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Repudiate the Iraqi Debt!

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Repudiating public debts incurred by states is entirely libertarian, as argued by Murray Rothbard. Yet even international law recognizes a more limited version of this notion, in the doctrine of Odious Debt developed by Alexander Sack, a professor of law in Paris and former minister in the Tsarist government. After the Russian Revolution of 1917, the Bolsheviks repudiated Russia's debts indiscriminately. Sack argued that debts not created in the interests of "the state" should not be bound to the general rule that liability for public debts should remain intact when the state is taken over or changed by revolution, coup, etc. He maintained that some debts were "dettes odieuses." As noted on the Jubilee Iraq site,

Debts are "odious" when they are contracted without the consent of the people and not spent in their interests and when the creditor is aware of this. The doctrine of odious debts was formalised in 1927 by Alexander Sack, a Russian international law scholar working in Paris.
"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. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfil one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the state. Odious debts, contracted and utilised, for purposes which, to the lenders' knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation - when it succeeds in overthrowing the government that contracted them - unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation, which has freed itself of a despotic regime, to assume these odious debts, which are the personal debts of the ruler."

In the case of Iraq, there is estimated to be about $125 billion in claims against the Iraqi people, based on debts incurred by Saddam Hussein's regime. This debt should be repudiated, both under libertarian principles and under principles of international law. As summarized here, "In April of 2003 Bush Administration officials started talking about how the people of Iraq should not be saddled with debts incurred by Saddam Hussein "to buy weapons and to build palaces." 

Debt campaigners quickly seized the initiative pointing out how these debts constitute a prime example of odious debts as they were contracted by a dictatorship, without the consent of the people and with the full awareness of the creditors. These debts should never have to be repaid by the Iraqi people."An excellent summary and discussion of the doctrine of Odious Debt, its history and origin, and its application to Iraq can be found in Cato Policy Analysis no. 526: Iraq's Odious Debts by Patricia Adams.

Adams notes, for example, that the US engaged in a version of odious debt practice by repudiating (in Section 4 of the Fourteenth Amendment), after the War to Prevent Southern Independence, "the debts that the Confederate States incurred in an attempt to form a new regime as not being the responsibility of either U.S. citizens or the southern states."

More info on the Doctrine of Odious Debt can be found in the Brookings Institution brief on Odious Debt; and at Probe International's Odious Debts Web site: The Internet source for information about the global odious debt movement.

Stephan Kinsella is an attorney in Houston, director of the Center for the Study of Innovative Freedom, and editor of Libertarian Papers.

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