Bollettino

Speaking of my omniscience, he modestly said... We were talking to a friend a couple of days ago about the debt that Iraq owes. And we said that given the amount, and the inability of Iraq to get out of that amount without significant imput from the American taxpayer, surely there will be a move to declare Saddam's debts null and void. Which will be a little hard to explain, since up until now, every nation that has emerged from a dictatorship has had to pay the debts accrued by the dictator. A policy supported vehemently, up until now, by the US government.

Well, congratulations to the New Yorker's Suriowieki to figure out that it was time to, uh, change the rules -- a tune which we are confident will soon turn into a chorus in the press. Since Surowiecki is, to put it mildly, a lackey for the most unbridled laissez faire policies this side of the Irish famine, the twist he undergoes is pretty humorous.

First, Suriowiecki quotes the polyvalent precedent of the liberation of Cuba which the US effected by an invasion that, at least, had the formal excuse that Americans could believe that they were attacked first. Cuba had a mountain of debt. The US, taking over the island, took over the debt. The US repudiated the debt on the grounds that it was unjustly accrued.

Now for the parallel case:

"In 1979, when Saddam Hussein took power, Iraq�thanks to the oil boom of the seventies�had a foreign surplus of about thirty-five billion dollars. A decade later, after the war with Iran, it had a foreign debt of some fifty billion dollars. And today, after more war and a dozen years of missed interest payments, the country owes, by many estimates, more than a hundred billion dollars. Its creditors, which include Kuwait, Bulgaria, and the Korean conglomerate Hyundai, are already jockeying for position to be repaid after the war."

Well, this isn't a situation that would normally stir the bowels of compassion in a man of Suriowiecki's iron trust in the terms of international finance. Yet he makes an uncharacteristically humane argument:

"Even if the Iraqi people could afford to pay back Saddam�s debts, it�s hard to see why they should. Most of the money that Iraq borrowed in the past twenty years went either to Saddam�s military misadventures in Iran and Kuwait or to his internal security apparatus. Asking the Iraqi people to assume Saddam�s debts is rather like telling a man who has been shot in the head that he has to pay for the bullet.

"Oddly, though, that�s pretty much what international custom seems to require. Lenders and borrowers still believe that debt belongs to a state, not to a regime. As a result, only a handful of countries have ever repudiated their debts. Even when tyrannical regimes have been deposed�Somoza in Nicaragua, Mobutu in Zaire, the apartheid system in South Africa�their successors have dutifully, if reluctantly, assumed their debts."

Notice -- this is a matter of "international custom." It has nothing whatsoever to do with official US policy over the last thirty years -- a policy that has benefited the biggest loaners, who just happen to be American banks and institutions. I wonder if the fact that these aren't the biggest creditors to Iraq has anything to do with Surowiecki's sudden concern for Iraq's fiscal health?

The obvious problem here is that "international custom" just might get a little upset over the US wiping the slate clean of debt Iraq owes in order for the US not to have to transfer the tremendous amount of money they would have to transfer in order to fullfill the promise to "reconstruct' Iraq. Surowiecki, of course, is aware of precedent, so he immediately separates out cases like, uh, Argentina, where no wiping of the slate is possible:

I"t might be time to change all that and consider an old idea that has recently been resurrected: the doctrine of odious debts. First articulated in the twenties by a former tsarist minister named Alexander Sack, the doctrine holds that a country is not responsible for debts incurred by a �despotic regime� and used for purposes �contrary to the interests of the nation.� Both criteria have to be met for the debt to be considered odious. (In other words, profligate Argentina couldn�t repudiate its debt, because it�s a democracy.)""

Profligate Argentina, eh? As we remember it, a lot of Argentina's debt in the eighties went to paying off military equipment bought by the military and paid for by loans from Citicorps. This money went repatriating back to the US by two routes -- since the US is the largest exporter of military hardware in the world. And Suriowiecki's same odious debt NGOs are well aware of that. On the Odious debt site,
Argentina's debts are indeed on consigned to the devil's portion.

"In July 2000, the Argentine Federal Court sent down a landmark ruling that will have far-reaching repercussions for odious debt campaigners worldwide. The court held that a substantial portion of Argentina�s foreign debt is rooted in fraudulent and illegitimate loans amassed during the country�s military period.
"In his decision, Judge Jorge Ballestero held that many loans to Argentina were part of "a damaging economic policy that forced [Argentina] on its knees through various methods . . . and which tended to benefit and support private companies - national and foreign - to the detriment of society and state companies." The ruling puts blame on the shoulders of corrupt civil servants as well as International Financial Institutions such as the IMF."

And here is a report on the situation from Arnaud Zacharie:

"Evidence now exists , resulting from a judicial enquiry over 18 years, following a legal process initiated back in 1982 by a journalist, Alejandro Olmos.; the Argentine debt crisis has its origin in wastage and fraudulent misuse of funds featuring the Argentine government, the IMF, private banks in the North and the American Federal Reserve. That is why the Argentine Federal Court has declared the debt contracted by the Videla regime"unlawful", as being contrary to the legislation and Constitution of the country. The court recommends Congress to employ this judgment to negotiate the cancellation of this execrable debt."

It is interesting that in the course of the War, various liberal claims have been suddenly taken up by conservatives -- such as the idea that the Iraqi sanctions were murderious -- but the idea of debt forgiveness has to be one of the oddest, as well as one of the most self-serving, instances of using progressive notions for imperialist ends. However, we do hope, as this train gets going, that it is hopped onto by the jubilee debt forgiveness people, the Indonesians, the Pakistanis, and many, many others.