After predicting a global GDP contraction of 3% last month, the IMF will today announce a new economic forecast projecting
After predicting a global GDP contraction of 3% last month, the IMF will today announce a new economic forecast projecting an even deeper global crisis.
Today’s projection reflects “the worst economic fallout since the Great Depression,” with negative growth projected in both advanced and emerging economies. Although politicians are clamouring over the idea of rapid economic recovery, countries that fail to build fairer economies that address wage inequality and fairer taxation might never recover.
Underlying the economic uncertainty is a growing bubble of private and public debt, which will limit the ability of states to address future crises. Small- and medium-sized US firms, responsible for half of total US employment, have seen profits flatline over the past decade and have taken on record debts to stay open. The expansion of debt without real wage and economic growth for the vast majority of workers means that these businesses will be hard-pressed to stay open and pay wages in a crisis without government intervention. If these firms fail, the ripples may permanently disrupt the entire economy, and the debt bubble will preclude governments from using a full suite of tools to fix it.
The COVID-19 pandemic has exposed these market fragilities and now these firms are facing uncertainty without future government cash injections. As countries race to find a way out of economic disaster, one thing is certain: only those nations that work to fix structural inequalities in infrastructure and social investment, fair taxation and wage inequality have any chance of emerging unscathed.
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