Public Power and Private Purpose: Odious Debt and the Political Economy of Hegemony

Abstract:     
This Article examines the process by which overlapping interests between private bankers and government translates into influence and power mediated through the use of bank loans as instruments of foreign policy. The article suggests the market transactions often act as a matter of U.S. interests. It makes use of historical narratives not only as means to document the origins of the Odious Debt doctrine, but also to demonstrate the complexity attending efforts to create an Odious Debt doctrine that might function in law. The International Lending Supervision Act, the Baker plan and Brady initiative - policies reinforced through legal interpretations, tax and revenue rules and regulations, SEC regulations - and a host of other statutes that intersect banking and foreign policy interests suggest that market forces rarely act independently of U.S. interests. Foreign banking is politicized and foreign policy is commercialized.

The article also addresses the ideological and procedural limitations of the use of private law as a conceptual framework for resolving odious debt. The specific case studies addressed in the article, including the Dominican Republic, Cuba, and Costa Rica, serve to underscore the necessity of including an analysis of the realpolitik of banking and foreign policy and the inexorable entanglement of private financial interests with national interests. The article argues that the realpolitik of lending activity requires a debt resolution framework that addresses not only the circumstances of the sovereign debtor, or the practices of creditor banks, but the circumstances of U.S. interests in which all such transactions are conceived and conducted.

Keywords: Sovereign Debt, Odious Debt, Foreign Policy, Private Law, Banking Regulations, Cuba, Santo Domingo, Law and History

JEL Classifications: F34, G15, G20, G21, G24, G28, H63, H87, N1, N2, P1

Accepted Paper Series