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Debt, Dictatorship, and Democratization

NEW YORK – After Saddam Hussein’s fall, the United States successfully pressed creditors to write off much of Iraq’s external debt. Senior American officials, including Paul Wolfowitz, later President of the World Bank, argued that the Iraqi people should not be saddled with obligations that the dictator contracted in order to enrich himself and oppress his subjects. Citing a long-standing doctrine in international law, advocates of a write-off claimed that Iraq’s debt was “odious.” As a result, the creditors were no longer protected under global legal rules.

As political change again sweeps across the Middle East, the issue of odious debt is back. But all debt that was contracted by a previous oppressive regime cannot, for that reason alone, be classified as “odious.” The question is this: how much of the money went to meritorious development projects, and how much went instead to prop up the regime and line its leaders’ pockets?