Watch out for a debt crisis that's emerging from the Global South

Multilateral institutions like the World Bank and others should act decisively before todays situation spirals out of control

- KAUSHIK BASU

The International Economic Association (IEA) recently concluded its 20th World Congress in Medellín, Colombia. This triennial event brings together scholars from all over the world to share and discuss the latest developments in economic thinking. This year's edition underscored the urgency of re-evaluating some of the field's core assumptions. The rapidly escalating debt crisis in the Global South, while not a direct focus of the conference, cast a shadow over it.

The IEA was founded in 1950, with Joseph Schumpeter chosen to be its first president. Since then, the organization has been led by some of the world's most renowned economists, including Paul Samuelson, János Kornai, Kenneth J. Arrow, Amartya Sen and Joseph E. Stiglitz. With the world economy increasingly strained by supply-chain disruptions related to the war in Ukraine, the lingering consequences of the covid pandemic, and the cloud of uncertainty hanging over the fighting between Israel and Hamas, this year's Congress has thrown these daunting challenges into sharp relief.

As the global economy undergoes a fundamental transformation, some of the deeply held assumptions economists have relied on to model it must evolve, too. Unsurprisingly, many of the presentations during this year's Congress focused on the impact of digital technologies and social media on labour, wages and inequality. Others focused on the changing nature of globalization, the shift from a unipolar to a multipolar economic order, and the erosion of democratic institutions amid the rise of populist nationalism. Danny Quah's lecture underscored the speed with which the global economy is changing.