Undemocratic Assumptions of Long(er)-Duration Sovereign Debt

A defining and underpinning characteristic of the international financial system in the 21st century is the apparent necessity of access to, usage of and infrastructure needed for sovereign debt (or comparable instruments), credit markets and capital markets more broadly. Typically, states across the globe rely on access to and usage of such markets to borrow or raise funds for a range of purposes (whether that be through issuance of sovereign debt, receiving loans, alternative debt instruments or otherwise) including but not limited to funding day-to-day operations, maintenance, projects and programmes, investments, paying or covering liabilities and obligations, contingency and much more. The comparable activities of the vast majority of individuals, households, firms and/or institutions tend to look relatively meagre in scale and complexity to those of present-day states. The International Monetary Fund’s 2024 ‘Global Debt Monitor’ stated that “Global debt (public plus private debt) amounted to almost USD 250 trillion in 2023. … The world’s public debt inched up by 2 percentage points to 94 percent of GDP in [2023, or USD 98 trillion…].” Within the global financial system, there’s a growing, parallel system of Islamic finance with the global Sukuk market size having reached USD 1.21 trillion in 2024.

The range of factors you [the reader(s)] or I (the author) may rely upon for accessing such funds and with which lenders and financiers evaluate our creditworthiness — whether that be current, past or expected income, pre-existing commitments, (net) asset positions, history of using credit and financial instruments responsibly, type of employment etc. — are not entirely dissimilar to the range of factors relied upon and evaluated for lending to states although are also distinctly different in important areas. From the perspective of numerous political philosophies and theories, states often assume (or otherwise impose) the right to extract resources (monetary, natural, physical, psychological and more) from the populations and territories they are deemed to be responsible for, usually within some framework or spectrum of ‘property rights’. This extraction, whether past, present or future, is therefore perceived as a credible, foundational source of creditworthiness, thereby assuring lenders these states will be able to afford their debt obligations.

Debt is a dominant feature of the global macroeconomy, upon which much else is currently underpinned or reliant. Even so, when examined, one might reasonably conjecture that significant swathes of this presuppose inherently undemocratic assumptions and the continuity of state-controlled, extraction-predicated public finance. When considering that duration of short-, medium- and long-term horizons can be variable in definition, it is worth noting that the length (or maturity) of sovereign debt issued, in terms of duration over which payments are due, can be as short as a few months or under a year, while running up to multiple years and even several decades. As such, in any given democratic state, while those elected may have a mandate to occupy their offices for up to, say, five or six years, with term limits on re-election or otherwise, the debt issued in that time (and periods preceding it) may be payable for up to 10, 20, 30 years or even more. Research published by S&P Global from 2024 states that “The estimated average share of short-term debt in the global stock of sovereign debt was 14.8% in 2023, significantly higher than the 9.5% recorded in 2019.” Maturity composition of sovereign bonds issued by OECD countries according to this ‘Global Debt Report 2025’ published by the OECD (Panel C of Figure 1.4, page 24) indicates sovereign debt with maturity of five years or more seems to account for roughly half of sovereign bonds issued by OECD countries.

Populations across the world continue to elect public servants to offices, governments and more, through a range of usually flawed and/or problematic voting systems, and there appears to be an implicit acceptance that this somehow (partially) legitimises the continued extraction of resources from those same populations by the various apparatuses of the state. Nevertheless, even when accepting this, it is arguably undemocratic to presuppose continuity of such arrangements and modes of social structures given that long(er)-dated sovereign debt is not, in and of itself, a necessary condition for functioning democracy.

One could contend that long(er)-dated debt is required to achieve optimal value in the context of the state’s overall portfolio of liabilities arising from sovereign debt obligations (i.e. optimising the state’s future expected payments with the right mix of debt); however, this is not the same as it being strictly necessary for a fully functional democracy except indirectly from the standpoint of demonstrating and making use of a specific, contextually-extrapolated interpretation of what it means to have sound public finances. That is, there is an assumption when issuing sovereign debt beyond any elected entity’s (often governments that are elected either directly or indirectly) duration for which it was elected (‘the elected term length’) that the population has implicitly consented to the sustained extraction of resources beyond that elected term length. It is not clear why a population would explicitly consent to this except for the fact that it may be assumed by the population to be an inevitable eventuality (which, many would contend, is not the same as meaningful consent). Put even more simply, it’s one thing for someone to lend to an individual for a 15-, 20-, 30- or 40-year mortgage on the basis of their expected lifetime income, net of all deductions such as the aforementioned resource-extraction by the state and other entities, but quite another thing for an entity’s entire creditworthiness to be predicated upon the perpetuation of societal structures and systems that presupposes such rights to impose resource-extraction upon the constituent elements of its population and territories. This is not necessarily problematic for authoritarian regimes, dictatorships, theocracies, autocracies and totalitarian states but it is a systemically flawed and potentially even unethical mode of operation for supposed democracies. 

Critically, the sheer volume of sovereign debt outstanding, the interest paid on it, the expected duration etc. has a considerable impact on the structure and activities of the global economy.  For example, if lending to states is seen as ‘less risky’ or ‘more reliable’ and the closest thing to a ‘risk free’ asset when compared to lending to firms or individuals then this will subsequently influence allocation of debt and funds across a macroeconomy; similarly, if some states are seen as ‘less risky’ or ‘more reliable’ to lend to than other states, this will affect capital flows and debt allocation across the international economy. This, in turn, determines what everyone can spend on, invest in, buy, sell, finance, global trade (im)balances, entire industrial structures and more. I would describe it not so much as a ripple effect — though that is definitely there — but, to extend the metaphor, something that determines the shape, depth, boundaries, compositions and very life of the oceans of economies, capital and credit markets. 

It’s difficult to definitively predict (be completely sure of) what may happen in the absence of such debt but I’ll attempt to conjecture and/or hypothesise. The greater demand for debt dated below the duration of the elected term, in the absence of long(er)-dated debt, may actually have an effect in the direction of reducing interest payable on such short(er)-duration debt and therefore work to suppress the heightened (perceived) need for resource extraction from the population. This could mean those with otherwise lendable funds look for other opportunities such as increased lending to households, firms, other institutions (all at potentially lower rates than currently done) using other financial instruments and more, thereby changing capital and debt allocation structures both within and across economies. Indeed, if there is an overall reduction in the amount of sovereign debt available to purchase and with many countries’ sovereign debt being perceived to be ‘less risky’ or the closest thing to a ‘risk free’ asset compared to alternatives, there may be increasing incentives for closer evaluation, risk assessment and more of other investable, lendable or otherwise fundable opportunities. The impact on the availability of credit and funds globally, including for demographics, geographies and peoples often underserved or underrepresented, may well be profound when considered against the status quo.

Importantly, long(er)-dated sovereign debt — more precisely, anything with a maturity beyond the elected term length of governments in those democratic states — presupposes the perpetuation of resource extraction by states and their apparatuses thereafter, including the socioeconomic structures necessary for this, thereby contributing to its purported legitimation through implicit, undemocratic assumptions.

The Center for a Stateless Society (www.c4ss.org) is a media center working to build awareness of the market anarchist alternative