Clauses & Controversies

Post-Colonial Odious Debt Talk of odious debt generally asks whether the populace must repay money borrowed by a corrupt former dictator. The assumption is that the people have overthrown a domestic despot. But what about money borrowed while under colonial rule? Discussions of odious debt generally overlook this scenario. In fact, it’s generally assumed that a newly-independent state cannot disavow these debts. Likewise, the new state commits expropriation and must pay compensation if it takes back property appropriated by a colonial oppressor. Our guest is the brilliant Gregoire Mallard (the Graduate Institute), whose work inspired us to wonder why discussions of odious debt tend to overlook post-colonial obligations. Gregoire’s recent book on this and related matters, Gift Exchange: The Transnational History of a Political Idea is available at https://www.cambridge.org/core/books/gift-exchange/DF1BB308065A9D2974095A6FC6242549 Producer: Leanna Doty

The Back Story of Iraq’s Debt Restructuring Iraq after Saddam Hussein had massive, patently unpayable debts. Creditors viewed Iraqi oil exports as a valuable potential source of recovery and were chomping at the bit to get paid. Yet in the end, there were few successful creditor lawsuits and the haircuts imposed in the restructuring were among the most brutal in sovereign debt history. How did this happen? Our guest is economic historian Simon Hinrichsen, who draws on his wonderful recent research to answer our questions. Producer: Leanna Doty

What Does the U.S. Owe Haiti for La Navasse? Sovereign debt and guano go together like ... they go together well, okay? Bird poop was once so valuable as fertilizer that Peru used it as collateral for sovereign debt. It was so valuable that, in the 19th century, the United States and other countries simply claimed sovereignty over islands with guano deposits. The only real limit was that the island couldn't belong to another recognized sovereign nation. That the island was inhabited, perhaps by people who viewed themselves as part of a sovereign nation, was unimportant. La Navasse is one such island, situated roughly 35 miles off the coast of Haiti, and a source of contention between the U.S. and Haiti to this day. Our guests are the wonderful Miami Herald reporter, Jacqueline Charles, who has written about La Navasse for the Miami Herald, and our friend and brilliant colleague, Guy-Uriel Charles. Producer: Leanna Doty

Zambia's Default and Restructuring Prospects Zambia was the first African country to default on its debt in the wake of COVID-19. It has significant debt to Chinese lenders as well as bond debt held by private investors. The latter may have a big enough stake to veto a restructuring and are in no mood to make concessions, ostensibly because they worry that Chinese lenders may get favorable treatment. Tommy Stubbington, one of the terrific emerging markets reporters at the Financial Times, helps us make sense of the Zambian debt. Producer: Leanna Doty

What Motivates China's Overseas Lending? Including lending by state owned enterprises, China appears to be the world’s biggest official creditor. Critics emphasize its lack of loan transparency. Some accuse China of using loans as tools to gain political or even territorial control. Are such criticisms fair? And what really motivates China's overseas lending. Pippa Morgan (Duke Kunshan)is a specialist in the political economy of China's foreign economic relations and joins us to talk about these questions. Producer: Leanna Doty

Do Investors Care About Odious Debts? The Tsarist Russian government used borrowed funds to repress domestic political movements. Vichy France borrowed while collaborating with the Nazis. King Leopold used borrowed funds to engage in horrific exploitation and repression in the Congo Free State, and these debts were later assumed by Belgium. There are nearly endless examples of truly odious sovereign debts. Do investors care about any of this? And if so, why? Our guest Kim Oosterlinck (Universite Libre de Bruxelles; Solvay Brussels School of Econ. & Mgmt.) is perhaps the foremost expert on such questions. We talk with Kim about odious debt, with a sidebar on efforts to recover looted art. Producer: Leanna Doty

Haiti’s Odious "Independence Debt" In 1825, France imposed on Haiti an indemnity obligation of 150 million francs, ostensibly to compensate French plantation owners for Haitians having fought for and won their freedom in the revolution two decades prior. Haiti assumed this vast debt with French gunboats lurking just offshore, and all parties understood that it could not be repaid without massive borrowing from French (and later U.S.) banks. It would be well into the 20th century before Haiti retired these debts. The Haitian independence debt was odious and unjust. But was it illegal at the time? And if so, does Haiti have an avenue to recover from France? We discuss these questions, and legal history more generally, with legal historian Julia Rudolph of North Carolina State University. Producer: Leanna Doty

Debt expert Lee Buchheit, economist Joyce Chang, and contingent debt specialist Jeromin Zettelmeyer discuss GDP-linked bonds, the COVID codicil as a solution to debt relief, challenges of state contingent debt instruments, efficacy of value recovery instruments, bond clauses, IMF's role in debt restructuring, concerns about sovereign debt markets, and logistics of COVID-19 vaccine distribution in emerging markets.

Restructuring Uncle Sam's Debt All together now (in a smarmy drawl): "Families must balance their budget, why not countries?" Okay, that's a stupid thing to say (although politicians love to say it). It's especially stupid to say about rich countries that borrow in their own currency. But this doesn't mean these countries can't or won't default, as the United States itself has demonstrated. We talk with Julia Mahoney and Ed Kitch (Virginia), whose recent article (link below) covers the history of U.S. debt default and argues provocatively that a debt restructuring might be needed, perhaps surprisingly soon. And no, the 14th Amendment doesn't prohibit this. Julia and Ed explain why. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3492085 Producer: Leanna Doty

Best Crisis Management in HISTORY! Felix Salmon (Axios; Slate Money) knows more about financial markets than pretty much anyone we know. He joins us to talk about the U.S. government's engagement (or lack thereof) with debt issues in emerging markets and with multilateral institutions like the IMF. Will things be different under a Biden administration? Also: what just happened with that lawsuit against Guatemala?