Iraq's Odious Debts

Lender beware

Cato Policy Report, Vol. XXVI, No. 6
November 1, 2004

It’s hard to justify asking an oppressed people to pay debts incurred by a tyrant in the process of oppressing them. That’s why, in “Iraq’s Odious Debts” (Policy Analysis no. 526), Patricia Adams argues that the Iraqi people should examine the outstanding claims against the Iraqi government and repudiate those debts that financed Saddam Hussein’s “weapons, palaces, and instruments of repression.” Those debts that were used for legitimate purposes, on the other hand, should be honored. As she explains in some detail, the Doctrine of Odious Debts has been an accepted principle of international law for more than a century. It was used in the American Civil War to repudiate the debts of the Confederacy, and in the Spanish-American War to repudiate the debts the Spanish had imposed on the people of Cuba. It has been used less frequently in recent years, but Adams notes that revitalizing the doctrine will give creditors a powerful incentive to ensure that the money they lend is not used for illegitimate purposes.

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