Anybody who has not returned from another planet would have noticed the scenes of anarchy and chaos streaming from our neighbour, Srilanka, which has not only declared bankruptcy but is also close to complete collapse. If this were not enough, there is every chance that several other countries, especially in the developing world, or, what are known as Emerging Markets, are likely to be victims of a similar crisis that is already engulfing them and would most likely lead to a “cascade of defaults” across the board. Indeed, the world is now just beginning to “feel” the aftermath of the “twin shocks” caused by the Pandemic and Putin! More so, those in the developing world where “safety nets” in the form of social security and unemployment assistance and other welfare payouts are absent, thereby making Billions of people worldwide “vulnerable” to economic pain.
While the developing world is witnessing the “shock doctrine” of the Pandemic and Putin-engineered economic crises, a recession is brewing in the developed world as well, meaning that the West (the US and its allies) are preoccupied with their own economic problems, and thereby not being of much help to those nations in the developing world, who are literally crying out for assistance. As usual, it would be left to the infamous bankers and the multilateral institutions such as the IMF (International Monetary Fund), The World Bank, and the alphabet UN (United Nations) agencies to tackle the crisis in the poorer parts of the world and bail them out, though at considerable cost to the latter. Indeed, what we are now seeing is what India went through in 1991 when it came close to bankruptcy and had to pledge its gold to pay for imports. In a country like India, where social norms emphasised using gold as a last resort, that move did rankle many Indians, who have not forgotten the dark days of 1991.
Continuing the above line of argument, I have seen many posts on social media “warning” of a Srilanka type Debt Crisis in India as well, what with nearly 50% of its humungous external debt maturing in the next nine months and with record outflows of forex mainly due to Foreign institutions pulling out money from the markets. While I do feel that a Srilanka type of crisis is unlikely in India, we must, at the same time, not let our guards down and focus on macroeconomic stability. Already the Indian Economy has been “battered” by the Pandemic. Where the loss of lives and livelihoods, coupled with supply chain shocks due to Chinese lockdowns, led to a “double whammy” of Demand Destruction and Supply Bottlenecks and in turn, led to a Stagflationary scenario of Low Growth and High Inflation. Indeed, it is no secret that the Indian Economy would take some more time to fully recover just from the Pandemic, and if its dear friend, Putin, decides to “turn the screws” on the West, it is more than likely that the latter would tip into recession, taking India down the same “rabbit hole” that other developing countries find themselves in.
If we were to go by some analyses about the “historic” crises underway, the present moment is a classic case of the Endgame of Neoliberalism, where a Global Reset is more than likely leading the world back to the days of asset-backed currencies and not “funny money” where the ability to create money needs assets to back them up and not out of “thin air”. Of course, this might be wishful thinking as such analyses do not appear in the mainstream media. On the other hand, it is very much the case that there is some sort of “correction” that is due and is being led by the Non-Western world. In other words, a return to “solid” money is the Endgame here, and this would lead to a decline in Western Hegemony. The fact that most non-Western world is “tired” of the former lends credence to this view. Indeed, the “Putin shock” has to be seen in this context, as is the slow-motion collapse of globalization and India’s “neutral” stand in its foreign policy ever since the Ukraine war started.
Having said that, a Global Reset might not be that easy, considering the “tightly integrated” financial markets worldwide and the very deep interlinked trading and economic systems. More so, when nations worldwide depend on trade for sustenance as well as count the West as their primary trading partner. While China is indeed replacing the US in many parts of the world, especially Africa, the Srilankan crisis has laid bare the “limitations” of Chinese power as it was not only responsible for leading the country into a debt trap but also stoked the current unrest, with its insidious support of the ruling regime. This makes the Chinese unreliable to many, and while the West, too has played the game this way earlier, what the Srilankan crisis proves is that the Old Order is not changing any time soon. This means that we have to live with the present global financial and economic system for the conceivable future, and the Endgame is more like there is no Endgame, meaning that the global disorder is bound to increase and the Zaniness we see all around us, is likely to become more frequent and entrenched.