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why
the debt should be cancelled : Illegitimate debt
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“Don’t owe -
wont pay”
An academic lawyer named Alexander Sack developed the
concept of `odious debt` at the begining of the 20th
Century. In referring to the national debt of a country
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, this debt is odious
for the population of all the State. This debt is not
an obligation for the nation.”
Sacks work provided the legal rationale for action
taken at the begining of the 20th Century by the USA
in relation to Cuba. In the aftermath of the Spanish-American
war the USA took over the administration of Cuba from
Spain. Spain looked to the USA to repay the debt owed
to it by Cuba. The US Government refused to repay debts
they considered to have been “created by the Government
of Spain, for its own purpose and through its own agents,
in whose creation Cuba had no voice”. The debt,
as far as the US Government was concerned had been used
to suppress the democratic will of the people of Cuba.
It was therefore an unjust debt and as such should not
be repaid.
At the begining of the 21st Century, the issue of odious
debt is set to become central to the debate on Third
World Debt. In 1973 the United Nations described the
apartheid system as a crime against humanity. During
the early part of the 1980s the apartheid regime in
South Africa was faced with bankruptcy; the cost of
maintaining such a regime and the economic sanctions
imposed from abroad had begun to take their toll. The
leaders of the movement for democracy in South Africa
urged international institutions and investors not to
bail out the South African economy unless deomocratic
reforms were introduced. However, the Swiss Government
proceeded to facilitate large loans from private banks
that allowed the apartheid government to stay in power.
The current democratic government, which represents
those who suffered from apartheid, is now having to
pay back this money.
The irony of this situation, whereby the oppressed
are being asked to pay for their oppression, is not
confined to South Africa. The country fromerly known
as Zaire was ruled for decades by Mobutu Sese Seko,
a man for whom the word kleprocrat was coined- a man
who ruled by theft. It is estimated that he stole more
than $10 billion, while he kept the people of his country
in fear and poverty.
There was widespread knowledge of Mobuto’s corruption.
A certain Edwin Blumenthal resigned from the central
Bank of Zaire in 1980 because of “sordid and pernicious
corruption” that was so serious that “there
is no chance, I repeat no chance that Zaire’s numerous
creditors will ever recover their loans.” Mr Blumenthal
was working in the central Bank of Zaire at the insistance
of the International Monetary Fund. Despite his daming
report, in the six years that followed, the IMF lent
Mobuto over $600 million, while the World Bank provided
$650 million. Western governments lent over $3billion
during the same period. Mr Mobuto had the good sense
to support the West in the Cold War and to allow the
exploitation of Zaire’s extensive mineral wealth
by multinational companies.
President Marcos of the Phillippines was another dictator
who improverished his country whilst amassing a personal
fortune of over $10 billion. The Philippine Freedom
from Debt Coalition (FDC) is the longest running campaign
for debt cancellation in the developing world. The title
of the FDC newsletter, People Against Immoral Debt (PAID).
exposes their unwillingness to repay odious debts incurred
by Marcos.
In each of these cases those who lent the money could
be in no doubt about the standing of those who received
it. Even if it could be argued that creditors were unaware
of the use to which their loans were put, the question
still remains about the moral responsibility of people
to pay back money that was used to oppress them.
The Government that organised and carried out the genocide
in Rwanda were in receipt of large loans. In recognising
these loans as an example of “odious debt”
the British House of Commons International Development
Committee in its May 1998 report on Debt Relief (paragraphs
11 & 57) wrote that “ the bulk of Rwanda’s
external debt was incurred by the genocidal regime which
preceded the current administration.... Some argue that
loans were used by the genocidal regime to purchase
weapons and the current administration and ultimately,
the people of Rwanda, should not have to repay these
“odious” debts”.
As well as debts incurred by corrupt or despotic regimes,
questions could be asked about loans that were given
for specific projects which were chosen and designed
by the creditors. The World Bank plays a major role
in design, implementation and monitoring of the projects
that it funds. A World Bank evaluation of 18 agricultural
projects funded up to 1986 in Tanzania, found that 12
produced negative economic rates of return. The World
Bank simply cannot attribute sole responsibility to
the Government of Tanazia for these and other project
failures.
A World Bank review of its programme in Zambia concludes
that the predominace of adjustment lending in Zambia
in the 1980s and 1990s was a mistaken approach. Looking
at 18 projects approved during 1980-1995, only three
were rated at likely to be sustainable. Between 1991and
1993 public expenditure halved as a share of Gross Domestic
Product. An external review of the IMF programme in
Zambia, pointed out that IMF policies resulted in high
levels of inflation with heavy social costs attached.
Recently a court in Argentina made a ruling about the
legitimacy of Argentinia’s debt. Between 1976 and
1983, under the military government, Argentina’s
debt rose from $ 7.5 billion to $43.5 billion. These
new loans were of no benefit to ordinary Argentineans.
According to the judge the loans 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.”
He specifically cited the IMF as being culpable for
lending money in an irresponsible way..
In recent years much has been done to highlight the
fact that many countries cannot pay back the debts they
owe. It is now time to point out clearly that it is
not simply a matter of an inability to pay. Some debts
should not be paid. As the slogan of Jubilee South campaigners
puts it -”Don’t owe- wont pay”.
Also read: Jubilee South’s Response to the
G8 Debt Proposal:
Justice Demands Unconditional and Total Debt Cancellation
for All South Countries!
click here 
PDF 
Futher Information
click here
Useful Websites:
www.jubileeplus.org
www.odiousdebts.org
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