Argentina's sovereign debt dispute: Spot the vulture
States like Argentina hoot that they are victims of greedy market forces to wriggle out of their obligations. Maybe they are the vultures, preying on the good will of everyone else?
This brutish behaviour is impossible to accept for individuals, so why is it OK for the institution purporting to represent the society comprised of those individuals?
Government greed and profligacy are mainly justified on ill-defined utilitarian grounds: for all the problems governments create, we all benefit overall if the state sets rules and maintains order. But very different arguments are also heard, based on ill-defined lofty principles: government is an a priori moral force for good, especially redistributive good and 'fairness'.
These rival positions are neatly expressed in two pieces about this Argentinean debt drama. In the first, Felix Salmon at Seeking Alpha looks hard at what is really happening and finds beneath the bluster and thick legal smoke a conventional battle of hard interests.
But then behold Huffington Post UK, where Nick Deardon of Jubilee Debt Campaign sees things very differently:
international debt is governed by a perverse set of laws, developed since the 1970s, which see a nation state as simply another ordinary actor in the 'market'. A state, with a duty to protect the human rights of millions of citizens, is dealt with in much the same way as any other company or investment fund - worse in that it doesn't even have the sort of bankruptcy protection afforded to local authorities and individuals.
In spite of all manner of international treaties and UN conventions, the human rights of citizens is not something to take into account when deciding whether a debt should be paid or not. A state's first duty is not to its people - but the market.
This couldn't be better demonstrated than in the latest New York judgement, which implies that a law Argentina democratically passed to prevent the President negotiating with vulture funds, is effectively in contravention of their duty to the market.
Of course the market is unable to function without the state - it was the powerful states of the world, including the US and UK who created the laws governing this investor-friendly paradise. That's why 'free market' bandits like Elliott run to the US courts to try to extract their profits from Argentina.
If we want to try to change this, people must force their governments to speak up for their rights over the rights of the markets. That means speaking up for Argentina's government when they in turn stand up against the vulture funds.
Perverse laws! Those pernicious, apostrophised ‘markets’! The Argentinean state has a duty to protect the human rights of millions of its citizens (Note: pause for hollow laugh), but should cheerily fulfil that duty by borrowing far beyond its means, then cheating millions of other private citizens elsewhere in the world who foolishly trusted Argentina’s word and lent it their savings.
An investor-friendly paradise! A paradise in which governments cheat private investors then hide behind their 'sovereign' rights, and make sure that private investors fall to the bottom of the lenders' line when things go wrong? The Financial Times is tentatively suggesting that this New York decision "may on the margins encourage better behaviour" by defaulting states. Shock! Encouraging better behaviour by greedy states towards private investors? Whatever next?
The very worst thing about this HuffPo UK populist-collectivist lumpen moralising is that it downplays to nothing much the moral value of those states that borrow money and repay it politely and on time. These states are the backbone of the planet's financial order.
By contrast incompetent states like Argentina massively mess up time and again and then hoot that they are victims of greedy market forces to wriggle out of their obligations. Maybe they are the vultures, preying down the decades on the good will and patience of everyone else?
Charles Crawford is a Contributing Editor to The Commentator. A former British Ambassador in Sarajevo, Belgrade and Warsaw, he is now a private consultant and writer. Visit his website and follow him on Twitter: @charlescrawford
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