August 31, 2012

Is the World Going Bankrupt?

Stephan Kaufmann

In the 1990s, it was “globalization.” Now “government debt” is considered the central problem of the world economy. The reason: for the first time since World War II, it is not the so-called developing countries that are experiencing a debt crisis, but rather established industrial countries. In Europe, some governments have become insolvent and have to be financed by other states. In the United States, government debt has grown to levels that are otherwise only reached during wars. That is why Bild, Germany’s biggest tabloid, asked: “Is the Whole World Going Bankrupt?”, while the headline of the newsweekly Der Spiegel asked: “Is the World Going Bust?”

In the public discourse, two things seem to be clear: first, government debt is bad. And second, there is too much of it. “Saving” is therefore the order of the day. States want to become “trimmer,” public property is being privatized, and national wage levels are to be lowered in order to raise the level of “competitiveness” of the nation as a location for business. Government debt thus engenders the same political measures as the specter of “globalization” a decade ago.

Now all governments of the industrial countries have resolved to save more drastically. In all countries, this affects the poor—especially in the form of social cuts. Why is that the case? Where does all this debt come from? Why do all states incur debt—even though it is generally considered to be something bad? And if the whole world is suffering under debt, why not just cancel all this debt?

These are some of the questions that this brochure, written by Stephan Kaufmann and Ingo Stützle, seeks to answer. It does not attempt to assert that government debt is actually not a problem. Rather, it attempts to demonstrate the purposes that government debt serves, and when it becomes a problem—and for whom. Because ultimately, questions of debt are questions of distribution: while some benefit, others have to pay.