According to a report from the Jubilee Debt Campaign, there are currently 24 countries facing a full-blown debt crisis, with 14 more on the verge. Globally, there is about $200 trillion of debt on the books. Although the poor and disenfranchised of the world play no role in negotiating these loans, in debt crises they usually end up paying the price. So when a country borrows money, who or what is the “economic agent” responsible for taking on the debt? Can traditional economic theory explain why we face debt crises and how we can get out of them? Or do we need a new economic model that dispels some of the myths of the traditional model and offers a more ethical solution to the global debt crisis? John and Ken are held to account with Julie Nelson from the University of Massachusetts Boston, author of Economics For Humans.
With 200 trillion dollars of debt held worldwide and over a dozen countries in crisis because of their inability to repay borrowed money, John and Ken take up a pressing question: the ethics of international debt. First, the two analyze the concept of debt. While it all seems straightforward on an individual level, things start to get complicated on the international level, when entire countries become the borrowers. Ken raises the problem that when a country borrows money, the people who take the loan may not be the same people who pay the loan back—for instance, when loans are paid back generations later, or when a president or dictator takes loans in their own self interest and forces their subjects to pay back the debt.
John and Ken take a break to turn things over to Shuka Kalantari, who files the week’s Roving Philosophical Report on how debt can cripple entire nations (see below). Afterwards, the hosts welcome the week’s guest, Julie Nelson, a professor of economics at University of Massachusetts Boston and author of Economics for Humans. Professor Nelson helps the hosts understand how the situation of international debt has become a crisis, and who is affected. She explains that many of the problems associated with debt come from poverty and the “Wild West” of the international financial system.
After a short break, the John, Ken, and Professor Nelson talk about ways to model the concept of debt on the international level, and then take questions from callers in the radio audience. After questions about how debt might affect dominance and inequality in the international system, John asks Professor Nelson a big question: if she had power over all international debt, how would she solve the problem? Nelson said she’d first cancel debts, and also shift the way loans are given. The three end up the show discussing how the simple version of ethics of a debt—where it’s ethical to repay one’s loans—might be more complicated.
Comments (2)
Shekar
Sunday, October 14, 2018 -- 5:17 PM
Aside from comments from oneAside from comments from one caller about how the lenders are not operating in good faith, there was no discussion about how the so called donor countries use loans to control other countries. I remember when the 2008 financial crisis hit the world, there was no talk of austerity -- because the US was affected -- but whenever there is a default by a third world country all the Western economists talk about austerity for the poor.
Also, the debts are incurred by corrupt leaders who are bribed to take loans -- which goes into Swiss bank accounts or for building big infrastructure projects which generate little value and devastate the local ecosystems and the livelihoods of the poor people living in villages. I am from India and remember all the dam building on dry river beds with thousands of villagers displaced thereby crowding the cities. Most of those dams were financed by international loans which India is still repaying. I can only imagine what mineral rights are gained by multinational corporations for loans given by donor nations.
The ethics of repaying loans is just one tiny sliver of the conversation. The bigger story is the donor nations and institutions and the pillaging and stealing they do. And the crook dictators they prop up with the help of CIA to ensure mineral rights, military rights, leverage in negotiations of international trade deals. It's downright immoral -- I don't need a degree in philosophy to see that. It's plainly inhuman.
Finally, where are the donor nations getting the money -- who is underwriting these loans -- which taxpayer is left holding the bag when the loans are defaulted. None of these questions were asked or discussed.
The answer is clear -- the debts should be written off and no new debts should be underwritten. Yes, borrowing is good if all the parties act in good faith and that includes the taxpayers (who ultimately underwrite these bad loans are lied to) are represented properly and if the donee nations' people are also represented properly (not by some dictator propped by the CIA).
Finally, there was no discussion about how much the US owes -- it's the greatest donor nation -- our prosperity is also financed by fiat currency -- which is propped by our mighty military. Our national public debt is almost 13 trillion dollars. With a population of approximately 300 million, each American owes $43,000. Thus, per capita, a Greek citizen owes only half of what an American owes. Where is the talk of austerity or default about America or it's policies?
I am sorry but I am not impressed with the show. A very narrow and parochial discussion.
Harold G. Neuman
Sunday, October 21, 2018 -- 11:33 AM
On the Debt Crisis piece ofOn the Debt Crisis piece of this blog discussion, I queried as to an outcome (if it could be called such) concerning world debt and its result (my question was about world war). People have fought over resources many times before. On a different level, usually personal or corporate, there have been disputes over money, that is, the currency(ies) we use to represent wealth. The thing about exchange of usable resources for currencies is that there is no useful product forthcoming. We are left with something with which to buy something else. So, economics theory aside---if we can do that---the practical worth of currencies is approximately zero, if there is nothing available to buy. There could well be war (I suppose) somewhere in this whole hot mess. But, what would THAT attain? Pretty much the same, or less, that it has ever attained? This may or may not be a valid thought experiment. But, I am reminded of the BBC's commentator this morning saying that economics is far too important a matter to be left in the hands of economists... War, by similar token token, is far too dangerous a matter to be left in the hands of idiots. We have proven this, time after time.