Odious Debts and Nation-Building: When the Incubus Departs

To most people, the notion that the citizens of a country lucky enough to have ousted a dictator should spend the rest of their lives paying off the debts incurred by that dictator in the name of the state is morally repugnant. This is a situation in which a strict requirement of the law (that governments automatically succeed to, and must honor, the debt obligations of their predecessors) is incongruent with most people’s sense of the morally right outcome. At a superficial level, state responsibility for debts incurred by prior governments resembles the belief that a country carries a collective responsibility for the crimes or wars perpetrated by prior governments of that country. The Allied Powers represented at the Paris Peace Conference in 1919 certainly demonstrated their belief in this version of collective responsibility. It did not matter to them that the German Kaiser had fled and his government had fallen—the German people had to be made to pay. In our own day, the damage caused by Iraq’s invasion of Kuwait in 1990 has resulted in more than $50 billion of reparation awards handed down by the United Nations Compensation Commission. Shortly after Saddam Hussein was deposed in 2003, the new Iraqi Government began to agitate for those awards to be reduced or nullified. The argument? The Iraqi people were co-victims of Saddam’s tyranny. It would be morally reprehensible to saddle them with the obligation to compensate Saddam’s other victims as well. But the similarity to other types of state collective responsibility is only superficial. The significant difference between foreign debts incurred by a prior regime and damages or injury inflicted on foreigners by such a regime is that, in the debt example, the foreign creditors chose to lend their money while the regime was in power. The odious (to use a word) characteristics of a prior regime—the very characteristics that fuel a sense of moral outrage when citizens are asked to assume the debts of such a regime once it is displaced—were presumably visible to a lender when it elected to advance money. So, the argument goes, such a lender is in the position of a collaborator whose head, or at least whose wallet, is subject to righteous shaving by the incoming administration. In contrast, it is difficult to portray the victims of state-sponsored crimes or aggressive wars as somehow complicit in the behavior of the perpetrators of those acts