windows, elegant counters, desks and other furniture. Others held big signs. “Cancel the debt of the global south!” one of the banners read.
Jackson, Mississippi - In August, clean water stopped flowing from residents’ taps in Jackson, Mississippi. The crisis lasted more than six weeks, leaving 150,000 people without a consistent source of safe water. The catastrophe can be traced back to a decision by a credit ratings agency four years ago that massively inflated the city’s borrowing costs for infrastructure improvements, most notably for its water and sewer system. In 2018, ratings analysts at Moody’s Investor Service — a credit rating agency with a legacy of misconduct — downgraded Jackson’s bond rating to a junk status, citing in part the “low wealth and income indicators of residents.” The decision happened even though Jackson has never defaulted on its debt.
The flood in Pakistan is a humanitarian crisis of epic proportions. Entire towns, vital infrastructure, homes, farmlands, and crops are being washed away. With a third of the land under water, 33 million people affected, and the death toll over a thousand and rising, the human and economic cost is set to be astronomical. It is estimated that the extensive damage to the country will cost at least $10 billion. The country faces both the immediate challenges of immense displacement, homelessness, hunger, and the spread of water-borne diseases as well as the longer-term costs of rebuilding and reconstruction. Pakistan faces a deepening debt crisis to pay the costs of a climate catastrophe it did not cause.
The Biden administration announcement of so-called student loan debt relief does little to alleviate the problem it claims to solve. Forgiving $20,000 for Pell grant holders and $10,000 for all who earn less than $125,000 is questionable for a variety of reasons. It is a midterm election bait and switch that pleases gullible democrats, helps only a minority of borrowers, and is nothing like what candidate Biden proposed during the 2020 campaign. Americans owe $1.7 trillion in student loan debt. This crisis did not occur by happenstance. Universities did not escape the neoliberal onslaught and are fund raising machines charging astronomical amounts of money for tuition and room and board.
President Biden announced today that his administration was taking two actions with regards to the student debt crisis affecting tens of millions of people in the United States. The administration pushed back the deadline for the resumption of student loan payments until the end of the year, and up to $10,000 of student debt will be forgiven for those making less than $125,000 a year (or $20,000 for Pell Grant recipients). The cancellation of student debt – which now totals over $1.7 trillion – has been a longstanding demand of the mass movements of the past decade. The popularity of this demand and the persistence with which it has been raised has made it impossible for the politicians to completely ignore. Clearly, Biden made the calculation that he could not go to the 48 million people who have student loan debt totally empty-handed.
Liz Gorski was a 15-year-old in Prescott, Arizona, when she was in a car accident that changed her life, and trapped her in a cycle of medical debt. After being in a coma for five days, Gorski woke up in the hospital to a new reality. She needed surgeries, physical therapy, and extensive medical care, a bill that ended up being over a million dollars, Gorski recalled. Insurance covered some of these initial expenses, and a lawsuit several years later covered more of the bill. But she still had medical debt sent to collections. Gorski’s health problems have required lifelong treatment, as she continues to deal with the aftermath of the crash, and the medical bills keep piling up. “Every single time I go, I have a copay and then I have some part of the bill billed to me, and every month I’m paying on all of these bills just to make sure that they don’t go to collections, but sometimes they do because it’s just too many at one time,” she told More Perfect Union.Liz Gorski was a 15-year-old in Prescott, Arizona, when she was in a car accident that changed her life, and trapped her in a cycle of medical debt. After being in a coma for five days, Gorski woke up in the hospital to a new reality. She needed surgeries, physical therapy, and extensive medical care, a bill that ended up being over a million dollars, Gorski recalled. Insurance covered some of these initial expenses, and a lawsuit several years later covered more of the bill. But she still had medical debt sent to collections. Gorski’s health problems have required lifelong treatment, as she continues to deal with the aftermath of the crash, and the medical bills keep piling up. “Every single time I go, I have a copay and then I have some part of the bill billed to me, and every month I’m paying on all of these bills just to make sure that they don’t go to collections, but sometimes they do because it’s just too many at one time,” she told More Perfect Union.
This July, Sri Lanka’s government was forced to resign, after hundreds of thousands of protesters stormed public buildings, setting some on fire, while also occupying the homes of the country’s leaders. The protests were driven by skyrocketing rates of inflation, as well as rampant corruption and widespread shortages of fuel, food, and medicine – a product of the country’s inability to pay for imports. In May, Sri Lanka defaulted on its debt. In June, it tried to negotiate another structural adjustment program with the US-dominated International Monetary Fund (IMF). This would have been Sri Lanka’s 17th IMF bailout, but the talks ended without a deal. By July, Sri Lankan Prime Minister Ranil Wickremesinghe publicly admitted that his government was “bankrupt.”
The greatest challenge facing societies has always been how to conduct trade and credit without letting merchants and creditors make money by exploiting their customers and debtors. All antiquity recognized that the drive to acquire money is addictive and indeed tends to be exploitative and hence socially injurious. The moral values of most societies opposed selfishness, above all in the form of avarice and wealth addiction, which the Greeks called philarguria– love of money, silver-mania. Individuals and families indulging in conspicuous consumption tended to be ostracized, because it was recognized that wealth often was obtained at the expense of others, especially the weak. The Greek concept of hubris involved egotistic behavior causing injury to others. Avarice and greed were to be punished by the justice goddess Nemesis, who had many Near Eastern antecedents, such as Nanshe of Lagash in Sumer, protecting the weak against the powerful, the debtor against the creditor.