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Old 10-16-2003, 01:32 PM   #1
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*blush* Wanna see my midterm paper on debt cancellation?

Well, here it is.

The Odious Debts of Developing Nations: Structural Violence?

Johan Galtung, among others, has defined structural violence as violence which is not direct, such as genocide, or war, but rather violence which results from inequitable social systems. Thus, if a child dies because of starvation, while there is food enough to feed her, that is violence just as surely as if that child had been attacked. Cultural violence, which manifests itself in the language and behaviors of stereotype and and exclusion, is the extension of the concept of structural violence—for example, the Jim Crow laws in the United States of the early 20th century, or the caste system in India. The two concepts are intimately related and critical for peace workers, as cultural and structural violence often lead to, and are used to justify, direct violence.

According to many analysts and economic justice advocates, the current system of international finance can be considered one of structural violence, resulting in deterioration economic conditions for much of the developing world and a widening gap between the rich and the poor. The United Nations Development Project states that, “The range of human development in the world is vast and uneven, with astounding progress in some areas amidst stagnation and dismal decline in others” (UNDP Online). They also cite widening gaps within developing nations, and state that Sub-Saharan Africa is “being left behind.” Notably, some of the countries in this region, Mozambique, Uganda and Ghana, which are making some progress have been given at least some measure of debt relief, according the Jubilee USA Network, which campaigns for debt cancellation. The UNDP also reports “stalled” progress in Latin America, and actually increasing poverty in many parts of Easter Europe (UNDP Online).

According to many analysts, odious debts in particular are a form of structural violence which enables and perpetuates direct violence, which has manifested itself as the most horrific types of genocide and political torture. They feel that such odious debts are a major reason for lack of progress seen in development, particularly in Africa and Latin America. An odious debt is one which has been made, with the knowledge of the creditors, to a dictator or tyrant who has not used the loans for the benefit of his people, but often dramatically the opposite. Example of this, tragically, abound. The apartheid debts which the current South African government is paying are an example; so to is the debt of Haiti, approximately 40% of which was incurred by the infamous “Papa Doc” and “Baby Doc” Duvalier regimes (Jubilee Haiti report). Argentina and Ethiopia have similar tales to tell. Most recently, the estimated $383 billion of the former Iraqi President, Saddam Hussein is the subject of heated international debate (Jubilee Iraq Online).

There is considerable historical precedent in both domestic and international law for the concept of odious debt. Most analysts cite the 1899 Treaty between the U.S. and Spain as the first invocation of this doctrine. The U.S. has just taken Cuba from Spain, and repudiated on the debt incurred during the Spanish occupation, arguing that those debts had been incurred at the force of arms and without the consent of the people (Odious Debts Online; Jubilee Iraq Online; Hanlon 8-9, Adams Online). This precedent has been consistently upheld, notably by U.S. Chief Justice Taft in the arbitration between Great Britain and Costa Rica in 1923. Here is a stunning piece of legislation: Taft ruled that the debts Great Britain felt it was owed were null because Great Britain had failed to prove that the monies in question had been used for the benefit of and by the consent of the people of Costa Rica (Taft Online). Not only did this rule in favor of a previously occupied indigenous people, it placed the burden of proof on the creditor! It further upheld the notion of Costa Rica’s sovereignty, arguing that, ““It is ably and earnestly argued on behalf of Costa Rica that the Tinoco government cannot be considered a de facto government, because it was not established and maintained in accord with the constitution of Costa Rica of 1871” (Taft Online). As Tinoco had not come into power according to Costa Rican law, the debts he incurred could be considered illegitimate.

Taft also notes that Great Britain, along with many other major powers, refused to recognize his government. He noted, “The non-recognition by other nations of a government claiming to be a national personality is usually appropriate evidence that it has not attained the independence and control entitling it by international law to be classed as such.” Later in this legislation, he reiterates: “But it is urged that many leading Powers refused to recognize the Tinoco government, and that recognition by other nations is the chief and best evidence of the birth, existence and continuity of succession of a government. Undoubtedly recognition by other Powers is an important evidential factor in establishing proof of the existence of a government in the society of nations” (Taft Online). Thus, according to Taft, an illegitimate government (at least according Great Britain, the claimant desiring the repayment of debts incurred by Tinoco) cannot be said to have incurred legitimate debts.

The U.S. also pioneered and affirmed the doctrine of odious debts, according to English economist Joseph Hanlon, in 1898 when it refused to pay the debts of Cuba after it had seized Cuba from Spain. Writes Hanlon, the U.S. argued that the debts had been “imposed on the people of Cuba without their consent and by force of arms (Hanlon 8)” It was thus not legitimate debt. Hanlon further builds his case by citing Russian foreign minister Alexander Stack, who wrote several decades after William Taft, asserting that, “If a despotic power incurs a debt not for the needs or in the interest of the state, but to strengthen its despotic regime, to repress the population that fights against it, etc, this debt is odious to the population 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 the power” (Hanlon 8). He even quotes Stack as accusing the creditors as “having committed a hostile act against the people.” Direct echoes of this can be found in the Jubilee South Movement, which argues that it is the North which owes the South reparations for having financed brutality and oppression. Jubilee South argues that, “The immorality and illegitimacy of these debts were contracted by illegitimate parties, and/or through illegitimate means, and/or accompanied with illegitimate terms, and/or used for illegitimate purposes…. The people of the South do not owe these debts. These "debts" have in fact been paid many times over in financial terms and, more importantly, in human terms by people of the South. Jubilee South rejects the continued plunder of the South by way of debts payments!” (Jubilee South Online). Here Jubilee South specifically argues that odious debt is one of the major reasons for the cycle of poverty in the third world, particularly in Africa.

Most recently, the case of odious debts in Iraq has come into the pubic eye. Some hold that governments should honor the debts of their predecessors, and that to repudiate debt endangers sovereignty and continuity of governance. Others argue that, while under normal circumstances of course public debts should be paid, Iraq’s debt, as incurred by Saddam Hussein, is clearly odious and that the Iraqi people should not be held responsible for the financing of his exploitation and oppression. U.S. House Representative Maloney recently introduced HR 2482, which calls on several bilateral creditors, such as France and Russia, as well as multilateral creditors, to recognize the odious nature of the debts incurred by the Baath Party under Saddam Hussein, and to accordingly cancel that debt. She notes that the World Bank and the IMF would indeed be able to afford such a cancellation. She further notes that, while U.N. Security Council Resolution 661 prohibits the sale of illegal weapons, “numerous countries appear to have violated this resolution” (Maloney Online). Such a violation, she argues, further classifies Iraq’s debt as odious: the creditors clearly should not have been leading to this regime.

A number of commentators have offered their opinions and advice. Patricia Adams, who has written extensively about political and developmental economics, argued in the Financial Post that “the Iraqi people should not have to pay back international loans which allowed Saddam Hussein to finance oppression and other objectionable pursuits” (Adams Online). Adams (among others) notes that three conditions must be met for a debt to be considered odious: “The debt must have been incurred without the consent of the people of the state; the debt can not have benefited the public in that state; the lender must have been aware of these two conditions” (Adams Online). She recommended that a new Iraqi government form a council, comprised of Iraqis and international citizens, to evaluate the claims of each creditor. Similar to Taft’s historic legislation, Adam’s suggestion places the burden of proof on the creditor, as Adams further suggests the creditors would have to provide documentation that the loans they made to the Baath party were used for the public good.

Former World Bank Chief Economist Joseph Stigletz agrees. In a recent article in the Atlantic Monthly, he points out that, as many historians now accept, the harsh economic conditions imposed on Germany after WWI were in part the cause of WWII. He warns that not allowing Iraq to “get back on its feet again economically” could have severe consequences, contributing to the already rampant instability in the Middle East (Stigletz online). He also notes the lack of any sort of established international mechanism for arbitration when a debt is disputed, writing, “Regrettably, we have no rule of law at the international level for the restructuring of government debts….We need an international "bankruptcy" court, with no vested national interest, to deal with debt restructuring and relief, and to ensure a fair sharing of the burdens this would create. The United Nations could devise a set of principles – a rule of law – that would guide the court as it assessed the validity of contracts made with, and debts incurred by, outlaw regimes” (Stigletz Online). Indeed, many NGOs in both the North and the South concerned with global justice, as well as many faith-based groups, are calling for what they name FTAP—a Fair and Transparent Arbitration Process; such calls echo Stigletz’s observations. Such a process would, as Stigletz points out, reject the IMF’s suggestion that it be the sole arbiter (Stigletz online).

As calls for the cancellation of Iraq’s debt grow, so to do the calls for canceling the debts of other nations who have had the misfortune of rulers as odious as Saddam Hussein. In a detailed report published in the Brookings Review, for example, Michael Kremer and Seema Jayachandran note the dozens of other nations who have had domestic, state-sponsored violence financed by wealthy Northern creditors. They argue, like Adams and Stigletz, that such loans should not be repaid, as this only encourages further odious lending. In a similar article in the Financial Times, they write, “An Iraqi move to renounce its debt would have important consequences for international lending generally. Creditors would think twice before lending to repressive or rapacious governments if they did not expect to be repaid. In turn, such regimes might behave better to avoid losing their borrowing privileges.” Other analysts also argue that as the case for canceling Iraq’s odious debt grows, so to does the case for canceling the odious debts in Africa, who is still repaying the loans of the likes of the Congo’s Mobutu. James K. Boyce and Leonce Ndikumana note specifically that odious debts are a leading cause of capital flight from Africa. It thus follows that odious debt is a leading cause of the current and growing levels of poverty in Africa. They write, “In a study of 30 sub-Saharan African countries, we estimate that total capital flight for the period 1970-1996 amounted to $187 billion. Adding imputed interest earnings, the stock of Africa’s capital flight stood at $274 billion—equivalent to 145% of the debt owed by these countries….In other words, sub-Saharan Africa is a net creditor to the rest of the world, its external assets exceed its external debt.” The then state that 80 cents on every dollar Africa borrows returns via debt service to the credtiors (Boyce and Ndikumana Online).

These analysts and more turn to the doctrine of odious debt as a way to explain what might be preventing some of the world’s most impoverished nations from being able to meet the Millennium Development Goals or demonstrate economic growth. There is strong historical precedent in both domestic and international law for the cancellation of such debts; advocates and civil society in both the Global North and the Global South are demanding that such debts be repudiated simply based on the immorality of financing brutal regimes. Other analysts, such as Joseph Stigletz, even point out the connection between odious debt and global security, arguing that if specifically Iraq is not economically stabilized, the rest of the Middle East could be destabilized as well. As calls for canceling Iraq’s odious debt grow, demands for canceling the odious debts in Africa and Latin America are likely to be strengthened. If heeded, these analysts argue, the century-old doctrine of odious debt could well set a just precedent for international lending and finally enable impoverished and often brutally war-torn nations to begin again.

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Old 10-16-2003, 05:37 PM   #2
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Thanks for sharing it with us! I have learned something new from it.


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Old 10-16-2003, 09:53 PM   #3
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Thanks so much Matt!

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Old 10-17-2003, 04:20 PM   #4
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That's great Sherry! Thanks for sharing it!!
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Old 10-18-2003, 08:05 AM   #5
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Thanks Verte!

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