Campaigners say new figures emphasise the responsibility of creditors and financial sector for creating debt crises
Figures show UK government does not have a debt crisis – but the UK financial sector does
Jubilee Debt Campaign have today released a ‘debt league’ which compares the foreign debts of all countries in the world in a new way. Based on separate calculations from World Bank, International Monetary Fund, central bank and OECD databases, it is the first time these figures have been presented together.
By showing both government debt and private debt, and how much a country owes as well as it is owed, JDC’s ‘net debt’ table better expresses the fact that crises are not simply created by debtors, but by creditors too. Countries such as Norway, Saudi Arabia and Germany are traditionally seen as ‘morally superior’ to indebted countries for their credit surpluses. But they are just as responsible for debt crises in a world increasingly characterised by huge imbalances.
JDC has published four measures of debt figures next to one another, which they claim together give a better picture of the true state of indebtedness. The organisation believes foreign owed debt is a more important factor causing crises than domestic debt, and private debt is far more important than traditionally believed.
Though the UK ranks 98th most indebted country in the world in the net debt league, its private sector debt is a massive 364 per cent of GDP, putting it fourth on that measure. JDC says this means the UK economy is in desperate need of reform – but not of the sort of austerity policies currently being imposed.
Jubilee Debt Campaign economist Tim Jones, who calculated the figures, said:
“Often when referring to a country’s debt, people only focus on how much debt is owed by a government. This includes debts which are owed to citizens of that country, often as part of their savings such as pensions; debt which doesn’t necessarily harm the country’s economy. But it ignores the debt owed by private companies, including banks, even though that was the main cause of the current financial crisis.”
“It is debts owed between countries which are at the root of current crises in Europe, as well as in countries such as Jamaica, Pakistan and El Salvador. But it takes two to tango; our figures also show the big creditor countries, including Germany, Saudi Arabia and Norway, whose surplus status is just as much a problem to the global economy. It’s the other side of the same coin.”
“Of course no one set of figures can capture all the complexities around debt. The quality of debt is a huge issue; whether debts are used productively and democratically, or are used to fund useless projects, and unrepresentative regimes. There can be no statistical way of measuring this. But these new figures give far more insight than the blinkered view which looks only at government debt, and takes no account of who it is owed to.”
“Countries in a foreign debt crisis need debts to be cancelled. But to prevent crises in the first place we need to regain control of the financial system. The UK debt crisis is a crisis of private debt, bank debt, and it hasn’t gone away. Austerity will do nothing to help this. Instead we need to regulate lending between states, including by private companies and banks. In the 1950s and 1960s, when such regulations existed, debts were far lower, growth was higher and there were hardly any debt crises.”[4]
a) Fifteen largest net debtors and lenders
| Country | Net debt as per cent of GDP | Country | Net surplus as per cent of GDP |
| Seychelles | 152 | Singapore | 294 |
| Portugal | 116 | Switzerland | 158 |
| Ireland | 98 | Saudi Arabia | 110 |
| Greece | 95 | Norway | 95 |
| Spain | 88 | Algeria | 93 |
| Jamaica | 84 | Luxembourg | 75 |
| Croatia | 83 | Japan | 53 |
| Belize | 72 | Kuwait | 45 |
| Sao Tome and Principe | 72 | Timor-Leste | 44 |
| New Zealand | 71 | Netherlands | 41 |
| Cyprus | 69 | Germany | 38 |
| Poland | 66 | Belgium | 36 |
| Latvia | 65 | China | 34 |
| Laos | 65 | Botswana | 33 |
| Zimbabwe | 65 | Denmark | 32 |
Commenting on the fact that it is the first time these figures have been put together, Tim Jones said:
“I find it incredible that no official organisation puts together such figures for the whole world. Whilst there are various gaps in the data, this is a first attempt to do so.”
Welcoming the release of the figures, Karel Williams, Professor of Accounting and Political Economy at Manchester Business School, said:
“This is Jubilee Debt Campaign doing what a radical NGO should be doing. Reworking the official figures to show the undisclosed long chains of international lending which create debt problems in the Global South and drive the Eurozone crisis.”
Jan Toporowski, Professor of Economics and Finance at The School of Oriental and African Studies, University of London, said:
“Jubilee Debt Campaign have done a great service to the economics profession and practitioners in international money, banking and finance by putting together this data on the structure of international debt. This is the untold story behind developments in international banking and finance, a story which shows that these are not just everyday transactions helpfully carried out by international banks as a benefit to the world in general. The data shows the legacy of debt that is the consequence of international transactions carried out without a proper system of debt management. They highlight the most urgent issue in international finance.”
John Weeks, Professor Emeritus at the School of Oriental and African Studies, University of London, said:
“The considerable confusion about which country has how much debt and identifying the creditor should be largely dispelled by this excellent work done by the Jubilee Debt Campaign. This information, a vast improvement on what went before, will benefit both activists and researchers.”
The figures are presented on a set of world maps available at www.jubileedebt.org.uk/countries
For more information and interviews contact Tim Jones on +44 (0)20 7324 4725 or +44 (0)7817 628196
Notes
[1] The figures released today show:
a) The net foreign owed debt as a percentage of GDP for 163 countries: the debt owed to foreigners by the whole country – public and private sectors – minus the debt owed to them.
b) Government foreign debt payments as a percentage of government revenue for 155 countries
c) The total (gross) government foreign owed debt as a percentage of GDP for 159 countries
d) The total (gross) private sector foreign owed debt as a percentage of GDP for 110 countries
[2] View the Tables of figures (Word, 25k)
[3] Methodology for calculations
a) The net foreign owed debt as a percentage of GDP
Data on the external debt of developing countries (government and private sector), and the debt owed to their governments, is from the World Bank, World Development Indicators database. However, no figures exist for debts owed to the private sectors in developing countries.
For richer countries, figures come from their International Investment Position figures, released by the individual countries, usually their Central Banks.
b) Government foreign debt payments as a percentage of government revenue
Data for developing countries comes from the World Bank, World Development Indicators database.
For richer countries, data was calculated by Jubilee Debt Campaign using:
– the World Bank External Debt database
– the IMF World Economic Outlook database
– the OECD Central Government Debt database
– IMF Article IV Consultation and Programme documents with individual countries
c) The total (gross) government foreign owed debt as a percentage of GDP
Data for developing countries comes from the World Bank, World Development Indicators database.
Data for richer countries comes from the World Bank External Debt database
d) The total (gross) private sector foreign owed debt as a percentage of GDP
Data for developing countries comes from the World Bank, World Development Indicators database. However, for many developing countries there is no data for private sector debts, whilst for many with data it is probably an underestimate.
Data for richer countries comes from the World Bank External Debt database
[4] For the situation in the 1950s and 1960s, see Bush, O., Farrant, K. and Wright, M. (2011). Reform of the international monetary and financial system. Bank of England Financial Stability Paper No. 13. December 2011.
“The current system has coexisted, on average, with: slower, more volatile, global growth; more frequent economic downturns; higher inflation and inflation volatility, larger current account imbalances; and more frequent banking crises, currency crises and external defaults [than the Bretton Woods System which existed from 1948 to 1972].”