June 27, 2005
African debt relief will be high on the agenda when leaders of the G-8 countries meet next week in Gleneagles, Scotland. Two weeks ago, G-8 finance ministers met and agreed to write off the debts of 18 of the world’s poorest countries. Fourteen of those countries are in sub-Saharan Africa.
While relieving the world’s poorest countries of their crippling debt is a laudable goal, the G-8 debt plan is more about bailing out the World Bank – to which Canadian taxpayers contribute more than one-third of a billion dollars annually – and other public lending institutions, than it is about bailing out African countries in need.
World views on debt relief have evolved dramatically since the invasion of Iraq in 2003. Saddam Hussein was such a wretched leader that the United States felt justified in using its military might to get rid of him. It would be inconsistent for western creditors to now claim that Saddam’s debts were legitimate when his regime clearly was not.
An Iraqi citizens’ group, Jubilee Iraq, is working to ensure that the Iraqi people are not unjustly forced to repay the loans of a corrupt, illegitimate regime. Using an international legal doctrine known as the Doctrine of Odious Debts, the group is calling for immediate and unconditional cancellation of all odious debt.
The Doctrine of Odious Debts was created in the 1920s by Alexander Sack, a former minister in Tsarist Russia and, after the Russian Revolution, a professor of law in Paris. He wrote:
“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.”
Surely Iraqi debt, as well as that of many African countries, is odious.
Under the Doctrine of Odious Debts, three conditions must be met before a state can repudiate a debt: the debt must have been incurred without the consent of the people of the state; the debt cannot have benefited the public in that state; and, the lender must have been aware of these two conditions.
Sack proposed that a new government be required to prove that the debts it inherited from a previous regime did not serve the public interest and that the creditors were aware of this. Once that was proven, the onus would then fall on the creditors to show that the funds were used for the benefit of the territory. If the creditors could not do so, before an international tribunal, the debt would be unenforceable.
One of the earliest applications of these legal principles followed the Spanish-American War of 1898 when the U.S. argued, successfully, that it could repudiate Cuba’s debts because the Spanish loans had not been contracted for the benefit of Cuba and that the burdens connected to those loans had been imposed upon Cuba without its consent.
There is a growing worldwide movement towards applying the legal principles in the Doctrine of Odious Debts.
Legislators in countries such as the Philippines, Nigeria and Argentina are demanding an accounting of how these loans were spent.
Rich western creditors, meanwhile, are growing increasingly nervous about what such investigations may reveal. If they forgive the debt, there’s no accountability and no scrutiny of how the money was spent.
“It’s a face-saving measure because they can say ‘aren’t we good guys, we forgive the debt, we care about the poor’ and they can write off the debts and never have an investigation and sweep their mistakes under the carpet,” says Patricia Adams, executive director of Probe International, a non-governmental organization in Toronto, and author of Odious Debts: Loose Lending, Corruption, and the Third World’s Environmental Legacy.
The G-8 debt relief plan for Africa is disingenuous and patronizing at best. Africans – and Canadian taxpayers – deserve an accounting of where these funds came from and how they were spent.
Twenty years from now, there will be a whole new generation of debt if the root causes aren’t somehow fixed. Applying the Doctrine of Odious Debts will ensure that Third World citizens don’t pay for debts that weren’t incurred for their benefit. Moreover, it will hold western creditors accountable for how they lend taxpayers money.
Andrea Davis is a freelance writer living in Guelph and a former employee of Probe International. She is a member of the Mercury’s Community Editorial Board.