Odious Debts

Talking ‘anarchy’ with Chomsky (excerpt)

David Barsamian
Nation
April 14, 2000

David Barsamian: Why do you say the debt crisis is an ideological construction?

Noam Chomsky: There is a debt, but who owes it and who’s responsible for it is an ideological question, not an economic question. For example, there’s a capitalist principle that nobody wants to pay any attention to, of course, which says that if I borrow money from you, it’s my responsibility to pay it back, and if you’re the lender, it’s your risk if I don’t pay it back. But nobody even conceives of that possibility. Suppose we were to follow that. Take, say, Indonesia, for example. Right now its economy is crushed by the fact that the debt is something like 140 percent of GDP. You trace that debt back, it turns out that the borrowers were something like 100 to 200 people around the military dictatorship that we supported, and their cronies. The lenders were international banks. A lot of that debt has been by now socialized through the IMF, which means Northern taxpayers are responsible. What happened to the money? They enriched themselves. There was some capital export and some development. But the people who borrowed the money aren’t held responsible for it. It’s the people of Indonesia who have to pay it off. And that means living under crushing austerity programs, severe poverty and suffering. In fact, it’s a hopeless task to pay off the debt that they didn’t borrow. What about the lenders? The lenders are protected from risk. That’s one of the main functions of the IMF, to provide free risk insurance to people who lend and invest in risky loans. That’s why they get high yields, because there’s a lot of risk. They don’t have to take the risk, because it’s socialized. It’s transferred in various ways to Northern taxpayers through the IMF and other devices, like Brady bonds. The whole system is one in which the borrowers are released from the responsibility. That’s transferred to the impoverished mass of the population in their own countries. And the lenders are protected from risk. These are ideological choices, not economic ones.

In fact, it even goes beyond that. There’s a principle of international law that was devised by the United States over a hundred years ago when it “liberated” Cuba, which means it conquered Cuba to prevent it from liberating itself from Spain in 1898. At that time, when the United States took over, it canceled Cuba’s debt to Spain on the quite reasonable grounds that the debt was invalid since it had been imposed on the people of Cuba without their consent, by force, under a power relationship. That principle was later recognized in international law, again under US initiative, as the principle of what’s called “odious debt.” Debt is not valid if it’s essentially imposed by force. The Third World debt is odious debt. That’s even been recognized by the US representative at the IMF, Karen Lissaker, an international economist, who pointed out a couple of years ago that if we were to apply the principles of odious debt, most of the Third World debt would simply disappear.

Categories: Odious Debts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s