ODIOUS DEBTS AND GLOBAL JUSTICE

CRISTIAN DIMITRIU

Bucharest

Congreso; Global Justice: Norms and Limits; 2012

University of Bucharest

Abstract: The recent international financial crisis has generated a lively debate among economists, political scientists, politicians, (a few) philosophers and the public in general about the causes, possible consequences and moral aspects of such crisis. One of the issues that has been discussed in this context is whether states burdened by onerous debts should repay these debts, and whether lenders are entitled to demand repayment. While some scholars and activists argue that citizens and future generation should not be burdened with debts when funds were misused by politicans; others argue that these debts ought to be repayed, as the state made the promise to repay it and the consequences of failing to fulfill this promise would be, overall, worse for the international community and citizens in general. The approach that those who believe debts ought not to be repaid has some resemblance with the old and mostly unkown concept of "odious debts". Odious debts, as the literature has defined them, are debts that citizens and future generations do not have obligation to repay, as funds from these debts were used by their autocratic or corrupt leaders for illegitimate purposes from which citizens do not benefit. In this paper I make a contribution to this debate by explaining the conditions under which debts are collectively binding for a state. In order to accomplish this goal, I divide my presentation into two parts. First, I show that the the account of illegitimate debts that global justice scholars (such as Pogge, Joshua Cohen and others) have provided does not work, or is based on wrong assumptions. On their view, the justice of debts depends on the magnitude of poverty it generates—that is, on its consequences—and not on the moral cirumstances of the loan. Given that autocratic regimes usually adopt policies that are harmful for the citizens, lending money to autocratic regimes leads to a state of affairs under which more people end up being poor (in comparison with democratic regimes), as they would have an extra incentive to stay in power. Therefore, if the regime that borrows is autocratic, lending should be banned; and if the regime that borrows is not autocratic, lending should not be banned. Pogge has called this problem the "resource privilege". The justice of debts, however, is not to be measured by asking whether it is an effective way of getting rid of global poverty. If that were the case, it would in fact be difficult, if not impossible, to determine whether there is something incorrect with the current international financial regime, as calculating the empirical consequences of what they have called the borrowing privilege will be an almost impossible task, especially if they involve counterfactuals. Also, and more importantly, the state of affairs that results from the existence of a debt is not what counts if we want show why a debt does not exist. A big and powerful bank may lend money to poor peasants in a village, and these loans may for some reason make them even poorer (for example, the peasants use the funds to build a damn that ends up killing the crop). The outcome that results from the loan is, overall, worst for the poor people of the village. But this does not make the loan itself immoral. Intuitively, the bank has absolutely no responsibility for the fact that the loans resulted in an undesirable outcome, even if it were the case that people in the village have a human right not be poor (the duty to raise the people above the human rights threshold should not be discharged by the bank alone, obviously). The bank, consequently, is entitled to repayment. The justice of debts, rather, should be judged as arrangements between parties. What we should do is determine whether or not they are binding for the people. The objection fails, as relying on resulting outcomes, effects, or states of affairs is helpless in order to determine the "bindingness" of a debt. What we need to do, rather, is to determine the exact reasons why debts could not be binding for citizens.This is what I attempt to do in the next section of my paper. Second, I explain the conditions that need to exist in order for a debt to be binding. I do this by clarifying the notion of "Odious Debts". The moral question that lies at the heart of the concept of odious debts is the following: If a despotic or corrupt leader uses loan money to repress his people, maintain himself in power, buy personal luxuries or any other illegitimate act; then why should citizens and their future generations bear the burden to repay what are basically the personal debts of their former captor? In order to answer this question, I connect the problem of odious debts with theories of social contract, and argue that the reason why certain debts are not binding in the first place is that they do not satisfy the conditions that generated collective responsibility (that is, that made citizens be bound by the state). Among these conditions, an important one is that rulers cannot be said to be acting in the name of the people when they fail act in accordance with any minimal acceptable threshold of political action. It follows from the account I am proposing that the fact that a debt is onerous or burdensome is not a valid reason to declare it not-binding. This is because the fact that a debt is big does not imply that the political leader was acting outside its mandate when it incurred those debts. But it also follows that a huge portion of the debts of the poorest countries should not be repaid, as in many of these cases political leaders used these funds for private purposes.