A REPORT on Wednesday by the Institute of International Finance (IIF) warned that the world is drowning under an unprecedented and increasing amount of debt and faces an ‘attack of the debt tsunami’.
Global debt increased by $15 trillion in the first nine months this year and is expected to reach a massive historic high of over $277 trillion by the end of the year according to the IIF, the organisation representing global financial institutions.
This represents total world debt reaching a staggering 365% of global Gross Domestic Product (GDP) by the end of 2020.
Although national debt is hitting poorer countries hard – with Zambia this week becoming the sixth developing country to default on its loan repayments and more defaults are expected – the report makes clear that the advanced capitalist economies are leading the way in running up massive debts.
Debts in these advanced economies increased by over 50% this year reaching 432% of GDP at the end of September.
Over half of this debt mountain was accounted for by the US which will have run up $80 trillion this year – an increase of $9 trillion from the end of 2019.
The US, the most powerful capitalist economy in the world, is drowning along the all the other capitalist nations with its national debt way over 100% of GDP – the highest level since 1946.
20% of US corporations have become zombie companies that are unable to make enough cash to pay off even the interest on their debt and are forced to survive only through more loans and bailouts.
This is the state that entire countries are now in, including Britain. The UK’s national debt has hit a record £2.024 trillion this year. It was less than £0.5 trillion in 2005, rapidly increasing to over £1 trillion in 2011 and over £1.5 trillion in 2016.
This surge in debt was caused by the Tories’ desperation to prevent the banking system from collapse after the global banking meltdown in 2008. When the Tories came in 2010 they introduced super-austerity.
In fact, the scale of world debt has been shooting up since 2008 when central banks launched a never ending round of printing money to bailout the banks from the financial crash.
This was the driving force behind the Tory government of Cameron and his Chancellor George Osborne’s vicious austerity attacks on the British working class making workers pay for bailing out the banks.
Today though it’s not just the banks that workers in Britain and throughout the world will be expected to bail-out, but the entire bankrupt international capitalist system.
The IIF make an important point that the coronavirus pandemic is not the sole factor to blame for the massive level of global debt saying: ‘The pace of global debt accumulation has been unprecedented since 2016, increasing by over $52 trillion.’
The coronavirus pandemic may have accelerated capitalism’s crash into debt as governments printed vast sums of money to keep banks and corporations from going bust but it is not the underlying cause.
The fact is that capitalism has reached the end of the road and exhausted any ability to stimulate any economic revival and can now only exist through debt.
Every attempt to stimulate capitalism and prevent it collapsing into bankruptcy from zero interest rates to printing trillions of worthless paper money has only had the effect of driving up debt.
All those reformists in the Labour Party and amongst the trade union leaders who are forever telling workers they must accept sacrifices to save capitalism are betraying the working class.
Capitalism today, is in its death agony, surviving only just through massive debt that it will try and force the workers and poor of the world to pay.
The only way forward today is for the working class and masses of the world to unite to overthrow capitalism and advance to a world socialist society. This debt crisis makes the victory of the world socialist revolution an historical necessity.
The urgent task of the day is to build revolutionary sections of the International Committee of the Fourth International in every country to lead the struggle for the world socialist revolution to its final victory. There is not a moment to lose.