A Critique of the Odious Debt Doctrine

Abstract:     
Defenders of the odious debt doctrine, which bars creditors from collecting sovereign debts that financed the personal consumption of former dictators, argue that this rule would benefit populations following dictatorships and discourage would-be dictators from staging coups in the first place. We show that optimism about the doctrine is based on unrealistic assumptions about the motives and practices of dictators. With more realistic assumptions, the odious debt doctrine could be beneficial or harmful, depending on circumstances. Defenders of the doctrine have not made the empirical case that the net benefits would be positive if the doctrine were incorporated into international law, and there is ample reason for skepticism that they would be.

Working Paper Series