Global economy's troubled spots

If you are looking for trouble spots, you will find many all over the world. The United States and China have problems caused by the mishandling on a large scale by policymakers. Most countries faced with demands from their restive populations have resorted to state spending to provide relief to the affected people. They have done this even though they were not able to raise domestic revenues for undertaking these expenditures. They have borrowed extensively from domestic markets or gone abroad and borrowed expensively from foreign capital markets. This has resulted in the buildup of debt with rising interest rates. Several governments across the globe are spending more money serving the accumulated debt than on providing relief and social services to the people facing stress.

This situation involves the entire populous sub-Saharan Africa which has total national debt larger than the region's gross national income. But Africa is not alone in facing this predicament. Pakistan is another country that now faces serious financial problems including the serving of national and provincial debts. As on several times in its troubled economic history, Pakistan has gone to the International Monetary Fund, the IMF, for securing financial help.

African economic problems have spilled over to the continent of Europe with the stressed Africans crowding into not quite seaworthy vessels to cross the narrow English Channel that lies between Northern Europe and Britain. Those who have made it have gone to the countries that seem to them to be more accommodating. France, Germany and Italy seem not to keep the migrants away. Once they were in the countries of the European Union they could travel freely. For those who preferred to live in Britain, they had to have immigration documents and cross the Channel.

The migrants from Africa belong mostly to the Islamic faith. The entry of Muslims led to the growth of Islamophobia in mainland Europe. This was most evident in Germany and France. In the recent state elections in Germany, a political party on the extreme right of the country's political spectrum won in the elections in two states that were once part of East Germany. The party narrowly lost in the third state.

Voters in France who went to the polls in an election unexpectedly called by President Emmanuel Macron also resulted in far-right surge. Official results published by the Interior Minister showed that the anti-immigration National Rally Party and its allies won about 33 per cent of the vote. The New Popular Front, a broad alliance of left-wing parties, got around 28 per cent of the vote. President Macron's centrist Renaissance party and its allies won about 20 per cent of the total vote; mainstream conservatives got only about 6.7 per cent. Once again the entry of Muslims into the French population played a role in placing anti-immigration groups in the French political system on the top rung of the political ladder.

The United States and China, respectively the world's largest and second largest economies, face different sets of problems. Americans worry about persistent inflation, an issue that has become important as Donald Trump and Kamala Harris campaign for the presidency. In China, the opposite is the concern. While the Americans wait for the new administration that would come into office after the November 5, 2024 elections for the president and induction on January 20, 2025, the Chinese have policymakers in place. Deflation is the worry in China. The Chinese economic downturn was largely the result of the collapse of the real estate sector.

On September 24, 2024, China's central bank announced a series of measures aimed at making it easier for families and private enterprises to invest in the housing market. Pan Gongsheng, the Governor of the People's Bank of China, said at a news conference that while home buyers would take advantage of the lower lending rates, his institution was ready to free banks to lend even more money if needed. In addition, the central bank told commercial banks that they would be allowed to repurchase their shares as well as allowing major shareholders to buy larger stakes in real estate companies. Investors who had been hoping for aggressive government action reacted positively to the central bank's moves. China's stock markets, among the worst in the world in 2024, rose more than 4 per cent following the series of actions by the central bank. A report by Capital Economics, a research firm, said the central bank's actions were a "step in the right direction, but it will probably be insufficient to drive a turnaround in growth unless followed up with greater fiscal support."

There are serious trouble spots in Pakistan's immediate neighbourhood. As I will discuss in a later article, the Taliban regime had hardened its stance in bringing extremist Islam to the centre of governance. While new laws have been promulgated that tighten even more the space available to women, this time around the male population has also been told to strictly observe the way they can deal with women who are not close relatives. Iran is now considering how to respond to the aggressive positions taken by the state of Israel against the groups that have the full support of Tehran. These include Hamas in the Gaza Strip and in the West Bank, Hezbollah in Lebanon, and the Houthis in Yemen. With Israel having used full military force against these groups that has resulted in the deaths of tens of thousands of people and displaced hundreds of thousands, it may lead to a response from Iran. How this growing conflict proceed and would it directly involve Iran are serious questions at this point.

Finally, there is the worsening situation in India, a subject on which I have touched upon in earlier articles. Under Prime Minister Narendra Modi - who has already governed India for ten years and the victory of his party in the elections held earlier this year would keep him in power for five more years - India has taken a decisive turn towards Hindu extremism. This has serious consequences for the country's 200 million Muslim population, the third largest in the world after Indonesia and Pakistan. While these moves have had little reaction in Pakistan, this is not the case in Bangladesh, India's other large Muslim neighbour. A students-led rebellion against prime minister Sheikh Hasina and the Awami League, the party she led, resulted in her resignation. She fled the country and took refuge in India. Her departure did not ease the student activity. According to a newspaper report, there were attacks on the homes of Hindus and their temples in at least four districts. Meenakshi Ganguly, the deputy director for Asia at Human Rights Watch, described the violence against Hindus as "extremely concerning".