The Debt System, A History of Sovereign Debts and their Repudiation

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24 September 2019

For as long as there have been rich nations and poor nations, debt has been a powerful force for maintaining the unequal relations between them. Treated as sacrosanct, immutable, and eternally binding, it has become the yoke of choice for imperial powers in the post-colonial world to enforce their subservience over the global south. In this ground-breaking history, renowned economist Éric Toussaint argues for a radical reversal of this balance of accounts through the repudiation of sovereign debt. This compelling, provocative, and accessible volume offers a rejoinder to the prevailing wisdom that views debt as holy writ.

Éric Toussaint, Senior Lecturer at the University of Liège, is President of Committee for the Abolition of Illegitimate Debts, Belgium. He is the author of Bankocracy and co-author of Debt, the IMF, and the World Bank, Sixty Questions, Sixty Answers.

  • 280 pages
  • Editor: Haymarket Books (9 mai 2019)
  • Language : English
  • ISBN-10: 1608463095
  • ISBN-13: 978-1608463091
  • Size: 15,2 x 1,9 x 22,2 cm
Preface of The Debt System - Patrick Saurin

Éric Toussaint has an acute and thorough knowledge of public debt issues, thanks not only to his theoretical research work but also to his involvement in the field (notably in Ecuador and Greece). As he takes us through 19th century to 21st century world history we notice that this painstakingly documented examination gives a version of historical events that is at odds with the mainstream discourse developed by those in power, those same people whose crimes are exposed in these pages.

As he patiently follows the thread of public debts, the author sheds new light on the eventful history of nations, on their complex relationships and above all on their underlying logic.

North-South relationships illustrate a process that is consubstantial to the capitalist system and its determination to develop, extend and dominate. Public debts are an essential cog in the structure of capitalism. The debt system as a tool to subdue and dominate is as it were capitalism’s economic architecture. Examples are many: Tunisia, Egypt, Portugal, Cuba, Costa Rica, Mexico, Russia or Greece (today and in the past) illustrate and support the author’s analysis. Through a thoroughly documented approach, based on a source criticism that is a model of its kind, he unfolds a detailed and impressive analysis of the odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
doctrine, the basis of which was laid out by Alexander Nahum Sack. This gives Éric Toussaint the opportunity to recall the CADTM’s essential role in better defining the notion of odious debt.

As we move from one chapter to the next, we discover little known aspects of history that are always truthful however bewildering. We meet those who were its actors. Éric Toussaint allows us to eavesdrop on the conversation that took place when Emiliano Zapata and Pancho Villa met in Mexico City on 4 December 1914. He takes us into the hotel room of Walter Rathenau, then German minister of Foreign Affairs, on 16 April 1922, when the members of the German delegation to the Genoa negotiations were woken up at one p.m. by the members of the Russian delegation to negotiate, in pajamas, a separate agreement. The agreement that was signed on the same day is known as the Treaty of Rapallo. Archive documents, official reports on meetings between delegations, press articles are part of the first-hand material used by the author to reopen files in order not only to question the misleading narratives of the doxa but also to propose a new and carefully documented version of what really happened.

Beyond their narrative dimension, all these elements draw a strikingly faithful picture of the vocation and features of what has to be called the debt system.

While public debts are a fertile prism to bring out the actual relationships between States, between capitalist finance and populations, between social classes, the author rightly points out at the end of his study:

Repudiation of illegitimate debts is not enough. To be of real use to society, repudiation must be part of a coherent set of political, economic, cultural, and social measures that can enable the country to evolve towards a society free of the different forms of oppression and exploitation.

The struggle to do away with odious, illegitimate, illegal and unsustainable debts must be part and parcel of our necessary fight against the various forms of domination that are the very essence of capitalism. Éric Toussaint’s work is an essential contribution to this everyday struggle.

Translated by Christine Pagnoulle et Mike Krolikowski.

Books review:


Other publications in English :

  • The World Bank A Critical History
    3 July - Eric Toussaint
  • Africa : the debt trap and how to get out of it
    27 March - CADTM
  • Greece 2015: There was an alternative
    6 October 2020 - Eric Toussaint
  • Impact of European policies on the Global South and possible alternatives
    8 September 2020 - ReCommons Europe
  • Package of common demands on debt and the need for citizens’ control on finance at European level - Executive summar
    3 August 2020 - CADTM, Collective



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