Odious Debt — Post-2008 Debt Is Not Your Debt

The Doctrine

Odious debt is an established doctrine in international law. It holds that debts incurred by a regime without the consent of the people, not for the benefit of the people, and where the creditor knew this to be the case, are not binding upon the people and do not transfer to successor governments or populations.

The doctrine was formally applied in 1898 when the United States repudiated Cuba’s debt to Spain following the Spanish-American War. The argument: the debt had been incurred by Spain to finance the colonial suppression of the Cuban people, not for their benefit, and the creditors knew this. The debt was therefore not Cuba’s to pay.

The Three Conditions

For a debt to qualify as odious, three conditions must be met:

Condition one — incurred without the consent of the people. Not one parliament in the democratic world voted to transfer the bad debts of private banks onto public balance sheets before the transfers were made. In the United Kingdom, RBS was nationalised overnight. In the United States, TARP was presented to Congress as an emergency fait accompli. In the Eurozone, the troika imposed austerity on Greece, Ireland, Portugal, and Cyprus through mechanisms that explicitly bypassed democratic deliberation.

Condition two — not for the benefit of the people. The beneficiaries of the 2008 bailouts were the large unsecured creditors of large financial institutions — institutional investors, other banks, sovereign wealth funds. The finding is from MIT professor Deborah Lucas (2019), peer-reviewed. The people whose wages had stagnated since 1979, whose children could no longer afford housing, whose public services were then cut to service the rescue debt — they did not benefit.

Condition three — the creditors knew. The Bank for International Settlements published the warnings before the crisis. The Bank of England published the warnings. The Federal Reserve published the warnings. The IMF published the warnings and then designed the bailout programmes anyway. The emails exist. The minutes exist. The risk assessments exist.

All three conditions are met. The debt is odious. It does not bind us.

The Selective Application Problem

The doctrine has been applied selectively and hypocritically since 1898 — always when convenient to creditor nations, never when inconvenient. Iraq’s debt to Saddam-era creditors was partially restructured using odious debt arguments after 2003. The debts of the global south accumulated under IMF structural adjustment programmes — which opened debtor markets to creditor nations while closing options for debtor populations — have never been subjected to the doctrine, though they meet all three conditions.

We apply it now. We apply it generally. We apply it to every jurisdiction where it fits. And it fits everywhere.

The Arithmetic

The post-2008 public debt increase was not caused by public profligacy. It was caused by the transfer of private bank losses to public balance sheets, followed by a decade of austerity that suppressed tax revenues while increasing demand for public services, followed by the fiscal response to COVID-19.

  • TARP disbursed: ~$426 billion (ProPublica Bailout Tracker)
  • Federal Reserve peak lending exposure: $7.7 trillion (Bloomberg / Fed H.4.1) — mostly overnight, largely repaid, but the balance sheet expansion was permanent
  • Fair-value net cost of all 2008 interventions: $498 billion (Lucas, 2019, MIT Sloan — peer-reviewed)
  • Global public debt 2024: $99.2 trillion (IMF Global Debt Monitor, Sep 2025)

The people did not create this debt. They were not consulted. They did not benefit. The creditors knew. The debt is odious.

Sources

  • Alexander, N. (2003). Odious Debts and the Legal Framework. — Background on the doctrine’s history
  • United States v. Cuba’s Spanish debt (1898) — original application
  • Lucas, D.J. (2019). “Measuring the Cost of Bailouts.” Annual Review of Financial Economics, Vol. 11. MIT Sloan.
  • IMF Global Debt Monitor, September 2025
  • ProPublica Bailout Tracker — projects.propublica.org/bailout
  • Barofsky, N. (2009). SIGTARP Quarterly Report to Congress, July 2009.

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