By Pradeep Baisakh
We live in a critical moment in history. Humanity is confronted with massive economic and climate injustice because the system is rigged. This unjust economic system favours wealthy countries at the expense of poorer ones, billionaire oligarchs over the rest of us and fossil fuels over clean energy. The super-rich and large corporations manipulate politicians, control the media and evade taxes — thus consolidating political power and trapping billions in poverty.Rapidly rising income inequality, unsustainable debt burdens on countries in the Global South and global warming have posed an existential threat to the planet and humanity. Global leaders, mainly from wealthy nations, are failing to take bold, transformative steps to reverse this downward spiral, as it would challenge entrenched corporate interests. After all, politicians rely heavily on corporate backing to contest elections. A case in point: The bonhomie between Donald Trump and Elon Musk, though it’s fast evaporating! One can find such alliances in most countries; some overt, others behind the scenes. This nexus is not new, but at this juncture, corporate control over politics is nearly absolute, pushing public interest to the back burner. Democracy has taken a severe beating..Debt’s climate link: Why sovereign debt is rising in developing world?.Rising inequality .Oxfam International has been publishing reports on inequality for years. According to its data, from 2020 to 2023, the wealth of the world’s five richest men doubled from $405 billion to $869 billion — while the income of five billion people declined. In just one year, from 2022–23 to 2023–24, the wealth of billionaires worldwide tripled! These are post-Covid developments. While the pandemic dealt a severe blow to people’s incomes and livelihoods, it was expected that governments would attempt to restore them. On the contrary, the system operated in such a way that the rich got richer while the poor were left to suffer. As things stand today, 838 million people live in extreme poverty, that is, 9.9 per cent of the global population, according to the World Bank.Big corporations lobby governments for favourable policies, use mass media to shape public opinion in their favour, routinely flout tax rules with impunity, hide wealth in tax havens and avoid paying inheritance tax, if such a tax exists; if it doesn’t, no questions asked! This is the recipe for becoming ultra-rich. “Most billionaire wealth is taken, not earned — 60 per cent comes from either inheritance, cronyism and corruption or monopoly power,” stated Oxfam’s Takers Not Makers report (2025).India is now the world’s fourth-largest economy. Despite being a fast-growing economy, the widening gap between rich and poor remains a pressing concern.“Inequality is the outcome of a flawed economic design that sucks income from the bottom to the top. In the name of ‘trickle down’, it has helped the rich amass wealth and driven the poor against the wall. It’s time to rethink economics and strengthen the bottom,” opined Devinder Sharma, food policy analyst based in India..African countries are bad at issuing bonds, so debt costs more than it should: what needs to change
.Debt crisis.Fifty-four low-income countries (LIC) and lower-middle-income countries (LMIC) were in urgent need of debt relief in 2022, according to the United Nations. According to a report by nonprofit Action Aid, 74 LICs and LMICs owe a collective external debt of $1.45 trillion to private creditors like BlackRock, Goldman Sachs and HSBC — mainly headquartered in New York, London, or other wealthy nations, as well as to the International Monetary Fund (IMF). In 2023, these countries paid $138 billion in debt servicing, often by slashing spending on health, education and public services, leading to a severely debilitating impact on the people, the report found. Women, who perform most unpaid care work, are hit particularly hard when public services fail.The debt distress stems largely from exorbitantly high interest rates. For countries in the Global South, international borrowing costs are far higher than for the United States or Europe. Average interest rates are 5.3 per cent per annum for Asian countries, 6.8 per cent for Latin America and the Caribbean and 9.8 per cent for African nations, as per the Action Aid report. In contrast, Germany pays 0.8 per cent and the US 2.5 per cent. These rates are dictated by credit rating agencies like S&P Global, Moody’s and Fitch that are based in the US and United Kingdom.The strictures are rather on the southern countries imposed by the IMF and the World Bank, which dictate the economy of the indebted nations to adopt harsh austerity measure. The IMF and World Bank aggressively enforce loan repayments even in some of the world’s most climate-vulnerable countries such as Eritrea, Ethiopia, Malawi, Yemen, Burundi, Angola, the Democratic Republic of Congo, Zimbabwe and Pakistan, despite these nations having contributed little to the climate crisis., according to the Action Aid report.The World Bank and IMF, known as the Bretton Woods institutions, were created in July 1944, 81 years ago during the colonial era. Their governance is dominated by the rich countries, mainly the G7 countries. The leaders of the World Bank and the IMF are decided by the US and Europe, respectively. Its not surprising that these instructions are known to have worked for the interest of the rich countries and their creditors than for southern nations. The whole debt architecture is a form of neo-colonialism..Economic slowdown to push developing & least-developed countries deeper into debt crisis: UN.Rising global temperature .Scientists warn that the planet could breach the 1.5°C warming threshold — set in the 2015 Paris Agreement — in as little as three years if current carbon emissions continue unabated. The impacts of climate change are already stark: Rising sea levels, droughts, floods, crop failures, resource depletion and the emergence of unknown diseases. These effects disproportionately impact marginalised communities and low-income countries, which lack the resources to cope.The commitment of rich countries to climate finance is far from encouraging. They must acknowledge their historic responsibility for the climate crisis and commit at least $1 trillion towards climate finance, as demanded by developing nations. Instead, at 29th Conference of Parties to the United Nations Framework Convention on Climate Change in 2024 in Baku, Azerbaijan, they agreed to only $300 billion per year, far short of what is needed..Debt’s climate link: Global finance system keeping developing countries from prioritising growth, resilience.FfD4 conference.The fourth International Conference on Financing for Development (FfD4), taking place in Seville, Spain from June 30 to July 3 this year, presents an opportunity to address the debt crisis, improve international development cooperation and overhaul the global financial architecture. However, the US has already withdrawn from the FfD4 process and the European Union and UK have blocked major demands raised by borrowing countries such as the Small Island Developing States (SIDS) and members of the Africa Group in the outcome document agreed upon by the UN member nations. These demands included the proposal for an intergovernmental process to establish a UN Framework Convention on Sovereign Debt. More than 1,200 civil society organisations from 114 countries, including ActionAid International, Action for Sustainable Development, Oxfam International, Amnesty International, Caritas Internationalis, the Global Call to Action Against Poverty and Greenpeace, have signed a statement calling on the world to “Stand with the Billions, not the Billionaires.” They denounce the concentration of wealth and power in the hands of a few ultra-rich individuals, corporations and governments and demand to cancel the debt and change the system.It is high time for the governments of wealthy nations to stop working for their corporate friends and take urgent measures to save the planet and humanity instead..Baisakh is a senior journalist..Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth..Read all the news related to economy in Hindi