Sunday, December 25, 2011

Odious policy

From Wikipedia, the free encyclopedia:
Odious debt

In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable.

I got that far, and I said Oh, yeah! This is how we solve the debt problem.

Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state.

Well... it will take some work. Change "regime" to "policymakers", and "not debts of the state" to "not debts of the people" and that should take care of it.

The doctrine was formalized in a 1927 treatise by Alexander Nahum Sack...

According to Sack:

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime.

Change "despotic regime" to "well-meaning and benevolent government". For a reason, say "because it mistakenly thinks it is in the best interest of the people to encourage their use of credit and accumulation of their debt".

Say "This bizarre and unnatural growth of debt was the result of a misunderstanding of economic principles, and consequently it falls with the demise of the policy".

That works for me.

And then I read the first footnote:

Graeme Smith A new euro crisis strategy: deny the debt The Globe and Mail 20 November 2011

And discovered that I was neither the only person nor the first to think we can reduce debt by treating it as odious. You have to be a subscriber to see the linked article. But you can also read it at

Graeme Smith writes:

When demonstrators scream “Make the bankers pay,” or the equivalent in Greek, Spanish, or Italian, many of them are embracing a concept that has gained popularity during the crisis. It’s a deceptively simple way of dealing with a crushing sovereign debt: Declare the loans illegal, or “odious.”

I'm in.

The argument is that when a lender knowingly gives money to a corrupt or dictatorial regime for purposes that don’t benefit the country, the debt should be erased when the tyrant falls.

When lenders profit from incorrect and unsustainable economic policies, regardless of the purposes of those policies, the debt should be erased when the policies fall.

None of Europe’s finance ministers have proposed anything of the kind, but they have been forced to explain why not...

Ireland’s Finance Minister quickly dismissed the proposal as “deranged and crazy”...

Well, sure. Because the alternative to saying "deranged and crazy" is to say Yes, our policies were foolish. Yes, our policies were wrong.

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