Odious debt
Encyclopedia
In international law
, odious debt is a legal theory that holds that the national debt
incurred by a regime
for purposes that do not serve the best interests of the nation
, 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
.
n émigré legal theorist, based upon 19th-century precedents including Mexico
's repudiation of debts incurred by Emperor Maximilian's regime, and the denial by the United States
of Cuba
n liability for debts incurred by the Spanish colonial regime
.
According to Sack:
In a Policy Analysis for the Cato Institute, Patricia Adams suggested that the debts incurred by the Iraqi state during the rule of Saddam Hussein
are odious, as the money borrowed was spent on weapons, instruments of repression and palaces.
A recent article by economists Seema Jayachandran and Michael Kremer
has 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.
Jayachandran proposed her new recommendations November 2010 at the 10th anniversary of the Jubilee movement held at the Center for Global Development in Washington, D.C..
International law
Public international law concerns the structure and conduct of sovereign states; analogous entities, such as the Holy See; and intergovernmental organizations. To a lesser degree, international law also may affect multinational corporations and individuals, an impact increasingly evolving beyond...
, odious debt is a legal theory that holds that the national debt
Government debt
Government debt is money owed by a central government. In the US, "government debt" may also refer to the debt of a municipal or local government...
incurred by a regime
Regime
The word regime refers to a set of conditions, most often of a political nature.-Politics:...
for purposes that do not serve the best interests of the nation
Nation
A nation may refer to a community of people who share a common language, culture, ethnicity, descent, and/or history. In this definition, a nation has no physical borders. However, it can also refer to people who share a common territory and government irrespective of their ethnic make-up...
, 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
Coercion is the practice of forcing another party to behave in an involuntary manner by use of threats or intimidation or some other form of pressure or force. In law, coercion is codified as the duress crime. Such actions are used as leverage, to force the victim to act in the desired way...
.
Origin
The doctrine was formalized in a 1927 treatise by Alexander Nahum Sack, a RussiaRussia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
n émigré legal theorist, based upon 19th-century precedents including Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
's repudiation of debts incurred by Emperor Maximilian's regime, and the denial by the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
of Cuba
Cuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
n liability for debts incurred by the Spanish colonial regime
Spanish colonization of the Americas
Colonial expansion under the Spanish Empire was initiated by the Spanish conquistadores and developed by the Monarchy of Spain through its administrators and missionaries. The motivations for colonial expansion were trade and the spread of the Christian faith through indigenous conversions...
.
According to Sack:
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.
Modern impacts
Patricia Adams, executive director of Probe International (an environmental and public policy advocacy organisation in Canada), and author of Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy, has stated that:In a Policy Analysis for the Cato Institute, Patricia Adams suggested that the debts incurred by the Iraqi state during the rule of Saddam Hussein
Saddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
are odious, as the money borrowed was spent on weapons, instruments of repression and palaces.
A recent article by economists Seema Jayachandran and Michael Kremer
Michael Kremer
Michael Robert Kremer is a development economist and is currently the Gates Professor of Developing Societies at Harvard University. He is a Fellow of the American Academy of Arts and Sciences, a recipient of a MacArthur Fellowship and a Presidential Faculty Fellowship, and was named a Young Global...
has 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.
Jayachandran proposed her new recommendations November 2010 at the 10th anniversary of the Jubilee movement held at the Center for Global Development in Washington, D.C..
See also
Related topics- Debt reliefDebt reliefDebt relief 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 particular agricultural debts and freeing of debt slaves...
- Developing countries' debtDeveloping countries' debtThe debt of developing countries is external debt incurred by governments of developing countries, generally in quantities beyond the governments' political ability to repay...
- Jubilee USA Network
- Haiti's external debtHaiti's external debtHaiti’s legacy of debt began shortly after gaining independence from France in 1804. In 1825, France, with warships at the ready, demanded Haiti compensate France for its loss of men and slave colony. In exchange for French recognition of Haiti as a sovereign republic, France demanded payment of...
- Moral hazardMoral hazardIn economic theory, moral hazard refers to a situation in which a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.Moral hazard...
- Right to revolution
- Sovereign debt
- Domestic Liability DollarizationDomestic liability dollarizationDomestic liability dollarization refers to the denomination of banking system deposits and lending in a currency other than that of the country in which they are held...
- DebtocracyDebtocracyDebtocracy is a 2011 documentary film by Katerina Kitidi and Aris Hatzistefanou. The documentary mainly focuses on two points: the causes of the Greek debt crisis in 2010 and possible future solutions that could be given to the problem that are not currently being considered by the government of...