I’ve read two different versions of the same statistic in the last week. It seems that these days everyone’s looking for a yard stick against which to measure the state of the spluttering economy. One of the measurements in fashion right now is this; the ratio of household debt to GDP.
If, like me, you virtually flunked your economics and have a little difficulty telling your macro from your micro, some explanation is in order. Household debt to GDP (Gross Domestic Product – a fancy title for the effective income of any given country) simply shows how much on average households are borrowing against what the whole country has coming in.
Last summer, according to some reports, the UK broke through an invisible – but significant – barrier; we started borrowing more than we were earning.
A few months later and the whole thing has gone crazy. We’re now in a situation where the world’s ‘wealthiest’ countries are caught up in the chains of debt, as the stats reveal:
Household debt as a percentage of GDP
(2005)
France 56.2%
United States 98%
United Kingdom 104.2%
Netherlands 116.5%
Another, more up to date, version put the UK in overall lead, with about household debt now at over 170% of GDP.
Yikes.
Here are a few more shockers for you…
The freshly-bailed out Royal Bank of Scotland’s liabilities alone exceed the total national income of the U.K. So far this year UK debt has grown at a rate of £1million every 8.5 minutes. The current rate of 104 house repossessions every day is sure to rise as is the fact that 1 person every 5 minutes is declared bankrupt.
There are a couple of questions that line up behind this; what does all this debt say about us? And what’s all this credit crunching going to do to our new-found passion to change the world and eliminate poverty?
We’ve all heard greed blamed as the number one fuel for the current financial crisis. But I doubt it’s really as simple as that. Why? Because – as I found out when I opened the results envelope and saw a shiny ‘D’ next to A level Economics – nothing ever really is that simple. Yet what we can be sure of is the fact that the current threat of Depression 2.0 tells us this; we really ought to be a little more sceptical of the hype that we pump out here in the wealthy west. All our strutting and strolling and summiteering (Ok, I just made that up, but you get the drift) is worth far les than we assume. We think of ourselves as the global leaders and yet we can’t even manage our own interests properly, let alone deal with the fact that 2 out of 3 people on this planet will be forced to try and get through the next 24 hours on less than £1.
Right now, if you ask me, we look a lot less like global leaders and a lot more like the prodigals taking our first look at the pig-sty which pretty soon could become our home.
But what about the other question; is this the end of our brief attempts to be the first generation in a while that makes real efforts to correct the problem of global injustice? Are we going to be too busy licking our own wounds over the coming years to worry about anyone else’s? Has charity got to go back to basics and start over again at home?
Opinions, please.
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