Basic concepts of macroeconomics: Debt crisis

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Annexe I: Basic concepts of macroeconomics

At the national level

National budget

Debt crisis

Debt crisis could stem from debt owed by governments or the private sector (firms or households) and can prevent the fulfillment of human rights obligations.1 Jubilee Debt Campaign. The Debt Crisis. Sovereign debt does not constitute a problem by itself. However, debt repayment conditions (e.g. Structural Adjustment Programmes, SAPs)2See Annexe II of this starter kit for a more detailed analysis of Structural Adjustment Programmes. or the sheer amount of debt can severely damage economies and hamper governments’ capacities to provide for the basic needs of its citizens.

Debt crises have led to devastating consequences for many countries of the Global South and some European countries since the 1970s. With the emergence of COVID-19 pandemic, investors moved an unprecedented $90 billion out of emerging markets. This will potentially lead to financial and debt crises in already fragile economies by draining governments of much needed sources of revenue, which could have been used for the wellbeing of their citizens.3UN News. (9 April 2020). Coronavirus-driven Debt Crisis Threatens Poor Countries Already at Risk, Says UN Report.

On the national and global level, the debt crisis manifests itself as above. On a more micro level, there are also different forms of individual and household debt throughout the world. Beginning in the 1970s, people in the US started to borrow significantly to cope with stagnating wages and to mitigate the effects of dismantling the welfare state. The increasing cost of housing, health, and education expenses (which were previously provided by the state) pushed people in large numbers into a debt economy.

In the Global South, the politics of micro-credit or microfinance well illustrate the complex ways in which poor women have become the source of huge profits.4Federici, S. (14 June 2016). From Commoning to Debt : Financialization, Micro-Credit and the Changing Architecture of Capital Accumulation. Committee for the Abolition of Illegitimate Debt. Micro-credits with high interest rates are promoted as a tool for poverty alleviation and female empowerment. Yet poor women are pushed into deeper poverty with growing amounts of debt.

In 2010, 56 poor women in Andhra Pradesh, India, died by suicide. This was related to the high debt levels they had accumulated from micro-credit, and pressures of microfinance institutions marked by exploitative loan extortion practices.5Parthasarathy, S. K. (February 2012). Fact and Fiction: Examining Microcredit/Microfinance from a Feminist Perspective. Association for Women’s Rights in Development. Anti-debt movements and campaigns for debt cancellation by human rights organisations all emphasise that the current debt system is unjust and a cause of poverty.

For more information on feminist approaches to debt, watch ActionAid’s online conversation ‘Ending the Debt Crisis for Women’:

Left ArrowBasic concepts of macroeconomics: Government taxation and spending Purple Dot AusterityRight Arrow




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