In
international law
International law (also known as public international law and the law of nations) is the set of rules, norms, and standards generally recognized as binding between states. It establishes normative guidelines and a common conceptual framework for ...
, odious debt, also known as illegitimate debt, is a legal theory that says that
the national debt incurred by a
despotic
Despotism ( el, Δεσποτισμός, ''despotismós'') is a form of government in which a single entity rules with absolute power. Normally, that entity is an individual, the despot; but (as in an autocracy) societies which limit respect an ...
regime
In politics, a regime (also "régime") is the form of government or the set of rules, cultural or social norms, etc. that regulate the operation of a government or institution and its interactions with society. According to Yale professor Juan Jo ...
should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under
coercion
Coercion () is compelling a party to act in an involuntary manner by the use of threats, including threats to use force against a party. It involves a set of forceful actions which violate the free will of an individual in order to induce a desi ...
.
Despite antecedents dating back to the 1800s and support from diverse fields such as
economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
,
philosophy
Philosophy (from , ) is the systematized study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language. Such questions are often posed as problems to be studied or resolved. Some ...
,
political science
Political science is the scientific study of politics. It is a social science dealing with systems of governance and power, and the analysis of political activities, political thought, political behavior, and associated constitutions and la ...
,
history
History (derived ) is the systematic study and the documentation of the human activity. The time period of event before the History of writing#Inventions of writing, invention of writing systems is considered prehistory. "History" is an umbr ...
, and
law
Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vario ...
, odious debt is not part of
international law
International law (also known as public international law and the law of nations) is the set of rules, norms, and standards generally recognized as binding between states. It establishes normative guidelines and a common conceptual framework for ...
; in fact, "
national or international tribunal has ever cited Odious Debt as grounds for invalidating a sovereign obligation."
[Mitu Gulati, Duke University School of Law; Ugo Panizza, The Graduate Institute Geneva and CEPR. The Hausmann-Gorky Effect. Working Paper No. HEIDWP02-2018. Graduate Institute of International and Development Studies, International Economics Department.] Instead, international law holds governments strictly liable for all debt incurred by their predecessors.
History
The concept of odious debt was formalized in a 1927 treatise by
Alexander Nahum Sack, a
Russia
Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
n émigré legal theorist. It was based on two 19th-century precedents—
Mexico
Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
's repudiation of debts incurred by
Emperor Maximilian, and the denial by the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
of
Cuba
Cuba ( , ), officially the Republic of Cuba ( es, República de Cuba, links=no ), is an island country comprising the island of Cuba, as well as Isla de la Juventud and several minor archipelagos. Cuba is located where the northern Caribbea ...
n liability for debts incurred by the
Spanish colonial regime.
Sack wrote:
When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfil one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State. Odious debts, contracted and utilised for purposes which, to the lenders' knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.
Sack theorized that such debts are not enforceable when (1) the lender should have known that (2) the debt was incurred without the consent and (3) without benefit to the populace. There are many examples of similar debt repudiation.
Chief Justice
William Howard Taft
William Howard Taft (September 15, 1857March 8, 1930) was the 27th president of the United States (1909–1913) and the tenth chief justice of the United States (1921–1930), the only person to have held both offices. Taft was elected pr ...
, acting as an
arbiter, used the doctrine to find that
Costa Rica
Costa Rica (, ; ; literally "Rich Coast"), officially the Republic of Costa Rica ( es, República de Costa Rica), is a country in the Central American region of North America, bordered by Nicaragua to the north, the Caribbean Sea to the no ...
did not have to pay the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
debts incurred by the
Federico Tinoco Granados
General José Federico Alberto de Jesús Tinoco Granados (21 November 1868 – 7 September 1931) was a politician, soldier, and the Dictator of Costa Rica from 1917 to 1919.
Biography
Tinoco was born in 1868. On 5 June 1898 in San José, ...
regime.
Reception
Patricia Adams, executive director of
Probe International
Energy Probe is a non-governmental social, economic, and environmental policy organization based in Toronto, Canada known for denying man-made climate change.
It was founded in 1970 as a sister project of Pollution Probe. In 1980, the two organi ...
, a
Canadian
Canadians (french: Canadiens) are people identified with the country of Canada. This connection may be residential, legal, historical or cultural. For most Canadians, many (or all) of these connections exist and are collectively the source of ...
environmental and public policy advocacy organization and author of ''Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy'', stated: "by giving creditors an incentive to lend only for purposes that are transparent and of public benefit, future tyrants will lose their ability to finance their armies, and thus the
war on terror
The war on terror, officially the Global War on Terrorism (GWOT), is an ongoing international Counterterrorism, counterterrorism military campaign initiated by the United States following the September 11 attacks. The main targets of the campa ...
and the cause of world peace will be better served."
In a
Cato Institute
The Cato Institute is an American libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Ed Crane, Murray Rothbard, and Charles Koch, chairman of the board and chief executive officer of Koch Industries.Koch Indust ...
policy analysis, Adams suggested that debts incurred by
Iraq
Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to Iraq–Turkey border, the north, Iran to Iran–Iraq ...
during
Saddam Hussein
Saddam Hussein ( ; ar, صدام حسين, Ṣaddām Ḥusayn; 28 April 1937 – 30 December 2006) was an Iraqi politician who served as the fifth president of Iraq from 16 July 1979 until 9 April 2003. A leading member of the revolution ...
's reign were odious because the money was spent on weapons, instruments of repression, and palaces.
A 2002 article by economists
Seema Jayachandran
Seema Jayachandran is an economist who currently works as Professor of Economics at Princeton University. Her research interests include development economics, health economics, and labor economics.
Biography
Seema Jayachandran earned a BS ...
and
Michael Kremer
Michael Robert Kremer (born November 12, 1964) is an American development economist who is University Professor in Economics And Public Policy at the University of Chicago. He is the founding director of the Development Innovation Lab at the B ...
renewed interest in this topic.
They propose that the idea can be used to create a new type of economic sanction to block further borrowing by
dictators
A dictator is a political leader who possesses absolute power. A dictatorship is a state ruled by one dictator or by a small clique. The word originated as the title of a Roman dictator elected by the Roman Senate to rule the republic in times ...
.
Jayachandran proposed new recommendations in November 2010 at the 10th anniversary of the Jubilee movement at the
Center for Global Development
The Center for Global Development (CGD) is a nonprofit think tank based in Washington, D.C., and London that focuses on international development.
History
It was founded in November 2001 by former senior U.S. official Edward W. Scott, directo ...
in
Washington, D.C.
)
, image_skyline =
, image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle, Jefferson Memorial, White House, Adams Morgan, ...
Subsequently, the loan sanctions model has been adapted by the Centre for Global Developments and has been the base for a number of further suggestions. Some think the doctrine could aid
international development
International development or global development is a broad concept denoting the idea that societies and countries have differing levels of economic or human development on an international scale. It is the basis for international classifications ...
. Others think that the doctrine should allow even more kinds of debt to be canceled.
Application
In December 2008,
Ecuador
Ecuador ( ; ; Quechua: ''Ikwayur''; Shuar: ''Ecuador'' or ''Ekuatur''), officially the Republic of Ecuador ( es, República del Ecuador, which literally translates as "Republic of the Equator"; Quechua: ''Ikwadur Ripuwlika''; Shuar: ''Eku ...
ian President
Rafael Correa
Rafael Vicente Correa Delgado (; born 6 April 1963), known as Rafael Correa, is an Ecuadorian politician and economist who served as President of Ecuador from 2007 to 2017. The leader of the PAIS Alliance political movement from its foundation ...
attempted to default on Ecuador's
national debt
A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit oc ...
, calling it illegitimate odious debt, because it was contracted by corrupt and despotic prior regimes. He succeeded in reducing the price of the debt letters before continuing paying the debt.
After the overthrow of
Haiti
Haiti (; ht, Ayiti ; French: ), officially the Republic of Haiti (); ) and formerly known as Hayti, is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean Sea, east of Cuba and Jamaica, and ...
's
Jean-Claude Duvalier
Jean-Claude Duvalier (; 3 July 19514 October 2014), nicknamed "Baby Doc" ( ht, Bebe Dòk), was a Haitian politician who was the President of Haiti from 1971 until he was overthrown by a popular uprising in February 1986. He succeeded his father F ...
in 1986, there were calls to cancel Haiti's debt owed to multilateral institutions, calling it unjust odious debt, and Haiti could better use the funds for education, health care, and basic infrastructure. As of February 2008, the Haiti Debt Cancellation Resolution had 66 co-sponsors in the
U.S. House of Representatives
The United States House of Representatives, often referred to as the House of Representatives, the U.S. House, or simply the House, is the lower chamber of the United States Congress, with the Senate being the upper chamber. Together they ...
. Several organizations in the United States issued
action alert
Action may refer to:
* Action (narrative), a literary mode
* Action fiction, a type of genre fiction
* Action game, a genre of video game
Film
* Action film, a genre of film
* ''Action'' (1921 film), a film by John Ford
* ''Action'' (1980 f ...
s around the Haiti Debt Cancellation Resolution, and a Congressional letter to the
U.S. Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
,
including Jubilee USA, the
Institute for Justice & Democracy in Haiti
The Institute for Justice & Democracy in Haiti (IJDH) is a non-profit organization based in Boston, Massachusetts, US, that seeks to accompany the people of Haiti in their nonviolent struggle for the consolidation of constitutional democracy, ju ...
and Pax Christi USA.
See also
*
Debt of developing countries
The debt of developing countries usually refers to the external debt incurred by governments of developing countries.
There have been several historical episodes of governments of developing countries borrowing in quantities beyond their abilit ...
*
Debt relief Debt relief or debt cancellation is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.
From antiquity through the 19th century, it refers to domestic debts, in particu ...
*
Domestic liability dollarization Domestic liability dollarization (DLD) refers to the denomination of banking system deposits and lending in a currency other than that of the country in which they are held. DLD does not refer exclusively to denomination in US dollars, as DLD encomp ...
*
Haiti's external debt
*
Jubilee USA Network
Jubilee USA Network is a nonprofit financial reform organization based in Washington D.C. Jubilee USA's work began in conjunction with the global Jubilee 2000 movement, founded in the late 1990s to advocate for debt relief for developing countri ...
*
Moral hazard
In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk ...
*
Sovereign debt
A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit o ...
*
Sovereign default
A sovereign default is the failure or refusal of the
government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it wi ...
References
{{debt
Debt
International law
Legal doctrines and principles
Philosophy of economics
Power (social and political) theories
Coercion
Dictatorship
Economic problems
Human rights
Anti-corruption activism
Political repression
Social ethics
International relations
Law and economics