Odious DebtCreated by: Alexis Norvack, Jessica Confalone, Brooke McCoubrey, Patrice Wright & Melissa Mattiasch Intro:

Simply stated an Odious Debt is an unfair debt resulting from illegitimate loans. These loans are usually money that has come from a dictatorial government that is using the money to oppress the people or for personal purposes. The countries or people who take the loans cannot legitimately be expected to repay these large amounts. For example stable nations, meaning Old core nations, are giving loans to
undeveloped countries, expecting them to pay it back with some sort of interest.


Basically, when a government falls from a monarchy to either a socialist, communist or facist government, there usually is a specific group in power. This could mean a dictatorship, oligarchy etc. These specific groups take out debts and loans from developed, stable countries, such as the United States and many European countries. The leaders of these countries are taking these Odious debts out for personal purposes, such as building armies.

Usually, when a country takes out an Odious debt, the developed country who lends this amount of money are expecting repayment and can easily ask for inflation and interest on the money lent out. Another problem needs to be addressed by the countries who are lending out this money; they are well aware of the reason why these leaders are asking for money. This could either be for warfare, or personal gain. When a country recieves an Odious debt, this is NOT benefitting the people of that soverignity. To clarify, the difference between a regular loan or debt and an Odious debt is that a regular debt affects the people of that nation. However, in an Odious debt, the loan is only benefitting the government in power.

However, these developed countries down the road demand payment. These countries do not care by what means the money is repaid, as long as it is. These nations who are in debt usually turn to their citizens to repay these loans. This means that since the citizens never benefitted from the loans in the first place, they are being forced to repay them anyways with their own money. Alot of the time countries never put proper taxations in place or social programs. So in total, these citizens are in a very large lose-lose situation.

"Debt has no friends. It loves no one. And when it shows up at your front door, it shows no mercy."

The chart above shows the External debt in comparrison to the Debt service between 1970 and 2007. The orange chart represents the amount of money that has been made into loans for the people living in third world countries, and the red dotted lines represent the actual amount of money that those people own. The difference in between the two has significantly increased over the years, leaving it cleat to see that those in Odious Debt are in a "continuing mess" which will contine to grow as the loans get higher.

What Started Odious Debt:

Although there is no defining event that started Odious debt, it began about a quarter of a century after the settlement of the Spanish- American War.

Odious debt is simular to a regular debt in the sense that it does not happen over night. It is a build up of loans that cannot not be repayed over time to the distibuter because, the actual final sum of the money is doubled, or even trippled from the origional amount.

[Taken From: http://www.ccc.nps.navy.mil/images/si/2003/si_june2003debt_1_1.GIF]

Real Life Examples:

Countries who face Odious debt, where their dictatorial leaders borrowed money are:
  • Indonesia
  • Argentina
  • Nicaragua
  • South Africa
Although there are countless others, these countries face debts that exceed their total GDP, sometimes its double the amount. Other times they end up paying double or tripple the amount that was origionally borrowed.

These countries start off in poverty because of how the government decides to distribute the loaned money, then they fall into a downward spiral from their impoverished state to becoming further oppressed once again because of the consequences from taking the large amount of money to begin with.

South Africa recently discovered that they have to pay a debt that occured during their "apartheid era" which the new South Africa must repay. For during their racial segregation money was borrowed to which the banks are now demanding they return.

"This report estimates 'apartheid-caused debt' at £28 billion [about $46 billion at the time the report was written]. That is the £11 billion [$18 billion] that South Africa borrowed to maintain apartheid, and the £17 billion [$28 billion] that the neighbouring states borrowed because of apartheid destabilisation and aggression. This is 74% of the present regional debt of £38 billion [$62.5 billion].
Apartheid wrought vast destruction across the region; now the people of Southern Africa want to rebuild. In a remarkable spirit of reconciliation, the people of Southern Africa want to forgive the horrors of the past and look forward. But the banks, international financial institutions, and individual countries which lent to both sides in the apartheid war are demanding repayment."
Taken From: http://www.actsa.org/Debt/paying_twice.htm

Although, there are situations where Odious debt has been stopped. In 1898 the US prevented Spain from imposing debts on Cuba and similarly Great Britain also imposed a claim on a large debt on Costa Rica in 1923 but they were also denied. Another situation is where a group or an organization joins together and decides that a country who is in large debt does not have to pay the rest of their debt, terminating their previous debts and allowing them to develop, move on and eventually help themselves.


Great Links:
Poor countries overpaying: http://www.neweconomics.org/gen/odiouslending180906.aspx
Drawing A Line Under Odious Debt: http://www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=5209

l. Adams, Patricia "What are Odious Debts?" 2008. Viewed November 12-13 2008. <http://www.odiousdebts.org/odiousdebts/index.cfm?DSP=subcontent&AreaID=3>
2. "Odious Debts" 11 October 2008. Wikipedia. Viewed November 12-13 2008. <http://en.wikipedia.org/wiki/Odious_debt>
3.Paulus, Christoph G. "The Concepts of Odious Debts - A Historical Survey" 2008. Humboldt University of Berlin. Viewed November 12th 2008. <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1077688>
4. Probe International. "What are Odious Debts?" 2008. Viewed November 12-13 2008. <http://www.odiousdebts.org/odiousdebts/index.cfm?DSP=subcontent&AreaID=3>
5. Shah, Anup. " Causes of the Debt Crisis - Global Issues". Sunday June 3, 2007. Viewed November 12th 2008. <http://www.globalissues.org/article/29/causes-of-the-debt-crisis>