Overlooked Sovereign Credit Events and Non-Pecuniary Defaults: British Debt Sustainability in the Post-Second World War Period
36 Pages Posted: 6 Jul 2016 Last revised: 31 Aug 2017
Date Written: July 4, 2016
This paper examines UK sovereign debt sustainability following the Second World War. Even though the UK in 1946 recorded the highest public debt-to-GDP ratio of the 20th century, the sovereign credit literature does not show a UK sovereign default following the Second World War. New archival evidence shows that Britain in fact defaulted multiple times following the Second World War by failing to fulfil several non-pecuniary terms of the Anglo-American Financial Agreement. Several of these default instances may be further classified as ‘partially excusable’. The British case illustrates the challenge of identifying and accurately classifying sovereign credit events along with the complex dynamics of sovereign debt sustainability vis-à-vis other competing policy objectives, such as geopolitical priorities.
Keywords: sovereign debt, debt sustainability, sovereign default, debt repudiation, partial default, excusable default, odious debt, sovereign debt crisis, external debt, foreign debt, financial repression, British economic history, Anglo-American Loan, John Maynard Keynes, geopolitics, grand strategy
JEL Classification: H63, E58, E61, E62, H12, H27, P24
Suggested Citation: Suggested Citation