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Ian Explains: Why is global debt so high?
As of 2023, global debt as ballooned to an eye-watering $300 trillion. That’s an average of $37,500 for every person on the planet.
Why is global debt so high? Decades of low interest rates and cheap good made money easy to borrow. Then, along came a pandemic which stalled growth and a war in Ukraine that drove food and energy prices through the roof.
While these crises impacted just about every nation on Earth, they didn’t react in the same way. The US and the European Union pumped trillions of pandemic stimulus money into their economies to keep them afloat, but poorer nations kept borrowing money they couldn’t afford to pay back. Now, an estimated 60% of those countries are facing debt distress and rising inflation means paying down those bills is more expensive.
Can the world do anything about the impending debt crisis before it’s too late?
On GZERO World, Ian explains what the debt problem means for the global financial system and whether it needs to be transformed to confront the economic realities of the developing world.
Debt limits of rich countries hurt poor countries' growth, says World Bank's Malpass
Does the global financial system need a major overhaul?
In his final interview on GZERO World as president of the World Bank Group, David Malpass discusses a serious problem with host Ian Bremmer: the consolidation of economic and political power in the hands of the wealthiest countries. The world is facing a massive debt crisis––60% of low-income countries are now in debt distress or dangerously close to it. The poorest countries are paying an average of 16% of revenue on servicing loans.
Decades of low interest rates and cheap goods, followed by the pandemic and runaway inflation led countries to borrow huge sums of money. But it didn’t happen in an equitable way. Wealthy nations like the US and the European Union pumped trillions into their economies to keep them afloat. But poor nations kept borrowing money they couldn’t afford to pay back.
“The poorer countries are not catching up, and we really want a world where the people in lower income levels actually get to grow faster,” Malpass tells Ian Bremmer. “That’s what creates stability."
Malpass says that the goal of the World Bank, and any value-based society, is faster growth in poorer countries so they can catch up with advanced economies and stabilize. And that means integrating the economies of developing countries better with the West, which can at odds with nationalist economic policies like “Buy America,” near-shoring, and inshoring.
“I think there’s plenty of room in a logical world to say we don’t want dependency,” Malpass stresses, “But we also want to have a vibrant, global marketplace that is competitive. And the US needs to lead and be the starting point for a lot of this rethinking of the global system.”
Watch the episode of GZERO World with Ian Bremmer: World Bank's David Malpass on global debt & economic inequality
- Ian Explains: The debt ceiling ›
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- World Bank's David Malpass on global debt & economic inequality ›
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- Odds of a global recession? 50/50, says David Malpass ›
- World Bank economist: The poorest are getting poorer globally - GZERO Media ›
- How to tackle global challenges: The IMF & World Bank blueprint - GZERO Media ›
Want to help poor countries now? Open your markets to their farmers, World Bank chief tells wealthy nations
Many developing countries now face high inflation, especially rising food prices.
What can they do to alleviate some of that pain? Wealthy nations should step in by opening their markets to farmers from poor nations, World Bank President David Malpass says during a Global Stage livestream conversation hosted by GZERO Media in partnership with Microsoft.
"This is a moment to make friends, to help people that ... don't have as much."
That means lifting trade barriers and subsidies that aren't really necessary so there can be more room for others to sell their stuff.
Malpass also recommends that all governments transition away from economic and fiscal policies that have spurred inflation toward encouraging boosting production and supply.
That's the best way to help small businesses, the most under pressure from high interest rates and the food price hike.
Watch more of this Global Stage event: Live from Washington, DC: Financing the Future
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- David Malpass: I'm not a climate denier - GZERO Media ›
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- World faces "lost decade" of economic growth, says World Bank economist - GZERO Media ›
Making sense of our new global economy
If billionaires shooting off into space because their net worth has jumped 60 percent sounds cringeworthy to you, you're not alone. Indeed, the pandemic hasn't been kind to the 120 million people into extreme poverty. Nor to the global economy as a whole, which stands to lose $2.3 trillion by 2025 due to vaccine inequality.
Even in the US, the vaccination rate is high but poor people still lack access to education, childcare, and healthcare. Still, despite these inequalities, America's economy has rebounded quickly. But we may not be fully back in the black quite yet. Economists disagree about how long rising inflation and supply chain shortages may last, and we're a long way off from vaccinating the world's poorest populations. Also, we face the twin threats of COVID variants and reduced vaccine efficacy over time.
Watch the episode: How the COVID-damaged economy surprised Adam Tooze
Scientist Jennifer Doudna on making CRISPR technology viable — and affordable — for everyone
While global cooperation on public health issues like access to COVID vaccines continues to sputter, a group of scientists from around the world are quietly working on making CRISPR gene-editing technology within reach for rich and poor nations alike. "We're going to want to work as quickly as possible to scale it to a point where that also helps bring down the cost," says Jennifer Doudna, who won the 2020 Nobel Prize in Chemistry for her work on CRISPR. Watch her interview with Ian Bremmer on GZERO World.
Watch the episode: CRISPR gene editing and the human race
Rethinking the post-pandemic workplace
While the pandemic continues to ravage much of the world, the rich world is opening back for business and companies are preparing to bring their employees back to the office. But quite a few of those workers don't seem thrilled about a return to pre-COVID workplace norms. A recent survey of 30,000 Americans found that three in ten never want to return to the office again. Another poll found that one in three US workers wouldn't want to work for an employer who requires them to be on site full time. But Wall Street's impatience is starting to show. Take Morgan Stanley CEO James Gorman, who effectively told his New York City employees that they should expect to be back in their cubicles by September, or else. If employers are going to require that their workers return to the office, what should those workers expect in return?
Watch the episode: Adam Grant reimagines work after COVID
- The Graphic Truth: New digital jobs in a post-pandemic world ... ›
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- Adam Grant on post-pandemic WFH: CEOs still don't get it - GZERO ... ›
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“Essential workers” and the inequality of work
Organizational psychologist Adam Grant discusses the "essential workers" who kept the world going throughout the pandemic and didn't get to work from home. According to Grant, the US should be rethinking its policy on essential work. "Where was hazard pay for all the teachers? For all the medical professionals? For all the warehouse workers who put their lives at risk to keep the world running, and to try to keep the economy alive as well?" asked Grant, in an interview with Ian Bremmer on GZERO World.
Watch the episode: Adam Grant reimagines work after COVID
2.6 billion people: “WTF is WFH?”
As the world's wealthier and more fully vaccinated countries begin to emerge from the pandemic, there's a lot of talk about "the office".
When do we go back to it? Do we go back to it? What is an "office" now anyway?
The vast majority of business execs say they expect employees will split time between home and the office now, according to a recent McKinsey study. Designer salad companies are keen to serve the wave of office returnees, while savvy entrepreneurs are making special speakers for remote workers to feel like they're in the office even when they aren't.
The office debate is an important one for sure — full disclosure: this piece was written from home! But for billions of people around the world, it's not relevant to their work or lives.
That's because they have jobs that can't be done from afar: like giving haircuts, serving food, or tending to seriously ill or injured patients. Or their jobs are in occupations like farming, deliveries, sanitation, or transportation that are essential but not confined to any specific space.
How many people are we talking about? According to the International Labor Organization, just 18 percent of the global workforce, or about 557 million people, were able to consistently telework during the pandemic. That's triple what it was before COVID. But it still leaves 2.6 billion people around the world for whom the "back-to-the-office debate" sounds like something from another planet.
Those 2.6 billion people and their families have been hit hardest by the pandemic in terms of hours and wages lost, psychological stress, and unemployment.
Work from home, you say? "Most of us in the Philippines don't have that luxury," said Liezl Gayeta, 30, who runs the kitchen at the Manila-based health food delivery company The Sexy Chef. "If we don't come to work," she told us, "we don't get paid. If we want to feed our families, we need to show up for our jobs."
But the division between the "Zoom class" and the rest of the world also closely tracks some of the broader fault lines of inequality that cut across our societies.
Rich countries vs poor countries. Even in wealthy economies, only a small portion of workers can telework consistently. In the US, it's about a fifth. But in lower and middle income countries, the size of the "laptop class" plummets. In India, for example, where more than 450 million people work in retail or farming alone, only 5 percent of workers can Zoom to the job. The numbers in sub-Saharan Africa are similar, says the ILO.
Part of this is because in-person services jobs are more prevalent in less economically developed countries — you are six times as likely to be a street-vendor in a middle-income country as you are in a wealthy one, and 16 times as likely to work in agriculture.
But it's also about limitations on internet connectivity and service. Most countries simply don't have the internet infrastructure to support massive teleworking populations.
And many of these countries have suffered the additional blow of evaporating remittances from their citizens working abroad in professions that often aren't "remote-workable."
Ramshid, a 34-year-old driver from southern India who has worked in Qatar for more than a decade, told us that the pandemic had slashed his monthly earnings from about $2,000 a month to less than half of that, leaving him with no money left over to send home to his wife and children in India.
Meanwhile, high debt loads and scarce cash mean that governments in low and middle income countries can't roll out the kinds of unemployment benefits or infrastructure rebuilding programs that we've seen in Europe and the US. Rich countries have uncorked close to 30 percent of GDP to cushion the pandemic blow. Others have barely mustered 7 percent, says the IMF.
That's one big reason why the pandemic has put decades of poverty-reduction in reverse. Last year, more than 120 million people fell below the poverty line globally, and the number of people in extreme poverty rose for the first time since 1997.
Haves vs have-lesses. Even in wealthier countries, non-remote jobs are overwhelmingly in lower-income, economically vulnerable professions. According to a Pew study, more than three-quarters of low-income workers in America can't work from home at all.
What's more, the ILO found, non-remote jobs have higher proportions of women, ethnic minorities, and younger people — groups who went into the pandemic at an economic disadvantage, and all suffered disproportionate economic losses during the crisis itself.
What's to be done? There are two separate things to focus on, says Janine Berg, a senior economist at the ILO. Globally, rich countries need to look at the thorny question of debt relief for cash-strapped lower-income countries.
But even within richer ones, better compensation and labor protections for "essential workers" are, well, essential.
"It's really nice to be out on the balcony applauding them," said Berg "but unless you start compensating them more, what happens if another pandemic comes around?"
Tell us where you're working from and what you think about all this here.