Mitu Gulati and Ugo Panizza on Haiti’s Odious Post-Colonial Debt

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:15)

And I'm Joe Weisenthal.

Tracy Alloway (0:18)

Joe, it feels like there's a lot of terrible things happening in the world at the moment.

Joe Weisenthal (0:24)

Yeah, it does. The news has been pretty grim between the virus, Afghanistan, natural disasters. I would agree with your assessment.

Tracy Alloway (0:35)

Yeah, and I think the sort of pace of the bad news means that a lot of stuff is kind of getting buried in the news cycle very quickly after it happens. So we're recording this on August 17th.

Just a few days ago, there was a massive earthquake in Haiti. I think more than a thousand people are believed to be dead, but that death toll is probably gonna go up some more.

But that event has already sort of been superseded by events in Afghanistan, and people have just sort of moved on to the next big global drama. But I wanted to dedicate this episode to Haiti, because if you think about what the country has recently experienced, you know, the earthquake that I just mentioned came off the back of its president getting assassinated just last month. And then of course, before that, Haiti has had a long history of natural disasters, Hurricane Matthew in 2016, a really, really catastrophic earthquake back in 2010 And the country itself is one of the poorest in the world. So in many ways, it just feels like Haiti can't take a break or catch a break.

Joe Weisenthal (1:52)

Right, I would say pretty much all of my life, I think Haiti has been known for violence, extreme poverty, international attempts at reviving the economy or domestic institutions that seem largely to have failed.

And then of course, these sort of unforeseen disasters. But I think within particularly the Western hemisphere, Haiti is known to have had an extraordinarily bad fortune.

Tracy Alloway (2:23)

Yeah, I'm glad you mentioned international efforts to revive the economy, because today we are going to be talking about one possible effort and possibly the most obscure of those efforts, which involves bonds that were issued more than, let's see, almost 200 years ago as part of Haiti's independence movement. And there is a discussion now about whether or not you could possibly sort of unwind that debt in order to pay reparations to Haiti. So it's sort of an obscure thing, but it fits right into Odd Lots and our obsession with old debt. So we're gonna get into it.

Joe Weisenthal (3:11)

I'm looking forward to this. This is odious debt, one of the topics that I think you have really done a great job sort of bringing to the forefront of media and odd lots and looking forward to this and talking about this in the Haiti context.

Tracy Alloway (3:24)

Oh, thank you.

Well, I have to credit one of our guests, Mitu Gulati. He's a professor at the University of Virginia. He's the one that introduced me to this concept. And we also have his fellow researcher, Ugo Panizza, a professor at the Graduate Institute of Geneva. So welcome, Mitu and Ugo.

Mitu Gulati (3:44)

Thank you.

Tracy Alloway (3:45)

Shall we start with the very basics for people who haven't heard the concept of odious debt before? What exactly do we mean when we say odious debt?

Mitu Gulati (3:58)

So there are at least two meanings of odious debt as it's discussed both in the popular press and in the academic slash legal literature.

One meaning is just any debt that you don't like. It just has a bad odor and you don't want to pay it back. The more technical legal meaning of odious debt is that it is debt incurred by a despotic leader without the approval of the population and the knowledge of the creditors that these debts are being used for purposes that are contrary to any benefit that would result for the populace. So the classic example, and during the Bush administration, odious debts became very popular when the US went into Iraq. The example was Saddam Hussein borrowing hundreds of billions of dollars to buy arms, and those arms were then used to oppress the Iraqi people. So that is the popularized version of this odious debt concept.

Joe Weisenthal (5:27)

You mentioned, okay, so we can understand easily enough this idea that if a despotic leader borrows money, doesn't use the money in service of the public, and then after they go, it's odious, the idea that the public would then have to bear the cost of that debt.

How much in the determination or the thinking of when debt is odious, how much or how difficult is it, or how important is it to establish that the lender understood this? That when they were lending, that when someone bought the sovereign debt of a given country, that they were buying into debt that really was not going to help the public in any way.