Global political unrest fueled by high prices and huge debts
Like a global tornado descending in unpredictable ways, deep economic worries are leaving a trail of political unrest and violence in countries both rich and poor.
In debt-ridden Kenya, protests against a proposed tax hike last week left dozens dead, demonstrators kidnapped and parliament partially destroyed.
At the same time in Bolivia, where residents lined up for gasoline because of the shortage, a general led a failed coup attempt, saying the president, a former economist, “must stop impoverishing our country,” just before an armored car rammed the presidential palace.
And in France, after months of roadblocks by farmers angry about low wages and rising costs, the far-right party gained support in the first round of snap parliamentary elections on Sunday, bringing its long-touted nationalist and anti-immigration policies to power.
The causes, contexts and circumstances underlying these disruptions vary widely from country to country. But a common thread is clear: rising inequality, reduced purchasing power and growing fear that the next generation will be worse off than this one.
As a result, citizens in many countries facing a bleak economic outlook have lost confidence in their governments’ ability to deal with the crisis and are pushing back.
The backlash is often directed at liberal democracy and democratic capitalism, with populist movements emerging on both the left and the right. “An economic malaise and a political malaise feed off each other,” said Nouriel Roubini, an economist at New York University.
In recent months, economic fears have led to protests around the world that have sometimes turned violent, including in high-income, stable-economy countries such as Poland and Belgium, as well as those struggling with out-of-control debt, such as ArgentinaPakistan, Tunisia, Angola And Sri Lanka.
On Friday, Sri Lankan President Ranil Wickremesinghe pointed to Kenya and warned: “If we do not bring economic stability to Sri Lanka, we could face similar unrest.”
Even in the United States, where the economy has proven resilient, economic worries are partly behind the potential return of Donald J. Trump, who has often deployed authoritarian rhetoric. In a recent poll, a majority of American voters said the economy was the most important issue in the election.
National elections in more than 60 countries this year have focused attention on the political process and invited citizens to voice their dissatisfaction.
Economic problems always have political consequences. Yet economists and analysts say a series of events set in motion by the Covid-19 pandemic has created an acute economic crisis in many parts of the planet, laying the groundwork for the civil unrest now brewing.
The pandemic shut down trade, wiped out revenues and created chaos in the supply chain, leading to shortages of everything from semiconductors to sneakers. Later, as life returned to normal, factories and retailers couldn’t meet the pent-up demand, sending prices up.
The Russian invasion of Ukraine has delivered a new shock, sending oil, gas, fertilizer and food prices into the stratosphere.
Central banks tried to contain inflation by raising interest rates, further damaging businesses and households.
Although inflation has slowed, the damage has been done. Prices remain high, and in some places the cost of bread, eggs, cooking oil and heating is two, three or even four times higher than it was a few years ago.
As usual, the poorest and most vulnerable countries were hit hardest. Governments already strangled by loans they could not pay saw the cost of that debt explode as interest rates rose. In Africa, half the population lives in countries that spend more on interest payments than on health or education.
That has left many countries desperate for solutions. Indermit Gill, chief economist at the World Bank, said countries unable to borrow because of a debt crisis essentially have two ways to pay their bills: print money or raise taxes. “One leads to inflation,” he said, “the other leads to turmoil.”
After Kenya paid off a $2 billion bond in June, it planned to raise taxes. Then it boiled over.
Thousands of protesters stormed parliament in Nairobi. At least 39 people were killed and 300 injured in clashes with police, according to human rights groups. The next day, President William Ruto withdrew the bill that included tax increases.
In Sri Lanka, mired in $37 billion in debt, “people are just devastated,” said Jayati Ghosh, an economist at the University of Massachusetts Amherst, after a recent visit to the capital, Colombo. Families are skipping meals, parents can’t afford school fees or medical coverage, and a million people have lost access to electricity in the past year because of unaffordable prices and tax increases, she said. Police have used tear gas and water cannons to spread protests.
In Pakistan, rising costs of flour and electricity sparked a wave of protests that began in Kashmir and spread to almost every major city this week. Merchants closed their shops on Monday, blocked roads and burned electricity bills.
“We can no longer bear the burden of these inflated electricity bills and the tax hike,” said Ahmad Chauhan, a pharmaceutical seller in Lahore. “Our businesses are suffering and we have no choice but to protest.”
Pakistan is deeply in debt to a range of international creditors and wants to increase tax revenues by 40 percent to try a rescue operation of up to 8 billion dollars from the International Monetary Fund, the lender of last resort, to prevent default.
No country has a larger IMF loan program than Argentina: $44 billion. Decades of economic mismanagement by successive Argentine leaders, including printing money to pay bills, has made inflation a constant struggle. Prices have nearly quadrupled this year compared to 2023. Argentines are now using U.S. dollars instead of Argentine pesos for big purchases like homes, and hiding stacks of $100 bills in coats or bras.
The economic turmoil led voters in November to elect Javier Milei, a self-described “anarcho-capitalist” who promised to slash government spending, as president. He has cut thousands of jobs, slashed wages and frozen infrastructure projects, imposing austerity measures that go even further than those pursued by the IMF in its efforts to help the country repair its finances. Poverty rates have soared in his first six months in office.
Many Argentines are fighting back. Nationwide strikes have closed businesses and canceled flights, and protests have clogged squares in Buenos Aires. Last month, at a demonstration Outside Argentina’s Congress, some protesters threw rocks or set cars on fire. Police responded with rubber bullets and tear gas. Several opposition members were injured in the clashes.
Martin Guzmán, a former economy minister for Argentina, said that when national leaders restructure the country’s crushing public debt, the deals fall hardest on those whose pensions are cut and whose taxes are raised. That’s why he pushed for a law in 2022 that would require Argentina’s elected Congress to approve all future deals with the IMF.
“There is a problem of representation and discontent,” Mr. Guzmán said. “That is a combination that leads to social unrest.”
Even the world’s richest countries are seething with frustration. European farmers, worried about their prospects, are angry that the cost of new environmental regulations designed to combat climate change is threatening their livelihoods.
In general, Europeans feel that their wages are not going as far as they used to. Inflation reached almost 11 percent in 2022, which has eroded incomes. About a third of people in the European Union believe that their standard of living will decline over the next five years, according to a recent survey.
Protests have broken out in Greece, PortugalBelgium and Germany this year. Outside Berlin in March, farmers spread manure on a motorway, causing several accidents. In France, they burned hay, dumped manure in Nice city hall and hung the carcass of a wild boar outside a labour inspectorate office in Agen.
As the leader of the French farmers’ union told The New York Times: “It’s the end of the world, rather than the end of the month.”
Economic concerns are fueling divisions between rural and urban dwellers, unskilled and college-educated workers, religious traditionalists and secularists. In France, Italy, Germany and Sweden, far-right politicians have seized on this discontent to promote nationalist, anti-immigrant agendas.
And growth is slowing globally, making it harder to find solutions.
“Terrible things are happening even in countries where there are no protests,” said Ms. Ghosh, an economist at the University of Massachusetts Amherst, “but protests are what wake everyone up.”
Zia ur-Rehman contributed reporting from Karachi, Pakistan.
