Eric
Tousaint’s study of the odious debt doctrine
by
Eric Toussaint
Part
6 - Sack and the continuity of States’ obligations concerning debt
despite a change of regime
Sack devotes
a significant part of his book to the transfer of debt in the case of
a change of regime, after a revolution, a coup d’Etat or a civil
war. He manifests his approval of what happened in France between
1789 and the time when he was developing his doctrine. He is pleased
that, despite all the regime changes, each successive government
assumed responsibility for the public debt.
This is what
he wrote: “Once the ancien régime had been overthrown during the
French Revolution of 1789, the new government did not renege on the
former financial obligations of the State. A decree dated 17 June
1789, the day that the Third Estate transformed the Estates-General
into a National Assembly or Parliament, placed “the State’s
creditors under the protection of the honour and loyalty of the
French nation”; in its session of 13 July 1789, the Constituent
Assembly formulated its point of view regarding the State debt as
follows: “This Assembly, acting for the nation, declares that
(…) the public debt having been placed under the protection of
French honour and loyalty, and the nation not declining to pay the
interest owed, no power has the right to pronounce the infamous word,
bankruptcy, no power has the right to break the public faith in any
possible form or denomination.”
The
Constitution of 3-4 September 1791 (Title V, Art. 2) contains the
following article: “Under no pretext may the funds necessary for
the payment of the national debt and the civil list be refused or
suspended”.
The
Constitution of 24 June 1793, Art. 122 “is guarantor to all
Frenchmen of … the public debt”. The financial obligations of
the ancien régime were inscribed in the Grand Livre de la dette
publique, (the Great Book of the Public Debt) in accordance with the
decrees of 15, 16, 17, 24 August and 13 September 1793, as former
contracts with creditors had to be annulled (§34). An account was
opened for the nation in the Great Book (§ 1, Art. 5). There were
also political considerations that were brought to bear: “Let
the debt contracted by tyranny be indistinguishable from that
contracted since the Revolution,” wrote Cambon in his report of
15 August 1793 on the Great Book of the Public Debt. He went on, “You
will observe how the capitalist who wanted a king because the king
was his debtor, and he was afraid to lose the money he was owed, will
desire the Republic, who will have become his new debtor if his
former debtor is not reinstated, for he will fear losing his capital
should it fail.”(p. 48-49).
In France,
there was no shortage of regime changes: The Monarchy fell in 1789,
the First Republic ended in 1804, the First Empire in 1814, the
Monarchy fell again in 1848, the Second Republic ended in 1852, the
Second Empire in 1870, and so on – not to mention changes of
dynasty. In 1830, the House of Orléans succeeded the Bourbons who
had regained the throne in 1815. Despite this political instability
and repeated eruptions of revolution, Sack claims that the rule of
transference of public debt from one regime to the next never failed
(p. 49-50).
Sack cites
numerous examples of debt transfers which took place in spite of
significant regime changes or even conquest or independence. In the
18th century, the United States of America honoured its debts towards
Great Britain, even as it declared independence which had been won by
warfare (p. 48). When Belgium seceded from Holland in 1830, it took
on part of the debt of the United Kingdom of the Netherlands of which
it had been part, and paid indemnities (p. 80 and 83-84). Most of
Spain’s former colonies agreed to pay off the debts that had been
incurred under Spanish rule (p. 52). In 1825, Brazil paid an
indemnity to Portugal in order to obtain its independence (p. 82).
However,
this continuity in the transfer of debt from one regime to the next
has not been universal, far from it. Several new regimes have
repudiated the debt contracted by the governments who preceded them,
including Russia in 1918, Mexico, on five occasions (between 1861 and
1922) and Costa Rica (in 1919-1922). In addition, there are the three
debt repudiations that took place in the United States during the
19th century, and the repudiation of the debt Spain was claiming from
Cuba. These examples are highly interesting.
Source
and references:
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