Magazine article U.S. Catholic

Debt Be Not Proud: "Odious Debt" Left over from Rotten Regimes Cripples the Developing World

Magazine article U.S. Catholic

Debt Be Not Proud: "Odious Debt" Left over from Rotten Regimes Cripples the Developing World

Article excerpt

A NEIGHBORHOOD BULLY TAKES OVER YOUR HOME, TIES YOU up, locks you in your own basement, then runs off with your credit cards. He goes on a wild spending spree, buying luxury items for friends and family but also picks up a number of expensive goodies that will be employed to make your basement confinement even more unpleasant. During his fiscal binge, the folks extending him all that credit are well aware that the person using your card has locked you away in the basement and is regularly brutalizing you.

When your tormentor has finally been run off or captured by the police, could any reasonable person expect you to pay off debt acquired under such circumstances?

That is precisely what folks in Argentina, Indonesia, South Africa, and many other developing nations are asked to do. Their homegrown despots may be deposed, but their debt lingers on, and now the people who were targets of oppression as debt accumulated-debt, in fact, that may have been assumed to buy the military hardware specifically deployed in their oppression--are being asked to pay up before further development aid will be released to them.

These international obligations are known as "odious debts," and according to many economists, they're strangling the developing world. Perhaps one fifth of all debt owed by the world's poorest countries began as dubious loans to compliant dictators during the Cold War.

The principle of odious debt was codified in the early 20th century by a Russian political theorist, Alexander Nahum Sack. He argued that "dettes odieuses"--debts generated not in the interest of the state or its citizens but during the maintenance of a despotic regime--were"not an obligation for the nation; it is a regime's debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power." And Sack had little sympathy for bankers who extended credit to odious regimes or financed their corrupt deals, figuring they had to accept the risk and the loss associated with the quality of their business partners.

Perhaps the world's best known odious debt today is owed by the citizens of the new Iraq. They remain responsible for more than $200 billion run up by Saddam Hussein and his henchmen in vigorous campaigns of self-enrichment, wars against Iran, reparations to Kuwait, and in debt and contractual obligations to Russia and France. …

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