Should We Worry About Growing World Debt?

The modern world operates on debt.

Debt is so much a part of our modern lives that it’s hard to imagine today’s civilization without it. And there’s no doubt that capitalism, the predominant economic model of the Western world for hundreds of years, could not exist without debt.

How much debt is sustainable? Reuters reported that world debt reached $313 trillion in 2023. This record-high figure includes government, business and household debt combined—and it’s growing.

Staggering growth of world debt

The Brookings Institution asserts that “a new wave of debt accumulation” worldwide began in 2010. This coincided with ongoing efforts to restore balance to the economies devastated by the Great Recession (2007-2009).

Adding to that, the pandemic of 2020 resulted in world debt surging even more. That year, according to the Brookings Institution, “total global debt rose by 30 percentage points of GDP, to 263 percent of GDP—the largest single-year increase since at least 1970.”

This figure is an important one to understand. The combined debt of governments, businesses and individuals is between two and three times what the entire world produces in a year.

Unfortunately, economists cannot agree even on what level of debt is “responsible” and what level isn’t. The Carnegie Endowment for International Peace points out that “few economists have a clear understanding of why too much debt is a bad thing, let alone how much debt is too much.”

Clearly, our civilization has grown comfortable with huge amounts of debt.

The consequences of world debt

High levels of public debt already affect an enormous number of people. As determined by the United Nations Conference on Trade and Development (UNCTAD), right now “3.3 billion people live in countries that spend more on interest payments than on education or health.”

In other words, governments for approximately 40 percent of the world’s population have trapped themselves in endless cycles of debt service. These nations are so burdened by debt that they cannot serve their citizens well.

That is bad enough by itself, but history is replete with far more devastating consequences. Economists Nouriel Roubini and Stephen Mihm explain that unsustainable debt is often the root of economic crises that “have toppled governments and bankrupted nations.” These crises “have driven countries to wage retaliatory trade battles. Crises have even paved the way for wars, much as the Great Depression helped set the stage for World War II” (Crisis Economics: A Crash Course in the Future of Finance, 2010, p. 15).

National governments grappling with their own economic problems often tend to work against the interests of other nations that are struggling with their own problems.

An Investopedia article explains why and how this occurred: “The Great Depression motivated individual nations to adopt more beggar-thy-neighbor trade policies to protect domestic industries from foreign competition.” It was every country for itself.

Debt-based crises lead nations to pursue selfish policies, just as personal debt crises can lead individuals to engage in foolish behavior.

How did we get here?

Although global debt has remained on a generally upward trajectory for decades, the greatest surge has come since the Great Recession. Observers aren’t in agreement about the dynamics of the financial crisis that resulted in that recession.

In Crisis Economics, Roubini and Mihm point out that some economists maintain the crisis was a “black swan event,” meaning that it was “highly improbable and impossible to predict.” Roubini and Mihm go on to say, however, that “financial crises generally follow the same script over and over again” (p. 16).

“Most crises begin with a bubble,” they explain, “in which the price of a particular asset rises far above its underlying fundamental value. This kind of bubble often goes hand in hand with an excessive accumulation of debt, as investors borrow money to buy into the boom” (p. 17).

That has been clearly true of recent crises. The prices of homes in the United States, as well as in other countries, rose astronomically in the years leading up to the crash in prices. On top of that, financial institutions did a brisk business in originating and then selling loans, another asset in a bubble.

Moral hazard

When the house of cards finally collapsed, the world watched in disbelief. Yet what had occurred was the predictable result of excessive greed. It was also a by-product of what economists call “moral hazard.”

This term, according to Roubini and Mihm, refers to a person’s “willingness to take risks—particularly excessive risks—that he would normally avoid, simply because he knows someone else will shoulder whatever negative consequences follow” (p. 68).

With easy access to financing and a belief that home prices could only rise, many people who weren’t really qualified to buy jumped into the market. Real estate agents, whose commissions are based on sales rather than the creditworthiness of their clients, sold houses their clients could not afford.

Even the mortgage brokers who originated the loans did not look too closely at borrowers. Their pay is based on origination fees taken up front. Whether the borrower ultimately defaulted would not affect their pay, and that fact may have affected their decisions.

Sadly, the government bailouts of “too big to fail” institutions only compounded the problem of moral hazard for the future. Knowing that big government is all too ready to step in and save them, these corporations have little incentive to change their behavior.

What does the Bible say about debt?

Written over the course of centuries by people living in thoroughly different cultures, the Bible does not directly discuss what we call world debt. However, there are important principles we can glean from Scripture.

In both the blessings and the curses passages, national indebtedness implies withheld blessings as a result of disobedience. The first concept we should notice is that the Bible portrays debt as a kind of servitude: “The rich rules over the poor, and the borrower is servant to the lender” (Proverbs 22:7). This verse, though directed at the individual, can be applied on a national level.

The book of Deuteronomy does just that. In a passage listing blessings Israel would receive for obedience, God tells His chosen people that He would so bless the work of their hands that the nation would “lend to many nations, but . . . not borrow” (Deuteronomy 28:12).

In that same chapter, God also lists the curses that would come upon Israel for disobedience. Included among these curses is the presence of foreigners who would “rise higher and higher” (verse 43). Those aliens would lend to the people of Israel.

In both the blessings and the curses passages, national indebtedness implies withheld blessings as a result of disobedience.

Lending from a biblical perspective

Quite a few biblical passages encourage lending to poorer members of the community, but without charging interest: “If one of your brethren becomes poor, and falls into poverty among you, then you shall help him, like a stranger or a sojourner, that he may live with you. Take no usury or interest from him; but fear your God, that your brother may live with you. You shall not lend him your money for usury, nor lend him your food at a profit” (Leviticus 25:35-37).

God prohibited usury, which is charging interest to make a profit. In fact, God even prohibited His people from other heartless practices, such as taking a “neighbor’s garment as a pledge” and keeping it overnight (Exodus 22:26).

This “pledge,” as it is called, was a type of collateral. Because Israelites often used their outer garments as blankets, keeping it overnight would have been cruel. The point is, those who were well-off were to consider the needs of their neighbors.

The concern for one’s neighbor was to be so strong that the more affluent members of the community would lend without expecting to be paid back. The book of Proverbs puts this willingness into perspective: “He who has pity on the poor lends to the LORD, and He will pay back what he has given” (Proverbs 19:17).

Jesus took this principle a step further, saying, “Give to him who asks you, and from him who wants to borrow from you do not turn away” (Matthew 5:42).

This statement comes on the heels of instructions dealing with the demands of the occupying Roman army (verse 41) and just before Christ’s command for believers to “love your enemies” (verse 44). In the context, the instruction to give in verse 42 may well apply to one’s enemies.

Of course, we should avoid unwise lending or giving that would negatively impact our families or the people we are lending or giving to.

A Christian perspective of world debt

The greed and moral hazard issues that brought our civilization ballooning world debt are at odds with the biblical attitude toward indebtedness. Scripture counsels us to avoid borrowing when possible; in contrast, many people today see debt as a get-rich-quick tool.

There seems to be no shame among many of those who brought our financial system to the brink of collapse a few years ago. Regardless of whatever structural changes governments of the world made after the Great Recession, the underlying problem of character has not been addressed.

The world’s mushrooming debt is a symptom of ongoing greed and decadence. Our civilization, living in opposition to God, is crumbling. This should not be a surprise to Christians, who are well aware that the Bible foretells of calamitous times just before the return of Christ.

We cannot know the precise day and hour when the end will come, but we can take note of the signs all around us. The staggering growth of world debt is just one indicator, but it is there to be noticed by anyone who will pay attention.

Should Christians be worried? No. Prepared? Yes!

We do not have the power to transform a broken system, but we can take control of our own finances. We can prepare by living according to biblical standards.

And we need not worry.

Jesus reassured believers, telling them four times in the Sermon on the Mount not to worry about material things (Matthew 6:25, 28, 31, 34). Instead, He told them to “seek first the kingdom of God and His righteousness” (verse 33). That’s good advice for all of us as we watch world events.

Study further about the world economy in Bible prophecy in our articles “What Is the Future of the World Economy?” and “Inflation, Economic Instability and Bible Prophecy.” Learn more about biblical personal finances in our online section “Foundational Principles for Managing Family Finances.”