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Does systemic property cause the continuing accumulation of severe debt in developed economies?

Authors:

H. Senanayake ,

University of Colombo, LK
About H.
Department of Economics
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W. Wimalaratana,

University of Colombo, LK
About W.
Department of Economics
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K. David

Hong Kong University of Science and Technology, HK
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Abstract

Even developed economies experience continuing severe debt problems. Debt crises were an old phenomenon, but since the global financial crisis of 2008, economists began to pay renewed interest on the subject. Recent studies show that unsustainable financial conditions that exist may be the decisive macroeconomic challenge in the 21st century. Unsustainable financial conditions mean nothing other than the overwhelming debt and debt relations. In this paper, the authors question whether there could be an inherent fundamental systemic cause that leads to creating unsustainable debt bubbles when the basic economic activity of supply and demand takes place. Upon making a scientific inquiry on the said problem, by employing deductive methodology, this paper finds out that there exists an ‘unavoidable inherent systemic contradiction’ in the economic system that leads to creating unsustainable debt growth. Understanding this unique behaviour of any money-based exchange economic system (not limited to capitalism) is essential to device new macroeconomic policy tools bringing stability to the global economy.
How to Cite: Senanayake, H., Wimalaratana, W. and David, K., 2023. Does systemic property cause the continuing accumulation of severe debt in developed economies?. Sri Lanka Journal of Economic Research, 9(2), pp.21–42. DOI: http://doi.org/10.4038/sljer.v9i2.161
Published on 25 Mar 2023.
Peer Reviewed

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