Conventional wisdom holds that all nations must repay debt. Regardless of the legitimacy of the regime that signs the contract, a country that fails to honor its loan obligations damages its reputation, inviting still greater problems down the road. Yet difficult dilemmas arise from this assumption. Should today's South Africa be responsible for apartheid-era debt? Is it reasonable to tether postwar Iraq with Saddam Hussein's excesses?
Rethinking Sovereign Debt is a probing historical analysis of how sovereign debt continuity--the rule that nations should repay loans even after a major regime change, or expect reputational consequences--became the consensus approach. Odette Lienau contends that the practice is not essential for functioning international capital markets, and demonstrates how it relies on ideas of absolutist government that have come under fire over the last century. Challenging previous accounts, Lienau incorporates a wealth of original research to argue that Soviet Russia's repudiation of Tsarist debt and Great Britain's 1923 arbitration with Costa Rica hint at the feasibility of selective debt cancellation. She traces the notion of debt continuity from the post-World War I era to the present, emphasizing the role of government officials, the World Bank, and private-market actors in shaping our existing framework.
Lienau calls on scholars and policymakers to recognize political choice and historical precedent in sovereign debt and reputation, in order to move beyond an impasse when a government is overthrown.
An excellent window into the usually unquestioned norms that govern the sovereign debt regime.
Odette Lienau's Rethinking Sovereign Debt is the most important book on sovereign borrowing in decades. Lienau brilliantly explains the historical origins of contemporary practices of government finance, and in doing so demonstrates the contingency of the understandings of market participants. Lienau asks the fundamental question: Who—exactly—is the sovereign that borrows on behalf of the nation? The answer, Lienau shows, must be central to how scholars, policy makers, and lenders make sense of sovereign finance, for they must know how regimes claim the legitimacy to oblige their citizens to repay the debts accumulated in their name. This extraordinary book should be widely read by scholars and practitioners.
In Rethinking Sovereign Debt, Odette Lienau probes two of the most enduring questions of sovereign finance: why do governments pay the debts they inherit from prior regimes even when those predecessors may be openly acknowledged as feckless, corrupt, incompetent, or outright tyrannical; and ought this to be—as it is now—a strict commandment of international law? The answers, as Lienau shows in this penetrating new book, must be sought in history, finance, political philosophy, law, morality, and plain common sense.
An original work of international legal theory as well as a gripping tale of the geopolitics and political economy of post–World War I international finance. Especially illuminating is Lienau’s discussion of concepts of state sovereignty in early modern political philosophy and their connection to views about the juridical agency of the state in public international law.
- 2016, Winner of the ASIL Certificates of Merit
- , Winner of the ASIL Certificates of Merit
- 344 pages
- 6-1/8 x 9-1/4 inches
- Harvard University Press
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