Eric Tousaint’s study of the odious debt doctrine
by Eric Toussaint
Part 18 - Sack’s comments on several debt repudiations and abolitions
As examples of odious debts, Sack cites debts that have personally enriched government representatives, and creditors’ dishonest machinations: “We can also put into this category of debt, loans clearly incurred in the personal interest of government members or persons and groups related to government for purposes that are not related to the government.” (p. 159) Sack says immediately after this that debts of this kind were repudiated in the US in the 1830s, as we have seen. “Cf. the case of the repudiation of certain debts by several North American States. One of the main reasons justifying these repudiations was the squandering of the sums borrowed: they were usually borrowed to establish banks or build railways; but the banks failed and the railway lines were never built. These questionable operations were often the result of agreements between crooked members of the government and dishonest creditors.” (p. 159) Note that in this particular case that involved four different States, these debts were not incurred by despotic governments.
Sack gives another example “When a government incurs debt for the purpose of subjugating the population of a part of its territory or to colonise the same by its own colonists. These debts are odious for the indigenous population of that part of the territory.” (p. 159)
Sack mentions and comments on several cases. He starts by highlighting the fact that among the reasons the US repudiated the debts that Spain claimed on Cuba was that they had been used to maintain their colonial domination over the Cuban people.
Then Sack looks at two debt abolitions that were decided in application of the Versailles treaty signed on 28 June 1919. The first concerned German and Prussian debts incurred in order to colonise Poland and to install Germans on land purchased from Poles. Following the defeat of Germany an independent Poland was restored. The Versailles treaty decreed that newly freed and independent Poland should not be held liable for debt that had been used to impose its own colonisation and subjugation. Sack had reservations about this proviso; he considered that a part of the debt should not have been abolished because it was not odious: “The borrowing of the Prussian government over the thirty years of its colonial occupation was for the purpose of the general budget or, at least, was not for odious purposes. These debts cannot be considered as ‘odious’.” (p. 164)
Sack then comments on a second debt abolition in the Versailles treaty. The German empire was relieved of its African colonies and their debts were abolished. However, the colonies were not emancipated – they came under the control of the victorious powers. About this, Sack cites an extract of the reply that the Allies made to Germany, which was not inclined to accept forgiveness of the debt of its ex-colonies, because Germany would have to continue the repayments itself. The Allies replied: “The colonies should not bear any portion of the German debt, nor remain under any obligation to refund to Germany the expenses incurred by the Imperial administration of the protectorate. In fact, it would be unjust to burden the natives with expenditure which appears to have been incurred in Germany’s own interest, and that it would be no less unjust to make this responsibility rest upon the Mandatory Powers which, in so far as they may be appointed trustees by the League of Nations, will derive no benefit from such trusteeship.”
Here are two more comments by Sack: “These considerations do not seem to be totally founded. Even if the spending was done in German interests it does not necessarily follow that it was odious for the colonies (...)” (p. 162). He adds: “We can question whether it is just, (...) that the colonial debt not be put to the charge of the respective colonies, seeing that much of the funds were used on productive spending in the colonies.” (p. 161).
What really highlights Sack’s conservative, Eurocentric and colonialist attitude is that he makes no reaction to the Allies’ affirmation that they gain nothing from exercising their new protectorates over Germany’s ex-colonies. What’s more, the Allies consider that expenditures for the colonies were productive. Whereas, in fact, they were used to rule over the peoples and to draw maximum profits towards the colonial powers.
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