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Outside In | Pandemic and climate change mean extraordinary debt levels are becoming the new normal
- Global debt has risen to record levels as countries try to shore up their health systems, fight Covid-19 and restart their economies
- Inflation, a flagging recovery and the prospect of further spending to fight climate change could have even rich countries sweating over debt levels
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Extraordinary times and extraordinary challenges perhaps inevitably allow the normal challenges that we wrestle with in normal times to escape attention.
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So the parallel imperatives of curbing the global Covid-19 death toll, funding unprecedented investment in health systems, as well as vaccine research and distribution, have created extraordinary challenges.
Combined with the need to aid economic recovery from the pandemic recession and begin meaningful funding for the green adjustments needed to rein in global warming, these have created a unique set of alibis for what in normal times would be seen as rampant fiscal profligacy.
As debt has soared to unprecedented levels worldwide, governments have justified emergency spending that in normal times would have cost them elections. Recall UK finance minister Rishi Sunak delivering back in March a “spend now, tax later” budget tailored to these extraordinary times.
“The amount we’ve borrowed is only comparable with the amount we borrowed during the two world wars,” he said. “It is going to be the work of many governments, over many decades, to pay it back.”
So far, almost two years into the pandemic, the ends have justified the fiscal means. The International Institute for Finance’s (IIF) Global Debt Monitor estimates that more than US$24 trillion has been added to global debt since the start of 2020 through tackling the pandemic, facilitating recovery and supporting companies and employees.
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