On reading ‘I.O.U.’ by Noreen Hertz

David was on the phone to Noreena Hertz’s agent the other day, trying to get her to speak on debt at one of the G20 events at St Andrews later in the year. I think the conversation was going really well until they started talking about costs! Anyway, you have to aim high… Overhearing the chat inspired me to get I.O.U. off the shelf – a book which I should probably have read five years ago. Rightly or wrongly we tend to regard 2005 as a water-shed year, but much of this book still seemed extremely up to date. One of the sections that most intrigued me was the last chapter, where she looked at solutions to what she refers to as the ‘holocaust’ of  international debt poverty. Plenty here to disagree with and inspire debate (nobody still thinks the IMF should be arbiter of it’s own cases, do they?) but one of the sections that gave me the most optimism was when she described two of the main obstacles standing in the way of Fair and Transparent Arbitration:

‘First, commercial and investment banks don’t want to see it happen. If it did, not only would they see some of their existing debts written down, they would also see the value of any relevant bonds that they or their clients were holding slashed. Their opposition has been completely unambiguous. An alliance of banks including Citigroup, JP Morgan Chase, UBS and Deutschebank responded to the IMF’s SDRM proposal with a statement to the effect that the plan was unworkable in any form. ‘no changes in any specific aspect of the plan’ would alter their ‘serious concern about the proposal,’ the banks said. And they wield immense political clout.

‘Second, despite Paul O’Neill’s support for a bankruptcy-type procedure while he was still in office, no one within the Bush Administration has got behind the idea since his abrupt resignation in December 2002. This is not surprising, given that all variants of this plan would entail the US handing over the de facto control it enjoys through the World Bank and the IMF  to a neutral authority. Multilateralism, as we all know, has not been high up the Bush Administration’s agenda.’ [Hertz, IOU, Harper Collins, 2004]

Reading this power analysis it occurred to me that both of these factors have changed – and changed in our favour. Clearly we have an administration in the US with a greater sympathy for multilateralism (as well as one which – thanks I’m sure to Jubilee USA – has already made a commitment to tackling the issue of odious debt). And as for the banks… well, they owe us one, don’t they? In fact, they owe us quite a few trillion…

Maybe one of the ways they could pay that back is by not interfering when we ask for an FTA?

James Picardo


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