Foreign Debts, Odious Debts - Who Should Pay?

What are odious debts?


WHAT WE FILIPINOS SHOULD KNOW: A substantial part of our homeland's debt burden is private, odious and fraudulent, thus unjust and oppressive because crony firms defaulted on state guaranteed loans extended at the behest of top government officials. As any concerned and thinking Filipino knows, the practice of granting sovereign guarantees risks the people's futures.


How did we get here? Between 1962 and 1986, our external debt grew from $355 million to $28.3 billion. By the end of the Marcos dictatorship in 1986, our homeland was the 9th most indebted country; and in terms of the ratio of external debt to gross domestic product (GDP), we ranked 2nd among the top 10 Third World Debtors.


Today, the external debt has grown to $55.4 billion. By the end of Y2004, the ratio of external debt to GDP was 78.7% (March 2005 BSP data, http://www.bsp.gov.ph/statistics/spei/tab6.htm).


By rough analogy, it's like an individual spending up to 78.7% of his gross income to pay for his outstanding debt; essentially insolvent and bankrupt.
[http://thefilipinomind.blogspot.com/2005/05/filipinos-in-cage-in-pursuit-to.html]


Similarly so for our homeland. The big difference being that our country is still extended more foreign loans to continually meet just payment dues; and thus perpetuating poverty and mortgaging the future of its citizens and children. [http://thefilipinomind.blogspot.com/2005/06/corporate-globalizationeconomically.html]


Only a nationalistic and thus united citizenry and leadership can stop such insanity and immorality that sacrifice everyone in the homeland, except the foreign/transnational corporations (TNCs) and their local partners.




"The selfish spirit of commerce knows no country, and feels no passion or principle but that of gain" - Thomas Jefferson, 1809



"You show me a capitalist, I'll show you a bloodsucker" - Malcolm X, 1965



"Capitalism and altruism are incompatible; they are philosophical opposites; they cannot coexist in the same man or in the same society" - Ayn Rand, 1961



"The chief business of America is business" - President Calvin Coolidge, 1925



"The glory of the United States is business" - Wendell L. Willkie, 1936



"What else do bankers do -- walk-in and turn-off the lights in the country." - William Slee, 1978

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The legal doctrine of odious debts was given shape by Alexander Nahum Sack a quarter of a century after the settlement of the Spanish-American War. Sack, a former minister of Tsarist Russia and, after the Russian Revolution, a professor of law in Paris, authored two major works on the obligations of successor systems: The Effects of State Transformations on Their Public Debts and Other Financial Obligations and The Succession of the Public Debts of the State.

With colonial territories becoming independent nation states and colonies changing hands, with monarchies being replaced by republics and military rule by civilian, with constantly changing borders throughout Europe, and with the ascendant new ideologies of socialism, communism and fascism overthrowing old orders, Sack's debt theories dealt with the practical problems created by such transformations of state.



Like many others, Sack believed that liability for public debts should remain intact, for these debts represent obligations of the state — the state being the territory, rather than a specific governmental structure. This he based not on some strict dictate of natural justice, but on the exigencies of international commerce. Without strong rules, he believed, chaos would reign in relations between nations, and international trade and finance would break down.

But Sack believed that debts not created in the interests of the state should not be bound to this general rule. Some debts, he said, were "dettes odieuses."

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 for the population of all the State.

This debt is 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.

The reason these "odious" debts cannot be considered to encumber the territory of the State, is that such debts do not fulfill one of the conditions that determine the legality of the debts of the State, that is: the debts of the State must be incurred and the funds from it employed for the needs and in the interests of the State.

"Odious" debts, incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the latter — in the case that the nation succeeds in getting rid of the government which incurs them — except to the extent that real advantages were obtained from these debts. The creditors have committed a hostile act with regard to the people; they can't therefore expect that a nation freed from a despotic power assume the "odious" debts, which are personal debts of that power.

Even when a despotic power is replaced by another, no less despotic or any more responsive to the will of the people, the "odious" debts of the eliminated power are not any less their personal debts and are not obligations for the new power....

One could also include in this category of debts the loans incurred by members of the government or by persons or groups associated with the government to serve interests manifestly personal — interests that are unrelated to the interests of the State.

For creditors to expect any protection in their loans to foreign states, their loans must be utilized for the needs and interests of the state, otherwise the loans belonged to the power which contracted them, and were therefore, "dettes de régime."

The doctrine of odious debts is open to abuse by self-serving interpretation. To avoid arbitrarily repudiated debts, Sack proposed that a new government be required to prove that the debt ill-served the public interest and that the creditors were aware of this. Following these proofs, the onus would be upon the creditors to show that the funds were utilized for the benefit of the territory. If the creditors could not do so, before an international tribunal, the debt would be unenforceable.



Source: Excerpt from The Doctrine of Odious Debts, Chapter 17 of the book Odious Debts: Loose Lending, Corruption, and the Third World's Environmental Legacy by Patricia Adams


"We shall be better and braver and less helpless if we think that we ought to enquire, than we should have been if we indulged in the idle fancy that there was no knowing and no use in seeking to know what we do not know..." – SOCRATES


"Upang maitindig natin ang bantayog ng ating lipunan, kailangang radikal nating baguhin hindi lamang ang ating mga institusyon kundi maging ang ating pag-iisip at pamumuhay. Kailangan ang rebolusyon, hindi lamang sa panlabas, kundi lalo na sa panloob!" --Apolinario Mabini, La Revolucion Filipina (1898)