The world faces the possibility of a series of economic collapses that could destabilize the lives of millions of people.
By Nikhil Kumar and Lili Pike | 2 August 2022
GRID — Sri Lanka might be only the beginning. The South Asian country, once an economic darling hailed as a “hidden jewel,” has been sucked into a financial black hole this year as an unsustainable pile of debt crushed sector after sector. The debt crisis has triggered widespread unrest and political upheaval.
But the small island nation isn’t alone, experts warn, as a range of countries worldwide — from Tunisia to Egypt, Kenya to Argentina, and beyond — groan under their own giant piles of debt.
Put aside the economic jargon, and the story is a straightforward one. As global prices and interest rates rise, putting pressure on the finances of these countries, they are struggling to pay the interest they owe on all the loans that they have taken out in recent years. That in turn is affecting their ability to keep their economies running — to feed their people, to provide fuel — even as they try to get things back on an even keel after the blows of the covid-19 pandemic.
The consequences now, as the debt crises gather pace and an already fragile global economy struggles with the fallout from the war in Ukraine, could extend far beyond these individual nations’ borders. The world faces the possibility of a series of collapses that could destabilize the lives of millions of people.
In the worst-case scenario, “we could head into a complete dystopia,” an “apocalypse” for some of the world’s poorest countries, Jayati Ghosh, an economics professor at the University of Massachusetts Amherst, told Grid.
Ghosh said she fears a tide of “terrible economic devastation in many countries … a kind of descent into a combination of warlordism, extreme inequality, extreme material suffering. Just bad stuff. And lots of instability.” […]