Justin Alexander: Stating the Odious
When Saddam Hussein's regime executed someone, it required the victim's family to pay for the bullets used. An appalling practice - but one which, Iraqis in the Jubilee Iraq campaign say, bears all too much resemblance to present-day demands that Iraq's people pay debts Hussein racked up during the Iran-Iraq war, which devastated the country and claimed around a million lives.
Western, Soviet and Arab creditors effectively bankrolled the Iran-Iraq war, and then in 2003 demanded that the Iraqi people take responsibility for the $130 billion debt. Since then, the Iraqi debt has been partially relieved, but only on the condition that the government reduce subsidies in the economically devastated country and pass a controversial oil law which could enable foreign companies to control much of Iraq's oil wealth.
Iraq isn't an isolated case. When rich countries cancel poor countries' debts they usually count this as charity, offset it against their aid budgets, and even require the recipients to implement often-harmful IMF economic conditions. They never consider whether they were wrong to make the loans in the first place.Around the world there are hundreds of billions of dollars' worth of examples, such as the Democratic Republic of Congo, where loans poured into the corrupt dictator Mobutu's personal accounts, and the Philippines, where a ridiculous, unusable nuclear power station was built on a geological fault line.
These are examples of the illegitimate or "odious" debt, an idea in international law that is gaining ground. The doctrine of odious debts would force creditors to behave responsibly when they make loans, ensuring there is genuine economic benefit to the recipient countries, and not simply handing out cash and credit to further political objectives or support exporting companies within the lender nation.
Momentum is building on odious debt, with campaigns being run by Jubilee Debt Campaign in the UK, Jubilee USA, CADTM and Eurodad in Europe, and Jubilee South representing people in debtor countries. Recently, Norway wrote off $80 million owed by Ecuador and others for ships exported on credit in the 1970s, admitting that the ships were "a development policy failure" and that therefore the seller "shares part of the responsibility for the resulting debts."
Creditors have tried for many years to ridicule the concept of odious debt as impractical, and handle debt relief on their own unjust terms. Now the tide is changing and 2007 is a critical year to add your voice to the debate - so check out the groups above, write to your representatives and demand that the chains of odious debt be broken, once and for all.
Justin Alexander is the coordinator of Jubilee Iraq. For more about odious debt and other problems with the current international debt regime, read Christina Cobourn Herman's article in the August issue of Sojourners magazine.
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Comments
I'm confused.
According to Sojo, should wealthy nations lend to poor nations or not? Would lending help the poor nation to develop infrastructure and capital in order to pull it out of poverty? (William Easterly says no.)
If wealthy nations should lend to poor nations should they expect repayment? What if there is a regime change? Should nations have the privilege of acting like LLC's?
Should LLC's exist...?
If a nation, like Iraq, has debt, is it in its best interest to pay the debt off, or to default? (Nials Ferguson says they should hold the debt and make payments on it.) The ability of a nation to make good on its loan payments sends a signal about the stability of its money and thereby its economy. One good way to improve an economy over time is to improve the quality and reliability of its financial institutions. (Preferably private.)
The appeal to sentimentality beneath the surface of this post misses the possible unseen consequences of the actions it advocates.
Finally, when rich nations lend to poor nations with bad institutions, especially corrupt governments, they do little other than bankroll tyranny. Better to encourage a more free environment for business by attracting entrepreneurs away from such a nation and forcing it to repeal bad laws in order to be competitive.
Nathanael Snow
Posted by: jurisnaturalist | August 3, 2007 4:56 PM
I'm not confused.
This is a simple issue, really. Should the people of nations be responsible for the debts their governments accumulate?
The answer is equally simple, and plays into our own definition of a legitimate government. If that government was democratically elected, then yes, the nation should continue to assume those debts (unless, of course, the debts are forgiven, but I see this as an entirely separate issue).
Banks, corporations, and governments knew what they were getting with Saddam Hussein. They had to know the risks when they lent to him. The people of a nation like Iraq have no more responsibility for a the debts a dictator racks up than they do for that dictator's other reprehensible actions.
Posted by: Historyguy | August 3, 2007 6:04 PM
This notion of "odious" debt is liable to create more problems than it solves.
Responsibility for the welfare of a nation lies primarily on its own government. Holding banks responsible for the well-being of the citizens of nations that take out loans allows regimes to avoid accountability for their actions, and is likely leave banks (and their own depositors and investors) holding the bag for the actions of corrupt or inept governments.
There is a silver lining: The uncertainty created by "Odious Debt" will cause banks to either cease making loans to poor countries or charge higher interest rates. This will diminish the funds that are available to corrupt or economically ignorant regimes, forcing them to reform. But in the process, deserving governments in poor nations may also be cut off from funds, or banks may charge higher interest rates as well.
Is this really what the Christian Left wants? If it isn't I'd have to recommend that they satisfy themselves with the existing loan forgiveness programs and leave "odious debt" alone.
Wolverine
Posted by: Wolverine | August 3, 2007 6:31 PM
Great post from Justin Alexander.
Historyguy gets it.
There are many other stories of African and South American dictators racking up astronomical debt, embezzling the money and secreting this wealth in unnumbered off shore accounts, leaving their impoverished citizens with crushing debt.
Western banks, even the IMF have acted irresponsibly in loaning money to corrupt dictators and thus are complicit in the theft of wealth from impoverished nations.
I've seen some estimates of the amount of stolen wealth existing in these secret accounts.
If this wealth could ever be recovered it would go a long way towards removing the crushing burden of debt from impoverished third world nations.
In a just world, the International Monetary Fund would be active in recovering this stolen wealth.
But it's not likely the IMF under Paul Wolfowitz would seriously consider such an action.
Posted by: justintime | August 3, 2007 7:43 PM
The book "Confessions of an Economic Hit Man" is a true account from a repentant broker of crushing debt for impoverished nations.
Posted by: justintime | August 3, 2007 7:53 PM
I wonder if records from these secret off-shore accounts could be subpoenaed?
By a special international committee, representing the citizens of an impoverished nation burdened with crushing debt?
Would you like to have a look at Pat Robertson's accounts?
I know I would.
Posted by: justintime | August 3, 2007 9:54 PM
So - what about nations loaning money to other countries with the understanding that they will 'stop' doing something lets say - evil. What is the money that was loaned to a country like PR or Congo and it is sitting in someones bank account(s) somewhere in the world. (are we surprised) Then they stage a 'Regime Change' so that the person leading the country is out - but very rich I might add. They put in a new one and the whole thing starts over. Oh - and since they kicked out the former leader - they are going to default on loans secured under that regime.
Kinda sounds like the movie Start the War Without Me. They declair war on the United States on Monday, surrender on Tuesday and are swimming in aid by Thursday.
This one will put a kink in your colon. The former Soviet Block Nations that bankrolled the V. Nam War. even after communism fell - demanded that the debt V. Nam owed them still be paid. They arranged payment by having citizens from V. Nam sent to their nation to work off the debt for about 20 years and then they were allowed to return as soon as someone else took their place. Dare I say slavery - but you don't hear much about that - not even from Am. Int'l.
Have a great weekend - I know I will.
.
Posted by: Moderatelad | August 4, 2007 8:36 AM
Laddy: "Oh - and since they kicked out the former leader - they are going to default on loans secured under that regime."
When did this ever happen?
Or did you just make this up?
"They arranged payment by having citizens from V. Nam sent to their nation to work off the debt for about 20 years and then they were allowed to return as soon as someone else took their place. Dare I say slavery - but you don't hear much about that - not even from Am. Int'l."
No, I never heard this story before.
Did you make this one up too?
Is that why you don't hear much about it?
Posted by: justintime | August 4, 2007 10:15 AM
justintime,
I agree with you that historyguy has a pretty good idea. But I don't think you fully grasp what he said: his point was about the continuity of regimes, not the state of mind of lenders: "If that government was democratically elected, then yes, the nation should continue to assume those debts".
A sovereign government has the ability to repudiate debt, and banks have the right to refuse to give loans. What historyguy has suggested has the advantage of clarity: a nation with a democratic government should repay the debts incurred by a prior elected administration. It also focuses on the character of the debtor government using a fairly straightforward criteria, as opposed to a vague sense of the intent of the lender.
Historyguy's suggestion strikes me as fairly straightforward and easy to apply. Lenders know what the likely consequences are and can plan accordingly. Alexander's idea is vague and difficult to apply, and likely to choke off loans to poor countries.
Again, is that really what you want?
Wolverine
Posted by: Wolverine | August 4, 2007 11:48 AM
Since we're on the subject, Alexander's economics is all screwed up: banks have an incentive not to make irresponsible loans because they do not make a profit unless the loans are repayed. If the venture falls through, the chances that the bank will get its money back are much less than if the venture works out.
Banks do not profit by throwing money at poor governments. I do believe that debt relief is appropriate in a lot of cases, but it is folly to focus on western banks as if they were the main culprit behind the third world debt problem.
Wolverine
Posted by: Wolverine | August 4, 2007 12:01 PM
Posted by: justintime | August 4, 2007 10:15 AM
No, I never heard this story before.
Did you make this one up too?
Is that why you don't hear much about it?
No - I did not make that up. I am sorry that you do not have the connections or read enough to find this stuff out.
Yes - whole groups of people were sent to former Soviet Block Nations to pay off the debt. This was wrong, but least we think that is where the story stops. What men did for evil - God in this case used for good. When the Soviet nations fell, that opened up others to come in and assist these people and talk to them about Christ. Because of people from the US willing to go over and reach out to these groups. There are thousands of home churches all over Viet Nam.
So in the future, respectfully disagree with me - I have no problem with that. BUT - do not accuse me of making this stuff up - my name is not Dan Rather.
Be blessed -
.
Posted by: | August 5, 2007 12:37 AM
Posted by: | August 5, 2007 12:37 AM
This post is mine - bet you know that already.
Have a great day
Moderatelad -
.
Posted by: Moderatelad | August 5, 2007 1:41 PM
And the worst president in American history.
By far.
Posted by: | August 5, 2007 8:34 PM
Hi since this kind of relates with unjust costing for civilians I am going to post it here.
This is my comment on current state of America.
America is in the same position now that Great Britian was in early America. Great Britian was taxing all goods coming in and out of the colonies. That's why colonial Americans revolted. British soldiers were going to be sent to America and have to be hosted by the local people out of their own pocket and be watched by them.
Sound familiar? America is in the almost identical situation in the "new land" of Iraq where we hold large interests in oil and relations with other countries such as Israel.
America is not the once fledging place for immigrants and freedom fighters that it once was. It is much more aristocratic.
Thanks. God Bless.
Aaron.
Posted by: Aaron Cavanaugh | August 5, 2007 9:32 PM
"Sound familiar?"
Kinda, though only because I thought you were going to rant about tariffs. Your tale is only familiar insofar as it is old.
"http://www.glcq.com/bush_at_arpc1.htm"
Oh good, a source with lot's of different font sizes. Those are always reasonable.
"Rather's story was never challenged on substance."
Yes it was.
"It's generally agreed Bush did indeed, desert his unit."
No it isn't.
"In the future, Laddy, if you don't like being accused of 'making things up', I would suggest including a reference and/or a link to support the stories you tell us."
You did his work for him, and I wouldn't be so quick to snark about the "may contain errors" caveat. It is pretty standard for archived pieces of any sort.
At any rate, here is a link to an AP follow up on the same story. Of course, the Soviet sponsored paper had a different side of the tale, but I'll go ahead and take the word of the free press over Soviet propaganda, thank you.
Posted by: kevin s. | August 5, 2007 10:59 PM
Wolverine,
Read this book:
Confessions of an Economic Hit Man by John Perkins
Summary of the book:
'Confessions of an Economic Hit Man reveals a game that, according to John Perkins, is "as old as Empire" but has taken on new and terrifying dimensions in an era of globalization. And Perkins should know. For many years he worked for an international consulting firm where his main job was to convince LDCs (less developed countries) around the world to accept multibillion-dollar loans for infrastructure projects and to see to it that most of this money ended up at Halliburton, Bechtel, Brown and Root, and other United States engineering and construction companies. This book, which many people warned Perkins not to write, is a blistering attack on a little-known phenomenon that has had dire consequences on both the victimized countries and the U.S.'
Posted by: justintime | August 6, 2007 12:38 AM
Posted by: justintime | August 5, 2007 7:56 PM
Most of the work that these people are doing is way below the radar. They are working in mfg. plants - infrastructure projects etc. I just find it interesting given the topic of this artcile that even when the debt happened under a different gov't under the Soviet leadership. That these countries are still having people displaced to pay the debt.
When institutions in the west lend money to countries with questionable leadership - they still make sure that they are going to be paid back. They have that responsibility to their share holders so that they can pay dividends on the money invested with them.
Have a great day!
.
Posted by: Moderatelad | August 6, 2007 8:51 AM
Hey everyone
It's Monday and I spent time in prayer for all of you that are in the Military Service or have children, friends, relatives in the service.
God protect our military personnel.
.
Posted by: Moderatelad | August 6, 2007 8:55 AM
justintime:
Sorry, my reading list is already quite full: I just finished the latest Harry Potter, and started The City of God, the Koran, a biography of Harry Truman, and For Whom the Bell Tolls are all on deck.
Anyway, your description of Economic Hit Man seems to boil down to the stunning revelation that consultants can be a little scuzzy. Yawn.
Wolverine
Posted by: Wolverine | August 6, 2007 9:46 AM
"Kevin could have also read this piece at wikipedia:"
That's a pretty messy Wiki article. It doesn't prove what you say it proves. And, yeah, I get a bad vibe from websites that use all sorts of fonts and explanation points to make their case.
I only have time to follow up with so many of the links that are provided here, and you use them constantly, so I am going to pick and choose. Suffice to say, "read this" is not an argument.
Posted by: kevin s. | August 6, 2007 9:54 AM
Posted by: justintime | August 6, 2007 1:10 AM
You know - links are OK but if you can't sum them up in 2 to 3 sentences - not really interested in reading what you can't put into words. Wiki is not a reliable source as compaired to others that are out there.
Your assessment of Econ Hit Man is incorrect. My son just got done reading it for a class that he will have in school this fall and I have it on my list to read. I am still struggling through (yawn) God's Politics. (Wallis might want to consider a different editor on his next book. Maybe Satan's Politics: Why the right doesn't get it correct all the time and the left fails to deal with it.- just kidding!)
Have a great day -
.
Posted by: | August 6, 2007 2:41 PM
"Notice how easy it is for conservative ideologues to dismiss any information that might conflict with their closed ethical world view."
The beliefnet has a policy against the overuse of links for good reason. It's a discussion, not an information dump. And yes, the Wiki article is an almost unreadable mess. One paragraph ennumerates the accusations of one women before conceding that none of the accusations have been corroborated. That's why you can't just say "Wiki says so" and call it a day.
Posted by: kevin s. | August 6, 2007 2:56 PM
Posted by: justintime | August 6, 2007 3:37 PM
Finding the truth requires an effort.
But spreading false info requires very little effort. If in fact - half of the intems that you and others have accused Pres Bush were true. There are enough George S. out there with money that they would be bringing suit against Pres Bush in a heart beat. No one has.
Have a great day -
.
Posted by: Moderatelad | August 6, 2007 4:17 PM
Laddy: 'If in fact - half of the intems that you and others have accused Pres Bush were true. There are enough George S. out there with money that they would be bringing suit against Pres Bush in a heart beat. No one has.'
Laddy's bogus argument:
No one has brought suit against Bush.
Therefore Bush is innocent of all charges.
Posted by: justintime | August 6, 2007 4:27 PM
The wikipedia article on odious debt sheds more light on the concept. What makes a debt odious is NOT that it is contracted by a less than perfectly democratic government; rather, it is contracted by a despot who uses the funds for stuff obviously not beneficial to the state. The article then explains why in theory it would be unjust to make the people pay the debt after they had *overthrown* the old despot, when the despot contracted the debt that is in reality a debt of himself, rather than legitimately that of the state.
I agree that generally states *should* pay their debts. Not doing so simply discourages lending and development, as lenders don't want to risk their funds for nothing. The odious debt concept though would tend to make lenders think twice before lending to various despots, which is probably a good thing. Maybe if a debt is disputed under this proposed rule, a reasonable rule can be that debts are presumed valid, but a repudiating state can rebut the presumption with evidence. I must concede that as bad as Saddam was, I'm not sure his loans can be said to fall under this category, at least the funds that weren't used for his palaces, as the military stuff can at least be plausibly argued to be beneficial to Iraq in its war on Iran. But kleptocrats like Mobutu and others are another story.
Posted by: Ngchen | August 6, 2007 5:49 PM
Thanks for getting the discussion back on track.
And very well stated.
Could we all agree on this?
Posted by: justintime | August 6, 2007 6:12 PM
"No one has brought suit against Bush.
Therefore Bush is innocent of all charges."
Yep, that's about how it works.
Posted by: | August 7, 2007 2:25 AM
To me, this is the same thing as the subprime market mess we have right now in the US. If a borrower is not financially stable enough to repay a loan, and does not have a solid history of repayment, the loan should not be made. The loans the author is calling "odious" are simply loans made to borrowers who were not and are either not financially able to repay them or are just run-of-the-mill deadbeats. Pouring money into countries like Congo with its tribalism and undeveloped governmental structures headed up by kleptocrats is like pounding sand in a rathole. But, I suppose there are well-meaning, but naive and gullible people, who would even today lend money to Zimbabwe!
Posted by: Jsens | August 9, 2007 5:01 PM
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